<PAGE>
As filed with the Securities and Exchange Commission on October 8, 1996
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
NATIONAL AUTO FINANCE COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 6141 65-0688619
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Identification
Organization) Code Number) Number)
---------------
621 N.W. 53rd Street, Suite 200
Boca Raton, Florida 33487
(561) 997-2747
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
---------------
Keith B. Stein
Vice Chairman
National Auto Finance Company, Inc.
621 N.W. 53rd Street, Suite 200
Boca Raton, Florida 33487
(561) 997-2747
(Name, Address Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
----------------
Copies to:
Howard Chatzinoff, Esq. Jorge L. Freeland, Esq.
Weil, Gotshal & Manges LLP Greenberg, Traurig, Hoffman, Lipoff, Rosen &
767 Fifth Avenue Quentel, P.A.
New York, New York 10153 1221 Brickell Avenue
(212) 310-8000 Miami, Florida 33131
(305) 579-0500
---------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
================================================================================
Title of Each Class of Securities Proposed Maximum Aggregate Amount of
to be Registered Offering Price(1) Registration Fee
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Common Stock, par value........... $16,000,000 $4,849
================================================================================
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 under the Securities Act of 1933.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
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NATIONAL AUTO FINANCE COMPANY, INC.
CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Registration Statement Item and Heading Location in Prospectus
--------------------------------------- ----------------------
<S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................................. Inside Front Cover Page; Available
Information; Outside Back Cover Page
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges........................... Outside Front Cover Page; Prospectus
Summary; Risk Factors
4. Use of Proceeds.............................................. Prospectus Summary; Use of Proceeds
5. Determination of Offering Price.............................. Outside Front Cover Page; Risk Factors;
Underwriting
6. Dilution..................................................... Risk Factors; Dilution
7. Selling Security Holders..................................... Certain Transactions; Principal Stockholders
8. Plan of Distribution......................................... Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered................... Outside Front Cover Page; Prospectus
Summary; Dividend Policy; Description of
Capital Stock
10. Interests of Named Experts and Counsel....................... Experts; Legal Matters
11. Information with Respect to the Registrant................... Outside Front Cover Page; Prospectus
Summary; Risk Factors; Use of Proceeds;
Dividend Policy; Capitalization; Dilution;
Selected Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Principal
Stockholders; Certain Transactions; Shares
Eligible for Future Sale; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................................ Not Applicable
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED OCTOBER 8, 1996
Shares
[NAFCO LOGO]
NATIONAL AUTO FINANCE COMPANY, INC.
COMMON STOCK
------------
The shares of Common Stock offered hereby are being issued and sold by
National Auto Finance Company, Inc. (the "Company"). Application will be made
for listing of the Common Stock on the NASDAQ National Market under the trading
symbol "NAFI." Prior to this offering, there has been no public market for the
Common Stock. It is currently estimated that the initial public offering price
per share will be between $ and $ . See "Underwriting" for a discussion
of factors to be considered in determining the initial public offering price.
-------------------------------
See "Risk Factors" on pages through for a discussion
of certain factors that should be considered by
prospective investors.
-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
</TABLE>
<TABLE>
<CAPTION>
===========================================================================================================================
Underwriting Proceeds
Price to Discounts and to
Public Commissions(1) Company(2)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share..................... $ $ $
- ---------------------------------------------------------------------------------------------------------------------------
Total(3)...................... $ $ $
===========================================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting expenses estimated at $ , which are payable by the
Company.
(3) The Company has granted to the Underwriter a 30-day option to purchase up to
additional shares of Common Stock on the same terms and conditions as the
securities offered hereby solely to cover over-allotments, if any. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
-------------------------------
The shares of Common Stock are offered by the Underwriter, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to other
conditions including the right of the Underwriter to withdraw, cancel, modify or
reject any order in whole or in part. It is expected that delivery of the shares
will be made on or about , 1996 at the offices of Raymond James &
Associates, Inc., St. Petersburg, Florida.
RAYMOND JAMES & ASSOCIATES, INC.
The date of this Prospectus is , 1996.
<PAGE>
[GRAPHICS TO BE SUPPLIED]
-------------------------------
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and quarterly reports for the first
three quarters of each fiscal year containing unaudited summary financial
information.
-------------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Except as otherwise specified, all information in
this Prospectus assumes (i) the consummation of the Reorganization (as described
in "The Reorganization") and (ii) no exercise of the Underwriter's
over-allotment option.
The Company
National Auto Finance Company, Inc. ("NAFCO" or the "Company") is a
specialized consumer finance company engaged in the purchase, securitization and
servicing of motor vehicle retail installment sale contracts ("Loans")
originated by automobile dealers ("Dealers") for Non-Prime Consumers (i.e.,
borrowers with limited financial resources or past credit problems). The Company
purchases Loans principally from manufacturer-franchised Dealers in connection
with their sale of new and used automobiles. The Company's strategy is to
develop a network of Dealers throughout the United States that will refer
Non-Prime Consumer Loan applications to the Company. To implement this strategy,
the Company offers to Dealers products and services designed to enhance their
ability to sell vehicles to Non-Prime Consumers. The Company markets these
products and services to Dealers through the efforts of its direct sales force
and through a strategic referral and marketing alliance with a financial
institution which has established relationships with Dealers.
Automobile financing is the second largest sector, by dollar amount, of
consumer installment debt in the United States. According to the United States
Federal Reserve Board, approximately $350 billion of automobile installment
credit was outstanding at the end of 1995. The Company estimates that the
outstanding automobile installment credit attributable to Non-Prime Consumers is
in excess of $60 billion. The Company believes that the portion of the
automobile finance market attributable to Non-Prime Consumers has grown
significantly in recent years and is poised for further growth. Factors
contributing to such growth include the rise of personal bankruptcy filings over
the past ten years, the rise of total consumer debt service payments as a
percentage of disposable income over the past three years, the increase in the
supply of used cars relative to new cars and the increased awareness among
Dealers of Non-Prime Consumer financing opportunities. Historically, the market
for Non-Prime Consumer credit has been highly fragmented, with no one company
controlling more than 3% of the market. The Company believes that it is well
positioned to gain an increasing share of this market through its emphasis on
Dealer support and service.
Since the commencement of the Company's operations in October 1994, the
Company has established contractual relationships with over 1,000 Dealers. The
Company attributes its success in rapidly establishing its Dealer base to the
following:
o Value-Added Products and Services -- The Company seeks to
differentiate itself from its competitors by introducing
value-added products and services designed to enhance the
ability of Dealers to sell vehicles to Non-Prime Consumers. In
developing such products and services, the Company relies on
its senior management's extensive experience in automobile
finance as well as on ideas the Company solicits and receives
from Dealers. The Company is constantly seeking to improve its
existing products and services and develop new ones in order
to respond to changing market conditions and serve specific
niches in the Non-Prime Consumer market.
o Dealer Assistance -- The Company believes that a Dealer's
ability to sell automobiles is enhanced if a Dealer
understands the product and service offerings, underwriting
criteria and financing capabilities of its financing sources.
Accordingly, the Company employs regional salespersons located
in strategic geographic areas ("Dealer Relations Managers")
who spend considerable time on-site with Dealers in order to
augment Dealers' understanding of the Non-Prime Consumer
market and the Company's products and services.
o Experienced Senior Management - Each of the Company's four
senior operating executives has over 14 years of direct
experience in automobile finance. The Company believes that
this experienced management team provides it with the ability
to maintain acceptable credit quality, supervise its
operations, further expand its business in existing markets
and penetrate new markets.
o Timely Communication of Credit Decisions - In the Company's
experience, a rapid response to Dealers' requests for
financing is critical to developing strong relationships with
Dealers and having frequent opportunities to purchase Loans
from Dealers. The Company believes that it
3
<PAGE>
provides this timely response to Dealers for their Non-Prime
Consumers. The Company typically communicates its credit
decisions to Dealers within 75 minutes of receipt of a Loan
application and provides next-day funding after the submission
of completed Loan documentation.
o Centralized Underwriting - The Company maintains centralized
control over the underwriting and Loan approval functions. The
Company believes that this centralized control ensures
consistent and efficient underwriting and Loan approval
functions. The Company's centralized underwriting policy has
enabled the Company to purchase a portfolio of Loans which
management believes will allow the Company to maintain
acceptable credit quality as its Loan portfolio grows.
o Underwriting Consistency - The Company employs a proprietary
credit scoring system and well-defined underwriting criteria
to ensure consistency in the underlying credit risks
associated with the Loans it purchases. The Company believes
that this consistency enhances the efficiency of the financing
process from a Dealer's perspective by enabling a Dealer to
gauge accurately which of its Non-Prime Consumer Loan
applications will be approved by the Company.
o Financing Strategy - The Company maintains a revolving
warehouse securitization facility with First Union National
Bank of North Carolina which enables the Company to finance
the purchase of a significant number of Loans through a single
financing source. To date, the Company has successfully
refinanced these borrowings through the discrete
securitization of warehoused Loans, thereby providing new
availability under the revolving warehouse securitization
facility.
The Company expects to increase the number of Loans that it purchases,
securitizes and services by (i) utilizing its Dealer Relations Managers to
market the Company's products and services directly to Dealers (including
Dealers with which the Company currently does not have a contractual
relationship) and (ii) forming strategic referral and marketing alliances with
financial institutions which have established relationships with Dealers.
Although the Company is currently doing business with Dealers in 26 states,
approximately 80% of the principal balance of the Company's Loan portfolio was
purchased through Dealers located in Georgia, North Carolina, South Carolina and
Virginia. The Company intends to increase its volume of business in the states
in which it currently operates and to expand into additional states.
In April 1996, the Company entered into its first strategic referral
and marketing alliance (the "First Union Strategic Alliance"), with First Union
National Bank of North Carolina and certain of its national bank affiliates
(collectively, "First Union"). The First Union Strategic Alliance provides for
(i) joint marketing of the Company's products and services by the Company's
sales force and the sales personnel in First Union's indirect sales finance
division ("FUSF") to the approximately 1,800 Dealers throughout seven
southeastern states and the District of Columbia (the "Southeastern Franchise")
with which FUSF has an existing relationship, and (ii) exclusive referral by
FUSF to the Company of all applications for Non-Prime Consumer Loans falling
below certain established credit guidelines. The First Union Strategic Alliance
significantly enhanced the Company's ability to further its market penetration
and increase the size of its Dealer base through the marketing assistance,
support and exclusive referrals provided by FUSF. Though still in the
introductory phase, through September 30, 1996, the Company has established
relationships with over 400 additional Dealers through the First Union Strategic
Alliance and financed approximately 1,571 Loans having an aggregate principal
balance of $18.9 million.
IronBrand Capital, LLC, a subsidiary of First Union National Bank of
North Carolina (the "First Union Partner"), is a limited partner of National
Auto Finance Company L.P., a Delaware limited partnership organized in October
1994 (the "NAFCO Partnership"). Upon consummation of this offering (this
"Offering"), the NAFCO Partnership will own approximately % of the Common Stock
of the Company. As a limited partner of the NAFCO Partnership, the First Union
Partner has an economic interest with respect to approximately 15% of the Common
Stock of the Company held by the NAFCO Partnership (or % of the outstanding
shares of Common Stock, upon consummation of the Offering). Based upon several
factors, including the overall performance of the First Union Strategic Alliance
and the total market value of the Company over a specified time period, the
First Union Partner may obtain an economic interest with respect to an
approximate additional 34% of the Common Stock held by the NAFCO Partnership.
Any such increase would be non-dilutive to the public stockholders of the
Company. The national banks comprising the First Union Strategic Alliance are
subsidiaries of First Union Corporation, a bank holding company headquartered in
Charlotte, North Carolina. As of June 30, 1996, First Union Corporation was the
nation's sixth largest bank holding company in terms of total assets.
4
<PAGE>
For the fiscal year ended December 31, 1995, which was the Company's
first full year of operations, the Company generated revenues of $7.8 million
and pre-tax income of $3.28 million on annual Loan volume of $43.5 million.
Through the end of fiscal 1995, the Company had purchased 3,886 Loans with
aggregate gross receivables of $73.6 million and net receivables of $49.8
million, as adjusted for unearned finance charges and before taking into account
Dealer discounts and allowance for possible Loan losses.
For the six months ended June 30, 1996, the Company generated revenues
of approximately $5.6 million and pre-tax income of approximately $1.7 million
on semiannual Loan volume of approximately $31.2 million. Through June 30, 1996,
the Company had purchased 6,557 Loans with aggregate gross receivables of
approximately $122 million and net receivables of approximately $82.8 million,
as adjusted for unearned finance charges and before taking into account Dealer
discounts and allowance for possible Loan losses.
National Auto Finance Company, Inc. was incorporated in Delaware in
October 1996. The NAFCO Partnership and Auto Credit Clearinghouse L.P., a
Delaware limited partnership organized in September 1995 (the "ACCH Partnership"
and together with the NAFCO Partnership, the "Partnerships"), are affiliated
entities that are the predecessors to the business of the Company. Unless the
context otherwise requires, references in this Prospectus to "NAFCO" and the
"Company" refer to National Auto Finance Company, Inc., and the business
previously conducted by the Partnerships. See "The Reorganization." The
Company's executive offices are located at 621 N.W. 53rd Street, Suite 200, Boca
Raton, Florida 33487 and its telephone number is (561) 997- 2747.
The Offering
Common Stock offered hereby................. shares
Common Stock to be outstanding after this
offering (1)............................... shares
Use of Proceeds............................. To support securitizations and
other long-term financing
arrangements; to repay a portion of
the subordinated indebtedness held
by certain affiliates of the
Company; and for working capital
and other general corporate
purposes. See "Use of Proceeds."
Proposed NASDAQ National Market symbol...... NAFI
- ---------------------
(1) Excludes shares of Common Stock reserved for issuance upon the
exercise of outstanding stock options.
5
<PAGE>
Summary Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended June 30,
Year Ended December 31, 1995 1996
----------------------------- ---- ----
Income Statement Data: 1994 (Three Months) 1995 (unaudited) (unaudited)
- --------------------- ------------------- ----
<S> <C> <C> <C> <C>
Gain on sales of Loans $ 0 $6,487 $2,857 $4,628
Gain on securitization of
Loans purchased prior to
January 16, 1995(1) 0 639 639 0
Interest income from cash investments 32 11 6 6
Finance charges earned 95 0 0 0
Provision for credit losses(2) (182) 182 0 0
Other income 0 492 104 1,001
---- ------ ------ ------
Total revenue (55) 7,811 3,606 5,635
Interest expense (78) (498) (222) (303)
Operating expenses (342) (4,032) (1,692) (3,664)
---- ------ ------ ------
Total expenses (420) (4,530) (1,914) (3,967)
---- ------ ------ ------
Net income (loss)
before pro forma income tax expense (475) 3,281 1,692 1,668
Pro forma income taxes(3) 0 (1,066) (464) (628)
---- ------ ------ ------
Pro forma net earnings (loss) ($475) $2,215 $1,228(5) $1,040
==== ====== ====== ======
Pro forma Earnings per Share:(4)
Net income (loss)
Pro forma weighted average shares outstanding
</TABLE>
- --------
(1) Represents gain on sale for Loans purchased between October 12, 1994 and
January 16, 1995 and sold to the Master Trust on January 16, 1995 in
connection with the Revolving Securitization (as such terms are defined in
"Risk Factors - Dependence on Securitization Transactions").
(2) Approximately 5% or $182,000 of the $3.6 million of Loans purchased during
the three months ended December 31, 1994 was set aside as a provision for
possible Loan losses. This reserve was reversed when these Loans were sold
to the Master Trust on January 16, 1995 in connection with the Revolving
Securitization.
(3) The pro forma income taxes reflect the application of a combined federal
and state income tax rate of approximately 40% as if the Company had been
taxed as a C corporation for all periods presented.
(4) Pro forma per share data assumes the issuance of shares at $ per
share.
(5) Includes $639,000 of gain on sale for Loans purchased between October 12,
1994 and January 16, 1995 and sold to the Master Trust on January 16, 1995
in connection with the Revolving Securitization (as such terms are defined
in "Risk Factors - Dependence on Securitization Transactions").
6
<PAGE>
<TABLE>
<CAPTION>
Balance Sheet Data: June 30, 1996
- ------------------- -------------------------------------------
Pro forma
as
Actual Pro forma(6) adjusted(7)
------ ------------ -----------
<S> <C> <C> <C>
Total assets $15,017 $15,017 $38,217
Senior Subordinated Notes --- --- 12,000
Junior Subordinated Notes $ 8,368 8,368 3,568
Total liabilities $ 9,053 9,053 17,947
Partners' preferred equity $ 1,456 --- ---
Partners' equity $ 4,508 --- ---
Stockholders equity 4,270 20,270
<CAPTION>
Loan Portfolio Information Six Months Ended
Years Ended December 31, June 30,
-------------------------------------- ------------------------------
1994 (Three Months) 1995 1995 1996
------------------- ------ ---------- ------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Number of Loans purchased
during period (not in
thousands) 300 3,586 1,715 2,671
Principal balance of Loans
purchased (during period) $3,820 $45,972 $20,919 $32,953
<CAPTION>
December 31, June 30,
------------------------------ ---------------------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aggregate number of
Loans purchased 300 3,886 2,015 6,557
Aggregate principal balance
of Loans purchased $3,820 $49,792 $24,739 $82,745
Number of outstanding Loans 300 3,586 1,957 5,774
Principal balance of
Loans outstanding $3,800 $43,145 $23,237 $66,397
Net Charge-offs as a percentage
of aggregate principal balance
of Loans purchased 0.00% 1.31% 0.13% 2.12%
</TABLE>
- --------
(6) Reflects the Reorganization as if it had occurred on June 30, 1996. See
"The Reorganization" and "Unaudited Pro Forma Pro forma Financial
Statements."
(7) Reflects the Reorganization, the issuance of the Senior Subordinated Notes
and the issuance of shares in the Offering, all as if they had occurred
on June 30, 1996. See "Certain Transactions - Senior Subordinated
Indebtedness" and "Unaudited Pro Forma Financial Statements."
7
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following risk
factors, together with the other information contained in this Prospectus,
before purchasing the shares offered hereby.
Creditworthiness of Non-Prime Consumers; Economic Factors Affecting
Delinquencies and Defaults. The Non-Prime Consumer automobile finance market is
comprised of customers who are deemed to be relatively high credit risks due to
various factors, including, among other things, the manner in which they have
handled previous credit, the absence or limited extent of their prior credit
history and/or their limited financial resources. Consequently, the Loans
acquired by the Company have a higher probability of delinquency and default and
greater servicing costs than Loans made to consumers who pose lesser credit
risks. The Company's profitability depends in part upon its ability to properly
evaluate the creditworthiness of Non-Prime Consumers and efficiently service its
Loans. There can be no assurance that satisfactory credit performance of a
Non-Prime Consumer will be maintained or that the rate of future defaults and/or
losses will be consistent with prior experience or at levels that will allow the
Company to maintain its profitability. Most borrowers' ability to remit payments
in accordance with the terms of the Loans is dependent on their continued
employment. An economic downturn resulting in increased unemployment could cause
a significant rise in delinquencies and defaults, which could materially
adversely affect the Company's financial condition and results of operations.
Moreover, increases in the delinquency and/or loss rates in the Company's Loan
portfolio could adversely affect the Company's ability to obtain or maintain its
financing sources. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Loan Loss and Delinquency Experience" and
"Business--Credit Underwriting and Administration."
Limited Operating History. The Company commenced operations in October
1994. Because of the Company's limited operating history, its Loan portfolio is
unseasoned. Accordingly, delinquency and loss rates in the Company's Loan
portfolio may not fully reflect the rates that would apply when the average
holding period for Loans is longer or when there are larger numbers of Loans in
the portfolio. Additionally, there can be no assurance that the Company will be
able to continue to successfully implement its business strategy, or that
revenues or profitability will continue to increase in the future. The Company's
prospects must be considered in light of the risks, expenses, difficulties and
delays frequently encountered in the establishment of a new business in an
industry characterized by intense competition and an increasing number of market
participants. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Historical Development and Growth" and
"Business--Competition."
Ability of the Company to Maintain Its Growth Strategy. The successful
implementation of the Company's growth strategy is dependent upon its ability to
increase the number of Loans it purchases that meet its underwriting criteria
while maintaining favorable interest rate spreads. The Company's ability to
increase Loan purchases will depend largely on the ability of the Company to:
(i) maintain existing relationships with Dealers and to establish new
relationships with additional Dealers, both in existing markets and in markets
where the Company intends to expand; (ii) successfully implement the First Union
Strategic Alliance and form similar strategic referral and marketing alliances
with other financial institutions; (iii) retain qualified employees and attract
additional qualified employees to manage the Company's expected growth; (iv)
obtain adequate financing on favorable terms to fund its growth strategy,
including the securitization of its Loans; and (v) maintain appropriate
procedures, policies and systems to ensure that the Company purchases Loans
within acceptable levels of credit risk and loss. The Company's growth strategy
will also be subject to factors beyond the Company's control, including economic
downturns, changes in the automobile market and the level of competition in the
automobile finance market. The Company's inability to successfully implement its
growth strategy and increase Loan purchases could have a material adverse effect
on the Company's financial condition and results of operations. See
"Business--Marketing Strategy" and "Business--Credit Underwriting and
Administration."
Need for Additional Capital. The Company's ability to continue to
increase the number of Loans it purchases is dependent, in part, upon its
ability to continue to effect securitization transactions or to establish
8
<PAGE>
alternative long-term financing arrangements and to obtain sufficient financing
upon acceptable terms under interim credit facilities. These transactions and
facilities will, in turn, require the Company to obtain additional subordinated
debt and/or equity financing. If the Company is unable to obtain such financing,
its ability to purchase Loans will be inhibited. The Company believes that the
net proceeds of this Offering, together with the net proceeds of recent
subordinated debt borrowings from certain affiliates of the Company and
third-party institutional investors, will be sufficient to meet the Company's
cash requirements and fund operations for approximately twelve months following
this Offering, assuming the Company completes regular securitizations during
such twelve month period. Thereafter, the Company could be required to issue
additional subordinated debt or equity, which could dilute the interests of
stockholders of the Company. No assurance can be given, however, that the
Company will have access to the capital markets in the future for debt or equity
issuances or for securitizations, or that financing through borrowings or other
means will be available on terms acceptable to the Company, to satisfy the
Company's cash requirements needed to implement its business strategy. The
Company's inability to access the capital markets or obtain financing on
acceptable terms could have a material adverse effect on the Company's financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
Dependence on Securitization Transactions. The Company currently
finances its purchases of Loans primarily through an asset securitization
strategy that involves (i) the securitized warehousing of all of its Loans
through their daily sale ("Revolving Securitization") to a bankruptcy remote
master trust (the "Master Trust"), followed by (ii) the refinancing, from time
to time, of such warehoused Loans through their transfer by the Master Trust to
a discrete trust ("Permanent Securitization"), thereby creating additional
availability of capital from the Master Trust. The timing of any future
Permanent Securitization could be affected by several factors, some of which are
beyond the Company's control. Such factors include, among others, conditions in
the securities market generally, conditions in the asset-backed securitization
market specifically and approval by certain third parties of the terms of the
transactions. During the six months ended June 30, 1996, the Company sold $31.2
million of the Company's Loans to the Master Trust pursuant to the Revolving
Securitization facility, and gains from the sale of such Loans represented
approximately 82% of the Company's revenues. The capacity of the Revolving
Securitization is dependent, in part, upon the subsequent refinancing of Loans
pursuant to Permanent Securitizations. In the Company's first Permanent
Securitization, completed in November 1995, the asset - backed securities issued
were credit enhanced by a financial guaranty insurance policy issued by
Financial Security Assurance Inc. ("FSA"), which was a significant factor in
enabling Standard & Poor's Rating Services ("S&P") and Moody's Investor Service,
Inc. ("Moody's") to rate the senior securities issued in such transaction AAA
and Aaa, respectively. Failure to obtain such credit enhancement in connection
with future Permanent Securitizations would most likely result in increased
costs to the Company and could affect the timing of, or the ability to
consummate, future Permanent Securitizations. If the Company were unable to
securitize Loans under the Revolving Securitization, refinance such Loans
pursuant to subsequent Permanent Securitizations, or otherwise obtain
alternative sources of capital in the future, the Company's revenues and income
could be significantly impaired and it could experience a significant change in
the timing of reported income. Further, there can be no assurance that the
Company will realize gains on future securitizations consistent with its gains
on previous securitizations.
A significant deterioration in the performance of Loans held in the
Master Trust or those held in a discrete trust pursuant to a Permanent
Securitization could result in the retention by such trusts of funds otherwise
distributable to the Company in respect of residual interests held by the
Company and, under certain circumstances, termination of the Master Trust's
ability to purchase additional Loans from the Company. A significant decline in
the performance of the Company's Loan portfolio could, therefore, have a
material adverse effect on both the Company's cash flows and reported net
income, and could require the Company to obtain alternative financing sources.
There can be no assurance that any alternative financing source would be
available, or if, available, that such financing could be effected at a cost
that would enable the Company to operate profitably.
The Company's gains on sale from securitizations have been calculated
using estimates concerning borrowing costs and future loss, prepayment and
present value discount rates on securitized Loans that are
9
<PAGE>
consistent with the Company's and its industry's experience and that the Company
believes would be applied by unrelated purchasers of similar streams of
estimated cash flows. The actual rates of default and/or prepayment on such
Loans or cost of financing such Loans may exceed those estimated, necessitating
write downs in the Company's excess spread receivable and decreases in cash flow
which could materially, adversely affect the Company's financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
The Company has accounted for the Loans securitized to date as asset
sales in accordance with FAS No. 77 and relevant pronouncements of the Emerging
Issues Task Force of the Financial Accounting Standards Board (the "FASB"). In
June 1996, the FASB issued Statement of Financial Accounting Standards No. 125
("FAS 125"), "Accounting for Transfers of Servicing of Financial Assets and
Extinguishments of Liabilities." FAS 125 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities based on a financial-components approach that focuses on control.
FAS 125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1996 and is to be
prospectively applied. Management is currently evaluating the impact of adoption
of FAS 125 on its financial position and results of operations.
Dependence upon First Union Strategic Alliance. The Company is
dependent upon the First Union Strategic Alliance to penetrate certain markets
and significantly increase the number of Loans the Company purchases. The
Company intends to enter into similar strategic referral and marketing alliances
with other financial institutions. However, the First Union Strategic Alliance
is the first such strategic referral and marketing alliance which the Company
has formed, and there can be no assurance that the Company can profitably
purchase a significant number of Loans through the First Union Strategic
Alliance. In addition, the Company's current focus on implementation of the
First Union Strategic Alliance and the significant involvement of First Union in
the Company's business may delay or impair the Company's ability to consummate
additional strategic referral and marketing alliances. There can be no assurance
that the Company will be able to enter into additional strategic referral and
marketing alliances, or that any such alliance will be profitable to the
Company. If the First Union Strategic Alliance is unsuccessful or if the Company
is unable to form additional strategic referral and marketing alliances, the
Company's financial condition and results of operations may be materially,
adversely affected. See "Business--Marketing Strategy."
Dependence on Key Personnel. The Company believes that the development
and growth of the Company to date has been due primarily to the efforts of the
Company's senior management. Although the Company has entered into employment
agreements with certain key personnel, the loss of services of one or more of
the Company's senior management in the future could have a material adverse
effect on the Company's ability to maintain credit quality, supervise its
operations, further expand into existing markets, penetrate new markets, develop
its internal servicing capacity and successfully manage the Company in other
areas. See "Management."
Competition and Market Conditions. The Non-Prime Consumer automobile
finance market is highly competitive. The level of competition has increased
significantly in recent years and this trend is expected to continue.
Historically, commercial banks, savings and loan associations, credit unions,
captive finance subsidiaries of automobile manufacturers and other consumer
lenders, many of which have significantly greater resources than the Company,
have not competed for Non-Prime Consumer business. To the extent that such
lenders expand their activities in the Non-Prime Consumer market, the Company's
financial condition and results of operations could be materially adversely
affected. See "Business--Competition." During the past two years, several
companies have devoted considerable resources to the Non-Prime Consumer market,
including well-capitalized public companies. Specifically, Ford Motor Credit
Company has announced that it intends to finance Non-Prime Consumers, General
Electric Capital Corporation established strategic alliances with several
regional Non-Prime Consumer automobile finance companies and KeyCorp acquired
AutoFinance Group, Inc., one of the Company's competitors. Other companies,
including Mellon Bank Corporation and Southern National Corporation, have also
entered the market.
10
<PAGE>
The Company's business is also affected by certain demographic,
economic and industry trends. These trends include increased sales of used cars,
rising new car prices relative to used car prices, stability in Non-Prime
Consumers' demand for used cars, the inability of Non-Prime Consumers to find
lower cost financing from other sources and the overall level of interest rates
in general. A reversal of any of these trends or a change in any of these
conditions could have a material adverse effect on the Company's financial
condition and results of operations. See "Business--Competition."
Regulation and Litigation. The Company's business is subject to
extensive regulation and supervision in the states in which the Company
operates. Such regulations, among other things, require the Company to obtain
and maintain licenses and qualifications, limit interest rates, fees and other
charges related to Loans purchased, require specified disclosures by Dealers to
consumers and limit rights to repossess and sell collateral. Such regulations
are primarily for the benefit of consumers, rather than for the protection of
Dealers or finance companies, and could limit the Company's discretion in
operating its business. Noncompliance with any applicable statutes or
regulations could result in suspension or revocation of any license or
registration at issue, as well as the imposition of civil fines and criminal
penalties. The Company's weighted average annual percentage rate on outstanding
Loans is 18.50% with an average yield of 21.68% as of June 30, 1996. At these
rates of interest, most of the Company's Loans bear interest at or near the
maximum rate allowed by law in their respective jurisdictions. To the extent
that the rates charged by the Company are limited by the application of any
maximum allowable interest rate, the Company will suffer adverse effects on its
profitability. In addition, due to the consumer-oriented nature of the
automobile finance industry, finance companies are frequently named as
defendants in litigation involving alleged violations of federal and state
consumer lending or other laws and regulations. There can be no assurance that
the Company will not become subject to such litigation in the future. A
significant judgment against the Company could have a material adverse effect on
the Company's financial condition and results of operations. See
"Business--Regulation."
Sensitivity to Interest Rates. A substantial portion of the Company's
income is derived from the sale of Loans to the Master Trust pursuant to the
Revolving Securitization. The Company relies in part on cash flow from the
Master Trust to support its operations. Since the Master Trust's borrowing rates
under the Revolving Securitization are floating and the interest rates charged
on the Loans (which are generally at or near the maximum rates permitted by
applicable state laws) are fixed, increases in the interest rates charged on the
Master Trust's borrowings could have a material adverse effect both on cash
flows from the Master Trust to the Company and on the Company's net income,
thereby adversely affecting the Company's financial condition and results of
operations. In order to mitigate the negative impact of rising interest rates,
the Master Trust has entered into interest rate swap agreements which have the
effect of fixing the rates charged on a portion of the Master Trust's
indebtedness. Although these agreements provide the Master Trust (and,
therefore, the Company) some protection against rising interest rates, these
agreements also reduce the benefits to the Master Trust (and, therefore, the
Company) when interest rates decline below the rates set forth in these
agreements. In addition, upon refinancing of Loans through Permanent
Securitizations, the interest spread with respect to such Loans may be fixed.
Although the Company expects the Master Trust to continue to refinance Loans in
the Master Trust through Permanent Securitizations, there can be no assurance
that such securitizations will occur or that the interest rates fixed pursuant
to such securitizations will be consistent with the Company's past experience.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Dependence on Servicing Arrangements. All of the Loans purchased by the
Company since it commenced business have been serviced by Omni Financial
Services of America ("World Omni"). The current servicing agreement between the
Company and World Omni contemplates that new Loans will be accepted for
servicing by World Omni until December 31, 1997, after which date, unless the
agreement is extended, World Omni would be obligated to continue to service only
the Loans then under contract for the life of such Loans. Although the Company
currently is considering its options with respect to developing its own
servicing capability, the Company currently does not have the internal capacity
to service all of its Loans. Accordingly, the failure of World Omni to
adequately service the Company's Loans or the termination of the servicing
agreement with World Omni could adversely affect the Company until arrangements
with another third-party
11
<PAGE>
servicer could be implemented or until the Company develops its own servicing
capability. While there are other independent consumer loan servicing
organizations that provide servicing on a contract basis, there can be no
assurance that another servicer could be substituted at a comparable cost and
quality of service, or on a timely basis. Further, there can be no assurance
that the Company would be able to profitably implement an in-house servicing
capability. See "Business--Credit Underwriting and Administration."
Geographic Concentration. As of June 30, 1996, approximately 80% of the
current principal balance of the Company's Loan portfolio was purchased from
Dealers located in Georgia, North Carolina, South Carolina and Virginia. An
economic slowdown or recession, or a change in the regulatory or legal
environment in one or more of these states, could have a material adverse effect
on the Company's financial condition and results of operations. See
"Business--Loan Portfolio Profile."
Banking and Other Restrictions. To facilitate the First Union Partner's
compliance with applicable banking laws, regulations and orders (collectively,
the "Banking Laws"), the Company has agreed that it will engage solely in
activities that are permissible for national banks as determined by Banking Laws
as in effect from time to time. The First Union Strategic Alliance also
generally provides that (i) the Company may not purchase a Loan through any
arrangement with a financial institution if such Loan is originated by an active
First Union Dealer and (ii) until January 15, 1997, the Company may not enter
into any other exclusive referral arrangement with a financial institution
involving Dealers in the territory covered by the First Union Strategic
Alliance. Although the Company believes that these restrictions are reasonable
in light of the advantages afforded by the First Union Strategic Alliance, the
effect of these restrictions may be to limit in certain respects the Company's
ability to seek or take advantage of certain business or marketing
opportunities, which may have a material adverse effect on the Company's
financial condition and results of operation. See "Business--Banking
Regulation."
Control by Principal Stockholders. Upon consummation of the Offering,
the NAFCO Partnership and its general partner, National Auto Finance
Corporation, will beneficially own approximately % of the Company's outstanding
Common Stock ( % if the Underwriter's over-allotment option is exercised in
full). In addition, the First Union Partner is a limited partner of the NAFCO
Partnership. Upon consummation of the Offering, the NAFCO Partnership will own
approximately % of the outstanding Common Stock of the Company. As a limited
partner of the NAFCO Partnership, the First Union Partner currently has an
economic interest with respect to approximately 15% of the Common Stock of the
Company held by the NAFCO Partnership (or % of the outstanding shares of Common
Stock upon consummation of the Offering). Based upon several factors, including
the overall performance of the First Union Strategic Alliance and the total
market value of the Company over a specified time period, the First Union
Partner may obtain an economic interest with respect to an approximate
additional 34% of the Common Stock held by the NAFCO Partnership. Any such
increase would be non- dilutive to the public stockholders of the Company. As a
result, the principals of National Auto Finance Corporation will be able to
determine the outcome of most day-to-day corporate actions and the NAFCO
Partnership will be able to determine the outcome of most corporate actions
requiring a stockholder vote, including the election of directors and any matter
submitted to the stockholders for approval, including mergers, consolidations
and the sale of all or substantially all of the Company's assets. In addition,
the First Union Partner, as a limited partner of the NAFCO Partnership, may be
able to influence the future operations of the Company. See "Principal
Stockholders."
Authorization of Preferred Stock. The Company's Certificate of
Incorporation authorizes the issuance of preferred stock with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue shares of preferred stock that have preferences over the
Common Stock with respect to the payment of dividends, liquidation, conversion,
voting or other rights which could adversely affect the voting power and
ownership percentages of the holders of Common Stock. The issuance of shares of
preferred stock or the issuance of rights to purchase such shares could have the
effect of discouraging, delaying or preventing a change in control of the
Company. See "Description of Capital Stock."
12
<PAGE>
Certain Anti-takeover Provisions. The Company's Certificate of
Incorporation and By-laws contain certain provisions which may be deemed to have
the effect of delaying, deferring or preventing a change of control of the
Company or a takeover attempt that a stockholder might consider in its best
interest. These provisions include a classified board of directors and the
Company's ability to issue preferred stock. See "Description of Capital Stock."
Absence of Prior Trading Market; Possible Volatility of Stock Price.
Prior to the Offering, there has been no public trading market for the shares of
Common Stock. There can be no assurance that an active trading market for the
Common Stock will develop or continue after the Offering. The initial public
offering price of the Common Stock offered hereby has been established through
negotiation between the Company and the Underwriter. See "Underwriting." The
market price of the Common Stock may be highly volatile and could be subject to
wide fluctuations in response to quarterly variations in operating results,
changes in financial estimates by securities analysts or other events or
factors. Broad market fluctuations or any failure of the Company's operating
results in a particular quarter to meet market expectations may adversely affect
the market price of the Common Stock. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such a company. Such
litigation could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect on the
Company's financial condition and results of operations.
Shares Eligible for Future Sale. Upon completion of the Offering, the
Company will have outstanding an aggregate of shares of Common Stock. All
of the shares sold in the Offering (plus an additional shares if the
over-allotment option granted to the Underwriter is exercised in full) will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), except for any shares
purchased by an affiliate of the Company that will be subject to the resale
limitations of Rule 144 under the Securities Act. Upon the expiration of lock-up
agreements between each of the executive officers, directors and existing
stockholders and the Underwriter, 180 days after the date of this Prospectus (or
earlier upon the written consent of Raymond James & Associates, Inc.),
shares of Common Stock outstanding prior to the Offering may be sold in the
public market by affiliates of the Company, subject to the limitations and
restrictions contained in Rule 144 under the Securities Act. In addition,
options to purchase up to shares of Common Stock will be reserved for
issuance upon completion of the Offering and any shares of Common Stock issuable
upon the exercise of options will be eligible for sale pursuant to registration
on Form S-8 in the future. Sales of substantial amounts of Common Stock, or the
availability of substantial amounts of Common Stock for future sale, could
adversely affect the prevailing market price of the Common Stock. Certain
stockholders of the Company holding shares of Common Stock have the right
to require the Company to register their shares of Common Stock under the
Securities Act, and to include shares of Common Stock in registrations proposed
to be effected by the Company. Such stockholders have agreed not to exercise
their registration rights prior to 180 days from the date of this Prospectus
without the prior written consent of Raymond James & Associates, Inc. See
"Shares Eligible for Future Sale" and "Underwriting."
No Cash Dividends. Following this Offering, the Company intends to
retain its earnings for use in its business and does not anticipate paying any
cash dividends in the foreseeable future. See "Dividend Policy."
Dilution. Purchasers of the Common Stock offered hereby will experience
immediate and substantial dilution per share of Common Stock of $ per share
(based upon an assumed offering price of $ per share) in net tangible book
value per share of Common Stock from the offering price. See "Dilution."
13
<PAGE>
THE REORGANIZATION
Background
The NAFCO Partnership was formed pursuant to an agreement of limited
partnership, dated as of October 1, 1994 (as amended and restated, the "NAFCO
Partnership Agreement"). National Auto Finance Corporation, a Delaware
corporation ("National Auto"), is the general partner of the NAFCO Partnership
and holds a 1% general partner interest. The limited partners of the NAFCO
Partnership include The S Associates Limited Partnership ("S Associates"), a
limited partnership controlled by Gary L. Shapiro, Chairman of the Board of
Directors and Chief Executive Officer of the Company, The O Associates Limited
Partnership ("O Associates"), a limited partnership controlled by Edgar A. Otto,
a director of the Company, the First Union Partner and certain other individuals
(collectively, the "NAFCO Limited Partners"). The NAFCO Limited Partners hold in
the aggregate a 99% partner interest in the NAFCO Partnership.
The ACCH Partnership was formed in September 1995. The general partner
of the ACCH Partnership, National Auto, holds a 1% general partner interest in
the ACCH Partnership. The NAFCO Partnership and two officers of the Company are
the limited partners of the ACCH Partnership (the "ACCH Limited Partners"). The
ACCH Limited Partners hold in the aggregate a 99% limited partner interest in
the ACCH Partnership.
Recent Developments
In August 1996, the Company completed a $12 million senior subordinated
debt financing with J.P. Morgan Investment Management, Inc., acting on behalf of
certain institutional investors. The principal amount of such senior
subordinated debt is due in August 2001. In connection with this senior
subordinated debt financing, the Company issued certain deferred additional
interest notes which, immediately prior to consummation of this Offering, were
exchanged for shares of Common Stock of the Company (representing 10% of the
outstanding Common Stock of the Company immediately prior to the consummation of
the Offering). See "Certain Transactions."
Asset Transfers
Prior to the sale of the shares of Common Stock offered hereby, the
respective assets and liabilities of the Partnerships will be transferred to the
Company in exchange for all of the Common Stock of the Company then outstanding
(such transaction being referred to herein as the "Reorganization").
Specifically, the Reorganization will entail the following transfers:
(i) The partners of the ACCH Partnership (other than the NAFCO
Partnership) will transfer all of their partner interests in the ACCH
Partnership to the NAFCO Partnership in exchange for limited partner interests
in the NAFCO Partnership.
(ii) The NAFCO Partnership will transfer all of its assets,
subject to all of its liabilities, to the Company in exchange for Common Stock.
Upon completion of the Reorganization and immediately prior to
this Offering, all of the Common Stock of the Company will be directly owned by
the NAFCO Partnership and the Morgan Group (as defined in "Certain
Transactions--Senior Subordinated Indebtedness"). See "Principal Stockholders."
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered hereby, assuming an initial public offering price of $
per share and after deducting estimated underwriting discounts and commissions
and expenses payable by the Company, are estimated to be approximately $16
million (approximately $ if the Underwriter's over-allotment option is
exercised in full). The Company anticipates that, of the net proceeds of this
Offering, approximately $ will be used to support securitizations and other
long-term financing arrangements, approximately $4.8 million will be used to
repay a portion of the outstanding subordinated indebtedness evidenced by the
Junior Subordinated Notes (as defined in "Certain Transactions-Junior
Subordinated Indebtedness") held by certain affiliates of the Company and the
remaining net proceeds will be used for working capital and other general
corporate purposes. As of September 30, 1996, the Company had outstanding junior
subordinated indebtedness, evidenced by such Junior Subordinated Notes, of
$8,368,000, which bears interest at a rate of 8% per annum. This indebtedness,
which is payable upon demand, was incurred primarily to support the Company's
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Certain
Transactions."
Pending utilization as described above, the net proceeds of this
Offering will be invested in short-term, high-grade, interest bearing
securities.
DIVIDEND POLICY
The Company has never paid cash dividends or made cash distributions
and does not anticipate paying cash dividends in the foreseeable future, but
intends to retain any future earnings for reinvestment in its business. The
Company is a party to a Note Purchase Agreement, dated as of August 7, 1996 (the
"Note Purchase Agreement"), which generally prohibits the Company's payment of
dividends on its Common Stock, subject to certain conditions, following the
consummation of this Offering, so long as any amount remains unpaid on the notes
issued in connection with such Note Purchase Agreement. See "Certain
Transactions-Senior Subordinated Indebtedness." Subject to the restrictions
contained in the Note Purchase Agreement, any future determination to pay cash
dividends will be at the discretion of the Board of Directors and will be
dependent upon the Company's financial condition, results of operations, capital
requirements and such other factors as the Board of Directors deems relevant.
15
<PAGE>
CAPITALIZATION
The following table sets forth the long-term debt and capitalization of
the Company (i) at June 30, 1996, (ii) at June 30, 1996 on a pro forma basis to
give pro forma effect to the Reorganization and (iii) at June 30, 1996 on a pro
forma basis as adjusted to reflect receipt and application by the Company of
estimated net proceeds of $16 million from the Offering (based upon an assumed
initial public offering price of $ per share) as described under "Use of
Proceeds" from the issuance of $12 million
of subordinated indebtedness in August 1996. The information presented below
should be read in conjunction with the financial statements of the Company and
the historical and pro forma financial data included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
As of June 30, 1996
-----------------------------------------------
(in thousands)
Pro forma
Actual Pro forma (as adjusted)
------ --------- -------------
<S> <C> <C> <C>
Long-term debt:
8% junior subordinated debt (including $811,882
of accrued interest)......................................... $8,368 $8,368 $ 3,568
10% senior subordinated debt................................. -- 12,000
------
Total Long-term debt............................................. 8,368 8,368 15,568
Ownership equity:
Partners' preferred equity................................... 1,456 -- --
Partners' capital............................................ 4,508 -- --
Total Partners' Equity.................................... 5,964 -- --
Stockholders' Equity(1).......................................... 4,270 20,270
Total ownership equity........................................... 4,270 20,270
----- ------
Total long-term debt and capitalization................... $14,332 $12,638 $35,838
====== ====== ======
</TABLE>
- ------------------------
(1) Excludes options with respect to shares of Common Stock reserved for
issuance under the Company's 1996 Stock Option Plan, none of which have been
granted.
16
<PAGE>
DILUTION
After giving effect to the Reorganization, the pro forma net tangible
book value (total assets less deferred costs, and total liabilities) of the
Company as of June 30, 1996 was approximately $ , or approximately $ per share.
As used below, "net tangible book value per share" represents the quotient
obtained by dividing the pro forma net tangible book value of the Company at
June 30, 1996 by the total number of shares of Common Stock that would have been
outstanding at June 30, 1996 had the Reorganization occurred on such date. After
giving effect to the Offering and the application of the estimated net proceeds
to the Company (after deduction of underwriting discounts and commissions and
estimated Offering expenses), the net tangible book value of the Company at June
30, 1996 would have been $ , or $ per share. This represents an immediate
increase in net tangible book value per share of $ to existing holders of Common
Stock as a result of the Offering and an immediate dilution of net tangible book
value per share of $ to new investors in the Offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......................................... $
Pro Forma net tangible book value before the Offering.......................... $
Increase in pro forma net tangible book value per share
attributable to new investors................................................
-------
Pro forma net tangible book value after the Offering....................................
Dilution in pro forma net tangible book value to new investors ......................... $
=======
</TABLE>
The following table sets forth, on a pro forma basis (after giving
effect to the Reorganization) as of June 30, 1996, the total number of shares of
Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by the existing stockholders and by new investors
(before deducting the estimated underwriting discounts and commissions and
Offering expenses payable by the Company).
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------------ ------------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders......... % % $
New Investors.................
--------- ---- ----------
Total 100% $ 100%
========= ==== ========== ======
</TABLE>
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The income statement data for the three months ended December 31, 1994
and the year ended December 31, 1995, and the balance sheet data as of December
31, 1994 and 1995 are derived from, and are qualified by reference to, the
financial statements of the Company audited by KPMG Peat Marwick LLP,
independent auditors, which are included elsewhere in this Prospectus, and
should be read in conjunction with those financial statements and the notes
thereto.
The income statement data for the six months ended June 30, 1995 and
1996, and the balance sheet data as of June 30, 1995 and 1996 are derived from
unaudited financial statements of the Company that, in the opinion of
management, reflect all adjustments necessary to present fairly the information
set forth therein. The results for the six months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for any other interim
period or for the full year.
The Company commenced operations in October 1994. Consequently,
financial information with respect to the Company is available only since
October 1994. This information is not necessarily indicative of the Company's
future performance. The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and the related notes
thereto included elsewhere herein.
18
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
Year Ended December 31, 1995 1996
----------------------------- ---- ----
Income Statement Data: 1994 (Three Months) 1995 (unaudited) (unaudited)
- --------------------- ------------------- ----
<S> <C> <C> <C> <C>
Gain on sales of Loans $ 0 $6,487 $2,857 $4,628
Gain on securitization of
Loans purchased prior to
January 16, 1995(1) 0 639 639 0
Interest income from cash investments 32 11 6 6
Finance charges earned 95 0 0 0
Provision for credit losses(2) (182) 182 0 0
Other income 0 492 104 1,001
---- ------- ------ ------
Total revenue (55) 7,811 3,606 5,635
Interest expense (78) (498) (222) (303)
Operating expenses (342) (4,032) (1,692) (3,664)
---- ------- ------ ------
Total expenses (420) (4,530) (1,914) (3,967)
---- ------- ------ ------
Net income (loss)
before pro forma income tax expense (475) 3,281 1,692 1,668
Pro forma income taxes(3) 0 (1,066) (464) (628)
---- ------- ------ ------
Pro forma net earnings (loss) ($475) $2,215 $1,228(5) $1,040
==== ====== ====== ======
Pro forma Earnings per Share:(4)
Net income (loss)
Pro forma weighted average shares outstanding
</TABLE>
- --------
(1) Represents gain on sale for Loans purchased between October 12, 1994 and
January 16, 1995 and sold to the Master Trust on January 16, 1995 in
connection with the Revolving Securitization (as such terms are defined in
"Risk Factors--Dependence on Securitization Transactions").
(2) Approximately 5% or $182,000 of the $3.6 million of Loans purchased during
the three months ended December 31, 1994 was set aside as a provision for
possible Loan losses. This reserve was reversed when these Loans were sold
to the Master Trust on January 16, 1995 in connection with the Revolving
Securitization.
(3) The pro forma income taxes reflect the application of a combined federal
and state income tax rate of approximately 40% as if the Company had been
taxed as a C corporation for all periods presented.
(4) Pro forma per share data assumes the issuance of shares at $ per
share.
(5) Includes $639,000 of gain on sale for Loans purchased between October 12,
1994 and January 16, 1995 and sold to the Master Trust on January 16, 1995
in connection with the Revolving Securitization.
19
<PAGE>
<TABLE>
<CAPTION>
December 31, June 30,
------------------------- -------------------
Balance Sheet Data: 1994 1995 1995 1996
- ------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Total assets $5,800 $12,003 $8,701 $15,017
Senior Subordinated Notes payable -- -- -- --
Junior Subordinated Notes payable 5,402 8,088 6,528 8,368
Total liabilities 5,775 8,556 6,984 9,053
Partners' preferred equity 48 482 400 1,456
Partners' equity (23) 2,965 1,317 4,508
</TABLE>
<TABLE>
<CAPTION>
Loan Portfolio Information Six Months Ended
- -------------------------- Year Ended December 31, June 30,
-------------------------------------- -------------------------------
1994 (Three Months) 1995 1995 1996
------------------- ------ ---------- ------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Number of Loans purchased
during period (not in
thousands) 300 3,586 1,715 2,671
Principal balance of Loans
purchased (during period) $3,820 $45,972 $20,919 $32,953
<CAPTION>
December 31, June 30,
------------------------------ ---------------------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aggregate number of
Loans purchased 300 3,886 2,015 6,557
Aggregate principal balance
of loans purchased $3,820 $49,792 $24,739 $82,745
Number of outstanding Loans 300 3,586 1,957 5,774
Principal balance of
outstanding Loans $3,800 $43,145 $23,237 $66,397
Net Charge-offs as a percentage
of aggregate principal balance
of Loans purchased. 0.00% 1.31% 0.13% 2.12%
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis provides information
regarding the Company's consolidated financial condition as of June 30, 1995 and
1996 and as of December 31, 1995, and its results of operations for the six
months ended June 30, 1995 and 1996 and the year ended December 31, 1995. A
discussion of other periods is not included below because the Company only
commenced its operations in October 1994, and any comparison with the results of
the full 1995 fiscal year would not be analytically useful. This management's
discussion and analysis should be read in conjunction with the preceding
"Selected Consolidated Financial Data" and the Company's Consolidated Financial
Statements and the notes thereto and the other financial data included elsewhere
in this Prospectus. Data for the six months ended June 30, 1996 are not
necessarily indicative of results expected for the full fiscal year. The ratios
and percentages provided below are calculated using detailed financial
information contained in the Company's Consolidated Financial Statements, the
notes thereto and the other consolidated financial data included elsewhere in
this Prospectus.
Overview
The Company is a specialized consumer finance company engaged in the
purchase, securitization and servicing of Non-Prime Consumer Loans originated by
Dealers. The Company acquires Loans principally from manufacturer-franchised
Dealers in connection with their sale of new and used automobiles to approved
Non-Prime Consumers. For all periods presented, the Company operated as two
limited partnerships. As such, the income tax effects of all earnings or losses
of the Company were passed directly to the partners and no provisions for income
taxes were required. See "The Reorganization."
Historical Development and Growth
From the inception of the Company in October 1994 through January 16,
1995, the primary source of revenue for the Company was net interest income on
Loans purchased by the Company. In January 1995, the Company began using a
Revolving Securitization pursuant to which the Company sells its Loans on a
daily basis to the Master Trust. The Revolving Securitization was implemented
effective January 16, 1995. On that date, the Company sold to the Master Trust
407 Loans (approximately $5 million principal amount) that were purchased by the
Company from October 12, 1994 through January 16, 1995. Thereafter, the Company
commenced selling Loans purchased by it to the Master Trust on a daily basis.
The Company's first Permanent Securitization, completed November 22, 1995,
involved the transfer by the Master Trust to the National Auto Finance 1995-1
Trust (the "1995-1 Trust") of Loans with principal amount totaling $42 million.
The Company retains a residual interest and a cash investment with respect to
each of the Master Trust and the 1995-1 Trust which are reflected as the "excess
spread receivable" ("ESR") and the "spread accounts" on the Company's balance
sheet. Since initiation of the Revolving Securitization, the Company's earnings
have been primarily attributable to the gains recognized on the sale of Loans
into the Master Trust. For the six months ended June 30, 1996, such gains
accounted for approximately 82% of the Company's revenues.
Components of Revenue and Expenses
Revenues. The Company derives revenues principally from the purchase
and daily sale of Loans to the Master Trust pursuant to the Revolving
Securitization. In determining its reported gain from these securitization
activities, the Company adds the total interest payments due from borrowers and
the dollar amount of the discount at which the Loans were purchased from
Dealers. The Company then deducts an estimated reserve for future Loan losses,
prepayments, borrowing charges and deferred servicing costs and discounts the
remaining cash flow to its net present value. The resulting amount is reported
as gain on securitization of finance receivables on the Company's income
statement.
In addition to interest income from cash investments, other revenues
are earned primarily from amortization of the deferred servicing costs which are
recognized to offset the direct servicing expenses incurred
21
<PAGE>
by the Company. Additional income is recognized from the monthly amortization of
the deferred gain resulting from the calculation of the net present value of the
net cash flows sold to the Master Trust.
Expenses. The Company's expenses consist of interest and operating
expenses. Interest expense is the interest incurred on notes to certain
affiliates of the Company and notes to certain institutional investors.
See "--Liquidity and Capital Resources" and "Certain Transactions."
Operating expenses consist primarily of personnel, general and
administrative and servicing expenses. Depreciation of the Company's capital
expenditures for furniture and equipment that is being recognized over five
years on a straight-line basis is also included in this category.
Results of Operations
Six Months Ended June 30, 1996, as Compared to Six Months Ended June
30, 1995.
Income from Operations. The Company reported income from operations of
$1,668,000 for the six months ended June 30, 1996, an increase of 58%, as
compared to income from operations of $1,053,000 for the six months ended June
30, 1995, after excluding $639,000 that represented income from Loans purchased
from October 8, 1994 to January 16, 1995 and sold to the Master Trust in January
1995.
Gain on Securitization of Loans. The Company's Loan purchasing and
servicing operations expanded significantly during the six months ended June 30,
1996, as compared to the six months ended June 30, 1995. The Company purchased
from Dealers and subsequently sold to the Master Trust $33.0 million principal
amount of Loans, or 2,671 Loans, during the six months ended June 30, 1996, as
compared to $20.9 million principal amount of Loans, or 1,715 Loans, purchased
from Dealers and subsequently sold to the Master Trust during the six months
ended June 30, 1995. For the six months ended June 30, 1996, the Company
recognized a gain on securitization of $4.6 million, representing a 58.6%
increase over the $2.9 million of gains recognized for the six months ended June
30, 1995, after subtracting $639,000 from the sale of Loans purchased in 1994.
This increase was primarily the result of a 57.52% increase in the dollar volume
of Loans purchased and subsequently sold to the Master Trust for the six months
ended June 30, 1996, as compared to the six months ended June 30, 1995.
The table below sets forth certain information relating to the
Company's Loan purchasing activities, including specifically the number and
aggregate principal amount of Loans purchased, the aggregate amount funded to
Dealers and the related amount of deferred gain and deferred servicing revenue
from the securitization of such Loans:
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
--------------------------- --------------------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Number of Loans purchased 300 3,586 1,715 2,671
Principal balance of Loans purchased $3,819,645 $45,972,454 $20,919,074 $32,952,711
Amount funded(1) $3,595,832 $43,504,918 $19,734,397 $31,201,767
Percent sold to trusts 0.00% 100.00% 100.00% 100.00%
Gain on sales of Loans 0 $ 7,125,849(2) $ 3,496,119(2) $ 4,628,179
Amortization of deferred gain and servicing 0 $ 456,811 $ 165,668 $ 619,692
Gain on sale revenue as a % of total revenue 0 91.22% 96.95% 82.12%
</TABLE>
- -----------------
(1) Amount funded represents the price at which the Company purchases a Loan
from a Dealer (i.e., the amount actually paid to a Dealer), calculated as the
principal of the Loan purchased less a negotiated discount.
(2) Includes $639,000 of gain on sale for Loans purchased between October 12,
1994 and January 16, 1995 and sold to the Master Trust in connection with the
Revolving Securitization on January 16, 1995.
22
<PAGE>
Loan Loss Provision
The securitization trusts record provisions for Loan losses to reflect
management's estimates of potential charge-offs from the Loan portfolio. For the
six months ended June 30, 1996, the provision for Loan losses was $1,563,000, or
5.0% of the amount funded, as compared to $996,000, or 5.1% of the amount funded
for the six months ended June 30, 1995. An increase in losses above levels
provided for would result in reduced cash flow to the Company and a possible
write-down of the ESR and spread account.
Loan Prepayment Provision
The securitization trusts record a provision for Loan prepayments to
reflect management's estimates of potential prepayments from the Loan portfolio.
For the six months ended June 30, 1996, the provision for Loan prepayments was
$4,183,000 million, or 13.41% of the amount funded, as compared to $2,306,000,
or 11.68% of the amount funded for the six months ended June 30, 1995.
Other Income
The Company generated approximately $1,001,000 of other income during
the six months ended June 30, 1996, as compared to $103,000 for the six months
ended June 30, 1995. The principal source of the Company's other income was the
amortization of the deferred gain and deferred servicing costs and the
amortization of additional deferred gain that resulted from the transfer of
receivables from the Master Trust to the 1995-1 Trust. This deferred gain
resulted from the fact that the Permanent Securitization was accomplished at a
lower borrowing rate than the Company assumed in calculating its gain on the
sale of such Loans to the Master Trust.
Operating Expenses
The Company reported operating expenses of $3.7 million (net of
depreciation and amortization expense of approximately $200,000) for the six
months ended June 30, 1996, as compared to $1.6 million (net of depreciation and
amortization expense of approximately $86,000) for the six months ended June 30,
1995. These expenses consisted primarily of personnel, general and
administrative (including origination and other operating expenses) and
servicing expenses. The increase in expenses primarily reflected the growth in
the amount of Loans purchased and serviced by the Company and the hiring of
additional senior management and the other start-up costs associated with
implementation of the Company's strategic referral and marketing alliance
program.
Personnel expenses for the six months ended June 30, 1996 were $1.5
million, as compared to $735,000 for the six months ended June 30, 1995.
Personnel expenses consisted primarily of salaries and wages, performance
incentives, employee benefits and payroll taxes. The increase in expenses
primarily reflected the growth in the amount of Loans purchased and serviced by
the Company, the hiring of additional senior management and the other start-up
costs associated with implementation of the Company's strategic referral and
marketing alliance program. The Company's number of full-time employees
increased from 33 as of June 30, 1995, to 45 as of June 30, 1996. The Company
expects that its number of full-time employees will continue to increase
commensurate with the growth of the Company's Loan purchasing and intended
future in-house servicing activities.
General and administrative expenses for the six months ended June 30,
1996 were $1.5 million, as compared to $777,000 for the six months ended June
30, 1995. These expenses consisted primarily of telecommunications, travel,
professional fees, insurance expenses, and management information systems
expenses. The increase in expenses primarily reflected the growth in the amount
of Loans purchased and serviced by the Company and the hiring of additional
senior management and the other start-up costs associated with implementation of
the Company's strategic referral and marketing alliance program.
23
<PAGE>
Servicing expenses for the six months ended June 30, 1996 were
$480,000, as compared to $94,000 for the six months ended June 30, 1995.
Servicing expenses consist primarily of a monthly fee to an outside servicer for
each active Loan. The increase in expenses primarily reflected the growth in the
amount of Loans purchased and serviced by the Company, the hiring of additional
senior management and the other start-up costs associated with implementation of
the Company's strategic referral and marketing alliance program. The Company's
total Loan portfolio grew to $66.4 million, or 5,774 outstanding Loans, as of
June 30, 1996 from $23.2 million, or 1,957 outstanding Loans, as of June 30,
1995.
Financial Condition
As of June 30, 1996, the Company had total assets of $15 million, as
compared to $12 million as of December 31, 1995 and $5.8 million as of December
31, 1994. For the periods ended June 30, 1996 and December 31, 1995, these
assets consisted primarily of cash, subordinated securities and ESRs from the
securitization trusts. For the period ended December 31, 1994, these assets
consisted primarily of Loans held for sale, net of allowances for Loan losses.
As of June 30, 1996, the Company had cash and cash equivalents totaling
$418,000. As of such date, the Company also had $1 million in cash balances held
in restricted bank accounts, representing credit enhancement in the form of Loan
loss reserves for the securitization trusts, which amount was included in the
total amount of the Company's ESRs as of such date.
As of June 30, 1996, the Company retained $8.6 million of ESRs and $5.2
million of subordinated securities. These assets represented 92% of the total
assets of the Company as of such date. The value of these assets would be
reduced in the event of a material increase in the Loan loss and prepayment
experience relative to the amounts estimated by the Company for such items at
the time of the sale of the related Loans to the Master Trust.
As of June 30, 1996, the principal amount owed by the Company on Junior
Subordinated Notes was $8.4 million (including $812,000 of accrued interest),
which bears interest at an annual rate of 8%. Interest in the amount of $886,000
accrued on such notes through August 15, 1996 was paid on such date.
Loan Loss and Delinquency Experience
The Company regularly reviews the adequacy of its net loss reserves on
Loans. The reserves are set at levels considered to be sufficient to cover the
expected future losses on existing Loans. Changes in reserves are based directly
on the dollar value of the Loans transferred to the Master Trust, historical
loss experience and, to a lesser extent, current economic conditions and other
factors which management deems relevant. Losses are continuously monitored on an
overall portfolio and individual month of purchase pool basis.
The Company's charge-off policy is based upon a Loan-by-Loan review of
delinquent accounts. The Company generally charges off a Loan at the time its
related collateral is liquidated, although certain Loans may be charged off
sooner if management determines them to be uncollectible.
24
<PAGE>
The following table summarizes the Company's Loan losses and
repossession loss experience:
<TABLE>
<CAPTION>
(dollars in thousands)
As of December 31, As of June 30,
--------------------- ----------------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aggregate number of Loans purchased 300 3,886 2,015 6,557
Aggregate principal balance of
Loans purchased $3,820 $49,792 $24,739 $82,745
Principal balance of outstanding Loans $3,800 $43,145 $23,237 $66,397
Number of outstanding Loans 300 3,586 1,957 5,774
Gross charge-off principal balance (1) 0 1,447 142 4,018
Liquidation recoveries 0 (797) (110) (2,265)
------ ------ ------ -----
Net charge-offs 0 650 32 1,753
====== ====== ====== =====
Net charge-offs as a percentage
of aggregate principal balance
of Loans purchased 0.00% 1.31% 0.13% 2.12%
====== ====== ====== =====
Principal balance of Loans related
to vehicles held in inventory $0 $553 $202 $678
====== ====== ====== =====
</TABLE>
- ----------------------
(1) Does not include vehicles repossessed and held in inventory.
25
<PAGE>
The Company considers a Loan to be delinquent if the borrower fails to
make any payment substantially in full on or before the due date as specified by
the terms of the Loan. The Company typically initiates contact with borrowers
whose payments are not received by the due date on the fifth day following the
due date. The following table summarizes the Company's delinquency experience
with respect to its outstanding Loans:
<TABLE>
<CAPTION>
(dollars in thousands)
As of December 31, As of June 30,
--------------------- ----------------------
1994 1995 1995 1996
---- ---- ---- ----
(Three Months)
<S> <C> <C> <C> <C>
Number of Loans 300 3,586 1,957 5,774
Period of delinquency
31 to 60 days 0 $2,148 $352 $2,663
61 to 90 days 0 157 22 587
91 days or more, average 0 46 0 64
----- ----- ----- -----
Total delinquencies 0 $2,351 $374 $3,314
Total delinquencies as a
percentage of the current
principal balance
of outstanding Loans 0% 5.45% 1.61% 4.99%
===== ===== ===== =====
</TABLE>
Management of the Company believes that the payment practices of
Non-Prime Consumers are partially a function of seasonality. Since Non-Prime
Consumers typically have low disposable incomes, they frequently tend to fall
behind in payments on their Loans during the early winter months, when the
holiday season generates demands for their limited disposable income and when
these borrowers encounter weather-related work slow-downs and other seasonal
demands on their disposable income. As a result, absent unforeseen
circumstances, management expects delinquencies to be highest in the first
calendar quarter and the fourth calendar quarter. Generally, there is a 60 to
120 day lag between initial delinquency and charge-off.
Since October 1994, the Company has maintained, at its own expense,
supplemental vendor's single interest ("VSI") insurance that protects the
Company's interest in Loan collateral against uninsured physical damage
(including total loss) and instances where neither the vehicle nor the borrower
can be found.
Liquidity and Capital Resources
General
Since inception, the Company has primarily funded its operations and
the growth of its Loan purchasing activities through five principal sources of
capital: (i) cash flows from operating activities; (ii) proceeds from
securitization transactions; (iii) cash flows from servicing fees; (iv) proceeds
from the issuance of senior subordinated debt to institutional investors; and
(v) proceeds from the issuance of junior subordinated debt to, and from the
capital contributions of, certain affiliates of the Company.
The Company's securitization financing activities are capital intensive
and will require significant additional capital to fund the Company's required
equity commitment to the Revolving Securitization facility and related
securitization expenses as the Company's Loan purchasing activities grow in the
future. The Company will use the proceeds of this Offering and the senior
subordinated debt borrowing completed in August 1996 to fund, among other
things, the Company's required equity commitment to the Revolving
Securitization. The Company believes that the net proceeds of this Offering,
together with the net proceeds of subordinated debt borrowings from certain
affiliates of the Company and from institutional investors, will be sufficient
to meet the
26
<PAGE>
Company's cash requirements and fund operations for approximately
twelve months following the Offering, assuming the Company completes additional
Permanent Securitizations during such twelve month period.
Securitization Program
The Company currently finances its purchases of Loans primarily through
an asset securitization program that involves (i) the securitized warehousing of
all of its Loans through their daily sale to the Master Trust pursuant to the
Revolving Securitization, followed by (ii) the refinancing of such warehoused
Loans from time to time through Permanent Securitizations.
Specifically, pursuant to the Revolving Securitization the Company
sells Loans that it has purchased from Dealers on a daily basis to a special
purpose subsidiary, which then sells the Loans to the Master Trust in exchange
for certain residual interests in future excess cash flows from the Master
Trust. The Master Trust, to date, has issued two classes of investor
certificates: "Class B Certificates," which are variable funding (i.e.,
revolving) certificates bearing interest at floating rates, and "Class C
Certificates," representing a portion of the residual interest of the Company's
special purpose subsidiary in future excess cash flows from the Master Trust
after required payments to the holders of the Class B Certificates, deposit of
funds to a restricted cash account as a reserve for future Loan losses (which
provides additional credit enhancement for the holders of the Class B
Certificates) and payment of certain other expenses and obligations of the
Master Trust. First Union National Bank of North Carolina currently owns 100% of
the outstanding Class B Certificates.
In November 1995, the Master Trust refinanced $42 million of its
receivables in a private placement of asset-backed securities through a
Permanent Securitization rated AAA and Aaa by S&P and Moody's, respectively. In
such transaction, a separate trust (the "1995-1 Trust") was formed which issued
to various private investors $42 million of asset-backed securities. Payment of
principal of, and interest on, those securities is insured by a payment guaranty
issued by FSA. The proceeds of the transaction were used by the Master Trust to
repay the then-outstanding balance of the Class B Certificates. Since such time,
the Master Trust has issued additional beneficial interests in Loans purchased
by the Master Trust, as evidenced by the Class B Certificates, to finance its
purchase of Loans from the Company. The Company expects additional Permanent
Securitizations to be consummated in the future in order to refinance
periodically amounts outstanding under such Class B Certificates.
Collection of the indebtedness evidenced by the Loans in each of the
Master Trust and the 1995-1 Trust and related administration is handled by World
Omni. World Omni is primarily responsible for invoicing customers, and
collecting and processing payments. The Company acts as master servicer for the
Loans sold to each of the trusts and receives monthly fees from the trusts at
base rates of 2% per annum for the 1995-1 Trust and 4% per annum for the Master
Trust, plus certain late fees and prepayment charges received on the securitized
Loans.
The Company relies in part on cash flow from the Master Trust to
support its operations. Since the Master Trust's interest rates under the
Revolving Securitization are floating and the interest rates charged on the
Loans (which are generally at or near the maximum rates permitted by applicable
state laws) are fixed, increases in the interest rates incurred with respect to
the Class B Certificates could have a material adverse effect both on cash flows
from the Master Trust and on the Company's net income, thereby adversely
affecting the Company's financial condition and results of operations. In order
to mitigate the negative impact of rising interest rates, the Master Trust has
entered into interest rate swap agreements which have the effect of fixing the
rates charged on a portion of the Master Trust's indebtedness. Although these
agreements provide the Master Trust (and therefore the Company) some protection
against rising interest rates, these agreements also reduce the benefits to the
Master Trust (and therefore the Company) when interest rates decline below the
rates set forth in such agreements. In addition, upon refinancing of Loans
through Permanent Securitizations, the interest spread with respect to such
refinanced Loans may be fixed.
27
<PAGE>
Subordinated Debt
In August 1996, the Company sold $12,000,000 aggregate principal amount
of Senior Subordinated Notes due July 2001 (as defined in "Certain
Transactions--Senior Subordinated Indebtedness") and related deferred additional
interest notes due 2006 (the "Deferred Additional Interest Notes" and,
collectively with the Senior Subordinated Notes, the "Morgan Notes"). The Senior
Subordinated Notes bear interest at a rate of 10% per annum, payable quarterly
in arrears commencing October 31, 1996. Immediately prior to the consummation of
this Offering, the Deferred Additional Interest Notes were exchanged for shares
of the Common Stock, representing 10% of the outstanding Common Stock
immediately prior to the consummation of this Offering, and the Senior
Subordinated Notes became the obligation of the Company. The Company also has
outstanding certain junior subordinated indebtedness evidenced by its Junior
Subordinated Notes (as defined in "Certain Transactions-Junior Subordinated
Indebtedness"). The Junior Subordinated Notes bear interest at a rate of 8% per
annum and are payable on demand. See "Certain Transactions-Senior Subordinated
Indebtedness."
28
<PAGE>
BUSINESS
General
The Company is a specialized consumer finance company engaged in the
purchase, securitization and servicing of Loans originated by Dealers for
Non-Prime Consumers. The Company purchases Loans principally from
manufacturer-franchised Dealers in connection with their sale of new and used
automobiles. The Company's strategy is to develop a network of Dealers
throughout the United States that will refer Non-Prime Consumer Loan
applications to the Company. To implement this strategy, the Company offers to
Dealers products and services designed to enhance their ability to sell vehicles
to Non-Prime Consumers. The Company markets these products and services to
Dealers through the efforts of its direct sales force and through a strategic
referral and marketing alliance with a financial institution which has
established relationships with Dealers.
Since the commencement of the Company's operations in October 1994, the
Company has established contractual relationships with over 1,000 Dealers. The
Company attributes its success in rapidly establishing its Dealer base to the
following:
o Value-Added Products and Services - The Company seeks to
differentiate itself from its competitors by introducing
value-added products and services designed to enhance the
ability of Dealers to sell vehicles to Non-Prime Consumers. In
developing such products and services, the Company relies on
its senior management's extensive experience in automobile
finance as well as on ideas the Company solicits and receives
from Dealers. The Company is constantly seeking to improve its
existing products and services and develop new ones in order
to respond to changing market conditions and serve specific
niches in the Non-Prime Consumer market.
o Dealer Assistance - The Company believes that a Dealer's
ability to sell automobiles is enhanced if a Dealer
understands the product and service offerings, underwriting
criteria and financing capabilities of its financing sources.
Accordingly, the Company employs Dealer Relations Managers who
spend considerable time on-site with Dealers in order to
augment Dealers' understanding of the Non-Prime Consumer
market and the Company's products and services.
o Experienced Senior Management - Each of the Company's four
senior operating executives has over 14 years of direct
experience in automobile finance. The Company believes that
this experienced management team provides it with the ability
to maintain acceptable credit quality, supervise its
operations, further expand its business in existing markets
and penetrate new markets.
o Timely Communication of Credit Decisions - In the Company's
experience, a rapid response to Dealers' requests for
financing is critical to developing strong relationships with
Dealers and having frequent opportunities to purchase Loans
from Dealers. The Company believes that it provides this
timely response to Dealers for their Non-Prime Consumers. The
Company typically communicates its credit decisions to Dealers
within 75 minutes of receipt of a Loan application and
provides next-day funding after the submission of completed
Loan documentation.
o Centralized Underwriting - The Company maintains centralized
control over the underwriting and Loan approval functions. The
Company believes that this centralized control ensures the
consistent and efficient underwriting and Loan approval
functions of these functions. The Company's centralized
underwriting policy has enabled the Company to purchase a
portfolio of
29
<PAGE>
Loans which management believes will allow the
Company to maintain acceptable credit quality as its Loan
portfolio grows.
o Underwriting Consistency - The Company employs a proprietary
credit scoring system and well-defined underwriting criteria
to ensure consistency in the underlying credit risks
associated with the Loans it purchases. The Company believes
that this consistency enhances the efficiency of the financing
process from a Dealer's perspective by enabling a Dealer to
gauge accurately which of its Non-Prime Consumer Loan
applications will be approved by the Company.
o Financing Strategy - The Company maintains a revolving
warehouse securitization facility with First Union National
Bank of North Carolina which enables the Company to finance
the purchase of a significant number of Loans through a single
financing source. To date, the Company has successfully
refinanced these borrowings through the discrete
securitization of warehoused Loans, thereby providing new
availability under the revolving warehouse securitization
facility.
The Non-Prime Consumer Automotive Finance Industry
Automobile financing is the second largest sector, by dollar amount, of
consumer installment debt in the United States. According to the United States
Federal Reserve Board, approximately $350 billion of automobile installment
credit was outstanding at the end of 1995. The Company estimates that the
outstanding automobile installment credit attributable to Non-Prime Consumers is
in excess of $60 billion. The Company believes that the portion of the
automobile finance market attributable to Non-Prime Consumers has grown
significantly in recent years and is poised for further growth. Factors
contributing to such growth include the following:
o The number of personal bankruptcy filings in the U.S. has more
than doubled in the past 10 years, with approximately 850,000
such filings occurring in 1995. For the quarter ended June 30,
1996, there were over 280,000 personal bankruptcy filings, a
27.5% increase from the quarter ended June 30, 1995.
o Total consumer debt service payments as a percentage of
disposable income have risen steadily over the past three
years, and as of March 31, 1996, were at their highest level
in 15 years.
o According to the American Bankers Association (the "ABA"),
credit card delinquencies for the quarter ended June 30, 1996
reached 3.66% of accounts, the highest ratio since the ABA
began tracking overdue payments in 1974.
o Sales of used cars grew at a compounded annual growth rate
over two times as large as the comparable growth rate for
sales of new cars during the period 1991 to 1995.
Historically, the market for Non-Prime Consumer credit has been highly
fragmented, with no one company controlling more than 3% of the market. The
Company believes that it is well positioned to gain an increasing share of this
growth market through its emphasis on Dealer support and service.
Dealer Relationships
As of September 30, 1996, the Company had contractual relationships
with over 1,000 Dealers located in 26 states, including over 400 contractual
relationships established through the First Union Strategic Alliance. The
Company focuses on developing relationships with well-established Dealers. Over
98% of the Company's contractual relationships are with manufacturer-franchised
Dealers, rather than independent Dealers. The
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<PAGE>
Company will not enroll a Dealer unless (i) it is duly licensed by the state in
which it does business, (ii) in the case of a used car Dealer, it has been in
business for a minimum of five years, (iii) the Dealer's net worth and financial
stability are acceptable to the Company and (iv) the Dealer's reputation in the
industry is satisfactory to the Company.
Each Dealer doing business with the Company enters into a non-exclusive
written agreement with the Company governing the Company's purchases of Loans
from such Dealer. Although these agreements do not obligate a Dealer to sell, or
the Company to purchase, any particular Loan, the agreements set forth the terms
upon which Loans will be purchased by the Company. Additionally, these
agreements contain representations and warranties to be made with respect to
each Loan purchased by the Company, each automobile which serves as collateral
for the Loan (e.g., that it is properly registered and that the Company is the
first lienholder), and compliance with certain laws and regulations. Dealer
agreements generally provide that the Loans are sold to the Company "without
recourse" (i.e., the Dealer does not assume or retain the credit risk with
respect to any Loan purchased by the Company) unless the Dealer has breached
certain representations and warranties in the agreement.
In the Company's experience, Dealers prefer financing sources which (i)
provide value-added products and services designed to increase Dealers' sales of
vehicles, (ii) maintain regular contact with Dealer finance departments, (iii)
communicate credit decisions in a timely manner, (iv) have consistent
underwriting standards and (v) are well capitalized. The Company's marketing and
operating strategy is designed to meet these needs while assuring that the
Company's delinquency and loss experience remain at acceptable levels.
Management believes that its strategy differentiates it from its competitors.
Products and Services
In its efforts to build a strong Dealer network, the Company provides a
broad array of products and services to Dealers. The most commonly used sales
technique of automobile finance companies is delivery of brochures and rate
cards to Dealers by sales representatives. The Company's Dealer Relations
Managers not only use such material, but also provide services which include (i)
reviewing Dealer inventories to determine adequate inventory levels with
suggestions about Non-Prime Consumer vehicle purchasing, (ii) training Dealer
sales people to identify Non-Prime Consumers who meet the Company's underwriting
criteria, and (iii) working with Dealers to establish separate finance desks
which specifically service the Non-Prime Consumer.
The Company has also developed specific products for Dealers designed
to attract customers and offer flexible financing. For example, Credit
Clinic(TM) is a service pursuant to which the Dealer advertises a sale for the
"credit challenged" and the Company provides an on-site credit counselor who
advises the Non-Prime Consumer on choosing a vehicle with a monthly payment he
or she can manage. The Company believes that this service enhances a Dealer's
sales of automobiles because it encourages Non-Prime Consumers who might
otherwise be apprehensive about their personal credit histories to finance their
acquisition of vehicles.
PCOP (Preferred Customer Option Plan) is a product developed for
customers who demonstrate a greater ability to meet payment requirements, but
have difficulty meeting the payment requirements of the vehicle they would like
to purchase. PCOP enables such a customer to buy the vehicle by reducing the
principal repayment amount until the maturity date of the Loan by up to 20% and
creating a balloon payment for that unpaid amount that is payable at the end of
the loan term. When the balloon payment is due, the customer has the option to
pay the remaining principal balance in cash, refinance the vehicle for up to one
year, or relinquish the vehicle to the Dealer. The Dealer then has the option of
either acquiring the vehicle by paying off the balloon payment or relinquishing
the vehicle to the Company.
In addition to the specific products and services described above, the
Company has other products and services designed to enhance Dealers' sales of
automobiles to Non-Prime Consumers. The Company is
31
<PAGE>
constantly seeking to modify existing products and services and implement new
ones in order to respond to changing market conditions and serve specific niches
in the Non-Prime Consumer market.
Marketing Strategy
General
The Company expects to increase the number of Loans that it purchases,
securitizes and services by (i) utilizing its Dealer Relations Managers to
market the Company's products and services directly to Dealers (including
Dealers with which the Company currently does not have a contractual
relationship) and (ii) forming strategic referral and marketing alliances with
financial institutions which have established relationships with Dealers.
Although the Company is currently doing business with Dealers in 26 states,
approximately 80% of the principal balance of the Company's Loan portfolio was
purchased through Dealers located in Georgia, North Carolina, South Carolina and
Virginia. The Company intends to increase its volume of business in the states
in which it currently operates and to expand opportunistically into additional
states.
The Company's direct marketing strategy is centered around experienced
management and field sales personnel located in key geographic regions. Direct
marketing to Dealers is conducted by Dealer Relations Managers who seek to train
and educate Dealers about the credit profile of the Non-Prime Consumer who meets
the Company's underwriting criteria, familiarize Dealers with the Company's
existing products and services, solicit feedback from Dealers regarding new
products and services which would enhance a Dealer's ability to sell vehicles to
Non-Prime Consumers, and generally provide Dealers with ongoing service and
support. The Company believes that the intensive face-to-face Dealer service
provided by Dealer Relations Managers enhances the effectiveness of the products
and services offered by the Company, strengthens existing Dealer relationships,
and fosters new business.
Through strategic referral and marketing alliances with financial
institutions, the Company expects to increase the number of Loans it purchases
by (i) leveraging a financial institution's existing Dealer relationships and
finance sales force to market the Company's Non-Prime Consumer products and
services and (ii) obtaining the right to review and purchase Non-Prime Consumer
Loans which do not meet a financial institution's underwriting criteria. Through
such strategic referral and marketing alliances, the Company offers financial
institutions the opportunity to provide a broader product offering to Dealers
and to earn additional income based on the number of Loans which are purchased
by the Company as a result of such alliance.
Direct marketing to financial institutions is conducted by senior
management staff and a field service staff of bank relations managers ("Bank
Relations Managers") who are experienced in the Dealer financing policies and
techniques of financial institutions. Generally, senior management seeks to
identify prospective financial institutions suitable for strategic alliances and
negotiate the terms of such alliances. The Bank Relations Managers provide
financial institutions with operating service and support, including training
and education with respect to the Non-Prime Consumer market and the Company's
products and services. Upon consummation of strategic alliances, the Company
expects that financial institution sales personnel will also support the
Company's direct marketing efforts with Dealers.
First Union Strategic Alliance
In April 1996, the Company entered into the First Union Strategic
Alliance. The First Union Strategic Alliance provides for (i) joint marketing of
the Company's products and services by both the Company's sales force and FUSF
sales personnel to the approximately 1,800 Dealers throughout the Southeastern
Franchise with which FUSF has an existing relationship, and (ii) exclusive
referral by FUSF to the Company of all applications for Non-Prime Consumer Loans
received from Dealers located in the Southeastern Franchise falling below
certain established credit guidelines. The First Union Strategic Alliance
significantly enhanced the Company's
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<PAGE>
ability to further its market penetration and increase the size of its Dealer
base through the marketing assistance, support
and exclusive referrals provided by FUSF. Though still in the introductory
phase, through September 30, 1996, the Company has established relationships
with over 400 additional Dealers through the First Union Strategic Alliance and
financed approximately 1,571 Loans having an aggregate principal balance of
$18,905,213. For a description of the referral agreement evidencing the First
Union Strategic Alliance, see "Certain Transactions-First Union."
The introduction of the First Union Strategic Alliance to FUSF sales
personnel in the Southeastern Franchise is expected to be completed by October
1996. Such introduction involves the Company's intensive training of FUSF sales
personnel with respect to both the Non-Prime Consumer market and the Company's
products and services, followed by the development of a joint marketing plan for
Dealers in each region served by FUSF. At any time prior to January 15, 1997,
First Union has the option (but not the obligation) to expand the scope of the
First Union Strategic Alliance to include approximately 1,500 Dealers throughout
five northeastern states with which FUSF has existing relationships.
Credit Underwriting and Administration
Target Market and Customer Profile
The Company seeks to identify customers with stable and predictable
income, whose payments will be made in a timely and consistent manner and who
fall into the "B-", "C+" and "C" credit borrower categories. A description of
the credit rating categories used by the Company is set forth below:
- --------------------------------------------------------------------------------
Category Description
- --------------------------------------------------------------------------------
"A" A consumer who has a long credit history with no defaults, has
been in the same job for at least 18 months and can easily
finance a new car purchase through a bank or captive finance
subsidiary of an automobile manufacturer.
"B" A Non-Prime Consumer who may have had some minor credit
problems in his or her past, or may not have been employed at
his or her current job for 18 months. To finance a new or
late-model used car, the "B" credit borrower may not qualify
for a loan from a bank, but may have success borrowing from a
captive finance subsidiary and can access credit through an
independent finance company.
"C" A Non-Prime Consumer who may have an inconsistent employment
record or more significant or unresolved problems with credit
in the past. To finance a late-model or older used car
purchase, this borrower will generally not be able to obtain a
loan from a captive finance subsidiary or a bank and will have
to access an independent finance company that lends into this
market category.
"D" A consumer who has unfavorable employment history and serious
credit problems, such as multiple personal bankruptcies. This
borrower's only choice is to finance his or her used car
purchase, which is often from an independent as opposed to a
franchise dealer, through an independent finance company that
is active in this market segment.
33
<PAGE>
The Company targets Non-Prime Consumers who previously established good credit
records but who have subsequently experienced non-repetitive credit problems
such as a personal bankruptcy due to illness, loss of employment or poor cash
management. The Company's target customer is generally anxious to re-establish
his or her credit and obtain transportation for employment. The Company's
average customer has a gross monthly income of approximately $3,092 and has
resided in the same area for approximately 8.2 years.
Credit Evaluation Procedures
The Company applies uniform underwriting standards in purchasing Loans.
These standards have been developed and refined over the course of management's
years of experience in the automobile finance industry. The two most important
criteria the Company uses in evaluating a Loan are the applicant's
creditworthiness and the collateral value of the vehicle. The Dealer submits the
customer's credit application to the Company's headquarters in Boca Raton,
Florida, where the customer's creditworthiness is reviewed. The Company utilizes
a proprietary credit scoring system initially developed by Fair, Issac and
Company, Inc. to assist it in determining a customer's creditworthiness. Among
other requirements, the Company requires that each Non-Prime Consumer make a
minimum 10% down payment on the purchase price of the vehicle. The Company's
senior management regularly reviews credit decisions made by the Company's
employees to assure uniformity in underwriting standards. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Loan
Loss and Delinquency Experience" for a numerical analysis of the Company's Loan
loss and delinquency experience.
Approval and Funding Statistics
The table below indicates, since the Company's inception, the number of
applications reviewed by the Company and the percentage of applications
approved, conditionally approved and funded. Conditionally approved applications
are applications by Non-Prime Consumers whose underlying credit is generally
acceptable to the Company but with respect to which the Company requires a
modification of terms (typically monthly payment levels) prior to final credit
approval.
<TABLE>
<CAPTION>
(As of June 30, 1996)
- ----------------------------------------------------------------------------------------------------
Number of Applications % of Applications % of Applications % of
Received Approved Conditionally Approved Applications Funded
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
61,046 21.06% 11.08% 10.74%
</TABLE>
Contract Servicing and Administration
The Company has contracted with World Omni for servicing and
administration of Loans. The servicing procedures have been specifically
tailored to Non-Prime Consumers and include (i) monitoring Loans and related
collateral, (ii) accounting for and posting all payments received, (iii)
responding to borrowers' inquiries, (iv) taking all necessary action to maintain
the security interest granted in the financed automobile, (v) investigating
delinquencies and communicating with borrowers to obtain timely payments, (vi)
pursuing deficiencies on Loans and (vii) when necessary, contracting licensed
third party agents to repossess and dispose of the financed automobile. In
addition, the Company intends to expand its own capability to service Loans.
Collection Policy
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<PAGE>
The Company employs a stringent collection policy which is implemented
by World Omni on a case-by-case basis. Rather than mailing past due notices, the
Company's policy is to immediately begin a proactive collection effort when the
account becomes five days past due. The extent of the Company's actions with
respect to delinquent Loans is measured against the extent of the delinquency.
Generally, the Company's policy is to work with the customer to permit the
customer to keep the automobile and continue making payments. However, the
Company takes more aggressive action if the customer fails to continue making
payments. Generally, the Company reviews whether to begin the process of
repossession when payments are fifty days past due. Repossessions are handled by
an independent licensed repossession firm engaged by the Company. Generally, the
Company's collection policy permits Loan extensions twice during the term of
financing assuming the borrower meets the following criteria: (i) no extensions
are permitted until the borrower has made the first six full payments on the
contract and (ii) a second extension is permitted if a borrower has made an
additional six payments since the first extension.
Management Information Systems
The Company uses advanced computer systems and software specifically
tailored for use by the Company to automate Loan purchasing and servicing. The
Company enters an applicant's data into the system for review by credit
investigators at the Company's office. Once investigators confirm the
applicant's information and complete the credit file, the application is
forwarded to a Company credit analyst for on-line review. After the analyst
makes a decision about the application, the result is telephoned and faxed to
the submitting Dealer. The Company believes that the capabilities and
flexibility of its application processing and its computer system provide the
Company with a competitive advantage.
The Company maintains a local area network of workstations that has a
dedicated connection to World Omni's computer systems. This integrated system
allows the Company and World Omni to share information about a customer from the
time of Loan origination through any collection and repossession procedures, if
necessary. Such integration allows the Company to monitor its delinquencies on a
"real time" basis. Since World Omni handles collections and repossessions for
the Company, all information about each Loan is already in World Omni's database
if such actions become necessary. The Company's computer systems provide the
ability to track all Loan details, assess losses and identify trends among
customers. This information is valuable in determining which consumers are more
likely to default on Loans and lessening the chance of extending Loans to higher
risk customers.
The Company believes that its management team possesses significant
management information systems expertise which will enable the Company to
develop its own internal servicing capacity. Several of the Company's senior
management personnel each worked at World Omni for in excess of 5 years and have
in-depth knowledge relating to the development and use of management information
systems for the automobile finance industry. The Company currently is
considering its options with respect to developing its own servicing capability
and enhancing its management information systems.
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Loan Portfolio Profile
Loan Statistical Profile
The tables below set forth an analysis of Loans purchased by the
Company from inception through the dates specified. The Company has been able to
significantly increase the number of Loans in its portfolio since its inception
while maintaining a consistent profile of key Loan parameters.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
As of As of As of As of As of As of As of
-------- ------- ------- --------- --------- ------ ------
Total December 31, March 31, June 30, September 30, December 31, March 31, June 30,
Portfolio 1994 1995 1995 1995 1995 1996 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate number of Loans
purchased 300 1,095 2,015 3,018 3,886 5,071 6,557
Average amount funded $11,986 $11,626 $11,578 $12,025 $12,121 $12,023 $11,942
Weighted average initial
(annual percentage rate) 17.83% 18.38% 18.43% 18.35% 18.31% 18.41% 18.50%
Weighted average initial term
(months) 54.6 52.1 51.9 52.3 52.5 52.0 53.6
Weighted average initial yield 21.17% 21.73% 21.78% 21.56% 21.45% 21.50% 21.68%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
New vs. Used Automobile Loans
The Company's aggregate principal balance of outstanding Loans as of
June 30, 1996 consisted of 32% new automobile Loans and 68% used automobile
Loans. The Company prefers to finance used automobiles because of the
significant depreciation on new automobiles (in case of repossession) relative
to used automobiles and the higher interest rates the Company is permitted to
charge under certain state laws on used automobile Loans.
<TABLE>
<CAPTION>
(As of June 30, 1996)
- ---------------------------------------------------------------------------------------------------------------------------------
Principal Number of % of Principal % of
Balance Active Loans Balance Active Loans
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New $21,112,895 1,491 31.80% 25.82%
Used $45,284,382 4,283 68.20% 74.18%
---------- ----- ----- -----
Total $66,397,277 5,774 100.00% 100.00%
========== ===== ====== ======
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Geographic Distribution of Loans
The Company has purchased Loans from Dealers in 26 states. The largest
concentration of business of the Company, based on Loan balance, is in the
states of Georgia (approximately 40%), North Carolina (approximately 21%), South
Carolina (approximately 11%) and Virginia (approximately 8%). The Company's
growth strategy includes expanding its network of Dealers in existing states and
in additional states.
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<PAGE>
The list below indicates the geographic distribution of Loans
outstanding as of June 30, 1996.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Principal Percentage of Number of
State Balance Principal Balance Active Loans
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Georgia $26,861,945 40.46% 2,277
North Carolina 13,658,260 20.57% 1,115
South Carolina 7,605,345 11.45% 716
Virginia 5,054,120 7.61% 416
Massachusetts 1,908,692 2.87% 211
Tennessee 1,872,768 2.82% 147
Maine 1,765,213 2.66% 201
Texas 1,684,766 2.54% 137
Ohio 1,207,335 1.82% 116
Maryland 1,147,884 1.73% 89
Pennsylvania 924,163 1.39% 101
Florida 915,725 1.38% 76
All Other States (1) 1,791,061 2.70% 172
- ---------------------------------------------------------------------------------------------------------------------------
TOTALS $66,397,277 100% 5,774
===========================================================================================================================
</TABLE>
(1) No state other than those listed represents more than one percent of the
principal balance of Loans outstanding.
Competition
The non-prime credit market is highly fragmented, consisting of a few
national and many regional and local competitors. Existing and potential
competitors include well-established financial institutions, such as commercial
banks, credit unions, savings and loan associations, small loan companies,
leasing companies and captive finance companies owned by automobile
manufacturers and others. Many of these financial institutions do not
consistently solicit business in the Non-Prime Consumer credit market. The
Company believes that captive finance companies generally focus on new car
financing and direct their marketing efforts on the Non-Prime Consumer market
only when inventory control and/or production scheduling requirements of their
parent organization dictate a need to enhance sales volumes, and then exit the
market once such sales volumes are satisfied. The Company also believes that
regulatory oversight and capital requirements imposed by market conditions and
governmental agencies have limited the activities of many banks and savings and
loan associations in the Non-Prime Consumer credit market. As a result, the
Non-Prime Consumer credit market is primarily serviced by smaller finance
companies that solicit business when and as their capital resources permit. Due
to the lack of major, consistent financing sources and the absence of
significant barriers to entry, many companies have entered this market in recent
years, including well-capitalized public companies. Recent entrants include
General Electric Capital Corporation, whose indirect finance program consists of
relationships with several small, regional independent non-prime automobile
finance companies. In addition, Ford Motor Credit Company, Mellon Bank
Corporation, KeyCorp and Southern National Corp. have all recently devoted
resources toward the Non-Prime Consumer market. In addition, there have been
several independent finance companies that have also recently entered the
market.
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<PAGE>
The Company believes that no one competitor or group of competitors has
a dominant presence in the Non-Prime Consumer market segment of "B-," "C+" and
"C" credit consumers. The Company's strategy is designed to capitalize on the
lack of a major national financing source in this market niche. The Company
believes that its competitors include: AutoFinance Group, Inc. (recently merged
into Key Auto Inc.), Auto One Acceptance Corp. and First Merchants Acceptance
Corp.
Regulation
The Company's business is subject to regulation and licensing under
various federal, state and local statutes and regulations. The Company's
business operations are conducted with Dealers located in 26 states and,
accordingly, the laws and regulations of such states govern the Company's
operations. Most states in which the Company purchases Loans (i) limit the
interest rate, fees and other charges that may be imposed by, or prescribe
certain other terms of, the Loans that the Company purchases and (ii) define the
Company's rights to repossess and sell collateral. In addition, the Company is
required to be licensed or registered to conduct its finance operations in 11 of
the 26 states in which the Company currently purchases Loans. As the Company
expands its operations into other states, it will be required to comply with the
laws of such states.
Numerous federal and state consumer protection laws and related
regulations impose substantive disclosure requirements upon lenders and services
involved in automotive financing. Some of the federal laws and regulations
include the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal
Trade Commission Act, the Fair Debt Collection Practices Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Board's Regulation B and Z and the Soldiers'
and Sailors' Civil Relief Act.
In addition, the Federal Trade Commission ("FTC") has adopted a
limitation on the holder-in-due-course rule which has the effect of subjecting
persons that finance consumer credit transactions (and certain related lenders
and their assignees) to all claims and defenses which the purchaser could assert
against the seller of the goods and services. With respect to used automobiles
specifically, the FTC's Rule on Sale of Used Vehicles requires that all sellers
of used automobiles prepare, complete and display a Buyer's Guide which explains
the warranty coverage for such automobiles. The Credit Practices Rules of the
FTC impose additional restrictions on sales contract provisions and credit
practices.
Certain states in which the Company operates have adopted motor vehicle
retail installment sales acts or variations thereof. Certain states have adopted
the Uniform Consumer Credit Code, subject to certain variations. This law and
similar laws in the other states in which the Company purchases Loans regulate,
among other things, the interest rate, fees and other charges and terms and
conditions of motor vehicle retail installment loans. These laws also impose
restrictions on consumer transactions and require disclosures in addition to
those required under federal law. These requirements impose specific statutory
liabilities upon creditors who fail to comply. In addition, certain states
impose plain language restrictions on the textual provisions of motor vehicle
retail installment sales contracts in the context of consumer credit
transactions. Furthermore, certain states or municipalities require that a
creditor provide a purchaser of a motor vehicle with a foreign language
translation of the entire motor vehicle retail installment sale contract if the
contract was negotiated in a language other than English. The plain language and
foreign language laws impose specific liabilities on creditors who fail to
comply.
The laws of certain states grant to the purchasers of vehicles certain
rights of rescission under so-called "lemon laws." Under such statutes,
purchasers of motor vehicles may be able to seek recoveries from, or assert
defenses against, the Company.
In the event of default by an obligor, the Company has all the remedies
of a secured party under the Uniform Commercial Code ("UCC"), except where
specifically limited by other state laws. The remedies of a secured party under
the UCC include the right to repossession by self-help means, unless such means
would
38
<PAGE>
constitute a breach of the peace. In the event of default by the obligor,
some jurisdictions require that the obligor be notified and be given time in
which to cure the default prior to repossession. In addition, courts have
applied general equitable principles to secured parties pursuing repossession or
litigation involving deficiency balances.
The UCC and other state laws require a secured party who has
repossessed collateral to provide an obligor with reasonable notice of the date,
time and place of any public sale and/or the date after which any private sale
of the collateral may be held. The obligor has the right to redeem the
collateral prior to actual sale.
The proceeds from resale of financed vehicles generally will be applied
first to the expenses of repossession and resale and then to the satisfaction of
the Loan. A deficiency judgement can be sought in most states subject to
satisfaction of statutory procedural requirements by the secured party and
certain limitations as to the initial sale price of the motor vehicle. Certain
state laws require the secured party to remit the surplus to any holder of a
lien with respect to the vehicle, or, if no such lienholder exists, the UCC
requires the secured party to remit the surplus to the former owner of the
financed vehicle.
In addition to laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of the Company to
realize upon collateral or enforce a deficiency judgment.
The Company believes that it is in substantial compliance with all
applicable material laws and regulations. Adverse changes in the laws or
regulations to which the Company's business is subject, or in the interpretation
thereof, could have a material adverse effect on the Company's business. Because
the Company generally charges the highest finance charges permitted by law,
reductions in statutory maximum rates could directly impair the Company's
profitability.
Banking Regulation
As a result of beneficial ownership in the Company by the First Union
Partner, the Company is subject to Banking Laws. For example, the Company is
subject to the supervision and examination of the Office of the Comptroller of
the Currency (the "OCC"), one of the principal regulatory bodies having
jurisdiction over First Union and the First Union Partner. The OCC has reviewed
the First Union Strategic Alliance and the terms thereof, and the OCC's written
approval was required in order for the First Union Strategic Alliance to be
consummated (the "OCC Approval"). To facilitate compliance by First Union and
the First Union Partner with the OCC Approval and other Banking Laws, the
Company has agreed to engage solely in activities that are permissible for
national banks as determined by Banking Laws as in effect from time to time. If
the First Union Partner determines that any proposed activities of the Company
are impermissible for national banks, such affiliate has the right to prevent
the Company from engaging in such activities. Management does not believe,
however, that the Banking Laws will impact significantly the manner in which the
Company intends to conduct or expand its business or product and service
offerings, although there can be no assurance that the Banking Laws will not
have such an effect. See "Risk Factors--Banking and Other Restrictions."
Facilities
The Company's headquarters are located at 621 N.W. 53rd Street, Suite
200, Boca Raton, Florida 33487. The Company currently has leases on
approximately 14,000 square feet of office space on favorable terms, and has
recently exercised an option on an additional 3,300 square feet adjacent to the
current leased premises.
39
<PAGE>
Employees
At June 30, 1996, the Company had 49 employees, of whom 14 held
marketing positions, 28 held administrative positions and 7 held executive
positions.
Litigation
The Company may be involved from time to time in routine litigation
incidental to its business. However, the Company believes that it is not a party
to any material pending litigation which is likely to have a significant
negative impact on the business, income, assets or operation of the Company.
40
<PAGE>
MANAGEMENT
Executive Officers and Directors
Certain information concerning directors and executive officers of the
Company is set forth below:
Name Age Position with the Company
------ --- -------------------------
Gary L. Shapiro 46 Chairman of the Board and Chief Executive Officer
Keith B. Stein 39 Vice Chairman, Treasurer, Secretary and Director
Roy E. Tipton 42 President and Director
William Magro 47 Executive Vice President
Blane H. MacDonald 39 Vice President and Chief Operating Officer
Kevin G. Adams 39 Vice President and Chief Financial Officer
Stephen R. Stack 38 Vice President
Edgar A. Otto 66 Director
Gary L. Shapiro has been the Chairman and Chief Executive Officer of
National Financial Companies LLC (the successor to National Financial
Corporation) for more than the past five years. Mr. Shapiro has been Chairman
and Chief Executive Officer of National Auto, the general partner of the NAFCO
Partnership, since October 1994 and will continue as Chief Executive Officer and
Chairman of the Board of Directors of the Company. Mr. Shapiro served as a
partner in the firm of Mailman, Ross, Toyes and Shapiro, Certified Public
Accountants, from November 1973 to March 1982. In 1981, Mr. Shapiro founded
National Machine Tool Finance Corporation ("National Tool"), a machine tool
finance company. He served as President of National Tool until 1990.
Keith B. Stein has been the Executive Vice President and Assistant
Secretary of National Auto since January 1995, and a Managing Director of
National Financial Companies LLC since January 1995. Mr. Stein will continue as
Vice Chairman, Secretary, Treasurer and a Director of the Company. Mr. Stein
served from March 1993 to September 1994 as Senior Vice President, Secretary and
General Counsel of WestPoint Stevens Inc. after having served the same company
from October 1992 to February 1993 in the capacity of Acting General Counsel and
Secretary. From May 1989 to February 1993, Mr. Stein was associated with the
law firm of Weil, Gotshal & Manges LLP. Mr. Stein has been a director of DVL,
Inc., a public company engaged in the real estate finance business, since
September 1996.
Roy E. Tipton has been the President of the NAFCO Partnership since May
1994 and will continue as the President and a Director of the Company. Mr.
Tipton served from April 1992 to May 1994 as the President of Stanford
Automotive Financial Company, an automobile finance company. Mr. Tipton served
from April 1991 to April 1992 as a Regional Manager of Primus Auto Company, an
automobile finance company ("Primus"). Mr. Tipton served in several capacities
at each of Ford Motor Credit Company from June 1975 to September 1985 and at
World Omni from September 1985 to February 1990.
William Magro has been the Executive Vice President of the NAFCO
Partnership since September 1994 and will continue as the Executive Vice
President of the Company. Mr. Magro served from January 1985 to August 1994 as a
Director of Collection and Client Services for World Omni. Mr. Magro served from
January 1972 to December 1984 as a Collection Supervisor and a Dealer Relations
Supervisor at General Motors Acceptance Corp.
Blane H. MacDonald has been the Vice President and Chief Operating
Officer of the NAFCO Partnership since July 1994 and will continue as the Vice
President and Chief Operating Officer of the Company.
41
<PAGE>
Mr. MacDonald served from February 1994 to July 1994 as a Vice President of
Operations of AutoLend Corporation, an automobile finance concern. Mr. MacDonald
served from February 1992 to February 1994 as a Vice President of Operations of
Stanford Automotive Financial, an automobile finance company. Mr. MacDonald
served from October 1990 to January 1992 as Sales Representative for the State
of Florida at Primus. Mr. MacDonald served in various positions from August 1984
to September 1990 at World Omni and from February 1982 to July 1984 at General
Motors Acceptance Corporation.
Kevin G. Adams has been a Vice President and Chief Financial Officer of
the NAFCO Partnership since October 1994 and will continue as a Vice President
and Chief Financial Officer of the Company. Mr. Adams served from December 1992
to October 1994 as a Vice President of National Finance Companies LLC. Mr. Adams
served from September 1983 to June 1992 as a Vice President and Chief Financial
Officer of National Tool.
Steven R. Stack has been Vice President of the NAFCO Partnership since
December 1995 and will continue as a Vice President of the Company. Mr. Stack
served from March 1990 through September 1995 in various executive positions
(including as executive director) with Alamo Rent-A-Car, Inc., an automobile
rental concession. From 1976 through 1989, Mr. Stack held various positions with
General Motors Acceptance Corporation.
Edgar A. Otto has been a Director of National Auto since October 1994
and will continue as a Director of the Company. Mr. Otto was a principal of
National Financial Corporation from its inception until April 1996. From 1971 to
1994, Mr. Otto served as President and Chief Executive Officer of Therma Systems
Corporation, a manufacturing company. He is currently Chairman of National
Healthnet Corporation, a healthcare services provider.
Board of Directors; Committees
Pursuant to the Certificate of Incorporation and By-Laws of the
Company, the Board of Directors consists of such number of directors as the
Board of Directors determines from time to time. The Board of Directors has
initially set the number of directors at seven. Currently, the Board of
Directors consists of four directors, and the vacancies will be filled with
three independent directors. The directors are divided into three classes. At
the first annual meeting of stockholders after the Offering, one class will be
elected to serve for a term expiring one year thereafter, the second class will
be elected to serve for a term expiring two years thereafter and the third class
will be elected to serve for a term expiring three years thereafter. After the
expiration of such initial terms, each class will be elected for a three-year
term.
Following the Reorganization, the Board of Directors will form an Audit
Committee, Compensation Committee and Executive Committee. The functions of the
Audit Committee will be to recommend to the Board of Directors independent
auditors for the Company and to analyze the reports and recommendations of such
auditors. The Compensation Committee will review the compensation of the
Chairman and employee benefit and incentive plans and present recommendations
thereon to the Board of Directors and will also administer the Company's 1996
Stock Option Plan. The Compensation Committee will consist of three directors,
two of whom will be "disinterested" (as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")). The function
of the Executive Committee will be to manage the day-to-day business and affairs
of the Company and to act on behalf of the Board of Directors to authorize and
approve actions of the Company's officers and employees.
Compensation of Directors
Directors who are also employees of the Company receive no remuneration
for services as members of the Board or any committee of the Board. Directors
who are not employed by the Company receive an annual
42
<PAGE>
retainer of stock options automatically granted on the date on which the
annual meeting of the Company's stockholders is held each year plus $1,000 for
each meeting of the Board that he attends and $500 for each meeting of a
Committee that he attends, plus, in each case, expenses incident to his
attendance at such meetings. The purchase price of the Common Stock covered by
such options is the fair market value of such Common Stock on the date of grant.
These options become exercisable at the rate of per year commencing one
year after the date of grant.
Executive Compensation
The following table sets forth the compensation paid for services
rendered in all capacities during the last fiscal year of the Company to the
Company's Chief Executive Officer and to the four other most highly compensated
executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
1995 Annual Compensation
-------------------------------------------
Other Annual All Other
Name and Principal Position Salary Bonus(1) Compensation Compensation
- --------------------------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C>
Gary L. Shapiro(2)(3) -- -- -- --
Chief Executive Officer
Roy E. Tipton(4)(6) $ 106,306 $ 40,000 -- --
President
William Magro(5) $ 96,277 -- -- --
Executive Vice President
Blane H. MacDonald(4)(6) $ 85,539 $ 27,500 -- --
Vice President and Chief Operating Officer
Kevin G. Adams(4)(6) $ 77,761 $ 25,000 -- --
Chief Financial Officer and Vice President
</TABLE>
- ----------------------
(1) Bonuses in respect of services rendered in 1994 were determined and paid
in 1995 ($33,040 for Mr. Tipton and $15,000 for Mr. Adams).
(2) No compensation was received from the Company in 1995. However, National
Auto, the general partner of the NAFCO Partnership, is paid a fee by the
Company for management services rendered pursuant to a management
agreement. National Financial Companies LLC, a limited liability company
controlled by Mr. Shapiro, is paid a fee by National Auto for management
services rendered to National Auto. See "Certain Transactions--Management
and Services Agreements."
(3) Mr. Shapiro is an officer, director and stockholder of National Auto.
(4) Compensation was paid by the NAFCO Partnership.
(5) Compensation was paid by the NAFCO Partnership and the ACCH Partnership.
(6) Bonus amounts were payable at the discretion of the general partner of the
applicable partnership.
No restricted stock awards, stock appreciation rights or long-term
incentive plan awards were awarded to, earned by or paid to the named executive
officers during the fiscal year ended December 31, 1995.
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<PAGE>
Employment Agreements
Effective September 16, 1995 and October 19, 1995, the Company entered
into three-year employment agreements with each of Roy E. Tipton, President of
the Company, and Blane H. MacDonald, Vice President and Chief Operating Officer
of the Company, respectively. Mr. Tipton's annual base salary from the effective
date of his agreement through December 31, 1995 was $115,000 and will be (i)
$130,000 from January 1, 1996 to December 31, 1996, (ii) $155,000 from January
1, 1997 to December 31, 1997 and (iii) $180,000 from January 1, 1998 to December
31, 1998. Mr. MacDonald's annual base salary from the effective date of his
agreement through December 31, 1995 was $88,000 and will be (i) $103,000 from
January 1, 1996 to December 31, 1996, (ii) $116,000 from January 1, 1997 to
December 31, 1997 and (iii) $126,000 from January 1, 1998 to December 31, 1998.
Each of Messrs. Tipton and MacDonald will receive from the Company an incentive
bonus based upon the achievement of certain performance goals and payable, in
each case, on or before March 31 of each of 1996, 1997 and 1998. Pursuant to Mr.
Tipton's agreement, the incentive bonus is computed as the lesser of a
prescribed fraction of the Company's net annual pre-tax income and (i) in 1996,
$78,000, (ii) in 1997, $96,875 and (iii) in 1998, $117,000. Pursuant to Mr.
MacDonald's agreement, the incentive bonus is computed as the lesser of a
prescribed fraction of the Company's net annual pre-tax income and (i) in 1996,
$51,500, (ii) in 1997, $58,000, and (iii) in 1998, $63,000. Each of the
agreements provides for the participation by Messrs. Tipton and MacDonald in any
stock option plan adopted by the Company or its successors.
Effective July 1, 1996, the Company entered into a three-year
employment agreement with William Magro, Executive Vice President of the
Company. Mr. Magro's annual base salary from the effective date of his agreement
through December 31, 1996 is $110,571 and will be (i) $118,000 from January 1,
1997 to December 31, 1997, (ii) $127,500 from January 1, 1998 to December 31,
1998 and (iii) $137,000 from January 1, 1999 to June 30, 1999. Mr. Magro will
receive an incentive bonus based upon the achievement of certain performance
goals, payable on or before March 31 of each of 1996, 1997, 1998 and 1999. The
incentive bonus is computed as the lesser of a prescribed fraction of the
Company's net annual pre-tax income and (i) in 1996, $55,285.50, (ii) in 1997,
$64,900, (iii) in 1998 $76,500 and (iv) in 1999, $82,200. Mr. Magro's agreement
provides for his participation in any stock option plan adopted by the Company
or its successors.
1996 Stock Option Plan
As part of the Reorganization, it is anticipated that the Board of
Directors of the Company will adopt a stock option plan (the "1996 Stock Option
Plan"). The 1996 Stock Option Plan is intended to afford certain key employees
and outside directors of the Company who are responsible for the continued
growth of the Company an opportunity to acquire a proprietary interest in the
Company.
The 1996 Stock Option Plan will provide for the granting of options to
purchase an aggregate of shares of Common Stock (subject to adjustment in
the event of stock dividends, stock splits and other contingencies). Options
granted under the 1996 Stock Option Plan will not be intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The 1996 Stock Option Plan is
intended to be qualified under Rule 16b-3 under the Exchange Act.
The 1996 Stock Option Plan will require the Board of Directors to
designate an option committee (the "Committee") to administer the 1996 Stock
Option Plan, consisting of no fewer than two directors who are "non-employee
directors" within the meaning of Rule 16b-3 under the Exchange Act (or any
successor rule or regulation). The Board of Directors may at any time remove
members from and may fill any vacancy on the Committee. The Committee will have
the authority, in its discretion and subject to the express provisions of the
1996 Stock Option Plan, to determine, among other things, the persons to receive
options, the date of grant of such options, the number of shares to be subject
to each option and the purchase price of each share subject to
44
<PAGE>
such options. The Company will receive no monetary consideration for granting
options under the 1996 Stock Option Plan.
The 1996 Stock Option Plan will also provide for the automatic grant,
to each non-employee director of the Company, of options to purchase shares
of Common Stock on the date on which the annual meeting of the Company's
stockholders is held each year. See "-Compensation of Directors."
The purchase price of shares of Common Stock issuable upon exercise of
each option granted pursuant to the 1996 Stock Option Plan will be the fair
market value of the shares on the date of grant. The expiration and vesting of
options granted will be determined by the Committee.
In the event of any change in the outstanding shares of Common Stock of
the Company through reorganization, stock dividend, subdivision or combination
of shares, or other like change in capital structure of the Company, appropriate
adjustments will be made by the Committee to each outstanding option under the
1996 Stock Option Plan and to the maximum number of shares of Common Stock which
may be acquired pursuant to the exercise of options, and the price per share
subject to outstanding options shall be proportionately adjusted.
Compensation Committee Interlocks and Insider Participation
Prior to the Reorganization, there was no Compensation Committee of the
Board of Directors. During fiscal 1995, executive compensation decisions were
made by the Board of Directors of National Auto, the general partner of the
NAFCO Partnership, which consisted of Messrs. Gary L. Shapiro and Edgar A. Otto.
Gary L. Shapiro, Chairman of the Board of Directors and Chief Executive
Officer of the Company, and Edgar A. Otto, a director of the Company, are
directors and officers of National Auto, the general partner of the NAFCO
Partnership and the ACCH Partnership. The NAFCO Partnership is a limited
partner of the ACCH Partnership. Mr. Shapiro is the general partner of S
Associates which is a limited partner of the NAFCO Partnership. Mr. Otto is the
general partner of O Associates which is a limited partner of the NAFCO
Partnership.
National Auto has entered into a Services Agreement with National
Financial Companies LLC ("National Financial"). Mr. Shapiro is a member and an
officer of National Financial. Mr. Stein is a member and an officer of National
Financial and an officer of National Auto. See "Certain Transactions-Management
and Services Agreements."
401(k) Profit Sharing Plan
The Company adopted a 401(k) Profit Sharing Plan (the "Plan") in August
1996 that is intended to be a tax qualified defined contribution plan
administered by NAFCO. All employees of the Company, other than part time
employees who work less than 1,000 hours per year, are eligible to participate
in the Plan once they have completed six months of continuous service.
A participating employee may contribute up to 15% of his or her
compensation, with a maximum contribution of $9,500 to the Plan on a pre-tax
basis. The Company may make a matching contribution to each employee's account
based on the amount of pre-tax contributions made by the employee. Currently,
the Company is allocating a 50% match of the first 6% contributed by the
employee, subject to certain legal limitations imposed on tax-qualified plans.
Matching contributions by the Company are made irrespective of profits and are
allocated only to qualified participants on a monthly basis.
45
<PAGE>
Contributions to the Plan are invested in a variety of funds as
directed by the Plan participants. All pre-tax employee contributions to the
Plan are 100% vested and matching contributions by the Company are vested at 20%
per annum over a five-year period from the date the employee joined the Plan.
All active full- time employees that had completed 1,000 hours of service as of
August 30, 1996 were invited to join the Plan and have matching contribution
vested rights predated to their date of employment.
Generally, employees may not receive distributions from the Plan until
their retirement, death, certain disabilities or termination of employment.
Loans are prohibited by the Plan, although distributions for certain hardship
purposes are allowed in accordance with tax regulations promulgated under the
Code. All distributions for the Plan are made in the form of a single lump sum
distribution.
Limitation of Liability and Indemnification
Pursuant to the provisions of the Delaware General Corporation Law (the
"DGCL"), the Company has adopted provisions in its Certificate of Incorporation
which provide that directors of the Company shall not be personally liable for
monetary damages to the Company or its stockholders for a breach of fiduciary
duty as a director, except for liability as a result of (i) a breach of the
director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) an act related to an unlawful stock repurchase or
payment of a dividend under Section 174 of the DGCL; and (iv) transactions from
which the director derived an improper personal benefit. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission.
The Company's Certificate of Incorporation also authorizes the Company
to indemnify its officers, directors and other agents, by means of by-laws,
agreements or otherwise, to the fullest extent permitted under the DGCL. The
Company has entered into separate indemnification agreements with its directors
and officers which are, in some cases, broader than the specific indemnification
provisions contained in the DGCL. The indemnification agreements require the
Company, among other things, to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct of
a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance if available on reasonable terms.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Company as to which
indemnification is being sought, nor is the Company aware of any pending or
threatened litigation that may result in claims for indemnification by any
director, officer, employee or other agent.
46
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of , 1996, and as adjusted to reflect
the sale of the Common Stock offered hereby, by (i) each person who is known by
the Company to own beneficially 5% or more of the Common Stock, (ii) each
director of the Company, (iii) each of the named executive officers and (iv) all
directors and executive officers as a group. Unless otherwise indicated, the
Company believes all persons listed have sole voting power and investment power
with respect to such shares.
<TABLE>
<CAPTION>
Name and Address Beneficial Ownership Beneficial Ownership
of Beneficial Owner(1) Prior to Offering(2)(5) After Offering(2)(5)
---------------------- ------------------------ --------------------
Principal Stockholders, Directors Number of Number of
and Named Executive Officers: Shares Percent Shares Percent
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
National Auto Finance Company
L.P.(2)...........................
621 N.W. 53rd Street, Suite 200
Boca Raton, Florida 33487
Morgan Guaranty Trust Company (3) (3)
of New York, as trustee...........
522 Fifth Avenue
New York, New York 10036
Gary L. Shapiro.....................
Edgar A. Otto.......................
Keith B. Stein......................
Roy E. Tipton.......................
William Magro.......................
Blane H. MacDonald..................
Kevin G. Adams......................
All directors and executive officers
as a group (8 persons)(2)(4)......
</TABLE>
- ------------------------
(1) The business address of each of the directors and current executive
officers listed in the table above is c/o National Auto Finance Company,
Inc., 621 N.W. 53rd Street, Suite 200, Boca Raton, Florida 33487.
(2) The general partner of the NAFCO Partnership is National Auto. National
Auto holds a 1% general partner interest in the NAFCO Partnership. A
majority of the outstanding capital stock of National Auto is owned
collectively by Messrs. Shapiro and Otto.
The limited partners of the NAFCO Partnership include S Associates, O
Associates, the First Union Partners, Keith B. Stein, Roy E. Tipton,
William Magro, Blane H. MacDonald and Kevin G. Adams. Mr. Shapiro owns all
of the outstanding capital stock of the general partner of S Associates.
Mr. Otto owns all of the outstanding capital stock of the general partner
of O Associates. The First Union Partner holds a vested 15% limited partner
economic interest in the NAFCO Partnership. The remaining limited partners
of the NAFCO Partnership hold the balance of the limited partner economic
interests. The First Union Partner may earn up to an additional 34% limited
partner economic interest, thus diluting the other limited partners, over a
period of time expiring on January 31, 1999 (the "Adjustment Period") based
upon various factors specified in the NAFCO Partnership Agreement,
including the overall performance of the First Union Strategic Alliance and
the total market value of Company over the Adjustment Period (the
"Adjustment Criteria"). Except for the First Union Partner, each limited
partner of the NAFCO Partnership has the right to vote on certain matters
specified in the NAFCO Partnership Agreement commensurate with each such
limited partner's respective economic limited partner interest. In
accordance with the NAFCO Partnership Agreement, the consent of the First
Union Partner is generally required before the NAFCO Partnership may take
certain fundamental actions.
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<PAGE>
Depending on the Adjustment Criteria, the First Union Partner's vested
economic limited partner interest may be increased up to an approximate
additional 34% (or an aggregate of approximately 49% when added to the
First Union Partner's current vested economic limited partner interest
(i.e., approximately 15%)) of the Common Stock held by the NAFCO
Partnership. Any such increase in the First Union Partner's economic
limited partner interest would be non-dilutive to the public stockholders
of the Company.
(3) Includes shares held by Morgan Guaranty Trust Company of New York, as
trustee of the Commingled Pension Fund Trust of Morgan Guaranty Trust
Company of New York, Morgan Guaranty Trust Company of New York, as trustee
of the Multi-Market Special Investment Trust Fund of Morgan Guaranty Trust
Company of New York and Morgan Guaranty Trust Company of New York, as
Investment Manager and Agent for the Alfred P. Sloan Foundation.
(4) Excludes shares held by the NAFCO Partnership.
(5) Beneficial ownership is calculated in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder.
48
<PAGE>
CERTAIN TRANSACTIONS
General
The Company, from time to time, has entered into transactions with
certain of its principals and entities in which they have an interest. The
Company believes that each such transactions has been on terms no less
favorable to the Company than could have been obtained in a transaction with an
independent third party.
The Reorganization
The NAFCO Partnership and the ACCH Partnership were organized in
October 1994 and September 1995, respectively, and have conducted the business
of the Company since their inception. Directors and executive officers of the
Company will have a direct and material interest in certain transactions that
will constitute the Reorganization, as described below. The Company believes
that the terms of such transactions will be as favorable as those which could
be obtained from an unaffiliated third party. See "The Reorganization."
First Union
The NAFCO Partnership
The First Union Partner is a limited partner of the NAFCO Partnership
and has an economic interest with respect to approximately 15% of the Common
Stock of the Company held by the NAFCO Partnership (or shares of the Common
Stock upon consummation of the Offering). Based upon several factors, including
the overall performance of the First Union Strategic Alliance and the total
market value of the Company over a specified time period, the First Union
Partner may obtain an economic interest with respect to an approximate
additional 34% of the Common Stock held by the NAFCO Partnership. Any such
increase would be non-dilutive to the public stockholders. See "--Partnership
Agreements" and "Principal Stockholders."
The First Union Strategic Alliance
The First Union Strategic Alliance is evidenced by a referral agreement
dated as of April 15, 1996 (the "Referral Agreement") between the Company and
First Union. Pursuant to the Referral Agreement, First Union will (i) have FUSF
introduce the Company to Dealers in the Southeastern Franchise for which First
Union provides consumer financing and (ii) refer on an exclusive basis to the
Company certain Non-Prime Consumer credit applications for Loans received from
such Dealers. In consideration for such services, First Union receives a fee on
each Loan purchased by the Company as a result of the First Union Strategic
Alliance. Pursuant to the Referral Agreement, funded Loan referrals are without
recourse to First Union. The parties are, however, liable to each other for any
breach of their respective representations, warranties, covenants and
indemnities. The term of the Referral Agreement is for an initial period of
three years from the date of its execution and is renewable by the Company on
each anniversary of such date for an additional year, provided that First Union
consents to such renewal. The agreement contains provisions which preclude the
Company from purchasing Loans from FUSF Dealers through alliances with other
financial institutions and which permit First Union to terminate the agreement
upon, among other things, a "change of control" of the Company.
Lending
First Union National Bank of North Carolina, a subsidiary of First
Union Corporation, is the sole holder of the Class B Certificates which relate
to the Revolving Securitization. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations Liquidity and Capital Resources."
49
<PAGE>
Placement Agent and Underwriting
First Union Capital Markets Corporation, a wholly owned subsidiary of
First Union Corporation ("FUCMC"), has served as placement agent for notes
issued by the Company to the Morgan Group (as defined below). FUCMC has also
privately placed asset-backed securities of the Company in connection with the
Company's securitization transactions and may continue to act as placement agent
or underwriter for the Company's future securitization activities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resource."
Registration Rights
At any time after six months following the consummation of this
Offering, the Company shall, promptly after receiving notice from the First
Union Partner requesting the registration of a specific number of shares of the
Common Stock, file with the Securities and Exchange Commission (the
"Commission") a registration statement with respect to such shares of Common
Stock. The First Union Partner will be entitled to two demand requests.
Senior Subordinated Indebtedness
General
Pursuant to the Note Purchase Agreement, the Company authorized the
issuance and sale of (i) $12 million aggregate principal amount of its senior
subordinated notes (the "Senior Subordinated Notes") and (ii) the Deferred
Additional Interest Notes to each of Morgan Guaranty Trust Company of New York,
as trustee of the Commingled Pension Fund Trust (Multi-Market Special Investment
Fund II) of Morgan Guaranty Trust Company of New York ("MGTC"), Morgan Guaranty
Trust Company of New York, as Trustee of the Multi- Market Special Investment
Trust Fund of Morgan Guaranty Trust Company of New York ("MGMM") and Morgan
Guaranty Trust Company of New York, as Investment Manager and Agent for the
Alfred P. Sloan Foundation ("MGAS"). Immediately prior to the consummation of
this Offering, the Deferred Additional Interest Notes were exchanged for shares
of Common Stock representing 10% of the outstanding Common Stock of the Company
immediately prior to the consummation of this Offering, and the Senior
Subordinated Notes became the obligation of the Company. The Note Purchase
Agreement generally prohibits the Company's payment of dividends on its Common
Stock, subject to certain conditions, following the consummation of this
Offering, so long as any amount remains unpaid on the Senior Subordinated Notes.
The Senior Subordinated Notes, whose final maturity date is in July 2001, bear
interest on the unpaid principal amount thereof at a rate of 10% per annum; such
interest is payable quarterly in arrears on July 31, October 31, January 31 and
April 30 of each year commencing October 31, 1996.
Registration Rights
Following consummation of this Offering, the Company will, as promptly
as practicable after receiving notice from MGMM, MGAS and MGTC (the "Morgan
Group") requesting the registration of a specific number of shares of the Common
Stock, file with the Commission a registration statement with respect to such
shares of Common Stock. Each such holder will be entitled to two demand
requests. In certain limited circumstances (e.g., if in the Company's reasonable
judgment such filing would adversely affect, among other things, a proposed
financing, reorganization or recapitalization of the Company), the Company may
delay the requested filing of a registration statement.
50
<PAGE>
The Morgan Group has agreed, upon the Underwriter's request, not to
sell or distribute securities of the Company of the same class as or convertible
into or exchangeable or exercisable for the securities included in the
registration statement during the 10-day period prior to and the day period
beginning on the closing date of an underwritten offering made pursuant to such
registration statement. Likewise, the Company agrees not to effect any sale,
distribution or private or public offering of such securities during the
aforementioned periods.
Junior Subordinated Indebtedness
During 1994, Gary L. Shapiro, Edgar A. Otto and Stephen L. Gurba loaned
$1,525,000, $3,675,000 and $123,732 respectively, to the Company. During 1995,
Messrs. Shapiro and Otto loaned $219,000 and $72,000, respectively, to the
Company. During 1995, Nova Financial Corporation and Nova Corporation, each of
which is a privately held corporation controlled by Messrs. Shapiro and Otto,
loaned $100,000 and $1,115,000, respectively, to the Company. During 1996, Nova
Corporation loaned $700,000 to the Company. All of such loans were made on a
junior subordinated basis and in exchange for promissory notes of the Company
(collectively, the "Junior Subordinated Notes"). The Company believes that the
terms of each of the Junior Subordinated Notes are as favorable as could have
been obtained from an unaffiliated third party. Each of the Junior Subordinated
Notes bears interest at a rate of 8% per annum and, in each case, is payable
upon demand. All accrued interest on the Junior Subordinated Notes accrued
through August 15, 1996 was paid in August 1996, and future interest will be
paid quarterly in arrears.
Management and Service Agreements
The Company is party to a management agreement with National Auto
pursuant to which National Auto provides operational, administrative and
analytical nature relating to the management, business operations, assets and
interests of the Company. During fiscal 1995, the Company paid National Auto a
fixed fee of $192,000 for such services. The Company believes that the terms of
such agreement are as favorable as could have been obtained from an unaffiliated
third party for comparable services.
Pursuant to a Service Agreement, dated as of December 29, 1994, between
National Auto and National Financial Companies LLC, as amended, National
Financial Companies LLC provides to National Auto certain legal, accounting,
management and other administrative services necessary to support National
Auto's performance of its obligations under the Management Agreement. The
Services Agreement expires on the earlier of December 31, 2015 or the date on
which National Auto is liquidated and its certificate of incorporation is
cancelled.
Partnership Agreements
The NAFCO Partnership was formed pursuant to the NAFCO Partnership
Agreement. The principal limited partners of the NAFCO Partnership are S
Associates, O Associates, the First Union Partner and Stephen L. Gurba. In
addition, certain members of the management of the Company, and certain
employees of National Financial Companies LLC own minority limited partner
interests in the NAFCO Partnership. All such persons and entities own, in the
aggregate, 99% of the partner interests in the NAFCO Partnership.
The NAFCO Partnership Agreement provides, in part, that upon the
occurrence of certain named events (collectively, the "Put Events") the First
Union Partner has the right to cause the NAFCO Partnership to redeem the First
Union Partner's partnership interest. The Put Events include: (i) the withdrawal
of National Auto from the NAFCO Partnership or the addition of one or more
persons as general partners thereof (except that such withdrawal and subsequent
addition are not considered a Put Event if any of National Auto, Gary L. Shapiro
or Edgar A. Otto is in control of the then general partner of the NAFCO
Partnership); (ii) any ownership exchanges which have specified tax consequences
with respect to National Auto; (iii) any merger, consolidation or other
reorganization of the NAFCO Partnership or its business (except that no Put
Event will be deemed to have occurred if there is no change in the business of
the NAFCO Partnership or the substantive terms of the NAFCO
51
<PAGE>
Partnership Agreement and the First Union Partner's interests in the NAFCO
Partnership are not adversely affected); (iv) the classification of the NAFCO
Partnership as an association taxable as a corporation or a publicly traded
partnership; (v) ; (vi) subject to certain exceptions, a transfer
of partner interests which, when added to all prior transfers, if any,
represents aggregate changes in ownership of more than 29% of the total partner
interests; and (vii) the existence of a regulatory requirement that prevents the
First Union Partner from owning its ownership interest in the NAFCO Partnership.
The Partnership Agreement provides further that upon the NAFCO Partnership's
receipt from the First Union Partner of a put notice pursuant to which First
Union requests redemption of its interest in the NAFCO Partnership, National
Auto has the right either to (i) dissolve the NAFCO Partnership, (ii) sell or
exchange one hundred percent of the interests of the NAFCO Partnership, (iii)
sell or exchange one hundred percent of the property of the NAFCO Partnership or
(iv) offer publicly the equity securities of the NAFCO Partnership.
The Partnership Agreement provides for certain adjustments to the First
Union Partner's interest in the NAFCO Partnership. See "--First Union."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of
shares of Common Stock and shares of preferred stock, par value $0.01 per share,
issuable in series (the "Preferred Stock"). The following summary description
of the capital stock of the Company is qualified in its entirety by reference to
the Certificate of Incorporation and the By-laws of the Company, copies of which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
Common Stock
Dividends. The holders of Common Stock will be entitled to receive
dividends when and as dividends are declared by the Board of Directors of the
Company out of funds legally available therefor, provided that if any shares of
the Preferred Stock are at the time outstanding, the payment of dividends on the
Common Stock or other distributions may be subject to the declaration and
payment of full cumulative dividends on outstanding shares of Preferred Stock.
Voting Rights. Holders of Common Stock are entitled to one vote per
share on all matters to be voted upon by the Stockholders.
No Preemptive Rights. The holders of Common Stock are not entitled to
preemptive, conversion or subscription rights.
Dissolution. In the event of liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior distribution
rights of the Preferred Stock, if any, outstanding.
Transfer Agent and Registrar of Common Stock. The transfer agent and
registrar for the Common Stock is .
Preferred Stock
The Board of Directors is authorized, without any action of the
stockholders, to provide for the issuance of one or more series of Preferred
Stock and to fix the designation, preferences, powers and relative,
participating, optional and other rights, qualifications, limitations and
restrictions thereof including, without limitation, the dividend rate, voting
rights, conversion rights, redemption price and liquidation preference per
series of Preferred Stock. Any series of Preferred Stock so issued may rank
senior to the Common Stock with
52
<PAGE>
respect to the payment of dividends or amounts to be distributed upon
liquidation, dissolution or winding up. There are no agreements or
understandings for the issuance of Preferred Stock, and the Board of Directors
has no present intent to issue any Preferred Stock. The existence of authorized
but unissued Preferred Stock may enable the Board of Directors to render more
difficult or to discourage an attempt to obtain control of the Company by means
of a merger, tender offer, proxy contest or otherwise. For example, if in the
due exercise of its fiduciary obligations, the Board of Directors were to
determine that a takeover proposal is not in the Company's best interests, the
Board of Directors could cause shares of Preferred Stock to be issued without
stockholder approval in one or more private offerings or other transactions that
might dilute the voting or other rights of the proposed acquirer or insurgent
stockholder or stockholder group. The issuance of shares of Preferred Stock
pursuant to the Board of Directors' authority described above could decrease the
amount of earnings and assets available for distribution to holders of Common
Stock and adversely affect the rights and powers, including voting rights, of
such holders and may have the effect of delaying, deferring or preventing a
change in control of the Company.
Business Combination Statute
Section 203 of the DGCL prohibits certain transactions between a
Delaware corporation and an "interested stockholder," which is defined as a
person who, together with any affiliates and/or associates of that person,
beneficially owns, directly or indirectly, 15% or more of the outstanding voting
shares of a Delaware corporation. This provision prohibits certain business
combinations (defined broadly to include mergers, consolidations, sales or other
dispositions of assets having an aggregate value in excess of 10% of the
consolidated assets of the corporation, and certain transactions that would
increase the interested stockholder's proportionate share ownership in the
corporation) between an interested stockholder and a corporation for a period of
three years after the date the interested stockholder acquired its stock, unless
(i) the business combination is approved by the corporation's board of directors
prior to the date the interested stockholder acquired shares; (ii) the
interested stockholder acquired at least 85% of the voting stock of the
corporation in the transaction in which it became an interested stockholder; or
(iii) the business combination is approved by a majority of the board of
directors and by the affirmative vote of two-thirds of the votes entitled to be
cast by disinterested stockholders at an annual or special meeting.
53
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have shares of Common
Stock outstanding and an additional shares of Common Stock authorized for
possible future issuance. The Common Stock sold in the Offering will be freely
tradeable without restriction or further registration under the Securities Act,
except for any shares purchased by an "affiliate" of the Company that will be
subject to the resale limitations of Rule 144 under the Securities Act ("Rule
144"). Sales of substantial amounts of Common Stock in the public market
following this offering could adversely affect the market price of the Common
Stock.
Under Rule 144, "restricted securities" that have been held for two
years may be publicly sold, provided that the amount of securities sold within
any three-month period does not exceed the greater of 1% of the then-outstanding
Common Stock or the average weekly trading volume in the Common Stock in
composite trading on all exchanges during the four calendar weeks preceding that
sale. Sales under Rule 144 are also subject to certain manner-of-sale
provisions, notice requirements and availability of current public information
about the Company. If three years have elapsed since the date of acquisition of
restricted securities from the Company or from any affiliate of the Company, and
the acquirer or subsequent holder thereof is deemed not to have been an
affiliate of the Company for at least three months immediately preceding the
sale, that person may sell those securities under Rule 144 without regard to the
volume and other limitations described above. The foregoing summary of Rule 144
is not intended to be a complete description thereof.
Upon consummation of this Offering, shares of Common Stock will
be entitled to registration rights, which rights will be exercisable within
days from the consummation of this Offering. See "Certain Transactions -
Senior Subordinated Indebtedness."
Upon completion of the Offering, shares of Common Stock will be held by
the NAFCO Partnership. The NAFCO Partnership has agreed for a period of 180
days, without the prior consent of Raymond James & Associates, Inc. not to
issue, sell or contract to sell or otherwise dispose of any shares of Common
Stock or any securities convertible into or exchangeable for Common Stock or
grant options or warrants to purchase any shares of Common Stock (other than in
connection with employee benefit plans). See "Underwriting."
Prior to the Offering there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that sales of
shares of Common Stock under Rule 144 or the future availability of such shares
for sale will have on the market price of the Common Stock prevailing from time
to time following this offering. Nevertheless, sales of substantial amounts of
Common Stock in the public market, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Common Stock.
54
<PAGE>
UNDERWRITING
Raymond James & Associates, Inc. (the "Underwriter") has agreed,
subject to the terms and conditions of the underwriting agreement between the
Company and the Underwriter (the "Underwriting Agreement"), to purchase from the
Company shares of Common Stock at the initial public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus.
The Underwriting Agreement provides that the obligations of the
Underwriter are subject to certain conditions precedent, and that the
Underwriter will purchase the total number of shares of Common Stock shown above
if any of such shares are purchased.
The Company has been advised by the Underwriter that the Underwriter
proposes initially to offer the shares of Common Stock to the public at the
initial public offering price set forth on the cover page of this Prospectus and
to certain dealers, including the Underwriter, at such price less a concession
not in excess of $ per share. The Underwriter may allow, and such
dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the initial public offering, the public offering
price and the other selling terms may be changed by the Underwriter.
The Company has granted the Underwriter an over-allotment option,
exercisable not later than 30 days after the date of this Prospectus, to
purchase up to additional shares of Common Stock at the initial public
offering price, less the underwriting discounts and commissions set forth on the
cover page of this Prospectus. The over-allotment option may be exercised for
fewer than all of the shares subject to such option. The Underwriter may
exercise such option only to cover over-allotments, if any, made in connection
with the sale of the shares of Common Stock offered hereby. If purchased, the
Underwriter will offer such additional shares on the same terms as the other
shares being offered hereby.
The Company has agreed to indemnify the Underwriter against, or to
contribute to, losses arising out of certain liabilities in connection with this
offering, including liabilities under the Securities Act.
Each of the directors and officers and certain shareholders of the
Company have agreed not to offer, sell or otherwise dispose of any shares of
Common Stock for a period of 180 days after the date of this Prospectus without
the prior written consent of the Underwriter.
Prior to this offering, there has been no public market for the Common
Stock of the Company. The initial public offering price for the Common Stock was
determined by negotiation between the Company and the Underwriter. Among the
factors considered in such negotiations were the prevailing market conditions,
the value of publicly traded companies believed to be comparable to the Company,
the results of operations of the Company in recent periods, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant.
The foregoing includes a summary of certain principal terms of the
Underwriting Agreement and does not purport to be complete. Reference is made to
the copy of the Underwriting Agreement that is on file on an exhibit to the
Registration Statement on Form S-1 under the Securities Act filed by the Company
with the Securities and Exchange Commission (the "Commission") with respect to
the shares of Common Stock offered hereby, of which this Prospectus is a part.
Lynn Dunham-Sirota, a % limited partner of the NAFCO Partnership, is
the spouse of a Managing Director of the Underwriter.
55
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Weil, Gotshal & Manges LLP, New York, New York (a
partnership including professional corporations). Certain legal matters will be
passed upon for the Underwriter by Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A.
EXPERTS
The consolidated financial statements of the Company and its subsidiary
as of December 31, 1995 and 1994, and for the year ended December 31, 1995 and
for the period from October 1, 1994 (date of inception) to December 31, 1994
have been included herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission, a Registration Statement on
Form S-1 (the "Registration Statement") pursuant to the Securities Act covering
the Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document are summaries of the material terms of such contract,
agreement or other document. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibits for a more complete description of the matter involved. The
Registration Statement (including the exhibits and schedules thereto) filed with
the Commission by the Company may be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, DC 20549 and at the regional offices of the Commission located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material may also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, DC 20549 at
prescribed rates. The Commission also maintains a Web Site at
http://www.sec.gov, which contains reports and other information regarding
registrants that file electronically with the Commission.
The Company is not currently subject to the informational requirements
of the Exchange Act. As a result of the Offering, the Company will become
subject to the informational requirements of the Exchange Act. The Company will
fulfill its obligations with respect to such requirements by filing periodic
reports with the Commission. In addition, the Company intends to furnish to its
stockholders annual reports containing audited financial statements certified by
its independent auditors and quarterly reports containing unaudited financial
information for the first three quarters of each fiscal year.
56
<PAGE>
NATIONAL AUTO FINANCE COMPANY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1996...................................... F-3
Unaudited Pro Forma Income Statement for the six-month
period ended June 30, 1996............................................................................ F-4
Notes to Unaudited Pro Forma Consolidated Financial Statements.......................................... F-5
National Auto Finance Company L.P. and Subsidiary
Independent Auditors' Report............................................................................ F-6
Consolidated Balance Sheets as of June 30, 1996 unaudited,
December 31, 1995 and December 31, 1994............................................................... F-7
Consolidated Statements of Income for the six months ended
June 30, 1996 and 1995 (unaudited), and the year ended December 31, 1995,
and the period from October 1, 1994 (inception) to December 31, 1994................................. F-8
Consolidated Statements of Partners' Capital for the six months ended
June 30, 1996 (Unaudited), the year ended December 31, 1995,
and the period from October 1, 1994 (inception) to December 31, 1994.................................. F-9
Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995
(unaudited), the year ended December 31, 1995, and the period from
October 1, 1994 (inception) to December 31, 1994..................................................... F-10
Notes to Financial Statements........................................................................... F-12
</TABLE>
F-1
<PAGE>
Unaudited Pro Forma Financial Statements
The following pro forma financial information sets forth
historical information which has been adjusted to reflect the
Reorganization which includes, among other things, (i) certain
transactions associated with the reorganization of the business of the
Partnerships into corporate form, (ii) the income tax effects of the
Reorganization assuming the Reorganization occurred on June 30, 1996,
(iii) the issuance by the Company of shares of Common Stock at an
assumed offering price of $ per share in an initial public
offering, net of related fees and expenses and (iv) repayment of the
$4.8 million of subordinated debt.
The Unaudited Pro Forma Statements of Operations assume the
Reorganization took place at the beginning of the periods presented.
The Unaudited Pro Forma Balance Sheet assumes the Reorganization took
place on the date presented. See "Notes to Unaudited Pro Forma
Financial Statements." The pro forma information is based on certain
assumptions and estimates that management believes are reasonable in
the circumstances and does not purport to be indicative of the results
which actually would have been attained had the above transactions
occurred at the dates indicated or the results which may be attained
in the future. This information should be read in conjunction with the
Company's financial statements and related notes included elsewhere in
this Prospectus.
F-2
<PAGE>
National Auto Finance Company, Inc.
UNUAUDITED PROFORMA CONSOLIDATED BALANCE SHEET
June 30, 1996
<TABLE>
<CAPTION>
NAFCO NAFCO, Inc.
Limited NAFCO, Inc. Proforma
Partnership Proforma (As Adjusted)
----------- ----------- -------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents $418,410 $418,410 $22,940,410
Excess spread receivable 8,617,068 8,617,068 8,617,068
Fixed assets, net 276,049 276,049 276,049
Investment in trusts 5,173,764 5,173,764 5,173,764
Unamortized costs 359,292 359,292 1,037,292 (1)
Other assets 172,805 172,805 172,805
----------- ----------- -----------
Total Assets $15,017,388 $15,017,388 $38,217,388
=========== =========== ===========
Liabilities and Ownership Equity
Liabilities
Senior subordinated notes $ 0 $ 0 $12,000,000 (1)
Junior subordinated notes 8,367,623 8,367,623 3,567,623 (5)
Due to National Auto Finance
Corporation 46,744 46,744 46,744
Proforma Deferred Taxes - 1,694,172 (4) 1,694,172
Accounts payable 638,859 638,859 638,859
----------- ----------- -----------
Total Liabilities 9,053,226 10,747,398 17,947,398
Ownership Equity
Preferred Equity 1,456,177 - (3) -
Partners Equity 4,507,985 - (2) -
----------- ----------- -----------
Total Partners Equity 5,964,162 - -
Stockholders Equity
Total Stockholders Equity 4,269,990 20,269,990
----------- -----------
Total Ownership Equity 5,964,162 4,269,990 20,269,990
----------- ----------- -----------
Total Liabilities and Ownership $15,017,388 $15,017,388 $38,217,388
=========== =========== ===========
</TABLE>
F-3
<PAGE>
National Auto Finance Company, Inc.
UNAUDITED PROFORMA INCOME STATEMENT
June 30, 1996
<TABLE>
<CAPTION>
NAFCO NAFCO, Inc.
Limited NAFCO, Inc. Proforma
Partnership Proforma (As Adjusted)
----------- ----------- -------------
<S> <C> <C> <C>
REVENUE
Gain on sale of receivables $4,628,179 $4,628,179 $4,628,179
Interest income from cash investments 6,336 6,336 6,336
Other income 1,001,297 1,001,297 1,001,297
---------- --------- ---------
Total Revenues 5,635,812 5,635,812 5,635,812
Interest expense 303,344 303,344 303,344
---------- --------- ---------
Net Interest Income 5,332,468 5,332,468 5,332,468
OPERATING EXPENSES 3,664,271 3,664,271 3,664,271
---------- --------- ---------
Net income before taxes 1,668,197 1,668,197 1,668,197
PROFORMA INCOME TAXES - 627,743 (4) 627,743
---------- ---------- ----------
Net Income $1,668,197 $1,040,454 $1,040,454
========== ========== ==========
</TABLE>
F-4
<PAGE>
National Auto Finance Company, Inc
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) Adjustment to reflect the issuance of the $12 million Senior subordinated
notes, net of $678,000 of unamortized placement costs.
(2) Adjustment to reflect the conversion of the general and limited partner
interests for Common Stock as part of the Incorporation.
(3) Adjustment to reflect the conversion of certain preferred equity interest
into Paid in Capital as part of the Incorporation.
(4) Adjustment to reflect the Pro Forma taxes (assuming an approximate rate of
40%) that would have been reported had the Company filed income tax retuns
as a taxable "C" Corporation as follows:
Year ended December 31, 1994 $ 0
Year ended December 31, 1995 1,066,429
Six months ended June 30, 1996 627,743
-----------
$ 1,694,172
(5) Adjustment to give effect to the receipt and use of proceeds from the
issuance of shares of Common Stock being offered by the Company to fund the
payment of Junior Subordinated Debt assuming net proceeds of $16,000,000.
F-5
<PAGE>
Independent Auditors' Report
The Board of Directors
National Auto Finance Corporation, General Partner
National Auto Finance Company L.P.:
We have audited the accompanying consolidated balance sheets of
National Auto Finance Company L.P. and subsidiary as of December 31,
1995 and 1994, and the related consolidated statements of income,
partners' capital, and cash flows for the year ended December 31, 1995
and from October 1, 1994 (date of inception) to December 31, 1994.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of National Auto Finance Company L.P. and subsidiary as of December
31, 1995 and 1994, and the results of their operations and their cash
flows for the year ended December 31, 1995 and for the period from
October 1, 1994 (date of inception) to December 31, 1994 in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Ft. Lauderdale, Florida
April 19, 1996
F-6
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1996 (unaudited), December 31, 1995 and 1994
<TABLE>
<CAPTION>
June 30, December 31, December 31,
1996 1995 1994
Assets ---- ---- ----
------ (unaudited)
<S> <C> <C> <C>
Cash and cash equivalents $ 418,410 824,388 1,590,021
Loans - - 3,660,064
Less allowance for credit losses - - (182,000)
----------- ----------- ----------
Net loans - - 3,478,064
Excess spread receivable 8,617,068 5,140,006 -
Spread accounts:
Master Trust 1,804,469 1,804,469 25,000
1995-1 Trust 3,369,295 3,369,295 -
Fixed assets, net 276,049 273,330 61,574
Unamortized start-up costs and deferred
structuring fee 359,292 434,135 533,543
Due from National Auto Finance Corporation - - 99,500
Other assets 172,805 157,207 12,776
----------- ----------- ----------
Total assets $15,017,388 12,002,830 5,800,478
=========== =========== ==========
Liabilities and Partners' Capital
---------------------------------
Junior subordinated notes-related parties $ 7,555,741 7,555,991 5,323,733
Accrued interest payable-related parties 811,882 531,850 77,949
Due to National Auto Finance Corporation 46,744 46,744 49,303
Accounts payable and accrued expenses 638,859 421,434 324,209
----------- ----------- ----------
Total liabilities 9,053,226 8,556,019 5,775,194
----------- ----------- ----------
Total partners' capital 5,964,162 3,446,811 25,284
----------- ----------- ----------
Total liabilities and partners'
capital $15,017,388 12,002,830 5,800,478
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Consolidated Statements of Income
For the six months ended June 30, 1996 and 1995 (unaudited),
for the year ended December 31, 1995 and for the period from
October 1, 1994 (date of inception) to December 31, 1994
<TABLE>
<CAPTION>
Six months Six months
ended ended Year ended October 1 to
June 30, June 30, December 31, December 31,
1996 1995 1995 1994
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Gain on sales of loans $ 4,628,179 3,496,119 7,125,849 -
Interest income from cash investments 6,336 6,476 10,828 32,097
Finance charges earned - - - 94,729
Provision for credit losses - - 182,000 (182,000)
Other income 1,001,297 103,407 492,302 -
--------- ---------- ---------- ----
Total revenue 5,635,812 3,606,002 7,810,979 (55,174)
--------- --------- --------- --------
Expenses:
Interest expense 303,344 222,041 498,460 77,950
Salaries and employee benefits 1,501,856 734,835 1,665,968 222,874
Direct loan acquisition expenses 340,034 166,240 502,064 22,172
Servicing costs 480,238 93,947 370,506 6,104
Depreciation and amortization 192,536 86,456 182,999 6,841
Other operating expenses 1,149,607 610,831 1,310,156 83,601
--------- ---------- --------- --------
Total expenses 3,967,615 1,914,350 4,530,153 419,542
--------- --------- --------- -------
Net income (loss) $ 1,668,197 1,691,652 3,280,826 (474,716)
========= ========= ========= =======
Pro forma data (note 7):
Pro forma income (loss) before income taxes 1,668,197 1,691,652 3,280,826 (474,716)
Pro forma income taxes 627,743 463,632 1,066,429 -
---------- ---------- --------- ----
Pro forma net income $ 1,040,454 1,228,020 2,214,397 (474,716)
========= ========= ========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Consolidated Statements of Partners' Capital
For six months ended June 30, 1996 (unaudited), the
year ended December 31, 1995 and for the period from
October 1, 1994 (date of inception) to December 31, 1994
<TABLE>
<CAPTION>
Preferred
General Limited equity
partner partners partners Total
-------- -------- -------- -----
<S> <C> <C> <C> <C>
Balance as of October 1, 1994 (date of
inception) $ - - - -
Contributions 1,000 99,000 400,000 500,000
Net loss (38,717) (83,836) (352,163) (474,716)
------ ----------- ---------- ----------
Balance as of December 31, 1994 (37,717) 15,164 47,837 25,284
Contributions - - 140,701 140,701
Net income 67,375 2,955,308 258,143 3,280,826
Preferred equity earnings - (35,000) 35,000 -
------ ----------- ----------- ---------
Balance as of December 31, 1995 29,658 2,935,472 481,681 3,446,811
Contributions - - 849,154 849,154
Net income 15,447 1,527,408 125,342 1,668,197
------ --------- ---------- ---------
Balance as of June 30, 1996 $ 45,105 4,462,880 1,456,177 5,964,162
====== ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the six months ended June 30, 1996 and June 30, 1995
(unaudited), the year ended December 31, 1995 and for the period
from October 1, 1994 (date of inception) to December 31, 1994
<TABLE>
<CAPTION>
Six months Six months Three months
ended ended Year ended ended
June 30, June 30, December 31, December 31,
1996 1995 1995 1994
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,668,197 1,691,652 3,280,826 (474,716)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Gain on sales of loans (4,628,179) (3,496,119) (7,125,849) -
Depreciation and amortization 192,536 86,456 191,896 6,841
Provision for credit losses - - (182,000) 182,000
Loss from the sale of fixed assets - - 1,415 -
Purchases of contracts held for sale (31,254,117) (19,377,989) (43,146,025) (3,690,004)
Proceeds from sale of loans 31,192,908 18,204,505 41,773,945 29,940
Cash received from spread account 2,074,527 410,064 2,242,751 -
Amortization of deferred gain and servicing (619,692) (165,668) (456,811) -
Amortization of deferred income (326,326) - - -
Changes in other assets and liabilities:
Other assets (15,598) (3,005) (144,431) (12,776)
Accounts payable and accrued expenses 217,515 130,864 97,225 324,209
Accrued interest payable-related parties 280,033 (77,949) 453,901 77,949
------------ ----------- ----------- ----------
Net cash used in operating activities (1,218,196) (2,597,189) (3,013,157) (3,556,557)
------------ ----------- ----------- ----------
Cash flows from investing activities:
Capitalized start-up costs and deferred structuring fees - (35,000) (45,086) (533,543)
Fixed assets purchased $ (36,686) (154,165) (265,285) (68,415)
Fixed assets sold - - 13,328 -
Net received from (invested in) National Financial Auto
Receivable Master Trust - - 3,186,395 (25,000)
Investment in National Auto Finance 1995-1 trust - - (3,369,295) -
Cash received from 1995-1 trust - - 257,567 -
Due from National Auto Finance Corporation - 99,500 99,500 (99,500)
------------ ----------- ----------- ----------
Net cash used in investing activities (36,686) (89,665) (122,876) (726,458)
------------ ----------- ----------- ----------
F-10
Cash flows from financing activities:
Proceeds from junior subordinated notes-related parties 590,000 1,204,749 2,336,745 5,323,733
Payments of junior subordinated notes-related parties (590,250) - (104,487) -
Preferred equity partners' contributions 849,154 - 140,701 400,000
General and limited partners' contributions - - - 100,000
Due to National Auto Finance Corporation - (49,303) (2,559) 49,303
------------ ----------- ----------- ----------
Net cash provided by financing activities 848,904 1,155,446 2,370,400 5,873,036
------------ ----------- ----------- ----------
Net increase (decrease) in cash and cash equivalents (405,978) (1,531,408) (765,633) 1,590,021
Cash and cash equivalents at beginning of year 824,388 1,590,021 1,590,021 -
------------ ----------- ----------- ----------
Cash and cash equivalents at end of period $ 418,410 58,613 824,388 1,590,021
============ =========== =========== ==========
</TABLE>
Noncash investing and financing activities:
On January 16, 1995, the Company transferred contracts of
$4,875,979 to the spread account.
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1996 (unaudited) and December 31, 1995
(1) Organization and Summary of Significant Accounting Policies
(a) Organization and Business
National Auto Finance Company L.P. (the "NAFCO
Partnership"), a Delaware limited partnership, was
established in October 1994 with approximately
$5,800,000 of partners' equity and junior subordinated
debt from certain partners and affiliates (the "Junior
Subordinated Notes"). The general partner, National
Auto Finance Corporation (the "General Partner"), a
Delaware corporation, was appointed to manage the
businesses. The NAFCO Partnership owns 97% of the
limited partnership interest and 100% of the preferred
equity partnership interest in Auto Credit
Clearinghouse L.P. (the "ACCH Partnership"), a
Delaware limited partnership. The general partner of
the NAFCO Partnership is also the general partner of
the ACCH Partnership. The ACCH Partnership was
established in September 1995 with approximately
$140,000 of partners' equity. As described below in
note (1)(b)(i), the consolidated partnerships are
referred to as the "Company" in the following notes to
the consolidated financial statements.
The Company purchases non-prime motor vehicle retail
installment sales contracts ("Loans") from manufacturer-
franchised automobile dealers on a nonrecourse basis. As
of June 30, 1996, approximately 40% of the outstanding
principal balance of Loans relates to Loans originated
in Georgia, 21% in North Carolina, and 11% in South
Carolina. No single dealer originates more than 6% of
the Loans.
Through strategic referral and marketing alliances
with financial institutions, the Company seeks to
increase the number of Loans it purchases by (i)
leveraging a financial institution's existing dealer
relationships and finance sales force to market the
Company's non-prime consumer products and services and
(ii) obtaining the right to review and purchase
non-prime consumer loans which do not meet a financial
institution's underwriting criteria. Through such
strategic referral and marketing alliances, the
Company offers the financial institution the
opportunity to provide a broader product offering to
F-12
dealers and to earn additional income based on the
number of Loans which are purchased by the Company.
In April 1996, the Company entered into its first
strategic referral and marketing alliance (the "First
Union Strategic Alliance"), with First Union National
Bank of North Carolina ("FUNB") and certain of its
national bank affiliates (collectively, "First
Union"). The First Union Strategic Alliance provides
for (i) joint marketing of the Company's products and
services by both the Company's sales force and the
marketing
F-13
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
and sales personnel in First Union's indirect sales
finance division ("FUSF") to dealers throughout seven
southeastern states and the District of Columbia with
whom FUSF has an existing relationship, and (ii)
exclusive referral by FUSF to the Company of all
applications for Non-Prime Consumer Loans falling below
certain established credit guidelines.
As a result of the strategic alliance with FUNB and an
affiliate of FUNB having a beneficial ownership
interest in the Company, the Company has agreed to
engage solely in activities that are permissible for
national banks. Management does not believe that the
banking laws, orders and regulations significantly
impact the manner in which the Company intends to
conduct or expand its business or product or service
offerings, although there can be no assurance that
such laws will not have such an effect.
Profits and losses of the ACCH Partnership and the
NAFCO Partnership are allocated to the partners as
follows: If a net loss has been previously incurred,
the income in future periods goes first to the
preferred equity partners and then to the general
partner up to the amount of their initial
contribution, provided, however, that losses related
to the Junior Subordinated Notes shall be allocated to
the partners bearing the risk of loss with respect to
such notes. Next, a seven percent return on the
preferred equity partners' initial investment is
allocated to them. Any remainder is allocated based on
the partnership agreement.
(b) Summary of Significant Accounting Policies
Reported balances as of June 30, 1996 and for the six
months ended June 30, 1996 and 1995 are unaudited.
A description of the significant accounting policies
that are followed by the Company is presented below:
(i) Principles of Consolidation
The consolidated financial statements include
the accounts of the NAFCO Partnership and the
ACCH Partnership. All significant intercompany
F-14
accounts and transactions have been eliminated
in consolidation.
(ii) Cash and Cash Equivalents
F-15
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
The Company considers money market funds and
all other highly liquid debt instruments
purchased with an original maturity of less
than three months to be cash equivalents.
(iii) Loans
Loans are held for sale until packaged and sold
through asset-backed securitization. The Loans
are carried at the lower of their principal
amount outstanding (amortized cost), or market
value. The Loans, which mature at various dates
through 2001, are carried as either precomputed
interest or simple interest Loans. Precomputed
interest Loans are carried at the aggregate of
receivable payments less unearned finance
charges and the deferred dealer discount.
Simple interest Loans are reported at the net
amount advanced plus the accrued unpaid finance
charges. All Loans are at a fixed rate of
interest and are secured by vehicles. The
Company provides an allowance for credit losses
from the date of purchase to the date of
securitization.
F-16
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Revenue from Loans is recognized based upon the
method of interest calculation of each loan
type. Unearned finance income from precomputed
interest Loans is accreted as interest income
using a level-yield interest method. Interest
income from simple interest Loans is recognized
as earned. The related deferred dealer discount
income, for both classifications, is recognized
on the actuarial method.
(iv) Securitizations of Loans
The Company sells its Loans through
asset-backed securitizations and recognizes a
gain at the time of sale of the Loans, based
upon the net present value of the excess spread
receivable from the cash flow stream over the
life of the Loans. The net present value
calculation is based upon a discount rate which
the Company believes is consistent with
industry practice and would be applied by an
unrelated purchaser of similar cash flows. The
Company retains a residual ownership interest
in the Loans sold through securitizations.
The Company is the master servicer and servicer
of record for the securitized Loans and
utilizes an unrelated entity to provide the
actual servicing. A normal servicing fee of 2
percent is assumed in the gain calculation;
this amount is passed through to the servicer
of record by the Master Trust (see note 3).
(v) Excess Spread Receivable
The excess spread receivable is established for
each securitization and represents the present
value of the gross interest income on the Loans
securitized less the pass-through interest paid
to the securitization investors, less
provisions for credit losses and prepayments
over the life of the respective securitization,
less normal servicing fees. The excess spread
receivable represents the gain recognized on
the sale of Loans through securitization,
deferred servicing income and a deferred gain
F-17
attributable to the time value of money. The
excess spread receivable is reduced by the
receipt of cash from the trusts and the
amortization of the deferred gain and deferred
servicing costs. Prepayment and loss experience
rates are based upon the nature of the
receivables and historical information
available to the Company. Prepayment
assumptions and credit loss provisions are
periodically reviewed. Deficiencies, if any, in
excess of estimated reserves, are charged to
operations. Favorable experience is recognized
prospectively as realized.
(vi) Spread Account
F-18
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
This account represents an over-collateralization
pool of the securitization facility to protect
securitization investors against credit losses.
Funds in excess of specified percentages are
available to be remitted to the Company over
the life of the securitization. For each
securitization, there is no recourse to the
Company beyond the amounts maintained in this
account. However, the excess spread receivable
noted above is only available to the Company to
the extent that there is no impairment of the
spread account that relates to the
securitization.
F-19
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(vii) Fixed Assets, Net
Purchases of capital equipment in excess of
$500 are capitalized and depreciated on a
straight-line basis over the estimated life of
the equipment, which is generally five years.
(viii) Unamortized Start-up Costs and Deferred Structuring Fee
In accordance with Financial Accounting
Standards Board Statement No. 7, "Development
Stage Enterprises," various organizational
expenses of the Company have been capitalized
for these financial statements and will be
amortized over five years on a straight-line
basis.
A structuring fee incurred in connection with
the placement of a securitized credit facility
was also capitalized and will be amortized on a
straight-line basis over the initial term of
the facility, which is three years.
(ix) Income Taxes
No provision or benefit for income taxes has
been included in these financial statements
since taxable income or loss passes through to,
and is reportable by, the partners
individually. The Company's tax returns are
subject to examination by federal and state
taxing authorities.
(x) Use of Estimates
In preparing the financial statements,
management is required to make estimates and
assumptions that affect the reported amounts of
assets, liabilities, revenue and expense. The
most significant of the estimates relate to the
components of the excess spread receivable and
the related gain on sales of Loans. Actual
results could differ from these estimates.
(c) New Accounting Pronouncement
F-20
(i) Accounting for Stock-Based Compensation
On October 23, 1995, the FASB issued Statement
No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"). This Statement
applies to all transactions in which an entity
acquires goods or services by issuing equity
instruments or by incurring liabilities where
the payment amounts are based on the entity's
common stock price. The Statement covers
transactions with
F-21
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
employees and nonemployees and is applicable
to both public and nonpublic entities. Entities
are allowed (1) to continue to use the Accounting
Principles Board Opinion No. 25 method ("APB 25"),
or (2) to adopt the FAS 123 fair value based
method. Once the method is adopted, an entity
cannot change and the method selected applies to
all of an entity's compensation plans and
transactions. For entities not adopting the FAS
123 fair value based method, FAS 123 requires
pro forma net income and earnings per share
information as if the fair value based method
has been adopted. For entities not adopting the
fair value based method, the disclosure
requirements of FAS 123, including the pro forma
information, are effective for financial
statements for fiscal years beginning after
December 15, 1995 (calendar year 1996). The pro
forma disclosures are to include all awards
granted in fiscal years that begin after
December 15, 1994 (calendar year 1995).
However, the disclosures, including the pro
forma net income and earnings per share
disclosures, for the fiscal year beginning
after December 15, 1994 (calendar year 1995)
will not be included in that year's financial
statements but will be included in the
following year-end (calendar year 1996)
financial statements if the first fiscal year
is presented for comparative purposes.
Management has not yet determined the impact of
FAS 123 on the Company.
(ii) Accounting for Transfers of Servicing of Financial
Assets and Extinguishments of Liabilities
In June 1996, the FASB issued Statement of
Financial Accounting Standards No. 125 ("FAS
125"), "Accounting for Transfers of Servicing
of Financial Assets and Extinguishments of
Liabilities." FAS 125 provides accounting and
reporting standards for transfers and servicing
of financial assets and extinguishments of
liabilities based on a financial-components
approach that focuses on control. FAS 125 is
effective for transfers and servicing of
F-22
financial assets and extinguishments of
liabilities occurring after December 31, 1996
and is to be prospectively applied. Management
is currently evaluating the impact of adoption
of FAS 125 on its financial position and
results of operations.
(2) Excess Spread Receivable
The excess spread receivable was as follows at June 30, 1996
and December 31, 1995:
June 30, December 31,
1996 1995
-------- ------------
Present value of expected future
cash flows $10,895,891 7,038,961
Allowance for credit losses (2,278,823) (1,898,955)
----------- ---------
8,617,068 5,140,006
----------- ---------
F-23
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Allowance for credit losses as
a percentage of loans serviced 4.91% 5.30%
==== ====
Activity in the excess spread receivable is as follows:
Six months Year ended
ended June 30, December 31,
1996 1995
-------------- ------------
Balance at beginning of period $ 5,140,006 -
Gain on sales of loans 4,628,179 7,125,849
Cash received, amortization and
other reductions during the
period (1,151,117) (1,985,843)
--------- ---------
Balance at end of period $ 8,617,068 5,140,006
========= =========
F-24
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Amounts capitalized at June 30, 1996, include $1,002,860 in
unamortized discount and $325,000 in deferred income from the
1995-1 trust securitization net of $85,000 in deferred
expenses related to the transaction.
Amounts capitalized at December 31, 1995, include $1,250,000
in amortized discount and $1,636,000 in deferred income from
the 1995-1 trust securitization net of $697,000 in deferred
expenses related to the transaction.
(3) Securitization of Loans
In January 1995, the Company began using a revolving
securitization facility pursuant to which the Company sells
its Loans on a daily basis to a bankruptcy remote special
purpose subsidiary trust ("Funding Trust I"), which in turn
transfers such Loans to the National Financial Auto
Receivables Master Trust (the "Master Trust"). The Company
retains, through Funding Trust I, certain residual interests
in future excess cash flows from the Master Trust, in
exchange for the transfer of Loans to the Master Trust.
The Master Trust, to date, has issued two classes of investor
certificates: "Class B Certificates," which are variable
funding (i.e., revolving) certificates, and "Class C
Certificates," representing a portion of such residual
interest retained by the Company. FUNB owns 100% of the
outstanding Class B Certificates. The Company has committed
to maintain up to $5,000,000 of over-collateralization
capital (represented by the Class C Certificates), and a cash
reserve account of up to 3.5% of the aggregate outstanding
principal balance of the Loans in the Master Trust, to
protect against future credit losses.
Interest on the Class B Certificates is charged (i) during
the month in which the Loan is sold to the Master Trust, at
FUNB's prime rate of interest, and (ii) thereafter, based
upon a formula of the London Interbank Offered Rate ("LIBOR")
plus between 75 and 300 basis points. The amount of funds
available under the Class B Certificates is governed by a
borrowing base formula that provides availability as a
multiple of the over-collateralization capital pledged and is
restricted by a number of financial covenants. Since the
Master Trust's borrowing rates under the securitization are
floating and the interest rates charged on the loans are
fixed, increases in the interest rates charged on the Master
F-25
Trust's borrowings could have an effect both on cash flows
from the Master Trust to the Company and on the Company's
reported net income. In order to mitigate the negative impact
of rising interest rates, the Master Trust has entered into
interest rate swap agreements which have the effect of fixing
the rates charged on a portion of the Master Trust's
indebtedness.
In November 1995, the Master Trust refinanced $42,000,000 of
its receivables through the transfer of the related Loans to
a separate trust, the National Auto Finance 1995-1 Trust (the
"1995-1 Trust"), which issued in a private placement to
various third-party investors
F-26
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
$42,000,000 of fixed-rate asset-backed securities. The payment
of the principal and interest on those securities is insured
by a payment guaranty issued by Financial Security Assurance,
Inc. ("FSA"). The proceeds of the transaction were used by the
Master Trust to repay the then outstanding balance of the
Class B Certificates. The Master Trust then commenced
re-borrowing against the Class B Certificates to finance its
purchase of additional Loans from the Company through Funding
Trust I.
The 1995-1 Trust securitization was accomplished by Funding
Trust I re-acquiring the Loans and transferring them to the
1995-1 Trust. In addition to offering fixed-rate financing,
the 1995-1 Trust securitization as insured by FSA offered
lower over-collateralization levels than that required by the
Master Trust facility. The Company retains, through a second
bankruptcy remote special purpose subsidiary trust ("Funding
Trust II"), certain residual interest in future excess cash
flows from the 1995-1 Trust.
The Master Trust organizational documents required the
consent of all certificate holders to transfer (sell) the
Loans. In November 1995, substantially all eligible Loans in
the Master Trust were transferred to the 1995-1 Trust. The
1995-1 Trust acquired the Loans from the Master Trust at par
with the net proceeds of the offering of certificates by the
1995-1 Trust, which are guaranteed by FSA.
The terms of the transactions between the Company and the
Master Trust which resulted in the issuance of the Class B
and Class C Certificates were negotiated by the Company with
FUNB. The terms of the reacquisition of the Loans from the
Master Trust were negotiated with FSA, the certificate
holders, and FUNB at the time of acquisition.
The 1995-1 Trust transaction did not affect the accounting
sale treatment previously extended to the transfers of the
Loans to the Master Trust, inasmuch as the transaction
required the consent of all certificate holders as provided
in the Master Trust documents, and therefore was consistent
with the sale treatment.
F-27
During the six months ended June 30, 1996, and the year ended
December 31, 1995, the following activity took place with
respect to securitization:
Six months Year ended
ended June 30, December 31,
1996 1995
-------------- ------------
Original customer principal
balance of Loans sold $ 32,952,711 49,814,996
Gain on sales 4,628,179 7,125,849
Customer principal balance
of Loans sold during each
period at June 30, 1996 31,568,485 43,144,670
F-28
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Weighted average coupon rate 18.8% 18.3%
Weighted average original term (months) 54 53
Both of the consolidated companies utilize the securitization
facilities.
(4) Junior Subordinated Notes
The debt is payable to principal equity holders of the
Company and certain affiliates and carries interest at 8
percent. Interest expense recognized for this debt for the
period from December 31, 1995 through June 30, 1996, the year
ended December 31, 1995 and the period October 1, 1994
(inception) to December 31, 1994 was $295,526, $497,260, and
$77,950, respectively.
F-29
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(5) Contingencies and Commitments
On January 16, 1995, the Company entered into an office lease
for its corporate headquarters commencing on March 1, 1995
and expiring April 30, 1997. Future minimum rental payments
as of June 30, 1996, are as follows:
Year ending
December 31,
------------
1996 $ 44,500
1997 30,000
------
Total lease commitment $ 74,500
======
(6) Fair Value of Financial Instruments
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value
of Financial Instruments" ("FAS 107") as of January 1, 1995.
FAS 107 defines the fair value of a financial instrument as
the amount at which the instrument could be exchanged in a
current transaction between willing parties.
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments:
o Cash and cash equivalents, trade accounts receivables,
due from officers and employees, other current assets,
notes payable to banks, trade accounts payables, due to
affiliated company, and accrued expenses
(nonderivatives) have carrying amounts which approximate
fair value because of the short maturity of these
instruments.
o The fair value of notes payable is determined as the
present value of expected future cash flows discounted
at the interest rate currently offered to the Company,
which approximates rates currently offered by local
lending institutions for loans of similar terms to
companies with comparable credit risk. Accordingly, the
carrying amount approximates fair value because the rate
is a current market rate.
o The fair value of the excess spread receivable: the fair
F-30
value is determined by taking the net present value of
the expected future cash flows discounted at a rate
which approximates the rate a willing investor would pay
for a comparable interest-only strip. The carrying
amount approximates fair value because the rate used to
determine the carrying value is a current market rate.
F-31
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(7) Unaudited Pro Forma Information
Pro forma adjustments for income taxes represent the
difference between historical income taxes and income taxes
that would have been reported had the companies filed income
tax returns as taxable C corporations for each of the years
presented.
F-32
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
The following summarizes historical and pro forma income taxes:
<TABLE>
<CAPTION>
Six months Six months Year ended Year ended
ended June 30, ended June 30, December 31, December 31,
1996 1995 1995 1994
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Historical income taxes:
Federal $ - - - -
State and local - - - -
-------- -------- ---------- ----
- - - -
-------- -------- ---------- ----
Pro forma income tax adjustments:
Federal 567,187 418,907 963,555 -
State and local 60,556 44,725 102,874 -
-------- -------- ---------- ----
627,743 463,632 1,066,429 -
------- ------- --------- ----
$ 627,743 463,632 1,066,429 -
======= ======= ========= ====
</TABLE>
If the Company terminated its partnership status (see note 9), as of June 30,
1996 the Companies would be required to record a deferred tax liability for the
tax effect of temporary differences between financial reporting and tax
reporting. The tax effect of such temporary differences existing on June 30,
1996 consist of:
Securitized assets sold for financial
statement purposes, financed for
income tax purposes $ 2,474,160
Fixed assets 9,914
Other 38,573
-----------
$ 2,522,647
===========
F-33
Pro forma income taxes differ from the amounts computed by
applying Federal statutory rates due to:
<TABLE>
<CAPTION>
Six months Six months Year ended Year ended
ended June 30, ended June 30, December 31, December 31,
1996 1995 1995 1994
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Pro forma provision computed
at Federal statutory rate
of 34% $ 567,187 575,162 1,115,481 (161,404)
State income taxes, net of
Federal tax benefit 60,556 61,407 119,094 (17,232)
------- ------- --------- -------
</TABLE>
F-34
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Valuation allowance - (178,045) (178,045) 178,045
Other - 5,108 9,899 591
------- ------- --------- -------
$ 627,743 463,632 1,066,429 -
======= ======= ========= ====
</TABLE>
F-35
<PAGE>
NATIONAL AUTO FINANCE COMPANY L.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(8) Senior Subordinated Debt (Unaudited)
In August 1996, the Company completed a $12 million senior
subordinated debt financing with J.P. Morgan Investment
Management, Inc., acting on behalf of certain institutional
investors. The principal amount of the Senior Subordinated
Debt is due in August 2001 and carries a 10% coupon payable
quarterly. There is also an additional 3% deferred interest
coupon that accrues on a compounded basis and is payable in
August 2006, if not earlier automatically converted into a
10% equity interest in the Company upon the occurrence of
certain events, including the consummation of an initial
public offering. The senior subordinated debt generally
prohibits the payment of dividends on common stock following
consummation of an initial public offering of common stock so
long as any amount remains outstanding on this debt.
F-36
(9) Selected Quarterly Results (Unaudited)
The following tables summarize the quarterly results of
operations for the periods indicated.
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------------------------------------------------
June 30, March 31, December 31, September 30, June 30, March 31,
1996 1996 1995 1995 1995 1995
-------- --------- ------------ ------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Gain on securitization
of Loans $ 2,530,932 2,097,247 1,748,615 2,063,115 1,732,447 1,763,672
Other revenue 513,533 494,100 214,986 178,261 92,249 17,634
---------- ---------- ---------- ----------- ----------- -----------
Total revenue 3,044,465 2,591,347 1,963,601 2,241,376 1,824,696 1,781,306
--------- --------- --------- --------- --------- ---------
Expenses:
Total expenses 2,178,331 1,789,284 1,432,180 1,183,623 1,058,182 856,158
--------- --------- --------- --------- --------- ----------
Net income $ 866,134 802,063 531,421 1,057,753 766,514 925,138
========== ========== ========== ========= ========== ==========
Pro forma income before
income taxes $ 866,134 802,063 531,421 1,057,753 766,514 925,138
Pro forma income taxes 325,927 301,816 204,766 398,032 293,547 170,084
---------- ---------- ---------- ---------- ---------- ----------
Pro forma net income $ 540,207 500,247 326,655 659,721 472,967 755,054
========== ========== ========== ========== ========== ==========
</TABLE>
F-37
<PAGE>
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
No person has been authorized in connection with the offering made
hereby to give any information or to make any representation not
contained in this Prospectus and, if given or made, such information
or representation must not be relied upon as having been authorized by
the Company or any underwriter. This Prospectus does not constitute an
offer to sell or a solicitation of any offer to buy any securities
offered hereby to any person or by anyone in any jurisdiction in which
it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information
contained herein is correct as of any date subsequent to the date
hereof.
TABLE OF CONTENTS
Page
----
Prospectus Summary...................................
The Company...........................................
Risk Factors.........................................
The Reorganization....................................
Use of Proceeds......................................
Dividend Policy......................................
Capitalization.......................................
Dilution ............................................
Selected Consolidated Financial Data.................
Management's Discussion and Analysis of
Financial Condition and Results of Operations......
Business ............................................
Management...........................................
Principal Stockholders................................
Certain Transactions..................................
Description of Capital Stock.........................
Shares Eligible for Future Sale......................
Underwriting.........................................
Legal Matters........................................
Experts..............................................
Available Information................................
Index to Consolidated Financial Statements...........
Until , 1996 (25 days after the date of
this Prospectus), all dealers effecting transactions in the
Common Stock offered hereby, whether or not participating in this
distribution, may be required to deliver a prospectus. This is in
addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
SHARES
[NAFCO LOGO]
NATIONAL AUTO FINANCE
COMPANY, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
RAYMOND JAMES & ASSOCIATES, INC.
, 1996
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The table below sets forth the expenses expected to be
incurred and borne solely by the Company in connection with the
registration of the Common Stock offered hereby (other than
underwriting commissions and discounts, if any).
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee..................................... $ 4,849
NASD Filing Fee......................................................................... *
Printing and Engraving Expenses......................................................... *
Blue Sky Fees and Expenses.............................................................. 15,000
Legal Fees and Expenses................................................................. *
Accountants' Fees and Expenses.......................................................... *
NASDAQ Stock Market Listing Fee......................................................... *
Transfer Agent and Registrar Fees and Expenses.......................................... *
------------
Miscellaneous........................................................................... *
------------
Total.......................................................................... *
=============
</TABLE>
* To be filed by amendment.
All such fees and expenses have been or will be paid by the
Registrant.
Item 14. Indemnification of Directors and Officers.
The Certificate of Incorporation and the By-Laws of the
Company provides for the indemnification of its officers and directors
to the fullest extent permitted by the DGCL. Pursuant to Section 145
of the DGCL, a Delaware corporation generally has the power to
indemnify its present and former directors and officers against
expenses incurred by them in connection with any suit to which such
directors and officers are, or are threatened to be made, a party by
reason of their serving in such positions, so long as they acted in
good faith and in a manner they reasonably believed to be in, or not
opposed to, the best interests of the corporation for which they
served in such positions, and with respect to any criminal action,
they had no reasonable cause to believe their conduct was unlawful.
The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such directors or officers acted in
good faith and in a manner such directors or officers reasonably
believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding,
had no reasonable cause to believe such directors' or officers'
conduct was unlawful. Indemnification is not available if such person
is adjudged to be liable to the corporation for which he or she served
in such positions, unless and only to the extent the court in which
such action is brought determines that, despite the adjudication of
liability, and in view of all the circumstances, the person is
reasonably and fairly entitled to indemnification for such expenses as
the court shall deem proper. Where a director or officer is successful
on the merits or otherwise in the defense of any action referred to
above or in defense of any claim, issue or matter therein, the
corporation must indemnify such director or officer against the
expenses (including attorneys' fees) which he or she actually and
reasonably incurred in connection therewith. The Company has the power
to purchase and maintain
II-1
<PAGE>
insurance for such persons. The statute also expressly provides that
the power to indemnify authorized thereby is not exclusive of any
rights granted under any by-law, agreement, vote of stockholders or
disinterested directors, or otherwise.
The above discussion of the Certificate of Incorporation and
By-Laws of the Company and of Section 145 of the DGCL is not intended
to be exhaustive and is qualified in its entirety by such Certificate
of Incorporation and By-Laws and the DGCL.
Item 15. Recent Sales of Unregistered Securities.
In October 1996, prior to the filing of the Registration
Statement, the NAPCO Partnership agreed to transfer all of its assets,
subject to all of the liabilities, of the Partnerships to a newly
formed corporation in exchange for shares of Common Stock. As part of
the Reorganization described under "The Reorganization" in the
Prospectus. The transaction was exempt from registration under Section
4(2) of the Securities Act as not involving a public offering. No
underwriter was involved in the transaction.
Immediately prior to the Consummation of the Offering, the
Deferred Additional Interest Notes were exchanged for ______ shares of
the Common Stock representing 10% of the outstanding Common Stock
immediately prior to consummation of the Offering.
Item 16. Exhibits and Financial Schedules.
(a) Exhibits
Exhibit
Number Description
- ------- -----------
1.1 Form of Underwriting Agreement.*
3.1 Form of Certificate of Incorporation of the Company.
3.2 Form of By-laws of the Company.
4.1 Specimen Certificate of Common Stock.*
5.1 Opinion of Weil, Gotshal & Manges LLP with respect to the legality of
the Common Stock.*
10.1 Second Amended and Restated Agreement of Limited Partnership of
National Auto Finance Company L.P., dated as of September 1, 1995,
among National Auto Finance Corporation, The S Associates Limited
Partnership, The O Associates Limited Partnership, Stephen L. Gurba,
Craig Schnee, Roy E. Tipton, Blane H. MacDonald, Michael B. Colley,
Irwin I. Kent, William G. Magro, Kevin G. Adams, Kamala R. Chapman,
Keith B. Stein, Colleen S. McMillen, Richard H. Steffer, Tim Rooney,
Lynn Dunham-Sirota and IronBrand Capital, LLC.
II-2
<PAGE>
10.2 Form of 1996 Stock Option Plan.*
10.3 Form of 401(k) Plan.
10.4 Employment Agreement, dated as of July 1, 1996, between National Auto
Finance Company, Inc. and William Magro.*
10.5 Employment Agreement, dated as of September 16, 1995, between National
Auto Finance Company, Inc. and Roy E. Tipton.*
10.6 Employment Agreement, dated as of October 19, 1995, between National
Auto Finance Company, Inc. and Blane H. MacDonald.*
10.7 Promissory Note, dated October 31, 1994, payable by National Auto
Finance Company L.P. to the order of Gary L. Shapiro.
10.8 Promissory Note, dated October 6, 1994, payable by National Auto
Finance Company L.P. to the order of Edgar Otto.
10.9 Promissory Note, dated November 8, 1994, payable by National Auto
Finance Company L.P. to the order of Stephen L. Gurba.
10.10 Promissory Note, dated March 27, 1995, payable by National Auto Finance
Company L.P. to the order of Nova Financial Corporation.
10.11 Promissory Note, dated May 1, 1995, payable by National Auto Finance
Company L.P. to the order of Nova Corporation.
10.12 Note Purchase Agreement, dated as of August 9, 1996, between
National Auto Finance Company L.P. and Morgan Guaranty Trust
Company of New York, as trustee of the Commingled Pension
Trust Fund (Multi-Market Special Investment Fund II) of
Morgan Guaranty Trust Company of New York, Morgan Guaranty
Trust Company of New York, as trustee of the Multi-Market
Special Investment Trust Fund of Morgan Guaranty Trust
Company of New York and Morgan Guaranty Trust Company, as
investment manager and agent for the Alfred P. Sloan
Foundation (Multi-Market Account).*
10.13 Promissory Note (No. 101), dated August 9, 1996, payable by National
Auto Finance Company L.P. to the order of Kelly & Co., as nominee for
Morgan Guaranty Trust Company of New York.*
10.14 Promissory Note (No. 201), dated August 9, 1996, payable by National
Auto Finance Company L.P. to the order of Kelly & Co., as nominee for
Morgan Guaranty Trust Company of New York.*
10.15 Promissory Note (No. 102), dated August 9, 1996, payable by National
Auto Finance Company L.P. to the order of Kelly & Co., as nominee for
Morgan Guaranty Trust Company of New York.*
10.16 Registration Rights Agreement, dated as of August 9, 1996, among
National Auto Finance Company Inc. and Morgan Guaranty Trust Company
of New York, as trustee of the Commingled Pension Trust Fund
(Multi-Market Special Investment Fund II) of Morgan Guaranty Trust
Company of New York, Morgan Guaranty Trust Company of New York, as
trustee of the Multi-Market Special Investment Trust Fund of Morgan
Guaranty Trust Company of New York and Morgan Guaranty Trust Company,
as investment manager and agent for the Alfred P. Sloan Foundation
(Multi-Market Account).*
II-3
<PAGE>
10.17 Receivables Purchase Agreement, dated as of December 8, 1994, between
National Auto Finance Company L.P. and NAFCO Funding Trust.
10.18 Promissory Note, dated December 8, 1994, payable by NAFCO
Funding Trust to the order of National Auto Finance Company
L.P.
10.19 Pooling and Administration Agreement, dated as of December 8, 1994,
among NAFCO Funding Trust, National Auto Finance Company L.P. and
Bankers Trust Company.
10.20 Series 1994-R, Class B Supplement, dated as of December 8,
1994, among NAFCO Funding Trust, National Auto Finance
Company L.P. and Bankers Trust Company, to the Pooling and
Administration Agreement, dated as of December 8, 1994.
10.21 Trust Agreement, dated as of October 5, 1994, between National Auto
Finance Corporation and Bankers Trust.
10.22 First Amended and Restated Trust Agreement, dated as of December 8,
1994, among National Auto Finance Company L.P., The Chase Manhattan
Bank (USA) and Gary L. Shapiro and Edgar Otto, as Co-Trustees.
10.23 Servicing Agreement, dated July 25, 1994, between World Omni Financial
Corp. and National Auto Finance Company L.P.
10.24 Certificate Purchase Agreement, dated as of December 8, 1994, among
NAFCO Funding Trust, National Auto Finance Company L.P. and First
Union National Bank of North Carolina.
10.25 Management Agreement, dated December 29, 1994, between National Auto
Finance Company L.P. and National Auto Finance Companies.
10.25-1 Amendment to Management Agreement, dated January 1, 1996, between
National Auto Finance Company L.P. and National Auto Finance Companies.
10.26 Service Agreement, dated December 29, 1994, between National Auto
Finance Corporation and National Financial Corporation.
10.26-1 Amendment to Service Agreement, dated January 1, 1996, between
National Auto Finance Corporation and National Financial Corporation.
10.27 Pooling and Servicing Agreement, dated as of October 1, 1995, among
National Financial Auto Funding Trust, National Auto Finance Company
L.P. and Harris Trust and Savings Bank.
10.28 Assignment Agreement, dated as of October 1, 1995, between
Bankers Trust Company and National Financial Auto Funding
Trust.
10.29 Transfer Agreement, dated as of October 1, 1995, between
National Financial Auto Funding Trust and Harris Trust and
Savings Bank.
10.30 Insurance and Indemnity Agreement, dated as of November 21, 1995,
between National Auto Finance Company L.P. and Financial Security
Assurance Inc.
10.31 Indemnification Agreement, dated as of November 21, 1995,
between National Financial Auto Funding Trust and First Union
Capital Markets Corp.
10.32 Master Spread Account Agreement, dated as of November 21, 1995, among
National Financial Auto Funding Trust, the Financial Security
Assurance Inc. and Harris Trust and Savings Bank.
II-4
<PAGE>
10.33 Financial Guaranty Insurance Policy, together with Endorsement No. 1
thereto, issued by Financial Security Assurance Inc. in favor of
Harris Trust and Savings Bank, as trustee for the benefit of the
Certificate holders.
10.34 Amended and Restated Servicing Agreement, dated as of December 5,
1994, between National Auto Finance Company L.P. and World Omni
Financial Corp.
10.35 Assignment and Assumption Agreement, dated as of October 23, 1995,
between World Omni Financial Corp. and Omni Financial Services of
America L.P.
10.36 Supplement to the Amended and Restated Servicing Agreement, dated as
of December 5, 1994, between National Auto Finance Company L.P. and
Omni Financial Services of America L.P.
10.37 Custodial Agreement, dated as of November 21, 1995, between National
Auto Finance Company L.P. and Omni Financial Services of America L.P.
10.38 Placement Agent Agreement, dated as of November 20, 1995, between First
Union Capital Markets Corp. and National Financial Auto Funding Trust.
10.39 Amendment, dated as of November 21, 1995, to the First Amended and
Restated Trust Agreement, dated as of December 8, 1994, among National
Auto Finance Company L.P., The Chase Manhattan Bank (USA) and the Gary
L. Shapiro and Edgar Otto, as Co-Trustees.
10.40 Form of Indemnification Agreement.*
10.41 Assignment and Assumption Agreement, dated as of October 7, 1996,
between the NAFCO Partnership and the Company.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Weil, Gotshal & Manges LLP (included in the opinion filed
as Exhibit 5.1)*
24.1 Power of Attorney (included on the signature page of this part II).
- ------------------
*To be filed by amendment.
II-5
<PAGE>
(b) Financial Statement Schedules:
All Schedules have been omitted because the information
is not applicable or is presented in the financial statements or the
notes thereto.
II-6
<PAGE>
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide
to the Underwriter at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under
the Securities Act, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions or otherwise, the registrant has been advised that in the
opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the adjudication of such issue.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Boca Raton, State of Florida on October 8, 1996.
NATIONAL AUTO FINANCE COMPANY, INC.
(Registrant)
By: /s/ Keith B. Stein
---------------------------------
Name: Keith B. Stein
Title: Vice Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints Gary L.
Shapiro and Keith B. Stein, and each individually, such person's true
and lawful attorneys-in-fact and agents, with full power of
substitution and revocation, for such person and in such person's
name, place and stead, in any and all capacities to sign any and all
amendments and post-effective amendments to this Registration
Statement, and to file the same with all exhibits thereto, and the
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents,
each of them, full power and authority to do and perform each and
every act and things requisite and necessary to be done, as fully to
all intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gary L. Shapiro Chief Executive Officer and October 8, 1996
- ---------------------------------- Chairman of the Board
Gary L. Shapiro (principal executive officer)
/s/ Kevin G. Adams Vice President and Chief October 8, 1996
- ---------------------------------- Financial Officer (principal
Kevin G. Adams financial and accounting
officer)
/s/ Keith B. Stein Vice Chairman and Director October 8, 1996
- ----------------------------------
Keith B. Stein
/s/ Edgar A. Otto Director October 8, 1996
- ----------------------------------
Edgar A. Otto
/s/ Roy E. Tipton Director October 8, 1996
- ----------------------------------
Roy E. Tipton
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
- ------- ----------- ----
1.1 Form of Underwriting Agreement.*
3.1 Form of Certificate of Incorporation of the Company.
3.2 Form of By-laws of the Company.
4.1 Specimen Certificate of Common Stock.*
5.1 Opinion of Weil, Gotshal & Manges LLP with respect to the
legality of the Common Stock.*
10.1 Second Amended and Restated Agreement of Limited Partnership of
National Auto Finance Company L.P., dated as of September 1,
1995, among National Auto Finance Corporation, The S Associates
Limited Partnership, The O Associates Limited Partnership,
Stephen L. Gurba, Craig Schnee, Roy E. Tipton, Blane H.
MacDonald, Michael B. Colley, Irwin I. Kent, William G. Magro,
Kevin G. Adams, Kamala R. Chapman, Keith B. Stein, Colleen S.
McMillen, Richard H. Steffer, Tim Rooney, Lynn Dunham-Sirota and
IronBrand Capital, LLC.
<PAGE>
10.2 Form of 1996 Stock Option Plan.*
10.3 Form of 401(k) Plan.
10.4 Employment Agreement, dated as of July 1, 1996, between National
Auto Finance Company, Inc. and William Magro.*
10.5 Employment Agreement, dated as of September 16, 1995, between
National Auto Finance Company, Inc. and Roy E. Tipton.*
10.6 Employment Agreement, dated as of October 19, 1995, between
National Auto Finance Company, Inc. and Blane H. MacDonald.*
10.7 Promissory Note, dated October 31, 1994, payable by National Auto
Finance Company L.P. to the order of Gary L. Shapiro.
10.8 Promissory Note, dated October 6, 1994, payable by National Auto
Finance Company L.P. to the order of Edgar Otto.
10.9 Promissory Note, dated November 8, 1994, payable by National Auto
Finance Company L.P. to the order of Stephen L. Gurba.
10.10 Promissory Note, dated March 27, 1995, payable by National Auto
Finance Company L.P. to the order of Nova Financial Corporation.
10.11 Promissory Note, dated May 1, 1995, payable by National Auto
Finance Company L.P. to the order of Nova Corporation.
10.12 Note Purchase Agreement, dated as of August 9, 1996, between
National Auto Finance Company L.P. and Morgan Guaranty Trust
Company of New York, as trustee of the Commingled Pension
Trust Fund (Multi-Market Special Investment Fund II) of
Morgan Guaranty Trust Company of New York, Morgan Guaranty
Trust Company of New York, as trustee of the Multi-Market
Special Investment Trust Fund of Morgan Guaranty Trust
Company of New York and Morgan Guaranty Trust Company, as
investment manager and agent for the Alfred P. Sloan
Foundation (Multi-Market Account).*
10.13 Promissory Note (No. 101), dated August 9, 1996, payable by
National Auto Finance Company L.P. to the order of Kelly & Co.,
as nominee for Morgan Guaranty Trust Company of New York.*
10.14 Promissory Note (No. 201), dated August 9, 1996, payable by
National Auto Finance Company L.P. to the order of Kelly & Co.,
as nominee for Morgan Guaranty Trust Company of New York.*
10.15 Promissory Note (No. 102), dated August 9, 1996, payable by
National Auto Finance Company L.P. to the order of Kelly & Co.,
as nominee for Morgan Guaranty Trust Company of New York.*
10.16 Registration Rights Agreement, dated as of August 9, 1996, among
National Auto Finance Company Inc. and Morgan Guaranty Trust
Company of New York, as trustee of the Commingled Pension Trust
Fund (Multi-Market Special Investment Fund II) of Morgan Guaranty
Trust Company of New York, Morgan Guaranty Trust Company of New
York, as trustee of the Multi-Market Special Investment Trust
Fund of Morgan Guaranty Trust Company of New York and Morgan
Guaranty Trust Company, as investment manager and agent for the
Alfred P. Sloan Foundation (Multi-Market Account).*
<PAGE>
10.17 Receivables Purchase Agreement, dated as of December 8, 1994,
between National Auto Finance Company L.P. and NAFCO Funding
Trust.
10.18 Promissory Note, dated December 8, 1994, payable by NAFCO Funding
Trust to the order of National Auto Finance Company L.P.
10.19 Pooling and Administration Agreement, dated as of December 8,
1994, among NAFCO Funding Trust, National Auto Finance Company
L.P. and Bankers Trust Company.
10.20 Series 1994-R, Class B Supplement, dated as of December 8,
1994, among NAFCO Funding Trust, National Auto Finance
Company L.P. and Bankers Trust Company, to the Pooling and
Administration Agreement, dated as of December 8, 1994.
10.21 Trust Agreement, dated as of October 5, 1994, between National
Auto Finance Corporation and Bankers Trust.
10.22 First Amended and Restated Trust Agreement, dated as of December
8, 1994, among National Auto Finance Company L.P., The Chase
Manhattan Bank (USA) and Gary L. Shapiro and Edgar Otto, as
Co-Trustees.
10.23 Servicing Agreement, dated July 25, 1994, between World Omni
Financial Corp. and National Auto Finance Company L.P.
10.24 Certificate Purchase Agreement, dated as of December 8, 1994,
among NAFCO Funding Trust, National Auto Finance Company L.P. and
First Union National Bank of North Carolina.
10.25 Management Agreement, dated December 29, 1994, between National
Auto Finance Company L.P. and National Auto Finance Companies.
10.25-1 Amendment to Management Agreement, dated January 1, 1996, between
National Auto Finance Company L.P. and National Auto Finance Companies.
10.26 Service Agreement, dated December 29, 1994, between National Auto
Finance Corporation and National Financial Corporation.
10.26-1 Amendment to Service Agreement, dated January 1, 1996, between
National Auto Finance Corporation and National Financial Corporation.
10.27 Pooling and Servicing Agreement, dated as of October 1, 1995,
among National Financial Auto Funding Trust, National Auto
Finance Company L.P. and Harris Trust and Savings Bank.
10.28 Assignment Agreement, dated as of October 1, 1995, between
Bankers Trust Company and National Financial Auto Funding
Trust.
10.29 Transfer Agreement, dated as of October 1, 1995, between
National Financial Auto Funding Trust and Harris Trust and
Savings Bank.
10.30 Insurance and Indemnity Agreement, dated as of November 21, 1995,
between National Auto Finance Company L.P. and Financial Security
Assurance Inc.
10.31 Indemnification Agreement, dated as of November 21, 1995,
between National Financial Auto Funding Trust and First Union
Capital Markets Corp.
10.32 Master Spread Account Agreement, dated as of November 21, 1995,
among National Financial Auto Funding Trust, the Financial
Security Assurance Inc. and Harris Trust and Savings Bank.
<PAGE>
10.33 Financial Guaranty Insurance Policy, together with Endorsement
No. 1 thereto, issued by Financial Security Assurance Inc. in
favor of Harris Trust and Savings Bank, as trustee for the
benefit of the Certificate holders.
10.34 Amended and Restated Servicing Agreement, dated as of December 5,
1994, between National Auto Finance Company L.P. and World Omni
Financial Corp.
10.35 Assignment and Assumption Agreement, dated as of October 23, 1995,
between World Omni Financial Corp. and Omni Financial Services of
America L.P.
10.36 Supplement to the Amended and Restated Servicing Agreement, dated
as of December 5, 1994, between National Auto Finance Company
L.P. and Omni Financial Services of America L.P.
10.37 Custodial Agreement, dated as of November 21, 1995, between
National Auto Finance Company L.P. and Omni Financial Services of
America L.P.
10.38 Placement Agent Agreement, dated as of November 20, 1995, between
First Union Capital Markets Corp. and National Financial Auto
Funding Trust.
10.39 Amendment, dated as of November 21, 1995, to the First Amended
and Restated Trust Agreement, dated as of December 8, 1994, among
National Auto Finance Company L.P., The Chase Manhattan Bank
(USA) and the Gary L. Shapiro and Edgar Otto, as Co-Trustees.
10.40 Form of Indemnification Agreement.*
10.41 Assignment and Assumption Agreement, dated as of October 7, 1996,
between the NAFCO Partnership and the Company.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Weil, Gotshal & Manges LLP (included in the opinion
filed as Exhibit 5.1)*
24.1 Power of Attorney (included on the signature page of this part
II).
- ------------------
*To be filed by amendment.
</TABLE>
<PAGE>
CERTIFICATE OF INCORPORATION
OF
NATIONAL AUTO FINANCE COMPANY, INC.
THE UNDERSIGNED, being a natural person for the purpose of
organizing a corporation under the General Corporation Law of the State of
Delaware (the "DGCL"), hereby certifies that:
FIRST: The name of the Corporation is National Auto Finance Company,
Inc. (hereinafter the "Corporation")
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the DGCL.
FOURTH: (A) The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 21,000,000 shares
("Capital Stock"), consisting of 20,000,000 shares of Common Stock, par value
$0.01 per share ("Common Stock"), and 1,000,000 shares of preferred stock, par
value $0.01 per share ("Preferred Stock").
(B) Shares of the Preferred Stock of the Corporation may be issued
from time to time in one or more series, each of which series shall have such
distinctive designation or title as shall be fixed by the Corporation's Board
of Directors (the "Board of Directors") prior to the issuance of any shares
thereof. Each such series of Preferred Stock shall have such voting powers,
full or limited, or no voting powers, and such preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution or
resolutions providing for the issuance of such series of Preferred Stock as may
be adopted from time to time by the Board of Directors prior to the issuance of
any shares thereof pursuant to authority hereby expressly vested in it, all in
accordance with the DGCL. Except as set forth in such resolutions, or as
otherwise may be required by law, the holders of shares of Preferred Stock
shall not have any voting rights.
<PAGE>
FIFTH: The name and mailing address of the incorporator are Kevin G.
Adams, c/o National Auto Finance Company L.P., One Park Place, 621 N.W. 53rd
Street, Suite 200, Boca Raton, Florida 33487.
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation, and of
its directors and stockholders:
(A) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. The Board of Directors shall
consist of not less than 4 members. The directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall consist,
as nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. The term of the initial Class I
directors shall terminate on the date of the 1997 annual meeting of
stockholders; the term of the initial Class II directors shall terminate of the
date of the 1998 annual meeting of stockholders; and the term of the initial
Class III directors shall terminate on the date of the 1999 annual meeting of
stockholders. At each annual meeting of stockholders beginning in 2000,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible, and
any additional directors of any class elected to fill a vacancy resulting from
an increase in such class shall hold office for a term that shall coincide with
the remaining term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. Each director shall
hold office until the annual meeting for the year in which his term expires and
until his successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from office.
Any vacancy on the Board of Directors in a Class I, II or III directorship,
howsoever resulting, shall be filled by a majority of the directors then in
office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill such a vacancy shall hold office for a term that shall
coincide with the term of the class to which such director shall have been
elected. Elections of directors at an annual or special meeting of stockholders
shall be by written ballot.
(B) Each of the directors of the Corporation may be removed from
office at any time, but only for cause and only by affirmative vote of the
holders of not less than eighty percent of the outstanding shares of Common
Stock.
(C) Notwithstanding the foregoing, whenever the holders of any one or
more series of Preferred Stock issued by the Corporation shall have the right,
voting separately by series,
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to elect directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Certificate of
Incorporation or the resolution or resolutions adopted by the Board of
Directors pursuant to Article FOURTH applicable thereto, and such directors so
elected shall not be divided pursuant to this Article SIXTH into classes with
the directors elected by the holders of Common Stock unless expressly provided
by such terms.
(D) In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, adopt, alter,
amend, change or repeal the Bylaws of the Corporation. Stockholders may not
make, adopt, alter, amend, change or repeal the By-laws of the Corporation,
except upon the affirmative vote of the holders of not less than eighty percent
of the outstanding shares of Common Stock.
(E) Any action required or permitted to be taken at any annual or
special meeting of the holders of Common Stock may be taken only upon the vote
of such holders at an annual or special meeting duly noticed and called, as
provided in the Certificate of Incorporation or the By-laws of the Corporation,
and may not be taken by a written consent of such holders in lieu of such
meeting.
(F) No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from
which the director derived an improper personal benefit. Any repeal or
modification of this Section (F) by the stockholders of the Corporation shall
not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
(G) Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by a majority of the Board of
Directors, the Chairman of the Board of Directors, the Vice Chairman or the
President of the Corporation. Special meetings of the stockholders of the
Corporation may not be called by any other person or persons.
(H) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject to the
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provisions of the DGCL, this Certificate of Incorporation, and any By-laws
adopted by the Board of Directors or the holders of Common Stock in accordance
with the provisions of this Certificate of Incorporation; provided, however,
that no By-laws hereafter adopted by the holders of Common Stock shall
invalidate any prior act of the directors which would have been valid if such
By-laws had not been adopted.
SEVENTH: Subject to Article VIII of the Corporation's By-laws, the
Corporation shall indemnify to the full extent permitted by law (as now or
hereafter in effect), any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he is or was a director or officer of the Corporation, or is
or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, trustee, employee or agent of, or in any
other capacity with respect to, another corporation, partnership, limited
liability company, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding. Nothing contained herein shall
affect any rights to indemnification to which employees other than directors
and officers may be entitled by law. No amendment to or repeal of this Article
SEVENTH shall apply to or have any effect on any right to indemnification
provided hereunder with respect to any acts or omissions occurring prior to
such amendment or repeal.
EIGHTH: Notwithstanding anything in this Certificate of Incorporation
to the contrary, and in addition to any vote of the Board of Directors required
by this Certificate of Incorporation or the By-laws of the Corporation, the
affirmative vote of the holders of not less than eighty percent of the
outstanding shares of Common Stock shall be required to alter, amend or repeal,
or adopt any provision inconsistent with, any provision of Article SIXTH,
Article SEVENTH or this Article EIGHTH.
NINTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the DGCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-laws of the Corporation.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein and granted subject to this reservation.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed in its name this 4th day of October, 1996.
NATIONAL AUTO FINANCE COMPANY, INC.
-----------------------------------
Kevin G. Adams
Sole Incorporator
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BY-LAWS
OF
NATIONAL AUTO FINANCE COMPANY, INC.
(hereinafter called the "Corporation")
ARTICLE I.
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such place,
date and hour, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of stockholders shall
be held on such date and at such time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by
the Certificate of Incorporation, Special Meetings of stockholders, for any
purpose or purposes, may be called at any time by a majority of the Board of
Directors, the Chairman of the Board of Directors,
<PAGE>
the Vice Chairman or the President of the Corporation. Such request shall state
the purpose or purposes of the proposed meeting. Written notice of a Special
Meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten nor
more than sixty days before the date of the meeting, to each stockholder
entitled to vote at such meeting.
Section 4. Advance Notification of Business to be Transacted at Annual
Meetings. No business may be transacted at an Annual Meeting of stockholders,
other than business that is either (a) specified in the notice of meeting (or
any supplement thereof) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (b) otherwise properly brought
before the Annual Meeting by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (c) otherwise properly brought before
the Annual Meeting by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 4 and on the record date for the determination of stockholders
entitled to vote at such Annual Meeting and (ii) who complies with the notice
procedures set forth in this Section 4.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary
of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty days nor more than ninety days prior to the
date of the Annual Meeting; provided, however, that in the event that less than
seventy days' notice or prior public disclosure of the date of the Annual
Meeting is given or made to stockholders, notice by the stockholder in order to
be timely must be so received not later than the close of business on the tenth
day following the day on which such notice of the date of the Annual Meeting
was mailed or such public disclosure of the date of the Annual Meeting was
made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth as to each matter such stockholder proposes to bring before the
Annual Meeting (i) a brief description of the business desired to be brought
before the Annual Meeting and the reasons for conducting such business at the
Annual Meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder, (iv) a description of
all arrangements or understandings between such stockholder and any other
person or persons (including their names) in connection with the proposal of
such business by such stockholder and any material interest of such stockholder
in such business and (v) a representation that
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such stockholder intends to appear in person or by proxy at the Annual Meeting
to bring such business before the meeting.
No business shall be conducted at the Annual Meeting of stockholders,
except business brought before the Annual Meeting in accordance with the
procedures set forth in this Section 4; provided, however, that, once business
has been properly brought before the Annual Meeting in accordance with such
procedures, nothing in this Section 4 shall be deemed to preclude discussion by
any stockholder of any such business. If the chairman of an Annual Meeting
determines that business was not properly brought before the Annual Meeting in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
Section 5. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting originally noticed. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.
Section 6. Voting. (a) Unless otherwise required by law, the
Certificate of Incorporation or these By-laws, any question brought before any
meeting of stockholders shall be decided by the vote of the holders of a
majority of the stock represented and entitled to vote thereat. Each
stockholder represented at a meeting of stockholders shall be entitled to cast
one vote for each share of the capital stock entitled to vote thereat held by
such stockholder. Such votes may be cast in person or by proxy but no proxy
shall be voted on or after three years from its date, unless such proxy
provides for a longer period. The Board of Directors, in its discretion, or the
officer of the Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall be cast by
written ballot; provided, however, that the vote for the election of directors,
and upon the direction of the presiding officer of the meeting, the vote on any
other question before the meeting, shall be by written ballot. Any action
required or permitted to be taken at any Annual Meeting or Special Meeting of
stockholders may be taken only upon the vote of such holders at an Annual
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Meeting or a Special Meeting duly noticed or called and may not be taken by a
written consent of stockholders in lieu of such meeting.
(b) In order that the Corporation may determine the
stockholders entitled to vote at an Annual Meeting or a Special Meeting, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which date shall not be more than 10 days after the
date upon which the resolution fixing the record date is adopted by the Board
of Directors. Any stockholder of record seeking to have the stockholders
authorize or take corporate action by a vote of such stockholders shall, by
written notice to the Secretary, request the Board of Directors to fix a record
date. The Board of Directors shall promptly, but in all events within 10 days
after the date on which such a request is received, adopt a resolution fixing
the record date. If no record date has been fixed by the Board of Directors
within 10 days of the date on which such a request is received, the record date
for determining stockholders entitled to vote when no proper action by the
Board of Directors is required by applicable law, shall be the first date on
which a notice of such vote which notice sets forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
any officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board
of Directors and prior action by the Board of Directors is required by
applicable law, the record date for determining stockholders entitled to vote
shall be at the close of business on the date on which the Board of Directors
adopts the resolution taking such prior action.
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required
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by Section 7 of this Article II or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
ARTICLE III.
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors
shall consist of not less than 4 members. The directors shall be divided into
three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. The term of the initial
Class I directors shall terminate on the date of the 1997 Annual Meeting of
stockholders; the term of the initial Class II directors shall terminate on the
date of the 1998 Annual Meeting of Stockholders; and the term of the initial
Class III directors shall terminate on the date of the 1999 Annual Meeting of
stockholders. At each Annual Meeting of stockholders beginning in 2000,
successors to the class of directors whose term expires at that Annual Meeting
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible, and
any additional directors of any class elected to fill a vacancy resulting from
an increase in such class shall hold office for a term that shall coincide with
the remaining term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. Each director shall
hold office until the Annual Meeting for the year in which his term expires and
until his successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from office.
Directors need not be stockholders.
Section 2. Nomination of Directors. Nominations of persons for
election to the Board of Directors may be made at any Annual Meeting of
stockholders (a) by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (b) by any stockholder of the Corporation (i)
who is a stockholder of record on the date of the giving of the notice provided
for in this Section 2 and on the record date for the determination of
stockholders entitled to vote at such Annual Meeting and (ii) who complies with
the notice procedures set forth in this Section 2. Persons nominated by a
stockholder of the Corporation shall only be eligible for election as directors
of the Corporation if such persons are nominated in accordance with the
following procedures.
In addition to any other applicable requirements, for a nomination to
be made by a stockholder, such stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation.
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To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty days nor more than ninety days prior to the
date of the Annual Meeting; provided, however, that in the event that less than
seventy days' notice or prior public disclosure of the date of the Annual
Meeting is given or made to stockholders, notice by the stockholder in order to
be timely must be so received not later than the close of business on the tenth
day following the day on which such notice of the date of the Annual Meeting
was mailed or such public disclosure of the date of the Annual Meeting was
made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act"); and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be made by
such stockholder, (iv) a representation that such stockholder intends to appear
in person or by proxy at the Annual Meeting to nominate the persons named in
its notice and (v) any other information relating to such stockholder that
would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act. Such notice must be
accompanied by a written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected.
No person nominated by a stockholder of the Corporation shall be
eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth in this Section 2. If the Chairman of
the Annual Meeting determines that a nomination was not made in accordance with
the foregoing procedures, the Chairman shall declare to the meeting that the
nomination was defective and such defective nomination shall be disregarded.
Section 3. Vacancies. Any vacancy on the Board of Directors in a Class
I, II or III directorship, howsoever resulting, shall be filled by a majority
of the directors then in office,
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even if less than a quorum, or by a sole remaining director. Any director
elected to fill such a vacancy shall hold office for a term that shall coincide
with the term of the class to which such director shall have been elected.
Section 4. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as
are not by statute or by the Certificate of Incorporation or by these By-laws
directed or required to be exercised or done by the stockholders.
Section 5. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may he held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special Meetings of the Board of Directors may be called by
the Chairman of the Board of Directors, the Vice Chairman, the Chief Executive
Officer, the President or a majority of the Board of Directors. Notice thereof
stating the place, date and hour of the meeting shall be given to each director
either by mail not less than forty-eight hours before the date of the meeting,
by telephone, telecopy or telegram on twenty-four hours' notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
Section 6. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 7. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof maybe taken without a meeting, if all the members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 8. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these By-laws, members of the
Board of Directors of the
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Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee by means
of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other; and participation
in a meeting pursuant to this Section 8 shall constitute presence in person at
such meeting.
Section 9. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, including an Executive Committee, a Compensation Committee, and an
Audit Committee, each such committee to consist of one or more of the directors
of the Corporation. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member; the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any absent or disqualified member. Any
committee, to the extent allowed by law and provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Each committee shall report to the Board of
Directors, and shall keep complete and accurate minutes and records and shall
promptly distribute such minutes and records to each member of the Board of
Directors when requested.
Section 10. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of The Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
Section 11. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, limited liability company,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer
is present at or participates in the meeting of the Board of Directors or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose if (i) the material
facts as to his or their relationship or interest and as to the contract
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or transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to his or their relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IV.
OFFICERS
Section 1. General. The following officers of the Corporation shall be
chosen by a majority of the entire Board of Directors: Chief Executive Officer,
Vice Chairman, President, Executive Vice Presidents, Secretary and Treasurer.
The Board of Directors or the Nominating and Compensation Committee of the
Board of Directors, in its respective discretion as it may deem proper, may
also choose a Chief Legal Officer and one or more Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers. Any number of offices
maybe held by the same person, unless otherwise prohibited by law the
Certificate of Incorporation or these By-laws. The officers of the Corporation
need not be stockholders of the Corporation nor, except in the case of the
Chairman of the Board of Directors, the Vice Chairman and the Chief Executive
Officer; need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after the commencement of each fiscal year shall elect officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation
or removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by
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the Corporation may be executed in the name of and on behalf of the Corporation
by the President or any Vice President and any such officer may, in the name of
and on behalf of the Corporation, take all such action as any such officer may
deem advisable to vote in person or by proxy at any meeting of security holders
of any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and powers incident
to the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at meetings of the Board of Directors and
meetings of stockholders. The Chairman of the Board of Directors shall be
responsible for, among other things, board and stockholder governance. The
Chairman of the Board of Directors shall be a member of the Executive Committee
and an ex officio member of all standing committees.
Section 5. Vice Chairman. The Vice Chairman shall be a director and
shall preside at meetings of the Board of Directors and meetings of
stockholders in the absence of the Chairman of the Board or upon the inability
of the Chairman of the Board to act. The Vice Chairman shall perform such
duties as may from time to time be assigned to him by the Board.
Section 6. Chief Executive Officer and President. The Chief Executive
Officer and President shall perform such duties and have other powers as a
majority of the entire Board of Directors from time to time may prescribe. Such
officers, as well as the Vice Chairman, shall also severally have such power to
execute on behalf of the Corporation any deed, bond, indenture, certificate,
note, contract or other instrument authorized or approved by the Board of
Directors.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and Special Meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or Chief Executive Officer. If the Secretary shall be unable or shall
refuse to cause to be given notice of all meetings of the stockholders and
Special Meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the Chief Executive Officer
may choose another officer to cause such notice to be given. The Secretary
shall have custody of the seal of the Corporation and the Secretary or any
Assistant Secretary, if there be one, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be
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attested by the signature of the Secretary or by the signature of any such
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing
by his signature. The Secretary shall see that all books, reports, statements,
certificates and other documents and records required by law to be kept or
filed are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation. If required by the Board of Directors, the Treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession
or under his control belonging to the Corporation.
Section 9. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V.
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation represented by certificates and upon request every holder of
uncertificated shares shall be entitled to have a certificate signed, in the
name of the Corporation (i) by the Chairman of the Board of Directors the Chief
Executive Officer, the Vice Chairman, the President or a Vice President and
(ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned
by him in the Corporation.
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Section 2. Signatures. Any or all of the signatures on a certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Uncertificated Shares. The Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares; provided,
however, that any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation.
Section 5. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 6. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express consent to
corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty days nor
less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
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Section 7. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner; and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VI.
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-laws, to be given to any director,
member of a committee or stockholder, such notice maybe given by mail,
addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by telegram, telecopy, or reliable overnight courier.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these By-laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII.
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or Special
Meeting, and may be paid in cash, in property, or in shares of capital stock.
Before payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the Corporation, or for any proper purpose, and
the Board of Directors may modify or abolish any such reserve.
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Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII.
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other
Than Those by or in the Right of the Corporation. Subject to Section 4 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director, officer, trustee, employee or agent of, or in
any other capacity with respect to, another corporation, partnership, limited
liability company, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 4 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or
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completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation as a director, officer,
trustee, employee or agent or in any other capacity with respect to, another
corporation, partnership, limited liability company, joint venture, trust,
employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. No Specific Authorization Required in Certain Cases. To the
extent that a director or officer of the Corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith, without the necessity of
authorization in the specific case.
Section 4. Specific Authorization Required in Certain Cases. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 1 or 2 of this Article VIII, as the case may be. Such determination
shall be made (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders; provided, however, that if a
Change in Control has occurred, such determination shall be made by independent
legal counsel, in a written opinion, chosen by the parties seeking
indemnification and paid for by the Corporation. To the extent, however, that a
director or officer of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
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Section 5. Good Faith Defined. For purposes of any determination under
Section 4 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was
unlawful, if his action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to him by the
officers of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used in
this Section 5 shall mean any other corporation or any partnership, limited
liability company, joint venture, trust, employee benefit plan or other
enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent or in any other
capacity. The provisions of this Section 5 shall not be deemed to be exclusive
or to limit in any way the circumstances in which a person may be deemed to
have met the applicable standard of conduct set forth in Section 1 or 2 of this
Article VIII, as the case may be.
Section 6. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 5 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court
shall be a determination by such court that indemnification of the director or
officer is proper in the circumstances because he has met the applicable
standards of conduct set forth in Section 1 or 2 of this Article VIII, as the
case may be. Neither a contrary determination in the specific case under
Section 4 of this Article VIII nor the absence of any determination thereunder
shall be a defense to such application or create a presumption that the
director or officer seeking indemnification has not met any applicable standard
of conduct. Notice of any application for indemnification pursuant to this
Section 6 shall be given to the Corporation promptly upon the filing of such
application. If successful, in whole or in part, the director or officer
seeking indemnification shall also be entitled to be paid the expense of
prosecuting such application.
Section 7. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article VIII.
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Section 8. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
maybe entitled under any Bylaw, agreement (such agreements being specifically
authorized herein), contract, vote of stockholders or disinterested directors
or pursuant to the direction (however embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of
the Corporation that indemnification of the persons specified in Sections 1 and
2 of this Article VIII shall be made to the fullest extent permitted by law.
The provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Section 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware,
or otherwise.
Section 9. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director; officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent of, or in any
other capacity with respect to, another corporation, partnership, limited
liability company, joint venture, trust, employee benefit plan or other
enterprise against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power or the obligation to indemnify him against
such liability under the provisions of this Article VIII.
Section 10. Certain Definitions. For purposes of this Article VIII
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer
of such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, trustee, employee or agent of, or in any other capacity
with respect to, another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, shall stand in the same position
under the provisions of this Article VIII with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued. For purposes of this
Article VIII, references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director or
officer of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith
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and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this Article VIII.
For purposes of this Article VIII a "Change in Control" shall mean a
change in control of the Corporation of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act, whether or not the Corporation is then subject to such
reporting requirement; provided that, without limitation, such a Change in
Control shall be deemed to have occurred if (a) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13(d)-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing fifteen
percent or more of the Corporation's then outstanding Common Stock without the
prior approval of at least two-thirds of the members of the Board of Directors
in office immediately prior to such acquisition, or (b) the Corporation is a
party to a merger, consolidation, sale of assets or other reorganization, or
proxy contest, as a consequence of which members of the Board of Directors in
office immediately prior to such transaction or event constitute less than a
majority of the Board of Directors thereafter, or (c) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors (including for this purpose any new director whose
election or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period) cease for any reason to
constitute at least a majority of the Board of Directors.
Section 11. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VIII shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
Section 12. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 6 of this
Article VIII), the Corporation shall not be obligated to indemnify any director
or officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
Section 13. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the
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Corporation similar to those conferred in this Article VIII to directors and
officers of the Corporation.
Section 14. Amendment of this Article VIII. No amendment or repeal of
this Article VIII shall apply to or have any effect on any right to
indemnification provided hereunder with respect to any acts or omissions
occurring prior to such amendment or repeal.
ARTICLE IX.
AMENDMENTS
Section 1. Subject to the provisions of the Company's Certificate of
Incorporation, these By-laws may be altered, amended or repealed, in whole or
in part, or new By-laws may be adopted by the stockholders or by the Board of
Directors, provided, however, that notice of such alteration, amendment, repeal
or adoption of new By-laws be contained in the notice of any Special Meeting of
stockholders at which such alteration, amendment, repeal or adoption is to be
voted upon. Subject to the provisions of the Company's Certificate of
Incorporation, as amended, all such amendments must be approved by either a
majority of the entire Board of Directors then in office or the affirmative
vote of the holders of not less than eighty percent of the outstanding shares
of Common Stock of the Corporation.
Section 2. Entire Board of Directors. As used in this Article IX and
in these By-laws generally, the term "entire Board of Directors" means the
total number of directors which the Corporation would have if there were no
vacancies.
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- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
NATIONAL AUTO FINANCE COMPANY L.P.
- --------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
ARTICLE I
Defined Terms.............................................................. 1
ARTICLE II
Establishment, Purpose, and Term........................................... 12
Section 2.1 Establishment...................................... 12
Section 2.2 Name, Principal Office, Registered Office
and Registered Agent............................... 12
Section 2.3 Purpose............................................ 12
Section 2.4 Authorized Acts.................................... 13
Section 2.5 Term and Dissolution............................... 15
Section 2.6 Noncompetition; Conflicts of Interest.............. 19
Section 2.7 Title to Property.................................. 21
Section 2.8 Individual Obligations of Partners................. 21
ARTICLE III
Partners; Capital.......................................................... 22
Section 3.1 Schedule A......................................... 22
Section 3.2 General Partner.................................... 24
Section 3.3 Limited Partners................................... 25
Section 3.4 Partnership Capital................................ 27
Section 3.5 Liability of Limited Partners...................... 27
Section 3.6 Limited Partners................................... 28
ARTICLE IV
Partners, Fees & Expenses.................................................. 28
Section 4.1 Admission of Additional Limited Partners/
Issuance of Additional Units....................... 28
Section 4.2 Fees and Expenses Paid by the Partnership.......... 28
Section 4.3 Services of the General Partner.................... 29
ARTICLE V
Rights, Powers and Duties of the Partners.................................. 30
Section 5.1 Business, Management and Control................... 30
Section 5.2 Duties and Obligations............................. 31
Section 5.3 Indemnification.................................... 32
Section 5.4 Liability of the General Partner to Limited
Partners........................................... 32
Section 5.5 Voting Rights...................................... 32
Section 5.6 Meetings of the Limited Partners................... 35
Section 5.7 Permissible Activities; Veto....................... 37
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Section 5.8 Supervision by the OCC............................. 38
Section 5.9 Costs of Regulatory Supervision.................... 38
Section 5.10 Special Provisions Relative to the Sale
of ACCH............................................ 38
ARTICLE VI
Registration Rights........................................................ 39
Section 6.1 Definitions........................................ 39
Section 6.2 Securities Subject to this Agreement............... 40
Section 6.3 Demand Registration................................ 41
Section 6.4 Piggy-Back Registration............................ 42
Section 6.5 Holdback Agreements................................ 43
Section 6.6 Registration Procedures............................ 44
Section 6.7 Registration Expenses.............................. 49
Section 6.8 Indemnification; Contribution...................... 49
Section 6.9 Rules 144 and 144A................................. 52
Section 6.10 Registration Rights of Others...................... 53
Section 6.11 Miscellaneous...................................... 53
ARTICLE VII
Transferability of Partnership Interests................................... 54
Section 7.1 Limitations and Restrictions....................... 54
Section 7.2 Involuntary Assignment of Partnership
Interests.......................................... 56
Section 7.3 Recordation of Transfers and Involuntary
Assignments of Partnership Interests............... 57
Section 7.4 Distributions and Applications with
Respect to Transferred and Involuntarily
Assigned Partnership Interests..................... 58
ARTICLE VIII
Loans...................................................................... 58
Section 8.1 General............................................ 58
Section 8.2 Restrictions on Rate of Interest................... 59
ARTICLE IX
Profits and Losses; Distributions.......................................... 59
Section 9.1 Profits and Losses................................. 59
Section 9.2 Distributions Prior to Dissolution................. 65
Section 9.3 Distributions On Dissolution....................... 67
Section 9.4 Distributions of Certain In-Kind Property.......... 68
Section 9.5 Changes in Percentage Interest..................... 69
Section 9.6 Withheld Tax From Distributions Among
Limited Partners................................... 70
Section 9.7 Adjustments to IronBrand's Forfeitable
Percentage Interest................................ 71
Section 9.8 Consequences of Forfeiture......................... 76
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Section 9.9 Limitations on Distributions....................... 77
Section 9.10 General Partner's Discretionary Powers;
Allocation Savings Provisions...................... 77
Section 9.11 Additional Financing Terms......................... 78
Section 9.12 Issuance of Bonus Units............................ 78
Section 9.13 Consequences of Issuance and Cancellation
of Bonus Units..................................... 80
Section 9.14 Vesting Upon Occurrence of Certain Put Events...... 81
Section 9.15 IronBrand's Imputed Indirect Ownership in ACCH..... 81
ARTICLE X
Books and Records, Accounting, Tax Elections, Etc.......................... 81
Section 10.1 Books and Records.................................. 81
Section 10.2 Annual and Interim Reports......................... 83
Section 10.3 Bank Accounts...................................... 85
Section 10.4 Accountants........................................ 85
Section 10.5 Copies of this Agreement........................... 85
Section 10.6 Tax Elections...................................... 85
Section 10.7 Special Basis Adjustments.......................... 85
Section 10.8 Fiscal Year and Accounting Method.................. 85
Section 10.9 Tax Matters Partner................................ 85
Section 10.10 Tax Returns and Information........................ 86
Section 10.11 Confidentiality.................................... 87
Section 10.12 Financial Statements of the Partnership
to be Prepared After an Initial Public
Offering........................................... 87
ARTICLE XI
IronBrand's Redemption Rights; The Partnership's Call Rights...... 88
Section 11.1 Put Option......................................... 88
Section 11.2 Notice............................................. 88
Section 11.3 Redemption Price................................... 88
Section 11.4 Closing............................................ 90
Section 11.5 Put Events......................................... 90
Section 11.6 Sale Transaction; Cure Rights...................... 92
Section 11.7 Call Option........................................ 96
ARTICLE XII
General Provisions......................................................... 96
Section 12.1 Restrictions on Transfer........................... 96
Section 12.2 Appointment of Partnership and General
Partner as Attorney-in-Fact........................ 96
Section 12.3 Notices............................................ 98
Section 12.4 Word Meanings...................................... 98
Section 12.5 Binding Provisions................................. 99
Section 12.6 Applicable Law..................................... 99
Section 12.7 Counterparts....................................... 99
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Section 12.8 Separability of Provisions......................... 99
Section 12.9 Paragraph Titles...................................100
Section 12.10 Incorporation by Reference.........................100
Section 12.11 Regulatory Compliance by IronBrand.................100
Section 12.12 No Implied Waiver..................................101
Section 12.13 Partition..........................................101
SCHEDULE A....................Partner Information
SCHEDULE A-1..................Additional Preferred Equity
SCHEDULE B....................MC/Referral Bonus Unit Percentage
EXHIBIT A.....................1994 Award Units Plan
EXHIBIT B ....................Illustration of Forfeiture Provisions
EXHIBIT C.....................Illustrations of Allocations Under
Section 9.1
EXHIBIT D.....................Letter Agreement Regarding Additional
Financing Terms
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SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF NATIONAL AUTO FINANCE COMPANY L.P.
This Second Amended and Restated Agreement of Limited Partnership (the
"Agreement"), dated as of September 1, 1995, by and among National Auto Finance
Corporation, a Delaware corporation (the "General Partner"), and The S
Associates Limited Partnership, a Nevada limited partnership, The O Associates
Limited Partnership, a Nevada limited partnership, Stephen L. Gurba, Craig
Schnee, Roy E. Tipton, Blane H. McDonald, Michael B. Colley, Irwin I. Kent,
William G. Magro, Kevin G. Adams, Kamala R. Chapman, Keith B. Stein, Colleen S.
McMillen, Richard H. Steffer, Tim Rooney, Lynn Dunham-Sirota and IronBrand
Capital, LLC (collectively, the "Limited Partners" and individually, a "Limited
Partner"), amends and restates in its entirety the Amended and Restated
Agreement of Limited Partnership of National Auto Finance Company L.P. dated as
of December 29, 1994, which amended and restated the limited partnership
agreement of National Auto Finance Company L.P. dated as of October 1, 1994,
which limited partnership was established pursuant to a certificate of limited
partnership, dated as of September 30, 1994.
In consideration of mutual promises made herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
Defined Terms
The capitalized terms used in this Agreement shall have the meanings
specified below, unless otherwise defined elsewhere herein:
"Accountants" means the "Big Six" firm of independent certified public
accountants engaged by the General Partner on behalf of the Partnership. "Big
Six" firm of independent certified public accountants means any of Arthur
Andersen LLP, Coopers & Lybrand L.L.P., Deloitte & Touche LLP, Ernst & Young
LLP, KPMG Peat Marwick LLP, and Price Waterhouse LLP or any successor accounting
firm of any of the foregoing.
"Adjusted Common Capital Account Balance" means, as to any Partner as of a
particular time, such Partner's Common Capital Account balance increased by an
amount equal to the sum of all Available Cash Distributed under Section 9.2.A(1)
to such Partner since the date hereof that is attributable to allocations made
to such Partner pursuant to, or in accordance with, Sections 9.1.A(1)(v)(II),
9.1.A(1)(vi) and 9.1.A(1)(vii).
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"Affiliate" of a specified Person means any Person which (i) directly or
indirectly controls, is controlled by or under common control with such
specified Person; (ii) owns or controls either ten percent (10%) or more of the
outstanding voting stock or other Equity Securities or beneficial interests of
such specified Person or twenty percent (20%) or more of the value of the total
stock or other Equity Securities or beneficial interests of such specified
Person determined on a fully diluted basis; (iii) is an executive officer,
director, general partner, trustee, manager, administrator, representative or
agent (with respect to any matter for which such representative or agent has
been engaged by such Person) of such specified Person; or (iv) is an officer,
director, trustee, manager, administrator, representative or agent, or owns or
controls ten percent (10%) or more of the outstanding voting interests, of a
Person described in clause (i), (ii) or (iii) of this sentence, except that
neither IronBrand nor the Partnership, nor IronBrand and ACCH, shall be
considered an Affiliate of each other. For purposes of the preceding sentence,
"control" means possession, directly or indirectly (through one or more
intermediaries), of the power to direct or cause the direction of management and
policies of a Person through ownership of voting securities (or other ownership
interests), contracts, voting trust or otherwise.
"Agreement" means this Second Amended and Restated Agreement of Limited
Partnership, as it may be amended from time to time.
"Appendix A" means Appendix A to the Pooling and Administration Agreement
among National Financial Auto Funding Trust II, the Partnership and Bankers
Trust Company, as master trustee.
"Audited Financial Statements" means the items listed in clauses (i)
through (iv) of Section 10.2.A.
"Auto Credit Clearinghouse" or "ACCH" means that Delaware limited
partnership established pursuant to a certificate of limited partnership, dated
as of September 5, 1995, and governed by that certain limited partnership
agreement designated as the "Agreement of Limited Partnership of Auto Credit
Clearinghouse L.P.," dated as of April 15, 1996 between the Partnership and
National Auto Finance Corporation, as the same may be amended or supplemented
from time to time, and any successor entity thereof (the "ACCH Agreement").
"Available Cash" means all cash funds of the Partnership from operations,
refinancings, asset sales or otherwise at any particular time available for
Distribution after reasonable provision has been made for (i) payment of all
operating expenses of the Partnership as of such time, (ii) capital reserves for
the on-going purchase of Motor Vehicle Finance and Lease Contracts, and (iii)
payment of all outstanding and unpaid current obligations of the Partnership as
of such time.
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"Bankruptcy" means with respect to any Person, a "Voluntary Bankruptcy" or
an "Involuntary Bankruptcy." A "Voluntary Bankruptcy" means, with respect to any
Person, the (i) institution of proceedings or filing of an answer to be
adjudicated a bankrupt or insolvent or seeking any liquidation, winding up,
dissolution, reorganization, arrangement, adjustment, protection or composition
or other similar relief of the Person or the Person's debts under any bankruptcy
law; (ii) filing or consenting to a petition, answer or other pleading seeking
for such Person any liquidation, winding up, dissolution, reorganization,
arrangement, adjustment, protection or composition or other similar relief of
the Person or the Person's debts under any bankruptcy law; or (iii) seeking,
consenting to or acquiescing in any entry of an order for relief or the
appointment of a receiver, trustee, liquidator, custodian or other similar
official for such Person or all or any substantial part of the Person's
property. An "Involuntary Bankruptcy" means, with respect to any Person, without
the consent of such Person, (i) the entering against such Person of an order for
relief or approving a petition for relief or reorganization or any other
petition seeking any liquidation, winding up, dissolution, reorganization,
arrangement, adjustment, composition or other similar relief under any
bankruptcy law; (ii) the filing of any such petition against such Person which
petition is not dismissed within ninety (90) days of such filing; or (iii)
without the consent or acquiescence of such Person, the entering of an order
appointing a receiver, trustee, liquidator, custodian or other similar official
for such Person or of all or any substantial part of the property of such
Person, which order is not dismissed within sixty (60) days of the date it is
entered. "Bankruptcy law" for purposes of the definition of "Bankruptcy" means
any law relating to bankruptcy, insolvency, reorganization, liquidation or other
relief of debtors. This definition of Bankruptcy is intended to apply with
respect to this Agreement and the Partnership in lieu of the events listed in
sections 17-402(a)(4) and 17-402(a)(5) of the Uniform Act.
"Base Rate" means the rate of interest announced from time to time by
Chase Manhattan Bank, N.A. (or successor bank) as its "base rate".
"Bonus Units" means those Units so described in Section 9.12.
"Bureau Score" means the proprietary score assigned to credit applicants
by TRW, Trans Union and Equifax, or as may otherwise be agreed to in writing
between the General Partner and IronBrand.
"Business" is defined in Section 2.3.
"Business Day" means any day other than a Saturday, Sunday or holiday on
which banks in the State of North Carolina are authorized or required to be
closed.
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"Capital Account" means, as to any Partner, the Capital Contribution
actually paid to the Partnership by the Partner plus all Net Income (or items
thereof) allocated to the Partner, minus the sum of (i) all Net Loss (or items
thereof) allocated to the Partner, and (ii) the cash and the fair market value
of Property other than cash Distributed to the Partner. Notwithstanding anything
herein to the contrary, the Capital Accounts of all Partners shall be determined
and maintained throughout the term of the Partnership in accordance with the
principles of section 1.704-1(b)(2)(iv) of the Treasury Regulations.
"Capital Contribution" of a Partner means the total amount of cash and the
fair market value of property other than cash contributed (net of any
liabilities secured by the Property or to which the Property is subject) to the
Partnership by such Partner as shown in Schedule A hereto, which shall
constitute the "agreed value" of such contribution for all purposes of the
Uniform Act.
"Capital Contributions" means, with respect to a Partner, that part of
such Partner's Capital Contribution made at a given time.
"Certificate" means the Certificate of Limited Partnership establishing
the Partnership, as filed in the office of the Delaware Secretary of State on
September 30, 1994, and as it may be amended from time to time in accordance
with the terms of this Agreement and the Uniform Act.
"Class B Stated Amount" means, with respect to the Combined Company, (i)
the "Stated Amount" of the "Class B Certificates" as those terms are defined in
Appendix A and shall include Class B Certificates sold or assigned by FUNB.
"Closing Date" means December 29, 1994.
"Code" means the Internal Revenue Code of 1986.
"Combined Company" means the Company and, for so long as it is an
Affiliate of the Company, ACCH.
"Common Capital Account" means, as to any Partner as of a particular time,
such Partner's Capital Account balance determined without regard to the
Preferred Equity and the allocations of Net Income or Net Loss (or items
thereof) and Distributions made hereunder with respect to the Preferred Equity.
"Company" means the Partnership prior to an Initial Public Offering and
the successor Entity, if any, thereof immediately prior to and after an Initial
Public Offering to which all or a substantial portion of the Partnership's
assets or operations are directly or indirectly transferred to effect such
Initial Public Offering as described in Section 11.6.A(iv).
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"Company Shares" means, as of a particular time after an Initial Public
Offering, those Equity Securities issued by the Company that are owned by the
Partnership or any Partner or former Partner, as the case may be, as of such
time.
"Consent of the Limited Partners" means either the written consent or the
affirmative vote of Limited Partners owning more than fifty percent (50%) of the
Units owned by all Limited Partners; provided, however, that for purposes of
calculating the percentage level of such consent or affirmative vote, Units
issued pursuant to the Plan shall be excluded from both the numerator and
denominator.
"Distribute" means to make a Distribution or Distributions.
"Distribution" or "Distributions" means any cash or other Property (net of
any liabilities assumed by such Partner or to which such Property is subject)
distributed to a Partner by the Partnership on account of that Partner's
Interest as provided in Article IX hereof; excluding payments made to a Partner
(i) pursuant to a loan by such Partner to the Partnership or transaction in
which such Partner is acting other than in his capacity as a Partner within the
meaning of section 707(a) of the Code or (ii) which are guaranteed payments
within the meaning of section 707(c) of the Code.
"Economic Income" means, for any particular period, Net Income determined
as if the Property was revalued and the Capital Accounts of the Partners were
adjusted in accordance with the principles of section 1.704-1(b)(2)(iv)(f) of
the Treasury Regulations as of the first day of such period and adjusted
thereafter in accordance with the principles of section 1.704-1(b)(2)(iv)(g) of
the Treasury Regulations. For purposes of this definition of Economic Income,
goodwill and similar intangible property shall be amortized over a 40-year
period or as otherwise required by GAAP. Nothing in this definition shall be
interpreted to mean that the Property has been revalued or that the Capital
Accounts have been accordingly adjusted in accordance with section
1.704-1(b)(2)(iv)(f) of the Treasury Regulations unless there has been an
explicit amendment of this Agreement to that effect.
"Entity" means any general partnership, limited partnership, corporation,
joint venture, trust, business trust, cooperative, association, limited
liability company or other entity.
"Equity Security" means any share of stock, partnership or joint venture
interest, limited liability company interest or membership interest, beneficial
interest in a trust, or similar security or any other interest in the equity of
an Entity, business or enterprise; and any security or other interest
convertible (with or without consideration) into any of the foregoing securities
or other equity or beneficial interests, including any warrant, option
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or other right to subscribe for or purchase any of the foregoing securities or
other equity interests (including convertible securities).
"FUNB" means First Union National Bank of North Carolina and
all Affiliates thereof.
"Forfeitable Percentage Interest" means 7.6522% (less any dilution thereof
by the issuance of additional Units pursuant to Section 3.3.F or Section
9.12.C).
"Full Enterprise Value" is defined in Section 11.3.
"Funded Referral" shall have the same meaning as provided in
the Referral Agreement.
"Funding Trust" means either National Financial Auto Funding
Trust, a Delaware business trust, or National Financial Auto Funding Trust II, a
Delaware business trust. "Funding Trusts" means both National Financial Auto
Funding Trust and National Financial Auto Funding Trust II.
"GAAP" means generally accepted accounting principles, conventions, rules
and procedures in the United States set forth in the opinions and pronouncements
of the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or any successor organization) that are applicable to the
circumstances as of the date of determination.
"General Partner" means, as of the date of this Agreement, National Auto
Finance Corporation, a Delaware corporation, and any other Person subsequently
admitted as a general partner of the Partnership.
"Income Alignment Fraction" means, as of a particular time, IronBrand's
Percentage Interest as of such time divided by the combined Percentage Interests
of all other Partners. For example, if IronBrand's Percentage Interest is twenty
percent (20%) as of a particular time, then the Income Alignment Fraction as of
such time would be two-eighths (2/8ths).
"Initial Percentage Interest" means, with respect to each Partner, such
Partner's "Initial Percentage Interest" so designated
on Schedule A hereto.
"Initial Public Offering" means the consummation of the first Qualified
Public Offering pursuant to a registration statement that has been declared
effective under the Securities Act.
"Interest" or "Partnership Interest" of a Partner at any time
means the entire ownership interest of such Partner in Units and
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Preferred Equity of the Partnership at such time, including all benefits to
which the owner of such Interest is entitled under this Agreement, the Uniform
Act and other applicable law, together with all obligations of such Partner
under this Agreement, the Uniform Act and other applicable law.
"Involuntarily Assign" means the act of causing an Involuntary
Assignment.
"Involuntary Assignment" means an involuntary assignment of all or any
part of a Partner's Interest upon, or as a result of, the death, dissolution,
liquidation, bankruptcy, or insolvency of such Partner or required by law and
for which provision with respect to such assignment is not otherwise made
herein.
"IronBrand" means IronBrand Capital, LLC, a North Carolina limited
liability company and, for purposes of Section 5.5.C, shall mean First Union.
"Limited Partner" means those Persons named as Limited Partners in the
preamble to this Agreement and each Person listed in the records of the
Partnership as a limited partner of the Partnership.
"Liquidated Units" means those Units purchased by the Partnership pursuant
to Section 9.2.B.
"Loss Alignment Fraction" means, as of a particular time, the combined
Percentage Interests of all Partners other than IronBrand divided by IronBrand's
Percentage Interest at such time. For example, if the combined Percentage
Interests of all Partners other than IronBrand, as of a particular time, is
eighty percent (80%), then the Loss Alignment Fraction at such time would be
four or (8/2).
"Market Capitalization" means, as of a particular date, the Market
Capitalization of the Company, which means, (i) if the only Equity Securities
that the Company has issued and outstanding on such date are Marketable Shares,
the sum of the Marketable Share Values of each class and (if any such class has
more than one series) each series of such Equity Securities multiplied by the
total number of issued and outstanding Equity Securities of such class or, if
applicable, series on such date or (ii) under all other circumstances, the Full
Enterprise Value of the Company determined in accordance with the principles and
procedures of Section 11.3, except to the extent such valuation is based on the
valuation of comparable public companies or market and economic conditions, such
comparables or the effect of such market and economic conditions on the value of
the Company on such date shall be the average value of such comparable companies
over the 180-day period immediately preceding the two Business Days preceding
such date.
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"Marketable Share" means any share or unit of Equity Securities that has a
Marketable Share Value.
"Marketable Share Value" means the market value of a share or unit of
Equity Securities as of a specified date determined as follows: (i) if such
Equity Securities is traded on a national securities exchange that is registered
under section 6 of the Securities Exchange Act of 1934 (15 U.S.C. ss. 78(f)),
the average of the closing prices of the stock on such national securities
exchange over the 30 trading days immediately preceding the Business Day
preceding such specified date or (ii) if such Equity Securities is traded on an
interdealer quotation system that regularly disseminates firm buy or sell
quotations by identified securities brokers or dealers, the average of the bid
and ask prices reported over the 30 trading days immediately preceding the one
Business Day preceding such specified date, subject, to in each of the cases
described in the foregoing clauses (i) or (ii), to appropriate adjustment in the
event of a stock dividend on, or stock split (or comparable distribution) or
other recapitalization of such capital stock.
"Motor Vehicle" means automobiles, sport utility vehicles, vans and light
duty trucks.
"Motor Vehicle Finance and Lease Contracts" means, as of the date hereof,
(i) any Motor Vehicle finance or lease contract with a Bureau Score above 559 or
Motor Vehicle finance and lease contract of substantially the same credit
quality and (ii) comparable contracts, should such scoring system hereafter be
amended, revised, modified, discontinued or restated.
"Net Income or Net Loss" for any fiscal year (or part thereof) means the
net income or net loss of the Partnership for the year (or part thereof) as
determined for federal income tax purposes by the Accountants (a) except to the
extent required by Treasury Regulations, without regard to any adjustments to
basis pursuant to section 743 of the Code; (b) if, and to the extent that,
assets of the Partnership have been reflected in the Capital Accounts of the
Partners and on the books of the Partnership at their respective fair market
values rather than their adjusted bases for tax purposes, by computing items of
gain, loss and deduction based upon such assets' values as reflected on the
Partnership's books; (c) by including as an item of gross income any tax-exempt
income received by the Partnership; (d) by treating as a deductible expense any
expenditure of the Partnership described in section 705(a)(2)(B) of the Code
(including amounts paid or incurred to organize the Partnership (unless an
election is made pursuant to Code section 709(b)), or to promote the sale of
interests in the Partnership); and (e) by treating deductions for any losses
incurred in connection with the sale or exchange of Partnership Property
disallowed pursuant to section 267(a)(1) or section 707(b) of the Code as
expenditures described in section 705(a)(2)(B) of the Code).
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Notwithstanding anything in this definition of "Net Income or Net Loss" to the
contrary, the determination of Net Income and Net Loss shall be further adjusted
if, and to the extent, necessary to conform with the capital account maintenance
rules of section 1.704-1(b)(2)(iv) of the Treasury Regulations.
"Net Taxable Profits" means for a particular quarter of a fiscal year of
the Partnership, the excess of (a) net taxable income (or items thereof) for
such fiscal quarter and all prior fiscal quarters of such fiscal year and all
prior fiscal years of the Partnership, over (b) net taxable losses (or items
thereof) for such fiscal quarter and all prior fiscal quarters of such fiscal
year and all prior fiscal years.
"1995 Percentage Interests" means, with respect to each Partner, such
Partners "1995 Percentage Interest" so designated on Schedule A hereto.
"Partner" means the General Partner or any Limited Partner.
"Partnership" means the limited partnership governed by this Agreement as
constituted and amended from time to time and any successor Entity after an
Initial Public Offering formed for the purpose of effecting the arrangement
among the Partners described herein with respect to the holding of Company
Shares.
"Percentage Interest" means, as to a Partner, the applicable percentage
represented by the number of Units held by a Partner as a percentage of all
Units outstanding.
"Person" means any individual or Entity.
"Plan" means the Partnership's 1994 Award Units Plan, pursuant to which
certain Units in the Partnership have been, and may in the future be, granted to
employees of the Partnership and its Affiliates, the form of which is attached
hereto as Exhibit A.
"Pool Balance" shall have the meaning ascribed thereto in Appendix A for
the Combined Company.
"Preferred Equity" means the amount so indicated in Schedule A hereto, as
adjusted from time to time by allocations of Net Income and Net Loss (or items
thereof) and Distributions with respect to Preferred Equity in a manner that
conforms with the capital account maintenance rules of section
1.704-1(b)(2)(iv). A Partner's Preferred Equity represents a portion of his
Capital Account. Neither a Partner's number of Units nor a Partner's Percentage
Interest shall be altered by reason of any Preferred Equity owned by the
Partner.
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"Property" or "Partnership Property" means all (or such lesser amount as
indicated by the context used herein) property -- real, personal, tangible or
intangible, and any improvements thereto or thereon, including receivables, cash
and cash equivalents, inventory, goodwill and any legal or equitable interest of
any type in such property -- owned from time to time by the Partnership as a
result of Capital Contributions, operations or otherwise.
"Public Securities" is defined in Section 11.6.A(iv).
"Qualified Public Offering" means a public offering of the Company's
Equity Securities that satisfies all of the requirements set forth in Section
11.6.A(iv).
"Reconstituted Percentage Interest" means the Percentage Interest that a
Partner would otherwise have if no Distributions had been made to such Partner
under Section 9.2.B.
"Reconstituted Value" means, as of any particular time after an Initial
Public Offering, the value of the Partnership or a Partner's Partnership
Interest therein (which in the case of determining the Reconstituted Value of
Units shall equal the product of the Reconstituted Value of the Partnership
multiplied by a fraction, the numerator of which shall be the number of Units
for which the Reconstituted Value thereof is being determined and the
denominator of which shall be the total number of the Partnership's Units
outstanding as of such time under the assumptions set forth in this definition),
as the case may be, determined by assuming that as of such time no Partnership
Property (including Company Shares) had been previously (i) Distributed by the
Partnership pursuant to Section 9.2.B, or (ii) to the extent of prior
Distributions of the proceeds from the sale of Partnership Property pursuant to
Section 9.2.B, sold or exchanged by or on behalf of the Partnership to make such
Distributions.
"Referral Agreement" means the Referral Agreement dated as of April 15,
1996 between ACCH and First Union National Bank of North Carolina (in its
individual capacity and as agent and attorney-in-fact for each of its national
bank affiliates described in Section 13(m) thereof), as the same may be amended,
modified, supplemented or assigned from time to time in accordance with the
terms thereof.
"Regulatory Requirement" is defined in Section 12.11.
"Remaining Capital Commitment" means, with respect to a Partner as of any
date, the amount, if any, set forth opposite such Partner's name on Schedule A-1
hereto, as in effect on the date hereof, under the caption "Remaining Capital
Commitment" minus the total of all of the Capital Contributions made by such
Partner to the Partnership pursuant to Capital Calls made pursuant to Section
3.1.B.
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"Special Tax Distributions" means the sum of all prior Distributions made
to the Partners under Section 9.2.A(1) that are attributable to prior
allocations made to the Partners pursuant to, or in accordance with, Sections
9.1.A(1)(v)(II), 9.1.A(1)(vi) and 9.1.A(1)(vii).
"State" means the State of Delaware.
"Subscription Agreement" means any subscription agreement executed and
delivered by a Limited Partner in connection with his purchase or grant of
Units.
"Subsidiary" means any Entity in which the Partnership owns or controls
either ten percent (10%) or more of the outstanding voting Equity Securities or
twenty percent (20%) or more of the value of the total outstanding Equity
Securities.
"Substitute Limited Partner" means any Person who is admitted to the
Partnership as a Limited Partner under the provisions of Article VII.
"Transfer" means (a) as a noun, any voluntary or involuntary transfer,
sale, assignment, conveyance, exchange, mortgage, pledge, encumbrance,
hypothecation or other disposition, absolute or as a security device or
encumbrance, including dispositions by operation of law and, (b) as a verb,
making any voluntary or involuntary transfer.
"Treasury Regulations" means the final and temporary regulations
promulgated by the Treasury Department under the provisions of the Code.
"Uniform Act" means the Delaware Revised Uniform Limited Partnership Act,
as amended or modified from time to time.
"Units" means the shares into which Partnership Interests (excluding
Preferred Equity but including Bonus Units) are divided.
"Vested Percentage Interest" means, as of a particular time, IronBrand's
Initial Percentage Interest plus any increase therein attributable to IronBrand
being vested with Bonus Units pursuant to Section 9.12.B, less any decrease in
its Percentage Interest attributable to (i) any forfeitures of Units by it
pursuant to Sections 9.7 or (ii) any dilution thereof by the issuance of
additional Units pursuant to Section 3.3.F or as provided by Section 9.12.C; and
further adjusted by assuming that, as of the time such determination is made,
all unissued Bonus Units that have not been cancelled under Section 9.12 are
owned by another Partner; and assuming further, for purposes of this definition,
that as of the time such determination is made, and applicable to all Partners,
no Units have been redeemed or liquidated by the Partnership pursuant to, or in
accordance with, Section 9.2.B.
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"Vested Units" means, as of a particular time, those Units owned by
IronBrand that are not subject to either forfeiture under Section 9.7 or
cancellation under Section 9.12 as of such time.
"Vesting Period" means that period from September 1, 1995 until January
31, 1999 or, if earlier, the date both (i) on which the Market Capitalization
equals or exceeds one hundred fifty million dollars ($150,000,000) and (ii) by
which FUNB has made 36,000 Funded Referrals.
"Withdrawal" means, with respect to a general partner of the Partnership,
death, adjudication of incompetency by a court of competent jurisdiction,
Bankruptcy, dissolution, voluntary withdrawal or resignation, or other event of
withdrawal as provided by section 17-402 and referred to in section 17-801(3) of
the Uniform Act of such Person as a general partner of the Partnership. After
such Withdrawal, such general partner is referred to herein as a "Withdrawn
General Partner." "Withdraw" means, with respect to a general partner of the
Partnership, to cease being general partner of the Partnership as a result of
such Person's Withdrawal or otherwise.
ARTICLE II
Establishment, Purpose, and Term
Section 2.1 Establishment.
The Partnership has been formed under the Uniform Act, and the rights and
liabilities of the Partners shall be as therein provided, except as otherwise
expressly provided herein.
Section 2.2 Name, Principal Office, Registered Office and
Registered Agent.
The name of the Partnership is National Auto Finance Company L.P. The
principal office of the Partnership is One Park Place, 621 NW 53rd Street, Suite
200, Boca Raton, FL 33487. The General Partner may at any time change the
location of the principal office and shall give due notice of any such change to
the Limited Partners. The address of the Registered Office of the Partnership in
the State is c/o The Prentice-Hall Corporation System, Inc., 32 Loockerman
Square, Suite L-100, Dover, Delaware 19904. The Registered Agent is The
Prentice-Hall Corporation System, Inc.
Section 2.3 Purpose.
A. The purpose of the Partnership is to identify, acquire, retain in its
portfolio, convey to one or more master trusts or other purchasers, or otherwise
finance and service Motor Vehicle Finance and Lease Contracts, together with
such other activities as may be necessary, advisable, convenient or useful to
such business
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of the Partnership and to hold an interest in the Funding Trusts and to raise
capital in furtherance of all such activities (the "Business"). The Partnership
and the Partners (consistent with their obligations as set forth in this
Agreement) shall operate the Business in accordance with all applicable laws and
regulations and shall use their best efforts to promote both the financial and
economic viability of the Partnership.
B. In the event of an Initial Public Offering, the purpose of the
Partnership would change and only be to acquire, hold, sell, exchange, vote,
transfer and Distribute Company Shares (or, for any period during which no
allocations under Section 9.1.A of Net Income or Net Loss, as the case may be,
are or would be made in accordance with the Partners' respective Percentage
Interests, the type of assets described in Section 2.4(1)(viii)) in accordance
with the terms and provisions of this Agreement and applicable law.
C. Unless approved by the Limited Partners pursuant to Section 5.5.B(vii),
the Partnership shall not engage in any other business or activity at any time
that is not within the scope of the purpose of the Partnership at such time as
described in this Section 2.3.
Section 2.4 Authorized Acts.
In furtherance of its purpose, but subject to all other provisions of this
Agreement, the Partnership:
(1) Prior to an Initial Public Offering, is hereby authorized to:
(i) Enter into arrangements with automobile dealers
intended to acquaint such dealers with the Partnership's motor
vehicle financing program, to ensure such dealers meet the
requirements of the Partnership to enroll in such program, and to
enroll the dealers in the program;
(ii) Purchase Motor Vehicle Finance and Lease Contracts;
(iii) Qualify the Partnership to conduct the Partnership's
Business in such states as the General Partner may from time to time
believe to be in the best interests of the Partnership;
(iv) Enter into one or more agreements or other
arrangements for servicing Motor Vehicle Finance and Lease
Contracts;
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(v) Lease office space on such terms and in such
geographic areas as the General Partner may determine to be
necessary to the Business;
(vi) Employ such management or other personnel as may from
time to time be required to carry on the Business;
(vii) Obtain and keep in force during the term of the
Partnership such insurance for the benefit of the Partnership or its
lenders as the General Partner may deem appropriate;
(viii) Invest reasonable reserves or other funds in
securities issued or guaranteed by the United States government or
any agency or instrumentality thereof, certificates of deposit of
any bank incorporated under the laws of the United States or any
state of the United States or the District of Columbia with a net
worth of at least fifty million dollars ($50,000,000), bankers
acceptances, bank repurchase agreements covering securities issued
or guaranteed by the United States government or any agency or
instrumentality thereof, money market funds having a net worth of at
least fifty million dollars ($50,000,000) or similar highly liquid
and secure investments;
(ix) Borrow money, or establish lines of credit, secured
as necessary by the assets of the Partnership, for use in the
Business, and take any action and enter into any agreement necessary
or advisable in connection with any such borrowing, subject to the
limitations set forth in Article VIII;
(x) Bring and defend actions at law or suits in equity;
(xi) Engage in any kind of activity and perform and carry
out contracts of any kind necessary to, in connection with, or
incidental to the accomplishment of the purpose of the Partnership
as described in Section 2.3.A or approved by the Limited Partners
pursuant to Sections 2.3.C and 5.5.B(vii), so long as the activities
and contracts may be lawfully carried on or performed by a
partnership under the laws of the State and of such other states in
which the Partnership conducts Business; and
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(xii) Do any and all such acts and things as may be
necessary or, in the opinion of the General Partner, necessary,
advisable or useful to the conduct of the Business; and
(2) After an Initial Public Offering, is hereby authorized to:
(i) Invest reasonable reserves or other funds in (a)
securities issued or guaranteed by the United States government or
any agency or instrumentality thereof, certificates of deposit of
any bank incorporated under the laws of the United States or any
state of the United States or the District of Columbia with a net
worth of at least fifty million dollars ($50,000,000), bankers
acceptances, bank repurchase agreements covering securities issued
or guaranteed by the United States government or any agency or
instrumentality thereof, money market funds having a net worth of at
least fifty million dollars ($50,000,000) or similar highly liquid
and secure investments or (b) Equity Securities issued by the
Company;
(ii) Bring and defend actions at law or suits in equity;
(iii) Engage in any kind of activity and perform and carry out
contracts of any kind necessary to, in connection with, or
incidental to the accomplishment of the purpose of the Partnership
as described in Section 2.3.B or approved by the Limited Partners
pursuant to Sections 2.3.C and 5.5.B(vii), so long as the activities
and contracts may be lawfully carried on or performed by a
partnership under the laws of the State and of such other states in
which the Partnership conducts business; and
(iv) Do any and all such acts and things as may be necessary
or, in the opinion of the General Partner, desirable and proper to
carry out such purpose of the Partnership.
Section 2.5 Term and Dissolution.
A. Except as otherwise provided herein, the Partnership shall dissolve and
commence winding up and liquidating upon the first to occur of any of the
following:
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(i) The close of the Partnership's business on December 31, 2015;
(ii) The election to dissolve the Partnership made in writing by the
General Partner with the Consent of the Limited Partners;
(iii) The sale or other disposition of all or substantially all of
the Property of the Partnership other than cash, cash equivalents and any
investments described in Section 2.4(1)(viii) or Section 2.4(2)(i), as the
case may be; provided, however, transfers of Property to the Company and
in the ordinary course of business shall not cause the Partnership to
dissolve nor shall any transaction described in this Section 2.5.A(iii)
if as of the time such transaction is to be consummated, no allocations
under Section 9.1.A of Net Income or Net Loss, as the case may be, are or
would be made in accordance with the Partners' respective Percentage
Interests; or
(iv) The Withdrawal of a general partner of the Partnership unless
at the time there is at least one other general partner of the Partnership
and all such remaining general partner(s) of the Partnership elect to
continue the business of the Partnership.
B. Notwithstanding Section 2.5.A(iv) or Section 2.5.C to the contrary, the
Partnership shall not be dissolved or required to be wound up by reason of the
Withdrawal of a general partner of the Partnership if, within ninety (90) days
after such Withdrawal, a majority in interest of the remaining Partners (within
the meaning of section 301.7701-2(b)(1) of the Treasury Regulation) or section
17-801(3) of the Uniform Act, whichever is greater) (including the Partners who
received Units granted under the Plan) agree in writing to continue the business
of the Partnership and to the appointment, effective as of the date of such
Withdrawal, of one or more substitute or additional general partners of the
Partnership if necessary or desired to continue the business of the Partnership
as provided by section 17-801(3) of the Uniform Act. Upon the continuation of
the Partnership in the manner described in this Section 2.5.B, conforming
amendments to this Agreement shall be made to reflect all necessary changes
caused by the events described in this Section 2.5.B, and, unless said majority
in interest of the remaining Partners elect with the consent of the Withdrawn
General Partner, to reinstate the Withdrawn General Partner as a general partner
of the Partnership, the Interest of the Withdrawn General Partner shall, as of
the time of such Withdrawal, convert to that of a Limited Partner, except such
conversion shall not affect any liabilities for which such Withdrawn General
Partner may be responsible with respect to its
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Interest or otherwise that may have existed prior to or as a result of such
Withdrawal.
C. The dissolution of the Partnership shall be effective on the date the
event occurs giving rise to dissolution, but the Partnership shall not make
Distributions pursuant to Section 9.3(iv) until such time that a portion or all
of the allocations under Section 9.1.A of Net Income or Net Loss, as the case
may be, are or would be made in accordance with the Partners' respective
Percentage Interests, without IronBrand's prior written consent; and shall not
terminate until such date that the Partnership shall have discharged or
otherwise satisfied its liabilities, and the remaining assets of the
Partnership, if any, have been Distributed as provided herein and the
Certificate has been cancelled. Nothing in this Section 2.5.C shall affect a
dissolution under Section 2.5.A(iv) caused by the Bankruptcy of a general
partner of the Partnership, but in the event that the Withdrawal of the General
Partner by Bankruptcy or otherwise contravenes Section 3.2.B, the Withdrawn
General Partner shall be subject to damages as provided therein.
D. Upon the Withdrawal of a general partner of the Partnership, the
Withdrawn General Partner (or its successors, representatives or assigns, as the
case may be) shall promptly, but in no event later than five (5) days
thereafter, send notice of its Withdrawal to each Partner.
E. The Partnership shall have the option, but not the obligation, to
liquidate the Interest of a Withdrawn General Partner, by purchasing such
Interest for an amount equal to the then present fair market value of such
Interest, determined by agreement between the Withdrawn General Partner and the
Partnership. The fair market value of the Withdrawn General Partner's Interest
shall be determined in the same manner and employing the same time periods,
assumptions and directives as used for the determination of the Redemption Price
of IronBrand's Partnership Interest, as set forth in Section 11.3 hereof. The
method of payment for any such amounts to the Withdrawn General Partner shall be
by means of a five (5) year unsecured promissory note bearing interest at a
fixed rate equal to the Base Rate, fixed as of the date of such Withdrawal, with
accrued interest and equal installments of principal payable each quarter, which
note may be prepaid without penalty by the Partnership at any time.
F. Upon the Withdrawal of a general partner of the Partnership, such
Person shall continue to be liable as a general partner of the Partnership for
all debts, liabilities and obligations of the Partnership existing at the time
such Person ceased to be a general partner of the Partnership, regardless of
whether at such time, such debts, liabilities or obligations were known or
unknown, actual or contingent. A general partner of the Partnership shall not be
liable as a general partner for the Partnership's debts,
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liabilities or obligations arising after such Withdrawal. If the general partner
ceases to be a general partner of the Partnership, its debts, obligations or
liabilities to the Partnership or the other Partners shall be collectible by any
legal means; and the Partnership is authorized, in addition to any other
remedies at law or in equity, to apply any amounts otherwise distributable or
payable by the Partnership to such Person to satisfy such debts, obligations or
liabilities.
G. Notwithstanding anything herein to the contrary, the General Partner
hereby covenants and agrees that to the fullest extent permitted by law, unless
it receives the Consent of the Limited Partners and the written consent of
IronBrand, not to (i) exercise any power under the Uniform Act to dissolve the
Partnership, (ii) Transfer all or any portion of its Partnership Interest or
(iii) petition for dissolution of the Partnership; provided, that the General
Partner shall not be required to obtain the prior written consent of IronBrand
to undertake any of those actions described in clauses (i), (ii) or (iii) of
this Section 2.5.G if at the time it is to undertake any such action no
allocations under Section 9.1.A of Net Income or Net Loss, as the case may be,
are or would be made in accordance with the Partners' respective Percentage
Interests. Further, the General Partner hereby agrees to continue to carry out
its duties as General Partner hereunder until the earlier of (a) its Withdrawal
as provided herein and subject to the restrictions set forth in this Section
2.5.G, Section 3.2.B and Section 5.5.A(vi) or 5.5.B(iv), as the case may be, or
(b) the Partnership is dissolved and liquidated pursuant to this Section 2.5.
Nothing in this Section 2.5.G shall affect a dissolution under Section 2.5.A(iv)
caused by the Bankruptcy of a general partner of the Partnership, but in the
event that the Withdrawal of the General Partner by Bankruptcy or otherwise
contravenes Section 3.2.B, the General Partner shall be subject to damages as
provided therein.
H. Upon both the dissolution and termination of the Partnership, a proper
accounting shall be made by the Partnership from the date of the last previous
accounting to the date of the dissolution or termination, as the case may be.
I. Upon the completion of the Distribution of the Partnership Property as
provided in Section 9.3 and the termination of the Partnership, the General
Partner (or liquidating agent or trustee, as the case may be) shall cause the
Certificate to be cancelled and shall take such other actions as may be
necessary to legally terminate the Partnership.
J. Notwithstanding anything in this Agreement to the contrary, the
Partnership shall be deemed to be wrongfully dissolved if (i) it is dissolved
(I) pursuant to Section 2.5.A and not continued pursuant to either Section
2.5.A(iv) or Section 2.6.B or (II) pursuant to section 17-801 or section 17-802
of the Uniform
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Act and not continued pursuant to section 17-801(3) of the Uniform Act, and (ii)
at the time of such dissolution no allocations under Section 9.1.A of Net Income
or Net Loss, as the case may be, are or would be made in accordance with the
Partners' respective Percentage Interests. In the event of such wrongful
dissolution, the General Partner, unless IronBrand otherwise agrees in writing,
(i) shall not be entitled to conduct the winding up of the Partnership pursuant
to Section 9.3, but instead the Partnership shall be wound up by a liquidating
agent or trustee selected by IronBrand and (ii) shall indemnify and hold
harmless the Partnership and the Partners (including IronBrand) for any damages
described in Section 3.2.B incurred or suffered by them as a result of, or which
are wholly or partly attributable to, such wrongful dissolution in accordance
with Section 3.2.B.
Section 2.6 Noncompetition; Conflicts of Interest.
A. The General Partner, each of Edgar Otto, Gary L. Shapiro and Stephen L.
Gurba, and any Partner other than IronBrand that owns (in combination with his
or its Affiliates) more than twenty-five percent (25%) of the Partnership's
outstanding Units (each a "Principal") agree that for so long as such Principal
or any of his or its Affiliates own an Interest in the Partnership such
Principal shall owe the Partnership and the Limited Partners the highest
fiduciary loyalty and duty; and such Principal further agrees that, except as
provided in Section 2.6.C, for so long as (i) such Principal or any of his or
its Affiliates own an Interest in the Partnership and for a period of two (2)
years after the liquidation or other disposition of all of such Interest
(whether caused by the termination of the Partnership prior to its scheduled
termination on December 31, 2015 or otherwise) and (ii) IronBrand or any of its
Affiliates owns an Interest in the Partnership, such Principal and his or its
respective Affiliates will not engage in any activity or acquire an interest in
any Entity (other than ACCH, so long as ACCH is an Affiliate of the Partnership,
but substituting for this purpose "fifty percent (50%)" in lieu of "ten percent
(10%)" and "twenty percent (20%)" in the definition of "Affiliate" of the
Partnership) that directly competes with the Company's Business or which is
engaged in any business that is the same as the Business of the Company (or the
business of any of its Subsidiaries) or any Business for which the Company (or
any business for which any of its Subsidiaries) was formed, unless otherwise
authorized by the approval of the Limited Partners under Section 5.5.B(vi). This
Section 2.6.A shall apply with respect to a Principal in the following
geographic areas: (i) Maine, Maryland, New Hampshire and Pennsylvania; (ii)
Delaware, Florida, Georgia, Illinois, Kentucky, Massachusetts, Mississippi,
North Carolina, Ohio, South Carolina, Tennessee, Vermont and Virginia; and (iii)
any other state of the United States.
B. Each Principal shall disclose and make available to the Partnership or
ACCH for so long as ACCH is an Affiliate of the
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Partnership, but substituting for this purpose "fifty percent (50%)" in lieu of
"ten percent (10%)" and "twenty percent (20%)" in the definition of "Affiliate",
as such Principal reasonably determines to be appropriate at the time, each
business opportunity that is directly related to the Business of the Company, or
any business for which the Company was formed, of which such Principal
(individually or through its shareholders, directors, agents, trustees,
partners, members, representatives, officers or otherwise) becomes aware, for so
long as such Principal or any of his or its Affiliates own an Interest in the
Partnership.
C. The ownership by a Principal of an equity interest of less than five
percent (5%) of either the capital or profits of an Entity that competes with
the Business of the Company will not be deemed to violate the restrictions
contained in this Section 2.6. Moreover, a Principal, without violating this
Section 2.6, may organize, acquire and own all or part of any business or
venture or any Equity Securities in any Entity (collectively an "Enterprise")
that competes with the Business of the Company; provided, that the Company is
prohibited from engaging in such Enterprise under applicable law or (b) the
conduct or operation of such Enterprise would cause IronBrand to exercise its
right under Section 11.5(vii) to have the Partnership redeem its Partnership
Interest.
D. Notwithstanding anything to the contrary in this Section 2.6:
(i) the "two-year" period of the noncompetitive restriction set
forth in Section 2.6.A shall be only six (6) months in the event of the
sale to a Person who is not an Affiliate (and for a period of six (6)
months after such sale does not become an Affiliate), determined on a
fully diluted basis (if by doing so causes such Person to be an
Affiliate), of any of Edgar Otto, Gary L. Shapiro or Stephen L. Gurba, of
(a) the Partnership as a going concern or (b) all or substantially all of
the Property of the Partnership, in either case for fair market value; and
(ii) The provisions of this Section 2.6 shall terminate and be of no
further force or effect upon the consummation of the redemption of
IronBrand's Partnership Interest pursuant to Section 11.4 hereof or a Sale
Transaction, other than an Initial Public Offering, pursuant to Section
11.6.A hereof.
E. If, during the term of the Referral Agreement, FUNB makes loans
pursuant to Motor Vehicle Finance and Lease Contracts (but for purposes of this
Section 2.6.E substituting "Bureau Score below 600" in lieu of "Bureau Score
above 559" in the definition of Motor Vehicle Finance and Lease Contracts)
(referred to in this Section 2.6 as "C Motor Vehicle Contracts"), or purchases
such C Motor
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Vehicle Contracts through its banking centers in Maryland, Washington, D.C.,
Tennessee, Virginia, North Carolina, South Carolina, Georgia or Florida, then,
if such activities are in contravention of this Section 2.6.E and not cured
pursuant to Section 2.6.F, IronBrand shall forfeit such Bonus Units to which it
has become vested under Section 9.12.B(2), if any, that represent a Percentage
Interest of up to, but no more than, 5.1015% (reduced by any dilution relative
to such interest applying the principles set forth in Section 9.12.C). The
Partners acknowledge that FUNB has historically made, and is expected to
continue to make, loans pursuant to C Motor Vehicle Contracts (and has purchased
and is expected to continue to purchase such contracts) through such banking
centers listed in the preceding sentence as an accommodation to certain bank
customers or other special situations and, therefore, do not intend for loans
made by FUNB pursuant to C Motor Vehicle Contracts (or the purchase of such
contracts) to be in contravention of this Section 2.6.E, but, instead, intend
for loans made pursuant to C Motor Vehicle Contracts (or the purchase of such
contracts) to be in contravention of this Section 2.6.E only if FUNB actively
solicits or markets such loans or financings ("Contravening Loans").
F. IronBrand shall not be required to forfeit any Bonus Units under
Section 2.6.E unless either (i) the General Partner delivers written notice to
IronBrand in the manner provided in Section 12.3 that FUNB has made or purchased
Contravening Loans through its banking centers in the states listed in Section
2.6.E or any of the officers of FUNB (other than attorneys of the Legal Division
of First Union Corporation) to whom notice is to be provided pursuant to Section
13 of the Referral Agreement becomes aware that FUNB has made or purchased such
Contravening Loans and (ii) IronBrand fails to cure and rectify in all material
respects the effect and consequences of such activities to the reasonable
satisfaction of the General Partner within thirty (30) days after its receipt of
either such notice or such knowledge.
Section 2.7 Title to Property.
All Property of the Partnership shall be owned by the Partnership as an
entity and no Partner shall have any ownership interest in the Property in the
Partner's individual name or right, and each Partner's Interest shall be
personal property for all purposes. The Partnership shall hold the Property in
the name of the Partnership and not in the name of any Partner.
Section 2.8 Individual Obligations of Partners.
The Partnership's credit and Property shall be used solely for the benefit
of the Partnership, and no asset of the Partnership shall be transferred for or
in payment of any individual obligation of any Partner.
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ARTICLE III
Partners; Capital
Section 3.1 Schedule A; Capital Contributions.
The name, address, Capital Contribution, Initial Percentage Interest, 1995
Percentage Interest, number of non-Bonus Units, Bonus Units, Percentage
Interest, and Preferred Equity (if any) of each Partner shall be set forth on
Schedule A hereto. In the event of any change with respect to the information
stated on Schedule A hereto, the General Partner shall promptly (i) amend
Schedule A to reflect such change and (ii) provide a copy of the revised
Schedule A to each of the Partners; provided, however, that the failure of the
General Partner to amend Schedule A hereto or provide a copy of Schedule A as
revised to the Partners shall not prevent the effectiveness of or otherwise
affect the underlying adjustments that would be reflected in such amendment to
Schedule A.
A. Original Closing. Each Partner is obligated to have made (or such
Partner's predecessor in interest to have made) Capital Contributions in
immediately available funds to the Partnership in the manner set forth on
Schedule A attached to the Amended and Restated Agreement of Limited Partnership
of the Partnership referred to in the preamble of this Agreement as in effect on
January 29, 1994 on such date.
B. Subsequent Closing. Upon the execution of this Agreement, each Partner,
as applicable, shall make Capital Contributions to the Partnership, in the
amount set forth opposite such Partner's name on Schedule A-1 hereto under the
column captioned "Capital Contributions at Subsequent Closing" and shall commit
to make Capital Contributions to the Partnership in the total amount set forth
opposite such Partner's name on Schedule A-1 hereto under the column captioned
"Remaining Capital Commitment" in accordance with the written capital demands
("Capital Call") made by the General Partner as provided below in this Section
3.1.B for the purpose of the Partnership making capital contributions to ACCH
with respect to its organization and operations. The General Partner may, from
time to time prior to June 30, 1997, deliver written notice (the "Capital Call
Notice") to each Partner, who at such time has a Remaining Capital Commitment,
to make Capital Contributions of immediately available funds to the Partnership
in an amount equal to such Partner's proportionate share of any such Capital
Call by the date (the "Capital Call Date") and time specified in, and as
otherwise provided by, such Capital Call Notice. The Capital Call Notice shall
(i) be delivered by the General Partner to each Partner who on the date of such
notice has a Remaining Capital Commitment; (ii) call for contribution to the
Partnership of the amount of immediately available funds determined in
accordance with clause (iii) below as may be determined in the reasonable
discretion of the General Partner to be needed to fund organizational and
operating expenses of ACCH; (iii) state each Partner's proportion-
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ate share of the Capital Call, which, for each Partner, shall be the amount that
bears the same ratio to the aggregate of the amounts payable by all Partners by
the applicable Capital Call Date with respect to the same Capital Call as such
Partner's Remaining Capital Commitment on such date bears to the aggregate of
the Remaining Capital Commitment of all Partners on such date; (iv) state, in
reasonable detail, the nature and amount or anticipated nature of the expenses
or costs of ACCH for which the Capital Call is made; (v) specify the Capital
Call Date which shall be no less than ten (10) days before and no more than
sixty (60) days after the date of such Capital Call Notice and (vi) shall not be
delivered after June 30, 1997. No Partner shall be required to make Capital
Contributions pursuant to this Section 3.1.B pursuant to any Capital Call in
excess of such Partner's Remaining Capital Commitment. Upon the receipt of
Capital Contributions made pursuant to a Capital Call, the General Partner shall
promptly (a) amend Schedule A and Schedule A-1 to reflect the receipt by the
Partnership of such Capital Contributions and the concomitant adjustment to the
contributing Partner's Remaining Capital Commitment and (b) provide a copy of
such revised schedules, and the effective date of each, to each of the Partners;
provided, however, the failure of the General Partner to amend Schedules A and
A-1 or provide a revised copy thereof to the Partners shall not prevent the
effectiveness of, or otherwise affect the underlying adjustments that would be
reflected in, such amendments nor affect the obligations of the Partners with
respect to Capital Calls.
C. Defaults. If any Partner fails, in a timely manner to contribute any
portion of such Partner's Remaining Capital Commitment as provided in Section
3.1.B and such failure continues for five (5) Business Days after delivery by
the General Partner to such Partner of notice of such failure (a "Default")
(which notice the General Partner hereby is required to make if the entire
amount of Capital Contributions to be contributed by a Partner pursuant to a
Capital Call Notice is not received by the Capital Call Date), then such Partner
shall be deemed a "Defaulting Partner," and the following subparagraphs of this
Section 3.1.C shall apply:
(i) The Defaulting Partner, until such Default is cured by such
Partner satisfying all of such Partner's obligations under this Section
3.1.C with respect to such Default shall not be entitled to participate in
any Consent or vote of the Partners or Limited Partners, or participate in
any decision relative to the Partnership, and such Consent, vote or
decision shall be tabulated or made as if such Defaulting Limited Partner
were not a Partner and the Interest thereof was not outstanding;
(ii) The General Partner shall assess the Defaulting Partner an
amount of damages with respect to such Default as the General Partner in
its reasonable, good faith discretion may determine (which damages shall
at a
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minimum include all of the costs and expenses incurred by the Partnership
and the non-Defaulting Partners associated with raising capital (including
raising such capital from any other Partner or Affiliate of any Partner)
to provide or attempt to provide additional funding in the amount of such
Default) and incidental costs and damages relative to the consequences of
the Default;
(iii) The Defaulting Partner shall be required to pay interest to
the Partnership, which shall accrue at the rate of eighteen percent (18%)
per annum, compounded monthly, or, if lower, the highest rate of interest
allowed by applicable law, from the Capital Call Date until the entire
amount of the Default is contributed, and such interest paid, to the
Partnership, and any such interest payments shall not be deemed to be
Capital Contributions for any purpose of this Agreement;
(iv) The Partnership shall have the authority, and shall exercise
such authority, to apply any Distributions to which such defaulting
Partner would otherwise be entitled towards the satisfaction of the
liabilities incurred by such Partner under this Section 3.1.C to the
Partnership; and
(v) No right, power or remedy conferred upon the General Partner in
this Section 3.1.C shall be exclusive, and each such right, power or
remedy shall be cumulative and in addition to every other right, power or
remedy at law or in equity or as otherwise provided hereunder. Each
Partner acknowledges that such Partner has relied upon the covenants made
under this Agreement, that the General Partner and the Partnership may
have no adequate remedy at law for a breach hereof and that damages
resulting from a breach hereof may be impossible to ascertain at the time
hereof or of such breach.
D. Commitments. The Limited Partners are not, subject to the following
sentence, obligated to contribute their respective Remaining Capital
Commitments, and creditors may not rely on the Available Capital Commitments in
extending credit. These obligations are conditional obligations of the Limited
Partners (within the meaning of section 17-502(b)(2) of the Uniform Act) payable
only to the extent, and only in such amount, required to be paid to the
Partnership pursuant to a Capital Call Notice in accordance with Section 3.1.B.
Section 3.2 General Partner.
A. The General Partner is, as of the date of this Agreement, National Auto
Finance Corporation (the address of which is One Park Place, 621 NW 53rd Street,
Suite 320, Boca Raton, FL 33487),
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and its Capital Contribution, number of Units, Percentage Interest, and
Preferred Equity as of the date of this Agreement are set forth on Schedule A.
The General Partner shall at all times maintain a level of Capital Contributions
such that its share of total Capital Contributions by all Partners is not less
than one percent (1%).
B. The General Partner shall not, and shall have no right to, voluntarily
or involuntarily Withdraw as general partner of the Partnership if such
Withdrawal would cause the Partnership to be wrongfully dissolved under, and
within the meaning of, Section 2.5.J (a "Wrongful Withdrawal") or contravene
Section 5.5.A(vi) and Section 5.5.B(iv), as the case may be. Notwithstanding
such prohibition against the Withdrawal by the General Partner, the Partners
acknowledge that pursuant to section 17-602(a) of the Uniform Act, the General
Partner has the statutory right to withdraw as general partner of the
Partnership at any time by giving written notice to the other Partners. The
General Partner, however, hereby agrees, in accordance with section 17-602(a) of
the Uniform Act, that, notwithstanding anything herein to the contrary, any
Withdrawal by the General Partner or voluntary Withdrawal not expressly
authorized by the Limited Partners under Section 5.5.A(vi) or Section 5.5.B(iv),
as the case may be, shall subject the General Partner, in addition to any
remedies otherwise available to the Partnership and the other Partners under
applicable law or in equity, to pay damages to the Partnership and each of the
other Partners to the extent of their respective losses attributable to such
unauthorized Withdrawal, and the amount of such damages shall be withheld by the
Partnership from amounts otherwise Distributable to the General Partner and
distributed instead by the Partnership to those Partners who suffered losses or
were otherwise adversely affected by such unauthorized Withdrawal; provided
that, the amount of any damages that the General Partner shall owe a Partner
under this Section 3.2.B shall be limited to the damages suffered by such
Partner that are independent from and not compensable by those damages directly
or indirectly paid by the General Partner to the Partnership; provided, however,
such damages shall not include speculative damages relative to potential future
business opportunities of the Partnership or punitive damages.
C. The General Partner shall have the right to admit any Person as an
additional or substitute general partner of the Partnership with the Consent of
the Limited Partners as provided in Section 5.5.A(ii), 5.5.B(iv), 5.5.B(viii) or
5.5.B(ix), as applicable.
Section 3.3 Limited Partners.
A. The Limited Partners and each of their Capital Contribution and all
other information referred to in Section 3.1, as of the date of this Agreement,
are set forth on Schedule A.
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B. Each Limited Partner shall be admitted to the Partnership as of the
date on which an entry is made in the records of the Partnership listing his or
its name, address, Capital Contribution, Remaining Capital Commitment, number of
Units, Percentage Interest, Preferred Equity (if any) and such other information
that is required to be set forth on Schedule A and Schedule A-1.
C. Each Limited Partner agrees, by the execution of this Agreement or by
complying with the provisions of Article VII, and as a condition of receiving
any Interest in the Partnership, to be bound by the terms and provisions of this
Agreement.
D. Each Limited Partner may become a signatory hereto by his
attorney-in-fact signing a conformed copy of this Agreement pursuant to the
power of attorney contained in his subscription documents or in the manner
provided in Article VII. Each Limited Partner shall thereupon be deemed to have
adopted and to have agreed to be bound by all the provisions of this Agreement;
provided, however, that no such signed copy shall be binding until it has been
signed by the General Partner.
E. Notwithstanding anything to the contrary in this Agreement, any Units
granted under the Plan (whether to a then-existing Partner or otherwise), up to
the limit on the number of Units which is set forth in Section 3 of such Plan,
and the admission of any Partner receiving such Units shall not require the
Consent of the Limited Partners or any other consent.
F. Before an Initial Public Offering, if the General Partner determines
that it is in the best interest of the Partnership to admit one or more new
Partners, it may, with the Consent of the Limited Partners as provided in
Section 5.5.A(ii), Section 5.5.A(iv) or Section 5.5.B(iv) (as the case may be),
authorize the Partnership to issue or sell (or contract for the sale of)
additional Units or other forms of Interest or equity in the Partnership (or
contract rights (in whatever form, including options, warrants and convertible
securities) to acquire Units or other form of Interest or equity in the
Partnership) (collectively "Additional Partnership Securities") and determine
the price per Additional Partnership Security and other terms relative to the
issuance or sale thereof. Except for Units issued pursuant to the Plan or as may
be approved by the Limited Partners pursuant to Section 5.5.B(xi), the
Partnership shall not issue or sell any Additional Partnership Securities unless
each Partner has first been offered the opportunity to purchase from the
Partnership all (or, at the option of such Person, part) of such Partner's pro
rata share (determined in accordance with such Partner's Percentage Interest
("Pro Rata Share")) of the Additional Partnership Securities to be issued or
sold by the Partnership on the same terms and conditions (except as otherwise
provided in the last sentence of this Section 3.3.F) for which they are
otherwise to be issued or sold by the Partnership and receive in exchange
therefor
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a Pro Rata Share of such Additional Partnership Securities (the right of Limited
Partners under this sentence to purchase their Pro Rata Share of such Additional
Partnership Securities, shall be referred to herein as a "Right of First
Offer"). Any Units acquired by the General Partner in accordance with this
Section 3.3.F shall increase its Interest as General Partner and any Units
acquired by a Limited Partner (including, if applicable, the General Partner
acting in its capacity as a Limited Partner) in accordance with this Section
3.3.F shall increase such Person's Interest as a Limited Partner.
Notwithstanding anything in this Section 3.3.F to the contrary, if the Limited
Partners do not approve an offering of Additional Partnership Securities
pursuant to Section 5.5.B(xi) within such reasonable time to take such action as
provided by the General Partner, the Right of First Offer shall not be
applicable to any Additional Partnership Securities offered in connection with
any offering of debt securities of the Partnership, if (i) the total issue price
of such debt securities (reduced by the amount of any "original issue discount"
as described in sections 1271 through 1275 of the Code) exceed $2,500,000 (such
debt securities, together with such Additional Partnership Securities offered in
connection therewith shall be referred to in this Section 3.3.F as the "Offered
Securities"), (ii) the Partnership retains an investment banking firm that is
not an Affiliate of the General Partner to act as agent for the Partnership with
respect to the offering of such Offered Securities, and (iii) IronBrand or any
Affiliate of IronBrand is permitted to bid to purchase such Offered Securities
on the same basis as any other bidder with respect to such offering.
G. No Units shall be issued under the Plan after an Initial Public
Offering.
Section 3.4 Partnership Capital.
Except as otherwise provided herein, no Partner shall (i) be paid interest
on any Capital Contributions, (ii) withdraw or be repaid all or any part of his
Capital Contributions, or (iii) have the right to receive, as a Distribution or
return of capital, Property other than cash.
Section 3.5 Liability of Limited Partners.
No Limited Partner shall be liable for any debts, liabilities, contracts
or obligations of the Partnership. A Limited Partner shall have no liability in
excess of (i) his obligation to make payments with respect to amounts he agreed
to contribute to the Capital of the Partnership as his capital contribution (his
"Capital Contribution Obligation") when such payments become due under this
Agreement or under such Person's Subscription Agreement, (ii) his obligation to
make other payments expressly provided for in this Agreement, (iii) his share of
any assets and undistributed
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profits of the Partnership, and (iv) the amount of any Distributions
wrongfully distributed to him.
Section 3.6 Limited Partners Obligations.
In addition to the protections afforded Limited Partners under Section
3.5, no Limited Partner, as such, shall be bound by, or be personally liable
for, the liabilities or obligations of the Partnership or other Partners, or be
required to lend any funds to (or provide any guarantees on behalf of) the
Partnership without the prior written consent of such Limited Partner, except as
otherwise expressly provided herein. No Limited Partner shall have any
obligation to make Contributions to the capital of the Partnership except the
Capital Contributions pursuant to, and as set forth in, each Limited Partner's
Subscription Agreement or Subscription Agreements executed by such Limited
Partner for the purchase of his Interest or that may be required (i) under
section 17-502(b) or section 17-607(b) of the Uniform Act; (ii) under Section
9.6.B with respect to the withholding by the Partnership of income taxes or
Section 3.3.F with respect to a Partner exercising its rights thereunder to
purchase Additional Partnership Securities; (iii) under the circumstances
described in Section 6.8 for the indemnification of the Partnership by such
Partner; (iv) under Section 3.1; or (v) as otherwise expressly provided herein.
ARTICLE IV
Partners, Fees & Expenses
Section 4.1 Admission of Additional Limited Partners/
Issuance of Additional Units.
Before an Initial Public Offering, the General Partner may admit
additional Limited Partners to the Partnership or issue additional Units to
existing Limited Partners in accordance with Section 3.3.F and 5.5.A(ii), as the
case may be. Upon or after an Initial Public Offering no additional or new
Limited Partners shall be admitted to the Partnership, other than as provided in
Section 5.5.B(viii) and Article VII, as applicable, and the Partnership shall
not issue any additional Units other than as approved by the Limited Partners
under Section 5.5.B(vii) or as provided in Article IX.
Section 4.2 Fees and Expenses Paid by the Partnership.
All expenses of the Partnership from the Closing Date forward shall be
billed directly to and be paid by the Partnership; provided, however, with
respect to the drafting and negotiation of this Agreement, IronBrand shall be
solely responsible for the legal fees and disbursements of Kennedy Covington
Lobdell & Hickman, L.L.P. and all other out-of-pocket expenses and the General
Partner shall be solely responsible for the legal fees and disbursements of
Weil, Gotshal & Manges, LLP, and each of IronBrand and National
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Auto Finance Corporation shall be responsible for their respective out-of-pocket
costs and expenses related to such drafting and negotiation of this Agreement.
Section 4.3 Services of the General Partner.
A. The General Partner shall provide services to the Partnership as a
general partner and be compensated for such services pursuant to and in
accordance with the provisions of that certain Management Agreement dated as of
December 29, 1994 between the Partnership and the General Partner, a copy of
which was presented within 7 days of the Closing Date for approval by IronBrand
as the same may be amended, modified or supplemented from time to time (the
"Management Agreement"). In general, however, on behalf of and in the name of
the Partnership, the General Partner, inter alia, shall:
(i) Provide or make available banking, record keeping and related
services;
(ii) Maintain all reasonable and necessary books and records with
respect to the Partnership's business;
(iii) Maintain the general accounting records of the Partnership and
prepare for certification such periodic financial statements as may be
necessary or appropriate;
(iv) Prepare and timely file such income, franchise or other tax
returns of the Partnership as shall be required to be filed by applicable
law;
(v) Respond to or otherwise reasonably deal with correspondence
relating to the Partnership's business;
(vi) Prepare for timely execution by the Partnership or cause the
timely preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as may be
necessary or appropriate;
(vii) Undertake such other managerial and administrative services as
may be reasonable to cause the Partnership to satisfy its obligations;
(viii) Retain (a) such legal counsel as may be necessary to perform
for the Partnership the services necessary or appropriate to its
organization and the services customarily provided by a general corporate
counsel, and (b) the Partnership's Accountants to timely prepare the
Audited Financial Statements and tax returns of the Partnership and to
provide such other accounting services as the Partnership may require;
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(ix) Make available telephone, telecopy and post office box
facilities as may be necessary for the conduct of the Partnership's
business and in particular, but without limitation, facilities for
meetings of the Partners from time to time;
(x) Prepare and timely file all reports required to be filed
under federal and state and securities laws; and
(xi) In furtherance of the foregoing and such other activities as
may be incident to the performance of its duties under the Management
Agreement and pursuant to Article V hereof, take all other actions as may
be appropriate or incident thereto.
B. Commencing fiscal year 1995 and ending in the fiscal year during which
an Initial Public Offering is consummated, the General Partner shall prepare and
deliver (or have prepared and delivered) to the Partners no later than November
30 of each year (the "Budgeting Year") a proposed operating budget for the
Partnership and each of its Subsidiaries for the following fiscal year prepared
on a projected monthly and year-to-date basis (including income and expense
projections); and prepare and deliver (or have prepared and delivered) to the
Partners no later than December 31 of the Budgeting Year a final operating
budget for both the Partnership and each of its Subsidiaries for the following
fiscal year, which shall set forth in reasonable detail the projected operating
expenses, capital expenditures, cash flow, and income projections for the
following fiscal year for such Entities on projected monthly and year-to-date
bases.
C. In the performance of its services hereunder and under the Management
Agreement, the General Partner shall be entitled to employ National Financial
Corporation ("NFC") and shall pay NFC for its services as provided by the
Management Agreement.
ARTICLE V
Rights, Powers and Duties of the Partners
Section 5.1 Business, Management and Control.
A. All powers of the Partnership for which approval by the Limited
Partners is not expressly required by this Agreement, the Uniform Act or other
applicable law, shall be exercised by, or under the direction of, and the
business and affairs of the Partnership shall be managed by, or under the
direction and control of, the General Partner in a manner consistent with the
terms, provisions and conditions of this Agreement and the Uniform Act.
B. Subject to the other provisions of this Agreement, the General Partner,
on behalf of the Partnership, may take any action
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it deems necessary or advisable in connection with the business of the
Partnership without the consent of the Limited Partners.
C. Except as otherwise provided in this Agreement, no Limited Partner
(except one who may also be a general partner of the Partnership, and then only
in its capacity as general partner of the Partnership) shall (i) have any
authority or right to act for or bind the Partnership or (ii) take any action
with respect to the Partnership's business and affairs. The Limited Partners
hereby approve of the exercise by the General Partner of the powers conferred on
it by this Agreement.
Section 5.2 Duties and Obligations.
A. The General Partner shall diligently and faithfully devote all of its
time to the business of the Partnership and its Subsidiaries. The General
Partner shall at all times have the responsibility for the safekeeping and use
of all Partnership Property, whether or not in the General Partner's possession
or control, and the General Partner shall not employ or permit another to employ
such Property in any manner except for the exclusive benefit of the Partnership.
Except as expressly authorized herein, the General Partner shall not commingle
Property of the Partnership with the funds or other assets of any other Person.
The General Partner shall cause the Partnership to (i) conduct its business and
operations separate from that of its own or any of its Affiliates; (ii) maintain
its books, bank accounts and financial records separate from those of any
Partner or their Affiliates; (iii) observe all procedures and formalities
provided hereunder, under the Uniform Act and other applicable law; (iv) pay
Partnership liabilities from the assets of the Partnership; (v) conduct its
dealings with third parties in the Partnership's own name and in all respects
hold the Partnership out as a separate and independent legal entity; (vi) except
as otherwise permitted by Section 4.3.C, engage in transactions with any Partner
or any Affiliate of a Partner only on arms length terms; and (vii) promptly
notify the Limited Partners of any written amendments made to this Agreement.
Except as otherwise required by applicable law, the General Partner shall be
required to take only such actions on behalf of the Partnership as are expressly
required by this Agreement, and it shall not be required to take any such action
requiring the expenditure of funds if Partnership funds are not available.
Except as expressly required herein or by law, the General Partner shall not be
required to advance, contribute or provide funds to the Partnership for any
purpose in excess of its Capital Contribution.
B. The General Partner shall take all actions which may be necessary or
appropriate (i) for the continuation of the Partnership's valid existence as a
limited partnership under the laws of the State of Delaware and of each other
jurisdiction in which it
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conducts business and (ii) for the accomplishment of the Partnership's purpose.
C. All funds of the Partnership not otherwise employed or invested shall
be deposited from time to time to the credit of the Partnership in the manner
provided in Section 2.4(1)(viii) or Section 2.4(2)(i), as the case may be.
Section 5.3 Indemnification.
In the event that the Partnership has requested a Partner to take action
on behalf of the Partnership and such Partner takes such action, the Partnership
shall hold harmless and indemnify each such Partner for any liability or loss
suffered by such Partner if (i) such Partner acted within the authority and
pursuant to the request, and in good faith on behalf of the Partnership and (ii)
such liability or loss was not the result of such Partner's gross negligence or
willful misconduct. Such indemnification of each Partner and agreement to hold
each Partner harmless are recoverable only out of the assets of the Partnership
and not from the Limited Partners.
Section 5.4 Liability of the General Partner to Limited
Partners.
The General Partner shall be liable, responsible and accountable for
damages or otherwise to any Limited Partner or the Partnership arising out of
any act performed or any failure to act only if such act or failure to act
resulted from bad faith, gross negligence or willful misconduct on the part of
the General Partner.
Section 5.5 Voting Rights.
A. Notwithstanding anything herein (other than Sections 5.5.B, 5.5.C and
5.6.K) to the contrary, in addition to any other requirement, limitation or
prohibition provided in this Agreement, the Consent of the Limited Partners
shall be required to authorize the General Partner to undertake the following
actions:
(i) Sell, exchange, Distribute, transfer or otherwise dispose
(including by merger) of all or substantially all of the Partnership's
Property (other than in the ordinary course of the Partnership's business
or as contemplated by Section 9.2);
(ii) Admit new Limited Partners to the Partnership in accordance
with Sections 3.3.B and 3.3.F at any time prior to an Initial Public
Offering;
(iii) Dissolve the Partnership as provided in Section 2.5.A(ii);
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(iv) Admit or appoint one or more additional or substitute general
partners to the Partnership at any time prior to an Initial Public
Offering; provided, that if the Partnership is to issue Additional
Partnership Securities within the meaning of Section 3.3.F to any such
additional or substitute general partner, such additional or substitute
general partner shall have first acquired such Additional Partnership
Securities as a Limited Partner, and its Interest shall then convert to
that of a General Partner as otherwise provided in this Section 5.5.A(iv);
(v) Cause the conversion or reorganization of the Partnership to
another Entity form (including a corporation) or maintain its status as a
partnership but cause it to be treated as an association taxable as a
corporation or a publicly traded partnership within the meaning of section
7704 of the Code;
(vi) Voluntarily Withdraw as general partner of the Partnership,
provided, that any such Withdrawal does not contravene any other provision
of this Agreement, including Sections 2.5.F and 3.2.B;
(vii) Enter on behalf of the Partnership any agreement of merger or
consolidation or otherwise merge or consolidate with or into one or more
other Entities; or
(viii) Vote, consent, approve, covenant, agree, represent or make
any decision relative to ACCH or the Partnership's ACCH Interest with
respect to any matter requiring the vote, consent, approval, agreement,
representation or decision of or by the Limited Partners under the
Agreement or the Uniform Act or other applicable law, but not with respect
to any matter requiring action by "NAFCO" under the ACCH Agreement for
which authorization may only be given pursuant to Section 5.5.B(x) hereof.
B. Notwithstanding anything herein (other than Section 5.5.C) to the
contrary, the Consent of the Limited Partners, which consent, for purposes of
this Section 5.5.B, must include the written consent of IronBrand, shall be
required to authorize the General Partner to undertake the following actions:
(i) To either amend the Plan to increase the number of Units that
may be issued thereunder or amend this Agreement;
(ii) Except as otherwise provided in the Management Agreement,
increase the fees, guaranteed payments or other compensation to be paid to
the General Partner or
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any Affiliate of the General Partner or amend, or cause the Partnership to
agree to amend, Section 2 of the Management Agreement or the effect
thereof;
(iii) Except as otherwise provided in Articles VII and XI, cause the
Partnership to purchase or redeem all or part of a Partner's Interest;
(iv) To take any of the actions described in Section 5.5.A (other
than under Section 5.5.A(ii)), or agree on behalf of the Partnership, or
to cause the Partnership to agree to undertake any such action, if at the
time such action or transaction is to be consummated no allocations under
Section 9.1.A of Net Income or Net Loss, as the case may be, are or would
be made in accordance with the Partners' respective Percentage Interests;
(v) Sell, exchange, transfer, Distribute or otherwise dispose of
any Company Shares received by the Partnership or to which the Partnership
is entitled after an Initial Public Offering (other than in the ordinary
course of business or to provide the necessary liquidity for the
Partnership to pay its debts and obligations as they become due) until the
later of (a) the expiration of the Vesting Period or (b) at such time that
all or part of the allocations under Section 9.1.A of Net Income or Net
Loss, as the case may be, are or would be made in accordance with the
Partners' respective Percentage Interests;
(vi) Authorize a Principal to engage in an activity that is
otherwise prohibited under Section 2.6.A;
(vii) Cause the Partnership to engage in or otherwise conduct any
business or activity that is not within the scope of the purpose of the
Partnership described in Section 2.3.A or 2.3.B, as the case may be, at
such time;
(viii) Issue or authorize the issuance of any Additional Partnership
Securities (within the meaning of Section 3.3.F) at any time upon or after
an Initial Public Offering;
(ix) Admit or appoint one or more additional or substitute general
partners of the Partnership at any time upon or after an Initial Public
Offering;
(x) Vote, consent, approve, covenant, agree, represent or make any
decision relative to ACCH or the Partnership's ACCH Interest with respect
to any matter requiring the vote, consent, approval, agreement,
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representation or decision of or by "NAFCO" under the ACCH Agreement; or
(xi) Issue Additional Partnership Securities within the meaning of
Section 3.3.F without the Limited Partners having the right to exercise a
Right of First Offer under, and to the extent provided by, Section 3.3.F.
C. Notwithstanding anything herein to the contrary, the written consent or
affirmative vote of all of the Limited Partners (including Limited Partners who
received Units granted under the Plan and First Union) shall be required to
authorize the General Partner to undertake the following actions:
(i) Knowingly perform any act that would subject any Limited Partner
to liability as a general partner;
(ii) Employ or permit to be employed, the Property of the
Partnership in any manner except for the exclusive benefit of the
Partnership;
(iii) Amend Sections 3.4, 3.5 and 5.5.C hereof, or the effect
thereof;
(iv) Increase the amount of the capital contribution to the
Partnership required to be paid by a Limited Partner;
(v) Extend the termination date specified in Section 2.5; or
(vi) Change the method or accelerate the dates for the payment of
Capital Contributions to the Partnership.
D. Any amendment to this Agreement (other than incidental to the
Withdrawal of the General Partner) that modifies the compensation or
Distributions to which the General Partner would otherwise be entitled to
receive or would affect the duties of the General Partner, shall require the
General Partner's prior written consent.
Section 5.6 Meetings of the Limited Partners.
A. The General Partner shall call meetings of the Limited Partners at such
times as it determines to be necessary or appropriate or upon the written
request of any Partner or Partners (other than Partners who received Units
granted under the Plan) with a combined Percentage Interest of ten percent (10%)
or more.
B. Any Limited Partner(s) making a request for a meeting of the Limited
Partners as provided in Section 5.6.A must sign the request and specify therein
the purpose or purposes of the proposed meeting. Upon receipt of such request,
the General Partner shall,
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at the expense of the Partnership, provide each Partner, within ten (10) days of
such request, with written notice of the meeting and the purpose of such
meeting. Such meeting shall be held on the date (if any) requested by the
Limited Partner(s) calling such meeting, but in no event less than fifteen (15)
days or more than sixty (60) days after the receipt of such request. The notice
shall include a detailed statement of the action to be proposed at the meeting,
including a verbatim statement of the wording of any resolution proposed for
adoption by the Limited Partners or any proposed amendments to this Agreement.
The Partnership shall provide for proxies or written consents which specify a
choice between approval and disapproval of each matter to be acted upon at the
meeting.
C. Written notice stating the date, time and place of a meeting not
described in Section 5.6.B shall be given not less than ten (10) or more than 60
(sixty) days before the date thereof, by the General Partner to each Limited
Partner, including IronBrand. The notice of a meeting shall specifically state
the purpose or purposes for which the meeting is called.
D. Any notice required to be given to any Partner under the Uniform Act or
this Agreement may be waived in writing by the Partner entitled to such notice
(whether before or after the meeting). A Partner's attendance at a meeting also
waives any required notice to him of the meeting, unless the Partner at the
beginning of a meeting objects to holding the meeting or transacting particular
business at the meeting.
E. All meetings of the Partners shall be held at the principal office of
the Partnership unless the General Partner designates another reasonable place
for the meeting.
F. Each Partner otherwise entitled to vote hereunder on the matter under
consideration shall be entitled to one vote for each Unit that Partner holds. At
all meetings of the Partners, a Partner may vote in person or by proxy executed
in writing by the Partner and exercised by his duly authorized representative.
G. Any one or more Partners may participate in a meeting of the Partners
by means of a conference telephone or similar communication device that allows
all persons participating in the meeting to simultaneously hear each other
during the meeting, and such participation in the meeting shall be the
equivalent of being present in person at such meeting.
H. Any action required or permitted to be taken at a meeting of the
Limited Partners may be taken without a meeting if one or more written consents,
setting forth the action so taken or to be taken is (i) sent to all Limited
Partners (in the manner provided in Section 12.3), including IronBrand, and is
signed by those Limited Partners (or the duly authorized representative or
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representatives of any such Limited Partners) owning the required combined
voting interest to approve such action, whether before or after the action so
taken, and (ii) delivered to the General Partner to be included in the
Partnership's permanent records. Action taken under this Section 5.6.H shall be
effective when all Limited Partners entitled to vote have been provided a copy
of the proposed written consent and the Limited Partners (or such duly
authorized representatives thereof) needed to approve such action have signed
the written consent (or counterpart thereof), unless the consent specifies that
it is effective as of an earlier or later date. Written consent of all Limited
Partners entitled to vote on any matter has the same force and effect as the
vote of such Limited Partners and may be described as such in any document or
instrument.
I. Each meeting of the Limited Partners shall be presided over by the
General Partner, or in the absence or at the request of the General Partner, by
such other Person as the General Partner may designate, or in the absence of
such designation, by any person selected to preside by a majority of the votes
cast by the Limited Partners for such purpose at the meeting.
J. The cost of calling and holding a meeting of the Limited Partners shall
be paid by the Partnership.
K. For the purposes of Section 5.5.A, the Consent of the Limited Partners
shall be determined without including the Units owned by IronBrand (except under
the circumstances described in Section 5.5.B(iv)); provided however that if The
S Associates Limited Partnership, The O Associates Limited Partnership and
Stephen L. Gurba (voting as a group) determine to take any action (or not to
take any action) described in Section 5.5.A (the vote of such group with respect
to such matter, the "NFC Vote") and the NFC Vote would not constitute the
"Consent of the Limited Partners" with respect to such matter, then, at the sole
election of the General Partner, the Units owned by IronBrand shall be permitted
to be included in the determination of "Consent of the Limited Partners" with
respect to such matter.
Section 5.7 Permissible Activities; Veto.
Notwithstanding anything to the contrary herein, the Partners hereby
acknowledge and agree that so long as any Partnership Interests are held
directly or indirectly by a national bank (not including such Interest, if any,
pledged in conformance with the terms of this Agreement to secure indebtedness
or held as a result of debts previously contracted), the Partnership and each of
its Subsidiaries shall engage solely in activities that are permissible for
national banks as determined by applicable statutes, regulations and regulatory
interpretations as in effect from time to time. The Partners further agree that,
if in the exercise of IronBrand's reasonable judgment, based upon advice of
counsel,
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IronBrand determines that the Partnership or any of its Subsidiaries is
proposing to engage in activities that are impermissible for national banks,
then IronBrand, as Limited Partner, shall have the right to veto any such
proposed activities and otherwise bar the Partnership from allowing such
activities to occur.
Section 5.8 Supervision by the OCC.
The parties hereto acknowledge that so long as any Partnership Interests
are held directly or indirectly by a national bank (not including such interests
pledged to secure indebtedness or held as a result of debts previously
contracted), the business and operations of the Partnership and each of its
Subsidiaries shall be subject to the regulation, supervision and examination of
the Office of the Comptroller of the Currency.
Section 5.9 Costs of Regulatory Supervision.
The Partnership shall be responsible for the costs and expenses associated
with the regulation, supervision and examination by the Office of the
Comptroller of the Currency of the Partnership and its Subsidiaries; provided,
however, any extraordinary out-of-pocket expenses in excess of $5,000 per year
incurred in connection with such regulation, supervision and examination shall
be paid by IronBrand unless such extraordinary expenses are related to the
failure of the Partnership to comply in any material respect with the laws and
regulations applicable to the business of the Partnership.
Section 5.10 Special Provisions Relative to the Sale of
ACCH.
A. In the event the General Partner, in good faith, with the Consent of
the Limited Partners in accordance with Section 5.5.A. determines that it would
be appropriate for the Company to offer for sale and to sell all or
substantially all of the Company (which transaction includes the assignment of
ACCH's rights under the Referral Agreement) to a purchaser (a "Sale/Referral
Transaction"), then, the General Partner shall retain an independent investment
banking firm to represent the Company in connection with such Sale/Referral
Transaction. After such firm is retained by the General Partner, FUNB shall, in
good faith, work with the General Partner and such investment banking firm to
develop a list of banking institutions and other potential purchasers which
would be, in the good faith determination of FUNB, reasonably acceptable to FUNB
such that FUNB would not elect to terminate the Referral Agreement if such
Sale/Referral Transaction was consummated with such purchaser and FUNB would
continue the contractual relationship set forth in the Referral Agreement with
such purchaser without amendment thereto (such list of acceptable purchasers,
collectively, the "Acceptable Referral Purchasers"). In making its
determination, FUNB shall have a reasonable period of time to conduct with
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respect to each potential purchaser such due diligence (with the knowledge and
cooperation of the potential purchaser) as FUNB, acting both for itself and as
agent for the Affiliate Banks described in Section 13(m) of the Referral
Agreement, deems appropriate considering, among other things, the compatibility
of the prospective partner with FUNB from a strategic, management and operating
standpoint, the financial capacity and soundness of the potential purchaser, the
expertise and staff which would be available to the potential purchaser in
performing the Referral Agreement and the potential purchaser's ability to meet
reasonable safety and soundness and banking and consumer regulatory standards
(such due diligence investigation being referred to hereafter as "FUNB Due
Diligence").
B. In the event that the General Partner, with the Consent of the Limited
Partners in accordance with Section 5.5.A., determines to proceed with the
Sale/Referral Transaction with an Acceptable Referral Purchaser, then, (i) ACCH
shall be entitled to assign all of ACCH's rights and obligations under the
Referral Agreement in connection with such Sale/Referral Transaction without
further consent of FUNB, (ii) FUNB shall use commercially reasonable efforts to
cooperate, to the fullest extent reasonably practicable, with the Company and
ACCH in connection with such Sale/Referral Transaction, and (iii) FUNB shall use
commercially reasonable efforts to cooperate with the Acceptable Referral
Purchaser in connection with the assignment of the Referral Agreement; provided,
that FUNB shall have no duty to incur any expense in connection with such
cooperation.
C. In the event that the General Partner obtains an offer from any Person
which does not constitute an "Acceptable Referral Purchaser" with respect to a
Sale/Referral Transaction, then, FUNB shall have 45 days after written notice
from the General Partner during which to conduct FUNB Due Diligence to determine
if the proposed purchaser is an Acceptable Referral Purchaser. In the event that
FUNB determines that such proposed purchaser is not an "Acceptable Referral
Purchaser", then, the General Partner, with the Consent of the Limited Partners
in accordance with Section 5.5.A., may elect to proceed with a Sale/Referral
Transaction and FUNB shall have all of its rights under this Agreement,
including, but not limited to, its rights under Section 10.
ARTICLE VI
Registration Rights
Section 6.1 Definitions.
For the purposes of this Article VI, in addition to the terms defined
elsewhere in this Agreement, the following capitalized terms shall have the
meanings set forth below, unless otherwise defined elsewhere herein:
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"Approved Underwriter" is defined in Section 6.3.D.
"Certificate of Incorporation" means the Certificate of Incorporation, or
similar document, of the Company as in effect on the date the Partnership, or
any successor entity, incorporates by the transfer of Partnership Interests or
Property to a corporation, by merger or otherwise.
"Commission" means the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"Company Underwriter" is defined in Section 6.4.
"Demand Registration" means a demand registration requested by IronBrand
pursuant to Section 6.3 hereof.
"Equity Securityholder" means a holder of Equity Securities issued by
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holders' Counsel" means, with respect to a registration, counsel to each
of IronBrand and any other holder of Registrable Securities to be registered in
such registration (it being understood that IronBrand and any such other holder
may select separate counsel to represent them in connection with any such
registration).
"Inspector" is defined in Section 6.6.A.(ix).
"NASD" means the National Association of Securities Dealers, Inc.
"Registrable Securities" means all of the Company Shares owned
by IronBrand or its successors or assigns.
"Registration Expenses" means all of the expenses with respect to which
the Partnership is obligated to pay or otherwise satisfy under Section 6.7.
"Securities Act" means the Securities Act of 1933, as amended.
Section 6.2 Securities Subject to this Agreement.
A. Registrable Securities. For the purposes of this Agreement, any Company
Shares held by a specific holder will cease to be Registrable Securities when
(i) a registration statement covering such Company Shares has been declared
effective under the Securities Act by the Commission and such Company Shares
have been disposed of pursuant to such effective registration statement or
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(ii) the entire amount of such Company Shares held by such holder are or, in the
opinion of counsel satisfactory to the Company and such holder each in their
reasonable judgment, may be distributed to the public in a single sale pursuant
to Rule 144 (or any successor provision then in force) under the Securities Act.
B. Holders of Registrable Securities. A Person is deemed to be a holder of
Registrable Securities whenever such Person owns of record Registrable
Securities, or holds an option to purchase, or a security convertible into,
Registrable Securities whether or not such acquisition or conversion has
actually been effected. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company may act upon the basis of the instructions,
notice or election received from the registered owner of such Registrable
Securities. Registrable Securities issuable upon exercise of an option or upon
conversion of another security shall be deemed outstanding for the purposes of
this Agreement.
Section 6.3 Demand Registration.
A. Demand Registration by IronBrand. At any time after six months after an
Initial Public Offering, IronBrand or any of its transferees may make a written
request for registration of any and all Registrable Securities under the
Securities Act, and under the securities or blue sky laws of any jurisdiction
designated by IronBrand; provided, that (i) subject to Section 6.3.C below, the
Company will not be required to effect more than two registrations at the
request of IronBrand pursuant to this Section 6.3.A with respect to each class
of Registrable Securities (or, if a class of Registrable Securities has more
than one series, each series), and (ii) the Company will not be required to
effect any such registration within the period beginning on the effective date
of a registration statement filed by the Company on its behalf covering a firm
commitment underwritten public offering and ending on the later of (A) 90 days
thereafter and (B) the expiration of any lock-up period required by the
underwriters, if any, in connection therewith.
B. Company Obligation to Register. A request for a Demand Registration
pursuant to Section 6.3.A shall specify the amount and class (or, if there is
more than one series in such class, series) of the Registrable Securities
proposed to be sold, the intended method of disposition thereof and the
jurisdictions in which registration is desired. Upon a request for a Demand
Registration, the Company shall (i) promptly and in any event at least 30 days
prior to the filing date give written notice of such request to all other
holders of such Registrable Securities, and (ii) with reasonable promptness and
in any event not later than 90 days after the Company's receipt of such request,
file a registration statement with the Commission relating to such Registrable
Securities as to which such request for a Demand Registration
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relates and use its reasonable best efforts to cause to be registered under the
Securities Act all Registrable Securities that such holders have requested to be
registered. A registration shall not constitute a Demand Registration until it
has become effective and remains continuously effective for at least 90 days. In
any registration initiated as a Demand Registration, the Company shall pay all
Registration Expenses in connection therewith, whether or not such Demand
Registration becomes effective.
C. Underwriting Procedures. If IronBrand so elects, the offering of such
Registrable Securities pursuant to such Demand Registration shall be in the form
of a firm commitment underwritten offering and the managing underwriter or
underwriters selected for such offering shall be the Approved Underwriter
selected in accordance with Section 6.3.D. In such event, if the Approved
Underwriter advises the Company and IronBrand that in its opinion marketing
considerations require a limitation on the number of securities to be sold, the
Company shall include in such registration only the number of Registrable
Securities which, in the good faith opinion of such Underwriter, can be sold,
selected in the following order: (i) first, the Registrable Securities as to
which such request for a Demand Registration relates, (ii) second, the
Registrable Securities requested to be included by the other holders of
Registrable Securities, pro rata, based on the number of Registrable Securities
owned by each of them, and (iii) third, any other Company Shares requested to be
included by any other holders of Company Shares, pro rata, based on the number
of unregistered Company Shares owned by each of them. To the extent Registrable
Securities held by IronBrand are excluded from the offering to be made pursuant
to the Demand Registration requested by IronBrand or its transferees, then
IronBrand or its transferees shall have the right to one additional Demand
Registration under this Section 6.3 with respect to such Registrable Securities.
D. Selection of Underwriters. IronBrand may select and obtain an
investment banking firm to act as the managing underwriter of the offering
(the "Approved Underwriter"); provided, that the Approved Underwriter shall, in
any case, be acceptable to the Company in its reasonable judgment.
Section 6.4 Piggy-Back Registration.
If the Company proposes to file a registration statement under the
Securities Act with respect to an offering by the Company for its own account,
or an offering for the account of any Equity Securityholders of the Company or
any group of such Equity Securityholders (other than a registration statement on
Form S-4 or S-8 or any successor or other forms not available for registering
Equity Securities for sale to the public), then the Company shall give written
notice of such proposed filing to each holder of Registrable Securities at least
30 days before the anticipated filing date, and such notice shall describe in
detail the proposed
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registration and distribution (including those jurisdictions where registration
under the securities or blue sky laws is intended) and offer such holders the
opportunity to register the number of Registrable Securities as each such holder
may request. If an underwritten offering, the Company shall use its reasonable
best efforts, within 10 days of the notice provided for in the preceding
sentence, to cause the managing underwriter or underwriters of a proposed
underwritten offering (the "Company Underwriter") to permit the holders of
Registrable Securities who have requested to participate in the registration for
such offering to include such Registrable Securities in such offering on the
same terms and conditions as the securities of the Company included therein,
including execution of an underwriting agreement in customary form (provided,
that, in connection with its obligations under the foregoing sentence, the
Company shall not be required to reduce the number or amount of securities to be
issued by it in any such offering to an amount which, in the opinion of the
Board of Directors of the Company, is below that which is necessary and in the
best interests of the Company). Notwithstanding the foregoing, if an
underwritten offering and the Company Underwriter delivers a written opinion to
the holders of Registrable Securities that marketing considerations require a
limitation on the number of securities to be sold, then the amount of securities
in excess of the amount to be registered for sale by the Company to be offered
for the account of holders requesting registration pursuant to this Section 6.4
and any other holders of any Company Shares requesting the registration of such
Company Shares by exercising piggy-back registration rights similar to the
rights granted by this Section 6.4 shall be reduced pro rata based on the number
of shares held by each such holder to the extent necessary to reduce the total
securities to be included in the offering to the amount recommended by the
Company Underwriter. The Company shall bear all Registration Expenses in
connection with any registration pursuant to this Section 6.4, whether or not
such registration becomes effective.
Section 6.5 Holdback Agreements.
A. Restrictions on Public Sale by Holders. Each holder of Registrable
Securities agrees not to effect any public sale or distribution of any
Registrable Securities being registered or of any securities convertible into or
exchangeable or exercisable for such Registrable Securities, including a sale
pursuant to Rule 144 under the Securities Act, during the period beginning on
the filing of such registration statement and ending on the later of (i) 90 days
after the effective date of such registration statement or the commencement of a
public distribution of the Registrable Securities pursuant to such registration
statement or (ii) the expiration of any lock-up period required by the
underwriters, if any, of such offering, if and to the extent requested by the
Company in the case of a non-underwritten public offering or if and to the
extent
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requested by the Approved Underwriter or Company Underwriter, as the case may
be, in the case of an underwritten public offering.
B. Restrictions on Public Sale by the Company. The Company agrees not to
effect any public sale or distribution of any of its securities, or any
securities convertible into or exchangeable or exercisable for such securities
(except pursuant to a registration statement on Form S-4 or S-8 or any successor
or other forms not available for registering Equity Securities for sale to the
public) during the period beginning on the filing of any registration statement
in which the holders of Registrable Securities are participating and ending on
the later of (i) 90 days after the effective date of any such registration
statement or the commencement of a public distribution of the Registrable
Securities pursuant to such registration statement or the commencement of a
public distribution of the Registrable Securities pursuant to such registration
statement and (ii) the expiration of any lock-up period required by the
underwriters, if any, of such offering.
Section 6.6 Registration Procedures.
A. Obligations of the Company. Whenever registration of Registrable
Securities has been requested pursuant to Section 6.3 or 6.4, the Company shall
use its reasonable best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended method of distribution
thereof as quickly as practicable, and in connection with any such request, the
Company shall, as expeditiously as possible:
(i) Prepare and file with the Commission (as promptly as
practicable, but in any event not later than 90 days after receipt of a
request to file a registration statement with respect to Registrable
Securities) a registration statement on any form for which the Company
then qualifies or which counsel for the Company shall deem appropriate and
which form shall be available for the sale of such Registrable Securities
in accordance with the intended method of distribution thereof, and use
its reasonable best efforts to cause such registration statement to become
effective; provided, that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall (A)
provide Holders' Counsel with an adequate and appropriate opportunity to
participate in the preparation of such registration statement and each
prospectus included therein (and each amendment or supplement thereto) to
be filed with the Commission, which documents shall be subject to the
review of Holders' Counsel, and (B) notify Holders' Counsel and each
seller of Registrable Securities of any stop order issued or threatened by
the Commission and take all reasonable action required to
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prevent the entry of such stop order or to remove it if entered;
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 9 months or such shorter
period which will terminate when all Registrable Securities covered by
such registration statement have been sold (but not before the expiration
of the 90-day period referred to in Section 4(3) of the Securities Act and
Rule 174 thereunder, if applicable), and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered
by such registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;
(iii) As soon as reasonably possible, furnish to each seller of
Registrable Securities, prior to filing a registration statement, copies
of such registration statement as is proposed to be filed, and thereafter
such number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the
prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as each such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(iv) Use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of
such jurisdictions as any seller of Registrable Securities requests, and
to continue such qualification in effect in such jurisdiction for as long
as is permissible pursuant to the laws of such jurisdiction, or for as
long as any such seller requests or until all of such Registrable
Securities are sold, or for 6 months, whichever is shortest, and do any
and all other acts and things which may be reasonably necessary or
advisable to enable any such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller;
(v) Use its reasonable best efforts to cause the Registrable
Securities covered by such registration statement to be listed with any
securities exchange or automated quotation system upon which Equity
Securities of the same class (or series, if applicable) are then listed;
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(vi) Use its reasonable best efforts to cause the Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to
enable the seller or sellers of Registrable Securities to consummate the
disposition of such Registrable Securities;
(vii) Notify each seller of Registrable Securities at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as
a result of which, the prospectus included in such registration statement
contains an 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 in light of the circumstances under
which they were made, and the Company shall promptly prepare a supplement
or amendment to such prospectus and furnish to each seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as
may be necessary so that, after delivery to the purchasers of such
Registrable Securities, such prospectus shall not contain an 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 in light of the circumstances under which they were made;
(viii) Enter into and perform customary agreements (including an
underwriting agreement in customary form with the Approved Underwriter or
Company Underwriter, if any, selected as provided in Sections 6.3 or 6.4)
and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities;
(ix) Make available for inspection by any seller of Registrable
Securities, any managing underwriter participating in any disposition
pursuant to such registration statement, any Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any
managing underwriter (each, an "Inspector" and collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the
Company's and its subsidiaries' officers, directors and employees, and the
independent public accountants of the Company, to supply all information
reasonably requested by any such Inspector in connection
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with such registration statement. Records that the Company determines, in
good faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (A) the
disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the registration statement or to confirm that no such
misstatement or omission has been made, (B) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, or (C) the information in such Records has been made
generally available to the public or is required to be filed with, or made
available as supplemental information to, the Commission. Each seller of
Registrable Securities agrees that it shall, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of the Records deemed
confidential;
(x) If such sale is pursuant to an underwritten offering, obtain a
"cold comfort" letter from the Company's independent public accountants in
customary form and covering such matters of the type customarily covered
by "cold comfort" letters as Holders' Counsel or the managing underwriters
reasonably request;
(xi) Furnish, at the request of any seller of Registrable Securities
on the date such securities are delivered to the underwriters for sale
pursuant to such registration or, if such securities are not being sold
through underwriters, on the date the registration statement with respect
to such securities becomes effective, an opinion, dated such date, of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such
request, covering such legal matters with respect to the registration in
respect of which such opinion is being given as such seller or
underwriters may reasonably request and are customarily included in such
opinions;
(xii) Otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable but no later than
15 months after the effective date of the registration statement, an
earnings statement covering a period of 12 months beginning after the
effective date of the registration statement, in a manner which satisfies
the provisions of Section 11(a) of the Securities Act;
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(xiii) Keep each seller of Registrable Securities advised in writing
as to the initiation and progress of any registration under Section 6.3 or
6.4 hereunder;
(xiv) Provide officers' certificates and other customary closing
documents;
(xv) Cooperate with each seller of Registrable Securities and each
underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the NASD or any securities exchange; and
(xvi) Use its reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Securities
contemplated hereby and cooperate with the holders of such Registrable
Securities to facilitate the disposition of such Registrable Securities
pursuant thereto.
B. Seller Information. The Company shall be entitled to require each
seller of Registrable Securities as to which any registration is being effected
to furnish to the Company such information regarding such seller and the
distribution of such securities as the Company may from time to time reasonably
request in writing.
C. Notice to Discontinue. Each holder of Registrable Securities agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 6.6.A(vii), such holder shall forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such holder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
6.6.A(vii) and, if so directed by the Company, such holder shall deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such holder's possession, of the prospectus covering such Registrable
Securities which is current at the time of receipt of such notice. If the
Company shall give any such notice, the Company shall extend the period during
which such registration statement shall be maintained effective pursuant to this
Agreement (including the period referred to in Section 6.6.A(ii)) by the number
of days during the period from and including the date of the giving of such
notice pursuant to Section 6.6.A(vii) to and including the date when the holder
shall have received the copies of the supplemented or amended prospectus
contemplated by and meeting the requirements of Section 6.6.A(vii).
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Section 6.7 Registration Expenses.
A. The Company shall pay all expenses (other than underwriting discounts
and commissions) arising from or incident to the performance of, or compliance
with, this Article VI, including (i) Commission, stock exchange and NASD
registration and filing fees, (ii) all fees and expenses incurred in complying
with securities or blue sky laws (including reasonable fees, charges and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), (iii) all printing, engraving, messenger and delivery
expenses and (iv) the fees, charges and disbursements of counsel to the Company
and of its independent public accountants and any other accounting and legal
fees, charges and expenses incurred by the Company (including any fees and
expenses in connection with any "cold comfort" letters and any special audits
incident to or required by any registration or qualification) regardless of
whether such registration statement is declared effective.
The Company will, in any event, pay its internal expenses (including all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the securities to be registered on
each securities exchange on which securities of the same class are then listed
or the qualification for trading of the securities to be registered in each
inter-dealer quotation system in which securities of the same class are then
traded, and rating agency fees.
B. In connection with each registration requested pursuant to Section 6.3
or any registration effected pursuant to Section 6.4 of this Agreement, the
Company will reimburse any holder of Registrable Securities for the reasonable
fees and disbursements of its counsel.
Section 6.8 Indemnification; Contribution.
A. Indemnification by the Company. The Company agrees to indemnify, to the
full extent permitted by law, each holder of Registrable Securities, their
officers, directors, partners, employees and agents and each Person who controls
(within the meaning of the Securities Act or the Exchange Act) such holder from
and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation and, subject to Section 6.8.C
hereof, reasonable fees, disbursements and other reasonable charges of legal
counsel) arising out of or based upon any untrue, or alleged untrue, statement
of a material fact contained in any registration statement, prospectus or
preliminary prospectus or notification or offering circular (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be
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stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any information
furnished in writing to the Company by such holder expressly for use therein.
B. Indemnification by Holders. In connection with any registration
statement in which a holder of Registrable Securities is participating pursuant
to Section 6.3 or 6.4 hereof, each such holder shall furnish to the Company in
writing such information with respect to such holder as the Company may
reasonably request or as may be required by law for use in connection with any
such registration statement or prospectus and each holder agrees to indemnify,
to the extent permitted by law, the Company, any underwriter retained by the
Company and their respective directors, officers, employees and each Person who
controls the Company or such underwriter (within the meaning of the Securities
Act and the Exchange Act) to the same extent as the foregoing indemnity from the
Company to the holders, but only with respect to any such information furnished
in writing by such holder expressly for use in such registration statement.
C. Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder (the "Indemnified Party") agrees to give prompt
written notice to the indemnifying party (the "Indemnifying Party") after the
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or contribution
pursuant to this Agreement; provided, that the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder. If notice of commencement
of any such action is given to the Indemnifying Party as above provided, the
Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
satisfactory to such Indemnified Party. The Indemnified Party shall have the
right to employ separate legal counsel in any such action and participate in the
defense thereof, but the fees, disbursements and other charges of such separate
legal counsel (other than reasonable costs of investigation) shall be paid by
the Indemnified Party unless (i) the Indemnifying Party agrees to pay the same,
(ii) the Indemnifying Party fails to assume the defense of such action with
legal counsel satisfactory to the Indemnified Party in its reasonable judgment,
(iii) the named parties to any such action (including any impleaded parties)
have been advised by such legal counsel that either (A) representation of such
Indemnified Party and the Indemnifying Party by the same legal counsel would be
inappropriate under applicable standards of professional conduct or (B) there
may be one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party. In either of such cases
the
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Indemnifying Party shall not have the right to assume the defense of such action
on behalf of such Indemnified Party. No Indemnifying Party shall be liable for
any settlement entered into without its written consent, which consent shall not
be unreasonably withheld.
D. Contribution. If the indemnification provided for in this Section 6.8
from the Indemnifying Party is unavailable to an Indemnified Party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative faults of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Sections 6.8.A, 6.8.B and 6.8.C, any fees,
charges or expenses (including the reasonable fees, disbursements and other
charges of legal counsel) reasonably incurred by such party in connection with
any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.8.D were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.8.D, a holder of Registrable
Securities shall not be required to contribute any amount in excess of the
amount by which the net proceeds received by such holder in the offering to
which such registration statement relates exceeds the amount of any damages that
such holder has otherwise been required to pay. 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.
E. Survival. The indemnity and contribution covenants contained in this
Section 6.8 shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of a holder or any Person controlling
a holder, (ii) any sale of any Registrable Securities pursuant to this Agreement
and
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receipt by the holders of the proceeds thereof, or (iii) any termination of this
Agreement for any reason, including after the initial filing of the registration
statements to which these indemnity and contribution covenants relate.
Section 6.9 Rules 144 and 144A.
The Company covenants that it shall duly and timely file any reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the Commission thereunder; and that it shall
take such further action as each holder of Registrable Securities may reasonably
request (including providing any information necessary to comply with Rules 144
and 144A under the Securities Act), all to the extent required from time to time
to enable such holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 or Rule 144A under the Securities Act, as such rules may be amended from
time to time, or (b) any similar rules or regulations hereafter adopted by the
Commission. The Company shall, upon the request of any holder of Registrable
Securities, deliver to such holder a written statement as to whether it has
complied with such requirements. Without limiting the foregoing, the Company
agrees that:
(i) It will, if required by law, maintain a registration statement
(containing such information and documents as the Commission shall
specify) with respect to Equity Securities of the same class under Section
12 of the Exchange Act and will timely file such information, documents
and reports as the Commission may require or prescribe for companies whose
Equity Securities has been registered pursuant to said Section 12;
(ii) It will, if a registration statement with respect to Equity
Securities of the same class under Section 12 is effective, or if required
by Section 15(d) of the Exchange Act, make whatever filings with the
Commission or otherwise make generally available to the public such
financial and other information as may be necessary to enable the holders
of Registrable Securities to be permitted to sell Equitable Securities of
the Company pursuant to the provisions of Rule 144 or 144A promulgated
under the Securities Act (or any successor rule or regulation thereto);
and
(iii) It will, at any time when any holder of Registrable Securities
desires to make sales of any Registrable Securities in reliance on Rule
144A under the Securities Act (or any successor rule or regulation),
provide such holder and any prospective purchaser therefrom with the
information required by Rule 144A and
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otherwise cooperate with the holder in connection with such sale.
The Company covenants and agrees that any registration statement or any
information document or report filed with the Commission in connection with the
foregoing or any information so made public shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements contained therein
not misleading. The Company agrees to indemnify and hold harmless (or to the
extent the same is not enforceable, make contribution to) the seller of
Registrable Securities, its partners, members, managers, officers, directors,
employees and agents, each broker, dealer or underwriter (within the meaning of
the Securities Act) acting for any such seller in connection with any offering
or sale by such seller of Registrable Securities or any Person controlling
(within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act) such seller and any such broker, dealer or underwriter from
and against any and all losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arising out of or resulting from any breach of the
foregoing representation or warranty, all on terms and conditions comparable to
those set forth in Section 6.8 of this Agreement.
Section 6.10 Registration Rights of Others.
The Company represents and warrants that it has not granted to any Person
the right to request or require the Company to register any securities issued by
the Company. The Company covenants and agrees that, so long as any Person holds
any Registrable Securities in respect of which any registration rights provided
for in Section 6.3 of this Agreement remain in effect, the Company will not,
directly or indirectly, grant to any Person or agree to or otherwise become
obligated with respect to rights of registration that are any more favorable
than such rights set forth in Sections 6.3 and 6.4 of this Agreement.
Section 6.11 Miscellaneous.
A. Recapitalizations, Exchanges, Etc. The provisions of this Article VI
shall apply, to the full extent set forth herein with respect to the Company
Shares, to any and all shares of Equitable Securities of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise) which may be issued in respect of, in exchange for or in
substitution of, the Company Shares and shall be appropriately adjusted for any
dividends, splits, reverse splits, combinations of stock or other Equity
Securities, recapitalizations and the like occurring after the date hereof.
B. No Inconsistent Agreements. The Company shall not enter into any
agreement with respect to its securities that is incon-
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sistent with the rights granted to the designated holders of the Registrable
Securities in this Article VI.
C. Remedies. The holders of the Registrable Securities, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, shall be entitled to specific performance of their rights under this
Article VI. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Article VI and hereby agrees to waive in any action for specific
performance the defense that a remedy at law would be adequate.
D. Amendments and Waivers. The provisions of this Article VI may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Company has obtained the prior
written consent of each holder of the Registrable Securities.
E. Successors and Assigns. The provisions of this Article VI shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties and the registration rights and the other obligations of the Company
contained in this Article VI shall with respect to any Registrable Security be
automatically transferred to any subsequent holder of Registrable Securities
(excluding any Person who acquires such securities in a transaction with respect
to which a registration statement under the Securities Act is effective at the
time or pursuant to a sale complying with Rule 144 under the Securities Act).
Notwithstanding any transfer of such rights, all of the obligations of the
Company hereunder shall survive any such transfer and shall continue to inure to
the benefit of all transferees.
ARTICLE VII
Transferability of Partnership Interests
Section 7.1 Limitations and Restrictions.
A. Except as otherwise specifically permitted in this Article VII and
Article XI, no Limited Partner shall have the right to Transfer all or any
portion of his Partnership Interest.
B. No Transfer of all or any part of a Partner's Interest may be made
except in compliance with Section 12.1.
C. Except as otherwise required by Section 7.2, and except for Transfers
to the Partnership required by the General Partner on behalf of the Partnership
pursuant to the Plan or Article XI, a Partner (the "Transferor") may Transfer
part or all of its Partnership Interest only with both (i) the prior written
consent of the General Partner and (ii) the consent of the Limited Partners
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owning more than fifty percent (50%) of the Units, including, for purposes of
this Section 7.1.C, Units issued pursuant to the Plan and Units held by
IronBrand, but excluding, for purposes of this Section 7.1.C, Units held by the
Transferor. Notwithstanding the foregoing, and in addition thereto, The S
Associates Limited Partnership may not transfer part or all of its Interest
except with the consent of The O Associates Limited Partnership, and The O
Associates Limited Partnership may not transfer part or all of its Interest
except with the consent of The S Associates Limited Partnership. Any consent
required under this Section 7.1.C shall be in the sole discretion of the
consenting party.
D. As a condition of any Transfer of a Partnership Interest, the
Transferor thereof must (i) pay or agree to pay all reasonable costs incurred by
the Partnership or the General Partner in connection with such Transfer; (ii) if
requested by the General Partner, furnish the Partnership with a legal opinion
satisfactory to it that, in the opinion of counsel, such Transfer would not
jeopardize the status of the Partnership as a partnership for federal income tax
purposes (or cause it to be taxed as a publicly traded partnership within the
meaning of section 7704 of the Code) or otherwise result in adverse tax
consequences to the Partnership or any other Partner, or cause a termination of
the Partnership for purposes of the Code, or violate, or cause the Partnership
to violate, any applicable law or governmental rule or regulation, including any
applicable federal or state securities law (provided, however, the General
Partner shall request such an opinion(s) only if an adverse application of such
laws is either reasonably possible or is reasonably uncertain); (iii) in
conjunction with the transferee (the "Transferee") of such Interest, timely
supply the General Partner with the information necessary to enable the General
Partner to file Internal Revenue Form 8308, as required by section 6050K of the
Code and the Treasury Regulations promulgated thereunder; (iv) timely deliver to
the General Partner an attestation of the Transferee regarding the Assignee's
status as either an exempt organization within the meaning of subchapter F of
chapter 1 or subtitle A of the Code or a "United States person" with the meaning
of section 7701(a)(30) of the Code; and (v) timely deliver to the General
Partner such other agreements and instruments as the General Partner may deem
necessary or advisable to effect such Transfer, in form and substance reasonably
satisfactory to the General Partner, including the written agreement by the
Transferee to be bound by this Agreement and the representations and warranties
of the Limited Partners set forth in this Agreement.
E. Any Transfer made in violation of this Article VII or Section 12.1
shall be void and of no force or effect.
F. Notwithstanding anything herein to the contrary, IronBrand may freely
Transfer, with full rights of substitution, all or part of its Partnership
Interest to one or more of its Affiliates, without having to otherwise comply
with the provisions
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of this Agreement, upon giving written notice of such Transfer to the General
Partner.
Section 7.2 Involuntary Assignment of Partnership Interests.
In the event of an Involuntary Assignment by any Partner of any
Partnership Interest, except in the case of a Transfer to the Partnership, the
following procedures shall apply:
A. The Partner deprived or divested of any Partnership Interest by the
Involuntary Assignment (the "Assignor") promptly shall give written notice of
such Involuntary Assignment in reasonable detail to the General Partner, and the
Person or Persons who take or propose to take any interest in such Partnership
Interest (for purposes of this Section 7.2, such Person(s) referred to
hereinafter as the "Assignee(s)" and such Partnership Interest referred to
hereinafter as the "Subject Interest") as a result of such Involuntary
Assignment shall hold such Interest subject to the rights of the Partnership as
set forth below.
B. Upon receipt of the notice referred to above or upon discovery by the
General Partner or the Partnership of such Involuntary Assignment, the
Partnership shall have the irrevocable option, exercisable at the sole
discretion of the General Partner, but not the obligation, for a period of sixty
(60) days following receipt of such notice or such discovery, to purchase all or
any part of the Subject Interest, subject to the terms set forth herein. Any
exercise of such option shall be in writing to the Assignor and Assignee, shall
specify the portion of the Subject Interest to be purchased and shall be
effective upon receipt thereof by the Assignor and Assignee.
C. The closing of any such sale of any Subject Interest to the Partnership
shall be held at the offices of the Partnership (or such other place that the
parties to such sale may mutually agree) not later than forty-five (45) days
after the receipt by the Assignor and Assignee of the notice exercising the
option to purchase such Subject Interest. The purchase price of the Subject
Interest purchased pursuant to this Section 7.2 shall be the fair market value
of the Subject Interest, as determined in good faith by the General Partner,
taking into account all discounts for lack of control, lack of marketability and
other relevant valuation factors that would be applicable to a sale of the
Subject Interest to a party unrelated to and unaffiliated with any existing
Partner.
D. The purchase price for any such sale of a Subject Interest (other than
Interests in Units granted under the Plan) shall be paid by the Partnership by
making and delivering to the seller a two-year nonrecourse promissory note,
bearing interest at a fixed rate equal to the Base Rate fixed as of the date of
such sale, with equal installments of principal and interest payable
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each quarter, and secured by a pledge of the Subject Interest accompanied by the
execution and delivery of a security agreement reflecting such pledge. The
purchase price for any such sale of a Subject Interest granted under the Plan
shall be as specified in the Plan.
E. In the event that the Partnership does not purchase all of the Subject
Interest involved in an Involuntary Assignment pursuant to this Section 7.2, the
Assignee of the Subject Interest not so purchased by the Partnership shall not
become a Substitute Limited Partner of the Partnership unless the Assignor
obtains the consent provided for in Section 7.1.C.
Section 7.3 Recordation of Transfers and Involuntary
Assignments of Partnership Interests.
A. A Transfer or Involuntary Assignment of Partnership Interests permitted
under this Article VII shall require the delivery to the Partnership of an
instruction to register the Transfer or Involuntary Assignment, and such other
documentation as shall be necessary to enable the Transferee or Assignee, as the
case may be, to cause the registration of the conveyance upon the books and
records of the Partnership. Upon delivery to the Partnership of such other
documentation, together with instructions from the Transferror/Assignor or
Transferee/Assignee, as the case may be, as to the registration of such Transfer
or Involuntary Assignment, the General Partner shall examine the same and shall
examine the books and records of the Partnership. If satisfied as to its duty to
register the purported Transfer or Involuntary Assignment, the General Partner
shall cause the Transfer or Involuntary Assignment to be registered in the
register maintained by the Partnership. Upon the registration of such Transfer
or Involuntary Assignment, (i) the Transferee (in the case of a Transfer) of
such Partnership Interests shall be admitted to the Partnership as a Substitute
Limited Partner, and shall have all rights, privileges and obligations
associated with such Transferred Partnership Interests, and (ii) the Assignee
(in the case of an Involuntary Assignment) shall not be admitted to the
Partnership as a Substitute Limited Partner unless the Assignor obtains the
consent provided for in Section 7.1.C.
B. Each purported Transferee or Assignee of Partnership Interests, by his
submission to the Partnership of the instructions and other documents and
instruments as described in Section 7.3.A, shall be deemed to have agreed to all
of the terms and conditions of this Agreement, shall (with the exception of
Transfers made in accordance with Section 7.1.F) be deemed to have appointed the
Partnership and the General Partner as his agent and attorney-in-fact for all
purposes described in this Agreement, and shall be deemed to have authorized and
directed the General Partner, on behalf of such purported Transferee or
Assignee, to execute and deliver a counterpart of this Agreement.
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C. A Substitute Limited Partner shall have all the rights and powers, and
shall be subject to all of the restrictions and liabilities, of the Limited
Partner from whom the Transferred Partnership Interest was acquired relative to
such Transferred Partnership Interest. The admission of a Substitute Limited
Partner, without more, shall not release the Transferor Limited Partner from any
liability with respect to the Transferred Partnership Interest (or otherwise)
that may have existed prior to, and at the time of, the substitution of
membership.
Section 7.4 Distributions and Applications with Respect to
Transferred and Involuntarily Assigned Partnership Interests.
If all or part of any Limited Partner's Partnership Interest is
Transferred or Involuntarily Assigned during any fiscal year in compliance with
the provisions of this Article VII, Net Income, Net Loss, each item of income,
gain, loss, and deduction specially allocated hereunder, and all other items
attributable to the Transferred or Involuntarily Assigned Partnership Interest
for such fiscal year shall be divided and allocated between the
Transferor/Assignor and the Transferee/Assignee, as the case may be, by taking
into account their varying Interests during such Fiscal Year in accordance with
any reasonable manner selected by the General Partner that complies with Code
section 706(d) as provided herein. All Distributions on or before the effective
date of such Transfer or Involuntary Assignment shall be made to the
Transferor/Assignor, and all Distributions thereafter shall be made to the
Transferee/Assignee. Solely for purposes of making such allocations and
Distributions, the Partnership shall recognize such Transfer or Involuntary
Assignment not later than as of the date the General Partner authorizes such
Transfer or records such Involuntary Assignment; provided, however, that, if the
General Partner authorizes a Transfer prior to the Transfer, the Partnership
shall recognize such Transfer as of the date of such Transfer. The General
Partner generally shall authorize any such Transfer only on the last day of the
month of the Fiscal Year in which the final condition precedent to such Transfer
has been fulfilled.
ARTICLE VIII
Loans
Section 8.1 General.
The Partnership may borrow from any source, including Partners, with the
written consent of the General Partner. If any Partner lends money to the
Partnership, the amount of any such loan shall not increase such Partner's
Capital Account balance or, except as contemplated by applicable Treasury
Regulations, affect in any way his share of the profits, losses or distributions
of the Partnership. Loans made by a Partner or an Affiliate, other than
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IronBrand or any Affiliate of IronBrand, shall be subject to the same Transfer
restrictions as apply to Partnership Interests and Units under Article VII.
Section 8.2 Restrictions on Rate of Interest.
Loans made by a Partner or an Affiliate of a Partner, other than FUNB to
the Partnership shall be evidenced by promissory notes which shall bear interest
at a commercially reasonable rate not in excess of the lesser of (i) the maximum
rate permitted by law or (ii) the Base Rate, said Base Rate being computed at
the end of each calendar month (based upon the Base Rate on the last day of each
such month) following the making of said loan.
ARTICLE IX
Profits and Losses; Distributions
Section 9.1 Profits and Losses.
A. Allocations.
1. Net Income. Subject to the application of Section 9.15 and Section
9.1.A(3), and except as otherwise provided in this Article IX, Net Income for
each fiscal year of the Partnership or part thereof shall be allocated in the
following order and priority:
(i) Restoration of Each General Partner's Capital Account Balance.
First, to each General Partner who was previously allocated amounts of Net
Loss under Section 9.1.A(2)(iv), if any, an amount equal to, and
proportionate thereto among such General Partners, the excess of all such
previous allocations of Net Loss to such General Partner under Section
9.1.A(2)(iv) over all previous allocations of Net Income to such Partner
under this Section 9.1.A(1)(i);
(ii) Restoration of Preferred Equity. Second, to each Partner who
was previously allocated amounts of Net Loss under Section 9.1.A(2)(iii),
if any, an amount equal to, and proportionate thereto among such Partners,
the excess of all such previous allocations of Net Loss to such Partner
under Section 9.1.A(2)(iii) over all previous allocations of Net Income to
such Partner under this Section 9.1.A(1)(ii);
(iii) Restoration of Common Equity. Third, to each Partner who was
previously allocated amounts of Net Loss under Section 9.1.A(2)(ii), if
any, an amount equal to, and proportionate thereto among such Partners,
the excess of all such previous allocations of Net Loss to such
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Partner under Section 9.1.A(2)(ii) over all previous allocations of Net
Income to such Partner under this Section 9.1.A(1)(iii);
(iv) Preferred Return. Fourth, to Partners owning Preferred Equity,
an amount sufficient to give such Partners a cumulative annual return of
seven percent (7%), compounded semiannually, on their "Undistributed
Preferred Equity." For purposes hereof, "Undistributed Preferred Equity"
means the amount of a Partner's Capital Contributions for Preferred Equity
as set forth on Schedule A, reduced, as of the time the applicable
allocations are to be made under this Section 9.1.A(1)(iv), by the amount
of any Distributions applied under Section 9.2.A(2) as a return of
Preferred Equity;
(v) Next Forty-Four Million Dollars ($44,000,000) of Net Income.
(I) Fifth,
(A) Ninety percent (90%) to IronBrand and ten percent
(10%) to the other Partners (to be allocated among such other
Partners in proportion to the ratios that their Initial
Percentage Interests bear to one another) until a total of
three million dollars ($3,000,000) of Net Income has been
allocated under this Section 9.1.A(iv)(I)(A); and
(B) To the Partners, in such proportions that will
result in IronBrand having been allocated 10.203% of the total
allocations under this Section 9.1.A(iv)(I) and the other
Partners having been allocated the balance of such allocations
(in proportion to the ratios that their Initial Percentage
Interests bear to one another) as of such time that a total of
thirty million dollars ($30,000,000) of Net Income has been
allocated under this Section 9.1.A(1)(vi)(I);
(II) Sixth, ninety percent (90%) to IronBrand and ten percent
(10%) to the other Partners (to be allocated among such other
Partners in proportion to the ratios that their respective 1995
Percentage Interests bear to one another) until a sufficient amount
of such Net Income has been allocated to
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IronBrand to increase its positive Adjusted Common Capital Account
Balance to equal 15.3046% of the aggregate positive Adjusted Common
Capital Account Balances of all Partners (subject to dilution by the
issuance of additional Units pursuant to Section 3.3.F or as
provided by Section 9.12.C);
(III) Seventh, to the Partners, in proportion to each
Partner's 1995 Percentage Interest, until a total of fourteen
million dollars ($14,000,000) of Net Income has been allocated under
Sections 9.1.A(1)(v)(II) and
9.1.A(1)(v)(III);
(vi) Initial Target. Eighth, until such date as of which the
Percentage Interests of the Partners change pursuant to Section 9.7 or
Section 9.12.A(3), ninety percent (90%) to IronBrand and ten percent 10%
to the other Partners (to be allocated among such other Partners in
proportion to the ratios that their respective Percentage Interests bear
to one another) until IronBrand's positive Adjusted Common Capital Account
Balance equals 35.7106% of the aggregate positive Adjusted Common Capital
Account Balances of all Partners (subject to dilution by the issuance of
additional Units pursuant to Section 3.3.F or as provided by Section
9.12.C);
(vii) Adjustments to Target.
(I) Ninth, as of the date on which IronBrand's Percentage
Interest increases pursuant to Section 9.7 or Section 9.12.A(3), one
hundred percent (100%) to IronBrand until IronBrand's positive
Adjusted Common Capital Account Balance equals the product of the
Income Alignment Fraction multiplied by the combined positive
Adjusted Common Capital Account Balances of all Partners other than
IronBrand;
(II) Tenth, as of the date on which IronBrand's Percentage
Interest decreases pursuant to Section 9.7 or Section 9.12.A(3), one
hundred percent (100%) to all Partners other than IronBrand (in
proportion to the ratios that such Partners' respective Percentage
Interests bear to one another) until the aggregate positive Adjusted
Common Capital Account Balances of such Partners equal the product
of the Loss Alignment Fraction multi-
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plied by the positive Adjusted Common Capital Account Balance of
IronBrand; and
(viii) Remaining Profits. The balance, to the Partners in proportion
to the Partners' respective Percentage Interests.
2. Net Loss. Subject to the application of Section 9.15 and Section
9.1.A(3), and except as otherwise provided in this Article IX, Net Loss for each
fiscal year or part thereof shall be allocated in the following order and
priority:
(i) Adjustments to Target.
(I) First, as of the date on which IronBrand's Percentage
Interest increases pursuant to Section 9.7 or Section 9.12.A(3), one
hundred percent (100%) to all Partners other than IronBrand (to be
allocated among such other Partners in proportion to the ratios that
their respective Percentage Interests bear to one another) until the
aggregate positive Adjusted Common Capital Account Balances of all
Partners other than IronBrand have been reduced to equal the product
of the Loss Alignment Fraction multiplied by IronBrand's positive
Adjusted Common Capital Account Balance;
(II) Second, as of the date on which IronBrand's Percentage
Interest decreases pursuant to Section 9.7 or Section 9.12.A(3), one
hundred percent (100%) to IronBrand until IronBrand's positive
Adjusted Common Capital Account Balance has been reduced in the
aggregate to equal the product of the Income Alignment Fraction
multiplied by the aggregate positive Adjusted Common Capital Account
Balances of all Partners other than IronBrand;
(ii) Reduction of Common Equity. Third, to all Partners, in
proportion to their respective positive Common Capital Account balances
until all such Common Capital Account balances have been reduced to zero;
(iii) Reduction of Preferred Equity. Fourth, to Partners with
Undistributed Preferred Equity, as defined in Section 9.1.A(1)(iv), in
proportion to their respective Undistributed Preferred Equity until such
Undistributed Preferred Equity, reduced by all previous allocations of Net
Loss under this Section 9.1.A(2)(iii) and increased by all previous
allocations of Net Income under
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Sections 9.1.A(1)(ii) and 9.1.A(1)(iv), is reduced to zero; and
(iv) Remaining Losses. The balance, one hundred percent (100%) to
the General Partner.
3. 1995 Valuations and Limitations. The Partners acknowledge, and hereby
agree, that the Full Enterprise Value of the Partnership was thirty million
dollars ($30,000,000) on August 31, 1995 and forty-four million dollars
($44,000,000) on December 31, 1995. Accordingly, notwithstanding anything to the
contrary in this Article IX, allocations pursuant to Sections 9.1.A(1)(v)(II)
and 9.1.A(1)(v)(III) shall not exceed Economic Income for the period commencing
on September 1, 1995, determined as if the Property was revalued at thirty
million dollars ($30,000,000) as of such date, allocations pursuant to Section
9.1.A(1)(vi) shall not exceed Economic Income for the period commencing on
January 1, 1996, determined as if the Property was revalued at forty-four
million dollars ($44,000,000) as of such date, and allocations pursuant to
Sections 9.1.A(1)(vii) shall not exceed Economic Income for the period
commencing on the date on which Percentage Interests change pursuant to Section
9.7 or 9.12.A(3), determined as if the Property was revalued as of such date in
accordance with the principles of Section 11.3; provided, that allocations
pursuant to, or in accordance with, this Section 9.1 to IronBrand shall be made
in respect of Net Income to the greatest extent possible in accordance with the
regime set forth in Sections 9.1.A(1) and 9.1.A(2). Moreover, notwithstanding
anything in Section 9.1.A(1)(v) to the contrary or as otherwise provided herein
(except Section 9.12), the Partners acknowledge, and hereby further agree, that
allocations of Net Income to IronBrand pursuant to, or in accordance with,
Section 9.1.A(1)(v) shall be no less than such amount as necessary to cause
IronBrand's positive Adjusted Common Capital Account Balance to equal 15.3046%
of the combined positive Adjusted Common Capital Account Balances of all
Partners (including IronBrand) (subject to dilution by the issuance of
Additional Units pursuant to Section 3.3.F or as provided by Section 9.12.C).]
B. Other Allocation and Related Rules.
1. Except as otherwise required by law, no Partner shall be obligated to
contribute additional capital to the Partnership in order to restore a deficit
balance in his Capital Account.
2. Notwithstanding any other provision hereof (other than Sections
9.1.B(3) and (4)), if at any time the allocation provisions of Section 9.1 do
not result in the allocation to the General Partner of an aggregate of at least
one percent (1%) of each item of Net Income and Net Loss, the General Partner
shall be allocated one percent (1%) of each such item. This Section 9.1.B(2) is
intended to comply with section 4.01 of the Revenue Procedure 89-12, 1989-1 C.B.
798, 800 and Section 4.01(1) of Revenue
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Procedure 92-88, 1992-2 C.B. 496, 497 (second paragraph) and shall be
interpreted consistently with such intent. The General Partner, notwithstanding
anything in this Agreement to the contrary, shall have the authority to amend
this Section 9.1.B(2) to the extent necessary to satisfy the minimum allocation
requirements with respect to general partners of a limited partnership that are
required to be included in the agreement of limited partnership before the
Internal Revenue Service will consider ruling that such limited partnership will
be treated as a partnership for federal income tax purposes, including as may be
appropriate to conform this Section 9.1.B(2) to any change in the Code, the
Regulations or the official interpretation or ruling position of the Internal
Revenue Service as set forth in its Revenue Rulings and Revenue Procedures with
respect to such minimum allocation requirements, which may include the deletion,
or suspension of the effect, of this Section 9.1.B(2) to the extent such
provisions, under Regulations that are currently being considered by the
Internal Revenue Service to which reference is made in Notice 95-14, 1995-1 C.B.
297, no longer need be included in an agreement of limited partnership in order
for the Internal Revenue Service to issue a ruling that the limited partnership,
to which such partnership agreement relates, is to be taxed as a partnership for
federal income tax purposes.
3. Notwithstanding the provisions of Section 9.1.A, in accordance with
section 704(c) of the Code, gain, loss, and deduction (including depreciation)
with respect to any Property contributed to the capital of the Partnership
shall, solely for tax purposes, be allocated among the Partners so as to take
account of any variation between the adjusted basis of such Property to the
Partnership for federal income tax purposes and its fair market value on the
date of contribution. Furthermore, in the event the value at which Partnership
assets are carried on its balance sheet maintained under the terms of this
Agreement are adjusted pursuant to section 1.704-1(b)(2)(iv)(f) of the Treasury
Regulations, subsequent allocations of income, gain, loss and deduction with
respect to such assets shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and the value carried on
such balance sheet in the same manner as under section 704(c) of the Code. Any
elections or other decisions relating to such allocations shall be made by the
General Partner in a fair and reasonable manner. Allocations pursuant to this
Section 9.1.B(3) are solely for purposes of federal, state and local taxes and
shall not affect, or in any way be taken into account in computing, any
Partner's Capital Account or share of profits and losses allocated pursuant to
Section 9.1, or Distributions pursuant to any provision of this Agreement.
4. Notwithstanding any other provision of this Agreement, Nonrecourse
Deductions (as defined in section 1.704-2(c) of the Treasury Regulations) shall
be allocated to the Partners in proportion to their Percentage Interests, and
Partner Nonrecourse
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Deductions (as defined in section 1.704-2(i) of the Treasury Regulations) shall
be allocated to the Partner who bears the corresponding risk of loss.
Notwithstanding any other provision of this Agreement, upon any decrease in
Partnership Minimum Gain or Partner Nonrecourse Debt Minimum Gain (as defined in
section 1.704-2(f) and (i) of the Treasury Regulations), Net Income shall be
allocated to the Partners in accordance with the Minimum Gain Chargeback and
Partner Nonrecourse Debt Minimum Gain Chargeback provisions of the Treasury
Regulations. Furthermore, notwithstanding any other provision of the Agreement,
Net Income (or, if necessary, items of gross income) shall be allocated to any
Partner whose Capital Account falls into deficit, in accordance with the
alternate test for economic effect of section 1.704-1(b)(2)(ii)(d), to the
extent and in the manner required by such Treasury Regulations, in order to
eliminate such deficit. The foregoing allocations of this Section 9.1.B(4) are
intended to comply with the indicated requirements and provisions of the cited
Treasury Regulations (including the requirement of a qualified income offset
under section 1.704-1(b)(2)(ii)(d)(3)) and shall be interpreted accordingly.
5. Gain or loss realized on the sale or Distribution of Company Shares
under Section 9.2.B that otherwise would be allocated pursuant to or in
accordance with Section 9.1.A(1) or Section 9.1.A(2) shall be specially
allocated entirely to the Partner to whom such Company Shares are Distributed or
for whom such Company Shares are sold, unless, as provided by Section 9.10.A,
and to the extent, the General Partner determines, on the advice of the
Accountants, that such an allocation would not be sustained.
C. Order of Priority. The allocations set forth in Section 9.1.A shall be
made after giving effect to the special allocations set forth in Sections 9.1.B
and 9.10.
Section 9.2 Distributions Prior to Dissolution.
A. Available Cash. Available Cash shall be Distributed in the following
order of priority:
1. First, not later than the 15th day prior to each date upon which
quarterly estimated federal income tax payments are required to be made by
individuals, the General Partner shall make Distributions of Available Cash to
each Partner in an amount equal to the excess, if any, of (I) the product of (a)
the estimated Net Taxable Profits allocable to such Partner as of the end of the
immediately preceding fiscal quarter (other than any allocation of taxable
income to a Partner attributable to the recognition of gain by the Partnership
upon the sale or exchange of Company Shares pursuant to Section 9.2.B(1) and is
Distributable as provided therein) multiplied by (b) forty percent (40%) over
(II) any previous Distributions of Available Cash made at any previous time
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to such Partner attributable to such fiscal year (a "Tax Distribution Amount").
Each Partner shall inherit the allocation and Distribution history of any Person
or Persons who previously owned such Partner's Interest, to the extent of such
Interest or applicable portion thereof.
2. Next, the General Partner may at the end of each fiscal year Distribute
Available Cash to Partners owning Preferred Equity, in proportion to their
Undistributed Preferred Equity, as defined in Section 9.1.A(1)(iv), until such
Undistributed Preferred Equity plus a cumulative annual return thereon of seven
percent (7%), compounded semiannually, has been fully Distributed, with any
Distributions made under this Section 9.2.A(2) being applied first towards any
such accrued cumulative annual return for which a Distribution under this
Section 9.2.A(2) had not previously been made before being applied to reduce the
Partners' Undistributed Preferred Equity.
3. Thereafter, the General Partner may Distribute, in its discretion, in
proportion to each Partner's Percentage Interest, subject to the application of
Section 9.15, the Available Cash of the Partnership that shall remain following
the Distributions provided for in Sections 9.2.A(1) and 9.2.A(2) above.
B. Partial Liquidation of Company Shares. Unless prohibited by law or the
Company's contract with the underwriter of the Initial Public Offering
(provided, that the limitations on transfer of Company Shares included in such
contract generally conform with customary underwriting practice), upon and after
the consummation of an Initial Public Offering, any Partner, subject to any
approval that may be required of the other Partners under Section 5.5.B(v), may
direct the General Partner to either Distribute all or part of such Partner's
distributive share of the Partnership's Property (including Company Shares) or
sell all or part of such Property and Distribute the proceeds from such sale to
such Partner (unless such action is precluded by applicable law or contract), in
which event, unless the General Partner determines, on the advice of the
Accountants and consistent with Section 9.10.A, that such an allocation would
not be sustained, the entire gain or loss from such sale that otherwise would be
allocated pursuant to or in accordance with Section 9.1.A(1) or Section 9.1.A(2)
shall be specially allocated entirely to such Partner and debited or credited,
as the case may be, to his Capital Account, and no Distribution with respect to
any such gain or loss shall be made to such Partner under Section 9.2.A(1) or
Section 9.2.A(2), as the case may be). A Partner's distributive share of the
Partnership's Property shall equal that number of the Company Shares (including
any fraction of a share) plus that portion of the Partnership's other Property,
if any, that, when aggregated with the Reconstituted Value of all prior
Distributions of, or with respect to, Partnership Property made to such Partner
pursuant to this Section 9.2.B, have a combined Reconstituted Value equal to the
product of
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such Partner's Reconstituted Percentage Interest multiplied by the Reconstituted
Value of the Partnership. Any Distribution made under this Section 9.2.B shall
be in full or partial liquidation, as the case may be, of such Partner's
Partnership Interest, and the Partnership shall cancel that number of such
Partner's Units (including fractions of Units) as necessary to cause such
Partner to have a Percentage Interest that corresponds with the percentage of
such Partner's distributive share of the Partnership's net assets remaining
after the Distribution, which shall equal the quotient of (x) (I) such Partner's
Percentage Interest immediately prior to the Distribution multiplied by the
"Common Net Worth of the Partnership" at such time (which shall equal the amount
that would be Distributed to the Partners pursuant to Section 9.3(iv) if the
Partnership were liquidated at such time) minus (II) the net fair market value
of the Distribution, divided by (y) (1) the Common Net Worth of the Partnership
immediately prior to the Distribution (determined in the manner provided in
clause (x) (I) of this Section 9.2.B) minus (2) the sum of the net fair market
value of the Distribution plus any other Distributions made simultaneously
therewith. All Liquidated Units shall be cancelled upon receipt by the
Partnership.
Section 9.3 Distributions On Dissolution.
Except as otherwise expressly provided herein for the continuation of the
business of the Partnership, upon the dissolution of the Partnership, the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets and satisfying the claims of its
creditors and the Partners; and the Partners, including the General Partner,
shall not take any action that is inconsistent with, or not necessary to or
appropriate for, the winding up of the Partnership's business and affairs. To
the extent not inconsistent with the foregoing, all covenants and obligations in
this Agreement shall continue in full force and effect until such time as all
Property has been distributed pursuant to this Section 9.3 and the Partnership
is terminated in accordance with the Uniform Act. The General Partner (or
liquidating agent or trustee, as the case may be) shall be responsible for
overseeing the winding up and dissolution of the Partnership, shall take full
account of the Partnership's liabilities and Property, shall cause the Property
to be liquidated as promptly as is consistent with obtaining the fair market
value thereof, and shall cause the proceeds therefrom, to the extent sufficient
therefor, to be applied and Distributed in the following order and priority:
(i) First, to creditors of the Partnership in satisfaction of
liabilities of the Partnership (whether by payment or the making of
reasonable provision for payment thereof), which may include the setting
up of such reserves as the General Partner (or liquidating agent or
trustee, as the case may be), reasonably may
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deem necessary for any obligations or contingent liabilities of the
Partnership; provided that (a) any such reserves shall be held by the
General Partner (liquidating agent or trustee, as the case may be), for
such period as the General Partner (liquidating agent or trustee, as the
case may be), shall deem advisable for the purpose of applying such
reserves to the payment of such liabilities or obligations as they become
due and (b) at the expiration of such period, the balance of such
reserves, if any, shall be distributed as hereinafter provided in this
Section 9.3;
(ii) Next, to all Partners who made loans, if any, to the Partnership
or who are otherwise creditors of the Partnership (including any liability
that the Partnership may have to a Partner under Section 11.4), in payment
of the unpaid principal of and then accrued interest on such loans, in
proportion to the total amount of principal and interest payable on such
loans, such distributions being treated first as in payment of accrued
interest on such loans and next as in payment of principal on such loans;
(iii) Next, to Partners owning Preferred Equity, in proportion to their
Undistributed Preferred Equity, as defined in Section 9.1.A(1)(iv), until
such Undistributed Preferred Equity plus a cumulative annual return
thereon of seven percent (7%), compounded semiannually, has been fully
Distributed; and
(iv) Thereafter, to the Partners in proportion to their respective
positive Capital Account balances, after giving effect to all Capital
Contributions, Distributions and allocations for all periods (including
the period or periods during which the dissolution and winding up occurs).
Section 9.4 Distributions of Certain In-Kind Property.
A. General. Except as otherwise provided in Section 9.2.B, if any Property
(other than cash) shall be Distributed in-kind, such Property shall be
Distributed to the Partners in the same proportions as they would have been
entitled to cash Distributions if (i) such Property had been sold for cash by
the Partnership at its fair market value on the date of Distribution; (ii) any
gain or loss that would have been realized by the Partnership from such sale
were allocated to the Partners in accordance with Article IX hereof, as
applicable; and (iii) the cash proceeds were Distributed to the Partners in
accordance with Section 9.3 hereof as applicable.
B. Regulatory Restrictions. Notwithstanding anything to the contrary
contained elsewhere in this Agreement, the General Partner
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shall not Distribute Property to any Limited Partner if the Distribution would
cause such Limited Partner or the Partnership to be in violation of any law,
ruling or regulation applicable to such Limited Partner or the Partnership. In
the event a Limited Partner shall, in the opinion of counsel reasonably
acceptable to the General Partner (which may be a qualified internal counsel),
determine that any Distribution would more likely than not cause such Limited
Partner or the Partnership to be in violation of any law, ruling or regulation,
such Limited Partner shall deliver to the General Partner a notice to such
effect within thirty (30) days from the date the Limited Partner learns of the
proposed Distribution. In any such case, the General Partner shall use
reasonable efforts to cause an allocable portion of such Property being
Distributed (and only such allocable portion of such Property) to be sold to a
third party, who may be another Partner, for the best consideration available
under the circumstances and to Distribute the cash proceeds thereof to such
affected Limited Partner. In the event such a sale cannot be achieved for the
best consideration available under the circumstances and within a reasonable
time period following the proposed Distribution, the obligation of the General
Partner shall be extinguished by establishing an escrow account in the name and
for the benefit of any affected Limited Partners into which shall be deposited
such Property, which account shall be liquidated at such time as a sale can be
accomplished. Property held in such escrow account shall continue to earn
dividends, interest or other income, as the case may be, and to carry all rights
attributable to such Property (which rights the General Partner may continue to
exercise to the extent that the affected Limited Partners are prohibited from
doing so), and shall be deemed for all purposes of this Agreement to have been
Distributed to the Limited Partner or Limited Partners to whom, and at such time
as, such Property would have been Distributed but for this Section 9.4.B.
Section 9.5 Changes in Percentage Interest.
If, as a result of the admission of additional Limited Partners or a
transfer of Units by Partners, the Percentage Interests of the Partners change
at any time other than on the last day of a Partnership taxable year, there
shall be an interim closing of the books of the Partnership as of the last day
of the calendar month preceding the calendar month in which the change occurs,
and allocations to newly admitted Partners shall be made on a monthly basis,
unless the Partnership is required by the Code and applicable Treasury
Regulations to make allocations on some other basis. The Partners' respective
shares of all items referred to in this Article IX for the taxable year of the
change shall be determined as follows:
(i) All items taken into account for the period of the taxable year
prior to the interim closing of the books shall be allocated as provided
by the terms of this
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Article IX, as applicable, using the Percentage Interests applicable prior
to the change whenever an allocation in accordance with Percentage
Interests is required; and
(ii) All items taken into account for the period of the taxable year
after the interim closing of the books shall be allocated as provided by
the terms of this Article IX using the Percentage Interests reflected on
the schedule listing the newly admitted additional Limited Partners
applicable after the change, whenever an allocation in accordance with
Percentage Interests is required.
Section 9.6 Withheld Tax From Distributions Among Limited
Partners.
A. Prior to making any Distribution, the General Partner may request from
any Partner a certification, affidavit or other evidence that such Partner is
not a foreign person for purposes of Code sections 1445 and 1446. In the event
such Partner does not provide such certification, affidavit or other evidence in
form and content satisfactory to the General Partner within 30 days after
request by the General Partner, the General Partner may assume that such Partner
is a foreign person.
B. If the Partnership is required to withhold and remit any federal,
state, foreign or local income taxes levied on all or part of a Partner's
allocable share of net income and gains, such withholdings by the Partnership
shall be treated as a Distribution to the Partner for whom such withholdings are
made and shall proportionately reduce the amount of Distributions to be paid
directly to such Partner. If the General Partner reasonably determines that the
Partnership lacks the funds to make any such withholding, the Partner for whom
such withholding is to be made shall make Capital Contributions of cash in the
amount of such withholding liability within ten (10) days after being so
notified by the Partnership. Should a Partner fail to timely make any such
Capital Contributions, such Partner shall be in default and shall indemnify and
hold the Partnership and the other Partners harmless for any costs, penalties,
payments or damages incurred by the Partnership or the other Partners as a
result of such failure, and such Partner shall pay the Partnership interest in
respect of any disbursements by the Partnership as a result of such Partner
failing to timely make the Capital Contributions required by this Section 9.6.B
at the lower of eighteen percent (18%) per annum, compounded monthly, or the
highest rate of interest allowed by applicable law, and any such interest
payments shall not be deemed to be Capital Contributions for any purpose of this
Agreement. The Partnership shall have the authority, and shall exercise such
authority, to apply any Distributions to which such defaulting Partner would
otherwise be entitled towards the satisfaction of the
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liabilities incurred by such Partner under this Section 9.6.B to
the Partnership.
Section 9.7 Adjustments to IronBrand's Forfeitable Percentage Interest.
A. IronBrand shall forfeit portions of its Forfeitable Percentage Interest
(less, in the event of the dilution of IronBrand's Percentage Interest pursuant
to Section 3.3.F or Section 9.12.C, the amount such Percentage Interest would be
reduced had such dilution occurred on the date hereof) and such Units (including
fractional Units) representing such forfeited portions of its Forfeitable
Percentage Interest according to this Section 9.7 depending upon the Pool
Balance and the Class B Stated Amount attained in the applicable time frames
provided in this Section 9.7. Unless modified pursuant to Section 9.7.B below,
the determination under Section 9.7.C as to whether the various Pool Balance
levels have been attained shall take place as of the end of the 48th month after
the Closing Date.
B. Forfeitures of portions of IronBrand's Forfeitable Percentage Interest
attributable to the failure of FUNB to provide, or have provided, certain
additional Class B Certificate financing shall be as follows:
(i) (a) If, by the end of the 18th month after the Closing Date,
FUNB has not agreed to increase the Class B Stated Amount to forty million
dollars ($40,000,000), then IronBrand shall forfeit 53.3334% of its
Forfeitable Percentage Interest (or, stated differently, a forfeited
Initial Percentage Interest of 4.08122%, assuming no dilution of
IronBrand's Percentage Interest pursuant to Section 3.3.F or Section
9.12.C).
(b) If IronBrand is not required to forfeit a portion of its
Forfeitable Percentage Interest pursuant to Section 9.7.B(i)(a) above,
then the determinations under Section 9.7.C as to whether various Pool
Balance levels have been attained shall take place at the end of the 60th
month after the Closing Date.
(ii) (a) If, by the end of the 30th month after the Closing Date, FUNB
has not agreed to increase the Class B Stated Amount to fifty million
dollars ($50,000,000) and IronBrand is not required to forfeit a portion
of its Percentage Interest pursuant to Section 9.7.B(i)(a), then IronBrand
shall forfeit 26.6667% of its Forfeitable Percentage Interest (or, stated
differently, a forfeited Initial Percentage Interest of 2.0406%, assuming
no dilution of IronBrand's Percentage Interest pursuant to Section 3.3.F
or Section 9.12.C). It is the intent of this clause (ii)(a) and the
following clause (ii)(b) that
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if FUNB fails to increase the Class B Stated Amount to forty million
dollars ($40,000,000) by the end of the 18th month after the Closing Date,
such clauses shall not cause a reversal of the forfeiture of that portion
of IronBrand's Forfeitable Percentage Interest effected by
Section 9.7.B(i)(a).
(b) If IronBrand is not required to forfeit a portion of its
Forfeitable Percentage Interest pursuant to Section 9.7.B(i)(a) or Section
9.7.B(ii)(a) above, then the determinations under Section 9.7.C as to
whether various Pool Balance levels have been attained shall take place at
the end of the 72nd month after the Closing Date.
(iii) After 30 months following the Closing Date, the application of
this Section 9.7.B will have caused IronBrand to have had an Initial
Percentage Interest of either 10.203%, 8.1624% or 6.1218% (assuming no
dilution of IronBrand's Percentage Interest pursuant to Section
3.3.F or Section 9.12.C).
C. Forfeitures of portions of IronBrand's Forfeitable Percentage Interest
attributable to the failure of the Partnership or its Subsidiaries to attain
certain Pool Balance levels shall be as follows:
(i) If at no time within the applicable time frame provided in this
Section 9.7 the Pool Balance equals or exceeds eighty-three million
dollars ($83,000,000), then IronBrand shall forfeit one hundred percent
(100%) of its Forfeitable Percentage Interest.
(ii) If at no time within the applicable time frame provided in this
Section 9.7 the Pool Balance equals or exceeds one hundred sixty-five
million dollars ($165,000,000) and Section 9.7.C(i) does not apply, then
IronBrand shall forfeit such portion of its Forfeitable Percentage
Interest remaining after the adjustments pursuant to Section 9.7.B have
been made to cause it to have a Forfeitable Percentage Interest equal to
twenty percent (20%) of what it otherwise would be if not for the
application of Section 9.7.B and, other than this Paragraph (ii), this
Section 9.7.C (i.e., a 1.5305% Initial Percentage Interest, assuming no
dilution of IronBrand's Percentage Interest pursuant to Section 3.3.F or
Section 9.12.C).
(iii) If (a) at no time within the applicable time frame provided in
this Section 9.7 the Pool Balance equals or exceeds two hundred
seventy-five million dollars ($275,000,000) and (b) none of the preceding
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subparagraphs of this Section 9.7.C apply, then IronBrand shall forfeit
that portion, if any, of its remaining Forfeitable Percentage Interest to
cause it to have a Forfeitable Percentage Interest equal to 46.6666% of
what it otherwise would be if not for the application of Section 9.7.B
and, other than this Paragraph (iii), this Section 9.7.C (i.e., a 3.5710%
Initial Percentage Interest, assuming no dilution of IronBrand's
Percentage Interest pursuant to Section 3.3.F or Section 9.12.C).
(iv) If (a) at no time within the applicable time frame provided in
this Section 9.7, the level of Pool Balance equals or exceeds three
hundred ninety million dollars ($390,000,000) and (b) none of the
preceding subparagraphs of this Section 9.7.C apply, then IronBrand shall
forfeit that portion, if any, of its remaining Forfeitable Percentage
Interest to cause it to have a Forfeitable Percentage Interest equal to
73.3333% of what it otherwise would be if not for the application of
Section 9.7.B and, other than this Paragraph (iv), this Section 9.7.C
(i.e., a 5.6116% Initial Percentage Interest, assuming no dilution of
IronBrand's Percentage Interest pursuant to Section 3.3.F or Section
9.12.C).
D. The Pool Balance level for purposes of Section 9.7.C above shall be
deemed to be at least equal to the sum of (i) the aggregate commitments for
financing offered to the Trust (as such term is defined in Appendix A) in the
form of Class A Certificates (as such term is defined in Appendix A) and Class B
Certificates on terms that are competitive with similar forms of financings in
the market place, plus (ii) the Class C Certificates financing commitment
(hereinafter referred to as the "Class C Stated Amount"). The Class C Stated
Amount shall be at least equal to (a) five million dollars ($5,000,000) if the
Class B Stated Amount is less than forty million dollars ($40,000,000); (b) six
million six hundred eighty thousand dollars ($6,680,000) by the end of the 18th
month after the Closing Date if the Class B Stated Amount is forty million
dollars ($40,000,000) or more but less than fifty million dollars ($50,000,000)
as of such time; (c) eight million three hundred forty thousand dollars
($8,340,000) by the end of the 30th month after the Closing Date if the Class B
Stated Amount is equal to fifty million dollars ($50,000,000) or more but less
than seventy-five million dollars ($75,000,000) as of such time; (d) twelve
million five hundred ten thousand dollars ($12,510,000) if the Class B Stated
Amount is equal to seventy-five million dollars ($75,000,000) or more but less
than one hundred million dollars ($100,000,000); (e) sixteen million, six
hundred eighty thousand dollars ($16,680,000) if the Class B Stated Amount is at
least equal to one hundred million dollars ($100,000,000); and (f) with respect
to any incremental increase of Class B Stated Amounts above fifty million
dollars ($50,000,000), other than an
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amount specified in this Section 9.7.D, 16.6667% of the Class B Stated Amount.
E. Notwithstanding anything in this Agreement to the contrary, any
forfeitures of IronBrand's Forfeitable Percentage Interest (and the adjustments
to the allocations of income, gain, loss, deduction and credit otherwise
prescribed by this Agreement relative to such forfeitures) shall not become
effective until the day after the end of the Vesting Period or immediately prior
to the consummation of a Sale Transaction; and any portion of IronBrand's
Percentage Interest that would otherwise be forfeited hereunder shall be applied
first towards the increase of IronBrand's Percentage Interest attributable to
the vesting of Bonus Units pursuant to Section 9.12. Moreover, if the
Partnership or its Subsidiaries fail either (i) to provide aggregate commitments
for the level of Class C Certificate financing set forth in the last sentence of
Section 9.7.D or (ii) accept any offer by FUNB to provide additional Class B
Certificate financing in accordance with the terms therefor set forth in Section
9.7.C and the Certificate Purchase Agreement, dated as of December 8, 1994,
among NAFCO Funding Trust, the Partnership, as initial administrator, and FUNB,
none of IronBrand's Forfeitable Percentage Interest shall be forfeitable
hereunder.
F. Upon either the closing of the redemption of IronBrand's Partnership
Interest pursuant to Section 11.4 or the consummation of a Sale Transaction (as
described in Section 11.6.A, irrespective of whether such Sale Transaction
occurred in response to a Put Notice from IronBrand or otherwise), the continued
application of the forfeiture provisions of Section 9.7.C shall lapse; and the
forfeiture provisions of Section 9.7.B (except in the case of a Sale Transaction
described in Section 11.6.A(i)) shall be effected as described below in this
Section 9.7.F.
(i) In the case of a Sale Transaction, other than one described in
Section 11.6.A(i), the General Partner shall provide IronBrand in writing
at least sixty (60) days prior to the consummation of such Sale
Transaction with the essential terms thereof, including copies of all
drafts of documents associated with such Sale Transaction and, with
respect to a Sale Transaction described in Section 11.6.A(ii) or (iii),
IronBrand shall be granted the right and full opportunity as of such time
to conduct whatever reasonable due diligence it determines to be necessary
or appropriate with respect to the prospective purchaser. If, no later
than thirty (30) days prior to the consummation of the redemption or Sale
Transaction referenced above in this Section 9.7.F and prior to the
applicable time frame provided in this Section 9.7, FUNB by written
notice, (a) agrees, in its sole discretion, to increase the Class B Stated
Amount and to extend the Scheduled Amortization Commencement Date (as
defined in
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Appendix A) with respect to all Class B Certificates to a date no earlier
than three (3) years from the effective date of such increase in the Class
B Stated Amount, and (b) agrees to waive the application of the provisions
of Section 7.2 of the Certificate Purchase Agreement (as defined in
Appendix A), then IronBrand shall be vested with the portion of the
Percentage Interest associated with the aggregate Class B Stated Amount
(inclusive of the amount of increase contained in such offer), and the
forfeiture provisions of Sections 9.7.C shall no longer apply with respect
to the remaining nonforfeited, forfeitable Units of IronBrand. To
illustrate the possible application of this Section 9.7.F(i), if a Sale
Transaction occurs in the 14th month after the Closing Date and FUNB
agrees to increase the Class B Stated Amount to forty million dollars
($40,000,000), IronBrand's vested Forfeitable Percentage Interest
(assuming no dilution of IronBrand's Percentage Interest pursuant to
Section 3.3.F or Section 9.12.C) would be 5.6116%, and if FUNB agrees to
increase the Class B Stated Amount to fifty million dollars ($50,000,000),
IronBrand's vested Forfeitable Percentage Interest would be 7.6522%
(assuming no dilution of IronBrand's Percentage Interest pursuant to
Section 3.3.F or Section 9.12.C); but if FUNB had not increased its Class
B Stated Amount to forty million dollars ($40,000,000) by the end of the
18th month after the Closing Date, then IronBrand's vested Forfeitable
Percentage Interest would be 3.5710% (assuming no dilution of IronBrand's
Percentage Interest pursuant to Section 3.3.F or Section 9.12.C).
(ii) If FUNB fails to increase the Class B Stated Amount within the
time period and as otherwise provided in Section 9.7.F(i), then IronBrand
shall forfeit that portion of its Forfeitable Percentage Interest
associated with the levels of Class B Stated Amount which FUNB has failed
or declined to commit. To illustrate the possible application of this
Section 9.7.F(ii), if a Sale Transaction occurs in the 14th month after
the Closing Date and FUNB fails to increase the Class B Stated Amount and
otherwise comply with the conditions and requirements of Section 9.7.F(i),
IronBrand would forfeit 53.3334% of its Forfeitable Percentage Interest,
which, assuming no dilution pursuant to Section 3.3.F or Section 9.12.C,
would cause it to have a Forfeitable Percentage Interest of 3.5710%
(assuming no dilution of IronBrand's Percentage Interest pursuant to
Section 3.3.F or Section 9.12.C).
G. Exhibit B attached hereto illustrates the application of the forfeiture
provisions set forth in this Section 9.7. In the
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event of any conflict between the provisions of this Section 9.7 and the
illustration set forth in Exhibit B, the provisions of this Section 9.7 shall
control.
Section 9.8 Consequences of Forfeiture.
A. If IronBrand's Percentage Interest is reduced as a result of a
forfeiture pursuant to Section 9.7, within ninety (90) days of such reduction
IronBrand shall contribute to the capital of the Partnership that portion of any
prior Distributions attributable to the forfeited portion of its Forfeitable
Percentage Interest (excluding Preferred Equity) and, unless the election and
full payment described in the following sentence is made, the Partnership shall
Distribute to IronBrand an amount equal to that portion of IronBrand's Capital
Contribution attributable to such forfeited portion (or the portion thereof not
timely paid pursuant to the alternative provided in the next sentence). In lieu
of the payment by the Partnership to IronBrand described in the preceding
sentence, the General Partner and certain Limited Partners designated by the
General Partner may elect to purchase the forfeited portion of IronBrand's
Forfeitable Percentage Interest for the same amount that the Partnership would
have paid to IronBrand pursuant to the preceding sentence. If, however, the
alternative provided in the preceding sentence is not undertaken or satisfied,
then each Partner other than IronBrand shall contribute to the Partnership his
pro rata share of the amount Distributed to IronBrand by the Partnership with
respect to the forfeited portion of IronBrand's Forfeitable Percentage Interest
pursuant to this 9.8.A, which shall be in proportion to the ratio that such
Partner's Percentage Interest on the date of such Distribution bears to the
total Percentage Interests of all Partners other than IronBrand on such date. In
either case, the Units attendant to the forfeited portion of IronBrand's
Percentage Interest shall be cancelled by the Partnership and an equal number of
new Units shall be issued to the other Partners in the same proportions as the
additional Percentage Interest each such Partner receives as a result of the
forfeiture. The intent of Section 9.7 and this Section 9.8.A is to realign the
Common Capital Account balances and Units of the Partners after the forfeiture
of a portion of IronBrand's Percentage Interest pursuant to Section 9.7 to what
the respective balances of such Common Capital Account balances and Units
otherwise would be if such forfeited portion of IronBrand's Percentage Interest
had been issued to the other Partners on the date of such Distribution instead
of to IronBrand and shall be interpreted consistent with such intent.
B. For purposes of Section 9.7 and this Section 9.8, any forfeiture and
consequences thereof shall not relate to IronBrand's Preferred Equity.
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Section 9.9 Limitations on Distributions.
Notwithstanding any provision to the contrary contained in this Agreement,
the Partnership shall not make a Distribution to any Partner if such
Distribution would violate section 17-607 of the Uniform Act.
Section 9.10 General Partner's Discretionary Powers;
Allocation Savings Provisions.
A. The allocation method set forth in Article IX of this Agreement is
intended to allocate Net Income and Net Loss (and the items thereof) to the
Partners in accordance with their economic interests in the Partnership while
complying with the requirements of Subchapter K of Chapter 1 of Subtitle A of
the Code (particularly section 704 thereof) and the Treasury Regulations
promulgated thereunder. If the General Partner determines, upon the advice of
the Accountants, that the allocation of Net Income or Net Loss (or items thereof
specifically allocated pursuant to Section 9.1.B) is made in such manner as does
not satisfy the requirements of Code section 704 or the Treasury Regulations
thereunder or comply with any other provisions of the Code and Treasury
Regulations, then, notwithstanding anything to the contrary contained in Article
IX hereof, Net Income and Net Loss (or items thereof) shall be reallocated in
such manner as the General Partner in its reasonable, good faith discretion
determines to be required so as to reflect properly the foregoing premises of
this Section 9.10.A, and this Agreement shall thereby be amended to reflect any
such change in the method of allocating Net Income or Net Loss (or items
thereof); provided, however, that any change in the method of allocating Net
Income or Net Loss (or items thereof specifically allocated pursuant to Section
9.1.B) shall be made in good faith and shall not materially alter the economic
arrangement of the Partners or unfairly discriminate against any Partner.
B. In the event the General Partner exercises its authority under Section
9.10.A above, then Net Income and Net Loss (and items thereof) shall in the
future be allocated in such manner as the General Partner in its reasonable,
good faith discretion determines is needed to cause the Capital Account balances
of the Partners to equal what they otherwise would have been had such authority
not been exercised. Such method of allocation shall be executed in a fair and
reasonable manner that does not unfairly discriminate against any Partner.
C. In addition, the Partners hereby express their intent that the
provisions of this Article IX are intended to deliver the economic results
illustrated in Exhibit C, and that such provisions shall be interpreted
consistently with such intent.
D. If the allocations required by Sections 9.1.B(2) and 9.1.B(4) distort
the intended economic arrangement of the Partners
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set forth in this Agreement, as fairly and reasonably interpreted by the General
Partner in light of the other provisions of Article IX and taking into account
future allocations to be made under Sections 9.1.B(2) and 9.1.B(4), then Net
Income and Net Loss (and the items thereof) shall in the future be allocated in
such manner as the General Partner in its good faith discretion determines shall
fairly and reasonably eliminate such distortion.
E. Whenever the General Partner exercises its authority pursuant to this
Section 9.10, the General Partner shall timely provide the Partners with written
notice thereof, explaining the reason therefor and the effect thereof.
Section 9.11 Additional Financing Terms.
Exhibit D attached hereto sets forth certain additional terms and
agreements in connection with commitments for additional Class B Certificate and
Class C Certificate financing, which terms and agreements are incorporated
herein by reference, as if fully set forth herein.
Section 9.12 Issuance of Bonus Units.
A. Bonus Units to be Issued to IronBrand During the Vesting Period.
1. Effective as of September 1, 1995, the Partnership shall issue such
number of Bonus Units (including fractional Units) to IronBrand as is necessary
to increase IronBrand's Percentage Interest from 10.203% to 15.3046%.
2. Effective as of January 1, 1996, the Partnership shall issue such
number of Bonus Units (including fractional Units) to IronBrand as is necessary
to increase IronBrand's Percentage Interest from 15.3046% to 35.7106%.
3. From time to time during the Vesting Period, including the occurrence
of a Sale Transaction as defined in Section 11.6.A, the General Partner (i) may
issue such additional Bonus Units (including fractional Units) to IronBrand or
cancel such Bonus Units (including fractional Units) previously issued to
IronBrand as necessary to cause the number of outstanding Bonus Units issued to
IronBrand to equal the General Partner's reasonable, good faith estimate of the
number of Bonus Units to which IronBrand will be vested by the end of the
Vesting Period as provided in Section 9.12.B hereof; (ii) may make such issuance
or cancellation effective as of any time during the Partnership fiscal year that
the General Partner takes such action or, if the General Partner takes such
action on or before April 15 of any fiscal year (provided, that April 15 is the
last day on which modifications to this Agreement may be made with respect to
the Partnership's prior fiscal year as contemplated by the principles of
Treasury Regula-
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tions section 1.761-1(c) (the "Section 1.761-1(c) Date"), otherwise such action
shall be taken no later than such Section 1.761-1(c) Date), the General Partner
may make such issuance or cancellation effective as of any time during the
preceding Partnership fiscal year in accordance with section 1.761-1(c) of the
Treasury Regulations. No adjustment, however, shall be made to the number of
outstanding Bonus Units issued to IronBrand by the General Partner under this
Section 9.12.A(2) without the General Partner first (x) having consulted with
IronBrand of its intention to make such an adjustment, (y) providing IronBrand
with such information that IronBrand may request in support of the General
Partner's proposed adjustment; and (iii) receiving IronBrand's written consent
to such action.
B. Vesting of Bonus Units. Under the circumstances described in this
Section 9.12.B, IronBrand shall be vested with, and the Partnership shall issue
such additional Bonus Units (including fractional Units) to IronBrand as may be
necessary for IronBrand to be vested with, the number of Bonus Units set forth
below:
1. As of September 1, 1995, IronBrand shall be vested with such number of
Bonus Units (including fractional Units) issued to it pursuant to Section
9.12.A(1) that represent a Percentage Interest of 5.1015%.
2. On the last day of the Vesting Period (the "Vesting Date"), IronBrand
shall be vested with such number of Bonus Units (including fractional Units)
that represent a Percentage Interest (determined without regard to that portion
of IronBrand's Percentage Interest derived by means other than the application
of this Section 9.12) equal to the MC/Referral Bonus Unit Percentage (as defined
in Section 9.12.B(3)(i)).
3. For purposes of this Section 9.12, the capitalized words and phrases
not otherwise defined in Article I shall have the following meanings:
(i) "MC/Referral Bonus Unit Percentage" means the product of (a) the
applicable MC Bonus Unit Percentage multiplied by (b) a fraction, the
numerator of which shall be the total Funded Referrals made through the
Vesting Date up to a total of 36,000 (thereby, preventing such fraction
from exceeding one) and the denominator shall be 36,000.
(ii) "MC/Bonus Unit Percentage" means that percentage determined by
applying the applicable formula under the column labeled "MC/Bonus Unit
Percentage" on Schedule B hereto as of the Vesting Date.
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C. Dilution of IronBrand's Percentage Interest. Notwithstanding anything
herein to the contrary, in the event additional Units are issued pursuant to
Section 3.3.F, IronBrand's Percentage Interest for all purposes under this
Agreement (but without causing any double counting of such dilution under any
other provision of this Agreement) shall be proportionately reduced by the
effect of such issuance, determined as if the Partnership had reserved such
number of Units as would be required to allow IronBrand to increase its
Percentage Interest from 10.203% to 49.995% on the date hereof (the "Reserved
Bonus Units"), and any Bonus Units issued to IronBrand under Section 9.12 shall
be deemed to be issued from such Reserved Bonus Units in the ratios that the
relative percentages in Section 9.12 bear to one another. By way of example, the
Bonus Units to be issued pursuant to Section 9.12.A(2) shall equal 51.28%
(20.406 (i.e., 35.7106 - 15.3046) / 39.792 (i.e., 49.995 - 10.203)) of such
Reserved Bonus Units. Any Units issued pursuant to Section 3.3.F shall be deemed
not to be issued from such Reserved Bonus Units.
Section 9.13 Consequences of Issuance and Cancellation of
Bonus Units.
A. If IronBrand's Percentage Interest is increased as a result of the
issuance to it of Bonus Units pursuant to Section 9.12, within ninety (90) days
of such increase, each of the other Partners, notwithstanding any other
provision in this Agreement to the contrary, shall contribute to the capital of
the Partnership such Partner's pro rata share of that portion of any prior
Distributions attributable to such increased portion of IronBrand's Percentage
Interest (excluding Preferred Equity), which shall be in proportion to the ratio
that such Partner's Percentage Interest on the date of such increase in
IronBrand's Percentage Interest bears to the total Percentage Interests of all
Partners other than IronBrand on such date. The intent of this Section 9.13 and
Sections 9.1, 9.2 and 9.12 is to realign the Common Capital Account balances of
the Partners after an increase in IronBrand's Percentage Interest pursuant to
Section 9.12 to what the respective balances of such Common Capital Account
balances otherwise would be if such increase in IronBrand's Percentage Interest
had occurred on the date of the formation of the Partnership and shall be
interpreted consistent with such intent.
B. If IronBrand's Percentage Interest is decreased as a result of the
cancellation pursuant to Section 9.12.A(3) of Bonus Units issued to it, then
within ninety (90) days of such decrease, IronBrand, notwithstanding any other
provision in this Agreement to the contrary, shall contribute to the capital of
the Partnership that portion of any prior Distributions attributable to such
decreased portion of IronBrand's Percentage Interest (excluding Preferred
Equity). The intent of this Section 9.13 and Sections 9.1, 9.2 and 9.12 is to
realign the Common Capital Account balances of the Partners after a decrease in
IronBrand's Percentage Interest
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pursuant to Section 9.12 to what the respective balances of such Common Capital
Account balances otherwise would be if such decrease in IronBrand's Percentage
Interest had occurred on the date such forfeited Bonus Units were issued (with
respect to each series of forfeited Bonus Units), unless the General Partner
reasonably determines that such adjustment shall be deemed to have occurred as
of a later date, and shall be interpreted consistent with such intent.
C. For purposes of Section 9.12 and this Section 9.13, any increase or
decrease, and the attendant consequences thereof, of IronBrand's Percentage
Interest shall not relate to any Partner's Preferred Equity.
Section 9.14 Vesting Upon Occurrence of Certain Put Events.
Upon the occurrence of a Put Event described in Section 11.5(i), (ii),
(iii), (iv) or (vi) before an Initial Public Offering and Section 11.5(i), (ii),
(iii) (other than in connection with an Initial Public Offering) or (iv) after
an Initial Public Offering, and the effect and consequences of such Put Event,
in either case, are not cured as provided in Section 11.6.H, IronBrand shall
immediately be vested with all Bonus Units that had not been cancelled under
Section 9.12 as of the time such Put Event occurred.
Section 9.15 IronBrand's Imputed Indirect Ownership in ACCH.
For all purposes of this Agreement, in determining IronBrand's Interest
(including the value thereof and all allocations of Net Income and Net Loss (or
items thereof) and Distributions to be made hereunder with respect to such
allocations thereto), the Partnership shall be deemed to own one hundred percent
(100%) of the ACCH Interests (as defined in the ACCH Agreement) issued by ACCH
other than a 1% ACCH Interest held by the General Partner and as may be issued
in accordance with Section 3.3.E of the ACCH Agreement.
ARTICLE X
Books and Records, Accounting, Tax Elections, Etc.
Section 10.1 Books and Records.
The General Partner shall keep or cause to be kept complete and accurate
books and records of the Partnership, its assets, liabilities, operations and
financial condition, including supporting documentation of transactions relating
to the conduct of the Partnership's business. The Partnership's books and
records (including all tax returns) shall be maintained in accordance with both
federal income tax accounting rules and GAAP (both consistently applied) and
shall be available at the principal office of the
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Partnership for examination and copying by any Partner or his duly authorized
representatives, at any reasonable time during normal business hours. The
General Partner shall maintain at the principal offices of the Partnership a
separate current register listing the names, addresses and business telephone
numbers of all Partners and all partners of ACCH, the number of Units and
Preferred Equity owned by each Limited Partner and all Transfers and other
information required to be set forth on the schedules hereto and to the ACCH
Agreement, or to be contained therein by law. Such registers will be in
alphabetical order, readily readable, and updated at least quarterly to reflect
changes with respect to the information reported therein. All Distributions of
cash and allocations of profits and losses by the Partnership to Partners shall
be made only to the Limited Partners listed on the register. Copies of the
Partnership register and the ACCH register will be available for inspection by
the Limited Partners. Upon request of a Limited Partner, the General Partner
will mail to such Limited Partner a copy of either or both of the registers
described above, within ten (10) days of such request. The purposes for which a
Limited Partner may request a copy of either or both of the registers include
matters relating to voting rights of the partners under this Agreement or the
ACCH Agreement, as the case may be, and the exercise of rights (to the extent
available) under federal proxy laws. If the General Partner neglects or refuses
to exhibit, produce or mail a copy of either or both of the registers as
requested, the General Partner shall be liable to any Limited Partner requesting
either or both of the registers for the costs, including reasonable attorneys'
fees, incurred by that Limited Partner for compelling the production of the
registers, and for actual damages suffered by any Limited Partner by reason of
such refusal or neglect; unless the General Partner has a reasonable basis to
believe that the actual purpose and reason for the requests for inspection or
for a copy of the registers is to secure such registers of Limited Partners or
other information for the purpose of selling or copies thereof, or of using the
same for a commercial purpose other than in the interest of the applicant as a
Limited Partner relative to the affairs of the Partnership. The General Partner
may require the Limited Partner requesting either or both of the registers to
represent that the register(s) is (are) not requested for a commercial purpose
unrelated to the Limited Partner's interest in the Partnership. The remedies
provided hereunder to Limited Partners requesting copies of the registers are in
addition to, and shall not in any way limit, other remedies specifically and
mandatorily available to Limited Partners under applicable law. The Partnership
will maintain such other books and records and will provide such other financial
or other statements as the General Partner deems advisable or as may be required
by this Agreement. In addition to the foregoing, any Partner may, at its option
and at its own expense, conduct audits of the books, records and accounts of the
Partnership and each of the Partnership's Subsidiaries from time to time. Audits
may be conducted by employees of any Partner, or by employees of an
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Affiliate of any Partner, or an auditor retained by the Partnership or such
Partner.
Section 10.2 Annual and Interim Reports.
Within ninety (90) days after the end of each fiscal year:
A. The General Partner shall cause each Partner to be furnished with
Audited Financial Statements prepared in accordance with the Partnership's (or
any Subsidiary's, as the case may be) methods of accounting and audited by the
Accountants (as evidenced by the auditor's report of the Accountants with
respect to such financial statements) in accordance with generally accepted
auditing standards, including the following:
(i) The balance sheet of the Partnership (and each of its
Subsidiaries) as of the last day of such fiscal year;
(ii) A statement of income or loss for the Partner-
ship (and each of its Subsidiaries) for such fiscal year;
(iii) A statement of each Partner's Capital Account balance and
changes therein (or changes in owner's equity, with respect to each of the
Partnership's Subsidiaries) for such fiscal year;
(iv) A statement of cash flow of the Partnership
(and each of its Subsidiaries) for such fiscal year;
B. The General Partner will also cause each Partner to be furnished with
the following:
(i) A statement of each Partner's Common Capital Account balance and
Adjusted Common Capital Account Balance and changes therein in respect of
such fiscal year;
(ii) For purposes of determining the number of Bonus Units to be
which Ironbrand is entitled under Section 9.12 and Schedule B hereto, a
statement of the Market Capitalization of the Combined Company, and the
amount thereof attributable to each of the Partnership and ACCH,
determined as of the last day of such fiscal year;
(iii) A statement by the General Partner of any transactions between
the Partnership (and each of its Subsidiaries) and the General Partner or
any of the General Partner's Affiliates, and any fees, commissions,
compensation or other benefits paid or accrued to the General Partner or
any of its Affiliates by or with respect to the Partnership (and any of
its Subsidiaries);
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(iv) A statement reconciling the differences in the financial
statements of the Partnership, and each of its Subsidiaries that are taxed
as a partnership for federal income tax purposes, if any, prepared in
accordance with GAAP and the financial statements prepared for such Entity
in accordance with federal income tax accounting rules; and
(v) Such other statements and reports of the Partnership and each of
its Subsidiaries as the General Partner determines are necessary or
appropriate for full, material disclosure of such Entity's financial
position, results of operations and changes of financial position for such
fiscal year.
C. Within thirty (30) days after the end of each month and at such time as
Distributions are made to the Partners pursuant to Section 9.3, the General
Partner shall cause each Partner to be furnished with unaudited financial
statements prepared in accordance with the Partnership's (or any Subsidiary's,
as the case may be) methods of accounting, with written certification thereof by
the Person responsible for preparing such financial statements, of the type
described in Section 10.2.A. as of the last day of such month or the date such
Distribution.
D. Before an Initial Public Offering, the General Partner shall prepare
and deliver (or have prepared and delivered) to the Partners annual budgets of
the Partnership as provided in Section 4.3.B and of ACCH as provided in Section
4.3.B of the ACCH Agreement, and each set of financial statements provided the
Limited Partners hereunder shall include a comparison of the actual to budgeted
financial results.
E. The General Partner shall (i) cause to be delivered to each Limited
Partner upon reasonable request such other information available to the General
Partner and reports relative to such information as shall be needed by such
Limited Partner to comply with any regulatory or governmental authority or
agency having jurisdiction over such Limited Partner or the Partnership, and
(ii) with respect to IronBrand, such information shall include the right of up
to three of IronBrand's representatives to attend, as observers, any meeting of
the Limited Partners of ACCH to the extent any meeting is held and the right to
receive all written consents of the Limited Partners of ACCH, setting forth the
action taken or to be taken by ACCH, before same shall become effective. Any
substantial costs incurred in connection with the production of the information
and reports described in Clause (i) of the preceding sentence shall be borne by
the Limited Partner or Limited Partners requesting same.
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Section 10.3 Bank Accounts.
The General Partner shall cause one or more bank accounts to be maintained
in the name of the Partnership in which shall be deposited all funds and
receipts of the Partnership. The General Partner shall designate the individual
or individuals upon whose signature or signatures withdrawals from such bank
accounts may be made.
Section 10.4 Accountants.
The Accountants for the Partnership shall be engaged by the General
Partner. The Accountants shall audit and certify all annual financial reports to
the Partnership in accordance with GAAP.
Section 10.5 Copies of this Agreement.
Upon the written request of any Limited Partner, the General Partner
shall, within 30 days after receipt of such request, distribute to the
requesting Limited Partner a copy of the Certificate and this Agreement.
Section 10.6 Tax Elections.
Except as provided in Section 10.7, all elections required or permitted to
be made by the Partnership under the Code shall be made by the General Partner
in a fair and equitable manner.
Section 10.7 Special Basis Adjustments.
If any part of the Interest of any Partner is Transferred, including a
Transfer of an Interest pursuant to Article VII, the Partnership may elect, in
the General Partner's sole discretion, pursuant to section 754 of the Code (or
corresponding provisions of succeeding law) to adjust the basis of the
Partnership's Property. Notwithstanding anything contained in Article IX, any
adjustments made pursuant to section 743 of the Code shall affect only the
successor-in-interest to the transferring Partner. Each Partner will furnish the
Partnership all information necessary to give effect to any such election.
Section 10.8 Fiscal Year and Accounting Method.
The fiscal year of the Partnership shall be the calendar year. The books
of the Partnership shall be kept on an accrual basis.
Section 10.9 Tax Matters Partner.
The General Partner shall be the "tax matters partner" of the Partnership
for federal income tax purposes. Pursuant to section 6223(c)(3) of the Code,
upon receipt of notice from the Internal
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Revenue Service of the beginning of an administrative proceeding with respect to
the Partnership, the General Partner, as the tax matters partner, agrees to
furnish the Internal Revenue Service with the names, addresses, and profits
interests of each of the Limited Partners. The General Partner agrees not to
enter into a settlement agreement pursuant to section 6224 of the Code without
providing at least 30 days' advance written notice of the terms of the
settlement to each of the Limited Partners. If the Partnership receives from the
Internal Revenue Service a Final Partnership Administration Adjustment pursuant
to Code section 6223, and if the General Partner determines to seek judicial
review of the Internal Revenue Service action pursuant to Code section 6226,
then the General Partner shall select the forum for judicial review. The General
Partner, as tax matters partner, shall (i) keep the other Partners fully advised
of the progress of any audit by the Internal Revenue Service ("IRS") or state
tax authority; (ii) promptly supply the other Partners with copies of any
written communications received from the IRS or any state tax authority relating
to any audit; and (iii) prior to submitting any materials relating to an audit
to the IRS, or other tax authority, provide a copy of such materials to the
Partners. In the event that the income tax returns of any of the Limited
Partners as they relate to any Partnership Interest herein shall be audited,
investigated, reviewed or questioned by the Internal Revenue Service, the
General Partner agrees to exert its best efforts to promptly supply all books,
records and financial information as may be necessary or required to
substantiate the entries on such tax return. Subject to the provisions of
Sections 5.3 and 5.4, the Partnership hereby indemnifies and holds harmless the
General Partner against any claim, loss, liability, action, or damage resulting
from its action or its failure to take any action as the "tax matters partner,"
provided that its action or failure to act was in accordance with Section 5.2
hereof.
Section 10.10 Tax Returns and Information.
The General Partner shall cause all tax returns that the Partnership is
required to file to be prepared and filed with the appropriate authorities
within the time prescribed by law (including extensions). The General Partner
shall use its best efforts to cause to be delivered to each Partner, within
sixty (60) days after the end of each fiscal year, information pertaining to the
Partnership and its operations for the previous fiscal year that is necessary
for the Partners to accurately prepare their respective federal and state income
tax returns for said fiscal year. In addition, the General Partner shall cause
to be delivered to each Partner promptly after the filing thereof: (i) a
confirmed copy of Internal Revenue Form 1065 and similar state tax form or forms
of the Partnership (and the federal and state income or information tax returns
filed by each of the Partnership's Subsidiaries) as filed for such fiscal year,
and (ii) a confirmed copy of Internal Revenue Schedule K-1 to such Form 1065 of
every Partner and similar
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state tax schedules or forms, each reporting a Partner's distributive share of
the Partnership's taxable income, and other tax items (and similar schedules or
forms, as applicable, with respect to each of the Partnership's Subsidiaries).
Section 10.11 Confidentiality.
Each Partner agrees, during the term of this Agreement and for a period of
two (2) years after the termination of the Partnership, to use reasonable
efforts to keep confidential all non-public information pertaining to the
Partnership and any Subsidiary of the Partnership that is provided to it by any
such parties and that the General Partner has requested in writing be kept
confidential, and shall not intentionally disclose such information to any
Person except (i) to the extent such information becomes generally available to
the public under circumstances that do not involve a breach of the terms hereof,
(ii) to the extent such information is generally disclosed to third parties by
the Partnership without restrictions on such third parties, (iii) to counsel,
auditors or accountants retained by the Partnership or any Partner, (iv) in
connection with any litigation to which the Partnership or any Partner is a
party, (v) to the extent required by any applicable statute, rule or regulation
or court order (including, by way of subpoena) or pursuant to the request of any
stock exchange or any regulatory or governmental authority or agency having
jurisdiction over the Partnership or such Partner, or (vi) with respect to
IronBrand, to employees, representatives and agents of IronBrand and its
Affiliates to the extent necessary to carry out the purposes of the Partnership
and to manage IronBrand's investment in the Partnership.
Section 10.12 Financial Statements of the Partnership to be
Prepared After an Initial Public Offering.
Notwithstanding anything in this Article X to the contrary, after an
Initial Public Offering, unless IronBrand otherwise requires, the Partnership
may (a) maintain its books and records solely in accordance with federal income
tax accounting rules as provided in this Agreement; (b) prepare and furnish to
the Partners interim financial statements under Section 10.2.C only at such
times as Distributions are made to the Partners pursuant to Sections 9.2 and
9.3; and (c) elect not to have formal, independent audits perform with respect
to its books of account.
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ARTICLE XI
IronBrand's Redemption Rights; The Partnership's Call Rights
Section 11.1 Put Option.
Notwithstanding anything herein to the contrary, on or after the
occurrence of a Put Event (as hereinafter defined) and prior to the consummation
of a Sale Transaction (as described in Section 11.6.A), IronBrand (or its
successors or assigns, as the case may be) can require the Partnership to redeem
its Partnership Interest. The procedures set forth in this Article XI shall
govern any such redemption.
Section 11.2 Notice.
IronBrand may exercise its put option under this Article XI by giving
written notice thereof (the "Put Notice") to the General Partner. Such Put
Notice shall obligate the Partnership to either redeem IronBrand's Partnership
Interest pursuant to Section 11.3 or, except with respect to the Put Event
described in Section 11.5(i), adopt a plan for a Sale Transaction (as defined in
Section 11.6), all in accordance with the terms of this Article XI.
Section 11.3 Redemption Price.
A. The redemption price for IronBrand's Partnership Interest (the
"Redemption Price") shall be an amount equal to the excess of (i) the product of
(I) the fractional equivalent of IronBrand's Percentage Interest of the
Partnership as of the day immediately preceding the date on which the applicable
Put Event occurs (the "Valuation Date"), determined (if the Valuation Date
occurs before such date and the Vesting Period had not earlier terminated as of
such date) as if the Vesting Period terminated on the Valuation Date, multiplied
by (II) the sum of (a) the fair market value of the Partnership as of the
Valuation Date (and, therefore, not being affected by the occurrence or the
threat of the occurrence of such Put Event) plus (for purposes of this Section
11.3.A) (b) the excess of the sum of all prior Special Tax Distributions made by
the Partnership to all Partners over the sum of all Capital Contributions made
by the Partners pursuant to Sections 9.8.A, 9.13.A and 9.13.B attributable to
such Special Tax Distributions; over (ii) the excess of the sum of all prior
Special Tax Distributions made to IronBrand over the sum of all Capital
Contributions made by IronBrand to the Partnership pursuant to Sections 9.8.A
and 9.13.B attributable to such Special Tax Distributions. For purposes of this
Section 11.3, the fair market value of the Partnership shall be an amount agreed
to between IronBrand and the General Partner as the price at which one hundred
percent (100%) of the Interests in the Partnership (i.e., one hundred percent
(100%) of the equity interests in the Partnership) or all of the Partnership
assets and liabilities (whichever transaction would produce the highest value)
would change hands between a willing buyer and
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a willing seller, neither being under any compulsion to buy or sell and both
having reasonable knowledge of and taking into consideration all relevant facts
about the Partnership as of the Valuation Date (including whether or not the
Partnership is then a publicly traded entity (and, if so, whether or not its
equity securities are then traded on a regulated securities exchange));
provided, that the Partnership's fair market value for this purpose shall be
based upon the full enterprise value of the Partnership and each of its
Subsidiaries as going concerns, preserving their respective goodwill and the
value of similar intangible assets, and shall not be discounted or otherwise
adversely affected by the fact that (i) only a minority interest in the
Partnership is proposed to be sold, (ii) such interest is that of a limited
partner with limited voting rights and not of a general partner (and any
interest the Partnership holds in any Subsidiary is that of a limited partner
with limited voting rights and not of a general partner or otherwise does not
entitle the Partnership to exercise control of such Subsidiary), (iii) there are
transfer and other restrictions with respect to either or both of the interest
proposed to be sold at the time of sale or thereafter or the interest the
Partnership holds of any Subsidiary, (iv) there is no market for the interest
proposed to be sold, or (v) there is outstanding Preferred Equity (the amount of
such fair market value as determined in accordance with this sentence shall be
referred to herein as the "Full Enterprise Value"). If written agreement as to
the Full Enterprise Value of the Partnership is not reached between IronBrand
and the General Partner within sixty (60) days following the receipt by the
General Partner of the Put Notice, then IronBrand and the General Partner each
shall appoint no later than ten (10) business days (the "selection period")
after the expiration of such sixty (60) day period a financial appraiser
(hereinafter referred to as a "Party-Appointed Appraiser") which shall be an
investment banking firm or other similar institution (other than IronBrand or
any of its Affiliates) qualified and experienced in the valuation of businesses
and interests in businesses such as that conducted by the Partnership and the
two Party-Appointed Appraisers shall then select an independent appraiser having
the qualifications and experience described above. All three of such appraisers
shall determine the Full Enterprise Value of the Partnership under the
assumptions and directives set forth in the first two sentences of this Section
11.3 and shall render their determinations of the Full Enterprise Value of the
Partnership in writing within thirty (30) days of the appointment. If either of
IronBrand or the General Partner fails or neglects to timely appoint a
Party-Appointed Appraiser, such party shall be deemed to have consented to the
selection of the other party's Party-Appointed Appraiser as the sole appraiser
for the determination of the Full Enterprise Value of the Partnership. In the
event that the two Party-Appointed Appraisers are unable to agree upon the
designation of an independent appraiser within ten (10) business days after the
date of the appointment of the Party-Appointed Appraisers, the independent
appraiser shall, at the request or of either IronBrand or the
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General Partner, be appointed by a court of competent jurisdiction. The Full
Enterprise Value of the Partnership shall be deemed to be the average of the two
closest determinations of the Full Enterprise Value of the Partnership made by
the three appraisers. The cost of the appraisals shall be borne equally by the
Partnership and IronBrand.
Section 11.4 Closing.
In the event the Partnership elects to redeem IronBrand's Partnership
Interest, the closing of such redemption under this Article XI shall take place
no later than twenty (20) days following the date the Redemption Price is
determined. The Redemption Price for IronBrand's Partnership Interest shall be
payable by wire transfer of immediately available funds at such closing.
Section 11.5 Put Events.
IronBrand's right to have the Partnership redeem its Partnership Interest
under this Article XI shall be exercisable upon the occurrence of any of the
following events or circumstances (each a "Put Event"):
(i) The Withdrawal of either National Auto Finance Corporation or
any other general partner of the Partnership or ACCH as a general partner
of the Partnership or ACCH or the addition of one or more other Persons as
general partner(s) of the Partnership or ACCH; provided, however, that if
immediately following such Withdrawal or addition(s) or both (A) any of
National Auto Finance Corporation, Gary L. Shapiro or Edgar Otto is in
control of the then general partner(s) of the Partnership taken as a group
(and thereafter remains in control of the general partner(s) of the
Partnership taken as a group) and (B) the Partnership or ACCH is not
dissolved, such Withdrawal or addition(s) shall not constitute a Put
Event;
(ii) Any "ownership change" with respect to National Auto Finance
Corporation (or any Affiliate thereof that is an Entity and is a general
partner of the Partnership, through which any of National Auto Finance
Corporation, Gary L. Shapiro or Edgar Otto exercises control, in whole or
in part, of the Partnership, and thereby, prevents the occurrence of a Put
Event under Section 11.5(i)) applying the principles of section 382 of the
Code, with the following modifications: (a) the "testing period" shall be
for five years rather than three years as provided in section 382(i)(1) of
the Code; (b) the principles of sections 382(l)(3)(A)(i) (family
attribution) and 382(l)(3)(B) (transfers by reason of death, gift,
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divorce, etc.) shall not apply; (iii) National Auto Finance Corporation
need not be a "loss corporation" referred to in section 382(g) and defined
in section 382(k) of the Code; (iv) the "5-percent shareholder" threshold
referred to in section 382(g) and defined in section 382(k) of the Code
shall not apply; (v) the exceptions to option attribution principles set
forth in section 1.382-2T(h)(4)(x) of the Treasury Regulations shall not
apply; and (vi) any changes of ownership with respect to Transfers for
which either Edgar Otto or Gary L. Shapiro is the Transferee shall be
disregarded for the purposes of this Section 11.5(ii);
(iii) Any merger, consolidation or other reorganization of or
involving the Partnership or ACCH, or any division of the Partnership's or
ACCH's assets or business into two or more Entities, whether as a
contribution of capital or an exchange (but not a sale for cash or an
exchange for Public Securities) of some or all of the Partnership's
Property or ACCH's assets to another Entity or otherwise, with respect to
which IronBrand did not give its prior written consent; provided, however,
that if the occurrence of any of such events has not directly or
indirectly resulted in a change in the business of the Partnership or ACCH
or the substantive terms of this Agreement, or otherwise materially
adversely affected IronBrand's interests in the Partnership or ACCH and
its rights hereunder or under the ACCH Agreement, whether economic or
otherwise, the occurrence of any of such events shall not constitute a Put
Event;
(iv) The Partnership being classified as either an association
taxable as a corporation or a publicly traded partnership (within the
meaning of section 7704 of the Code) for federal income tax purposes;
(v) The eighth (8th) anniversary of the Closing Date;
(vi) The Transfer of Partnership Interests to Persons (other than
Related Parties (which for purposes of this Section 11.5(vi) means any
Person which has one of the relationships to such specified Person set
forth in section 318 of the Code with respect to the application of the
rules for the constructive ownership of stock) of the Transferor or with
respect to which either The S Associates Limited Partnership, The O
Associates Limited Partnership or Stephen L. Gurba is the Transferee (each
an "Exempt Transferee)) that when added to all previous Transfers of
Partnership Interests to Persons (other than Exempt Transferees) represent
aggregate changes in ownership of more than the lesser of twenty-
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nine percent (29%) of the total Partnership Interests or causes The S
Associates Limited Partnership, The O Associates Limited Partnership and
Stephen L. Gurba (as a group) to have a Percentage Interest of less than
36.5% or, if on the date that such Transfer is to be made The S Associates
Limited Partnership, the O Associates Limited Partnership and Stephen L.
Gurba (as a group) have a Percentage Interest of less than 36.5%, causes a
further reduction of the total Percentage Interest of such group;
provided, however, that (a) this Section 11.5(vi) shall not apply to a
secondary public offering of equity interests in the Partnership (or
equity interests in any successor Entity to the Partnership formed for the
purpose of effecting such public offering) pursuant to which each Partner
is afforded an opportunity to sell a part of his equity interest (or
successor equity interest, as the case may be) on a basis that is pro rata
to the equity interests being sold by all other participating Partners,
(b) neither the Transfer of Partnership Interests by IronBrand or pursuant
to redemptions under the Plan shall be counted for purposes of the
calculation under this Section 11.5(vi) of the aggregate percentage of
changes in ownership of Partnership Interests and (c) the percentages of
ownership provided herein shall be adjusted in proportion to any dilution
of such applicable Partner's Interest by the issuance of additional Units
pursuant to Section 3.3.F or Section 9.12.C; or
(vii) The existence of a Regulatory Requirement that prevents or has
the effect of preventing IronBrand from owning its Partnership Interest
and no reasonable alternative, as contemplated by Section 12.11, exists or
is agreed to by the Partnership for IronBrand to continue to own such
Interest (or an Interest with equivalent rights and obligations) and
comply with such Regulatory Requirement.
Section 11.6 Sale Transaction; Cure Rights.
A. Upon receipt of a Put Notice from IronBrand, the General Partner shall
have the right (the "Sale Right"), but not the obligation, in its sole
discretion, to cause the Partnership to immediately take all necessary and
appropriate steps and actions to effect any of the following transactions (each
a "Sale Transaction") at any time during the existence of the Partnership,
including upon the receipt of a Put Notice from IronBrand:
(i) The orderly dissolution and liquidation of the Partnership's
Property, including the run-out in the ordinary course of business of any
Receivables (as
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defined in Appendix A) and other similar assets of the Partnership in the
manner provided in Section 9.3;
(ii) The sale or exchange of one hundred percent (100%) of the
Interests of the Partnership;
(iii) The sale or exchange of all or substantially all of the
Property of the Partnership; or
(iv) A public offering of Equity Securities in the Company and
pursuant to which (a) each Partner is afforded an opportunity to sell a
part of such Equity Securities in a secondary public offering on a basis
that is pro rata to the equity securities being sold by all other
participating Partners, (b) either (1) the Partnership (or successor
Entity to the Partnership, as the case may be) becomes a public Entity
registered under the Securities Exchange Act of 1934 (a "Public Entity")
and such Equity Securities (hereinafter referred to as "Public
Securities") are traded on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq-National Market (each a "Qualified Securities
Exchange") or (2) the net proceeds to the Partnership (or successor Entity
to the Partnership, as the case may be) resulting from such public
offering of Equity Securities equals or exceeds fifteen million dollars
($15,000,000), and (c) any such successor Entity shall have entered into
an agreement to assume the obligations of the Company set forth in Article
VI, which agreement shall be in such form, scope and substance that
IronBrand determines to be reasonably satisfactory;
followed, in the case of any of the transactions in clauses (i), (ii) and (iii)
of this Section 11.6.A, by the Distribution in accordance with the terms of this
Agreement to the Partners of the net consideration received by the Partnership
in connection with such Sale Transaction.
B. The General Partner shall, in exercising the Sale Right, pursue the
form of Sale Transaction that the General Partner deems most likely to yield the
greatest value to the Partners taking into account all relevant factors,
including factors relating to the risk of completing such form of Sale
Transaction and the realization and collection of the consideration to be
received thereunder; provided, however, that if part of the consideration to be
received by the Partnership in connection with a proposed Sale Transaction is in
a form other than cash or Public Securities, upon the Distribution to the
Partners of the net consideration resulting from such Sale Transaction in the
manner provided in Section 9.3, the General Partner shall cause the Partnership
to Distribute to IronBrand (in accordance with the terms of this Agreement) cash
or Public Securities in an amount equal to the product of (i) the
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fractional equivalent of IronBrand's Percentage Interest of the Partnership on
the Determination Date (as hereinafter defined) and (ii) the aggregate value of
the consideration received by and otherwise available to the Partnership or the
Partners (or any of their Affiliates) in connection with the Sale Transaction,
including the value of all securities (equity or debt), management agreements,
employment agreements and non-compete agreements (the "Aggregate Sale
Transaction Consideration"). For purposes of this Section 11.6.B, the Aggregate
Sale Transaction Consideration shall be an amount agreed to in writing between
IronBrand and the General Partner; provided, however, that if written agreement
as to the Aggregate Sale Transaction Consideration is not reached between
IronBrand and the General Partner within thirty (30) days of the date on which
the General Partner gives written notice to IronBrand of the need to determine
the Aggregate Sale Transaction Consideration for such purpose (the
"Determination Date"), the Aggregate Sale Transaction Consideration shall be
deemed to be the average of the two closest determinations of the Aggregate Sale
Transaction Consideration made by two Party-Appointed Appraisers and an
independent appraiser appointed in the manner described in Section 11.3.
Notwithstanding anything to the contrary in this Agreement, in the event of the
consummation of a Sale Transaction under the circumstances described in the
proviso of the immediately preceding sentence, the General Partner is hereby
authorized to make such a Distribution to IronBrand notwithstanding that such
Distribution may result in IronBrand receiving a form of Property in connection
with such Distribution that is different from the form of property received by
other Partners at such time.
C. The General Partner shall invoke the Sale Right by delivering written
notice thereof to each of the Partners not less than thirty (30) days after
receipt by the General Partner of the Put Notice; otherwise the Sale Right with
respect to such Put Option shall lapse and no longer be available to the
Partnership, and the Partnership shall then redeem IronBrand's Interest pursuant
to this Article XI without regard to this Section 11.6.
D. Notwithstanding anything to the contrary in this Agreement, once the
Sale Right is invoked, each Partner shall automatically and without further
action be deemed to have irrevocably granted to the General Partner an
irrevocable proxy and durable power of attorney, which proxy and power of
attorney shall be deemed coupled with an interest, further authorizing and
empowering the General Partner to pursue, negotiate, document and consummate a
Sale Transaction, including the power and authority to engage professional
service firms to assist in and facilitate a Sale Transaction, to bind the
Partnership and each Partner to any contracts and agreements it deems necessary
or appropriate to facilitate and consummate a Sale Transaction, and to vote the
Units of each Partner in favor of a Sale Transaction (the "Super Proxy");
provided, however, that the General Partner shall not (and nothing in this
Agreement shall be construed as granting the General
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Partner the right or authority to) enter into any contract or agreement or take
any action that would in any way contravene (or risk the contravention of) the
principles of Sections 3.5 and 5.3 with respect to the Limited Partners and the
protection against personal liability afforded the Limited Partners by this
Agreement and the Uniform Act.
E. In pursuing a Sale Transaction pursuant to this Section 11.6 and the
Super Proxy, the General Partner may engage one or more investment banker(s) to
facilitate and assist in effecting such transaction, unless it determines that
the engagement of an investment banker is unnecessary or not in the best
interests of the Partners.
F. Any agreement in connection with a proposed Sale Transaction that the
General Partner causes the Partnership to enter into shall contain terms and
conditions that are consistent with the requirements of this Section 11.6,
including appropriate termination rights permitting the Partnership to
unilaterally terminate any such agreement if the Termination Date hereinafter
defined shall occur prior to consummation of the transaction contemplated by
such agreement. Unless otherwise agreed in writing by the General Partner, the
Super Proxy shall terminate only upon the earlier of the actual consummation of
a Sale Transaction or the date that is one (1) year after the date of the Put
Notice (the "Termination Date").
G. If the General Partner has invoked the Sale Right, it shall use its
reasonable best efforts to effect a Sale Transaction on or before the
Termination Date; however, if a Sale Transaction is not fully consummated prior
to 11:00 p.m., eastern standard time, on the Termination Date, the Sale Right,
the Super Proxy and the power and authority of the General Partner to pursue and
consummate a Sale Transaction pursuant to this Section 11.6 shall terminate, and
unless IronBrand and the General Partner consent in writing to an extension of
the Termination Date, the Partnership shall then redeem IronBrand's Interest
pursuant to this Article XI without regard to this Section 11.6.
H. The Partnership shall have the right, for a period of thirty (30) days
following the receipt by the General Partner of the Put Notice, and provided
that the General Partner has not invoked the Sale Right, to cure each of the Put
Events described in Sections 11.5(i), (ii) and (vi), by effecting a transaction
(or transactions) that, within such thirty (30) day period, restores the
Partnership and its Partners to a condition that would not have given rise to
the Put Event.
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Section 11.7 Call Option.
A. Notwithstanding anything herein to the contrary, on or after the ninth
(9th) anniversary of the Closing Date, the Partnership (or its successors or
assigns, as the case may be) can call for redemption IronBrand's Partnership
Interest (the "Call Option"). The Partnership may exercise its Call Option under
this Article XI by giving written notice thereof (the "Call Notice") to
IronBrand.
B. The price to be paid by the Partnership for IronBrand's Partnership
Interest upon exercise of the Call Option (the "Call Price") shall be the same
as the Redemption Price, and shall be determined in the identical manner as the
determination of the Redemption Price under Section 11.3 hereof.
C. In the event the Partnership elects to call IronBrand's Partnership
Interest, the closing of such call under this Article XI shall take place no
later than twenty (20) days following the date the Call Price is determined. The
Call Price for IronBrand's Partnership Interest shall be payable by wire
transfer of immediately available funds at closing.
D. This Section 11.7 shall expire and terminate upon the consummation of a
Sale Transaction (as described in Section 11.6.A).
ARTICLE XII
General Provisions
Section 12.1 Restrictions on Transfer.
A. No assignment, sale, Transfer, exchange, or other disposition of all or
part of any Partnership Interest (including any Units) may be made except in
compliance with the then-applicable rules and regulations of any governmental
authority with jurisdiction over such disposition.
B. Any sale, exchange, or other Transfer in contravention of the
provisions of this Agreement shall be void and ineffectual and shall not bind or
be recognized by the Partnership.
Section 12.2 Appointment of Partnership and General Partner
as Attorney-in-Fact.
Each Limited Partner (including a Substitute or additional Limited
Partner) other than IronBrand or any Affiliate of IronBrand hereby irrevocably
appoints and empowers the Partnership and the General Partner, acting through
the Partnership's authorized officers and agents and the authorized officers and
agents of the General Partner, acting singly or collectively, in each case with
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full power of substitution, as his true and lawful attorney-in-fact, in his
name, place and stead, to execute, acknowledge, swear and deliver all
instruments and file all documents required to carry out the purposes of this
Agreement, including the following:
(i) the Certificate and any like documents required or permitted by
this Agreement or the laws of the State of Delaware;
(ii) any certificate of cancellation of the Certificate that may
be necessary upon the termination of the Partnership;
(iii) any amendments to this Agreement and to Schedule A, any
assignments necessary to reflect any change or Transfer of a Partner's
Interest, and any other amendments to this Agreement adopted in the manner
provided herein;
(iv) any business certificate, Certificate of Limited Partnership,
amendment thereto or restatement thereof, or other instrument or document
of any kind necessary to accomplish the business purposes and objectives
of the Partnership;
(v) any endorsements, transfer instructions, instruments, UCC
financing statements, continuation statements, and other documents
necessary or required to grant and perfect the security interest of a
financing institution in the Partnership; and
(vi) all other instruments that may be required or permitted by law
to be filed on behalf of the Partnership and that are not inconsistent
with this Agreement.
The Partnership and the General Partner shall take no action as an
attorney-in-fact for any Limited Partner which would in any way increase the
liability of any Limited Partner beyond the liability expressly set forth in
this Agreement or would diminish the substantive rights of any Limited Partner.
The appointment by each Limited Partner (other than IronBrand or any
Affiliate of IronBrand) of the Partnership and the General Partner, acting
through the Partnership's authorized officers and agent, and the authorized
officers and agents of the General Partner, acting singly or collectively, in
each case as attorneys-in-fact, shall be deemed to be a power coupled with an
interest in recognition of the fact that the Limited and General Partners under
this Agreement will be relying upon the power of the Partnership or the General
Partner and their officers, agents and principals to act as contemplated by this
Agreement in any filing or other action by them. This power of attorney shall
survive and not be affected
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by the subsequent death, disability, or incapacity of a Limited Partner or by
the Transfer by any Limited Partner (other than IronBrand or any Affiliate of
IronBrand) of any Interest in the Partnership.
Section 12.3 Notices.
Any notices (as distinguished from periodic reports) called for under this
Agreement shall be deemed adequately given only if in writing and (i) if mailed,
sent registered or certified mail, postage prepaid, to the party or parties for
whom such notices are intended, (ii) if hand delivered, receipt is acknowledged
by signature on a receipt form, and (iii) if telecopied, transmission is
acknowledged.
All such notices or periodic reports, in order to be effective, shall be
addressed or telecopied to the last address or telecopy number of record on the
Partnership books when given by the General Partner and intended for the other
Partners, and to the address or telecopy number of the Partnership when given by
the Limited Partners and intended for the General Partner or the Partnership.
Section 12.4 Word Meanings.
Common nouns and pronouns and any variations thereof shall be deemed to
refer to masculine, feminine, or neuter, singular or plural, as the identity of
the Person, Persons or other reference in the context requires. Any reference to
the Uniform Act, Code or other statutes, or other laws, or regulations
(including the Treasury Regulations), forms, certificates (including the
Certificate of Limited Partnership), exhibits or schedules shall include the
amendments, modifications, or replacements of such authorities, forms,
certificates, exhibits or schedules, or the sections and provisions concerned,
as may occur from time to time. Whenever used herein, the conjunction "or" shall
include both the conjunctive and disjunctive; the adjective "any" with respect
to a Person, act, thing or concept shall mean and refer to one or more of such
Persons, acts, things or concepts; and "including" shall be read to mean
"including without limitation." The illustration of a concept herein by
including examples thereof shall not be construed as a limitation of such
concept to the examples given. Unless otherwise indicated, "Articles,"
"Sections," "subsections," "paragraphs," "subparagraphs" and "clauses" mean and
refer to the numbered or lettered Articles, Sections, subsections, paragraphs,
subparagraphs and clauses of this Agreement. Words such as "herein," "hereby,"
"hereinafter," "hereof," "hereto" and "hereunder" refer to this Agreement as a
whole, unless the context requires otherwise.
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Section 12.5 Binding Provisions.
The covenants and agreements contained in this Agreement shall be binding
upon, and inure to the benefit of, the heirs, legal representatives, successors,
and assigns of the respective parties. This Agreement is made solely and
specifically between and for the benefit of the Partners, and their respective
successors and assigns subject to the express provisions hereof relating to
successors and assigns, and no other Person (including any creditor of the
Partnership), unless express provision is made herein to the contrary (such as
for FUNB under Section 9.7 and Section 5.10 with respect to the provisions of
which FUNB shall be a third party beneficiary of this Agreement), shall have any
rights, interests, or claims hereunder or be entitled to any benefits under or
on account of this Agreement as a third party beneficiary or otherwise,
including such third party not having the right to have any of the provisions of
this Agreement exercised or enforced on its behalf.
Section 12.6 Applicable Law.
The laws of the State of Delaware shall govern the validity of this
Agreement, the construction of its terms, and the interpretation of the rights
and duties of the Partners; provided, however, that the foregoing shall not be
construed so as to restrict in any manner the ability of the Partnership or the
General Partner to enforce any judgment obtained in any court of competent
jurisdiction.
Section 12.7 Counterparts.
This Agreement may be executed in one or more counterparts, and all
counterparts so executed shall constitute one agreement binding on all parties,
notwithstanding the fact that all the parties have not signed the original or
the same counterpart, except that no counterpart shall be binding unless signed
by the General Partner. Any counterpart signed by the party against whom
enforcement of this Agreement is sought shall be admissible into evidence as an
original of this Agreement to prove its contents.
Section 12.8 Separability of Provisions.
Each provision of this Agreement shall be considered separable, and (i) if
for any reason any provision is determined to be invalid and contrary to any
existing or future law, the invalidity shall not impair the operation of or
affect those portions of this Agreement which are valid, or (ii) if for any
reason any provision would cause the Limited Partners to be bound by the
obligations of the Partnership under the laws of the State of Delaware as they
may now or hereafter exist, that provision or provisions shall be deemed void
and of no effect.
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Section 12.9 Paragraph Titles.
Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any of its provisions.
Section 12.10 Incorporation by Reference.
All exhibits, schedules, instruments and other documents referred to
herein, and as the same may be amended from time to time, are by this reference
made a part hereof as though fully set forth herein.
Section 12.11 Regulatory Compliance by IronBrand.
In the event of any reasonable determination by IronBrand (or its
successors or assigns, as the case may be), that, by reason of any future
federal or state rule, regulation, guideline, order, interpretive release,
ruling, request or directive (having the force of law and where the failure to
comply therewith would be unlawful) (collectively, a "Regulatory Requirement"),
it is effectively restricted or prohibited from holding its Partnership Interest
(including any securities distributable to IronBrand in any merger,
reorganization, or exchange with respect to the Partnership, its assets or
Partnership Interests or as otherwise provided or contemplated in this
Agreement), and following IronBrand's exercise of its best efforts to overcome
such Regulatory Requirement, the Partnership and the General Partner and the
other Limited Partners shall take such action as may be deemed reasonably
necessary by IronBrand to permit IronBrand to comply with such Regulatory
Requirement; provided, however, that such action does not materially adversely
affect the Partnership or any of such Partners. Such action to be taken may
include the Partnership's authorization of one or more new classes of
Partnership Interests and the modification or amendment of this Agreement or any
other documents or instruments executed in connection with the Partnership
Interests held by IronBrand. IronBrand shall give written notice to the
Partnership and the General Partner of any such determination and the action or
actions necessary to comply with such Regulatory Requirement, and the
Partnership and the other Partners shall take all steps necessary to comply with
such determination as expeditiously as possible. The Partnership shall be
responsible for the costs and expenses associated with complying with such
Regulatory Requirements; provided, however, any extraordinary expenses in excess
of $5,000 per year incurred in connection with such compliance activities shall
be paid by IronBrand.
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Section 12.12 No Implied Waiver.
No failure on the part of the Partnership or any Partner to exercise, and
no delay or other forbearance in exercising, any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. No term or provision of this Agreement
shall be deemed waived and no breach excused unless such waiver or excused
breach is in writing and signed by the Partner against whom it is asserted.
The Partners or Partnership shall have the right at all times to enforce
the provisions of this Agreement in strict accordance with the terms hereof, and
no waiver of any provision of this Agreement shall constitute a waiver of any
other provision, nor shall any waiver constitute a continuing waiver unless
otherwise provided in writing.
Section 12.13 Partition.
The Partners hereby agree that no Partner or successor-in-interest shall
have the right, while this Agreement remains in effect, to have the Property of
the Partnership partitioned or to file a complaint or institute any proceeding
at law or in equity to have the Property of the Partnership partitioned. Each
Partner, on behalf of himself, his successors, representatives, heirs, and
assigns, hereby waives any right to partition. It is the intention of the
Partners that during the term of this Agreement the rights of the Partners and
their successors-in-interest, as among themselves, shall be governed by the
terms of this Agreement, and that the right of any Partner or
successors-in-interest to Transfer or otherwise dispose of his interest in the
Partnership's Properties shall be subject to the limitations and restrictions of
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their respective duly authorized officers, this Agreement under
seal.
Dated: April 15, 1996. GENERAL PARTNER:
NATIONAL AUTO FINANCE CORPORATION
By:________________________________ [SEAL]
Title:___________________________________
LIMITED PARTNERS:
IRONBRAND CAPITAL, LLC
By: FIRST UNION COMMERCIAL
CORPORATION, General Manager
By:__________________________ [SEAL]
Name:____________________________
Title:___________________________
NATIONAL AUTO FINANCE CORPORATION, as
attorney-in-fact for each Limited
Partner other than IronBrand Capi-
tal, LLC, The O Associates Limited
Partnership, The S Associates Limit-
ed Partnership and Stephen L. Gurba
By:________________________________ [SEAL]
Name:__________________________________
Title:_________________________________
THE O ASSOCIATES LIMITED PARTNERSHIP
By: LAKE ESTATES CORPORATION, a
Nevada corporation
By:__________________________ [SEAL]
Name: Edgar Otto
Title: President
<PAGE>
THE S ASSOCIATES LIMITED PARTNERSHIP
By: ADDISON PARK CORPORATION, a
Nevada corporation
By:__________________________ [SEAL]
Name: Gary L. Shapiro
Title: President
___________________________________________
Stephen L. Gurba
Edgar Otto, Gary L. Shapiro and
Stephen L. Gurba, solely with respect
to their individual obligations under
Section 2.6
___________________________________________
Edgar Otto
___________________________________________
Gary L. Shapiro
___________________________________________
Stephen L. Gurba
<PAGE>
ADOPTION AGREEMENT #003
NONSTANDARDIZED CODE SECTION 401(k) PROFIT SHARING PLAN
The undersigned, NATIONAL AUTO FINANCE CORPORATION ("Employer"), by executing
this Adoption Agreement, elects to become a participating Employer in the
EJREYNOLDS, INC. DEFINED CONTRIBUTION PROTOTYPE PLAN (BASIC PLAN DOCUMENT #01)
by adopting the accompanying Plan and Trust in full as if the Employer were a
signatory to that Agreement. The Employer makes the following elections granted
under the provisions of the Prototype Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is: (Choose (a)
or (b))
[X] (a) A discretionary Trustee. See Section 10.03[A] of the
Plan.
[ ] (b) A nondiscretionary Trustee. See Section 10.03[B] of
the Plan. [Note: The Employer may not elect Option
(b) if a Custodian executes the Adoption Agreement.]
1.03 PLAN. The name of the Plan as adopted by the Employer is: NATIONAL
AUTO FINANCE CORPORATION 401(K) PLAN.
1.07 EMPLOYEE. The following Employees are not eligible to participate in
the Plan: (Choose (a) or at least one of (b) through (g))
[ ] (a) No exclusions.
[ ] (b) Collective bargaining employees (as defined in Section
1.07 of the Plan). [Note: If the Employer excludes
union employees from the Plan, the Employer must be
able to provide evidence that retirement benefits were
the subject of good faith bargaining.]
[ ] (c) Nonresident aliens who do not receive any earned income
(as defined in Code ss.911(d)(2)) from the Employer
which constitutes United States source income (as
defined in Code ss.861(a)(3)).
[ ] (d) Commission Salesmen.
[ ] (e) Any Employee compensated on a salaried basis.
[ ] (f) Any Employee compensated on an hourly basis.
[X] (g) (Specify) Part-time employees who work less than thirty
(30) hours per week.
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Leased Employees. Any Leased Employee treated as an Employee under
Section 1.31 of the Plan, is: (Choose (h) or (i))
[X] (h) Not eligible to participate in the Plan.
[ ] (i) Eligible to participate in the Plan, unless excluded by
reason of an exclusion classification elected under
this Adoption Agreement Section 1.07.
Related Employers. If any member of the Employer's related group (as
defined in Section 1.30 of the Plan) executes a Participation
Agreement to this Adoption Agreement, such member's Employees are
eligible to participate in this Plan, unless excluded by reason of an
exclusion classification elected under this Adoption Agreement Section
1.07. In addition: (Choose (j) or (k))
[X] (j) No other related group member's Employees are eligible
to participate in the Plan.
[ ] (k) The following nonparticipating related group member's
Employees are eligible to participate in the Plan
unless excluded by reason of an exclusion
classification elected under this Adoption Agreement
Section 1.07: .
1.12 COMPENSATION.
Treatment of elective contributions. (Choose (a) or (b))
[X] (a) "Compensation" includes elective contributions made by
the Employer on the Employee's behalf.
[ ] (b) "Compensation" does not include elective contributions.
Modifications to Compensation definition. (Choose (c) or at least
one of (d) through (j))
[X] (c) No modifications other than as elected under Options
(a) or (b).
[ ] (d) The Plan excludes Compensation in excess of
$_______________________________________________.
[ ] (e) In lieu of the definition in Section 1.12 of the Plan,
Compensation means any earnings reportable as W-2 wages
for Federal income tax withholding purposes, subject to
any other election under this Adoption Agreement
Section 1.12.
[ ] (f) The Plan excludes bonuses.
[ ] (g) The Plan excludes overtime.
[ ] (h) The Plan excludes Commissions.
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[ ] (i) Compensation will not include Compensation from a
related employer (as defined in Section 1.30 of the
Plan) that has not executed a Participation Agreement
in this Plan unless, pursuant to Adoption Agreement
Section 1.07, the Employees of that related employer
are eligible to participate in this Plan.
[ ] (j) (Specify)____________________________________________.
If, for any Plan Year, the Plan uses permitted disparity in the
contribution or allocation formula elected under Article III, any
election of Options (f), (g), (h) or (j) is ineffective for such Plan
Year with respect to any Non highly Compensated Employee.
Special definition for matching contributions. "Compensation" for
purposes of any matching contribution formula under Article III means:
(Choose (k) or (l) only (applicable)
[X] (k) Compensation as defined in this Adoption Agreement
Section 1.12.
[ ] (l) (Specify)____________________________________________.
Special definition for salary reduction contributions. An Employee's
salary reduction agreement applies to his Compensation determined
prior to the reduction authorized by that salary reduction agreement,
with the following exceptions: (Choose (m) or at least one of (n) or
(o), if applicable)
[X] (m) No exceptions.
[ ] (n) If the Employee makes elective contributions to another
plan maintained by the Employer, the Advisory Committee
will determine the amount of the Employee's salary
reduction contribution for the withholding period:
(Choose (1) or (2))
[ ] (1) After the reduction for such period of
elective contributions to the other plan(s).
[ ] (2) Prior to the reduction for such period of
elective contributions to the other plan(s).
[ ] (o) (Specify)_____________________________________________.
1.17 PLAN YEAR/LIMITATION YEAR.
Plan Year. Plan Year means: (Choose (a) or (b))
[X] (a) The 12 consecutive month period ending every
December 31st.
[ ] (b) (Specify)_____________________________________________.
3
<PAGE>
Limitation Year. The Limitation Year is: (Choose (c) or (d))
[X] (c) The Plan Year.
[ ] (d) The 12 consecutive month period ending every
_____________________________________________________.
1.18 EFFECTIVE DATE.
New Plan. The "Effective Date" of the Plan is January 1, 1996.
Restated Plan. The restated Effective Date is_______________________.
This Plan is a substitution and amendment of an existing retirement
plan(s) originally established_______________________________________.
[Note: See the Effective Date Addendum.]
1.27 HOUR OF SERVICE. The crediting method for Hours of Service is:
(Choose (a) or (b))
[X] (a) The actual method.
[ ] (b) The _______________________ equivalency method, except:
[ ] (1) No exceptions.
[ ] (2) The actual method applies for purposes of:
(Choose at least one)
[ ] (i) Participation under Article II.
[ ] (ii) Vesting under Article V.
[ ] (iii) Accrual of benefits under
Section 3.06.
[Note: On the blank line, insert "daily," "weekly,"
"semi-monthly payroll periods" or "monthly."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the predecessor
service the Plan must credit by reason of Section 1.29 of the Plan,
the Plan credits Service with the following predecessor employer(s):
Not Applicable. Service with the designated predecessor employer(s)
applies: (Choose at least one of (a) or (b); (c) is available only in
addition to (a) or (b))
[ ] (a) For purposes of participation under Article II.
[ ] (b) For purposes of vesting under Article V.
[ ] (c) Except the following Service:________________________.
4
<PAGE>
[Note: If the Plan does not credit any predecessor service under this
provision, insert "N/A" in the first blank line. The Employer may
attach a schedule to this Adoption Agreement, in the same format as
this Section 1.29, designating additional predecessor employers and
the applicable service crediting elections.]
1.31 LEASED EMPLOYEES. If a Leased Employee is a Participant in the Plan
and also participates in a plan maintained by the leasing
organization: (Choose (a) or (b))
[ ] (a) The Advisory Committee will determine the
Leased Employee's allocation of Employer
contributions under Article III without taking
into account the Leased Employee's allocation,
if any, under the leasing organization's plan.
[X] (b) The Advisory Committee will reduce a Leased
Employee's allocation of Employer nonelective
contributions (other than designated qualified
nonelective contributions) under this Plan by the
Leased Employee's allocation under the leasing
organization's plan, but only to the extent that
allocation is attributable to the Leased Employee's
service provided to the Employer. The leasing
organization's plan:
[X] (1) Must be a money purchase plan
which would satisfy the definition
under Section 1.31 of a safe harbor
plan, irrespective of whether the
safe harbor exception applies.
[ ] (2) Must satisfy the features and,
if a defined benefit plan, the method
of reduction described in an addendum
to this Adoption Agreement, numbered
1.31.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
Eligibility conditions. To become a Participant in the Plan, an
Employee must satisfy the following eligibility conditions: (Choose
(a) or (b) or both; (c) is optional as an additional election)
[X] (a) Attainment of age 21 (specify age, not exceeding 21).
[X] (b) Service requirement. (Choose one of (1) through (3))
[ ] (1) One Year of Service.
[X] (2) Six (6) months (not exceeding 12) following
the Employee's Employment Commencement Date.
[ ] (3) One Hour of Service.
5
<PAGE>
[ ] (c) Special requirements for non-401(k) portion of plan.
(Make elections under (1) and under (2))
(1) The requirements of this Option (c) apply to
participation in: (Choose at least one of
(i) through (iii))
[ ] (i) The allocation of Employer nonelective
contributions and Participant
forfeitures.
[ ] (ii) The allocation of Employer matching
contributions (including forfeitures
allocated as matching contributions).
[ ] (iii) The allocation of Employer qualified
nonelective contributions.
(2) For participation in the allocations described
in (1), the eligibility conditions are:
(Choose at least one of (i) through (iv))
[ ] (i) _______________ (one or
two) Year(s) of Service, without
an intervening Break in Service
(as described in Section 2.03(A)
of the Plan) if the requirement
is two Years of Service.
[ ] (ii) ______________ months (not exceeding 24)
following the Employee's Employment
Commencement Date.
[ ] (iii) One Hour of Service.
[ ] (iv) Attainment of age __________ (Specify
age, not exceeding 21).
Plan Entry Date. "Plan Entry Date" means the Effective Date and:
(Choose (d), (e) or (f))
[X] (d) Semi-annual Entry Dates. The first day of the Plan Year
and the first day of the seventh month of the Plan
Year.
[ ] (e) The first day of the Plan Year.
[ ] (f) (Specify entry dates)_________________________________.
Time of Participation. An Employee will become a Participant (and, if
applicable, will participate in the allocations described in Option
(c)(1)), unless excluded under Adoption Agreement Section 1.07, on the
Plan Entry Date (if employed on that date): (Choose (g), (h) or (i))
[X] (g) immediately following
6
<PAGE>
[ ] (h) immediately preceding
[ ] (i) nearest
the date the Employee completes the eligibility conditions described
in Options (a) and (b) (or in Option (c)(2) if applicable) of this
Adoption Agreement Section 2.01. [Note: The Employer must coordinate
the selection of (g), (h) or (i) with the "Plan Entry Date" selection
in (d), (e) or (f). Unless otherwise excluded under Section 1.07, the
Employee must become a Participant by the earlier of (1) the first day
of the Plan Year beginning after the date the Employee completes the
age and service requirements of Code ss.410(a); or (2) 6 months after
the date the Employee completes those requirements.]
Dual eligibility. The eligibility conditions of this Section 2.01
apply to: (Choose (j) or (k))
[ ] (j) All Employees of the Employer, except: (Choose (1)
or (2))
[ ] (1) No exceptions.
[ ] (2) Employees who are Participants in the Plan as
of the Effective Date.
[X] (k) Solely to an Employee employed by the Employer after
September 1, 1996. If the Employee was employed by the
Employer on or before the specified date, the Employee
will become a Participant: (Choose (1), (2) or (3))
[X] (1) On the latest of the Effective Date,
his Employment Commencement Date or the
date he attains age 21 (not to exceed
21).
[ ] (2) Under the eligibility conditions in effect
under the Plan prior to the restated
Effective Date. If the restated Plan required
more than one Year of Service to participate,
the eligibility condition under this Option
(2) for participation in the Code ss.401(k)
arrangement under this Plan is one Year of
Service for Plan Years beginning after
December 31, 1988. [For restated plans only]
[ ] (3) (Specify)___________________________________.
2.02 YEAR OF SERVICE - PARTICIPATION.
Hours of Service. An Employee must complete: (Choose (a) or (b))
[ ] (a) 1,000 Hours of Service
[ ] (b) ___________ Hours of Service
7
<PAGE>
during an eligibility computation period to receive credit for a Year
of Service. [Note: The Hours of Service requirement may not exceed
1,000.]
Eligibility computation period. After the initial eligibility
computation period described in Section 2.02 of the Plan, the Plan
measures the eligibility computation period as: (Choose (c) or (d))
[ ] (c) The 12 consecutive month period beginning with each
anniversary of an Employee's Employment Commencement
Date.
[X] (d) The Plan Year, beginning with the Plan Year which
includes the first anniversary of the Employee's
Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule described
in Section 2.03(B) of the Plan: (Choose (a) or (b))
[X] (a) Does not apply to the Employer's Plan.
[ ] (b) Applies to the Employer's Plan.
2.06 ELECTION NOT TO PARTICIPATE. The Plan: (Choose (a) or (b))
[X] (a) Does not permit an eligible Employee or a Participant
to elect not to participate.
[ ] (b) Does permit an eligible Employee or a Participant to
elect not to participate in accordance with Section
2.06 and with the following rules: (Complete (1), (2),
(3) and (4))
(1) An election is effective for a Plan Year if filed
no later than _________________.
(2) An election not to participate must be effective
for at least ________ Plan Year(s).
(3) Following a re-election to participate, the
Employee or Participant:
[ ] (i) May not again elect not to participate
for any subsequent Plan Year.
[ ] (ii) May again elect not to participate, but
not earlier than the _________ Plan
Year following the Plan Year in which
the re-election first was effective.
(4) (Specify) ________________. [Insert "N/A" if no
other rules apply].
8
<PAGE>
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
Part I. [Options (a) through (g)] Amount of Employer's contribution.
The Employer's annual contribution to the Trust will equal the total
amount of deferral contributions, matching contributions, qualified
nonelective contributions and nonelective contributions, as determined
under this Section 3.01.
(Choose any combination of (a), (b), (c) and (d), or choose (e))
[X] (a) Deferral contributions (Codess.401(k) arrangement).
(Choose (1) or (2) or both)
[X] (1) Salary reduction arrangement. The
Employer must contribute the amount by
which the Participants have reduced
their Compensation for the Plan Year,
pursuant to their salary reduction
agreements on file with the Advisory
Committee. A reference in the Plan to
salary reduction contributions is a
reference to these amounts.
[ ] (2) Cash or deferred arrangement. The Employer
will contribute on behalf of each Participant
the portion of the Participant's
proportionate share of the cash or deferred
contribution which he has not elected to
receive in cash. See Section 14.02 of the
Plan. The Employer's cash or deferred
contribution is the amount the Employer may
from time to time deem advisable which the
Employer designates as a cash or deferred
contribution prior to making that
contribution to the Trust.
[X] (b) Matching contributions. The Employer will make
matching contributions in accordance with the
formula(s) elected in Part II of this Adoption
Agreement Section 3.01.
[X] (c) Designated qualified nonelective contributions. The
Employer, in its sole discretion, may contribute an
amount which it designates as a qualified nonelective
contribution.
[X] (d) Nonelective contributions. (Choose any combination of
(1) through (4))
[X] (1) Discretionary contribution. The amount (or
additional amount) the Employer may from time
to time deem advisable.
[ ] (2) The amount (or additional amount) the
Employer may from time to time deem
advisable, separately determined for each of
the following classifications of
Participants: (Choose (i) or (ii))
[ ] (i) Nonhighly Compensated Employees and
Highly Compensated Employees.
[ ] (ii) (Specify classifications)
__________________________________.
9
<PAGE>
Under this Option (2), the Advisory
Committee will allocate the amount
contributed for each Participant
classification in accordance with Part II of
Adoption Agreement Section 3.04, as if the
Participants in that classification were the
only Participants in the Plan.
[ ] (3) ___________ % of the Compensation of all
Participants under the Plan, determined for
the Employer's taxable year for which it
makes the contribution. [Note: The percentage
selected may not exceed 15%.]
[ ] (4) ___________ % of Net Profits but not more
than $ ___________________.
[ ] (e) Frozen Plan. This Plan is a frozen Plan effective
________________________________. The Employer will not
contribute to the Plan with respect to any period
following the stated date.
Net Profits. The Employer: (Choose (f) or (g))
[X] (f) Need not have Net Profits to make its annual
contribution under this Plan.
[ ] (g) Must have current or accumulated Net Profits exceeding
$ ________________________ to make the following
contributions: (Choose at least one)
[ ] (1) Cash or deferred contributions described in
Option (a)(2).
[ ] (2) Matching contributions described in Option
(b), except:_________________________.
[ ] (3) Qualified nonelective contributions described
in Option (c).
[ ] (4) Nonelective contributions described in
Option (d).
The term "Net Profits" means the Employer's net income or profits for any
taxable year determined by the Employer upon the basis of its books of account
in accordance with generally accepted accounting practices consistently applied
without any deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under any other employee
benefit plan the Employer maintains. The term "Net Profits" specifically
excludes Not Applicable. [Note: Enter "N/A" if no exclusions apply.]
If the Employer requires Net Profits for matching contributions and the
Employer does not have sufficient Net Profits under Option (g), it will reduce
the matching contribution under a fixed formula on a prorata basis for all
Participants. A Participant's share of the reduced contribution will bear the
same ratio as the matching contribution the Participant would have received if
Net Profits were sufficient bears to the total matching contribution all
Participants would have received if Net Profits were sufficient. If more than
one member of a related group (as defined in Section 1.30) execute this
Adoption Agreement, each participating member will determine Net Profits
separately but will not apply this reduction unless, after combining the
separately determined
10
<PAGE>
Net Profits, the aggregate Net Profits are insufficient to satisfy the matching
contribution liability. "Net Profits" includes both current and accumulated Net
Profits.
Part II. [Options (h) through (j)] Matching contribution formula. [Note: If the
Employer elected Option (b), complete Options (h), (i) and (j).]
[X] (h) Amount of matching contributions. For each Plan Year,
the Employer's matching contribution is: (Choose any
combination of (1), (2), (3), (4) and (5))
[ ] (1) An amount equal to ________% of each
Participant's eligible contributions for the
Plan Year.
[ ] (2) An amount equal to __________ % of each
Participant's first tier of eligible
contributions for the Plan Year, plus the
following matching percentage(s) for the
following subsequent tiers of eligible
contributions for the Plan ________________.
[X] (3) Discretionary formula.
[X] (i) An amount (or additional
amount) equal to a matching
percentage the Employer from
time to time may deem advisable
of the Participant's eligible
contributions for the Plan
Year.
[ ] (ii) An amount (or additional amount)
equal to a matching percentage the
Employer from time to time may
deem advisable of each tier of the
Participant's eligible
contributions for the Plan Year.
[ ] (4) An amount equal to the following percentage
of each Participant's eligible contributions
for the Plan Year, based on the Participant's
Years of Service:
Number of Years of Service Matching Percentage
-------------------------- -------------------
----- -----
----- -----
----- -----
----- -----
The Advisory Committee will apply this
formula by determining Years of Service as
follows: .
[ ] (5) A Participant's matching contributions may
not: (Choose (i) or (ii))
[ ] (i) Exceed __________________________.
[ ] (ii) Be less than ____________________.
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<PAGE>
Related Employers. If two or more related employers (as defined in Section
1.30) contribute to this Plan, the related employers may elect different
matching contribution formulas by attaching to the Adoption Agreement a
separately completed copy of this Part II. [Note: Separate matching
contribution formulas create separate current benefit structures that must
satisfy the minimum participation test of Code ss.401(a)(26).]
[X] (i) Definition of eligible contributions. Subject to the
requirements of Option (j), the term "eligible
contributions" means: (Choose any combination of (1)
through (3))
[X] (1) Salary reduction contributions.
[ ] (2) Cash or deferred contributions
(including any part of the
Participant's proportionate share of
the cash or deferred contribution
which the Employer defers without the
Participant's election).
[ ] (3) Participant mandatory contributions, as
designated in Adoption Agreement Section
4.01. See Section 14.04 of the Plan.
[X] (j) Amount of eligible contributions taken into
account. When determining a Participant's eligible
contributions taken into account under the matching
contributions formula(s), the following rules apply:
(Choose any combination of (1) through (4))
[X] (1) The Advisory Committee will take
into account all eligible contributions
credited for the Plan Year.
[ ] (2) The Advisory Committee will disregard
eligible contributions exceeding
____________________________________________.
[ ] (3) The Advisory Committee will treat as the
first tier of eligible contributions, an
amount not exceeding: ______________________.
The subsequent tiers of eligible
contributions are: _________________________.
[ ] (4) (Specify)___________________________________.
Part III. [Options (k) and (l)]. Special rules for Code ss.401(k) Arrangement.
(Choose (k) or (l), or both, as applicable)
[X] (k) Salary Reduction Agreements. The following rules and
restrictions apply to an Employee's salary reduction
agreement: (Make a selection under (1), (2), (3) and
(4))
12
<PAGE>
(1) Limitation on amount. The Employee's salary reduction
contributions: (Choose (i) or at least one of (ii) or
(iii))
[ ] (i) No maximum limitation other than as provided
in the Plan.
[X] (ii) May not exceed 15% of Compensation for the
Plan Year, subject to the annual additions
limitation described in Part 2 of Article
III and the 402(g) limitation described in
Section 14.07 of the Plan.
[ ] (iii) Based on percentages of Compensation must
equal at least_____________________________.
(2) An Employee may revoke, on a prospective basis, a
salary reduction agreement: (Choose (i), (ii), (iii) or
(iv))
[ ] (i) Once during any Plan Year
but not later than
_____________________________________
of the Plan Year.
[ ] (ii) As of any Plan Entry Date.
[ ] (iii) As of the first day of any month.
[X] (iv) Specify, but must be at least once per Plan
Year) At any time, effective as of the next
pay period .
(3) An Employee who revokes his salary reduction agreement
may file a new-salary reduction agreement with an
effective date: (Choose (i), (ii), (iii) or (iv))
[ ] (i) No earlier than the first day of the next
Plan Year.
[X] (ii) As of any subsequent Plan Entry Date.
[ ] (iii) As of the first day of any month subsequent
to the month in which he revoked an
Agreement.
[ ] (iv) (Specify, but must be at least once per Plan
Year following the Plan Year of revocation)
______________________.
(4) A Participant may increase or may decrease, on a
prospective basis, his salary reduction percentage or
dollar amount: (Choose (i), (ii), (iii) or (iv))
[ ] (i) As of the beginning of each payroll period.
13
<PAGE>
[ ] (ii) As of the first day of each month.
[X] (iii) As of any Plan Entry Date.
[ ] (iv) (Specify, but must permit an increase or a
decrease at least once per Plan Year)
_________________________________________.
[ ] (l) Cash or deferred contributions. For each
Plan Year for which the Employer makes a
designated cash or deferred contribution, a
Participant may elect to receive directly in
cash not more than the following portion
(or, if less, the 402(g) limitation
described in Section 14.07 of the Plan) of
his proportionate share of that cash or
deferred contribution: (Choose (1) or (2))
[ ] (1) All or any portion.
[ ] (2) _________________%.
3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate deferral
contributions, matching contributions, qualified nonelective
contributions and nonelective contributions in accordance with Section
14.06 and the elections under this Adoption Agreement Section 3.04.
Part I. [Options (a) through (d)]. Special Accounting Elections.
(Choose whatever elections are applicable to the Employer's Plan)
[X] (a) Matching Contributions Account. The Advisory Committee
will allocate matching contributions to a
Participant's: (Choose (1) or (2); (3) is available
only in addition to (1))
[X] (1) Regular Matching Contributions Account.
[ ] (2) Qualified Matching Contributions Account.
[ ] (3) Except, matching contributions under
Option(s) ______________________ of Adoption
Agreement Section 3.01 are allocable to the
Qualified Matching Contributions Account.
[ ] (b) Special Allocation Dates for Salary Reduction
Contributions. The Advisory Committee will allocate
salary reduction contributions as of the Accounting
Date and as of the following additional allocation
dates: _______________________________________________
_____________________________________________________.
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<PAGE>
[ ] (c) Special Allocation Dates for Matching Contributions.
The Advisory Committee will allocate matching
contributions as of the Accounting Date and as of the
following additional allocation dates:________________.
[X] (d) Designated Qualified Nonelective Contributions -
Definition of Participant. For purposes of allocating
the designated qualified nonelective contribution,
"Participant" means: (Choose (1), (2) or (3))
[ ] (1) All Participants.
[X] (2) Participants who are Nonhighly Compensated
Employees for the Plan Year.
[ ] (3) (Specify.)__________________________________.
Part II. Method of Allocation - Nonelective Contribution. Subject to
any restoration allocation required under Section 5.04, the Advisory
Committee will allocate and credit each annual nonelective
contribution (and Participant forfeitures treated as nonelective
contributions) to the Employer Contributions Account of each
Participant who satisfies the conditions of Section 3.06, in
accordance with the allocation method selected under this Section
3.04. If the Employer elects Option (e)(2), Option (g)(2) or Option
(h), for the first 3 % of Compensation allocated to all Participants,
"Compensation" does not include any exclusions elected under Adoption
Agreement Section 1.12 (other than the exclusion of elective
contributions), and the Advisory Committee must take into account the
Participant's Compensation for the entire Plan Year. (Choose an
allocation method under (e), (f), (g) or (h); (i) is mandatory if the
Employer elects (f), (g) or (h); (j) is optional in addition to any
other election.)
[ ] (e) Nonintegrated Allocation Formula. (Choose (1) or (2))
[ ] (1) The Advisory Committee will allocate the
annual nonelective contributions in the same
ratio that each Participant's Compensation
for the Plan Year bears to the total
Compensation of all Participants for the Plan
Year.
[ ] (2) The Advisory Committee will allocate the
annual nonelective contributions in the same
ratio that each Participant's Compensation
for the Plan Year bears to the total
Compensation of all Participants for the Plan
Year. For purposes of this Option (2),
"Participant" means, in addition to a
Participant who satisfies the requirements of
Section 3.06 for the Plan Year, any other
Participant entitled to a top heavy minimum
allocation under Section 3.04(B), but such
Participant's allocation will not exceed 3%
of his Compensation for the Plan Year.
[ ] (f) Two-Tiered Integrated Allocation Formula - Maximum
Disparity. First, the Advisory Committee will allocate
the annual Employer nonelective contributions in the
same ratio that
15
<PAGE>
each Participant's Compensation plus
Excess Compensation for the Plan Year bears to the
total Compensation plus Excess Compensation of all
Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's
Compensation plus Excess Compensation, must not exceed
the applicable percentage (5.7%, 5.4% or 4.3%) listed
under the Maximum Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining
nonelective contributions in the same ratio that each
Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan
Year.
[ ] (g) Three-Tiered Integrated Allocation Formula. First, the
Advisory Committee will allocate the annual Employer
nonelective contributions in the same ratio that each
Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan
Year. The allocation under this paragraph, as a
percentage of each Participant's Compensation may not
exceed the applicable percentage (5.7%, 5.4% or 4.3%)
listed under the Maximum Disparity Table following
Option (i). Solely for purposes of the allocation in
this first paragraph, "Participant" means, in addition
to a Participant who satisfies the requirements of
Section 3.06 for the Plan Year: (Choose (1) or (2))
[ ] (1) No other Participant.
[ ] (2) Any other Participant entitled to a top heavy
minimum allocation under Section 3.04(B), but
such Participant's allocation under this
Option (g) will not exceed 3% of his
Compensation for the Plan Year.
As a second tier allocation, the Advisory Committee
will allocate the nonelective contributions in the same
ratio that each Participant's Excess Compensation for
the Plan Year bears to the total Excess Compensation of
all Participants for the Plan Year. The allocation
under this paragraph, as a percentage of each
Participant's Excess Compensation, may not exceed the
allocation percentage in the first paragraph.
Finally, the Advisory Committee will allocate any
remaining nonelective contributions in the same ratio
that each Participant's Compensation for the Plan Year
bears to the total Compensation of all Participants for
the Plan Year.
[X] (h) Four-Tiered Integrated Allocation Formula. First, the
Advisory Committee will allocate the annual Employer
nonelective contributions in the same ratio that each
Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan
Year, but not exceeding 3% of each Participant's
Compensation. Solely for purposes of this first tier
allocation, a "Participant" means, in addition to any
Participant who satisfies the requirements of Section
3.06 for the Plan Year, any other Participant entitled
to a top heavy minimum allocation under Section 3.04(B)
of the Plan.
16
<PAGE>
As a second tier allocation, the Advisory Committee
will allocate the nonelective contributions in the same
ratio that each Participant's Excess Compensation for
the Plan Year bears to the total Excess Compensation of
all Participants for the Plan Year, but not exceeding
3% of each Participant's Excess Compensation.
As a third tier allocation, the Advisory Committee will
allocate the annual Employer contributions in the same
ratio that each Participant's Compensation plus Excess
Compensation for the Plan Year bears to the total
Compensation plus Excess Compensation of all
Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's
Compensation plus Excess Compensation, must not exceed
the applicable percentage (2.7%, 2.4% or 1.3%) listed
under the Maximum Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining
nonelective contributions in the same ratio that each
Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan
Year.
[X] (i) Excess Compensation. For purposes of Option (f), (g) or
(h), "Excess Compensation" means Compensation in excess
of the following Integration Level: (Choose (1) or (2))
[X] (1) 100 % (not exceeding 100%) of the taxable
wage base, as determined under Section 230 of
the Social Security Act, in effect on the
first day of the Plan Year: (Choose any
combination of (i) and (ii) or choose (iii))
[ ] (i) Rounded to __________________ (but
not exceeding the taxable wage
base).
[ ] (ii) But not greater than
$_______________________________.
[X] (iii) Without any further adjustment or
limitation.
[ ] (2) $ ________________ [Note: Not exceeding the
taxable wage base for the Plan Year in which
this Adoption Agreement first is effective.]
17
<PAGE>
Maximum Disparity Table. For purposes of Options (f), (g) and (h), the
applicable percentage is:
<TABLE>
<CAPTION>
Integration Level
(as percentage of Applicable Percentages for Applicable Percentages
taxable wage base) Option (f) or Option (g) for Option (h)
------------------ -------------------------- ----------------------
<S> <C> <C>
100% 5.7% 2.7%
More than 80% but less than 100% 5.4% 2.4%
More than 20% (but not less than
$10,001) and not more
than 80% 4.3% 1.3%
20% (or $10,000, if greater) or less 5.7% 2.7%
</TABLE>
[ ] (j) Allocation offset. The Advisory Committee will reduce a
Participant's allocation otherwise made under Part II
of this Section 3.04 by the Participant's allocation
under the following qualified plan(s) maintained by the
Employer:_____________________________________________.
The Advisory Committee will determine this allocation
reduction: (Choose (1) or (2))
[ ] (1) By treating the term "nonelective
contribution" as including all amounts paid
or accrued by the Employer during the Plan
Year to the qualified plan(s) referenced
under this Option (j). If a Participant under
this Plan also participates in that other
plan, the Advisory Committee will treat the
amount the Employer contributes for or during
a Plan Year on behalf of a particular
Participant under such other plan as an
amount allocated under this Plan to that
Participant's Account for that Plan Year. The
Advisory Committee will make the computation
of allocation required under the immediately
preceding sentence before making any
allocation of nonelective contributions under
this Section 3.04.
[ ] (2) In accordance with the formula provided in an
addendum to this Adoption Agreement, numbered
3.04(j).
Top Heavy Minimum Allocation - Method of Compliance. If a Participant's
allocation under this Section 3.04 is less than the top heavy minimum
allocation to which he is entitled under Section 3.04(B):
(Choose (k) or (l))
[X] (k) The Employer will make any necessary additional
contribution to the Participant's Account, as described
in Section 3.04(B)(7)(a) of the Plan.
[ ] (l) The Employer will satisfy the top heavy minimum
allocation under the following plan(s) it maintains:
_____________________________________________________.
18
<PAGE>
However, the Employer will make any necessary
additional contribution to satisfy the top heavy
minimum allocation for an Employee covered only under
this Plan and not under the other plan(s) designated in
this Option (l). See Section 3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan, the Employer
may provide in an addendum to this Adoption Agreement,
numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under
Code Section 416.
Related employers. If two or more related employers (as defined in Section
1.30) contribute to this Plan, the Advisory Committee must allocate all
Employer nonelective contributions (and forfeitures treated as nonelective
contributions) to each Participant in the Plan, in accordance with the
elections in this Adoption Agreement Section 3.04: (Choose (m) or (n))
[ ] (m) Without regard to which contributing related group
member employs the Participant.
[X] (n) Only to the Participants directly employed by the
contributing Employer. If a Participant receives
Compensation from more than one contributing Employer,
the Advisory Committee will determine the allocations
under this Adoption Agreement Section 3.04 by prorating
among the participating Employers the Participant's
Compensation and, if applicable, the Participant's
Integration Level under Option (i).
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required
under Sections 5.04 or 9.14, the Advisory Committee will allocate a
Participant forfeiture in accordance with Section 3.04: (Choose (a) or
(b); (c) and (d) are optional in addition to (a) or (b))
[X] (a) As an Employer nonelective contribution for the
Plan Year in which the forfeiture occurs, as if the
Participant forfeiture were an additional nonelective
contribution for that Plan Year.
[ ] (b) To reduce the Employer matching contributions and
nonelective contributions for the Plan Year: (Choose
(1) or (2))
[ ] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in which
the forfeiture occurs.
[ ] (c) To the extent attributable to matching contributions:
(Choose (1), (2) or (3))
[ ] (1) In the manner elected under Options (a)
or (b).
[X] (2) First to reduce Employer matching
contributions for the Plan Year: (Choose (i)
or (ii))
[ ] (i) in which the forfeiture occurs,
19
<PAGE>
[X] (ii) immediately following the Plan Year
in which the forfeiture occurs,
then as elected in Options (a) or (b).
[ ] (3) As a discretionary matching
contribution for the Plan Year in which the
forfeiture occurs, in lieu of the manner
elected under Options (a) or (b).
[ ] (d) First to reduce the Plan's ordinary and necessary
administrative expenses for the Plan Year and then will
allocate any remaining forfeitures in the manner
described in Options (a), (b) or (c), whichever
applies. If the Employer elects Option (c), the
forfeitures used to reduce Plan expenses: (Choose (1)
or (2))
[ ] (1) relate proportionately to forfeitures
described in Option (c) and to forfeitures
described in Options (a) or (b).
[ ] (2) relate first to forfeitures described in
Option ____________________________________.
Allocation of forfeited excess aggregate contributions. The Advisory
Committee will allocate any forfeited excess aggregate contributions
(as described in Section 14.09): (Choose (e), (f) or (g))
[X] (e) To reduce Employer matching contributions for the Plan
Year: (Choose (1) or (2))
[ ] (1) in which the forfeiture occurs.
[X] (2) immediately following the Plan Year in which
the forfeiture occurs.
[ ] (f) As Employer discretionary matching contributions for
the Plan Year in which forfeited, except the Advisory
Committee will not allocate these forfeitures to the
Highly Compensated Employees who incurred the
forfeitures.
[ ] (g) In accordance with Options (a) through (d), whichever
applies, except the Advisory Committee will not
allocate these forfeitures under Option (a) or under
Option (c)(3) to the Highly Compensated Employees who
incurred the forfeitures.
3.06 ACCRUAL OF BENEFIT.
Compensation taken into account. For the Plan Year in which the
Employee first becomes a Participant, the Advisory Committee will
determine the allocation of any cash or deferred contribution,
designated qualified nonelective contribution or nonelective
contribution by taking into account: (Choose (a) or (b))
[ ] (a) The Employee's Compensation for the entire Plan Year.
20
<PAGE>
[X] (b) The Employee's Compensation for the portion of the
Plan Year in which the Employee actually is a
Participant in the Plan.
Accrual Requirements. Subject to the suspension of accrual
requirements of Section 3.06(E) of the Plan, to receive an allocation
of cash or deferred contributions, matching contributions, designated
qualified nonelective contributions, nonelective contributions and
Participant forfeitures, if any, for the Plan Year, a Participant must
satisfy the conditions described in the following elections: (Choose
(c) or at least one of (d) through (f))
[ ] (c) Safe harbor rule. If the Participant is employed by the
Employer on the last day of the Plan Year, the
Participant must complete at least one Hour of Service
for that Plan Year. If the Participant is not employed
by the Employer on the last day of the Plan Year, the
Participant must complete at least 501 Hours of Service
during the Plan Year.
[X] (d) Hours of Service condition. The Participant must
complete the following minimum number of Hours of
Service during the Plan Year: (Choose at least one of
(1) through (5))
[X] (1) 1,000 Hours of Service.
[ ] (2) (Specify, but the number of Hours of Service
may not exceed 1,000)______________________.
[ ] (3) No Hour of Service requirement if the
Participant terminates employment during
the Plan Year on account of: (Choose (i),
(ii) or (iii))
[ ] (i) Death.
[ ] (ii) Disability.
[ ] (iii) Attainment of Normal Retirement
Age in the current Plan Year or in
a prior Plan Year.
[ ] (4) ________________ Hours of Service (not
exceeding 1,000) if the Participant
terminates employment with the Employer
during the Plan Year, subject to any election
in Option (3).
[X] (5) No Hour of Service requirement for an
allocation of the following contributions:
Employer matching contributions .
[X] (e) Employment condition. The Participant must be employed
by the Employer on the last day of the Plan Year,
irrespective of whether he satisfies any Hours of
Service condition under Option (d), with the following
exceptions: (Choose (1) or at least one of (2) through
(5))
21
<PAGE>
[ ] (1) No exceptions.
[ ] (2) Termination of employment because of death.
[ ] (3) Termination of employment because of
disability.
[ ] (4) Termination of employment following
attainment of Normal Retirement Age.
[X] (5) No employment condition for the following
contributions: Employer matching
contributions.
[ ] (f) (Specify other conditions, if applicable):____________
_____________________________________________________.
Suspension of Accrual Requirements. The suspension of accrual
requirements of Section 3.06(E) of the Plan: (Choose (g), (h) or (i))
[X] (g) Applies to the Employer's Plan.
[ ] (h) Does not apply to the Employer's Plan.
[ ] (i) Applies in modified form to the Employer's
Plan, as described in an addendum to this
Adoption Agreement, numbered Section 3.06(E).
Special accrual requirements for matching contributions. If the Plan
allocates matching contributions on two or more allocation dates for a
Plan Year, the Advisory Committee, unless otherwise specified in
Option (l), will apply any Hours of Service condition by dividing the
required Hours of Service on a prorata basis to the allocation periods
included in that Plan Year. Furthermore, a Participant who satisfies
the conditions described in this Adoption Agreement Section 3.06 will
receive an allocation of matching contributions (and forfeitures
treated as matching contributions) only if the Participant satisfies
the following additional condition(s): (Choose (j)) or at least one of
(k) or (l))
[X] (j) No additional conditions.
[ ] (k) The Participant is not a Highly Compensated Employee
for the Plan Year. This Option (k) applies to: (Choose
(1) or (2))
[ ] (1) All matching contributions.
[ ] (2) Matching contributions described in Option(s)
______________ of Adoption Agreement Section
3.01.
[ ] (l) (Specify)_____________________________________________.
22
<PAGE>
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15
apply, the Excess Amount attributed to this Plan equals: (Choose (a),
(b) or (c))
[ ] (a) The product of:
(i) the total Excess Amount allocated as of such
date (including any amount which the Advisory
Committee would have allocated but for the
limitations of Code Section 415), times
(ii) the ratio of (1) the amount allocated to the
Participant as of such date under this Plan
divided by (2) the total amount allocated as
of such date under all qualified defined
contribution plans (determined without
regard to the limitations of Code Section 415).
[X] (b) The total Excess Amount.
[ ] (c) None of the Excess Amount.
3.18 DEFINED BENEFIT PLAN LIMITATION.
Application of limitation. The limitation under Section 3.18 of the
Plan: (Choose (a) or (b))
[X] (a) Does not apply to the Employer's Plan because the
Employer does not maintain and never has maintained a
defined benefit plan covering any Participant in this
Plan.
[ ] (b) Applies to the Employer's Plan. To the extent necessary
to satisfy the limitation under Section 3.18, the
Employer will reduce: (Choose (1) or (2))
[ ] (1) The Participant's projected annual benefit
under the defined benefit plan under which
the Participant participates.
[ ] (2) Its contribution or allocation on behalf of
the Participant to the defined contribution
plan under which the Participant participates
and then, if necessary, the Participant's
projected annual benefit under the defined
benefit plan under which the Participant
participates.
[Note: If the Employer selects (a), the remaining
options in this Section 3.18 do not apply to the
Employer's Plan.]
Coordination with top heavy minimum allocation. The Advisory Committee
will apply the top heavy minimum allocation provisions of Section
3.04(B) of the Plan with the following modifications: (Choose (c) or
at least one of (d) or (e))
[ ] (c) No modifications.
23
<PAGE>
[ ] (d) For Non-Key Employees participating only in this Plan,
the top heavy minimum allocation is the minimum
allocation described in Section 3.04(B) determined by
substituting ____________ % (not less than 4%) for
"3%," except: (Choose (i) or (ii))
[ ] (i) No exceptions.
[ ] (ii) Plan Years in which the top heavy ratio
exceeds 90%.
[ ] (e) For Non-Key Employees also participating in the defined
benefit plan, the top heavy minimum is: (Choose (1) or
(2))
[ ] (1) 5% of Compensation (as determined under
Section 3.04(B) or the Plan) irrespective of
the contribution rate of any Key Employee,
except: (Choose (i) or (ii))
[ ] (i) No exceptions.
[ ] (ii) Substituting "7 1/2%" for 5%" if
the top heavy ratio does not
exceed 90%.
[ ] (2) 0%. [Note: The Employer may not select this
Option (2) unless the defined benefit plan
satisfies the top heavy minimum benefit
requirements of Code ss.416 for these Non-Key
Employees.]
Actuarial Assumptions for Top Heavy Calculation. To determine the top
heavy ratio, the Advisory Committee will use the following interest
rate and mortality assumptions to value accrued benefits under a
defined benefit plan:
_____________________________________________________________________
____________________________________________________________________.
If the elections under this Section 3.18 are not appropriate to
satisfy the limitations of Section 3.18, or the top heavy requirements
under Code ss.416, the Employer must provide the appropriate
provisions in an addendum to this Adoption Agreement.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan: (Choose (a) or (b);
(c) is available only with (b))
24
<PAGE>
[X] (a) Does not permit Participant nondeductible contributions.
[ ] (b) Permits Participant nondeductible contributions,
pursuant to Section 14.04 of the Plan.
[ ] (c) The following portion of the Participant's
nondeductible contributions for the Plan Year are
mandatory contributions under Option (i)(3) of Adoption
Agreement Section 3.01: (Choose (1) or (2))
[ ] (1) The amount which is not less than:
____________________________________________.
[ ] (2) The amount which is not greater than:
____________________________________________.
Allocation dates. The Advisory Committee will allocate nondeductible
contributions for each Plan Year as of the Accounting Date and the
following additional allocation dates: (Choose (d) or (e))
[ ] (d) No other allocation dates.
[ ] (e) (Specify)_____________________________________________.
As of an allocation date, the Advisory Committee will credit all
nondeductible contributions made for the relevant allocation period.
Unless otherwise specified in (e), a nondeductible contribution
relates to an allocation period only if actually made to the Trust no
later than 30 days after that allocation period ends.
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION. Subject to the
restrictions of Article VI, the following distribution options apply
to a Participant's Mandatory Contributions Account, if any, prior to
his Separation from Service: (Choose (a) or at least one of (b)
through (d))
[ ] (a) No distribution options prior to Separation from
Service.
[ ] (b) The same distribution options applicable to the
Deferral Contributions Account prior to the
Participant's Separation from Service, as elected in
Adoption Agreement Section 6.03.
[ ] (c) Until he retires, the Participant has a continuing
election to receive all or any portion of his Mandatory
Contributions Account if: (Choose (1) or at least one
of (2) through (4))
[ ] (1) No conditions.
[ ] (2) The mandatory contributions have accumulated
for at least _____________ Plan Years since
the Plan Year for which contributed.
[ ] (3) The Participant suspends making nondeductible
contributions for a period of ______________
months.
25
<PAGE>
[ ] (4) (Specify)
--------------------------------------
[ ] (d) (Specify)
------------------------------------------------
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is:
(Choose (a) or (b))
[ ] (a) _________ [State age, but may not exceed age 65].
[ ] (b) The later of the date the Participant attains 65 years
of age or the 5th anniversary of the first day of the
Plan Year in which the Participant commenced
participation in the Plan. [The age selected may not
exceed age 65 and the anniversary selected may not
exceed the 5th.]
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section
5.02 of the Plan: (Choose (a) or choose one or both of (b) and (c))
[ ] (a) Does not apply.
[X] (b) Applies to death.
[X] (c) Applies to disability.
5.03 VESTING SCHEDULE.
Deferral Contributions Account/Qualified Matching Contributions
Account/Qualified Nonelective Contributions Account/Mandatory
Contributions Account. A Participant has a 100% Nonforfeitable
interest at all times in his Deferral Contributions Account, his
Qualified Matching Contributions Account, his Qualified Nonelective
Contributions Account and in his Mandatory Contributions Account.
Regular Matching Contributions Account/Employer Contributions Account.
With respect to a Participant's Regular Matching Contributions Account
and Employer Contributions Account, the Employer elects the following
vesting schedule: (Choose (a) or (b); (c) and (d) are available only as
additional options)
[ ] (a) Immediate vesting. 100% Nonforfeitable at all times.
[Note: The Employer must elect Option (a) if the
eligibility conditions under Adoption Agreement
Section 2.01(c) require 2 years of service or more than
12 months of employment.]
26
<PAGE>
[X] (b) Graduated Vesting Schedules.
Top Heavy Schedule Non Top Heavy Schedule
(Mandatory) (Optional)
Years of Nonforfeitable Years of Nonforfeitable
Service Percentage Service Percentage
------- ---------- ------- ----------
Less than 1 0% Less than 1 0%
1 20% 1 20%
2 40% 2 40%
3 60% 3 60%
4 80% 4 80%
5 100% 5 100%
6 or More 100% 6 100%
7 or More 100%
[ ] (c) Special vesting election for Regular Matching Contributions
Account. In lieu of the election under Options (a) or (b),
the Employer elects the following vesting schedule for a
Participant's Regular Matching Contributions Account:
(Choose (1) or (2))
[ ] (1) 100% Nonforfeitable at all times.
[ ] (2) In accordance with the vesting schedule
described in the addendum to this Adoption
Agreement, numbered 5.03(c). [Note: If the
Employer elects this Option (c)(2), the
addendum must designate the applicable vesting
schedule(s) using the same format as used in
Option (b).]
[Note: Under Options (b) and (c)(2), the Employer must complete
a Top Heavy Schedule which satisfies Code Section 416. The
Employer, at its option, may complete a Non Top Heavy Schedule.
The Non Top Heavy Schedule must satisfy Code Section 411(a) (2).
Also see Section 7.05 of the Plan.]
[ ] (d) The Top Heavy Schedule under Option (b) (and, if
applicable, under Option (c)(2)) applies:
(Choose (1) or (2))
[ ] (1) Only in a Plan Year for which the Plan is top
heavy.
[ ] (2) In the Plan Year for which the Plan first is
top heavy and then in all subsequent Plan
Years. [Note: The Employer may not elect
Option (d) unless it has completed a Non Top
Heavy Schedule.]
Minimum vesting. (Choose (e) or (f))
27
<PAGE>
[X] (e) The Plan does not apply a minimum vesting rule.
[ ] (f) A Participant's Nonforfeitable Accrued Benefit will never
be less than the lesser of $_______ or his entire Accrued
Benefit, even if the application of a graduated vesting
schedule under Options (b) or (c) would result in a
smaller Nonforfeitable Accrued Benefit.
Life Insurance Investments. The Participant's Accrued Benefit
attributable to insurance contracts purchased on his behalf under
Article XI is: (Choose (g) or (h))
[X] (g) Subject to the vesting election under Options (a), (b) or
(c).
[ ] (h) 100% Nonforfeitable at all times, irrespective of the
vesting election under Options (b) or (c)(2).
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF
FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described in
Section 5.04(C) of the Plan: (Choose (a) or (b))
[ ] (a) Does not apply.
[X] (b) Will apply to determine the timing of forfeitures
for 0% vested Participants. A Participant is not a 0%
vested Participant if he has a Deferral Contributions
Account.
5.06 YEAR OF SERVICE - VESTING.
Vesting computation period. The Plan measures a Year of Service on the
basis of the following 12 consecutive month periods: (Choose (a) or (b))
[X] (a) Plan Years.
[ ] (b) Employment Years. An Employment Year is the 12 consecutive
month period measured from the Employee's Employment
Commencement Date and each successive 12 consecutive month
period measured from each anniversary of that Employment
Commencement Date.
Hours of Service. The minimum number of Hours of Service an Employee
must complete during a vesting computation period to receive credit for
a Year of Service is: (Choose (c) or (d))
[X] (c) 1,000 Hours of Service.
[ ] (d) ______________ Hours of Service. [Note: The Hours of
Service requirement may not exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer specifically excludes
the following Years of Service: (Choose (a) or at least one of (b)
through (e))
28
<PAGE>
[X] (a) None other than as specified in Section 5.08(a) of the Plan.
[ ] (b) Any Year of Service before the Participant attained the
age of _________. Note: The age selected may not exceed
age 18.]
[ ] (c) Any Year of Service during the period the Employer did not
maintain this Plan or a predecessor plan.
[ ] (d) Any Year of Service before a Break in Service if the
number of consecutive Breaks in Service equals or exceeds
the greater of 5 or the aggregate number of the Years of
Service prior to the Break. This exception applies only
if the Participant is 0% vested in his Accrued Benefit
derived from Employer contributions at the time he has a
Break in Service. Furthermore, the aggregate number of
Years of Service before a Break in Service do not include
any Years of Service not required to be taken into account
under this exception by reason of any prior Break in
Service.
[ ] (e) Any Year of Service earned prior to the effective date of
ERISA if the Plan would have disregarded that Year of
Service on account of an Employee's Separation from
Service under a Plan provision in effect and adopted before
January 1, 1974.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
Code Section 411(d)(6) Protected Benefits. The elections under this Article VI
may not eliminate Code Section 411(d)(6) protected benefits. To the extent the
elections would eliminate a Code Section 411(d)(6) protected benefit, see
Section 13.02 of the Plan. Furthermore, if the elections liberalize the optional
forms of benefit under the Plan, the more liberal options apply on the later of
the adoption date or the Effective Date of this Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Distribution Date. A distribution date under the Plan means the last day
of the calendar quarter following a participant's separation from service.
[Note: The Employer must specify the appropriate date(s). The specified
distribution dates primarily establish annuity starting dates and the
notice and consent periods prescribed by the Plan. The Plan allows the
Trustee an administratively practicable period of time to make the actual
distribution relating to a particular distribution date.]
Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject to the
limitations of Section 6.01(A)(1), the distribution date for distribution
of a Nonforfeitable Accrued Benefit not exceeding $3,500 is:
(Choose (a), (b), (c), (d) or (e))
29
<PAGE>
[ ] (a) __________________________________________________________
________________ of the _____________________ Plan Year
beginning after the Participant's Separation from Service.
[X] (b) The last day of the calendar quarter following the
Participant's Separation from Service.
[ ] (c) _____________________ of the Plan Year after the
Participant incurs ___________ Break(s) in Service (as
defined in Article V).
[ ] (d) ______________________________________ following the
Participant's attainment of Normal Retirement Age, but not
earlier than __________________ days following his
Separation from Service.
[ ] (e) (Specify) ________________________________________________.
Nonforfeitable Accrued Benefit Exceeds $3,500. See the elections under
Section 6.03.
Disability. The distribution date, subject to Section 6.01(A)(3), is:
(Choose (j), (g) or (h))
[ ] (f) ____________________________________ after the Participant
terminates employment because of disability.
[X] (g) The same as if the Participant had terminated employment
without disability.
[ ] (h) (Specify) _________________________________________________.
Hardship. (Choose (i) or (j))
[X] (i) The Plan does not permit a hardship distribution to
a Participant who has separated from Service.
[ ] (j) The Plan permits a hardship distribution to a Participant
who has separated from Service in accordance with the
hardship distribution policy stated in: (Choose (1), (2)
or (3))
[ ] (1) Section 6.01(A)(4) of the Plan.
[ ] (2) Section 14.11 of the Plan.
[ ] (3) The addendum to this Adoption Agreement,
numbered Section 6.01.
Default on a Loan. If a Participant or Beneficiary defaults on a loan
made pursuant to a loan policy adopted by the Advisory Committee
pursuant to Section 9.04, the Plan: (Choose (k), (l) or (m))
30
<PAGE>
[X] (k) Treats the default as a distributable event. The
Trustee, at the time of the default, will reduce the
Participant's Nonforfeitable Accrued Benefit by the
lesser of the amount in default (plus accrued interest)
or the Plan's security interest in that Nonforfeitable
Accrued Benefit. To the extent the loan is attributable
to the Participant's Deferral Contributions Account,
Qualified Matching Contributions Account or Qualified
Nonelective Contributions Account, the Trustee will not
reduce the Participant's Nonforfeitable Accrued Benefit
unless the Participant has separated from Service or
unless the Participant has attained age 59 1/2.
[X] (l) Does not treat the default as a distributable
event. When an otherwise distributable event first
occurs pursuant to Section 6.01 or Section 6.03 of the
Plan, the Trustee will reduce the Participant's
Nonforfeitable Accrued Benefit by the lesser of the
amount in default (plus accrued interest) or the Plan's
security interest in that Nonforfeitable Accrued
Benefit.
[ ] (m) (Specify) ________________________________________________.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will apply
Section 6.02 of the Plan with the following modifications: (Choose (a)
or at least one of (b), (c), (d) and (e))
[ ] (a) No modifications.
[ ] (b) Except as required under Section 6.01 of the Plan, a lump
sum distribution is not available: ________________________
__________________________________________________________
[ ] (c) An installment distribution: (Choose (1) or at least one
of (2) or (3))
[ ] (1) Is not available under the Plan.
[ ] (2) May not exceed the lesser of ______________________
years or the maximum period permitted under Section
6.02.
[ ] (3) (Specify) _________________________________________.
[ ] (d) The Plan permits the following annuity options: None .
Any Participant who elects a life annuity option is subject
to the requirements of Sections 6.04(A), (B), (C) and (D)
of the Plan. See Section 6.04(E). [Note: The Employer may
specify additional annuity options in an addendum to this
Adoption Agreement, numbered 6.02(d).]
[ ] (e) If the Plan invests in qualifying Employer securities, as
described in Section 10.03(F), a Participant eligible to
elect distribution under Section 6.03 may elect to receive
that distribution in Employer securities only in accordance
with the provisions of the addendum to this Adoption
Agreement, numbered 6.02(e).
31
<PAGE>
6.03 BENEFIT PAYMENT ELECTIONS.
Participant Elections After Separation from Service. A Participant who
is eligible to make distribution elections under Section 6.03 of the Plan
may elect to commence distribution of his Nonforfeitable Accrued Benefit:
(Choose at least one of (a) through (c))
[ ] (a) As of any distribution date, but not
earlier than _____________ of the __________
Plan Year beginning after the Participant's
Separation from Service.
[X] (b) As of the following date(s): (Choose at least one of
Options (1) through (6))
[ ] (1) Any distribution date after the
close of the Plan Year in which the
Participant attains Normal Retirement
Age.
[X] (2) Any distribution date following his Separation
from Service with the Employer.
[ ] (3) Any distribution date in the ___________ Plan
Year(s) beginning after his Separation from
Service.
[ ] (4) Any distribution date in the Plan
Year after the Participant incurs
________ Break(s) in Service (as
defined in Article V).
[ ] (5) Any distribution date following
attainment of age _________ and
completion of at least ____ Years of
Service (as defined in Article V).
[ ] (6) (Specify) _____________________________________.
[ ] (c) (Specify)__________________________________________________.
The distribution events described in the election(s) made under
Options (a), (b) or (c) apply equally to all Accounts maintained for
the Participant unless otherwise specified in Option (c).
Participant Elections Prior to Separation from Service - Regular
Matching Contributions Account and Employer Contributions Account.
Subject to the restrictions of Article VI, the following distribution
options apply to a Participant's Regular Matching Contributions
Account and Employer Contributions Account prior to his Separation
from Service: (Choose (d) or at least one of (e) through (h))
[X] (d) No distribution options prior to Separation from Service.
32
<PAGE>
[ ] (e) Attainment of Specified Age. Until he retires, the
Participant has a continuing election to receive all or
any portion of his Nonforfeitable interest in these
Accounts after he attains:
(Choose (1) or (2))
[ ] (l) Normal Retirement Age.
[ ] (2) __________ years of age and is at least
______________ % vested in these Accounts.
[Note: If the percentage is less than
100%, see the special vesting formula in
Section 5.03.]
[ ] (f) After a Participant has participated in the Plan for a
period of not less than _____ years and he is 100% vested
in these Accounts, until he retires, the Participant has a
continuing election to receive all or any portion of the
Accounts. [Note: The number in the blank space may not
be less than 5.]
[ ] (g) Hardship. A Participant may elect a hardship distribution
prior to his Separation from Service in accordance with
the hardship distribution policy: (Choose (1), (2) or (3);
(4) is available only as an additional option)
[ ] (1) Under Section 6.01(A)(4) of the Plan.
[ ] (2) Under Section 14.11 of the Plan.
[ ] (3) Provided in the addendum to this Adoption
Agreement, numbered Section 6.03.
[ ] (4) In no event may a Participant receive a
hardship distribution before he is at
least ___________ % vested in these
Accounts. [Note: If the percentage in
the blank is less than 100%, see the
special vesting formula in Section 5.03.]
[ ] (h) (Specify) ____________________________
[Note: The Employer may use an addendum, numbered 6.03,
to provide additional language authorized by Options
(b)(6), (c), (g)(3) or (h) of this Adoption Agreement
Section 6.03.]
Participant Elections Prior to Separation from Service - Deferral
Contributions Account, Qualified Matching Contributions Account and
Qualified Nonelective Contributions Account. Subject to the restrictions
of Article VI, the following distribution options apply to a Participant's
Deferral Contributions Account, Qualified Matching Contributions Account
and Qualified Nonelective Contributions Account prior to his Separation
from Service: (Choose (i) or at least one of (j) through (l))
[X] (i) No distribution options prior to Separation from Service.
33
<PAGE>
[ ] (j) Until he retires, the Participant has a continuing election
to receive all or any portion of these Accounts after he
attains: (Choose (1) or (2))
[ ] (1) The later of Normal Retirement Age or age
59 1/2.
[ ] (2) Age _____ (at least 59 1/2).
[ ] (k) Hardship. A Participant, prior to this Separation from
Service, may elect a hardship distribution from his
Deferral Contributions Account in accordance with the
hardship distribution policy under Section 14.11 of the
Plan.
[ ] (l) (Specify) _______________________________________________.
[Note: Option (l) may not permit in service distributions
prior to age 59 1/2 (other than hardship) and may not
modify the hardship policy described in Section 14.11.]
Sale of trade or business/subsidiary. If the Employer sells substantially
all of the assets (within the meaning of Code ss.409(d)(2)) used in a
trade or business or sells a subsidiary (within the meaning of Code
ss.409(d)(3)), a Participant who continues employment with the acquiring
corporation is eligible for distribution from his Deferral Contributions
Account, Qualified Matching Contributions Account and Qualified
Nonelective Contributions Account: (Choose (m) or (n))
[X] (m) Only as described in this Adoption Agreement Section 6.03
for distributions prior to Separation from Service.
[ ] (n) As if he has a Separation from Service. After March 31,
1988, a distribution authorized solely by reason of this
Option (n) must constitute a lump sum distribution,
determined in a manner consistent with Code ss.401(k)(10)
and the applicable Treasury regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The annuity
distribution requirements of Section 6.04: (Choose (a) or (b))
[X] (a) Apply only to a Participant described in Section 6.04(E)
of the Plan (relating to the profit sharing exception to
the joint and survivor requirements).
[ ] (b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than a
distribution from a segregated Account and other than a corrective
distribution described in Sections 14.07, 14.08, 14.09 or 14.10 of the
34
<PAGE>
Plan) occurs more than 90 days after the most recent valuation date,
the distribution will include interest at: (Choose (a), (b) or (c))
[X] (a) 0 % per annum. [Note: The percentage may equal 0%.]
[ ] (b) The 90 day Treasury bill rate in effect at the beginning
of the current valuation period.
[ ] (c) (Specify) ____________________________________________.
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. Pursuant to
Section 14.12, to determine the allocation of net income, gain or loss:
(Complete only those items, if any, which are applicable to the Employer's
Plan)
[X] (a) For salary reduction contributions, the Advisory Committee
will: (Choose (1), (2), (3), (4) or (5))
[ ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach
described in Section 14.12.
[X] (3) Use the weighted average method described in
Section 14.12, based on a 365-day weighting
period.
[ ] (4) Treat as part of the relevant Account at the
beginning of the valuation period
__________ % of the salary reduction
contributions: (Choose (i) or (ii))
[ ] (i) made during that valuation
period.
[ ] (ii) made by the following
specified time: ____________
____________________________.
[ ] (5) Apply the allocation method described in
the addendum to this Adoption Agreement
numbered 9.11(a).
[X] (b) For matching contributions, the Advisory Committee will:
(Choose (1), (2), (3) or (4))
[ ] (1) Apply Section 9.11 without modification.
[X] (2) Use the weighted average method described
in Section 14.12, based on a 365-day
weighting period.
35
<PAGE>
[ ] (3) Treat as part of the relevant Account at
the beginning of the valuation period
___________ % of the matching
contributions allocated during the
valuation period.
[ ] (4) Apply the allocation method described in
the addendum to this Adoption Agreement
numbered 9.11(b).
[ ] (c) For Participant nondeductible contributions, the Advisory
Committee will: (Choose (1), (2), (3), (4) or (5))
[ ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach
described in Section 14.12.
[ ] (3) Use the weighted average method described
in Section 14.12, based on a __________
weighting period.
[ ] (4) Treat as part of the relevant Account at
the beginning of the valuation period
____________ % of the Participant
nondeductible contributions:
(Choose (i) or (ii))
[ ] (i) made during that valuation
period.
[ ] (ii) made by the following
specified time: ____________
____________________________.
[ ] (5) Apply the allocation method described in
the addendum to this Adoption Agreement
numbered 9.11(c).
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.03 INVESTMENT POWERS. Pursuant to Section 10.03[F] of the Plan, the
aggregate investments in qualifying Employer securities and in qualifying
Employer real property: (Choose (a) or (b))
[X] (a) May not exceed 10% of Plan assets.
[ ] (b) May not exceed ________ % of Plan assets. [Note: The
percentage may not exceed 100%.]
36
<PAGE>
10.14 VALUATION OF TRUST. In addition to each Accounting Date, the Trustee must
value the Trust Fund on the following valuation date(s): (Choose (a) or
(b))
[X] (a) No other mandatory valuation dates.
[ ] (b) (Specify) ______________________________________________.
37
<PAGE>
EXECUTION PAGE
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Prototype Plan and Trust. The Employer hereby agrees to the provisions of this
Plan and Trust, and in witness of its agreement, the Employer by its duly
authorized officers, has executed this Adoption Agreement, and the Trustee (and
Custodian, if applicable) signified its acceptance, on this ____ day of
___________, 1996.
Name and EIN of Employer: NATIONAL AUTO FINANCE CORPORATION (EIN: 65-0493629)
Signed: _______________________________________________________________________
KEVIN G. ADAMS - Vice President (FOR NATIONAL AUTO FINANCE CORPORATION)
Name(s) of Trustee: Kevin G. Adams (Vice President), Roy Tipton (President),
Gary L. Shapiro (Chief Executive Officer) and Keith B.
Stein (Vice President)
Signed: _______________________________________________________________________
KEVIN G. ADAMS - Vice President (AS THE TRUSTEE)
_______________________________________________________________________
ROY TIPTON - PRESIDENT (AS THE TRUSTEE)
_______________________________________________________________________
GARY L. SHAPIRO - Chief Executive Officer (AS THE TRUSTEE)
_______________________________________________________________________
KEITH B. STEIN - Vice President (AS THE TRUSTEE)
Name of Custodian: Not Applicable
Signed: _______________________________________________________________________
[Note: A Trustee is mandatory, but a Custodian is optional. See Section 10.03
of the Plan.]
Plan Number. The 3-digit plan number the Employer assigns to this Plan for
ERISA reporting purposes (Form 5500 Series) is: 001.
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1)
38
<PAGE>
is solely for the Regional Prototype Plan Sponsor's recordkeeping purposes and
does not necessarily correspond to the plan number the Employer designated in
the prior paragraph.
Reliance on Notification Letter. The Employer may not rely on the Regional
Prototype Plan Sponsor's notification letter covering this Adoption Agreement.
For reliance on the Plan's qualification, the Employer must obtain a
determination letter from the applicable IRS Key District office.
39
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Prototype
Plan as made by NATIONAL AUTO FINANCE CORPORATION, the Signatory Employer to
the Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: January 1, 1996.
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[X] (b) The adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
__________, and having an original effective date of
__________.
Dated this ___________ day of ____________________, 1996.
Name of Participating Employer: National Auto Finance Company, L.P.
Signed: ______________________________________________________________________
KEVIN G. ADAMS (FOR NATIONAL AUTO FINANCE COMPANY, L.P.)
Participating Employer's EIN: 65-0523698
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: NATIONAL AUTO FINANCE CORPORATION
Accepted: ______________________
[Date] Signed: __________________________
KEVIN G. ADAMS
Name(s) of Trustee: KEVIN G. ADAMS, ROY TIPTON, GARY L. SHAPIRO AND
KEITH B. STEIN
Accepted: ______________________
[Date] Signed: __________________________
KEVIN G. ADAMS
Accepted: _______________________
[Date] Signed: __________________________
ROY TIPTON
Accepted: ______________________
[Date] Signed: __________________________
GARY L. SHAPIRO
Accepted: _______________________
[Date] Signed: __________________________
KEITH B. STEIN
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Prototype Plan information.]
40
<PAGE>
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Prototype
Plan as made by NATIONAL AUTO FINANCE CORPORATION, the Signatory Employer to
the Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: January 1, 1996.
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[X] (b) The adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
__________, and having an original effective date of
__________.
Dated this ___________ day of ____________________, 1996.
Name of Participating Employer: Auto Credit Clearinghouse, L.P.
Signed: ______________________________________________________________________
KEVIN G. ADAMS (FOR AUTO CREDIT CLEARINGHOUSE, L.P.)
Participating Employer's EIN: 65-0613974
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: NATIONAL AUTO FINANCE CORPORATION
Accepted: ______________________
[Date] Signed: __________________________
KEVIN G. ADAMS
Name(s) of Trustee: KEVIN G. ADAMS, ROY TIPTON, GARY L. SHAPIRO AND
KEITH B. STEIN
Accepted: ______________________
[Date] Signed: __________________________
KEVIN G. ADAMS
Accepted: _______________________
[Date] Signed: __________________________
ROY TIPTON
Accepted: ______________________
[Date] Signed: __________________________
GARY L. SHAPIRO
Accepted: _______________________
[Date] Signed: __________________________
KEITH B. STEIN
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Prototype Plan information.]
41
<PAGE>
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Prototype
Plan as made by NATIONAL AUTO FINANCE CORPORATION, the Signatory Employer to
the Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: January 1, 1996.
2. The undersigned Employer's adoption of this Plan constitutes:
[X] (a) The adoption of a new plan by the Participating Employer.
[ ] (b) The adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
__________, and having an original effective date of
__________.
Dated this ___________ day of ____________________, 1996.
Name of Participating Employer: National Financial Companies LLC
Signed: ______________________________________________________________________
KEITH B. STEIN (FOR NATIONAL FINANCIAL COMPANIES LLC)
Participating Employer's EIN: 65-0638388
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: NATIONAL AUTO FINANCE CORPORATION
Accepted: ______________________
[Date] Signed: __________________________
KEITH B. STEIN
Name(s) of Trustee: KEVIN G. ADAMS, ROY TIPTON, GARY L. SHAPIRO AND
KEITH B. STEIN
Accepted: ______________________
[Date] Signed: __________________________
KEVIN G. ADAMS
Accepted: _______________________
[Date] Signed: __________________________
ROY TIPTON
Accepted: ______________________
[Date] Signed: __________________________
GARY L. SHAPIRO
Accepted: _______________________
[Date] Signed: __________________________
KEITH B. STEIN
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Prototype Plan information.]
42
<PAGE>
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS (PLAN SECTION 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Prototype
Plan as made by NATIONAL AUTO FINANCE CORPORATION, the Signatory Employer to
the Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: January 1, 1996.
2. The undersigned Employer's adoption of this Plan constitutes:
[X] (a) The adoption of a new plan by the Participating Employer.
[ ] (b) The adoption of an amendment and restatement of a plan
currently maintained by the Employer, identified as
__________, and having an original effective date of
__________.
Dated this ___________ day of ____________________ 1996.
Name of Participating Employer: Hospitality Finance Company, L.P.
Signed: ______________________________________________________________________
KEITH B. STEIN (FOR HOSPITALITY FINANCE COMPANY, L.P.)
Participating Employer's EIN: 65-0571848
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: NATIONAL AUTO FINANCE CORPORATION
Accepted: ______________________
[Date] Signed: __________________________
KEITH B. STEIN
Name(s) of Trustee: KEVIN G. ADAMS, ROY TIPTON, GARY L. SHAPIRO AND
KEITH B. STEIN
Accepted: ______________________
[Date] Signed: __________________________
KEVIN G. ADAMS
Accepted: _______________________
[Date] Signed: __________________________
ROY TIPTON
Accepted: ______________________
[Date] Signed: __________________________
GARY L. SHAPIRO
Accepted: _______________________
[Date] Signed: __________________________
KEITH B. STEIN
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Prototype Plan information.]
43
<PAGE>
===============================================================================
NATIONAL AUTO FINANCE CORPORATION
401(k) PLAN
SUMMARY PLAN DESCRIPTION
===============================================================================
PARTICIPANT'S ACKNOWLEDGEMENT OF RECEIPT OF
-------------------------------------------
SUMMARY PLAN DESCRIPTION
------------------------
I hereby acknowledge receipt of a copy of the Summary Plan Description ("SPD")
for the plan identified above. I received a copy of the SPD on the date
indicated below.
Dated: _________________
____________________________________________________
Participant's Name - Printed
____________________________________________________
Signature of Participant
Note: This form should be completed by plan participants (to acknowledge
receipt of the Summary Plan Description) and returned to the Plan
Administer. A copy of this receipt is not required by EJReynolds, Inc.
(the third party administrator).
44
<PAGE>
----
-----------
------------------
-------------------------
----------------------------------
-------------------------------------------
---------------------------------------------------
----------------------------------------------------------------
------------------------------------------------------------------------
================================================================================
NATIONAL AUTO FINANCE CORPORATION
401(k) PLAN
(ADOPTION AGREEMENT)
================================================================================
<PAGE>
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, NATIONAL AUTO FINANCE
COMPANY L.P., a Delaware limited partnership, promises to pay to the order of
GARY L. SHAPIRO; the principal sums set forth on Exhibit A attached hereto,
with interest on the unpaid balance thereof from the date such amounts are
advanced until the entire indebtedness evidenced by this Note is paid in full
at the rate of eight percent (8%) per annum, both principal and accrued
interest payable ON DEMAND, in lawful money of the United States of America at
the address of Gary L. Shapiro c/o National Financial Corporation in Boca
Raton, Florida or at such other place in Boca Raton, Florida as from time to
time may be designated by the holder of this Note.
1. Amendment to Exhibit A. Set forth on Exhibit A is the
original amount advanced by the payee of this Note to the undersigned as of the
date hereof. The undersigned and the payee of this Note agree that the payee
may advance additional funds to the undersigned from time to time, which shall
be evidenced by this Note. When, as, and if such additional funds are advanced
to the undersigned by the payee of this Note, the undersigned hereby authorizes
the payee of this Note to set forth the amount of such advance and the date
such advance is made on Exhibit A attached hereto. Absent manifest effort, the
information set forth on Exhibit A shall constitute prima facie evidence of the
amount of the principal indebtedness advanced to the undersigned pursuant to
this Note. The failure of the payee of this Note to update the information set
forth on Exhibit A shall not affect, in any way whatsoever, the liability of the
undersigned for any advances, together with accrued and unpaid interest
thereon, which are made to such undersigned by the payee of this Note.
2. Demand Note. THIS IS A DEMAND NOTE. Upon demand by the
holder of this Note, the entire principal balance hereof and the interest
accrued hereon shall be immediately due and payable.
3. The undersigned and any endorsers, sureties, guarantors
and all others who are or may become liable for the payment hereof severally
waive notice of intent to accelerate, presentment for payment, demand, notice
of demand, notice of nonpayment or dishonor, protest and notice of protest with
respect to this Note, notice of acceleration and all other notices in
connection with the delivery, acceptance, performance, default or enforcement
of or consideration for this Note.
4. Stipulation of Jurisdiction. The parties hereby
irrevocably and unconditionally stipulate and agree that the Federal Courts in
the State of Florida or the State Court of the State of Florida shall have
non-exclusive jurisdiction to hear and finally determine any dispute, claim, or
controversy or action arising out of or connected (directly or indirectly) with
this Note.
5. Usury Savings Provision. Neither the undersigned nor any
guarantors endorsers or other parties now or hereafter becoming liable for
payment of this Note shall ever be required to pay interest on this Note at a
rate in excess of the maximum
<PAGE>
interest that may be lawfully charged under applicable law, and the provisions
of this paragraph shall control over all other provisions of this Note and any
other instruments now or hereafter executed in connection herewith which may be
in apparent conflict herewith.
6. Governing Law. This Note and the rights and duties of the
parties hereunder shall be governed for all purposes by the law of the State of
Florida and the law of the United States applicable to transactions within such
State.
7. Non-Recourse Note. Notwithstanding anything to the
contrary contained herein or in any instrument securing this Note, none of the
partners of the undersigned (including, without limitation, the general partner
and any limited partner of the undersigned) shall have any personal liability
for the payment of this Note or for the performance or observance of the
covenants, representations and warranties of the undersigned contained in this
Note or in any instrument now or hereafter securing this Note and the payee and
each holder of this Note agree not to seek any dnmages or personal money
judgment against any of the partners of the undersigned for any default under
this Note or under any instrument now or hereafter securing this Note but in
such event will look solely to the assets of the undersigned and any assets
which may hereafter be pledged by the undersigned to secure this Note.
EXECUTED AND AGREED as of October 31,1994.
NATIONAL AUTO FINANCE COMPANY L.P.,
a Delaware limited partnership
By: National Auto Finance Corporation, a
Delaware corporation, its general partner
By:
------------------------------
Gary L. Shapiro, President
<PAGE>
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, NATIONAL AUTO FINANCE COMPANY
L.P., a Delaware limited partnership, promises to pay to the order of EDGAR
OTTO, the principal sums set forth on Exhibit A attached hereto, with interest
on the unpaid balance thereof from the date such amounts are advanced until the
entire indebtedness evidenced by this Note is paid in full at the rate of eight
percent (8%) per annum, both principal and accrued interest payable ON DEMAND,
in lawful money of the United States of America at the address of Edgar Otto in
Boca Raton, Florida or at such other place in Boca Raton, Florida as from time
to time may be designated by the holder of this Note.
1. Amendment to Exhibit A. Set forth on Exhibit A is the
original amount advanced by the payee of this Note to the undersigned as of the
date hereof. The undersigned and the payee of this Note agree that the payee
may advance additional funds to the undersigned from time to time, which shall
be evidenced by this Note. When as, and if such additional funds are advanced
to the undersigned by the payee of this Note, the undersigned hereby authorizes
the payee of this Note to set forth the amount of such advance and the date
such advance is made on Exhibit A attached hereto. Absent manifest effort, the
information set forth on Exhibit A shall constitute prima facie evidence of the
amount of the principal indebtedness advanced to the undersigned pursuant to
this Note. The failure of the payee of this Note to update the information set
forth on Exhibit A shall not affect, in any way whatsoever, the liability of
the undersigned for any advances, together with accrued and unpaid interest
thereon, which are made to such undersigned by the payee of this Note.
2. Demand Note. THIS IS A DEMAND NOTE. Upon demand
by the holder of this Note, the entire principal balance hereof and the
interest accrued hereon shall be immediately due and payable.
3. Waiver. The undersigned and any endorsers, sureties,
guarantors and all others who are or may become liable for the payment hereof
severally waive notice of intent to accelerate, presentment for payment,
demand, notice of demand, notice of nonpayment or dishonor, protest and notice
of protest with respect to this Note, notice of acceleration and all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of or consideration for this Note.
4. Stipulation of Jurisdiction. The parties hereby
irrevocably and unconditionally stipulate and agree that the Federal
Courts in the State of Florida or the State Court of the State of
Florida shall have non-exclusive jurisdiction to hear and finally
determine any dispute, claim, or controversy or action arising out of or
connected (directly or indirectly) with this Note.
5. Usury Saving Provision. Neither the undersigned nor any
guarantors, endorsers or other parties now or hereafter becoming liable for
payment of this Note shall ever be required to pay interest on this Note at a
rate in excess of the maximum interest that may be lawfully charged under
applicable law, and the provisions of this paragraph shall control over all
other provisions of this Note and any other
<PAGE>
instruments now or hereafter executed iii connection herewith which may be in
apparent conflict herewith.
6. Governing Law. This Note the rights and duties of
the parties hereunder shall be governed for all purposes by the law of
the State of Florida and the law of the United States applicable to
transactions within such State.
7. Non-Recourse Note. Notwithstanding anything to the
contrary contained herein or in any instrument securing this Note, none of the
partners of the undersigned (including, without limitation, the general partner
and any limited partner of the undersigned) shall have any personal liability
for the payment of this Note or for the performance or observance of the
covenants, representations and warranties of the undersigned contained in this
Note or in any instrument now or hereafter securing this Note and the payee and
each holder of this Note agree not to seek ally damages or personal money
judgment against any of the partners of the undersigned for any default under
this Note or under any instrument now or hereafter securing this Note but in
such event will look solely to the assets of the undersigned and any assets
which may hereafter be pledged by the undersigned to secure this Note.
EXECUTED AND AGREED as of October 6, 1994.
NATIONAL AUTO FINANCE COMPANY L.P.,
a Delaware limited partnership
By: National to Finance Corporation, a
Delaware corporation, its general partner
By:__________________________
Gary L. Shapiro, President
2
<PAGE>
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, NATIONAL AUTO
FINANCE COMPANY L.P., a Delaware limited partnership, promises to pay to
the order of STEPHEN L. GURBA, the principal sums set forth on Exhibit A
attached hereto, with interest on the unpaid balance thereof from the
date such amounts are advanced until the entire indebtedness evidenced
by this Note is paid in full at the rate of eight percent (8%) per
annum, both principal and accrued interest payable ON DEMAND, in lawful
money of the United States of America at the address of Stephen L. Gurba
c/o National Financial Corporation in Boca Raton, Florida or at such
other place in Boca Raton, Florida as from time to time may be
designated by the holder of this Note.
1. Amendment to Exhibit A. Set forth on Exhibit A is the
original amount advanced by the payee of this Note to the undersigned as of the
date hereof. The undersigned and the payee of this Note agree that the payee may
advance additional funds to the undersigned from time to time, which shall be
evidenced by this Note. When, as, and if such additional funds are advanced to
the undersigned by the payee of this Note, the undersigned hereby authorizes the
payee of this Note to set forth the amount of such advance and the date such
advance is made on Exhibit A attached hereto. Absent manifest effort, the
information set forth on Exhibit A shall constitute prima facie evidence of the
amount of the principal indebtedness advanced to the undersigned pursuant to
this Note. The failure of the payee of this Note to update the information set
forth on Exhibit A shall not affect, in any way whatsoever, the liability of the
undersigned for any advances, together with accrued and unpaid interest thereon,
which are made to such undersigned by the payee of this Note.
2. Demand Note. THIS IS A DEMAND NOTE. Upon demand by the
holder of this Note, the entire principal balance hereof and the interest
accrued hereon shall be immediately due and payable.
3. Waiver. The undersigned and any endorsers, sureties,
guarantors and all others who are or may become liable for the payment hereof
severally waive notice of intent to accelerate, presentment for payment, demand,
notice of demand, notice of nonpayment or dishonor, protest and notice of
protest with respect to this Note, notice of acceleration and all other notices
in connection with the delivery, acceptance, performance, default or enforcement
of or consideration for this Note.
4. Stipulation of Jurisdiction. The parties hereby irrevocably
and unconditionally stipulate and agree that the Federal Courts in the State of
Florida or the State Court of the State of Florida shall have non-exclusive
jurisdiction to hear and finally determine any dispute, claim, or controversy or
action arising out of or connected (directly or indirectly) with this Note.
5. Usury Savings Provision. Neither the undersigned nor any
<PAGE>
guarantors, endorsers or other parties now or hereafter becoming liable for
payment of this Note shall ever be required to pay interest on this Note at a
rate in excess of the maximum interest that may be lawfully charged under
applicable law, and the provisions of this paragraph shall control over all
other provisions of this Note and any other instruments now or hereafter
executed in connection herewith which may be in apparent conflict herewith.
6. Governing Law. This Note and the rights and duties of the
parties hereunder shall be governed for all purposes by the law of the State of
Florida and the law of the United States applicable to transactions within such
State.
7. Non-Recourse Note. Notwithstanding anything to the contrary
contained herein or in any instrument securing this Note, none of the partners
of the undersigned (including, without limitation, the general partner and any
limited partner of the undersigned) shall have any personal liability for the
payment of this Note or for the performance or observance of the covenants,
representations and warranties of the undersigned contained in this Note or in
any instrument now or hereafter securing this Note and the payee and each holder
of this Note agree not to seek any damages or personal money judgment against
any of the partners of the undersigned for any default under this Note or under
any instrument now or hereafter securing this Note but in such event will look
solely to the assets of the undersigned and any assets which may hereafter be
pledged by the undersigned to secure this Note.
EXECUTED AND AGREED as of November 8, 1994.
NATIONAL AUTO FINANCE COMPANY L.P.,
a Delaware limited partnership
By: National Auto Finance Corporation,
a Delaware corporation, its
general partner
By:_______________________________________
Gary L. Shapiro, President
2
<PAGE>
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, NATIONAL AUTO FINANCE
COMPANY L.P., a Delaware limited partnership, promises to pay to the order of
NOVA FINANCIAL CORPORATION, a Delaware corporation, the principal sums set
forth on Exhibit A attached hereto, with interest on the unpaid balance thereof
from the date such amounts are advanced until the entire indebtedness evidenced
by this Note is paid in full at the rate of eight percent (8%) per annum, both
principal and accrued interest payable ON DEMAND, in lawful money of the United
States of America at the address of Nova Financial Corporation c/o National
Financial Corporation in Boca Raton, Florida or at such other place in Boca
Raton, Florida as from time to time may be designated by the holder of this
Note.
1. Amendment to Exhibit A. Set forth on Exhibit A is the
original amount advanced by the payee of this Note to the undersigned as of the
date hereof. The undersigned and the payee of this Note agree that the payee
may advance additional funds to the undersigned from time to time, which shall
be evidenced by this Note. When, as, and if such additional funds are advanced
to the undersigned by the payee of this Note, the undersigned hereby authorizes
the payee of this Note to set forth the amount of such advance and the date
such advance is made on Exhibit A attached hereto. Absent manifest effort, the
information set forth on Exhibit A shall constitute prima facie evidence of the
amount of the principal indebtedness advanced to the undersigned pursuant to
this Note. The failure of the payee of this Note to update the information set
forth on Exhibit A shall not affect, in any way whatsoever, the liability of
the undersigned for any advances, together with accrued and unpaid interest
thereon, which are made to such undersigned by the payee of this Note.
2. Demand Note. THIS IS A DEMAND NOTE. Upon demand by the
holder of this Note, the entire principal balance hereof and the interest
accrued hereon shall be immediately due and payable.
3. Waiver. The undersigned and any endorsers, sureties,
guarantors and all others who are or may become liable for the payment hereof
severally waive notice of intent to accelerate, presentment for payment,
demand, notice of demand, notice of non-payment or dishonor, protest and notice
of protest with respect to this Note, notice of acceleration and all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of or consideration for this Note.
4. Stipulation of Jurisdiction. The parties hereby
irrevocably and unconditionally stipulate and agree that the Federal Courts
in the State of Florida or the State Court of the State of Florida shall have
non-exclusive jurisdiction to hear and finally determine any
<PAGE>
dispute, claim, or controversy or action arising out of or connected
(directly or indirectly) with this Note.
5. Usury Savings Provision. Neither the undersigned nor any
guarantors, endorsers or other parties now or hereafter becoming liable for
payment of this Note shall ever be required to pay interest on this Note at a
rate in excess of the maximum interest that may be lawfully charged under
applicable law, and the provisions of this paragraph shall control over all
other provisions of this Note and any other instruments now or hereafter
executed in connection herewith which may be in apparent conflict herewith.
6. Governing Law. This Note and the rights and duties of the
parties hereunder shall be governed for all purposes by the law of the State of
Florida and the law of the United States applicable to transactions within such
State.
7. Non-Recourse Note. Notwithstanding anything to the
contrary contained herein or in any instrument securing this Note, none of the
partners of the undersigned (including, without limitation, the general partner
and any limited partner of the undersigned) shall have any personal liability
for the payment of this Note or for the performance or observance of the
covenants, representations and warranties of the undersigned contained in this
Note or in any instrument now or hereafter securing this Note and the payee and
each holder of this Note agree not to seek any damages or personal money
judgment against any of the partners of the undersigned for any default under
this Note or under any instrument now or hereafter securing this Note but in
such event will look solely to the assets of the undersigned and any assets
which may hereafter be pledged by the undersigned to secure this Note.
EXECUTED AND AGREED as of March 27, 1995.
NATIONAL AUTO FINANCE COMPANY L.P.,
a Delaware limited partnership
By: National Auto Finance Corporation,
a Delaware corporation, its general partner
By:
-----------------------------------------
Gary L. Shapiro, President
2
<PAGE>
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, NATIONAL AUTO FINANCE
COMPANY L.P., a Delaware limited partnership, promises to pay to the order of
NOVA CORPORATION, a Delaware corporation, the principal sums set forth on
Exhibit A attached hereto, with interest on the unpaid balance thereof from the
date such amounts are advanced until the entire indebtedness evidenced by this
Note is paid in full at the rate of eight percent (8%) per annum, both
principal and accrued interest payable ON DEMAND, in lawful money of the United
States of America at the address of Nova Corporation c/o National Financial
Corporation in Boca Raton, Florida or at such other place in Boca Raton,
Florida as from time to time may be designated by the holder of this Note.
1. Amendment to Exhibit A. Set forth on Exhibit A is the
original amount advanced by the payee of this Note to the undersigned as of the
date hereof. The undersigned and the payee of this Note agree that the payee
may advance additional funds to the undersigned from time to time, which shall
be evidenced by this Note. When, as, and if such additional funds are advanced
to the undersigned by the payee of this Note, the undersigned hereby authorizes
the payee of this Note to set forth the amount of such advance and the date
such advance is made on Exhibit A attached hereto. Absent manifest effort, the
information set forth on Exhibit A shall constitute prima facie evidence of the
amount of the principal indebtedness advanced to the undersigned pursuant to
this Note. The failure of the payee of this Note to update the information set
forth on Exhibit A shall not affect, in any way whatsoever, the liability of
the undersigned for any advances, together with accrued and unpaid interest
thereon, which are made to such undersigned by the payee of this Note.
2. Demand Note. THIS IS A DEMAND NOTE. Upon demand by the
holder of this Note, the entire principal balance hereof and the interest
accrued hereon shall be immediately due and payable.
3. Waiver. The undersigned and any endorsers, sureties,
guarantors and all others who are or may become liable for the payment hereof
severally waive notice of intent to accelerate, presentment for payment,
demand, notice of demand, notice of nonpayment or dishonor, protest and notice
of protest with respect to this Note, notice of acceleration and all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of or consideration for this Note.
4. Stipulation of Jurisdiction. The parties hereby
irrevocably and unconditionally stipulate and agree that the Federal Courts in
the State of Florida or the State Court of the State of Florida shall have
non-exclusive jurisdiction to hear and finally
<PAGE>
determine any dispute, claim, or controversy or action arising out of or
connected (directly or indirectly) with this Note.
5. Usury Savings Provision. Neither the undersigned nor any
guarantors, endorsers or other parties now or hereafter becoming liable for
payment of this Note shall ever be required to pay interest on this Note at a
rate in excess of the maximum interest that may be lawfully charged under
applicable law, and the provisions of this paragraph shall control over all
other provisions of this Note and any other instruments now or hereafter
executed in connection herewith which may be in apparent conflict herewith.
6. Governing Law. This Note and the rights and duties of the
parties hereunder shall be governed for all purposes by the law of the State of
Florida and the law of the United States applicable to transactions within such
State.
7. Non-Recourse Note. Notwithstanding anything to the
contrary contained herein or in any instrument securing this Note, none of the
partners of the undersigned (including, without limitation, the general partner
and any limited partner of the undersigned) shall have any personal liability
for the payment of this Note or for the performance or observance of the
covenants, representations and warranties of the undersigned contained in this
Note or in any instrument now or hereafter securing this Note and the payee and
each holder of this Note agree not to seek any damages or personal money
judgment against any of the partners of the undersigned for any default under
this Note or under any instrument now or hereafter securing this Note but in
such event will look solely to the assets of the undersigned and any assets
which may hereafter be pledged by the undersigned to secure this Note.
EXECUTED AND AGREED as of May 1, 1995.
NATIONAL AUTO FINANCE COMPANY L.P.,
a Delaware limited partnership
By: National Auto Finance Corporation,
a Delaware corporation, its general partner
By:
----------------------------------------
Gary L. Shapiro, President
2
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
dated as of December 8, 1994
by and between
NATIONAL AUTO FINANCE COMPANY L.P.
as Seller,
and the other Subsidiaries of National Auto
Finance Company, L.P. from time to time parties
hereto, also as Sellers
and
NAFCO FUNDING TRUST
as Purchaser
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement to Purchase and Sell.................... 1
SECTION 1.2 Timing of Purchases............................... 2
SECTION 1.3 Consideration for Purchases....................... 3
SECTION 1.4 No Recourse....................................... 3
SECTION 1.5 No Assumption of Obligations Relating to
Receivables, Related Assets or Contracts........ 3
SECTION 1.6 True Sales........................................ 3
SECTION 1.7 [Reserved]........................................ 3
SECTION 1.8 Addition of Sellers............................... 3
SECTION 1.9 Termination of Status as a Seller................. 4
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1 Calculation of Purchase Price..................... 5
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC
SECTION 3.1 Purchase Price Payments........................... 6
SECTION 3.2 The NAFCO Note.................................... 6
SECTION 3.3 Application of Collections and Other
Funds........................................... 7
SECTION 3.4 Servicing of Receivables and Related
Assets.......................................... 7
SECTION 3.5 Repurchase Events................................. 8
SECTION 3.6 Payments and Computations, Etc.................... 9
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase.......... 9
SECTION 4.2 Certification as to Representations and
Warranties...................................... 10
SECTION 4.3 Effect of Payment of Purchase Price............... 10
i
<PAGE>
Page
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of the
Seller.......................................... 11
SECTION 5.2 Representations and Warranties of NAFCO........... 19
ARTICLE VI
GENERAL COVENANTS OF THE SELLER
SECTION 6.1 Affirmative Covenants............................. 19
SECTION 6.2 Reporting Requirements............................ 22
SECTION 6.3 Negative Covenants................................ 24
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE TRANSFERRED ASSETS
SECTION 7.1 Rights of NAFCO................................... 26
SECTION 7.2 Responsibilities of Seller........................ 27
SECTION 7.3 Further Action Evidencing Purchases............... 27
SECTION 7.4 Rights of NAFCO and Its Assignees................. 29
SECTION 7.5 Notice to Trustee................................. 29
SECTION 7.6 Acknowledgement of Transfer....................... 29
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination by the Seller......................... 29
SECTION 8.2 Automatic Termination............................. 29
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnities by the Seller......................... 30
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments; Waivers, Etc......................... 30
SECTION 10.2 Notices, Etc..................................... 31
SECTION 10.3 Cumulative Remedies.............................. 31
SECTION 10.4 Binding Effect; Assignability; Survival
ii
<PAGE>
Page
of Provisions................................... 32
SECTION 10.5 Governing Law.................................... 32
SECTION 10.6 Costs, Expenses and Taxes........................ 32
SECTION 10.7 SUBMISSION TO JURISDICTION....................... 33
SECTION 10.8 WAIVER OF JURY TRIAL............................. 33
SECTION 10.9 Integration...................................... 33
SECTION 10.10 Execution in Counterparts........................ 33
SECTION 10.11 No Partnership or Joint Venture.................. 33
SECTION 10.12 No Proceedings................................... 33
SECTION 10.13 Severability of Provisions....................... 34
SECTION 10.14 Recourse to NAFCO................................ 34
SECTION 10.15 Limitation of Liability.......................... 34
iii
<PAGE>
EXHIBITS
EXHIBIT 3.2 Form of Non-Negotiable Promissory Note
EXHIBIT 4.1(a) Form of Seller Assignment Certificate
SCHEDULES
SCHEDULE 5.1(f) Litigation and Other Proceedings
APPENDICES
APPENDIX A Definitions
iv
<PAGE>
THIS RECEIVABLES PURCHASE AGREEMENT (this "Agreement"), dated as of
December 8, 1994, is made by and between National Auto Finance Company L.P., a
Delaware limited partnership, (the "Seller" or "National Auto"), and NAFCO
Funding Trust, a Delaware business trust ("NAFCO"). Except as otherwise
specifically provided herein, capitalized terms used in this Agreement have the
meanings ascribed to such terms in Appendix A hereto, and this Agreement shall
be interpreted in accordance with the conventions set forth in Parts B, C and D
of Appendix A.
WHEREAS, the Seller wishes to sell Receivables that it now owns and from
time to time hereafter will own to NAFCO, and NAFCO is willing, on the terms and
subject to the conditions contained in this Agreement, to purchase such
Receivables from the Seller from time to time; and
WHEREAS, NAFCO intends to transfer its interests in the Receivables sold
pursuant hereto, together with Receivables contributed to NAFCO by the Seller
from time to time, to the NAFCO Auto Receivables Master Trust in order to, among
other things, finance its purchases hereunder;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement to Purchase and Sell. On the terms and subject to
the conditions set forth in this Agreement (including the conditions to
purchases set forth in Article IV), the Seller agrees to sell, transfer, assign,
set over and otherwise convey to NAFCO, and NAFCO agrees to purchase from the
Seller, at the times set forth in Section 1.2, all of the Seller's right, title
and interest in, to and under:
(a) each Receivable (other than Contributed Receivables) that existed and
was owing to the Seller as of the closing of Seller's business on the
Initial Cut-Off Date,
(b) each Receivable created by the Seller (other than Contributed
Receivables) that arises during the period
1
<PAGE>
from and including the Initial Cut-Off Date to but excluding the
Purchase Termination Date,
(c) all Related Security with respect to all Receivables (other than
Contributed Receivables) of the Seller,
(d) all proceeds of the foregoing, including all Collections described
above (other than Collections in respect of a Contributed Receivable)
or Related Security with respect to any such Receivable, or otherwise
applied to repay or discharge any such Receivable (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), and
(e) all Records relating to any of the foregoing.
As used herein, (i) "Purchased Receivables" means the items listed above
in clauses (a) and (b); (ii) "Related Purchased Assets" means the items listed
above in clauses (c), (d) and (e); (iii) "Related Contributed Assets" means the
items listed above in clauses (c), (d) and (e) as they relate to the Contributed
Receivables, (iv) "Related Assets" means the Related Purchased Assets and the
Related Contributed Assets; (v) "Purchased Assets" means the Purchased
Receivables and the Related Purchased Assets; and (vi) "Transferred Assets"
means the Purchased Receivables, the Contributed Receivables and the Related
Assets. It is understood and agreed that the term "Receivables" includes the
Purchased Receivables and the Contributed Receivables. NAFCO's foregoing
commitment to purchase Purchased Assets is herein called the "Facility."
SECTION 1.2 Timing of Purchases.
(a) Initial Purchase. All of the Purchased Assets of the Seller that exist
at the closing of Seller's business on the Initial Cut-Off Date automatically
shall be deemed to have been sold to NAFCO on the Purchase Commencement Date
without further action by any Person.
(b) Regular Purchases. Except to the extent otherwise provided in Section
8.2, after the closing of Seller's business on the Initial Cut-Off Date until
the closing of Seller's business on the Business Day immediately preceding the
Purchase Termination Date, each Receivable and the Related Assets of
2
<PAGE>
Seller shall be deemed to have been sold to NAFCO pursuant hereto immediately
(and without further action by any Person) upon the acquisition of such
Receivable by Seller, unless such Receivable and Related Assets have been
contributed to NAFCO at such time.
SECTION 1.3 Consideration for Purchases. On the terms and subject to the
conditions set forth in this Agreement, NAFCO agrees to make Purchase Price
payments to the Seller in accordance with Article III.
SECTION 1.4 No Recourse. Except as specifically provided in this
Agreement, the sale and purchase of Purchased Assets under this Agreement shall
be without recourse to the Seller; it being understood that Seller shall be
liable to NAFCO for all representations, warranties, covenants and indemnities
made by Seller pursuant to the terms of this Agreement, all of which obligations
are limited so as not to constitute recourse to the Seller for the credit risk
of the Obligors.
SECTION 1.5 No Assumption of Obligations Relating to Receivables, Related
Assets or Contracts. Neither NAFCO, the NAFCO Trustee, the Administrator, any
Certificateholder, nor the Trustee shall have any obligation or liability to any
Obligor or other customer or client of Seller (including any obligation to
perform any of the obligations of Seller under any Receivable, related Contracts
or any other related purchase orders or other agreements). No such obligation or
liability is intended to be assumed by NAFCO, the NAFCO Trustee, the
Administrator, any Certificateholder, or the Trustee hereunder, and any such
assumption is expressly disclaimed.
SECTION 1.6 True Sales. The Seller and NAFCO intend the transfers of the
Purchased Assets hereunder to be true sales by the Seller to NAFCO that are
absolute and irrevocable and that provide NAFCO with the full benefits of
ownership of the Purchased Assets, and neither the Seller nor NAFCO intends the
transactions contemplated hereunder to be, or for any purpose to be
characterized as, loans from NAFCO to the Seller.
SECTION 1.7 [Reserved].
SECTION 1.8 Addition of Sellers. Any Subsidiary of National Auto may
become a seller hereunder and sell its receivables and property of the types
that constitute Related Assets hereunder to NAFCO if (i) NAFCO consents and (ii)
the Rating Agency Condition is satisfied with respect to such addition. National
Auto and its Subsidiary that is proposed to be added as a seller shall give to
NAFCO, the Trustee and the
3
<PAGE>
Applicable Rating Agencies not less than thirty days' prior written notice of
the effective date of the addition of such Subsidiary as a seller. Once such
notice has been given, any addition of a Subsidiary of National Auto as a seller
pursuant to this Section 1.8 shall become effective on the first Business Day
following the expiration of such thirty-day period (or such later date as may be
specified in such notice) on which the Rating Agency Condition has been
satisfied and such Subsidiary and the parties hereto shall have executed and
delivered such agreements, instruments and other documents and such amendments
or other modifications to the Transaction Documents, in form and substance
reasonably satisfactory to NAFCO and the Trustee, that NAFCO or the Trustee
reasonably determines are necessary or appropriate to effect such addition.
SECTION 1.9 Termination of Status as a Seller. (a) At any time when more
than one Person is a Seller, a Seller (other than National Auto) may terminate
its obligation to sell its Receivables and Related Assets to NAFCO if:
(i) such Seller (a "Terminating Seller") shall have given NAFCO
not less than thirty days' prior written notice of such
Seller's intention to terminate such obligations, which notice
shall be given by NAFCO to the Trustee and the Applicable
Rating Agencies;
(ii) an Authorized Officer of National Auto shall have certified
that the termination of the Terminating Seller as a Seller
will not have a Material Adverse Effect;
(iii) both immediately before and after giving effect to such
termination by the Terminating Seller, no Amortization Event
or Unmatured Amortization Event shall have occurred and be
continuing or shall reasonably be expected to occur; and
(iv) the Rating Agency Condition has been satisfied with respect to
such termination and the Trustee has consented to such
termination.
Any termination by a Seller pursuant to this Section 1.9(a) shall become
effective on the first Business Day that follows the day on which the
requirements of foregoing clauses (a)(i) through (iv) shall have been satisfied
(or such later date specified in the notice or certificate referred to in such
clauses). Any
4
<PAGE>
termination by a Seller pursuant to this Section 1.9(a) shall terminate such
Seller's right and obligation to sell Receivables and Related Assets hereunder
to NAFCO and NAFCO's agreement, with respect to such Seller, to purchase such
Receivables and Related Assets; provided, however, that such termination shall
not relieve such Seller of any of its other Obligations, to the extent such
Obligations related to Receivables (and Related Assets with respect thereto)
originated by such Seller prior to the effective date of such termination.
(b) A Seller's right and obligation to sell its Receivables and Related
Assets to NAFCO shall terminate immediately if such Seller ceases to be a
Subsidiary of National Auto; provided, however, that such termination shall not
relieve such Seller of any of its other Obligations, to the extent such
Obligations relate to Receivables (and Related Assets with respect thereto)
originated by such Seller prior to the effective date of such termination.
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1 Calculation of Purchase Price. (a) On each Business Day
(including the Purchase Commencement Date), the Administrator shall deliver to
NAFCO, the Trustee and the Seller a Daily Report with respect to NAFCO's
purchases of Receivables from the Seller
(i) that are to be made on such Business Day (in the case of the
Daily Report to be delivered on the Purchase Commencement Date) or
(ii) that were made on the immediately preceding Business Day (in
the case of each subsequent Daily Report).
(b) On each day when Receivables are purchased by NAFCO from the Seller
pursuant to Article I hereof, the "Purchase Price" to be paid to the Seller on
such day (in the case of the Purchase Commencement Date) or on the next Business
Day for the Receivables and Related Assets that are to be sold by the Seller on
such day shall be an amount equal to the sum of (i) the Amount Financed minus
the Dealer Discount and (ii) the lesser of (a) the amount of any up-front
insurance premium paid by the Seller for physical damage insurance on the
related Financed Vehicle, and (b) $165.00.
5
<PAGE>
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION 3.1 Purchase Price Payments.
On the Purchase Commencement Date and on the Business Day following
each day on which any Receivables are purchased from the Seller by NAFCO
pursuant to Article I hereof, on the terms and subject to the conditions of this
Agreement, NAFCO shall pay to the Seller the Purchase Price for the Receivables
and Related Assets purchased on such day by NAFCO from the Seller by (i) making
a cash payment (pro rata on the basis of the Purchase Price owing to each seller
if there is more than one seller) to the Seller to the extent that NAFCO has
cash available to make such payment pursuant to Section 3.3 and (ii)
automatically increasing the principal amount outstanding under the Seller's
NAFCO Note by the amount of the excess of the Purchase Price to be paid to the
Seller for such Receivables and Related Assets over the amount of any cash
payment made on such day to the Seller.
SECTION 3.2 The NAFCO Note.
(a) On the Purchase Commencement Date, NAFCO shall deliver to the Seller a
promissory note, substantially in the form of Exhibit 3.2, payable to the order
of Seller (each such promissory note, as the same may be amended, supplemented,
endorsed or otherwise modified from time to time, together with any promissory
note issued from time to time in substitution therefor or renewal thereof in
accordance with the Transaction Documents, being herein called a "NAFCO Note"),
which NAFCO Note is subordinated to all Certificates now or hereafter arising
under or in connection with the Pooling and Administration Agreement. The NAFCO
Note is payable in full on the date that is sixty (60) months after the
Amortization Commencement Date. The NAFCO Note bears interest at a rate per
annum equal to the rate publicly announced by the Trustee from time to time as
its "reference" rate, determined as of each Determination Date. NAFCO may prepay
all or part of the outstanding balance of the NAFCO Note from time to time
without any premium or penalty, unless such prepayment would result in a default
in NAFCO's payment of any other amount required to be paid by it under any
Transaction Document.
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(b) The Administrator shall hold the NAFCO Note for the benefit of the
Seller to whom such NAFCO Note was issued, and shall make all appropriate
recordkeeping entries with respect to the NAFCO Note or otherwise to reflect the
payments on and adjustments of the NAFCO Note. The Administrator's books and
records shall constitute rebuttable presumptive evidence of the principal amount
of and accrued interest on the NAFCO Note at any time. The Seller hereby
irrevocably authorizes the Administrator to mark the NAFCO Note issued to Seller
"CANCELLED" and to return the NAFCO Note to NAFCO upon the final payment
thereof.
SECTION 3.3 Application of Collections and Other Funds. If, on any day,
NAFCO receives (a) remittance to NAFCO in respect of the Class C Certificates
that it is not required to hold in trust for, or remit to, the Administrator or
the Trustee pursuant to the Pooling and Administration Agreement or (b) proceeds
of transfers pursuant to the Pooling and Administration Agreement, NAFCO shall
apply such funds as follows:
(i) first, to pay its existing expenses and to set aside funds for
the payment of expenses that are then accrued;
(ii) second, to pay the Purchase Price pursuant to Section 3.1 for
Receivables and Related Assets purchased by NAFCO from the Seller on such
day (in the case of the Purchase Commencement Date) or the next preceding
Business Day; and
(iii) third, in such order as NAFCO may elect, (A) to repay amounts
owed by NAFCO to the Seller under the NAFCO Note or (B) to make
distributions to National Auto to the extent permitted by law and the
NAFCO Trust Agreement.
SECTION 3.4 Servicing of Receivables and Related Assets. Consistent with
NAFCO's ownership, as between the parties to this Agreement, of the Receivables
and the Related Assets, NAFCO shall have the sole right to service, administer
and collect the Receivables, to assign such right and to delegate such right to
others (subject, in any event, to the terms and conditions of the Transaction
Documents). Without limiting the generality of Section 10.4, the Seller hereby
acknowledges and agrees that NAFCO shall assign to the Trustee for the benefit
of the Certificateholders the rights and interests granted by the Seller to
NAFCO hereunder and agrees to cooperate fully with the Administrator and the
Trustee in the exercise of such rights. As more fully described in Section 7.4
and in the Pooling and Administration Agreement, the Trustee may only exercise
the
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rights granted NAFCO pursuant to this Section 3.4 in the place of NAFCO (as
assignee or otherwise) following the designation of an Administrator other than
National Auto pursuant to Section 10.02 of the Pooling and Administration
Agreement.
SECTION 3.5 Repurchase Events.
(a) The Seller hereby covenants and agrees with NAFCO, for the
benefit of NAFCO, the Trustee and the Certificateholders, that the occurrence of
a breach of any of the Seller's representations and warranties contained in
Section 5.1 hereof shall constitute events obligating the Seller to repurchase
Receivables hereunder ("Repurchase Events"), at the Repurchase Price from NAFCO
or from the Trust. The repurchase obligation of the Seller shall constitute the
sole remedy to the Certificateholders, the Trustee, or NAFCO against the Seller
with respect to any Repurchase Event.
(b) With respect to all Receivables repurchased by the Seller
pursuant to this Agreement, NAFCO shall assign, without recourse, representation
or warranty, to the Seller all NAFCO's right, title and interest in and to such
Receivables, and all security and documents relating thereto.
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SECTION 3.6 Payments and Computations, Etc. All amounts to be paid by the
Seller to NAFCO or by NAFCO to the Seller hereunder shall be paid in accordance
with the terms hereof no later than 1:00 p.m. (New York time) on the day when
due in Dollars in immediately available funds to an account that NAFCO or the
Seller shall from time to time specify in writing. Payments received after such
time shall be deemed to have been received on the next Business Day. In the
event that any payment becomes due on a day which is not a Business Day, then
such payment shall be made on the next succeeding Business Day. Seller shall, to
the extent permitted by law, pay to NAFCO, on demand, interest on all amounts
not paid when due hereunder at 1% per annum above the interest rate on the NAFCO
Note in effect on the date such payment was due; provided, however, that such
interest rate shall not at any time exceed the maximum rate permitted by
applicable law. All computations of interest payable hereunder shall be made on
the basis of a year of 360 days for the actual number of days (including the
first but excluding the last day) elapsed.
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase. The initial purchase
hereunder is subject to the conditions precedent that (i) each of the conditions
precedent to the execution, delivery and effectiveness of each other Transaction
Document (other than a condition precedent in any such other Transaction
Document relating to the effectiveness of this Agreement) shall have been
fulfilled to the satisfaction of NAFCO, and (ii) NAFCO shall have received each
of the following, on or before the Closing Date, each (unless otherwise
indicated) dated the date hereof or the Closing Date and each in form and
substance satisfactory to NAFCO:
(a) Seller Assignment Certificates. The Seller Assignment
Certificate in the form of Exhibit 4.1(a) from the Seller, duly completed,
executed and delivered by the Seller;
(b) Good Standing Certificate of the Seller. A good standing
certificate for National Auto, issued by the Secretary of State of
Delaware;
(c) Incumbency Certificate. A certificate of the Secretary or
Assistant Secretary of the Seller certifying,
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as of a recent date reasonably acceptable to NAFCO, the names and true
signatures of the officers authorized on Seller's behalf to sign this
Agreement and the other Transaction Documents to be delivered by Seller
hereunder (on which certificate NAFCO, the Trustee and the Administrator
may conclusively rely until such time as NAFCO shall receive from the
Seller (with a copy to the Trustee and the Administrator) a revised
certificate meeting the requirements of this subsection (c);
(d) Other Transaction Documents. Original copies, executed by each
of the parties thereto in such reasonable number as shall be specified by
NAFCO, of each of the other Transaction Documents to be executed and
delivered in connection herewith; and
(e) Opinions of Counsel. The following opinions of counsel, each in
form and substance satisfactory to NAFCO: (i) opinions of Weil, Gotshal &
Manges, special counsel to the Seller as to general corporate, UCC, true
sale, non-consolidation and tax matters and (ii) an opinion of the General
Counsel of the Seller as to certain corporate matters.
Each seller which is added subsequent to the Closing Date pursuant to
Section 1.8 hereof shall furnish to NAFCO, prior to the sale of its Receivables,
the items set forth in clauses (a), (b) and an opinion of counsel as to UCC
matters and corporate matters above.
SECTION 4.2 Certification as to Representations and Warranties. Seller, by
accepting the Purchase Price paid for each purchase of Receivables generated by
Seller and the Related Assets of Seller, shall be deemed to have certified, with
respect to the Receivables and Related Assets to be sold by it on such day, that
its representations and warranties contained in Article V are true and correct
on and as of such day, with the same effect as though made on and as of such day
and that no Amortization Commencement Date has occurred.
SECTION 4.3 Effect of Payment of Purchase Price. Upon the payment of the
Purchase Price (whether in cash or by an increase in the Seller's NAFCO Note
pursuant to Section 3.1) for any Purchase, title to the Receivables and the
Related Assets included in such Purchase shall rest in NAFCO, whether or not the
conditions precedent to such Purchase were in fact satisfied; provided, however,
that NAFCO shall not be deemed to have waived
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any claim it may have under this Agreement for the failure by the Seller in fact
to satisfy any such condition precedent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of the Seller. In order to
induce NAFCO to enter into this Agreement and to make purchases hereunder,
Seller hereby makes the representations and warranties set forth in this Section
5.1 at the times and to the extent set forth in Section 4.2.
(a) Organization and Good Standing. Seller is a limited partnership
duly organized and validly existing in good standing under the laws of the
State of Delaware and has full power and authority to own its properties
and to conduct its business as such properties are presently owned and
such business is presently conducted. Seller had at all relevant times,
and now has, all necessary power, authority, and legal right to own and
sell the Receivables and the Related Assets.
(b) Due Qualification. Seller is duly qualified to do business and
is in good standing (or is exempt from such requirement), and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business requires
such qualification, licenses or approvals and where the failure so to
qualify, to obtain such licenses and approvals or to preserve and maintain
such qualification, licenses or approvals would have a reasonable
likelihood of having a Material Adverse Effect.
(c) Power and Authority; Due Authorization. Seller has (i) all
necessary power and authority to (A) execute and deliver this Agreement
and the other Transaction Documents to which it is a party, (B) perform
its obligations under this Agreement and the other Transaction Documents
to which it is a party, and (C) sell and assign Receivables and the
Related Assets on the terms and subject to the conditions herein and
therein provided and (ii) duly authorized by all necessary action such
sale and assignment and the execution, delivery, and performance of this
Agreement and the other Transaction Documents to which it is a party and
the consummation of the transactions provided for in this
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Agreement and the other Transaction Documents to which it is a party.
(d) Valid Sale; Binding Obligations. Each sale made by Seller
pursuant to this Agreement, and each contribution made to NAFCO pursuant
to the NAFCO Trust Agreement, shall constitute a valid sale (except in the
case of Contributed Receivables), transfer, and assignment of all of
Seller's right, title and interest in, to and under the Receivables and
the Related Assets of Seller to NAFCO which is perfected and of first
priority under the UCC and otherwise, enforceable against creditors of,
and purchasers from, Seller and free and clear of any Adverse Claim (other
than any Adverse Claim arising solely as a result of any action taken by
NAFCO hereunder or by the Trustee under the Pooling and Administration
Agreement); and this Agreement constitutes, and each other Transaction
Document to which Seller is a party when duly executed and delivered will
constitute, a legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(e) No Conflict or Violation. The execution, delivery and
performance of, and the consummation of the transactions contemplated by,
this Agreement and the other Transaction Documents to be signed by Seller
and the fulfillment of the terms hereof and thereof will not (i) conflict
with, violate, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default
under, (A) the Limited Partnership Agreement or (B) any indenture, loan
agreement, mortgage, deed of trust, or other material agreement or
instrument to which Seller is a party or by which it or any of its
properties is bound, (ii) result in the creation or imposition of any
Adverse Claim upon any of the Receivables or Related Assets other than
pursuant to this Agreement and the other Transaction Documents, or (iii)
conflict with or violate any federal, state, local or foreign law or any
decision, decree, order, rule, or regulation applicable to Seller or any
of its properties of any court or of any federal, state, local or foreign
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over Seller or any of its properties,
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which conflict, violation, breach or default, individually or in the
aggregate, would have a reasonable likelihood of having a Material Adverse
Effect.
(f) Litigation and Other Proceedings. Except as described in
Schedule 5.1(f), (i) there is no action, suit, proceeding or investigation
pending or, to the best knowledge of Seller, threatened against Seller
before any court, regulatory body, arbitrator, administrative agency, or
other tribunal or governmental instrumentality and (ii) Seller is not
subject to any order, judgment, decree, injunction, stipulation or consent
order of or with any court or other government authority, that, in the
case of each of the foregoing clauses (i) and (ii), (A) asserts the
invalidity of this Agreement or any other Transaction Document, (B) seeks
to prevent the sale of any Receivables or Related Assets by Seller to
NAFCO, the issuance of the Seller Assignment Certificate or the
consummation of any of the transactions contemplated by this Agreement or
any other Transaction Document, (C) seeks any determination or ruling that
has a reasonable likelihood of materially and adversely affecting the
performance by Seller of its obligations under this Agreement or any other
Transaction Document or the validity or enforceability of this Agreement
or any other Transaction Document, (D) seeks to affect adversely the
income tax attributes of the purchases hereunder or the Seller Assignment
Certificate, in the case of each of the foregoing whether under the United
States federal income tax system or any state income tax system, or (E)
individually or in the aggregate for all such actions, suits, proceedings
and investigations, would have a reasonable likelihood of having a
Material Adverse Effect.
(g) Government Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority that are
required to be obtained by the Seller, and all notices to and filings with
any Governmental Authority that are required to be made by the Seller, in
the case of each of the foregoing in connection with the conveyance of
Receivables and Related Assets or the due execution, delivery and
performance by the Seller of this Agreement, the Seller Assignment
Certificate or any other Transaction Document to which it is a party and
the consummation of the transactions contemplated by this Agreement, have
been obtained or made and are in full force and effect, except where the
failure to obtain or to make any such authorization, consent, order,
approval, notice or filing, individually or in the aggregate for all such
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failures, would not have a reasonable likelihood of having a Material
Adverse Effect.
(h) Margin Regulations. No use of any funds obtained by Seller under
this Agreement will conflict with or contravene any of Regulations G, T, U
and X promulgated by the Federal Reserve Board from time to time.
(i) Quality of Title.
(i) Immediately before each purchase to be made by NAFCO
hereunder and each contribution to be made under the NAFCO Trust
Agreement to NAFCO, each Receivable and Related Asset of Seller
which is then to be transferred to NAFCO hereunder or thereunder,
and the related Contracts, shall be owned by Seller free and clear
of any Adverse Claim (other than any Adverse Claim arising solely as
the result of any action taken by NAFCO hereunder or by the Trustee
under the Pooling and Administration Agreement); and Seller shall
have made all filings and shall have taken all other action under
applicable law in each relevant jurisdiction in order to protect and
perfect the ownership interest of NAFCO and its successors in such
Receivables and Related Assets against all creditors of, and
purchasers from, Seller.
(ii) Whenever NAFCO makes a Purchase or accepts a contribution
under the NAFCO Trust Agreement, it shall have acquired a valid and
perfected first priority ownership interest in each Transferred
Asset, free and clear of any Adverse Claim (other than any Adverse
Claim arising solely as the result of any action taken by NAFCO
hereunder or by the Trustee under the Pooling and Administration
Agreement).
(iii) No effective financing statement or other instrument
similar in effect that covers all or part of any Receivable, any
interest therein or any Related Asset with respect thereto is on
file in any recording office except (x) such as may be filed (A) in
favor of Seller in accordance with the Contracts, (B) in favor of
NAFCO pursuant to this Agreement or the NAFCO Trust Agreement and
(C) in favor of the Trustee, for the benefit of the
Certificateholders, in accordance with the Pooling and
Administration Agreement and (y) such as may have been identified to
NAFCO prior to the Closing Date and termination statements relating
to
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which have been placed with LEXIS Document Services for filing on
the Closing Date or the first Business Day thereafter.
(iv) No purchase of an interest in any Receivable or Related
Asset of Seller by NAFCO from Seller constitutes a fraudulent
transfer or fraudulent conveyance under the United States Bankruptcy
Code or applicable state bankruptcy or insolvency laws or is
otherwise void or voidable or subject to subordination under similar
laws or principles or for any other reason.
(v) The purchase of Receivables and Related Assets by NAFCO
from Seller constitutes a true and valid sale of such Receivables
and Related Assets under applicable state law and true and valid
assignments and transfers for consideration (and not merely a pledge
of such Receivables and Related Assets for security purposes),
enforceable against the creditors of Seller, and no Receivables or
Related Assets transferred to NAFCO hereunder or under the NAFCO
Trust Agreement shall constitute property of Seller.
(j) Eligible Receivables. (i) On the date of each Purchase of
Receivables hereunder and upon transfer of such Receivables to the Trust
in accordance with the Pooling and Administration Agreement, each such
Receivable, unless otherwise identified to NAFCO and the Trustee by the
Administrator in the Daily Report for such date, is an Eligible
Receivable, and (ii) on the date of each Daily Report or Distribution Date
Statement which identifies a Receivable as an Eligible Receivable, such
Receivable is an Eligible Receivable.
(k) Accuracy of Information. All written information furnished on
and after the Closing Date by Seller or any other NAFCO Person to NAFCO,
the Administrator or the Trustee pursuant to or in connection with any
Transaction Document or any transaction contemplated herein or therein
shall not contain any untrue statement of a material fact or omit to state
material facts necessary to make the statements made not misleading, in
each case on the date such statement was made and in light of the
circumstances under which such statements were made or such information
was furnished.
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(l) Compliance with Applicable Laws. Seller is in compliance with
the requirements of all applicable laws, rules, regulations, and orders of
all Governmental Authorities (federal, state, local or foreign, and
including environmental laws), a violation of any of which, individually
or in the aggregate for all such violations, would have a reasonable
likelihood of having a Material Adverse Effect.
(m) Investment Company Act. The Seller is not, and is not controlled
by, an "investment company" registered or required to be registered under
the Investment Company Act of 1940, as amended.
(n) Representations and Warranties. At the time that any Receivable
is sold or transferred by the Seller to NAFCO, the Seller hereby
represents and warrants that:
(i) Characteristics of Receivables. Each Receivable (a) shall
have been originated in the United States of America by a Dealer for
the retail sale of a Financed Vehicle in the ordinary course of such
Dealer's business, shall have been fully and properly executed by
the parties thereto, shall have been purchased by National Auto from
such Dealer under an existing dealer agreement, and shall have been
validly assigned by such Dealer to National Auto, which in turn is
being validly assigned pursuant to this Purchase Agreement by
National Auto to NAFCO in accordance with the terms of this
Agreement, (b) shall have created or shall create a valid,
subsisting, and enforceable first priority security interest in
favor of National Auto in the Financed Vehicle, which security
interest is being assigned pursuant to this Purchase Agreement by
National Auto to NAFCO, (c) shall contain customary and enforceable
provisions such that the rights and remedies of the holder thereof
shall be adequate for realization against the collateral of the
benefits of the security, (d) shall provide for level monthly
payments (provided that the payment in the first or last month in
the life of the Receivable may be minimally different from the level
payment) that fully amortize the Amount Financed over an original
term of no greater than 60 months and the related Contract and (e)
has not been modified since its issuance date.
(ii) Compliance with Law. Each Receivable and the sale of the
Financed Vehicle shall have complied in
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all material respects at the time it was originated or made and at
the execution of this Agreement shall comply in all material
respects with all requirements of applicable federal, state, and
local laws, and regulations thereunder, including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations
B and Z, and state adaptations of the National Consumer Act and of
the Uniform Consumer Credit Code, and other consumer credit laws and
equal credit opportunity and disclosure laws.
(iii) Binding Obligation. Each Receivable shall represent the
genuine, legal, valid, and binding payment obligation in writing of
the Obligor, enforceable by the holder thereof in accordance with
its terms subject to the effect of bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights generally. No Obligor on a Contract is the United
States of America, any state or local governmental agency or
instrumentality, or any of the foregoing.
(iv) Security Interest in Financed Vehicle. Immediately prior
to the sale, assignment, and transfer thereof, each Receivable shall
be secured by a validly perfected first priority security interest
in the Financed Vehicle in favor of National Auto as secured party
or all necessary and appropriate actions shall have been commenced
that would result in the valid perfection of a first priority
security interest in the Financed Vehicle in favor of National Auto
as secured party.
(v) Receivables in Force. No Receivable shall have been
satisfied, subordinated, or rescinded, nor shall any Financed
Vehicle have been released from the lien granted by the related
Receivable in whole or in part.
(vi) No Defenses. No Contract is subject to any asserted
reduction (including any reduction on account of any offsetting
account payable by the Seller to an Obligor or funds of an Obligor
held by the Seller), cancellation, rebate (including any advertising
rebate)
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or refund or any dispute, offset, counterclaim, lien or defense
whatsoever;
(vii) No Liens. To the best of the Seller's knowledge, no
liens or claims shall have been filed for work, labor, or materials
relating to a Financed Vehicle that shall be liens prior to, or of
equal priority with, the security interest in the Financed Vehicle
granted by the Contract.
(viii) No Default. Except for payment defaults continuing for
a period of not more than 45 days, no default, breach, violation, or
event permitting acceleration under the terms of any Receivable
shall have occurred; and no continuing condition that with notice or
the lapse of time would constitute a default, breach, violation, or
event permitting acceleration under the terms of any Receivable
shall have arisen; and the Seller shall not waive any of the
foregoing except as otherwise permitted hereunder.
(ix) Insurance. National Auto, in accordance with its
customary procedures, shall have determined that the Obligor has
obtained or agreed to obtain physical damage insurance covering the
Financed Vehicle or the vehicle is protected by force-placed
insurance.
(x) Title. It is the intention of the Seller that the transfer
and assignment herein contemplated constitute a sale of the
Receivables from the Seller to NAFCO and that the beneficial
interest in and title to the Receivables 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. No Receivable has been
sold, transferred, assigned, or pledged by the Seller to any Person
other than NAFCO. Immediately prior to the transfer and assignment
herein contemplated, the Seller had good and marketable title to
each Receivable free and clear of all Liens, security interests, and
rights of others; and, immediately upon the transfer thereof, NAFCO
shall have good and marketable title to each Receivable, free and
clear of all Liens, security interests, and rights of others and no
offsets, defenses or counterclaims against it have been asserted or
threatened; and the transfer has been perfected under the UCC.
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(xi) Possession; One Contract. With respect to each
Receivable, there is only one Contract, which Contract shall be held
by the Servicer on behalf of NAFCO, pursuant to the Servicing
Agreement.
(xii) All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give NAFCO
a first priority perfected ownership interest in the Receivables
shall have been made and shall remain in full force and effect.
(xiii) Chattel Paper. Each Receivable constitutes "chattel
paper" as defined in the UCC.
(xiv) Delinquency. No Receivable is more than 45 days past
due.
SECTION 5.2 Representations and Warranties of NAFCO. From the date hereof
until the Purchase Termination Date, NAFCO hereby represents and warrants that
(a) (i) this Agreement has been duly executed and delivered by NAFCO and (ii)
constitutes NAFCO's valid, binding and legally enforceable obligation, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law, and (b) the execution, delivery
and performance of this Agreement does not violate any applicable law or any
agreement to which NAFCO is a party or by which its properties are bound.
ARTICLE VI
GENERAL COVENANTS OF THE SELLER
SECTION 6.1 Affirmative Covenants. From the Closing Date until the first
day following the Purchase Termination Date on which all Obligations of the
Seller shall have been finally and fully paid and performed and the Pool Balance
shall have been reduced to zero, unless NAFCO shall otherwise give its prior
written consent, the Seller hereby agrees that it will perform the covenants and
agreements set forth in this Section 6.1.
(a) Compliance with Laws, Etc. Seller will comply in all material
respects with all applicable laws, rules, regulations, judgments, decrees
and orders (including those relating to the Receivables, the Related
Assets, the related
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Contracts of the Seller and any other agreements related thereto), where
the failure so to comply, individually or in the aggregate for all such
failures, would have a reasonable likelihood of having a Material Adverse
Effect.
(b) Preservation of Existence. Seller will preserve and maintain its
existence, rights, franchises and privileges in the jurisdiction of its
organization, and qualify and remain qualified in good standing in each
jurisdiction where the failure to preserve and maintain such existence,
rights, franchises, privileges and qualifications would have a reasonable
likelihood of having a Material Adverse Effect.
(c) Receivables Reviews. Seller shall, during regular business hours
upon reasonable advance notice permit NAFCO and its agents or
representatives, at the expense of Seller, (i) to examine and make copies
of and abstracts from, and to conduct accounting reviews of, all Records
in the possession or under the control of Seller relating to the
Receivables or Related Assets generated by Seller, and (ii) to visit the
offices and properties of Seller for the purpose of examining such
materials described in clause (i) above, and to discuss matters relating
to any Receivables or any Related Assets of Seller or the Seller's
performance hereunder with any of the Authorized Officers of Seller or,
with the prior consent of an Authorized Officer of Seller, with employees
of Seller having knowledge of such matters (the examinations set forth in
the foregoing clauses (i) and (ii) being herein called a "Seller
Receivables Review"). NAFCO and its agents or representatives shall be
entitled to conduct Seller Receivables Reviews whenever NAFCO, in its
reasonable judgment, deems a Seller Receivables Review appropriate.
(d) Keeping of Records and Books of Account. Seller shall maintain
and implement or cause to be maintained and implemented, administrative
and operating procedures (including, an ability to recreate records
evidencing its Receivables and Related Assets in the event of the
destruction of the originals thereof), and shall keep and maintain, or
cause to be kept or maintained, all documents, books, records and other
information which, in the reasonable determination of NAFCO and the
Trustee, are necessary or advisable in accordance with prudent industry
practice and custom for transactions of this type for the collection of
all Receivables and the Related Assets. At any time after the occurrence
and continuance of an
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Administrator Default, Seller will, upon NAFCO's request, deliver copies
of all books and records maintained pursuant to this Section 6.1(d) to the
Trustee. Seller shall maintain or cause to be maintained at all times
accurate and complete books, records and accounts relating to the
Receivables, Related Assets and Contracts and all Collections thereon in
which timely entries shall be made. Such books and records shall be marked
to indicate the sales of all Receivables and Related Assets hereunder.
(e) Performance and Compliance with Receivables and Contracts.
Seller will, at its expense, timely and fully perform and comply with all
provisions, covenants and other promises required to be observed by it
under the Contracts of the Seller related to the Receivables and Related
Assets, the breach of which provisions, covenants or promises would have a
reasonable likelihood of having a Material Adverse Effect.
(f) Location of Records and Offices. Seller will keep its principal
place of business and chief executive office, and the offices where it
keeps all Records maintained by it at the addresses referred to in
Schedule 5.1(f) or, upon not less than 30 days' prior written notice given
by Seller to NAFCO, the Trustee and the Applicable Rating Agencies, at
such other locations in jurisdictions where all action required by Section
7.3 shall have been taken and completed.
(g) Separate Existence of NAFCO. Seller hereby acknowledges that the
Trustee, on behalf of the Trust, is entering into the transactions
contemplated by the Transaction Documents in reliance upon NAFCO's
identity as a legal entity separate from Seller and the other NAFCO
Persons. Therefore, from and after the date hereof until the first day
following the Purchase Termination Date on which all Obligations of the
Seller shall have been fully paid and performed and the Pool Balance shall
have been reduced to zero, Seller will, and will cause each other NAFCO
Person to, take all reasonable steps to continue their respective
identities as separate legal entities and to make it apparent to third
Persons that each is an entity with assets and liabilities distinct from
those of NAFCO and that NAFCO is not a division of the Administrator,
Seller or any other Person.
(h) Payment Instructions to Obligors. Seller will instruct all
Obligors to submit all payments on Receivables and Related Assets directly
to the Servicer Account.
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(i) Taxes. Seller will file all tax returns and reports required by
law to be filed by it, will accrue in accordance with GAAP for all taxes
payable by it and will pay all taxes and governmental charges shown on
such tax returns and reports to be owing by it, prior to the date on which
penalties attach thereto except any such taxes or charges which (i) are
being diligently contested in good faith by appropriate proceedings, (ii)
for which adequate reserves in accordance with GAAP have been set aside on
their respective books and (iii) with respect to which no Lien has been
imposed upon any Receivables or Related Assets.
(j) Segregation of Collections. Seller shall use its best efforts to
ensure that there will be no deposit of any funds other than Collections
into the Servicer Account and, to the extent that any such funds
nevertheless are deposited into the Servicer Account, shall promptly
identify any such funds, or shall cause such funds to be so identified, to
NAFCO, the Administrator and the Trustee (following which notice, NAFCO
shall cause the Administrator to return all such funds to the Seller).
(m) Accuracy of Information. All written information furnished on
and after the Closing Date by Seller or any other NAFCO Person to NAFCO,
the Administrator or the Trustee pursuant to or in connection with any
Transaction Document or any transaction contemplated herein or therein
shall not contain any untrue statement of a material fact or omit to state
material facts necessary to make the statements made not misleading, in
each case on the date such statement was made and in light of the
circumstances under which such statements were made or such information
was furnished.
(n) Credit and Collection Policies. Seller shall comply in all
material respects with its Credit and Collection Policy in regard to each
Receivable of the Seller and the Related Assets and the Contracts related
to each such Receivable, where the failure so to comply, individually or
in the aggregate for all such failures, would reasonably be expected to
have a Material Adverse Effect.
SECTION 6.2 Reporting Requirements. From the Closing Date until the first
day following the Purchase Termination Date on which all Obligations of the
Seller shall have been finally and fully paid and performed and the Pool Balance
shall have been
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reduced to zero, Seller agrees that it will, unless NAFCO and the Trustee and
(with respect to the notices described below in clauses (c) and (d)) the
Applicable Rating Agencies shall otherwise give prior written consent, furnish
to NAFCO and the Trustee and, in the case of the notices described below in
clauses (c) and (d), to the Applicable Rating Agencies:
(a) Annual Financial Statements. As soon as possible and in any
event within 120 days after the end of each fiscal year of Seller, a copy
of the consolidated balance sheet of Seller and its Consolidated
Subsidiaries as at the end of such fiscal year and the related statements
of earnings, stockholders' equity and cash flows of Seller and its
Consolidated Subsidiaries for such fiscal year, setting forth in each case
in comparative form the corresponding figures for the preceding fiscal
year and prepared in accordance with GAAP consistently applied throughout
the periods reflected therein, certified, without Impermissible
Qualification, by KPMG Peat Marwick (or such other independent certified
public accountants of a nationally recognized standing in the United
States of America as shall be selected by Seller);
(b) Amortization Events. As soon as possible, and in any event
within two (2) Business Days after an Authorized Officer of the Seller has
obtained knowledge of the occurrence of any Amortization Event or any
Unmatured Amortization Event, a written statement of an Authorized Officer
of Seller describing such event and the action that Seller proposes to
take with respect thereto, in each case in reasonable detail;
(c) Material Adverse Effect. As soon as possible and in any event
within two (2) Business Days after an Authorized Officer of Seller has
knowledge thereof, written notice that describes in reasonable detail any
event or occurrence which, individually or in the aggregate for all such
events or occurrences, has had, or that would have a substantial
likelihood of having, a Material Adverse Effect;
(d) Proceedings. As soon as possible and in any event within five
Business Days after an Authorized Officer of Seller has knowledge thereof,
written notice of (i) any litigation, investigation or proceeding of the
type described in Section 5.1(f) not previously disclosed to NAFCO and
(ii) any judgment, settlement or other final disposition with respect to
any such previously disclosed litigation, investigation or proceeding;
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(e) Other. Promptly, from time to time, (i) such other information,
documents, records or reports respecting the Receivables or the Related
Assets or (ii) such other publicly available information respecting the
condition or operations, financial or otherwise, of Seller, in each case
as NAFCO may from time to time reasonably request in order to protect the
interests of NAFCO, the Trustee or the Certificateholders under or as
contemplated by this Agreement.
SECTION 6.3 Negative Covenants. From the Closing Date until the first day
following the Purchase Termination Date on which all Obligations of the Seller
shall have been finally and fully paid and performed and the Pool Balance shall
have been reduced to zero, unless NAFCO shall otherwise give its prior written
consent, the Seller hereby agrees that it will perform the covenants and
agreements set forth in this Section 6.3.
(a) Sales, Liens, Etc. Except as otherwise provided herein or in the
Pooling and Administration Agreement, Seller will not (i) (A) sell, assign
(by operation of law or otherwise) or otherwise transfer to any Person,
(B) pledge any interest in, (C) grant, create, incur, assume or permit to
exist any Adverse Claim to or in favor of any Person upon or with respect
to, or (D) cause to be filed any financing statement or equivalent
document relating to perfection that covers, any Transferred Asset or any
Contract related to any Receivable, or upon or with respect to the
Servicer Account or any lockbox or other account to which any Collections
of any such Receivable or any Related Assets are sent or any interest
therein, or (ii) assign to any Person any right to receive income from or
in respect of any of the foregoing.
In the event that Seller fails to keep any Transferred Assets free
and clear of any Adverse Claim (other than Adverse Claims arising
hereunder, and other Adverse Claims permitted by any other Transaction
Document), NAFCO may (without limiting its other rights with respect to
Seller's breach of its obligations hereunder) make reasonable expenditures
necessary to release such Adverse Claim. NAFCO shall be entitled to
indemnification for any such expenditures pursuant to the indemnification
provisions of Article IX. Alternatively, NAFCO may deduct such
expenditures as an offset to the Purchase Price owed to Seller hereunder.
(b) Extension or Amendment of Receivables. Seller will not extend,
amend or otherwise modify the terms of any
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Receivable or Contract in a manner that could reasonably be expected to
have a Material Adverse Effect other than (i) in accordance with the
Credit and Collection Policy or (ii) with the consent of NAFCO.
(c) Mergers, Acquisitions, Sales, etc. Except for (i) mergers or
consolidations in which Seller is the surviving Person or (ii) mergers or
consolidations of a Subsidiary of the Seller into the Seller, Seller will
not be a party to any merger or consolidation. Seller will give NAFCO, the
Applicable Rating Agencies and the Trustee notice of any such permitted
merger or consolidation promptly following completion thereof. Seller will
not, directly or indirectly, transfer, assign, convey or lease, whether in
one transaction or in a series of transactions, all or substantially all
of its assets or sell or assign, with or without recourse, any Receivables
or Related Assets, in each case other than pursuant to this Agreement or
the NAFCO Trust Agreement.
(d) Change in Name. Seller will not (i) change its name or (ii)
change the name under or by which it does business in any manner which
would or may make any financing statement filed by Seller in accordance
herewith seriously misleading within the meaning of Section 9-402(7) of an
applicable enactment of the UCC, in each case unless Seller shall have
given NAFCO, the Administrator, the Trustee and the Applicable Rating
Agencies 30 days' prior written notice thereof and unless, prior to any
such change in name, Seller shall have taken and completed all action
required by Section 7.3.
(e) Trust Agreement. Seller will not cause NAFCO to amend the NAFCO
Trust Agreement without the Trustee's prior written consent.
(f) Amendments to Transaction Documents. Seller will not amend or
otherwise modify or supplement any Transaction Document to which it is a
party unless NAFCO shall have given its prior written consent to each such
amendment, modification or supplement, which consent shall not be
unreasonably withheld or delayed.
(g) Accounting for Purchases. Seller shall prepare its financial
statements in accordance with GAAP and, to the extent the transactions
contemplated in this Agreement constitute sales of the Purchased Assets
under GAAP. Seller shall not prepare any financial statements which
account for
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the transactions contemplated in this Agreement in any manner other than
as a sale of the Purchased Assets by Seller to NAFCO, or in any other
respect account for or treat the transactions contemplated in this
Agreement (including but not limited to accounting and, where taxes are
not consolidated, for tax reporting purposes) in any manner other than as
a sale of the Purchased Assets by Seller to NAFCO.
(h) Change in Credit and Collection Policy. Seller will not change
the terms and provisions of the Credit and Collection Policy in any
material respect unless the Rating Agency Condition is satisfied with
respect thereto.
(i) Change in Payment Instructions to Obligors. Seller will not make
any change in its instructions to Obligors regarding payments to be made
to the Servicer Account other than changes in such instructions which
direct Obligors to make payments to another Servicer Account duly
designated in accordance with the Servicing Agreement or to the
Certificate Account.
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE TRANSFERRED ASSETS
SECTION 7.1 Rights of NAFCO.
(a) Subject to Section 7.4, Seller hereby authorizes NAFCO, the
Administrator and/or their respective designees or assignees to take any and all
steps in Seller's name and on behalf of Seller that NAFCO, the Administrator
and/or their respective designees or assignees determine are reasonably
necessary or appropriate to collect all amounts due under any and all
Transferred Assets and enforcing or protecting their rights under this
Agreement, including endorsing the name of Seller on checks and other
instruments representing Collections and enforcing such Receivables and Related
Assets.
(b) Except as set forth in Section 3.5 with respect certain Repurchase
Events, NAFCO shall have no obligation to account for, to replace, to substitute
or to return any Purchased Asset to Seller. NAFCO shall have no obligation to
account for, or to return Collections, or any interest or other finance charge
collected pursuant thereto, to Seller, irrespective of whether
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such Collections and charges are in excess of the Purchase Price for such
Purchased Assets.
(c) NAFCO shall have the unrestricted right to further assign, transfer,
deliver, hypothecate, subdivide or otherwise deal with the Transferred Assets,
and all of NAFCO's right, title and interest in, to and under this Agreement and
the NAFCO Trust Agreement, on whatever terms NAFCO shall determine, pursuant to
the Pooling and Administration Agreement or otherwise.
(d) NAFCO shall have the sole right to retain any gains or profits created
by buying, selling or holding the Transferred Assets and shall have the sole
risk of and responsibility for losses or damages created by such buying, selling
or holding.
SECTION 7.2 Responsibilities of Seller. Anything herein to the contrary
notwithstanding:
(a) Seller agrees to deliver directly to the Administrator (for
NAFCO's account), within one Business Day after receipt thereof, any
Collections that it receives, in the form so received, and agrees that all
such Collections shall be deemed to be received in trust for NAFCO and
shall be maintained and segregated separate and apart from all other funds
and moneys of Seller until delivery of such Collections to the
Administrator.
(b) Seller shall perform all of its obligations hereunder and under
the Contracts related to the Receivables and Related Assets to the same
extent as if such Receivables had not been sold hereunder, and the
exercise by NAFCO or its designee or assignee of NAFCO's rights hereunder
or in connection herewith shall not relieve Seller from any of its
obligations under the Contracts or Related Assets related to the
Receivables.
(c) Seller hereby grants to NAFCO an irrevocable power of attorney,
with full power of substitution, coupled with an interest, to take in the
name of Seller all steps necessary or advisable to endorse, negotiate or
otherwise realize on any writing or other right of any kind held or
transmitted by Seller or transmitted or received by NAFCO (whether or not
from Seller) in connection with any Purchased Asset.
SECTION 7.3 Further Action Evidencing Purchases. Seller agrees that from
time to time, at its expense, it will promptly, upon reasonable request, execute
and deliver all further
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instruments and documents, and take all further action, in order to perfect,
protect or more fully evidence the purchase by NAFCO or contribution to NAFCO of
the Receivables and the Related Assets under this Agreement or the NAFCO Trust
Agreement (as applicable), or to enable NAFCO to exercise or enforce any of its
rights hereunder or under any other Transaction Document. Seller further agrees
that from time to time, at its expense, it will promptly, upon request, take all
action that NAFCO, the Administrator or the Trustee may reasonably request in
order to perfect, protect or more fully evidence such purchase or contribution
of the Receivables and the Related Assets or to enable NAFCO or the Trustee (as
the assignee of NAFCO) to exercise or enforce any of its rights hereunder or
under any other Transaction Document. Without limiting the generality of the
foregoing, upon the request of NAFCO, Seller will:
(a) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as NAFCO or the Trustee may reasonably determine to be necessary
or appropriate; and
(b) mark the master data processing records evidencing the
Receivables with the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD
TO NAFCO FUNDING TRUST AND SUCH RECEIVABLES HAVE
BEEN TRANSFERRED BY NAFCO FUNDING TRUST TO THE
NAFCO AUTO RECEIVABLES MASTER TRUST."
Seller hereby authorizes NAFCO or its designee or assignee to file one or
more financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Receivables and Related
Assets of Seller, in each case whether now existing or hereafter generated by
Seller. Except for material performance obligations of the Seller to any Obligor
hereunder or under any of the Contracts, if (i) Seller fails to perform any of
its agreements or obligations under this Agreement and does not remedy such
failure within the applicable cure period, if any, and (ii) NAFCO in good faith
reasonably believes that the performance of such agreements and obligations is
necessary or appropriate to protect the interests of NAFCO under this Agreement,
then NAFCO or its designee or assignee may (but shall not be required to)
perform, or cause performance of, such agreement or obligation and the
reasonable expenses of NAFCO or its designee or assignee incurred in connection
with such performance shall be payable by the Seller as provided in Section 9.1.
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SECTION 7.4 Rights of NAFCO and Its Assignees.
At any time when an Administrator other than National Auto has been
designated pursuant to Section 10.02 of the Pooling and Administration
Agreement, the Seller shall, at NAFCO's request, assemble all of the Records
which evidence the Receivables and Related Assets originated by the Seller and
the Contracts related to such Receivables, or which are otherwise necessary or
desirable to collect such Receivables or Related Assets, and make the same
available to NAFCO or the Trustee at a place selected by the Trustee or its
designee.
SECTION 7.5 Notice to Trustee. Seller (including any seller added after
Closing Date) agrees that, concurrently with its delivery to NAFCO, copies of
all notices, reports, documents and other information shall be delivered by the
Seller to the Trustee.
SECTION 7.6 Acknowledgement of Transfer. Seller hereby acknowledges that
NAFCO will transfer all of its interests and rights hereunder (including all
rights of consent) to the Trustee under the Pooling and Administration
Agreement.
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination by the Seller. The Seller may terminate its
agreement to sell Receivables hereunder to NAFCO by giving NAFCO and the Trustee
not less than five Business Days' prior written notice of the Seller's election
not to continue to sell Receivables to NAFCO. The Trustee shall notify the
Certificateholders within five Business Days of receiving any such notice. Upon
receipt of a termination notice from the Seller, NAFCO shall cause each Series
of Revolving Certificates to be repaid as early as is practicable.
SECTION 8.2 Automatic Termination. The agreement of the Seller to sell
Receivables hereunder, and the agreement of NAFCO to purchase Receivables from
the Seller hereunder, shall terminate automatically on the earlier to occur of
(i) the Scheduled Amortization Commencement Date, (ii) an Amortization Event
(which Amortization Event has not been waived in accordance with the Pooling and
Administration Agreement), and (iii) a bankruptcy proceeding being filed by or
against the Seller or NAFCO.
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ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnities by the Seller. Seller shall indemnify and hold
harmless NAFCO, each of its successors, permitted transferees and assigns, and
all officers, directors, shareholders or trust certificateholders, employees and
agents of any of the foregoing (each of the foregoing persons being individually
called a "RPA Indemnified Party"), from and against any loss, liability,
expense, claim, damage or injury suffered or sustained by reason of any acts,
omissions or alleged acts or omissions arising out of activities of the Seller
pursuant to this Agreement arising out of or based on the arrangement created by
this Agreement and the activities of the Seller taken pursuant thereto,
including any judgment, award, settlement, reasonable attorneys' fees and other
costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim; provided, however, that the Seller shall
not indemnify NAFCO if such acts, omissions or alleged acts or omissions
constitute fraud, gross negligence or wilful misconduct by NAFCO; and provided
further, that the Seller shall not indemnify NAFCO for any liabilities, cost or
expense of NAFCO with respect to any Federal, state or local income or franchise
taxes (or any interest or penalties with respect thereto) required to be paid by
NAFCO in connection herewith to any taxing authority. Any indemnification under
this Article IX shall survive the termination of the Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments; Waivers, Etc.
(a) The provisions of this Agreement may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
signed by NAFCO and the Seller (with respect to an amendment) or by NAFCO (with
respect to a waiver or consent by it) and, as provided in Section 7.02(i) of the
Pooling and Administration Agreement, by the Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. This Agreement shall not be amended unless NAFCO shall
have delivered the proposed amendment to the Applicable Rating Agencies at least
ten Business Days (or such shorter period as shall be acceptable to each of
them) prior to the execution and delivery thereof.
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(b) No failure or delay on the part of NAFCO, any RPA Indemnified Party,
or the Trustee or any other third party beneficiary referred to in Section
10.12(a) in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. No notice to or demand on the Seller in any case shall entitle
it to any notice or demand in similar or other circumstances. No waiver or
approval by NAFCO or the Trustee under this Agreement shall, except as may
otherwise be stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval under this Agreement shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 10.2 Notices, Etc. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by certified
mail, postage prepaid, by facsimile or by overnight courier, to the intended
party at the address or facsimile number of such party set forth under its name
on the signature pages hereof or at such other address or facsimile number as
shall be designated by such party in a written notice to the other parties
hereto given in accordance with this Section 10.2. Copies of all notices and
other communications provided for hereunder shall be delivered to the Trustee
and the Applicable Rating Agencies at their respective addresses for notices set
forth in the Pooling and Administration Agreement. All notices and
communications provided for hereunder shall be effective, (a) if personally
delivered, when received, (b) if sent by certified mail, four Business Days
after having been deposited in the mail, postage prepaid and properly addressed,
(c) if transmitted by facsimile, when sent, receipt confirmed by telephone or
electronic means and (d) if sent by overnight courier, two Business Days after
having been given to such courier unless sooner received by the addressee.
SECTION 10.3 Cumulative Remedies. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. Without limiting
the foregoing, Seller hereby authorizes NAFCO, at any time and from time to
time, to the fullest extent permitted by law, to set-off, against any
Obligations of Seller to NAFCO that are then due and payable or that are not
then due and payable from the Seller to NAFCO but have then accrued, any and all
indebtedness or other obligations at any time owing to Seller by NAFCO to or for
the credit or the
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account of Seller or that are not then due and payable from NAFCO to Seller but
have then accrued.
SECTION 10.4 Binding Effect; Assignability; Survival of Provisions. This
Agreement shall be binding upon and inure to the benefit of NAFCO and the Seller
and its respective successors and permitted assigns. The Seller may not assign
any of its rights hereunder or any interest herein without the prior written
consent of NAFCO, the Trustee and the Applicable Rating Agencies. This Agreement
shall create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until the
first date following the Purchase Termination Date, but not later than the date
on which the Trust is terminated pursuant to Section 12.01 of the Pooling and
Administration Agreement, on which all Obligations of the Seller shall have been
finally and fully paid and performed or such other time as the parties hereto
shall agree and as to which the Trustee (at the direction of the Majority
Certificateholders) shall have given its prior written consent, which consent
shall not be unreasonably withheld or delayed. The rights and remedies with
respect to any breach of any representation and warranty made by Seller pursuant
to Article V and the indemnification and payment provisions of Article IX and
Section 10.6 shall be continuing and shall survive any termination of this
Agreement.
SECTION 10.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE
PERFECTION OF THE INTERESTS OF NAFCO IN THE RECEIVABLES AND THE RELATED ASSETS
ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 10.6 Costs, Expenses and Taxes. In addition to the obligations of
the Seller under Article IX, Seller, severally with respect to itself, agrees to
pay on demand:
(a) all reasonable out-of-pocket and other costs and expenses in
connection with the enforcement of, and any modifications, amendments or
waivers of, this Agreement, the Seller Assignment Certificate or the other
Transaction Documents by NAFCO or any successor in interest to NAFCO; and
(b) all stamp and other taxes and fees payable or determined to be
payable in connection with the execution and delivery by the Seller, and
the filing and recording, of
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this Agreement or the other Transaction Documents, and agrees to indemnify
each RPA Indemnified Party against any liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
SECTION 10.7 SUBMISSION TO JURISDICTION. EACH PARTY HERETO HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW
YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER TRANSACTION DOCUMENT, AND HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW
YORK STATE OR FEDERAL COURT.
SECTION 10.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER
OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS OF
EITHER OF THE PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 10.9 Integration. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
SECTION 10.10 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
SECTION 10.11 No Partnership or Joint Venture. Nothing contained in this
Agreement shall be deemed or construed by the parties hereto or by any third
person to create the relationship of principal and agent or of partnership or of
joint venture.
SECTION 10.12 No Proceedings. The Seller hereby agrees that it will not
institute against NAFCO or the Trust, or join
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any other Person in instituting against NAFCO or the Trust, any insolvency
proceeding (namely, any proceeding of the type referred to in the definition of
"Event of Bankruptcy") so long as any Certificates issued by the Trust shall be
outstanding or there shall not have elapsed one year plus one day since the last
day on which any such Certificates shall have been outstanding. The foregoing
shall not limit the right of Seller to file any claim in or otherwise take any
action with respect to any insolvency proceeding that was instituted against
NAFCO or the Trust by any Person other than Seller, or any other NAFCO Person.
SECTION 10.13 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement or any of the other
Transaction Documents shall for any reason whatsoever be held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement or such
other Transaction Document (as applicable) and shall in no way affect the
validity or enforceability of the other provisions of this Agreement or any of
the other Transaction Documents.
SECTION 10.14 Recourse to NAFCO. Except to the extent expressly provided
otherwise in the Transaction Documents, the obligations of NAFCO under the
Transaction Documents to which it is a party are solely the obligations of
NAFCO, and no recourse shall be had for payment of any fee payable by or other
obligation of or claim against NAFCO that arises out of any Transaction Document
to which NAFCO is a party against any trustee, officer or employee of NAFCO. The
provisions of this Section 10.14 shall survive the termination of this
Agreement.
SECTION 10.15 Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by The Chase Manhattan Bank (USA), not individually or personally but solely as
trustee of NAFCO, 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 NAFCO is made and intended not as personal
representations, undertakings and agreements by The Chase Manhattan Bank (USA)
but is made and intended for the purpose for binding only NAFCO and (c) under no
circumstances shall The Chase Manhattan Bank (USA) be personally liable for the
payment of any indebtedness or expenses of NAFCO or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by NAFCO under this Agreement or the other Transaction Documents.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
NATIONAL AUTO FINANCE COMPANY L.P.
By: NATIONAL AUTO FINANCE CORPORATION,
as General Partner
By: _________________________
Name
Title:
Address: One Park Place
621 NW 53rd Street
Boca Raton, Florida 33487
Attention:
Telephone: (407) 997-2747
Facsimile: (407) 997-2793
NAFCO FUNDING TRUST
By: THE CHASE MANHATTAN BANK (USA),
not in its individual capacity
but solely as Owner Trustee of the
NAFCO Funding Trust
By: _________________________
Name:
Title:
Address: 802 Delaware Avenue
Wilmington, Delaware 19801
Attention:
Telephone:
Facsimile:
35
<PAGE>
WG&M Draft
10/03/96
FORM OF
NON-NEGOTIABLE
PROMISSORY NOTE
New York, New York
December 8, 1994
FOR VALUE RECEIVED, the undersigned, NAFCO Funding Trust, a
Delaware business trust ("NAFCO"), promises to pay to National Auto
Finance Company L.P., a Delaware limited partnership (the "Seller"),
on the terms and subject to the conditions set forth herein and in the
Receivables Purchase Agreement referred to below, the aggregate unpaid
Purchase Price of all Receivables and Related Assets purchased by
NAFCO pursuant to the Receivables Purchase Agreement. Such amount and
accrued interest thereon as shown in the records of the Administrator
will be rebuttable presumptive evidence of the principal amount and
accrued interest thereon owing under this Note.
1. Purchase Agreement. This Note is the NAFCO Note described
in, and is subject to the terms and conditions set forth in, that
certain Receivables Purchase Agreement dated as of December 8, 1994
(as the same may be amended, supplemented, amended and restated or
otherwise modified in accordance with its terms, the "Purchase
Agreement"), between the Seller, as seller and NAFCO, as purchaser.
Reference is hereby made to the Purchase Agreement for a statement of
certain other rights and obligations of NAFCO and the Seller.
2. Definitions. Capitalized terms used (but not defined)
herein have the meaning ascribed thereto in Appendix A to the
Purchase Agreement. In addition, as used herein, the following
terms have the following meanings:
"Bankruptcy Proceedings" has the meaning set forth in
clause (a) of paragraph 7 hereof.
"Final Maturity Date" means the date occurring 60
months after the Amortization Commencement Date.
"Junior Liabilities" means all obligations of NAFCO to
the Seller under this Note.
"Senior Interests" means all obligations of NAFCO to
the Trust and the Indemnified Parties, howsoever created,
<PAGE>
arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become
due, including, without limitation, all interest, fees and
other charges that accrue after the commencement of a
Bankruptcy Proceeding whether or not allowed as a claim in
such proceeding.
"Senior Interest Holders" means, collectively, the
Trust, the Trustee and each other Indemnified Party.
"Subordination Provisions" means, collectively, the
provisions of paragraph 7 hereof.
3. Interest. Subject to the Subordination Provisions,
NAFCO promises to pay interest on the aggregate unpaid principal
amount of this Note outstanding on each day at a rate per annum
equal to the rate of interest publicly announced from time to
time by the Trustee as its "reference rate."
4. Interest Payment Dates. Subject to the Subordination
Provisions, NAFCO shall pay accrued interest on this Note on each
Distribution Date and on the Final Maturity Date. Subject to the
Subordination Provisions, NAFCO also shall pay accrued interest on the
principal amount of each prepayment hereof on the date of each such
prepayment.
5. Basis of Computation. Interest accrued hereunder shall
be computed for the actual number of days (including the first
but excluding the last day) elapsed on the basis of a 360-day
year.
6. Principal Payment Dates. Subject to the Subordination
Provisions, any unpaid principal of this Note shall be paid on
the Final Maturity Date. Subject to the Subordination
Provisions, the principal amount of and accrued interest on this
Note may be prepaid on any Business Day without premium or
penalty.
7. Subordination Provisions. NAFCO covenants and agrees, and
the Seller, by its acceptance of this Note, likewise covenants and
agrees, that the payment of all Junior Liabilities is hereby expressly
subordinated in right of payment to the payment and performance of the
Senior Interests to the extent and in the manner set forth in this
paragraph 7:
(a) In the event of any dissolution, winding up,
liquidation, readjustment, reorganization or other similar
event relating to NAFCO, whether voluntary or involuntary,
<PAGE>
partial or complete, and whether in bankruptcy, insolvency,
receivership or other similar proceedings, or upon an
assignment for the benefit of creditors, or any other
marshalling of the assets and liabilities of NAFCO or any
sale of all or substantially all of the assets of NAFCO
except pursuant to the Pooling and Administration Agreement
(such proceedings being herein collectively called
"Bankruptcy Proceedings" and individually called a
"Bankruptcy Proceeding"), the Senior Interests shall first be
paid and performed in full and in cash before the Seller
shall be entitled to receive and to retain any payment or
distribution in respect of the Junior Liabilities. In order
to implement the foregoing: (x) all payments and
distributions of any kind or character in respect of the
Junior Liabilities to which the Seller would be entitled
except for this clause (a) shall be made directly to the
Trustee (for the benefit of the Senior Interest Holders); (y)
if a Bankruptcy Proceeding has been commenced, the Seller
shall promptly file a claim or claims, in the form required
in any Bankruptcy Proceedings, for the full outstanding
amount of the Junior Liabilities, and shall use reasonable
efforts to cause said claim or claims to be approved and all
payments and other distributions in respect thereof to be
made directly to the Trustee (for the benefit of the Senior
Interest Holders) until the Senior Interests shall have been
paid and performed in full and in cash; and (z) the Seller
hereby irrevocably agrees that the Trust (or the Trustee
acting on the Trust's behalf), in the name of the Seller or
otherwise, may demand, sue for, collect, receive and receipt
for any and all such payments or distributions, and file,
provide and vote or consent in any such Bankruptcy
Proceedings with respect to any and all claims of the Seller
relating to the Junior Liabilities, in each case until the
Senior Interests shall have been paid and performed in full
and in cash.
(b) In the event that the Seller receives any
payment or other distribution of any kind or character from
NAFCO or from any other source whatsoever in respect of the
Junior Liabilities after the commencement of any Bankruptcy
Proceeding, such payment or other distribution shall be
received in trust for the Senior Interest Holders and shall
be turned over by the Seller to the Trustee (for the benefit
of the Senior Interest Holders) forthwith, until all Senior
Interests shall have been paid and performed in full and in
cash. All payments and distributions received by the Trustee
in respect of the Junior Liabilities, to the extent received
in or converted into cash, may be applied by the
<PAGE>
Trustee (for the benefit of the Senior Interest Holders)
first to the payment of any and all reasonable expenses
(including reasonable attorneys' fees and legal expenses)
paid or incurred by the Trustee or the Senior Interest
Holders in enforcing these Subordination Provisions, or in
endeavoring to collect or realize upon the Junior
Liabilities, and any balance thereof shall, solely as between
the Seller and the Senior Interest Holders, be applied by the
Trustee toward the payment of the Senior Interests in a
manner determined by the Trustee to be in accordance with the
Pooling and Administration Agreement; but as between NAFCO
and its creditors, no such payments or distributions of any
kind or character shall be deemed to be payments or
distributions in respect of the Senior Interests.
(c) Upon the final payment in full and in cash of
all Senior Interests, the Seller shall be subrogated to the
rights of the Senior Interest Holders to receive payments or
distributions from NAFCO that are applicable to the Senior
Interests until the Junior Liabilities are paid in full.
(d) These Subordination Provisions are intended
solely for the purpose of defining the relative rights of the
Seller, on the one hand, and the Senior Interest Holders, on
the other hand. Nothing contained in these Subordination
Provisions or elsewhere in this Note is intended to or shall
impair, as between NAFCO, its creditors (other than the
Senior Interest Holders) and the Seller, NAFCO's obligation,
which is unconditional and absolute, to pay the Junior
Liabilities as and when the same shall become due and payable
in accordance with the terms hereof and of the Purchase
Agreement or to affect the relative rights of the Seller and
creditors of NAFCO (other than the Senior Interest Holders).
(e) The Seller shall not, until the Senior Interests
have been finally paid and performed in full and in cash, (i)
cancel, waive, forgive, transfer or assign, or commence legal
proceedings to enforce or collect, or subordinate to any
obligation of NAFCO, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, or now or
hereafter existing, or due or to become due, other than the
Senior Interests, the Junior Liabilities or any rights in
respect hereof or (ii) convert the Junior Liabilities into an
equity interest in NAFCO, unless, in the case of each of
clauses (i) and (ii) above,
<PAGE>
the Seller shall have received the prior written consent of
the Trustee in each case.
(f) The Seller shall not, without the advance
written consent of the Trustee, commence, or join with any
other Person in commencing, any Bankruptcy Proceedings with
respect to NAFCO until at least one year and one day shall
have passed since the Senior Interests shall have been
finally paid and performed in full and in cash.
(g) If, at any time, any payment (in whole or in
part) made with respect to any Senior Interest is rescinded
or must be restored or returned by a Senior Interest Holder
(whether in connection with any Bankruptcy Proceedings or
otherwise), these Subordination Provisions shall continue to
be effective or shall be reinstated, as the case may be, as
though such payment had not been made.
(h) As between the Seller and the Senior Interest
Holders, each of the Senior Interest Holders may, from time
to time, at its sole discretion, without notice to the
Seller, and without waiving any of its rights under these
Subordination Provisions, take any or all of the following
actions: (i) retain or obtain an interest in any property to
secure any of the Senior Interests; (ii) retain or obtain the
primary or secondary obligations of any other obligor or
obligors with respect to any of the Senior Interests; (iii)
extend or renew for one or more periods (whether or not
longer than the original period), alter, increase or exchange
any of the Senior Interests, or release or compromise any
obligation of any nature with respect to any of the Senior
Interests; (iv) amend, supplement, amend and restate, or
otherwise modify any Transaction Document; and (v) release
its security interest in, or surrender, release or permit any
substitution or exchange for all or any part of any rights or
property securing any of the Senior Interest, or extend or
renew for one or more periods (whether or not longer than the
original period), or release, compromise, alter or exchange
any obligations of any nature of any obligor with respect to
any such rights or property.
(i) By its acceptance hereof, the Seller hereby
waives: (i) notice of acceptance of these Subordination
Provisions by any of the Senior Interest Holders; (ii) notice
of the existence, creation, non-payment or non-performance of
all or any of the Senior Interests; and (iii) all diligence
in enforcement, collection or protection of,
<PAGE>
or realization upon, the Senior Interests, or any thereof,
or any security therefor.
(j) These Subordination Provisions constitute a
continuing obligation from NAFCO to all Persons who become
the holders of, or who continue to hold, Senior Interests;
and these Subordination Provisions are made for the benefit
of the Senior Interest Holders, and the Trustee may proceed
to enforce such provisions on behalf on each of such Persons.
8. General. No failure or delay on the part of the Seller in
exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise
of any other power or right. No amendment, modification or waiver of,
or consent with respect to, any provision of this Note shall in any
event be effective unless (a) the same shall be in writing and signed
and delivered by NAFCO and the Seller, and (b) all consents required
for such actions under the Transaction Documents shall have been
received by the appropriate Persons.
9. Limitation on Interest. Notwithstanding anything in this
Note to the contrary, NAFCO shall never be required to pay unearned
interest on any amount outstanding hereunder, and shall never be
required to pay interests on the principal amount outstanding
hereunder, at a rate in excess of the maximum nonusurious interest
rate that may be contracted for, charged or received under applicable
federal or state law (such maximum rate being herein called the
"Highest Lawful Rate"). If the effective rate of interest which would
otherwise be payable under this Note would exceed the Highest Lawful
Rate, or the Seller shall receive any unearned interest or shall
receive monies that are deemed to constitute interest which would
increase the effective rate of interest payable by NAFCO under this
Note to a rate in excess of the Highest Lawful Rate, then (i) the
amount of interest which would otherwise be payable by NAFCO under
this Note shall be reduced to the amount allowed by applicable law,
and (ii) any unearned interest paid by NAFCO or any interest paid by
NAFCO in excess of the Highest Lawful Rate shall be refunded to NAFCO.
Without limitation of the foregoing, all calculations of the rate of
interest contracted for, charged or received by the Seller under this
Note that are made for the purpose of determining whether such rate
exceeds the Highest Lawful Rate shall be made, to the extent permitted
by applicable usury laws (now or hereafter enacted), by amortizing,
prorating and spreading in equal parts during the actual period during
which any amount has
<PAGE>
been outstanding hereunder all interest at any time contracted for,
charged or received by the Seller in connection herewith. If at any
time and from time to time (i) the amount of interest payable to the
Seller on any date shall be computed at the Highest Lawful Rate
pursuant to the provisions of the foregoing sentence, and (ii) in
respect of any subsequent interest computation period the amount of
interest otherwise payable to the Seller would be less than the amount
of interest payable to the Seller computed at the Highest Lawful Rate,
then the amount of interest payable to the Seller in respect of such
subsequent interest computation period shall continue to be computed
at the Highest Lawful Rate until the total amount of interest payable
to the Seller shall equal the total amount of interest which would
have been payable to the Seller if the total amount of interest had
been computed without giving effect to the provisions of the foregoing
sentence.
10. No Negotiation. This Note is not negotiable.
11. Restrictions on Transfer, Etc. Except to the extent
expressly provided otherwise in the Transaction Documents, the Seller
shall not create or permit to exist any Adverse Claim with respect to
this Note or any interest herein and shall not sell or otherwise
transfer or dispose of this Note or any interest herein. Except to the
extent expressly provided otherwise in the Transaction Documents, no
Person other than the Seller, on its own behalf and not for the
benefit of any other Person, may enforce any rights of the Seller
arising under or in connection with this Note.
12. Governing Law. THIS NOTE HAS BEEN DELIVERED IN NEW
YORK, NEW YORK, AND SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
13. Captions. Paragraph captions used in this Note are
provided solely for convenience of reference and shall not affect
the meaning or interpretation of any provisions of this Note.
14. Limitation of Liability. This Note is executed and
delivered by The Chase Manhattan Bank (USA), not individually or
personally but solely as owner trustee of NAFCO, in the exercise of
the powers and authority conferred and vested in it, (b) each of the
undertakings and agreements herein made on the part of NAFCO is made
and intended not as personal undertakings and agreements by The Chase
Manhattan Bank (USA) but is made and intended for the purpose for
binding only NAFCO and (c) under no circumstances shall The Chase
Manhattan Bank (USA) be personally
<PAGE>
liable for the payment of any indebtedness or expenses of NAFCO or be
liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by NAFCO under this Note.
<PAGE>
IN WITNESS WHEREOF, NAFCO has caused this Note to be executed
by its officer thereunto duly authorized.
NAFCO FUNDING TRUST
a Delaware business trust
BY: THE CHASE MANHATTAN BANK (USA)
not in its individual capacity, but
solely as Owner Trustee under the
First Amended and Restated Trust
Agreement dated as of December __,
1994
By:
---------------------------------------
Name:
Title:
<PAGE>
-----------------------------------------
NAFCO AUTO RECEIVABLES MASTER TRUST
POOLING AND ADMINISTRATION AGREEMENT
dated as of December 8, 1994
among
NAFCO FUNDING TRUST,
as transferor,
NATIONAL AUTO FINANCE COMPANY L.P.,
as the Administrator,
and
BANKERS TRUST COMPANY
as Trustee
-----------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; TRANSITIONAL MATTERS
Section 1.01 Definitions................................................... 1
ARTICLE II
CONVEYANCE OF CERTAIN ASSETS; ISSUANCE
OF CERTIFICATES
Section 2.01 Creation of the Trust; Conveyance of Certain
Assets..................................................... 1
Section 2.02 Acceptance by Trustee......................................... 3
Section 2.03 Representations and Warranties of NAFCO
Relating to the Trust Assets............................... 3
Section 2.04 Repurchase Upon Breach........................................ 7
ARTICLE III
ADMINISTRATION OF RECEIVABLES
Section 3.01 Acceptance of Appointment and Other Matters
Relating to the Administrator.............................. 8
Section 3.02 Duties of the Administrator and NAFCO......................... 9
Section 3.03 Compensation.................................................. 12
Section 3.04 Records of the Administrator and Reports to be
Prepared by the Administrator.............................. 12
Section 3.05 Rights of the Trustee......................................... 15
Section 3.06 Further Action Evidencing Transfers........................... 16
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.01 Rights of Certificateholders.................................. 18
Section 4.02 Establishment of Trust Accounts............................... 18
Section 4.03 Distributions................................................. 19
Section 4.04 Distributions to NAFCO........................................ 23
Section 4.05 Establishment of Reserve Fund................................. 23
Section 4.06 Application of Reserve Fund................................... 23
Section 4.07 Investment of Funds in Trust Accounts......................... 24
Section 4.08 Attachment of Trust Accounts.................................. 25
-i-
<PAGE>
Page
ARTICLE V
REPORTS TO CERTIFICATEHOLDERS
Section 5.01 Information to Certificateholders............................. 25
Section 5.02 Notice of Early Liquidation at Seller
Election................................................... 25
Section 5.03 Annual Tax Information........................................ 26
ARTICLE VI
THE CERTIFICATES
Section 6.01 The Certificates.............................................. 26
Section 6.02 Authentication of Certificates................................ 27
Section 6.03 Registration of Transfer and Exchange of
Certificates............................................... 27
Section 6.04 Mutilated, Destroyed, Lost or Stolen
Certificates............................................... 31
Section 6.05 Persons Deemed Owners......................................... 32
Section 6.06 Appointment of Paying Agent................................... 32
Section 6.07 Access to List of Certificateholders' Names
and Addresses.............................................. 33
Section 6.08 Authenticating Agent.......................................... 34
Section 6.09 Tax Treatment................................................. 35
Section 6.10 Changes in Amount of Certificates............................. 35
ARTICLE VII
NAFCO
Section 7.01 Representations and Warranties of NAFCO
Relating to NAFCO and the Transaction
Documents.................................................. 36
Section 7.02 Covenants of NAFCO............................................ 42
Section 7.03 Indemnification by the Class C
Certificateholders......................................... 47
ARTICLE VIII
THE ADMINISTRATOR
Section 8.01 Representations and Warranties of the
Administrator.............................................. 48
Section 8.02 Covenants of the Administrator................................ 51
Section 8.03 Merger or Consolidation of, or Assumption of
the Obligations of, the Administrator...................... 52
Section 8.04 Administrator Liability....................................... 53
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Page
----
Section 8.05 Limitation on Liability of the Administrator
and Others................................................. 53
ARTICLE IX
AMORTIZATION EVENTS
Section 9.01 Amortization Events........................................... 55
Section 9.02 Remedies...................................................... 58
Section 9.03 Additional Rights Upon the Occurrence of
Certain Events............................................. 59
ARTICLE X
ADMINISTRATOR DEFAULTS
Section 10.01 Administrator Defaults....................................... 60
Section 10.02 Trustee to Act; Appointment of Successor..................... 62
Section 10.03 Notification of Administrator Default;
Notification of Appointment of Successor
Administrator............................................. 65
ARTICLE XI
THE TRUSTEE
Section 11.01 Duties of Trustee............................................ 65
Section 11.02 Certain Matters Affecting the Trustee........................ 69
Section 11.03 Limitation on Liability of Trustee........................... 71
Section 11.04 Trustee May Deal with Other Parties.......................... 72
Section 11.05 Administrator To Pay Trustee's Fees and
Expenses.................................................. 72
Section 11.06 Eligibility Requirements for Trustee......................... 73
Section 11.07 Resignation or Removal of Trustee............................ 74
Section 11.08 Successor Trustee............................................ 75
Section 11.09 Merger or Consolidation of Trustee........................... 75
Section 11.10 Appointment of Co-Trustee or Separate
Trustee................................................... 76
Section 11.11 Tax Returns.................................................. 77
Section 11.12 Trustee May Enforce Claims Without Possession
of Certificates........................................... 78
Section 11.13 Suits for Enforcement........................................ 78
Section 11.14 Rights of Certificateholders To Direct
Trustee................................................... 79
Section 11.15 Representations and Warranties of Trustee.................... 79
Section 11.16 Maintenance of Office or Agency.............................. 80
-iii-
<PAGE>
Page
----
ARTICLE XII
TERMINATION
Section 12.01 Termination of Trust......................................... 80
Section 12.02 Final Distribution........................................... 80
Section 12.03 Rights Upon Termination of the Trust......................... 81
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Amendment, Waiver, Etc....................................... 83
Section 13.02 Actions by Certificateholders................................ 85
Section 13.03 Limitation on Rights of Certificateholders................... 86
Section 13.04 Governing Law................................................ 87
Section 13.05 Notices...................................................... 87
Section 13.06 Severability of Provisions................................... 88
Section 13.07 Certificates Nonassessable and Fully Paid.................... 88
Section 13.08 Further Assurances........................................... 88
Section 13.09 Nonpetition Covenant......................................... 88
Section 13.10 No Waiver; Cumulative Remedies............................... 89
Section 13.11 Counterparts................................................. 89
Section 13.12 Third-Party Beneficiaries.................................... 89
Section 13.13 Integration.................................................. 90
Section 13.14 Binding Effect; Assignability; Survival of
Provisions................................................ 90
Section 13.15 Recourse to NAFCO............................................ 90
Section 13.16 Recourse to Trust Assets..................................... 90
Section 13.17 Submission to Jurisdiction................................... 91
Section 13.18 Waiver of Jury Trial......................................... 91
Section 13.19 Limitation of Liability.................... 92
EXHIBITS
Exhibit A Form of Certificate
Exhibit B Form of Servicing Agreement
Exhibit C Form of Distribution Date Statement
Exhibit D Trust Accounts
Exhibit E Form of Investor Letter
Exhibit F Form of Accountant's Agreed-Upon Procedures
Exhibit G Form of Daily Report
SCHEDULES
Schedule 7.01(h) Office of NAFCO and the Administrator where
Records are maintained
-iv-
<PAGE>
APPENDIX
Appendix A Definitions
-v-
<PAGE>
THIS POOLING AND ADMINISTRATION AGREEMENT, dated as of December 8, 1994
(this "Agreement"), is by and among NAFCO FUNDING TRUST, a Delaware business
trust ("NAFCO"), as transferor, NATIONAL AUTO FINANCE COMPANY L.P., a Delaware
limited partnership ("National Auto"), as initial Administrator, and BANKERS
TRUST COMPANY, a New York banking corporation, as Trustee.
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other parties and the
Certificateholders to the extent provided herein:
ARTICLE I
DEFINITIONS; TRANSITIONAL MATTERS
Section 1.01 Definitions. Whenever used in this Agreement, capitalized
terms, unless otherwise defined herein, have the meanings that Appendix A
assigns to such terms. In addition, this Agreement shall be interpreted in
accordance with the conventions set forth in Parts B, C and D of Appendix A.
ARTICLE II
CONVEYANCE OF CERTAIN ASSETS; ISSUANCE
OF CERTIFICATES
Section 2.01 Creation of the Trust; Conveyance of Certain Assets. (a) Upon
the execution of this Agreement by the parties hereto, there is hereby created
NAFCO Auto Receivables Master Trust.
(b) By execution and delivery of this Agreement, NAFCO does hereby
transfer, assign, set over and otherwise convey to the Trust, for the benefit of
the Certificateholders, all its right, title and interest in, to and under,
whether now existing or hereafter created, without recourse except as expressly
provided otherwise herein, (i) each Receivable that is or has been transferred
by the Seller to NAFCO, pursuant to the Purchase Agreement or NAFCO Trust
Agreement, from and including the date on which the first Purchase occurs under
the Purchase Agreement to but excluding the Purchase Termination Date, (ii) all
Related Assets, (iii) the Seller Transaction Documents (all of NAFCO's right,
title and interest in, to and under such Seller Transaction Documents and the
Related Assets being herein called the "Related Transferred Assets"), (iv) all
funds from time to time on deposit in each of the Trust Accounts representing
<PAGE>
Collections on, or other proceeds of, the foregoing and, in each case, all
certificates and instruments, if any, from time to time evidencing such funds,
all Investment Proceeds, all claims thereunder or in connection therewith and
all interest, dividends, monies, instruments, securities and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the foregoing, and (v) all moneys due or to become
due and all amounts received or receivable with respect to any of the foregoing
and all proceeds of the foregoing. Such property shall constitute the assets of
the Trust (collectively, the "Trust Assets"). The foregoing transfer,
assignment, setover and conveyance to the Trust shall be made to the Trustee, on
behalf of the Trust, and each reference in this Agreement to such transfer,
assignment, setover and conveyance shall be construed accordingly. In no event
shall the Trust acquire any real estate mortgages or interests in any real
estate mortgages.
(c) In connection with the transfer described above in subsection (b),
NAFCO has recorded and filed or caused to be recorded and filed, financing
statements (and continuation statements with respect to such financing
statements when applicable) with respect to the Trust Assets (whether now
existing or hereafter created) meeting the requirements of applicable state law
in such manner and in such jurisdictions as are reasonably determined necessary
or desirable to perfect, and maintain perfection of, the transfer and assignment
of the Trust Assets to the Trust. The Trustee shall be under no obligation
whatsoever to file such financing statements, or continuation statements to such
financing statements, or to make any other filing under the UCC in connection
with such transfer unless otherwise instructed to do so by the Required
Certificateholders. In connection with the transfer described above in
subsection (b), NAFCO and the Administrator further agree to deliver to the
Trustee each Trust Asset (including any original documents or instruments
included in the Trust Assets as are necessary to effect such transfer) in which
the transfer of an interest is perfected under the UCC or otherwise by
possession. NAFCO or the Administrator shall deliver each such Trust Asset to
the Trustee immediately upon the transfer of any such Trust Asset to the Trust
pursuant to Section 2.01(b).
(d) In connection with the transfer described above in subsection (b),
NAFCO shall, on or prior to the Closing Date, mark the master data processing
records evidencing the Receivables with the following legend:
-2-
<PAGE>
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO NAFCO FUNDING
TRUST PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT, DATED AS OF
DECEMBER 8, 1994, BETWEEN NATIONAL AUTO FINANCE COMPANY L.P., AS
SELLER, AND NAFCO FUNDING TRUST; AND SUCH RECEIVABLES HAVE BEEN
TRANSFERRED TO NAFCO AUTO RECEIVABLES MASTER TRUST PURSUANT TO A
POOLING AND ADMINISTRATION AGREEMENT, DATED AS OF DECEMBER 8, 1994,
AMONG NAFCO FUNDING TRUST, AS TRANSFEROR, NATIONAL AUTO FINANCE
COMPANY L.P., AS THE ADMINISTRATOR, AND BANKERS TRUST COMPANY, AS
TRUSTEE."
(e) Upon the request of NAFCO, the Trustee will cause the Class B and
Class C Certificates in authorized denominations evidencing the entire interest
in the Trust to be duly authenticated and delivered to or upon the order of
NAFCO pursuant to Section 6.02.
Section 2.02 Acceptance by Trustee. The Trustee hereby acknowledges its
acceptance on behalf of the Trust of all right, title and interest to the
property, now existing and hereafter created, conveyed to the Trust pursuant to
Section 2.01(b) and declares that it shall maintain such right, title and
interest, upon the trust herein set forth, for the benefit of all
Certificateholders, on the terms and subject to the conditions hereinafter set
forth.
Section 2.03 Representations and Warranties of NAFCO Relating to the Trust
Assets.
(a) Representations and Warranties. At the time that any Receivable or
Related Asset is sold or transferred by NAFCO to the Trust, NAFCO hereby
represents and warrants that:
(i) Characteristics of Receivables. Each Receivable (a) shall have
been originated in the United States of America by a Dealer for the retail
sale of a Financed Vehicle in the ordinary course of such Dealer's
business, shall have been fully and properly executed by the parties
thereto, shall have been purchased by NAFCO from the Seller pursuant to
the Purchase Agreement (or contributed by the Seller to NAFCO pursuant to
NAFCO Trust Agreement), shall have been purchased by the Seller from such
Dealer under an existing dealer agreement, and shall have been validly
assigned by such Dealer to the Seller, which in turn
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shall have been validly assigned pursuant to the Purchase Agreement by the
Seller to NAFCO in accordance with its terms, (b) shall have created or
shall create a valid, subsisting, and enforceable first priority security
interest in favor of the Seller in the Financed Vehicle, which security
interest has been assigned pursuant to the Purchase Agreement by the
Seller to NAFCO, which in turn shall be assigned by NAFCO to the Trustee,
(c) shall contain customary and enforceable provisions such that the
rights and remedies of the holder thereof shall be adequate for
realization against the collateral of the benefits of the security, and
(d) shall provide for level monthly payments (provided that the payment in
the first or last month in the life of the Receivable may be minimally
different from the level payment) that fully amortize the Amount Financed
over an original term of no greater than 60 months and the related
Contract has not been modified since its issuance date.
(ii) Compliance with Law. Each Receivable and the sale of the
Financed Vehicle shall have complied in all material respects at the time
it was originated or made and at the execution of this Agreement shall
comply in all material respects with all requirements of applicable
federal, state, and local laws, and regulations thereunder, including,
without limitation, usury laws, the Federal Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and
Z, and state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, and other consumer credit laws and equal credit
opportunity and disclosure laws.
(iii) Binding Obligation. Each Receivable shall represent the
genuine, legal, valid, and binding payment obligation in writing of the
Obligor, enforceable by the holder thereof in accordance with its terms
subject to the effect of bankruptcy, insolvency, reorganization, or other
similar laws affecting the enforcement of creditors' rights generally. No
Obligor on a Contract is the United States of America, any state or local
governmental agency or instrumentality, or any of the foregoing.
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(iv) Security Interest in Financed Vehicle. Immediately prior to the
sale, assignment, and transfer thereof, each Receivable shall be secured
by a validly perfected first priority security interest in the Financed
Vehicle in favor of the Seller as secured party or all necessary and
appropriate actions shall have been commenced that would result in the
valid perfection of a first priority security interest in the Financed
Vehicle in favor of the Seller as secured party.
(v) Receivables in Force. No Receivable shall have been satisfied,
subordinated, or rescinded, nor shall any Financed Vehicle have been
released from the lien granted by the related Receivable in whole or in
part.
(vi) No Defenses. No Contract is subject to any asserted reduction
(including any reduction on account of any offsetting account payable by
NAFCO or the Seller to an Obligor or funds of an Obligor held by NAFCO or
the Seller), cancellation, rebate (including any advertising rebate) or
refund or any dispute, offset, counterclaim, lien or defense whatsoever;
(vii) No Liens. To the best of NAFCO's knowledge, no liens or claims
shall have been filed for work, labor, or materials relating to a Financed
Vehicle that shall be liens prior to, or equal with, the security interest
in the Financed Vehicle granted by the Contract.
(viii) No Default. Except for payment defaults continuing for a
period of not more than 45 days, no default, breach, violation, or event
permitting acceleration under the terms of any Receivable shall have
occurred; and no continuing condition that with notice or the lapse of
time would constitute a default, breach, violation, or event permitting
acceleration under the terms of any Receivable shall have arisen; and
NAFCO shall not waive any of the foregoing except as otherwise permitted
hereunder.
(ix) Insurance. The Seller, in accordance with its customary
procedures, shall have determined that the Obligor has obtained or agreed
to obtain physical damage insurance covering the Financed Vehicle or the
vehicle is protected by force-placed insurance.
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(x) Title. It is the intention of NAFCO that the transfer and
assignment herein contemplated constitute a sale of the Receivables from
NAFCO to the Trust and that the beneficial interest in and title to the
Receivables not be part of NAFCO's estate in the event of the filing of a
bankruptcy petition by or against NAFCO under any bankruptcy law. No
Receivable has been sold, transferred, assigned, or pledged by NAFCO to
any Person other than the Trustee on behalf of the Trust. Immediately
prior to the transfer and assignment herein contemplated, NAFCO had good
and marketable title to each Receivable free and clear of all Liens,
security interests, and rights of others and no offsets, defenses or
counterclaims against it had been asserted or threatened and, immediately
upon the transfer thereof, the Trustee for the benefit of the
Certificateholders shall have good and marketable title to each
Receivable, free and clear of all Liens, security interests, and rights of
others and no offsets, defenses or counterclaims against it have been
asserted or threatened; and the transfer has been perfected under the UCC.
(xi) Possession; One Contract. With respect to each Receivable,
there is only one Contract, which Contract shall be held by the Servicer
on behalf of NAFCO, pursuant to the Servicing Agreement.
(xii) All Filings Made. All filings (including, without limitation,
UCC filings) necessary in any jurisdiction to give the Trustee a first
priority perfected ownership interest in the Receivables shall have been
made and shall remain in full force and effect.
(xiii) Chattel Paper. Each Receivable constitutes "chattel paper" as
defined in the UCC.
(xiv) Delinquency. No Receivable is more than 45 days past due.
(b) Notice of Breach. The representations and warranties set forth in this
Section 2.03 shall survive the transfer and assignment of the Receivables and
the Related Transferred Assets to the Trust. Upon discovery by NAFCO, the
Administrator or a Responsible Officer of the Trustee of a breach of any of the
representations and warranties set forth in this Section 2.03, the party
discovering such breach shall give written notice to the other parties to
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this Agreement within three Business Days following such discovery. The
Trustee's obligations in respect of discovering any such breach are limited as
provided in Section 11.02(g).
Section 2.04 Repurchase Upon Breach. NAFCO, the Administrator or a
Responsible Officer of the Trustee, as the case may be, shall inform the other
parties to the Agreement promptly, in writing, upon the discovery of any breach
of NAFCO representations and warranties pursuant to Section 2.03 unless the
breach shall have been cured by the last day of the second full Calculation
Period following the discovery by NAFCO, or receipt of notice by NAFCO, of such
breach, NAFCO shall have an obligation, and the Trustee shall (provided that it
either has made such discovery or has received such notice thereof) enforce such
obligation of NAFCO to repurchase any Receivable materially and adversely
affected by the breach as of such last day (or, at NAFCO's option, the last day
of the first full Collection Period following the discovery). In consideration
of the purchase of the Receivable, NAFCO shall remit, or cause the Seller to
remit, to the Certificate Account on the Business Day immediately preceding the
next succeeding Distribution Date, the Purchase Amount. Except as provided in
the preceding sentence, the sole remedy of the Trustee, the Trust, or the
Certificateholders with respect to a breach of NAFCO's representations and
warranties pursuant to Section 2.03 shall be to require NAFCO to repurchase
Receivables pursuant to this Section 2.04 or to enforce the obligation of the
Seller to repurchase such Receivables pursuant to the Purchase Agreement.
Section 2.05 No Assumption of Obligations Relating to Receivables, Related
Transferred Assets or Contracts. The transfer, assignment, setover and
conveyance described above in Section 2.01 does not constitute and is not
intended to result in a creation or an assumption by the Trust, the Trustee or
any Certificateholder of any obligation of the Administrator, NAFCO or any other
Person in connection with the Receivables or the Related Transferred Assets or
under the related Contracts or any other agreement or instrument relating
thereto, including any obligation to any Obligors. None of the Trustee, the
Trust or any Certificateholder shall have any obligation or liability to any
Obligor or other customer or client of the Seller (including any obligation to
perform any of the obligations of the Seller to any Obligor under any such
Receivables, related Contracts or any other related purchase orders or other
agreements or otherwise). No such obligation or liability is intended to
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be assumed by the Trustee, the Trust or any Certificateholder hereunder, and any
such assumption is hereby expressly disclaimed.
ARTICLE III
ADMINISTRATION OF RECEIVABLES
Section 3.01 Acceptance of Appointment and Other Matters Relating to the
Administrator. (a) The administering of the Receivables and the Related
Transferred Assets shall be conducted by the Administrator hereunder in
accordance with this Section 3.01. Until the Trustee gives a Termination Notice
to National Auto pursuant to Section 10.01, National Auto is hereby designated
as, and National Auto hereby agrees to act as, the Administrator under this
Agreement and the other Transaction Documents with respect to the Receivables
and the Related Transferred Assets, and the Certificateholders by their
acceptance of the Certificates consent to National Auto acting as the
Administrator.
(b) Termination. The designation of the Administrator under this Agreement
shall automatically cease and terminate upon termination of the Trust pursuant
to Section 12.01.
(c) Resignation of the Administrator. The Administrator shall not resign
from the obligations and duties hereby imposed on it except upon the
Administrator's determination that (i) the performance of its duties hereunder
is no longer permissible under applicable law and (ii) there is no reasonable
action which the Administrator could take to make the performance of its duties
hereunder permissible under applicable law. If the Administrator makes a
determination that it must resign for the reasons stated above, the
Administrator shall, prior to the tendering of its resignation, deliver to the
Trustee an Opinion of Counsel for the Administrator, in form and substance
reasonably satisfactory to the Trustee, confirming the satisfaction of the
conditions set forth in clause (i) of the preceding sentence. No resignation by
the Administrator shall become effective until the Trustee or a Successor
Administrator shall have assumed the responsibilities and obligations of the
Administrator in accordance with Section 10.02 hereof. If the Administrator has
tendered its resignation and no Successor Administrator has been appointed, the
Trustee may appoint, or may petition a court of competent jurisdiction to
appoint, a Successor
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Administrator hereunder. The Trustee shall give prompt notice to the Applicable
Rating Agencies of the appointment of any Successor Administrator.
Section 3.02 Duties of the Administrator and NAFCO.
(a) Duties of Administrator in General. The Administrator shall monitor
the servicing of and administer the Receivables and the Related Transferred
Assets and, subject to the terms and provisions of this Agreement, shall have
full power and authority, acting alone or through any Person properly designated
by it (provided that in any event the Administrator shall remain liable for all
actions taken), to do any and all things in connection with such administration
which it may deem necessary or appropriate. In connection therewith, the
Administrator shall take direction from the majority in interest of the Class C
Certificateholders or the Class B Certificateholders, provided, however, that
such direction is neither contrary to any specific provision of this Agreement
nor may result in any adverse consequences to the Certificateholders of any
other Class (and further provided that in the event of a conflict between the
directions of the Class C and Class B Certificateholders, the directions of the
Class C Certificateholders will control). The Trustee shall execute and deliver
to the Administrator any powers of attorney or other instruments or documents
that are prepared by the Administrator and stated in an Officer's Certificate to
be necessary or appropriate to enable the Administrator to carry out its
administrative duties hereunder. The Administrator shall exercise the same care
and apply the same policies with respect to the administration of the
Receivables and the Related Transferred Assets as is customary for administering
Receivables and that it would exercise and apply if it owned such Receivables
and the Related Transferred Assets.
The Administrator shall take or cause to be taken all such actions as it
deems necessary or appropriate to collect each Receivable and Related
Transferred Asset (and shall cause the Servicer to take or cause to be taken all
such actions as the Administrator deems necessary or appropriate to collect each
Receivable and Related Transferred Asset for which such Servicer is responsible
in its capacity as Servicer) from time to time, all in accordance with
applicable law.
The Administrator has appointed World Omni Financial Corp. to act as
Servicer pursuant to the Servicing Agreement
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attached hereto as Exhibit B, and the Servicer shall perform such duties of the
Administrator delegated to it pursuant to the terms of the Servicing Agreement,
provided that under no circumstances shall the Administrator's responsibility to
perform such administrative duties hereunder be diminished by such delegation to
the Servicer.
Without limiting the generality of the foregoing and subject to the next
preceding paragraph and Section 10.01, the Administrator or its designee is
hereby authorized and empowered, unless such power and authority is revoked by
the Trustee on account of the occurrence of an Administrator Default pursuant to
Section 10.01, (i) to instruct the Trustee to make withdrawals and payments from
the Trust Accounts as set forth in this Agreement, (ii) to execute and deliver,
on behalf of the Trust for the benefit of the Certificateholders, 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 the Related Transferred Assets, (iii) to make any filings, reports, notices,
applications and registrations with, and to seek any consents or authorizations
from, the Securities and Exchange Commission and any state securities authority
on behalf of the Trust as may be necessary or appropriate to comply with any
federal or state securities laws or reporting requirements or other laws or
regulations, and (iv) after the delinquency of any Receivable or any default in
connection with a Related Transferred Asset and to the extent permitted under
and in compliance with all applicable laws, rules, regulations, judgments,
orders and decrees of courts and other governmental authorities (whether
federal, state, local or foreign) and all other tribunals, to commence or settle
collection proceedings with respect to such Receivable and otherwise to enforce
the rights and interests of the Trust and the Certificateholders in, to and
under such Receivable or Related Transferred Asset (as applicable). The Trustee
shall promptly comply with the instructions of the Administrator to withdraw
funds and make payments from the Trust Accounts pursuant to the terms of this
Agreement.
(b) Modification of Receivables, Etc. So long as no default shall have
occurred and be continuing, the Administrator may adjust, and may permit the
Servicer to adjust the outstanding unpaid balance of any Receivable, or
otherwise modify the terms of any Receivable or amend, modify or waive any term
or condition of any Contract related thereto, all as it may determine to be
appropriate to maximize collection thereof, in accordance with the
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Credit and Collection Policy. The Administrator shall, or shall cause the
Servicer to, write off Receivables from time to time in accordance with the
terms of this Agreement (including Section 7.02(n)).
(c) Authorization to Act as NAFCO's Agent. Without limiting the generality
of Section 3.02(a), NAFCO hereby appoints the Administrator as its agent for the
following purposes: (i) specifying accounts to which payments are to be made to
NAFCO, (ii) making transfers among, and deposits to and withdrawals from, all
deposit accounts of NAFCO for the purposes described in the Transaction
Documents, (iii) arranging payment by NAFCO of all fees, expenses and other
amounts payable by NAFCO pursuant to the Transaction Documents, (iv) and taking
any other action not specifically required to be taken by the NAFCO Trustee
hereunder or under any other Transaction Documents. NAFCO irrevocably agrees
that (A) it shall be bound by all actions taken by the Administrator pursuant to
the preceding sentence, and (B) the Trustee and the banks holding all deposit
accounts of NAFCO are entitled to accept submissions, determinations,
selections, specifications, transfers, deposits and withdrawal requests, and
payments from the Administrator on behalf of NAFCO.
(d) Grant of Power of Attorney. NAFCO and the Trustee hereby each grant to
the Administrator a power of attorney, with full power of substitution, to take
in the name of NAFCO and the Trustee all steps which are necessary or
appropriate to endorse, negotiate, deposit or otherwise realize on any writing
of any kind held or transmitted by NAFCO or transmitted or received by the
Trustee (whether or not from NAFCO) in connection with any Receivable or Related
Transferred Asset. The power of attorney that NAFCO and the Trustee have granted
to the Administrator pursuant to this Section 3.02(d) may be revoked by the
Trustee, and shall be revoked by NAFCO,in the event of an Administrator Default.
In exercising its power granted hereby, the Administrator shall take directions
from the Trustee, if any, arising out of the exercise of the rights granted
under Section 11.14.
(e) Turnover of Collections. If NAFCO, the Administrator or any of their
respective agents or representatives shall at any time receive any cash, checks
or other instruments constituting Collections including any payments received by
NAFCO on account of the Seller Noncomplying Receivables Adjustment, such
recipient shall segregate such payments and hold such payments in trust for, and
in a manner acceptable to the Trustee and shall,
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promptly upon receipt (and in any event within one Business Day following
receipt), remit all such cash, checks and instruments, duly endorsed or with
duly executed instruments of transfer, to the Certificate Account.
(f) Credit and Collection Policies. The Administrator shall comply in all
material respects with its Credit and Collection Policy in regard to each
Receivable and the Related Assets and the Contracts related to each such
Receivable, where the failure so to comply, individually or in the aggregate for
all such failures, would reasonably be expected to have a Material Adverse
Effect.
Section 3.03 Compensation. The Administrator, as full compensation for
activities performed by the Administrator under this Agreement and the other
Transaction Documents, shall be entitled to a fee (the "Administration Fee") in
respect of each Calculation Period (or portion thereof) prior to the termination
of the Trust pursuant to Section 12.01, payable in arrears on each Distribution
Date as set forth in Section 4.03(a) hereof. The Administration Fee shall be
paid out of funds in the Certificate Account as more fully described in Article
IV, and shall be payable to the Administrator solely to the extent amounts are
available for payment pursuant to Article IV. In no event shall the Trust, the
Trustee or the Certificateholders be liable for payment of the Administration
Fee.
The fees, costs and expenses of the Servicer, the Trustee, the Paying
Agent, the Authenticating Agent, and the Transfer Agent and Registrar, and
certain other costs and expenses payable from the Administration Fee pursuant to
other provisions of this Agreement, and all other fees and expenses that are not
expressly stated in this Agreement or any Supplement to be payable by the Trust
or NAFCO, other than Federal, state, local and foreign income and franchise
taxes, if any, or any interest or penalties with respect thereto, of the Trust,
shall be paid out of the Administration Fee and shall be paid by the
Administrator from the funds that constitute the Administration Fee. The
Administration Fee shall be paid to the Administrator solely to the extent that
funds are available to make such payment pursuant to Section 4.03, and there
shall be no recourse to NAFCO for all or any part of the Administration Fee that
is payable from time to time if such funds are at any time insufficient to pay
the Administration Fee.
Section 3.04 Records of the Administrator and Reports to be Prepared by
the Administrator.
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(a) Keeping of Records and Books of Account. The Administrator shall
maintain at all times accurate and complete books, records and accounts relating
to the Receivables, Related Transferred Assets and Contracts and all Collections
thereon in which timely entries shall be
made.
The Administrator shall maintain and implement administrative and
operating procedures (including an ability to generate or cause to be generated
duplicates of Records evidencing Receivables and the Related Transferred Assets
in the event of the destruction of the originals thereof), and shall keep and
maintain all documents, books, records and other information which the
Administrator deems reasonably necessary for the collection of all Receivables
and Related Transferred Assets.
(b) Receivables Reviews. The Administrator shall, during regular business
hours upon reasonable advance notice permit the Trustee and its agents or
representatives, at the expense of the Administrator, (i) to examine and make
copies of and abstracts from, and to conduct accounting reviews of, all Records
in the possession or under the control of the Administrator relating to the
Receivables or Related Assets generated by National Auto and (ii) to visit the
offices and properties of the Administrator for the purpose of examining such
materials described in clause (i) above, and to discuss matters relating to any
Receivables or any Related Assets of the Administrator or the Administrator's
performance hereunder with any of the Authorized Officers of National Auto or,
with the prior consent of an Authorized Officer of National Auto, with employees
of National Auto having knowledge of such matters (the examinations set forth in
the foregoing clauses (i) and (ii) being herein called an "Administrator
Receivables Review"). The Trustee and its agents or representatives shall be
entitled to conduct Administrator Receivables Reviews whenever the Trustee, in
its reasonable judgment, deems an Administrator Receivables Review appropriate.
(c) Distribution Date Statement. The Administrator shall on each
Determination Date, by 12:00 noon (New York City time), prepare and deliver to
the Trustee, the Applicable Rating Agencies and the Certificateholders a report
substantially in the form of Exhibit C or in such other form as is reasonably
acceptable to the Trustee and the Administrator (each such report in the form of
Exhibit C (as supplemented) or such other forms being herein called a
"Distribution Date Statement"); provided that, with respect
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to any Distribution Date Statement, if a Force Majeure or a "system failure" or
other similar technical failure in the operations of the Administrator shall
occur that prevents the preparation or delivery of any Distribution Date
Statement, a Distribution Date Statement containing all information for each day
required to be included therein shall be prepared and delivered to the Trustee
and the Applicable Rating Agencies by 1:00 p.m. on the second Business Day from
the date such Distribution Date Statement was otherwise required to be
delivered.
(d) Daily Reports. Prior to 10:00 a.m. New York City time, on each
Business Day, the Administrator shall prepare and deliver to the Trustee a
report substantially in the form of Exhibit G (as the same may be supplemented
in accordance with any Supplement) or in such other form as is reasonably
acceptable to the Trustee (each such report in the form of Exhibit G (as
supplemented) or such other forms being herein called a "Daily Report").
(e) Compliance Statements. The Administrator shall deliver to NAFCO and to
the Trustee, on or before April 30 of each year (beginning April 30, 1995) a
certificate signed by a financial officer stating that (1) a review of its
activities relating to the administration of the Receivables during the prior
year ending December 31 and performance under this Agreement has been made under
such officer's supervision, and (2) to the best of such officer's knowledge,
based on such review, the Administrator has fulfilled all its obligations under
this Agreement throughout the period covered by such certificate, or, if there
has been a default in the fulfillment of any such obligations, specifying each
such default known to such officer and the nature and status thereof.
(f) Annual Independent Public Accountant's Administration Report. The
Administrator shall, no later than September 30 of each year (commencing
September 30, 1995), cause either Arthur Andersen & Co., Price Waterhouse,
Coopers & Lybrand, Deloitte & Touche, Ernst & Young or KPMG Peat Marwick (or any
of their successors in interest) (which firm may also render other services to
the Administrator or any Affiliate thereof) to furnish a report, as of June 30
of such year, to NAFCO, the Seller, each Applicable Rating Agency and the
Trustee, which accounting firm is performing certain agreed upon procedures with
respect to certain documents and records relating to the administration of the
Receivables set forth as Exhibit F hereto and which accounting firm states that,
based upon such agreed-upon
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procedures, no matters came to its attention that caused it to believe that such
administration was not conducted in compliance with this Agreement except for
such exceptions or errors as such firm shall believe to be immaterial and such
other exceptions as shall be set forth in such statement. Each such accountant's
report shall state that the accountants have compared the amounts contained in
one randomly selected Distribution Date Statement from each fiscal quarter
delivered by the Administrator during the period covered by such report with the
records from which such amounts were derived and that, on the basis of such
comparison, such accountants are of the opinion that the amounts are in
agreement with such records, except for such exceptions as they believe to be
immaterial and such other exceptions as shall be set forth in such report.
Section 3.05 Rights of the Trustee.
(a) Each of NAFCO and the Administrator hereby authorizes the Trustee,
from time to time after the designation of an Administrator other than National
Auto pursuant to Section 10.02, to take any and all steps in NAFCO's name and on
behalf of NAFCO and the Administrator which are necessary or appropriate, in the
reasonable determination of the Trustee, to collect all amounts due under any
and all Receivables or Related Transferred Assets, including endorsing the name
of NAFCO or the Seller on checks and other instruments representing Collections
and enforcing such Receivables and the Related Transferred Assets.
(b) NAFCO hereby irrevocably appoints the Trustee to act as NAFCO's
attorney-in-fact, with full authority in the place and stead of NAFCO and in the
name of NAFCO or otherwise, from time to time after the designation of an
Administrator other than National Auto pursuant to Section 10.02, to take
(subject to the same protections which are afforded the Trustee in Section 11.14
hereof) any action and to execute any instrument or document that the Trustee,
in its reasonable determination, may deem necessary to accomplish the purposes
of this Agreement, including:
(i) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under
or in respect of any Receivable or any Related Transferred Asset;
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(ii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (i)
above;
(iii) to file any claims or take any action or institute any
proceedings which the Trustee in its reasonable determination may deem
necessary or appropriate for the collection of any of the Receivables or
any Related Transferred Asset or otherwise to enforce the rights of the
Trustee and the Certificateholders with respect to any of the Receivables
or any Related Transferred Asset; and
(iv) to perform the affirmative obligations of
NAFCO under any Transaction Document.
NAFCO hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section 3.05(b) is irrevocable and coupled with an
interest.
Section 3.06 Further Action Evidencing Transfers.
(a) Each of NAFCO and the Administrator agrees that from time to time, as
an expense of the Administrator paid out of the Administration Fee, it will
promptly execute and deliver (or cause the Servicer to execute and deliver) all
further instruments and documents, and will promptly take all further action (or
cause the Servicer to take all further action) that the Trustee may reasonably
request, in order to perfect, protect or more fully evidence the conveyances
hereunder, or to enable the Certificateholders or the Trustee to exercise or
enforce any of their respective rights hereunder or under any other Transaction
Document. Without limiting the generality of the foregoing, upon the Trustee's
request, NAFCO (or, in the case of clause (ii) below, the Administrator) will,
or will cause the Administrator to:
(i) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be required from time to time pursuant to Section 7.02(c)
or as the Trustee reasonably determines necessary or desirable; and
(ii) mark its master data processing records that evidence or list
Receivables or Related Transferred Assets as described in Section 2.01(d).
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The Administrator shall cause all financing statements and continuation
statements and any other necessary documents relating to the right, title and
interest of the Trustee (for the benefit of the Certificateholders) in and to
the Trust Assets to be promptly recorded, registered and filed, and at all times
to be kept recorded, registered and filed, all in such manner and in such places
as may be required by law fully to preserve, maintain and protect the right,
title and interest of the Trustee hereunder (for the benefit of the
Certificateholders) in and to all property comprising the Trust Assets. The
Administrator shall deliver to the Trustee file-stamped copies of, or filing
receipts for, any document recorded, registered or filed as provided above, as
soon as available following such recording, registration or filing. NAFCO shall
cooperate fully with the Administrator in connection with the obligations set
forth above and will execute any and all documents which are reasonably required
to fulfill the intent of this Section 3.06.
(b) If NAFCO or the Administrator fails to perform any of its agreements
or obligations under any Transaction Document and does not remedy such failure
within the applicable cure period, if any, then the Trustee or its designee may
(but shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the reasonable expenses of the Trustee or its
designee incurred in connection therewith shall be payable by the Administrator
as provided in Section 11.05 and (if applicable) by NAFCO as provided in Section
7.03. If, at any time, NAFCO or the Administrator fails to file any financing
statement or continuation statement, or amendment thereto or assignment thereof,
that is required to be filed pursuant to this Agreement or any of the other
Transaction Documents, the Trustee may (but shall not be obligated to), and
NAFCO and the Administrator hereby authorize the Trustee to, file such financing
or continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Receivables or the Related Transferred Assets now
existing or hereafter arising in the name of NAFCO or the Administrator as an
expense of the Administrator paid out of the Administration Fee.
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
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Section 4.01 Rights of Certificateholders. Each Certificate shall
represent a fractional undivided ownership interest in the Trust, consisting of,
among others, a right to receive Collections, funds on deposit in the Trust
Accounts and other Trust Assets, to the extent and at the times provided herein,
in payment of the principal amount of such Certificate (which principal amount
shall vary from time to time in accordance with the terms of this Agreement) and
interest accrued on the principal amount of any Certificate from time to time at
the applicable Certificate Rate, and other Obligations owed to the Holder of a
Certificate (all such undivided interests being herein collectively called the
"Certificate Interest").
In addition, the Class C Certificate shall represent the ownership
interest in the remainder of the Trust Assets not allocated pursuant to this
Agreement to the Certificate Interest, including the right to receive payments
at the times and in the amounts specified in this Article IV to be paid in
respect of the Class C Certificates (the "Residual Interest").
Section 4.02 Establishment of Trust Accounts. (a) The Trustee shall
establish and maintain in the name of the Trustee, on behalf of the Trust and
for the benefit of the Certificateholders, the segregated trust accounts
referred to in clauses (b) and (c) below and listed on Exhibit D hereto (and
such additional accounts as may be required by any Supplement). Each of the
Trust Accounts shall be established and maintained in the Corporate Trust Office
of the Trustee or as provided in Section 4.02(d) below and shall bear a
designation clearly indicating that funds deposited therein are held for the
benefit of the Certificateholders.
(b) All Collections and all other Trust Assets consisting of cash or cash
equivalents transferred from the Servicer Account shall be deposited in a
segregated trust account (the "Certificate Account"). Funds on deposit in the
Certificate Account will be allocated as provided in Section 4.03.
(c) From time to time prior to the occurrence of an Amortization Event,
the purchase price for purchases of Trust Interests by Certificateholders
pursuant to the applicable Certificate Purchase Agreement will be deposited by
the Trustee in a segregated trust account (the "Excess Funding Account"). On any
Business Day, the Administrator may cause the Trustee to withdraw from the
Excess Funding
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Account and distribute to NAFCO amounts on deposit therein; provided, (i) that
no Amortization Event shall have occurred and be continuing, and (ii) after
giving effect to such withdrawals from or deposits into the Excess Funding
Account, there shall not exist any Overcollateralization Deficit. In addition,
funds on deposit in the Excess Funding Account shall be withdrawn from the
Excess Funding Account and deposited in the Certificate Account in accordance
with Section 4.03(c).
(d) Interest accrued on any class of Certificates that is not
distributable to Certificateholders on the Distribution Date relating to such
Interest Period shall be deposited in a segregated trust account (the "Accrued
Interest Account") pursuant to Section 4.03(a)(v). The Trustee shall, on the
Business Day preceding the Distribution Date on which such funds are
distributable to Certificateholders, withdraw such funds from the Accrued
Interest Account and deposit such funds in the Certificate Account for
application on such Distribution Date pursuant to Section 4.03(a).
(e) The Certificate Account shall be held by the Trustee for the benefit
of all Certificateholders. Each Trust Account shall be maintained in the
Corporate Trust Office of the Trustee or with a bank which is organized under
the laws of the United States or any state which is a member of the FDIC and has
a certificate of deposit rating in the highest investment category granted by
the Applicable Rating Agency or otherwise approved by each Applicable Rating
Agency.
(f) The Trustee shall possess (for its benefit and for the benefit of the
Certificateholders) all right, title and interest in and to all funds on deposit
from time to time in each of the Trust Accounts and in all proceeds thereof. The
Trust Accounts shall be under the sole dominion and control of the Trustee for
the benefit of the applicable Certificateholders. Pursuant to the authority
granted to the Administrator, the Administrator shall have the power, revocable
at any time by the Trustee or by the Trustee at the direction of the Majority
Certificateholders, to instruct the Trustee to make withdrawals and payments
from the Trust Accounts for the purposes of carrying out the Administrator's or
the Trustee's duties hereunder.
Section 4.03 Distributions.
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In the manner and to the degree set forth in the applications of
Collections described below in Sections 4.03(a) and (b), the rights of the Class
B and Class C Certificateholders to receive distributions shall be and hereby
are subordinated to the rights of the Class A Certificateholders to receive
distributions, and the rights of the Class C Certificateholders to receive
distributions shall be and hereby are subordinated to the rights of the Class A
and Class B Certificateholders to receive distributions, in the event of
delinquency or defaults on the Receivables. On each Distribution Date, the
Trustee (based on the information contained in the Distribution Date Statement
delivered on the related Determination Date pursuant to Section 3.04(c)) shall
make the following distributions from the Certificate Account in the following
order of priorities, satisfying in full, to the extent required and possible,
each priority before making any distribution with respect to any succeeding
priority:
(a) Available Certificateholder Finance Charge Collections,
Investment Proceeds in respect of the related Calculation Period and funds
withdrawn from the Accrued Interest Account and deposited in the Certificate
Account on such Distribution Date pursuant to Section 4.02(d) hereof shall be
applied in the following priority:
(i) to the Administrator, an amount equal to the sum of (i)
one-half (1/2) of the Administration Fee and (ii) all unpaid amounts from
prior Calculation Periods distributable pursuant to this subsection (i),
if any;
(ii) to the Structuring Advisor, an amount
equal to the Monthly Structuring Fee due and owing on
such Distribution Date, if any;
(iii) to the Class A Certificateholders, an amount equal to
the sum of the Class A Interest Distributable Amount and any outstanding
Class A Interest Carryover Shortfall as of the close of business on the
preceding Distribution Date;
(iv) to the Class B Certificateholders, an amount equal to the
sum of the Class B Interest Distributable Amount and any outstanding Class
B Interest Carryover Shortfall as of the close of business on the
preceding Distribution Date;
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(v) to the Accrued Interest Account in an amount equal to the
excess of (i) interest accrued on the Class A Certificates and Class B
Certificates during the related Interest Period over (ii) the sum of the
Class A Interest Distributable Amount and the Class B Interest
Distributable Amount.
(vi) to the Class A Certificateholders, an amount equal to any
shortfall in amounts distributed on such Distribution Date to Class A
Certificateholders pursuant to Section 4.03(b)(i);
(vii) to the Class B Certificateholders, an amount equal to
any shortfall in amounts distributed on such Distribution Date to Class B
Certificateholders pursuant to Section 4.03(b)(ii);
(viii) to the Reserve Fund in an amount equal
to the Reserve Fund Deposit Amount;
(ix) on any Distribution Date occurring prior to the
Amortization Commencement Date, an amount equal to any
Overcollateralization Deficit remaining after giving effect to the
distributions pursuant to Section 4.3(b)(i) and (b)(ii), either (as
specified in the Distribution Date Statement) (a) to the Excess Funding
Account or (b) pro rata to the Class A Certificateholders and Class B
Certificateholders in reduction of the respective outstanding principal
amounts thereof;
(x) on any Distribution Date occurring on or after the
Liquidation Commencement Date, to the Reserve Fund in an amount equal to
the Liquidation Reserve Requirement.
(xi) to the Administrator, the portion of the Administration
Fee not distributed pursuant to subsection (i) above and all unpaid
amounts distributable pursuant to this subsection (x) from prior
Distribution Dates, if any;
(xii) the remainder to the Class C Certificateholder
in respect of the Residual Interest.
(b) Available Certificateholder Principal Collections, the aggregate
Purchase Amounts for Receivables repurchased pursuant to Section 2.04 in respect
of the related Calculation Period and any amounts withdrawn from
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the Excess Funding Account and deposited in the Certificate Account pursuant to
Section 4.03(c) hereof shall be applied in the following priority:
(i) to the Class A Certificateholders, an amount equal to the
sum of the Class A Principal Distributable Amount and any outstanding
Class A Principal Carryover Shortfall as of the close of business on the
preceding Distribution Date;
(ii) to the Class B Certificateholders, an amount equal to the
sum of the Class B Principal Distributable Amount and any outstanding
Class B Principal Carryover Shortfall as of the close of business on the
preceding Distribution Date;
(iii) on any Distribution Date occurring prior to the
Amortization Commencement Date, an amount equal to any
Overcollateralization Deficit remaining after giving effect to the
distributions pursuant to Section 4.03(a) and clauses (b)(i) and (b)(ii)
above, either (as specified in the Distribution Date Statement) (a) to the
Excess Funding Account or (b) pro rata to the Class A Certificateholders
and Class B Certificateholders in reduction of the respective outstanding
principal amounts thereof;
(iv) on any Distribution Date occurring on or after the
Liquidation Commencement Date, to the Reserve Fund in an amount equal to
the Liquidation Reserve Requirement (as calculated after giving effect to
any deposits to the Reserve Fund on such Distribution Date pursuant to
Section 4.03(a)(x), provided that, if on such date, the amount on deposit
in the Reserve Fund at least equals the sum of the outstanding principal
amounts of the Class A Certificates and the Class B Certificates, the
Trustee shall apply such amounts to the Class A and Class B
Certificateholders in reduction of the respective outstanding principal
amounts thereof; and
(v) the remainder to the Class C Certificateholder in
respect of the Residual Interest.
(c) Commencing with the first Distribution Date occurring on or
after the Amortization Commencement Date and on each succeeding Distribution
Date, until the balance of funds on deposit in the Excess Funding Account has
been reduced to zero, funds on deposit in the Excess Funding
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Account shall be deposited in the Certificate Account and applied in reduction
of the outstanding principal amount of the Certificates in the priority set
forth in Section 4.03(b) in an amount equal to the lesser of (i) the balance of
funds on deposit in the Excess Funding Account and (ii) the sum of the
outstanding principal balances of the Class A and Class B Certificates (or
portions thereof) for which the designated interest tranches are maturing on the
applicable Distribution Date prior to giving effect to distributions made
pursuant to Section 4.03(b) on such Distribution Date. In addition, the
Administrator may instruct the Trustee on any Distribution Date prior to the
Amortization Commencement Date to withdraw funds from the Excess Funding Account
and deposit such funds in the Certificate Account for application pro rata to
the Class A Certificateholders and Class B Certificateholders in reduction of
the respective outstanding principal amounts thereof, such withdrawal and
application only to be made to the extent that, after giving effect to such
withdrawals and applications and any withdrawals from the Excess Funding Account
pursuant to Section 4.02(c), there exists no Overcollateralization Deficit.
Section 4.04 Distributions to NAFCO. The Administrator shall calculate on
each Determination Date the Transferor Distribution Amount and shall instruct
the Trustee to distribute such amount to NAFCO or to any other party whom NAFCO
designates on the following Distribution Date. Distribution of the Transferor
Distribution Amount shall be in addition to any Excess Amounts or other payments
distributed to NAFCO in its capacity as the Class C Certificateholder.
Section 4.05 Establishment of Reserve Fund. The Administrator, for the
benefit of the Certificateholders, shall cause to be established and maintained
in the name of the Trustee, on behalf of the Trust, an account (the "Reserve
Fund") which shall be identified as the "Reserve Fund for NAFCO Auto Receivables
Master Trust" and shall bear a designation clearly indicating that the funds
deposited therein are held for the benefit of the Certificateholders.
Section 4.06 Application of Reserve Fund. (a) If amounts distributed on
any Distribution Date pursuant to Section 4.03 are not sufficient to make the
entire distributions required on such Distribution Date by Section 4.03(a)(iii),
(iv), (vi) and (vii) and Section 4.03(b)(i) and (b)(ii), the Administrator shall
cause the Trustee to withdraw funds from the Reserve Fund to the extent
available
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therein, and apply such funds first to complete the distributions pursuant to
Section 4.03(a)(iii) through 4.03(a)(vi) in the priority therein provided, and
second to complete the distributions pursuant to Section 4.03(b)(i) and (b)(ii),
in the priority therein provided.
(b) If, after giving effect to the allocations of, distributions
from, and deposits in, the Reserve Fund on any Distribution Date, the amount in
the Reserve Fund is greater than (i) in the case of any Distribution Date
occurring prior to the Liquidation Commencement Date, the Required Reserve Fund
Amount for such Distribution Date, and (ii) in the case of any Distribution Date
occurring on or after the Liquidation Commencement Date, the Certificate
Principal Amount (after giving effect to distributions in reduction thereof on
such Distribution Date), the Administrator shall cause the Trustee to distribute
such excess amount to the holders of the Class C Certificates. Upon payment in
full of the outstanding principal balance of the Certificates plus all
outstanding interest and other amounts owing in respect of the Certificates, any
funds remaining on deposit in the Reserve Fund shall be paid to the holders of
the Class C Certificates.
Section 4.07 Investment of Funds in Trust Accounts. On any day when funds
on deposit in any Trust Account shall exceed $100,000.00 (after giving effect to
the allocations of such funds required by this Article IV), and at such other
times as investment is practicable, the Trustee, at the written direction of the
Administrator, shall invest and reinvest monies on deposit in such Trust Account
(in the name of the Trustee) in such Eligible Investments as are specified in a
notice from the Administrator, subject to the restrictions set forth
hereinafter. The Trustee shall, at the direction of the Administrator: (a)
invest the funds in the Excess Funding Account in Eligible Investments that
mature not later than one Business Day preceding the next succeeding
Distribution Date (or, if earlier, the Business Day next preceding the Scheduled
Amortization Commencement Date or the Final Scheduled Payment Date); (b) invest
all other funds in the Trust Accounts in Eligible Investments that mature not
later than one Business Day preceding the next succeeding Distribution Date (or,
if earlier, the Business Day next preceding the Scheduled Amortization
Commencement Date or the Final Scheduled Payment Date). All Eligible Investments
made from funds in any Trust Account, and the interest, dividends and income
received thereon and therefrom and the net proceeds realized on the sale
thereof, shall be deposited in such Trust Account. The Trustee may
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liquidate an Eligible Investment prior to maturity if such liquidation would not
result in a loss of all or part of the principal portion of such Eligible
Investment or if, prior to the maturity of such Eligible Investment, a default
occurs in the payment of principal, interest or any other amount with respect to
such Eligible Investment. In the absence of negligence of the Trustee or willful
misconduct by the Trustee, the Trustee shall have no liability in connection
with investment losses incurred on Eligible Investments. It is intended for
income tax purposes that the income earned through investment of funds in the
Trust Accounts shall be treated as income of the Class C Certificateholders.
Section 4.08 Attachment of Trust Accounts. If the Trustee receives written
notice that any account designated as a Trust Account has or will become subject
to any writ, judgment, warrant of attachment, execution or similar process, the
Trustee shall (notwithstanding any other provision of the Transaction Documents)
promptly notify NAFCO, the Administrator and the Certificateholders thereof, and
shall not deposit or transfer funds into such Trust Account but shall cause
funds otherwise required to be deposited into such Trust Account to be held in
another account pending distribution of such funds in the manner required by the
Transaction Documents.
ARTICLE V
REPORTS TO CERTIFICATEHOLDERS
Section 5.01 Information to Certificateholders.
Distribution Date Statement. Within two Business Days after each
Distribution Date, the Trustee shall send to each Certificateholder a copy of a
monthly report prepared by the Administrator in the form of Exhibit C by
first-class mail, postage prepaid, to the address of such Certificateholder that
is indicated in the Certificate Register.
Section 5.02 Notice of Early Liquidation at Seller Election. If NAFCO
shall receive a notice from the Seller, pursuant to Section 8.1 of the Purchase
Agreement, to the effect that the Seller desires to terminate its agreement to
sell Receivables to NAFCO, NAFCO shall deliver a copy of such notice to the
Trustee, and the Trustee shall deliver a copy of such notice to each
Certificateholder and to the Applicable Rating Agencies, as soon as practicable
(and in
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any event within two Business Days), which notice shall become effective at the
time, and subject to the conditions, specified in such notice and in Section 8.1
of the Purchase Agreement.
Section 5.03. Annual Tax Information. On or before February 15, of each
calendar year, beginning with calendar year 1994, the Administrator on behalf of
the Trust, shall furnish or cause to be furnished to each Person who at any time
during the preceding calendar year was a Certificateholder such information for
such preceding calendar year, or the applicable portion thereof during which
such Person was a Holder of record of a Certificate, as is required to be
provided by an issuer of indebtedness under the Internal Revenue Code to the
holders of the issuer's indebtedness and such other customary information as is
necessary to enable the Certificateholders to prepare their federal income tax
returns. Such obligation of the Administrator shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Paying Agent to such Certificateholder pursuant to any
requirements of the Internal Revenue Code as from time to time in effect.
ARTICLE VI
THE CERTIFICATES
Section 6.01 The Certificates. The Class B Certificates shall be
substantially in the form of Exhibit A and the Class C Certificate shall be
substantially in the form of Exhibit B. Upon issuance, all Certificates
including the Class C Certificate shall be executed and delivered by NAFCO to
the Trustee for authentication and redelivery as provided in Section 6.02.
Except to the extent provided otherwise in an applicable Supplement,
Certificates shall be issued in minimum denominations of $20,000 (and such
interests shall not be subdivided in denominations of less than $20,000) and in
integral multiples of $20,000 in excess thereof. The Certificates shall
initially be issued with an initial aggregate Stated Amount in the amount set
out in the related Supplement and Certificate Purchase Agreement.
Each Certificate shall be executed by manual or facsimile signature on
behalf of NAFCO by an Authorized Officer of the NAFCO Trustee or by any
attorney-in-fact duly authorized to execute such Certificate on behalf of any
such
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officer. The Certificates shall be authenticated on behalf of the Trust by
manual signature of a duly authorized signatory of the Trustee. Certificates
bearing the manual or facsimile signature of the individual who was, at the time
when such signature was affixed, authorized to sign on behalf of NAFCO or the
Trust (as applicable) shall be valid and binding obligations of the Trust,
notwithstanding that such individuals or any of them ceased to be so authorized
prior to the authentication and delivery of such Certificates or do not hold
such office on the date of issuance of such Certificates. No Certificates shall
be entitled to any benefit under this Agreement, or be valid for any purpose,
unless there appears on such Certificate a certificate of authentication
substantially in the form provided for herein executed by or on behalf of the
Trustee by the manual signature of a duly authorized signatory, and such
certificate of authentication upon any Certificate shall be conclusive evidence,
and the only evidence, that such Certificate has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Agreement. Except as
otherwise provided in the applicable Supplement, all Certificates shall be dated
the date of their authentication.
Section 6.02 Authentication of Certificates. (a) The Trustee will
authenticate and deliver the Class B Certificate and the Class C Certificate to
NAFCO pursuant to an order from NAFCO to the Trustee.
(b) On each Subsequent Issuance Date, upon the written order of NAFCO, the
Trustee shall authenticate and deliver to NAFCO the Series of Certificates that
are to be issued originally on such Subsequent Issuance Date (the "Subsequent
Issuance Certificates") pursuant to the applicable Supplement. The Subsequent
Issuance Certificates shall be duly authenticated by or on behalf of the
Trustee, in authorized denominations equal, in the aggregate, to the aggregate
Stated Amounts of such Certificates, in the case of a Series of Certificates.
Section 6.03 Registration of Transfer and Exchange of Certificates. (a)
The Trustee, as agent for NAFCO, shall keep, or shall cause to be kept, at the
office or agency to be maintained in accordance with the provisions of Section
11.16 a register, in written form or capable of being converted into written
form within a reasonable time (the "Certificate Register") in which, subject to
such reasonable regulations as it may prescribe, a transfer agent and registrar
(which may be the Trustee) (the "Transfer Agent
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and Registrar") shall provide for the registration of the Certificates and of
transfers and exchanges of the Certificates as herein provided. NAFCO hereby
appoints the Trustee as the initial Transfer Agent and Registrar.
NAFCO, or the Trustee, as agent for NAFCO (if the Trustee is not then
acting as Transfer Agent and Registrar), may revoke such appointment as Transfer
Agent and Registrar and remove the then-acting Transfer Agent and Registrar as
Transfer Agent and Registrar if the Trustee or NAFCO (as applicable) determines
in its sole discretion that the then-acting Transfer Agent and Registrar has
failed to perform its obligations under this Agreement in any material respect.
The then-acting Transfer Agent and Registrar shall be permitted to resign as
Transfer Agent and Registrar upon 30 days' prior written notice to the Trustee,
NAFCO and the Administrator; provided, however, that such resignation shall not
be effective and the then-acting Transfer Agent and Registrar shall continue to
perform its duties as Transfer Agent and Registrar until NAFCO or the Trustee
has appointed a successor Transfer Agent and Registrar reasonably acceptable to
NAFCO and the Person so appointed has given NAFCO or the Trustee written notice
that it accepts the appointment. The provisions of Sections 11.01 through 11.05
shall apply to the Transfer Agent and Registrar as if all references to "the
Trustee" in the applicable provisions of Sections 11.01 through 11.05 were also
references to the Transfer Agent and Registrar.
It is intended that the registration of Certificates which is described in
this Section 6.03(a) comply with the registration requirements contained in
Section 163 of the Internal Revenue Code.
(b) None of the Certificates may be sold, transferred or otherwise
disposed of (any such sale, transfer or other disposition, as defined for
purposes of this Section 6.03(b), being called a "Sale", with "Sell" having a
correlative meaning), except in compliance with this Section 6.03(b). The
Certificates will not be registered under the provisions of the Securities Act
of 1933 (the "Act") and the Certificateholders, by purchasing their
Certificates, acknowledge that the Certificates will not be so registered.
A Certificateholder may not Sell any of the Certificates held by it
unless
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(i) such Sale is to a "qualified institutional buyer" within the
meaning of Rule 144A promulgated under the Securities Act ("Rule 144A")
that purchases for its own account or for the account of another Person
that is a "qualified institutional buyer," (or such Certificateholder
reasonably believes its buyer is a "qualified institutional buyer") which
Person is aware that the proposed Sale is being made in reliance on Rule
144A and to whom such Sale is being made pursuant to an available
exemption from the registration requirements of applicable state
securities laws, and, prior to the proposed Sale, such Certificateholder
has executed and delivered to the Trustee and NAFCO an investor letter,
substantially in the form of Exhibit E; or
(ii) such Sale is being made pursuant to an applicable exemption
from the registration requirements of the Securities Act and applicable
state securities laws and, prior to the proposed Sale, such
Certificateholder and the proposed transferee each provide the Trustee and
NAFCO with written representations and an opinion of counsel (which may be
in-house counsel), in each case satisfactory in form and substance to the
Trustee and NAFCO, concerning the proposed Sale and the availability of
such exemption.
No Certificateholder or other Person acting on behalf of a Certificateholder
shall use any means of general solicitation or distribution in connection with
the marketing, sale, transfer or other disposition of any Certificates. The
Certificates shall bear a legend substantially as set forth in the form of the
Certificate attached to this Agreement pursuant to which such Certificate is
issued.
The provisions of this Section 6.03(b) shall not apply to any Sale
of any Certificates in a transaction that is registered under the Securities Act
and all applicable state securities laws. None of National Auto or any of its
Subsidiaries, NAFCO or the Trustee shall be required to effect any registration
of the Certificates under the Securities Act or the Securities Exchange Act of
1934, as amended.
NAFCO, the Administrator and the Trustee shall make available to any
selling Certificateholder and any prospective transferee of Certificates such
information within the possession of NAFCO, the Administrator or the
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Trustee about the Trust, the Trust Assets and the servicing of the Receivables
and the Related Transferred Assets as is required to permit such Holder to
comply with the requirements of Rule 144A in connection with the resale of
Certificates, in any such case promptly after the same is requested.
(c) In connection with each issuance of a Series of Certificates,
NAFCO will determine whether such Certificates may be purchased by employee
benefit plans (as defined in ERISA) and shall cause the Certificates evidencing
such Series to bear a legend describing any restrictions on such purchases.
(d) (i) The holders of the Class C Certificates shall not transfer,
assign, exchange or otherwise convey or pledge, hypothecate or otherwise grant a
security interest in any Class C Certificate or any interest represented
thereby, (ii) the purchaser of the Class B Certificates shall at all times
retain at least fifty percent (50%) of the Class B Certificates and shall not
transfer, assign, exchange or otherwise convey or pledge, hypothecate or
otherwise grant a security interest in such Certificates, and any attempt to
transfer, assign, exchange, convey, pledge, hypothecate or grant a security
interest in such Class C Certificates or such Class B Certificates or any
interest represented thereby shall be void and of no effect.
(e) Subject to the requirements of Sections 6.03(b), 6.03(c) and, if
applicable, Section 6.03(d) having been fulfilled, upon surrender for
registration of transfer of any Certificate at any office or agency of the
Transfer Agent and Registrar maintained for such purpose, NAFCO shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Certificates of the appropriate Class
and Series which are in authorized denominations of like aggregate fractional
interest in the Certificate Interest, and, in the case of each Certificate,
which bear numbers that are not contemporaneously outstanding.
At the option of a Certificateholder, such Holder's Certificates may be
exchanged for other Certificates of the same Class and Series (and bearing the
same interest rate as the Certificate surrendered for registration of exchange)
of authorized denominations of like aggregate fractional interests in the
Certificate Interest and bearing numbers that are not contemporaneously
outstanding, upon surrender of the Certificates to be exchanged at any such
office or
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agency. Whenever any Certificates are so surrendered for exchange, NAFCO shall
execute, and the Trustee shall authenticate and deliver, the appropriate number
of Certificates of the Class and Series which the Certificateholder making the
exchange is entitled to receive. Every Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in a form satisfactory to the Transfer Agent and
Registrar duly executed by the Certificateholder thereof or his attorney-in-fact
duly authorized in a writing delivered to the Transfer Agent and Registrar.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Transfer Agent and Registrar or any
co-transfer agent and co-registrar may require any Certificateholder that is
transferring or exchanging one or more Certificates to pay a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer or exchange of Certificates.
All Certificates surrendered for registration of transfer and exchange
shall be cancelled and disposed of in a manner satisfactory to the Trustee.
(f) Certificates may be surrendered for registration of transfer or
exchange at the office of the Transfer Agent and Registrar designated in Section
13.05.
Section 6.04 Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any
mutilated Certificate is surrendered to the Transfer Agent and Registrar, or the
Transfer Agent and Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there is delivered to the
Transfer Agent and Registrar and the Trustee such security or indemnity as may
be required by them and NAFCO to hold each of them, the Trust and NAFCO
harmless, then, in the absence of notice to the Trustee that such Certificate
has been acquired by a bona fide purchaser, NAFCO shall execute and, upon the
request of NAFCO, the Trustee shall authenticate and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like Class, Series, tenor, terms and principal amount and bearing
a number that is not contemporaneously outstanding. In connection with the
issuance of any new Certificate under this Section 6.04, the Trustee or the
Transfer Agent and Registrar may require the payment by the Certificateholder of
a sum sufficient to cover any tax or other governmental
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charge that may be imposed in relation thereto and any other expenses (including
the reasonable fees and expenses of the Trustee and Transfer Agent and
Registrar) connected therewith. Any duplicate Certificate issued pursuant to
this Section 6.04 shall constitute conclusive and indefeasible evidence of
ownership of an interest in the Trust, as if originally issued, whether or not
the lost, stolen or destroyed Certificate shall be enforceable by anyone, and
shall be entitled to all the benefits of this Agreement equally and
proportionately with any and all Certificates of the same Class and Series that
are duly issued hereunder.
Section 6.05 Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, NAFCO, the Trustee, the Paying Agent,
the Transfer Agent and Registrar and any agent of any of them may treat the
Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Article IV
and for all other purposes whatsoever, and none of NAFCO, the Trustee, the
Paying Agent, the Transfer Agent and Registrar or any agent of any of them shall
be affected by any notice to the contrary. Any Certificate held by NAFCO or an
Affiliate thereof shall be deemed not to be outstanding for purposes of
determining Majority Certificateholders or Required Certificateholders.
Section 6.06 Appointment of Paying Agent. The Paying Agent shall initially
be the Trustee. NAFCO hereby appoints the Paying Agent as its agent to make
distributions to Certificateholders from the Certificate Account pursuant to
Section 4.03 and to report the amounts of such distributions to the Trustee. Any
Paying Agent shall have the revocable power to withdraw funds from the
Certificate Account for the purpose of making the distributions referred to
above. The Trustee or, at any time when the Trustee is also the Paying Agent,
NAFCO may revoke such power of the Paying Agent and remove the Paying Agent if
the Trustee or NAFCO (as applicable) determines in its sole discretion that the
Paying Agent shall have failed to perform its obligations under this Agreement
in any material respect. The Paying Agent shall be permitted to resign as Paying
Agent upon 30 days' prior written notice to the Trustee, NAFCO, the
Administrator and the Applicable Rating Agencies. In the event that the Trustee
shall no longer be the Paying Agent, the Trustee shall appoint a successor
Paying Agent (which shall be a bank or trust company) reasonably acceptable to
NAFCO, which appointment shall be effective on the date on which the Person so
appointed gives the Trustee written
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notice that it accepts the appointment. The Trustee shall cause such successor
Paying Agent or any additional Paying Agent appointed by the Trustee to execute
and deliver to the Trustee an instrument in which such successor Paying Agent or
additional Paying Agent shall agree with the Trustee that, as Paying Agent, such
successor Paying Agent or additional Paying Agent will hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Paying Agent shall return all unclaimed funds to the
Trustee, and upon removal of a Paying Agent such Paying Agent shall also return
all funds in its possession to the Trustee. The provisions of Sections 11.01
through 11.05 shall apply to the Paying Agent as if all references in the
applicable provisions thereof to "the Trustee" were also references to the
Paying Agent.
Section 6.07 Access to List of Certificateholders' Names and Addresses.
The Trustee will furnish or cause to be furnished by the Transfer Agent and
Registrar to NAFCO, the Administrator or the Paying Agent, within two Business
Days after receipt by the Trustee of a request therefor from the Administrator
or the Paying Agent, respectively, in writing, a list in such form as the
Administrator or the Paying Agent may reasonably require, of the names and
addresses of the Certificateholders as of the most recent Record Date. If any
Holder or group of Holders of the Certificates in any Series evidencing not less
than 10% of the aggregate unpaid principal amount of such Series (the
"Applicant") applies in writing to the Trustee, and such application states that
the Applicant desires to communicate with other Certificateholders with respect
to their rights under this Agreement, any Supplement or the Certificates and is
accompanied by a copy of the communication which such Applicant proposes to
transmit, then the Trustee, after having been indemnified to its reasonable
satisfaction by the Applicant for its costs and expenses, shall afford or shall
cause the Transfer Agent and Registrar to afford such Applicant access during
normal business hours to the most recent list of Certificateholders held by the
Trustee, within five Business Days after the receipt of such application and
indemnification. Such list shall be as of a date no more than 45 days prior to
the date of receipt of such Applicant's request.
Every Certificateholder, by receiving and holding a Certificate, agrees
with the Trustee that neither the Trustee, the Transfer Agent and Registrar,
NAFCO, the
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Administrator nor any of their respective agents, shall be held accountable by
reason of the disclosure of any such information as to the names and addresses
of the Certificateholders hereunder, regardless of the sources from which such
information was derived.
Section 6.08 Authenticating Agent. (a) The Trustee may appoint one or more
Authenticating Agents (each an "Authenticating Agent") with respect to the
Certificates which shall be authorized to act on behalf of the Trustee in
authenticating the Certificates in connection with the issuance, delivery,
registration of transfer, exchange or repayment of the Certificates. Either the
Trustee or the Authenticating Agent, if any, then appointed and acting on behalf
of the Trustee shall authenticate the Certificates. Whenever reference is made
in this Agreement to the authentication of Certificates by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication on behalf of the Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent must be reasonably acceptable to
NAFCO.
(b) Any institution succeeding to the corporate agency business of an
Authenticating Agent shall continue to be an Authenticating Agent without the
execution or filing of any document or any further act on the part of the
Trustee, such Authenticating Agent or any other Person.
(c) An Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to NAFCO. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving notice of termination
to such Authenticating Agent and to NAFCO. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time an Authenticating
Agent shall cease to be acceptable to the Trustee or NAFCO, the Trustee may
promptly appoint a successor Authenticating Agent. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder, with like effect as
if originally named as an Authenticating Agent. No successor Authenticating
Agent shall be appointed unless acceptable to the Trustee and NAFCO.
(d) The Administrator agrees to pay to each Authenticating Agent (if any),
as an expense of the Administrator paid out of the Administration Fee,
reasonable
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compensation from time to time for services performed by such Authenticating
Agent under this Section 6.08.
(e) The provisions of Sections 11.01, 11.02, 11.03, 11.04 and 11.05 shall
be applicable to any Authenticating Agent as if the references in the applicable
provisions thereof to "the Trustee" were also references to the Authenticating
Agent.
(f) Pursuant to an appointment made under this Section 6.08, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
"This is one of the Certificates described in
the Supplement dated as of __________ ___, 199_.
__________________, as Trustee
By:_________________________
as Authenticating Agent
for the Trustee,
By:_________________________
Authorized Officer."
Section 6.09 Tax Treatment. It is the intent of NAFCO and the
Certificateholders that, for federal, state and local income and franchise tax
purposes, the Class A and Class B Certificates will be treated as evidence of
indebtedness secured by the Trust Assets and the Trust will not be characterized
as an association taxable as a corporation. NAFCO, by entering into this
Agreement, and each Certificateholder, by its acceptance of its Certificate,
agree to treat the Class A and Class B Certificates for federal, state and local
income and franchise tax purposes as indebtedness. The provisions of this
Agreement and all related Transaction Documents shall be construed to further
these intentions of the parties.
Section 6.10 Changes in Amount of Certificates. (a) The outstanding
principal amount of a Certificate shall at no time exceed the Stated Amount then
applicable to such Certificate. The Stated Amount of a Certificate may be
increased or decreased from time to time by NAFCO, with the prior written
consent of the Holder of such Certificate, if
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the following conditions shall have each been satisfied on or prior to the
effective date of such proposed increase or decrease (as the case may be):
(i) NAFCO shall have delivered to the Trustee a Tax Opinion with
respect to such proposed increase; and
(ii) the Rating Agency Condition shall have been satisfied with
respect to the increase.
(b) NAFCO may, pursuant to the Certificate Purchase Agreement or
Supplement that applies to a particular Certificate, request the Holder of such
Certificate to provide funds to the Trustee in respect of such Holder's
Certificate in order to increase the then-outstanding principal amount of such
Certificate, which requested increase shall be subject to the further provisions
of this Section 6.11(b) and to the provisions of such Certificate Purchase
Agreement or Supplement. NAFCO may make such a request at any time prior to the
occurrence of an Amortization Event and provided that there shall not exist an
Overcollateralization Deficit and shall make any such request in a writing that
is substantially in the form required by such Certificate Purchase Agreement or
the applicable Supplement, appropriately completed, and that is delivered to the
Holder of such Certificate at the time required by such Certificate Purchase
Agreement or the applicable Supplement. The outstanding principal amount of such
Holder's Certificate shall be increased on the Business Day on which such Holder
provides to the Excess Funding Account immediately available funds in the amount
of the requested increase by an amount equal to the amount of such funds.
ARTICLE VII
NAFCO
Section 7.01 Representations and Warranties of NAFCO Relating to NAFCO and
the Transaction Documents. On the date hereof and on each date Receivables are
transferred hereunder, NAFCO hereby represents and warrants that:
(a) Organization and Good Standing. NAFCO is a business trust duly
organized and validly existing in good standing under the laws of the
State of Delaware and has full power and authority to own its properties
and to conduct its business as such properties are
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presently owned and such business is presently conducted. NAFCO had at all
relevant times, and now has, all necessary power, authority, and legal
right to acquire, own and transfer the Receivables and the Related
Transferred Assets.
(b) Due Qualification. NAFCO is duly qualified to do business and is
in good standing as a business trust, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires such
qualification, licenses or approvals and where the failure so to qualify,
to obtain such licenses and approvals or to preserve and maintain such
qualification, licenses or approvals could have a Material Adverse Effect.
(c) Power and Authority; Due Authorization. NAFCO has (i) all
necessary power and authority to (A) execute and deliver this Agreement
and the other Transaction Documents to which it is a party, (B) perform
its obligations under this Agreement and the other Transaction Documents
to which it is a party, (C) transfer, assign, set-over and convey its
right, title and interest in, to and under the Receivables, the Related
Transferred Assets and the funds in the Trust Accounts on the terms and
subject to the conditions herein and therein provided and (ii) duly
authorized by all necessary action such transfer, assignment, set-over and
conveyance and the execution, delivery, and performance of this Agreement
and the other Transaction Documents to which it is a party and the
consummation of the transactions provided for in this Agreement and the
other Transaction Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each other
Transaction Document to which NAFCO is a party when executed and delivered
will constitute, a legal, valid and binding obligation of NAFCO,
enforceable against NAFCO in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) No Conflict or Violation. The execution, delivery and
performance of, and the consummation of
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the transactions contemplated by, this Agreement and the other Transaction
Documents to be signed by NAFCO and the fulfillment of the terms hereof
and thereof will not (i) conflict with, violate, result in any breach of
any of the terms and provisions of, or constitute (with or without notice
or lapse of time or both) a default under, (A) NAFCO Trust Agreement or
(B) any indenture, loan agreement, mortgage, deed of trust, or other
agreement or instrument to which NAFCO is a party or by which it or any of
its properties is bound, (ii) result in the creation or imposition of any
Adverse Claim upon any of its properties pursuant to the terms of any such
contract, indenture, loan agreement, mortgage, deed of trust, or other
agreement or instrument, other than this Agreement and the other
Transaction Documents, or (iii) conflict with or violate any federal,
state, local or foreign law or any decision, decree, order, rule, or
regulation applicable to NAFCO or any of its properties of any court or of
any federal, state, local or foreign regulatory body, administrative
agency, or other governmental instrumentality having jurisdiction over
NAFCO or any of its properties, which conflict, violation, breach, default
or Adverse Claim, individually or in the aggregate, could have a Material
Adverse Effect.
(f) No Proceedings. (i) There is no action, suit, proceeding or
investigation pending or, to the best knowledge of NAFCO, threatened
against NAFCO before any court, regulatory body, arbitrator,
administrative agency, or other tribunal or governmental instrumentality
and (ii) NAFCO is not subject to any order, judgment, decree, injunction,
stipulation or consent order of or with any court or other government
authority, that, in the case of each of foregoing clauses (i) and (ii),
(A) asserts the invalidity of this Agreement or any other Transaction
Document, (B) seeks to prevent the transfer of any Receivables or Related
Transferred Assets to the Trust, the issuance of the Certificates or the
consummation of any of the transactions contemplated by this Agreement or
any other Transaction Document, (C) seeks any determination or ruling that
would materially and adversely affect the performance by NAFCO of its
obligations under this Agreement or any other Transaction Document or the
validity or enforceability of this Agreement or any other Transaction
Document, (D) seeks to affect adversely the income tax attributes of the
transfers hereunder or the Trust under the
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United States federal income tax system or any state income tax system or
(E) individually or in the aggregate for all such actions, suits,
proceedings and investigations, could have a Material Adverse Effect.
(g) Governmental Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority that are
required to be obtained by NAFCO, and all notices to and filings with any
Governmental Authority that are required to be made by NAFCO, in the case
of each of the foregoing in connection with the transfer of Receivables
and Related Transferred Assets to the Trust or the execution, delivery and
performance by NAFCO of this Agreement and any other Transaction Documents
to which it is a party and the consummation of the transactions
contemplated by this Agreement, have been obtained or made and are in full
force and effect, except where the failure to obtain or make any such
authorization, consent, order, approval, notice or filing, individually or
in the aggregate for all such failures, could not have a Material Adverse
Effect.
(h) Offices. NAFCO's principal place of business and chief executive
office is located at the address set forth under NAFCO's signature hereto,
and the offices where NAFCO and the Administrator keep all Records and all
Contracts, purchase orders and agreements related to the Receivables and
the Related Transferred Assets (and all original documents relating
thereto) are located at the addresses specified in Schedule 7.01(h) (or at
such other locations, notified to the Administrator and the Trustee in
accordance with Section 7.02(c), in jurisdictions where all action
required by Section 7.02(c) has been taken and completed).
(i) Investment Company Act. NAFCO is not, and is not controlled by,
an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended.
(j) Margin Regulations. No use of any funds obtained by NAFCO under
this Agreement will conflict with or contravene any of Regulations G, T, U
and X promulgated by the Federal Reserve Board from time to time.
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(k) Quality of Title.
(i) Immediately before each transfer to the Trust to be made
by NAFCO under this Agreement, each Receivable and Related Asset of NAFCO
which is then to be transferred to the Trust hereunder, and the related
Contracts, shall be owned by NAFCO free and clear of any Adverse Claim
(other than any Adverse Claim arising solely as the result of any action
taken by NAFCO under this Agreement); and NAFCO shall have made all
filings and shall have taken all other action under applicable law in each
relevant jurisdiction in order to protect and perfect the ownership
interest of the Trust and its successors in such Receivables and Related
Assets against all creditors of, and purchasers from, NAFCO.
(ii) Whenever NAFCO makes a purchase under the Purchase
Agreement or accepts a contribution under NAFCO Trust Agreement, it shall
have acquired a valid and perfected first priority ownership interest in
each Transferred Asset, free and clear of any Adverse Claim (other than
any Adverse Claim arising solely as the result of any action taken by
NAFCO under the Purchase Agreement or under this Agreement).
(iii) No effective financing statement or other instrument
similar in effect that covers all or part of any Receivable, any interest
therein or any Related Asset with respect thereto is on file in any
recording office except (x) such as may be filed (A) in favor of Seller in
accordance with the Contracts, (B) in favor of NAFCO pursuant to the
Purchase Agreement or NAFCO Trust Agreement and (C) in favor of the
Trustee, for the benefit of the Certificateholders, in accordance with
this Agreement and (y) such as may have been identified to NAFCO prior to
the Closing Date and termination statements relating to which have been
placed with LEXIS Document Services for filing on the Closing Date or the
first Business Day thereafter.
(iv) No purchase of an interest in any Receivable or Related
Asset of National Auto by NAFCO from National Auto constitutes a
fraudulent transfer or fraudulent conveyance under the United States
Bankruptcy Code or applicable state bankruptcy or insolvency laws or is
otherwise void or voidable or subject to subordination under similar laws
or principles or for any other reason.
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(v) The purchase of Receivables and Related Assets by NAFCO
from National Auto constitutes a true and valid sale of such Receivables
and Related Assets under applicable state law and true and valid
assignments and transfers for consideration (and not merely a pledge of
such Receivables and Related Assets for security purposes), enforceable
against the creditors of National Auto, and no Receivables or Related
Assets transferred to NAFCO under the Purchase Agreement or under NAFCO
Trust Agreement shall constitute property of National Auto.
(l) Accuracy of Information. All written information furnished on
and after the Closing Date by NAFCO to the Administrator, the Trustee or
any Certificateholder pursuant to or in connection with any Transaction
Document or any transaction contemplated herein or therein shall not
contain any untrue statement of a material fact or omit to state material
facts necessary to make the statements made not misleading, in each case
on the date such statement was made and in light of the circumstances
under which such statements were made or such information was furnished.
(m) Compliance with Applicable Laws. NAFCO is in compliance with the
requirements of all applicable laws, rules, regulations, and orders of all
Governmental Authorities (federal, state, local or foreign, and including
environmental laws), a violation of any of which, individually or in the
aggregate for all such violations, could have a Material Adverse Effect.
(n) Valid Transfer. Each transfer made by NAFCO pursuant to this
Agreement constitutes a valid transfer and assignment of all of its right,
title and interest in, to and under the Receivables and the Related
Transferred Assets to the Trust which is perfected and of first priority
under the UCC and otherwise enforceable against creditors of, and
purchasers from, NAFCO and National Auto and free and clear of any Adverse
Claim (other than any Adverse Claim arising solely as a result of any
action taken by the Trustee under this Agreement).
The representations and warranties set forth in this Section 7.01 shall
survive the transfer and assignment of the Receivables and the other Trust
Assets to the Trust. Upon discovery by NAFCO, the Administrator or a Responsible
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Officer of the Trustee of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give written notice to the
other parties to this Agreement within three Business Days following such
discovery. The Trustee's obligations in respect of discovering any such breach
are limited as provided in Section 11.02(g).
Section 7.02 Covenants of NAFCO. From the Closing Date until the date
following the Amortization Commencement Date on which the Certificate Invested
Amount shall be reduced to zero and all Obligations of NAFCO and the
Administrator to the Certificateholders that have ever been outstanding
hereunder shall have been finally and fully paid and performed, NAFCO hereby
covenants that NAFCO will:
(a) Compliance with Laws, Etc. Comply in all material respects with
all applicable laws, rules, regulations, judgments, decrees and orders
(including those relating to the Receivables, the Related Transferred
Assets, the funds in the Trust Accounts and the related Contracts and any
other agreements related thereto), where the failure so to comply,
individually or in the aggregate for all such failures, could have a
Material Adverse Effect.
(b) Preservation of Trust Existence. Preserve and maintain its trust
existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified in good standing as a
foreign trust in each jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and qualifications
could have a Material Adverse Effect.
(c) Location of Records and Offices. Keep its principal place of
business and chief executive office, and (and will cause the Servicer to)
keep substantially all Records, Contracts and other agreements related to
the Receivables and the Related Transferred Assets (and all original
documents relating thereto), at the addresses referred to in Schedule
7.01(h). NAFCO will at all times maintain its chief executive offices
within the United States of America, and will cause the Servicer to
maintain at all times each office from which the Servicer services or
collects Receivables and Related Transferred Assets and the Servicer's
chief executive offices within the United States of America.
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(d) Reporting Requirements of NAFCO. Furnish to the Trustee, the
Certificateholders and to the Applicable Rating Agencies:
(i) Amortization Events. As soon as possible, and in any event
within one Business Day after an Authorized Officer of NAFCO has
obtained knowledge of the occurrence of any Amortization Event or
any Unmatured Amortization Event, a written statement of an
Authorized Officer of NAFCO describing such event and the action
that NAFCO proposes to take with respect thereto, in each case in
reasonable detail;
(ii) Material Adverse Effect. As soon as possible and in any
event within one Business Day after an Authorized Officer of NAFCO
has knowledge thereof, written notice that describes in reasonable
detail any Adverse Claim against the Trust Assets or any other event
or occurrence which, individually or in the aggregate for all such
events or occurrences, has had, or could have, in the reasonable,
good faith judgment of NAFCO, a Material Adverse Effect;
(iii) Proceedings. As soon as possible and in any event within
three Business Day after an Authorized Officer of NAFCO has
knowledge thereof, written notice of (A) any litigation,
investigation or proceeding of the type described in Section 7.01(f)
not previously disclosed to the Trustee and (B) any material adverse
development that has occurred with respect to any such previously
disclosed litigation, investigation or proceeding; and
(iv) Other. Promptly, from time to time, such other
information, documents, records or reports respecting the
Receivables or the Related Transferred Assets or such other
information respecting the condition or operations, financial or
otherwise, of NAFCO, in each case as the Trustee may from time to
time reasonably request in order to protect the interests of the
Trustee, the Trust or the Certificateholders under or as
contemplated by this Agreement.
(e) Sales, Liens, Etc. Except for the conveyances hereunder and
under the other Transaction
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Documents, NAFCO will not (i)(A) sell, assign (by operation of law or
otherwise) or otherwise transfer to any Person, (B) pledge any interest
in, (C) grant, create, incur, assume or permit to exist any Adverse Claim
to or in favor of any Person upon or with respect to, or (D) cause to be
filed any financing statement or equivalent document relating to
perfection that covers, any Receivable, related Contract, Related
Transferred Asset or other Trust Asset, or any interest therein, or (ii)
assign to any Person any right to receive income from or in respect of any
of the foregoing. NAFCO shall defend the right, title and interest of the
Trust in, to and under the Trust Assets, whether now existing or hereafter
created, against all claims of third parties claiming through or under
NAFCO.
In the event that NAFCO fails to keep any Trust Assets free and
clear of any Adverse Claim (other than Adverse Claims arising hereunder
and other Adverse Claims permitted by any other Transaction Document), the
Trustee may (without limiting its other rights with respect to NAFCO's
breach of its obligations hereunder) make reasonable expenditures
necessary to release such Adverse Claim. The Trustee shall be entitled to
indemnification for any such expenditures pursuant to the indemnification
provisions of Section 7.03. Alternatively, the Trustee may deduct such
expenditures as an offset to any amounts owed to NAFCO hereunder.
(f) Mergers, Acquisitions, Sales, Etc. NAFCO shall not
(i) (A) be a party to any merger or consolidation, or directly
or indirectly purchase or otherwise acquire all or substantially all
of the assets or any stock of any class of, or any partnership or
joint venture interest in, any other Person, or (B) except pursuant
to the Transaction Documents, directly or indirectly, sell,
transfer, assign, convey or lease, whether in one transaction or in
a series of transactions, all or substantially all of its assets, or
sell or assign with or without recourse any Receivables or Related
Transferred Assets (other than pursuant hereto);
(ii) except as contemplated in the Purchase Agreement in
connection with NAFCO's purchases of Receivables and Related Assets
from the Sellers,
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(A) make, incur or suffer to exist an investment in, equity
contribution to, or payment obligation in respect of the deferred
purchase price of property or services from, any Person, or (B) make
any loan or advance to any Person other than for reasonable and
customary operating expenses; or
(iii) create any direct or indirect Subsidiary or otherwise
acquire direct or indirect ownership of any equity interests in any
other Person (other than the Trust).
(g) Change in Name. NAFCO will not change its name or the name under
or by which it does business unless NAFCO shall have given the
Administrator and the Trustee 30 days' prior written notice thereof and
unless, prior to any such change in name, NAFCO shall have filed (or shall
have caused to be filed) such financing statements or amendments as the
Administrator or the Trustee determines may be necessary to continue the
perfection of the Trust's interest in the Receivables, the Related
Transferred Assets and the proceeds thereof.
(h) Change in Business. NAFCO will not engage in any business other
than as contemplated by the Transaction Documents, unless the Required
Certificateholders consent and the Rating Agency Condition has been
satisfied in connection with such amendment or such change in NAFCO's
business.
(i) Amendments to Purchase Agreement. Except as expressly provided
otherwise in this Agreement, no amendment, waiver, modification to or
consent under the Purchase Agreement shall be made that would adversely
affect in any material respect the interests of the Certificateholders or
any Enhancement Provider unless there shall have been obtained the prior
written consent of the Required Certificateholders and any such
Enhancement Provider.
(j) Enforcement of Purchase Agreement. NAFCO will perform all its
obligations under and otherwise comply with the Purchase Agreement and
will enforce, for the benefit of the Trust, the covenants and agreements
of the Seller in the Purchase Agreement.
(k) Other Indebtedness. NAFCO shall not (i) create, incur or permit
to exist any Indebtedness,
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Guaranty or liability or (ii) cause or permit to be issued for its account
any letters of credit or bankers' acceptances, except for (A) Indebtedness
incurred pursuant to NAFCO Notes, (B) other liabilities specifically
permitted to be created, incurred or owed by NAFCO pursuant to or in
connection with the Transaction Documents and (C) reasonable and customary
operating expenses.
(l) Separate Existence. NAFCO hereby acknowledges that the Trustee
and the Certificateholders are, and will be, entering into the
transactions contemplated by the Transaction Documents in reliance upon
NAFCO's identity as a legal entity separate from National Auto and any
other Person. Therefore, from and after the Closing Date, NAFCO shall take
all reasonable steps to continue its identity as a separate legal entity
and to make it apparent to third Persons that NAFCO is an entity with
assets and liabilities distinct from those of National Auto and any other
Person, and that NAFCO is not a division of National Auto or any other
Person.
(m) Acquisition of Receivables. NAFCO will acquire Receivables only
through (i) its purchase of such Receivables pursuant to the Purchase
Agreement or (ii) as a contribution by National Auto to NAFCO in
accordance with the NAFCO Trust Agreement.
(n) Extension or Amendment of Receivables; Change in Credit and
Collection Policy or Contracts. The Administrator will not extend, amend
or otherwise modify the terms of any Receivable or Contract in a manner
that could have a Material Adverse Effect other than in accordance with
the Credit and Collection Policy.
(o) Amendment of Certificate of Trust. NAFCO will not amend, modify,
restate or change in any manner its certificate of trust or the NAFCO
Trust Agreement, unless the Rating Agency Condition has been satisfied in
connection with, and the Required Certificateholders have consented to,
such amendment, modification, restatement or change.
The covenants set forth in this Section 7.02 shall survive the transfer
and assignment of the Receivables and the other Trust Assets to the Trust. Upon
discovery by NAFCO, the Administrator or a Responsible Officer of the
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Trustee of a breach of any of the foregoing covenants, the party discovering
such breach shall give written notice to the other parties to this Agreement
within three Business Days following such discovery. The Trustee's obligations
in respect of discovering any such breach are limited as provided in Section
11.02(g).
Section 7.03 Indemnification by the Class C Certificateholders. (a)
Without limiting any other rights which any Indemnified Party may have hereunder
or under applicable law, the Class C Certificateholders hereby agree to
indemnify the Trust, the Trustee, each Certificateholder and each of the
successors, permitted transferees and assigns of any such Person and all
officers, directors, shareholders, controlling Persons, employees and agents of
any of the foregoing (each of the foregoing Persons being individually called an
"Indemnified Party"), forthwith on demand, from and against any and all damages,
losses, claims (whether on account of settlements or otherwise, and whether or
not the relevant Indemnified Party is a party to any action or proceeding that
gives rise to any Indemnified Losses (as defined below)), judgments, liabilities
and related reasonable costs and expenses (including reasonable attorneys' fees
and disbursements) (all of the foregoing being collectively called "Indemnified
Losses") awarded against or incurred by any of them that arise out of or relate
to this Agreement, any other Transaction Document or any of the transactions
contemplated herein or therein or the use of proceeds herefrom or therefrom.
Payments to be made pursuant to this Section 7.03 shall be paid to the extent
that funds are available to make such payments after all amounts to be paid to
the Certificateholders pursuant to Section 4.03 shall have been paid, and there
shall be no recourse to the Class C Certificateholders for all or any part of
any amounts payable pursuant to this Section 7.03 if such funds are at any time
insufficient to make all or part of any such payments.
Notwithstanding the foregoing (and with respect to clause (b) below,
without prejudice to the rights that the Trustee may have pursuant to the other
provisions of this Agreement or the provisions of any of the other Transaction
Documents), in no event shall any Indemnified Party be indemnified for any
Indemnified Losses (a) resulting from gross negligence or willful misconduct on
the part of such Indemnified Party (or the gross negligence or willful
misconduct on the part of any of such Indemnified Party's officers, directors,
employees or agents), (b) to the extent the same includes Indemnified Losses in
respect of
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Receivables and reimbursement therefor that would constitute credit recourse to
the Class C Certificateholders for the amount of any Receivable or Related
Transferred Asset not paid by the related Obligor, (c) to the extent such
Indemnified Losses are or result from lost profits, (d) to the extent such
Indemnified Losses are or result from taxes (including interest and penalties
thereon) asserted with respect to (i) distributions on the Certificates, (ii)
franchise or withholding taxes imposed on any Indemnified Party other than the
Trust or the Trustee in its capacity as Trustee, or (iii) federal or other
income taxes on or measured by the net income of such Indemnified Party and
costs and expenses in defending against the same, or (e) to the extent such
Indemnified Losses constitute consequential, or punitive damages.
If for any reason the indemnification provided above in this Section 7.03
is unavailable to an Indemnified Party or is insufficient to hold an Indemnified
Party harmless, then the Class C Certificateholders shall contribute to the
amount paid by such Indemnified Party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Party on the one hand and the Class C
Certificateholders on the other hand, but also the relative fault (if any) of
such Indemnified Party and the Class C Certificateholders and any other relevant
equitable considerations.
(b) Notwithstanding anything to the contrary herein, the Class C
Certificateholders shall be liable to all creditors of the Trust (but not to
Holders of the Certificates) for all liabilities of the Trust to the same extent
as it would be if the Trust constituted a partnership under the Delaware Revised
Uniform Limited Partnership Act and the Class C Certificateholders were a
general partner thereof. Notwithstanding anything to the contrary herein, any
such creditor shall be a third party beneficiary of this clause (b).
ARTICLE VIII
THE ADMINISTRATOR
Section 8.01 Representations and Warranties of the Administrator. On the
date hereof, on each date Receivables are transferred and on each Subsequent
Issuance Date, the Administrator hereby makes, and any Successor
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Administrator also shall be deemed to make by its acceptance of its appointment
hereunder, the following representations and warranties for the benefit of the
Trustee and the Certificateholders:
(a) Organization and Good Standing. The Administrator is a limited
partnership duly organized and validly existing in good standing under the
laws of its jurisdiction of organization and has full power and authority
to own its properties and to conduct its business as such properties are
presently owned and as such business is presently conducted.
(b) Due Qualification. The Administrator is duly qualified to do
business and is in good standing (or is exempt from such requirements),
and has obtained all necessary licenses and approvals, in all
jurisdictions in which the administration of the Receivables and the
Related Transferred Assets as required by this Agreement requires such
qualification, licenses or approvals and where the failure so to qualify,
to obtain such licenses and approvals or to preserve and maintain such
qualification, licenses or approvals would have a reasonable likelihood of
having a material adverse effect on its ability to perform its obligations
as Administrator under this Agreement or a Material Adverse Effect.
(c) Power and Authority; Due Authorization. The Administrator has
(i) all necessary power and authority to (A) execute and deliver this
Agreement and the other Transaction Documents to which it is a party, and
(B) perform its obligations under this Agreement and the other Transaction
Documents to which it is a party, and (ii) duly authorized by all
necessary action the execution, delivery, and performance of this
Agreement and the other Transaction Documents to which it is a party and
the consummation of the transactions provided for in this Agreement and
the other Transaction Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each other
Transaction Document to which the Administrator is party when executed and
delivered will constitute, a legal, valid and binding obligation of the
Administrator, enforceable against the Administrator in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws
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affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(e) No Conflict or Violation. The execution and delivery by the
Administrator of this Agreement and the other Transaction Documents to
which it is a party, the performance by the Administrator of its
obligations hereunder and thereunder and the fulfillment by the
Administrator of the terms hereof and thereof that are applicable to it
will not (i) conflict with, violate, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse of
time or both) a default under, (A) the Limited Partnership Agreement of
the Administrator or (B) any indenture, loan agreement, mortgage, deed of
trust, or other material agreement or instrument to which the
Administrator is a party or by which it or any of its properties is bound
or (ii) conflict with or violate any federal, state, local or foreign law
or any decision, decree, order, rule, or regulation applicable to the
Administrator or any of its properties of any court or of any federal,
state, local or foreign regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Administrator or
any of its properties, which conflict, violation, breach or default
described in clause (i) or clause (ii), individually or in the aggregate,
would have a reasonable likelihood of having a Material Adverse Effect.
(f) Governmental Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority that are
required to be obtained by the Administrator, and all notices to and
filings with any Governmental Authority that are required to be made by
the Administrator, in the case of each of the foregoing in connection with
the execution, delivery and performance by the Administrator of this
Agreement and any other Transaction Documents to which it is a party and
the consummation of the transactions contemplated by this Agreement, have
been obtained or made and are in full force and effect (other than the
filing of the UCC financing statements referred to in Section 2.03(a), all
of which, at the time required in Section 2.03(a), will be duly made),
except where the failure to obtain or make such authorization, consent,
order, approval,
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notice or filing would not reasonably be expected to have a Material
Adverse Effect.
(g) No Proceedings. (i) There is no action, suit, proceeding or
investigation pending or, to the best knowledge of the Administrator,
threatened against the Administrator before any court, regulatory body,
arbitrator, administrative agency, or other tribunal or governmental
instrumentality and (ii) the Administrator is not subject to any order,
judgment, decree, injunction, stipulation or consent order of or with any
court or other government authority, that, in the case of foregoing
clauses (i) and (ii), (A) seeks to affect adversely the income tax
attributes of the transfers hereunder or the Trust under the United States
federal income tax system or any state income tax system, or (B)
individually or in the aggregate for all such actions, suits, proceedings
and investigations, would have a reasonable likelihood of having a
Material Adverse Effect.
The representations and warranties set forth in this Section 8.01 shall survive
the transfer and assignment of the Trust Assets to the Trust. Upon discovery by
NAFCO, the Administrator or a Responsible Officer of the Trustee of a breach of
any of the foregoing representations and warranties, the party discovering such
breach shall give written notice to the other parties to this Agreement within
three Business Days following such discovery. The Trustee's obligations in
respect of discovering any such breach are limited as provided in Section
11.02(g).
Section 8.02 Covenants of the Administrator. From the Closing Date until
the day following the Amortization Commencement Date on which the Certificate
Invested Amount shall be reduced to zero and all Obligations of NAFCO and the
Administrator to the Certificateholders that have ever been outstanding under
this Agreement shall have been finally and fully paid and performed, the
Administrator hereby covenants and agrees, and any Successor Administrator by
its acceptance of its appointment hereunder shall be deemed to covenant and
agree, as follows for the benefit of the Trust and the Certificateholders:
(a) Compliance with Laws, Etc. The Administrator shall maintain in
effect all qualifications required under applicable law in order to
service properly the Receivables and shall comply in all material respects
with all applicable laws, rules, regulations,
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judgments, decrees and orders, in each case to the extent the failure to
comply with which, individually or in the aggregate for all such failures,
would have a reasonable likelihood of having a Material Adverse Effect.
(b) Preservation of Existence. The Administrator shall preserve and
maintain its partnership existence, rights, franchises and privileges in
the jurisdiction of its formation, and qualify and remain qualified in
good standing as a foreign corporation in each jurisdiction where the
failure to preserve and maintain such existence, rights, franchises,
privileges and qualification would have a reasonable likelihood of having
a Material Adverse Effect.
(c) Compliance with Transaction Documents. The Administrator will
comply with the terms and provisions of each of the Transaction Documents
to which it is a party.
(d) Adequate Collection Systems. The Administrator shall maintain
and implement, or cause to be maintained or implemented, administrative
and operating procedures reasonably necessary or advisable for the
administration, servicing and collection of amounts owing on all
Receivables.
The covenants set forth in this Section 8.02 shall survive the transfer and
assignment of the Trust Assets to the Trust. Upon discovery by NAFCO, the
Administrator or a Responsible Officer of the Trustee of a breach of any of the
foregoing covenants, the party discovering such breach shall give written notice
to the other parties to this Agreement within three Business Days following such
discovery. The Trustee's obligations in respect of discovering any such breach
are limited as provided in Section 11.02(g).
Section 8.03 Merger or Consolidation of, or Assumption of the Obligations
of, the Administrator. The Administrator shall not consolidate with or merge
into any other Person or convey, transfer or sell all or substantially all of
its properties and assets to any Person, unless:
(a) (i) the Administrator is the surviving entity or, if the
Administrator is not the surviving entity, the Person formed by such
consolidation or into which the Administrator is merged or the Person
which
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acquires by conveyance, transfer or sale all or substantially all of the
properties and assets of the Administrator shall be organized and existing
under the laws of the United States of America or any State thereof or the
District of Columbia and, if the Administrator is not the surviving
entity, such entity shall expressly assume, by an agreement supplemental
hereto, executed and delivered to the Trustee and in form and substance
satisfactory to the Trustee, the performance of every covenant and
obligation of the Administrator hereunder and under the other Transaction
Documents to which the Administrator is a party; and (ii) the
Administrator shall have delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel for the Administrator each stating that such
consolidation, merger, conveyance, transfer or sale and such supplemental
agreement comply with this Section 8.03(a), that such supplemental
agreement is a valid and binding obligation of such surviving entity
enforceable against such surviving entity in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity, and that
all conditions precedent in Section 8.03(a)(i) that relate to such
transaction have been complied with;
(b) the Rating Agency Condition shall have been satisfied in
connection with such merger, consolidation or succession; and
(c) the Trustee shall have received an Officer's Certificate of the
Administrator to the effect that the conditions set forth in clauses (a)
and (b) have been satisfied.
Section 8.04 Administrator Liability. The Administrator shall be liable in
accordance with this Agreement only to the extent of the obligations
specifically undertaken by the Administrator in such capacity herein and as set
forth herein.
Section 8.05 Limitation on Liability of the Administrator and Others. No
recourse under or upon any obligation or covenant of this Agreement, any
Supplement, any Certificate or any other Transaction Document, or for any claim
based thereon or otherwise in respect thereof, shall be had against any partner,
limited partner,
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shareholder, officer or director, as such, past, present or future, of the
Administrator or of any successor entity, either directly or through the
Administrator, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Agreement, any Supplement, all other relevant Transaction
Documents and the obligations incurred hereunder or thereunder are solely
partnership obligations, and that no such personal liability whatsoever shall
attach to, or is or shall be incurred by the general and limited partners,
officers or directors, as such, of the Administrator or of any successor entity,
or any of them, by reason of the obligations, covenants or agreements contained
in this Agreement, any Supplement, any of the Certificates or any other
Transaction Documents, or implied therefrom; and that any and all such personal
liability of, either at common law or in equity or by constitution or statute,
and any and all such rights and claims against, every such partner, limited
partner, officer or director, as such, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations or
covenants contained in this Agreement, any Supplement, any of the Certificates
or any other Transaction Documents, or implied therefrom, are hereby expressly
waived and released as a condition of, and as a consideration for, the execution
of this Agreement and any Supplement. The Administrator and any director,
officer, employee or agent of the Administrator 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. The Administrator shall not be under
any obligation to appear in, prosecute or defend any legal action which is not
incidental to its duties to administer the Receivables in accordance with this
Agreement or any Supplement which in its reasonable opinion may involve it in
any expense or liability. The Administrator may, in its sole discretion,
undertake any such legal action relating to the administration of Receivables
and Related Transferred Assets that it may reasonably deem necessary or
appropriate for the benefit of the Certificateholders with respect to this
Agreement and the rights and duties of the parties hereto and the interests of
the Certificateholders hereunder.
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ARTICLE IX
AMORTIZATION EVENTS
Section 9.01 Amortization Events. Any of the following events shall
constitute a "Amortization Event":
(a) (i) failure on the part of NAFCO or the Administrator to make or
cause to be made any payment or deposit, or any delivery of any report,
required by the terms of this Agreement, any Supplement, any Certificate
Purchase Agreement or the Purchase Agreement on or before five Business
Days after the date such payment, deposit or delivery is required to be
made herein; (ii) failure on the part of the Seller to duly observe or
perform Sections 6.1(g) and 6.3(a) of the Purchase Agreement or NAFCO to
duly observe or perform Sections 7.02(e) or 7.02(n) or clause (i) or (ii)
of Section 7.02(d) of this Agreement, or the Trustee to duly observe or
perform Section 5.01 of this Agreement, which failure has a Material
Adverse Effect and continues unremedied for a period of five Business Days
after the date on which written notice of such failure, requiring same to
be remedied, shall have been given to NAFCO by the Trustee or to NAFCO and
the Trustee by any Certificateholder; or (iii) failure on the part of
NAFCO to duly observe or perform any other covenant or agreement of NAFCO
set forth in any Transaction Document, which failure has a Material
Adverse Effect and continues unremedied for a period of 30 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to NAFCO by the Trustee or to NAFCO and
the Trustee by any Certificateholder;
(b) any representation or warranty made by the Seller in Sections
5.1(d) or 5.1(i)(i), (ii) or (iii) of the Purchase Agreement or by NAFCO
in Sections 7.01(k)(i), (ii), or (iii) or 7.01(n) of this Agreement shall
prove to have been incorrect in any material respect when made, and
continues to be incorrect in any material respect for a period of five
Business Days after the date on which written notice of such breach,
requiring the same to be remedied, shall have been given to NAFCO by the
Trustee or to NAFCO and the Trustee by any Certificateholder, or any other
representation or warranty made by the Seller in the Purchase Agreement or
by NAFCO in this Agreement shall prove to have been incorrect in any
material respect
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when made, and continues to be incorrect in any material respect for a
period of 30 days after the date on which written notice of such breach,
requiring the same to be remedied, shall have been given to NAFCO by the
Trustee, or to NAFCO and the Trustee by any Certificateholder; provided,
however, that a mistake in representation of a Receivable as an Eligible
Receivable shall not constitute a Liquidation Event unless and until the
Seller or NAFCO, as the case may be, has failed to make any cash payments
owed under the Purchase Agreement or this Agreement in respect of the
Noncomplying Receivables arising from such misrepresentation;
(c) an Event of Bankruptcy shall occur with respect to National Auto
or NAFCO, or NAFCO shall become unable for any reason to transfer
Receivables or Related Transferred Assets to the Trust in accordance with
the provisions of this Agreement;
(d) the Trust shall become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(e) the occurrence and continuance of an Administrator Default;
(f) the Net Loss Rate for any Distribution Date exceeds 7% for four
consecutive Calculation Periods and the first such Calculation Period was
subsequent to the first Calculation Period in which the aggregate number
of Contracts in the Trust exceeded 500 as of the end of such Calculation
Period.
(g) the Net Loss Rate for any Distribution Date exceeds 9% for four
consecutive Calculation Periods and the first such Calculation Period was
subsequent to the first Calculation Period in which the aggregate number
of Contracts in the Trust exceeded 500 as of the end of such Calculation
Period.
(h) the Delinquency Rate exceeds 10% for four consecutive
Calculation Periods and the first such Calculation Period was subsequent
to the first Calculation Period at the end of which the number of
Receivables in the Trust exceeded 500.
(i) the Servicing Agreement is terminated and a successor Servicer,
appointment of which shall have
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been consented to by the Class B Certificateholder (which consent shall
not be unreasonably withheld), shall not have been so appointed by the
Administrator;
(j) the number of Financed Vehicles repossessed and liquidated
during the four preceding Calculation Periods is equal to or greater than
75 and the aggregate Recoveries in respect of such Financed Vehicles is
less than 50% of the aggregate unpaid principal balance of the related
Receivables;
(k) the number of Financed Vehicles repossessed and liquidated
during the four preceding Calculation Periods is equal to or greater than
75 and the aggregate Recoveries in respect of such Financed Vehicles is
less than 60% of the aggregate unpaid principal balance of the related
Receivables;
(l) a requirement set forth in clauses (iii), (iv) and (v) of the
definition of "Portfolio Requirements" shall not have been satisfied for
two consecutive Calculation Periods;
(m) a requirement set forth in clauses (i) and (ii) of the
definition of "Portfolio Requirements" shall not have been satisfied for
three consecutive Calculation Periods;
(n) the Delinquency Rate exceeds 15% for four consecutive
Calculation Periods and the first such Calculation Period was subsequent
to the first Calculation Period at the end of which the number of
Receivables in the Trust exceeded 500; or
(o) the Seller shall have ceased selling Receivables to NAFCO
pursuant to Section 8.1 of the Purchase Agreement.
Upon the occurrence and continuance of any event described in subsection (c),
(d) or (o) above, subject to the applicable grace period, if any, set forth in
such subsection, the Liquidation Commencement Date shall occur without any
notice or other action on the part of the Trustee or the Certificateholders,
immediately upon the occurrence of such event. Upon the occurrence and
continuance of any event described in subsections (a)(i), (b), (e), (g), (i),
(j), (l) or (n) above (each such event, and the events described in subsections
(c) and (d), a "Liquidation Event"), subject to the applicable grace
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period, if any, set forth in such subsection, the Trustee may (and, at the
direction of the Majority Certificateholders shall) by notice then given in
writing to NAFCO and the Administrator, declare that the Liquidation
Commencement Date shall have occurred as of the date of NAFCO's receipt of such
notice. Upon the occurrence and continuance of any event described in any
subsection above other than a Liquidation Event, after the applicable grace
period, if any, set forth in such subsection (each, an "Early Amortization
Event"), the Trustee may (and, at the direction of the Required
Certificateholders shall) by notice then given in writing to NAFCO and the
Administrator, declare that the Early Amortization Commencement Date shall have
occurred as of the date of NAFCO's receipt of such notice.
Notwithstanding the foregoing, a delay in or failure in performance
referred to in subsection (a)(i) above for a period of 10 Business Days after
the applicable grace period, or in subsections a(ii), a(iii) or (b) above for a
period of 30 Business Days after the applicable grace period, shall not
constitute an Amortization Event if such delay or failure could not have been
prevented by the exercise of reasonable diligence by NAFCO or the Administrator
and such delay or failure was caused by an act of God or the public enemy,
riots, acts of war, acts of terrorism, epidemics, flood, embargoes, weather,
landslides, fire, earthquakes or similar causes. The preceding sentence shall
not relieve NAFCO or the Administrator from using its best efforts to perform
its obligations in a timely manner in accordance with the terms of the
Transaction Documents, and NAFCO and/or the Administrator, as applicable, shall
promptly give the Trustee and, in the case of such delay or failure in
performance by the Administrator, NAFCO, an Officer's Certificate notifying them
of such failure or delay by it.
Section 9.02 Remedies. Upon the occurrence of an Amortization Event, the
Trustee shall have, in addition to all other rights and remedies available to
the Trustee under this Agreement or otherwise, (a) the right to apply
Collections to the payment of the Obligations of NAFCO and the Administrator
under this Agreement or under any of the other Transaction Documents, as
provided herein, and (b) all rights and remedies provided under all other
applicable laws, which rights, in the case of each and all of the foregoing,
shall be cumulative. The Trustee shall exercise such rights at the direction of
the Certificateholders
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pursuant to (and subject to the limitations specified in) Section 11.14.
Section 9.03 Additional Rights Upon the Occurrence of Certain Events. (a)
If an Event of Bankruptcy shall occur with respect to any of the Class C
Certificateholders in this Agreement and the Trust shall be deemed to have
terminated on the day of such Event of Bankruptcy; and within 7 Business Days of
the date of written notice to the Trustee of such Event of Bankruptcy, the
Trustee shall:
(i) publish a notice in an Authorized Newspaper that an Event of
Bankruptcy has occurred with respect to any of the Class C
Certificateholders, that the Trust has terminated, and that the Trustee
intends to sell, dispose of or otherwise liquidate the Receivables and the
Related Transferred Assets pursuant to this Agreement in a commercially
reasonable manner and on commercially reasonable terms, which shall
include the solicitation of competitive bids (a "Disposition"); and
(ii) send written notice to the Certificateholders describing the
provisions of this Section 9.03 and requesting each Certificateholder to
advise the Trustee in writing whether (A) it wishes the Trustee to
instruct the Administrator not to effectuate a Disposition, (B) it refuses
to advise the Trustee as to the specific action the Trustee shall instruct
the Administrator to take or (C) it wishes the Administrator to effect a
Disposition.
If, after 60 days from the day notice pursuant to clause (a)(i) is first
published (the "Publication Date"), the Trustee shall not have received the
written instruction described in sub-clause (A) of clause (a)(ii) from Holders
of the Certificates representing in excess of 50% of the outstanding principal
amount of each of the Certificates, the Trustee shall instruct the Administrator
to effectuate a Disposition, and the Administrator shall proceed to consummate a
Disposition. If, however, Holders of the Certificates representing in excess of
50% of the outstanding principal amount of each Class of the Certificates
instruct the Trustee not to effectuate a Disposition, the Trustee shall consent
to the formation of a new trust, transfer the Trust Assets to such trust,
exchange new certificates for the existing Certificates and otherwise continue
pursuant to the terms of this Agreement.
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(b) Notwithstanding the termination of this Agreement and the Trust
pursuant to clause (a), the proceeds from any Disposition of the Receivables and
the Related Transferred Assets pursuant to clause (a) shall be treated as
Collections on the Receivables and shall be allocated and deposited in
accordance with the provisions of Article IV.
(c) The Trustee may appoint an agent or agents to assist with its
responsibilities pursuant to this Section 9.03 with respect to competitive bids.
(d) NAFCO or any of its Affiliates shall be permitted to bid for the
Receivables and the Related Transferred Assets. The Trustee may obtain a prior
determination from any bankruptcy trustee, receiver or liquidator that the terms
and manner of any proposed Disposition are commercially reasonable.
(e) Notwithstanding the termination of this Agreement and the Trust
pursuant to clause (a), the Trustee shall continue to have the rights described
in Section 9.2 and Article XI, and be subject to direction on terms consistent
with those set out in Section 11.14, pending the completion of any Disposition
and/or the reconstitution of the Trust.
ARTICLE X
ADMINISTRATOR DEFAULTS
Section 10.01 Administrator Defaults. Any of the following events shall
constitute an "Administrator Default":
(a) any failure by the Administrator in its capacity as
Administrator to make any payment, transfer or deposit, or deliver any
report, required by any Transaction Document to be made by it or to give
instructions or to give notice to the Trustee to make such payment,
transfer or deposit, which failure continues unremedied (A) in the case of
distributions of interest to the Certificateholders or the delivery of
such reports, for three Business Days and (B) in the case of all payments
not included in clause (A) above, for five Business Day after the date on
which an Authorized Officer of the Administrator has actual knowledge of
such failure;
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(b) failure on the part of the Administrator duly to observe or
perform in any material respect any other covenants or agreements of the
Administrator set forth in this Agreement or any other Transaction
Document, which failure has a Material Adverse Effect and continues
unremedied for a period of 30 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given
to the Administrator by the Trustee, or to the Administrator and the
Trustee by any Certificateholder;
(c) the Administrator shall assign its duties under this Agreement,
except as permitted by Sections 3.01(b) and 8.03;
(d) any representation, warranty or certification made by the
Administrator in any Transaction Document or in any certificate or other
document or instrument delivered pursuant to any Transaction Document
shall prove to have been incorrect in any material respect when made or
delivered, which has a material adverse effect on the Certificateholders
of any Series and which material adverse effect continues unremedied for a
period of 30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the
Administrator by the Trustee, or to the Administrator and the Trustee by
any Certificateholder; or
(e) any Event of Bankruptcy shall occur with respect to the
Administrator.
In the event of any Administrator Default, so long as the Administrator Default
shall not have been remedied, the Trustee may (and, at the direction of the
Required Certificateholders, shall), by notice then given in writing to the
Administrator (a "Termination Notice"), terminate all (but not less than all)
the rights and obligations of the Administrator as Administrator under this
Agreement and in and to the Receivables, the Related Transferred Assets and the
proceeds thereof.
As soon as possible, and in any event within five Business Days, after an
Authorized Officer of the Administrator has obtained knowledge of the occurrence
of any Administrator Default, the Administrator shall furnish the Trustee, and
the Applicable Rating Agencies, and the Trustee shall promptly furnish each
Certificateholder, notice of such Administrator Default.
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Notwithstanding the foregoing, a delay in or failure in performance
referred to in Subsection (a) above for a period of 10 Business Days after the
applicable grace period, or in subsection (b) or (d) above for a period of 30
Business Days after the applicable grace period, shall not constitute an
Administrator Default if such delay or failure could not have been prevented by
the exercise of reasonable diligence by the Administrator and such delay or
failure was caused by an act of God or the public enemy, riots, acts of war,
acts of terrorism, epidemics, flood, embargoes, weather, landslides, fire,
earthquakes or similar causes. The preceding sentence shall not relieve the
Administrator from using its best efforts to perform its obligations in a timely
manner in accordance with the terms of the Transaction Documents, and the
Administrator shall promptly give the Trustee, and NAFCO an Officer's
Certificate notifying them of such failure or delay by it.
Section 10.02 Trustee to Act; Appointment of Successor. (a) On and after
the Administrator's receipt of a Termination Notice pursuant to Section 10.01,
the Administrator shall continue to perform all administration functions under
this Agreement until the date specified in the Termination Notice or otherwise
specified by the Trustee in writing or, if no such date is specified in such
Termination Notice, or otherwise specified by the Trustee, until a date mutually
agreed upon by the Administrator and the Trustee. The Trustee shall, as promptly
as possible after the giving of a Termination Notice, nominate a successor
administrator (the "Successor Administrator"); provided, however, that such
Successor shall accept its appointment by a written assumption in a form
acceptable to the Trustee. Any Person who is nominated to be a Successor
Administrator shall accept its appointment by a written assumption in form and
substance acceptable to the Trustee. In the event that a Successor Administrator
has not been appointed or has not accepted its appointment at the time when the
Administrator ceases to act as Administrator, the Trustee without further action
shall automatically be appointed the Successor Administrator. The Trustee may
delegate any of its administration obligations to an affiliate or agent in
accordance with Section 3.01(b). If the Trustee is prohibited by applicable law
from performing the duties of the Administrator hereunder, the Trustee may
appoint, or may petition a court of competent jurisdiction to appoint, a
Successor Administrator hereunder. The Trustee shall give prompt notice to the
Applicable Rating Agencies and each Certificateholder upon the appointment of a
Successor Administrator.
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(b) After the Administrator's receipt of a Termination Notice, and on the
date that a Successor Administrator shall have been appointed by the Trustee and
shall have accepted such appointment pursuant to Section 10.02(a), all authority
and power of the Administrator under this Agreement shall pass to and be vested
in the Successor Administrator (an "Administration Transfer"); and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Administrator, as attorney-in-fact or otherwise, all
documents and instruments, and to do and accomplish all other acts or things
that the Trustee reasonably determines are necessary or appropriate to effect
the purposes of such Administration Transfer. Upon the appointment of such
Successor Administrator and its acceptance thereof, the Administrator agrees
that it will terminate its activities as Administrator hereunder in a manner
that the Trustee indicates will facilitate the transition of the performance of
such activities to the Successor Administrator. The Administrator agrees that it
shall use reasonable efforts to assist the Successor Administrator in assuming
the obligations to administer the Receivables and the Related Transferred
Assets, on the terms and subject to the conditions set forth herein, and to
effect the termination of the responsibilities and rights of the Administrator
to conduct administration hereunder, including the transfer to such Successor
Administrator of all authority of the Administrator to service the Receivables
and Related Transferred Assets provided for under this Agreement and all
authority over all cash amounts which shall thereafter be received with respect
to the Receivables or the Related Transferred Assets. The Administrator shall,
within five Business Days after the designation of a Successor Administrator,
transfer its electronic records (including software) relating to the
Receivables, the related Contracts and the Related Transferred Assets to the
Successor Administrator in such electronic form as the Successor Administrator
may reasonably request and shall promptly transfer to the Successor
Administrator all other records, correspondence and documents necessary for the
continued administration of the Receivables and the Related Transferred Assets
in the manner and at such times as the Successor Administrator shall request. To
the extent that compliance with this Section 10.02(b) shall require the
Administrator to disclose to the Successor Administrator information of any kind
which the Administrator reasonably deems to be confidential, prior to the
transfer contemplated by the preceding sentence the Successor Administrator
shall be required to enter into such customary licensing and confidentiality
agreements as the
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Administrator shall reasonably deem necessary to protect its interest. All
reasonable costs and expenses (including attorneys' fees and disbursements)
incurred in connection with transferring the Receivables, the Related
Transferred Assets and all related Records (including the related Contracts) to
the Successor Administrator and amending this Agreement and the other
Transaction Documents to reflect such succession as Administrator pursuant to
this Section 10.02(b) shall be paid by the predecessor Administrator (or, if the
Trustee serves as Successor Administrator on an interim basis, the initial
Administrator) within 15 days after presentation of reasonable documentation of
such costs and expenses.
(c) Upon its appointment and acceptance thereof, the Successor
Administrator shall be the successor in all respects to the Administrator with
respect to administration functions under this Agreement and shall be subject to
all the responsibilities and duties relating thereto placed on the Administrator
by the terms and provisions hereof, and all references in this Agreement to the
Administrator shall be deemed to refer to the Successor Administrator.
(d) All authority and power granted to the Administrator or the Successor
Administrator under this Agreement shall automatically cease and terminate upon
termination of the Trust pursuant to Section 12.01, and shall pass to and be
vested in NAFCO and, without limitation, NAFCO is hereby authorized and
empowered, on and after the effective date of such termination, to execute and
deliver, on behalf of the Successor Administrator, as attorney-in-fact or
otherwise, all documents and other instruments and to do and accomplish all
other acts or things that NAFCO reasonably determines are necessary or
appropriate to effect the purposes of such transfer of administration rights.
The Successor Administrator agrees to cooperate with NAFCO in effecting the
termination of the responsibilities and rights of the Successor Administrator to
conduct administration of the Receivables and the Related Transferred Assets.
The Successor Administrator shall, within five Business Days after such
termination, transfer its electronic records relating to the Receivables and the
Related Transferred Assets to NAFCO in such electronic form as NAFCO may
reasonably request and shall transfer all other records, correspondence and
documents relating to the Receivables and the Related Transferred Assets to
NAFCO in the manner and at such times as NAFCO shall reasonably request. To the
extent that compliance with this Section 10.02(d) shall require the Successor
Administrator to
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disclose to NAFCO information of any kind which the Successor Administrator
deems to be confidential, NAFCO shall be required to enter into such customary
licensing and confidentiality agreements as the Successor Administrator shall
reasonably deem necessary to protect its interests. All reasonable costs and
expenses (including attorneys' fees and disbursements) incurred by the Trustee,
in its capacity as Successor Administrator, in connection with such termination
shall be paid by NAFCO within 15 days after presentation of reasonable
documentation of such costs and expenses.
Section 10.03 Notification of Administrator Default; Notification of
Appointment of Successor Administrator. Within three Business Days after an
Authorized Officer of the Administrator becomes aware of any Administrator
Default, the Administrator shall give written notice thereof to the Trustee and
the Applicable Rating Agencies, and the Trustee shall, promptly upon receipt of
such written notice (and in any event within two days), give notice to the
Certificateholders at their respective addresses appearing in the Certificate
Register. Upon any termination or appointment of a Successor Administrator
pursuant to this Article X, the Trustee shall give prompt written notice thereof
to the Certificateholders at their respective addresses appearing in the
Certificate Register and to the Applicable Rating Agencies.
ARTICLE XI
THE TRUSTEE
Section 11.01 Duties of Trustee. (a) The Trustee undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. The provisions of this Article XI shall apply to the Trustee solely
in its capacity as Trustee, and not to the Trustee in its capacity as
Administrator if it is acting as the Administrator. Following the occurrence of
an Administrator Default of which a Responsible Officer has knowledge, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs; provided, however, that if the Trustee shall assume the
duties of the Administrator pursuant to Section 10.02, the Trustee in performing
such duties shall use the degree of skill and attention customarily exercised by
a
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servicer or administrator with respect to auto receivables that it services or
administers for itself or others. The Trustee shall have no power to create,
assume or incur indebtedness or other liabilities in the name of the Trust other
than as contemplated in, or incidental to the performance of its duties under,
this Agreement.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they are
complete and reasonably in the form required by this Agreement. The Trustee
shall give prompt written notice to the Person who furnished any item of the
type listed in the preceding sentence of any lack of completeness or conformity
of any such item to the applicable requirements of this Agreement. In addition,
the Trustee shall give prompt written notice to the Certificateholders of any
material lack of completeness or conformity of any such instrument to the
applicable requirements of this Agreement discovered by the Trustee which would
entitle a specified percentage of the Certificateholders to take any action
pursuant to this Agreement.
(c) Subject to Section 11.01(a), no provision of this Agreement shall be
construed to relieve the Trustee from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct; provided,
however, that:
(i) the Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(ii) the Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in accordance
with the direction (as applicable) of the Majority Certificateholders or
the Required Certificateholders relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Agreement;
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(iii) the Trustee shall not be charged with knowledge of (A) any
failure by the Administrator to comply with the obligations of the
Administrator referred to in subsections (a), (b), (c), (d) or (e) of
Section 10.01, (B) any breach of the representations and warranties of
NAFCO set forth in Section 2.03 or 7.01 or the representations and
warranties of the Administrator set forth in Section 8.01 or (C) any
breach of the covenants of NAFCO set forth in Section 7.02 or the
covenants of the Administrator set forth in Section 8.02 in each case
unless a Responsible Officer of the Trustee obtains actual knowledge of
such matter or the Trustee receives written notice of such matter from the
Administrator or from any Holder;
(iv) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Agreement, the Trustee shall not
be liable except for the performance of such duties and obligations as
shall be specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and, in
the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely on the truth of the statements and the correctness of
the opinions expressed in any certificates or opinions that are furnished
to the Trustee and that conform to the requirements of this Agreement; and
(v) without limiting the generality of this Section 11.01 or Section
11.02, the Trustee shall have no duty (A) to see to any recording, filing,
or depositing of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a security
interest in the Receivables or the Related Transferred Assets, or to see
to the maintenance of any such recording or filing or depositing or to any
rerecording, refiling or redepositing of any thereof, (B) to see to the
payment or discharge of any tax, assessment, or other governmental charge
or any Adverse Claim or encumbrance of any kind owing with respect to,
assessed or levied against, any part of the Trust, (C) to confirm or
verify the contents of any reports or certificates of the Administrator
delivered to the Trustee pursuant to this Agreement that are believed by
the Trustee to be genuine and to have been signed or presented by the
proper party or parties or (D) to ascertain or inquire as to the
performance or observance of any of NAFCO's
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or the Administrator's representations, warranties or covenants or the
Administrator's duties and obligations as Administrator.
(d) The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if the Trustee
reasonably believes that the repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it, and none of the
provisions contained in this Agreement shall in any event require the Trustee to
perform, or be responsible for the manner of performance of, any obligations of
the Administrator under this Agreement except during such time, if any, as the
Trustee shall be the successor to, and be vested with the rights, duties, powers
and privileges of, the Administrator in accordance with the terms of this
Agreement.
(e) Except for actions expressly authorized by this Agreement, the Trustee
shall take no action reasonably likely to impair the interests of the Trust in
any Trust Asset now existing or hereafter created or to impair the value of any
Trust Asset now existing or hereafter created.
(f) Except to the extent expressly provided otherwise in this Agreement,
the Trustee shall have no power to vary the corpus of the Trust, including the
power to (i) accept any substitute obligation for a Receivable initially
transferred to the Trust under Section 2.01 hereof, (ii) add any other
investment, obligation or security to the Trust, (iii) withdraw from the Trust
any Trust Asset, except for a withdrawal permitted under Section 12.01 or a
withdrawal that has been consented to by all of the Certificateholders.
(g) In the event that the Paying Agent or the Transfer Agent and Registrar
shall fail to perform any obligation, duty or agreement in the manner or on the
day on which such obligation, duty or agreement is required to be performed by
the Paying Agent or the Transfer Agent and Registrar, as the case may be, under
this Agreement, the Trustee shall be obligated, promptly upon the actual
knowledge thereof by a Responsible Officer, to perform such obligation, duty or
agreement in the manner so required.
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Section 11.02 Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 11.01:
(a) the Trustee may rely on and shall be protected in acting on, or
in refraining from acting in accordance with, any resolution, Officer's
Certificate, opinion of counsel, certificate of auditors or any other
certificate, statement, instrument, instruction, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document and
any information contained therein believed by it to be genuine and to have
been signed or presented to it pursuant to this Agreement by the proper
party or parties including, but not limited to, reports and records
required by Article III;
(b) the Trustee may consult with counsel and any advice or Opinion
of Counsel shall be full and complete authorization and protection in
respect of any action taken or permitted or omitted by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel;
(c) the Trustee (including in its role as Successor Administrator,
if it ever acts in that capacity) shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation or other proceeding hereunder
or in relation hereto, at the request, order or direction of any of the
Certificateholders pursuant to the provisions of this Agreement, unless
such Certificateholders shall have offered to the Trustee security or
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities which may be incurred therein or thereby; provided, however,
that nothing contained herein shall relieve the Trustee of the
obligations, upon the occurrence and continuance of an Administrator
Default which has not been cured, to exercise such of the rights and
powers vested in it by this Agreement and to use the same degree of care
and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs;
(d) the Trustee shall not be personally liable for any action taken,
permitted or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by this Agreement;
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(e) the Trustee shall not be bound to make any investigation into
the facts of 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 Required Certificateholders; provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses, or
liabilities likely to be incurred by it in connection with making such
investigation shall be, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of this
Agreement, the Trustee may require reasonable indemnity against such cost,
expense, or liability as a condition to proceeding with such
investigation. The reasonable expense of every such examination shall be
paid by the Administrator or, if paid by the Trustee, shall be reimbursed
by the Administrator upon demand;
(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
representatives, attorneys or a custodian, and the Trustee shall not be
responsible for any misconduct or negligence on the part of any such
agent, representative, attorney or custodian appointed with due care by it
hereunder;
(g) except as may be required by Section 11.01(b) hereof, the
Trustee shall not be required to make any initial or periodic examination
of any documents or records related to the Trust Assets for the purpose of
establishing the presence or absence of defects or for any other purpose;
(h) whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section 11.02;
(i) the Trustee shall have no liability with respect to the acts or
omissions of the Administrator (except and to the extent the Administrator
is the Trustee), including, but not limited to, acts or omissions in
connection with: the management or administration of the Receivables or
the Related Transferred Assets, calculations made by the Administrator
whether or not reported to the Trustee,
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and deposits into or withdrawals from any Trust Accounts established
pursuant to the terms of this Agreement; and
(j) in the event that the Trustee is also acting as Paying Agent or
Transfer Agent and Registrar hereunder, the rights and protections
afforded to the Trustee pursuant to this Article XI shall also be afforded
to the Trustee acting as Paying Agent or as Transfer Agent and Registrar.
Section 11.03 Limitation on Liability of Trustee. The Trustee shall at no
time have any responsibility or liability for or with respect to the correctness
of the recitals contained herein or in the Certificates (other than the
certificate of authentication on the Certificates). Except as set forth in
Section 11.15, the Trustee makes no representations as to the validity or
sufficiency of this Agreement, any Supplement, the Certificates (other than the
certificate of authentication on the Certificates) or any other Transaction
Document or any Trust Asset or related document. The Trustee shall not be
accountable for the use or application by NAFCO of any of the Certificates or of
the proceeds of such Certificates, or for the use or application of any funds
paid to NAFCO or the Administrator in respect of the Trust Assets or deposited
by the Administrator in or withdrawn by the Administrator from the Trust
Accounts or any other accounts hereafter established to effectuate the
transactions contemplated herein or in the other Transaction Documents and in
accordance with the terms hereof or thereof.
The Trustee shall at no time have any responsibility or liability for or
with respect to the legality, validity, or enforceability of any ownership or
security interest in any Trust Asset, or the perfection or priority of such a
security interest or the maintenance of any such perfection or priority, or for
or with respect to the efficacy of the Trust or its ability to generate the
payments to be distributed to Certificateholders under this Agreement,
including: the existence and substance of any Trust Asset or any related Record
or any computer or other record thereof; the validity of the transfer of any
Trust Asset to the Trust or of any preceding or intervening transfer; the
performance or enforcement of any Trust Asset; the compliance by NAFCO or the
Administrator with any warranty or representation made under this Agreement or
in any other Transaction Document and the accuracy of any such warranty or
representation prior to the Trustee's receipt of actual
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notice of any noncompliance therewith or any breach thereof; any investment of
monies pursuant to Section 4.04 or any loss resulting therefrom; the acts or
omissions of NAFCO, the Administrator, or any Obligor; any action of the
Administrator taken in the name of the Trustee; or any action by the Trustee
taken at the instruction of the Administrator; provided, however, that the
foregoing shall not relieve the Trustee of its obligation to perform its duties
under the Agreement in accordance with the terms hereof.
Except with respect to a claim based on the failure of the Trustee to
perform its duties under this Agreement or based on the Trustee's negligence or
willful misconduct, no recourse shall be had against the Trustee in its
individual capacity for any claim based on any provision of this Agreement, any
other Transaction Document, the Certificates, any Trust Asset or any assignment
thereof. The Trustee shall not have any personal obligation, liability, or duty
whatsoever to any Certificateholder or any other Person with respect to any such
claim, and any such claim shall be asserted solely against the Trust or any
indemnitor who shall furnish indemnity to the Trust or the Trustee as provided
in this Agreement. Any obligation of the Trustee to give any notice or statement
to any rating agency hereunder shall constitute only a best efforts obligation
and such notice or statement shall be so provided only as a matter of courtesy
and accommodation, the Trustee having no liability to any rating agency or any
other Person for any failure to so provide such notice or statement.
Section 11.04 Trustee May Deal with Other Parties. Subject to any
restrictions that may otherwise be imposed by Section 406 of ERISA or Section
4975(e) of the Internal Revenue Code, the Trustee in its individual or any other
capacity may deal with the other parties hereto (other than NAFCO) and their
respective affiliates, with the same rights as it would have if it were not the
Trustee.
Section 11.05 Administrator To Pay Trustee's Fees and Expenses. (a) To the
extent not paid by the Administrator to the Trustee from funds constituting the
Administration Fee, the Administrator covenants and agrees to pay to the Trustee
from time to time, and the Trustee shall be entitled to receive, such reasonable
compensation as is agreed upon in writing between the Trustee and the
Administrator (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) for all services rendered by
it in the execution of the trust hereby
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created and in the exercise and performance of any of the powers and duties
hereunder of the Trustee, and the Administrator will pay or reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Agreement and the other Transaction Documents to which it is a party (including
the reasonable fees and expenses of its agents, any co-trustee and counsel)
except any such expense, disbursement or advance as may arise from the Trustee's
negligence or bad faith and except as provided in the following sentence.
(b) In addition, the Administrator agrees to indemnify the Trustee (and
its officers, employees, directors and agents) from, and hold it harmless
against, any and all losses, liabilities, damages, claims or expenses incurred
by the Trustee in the execution of the Trust or in the exercise or performance
of any of the powers or duties of the Trustee hereunder, other than those
resulting from the gross negligence or willful misconduct of the Trustee.
(c) If the Trustee is appointed Successor Administrator pursuant to
Section 10.02, the provisions of this Section 11.05 shall not apply to expenses,
disbursements and advances made or incurred by the Trustee in its capacity as
Successor Administrator, which shall be paid out of the Administration Fee. The
Administrator's covenant to pay the fees, expenses, disbursements and advances
provided for in this Section 11.05 shall survive the resignation or removal of
the Trustee and the termination of this Agreement.
Section 11.06 Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times
(a) be (i) a banking institution organized under the laws of the United
States, (ii) a member bank of the Federal Reserve System or (iii) any other
banking institution or trust company, incorporated and doing business under the
laws of any State or of the United States, a substantial portion of the business
of which consists of receiving deposits or exercising fiduciary powers similar
to those permitted to national banks under the authority of the Comptroller of
the Currency, and which is supervised and examined by a state or federal
authority having supervision over banks; (b) not be an Enhancement Provider or
an Affiliate of First Union National Bank of North Carolina; (c) have, in the
case of an entity that is subject to risk-based capital adequacy requirements,
risk-based capital of
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at least $50,000,000 or, in the case of an entity that is not subject to
risk-based capital adequacy requirements, a combined capital and surplus of at
least $50,000,000 and (d) a long-term unsecured debt rating of at least A or its
equivalent by each Applicable Rating Agency. If such corporation or association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then, for the
purpose of this Section 11.06, the combined capital and surplus of such
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 11.06, the Trustee shall resign immediately in the
manner and with the effect specified in Section 11.07.
Section 11.07 Resignation or Removal of Trustee. (a) The Trustee may at
any time resign and be discharged from the trust hereby created by giving 30
days' prior written notice thereof to NAFCO, the Administrator, the Applicable
Rating Agencies, the Certificateholders and the Purchaser Agents. Upon receiving
such notice of resignation, NAFCO shall promptly appoint a successor trustee who
meets the eligibility requirements set forth in Section 11.06 by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no successor trustee
shall have been so appointed and shall have accepted appointment within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction to appoint a successor trustee.
(b) If at any time the Trustee shall cease to be eligible to be the
Trustee hereunder in accordance with the provisions of Section 11.06 hereof and
shall fail to resign promptly after its receipt of a written request therefor by
the Administrator, or if at any time the Trustee shall be legally unable to act,
or shall be adjudged bankrupt or insolvent, or if a receiver for the Trustee or
of its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Administrator may remove
the Trustee and promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee.
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(c) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 11.07 shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 11.08 hereof.
Section 11.08 Successor Trustee. (a) Any successor trustee appointed as
provided in Section 11.07 hereof shall execute, acknowledge and deliver to
NAFCO, the Administrator, the Certificateholders and the predecessor Trustee an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor Trustee shall, upon payment of its fees and
expenses and other amounts owed to it pursuant to Section 11.05, become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein. The predecessor Trustee shall deliver to the successor
trustee, at the expense of the Administrator, all documents or copies thereof
and statements held by it hereunder; and NAFCO and the predecessor Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully vesting and confirming in the successor trustee all such
rights, powers, duties and obligations. The Administrator shall promptly give
notice to the Applicable Rating Agencies upon the appointment of a successor
trustee.
(b) No successor trustee shall accept appointment as provided in this
Section 11.08 unless at the time of such acceptance such successor trustee shall
be eligible to become the Trustee under the provisions of Section 11.06 hereof.
(c) Upon acceptance of appointment by a successor trustee as provided in
this Section 11.08, such successor trustee shall mail notice of such succession
hereunder to all Certificateholders at their addresses as shown in the
Certificate Register.
(d) The retiring Trustee shall not be liable for any acts or omissions of
any successor trustee.
Section 11.09 Merger or Consolidation of Trustee. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
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Trustee shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, if such Person meets the requirements of Section 11.06,
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. The
Administrator shall promptly give notice to the Applicable Rating Agencies upon
any such merger or consolidation of the Trustee.
Section 11.10 Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust may at the time be located, the Trustee shall have the power and
may execute and deliver all instruments to appoint one or more Persons (which
may be an employee or employees of the Trustee) 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 Certificateholders and the Purchasers, such title to the Trust,
or any part thereof, and, subject to the other provisions of this Section 11.10,
such powers, duties, obligations, rights and trusts as the Trustee may consider
necessary or appropriate. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
11.06 and no notice to Certificateholders of the appointment of any such
co-trustee or separate trustee shall be required under Section 11.08; provided,
however, that the Trustee shall give the Administrator and NAFCO notice of any
such appointment as promptly as practicable.
(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 Trustee shall be conferred or imposed upon and exercised or
performed by the 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 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 (whether as the Trustee
hereunder or as successor to the Administrator hereunder), the Trustee
shall be
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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 Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the 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 Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XI. 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 Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection or indemnity to, the
Trustee. Every such instrument shall be filed with the Trustee and a copy
thereof given to the Administrator.
(d) Any separate trustee or co-trustee may at any time constitute the
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 to this
Agreement or any other Transaction Document on its behalf and in its name. If
any separate trustee or co-trustee shall die, become incapable of acting, resign
or be removed, all its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Trustee, to the extent permitted by law, without
the appointment of a new or successor trustee.
Section 11.11 Tax Returns. In the event the Trust shall be required to
file tax returns, the Administrator shall prepare or shall cause to be prepared
any tax returns required to be filed by the Trust and shall remit such
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returns to the Trustee for signature at least five Business Days before such
returns are due to be filed. The Administrator, shall also prepare or shall
cause to be prepared all tax information required by law to be made available to
Certificateholders and shall deliver such information to the Trustee at least
five Business Days prior to the date it is required by law to be made available
to the Certificateholders. The Trustee, upon request, will furnish the
Administrator with all such information known to the Trustee as may be
reasonably required in connection with the preparation of all tax returns of the
Trust and shall, upon request, execute such returns as the Trustee determines
are appropriate.
Section 11.12 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement, the
Certificates or the other Transaction Documents may be prosecuted and enforced
by the Trustee without the possession of any of the Certificates or the
production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as trustee. Any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be distributed to the Certificateholders in respect of which such
judgment has been obtained in the manner specified in Section 4.03(h).
Section 11.13 Suits for Enforcement. If an Amortization Event or an
Administrator Default shall occur and be continuing, the Trustee, in its
discretion may, subject to the provisions of Sections 11.01 and 11.14, proceed
to protect and enforce its rights and the rights of the Certificateholders under
this Agreement by suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in
this Agreement or any other Transaction Document or in aid of the execution of
any power granted in this Agreement or any other Transaction Document or for the
enforcement of any other legal, equitable or other remedy as the Trustee, being
advised by counsel, shall deem most effectual to protect and enforce any of the
rights of the Trustee or the Certificateholders. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Certificateholder any plan of reorganization, arrangement,
adjustment or composition affecting the Certificates or the rights of any Holder
thereof or to authorize the Trustee to
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vote in respect of the claim of any Certificateholder in any such proceeding.
Section 11.14 Rights of Certificateholders To Direct Trustee. The Required
Certificateholders shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee; provided, however, that, subject to
Section 11.01, the Trustee may decline to follow any such direction if the
Trustee, being advised by counsel, determines that the action so directed may
not lawfully be taken, or if a Responsible Officer or Responsible Officers of
the Trustee shall determine, in good faith, that the proceedings so directed
would be illegal or involve the Trustee in personal liability or be unduly
prejudicial to the rights of the Certificateholders not giving such direction;
and, provided further that nothing in this Agreement shall impair the right of
the Trustee to take any action deemed proper by the Trustee and which is not
inconsistent with such direction of the Required Certificateholders.
Section 11.15 Representations and Warranties of Trustee. The Trustee
represents and warrants that:
(a) the Trustee is a New York banking corporation organized,
existing and in good standing under the laws of the State of New York;
(b) the Trustee has full power, authority and right to execute,
deliver and perform this Agreement executed by it on the date hereof, and
has taken all necessary action to authorize the execution, delivery and
performance by it of this Agreement; and
(c) this Agreement and the other Transaction Documents executed by
it on the date hereof have been duly executed and delivered by the Trustee
and, in the case of all such Transaction Documents, are legal, valid and
binding obligations of the Trustee, enforceable in accordance with their
respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
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Section 11.16 Maintenance of Office or Agency. The Trustee will maintain,
at its address designated pursuant to Section 13.06, an office or offices or
agency or agencies where notices and demands to or upon the Trustee in respect
of the Certificates, this Agreement and the other Transaction Documents to which
it is a party may be served. The Trustee will give prompt written notice to the
Administrator and to the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
Section 11.17 No Bond. The Trustee and each co-trustee and separate
trustee from time to time appointed pursuant to this Agreement are relieved from
giving any bond, surety or security, and from making any inventories, appraisals
or accountings of the Trust Assets, in each case that would otherwise have been
required under the laws of the State of Florida merely on account of their
acting in such capacities.
Section 11.18 Statements, Certificates and Reports. A copy of each
statement, certificate and report furnished to the Trustee pursuant to this
Agreement shall be provided to any Certificateholder or the Applicable Rating
Agencies requesting the same in a writing to the Trustee addressed to
the Corporate Trust Office.
ARTICLE XII
TERMINATION
Section 12.01 Termination of Trust. The Trust and the respective
obligations and responsibilities of NAFCO, the Administrator and the Trustee
created hereby (other than the obligation of the Trustee to make payments to
Certificateholders as hereinafter set forth) shall terminate, except with
respect to the duties and obligations described in Sections 7.03, 8.04, 11.05,
11.11, 12.02(b), 13.10, 13.13, 13.15, 13.16 and 13.17 and any other provision
which by its terms is stated to survive, upon the day on which the
Certificateholders and the Trustee shall have been paid all amounts required to
be paid to them pursuant to this Agreement and the Trustee has disposed of all
property held as part of the Trust (including pursuant to Section 12.03).
Section 12.02 Final Distribution. (a) The Administrator shall give the
Trustee at least ten days'
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prior written notice of the date on which the Trust is expected to terminate in
accordance with Section 12.01(a). Upon receiving such notification from the
Administrator, the Trustee shall give the Certificateholders written notice as
soon as practicable after the Trustee's receipt of notice from the
Administrator, which notice shall specify (i) the Distribution Date upon which
final payment with respect to the Certificates is expected to be made and (ii)
the amount of any such final payment. The Trustee shall give such notice to the
Transfer Agent and Registrar and the Paying Agent at the time such notice is
given to the Certificateholders. On the Distribution Date specified in such
notice, the Trustee shall, based upon the Distribution Date Statement relating
to such Distribution Date, cause to be distributed to the Certificateholders the
amounts distributable to them on such Distribution Date pursuant to Article IV
and Article V. Each Certificateholder shall present the Certificates owned by
them to the Trustee and surrender such Certificates for cancellation at the
address of the Trustee set forth in Section 13.06 not more than ten Business
Days after the Distribution Date upon which final payment with respect to the
Certificates has been made.
(b) Notwithstanding the termination of the Trust pursuant to Section
12.01(a), all funds then on deposit in the Certificate Account shall continue to
be held in trust for the benefit of the Certificateholders and the Paying Agent
or the Trustee shall pay such funds to the Certificateholders at the time set
forth in Section 12.01(a). In the event that any of the Certificateholders shall
not have surrendered their Certificates for cancellation within six months after
the date specified in the above-mentioned written notice from the Trustee, the
Trustee shall give a second written notice to the remaining Certificateholders
concerning the final distribution and surrender of their Certificates for
cancellation. The Trustee and the Paying Agent shall pay to the Class C
Certificateholder any monies held by them for the payment of principal of or
interest on the Certificates that remains unclaimed for two years after the
termination of the Trust pursuant to Section 12.01(a). After payment of such
monies to the Class C Certificateholder, Certificateholders entitled to the
money must look to the Class C Certificateholder for payment as general
creditors unless an applicable abandoned property law designates another Person.
Section 12.03 Rights Upon Termination of the Trust. Upon the termination
of the Trust pursuant to Section 12.01
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and the surrender of the Class C Certificate by NAFCO to the Trustee, the
Trustee shall transfer, assign, set over and otherwise convey to NAFCO (without
recourse, representation or warranty), all right, title and interest of the
Trust in the Receivables, whether then existing or thereafter created, the
Related Transferred Assets and all of the other property previously conveyed to
the Trust pursuant to Section 2.01(b), except for amounts held by the Trustee
pursuant to Section 12.02(b) and except for the rights of RPA Indemnified
Parties (other than NAFCO and its officers, directors, shareholders, controlling
Persons, employees and agents) to indemnification and contribution under Section
9.1 of the Purchase Agreement. The Trustee shall execute and deliver such
instruments of transfer and assignment (including any document necessary to
release the security interest in favor of the Trustee (for the benefit of the
Certificateholders) in such Receivables and Related Transferred Assets and to
release any filing evidencing or perfecting such security interest), in each
case without recourse, representation or warranty, as shall be reasonably
requested by NAFCO to vest in NAFCO all right, title and interest which the
Trust had in the Trust Assets.
Section 12.04 Optional Repurchase of Investor Interests. On any
Distribution Date occurring on or after the date that the Certificate Principal
Amount is reduced to 10% or less of the initial aggregate principal amount of
the Certificates, NAFCO shall have the option, upon the giving of 10 days' prior
written notice by NAFCO to the Administrator, the Trustee and the Applicable
Rating Agencies, to repurchase the undivided interest in the Trust by depositing
into the Certificate Account, on such Distribution Date, an amount equal to the
unpaid Certificate Principal Amount plus accrued and unpaid interest on the
unpaid principal amount of such Certificates (and accrued and unpaid interest
with respect to interest amounts that were due but not paid on a prior
Distribution Date) through the day preceding such Distribution Date at the
Certificate Rate applicable to such Certificates. Upon tender of all outstanding
Certificates by the Certificateholders, the Trustee shall then distribute such
amounts, together with all other amounts on deposit in the Certificate Account
to the Certificateholders on the next Distribution Date in repayment of the
principal amount and all accrued and unpaid interest owing to such
Certificateholders. Following any such repurchase, the Certificateholders shall
have no further rights with respect to the Receivables and the Trustee shall
execute and deliver such instruments of transfer and assignment (including any
document necessary to
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release the security interest in favor of the Trustee (for the benefit of the
Certificateholders) in such Receivables and Related Transferred Assets and to
release any filing evidencing or perfecting such security interest), in each
case without recourse, representation or warranty, as shall be reasonably
requested by NAFCO to vest in NAFCO all right, title and interest which the
Trust had in the Trust Assets. In the event that NAFCO fails for any reason to
deposit the aggregate purchase price for the Certificate Principal Amount
payments shall continue to be made to the Certificateholders in accordance with
the terms of this Agreement.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Amendment, Waiver, Etc. (a) This Agreement and any
Supplement may be amended from time to time by the Administrator, NAFCO and the
Trustee by a written instrument signed by each of them, without the consent of
any of the Certificateholders but only to cure any ambiguities, or to cure,
correct or supplement any provisions contained in this Agreement that may be
defective or inconsistent with any other provision contained in this Agreement;
provided, however, that such action shall not adversely affect in any material
respect the interests of any Certificateholder (as evidenced by an Officer's
Certificate of NAFCO). This Agreement and any Supplement may not be amended
unless NAFCO shall have delivered the proposed amendment to the Applicable
Rating Agencies at least ten Business Days (or such shorter period as shall be
acceptable to each of them) prior to the execution and delivery thereof and the
Rating Agency Condition has been satisfied with respect to such amendment.
(b) The provisions of this Agreement and any Supplement may also be
amended, modified or waived from time to time by the Administrator, NAFCO and
the Trustee with the consent of: the Required Certificateholders for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or any Supplement or of modifying in any manner the
rights of the Certificateholders; provided, however, that no such amendment
shall (i) result in the Trust becoming an association taxable as a corporation
or a "publicly traded partnership" within the meaning of the Internal Revenue
Code, (ii) reduce in any manner the amount of or delay the
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timing of any distributions to be made to Certificateholders or deposits of
amounts to be so distributed or the amount available under any Enhancement
without the consent of each affected Certificateholder, (iii) change the
definition of or the manner of calculating the interest of any Certificateholder
without the consent of each affected Certificateholder, (iv) reduce the
aforesaid percentage required to consent to any such amendment without the
consent of each Certificateholder or (v) adversely affect the rating of any
Series or Class by any Applicable Rating Agency without the consent of the
Holders of the Certificates of such Series or Class evidencing not less than 66
2/3% of the aggregate unpaid principal amount of the Certificates of such Series
or Class.
NAFCO or the Trustee shall establish a record date for determining which
Certificateholders may give such waivers and consents. No waiver of any
Amortization Event or other default hereunder given at any time shall apply to
any other prior or subsequent Amortization Event or default.
(c) Promptly after the execution of any amendment, consent or waiver
described in clause (a) or (b), the Trustee shall furnish written notification
of the substance of such amendment or consent to each Certificateholder, and the
Administrator shall furnish written notification of the substance of such
amendment or consent to the Applicable Rating Agencies and each Enhancement
Provider.
(d) It shall not be necessary for any waiver or consent given by the
Certificateholders under this Section 13.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such waivers and consents and of
evidencing the authorization of the execution thereof by the Certificateholders
shall be subject to such reasonable requirements as the Trustee may prescribe.
(e) Notwithstanding anything in this Section to the contrary, no amendment
may be made to this Agreement or any Supplement which would adversely affect in
any material respect the interests of any Enhancement Provider without the
consent of such Enhancement Provider.
(f) Any Supplement executed in accordance with the provisions of Section
6.10 shall not be considered an amendment to this Agreement for the purposes of
this Section 13.01.
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(g) Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement and
that all conditions precedent to such execution and delivery have been
satisfied. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement.
Section 13.02 Actions by Certificateholders (a) By its acceptance of
Certificates pursuant to this Agreement and the applicable Supplement, each
Certificateholder (other than NAFCO and any NAFCO Person) acknowledges and
agrees that, wherever in this Agreement a provision states that an action may be
taken or a notice, demand or instruction given by any Series of
Certificateholders, any Class of Certificateholders or the Certificateholders,
such action, notice or instruction may be taken or given by any Holder of any
Certificate of such Series or Class or by any Certificateholder, respectively,
unless such provision requires a specific percentage of such Series or Class of
Certificateholders or of all Certificateholders.
(b) By its acceptance of Certificates pursuant to this Agreement and the
applicable Supplement, each Certificateholder (other than NAFCO and any other
NAFCO Person) acknowledges and agrees that any request, demand, authorization,
direction, notice, consent, waiver or other act by the Holder of a Certificate
shall bind such Holder and every subsequent Holder of such Certificate and of
any Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or omitted to be done by
the Trustee or the Administrator in reliance thereon, whether or not notation of
such action is made upon such Certificate.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement or any Supplement to be given or
taken by Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders in
person or by agent 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 Trustee and, when required, to Administrator.
Proof of execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Agreement or any
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Supplement and conclusive in favor of the Trustee and the Administrator, if made
in the manner provided in this Section.
(d) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
Section 13.03 Limitation on Rights of Certificateholders. (a) The death or
incapacity of any Certificateholder (other than NAFCO or any other NAFCO Person)
shall not operate to terminate this Agreement or the Trust, nor shall such death
or incapacity entitle such Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or commence any proceeding in any
court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
(b) No Certificateholder shall have any right to vote (except as expressly
provided otherwise in this Agreement) or in any manner otherwise to control the
operation and management of the Trust, or the obligations of the parties hereto,
nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association, nor shall any
Certificateholder be under any liability to any third Person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any provisions
of this Agreement to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given to the Trustee, and unless the
Required Certificateholders shall have made, written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee, for 60 days after its receipt of such notice, request
and offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more
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Certificateholders shall have any right in any manner whatever by virtue of, or
by availing itself or themselves of, any provisions of this Agreement to affect,
disturb or prejudice the rights of any other Certificateholder or any Holder of
any other Series of Certificates, or to obtain or seek to obtain priority over
or preference to any such other Certificateholder or any such Holder of any
other Series of Certificates, or to enforce any right under this Agreement,
except in the manner herein provided and for the equal, ratable and common
benefit of, in the case of actions affecting the Certificateholders as a class,
all Certificateholders or, in the case of actions affecting the Holders of any
Certificates, the Holders of the Certificates. For the protection and
enforcement of the provisions of this Section 13.03, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
(d) By their acceptance of Certificates pursuant to this Agreement and the
applicable Supplement, the Certificateholders (other than NAFCO and any other
NAFCO Person) agree to the provisions of this Section 13.03.
Section 13.04 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO CONFLICT
OF LAWS PRINCIPLES, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
Section 13.05 Notices. All demands, notices, directions, orders, requests,
instructions and communications hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered, four Business Days after
mailing if mailed by registered mail, return receipt requested, or sent by
facsimile transmission (a) in the case of NAFCO, to its address set forth below
its signature hereto; (b) in the case of National Auto, to its address set forth
below its signature hereto; and (c) in the case of the Trustee, the Paying Agent
or the Transfer Agent and Registrar, to the address of the Trustee set forth on
the signature pages hereof; or, as to each party, at such other address or
facsimile number as shall be designated by such party in a written notice to
each other party given in accordance with this Section 13.05. Except to the
extent expressly provided otherwise in an applicable Supplement, any notice
required or permitted to be mailed to a Certificateholder shall be sent by
first-class mail, postage prepaid, to the address of such Certificateholder as
shown
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in the Certificate Register. Except to the extent expressly provided otherwise
in an applicable Supplement, any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given on the
fourth Business Day after such notice is so mailed, whether or not the
Certificateholder receives such notice.
Section 13.06 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement or any of the other
Transaction Documents shall for any reason whatsoever be held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement or such
other Transaction Document (as applicable) and shall in no way affect the
validity or enforceability of the other provisions of this Agreement, the
Certificates or any of the other Transaction Documents or the rights of the
Certificateholders or the Purchasers.
Section 13.07 Certificates Nonassessable and Fully Paid. Except to the
extent otherwise expressly provided in Section 7.03 with respect to NAFCO, it is
the intention of the parties to this Agreement that the Certificateholders shall
not be personally liable for obligations of the Trust, that the interests in the
Trust represented by the Certificates shall be nonassessable for any losses or
expenses of the Trust or for any reason whatsoever and that Certificates upon
authentication thereof by the Trustee pursuant to Section 6.02 are and shall be
deemed fully paid.
Section 13.08 Further Assurances. NAFCO and the Administrator agree to do
and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the Trustee more fully
to effect the purposes of this Agreement, including the execution of any
financing statements or continuation statements relating to the Receivables for
filing under the provisions of the UCC or other applicable law of any applicable
jurisdiction.
Section 13.09 Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement, each of the Trustee, the Administrator, NAFCO, the Paying
Agent, the Authenticating Agent and the Transfer Agent and Registrar (but not
any Certificateholder) agrees that it shall not, with respect to the Trust or
NAFCO, institute or join any other Person in instituting any proceeding of the
type referred to in the definition of "Event of Bankruptcy" so
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long as any Certificates issued by the Trust shall be outstanding or there shall
not have elapsed one year plus one day since the last day on which any such
Certificates shall have been outstanding. The foregoing shall not limit the
right of the Trustee, the Administrator, NAFCO, the Paying Agent, the
Authenticating Agent and the Transfer Agent and Registrar to file any claim in
or otherwise take any action with respect to any such insolvency proceeding that
was instituted against NAFCO or the Trust by any Person other than the Trustee,
the Administrator, NAFCO, the Paying Agent, the Authenticating Agent or the
Transfer Agent and Registrar. In addition, each of the Administrator, the Paying
Agent, the Authenticating Agent, the Transfer Agent and Registrar and (as to the
Trust) NAFCO agree that all amounts owed to them by the Trust or NAFCO shall be
payable solely from amounts that become available for such payment pursuant to
this Agreement and the Receivables Purchase Agreement, and no such amounts shall
constitute a claim against the Trust or NAFCO to the extent that they are in
excess of the amounts available for their payment.
Section 13.10 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Trustee, the Certificateholders or
the Holders of any Series of Certificates, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and are not exhaustive of any rights, remedies, powers and privileges
provided by law.
Section 13.11 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original, and all of
which together shall constitute one and the same instrument.
Section 13.12 Third-Party Beneficiaries. This Agreement will inure to the
benefit of and be binding upon the parties hereto and the Certificateholders and
their respective successors and permitted assigns. Except as otherwise expressly
provided in this Agreement, nothing contained in this Agreement shall confer any
rights upon any Person which is not a party to, or a permitted assignee of a
party to, this Agreement.
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Section 13.13 Integration. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
Section 13.14 Binding Effect; Assignability; Survival of Provisions. This
Agreement shall be binding upon and inure to the benefit of NAFCO, the
Administrator and the Trustee and their respective successors and permitted
assigns; provided that NAFCO shall not delegate any of its obligations
hereunder. This Agreement shall create and constitute the continuing obligations
of the parties hereto in accordance with its terms, and shall remain in full
force and effect until the termination of the Trust pursuant to Section 12.01.
Section 13.15 Recourse to NAFCO. Except to the extent expressly provided
otherwise in the Transaction Documents, the obligations of NAFCO under this
Agreement and the other Transaction Documents to which it is a party are solely
the obligations of NAFCO. No recourse shall be had for payment of any fee
payable by or other obligation of or claim against NAFCO that arises out of this
Agreement or any other Transaction Document to which NAFCO is a party against
any trustee ,director, officer or employee of NAFCO. Payments to be made by
NAFCO pursuant to this Agreement shall be paid to the extent that funds are
available to make such payments after all amounts to be paid to the
Certificateholders pursuant to Section 4.03(a) or 4.03(b) (as applicable) shall
have been paid, and there shall be no recourse to NAFCO for all or any part of
any amounts payable pursuant to this Agreement if such funds are at any time
insufficient to make all or part of any such payments. The provisions of this
Section 13.15 shall survive the termination of this Agreement.
Section 13.16 Recourse to Trust Assets. The Certificates do not represent
an obligation of, or an interest in, NAFCO, National Auto, the Administrator,
the Trustee or any Affiliate of any of them. Except as expressly provided
otherwise in this Agreement, the Certificates are limited in right of payment to
the Trust Assets.
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Section 13.17 Submission to Jurisdiction. EACH PARTY HERETO HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW
YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER TRANSACTION DOCUMENT, AND HEREBY (A) IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH NEW YORK STATE OR FEDERAL COURT; (B) IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING; AND (C) IN THE CASE OF NAFCO,
IRREVOCABLY APPOINTS NATIONAL AUTO (THE "PROCESS AGENT"), WITH AN OFFICE ON THE
DATE HEREOF AT ONE PARK PLACE, 621 NW 53rd STREET, BOCA RATON, FLORIDA 33487,
UNITED STATES OF AMERICA, AS ITS AGENT TO RECEIVE ON BEHALF OF IT AND ITS
PROPERTY SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS
WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE
BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO NAFCO IN CARE OF THE PROCESS
AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND NAFCO HEREBY IRREVOCABLY
AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF.
AS AN ALTERNATIVE METHOD OF SERVICE, EACH OF NAFCO AND THE ADMINISTRATOR ALSO
IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO NAFCO OR THE
ADMINISTRATOR (AS APPLICABLE) AT ITS ADDRESS SPECIFIED HEREIN. NOTHING IN THIS
SECTION 13.17 SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY PARTY HERETO TO
BRING ANY ACTION OR PROCEEDING AGAINST ANY OR ALL OF THE OTHER PARTIES HERETO OR
ANY OF THEIR RESPECTIVE PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTION.
Section 13.18 Waiver of Jury Trial. EACH PARTY HERETO WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN),
ACTIONS OF ANY OF THE PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
-91-
<PAGE>
Section 13.19 Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by The Chase Manhattan Bank (USA), not individually or personally but solely as
trustee of NAFCO, 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 NAFCO is made and intended not as personal
representations, undertakings and agreements by The Chase Manhattan Bank (USA)
but is made and intended for the purpose of binding only NAFCO and (c) under no
circumstances shall The Chase Manhattan Bank (USA) be personally liable for the
payment of any indebtedness or expenses of NAFCO or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by NAFCO under this Agreement or the other Transaction Documents.
-92-
<PAGE>
IN WITNESS WHEREOF, NAFCO, the Administrator and the Trustee have caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first above written.
NAFCO FUNDING TRUST
as the transferor
By: THE CHASE MANHATTAN BANK (USA),
not in its individual capacity
but solely as Owner Trustee of the
NAFCO Funding Trust
By _________________________________
Name:
Title:
Address: 802 Delaware Avenue
Wilmington, Delaware 19801
Attention:
Telephone:
Facsimile:
NATIONAL AUTO FINANCE COMPANY L.P.
as Administrator
By: NATIONAL AUTO FINANCE CORPORATION,
as General Partner
By _________________________________
Name:
Title:
Address: One Park Place
621 NW 53rd Street
Boca Raton, Florida 33487
Attention:
Telephone: (407) 997-2747
Facsimile: (407) 997-2793
-93-
<PAGE>
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Trustee of NAFCO Auto
Receivables Master Trust
By _________________________________
Name:
Title:
Address: Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency
Group
Telephone: 212-250-8360
Facsimile: 212-250-6439
-94-
<PAGE>
NAFCO FUNDING TRUST
as Transferor,
NATIONAL AUTO FINANCE COMPANY L.P.
as Administrator,
and
BANKERS TRUST COMPANY
as Trustee
-----------------------------------------
SERIES 1994-R, CLASS B SUPPLEMENT
dated as of December 8, 1994
to the
POOLING AND ADMINISTRATION AGREEMENT
dated as of December 8, 1994
-----------------------------------------
NAFCO AUTO RECEIVABLES MASTER TRUST
$25,000,000 SERIES 1994-R, CLASS B CERTIFICATES
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS OF
Pooling and Administration AGREEMENT
SECTION 1.01 Definitions...................................... 1
SECTION 1.02 Incorporation of Terms and Conditions of
Pooling and Administration Agreement............... 4
ARTICLE II
DESIGNATION
SECTION 2.01 Designation...................................... 4
ARTICLE III
PAYMENTS
SECTION 3.01 Payments......................................... 5
SECTION 3.02 Interest......................................... 5
SECTION 3.03 Principal........................................ 5
ARTICLE IV
MISCELLANEOUS
SECTION 4.01 Governing Law.................................... 6
SECTION 4.02 Execution in Counterparts........................ 6
SECTION 4.03 Effect of Unenforceable Provisions............... 6
SECTION 4.04 Amendment, Waiver, Etc........................... 6
SECTION 4.05 The Trustee...................................... 7
SECTION 4.06 Instructions in Writing.......................... 7
Section 4.07 Limitation of Liability.......................... 7
i
<PAGE>
SERIES 1994-R, CLASS B SUPPLEMENT
THIS SERIES 1994-R, CLASS B SUPPLEMENT, dated as of December 8, 1994 (this
"Supplement"), is made by and among NAFCO Funding Trust, a Delaware business
trust, as transferor ("NAFCO"), National Auto Finance Company L.P., a Delaware
limited partnership, as administrator (in such capacity, together with any
successor in such capacity, the "Administrator"), and BANKERS TRUST COMPANY, a
New York banking corporation, as Trustee (in such capacity, together with any
successor in such capacity, the "Trustee").
Pursuant to the Pooling and Administration Agreement, dated as of December
8, 1994 (as it may be amended, supplemented or otherwise modified from time to
time and as supplemented hereby, the "Pooling and Administration Agreement"),
among NAFCO, the Administrator and the Trustee, NAFCO may from time to time
direct the Trustee to issue, on behalf of the Trust, one or more Series of
Certificates representing undivided interests in the Trust. Certain terms
applicable to any such Series are to be set forth in a Supplement.
Pursuant to this Supplement, NAFCO and the Trustee shall create a Series of
Certificates and specify certain terms thereof.
ARTICLE I
DEFINITIONS; INCORPORATION OF TERMS OF
Pooling and Administration AGREEMENT
SECTION 1.01 Definitions. (a) Capitalized terms that are used but not
defined herein have the meanings that Appendix A to the Pooling and
Administration Agreement ascribes to such terms. In addition, this Supplement
shall be interpreted in accordance with the conventions set forth in Parts B, C
and D of that Appendix A. Except as expressly provided otherwise herein,
references herein to an "Article," "Section," or "clause" refer to an Article,
Section, or clause of this Supplement.
1
<PAGE>
(b) Each capitalized term defined herein relates only to the Series 1994-R,
Class B Certificates and to no other Series of Certificates issued by the Trust.
Whenever used in this Supplement, the following words and phrases shall have the
following meanings:
"Applicable Rating Agencies" means each nationally recognized rating agency
that, at the request of NAFCO, from time to time maintains a credit rating of
the Class B Certificates.
"Certificate Purchase Agreement" means the Certificate Purchase Agreement
dated as of the date hereof among NAFCO, National Auto Finance Company L.P. and
First Union National Bank of North Carolina, as the same may be amended,
supplemented or otherwise modified from time to time.
"Class B Certificates" shall mean the Series 1994-R, Class B Certificates
issued pursuant to the Pooling and Administration Agreement and this Supplement.
"Class B Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of (i) the sum of the daily interest accruals on the
outstanding principal balance of the Prime Tranche as of the close of business
on each day during the related Yield Period and (ii) the sum of the daily
interest accruals on the outstanding principal balance of any Maturing
Eurodollar Tranches as of the close of business on each day during the related
Yield Period.
"Class B Principal Distributable Amount" means, with respect to any
Distribution Date, the lesser of (a) the outstanding principal balance of the
Class B Certificates as of such Distribution Date (prior to giving effect to any
distributions in reduction of the outstanding principal amount of the Class B
Certificates made on such Distribution Date) and (b)(i) in the case of any
Distribution Date that occurs prior to the Amortization Commencement Date, the
lesser of (x) the Certificate Amortized Pool Balance for such Distribution Date
less any amounts in respect thereof distributed in reduction of the principal
balance of the Class A Certificates on such Distribution Date and (y) the sum of
the outstanding principal balances of the Prime Tranche and any Maturing
Eurodollar Tranches, (ii) in the case of any Distribution Date that occurs on or
after the
2
<PAGE>
Early Amortization Commencement Date, and prior to the Liquidation Commencement
Date, the product of (A) the Class B Percentage and (B) the Certificate
Amortized Pool Balance for such Distribution Date, and (iii) in the case of any
Distribution Date that occurs on or after the Liquidation Commencement Date, an
amount equal to the Certificate Amortized Pool Balance for such Distribution
Date less any amounts in respect thereof distributed in reduction of the
principal balance of the Class A Certificates on such Distribution Date.
"Eurodollar Tranche" means, during any Yield Period, any portion of the
Class B Certificate Principal Amount that has been designated by NAFCO in
accordance with the Certificate Purchase Agreement to accrue interest based on
LIBOR.
"Maturing Eurodollar Tranche" means, with respect to any Distribution Date,
any Eurodollar Tranche the related Yield Period of which concludes on such
Distribution Date.
"Prime Rate" means the "prime rate" of interest announced by the Purchaser
from time to time, changing when and as such rate of interest changes.
"Prime Tranche" means, at any time, the portion of the Class B Certificate
Principal Amount that is designated by NAFCO in accordance with the Certificate
Purchase Agreement to accrue interest based on the Prime Rate. Any change in the
interest rate resulting from a change in the Prime Rate announced by the
Purchaser shall become effective without prior notice to NAFCO or the
Administrator as of 12:01 A.M. (New York time) on the Business Day on which each
change in the Prime Rate is announced by the Purchaser.
"Purchaser" means the First Union National Bank of North Carolina, as the
purchaser under the Certificate Purchase Agreement.
"Tranche" means each of the Prime Tranche and each Eurodollar Tranche.
"Yield Period" means with respect to the Class B Certificates:
3
<PAGE>
(a) as to the Prime Tranche (if any), each period from the date upon
which the Prime Tranche was designated as such pursuant to the Certificate
Purchase Agreement to the next Distribution Date (except that the initial
Yield Period shall commence on the Closing Date and end on the January 15,
1995 Distribution Date); and
(b) as to each Eurodollar Tranche (if any) from time to time, each
period from the Distribution Date designated as the commencement of such
Yield Period pursuant to the Certificate Purchase Agreement to the
Distribution Date specified at the time such Eurodollar Tranche was
designated, provided that the Yield Period shall not extend beyond the
third Distribution Date next succeeding the Distribution Date on which such
Yield Period commenced.
SECTION 1.02 Incorporation of Terms and Conditions of Pooling and
Administration Agreement. This Supplement hereby incorporates by reference the
terms and provisions of the Pooling and Administration Agreement as if such
terms and conditions were set forth in full herein. As supplemented by this
Supplement, the Pooling and Administration Agreement is hereby in all respects
ratified and confirmed and the Pooling and Administration Agreement as so
supplemented by this Supplement shall be read, taken and construed as one and
the same agreement. In the event of any conflict or inconsistency between the
terms of this Supplement and the terms of the Pooling and Administration
Agreement as such terms apply to any of the Class B Certificates, the terms of
this Supplement shall control with respect to the Class B Certificates.
ARTICLE II
DESIGNATION
SECTION 2.01 Designation. There is hereby created a series of Certificates
to be issued pursuant to the Pooling and Administration Agreement and this
Supplement to be known as "Series 1994-R, Class B Certificates." The Trustee
shall authenticate and deliver the Class B Certificates, to or upon the order of
NAFCO, in an aggregate Stated Amount equal
4
<PAGE>
to $25 million. Each of the Class B Certificates shall be authenticated and
delivered in the manner and at the times for authentication and delivery of
Certificates that is specified in Article VI of the Pooling and Administration
Agreement.
ARTICLE III
PAYMENTS
SECTION 3.01 Payments. Except as expressly provided otherwise in this
Supplement, interest and principal shall be distributed in respect of the Class
B Certificates at the times described in, and in the amounts calculated pursuant
to, Article IV of the Pooling and Administration Agreement for payments that are
to be made with respect to Certificates.
SECTION 3.02 Interest. (a) NAFCO shall have the right from time to time, in
accordance with the terms and conditions in the Certificate Purchase Agreement,
to allocate the outstanding principal amount under the Class B Certificates to
multiple Tranches: one or more Eurodollar Tranches and a Prime Tranche. Interest
on a Prime Tranche shall be payable on each Distribution Date, and interest on a
Eurodollar Tranche shall be payable at the end of the applicable Yield Period,
except that interest on the amount of any principal repaid on any other date
shall be payable on the date of such repayment.
(b) Interest on each Eurodollar Tranche shall accrue during each Yield
Period at a rate per annum equal to the sum of (i) LIBOR and (ii) the Applicable
Margin and shall be calculated on the basis of actual days over a year of 360
days.
(c) Interest on the Prime Tranche shall accrue at the Prime Rate in
effect from time to time and shall be calculated on the basis of actual days
over a year of 365 or 366 days, as the case may be.
SECTION 3.03 Principal. Notwithstanding the priority of payments set forth
in Section 4.03(b) of the Pooling and Administration Agreement, if on any
Distribution Date
5
<PAGE>
occurring on or after the Amortization Commencement Date the Class B Principal
Distributable Amount exceeds the sum (calculated prior to giving effect to
distributions pursuant to Section 4.03(b) on such Distribution Date) of (i) the
outstanding principal balance of the Prime Tranche, if any, and (ii) the
outstanding principal balances of the Maturing Eurodollar Tranches, if any, such
excess shall be deposited in the Excess Funding Account pending distribution
thereof pursuant to Section 4.03(c).
ARTICLE IV
MISCELLANEOUS
SECTION 4.01 Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
SECTION 4.02 Execution in Counterparts. This Supplement may be executed in
any number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which taken together shall constitute one and the same agreement.
SECTION 4.03 Effect of Unenforceable Provisions. If any provision hereof
shall be invalid, illegal or unenforceable in any jurisdiction, the remaining
provisions shall continue to be valid and enforceable and such provision shall
continue to be valid and enforceable in any other jurisdiction.
SECTION 4.04 Amendment, Waiver, Etc.
(a) This Supplement may be amended, subject to the provisions of Article
XIII of the Pooling and Administration Agreement, from time to time by the
Administrator, NAFCO and the Trustee by a written instrument signed by each of
them, without the consent of any of the holders of the Class B Certificates but
only to cure any ambiguities, or to cure, correct or supplement any provisions
contained in this Supplement that may be defective or inconsistent with any
other provision contained in this Supplement; provided, however, that such
action shall not adversely affect in any
6
<PAGE>
material respect the interests of any holder of a Class B Certificate (as
evidenced by an officer's certificate of the Administrator); and, provided,
further, that for purposes of this Supplement, any decrease in the Class B
Certificate Rate, or any increase in the Stated Amount shall be deemed to
materially adversely affect the interests of a holder of a Class B Certificate.
(b) The provisions of this Supplement may also be amended, modified or
waived from time to time by the Administrator, NAFCO and the Trustee with the
consent of the holders of class B Certificates that evidence at lease 66- 2/3%
of the outstanding principal amount of the Class B Certificates (exclusive of
any Class B Certificates held by NAFCO or any of its Affiliates) to the extent
permitted by Section 13.01 of the Pooling and Administration Agreement, and the
terms of such Section 13.01 shall apply to any such amendment, modification or
waiver.
SECTION 4.05 The Trustee. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplement or for or in respect of the recitals contained herein, all of which
recitals are made solely by NAFCO and the Administrator.
SECTION 4.06 Instructions in Writing. All instructions given by the
Administrator to the Trustee pursuant to this Supplement shall be in writing,
and may be included in a Daily Report or the Distribution Date Statement.
Section 4.07 Limitation of Liability. It is expressly understood and agreed
by the parties hereto that (a) this Agreement is executed and delivered by The
Chase Manhattan Bank (USA), not individually or personally but solely as trustee
of NAFCO, 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 NAFCO is made and intended not as personal representations,
undertakings and agreements by The Chase Manhattan Bank (USA) but is made and
intended for the purpose of binding only NAFCO and (c) under no circumstances
shall The Chase Manhattan Bank (USA) be personally liable for the payment of any
indebtedness or expenses of NAFCO or be liable for the breach or failure of any
obligation,
7
<PAGE>
representation, warranty or covenant made or undertaken by NAFCO under this
Agreement or the other Transaction Documents.
8
<PAGE>
IN WITNESS WHEREOF, NAFCO, the Administrator and the Trustee have caused
this Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
NAFCO FUNDING TRUST
By: THE CHASE MANHATTAN BANK (USA),
not in its individual capacity
but solely as Owner Trustee of the
NAFCO Funding Trust
By: _________________________
Name:
Title:
Address: 802 Delaware Avenue
Wilmington, Delaware 19801
Attention:
Telephone:
Facsimile:
NATIONAL AUTO FINANCE COMPANY L.P.
By: NATIONAL AUTO FINANCE CORPORATION,
as General Partner
By: _________________________
Name
Title:
Address: One Park Place
621 NW 53rd Street
Boca Raton, Florida 33487
Attention:
Telephone: (407) 997-2747
Facsimile: (407) 997-2793
9
<PAGE>
BANKERS TRUST COMPANY,
not in its individual
capacity but solely as the Trustee of NAFCO
Auto Receivables Master Trust
By _________________________________
Name:
Title:
Address: Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency
Group
Telephone: 212-250-8360
Facsimile: 212-250-6439
10
<PAGE>
TRUST AGREEMENT, dated as of October 5, 1994, between
National Auto Finance Corporation, a Delaware corporation, as
Depositor, and Bankers Trust (Delaware), a Delaware banking
corporation, not in its individual capacity but solely as Owner
Trustee. The Depositor and the Owner Trustee hereby agree as follows:
1. Creation of Trust.
(a) The trust created hereby shall be known as
"NAFCO Funding Trust", in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts, and sue and be
sued.
(b) The Depositor hereby assigns, transfers, conveys
and sets over to the Owner Trustee the sum of $1. The Owner Trustee
hereby acknowledges receipt of such amount in trust from the
Depositor, which amount shall constitute the initial trust estate. The
Owner Trustee hereby declares that it will hold the trust estate in
trust for the Depositor. It is the intention of the parties hereto
that the Trust created hereby constitute a business trust under
Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. ss. 3801 et
seq. and that this document constitute the governing instrument of the
Trust. The Owner Trustee is hereby authorized and directed to execute
and file a certificate of trust with the Delaware Secretary of State
in the form attached hereto.
(c) The Depositor and the Owner Trustee will enter
into an amended and restated Trust Agreement, satisfactory to each
such party, to provide for the contemplated operation of the Trust
created hereby. Prior to the execution and delivery of such amended
and restated Trust Agreement, the Owner Trustee shall not have any
duty or obligation hereunder or with respect to the trust estate,
except as otherwise required by applicable law.
2. Concerning the Owner Trustee.
(a) Except as otherwise expressly required by
Section 1 of this Trust Agreement, unless specifically authorized in
writing by the Depositor and consented to by the Owner Trustee, the
Owner Trustee shall not have any duty or obligation with respect to
the administration of the Trust, the investment of the Trust's
property or the payment of dividends or other distributions of income
or principal to the Trust's beneficiaries. The Owner Trustee shall not
be liable for the
<PAGE>
acts or omissions of the Depositor and shall owe no other fiduciary
duties to the Trust or its beneficiaries other than as expressly
provided for in this Section 2.
(b) The Owner Trustee accepts the trusts hereby
created and agrees to perform its duties hereunder with respect to the
same but only upon the terms of this Trust Agreement. The Owner
Trustee shall not be personally liable under any circumstances, except
for its own willful misconduct or gross negligence. In particular, but
not by way of limitation:
(i) The Owner Trustee shall not be personally
liable for any error of judgment made in good faith;
(ii) No provision of this Trust Agreement shall
require the Owner Trustee to expend or risk its personal funds or
otherwise incur any financial liability in the performance of its
rights or powers hereunder, if the Owner Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured or
provided to it;
(iii) Under no circumstance shall the Owner
Trustee be personally liable for any indebtedness of the Trust; and
(iv) The Owner Trustee shall not be personally
responsible for or in respect of the validity or sufficiency of this
Trust Agreement or for the due execution hereof by the Depositor.
(c) The Owner Trustee shall incur no liability to
anyone in acting upon any signature, instrument, notice, resolution,
request, consent, order, certificate, report, opinion, bond or other
document or paper believed by it to be genuine and believed by it to
be signed by the proper party or parties. The Owner Trustee may accept
a certified copy of a resolution of the board of directors or other
governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the manner of
ascertainment of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on a certificate,
signed by the Depositor, as to such fact or matter, and such
certificate shall constitute full protection to the Owner Trustee for
any action taken or omitted to be taken by it in good faith in
reliance thereon.
2
<PAGE>
(d) In the exercise or administration of the trusts
hereunder, the Owner Trustee (i) may act directly or, at the expense
of the Trust, through agents or attorneys pursuant to agreements
entered into with any of them, and the Owner Trustee shall not be
liable for the default or misconduct of such agents or attorneys if
such agents or attorneys shall have been selected by the Owner Trustee
with reasonable care; and (ii) may, at the expense of the Trust,
consult with counsel, accountants and other skilled persons to be
selected with reasonable care and employed by it, and it shall not be
liable for anything done, suffered or omitted in good faith by it in
accordance with the advice or opinion of any such counsel, accountants
or other skilled persons.
(e) Except as expressly provided in this Section 2,
in accepting and performing the trusts hereby created the Owner
Trustee acts solely as trustee hereunder and not in its individual
capacity, and all persons having any claim against the Owner Trustee
by reason of the transactions contemplated by this Trust Agreement
shall look only to the Trust's property for payment or satisfaction
thereof.
3. The Depositor shall indemnify, defend and hold harmless
the Trust and the Owner Trustee and any of the officers, directors,
employees and agents of the Trust and the Owner Trustee (the
"Indemnified Persons") from and against any and all costs, expenses,
disbursements (including the reasonable fees and expenses of counsel),
losses, claims, taxes, damages and liabilities of any kind and nature
whatsoever (collectively, "Expenses"), to the extent that such
Expenses arise out of or are imposed upon or asserted against such
Indemnified Persons with respect to the execution, delivery or
performance of this Trust Agreement, the creation, operation or
termination of the Trust or the transactions contemplated hereby;
provided, however, that the Depositor shall not indemnify any
Indemnified Person for any costs, expenses, disbursements, losses,
claims, taxes, damages or liabilities which are a result of the
willful misfeasance, bad faith or gross negligence of such Indemnified
Person.
4. This Trust Agreement may be executed in one or more counterparts.
5. The Owner Trustee may resign upon thirty days prior notice to the
Depositor.
6. This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference
to its conflict of
3
<PAGE>
law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
[SIGNATURE PAGE FOLLOWS]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto
duly authorized, as of the day and year first above written.
BANKERS TRUST (DELAWARE),
as Owner Trustee
By: /s/James H. Stallkemp
------------------------------
Name: James H. Stallkemp
Title: President
NATIONAL AUTO FINANCE CORPORATION
as Depositor
By:
------------------------------
Name:
Title:
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto
duly authorized, as of the day and year first above written.
BANKERS TRUST (DELAWARE),
as Owner Trustee
By:
------------------------------
Name:
Title:
NATIONAL AUTO FINANCE
CORPORATION, as Depositor
By: /s/ Craig Schnee
------------------------------
Name: Craig Schnee
Title: Vice President
6
<PAGE>
================================================================================
NATIONAL AUTO FINANCE COMPANY L.P.
Depositor,
THE CHASE MANHATTAN BANK (USA)
Owner Trustee
and
the CO-TRUSTEES
FIRST AMENDED AND RESTATED TRUST AGREEMENT
of
NAFCO Funding Trust,
Dated as of December 8, 1994
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions
1.01. Definitions.......................................................... 1
ARTICLE II
Declaration of Business Trust; Issuance
and Transfer of Certificates of Beneficial
Interest; Duties of Owner Trustee
2.01. Declaration of Business Trust........................................ 4
2.02. Transfer of Trust Property to Owner Trustee.......................... 5
2.03. Issuance and Transfer of Certificates of Beneficial Interest......... 5
2.04. Payments and Distributions........................................... 7
2.05. ..................................................................... 8
2.06. Further Assurances................................................... 8
2.07. Activities of Trust.................................................. 8
2.08. Duties of Owner Trustee.............................................. 9
2.09. Instructions of the Co-Trustees...................................... 10
2.10. Furnishing of Documents.............................................. 11
2.11. Situs of Trust....................................................... 11
2.12. Title to Trust Property.............................................. 11
ARTICLE III [Reserved]
ARTICLE IV
Representations and Warranties of Depositor
4.01. Good Standing........................................................ 12
4.02. Partnership Power.................................................... 12
4.03. Consents and Approvals............................................... 12
4.04. Title to Trust Property.............................................. 13
4.05. Binding Effect....................................................... 13
4.06. Investment Company................................................... 13
i
<PAGE>
ARTICLE V
Representations and Warranties
of The Chase Manhattan Bank (USA)
5.01. Good Standing........................................................ 13
5.02. Corporate Power...................................................... 13
5.03. Consents and Approvals............................................... 14
5.04. Binding Effect....................................................... 14
ARTICLE VI
Certain Covenants of Depositor, Owners of
Certificates of Beneficial Interest and the Trust
6.01. Title to Trust Property.............................................. 15
6.02. Notification of Transfer............................................. 15
6.03. Investment Company................................................... 15
6.04. Certain Business Conduct............................................. 15
ARTICLE VII
Concerning the Owner Trustee and the Trust
7.01. General Matters Relating to the Owner Trustee........................ 17
7.02. Books and Records; Mailings to Owners of
Certificates of Beneficial Interest.................................. 19
7.03. Compensation and Indemnification of the Owner Trustee................ 19
7.04. Resignation, Discharge or Removal of Owner Trustee; Successor........ 21
7.05. Qualification of Owner Trustee....................................... 23
7.06. Appointment of Additional Trustees................................... 23
7.07. Not Acting in Individual Capacity.................................... 23
7.08. Liability of the Certificateholder................................... 23
7.09. Acting in its Own Name............................................... 24
7.10. Decisions by Owner Trustee........................................... 24
ARTICLE VIII
Co-Trustees
8.01. Appointment of Co-Trustees........................................... 24
8.02. Qualification; Number; Term.......................................... 25
8.03. Places of Meetings, Quorum and Manner of Voting...................... 26
8.04. Indemnification; Remuneration........................................ 26
8.05. Not Acting in Individual Capacity.................................... 27
8.06. Separate Class....................................................... 27
ii
<PAGE>
ARTICLE IX
Accounts of the Trust
9.01. Accounts of the Trust................................................ 27
9.02. Investment of Amounts on Deposit in Accounts of the Trust............ 28
ARTICLE X
Miscellaneous
10.01. Benefit of Agreement................................................ 28
10.02. Severability........................................................ 28
10.03. Amendments and Waivers.............................................. 28
10.04. Notices............................................................. 29
10.05. Termination of This Agreement; No Power to
Revoke or Withdraw Trust Property................................... 29
10.06. Nature of Interest in Trust Property................................ 30
10.07. No Filing........................................................... 30
10.08. GOVERNING LAW....................................................... 30
10.09. Counterparts........................................................ 31
10.10. Limitations on Rights of Others..................................... 31
10.11. References to Sections.............................................. 31
10.12. Administrator....................................................... 31
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FIRST AMENDED AND RESTATED TRUST AGREEMENT relating to NAFCO Funding Trust,
dated as of December 8, 1994, between National Auto Finance Company L.P., a
Delaware limited partnership (herein, together with its permitted successors and
assigns, the "Depositor") and The Chase Manhattan Bank (USA), a Delaware banking
corporation (the "Owner Trustee") and the Co-Trustees identified herein (the "Co
Trustees").
This Agreement amends and restates in its entirety the Trust Agreement
entered into on October 5, 1994, by and between National Auto Finance
Corporation and Bankers Trust (Delaware). National Auto Finance Corporation and
Bankers Trust (Delaware) hereby acknowledge and agree to the amendment and
restatement of the Trust Agreement entered into by them.
In consideration of good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
Definitions
1.01. Definitions. Capitalized terms set forth below shall have the
following meanings when used in this Agreement:
"Actual Knowledge" means the actual knowledge of any Authorized Officer of
the Owner Trustee.
"Affiliate" of any Person means any other Person controlling, controlled by
or under common control with such Person. Control shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, and "Controlling" and "Controlled" shall
have meanings correlative thereto.
"Agreement" means this Trust Agreement.
"Authorized Officer" means any officer within the corporate trust
department of the Owner Trustee (or any successor group of such entity)
including any vice president, second vice president, assistant secretary or any
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other officer of such entity customarily performing such functions similar to
those performed by the persons who at the time shall be such officers, or to
whom any corporate trust matter is referred because of his or her knowledge of
and familiarity with the particular subject.
"Business Day" means a day on which the Owner Trustee and banks located in
New York City are open for the purpose of conducting commercial business.
"Certificate of Beneficial Interest" means any certificate representing a
beneficial ownership interest in the Trust in substantially the form attached
hereto as Annex 1.
"Certificateholder" means any holder of a Certificate of Beneficial
Interest in the Trust.
"Certificate Registrar" shall have the meaning set forth in Section 2.03(d)
hereof.
"Closing Date" means December 8, 1994.
"Code" means the Internal Revenue Code of 1986.
"Commission" means the Securities and Exchange Commission.
"Corporate Trust Office" of a Person means the principal office of the
Owner Trustee in Delaware at which at any particular time its corporate trust
business shall be principally administered, which office on the Closing Date is
located at 802 Delaware Avenue, Wilmington, DE 19801.
"Co-Trustee" means each of the co-trustees designated in Section 8.01
hereof and any successors thereto.
"Depositor" means National Auto Finance Company L.P., a Delaware limited
partnership and its successors and assigns.
"Independent Co-Trustee" is defined in Section 8.02(a) hereof.
"Lien" means any lien, mortgage, security interest, pledge, charge, equity
or claim of others or encumbrance of any kind.
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"Owner Trustee" means The Chase Manhattan Bank (USA), a Delaware banking
corporation acting not in its individual capacity, but solely in its fiduciary
capacity as trustee hereunder, and any banking corporation that shall have
become its successor pursuant to Section 7.04 hereof.
"NAFCO Note" means the note issued to the Depositor by the Trust pursuant
to the Purchase Agreement.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Pooling and Administration Agreement" means that certain Pooling and
Administration Agreement, dated as of December 8, 1994 by and among NAFCO, as
transferor, National Auto, as Administrator, and Bankers Trust Company, as
Trustee, as the same may be further amended, supplemented, amended and restated
or otherwise modified from time to time in accordance with the terms thereof.
"Purchase Agreement" means the Receivables Purchase Agreement, dated as of
December 8, 1994, entered into between the Depositor and the Trust whereby the
Receivables are sold to the Trust by the Depositor.
"Receivables" shall have the meaning assigned in Section 2.07(a)(i) hereof.
"Related Agreement" means any agreement executed and delivered in
connection with the issuance of the Certificates of Beneficial Interest and any
other agreement relating to the transactions contemplated hereby.
"Servicer" means World Omni Financial Corp., a Florida corporation.
"Servicing Agreement means the Servicing Agreement, dated July 25, 1994,
between the Depositor and the Servicer.
"Trust" means the trust existing pursuant to this Agreement, designated as
NAFCO Funding Trust.
"Trust Property" means all money, instruments and other property deposited
and held in the Trust pursuant hereto, including all proceeds thereof.
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As used in this Agreement, unless specified to the contrary in such
document, the definitions set forth or referred to below (1) shall apply equally
to both the singular and plural forms of the terms defined; (2) whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms; and (3) the words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
ARTICLE II
Declaration of Business Trust; Issuance
and Transfer of Certificates of Beneficial
Interest; Duties of Owner Trustee
2.01. Declaration of Business Trust. The Chase Manhattan Bank (USA) is
hereby appointed to hold and agrees to hold the Trust Property as Owner Trustee
in trust upon the terms and conditions and for the use and benefit of the owners
of the Certificates of Beneficial Interest as herein set forth.
It is the intention of the parties hereto that the trust created by this
Agreement constitute a business trust under the Business Trust Statute and that
this Agreement constitute the governing instrument of such business trust. The
Trust created under this Agreement is intended to be either a sole
proprietorship or a partnership for federal income tax purposes. It is not
intended to be an association taxable as a corporation. The provisions hereof
shall be interpreted accordingly and no party hereto shall take a contrary
position for federal income tax purposes. No later than the Closing Date, the
Owner Trustee shall file the Restated Certificate of Trust required by Section
3810 of the Business Trust Statute (as defined below), in the Office of the
Secretary of State of the State of Delaware to reflect the amendments thereto
(the "Certificate of Trust"). Effective as of the date hereof, the Owner Trustee
shall have all the rights, powers and duties set forth herein and in the
Business Trust Statute with respect to accomplishing the purposes of the Trust.
For purposes of this Agreement, "Business Trust Statute" means Chapter 38 of
Title 12 of the Delaware Code, 12 Del. C. ss. 3801 et seq., as the same may be
amended from time to time.
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2.02. Transfer of Trust Property to Owner Trustee.
(a) The Depositor has granted to the Owner Trustee and its successors,
forever, all right, title and interest of the Depositor in and to the sum of
twenty-five thousand Dollars ($25,000) pursuant to the terms of this Agreement;
and
(b) Upon execution and delivery of the Purchase Agreement, the Trust
shall accept all right, title and interest in the Receivables and other assets
acquired pursuant to the Purchase Agreement.
2.03. Issuance and Transfer of Certificates of Beneficial Interest.
(a) The Owner Trustee acknowledges it is holding in trust on the date
hereof the sum of twenty-five thousand Dollars ($25,000), in lawful money of the
United States of America, duly paid by the Depositor, and has issued a
Certificate of Beneficial Interest duly executed and delivered to the Depositor
in exchange therefor in substantially the form attached hereto as Annex 1,
evidencing ownership of 100% of the beneficial interest in the Trust.
(b) Each Certificate of Beneficial Interest shall be executed by
manual signature on behalf of the Owner Trustee by one of its Authorized
Officers. Certificates of Beneficial Interest bearing the manual signature of an
individual who was, at the time when such signature was affixed, authorized to
sign on behalf of the Owner Trustee, will be validly issued and entitled to the
benefits of this Agreement, notwithstanding that such individual has ceased to
be so authorized prior to the delivery of such Certificates of Beneficial
Interest or does not hold such office at the date of such Certificates of
Beneficial Interest. Each Certificate of Beneficial Interest shall be dated the
date of its issuance.
(c) The owners of the Certificates of Beneficial Interest shall be
entitled to all rights provided to them under this Agreement and in the
Certificate of Beneficial Interest and shall be subject to the terms and
conditions contained in this Agreement and in the Certificate of Beneficial
Interest. A person shall be entitled to the rights and subject to the
obligations of an
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owner of a Certificate of Beneficial Interest hereunder upon such person's
acceptance of a Certificate of Beneficial Interest duly registered in such
person's name pursuant to Section 7.02 hereof.
(d) The Owner Trustee or its designee (the "Certificate Registrar")
shall cause to be kept at its Corporate Trust Office, in accordance with the
provisions of Section 7.02 hereof, a register (the "Certificate Register") in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of the Certificate of Beneficial
Interest. The registered Certificateholder shall have the right to inspect the
Certificate Register, subject to such reasonable regulations as the Certificate
Registrar shall prescribe. The person listed as the owner of a Certificate of
Beneficial Interest on the Certificate Register shall be treated as the owner of
such Certificate for purposes of this Agreement and otherwise.
(e) Neither the registered nor the beneficial interest in any
Certificate of Beneficial Interest may be transferred, assigned, hypothecated or
pledged in any manner. Any purported transfer or assignment of a Certificate of
Beneficial Interest other than as permitted herein, and any direct or indirect
beneficial interest therein, shall be null and void and shall not cause any
rights to inure to the benefit of the purported transferee. If, notwithstanding
this prohibition, a court of competent jurisdiction determines that a transfer
of a Certificate of Beneficial Interest has arisen by operation of law, such
involuntary transfer shall transfer to the transferee only the
Certificateholder's rights to distributions on the Certificate of Beneficial
Interest but such transferee shall not become a substitute registered
Certificateholder and shall not succeed to any of the rights of the
Certificateholder other than the right to receive distributions on the
Certificate of Beneficial Interest.
(f) Neither the Trust nor the Owner Trustee shall be required to
register the Certificates of Beneficial Interest under the Securities Act of
1933, as amended, or any other state or federal securities law, or to determine
whether any purported transfer is in compliance therewith. Each Certificate of
Beneficial Interest shall bear a legend setting forth restrictions on
transferability substantially as follows:
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"THE BENEFICIAL INTEREST IN THE TRUST REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND MAY BE OFFERED OR SOLD OR
OTHERWISE DISPOSED OF BY THE HOLDER HEREOF ONLY IN ACCORDANCE WITH THE TERMS OF
THE TRUST AGREEMENT."
(g) If (i) any mutilated Certificate of Beneficial Interest is
surrendered to the Owner Trustee or the Certificate Registrar or the Owner
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate of Beneficial Interest and (ii) there is delivered to the
Owner Trustee such security or indemnity as may be required by it to save it
harmless, then the Owner Trustee shall execute and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Certificate of
Beneficial Interest, a new Certificate of Beneficial Interest of like tenor and
aggregate beneficial interest. In connection with the issuance of any new
Certificate of Beneficial Interest under this Section 2.03(g), the Owner Trustee
may require the payment by the holder of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Owner Trustee) connected
therewith. Any duplicate Certificate of Beneficial Interest issued pursuant to
this Section 2.03(g) shall constitute complete and indefeasible evidence of
ownership of a beneficial interest in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Certificate of Beneficial Interest
shall be found at any time.
2.04. Payments and Distributions.
(a) Any amount held by the Trust with respect to the Trust Property
shall be applied in the following order:
(i) to the extent not otherwise paid, to pay all amounts (if any) then
due and payable to the Owner Trustee or The Chase Manhattan Bank (USA),
pursuant to Sections 7.01 and 7.03 of this Agreement;
(ii) to make any payments required pursuant to and in accordance with
the Purchase Agreement; and
(iii) to distribute any remaining amounts and other property to the
Certificateholder at the
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direction of and in accordance with the written instructions of the
Co-Trustees.
(b) All payments and distributions required to be made to the
Certificateholder pursuant to this Section 2.04 shall be made to the
Certificateholder on such dates and in such amounts as specified in written
instructions from the Administrator by wire transfer of immediately available
funds or by such other means as are acceptable to the Owner Trustee, in either
case as specified in written instructions from the Certificateholder delivered
to the Owner Trustee in accordance with Section 10.04 at least five Business
Days prior to such payment or distribution.
(c) For purposes of making the distributions set forth in this Section
2.04(a), the Owner Trustee hereby appoints Chase Manhattan Bank, N.A., having an
address at 4 Chase MetroTech Center, Brooklyn, New York 11245, as its paying
agent.
2.05. [intentionally left blank]
2.06. Further Assurances. The Owner Trustee shall execute and deliver all
such other instruments, documents or certificates and take all such other
actions in accordance with the direction of the owners of the Certificates of
Beneficial Interest as such owners may deem necessary or advisable to give
effect to the transactions contemplated hereby, the taking of any such action by
the Owner Trustee on the Closing Date in the presence of the owners of the
Certificates of Beneficial Interest or its counsel shall evidence, conclusively,
such direction of the owners of the Certificates of Beneficial Interest.
2.07. Activities of Trust.
(a) The nature of the business or purposes to be conducted or promoted
by the Trust is to engage in the following activities:
(i) to enter into the Purchase Agreement and to acquire from time to
time all right, title and interest in and to receivables arising out of or
relating to the financing of automobile purchases (the "Receivables"),
including monies due thereunder, security interests in the vehicles and
other goods financed thereby, proceeds from claims on insurance policies
related thereto, and related rights;
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(ii) to acquire, own, hold, sell, transfer, assign, pledge, finance,
refinance and otherwise deal in or with Receivables;
(iii) to receive cash contributions from any Certificateholder;
(iv) to sell, transfer, assign, pledge and otherwise deal in or with
any or all of its ownership interest in Receivables;
(v) to own interests in other entities created for the purpose of
engaging in the foregoing activities; and
(vi) to enter into any other agreements and to engage in any other
acts and activities and to execute any powers permitted to business trusts
under the Business Trust Statute that are incidental, advantageous or
necessary to the foregoing.
(b) Notwithstanding any other provisions of this Agreement and any
provision of law that otherwise so empowers the Trust, the Trust shall not,
engage in any business or activity other than those set forth in subsection (a).
2.08. Duties of Owner Trustee.
(a) Subject to Section 2.09 hereof, the Owner Trustee is hereby
authorized to take all actions required or permitted to be taken by the Trust
under this Agreement and is hereby directed to comply with the terms of this
Agreement. In addition, the Owner Trustee is authorized and directed to execute
and deliver on behalf of the Trust on the Closing Date the Pooling and
Administration Agreement, the Purchase Agreement, the NAFCO Note, the
Certificates, each Certificate Purchase Agreement and each certificate or other
document attached as an exhibit to or contemplated by the foregoing documents,
in each case, in such form as the Depositor shall approve as evidenced
conclusively by the Owner Trustee's execution thereof. The Owner Trustee shall
be deemed to have discharged its duties hereunder to the extent that the
Servicer, the Administrator or the Co-Trustees have agreed to perform such
duties.
(b) The Owner Trustee shall not have any duty or obligation to manage,
control, use, sell, dispose of
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or otherwise deal with the Trust Property, to prepare or file any document or
report, or otherwise to take or refrain from taking any action under or in
connection with this Agreement, any other Related Agreement or any other
Transaction Document (as such term is defined in the Pooling and Administration
Agreement), except as expressly required by the terms of this Agreement, any of
the Transaction Documents or as expressly directed in written instructions
pursuant to Section 2.09; and no implied duties or obligations shall be read
into this Agreement or any other Related Agreement against the Owner Trustee.
The Chase Manhattan Bank (USA) nevertheless agrees that it will, at its own cost
and expense, promptly take all actions as may be necessary to discharge any
Liens on any part of the Trust Property which result from actions by or claims
against The Chase Manhattan Bank (USA) that are not related to the ownership of
the Trust Property or any other part of the Trust or the administration of the
Trust Property or the transactions contemplated by the Related Agreements.
(c) The Owner Trustee shall not have any duty to enforce any
obligation or promise of any Certificateholder to contribute cash, property or
perform services to and for the Trust. The Administrator shall have the duty to
enforce any such obligation or promise.
2.09. Instructions of the Co-Trustees.
(a) The Owner Trustee shall only take such action or shall refrain
from taking such action under this Agreement as it shall be directed pursuant to
a specific provision of this Agreement or as it shall be directed in writing by
(i) the Co-Trustees in accordance with the notice provisions of Section 10.04 or
(ii) by either owner of the Certificates of Beneficial Interest, provided
however, that such direction shall not be contrary to any specific provision
contained in this Agreement or result in a Material Adverse Effect. The Owner
Trustee shall not take the actions set forth in Section 10.03 relating to
amendments or waivers of this Agreement, Section 10.05 relating to dissolution
of the Trust, Section 10.07 relating to filing of a petition in bankruptcy of
the Trust or permit the Trust to merge with or into another entity unless it
shall have obtained the consent of or shall be directed by the Co-Trustees in
accordance with the provisions of Section 8.03.
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(b) If in performing its duties under this Agreement the Owner Trustee
is required to decide between alternative courses of action, the Owner Trustee
shall consult with the owner of the Certificates of Beneficial Interest. If the
Owner Trustee is unsure of the application of any provision of this Agreement or
any other Related Agreement, then the Owner Trustee may, promptly deliver a
notice to the Co-Trustees in accordance with the notice provisions of Section
10.04 hereof requesting written instructions as to the course of action desired
by them. The Co-Trustees shall make any determination required pursuant to this
Section 2.09, as reflected in instructions to the Owner Trustee delivered by
such Co-Trustees in accordance with Section 8.03 hereof. If the Owner Trustee
does not receive such instructions within 10 Business Days after it has
delivered such notice, or such shorter period of time set forth in such notice,
it may, but shall be under no duty to, take or refrain from taking such action
not inconsistent with this Agreement as it shall deem advisable and in the best
interests of the owners of the Certificates of Beneficial Interest.
2.10. Furnishing of Documents. The Owner Trustee shall furnish to the
Co-Trustees and to each owner of a Certificate of Beneficial Interest promptly
upon receipt thereof, duplicates or copies of all reports, notices, requests,
demands, certificates, financial statements and any other instruments furnished
to the Owner Trustee hereunder or under the Related Agreements (other than
documents originated by or otherwise furnished to an owner of a Certificate of
Beneficial Interest).
2.11. Situs of Trust. The Trust will be located and administered in the
State of Delaware. All bank accounts maintained by the Owner Trustee on behalf
of the Trust shall be held in the name of the Trust and located in the State of
Delaware unless otherwise required by the terms of the Purchase Agreement, the
Pooling and Administration Agreement or the Servicing Agreement.
2.12. Title to Trust Property. Until this Agreement terminates pursuant to
Article X hereof, title to all of the Trust Property shall be vested in the
Trust; provided, however, that if the laws of any jurisdiction require that
title to any part of the Trust Property be vested in the trustee of the Trust,
then title to that part of the Trust Property shall be deemed to be vested in
the Owner Trustee or any co-trustee or separate trustee, as the
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case may be, appointed pursuant to Article VII of this Agreement.
ARTICLE III [Reserved]
ARTICLE IV
Representations and Warranties of Depositor
The Depositor hereby represents and warrants that:
4.01. Good Standing. The Depositor is a partnership formed under the
limited partnership laws of the State of Delaware, validly existing and in good
standing under the laws of the State of Delaware and has all partnership powers
and all material governmental licenses, authorization, consents and approvals
required under the laws of the State of Delaware to carry on its business as now
conducted.
4.02. Partnership Power. The execution, delivery and performance by the
Depositor of this Agreement, the Purchase Agreement and the Pooling and
Administration Agreement are within the partnership power of the Depositor, have
been duly authorized by all necessary partnership action on the part of the
Depositor (no action by its shareholders being required) and do not and will not
(i) violate or contravene any judgment, injunction, order or decree binding on
the Depositor, (ii) violate, contravene or constitute a default under any
provision of the Limited Partnership Agreement of the Depositor or of any
material agreement, contract, mortgage or other instrument binding on the
Depositor or (iii) result in the creation or imposition of any Lien attributable
to the Depositor, except as are expressly contemplated hereby.
4.03. Consents and Approvals. No consent, approval, authorization or order
of, or filing with, any court or regulatory, supervisory or governmental agency
or body is required under Delaware law in connection with the execution,
delivery and performance by the Depositor of this Agreement and the Purchase
Agreement or the consummation by the Depositor of the transactions contemplated
hereby or thereby (except as may be required by the Delaware securities laws).
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4.04. Title to Trust Property. Upon the sale, assignment or other transfer
of any of the Trust Property by the Depositor to the Trust under this Agreement
or the Purchase Agreement, the Depositor will have conveyed to the Trust all of
its right, title and interest in the Receivables, free and clear of any Lien
arising by reason of ownership of the Receivables by the Depositor or any action
taken or omitted to be taken by the Depositor.
4.05. Binding Effect. This Agreement and any Related Agreements to which
the Depositor is a party have been duly and validly authorized, executed and
delivered by, and constitute valid and binding agreements of, the Depositor
(assuming that they constitute valid and binding agreements of the other parties
thereto, enforceable against such parties in accordance with their respective
terms) enforceable against the Depositor in accordance with their respective
terms, except that the enforceability thereof may be subject to (A) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (B) general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or law).
4.06. Investment Company. The Trust is not an investment company which is
required to be registered under the Investment Company Act of 1940.
ARTICLE V
Representations and Warranties
of The Chase Manhattan Bank (USA)
The Chase Manhattan Bank (USA) hereby represents and warrants that:
5.01. Good Standing. The Chase Manhattan Bank (USA) is a banking
corporation organized under the laws of the State of Delaware, validly existing
and in good standing under the laws of the State of Delaware and has all
corporate powers and all material governmental licenses, authorization, consents
and approvals required under the laws of the State of Delaware to carry on its
trust business as now conducted.
5.02. Corporate Power. The execution, delivery and performance by The Chase
Manhattan Bank (USA), in its
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individual capacity and in its capacity as Owner Trustee of this Agreement, the
Purchase Agreement and related documents and the issuance of the Certificate of
Beneficial Interest by the Owner Trustee on behalf of the Trust pursuant to this
Agreement are within the corporate power of The Chase Manhattan Bank (USA), have
been duly authorized by all necessary corporate action on the part of The Chase
Manhattan Bank (USA) (no action by its shareholders being required) and do not
and will not (i) violate or contravene any judgment, injunction, order or decree
binding on The Chase Manhattan Bank (USA), (ii) violate, contravene or
constitute a default under any provision of the certificate of incorporation or
by-laws of The Chase Manhattan Bank (USA) or of any material agreement,
contract, mortgage or other instrument binding on The Chase Manhattan Bank (USA)
or (iii) result in the creation or imposition of any Lien attributable to The
Chase Manhattan Bank (USA) on the Trust Property, except as are expressly
contemplated hereby.
5.03. Consents and Approvals. Other than such filing of a Certificate of
Trust as has been made, no other consent, approval, authorization or order of,
or filing with, any court or regulatory, supervisory or governmental agency or
body is required under Delaware law in connection with the execution, delivery
and performance by The Chase Manhattan Bank (USA), in its individual capacity
and in its capacity as Owner Trustee, of this Agreement or the issuance of the
Certificates of Beneficial Interest by the Owner Trustee on behalf of the Trust
pursuant to this Agreement or the consummation by the Owner Trustee of the
transactions contemplated hereby or thereby (except as may be required by the
Delaware securities laws).
5.04. Binding Effect. This Agreement has been duly and validly authorized,
executed and delivered by, and constitutes a valid and binding agreement of, The
Chase Manhattan Bank (USA), (assuming that it constitutes a valid and binding
agreement of the other parties thereto, enforceable against such parties in
accordance with its terms) enforceable against The Chase Manhattan Bank (USA) in
accordance with its terms, except that the enforceability thereof may be subject
to (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and (B)
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or law).
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ARTICLE VI
Certain Covenants of Depositor, Owners of
Certificates of Beneficial Interest and the Trust
6.01. Title to Trust Property. The Certificateholder from time to time is
deemed to acknowledge by its acquisition thereof that the Trust owns the Trust
Property and the Certificateholder is deemed to agree to refrain from taking any
action contrary to such ownership by the Trust.
6.02. Notification of Transfer. Immediately upon the sale or other transfer
of any Trust Property to the Trust pursuant to this Agreement or the Purchase
Agreement, the Depositor will make any appropriate notations on its records to
indicate that such Trust Property has been sold or transferred to the Trust
pursuant to this Agreement or the Purchase Agreement.
6.03. Investment Company. Neither the Depositor nor any other
Certificateholder shall take any action which would cause the Trust to become an
investment company which would be required to register under the Investment
Company Act of 1940.
6.04. Certain Business Conduct.
(a) The Trust shall not, except as provided in this Agreement or any
other Related Agreement (i) make or permit to remain outstanding any loan or
advance by the Trust to any Person (except for certain adjustments to reflect
cash and accrual accounting); (ii) own or acquire any stock or securities of any
Person or guarantee any obligation of any Person; or (iii) commingle its assets
with the assets of the Depositor or the Certificateholder or any other Person.
(b) The Trust shall at all times maintain or cause to be maintained
the following procedures to avoid or minimize any risk of substantive
consolidation of the assets and liabilities of the Trust and the
Certificateholder or the Depositor or any other Person: (i) maintenance of books
of account and records, bank accounts and assets separate from those of any
Person; (ii) filing or causing to be filed tax returns separate from those of
the Certificateholder or the Depositor or any of their Affiliates (except to the
extent required or permitted by applicable law, rule or
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regulation to be included in a consolidated or unitary group, as appropriate);
(iii) except as required or specifically provided in this Agreement, conducting
business with Affiliates of the Owner Trustee, the Certificateholder or the
Depositor (or any Affiliate thereof) on an arm's-length basis; (iv) observance
of trust (or similar organizational) formalities; (v) holding the Trust out to
the public as a legal entity separate and distinct from any of the Owner
Trustee's Affiliates and from the Certificateholder or the Depositor or any
Affiliate thereof; and (vi) paying from its assets all obligations and
indebtedness of any kind incurred by the Trust. The Trust shall act solely in
its own name through the Owner Trustee, any Co-Trustee or other agents in the
conduct of its businesses in accordance with this Agreement except to the extent
required by the laws of any applicable jurisdiction.
(c) The Trust shall conduct its business through the office of the
Owner Trustee or the Co-Trustees and will use stationery and other business
forms under its own name and not that of the Certificateholder, the Depositor or
any Affiliate thereof and will use its best efforts to avoid the appearance of
conducting business on behalf of the Certificateholder, the Depositor or any
Affiliate thereof or that the assets of the Trust are available to pay the
creditors of the Certificateholder, the Depositor or any Affiliate thereof.
(d) Nothing in this Section 6.04 shall restrict the authority of the
Trust to authorize the Servicer to act in the name or on behalf of the Trust
when authorized by any Related Document.
(e) The Trust shall not create, incur, assume or suffer to exist any
indebtedness, whether current or funded, or any other liability other than any
fees and expenses under this Agreement, the Purchase Agreement, the Pooling and
Administration Agreement and any other Related Agreements, except (i) the NAFCO
Note, (ii) additional debt incurred in accordance with the Pooling and
Administration Agreement or (iii) additional debt securities, provided that the
issuance of such debt securities is permitted by the Purchase Agreement or the
Pooling and Servicing Agreement.
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ARTICLE VII
Concerning the Owner Trustee and the Trust
7.01. General Matters Relating to the Owner Trustee.
(a) Subject to the terms of Section 7.03 and Article IX of this
Agreement, all moneys deposited with or received by the Owner Trustee hereunder
shall be held by it in trust as part of the Trust Property until distributed in
accordance with Section 2.04 hereof.
(b) The Owner Trustee shall be under no liability for any action taken
by the Owner Trustee in good faith in reliance upon any paper, order,
instruction, list, demand, request, consent, affidavit, notice, opinion,
direction, endorsement, assignment, resolution, draft or other document, prima
facie property executed, or for the disposition of moneys or Trust Property
pursuant to this Agreement; provided, however, that this provision shall not
protect the Owner Trustee against any liability to which it would otherwise be
subject by reason of bad faith, willful misconduct, or gross negligence in the
performance of its duties.
(c) The Owner Trustee may construe any of the provisions of this
Agreement, insofar as the same may appear ambiguous or inconsistent with any
other provisions hereof, and any such construction by the Owner Trustee in good
faith shall be binding upon the parties hereto and the Certificateholder;
provided that this provision shall not protect the Owner Trustee against any
liability to which it would otherwise be subject by reason of bad faith, willful
misconduct or gross negligence.
(d) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by the Owner Trustee in accordance with
instructions of the Depositor, the Co-Trustees or the Certificateholder pursuant
to Sections 2.09 and 10.04 hereof. The Owner Trustee shall have no duty to
monitor the performance of the Servicer, the Administrator or the Co-Trustees,
nor shall it have any liability with respect to any acts or omissions of the
Servicer, the Administrator or the Co-Trustees.
(e) The Owner Trustee shall not be responsible for the validity or
sufficiency of this
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Agreement or for the due execution hereof by the Depositor or for the form,
character, genuineness, sufficiency, value or validity of any Trust Property or
for or in respect of the validity or sufficiency of the Certificates of
Beneficial Interest (except for the due execution thereof by the Owner Trustee),
and the Owner Trustee shall in no event assume or incur any liability, duty or
obligation to the Depositor, the Co-Trustees or to the Certificateholder, other
than as expressly provided for herein.
(f) The Owner Trustee shall promptly notify the Co-Trustees and the
Certificateholder of any legal action taken by any Person with respect to the
Trust of which it has Actual Knowledge. The Owner Trustee shall not be under any
obligation to appear in, prosecute or defend any action, which in its opinion
may require it to incur any out-of-pocket expense or any liability unless it
shall be furnished with such reasonable security and indemnity against such
expense or liability as it may require, and any out-of-pocket cost of the Owner
Trustee as a result of such actions shall be deductible from and a charge
against the Trust Property. The Owner Trustee may, but shall be under no duty
to, undertake such action as it may deem necessary at any and all times, without
any further action by the Certificateholder, to protect the Trust Property and
the rights and interests of the Certificateholder pursuant to the terms of this
Agreement.
(g) The Owner Trustee, in the exercise or administration of the trusts
and powers hereunder, may, at the expense of the Trust, employ agents,
attorneys, accountants and auditors and enter into agreements with any of them
and the Owner Trustee shall not be liable for the supervision of or the default
or misconduct of any such agents, attorneys, accountants or auditors if such
agents, attorneys, or accountants or auditors shall have been selected by it
with reasonable care.
(h) The Owner Trustee shall not be required to take any action in any
jurisdiction other than in the State of Delaware if the taking of such action
will (i) require the consent or approval or authorization or order of or the
giving of notice to, or the registration with or taking of any action in respect
of, any state or other governmental authority or agency of any jurisdiction
other than the State of Delaware; (ii) result in any fee, tax or other
governmental charge under the laws of any jurisdiction or any political
subdivisions thereof in
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existence on the date hereof other than the State of Delaware becoming payable
by the Owner Trustee; or (iii) subject the Owner Trustee to personal
jurisdiction in any jurisdiction other than the State of Delaware for causes of
action arising from acts unrelated to the consummation of the transactions by
the Owner Trustee.
7.02. Books and Records; Mailings to Owners of Certificates of Beneficial
Interest. The Owner Trustee shall keep at its Corporate Trust Office a record of
the name and address of the Certificateholder, and such records shall be open to
inspection by any such owner at all reasonable times during usual business hours
of the Owner Trustee.
7.03. Compensation and Indemnification of the Owner Trustee.
(a) The Owner Trustee shall be entitled from the Trust (as may be
specified in a fee arrangement entered into between the Owner Trustee and the
Depositor) or from the Depositor, to the extent that the Trust Property is not
sufficient to promptly pay such amounts, to reasonable compensation for the
services of the Owner Trustee (which shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust) and
reimbursement for all reasonable out-of-pocket expenses, disbursements and
advances incurred by the Owner Trustee in accordance with any of the provisions
of this Agreement (including the reasonable compensation, reasonable expenses
and reasonable disbursements of its counsel and of all persons not regularly in
its employ), except any such expense, disbursement or advance as may be incurred
or arise out of the gross negligence or willful misconduct of the Owner Trustee.
The Owner Trustee shall notify the Co-Trustees and the Certificateholder upon
receipt by the Owner Trustee of compensation from the Trust Property pursuant to
the foregoing sentence of the amount of such compensation. Notwithstanding
Section 7.03 of this Agreement and without limiting Section 10.07 hereof, the
Owner Trustee hereby agrees not to cause the filing of a petition in bankruptcy
against the Trust for the non-payment to the Owner Trustee of any amounts
provided by this Agreement until one year and one day after the termination of
this Trust in accordance with Section 10.05 of this Agreement.
(b) The Trust or the Depositor, to the extent that the Trust Property
is not sufficient to promptly
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pay such amounts, agrees to indemnify the Owner Trustee or any of its officers,
directors, employees or agents for, and to hold each of them harmless against,
any and all losses and liabilities, obligations, damages, penalties, taxes
(excluding any taxes payable by The Chase Manhattan Bank (USA) on or measured by
any compensation for services rendered by the Owner Trustee under this
Agreement), claims, actions, suits or out-of-pocket expenses or costs of any
kind and nature whatsoever incurred or arising out of or in connection with the
acceptance or administration of this trust or the transactions contemplated by
the Transaction Documents, including the reasonable costs and out-of-pocket
expenses of defending itself against any claim of liability in the premises,
except to the extent that the same may be incurred or arise out of the gross
negligence or willful misconduct of the Owner Trustee or for the Owner Trustee's
failure to use ordinary care to disburse funds pursuant to Section 2.04 hereof.
The obligations of the Depositor to indemnify the Owner Trustee, and
its right to be compensated and be reimbursed for the reasonable out-of-pocket
expenses, disbursements and advances of the Owner Trustee from the Trust
Property pursuant to Section 7.03(a) and (b) hereof, shall survive the
termination of this Agreement pursuant to Section 9.05 hereof or the resignation
or removal of the Owner Trustee hereunder. Such obligations shall be secured by
a Lien upon the Trust Property senior to that of the Certificates of Beneficial
Interest in the Trust Property.
(c) The Owner Trustee shall not be required to take or refrain from
taking any action under this Agreement (other than giving of notices) unless the
Owner Trustee shall have been indemnified by the Certificateholder, in manner
and form reasonably satisfactory to the Owner Trustee, against any liability,
fee, cost or expense (including attorneys' fees) which may be incurred or
charged in connection therewith, except to the extent the same may be incurred
or arise out of the gross negligence or willful misconduct of the Owner Trustee
or the Owner Trustee's failure to use ordinary care to disburse funds pursuant
to this Agreement. The Owner Trustee shall not be required to take any action if
the Owner Trustee shall reasonably determine, or shall have been advised by
counsel, that such action is likely to result in personal liability, or is
contrary to the terms hereof or of any document contemplated hereby to which the
Owner Trustee is a party or otherwise contrary to law.
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(d) Any amounts paid to the Owner Trustee pursuant to Section 7.01(e)
hereof and subsections (a) and (b) of this Section 7.03 shall not be deemed to
be part of the Trust Property immediately after such payment.
7.04. Resignation, Discharge or Removal of Owner Trustee; Successor.
(a) The Owner Trustee may resign and be discharged of the trust
created by this Agreement by executing an instrument in writing, filing the same
with the Co-Trustees and mailing a copy of a notice of resignation to the
Certificateholder then of record, not less than sixty (60) days before the date
specified in such instrument when, subject to Section 7.04(c) hereof, such
resignation is to take effect. Upon receiving such notice of resignation, the
Co-Trustees shall use their best efforts promptly to appoint a successor Owner
Trustee in the manner and meeting the qualifications hereinafter provided by
written instrument or instruments delivered pursuant to Section 10.04 to such
resigning Owner Trustee and the successor Owner Trustee. Except as provided in
subsection (b) of this Section 7.04, the appointment of any successor Owner
Trustee shall be approved by the Co-Trustees. The Co-Trustees may remove the
Owner Trustee for any reason and appoint a successor Owner Trustee by written
instrument or instruments delivered to the Owner Trustee so removed and the
successor Owner Trustee.
(b) In case at any time the Owner Trustee shall resign and no
successor Owner Trustee shall have been appointed within thirty (30) days after
notice of such resignation has been filed and mailed as required by Section
7.04(a) hereof, the resigning Owner Trustee may forthwith apply to a court of
competent jurisdiction for the appointment of a successor Owner Trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Owner Trustee.
(c) Any successor Owner Trustee appointed hereunder shall promptly
execute and deliver to the Co-Trustees and the retiring Owner Trustee an
instrument accepting such appointment hereunder, and the successor Owner Trustee
without any further act, deed or conveyance shall become vested with all the
rights, powers, duties and obligations of its predecessor hereunder with like
effect as if originally named the Owner Trustee herein and shall be bound by all
the terms and conditions of this Agreement.
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Upon the request of the successor Owner Trustee, the retiring Owner Trustee
shall, upon payment of all amounts due the retiring Owner Trustee, execute and
deliver an instrument transferring to the successor Owner Trustee all the rights
and powers of the retiring Owner Trustee; and the retiring Owner Trustee shall
transfer, deliver and pay over to the successor Owner Trustee all of the Trust
Property at the time held by it, if any, together with all necessary instruments
of transfer and assignment or other documents properly executed necessary to
effect such transfer and such of the records or copies thereof maintained by the
retiring Owner Trustee in the administration hereof as may be requested by the
successor Owner Trustee and shall thereupon be discharged from all duties and
responsibilities under this Agreement. Any resignation or removal of an Owner
Trustee and appointment of a successor Owner Trustee pursuant to this Section
7.04 shall become effective upon such acceptance of appointment by the successor
Owner Trustee. Notice of such appointment of a successor Owner Trustee shall be
furnished to the Applicable Rating Agencies.
(d) Any corporation into which the Owner Trustee may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Owner Trustee shall be a party, shall be the
successor Owner Trustee under this Agreement without the execution, delivery or
filing of any paper, instrument or further act to be done on the part of the
parties hereto, anything herein, or in any agreement relating to such merger or
consolidation, by which the predecessor corporation may seek to retain certain
powers, rights and privileges theretofore obtaining for any period of time
following such merger or consolidation, to the contrary notwithstanding;
provided that such corporation resulting from any such merger or consolidation
shall meet the qualifications set forth in Section 7.05 hereof.
(e) Upon the happening of any of the events described in this Section
7.04 that requires an amendment to the Certificate of Trust under the Business
Trust Statute, the successor Owner Trustee shall cause an amendment to the
Certificate of Trust to be filed with the Secretary of State, in accordance with
the provisions of Section 3810 of the Business Trust Statute, indicating the
change with respect to the Owner Trustee's identity.
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7.05. Qualification of Owner Trustee. The Owner Trustee shall at all times
be a banking corporation organized and doing business under the laws of the
United States, or any state thereof, with a principal place of business in the
State of Delaware and having all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on a trust
business and having at all times an aggregate capital, surplus and undivided
profits of not less than $50,000,000.
7.06. Appointment of Additional Trustees. At any time or times, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Property may at the time be located, the Owner Trustee, by an
instrument in writing, may appoint one or more individuals or corporations to
act as separate trustees of all or any part of the Trust Property to the full
extent that local law makes it necessary for such separate trustees to act
alone.
7.07. Not Acting in Individual Capacity. Except as otherwise expressly
provided herein, in acting hereunder, The Chase Manhattan Bank (USA) acts solely
as Owner Trustee and not in its individual capacity; and, except as so provided,
all persons, having any claim against The Chase Manhattan Bank (USA) by reason
of the transactions contemplated hereby shall look only to the Trust Property
for payment or satisfaction thereof; provided, however, that the provisions of
Article VII shall not protect The Chase Manhattan Bank (USA) (in either
capacity) against any liability to which it would otherwise be subject by reason
of (i) willful misconduct or gross negligence in the performance of its duties,
(ii) the inaccuracy of any representation or warranty contained in Article V
hereof expressly made by The Chase Manhattan Bank (USA), (iii) liabilities
arising from the failure by The Chase Manhattan Bank (USA) to perform
obligations expressly undertaken by it in the last sentence of Section 2.08(b)
or (iv) taxes, fees or other charges on, based on or measured by any fees,
commissions or compensation received by the Owner Trustee in connection with any
of the transactions contemplated by this Agreement or the Related Agreements.
7.08. Liability of the Certificateholder. Notwithstanding Section 3803 of
the Business Trust Statute, the Certificateholders agree to be liable for all
fees, expenses, taxes, indemnity payments and other liabilities of the Trust
(other than liabilities which by their terms are
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nonrecourse), in accordance with the terms of this Agreement, including (except
as otherwise provided herein) those incurred by the Owner Trustee in the
administration of the Trust hereunder, to the extent such fees, expenses, taxes,
indemnity payments and other liabilities of the Trust or the Owner Trustee, as
the case may be, including the reasonable fees and expenses of legal counsel
with respect to the Trust, are not paid out of the Trust Property to the same
extent, but only to the same extent as if the Certificateholder were a general
partner and the Trust a partnership under Delaware's Revised Uniform Limited
Partnership Act; provided, however, that the Certificateholders shall be liable
only for fees, expenses, taxes, indemnity payments and other liabilities of the
Trust arising after such Certificateholder becomes a holder of Certificates of
Beneficial Interest.
The Certificateholder shall, within five Business Days of receipt of a
statement from the Owner Trustee to the effect that the Trust Property is
insufficient for the payment of such fees, expenses, taxes, indemnity payments
and other liabilities of the Trust for which such holder is liable, pay such
fees, expenses, taxes, indemnity payments and other liabilities.
7.09. Acting in its Own Name. The Owner Trustee shall conduct its business
as Owner Trustee of the Trust and will use stationery and other business forms
under such name and not that of the Certificateholder, the Depositor or any
Affiliate thereof and will use its best efforts to avoid the appearance of
conducting business on behalf of the Certificateholder, the Depositor or any
Affiliate thereof or that the assets of the Trust are available to pay the
creditors of the Certificateholder, the Depositor or any Affiliate thereof.
7.10. Decisions by Owner Trustee. Subject to the provisions of Section
2.09(a) and (b), the Owner Trustee shall make all decisions relating to the
actions of the Trust independent of the Certificateholders.
ARTICLE VIII
Co-Trustees
8.01. Appointment of Co-Trustees. Pursuant to Section 3806 of the Business
Trust Statute, the following
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persons are hereby appointed to manage the business and affairs of the Trust as
trustees (the "Co-Trustees") for the benefit of the owners of the Certificates
of Beneficial Interest as herein set forth:
Name Mailing Address
---- ---------------
Gary Shapiro National Financial Corporation
621 NW 53rd Street, Suite 320
Boca Raton, Florida 33487
Edgar Otto National Financial Corporation
621 NW 53rd Street, Suite 320
Boca Raton, Florida 33487
The Co-Trustees shall have all such rights, duties and obligations with
respect to the management of the business and affairs of the Trust and the Trust
Property as are permitted under applicable law and not otherwise expressly
vested in the Owner Trustee in this Agreement, including, without limitation,
the right to direct the Owner Trustee as provided in Section 2.09 hereof,
subject to the limitations on the activities of the Trust imposed by Section
2.07 hereof.
8.02. Qualification; Number; Term.
(a) Each Co-Trustee shall be at least 18 years of age. A Co-Trustee
need not be an owner of a Certificate of Beneficial Interest, a citizen of the
United States or a resident of the State of Delaware. The number of Co-Trustees
shall at all times be not less than three, or such larger number as may be fixed
from time to time by action of the Certificateholder or the Co-Trustees.
Notwithstanding anything to the contrary contained herein, at all times at least
one Co-Trustee shall be an Independent Co-Trustee. An "Independent Co-Trustee"
shall be an individual who is not at such time, and shall not have been at any
time during the preceding three years (i) a director, officer, employee or
affiliate of the Depositor, or any of its subsidiaries or Affiliates, or (ii)
the direct, indirect or beneficial owner at the time of such individual's
appointment as an Independent Co-Trustee or at any time thereafter while serving
as an Independent Co-Trustee, of
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the Depositor or (iii) a relative of any person described in (i) or (ii) above.
(b) Co-Trustees may be appointed or removed at the direction of the
Certificateholder evidenced by written notice to the Co-Trustees and the Owner
Trustee specifying the effective date of any such appointment or removal and the
term of service of such Co-Trustee, if finite. Co-Trustees shall serve in such
capacity until the end of the term specified in such notice or until their
earlier resignation, death or removal.
8.03. Places of Meetings, Quorum and Manner of Voting.
(a) Meetings of the Co-Trustees may be held at any place within or
without the State of Delaware, as may from time to time be fixed by the
Co-Trustees, and may be convened by telephonic or other means as the Co-Trustees
may deem appropriate.
(b) Except as otherwise provided by law, a majority of the Co-Trustees
shall constitute a quorum. Except as set forth herein, the vote of a majority of
the Co-Trustees present at a meeting at which a quorum is present shall be the
act of the Co-Trustees. Any action required or permitted to be taken at any
meeting of the Co-Trustees may be taken without a meeting if all the Co-Trustees
consent thereto in writing.
8.04. Indemnification; Remuneration.
(a) A Co-Trustee shall not be personally liable either to the Trust or
any Certificateholder for monetary damages for breach of fiduciary duty as a
Co-Trustee, except (i) for any breach of the Co-Trustee's duty of loyalty to the
Trust or the Certificateholder, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of the law or (iii)
for any transaction from which the Co-Trustee shall have derived an improper
personal benefit.
(b) The Depositor shall indemnify any person who was or is a party or
is threatened to be made a party to, or testifies in, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative in nature, by reason of the fact that such person is or was a
Co-Trustee, or is or was
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serving at the request of the Certificateholder as a Co-Trustee, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding to the full extent permitted by law.
(c) Co-Trustees may be paid their expenses, if any, of attendance at
each meeting of the Co-Trustees and may be paid a fixed sum for attendance at
each meeting of the Co-Trustees or a stated salary as Co-Trustee.
8.05. Not Acting in Individual Capacity. Except as otherwise expressly
provided herein, in acting hereunder, each Co-Trustee acts solely as Co-Trustee
and not in its individual capacity; and, except as so provided, all persons,
having any claim against any Co-Trustee by reason of the transactions
contemplated hereby shall look only to the Trust Property for payment or
satisfaction thereof; provided, however, that this provision shall not protect
any Co-Trustee (in either capacity) against any liability to which it would
otherwise be subject by reason of (i) willful misconduct or gross negligence in
the performance of its duties, (ii) taxes, fees or other charges on, based on or
measured by any fees, commissions or compensation received by any Co-Trustee in
connection with any of the transactions contemplated by this Agreement or the
Related Agreements.
8.06. Separate Class. The Co-Trustees shall constitute a class of trustees
separate from the Owner Trustee pursuant to Section 3806(b) of the Delaware
Business Trust Statute, and shall be entitled to vote and otherwise exercise the
rights and powers granted herein without the consent of or consultation with the
Owner Trustee.
ARTICLE IX
Accounts of the Trust
9.01. Accounts of the Trust. Subject to the provisions of Section 2.09(a)
and (b) hereof, at any time and from time to time the Co-Trustees may direct the
Owner Trustee to establish one or more accounts of the Trust, in the name of the
Owner Trustee as trustee of the Trust, for the operations of the Trust. Any
funds in any account of the Trust that the Co-Trustees believe are not needed
for
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purposes of such account shall be applied in accordance with Section 2.04.
9.02. Investment of Amounts on Deposit in Accounts of the Trust. Subject to
the provisions of Section 2.09(a) and (b) hereof, the amounts on deposit in any
account of this Trust shall be invested as directed in writing by the
Co-Trustees. All investments of amounts held in any account shall be made in the
name of the Trust. In no event shall the Owner Trustee be liable for the
selection of investments or for any losses resulting from such investments. All
investment earnings on amounts in any account of this Trust shall be deposited
therein and shall be subject to the provisions of this Article IX.
ARTICLE X
Miscellaneous
10.01. Benefit of Agreement. All the representations, warranties, covenants
and agreements contained in this Agreement by or on behalf of the Depositor, the
Co-Trustees, the owners of the Certificates of Beneficial Interest or the Owner
Trustee shall bind, and inure to the benefit of, their respective successors and
assigns and the owners of the Certificates of Beneficial Interest from time to
time, whether so expressed or not.
10.02. Severability. If any one or more of the covenants, agreements,
provisions or terms of this Agreement shall be held invalid for any reason
whatsoever, 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 or of the Certificates of Beneficial Interest or
the rights of the owners thereof or of the Holders of the Notes.
10.03. Amendments and Waivers. This Agreement may not be amended, and
compliance with any provision hereof may not be waived by the Owner Trustee, the
Co-Trustees or the Certificateholder, unless such amendment or waiver is
consented to by the Owner Trustee, the Co-Trustees and the Certificateholder.
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10.04. Notices. Any notice, demand, consent, direction or instruction to be
given to the Owner Trustee under this Agreement shall be in writing and shall be
duly given if mailed or delivered to the Corporate Trust Office at: The Chase
Manhattan Bank (USA), Owner Trustee for NAFCO Funding Trust, 802 Delaware
Avenue, 13th Floor, Wilmington, Delaware 19801, Attention: Corporate Trust
Administration, with a copy to The Chase Manhattan Bank (USA), c/o The Chase
Manhattan Bank, N.A., 4 Chase MetroTech Center, Brooklyn, New York 11245,
Attention: Corporate Trust Administration or such other address as shall be
specified by the Owner Trustee in a notice to the Certificateholder given in
accordance with this Section.
Any notice, demand, direction or instruction to be given to the Depositor
under this Agreement shall be in writing and shall be duly given if mailed or
delivered to the Depositor at One Park Place, Suite 320, 621 NW 53rd Street,
Boca Raton, Florida 33487, Attention: Roy E. Tipton, or at such other address as
shall be specified by the Depositor to the other parties to the Agreement in
writing.
Any notice or other communication to be given to Certificateholder (other
than the Depositor) under this Agreement shall be in writing and shall be duly
given if mailed or delivered to each such Certificateholder outstanding at the
time such notice or other communication is given at the address for such
Certificateholder contained in the records maintained by the Owner Trustee
pursuant to Section 7.02 hereof. If mailed, any notice or other communication
shall be effective 72 hours after being deposited in the United States mail,
first class postage prepaid.
10.05. Termination of This Agreement; No Power to Revoke or Withdraw Trust
Property.
(a) Subject to the provisions of Section 2.09(a) hereof, the Trust may
be dissolved by the holders of all of the Certificates evidencing 100% of the
beneficial interest in the Trust as shall then be entitled to vote with the
consent of the Independent Co-Trustee. After payment of all amounts then due and
payable to The Chase Manhattan Bank (USA) pursuant to Section 7.03 hereof, all
right, title and interest in the Trust Property still held by the Trust at the
time of such dissolution shall be transferred, assigned
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and paid over to the Certificateholder in accordance with Section 2.04.
(b) Except as expressly provided in Section 10.05(a) hereof, neither
the Depositor nor any other Certificateholder shall be entitled to revoke or
terminate the Trust established hereunder.
(c) Upon the dissolution and winding up of the Trust, the Owner
Trustee shall cause the Certificate of Trust of the Trust to be canceled by
filing a certificate of cancellation with the Secretary of State of Delaware in
accordance with the provisions of Section 3810 of the Business Trust Statute and
the Trust shall terminate at such time.
10.06. Nature of Interest in Trust Property. Neither the Depositor nor any
other Certificateholder shall have legal title to any part of the Trust Property
and shall only be entitled to receive distributions with respect to their
undivided beneficial interest in the Trust Property pursuant to Section 2.04
hereof as expressly provided herein. No transfer, by operation of law or
otherwise, of any right, title and interest of the Depositor or of any other
Certificateholder, held by the Depositor or such other holder, shall operate to
terminate this Agreement or the trusts hereunder or entitle any successor
transferee to an accounting or to the transfer to it of legal title to any part
of the Trust Property.
10.07. No Filing. Without the express written consent of the
Certificateholder, the Depositor, the Owner Trustee and the Independent
Co-Trustee, the Trust shall not institute proceedings to be adjudicated bankrupt
or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition seeking or consent to reorganization
or relief under any applicable federal or state law relating to bankruptcy or
insolvency, or consent to the appointment of a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of the Trust or a
substantial part of its property, or make any assignment for the benefit of
creditors, or admit in writing its inability to pay its debts generally as they
become due, or take action in furtherance of any such action.
10.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF
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THE STATE OF DELAWARE (WITHOUT REGARD TO THE PROVISIONS AND CONFLICTS OF LAW),
AND ALL LAWS OR RULES OF CONSTRUCTION OF SUCH STATE SHALL GOVERN THE RIGHTS OF
THE PARTIES TO THIS AGREEMENT AND THE INTERPRETATION OF THE PROVISIONS OF THIS
AGREEMENT.
10.09. Counterparts. This Agreement may be executed and delivered in any
number of counterparts, and such counterparts taken together shall constitute
one and the same instrument.
10.10. Limitations on Rights of Others. Nothing in this Agreement, whether
express or implied, shall be construed to give to any person other than the
Owner Trustee, the Co-Trustees and the Certificateholder any legal or equitable
right, remedy or claim in the Trust Property or under or, except as provided in
Section 7.08(a) hereof with respect to creditors of the Trust, in respect of
this Agreement or any covenants, conditions or provisions contained herein.
10.11. References to Sections. References to sections used herein shall
refer to sections of this Agreement unless otherwise specified herein.
10.12. Administrator. The Administrator is authorized to execute on behalf
of the Trust all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Trust to prepare, file or deliver
pursuant to the Transaction Documents. Upon written request, the Owner Trustee
shall execute and deliver to the Administrator a power of attorney appointing
the Administrator its agent and attorney-in-fact to execute all such documents,
reports, filings, instruments, certificates and opinions.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
NATIONAL AUTO FINANCE COMPANY L.P.
By: NATIONAL AUTO FINANCE CORPORATION,
as General Partner
By: _________________________
Name:
Title:
THE CHASE MANHATTAN BANK (USA),
as Owner Trustee
By: _________________________
Name:
Title:
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CO-TRUSTEE
By: _________________________
Name: Gary Shapiro
CO-TRUSTEE
By: _________________________
Name: Edgar Otto
CO-TRUSTEE
By: _________________________
Name: Andrew Stidd
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Acknowledged and Agreed by:
NATIONAL AUTO FINANCE CORPORATION
By:______________________________
Name:
Title:
BANKERS TRUST (DELAWARE)
_________________________________
Name:
Title:
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State of ________________
County of _______________
Before me, a notary public, on this day personally appeared
______________________________, known to me to be the person whose name is
subscribed to the foregoing document and, being first duly sworn, declared that
the statements contained are true and correct.
Given under my hand and seal of office the ____ day of December, 1994.
SEAL
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SERVICING AGREEMENT
This Agreement is made the 25th day of July, 1994 by and between World Omni
Financial Corp. ("WOFC") and National Auto Finance corporation (the "Company").
RECITALS
The Company is engaged in the business of providing financing for
purchasers and lessees of motor vehicles by either purchasing Obligations (as
hereinafter defined) arising from the retail sale or lease of motor vehicles
from various motor vehicle dealers or by providing financing for such retail
sale or lease directly to the purchaser or lessee (collectively, the
"Obligations"). The Company intends to either hold these Obligations for its own
account or fund the purchase of these Obligations through third party investors.
Unless WOFC and the Company agree in writing to the contrary, in the event third
party investors purchase or obtain security interests in the Obligations, WOFC's
responsibilities hereunder shall be to the Company to subservice the
Obligations.
WOFC is engaged in the business of, among other things, servicing loans,
leases and accounts and the Company desires to retain WOFC to provide certain
accounting and collection services and WOFC agrees to provide such services in
accordance with the terms of this Agreement.
<PAGE>
ARTICLE I
Definitions
1. Account or Accounts. A retail installment contract, closed end lease
agreement, security agreement, conditional sales contract, chattel paper,
chattel mortgage and related promissory note, or any other obligation,
evidencing a Borrower's obligation arising from the bona fide sale or lease of a
motor vehicle by a dealer to a Borrower, including but not limited to all Lease
Accounts and Retail Accounts.
2. Borrower. The purchaser or lessee of a motor vehicle through an Account.
3. Business Day. A day other than a Saturday, Sunday, or a day on which the
executive offices of WOFC are closed pursuant to its published annual schedule
which shall be provided to Company pursuant to Company's request.
4. Collateral. A motor vehicle or other personal property which is leased
pursuant to an Account or which is pledged to, or in which a security interest
is granted to secure an Account.
5. Collection Assignment. An Account which is assigned to the collection
department of WOFC in order to attempt to contact the Borrower regarding the
delinquency or insurance requirements of the Account.
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6. Company Account. A bank account established by Company into which are
deposited any amounts remaining in the Servicing Account after deduction of the
Servicing Fee and any other amounts owed to WOFC pursuant to this Agreement.
7. Defaulted Account. An Account which is delinquent in the amount of at
least three regular installment payments or which is in default of the
contractual requirement to provide insurance to cover the Collateral and the
Company has requested that the Account be returned.
8. Delinquent Account Review. A report in either electronic or hard copy
form, at the option of WOFC, in the form attached hereto as Exhibit "A", which
shall describe Accounts which are delinquent for a period of time agreed upon in
writing by WOFC and Company.
9. Lease Account(s). A closed end lease agreement, or any other obligation,
evidencing a Borrower's obligation arising from the bona fide lease of a motor
vehicle by a dealer to a Borrower.
10. Loan File. With respect to any Account, the file delivered to WOFC by
the Company, which file shall contain the data entry worksheet in a form
substantially similar to Exhibit "B" attached hereto, the Borrower
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application, the retail instalment sales contract, closed end lease agreement,
promissory note and/or security agreement which are related to the Account, and
such other information as the Company shall supply.
11. Retail Account(s). A retail installment contract, security agreement,
conditional sales contract, chattel paper, chattel mortgage and related
promissory note, or any other obligation, evidencing a Borrower's obligation
arising from the bona fide sale of a motor vehicle by a dealer to a Borrower.
12. Returned Account. An Account which has been returned to the Company by
WOFC pursuant to the provisions of Article II of this Agreement.
13. Servicing Account. A separate interest bearing bank account, if
available, established by WOFC into which are deposited the amount of payments,
including late charges and extension fees, if any, made on the Accounts. Such
interest, if any, shall be for the benefit of the Company.
14. Servicing Fee. A monthly fee payable to WOFC in accordance with Article
V of this Agreement.
15. Title or Certificate of Title. The actual motor vehicle title in
question or the application therefor pending issuance of the actual title;
alternatively, in those
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certain states whose law requires or contemplates that the original of the
actual motor vehicle title be possessed by the Borrower, then, in lieu of the
actual title, "Title" or "Certificate of Title" shall mean such duplicate
titles, certificates or other documents as are permitted, required and/or
contemplated to be possessed by the secured party under such state's laws and/or
procedures or applications thereof or pending issuance of the appropriate
document.
ARTICLE II
General Obligations of WOFC
1. Standard of Care. WOFC agrees to manage, service and make collections on
the Accounts for and on behalf of the Company to the extent provided in the
Agreement and to otherwise perform and carry out the duties, responsibilities
and obligations that are to be performed and carried out by WOFC under this
Agreement. WOFC shall service the Accounts in a manner consistent with the
servicing standards and procedures generally accepted in the financial services
industry for similar accounts and as otherwise expressly provided by this
Agreement.
2. Servicing Duties. WOFC shall provide the following services with respect
to the Accounts.
a. Upon the receipt of a completed Loan File from the Company, WOFC
shall cause to be maintained for each
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Account automated information including, but not limited to, (i) name and
address of the Borrower, (ii) principal balance plus earned interest or the
balance of monthly payments due, as well as any other accrued charges of the
Account, (iii) the loan number, (iv) a description of the Collateral, (v) the
monthly payment, (vi) the residual value of the motor vehicle for Loan File
involving closed-end lease agreements, (vii) the current payment status of the
Account, (viii) each Account with respect to which WOFC has not received a
Certificate of Title for the Collateral Financed thereby in the name of or with
a first lien in favor of Company, and (ix) proof of insurance, and (x) such
other information concerning such Accounts as Company may reasonably request and
which is available to WOFC at no additional cost or expense.
b. After the receipt of the Loan File, WOFC shall mail to each
Borrower a monthly billing statement in the forms attached to this Agreement as
Exhibit C and Exhibit D for any Account involving the sale or lease of a motor
vehicle to the Borrower.
c. WOFC shall maintain records for each Account, which records shall
include the original principal balance, the amount of each payment applied to
the Account, the date of each payment the interest or lease rate, and the
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current outstanding principal balance. WOFC's obligation to perform its
servicing duties and maintain accurate records hereunder is limited to the
accuracy and availability of the information WOFC receives from time to time
from the Company.
d. WOFC shall provide to the Company on or before the 10th day of each
month detailed reports by investor number including, but not limited to, the
legal status of each Account, the accounting status of each Account, and the
delinquency status of each Account. WOFC shall provide to the Company on or
before the 10th day of each month summary level reports of the above information
by investor and total Company portfolios. Said reports shall be presumed correct
and accurate unless the Company delivers to WOFC by registered or certified
mail, written objection thereto specifying the error contained in the reports.
In such event, the Company's sole and exclusive remedy and WOFC's only liability
shall be to make appropriate adjustments in the report to make it effective as
of the date the report is rerun, to the extent possible. For those Accounts
which are transferred to WOFC, WOFC shall provide the above reports to Company
beginning on the 10th day of the month following the month such Accounts are
completely converted and entered into WOFC's computer system. The Company agree
and understands that until the conversion and
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<PAGE>
transfer of all Accounts to WOFC is complete, which conversion period shall not
exceed a reasonable number of days mutually agreed to by WOFC and Company, WOFC
will make best efforts to provide the above referenced detailed reports.
However, WOFC does not guarantee the accuracy of such reports until the
conversion of all such Accounts is complete. Company agrees to pay WOFC all
costs and expenses, including but not limited to, additional fees for accounting
and technical support, incurred by WOFC for the conversion of such Accounts.
e. WOFC shall deposit the total of all amounts received in connection
with the Accounts into the Servicing Account within two Business Days of
receipt. WOFC shall use reasonable efforts to deposit such amounts within one
Business Day. After deducting the monthly Servicing Fee and any other amounts
owed by Company to WOFC pursuant to this Agreement from the Servicing Account,
WOFC shall deposit any remaining amounts in the Servicing Account to the Company
Account no later than the 10th day of each month.
f. WOFC shall report to the appropriate credit bureaus the historical
payment and default activity on each Account.
3. Collection of Delinquent Accounts. WOFC shall use its standard
collection practices for similar accounts to
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<PAGE>
collect past due payments, including but not limited to, automated collections
and live collector interfaces as necessary. WOFC may in its sole discretion
waive late charges, arrange deferred payment plans, grant extensions, or make
other arrangements for payment of past due accounts. WOFC will attempt to have
telephone communication with the Borrower once the Account is 5 days delinquent,
or such other longer period as Company may instruct WOFC in writing. WOFC shall
make available to the Company, on a weekly basis a Delinquent Account Review on
all defaulted Accounts and Accounts which in WOFC's good faith judgment, are at
high risk of becoming defaulted Accounts.
4. Returned Accounts.
a. By the 15th Business Day of each month, or within three business
days of comply's request, WOFC will send to the Company the Loan File for each
Account:
i. for which WOFC has determined, in its good faith judgment,
that all funds that are recoverable (including recovery from liquidation of the
Collateral) have been collected without instituting suit and/or obtaining legal
counsel; or
ii. for which insurance proceeds representing the payment of a
claim for the total destruction of the Collateral have been applied; or
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<PAGE>
iii. which is in Default and for which WOFC is unable to locate
the Collateral;
b. WOFC may also return to the Company at any time an Account which
WOFC believes, in its good faith judgment, the collection of which may subject
WOFC or the Company to liability.
c. Except for Accounts which become Returned Accounts pursuant to this
Article II, Section Four, no other Account shall be returned to the Company
prior to its payment in full or its classification as a Returned Account during
the term of this Agreement without the mutual consent of the Company and WOFC.
5. Repossession of Collateral. Upon the Company's request, WOFC shall be
responsible for repossessing and disposing of collateral at any time an Account
is a Defaulted Account. WOFC may engage subcontractors to provide services for
such repossession and disposition at Collateral. The Company agrees to pay all
reasonable expenses related to the repossession, including but not limited to, a
fee of $300.00 per repossession, and agrees that WOPC may deduct such expenses
from the Servicing Account. At Company's option, upon providing 30 days written
notice to WOFC, Company may elect to repossess the Collateral of any Account, in
which case, the $300 fee per repossession shall not apply.
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<PAGE>
6. Insurance. WOFC shall monitor each Account for insurance coverage. The
expiration dates of insurance policies shall be tracked and reminder notices
sent to the Borrowers whose insurance policies have expired. Default letters
shall be sent to Borrowers who fail to provide insurance coverage. WOFC shall
notify the Company on a monthly basis of Accounts where the Borrower fails to
provide the required insurance. Under no circumstances shall WOFC have the
responsibility to keep in force a blanket policy which provides insurance
coverage.
7. Titles. WOFC will establish a procedure to determine whether Titles are
received for each Account. WOFC shall advise the Company of any Account for
which a Title is not received within 60 days of WOFC's receipt of the Loan File.
WOFC shall diligently attempt to obtain these Titles. WOFC shall have no
obligation to determine whether Titles are received in those states which permit
the Borrower, rather than the lienholder, to have possession of the Title.
However, WOFC is not ultimately responsible for obtaining the Title or ensuring
that the information on the Title is accurate.
8. Reporting Requirements. WOFC will provide to the Company such monthly
reports and information as Company may reasonably request and that WOFC may
reasonably provide.
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At the request of the Company WOFC will provide a copy of any report which WOFC
receives from any outside service vendor for which WOFC is not required to pay a
fee.
9. Insurance Claims. WOFC shall cooperate with the Company in filing all
insurance claims pursuant to blanket casualty insurance and gap indemnity
insurance provided by the Company applicable to the Accounts or the Collateral,
regardless of investor status. The Company shall provide all forms and
information not included in the respective Loan File required to file each such
claim. Except for filing the claim, WOFC shall have no liability in the event a
claim is denied or not paid in full.
10. Bankruptcies. If WOFC receives a notice that a Borrower on an Account
has filed for relief under the United States Bankruptcy Code, WOFC shall file a
proof of claim and notify Company of the bankruptcy filing. In the event that
activities outside the scope of routine bankruptcy filings and follow-up are
necessary, the Company may, at its option, instruct WOFC to hire the services of
a law firm to represent the Company in the Borrower's bankruptcy at the expense
of Company. If WOFC must retain the services of an attorney to file a proof of
claim, Company agrees to pay all reasonable attorney fees and costs, including
all filing fees, relating to the filing of such proof of claim.
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However, if Company instructs WOFC to retain the services of a specific law
firm, Company agrees to pay all attorney fees and costs, including all filing
fees, relating to the filing of such proof of claim. The Company agrees that
WOFC may deduct any reasonable or all attorney fees and/or costs, as applicable,
from the Servicing Account.
11. No Other Obligations. WOFC shall not be liable for performing any other
service other than those set forth in this Agreement. Other services which are
performed by WOFC at the request of the Company shall not be included in the
Servicing Fee and the expense of such additional services shall be paid
separately to WOFC by the Company.
ARTICLE III
General Obligations of the Company
The Company hereby agrees to undertake the following obligations.
1. Loan Files. The Company shall provide to WOFC the Loan Files when
tendering an Account for servicing.
2. Payment of Servicing Fees and Compensation. WOFC shall deduct monthly by
the tenth (10th) day of each month the Servicing Fees as well as any other
expenses or charges due WOFC pursuant to this Agreement from the amounts held in
the Servicing Account. Any other expenses or charges, other than Servicing Fees
and other expenses or
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<PAGE>
charges due WOFC pursuant to this Agreement, must be pre-approved in writing by
the Company.
3. Goodwill. The Company hereby acknowledges that substantial goodwill
exists with respect to the trade names "WOFC", "World Omni Financial Corp.", or
"World Omni" in the United States and that WOFC's reputation in the financial
services business is of substantial importance to the operations of WOFC.
Accordingly, the Company agrees to use its best efforts to conduct its
activities under this Agreement in a manner that will not detract from WOFC's
goodwill and standing and will not otherwise damage the reputation of WOFC. WOFC
hereby acknowledges that substantial goodwill exists with respect to the trade
names National Auto Finance corporation, and NAFCO, and that the Company's
business reputation is of substantial importance to the operations of the
Company. Accordingly, WOFC agrees to use its best efforts to conduct its
activities under this Agreement in a manner that shall not detract from the
Company's goodwill and standing and shall not otherwise damage the reputation of
the Company.
4. Marketing and Selling Interests in the Accounts. The Company
acknowledges and agrees that it is not an agent for WOFC and is not authorized
to make representations on behalf of WOFC and that WOFC shall have no
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liability for any actions or omissions made by the Company in its marketing and
selling of interests in the Accounts or otherwise. The Company further agree
that in its obtaining leases, loans or in its marketing and selling of interests
in or related to the Accounts it shall: (i) not make any misrepresentations,
(ii) not make any representations on behalf of WOFC, and (iii) comply with all
state and federal investment offering and other applicable laws.
ARTICLE IV
Licensing Fees for Computer Software
1. WOFC shall grant Company a license to utilize its "ACE" and "Contract
Entry" computer software systems for a fee described in paragraph 2 below so
long as this Agreement remains effective. WOFC shall have the right to
immediately cancel any such license, and Company agrees to surrender such
license and return any and all software, manuals, documents, etc. relating to
ACE and Contract Entry in its possession to WOFC upon termination of this
Agreement. WOFC also agrees to provide training to Company on these systems for
a fee of $75.00 per hour. Company shall be responsible for all computer hardware
expenses, including, but not limited to all installation charges and telephone
line charges.
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2. Company agrees to pay WOFC the following fees for each credit
application submitted by Company to ACE:
Number of Credit Applications Per Month Cost Per Application
- --------------------------------------- --------------------
a) 1 through 1500 $1.90
b) 1501 - 4999 1.80
c) over 5000 1.75
Company agrees to obtain its own subscriber number from the credit bureaus, and
to pay any and all fees charged by the credit bureaus, as well as all postage
fees incurred in the mailing of the form letters generated by the ACE system.
3. If required by the below named vendor, Company agrees to obtain licenses
far the following software systems which are utilized by ACE and Contract Entry:
(a) Bureaulink;
(b) RL Polk verifications for vehicle identification numbers;
(c) Vertex - verification of tax information.
4. Company agrees that the above fees may be deducted monthly from the
Servicing Account.
5. This Article IV may be separately terminated by the Company upon thirty
(30) days prior written notice to WOFC. In the event the Company terminates this
Article IV, WOFC shall assist the Company with any computer system conversion.
Company agrees to pay WOFC all of WOFC's
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reasonable costs associated with such assistance including, but not limited to,
reasonable hourly rates of all WOFC personnel and all out of pocket expenses
incurred by WOFC.
ARTICLE V
Servicing Compensation
1. WOFC shall receive as compensation for servicing the Retail Accounts a
Servicing Fee each month equal to $12.65 per Retail Account being serviced by
WOFC during that month.
2. In the event that the number of Accounts requiring collection Assignment
for any month exceed 30% of the total number of Retail Accounts being serviced
as of the first of that month, WOFC shall be entitled to additional compensation
of $6.00 for each Retail Account requiring Collection Assignment which exceeds
the 30% floor for that month.
3. WOFC shall receive as compensation for servicing the Lease Accounts a
Servicing Fee each month equal to $20.65 per Lease Account being serviced by
WOFC during that month.
4. In the event that the number of Accounts requiring collection activity
for any month exceed 30% of the total number of Lease Accounts being serviced as
of the first of that month, WOFC shall be entitled to additional
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compensation of $6.00 for each Lease Account requiring collection activity which
exceeds the 30% floor for that month.
5. WOFC, or an affiliate of WOFC, shall receive as additional compensation
for repossessing and disposing of collateral all reasonable expenses related to
the repossession, including but not limited to, a fee of $300.00 per
repossession.
6. Upon the mutual agreement of Company and WOFC, including is but not
limited to, mutual agreement between Company and WOFC regarding the amount of
additional compensation which Company will pay to WOFC for legal and accounting
services, WOFC agrees to provide appropriate Collateral Schedules to Company, or
to a Lender designated by Company, and to provide legal and accounting review as
to WOFC performing services as a Master Servicer, in the event that Company
desires to securitize any or all of the Accounts.
7. WOFC is granted the right of set off against any funds of the Company
held in WOFC's possession or control to pay amounts owed to WOFC under any
section of this Agreement.
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ARTICLE VI
Representations and Warranties
1. Representations and Warranties of WOFC. WOFC covenants, represents and
warrants to Company as follows:
a. WOFC is a corporation duly organized, validly existing and in good
standing under the laws of the state of Florida.
b. WOFC has the corporate power to enter into this Agreement and to
perform its obligations under this Agreement, and the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action of WOFC, and constitute
the legal, valid and enforceable actions of WOFC.
c. WOFC holds all material licenses, certificates, franchises, and
permits from all governmental authorities necessary for the conduct of its
business and has received no notice of proceedings relating to the revocation of
any such license, certificate or permit, which singly or in the aggregate, might
affect the Accounts or this transaction or might materially affect the conduct
of the business, results of operations, net worth or condition (financial or
otherwise) of Company.
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d. There are no actions, suits or proceedings pending or, to the
knowledge of WOFC, threatened against WOFC or any of its properties or assets,
at law or in equity before or by any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over WOFC, which
might have a material adverse effect on the Accounts or the business or property
of WOFC or which in any way would prevent, interfere with or materially and
adversely affect the ability of WOFC to perform its duties and obligations under
this Agreement.
e. WOFC will maintain all policies of insurance in such amounts and
against such risks as is necessary and prudent for the conduct of its business,
including a blanket crime insurance policy in an amount not less than ten
million dollars. WOFC shall deliver to Company a certificate evidencing such
coverage. Such certificate shall provide that WOFC or its broker shall provide
Company thirty (30) days advance written notice of any material change to or
cancellation of such coverage. Furthermore, WOFC agrees to assign to Company any
monies it collects under such policies which are paid to WOFC as a result of any
WOFC employee misconduct regarding Company's Accounts.
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2. Representations and Warranties of Company. Company covenants, represents
and warrants to WOFC as follows:
a. Company is a corporation duly organized under the laws of the State
of Delaware.
b. Company has the corporate power to enter into this Agreement and to
perform its obligations under this Agreement and the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action of Company, and
constitute the legal, valid and enforceable actions of Company.
c. Company holds all material licenses, certificates, franchises, and
permits from all governmental authorities necessary for the conduct of its
business and has received no notice of proceedings relating to the revocation of
any such license, certificate or permit, which singly or in the aggregate, might
affect the Accounts or this transaction or might materially affect the conduct
of the business, results of operations, net worth or condition (financial or
otherwise) of Company.
d. There are no actions, suits or proceedings pending or threatened
against the Company or, to the knowledge of the Company, any of its properties
or assets, at
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law or in equity before or by any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over the Company,
which might have a material adverse effect on the Accounts or the business or
property of the Company or which in any way would prevent, interfere with or
materially and adversely affect the ability of the Company to perform its duties
and obligations under this Agreement.
e. All information provided to WOFC by the Company regarding any
Account tendered or to be tendered to WOFC for servicing is true and correct to
the best of Company's knowledge.
f. All Accounts which are tendered by Company to WOFC for servicing
will be secured by, or involve the leasing of, a motor vehicle, will be duly and
validly authorized, executed and delivered by the related Borrower and will
constitute a legal, valid and binding obligation of the related Borrower.
g. All Accounts tendered to WOFC by Company for servicing will comply
in all respects with all applicable State and Federal laws and regulations,
including but not limited to usury, credit reporting, truth-in-lending, and
provisions of the laws of the state where the Account originated which pertain
to the financing and leasing of motor vehicles.
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ARTICLE VII
Indemnities
1. Indemnities by Company. (a) The Company shall indemnify, defend and hold
harmless WOFC, its parent, subsidiaries, affiliates and the directors, officers,
employees, partners, agents, successors and assigns of each of such companies
from and against any claim, action, loss, damage, penalty, fine, cost, expense,
or other liability, including all court costs and reasonable attorneys' fees
incurred in enforcing this indemnity or defending any claim or action, including
any claims or causes of action brought by any person who obtains an interest in
or related to the Accounts, directly or indirectly resulting from or arising out
of Company's performance of its duties under this Agreement or the Company's
breach of its duties, including without limitation, any misrepresentation or
breached warranty under this Agreement. The right of indemnification for acts
occurring during the term of this Agreement provided hereby shall survive the
termination of this Agreement. Payment of and amounts owed under this indemnity
provision are secured by and subject to set off and application out of the
payments on deposit in the Servicing Account.
(b) It is hereby acknowledged that the Company acquires installment
contracts, evidencing Accounts
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in multiple forms. It is further acknowledged that the Company has requested
WOFC to make a distinction on its records for differences in forms relating only
to the actuarial and simple interest methods of accounting for interest. The
Company hereby indemnifies WOFC for any claim, action, loss, damage, penalty,
fine, cost, expense or other liability sustained by WOFC as a result of honoring
such request and making no further distinction between installment contract
forms.
(c) If any legal proceeding is instituted, or if any claim or demand
is made, in respect of which indemnification may be sought from Company
hereunder, WOFC shall promptly cause written notice thereof to be given to
Company. Company shall retain at its own expense, legal counsel of its choice
(who must be reasonably satisfactory to WOFC) who shall also represent WOFC if
Company accepts such indemnification request, and to defend against, negotiate,
settle or otherwise deal with any such proceeding, claim or demand; provided,
however, that WOFC may participate in any such proceeding with counsel of its
choice and at its expense.
2. Indemnities by WOFC. (a) WOFC shall indemnify, defend and hold harmless
the Company, its parent, subsidiaries, affiliates, directors, officers,
employees,
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partners, agents, successors and assigns, respectively, as applicable, from and
against any claim, action, loss, damage, penalty, fine, cost, expense, or other
liability, including all court costs and reasonable attorneys' fees incurred in
enforcing this indemnity or defending any claim or action, directly or
indirectly resulting from or arising out of WOFC's performance of its duties
under this Agreement or WOFC's breach of its duties, including without
limitation any misrepresentation or breached warranty made by WOFC under this
Agreement except to the extent that any claim, action, loss, penalty, time,
cost, expense or other liability is caused as a result of WOFC following and
complying with the written specific instructions of Company regarding the
servicing of the Accounts. The right of indemnification provided hereby shall
survive the termination of this Agreement.
(b) If any legal proceeding is instituted, or if any claim or demand
is made, in respect of which indemnification may be sought from WOFC hereunder,
Company shall promptly cause written notice thereof to be given to WOFC. WOFC
shall retain at its own expense legal counsel of its choosing who must be
reasonably satisfactory to Company who shall also represent Company if WOFC
accepts such indemnification request and shall defend against, negotiate,
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settle or otherwise deal with any such proceeding, claim or demand; provided,
however, that Company may participate in any such proceeding with counsel of its
choice and at its expense.
ARTICLE VIII
Default
1. Events of Default. It shall be an event of default under this Agreement
upon the happening of any of the following events (an "Event of Default"):
a. If the Company fails to timely remit to WOFC the Servicing
Compensation or other amounts due under this Agreement which are due and payable
and such failure to pay continues for a period of ten days from the date of the
mailing or delivery of an invoice from WOFC.
b. If any representation or warranty of the Company in this Agreement
is false, incorrect or misleading in any material respect, or if any
representation or warranty contained in any reports, documents, certificates or
other papers delivered to WOFC from time to time is false, incorrect or
misleading in any material respect, and is not cured within thirty days of
written notice thereof to the Company.
c. If the Company breaches or fails to perform or observe any
obligation or condition to be
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performed or observed by it under this Agreement in any material respect and
such breach or default is not cured within thirty days after WOFC has given the
Company written notice demanding that such breach or default be cured;
d. If any representation or warranty of WOFC in this Agreement is
false, incorrect or misleading in any material respect, or if any representation
or warranty contained in any reports, documents, certificates or other papers
delivered to the Company from time to time is false, incorrect or misleading in
any material respect and is not cured within thirty days of written notice
thereof to WOFC;
e. If WOFC breaches or fails to perform or observe any obligation or
condition to be performed or observed by it under this Agreement in any material
respect and such breach or default is not cured within thirty days after the
Company has given WOFC written notice demanding that such breach or default be
cured;
f. If WOFC fails, in any material respect, to perform its obligations
under this Agreement in conformance with industry standards applicable to
servicing of similar Accounts and such failure is not cured within thirty days
after the Company has given WOFC written notice demanding such failure be cured.
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2. Termination for Cause. Upon the happening of an Event of Default, after
the expiration of any opportunity to cure such default, the non-defaulting party
may terminate this Agreement by notice in writing to the defaulting party sent
by facsimile or certified mail, postage prepaid, or by hand delivery.
3. Record Availability. In the event of termination WOFC agrees to make
available to the Company such computer records as are reasonably required to
effect an orderly conversion to another computer system.
4. Limitation on Actions. All legal actions for breach of this Agreement
must be commenced within two years of the breach or be forever barred. Both
parties agree that the sole and exclusive remedy for any matter or cause of
action related directly or indirectly to any breach of the Agreement or the
matters contemplated hereunder shall be a cause of action sounding in contract
and with damages limited to actual and direct damages incurred. Neither party
shall in any event be liable for any consequential, special, punitive,
incidental or indirect damages, including without limitation, loss of profit or
goodwill. Except as otherwise provided herein, there are no warranties of
merchantability or fitness for a particular purpose.
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ARTICLE IX
Term
This Agreement shall be effective upon the execution and delivery hereof,
and shall remain in full force and effect until the maturity of each Account
accepted by WOFC for servicing. WOFC may terminate the acceptance of new
Accounts on July 15, 1997 unless sooner terminated as provided in the Agreement.
Notwithstanding anything to the contrary, the Company may terminate this
Agreement at any time without cause. Upon termination of this Agreement by
Company without cause and if and when Company elects, in its sole discretion, to
terminate WOFC's duties as servicer under this Agreement with respect to any and
all Accounts transferred to WOFC by Company for servicing prior to such
termination of this Agreement, Company shall pay to WOFC the following amounts:
(i) if terminated prior to or on the first anniversary date of
the effective date of this Agreement, the amount of Forty Thousand Dollars
($40,000.00);
(ii) if terminated after the first anniversary date but prior to
or on the second anniversary date of this Agreement, the amount of Ten Thousand
Dollars ($10,000.00); and
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(iii) if terminated after the second anniversary date but prior
to or on the third anniversary date of this Agreement, the amount of Five
Thousand Dollars ($5,000.00); and
(iv) if terminated after the third anniversary date but prior to
the fourth anniversary date of this Agreement, the amount of Five Thousand
Dollars ($5,000.00).
In the event Company terminates this Agreement without cause, WOFC shall
assist Company with any computer system conversion. Company agrees to pay WOFC
all of WOFC's reasonable costs associated with such assistance including, but
not limited to, reasonable hourly rates of all WOFC personnel and all
out-of-pocket expenses incurred by WOFC.
ARTICLE X
General Provisions
1. Confidentiality. All information not generally available to the public
with respect to the Company and WOFC shall be kept confidential and shall not be
disclosed to third parties or used by the recipient other than for purposes of
carrying out its obligations under this Agreement except for disclosures
required by law or required to be made to governmental agencies, disclosures to
an independent certified public accounting firm auditing the
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books and records of the party, disclosures to investment banking institution,
or disclosures for which both WOFC and the Company have given written consent.
This information includes, but is not limited to, customer lists of the Company.
2. Continuation of Representations and Warranties. WOFC and Company each
acknowledge and agree that the representations and warranties given by each
party in this Agreement are to be continuing and shall remain in full force and
effect throughout the term of this Agreement and that the breach of any
representation and/or warranty shall constitute a breach of this Agreement. WOFC
and Company further agree that should any party become aware that it has
breached its representations or warranties given by it in this Agreement, it
shall give notice to the other party within 10 days of the occurrence of such
breach.
3. Company's Right of Audit. The Company shall have the right, under this
Agreement, after five days written notice to WOFC to reasonably examine and
audit, during regular business hours, the books and records of WOFC which
concern the transactions covered by this Agreement. The Company agrees to
reimburse WOFC for the costs of conducting an audit or reviewing the books and
records of WOFC.
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4. Notices. Any notice to be given under this Agreement shall be made in
writing and shall be deemed to have been duly given upon mailing of certified or
registered mail, return receipt requested, addressed as set forth below:
a. If to WOFC:
World Omni Financial Corp.
120 N. W. 12th Ave.
Deerfield Beach, Florida 33442
Attention: Frank Carstens, Vice President
with a copy to
Frani DeJaco, Associate Counsel at the above address,
and a copy to,
Attention: Mike Phillips
World Omni Financial Corp.
6150 Omni Park Dr.
Mobile, Alabama 36609
b. If to Company:
National Auto Finance Corporation
621 N. W. 53rd Street, Suite 320
Boca Raton, Florida 33487
Attention: Roy Tipton, Executive Vice President
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with a copy to
Stacy McMillen at the above address
5. CONTROLLING LAW. THIS AGREEMENT AND ALL QUESTIONS RELATING TO ITS
VALIDITY, INTERPRETATION, PERFORMANCE AND ENFORCEMENT, SHALL BE GOVERNED BY AND
CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
FLORIDA NOTWITHSTANDING ANY FLORIDA OR OTHER CHOICE-OF-LAW RULES TO THE
CONTRARY.
The parties agree to the application of Florida law because Florida is the
location of WOFC'S executive and administrative offices and such application
allows for the uniform application of law to WOFC's contracts.
6. Indulgence Not Waivers. Neither the failure nor any delay on the part of
any party to exercise any right, remedy, power or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege preclude any other or further exercise of
the same or of any other right, remedy, power or privilege with respect to any
occurrence will be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
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7. Provisions Separable. The provisions of this Agreement are independent
of and separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason other or
others of them may be invalid or unenforceable in whole or in part.
8. Assignment. Without Company's consent, WOFC may assign its rights and/or
obligations under this Agreement to a parent, subsidiary or affiliate of WOFC
provided WOFC shall not be released from this Agreement by virtue of said
assignment. WOFC shall notify the Company of any such assignment at least thirty
(30) days prior to the effective date of such assignment. Except as set forth in
this paragraph 8, neither party may assign this Agreement or its rights
hereunder without the prior written consent of the other party.
9. Independent Contractor. WOFC undertakes to service the Accounts and to
otherwise perform and carry out the duties, responsibilities and obligations to
be performed and carried out by it under this Agreement as an independent
contractor, and nothing herein shall be construed so as to create any
partnership, joint venture or other relationship with the Company.
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10. No Third-Party Beneficiaries. This Agreement is for the benefit of, is
binding upon and may only be enforced by the parties hereto and their respective
successors and permitted assigns, and is not for the benefit of any other person
or entity and may not be enforced by such third party, including but not limited
to those who obtain interests in or related to the Accounts.
11. Attorneys' Fees. Each party shall be responsible for its own attorney
fees associated with the preparation and enforcement of this Agreement.
12. Entire Aareement. This Agreement constitutes the entire understanding
and agreement among the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings, inducements or
conditions, express or implied, oral or written, except as expressly herein
contained. This agreement may not be modified or amended other than by an
agreement in writing executed by an authorized representative of each party at a
contemporaneous or subsequent date.
13. Execution in Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall
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<PAGE>
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.
14. Cooperation. At any time and from time to time on and after the date of
execution of this Agreement (a) WOFC shall at the request of the Company execute
and deliver or cause to be executed and delivered all such documents and take or
cause to be taken all such other actions, as the Company may reasonably deem
necessary in order to carry out the terms and provisions of this Agreement; and
(b) the Company shall, at the request of WOFC, execute and deliver or cause to
be executed and delivered such further instruments and take or cause to be taken
such further actions as WOFC may reasonably deem necessary to carry out the
terms and provisions of this Agreement.
15. Force Majeure. Neither party shall be liable to the other, or held in
breach of this Agreement if prevented, hindered, or delayed in performance or
observance of any provision contained herein by reason of acts of God, strikes,
lockouts, riots, acts of war, epidemics, governmental action or judicial order,
earthquakes, fires, floods, or other similar cause, provided, however if WOFC is
prevented from performing under this Agreement for a period in excess of ninety
(90) days due to such cause, the Company
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<PAGE>
may, in its sole discretion terminate this Agreement and WOFC shall cooperate,
to the extent possible, given the nature of the cause for non-performance, in an
orderly transition.
16. Usage of Terms. With respect to all terms in the Agreement the singular
includes the plural and the plural the singular; words importing any gender
include the other genders; 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 the Agreement; references to Persons
include their permitted successors and assigns; and the term "including" means
"including without limitation."
17. No Jury Trial. Both parties to this Agreement waive any and all right
to a trial by jury in any action or proceeding brought or commenced by either
party which is directly or indirectly related to this Agreement.
18. Non Exclusivity. Nothing herein shall be construed so as to restrict
either party from performing the same type or similar services or entering into
the same type or similar agreements with any other Company or organization.
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19. Survival of Covenants, Representations and Warranties. The
representations, warranties and covenants set forth herein shall survive the
termination of this Agreement.
20. Arbitration. At its option, either the Company or WOFC may require that
any claim or dispute arising under or related to the terms of this Agreement,
whether in law or in equity, shall be submitted to arbitration in accordance
with the rules of the American Arbitration Association then prevailing in the
capital city of the state governing this Agreement.
Executed this __ day of ______, 199_
WORLD OMNI FINANCIAL CORP.
By:______________________________
Its:_____________________________
NATIONAL AUTO FINANCE CORPORATION
By:______________________________
Its:_____________________________
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<PAGE>
CERTIFICATE PURCHASE AGREEMENT
Dated as of December 8, 1994
among
NAFCO FUNDING TRUST,
NATIONAL AUTO FINANCE COMPANY L.P.,
as initial Administrator
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 Definitions....................................................... 1
SECTION 2 Purchase and Sale of the Class B Certificate...................... 2
2.1 The Commitments.............................................. 2
2.2 Purchase Mechanics........................................... 2
2.3 Reduction of Stated Amounts.................................. 3
2.4 Class B Certificates......................................... 4
SECTION 3 Payments.......................................................... 5
SECTION 4 Time and Method of Payment........................................ 5
SECTION 5 Representations and Warranties.................................... 5
5.1 NAFCO........................................................ 5
5.2 National Auto................................................ 6
5.3 Purchaser.................................................... 6
SECTION 6 Conditions........................................................ 7
6.1 Conditions to Initial Purchase............................... 7
6.2 Conditions to Each Purchase.................................. 9
6.3 Condition to Additional Purchases............................ 9
SECTION 7 Covenants......................................................... 9
7.1 Affirmative Covenants........................................ 9
7.2 Negative Covenants........................................... 11
SECTION 8 Miscellaneous Provisions.......................................... 11
8.1 Amendments................................................... 11
8.2 No Waiver; Remedies.......................................... 12
8.3 Successors and Assigns; Assignments.......................... 12
8.4 Survival of Agreement........................................ 13
8.5 Entire Agreement............................................. 13
8.6 Notices...................................................... 13
8.7 Severability of Provisions................................... 14
8.8 Counterparts................................................. 14
8.9 APPLICABLE LAW............................................... 14
8.10 Confidentiality.............................................. 14
8.11 Tax Characterization......................................... 15
8.12 No Proceedings............................................... 15
8.13 Limitation of Liability...................................... 15
8.14 Acknowledgement of Attorney-in-Fact.......................... 16
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EXHIBITS
Exhibit A Form of Pooling and Administration Agreement
Exhibit B Form of Receivables Purchase Agreement
Appendix X Index of Additional Defined Terms
ii
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THIS CERTIFICATE PURCHASE AGREEMENT dated as of December 8, 1994 (this
"Agreement") is entered into among NAFCO FUNDING TRUST, a Delaware business
trust ("NAFCO"), NATIONAL AUTO FINANCE COMPANY L.P., a Delaware limited
partnership ("National Auto"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA
("FUNB") (the "Purchaser").
BACKGROUND
1. NAFCO will enter into (a) a Pooling and Administration Agreement
substantially in the form of Exhibit A (the "Pooling and Administration
Agreement") with National Auto, as Administrator, and Bankers Trust Company, as
trustee (in that capacity, together with any successors in that capacity, the
"Trustee") and (b) a Receivables Purchase Agreement substantially in the form of
Exhibit B. Pursuant to the Pooling and Administration Agreement, NAFCO will
obtain a Series 1994-R Certificates, Class B (the "Class B Certificate"), which
will represent a fractional undivided beneficial interest in the assets of the
NAFCO Auto Receivables Master Trust (the "Trust"), a trust existing under the
Pooling and Administration Agreement.
2. NAFCO wishes to sell the Class B Certificate to the Purchaser and obtain
the commitment of the Purchaser to purchase fractional undivided beneficial
interests in the assets of the Trust ("Trust Interests") which will be evidenced
by the Class B Certificate. Subject to the terms and conditions of this
Agreement, the Purchaser is willing (i) to purchase the Class B Certificate with
an initial Stated Amount in the amount set forth below its name on the signature
pages to this Agreement and (ii) to agree to make purchases, from time to time
in accordance with the terms and conditions hereof, of Trust Interests. National
Auto has joined in this Agreement to confirm certain representations, warranties
and covenants for the benefit of the Purchaser.
AGREEMENT
The parties hereto agree as follows:
SECTION 1 Definitions.
Capitalized terms used and not otherwise defined herein have the meanings
given to them in Appendix A to the Pooling and Administration Agreement and the
Class B Supplement. In addition, this Agreement shall be interpreted in
accordance with the conventions set forth in Parts B, C and D of such
Appendix A.
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SECTION 2 Purchase and Sale of the Class B Certificate.
2.1 The Commitments. Subject to the terms and conditions of this Agreement
and the Pooling and Administration Agreement, the Purchaser hereby purchases the
Class B Certificate and the Trust Interest evidenced thereby for a purchase
price of $1,000,000 (one million dollars) (the "Initial Purchase") and the
Purchaser hereby agrees, upon NAFCO's request, to make additional purchases (the
Initial Purchase and each such additional purchase herein referred to
individually as a "Purchase") of Trust Interests from time to time during the
period from (and including) the date hereof to (but excluding) the Amortization
Commencement Date with respect to the Class B Certificate, provided that the
Purchaser will not be required or permitted to make a Purchase on any date if
the funded principal amount of its Class B Certificate, after giving effect to
such Purchase, would exceed the Stated Amount of the Purchaser's Class B
Certificate, provided further that proceeds of Initial Purchase shall be
deposited into the Excess Funding Account and shall not be available to be
withdrawn from such account until the earlier of (i) April 15, 1995 (the
"Initial Purchase Return Date") or (ii) the date on which the condition
precedent set forth in Section 6.3 hereof is first satisfied. If, on the Initial
Purchase Return Date, the full Initial Purchase remains on deposit, then NAFCO
will cause the Trustee to return to the Purchaser an amount equal to the Initial
Purchase plus all accrued and unpaid interest thereon. Subject to the terms of
this Agreement, the aggregate principal amount of the Purchaser's investment
represented by its Class B Certificate may be increased or decreased from time
to time.
2.2 Purchase Mechanics. (a) Whenever NAFCO wishes the Purchaser to make
Purchases, NAFCO shall cause the Administrator to notify the Purchaser not later
than (i) if the Trust Interests to be purchased will initially form a part of
the Prime Tranche, not later than 3:00 p.m., New York City time, one Business
Day prior to the date of the proposed Purchase and (ii) if the Trust Interests
to be Purchased will initially form all or a part of a Eurodollar Tranche, not
later than 9:00 a.m., New York City time, two Business Days prior to the date of
the proposed Purchase. Each such notice shall be irrevocable and shall in each
case refer to this Agreement and specify (1) the aggregate principal amount for
the requested Purchases (which shall be in a minimum amount of $20,000 or
integral multiple of $20,000 in excess thereof (or in the total unutilized
amount of the Purchaser's Stated Amount), (2) whether the Trust Interests to be
Purchased will form a part of the Prime Tranche or a Eurodollar Tranche, (3) if
the Trust Interest to be Purchased
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will form a part of a Eurodollar Tranche, the Yield Period for such Eurodollar
Tranche, and (4) the date of such Purchase (which shall be a Business Day and,
in the case of any Eurodollar Tranche, shall be a Distribution Date). In
addition to such notice, the Administrator shall deliver a certificate of an
Authorized Officer certifying that no Overcollateralization Deficit exists
(other than in connection with the Initial Purchase). Upon payment of the
purchase price in respect of each Purchase, the outstanding principal amount of
the related Class B Certificate shall be automatically increased by the amount
of that purchase price. The outstanding principal amount of the Class B
Certificate shall be decreased only upon application of Collections to repay
that principal amount (and receipt by the Purchaser of such amounts) in
accordance with the terms of Section 3 hereof and as provided in the Pooling and
Administration Agreement. As used in this Section 2.2, purchase price shall mean
the lesser of (x) the amount specified by NAFCO in its notice of a Purchase
given to the Purchaser in accordance with the first sentence of this Section
2.2(a) and (y) the Stated Amount minus the outstanding principal amount of the
Class B Certificate.
(b) After receiving any notice given pursuant to clause (a), the Purchaser
shall (unless any condition precedent to such Purchase has not been satisfied on
or prior to such date), not later than 4:00 p.m. New York City time on the same
day, make a Purchase in the amount specified by NAFCO pursuant to Section 2.2(a)
by making available to NAFCO by wire transfer of Dollars in immediately
available funds to be deposited into the Excess Funding Account an amount equal
to the purchase price for the requested Purchases.
2.3 Reduction of Stated Amounts. Upon at least 30 Business Days' prior
irrevocable notice to the Purchaser, NAFCO may reduce the Stated Amount of the
Purchaser's Class B Certificate; provided that (i) each partial reduction of the
Stated Amount shall be in an integral multiple of $500,000 and in a minimum
principal amount of $500,000 and (ii) no such partial reduction shall be made
which would reduce the Stated Amount to an amount less than the outstanding
principal amount of the Class B Certificate at the time of such reduction. Each
reference in this Agreement to the "Stated Amount" of a Class B Certificate
means the Stated Amount of such Class B Certificate after giving effect to any
reductions made pursuant to this Section 2.3. Promptly after the Stated Amount
of the Purchaser's Class B Certificate has been reduced to zero (and all
obligations owed to the Purchaser have been repaid in full), the Purchaser will
mark its Class B Certificate "cancelled" and return it to NAFCO.
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<PAGE>
2.4 Class B Certificates. The outstanding amounts of (including principal,
interest and any other amounts in respect of) the Purchases made by the
Purchaser shall be evidenced by a Class B Certificate, to be issued on the
Closing Date substantially in the form of Exhibit A to the Pooling and
Administration Agreement. The Purchaser shall and is hereby authorized to record
on the grid attached to its Class B Certificate (or at the Purchaser's option,
in its internal books and records) the date and principal amount of each
Purchase made by it, the portions of its outstanding Purchases that are made
from time to time, the amount of each repayment of the principal amount
represented by its Class B Certificate and any reductions to the Stated Amount
of its Class B Certificate made pursuant to Section 2.3; provided that failure
to make any such recordation on such grid or records or any error in such grid
or records shall not adversely affect the Purchaser's rights with respect to its
interest in the assets of the Trust and its right to receive interest in respect
of the outstanding principal amount of all Purchases made by the Purchaser. The
Class B Certificate shall bear interest at the Class B Certificate Rate and the
Purchaser shall be entitled to all of the rights of a Certificateholder as set
forth under the Pooling and Administration Agreement.
2.5 Conversion of Tranches. (a) NAFCO shall have the option prior to the
Amortization Commencement Date, on the last day of any Yield Period with respect
to any Tranche to (i) convert all or any part of any such Eurodollar Tranche to
form a part of the Prime Tranche and/or to continue all or any part of such
Eurodollar Tranche as a new Eurodollar Tranche the Yield Period for which shall
commence on the last day of such prior Yield Period, or (ii) convert all or any
part of the Prime Tranche to form all or a part of a Eurodollar Tranche. If
NAFCO wishes to convert and/or continue a Tranche under this Section 2.5, NAFCO
shall notify the Purchaser (i) in the case of a conversion to or continuation of
a Eurodollar Tranche, not later than 9:00 a.m., New York City time, two Business
Days prior to the date of the proposed conversion or continuation Date and (ii)
otherwise, not later than 3:00 p.m., New York City time, one Business Day prior
to the date of the proposed conversion or continuation. Each such notice shall
be irrevocable and shall refer to this Agreement and specify (1) the identity
and amount of the Tranche that NAFCO wishes to convert or continue, (2) whether
such Tranche is to be converted to or continued as a Eurodollar Tranche or all
or part of the Prime Tranche and (3) the date of the proposed conversion or
continuation (which shall be a Business Day). If NAFCO shall not have delivered
a timely notice in accordance with this Section 2.5 with respect to any Tranche,
such Tranche shall, at the end of the Yield Period
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<PAGE>
applicable thereto (unless repaid pursuant to the terms hereof), automatically
be converted into or continued as a Eurodollar Tranche with a Yield Period
concluding on the next succeeding Distribution Date.
(b) Commencing with the first Distribution Date occurring on or after the
Amortization Commencement Date, each outstanding Tranche, upon conclusion of the
Yield Period for such Tranche that was in effect as of the Amortization
Commencement Date, shall automatically continue as or convert to a Eurodollar
Tranche with a Yield Period that commences on the Distribution Date on which
such Yield Period concludes and on each succeeding Distribution Date and
concludes on the Distribution Date next succeeding the Distribution Date on
which the applicable Yield Period commenced.
SECTION 3 Payments
Interest and principal shall be distributed to the holders of the Class B
Certificates at the times described in, and in the amounts calculated pursuant
to, Article IV of the Pooling and Administration Agreement and the Class B
Supplement.
SECTION 4 Time and Method of Payment.
All amounts payable to the Purchaser hereunder or with respect to its Class
B Certificate shall be made to the Purchaser by wire transfer of immediately
available funds into the Excess Funding Account on the date due. Any funds
received after that date will be deemed to have been received on the next
Business Day.
SECTION 5 Representations and Warranties.
5.1 NAFCO. NAFCO represents and warrants to the Purchaser that, as of the
date hereof and the date of each Purchase, each of NAFCO's representations and
warranties in the Pooling and Administration Agreement and Purchase Agreement
are true and correct and further represents and warrants that:
(a) no Amortization Event or Unmatured Amortization Event has occurred
and is continuing;
(b) no Administrator Default or unmatured Administrator Default has
occurred and is continuing;
(c) the offer and sale of the Class B Certificate in the manner
contemplated by this Agreement is a
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<PAGE>
transaction exempt from the registration requirements of the Securities
Act; and the Pooling and Administration Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended; and
(d) the Class B Certificate has been duly and validly authorized and,
when executed by NAFCO and authenticated by the Trustee and paid for
hereunder, shall be validly issued and outstanding and entitled to the
benefits of the Pooling and Administration Agreement.
5.2 National Auto. National Auto represents and warrants to the Purchaser
that, as of the date hereof and the date of each Purchase, each of National
Auto's representations and warranties in the Pooling and Administration
Agreement (in its capacity as Administrator) and the Purchase Agreement (in its
capacity as Seller) is true and correct (taking into account materiality
standards included in each such representation and warranty).
5.3 Purchaser. The Purchaser represents and warrants to NAFCO, as of the
date hereof, that:
(a) it has had an opportunity to discuss NAFCO's and the
Administrator's business, management and financial affairs, and the terms
and conditions of the proposed purchase, with NAFCO and the Administrator
and their respective representatives;
(b) it is an "accredited investor" within the meaning of Rule
501(a)(1) of Regulation D under the Securities Act and has sufficient
knowledge and experience in financial and business matters to be capable of
evaluating the merits and risks of investing in, and is able and prepared
to bear the economic risk of investing in, the Class B Certificate;
(c) it is purchasing the Class B Certificate for its own account, or
for the account of one or more "accredited investors" within the meaning of
Rule 501(a)(1) of Regulation D under the Securities Act which meet the
criteria described in clause (b) above and for which it is acting with
complete investment discretion, for investment purposes only and not with a
view to distribution, subject, nevertheless, to the understanding that the
disposition of its property shall at all times be and remain within its
control;
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(d) it understands that the Class B Certificate has not been and will
not be registered or qualified under the Securities Act or any applicable
state securities laws or the securities laws of any other jurisdiction and
are being offered only in a transaction not involving any public offering
within the meaning of the Securities Act, and that the Certificates
initially will bear the legend set out in the form of Class B Certificate
attached as Exhibit A to the Pooling and Administration Agreement and be
subject to the restrictions on transfer described in Section 6.03 of the
Pooling and Administration Agreement; and
(e) it is not (i) an "Employee Benefit Plan" (as defined in Section
3(3) of (ERISA) that is subject to the provisions of Title I of ERISA, (ii)
a "Plan" described in Section 4975(E)(1) of the Internal Revenue Code or
(iii) an entity whose underlying assets include plan assets by reason of an
"Employee Benefit Plan's" or "Plan's" investment in the entity.
SECTION 6 Conditions.
6.1 Conditions to Initial Purchase. The obligations of the Purchaser to
make its Initial Purchase shall be subject to the satisfaction of the condition
precedent that it shall have received (x) payment of $150,000 by wire transfer
of immediately available funds to the account designated by the Purchaser, (y) a
duly executed and authenticated Class B Certificate registered in the name of
the Purchaser and in a Stated Amount equal to the amount set out opposite the
Purchaser's name on the signature page of this Agreement, and (z) an original
(except as indicated below) of the following (each of which, if not in a form
attached to this Agreement, shall be in form and substance satisfactory to the
Purchaser):
(a) a certificate of an Authorized Officer of NAFCO and a certificate
of an officer of National Auto, each to the effect that (i) each of the
Pooling and Administration Agreement and the Purchase Agreement and the
Servicing Agreement, is in full force and effect, and all actions required
to be taken and conditions required to be satisfied under those documents
in connection with the issuance of the Class B Certificate have been taken
or satisfied, as the case may be (and not waived, without the consent of
the Purchaser) and (ii) all representations and warranties set forth
therein are true and correct;
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(b) a certificate of an Authorized Officer of NAFCO and a certificate
of the Secretary, or an Assistant Secretary, of the Administrator with
respect to:
(i) the incumbency and signatures of those of its officers,
authorized to act with respect to the Transaction Documents;
(ii) attached copies of the Limited Partnership Agreement and the
NAFCO Trust Agreement; and
(iii) attached good standing (or equivalent) certificates;
(c) a certificate of an Authorized Officer of each of NAFCO and the
Administrator as to the satisfaction of the conditions precedent set forth
in Section 6.2 below;
(d) opinions addressed to the Purchaser, of (i) Weil Gotshal & Manges,
special counsel to NAFCO and the Administrator as to (A) corporate matters
(including NAFCO's and Master Trust's security interest in the Receivable),
(B) "true sale" issues and (C) "non-substantive consolidation", (ii) Craig
Schnee, General Counsel of National Auto as to certain corporate matters,
(iii) an opinion of Weil, Gotshal & Manges, in the form of Exhibit C hereto
as to the characterization of the Trust for purposes of federal income tax
laws, (iv) an opinion from Seward & Kissel, counsel to the Master Trustee
and (v) an opinion of Richards, Layton & Finger, counsel to the NAFCO
Trustee;
(e) confirmation by the Trustee of (i) delivery by NAFCO and receipt
by the Trust of cash and/or Receivables in an amount such that the sum of
such cash, if any, and the outstanding principal balance of such
Receivables, if any, is not less than $100,000 and (ii) deposit in the
Excess Funding Account of any cash, receipt which is confirmed pursuant to
the preceding clause (i);
(f) confirmation by the Trustee of the establishment of Trust
Accounts;
(g) evidence that UCC-1 financing statements are being filed in the
office of the Secretary of States of Delaware and Florida reflecting the
transfer of the interest of the Seller in the Receivables and the proceeds
thereof to NAFCO and the transfer of such interest by NAFCO to the Trust;
and
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(h) the fully executed Limited Partnership Agreement.
6.2 Conditions to Each Purchase. The obligation of the Purchaser to make
any Purchase on any day (including those comprising the Initial Purchase) shall
be subject to the condition precedent that on the date of such Purchase, before
and after giving effect thereto and to the application of any proceeds
therefrom, the following statements shall be true:
(a) the representations and warranties of NAFCO and the Administrator
set out or incorporated by reference in this Agreement are true and
accurate (taking into account materiality standards included in each such
representation and warranty) as of such date with the same effect as though
made on such date (unless specifically stated to relate to an earlier
date);
(b) the Amortization Commencement Date shall not have occurred, and no
Unmatured Amortization Event has occurred and is continuing;
(c) no Administrator Default or unmatured Administrator Default has
occurred and is continuing; and
(d) no Overcollateralization Deficit exists.
The giving of any notice pursuant to Section 2.2 shall constitute a
representation and warranty by NAFCO and the Administrator that the foregoing
statements (limited, in the case of clause (a) to the representations and
warranties of the Person deemed to make the representation and warranty referred
to in this sentence) are true.
6.3 Condition to Additional Purchases. The obligation of the Purchaser to
make any Purchase following the Initial Purchase shall be subject to the
condition precedent that there shall have been transferred to the Trust cash
and/or Receivables with an aggregate value of $5,000,000 (inclusive of
Receivables transferred to the Trust evidenced by the written confirmation
delivered pursuant to Section 6.1 hereof).
SECTION 7 Covenants.
7.1 Affirmative Covenants. NAFCO and the Administrator each severally
covenants and agrees that, until the Certificates have been paid in full and the
obligation of the Purchaser to make Purchases has terminated it will:
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(a) duly and timely perform all of its covenants and obligations under
each Transaction Document to which it is a party;
(b) promptly deliver to the Purchaser (in addition to the materials
required to be delivered pursuant to the Pooling and Administration
Agreement) such information, documents, records or reports respecting the
Trust or the condition or operations, financial or otherwise, of NAFCO and
the Administrator, as the Purchaser may from time to time reasonably
request (including all information required to be provided to a holder or
prospective holder of a Class B Certificate pursuant to Rule 144A(d)(4) of
the Securities Act);
(c) at the same time any report, document or notice (including any
annual auditors' report) is provided to the Trustee, or caused to be
provided, by NAFCO or the Administrator under the Pooling and
Administration Agreement, provide the Purchaser with a copy of such report,
document or notice;
(d) permit representatives of the Purchaser, at any time during the
Calculation Period immediately following the Calculation Period in which
the number of Receivables purchased pursuant to the Purchase Agreement
first exceeds (i) 100, (ii) 500 and (c) each increment of 1000 in excess of
500, during normal business hours and upon at least three Business Days'
prior written notice, to examine and make copies of and abstracts from its
records relating to the Receivables;
(e) deliver or cause to be delivered to the Purchaser, (x) within 120
days after the end of each fiscal year of National Auto, the consolidated
balance sheet of National Auto and its Consolidated Subsidiaries as at the
end of such fiscal year and the related statements of earnings,
stockholders' equity and cash flow of National Auto and its Consolidated
Subsidiaries for such fiscal year, prepared in accordance with GAAP
consistently applied throughout the periods reflected therein, certified by
[KPMG Peat Marwick] (or such other independent certified public accountants
of nationally recognized standing as shall be selected by National Auto;
and (y) within 60 days after the end of each of the first three fiscal
quarters of each fiscal year of National Auto, copies of the unaudited
consolidated balance sheets of National Auto and its Consolidated
Subsidiaries as at the end of such fiscal
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quarter and the related unaudited statements of earnings, stockholders'
equity and cash flow, in each case for such fiscal quarter and for the
period from the beginning of such fiscal year through the end of such
fiscal quarter, prepared in accordance with GAAP consistently applied
throughout the periods reflected therein and certified (subject to year end
adjustments) by the chief financial officer or chief accounting officer of
National Auto.
7.2 Negative Covenants. NAFCO and the Administrator each severally
covenants and agrees that the Pool Balance shall not exceed the amounts set
forth below as of the end of the corresponding Calculation Period:
April 1995 $ 15,000,000
October 1995 43,000,000
April 1996 70,000,000
October 1996 98,000,000
April 1997 130,000,000
October 1997 165,000,000
SECTION 8 Miscellaneous Provisions.
8.1 Amendments. No amendment to or waiver of any provision of this
Agreement shall in any event be effective unless the same shall be in writing
and signed by NAFCO and holders of more than 50% of the outstanding principal
amount of the Class B Certificate; provided, however, that (i) this Agreement
may not be amended unless NAFCO shall have delivered the proposed amendment to
the Applicable Rating Agency at least ten Business Days (or such shorter period
as shall be acceptable to it) prior to the execution and delivery thereof and
the Rating Agency Condition has been satisfied with respect to such amendment
and (ii) no amendment shall (w) reduce the amount of or delay the timing of any
distributions to be made to the Class B Certificateholders or deposits of
amounts to be so distributed without the consent of each Class B
Certificateholder, (x) change the definition of or the manner of calculating the
interest of any Class B Certificateholder without the consent of each affected
Class B Certificateholder and (y) reduce the aforesaid percentage required to
consent to any such amendment without the consent of each Class B
Certificateholder amendments require 100% approval of the Class B
Certificateholders. Each holder of a Certificate shall be bound by any
modification waiver or consent authorized by this Section 8.1, whether or not
such Certificate shall have been marked to indicate such modification, waiver or
consent.
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8.2 No Waiver; Remedies. Any waiver, consent or approval given by the
Purchaser shall be effective only in the specific instance and for the specific
purpose for which given, and no waiver by the Purchaser of any breach or default
of or by NAFCO under this Agreement shall be deemed a waiver of any other breach
or default. No failure on the part of the Purchaser to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder, or any abandonment or
discontinuation of steps to enforce such right, power or privilege, preclude any
other or further exercise thereof or the exercise of any other right. No notice
to or demand on NAFCO in any case shall entitle NAFCO to any other or further
notice or demand in the same, similar or other circumstances. The remedies
herein provided are cumulative and not exclusive of any remedies provided by law
(and subject to Section 8.13).
8.3 Successors and Assigns; Assignments. (a) This Agreement shall be
binding upon, and inure to the benefit of, NAFCO, the Administrator, the
Purchaser and their respective successors and assigns; provided, however, that
neither NAFCO nor the Administrator may assign its rights or obligations
hereunder or in connection herewith or any interest herein (voluntarily, by
operation of law or otherwise) without the prior written consent of the holders
of at least 66-2/3% of the outstanding Class B Certificates; and, provided,
further, that the Purchaser may not transfer, pledge, assign, sell
participations in or otherwise encumber its rights or obligations hereunder or
in connection herewith or any interest herein except as permitted under this
Section 8.3.
(b) The Purchaser may at any time sell to one or more banks or other
entities ("Participants") participating interests in all or any portion of its
Certificate and its obligations hereunder. In the event of any such sale by the
Purchaser of participating interests to a Participant, the Purchaser shall
notify NAFCO of the identity of such Participant upon a request by NAFCO, the
Purchaser's obligations under this Agreement shall remain unchanged, the
Purchaser shall remain solely responsible for the performance thereof, and the
Purchaser shall remain the holder of its rights under its Class B Certificate
and this Agreement for all purposes under this Agreement. The Purchaser agrees
that any agreement between the Purchaser and any Participant in respect of such
participating interest shall not restrict the Purchaser's right to agree to any
amendment, supplement or modification of the Transaction Documents except to
extend the final maturity of any Obligation, reduce the rate or extend the time
of payment of interest thereon or any fees owed
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to the Purchaser under this Agreement or any of the other Transaction Documents
or reduce the principal amount of any Obligation.
(c) Subject to Section 8.11, NAFCO and National Auto each authorize the
Purchaser to disclose to any Participant (each, a "Transferee") and any
prospective Transferee and any prospective Transferee any and all information in
the Purchaser's possession concerning NAFCO, National Auto and any Subsidiary of
National Auto which has been delivered to the Purchaser by NAFCO, National Auto
or the Trustee in connection with the Purchaser's credit evaluation of the Trust
prior to entering into this Agreement.
(d) Notwithstanding any other provisions set forth in this Agreement, the
Purchaser may at any time create a security interest in all or any portion of
its rights under this Agreement and its Class B Certificate in favor of any
Federal Reserve Bank in accordance with Regulation A of the Board of Governors
of the Federal Reserve System.
8.4 Survival of Agreement. All covenants, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto shall
survive the making and the repayment of the Purchases and the execution and
delivery of this Agreement and any Class B Certificates and shall continue in
full force and effect until the Class B Certificates have been paid in full and
all Commitments terminated.
8.5 Entire Agreement. This Agreement, together with the other Transaction
Documents, including the exhibits and schedules thereto, contains a final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof, superseding all
previous oral statements and other writings with respect thereto.
8.6 Notices. All communications hereunder shall be in writing (except that
notices pursuant to Section 2 may be given by telephone promptly confirmed in
writing or by telecopy) and shall be deemed to have been duly given if
personally delivered, sent by overnight courier or mailed by registered mail,
postage prepaid and return receipt requested, or transmitted by telex, telegraph
or telecopier and confirmed by a similar mailed writing to any party at the
address for such party set forth on the signature pages to this Agreement or in
each case to such other address as such party may designate in writing.
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8.7 Severability of Provisions. Any covenant, provision, agreement or term
of this Agreement that is prohibited or is held to be void 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.
8.8 Counterparts. This Agreement may be executed in counterparts, which may
include facsimile counterparts, each of which shall constitute an original, but
all of which shall together constitute one instrument.
8.9 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.
8.10 Confidentiality. The Purchaser agrees to use reasonable efforts to
keep confidential all non-public information pertaining to NAFCO, National Auto
and any subsidiary of National Auto that is provided to it by any such parties
and that an officer of NAFCO has requested in writing be kept confidential, and
shall not intentionally disclose such information to any Person except (i) to
the extent such information is public when received by the Purchaser or becomes
public thereafter due to the act or omission of any party other than the
Purchaser, (ii) to the extent such information is independently obtained from a
source other than one of NAFCO, National Auto and any subsidiary of National
Auto and such information from such source is not, to the Purchaser's knowledge,
subject to an obligation of confidentiality or, if such information is subject
to an obligation of confidentiality, that disclosure of such information is
permitted, (iii) to counsel, auditors or accountants or other advisors and
agents retained by the Purchaser or any other Person, (iv) in connection with
any litigation to which the Purchaser or any other Person is a party or the
enforcement of the rights of the Purchaser under this Agreement or any other
Transaction Document or otherwise, (v) to the extent required by any applicable
statute, rule or regulation or court order (including, by way of subpoena) or
pursuant to the request of any regulatory or governmental authority having
jurisdiction over the Purchaser, or (vi) to the extent disclosure to other
entities is appropriate or advisable in connection with any proposed or actual
assignment or grant of a participation by the Purchaser of any interest in this
Agreement and/or its Class B Certificate to such other financial institutions
(who will in turn be required to maintain confidentiality as if they were
Purchasers parties to this Agreement).
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8.11 Tax Characterization. Each party to this Agreement (a) acknowledges
and agrees that it is the intent of the parties to this Agreement that, for
federal, state and local income and franchise tax purposes, the Class B
Certificates will be treated as evidence of indebtedness secured by the Trust
Assets and the Trust not be characterized as an association taxable as a
corporation, (b) agrees to treat the Class B Certificates for federal, state and
local income and franchise tax purposes as indebtedness and (c) agrees that the
provisions of this Agreement and all related Transaction Documents shall be
construed to further these intentions of the parties.
8.12 No Proceedings. Each of National Auto and the Purchaser hereby agrees
that it will not institute against NAFCO or the Trust, or join any other Person
in instituting against NAFCO or the Trust any insolvency proceeding (namely, any
proceeding of the type referred to in the definition of "Event of Bankruptcy")
so long as any Class B Certificates issued by the Trust shall be outstanding or
there shall not have elapsed one year plus one day since the last day on which
any such Certificates shall have been outstanding. The foregoing shall not limit
the right of National Auto to file any claim in or otherwise take any action
with respect to any insolvency proceeding that was instituted against NAFCO or
the Trust by any Person other than National Auto. In addition, each of the
foregoing parties agrees that all amounts owed to them by the Trust or NAFCO
shall be payable solely from amounts that become available for such payment
pursuant to the Pooling and Administration Agreement, and no such amounts shall
constitute a claim against the Trust or NAFCO to the extent that they are in
excess of the amounts available for their payment.
8.13 Limitation of Liability. It is expressly understood and agreed by the
parties hereto that (a) this Agreement is executed and delivered by The Chase
Manhattan Bank (USA), not individually or personally but solely as trustee of
NAFCO, 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 NAFCO is made and intended not as personal representations, undertakings
and agreements by The Chase Manhattan Bank (USA) but is made and intended for
the purpose for binding only NAFCO and (c) under no circumstances shall The
Chase Manhattan Bank (USA) be personally liable for the payment of any
indebtedness or expenses of NAFCO or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by NAFCO
under this Agreement or the other Transaction Documents.
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8.14 Acknowledgement of Attorney-in-Fact. The parties hereto acknowledge
that National Auto, as Administrator pursuant to the terms of the Pooling and
Administration Agreement, has been granted the power to act as attorney-in-fact
of NAFCO with respect to certain of NAFCO's duties and obligations under the
Transaction Documents, but not including those duties or obligations
specifically required by the terms of this Agreement or any of the Transaction
Documents to be performed by NAFCO.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers and delivered as of the day and
year first above written.
NAFCO FUNDING TRUST
a Delaware business trust
By: THE CHASE MANHATTAN BANK (USA)
not in its individual capacity,
but solely as Owner Trustee under
the First Amended and Restated
Trust Agreement dated as of
December __, 1994
By: _______________________________
Name:
Title:
Notice Address: 802 Delaware Avenue
14th Floor
Wilmington, Delaware 19801
Attention:
Telephone:
Telecopy:
NATIONAL AUTO FINANCE COMPANY L.P.
By: NATIONAL AUTO FINANCE CORPORATION,
as General Partner
By: __________________________________
Name:
Title:
Notice Address: One Park Place
Suite 320
621 NW 53rd Street
Boca Raton, Florida 33487
Attention:
Telephone:
Telecopy:
<PAGE>
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By: ___________________________________
Name: Reginald H. Imamura
Title: Director
Notice Address: One First Union Center
TW-19
Charlotte, NC 28288-0735
Attention: Reginald H. Imamura
Telephone: 704-374-6501
Telecopy: 704-374-4092
Stated Amount: $25,000,000
Percentage: 100%
<PAGE>
MANAGEMENT AGREEMENT
This Management Agreement by and between National Auto Finance Company
L.P., a Delaware limited partnership ("NAFCO LP" or the "Partnership") and
National Auto Finance Corporation, a Delaware corporation (the "Corporation") is
dated and effective as of the 29th day of December, 1994.
WHEREAS, NAFCO LP is engaged in the business of identifying, acquiring,
lending with respect to, conveying to one or more master trusts, and servicing
motor vehicle finance and lease contracts;
WHEREAS, the Corporation is the general partner of NAFCO LP; and
WHEREAS, both NAFCO LP and the Corporation wish to define more specifically
the role of the Corporation in the performance of its obligations as general
partner of NAFCO LP and the payment to the Corporation of fees and expenses as
compensation for the performance of its obligations.
NOW, THEREFORE, in accordance with these premises and the mutual promises
contained herein, NAFCO LP and the Corporation agree as follows:
1. Services. On behalf of and in the name of NAFCO LP, the Corporation, inter
alia, shall:
(i) provide or make available banking, record keeping and related
services;
(ii) maintain all reasonable and necessary books and records with respect
to the Partnership's business;
(iii) maintain the general accounting records of the Partnership and
prepare for certification such periodic financial statements as may be
necessary or appropriate;
(iv) prepare and timely file such income, franchise or other tax returns of
the Partnership as shall be required to be filed by applicable law;
(v) respond to or otherwise reasonably deal with correspondence relating
to the Partnership's business;
(vi) prepare for timely execution by the Partnership or cause the timely
preparation by other appropriate persons of all such documents,
reports,
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filings, instruments, certificates and opinions as may be necessary or
appropriate;
(vii) undertake such other managerial and administrative services as may be
reasonable to cause the Partnership to satisfy its obligations;
(viii) retain (a) such legal counsel as may be necessary to perform for the
Partnership the services necessary or appropriate to its organization
and the services customarily provided by a general corporate counsel,
and (b) the Partnership's accountants to timely prepare the audited
financial statements and tax returns of the Partnership and to provide
such other accounting services as the Partnership may require;
(ix) make available telephone, telecopy and post office box facilities as
may be necessary for the conduct of the Partnership's business and in
particular, but without limitation, facilities for meetings of the
partners from time to time;
(x) prepare and timely file all reports required to be filed under federal
and state securities laws; and
(xi) in furtherance of the foregoing and such other activities as may be
incident to the performance of its duties pursuant to Article V of the
Amended and Restated Agreement of Limited Partnership of National Auto
Finance Company L.P. (the "Partnership Agreement"), take all other
actions as may be appropriate or incident thereto.
In the performance of its services hereunder, the Corporation shall have
the right to utilize the services of National Finance Corporation (the "NFC") in
accordance with the Services Agreement attached hereto as Attachment A, as such
Services Agreement may be amended from time to time.
2. Fees and Expenses. The Corporation shall be entitled to receive fees and
expenses as follows:
(i) reimbursement of an amount equal to all of its direct out-of-pocket
costs and expenses (including expenses incurred in utilizing the
services of NFC) in providing the services required by this Management
Agreement;
(ii) reimbursement of reasonable and customary fees and expenses for the
Corporation's directors;
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(iii) reimbursement of all cash and non-cash compensation, bonuses,
benefits and expenses for its officers and employees;
(iv) reimbursement of all governmental or similar fees, charges, taxes,
duties and imposts of every kind and nature; and
(v) a fixed fee of $16,000 per month during each month of calendar year
1995. Such payments shall be made beginning on the fifteenth of
January 1995 and continue on the fifteenth of each succeeding month
through December 1995.
3. Term. This Management Agreement shall expire on the earlier of December 21,
2015 or the date on which the complete liquidation of NAFCO LP and the
cancellation of its Certificate of Limited Partnership has been effected.
4. Notices. All notices provided hereunder shall be in writing and shall be
effective upon receipt.
Notices provided to the Corporation shall be addressed as follows:
National Auto Finance Corporation
621 N.W. 53rd Street, Suite 320
Boca Raton, Florida 33487
Attn: Gary L. Shapiro, President
(407) 241-7797 Fax
with a copy to Craig Schnee
Notices provided to National Auto Finance Company L.P. shall be addressed
as follows:
National Auto Finance Corporation
621 N.W. 53rd Street, Suite 320
Boca Raton, Florida 33487
Attn: Roy Tipton, Executive Vice President
with a copy to Stacy McMillen
Either party may change the address to which notices or other
communications are to be sent to it by giving notice of such change in the
manner provided herein.
5. Assignment. This Management Agreement may not be assigned by any party hereto
without the prior written consent of the other parties. Subject to the
foregoing, this Management Agreement shall bind and inure to the benefit of the
parties hereto, and their respective legal representatives, successors and
permitted assigns.
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6. Entire Agreement. This Management Agreement, together with Attachment A
hereto and the Partnership Agreement sets forth the entire agreement and
understanding of the parties hereto in respect of the transactions contemplated
hereby, and supersedes all prior agreements, arrangements and understandings
relating to the subject matter hereof.
7. Counterparts. This Management Agreement may be executed in any number of
counterparts, each of which shall be considered to be an original instrument.
8. Section Headings. All section headings are inserted for convenience only and
shall not control or affect the meaning or construction of any provision of this
Management Agreement.
9. Applicable Law. This Management Agreement shall be governed by and construed
in accordance with the laws of the State of Florida without regard to its choice
of law provisions.
IN WITNESS WHEREOF, each party hereto has caused this Management Agreement
to be duly executed as of the date first above written.
NATIONAL AUTO FINANCE COMPANY L.P.
By: National Auto Finance Corporation,
as General Partner
--------------------------------------
By: Roy Tipton, Executive
Vice President
NATIONAL AUTO FINANCE CORPORATION
--------------------------------------
By: Gary L. Shapiro, President
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FIRST AMENDMENT OF MANAGEMENT AGREEMENT
This First Amendment of Management Agreement is dated as of
the 1st day of January, 1996, by and between NATIONAL AUTO FINANCE COMPANY
L.P., a Delaware limited partnership (the "Partnership"), AUTO CREDIT
CLEARINGHOUSE L.P., a Delaware limited partnership ("ACCH") and NATIONAL AUTO
FINANCE CORPORATION, a Delaware corporation (the "Corporation").
RECITALS
A. The Partnership and the Corporation entered into that
certain Management Agreement as of December 29, 1994 (the "Management
Agreement").
B. The Corporation is the general partner of the Partnership
and ACCH.
C. ACCH desires to define more specifically the role of the
Corporation in the performance of its obligations as general partner of ACCH
and the payment to the Corporation of fees and expenses as compensation for the
performance of its obligations.
D. The Partnership and the Corporation desire to amend the
fixed fee payable under the Management Agreement.
NOW THEREFORE, in accordance with these premises and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
1. Services Performed for ACCH. The Corporation shall
perform, in its capacity as general partner of ACCH, each of the services which
are required to be performed by the Corporation pursuant to the terms of the
Management Agreement; provided however that the Corporation shall be entitled
to utilize the services of National Financial Corporation, or its designee,
National Financial Companies LLC (collectively "NFC") in accordance with that
certain Services Agreement, by and between the Corporation and NFC, as amended
on the date hereof.
2. Fees and Expenses. The Corporation shall be entitled to
receive fees and expenses as described in Section 2 of the Management Agreement
with respect to the
<PAGE>
services performed by the Corporation for the Partnership and ACCH; provided
however that Section 2(v) is hereby deleted and the following paragraph is
hereby substituted in lieu thereof:
(v) (A) a fixed fee of $25,000.00 per month during each month
of calendar year 1996 with respect to the services performed for the
benefit of the Partnership and (B) a fixed fee of $20,000 per month of
calendar year 1996 with respect to the services performed for the
benefit of ACCH. Such payments shall be made beginning on January 15,
1996 and shall continue on the fifteenth of each succeeding month
through and including December 1996.
3. Term. Section 3 of the Management Agreement is hereby
deleted in its entirety and the following is hereby substituted in lieu
thereof:
3. Term. This Management Agreement shall expire on the
earlier to occur of (A) December 21, 2015 and (B) the later
to occur of (1) the date on which the complete liquidation of
the Partnership and the cancellation of its Certificate of
Limited Partnership has been effected and (2) the date on
which the complete liquidation of ACCH and the cancellation
of its Certificate of Limited Partnership has been effected.
4. Notices. Notices provided to ACCH under this Agreement
shall be sent care of the Partnership.
5. Services Agreement. The parties hereto consent to the
amendment of the Services Agreement as set forth on Exhibit A attached hereto.
6. NFC. As used in the Management Agreement, the term "NFC"
shall mean National Financial Corporation, or its designee, National Financial
Companies, LLC, as designated by National Financial Corporation.
7. Effect of this Agreement. The Management Agreement, as
amended hereby, is hereby ratified and confirmed in full force and effect, by
each of the parties hereto.
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IN WITNESS WHEREOF, each party hereto has caused this First
Amendment to Management Agreement to be duly executed as of the date first
above written.
NATIONAL AUTO FINANCE COMPANY L.P.
By: National Auto Finance
Corporation,
its general partner
By:_______________________________
Name:_____________________________
Title:____________________________
NATIONAL AUTO FINANCE CORPORATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
AUTO CREDIT CLEARINGHOUSE L.P.
By: National Auto Finance
Corporation,
its general partner
By:_______________________________
Name:_____________________________
Title:____________________________
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SERVICES AGREEMENT
This Services Agreement by and between National Auto Finance
Corporation ("NAFCORP") and National Financial Corporation ("NFC") is
dated and effective as of the 29th day of December, 1994.
WHEREAS, NAFCORP is the general partner of National Auto
Finance Company L.P., a Delaware limited partnership ("NAFCO LP" or
the "Partnership");
WHEREAS, NAFCORP is entering into an agreement styled a
"Management Agreement" of even date herewith pursuant to which NAFCORP
is to provide services to and on behalf of NAFCO; and
WHEREAS, NAFCORP wishes to employ the services of NFC to
assist NAFCORP in meeting its obligations under the Management
Agreement, and NFC wishes to provide such services to NAFCORP.
NOW, THEREFORE, in accordance with these premises and the
mutual promises contained herein, NAFCORP and NFC agree as follows:
1. Services. NAFCORP shall purchase from NFC, and NFC shall furnish to
NAFCORP such tax, legal, accounting, personnel, financial, management
and other services that may be necessary or useful to NAFCORP in the
performance of its obligations under the Management Agreement. Such
Services shall be furnished from time to time as and when requested by
any officer of NAFCORP.
2. Prices of Services. The categories of Services which may be
furnished by NFC and the initial prices of the Services are set forth
on Schedule A hereto. The prices of Services may be varied from time
to time by NFC to remain consistent with salaries of the respective
service providers in the employment of NFC and the applicable NFC
burden rates. Variations in prices shall be provided by notice to
NAFCORP and shall be effected not more frequently than once per
calendar quarter. Materials and third party services incidental to the
provision of Services shall be furnished at cost.
3. Term. This Services Agreement shall expire on the earlier of
December 31, 2015 or the date on which the complete liquidation of
NAFCORP and the cancellation of its Certificate of Limited Partnership
has been effected. However, either party may
<PAGE>
terminate this Service Agreement prior to the Expiration Date upon
sixty (60) days prior written notice to the other.
4. Notices. All notices provided hereunder shall be in writing
and shall be effective upon receipt.
Notices provided to NFC shall be addressed as follows:
National Financial Corporation
621 N.W. 53rd Street, Suite 320
Boca Raton, Florida 33487
Attn: Gary L. Shapiro, President
(407) 241-7797 Fax
with a copy to Craig Schnee
Notices provided to National Auto Finance Corporation shall
be addressed as follows:
National Auto Finance Corporation
621 N.W. 53rd Street, Suite 320
Boca Raton, Florida 33487
Attn: Roy Tipton, Executive Vice President
with a copy to Stacy McMillen
Either party may change the address to which notices or other
communications are to be sent to it by giving notice of such change in
the manner provided herein.
5. Assignment. This Services Agreement may not be assigned by
any party hereto without the prior written consent of the other
parties. Subject to the foregoing, this Services Agreement shall bind
and inure to the benefit of the parties hereto, and their respective
legal representatives, successors and permitted assigns.
6. Entire Agreement. This Services Agreement, together with
Schedule A hereto, sets forth the entire agreement and understanding
of the parties hereto in respect of the transactions contemplated
hereby, and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof.
7. Counterparts. This Services Agreement may be executed in any
number of counterparts, each of which shall be considered to be an
original instrument.
2
<PAGE>
8. Section Headings. All section headings are inserted for
convenience only and shall not control or affect the meaning or
construction of any provision of this Services Agreement.
9. Applicable Law. This Services Agreement shall be governed by
and construed in accordance with the laws of the State of Florida
without regard to its choice of law provisions.
IN WITNESS WHEREOF, each part hereto has caused this Services
Agreement to be duly executed as of the date first above written.
NATIONAL FINANCIAL CORPORATION
-----------------------------------
By: Gary L. Shapiro
Chief Executive Officer
NATIONAL AUTO FINANCE CORPORATION
-----------------------------------
By: Roy Tipton
Executive Vice President
3
<PAGE>
FIRST AMENDMENT TO SERVICES AGREEMENT
This First Amendment of Services Agreement is dated as of the
1st day of January, 1996, by and between NATIONAL AUTO FINANCE CORPORATION
("NAFCORP") and NATIONAL FINANCIAL CORPORATION, or its designee, National
Financial Companies, LLC ("NFC").
RECITALS
A. NAFCORP and NFC have executed and delivered that certain
Services Agreement, dated December 29, 1994 (as amended, the "Services
Agreement").
B. NAFCORP is the general partner of National Auto Finance
Company L.P. and Auto Credit Clearinghouse L.P. and the parties hereto desire
to extend the Services Agreement to include both partnerships.
NOW, THEREFORE, in accordance with these premises and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledge, the parties hereby agree as follows:
1. ACCH. All references to the "Partnership" in the Services
Agreement shall mean the collective reference to (1) National Auto Finance
Company L.P. and (2) Auto Credit Clearinghouse L.P.
2. NFC. All references to "NFC" in the Services Agreement
shall mean NFC.
3. Prices of Services. The first sentence of Section 2 of the
Services Agreement is hereby deleted in its entirety. Schedule A to the
Services Agreement is hereby deleted in its entirety.
4. Notices. All notices to ACCH under the Services Agreement
shall be sent care of NAFCORP.
5. Effect of this Agreement. The Services Agreement, as
amended hereby, is hereby ratified and confirmed in full force and effect for
all purposes.
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this First
Amendment to Services Agreement have duly executed and delivered as of the date
first above written.
NATIONAL FINANCIAL CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
NATIONAL AUTO FINANCE CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
2
<PAGE>
================================================================================
POOLING AND SERVICING AGREEMENT
by and among
NATIONAL FINANCIAL AUTO FUNDING TRUST,
AS TRANSFEROR,
NATIONAL AUTO FINANCE COMPANY L.P.
AS MASTER SERVICER,
and
HARRIS TRUST AND SAVINGS BANK
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE
------------------------------------
Dated as of October 1, 1995
------------------------------------
National Auto Finance 1995-1 Trust
6.36% Automobile Loan Asset-Backed Certificates
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions
Section 1.01. Definitions.................................................. 1
Section 1.02. Calculations as to Principal and Interest in Respect of
Contracts.................................................... 21
Section 1.03. Material Adverse Effect...................................... 21
ARTICLE II
Creation of Trust;
Transfer of Trust Estate;
Original Issuance of Certificates
Section 2.01. Creation of Trust: Transfer of Trust Estate.................. 22
Section 2.02. Acceptance by Trustee........................................ 24
Section 2.03. Representations, Warranties and Covenants of the Master
Servicer and the Transferor.................................. 24
Section 2.04. Execution and Authentication of Certificates................. 35
Section 2.05. Restriction on Transfer of Transferor Interest............... 35
Section 2.06. Transfers of Additional Contracts............................ 36
ARTICLE III
Administration and Servicing of Contracts;
Establishment and Administration of Accounts
Section 3.01. Master Servicer to Act as Servicer........................... 38
Section 3.02. Subservicing Agreements between Master Servicer and the
Subservicers................................................. 41
Section 3.03. Obligations of the Master Servicer........................... 42
Section 3.04. No Contractual Relationship between a Subservicer
and Trustee or Certificateholders............................ 42
Section 3.05. Assumption or Termination of Subservicing Agreement by
Trustee...................................................... 42
Section 3.06. Collection of Contract Payments.............................. 43
Section 3.07. Maintenance of Comprehensive and Collision Insurance......... 44
Section 3.08. Realization upon Defaulted Contracts......................... 44
Section 3.09. Master Servicing and Other Compensation...................... 45
Section 3.10. The Collection Account....................................... 45
<PAGE>
Section 3.11. The Certificate Account...................................... 46
Section 3.12. Pre-Funding Period Reserve Account........................... 47
Section 3.13. The Revolving Account........................................ 48
Section 3.14. Pre-Funding Account.......................................... 49
Section 3.15. Administration of Accounts................................... 49
Section 3.16. [Reserved]................................................... 50
Section 3.17. Reports to the Trustee and the Transferor Certificate
Account Statements; Reports to the Master Servicer,
the Certificate Insurer and Transferor....................... 51
Section 3.18. Annual Statement as to Compliance; Notice of Servicer
Default...................................................... 51
Section 3.19. Custodial Arrangements....................................... 52
Section 3.20. Annual Independent Accountants' Report....................... 52
Section 3.21. Access to Certain Documentation and Information Regarding
Contracts.................................................... 53
Section 3.22. Retention and Termination of Master Servicer................. 53
ARTICLE IV
Payments to Certificateholders
Section 4.01. Distributions................................................ 54
Section 4.02. Statements to Certificateholders............................. 55
Section 4.03. Specification of Certain Tax Matters......................... 55
Section 4.04. Withdrawals from Spread Account; Claims Under Certificate
Policy....................................................... 56
Section 4.05. Preference Claims............................................ 58
Section 4.06. Retirement of Certificates................................... 59
Section 4.07. Spread Account............................................... 59
ARTICLE V
The Certificates
Section 5.01. The Certificates............................................. 59
Section 5.02. Registration of Transfer and Exchange of Certificates........ 59
Section 5.03. Mutilated, Destroyed Lost or Stolen Certificates............. 61
Section 5.04. Persons Deemed Owner......................................... 62
Section 5.05. Appointment of Paying Agent.................................. 62
ARTICLE VI
The Transferor and the Master Servicer
<PAGE>
Section 6.01. Respective Liabilities of the Transferor and the
Master Servicer.............................................. 62
Section 6.02. Existence of Transferor and Master Servicer; Merger or
Consolidation of the Master Servicer; Assignment of
Rights and Delegation of Duties by Master Servicer........... 63
Section 6.03. Limitation on Liability of the Transferor, the Master
Servicer and Others.......................................... 63
Section 6.04. Transfer of Duties of Master Servicer........................ 65
Section 6.05. Master Servicer May Own Certificates......................... 65
ARTICLE VII
Default
Section 7.01. Servicer Defaults............................................ 66
Section 7.02. Trustee to Act; Appointment of Successor..................... 68
Section 7.03. Notification to Certificateholders........................... 69
Section 7.04. Waiver of Past Defaults...................................... 69
ARTICLE VIII
Concerning the Trustee
Section 8.01. Duties of Trustee............................................ 70
Section 8.02. Certain Matters Affecting the Trustee........................ 71
Section 8.03. Trustee Not Liable for Certificates or Contracts............. 73
Section 8.04. Trustee May Own Certificates................................. 73
Section 8.05. Eligibility Requirements for Trustee......................... 73
Section 8.06. Resignation and Removal of the Trustee....................... 74
Section 8.07. Successor Trustee............................................ 75
Section 8.08. Merger or Consolidation of Trustee........................... 75
Section 8.09. Appointment of Co-Trustee or Separate Trustee................ 76
Section 8.10. Appointment of Office or Agency.............................. 77
Section 8.11. Trustee's Compensation and Reimbursement..................... 77
Section 8.12. Trustee May Enforce Claims Without Possession Of
Certificates................................................. 78
Section 8.13. Suits for Enforcement........................................ 78
Section 8.14. Rights of Direct Trustee..................................... 79
ARTICLE IX
Termination
<PAGE>
Section 9.01. Termination upon Retransfer to the Transferor or
Liquidation of All Contracts................................. 79
Section 9.02. Disposition of Contracts upon Bankruptcy Event............... 81
ARTICLE X
Miscellaneous Provisions
Section 10.01. Amendment.................................................... 82
Section 10.02. Recordation of Agreement..................................... 83
Section 10.03. Limitation on Rights of Certificateholders................... 84
Section 10.04. GOVERNING LAW................................................ 85
Section 10.05. Notices...................................................... 85
Section 10.06. Intention of the Parties..................................... 86
Section 10.07. Severability of Provisions................................... 86
Section 10.08. Protection of Title to Interest.............................. 86
Section 10.09. Assignment................................................... 87
Section 10.10. Certificates Nonassessable and Fully Paid.................... 87
Section 10.11. Third-party Beneficiaries.................................... 88
Section 10.12. Financial Security as Controlling Party...................... 88
Section 10.13. Limitation of Liability of Trustee........................... 88
Section 10.14. Limitation of Liability of Chase............................. 88
Section 10.15. Matters Relating to Purchase Agreement....................... 89
Section 10.16. No Petition.................................................. 89
Section 10.17. Submission to Jurisdiction................................... 89
Section 10.18. Waiver of Jury Trial......................................... 90
Section 10.19. Counterparts................................................. 90
Exhibit 2.01 Form of Transfer Agreement
Exhibit 2.06A Officer's Certificate of National Auto Finance Company L.P.
Exhibit 2.06B Officer's Certificate of the Transferor
Exhibit 3.17 Form of Master Servicer Report
Exhibit 4.02 Form of Distribution Date Report
Exhibit 5.01 Form of Certificate
Exhibit 5.02 Form of Transferee Letter
Exhibit A Form of Subservicing Agreement
Exhibit B Form of Purchase Agreement
Exhibit C Form of Financial Guaranty Insurance Policy
Exhibit D Form of Insurance and Indemnity Agreement
Exhibit E Form of Spread Account Agreement
Schedule 1 Contract Schedule
Schedule 2 Trustee's Fee Schedule
<PAGE>
This Pooling and Servicing Agreement is entered into effective as of
October 1, 1995, among NATIONAL FINANCIAL AUTO FUNDING TRUST, as Transferor,
NATIONAL AUTO FINANCE COMPANY L.P., as Master Servicer, and HARRIS TRUST AND
SAVINGS BANK, an Illinois banking corporation, not in its individual capacity
but solely as Trustee (the "Trustee").
W I T N E S S E T H T H A T
In consideration of the mutual agreements herein contained, the
Transferor, the Master Servicer and the Trustee agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions.
Whenever used in this Agreement, the following words and phrase, unless
the context otherwise requires, shall have the meanings specified in this
Article.
Account Property: The moneys and Permitted Investments held in the
Accounts from time to time.
Accounts: The Collection Account, the Certificate Account, the Pre-Funding
Account, the Pre-Funding Period Reserve Account and the Revolving Account.
Actuarial Method: The method of allocating a fixed level payment between
principal and interest, pursuant to which the portion of such payment that is
allocated to interest is the product of the fixed rate of interest multiplied by
the unpaid principal balance multiplied by the fixed period of time (expressed
as a fraction of a year) between scheduled payments.
Additional Contract: Each Contract transferred and assigned to the Trust
on a Subsequent Transfer Date pursuant to the procedures set forth in Section
2.06.
Additional Contract Transfer Percentage: 91%, in the case of Additional
Contracts with respect to which funds were released therefor from the
Pre-Funding Account, and (y) 100%, in the case of Additional Contracts with
respect to which funds were released therefor from the Revolving Account.
Agreement: This Pooling and Servicing Agreement and all amendments hereof
and supplements hereto.
<PAGE>
Amortization Event: The occurrence of (i) any event described in Section
5.01(a) through (e) or Section 5.01(i) through (j) of the Insurance Agreement,
or (ii) a withdrawal from the Spread Account pursuant to Section 4.04(a) hereof.
Assignment: With respect to a Contract, collectively (i) the original
instrument of assignment of such Contract and all other documents securing such
Contract made by the Person originating such Contract to NAFCO, which is in a
form sufficient under the laws of the jurisdiction in which the related Financed
Vehicle is located to permit the assignee to exercise all rights granted by the
Obligor under such Contract and such other documents and all rights available
under applicable law to the obligee under such Contract and which, in each case,
may, to the extent permitted by the laws of the state in which the related
Financed Vehicle is located, be a blanket instrument of assignment covering
other Contracts as well.
Assignment Agreement: The Assignment Agreement, dated of even date
herewith, between the Master Trust and the Transferor and all amendments thereof
and supplements thereto.
Available Amount: With respect to any Distribution Date, an amount equal
to (i) the amount on deposit in the Certificate Account on the preceding
Distribution Date after giving effect to all withdrawals therefrom on such
preceding Distribution Date, plus (ii) the amount, if any, to be transferred by
the Trustee to the Certificate Account from the Pre-Funding Period Reserve
Account, the Revolving Account and/or the Pre-Funding Account on such
Distribution Date pursuant to Section 3.12(b), Section 3.13(b) or Section
3.14(b), as applicable, plus (iii) the amount to be transferred by the Trustee
to the Certificate Account from the Collection Account on such Distribution Date
pursuant to Section 3.10(b), plus (iv) any amounts paid by the Certificate
Insurer to the Trustee pursuant to Section 4.04(e) hereof for distribution to
the Certificateholders on such Distribution Date.
Average Default Rate: With respect to any Distribution Date, the
arithmetic average of the Default Rates for each of the three Due Periods
immediately preceding the Due Period in which such Distribution Date occurs.
Average Delinquency Ratio: With respect to any Distribution Date, the
arithmetic average of the Delinquency Ratios for each of the three Due Periods
immediately preceding the Due Period in which such Distribution Date occurs.
Average Net Loss Rate: With respect to any Distribution Date, the
arithmetic average of the Net Loss Rates for each of the three Due Periods
immediately preceding the Due Period in which such Distribution Date occurs.
Bankruptcy Event: The occurrence of either of the following with respect
to either NAFCO or the Transferor:
2
<PAGE>
(a) a case or other proceeding shall be commenced, without the application
or consent of such Person, in any court, seeking the liquidation,
reorganization, debt arrangement, dissolution, winding up, or composition or
readjustment of debts of such Person, the appointment of a trustee, receiver,
custodian, liquidator, assignee, sequestrator or the like for such Person or for
any substantial part of its assets, or any similar action with respect to such
Person 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
such Person 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) such Person 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
shall consent to the appointment of or taking possession by a trustee, receiver,
custodian, liquidator, assignee, sequestrator or the like for such Person 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.
Bankruptcy Loss: With respect to a Contract, if a court of appropriate
jurisdiction in a bankruptcy or insolvency proceeding shall have issued an order
reducing the amount owed on a Contract or otherwise modifying or restructuring
the scheduled payments to be made on a Contract, an amount equal to the excess
of the principal balance of such Contract immediately prior to such order over
the principal balance of such Contract as so reduced or the net present value
(using as the discount rate the higher of the Contract Rate on such Contract 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.
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day
on which commercial banks in Florida, Illinois or the state in which the
Subservicer Account is maintained are authorized or obligated by law or
executive order to be closed.
Certificate: Any one of the Certificates executed by the Trust and
authenticated by the Trustee in substantially the form set forth in Exhibit 5.01
hereto evidencing a fractional undivided interest in the Trust Estate.
Certificate Account: The segregated account created and maintained by the
Trustee in its Corporate Trust Office for the benefit of the Certificateholders
and the Certificate Insurer in accordance with Section 3.11.
Certificate Balance: Initially, the aggregate principal amount of
Certificates issued on the Closing Date and, thereafter, such principal amount
reduced by all amounts distributed to the Certificateholders in respect of the
Certificate Principal Distributable Amount.
3
<PAGE>
Certificate Distributable Amount: On any Distribution Date, the sum of the
Certificate Principal Distributable Amount and the Certificate Interest
Distributable Amount.
Certificate Factor: As of any Distribution Date, a fraction, expressed as
a decimal carried to seven places, the numerator of which is the Certificate
Balance as of such Distribution Date (after giving effect to any distributions
reducing the Certificate Balance of the Certificates on such Distribution Date)
and the denominator of which is the aggregate principal amount of Certificates
issued on the Closing Date.
Certificate Insurer: 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 Certificate Policy.
Certificate Insurer Default: Any one of the following events shall have
occurred and be continuing:
(i) the Certificate Insurer fails to make a payment required under
the Certificate Policy in accordance with its terms;
(ii) the Certificate Insurer (A) files a petition or commences 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, (B)
makes a general assignment for the benefit of its creditors, or (C) has 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
(iii) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority enters a final and
nonappealable order, judgment or decree (1) appointing a custodian,
trustee, agent or receiver for the Certificate Insurer or for all or any
material portion of its property or (2) authorizing the taking of
possession by a custodian, trustee, agent or receiver of the Certificate
Insurer (or the taking of possession of all or any material portion of the
property of the Certificate Insurer).
Certificate Interest Carryover Shortfall: With respect to any Distribution
Date, the excess of (a) the Certificate Interest Distributable Amount for the
preceding Distribution Date plus any outstanding Certificate Interest Carryover
Shortfall with respect to the preceding Distribution Date over (b) the amount of
interest that the holders of the Certificates actually received on such
preceding Distribution Date.
Certificate Interest Distributable Amount: For any Distribution Date, the
sum of (i) thirty (30) days of interest at the Certificate Rate on the
Certificate Balance on such Distribution
4
<PAGE>
Date (before reduction of the Certificate Balance by any distributions made on
such Distribution Date), (ii) the Certificate Interest Carryover Shortfall and
(iii) interest on the Certificate Interest Carryover Shortfall at the
Certificate Rate from the preceding Distribution Date through the current
Distribution Date, to the extent permitted by law.
Certificate Percentage: 91%.
Certificate Policy: The financial guaranty insurance policy number 50410-N
issued by the Certificate Insurer to the Trustee for the benefit of the
Certificateholders on the Closing Date, including any endorsements thereto.
Certificate Principal Carryover Shortfall: With respect to any
Distribution Date, the excess of (i) the Certificate Principal Distributable
Amount for the preceding Distribution Date plus any outstanding Certificate
Principal Carryover Shortfall with respect to the preceding Distribution Date
over (ii) the amount of principal that the holders of the Certificates actually
received on such preceding Distribution Date.
Certificate Principal Distributable Amount: With respect to (i) any
Distribution Date prior to the Final Scheduled Distribution Date, the sum of (a)
the Certificate Percentage of the Principal Distributable Amount, (b) amounts
transferred from the Pre-Funding Account to the Certificate Account on such
Distribution Date, if any, pursuant to Section 3.14(b) less any undistributed
income or gain from investments on deposit in the Pre-Funding Account so
transferred, and (c) the Certificate Principal Carryover Shortfall with respect
to such Distribution Date, and (ii) the Final Scheduled Distribution Date, the
Certificate Balance (before giving effect to any distribution on the
Certificates on such Final Scheduled Distribution Date).
Certificate Rate: 6.36% per annum, any regular monthly computation of
interest at such rate being based upon annual interest at such rate on the
applicable amount divided by twelve; provided that if a Registration Statement
on Form S-3 with respect to the Certificates is not declared effective within
120 days of the Closing Date, the Certificate Rate shall be 6.61% per annum from
the Distribution Date next succeeding expiration of such 120 day period.
Certificate Register: The register maintained pursuant to Section 5.02.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Transferor, the Master Servicer or any affiliate thereof shall be
deemed not to be outstanding and the Percentage Interest evidenced thereby shall
not be taken into account in determining whether the requisite amount of
Percentage Interests necessary to effect any such consent has been obtained;
provided however, that for purposes of determining whether the Trustee shall be
protected in conclusively relying upon any such consent, only Certificates which
a Responsible Officer of the Trustee actually knows are so registered shall not
be so taken into account.
5
<PAGE>
Chase: The Chase Manhattan Bank (USA), as trustee.
Closing Date: The date on which the Certificates are originally issued.
Collateral Agent: Harris Trust and Savings Bank, not in its individual
capacity but solely as collateral agent under the Spread Account Agreement, or
any successor thereto acting as such under the Spread Account Agreement.
Collection Account: The segregated account created and maintained by the
Trustee in its trust capacity for the benefit of Certificateholders and the
Certificate Insurer in accordance with Section 3.10.
Contract: 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 Trustee
hereunder as of the Closing Date or a Subsequent Transfer Date, as the case may
be, and not reassigned, retransferred or otherwise released from the Trust
Estate in accordance herewith, each such Contract being identified in a Contract
Schedule attached to a Transfer Agreement.
Contract Documents: With respect to a Contract, all Contract papers and
documents (including those contained in the Contract File) and all other papers
and records (including computerized data) of whatever kind or description,
whether developed or originated by NAFCO, a Dealer, the Master Servicer or
another Person, required to document the Contract or to service the Contract.
Contract File: With respect to a Contract, the fully executed original of
such Contract; the Assignment of such Contract; the original Title Document or
UCC financing statement evidencing that the security interest in a financed
vehicle granted to NAFCO under such Contract 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 the Transferor
or Master Servicer will deliver, on the Closing Date or the applicable
Subsequent Transfer Date, as the case may be, an Officer's Certificate
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 NAFCO, as agent, as the lienholder or secured party and that
the Transferor or Master Servicer will deliver the originals thereof when
returned from such office); the original of any assumption agreement or any
modification, extension or refinancing and agreement; and the original
application of the related Obligor to obtain the financing extended by such
Contract, fully executed by such Obligor.
Contract Rate: 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.
6
<PAGE>
Contract Schedule: The schedule of Contracts delivered concurrently with
the execution and delivery of a Transfer Agreement to the Trustee and attached
thereto as Schedule 1, such schedule identifying each Contract being transferred
and assigned to the Trust pursuant to such Transfer Agreement by the name of the
Obligor and setting forth as to each such Contract its Individual Sold Balance
as of the applicable Cut-off Date, loan number, Contract Rate, scheduled monthly
payment of principal and interest, final maturity date and original principal
amount.
Conveyance: As defined in Section 2.3(b) of the Purchase Agreement.
Corporate Trust Office: The principal office of the Trustee in the City of
Chicago, Illinois at which at any particular time its corporate business shall
be administered, which office at the date of the execution of this instrument is
located at 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606,
Attention: Indenture Trust Division.
Custodial Agreement: The Custodial Agreement, dated as of November 21,
1995, between NAFCO and OFSA, as assigned to the Trust pursuant to Section 3.19
hereof.
Custodian: OFSA or any successor custodian for the Contract Files
appointed pursuant to Section 3.19.
Cut-off Date: With respect to an Initial Contract, the Initial Cut-off
Date, and with respect to any Additional Contract, the related Subsequent
Cut-off Date.
Dealer: A retail motor vehicle dealer that originated one or more
Contracts and sold the respective Contract to NAFCO.
Dealer Agreement: Each of the respective agreements entered into by a
Dealer and NAFCO whereby the Dealer sold Contracts to NAFCO.
Default Rate: 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
Contracts which became Defaulted Contracts during such Due Period and (y) the
Outstanding Principal Balance of all Contracts that became Retransferred
Contracts during such Due Period and were 30 days or more past due as of the
date such Contracts were retransferred hereunder by (b) the arithmetic average
of the Pool Outstanding Principal Balance as of the end of such Due Period and
the Pool Outstanding Principal Balance as of the end of the preceding Due
Period.
Defaulted Contract: With respect to any Due Period, a Contract 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 Contract is in default and the Master Servicer
(or a Subservicer) has in good faith determined that payments thereunder are not
likely to be resumed or (iii) the Financed Vehicle that secures the Contract
7
<PAGE>
has been repossessed without reinstatement of the Contract on or before the last
day of such Due Period and any applicable redemption period has expired.
Deficiency Notice: as defined in Section 4.04(a) hereof.
Deficiency Claim Amount: as defined in Section 4.04(a) hereof.
Delinquency Ratio: With respect to any Due Period, the quotient, expressed
as a percentage, obtained by dividing (a) the aggregate Outstanding Principal
Balance of all Contracts in the Trust Estate on which a scheduled payment is 30
or more days past due as of the end of such Due Period, by (b) the Pool
Outstanding Principal Balance as of the end of such Due Period.
Delivery: When used with respect to 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 (other
than certificated securities) and are susceptible of physical delivery,
transfer thereof to the Trustee by physical delivery to the Trustee,
indorsed to, or registered in the name of, the Trustee or its nominee or
indorsed in blank and such additional or alternative procedures as may
hereafter become appropriate to effect the complete transfer of ownership
of any such Account Property to the Trustee 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(1)(a) of the UCC), transfer thereof:
(i) by physical delivery of such certificated security to the
Trustee, provided that if the certificated security is in registered form,
it shall be indorsed to, or registered in the name of, the Trustee or
indorsed in blank;
(ii) by physical delivery of such certificated security to a
"financial intermediary" (as defined in Section 8-313(4) of the UCC) of
the Trustee specially indorsed to or issued in the name of the Trustee;
(iii) by the sending by a financial intermediary, not a "clearing
corporation" (as defined in Section 8-102(3) of the UCC), of a
confirmation of the purchase and the making by such financial intermediary
of entries on its books and records identifying as belonging to the
Trustee of (A) a specific certificated security in the financial
intermediary's possession, (B) a quantity of securities that constitute or
are part of a fungible bulk of certificated securities in the financial
intermediary's possession, or (C) a quantity of securities that constitute
or are part of a fungible bulk of securities shown
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on the account of the financial intermediary on the books of another
financial intermediary; or
(iv) by the making by a clearing corporation of appropriate entries
on its books reducing the appropriate securities account of the transferor
and increasing the appropriate securities account of the Trustee or a
person designated by the Trustee by the amount of such certificated
security, provided that in each case: (A) the clearing corporation
identifies such certificated security for the sole and exclusive account
of the Trustee or the person designated by the Trustee, (B) such
certificated security shall be subject to the clearing corporation's
exclusive control, (C) such certificated security is in bearer form or
indorsed in blank or registered in the name of the clearing corporation or
custodian bank or a nominee of either of them, (D) custody of such
certificated security shall be maintained by such clearing corporation or
a "custodian bank" (as defined in Section 8-102(4) of the UCC) or the
nominee of either subject to the control of the clearing corporation and
(E) such certificated security is shown on the account of the transferor
thereof on the books of the clearing corporation prior to the making of
such entries; and such additional or alternative procedures as may
hereafter become appropriate to effect the complete transfer of ownership
of any such Account Property to the Trustee free and clear of any adverse
claims, 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 property to an appropriate
book-entry account maintained with a Federal Reserve Bank by a financial
intermediary which is also a "depositary" pursuant to applicable federal
regulations and issuance by such financial intermediary of a deposit advice or
other written confirmation of such book-entry registration to the Trustee of the
purchase by the financial intermediary on behalf of the Trustee of such
book-entry security; the making by such financial intermediary of entries in its
books and records identifying such book-entry security held through the Federal
Reserve System pursuant to Federal book-entry regulations as belonging to the
Trustee and indicating that such financial intermediary holds such book-entry
security solely an agent for the Trustee; and such additional or alternative
procedures as may hereafter become appropriate to effect complete transfer of
ownership of any such Account Property to the Trustee free of any adverse
claims, consistent with changes in applicable law or regulations or the
interpretation thereof;
(d) with respect to any item of Account Property that is an
"uncertificated security" (as defined in Section 8-102(1)(b) of the UCC) and
that is not governed by clause (c) above, transfer thereof:
(i) by registration of the transfer thereof to the Trustee, on the
books and records of the issuer thereof;
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(ii) by the sending of a confirmation by a financial intermediary of
the purchase, and the making by such financial intermediary of entries on
its books and records identifying as belonging to the Trustee (A) a
quantity of securities which constitute or are part of a fungible bulk of
uncertificated securities registered in the name of the financial
intermediary or (B) a quantity of securities which constitute or are part
of a fungible bulk of securities shown on the account of the financial
intermediary on the books of another financial intermediary; or
(iii) by the making by a clearing corporation of appropriate entries
on its books reducing the appropriate account of the transferor and
increasing the account of the Trustee or a person designated by the
Trustee by the amount of such uncertificated security, provided that in
each case: (A) the clearing corporation identifies such uncertificated
security for the sole and exclusive use of the Trustee or the person
designated by the Trustee, (B) such uncertificated security is registered
in the name of the clearing corporation or a custodian bank or a nominee
of either, and (C) such uncertificated security is shown on the account of
the transferor on the books of the clearing corporation prior to the
making of such entries; and
(e) in each case of delivery contemplated herein, the Trustee shall make
appropriate notations on its records, and shall cause same to be made of the
records of its nominees, indicating that such securities are held in trust
pursuant to and as provided in this Agreement.
Determination Date: With respect to a Distribution Date, the last day of
the related Due Period.
Distribution Date: The 21st day of any month, commencing November 21,
1995, or, if such 21st day is not a Business Day, the Business Day immediately
following.
Draw Date: With respect to a Distribution Date, the fourth Business Day
immediately preceding such Distribution Date.
Due Date: With respect to a Contract, the date in each Due Period on which
a scheduled payment on such Contract is due.
Due Period: With respect to a 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.
Eligible Account: (i) A segregated trust account that is maintained with
the corporate trust department of a depository institution or trust company
acceptable to the Certificate Insurer (unless a Certificate 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)), (ii) a segregated direct deposit account maintained with a
depository institution or trust company organized under the laws of the United
States of
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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
Certificate Insurer Default has occurred and is continuing) acceptable to the
Certificate Insurer, or (iii) a segregated direct deposit account maintained
with a depository institution or trust company and fully insured by the Federal
Deposit Insurance Corporation and, unless a Certificate Insurer Default has
occurred and is continuing, acceptable to the Certificate Insurer.
Eligible Servicer: The Master Servicer, the Standby Servicer or another
Person that, at the time of its appointment as Master 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 Contracts 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 Contracts with
reasonable skill and care.
Final Scheduled Distribution Date: The Distribution Date occurring in
September, 2001.
Financed Vehicle: The new or used automobile, light-duty truck, van or
minivan, together with all accessories thereto, securing the indebtedness of the
Obligor under the related Contract.
First Union: First Union Capital Markets Corp.
Governmental Authority: (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.
Grant: To grant, bargain, sell, warrant, alienate, devise, release,
convey, assign, transfer, mortgage, pledge, create and grant a security interest
in and right of set-off against, deposit, set over and confirm.
Guaranteed Distributions: As defined in the Certificate Policy.
Indemnification Agreement: The Indemnification Agreement dated as of the
Closing Date among the Certificate Insurer, the Transferor and First Union.
Individual Sold Balance: With respect to any Contract, the original
principal balance of such Contract 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 Contract based on the amortization method provided in such Contract.
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Initial Contract: Each Contract transferred and assigned to the Trust on
the Closing Date.
Initial Cut-off Date: September 30, 1995.
Initial Spread Account Deposit: As defined in the Spread Account
Agreement.
Insurance Agreement: The Insurance and Indemnity Agreement, dated as of
the Closing Date, among the Transferor, NAFCO and the Certificate Insurer, as
amended or supplemented in accordance with the provisions thereof.
Insurance Agreement Event of Default: An "Event of Default" as defined in
the Insurance Agreement.
Insurance Proceeds: Proceeds paid by any insurer pursuant to any insurance
policy covering a Financed Vehicle or the related Obligor.
Internal Revenue Code: The Internal Revenue Code of 1986.
Liquidated Contract: With respect to any Due Period, a Contract 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 Master Servicer (or a Subservicer) has in good faith determined that all
amounts that it expects to recover under such Contract have been received, or
(iii) 90% of any scheduled payment on such Contract is 120 days or more
delinquent as of the end of such Due Period.
Liquidation Expenses: Reasonable out-of-pocket expenses which are incurred
by the Master Servicer or any Subservicer in connection with the liquidation of
any Defaulted Contract. Such expenses shall include, without limitation, legal
fees and expenses, any unreimbursed amount expended by the Master Servicer or
any Subservicer pursuant to Section 3.08 (to the extent such amount is
reimbursable under the terms of Section 3.08) respecting the related Contract,
and any related and unreimbursed expenditures for property restoration or
preservation.
Liquidation Proceeds: With respect to a Liquidated Contract, all amounts
(including, without limitation, Insurance Proceeds) realized with respect to
such Contract net of amounts that are required to be refunded to the Obligor on
such Contract; provided however, that the Liquidation Proceeds with respect to
any Contract shall in no event be less than zero.
Lockbox Account: Any bank account maintained at a Lockbox Bank into which
collections under the Contracts are deposited in accordance with Section 3.06.
Lockbox Agreement: A letter agreement among a Lockbox Bank, the
Transferor, NAFCO, the Trustee, the Master Servicer and, if applicable, any
Subservicer, relating to one
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or more Lockbox Accounts, as the same may be amended, supplemented, amended and
restated or otherwise modified from time to time. So long as no Certificate
Insurer Default shall have occurred and be continuing, any Lockbox Agreement is
also required to be acceptable to the Certificate Insurer.
Lockbox Bank: 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 Certificate Insurer Default shall have occurred and be
continuing, any Lockbox Bank is also required to be acceptable to the
Certificate Insurer.
Master Servicer: NAFCO, or its successor in interest, or any successor
Master Servicer appointed as provided in Section 7.01 or 7.02.
Master Servicing Fee: As to any Due Period, the monthly fee payable to the
Master Servicer, which, as long as either NAFCO or the Standby Servicer is the
Master Servicer, shall be equal to 1/12 of the product of (i) 2.0 percent and
(ii) the Pool Outstanding Principal Balance as of the close of business on the
last Business Day of the preceding Due Period. The Master Servicing Fee for any
successor Master Servicer other than the Standby Servicer shall be determined as
provided in Section 7.02.
Master Trust: National Financial Auto Receivables Master Trust.
Monthly Interest: For any Distribution Date, thirty (30) days of interest
at the Certificate Rate on the Certificate Balance on such Distribution Date
(before reduction of the Certificate Balance by any distributions made on such
Distribution Date).
Moody's: Moody's Investors Service, Inc., a corporation organized and
existing under the laws of the State of Delaware, its successors and their
assigns, and if such corporation shall for any reason no longer perform the
functions of a securities rating agency, Moody's shall be deemed to refer to any
other nationally recognized statistical rating organization designated by the
Certificate Insurer.
NAFCO: National Auto Finance Company L.P., a Delaware limited partnership.
Net Loss Rate: 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 Outstanding Principal Balances of all
Contracts that became Liquidated Contracts in such Due Period and (2) accrued
and unpaid interest on such Outstanding Principal Balances at the related
Contract Rates through the end of such Due Period and (3) the amount of any
Bankruptcy Losses, over (B) the Liquidation Proceeds received by the Trust
during such Due Period with respect to all Liquidated Contracts in the Trust
(including Liquidated Contracts that became Liquidated Contracts in a prior Due
Period) less all Liquidation Expenses incurred during such Due Period and the
denominator of which equals the arithmetic average of the Pool
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Outstanding Principal Balance as of the end of such Due Period and the Pool
Outstanding Principal Balance as of the last day of the preceding Due Period.
Non-Simple Interest Contract: A Contract which is not a Simple Interest
Contract.
Notice of Claim: The notice required to file a claim under the Certificate
Policy.
Obligor: The purchaser or the co-purchasers of the Financed Vehicle and
any other Person or Persons who are primarily or secondarily obligated to make
the payments required by a Contract.
Officer's Certificate: A certificate signed by a Co-Trustee of the
Transferor or the Chairman of the Board, President, Executive Vice President,
Senior Vice President, Vice President, or Assistant Vice President of the
Custodian, NAFCO or by a Servicing Official, as the case may be, and delivered
to the Trustee, as required by this Agreement.
OFSA: Omni Financial Services of America, Inc., a Florida corporation, or
any substitute Subservicer performing substantially the same services on behalf
of the Master Servicer as OFSA performs pursuant to the Subservicing Agreement,
dated as of December 8, 1994, as amended as of the Closing Date, between the
Master Servicer and OFSA.
Opinion of Counsel: A written opinion in form reasonably satisfactory to
the Trustee (and the Certificate Insurer if such opinion is addressed to the
Certificate Insurer) of counsel reasonably satisfactory to the Trustee (and the
Certificate Insurer if such opinion is addressed to the Certificate Insurer).
Any such counsel may be counsel to the Transferor.
Original Pool Outstanding Principal Balance: The aggregate Individual Sold
Balances of all of the Contracts as of their respective Cut-off Dates.
Outstanding Principal Balance: As of any date and with respect to any
Contract, the outstanding principal balance of such Contract as of such date
which shall be computed by reducing the Individual Sold Balance thereof on the
applicable Cut-off Date (i) by the principal portion of each payment applied to
such Contract on or after the applicable Cut-off Date in accordance with the
terms of such Contract and processed by the Master Servicer or a Subservicer on
or before such date and (ii) by any Bankruptcy Loss in respect of such Contract;
provided however, that for any date following the Due Period in which the
remaining principal balance of such Contract was included in the Principal
Distributable Amount as a Liquidated Contract or was subject to a Principal
Prepayment in Full (including a retransfer pursuant to Sections 2.02, 2.03 or
3.01), the Outstanding Principal Balance for such Contract shall be zero.
Paying Agent: The Person, if any, appointed as such pursuant to Section
5.05.
Percentage Interest: As to any Certificate, the percentage interest
evidenced thereby in distributions required to be made with respect to the
Certificates, such percentage interest being
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equal to the percentage obtained by dividing the denomination of such
Certificate by the aggregate of the denominations of all Certificates.
Permitted Investments: One or more of the following:
(a) (i) direct interest-bearing obligations of, and interest-bearing
obligations guaranteed as to timely payment of principal and interest by,
the United States or any agency or instrumentality of the United States
the obligations of which are backed by the full faith and credit of the
United States; or (ii) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal
and interest by, the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation, but only if, at the time of investment,
such obligations are assigned the highest credit rating by each Rating
Agency;
(b) demand or time deposits in, certificates of deposit of, or
bankers' acceptances issued by any depository institution or trust company
organized under the laws of the United States or any State and subject to
supervision and examination by federal and/or State banking authorities
(including, if applicable, the Trustee or any agent of the Trustee acting
in its commercial capacities); provided that the short-term unsecured debt
obligations of such depository institution or trust company at the time of
such investment, or contractual commitment providing for such investment,
are assigned the highest credit rating by each Rating Agency;
(c) 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);
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any State
whose long-term unsecured debt obligations are assigned the highest credit
rating by each Rating Agency at the time of such investment or contractual
commitment providing for such investment; provided however, that
securities issued by any particular corporation will not be Permitted
Investments to the extent that an investment therein will cause the then
outstanding principal amount of securities issued by such corporation and
held in the Accounts to exceed 10% of the Permitted Investments held in
the Accounts (with Permitted Investments held in the Accounts valued at
par);
(e) commercial paper that (i) is payable in United States dollars
and (ii) is rated in the highest credit rating category by each Rating
Agency; and
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(f) (i) money market mutual funds rated in the highest rating
category of each Rating Agency and investing only in other Permitted
Investments, any such market funds which provide for demand withdrawals
being conclusively deemed to satisfy any maturity requirements for
Permitted Investments set forth in this Agreement, and (ii) any other
demand or time deposit, obligations security or investment, provided in
the case of either (i) or (ii) such investments shall be acceptable to the
Certificate Insurer, as evidenced by the prior written consent of the
Certificate Insurer (or if a Certificate Insurer Default has occurred and
is continuing, each Rating Agency), as may from time to time be confirmed
in writing to the Trustee by the Certificate Insurer or the Rating
Agencies, as applicable.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Physical Property: The "instruments" and "certificated securities"
described in subparagraphs (a) and (b) of the definition of "Delivery" in this
Article I.
Placement Agent Agreement: The Placement Agent Agreement dated as of the
Closing Date by and between the Transferor and First Union.
Policy Claim Amount: As defined in Section 4.04(b).
Pool Outstanding Principal Balance: As to any Distribution Date, the
aggregate Outstanding Principal Balances of the Contracts at the end of the Due
Period preceding such Distribution Date and, as of the Initial Cut-off Date, the
aggregate Individual Sold Balances of the Initial Contracts on the Initial
Cut-off Date.
Pre-Funding Account: The segregated account created and maintained by the
Trustee in its trust capacity for the benefit of the Certificateholders in
accordance with Section 3.14.
Pre-Funding Period: The period from the Closing Date until the earliest of
(i) the occurrence of an Amortization Event, (ii) the date on which the balance
of funds on deposit in the Pre-Funding Account is reduced to zero and (iii) the
close of business on December 31, 1995.
Pre-Funding Period Reserve Account: The segregated account created and
maintained by the Trustee in its trust capacity for the benefit of the
Certificateholders in accordance with Section 3.12.
Preference Claim: As defined in Section 4.05(b).
Principal Distributable Amount:
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(i) With respect to any Distribution Date following the calendar month in
which the Revolving Period terminates (other than the Final Scheduled
Distribution Date), the sum of (a) that portion of all collections on the
Contracts (other than Liquidated Contracts, Retransferred Contracts and, to the
extent included in clause (d) below, Retransfer Default Contracts) allocable to
principal, including all full and partial principal prepayments, on deposit in
the Collection Account at the close of business of the last day of the related
Due Period, (b) the Outstanding Principal Balance of all Contracts that became
Liquidated Contracts during the related Due Period (other than Liquidated
Contracts that became Retransferred Contracts during such Due Period and, to the
extent included in clause (d) below, the Outstanding Principal Balance of
Retransfer Default Contracts), (c) the portion of the Retransfer Amount
allocable to principal of all Contracts that became Retransferred Contracts on
or prior to the related Reporting Date and subsequent to the preceding Reporting
Date, (d) in the sole discretion of the Certificate Insurer, the Outstanding
Principal Balance as of the related Reporting Date of all Retransfer Default
Contracts, (e) the aggregate amount of Bankruptcy Losses that occurred during
the related Due Period, (f) the amount, if any, transferred by the Trustee to
the Certificate Account from the Revolving Account pursuant to Section 3.13(b).
(ii) With respect to any Distribution Date occurring prior to or during
the calendar month in which the Revolving Period terminates, the sum of (a) the
aggregate Outstanding Principal Balance of all Contracts that became Liquidated
Contracts during the related Due Period and (b) the amount, if any, transferred
by the Trustee to the Certificate Account from the Revolving Account on such
Distribution Date pursuant to Section 3.13(b).
Principal Prepayment in Full: Any prepayment of the entire principal
balance of a Contract. Contracts required to be retransferred to the Transferor
pursuant to Section 2.02 or 2.03 during a Due Period shall be deemed to have
been subject to a Principal Prepayment in Full during such Due Period.
Purchase Agreement: The Purchase and Contribution Agreement, dated October
1, 1995, between the Transferor and NAFCO and all amendments thereof and
supplements thereto.
Purchase Agreements: The Purchase Agreement and the Assignment Agreement.
Rating Agencies: Standard & Poor's and Moody's.
Record Date: With respect to any Distribution Date, the last day of the
preceding calendar month.
Registrar of Titles: The agency, department or office having the
responsibility for maintaining records of titles to motor vehicles and issuing
documents evidencing such titles in the jurisdiction in which a particular
Financed Vehicle is registered.
Registration Rights Agreement: The Registration Rights Agreement to be
entered into between the Transferor and the initial Certificateholders.
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Reporting Date: 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: Any action taken or to be taken pursuant to the UCC or other
applicable laws in connection with recovery on a defaulted Contract (including
any Liquidated Contract), 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 Contract, or a levy on and sheriff's
sale of the related Financed Vehicle in enforcement of a judgment on such
defaulted Contract or by voluntary surrender or otherwise.
Required Reserve Amount: With respect to any Distribution Date, an amount
equal to the product of (i) a per annum rate equal to the Certificate Rate less
250 basis points (2.50%), (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) December 31, 1995, and the
denominator of which is 360.
Requisite Amount: As defined in the Spread Account Agreement.
Responsible Officer: With respect to the Trustee, any officer within the
Corporate Trust Office of the Trustee including any Vice President, Assistant
Vice President, Secretary or Assistant Secretary, or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also, with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
Retransfer Amount: With respect to any Contract required to be
retransferred to the Transferor pursuant to Section 2.02 or 2.03 or the Master
Servicer pursuant to Section 3.01, an amount equal to the sum of (i) 100% of the
Outstanding Principal Balance thereof on the date of retransfer and (ii) unpaid
accrued interest at the applicable Contract Rate on the Outstanding Principal
Balance thereof on the date of retransfer from the date to which interest was
last paid by the Obligor to the Due Date in the Due Period in which such
retransfer occurs. For purposes of determining the Retransfer Amount of any
Contract, the Outstanding Principal Balance thereof on the date of retransfer
shall not be reduced to zero as a result of its classification as a Liquidated
Contract.
Retransferred Contract: Any Contract retransferred to the Transferor or
the Master Servicer pursuant to Section 2.02, Section 2.03 or Section 3.01
hereof.
Retransfer Default Contract: Any Contract with respect to which the
Transferor or the Master Servicer is required to deposit in the Collection
Account the related Retransfer Amount pursuant to Section 2.02, Section 2.03 or
Section 3.01 and has not so deposited such amount on
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the Reporting Date on which it is required to repurchase such Contract following
receipt of notice from the Trustee that such Contract is required to be
retransferred.
Revolving Account: The segregated account created and maintained by the
Trustee in its trust capacity for the benefit of the Certificateholders and the
Certificate Insurer in accordance with Section 3.13.
Revolving Period: The period from and including the Closing Date until the
earlier of (i) the date on which an Amortization Event occurs and (ii) the close
of business on April 30, 1996.
Rule of 78's Method: The method of allocating a fixed level payment
between principal and interest based upon the "sum of periodic balances" or "sum
of monthly payments" method.
Servicer Default: As defined in Section 7.01.
Servicing Official: Any employee of the Master Servicer involved in, or
responsible for, the administration and servicing of the Contracts whose name
appears on a list of servicing employees furnished to the Trustee and the
Certificate Insurer by the Master Servicer, as such list may from time to time
be amended.
Simple Interest Method: The method of allocating a fixed level payment
between principal and interest, pursuant to which the portion of such payment
that is allocated to interest is the product of a fixed rate of interest
multiplied by the unpaid principal balance multiplied by the period of time
(expressed as a fraction of a year) between (a) the date such payment is
received and (b) the date the prior scheduled payment was received, or in the
case of the first payment, the date of the Contract.
Spread Account: The Spread Account established and maintained pursuant to
the Spread Account Agreement. The Spread Account shall in no event be deemed
part of the Trust Estate.
Spread Account Agreement: The Master Spread Account Agreement, dated as of
the Closing Date, among the Transferor, the Certificate Insurer, the Collateral
Agent and the Trustee substantially in the form attached hereto as Exhibit E, as
the same may be amended, supplemented or otherwise modified in accordance with
the terms thereof.
Standard & Poor's: Standard & Poor's Ratings Service, its successors and
their assigns, and if Standard & Poor's Ratings Service shall for any reason no
longer perform the functions of a securities rating agency, "Standard & Poor's"
shall be deemed to refer to any other nationally recognized statistical rating
organization designated by the Certificate Insurer.
Standby Servicer: Harris Trust and Savings Bank, or any successor thereto
under the Standby Servicing Agreement.
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Subsequent Cut-off Date: With respect to any Subsequent Transfer Date, the
third Business Day prior thereto.
Subsequent Transfer Date. Any day on which Additional Contracts are
transferred and assigned to the Trust pursuant to Section 2.06.
Subservicer: Any Person that is subservicing a Contract pursuant to a
Subservicing Agreement pursuant to Section 3.02.
Subservicer Account: The account maintained by OFSA with Mellon Financial
Services to which Obligors have been or will be instructed to remit payments in
respect of the Contracts.
Subservicing Agreement: The written contract between the Master Servicer
and any Subservicer relating to the servicing and/or administration of certain
Contracts as provided in Section 3.02.
Supplemental Servicing Fee: 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.
Taxes: Motor vehicle registration fees or taxes, personal property or
other ad valorem taxes, and all other similar fees and taxes imposed by a
governmental unit with respect to the ownership or use of a Financed Vehicle.
Title Documents: 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.
Total Retransfer Amount: As defined in Section 9.01.
Transaction Documents: This Agreement, the Assignment Agreement, the
Purchase Agreement, the Certificates, the Insurance Agreement, the
Indemnification Agreement, each Conveyance, the Spread Account Agreement, the
Placement Agent Agreement, the Custodial Agreement, the Premium Letter, and any
Transfer Agreement.
Transfer Agreement: As defined in Section 2.01(b).
Transferor: National Financial Auto Funding Trust, a Delaware business
trust.
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Transferor Interest: The interest in the Trust held by the Transferor
evidencing the right of the Transferor to all distributions pursuant to Section
4.01(b)(xi) hereof and to any assets remaining in the Trust upon termination of
this Agreement and the Insurance Agreement.
Transferor Trust Agreement: The First Amended and Restated Trust
Agreement, dated as of December 8, 1994, as amended as of the Closing Date
between the Transferor and The Chase Manhattan Bank (USA), as trustee.
Trigger Event: As defined in the Spread Account Agreement.
Trust: The National Auto Finance 1995-1 Trust created by this Agreement.
Trust Estate: The corpus of the Trust, consisting of (i) the Contracts,
(ii) all monies paid or payable thereunder on or after the applicable Cut-off
Date, (iii) the Contract Files, (iv) such assets as shall from time to time be
identified as deposited in the Collection Account, the Certificate Account, the
Pre-Funding Account, the Pre-Funding Period Reserve Account and the Revolving
Account, (v) property that secured a Contract and that has been acquired by
Repossession or otherwise, (vi) all rights to Insurance Proceeds and Liquidation
Proceeds, (vii) the Transferor's right, title and interest in, to and under the
Purchase Agreements, (viii) the Certificate Policy, (ix) NAFCO's rights against
Dealers under the Dealer Agreements in respect of the representations and
warranties made by the Dealer thereunder with regard to the related Contracts
and (x) the proceeds of the foregoing and the rights to enforce the foregoing.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
Unearned Finance Charge: With respect to any Contract, the amount of the
add-on finance charge that, under the term of such Contract, would be required
to be refunded or credited to the related Obligor in accordance with such
Contract if such Contract were then prepaid in full.
Section 1.02. Calculations as to Principal and Interest in Respect of
Contracts. For all purposes of this Agreement the allocation of a payment on a
Contract between principal and interest shall be made based upon the
amortization method provided in such Contract. For purposes of allocating a
pay-ahead payment on a Contract between principal and interest, the pay-ahead
shall be deemed to have been received on the date it was actually due. For all
purposes of this Agreement, no amount shall be treated as collected under a
Contract until such amount has been deposited into the Collection Account.
Section 1.03. 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 Certificateholders (or any similar or analogous determination), such
determination shall be made without taking into account the insurance provided
by the Certificate Policy.
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ARTICLE II
Creation of Trust;
Transfer of Trust Estate;
Original Issuance of Certificates
Section 2.01. Creation of Trust: Transfer of Trust Estate.
(a) The Trust hereby is created. The Transferor hereby appoints the
Trustee as trustee of the Trust effective as of the Closing Date, and the
Trustee hereby acknowledges and accepts such appointment. The Trust shall be
administered pursuant to the provisions of this Agreement for the benefit of the
Certificateholders, the Certificate Insurer and the Transferor. The Trustee is
hereby specifically empowered to conduct any business dealings with the
Transferor and the Master Servicer on behalf of the Trust, and shall have all
the rights, powers and duties of the Trustee set forth in this Agreement. The
parties hereto intend that the Trust constitute a trust under the laws of the
State of New York.
(b) The Transferor does hereby transfer, assign, set-over and
otherwise convey to the Trustee, without recourse (except as otherwise
specifically provided in this Agreement), and does hereby grant to the Trustee,
in trust for the exclusive use and benefit of all present and future
Certificateholders and the Certificate Insurer, all the right, title and
interest of the Transferor in and to the Contracts and all other items in the
Trust Estate (other than the Certificate Policy), whether now owned or hereafter
acquired. The foregoing transfer and assignment does not constitute and is not
intended to result in an assumption by the Trustee, any Certificateholder or the
Certificate Insurer of any obligation of the Transferor or the Master Servicer
to the Obligors, Dealers, insurers or any other Person in connection with the
Contracts, the Contract Files, or the insurance policies or any agreements or
instruments relating to any of them. In connection with each transfer of
Contracts by the Transferor to the Trust, the Transferor agrees, at its own
expense, on or before the Closing Date or the applicable Subsequent Transfer
Date, to deliver to the Trustee and the Certificate Insurer a written assignment
(including an acceptance by the Trustee on behalf of the Trust) covering such
Contracts in substantially the form of Exhibit 2.01 (each, a "Transfer
Agreement").
(c) The Transferor intends that the transfer and assignment of
Contracts by the Transferor to the Trust constitute an absolute transfer to the
Trust of all the Transferor's right, title, and interest in and to the Contracts
and the remainder of the Trust Estate (other than the Certificate Policy);
provided that, in the event that, notwithstanding the intent of the Transferor,
the transfer is not held to be a sale, then it is intended that the conveyance
shall be deemed to be a grant of a security interest in the Contracts and the
remainder of the Trust Estate. By the transfer, assignment and set-over
contemplated by this Section 2.01, the Transferor further grants and transfers
to the Trustee, for the benefit of all Certificateholders, and the Certificate
Insurer a first priority, perfected security interest, as their respective
interests appear in Section 4.01, in all of the Transferor's right, title and
interest in, to and under the Contracts and the remainder of the Trust Estate,
whether now existing or hereafter acquired, and
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agrees that this Agreement shall also constitute a security agreement under
applicable law. On or prior to the Closing Date, the Transferor shall have filed
a UCC financing statement or statements, appropriate under the applicable UCC,
to reflect the assignment of the Contracts and the remainder of the Trust Estate
(other than the Certificate Policy) by the Transferor to the Trustee and the
Certificate Insurer and to protect the Certificateholders' and the Certificate
Insurer's interest in the Contracts, 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 Transferor
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 Trustee, the Master Servicer and the Certificate
Insurer; provided however, that the Trustee, the Master Servicer and the
Certificate Insurer shall, subject to the last sentence of this paragraph, have
no right or power to prohibit a change in the Transferor's name, identity or
structure or a relocation of, its chief executive office or principal place of
business. If any change in the Transferor'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 Transferor, promptly but in no
event later than thirty days after the effective date of such change, shall file
such amendments or take such other actions as may be required to preserve and
protect the Trustee's interest in the Contract and proceeds thereof and the
Financed Vehicles and the remainder of the Trust Estate. Promptly after filing
such amendments or taking such other action, the Transferor shall deliver to the
Trustee and the Certificate 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 Trustee in the Trust Estate have
been filed and reciting the details thereof.
(d) The Master Servicer shall be responsible for maintaining, and
shall maintain and cause the respective Subservicers, if any, to maintain, a
complete set of books and records (including tapes and disks for computer use)
for each Contract to the extent that such books and records were delivered to
the Master Servicer or such Subservicer or were developed by it during the
course of servicing such Contract. The Master Servicer shall, and shall cause
the respective Subservicers to, maintain such books of account and other records
as will enable the Trustee to determine the ownership status of each Contract;
provided however, that neither the Master Servicer nor any Subservicer shall be
required to physically mark or segregate any Contracts or other Contract
Documents to indicate such ownership status. Promptly after the Closing Date and
each Subsequent Transfer Date, the Transferor and the Master Servicer shall
deliver to the Custodian all Contract Documents in its possession or under its
control, and shall promptly deliver to the Custodian any Contract Documents that
subsequently come into its possession or within its control. NAFCO hereby
warrants, represents and covenants to and with the Trustee and the Certificate
Insurer that recordation of the name of NAFCO as lienholder in the Title
Documents respecting any Financed Vehicle as well as such lien itself is
maintained by NAFCO as agent for the Trustee for the benefit of the Trust and
NAFCO has no equitable ownership in the Contracts, except as it may have by
virtue of ownership of a Certificate or an equity interest in the Transferor or
any Certificateholder.
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(e) On the Closing Date, the Transferor shall deliver to the Trustee
for deposit in the Collection Account, or to the extent received by the Master
Servicer or any Subservicer, cause the Master Servicer to deliver or cause to be
delivered to the Trustee for deposit in the Collection Account, all payments
received on the Contracts 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 Transferor shall deliver to the Trustee
for deposit in the Collection Account, or to the extent received by the Master
Servicer or any Subservicer, cause the Master Servicer to deliver or cause to be
delivered to the Trustee for deposit in the Collection Account, all payments
received on the Contracts on or after the applicable Cut-off Date and on or
before such Subsequent Transfer Date.
Section 2.02. Acceptance by Trustee. The Trustee, 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
Contract File relating to each Contract. It is understood and agreed that OFSA
makes no representation as to the contents of the Contract File. If the Master
Servicer or any such Subservicer subsequently finds any document or documents
constituting a part of a Contract File to be missing or defective in any
material respect, the Master Servicer or such Subservicer shall promptly so
notify the Trustee, the Certificate Insurer and the Transferor in writing, and
the Master Servicer shall add such item to the exceptions list. The Transferor
shall use best efforts to cure each such omission or defect on the exceptions
list. If the Transferor does not correct or cure any such omission or defect
within sixty (60) days from the date the Trustee was notified of such omission
or defect, then the Transferor shall promptly accept a retransfer of the related
Contract from the Trustee. The Retransfer Amount for the retransferred Contract
shall be delivered by the Transferor to the Trustee for deposit in the
Collection Account and upon receipt of the Retransfer Amount by the Trustee and
its receipt of written notice thereof, the Trustee shall cause the Custodian to
release to the Transferor the related Contract File and the Trustee shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as shall be reasonably necessary to vest in the Transferor or
its designee any Contract released pursuant hereto. It is understood and agreed
that the obligation of the Transferor to accept a retransfer of any Contract 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
Certificateholders or the Trustee on behalf of Certificateholders.
Section 2.03. Representations, Warranties and Covenants of the Master
Servicer and the Transferor. (a) The Master Servicer hereby represents, warrants
and covenants to the Trustee and the Certificate Insurer that as of the Closing
Date and each Subsequent Transfer Date:
(i) the Master 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 Master
Servicer has the full power and authority to own its property, to carry on
its business as presently
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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 Master 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
Master 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 Master Servicer to make
each of the Transaction Documents to which it is a party valid and binding
upon the Master Servicer (subject as aforesaid in the preceding clause);
(ii) the Master Servicer is not required to obtain the consent of
any other party or obtain the consent, license, approval or authorization
of, or make any registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of each of the Transaction
Documents to which it is a party;
(iii) the consummation of the transactions contemplated by the
Transaction Documents will not result in the breach of any term or
provision of the partnership agreement of the Master 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 Master Servicer or
its property is subject, or result in the creation or imposition of any
Lien upon any of the properties pursuant to the terms of any such
agreement indenture or loan or credit agreement or other instrument (aside
from the lien created pursuant to this Agreement) or result in the
violation of any law, rule, regulation, order, judgment or decree to which
the Master Servicer or its property or the Contracts are subject;
(iv) the Master Servicer is not a party to, bound by or in breach or
violation of any indenture or other agreement or instrument, or subject to
or in violation of any statute, order or regulation of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over it, which materially and adversely affects, or may in
the future materially and adversely affect, the ability of the Master
Servicer to perform its obligations under this Agreement or the interest
of the Certificateholders, the Trust or the Certificate Insurer in any
material respect;
(v) there are no actions, suits, proceedings or investigations
pending or, to the Master Servicer's knowledge, threatened against the
Master Servicer, before any court, regulatory body, administrative agency
or other tribunal or governmental instrumentality (A) asserting the
invalidity of this Agreement or any of the Transaction Documents, (B)
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seeking to prevent the issuance of the Certificates or the consummation of
any of the transactions contemplated by the Transaction Documents, (C)
seeking any determination or ruling that might materially and adversely
affect the performance by the Master Servicer of its obligations under, or
the validity or enforceability of, this Agreement or any of the
Transaction Documents, (D) involving the Master Servicer and which might
adversely affect the federal income tax or other federal, state or local
tax attributes of the Certificates, or (E) that could have a material
adverse effect on the Contracts. To the Master Servicer's knowledge, there
are no proceedings or investigations pending or threatened against the
Master Servicer, before any court, regulatory body, administrative agency
or other tribunal or governmental instrumentality having jurisdiction over
the Master Servicer or its properties relating to the Master Servicer
which might adversely affect the federal income tax or other federal,
state or local tax attributes of the Certificates;
(vi) the chief executive office of the Master Servicer is located at
One Park Place, 621 NW 53rd Street, Boca Raton, Florida 33487; and
(vii) the Subservicing Agreement is enforceable against the Master
Servicer and has been duly authorized by all necessary corporate action of
the Master Servicer and has been duly executed and delivered by the Master
Servicer.
It is understood and agreed that the representations and warranties set
forth in this Section 2.03(a) shall survive delivery of the respective Contract
Files to the Custodian and the Subservicers, if any, on behalf of the Trustee
and shall survive as long as any Certificate shall be outstanding or this
Agreement has not been terminated. Upon discovery by the Transferor, the Master
Servicer or a Responsible Officer of the Trustee of a breach of any of the
representations and warranties set forth in this Section 2.03(a) which
materially and adversely affects the interests of the Certificateholders or the
Certificate Insurer in any Contract, the party discovering such breach shall
give prompt written notice thereof to the other parties and to the Certificate
Insurer. In addition to the foregoing, the Master Servicer shall indemnify the
Transferor, the Trustee, the Certificate Insurer, the Trust and the
Certificateholders 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 2.03(a).
(b) The Transferor hereby represents, warrants and covenants to the
Trustee, the Certificate Insurer and the Master Servicer that as of the Closing
Date and each Subsequent Transfer Date:
(i) the Transferor 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
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necessary to take action under this Agreement and the other Transaction
Documents; the Transferor has the full power and authority to own its
property, to carry on its business as presently conducted, and to execute,
deliver and perform this Agreement (including all instruments of transfer
to be delivered pursuant to this Agreement) and the other Transaction
Documents by the Transferor and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized;
this Agreement evidences the valid, binding and enforceable obligations of
the Transferor (subject to applicable bankruptcy and insolvency laws and
other similar laws affecting the enforcement of creditors' rights
generally whether enforcement is sought in a proceeding in equity or at
law); and all requisite action has been taken by the Transferor to make
this Agreement and the other Transaction Documents valid and binding upon
the Transferor (subject as aforesaid in the preceding clause);
(ii) the Transferor 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;
(iii) 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 Transferor
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
Transferor or its property is subject or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of
any such agreement, indenture or loan or credit agreement or other
instruments (aside from the lien created pursuant to this Agreement), or
result in the violation of any law (including, without limitation, any
bulk transfer or similar law), rule, regulation, order, judgment or decree
to which the Transferor or its property or the Contracts are subject;
(iv) no statement, report or other document furnished or to be
furnished pursuant to this Agreement or in connection with the transaction
contemplated hereby contains or will, when furnished, contain any untrue
statement of a material fact or omits or will, when furnished, omit to
state a material fact necessary to make the statements contained therein
not misleading, in light of the circumstances under which they were made;
(v) neither the Transferor 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
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ability of the Transferor to perform its obligations under this Agreement
or any other Transaction Document;
(vi) this Agreement and each Transfer Agreement, when duly executed
and delivered, shall effect a valid sale, transfer and assignment of the
Contracts and the remaining Trust Estate, enforceable against the
Transferor and creditors of and purchasers from the Transferor;
(vii) there are no proceedings or investigations pending or, to the
Transferor's knowledge, threatened against the Transferor or NAFCO, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Transferor or
its properties (a) asserting the invalidity of this Agreement or any of
the Transaction Documents, (b) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated
by this Agreement or any of the Transaction Documents, (c) seeking any
determination or ruling that might materially and adversely affect the
performance by the Transferor of its obligations under, or the validity or
enforceability of, this Agreement or any of the Transaction Documents, (d)
involving the Transferor and which might adversely affect the federal
income tax or other federal, state or local tax attributes of the
Certificates, or (e) that could have a material adverse effect on the
Contracts.
(viii) the Transferor 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;
(ix) the Transferor shall not take any action to impair the
Trustee's rights on behalf of the Certificateholder and the Certificate
Insurer in any Contract;
(x) the Transferor 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;
(xi) since the date of its organization, the Transferor 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 Transferor's
chief executive office during the four (4) months preceding the Closing
Date;
(xii) Transferor is solvent and will not become insolvent after
giving effect to the transactions contemplated hereunder; Transferor is
paying its debts as they become due; Transferor, after giving effect to
the contemplated transactions, will have adequate capital to conduct its
business;
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(xiii) since February 1995, "National Financial Auto Funding Trust"
is the only trade name under which the Transferor has operated its
business and, prior to such date, NAFCO Funding Trust was the only trade
name under which the Transferor operated its business;
(xiv) the Transferor 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;
(xv) the Transferor is not and shall not be involved in the
day-to-day or other management of its parent or any of its affiliates;
(xvi) the Transferor's financial statements shall reflect its
separate legal existence from any of its affiliates;
(xvii) the Transferor shall maintain records and books of account of
the Transferor and shall not commingle such records and books of account
with the records and books of account of any Person;
(xviii) the Transferor 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;
(xix) at all times, except in the case of a temporary vacancy, which
shall promptly be filled, the Transferor shall have at least one trustee
who qualifies as an "Independent Trustee" as such term is defined in the
Transferor Trust Agreement as in effect on the date hereof;
(xx) the Transferor shall execute and deliver the Registration
Rights Agreement as soon as practicable after the Closing Date and in any
event no later than November 27, 1995. Pursuant to such Registration
Rights Agreement the initial Certificateholders can require the Transferor
to register the Certificates on a Form S-3 registration statement under
the Securities Act, and the Transferor will undertake in the Registration
Rights Agreement to use its best efforts to have such Form S-3
registration statement declared effective by the Securities and Exchange
Commission on or prior to 120 days following the Closing Date. In the
event such a registration statement is not declared effective by such date
the Certificate Rate shall increase by 25 basis points (0.25%) and
interest on the Certificates will commence accruing at such increased
Certificate Rate as of the Distribution Date next succeeding expiration of
such 120 days period.
The Transferor shall indemnify the Trustee, the Certificate Insurer, the
Master Servicer, and each Certificateholder 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
2.03(b).
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(c) The Transferor hereby represents and warrants to the Trustee on
behalf of the Certificateholders and the Certificate Insurer as of the Closing
Date with respect to the Initial Contracts transferred to the Trust on the
Closing Date and as of each Subsequent Transfer Date with respect to the
Additional Contracts 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):
(i) immediately prior to the Closing Date or the Subsequent Transfer
Date, at the case may be, the Transferor 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
Transferor had the full right to assign such security interest to the
Trustee;
(ii) on and after the Closing Date or the Subsequent Transfer Date,
as the case may be, there shall exist under the Contract a valid,
subsisting and enforceable first priority perfected security interest in
the Financed Vehicle securing such Contract (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 Trustee (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);
(iii) no Contract has been sold, assigned or pledged to any other
Person other than an endorsement to the Master Servicer for purposes of
servicing or any such pledge has been released; immediately prior to the
transfer and assignment herein contemplated, the Transferor 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 Contract to the Trustee. No Dealer has
a participation in, or other right to receive, proceeds of any Contract.
None of NAFCO, the Master Trust nor the Transferor has taken any action to
convey any right to any Person that would result in such Person having a
right to payments received under the related insurance policies or Dealer
Agreements or to payments due under such Contract;
(iv) upon the transfers pursuant to Section 2.01, the Trustee will
have a first priority ownership or security interest in each such Contract
free and clear of any encumbrance, lien, pledge, charge, claim, security
interest or rights of others; the purchase of each such Contract by NAFCO
from a Dealer was not an extension of financing to such Dealer;
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(v) no such Contract is delinquent for more than thirty days in
payment as to any scheduled payment;
(vi) there is no lien against any related Financed Vehicle for
delinquent taxes;
(vii) 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 Contract; the operation of the terms
of such Contract or the exercise of any right thereunder will not render
such Contract 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) no Contract is assumable by another Person in a manner which
would release the Obligor thereon from such Obligor's obligations to the
Transferor with respect to such Contract;
(ix) 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 Contract;
(x) each such Contract, and the sale of the Financed Vehicle
securing such Contract, 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 Contract
to the Trust will not violate any such laws;
(xi) each such Contract 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 Contract had
full legal capacity to execute such Contract 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 Contract have not been impaired,
waived, altered or modified in any respect, except by written instruments
that are part of the Contract Documents, and no such Contract has been
satisfied, subordinated or rescinded;
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(xiii) at the time of origination of each such Contract, the
proceeds of such Contract were fully disbursed, there is no requirement
for future advances thereunder, and all fees and expenses in connection
with the origination of such Contract have been paid;
(xiv) there is no default, breach, violation or event of
acceleration existing under any such Contract (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
Contract or would otherwise affect the value or marketability of such
contract; neither NAFCO nor the Transferor has 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 Contract, the related
Financed Vehicle was covered by a comprehensive and collision insurance
policy (i) in an amount at least equal to the lesser of (a) the actual
cash value of the related Financed Vehicle or (b) the unpaid balance owing
of such Contract, less the related Unearned Finance Charge, (ii) naming
NAFCO as a loss payee and (iii) insuring against loss and damage due to
fire, theft, transportation, collision and other risks generally covered
by comprehensive and collision coverage; each Contract requires the
Obligor to maintain physical loss and damage insurance, naming NAFCO as an
additional insured party;
(xvi) each such Contract was acquired by NAFCO from a Dealer with
which it ordinarily does business; such Dealer had full right to assign to
NAFCO such Contract and the security interest in the related Financed
Vehicle and the Dealer's assignment thereof to NAFCO is legal, valid and
binding and NAFCO had full right to assign to the Transferor such Contract
and the security interest in the related Financed Vehicle and NAFCO's
assignment thereof to the Transferor is legal, valid and binding;
(xvii) each such Contract 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;
(xiii) scheduled payments under each such Contract are due monthly
(or, in the case of the first payment, no later than the forty-fifth day
after the date of the Contract) in substantially equal amounts to
maturity, and will be sufficient to fully amortize such Contract 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 Contract and not to the payment of any insurance premiums
(although the proceeds of the extension of credit on such Contract may
have been used to pay insurance premiums); and the original term to
maturity of each such Contract was not more than 60 months;
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(xix) the collection practices used with respect to each such
Contract 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 Contract, the Master
Servicer or a Subservicer is currently in possession of the Contract
Documents for such Contract and there are no custodial agreements in
effect adversely affecting the rights of the Transferor to make the
deliveries required hereunder on the Closing Date or the 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 Contracts in such Due Period from scheduled
payments is in excess of the sum of (i) the Master Servicing Fee due and
any fees due to the Trustee and the Certificate Insurer, each with respect
to such Due Period and (ii) the amount of interest payable on the
Certificates with respect to such Due Period, in each case assuming that
each scheduled payment is made on its Due Date;
(xxiii) the Contracts 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 Trustee a first priority perfected lien on, or
ownership interest in, the Contracts and the proceeds thereof and the
remaining Trust Estate have been made, taken or performed;
(xxiv) the information regarding such Contracts set forth in the
applicable Contract 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 Contract was originated in the United States of
America and at the time of origination, materially conformed to all
requirements of the NAFCO 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;
(xxv) by the Closing Date and prior to each Subsequent Transfer
Date, as applicable, NAFCO will have caused the portions of NAFCO's
servicing records relating to the Contracts to be clearly and
unambiguously marked to show that the Contracts constitute part of the
Trust Estate and are owned by the Trust in accordance with the terms of
this Agreement;
(xxvi) the computer tape or listing made available by NAFCO to the
Trustee on the Closing Date and on each Subsequent Transfer Date was
complete and accurate as
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of the applicable Cut-off Date, and includes a description of the same
Contracts that are described in the applicable Contract Schedule;
(xxvii) no Contract was originated in, or is subject to the laws of,
any jurisdiction the laws of which would make unlawful, void or voidable
the sale, transfer and assignment of such Contract under this Agreement or
the Transfer Agreement, as applicable, or pursuant to transfers of the
Certificates. The Transferor has not entered into any agreement with any
account debtor that prohibits, restricts or conditions the assignment of
any portion of the Contracts;
(xxviii) no selection procedures adverse to the Certificateholders
or to the Certificate Insurer have been utilized in selecting such
Contract from all other similar Contracts originated by NAFCO; and
(xxix) 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 Contracts was approximately
18.32% and the weighted average remaining scheduled maturity on the
Initial Contracts was approximately 50.49 months and the percentage of the
aggregate outstanding balance of the Initial Contracts relating to the
financing of used Financed Vehicles was 60.61%. The final scheduled
payment date on the Initial Contract with the latest maturity is October
7, 2000. Each Contract amortizes based on a Rule of 78s Method, Simple
Interest Method or Actuarial Method; and
(xx) No Contract provides for a prepayment penalty.
The representations and warranties set forth in this Section 2.03(c) shall
survive assignment of the Contracts to the Trustee and shall survive as long as
any Certificate shall be outstanding or this Agreement has not been terminated.
Upon discovery by the Transferor, the Master Servicer, a Responsible Officer of
the Trustee or any Subservicer of a breach of any of the representations and
warranties set forth in this section 2.03(c) which materially and adversely
affects the interests of the Certificateholders or the Certificate Insurer in
the related Contract, the party discovering such breach shall give prompt
written notice thereof to the other parties and the Certificate Insurer (any
Subservicer being so obligated under a Subservicing Agreement). In addition,
with respect to any Contract in respect of which the Title Document was being
applied for on the Closing Date or the related Subsequent Transfer Date, as
applicable, if such Title Document has not been received by the Master Servicer
within 180 days after the Closing Date or such Subsequent Transfer Date, as
applicable, the Master Servicer shall give the Trustee, the Certificate Insurer
and Transferor written notice of such fact. If the Transferor does not correct
or cure such breach (including delivery of such Title Document, if applicable)
by the Reporting Date occurring during the second full calendar month following
the calendar month in which the Trustee was notified or the Transferor, Master
Servicer or Subservicer became aware, if earlier, of such breach (including
failure to deliver such Title Document), then the Transferor shall promptly
accept a retransfer of such Contract from the Trust. Any such retransfer by the
Transferor shall be in exchange for the delivery by the Transferor to the Trust
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of the Retransfer Amount and shall be accomplished in the manner set forth in
Section 2.02. Except as expressly provided in Section 6.03, it is understood and
agreed that the obligation of the Transferor to accept a retransfer of any
Contract as to which such a breach has occurred and is continuing as described
above shall constitute the sole remedy respecting such breach available to the
Master Servicer, Certificateholders, the Certificate Insurer or the Trustee on
behalf of Certificateholders.
In addition to the foregoing and notwithstanding whether the related
Contract shall have been purchased by the Transferor or NAFCO, the Transferor
shall indemnify the Trustee, the Certificate Insurer and the Certificateholders
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 representations and warranties
set forth in Section 2.03(c))(vii) and (x).
Section 2.04. Execution and Authentication of Certificates. The Trustee
acknowledges the assignment to it of the Initial Contracts and the remainder of
the Trust Estate, on behalf of the Certificateholders and the Certificate
Insurer, and, concurrently with such delivery, has caused to be authenticated
and delivered to or upon the order of the Transferor, in exchange for the
Initial Contracts and the remainder of the Trust Estate, Certificates in
authorized denominations evidencing an undivided interest in the entire Trust
Estate.
Section 2.05. Restriction on Transfer of Transferor Interest. The
Transferor and any subsequent transferee under this Section 2.05 may not and
shall not transfer or assign the Transferor Interest unless (i) the Transferor
shall have given each Rating Agency, the Certificate Insurer and the Trustee
prior written notice of such proposed transfer, (ii) the Certificate Insurer
shall have consented in writing thereto (or, if a Certificate Insurer Default
shall have occurred and be continuing, each Rating Agency shall have notified
the Transferor and the Trustee that such proposed transfer will not result in
the downgrading or withdrawal of the rating then assigned by such Rating Agency
to the Certificates) and (iii) the Transferor shall have delivered to the
Trustee and the Certificate Insurer a ruling of the Internal Revenue Service or
an Opinion of Counsel, which, in either case, shall be to the effect that the
proposed transfer (A) will not result in the arrangement contemplated by this
Agreement being treated as an association taxable as a corporation under the
Internal Revenue Code and (B) will not have an adverse effect on the federal
income taxation of the Trust or the Certificateholders. Further, no transfer of
the Transferor Interest or any interest therein shall be made unless the
transferee thereof shall have given the Trustee a written certification that
such transferee is not, and is not purchasing such Transferor Interest or any
interest therein directly or indirectly on behalf of, (i) an employee benefit
plan or other retirement arrangement, Individual Retirement Account or Keogh
Plan subject to either Title I of ERISA or Section 4975 of the Code (each, a
"Plan"), or an entity whose assets are deemed to include Plan assets as a result
of a Plan's investment in such entity (each, a "Plan Entity") or (ii) a "Party
in Interest" or "Disqualified Person," as defined in Section 3(14) of ERISA and
Section 4975 of the Code, respectively, with respect to a Plan or
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a Plan Entity that holds any security of the Transferor or the Trust or an
affiliate of any such "Party in Interest" or "Disqualified Person."
Section 2.06. Transfers of Additional Contracts. (a) During the Revolving
Period, upon the Transferor's written direction to the Trustee and the Master
Servicer from time to time (but not more often than once during each calendar
month or as more frequently consented to in writing by the Certificate Insurer)
and subject to the terms and conditions hereof, amounts on deposit in the
Revolving Account shall be transferred to the Transferor pursuant to Section
3.13(b) in exchange for the transfer and assignment of Additional Contracts and
related Trust Estate to the Trust. In addition, during the Pre-Funding Period,
upon the Transferor's written direction to the Trustee and the Master Servicer
from time to time (but not more often than once each calendar month or as more
frequently consented to in writing by the Certificate Insurer) and subject to
the terms and conditions hereof, amounts on deposit in the Pre-Funding Account
shall be transferred to the Transferor pursuant to Section 3.14(b) in exchange
for the transfer and assignment of Additional Contracts and related Trust Estate
to the Trust. Not later than 10 days prior to each Subsequent Transfer Date, the
Transferor shall give the Trustee, the Rating Agencies, the Certificate Insurer
and the Master Servicer written notice of the proposed transfer and assignment
of Additional Contracts to the Trust on such Subsequent Transfer Date,
specifying the aggregate Individual Sold Balances of the Additional Contracts to
be transferred and assigned to the Trust on such Subsequent Transfer Date as of
the applicable Cut-off Date. On the related Subsequent Transfer Date, the Trust
will release funds in the Revolving Account and/or the Pre-Funding Account, as
specified in the Transferor's written direction to the Trustee and the Master
Servicer, to the Transferor in an amount equal to the product of (i) the
Additional Contract Transfer Percentage and (ii) the aggregate Individual Sold
Balance of the Additional Contracts so transferred as of the related Subsequent
Cut-Off Date, and the Transferor will transfer and assign to the Trust, without
recourse, the Transferor's entire right, title and interest in and to such
Additional Contracts and related Trust Estate pursuant to the related Transfer
Agreement.
(b) Any transfer of Additional Contracts and related Trust Estate to
the Trust on a Subsequent Transfer Date shall be subject to the following
conditions:
(i) the representations and warranties made by the Master Servicer
and the Transferor in Sections, 2.01(e), 2.03(a) and 2.03(b) shall be true
and correct on and as of such Subsequent Transfer Date and the
representations and warranties made by the Transferor in Section 2.03(c)
with respect to each such Additional Contract being transferred to the
Trust on such Subsequent Transfer Date shall be true and correct on and as
of such Subsequent Transfer Date and the representations and warranties
made by NAFCO in Section 4.1 of the Purchase Agreement shall be true and
correct on and as of such Subsequent Transfer Date;
(ii) no Amortization Event shall have occurred and be continuing on
and as of such Subsequent Transfer Date;
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(iii) the Contracts then in the Trust, together with the Additional
Contracts to be transferred to the Trust on such Subsequent Transfer Date,
shall meet the following criteria (computed based on the characteristics
of the Initial Contracts as of the Initial-Cut-off Date and the
characteristics of any Additional Contracts as of the applicable
Subsequent Cut-off Date): (A) the weighed average Contract Rate of the
Contracts shall not be less than 18.0%, (B) the weighted average remaining
term of the Contracts shall not be greater than 55 months, and (C) not
more than 70% of the aggregate Outstanding Principal Balance Contracts
shall represent loans to finance the purchase of used Financed Vehicles
and (D) the final scheduled payment date on the Contract with the latest
maturity shall not be later than April 30, 2001;
(iv) the Transferor shall have delivered the Contract Schedule for
the Additional Contracts to be transferred to the Trust on such Subsequent
Transfer Date to each Rating Agency and the Certificate Insurer at least
three Business Days prior to such Subsequent Transfer Date, and the
Trustee and the Certificate Insurer shall have received, prior to 10:00
a.m., New York City time, on such Subsequent Transfer Date, written notice
from each Rating Agency to the effect that such transfer will result in
the downgrade or withdrawal of the rating then assigned by such Rating
Agency to the Certificates;
i (v) the Certificate Insurer (so long as a Certificate Insurer
Default shall not have occurred and be continuing) shall, in its sole and
absolute discretion, have given its prior written approval to the transfer
of such Additional Contracts to the Trust and shall have received an
executed Transfer Agreement; and
(vi) on or before such Subsequent Transfer Date, the Transferor
shall deliver to the Trustee (with copies to the Certificate Insurer) (A)
an Officer's Certificate of NAFCO substantially in the form attached
hereto as Exhibit 2.06A, (B) an Officer's certificate of the Transferor
substantially in the form attached hereto as Exhibit 2.06B, (C) a Transfer
Agreement executed by the Transferor and including, as an attachment
thereto, a Contract Schedule identifying the Additional Contracts being
transferred and assigned to the Trust on such Subsequent Transfer Date.
(vii) on or before such Subsequent Transfer Date, the Transferor
shall have provided any information reasonably requested by the Rating
Agencies, the Certificate Insurer or the Trustee with respect to such
Additional Contracts.
(c) Within ten Business Days after the later of the last day of the
Pre-Funding Period and the last day of the Revolving Period, the Transferor
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 Certificate
Insurer to deliver to the Certificate Insurer a report covering the Contracts
then in the Trust and addressing such procedures as the Transferor and the
Certificate Insurer may agree upon.
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ARTICLE III
Administration and Servicing of Contracts;
Establishment and Administration of Accounts
Section 3.01. Master Servicer to Act as Servicer.
(a) The Master Servicer shall service and administer the Contracts on
behalf of the Trust and shall have full power and authority, acting alone and/or
through Subservicers as provided in Section 3.02, 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 Master Servicer may waive, modify or vary any term
of any Contract or consent to the postponement of strict compliance with any
such term or in any manner, grant indulgence to any Obligor if, in the Master
Servicer's sole determination, which shall be conclusive and binding, such
waiver, modification, postponement or indulgence is not materially adverse to
the Certificateholders or the Certificate Insurer; provided however, that the
Master Servicer may not permit any modification with respect to any Contract
that would change its Contract Rate, defer the payment of any principal or
interest (except to the extent permitted by Section 3.06(a)), reduce the
outstanding principal balance (except for actual payments of principal), or
extend (except to the extent permitted by Section 3.06(a)) the final maturity
date on such Contract. Without limiting the generality of the foregoing, the
Master Servicer in its own name or in the name of the Transferor is hereby
authorized and empowered by the Trustee when the Master 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
Contracts and with respect to the Financed Vehicles; provided however, that
notwithstanding the foregoing, the Master Servicer shall not, except pursuant to
an order from a Court of competent jurisdiction, release an Obligor from payment
of any unpaid amount under any Contract or waive the right to collect the unpaid
balance of any Contract from the Obligor, except that the Master 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 Contract contains a "due-on-sale" provision allowing the holder thereof to
accelerate the Contract upon sale of the Financed Vehicle financed thereunder,
the Master 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 Master Servicer shall not be obligated to take any legal
action to enforce such provision.
(b) The Master Servicer shall service and administer the Contracts 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 motor vehicle retail installment sales
contracts and notes comparable to the Contracts. The Master Servicer shall take
all actions (other than those required to be taken by the Transferor pursuant to
this Agreement) that are necessary or desirable to maintain continuous
perfection and
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first priority of security interests granted by the obligors in the Financed
Vehicles to NAFCO and to maintain continuous perfection of the security release
created by each Contract in the related Finance Vehicle on behalf of the
Trustee, 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
Trustee and do not and need not identify the Trustee as the secured party or
lienholder with respect to the Contracts), security agreements, financing
statements, continuation statements or other instruments as are necessary to
maintain the security interests granted by the Obligors under the respective
Contracts on behalf of the Trustee; provided however, that the Master 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 Master Servicer shall not
take any action to impair the Trust's rights in any Contract, except to the
extent allowed pursuant to this Agreement or required by law. The Financed
Vehicle securing each Contract shall not be released in whole or in part from
the security interest granted by the Contract, except upon payment in full of
the Contract or as otherwise contemplated herein. The Master Servicer shall not
extend or otherwise amend the terms of any Contract, except in accordance with
Section 3.01(a). Upon discovery by either the Master Servicer, a Responsible
Officer of the Trustee or any Subservicer of a default by the Master Servicer in
the performance of its obligations under this Section 3.01(b) which materially
and adversely affects the interests of the Certificateholders or the Certificate
Insurer in the related Contract, the party discovering such breach shall give
prompt written notice thereof to the other parties and the Certificate Insurer.
If the Master 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 Trustee was notified or the Master Servicer, the Trustee or
the Subservicer became aware, if earlier, of such default, then the Master
Servicer shall promptly purchase such Contract from the Trust. Any such purchase
by the Master Servicer shall be in exchange for the delivery by the Master
Servicer to the Trust of the Retransfer Amount and shall be accomplished in the
manner set forth in Section 2.02. Except as expressly provided in Section 6.03
and subject to Section 7.01, it is understood and agreed that the obligation of
the Master Servicer to repurchase any Contract 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 Transferor, Certificateholders, the
Certificate Insurer or the Trustee on behalf of Certificateholders.
(c) So long as a Certificate Insurer Default shall not have occurred and
be continuing, upon the occurrence of an Insurance Agreement Event of Default
pursuant to Section 5.01(b), (c), (d), (e) or (i) of the Insurance Agreement,
the Certificate Insurer may instruct the Trustee and the Master Servicer to take
or cause to be taken such action as may, in the opinion of counsel to the
Certificate Insurer, be necessary to desirable to perfect or re-perfect the
security interests in the Financed Vehicles securing the Contracts in the name
of the Trustee on behalf 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 Certificate Insurer, be necessary or prudent. If a Certificate
Insurer Default shall have occurred and be continuing, upon the occurrence of a
Servicer Default, the Trustee and the Master Servicer shall take or cause to be
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taken such action as may, in the opinion of counsel to the Trustee, be necessary
to perfect or re-perfect the security interests in the Financed Vehicles
securing the Contracts in the name of the Trustee on behalf 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 Trustee, be necessary
or prudent. NAFCO hereby agrees to pay all expenses related to such perfection
or re-perfection and to take all action necessary therefor. In addition, prior
to the occurrence of an Insurance Agreement Event of Default, the Certificate
Insurer may (unless a Certificate Insurer Default shall have occurred and be
continuing) instruct the Trustee and the Master Servicer to take or cause to be
taken such action as may, in the opinion of counsel to the Certificate Insurer,
be necessary to perfect or re-perfect the security interest in the Financed
Vehicles underlying the Contracts in the name of the Trustee, 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 Certificate Insurer,
be necessary or prudent; provided however, that (unless a Certificate Insurer
Default shall have occurred and be continuing) if the Certificate Insurer
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 Master
Servicer or the Trustee in connection with such action shall be reimbursed to
the Master Servicer or the Trustee, as applicable, by the Certificate Insurer.
(d) The Master Servicer may perform any of its duties pursuant to this
Agreement, including those delegated to it by the Trustee pursuant to this
Agreement, through Persons appointed by the Master Servicer. Such Persons may
include affiliates of the Master Servicer and may include the Transferor and its
affiliates. Notwithstanding any such delegation of a duty, the Master Servicer
shall remain obligated and liable for the performance of such duty as if the
Master Servicer were performing such duty.
(e) Upon the execution and delivery of this Agreement, the Master Servicer
shall deliver to the Trustee and the Certificate Insurer a list of officers and
employees of the Master Servicer, upon which the Trustee may conclusively rely,
involved in, or responsible for, the administration and servicing of the
Contracts, which list shall from time to time be updated by the Master Servicer
as additional officers and employees of the Master Servicer become involved, or
responsible for, the administration and servicing of the Contracts or officers
or employees of the Master Servicer previously identified on any such list
become disassociated with the administration and servicing of the Contracts.
(f) The Master Servicer may take such actions as are necessary to
discharge its duties as Master 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 Master Servicer's duties under this
Agreement (including consents, waivers and discharges relating to the Contracts
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 Trustee hereby irrevocably appoints the
Master 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
Contract
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Documents, Title Documents and the Contract Files to the Transferor upon the
transfer of a Contract to the Transferor under this Agreement and to deliver
applicable Contract Documents, Title Documents and the Contract Files upon
liquidation or final payment of a Contract. The Trustee, upon receipt of a
certificate of a Servicing Official requesting the same be accepted by the
Trustee and certifying as to the reasons such documents are required, shall
furnish the Master Servicer with any other powers of attorney or other documents
reasonably necessary or appropriate which the Trustee may legally execute to
enable the Master Servicer to carry out its servicing and administrative duties
hereunder. Neither the Master Servicer nor any of its directors, officers,
employees or agents will be under any liability to the Trust, the Trustee, the
Certificate Insurer, any Certificateholder, or the Transferor for the
consequences of any delay resulting from having to obtain such documents from
the Trustee, provided that the Master Servicer furnished such certificate to the
Trustee reasonably promptly after determining the necessity therefor in the
particular instance.
(g) The Master Servicer warrants, represents and covenants to and with the
Trustee that recordation of the name of the Master Servicer as lienholder in
Title Documents respecting any Financed Vehicle is maintained by the Master
Servicer as agent for the Trust and that the Master Servicer has no equitable
ownership in the Contracts, except as it may have by virtue of ownership of a
Certificate or an equity interest in the Transferor or any Certificateholder.
The Master Servicer acknowledges that it is holding the Contract Documents
coming into its possession and any other property constituting a part of the
Trust Estate held by it, in trust, for the benefit of the Certificateholders and
the Certificate Insurer.
Section 3.02. Subservicing Agreements between Master Servicer and the
Subservicers. The Master Servicer may enter into Subservicing Agreements with
one or more Subservicers for the servicing and administration of certain of the
Contracts; provided however, that the Master Servicer shall not enter into any
such Subservicing Agreement with any Subservicer other than OFSA, without the
prior written consent of the Certificate Insurer (so long as a Certificate
Insurer Default shall not have occurred and be continuing), which consent shall
not be unreasonably withheld; provided further that the Master Servicer shall
not amend any Subservicing Agreement without (i) with respect to a material
amendment, the consent of the Certificate Insurer and (ii) with respect to all
other amendments, upon five (5) days prior written notice of such amendment.
References in this Agreement to actions taken or to be taken by the Master
Servicer in servicing the Contracts include actions taken or to be taken by a
Subservicer on behalf of the Master Servicer. Each Servicing Agreement shall be
upon such terms and conditions as are not inconsistent with this Agreement and
as the Master Servicer and the Subservicer have agreed. Each Subservicing
Agreement shall require that the related Subservicer acknowledge that it is
holding the Contract Documents for the related Contracts coming into its
possession and any other property constituting a part of the Trust Estate held
by it, in trust, for the benefit of the Certificateholders and the Certificate
Insurer. The Master Servicer and a Subservicer may enter into amendments
thereto; provided however, that any such amendments or different forms shall be
consistent with and not violate the provisions of this Agreement. The Master
Servicer shall notify each Rating Agency, the Trustee and the Certificate
Insurer upon entering into any Subservicing Agreement.
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Section 3.03. Obligations of the Master Servicer. Notwithstanding any
Subservicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer or a Subservicer or
reference to actions taken through a Subservicer or otherwise, the Master
Servicer shall remain obligated for the servicing and administering of the
Contracts in accordance with the provisions of Section 3.01 and this Agreement
without diminution of such obligation or liability by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from a
Subservicer and to the same extent and under the same terms and conditions as if
the Master Servicer alone were servicing and administering the Contracts. The
Master Servicer shall be entitled to enter into any agreement with a Subservicer
for indemnification of the Master Servicer, and nothing contained in this
Agreement shall be deemed to limit or modify such indemnification.
Section 3.04. No Contractual Relationship between a Subservicer and
Trustee or Certificateholders. Any Subservicing Agreement that may be entered
into and any other transactions or services relating to the Contracts involving
a subservicer in its capacity as such and not as an originator shall be deemed
to be between a Subservicer and the Master Servicer alone and the Trustee, the
Trust, the Certificate Insurer and Certificateholders shall not be deemed
parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to a Subservicer except as expressly set forth in
Section 3.05 or in the applicable Subservicing Agreement; provided that, if the
Master Servicer is deemed terminated, the Subservicer may be terminated. Master
Servicer shall promptly provide to the Trustee and the Certificate Insurer any
notice received from a Subservicer.
Section 3.05. Assumption or Termination of Subservicing Agreement by
Trustee. In the event the Master Servicer shall for any reason no longer be the
servicer of the Contracts (including by reason of a Servicer Default), the
Trustee, its designee or any successor Master Servicer will thereupon assume all
of the rights and obligations of the Master Servicer under one or more
Subservicing Agreements that may have been entered into by giving notice of such
assumption to the related Subservicer or Subservicers within ten (10) Business
Days of the termination of the Master Servicer as servicer of the Contracts.
Upon the giving of such notice, the Trustee, its designee or the successor
Master Servicer, shall be deemed to have assumed all of the Master Servicer's
interest therein and to have replaced the Master Servicer as a party to the
Subservicing Agreement to the same extent as if the Subservicing Agreement had
been assigned to the assuming party except that the Master Servicer and the
Subservicer, if any, shall not thereby be relieved of any accrued liability or
obligations under the Subservicing Agreement and the Subservicer, if any, shall
not be relieved of any liability or obligation to the Master Servicer that
survives the assignment or termination of the Subservicing Agreement. The
Trustee shall notify each Rating Agency and the Certificate Insurer if any
Subservicing Agreement is assumed by the Trustee, its designee or the successor
Master Servicer.
The Master Servicer shall, upon request of the Trustee but at the expense
of the Master Servicer, deliver to the assuming party all documents and records
relating to the Subservicing Agreement and the Contracts then being serviced and
an accounting of amounts collected and
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held by it and otherwise use its reasonable efforts to effect the orderly and
efficient transfer of the Subservicing Agreement to the assuming party.
Section 3.06. Collection of Contract Payments. (a) The Master Servicer
shall proceed diligently to collect all payments called for under the terms and
provisions of the Contracts, and shall service the Contracts in a manner
consistent with the servicing standards and procedures generally accepted in the
financial services industry for similar contracts, and as otherwise expressly
provided by this Agreement. Consistent with the foregoing, the Master Servicer
may in its discretion (i) waive any late payment charge and (ii) extend the then
current maturity date of a Contract 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 Contract; provided however, that the Master Servicer may not so extend the
then current maturity date of Contract more than twice during the life of such
Contract; provided further, that the aggregate number of contracts that have
been so extended during any twelve month period shall not exceed the product of
(i) 3.5% (0.035) and (i) the aggregate number of outstanding Contracts as of the
beginning of such twelve month period.
(b) The Master Servicer shall instruct (or shall cause the Subservicer to
instruct) all Obligors to make all payments due in respect of the Contracts to
the Subservicer Account. The Master Servicer shall, pursuant to the Subservicing
Agreement, cause the Subservicer to use any amounts other than collections in
respect of motor vehicle financing obligations serviced by the Subservicer. The
Master Servicer shall cause the Subservicer to use its best efforts to transfer
to the Collection Account all collected funds on deposit in the Subservicer
Account that constitute part of the Trust Estate within one Business Day, and in
any event within two Business Days of receipt thereof. If the Master Servicer,
the Transferor, NAFCO or any Subservicer receives collections under or other
payments in respect of the Contracts, 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 Trustee for deposit to
the Collection Account. If the Master Servicer determines that any amount that
is not a part of the Trust Estate has been deposited in any Account, the Master
Servicer shall promptly instruct the Trustee by facsimile (with prompt telephone
confirmation) to segregate such amount, and shall therein direct the Trustee 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 Master Servicer to the
Certificate Insurer.
(c) The Master Servicer shall cause OFSA to maintain the Subservicer
Account or a comparable account, and shall cause any other Subservicer to
maintain an account comparable to the Subservicer Account, to which Obligors
shall have been directed to remit payments in respect of the Contracts. If the
Subservicer Account or any comparable account maintained by a Subservicer is
terminated for any reason prior to the establishment of, and notification to
Obligors to remit payments to, a replacement servicing account comparable to the
Subservicer Account, the Master Servicer shall promptly, and in any event within
30 days of termination of such Subservicer Account or comparable account,
establish a Lockbox Account pursuant to a
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Lockbox Agreement and notify all Obligors to remit payments in respect of the
Contracts to such Lockbox Account.
(d) Notwithstanding any Lockbox Agreement, or any of the provisions of
this Agreement relating to a Lockbox Agreement, a Lockbox Bank or a Lockbox
Account, the Master Servicer shall remain obligated an liable to the Trustee and
the certificateholders for servicing and administering the Contracts and the
rest of the Trust Estate in accordance with the provisions of this Agreement
without diminution of such obligations or liability by virtue thereof.
Section 3.07. Maintenance of Comprehensive and Collision Insurance. The
Master 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 Contract,
less Unearned Finance Charges; provided however, that the Master 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 3.06, any amounts collected by
the Master 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 Master 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 Master Servicer or the related Subservicer and its successors and assigns.
Master Servicer shall maintain and keep in place a vendor's single interest
insurance policy.
Section 3.08. Realization upon Defaulted Contracts. In the event that a
Contract becomes and continues to be a Defaulted Contract, the Master Servicer
shall take all reasonable and lawful steps necessary for Repossession; provided
however, that the Master Servicer shall not be obligated to institute any action
for Repossession through judicial proceedings unless it determines in its good
faith judgment, which determination will be conclusive and binding, that
Insurance Proceeds or Liquidation Proceeds that would be realized in connection
therewith or amounts payable pursuant to the last sentence of this Section 3.08
would be sufficient for the reimbursement in full of its out-of-pocket expenses
pursuant to this Agreement. In connection with such Repossession, the Master
Servicer shall follow such practices and procedures required by Section 3.01 and
make advances of its own funds for any out-of-pocket expenses incurred. The
Master Servicer shall be reimbursed for Liquidation Expenses (including
advances) by retention of the required reimbursement from the first Liquidation
Proceeds or Insurance Proceeds received with respect to such Defaulted Contract.
The Master Servicer shall be entitled to receive the following amounts, which
shall be distributable pursuant to Sections 3.11(b)(i) with respect to any
Contract 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 Contracts not referred to outside legal counsel, or, in the case of those
Contracts that are so referred, reimbursement of the fees and expenses of
outside legal counsel, if their retention was necessary in the reasonable
judgment of the Master Servicer.
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Section 3.09. Master Servicing and Other Compensation. The Master
Servicer, as compensation for its activities hereunder, shall be entitled to
receive the Master Servicing Fee and amounts, if any, described in Section
3.11(b)(ii). The Master Servicer shall be required to pay all expenses incurred
by it in connection with its servicing activities hereunder (including payment
of the fees and expenses of any Subservicer) and shall not be entitled to
reimbursement therefor except as specifically provided in Sections 3.08, 3.11
and 4.01, 6.03 and 10.01.
Section 3.10. The Collection Account. (a) The Trustee shall establish and
shall thereafter maintain the Collection Account for the Trust. The Collection
Account shall be an Eligible Account. The Collection Account shall be entitled
"Harris Trust and Savings Bank, as Trustee, for the benefit of registered
holders of National Auto Finance 1995-1 Trust and the Certificate Insurer." The
Trustee shall deposit the following amounts into the Collection Account upon
receipt:
(i) All amounts withdrawn by a Subservicer from the Subservicer
Account and all amounts received by the Master Servicer, the Transferor,
NAFCO or any Subservicer and transferred to the Trustee pursuant to
Section 3.06(b);
(ii) The Retransfer Amount received in respect of any Retransferred
Contracts pursuant to Sections 2.02, 2.03 and 3.01;
(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 Master Servicer or Subservicer) and other amounts with respect to
the Trust Estate, if any, received from the Transferor, the Master
Servicer or any Subservicer.
(b) No later than each Distribution Date, the Trustee shall, at the
written direction of the Master Servicer, withdraw from the Collection Account
and deposit in the Certificate Account the amount on deposit in the Collection
Account as of the close of business on the related Determination Date and any
amount deposited to the Collection Account in respect of Retransferred Contracts
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 Contracts 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) the amount, if any,
required to be transferred by the Trustee from the Collection Account to the
Revolving Account pursuant to the last sentence of this Section 3.10(b) and (iv)
any collection or other amounts deposited to the Collection Account in respect
of Retransferred Contracts other than the related Retransfer Amounts. In
addition, on each Distribution Date, the Trustee shall, at the written direction
of the Master Servicer, withdraw from the Collection Account and shall pay (i)
to the Transferor 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 Transferor with respect to each Contract or
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property acquired in respect thereof that has been retransferred to the
Transferor pursuant to Sections 2.02, 2.03 or 9.01, all amounts received thereon
and not distributed as of, or received after, the date on which the related
Outstanding Principal Balance or Retransfer Amount is determined. On or prior to
the close of business on each Business Day during the Revolving Period and on
the first Business Day thereafter, the Trustee, at the written direction of the
Master Servicer or a Subservicer pursuant to Section 3.17(a), shall withdraw
from the Collection Account and transfer to the Revolving Account all amounts
representing principal collections on the Contracts deposited into the
Collection Account during the previous Business Day.
(c) In the event the Master Servicer, any Subservicer or the Trustee shall
deposit in the Collection Account any amount in error and such amount is not
required to be deposited therein, the Trustee may withdraw at any time, on its
own behalf if the erroneous deposit was made by the Trustee and on behalf of the
Master Servicer or Subservicer if the erroneous deposit was made by the Master
Servicer or Subservicer promptly after receipt of an Officer's Certificate
setting forth the reason for such withdrawal, such amount from the Collection
Account, any provision herein to the contrary notwithstanding.
Section 3.11. The Certificate Account. (a) The Trustee shall establish and
thereafter maintain the Certificate Account for the Trust. The Certificate
Account shall be an Eligible Account. The Certificate Account shall be entitled
"Harris Trust and Savings Bank, as Trustee, for the benefit of registered
holders of National Auto Finance 1995-1 Trust Automobile Loan Asset-Backed
Certificates, and the Certificate Insurer-Certificate Account." The Trustee
shall deposit the following amounts into the Certificate Account upon receipt:
(i) Amounts received, if any, from the Transferor for deposit in the
Certificate Account;
(ii) Amounts received, if any, from the Master Servicer or any
Subservicer for deposit in the Certificate Account;
(iii) Any withdrawals made from the Pre-Funding Period Reserve
Account or Spread Account for deposit in the Certificate Account pursuant
to Section 3.12(b) or Section 4.04;
(iv) All proceeds of any Contracts or property acquired in respect
thereof, received by the Trustee, pursuant to Section 9.01 or Section
9.02;
(v) All income and gain from investments of funds in the Certificate
Account;
(vi) Any withdrawals made from the Collection Account for deposit in
the Certificate Account pursuant to Section 3.10(b);
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(vii) All amounts received from the Certificate Insurer (A) in
respect of claims made under the Certificate Policy and required to be
deposited therein pursuant to Section 4.04(a) or 4.05 or (B) pursuant to
Section 4.04(e) and required by such Section 4.04(e) to be deposited
therein; and
(viii) Any withdrawal from the Revolving Account or Pre-Funding
Account for deposit in the Certificate Account pursuant to Section 3.13(b)
or Section 3.14(b).
(b) On each Distribution Date, the Trustee shall, at the written direction
of the Master Servicer, make withdrawals from the Certificate Account for the
following purposes:
(i) to make payments as provided in Section 4.01;
(ii) upon the final Distribution Date, to clear and terminate the
Certificate Account pursuant to Section 9.01.
Distributions of amounts withdrawn from the Certificate Account under this
Section 3.11 shall be made in accordance with the priorities set forth in
Section 4.01.
Since, in connection with withdrawals pursuant to subclauses (ii) and
(iii), the Master Servicer's or Transferor's entitlement thereto is limited to
collections or other recoveries on the related Contract, the Master Servicer
shall keep and maintain a separate accounting, on a Contract by Contract basis,
for the purpose of justifying any withdrawal from the Certificate Account
pursuant to such subclauses (ii) and (iii).
(c) In the event the Master Servicer, any Subservicer or the Trustee shall
deposit in the Certificate Account any amount in error and such amount is not
required to be deposited therein, the Trustee may withdraw at any time, on its
own behalf if the erroneous deposit was made by the Trustee and on behalf of the
Master Servicer or Subservicer if the erroneous deposit was made by the Master
Servicer or Subservicer promptly after receipt of an Officer's Certificate
setting forth the reason for such withdrawal, such amount from the Certificate
Account, any provision herein to the contrary notwithstanding.
Section 3.12. Pre-Funding Period Reserve Account. (a) The Trustee shall
establish and thereafter maintain the Pre-Funding Period Reserve Account for the
Trust. The Pre-Funding Period Reserve Account shall be an Eligible Account. The
Pre-Funding Period Reserve Account shall be entitled "Harris Trust and Savings
Bank", as Trustee, for the benefit of registered holders of National Auto
Finance 1995-1 Trust Automobile Loan Asset-Backed Certificates, and the
Certificate Insurer -- Pre-Funding Period Reserve Account." On the Closing Date,
the Transferor shall deliver to the Trustee for deposit in the Pre-Funding
Period Reserve Account immediately available funds in the amount of $74,766.38.
The Trustee shall deposit the foregoing amount in the Pre-Funding Period Reserve
Account immediately upon its receipt thereof. In addition, on each Distribution
Date during the Pre-Funding Period, the Trustee shall
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deposit into the Pre-Funding Period Reserve Account the amount required to be
deposited therein pursuant to Section 4.01(b). The Trustee also shall deposit
into the Pre-Funding Period Reserve Account any income or gain earned from the
investment of amounts on deposit in the Pre-Funding Period Reserve Account as
received.
(b) On each Distribution Date occurring on or prior to the Distribution
date next Succeeding Termination of the Pre-Funding Period, the Trustee will
withdraw from the Pre-Funding Period Reserve Account and transfer to the
Certificate Account an amount equal to the excess,if any, of (i) the product of
(a) 1/12th, (b) the Certificate Rate and (c) the average daily balance of funds
on deposit in the Pre-Funding Account from and including the preceding
Distribution Date (or, in the case of the first Distribution Date, the Closing
Date) to but not including the current Distribution Date, over (ii) the amount
of interest accrued on Permitted Investments on deposit in the Pre-Funding
Account from and including the preceding Distribution Date (or, in the case of
the first Distribution Date, the Closing Date) to but not including the current
Distribution Date. If after making any required transfer from the Pre-Funding
Period Reserve Account to the Certificate Account on any Distribution Date the
amount of funds on deposit in the Pre-Funding Period Reserve Account exceeds the
Required Reserve Amount, the Trustee shall withdraw such excess amount and
distribute it to the Transferor. On the first Distribution Date related to the
Reporting Date next succeeding termination of the Pre-Funding Period after
payment on the Certificates on such date the Trustee shall withdraw from the
Pre-Funding Period Reserve Account and distribute to the Transferor the balance
of any funds on deposit therein.
Section 3.13. The Revolving Account. (a) The Trustee shall establish and
thereafter maintain the Revolving Account. The Revolving Account shall be a
segregated trust account created and maintained by the Trustee in its corporate
trust department for the benefit of the Certificateholders and the Certificate
Insurer, and shall be an Eligible Account. The Revolving Account shall be
entitled "Harris Trust and Savings Bank, as Trustee, for the benefit of the
registered holders of National Auto Finance 1995-1 Trust Automobile Loan
Asset-Backed Certificates, and the Certificate Insurer -- Revolving Account." On
each Business Day during the Revolving Period and on the first Business Day
thereafter, the Trustee shall deposit into the Revolving Account the amount
withdrawn by the Trustee from the Collection Account for deposit therein on such
Business Day pursuant to Section 3.10(b). The Trustee also shall deposit into
the Revolving Account any income or gain earned from the investment of amount on
deposit in the Revolving Account as received.
(b) On each Subsequent Transfer Date, upon satisfaction of each of the
conditions set forth in Section 2.06 with respect to the transfer of Additional
Contracts to the Trust on such Subsequent Transfer Date, the Trustee shall
withdraw from the Revolving Account and pay to the Transferor the amount
designated in the Transferor's written direction to the Trustee and the Master
Servicer delivered pursuant to Section 2.06. On each Distribution Date, any
income and gain earned from the investment of amounts on deposit in the
Revolving Account since the previous Distribution Date (or the Closing Date, in
the case of the first Distribution Date) shall be deposited to the Certificate
Account. On the Distribution Date relating to the Reporting Date
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next succeeding the termination of the Revolving Period, the Trustee shall
withdraw from the Revolving Account and deposit in the Certificate Account the
amount on deposit in the Revolving Account as of the close of business on the
first Business Day following the end of the Revolving Period. In addition, the
Trustee shall on or prior to each Distribution Date occurring during the
Revolving Period withdraw from the Revolving Account and deposit in the
Certificate Account the amount, if any, by which the amount on deposit in the
Revolving Account at the close of business on the last day of the preceding
calendar month, less any undistributed income or gain from investments on
deposit therein, exceeds $1,500,000.
Section 3.14. Pre-Funding Account. (a) The Trustee shall establish and
shall thereafter maintain the Pre-Funding Account. The Pre-Funding Account shall
be an Eligible Account. The Pre-Funding Account shall be entitled "Harris Trust
and Savings Bank, as Trustee, for the benefit of registered holders of National
Auto Trust Automobile Loan Asset-Backed Certificates, and the Certificate
Insurer -- Pre-Funding Account." On the Closing Date, the Transferor shall
deliver $7,747,810.67 to the Trustee for deposit in the Pre-Funding Account and
the Trustee shall deposit such amount therein upon its receipt thereof. The
Trustee also shall 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.
(b) On each Subsequent Transfer Date, upon satisfaction of each of the
conditions set forth in Section 2.06 with respect to the transfer of Additional
Contracts to the Trust on such Subsequent Transfer Date, the Trustee shall
withdraw from the Pre-Funding Account and pay to the Transferor the amount
designated in the Transferor's written direction to the Trustee and the Master
Servicer delivered pursuant to Section 2.06. 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 to the
Certificate Account. On the Distribution Date related to the Reporting Date next
succeeding termination of the Pre-Funding Period, the Trustee shall withdraw
from the Pre-Funding Account and deposit in the Certificate Account the amount
on deposit in the Pre-Funding Account as of the close of business on the last
day of the Pre-Funding Period.
Section 3.15. Administration of Accounts. (a) Funds deposited in the
Accounts other than the Pre-Funding Account and the Revolving Account shall be
invested by the Trustee pursuant to written instructions from the Transferor in
Permitted Investments that mature no later than the Business Day next preceding
the Distribution Date next succeeding the date of such investment (or on such
Distribution Date if such Permitted Investment in an obligation of the
institution maintaining the Account), and no such investment shall be sold prior
to its maturity. Funds deposited in the Pre-Funding Account and the Revolving
Account shall be invested by the Trustee pursuant to written instructions from
the Transferor in Permitted 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
Permitted Investment is an obligation of the institution maintaining such
Account), and no such investment shall be sold prior to its maturity.
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(b) Any Account Property that is held in deposit accounts shall be held
solely in the name of the Trustee in its trust capacity in an Eligible Account.
Each such deposit account shall be subject to the exclusive custody and control
of the Trustee, and the Trustee shall have sole signature authority with respect
thereto. Any Account Property that constitutes Physical Property shall be
delivered to the Trustee in accordance with paragraph (a) or (b) of the
definition of "Delivery" and shall be held, pending maturity or disposition, in
the State of Illinois solely by the Trustee or shall be held in the State of
Illinois or the State of New York through a financial intermediary or clearing
corporation (as defined and described in paragraph (b) of the definition of
"Delivery") or the clearing corporation's nominee, in each case acting for the
Trustee. Any 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 Trustee, pending maturity or disposition, through
continued book-entry registration of such Account Property as described in such
paragraph. Any Account Property that is an "uncertificated security" (as defined
in Section 8- 102(1)(b) of the UCC) and that is not governed by the third
sentence of this Section 3.15(b) shall be delivered and held in accordance with
paragraph (d) of the definition of "Delivery" and shall be maintained by the
Trustee, pending maturity or disposition. The Trustee, or any agent of the
Trustee acting in the name of and on behalf of the Trustee, shall have absolute
control over each investment of funds in the applicable Account, the income
thereon and the proceeds thereof. The proceeds of an investment at maturity or
upon demand shall be remitted by the issuer thereof or its agent directly to the
Trustee or its agent for deposit in the applicable Account and all earnings on
such investments shall be added to the corpus of the applicable Account and
distributed as provided herein.
(c) Effective upon Delivery of any Account Property in the form of
Physical Property, book-entry securities, or uncertificated securities, the
Trustee shall represent that at the time it submitted the purchase order for
such Account Property a Responsible Officer of the Trustee had no actual notice
of any adverse claim with respect thereto; provided that if a Responsible
Officer of the Trustee has actual notice of an adverse claim prior to submitting
the purchase order, the Trustee shall notify the Transferor and request that the
adverse claim be resolved prior to any such purchase. Additionally, each
instruction as to Permitted Investments to the Trustee from the Transferor shall
be accompanied by a statement from the Transferor to the effect that the
proposed purchase is made in good faith, for value and without any notice of
adverse claim thereto. As used herein, the term "notice" shall have the meaning
ascribed to it in the UCC.
(d) The Trustee shall not enter into any subordination or intercreditor
agreement with respect to the Account Property.
Section 3.16. [Reserved].
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Section 3.17. Reports to the Trustee and the Transferor Certificate
Account Statements; Reports to the Master Servicer, the
Certificate Insurer and Transferor.
(a) Not later than the Reporting Date, the Master Servicer shall forward
to the Collateral Agent, the Trustee, each Rating Agency, the Certificate
Insurer and the Transferor a statement substantially in the form attached hereto
as Exhibit 3.17 (as such form may be modified from time to time by agreement
between the Trustee and Master Servicer with the prior written consent of the
Certificate Insurer), certified by an officer of the Master Servicer. In
addition to the information required by Exhibit 3.17, the Master Servicer shall
include in the copy of such statement delivered to the Certificate Insurer (i)
the Delinquency Ratio, Average Delinquency Ratio, Default Rate, Average Default
Rate, Net Loss Rate and Average Net Loss Rate for such Reporting Date, (ii)
whether any Trigger Event has occurred as of such Reporting Date, (iii) whether
any Trigger Event that may have occurred as of a prior Reporting Date is deemed
cured as of such Reporting Date, and (iv) whether to the knowledge of the Master
Servicer an Insurance Agreement Event of Default has occurred.
(b) On the first Business Day after each Determination Date, the Trustee
shall forward by telecopier to the Master Servicer, the Certificate Insurer and
the Transferor a statement (and shall also mail a Copy to the Master Servicer,
the Certificate Insurer and the Transferor) setting forth the amount, if any, on
deposit in the Collection Account, the Certificate Account, the Pre-Funding
Account, the Revolving Account and the Pre-Funding 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 Trustee shall forward by telecopier to
the Collateral Agent and the Certificate Insurer a copy of the statement
required to be delivered to Certificateholders on such Distribution Date
pursuant to Section 4.02, prepared assuming that the Certificate Insurer will
not exercise its right under Section 4.04(e). Not later than five days after
each Determination Date, the Trustee shall forward to the Master Servicer, the
Certificate Insurer and the Transferor a statement showing, for the previous
Distribution Date, the aggregate of withdrawals from the Certificate Account for
each category of withdrawal specified in Section 3.11(b) and the withdrawals
from and deposits to the Spread Account.
Section 3.18. Annual Statement as to Compliance; Notice of Servicer
Default. (a) The Master Servicer will deliver to each Rating Agency the Trustee
and the Certificate Insurer on or before April 30 of each year, beginning with
the first April 30 that occurs at least six months after the Initial Cut-off
Date, an Officer's Certificate stating, that (i) a review of the activities of
the Master 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 Master Servicer has
fulfilled all its obligations under this Agreement throughout such year, or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default known to such officer and the nature and status thereof and
(iii) to the best of such officer's knowledge, each Subservicer has fulfilled
its obligations under its Subservicing Agreement in all material respects, or if
there has been a material default in the fulfillment of such obligations,
specifying such default known to such employee and the nature and status
thereof.
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(b) The Master Servicer shall deliver to the Trustee, the Certificate
Insurer, the Certificateholders 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 Default
under Section 7.01.
Section 3.19. Custodial Arrangements. (a) The Custodian shall maintain
custody and possession of the Contract Files as custodian and bailee for in
accordance with and pursuant to the Custodial Agreement dated as of the Closing
Date by and between the Master Servicer and OFSA. The Master Servicer hereby
assigns all of its right, title and interest in and to such Custodial Agreement
to the Trustee. To the extent the Master Servicer receives any notices with
respect to the Custodial Agreement, the Master Servicer will forward a copy of
such notice to the Trustee and the Certificate Insurer.
Section 3.20. Annual Independent Accountants' Report. (a) The Master
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 Master Servicer or to the Transferor, to
deliver to the Trustee, the Certificate Insurer, and each Rating Agency, on or
before March 30 (or 90 days after the end of the Master Servicer's fiscal year,
if other than March 30) of each year, beginning on the first March 30 (or other
applicable date) after the date that is six months after the Closing Date with
respect to the twelve months ended the immediately preceding December 31 (or
other applicable date), a statement (the "Accountant's Report") addressed to the
general partner of the Master Servicer, to the Trustee, and the Certificate
Insurer, to the effect that such firm has audited the financial statements of
the Master Servicer and issued its report thereon 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 Accountant's Report to have attached thereto a
schedule setting forth the pooling and servicing agreements covered thereby,
including this Agreement); (3) included an examination of the delinquency and
loss statistics relating to the Trust's portfolio of automobile installment
sales contracts; and (4) except as described in the Accountant's Report,
disclosed no exceptions or errors in the records relating to the automobile and
light truck loans serviced 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; and (2)
except as disclosed in the Report, no exceptions or errors in the Servicer's
Certificates so examined were found.
(b) The Accountants' Report shall also indicate that the firm is
independent of the Transferor and the Master Servicer within the meaning of the
Code of Professional Ethics of the American Institute of Certified Public
Accountants.
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(c) A copy of the Accountants' Report may be obtained by any
Certificateholder by a request in writing to the Trustee addressed to its
Corporate Trust Office.
Section 3.21. Access to Certain Documentation and Information Regarding
Contracts. The Master Servicer shall provide to representatives of the Trustee
and the Certificate Insurer reasonable access to the documentation regarding the
Contracts. Each of the Transferor and Master Servicer will permit any authorized
representative or agent designated by the Certificate Insurer to visit and
inspect any of the properties of the Transferor or Master Servicer, as the case
may be, to examine the corporate books and financial records of the Transferor
or Master Servicer, as the case may be, its records relating to the Contracts,
and make copies thereof or extracts therefrom and to discuss the affairs,
finances, and accounts of the Transferor or Master Servicer, as the case may be,
with its principal officers, as applicable, and its independent accountants. Any
expense incident to the exercise by the Certificate Insurer of any right under
this Section 3.21 shall be borne by NAFCO, so long as NAFCO is the Master
Servicer. In each case, such access shall be afforded without charge but only
upon reasonable request and during normal business hours.
Section 3.22. Retention and Termination of Master Servicer. The Master
Servicer hereby covenants and agrees to act as such under the Agreement for an
initial term, commencing on the Closing Date and ending on December 31, 1995,
which term shall be extendible by the Certificate 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 Master Servicer and the Trustee, 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 "Master Servicer Extension Notice") shall be
delivered by the Certificate Insurer to the Trustee and the Master Servicer. The
Master Servicer hereby agrees that, as of the date hereof and upon its receipt
of any such Master Servicer Extension Notice, the Master 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 Master Servicer subject to
and in accordance with the other provisions of this Agreement. Until such time
as a Certificate Insurer Default shall have occurred and be continuing, the
Trustee agrees that if as of the fifteenth day prior to the last day of any term
of the Master Servicer the Trustee shall not have received any Master Servicer
Extension Notice from the Certificate Insurer, the Trustee will, within five
days thereafter, give written notice of such non-receipt to the Certificate
Insurer, and the Master Servicer and the Master Servicer's terms shall not be
extended unless a Master Servicer Extension Notice is received on or before the
last day of such term.
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ARTICLE IV
Payments to Certificateholders
Section 4.01. Distributions.
(a) The Trustee shall, based upon a certificate delivered to the Trustee
and the Certificate Insurer by the Master Servicer not later than the Reporting
Date, calculate the Available Amount and the Certificate Distributable Amount
for the related Distribution Date and, based upon such determinations and the
distributions to be made on such Distribution Date, as described below, the
amount of any withdrawal required to be made from the Spread Account and/or any
Policy Claim Amount, in each case with respect to such Distribution Date.
(b) On each Distribution Date the Trustee will, to the extent of the
Available Amount together with (i) funds withdrawn from the Spread Account, if
any, (ii) the Policy Claim Amount, if any, and (iii) any amount deposited to the
Certificate Account pursuant to Section 4.04(e) (such amounts so deposited to be
applied only as directed by the Certificate Insurer) make the following payments
(in case of the withdrawals from the Spread Account, for payments of the Master
Servicing Fee and the Certificate Distributable Amount, only, and in the case of
the Policy Claim Amount, for Guaranteed Distributions only, from the Certificate
Account in the following order of priority:
(i) first, to the Master Servicer, the amount of the Master
Servicing Fee payable in respect of the related Due Period and any unpaid
Master Servicing Fees from prior Due Periods to the extent not previously
paid;
(ii) second, accrued and unpaid fees owing to the Trustee,
Collateral Agent to the standby Servicer or the Custodian, to the extent
not paid by the Master Servicer;
(iii) to the Certificateholders, to be applied first to the
Certificate Interest Distributable Amount and then to the Certificate
Principal Distributable Amount, the Certificate Distributable Amount;
(iv) fourth, to the Certificate Insurer (or any designee thereof),
any amounts then due to the Certificate Insurer under the Insurance
Agreement or this Agreement;
(v) fifth, to the Collateral Agent for deposit in the Spread
Account, the amount, if any, required to cause the balance deposited
therein to equal the Requisite Amount;
(vi) sixth, to the Pre-Funding Period Reserve Account, the amount by
which the Required Reserve Amount exceeds the amount of funds on deposit
therein after giving effect to any withdrawals from the Pre-Funding Period
Reserve Account on such Distribution Date;
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(vii) seventh, to the Trustee to reimburse the Trustee for any
unreimbursed expenses incurred by it under this Agreement and to pay any
indemnities owed by the Transferor to the Trustee under Section 2.03(b),
Section 6.03 and Section 8.11;
(viii) eighth, to reimburse the Master Servicer any expense of an
Opinion of Counsel described in Section 10.01, and any expenses described
in the last sentence of Section 3.08;
(ix) ninth, to reimburse the Standby Servicer for expenses incurred
by the Standby Servicer and to reimburse the Master Servicer for expenses
incurred by and reimbursable, or any indemnities payable by the
Transferor, to the Master Servicer pursuant to Sections 2.03(b), 6.03 and
7.01;
(x) tenth, to reimburse the Transferor for expenses incurred by and
reimbursable to the Transferor pursuant to Section 6.03; and
(xi) eleventh, to the holder of the Transferor Interest, the balance
of any funds remaining in the Certificate Account after application
pursuant to the preceding clauses (i) through (x).
(c) Distributions to Certificateholders on a Distribution Date shall be
made on the basis of the Percentage Interests evidenced by Certificates held by
the Holders and shall be made to each Certificateholder of record on the next
preceding Record Date (other than as provided in Section 9.01 respecting the
final distribution), either in immediately available funds (by wire transfer or
otherwise) to the account of such Certificateholder at a bank or other entity
having appropriate facilities therefor, if such Certificateholder holds
Certificates having an aggregate denomination of at least $1,000,000.00 and has
provided appropriate wire or other transfer information to the Trustee, or, if
such Certificateholder does not hold Certificates with such aggregate
denomination or holds such aggregate denomination but does not so notify the
Trustee, by check mailed to such Certificateholder at the address of such Holder
appearing in the Certificate Register.
Section 4.02. Statements to Certificateholders. Concurrently with each
distribution charged to the Certificate Account, the Trustee shall forward by
mail to each Holder of a Certificate, the Transferor, the Master Servicer, the
Certificate Insurer and each Rating Agency a written statement prepared by the
Master Servicer substantially in the form attached hereto as Exhibit 4.02.
Section 4.03. Specification of Certain Tax Matters.
(a) Each Certificateholder shall provide the Trustee with a completed and
executed Form W-9 prior to purchasing a Certificate. The Trustee shall comply
with all requirements of the Internal Revenue Code, and applicable state and
local law with respect to the withholding from any distributions made to any
Certificateholder of any applicable withholding taxes imposed
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thereon and with respect to any applicable reporting requirements in connection
therewith. The Transferor and each Certificateholder, by acceptance of its
Certificate, agree for purposes of such withholding (and for all other federal,
state, and local income and franchise tax purposes) to recognize and treat the
Certificates as indebtedness of the Transferor.
(b) On or before the last day of February of each calendar year beginning
with calendar year 1996, the Master Servicer shall furnish to each Person who at
any time during the preceding calendar year was Certificateholder a statement
prepared by the Master Servicer setting forth the amount of interest and
principal distributed to such Person during the preceding calendar year and such
other information required to be provided by an issuer of indebtedness under the
Internal Revenue Code and such other customary information (consistent with the
treatment of the Certificates as debt, as provided in Section 10.06) as the
Master Servicer deems necessary or desirable to enable the Certificateholders to
prepare their tax returns. Such obligations of the Master Servicer shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided to the Certificateholder by the Transferor
pursuant to any requirements of the Internal Revenue Code.
Section 4.04. Withdrawals from Spread Account; Claims Under Certificate
Policy.
(a) The Master Servicer shall determine on the Business Day prior to each
Draw Date whether the sum of (i) the Available Amount for the related
Distribution Date and (ii) the amount, if any, to be paid by the Certificate
Insurer to the Trustee with respect to such Distribution Date pursuant to
Section 4.04(e), is sufficient to pay the amounts required to be distributed on
the related Distribution Date pursuant to clauses (i) through (iii), inclusive,
of subsection 4.01(b) and shall send written notice of such determination to the
Trustee and the Certificate Insurer on such Business Day. The Trustee
independently shall verify the accuracy of such determination, and in the event
that such sum is not sufficient to pay such amounts required to be distributed
pursuant to clauses (i) through (iii), inclusive, of subsection 4.01(b), the
Trustee shall, for the benefit of the Certificateholders, deliver to the
Collateral Agent, the Certificate Insurer and the Servicer, no later than 12:00
noon, New York City time, on the day preceding such Draw Date, a written notice
(a "Deficiency Notice") specifying the amount of the shortfall (the amount of
any such shortfall being hereinafter referred to as the "Deficiency Claim
Amount"). 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 Trustee. Amounts paid by the
Collateral Agent to the Trustee pursuant to a claim submitted under this Section
4.04(a) shall be deposited by the Trustee into the Certificate Account for
payment to Certificateholders on the related Distribution Date.
(b) In the event that the Trustee has delivered a Deficiency Notice with
respect to any Distribution Date, the Trustee shall determine on the related
Draw Date whether the sum of (i) the Available Amount for the related
Distribution Date, and (ii) the amount of the Deficiency Claim Amount, if any,
to be delivered by the Collateral Agent to the Trustee pursuant to a Deficiency
Notice delivered with respect to such Distribution Date would be insufficient to
pay
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the Guaranteed Distributions for the related Distribution Date. In the event the
Trustee determines that the amounts described in clauses (i) through (iii),
inclusive, of the preceding sentence would be insufficient to pay the Guaranteed
Distributions for the related Distribution Date, then in such event the Trustee
shall furnish to the Certificate Insurer no later than 12:00 noon, New York City
time, on such Draw Date, a completed Notice of Claim in the amount of the
shortfall the amount of such shortfall being hereinafter referred to as the
"Policy Claim Amount"). Any notice delivered by the Trustee to the Certificate
Insurer shall specify the Policy Claim Amount claimed under the Certificate
Policy and shall constitute a "Notice of Claim" under the Certificate Policy. In
accordance with the provisions of the Certificate Policy, the Certificate
Insurer is required to pay to the Trustee the 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 Certificate Policy) following receipt on a
Business Day (as defined in the Certificate Policy) of the Notice of Claim, and
(ii) the applicable Distribution Date. Any payment made by the Certificate
Insurer under the Certificate Policy shall be applied solely to the payment of
the Guaranteed Distributions, and for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each
Certificateholder any Policy Claim Amount from the Certificate Insurer and (ii)
deposit the same in the Certificate Account for disbursement to the
Certificateholders as set forth in Section 4.01(b)(iii). Any and all Policy
Claim Amounts disbursed by the Trustee from claims made under the Certificate
Policy shall not be considered payment by the Trust or from the Spread Account
with respect to such Certificates, and shall not discharge the obligations of
the Trust to make such payment. The Certificate Insurer shall, to the extent it
makes any payment with respect to the Certificates, 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 Certificates by
or on behalf of the Certificate Insurer, the Trustee shall assign to the
Certificate Insurer all rights to the payment of interest or principal with
respect to the Certificates which are then due for payment to the extent of all
payments made by the Certificate Insurer and the Certificate Insurer may
exercise any option, vote, right, power or the like with respect to the
Certificates to the extent that it has made payment pursuant to the Certificate
Policy. The Trustee agrees that the Certificate Insurer shall be subrogated to
all of the rights of payment of the Certificateholders or in relation thereto to
the extent that any such payment was made to such Certificateholders with
payments made under the Certificate Policy. To evidence such subrogation, the
Trustee shall note the Certificate Insurer's rights as subrogee upon the
Certificate Register upon receipt from the Certificate Insurer of proof of
payment by the Certificate Insurer of any Guaranteed Distributions.
(d) The Trustee shall be entitled to enforce on behalf of the
Certificateholders the obligations of the Certificate Insurer under the
Certificate Policy. Notwithstanding any other provision of this Agreement, the
Certificateholders are not entitled to institute proceedings directly against
the Certificate Insurer.
(e) The Certificate Insurer shall have the right, but not the obligation,
to pay to the Trustee for deposit into the Certificate Account with respect to
any Distribution Date all or any
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part of the amount, distributable pursuant to clauses (i) through (iii),
inclusive, of subsection 4.01(b) for such Distribution Date. To exercise such
right, the Certificate Insurer must cause written notice thereof to be delivered
to the Trustee prior to the close of business on the second Business Day prior
to the applicable Distribution Date and must cause the amount to be paid to be
delivered (in immediately available funds) to the Trustee on or prior to 12:00
noon, New York City time, on the applicable Distribution Date. Any amount so
paid to the Trustee shall be deposited by the Trustee in the Certificate
Account.
(f) The Certificate Insurer shall have the right, but not the obligation,
to pay to the Trustee from time to time for deposit in the Spread Account an
amount equal to the amount, if any, by which the Requisite Amount exceeds the
amount on deposit in the Spread Account at the time. To exercise such right, the
Certificate Insurer or its designee must deliver to the Collateral Agent the
amount to be paid, in immediately available funds, and written notice to deposit
such amount in the Spread Account. Any amount so paid to the Collateral Agent
shall be deposited by the Collateral Agent in the Spread Account.
Section 4.05. Preference Claims.
(a) In the event that the Trustee has received a certified copy of an
order of an appropriate court that any Guaranteed Distributions paid on a
Certificate has been avoided in whole or in part as a preference payment under
applicable bankruptcy law, the Trustee shall so notify the Certificate Insurer,
shall comply with the provisions of the Certificate Policy to obtain payment by
the Certificate Insurer of such avoided payment, and shall, at the time it
provides notice to the Certificate Insurer notify Holders of the Certificates by
mail that, in the event that any Certificateholder's payment is so recoverable,
such Certificateholder will be entitled to payment pursuant to the terms of the
Certificate Policy. Pursuant to the terms of the Certificate Policy, the
Certificate Insurer will make such payment on behalf of the Certificateholder to
the receiver, conservator, debtor-in-possession or trustee in bankruptcy named
in the Order (as defined in the Certificate Policy) and not to the Trustee or
any Certificateholder directly (unless a Certificateholder has previously paid
such payment to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy, in which case the Certificate Insurer will make such payment to the
Trustee for distribution to such Certificateholder upon proof of such payment
reasonably satisfactory to the Certificate Insurer).
(b) The Trustee shall promptly notify the Certificate Insurer of any
proceeding or the institution of any action (of which a Responsible Officer of
the 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 Certificates. Each Holder, by its purchase of Certificates, and the Trustee
hereby agree that so long as a Certificate Insurer Default shall not have
occurred and be continuing, the Certificate 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 or performance bond pending any such appeal
at the
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expense of the Certificate Insurer, but subject to reimbursement as provided in
the Insurance Agreement. In addition, and without limitation of the foregoing,
as set forth in Section 4.04(c), the Certificate Insurer shall be subrogated to,
and each Certificateholder and the Trustee hereby delegate and assign, to the
fullest extent permitted by law, the rights of the Trustee and each
Certificateholder 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 4.06. Retirement of Certificates. The Trustee, upon termination of
the Trust Estate pursuant to Section 9.01 or Section 9.02, shall furnish to the
Certificate Insurer a notice of such termination, and, upon retirement of the
Certificates and the expiration of the term of the Certificate Policy, shall
surrender the Certificate Policy to the Certificate Insurer for cancellation.
Section 4.07. Spread Account. The Transferor agrees, simultaneously with
the execution and delivery of this Agreement, to execute and deliver the Spread
Account Agreement, and pursuant to the terms thereof, to deposit the Initial
Spread Account Deposit in the Spread Account.
ARTICLE V
The Certificates
Section 5.01. The Certificates. The Certificates shall be substantially in
the form set forth in Exhibit 5.01 attached hereto and shall, on original issue,
be executed and delivered by the Trustee to or upon the order of the Transferor
upon receipt by the Master Servicer and the Subservicers, on behalf of the
Trustee, of the documents specified in Section 2.01. The Certificates shall be
issuable in the aggregate original Certificate Balance of $38,220,000 in
denominations of $20,000, and in integral multiples of $1,000 in excess thereof.
The Certificates shall be executed by manual or facsimile signature on behalf of
the Trustee by an authorized officer under its seal imprinted thereon. No
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless such Certificate shall have been executed by the Trustee
by manual signature of an authorized signatory of the Trustee and such execution
shall be conclusive evidence, and the only evidence, that such Certificate has
been duly delivered and entitled to the benefits hereof. All Certificates shall
be dated the date of their authentication.
Section 5.02. Registration of Transfer and Exchange of Certificates. (a)
The Trustee shall cause to be kept at one of its offices or agencies in Chicago,
Illinois a Certificate Register in which, subject to such reasonable regulations
as it may prescribe, the Trustee shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein provided.
The office of Harris Trust and Savings Bank, 311 West Monroe Street, 11th floor,
Chicago, Illinois 60606, Attention: Bond Services Unit, is initially appointed
such office for the purpose of registering Certificates and transfers and
exchanges of Certificates as herein provided.
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(b) No transfer of any Certificate shall be made unless that transfer is
made pursuant to an effective registration statement under the Securities Act,
and effective registration or qualification under applicable state securities
laws, or is made in a transaction which does not require such registration or
qualification. If such a transfer of any Certificate (other than in connection
with the initial issuance thereof) is to be made without registration under the
Securities Act, then the Certificate Registrar shall require, in order to assure
compliance with such laws, receipt of: (i) if such transfer is purportedly being
made in reliance upon Rule 144A under the Securities Act, a certificate from the
Certificateholder desiring to effect such transfer substantially in the form
attached as Exhibit 5.02(a) hereto, or (ii) in all other cases, a certificate
from the transferee substantially in the form of Exhibit 5.02(b) that the
transferee is an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) of the Securities Act and, with respect to (ii) only,
an Opinion of Counsel satisfactory to the Certificate Registrar to the effect
that such transfer may be made without such registration (which Opinion of
Counsel shall not be an expense of the Trust or of the Transferor, the Master
Servicer, the Trustee or the Certificate Registrar in their respective
capacities as such); provided that no such opinion shall be required after the
expiration of the three-year period referred to in Rule 144(k) of the Securities
Act. None of the Transferor, the Trustee or the Certificate Registrar is
obligated to register or qualify the Certificates under the Securities Act or
any other securities law or to take any action not otherwise required under this
Agreement to permit the transfer of any Certificate without registration or
qualification. Any Holder of a Certificate desiring to effect such a transfer
shall, and does hereby agree to, indemnify the Transferor, the Trustee, the
Master Servicer and the Certificate Registrar against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
So long as the Certificates are "restricted securities" within the meaning
of Rule 144(a)(3) of the Securities Act, the Transferor covenants to furnish or
cause to be furnished, promptly upon the written request of a Certificateholder,
the following information ("Rule 144A Information") to such Certificateholder or
to a prospective transferee of a Certificate (or interests in such Certificate)
designated by such Certificateholder, as the case may be, in connection with the
resale of such Certificate or such interests by such Certificateholder pursuant
to Rule 144A: (i) a copy of this Agreement and any amendments thereto to date,
(ii) a copy of all Statements to Certificateholders furnished to such date by
the Trustee to Certificateholders and (iii) any other materials provided by the
Transferor to the Trustee with a written request that such information be sent
to such Certificateholder or prospective transferees as additional Rule 144A
Information. The Trustee may place its disclaimer on any such Rule 144A
Information.
(c) No transfer of any Certificate or interest therein shall be made (i)
to any employee benefit plan or other retirement arrangement, including
individual retirement accounts and annuities, Keogh plans and collective
investment funds and separate accounts in which such plans, accounts or
arrangements are invested, that is subject to ERISA or the Code (each, a
"Plan"), or (ii) to any person who is directly or indirectly purchasing such
Certificate or interest therein on behalf of, as named fiduciary of, as trustee
of, or with assets of a Plan, unless the prospective transferee provides the
Certificate Registrar with a certificate of facts acceptable to the Certificate
Registrar which establishes that such transfer will not cause the assets of the
Trust
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to be assets of any "Benefit Plan Investor" (as defined in 29 C.F.R. Section
2510.3-101 or any successor provision) (assuming that Benefit Plan Investors
hold less than 25% of the Percentage Interests of the Certificates) and the
purchase and holding of the Certificates by the transferee will not give rise to
a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975
of the Code. In addition, no transfer of a Certificate will be permitted if the
Certificate Registrar makes a good faith determination, that, as a result of
such transfer, 25% or more in Percentage Interest of the Certificates would be
held by Benefit Plan Investors. For purposes of the immediately preceding
sentence, in determining the total Percentage Interest of the Certificates, any
Certificates held by a Person (other than a Benefit Plan Investor) who has
discretionary authority or control with respect to the assets of the Trust or
any Person who provides investment advice for a fee (direct or indirect) with
respect to such assets, or an affiliate of such a Person, shall be disregarded.
If the prospective transferee is not a Plan, the Certificate Registrar shall be
entitled to receive a certificate in form acceptable to it from such prospective
transferee establishing that such transferee is not a Plan, or acting on behalf
of or with the assets of a Plan, and shall be entitled to rely exclusively
thereon.
Upon surrender for registration of transfer of any Certificate at any
office or agency of the Trustee maintained for such purpose pursuant to this
Section 5.02 and upon satisfaction of the conditions set forth below, the
Transferor shall execute and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Certificates
of a like aggregate Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged for
other Certificates of authorized denomination of a like aggregate Percentage
Interest, upon surrender of the Certificates to be exchanged at any such office
or agency. Whenever any Certificates are so surrendered for exchange, the
Transferor shall execute and the Trustee shall authenticate and deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for transfer or exchange
shall (if so required by the Trustee) be duly endorsed by, or be accompanied by
a written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder thereof or his attorney-in-fact duly authorized in
writing.
No service charge shall be made for any transfer or exchange of
Certificates, but the Trustee may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
transfer or exchange of certificates.
All Certificates surrendered for transfer and exchange shall be cancelled
and returned to the Transferor.
Section 5.03. Mutilated, Destroyed Lost or Stolen Certificates. If (i) any
mutilated Certificate is surrendered to the Trustee or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee and the Transferor such
security or indemnity as may be required by the Transferor or the Trustee to
hold them harmless, then, in the absence of written notice to the Trustee that
such Certificate
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has been acquired by a bona fide purchaser, the Transferor shall execute and the
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and Percentage Interest. Upon the issuance of any new Certificate under
this Section, the Trustee may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Transferor) connected therewith. Any duplicate Certificate issued pursuant to
this Section shall constitute complete and indefeasible evidence of ownership in
the Trust Estate, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time. The Trustee may appoint an
affiliate of the Master Servicer to perform its duties under this Section,
subject to the agreement of such affiliate (including as to compensation
indemnity and the other terms of such appointment).
Section 5.04. Persons Deemed Owner. Prior to due presentation of a
Certificate for registration of transfer, the Transferor, the Master Servicer,
the Trustee and any agent of the Transferor, the Master Servicer, or the Trustee
may treat the Person in whose name any Certificate is registered as the owner of
such Certificate for the purpose of receiving distributions pursuant to Section
4.01 and for all other purposes whatsoever, and neither the Transferor, the
Master Servicer, the Trustee nor any agent of the Transferor, the Master
Servicer or the Trustee shall be affected by notice to the contrary.
Section 5.05. Appointment of Paying Agent. The Transferor may appoint a
Paying Agent, which shall be acceptable to the Transferor and the Certificate
Insurer (unless a Certificate Insurer Default has occurred and is continuing),
for the purpose of making distributions to Certificateholders pursuant to
Section 4.01. In the event of any such appointment, on or prior to each
Distribution Date, the Trustee shall deposit or cause to be deposited with the
Paying Agent a sum sufficient to make the payments to Certificateholders in the
amounts and in the manner provided for in Section 4.01, such sum to be held, in
trust, for the benefit of Certificateholders. The Transferor hereby initially
appoints the Trustee as Paying Agent for the Certificates.
The Trustee shall cause each Paying Agent to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the Trustee
that such Paying Agent will hold all sums held by it for the payment to
Certificateholders, in trust, for the benefit of the Certificateholders entitled
thereto until such sums shall be paid to such Certificateholders.
ARTICLE VI
The Transferor and the Master Servicer
Section 6.01. Respective Liabilities of the Transferor and the Master
Servicer. The Transferor and the Master Servicer shall each be liable in
accordance herewith only to the extent of the obligations specifically and
respectively imposed upon and undertaken by the Transferor
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and the Master Servicer herein and the representations made by the Transferor or
the Master Servicer.
Section 6.02. Existence of Transferor and Master Servicer; Merger or
Consolidation of the Master Servicer; Assignment of Rights and Delegation of
Duties by Master Servicer. Subject to the following paragraph, the Transferor
and the Master Servicer each will keep in full effect its existence, rights and
franchises under the laws of the jurisdiction of its organization, and each will
obtain and preserve its qualification to do business, or employ agents qualified
to do business, in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, the
Certificates or any of the Contracts and to perform its respective duties under
this Agreement.
The Master 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 Master Servicer
shall be a party, or any Person succeeding to the business of the Master
Servicer, shall be the successor of the Master 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 Master Servicer shall be
an Eligible Servicer and each successor to the Master Servicer by virtue of its
acquisition of substantially all of the Master Servicer's assets shall be deemed
to have made the representations and warranties set forth in Section 2.03(a)
hereof and shall agree in writing to be bound by each of the Master Servicer's
obligations hereunder; provided further, that, (i) no representation or warranty
of the Master 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 Master Servicer shall provide notice of any such
merger, consolidation or transfer of substantially all of its assets to the
Certificate Insurer, the Trustee and the Rating Agencies. The Transferor may not
be merged or consolidated with or into any Person or transfer substantially all
of its assets to any Person.
Section 6.03. Limitation on Liability of the Transferor, the Master
Servicer and Others. The Master Servicer will defend and indemnify the Trustee,
the Certificate Insurer and their respective officers, directors, employees and
agents and the Certificateholders against any and all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation, arising out of or resulting from the use or
operation of any Financed Vehicle by the Master Servicer or any Subservicer. In
addition, the Master Servicer will defend and indemnify the Trustee, the
Certificate Insurer and their respective officers, directors, employees and
agents and the Certificateholders against any and all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation, arising from a breach of its obligations to
service the Contracts in accordance with this Agreement; provided however, that
the Master 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 Trustee, its
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officers, directors, employees and agents; and provided further that the Master
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
Trustee. If the Master Servicer or Transferor has made any indemnity payments to
the Certificateholders or the Trustee, the Certificate Insurer or their
respective officers, directors, employees or agents pursuant to this paragraph,
and the Trustee, the Certificate 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 Trustee or its officers, directors, employees or agents, the Trustee or its
officers, directors, employees or agents shall repay such amounts collected to
the Master Servicer or Transferor who made such indemnity payment. These
indemnities of the Master Servicer and the Transferor will survive any transfer
of the respective rights, duties and obligations of the Master Servicer or the
Transferor hereunder to another Person, the termination of this Agreement
pursuant to Section 9.01 hereof, any Servicer Default, the termination of the
Trust Estate or the resignation or replacement of the Trustee for acts accruing
prior to the transfer, termination of the Trust Estate or the resignation or
replacement of the Trustee, but will not cover actions or omissions of any
successor Master Servicer after a Servicer Default. Neither the Master Servicer
nor any of its directors, officers, employees or agents shall be under any
liability to the Trust Estate, the Trustee, any Certificateholder, the
Certificate Insurer or the Transferor for any action taken by the Master
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 Master Servicer under
Section 2.03(a). The Transferor, the Master Servicer and any director, officer,
employee or agent of any Transferor or the Master 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.
The Transferor, the Master Servicer and any director, officer, employee or
agent of the Transferor or the Master Servicer shall be indemnified by the Trust
Estate and held harmless against any loss, liability or expense incurred in
connection with any legal action relating to this Agreement or the Certificates,
other than any loss, liability or expense for which the Transferor or Master
Servicer provides an indemnity as provided in the preceding paragraph (except as
any such loss, liability or expense shall be otherwise reimbursable pursuant to
this Agreement). Neither the Transferor nor the Master 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 Master 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 Certificateholders 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 Estate, and the Master Servicer shall be entitled
to be reimbursed therefor out of the Certificate Account as provided by Section
3.11(b) and Section 4.01(b)(ix). The rights of the Master Servicer to indemnity,
reimbursement or limitation on its liability pursuant to this Section 6.03 shall
survive the transfer of the rights, duties and obligations of the Master
Servicer to another Person or any Servicer Default.
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The Master Servicer shall defend, indemnify and hold harmless the Trust,
the Trustee, the Certificate Insurer, their respective officers, directors,
agents and employees, and the Certificateholders from and against any taxes that
may at any time be asserted against the Trust, the Trustee or the
Certificateholders with respect to the transactions contemplated in this
Agreement, including, without limitation, any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes (but not
including any taxes asserted with respect to, and as of the date of, the sale of
the Contracts and the other Trust Estate to the Trustee or the issuance and
original sale of the Certificates, or asserted with respect to ownership of the
Contracts, or federal or other income taxes arising out of distributions on the
Certificates) and costs and expenses in defending against the same.
The Master Servicer shall indemnify, defend and hold harmless the Trust,
the Trustee, the Certificate Insurer, their respective officers, directors,
agents and employees and the Certificateholders 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 Trustee, the Trust, the Certificate Insurer or the
Certificateholders through the breach of this Agreement, the negligence, willful
misfeasance, or bad faith of the Master Servicer in the performance of its
duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement.
Section 6.04. Transfer of Duties of Master Servicer. Subject to the
provisions of Section 6.02, the Master Servicer shall not resign from the
obligations and duties imposed on it by this Agreement as Master 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 Master Servicer, and the Certificate Insurer (which shall be
required so long as a Certificate Insurer Default shall not have occurred and be
continuing) does not elect to waive the obligation of the Master 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 Master Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered and acceptable to the Trustee and the Certificate Insurer (unless a
Certificate Insurer Default shall have occurred and be continuing). No
resignation of the Master Servicer shall become effective until, so long as no
Certificate Insurer Default shall have occurred and be continuing, the Standby
Servicer, or an entity acceptable to the Certificate Insurer shall have assumed
the responsibilities and obligations of the Master Servicer or, if a Certificate
Insurer Default shall have occurred and be continuing, a Person that is an
Eligible Servicer shall have assumed the responsibilities and obligations of the
Master Servicer.
Section 6.05. Master Servicer May Own Certificates. The Master Servicer in
its individual or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not the Master
Servicer. The Master Servicer shall notify the Trustee and the Certificate
Insurer promptly after it becomes the owner or pledgee of a Certificate.
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ARTICLE VII
Default
Section 7.01. Servicer Defaults. "Servicer Default," wherever used herein,
means any one of the following events (whatever the reason for such Servicer
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):
(a) the Master Servicer shall fail, or fail to cause any Subservicer, to
deliver to the Trustee for distribution to Certificateholders or deposit in the
Spread Account any proceeds or payments required to be so delivered by the
Master Servicer or Subservicer under the terms of the Certificates or this
Agreement (including deposits of the Retransfer Amounts) and such failure shall
continue unremedied for two Business Days after written notice is received by
the Master Servicer from the Trustee or (unless a Certificate Insurer Default
shall have occurred and be continuing) the Certificate Insurer or after
discovery of such failure by a Servicing Official; or
(b) the Master Servicer shall fail to observe or perform any other of the
covenants or agreements on the part of the Master Servicer in this Agreement,
which failure (i) materially and adversely affects the rights of
Certificateholders (determined without regard to the availability of funds under
the Certificate Policy) or of the Certificate Insurer (unless a Certificate
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
Master Servicer by the Trustee, or to the Master Servicer and the Trustee by the
Certificate Insurer (or, if a Certificate Insurer Default has occurred and is
continuing, Certificateholders evidencing in the aggregate not less than 25% of
the Percentage Interest); or
(c) there shall have occurred a Bankruptcy Event with respect to the
Master Servicer; or
(d) the Master Servicer shall have breached any of the representations and
warranties set forth in this Agreement which breach materially and adversely
affects the interests of the Certificateholders in any Contract determined
without regard to the availability of funds under the Certificate Policy or of
the Certificate Insurer (or, if NAFCO is the Master Servicer, the Transferor)
and the Master Servicer shall have failed to cure such breach in all material
respects within thirty days of its receipt of a notice of such breach; or
(e) there shall have occurred an Insurance Agreement Event of Default or
an event of default under any other insurance agreement to which the Certificate
Insurer and NAFCO and/or the Transferor are party; or
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(f) a claim is made under the Certificate Policy; or
(g) the Master Servicer fails to deliver the report required to be
delivered by the Master Servicer pursuant to Section 3.17 and such failure
remains unremedied for a period of five days.
(h) so long as a Certificate Insurer Default shall not have occurred and
be continuing, the Certificate Insurer shall not have delivered a Master
Servicer Extension Notice pursuant to Section 3.22.
If a Servicer Default shall occur, then, and in each and every such case,
so long as such Servicer Default shall not have been remedied, the Trustee may,
with the written consent of the Certificate Insurer (unless a Certificate
Insurer Default has occurred and is continuing), and at the written direction of
the Certificate Insurer (or, if a Certificate Insurer Default has occurred and
is continuing, Certificateholders evidencing in the aggregate not less than 51%
of the Percentage Interests), the Trustee shall, by notice in writing to the
Master Servicer, the Transferor and the Standby Servicer, (i) terminate all of
the rights and obligations of the Master Servicer under this Agreement and in
and to any Contracts and the proceeds thereof, subject to compensation, rights
of reimbursement, indemnity and limitation on liability to which the Master
Servicer is then entitled and the rights of indemnity to which the Trustee and
the Certificate Insurer are then entitled pursuant to Section 6.03 hereof, and
(ii) subject to 7.02, appoint the Standby Servicer as the successor Master
Servicer. Such notice shall specify, to the extent possible, the timing and
method of transition of the servicing of the Contracts from the Master Servicer
to the Standby Servicer or another successor Master Servicer appointed pursuant
to Section 7.02. On and after the receipt by the Master Servicer of such written
notice and upon the effective date of the transfer to the Standby Servicer or
such other successor Master Servicer specified in such notice, all authority and
power of the Master Servicer under this Agreement, whether with respect to the
Certificates or the Contracts or otherwise, shall pass to and be vested in the
Standby Servicer or such other successor Master 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 Master 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 Contracts and related documents, or otherwise.
The Master Servicer agrees to cooperate with such Person in effecting the
termination of the Master 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
Contracts.
The Trustee shall not be charged with knowledge of any event referred to
in clauses (a) through (d) above unless a Responsible Officer of the Trustee at
the Corporate Trust Office obtains actual knowledge of such event or receives
written notice of such event from the Master Servicer, the Certificate Insurer
or from a Certificateholder. The Trustee promptly shall send
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written notice to each Rating Agency and the Certificate Insurer of each
Servicer Default of which it is charged with knowledge in accordance with the
preceding sentence.
If the Master Servicer is terminated pursuant to this Section 7.01, then
the Master Servicer shall bear all of the costs and expenses of transferring the
duties and obligations of the Master Servicer to a successor Master Servicer and
except as otherwise agreed by the Certificate Insurer such costs and expenses
shall not be reimbursable from the Trust Estate nor payable by the Transferor or
the Trustee. To the extent not borne by the Master Servicer as described above,
such costs and expenses (including attorney's fees and expenses) shall be borne
by the Trust Estate in accordance with Section 4.01(b)(ix).
Section 7.02. Trustee to Act; Appointment of Successor. On and after the
time the Master Servicer receives a notice of termination pursuant to Section
7.01, the Standby Servicer shall be the successor in all respects to the Master
Servicer in its capacity as Master Servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Master
Servicer by the terms and provisions hereof; provided however, that in the event
that the Standby Servicer refuses or is unable to act as successor Master
Servicer, the Trustee or a successor Master Servicer appointed pursuant to this
Section 7.02 shall be the successor Master Servicer hereunder and provided
further, however, that if no Certificate Insurer Default shall have occurred and
be continuing the Certificate Insurer, by written notice to the Trustee, the
Transferor, the Master Servicer and the Standby Servicer, may designate another
Person to act as successor Master Servicer hereunder. As compensation therefor,
the Trustee, its designee, or other successor Master Servicer, as the case may
be, shall be entitled to all funds relating to the Contracts which the Master
Servicer would have been entitled to charge to the Certificate Account if the
Master Servicer had continued to act hereunder. If the Standby Servicer refuses
or is unable to act as successor Master Servicer hereunder, the Trustee may, if
it shall be unwilling to so act, or shall, if it is unable to so act, appoint,
or petition a court of competent jurisdiction to appoint, any experienced
servicer of motor vehicle installment sales contracts and notes having a net
worth of not less than $10,000,000 as the successor to the Master Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder. The Trustee shall obtain the
prior written consent of the Certificate Insurer (unless a Certificate Insurer
Default has occurred and is continuing) before appointing a successor Master
Servicer other than the Standby Servicer, and any successor Master Servicer
other than the Standby Servicer shall be satisfactory to the Certificate Insurer
(unless a Certificate Insurer Default has occurred and is continuing). Pending
appointment of a successor to the Master Servicer hereunder, the Trustee shall
act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Contracts as it and such
successor shall agree; provided however, that no such compensation to the
Trustee shall be in excess of that permitted the Master Servicer hereunder
unless (A) the Trustee and the Certificate Insurer (or if a Certificate Insurer
Default has occurred and is continuing, holders of Certificates evidencing a
majority in Percentage Interests of the Certificates) agree in writing to a
larger Master Servicing Fee and (B) each Rating Agency delivers a letter to the
Trustee to the effect that such
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larger Master Servicing Fee will not result in a reduction or the withdrawal of
the rating assigned by such Rating Agency to the Certificates; and provided
further, however, that the Master Servicing Fee to a successor Master Servicer,
including the Trustee, 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
Contracts outstanding as of the last day of the related Due Period and (ii) two
percent (2%). The Transferor, the Trustee, any Subservicer and such successor
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
If the Trustee shall succeed to the Master Servicer's duties as Master
Servicer of the Contracts as provided herein, it shall do so in its individual
capacity and not in its capacity as Trustee and, accordingly, the provisions of
Article VIII shall be inapplicable to the Trustee and its duties in its capacity
as a successor Master Servicer to the Master Servicer and the servicing of the
Contracts. In the event that the Trustee shall not seek to appoint a successor
Master Servicer within three months of its succession to the Master Servicer's
duties as servicer, it shall resign as Trustee pursuant to Section 8.06 and the
Transferor shall, with the written consent of the Certificate Insurer (unless a
Certificate Insurer Default shall have occurred and be continuing), appoint, or
the Trustee shall petition a court to appoint, a successor trustee pursuant to
such Section 8.06. To the extent a successor Master Servicer is appointed, the
Trustee shall not be liable for the acts or omissions of such successor Master
Servicer.
Section 7.03. Notification to Certificateholders.
(a) Upon any such termination or appointment of a successor to the Master
Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register.
(b) Within 60 days after the occurrence of any Servicer Default, the
Trustee shall transmit by mail to all Holders of Certificates notice of each
such Servicer Default hereunder actually known to a Responsible Officer of the
Trustee, unless such Servicer Default shall have been cured or waived.
Section 7.04. Waiver of Past Defaults. The Certificate Insurer (or, if a
Certificate Insurer Default shall have occurred and be continuing, the Holders
of Certificates representing in the aggregate at least 51% of the Percentage
Interests) may, on behalf of all Holders of Certificates, waive any default by
the Master 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 Default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon.
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ARTICLE VIII
Concerning the Trustee
Section 8.01. Duties of Trustee. The Trustee, prior to the occurrence of a
Servicer Default of which a Responsible Officer of the Trustee has actual
knowledge and after the curing of all Events of Default and Servicer Defaults
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. In case an Event of Default or
Servicer Default has occurred of which a Responsible Officer of the Trustee has
actual knowledge (and which has not been cured), the Trustee shall exercise such
of the rights and powers vested in it by this Agreement, and use the same degree
of care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of his own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own bad faith or willful misconduct; provided however, that:
(i) Prior to the occurrence of a Servicer Default, and after the
curing of all such Events of Default and Servicer Defaults which may have
occurred, the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Agreement, the Trustee shall not
be liable except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenant or
obligation shall be read into this Agreement against the Trustee and, in
the absence of bad faith or willful misconduct on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any certificates
or opinions furnished to the Trustee and conforming to the requirements of
this Agreement;
(ii) The Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Certificate Insurer (or, if a
Certificate Insurer Default has occurred and is continuing,
Certificateholders holding Certificates which evidence
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not less than 25% of the Percentage Interests) as to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement, so long as the Trustee shall not have received
directions in a timely manner to the contrary from a larger Percentage
Interest; and
(iv) The Trustee shall not, except as expressly authorized under
this Agreement, take any action reasonably likely to impair the security
interests created or existing under any Contract or Financed Vehicle or to
impair the value of any Contract or Financed Vehicle.
Section 8.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 8.01:
(i) The Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, Officer's
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document believed by it to be genuine and to have
been signed or presented to it by the proper party or parties;
(ii) The Trustee may consult with counsel and any Opinion of Counsel
or advice of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel or
advice;
(iii) The Trustee shall be under no obligation to exercise any of
the trusts or powers vested in it by this Agreement or to institute,
conduct or defend any litigation hereunder or in relation hereto at the
request, order or direction of the Certificate Insurer or any of the
Certificateholders, pursuant to the provisions of this Agreement, unless
the Certificate Insurer or such Certificateholders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the obligation,
upon the occurrence of a Servicer Default of which a Responsible Officer
has actual knowledge (which has not been cured), to exercise such of the
rights and powers vested in it by this Agreement, and to use the same
degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs;
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by this Agreement;
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(v) Prior to the occurrence of a Servicer Default hereunder and
after the curing of all Servicer Defaults which may have occurred, the
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, direction, note, request, consent, order,
approval, bond or other paper or document, unless requested in writing to
do so by the Certificate Insurer or, after a Certificate Insurer Default,
Holders of Certificates evidencing not less than 25% of the Percentage
Interests; provided however, that if the prompt payment to the Trustee of
the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Agreement, the Trustee may require indemnity satisfactory to
it against such expense or liability as a condition to so proceeding. The
reasonable expense of every such examination shall be paid by the
Transferor, if a Servicer Default shall have occurred and is continuing,
and otherwise by the Certificate Insurer or the Certificateholder
requesting the investigation;
(vi) The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any
of its duties hereunder or in the exercise of any of its rights or powers,
if there is any ground for believing that the repayment of such funds or
adequate indemnity against such risk or liability is not assured to it,
and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of
performance of, any obligations of the Master Servicer under this
Agreement except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges
of, the Master Servicer in accordance with the terms of this Agreement;
(vii) Whenever in the administration of this Agreement the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, offering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, conclusively rely upon an Officer's Certificate;
and
(viii) The Trustee may execute any of the trusts or powers hereunder
by or through agents, attorneys, custodians or nominees or perform any
duties hereunder either directly or by or through agents, attorneys,
custodians or nominees and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent, attorney, custodian or
nominee appointed with due care by it hereunder.
Specifically, and not by way of limitation of the foregoing, the Trustee
may consult with counsel as to the limitations, if any, on interest to be
computed with respect to interest shortfalls in respect of prior distribution
dates, if any, and any Opinion of Counsel with respect thereto
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shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted to be taken with respect thereto by it in good faith
and in accordance with such Opinion of Counsel.
Section 8.03. Trustee Not Liable for Certificates or Contracts. The
recitals contained herein and in the Certificates (other than the certification
of authentication on the Certificates) shall be taken as the statements of the
Transferor or the Master Servicer, as the case may be, and the Trustee assumes
no responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Agreement or of the Certificates (except
that the Certificates shall be duly and validly authenticated by it) or of any
Contract or related document. The Trustee shall not be accountable for the use
or application by the Transferor, the Master Servicer or any Subservicers of any
of the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid pursuant hereto to the Transferor, the Master
Servicer or any Subservicers in respect of the Contracts or deposited in any
Account (or any other account hereafter established to effectuate the
transactions contemplated herein and in accordance with the terms hereof) by the
Transferor, the Master Servicer or any Subservicers. Subject to Article VII and
Sections 8.01 and 8.02, the Trustee shall have no responsibility or liability
for or with respect to the validity of any security interest in any Financed
Vehicle, the perfection of any such security interest (whether as of the date
hereof or at any future time), the maintenance of or the taking of any action to
maintain such perfection, the existence or validity of any Contract, the
validity of the assignment of any Contract to the Trust Estate or of any
intervening assignment, the review of any Contract or any Contract File (it
being understood that the Trustee has not reviewed and does not intend to review
such matters), the completeness of any Contract File, the receipt by its
custodian of any Contract or Contract File, the performance or enforcement of
any Contract (subject to Section 3.01), the compliance by the Master Servicer or
the Transferor with any covenant or the breach by the Master Servicer or the
Transferor of any warranty or representation made hereunder or in any related
document or the accuracy of any such warranty or representation, the acts or
omissions of the Master Servicer or any Obligor or Dealer, any action of the
Master Servicer or any Subservicer taken in the name of the Trustee or any
action by the Trustee taken at the instruction of the Transferor, the Master
Servicer or any Subservicer.
Section 8.04. Trustee May Own Certificates. The Trustee in its individual
or any other capacity may become the owner or pledgee of Certificates with the
same rights it would have if it were not Trustee.
Section 8.05. Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be a corporation organized and doing business under the laws
of the United States of America or any state thereof, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by federal or State
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent
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report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 8.06.
Section 8.06. Resignation and Removal of the Trustee. The Trustee may at
any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Transferor and the Certificate Insurer. Upon
receiving such notice of resignation, the Transferor shall with the written
consent of the Certificate Insurer (unless a Certificate Insurer Default has
occurred and is continuing), promptly appoint a successor trustee by written
instrument, in triplicate, one copy of which instrument shall be delivered to
the resigning Trustee, one copy to the Certificate Insurer and one copy to the
successor trustee. If no successor trustee shall have been so appointed and have
accepted appointment within thirty (30) days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee. If the Trustee shall
resign voluntarily, for any reason, except lack of eligibility, then the Trustee
shall bear all of its costs and expenses (including without limitation its
attorneys' fees) of transferring the trusteeship to a successor trustee and such
costs and expenses shall not be reimbursable from the Trust Estate nor payable
by the Transferor or the Master Servicer.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.05 and shall fail to resign after written request
therefor by the Transferor, or if at any time the Trustee shall become incapable
of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Transferor may with the
written consent of the Certificate Insurer (unless a Certificate Insurer Default
has occurred and is continuing), remove the Trustee and appoint a successor
trustee by written instrument, in triplicate, one copy of which instrument shall
be delivered to the Trustee so removed, one copy to the Certificate Insurer and
one copy to the successor trustee.
The Certificate Insurer (or if a Certificate Insurer Default shall have
occurred and be continuing, Certificateholders holding Certificates evidencing
in the aggregate a majority of Percentage Interests) at any time may remove the
Trustee and appoint a successor trustee by written instrument or instruments, in
triplicate, signed by the Certificate Insurer or such Holders, as the case may
be, or their attorneys-in-fact duly authorized, one complete set of which
instruments shall be delivered to the Transferor, one complete set to the
Trustee so removed and one complete set to the successor trustee so appointed.
Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to any of the provisions of this Section shall become effective
only upon acceptance of appointment by the successor trustee as provided in
Section 8.07. Upon resignation or removal of the Trustee and appointment of a
successor trustee, the predecessor trustee shall transfer the Certificate Policy
to the successor trustee by delivering the Certificate Policy to the successor
trustee.
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The respective obligations of the Transferor and the Master Servicer as
set forth in this Agreement; provided that, such obligations include upon any
removal shall survive the removal or resignation of the Trustee as provided in
this Section (the obligation to pay any amounts owed to the Trustee pursuant to
Section 8.11 of this Agreement which amount shall be due and payable. No Trustee
under this Agreement shall be liable for any acts or omissions of any successor
trustee.
Section 8.07. Successor Trustee. Any successor trustee appointed as
provided in Section 8.06 shall execute, acknowledge and deliver to the
Transferor, the Master Servicer, the Certificate Insurer and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee and the appointment of such
successor trustee shall become effective and such successor trustee, without any
further act, deed or conveyance, shall become fully vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with the like
effect as if originally named as trustee herein. The predecessor trustee upon
payment of its then unpaid charges, if any, shall execute and deliver an
instrument transferring to such successor trustee all of the rights, powers and
trusts of the predecessor trustee, and shall duly assign, transfer and deliver
to such successor trustee all property and money held by such predecessor
trustee and the Transferor, the Master Servicer and the predecessor trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for more fully and certainly vesting and confirming in
the successor trustee all such rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in this Section
unless at the time of such acceptance such successor trustee shall be eligible
under the provisions of Section 8.05.
Upon acceptance of appointment by a successor trustee as provided in this
Section, the successor trustee shall mail notice of the succession of such
trustee hereunder to each Rating Agency and all Holders of Certificates at their
addresses as shown in the Certificate Register. If the successor trustee fails
to mail such notice within ten days after acceptance of appointment by the
successor trustee, the Master Servicer shall cause such notice to be mailed at
the expense of the successor trustee.
Section 8.08. Merger or Consolidation of Trustee. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible under the provisions of
Section 8.05, 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. The Trustee or its successor hereunder shall provide the Master
Servicer and the Certificate Insurer with prompt notice of any such transaction.
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Section 8.09. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the
Trust Estate or property securing the same may at the time be located, the
Transferor, the Certificate Insurer (unless a Certificate Insurer Default shall
have occurred and be continuing) and the Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees, jointly
with the Trustee, or separate trustee or separate trustees, of all or any part
of the Trust Estate, and to vest in such Person or Persons, in such capacity and
for the benefit of the Certificateholders, such title to the Trust Estate, or
any part thereof, and, subject to the other provisions of this Section 8.09,
such powers, duties, obligations, rights and trusts as the Transferor, the
Certificate Insurer and the Trustee may consider necessary or desirable. If the
Transferor and the Certificate Insurer shall not have joined in such appointment
within fifteen (15) days after the receipt by it of a request so to do, or a
Certificate Insurer Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 8.05 hereunder and no notice to Holders of
Certificates of the appointment of a co-trustee or separate trustee shall be
required under Section 8.07.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 8.09, all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly (it being understood at such separate trustee or co-trustee is not
authorized to act without the 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 (whether as Trustee hereunder or as successor to the Master
Servicer hereunder), the 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 Estate or any portion thereof in
any such jurisdiction) shall be exercised and performed by such separate trustee
or co-trustee at the direction of the Trustee.
No trustee hereunder shall be liable by reason of any act or omission of
any other trustee hereunder. The Master Servicer, the Trustee and, provided no
Certificate Insurer Default shall have occurred, the Certificate Insurer acting
jointly may at any time accept the resignation of or remove any separate trustee
or co-trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. 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 Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision
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of this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Every such instrument shall be filed with
the Trustee.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 8.10. Appointment of Office or Agency. The Trustee will maintain
an office at the address stated in Section 10.05(c) hereof where notices and
demands to or upon the Trustee in respect of the Certificates may be served.
Section 8.11. Trustee's Compensation and Reimbursement.
(a) The Transferor and NAFCO jointly and severally agree:
(i) to pay the Trustee compensation in any amount computed in
accordance with the Trustee's fee schedule attached hereto as
Schedule 2 (which compensation shall not be limited by any provision
of law relating to the compensation of a trustee of an express
trust);
(ii) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances (including, without limitation, expenses
incurred in connection with notices or other communications to
Certificateholders) incurred or made by the Trustee in accordance
with any provision of this Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or willful misconduct; and
(iii) to indemnify the Trustee and its officers, directors,
employees and agents for, and to hold them harmless against, any
loss, liability, expense or tax (but not including taxes measured by
income or revenues) incurred without negligence or willful
misconduct on their part, arising out of or in connection with (A)
the acceptance of the Trustee's duties under, or administration of
the Trust Estate in accordance with the terms of, this Agreement,
including the costs and expenses of counsel to defend themselves
against any claim or liability in connection with the exercise or
performance of any of their powers or duties hereunder, or (B) the
Transferor's violation of any federal or state securities laws in
connection with the offering and sale of the Certificates, provided
that:
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(A) with respect to any such claim, the Trustee shall have
given the Transferor written notice thereof promptly after the
Trustee shall have knowledge thereof;
(B) while maintaining absolute control over its own defense,
the Trustee shall, unless its interests are adverse to that of the
Transferor, cooperate and consult fully with the Transferor in
preparing such defense;
(C) notwithstanding any other provision of this Section
8.11(a) the Transferor shall not be liable for settlement of any
such claim by the Trustee entered into without the prior written
consent of the Transferor; and
(D) the Trustee and its agents, as a group, shall be entitled
to counsel separate from the Transferor to the extent the
Transferor's interests are adverse to the Trustee's or the interests
of such agents (to be determined in the sole discretion of the
Trustee).
(b) Notwithstanding that the Transferor and NAFCO agree to pay the
Trustee the amounts set forth in Section 8.11(a), the Trustee shall distribute
to itself its fee described in Section 8.11(a)(i) pursuant to Section 3.11(b)
and Section 4.01 and shall distribute to itself its expenses and amounts
described in Section 8.11(a)(ii) and (iii) pursuant to Section 4.01. To the
extent that amounts are available to pay the Trustee as provided herein, the
Transferor and NAFCO shall not be liable to the Trustee. To the extent that
amounts are not available to pay the Trustee as provided herein, NAFCO, whether
or not it then is acting as Master Servicer, shall pay the Trustee such amounts.
Section 8.12. Trustee May Enforce Claims Without Possession Of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceedings instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after the payment in full of compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, be for the ratable benefit of the
Certificateholders in respect of which such judgment has been obtained.
Section 8.13. Suits for Enforcement. If a Servicer Default shall occur and
be continuing, the Trustee, in its sole discretion, may proceed to protect and
enforce its rights and the rights of the Certificateholders under this Agreement
by suit, action or proceeding in equity or at law or otherwise, whether for the
specific performance of any covenant or agreement contained in this Agreement or
in aid of the execution of any power granted in this Agreement or for the
enforcement of any other legal, equitable or other remedy as the Trustee, being
advised by counsel, shall deem most effectual to protect and enforce any of the
rights of the Trustee or the Certificateholders. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Certificateholder any plan of
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reorganization, arrangement, adjustment or composition affecting the
Certificates or the rights of any Holder, thereof, or authorize the Trustee to
vote in respect of the claim of any Certificateholder in any such proceeding.
Section 8.14. Rights of Direct Trustee. The Certificate Insurer or, if a
Certificate Insurer Default shall have occurred and be continuing, the Holders
of Certificates evidencing in the aggregate not less than a majority of the
Percentage Interests of the Certificates (the "Majority Certificateholders"),
shall have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee; provided however, that the Trustee may decline
to follow any such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken, or if the
Trustee shall determine, in good faith, that the proceedings so directed would
be illegal or involve the Trustee in personal liability or, only if a
Certificate Insurer Default shall have occurred and be continuing, be unduly
prejudicial to the rights to the Certificateholders not giving such direction or
that reasonable security or indemnity against the cost, expenses and liabilities
which may be incurred has not been offered to it; and, provided further that
nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction of the Certificate Insurer or Majority Certificateholders.
ARTICLE IX
Termination
Section 9.01. Termination upon Retransfer to the Transferor or Liquidation
of All Contracts. The respective obligations and responsibilities of the Master
Servicer, the Transferor and the Trustee created hereby (other than the
obligation of the Trustee to make final payments to Certificateholders, the
Master Servicer and the Transferor as herein set forth) shall terminate upon (i)
the retransfer to the Transferor of all Contracts and all property acquired in
respect of any Contract remaining in the Trust Estate in exchange for the
delivery to the Trustee of an amount (the "Total Retransfer Amount") equal to
the sum of (A) 100% of the Certificate Balance as of the Distribution Date upon
which the proceeds of any retransfer are to be distributed, plus (B) one month's
interest at the Certificate Rate on the Certificate Balance on the Distribution
Date upon which the proceeds of any retransfer are to be distributed, (ii) the
sale, liquidation or disposal of the Contracts pursuant to Section 9.02 upon the
occurrence of a Bankruptcy Event with respect to the Transferor or (iii) five
months after the later of the final payment or other liquidation of the last
Contract remaining in the Trust Estate or the disposition of all property
acquired upon Repossession of any Financed Vehicle; provided however, that in no
event shall the trust created hereby continue beyond the expiration of
twenty-one years from the death of the last survivor of the descendants of
Joseph P. Kennedy, former ambassador to the Court of St. James, living on the
Closing Date.
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The right of the Transferor to require the retransfer to it of all
Contracts pursuant to (i) above is conditioned upon (a) the Pool Outstanding
Principal Balance as of the Distribution Date upon which the proceeds of such
repurchase are to be distributed being less than ten percent (10%) of the
Original Pool Outstanding Principal Balance, (b) delivery by the Transferor of
written notice of such retransfer to the Trustee and the Master Servicer not
later than the fifteenth day of the month next preceding the month in which such
retransfer will occur and (c) receipt of the prior written consent of the
Certificate Insurer if such retransfer would result in a claim on the
Certificate Policy on such Distribution Date or any Distribution Date thereafter
or would result in any amount owing to the Certificate Insurer under the
Insurance Agreement remaining unpaid. If such right is exercised, the Master
Servicer shall cooperate fully with the Transferor in effecting the retransfer
of the Contracts and related Contract Files and records to the Transferor. In
addition, the Trustee and any Subservicer shall promptly release to the
Transferor the Contract Files pertaining to the Contracts being retransferred.
Notice of any termination pursuant to clause (i) above specifying the
Distribution Date (the "Payment Date") upon which the Certificateholders may
surrender their Certificates to the Trustee for payment of the final
distribution and cancellation, shall be given promptly by the Trustee by letter
to Certificateholders mailed not earlier than the twenty first (21st) day and
not later than the twenty-fifth day of the month next preceding the month of
such final distribution specifying (A) the Distribution Date upon which final
payment of the Certificates will be made upon presentation and surrender of
Certificates at the office or agency appointed by the Trustee for that purpose
at the Corporate Trust Office (B) the amount of any such final payment and (C)
that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified. The
Trustee shall give such notice to the Master Servicer, the Certificate Insurer
and the Transferor at the time such notice is given to Certificateholders. The
Transferor shall deposit in the Certificate Account at least one Business Day
prior to the date on which such notice is given an amount equal to the amount
necessary to make the amount on deposit in the Certificate Account on the
Payment Date equal to the Total Retransfer Amount for the Contracts computed as
above provided. Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to Certificateholders the Guaranteed Distribution
Amount. If the Transferor has deposited the Total Retransfer Amount in the
Certificate Account in accordance with this paragraph, no interest shall be
payable in respect of the Certificates after the Payment Date.
If the Trustee is unable to apply any funds in accordance with this
Section by reason of any legal proceeding or by reason of any order or judgment
of any court or governmental authority enjoining, or restraining or otherwise
prohibiting such application, the obligations under this Agreement and the
Certificates shall be revived and restated as though no deposit of funds had
occurred pursuant to this Section and the Transferor shall promptly reassign the
Contracts and Contract Files to the Trustee until such time as the Trustee is
permitted to apply all such funds in accordance with this Section or the
obligations with respect to the Certificates are otherwise satisfied.
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In the event that all of the Certificateholders shall not surrender their
Certificates for cancellation within six months after the time specified in the
above-mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice all the Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain subject
hereto.
Upon final termination of the Trust Estate, the Accounts shall be
terminated and any amounts on deposit therein in excess of those lawfully due
and payable to any Person shall be paid to the Transferor.
Notwithstanding any termination of the Trust Estate pursuant to Section
9.01, the Trustee shall remain obligated to distribute to the Certificateholders
or former Certificateholders entitled thereto any amounts paid by the
Certificate Insurer to the Trustee as Preference Claims pursuant to the
Certificate Policy.
Section 9.02. Disposition of Contracts upon Bankruptcy Event. (a) Upon the
occurrence of a Bankruptcy Event with respect to the Transferor, the Transferor
shall promptly give written notice to the Trustee and the Certificate Insurer of
the occurrence of such Bankruptcy Event and, if the Revolving Period has not
terminated shall immediately cease transferring Additional Contracts to the
Trust. Notwithstanding any cessation of the transfer of Additional Contracts to
the Trust, Contracts transferred to the Trust prior to the occurrence of such
Bankruptcy Event and collections in respect thereof, whenever collected or
accrued on such Contracts, shall continue to be a part of the Trust. Within 15
days after receipt by the Trustee of notice of the occurrence of a Bankruptcy
Event, the Trustee shall (i) publish a notice in either The Wall Street Journal
or The New York Times that a Bankruptcy Event has occurred with respect to the
Transferor and that the Trustee intends to sell, dispose of or otherwise
liquidate the Contracts on commercially reasonable terms and in a commercially
reasonable manner and (ii) give notice to Certificateholders and the Certificate
Insurer describing the provisions of this Section and requesting instructions
from such Holders. If after 90 days from the day notice pursuant to clause (i)
of the preceding sentence is first published (the "Publication Date"), the
Trustee shall not have received written instructions of (x) Holders of
Certificates representing a majority of the Percentage Interests to the effect
that such Certificateholders disapprove of the liquidation of the Contracts, and
(y) the Certificate Insurer to such effect, the Trustee shall, subject to
9.02(c) below, promptly sell, dispose of or otherwise liquidate the Contracts
(other than any Contracts assigned to the Certificate Insurer pursuant to clause
(c) below) in a commercially reasonable manner and on commercially reasonable
terms, which shall include the solicitation of competitive bids. The Trustee
shall promptly notify the Certificate Insurer upon accepting an offer for the
Contracts. The Trustee may obtain a prior determination from any conservator,
receiver or liquidator that the terms and manner of any proposed sale,
disposition or liquidation are commercially reasonable. The provisions of
Section 9.01 and 9.02 shall not be deemed to be mutually exclusive.
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(b) The proceeds from any sale, disposition or liquidation of the
Contracts pursuant to Section 9.01 or subsection (a) above shall be treated as
collections on the Contracts and shall immediately be deposited in the
Collection Account. The Trustee shall determine conclusively the amount of such
proceeds which are deemed to be principal collections and finance charge
collections. Such proceeds and all amounts on deposit in the Collection Account,
the Pre-Funding Account, the Pre-Funding Period Reserve Account and the
Revolving Account shall be distributed pursuant to Section 4.01 on the
Distribution Date following the Due Period in which such sale, liquidation or
disposition occurs and the Trust shall terminate immediately thereafter.
(c) In the event that, based on offers to purchase the Contracts accepted
by the Trustee, the Certificate Insurer would not be reimbursed in full for all
amounts due to it under the Insurance Agreement following the distribution of
the proceeds of such sale and all funds on deposit in the Collection Account,
the Revolving Account, the Pre-Funding Account, the Certificate Account and the
Pre-Funding Reserve Account to the Certificateholders pursuant to Section
9.02(b) of this Agreement, the Certificate Insurer shall be permitted to request
an assignment of Contracts and all funds on deposit in the Revolving Account,
the Pre-Funding Account, the Certificate Account and the Pre-Funding Reserve
Account to it or its designee (including any liquidating or grantor trust
designated by it) in lieu of such a distribution of such sale proceeds. In the
event that the Certificate Insurer elects to request such an assignment,
promptly following receipt by the Trustee of notice of such request, the Trustee
shall file with the Certificate Insurer a Notice of Claim in accordance with the
Certificate Policy in respect of the principal amount, if any, of the
Certificates that are unpaid on the Distribution Date immediately preceding the
date of the receipt by the Trustee of such notice plus accrued interest thereon.
All amounts received by the Trustee from the Certificate Insurer pursuant to
this Section 9.02(c) shall be distributed to the Certificateholders. Immediately
upon payment by the Certificate Insurer of all amounts required to be paid by
the Certificate Insurer pursuant to this Section 9.02(c), the Trustee shall be
deemed to have assigned the Contracts and all funds on deposit in the Revolving
Account, the Pre-Funding Account, the Collection Account, the Certificate
Account and the Pre-Funding Reserve Account to the Certificate Insurer or its
designee. To effect such deemed assignment, the Trustee shall do and perform any
reasonable acts and execute any further instruments reasonably requested by the
Certificate Insurer.
ARTICLE X
Miscellaneous Provisions
Section 10.01. Amendment. This Agreement may be amended from time to time
by the Master Servicer, the Transferor and the Trustee, without the consent of
any of the Certificateholders but with the prior written consent of the
Certificate Insurer (unless a Certificate Insurer Default has occurred and is
continuing), 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,
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provided that such action shall not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the interests of any Certificateholder
or the Certificate Insurer.
In executing or accepting the additional trusts created by any amendment
to this Agreement permitted by this Section, the Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by this
Agreement. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this agreement or otherwise. The Master Servicer may, but shall not be obligated
to, enter into any amendment which affects the Master Servicer's own rights,
duties or immunities under this Agreement or otherwise.
This Agreement may also be amended from time to time, with the written
consent of the Certificate Insurer (unless a Certificate Insurer Default has
occurred and is continuing), by the Master Servicer, the Transferor and the
Trustee with the consent of the Holders of Certificates evidencing in the
aggregate not less than a 662/3 Percentage Interest of the Certificates 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 Certificateholders; provided however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments received on
Contracts which are required to be distributed on any Certificate without the
content of the Holder of such Certificate, or (ii) reduce the aforesaid level of
Percentage Interests the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all Certificates then
outstanding. Promptly after the execution of any amendment pursuant to this
paragraph, the Trustee shall furnish written notification of the substance of
such amendment to each Certificateholder. If a Certificate Insurer Default shall
have occurred and be continuing, no amendment to this Agreement that would
materially and adversely affect the interests of the Certificate Insurer shall
be effected without the Certificate Insurer's prior written consent.
It shall not be necessary for the consent of Certificateholders under this
Section 10.01 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe. The Transferor shall notify each
Rating Agency prior to executing any amendment of this agreement pursuant to
this Section 10.01.
The expenses of any Opinion of Counsel delivered hereunder shall be paid
for by the Person requesting the opinion and, in the case of the Trustee and the
Certificate Insurer, shall be considered an expense reimbursable as otherwise
provided herein and, in the case of the Master Servicer, shall be reimbursable
under Sections 3.11(b) and 4.01(b).
Section 10.02. Recordation of Agreement. To the extent permitted by
applicable law, this Agreement is subject to recordation in any appropriate
public recording office or elsewhere, such
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recordation to be effected by the Transferor and at its expense upon direction
by the Trustee, but only upon direction accompanied by an Opinion of Counsel at
the Transferor's expense to the effect that such recordation materially and
beneficially affects the interests of the Certificateholders and the Certificate
Insurer. The Trustee shall have no duty to determine whether the recordation of
this Agreement is necessary under applicable law to perfect the interests of the
Certificateholders and the Certificate Insurer in the Trust Estate.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 10.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Estate, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Estate, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
No Certificateholder shall have any right to vote (except as provided in
this Agreement) or in any manner otherwise control the operation and management
of the Trust Estate, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor, to the extent permitted by law,
shall any Certificateholder be under any liability to any third person by reason
of any action taken by the parties to this Agreement pursuant to any provision
hereof.
So long as no Certificate Insurer Default has occurred and is continuing,
whenever Certificateholder action, consent or approval is required under this
Agreement, such action, consent or approval shall be deemed to have been taken
or given on behalf of, and shall be binding upon, all Certificateholders if the
Certificate Insurer agrees to take such action or give such consent or approval.
No Certificateholder shall have any right by virtue of any provision of this
Agreement to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Agreement, unless (i) a Certificate Insurer
Default shall have occurred and be continuing and (ii) such Holder previously
shall have given to the Trustee a written notice of default and of the
continuance thereof, as hereinbefore provided, and unless also the
Certificateholders evidencing in the aggregate not less than 25% of the
Percentage Interests shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such indemnity as it may require against
the costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for sixty days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee, that
no one or more Certificateholders shall have any right in any manner whatever by
virtue of any provision of this Agreement to affect, disturb or prejudice
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the rights of the Holders of any other of such Certificates, or to obtain or
seek to obtain priority over or preference to any other such Holder, or to
enforce any right under this Agreement, except in the manner herein provided and
for the equal, ratable and common benefit of Certificateholders. For the
protection and enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Nothing in this Agreement shall be construed as giving the
Certificateholders any right to make a claim under the Certificate Policy.
Section 10.04. GOVERNING LAW. THIS AGREEMENT AND THE CERTIFICATES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL, SUBSTANTIVE 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, PROVIDED THAT THE
IMMUNITIES, STANDARD OF CARE, RIGHTS AND OBLIGATIONS OF THE TRUSTEE IN
CONNECTION WITH THE PERFORMANCE OF ITS DUTIES HEREUNDER SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE JURISDICTION IN WHICH ITS CORPORATE
TRUST OFFICE IS LOCATED.
Section 10.05. Notices. All demands and notices hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or delivered by facsimile
transmission, promptly confirmed in writing, to (a) in the case of the
Transferor, One Park Place, Suite 200, 621 NW 53rd Street, Boca Raton, Florida
33407, or such other address as may hereafter be furnished to the Master
Servicer and the Trustee in writing by the Transferor, (b) in the case of the
Master Servicer, One Park Place, Suite 200, 621 NW 53rd Street, Boca Raton,
Florida 33487, or such other address as may be hereafter furnished to the
Transferor and the Trustee by the Master Servicer in writing, (c) in the case of
the Trustee, 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606, or
such other address as may hereafter be furnished to the Transferor and the
Master Servicer in writing by the Trustee, (d) in the case of the Certificate
Insurer, to its address at 350 Park Avenue, New York, New York 10022 or its fax
number at (212) 339-3518, Attention: Surveillance Department Re: National Auto
Finance 1995-1 Trust, 6.36% Automobile Loan Asset-Backed Certificates, or such
other address or fax number as may hereafter be furnished to the Transferor, the
Master Servicer and the Trustee in writing by the Certificate Insurer and (e) in
the case of the Collateral Agent, to its address at 311 West Monroe Street, 12th
Floor, Chicago, Illinois 60606, or such other address as may hereafter be
furnished to the Transferor, the Master Servicer and the Trustee in writing by
the Collateral Agent. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
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Section 10.06. Intention of the Parties. The Transferor intends that the
Certificates constitute indebtedness of the Transferor for federal, state and
local income and franchise tax purposes. The Transferor, the Master Servicer and
each Certificateholder, by acceptance of its Certificate, agrees to recognize
and report the Certificates as indebtedness of the Transferor for purposes of
federal, state and local income or franchise taxes and any other tax imposed on
or measured by income, and to report all receipts and repayments relating
thereto in a manner that is consistent with such characterization. The powers
granted and obligations undertaken in this Agreement shall be construed so as to
further such intent.
Section 10.07. 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 or of the Certificates
or the rights of the Holders thereof.
Section 10.08. Protection of Title to Interest. (a) The Transferor or the
Master Servicer or both 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 the Trust, the Trustee and the Certificate
Insurer under this Agreement in the Trust Estate and in the proceeds thereof.
The Transferor or the Master Servicer or both shall deliver (or cause to be
delivered) to the Trustee and the Certificate Insurer file-stamped copies of, or
filing receipts for, any document filed as provided above, as soon as available
following such filing.
(b) Neither the Transferor nor the Master 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 by the Transferor 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 Trustee and the
Certificate Insurer (so long as a Certificate Insurer Default shall not have
occurred and be continuing) at least 30 days prior written notice thereof, and
shall promptly file appropriate amendments to all previously filed financing
statements and continuation statements.
(c) Each of the Transferor and the Master Servicer shall give the Trustee
and the Certificate Insurer at least 30 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. The Master Servicer shall at all times maintain each office
from which it services Contracts and its principal executive office within the
United States of America.
(d) If at any time the Transferor or the Master Servicer proposes to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the Master
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including
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any restored from backup archives) that, if they refer in any manner whatsoever
to any Contract, indicate clearly that such contract has been sold and is owned
by the Trust unless such Contract has been paid in full or repurchased by NAFCO,
the Transferor or the Master Servicer.
(e) The Master Servicer shall permit the Trustee, the Certificate Insurer,
the Transferor and their respective agents, at any time to inspect, audit and
make copies of and abstracts from the Master Servicer's records regarding any
Contracts or any other portion of the Trust Estate.
(f) The Master Servicer shall furnish to the Trustee, the Transferor and
the Certificate Insurer at any time upon request a list of all Contracts then
held as part of the Trust, together with a reconciliation of such list to the
Contract Schedules and to each of the Master Servicer's statements furnished
before such request indicating removal of Contracts from the Trust. The Trustee
shall hold any such list and Contract 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.
(g) The Transferor and Master Servicer shall deliver to the Trustee and
the Certificate Insurer simultaneously with the execution and delivery of this
Agreement and of each amendment thereto and upon the occurrence of the events
giving rise to an obligation to give notice pursuant to Section 10.08(b) or (c),
an Opinion of Counsel (a) stating that, in the opinion of such Counsel, all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Trustee in
the Contracts and the Trust Estate, and reciting the details of such filing or
referring to prior Opinions of Counsel in which such details are given, (b)
stating that, in the opinion of such counsel, no such action is necessary to
preserve and protect such interest, or (c) stating in the opinion of such
counsel, any action which is necessary to preserve and protect such interest
during the following 12-month period.
(h) The Master Servicer shall deliver to the Trustee and the Certificate
Insurer, within 90 days after the beginning of each calendar year beginning with
calendar year 1996, an Opinion of Counsel, either (a) stating that, in the
opinion of such counsel, all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and protect
the interest of the Trustee in the Contracts and the Trust Estate, and reciting
the details of such filings or referring to prior Opinions of Counsel in which
such details are given, (b) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest.
Section 10.09. Assignment. Notwithstanding anything to the contrary
contained in this Agreement, this Agreement may not be assigned by any of the
parties hereto without the prior written consent of the Trustee and the
Certificate Insurer.
Section 10.10. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust,
the interests in the Trust represented by the
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Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever, and Certificates upon authentication thereof by the
Trustee pursuant to Section 5.01 are and shall be deemed fully paid.
Section 10.11. 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
10.11, no other Person shall have any right or obligation hereunder. The
Certificate 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
Certificate Insurer Default shall have occurred and be continuing. Except as
expressly stated otherwise herein or in the Transaction Documents, any right of
the Certificate Insurer to direct, appoint, consent to, approve of, or take any
action under this Agreement, shall be a right exercised by the Certificate
Insurer in its sole and absolute discretion. The Certificate Insurer may
disclaim any of its rights and powers under this Agreement (but not its duties
and obligations under the Certificate Policy) upon delivery of a written notice
to the Trustee.
Section 10.12. Financial Security as Controlling Party. Each
Certificateholder by purchase of the Certificates held by it acknowledges that
the Trustee on behalf of the Trust, as partial consideration of the issuance of
the Policy, has agreed that the Certificate Insurer shall have certain rights
hereunder for so long as no Certificate Insurer Default shall have occurred and
be continuing. So long as a Certificate Insurer Default has occurred and is
continuing, any provision giving the Certificate 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 Certificate Insurer Default and such
right shall instead vest in the Trustee acting at the direction of the Holders
of Certificates. The Certificate Insurer may disclaim any of its rights and
powers under this Agreement (but not its duties and obligations under the
Certificate Policy) upon delivery of a written notice to the Trustee. The
Certificate Insurer may give or withhold any consent hereunder in its sole and
absolute discretion.
Section 10.13. Limitation of Liability of Trustee. Notwithstanding
anything contained herein to the contrary (i) this Agreement has been accepted
by Harris Trust and Savings Bank not in its individual capacity but solely as
Trustee and in no event shall Harris Trust and Savings Bank have any liability
for the representations, warranties, covenants, agreements or other obligations
of the Transferor 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 Transferor, and (ii) under no circumstances shall Harris Trust
and Savings Bank be personally liable for the payment of any indebtedness or
expenses arising in connection with this Agreement to the Certificates or
otherwise. Notwithstanding the foregoing, the Trustee shall remain and be liable
for any breach of its duties and obligations hereunder.
Section 10.14. Limitation of Liability of Chase. Notwithstanding anything
contained herein to the contrary (i) this Agreement has been accepted by Chase
not in its individual capacity but solely as owner trustee of the National
Financial Auto Funding Trust and in no
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event shall Chase have any liability for the representations, warranties,
covenants, agreements or other obligations of the Transferor 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 Transferor, and (ii)
under no circumstances shall Chase be personally liable for the payment of any
indebtedness or expenses arising in connection with this Agreement to the
Certificates or otherwise. Notwithstanding the foregoing, Chase shall remain and
be liable for any breach of its duties and obligations hereunder.
Section 10.15. Matters Relating to Purchase Agreement. To the extent that
it has rights against NAFCO under the Purchase Agreement, the Trustee shall,
subject to Article VIII, diligently pursue and enforce such rights; provided
however, that the Trustee shall not be obligated to file any suit or incur any
expense in connection therewith unless there are sufficient funds available to
reimburse the Trustee in accordance with Section 4.01 or unless the Trustee
receives satisfactory indemnity for such expenses.
Section 10.16. No Petition. Each of the Master Servicer, the Trustee and
the Certificateholders hereby agree for the benefit of the Trust that it will
not institute against the Transferor, or join any other Person is instituting
against the Transferor, any bankruptcy or insolvency proceeding under any
applicable state or federal law so long as any Certificate remains outstanding
or there shall have not elapsed one year plus one day since the date of the
final payment on the Certificates. The foregoing shall not limit the right of
the Master Servicer or the Trustee to file any claim in or otherwise take any
action with respect to any bankruptcy or insolvency proceeding that was
instituted against the Transferor by any Person other than the Trustee or the
Master Servicer.
Section 10.17. Submission to Jurisdiction. EACH PARTY HERETO HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW
YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER TRANSACTION DOCUMENT, AND HEREBY (A) IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH NEW YORK STATE OR FEDERAL COURT; (B) IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING; AND (C) IN THE CASE OF THE TRANSFEROR,
IRREVOCABLY APPOINTS NATIONAL FINANCIAL CORP. (THE "PROCESS AGENT"), WITH AN
OFFICE ON THE DATE HEREOF AT 1 PARK AVENUE, NEW YORK, NEW YORK 10016, UNITED
STATES OF AMERICA, AS ITS AGENT TO RECEIVE ON BEHALF OF IT AND ITS PROPERTY
SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY
BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING
OR DELIVERING A COPY OF SUCH PROCESS TO THE TRANSFEROR IN CARE OF THE PROCESS
AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND TRANSFEROR HEREBY IRREVOCABLY
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AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF.
NOTHING IN THIS SECTION 10.13 SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO
BRING ANY ACTION OR PROCEEDING AGAINST ANY OR ALL OF THE OTHER PARTIES HERETO OR
ANY OF THEIR RESPECTIVE PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTION.
Section 10.18. Waiver of Jury Trial. EACH PARTY HERETO WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN),
ACTIONS OF ANY OF THE PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
Section 10.19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Transferor, the Master Servicer and the Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized, all as of the day and year first above written.
NATIONAL FINANCIAL AUTO FUNDING
TRUST, as Transferor
By: THE CHASE MANHATTAN BANK
(USA), not in its individual capacity but
solely as Owner Trustee of the National
Financial Auto Funding Trust
By: [ILLEGIBLE]
------------------------------------------
NATIONAL AUTO FINANCE COMPANY L.P.,
as Master Servicer
By: NATIONAL AUTO FINANCE
CORPORATION, its General Partner
By: __________________________________________
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity
but solely as Trustee
By: [ILLEGIBLE]
------------------------------------------
<PAGE>
IN WITNESS WHEREOF, the Transferor, the Master Servicer and the Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized, all as of the day and year first above written.
NATIONAL FINANCIAL AUTO FUNDING
TRUST, as Transferor
By: THE CHASE MANHATTAN BANK
(USA), not in its individual capacity but
solely as Owner Trustee of the National
Financial Auto Funding Trust
By: __________________________________________
NATIONAL AUTO FINANCE COMPANY L.P.,
as Master Servicer
By: NATIONAL AUTO FINANCE
CORPORATION, its General Partner
By: [ILLEGIBLE]
------------------------------------------
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity
but solely as Trustee
By: __________________________________________
<PAGE>
- -----------------------------------------------------------------------
ASSIGNMENT AGREEMENT
between
BANKERS TRUST COMPANY,
as Trustee of the National Financial
Auto Receivables Master Trust
and
NATIONAL FINANCIAL AUTO FUNDING TRUST
---------------------
Dated as of October 1, 1995
- -----------------------------------------------------------------------
<PAGE>
ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT, dated as of October 1, 1995,
by and between NATIONAL FINANCIAL AUTO FUNDING TRUST, a Delaware
business trust ("Funding Trust") and BANKERS TRUST COMPANY ("Bankers
Trust" or the "Trustee"), not in its individual capacity but solely as
Trustee of the National Financial Auto Receivables Master Trust (the
"Master Trust") under the Pooling and Administration Agreement, dated
as of December 8, 1994 (the "Pooling and Administration Agreement"),
among Funding Trust, as Transferor, National Auto Finance Company L.P.
("NAFCO"), as Administrator, and Bankers Trust, as Trustee.
W I T N E S S E T H:
In consideration of the mutual covenants herein
contained, Funding Trust and the Trustee 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.
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 November 21, 1995.
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 principal
portion of each payment received and processed by the Servicer on or
before such date.
Purchase Price: As defined in Section 2.1.
Receivable Assets: The assets described in clauses
(i) through (vii), inclusive, of subsection 2.1 hereof.
Related Security: means, with respect to any Receivable,
the interest of the Seller
<PAGE>
in (i) the security interest in the Financed Vehicles granted by the
Obligors of 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, the Trustee hereby sells, transfers,
conveys and assigns, on behalf of the Master Trust, without
representation, warranty or recourse, except as specifically set forth
herein (i) the Receivables identified on the Receivables Schedule
attached hereto as Schedule I, (ii) all monies paid or payable
thereunder on or after October 1, 1995 (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) all of its right, title and interest in the Seller
Transaction Documents, (vi) all Records relating to any of the
foregoing and (vii) any other Trust Assets relating to the Receivables
Assets. Funding Trust agrees to pay to the Trustee on the Closing 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
Outstanding Principal Balance of the Receivables as of the Cut-off
Date in immediately available funds to an account at a bank designated
by the Trustee to Funding Trust.
2.2 Filings. (a) On or prior to the Closing Date,
the Trustee shall have filed in the office of the Secretary of State
of New York a UCC financing statement or statements, appropriate under
the Uniform Commercial Code in effect in New York to reflect the
transfer of the Receivables Assets from the Trustee to Funding Trust
and to protect Funding Trust's interest in the Receivables Assets
against all other Persons, and shall have filed (i) in the office of
the Secretary of State of Delaware and the office of the Secretary of
State of Florida UCC-3 financing statements amending the UCC-1
financing statements filed in such jurisdictions naming Funding Trust
as debtor and the Trustee as secured party and (ii) in the office of
the Secretary of State of Florida UCC-3 financing statements amending
the UCC-1 financing statements filed in such jurisdiction naming NAFCO
as debtor, Funding Trust as secured party and the Trustee
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as assignee, in each case to reflect the transfer of the Receivables
Assets to Funding Trust. During the term of this Agreement, the
Trustee shall not change its name, identity or structure or relocate
its chief executive office or principal place of business without
first giving 60 days prior written notice to Funding Trust and
Financial Security Assurance Inc. (for so long as any policy issued
Financial Security Assurance Inc. is in effect with respect to any
securities issued by Funding Trust or any trust of which Funding Trust
is depositor or transferor; provided, however, that Funding Trust has
no right or power to prohibit a change in the Trustee'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 the
Trustee'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, NAFCO, shall
after the effective date of such change, promptly file such amendments
as may be required to preserve and protect Funding Trust's interest in
the Receivables Assets.
(b) On or prior to the Closing Date, the Trustee
shall deliver to Funding Trust or such other Person as Funding Trust
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,
the Trustee shall deliver to Funding Trust or such other Person as
Funding Trust shall direct all other payments received on such
Receivables on or after the Cut-off Date and on or before the Closing
Date.
2.3 No Recourse. The sale and purchase of Receivables
and the other Receivables Assets under this Agreement shall be without
recourse to the Trustee or the Master Trust.
2.4 True Sales. The Trustee and Funding Trust intend
that the transactions contemplated hereby be true sales of Receivables
and other Receivables Assets by the Trustee to Funding Trust providing
Funding Trust with the full benefits of ownership of the Receivables
and other Receivables Assets free and clear of any liens, and neither
the Trustee nor Funding Trust intends the transactions contemplated
hereby to be, or for an purpose to be characterized as, a loan from
Funding Trust to the Trustee. The Trustee shall reflect sales of the
Receivables Assets hereunder on the books and records maintained by
the Trustee with respect to the Master Trust as sales of assets, and
shall treat such sales as sales for all purposes.
2.5 Receipt of Payments after Closing Date. Funding
Trust shall be entitled to all payments received or receivable with
respect to any Receivable sold and conveyed by the Trustee to Funding
Trust hereunder that are received on and after the Cut-off Date. If
the Trustee receives any payment on a Receivable belonging to Funding
Trust, the Trustee promptly shall turn such payment over to Harris
Trust and Savings Bank ("Harris Trust"), as trustee under the Pooling
and Servicing Agreement, dated as of October 1, 1995 (the "Pooling and
Servicing Agreement"), among Funding Trust, NAFCO and Harris Trust.
3
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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 the Trustee:
Four Albany Street
New York, New York 10006
Attn: Corporate Trust and Agency Group -
Structured Finance
If to Funding Trust:
National Financial Auto Funding Trust
c/o The Chase Manhattan Bank (USA),
as Trustee
802 Delaware Avenue
Wilmington, Delaware 19801
Attn: Corporate Administration Procedure
If to Financial Security Inc.:
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Re: NAFCO Auto Finance 1995-1 Trust,
6.36% Automobile
Loan Asset Backed Certificates
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 the Trustee or Funding Trust except as contemplated by this
Section; provided, however, that simultaneously with the execution and
delivery of this Agreement, Funding Trust shall assign all of its
right,
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<PAGE>
title and interest hereunder to Harris Trust and Savings Bank ("Harris
Trust"), as trustee under the Pooling and Servicing, dated as of
October 1, 1995 (the "Pooling Agreement"), among Funding Trust, as
transferor, NAFCO, as Master Servicer, and Harris Trust, and the
Certificateholders (as defined in the Pooling Agreement, the
"Certificateholders") and the Certificate Insurer (as defined in the
Pooling Agreement, the "Certificate Insurer") as provided in Section
2.01 of the Pooling Agreement, to which the Trustee hereby expressly
consents.
3.5 Third-Party Beneficiaries. This Agreement will
inure to the benefit of and be binding upon the parties hereto and
Harris Trust for the benefit of the Certificateholders and the
Certificate Insurer, 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. The Certificate Insurer may disclaim any of its
rights and powers under this Agreement upon delivery of a written note
to the Trustee and Funding Trust.
3.6 No Petition. The Trustee hereby agrees not to
cause the filing of a petition in bankruptcy against Funding Trust
until one year and one day after the maturity of any securities issued
pursuant to the Pooling and Servicing Agreement.
3.7 Further Assurances. It is the Trustee's
intention to convey its entire rights, title and interest in the
Receivables Assets or other assets related thereto acquired from
Funding Trust pursuant to the Pooling and Administration Agreement.
5
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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first written above.
NATIONAL FINANCIAL AUTO FUNDING TRUST
By: THE CHASE MANHATTAN BANK (USA)
not in its individual capacity but solely as
Owner Trustee of the National Financial
Auto Funding Trust
By: /s/ JOHN W. MACK
------------------------------------------
Name: JOHN W. MACK
Title: SECOND VICE PRESIDENT
NATIONAL FINANCIAL AUTO RECEIVABLES
MASTER TRUST
By: BANKERS TRUST COMPANY, not in its
individual capacity but solely as Trustee of
National Financial Auto Receivables Master
Trust
By: /s/
------------------------------------------
Name:
Title:
<PAGE>
TRANSFER AGREEMENT
TRANSFER AGREEMENT No. 1, dated as of October 1, 1995, by
National Financial Auto Funding Trust, a Delaware business trust (the
"Transferor"), to Harris Trust and Savings Bank, an Illinois banking
corporation, not in its individual capacity but solely as trustee (the
"Trustee), pursuant to the Pooling and Servicing Agreement referred to
below.
WITNESSETH:
WHEREAS, the Transferor, National Auto Finance Company L.P.,
as Master Servicer, and the Trustee are parties to the Pooling and
Servicing Agreement, dated as of October 1, 1995 (as such agreement
may have been, or may from time to time be, amended, supplemented or
otherwise modified, the "Pooling and Servicing Agreement");
WHEREAS, pursuant to the Pooling and Servicing Agreement, the
Transferor wishes to transfer Contracts to the Trustee on behalf of
the Trust as part of the corpus of the Trust Estate (as each such
capitalized term is defined in the Pooling and Servicing Agreement);
and
WHEREAS, the Trustee on behalf of the Trust is willing to
accept such transfer subject to the terms and condition hereof.
NOW THEREFORE, the Transferor and the Trustee hereby agree as
follows:
1. Defined Terms. All capitalized term used but not defined
herein shall have meanings ascribed to them in the Pooling and
Servicing Agreement.
Closing Date shall mean, with respect to the Initial
Initial Contracts transferred hereby, November 21, 1995.
2. Transfer of Initial Contracts. (a) For value received, the
Transferor hereby transfers, assigns, sets-over and conveys to the
Trust, without recourse except as set forth in the Pooling and
Servicing Agreement, and with the representations, warranties and
covenants set forth in the Pooling and Servicing Agreement, on and
after the Closing Date, all right, title and interest of the
Transferor in, to and under all Initial Contracts listed in Schedule 1
hereto, all monies paid or payable thereunder on or after the
applicable Cut-off Date, all Contract Files related thereto, property
which secured any such Contract and which has been acquired by
Repossession or otherwise, all rights to Insurance Proceeds and
Liquidation Proceeds relating thereto and all proceeds of any of the
foregoing and all rights to enforce the foregoing.
3. Delivery of Contract Schedule. The Transferor does hereby
deliver to the Trustee on behalf of the Trust herewith a Contract
Schedule containing a true and complete list of each Initial Contract
being transferred hereby as of the Closing Date, as the case may be.
Such Initial Contract Schedule is marked as Schedule 1 to this
Transfer Agreement and is hereby incorporated in and made a part of
this Transfer Agreement and the Pooling and Servicing
<PAGE>
Agreement.
4. Contract Files. The Transferor does hereby deliver to
the Custodian the original motor vehicle retail installment sales
contracts and Contract Files for each Contract identified in the
Contract Schedule.
5. Acceptance and Acknowledgement by Trustee. The Trustee
hereby acknowledges its acceptance on behalf of the Trust of all
right, title and interest of the Transferor in, to and under the
Contracts and other assets transferred hereby, and declares that it
shall hold such right, title and interest upon the trust set forth in
the Pooling and Servicing Agreement.
6. Conditions Precedent; Representations and Warranties. The
Transferor hereby represents and warrants to the Trustee that all
applicable requirements of the Pooling and Servicing Agreement with
respect to the transfer of the Contracts transferred hereby have been
fully satisfied and that all representations and warranties of the
Transferor set forth in Section 2.03(b) of the Pooling and Servicing
Agreement are true and correct on and as of the date hereof and all
representations and warranties of the Transferor set forth in Section
2.03(c) of the Pooling and Servicing Agreement are true and correct
with respect to the Initial Contracts transferred by the Transferor to
the Trust hereby. The aggregate outstanding principal balance of the
Initial Contracts transferred by the Transferor to the Trust hereby as
of the applicable Cut-Off Date is $33,485,922. The Master Servicer
hereby represents and warrants to the Trustee that all representations
and warranties of the Master Servicer set forth in Section 2.03(a) of
the Pooling and Servicing Agreement are ture and correct as of the
date hereof.
7. The Pooling and Servicing Agreement. The Pooling and
Servicing 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. Counterpart. This Transfer Agreement may be executed in
any number of counterparts, all of which taken together shall
constitute one and the same instrument
9. Limitation of Liability of Trustee. Notwithstanding
anything contained herein to the contrary (i) this Transfer Agreement
has been accepted by Harris Trust and Savings Bank not in it
individual capacity but solely as Trustee and in no event shall Harris
Trust and Savings Bank have any liability for the representations,
warranties, covenants, agreements or other obligations of the
Transferor 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 Transferor, and (ii) under no
circumstances shall Harris Trust and Savings Bank be personally liable
for the payment of any indebtedness or expenses arising in connection
with this Transfer Agreement or the Certificates or otherwise.
Notwithstanding the foregoing, the Trustee shall remain and be liable
for any breach of its duties and obligations hereunder and under the
Pooling and Servicing Agreement.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Transfer
Agreement to be duly executed and delivered by their respective duly
authorized officers as of the day and year first above written.
NATIONAL FINANCIAL AUTO FUNDING TRUST
By: THE CHASE MANHATTAN BANK (USA),
not in its individual capacity but solely as Owner
Trustee of the National Financial Auto Funding Trust
By: /s/ JOHN W. MACK
----------------------------------
Name: JOHN W. MACK
--------------------------------
Title: SECOND VICE PRESIDENT
-------------------------------
NATIONAL AUTO FINANCE 1995-1 TRUST
HARRIS TRUST AND SAVINGS BANK, not
in its individual capacity but solely as Trustee
of the National Auto Finance 1995-1 Trust
By: /s/ E. KAY LIEDERMAN
----------------------------------
Name: E. KAY LIEDERMAN
--------------------------------
Title: VICE PRESIDENT
-------------------------------
<PAGE>
Execution Copy
===============================================================================
INSURANCE AND INDEMNITY AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
NATIONAL FINANCIAL AUTO FUNDING TRUST,
and
NATIONAL AUTO FINANCE COMPANY L.P.
Dated as of November 21, 1995
National Auto Finance 1995-1 Trust
6.36% Automobile Loan Asset-Backed Certificates
$38,220,000
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions............................................... 2
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of NAFCO
and the Transferor........................................ 2
Section 2.02. Affirmative Covenants of NAFCO and the
Transferor................................................ 10
Section 2.03. Negative Covenants of NAFCO and the
Transferor................................................ 19
Section 2.04. Representations and Warranties of NAFCO
and the Transferor with respect to the
Master Trust.............................................. 22
Section 2.05. Affirmative Covenants of NAFCO and
the Transferor with respect to the
Master Trust.............................................. 22
Section 2.06. Negative Covenants of NAFCO and
the Transferor with respect to the
Master Trust.............................................. 24
ARTICLE III.
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Issuance of the Policy.................................... 24
Section 3.02. Payment of Fees and Premium............................... 24
Section 3.03. Reimbursement Obligation.................................. 26
Section 3.04. Indemnification........................................... 27
Section 3.05. Subrogation............................................... 30
i
<PAGE>
ARTICLE IV.
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of Agreement......................... 30
Section 4.02. Obligation Absolute....................................... 31
Section 4.03. Assignments; Reinsurance; Third-Party Rights.............. 32
Section 4.04. Liability of Financial Security........................... 33
ARTICLE V.
EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default......................................... 34
Section 5.02. Remedies; Waivers......................................... 36
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Amendments, Etc. ......................................... 37
Section 6.02. Notices................................................... 37
Section 6.03. Payment Procedure......................................... 39
Section 6.04. Confidentiality........................................... 39
Section 6.05. Severability.............................................. 40
Section 6.06. Governing Law............................................. 40
Section 6.07. Consent to Jurisdiction................................... 40
Section 6.08. Consent of Financial Security............................. 41
Section 6.09. Counterparts.............................................. 41
Section 6.10. Trial by Jury Waived...................................... 41
Section 6.11. Limited Liability......................................... 41
Section 6.12. Entire Agreement.......................................... 42
ii
<PAGE>
INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT dated as of November 21, 1995, by
and among FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), NATIONAL
FINANCIAL AUTO FUNDING TRUST (the "Transferor") and NATIONAL AUTO FINANCE
COMPANY L.P. ("NAFCO", and in its capacity as Master Servicer, the "Master
Servicer").
INTRODUCTORY STATEMENTS
A. On the Closing Date, the Transferor will acquire the Initial
Contracts and certain other property related thereto from the Master Trust and
will simultaneously sell to the Trust all of its right, title and interest in
and to the Initial Contracts and such other property related thereto pursuant
to the Pooling and Servicing Agreement.
B. Subsequent to the Closing Date, the Transferor proposes to acquire
Additional Contracts and certain other property related thereto from NAFCO, and
to simultaneously sell to the Trust all of its right, title and interest in and
to such Additional Contracts and such other property related thereto pursuant
to the Pooling and Servicing Agreement.
C. The Securities will evidence in the aggregate an undivided
ownership interest of 91% of the Trust. The Transferor has requested that
Financial Security issue a financial guaranty insurance policy guarantying
certain distributions of the principal of and interest on the Securities
(including any such distributions subsequently avoided as a preference under
applicable bankruptcy law) upon the terms and subject to the conditions
provided herein.
D. NAFCO and the Transferor may in the future enter into one or more
pooling and servicing agreements or sale and servicing agreements with a trust
pursuant to which the Transferor will sell all of its right, title and interest
in and to contracts and other trust property and in connection therewith
Financial Security may in the future issue additional policies with respect to
certain guaranteed distributions on the corresponding securities issued by the
trust.
E. The parties hereto desire to specify the conditions
precedent to the issuance of the Policy, the terms of payment of
premium in respect of the Policy, the indemnity and reimbursement
to be provided to Financial Security in respect of amounts paid
<PAGE>
by Financial Security under the Policy or otherwise and certain
other matters.
In consideration of the premises and of the agreements herein
contained, Financial Security, NAFCO and the Transferor hereby agree as
follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions. All terms defined in the Pooling and
Servicing Agreement or in the Spread Account Agreement shall have the same
meanings in this Insurance Agreement. Unless otherwise specified, if a word or
phrase defined in the Pooling and Servicing Agreement or in the Spread Account
Agreement can be applied with respect to one or more Series, such a word or
phrase shall be used herein as applied to Series 1995-1. In addition,
capitalized terms used herein shall have the meanings provided in Appendix I
hereto unless the context otherwise requires.
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of NAFCO and the
Transferor. NAFCO represents, warrants and covenants, as of the date hereof,
the Date of Issuance, each Subsequent Transfer Date and the Date of Public
Offering, with respect to itself, with respect to the Transferor and otherwise
as follows, and the Transferor represents, warrants and covenants, as of the
date hereof, the Date of Issuance, each Subsequent Transfer Date and the Date
of Public Offering, with respect to itself and otherwise, as follows:
(a) Due Organization and Qualification. NAFCO is a limited
partnership, duly organized, validly existing and in good standing
under the laws of the state of Delaware. The Transferor is a business
trust, duly organized, validly existing and in good standing under the
laws of the state of Delaware. Each of NAFCO and the Transferor is
duly qualified to do business, is in good standing and has obtained
all necessary licenses, permits, charters, registrations and approvals
(together, "approvals") necessary for the conduct of its business as
currently
2
<PAGE>
conducted and as described in the Offering Document and the
performance of its obligations under the Transaction Documents, the
Subservicing Agreement and the Master Trust Transaction Documents, in
each jurisdiction in which the failure to be so qualified or to obtain
such approvals would render any Contract unenforceable in any respect
or would otherwise have a material adverse effect upon the
Transaction.
(b) Power and Authority. Each of NAFCO and the Transferor has
all necessary power and authority to conduct its business as currently
conducted and as described in the Offering Document, to execute,
deliver and perform its obligations under the Transaction Documents,
the Subservicing Agreement and the Master Trust Transaction Documents
and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and
performance of the Transaction Documents, the Subservicing Agreement
and the Master Trust Transaction Documents by each of NAFCO and the
Transferor have been duly authorized by all necessary action and do
not require any additional approvals or consents or other action by or
any notice to or filing with any Person.
(d) Noncontravention. None of the execution and delivery of
the Transaction Documents, the Subservicing Agreement or the Master
Trust Transaction Documents by the Transferor or by NAFCO, the
consummation of the transactions contemplated thereby or the
satisfaction of the terms and conditions of the Transaction Documents,
the Subservicing Agreement or the Master Trust Transaction Documents,
(i) conflicts with or results in any breach or
violation of any provision of the trust agreement or
agreement of limited partnership of the Transferor or of
NAFCO, respectively, or any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award
currently in effect having applicability to the Transferor or
NAFCO, as the case may be, or any of their respective
properties, including regulations issued by an administrative
agency or other governmental authority having supervisory
powers over the Transferor or NAFCO, as the case may be,
(ii) constitutes a default by the Transferor or
NAFCO, as the case may be, under or a breach of any
3
<PAGE>
provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Transferor or NAFCO, as
the case may be, or any of their respective Subsidiaries is a
party or by which it or any of its or their properties is or
may be bound or affected, or
(iii) results in or requires the creation of any
Lien upon or in respect of any of the assets of the
Transferor or NAFCO or any of their respective Subsidiaries
except as otherwise expressly contemplated by the Transaction
Documents.
(e) Legal Proceedings. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting all or any of the Contracts,
NAFCO, the Transferor or any of their respective Subsidiaries, or any
properties or rights of NAFCO, the Transferor or any of their
respective Subsidiaries, pending or threatened, which, in any case, if
decided adversely, would result in a Material Adverse Change with
respect to NAFCO, the Transferor or any Contract.
(f) Valid and Binding Obligations. Each of the Transaction
Documents and the Master Trust Transaction Documents to which either
NAFCO or the Transferor is a party when executed and delivered by
NAFCO or by the Transferor, as the case may be, and the Subservicing
Agreement when executed and delivered by NAFCO will constitute the
legal, valid and binding obligations of such Person, enforceable in
accordance with their respective terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and
general equitable principles. The Securities, when executed,
authenticated and delivered in accordance with the Pooling and
Servicing Agreement, will be validly issued and outstanding and
entitled to the benefits of the Pooling and Servicing Agreement and,
together with the Retained Interest, will evidence the entire
beneficial ownership interest in the Trust.
(g) Financial Statements. The Financial Statements of each of
the Transferor and NAFCO, copies of which have been furnished to
Financial Security, (i) are, as of the dates and for the periods
referred to therein, complete and correct in all material respects,
(ii) present fairly the financial condition and results of operations
of each of the
4
<PAGE>
Transferor and NAFCO as of the dates and for the periods indicated and
(iii) have been prepared in accordance with generally accepted
accounting principles consistently applied, except as noted therein
(subject as to interim statements to normal year-end adjustments).
Since the date of the most recent Financial Statements, there has been
no material adverse change in such financial condition or results of
operations. Except as disclosed in the Financial Statements, neither
the Transferor nor NAFCO is subject to any contingent liabilities or
commitments that, individually or in the aggregate, have a material
possibility of causing a Material Adverse Change in respect of the
Transferor or NAFCO, as the case may be.
(h) ERISA. Each of the Transferor and NAFCO is in compliance
with ERISA and has not incurred and does not reasonably expect to
incur any liabilities to the PBGC under ERISA in connection with any
Plan or Multiemployer Plan or to contribute now or in the future in
respect of any Plan or Multiemployer Plan.
(i) Accuracy of Information. None of the Provided Documents
contain any statement of a material fact with respect to NAFCO, the
Transferor or the Transaction that was untrue or misleading in any
material respect when made. Since the furnishing of the Provided
Documents, there has been no change, nor any development or event
involving a prospective change known to NAFCO or to the Transferor,
that would render any of the Provided Documents untrue or misleading
in any material respect. There is no fact known to NAFCO or to the
Transferor which has a material possibility of causing a Material
Adverse Change with respect to NAFCO, the Transferor or the Contracts.
(j) Compliance With Securities Laws. The offer and sale of
the Securities comply in all material respects with all requirements
of law, including all applicable registration requirements of
securities laws. Without limitation of the foregoing, the Offering
Document does not contain any untrue statement of a material fact and
does not omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading; provided
that no representation is made with respect to information included in
an Offering Document and furnished by Financial Security in writing
expressly for use therein (all such information so furnished being
referred to herein as "Financial Security Information"), it being
5
<PAGE>
understood that, in respect of the initial Offering Document, the
Financial Security Information is limited to the information included
under the caption "The Certificate Insurer" and the financial
statements of Financial Security appended thereto. Neither the Trust
nor the Trust Estate is required to be registered as an "investment
company" under the Investment Company Act. The Pooling and Servicing
Agreement is not required to be qualified under the Trust Indenture
Act.
(k) Transaction Documents. Each of the representations and
warranties of NAFCO or of the Transferor contained in the Transaction
Documents is true and correct in all material respects and each of
NAFCO and the Transferor hereby makes each such representation and
warranty made by it to, and for the benefit of, Financial Security as
if the same were set forth in full herein.
(l) No Consents. No consent, license, approval or
authorization from, or registration, filing or declaration with, any
regulatory body, administrative agency, or other governmental
instrumentality, nor any consent, approval, waiver or notification of
any creditor, lessor or other nongovernmental person, is required in
connection with the execution, delivery and performance by NAFCO or by
the Transferor of this Insurance Agreement or of any other Transaction
Document to which such Person is a party, except (in each case) such
as have been obtained and are in full force and effect (other than,
with respect to the Date of Issuance, the UCC financing statements
required to be filed pursuant to the Transaction Documents by NAFCO,
the Transferor and the Master Trust, which shall be filed no later
than one Business Day after the Date of Issuance).
(m) Compliance With Law, Etc. No practice, procedure or
policy employed or proposed to be employed by NAFCO or by the
Transferor in the conduct of their respective businesses violates any
law, regulation, judgment, agreement, order or decree applicable to it
which, if enforced, would result in a Material Adverse Change with
respect to such Person.
(n) Special Purpose Entity.
(i) The capital of the Transferor is adequate
for the business and undertakings of the Transferor.
(ii) Other than with respect to the purchase by
NAFCO and its affiliates of all of the beneficial
6
<PAGE>
ownership interests of the Transferor and the transactions as
provided in (a) the Purchase Agreement, (b) each Conveyance,
(c) the Pooling and Servicing Agreement, (d) each Transfer
Agreement and (e) the case of the Date of Issuance only, the
Pooling and Administration Agreement and the Receivables
Purchase Agreement, the Transferor is not engaged in any
business transactions with NAFCO or any of its affiliates.
(iii) At least one co-trustee of the Transferor
shall be a person who is not, and will not be, a director,
officer, employee or holder of any partnership interests or
equity securities of NAFCO or any of its affiliates.
(iv) The Transferor's funds and assets are not,
and will not be, commingled with the funds of any other
person.
(v) The trust agreement of the Transferor requires
it to maintain (A) correct and complete books and records of
account, and (B) minutes of the meetings and other
proceedings of its holders of beneficial ownership interests
and trustees (including any co-trustees).
(o) Solvency; Fraudulent Conveyance. Each of NAFCO and the
Transferor is solvent and will not be rendered insolvent by the
Transaction and, after giving effect to such Transaction, neither
NAFCO nor the Transferor will be left with an unreasonably small
amount of capital with which to engage in its business. Neither NAFCO
nor the Transferor intends to incur, or believes that it has incurred,
debts beyond its ability to pay such debts as they mature. Neither
NAFCO nor the Transferor is contemplating the commencement of
insolvency, bankruptcy, liquidation or consolidation proceedings or
the appointment of a receiver, liquidator, conservator, trustee or
similar official in respect of NAFCO or the Transferor, as the case
may be, or any of its respective assets. The amount of consideration
being received by the Transferor upon the sale of the Securities
constitutes reasonably equivalent value and fair consideration for the
interest in the portion of the Trust Estate evidenced by the
Securities. The amount of consideration being received by the Master
Trust upon the sale of the Initial Contracts to the Transferor and
thereafter upon the sale of any Additional Contracts by the
7
<PAGE>
Master Trust to the Transferor constitutes reasonably equivalent value
and fair consideration for such Contracts. The amount of consideration
being received by NAFCO upon the sale of any Additional Contracts by
NAFCO or the sale of any of its interest in the Initial Contracts to
the Transferor constitutes reasonably equivalent value and fair
consideration for the Additional Contracts. Neither (i) the Master
Trust, with respect to Initial Contracts transferred by it to the
Transferor, nor (ii) NAFCO, with respect to any Additional Contracts
or any interest in the Initial Contracts transferred by it to the
Transferor, is transferring any of the above-mentioned Contracts or
interests with any intent to hinder, delay or defraud any of their
respective creditors. The Transferor is not transferring the Contracts
to the Trust or selling the Securities, as provided in the Transaction
Documents, with any intent to hinder, delay or defraud any of the
Transferor's creditors.
(p) Investment Company Act Compliance. Neither NAFCO nor the
Transferor is required to be registered as an investment company"
under the Investment Company Act.
(q) Good Title; Valid Transfer; Absence of Liens; Security
Interest. Immediately prior to the sale of the Initial Contracts and
related Other Trust Property to the Trust pursuant to the Pooling and
Servicing Agreement and the related Transfer Agreement on the Closing
Date and immediately prior to the sale of Additional Contracts and
related Other Trust Property to the Trust pursuant to the Pooling and
Servicing Agreement and the related Transfer Agreement on any
Subsequent Transfer Date, the Transferor was the owner of, and had
good and marketable title to, such property free and clear of all
Liens and Restrictions on Transferability, and had full right, power
and lawful authority to assign, transfer and pledge such Contracts and
related Other Trust Property. The Pooling and Servicing Agreement and
the related Transfer Agreement constitute a valid sale, transfer and
assignment of the Initial Contracts and related Other Trust Property
to the Trust and the Pooling and Servicing Agreement and each Transfer
Agreement constitute a valid sale, transfer and assignment of the
related Additional Contracts and related Other Trust Property to the
Trust, in each case enforceable against creditors of and purchasers of
the Transferor. In the event that, in contravention of the intention
of the parties, the transfer of the Contracts and related Other Trust
Property by the Transferor to the Trust is characterized as other
8
<PAGE>
than a sale, such transfer shall be characterized as a secured
financing, and the Trust shall have a valid and perfected first
priority security interest in the Contracts and related Other Trust
Property free and clear of all Liens and Restrictions on
Transferability.
(r) Perfection of Liens and Security Interest. On the Closing
Date, the Lien and security interest in favor of the Trustee with
respect to the Trust Estate will be perfected by the delivery of the
Contracts to the Custodian, which Contracts the Custodian will hold on
behalf of the Trustee, the filing of financing statements on Form
UCC-l in each jurisdiction where such recording or filing is necessary
for the perfection of the security interest in favor of the Trustee
and the establishment of the Collection Account, the Certificate
Account, the Pre-Funding Period Reserve Account, the Pre-Funding
Account and the Revolving Account in accordance with the provisions of
the Transaction Documents, and no other filings in any jurisdiction or
any other actions (except as expressly provided herein) are necessary
to perfect the Trustee's first priority Lien on and security interest
in the Trust Estate as against any third parties.
(s) Security Interest in Funds and Investments. Assuming the
retention of funds in the Trust Accounts and the acquisition of
Permitted Investments in accordance with the Transaction Documents,
such funds and Permitted Investments will be subject to a valid and
perfected, first priority security interest in favor of the Trustee.
Assuming the retention of funds in the Spread Account and the
acquisition of Permitted Investments in accordance with the Spread
Account Agreement, such funds and Permitted Investments will be
subject to a valid and perfected, first priority security interest in
favor of the Collateral Agent on behalf of Financial Security.
(t) Taxes. Each of NAFCO and the Transferor have and each of
their respective Subsidiaries have filed all federal and state tax
returns which are required to be filed and paid all taxes, including
any assessments received by it, to the extent that such taxes have
become due. Any taxes, fees and other governmental charges payable by
the Transferor or NAFCO in connection with the Transaction, the
execution and delivery of the Transaction Documents and the issuance
of the Securities have been paid or shall have been paid at or prior
to the Date of Issuance. Any taxes, fees and other governmental
charges payable by the Transferor or NAFCO in connection with the
transactions contemplated by the
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<PAGE>
Registration Rights Agreement have been paid or shall have been paid
at or prior to the Date of Public Offering.
(u) Additional Contracts. With respect to the transfer by
NAFCO of Additional Contracts on any Subsequent Transfer Date,
immediately prior to the sale of such Additional Contracts and related
Other Trust Property to the Transferor pursuant to the Purchase
Agreement and the related Conveyance, NAFCO was the owner of, and had
good and marketable title to, such property free and clear of all
Liens and Restrictions on Transferability, and had full right,
corporate power and lawful authority to assign, transfer and pledge
such Additional Contracts and related Other Trust Property. The
Purchase Agreement and the related Conveyance constitute a valid sale,
transfer and assignment of the related Additional Contracts and
related Other Trust Property to the Transferor enforceable against
creditors of and purchasers of NAFCO. In the event that, in
contravention of the intention of the parties, the transfer of such
Additional Contracts and related Other Trust Property by NAFCO to the
Transferor is characterized as other than a sale, such transfer shall
be characterized as a secured financing, and the Transferor shall have
a valid and perfected first priority security interest in such
Additional Contracts and related Other Trust Property free and clear
of all Liens and Restrictions on Transferability.
Section 2.02. Affirmative Covenants of NAFCO and the Transferor. NAFCO
hereby agrees with respect to itself and with respect to the Transferor and the
Transferor hereby agrees with respect to itself that during the Term of the
Agreement, unless Financial Security shall otherwise expressly consent in
writing:
(a) Compliance With Agreements and Applicable Laws. Each of
the Transferor and NAFCO shall perform each of its respective
obligations under the Transaction Documents and the Master Trust
Transaction Documents and shall comply with all material requirements
of, and the Securities shall be offered and sold in accordance with,
any law, rule or regulation applicable to it or thereto, or that are
required in connection with its performance under any of the
Transaction Documents or the Master Trust Transaction Documents.
(b) Financial Statements; Accountants' Reports; Other
Information. Each of NAFCO and the Transferor shall keep or
cause to be kept in reasonable detail books and records of
account of its assets and business and, in the case of
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<PAGE>
NAFCO, shall clearly reflect therein the transfer of Additional
Contracts to the Transferor, and, in the case of the Transferor, shall
clearly reflect therein the transfer of the Contracts to the Trust.
Each of NAFCO and the Transferor shall furnish or cause to be
furnished to Financial Security:
(i) Annual Financial Statements. As soon as
available, and in any event within 90 days after the close of
each fiscal year of NAFCO and the Transferor, the audited
balance sheets of NAFCO and the Transferor, as the case may
be, as of the end of such fiscal year and the audited
statements of income, changes in equity and cash flows of
NAFCO and the Transferor, as the case may be, for such fiscal
year, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and
period in the preceding fiscal year, prepared in accordance
with generally accepted accounting principles, consistently
applied, and accompanied by the certificate of NAFCO's and
the Transferor's independent accountants (who shall be, in
each case, a nationally recognized firm or otherwise
acceptable to Financial Security) and by the certificate
Specified in Section 2.02(c) hereof.
(ii) Quarterly Financial Statements. As soon as
available, and in any event within 45 days after the close of
each of the first three quarters of each fiscal year of NAFCO
and the Transferor, as the case may be, the unaudited balance
sheets of NAFCO and the Transferor, as the case may be, as of
the end of such quarter and the unaudited statements of
income, changes in equity and cash flows of NAFCO and the
Transferor, as the case may be, for the portion of the fiscal
year then ended, all in reasonable detail and stating in
comparative form the respective figures for the corresponding
date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles,
consistently applied (subject to normal year-end
adjustments), and accompanied by the certificate specified in
Section 2.02(c) hereof if such certificate is required to be
provided pursuant to such Section.
(iii) Accountants' Reports. If a Special Event
has occurred, copies of any reports submitted to NAFCO
or the Transferor by their respective independent
accountants in connection with any examination of the
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financial statements of NAFCO or the Transferor, promptly
upon receipt thereof.
(iv) Other Information. Promptly upon receipt
thereof, copies of all reports, statements, certifications,
schedules, or other similar items delivered to or by NAFCO or
the Transferor pursuant to the terms of the Transaction
Documents and, promptly upon request, such other data as
Financial Security may reasonably request; provided, however,
that NAFCO shall not be required to deliver any such items if
provision by some other party to Financial Security is
required under the Transaction Documents unless such other
party wrongfully fails to deliver such item. NAFCO and the
Transferor shall, upon the request of Financial Security,
permit Financial Security or its authorized agents (A) to
inspect the books and records of NAFCO and the Transferor as
they may relate to the Securities, the Contracts and the
Other Trust Property, the obligations of NAFCO or of the
Transferor under the Transaction Documents, the Transaction
and, but only following the occurrence of a Special Event,
NAFCO's business; (B) to discuss the affairs, finances and
accounts of NAFCO or the Transferor with its respective Chief
Operating Officer and Chief Financial Officer, no more
frequently than annually, unless a Special Event has
occurred; and (C) to discuss the affairs, finances and
accounts of NAFCO or the Transferor with its independent
accountants, provided that an officer of NAFCO or the
Transferor, as the case may be, shall have the right to be
present during such discussions. Such inspections and
discussions shall be conducted during normal business hours
and shall not unreasonably disrupt the business of NAFCO or
the Transferor, as the case may be. In addition, NAFCO shall
promptly (but in no case more than 30 days following issuance
or receipt by a Commonly Controlled Entity) provide to
Financial Security a copy of all correspondence between a
Commonly Controlled Entity and the PBGC, IRS, Department of
Labor or the administrators of a Multiemployer Plan relating
to any Reportable Event or the underfunded status,
termination or possible termination of a Plan or a
Multiemployer Plan. The books and records of NAFCO and the
Transferor will be maintained at the respective addresses
designated herein for receipt of notices, unless NAFCO or the
Transferor shall otherwise advise the parties hereto in
writing.
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(v) NAFCO shall provide or cause to be provided to
Financial Security an executed original copy of each document
executed in connection with the Transaction within 10 days
after the date of closing.
(vi) Subject to clause (1) of this Section 2.02,
promptly after the filing or sending thereof, copies of all
proxy statements, financial statements, reports and
registration statements which NAFCO or the Transferor files,
or delivers to, the IRS, the Commission, or any other
federal, state or foreign government agency, authority or
body which supervises the issuance of securities by NAFCO or
the Transferor or any national securities exchange.
(c) Compliance Certificate. Each of NAFCO and the Transferor
shall deliver to Financial Security concurrently with the delivery of
the financial statements required pursuant to Section 2.02(b) (i)
hereof and concurrently with the delivery of the financial statements
required pursuant to Section 2.02(b) (ii) hereof, a certificate signed
by the Chief Financial Officer of each of NAFCO and the Transferor
stating that:
(i) a review of NAFCO's and the Transferor's
respective performance under the Transaction Documents during
such period has been made under such officer's supervision;
(ii) to the best of such individual's knowledge, no
Special Event, Default or Event of Default has occurred, or
if a Special Event, Default or Event of Default has occurred,
specifying the nature thereof and, if NAFCO or the Transferor
has a right to cure any such Default or Event of Default
pursuant to Section 5.01, stating in reasonable detail the
steps, if any, being taken by NAFCO or the Transferor, as the
case may be, to cure such Default or Event of Default or to
otherwise comply with the terms of the agreement to which
such Default or Event of Default relates; and
(iii) the attached financial reports submitted in
accordance with Section 2.02(b) (i) or (ii) hereof, as
applicable, are complete and correct in all material respects
and present fairly the financial condition and results of
operations of NAFCO or the Transferor, as the case may be, as
of the dates and for the periods indicated, in accordance
with generally accepted
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accounting principles consistently applied (subject as to
interim statements to normal year-end adjustments).
(d) Notice of Material Events. Each of NAFCO and the
Transferor shall promptly inform (unless, in the case of clause (i)
only, prohibited by applicable law) Financial Security in writing of
the occurrence of any of the following:
(i) the submission of any claim or the initiation
of any legal process, litigation or administrative or
judicial investigation (A) against NAFCO or the Transferor
pertaining to the Contracts in general, (B) with respect to a
material portion of the Contracts or (C) in which a request
has been made for certification as a class action (or
equivalent relief) that would involve a material portion of
the Contracts;
(ii) any change in the location of NAFCO's or
the Transferor's principal office or any change in the
location of NAFCO's or of the Transferor's books and
records;
(iii) the occurrence of any Default, Event of
Default or Special Event; or
(iv) any other event, circumstance or condition
that has resulted, or has a material possibility of
resulting, in a Material Adverse Change in respect of NAFCO
or of the Transferor.
(e) Further Assurances. Each of NAFCO and the Transferor will
file or cause to be filed all necessary financing statements,
assignments or other instruments, and any amendments or continuation
statements relating thereto, necessary to be kept and filed in such
manner and in such places as may be required by law to preserve and
protect fully the Lien on and first priority security interest in, and
all rights of the Trustee for the benefit of the Certificateholders
and Financial Security with respect to the Contracts, under the
Pooling and Servicing Agreement. In addition, each of NAFCO and the
Transferor shall, upon the request of Financial Security, from time to
time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within ten (10) days of such request, such
amendments hereto and such further instruments and take such further
action as may be reasonably necessary to effectuate the intention,
performance and provisions of
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the Transaction Documents or to protect the interest of the Trustee,
for the benefit of the Certificateholders and Financial Security, in
the Contracts, free and clear of all Liens and Restrictions on
Transferability except the Lien in favor of the Trustee, for the
benefit of the Certificateholders and Financial Security, and the
Restrictions on Transferability imposed by the Pooling and Servicing
Agreement. In addition, each of NAFCO and the Transferor agrees to
cooperate with S&P and Moody's in connection with any review of the
Transaction which may be undertaken by S&P and Moody's after the date
hereof.
(f) Retirement of Securities. NAFCO or the Transferor shall
cause the Trustee, upon retirement of the Securities pursuant to the
Pooling and Servicing Agreement or otherwise, to furnish to Financial
Security a notice of such retirement, and, upon retirement of the
Securities and the expiration of the term of the Policy, to surrender
the Policy to Financial Security for cancellation.
(g) Third-Party Beneficiary. Each of NAFCO and the Transferor
agrees that Financial Security shall have all rights of a third-party
beneficiary in respect of the Pooling and Servicing Agreement, the
Purchase Agreement, the Registration Rights Agreement, each Transfer
Agreement, the Assignment Agreement, the Custodial Agreement and each
Conveyance and hereby incorporates and restates its representations,
warranties and covenants as set forth therein for the benefit of
Financial Security.
(h) Corporate Existence. Each of NAFCO and the Transferor
shall maintain its existence as a limited partnership and as a
business trust, respectively, and shall at all times continue to be
duly organized under the laws of the jurisdiction of its formation and
duly qualified and duly authorized (as described in Sections 2.01(a),
(b) and (c) hereof) and shall conduct its business in accordance with
the terms of its agreement of limited partnership or trust agreement,
as the case may be.
(i) Disclosure Document. (1) Each Offering Document delivered
with respect to the Securities shall clearly disclose that the Policy
is not covered by the property/ casualty insurance security fund
specified in Article 76 of the New York Insurance Law. In addition,
each Offering Document delivered with respect to the Securities which
includes financial statements of Financial Security prepared in
accordance with generally accepted accounting principles
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shall include the following statement immediately preceding
such financial statements:
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.
(2) Each Offering Document (other than the Preliminary
Private Placement Memorandum dated as of November 7, 1995 and the
Private Placement Memorandum dated as of November 16, 1995) delivered
with respect to the Securities subsequent to the Date of Issuance
shall be in form and substance satisfactory to Financial Security in
its sole discretion as evidenced by Financial Security's prior written
consent to the use thereof.
(j) Special Purpose Entity.
(i) The Transferor shall conduct its business
solely in its own name through its duly authorized officers
or agents so as not to mislead others as to the identity of
the entity with which those officers are concerned, and
particularly will use its best efforts to avoid the
appearance of conducting business on behalf of NAFCO or any
affiliate thereof or that the assets of the Transferor are
available to pay the creditors of NAFCO or any affiliate
thereof. Without limiting the generality of the foregoing,
all oral and written communications, including, without
limitation, letters, invoices, purchase orders, contracts,
statements and loan applications, will be made solely in the
name of the Transferor.
(ii) The Transferor shall maintain records and
books of account separate from those of NAFCO and the
affiliates thereof. The Transferor's books and records
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shall clearly reflect the transfer of the Contracts to the
Trust and the sale of the Securities each as a sale of the
Transferor's interest in the Contracts. The books and records
of the Transferor will be maintained at the address
designated herein for receipt of notices, unless the
Transferor shall otherwise advise the parties hereto in
writing.
(iii) The Transferor shall obtain proper
authorization of all action requiring approval of the
co-trustees or holders of beneficial ownership interests of
the Transferor, as the case may be. Meetings of the holders
of beneficial ownership interests of the Transferor shall be
held not less frequently than one time per annum and copies
of each such authorization and the minutes of each such
meeting shall be delivered to Financial Security within two
weeks of such authorization or meeting, as the case may be.
(iv) Although the organizational expenses of the
Transferor have been paid by NAFCO, operating expenses and
liabilities of the Transferor shall be paid from its own
funds.
(v) The annual financial statements of the
Transferor shall disclose the effects of the Transferor's
transactions in accordance with generally accepted accounting
principles and shall disclose that the assets of the
Transferor are not available to pay creditors of NAFCO or any
affiliate thereof.
(vi) The resolutions, agreements and other
instruments of the Transferor underlying the transactions
described in this Agreement, the other Transaction Documents
and the Master Trust Transaction Documents shall be
continuously maintained by the Transferor as official records
of the Transferor separately identified and held apart from
the records of NAFCO and each affiliate thereof.
(vii) The Transferor shall maintain an arm's- length
relationship with NAFCO and the affiliates thereof and will
not hold itself out as being liable for the debts of NAFCO or
any affiliate thereof.
(viii) The Transferor shall keep its assets and
its liabilities wholly separate from those of all other
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entities, including, but not limited to NAFCO and the
affiliates thereof.
(k) Maintenance of Licenses. NAFCO and the Transferor shall
each maintain all licenses, permits, charters and registrations which
are material to the performance by NAFCO or the Transferor, as the
case may be, of its business or of its respective obligations under
this Agreement, each other Transaction Document and the Master Trust
Transaction Documents.
(l) Registration Statements for the Securities. Each of NAFCO
and the Transferor shall (i) provide Financial Security with written
notice at least 30 days prior to the filing of any registration
statement relating to the Securities, (ii) provide Financial Security
with a copy of such registration statement within one Business Day of
such filing, (iii) prior to the effectiveness of any such registration
statement, obtain the written consent of Financial Security with
respect to the form of such registration statement and (iv) provide
Financial Security with any opinions of counsel as Financial Security
may request in connection with the registration of the Securities
under the Securities Act, which opinions shall be addressed to
Financial Security and shall be in form and substance satisfactory to
Financial Security.
(m) Master Trust Transactions. NAFCO shall, not later than
the fourteenth (14) day subsequent to the Date of Issuance (the
"Assumption Date"), form a special purpose entity and cause such
entity to assume in writing all of the Transferor's duties,
obligations and liabilities under, or arising in connection with, the
Master Trust Transaction Documents. Any such writing shall be in form
and substance satisfactory to Financial Security. In addition, each of
NAFCO and the Transferor shall, not later than the Assumption Date,
cause each creditor of the Transferor, including without limitation,
each creditor of the Master Trust, to release and discharge the
Transferor from any existing, and all future, liability, indebtedness
or obligation to such creditor. Each such release and discharge shall
be in writing and in form and substance satisfactory to Financial
Security. Each of NAFCO and the Transferor shall, not later than the
Assumption Date, cause any and all financing statements, registrations
or other filings, in effect with respect to the Transferor (as debtor
or secured party) prior to the Assumption Date, to be terminated. Each
of NAFCO and the Transferor shall cause
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(i) evidence of such termination to be delivered to Financial Security
on or prior to the Assumption Date and (ii) each release and discharge
executed under this Section 2.02(m) to name Financial Security as a
third party beneficiary thereunder.
Section 2.03. Negative Covenants of NAFCO and the Transferor. NAFCO
hereby agrees with respect to itself and with respect to the Transferor and the
Transferor hereby agrees with respect to itself that during the Term of the
Agreement, unless Financial Security shall otherwise expressly consent in
writing:
(a) Restrictions on Liens. Neither NAFCO nor the Transferor
shall (i) create, incur or suffer to exist, or agree to create, incur
or suffer to exist, or consent to cause or permit in the future (upon
the happening of a contingency or otherwise) the creation, incurrence
or existence of any Lien or Restriction on Transferability on the
Contracts except for the Lien in favor of the Trustee, for the benefit
of the Certificateholders and Financial Security, and the Restrictions
on Transferability imposed by the Pooling and Servicing Agreement or
(ii) with respect to the Contracts, sign or file under the Uniform
Commercial Code of any jurisdiction any financing statement which
names either NAFCO or the Transferor as a debtor, or sign any security
agreement authorizing any secured party thereunder to file such
financing statement, except in each case any such instrument solely
securing the rights and preserving the Lien of the Trustee, for the
benefit of the Certificateholders and Financial Security.
(b) Impairment of Rights. Neither NAFCO nor the Transferor
shall take any action, or fail to take any action, if such action or
failure to take action may (i) interfere with the enforcement of any
rights under the Transaction Documents or the Master Trust Transaction
Documents that are material to the rights, benefits or obligations of
the Trustee, the Certificateholders or Financial Security, (ii) result
in a Material Adverse Change in respect of the Contracts or (iii)
impair the ability of NAFCO or of the Transferor to perform its
obligations under the Transaction Documents or the Master Trust
Transaction Documents, including any consolidation or merger with any
Person or any transfer of all or any material amount of NAFCO's assets
to any other Person if such consolidation, merger or transfer would
materially impair the net worth of NAFCO or any successor Person
obligated, after such event,
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to perform NAFCO's obligations under the Transaction Documents or the
Master Trust Transaction Documents.
(c) Waiver, Amendments, Etc. Neither NAFCO nor the Transferor
shall waive, modify or amend, or consent to any waiver, modification
or amendment of, any of the provisions of any of the Transaction
Documents or the Transferor's trust agreement.
(d) Successors. Neither NAFCO nor the Transferor shall
terminate or designate, or consent to the termination or designation
of, the Master Servicer, the Custodian, the Standby Servicer, the
Trustee, the Subservicer or Collateral Agent or any successor thereto
without the prior written approval of Financial Security.
(e) Creation of Indebtedness; Guarantees. The Transferor
shall not create, incur, assume or suffer to exist any indebtedness
other than indebtedness guaranteed or approved in writing by Financial
Security. Without the prior written consent of Financial Security, the
Transferor shall not assume guarantee, endorse or otherwise be or
become directly or contingently liable for the obligations of any
Person by, among other things, agreeing to purchase any obligation of
another Person, agreeing to advance funds to such Person or causing or
assisting such Person to maintain any amount of capital.
(f) Subsidiaries. The Transferor shall not form, or cause to
be formed, any Subsidiaries.
(g) Issuance of Additional Beneficial Ownership Interests.
The Transferor shall not issue or allow the issuance of any additional
beneficial ownership interests or securities convertible into or
exchangeable for beneficial ownership interests in the Transferor.
(h) No Mergers. (a) The Transferor shall not consolidate with
or merge into any Person or transfer all or any material portion of
its assets to any Person or liquidate or dissolve; and (b) NAFCO shall
not consolidate with or merge into any Person unless it complies with
the procedures set forth in Section 6.02 of the Pooling and Servicing
Agreement with respect to the merger or consolidation of the Master
Servicer or transfer all or any material portion of its assets to any
Person or liquidate or dissolve.
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(i) Other Activities. The Transferor shall not:
(i) sell, transfer, exchange or otherwise
dispose of any of its assets except as permitted under
the Transaction Documents; or
(ii) engage in any business or activity other than
in connection with (a) the Pooling and Servicing Agreement,
the Purchase Agreement, each Transfer Agreement, each
Conveyance, the Assignment Agreement and the Spread Account
Agreement and (b) the Pooling and Administration Agreement
and the Receivables Purchase Agreement prior to the
Assumption Date only, and as permitted under its trust
agreement.
(j) Insolvency. Neither NAFCO nor the Transferor shall
commence with respect to the Transferor any case, proceeding or other
action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to the bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
corporation or other relief with respect to it or (B) seeking
appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, or
make a general assignment for the benefit of its creditors. Neither
NAFCO nor the Transferor shall take any action in furtherance, of, or
indicating the consent to, approval of, or acquiescence in any of the
acts set forth above. The Transferor shall not admit in writing its
inability to pay its debts.
(k) ERISA. The Transferor shall not contribute or incur any
obligation to contribute to, or incur any liability in respect of, any
Plan or Multiemployer Plan.
(l) Distributions. The Transferor shall not declare or make
payment of (i) any distribution on or in respect of any of its
beneficial ownership interests, or (ii) any payment on account of the
purchase, redemption, retirement or acquisition of any opt ion,
warrant or other right to acquire its beneficial ownership interests
unless (in each case) at the time of such declaration or payment (and
after giving effect thereto) no amount payable by the Transferor under
any Transaction Document with respect to any Series is then due and
owing but unpaid.
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(m) Transfer of Retained Interest. The Transferor shall not
sell, transfer, assign, convey or pledge the Retained Interest to any
Person (including, without limitation, NAFCO).
Section 2.04. Representations and Warranties of NAFCO and the
Transferor with respect to the Master Trust. Each of the Transferor and NAFCO
represents, warrants and covenants, as of the date hereof, as of the Date of
Issuance, as of each Subsequent Transfer Date and as of the Date of Public
Offering, with respect to itself, with respect to the Master Trust and
otherwise, as follows:
(a) Good Title; Valid Transfer; Absence of Liens; Security
Interest. Immediately prior to the sale of the Initial Contracts and
related Other Trust Property to the Transferor pursuant to the
Assignment Agreement on the Closing Date, the Master Trust was the
owner of, and had good and marketable title to, such property free and
clear of all Liens and Restrictions on Transferability, and had full
right, power and lawful authority to assign, transfer and pledge such
Contracts and related Other Trust Property. The Assignment Agreement
constitutes a valid sale, transfer and assignment of the Initial
Contracts and related Other Trust Property to the Transferor
enforceable against creditors of and purchasers of the Master Trust.
In the event that, in contravention of the intention of the parties,
the transfer of such Contracts and related Other Trust Property by the
Master Trust to the Transferor is characterized as other than a sale,
such transfer shall be characterized as a secured financing, and the
Transferor shall have a valid and perfected first priority security
interest in such Contracts and related Other Trust Property free and
clear of all Liens and Restrictions on Transferability.
(b) Compliance With Agreements and Applicable Laws. The
Master Trust has performed each of its obligations under the
Assignment Agreement and is in compliance with all material
requirements of, any law, rule or regulation applicable to it, or that
are required in connection with its performance under the Assignment
Agreement. The Master Trust has not taken any action that would
interfere with the enforcement of any rights under the Assignment
Agreement.
Section 2.05. Affirmative Covenants of NAFCO and the Transferor with
respect to the Master Trust. Each of NAFCO and the Transferor hereby agrees
with respect to itself and with
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respect to the Master Trust that during the Term of the Agreement, unless
Financial Security shall otherwise expressly consent in writing:
(a) Notice of Material Events. Each of NAFCO and the
Transferor shall promptly inform Financial Security in writing of the
occurrence of any of the following:
(i) the submission of any claim or the initiation
of any legal.process, litigation or administrative or
judicial investigation (A) against the Master Trust, (B) with
respect to any of the Contracts transferred by the Master
Trust to the Transferor or (C) in which a request has been
made for certification as a class action (or equivalent
relief) that would involve any of the Contracts transferred
by the Master Trust to the Transferor;
(ii) the occurrence of any Amortization Event or
Administrator Default (as such terms are defined in the
Pooling and Administration Agreement) prior to the Assumption
Date with respect to the Master Trust; or
(iii) any other event, circumstance or condition
that has resulted in a material adverse change in the ability
of the Master Trust to perform its obligations under the
Assignment Agreement.
(b) Further Assurances. Each of NAFCO and the Transferor will
file all necessary termination statements, assignments or other
instruments, and any amendments or continuation statements relating
thereto, necessary to be kept and filed in such manner and in such
places as may be required by law to release the Lien and security
interest of the Master Trust in any Contracts transferred by the
Master Trust to the Transferor. In addition, each of NAFCO and the
Transferor shall, upon the written request of Financial Security, from
time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within ten (10) days of such
request, such further instruments and take such further action as may
be reasonably commercially necessary to protect the interest of the
Transferor in the Contracts transferred by the Master Trust to the
Transferor, free and clear of all Liens and Restrictions on
Transferability created by or for the benefit of the Master Trust.
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(c) Third-Party Beneficiary. The Transferor agrees that
Financial Security shall have all rights of a third-party beneficiary
in respect of the Assignment Agreement and each of NAFCO and the
Transferor hereby restates the representations, warranties and
covenants of the Master Trust as set forth therein for the benefit of
Financial Security.
Section 2.06. Negative Covenants of NAFCO and the Transferor with
respect to the Master Trust. Each of NAFCO and the Transferor hereby agrees
with respect to itself and with respect to the Master Trust that during the
Term of the Agreement, unless Financial Security shall otherwise expressly
consent in writing:
(a) Restrictions on Liens. Neither NAFCO nor the Transferor
shall permit the execution or filing under the Uniform Commercial Code
of any jurisdiction any financing statement naming the Master Trust as
a debtor, or the execution of any security agreement authorizing any
secured party thereunder to file such financing statement, with
respect to the Contracts transferred by the Master Trust to the
Transferor, except in each case any such instrument solely securing
the rights and preserving the Lien of the Trustee, for the benefit of
the Certificateholders and Financial Security.
ARTICLE III.
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Issuance of the Policy. Financial Security agrees to
issue the Policy subject to satisfaction of the conditions precedent set forth
in Appendix II hereto.
Section 3.02. Payment of Fees and Premium.
(a) Inducement Letter Fees and Expenses. On the Date of
Issuance, NAFCO and the Transferor agree to pay or cause to be paid
the amounts specified with respect to fees, expenses and disbursements
in the Inducement Letter unless otherwise agreed between NAFCO and
Financial Security.
(b) Legal Fees. On the Date of Issuance, NAFCO shall
pay or cause to be paid legal fees and disbursements
incurred by Financial Security in connection with the
issuance of the Policy.
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(c) Rating Agency Fees. The initial fees of S&P and Moody's
with respect to the Securities and the transactions contemplated
hereby shall be paid by the Transferor in full on the Date of
Issuance, or otherwise provided for to the satisfaction of Financial
Security. All periodic and subsequent fees of S&P or Moody's with
respect to, and directly allocable to, the Securities shall be for the
account of, and shall be billed to, the Transferor. The fees for any
other rating agency shall be paid by the party requesting such other
agency's rating, unless such other agency is a substitute for S&P or
Moody's in the event that S&P or Moody's is no longer rating the
Securities, in which case the cost for such agency shall be paid by
the Transferor.
(d) Auditors' Fees. The Transferor shall pay on demand any
additional fees of Financial Security's auditors payable in respect of
any Offering Document that are incurred after the Date of Issuance. It
is understood that Financial Security's auditors shall not incur any
additional fees in respect of future Offering Documents except at the
request of or with the consent of the Transferor.
(e) Premium. In consideration of the issuance by Financial
Security of the Policy, Financial Security shall be entitled to
receive the Premium as and when due in accordance with the terms of
the Premium Letter (i) in the case of Premium due on or before the
Date of Issuance, directly from the Transferor and (ii) in the case of
Premium due after the Date of Issuance, first, from monies available
for such payment in accordance with Section 4.01 of the Pooling and
Servicing Agreement and second, to the extent that such monies are
insufficient, from NAFCO. The Premium paid hereunder or under the
Pooling and Servicing Agreement shall be nonrefundable without regard
to whether Financial Security makes any payment under the Policy or
any other circumstances relating to the Securities or provision being
made for payment of the Securities prior to maturity. Although the
Premium is fully earned by Financial Security as of the Closing Date,
the Premium shall be payable in periodic installments as provided in
the Premium Letter. Anything herein or in any of the Transaction
Documents notwithstanding, upon the occurrence of an Event of Default,
the entire out standing balance of further installments of the Premium
shall be immediately due and payable. All payments of Premium shall be
made by wire transfer to an account designated from time to time by
Financial Security by written notice to the Transferor and NAFCO.
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Section 3.03. Reimbursement Obligation. Notwithstanding any of the
following provisions of this Section 3.03 to the contrary, the payment
obligations set forth in Sections 3.03(a), (b), (c) and (d)(v) (to the extent
of advances to the Trust in respect of distributions on the Securities) shall
be non-recourse obligations with respect to NAFCO and shall be payable only
from monies available for such payment in accordance with Section 4.01 of the
Pooling and Servicing Agreement (except to the extent that any such payment
obligation arises from a failure to perform or default of NAFCO, the Transferor
or any affiliate thereof under any Transaction Document or by reason of
negligence, willful misconduct or bad faith on the part of NAFCO or the
Transferor in the performance of its duties and obligations thereunder or
reckless disregard by NAFCO or the Transferor of its duties and obligations
thereunder). NAFCO and the Transferor agree to pay to Financial Security the
following amounts as and when incurred:
(a) a sum equal to the total of all amounts paid by Financial
Security under the Policy;
(b) interest on any and all amounts described in this Section
3.03 or Section 3.02(e) from the date due to Financial Security
pursuant to the provisions hereof until payment thereof in full,
payable to Financial Security at the Late Payment Rate per annum;
(c) any payments made by Financial Security on behalf of, or
advanced to, NAFCO, in its capacity as Master Servicer, the Trust or
the Trustee, including, without limitation, any amounts payable by
NAFCO, in its capacity as Master Servicer, the Trust or the Trustee
pursuant to the Securities or any other Transaction Documents or the
Subservicing Agreement; and any payments made by Financial Security
as, or in lieu of, any servicing, management, trustee, custodial or
administrative fees payable, in the sole discretion of Financial
Security to third parties in connection with the Transaction; and
(d) any and all out-of-pocket charges, fees, costs and
expenses which Financial Security may reasonably pay or incur,
including, but not limited to, attorneys' and accountants' fees and
expenses, in connection with (i) in the event of payments under the
Policy, any accounts established to facilitate payments under the
Policy, to the extent Financial Security has not been immediately
reimbursed on the date that any amount is paid by Financial Security
under the Policy, or other administrative expenses relating to such
payments under the Policy, (ii) the
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administration, enforcement, defense or preservation of any rights in
respect of any of the Transaction Documents or the Master Trust
Transaction Documents, including defending, monitoring or
participating in any litigation or proceeding (including any
insolvency or bankruptcy proceeding in respect of any Transaction
participant or any affiliate thereof) relating to any of the
Transaction Documents or the Master Trust Transaction Documents, any
party to any of the Transaction Documents, the Master Trust
Transaction Documents or the Transaction, (iii) any amendment, waiver
or other action with respect to, or related to, any Transaction
Document or the Master Trust Transaction Documents whether or not
executed or completed, (iv) any review or investigation made by
Financial Security in those circumstances where its approval or
consent is sought under any of the Transaction Documents or the Master
Trust Transaction Documents, (v) the foreclosure against, sale or
other disposition of any collateral securing any obligations under any
of the Transaction Documents or otherwise in the discretion of
Financial Security, or pursuit of any other remedies under any of the
Transaction Documents, to the extent such costs and expenses are not
recovered from such foreclosure, sale or other disposition, (vi)
preparation of bound volumes of the Transaction Documents, (vii) the
transfer of Additional Contracts to the Trust and (viii) transactions
contemplated by the Registration Rights Agreement whether or not such
transactions are consummated, including without limitation, the
registration of the Securities under the Securities Act. Financial
Security reserves the right to charge a reasonable fee as a condition
to executing any amendment, waiver or consent proposed in respect of
any of the Transaction Documents.
Section 3.04. Indemnification.
(a) Indemnification by NAFCO and the Transferor. In addition
to any and all rights of reimbursement, indemnification, subrogation
and any other rights pursuant hereto or under law or in equity, each
of NAFCO and the Transferor, jointly and severally, agrees to pay, and
to protect, indemnify and save harmless, Financial Security and its
officers, directors, shareholders, employees, agents and each Person,
if any, who controls Financial Security within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act from and against any and all claims, losses, liabilities
(including penalties), actions, suits, judgments, demands, damages,
costs or expenses (including, without limitation, fees and
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expenses of attorneys, consultants and auditors and reasonable costs
of investigations) of any nature arising out of or relating to the
transactions contemplated by the Transaction Documents by reason of:
(i) any statement, omission or action (other
than of or by Financial Security) in connection with
the offering, issuance, sale, remarketing or delivery
of the Securities;
(ii) the negligence, bad faith, willful
misconduct, misfeasance, malfeasance or theft committed
by any director, officer, employee or agent of the
Transferor or NAFCO, as the case may be;
(iii) the breach by the Transferor or NAFCO, as the
case may be, of any representation, warranty or covenant
under any of the Transaction Documents (other than a
representation or warranty set forth in Section 2.03(c), for
which the remedy with respect to a breach thereof is set
forth in the Pooling and Servicing Agreement) or the
occurrence, in respect of the Transferor or NAFCO, as the
case may be, under any of the Transaction Documents of any
"event of default" or any event which, with the giving of
notice or the lapse of time or both, would constitute any
"event of default";
(iv) the violation by the Transferor or NAFCO of
any federal, state or foreign law, rule or regulation,
or any judgment, order or decree applicable to it; or
(v) any untrue statement or alleged untrue
statement of a material fact contained in any Offering
Document or any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as
such claims arise out of or are based upon any untrue
statement or omission in the Financial Security Information,
it being understood that in respect of the initial Offering
Document, the Financial Security Information is limited to
information included under the caption "The Certificate
Insurer" and the financial statements of Financial Security
appended thereto.
(b) Conduct of Actions or Proceedings. If any action or
proceeding (including any governmental investigation)
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shall be brought or asserted against Financial Security, any officer,
director, shareholder, employee or agent of Financial Security or any
Person controlling Financial Security (individually, an "Indemnified
Party" and, collectively, the "Indemnified Parties") in respect of
which indemnity may be sought from the Transferor and NAFCO (the
"Indemnifying Party") hereunder, Financial Security shall promptly
notify the Indemnifying Party in writing, and the Indemnifying Party
shall assume the defense thereof, including the employment of counsel
satisfactory to Financial Security and the payment of all expenses. An
Indemnified Party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof at the
expense of the Indemnified Party; provided, however, that the fees and
expenses of such separate counsel shall be at the expense of the
Indemnifying Party if (i) the Indemnifying Party has agreed to pay
such fees and expenses, (ii) the Indemnifying Party shall have failed
to assume the defense of such action or proceeding and employ counsel
satisfactory to Financial Security in any such action or proceeding or
(iii) the named parties to any such action or proceeding (including
any impleaded parties) include both the Indemnified Party and the
Indemnifying Party, and the Indemnified Party shall have been advised
by counsel that (A) there may be one or more legal defenses available
to it which are different from or additional to those available to the
Indemnifying Party and (B) the representation of the Indemnifying
Party and the Indemnified Party by the same counsel would be
inappropriate or contrary to prudent practice (in which case, if the
Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the
defense of such action or proceeding on behalf of such Indemnified
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 the Indemnified
Parties, which firm shall be designated in writing by Financial
Security). The Indemnifying Party shall not be liable for any
settlement of any such action or proceeding effected without its
written consent to the extent that any such settlement shall be
prejudicial to the Indemnifying Party but, if settled with its written
consent, or if there be a final judgment for the
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plaintiff in any such action or proceeding with respect to which the
Indemnifying Party shall have received notice in accordance with this
subsection (b), the Indemnifying Party agrees to indemnify and hold
the Indemnified Parties harmless from and against any loss or
liability by reason of such settlement or judgment.
(c) Contribution. To provide for just and equitable
contribution if the indemnification provided by the Indemnifying Party
is determined to be unavailable for any Indemnified Party (other than
due to application of this Section), the Indemnifying Party shall
contribute to the losses incurred by the Indemnified Party on the
basis of the relative fault of the Indemnifying Party, on the one
hand, and the Indemnified Party, on the other hand.
Section 3.05. Subrogation. Subject only to the priority of payment
provisions of the Pooling and Servicing Agreement, each of the Transferor and
NAFCO acknowledges that, to the extent of any payment made by Financial
Security pursuant to the Policy, Financial Security is to be fully subrogated
to the extent of such payment and any additional interest due on any late
payment, to the rights of the Certificateholders to any moneys paid or payable
in respect of the Securities under the Transaction Documents or otherwise. Each
of the Transferor and NAFCO agrees to such subrogation and, further, agrees to
execute such instruments and to take such actions as, in the sole judgment of
Financial Security, are necessary to evidence such subrogation and to perfect
the rights of Financial Security to receive any moneys paid or payable in
respect of the Securities under the Transaction Documents or otherwise.
ARTICLE IV.
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of Agreement. This Agreement shall
take effect on the Date of Issuance and shall remain in effect until the later
of (a) such time as Financial Security is no longer subject to a claim under
the Policy and the Policy shall have been surrendered to Financial Security for
cancellation and (b) all amounts payable to Financial Security and the
Certificateholders under the Transaction Documents and under the Securities
have been paid in full; provided, however, that the provisions of Sections
3.02, 3.03 and 3.04 hereof shall survive any termination of this Agreement.
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Section 4.02. Obligation Absolute. (a) The payment obligations of the
Transferor and NAFCO hereunder shall be absolute and unconditional, and shall
be paid strictly in accordance with this Agreement under all circumstances
irrespective of the following:
(i) any lack of validity or enforceability of, or
any amendment or other modifications of, or waiver with
respect to, any of the Transaction Documents, the Master
Trust Transaction Documents, the Securities or the Policy;
(ii) any exchange or release of any other
obligations hereunder;
(iii) the existence of any claim, setoff, defense,
reduction, abatement or other right which the Transferor or
NAFCO may have at any time against Financial Security or any
other Person;
(iv) any document presented in connection with the
Policy proving to be forged, fraudulent, invalid or
insufficient in any respect, including any failure to
strictly comply with the terms of the Policy, or any
statement therein being untrue or inaccurate in any respect;
(v) any failure of the Transferor to receive
the proceeds from the sale of the Securities;
(vi) any breach by the Transferor or NAFCO of
any representation, warranty or covenant contained in
any of the Transaction Documents or the Master Trust
Transaction Documents; or
(vii) any other circumstances, other than payment in
full, which might otherwise constitute a defense available
to, or discharge of the Transferor or NAFCO in respect of any
Transaction Document.
(b) The Transferor and NAFCO and any and all others who are
now or may become liable for all or part of the obligations of the
Transferor or NAFCO under this Agreement agree to be bound by this
Agreement and (i) to the extent permitted by law, waive and renounce
any and all redemption and exemption rights and the benefit of all
valuation and appraisement privileges against the indebtedness, if
any, and obligations evidenced by any Transaction Document or by
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any extension or renewal thereof; (ii) waive presentment and demand
for payment, notices of nonpayment and of dishonor, protest of
dishonor and notice of protest; (iii) waive all notices in connection
with the delivery and acceptance hereof and all other notices in
connection with the performance, default or enforcement of any payment
hereunder except as required by the Transaction Documents; (iv) waive
all rights of abatement, diminution, postponement or deduction, or to
any defense other than payment, or to any right of setoff or
recoupment arising out of any breach under any of the Transaction
Documents, by any party thereto or any beneficiary thereof, or out of
any obligation at any time owing to the Transferor or NAFCO; (v) agree
that any consent, waiver or forbearance hereunder with respect to an
event shall operate only for such event and not for any subsequent
event; (vi) consent to any and all extensions of time that may be
granted by Financial Security with respect to any payment hereunder or
other provisions hereof and to the release of any security at any time
given for any payment hereunder, or any part thereof, with or without
substitution, and to the release of any Person or entity liable for
any such payment; and (vii) consent to the addition of any and all
other makers, endorsers, guarantors and other obligors for any payment
hereunder, and to the acceptance of any and all other security for any
payment hereunder, and agree that the addition of any such obligors or
security shall not affect the liability of the parties hereto for any
payment hereunder.
(c) Nothing herein shall be construed as prohibiting NAFCO or
the Transferor from pursuing any rights or remedies it may have
against any Person other than Financial Security in a separate legal
proceeding.
Section 4.03. Assignments; Reinsurance; Third-Party Rights. (a) This
Agreement shall be a continuing obligation of the parties hereto and shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither the Transferor nor NAFCO
may assign its rights under this Agreement, or delegate any of its duties
hereunder, without the prior written consent of Financial Security. Any
assignment made in violation of this Agreement shall be null and void.
(b) Financial Security shall have the right to give participations in
its rights under this Agreement and to enter into contracts of reinsurance with
respect to the Policy upon such terms and conditions as Financial Security may
in its
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discretion determine; provided, however, that no such participation or
reinsurance agreement or arrangement shall relieve Financial Security of any of
its obligations hereunder or under the Policy.
(c) In addition, Financial Security shall be entitled to assign or
pledge to any bank or other lender providing liquidity or credit with respect
to the Transaction or the obligations of Financial Security in connection
therewith any rights of Financial Security under the Transaction Documents, or
with respect to any real or personal property or other interests pledged to
Financial Security, or in which Financial Security has a security interest, in
connection with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or claim,
express or implied, upon any Person, including, particularly, any
Certificateholder, other than Financial Security, against the Transferor or
NAFCO, and all the terms, covenants, conditions, promises and agreements
contained herein shall be for the sole and exclusive benefit of the parties
hereto and their successors and permitted assigns. Neither the Trustee nor any
Certificateholder shall have any right to payment from any premiums paid or
payable hereunder or from any other amounts paid by NAFCO or the Transferor
pursuant to Section 3.02, 3.03 or 3.04 hereof.
Section 4.04. Liability of Financial Security. Neither Financial
Security nor any of its officers, directors or employees shall be liable or
responsible for: (a) the use which may be made of the Policy by the Trustee or
for any acts or omissions of the Trustee in connection therewith or (b) the
validity, sufficiency, accuracy or genuineness of documents delivered to
Financial Security (or its Fiscal Agent) in connection with any claim under the
Policy, or of any signatures thereon, even if such documents or signatures
should in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged (unless Financial Security had actual knowledge thereof).
In furtherance and not in limitation of the foregoing, Financial Security (or
its Fiscal Agent) may accept documents that appear on their face to be in
order, without responsibility for further investigation.
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ARTICLE V.
EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default. The occurrence of any of
the following events shall constitute an Event of Default
hereunder:
(a) any demand for payment shall be made under the
Policy;
(b) any representation or warranty made by the Transferor,
the Master Trust, the Master Servicer or NAFCO under any of the
Transaction Documents, or in any certificate or report furnished under
any of the Transaction Documents, shall prove to be untrue or
incorrect in any material respect; provided, however, that if the
Transferor, the Master Trust, the Master Servicer or NAFCO effectively
cures any such defect in any representation or warranty under any
Transaction Document, or certificate or report furnished under any
Transaction Document, within the time period specified in the relevant
Transaction Document as the cure period therefor, such defect shall
not in and of itself constitute an Event of Default hereunder;
(c) (i) the Transferor, the Master Servicer or NAFCO shall
fail to pay when due any amount payable by the Transferor, the Master
Servicer or NAFCO under any of the Transaction Documents, unless such
amounts are paid in full within any applicable cure period explicitly
provided for under the relevant Transaction Document; (ii) the
Transferor, the Master Servicer or NAFCO shall have asserted that any
of the Transaction Documents to which it is a party is not valid and
binding on the parties thereto; or (iii) any court, governmental
authority or agency having jurisdiction over any of the parties to any
of the Transaction Documents or any property thereof shall find or
rule that any material provision of any of the Transaction Documents
is not valid and binding on the parties thereto;
(d) the Transferor, the Master Servicer, the Master Trust or
NAFCO shall fail to perform or observe any other covenant or agreement
contained in any of the Transaction Documents (except for the
obligations described under clause (c) above and the failure to
register the Securities under the Securities Act pursuant to the
Registration Rights Agreement) and, except in the case of the
covenants and agreements contained in Section 2.02(m) of this
Insurance
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Agreement, such failure shall continue for a period of 30 days after
written notice given to the Transferor, the Master Servicer or NAFCO
as the case may be;
(e) NAFCO, the Master Servicer or the Transferor shall fail
to pay its debts generally as they come due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors, or shall institute any
proceeding seeking to adjudicate it insolvent or seeking a
liquidation, or shall take advantage of any insolvency act, or shall
commence a case or other proceeding naming it as debtor under the
United States Bankruptcy Code or similar law, domestic or foreign, or
a case or other proceeding shall be commenced against any of NAFCO,
the Master Servicer or the Transferor under the United States
Bankruptcy Code or similar law, domestic or foreign, or any proceeding
shall be instituted against any of NAFCO, the Master Servicer or the
Transferor seeking liquidation of its assets and such Person shall
fail to take appropriate action resulting in the withdrawal or
dismissal of such proceeding within 30 days or there shall be
appointed or any of NAFCO, the Master Servicer or the Transferor shall
consent to, or acquiesce in, the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of
such Person or the whole or any substantial part of its properties or
assets or such Person shall take any corporate action in furtherance
of any of the foregoing;
(f) the Average Delinquency Ratio as of any Reporting
Date shall have been equal to or greater than 10%;
(g) the Average Default Rate as of any Reporting Date (i)
occurring on or prior to November 14, 1996, is equal to or greater
than 16%, (ii) occurring subsequent to November 14, 1996, and on or
prior to November 14, 1997, is equal to or greater than 22% and (iii)
occurring subsequent to November 14, 1997, is equal to or greater than
16%;
(h) the Average Net Loss Rate as of any Reporting Date (i)
occurring on or prior to November 14, 1996, is equal to or greater
than 8%, (ii) occurring subsequent to November 14, 1996, and on or
prior to November 14, 1997, is equal to or greater than 11% and (iii)
occurring subsequent to November 14, 1997, is equal to or greater than
8%;
(i) the occurrence of a Servicer Default under the
Pooling and Servicing Agreement; and
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(j) the occurrence of an "Event of Default" under and as
defined in any Insurance and Indemnity Agreement among Financial
Security, the Transferor and NAFCO entered into with respect to
another Series of Certificates, which "Event of Default" is not
defined as a "Portfolio Performance Event of Default" in such
Insurance and Indemnity Agreement.
Section 5.02. Remedies; Waivers. (a) Upon the occurrence of an Event
of Default, Financial Security may exercise any one or more of the rights and
remedies set forth below:
(i) declare the Premium Supplement to be
immediately due and payable, and the same shall thereupon be
immediately due and payable, whether or not Financial
Security shall have declared an "Event of Default" or shall
have exercised, or be entitled to exercise, any other rights
or remedies hereunder;
(ii) exercise any rights and remedies available
under the Transaction Documents in its own capacity or in its
capacity as the Person entitled to exercise the rights of the
Certificateholders in respect of the Securities; or
(iii) take whatever action at law or in equity may
appear necessary or desirable in its judgment to enforce
performance of any obligation of the Transferor or NAFCO
under the Transaction Documents.
(b) Unless otherwise expressly provided, no remedy herein
conferred upon or reserved is intended to be exclusive of any other
available remedy, but each remedy shall be cumulative and shall be in
addition to other remedies given under the Transaction Documents or
existing at law or in equity. No delay or failure to exercise any
right or power accruing under any Transaction Document upon the
occurrence of any Event of Default or otherwise shall impair any such
right or power or shall be construed to be a waiver thereof, but any
such right and power may be exercised from time to time and as often
as may be deemed expedient. In order to entitle Financial Security to
exercise any remedy reserved to Financial Security in this Article, it
shall not be necessary to give any notice, other than such notice as
may be expressly required in this Article.
(c) If any proceeding has been commenced to enforce any right
or remedy under this Agreement and such proceeding
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has been discontinued or abandoned for any reason, or has been
determined adversely to Financial Security, then and in every such
case the parties hereto shall, subject to any determination in such
proceeding, be restored to their respective former positions
hereunder, and, thereafter, all rights and remedies of Financial
Security shall continue as though no such proceeding had been
instituted.
(d) Financial Security shall have the right, to be exercised
in its complete discretion, to waive any covenant, Default or Event of
Default by a writing setting forth the terms, conditions and extent of
such waiver signed by Financial Security and delivered to the
Transferor and NAFCO. Any such waiver may only be effected in writing
duly executed by Financial Security, and no other course of conduct
shall constitute a waiver of any provision hereof. Unless such writing
expressly provides to the contrary, any waiver so granted shall extend
only to the specific event or occurrence so waived and not to any
other similar event or occurrence.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Amendments, Etc. This Agreement may be amended, modified
or terminated only by written instrument or written instruments signed by the
parties hereto. No act or course of dealing shall be deemed to constitute an
amendment, modification or termination hereof.
Section 6.02. Notices. All demands, notices and other communications
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 the recipient as follows:
(a) To Financial Security: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: NAFCO Auto Finance 1995-1
Trust, 6.36% Automobile Loan Asset
Backed Certificates
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518,
(212) 339-3529
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(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 shall be
marked to indicate "URGENT MATERIAL
ENCLOSED.")
(b) To the Transferor: National Financial Auto Funding
Trust
c/o The Chase Manhattan Bank (USA)
802 Delaware Avenue
Wilmington, Delaware 19801
Attention: Corporate Trust
Administration
Telecopy No: (302) 575-5467
Confirmation: (302) 575-5099
with a copy to: The Chase Manhattan Bank (USA)
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
(c) To NAFCO: National Auto Finance
Company L.P.
One Park Place
621 N.W. 53rd Street
Boca Raton, Florida 33487
Attention: President
Telecopy No: (800) 787-6232
Confirmation: (407) 997-2747
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A party may specify an additional or different address or addresses by
writing mailed or delivered to the other party as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. Payment Procedure. In the event of any payment by
Financial Security for which it is entitled to be reimbursed or indemnified as
provided above, each of the Transferor and NAFCO agrees to accept the voucher
or other evidence of payment as prima facie evidence of the propriety thereof
and the liability therefor to Financial Security. All payments to be made to
Financial Security under this Agreement shall be made to Financial Security in
lawful currency of the United States of America in immediately available funds
to the account number provided in the Premium Letter before 1:00 p.m. (New
York, New York time) on the date when due or as Financial Security shall
otherwise direct by written notice to the Transferor and NAFCO. In the event
that the date of any payment to Financial Security or the expiration of any
time period hereunder occurs on a day which is not a Business Day, then such
payment or expiration of time period shall be made or occur on the next
succeeding Business Day with the same force and effect as if such payment was
made or time period expired on the scheduled date of payment or expiration
date. Payments to be made to Financial Security under this Agreement shall bear
interest at the Late Payment Rate from the date due to the date paid.
Section 6.04. Confidentiality. Any information obtained by Financial
Security pursuant to this Insurance Agreement shall be held in confidence by
Financial Security unless (i) such information has become available to the
public other than as a result of a disclosure by or through Financial Security,
(ii) such information was available to Financial Security on a nonconfidential
basis prior to its disclosure to Financial Security hereunder, (iii) Financial
Security shall be required in connection with any legal or regulatory
proceeding to disclose such information, or (iv) Financial Security, in its
sole discretion, deems it necessary to disclose such information to the Rating
Agencies; provided, that, in any such instance, Financial Security will use its
best efforts to notify the Transferor or NAFCO of its intention to make any
such disclosure prior to making any such disclosure and, in the case of
disclosure to a Rating Agency, Financial Security shall notify such Rating
Agency that such information is confidential and should be treated as such by
such Rating Agency.
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Section 6.05. Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate
or render unenforceable any other provision hereof. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy
pursued by any party hereto is unavailable or unenforceable shall not affect in
any way the ability of such party to pursue any other remedy available to it.
Section 6.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 6.07. Consent to Jurisdiction. (a) THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK
LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN
CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND
THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS
IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH
NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO
ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THE
TRANSACTION DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR
BY SUCH COURTS.
(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of any
such court by any court of any other nation or jurisdiction which may be called
upon to grant an enforcement of such judgment.
(c) Each of the Transferor and NAFCO hereby irrevocably appoints and
designates CT Corporation System, whose address is 1633 Broadway, New York, New
York 10019, as its true and lawful
40
<PAGE>
attorney and duly authorized agent for acceptance of service of legal process.
Each of the Transferor and NAFCO agrees that service of such process upon such
Person shall constitute personal service of such process upon it.
(d) Nothing contained in the Agreement shall limit or affect Financial
Security's right to serve process in any other manner permitted by law or to
start legal proceedings relating to any of the Transaction Documents against
the Transferor or NAFCO or its respective property in the courts of any
jurisdiction.
Section 6.08. Consent of Financial Security. In the event that
Financial Security's consent is required under any of the Transaction
Documents, the determination whether to grant or withhold such consent shall be
made by Financial Security in its sole discretion without any implied duty
towards any other Person, except as otherwise expressly provided therein.
Section 6.09. Counterparts. This Insurance Agreement may
be executed in counterparts by the parties hereto, and all such
counterparts shall constitute one and the same instrument.
Section 6.10. Trial by Jury Waived. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION
WITH ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER.
Section 6.11. Limited Liability. No recourse under any Transaction
Document shall be had against, and no personal liability shall attach to, any
officer, employee, director, affiliate or shareholder of any party hereto, as
such, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise in respect of any of the
Transaction Documents, the Securities or the Policy, it being expressly agreed
and understood that each Transaction Document is solely a corporate obligation
of each party hereto, and that any and all personal liability, either at common
law or in equity, or by statute or constitution, of every such officer,
employee, director, affiliate or shareholder for breaches by any party hereto
of any obligations under any Transaction Document is
41
<PAGE>
hereby expressly waived as a condition of and in consideration for the
execution and delivery of this Agreement.
Section 6.12. Entire Agreement. This Agreement, the Premium Letter,
the Inducement Letter and the Policy set forth the entire agreement between the
parties with respect to the subject matter thereof, and this Agreement
supersedes and replaces any agreement or understanding that may have existed
between the parties prior to the date hereof in respect of such subject matter.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
FINANCIAL SECURITY ASSURANCE INC.
By: /s/ Robert P. Cochran
------------------------------------
Name: Robert P. Cochran
Title: President
NATIONAL FINANCIAL AUTO FUNDING
TRUST
By:
------------------------------------
Name:
Title: __________________ of
The Chase Manhattan Bank
(USA), as trustee for National
Financial Auto Funding Trust
NATIONAL AUTO FINANCE COMPANY L.P.
By:
------------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
FINANCIAL SECURITY ASSURANCE INC.
By:
------------------------------------
Name:
Title:
NATIONAL FINANCIAL AUTO FUNDING
TRUST
By: /s/ John W. Mack
------------------------------------
Name: John W. Mack
Title: Second Vice President of
The Chase Manhattan Bank
(USA), as trustee for National
Financial Auto Funding Trust
NATIONAL AUTO FINANCE COMPANY L.P.
By: /s/ Keith B. Stein
------------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
FINANCIAL SECURITY ASSURANCE INC.
By:
------------------------------------
Name:
Title:
NATIONAL FINANCIAL AUTO FUNDING
TRUST
By:
------------------------------------
Name:
Title: __________________ of
The Chase Manhattan Bank
(USA), as trustee for National
Financial Auto Funding Trust
NATIONAL AUTO FINANCE COMPANY L.P.
By: /s/ Keith B. Stein
------------------------------------
Name: Keith B. Stein
Title: Executive Vice President
<PAGE>
Execution Copy
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
NATIONAL FINANCIAL AUTO FUNDING TRUST
and
FIRST UNION CAPITAL MARKETS CORP.
Dated as of November 21, 1995
National Auto Finance 1995-1 Trust
6.36% Automobile Loan Asset-Backed Certificates
$38,220,000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Section 1. Definitions...........................................................................................1
Section 2. Representations, Warranties and
Agreements of Financial Security...........................................................3
Section 3. Representations, Warranties and
Agreements of the Placement Agent..........................................................6
Section 4. Indemnification.......................................................................................7
Section 5. Indemnification Procedures............................................................................8
Section 6. Contribution..........................................................................................9
Section 7. Miscellaneous........................................................................................10
</TABLE>
EXHIBIT A - Opinion of Assistant General Counsel
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of November 21, 1995,
among FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"),
NATIONAL FINANCIAL AUTO FUNDING TRUST (the "Company") and FIRST
UNION CAPITAL MARKETS CORP. (the "Placement Agent"):
Section 1. Definitions. For purposes of this Agreement,
the following terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as amended
from time to time.
"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 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.
"Insurance Agreement" means the Insurance and Indemnity
Agreement, dated as of November 21, 1995, among Financial
Security, the Company and NAFCO.
"Losses" means (a) any actual out-of-pocket damages incurred
by the party entitled to indemnification or contribution
<PAGE>
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.
"NAFCO" means National Auto Finance Company L.P., a Delaware
limited partnership.
"Offering Circular" means the Preliminary Private Placement
Memorandum dated November 7, 1995 and the Private Placement
Memorandum dated November 16, 1995, in each case relating to the
Securities, and any amendment or supplement thereto, or a
prospectus in respect of the Securities that makes reference to
the Policy used in connection with the registration of the
Securities under the Securities Act pursuant to the Registration
Rights Agreement.
"Offering Document" means the Offering Circular and any
other material or documents delivered by the Placement Agent to
any Person in connection with the offer or sale of the Securities
or registration of the Securities under the Securities Act
pursuant to the Registration Rights Agreement.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other
organization or entity (whether governmental or private).
"Placement Agent Agreement" means the Placement Agent
Agreement dated November 21, 1995, between the Company and the
Placement Agent in respect of the Securities.
"Placement Agent Information" has the meaning provided in
Section 3(c) hereof.
"Placement Agent Party" means any of the Placement Agent,
its parent, subsidiaries and affiliates and any shareholder,
director, officer, employee, agent of "controlling person" (as
such item is used in the Securities Act) of any of the foregoing.
-2-
<PAGE>
"Policy" means the financial guaranty insurance policy
delivered by Financial Security with respect to the Securities.
"Pooling and Servicing Agreement" means the Pooling and
Servicing Agreement, dated as of October 1, 1995, by and among
the Company, NAFCO, as Master Servicer and Harris Trust and
Savings Bank, not in its individual capacity but solely as
Trustee.
"Registration Rights Agreement" means the Registration
Rights Agreement dated as of November 21, 1995, between the
Company and the initial purchasers of the Securities, pursuant to
which such initial purchasers may require the Company to register
the Securities on a Form S-3 registration statement under the
Securities Act if and when such Form S-3 registration statement
becomes available to the Company, subject to certain conditions
and limitations set forth therein.
"Securities" means the National Auto Finance 1995-1 Trust
$38,220,000 6.36% Automobile Loan Asset-Backed Certificates,
described in the Offering Circular and issued pursuant to the
Pooling and Servicing Agreement.
"Securities Act" means the Securities Act of 1933, as
amended from time to time.
"Spread Account Agreement" means the Master Spread Account
Agreement dated as of November 21, 1995 among the Company,
Financial Security and the Collateral Agent and Trustee specified
therein, as the same may be amended, supplemented or otherwise
modified in accordance with the terms thereof.
Section 2. Representations, Warranties and Agreements of
Financial Security. Financial Security represents, warrants and
agrees 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
-3-
<PAGE>
laws affecting the enforceability of creditors' rights
generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of
general principles of equity and subject, in the case of
this Agreement, to principles of public policy limiting the
right to enforce the indemnification provisions contained
herein.
(d) Exemption From Registration. The Policy is exempt
from registration under the Securities Act.
(e) No Conflicts. Neither the execution or delivery
by Financial Security of the Policy or the Financial
Security Agreements, nor the performance by Financial
Security of its obligations thereunder, will conflict with
any provision of the certificate of incorporation or the
bylaws of Financial Security nor result in a breach of, or
constitute a default under, any material agreement or other
instrument to which Financial Security is a party or by
which any of its property is bound nor violate any judgment,
order or decree applicable to Financial Security of any
governmental or regulatory body, administrative agency,
court or arbitrator having jurisdiction over Financial
Security (except that, in the published opinion of the
Securities and Exchange 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, 1993 and
December 31, 1994 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,
1995, 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 Placement
Agent, 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.
-4-
<PAGE>
(g) Financial Security Information. The information
in the Offering Circular set forth under the caption "The
Certificate Insurer" (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 include 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 Offering
Circular 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 Placement Agent, or the Company, upon request
of the Placement Agent 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 an
Offering Circular relating to the Securities is required at
any time prior to the expiration of nine months after the
time of issue of the Offering Circular in connection with
the offering or sale of the Securities or in connection with
the registration of the Securities under the Securities Act
in accordance with the Registration Rights Agreement, the
Company or the Placement Agent will notify Financial
Security of such requirement to deliver an Offering Circular
and Financial Security will promptly provide the Placement
Agent and the Company with any revisions to the Financial
Security Information that are in the judgment of Financial
Security necessary to prepare an amended Offering Circular
or a supplement to the Offering Circular.
(i) Opinion of Counsel. Financial Security will
furnish to the Placement Agent 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 Placement Agent.
(j) Consents and Reports of Independent Accountants.
Financial Security will furnish to the Placement Agent and
the Company, upon request, as comfort from its independent
-5-
<PAGE>
accountants in respect of its financial condition, (i) at
the expense of the Person specified in the Insurance
Agreement, a copy of the Offering Circular, 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 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 Offering Circular and the facts and
assumptions which are considered by the Rating Agencies, and the
ratings issued thereby, are subject to change over time.
Section 3. Representations, Warranties and Agreements of
the Placement Agent. The Placement Agent represents, warrants
and agrees as follows:
(a) Compliance With Laws. The Placement Agent 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 Circular.
(b) Offering Document. The Placement Agent 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
Preliminary Private Placement Memorandum dated November 7,
1995 and the Private Placement Memorandum dated November 16,
1995, in each case relating to the Securities. 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
-6-
<PAGE>
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) Placement Agent Information. All material
provided by the Placement Agent for inclusion in the
Offering Circular (as revised from time to time, the
"Placement Agent Information"), insofar as such information
relates to the Placement Agent, is true and correct in all
material respects. In respect of the initial Offering
Circular, the Placement Agent Information is limited to the
information set forth under the caption "Offering" in the
Offering Circular.
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
Placement Agent 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 Placement Agent 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 Placement Agent 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
-7-
<PAGE>
and resulting from the Placement Agent'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 Placement Agent Information included therein.
(c) Upon the incurrence of any Losses for which a
party is entitled to indemnification hereunder, the
Indemnifying Party shall reimburse the Indemnified Party
promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided
below in Section 6 with respect to contribution, the
indemnification provided herein by an Indemnifying Party shall be
the exclusive remedy of any and all Indemnified Parties for the
breach of a representation, warranty or agreement hereunder by an
Indemnifying Party; provided, however, that each Indemnified
Party shall be entitled to pursue any other remedy at law or in
equity for any such breach so long as the damages sought to be
recovered shall not exceed the Losses incurred thereby resulting
from such breach. In the event that any action or regulatory
proceeding shall be commenced or claim asserted which may entitle
an Indemnified Party to be indemnified under this Agreement, such
party shall give the Indemnifying Party written or telegraphic
notice of such action or claim reasonably promptly after receipt
of written notice thereof. The Indemnifying Party shall be
entitled to participate in and, upon notice to the Indemnified
Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation
of, the Indemnified Party. The Indemnified Party shall have the
right to employ its own counsel in any such action in addition to
the counsel of the Indemnifying Party, but the fees and expenses
of such separate counsel shall be at the expense of the
Indemnified Party unless (i) the employment of counsel by the
Indemnified Party at its expense have been authorized in writing
by the Indemnifying Party, (ii) the Indemnifying Party has not in
fact employed counsel to assume the defense of such action or
proceeding within a reasonable time after receiving notice of the
commencement of the action or proceeding or (iii) the named
parties to any such action or proceeding (including any impleaded
parties) include both the Indemnifying Party and one or more
Indemnified Parties, and the Indemnified Parties shall have been
advised by counsel that there may be one or more legal defenses
-8-
<PAGE>
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 Placement Agent 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 Placement Agent in
respect of the Placement Agent Parties and by Financial Security
in respect of the Financial Security Parties), in each of which
cases the fees and expenses of counsel will be at the expense of
the Indemnifying Party and all such fees and expenses will be
reimbursed promptly as they are incurred. The Indemnifying Party
shall not be liable for any settlement of any such claim or
action unless the Indemnifying Party shall have consented thereto
or be in default in its obligations hereunder. Any failure by an
Indemnified Party to comply with the provisions of this Section
shall relieve the Indemnifying Party of liability only if such
failure is prejudicial to the position of the Indemnifying Party
and then only to the extent of such prejudice.
Section 6. Contribution.
(a) To provide for just and equitable contribution if the
indemnification provided by any Indemnifying Party is determined
to be unavailable for any Indemnified Party (other than due to
application of this Section), 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.
-9-
<PAGE>
(c) The parties agree that Financial Security shall be
solely responsible for the Financial Security Information, the
Placement Agent shall be solely responsible for the Placement
Agent 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 Placement Agent shall not be required to contribute
an amount in excess of the amount by which the total offering
price of the Securities placed by the Placement Agent exceeds the
amount of any damages that such Placement Agent has otherwise
been required to pay in respect of any breach by the Placement
Agent of its representations or warranties contained in Section 3
hereof.
(e) No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(f) Upon the incurrence of any Losses entitled to
contribution hereunder, the contributor shall reimburse the party
entitled to contribution promptly upon establishment by the party
entitled to contribution to the contributor of the Losses
incurred.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided
for under this Agreement shall be delivered to the address set
forth below or to such other address as shall be designated by
the recipient in a written notice to the other party or parties
hereto:
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 1995-1 Trust,
6.36% Automobile Loan Asset-Backed
Certificates
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
-10-
<PAGE>
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 Head-Financial Guaranty
Group and each such notice shall be
marked to indicate "URGENT MATERIAL
ENCLOSED.")
If to the Company: National Financial Auto Funding Trust
c/o The Chase Manhattan Bank (USA)
802 Delaware Avenue
Wilmington, Delaware 19801
Attention: Corporate Trust
Administration
Telecopy No.: (302) 575-5467
Confirmation: (302) 575-5099
with a copy to: The Chase Manhattan Bank (USA)
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 Placement Agent:
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.
-11-
<PAGE>
(d) Amendments. Amendments of this Agreement shall be in
writing signed by each party hereto.
(e) Survival, Etc. The indemnity and contribution
agreements contained in this Agreement shall remain operative and
in full force and effect, regardless of (i) any investigation
made by or on behalf of any Indemnifying Party, (ii) the issuance
of the Securities or (iii) any termination of this Agreement or
the Policy. The indemnification provided in this Agreement will
be in addition to any liability which the parties may otherwise
have and shall in no way limit any obligations of the Company
under the Placement Agency 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.
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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
the Chase Manhattan Bank (USA),
as trustee for National
Financial Auto Funding Trust
Execution Copy
MASTER SPREAD ACCOUNT AGREEMENT,
dated as of November 21, 1995,
among
NATIONAL FINANCIAL AUTO FUNDING TRUST
FINANCIAL SECURITY ASSURANCE INC.
and
HARRIS TRUST AND SAVINGS BANK,
as Trustee and as Collateral Agent
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I.
DEFINITIONS
<S> <C> <C>
Section 1.01. Definitions...................................................................... 2
Section 1.02. Rules of Interpretation.......................................................... 8
<CAPTION>
ARTICLE II.
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
<S> <C> <C>
Section 2.01. Credit Enhancement Fee........................................................... 9
Section 2.02. Series Supplements............................................................... 9
Section 2.03. Grant of Security Interest by the Transferor..................................... 10
Section 2.04. Priority......................................................................... 10
Section 2.05. Transferor Remains Liable........................................................ 11
Section 2.06. Maintenance of Collateral........................................................ 11
Section 2.07. Termination and Release of Rights................................................ 12
Section 2.08. Non-Recourse Obligations of Transferor........................................... 13
<CAPTION>
ARTICLE III.
SPREAD ACCOUNTS
<S> <C> <C>
Section 3.01. Establishment of Spread Accounts; Initial Deposits into
Spread Accounts............................................................... 13
Section 3.02. Investments...................................................................... 14
Section 3.03. Distributions; Priority of Payments.............................................. 15
Section 3.04. General Provisions Regarding Spread Accounts..................................... 17
Section 3.05. Reports by the Collateral Agent.................................................. 18
<CAPTION>
ARTICLE IV.
THE COLLATERAL AGENT
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Section 4.01. Appointment and Powers........................................................... 19
Section 4.02. Performance of Duties............................................................ 19
Section 4.03. Limitation on Liability.......................................................... 19
Section 4.04. Reliance upon Documents.......................................................... 20
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<PAGE>
Section 4.05. Successor Collateral Agent....................................................... 20
Section 4.06. Indemnification.................................................................. 22
Section 4.07. Compensation and Reimbursement................................................... 23
Section 4.08. Representations and Warranties of the Collateral Agent........................... 23
Section 4.09. Waiver of Setoffs................................................................ 23
Section 4.10. Control by the Controlling Party................................................. 24
<CAPTION>
ARTICLE V.
COVENANTS OF THE TRANSFEROR
<S> <C> <C>
Section 5.01. Preservation of Collateral....................................................... 24
Section 5.02. Opinions as to Collateral........................................................ 24
Section 5.03. Notices.......................................................................... 25
Section 5.04. Waiver of Stay or Extension Laws; Marshalling of Assets.......................... 25
Section 5.05. Noninterference, etc............................................................. 25
Section 5.06. Transferor Changes............................................................... 26
<CAPTION>
ARTICLE VI.
CONTROLLING PARTY; INTERCREDITOR PROVISIONS
<S> <C> <C>
Section 6.01. Appointment of Controlling Party................................................. 26
Section 6.02. Controlling Party's Authority.................................................... 27
Section 6.03. Rights of Secured Parties........................................................ 27
Section 6.04. Degree of Care................................................................... 28
<CAPTION>
ARTICLE VII.
REMEDIES UPON DEFAULT
<S> <C> <C>
Section 7.01. Remedies upon a Default.......................................................... 28
Section 7.02. Waiver of Default................................................................ 28
Section 7.03. Restoration of Rights and Remedies............................................... 29
Section 7.04. No Remedy Exclusive.............................................................. 29
<CAPTION>
ARTICLE VIII.
MISCELLANEOUS
<S> <C> <C>
Section 8.01. Further Assurances............................................................... 29
Section 8.02. Waiver........................................................................... 29
Section 8.03. Amendments, Waivers.............................................................. 30
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<PAGE>
Section 8.04. Severability..................................................................... 30
Section 8.05. Nonpetition Covenant............................................................. 30
Section 8.06. Notices.......................................................................... 31
Section 8.07. Term of this Agreement........................................................... 32
Section 8.08. Assignments, Third-Party Rights; Reinsurance..................................... 33
Section 8.09. Consent of Controlling Party..................................................... 33
Section 8.10. Trial by Jury Waived............................................................. 33
Section 8.11. Governing Law.................................................................... 34
Section 8.12. Consents to Jurisdiction......................................................... 34
Section 8.13. Limitation of Liability.......................................................... 34
Section 8.14. Determination of Adverse Effect.................................................. 35
Section 8.15. Counterparts..................................................................... 35
Section 8.16. Headings......................................................................... 35
</TABLE>
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<PAGE>
MASTER SPREAD ACCOUNT AGREEMENT
MASTER SPREAD ACCOUNT AGREEMENT, dated as of November 21,
1995 (the "Agreement"), by and among NATIONAL FINANCIAL AUTO FUNDING
TRUST, a Delaware business trust (the "Transferor"), FINANCIAL
SECURITY ASSURANCE INC., a New York stock insurance company
("Financial Security") and HARRIS TRUST AND SAVINGS BANK, an Illinois
banking corporation in its capacities as Trustee under each Pooling
and Servicing Agreement referred to below, in such capacity as agent
for the Certificateholders with respect to the related Series (the
"Trustee") and as Collateral Agent (as defined below).
RECITALS
1. National Auto Finance 1995-1 Trust (the "Series 1995-1
Trust") was formed pursuant to a Pooling and Servicing Agreement,
dated as of October 1, 1995 (the "Series 1995-1 Pooling and Servicing
Agreement"), among the Transferor, National Auto Finance Company, L.P.
("NAFCO"), as Master Servicer (the "Master Servicer") and the Trustee.
2. Pursuant to the Series 1995-1 Pooling and Servicing
Agreement, the Transferor sold to the Series 1995-1 Trust all of its
right, title and interest in and to the Contracts and certain other
property of the Trust Estate.
3. The Transferor requested that Financial Security issue the
Series 1995-1 Policy to the Trustee to guarantee payment of the
Guaranteed Distributions (as defined in such Policy) on each
Distribution Date in respect of the Series 1995-1 Certificates.
4. In partial consideration of the issuance of the Series
1995-1 Policy, the Transferor has agreed that Financial Security shall
have certain rights as Controlling Party, to the extent set forth
herein with respect to the Series 1995-1 Trust.
5. The Transferor is a special purpose Delaware business
trust, the beneficial ownership interests of which are held by NAFCO
and its affiliates. The Series 1995-1 Trust has agreed to pay a Series
1995-1 Credit Enhancement Fee to the Transferor in consideration of
the obligations of the Transferor pursuant hereto in respect of the
Series 1995-1 Certificates and in consideration of the obligations of
the Transferor pursuant to the Series 1995-1 Insurance Agreement (such
obligations forming part of the 1995-1 Insurer Secured Obligations
referred to herein). The 1995-1 Insurer Secured Obligations form part
of the consideration to Financial Security for its issuance of the
Series 1995-1 Policy.
6. To secure the performance of the Series 1995-1 Secured
Obligations, to further effect and enforce the subordination
provisions to which the Credit Enhancement Fee is subject to, and in
consideration of the receipt of the Credit Enhancement Fee, the
Transferor has agreed to pledge the Series 1995-1 Collateral as
Collateral to the Collateral Agent for the
<PAGE>
benefit of Financial Security and for the benefit of the Trustee on behalf of
the Trust, upon the terms and conditions set forth herein.
7. It is contemplated that the Transferor and NAFCO may enter
into one or more additional Pooling and Servicing Agreements with the
Trustee pursuant to which the Transferor will sell all of its right,
title and interest in pools of Contracts, and that Financial Security
in its discretion may issue additional Policies with respect to
certain guaranteed distributions on the corresponding additional
Series of Certificates. In connection with any such issuance of
additional Policies, it is contemplated that Financial Security will
obtain certain Controlling Party rights with respect to the related
Series, and that, in connection with each such additional Series, the
parties hereto will enter into a Series Supplement hereto pursuant to
which the Transferor will pledge additional Collateral pursuant to the
terms hereof.
AGREEMENTS
In consideration of the premises, and for other good and
valuable consideration, the adequacy, receipt and sufficiency of which
are hereby acknowledged the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions. Unless defined in this Agreement,
capitalized terms used in this Agreement shall have the meaning given
such terms in the applicable Series Pooling and Servicing Agreement or
Series Supplement, as identifiable from the context in which such term
is used. The following terms shall have the following respective
meanings:
"Authorized Officer" means, (i) with respect to Financial
Security, the Chairman of the Board, the President, the Executive Vice
President or any Managing Director of Financial Security, (ii) with
respect to the Trustees or the Collateral Agent, any Vice President or
Trust Officer thereof, and (iii) with respect to the Transferor, any
Co-Trustee thereof.
"Certificates" means, with respect to a Series, the
Certificates issued pursuant to the Pooling and Servicing Agreement
for such Series.
"Collateral" means the Series 1995-1 Collateral, and with
respect to any other Series, all collateral delivered hereunder with
respect to each of such Series, as specified in the related Series
Supplement.
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<PAGE>
"Collateral Agent" means, initially, Harris Trust and Savings
Bank, in its capacity as collateral agent on behalf of the Secured
Parties, including its successors in interest, until a successor
Person shall have become the Collateral Agent pursuant to Section 4.05
hereof, and thereafter "Collateral Agent" shall mean such successor
Person.
"Collateral Agent Fee" means, with respect to the Series
1995-1 Certificates, the annual fee payable to the Collateral Agent
for services rendered as the Collateral Agent, which Collateral Agent
Fee is included in the fees paid to Harris Trust pursuant to the
Series 1995-1 Pooling and Servicing Agreement.
"Collection Account" means the Collection Account applicable
to any Series, as specified in the related Pooling and Servicing
Agreement.
"Controlling Party" means with respect to a Series, at any
time, the Person designated as the Controlling Party at such time
pursuant to Section 6.01 hereof.
"Credit Enhancement Fee" means the Credit Enhancement Fee
applicable to any Series as specified in this Agreement or any Series
Supplement.
"Deemed Cured" means, as of a Reporting Date, with respect to
a Trigger Event that has occurred with respect to a Series, that no
Trigger Event with respect to such Series shall have occurred as of
such Reporting Date or as of any of the three consecutively preceding
Reporting Dates.
"Default" means with respect to any Series, at any time, (i)
if Financial Security is then the Controlling Party with respect to
such Series, any Insurance Agreement Event of Default with respect to
such Series, and (ii) if the Trustee is then the Controlling Party
with respect to such Series, any Servicer Default with respect to such
Series.
"Delinquency Claim Date" means, with respect to any
Distribution Date, the fourth Business Day preceding such Distribution
Date.
"Delivery" shall have the meaning set forth in the Series
1995-1 Pooling and Servicing Agreement.
"Final Termination Date" means, with respect to a Series, the
date that is the later of (i) the Insurer Termination Date with
respect to such Series and (ii) the Trustee Termination Date with
respect to such Series.
"Financial Security Default" means, with respect to any
Series, any one of the following events shall have occurred and be
continuing:
(a) Financial Security shall have failed to make
a payment required under the related Policy;
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<PAGE>
(b) Financial Security 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 Financial Security 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
Financial Security (or the taking of possession of all or any
material portion of the property of Financial Security).
"Guaranteed Distributions" shall have the meaning set forth in the
related Policy.
"Initial Spread Account Deposit" means, with respect to the
Series 1995-1 Certificates, an amount equal to 1% of the Series 1995-1
Initial Balance or $420,000.
"Insurance Agreement" means, with respect to any Series, the
Insurance and Indemnity Agreement among Financial Security, NAFCO and
the Transferor and such other parties as may be named therein,
pursuant to which Financial Security issued a Policy to the Trustee.
"Insurer Secured Obligations" means, with respect to a
Series, all amounts and obligations which may at any time be owed to
or on behalf of Financial Security (or any agents, accountants or
attorneys for Financial Security) under the Insurance Agreement
related to such Series or under any Transaction Document in respect of
such Series, regardless of whether such amounts are owed now or in the
future, whether liquidated or unliquidated, contingent or
noncontingent.
"Insurer Termination Date" means, with respect to any Series,
the date which is the latest of (i) the date of the expiration of all
Policies issued in respect of such Series, (ii) the date on which
Financial Security shall have received payment and performance in full
of all Insurer Secured Obligations with respect to such Series and
(iii) the latest date any payment referred to above could be avoided
as a preference or otherwise under the United States Bankruptcy Code
or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, as specified
in an Opinion of Counsel delivered to the Collateral Agent and the Trustee.
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<PAGE>
"Lien" means any security interest, lien, change, pledge,
preference, equity or encumbrance of any kind, including tax liens,
mechanics' liens and any liens that attach by operation of the law.
"Monthly Period" means, with respect to a Reporting Date or a
Distribution Date, the calendar month immediately preceding the month
in which such Reporting Date or Distribution Date occurs (such
calendar month being referred to as the "related" Monthly Period with
respect to such Reporting Date or Distribution Date).
"NAFCO" means National Auto Finance Company L.P.
"Non-Controlling Party" means with respect to a Series at any
time, the Secured Party that is not the Controlling Party at such
time.
"Opinion of Counsel" means a written opinion of counsel
acceptable, as to form, substance and issuing counsel, to the
Controlling Party.
"Policy" means the Series 1995-1 Policy and any insurance
policy subsequently issued by Financial Security with respect to a
Series.
"Pooling and Servicing Agreement" means, with respect to the
Series 1995-1 Certificates, the Series 1995-1 Pooling and Servicing
Agreement and, for each other Series created pursuant to a Pooling and
Servicing Agreement, the Pooling and Servicing Agreement related to
such Series.
"Requisite Amount" means, with respect to the 1995-1 Series,
as of any Reporting Date after giving effect to any distributions of
Certificate Distributable Amount to be made on the related
Distribution Date, the greater of (a) the lesser of (i) 2% of the
Series 1995-1 Initial Balance and (ii) the greater of (A) the
Certificate Balance, and (B) $100,000 and (b) (i) if a Trigger Event
shall have occurred as of such Reporting Date (and until such Trigger
Event is Deemed Cured) and no Insurance Agreement Event of Default
shall have occurred as of such Reporting Date, 7% of the Series 1995-1
Balance; or (iii) if an Insurance Agreement Event of Default shall
have occurred as of such Reporting Date, an unlimited amount.
"Secured Obligations" means, with respect to each Series the
Insurer Secured Obligations with respect to such Series and the
Trustee Secured Obligations with respect to such Series.
"Secured Parties" means Financial Security and the Trustee.
"Security Interests" means, with respect to the Series 1995-1
Certificates, the security interests and Liens in the Series 1995-1
Collateral granted pursuant to Section 2.03 hereof,
-5-
<PAGE>
and, with respect to any other Series, the security interests and Liens
in the related Collateral granted pursuant to the related Series Supplement.
"Series 1995-1 Balance" means with respect to any
Determination Date, the sum of the Pool Outstanding Principal Balance
as of the related Distribution Date, the amount on deposit in the
Pre-Funding Account, if any, on such date and the amount on deposit
the Revolving Account, if any, on such date.
"Series 1995-1 Certificates" means the Series of Certificates
issued pursuant to the Series 1995-1 Pooling and Servicing Agreement.
"Series 1995-1 Collateral" has the meaning specified in
Section 2.03(a) hereof.
"Series 1995-1 Credit Enhancement Fee" means the amount
distributable on each Distribution Date pursuant to Section 4.01(b)(v)
of the Series 1995-1 Pooling and Servicing Agreement.
"Series 1995-1 Initial Balance" means $42,000,000.
"Series 1995-1 Insurance Agreement" means the Insurance
Agreement related to the Series 1995-1 Certificates.
"1995-1 Insurer Secured Obligations" means the Insurer
Secured Obligations with respect to the Series 1995-1 Certificates.
"Series 1995-1 Policy" means the Policy issued with respect
to the Series 1995-1 Certificates.
"Series 1995-1 Pooling and Servicing Agreement" means the
Pooling and Servicing Agreement, dated as of October 1, among the
Transferor, NAFCO, as the Master Servicer, and Harris Trust and
Savings Bank, as Trustee, as such agreement may be supplemented,
amended or modified from time to time.
"Series 1995-1 Secured Obligations" means the Secured
Obligations related to the Series 1995-1 Certificates.
"Series 1995-1 Spread Account" has the meaning specified in
Section 3.01(a) hereof.
"Series of Certificates" or "Series" means the Series 1995-1
Certificates or, as the context may require, any other series of
Certificates issued as described in Section 2.02 hereof, or
collectively, all such series.
"Series Supplement" means a supplement hereto executed by the
parties hereto in accordance with Section 2.02 hereof.
-6-
<PAGE>
"Spread Account" has the meaning specified in Section 3.01(a) hereof.
"Spread Account Permitted Investments" means Permitted
Investments held by the Collateral Agent in a Spread Account and with
respect to which the Collateral Agent has taken Delivery.
"Spread Account Shortfall" means, with respect to any Series
and any Reporting Date with respect to which the Requisite Amount for
such Series is 7% of the Series 1995-1 Balance or unlimited, the
excess, if any, of (a) the greater of 7% of the Series 1995-1 Balance
and the amount determined by reference to clause (a) of the definition
of Requisite Amount with respect to such Distribution Date over (b)
the amount on deposit in the related Spread Account after making any
withdrawals therefrom required by priority THIRD of Section 3.03(b)
hereof.
"Transaction Documents" means, with respect to a Series, this
Agreement, each of the Pooling and Servicing Agreement, the Insurance
Agreement, the Indemnification Agreement, the Purchase Agreement, the
Registration Rights Agreement, if any, the Assignment Agreement, if
any, the Custodial Agreement, any Conveyance related to such Series
and any Transfer Agreement related to such Series.
"Trigger Event" means, with respect to Series 1995-1, as of
any Reporting Date with respect to Series 1995-1 that any one of the
following events shall have occurred and shall not have terminated:
(a) the Average Delinquency Ratio as of such Reporting Date is equal
to or greater than 7.5%; or (b) the Average Default Rate as of any
Reporting Date (i) occurring on or prior to November 14, 1996, is
equal to or greater than 12%, (ii) occurring subsequent to November
14, 1996 and on or prior to November 14, 1997, is equal to or greater
than 16% and (iii) occurring subsequent to November 14, 1997, is equal
to or greater than 12%; or (c) the Average Net Loss Rate as of any
Reporting Date (i) occurring on or prior to November 14, 1996, is
equal to or greater than 6%, (ii) occurring subsequent to November 14,
1996 and on or prior to November 14, 1997, is equal to or greater than
8%, (iii) occurring subsequent to November 14, 1997, is equal to or
greater than 6%. A Trigger Event will be deemed to have terminated as
of a Reporting Date if as of each of the two most recent Reporting
Dates and the current Reporting Date no event constituting a Trigger
Event shall exist.
"Trust" means a trust formed pursuant to a Pooling and Servicing
Agreement.
"Trust Estate" with respect to any Series means the property
held in the estate of the Trust formed pursuant to the related Pooling
and Servicing Agreement.
"Trustee" means with respect to any Series, the Trustee named
in the related Pooling and Servicing Agreement.
-7-
<PAGE>
"Trustee Secured Obligations" means, with respect to a
Series, all amounts and obligations which NAFCO or the Transferor may
at any time owe to or on behalf of the Trustee, the Trust or the
Certificateholders under the Pooling and Servicing Agreement with
respect to such Series.
"Trustee Termination Date" means, with respect to any Series,
the date which is the latest of (i) the date on which the Trustee
shall have received, as Trustee for the holders of the Certificates of
such Series, payment and performance in full of all Trustee Secured
Obligations arising out of or relating to such Series and (ii) the
date on which all payments in respect of the Certificates shall have
been made and the related Trust shall have been terminated pursuant to
the terms of the related Pooling and Servicing Agreement and (iii) the
latest date any payment referred to above could be avoided as a
preference or otherwise under the United States Bankruptcy Code or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, as specified in an
Opinion of Counsel delivered to the Collateral Agent and the Trustee.
"Uniform Commercial Code" or "UCC" means the Uniform
Commercial Code in effect in the relevant jurisdiction, as the same
may be amended from time to time.
"Unreimbursed Amounts" has the meaning specified in Section
3.03(b) hereof.
Section 1.02. Rules of Interpretation. The terms "hereof,"
"herein" or "hereunder," unless otherwise modified by more specific
reference, shall refer to this Agreement in its entirety. Unless
otherwise indicated in context, the terms "Article," "Section,"
"Appendix," "Exhibit" or "Annex" shall refer to an Article or Section
of, or Appendix, Exhibit or Annex to, this Agreement. The definition
of a term shall include the singular, the plural, the past, the
present, the future, the active and the passive forms of such term. A
term defined herein and used herein preceded by a Series designation,
shall mean such term as it relates to the Series designated.
ARTICLE II.
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.01. Credit Enhancement Fee. To the extent that a
Pooling and Servicing Agreement relating to a particular Series
provides for the payment to the Transferor of a Credit Enhancement
Fee, such Credit Enhancement Fee is to be paid to the Transferor by
distribution of such amounts to the Collateral Agent for deposit and
distribution pursuant to this Agreement. The Transferor hereby agrees
that payment of the Credit Enhancement Fee in the manner and subject
to the conditions set forth herein and in the related Pooling and
Servicing Agreement is adequate consideration and the exclusive
consideration to be received by the Transferor for the obligations
of the Transferor pursuant hereto (including, without limitation, the
transfer by the Transferor to the Collateral Agent of the Initial
Spread Account
-8-
<PAGE>
Deposit related to such Series). The Transferor hereby agrees with
the Trustee and with Financial Security that payment of the Credit
Enhancement Fee to the Transferor is expressly conditioned on
subordination of the Credit Enhancement Fee to payments on the senior
Certificates of any Series, payments of amounts due to Financial
Security and the other obligations in respect of each Trust, in each
case to the extent provided in the applicable Pooling and Servicing
Agreement and Section 3.03 hereof; and the Security Interests of the
Secured Parties in the Collateral is intended to effect and enforce
such subordination and to provide security for the Secured Obligations
related to such Series and, except as otherwise provided in the
related Series Supplement, for Secured Obligations with respect to
other Series.
Section 2.02. Series Supplements. The parties hereto agree
that NAFCO and the Transferor will have the option to enter into a
Series Supplement hereto with respect to each Series of Certificates,
the Secured Obligations with respect to which are to be secured by
Collateral held pursuant to the provisions of this Agreement. The
parties will enter into a Series Supplement only if the following
conditions shall have been satisfied:
(i) The Transferor shall have sold Contracts to a
Trust pursuant to a Pooling and Servicing Agreement;
(ii) Financial Security shall have issued a Policy
in respect of the Guaranteed Distributions on the Series of
Certificates issued pursuant to such Pooling and Servicing
Agreement; and
(iii) Pursuant to the related Series Supplement any
and all right, title and interest of the Transferor in the
Collateral specified herein shall be pledged to the Secured
Parties substantially on the terms set forth in Section 2.03
hereof.
Section 2.03. Grant of Security Interest by the Transferor.
(a) To secure the performance of the 1995-1 Secured
Obligations and the Secured Obligations with respect to each other
Series, to the extent provided herein, the Transferor hereby pledges,
assigns, grants, transfers and conveys to the Collateral Agent, on
behalf of and for the benefit of the Secured Parties, a lien on and
security interest in (which lien and security interest is intended to
be prior to all other Liens), all of its right, title and interest in
and to the following (all being collectively referred to herein as the
"Series 1995-1 Collateral" and constituting Collateral hereunder):
(i) the Series 1995-1 Credit Enhancement Fee and all
rights and remedies that the Transferor may have to enforce
payment of the Series 1995-1 Credit Enhancement Fee whether
under the Series 1995-1 Pooling and Servicing Agreement or
otherwise;
(ii) the Series 1995-1 Spread Account established
pursuant to Section 3.01 hereof, and each other account owned
by the Transferor and maintained by the
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Collateral Agent (including, without limitation, the Initial
Spread Account Deposit related thereto and all additional
monies, checks, securities, investments and other documents
from time to time held in or evidencing any such accounts);
(iii) all of the Transferor's right, title and
interest in and to investments made with proceeds of the
property described in clauses (i) and (ii) above, or made
with amounts on deposit in the Series 1995-1 Spread Account;
and
(iv) all distributions, revenues, products,
substitutions, benefits, profits and proceeds, in whatever
form, of any of the foregoing.
(b) To effectuate the provisions and purposes of this
Agreement, including for the purpose of perfecting the security
interests granted hereunder, the Transferor represents and warrants
that it has, prior to the execution of this Agreement, executed and
filed an appropriate Uniform Commercial Code financing statement in
Illinois sufficient to assure that the Collateral Agent, as agent for
the Secured Parties, has a first priority perfected security interest
in all Series 1995-1 Collateral which can be perfected by the filing
of a financing statement.
Section 2.04. Priority. The Transferor intends the security
interests in favor of the Collateral Agent, for the benefit of the
Secured Parties, to be prior to all other Liens in respect of the
Collateral, and the Transferor shall take all actions necessary to
obtain and maintain, in favor of the Collateral Agent, for the benefit
of the Secured Parties, a first lien on and a first priority,
perfected security interest in the Collateral. Subject to the
provisions hereof specifying the rights and powers of the Controlling
Party from time to time to control certain specified matters relating
to the Collateral, each Secured Party shall have all of the rights,
remedies and recourse with respect to the Collateral afforded a
secured party under the Uniform Commercial Code, and all other
applicable law in addition to, and not in limitation of, the other
rights, remedies and recourse granted to such Secured Parties by this
Agreement or any other law relating to the creation and perfection of
liens on, and security interests in, the Collateral.
Section 2.05. Transferor Remains Liable. The Security
Interests are granted as security only and shall not (i) transfer or
in any way affect or modify, or relieve the Transferor from, any
obligation to perform or satisfy, any term, covenant, condition or
agreement to be performed or satisfied by the Transferor under or in
connection with this Agreement, the Insurance Agreement or any other
Transaction Document to which it is a party or (ii) impose any
obligation on any of the Secured Parties or the Collateral Agent to
perform or observe any such term, covenant, condition or agreement
or impose any liability on any of the Secured Parties or the Collateral
Agent for any act or omission on its part relative thereto or for any
breach of any representation or warranty on its part contained therein
or made in connection therewith, except, in each case, to the extent
provided herein and in the other Transaction Documents.
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Section 2.06. Maintenance of Collateral.
(a) Safekeeping. The Collateral Agent agrees to (i) maintain
the Collateral (other than Spread Account Permitted Investments)
received by it and all records and documents relating thereto at the
office of the Collateral Agent specified in Section 8.06 hereof or
such other address within the State of Illinois (unless all filings
have been made to continue the perfection of the security interest in
the Collateral to the extent such security interest can be perfected
by filing a financing statement, as evidenced by an Opinion of Counsel
delivered to the Controlling Party, as may be approved by the
Controlling Party and (ii) take Delivery of and maintain the Spread
Account Permitted Investments and all records and documents relating
thereto at its offices within the State of New York. The Collateral
Agent shall keep all Collateral and related documentation in its
possession separate and apart from all other property that it is
holding in its possession and from its own general assets and shall
maintain accurate records pertaining to the Spread Account Permitted
Investments and Spread Accounts included in the Collateral in such a
manner as shall enable the Collateral Agent and the Secured Parties to
verify the accuracy of such record-keeping. The Collateral Agent's
books and records shall at all times show that the Collateral is held
by the Collateral Agent as agent of the Secured Parties and is not the
property of the Collateral Agent. The Collateral Agent will promptly
report to each Secured Party and the Transferor any failure on its
part to hold the Collateral as provided in this Section 2.06(a) and
will promptly take appropriate action to remedy any such failure.
(b) Access. The Collateral Agent shall permit each of the
Secured Parties, or their respective duly authorized representatives,
attorneys, auditors or designees, to inspect the Collateral in the
possession of or otherwise under the control of the Collateral Agent
pursuant hereto at such reasonable times during normal business hours
as any such Secured Party may reasonably request upon not less than
two Business Days' prior written notice. The costs and expenses
associated with any such inspection will be paid by the party making
such inspection.
Section 2.07. Termination and Release of Rights.
(a) On the Insurer Termination Date relating to a Series, the
rights, remedies, powers, duties, authority and obligations conferred
upon Financial Security pursuant to this Agreement in respect of the
Collateral related to such Series (and, to the extent provided herein,
in respect of Collateral related to other Series) shall terminate and
be of no further force and effect and all rights, remedies, powers,
duties, authority and obligations of Financial Security with respect
to such Collateral shall be automatically released; provided that any
indemnity provided to or by Financial Security herein shall survive
such Insurer Termination Date. If Financial Security is acting as
Controlling Party with respect to a Series on the related Insurer
Termination Date, Financial Security agrees, at the expense of the
Transferor, to execute and deliver such instruments as the successor
Controlling Party may reasonably request to effect such release, and
any such instruments so executed and
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delivered shall be fully binding on Financial Security and any Person
claiming by, through or under Financial Security.
(b) On the Trustee Termination Date related to a Series, the
rights, remedies, powers, duties, authority and obligations, if any,
conferred upon the Trustee pursuant to this Agreement in respect of
the Collateral related to such Series (and, to the extent provided
herein, in respect of Collateral related to other Series) shall
terminate and be of no further force and effect and all such rights,
remedies, powers, duties, authority and obligations of the Trustee
with respect to such Collateral shall be automatically released;
provided that any indemnity provided to the Trustee herein shall
survive such Trustee Termination Date. If the Trustee is acting as
Controlling Party with respect to a Series on the related Trustee
Termination Date, the Trustee agrees, at the expense of the
Transferor, to execute and deliver such instruments as the Transferor
may reasonably request to effectuate such release, and any such
instruments so executed and delivered shall be fully binding on the
Trustee.
(c) On the Final Termination Date with respect to a Series,
the rights, remedies, powers, duties, authority and obligations
conferred upon the Collateral Agent and each Secured Party pursuant to
this Agreement shall terminate and be of no further force and effect
and all rights, remedies, powers, duties, authority and obligations of
the Collateral Agent and each Secured Party with respect to the
Collateral related to such Series (and, to the extent provided herein,
in respect of Collateral related to other Series) shall be
automatically released. On the Final Termination Date with respect to
a Series, the Collateral Agent agrees, and each Secured Party agrees,
at the expense of the Transferor, to execute such instruments of
release, in recordable form if necessary, in favor of the Transferor
as the Transferor may reasonably request, to deliver any Collateral
related to such Series in its possession to the Transferor, and to
otherwise release the lien of this Agreement and release and deliver
to the Transferor the Collateral related to such Series.
Section 2.08. Non-Recourse Obligations of Transferor.
Notwithstanding anything herein or in the other Transaction Documents
to the contrary, the parties hereto agree that the obligations of the
Transferor hereunder (without limiting the obligation to apply
distributions of the respective Credit Enhancement Fees in accordance
with Section 3.03(b) hereof) shall be recourse only to the extent of
amounts released to the Transferor pursuant to priority SEVENTH of
Section 3.03(b) hereof and retained by the Transferor in accordance
with the next sentence. The Transferor agrees that it shall not
declare or make payment of (i) any dividend or other distribution on
or in respect of any beneficial interests in the Transferor or (ii)
any payment on account of the purchase, redemption, retirement or
acquisition of (x) any beneficial interest in the Transferor, (y)
any option, warrant or other right to acquire any beneficial interest
in the Transferor or (z) any payment of any loan made by NAFCO to
the Transferor, unless (in each case) at the time of such
declaration or payment (and after giving effect thereto) no
amount payable by Transferor under any Transaction Document is then
due and owing but unpaid. Nothing contained herein shall be deemed to
limit the rights of the Certificateholders under any other Transaction
Document.
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ARTICLE III.
SPREAD ACCOUNTS
Section 3.01. Establishment of Spread Accounts; Initial Deposits
into Spread Accounts.
(a) On or prior to the Closing Date relating to Series
1995-1, the Collateral Agent shall establish with respect to such
Series, at its office or at another depository institution or trust
company an Eligible Account, designated, "Spread Account - National
Auto Finance Series 1995-1 Trust - Harris Trust and Savings Bank, as
Collateral Agent for Financial Security Assurance Inc. and another
Secured Party" (the "Spread Account", and, with respect to the Series
1995-1 Certificates, the "Series 1995-1 Spread Account"). All Spread
Accounts established under this Agreement from time to time shall be
maintained at the same depository institution (which depository
institution may be changed from time to time in accordance with this
Agreement). If any Spread Account or established with respect to a
Series ceases to be an Eligible Account, the Collateral Agent shall,
within five Business Days, establish a new Eligible Account for such
Series.
(b) No withdrawals may be made of funds in any Spread Account
except as provided in Section 3.03 of this Agreement. Except as
specifically provided in this Agreement, funds in a Spread Account
established with respect to a Series shall not be commingled with
funds in a Spread Account established with respect to another Series
or with any other moneys. All moneys deposited from time to time in
such Spread Account and all investments made with such moneys shall be
held by the Collateral Agent as part of the Collateral with respect to
such Series.
(c) On the Closing Date with respect to a Series, the
Collateral Agent shall deposit the Initial Spread Account Deposit with
respect to such Series, if any, received from the Transferor into the
related Spread Account.
(d) Each Spread Account shall be separate from each Trust and
amounts on deposit therein will not constitute a part of the Trust
Estate of any Trust. Each Spread Account shall be maintained by the
Collateral Agent at all times separate and apart from any other
account of the Transferor, the Master Servicer or the Trust. All income
or loss on investments of funds in any Spread Account shall be reported
by the Transferor as taxable income or loss of the Transferor.
Section 3.02. Investments.
(a) Funds which may at any time be held in the Spread Account
established with respect to a Series shall be invested and reinvested
by the Collateral Agent, at the written direction (including, subject
to the provisions hereof, general standing instructions) of the
Transferor (unless a Default actually known to a Responsible Officer
of the Collateral Agent
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shall have occurred and be continuing, in which case at the written
direction of the Controlling Party) or its designee received by the
Collateral Agent by 1:00 P.M. New York City time on the Business Day
prior to the date on which such investment shall be made, in one or
more Spread Account Permitted Investments in the manner specified in
Section 3.02(c) hereof. If no written direction with respect to any
portion of such Spread Account is received by the Collateral Agent,
the Collateral Agent shall invest such funds overnight in such
Permitted Investments as the Collateral Agent may select, provided
that the Collateral Agent shall not be liable for any loss or absence
of income resulting from such investments or for investments made
pursuant to written instructions received in accordance with this
Section 3.02(a).
(b) Each investment made pursuant to this Section 3.02 on any
date shall mature not later than the Business Day immediately
preceding the Distribution Date next succeeding the day such
investment is made, except that any investment made on the day
preceding a Distribution Date shall mature on such Distribution Date;
provided that any investment of funds in any Spread Account maintained
with the Collateral Agent (which shall be qualified as a Spread
Account Permitted Investment) in any investment as to which the
Collateral Agent is the obligor, if otherwise qualified as an
Permitted Investment (including any repurchase agreement on which the
Collateral Agent in its commercial capacity is liable as principal)
may mature on the Distribution Date next succeeding the date of such
investment.
(c) Subject to the other provisions hereof, the Collateral
Agent shall have sole control over each such investment and the income
thereon, and any certificate or other instrument evidencing any such
investment, if any, shall be delivered directly to the Collateral
Agent or its agent, together with each document of transfer, if any,
necessary to transfer title to such investment to the Collateral Agent
in a manner complying with Section 2.06 hereof and the requirements of
the definition of "Spread Account Permitted Investments."
(d) If amounts on deposit in any Spread Account are at any
time invested in a Spread Account Permitted Investment payable on
demand, the Collateral Agent shall (i) consistent with any notice
required to be given thereunder, demand that payment thereon be made
on the last day such Spread Account Permitted Investment is permitted
to mature under the provisions hereof and (ii) demand payment of all
amounts due thereunder promptly upon receipt of written notice from
the Controlling Party to the effect that such investment does not
constitute a Spread Account Eligible investment.
(e) All moneys on deposit in a Spread Account together with
any deposits or securities in which such moneys may be invested or
reinvested, and any gains from such investments, shall constitute
Collateral hereunder with respect to the related Series subject to the
Security Interests of the Secured Parties.
(f) Subject to Section 4.03 hereof, the Collateral Agent
shall not be liable by reason of any insufficiency in any Spread
Account resulting from any loss on any Permitted Investment included
therein except for losses attributable to the Collateral Agent's
failure to
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make payments on Permitted Investments as to which the Collateral Agent,
in its commercial capacity, is obligated to make.
Section 3.03. Distributions; Priority of Payments.
(a) On or before each Delinquency Claim Date with respect to
any Series, the Collateral Agent will make the following calculations
on the basis of information (including, without limitation, the amount
of any Deficiency Claim Amount with respect to any Series) received
pursuant to Section 3.17 of the Pooling and Servicing Agreement, with
respect to each such Series from the Master Servicer thereunder;
provided, however, that if the Collateral Agent receives written
notice from Financial Security of the occurrence of an Insurance
Agreement Event of Default with respect to any Series, such notice
shall be determinative for the purposes of determining the Requisite
Amount for such Series:
FIRST, determine the amounts to be on deposit in the
respective Spread Accounts (taking into account amounts in
respect of the respective Credit Enhancement Fees to be
deposited into the related Spread Accounts) on the next
succeeding Distribution Date which will be available to
satisfy any Deficiency Claim Amount.
SECOND, determine (i) the amounts, if any, to be
distributed from each Spread Account related to each Series
with respect to which there exists a Deficiency Claim Amount
and (ii) whether, following distribution from the related
Spread Accounts to the respective Trustees for deposit into
the respective Certificate Account with respect to which
there exists a Deficiency Claim Amount, a Deficiency Claim
Amount will continue to exist with respect to one or more
Series.
THIRD, if a Deficiency Claim Amount will continue to
exist with respect to one or more Series following the
distributions from the related Spread Accounts contemplated
by paragraph SECOND above, determine the amount, if any, to
be distributed to the Trustee with respect to each Series
from unrelated Spread Accounts
in respect of such Deficiency Claim Amount(s). This
determination shall be made in accordance with the
distribution priority scheme set forth in Section 3.03(b)
below.
On such Delinquency Claim Date related to a Series, the
Collateral Agent shall deliver a certificate to each Trustee in
respect of which the Collateral Agent has received a Deficiency Notice
stating the amount, if any, to be distributed to such Trustee on the
next Distribution Date in respect of such Deficiency Claim Amount.
(b) On each Distribution Date, following delivery by the
Trustee of the respective Credit Enhancement Fees for deposit into the
respective Spread Accounts pursuant to the respective Pooling and
Servicing Agreements and if the Trustee has received a Deficiency
Notice with respect to one or more such Series, or with respect to
priority SIXTH below to
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the extent the amount referred to therein is due and owing, the
Collateral Agent shall make the following distributions in the following
order of priority:
FIRST, if with respect to any Series there exists a
Deficiency Claim Amount, from the Spread Account related to
such Series, to the Trustee for deposit in the related
Certificate Account the amount of such Deficiency Claim
Amount.
SECOND, if with respect to any Series there
continues to exist a Deficiency Claim Amount after deposit
into the Certificate Account of amounts distributed pursuant
to priority FIRST of this Section 3.03(b), from amounts, if
any, on deposit in each unrelated Spread Account in excess of
the related Requisite Amount, an amount in the aggregate up
to the aggregate of the Deficiency Claim Amounts for all
Series, for deposit in the respective Certificate Accounts
pro rata in accordance with the respective Deficiency Claim
Amounts.
THIRD, if with respect to any Series there continues
to exist a Deficiency Claim Amount after deposit into the
Certificate Account of amounts distributed pursuant to
priority FIRST and SECOND of this Section 3.03(b), from each
unrelated Spread Account pro rata in accordance with amounts
on deposit therein, an amount up to the aggregate of the
remaining Deficiency Claim Amounts for all Series, to the
respective Trustees for deposit in the respective Certificate
Accounts pro rata in accordance with the respective
Deficiency Claim Amounts.
FOURTH, if with respect to one or more Series there
exists a Spread Account Shortfall, from amounts, if any, (1)
on deposit in each Spread Account in excess of the related
Requisite Amount; or (2) on deposit in any Spread Account
with respect to which the Final Termination Date shall have
occurred on such Distribution Date or a prior Distribution
Date, an amount in the aggregate up to the aggregate of the
Spread Account Shortfalls for all Series for deposit into
each Spread Account pro rata in accordance with the
respective Spread Account Shortfalls.
FIFTH, if with respect to one or more Series,
amounts have been withdrawn from the related Spread Account
pursuant to priority THIRD of this Section 3.03(b) on such
Distribution Date and/or prior Distribution Dates and such
amounts have not been redeposited in full into such Spread
Account pursuant to this priority FIFTH (such amounts in the
aggregate for a Series "Unreimbursed Amounts"), from amounts,
if any, (1) on deposit in each Spread Account in excess of
the related Requisite Amount; or (2) on deposit in any Spread
Account with respect to which the Final Termination Date
shall have occurred on such Distribution Date or a prior
Distribution Date, an amount up to the aggregate of the
Unreimbursed Amounts for all such Series for deposit into
each Spread Account with respect to which there exist
Unreimbursed Amounts pro rata in accordance with the
respective Unreimbursed Amounts.
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SIXTH, if any amounts are owed to the Trustee,
Collateral Agent or Standby Servicer for reasonable
out-of-pocket expenses in connection with the administration
of the Trust, including the expenses incurred in the
transition to a successor Master Servicer and such amounts
have not been paid, then from amounts (if any) on deposit in
the related Spread Account, an amount up to the amount so
owed, to be paid to the Trustee, the Collateral Agent and the
Standby Servicer.
SEVENTH, any funds in a Spread Account in excess of
the applicable Requisite Amount and any funds in a Spread
Account with respect to a Series for which the Final
Termination Date shall have occurred after distribution
pursuant to priorities FIRST through SIXTH will be released
to the Transferor (or as otherwise provided in priority
ELEVENTH of Section 4.01(b) of the Pooling and Servicing
Agreement) free and clear of the Lien established hereunder.
Section 3.04. General Provisions Regarding Spread Accounts.
(a) Promptly upon the establishment (initially or upon any
relocation) of a Spread Account hereunder, the Collateral Agent shall
advise the Transferor and each Secured Party in writing of the name
and address of the depository institution or trust company where such
Spread Account has been established (if not Harris Trust and Savings
Bank or any successor Collateral Agent in its commercial banking
capacity), the name of the officer of the depository institution
responsible for overseeing such Spread Account, the account number and
the individuals whose names appear on the signature cards for such
Spread Account. The Transferor shall cause each such depository
institution or trust company to execute a written agreement, in form
and substance satisfactory to the Controlling Party, waiving, and the
Collateral Agent by its execution of this Agreement hereby waives
(except to the extent expressly provided herein), in each case to the
extent permitted under applicable law, (i) any banker's or other
statutory or similar Lien, and (ii) any right of set-off or other
similar right under applicable law with respect to such Spread Account
and any other Spread Account and agreeing, and the Collateral Agent by
its execution of this Agreement hereby agrees, to notify the
Transferor, the Collateral Agent, and each Secured Party of any charge
or claim against or with respect to such Spread Account. The Collateral
Agent shall give the Transferor and each Secured Party at least ten
(10) Business Days' prior written notice of any change in the location
of such Spread Account or in any related account information. If the
Collateral Agent changes the location of any Spread Account, it shall
change the location of the other Spread Accounts, so that all Spread
Accounts shall at all times be located at the same depository
institution. Anything herein to the contrary notwithstanding, unless
otherwise consented to by the Controlling
Party in writing, the Collateral Agent shall have no right to change
the location of any Spread Account.
(b) Upon the written request of the Controlling Party or the
Transferor, the Collateral Agent shall cause, at the expense of the
Transferor, the depository institution at which any Spread Account is
located to forward to the requesting party copies of all monthly
account statements for such Spread Account.
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(c) If at any time any Spread Account ceases to be an
Eligible Account, the Collateral Agent shall notify the Controlling
Party of such fact and shall establish within five (5) Business Days
of such determination in accordance with paragraph (a) of this
Section, a successor Spread Account thereto, which shall be an
Eligible Account, at another depository institution or trust company
acceptable to the Controlling Party and shall establish successor
Spread Accounts with respect to all other Spread Accounts, each of
which shall be an Eligible Account at the same depository institution.
The Transferor shall cause such depository institution to execute a
written agreement under terms provided for in paragraph (a) of this
Section.
(d) No passbook, certificate of deposit or other similar
instrument evidencing a Spread Account shall be issued, and all
contracts, receipts and other papers, if any, governing or evidencing
a Spread Account shall be held by the Collateral Agent.
Section 3.05. Reports by the Collateral Agent. The Collateral
Agent shall report to the Transferor, Financial Security, the Trustee
and the Master Servicer on a monthly basis no later than each
Distribution Date with respect to the amount on deposit in each Spread
Account and the identity of the investments included therein as of the
last day of the related Monthly Period, and shall provide accountings
of deposits into and withdrawals from the Spread Accounts, and of the
investments made therein, upon the request of the Transferor,
Financial Security or the Master Servicer.
ARTICLE IV.
THE COLLATERAL AGENT
Section 4.01. Appointment and Powers. Subject to the terms
and conditions hereof, each of the Secured Parties hereby appoints
Harris Trust and Savings Bank as the Collateral Agent with respect to
the Series 1995-1 Collateral and the related Collateral subsequently
specified in a Series Supplement, and Harris Trust and Savings Bank
hereby accepts such appointment and agrees to act as Collateral Agent
with respect to the Series 1995-1 Collateral, and upon execution of
any Series Supplement, shall be deemed to accept such appointment, and
agree to act as Collateral Agent with respect to such Collateral, in
each case, for the Secured Parties, to maintain custody and possession
of such Collateral (except as otherwise provided hereunder) and to
perform the other duties of the Collateral Agent in accordance with
the provisions of this Agreement. Each Secured Party hereby authorizes
the 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 Collateral Agent by the terms hereof, together
with such actions, rights, remedies, powers and privileges as are
reasonably incidental thereto. The Collateral Agent shall act upon and
in compliance with the written instructions of the Controlling Party
delivered pursuant to this Agreement promptly following receipt of
such written instructions; provided, however, that the Collateral
Agent shall not act in accordance
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with any instructions (i) which are not authorized by, or in
violation of the provisions of, this Agreement, (ii) which are in
violation of any applicable law, rule or regulation or (iii) for
which the Collateral Agent has not received reasonable indemnity.
Receipt of such instructions shall not be a condition to the
exercise by the Collateral Agent of its express duties hereunder,
except where this Agreement provides that the Collateral Agent is
permitted to act only following and in accordance with such instructions.
Section 4.02. Performance of Duties. The Collateral Agent
shall have no duties or responsibilities except those expressly set
forth in this Agreement and the other Transaction Documents to which
the Collateral Agent is a party as Collateral Agent or as directed by
the Controlling Party in accordance with this Agreement. The
Collateral Agent shall not be required to take any discretionary
actions hereunder except at the written direction and with the
indemnification of the Controlling Party.
Section 4.03. Limitation on Liability. Neither the Collateral
Agent nor any of its directors, officers or employees, shall be liable
for any action taken or omitted to be taken by it or them hereunder,
or in connection herewith, except that the Collateral Agent shall be
liable for its gross negligence, bad faith or willful misconduct; nor
shall the Collateral Agent be responsible for the validity,
effectiveness, value, sufficiency or enforceability against the
Transferor of this Agreement or any of the Collateral (or any part
thereof). Notwithstanding any term or provision of this Agreement, the
Collateral Agent shall incur no liability to the Transferor or the
Secured Parties for any action taken or omitted by the Collateral
Agent in connection with the Collateral, except for the negligence,
bad faith or willful misconduct on the part of the Collateral Agent,
and, further, shall incur no liability to the Secured Parties except
for negligence, bad faith or willful misconduct in carrying out its
duties to the Secured Parties. Subject to Section 4.04 hereof, the
Collateral Agent shall be protected and shall incur no liability to
any such party in 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 Collateral Agent to be genuine and to have been duly
executed by the appropriate signatory, and (absent actual knowledge to
the contrary) the Collateral Agent shall not be required to make any
independent investigation with respect thereto. The 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 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
written advice of such counsel. The Collateral Agent shall not be
under any obligation to exercise any of the remedial rights or powers
vested in it by this Agreement or to follow any direction from the
Controlling Party unless it shall have received reasonable security or
indemnity satisfactory to the Collateral Agent against the costs,
expenses and liabilities which might be incurred by it in the exercise
thereof.
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Section 4.04. Reliance upon Documents. In the absence of
negligence, bad faith or willful misconduct on its part, the
Collateral Agent shall be entitled to conclusively rely 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 reliance
upon any statement or opinion contained in any such document or
instrument.
Section 4.05. Successor Collateral Agent.
(a) Merger. Any Person into which the 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
Collateral Agent is a party, shall (provided it is otherwise qualified
to serve as the Collateral Agent hereunder) be and become a successor
Collateral Agent hereunder and be vested with all of the title to and
interest in the 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 Secured Parties in the
Collateral.
(b) Resignation. The Collateral Agent and any successor
Collateral Agent may resign only (i) upon a determination that by
reason of a change in legal requirements, the performance of its
duties under this Agreement would cause it to be in violation of such
legal requirements in a manner which would result in a material
adverse effect on the Collateral Agent, and the Controlling Party does
not elect to waive the Collateral Agent's obligation to perform those
duties which render it legally unable to act or elect to delegate
those duties to another Person, or (ii) with the prior written consent
of the Controlling Party. The Collateral Agent shall give not less
than 60 days' prior written notice of any such permitted resignation
by registered or certified mail to the other Secured Party and the
Transferor; provided, that such resignation shall take effect only
upon the date which is the latest of (i) the effective date of the
appointment of a successor Collateral Agent and the acceptance in
writing by such successor Collateral Agent of such appointment and of
its obligation to perform its duties hereunder in accordance with the
provisions hereof, (ii) delivery of the Collateral to such successor
to be held in accordance with the procedures specified in Article II
hereof, and (iii) receipt by the Controlling Party of an Opinion of
Counsel to the effect described in Section 5.02 hereof.
Notwithstanding the preceding sentence, if, by the contemplated date
of resignation specified in the written notice of resignation
delivered as described above, no successor Collateral Agent or
temporary successor Collateral Agent has been appointed Collateral
Agent or becomes the Collateral Agent pursuant to subsection (d)
hereof, the resigning Collateral Agent may petition a court of
competent jurisdiction in New York, New York for the appointment of a
successor.
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(c) Removal. The Collateral Agent may be removed by the
Controlling Party at any time, with or without cause, by an instrument
or concurrent instruments in writing delivered to the Collateral
Agent, the other Secured Party and the Transferor. A temporary
successor may be removed at any time to allow a successor 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 Collateral Agent and the acceptance in
writing by such successor Collateral Agent of such appointment and of
its obligation to perform its duties hereunder in accordance with the
provisions hereof, (ii) delivery of the Collateral to such successor
to be held in accordance with the procedures specified in Article II
hereof and (iii) receipt by the Controlling Party of an Opinion of
Counsel to the effect described in Section 5.02 hereof.
(d) Acceptance by Successor. The Controlling Party shall have
the sole right to appoint each successor Collateral Agent. Every
temporary or permanent successor Collateral Agent appointed hereunder
shall execute, acknowledge and deliver to its predecessor and to each
Secured Party and the Transferor an instrument in writing accepting
such appointment hereunder and the relevant predecessor shall execute,
acknowledge and deliver such other documents and instruments as will
effectuate the delivery of all Collateral to the successor Collateral
Agent to be held in accordance with the procedures specified in
Article II hereof, 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 Secured Party or the Transferor, 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 Transferor or a Secured
Party is reasonably required by a successor 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 Collateral Agent, any and all such written
instruments shall, at the request of the temporary or permanent
successor Collateral Agent, be forthwith executed, acknowledged and
delivered by the Transferor. The designation of any successor
Collateral Agent and the instrument or instruments removing any
Collateral Agent and appointing a successor hereunder, together with
all other instruments provided for herein, shall be maintained with
the records relating to the Collateral and, to the extent required by
applicable law, filed or recorded by the successor Collateral Agent in
each place where such filing or recording is necessary to effect the
transfer of the Collateral to the successor Collateral Agent or to
protect or continue the perfection of the security interests granted
hereunder.
(e) Any resignation or removal of a Collateral Agent and
appointment of a successor Collateral Agent shall be effected with
respect to this Agreement and all Series Supplements simultaneously,
so that at no time is there more than one Collateral Agent acting
hereunder and under all Series Supplements.
Section 4.06. Indemnification. The Transferor shall indemnify
the Collateral Agent, its directors,
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officers, employees and agents for, and hold the Collateral Agent, its
directors, officers, employees and agents harmless against, any loss,
liability or expense (including the costs and expenses of defending against
any claim of liability) arising out of or in connection with the Collateral
Agent's acting as Collateral Agent hereunder, except such loss, liability
or expense as shall result from the negligence, bad faith or willful
misconduct of the Collateral Agent or its officers or agents. The
obligation of the Transferor under this Section shall survive the
termination of this Agreement and the resignation or removal of the
Collateral Agent. The Collateral Agent covenants and agrees that the
obligations of the Transferor hereunder and under Section 4.07 hereof
shall be limited to the extent provided in Section 2.08 hereof, and
further covenants not to take any action to enforce its rights to
indemnification hereunder with respect to the Transferor and to payment
under Section 4.07 hereof except in accordance with the provisions of
Section 8.05 hereof, or otherwise to assert any Lien or take any other
action in respect of the Collateral or the Trust Estate of a Series
until the applicable Final Termination Date.
Section 4.07. Compensation and Reimbursement. The Transferor
agrees for the benefit of the Secured Parties and as part of the
Secured Obligations (a) to pay to the Collateral Agent, on each
Distribution Date, the Collateral Agent Fee for all services rendered
by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a collateral
trustee); and (b) to reimburse the Collateral Agent upon its request
for all reasonable expenses, disbursements and advances incurred or
made by the Collateral Agent in accordance with any provision of,
or carrying out its duties and obligations under, this Agreement
(including the reasonable compensation and fees and the expenses and
disbursements of its agents, any independent certified public
accountants and independent counsel), except any expense, disbursement
or advances as may be attributable to negligence, bad faith or willful
misconduct on the part of the Collateral Agent.
Section 4.08. Representations and Warranties of the Collateral
Agent. The Collateral Agent represents and warrants to the Transferor and to
each Secured Party as follows:
(a) Due Organization. The Collateral Agent is an Illinois
banking corporation, duly organized, validly existing and in good
standing under the laws of Illinois and is duly authorized and
licensed under applicable law to conduct its business as presently
conducted.
(b) Corporate Power. The Collateral Agent has all requisite right,
power andauthority to execute and deliver this Agreement and to perform all of
its duties as Collateral Agent hereunder.
(c) Due Authorization. The execution and delivery by the
Collateral Agent of this Agreement and the other Transaction Documents
to which it is a party, and the performance by the Collateral Agent of
its duties hereunder and thereunder, have been duly authorized by all
necessary corporate proceedings and no further approvals or filings,
including any governmental approvals, are required for the valid
execution and delivery by the Collateral Agent, or the performance by
the Collateral Agent, of this Agreement and such other Transaction
Documents.
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(d) Valid and Binding Agreement. The Collateral Agent has
duly executed and delivered this Agreement and each other Transaction
Document to which it is a party, and each of this Agreement and each
such other Transaction Document constitutes the legal, valid and
binding obligation of the Collateral Agent, enforceable against the
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 4.09. Waiver of Setoffs. The Collateral Agent hereby
expressly waives any and all rights of setoff that the Collateral
Agent may otherwise at any time have under applicable law with respect
to any Spread Account and agrees that amounts in the Spread Accounts
shall at all times be held and applied solely in accordance with the
provisions hereof.
Section 4.10. Control by the Controlling Party. The
Collateral Agent shall comply with notices and instructions given by
the Transferor only if accompanied by the written consent of the
Controlling Party, except that if any Default shall have occurred and
be continuing, the Collateral Agent shall act upon and comply with
notices and instructions given by the Controlling Party alone in the
place and stead of the Transferor.
ARTICLE V.
COVENANTS OF THE TRANSFEROR
Section 5.01. Preservation of Collateral. Subject to the
rights, powers and authorities granted to the Collateral Agent and the
Controlling Party in this Agreement, the Transferor shall take such
action as is necessary and proper with respect to the Collateral in
order to preserve and maintain such Collateral and to cause (subject
to the rights of the Secured Parties) the Collateral Agent to perform
its obligations with respect to such Collateral as provided herein.
The Transferor will do, execute, acknowledge and deliver, or cause to
be done, executed, acknowledged and delivered, such instruments of
transfer or take such other steps or actions as may be necessary, or
required by the Controlling Party, to perfect the Security Interests
granted hereunder in the Collateral, to ensure that such Security
Interests rank prior to all other Liens and to preserve the priority
of such Security Interests and the validity and enforceability
thereof. Upon any delivery or substitution of Collateral, the
Transferor shall be obligated to execute such documents and perform
such actions as are necessary to create in the Collateral Agent for
the benefit of the Secured Parties a valid first Lien on, and valid
and perfected, first priority security interest in, the Collateral so
delivered and to deliver such Collateral to the Collateral Agent, free
and clear of any other Lien, together with satisfactory assurances
thereof, and to pay any reasonable costs incurred by any of the
Secured Parties or the Collateral Agent (including its agents) or
otherwise in connection with such delivery.
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Section 5.02. Opinions as to Collateral. Not more than 90
days nor less than 30 days prior to (i) each anniversary of the date
hereof during the term of this Agreement and (ii) each date on which
the Transferor proposes to take any action contemplated by Section
5.06 hereof, the Transferor shall, at its own cost and expense,
furnish to each Secured Party and the Collateral Agent an Opinion of
Counsel with respect to each Series either (a) stating that, in the
opinion of such counsel, such action has been taken with respect to
the execution and filing of any financing statements and continuation
statements and other actions as are necessary to perfect, maintain and
protect the lien and security interest of the Collateral Agent (and
the priority thereof), on behalf of the Secured Parties, with respect
to such Collateral against all creditors of, and purchasers from, the
Transferor and reciting the details of such action, or (b) stating
that, in the opinion of such counsel, no such action is necessary to
maintain such perfected lien and security interest. Such Opinion of
Counsel shall further describe each execution and filing of any
financing statements and continuation statements and such other
actions as will, in the opinion of such counsel, be required to
perfect, maintain and protect the lien and security interest of the
Collateral Agent, on behalf of the Secured Parties, with respect to
such Collateral against all creditors of, and purchasers from, the
Transferor for a period, specified in such Opinion, continuing until
a date not earlier than eighteen months from the date of such Opinion.
Section 5.03. Notices. In the event that the Transferor
acquires knowledge of the occurrence and continuance of any Insurance
Agreement Event of Default or Servicer Default or of any event of
default or like event, howsoever described or called, under any of the
Transaction Documents, the Transferor shall immediately give notice
thereof to the Collateral Agent and each Secured Party.
Section 5.04. Waiver of Stay or Extension Laws; Marshalling
of Assets. The Transferor covenants, to the fullest extent permitted
by applicable law, that it will not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of,
any appraisement, valuation, stay, extension or redemption law
wherever enacted, now or at any time hereafter in force, in order to
prevent or hinder the enforcement of this Agreement or any absolute
sale of the Collateral or any part thereof, or the possession thereof
by any purchaser at any sale under Article VII of this Agreement; and
the Transferor, to the fullest extent permitted by applicable law, for
itself and all who may claim under it, hereby waives the benefit of
all such laws, and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Collateral Agent, but
will suffer and permit the execution of every such power as though no
such law had been enacted. The Transferor, for itself and all who may
claim under it, waives, to the fullest extent permitted by applicable
law, all right to have the Collateral marshalled upon any foreclosure
or other disposition thereof.
Section 5.05. Noninterference, etc. The Transferor shall not
(i) waive or alter any of its rights under the Collateral (or any
agreement or instrument relating thereto) without the prior written
consent of the Controlling Party; or (ii) fail to pay any tax, assessment,
charge or fee levied or assessed against the Collateral, or to defend any
action, if such failure to pay
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or defend may adversely affect the priority or enforceability of the
Transferor's right, title or interest in and to the Collateral or the Collateral
Agent's lien on, and security interest in, the Collateral for the benefit of the
Secured Parties; or (iii) take any action, or fail to take any action, if such
action or failure to take action would interfere with the enforcement of any
rights under the Transaction Documents.
Section 5.06. Transferor Changes.
(a) Change in Name, Structure, etc. The Transferor shall not
change its name, identity or corporate structure unless it shall have
given each Secured Party and the Collateral Agent at least 60 days'
prior written notice thereof, shall have effected any necessary or
appropriate assignments or amendments thereto and filings of financing
statements or amendments thereto, and shall have delivered to the
Collateral Agent and each Secured Party an Opinion of Counsel of the
type described in Section 5.02 hereof.
(b) Relocation of the Transferor. Neither NAFCO nor the
Transferor shall change its principal executive office unless it gives
each Secured Party and the Collateral Agent at least 90 days, prior
written notice of any relocation of its principal executive office. If
the Transferor relocates its principal executive office or principal
place of business from Florida, the Transferor shall give prior notice
thereof to the Controlling Party and the Collateral Agent and shall
effect whatever appropriate recordations and filings are necessary and
shall provide an Opinion of Counsel to the Controlling Party and the
Collateral Agent, to the effect that, upon the recording of any
necessary assignments or amendments to previously-recorded assignments and
filing of any necessary amendments to the previously filed financing or
continuation statements or upon the filing of one or more specified new
financing statements, and the taking of such other actions as may be
specified in such opinion, the security interests in the Collateral shall
remain, after such relocation, valid and perfected.
ARTICLE VI.
CONTROLLING PARTY; INTERCREDITOR PROVISIONS
Section 6.01. Appointment of Controlling Party. From and
after the Closing Date of a Series until the Insurer Termination Date
related to such Series, Financial Security shall be the Controlling
Party with respect to such Series and shall be entitled to exercise
all the rights given the Controlling Party hereunder with respect to
such Series. From and after the Insurer Termination Date related to
such Series until the Trustee Termination Date related to such Series,
the Trustee shall be the Controlling Party with respect to such
Series. Notwithstanding the foregoing, in the event that a Financial
Security Default shall have occurred and be continuing, the Trustee
shall be the Controlling Party with respect to such Series until the
applicable Trustee Termination Date. If prior to an Insurer
Termination Date, the Trustee shall have become the Controlling Party
with respect to a Series as a result
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of the occurrence of a Financial Security Default and either such
Financial Security Default is cured or for any other reason ceases
to exist or the Trustee Termination Date with respect to a Series occurs,
then upon such cure or other cessation or on such Trustee Termination
Date, as the case may be, Financial Security shall, upon notice thereof
being duly given to the Collateral Agent, again be the Controlling Party
with respect to such Series.
Section 6.02. Controlling Party's Authority.
(a) The Transferor hereby irrevocably appoints the
Controlling Party, and any successor to the Controlling Party
appointed pursuant to Section 6.01 hereof, its true and lawful
attorney, with full power of substitution, in the name of the
Transferor, the Secured Parties or otherwise, at the expense of the
Transferor, to the extent permitted by law to exercise, at any time
and from time to time while any Insurance Agreement Event of Default
has occurred and is continuing, any or all of the following powers
with respect to all or any of the Collateral related to the
relevant Series: (i) to demand, sue for, collect, receive and
give acquittance for any and all monies due or to become due upon
or by virtue thereof, (ii) to settle, compromise, compound, prosecute
or defend any action or proceeding with respect thereto, (iii) to
sell, transfer, assign or otherwise deal with the same or the proceeds
thereof as fully and effectively as if the Collateral Agent were
the absolute owner thereof, and (iv) to extend the time of payment
of any or all thereof and to make any allowance or other adjustments
with respect thereto.
(b) With respect to each Series of Certificates and the
related Collateral, each Secured Party hereby irrevocably and
unconditionally constitutes and appoints the Controlling Party with
respect to such Series, and any successor to such Controlling Party
appointed pursuant to Section 6.01 hereof from time to time, as the
true and lawful attorney-in-fact of such Secured Party for so long as
such Secured Party is the Non-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 Secured Party such acts, things and deeds for and on behalf of
and in the name of such Secured Party under this Agreement with
respect to such Series which such 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, without limitation, exercise full right, power and authority to
take, or defer from taking, any and all acts with respect to the
administration of the Collateral related to such Series, and the
enforcement of the rights of the Secured Parties hereunder with
respect to such Series, on behalf of and for the benefit of such
Controlling Party and such Non- Controlling Party, as their interests
may appear.
Section 6.03. Rights of Secured Parties. With respect to each
Series of Certificates and the related Collateral, the Non-Controlling
Party at any time expressly agrees that it shall not assert any rights
that it may otherwise have, as a Secured Party with respect to the
Collateral, to direct the maintenance, sale or other disposition of
the Collateral or any portion thereof, notwithstanding the occurrence
and continuance of any Insurance Agreement Event
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of Default or Servicer Default with respect to such Series or any
non-performance by the Transferor of any obligation owed to such
Secured Party hereunder or under any other Transaction Document, and
each party hereto agrees that the Controlling Party shall be the only
Person entitled to assert and exercise such rights.
Section 6.04. Degree of Care.
(a) Controlling Party. Notwithstanding any term or provision
of this Agreement, the Controlling Party shall incur no liability to
the Transferor for any action taken or omitted by the Controlling
Party in connection with the Collateral, except for any gross
negligence, bad faith or willful misconduct on the part of the
Controlling Party and, further, shall incur no liability to the
Non-Controlling Party except for a breach of the terms of this
Agreement or for gross negligence, bad faith or willful misconduct in
carrying out its duties, if any, to the Non-Controlling Party. The
Controlling Party shall be protected and shall incur no liability
to any such party in relying upon the accuracy, acting in reliance
upon the contents and assuming the genuineness of any notice, demand,
certificate, signature, instrument or other document believed by the
Controlling Party to be genuine and to have been duly executed by the
appropriate signatory, and (absent manifest error or actual knowledge
to the contrary) the Controlling Party shall not be required to make
any independent investigation with respect thereto. The Controlling
Party shall, at all times, be free independently to establish to its
reasonable satisfaction the existence or nonexistence, as the case
may be, of any fact the existence or nonexistence of which shall be
a condition to the exercise or enforcement of any right or remedy
under this Agreement or any of the Transaction Documents.
(b) The Non-Controlling Party. The Non-Controlling Party shall
not be liable to the Transferor for any action or failure to act by the
Controlling Party or the Collateral Agent in exercising, or failing to
exercise, any rights or remedies hereunder.
ARTICLE VII.
REMEDIES UPON DEFAULT
Section 7.01. Remedies upon a Default. If a Default with
respect to a Series has occurred and is continuing, the Collateral
Agent shall, at the written direction of the Controlling Party, take
whatever action at law or in equity as may appear necessary or
desirable in the judgment of the Controlling Party to collect and
satisfy all Secured Obligations, including, but not limited to,
foreclosure upon the Collateral and all other rights available to
secured parties under applicable law or to enforce performance and
observance of any obligation, agreement or covenant under any of the
Transaction Documents related to such Series.
Section 7.02. Waiver of Default. The Controlling Party shall
have the sole right, to be exercised in its complete discretion, to
waive any Default by a writing setting forth the
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terms, conditions and extent of such waiver signed by the Controlling
Party and delivered to the Collateral Agent, the other Secured Party
and the Transferor. Any such waiver shall be binding upon the
Non-Controlling Party and the Collateral Agent. Unless such writing
expressly provides to the contrary, any waiver so granted shall
extend only to the specific event or occurrence which gave rise to
the Default so waived and not to any other similar event or
occurrence occurring subsequent to the date of such waiver.
Section 7.03. Restoration of Rights and Remedies. If the
Collateral Agent has instituted any proceeding to enforce any right or
remedy under this Agreement, and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to such
Collateral Agent, then and in every such case the Transferor, the
Collateral Agent and each of the Secured Parties 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 Secured Parties shall continue as though no such
proceeding had been instituted.
Section 7.04. No Remedy Exclusive. No right or remedy herein
conferred upon or reserved to the Collateral Agent, the Controlling
Party or either of the Secured Parties is intended to be exclusive of
any other right or remedy, and every right or 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,
in equity or otherwise (but, in each case, shall be subject to the
provisions of this Agreement limiting such remedies), and each and
every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time and as often and
in such order as may be deemed expedient by the Controlling Party, and
the exercise of or the beginning of the exercise of any right or power
or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power or
remedy.
ARTICLE VIII.
MISCELLANEOUS
Section 8.01. Further Assurances. Each party hereto shall
take such action and deliver such instruments to any other party
hereto, in addition to the actions and instruments specifically
provided for herein, as may be reasonably requested or required to
effectuate the purpose or provisions of this Agreement or to confirm
or perfect any transaction described or contemplated herein.
Section 8.02. Waiver. Any waiver by any party of any
provision of this Agreement or any right, remedy or option hereunder
shall only prevent and estop such party from thereafter enforcing such
provision, right, remedy or option if such waiver is given in writing
and only as to the specific instance and for the specific purpose for
which such waiver was given. The failure or refusal of any party
hereto to insist in any one or more
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instances, or in a course of dealing, upon the strict performance of
any of the terms or provisions of this Agreement by any party hereto
or the partial exercise of any right, remedy or option hereunder shall
not be construed as a waiver or relinquishment of any such term or
provision, but the same shall continue in full force and effect.
Section 8.03. Amendments, Waivers. No amendment,
modification, waiver or supplement to this Agreement or any provision
of this Agreement shall in any event be effective unless the same
shall have been made or consented to in writing by each of the parties
hereto and each Rating Agency shall have confirmed in writing that
such amendment will not cause a reduction or withdrawal of a rating on
any Series; provided, however, that, for so long as Financial Security
shall be the Controlling Party with respect to a Series, amendments,
modifications, waivers or supplements hereto relating to such Series,
the related Collateral or Spread Account or any requirement hereunder
to deposit or retain any amounts in such Spread Account or to
distribute any amounts therein as provided in Section 3.03 hereof
shall be effective if made or consented to in writing by Financial
Security, the Transferor, NAFCO 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) but
shall in no circumstances require the consent of the Trustee or the
Certificateholders related to such Series or any other Series.
Section 8.04. Severability. In the event that any provision
of this Agreement or the application thereof to any party hereto or to
any circumstance or in any jurisdiction governing this Agreement
shall, to any extent, be invalid or unenforceable under any applicable
statute, regulation or rule of law, then such provision shall be
deemed inoperative to the extent that it is invalid or unenforceable,
and the remainder of this Agreement, and the application of any such
invalid or unenforceable provision to the parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby nor shall the same affect
the validity or enforceability of any other provision of this
Agreement. The parties hereto further agree that the holding by any
court of competent jurisdiction that any remedy pursued by the
Collateral Agent, or any of the Secured Parties, hereunder is
unavailable or unenforceable shall not affect in any way the ability
of the Collateral Agent or any of the Secured Parties to pursue any
other remedy available to it or them (subject, however, to the
provisions of this Agreement limiting such remedies).
Section 8.05. Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, each of the parties hereto agrees that
it shall not, prior to one year and one day after the Final Scheduled
Distribution Date with respect to each Series, acquiesce, petition or
otherwise invoke or cause the Transferor or the Trust to invoke the
process of the United States of America, any State or other political
subdivision thereof or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government for the purpose of commencing or sustaining a case by or
against the Transferor or the Trust under a Federal or state
bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the
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Transferor or the Trust or all or any part of its property or assets
or ordering the winding up or liquidation of the affairs of the
Transferor or the Trust. The parties agree that damages will be an
inadequate remedy for breach of this covenant and that this covenant
may be specifically enforced.
Section 8.06. Notices. All notices, demands, certificates,
requests and communications hereunder ("notices") shall be in writing
and shall be effective (a) upon receipt when sent through the U.S.
mails, registered or certified mail, return receipt requested, postage
prepaid, with such receipt to be effective the date of delivery
indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally
delivered to an Authorized Officer of the party to which sent, or
(d) on the date transmitted by legible telecopier transmission with
a confirmation of receipt, in all cases addressed to the recipient as follows:
(i) If to the Transferor:
National Financial Auto Funding Trust
c/o The Chase Manhattan Bank (USA)
802 Delaware Avenue
Wilmington, Delaware 19801
Attention: Corporate Trust Administration
Telecopier No.: (302) 575-5467
with a copy to:
The Chase Manhattan Bank (USA)
c/o The Chase Manhattan Bank, N.A.
4 Chase Metrotech Center
Brooklyn, New York 11242
Attention: Corporate Trust Administration
Telecopier No.: (718) 242-3529
(ii) If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Telecopier No.: (212) 339-3518
(212) 339-3529
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(in each case in which notice or other communication
to Financial Security refers to a Default or a claim
on the Policy or in which failure on the part of
Financial Security to respond shall be deemed to
constitute consent or acceptance, then with a copy to
the attention of the Senior Vice President
Surveillance)
(iii) If to the Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Attention: Indenture Trust Division
Telecopier No.: (312) 461-3525
(iv) If to the Collateral Agent:
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Attention: Indenture Trust Division
Telecopier No.: (312) 461-3525
(v) If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Telecopier No.: (212) 553-0344
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Group
26 Broadway
New York, New York 10004
Telecopier No.: (212) 208-1582
A copy of each notice given hereunder to any party hereto shall also
be given to (without duplication) Financial Security, the Transferor,
the Trustee and the Collateral Agent. Each
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party hereto may, by notice given in accordance herewith to each of
the other parties hereto, designate any further or different address
to which subsequent notices shall be sent.
Section 8.07. Term of this Agreement. This Agreement shall
take effect on the Closing Date of the Series 1995-1 Certificates and
shall continue in effect until the last Final Termination Date to
occur with respect to each Series. On such Final Termination Date,
this Agreement shall terminate, all obligations of the parties
hereunder shall cease and terminate and the Collateral, if any, held
hereunder and not to be used or applied in discharge of any
obligations of the Transferor or NAFCO in respect of the Secured
Obligations or otherwise under this Agreement, shall be released
to and in favor of the Transferor, provided that the provisions
of Sections 4.06, 4.07 and 8.05 hereof shall survive any termination
of this Agreement and the release of any Collateral upon such
termination.
Section 8.08. Assignments, Third-Party Rights; Reinsurance.
(a) This Agreement shall be a continuing obligation of the
parties hereto and shall (i) be binding upon the parties and their
respective successors and assigns, and (ii) inure to the benefit of
and be enforceable by each Secured Party and the Collateral Agent, and
by their respective successors, transferees and assigns. Neither the
seller nor NAFCO may assign this Agreement, or delegate any of its
duties hereunder, without the prior written consent of the Controlling
Party.
(b) Financial Security shall have the right (unless a
Financial Security Default shall have occurred and be continuing) to
give participations in its rights under this Agreement and to enter
into contracts of reinsurance with respect to any Policy issued in
connection with a Series of Certificates and each such participant or
reinsurer shall be entitled to the benefit of any representation,
warranty, covenant and obligation of each party (other than Financial
Security) hereunder as if such participant or reinsurer was a party
hereto and, subject only to such agreement regarding such reinsurance
or participation, shall have the right to enforce the obligations of
each such other party directly hereunder; provided, however, that no
such reinsurance or participation agreement or arrangement shall
relieve Financial Security of its obligations hereunder, under the
Transaction Documents to which it is a party or under any such Policy.
In addition, nothing contained herein shall restrict Financial
Security from assigning to any Person pursuant to any liquidity
facility or credit facility any rights of Financial Security under
this Agreement or with respect to any real or personal property or
other interests pledged to Financial Security, or in which Federal
Security has a security interest, in connection with the transactions
contemplated hereby. The terms of any such assignment or participation
shall contain an express acknowledgment by such Person of the
condition of this Section and the limitations of the rights of
Financial Security hereunder.
Section 8.09. Consent of Controlling Party. In the event that
the Controlling Party's consent is required under the terms hereof or
under the terms of any Transaction Document, it is understood and
agreed that, except as otherwise provided expressly herein, the
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determination whether to grant or withhold such consent shall be made
solely by the Controlling Party in its sole discretion.
Section 8.10. Trial by Jury Waived. Each of the parties
hereto waives, to the fullest extent permitted by law, any right it
may have to a trial by jury in respect of any litigation arising
directly or indirectly out of, under or in connection with this
Agreement, any of the other Transaction Documents or any of the
transactions contemplated hereunder or thereunder. Each of the
parties hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise,
that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it has
been induced to enter into this Agreement and the other Transaction
Documents to which it is a party, by among other things, this waiver.
Section 8.11. Governing Law. This Agreement shall be governed
by and construed, and the obligations, rights and remedies of the
parties hereunder shall be determined, in accordance with the laws of
the State of New York.
Section 8.12. Consents to Jurisdiction. Each of the parties
hereto irrevocably submits to the jurisdiction of the United States
District Court for the Southern District of New York, any court in the
state of New York located in the city and county of New York, and any
appellate court from any thereof, in any action, suit or proceeding
brought against it and related to or in connection with this
Agreement, the other Transaction Documents or the transactions
contemplated hereunder or thereunder or for recognition or enforcement
of any judgment and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such suit or
action or proceeding may be heard or determined in such New York State
court or, to the extent permitted by law, in such federal court. Each
of the parties hereto agrees that a final judgment in any such action,
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided
by law. To the extent permitted by applicable law, each of the parties
hereby waives and agrees not to assert by way of motion, as a defense
or otherwise in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such courts, that the
suit, action or proceeding is brought in an inconvenient forum, that
the venue of the suit, action or proceeding is improper or that this
Agreement or any of the other Transaction Documents or the subject
matter hereof or thereof may not be litigated in or by such courts.
The Transferor hereby irrevocably appoints and designates Harris Trust
and Savings Bank, as its true and lawful attorney and duly authorized
agent for acceptance of service of legal process. The Transferor
agrees that service of such process upon such Person shall constitute
personal service of such process upon it. Subject to Section 8.05
hereof, nothing contained in this Agreement shall limit or affect the
rights of any party hereto to serve process in any other manner
permitted by law or to start legal proceedings relating to any of the
Transaction Documents against NAFCO or the Transferor or their
respective property in the courts of any jurisdiction.
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<PAGE>
Section 8.13. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) Harris Trust and
Savings Bank is executing this Agreement not in its individual
capacity but solely in its capacities as collateral agent and trustee
of the Trusts pursuant to the Pooling and Servicing Agreements and (b)
in no case whatsoever shall Harris Trust and Savings Bank be
personally liable on, or for any loss in respect of, any of the
statements, representations, warranties, covenants, agreements or
obligations of the Trust hereunder, all such liability, if any, being
expressly waived by the parties hereto.
Section 8.14. Determination of Adverse Effect. Any
determination of an adverse effect on the interest of the Secured
Parties or the Certificateholders shall be made without consideration
of the availability of funds under the Policies.
Section 8.15. Counterparts. This Agreement may be executed
in two or more counterparts by the parties hereto, and each such
counterpart shall be considered an original and all such counterparts
shall constitute one and the same instrument.
Section 8.16. Headings. The headings of sections and
paragraphs and the Table of Contents contained in this Agreement are
provided for convenience only. They form no part of this Agreement
and shall not affect its construction or interpretation.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth on the first page hereof.
NATIONAL FINANCIAL AUTO FUNDING
TRUST
By____________________________________
Name:
Title: __________________ of the
Chase Manhattan Bank (USA), as trustee for
National Financial Auto Funding Trust
FINANCIAL SECURITY ASSURANCE INC.
By____________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By___________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Collateral Agent
By___________________________________
Name:
Title:
<PAGE>
FINANCIAL GUARANTY
INSURANCE POLICY
TRUST: National Auto Finance 1995-1 Trust Policy No. 50410-N
CERTIFICATES: $38,220,000 6.36% Automobile Loan, Date of Issuance: 11/21/95
Asset-Backed Certificates
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY
GUARANTEES to the Trustee for the benefit of each Holder, subject only
to the terms of this Policy (which includes each endorsement hereto),
the full and complete payment of Guaranteed Distributions with respect
to the Certificates of the Trust referred to above.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees payment of the amount of
any distribution of principal or interest with respect to the
Certificates 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.
Payment of any amount required to be paid under this Policy will be
made following receipt by Financial Security of notice as described in
Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive distributions with respect to each Certificate held by such
Holder to the extent of any payment by Financial Security hereunder.
Except to the extent expressly modified by Endorsement No. 1 hereto,
the following terms shall have the meanings specified for all purposes
of this Policy. "Holder" means the registered owner of any Certificate
as indicated on the registration books maintained by or on behalf of
the Trustee for such purpose or, if the Certificate is in bearer form,
the Holder of the Certificate. "Trustee", "Guaranteed Distributions"
and "Term of this Policy" shall have the meanings 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.
Except to the extent expressly modified by an endorsement hereto, the
premiums paid in respect of this Policy are nonrefundable for any
reason whatsoever. This
<PAGE>
Policy may not be cancelled or revoked during the Term of this Policy.
An acceleration payment shall not be due under this Policy unless such
acceleration is at the sole option of Financial Security. 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 101NY (5/89)
2
<PAGE>
AMENDED AND RESTATED
SERVICING AGREEMENT
This Amended and Restated Servicing Agreement is
hereby made effective as of the 5th day of December 1994 by
and between World Omni Financial Corp. ("WOFC") and National
Auto Finance Company L.P. (the "Company").
RECITALS
The Company is engaged in the business of providing
financing for purchasers and lessees of motor vehicles by either
purchasing Obligations (as hereinafter defined) arising from the
retail sale or lease of motor vehicles from various motor vehicle
dealers or by providing financing for such retail sale or lease
directly to the purchaser or lessee (collectively, the "Obligations").
The Company intends to either hold these Obligations for its own
account or fund the purchase of these Obligations through third party
investors. Unless WOFC and the Company agree in writing to the
contrary, in the event third party investors purchase or obtain
security interests in the Obligations, WOFC's responsibilities
hereunder shall be to the Company to subservice the Obligations.
WOFC is engaged in the business of, among other
things, servicing loans, leases and accounts and the Company desires
to retain WOFC to provide certain accounting and collection services
and WOFC agrees to provide such services in accordance with the terms
of this Agreement.
<PAGE>
The Servicing Agreement which this Amended and
Restated Servicing Agreement amends and restates was made as of July
25, 1994 by and between WOFC and National Auto Finance Corporation.
This Servicing Agreement was amended as of September 10, 1994. On
September 10, 1994 National Auto Finance Corporation transferred to
National Auto Finance Company L.P., with the consent of WOFC, all of
its rights and obligations under the Servicing Agreement by means of a
Novation and Consent Agreement.
ARTICLE I
Definitions
1. Account or Accounts. A retail installment
contract, closed end lease agreement, security agreement, conditional
sales contract, chattel paper, chattel mortgage and related promissory
note, or any other obligation, evidencing a Borrower's obligation
arising from the bona fide sale or lease of a motor vehicle by a
dealer to a Borrower, including but not limited to all Lease Accounts
and Retail Accounts.
2. Borrower. The purchaser or lessee of a motor
vehicle through an Account.
3. Business Day. A day other than a Saturday,
Sunday, or a day on which the executive offices of WOFC are
closed pursuant to its published annual schedule which shall
be provided to Company pursuant to Company's request.
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<PAGE>
4. Collateral. A motor vehicle or other personal
property which is leased pursuant to an Account or which is
pledged to, or in which a security interest is granted to
secure an Account.
5. Collection Assignment. An Account which is
assigned to the collection department of WOFC in order to
attempt to contact the Borrower regarding the delinquency or
insurance requirements of the Account.
6. Company Account. The NAFCO Master Trust
Certificate Account into which are deposited amounts received by WOFC
on behalf of the Company which may include deduction of certain
amounts due WOFC pursuant to Article II, paragraph 5 of this
Agreement. The wiring address for such account is Bankers Trust ABA
021001033 Corporate Trust and Agency Group Certificate Account
#01419647 Attention: Steve Husbands; NAFCO Master Trust Certificate
Account.
7. Defaulted Account. An Account which is
delinquent in the amount of at least three regular
installment payments or which is in default of the
contractual requirement to provide insurance to cover the
Collateral and the Company has requested that the Account be
returned.
8. Delinquent Account Review. A report in either
electronic or hard copy form, at the option of WOFC, in the
form attached hereto as Exhibit "A", which shall describe
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<PAGE>
Accounts which are delinquent for a period of time agreed upon in
writing by WOFC and Company.
9. Lease Account(s). A closed end lease
agreement, or any other obligation, evidencing a Borrower's
obligation arising from the bona fide lease of a motor
vehicle by a dealer to a Borrower.
10. Loan File. With respect to any Account, the file
delivered to WOFC by the Company, which file shall contain the data
entry worksheet in a form substantially similar to Exhibit "B"
attached hereto, the Borrower application, the retail installment
sales contract, closed end lease agreement, promissory note and/or
security agreement which are related to the Account, and such other
information as the Company shall supply.
11. Retail Account(s). A retail installment
contract, security agreement, conditional sales contract, chattel
paper, chattel mortgage and related promissory note, or any other
obligation, evidencing a Borrower's obligation arising from the bona
fide sale of a motor vehicle by a dealer to a Borrower.
12. Returned Account. An Account which has been
returned to the Company by WOFC pursuant to the provisions of
Article II of this Agreement.
13. Servicing Account. A separate interest
bearing bank account, if available, established by WOFC into
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<PAGE>
which are deposited the amount of payments, including late charges and
extension fees, if any, made on the Accounts. Such interest, if any,
shall be for the benefit of the Company.
14. Servicing Fee. A monthly fee payable to WOFC
in accordance with Article V of this Agreement.
15. Title or Certificate of Title. The actual motor
vehicle title in question or the application thereof or pending
issuance of the actual title; alternatively, in those certain states
whose law requires or contemplates that the original of the actual
motor vehicle title be possessed by the Borrower, then, in lieu of the
actual title, "Title" or "Certificate of Title" shall mean such
duplicate titles, certificates or other documents as are permitted,
required and/or contemplated to be possessed by the secured party
under such state's laws and/or procedures or applications therefor
pending issuance of the appropriate document.
ARTICLE II
General Obligations of WOFC
1. Standard of Care. WOFC agrees to manage,
service and make collections on the Accounts for and on
behalf of the Company to the extent provided in the Agreement
and to otherwise perform and carry out the duties,
responsibilities and obligations that are to be performed and
carried out by WOFC under this Agreement. WOFC shall service
5
<PAGE>
the Accounts in a manner consistent with the servicing standards and
procedures generally accepted in the financial services industry for
similar accounts and as otherwise expressly provided by this
Agreement.
2. Servicing Duties. WOFC shall provide the
following services with respect to the Accounts.
a. Upon the receipt of a completed Loan File
from the Company, WOFC shall cause to be maintained for each Account
automated information including, but not limited to, (i) name and
address of the Borrower, (ii) principal balance plus earned interest
or the balance of monthly payments due, as well as any other accrued
charges of the Account, (iii) the loan number, (iv) a description of
the Collateral, (v) the monthly payment, (vi) the residual value of
the motor vehicle for Loan Files involving closed end lease
agreements, (vii) the current payment status of the Account, (viii)
each Account with respect to which WOFC has not received a Certificate
of Title for the Collateral Financed thereby in the name of or with a
first lien in favor of Company, and (ix) proof of insurance as to
Lease Accounts only, and (x) such other information concerning such
Accounts as Company may reasonably request and which is available to
WOFC at no additional cost or expense.
b. After the receipt of the Loan File, WOFC
shall mail to each Borrower a monthly billing statement in
6
<PAGE>
the forms attached to this Agreement as Exhibit C and Exhibit D for
any Account involving the sale or lease of a motor vehicle to the
Borrower.
c. WOFC shall maintain records for each
Account, which records shall include the original principal balance,
the amount of each payment applied to the Account, the date of each
payment, the interest or lease rate, and the current outstanding
principal balance. WOFC's obligation to perform its servicing duties
and maintain accurate records hereunder is limited to the accuracy and
availability of the information WOFC receives from time to time from
the Company.
d. WOFC shall provide to the Company on or
before the 10th day of each month detailed reports by investor number
including, but not limited to, the legal status of each Account, the
accounting status of each Account, and the delinquency status of each
Account. WOFC shall provide to the Company on or before the 10th day
of each month summary level reports of the above information by
investor and total Company portfolios. Said reports shall be presumed
correct and accurate unless the Company delivers to WOFC by registered
or certified mail, written objection thereto specifying the error
contained in the reports. In such event, the Company's sole and
exclusive remedy and WOFC's only liability shall be to make
appropriate adjustments in the report to make it effective as of the
date
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<PAGE>
the report is rerun, to the extent possible. For those Accounts which
are transferred to WOFC, WOFC shall provide the above reports to
Company beginning on the 10th day of the month following the month
such Accounts are completely converted and entered into WOFC's
computer system. The Company agrees and understands that until the
conversion and transfer of all Accounts to WOFC is complete, which
conversion period shall not exceed a reasonable number of days
mutually agreed to by WOFC and Company, WOFC will make best efforts to
provide the above referenced detailed reports. However, WOFC does not
guarantee the accuracy of such reports until the conversion of all
such Accounts is complete. Company agrees to pay WOFC all costs and
expenses, including but not limited to, additional fees for accounting
and technical support, incurred by WOFC for the conversion of such
Accounts.
e. WOFC shall deposit the total of all
amounts received in connection with the Accounts into the Company
Account within two Business Days of receipt. WOFC shall use reasonable
efforts to deposit such amounts within one Business Day.
f. WOFC shall report to the appropriate
credit bureaus the historical payment and default activity on
each Account.
8
<PAGE>
3. Collection of Delinquent Accounts. WOFC shall
use its standard collection practices for similar accounts to collect
past due payments, including but not limited to, automated collections
and live collector interfaces as necessary. WOFC may in its sole
discretion waive late charges, arrange deferred payment plans, grant
extensions, or make other arrangements for payment of past due
accounts, except that, unless otherwise directed in writing by the
Company, WOFC shall be permitted to extend the payment obligations of
a Borrower only two times during the life of such Borrower's
obligations to the Company. WOFC will attempt to have telephone
communication with the Borrower once the Account is 5 days delinquent,
or such other longer period as Company may instruct WOFC in writing.
WOFC shall make available to the Company, on a weekly basis a
Delinquent Account Review on all defaulted Accounts and Accounts which
in WOFC's good faith judgment, are at high risk of becoming defaulted
Accounts.
4. Returned Accounts.
a. By the 15th Business Day of each month,
or within three business days of Company's request, WOFC will send to
the Company the Loan File for each Account:
i. for which WOFC has determined, in its
good faith judgment, that all funds that are recoverable (including
recovery from liquidation of the Collateral) have
9
<PAGE>
been collected without instituting suit and/or obtaining
legal counsel; or
ii. for which insurance proceeds
representing the payment of a claim for the total destruction of the
Collateral have been applied; or
iii. which is in Default and for
which WOFC is unable to locate the Collateral;
b. WOFC may also return to the Company at any
time an Account which WOFC believes, in its good faith judgment, the
collection of which may subject WOFC or the Company to liability.
c. Except for Accounts which become Returned
Accounts pursuant to this Article II, Section Four, no other Account
shall be returned to the Company prior to its payment in full or its
classification as a Returned Account during the term of this Agreement
without the mutual consent of the Company and WOFC.
5. Repossession of Collateral. Upon the Company's
request, WOFC shall be responsible for repossessing and disposing of
Collateral at any time an Account is a Defaulted Account. WOFC may
engage subcontractors to provide services for such repossession and
disposition of Collateral. The Company agrees to pay all reasonable
expenses related to the repossession, including but not limited to, a
fee of $300.00 per repossession, and agrees that WOFC may deduct
10
<PAGE>
such expenses from the amount received by WOFC upon disposition of the
Collateral, with the balance to be paid to the Company's Account. At
Company's option, upon providing 30 days written notice to WOFC,
Company may elect to repossess the Collateral of any Account, in which
case, the $300 fee per repossession shall not apply.
6. Insurance. WOFC shall monitor each Lease Account
for insurance coverage. The expiration dates of insurance policies
shall be tracked and reminder notices sent to the Borrowers whose
insurance policies have expired. Default letters shall be sent to
Borrowers who fail to provide insurance coverage. WOFC shall notify
the Company on a monthly basis of Lease Accounts where the Borrower
fails to provide the required insurance. Under no circumstances shall
WOFC have the responsibility to keep in force a blanket policy which
provides insurance coverage.
7. Titles. WOFC will establish a procedure to
determine whether Titles are received for each Account. WOFC shall
advise the Company of any Account for which a Title is not received
within 60 days of WOFC's receipt of the Loan File. WOFC shall
diligently attempt to obtain these Titles. WOFC shall have no
obligation to determine whether Titles are received in those states
which permit the Borrower, rather than the lienholder, to have
possession of the Title. However, WOFC is not ultimately responsible
for obtaining the
11
<PAGE>
Title or ensuring that the information on the Title is accurate.
8. Reporting Requirements. WOFC will provide to the
Company such monthly reports and information as Company may reasonably
request and that WOFC may reasonably provide. At the request of the
Company WOFC will provide a copy of any report which WOFC receives
from any outside service vendor for which WOFC is not required to pay
a fee.
9. Insurance Claims. WOFC shall cooperate with the
Company in filing all insurance claims pursuant to blanket casualty
insurance and gap indemnity insurance provided by the Company
applicable to the Accounts or the Collateral, regardless of investor
status. The Company shall provide all forms and information not
included in the respective Loan File required to file each such claim.
Except for filing the claim, WOFC shall have no liability in the event
a claim is denied or not paid in full.
10. Bankruptcies. If WOFC receives a notice that a
Borrower on an Account has filed for relief under the United States
Bankruptcy Code, WOFC shall file a proof of claim and notify Company
of the bankruptcy filing. In the event that activities outside the
scope of routine bankruptcy filings and follow-up are necessary, the
Company may, at its option, instruct WOFC to hire the services of a
law firm to represent the Company in the Borrower's bankruptcy at the
12
<PAGE>
expense of Company. If WOFC must retain the services of an attorney to
file a proof of claim, Company agrees to pay all reasonable attorney
fees and costs, including all filing fees, relating to the filing of
such proof of claim. However, if Company instructs WOFC to retain the
services of a specific law firm, Company agrees to pay all attorney
fees and costs, including all filing fees, relating to the filing of
such proof of claim. Company's Payment of such attorneys fees and
costs shall be made monthly, as invoiced by WOFC, concurrently with
payment of the Servicing Fees.
11. No Other Obligations. WOFC shall not be liable
for performing any other service other than those set forth in this
Agreement. Other services which are performed by WOFC at the request
of the Company shall not be included in the Servicing Fee and the
expense of such additional services shall be paid separately to WOFC
by the Company.
ARTICLE III
General Obligations of the Company
The Company hereby agrees to undertake the
following obligations.
1. Loan Files. The Company shall provide to WOFC
the Loan Files when tendering an Account for servicing.
2. Payment of Servicing Fees and Compensation.
Company shall pay monthly by the fifteenth (15th) day of each
month the Servicing Fees as well as any other expenses or
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<PAGE>
charges due WOFC pursuant to this Agreement. Any other expenses or
charges, other than Servicing Fees and other expenses or charges due
WOFC pursuant to this Agreement, must be pre-approved in writing by
the Company.
3. Goodwill. The Company hereby acknowledges that
substantial goodwill exists with respect to the trade names "WOFC",
"World Omni Financial Corp.", or "World Omni" in the United States and
that WOFC's reputation in the financial services business is of
substantial importance to the operations of WOFC. Accordingly, the
Company agrees to use its best efforts to conduct its activities under
this Agreement in a manner that will not detract from WOFC's goodwill
and standing and will not otherwise damage the reputation of WOFC.
WOFC hereby acknowledges that substantial goodwill exists with respect
to the trade names National Auto Finance Corporation, National Auto
Finance Company L.P. and NAFCO, and that the Company's business
reputation is of substantial importance to the operations of the
Company. Accordingly, WOFC agrees to use its best efforts to conduct
its activities under this Agreement in a manner that shall not detract
from the Company's goodwill and standing and shall not otherwise
damage the reputation of the Company.
4. Marketing and Selling Interests in the
Accounts. The Company acknowledges and agrees that it is not
14
<PAGE>
an agent for WOFC and is not authorized to make representations on
behalf of WOFC and that WOFC shall have no liability for any actions
or omissions made by the Company in its marketing and selling of
interests in the Accounts or otherwise. The Company further agrees
that in its obtaining leases, loans or in its marketing and selling of
interests in or related to the Accounts it shall: (i) not make any
misrepresentations, (ii) not make any representations on behalf of
WOFC, and (iii) comply with all state and federal investment offering
and other applicable laws.
ARTICLE IV
Licensing Fees for Commuter Software
1. WOFC hereby grants Company a license to
utilize its "ACE" and "Contract Entry" computer software systems for a
fee described in paragraph 2 below so long as this Agreement remains
effective. WOFC shall have the right to immediately cancel such
license, and Company agrees to surrender such license and return any
and all software, manuals, documents, etc. relating to ACE and
Contract Entry in its possession to WOFC upon termination of this
Agreement. WOFC also agrees to provide training to Company on these
systems for a fee of $75.00 per hour. Company shall be responsible for
all computer hardware expenses, including, but not limited to all
installation charges and telephone line charges.
15
<PAGE>
2. Company agrees to pay WOFC the following fees
("Application Fees") for each credit application submitted by
Company to ACE:
Number of Credit Applications Per Month Cost Per Application
- --------------------------------------- --------------------
a) 1 through 1500 $1.90
b) 1501 - 4999 1.80
c) over 5000 1.75
Company agrees to obtain its own subscriber number from the credit
bureaus, and to pay any and all fees charged by the credit bureaus, as
well as all postage fees incurred in the mailing of the form letters
generated by the ACE system.
3. If required by the below named vendor, Company
agrees to obtain licenses for the following software systems
which are utilized by ACE and Contract Entry:
(a) Bureaulink;
(b) RL Polk verifications for vehicle
identification numbers;
(c) Vertex - verification of tax information.
4. The Application Fees and related fees and
expenses shall be paid monthly concurrently with payment of the
Servicing Fees. Company shall deposit with WOFC the amount of
$5,000.00 which amount may be drawn upon by WOFC in the event of
non-payment by Company of such Application Fees and related fees and
expenses, or any other Servicing Fees or
16
<PAGE>
other fees and expenses due WOFC under this Agreement which Company
has failed to pay for 30 days or more.
5. This Article IV may be separately terminated by
the Company upon thirty (30) days prior written notice to WOFC. In the
event the Company terminates this Article IV, WOFC shall assist the
Company with any computer system conversion. Company agrees to pay
WOFC all of WOFC's reasonable costs associated with such assistance
including, but not limited to, reasonable hourly rates of all WOFC
personnel and all out of pocket expenses incurred by WOFC.
ARTICLE V
Servicing Compensation
1. WOFC shall receive as compensation for servicing
the Retail Accounts a Servicing Fee each month equal to $12.30 per
Retail Account being serviced by WOFC during that month.
2. In the event that the number of Accounts
requiring Collection Assignment for any month exceed 30% of the total
number of Retail Accounts being serviced as of the first of that
month, WOFC shall be entitled to additional compensation of $6.00 for
each Retail Account requiring Collection Assignment which exceeds the
30% floor for that month.
3. WOFC shall receive as compensation for
servicing the Lease Accounts a Servicing Fee each month equal
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<PAGE>
to $20.65 per Lease Account being serviced by WOFC during
that month.
4. In the event that the number of Accounts
requiring collection activity for any month exceed 30% of the total
number of Lease Accounts being serviced as of the first of that month,
WOFC shall be entitled to additional compensation of $6.00 for each
Lease Account requiring collection activity which exceeds the 30%
floor for that month.
5. WOFC, or an affiliate of WOFC, shall receive
as additional compensation for repossessing and disposing of
collateral all reasonable expenses related to the
repossession, including but not limited to, a fee of $300.00
per repossession.
6. Upon the mutual agreement of Company and WOFC,
including but not limited to, mutual agreement between
Company and WOFC regarding the amount of additional compensation which
Company will pay to WOFC for legal and accounting services, WOFC
agrees to provide appropriate Collateral Schedules to Company, or to a
lender designated by Company, and to provide legal and accounting
review as to WOFC performing services as a Master Servicer, in the
event that Company desires to securitize any or all of the Accounts.
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<PAGE>
7. WOFC is granted the right of set off against any
funds of the Company held in WOFC's possession or control to pay
amounts owed to WOFC under any section of this Agreement.
ARTICLE VI
Representations and Warranties
1. Representations and Warranties of WOFC. WOFC
covenants, represents and warrants to Company as follows:
a. WOFC is a corporation duly organized,
validly existing and in good standing under the laws of the
state of Florida.
b. WOFC has the corporate power to enter into
this Agreement and to perform its obligations under this Agreement,
and the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by
all necessary corporate action of WOFC, and constitute the legal,
valid and enforceable actions of WOFC.
c. WOFC holds all material licenses,
certificates, franchises, and permits from all governmental
authorities necessary for the conduct of its business and has received
no notice of proceedings relating to the revocation of any such
license, certificate or permit, which singly or in the aggregate,
might affect the Accounts or this transaction or might materially
affect the conduct of the
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business, results of operations, net worth or condition
(financial or otherwise) of Company.
d. There are no actions, suits or proceedings
pending or, to the knowledge of WOFC, threatened against WOFC or any
of its properties or assets, at law or in equity before or by any
governmental or regulatory body, administrative agency, court or
arbitrator having jurisdiction over WOFC, which might have a material
adverse effect on the Accounts or the business or property of WOFC or
which in any way would prevent, interfere with or materially and
adversely affect the ability of WOFC to perform its duties and
obligations under this Agreement.
e. WOFC will maintain all policies of
insurance in such amounts and against such risks as is necessary and
prudent for the conduct of its business, including a blanket crime
insurance policy in an amount not less than ten million dollars. WOFC
shall deliver to Company a certificate evidencing such coverage. Such
certificate shall provide that WOFC or its broker shall provide
Company thirty (30) days advance written notice of any material change
to or cancellation of such coverage. Furthermore, WOFC agrees to
assign to Company any monies it collects under such policies which are
paid to WOFC as a result of any WOFC employee misconduct regarding
Company's Accounts.
20
<PAGE>
2. Representations and Warranties of Company.
Company covenants, represents and warrants to WOFC as
follows:
a. Company is a limited partnership duly
formed under the laws of the State of Delaware.
b. Company has all necessary power to enter
into this Agreement and to perform its obligations under this
Agreement and the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary action of Company, and constitute the
legal, valid and enforceable actions of Company.
c. Company holds all material licenses,
certificates, franchises, and permits from all governmental
authorities necessary for the conduct of its business and has received
no notice of proceedings relating to the revocation of any such
license, certificate or permit, which singly or in the aggregate,
might affect the Accounts or this transaction or might materially
affect the conduct of the business, results of operations, net worth
or condition (financial or otherwise) of Company.
d. There are no actions, suits or proceedings
pending or threatened against the Company or, to the knowledge of the
Company, any of its properties or assets, at
21
<PAGE>
law or in equity before or by any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over
the Company, which might have a material adverse effect on the
Accounts or the business or property of the Company or which in any
way would prevent, interfere with or materially and adversely affect
the ability of the Company to perform its duties and obligations under
this Agreement.
e. All information provided to WOFC by the
Company regarding any Account tendered or to be tendered to WOFC for
servicing is true and correct to the best of Company's knowledge.
f. All Accounts which are tendered by Company
to WOFC for servicing will be secured by, or involve the leasing of, a
motor vehicle, will be duly and validly authorized, executed and
delivered by the related Borrower and will constitute a legal, valid
and binding obligation of the related Borrower.
g. All Accounts tendered to WOFC by Company
for servicing will comply in all respects with all applicable State
and Federal laws and regulations, including but not limited to usury,
credit reporting, truth-in-lending, and provisions of the laws of the
state where the Account originated which pertain to the financing and
leasing of motor vehicles.
22
<PAGE>
ARTICLE VII
Indemnities
1. Indemnities by Company. (a) The Company shall
indemnify, defend and hold harmless WOFC, its parent, subsidiaries,
affiliates and the directors, officers, employees, partners, agents,
successors and assigns of each of such companies from and against any
claim, action, loss, damage, penalty, fine, cost, expense, or other
liability, including all court costs and reasonable attorneys' fees
incurred in enforcing this indemnity or defending any claim or action,
including any claims or causes of action brought by any person who
obtains an interest in or related to the Accounts, directly or
indirectly resulting from or arising out of Company's performance of
its duties under this Agreement or the Company's breach of its duties,
including without limitation, any misrepresentation or breached
warranty under this Agreement. The right of indemnification for acts
occurring during the term of this Agreement provided hereby shall
survive the termination of this Agreement. Payment of any amounts owed
under this indemnity provision are secured by and subject to set off
and application out of the payments on deposit in the Servicing
Account.
(b) It is hereby acknowledged that the Company
acquires installment contracts, evidencing Accounts in
multiple forms. It is further acknowledged that the Company
23
<PAGE>
has requested WOFC to make a distinction on its records for
differences in forms relating only to the actuarial and simple
interest methods of accounting for interest. The Company hereby
indemnifies WOFC for any claim, action, loss, damage, penalty, fine,
cost, expense or other liability sustained by WOFC as a result of
honoring such request and making no further distinction between
installment contract forms.
(c) If any legal proceeding is instituted, or if any
claim or demand is made, in respect of which indemnification may be
sought from Company hereunder, WOFC shall promptly cause written
notice thereof to be given to Company. Company shall retain at its own
expense, legal counsel of its choice (who must be reasonably
satisfactory to WOFC) who shall also represent WOFC if Company accepts
such indemnification request, and to defend against, negotiate, settle
or otherwise deal with any such proceeding, claim or demand; provided,
however, that WOFC may participate in any such proceeding with counsel
of its choice and at its expense.
2. Indemnities by WOFC. (a) WOFC shall indemnify,
defend and hold harmless the Company, its parent, subsidiaries,
affiliates, directors, officers, employees, partners, agents,
successors and assigns, respectively, as applicable, from and against
any claim, action, loss, damage,
24
<PAGE>
penalty, fine, cost, expense, or other liability, including all court
costs and reasonable attorneys' fees incurred in enforcing this
indemnity or defending any claim or action, directly or indirectly
resulting from or arising out of WOFC's performance of its duties
under this Agreement or WOFC's breach of its duties, including without
limitation any misrepresentation or breached warranty made by WOFC
under this Agreement except to the extent that any claim, action,
loss, penalty, time, cost, expense or other liability is caused as a
result of WOFC following and complying with the written specific
instructions of Company regarding the servicing of the Accounts. The
right of indemnification provided hereby shall survive the termination
of this Agreement.
(b) If any legal proceeding is instituted, or if any
claim or demand is made, in respect of which indemnification may be
sought from WOFC hereunder, Company shall promptly cause written
notice thereof to be given to WOFC. WOFC shall retain at its own
expense legal counsel of its choosing who must be reasonably
satisfactory to Company who shall also represent Company if WOFC
accepts such indemnification request and shall defend against,
negotiate, settle or otherwise deal with any such proceeding, claim or
demand; provided, however, that Company may participate in
25
<PAGE>
any such proceeding with counsel of its choice and at its expense.
ARTICLE VIII
Default
1. Events of Default. It shall be an event of
default under this Agreement upon the happening of any of the
following events (an "Event of Default"):
a. If the Company fails to timely remit to
WOFC the Servicing Compensation or other amounts due under this
Agreement which are due and payable and such failure to pay continues
for a period of ten days from the date of the mailing or delivery of
an invoice from WOFC.
b. If any representation or warranty of the
Company in this Agreement is false, incorrect or misleading in any
material respect, or if any representation or warranty contained in
any reports, documents, certificates or other papers delivered to WOFC
from time to time is false, incorrect or misleading in any material
respect, and is not cured within thirty days of written notice thereof
to the Company.
c. If the Company breaches or fails to
perform or observe any obligation or condition to be performed or
observed by it under this Agreement in any material respect and such
breach or default is not cured
26
<PAGE>
within thirty days after WOFC has given the Company written notice
demanding that such breach or default be cured;
d. If any representation or warranty of WOFC
in this Agreement is false, incorrect or misleading in any material
respect, or if any representation or warranty contained in any
reports, documents, certificates or other papers delivered to the
Company from time to time is false, incorrect or misleading in any
material respect and is not cured within thirty days of written notice
thereof to WOFC;
e. If WOFC breaches or fails to perform or
observe any obligation or condition to be performed or observed by it
under this Agreement in any material respect and such breach or
default is not cured within thirty days after the Company has given
WOFC written notice demanding that such breach or default be cured;
f. If WOFC fails, in any material respect, to
perform its obligations under this Agreement in conformance with
industry standards applicable to servicing of similar Accounts and
such failure is not cured within thirty days after the Company has
given WOFC written notice demanding such failure be cured.
2. Termination for Cause. Upon the happening of
an Event of Default, after the expiration of any opportunity
to cure such default, the non-defaulting party may terminate
this Agreement by notice in writing to the defaulting party
27
<PAGE>
sent by facsimile or certified mail, postage prepaid, or by
hand delivery.
3. Record Availability. In the event of
termination WOFC agrees to make available to the Company such
computer records as are reasonably required to effect an
orderly conversion to another computer system.
4. Limitation on Actions. All legal actions for
breach of this Agreement must be commenced within two years of the
date upon which the breach becomes known or should have been known,
but in no event to exceed the applicable statute of limitations, or be
forever barred. Both parties agree that the sole and exclusive remedy
for any matter or cause of action related directly or indirectly to
any breach of the Agreement or the matters contemplated hereunder
shall be a cause of action sounding in contract and with damages
limited to actual and direct damages incurred. Neither party shall in
any event be liable for any consequential, special, punitive,
incidental or indirect damages, including without limitation, loss of
profit or goodwill. Except as otherwise provided herein, there are no
warranties of merchantability or fitness for a particular purpose.
28
<PAGE>
ARTICLE IX
Term
This Agreement shall be effective upon the execution
and delivery hereof, and shall remain in full force and effect until
the maturity of each Account accepted by WOFC for servicing. WOFC may
terminate the acceptance of new Accounts on December 31, 1997 unless
sooner terminated as provided in the Agreement.
Notwithstanding anything to the contrary, the
Company may terminate this Agreement at any time without cause. Upon
termination of this Agreement by Company without cause and if and when
Company elects, in its sole discretion, to terminate WOFC's duties as
servicer under this Agreement with respect to any and all Accounts
transferred to WOFC by Company for servicing prior to such termination
of this Agreement, Company shall pay to WOFC the following amounts:
(i) if terminated prior to or on the
first anniversary date of the effective date of this
Agreement, the amount of Forty Thousand Dollars ($40,000.00);
(ii) if terminated after the first
anniversary date but prior to or on the second anniversary
date of this Agreement, the amount of Ten Thousand Dollars
($10,000.00); and
(iii) if terminated after the second
anniversary date but prior to or on the third anniversary
29
<PAGE>
date of this Agreement, the amount of Five Thousand Dollars
($5,000.00); and
(iv) if terminated after the third
anniversary date but prior to the fourth anniversary date of this
Agreement, the amount of Five Thousand Dollars ($5,000.00).
In the event Company terminates this Agreement
without cause, WOFC shall assist Company with any computer system
conversion. Company agrees to pay WOFC all of WOFC's reasonable costs
associated with such assistance including, but not limited to,
reasonable hourly rates of all WOFC personnel and all out-of-pocket
expenses incurred by WOFC.
ARTICLE X
General Provisions
1. Confidentiality. All information not generally
available to the public with respect to the Company and WOFC shall be
kept confidential and shall not be disclosed to third parties or used
by the recipient other than for purposes of carrying out its
obligations under this Agreement except for disclosures required by
law or required to be made to governmental agencies, disclosures to an
independent certified public accounting firm auditing the books and
records of the party, disclosures to investment banking institution,
or disclosures for which both WOFC and the Company have given written
consent. This information
30
<PAGE>
includes, but is not limited to, customer lists of the
Company.
2. Continuation of Representations and Warranties.
WOFC and Company each acknowledge and agree that the representations
and warranties given by each party in this Agreement are to be
continuing and shall remain in full force and effect throughout the
term of this Agreement and that the breach of any representation
and/or warranty shall constitute a breach of this Agreement. WOFC and
Company further agree that should any party become aware that it has
breached its representations or warranties given by it in this
Agreement, it shall give notice to the other party within 10 days of
the occurrence of such breach.
3. Company's Right of Audit. The Company shall have
the right, under this Agreement, after five days written notice to
WOFC to reasonably examine and audit, during regular business hours,
the books and records of WOFC which concern the transactions covered
by this Agreement. The Company agrees to reimburse WOFC for the costs
of conducting an audit or reviewing the books and records of WOFC.
4. Notices. Any notice to be given under this
Agreement shall be made in writing and shall be deemed to
have been duly given upon mailing of certified or registered
mail, return receipt requested, addressed as set forth below:
a. If to WOFC:
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<PAGE>
World Omni Financial Corp.
120 N.W. 12th Ave.
Deerfield Beach, Florida 33442
Attention: Frank Carstens, Vice President
with a copy to Frani DeJaco, Associate
Counsel at the above address, and a copy to,
Attention: Mike Phillips
World Omni Financial Corp.
6150 Omni Park Dr.
Mobile, Alabama 36609
b. If to Company:
National Auto Finance Corporation
621 N.W. 53rd Street, Suite 320
Boca Raton, Florida 33487
Attention: Roy Tipton, Executive Vice President
with a copy to Stacy McMillen at the above address
5. CONTROLLING LAW. THIS AGREEMENT AND ALL
QUESTIONS RELATING TO ITS VALIDITY, INTERPRETATION, PERFORMANCE AND
ENFORCEMENT, SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE
32
<PAGE>
LAWS OF THE STATE OF FLORIDA NOTWITHSTANDING ANY FLORIDA OR OTHER
CHOICE-OF-LAW RULES TO THE CONTRARY.
The parties agree to the application of Florida law
because Florida is the location of WOFC's executive and administrative
offices and such application allows for the uniform application of law
to WOFC's contracts.
6. Indulgence Not Waivers. Neither the failure nor
any delay on the part of any party to exercise any right, remedy,
power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right,
remedy, power or privilege preclude any other or further exercise of
the same or of any other right, remedy, power or privilege with
respect to any occurrence will be construed as a waiver of such right,
remedy, power or privilege with respect to any other occurrence. No
waiver shall be effective unless it is in writing and is signed by the
party asserted to have granted such waiver.
7. Provisions Separable. The provisions of this
Agreement are independent of and separable from each other,
and no provision shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason other
or others of them may be invalid or unenforceable in whole or
in part.
8. Assignment. Without Company's consent, WOFC
may assign its rights and/or obligations under this Agreement
33
<PAGE>
to a parent, subsidiary or affiliate of WOFC provided WOFC shall not
be released from this Agreement by virtue of said assignment. WOFC
shall notify the Company of any such assignment at least thirty (30)
days prior to the effective date of such assignment. Without WOFC's
consent, Company may assign all or any part of its rights and/or
obligations under this Agreement to a financial institution or trust
assisting in the securitization of the Accounts, provided Company
shall not be released from this Agreement by virtue of such
assignment. Except as set forth in this paragraph 8, neither party may
assign this Agreement or its rights hereunder without the prior
written consent of the other party.
9. Independent Contractor. WOFC undertakes to
service the Accounts and to otherwise perform and carry out the
duties, responsibilities and obligations to be performed and carried
out by it under this Agreement as an independent contractor, and
nothing herein shall be construed so as to create any partnership,
joint venture or other relationship with the Company.
10. No Third-Party Beneficiaries. This Agreement
is for the benefit of, is binding upon and may only be enforced by the
parties hereto and their respective successors and permitted assigns,
and is not for the benefit of any other person or entity and may not
be enforced by such
34
<PAGE>
third party, including but not limited to those who obtain interests
in or related to the Accounts.
11. Attorneys' Fees. Each party shall be
responsible for its own attorney fees associated with the preparation
and enforcement of this Agreement.
12. Entire Agreement. This Agreement constitutes the
entire understanding and agreement among the parties hereto with
respect to the subject matter hereof, and supersedes all prior
agreements and understandings, inducements or conditions, express or
implied, oral or written, except as expressly herein contained. This
agreement may not be modified or amended other than by an agreement in
writing executed by an authorized representative of each party at a
contemporaneous or subsequent date.
13. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed
to be an original as against any party whose signature appears
thereon, and all of which shall together constitute one and the same
instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
14. Cooperation. At any time and from time to
time on and after the date of execution of this Agreement (a)
WOFC shall at the request of the Company execute and deliver
35
<PAGE>
or cause to be executed and delivered all such documents and take or
cause to be taken all such other actions, as the Company may
reasonably deem necessary in order to carry out the terms and
provisions of this Agreement; and (b) the Company shall, at the
request of WOFC, execute and deliver or cause to be executed and
delivered such further instruments and take or cause to be taken such
further actions as WOFC may reasonably deem necessary to carry out the
terms and provisions of this Agreement.
15. Force Majeure. Neither party shall be liable to
the other, or held in breach of this Agreement if prevented, hindered,
or delayed in performance or observance of any provision contained
herein by reason of acts of God, strikes, lockouts, riots, acts of
war, epidemics, governmental action or judicial order, earthquakes,
fires, floods, or other similar cause, provided, however if WOFC is
prevented from performing under this Agreement for a period in excess
of ninety (90) days due to such cause, the Company may, in its sole
discretion terminate this Agreement and WOFC shall cooperate, to the
extent possible, given the nature of the cause for non-performance, in
an orderly transition.
16. Usage of Terms. With respect to all terms in
the Agreement the singular includes the plural and the plural the
singular; words importing any gender include the other genders;
references to "writing" include printing, typing,
36
<PAGE>
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 the
Agreement; references to Persons include their permitted successors
and assigns; and the term "including" means "including without
limitation."
17. No Jury Trial. Both parties to this Agreement
waive any and all right to a trial by jury in any action or proceeding
brought or commenced by either party which is directly or indirectly
related to this Agreement.
18. Non Exclusivity. Nothing herein shall be
construed so as to restrict either party from performing the same type
or similar services or entering into the same type or similar
agreements with any other company or organization.
19. Survival of Covenants, Representations and
Warranties. The representations, warranties and covenants set forth
herein shall survive the termination of this Agreement.
20. Arbitration. At its option, either the Company
or WOFC may require that any claim or dispute arising under or related
to the terms of this Agreement, whether in law or in equity, shall be
submitted to arbitration in accordance with the rules of the American
Arbitration
37
<PAGE>
Association then prevailing in the capital city of the state governing
this Agreement.
Executed this ___ day of _____
WORLD OMNI FINANCIAL CORP.
By:__________________________
Its:__________________________
NATIONAL AUTO FINANCE
CORPORATION, General Partner,
on behalf of National Auto
Finance Company L.P.
By:__________________________
Its:_________________________
38
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of October 23, 1995,
among WORLD OMNI FINANCIAL CORP., a Florida corporation ("WOFC") and OMNI
FINANCIAL SERVICES OF AMERICA, INC., a Delaware corporation, its successors and
assigns ("OFSA").
WITNESSETH:
WHEREAS, WOFC has entered into the following agreements, each as
amended from time to time:
a. Servicing Agreement by and between World Omni Financial Corp. and
Gulf States Financial Services, Inc. d/b/a Gulf States Acceptance Company,
effective as of the 27th day of May, 1993; and
b. Sub-Servicing Agreement by and between World Omni Financial Corp.
and Gulf States Acceptance Company, d/b/a Gulf States Acceptance Company dated
as of the 1st day of September, 1994; and
c. Sub-Servicing Agreement by and between World Omni Financial Corp.
and Gulf States Acceptance Company, d/b/a Gulf States Acceptance Company dated
as of the 1st day of April, 1995; and
d. Servicing Agreement by and between World Omni Financial Corp. and
First City Finance, Inc. effective as of the 15th day of May, 1995; and
e. Amended and Restated Servicing Agreement by and between World Omni
Financial Corp. and National Auto Finance Company, LP, effective as of the 15th
day of December, 1994; and
f. Servicing Agreement between World Omni Financial Corp. and First
Lenders Indemnity Company, effective as of the 1st day of September, 1995;
(the above agreements collectively referred to as the "Assigned Agreements");
WHEREAS, WOFC wishes to assign all of its rights and obligations under
the Assigned Agreements to OFSA and OFSA wishes to assume such rights and
obligations;
<PAGE>
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto hereby agree as follows:
1. For good and valuable consideration, the receipt of which is hereby
acknowledged, WOFC hereby assigns, transfers and sets over onto OFSA all the
rights, title and interest, powers, privileges and remedies of WOFC in and to
the Assigned Agreements and to any and all amounts which may be or become due
or owing to WOFC under the Assigned Agreements. In furtherance of the foregoing
assignment and transfer, WOFC hereby authorizes and empowers OFSA in OFSA's own
name, or in the name of OFSA's nominee or in the name and as attorney for WOFC,
hereby irrevocably constituted, to ask, demand, sue for, collect, receive and
enforce any and all sums to which WOFC is or may become entitled under the
Assigned Agreements, as well as for the purpose of carrying out the terms of
this Assignment and Assumption Agreement to take any and all action and to
execute any and all instruments which may be necessary to accomplish the
purposes of this Assignment and Assumption Agreement, but at the expense and
liability and for the sole benefit of OFSA. This power is a power coupled with
an interest and shall be irrevocable. OFSA hereby agrees to assume, as of the
date of this Agreement, all the duties, liabilities and obligations of WOFC
under the Assigned Agreements.
2. This Assignment and Assumption Agreement may be amended, from time
to time, by the parties hereto in writing executed by each of them.
3. Each party hereto agrees to do and perform, from time to time, any
and all acts and to execute any and all further instruments required or
reasonably requested by the other party hereto fully to effect the purposes of
this Assignment and Assumption Agreement.
4. This Assignment and Assumption Agreement may be executed in any
number of counterparts, each of which counterpart shall be an original, but all
of which shall constitute one and the same instrument.
5. This Assignment and Assumption Agreement shall be construed in
accordance with the laws of the state of Florida.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective officers duly authorized as of the day and
year first above written.
WORLD OMNI FINANCIAL CORP.
By:
-------------------------------------
Name: Alan Browdy
-----------------------------------
Title: Vice President
----------------------------------
Date: October 23, 1995
-----------------------------------
OMNI FINANCIAL SERVICES OF AMERICA, INC.
By:
-------------------------------------
Name: Daryl Smith
-----------------------------------
Title: President
----------------------------------
Date: October 23, 1995
-----------------------------------
3
SUPPLEMENT TO AMENDED AND RESTATED SERVICING AGREEMENT
THIS SUPPLEMENT (this "Supplement") of the Amended and
Restated Servicing Agreement dated as of December 5, 1994, as amended
as of October 1, 1995 (the "Servicing Agreement"), between WORLD OMNI
FINANCIAL CORP. ("WOFC"), as servicer and NATIONAL AUTO FINANCE
COMPANY L.P. ("NAFCO") is made as of November 21, 1995 by and between
OMNI FINANCIAL SERVICES OF AMERICA, INC. as assignee of WOFC (the
"Servicer" or "OFSA") and NAFCO.
RECITALS
A. National Financial Auto Funding Trust ("Auto Funding"), a
Delaware business trust, 100% of the beneficial ownership interest in
which is held by NAFCO or affiliates of NAFCO, intends to assign the
accounts designated in Schedule 1 hereto (the "Assigned Accounts") to
National Auto Finance 1995-1 Trust (the "1995-1 Trust") pursuant to
the Pooling and Servicing Agreement, dated as of October 1, 1995 (the
"Pooling and Servicing Agreement"), by and among Auto Funding, NAFCO
and Harris Trust and Savings Bank, as trustee (the "Trustee").
B. NAFCO and OFSA have agreed to further amend the Servicing
Agreement as set forth below to provide for the servicing of the
Assigned Accounts following assignment of the Assigned Accounts by
Auto Funding to the 1995-1 Trust.
C. Capitalized terms used but not defined herein shall have
the same meanings ascribed thereto in the Servicing Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, NAFCO
and OFSA, as assignee of WOFC hereby amend and supplement the
Servicing Agreement solely with respect to the Assigned Accounts, as
follows:
1. The Preamble is hereby deleted in its entirety and the
following inserted in lieu thereof:
<PAGE>
This Amended and Restated Servicing Agreement is
hereby made effective as of the 5th day of December
1994 by and between World Omni Financial Corp. (the
"Servicer" or "WOFC") and National Auto Finance
Company L.P. (the "Company" or "NAFCO").
2. Section 6 of Article I is hereby deleted and the following
inserted in lieu thereof:
6. Company Account. The Collection Account designated
in the Pooling and Servicing Agreement dated as of October 1,
1995 among the Company, National Financial Auto Funding Trust
and Harris Trust and Savings Bank (the "Pooling and Servicing
Agreement") into which are deposited amounts received by the
Servicer on behalf of the Company which may include deduction
of certain amounts due the Servicer pursuant to Article II,
paragraph 5 of this Agreement. The wiring address for such
account is Harris Trust and Savings Bank ABA #071000288 A/C
#1092113 For Further Credit: NAFCO 95-A #1011774 Attention:
K. Richardson - Ext. 2647.
3. The second sentence of Section 1 of Article II is hereby
deleted and following inserted in lieu thereof: "The Servicer shall
service and administer the Accounts 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 motor vehicle retail installment sales
contracts comparable to the Accounts."
4. The following is hereby inserted at the end of the second
sentence of Section 3 of Article II the following: "provided, however,
that Servicer shall be permitted to extend the then current maturity
date of an Account not more than once during each calendar year and by
not more than two months in connection with each such extension;
provided, further, Servicer shall in no event extend the maturity date
of an Account beyond August 31, 2001."
5. Notwithstanding Section 4 of Article II, Servicer shall,
as custodian for the 1995-1 Trust, retain possession of the Loan File
for each Assigned Account in accordance with the Custodial Agreement
dated as of October 1, 1995 by and between OFSA, as custodian and
NAFCO; provided, however, that this Section 5 of this Amendment shall
not be construed to amend or modify the obligation of the Servicer to
service
2
<PAGE>
or continue to service any Account; and provided, further, that NAFCO
will indemnify and hold Servicer harmless against any liability of
Servicer for not returning the Loan File with respect to an Assigned
Account to NAFCO in accordance with such Section 4 to the extent
Servicer retained such Loan File in accordance with its obligations as
Custodian.
6. The fourth sentence of Section 7 of Article II is hereby
deleted and the following inserted in lieu thereof: "Servicer shall
have no obligation to determine whether the actual motor vehicle title
is received in those states which permit the Borrower, rather than the
lienholder, to have possession of the actual motor vehicle title."
7. The first sentence of Section 2 of Article III is hereby
deleted and the following inserted in lieu thereof: "Company shall pay
monthly on the twenty-first day of each month or, if such date is not
a Business Day, the next succeeding Business Day, the Servicing Fees
as well as any other expenses or charges due the Servicer pursuant to
this Agreement; provided that, to the extent such amounts are not paid
by the Company on such twenty-first day (for any reason other than
errors of transmission), Servicer may withdraw and apply the amount of
such Servicing Fees owed but not paid from the $5000 reserve account
maintained for such purpose."
8. Section 7 of Article V is hereby deleted in its entirety
(solely with respect to the Assigned Accounts).
9. Subsection (b) of Section 14 of Article X is hereby
deleted and the following inserted in lieu thereof: "(b) the Company
shall, at the request of the Servicer, execute and deliver or cause to
be executed and delivered such further instruments (including any
powers of attorney or similar instruments from Auto Funding or 1995-1
Trust) and take or cause to be taken such further actions as Servicer
may reasonably deem necessary to carry out the terms and provisions of
this Agreement."
10. Article VIII, is hereby amended by inserting the following
language at the end of Section 1 thereof:
"g. If (i)(A) the Company fails to remit timely to
the Servicer the Servicing Fees in accordance with Section 2
3
<PAGE>
of Article III and such failure to pay continues for a period of three
Business Days and (B) there are insufficient funds in the Reserve
Account to cover payment of any Servicing Fees owed and not paid or
(ii) the Company does not receive first priority payment of
distributions in accordance with Section 4.01 of the Pooling and
Servicing Agreement."
11. This Amendment amends the Amended and Restated Servicing
Agreement and supersedes the Amended and Restated Servicing Agreement
solely with respect to the Assigned Accounts and the subject matter
hereof. This amendment is not intended to amend or modify, and shall
not be construed to amend or modify in any respect, the servicing by
the Servicer pursuant to the Amended and Restated Servicing Agreement
of Accounts other than the Assigned Accounts, and the provisions of
the Amended and Restated Servicing Agreement, as such provisions
appear in the Amended and Restated Servicing Agreement dated as of
December 5, 1994, as amended as of October 1, 1995, shall remain in
full force and effect with respect to all Accounts (including, except
as amended hereby, the Assigned Accounts).
12. This Amendment shall become effective upon the assignment
of the Assigned Accounts to the 1995-1 Trust.
13. Except as the terms and provisions of the Amended and
Restated Servicing Agreement shall have been amended and superseded
hereby, the Amended and Restated Servicing Agreement shall remain in
full force and effect.
14. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this amendment as of the date first provided above.
OMNI FINANCIAL SERVICES OF AMERICA, INC.
By:
-------------------------------------
Name:
Title:
NATIONAL AUTO FINANCE COMPANY, L.P.
By: NATIONAL AUTO FINANCE CORPORATION,
its general partner
By:
-------------------------------------
Name:
Title:
5
<PAGE>
- ---------------------------------------------------------------------
CUSTODIAL AGREEMENT
NATIONAL AUTO FINANCE COMPANY, L.P.
Company
and
OMNI FINANCIAL SERVICES OF AMERICA
Custodian
Dated as of November 21, 1995
- ---------------------------------------------------------------------
<PAGE>
CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT ("Agreement"), dated as of
November 21, 1995, is entered into by and between OMNI FINANCIAL
SERVICES OF AMERICA, INC. as custodian ("Custodian"or "OFSA"), and
NATIONAL AUTO FINANCE COMPANY, L.P., as master servicer (the "Company"
or "NAFCO").
RECITALS
A. National Financial Auto Funding Trust ("National
Financial"), a Delaware business trust, intends to transfer, set over,
assign and otherwise convey the accounts designated in Schedule 1 to
the Servicing Agreement (as defined below) (the "Assigned Accounts")
to National Auto Finance 1995-1 Trust (the "Trust") pursuant to the
Pooling and Servicing Agreement, dated as of October 1, 1995 (the
"Pooling and Servicing Agreement"), by and among National Financial,
NAFCO and Harris Trust and Savings Bank, as trustee (the "Trustee").
B. NAFCO and OFSA have agreed pursuant to the Amended and
Restated Servicing Agreement (the "Servicing Agreement") dated as of
December 5, 1994, as amended as of October 1, 1995 and supplemented as
of November 21, 1995 that OFSA shall provide certain accounting and
collection services with respect to the Assigned Accounts following
assignment of the Assigned Accounts by National Financial to the
Trust.
C. NAFCO desires to have OFSA take possession of the Contract
Files as custodian and bailee of the Trustee and NAFCO and the
Trustee, as assignee of NAFCO in accordance with the terms and
conditions hereof.
D. Capitalized terms used but not defined herein shall have
the same meanings ascribed thereto in the Pooling and Servicing
Agreement.s
STATEMENT OF AGREEMENT
A. The Custodian shall maintain custody and possession of the
Contract Files as custodian for the benefit of, and bailee for, NAFCO
and the Trustee, as assignee of NAFCO.
B. The Custodian shall maintain possession of the related
Contract Files at its offices in Memphis, Tennessee or at such other
offices of the Custodian as shall from time to time be identified to
NAFCO by written notice; provided that, if such other offices are
outside of Tennessee, the Custodian must get NAFCO's prior written
consent. The Custodian may temporarily move individual Contract Files
or any portion thereof without notice as necessary to conduct
collection and other servicing activities in accordance with its
customary practices and procedures. It is intended that by the
Custodian's agreements pursuant to this agreement that the Trustee
will be deemed to have possession of the Contract Files for purposes
of Section 9-305 of the UCC as in effect in the state in which the
Contract Files are located.
<PAGE>
-2-
C. As custodian and bailee, the Custodian shall have and
perform the following powers and duties:
(i) hold the Contract Files on behalf of
NAFCO and the Trustee, as assignee of NAFCO maintain accurate
records pertaining to each Contract to enable it to comply
with the terms and conditions of this custodial agreement and
maintain a current inventory thereof (by computer records or
otherwise);
(ii) implement policies and procedures with
respect to the reasonable and customary handling and custody of
the Contract Files;
(iii) attend to details in maintaining custody of
the Contract Files on behalf of NAFCO; and
(iv) at all times maintain the original of
each fully executed Contract and store such original Contract
in a secure place.
D. The Custodian shall:
(i) act with reasonable care, using that
degree of skill and care that it exercises with respect to
similar contracts owned and/or serviced by it;
(ii) promptly report to NAFCO any material
failure by it to hold the Contract Files as herein provided;
(iii) promptly take appropriate action to remedy
any such failure; and
(iv) in acting as custodian and bailee of the
Contract Files, not assert, and shall cause a related
subservicer not to assert, any beneficial ownership interests
in the Contracts or the Contract Files.
E. The Custodian agrees to indemnify the Company and the
Trustee, its respective officers, directors, employees and agents for
any and all liabilities, obligations, losses, damages, payments,
costs, or expenses of any kind whatsoever which may be imposed on or
incurred by the Company and the Trustee arising from the gross
negligence or willful misconduct of the Custodian in maintaining
custody of the Contract Files pursuant to this Agreement; provided,
however, that the Custodian will not be liable to the extent that any
such amount resulted from the gross negligence or willful misconduct
of the Company and provided further that the Custodian will not be
liable for any such liability, obligation, loss, damage, payment, cost
or expense that resulted from any act or omission to act by it done in
conformity with the written instructions of the Company.
F. If at any time the Company notifies the Custodian that other
custodial arrangements have been made for the holding of the Contract
Files, such Custodian shall
<PAGE>
-3-
cooperate with the Company in such new custodial arrangement at the
expense of the Company. Such Custodian shall cooperate with the
Company to assure that the various documents contained in such
Contract Files are made available to the Company, as necessary for the
performance of the Company's duties under the other custodial
agreements.
G. The Custodian shall not without the prior written consent
of the Company and the Trustee, deliver or release to any Person any
Contracts or related Title Documents (or any security interest in the
related Financed Vehicle) except (i) in the ordinary course of its
business in connection with the release of collateral securing such
Contract after satisfaction of the related indebtedness thereunder or
in connection with correcting vehicle lienholder or similar
information on a Contract or title document or (ii) upon written
notice from the Transferor or NAFCO that such contract has been
retransferred to the Transferor in accordance with the Pooling and
Servicing Agreement.
H. The Custodian shall retain possession of the Contract File
for each Assigned Account until written notice from NAFCO that the
related account has been determined to be a contract with respect to
which any of the following has occurred during the due period: (i) 91
days have elapsed since repossession of the related financed vehicle,
(ii) NAFCO has in good faith determined that all amounts that it
expects to recover under such contract have been received, or (iii)
90% of any scheduled payment on such contract is 120 days or more
delinquent as of the end of such due period; provided that, OFSA shall
not be required to continue collection efforts beyond its standard
collection practices (as provided in the Servicing Agreement) except
at NAFCO's expense.
MISCELLANEOUS PROVISIONS
A. Effect of Invalidity of Provisions. In case any
one or more of the provisions contained in this Agreement should be or
become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herein or therein shall in no way be affected, prejudiced or disturbed
thereby.
B. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
without regard to conflict of laws rules.
C. Termination. It is agreed that NAFCO may terminate
this Agreement at anytime without cause. In addition, this Agreement
will terminate if and to the extent that the Supplement dated November
21, 1995 to the Servicing Agreement terminates. The custodian will
deliver the Contract files to the Trustee or at the direction of the
Trustee upon such termination.
D. Assignment. This Agreement may be assigned only
with the prior written consent of the other party hereto and the
Trustee; provided that, the Company may assign all
<PAGE>
-4-
its rights under this Agreement to the Trustee, to which the Custodian
hereby expressly consents. The Trustee as assignee of the Company can
enforce the rights under this Agreement directly against the
Custodian.
<PAGE>
-5-
IN WITNESS WHEREOF, the Company and Custodian have
caused this Agreement to be duly executed as of the date and year
first above written.
NATIONAL AUTO FINANCE COMPANY, L.P.
By: NATIONAL AUTO FINANCE
CORPORATION, its General Partner
By: /s/ Keith B. Stein
--------------------------------
Name: Keith B. Stein
Title: Executive Vice President
OMNI FINANCIAL SERVICES OF AMERICA, INC.
By: /s/ Daryl Smith
--------------------------------
Name: Daryl Smith
Title: President
<PAGE>
EXECUTION COPY
================================================================================
$38,220,000
NATIONAL AUTO FINANCE 1995-1 TRUST
----------------------
PLACEMENT AGENT AGREEMENT
Dated as of November 20, 1995
-----------------------------
================================================================================
<PAGE>
$38,220,000
NATIONAL AUTO FINANCE 1995-1 TRUST
PLACEMENT AGENT AGREEMENT
November 20, 1995
First Union Capital Markets Corp.
One First Union Center, TW-10
Charlotte, NC 28288-0610
Ladies and Gentlemen:
NATIONAL FINANCIAL AUTO FUNDING TRUST, a Delaware business trust (the
"Transferor"), hereby agrees with you as follows:
Section 1. Authorization of Certificates. The Transferor has
authorized the issuance by National Auto Finance 1995-1 Trust (the "Trust") of
$38,220,000 of 6.36% Automobile Loan Asset-Backed Certificates, Series 1995-1
(the "Certificates"). The Certificates will evidence in the aggregate an
undivided ownership interest of 91% of the Trust to be formed pursuant to a
Pooling and Servicing Agreement dated as of October 1, 1995 (the "Pooling and
Servicing Agreement") by and among the Transferor, National Auto Finance Company
L.P., as master servicer (the "Master Servicer" or "NAFCO"), and Harris Trust
and Savings Bank, as trustee (the "Trustee"). The assets of the Trust (the
"Trust Estate") 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 Transferor will own the undivided
interest in the Trust not represented by the Certificates (the "Transferor
Interest"). The Transferor Interest will be subordinated to the Certificates.
The Contracts will be serviced by the Master Servicer, an affiliate of the
Transferor, and subserviced initially by Omni Financial Services of America,
Inc. ("OFSA"), a wholly owned subsidiary of World Omni Financial Corp. ("World
Omni"). The Certificates will be sold by the Transferor and placed by you
pursuant to this Agreement. The Certificates will be issued on November 21, 1995
or such other date as we shall mutually agree upon (the "Closing Date").
The Transferor intends to sell the Certificates to a limited number of
institutional investors (the "Purchasers")
<PAGE>
in reliance upon an exemption from registration under the Securities Act of
1933, as amended (the "Securities Act").
The Transferor has requested you to act as placement agent in the
private placement of the Certificates, and you have indicated your willingness
to do so, subject to the satisfactory completion of such investigation and
inquiry into the Transferor's business as you deem appropriate under the
circumstances and subject to the conditions set forth below.
Section 2. Appointment of Placement Agent; Placement of Certificates.
(a) The Transferor hereby appoints you as exclusive placement agent in
connection with the placement of all of the Certificates (the "Placement
Agent"). Subject to the performance in all material respects by the Transferor
of its obligations to be performed hereunder, and to the completeness and
accuracy in all material respects of all of the representations and warranties
of the Transferor contained herein, you hereby accept such agency and agree on
the terms and conditions herein set forth to utilize your best efforts in the
ordinary course of business to obtain one or more purchasers for the
Certificates in compliance with applicable law. Your agency hereunder is not
terminable by the Transferor without your permission, until December 31, 1995.
(b) The Placement Agent shall not utilize any form of general
solicitation or general advertising in connection with the placement of the
Certificates, including any advertisement, article, notice or other
communication published in any newspaper, magazine or similar medium or
broadcast over television or radio, or conduct any seminar or meeting with
respect to the Certificates whose attendees have been invited by general
solicitation or advertising.
(c) The Placement Agent shall not, in fulfilling its obligations
hereunder, act as underwriter for the Certificates, and is in no way obligated,
directly or indirectly, to advance its own funds to purchase any Certificates.
Section 3. Delivery. Delivery of the Certificates to the purchasers
thereof (the "Purchasers") shall be made at the offices of Thacher Proffitt &
Wood, Two World Trade Center, New York, New York 10048, at 10:00 A.M., New York
time, on the Closing Date. The denominations of the Certificates to be delivered
and the name in which each Certificate is to be registered will be set forth in
a notice to be delivered by you on behalf of the Purchasers to the Trustee.
2
<PAGE>
Section 4. Representations and Warranties. (a) The Transferor hereby
represents and warrants to you that as of the date hereof, unless otherwise
stated:
(i) The Transferor 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 under this
Agreement, the Assignment Agreement, dated as of October 1, 1995 (the
"Assignment Agreement") by and between National Financial Auto Receivables
Master Trust (the "Master Trust") and the Transferor, the Purchase and
Contribution Agreement, dated as of October 1, 1995 (the "Purchase
Agreement") by and between the Transferor and NAFCO, the Transfer
Agreement, dated October 1, 1995 between the Transferor and the Trustee,
the Insurance and Indemnity Agreement, dated as of November 21, 1995 (the
"Insurance and Indemnity Agreement") by and among NAFCO, the Transferor and
FSA, the Master Spread Account Agreement, dated as of October 1, 1995 (the
"Master Spread Account Agreement"), by and among the Transferor, FSA and
the Trustee, the Registration Rights Agreement, dated November 21, 1995
(the "Registration Rights Agreement") by and between the Transferor and the
initial Purchasers and the Pooling and Servicing Agreement (together, the
"Transaction Documents") and the Certificates.
(ii) The Transferor has prepared and furnished to you a copy of a
Preliminary Private Placement Memorandum dated November 7, 1995 relating to
the Certificates (as supplemented and amended, the "Preliminary
Memorandum"), and prior to the Closing Date, the Transferor will prepare
and furnish to you a copy of an updated Private Placement Memorandum (the
"Final Memorandum"), each containing, among other things, information
concerning the Transferor, NAFCO, OFSA, FSA, the Certificates and the
Contracts. The Preliminary Memorandum does not, and the Final Memorandum
will not, contain any untrue statement of a material fact or omit 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.
(iii) Each of the Transaction Documents has been duly authorized,
executed and delivered by the Transferor and constitutes a valid and
binding agreement of the Transferor.
(iv) The Certificates will conform in all material respects to the
description thereof contained in the Final Memorandum and will be duly
authorized and, when duly and validly executed in accordance with the
Pooling
3
<PAGE>
and Servicing Agreement and when delivered and paid for as provided herein,
will be validly issued and outstanding and entitled to the benefits of the
Pooling and Servicing Agreement.
(v) Neither the transfer and assignment of all of the Transferor's
right, title and interest in the Contracts and the Trust Estate to the
Trustee, nor the issuance nor the delivery of the Certificates, nor the
consummation of any other of the transactions herein contemplated, nor the
fulfillment of the terms of the Certificates, the Transaction Documents or
this Agreement, will result in the breach of any term or provision of the
organizational documents of the Transferor 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 Transferor 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
Pooling and Servicing Agreement, or violate any law, statute, order or
regulation applicable to the Transferor of any court, regulatory body,
administrative agency or governmental body having jurisdiction over the
Transferor or any of their properties.
(vi) The Transferor is not subject to or in violation of any statute,
order or regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it or any of its properties,
which materially and adversely affects (A) the ability of the Transferor to
perform any of its obligations under the Transaction Documents, or the
ability of the Transferor to perform any of its obligations hereunder, or
(B) the business, operations, financial condition, properties or assets of
the Transferor, and the Transferor 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
Transferor to perform any of its obligations under the Transaction
Documents, or the ability of the Transferor to perform any of its
obligations hereunder.
(vii) There are no actions, proceedings or investigations to which the
Transferor, or any of its affiliates, is a party pending, or, to the
knowledge of the Transferor, threatened, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality (A)
asserting the invalidity
4
<PAGE>
of the Transaction Documents or the Certificates, (B) seeking to prevent
the issuance of the Certificates or the consummation of any of the
transactions contemplated by the Transaction Documents, (C) which might
materially and adversely affect the performance by the Transferor of its
obligations under the Transaction Documents or the Certificates, (D) which
might materially and adversely affect the validity or enforceability of the
Transaction Documents or the Certificates or (E) which might adversely
affect the federal income tax attributes of the Certificates described in
the Preliminary Memorandum.
(viii) 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 Certificates 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
NAFCO or the Transferor.
(ix) As of the Closing Date and each date of purchase of receivables
thereafter, the Transferor 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").
(x) As of the Closing Date and each date of purchase of Contracts
thereafter, neither the Transferor nor any Person acting on the
Transferor's behalf will have offered, transferred, pledged, sold or
otherwise disposed of any of its right, title and interest in the Contracts
or the Pooling and Servicing Agreement other than as contemplated by this
Agreement and the Pooling and Servicing Agreement; and upon the execution
and delivery of the Pooling and Servicing Agreement and the execution and
delivery of the Certificates, the Transferor will have taken all necessary
steps to convey good and marketable title to the Certificates to the
Purchasers, in each case free and clear of any Liens.
(xi) The Transferor is unaware of any facts or circumstances that
would materially adversely affect the Transferor's ability to perform its
obligations under the Transaction Documents or its obligations with respect
to the Contracts.
(xii) Neither the Transferor nor anyone acting on its behalf, other
than you, has offered, transferred, pledged, sold or otherwise disposed of
any of the Certificates or any other similar security to, or
5
<PAGE>
solicited offers to buy or accept a transfer, pledge or other disposition
of any Certificate, any interest in any Certificate or any other similar
security from, or otherwise approached or negotiated with respect to any
Certificate, any interest in any Certificate or any other similar security
with, any Person, in any manner, or made any general solicitation by means
of general advertising or in any other manner, or taken any other action
which would constitute a distribution of the Certificates under the
Securities Act or which would render the disposition of any Certificate a
violation of Section 5 of the Securities Act or require registration
pursuant thereto.
(xiii) Each of the representations and warranties of the Transferor
set forth in Section 2.03(b) and Section 2.03(c) of the Pooling and
Servicing Agreement are true and correct.
(xiv) Each of the representations and warranties of NAFCO set forth in
Section 2.03(a) of the Pooling & Servicing Agreement and Section 4.1 of the
Purchase Agreement are true and correct.
(xv) There has not been any material adverse change in the business,
operations, financial condition, properties or assets of NAFCO since the
financial statements dated September 30, 1995 were delivered to you. Such
financial statements (together with notes and schedules, if any, thereto)
fairly present the financial condition of NAFCO, 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, NAFCO has not sustained any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute,
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 NAFCO) or a material adverse
change in the financial condition of NAFCO 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 NAFCO, which would adversely affect the ability of NAFCO to
perform its obligations hereunder or NAFCO's ability to perform its
obligations under the Purchase Agreement, the Insurance and Indemnity
Agreement, the Amended and Restated Servicing Agreement, dated as of
December 8, 1994, (the "Amended and Restated
6
<PAGE>
Servicing Agreement") by and between NAFCO and World Omni, the Supplement
to the Amended and Restated Servicing Agreement, dated November 21, 1995
(the "Supplement to the Amended and Restated Servicing Agreement") by and
between NAFCO and OFSA and the Pooling and Servicing Agreement.
Section 5. Covenants of the Transferor. The Transferor hereby
covenants and agrees with you as follows:
(a) If, at any time prior to December 31, 1995, any event shall occur
as a result of which the Final Memorandum, as of the date of the Final
Memorandum, would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and
a responsible officer of NAFCO or the Transferor has actual knowledge of
such event, then NAFCO or the Transferor will promptly notify you and
prepare and furnish to you an amendment or supplement to the Final
Memorandum reasonably satisfactory to you that will correct such statement
or omission.
(b) During the period referred to in Section 5(a), the Transferor will
furnish to you without charge copies of the Preliminary Memorandum and the
Final Memorandum (including all exhibits and documents incorporated by
reference therein) and the Transaction Documents and all amendments or
supplements to such documents, in each case as soon as available and in
such quantities as you shall reasonably request. The Transferor authorizes
you to deliver to prospective purchasers copies of the Preliminary
Memorandum and the Final Memorandum, the Transaction Documents, all
amendments or supplements to such documents and any information obtained
pursuant hereto in connection with the offer or sale of the Certificates by
you in accordance herewith.
(c) The Transferor understands that each Purchaser may request
documents or information in addition to those referred to in Section 5(b)
relating to the Transferor, NAFCO or the Contracts. The Transferor hereby
agrees that during the period referred to in Section 5(a) it will provide
to you all such documents as such potential purchasers shall reasonably
request or have requested; it being understood that all such documents may
be subject to appropriate confidentiality agreements. Accordingly, you
agree to cooperate with the Placement Agent and the investors in such
regard, including, but not limited to, amending the documents to reflect
the reasonable requests of such investors and the Placement Agent.
7
<PAGE>
(d) The Transferor agrees that, so long as the Certificates shall be
outstanding, it will deliver to you and each Purchaser upon request, such
other information regarding the business, affairs, property and condition,
financial or otherwise, of the Transferor in such detail as may reasonably
be requested; it being understood that all such information may be subject
to appropriate confidentiality agreements.
(e) The Transferor agrees that any person designated in writing by you
or by any other holder of the Certificates may consult with the proper
officials of the Transferor and the Transferor shall use its 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(d) or regarding the
performance of the Transferor'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 Transferor agrees to provide any further information and
documentation as may reasonably be requested by the holders of the
Certificates 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.
(f) The Transferor will furnish such information, execute such
instruments and take such action at your direction, if any, as may be
required to qualify for an exemption from registration with respect to the
offer and sale of the Certificates for sale to any Purchaser under state
securities or "Blue Sky" laws applicable to such purchase and will maintain
such exemption in effect so long as required for the sale of such
Certificates to such Purchaser.
(g) The Transferor will not, directly or indirectly, transfer, pledge,
sell or otherwise dispose of, or offer to transfer, pledge, sell or
otherwise dispose of any Certificate, any interest in any Certificate, the
Transferor Interest or any other similar security in a manner which would
render the issuance of the Certificates pursuant to the Pooling and
Servicing Agreement and the placement by you of the Certificates pursuant
to this Agreement a violation of Section 5 of the Securities Act, or which
would constitute a breach of the covenants of the Transferor in or a
violation of the provisions of the Pooling and Servicing Agreement.
8
<PAGE>
(h) The Transferor agrees to provide the holders of the Certificates
with the information required by Rule 144A(d)(4) such that the Certificates
are eligible for transfer under the provisions of Rule 144A of the
Securities Act.
(i) The Transferor covenants that it has directed that there be no
simultaneous marketing of any other issuance backed by loans similar to the
Contracts.
Section 6. Conditions of Placement Agent Obligation. Your obligation
to act as Placement Agent for the Certificates on the Closing Date shall be
subject to the accuracy in all material respects of the representations and
warranties of the Transferor herein and in the Transaction Documents, to the
performance by the Transferor in all material respects of its obligations
hereunder, and to the execution and delivery of the Transaction Documents, the
Certificates, the Amended and Restated Servicing Agreement, the Assignment of
the Amended and Restated Servicing Agreement from World Omni to OFSA, dated
November 21, 1995, the Supplement to the Amended and Restated Servicing
Agreement, the Custodial Agreement, dated November 21, 1995 by and between the
Trustee and OFSA, by all parties thereto, and to the following additional
conditions:
(a) The representations and warranties of the Transferor contained in
Section 4 hereof and in the Transaction Documents shall be true and correct
in all material respects, and NAFCO and the Transferor shall have delivered
to you certificates, dated the Closing Date, of the Executive Vice
President of National Auto Finance Corporation, the sole general partner of
NAFCO to the effect that the signer of such certificate examined this
Agreement, the Transaction Documents, the Preliminary Memorandum and the
Final Memorandum and that: (i) the representations and warranties of the
Transferor in Section 4 of this Agreement and in the Transaction Documents
are true and correct in all material respects, (ii) each of NAFCO and the
Transferor 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, and (iii) nothing has come to his
attention that would lead him to believe that the Preliminary Memorandum or
the Final Memorandum 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. Such certificate shall further state
that the contents thereof constitute representations and warranties to you
and each Purchaser as to the matters covered thereby.
9
<PAGE>
(b) You shall have received from Thacher Proffitt & Wood, 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 NAFCO, the
Transferor 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.
(c) You shall have received from Dewey Ballantine, your special
counsel, a favorable opinion, dated the Closing Date and reasonably
satisfactory in form and substance to you, and NAFCO and the Transferor
shall have furnished to your special counsel such documents as they may
request for the purpose of enabling them to pass on certain matters.
(d) You shall have received, a comfort letter, dated the Closing Date
and satisfactory to you (the "Comfort Letter"), with respect to the
Contracts.
(e) The Certificates shall have been rated at least "AAA" by Standard
and Poor's Ratings Service ("S&P") and "Aaa" by Moody's Investor Services,
Inc. ("Moody's").
(f) The Policy shall have been issued by FSA with respect to the
Certificates guaranteeing the payment of the Guaranteed Distributions under
the Pooling and Servicing Agreement.
(g) You shall have received a certificate of a responsible officer of
FSA stating that the information contained in the sections of the Final
Memorandum entitled "The Certificate Policy", "The Certificate Insurer" and
Appendix A thereto are true and correct in all material respects.
(h) You shall have received a certificate of a responsible officer of
OFSA stating that the information contained in the Section of the Final
Memorandum entitled "The Servicer" is true and correct in all material
respects.
(i) You shall have received an opinion of local Florida counsel, dated
the Closing Date and reasonably satisfactory in form and substance to you
and your
10
<PAGE>
special counsel with respect to the first priority security interest of
NAFCO and the Transferor in the Contracts and with respect to the
disclosures contained in the Final Memorandum in the section entitled
"State and Local Tax Consequences - Florida".
(j) You shall have received an opinion of local Tennessee counsel,
dated the Closing Date and reasonably satisfactory to you and your special
counsel with respect to the disclosure contained in the Final Memorandum in
the section entitled "State and Local Tax Consequences - Tennessee".
(k) You shall have received an opinion of the general counsel of
NAFCO, dated the Closing Date and reasonably satisfactory in form and
substance to you and your special counsel.
(l) 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.
(m) 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.
(n) 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.
(o) You shall have received an opinion of local Delaware counsel to
the Transferor, 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 counsel to the trustee of
the Transferor, dated the Closing Date and reasonably satisfactory in form
and substance to you and your special counsel.
(q) 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.
(r) You and your special counsel shall have received such other
information, certificates and documents as you or they may reasonably
request.
11
<PAGE>
Section 7. Survival. The Transferor 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 Transferor shall survive the delivery and payment for
the Certificates.
Section 8. Fees and Expenses. In consideration of the Placement
Agent's services in acting as exclusive placement agent for the placement of the
Certificates, the Transferor hereby agrees to pay to the Placement Agent a fee
in an amount equal to 100 basis points of $38,220,000, such fee to be payable on
the Closing Date by wire transfer of immediately available funds to an account
to be designated by the Placement Agent no later than the Closing Date. In the
event that no closing of the sale of the Certificates occurs through no fault of
the Transferor or because the conditions set forth in Sections 6(b) and 6(c)
have not been met, then the Transferor's liability to the Placement Agent shall
be limited to the reimbursement of the Placement Agent's expenses incurred
through the date of termination for its reasonable out-of-pocket and incidental
expenses. In addition, whether or not the Certificates are issued or sold, the
Transferor 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 Certificates;
(b) The fees and expenses of the Transferor's and NAFCO'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(d) for the Comfort Letter;
(d) Reasonable copying costs for the Preliminary Memorandum and the
Final Memorandum;
(e) Legal fees of Dewey Ballantine, special counsel to the Placement
Agent up to $30,000;
(f) Trustee's fees and reasonable fees of counsel to the Trustee; and
(g) Fees and expenses of the Placement Agent (including legal fees and
expenses) in connection with compliance with Blue Sky laws.
12
<PAGE>
;provided that the Transferor shall not be liable for the fees and expenses of
the Placement Agent in the event that this Agreement is terminated without cause
by the Placement Agent.
Section 9. Indemnification. The Transferor hereby agrees to indemnify
and hold harmless the Placement Agent 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 Securities Exchange Act of 1934 (the
"Exchange Act")), if any, agents and employees of the Placement Agent or any of
the Placement Agent's affiliates (collectively, "Placement Agent Indemnified
Persons", and individually, a "Placement Agent Indemnified Person") from and
against any and all claims, liabilities, losses, damages and expenses incurred
by any Placement Agent Indemnified Person (including reasonable fees and
disbursements of the Placement Agent's and a Placement Agent Indemnified
Person's counsel) which (a) are related to or arise out of (i) actions taken or
omitted to be taken (including any untrue statements made or any statements
omitted to be made) by NAFCO or the Transferor, (ii) the accuracy or
completeness of the materials or information provided by the Transferor or NAFCO
to the Placement Agent, (iii) arise as a result of violations by the Transferor
or NAFCO of the Securities Act or the securities law of any state or (iv)
actions taken or omitted to be taken by an Indemnified Person with NAFCO's or
the Transferor's written consent or in conformity with NAFCO's or the
Transferor's written instructions or NAFCO's or the Transferor's actions or
omissions or (b) are otherwise related to or arise out of the Placement Agent's
engagement, and will reimburse the Placement Agent and any other Placement Agent
Indemnified Person for all reasonable costs and expenses, including fees of the
Placement Agent's or a Placement Agent Indemnified Person's counsel, as they are
incurred, in connection with investigating, preparing for, or defending any
action, formal or informal claim, investigation, inquiry or other proceeding,
whether or not in connection with pending or threatened litigation, caused by or
arising out of or in connection with the Placement Agent acting pursuant to the
engagement, whether or not the Placement Agent or any Placement Agent
Indemnified Person is named as a party thereto and whether or not any liability
results therefrom. It is understood that the foregoing indemnity shall not apply
to any loss, claim, damage or liability arising from work performed by the
Placement Agent in preparation of the Supplemental Information, dated November
8, 1995 (the "Supplemental Information"). In addition, the Transferor will not
be responsible for any claims, liabilities, losses, damages, or expenses
pursuant to clause (b) of the preceding sentence which are finally judicially
determined to have resulted primarily from the Placement Agent's or any
Placement Agent Indemnified Person's bad faith or negligence. The Transferor
also agrees that neither the Placement Agent nor any other
13
<PAGE>
Placement Agent Indemnified Person shall have any liability to the Transferor
for or in connection with such losses, damages, or expenses incurred by the
Transferor which are judicially determined to have resulted other than from the
Placement Agent's bad faith or negligence. Upon the assertion by a third party
against a party to this Agreement of a claim to which the indemnification
provisions of this Agreement may apply, the party against whom the claim has
been asserted shall promptly notify the other party to this Agreement of such
claim. Each party shall cooperate in every reasonable way with the party
assuming responsibility for the defense and disposition of such claim.
The Placement Agent hereby agrees to indemnify and hold harmless the
Transferor 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 Transferor or any of
the Transferor's affiliates (collectively, "Transferor Indemnified Persons", and
individually, a "Transferor 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 Transferor's and a
Transferor Indemnified Person's counsel) which arise out of work performed by
the Placement Agent in the preparation of the Supplemental Information and the
Placement Agent shall reimburse the Transferor, its affiliates, and each of
their directors, officers, or controlling persons for any legal and other
expenses reasonably incurred by the Transferor, its affiliates, or any such
directors, officers, employees, agents or controlling persons in investigating
or defending or preparing to defend against any such loss, claim, damage,
liability or action.
It is understood that the foregoing indemnity applies only to work
performed by the Placement Agent in the preparation of the Supplemental
Information and such indemnity specifically does not apply to any loss, claim,
damage, liability or action caused by the inaccuracy or incompleteness of any
materials or information provided by the Transferor or NAFCO to the Placement
Agent. Furthermore, the Placement Agent will not be responsible for any claims
liabilities, losses, damages, or expenses which are finally judicially
determined to have resulted primarily from the Transferor's or NAFCO's bad faith
or negligence.
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
14
<PAGE>
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 Transferor or the Placement
Agent 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
Transferor or the Placement Agent as the case may be in connection with the
transactions contemplated by the engagement. The relative benefits received by
the Transferor or the Placement Agent 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 Transferor or the
Placement Agent as the case may be. The Transferor and the Placement Agent 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.
The foregoing right to indemnity and contribution shall be in addition
to any rights that any party or Placement Agent Indemnified Person or Transferor
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 Placement Agent Indemnified Person or Transferor Indemnified Person.
Section 10. Termination.
(a) This Agreement may be terminated by you at any time upon the
giving of notice at any time prior to the Closing Date: (A) if there has
been, since the respective dates as of which information is given in the
Preliminary Memorandum or the Final Memorandum, any material adverse change
in the condition, financial or otherwise, of NAFCO or the Transferor, or in
the earnings, business affairs or business prospects of NAFCO or the
Transferor, 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 Certificates or enforce contracts for the sale
of the Certificates, 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
15
<PAGE>
governmental authority, or (D) if a banking moratorium has been declared by
either federal or New York authorities. In the event of any such
termination, no party will have any liability to any other party hereto,
except as otherwise provided in Section 8 or 9 hereof.
(b) This Agreement may not be terminated by the Transferor without the
written consent of the Placement Agent until after December 31, 1995.
(c) Notwithstanding anything herein to the contrary, in the event the
Transferor 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 Placement Agent's
obligations hereunder may be immediately cancelled by the Placement Agent
by notice thereof to the Transferor. 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(d), 5(h) 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 Transferor and, if
to the Transferor, addressed to the Transferor at One Park Place, 621 N.W. 53rd
Street, Boca Raton, Florida 33487 or to such other address as the Transferor may
have designated in writing to you.
Section 13. Successors. This Agreement will inure to the benefit of
and be binding upon the Transferor 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
Transferor 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
16
<PAGE>
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 Pooling and
Servicing Agreement.
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 CONFLICT OF LAWS PROVISIONS) OF THE STATE OF
NEW YORK.
(B) THE PLACEMENT AGENT AND THE TRANSFEROR 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 PLACEMENT AGENT AND THE TRANSFEROR 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 PLACEMENT AGENT OR THE TRANSFEROR, 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 PLACEMENT AGENT OR ITS
PROPERTY OR THE TRANSFEROR OR ITS PROPERTY IN THE COURT OF ANY OTHER
JURISDICTION.
17
<PAGE>
(C) THE PLACEMENT AGENT AND THE TRANSFEROR 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.
18
<PAGE>
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 Transferor.
Very truly yours,
NATIONAL FINANCIAL AUTO FUNDING TRUST
By: THE CHASE MANHATTAN BANK
(USA), not in its
individual capacity but
solely as Owner Trustee
of the National Financial
Auto Funding Trust
By /s/ John W. Mack
Name: JOHN W. MACK
Title: SECOND VICE PRESIDENT
BY AFFIXING ITS SIGNATURE HERETO, NATIONAL AUTO FINANCE COMPANY L.P.
ALSO HEREBY AGREES TO BE JOINTLY AND SEVERALLY LIABLE FOR THE OBLIGATIONS OF
NATIONAL FINANCIAL AUTO FUNDING TRUST.
NATIONAL AUTO FINANCE COMPANY L.P.
By: NATIONAL AUTO FINANCE
CORPORATION, as
its general partner
Name:/s/ [ILLEGIBLE]
Title: Executive Vice President
The foregoing Agreement is hereby accepted and entered into as of the date
hereof.
FIRST UNION CAPITAL MARKETS CORP.
By____________________________
Name:_________________________
Title:________________________
<PAGE>
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 Transferor.
Very truly yours,
NATIONAL FINANCIAL AUTO FUNDING TRUST
By: THE CHASE MANHATTAN BANK
(USA), not in its
individual capacity but
solely as Owner Trustee
of the National Financial
Auto Funding Trust
By__________________________________________
Name:_______________________________________
Title:______________________________________
BY AFFIXING ITS SIGNATURE HERETO, NATIONAL AUTO FINANCE COMPANY L.P.
ALSO HEREBY AGREES TO BE JOINTLY AND SEVERALLY LIABLE FOR THE OBLIGATIONS OF
NATIONAL FINANCIAL AUTO FUNDING TRUST.
NATIONAL AUTO FINANCE COMPANY L.P.
By: NATIONAL AUTO FINANCE
CORPORATION, as
its general partner
Name: /s/ [ILLEGIBLE]
Title: Executive Vice President
The foregoing Agreement is hereby accepted and entered into as of the date
hereof.
FIRST UNION CAPITAL MARKETS CORP.
By____________________________
Name:_________________________
Title:________________________
<PAGE>
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 Transferor.
Very truly yours,
NATIONAL FINANCIAL AUTO FUNDING TRUST
By: THE CHASE MANHATTAN BANK
(USA), not in its
individual capacity but
solely as Owner Trustee
of the National Financial
Auto Funding Trust
By__________________________________________
Name:_______________________________________
Title:______________________________________
BY AFFIXING ITS SIGNATURE HERETO, NATIONAL AUTO FINANCE COMPANY L.P.
ALSO HEREBY AGREES TO BE JOINTLY AND SEVERALLY LIABLE FOR THE OBLIGATIONS OF
NATIONAL FINANCIAL AUTO FUNDING TRUST.
NATIONAL AUTO FINANCE COMPANY L.P.
By: NATIONAL AUTO FINANCE
CORPORATION, as
its general partner
Name:_______________________________________
Title:______________________________________
The foregoing Agreement is hereby accepted and entered into as of the date
hereof.
FIRST UNION CAPITAL MARKETS CORP.
By /s/ Reginald H. Imamura
Name: Reginald H. Imamura
Title: Director
<PAGE>
AMENDMENT TO FIRST AMENDED AND RESTATED
TRUST AGREEMENT OF NAFCO FUNDING TRUST
AMENDMENT (this "Amendment") dated as of November 21, 1995 to the
First Amended and Restated Trust Agreement of NAFCO Funding Trust dated as of
December 8, 1994 (the "Trust Agreement") among NATIONAL AUTO FINANCE COMPANY
L.P. ("Depositor"), THE CHASE MANHATTAN BANK (USA) ("Owner Trustee") and Gary
Shapiro, Edgar Otto and Andrew Stidd (collectively, the "Co-Trustees").
RECITALS
1. The Depositor intends to sell and National Financial Auto Funding
Trust (formerly known as NAFCO Funding Trust) ("Funding Trust") intends to
purchase certain contracts (the "Contract Assets") pursuant to a Purchase and
Contribution Agreement (the "Purchase and Contribution Agreement") dated as of
October 1, 1995 between the Depositor and Funding Trust.
2. The Depositor, the Owner Trustee and the Co-Trustees have agreed to
further amend the Trust Agreement as set forth below to provide for the sale of
the Contract Assets to Funding Trust, to ratify the name National Financial
Auto Funding Trust and to make certain other amendments as follows.
3. Capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Purchase and Contribution Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the Depositor,
the Owner Trustee and the Co-Trustees hereby amend the Trust Agreement as
follows:
1. The definition section is hereby amended as follows:
<PAGE>
(a) by deleting the definition of "Closing Date" and
substituting the following therefore:
"Closing Date" means December 8, 1994 or November
21, 1995, as applicable with respect to the related
Purchase Agreement.
(b) by deleting the definition of "Pooling and
Administration Agreement" and substituting the
following therefore:
"Pooling and Administration Agreement" means,
collectively, the (i) Pooling and Administration
Agreement, dated as of December 8, 1994 by and among
the Trust, as transferor, the Depositor, as
Administrator, and Bankers Trust Company, as
Trustee, as the same may be further amended,
supplemented, amended and restated or otherwise
modified from time to time in accordance with the
terms thereof and (ii) Pooling and Servicing
Agreement, dated as of October 1, 1995 by and among
the Trust, as transferor the Depositor, as master
servicer and Harris Trust and Savings Bank, as
trustee, as the same may be further amended,
supplemented, amended and restated or otherwise
modified from time to time in accordance with the
terms thereof.
(c) by deleting the definition of "Purchase Agreement"
and substituting the following therefore:
"Purchase Agreement" means, collectively, the
agreements whereby the Receivables are sold to the
Trust by the Depositor, namely (i) the Receivables
Purchase Agreement, dated as~of December 8, 1994,
entered into between the Depositor and the Trust and
(ii) the Purchase and Contribution Agreement dated
as of October 1, 1995 between National Auto Finance
Company L.P. and the Trust.
2. Section 2.01 is hereby amended by adding the following language
after the last sentence thereof, "The name of the Trust is hereby ratified to
be and shall be National Financial Auto Funding Trust".
3. Section 8.01 is hereby amended by adding the following language
immediately after the language regarding Edgar Otto:
2
<PAGE>
Andrew Stidd Lord Securities Corp.
2 Wall Street
New York, New York 10005
4. Section 8.03(a) is hereby amended by adding the language:
";provided that, there shall be meetings not less than annually and records of
minutes of such meetings shall be maintained by the Trust." to the end of such
Section.
5. Section 10.07 is hereby amended by adding the words "Financial
Security Assurance Inc.", immediately following the word the "Depositor," in
the second line thereof.
6. The following Section is hereby added to the end of Article X:
10.13. Appointment of Secretary. Keith Stein is
hereby appointed as an officer of the Trust whose title shall
be Secretary. The Secretary shall have responsibility for
carrying out such actions of the Trust as shall have been
duly authorized and consented to by the Co-Trustees.
The parties hereto hereby authorize the Secretary to execute
on behalf of the Trust instruments and documents in
furtherance of the purposes of the Trust.
7. This Amendment amends the First Amended and Restated Trust
Agreement and supersedes the First Amended and Restated Servicing Agreemnet
solely with respect to the subject matter hereof.
8. Except as the terms and provisions of the Amended and Restated
Servicing Agreement shall have been amended and superseded hereby, the First
Amended and Restated Trust Agreement shall remain in full force and effect.
3
<PAGE>
9. This Amendment may be executed in any number of counterparts, each
of which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
amendment as of the date first provided above.
THE CHASE MANHATTAN BANK (USA)
By:
---------------------------
Name:
Title:
NATIONAL AUTO FINANCE COMPANY, L.P.
By: NATIONAL AUTO FINANCE CORPORATION,
its general partner
By:
---------------------------
Name:
Title:
CO-TRUSTEE
By:
---------------------------
Name: Gary Shapiro
4
<PAGE>
CO-TRUSTEE
By:
---------------------------
Name: Edgar Otto
CO-TRUSTEE
By:
---------------------------
Name: Andrew Stidd
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
amendment as of the date first provided above.
THE CHASE MANHATTAN BANK (USA)
By:
---------------------------
Name:
Title:
NATIONAL AUTO FINANCE COMPANY, L.P.
By: NATIONAL AUTO FINANCE CORPORATION,
its general partner
By:
---------------------------
Name:
Title:
CO-TRUSTEE
By:
---------------------------
Name: Gary Shapiro
CO-TRUSTEE
By:
---------------------------
Name: Edgar Otto
6
<PAGE>
CO-TRUSTEE
By:
---------------------------
Name: Andrew Stidd
The Depositor, as 99% beneficial owner of Funding Trust hereby consent
to the attached amendment to the First Amended and Restated Trust Agreement.
NATIONAL AUTO FINANCE COMPANY, L.P.
By: NATIONAL AUTO FINANCE CORPORATION,
its General Partner
By:
---------------------------
Name:
Title:
National Chartered Auto Corporation, as 1 % beneficial owner of
Funding Trust hereby consent to the attached amendment to the First Amended and
Restated Trust Agreement.
NATIONAL CHARTERED AUTO CORPORATION
By:
---------------------------
Name:
Title:
7
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of October 7, 1996 (this
"Agreement"), between National Auto Finance Company, Inc., a Delaware
corporation (the "Company"), and National Auto Finance Company L.P., a Delaware
limited partnership (the "NAFCO Partnership").
W I T N E S S E T H
WHEREAS, the NAFCO Partnership is organized and existing pursuant to a
Second Amended and Restated Agreement of Limited Partnership, dated as of
September 1, 1995 (the "NAFCO Partnership Agreement"; terms defined therein and
not otherwise defined herein being used herein with the meanings as so defined),
among National Auto Finance Corporation, as general partner, and the limited
partners party thereto;
WHEREAS, the Company was formed on October 4, 1996, for the purpose of
acquiring all of the assets, subject to all of the liabilities, of the NAFCO
Partnership in exchange (the "NAFCO Exchange") for shares of common stock, par
value $.01 per share, of the Company (the "Common Stock");
WHEREAS, immediately prior to the NAFCO Exchange, all of the partners of
Auto Credit Clearinghouse (other than the NAFCO Partnership) will transfer their
limited partner interests in Auto Credit Clearinghouse to the NAFCO Partnership
in exchange for limited partner interests in the NAFCO Partnership (such
transaction being referred to herein as the "ACCH Exchange").
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
1. (a) The NAFCO Partnership shall assign, transfer, convey and deliver all
of its right, title and interest in all of its assets, subject to all of its
liabilities, to the Company, and the Company shall accept the assignment and
shall assume all of the duties, obligations and liabilities relating thereto.
(b) In consideration for the transfer of all of the assets, subject to
all of the liabilities, of the NAFCO Partnership, the Company will issue to the
NAFCO Partnership
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on the Closing Date (as defined below), the number of shares of Common Stock set
forth on Schedule I hereto, which shares, together with the shares of Common
Stock currently owned by the NAFCO Partnership, shall constitute all of the
issued and outstanding shares of Common Stock of the Company; provided, that the
number of shares of Common Stock set forth on Schedule I hereto may be modified
by the Company prior to the Closing Date; provided, further, that such shares of
Common Stock shall constitute, together with the shares of Common Stock owned by
the NAFCO Partnership, all of the issued and outstanding shares of Common Stock.
(c) Notwithstanding anything to the contrary contained herein, the
parties hereto agree that fulfillment by the NAFCO Partnership of its
obligations hereunder is subject to prior Consent of the Limited Partners.
2. The closing of the transactions contemplated by this Agreement shall
take place at the offices of Weil, Gotshal & Manges LLP in New York City, or
such other place as the parties shall agree, immediately prior to the closing of
the initial public offering and sale by the Company of shares of Common Stock
(the "Offering") pursuant to a Registration Statement on Form S-1 under the
Securities Act of 1933, as amended (the "Act"), to be filed with the Securities
and Exchange Commission following the execution and delivery of this Agreement
(such date being referred to herein as the "Closing Date").
3. In the event the Closing Date shall not have occurred or the Offering
shall have been abandoned by the Company on or prior to March 31, 1997, this
Agreement shall terminate and be of no further force or effect and the Company
shall give notice of such abandonment to the parties hereto promptly thereafter.
4. The Company represents, warrants and covenants to the NAFCO Partnership
as follows:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power to own, lease and operate its properties and to carry on its
business as the same is now being conducted and will be conducted following the
Closing Date.
(b) The Company is authorized to issue 20,000,000 shares of Common
Stock, of which 1,000 shares are issued and
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outstanding as of the date hereof and registered in the name of the NAFCO
Partnership, and 1,000,000 shares of Preferred Stock, par value $0.01, of which
no shares are issued and outstanding as of the date hereof. On the Closing Date
and prior to the consummation of the Offering, (a) the Company will have issued
to the NAFCO Partnership a number of shares of Common Stock which, when taken
together with all of the shares of Common Stock then owned by the NAFCO
Partnership, will constitute 100% of the then outstanding Common Stock, and (b)
no other shares of capital stock of the Company will then be outstanding.
(c) On the Closing Date after giving effect to the transactions
contemplated hereby, there will be no outstanding rights of subscription,
warrants, calls, options, contracts or other agreements of any kind issued or
granted by the Company to purchase or otherwise to receive any capital stock of
the Company, except (i) for shares of Common Stock issuable upon the exchange of
deferred additional interest notes held by Morgan Guaranty Trust Company of New
York, as trustee of (A) the Commingled Pension Fund Trust (Multi-Market Special
Investment Fund II) of Morgan Guaranty Trust Company of New York and (B)
Multi-Market Special Investment Trust Fund of Morgan Guaranty Trust Company of
New York) and Morgan Guaranty Trust Company of New York, as investment manager
and agent for the Alfred P. Sloan Foundation, (ii) the underwriting agreement
with respect to the shares of Common Stock to be issued and sold in the Offering
and (iii) stock options issued pursuant to the Company's 1996 Stock Option Plan.
(d) Since its formation, the Company has not been engaged in the conduct
of any business except for the activities incident to the transactions
contemplated hereunder and in connection with the Offering.
5. The NAFCO Partnership represents and warrants to the Company as follows:
(a) Upon the transfer of the assets of the NAFCO Partnership to the
Company on the Closing Date, title to such assets will be acquired by the
Company, free and clear of any pledge, lien, security interest or other
encumbrances, other than any lien securing obligations of the NAFCO Partnership.
(b) The NAFCO Partnership acknowledges that: (i) it has no present plan
or intention to sell, exchange,
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transfer, distribute or otherwise dispose of (whether by gift or by means of any
hedging or similar transaction that would reduce its risk of loss on) any of the
shares of Common Stock or rights to acquire shares of Common Stock that it will
receive on the Closing Date; and (ii) it has been informed by the Company of the
restrictions contained in Section 6 hereof and that it is acquiring the Common
Stock for its own account with no present intention of distributing the same,
except in compliance with the Act.
(c) The NAFCO Partnership acknowledges that it has such knowledge and
experience in financial and business matters that such party is capable of
evaluating the merits and risks of the acquisition of the Common Stock pursuant
to this Agreement. The NAFCO Partnership recognizes that the Common Stock has
not been registered under the Act or applicable state securities laws, and that,
accordingly, such securities will not be transferable except upon satisfaction
of the registration and prospectus delivery requirements of such laws or
pursuant to an available exemption therefrom, and such party must bear the
economic risk of its investment for an indefinite period of time. The NAFCO
Partnership acknowledges it has received or been given access to financial
information and other documents and records necessary to make a well-informed
investment decision and has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management.
(d) The NAFCO Partnership acknowledges that nothing in this Agreement
shall obligate the Company or any proposed underwriter to commence the Offering,
nor create any liability on the part of the Company or any proposed underwriter
to the parties hereto if (i) the Company shall elect for any reason not to file
a registration statement or withdraw any registration statement subsequent to
its filing or if any underwriter shall decline to participate in the Offering,
regardless of any action that any party hereto may have taken in connection
therewith or (ii) the ACCH Exchange shall not have occurred. The NAFCO
Partnership acknowledges that no representation is being made by the Company or
any proposed managing underwriter, nor can there be any assurance, that the
Offering will be made or consummated.
(e) The NAFCO Partnership shall, prior to the initial filing of the
registration statement for the Offering, maintain the confidentiality of, and
not disclose to any person, the pendency of the Offering except as may be
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<PAGE>
required by applicable law or authorized by the Company and except on a
confidential basis to any agents or employees of such party to the extent
reasonably necessary in order to effectuate the transactions contemplated
hereby.
6. (a) The NAFCO Partnership shall not, directly or indirectly, at any time
transfer, sell, assign, convey or otherwise dispose of any shares of Common
Stock held by it or any right, title or interest therein (each a "Transfer")
except in compliance with the Act, and the certificates representing the Common
Stock issued pursuant hereto shall be so restricted and a restrictive legend
placed on the certificates therefor in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR AN OPINION OF COUNSEL SELECTED BY THE
HOLDER AND SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS
NOT REQUIRED BY SAID ACT."
(b) Until 180 days after the effective date of the registration
statement for the Offering, the NAFCO Partnership shall not offer to sell, sell,
contract to sell or otherwise dispose of any shares of Common Stock, or
securities convertible into or exchangeable or exercisable for, or rights to
acquire shares of Common Stock (including the right to acquire Common Stock
arising out of this Agreement) without the prior written consent of the
underwriter of the Offering.
(c) Each of the parties shall execute such documents and other
instruments and take such further actions as may be reasonably required or
desirable or as may be reasonably be requested by the Company to give effect to
the transactions contemplated hereby or carry out its obligations hereunder in
consummating the transactions contemplated hereby. The Company may issue "stop
transfer" instructions to the transfer agent for the Common Stock and take such
other actions as it may deem appropriate to prevent transfers in violation of
this Paragraph 6(c).
7. On the Closing Date, the Company shall deliver to the NAFCO Partnership
a stock certificate or certificates representing the shares of Common Stock to
be issued to the NAFCO Partnership pursuant to this Agreement.
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8. Any notice or other communication required or permitted hereunder shall
be in writing and shall be delivered personally, telegraphed, telexed, sent by
facsimile transmission, sent by a recognized national courier service, postage
or charges prepaid or sent by first class registered or certified mail, return
receipt requested, postage prepaid. Any such notice shall be deemed given when
so delivered personally, telegraphed, telexed or sent by facsimile transmission,
or in the case of delivery by a courier service, on the date of confirmation of
delivery or, if by first class registered or certified mailed, return receipt
requested, three days after the date of deposit in the United States mails, as
follows:
(i) If to the Company, to:
National Auto Finance Company, Inc.
621 N.W. 53rd Street
Suite 200
Boca Raton, Florida 33487
Attn: Keith B. Stein
Vice Chairman and Secretary
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attn: Howard Chatzinoff, Esq.
(ii) If to the NAFCO Partnership, to the address set forth on Schedule I
hereto.
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9. (a) This Agreement contains the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior agreements,
written or oral, with respect thereto.
(b) This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms and conditions hereof may be waived, only by a written
instrument signed by the parties. No delay on the part of any party in
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<PAGE>
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity.
(c) This Agreement shall be governed and construed in accordance with
the laws of the State of New York, without regard to the conflict of laws
principles thereof.
(d) This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.
(e) 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. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above.
NATIONAL AUTO FINANCE COMPANY L.P.
by National Auto Finance
Corporation,
its general partner
By: _________________________________
Name:
Title:
NATIONAL AUTO FINANCE COMPANY, INC.
By: _________________________________
Name:
Title:
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Exhibit 23.1
Consent of Independent Auditors' Report
The Partners
National Auto Finance Company L.P.:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Selected Consolidated Financial Data" and "Experts" in
the prospectus.
KPMG Peat Marwick LLP /s/ KPMG Peat Marwick LLP
Fort Lauderdale, Florida
October 7, 1996
