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POOLING AND SERVICING AGREEMENT
by and among
NATIONAL FINANCIAL AUTO FUNDING TRUST,
AS TRANSFEROR,
NATIONAL AUTO FINANCE COMPANY L.P.
AS SERVICER,
and
▇▇▇▇▇▇ TRUST AND SAVINGS BANK
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE
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Dated as of October 21, 1996
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National Auto Finance 1996-1 Trust
6.33% Automobile Receivables-Backed Certificates
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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........ 21
Section 2.02. Acceptance by Trustee.............................. 23
Section 2.03. Representations, Warranties and
Covenants of the Servicer and the Transferor................. 24
Section 2.04. Execution and Authentication of Certificates....... 33
Section 2.05. Restriction on Transfer of Transferor Interest..... 34
Section 2.06. Transfers of Additional Contracts.................. 34
ARTICLE III
Administration and Servicing of Contracts;
Establishment and Administration of Accounts
Section 3.01. Servicer to Act as Servicer........................ 36
Section 3.02. Subservicing Agreements between Servicer and the
Subservicers................................................. 39
Section 3.03. Obligations of the Servicer........................ 40
Section 3.04. No Contractual Relationship between a
Subservicer and Trustee or Certificateholders................ 40
Section 3.05. Assumption or Termination of
Subservicing Agreement by
Trustee...................................................... 40
Section 3.06. Collection of Contract Payments.................... 41
Section 3.07. Maintenance of Comprehensive and Collision
Insurance.................................................... 42
Section 3.08. Realization upon Defaulted Contracts............... 42
Section 3.09. Master Servicing and Other Compensation............ 42
Section 3.10. The Collection Account............................. 42
Section 3.11. The Certificate Account............................ 44
Section 3.12. Pre-Funding Period Reserve Account................. 45
Section 3.13. The Revolving Account.............................. 46
Section 3.14. Pre-Funding Account................................ 46
Section 3.15. Administration of Accounts......................... 47
Section 3.16. [Reserved]......................................... 48
Section 3.17. Reports to the Trustee and the
Transferor Certificate Account
Statements; Reports to the Servicer, the
Certificate Insurer and
Transferor......................................... 48
Section 3.18. Annual Statement as to Compliance;
Notice of Servicer
Default...................................................... 49
Section 3.19. Custodial Arrangements............................. 49
Section 3.20. Annual Independent Accountants' Report............. 49
Section 3.21. Access to Certain Documentation and
Information Regarding
Contracts.................................................... 50
Section 3.22. Retention and Termination of Servicer.............. 50
ARTICLE IV
Payments to Certificateholders
Section 4.01. Distributions...................................... 51
Section 4.02. Statements to Certificateholders................... 52
Section 4.03. Specification of Certain Tax Matters............... 52
Section 4.04. Withdrawals from Spread Account; Claims
Under Certificate
Policy....................................................... 53
Section 4.05. Preference Claims.................................. 55
Section 4.06. Retirement of Certificates......................... 56
Section 4.07. Spread Account..................................... 56
ARTICLE V
The Certificates
Section 5.01. The Certificates................................... 56
Section 5.02. Registration of Transfer and Exchange of
Certificates ................................................ 56
Section 5.03. Mutilated, Destroyed Lost or Stolen Certificates... 57
Section 5.04. Persons Deemed Owner............................... 57
Section 5.05. Appointment of Paying Agent........................ 58
Section 5.06 Book-Entry Certificates............................ 58
Section 5.07 Notices to Clearing Agency......................... 59
Section 5.08 Definitive Certificates............................ 59
ARTICLE VI
The Transferor and the Servicer
Section 6.01. Respective Liabilities of the Transferor
and the Servicer ............................................ 59
Section 6.02. Existence of Transferor and Servicer;
Merger or Consolidation of the Servicer;
Assignment of Rights and Delegation of Duties by
Servicer..................................................... 59
Section 6.03. Limitation on Liability of the
Transferor, the Servicer and
Others....................................................... 60
Section 6.04. Transfer of Duties of Servicer..................... 62
Section 6.05. Servicer May Own Certificates...................... 62
ARTICLE VII
Default
Section 7.01. Servicer Defaults.................................. 62
Section 7.02. Trustee to Act; Appointment of Successor........... 64
Section 7.03. Notification to Certificateholders................. 65
Section 7.04. Waiver of Past Defaults............................ 66
ARTICLE VIII
Concerning the Trustee
Section 8.01. Duties of Trustee.................................. 66
Section 8.02. Certain Matters Affecting the Trustee.............. 67
Section 8.03. Trustee Not Liable for Certificates or Contracts... 69
Section 8.04. Trustee May Own Certificates....................... 69
Section 8.05. Eligibility Requirements for Trustee............... 70
Section 8.06. Resignation and Removal of the Trustee............. 70
Section 8.07. Successor Trustee.................................. 71
Section 8.08. Merger or Consolidation of Trustee................. 71
Section 8.09. Appointment of Co-Trustee or Separate Trustee...... 72
Section 8.10. Appointment of Office or Agency.................... 73
Section 8.11. Trustee's Compensation and Reimbursement........... 73
Section 8.12. Trustee May Enforce Claims Without
Possession Of
Certificates................................................. 74
Section 8.13. Suits for Enforcement.............................. 74
Section 8.14. Rights of Direct Trustee........................... 74
ARTICLE IX
Termination
Section 9.01. Termination upon Retransfer to the
Transferor or Liquidation of All Contracts................... 75
Section 9.02. Disposition of Contracts upon Bankruptcy Event..... 77
ARTICLE X
Miscellaneous Provisions
Section 10.01. Amendment............................................. 79
Section 10.02. Recordation of Agreement.............................. 80
Section 10.03. Limitation on Rights of Certificateholders............ 80
Section 10.04. GOVERNING LAW......................................... 81
Section 10.05. Notices............................................... 81
Section 10.06. Intention of the Parties.............................. 82
Section 10.07. Severability of Provisions............................ 82
Section 10.08. Protection of Title to Interest....................... 82
Section 10.09. Assignment............................................ 83
Section 10.10. Certificates Nonassessable and Fully Paid............. 83
Section 10.11. Third-party Beneficiaries............................. 83
Section 10.12. Financial Security as Controlling Party............... 84
Section 10.13. Limitation of Liability of Trustee.................... 84
Section 10.14. Limitation of Liability of Chase...................... 84
Section 10.15. Matters Relating to Purchase Agreements............... 84
Section 10.16. No Petition........................................... 85
Section 10.17. Submission to Jurisdiction............................ 85
Section 10.18. Waiver of Jury Trial.................................. 85
Section 10.19. Counterparts.......................................... 86
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 Servicer Report
Exhibit 4.02 Form of Distribution Date Report
Exhibit 5.01 Form of Certificate
Exhibit A Form of Subservicing Agreement
Exhibit B Form of Purchase and Contribution Agreement
Exhibit C Form of Financial Guaranty Insurance Policy
Exhibit D Form of Insurance and Indemnity Agreement
Exhibit E Form of Spread Account Agreement
Exhibit F DTC Letter of Representations
Schedule 1 Contract Schedule
Schedule 2 Trustee's Fee Schedule
This Pooling and Servicing Agreement is entered into effective as of
October 21, 1996, among NATIONAL FINANCIAL AUTO FUNDING TRUST, as Transferor,
NATIONAL AUTO FINANCE COMPANY L.P., as Servicer, and ▇▇▇▇▇▇ 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 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.
ACCH: Auto Credit Clearinghouse L.P., a Delaware limited partnership of
which NAFCO is the sole general partner and the majority limited partner.
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: (x) 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, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof.
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 the original
instrument of assignment of such Contract and all other documents securing such
Contract made by the Person originating such Contract to NAFCO or ACCH, as the
case may be, 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 Funding Trust II, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof.
Available Amount: 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
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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:
(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.
Beneficial Owner: With respect to a Book-Entry Certificate, the Person who
is the beneficial owner of the undivided interest represented thereby, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).
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Book-Entry Certificates: Beneficial interests in the Certificates,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 5.06; provided that after the occurrence
of a condition whereupon book-entry registration and transfer are no longer
permitted and Definitive Certificates are issued to the Beneficial Owners, such
Definitive Certificates shall replace Book-Entry Certificates.
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.
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
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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 (or, in the case of the initial
Distribution Date, the number of days from and including the Closing Date to but
not including such initial Distribution Date) at the Certificate Rate on the
Certificate Balance on such Distribution 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
__________ 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
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(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: 6.33% 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.
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 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.
Chase: The Chase Manhattan Bank USA, N.A. as owner trustee of the
Transferor and Funding Trust II.
Clearing Agency: An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, or
any successor provision thereto. The initial Clearing Agency shall be the
Depository Trust Company ("DTC").
Clearing Agency Participant: A broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
Closing Date: The date on which the Certificates are originally issued.
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Collateral Agent: ▇▇▇▇▇▇ 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, ACCH, a Dealer, the 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 or ACCH, as the case may be, 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 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, or ACCH, as the case may be, as agent, as the
lienholder or secured party and that the Transferor or 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.
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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 and Contribution
Agreement.
Conveyance Agreements: The Purchase Agreements, the Sale Agreement and the
Assignment 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 ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Indenture Trust Division.
Custodial Agreement: The Custodial Agreement, dated as of November 13,
1996, 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 or ACCH, as the case may be.
Dealer Agreement: Each of the respective agreements entered into by a
Dealer and NAFCO or ACCH, as the case may be, whereby the Dealer sold Contracts
to NAFCO or ACCH, as the case may be.
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.
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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 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 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.
Definitive Certificates: as defined in Section 5.06 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;
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(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 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
10
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;
(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.
Depository Agreement: The agreement among the Transferor, the Trustee and
the initial Clearing Agency, dated as of November 13, 1996, substantially in the
form attached hereto as Exhibit F hereto.
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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,
1996, 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 ss.9.10(b)), or (ii) a segregated direct deposit account maintained with a
depository institution or trust company organized under the laws of the United
States of America, or any of the States thereof, or the District of Columbia,
having a certificate of deposit, short-term deposit or commercial paper rating
of at least "A-1+" from Standard & Poor's and "P-1" from Moody's and (unless a
Certificate Insurer Default has occurred and is continuing) acceptable to the
Certificate Insurer.
Eligible Servicer: The Servicer, the Standby Servicer or another Person
that, at the time of its appointment as Servicer, (i) is servicing a portfolio
of motor vehicle retail installment sales contracts and/or motor vehicle
installment loans, (ii) is legally qualified and has the capacity to service the
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
December __, 2002.
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.
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Funding Trust II: National Auto Funding Trust II, a Delaware business
trust.
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
October 21, 1996 among the Certificate Insurer, the Transferor and First Union,
as the same may be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof.
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.
Initial Contract: Each Contract transferred and assigned to the Trust on
the Closing Date.
Initial Cut-off Date: October 21, 1996.
Initial Spread Account Deposit: As defined in the Spread Account
Agreement.
Insurance Agreement: The Insurance and Indemnity Agreement, dated as of
October 21, 1996, among the Transferor, NAFCO and the Certificate Insurer, as
the same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms 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.
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Internal Revenue Code: The Internal Revenue Code of 1986, as amended.
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 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 (or, if the
related Obligor is a debtor under Chapter 13 of the U.S. Bankruptcy Code, 180
days or more) delinquent as of the end of such Due Period.
Liquidation Expenses: Reasonable out-of-pocket expenses which are incurred
by the 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 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 Servicer and, if applicable, any
Subservicer, relating to one or more Lockbox Accounts, as the same may be
amended, supplemented, amended and restated or otherwise modified from time to
time in accordance with the terms thereof. So long as no 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 Trust: National Financial Auto Receivables Master Trust.
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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: ▇▇▇▇▇'▇ 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 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 Funding Trust II, as the case may be, or the Chairman of the
Board, President, Executive Vice President, Senior Vice President, Vice
President, or Assistant Vice President of the Custodian, NAFCO, ACCH 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
15
substantially the same services on behalf of the Servicer as OFSA performs
pursuant to the Amended Restated Servicing Agreement, dated as of December 8,
1994, between the Servicer and World Omni Financial Corp. ("WOFCO"), as such
agreement may be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof and the terms of this Agreement, and the
Assignment and Assumption Agreement dated as of October 23, 1995 between WOFCO
and OFSA pursuant to which WOFCO assigned its subservicing duties to OFSA.
Opinion of Counsel: 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 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 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
16
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
(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
17
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, limited liability
company, limited liability partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity.
Physical Property: The "instruments" and "certificated securities"
described in subparagraphs (a) and (b) of the definition of "Delivery" in this
Article I.
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 January 31, 1997.
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:
(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
18
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 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 Agreement, dated as of October 21, 1996,
between ACCH and NAFCO, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
Purchase Agreements: (i) The Purchase Agreement and (ii) the Purchase and
Contribution Agreement.
Purchase and Contribution Agreement: The Purchase and Contribution
Agreement, dated as of October 21, 1996 between NAFCO and the Transferor, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
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.
19
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) the Distribution Date
immediately following the Pre-Funding Period, 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 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 Servicer pursuant to Section 2.02, Section 2.03 or Section 3.01 hereof.
20
Retransfer Default Contract: Any Contract with respect to which the
Transferor or the 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 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, 1997.
Sale Agreement: The Sale Agreement, dated of even date herewith, between
Funding Trust II and the Transferor, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
Servicer: NAFCO, or its successor in interest, or any successor Servicer
appointed as provided in Section 7.01 or 7.02.
Servicer Default: As defined in Section 7.01.
Servicer Termination Side Letter: The letter from Financial Security
Assurance Inc. to the Trustee and NAFCO dated as of the date hereof with regard
to the renewal term of the Servicer, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
Servicing Fee: As to any Due Period, the monthly fee payable to the
Servicer, which, as long as either NAFCO or the Standby Servicer is the
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 Servicing Fee for any successor
Servicer other than the Standby Servicer shall be determined as provided in
Section 7.02.
Servicing Official: Any employee of the 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 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
21
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 from time to time in
accordance with the terms thereof.
Standard & Poor's: Standard & Poor's Ratings Service, a division of
▇▇▇▇▇▇-▇▇▇▇, Inc., 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: ▇▇▇▇▇▇ Trust and Savings Bank, or any successor thereto
under the Standby Servicing Agreement.
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 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.
22
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 Servicer Termination Side
Letter, the Assignment Agreement, the Sale Agreement, the Purchase Agreements,
the Certificates, the Insurance Agreement, the Indemnification Agreement, each
Conveyance, the Spread Account Agreement, the Underwriting 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.
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 1996-1 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 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 Conveyance
Agreements, (viii) the Certificate Policy, (ix)
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NAFCO's and ACCH's rights against Dealers under the Dealer Agreements in respect
of the representations and warranties made by the Dealers 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.
Underwriting Agreement: The Underwriting Agreement, dated as of November
13, 1996, between First Union and the Transferor, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
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.
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
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with the Transferor and the 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, ACCH or the 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 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
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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 Servicer and the Certificate Insurer; provided however, that
the Trustee, the 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 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
Servicer or such Subservicer or were developed by it during the course of
servicing such Contract. The 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 Servicer nor any Subservicer shall be required to
physically ▇▇▇▇ 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 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 Servicer
or any Subservicer, cause the 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 Servicer or
any Subservicer, cause the 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 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 Servicer or such Subservicer shall promptly so notify the
Trustee, the Certificate Insurer and the Transferor in writing, and the 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 Servicer
and the Transferor. (a) The Servicer hereby represents, warrants and covenants
to the Trustee and the Certificate Insurer that as of the Closing Date and each
Subsequent Transfer Date:
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(i) the Servicer is duly organized, validly existing and in good
standing under the laws of the state of its organization and is qualified
to transact business in and is in good standing under the laws of each
state in which it is necessary for it to be so qualified in order to carry
on its business as now being conducted and has all licenses necessary to
carry on its business as now being conducted; the Servicer has the full
power and authority to own its property, to carry on its business as
presently conducted, and to execute, deliver and perform each of the
Transaction Documents to which it is a party; the execution, delivery and
performance of each of the Transaction Documents to which it is a party
(including all instruments of transfer to be delivered pursuant to any
such Transaction Documents to which it is a party) by the Servicer and the
consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized; each of the Transaction Documents to which it
is a party evidences the valid, binding and enforceable obligation of the
Servicer (subject to applicable bankruptcy and insolvency laws and other
similar laws affecting the enforcement of creditors' rights generally and
to general principles of equity, regardless of whether enforcement is
sought in a proceeding in equity or at law) and all requisite partnership
action has been taken by the Servicer to make each of the Transaction
Documents to which it is a party valid and binding upon the Servicer
(subject as aforesaid in the preceding clause);
(ii) the Servicer is not required to obtain the consent of any other
party or obtain the consent, license, approval or authorization of, or
make any registration or declaration with, any governmental authority,
bureau or agency in connection with the execution, delivery, performance,
validity or enforceability of each of the Transaction Documents to which
it is a party;
(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 Servicer or result in the
breach of any term or provision of, or conflict with or constitute a
default (with or without notice, lapse of time or both) under or result in
the acceleration of any obligation under, any agreement, indenture or loan
or credit agreement or other instrument to which the Servicer or its
property is subject, or result in the creation or imposition of any Lien
upon any of the properties pursuant to the terms of any such agreement
indenture or loan or credit agreement or other instrument (aside from the
lien created pursuant to this Agreement) or result in the violation of any
law, rule, regulation, order, judgment or decree to which the Servicer or
its property or the Contracts are subject;
(iv) the Servicer is not a party to, bound by or in breach or
violation of any indenture or other agreement or
28
instrument, or subject to or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it, which materially and
adversely affects, or may in the future materially and adversely affect,
the ability of the Servicer to perform its obligations under this
Agreement or the interest of the Certificateholders, the Trust or the
Certificate Insurer in any material respect;
(v) there are no actions, suits, proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality (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 the Transaction Documents, (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or any of the Transaction Documents, (D)
involving the 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
Servicer's knowledge, there are no proceedings or investigations pending
or threatened against the Servicer, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Servicer or its properties relating to the
Servicer which might adversely affect the federal income tax or other
federal, state or local tax attributes of the Certificates;
(vi) the chief executive office of the Servicer is located at One
Park Place, ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇; and
(vii) the Subservicing Agreement is enforceable against the Servicer
and has been duly authorized by all necessary corporate action of the
Servicer and has been duly executed and delivered by the Servicer.
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
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
29
breach shall give prompt written notice thereof to the other parties and to the
Certificate Insurer. In addition to the foregoing, the 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 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 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,
30
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 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.
31
(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;
(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;
32
(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.
The Transferor shall indemnify the Trustee, the Certificate Insurer, the
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).
(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);
33
(iii) no Contract has been sold, assigned or pledged to any other
Person other than an endorsement to the Servicer for purposes of servicing
or any such pledge has been released; immediately prior to the transfer
and assignment herein contemplated, the 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, ACCH, the Master Trust, Funding Trust II 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
or ACCH, as the case may be, from a Dealer was not an extension of
financing to such Dealer;
(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
34
(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;
(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; NAFCO, ACCH, and the Transferor have not waived any such
default, breach, violation or event of acceleration; and as of the
applicable Cut-Off Date, the related Financed Vehicle has not been
repossessed;
(xv) at the origination date of each such 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 or ACCH, as the case may be, as a loss payee and (iii) insuring
against loss and damage due to fire, theft, transportation, collision and
other risks generally
35
covered by comprehensive and collision coverage; each Contract requires
the Obligor to maintain physical loss and damage insurance, naming NAFCO
or ACCH, as the case may be, as an additional insured party;
(xvi) each such Contract was acquired by NAFCO or ACCH, as the case
may be, from a Dealer with which it ordinarily does business; such Dealer
had full right to assign to NAFCO or ACCH, as the case may be, such
Contract and the security interest in the related Financed Vehicle and the
Dealer's assignment thereof to NAFCO or ACCH, as the case may be, is
legal, valid and binding and NAFCO or ACCH, as the case may be, had full
right to assign to the Transferor such Contract and the respective
security interest in the related Financed Vehicle and NAFCO's or ACCH's
respective 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
(other than with respect to those Contracts designated as balloon
contracts on the related Contract Schedule), 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;
(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 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;
36
(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 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 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;
37
(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 or ACCH; 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
18.88% and the weighted average remaining scheduled maturity on the
Initial Contracts was approximately 50.27 months and the percentage of the
aggregate outstanding balance of the Initial Contracts relating to the
financing of used Financed Vehicles was 75.05%. The final scheduled
payment date on the Initial Contract with the latest maturity is November
1, 2001. Each Contract amortizes based on a Simple Interest Method or
Actuarial Method; and
(xxx) 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 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 Servicer within
180 days after the Closing Date or such Subsequent Transfer Date, as applicable,
the 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, 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
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
Servicer,
38
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 ▇▇▇▇▇
plan subject to either Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or Section 4975 of the Code (each, a "Plan"), or (ii)
an entity whose assets are deemed to include Plan assets as a result of a Plan's
investment in such
39
entity under Department of Labor Regulation Section 2510.3-101. (each, a "Plan
Entity").
Section 2.06. Transfers of Additional Contracts. (a) During the Revolving
Period, upon the Transferor's written direction to the Trustee and the 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 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 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 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 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 and Contribution Agreement and by
ACCH
40
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;
(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%, (B) the weighted average remaining
term of the Contracts shall not be greater than 55 months, and (C) not
more than 80% 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, 2002;
(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;
(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
41
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.
ARTICLE III
Administration and Servicing of Contracts;
Establishment and Administration of Accounts
Section 3.01. Servicer to Act as Servicer.
(a) The 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 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 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 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 Servicer in its own name or in the name of the
Transferor is hereby authorized and empowered by the Trustee when the Servicer
believes it appropriate in its best judgment to execute and deliver, on behalf
of the Trust, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge and all other comparable instruments, with
respect to the Contracts and with respect to the Financed Vehicles; provided
however, that notwithstanding the foregoing, the Servicer shall not, except
pursuant to an order from a Court of competent jurisdiction, release an Obligor
from payment of any unpaid amount under any Contract or waive the right to
collect the unpaid balance of any Contract from the Obligor, except that the
Servicer may forego collection efforts if the amount subject to collection is de
minimis and if it would forego collection in accordance with its customary
procedures. If any Contract
42
contains a "due-on-sale" provision allowing the holder thereof to accelerate the
Contract upon sale of the Financed Vehicle financed thereunder, the Servicer
shall take reasonable steps under the circumstances to enforce such due on sale
provision if a Financed Vehicle is sold as soon as practicable after determining
that such Financed Vehicle has been sold; provided however, that the Servicer
shall not be obligated to take any legal action to enforce such provision.
(b) The Servicer shall service and administer the 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 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 first
priority of security interests granted by the obligors in the Financed Vehicles
to NAFCO or ACCH, as the case may be, and to maintain continuous perfection of
the security interest 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
Servicer is not required to expend any of its own funds to remove any security
interest, lien or other encumbrance on any Financed Vehicle. The Servicer shall
not take any action to impair the Trust's rights in any 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 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 Servicer, a Responsible Officer of the
Trustee or any Subservicer of a default by the 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
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 Servicer, the Trustee or the Subservicer became
aware, if earlier, of such default, then the Servicer shall promptly purchase
such Contract
43
from the Trust. Any such purchase by the Servicer shall be in exchange for the
delivery by the 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 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 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
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 Servicer shall take or cause to be 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 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 Servicer or the Trustee in connection with such
action shall be reimbursed to the Servicer or the Trustee, as applicable, by the
Certificate Insurer.
(d) The Servicer may perform any of its duties pursuant to this Agreement,
including those delegated to it by the Trustee
44
pursuant to this Agreement, through Persons appointed by the Servicer. Such
Persons may include affiliates of the Servicer and may include the Transferor
and its affiliates. Notwithstanding any such delegation of a duty, the Servicer
shall remain obligated and liable for the performance of such duty as if the
Servicer were performing such duty.
(e) Upon the execution and delivery of this Agreement, the Servicer shall
deliver to the Trustee and the Certificate Insurer a list of officers and
employees of the 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 Servicer as
additional officers and employees of the Servicer become involved, or
responsible for, the administration and servicing of the Contracts or officers
or employees of the Servicer previously identified on any such list become
disassociated with the administration and servicing of the Contracts.
(f) The Servicer may take such actions as are necessary to discharge its
duties as Servicer in accordance with this Agreement, including the power to
execute and deliver on behalf of the Trust such instruments and documents as may
be customary, necessary or desirable in connection with the performance of the
Servicer's duties under this Agreement (including consents, waivers and
discharges relating to the 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 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 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 Servicer with any other powers of
attorney or other documents reasonably necessary or appropriate which the
Trustee may legally execute to enable the Servicer to carry out its servicing
and administrative duties hereunder. Neither the Servicer nor any of its
directors, officers, employees or agents will be under any liability to the
Trust, the 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 Servicer furnished such
certificate to the Trustee reasonably promptly after determining the necessity
therefor in the particular instance.
(g) The Servicer warrants, represents and covenants to and with the
Trustee that recordation of the name of the Servicer as
45
lienholder in Title Documents respecting any Financed Vehicle is maintained by
the Servicer as agent for the Trust and that the Servicer has no equitable
ownership in the Contracts, except as it may have by virtue of ownership of a
Certificate or an equity interest in the Transferor or any Certificateholder.
The 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 Servicer and the
Subservicers. The 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 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 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 Servicer in
servicing the Contracts include actions taken or to be taken by a Subservicer on
behalf of the Servicer. Each Servicing Agreement shall be upon such terms and
conditions as are not inconsistent with this Agreement and as the Servicer and
the 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 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 Servicer shall notify each Rating Agency, the
Trustee and the Certificate Insurer upon entering into any Subservicing
Agreement.
Section 3.03. Obligations of the Servicer. Notwithstanding any
Subservicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer or a Subservicer or reference to
actions taken through a Subservicer or otherwise, the 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 Servicer alone were
servicing and administering the Contracts. The Servicer shall be entitled to
enter into any agreement with a Subservicer for indemnification of the Servicer,
and nothing contained in this
46
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 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 Servicer is
deemed terminated, the Subservicer may be terminated. 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 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 Servicer will thereupon assume all of the
rights and obligations of the 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 Servicer as servicer of the Contracts. Upon the giving of
such notice, the Trustee, its designee or the successor Servicer, shall be
deemed to have assumed all of the Servicer's interest therein and to have
replaced the Servicer as a party to the Subservicing Agreement to the same
extent as if the Subservicing Agreement had been assigned to the assuming party
except that the 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 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 Servicer.
The Servicer shall, upon request of the Trustee but at the expense of the
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 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 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
47
services industry for similar contracts, and as otherwise expressly provided by
this Agreement. Consistent with the foregoing, the Servicer may in its
discretion (i) waive any late payment charge and (ii) extend the then current
maturity date of a 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 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 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 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
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 Servicer, the
Transferor, NAFCO, ACCH 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 Servicer determines that any amount that is not a
part of the Trust Estate has been deposited in any Account, the 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 Servicer to the Certificate Insurer.
(c) The 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 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 Lockbox Agreement and notify all Obligors to remit
payments in respect of the Contracts to such Lockbox Account.
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(d) Notwithstanding any Lockbox Agreement, or any of the provisions of
this Agreement relating to a Lockbox Agreement, a Lockbox Bank or a Lockbox
Account, the Servicer shall remain obligated and liable to the 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
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 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
Servicer under any such policies (other than amounts to be applied to the
restoration or repair of the related Financed Vehicles or amounts released to
the Obligor in accordance with the Servicer's normal servicing procedures) shall
be deposited in the Collection Account. All policies required by this paragraph
shall be endorsed with clauses providing for loss payable to the Servicer or the
related Subservicer and its successors and assigns. Servicer shall maintain and
keep in place a vendor's single interest insurance policy.
Section 3.08. Realization upon Defaulted Contracts. In the event that a
Contract becomes and continues to be a Defaulted Contract, the Servicer shall
take all reasonable and lawful steps necessary for Repossession; provided
however, that the Servicer shall not be obligated to institute any action for
Repossession through judicial proceedings unless it determines in its good faith
judgment, which determination will be conclusive and binding, that Insurance
Proceeds or Liquidation Proceeds that would be realized in connection therewith
or amounts payable pursuant to the last sentence of this Section 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 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 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 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
49
legal counsel, or, in the case of those Contracts that are so referred,
reimbursement of the reasonable fees and expenses of outside legal counsel, if
their retention was necessary in the reasonable judgment of the Servicer.
Section 3.09. Master Servicing and Other Compensation. The Servicer, as
compensation for its activities hereunder, shall be entitled to receive the
Servicing Fee and amounts, if any, described in Section 3.11(b)(ii). The
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
"▇▇▇▇▇▇ Trust and Savings Bank, as Trustee, for the benefit of registered
holders of National Auto Finance 1996-1 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 Servicer, the
Transferor, NAFCO, ACCH 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 Servicer or Subservicer) and other amounts with respect to
the Trust Estate, if any, received from the Transferor, the Servicer or
any Subservicer.
(b) No later than each Distribution Date, the Trustee shall, at the
written direction of the 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
50
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 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 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 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 and other recoveries of principal received on
the Contracts deposited into the Collection Account during the previous Business
Day together (without duplication) with an amount equal to the Outstanding
Principal Balance of all Contracts that became Liquidated Contracts during the
Revolving Period.
(c) In the event the 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
Servicer or Subservicer if the erroneous deposit was made by the 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
"▇▇▇▇▇▇ Trust and Savings Bank, as Trustee, for the benefit of registered
holders of National Auto Finance 1996-1 Trust Automobile Receivables-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 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;
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(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);
(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 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 Servicer's or Transferor's entitlement thereto is limited to
collections or other recoveries on the related Contract, the 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 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
Servicer or Subservicer if the erroneous deposit was made by the 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.
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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 "▇▇▇▇▇▇ Trust and Savings
Bank", as Trustee, for the benefit of registered holders of National Auto
Finance 1996-1 Trust Automobile Receivables-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 $161,856.71.
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 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 "▇▇▇▇▇▇ Trust and Savings Bank, as Trustee, for the benefit of the
registered holders of National Auto Finance 1996-1 Trust Automobile
Receivables-Backed Certificates, and the
53
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 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 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 $3,000,000.
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 "▇▇▇▇▇▇ Trust
and Savings Bank, as Trustee, for the benefit of registered holders of National
Auto Trust Automobile Receivables-Backed Certificates, and the Certificate
Insurer -- Pre-Funding Account." On the Closing Date, the Transferor shall
deliver $15,524,168.66 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 Servicer
delivered pursuant to Section 2.06. On each
54
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.
(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
55
"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].
Section 3.17. Reports to the Trustee and the Transferor Certificate
Account Statements; Reports to the Servicer, the Certificate
Insurer and Transferor.
(a) Not later than the Reporting Date, the 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 Servicer with the prior written consent of the Certificate Insurer),
certified by an officer of the Servicer. In addition to the information required
by Exhibit 3.17, the 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 Servicer an Insurance Agreement
Event of Default has occurred.
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(b) On the first Business Day after each Determination Date, the Trustee
shall forward by telecopier to the Servicer, the Certificate Insurer and the
Transferor a statement (and shall also mail a copy to the 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 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 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
Servicer during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision, (ii) to the best of
such officer's knowledge, based on such review, the Servicer has fulfilled all
its obligations under this Agreement throughout such year, or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof and (iii) to the
best of such officer's knowledge, each Subservicer has fulfilled its obligations
under its Subservicing Agreement in all material respects, or if there has been
a material default in the fulfillment of such obligations, specifying such
default known to such employee and the nature and status thereof.
(b) The Servicer shall deliver to the 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 Servicer and OFSA. The Servicer hereby assigns all of
its
57
right, title and interest in and to such Custodial Agreement to the Trustee.
To the extent the Servicer receives any notices with respect to the Custodial
Agreement, the Servicer will forward a copy of such notice to the Trustee and
the Certificate Insurer.
Section 3.20. Annual Independent Accountants' Report. (a) The Servicer
shall, at its expense, cause a firm of nationally recognized independent
certified public accountants (the "Independent Accountants"), who may also
render other services to the Servicer or to the 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 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
Servicer, to the Trustee, and the Certificate Insurer, to the effect that such
firm has audited the financial statements of the 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 Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
(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 Servicer shall provide to representatives of the Trustee and the
Certificate Insurer
58
reasonable access to the documentation regarding the Contracts. Each of the
Transferor and 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 Servicer, as the case may be, to examine the corporate
books and financial records of the Transferor or 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 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 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 Servicer. The Servicer hereby
covenants and agrees to act as such under the Agreement for an initial term,
commencing on the Closing Date and ending on December 31, 1996, 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 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 "Servicer
Extension Notice") shall be delivered by the Certificate Insurer to the Trustee
and the Servicer. The Servicer hereby agrees that, as of the date hereof and
upon its receipt of any such Servicer Extension Notice, the Servicer shall
become bound, for the initial term beginning on the date hereof and for the
duration of the term covered by such Notice, to continue as the Servicer subject
to and in accordance with the other provisions of this Agreement. Until such
time as 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 Servicer the Trustee shall not have received any 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 Servicer and the Servicer's terms shall not be extended unless a
Servicer Extension Notice is received on or before the last day of such term.
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 Servicer not
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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
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 Servicer, the amount of the Servicing Fee payable
in respect of the related Due Period and any unpaid 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 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;
(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;
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(viii) eighth, to reimburse the 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 Servicer for expenses
incurred by and reimbursable, or any indemnities payable by the
Transferor, to the 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
Book-Entry Certificates or Definitive 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 Servicer, the
Certificate Insurer and each Rating Agency a written statement prepared by the
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 thereon and with
respect to any applicable reporting requirements in connection therewith. The
Transferor and each
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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 1997, the Servicer shall furnish to each Person who at any
time during the preceding calendar year was Certificateholder a statement
prepared by the 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
Servicer deems necessary or desirable to enable the Certificateholders to
prepare their tax returns. Such obligations of the 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 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.
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(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 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
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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 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,
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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 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
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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 by the Trustee on behalf of the Trust and authenticated and
delivered by the Trustee upon receipt by the 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
$62,098,000 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 Trust by an authorized officer of the Trustee 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 authenticated by the Trustee by manual signature of an authorized
signatory of the Trustee and such authentication 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 ▇▇▇▇▇▇ Trust and Savings Bank, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Bond Services Unit, is initially appointed
such office for the purpose of registering Certificates and transfers and
exchanges of Certificates as herein provided.
(b) [Reserved].
(c) No transfer of any Certificate or interest therein shall be made to
any transferee or purchaser who is a Plan or Plan Entity or who is purchasing
such Certificate or interest therein directly or indirectly on behalf of any
Plan or Plan Entity. Any prospective transferee shall be deemed to represent
that it is not purchasing directly or indirectly on behalf of a Plan or Plan
Entity and the Transferor, the Trustee and Servicer shall be entitled to
conclusively rely 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
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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 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 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 Servicer, the
Trustee and any agent of the Transferor, the 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 Servicer,
the Trustee nor any agent
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of the Transferor, the 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.
Section 5.06 Book-Entry Certificates. The Certificates, upon original
issuance, shall be issued in the form of typewritten Certificates representing
the Book-Entry Certificates, to be delivered to The Depository Trust Company,
the initial Clearing Agency, by, or on behalf of, the Transferor. The
Certificates shall initially be registered on the Certificate Register in the
name of CEDE & Co., the nominee of the Clearing Agency, and no Beneficial Owner
will receive a definitive certificate representing such Beneficial Owner's
interest in the Investor Certificates, except as provided in Section 5.08.
Unless and until definitive, fully registered Certificates ("Definitive
Certificates") have been issued to Beneficial Owners pursuant to Section 5.08:
(i) the provision of this Section 5.06 shall be in full force and
effect;
(ii) the Transferor, the Servicer, the Paying Agent, if any, and the
Trustee may deal with the Clearing Agency for all purposes (including the
making of distributions on the Certificates) as the authorized
representatives of the Beneficial Owners;
(iii) to the extent that the provisions of this Section 5.06
conflict with any other provisions of this Agreement, the provisions of
this Section 5.06 shall control;
(iv) the rights of Beneficial Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such
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Beneficial Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Depository Agreement, unless and until
Definitive Certificates are issued pursuant to Section 5.08, the initial
Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit distributions of principal and
interest on the Certificates to such Participants; and
(v) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Certificateholders evidencing a
specified Percentage Interest, the Clearing Agency shall be deemed to
represent such percentage only to the extent that it has received
instructions to such effect from Beneficial Owners and/or Clearing Agency
Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Certificates and has
delivered instructions to the Trustee reflecting such instructions.
Section 5.07 Notices to Clearing Agency. Whenever notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Certificates shall have been issued to Beneficial Owners
pursuant to Section 5.08, the Trustee shall give all such notices and
communications specified herein to be given to Holders of the Certificates to
the Clearing Agency.
Section 5.08 Definitive Certificates. If (i)(A) the Servicer advises the
Trustee in writing that the Clearing Agency is no longer willing or able to
discharge properly its responsibilities under the Depository Agreement, and (B)
the Servicer is unable to locate a qualified successor, (ii) the Servicer, at
its option, advises the Trustee in writing that it elects to terminate the
book-entry system through the Clearing Agency or (iii) after the occurrence of a
Servicer Default, Beneficial Owners representing beneficial interests
aggregating not less than 50% of the Percentage Interests, advise the Trustee
and the Clearing Agency through the Clearing Agency Participants in writing that
the continuation of a book-entry system through the Clearing Agency is no longer
in the best interests of the Beneficial Owners, the Trustee shall notify all
Beneficial Owners, through the Clearing Agency, of the occurrence of any such
event and of the availability of Definitive Certificates to Beneficial Owners
requesting the same. Upon surrender to the Trustee of the Certificates by the
Clearing Agency, accompanied by registration instructions from the Clearing
Agency for registration, the Transferor shall execute and the Trustee shall
authenticate and deliver at its Corporate Trust Office the Definitive
Certificates. Neither the Transferor nor the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such instructions. Upon the issuance of Definitive
Certificates the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder. The
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Trustee shall not be liable if the Trustee or the Transferor is unable to locate
a qualified successor Clearing Agency.
ARTICLE VI
The Transferor and the Servicer
Section 6.01. Respective Liabilities of the Transferor and the Servicer.
The Transferor and the 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 and the Servicer herein and the representations
made by the Transferor or the Servicer.
Section 6.02. Existence of Transferor and Servicer; Merger or
Consolidation of the Servicer; Assignment of Rights and Delegation of Duties by
Servicer. Subject to the following paragraph, the Transferor and the 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 Servicer may be merged or consolidated with or into any Person, or
transfer substantially all of its assets to any Person, in which case any Person
resulting from any merger or consolidation to which the Servicer shall be a
party, or any Person succeeding to the business of the Servicer, shall be the
successor of the Servicer hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided however, that the successor or
surviving person to the Servicer shall be an Eligible Servicer and each
successor to the Servicer by virtue of its acquisition of substantially all of
the Servicer's assets shall be deemed to have made the representations and
warranties set forth in Section 2.03(a) hereof and shall agree in writing to be
bound by each of the Servicer's obligations hereunder; provided further, that,
(i) no representation or warranty of the Servicer is breached at the time of
merger, (ii) no event has occurred that, after notice or lapse of time or both,
would be an Insurance Agreement Event of Default and (iii) an opinion of counsel
to the effect that all conditions precedent to merger have been satisfied and a
security interest opinion have been provided. The Servicer shall provide notice
of any such merger, consolidation or transfer of substantially all of its assets
to the 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.
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Section 6.03. Limitation on Liability of the Transferor, the Servicer and
Others. The 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 Servicer or any Subservicer. In addition, the 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 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 officers, directors, employees and agents; and provided further
that the Servicer will not be liable for any such amount that resulted from any
act or omission to act by it done in conformity with the written instruction of
the Trustee. If the 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 Servicer or Transferor who made such indemnity payment. These indemnities of
the Servicer and the Transferor will survive any transfer of the respective
rights, duties and obligations of the 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 Servicer
after a Servicer Default. Neither the Servicer nor any of its directors,
officers, employees or agents shall be under any liability to the Trust Estate,
the Trustee, any Certificateholder, the Certificate Insurer or the Transferor
for any action taken by the Servicer in its capacity as such (and not in any
other capacity) in good faith or for errors in judgment except for any action
taken or errors committed which caused a breach of a representation or warranty
of the Servicer under Section 2.03(a). The Transferor, the Servicer and any
director, officer, employee or agent of any Transferor or the Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder.
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The Transferor, the Servicer and any director, officer, employee or agent
of the Transferor or the 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 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 Servicer shall be under any
obligation to appear in, prosecute or defend any legal action which is not in
its reasonable judgment incidental to its respective duties under this Agreement
and which in its reasonable judgment may subject it to any expense or liability;
provided however, that the Servicer may in its discretion undertake any such
action which it may deem necessary or desirable in respect to this Agreement and
the rights and duties of the parties hereto and the interest of the
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 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 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 Servicer to
another Person or any Servicer Default.
The 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 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 Servicer in the performance of its duties under this Agreement or by
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reason of reckless disregard of its obligations and duties under this Agreement.
Section 6.04. Transfer of Duties of Servicer. Subject to the provisions of
Section 6.02, the Servicer shall not resign from the obligations and duties
imposed on it by this Agreement as Servicer except upon a determination that by
reason of a change in legal requirements the performance of its duties under
this Agreement would cause it to be in violation of such legal requirements in a
manner which would have a material adverse effect on the Servicer, and the
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 Servicer to perform the duties which render it legally unable
to act or to delegate those duties to another Person. Any such determination
permitting the resignation of the Servicer shall be evidenced by an Opinion of
Counsel to such effect delivered and acceptable to the Trustee and the
Certificate Insurer (unless a Certificate Insurer Default shall have occurred
and be continuing). No resignation of the 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 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 Servicer.
Section 6.05. Servicer May Own Certificates. The 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 Servicer. The Servicer
shall notify the Trustee and the Certificate Insurer promptly after it becomes
the owner or pledgee of a Certificate.
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 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 Servicer or
Subservicer under the terms of the Certificates or this Agreement (including
deposits of the Retransfer Amounts) and such failure
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shall continue unremedied for two Business Days after written notice is received
by the 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 Servicer shall fail to observe or perform any other of the
covenants or agreements on the part of the Servicer in this Agreement, which
failure (i) materially and adversely affects the rights of 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 Servicer by the
Trustee, or to the 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
Servicer; or
(d) the 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 Servicer, the Transferor) and the
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
(f) a claim is made under the Certificate Policy; or
(g) the Servicer fails to deliver the report required to be delivered by
the 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 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
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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
Servicer, the Transferor and the Standby Servicer, (i) terminate all of the
rights and obligations of the 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 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 Servicer. Such
notice shall specify, to the extent possible, the timing and method of
transition of the servicing of the Contracts from the Servicer to the Standby
Servicer or another successor Servicer appointed pursuant to Section 7.02. On
and after the receipt by the Servicer of such written notice and upon the
effective date of the transfer to the Standby Servicer or such other successor
Servicer specified in such notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Certificates or the Contracts or
otherwise, shall pass to and be vested in the Standby Servicer or such other
successor Servicer, pursuant to and under this Section; and, without limitation,
such Person is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, an attorney-in-fact or otherwise, any and all documents and
other instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Contracts and related
documents, or otherwise. The Servicer agrees to cooperate with such Person in
effecting the termination of the Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to such party for
administration by is of all cash amounts which shall thereafter be received with
respect to the 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 Servicer, the Certificate Insurer or from
a Certificateholder. The Trustee promptly shall send 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 Servicer is terminated pursuant to this Section 7.01, then the
Servicer shall bear all of the costs and expenses of transferring the duties and
obligations of the Servicer to a successor Servicer and except as otherwise
agreed by the 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 Servicer as described above, such costs and
expenses (including attorney's
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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 Servicer receives a notice of termination pursuant to Section 7.01, the
Standby Servicer shall be the successor in all respects to the Servicer in its
capacity as Servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof; provided however, that in the event that the Standby Servicer refuses or
is unable to act as successor Servicer, the Trustee or a successor Servicer
appointed pursuant to this Section 7.02 shall be the successor 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 Servicer and the Standby Servicer, may
designate another Person to act as successor Servicer hereunder. As compensation
therefor, the Trustee, its designee, or other successor Servicer, as the case
may be, shall be entitled to all funds relating to the Contracts which the
Servicer would have been entitled to charge to the Certificate Account if the
Servicer had continued to act hereunder. If the Standby Servicer refuses or is
unable to act as successor 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 Servicer hereunder in the assumption of
all or any part of the responsibilities, duties or liabilities of the 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 Servicer other than the Standby Servicer, and any
successor 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 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 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 Servicing
Fee and (B) each Rating Agency delivers a letter to the Trustee to the effect
that such larger Servicing Fee will not result in a reduction or the withdrawal
of the rating assigned by such Rating Agency to the Certificates; and provided
further, however, that the Servicing Fee to a successor Servicer, including the
Trustee,
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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 Servicer's duties as 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 Servicer to the Servicer and the servicing of the Contracts. In the
event that the Trustee shall not seek to appoint a successor Servicer within
three months of its succession to the Servicer's duties as servicer, it shall
resign as 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 Servicer is appointed, the Trustee shall not be liable for
the acts or omissions of such successor Servicer.
Section 7.03. Notification to Certificateholders.
(a) Upon any such termination or appointment of a successor to the
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 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
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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 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
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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;
(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 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
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
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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 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 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 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 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 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 Servicer or the Transferor with any covenant or the breach by
the
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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 Servicer or any Obligor or Dealer, any action of
the 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 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 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 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
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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.
The respective obligations of the Transferor and the 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 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
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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 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 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
Servicer and the Certificate Insurer with prompt notice of any such transaction.
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
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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 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 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 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
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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:
(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;
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(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 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
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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 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
Servicer, the Transferor and the Trustee created hereby (other than the
obligation of the Trustee to make final payments to Certificateholders, the
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
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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
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, former ambassador to the Court of St. ▇▇▇▇▇, living on the
Closing Date.
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 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 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 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
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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.
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
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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.
(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
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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 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, 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 Servicer may, but shall not be obligated to,
enter into any amendment which affects the 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 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
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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
consent 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 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 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
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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 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.
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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, ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, or such other address as may hereafter be furnished to the Servicer and
the Trustee in writing by the Transferor, (b) in the case of the Servicer, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or such
other address as may be hereafter furnished to the Transferor and the Trustee by
the Servicer in writing, (c) in the case of the Trustee, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other address as may hereafter be
furnished to the Transferor and the Servicer in writing by the Trustee, (d) in
the case of the Certificate Insurer, to its address at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or its fax number at (▇▇▇) ▇▇▇-▇▇▇▇, Attention:
Surveillance Department Re: National Auto Finance 1996-1 Trust, 6.33% Automobile
Receivables-Backed Certificates, or such other address or fax number as may
hereafter be furnished to the Transferor, the Servicer and the Trustee in
writing by the Certificate Insurer and (e) in the case of the Collateral Agent,
to its address at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
or such other address as may hereafter be furnished to the Transferor, the
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.
Section 10.06. Intention of the Parties. The Transferor intends that the
Certificates constitute indebtedness of the
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Transferor for federal, state and local income and franchise tax purposes. The
Transferor, the 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
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 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 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 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 Servicer shall at all times maintain each office from which it
services Contracts and its principal executive office within the United States
of America.
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(d) If at any time the Transferor or the 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
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they 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
Servicer.
(e) The 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 Servicer's records regarding any Contracts or
any other portion of the Trust Estate.
(f) The 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 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 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 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
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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 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.
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Section 10.13. Limitation of Liability of Trustee. Notwithstanding
anything contained herein to the contrary (i) this Agreement has been accepted
by ▇▇▇▇▇▇ Trust and Savings Bank not in its individual capacity but solely as
Trustee and in no event shall ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 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 Agreements. To the extent that
it has rights against NAFCO and ACCH under the Purchase Agreements, 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 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 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 Servicer.
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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 ▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ 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
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 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: CHASE MANHATTAN BANK USA,
N.A., 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 Servicer
By: NATIONAL AUTO FINANCE
CORPORATION, its General Partner
By:_________________________________________
▇▇▇▇▇▇ TRUST AND SAVINGS BANK,
not in its individual capacity
but solely as Trustee
By:_________________________________________
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