SALE AND SERVICING AGREEMENT
among
NAL AUTO TRUST 1997-2,
Issuer,
and
AUTORICS II, INC.,
Depositor,
and
NAL ACCEPTANCE CORPORATION,
Servicer
and
LSI FINANCIAL GROUP,
Backup Servicer
Dated as of June 1, 1997
TABLE OF CONTENTS
ARTICLE I
Definitions
Page
SECTION 1.01. Definitions...................................................I-1
SECTION 1.02. Other Definitional Provisions................................I-18
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables....................................II-1
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of the Depositor with Respect
to the Receivables..........................................III-1
SECTION 3.02. Repurchase upon Breach......................................III-1
SECTION 3.03. Custody of Receivable Files.................................III-2
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer...........................................IV-1
SECTION 4.02. Collection and Allocation of Receivable Payments.............IV-1
SECTION 4.03. Realization upon Receivables.................................IV-2
SECTION 4.04. Insurance....................................................IV-2
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles.......IV-3
SECTION 4.06. Covenants of Servicer........................................IV-3
SECTION 4.07. Purchase of Receivables upon Breach..........................IV-3
SECTION 4.08. Servicing Fee................................................IV-4
SECTION 4.09. Servicer's Certificate.......................................IV-4
SECTION 4.10. Annual Statement as to Compliance; Notice of Default.........IV-4
SECTION 4.11. Annual Independent Certified Public Accountants' Report......IV-5
SECTION 4.12. Servicer Expenses............................................IV-5
SECTION 4.13. Appointment of Subservicer...................................IV-5
SECTION 4.14. Oversight of Servicing.......................................IV-6
SECTION 4.15. Duties of Backup Servicer....................................IV-7
SECTION 4.16. Backup Servicing Fee.........................................IV-7
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ARTICLE V
Trust Accounts; Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Establishment of Trust Accounts...............................V-1
SECTION 5.02. Collections...................................................V-3
SECTION 5.03. Application of Collections....................................V-3
SECTION 5.04. Additional Deposits...........................................V-4
SECTION 5.05. Distributions.................................................V-4
SECTION 5.06. Reserve Account...............................................V-5
SECTION 5.07. Statements to Certificateholders and Noteholders..............V-7
SECTION 5.08. Transfer of the Notes.........................................V-8
SECTION 5.09. Dealer Reserve Account........................................V-8
SECTION 5.10. Backup Servicer Account.......................................V-9
SECTION 6.01. Representations of Depositor.................................VI-1
SECTION 6.02. Corporate Existence..........................................VI-2
SECTION 6.03. Liability of Depositor; Indemnities..........................VI-3
SECTION 6.04. Merger or Consolidation of, or Assumption of the Obligations
of, Depositor..............................................VI-4
SECTION 6.05. Limitation on Liability of Depositor and Others..............VI-4
SECTION 6.06. Depositor May Own Certificates or Notes......................VI-5
SECTION 6.07. Sale of Receivables..........................................VI-5
ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer.................................VII-1
SECTION 7.02. Indemnities of Servicer.....................................VII-2
SECTION 7.03. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer..............................................VII-3
SECTION 7.04. Limitation on Liability of Servicer and Others..............VII-4
SECTION 7.05. NAL Not To Resign as Servicer...............................VII-5
SECTION 7.06. Representations of Backup Servicer..........................VII-5
SECTION 7.07. Merger or Consolidation of, or Assumption of the Obligations
of, Backup Servicer.......................................VII-6
SECTION 7.08. Resignation as Backup Servicer..............................VII-6
ARTICLE VIII
Default
SECTION 8.01. Servicer Default...........................................VIII-1
SECTION 8.02. Appointment of Successor...................................VIII-2
SECTION 8.03. Notification to Noteholders and Certificateholders.........VIII-3
SECTION 8.04. Waiver of Past Defaults....................................VIII-4
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ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables.........................IX-1
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment....................................................X-1
SECTION 10.02. Protection of Title to Trust.................................X-2
SECTION 10.03. Notices......................................................X-4
SECTION 10.04. Assignment by the Depositor or the Servicer..................X-4
SECTION 10.05. Limitations on Rights of Others..............................X-4
SECTION 10.06. Severability.................................................X-4
SECTION 10.07. Separate Counterparts........................................X-5
SECTION 10.08. Headings.....................................................X-5
SECTION 10.09. Governing Law................................................X-5
SECTION 10.10. Assignment by Issuer.........................................X-5
SECTION 10.11. Nonpetition Covenants........................................X-5
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee....................................................X-5
SCHEDULE A Schedule of Receivables
EXHIBIT A Form of Distribution Date Statement to Noteholders
EXHIBIT B Form of Distribution Date Statement to Certificateholders
EXHIBIT C Form of Servicer's Certificate
EXHIBIT D Form of Receivables Checklist
EXHIBIT E Form of Receivables Assignment
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SALE AND SERVICING AGREEMENT dated as of June 1, 1997, among NAL AUTO
TRUST 1997-2, a Delaware business trust (the "Issuer"), AUTORICS II, INC., a
Delaware corporation (the "Depositor"), NAL ACCEPTANCE CORPORATION, a Florida
corporation (the "Servicer") and LSI FINANCIAL GROUP, INC. (the "Backup
Servicer").
WHEREAS the Issuer desires to purchase a portfolio of receivables
arising in connection with automobile retail installment sale contracts
generated by NAL Acceptance Corporation in the ordinary course of business which
were sold by NAL Acceptance Corporation to the Seller and by the Seller to the
Depositor;
WHEREAS the Depositor is willing to sell such receivables to
the Issuer; and
WHEREAS NAL Acceptance Corporation is willing to service
such receivables;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"AA" means Auto Analyst, Inc., a Georgia corporation, and
any successor in interest.
"Amount Financed" means, with respect to any Receivable, the amount
advanced under the Receivable toward the purchase price of the Financed Vehicle
and any related costs, exclusive of any amount allocable to the premium of "dual
interest" insurance covering the Financed Vehicle.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate
of finance charges stated in the related Contract.
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"Average Three Month Delinquency Ratio" means, as of any date, the
ratio of the average aggregate Principal Balances of Receivables that are 60
days or more delinquent for each of the three prior calendar months prior to
such date to the average of the Pool Balances as of the end of such periods.
"Backup Servicer" means LSI Financial Group, a California corporation,
and its successors or assigns, when acting in its capacity as Backup Servicer
under this Agreement.
"Backup Servicer Account" means the account designated as such,
established and maintained pursuant to Section 5.10.
"Backup Servicing Fee" means the fee payable to the Backup Servicer for
services rendered during a Collection Period, determined pursuant Section 4.16.
"Backup Servicing Fee Rate" means 0.05% per annum.
"Certificate Balance" equals, as of the Closing Date, the Initial
Certificate Balance and, thereafter, will equal the Initial Certificate Balance
reduced by all amounts allocable to principal previously distributed to
Certificateholders.
"Certificate Distribution Account" has the meaning assigned
to such term in the Trust Agreement.
"Certificate Pool Factor" means, as of the close of business on the
last day of a Collection Period, a seven-digit decimal figure equal to the
Certificate Balance (after giving effect to any reductions therein to be made on
the immediately following Distribution Date) divided by the Initial Certificate
Balance. The Certificate Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Certificate Pool Factor will decline to reflect reductions in
the Certificate Balance.
"Certificateholders" or "Holders" (when used in the context of the
Holders of Certificates) has the meaning assigned to such term in the Trust
Agreement.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount for such date.
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"Certificateholders' Interest Carryover Shortfall" means, with respect
to any Distribution Date, (i) the excess of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date, over the amount in
respect of interest that is actually deposited in the Certificate Distribution
Account on such preceding Distribution Date, plus (ii) 90 days of interest on
the amount of such excess for such preceding Distribution Date, to the extent
permitted by law, at the Pass-Through Rate.
"Certificateholders' Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders' Quarterly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date. Interest with respect
to the Certificates shall be computed on the basis of a 360-day year consisting
of twelve 30-day months for all purposes of this Agreement and the Basic
Documents.
"Certificateholders' Quarterly Interest Distributable Amount" means,
with respect to any Distribution Date, 90 days of interest at the Pass-Through
Rate on the Certificate Balance on the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, on the Closing Date) after
giving effect to all payments of principal to Certificateholders on such
immediately preceding Distribution Date.
"Certificateholders' Quarterly Principal Distributable Amount" means,
with respect to any Distribution Date prior to the Distribution Date on which
the Notes are paid in full, (i) 10% of the Principal Distribution Amount or (ii)
if a Loss Trigger Event has occurred (whether or not such Loss Trigger Event is
subsequently cured), zero; and with respect to any Distribution Date on or after
the Distribution Date on which the Notes are paid in full, 100% of the Principal
Distribution Amount for such Distribution Date (less, on the Distribution Date
on which the Notes are paid in full, the portion thereof payable as principal of
the Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the
close of a particular Distribution Date, the excess of the Certificateholders'
Quarterly Principal Distributable Amount and any outstanding Certificateholders'
Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Certificate
Distribution Account on such particular Distribution Date.
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"Certificateholders' Principal Distributable Amount" means, with
respect to any Distribution Date, the sum of the Certificateholders' Quarterly
Principal Distributable Amount for such Distribution Date and the
Certificateholders' Principal Carryover Shortfall as of the close of the
preceding Distribution Date; provided, however, that the Certificateholders'
Principal Distributable Amount shall not exceed the Certificate Balance. In
addition, on the Final Scheduled Distribution Date, the principal required to be
included in the Certificateholders' Principal Distributable Amount will include
the lesser of (a) (i) any Scheduled Payments of principal due and remaining
unpaid on each Precomputed Receivable and (ii) any principal due and remaining
unpaid on each Simple Interest Receivable, in each case, in the Trust as of the
Final Scheduled Distribution Date or (b) the amount that is necessary (after
giving effect to the other amounts to be deposited in the Certificate
Distribution Account on such Distribution Date and allocable to principal) to
reduce the Certificate Balance to zero.
"Certificates" means the Trust Certificates (as defined in
the Trust Agreement).
"Closing Date" means June 27, 1997.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.01(a)(i).
"Collection Period" means the three calendar-month period ending on the
last day of the month preceding the month of each Distribution Date. Any amount
or balance stated as of the last day of a Collection Period shall give effect to
the following calculations as determined as of the close of business on such
last day: (1) all applications of collections, (2) all current and previous
Payaheads, (3) all applications of Payahead Balances and (4) all distributions
to be made on the following Distribution Date.
"Cumulative Realized Loss Ratio" means, as to any Collection Period,
the ratio of the aggregate Realized Losses in respect of Liquidated Receivables
since the Cutoff Date to the Original Pool Balance.
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"Computer Tape" means a computer tape generated by the Servicer which
provides information relating to the Receivables.
"Contract" means a motor vehicle retail installment sale
contract.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at Four Albany Street, New York, New York, Corporate Trust and Agency
Group, Structured Finance Team; or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Depositor, or the principal corporate trust office of any successor Indenture
Trustee (of which address such successor Indenture Trustee will notify the
Noteholders and the Depositor).
"Custodial Agreement" means the Custodial Agreement dated as of June 1,
1997, among the Issuer, Bankers Trust Company, as Indenture Trustee and
Custodian, and the Servicer.
"Custodian" means Bankers Trust Company, as Custodian under the
Custodial Agreement and any successor Custodian pursuant to the Custodial
Agreement.
"Cutoff Date" means June 1, 1997.
"Dealer" means the dealer, SFI, AA or other entity who sold a Financed
Vehicle and who originated the related Contract or who acquired a Contract and
in either case assigned the related Receivable to NAL under an existing
agreement between it and NAL.
"Dealer Reserve Account" means the account designated as such,
established and maintained pursuant to Section 5.01.
"Delinquency Trigger Event" means, as to any Collection Period, that
the Average Three Month Delinquency Ratio as of the last day of such Collection
Period is greater than 7.5%.
"Delivery" when used with respect to Trust Account Property
means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC and are susceptible of physical delivery, transfer thereof to
I-5
the Indenture Trustee or its nominee or custodian by physical delivery
to the Indenture Trustee or its nominee or custodian endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank, and, with respect to a "certificated
security" (as defined in Section 8-102(1)(a) of the UCC) transfer
thereof (i) by delivery of such certificated security endorsed to, or
registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined
in Section 8-313 of the UCC) and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Indenture Trustee or its
nominee or custodian and as having been credited to a securities
account in the name of the Indenture Trustee and the sending by such
financial intermediary of a confirmation of the purchase of such
certificated security by the Indenture Trustee or its nominee or
custodian, or (ii) by delivery thereof to a "clearing corporation" (as
defined in Section 8-102(3) of the UCC) and the making by such clearing
corporation of appropriate entries on its books reducing the
appropriate securities account of the transferor and increasing the
appropriate securities account of the Indenture Trustee or a financial
intermediary by the amount of such certificated security, the
identification by the clearing corporation of the certificated
securities for the sole and exclusive account of the Indenture Trustee
or such financial intermediary, the maintenance of such certificated
securities by such clearing corporation or a "custodian bank" (as
defined in Section 8-102(4) of the UCC) or the nominee of either
subject to the clearing corporation's exclusive control, the sending of
a confirmation by the financial intermediary of the purchase by the
Indenture Trustee or its nominee or custodian of such securities and
the making by such financial intermediary of entries on its books and
records identifying such certificated securities as belonging to the
Indenture Trustee or its nominee or custodian and as having been
credited to a securities account in the name of the Indenture Trustee
(all of the foregoing, "Physical Property"), and, in any event, any
such Physical Property in registered form shall be in the name of the
Indenture Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect
the complete transfer of ownership of any such Trust Account Property
(as defined herein) to the Indenture Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or
the interpretation thereof;
I-6
(b) with respect to any security issued by the U.S. Treasury,
the Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that is a book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations, the
following procedures, all in accordance with applicable law, including
applicable Federal regulations and Articles 8 and 9 of the UCC:
book-entry registration of such Trust Account Property to an
appropriate "Participant's Securities Account" (as defined in such
applicable Federal regulations) maintained with a Federal Reserve Bank
by a financial intermediary which is also a "Participant" pursuant to
applicable Federal regulations and issuance by such financial
intermediary of a deposit advice or other written confirmation of such
book-entry registration to the Indenture Trustee or its nominee or
custodian of the purchase by the Indenture Trustee or its nominee or
custodian of such book-entry security; the making by such financial
intermediary of entries in its books and records identifying such
book-entry security held through the Federal Reserve System pursuant to
Federal book-entry regulations as belonging to the Indenture Trustee or
its nominee or custodian and as having been credited to a securities
account in the name of the Indenture Trustee and indicating that such
custodian holds such Trust Account Property solely as agent for the
Indenture Trustee or its nominee or custodian; and
(c) with respect to any item of Trust Account Property that is
an uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the Indenture Trustee or a financial
intermediary, the sending of a confirmation by the financial
intermediary of the purchase by the Indenture Trustee or its nominee or
custodian of such uncertificated security, and the making by such
financial intermediary of entries on its books and records identifying
such uncertificated certificates as belonging to the Indenture Trustee
or its nominee or custodian and as having been credited to a securities
account in the name of the Indenture Trustee; and such additional or
alternative procedures as may hereafter become appropriate to effect
complete transfer of ownership of any such Trust Account Property to
the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof.
I-7
"Depositor" means AUTORICS II, Inc., a Delaware corporation
and any successor in interest.
"Distribution Date" means March 15, June 15, September 15 and December
15 of each year or, if such day is not a Business Day, the immediately following
Business Day, commencing on September 15, 1997.
"Eligible Deposit Account" means either (a) a segregated account with
an Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution shall have a credit rating from
the Rating Agency in one of its generic rating categories that signifies
investment grade.
"Eligible Institution" means (a) the corporate trust department of the
Indenture Trustee or the Owner Trustee or (b) a depository institution organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia (or any domestic branch of a foreign bank), which
(i) has either (A) a long-term unsecured debt rating of A or better by the
Rating Agency, or if not rated by the Rating Agency, of A or better by Standard
& Poor's, A1 or better by Moody's and, if rated by the Rating Agency, A or
better by such agency and (ii) whose deposits are insured by the FDIC. If so
qualified, the Indenture Trustee or the Owner Trustee may be considered an
Eligible Institution for the purposes of clause (b) of this definition.
"Eligible Investments" means book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed
as to the full and timely payment by, the United States of America;
I-8
(b) demand deposits, time deposits or certificates of deposit
of any depository institution or trust company incorporated under the
laws of the United States of America or any state thereof (or any
domestic branch of a foreign bank) and subject to supervision and
examination by federal or state banking or depository institution
authorities; provided, however, that at the time of the investment or
contractual commitment to invest therein, the commercial paper or other
short-term unsecured debt obligations thereof (other than such
obligations the rating of which is based on the credit of a Person
other than such depository institution or trust company) shall have a
short-term credit rating from the Rating Agency in the highest
investment category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from the Rating
Agency in the highest investment category granted thereby;
(d) investments in money market mutual funds having a rating
from Standard & Poor's and Moody's and, if the Rating Agency rates such
fund, from such agency in the highest investment category granted by
the Rating Agency so rating such fund (including funds for which the
Indenture Trustee or the Owner Trustee or any of their respective
Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed by, the United States of
America or any agency or instrumentality thereof the obligations of
which are backed by the full faith and credit of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (b); and
(g) any other investment with respect to which the Issuer or
the Servicer has received written notification from the Rating Agency
that the acquisition of such investment as an Eligible Investment will
not result in a withdrawal or downgrading of the ratings on the Notes
or Certificates.
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"Excess Spread" shall have the meaning set forth in Section
5.06(a)(ii).
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Distribution Date" means the December, 2002
Distribution Date.
"Final Scheduled Maturity Date" means June 1, 2002.
"Financed Vehicle" means an automobile, light-duty truck or van,
together with all accessions thereto, securing an Obligor's indebtedness under
the related Receivable.
"Indenture" means the Indenture dated as of June 1, 1997, between the
Issuer and the Indenture Trustee.
"Indenture Trustee" means the Person acting as Indenture Trustee under
the Indenture, its successors in interest and any successor trustee under the
Indenture.
"Initial Certificate Balance" shall have the meaning set
forth in the Trust Agreement.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
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"Insolvency Proceeds" shall have the meaning set forth in
Section 9.01.
"Insurance Policies" means any physical damage, credit life,
disability, theft, mechanical breakdown, dual interest or guaranteed
auto-protection insurance policies or coverage relating to the Financed Vehicles
or Obligors.
"Investment Earnings" means, with respect to any Payment Determination
Date, the investment earnings (net of losses and investment expenses) on amounts
on deposit in the Trust Accounts (other than the Dealer Reserve Account) to be
deposited into the Collection Account and to be deemed to constitute a portion
of the Total Distribution Amount for the related Distribution Date pursuant to
Section 5.01(b).
"Issuer" means NAL Auto Trust 1997-2.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to a Receivable by operation of law as a result of any act or
omission by the related Obligor.
"Liquidated Receivable" means any defaulted Receivable as to which the
Servicer has determined that all amounts which it expects to recover from or on
account of such Receivables have been recovered or with respect to which the
related Financed Vehicle has been realized upon and disposed of and the proceeds
of such disposition have been received; provided that any Receivable which is
120 days or more past due shall be deemed to be a Liquidated Receivable.
"Liquidation Proceeds" means, with respect to any Liquidated
Receivable, the moneys collected in respect thereof, from whatever source,
including Insurance Policy proceeds, net of the sum of any amounts expended by
the Servicer in connection with such liquidation and any amounts required by law
to be remitted to the Obligor on such Liquidated Receivable.
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"Loss Trigger Event" means, as to any Collection Period, that the
Cumulative Realized Loss Ratio as of the last day of any calendar month
occurring during such Collection Period is greater than the percentage set forth
in the table below.
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Loss Trigger Event Table
Cumulative Realized
Month Loss Ratio
----- -------------------
July 1997 0.75%
August 1997 1.67%
September 1997 2.58%
October 1997 3.50%
November 1997 4.42%
December 1997 5.33%
January 1998 6.25%
February 1998 7.17%
March 1998 8.08%
April 1998 9.00%
May 1998 9.31%
June 1998 9.63%
July 1998 9.94%
August 1998 10.25%
September 1998 10.56%
October 1998 10.88%
November 1998 11.19%
December 1998 11.50%
January 1999 11.81%
February 1999 12.12%
March 1999 12.44%
April 1999 12.75%
May 1999 12.94%
June 1999 13.12%
July 1999 13.31%
August 1999 13.50%
September 1999 13.69%
October 1999 13.87%
November 1999 14.06%
December 1999 14.25%
January 2000 14.44%
February 2000 14.62%
March 2000 14.81%
April 2000 15.00%
and thereafter
"Moody's" means Xxxxx'x Investors Service, Inc., and any
successors in interest.
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"NAL" means NAL Acceptance Corporation, a Florida corporation and any
successor in interest.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.01.
"Note Final Scheduled Distribution Date" means the December, 2002
Distribution Date.
"Note Pool Factor" means, as of the close of business on the last day
of a Collection Period, a seven-digit decimal figure equal to the Outstanding
Amount of the Notes divided by the original Outstanding Amount of the Notes. The
Note Pool Factor will be 1.0000000 as of the Closing Date; thereafter, the Note
Pool Factor will decline to reflect reductions in the Outstanding Amount of the
Notes.
"Noteholder" means the Person in whose name a Note is registered in
the Note Register.
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount for such Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, (i) the excess of the Noteholders' Interest Distributable
Amount for the preceding Distribution Date, over the amount in respect of
interest that is actually deposited in the Note Distribution Account on such
preceding Distribution Date, plus (ii) 90 days of interest on the amount of such
excess for such preceding Distribution Date, to the extent permitted by law, at
the Note Rate.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Quarterly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date. For all purposes of this Agreement and the
Basic Documents, interest with respect to the Notes shall be computed on the
basis of a 360-day year consisting of twelve 30-day months.
"Noteholders' Quarterly Interest Distributable Amount" means, with
respect to any Distribution Date, 90 days of interest on the Notes at the Note
Rate on the Outstanding Amount of the Notes on the immediately preceding
Distribution Date (or, in the case of the first Distribution Date, the Closing
Date) after giving effect to all payments of principal to the Noteholders on
such immediately preceding Distribution Date.
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"Noteholders' Quarterly Principal Distributable Amount" means, with
respect to any Distribution Date for so long as the Notes are outstanding, (i)
90% or (ii) if a Loss Trigger Event has occurred (whether or not such Loss
Trigger Event is subsequently cured), 100% of the Principal Distribution Amount;
provided, however, that on the Distribution Date on which the Outstanding Amount
of the Notes is reduced to zero, the portion, if any, of the Principal
Distribution Amount that is not applied to the Notes will be applied to the
principal of the Certificates.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
business on a particular Distribution Date, the excess of the Noteholders'
Quarterly Principal Distributable Amount and any outstanding Noteholders'
Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Note
Distribution Account on such particular Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of the Noteholders' Quarterly Principal
Distributable Amount for such Distribution Date and the Noteholders' Principal
Carryover Shortfall as of the close of the preceding Distribution Date;
provided, however, that the Noteholders' Principal Distributable Amount shall
not exceed the Outstanding Amount of the Notes. In addition, on the Note Final
Scheduled Distribution Date, the Noteholders' Principal Distributable Amount
will not be less than the amount that is necessary (after giving effect to all
other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the Outstanding Amount
of the Notes to zero.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officers' Certificate" means a certificate signed by (a) the chairman
of the board, the president or any vice president and (b) a treasurer, assistant
treasurer, the controller or any assistant controller, secretary or assistant
secretary of the Seller, the Depositor, the Servicer or the Backup Servicer, as
appropriate.
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"Opinion of Counsel" means one or more written opinions of counsel, who
may be an employee of or counsel to the Seller, the Depositor, Servicer or the
Backup Servicer, which counsel shall be acceptable to the Indenture Trustee, the
Owner Trustee or the Rating Agency, as applicable.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means the Person acting as Owner Trustee under the
Trust Agreement, its successors in interest and any successor owner trustee
under the Trust Agreement.
"Pass-Through Rate" means 9.10% per annum.
"Payahead" on a Receivable that is a Precomputed Receivable means the
amount, as of the close of business on the last day of a Collection Period,
computed in accordance with Section 5.03 with respect to such Receivable.
"Payahead Account" means the account designated as such, established
and maintained pursuant to Section 5.01.
"Payahead Balance" on a Receivable that is a Precomputed Receivable
means the sum, as of the close of business on the last day of a Collection
Period, of all Payaheads made by or on behalf of the Obligor with respect to
such Precomputed Receivable, as reduced by applications of previous Payaheads
with respect to such Precomputed Receivable pursuant to Section 5.03.
"Payment Determination Date" means, with respect to any Distribution
Date, the 10th day of the month (or if such day is not a Business Day, the next
succeeding Business Day) of such Distribution Date.
"Physical Property" has the meaning assigned to such term in
the definition of "Delivery" above.
"Pool Balance" means, as of the close of business on the last day of a
Collection Period or any other date of determination, the aggregate Principal
Balance of the Receivables as of such day (excluding Purchased Receivables and
Liquidated Receivables).
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"Precomputed Receivable" means any Receivable under which the portion
of a payment allocable to earned interest (which may be referred to in the
related Contract as an add-on finance charge) and the portion allocable to the
Amount Financed is determined according to the sum of periodic balances or the
sum of monthly balances or any equivalent method or are monthly actuarial
receivables.
"Principal Balance" means (a) with respect to any Precomputed
Receivable as of the close of business on the last day of a Collection Period,
the Amount Financed minus the sum of (i) that portion of all Scheduled Payments
due on or prior to such day allocable to principal using the actuarial or
constant yield method, (ii) any payment of the Purchase Amount with respect to
the Precomputed Receivable allocable to principal and (iii) any prepayment in
full applied to reduce the Principal Balance of the Precomputed Receivable and
(b) with respect to any Simple Interest Receivable as of the close of business
on the last day of a Collection Period, the Amount Financed minus the sum of (i)
the portion of all payments made by or on behalf of the related Obligor on or
prior to such day and allocable to principal using the Simple Interest Method
and (ii) any payment of the Purchase Amount with respect to the Simple Interest
Receivable allocable to principal.
"Principal Distribution Amount" means, with respect to any Distribution
Date, an amount equal to the sum of the following amounts with respect to the
related Collection Period (i) with respect to Precomputed Receivables, the
principal component of all monthly payments scheduled to be received with
respect to such Receivables and all prepayments in full of such Receivables
(including amounts with respect thereto withdrawn from the Payahead Account);
(ii) with respect to Simple Interest Receivables, that portion of all
collections on such Receivables allocable to principal; (iii) the Principal
Balance of all Precomputed Receivables that became Liquidated Receivables during
such Collection Period; (iv) all Liquidation Proceeds attributable to the
principal amount of Simple Interest Receivables that became Liquidated
Receivables during such Collection Period, plus all Realized Losses with respect
to such Liquidated Receivables; and (v) to the extent attributable to principal,
the Purchase Amount of each Receivable that was purchased by NAL or by the
Servicer during the related Collection Period.
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"Purchase Amount" means the amount, as of the close of business on the
last day of a Collection Period, required to prepay in full a Receivable under
the terms thereof including interest to the end of the month of purchase.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.07 or by NAL pursuant to Section 3.02.
"Rating Agency" means Fitch Investors Service, L.P. and its successors
in interest.
"Rating Agency Condition" means, with respect to any action, that the
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to the Rating Agency) prior notice thereof and that the Rating Agency
shall have notified the Depositor, the Servicer, the Owner Trustee and the
Indenture Trustee in writing that such action will not result in a reduction or
withdrawal of the then current rating of the Notes or the Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Contract listed on Schedule A (which Schedule
may be in the form of microfiche).
"Receivable Files" means the documents specified in Section 3.03.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement dated as of June 1, 1997, among NAL, Autorics, Inc., as seller, and
the Depositor, as purchaser.
"Recoveries" means, with respect to any Receivable that becomes a
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in which
such Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts required
by law to be remitted to the Obligor.
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"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 5.01.
"Reserve Account Initial Deposit" means $11,603,581.
"Scheduled Payment" on a Precomputed Receivable means that portion of
the payment required to be made by the Obligor during a calendar month
sufficient to amortize the Principal Balance under the actuarial method over the
term of the Receivable and to provide interest at the APR.
"Seller" means AUTORICS, Inc., a Delaware corporation, and any
successor in interest.
"Servicer" means NAL, in its capacity as the servicer of the
Receivables, and each successor to NAL (in the same capacity) pursuant to
Section 7.03 or 8.02.
"Servicer Default" means an event specified in Section 8.01.
"Servicer's Certificate" means an Officers' Certificate of the Servicer
delivered pursuant to Section 4.09, substantially in the form of Exhibit C.
"Servicing Fee" means the fee payable to the Servicer for services
rendered during a Collection Period, determined pursuant to Section 4.08.
"Servicing Fee Commencement Date" means the Distribution Date that is
the earlier of (i) the March 1998 Distribution Date, (ii) the Distribution Date
on which the amount in deposit in the Reserve Account equals the Specified
Reserve Account Balance or, if a Trigger Event has occurred and not terminated,
the Trigger Event Reserve Account Balance or (iii) the first Distribution Date
following the date on which NAL is replaced as Servicer pursuant to Section
8.02.
"Servicing Fee Rate" means 2.95% per annum.
"SFI" means Special Finance, Inc., a Florida corporation, and any
successor in interest.
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"Simple Interest Method" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the fixed rate of
interest multiplied by the unpaid principal balance multiplied by the period of
time elapsed since the preceding payment of interest was made, and the remainder
of such payment is allocable to principal.
"Simple Interest Receivable" means any Receivable under which the
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"Specified Reserve Account Balance" means, with respect to any
Distribution Date, the greater of 12% of the Pool Balance on the close of
business on the last day of the related Collection Period and $2,700,149 until
the first Distribution Date on which the Pool Balance on the close of business
on the last day of the preceding Collection Period is less than or equal to
$2,700,149. On such Distribution Date and thereafter the Specified Reserve
Account Balance shall equal 100% of the Pool Balance on the close of business on
the last day of the related Collection Period. In no event, however, shall the
Specified Reserve Account Balance exceed the aggregate outstanding principal
balance of the Notes and the Certificates.
"Standard & Poor's" means Standard & Poor's Rating Services, a division
of the XxXxxx-Xxxx Companies and any successor in interest.
"Total Distribution Amount" means, with respect to a Distribution Date,
the sum of the following amounts with respect to the related Collection Period:
(i) that portion of all collections on the Receivables (including amounts
withdrawn from the Payahead Account but excluding amounts deposited into the
Payahead Account) allocable to principal and interest; (ii) all Liquidation
Proceeds, and all Recoveries in respect of Liquidated Receivables that were
written off in prior Collection Periods; (iii) the Purchase Amount of each
Receivable that was purchased by NAL or by the Servicer during the related
Collection Period; and (iv) Investment Earnings.
"Trigger Event" means a Delinquency Trigger Event or a Loss Trigger
Event. A Trigger Event will be deemed to have occurred as to any Distribution
Date if either a Delinquency Trigger Event or a Loss Trigger Event has occurred
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with respect to the related Collection Period. A Trigger Event will be deemed to
have terminated as to any Distribution Date (subject to the reoccurrence of such
event) if neither a Delinquency Trigger Event or a Loss Trigger Event shall have
occurred during the related Collection Period.
"Trigger Event Reserve Account Balance" means, with respect to any
Distribution Date after a Trigger Event has occurred and not terminated, the
greater of 18% of the Pool Balance on the close of business on the last day of
the related Collection Period and $2,700,149 until the first Distribution Date
on which the Pool Balance on the close of business on the last day of the
preceding Collection Period is less than or equal to $2,700,149. On such
Distribution Date and thereafter the Trigger Event Reserve Account Balance shall
equal 100% of the Pool Balance on the close of business on the last day of the
related Collection Period. In no event, however, shall the Trigger Event Reserve
Account Balance exceed the aggregate outstanding principal balance of the Notes
and the Certificates.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit, and all
proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.01.
"Trust Agreement" means the Trust Agreement dated as of June 1, 1997,
between the Depositor and the Owner Trustee.
"Trust Officer" means, in the case of the Indenture Trustee, any
Officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Secretary, Assistant Secretary or
any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject and, with respect to the Owner Trustee, any officer in the
Corporate Trust Administration Department of the Owner Trustee with direct
responsibility for the administration of the Trust Agreement and the Basic
Documents on behalf of the Owner Trustee.
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SECTION 1.02. Other Definitional Provisions.
(a) Capitalized terms used and not otherwise defined herein have the
meanings assigned to them in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Article, Section, Schedule
and Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
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ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. (a) In consideration of the
Issuer's delivery on the Closing Date to or upon the order of the Depositor of
(i) Certificates with a Certificate Balance of $13,507,436 and (ii) Notes with a
principal balance of $121,500,000 the Depositor does hereby sell, transfer,
assign, set over and otherwise convey to the Issuer, without recourse (subject
to the obligations herein), all right, title and interest of the Depositor in
and to (but none of the Depositor's obligations with respect to):
(1) the Receivables and all moneys received thereon on
and after the Cutoff Date plus all Payaheads as of the
Cutoff Date;
(2) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Receivables, any other right to realize upon
property securing a Receivable and any other interest of the Depositor
in such Financed Vehicles including the Depositor's right, title and
interest in the lien on the Financed Vehicles in the name of the
Depositor's agent, Autorics, Inc., NAL or SFI;
(3) any proceeds with respect to the Receivables from claims
on any Insurance Policies relating to Financed Vehicles or Obligors;
(4) proceeds of any recourse (but none of the obligations) to
Dealers on Receivables;
(5) any Financed Vehicle that shall have secured a Receivable
and shall have been acquired by or on behalf of the Seller, the
Depositor, the Servicer, or the Trust;
(6) the Receivable Files;
(7) all right, title and interest of the Depositor under the
Receivables Purchase Agreement, including, without limitation, the
right of the Depositor to cause NAL to purchase Receivables under
certain circumstances;
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(8) the Trust Accounts; and
(9) the proceeds of any and all of the foregoing.
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ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of the Depositor with
Respect to the Receivables. The Depositor makes the following representations
and warranties with respect to the Receivables on which the Issuer relies in
acquiring the Receivables and issuing the Notes and Certificates. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the sale, transfer and
assignment of the Receivables to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) Title. It is the intention of the Depositor that the transfer and
assignment herein contemplated constitute a sale of the Receivables from the
Depositor to the Issuer and that the beneficial interest in and title to the
Receivables not be part of the debtor's estate in the event of the filing of a
bankruptcy petition by or against the Depositor under any bankruptcy law. No
Receivable has been sold, transferred, assigned or pledged by the Depositor to
any Person other than the Issuer. Immediately prior to the transfer and
assignment herein contemplated, the Depositor had good and marketable title to
each Receivable, free and clear of all Liens and rights of others and,
immediately upon the transfer thereof, the Issuer shall have good and marketable
title to each Receivable, free and clear of all Liens and rights of others; and
the transfer has been perfected under the UCC.
(b) All Filings Made. All filings (including UCC filings) necessary in
any jurisdiction to give (i) the Issuer a first perfected ownership interest in
the Receivables and (ii) the Indenture Trustee a first perfected security
interest in the Receivables shall have been made.
SECTION 3.02. Repurchase upon Breach. The Depositor, the Servicer, the
Backup Servicer and the Issuer, as the case may be, shall inform the other
parties to this Agreement, NAL and the Indenture Trustee promptly, in writing,
upon the discovery of any breach of the Depositor's representations and
warranties made pursuant to Section 3.01 or of NAL's representations and
warranties made pursuant to Section 3.02(c) of the Receivables Purchase
Agreement. Unless any such breach shall have been cured by the last day of the
Collection Period following the discovery thereof by NAL or the receipt by NAL
of written notice thereof from the Owner Trustee, the Indenture Trustee, the
Depositor, the Servicer or the Backup Servicer, the Depositor, the Issuer or the
Owner Trustee shall enforce the obligation of NAL under the Receivables Purchase
Agreement, to purchase as of such last day any Receivable with respect to which
such a breach had occurred if such breach has a material and adverse effect on
the interests of the Depositor or the Trust in and to such Receivable. In
consideration for the purchased Receivable, NAL shall remit the Purchase Amount
in the manner specified in Section 6.02 of the
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Receivables Purchase Agreement. Upon payment of such Purchase Amount, NAL shall
have all right, title and interest in such Purchased Receivable and all proceeds
thereof. Subject to the provisions of Section 6.03, the sole remedy of the
Issuer, the Owner Trustee, the Indenture Trustee, the Noteholders or the
Certificateholders with respect to a breach of representations and warranties
pursuant to Section 3.01 and the agreement contained in this Section shall be to
require NAL to purchase Receivables pursuant to this Section and the Receivables
Purchase Agreement.
SECTION 3.03. Custody of Receivable Files. (a) In connection with the
sale and transfer of the Receivables pursuant to this Agreement, the Issuer,
simultaneously with the execution and delivery of this Agreement, is entering
into the Custodial Agreement with the Custodian pursuant to which the Issuer
appoints the Custodian, and the Custodian accepts such appointment, to act as
the agent and bailee of the Issuer (initially), the Indenture Trustee (until all
amounts in respect of the Notes have been paid) and thereafter the Issuer, all
in accordance with the terms of the Custody Agreement, for all purposes of
Article 9 of the UCC, as Custodian of the following documents or instruments,
which are hereby constructively delivered to the Issuer or Indenture Trustee, as
pledgee of the Issuer, as the case may be, with respect to each Receivable:
(i) a list of Receivables in the form of Schedule A hereto,
identifying such Receivable together with the Computer Tape identifying
such Receivable and a completed checklist in the form of Exhibit D
hereto (it being expressly understood and agreed that the Custodian and
Indenture Trustee have no duties or responsibilities for checking or
verifying the accuracy or completeness of such checklist);
(ii) the fully executed original Receivable with manual
signatures and Dealer endorsements, together with executed assignments
thereof by NAL, the Seller and the Depositor in blank, which
assignments shall be substantially in the form of Exhibit E hereto;
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(iii) a written confirmation from the Servicer certifying as
to the Insurance Policies covering the Receivable and stating that they
are in full force and effect;
(iv) the original certificate of title relating to the
Financed Vehicle or (a) a copy of the application for a certificate of
title and (b) a copy of the existing title, lien entry form or receipt
of registration or (c) a copy of the related letter guarantee, in each
case noting the lien of NAL, the Seller or SFI; provided, however, that
at any time during the term hereof the Owner Trustee may request and
require that the Depositor cause the party in whose name the lien is
noted to transfer such lien to the Depositor;
(v) an original or copy of the credit application of
the Obligor; and
(vi) financing statements on Form UCC-1 listing the Owner
Trustee as the secured party with respect to each Receivable and the
other items conveyed pursuant to Section 2.01 and stamped to indicate
filing with the Office of the Secretary of State of the State of
Florida and with the Office of the Secretary of State of Delaware.
(b) Access to Records. The Servicer or the Custodian, as the case may
be, shall provide to (or in the case of the Custodian shall be required pursuant
to the Custodial Agreement to provide to) the Indenture Trustee, the Issuer, the
Backup Servicer, Noteholders and Certificateholders and their duly authorized
representatives, attorneys or auditors access to the Receivable Files in such
cases where the Indenture Trustee, the Issuer, a Noteholder or a
Certificateholder is required by applicable statutes or regulations to review
the related accounts, records and computer systems maintained by the Servicer or
the Custodian, as the case may be, such access being afforded without charge but
only upon reasonable request and during normal business hours at offices of the
Servicer or the Custodian, as the case may be, designated by the Servicer or the
Custodian. Nothing in this Section shall derogate from the obligation of the
Servicer or the Custodian to observe any applicable law prohibiting disclosure
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of information regarding the Obligors, and the failure of the Servicer or the
Custodian to provide access as provided in this Section as the result of such
obligation shall not constitute a breach of this Section.
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ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer. The Servicer, for the benefit of the
Issuer (to the extent provided herein), shall manage, service, administer and
make collections on the Receivables (other than Purchased Receivables) with
reasonable care, acting prudently and in accordance with customary and usual
servicing procedures for other institutional servicers of receivables of the
type subject to this Agreement and applicable law, and to the degree not
inconsistent with the foregoing, using that degree of skill and attention that
the Servicer exercises with respect to all comparable automotive receivables
that it services for itself or others. The Servicer's duties shall include
collection and posting of all payments, responding to inquiries of Obligors on
such Receivables, investigating delinquencies, sending billing statements to
Obligors, reporting tax information to Obligors, accounting for collections, and
furnishing monthly, and annual statements to the Owner Trustee and the Indenture
Trustee with respect to distributions. Subject to the provisions of Section
4.02, the Servicer shall follow its customary standards, policies and procedures
in performing its duties as Servicer. Without limiting the generality of the
foregoing, the Servicer is authorized and empowered to execute and deliver, on
behalf of itself, the Issuer, the Owner Trustee, the Indenture Trustee, the
Certificateholders and the Noteholders or any of them, any and all instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other comparable instruments, with respect to such Receivables or to the
Financed Vehicles securing such Receivables. If the Servicer shall commence a
legal proceeding to enforce a Receivable, the Issuer (in the case of a
Receivable other than a Purchased Receivable) shall thereupon be deemed to have
automatically assigned, solely for the purpose of collection, such Receivable to
the Servicer. If in any enforcement suit or legal proceeding it shall be held
that the Servicer may not enforce a Receivable on the ground that it shall not
be a real party in interest or a holder entitled to enforce such Receivable, the
Owner Trustee shall, at the Servicer's expense and direction, take steps to
enforce such Receivable, including bringing suit in its name or the name of the
Owner Trustee, the Indenture Trustee, the Certificateholders or the Noteholders.
The Owner Trustee shall (and the Custodian pursuant to the Custodial Agreement
shall be required) upon the written request of the Servicer furnish the Servicer
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with any powers of attorney and other documents reasonably necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder.
SECTION 4.02. Collection and Allocation of Receivable Payments. The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable automotive receivables that it services for itself or others. The
Servicer may grant extensions, rebates or adjustments on a Receivable or arrange
with the Obligor to extend or modify the payment schedule, which actions shall
not, for the purposes of this Agreement, modify the original due dates or
amounts of the Scheduled Payments on a Precomputed Receivable or the original
due dates or amounts of the originally scheduled payments of interest on Simple
Interest Receivables; provided, however, that if the Servicer extends the date
for final payment by the Obligor of any Receivable beyond the Final Scheduled
Maturity Date, it shall promptly repurchase the Receivable from the Issuer in
accordance with the terms of Section 4.07. Upon payment of such Purchase Amount,
NAL shall have all right, title and interest in such Purchased Receivable and
all proceeds thereof. The Servicer may in its discretion waive any late payment
charge or any other fees that may be collected in the ordinary course of
servicing a Receivable. The Servicer shall not agree to any alteration of the
interest rate on any Receivable or of the amount of any Scheduled Payment on
Precomputed Receivables or the originally scheduled payments on Simple Interest
Receivables.
SECTION 4.03. Realization upon Receivables. On behalf of the Issuer,
the Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of and liquidate the
Financed Vehicle securing any Receivable as to which the Servicer shall have
determined eventual payment in full is unlikely. The Servicer shall follow such
customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of automotive receivables, which may include
reasonable efforts to realize upon any recourse to Dealers and selling the
Financed Vehicle at public or private sale. The foregoing shall be subject to
the provision that, in any case in which the Financed Vehicle shall have
suffered damage, the Servicer shall not expend funds in connection with the
repair or the repossession of such Financed Vehicle unless it shall determine in
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its discretion that such repair and/or repossession will increase the
Liquidation Proceeds by an amount greater than the amount of such expenses. The
Servicer may not sell any Financed Vehicles to X.X. Xxxxxxx Systems, Inc. for
less than 100% of such Financed Vehicles' wholesale value, determined from the
"Black Book".
SECTION 4.04. Insurance. The Servicer shall, in accordance with its
customary servicing procedures, require that each Obligor shall have obtained
physical damage and theft insurance covering the Financed Vehicle as of the
execution of the Receivable. The Servicer shall notify each insurer providing a
"guaranteed auto protection" insurance policy with respect to the Receivables to
include the Indenture Trustee as an additional insured and its payee on each
such policy. Upon receipt of notification that the insurance required pursuant
to the terms of any Receivable is not in place, the Servicer shall obtain "dual
interest" insurance chargeable to the Obligor in accordance with its customary
servicing procedures.
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles.
The Servicer shall, in accordance with its customary servicing procedures, take
such steps as are necessary to maintain perfection of the security interest
created by each Receivable in the related Financed Vehicle. The Servicer is
hereby authorized to take such steps as are necessary to re-perfect such
security interest on behalf of the Issuer and the Indenture Trustee in the event
of the relocation of a Financed Vehicle or for any other reason.
SECTION 4.06. Covenants of Servicer. The Servicer shall not release the
Financed Vehicle securing any Receivable from the security interest granted by
such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or repossession, nor shall the Servicer impair the rights
of the Issuer, the Indenture Trustee, the Certificateholders or the Noteholders
in such Receivable, nor shall the Servicer (except in the case of an extension
permitted pursuant to Section 4.02) increase the number of scheduled payments
due under a Receivable.
Neither NAL nor any Affiliate thereof shall incur liabilities of any
kind to SunTrust Bank, South Florida, National Association ("SunTrust"), if the
total amount of such liabilities outstanding at any time exceeds $10,000 except
for liabilities with respect to which SunTrust has expressly agreed to
irrevocably and unconditionally waive all right of set-off or other claims that
it may have under contract, applicable law or otherwise with respect to any
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funds or monies SunTrust may hold from time to time pursuant to the Lock-box
Agreement dated November 27, 1995 between NAL, SunTrust and General Electric
Capital Corporation, or any other agreement related to the holding of any
proceeds of the Receivables or the other property conveyed pursuant to Section
2.01.
SECTION 4.07. Purchase of Receivables upon Breach. The Servicer or the
Owner Trustee shall inform the other party and the Indenture Trustee and the
Depositor promptly, in writing, upon the discovery of any breach pursuant to
Section 4.02, 4.05 or 4.06. Unless the breach shall have been cured by the last
day of the Collection Period following such discovery, the Servicer shall
purchase as of such last day any Receivable with respect to which such breach
had occurred if such breach has a material and adverse effect on the interests
of the Depositor or the Trust in and to such Receivable. If the Servicer takes
any action during any Collection Period pursuant to Section 4.02 that impairs
the rights of the Issuer, the Indenture Trustee, the Certificateholders or the
Noteholders in any Receivable or as otherwise provided in Section 4.02, the
Servicer shall purchase such Receivable as of the last day of such Collection
Period. In consideration of the purchase of any such Receivable pursuant to
either of the two preceding sentences, the Servicer shall remit the Purchase
Amount in the manner specified in Section 5.04. Subject to Section 7.02, the
sole remedy of the Issuer, the Owner Trustee, the Indenture Trustee, the
Certificateholders or the Noteholders with respect to a breach pursuant to
Section 4.02, 4.05 or 4.06 shall be to require the Servicer to purchase
Receivables pursuant to this Section. Upon payment of such Purchase Amount, NAL
shall have all right, title and interest in such Purchased Receivable and all
proceeds thereof. The Owner Trustee shall have no duty to conduct any
affirmative investigation as to the occurrence of any condition requiring the
repurchase of any Receivable pursuant to this Section.
SECTION 4.08. Servicing Fee. The Servicing Fee for a Distribution Date
shall equal the product of (a) one-fourth, (b) the Servicing Fee Rate and (c)
the Pool Balance as of the first day of the preceding Collection Period. The
Servicer shall also be entitled to all late fees, prepayment charges (including,
in the case of a Receivable that provides for payments according to the "Rule of
78s" and that is prepaid in full, the difference between the Principal Balance
of such Receivable (plus accrued interest to the date of prepayment) and the
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principal balance of such Receivable computed according to the "Rule of 78s"),
and other administrative fees or similar charges allowed by applicable law with
respect to the Receivables, collected (from whatever source) on the Receivables,
plus any reimbursement pursuant to the last paragraph of Section 7.02.
SECTION 4.09. Servicer's Certificate. Not later than 11:00 a.m. (New
York time) on the 10th day of each month, or if such 10th day is not a Business
Day, the next succeeding Business Day, the Servicer shall deliver to the Owner
Trustee, each Paying Agent, the Indenture Trustee, the Backup Servicer (in
electronic media form acceptable to the Backup Servicer) and the Depositor, with
a copy to the Rating Agency, a Servicer's Certificate substantially in the form
attached hereto as Exhibit C setting forth the applicable information for each
of the items set forth therein. Receivables to be purchased by the Servicer or
by NAL shall be identified by the Servicer by account number with respect to
such Receivable (as specified in Schedule A).
SECTION 4.10. Annual Statement as to Compliance; Notice of Default. (a)
The Servicer shall deliver to the Owner Trustee and the Indenture Trustee,
within 120 days after the end of each fiscal year of the Issuer (commencing with
the fiscal year 1998), an Officers' Certificate, dated as of December 31 of the
preceding year, stating that (i) a review of the activities of the Servicer
during the preceding 12-month period (or such shorter period as shall have
elapsed since the Closing Date) and of its performance under this Agreement has
been made under such officers' supervision and (ii) to the best of such
officers' knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such year or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officers and the nature and status thereof. The Indenture Trustee
shall send a copy of such certificate and the report referred to in Section 4.11
to the Rating Agency. A copy of such certificate and the report referred to in
Section 4.11 may be obtained by any Certificateholder or Noteholder by a request
in writing to the Owner Trustee addressed to the Corporate Trust Office. Upon
the telephone request of the Owner Trustee, the Indenture Trustee will promptly
furnish the Owner Trustee with a list of Noteholders as of the date specified by
the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Backup Servicer and the Rating Agency, promptly after having
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obtained knowledge thereof, but in no event later than five (5) Business Days
thereafter, written notice in an Officers' Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Servicer Default
under Section 8.01.
SECTION 4.11. Annual Independent Certified Public Accountants' Report.
The Servicer shall cause a firm of independent certified public accountants,
which may also render other services to the Servicer, the Depositor or their
Affiliates, to deliver to the Owner Trustee and the Indenture Trustee on or
before February 28 of each year beginning February 28, 1998, a report addressed
to the Board of Directors of the Servicer, to the effect that such firm has
examined the financial statements of the Servicer for the preceding twelve
months or, in the case of the first such report, during such longer period that
shall have elapsed since the Closing Date) and issued its report thereon and
that such examination (a) was made in accordance with generally accepted
auditing standards and accordingly included such tests of the accounting records
and such other auditing procedures as such firm considered necessary in the
circumstances; (b) included tests relating to automotive loans serviced for
others in accordance with the requirements of the Uniform Single Audit Program
for Mortgage Bankers (the "Program"), to the extent the procedures in such
Program are applicable to the servicing obligations set forth in this Agreement;
and (c) except as described in the report, disclosed no exceptions or errors in
the records relating to automobile, light-duty truck and van loans serviced for
others that, in the firm's opinion, paragraph four of such Program requires such
firm to report. In the event such firm requires the Indenture Trustee to agree
to the procedures performed by such firm, the Servicer shall direct the
Indenture Trustee in writing to so agree; it being understood and agreed that
the Indenture Trustee will deliver such letter of agreement in conclusive
reliance upon the direction of the Servicer, and the Indenture Trustee makes no
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
Such report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 4.12. Servicer Expenses. The Servicer shall be required to pay
all expenses incurred by it in connection with its activities hereunder,
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including fees and disbursements of independent accountants, taxes imposed on
the Servicer and expenses incurred in connection with distributions and reports
to Certificateholders and Noteholders.
SECTION 4.13. Appointment of Subservicer. The Servicer may at any time
appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; and provided, further, that the
Servicer shall remain obligated and be liable to the Issuer, the Owner Trustee,
the Indenture Trustee, the Certificateholders and the Noteholders for the
servicing and administering of the Receivables in accordance with the provisions
hereof without diminution of such obligation and liability by virtue of the
appointment of such subservicer and to the same extent and under the same terms
and conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of the subservicer shall be as agreed between
the Servicer and its subservicer from time to time, and none of the Issuer, the
Owner Trustee, the Indenture Trustee, the Certificateholders or the Noteholders
shall have any responsibility therefor.
SECTION 4.14. Oversight of Servicing.
(a) Commencing on the date of execution of this Agreement and
continuing until the earlier of (i) the termination of the Trust created by the
Trust Agreement and (ii) the appointment of the Backup Servicer as Servicer
under this Agreement, the Servicer shall, on the last day of each calendar
month, deliver to the Backup Servicer in the Computer Tape format acceptable to
the Backup Servicer, such information as is necessary to permit the Backup
Servicer to service the Receivables in accordance with the provisions of this
Agreement. The Backup Servicer shall accept and store, but shall not be required
to examine, such information. Upon notice that the Servicer has resigned or upon
the removal of the Servicer under this Agreement, the Backup Servicer shall
assume all responsibilities of the Servicer (or of Indenture Trustee or any
other Person then acting as successor to such Servicer in accordance with
Sections 8.01 and 8.02) under this Agreement within thirty days of such notice
or removal. The Backup Servicer shall service the Receivables in accordance with
provisions of this Agreement.
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(b) On the date that each Servicer's Certificate is delivered by the
Servicer to the Owner Trustee and Indenture Trustee, the Servicer shall also
deliver to the Backup Servicer a Computer Tape containing detailed information
with respect to the Receivables for the related Collection Period. The Backup
Servicer shall determine that (i) the Servicer's Certificate appears on its face
to be complete and (ii) that amounts credited to and withdrawn from the Trust
Accounts and the balance of such Trust Accounts are the same as the amount set
forth in such Servicer's Certificate. To the extent verifiable using the
information contained in the Servicer's Certificate, the Backup Servicer shall
calculate and check that the calculations made by the Servicer in the Servicer's
Certificate are mathematically accurate.
(c) In the event of any discrepancies or exceptions noted by the Backup
Servicer in the Servicer's Certificate, the Backup Servicer shall, within three
Business Days of its receipt of the Servicer's Certificate, notify the Servicer
and the Indenture Trustee of such discrepancies or exceptions. The Servicer
shall consult with the Backup Servicer and use its best efforts to ensure that
such Servicer's Certificate is corrected, and that subsequent Servicer's
Certificates are accurate. If such discrepancies or exceptions cannot be
reconciled within 30 days, the Backup Servicer's interpretation shall prevail
for all subsequent Distribution Dates.
(d) The Backup Servicer will not be responsible for delays attributable
to the Servicer's failure to deliver information, defects in the information
supplied by Servicer or other circumstances beyond the control of the Backup
Servicer.
SECTION 4.15. Duties of Backup Servicer.
(a) The Backup Servicer shall perform such duties and only such duties
as are specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Backup Servicer.
(b) In the absence of bad faith or negligence on its part, the Backup
Servicer may conclusively rely as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Backup Servicer and conforming to the requirements of this
Agreement.
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(c) The Backup Servicer shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if the
repayment of such funds or adequate written indemnity against such risk or
liability is not reasonably assured to it in writing prior to the expenditure or
risk of such funds or incurrence of financial liability.
(d) The Servicer shall indemnify, defend and hold harmless the Backup
Servicer, its agents, officers, directors or employees from and against any
claim, action, loss, damage, penalty, fine, cost, expense, or other liability,
including court costs and reasonable attorney's fees and expenses, incurred as a
result of its acts or omissions or its breach of its own representations made in
this Agreement or the Backup Servicer's performance of its duties under this
Agreement. The right of indemnification provided hereby shall survive the
termination of this Agreement. The Servicer shall not be liable to the Backup
Servicer, under this Section 4.15 or otherwise, for the improper acts,
negligence or bad faith of the Backup Servicer.
SECTION 4.16. Backup Servicing Fee.
The Backup Servicing Fee shall equal the product of (a) one-fourth, (b)
the Backup Servicing Fee Rate and (c) the Pool Balance as of the first day of
the preceding Collection Period.
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ARTICLE V
Trust Accounts; Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Establishment of Trust Accounts. (a) (i) The Servicer,
for the benefit of the Noteholders and the Certificateholders, shall establish
and maintain in the name of the Indenture Trustee an Eligible Deposit Account
(the "Collection Account"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Noteholders and the
Certificateholders.
(ii) The Servicer, for the benefit of the Noteholders,
shall establish and maintain in the name of the Indenture Trustee an
Eligible Deposit Account (the "Note Distribution Account"), bearing a
designation clearly indicating that the funds deposited therein are
held for the benefit of the Noteholders.
(iii) The Servicer, for the benefit of the Noteholders
and the Certificateholders, shall establish and maintain in the name of
the Indenture Trustee an Eligible Deposit Account (the "Reserve
Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Noteholders and the
Certificateholders.
(iv) The Servicer, for the benefit of the Noteholders
and the Certificateholders, shall establish and maintain in the name of
the Indenture Trustee an Eligible Deposit Account (the "Payahead
Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Noteholders and the
Certificateholders.
(v) The Servicer, for the benefit of the Noteholders,
the Certificateholders and NAL, shall establish and maintain in the
name of the Indenture Trustee an Eligible Deposit Account (the "Dealer
Reserve Account") bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Noteholders,
the Certificateholders, the Depositor and NAL.
(b) With respect to the Collection Account, the Note Distribution
Account, the Reserve Account, the Payahead Account and the Dealer Reserve Amount
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(collectively the "Trust Accounts") funds on deposit in such Trust Accounts
(other than the Note Distribution Account) shall be invested by the Indenture
Trustee in Eligible Investments. All such Eligible Investments of the Trust
Accounts shall be held by the Indenture Trustee for the benefit of the
beneficiaries of such accounts; provided, that on each Payment Determination
Date all interest and other investment income (net of losses and investment
expenses) on funds on deposit in the Trust Accounts (other than the Dealer
Reserve Account) shall be deposited into the Collection Account and shall be
deemed to constitute a portion of the Total Distribution Amount for the related
Distribution Date. Investment income (net of losses and investment expenses) on
the Dealer Reserve Account will be payable on each Distribution Date to the
Depositor. Other than as permitted by the Rating Agency, funds on deposit in the
Trust Accounts shall be invested in Eligible Investments that will mature not
later than the Business Day immediately preceding the next Distribution Date.
Funds deposited in a Trust Account on a day which immediately precedes a
Distribution Date are not required to be invested overnight.
(c) (i) The Indenture Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Trust
Accounts and in all proceeds thereof (including all income thereon) and
all such funds, investments, proceeds and income shall be part of the
Owner Trust Estate. The Trust Accounts shall be under the sole dominion
and control of the Indenture Trustee for the benefit of the Noteholders
and the Certificateholders (and in the case of the Dealer Reserve
Account, NAL), as the case may be. If, at any time, any of the Trust
Accounts ceases to be an Eligible Deposit Account, the Indenture
Trustee (or the Servicer on its behalf) shall within 10 Business Days
(or such longer period, not to exceed 30 calendar days, as to which the
Rating Agency may consent) establish a new Trust Account as an Eligible
Deposit Account and shall transfer any cash and/or any investments to
such new Trust Account.
(ii) With respect to the Trust Account Property, the Indenture
Trustee agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in
deposit accounts shall be held solely in the Eligible Deposit
Accounts, subject to the last sentence of Section 5.01(c)(i);
and each such Eligible Deposit Account shall be subject to the
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exclusive custody and control of the Indenture Trustee, and
the Indenture Trustee shall have sole signature authority with
respect thereto;
(B) any Trust Account Property that constitutes
Physical Property shall be delivered to the Indenture Trustee
in accordance with paragraph (a) of the definition of
"Delivery" and shall be held, pending maturity or disposition,
solely by the Indenture Trustee or a financial intermediary
(as such term is defined in Section 8-313(4) of the UCC)
acting solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to
federal book-entry regulations shall be delivered in
accordance with paragraph (b) of the definition of "Delivery"
and shall be maintained by the Indenture Trustee, pending
maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in
such paragraph; and
(D) any Trust Account Property that is an
"uncertificated security" under Article VIII of the UCC and
that is not governed by clause (C) above shall be delivered to
the Indenture Trustee in accordance with paragraph (c) of the
definition of "Delivery" and shall be maintained by the
Indenture Trustee, pending maturity or disposition, through
continued registration of the Indenture Trustee's (or its
nominee's) ownership of such security.
(iii) The Servicer shall have the power, revocable by the
Indenture Trustee or by the Owner Trustee with the consent of the
Indenture Trustee, to instruct the Indenture Trustee to make
withdrawals and payments from the Trust Accounts for the purpose of
permitting the Servicer or the Owner Trustee to carry out its
respective duties hereunder or permitting the Indenture Trustee to
carry out its duties under the Indenture.
(d) The Servicer shall on or prior to each Distribution Date (and prior
to deposits to the Note Distribution Account or the Certificate Distribution
Account) transfer from the Collection Account to the Payahead Account an amount
equal to the increase in the Payahead Balance as described in Section 5.03
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received by the Servicer during the related Collection Period or, if the
Payahead Balance decreased during such Collection Period, shall transfer an
amount equal to the amount of such decrease from the Payahead Account to the
Collection Account.
(e) The Servicer shall withdraw from the Collection Account any amounts
determined by the Servicer to have been remitted thereto in error.
SECTION 5.02. Collections. The Servicer shall remit within two Business
Days of receipt thereof to the Collection Account all payments by or on behalf
of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Liquidation Proceeds and Recoveries, both as collected
during the Collection Period.
SECTION 5.03. Application of Collections. All collections
for the Collection Period shall be applied by the Servicer as
follows:
With respect to each Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor shall be applied
first, in the case of Precomputed Receivables, to the Scheduled Payment
and, in the case of Simple Interest Receivables, to interest and
principal in accordance with the Simple Interest Method. With respect
to Precomputed Receivables, any remaining excess shall be added to the
Payahead Balance, and shall be applied to prepay the Precomputed
Receivable (in reduction of the Payahead Balance as evidenced by a
transfer of the net amount of such reduction from the Payahead Account
to the Collection Account), but only if the sum of such excess and the
previous Payahead Balance shall be sufficient to prepay the Receivable
in full. Otherwise, any such remaining excess payments shall constitute
a Payahead (as shall the accumulated amount of such excess on the
Receivables as of the Cut-off Date) and shall increase the Payahead
Balance. With respect to a Precomputed Receivable the related payment
on behalf of which is less than the Scheduled Payment, amounts (to the
extent of the related Payahead Balance) in respect of such deficiency
will be transferred from the Payahead Account to the Collection Account
in accordance with Section 5.01(d).
SECTION 5.04. Additional Deposits. The Servicer and the Depositor shall
deposit or cause to be deposited in the Collection Account the aggregate
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Purchase Amount with respect to Purchased Receivables, and the Servicer shall
deposit therein all amounts to be paid under Section 9.01. The Servicer will
deposit the aggregate Purchase Amount with respect to Purchased Receivables in
the Collection Account when such obligations are due.
SECTION 5.05. Distributions. (a) On each Payment Determination Date,
the Servicer shall calculate all amounts required to be deposited in the Note
Distribution Account and the Certificate Distribution Account.
(b) On each Distribution Date, the Servicer shall instruct the
Indenture Trustee (based on the information contained in the Servicer's
Certificate delivered on the related Payment Determination Date pursuant to
Section 4.09) to make the following deposits and distributions for receipt by
the Servicer or deposit in the applicable account by 1:00 p.m. (New York time),
to the extent of the Total Distribution Amount, in the following order of
priority:
(i) (A) to the Backup Servicer, the Backup Servicing Fee
(and all unpaid Backup Servicing Fees from prior Collection Periods) and
(B) on and after the Servicing Fee Commencement Date, to the Servicer,
the Servicing Fee (and all unpaid Servicing Fees from prior Collection
Periods);
(ii) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clause (i), the
Noteholders' Interest Distributable Amount;
(iii) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) and
(ii), the Certificateholders' Interest Distributable Amount;
(iv) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iii), the Noteholders' Principal Distributable Amount;
(v) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iv), the Certificateholders' Principal Distributable Amount;
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(vi) to the Reserve Account, the Total Distribution Amount
remaining after application of clauses (i) through (v), as and to the
extent provided in Section 5.06; and
(vii) to the Depositor, any remaining amount.
Notwithstanding that the Notes have been paid in full, the Indenture Trustee
shall continue to maintain the Collection Account hereunder until the
Certificate Balance is reduced to zero.
SECTION 5.06. Reserve Account. (a) (i) On the Closing Date, the
Owner Trustee will deposit, on behalf of the Depositor, the Reserve Account
Initial Deposit into the Reserve Account from the net proceeds of the sale of
the Notes and the Certificates.
(ii) If on a Distribution Date (i) the amount on deposit
in the Reserve Account, after any withdrawals therefrom on or prior to
such Distribution Date, is less than the Specified Reserve Account
Balance, there shall be deposited into the Reserve Account on such
Distribution Date pursuant to Section 5.05(b)(vi) the portion of the
Total Distribution Amount on such Distribution Date remaining after
payment of the Backup Servicing Fee, the Servicing Fee (on and after
the Servicing Fee Commencement Date), the Noteholders' Interest
Distributable Amount, the Certificateholders' Interest Distributable
Amount, the Noteholders' Principal Distributable Amount and the
Certificateholders' Principal Distributable Amount (such amount, the
"Excess Spread") until the amount on deposit in the Reserve Account
equals the Specified Reserve Account Balance for such Distribution Date
or (ii) the amount on deposit in the Reserve Account, after any
withdrawals therefrom on or prior to such Distribution Date, is less
than the Trigger Event Reserve Account Balance and a Trigger Event has
occurred and not terminated, there shall be deposited into the Reserve
Account on such Distribution Date pursuant to Section 5.05(b)(vi) the
Excess Spread, if any, for such Distribution Date until the amount on
deposit in the Reserve Account equals the Trigger Event Reserve Account
Balance.
(b) Unless a Trigger Event has occurred and has not terminated, if the
amount on deposit in the Reserve Account on any Distribution Date (after giving
effect to all deposits
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thereto or withdrawals therefrom on such Distribution Date) is greater than the
Specified Reserve Account Balance for such Distribution Date, the Servicer shall
instruct the Indenture Trustee to distribute the amount of such excess to the
Depositor. If a Trigger Event has occurred and has not terminated, if the amount
on deposit in the Reserve Account on any Distribution Date (after giving effect
to all deposits thereto or withdrawals therefrom on such Distribution Date) is
greater than the Trigger Event Reserve Account Balance for such Distribution
Date, the Servicer shall instruct the Indenture Trustee to distribute the amount
of such excess to the Depositor.
(c) In the event that the Noteholders' Interest Distributable Amount
for a Distribution Date exceeds the amount deposited into the Note Distribution
Account pursuant to Section 5.05(b)(ii) on such Distribution Date, the Servicer
shall instruct the Indenture Trustee to withdraw from the Reserve Account on
such Distribution Date an amount equal to such excess, to the extent of funds
available therein, and deposit such amount into the Note Distribution Account on
such Distribution Date.
(d) In the event that the Certificateholders' Interest Distributable
Amount for a Distribution Date exceeds the amount deposited into the Certificate
Distribution Account pursuant to Section 5.05(b)(iii) on such Distribution Date,
the Servicer shall instruct the Indenture Trustee to withdraw from the Reserve
Account on such Distribution Date an amount equal to such excess, to the extent
of funds available therein after giving effect to paragraph (c) above, and
deposit such amount into the Certificate Distribution Account on such
Distribution Date.
(e) In the event that the Noteholders' Principal Distributable Amount
for a Distribution Date exceeds the amount deposited into the Note Distribution
Account pursuant to Section 5.05(b)(iv) on such Distribution Date, the Servicer
shall instruct the Indenture Trustee to withdraw from the Reserve Account on
such Distribution Date an amount equal to such excess, to the extent of funds
available therein after giving effect to paragraphs (c) and (d) above, and
deposit such amount into the Note Distribution Account on such Distribution
Date.
(f) In the event that the Certificateholders' Principal Distributable
Amount for a Distribution Date exceeds the amount deposited into the Certificate
Distribution Account pursuant to Section 5.05(b)(v) on such Distribution Date,
the Servicer shall instruct the Indenture Trustee to withdraw from the Reserve
Account on such Distribution Date an amount equal to such excess, to the extent
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of funds available therein after giving effect to paragraphs (c), (d) and (e)
above, and deposit such amount into the Certificate Distribution Account on such
Distribution Date.
(g) Following the payment in full of the aggregate Outstanding Amount
of the Notes and the Certificate Balance and of all other amounts owing or to be
distributed hereunder or under the Indenture or the Trust Agreement to
Noteholders and Certificateholders and the termination of the Trust, any amount
remaining on deposit in the Reserve Account shall be distributed to the
Depositor.
(h) Upon any distribution to the Depositor of amounts from the Reserve
Account in accordance with the terms hereof, neither the Noteholders nor the
Certificateholders will have any rights in, or claims to, such amounts.
SECTION 5.07. Statements to Certificateholders and Noteholders. (a) On
or prior to each Distribution Date, the Servicer shall provide to the Indenture
Trustee (with a copy to the Rating Agency and each Paying Agent) for the
Indenture Trustee to forward to each Noteholder of record as of the most recent
Record Date and to the Owner Trustee (with a copy to each Paying Agent) for the
Owner Trustee to forward to each Certificateholder of record as of the most
recent Record Date a statement substantially in the form of Exhibits A and B,
respectively, setting forth at least the following information as to the Notes
and the Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal
allocable to the Notes and to the Certificates;
(ii) the amount of such distribution allocable to interest
allocable to the Notes and to the Certificates;
(iii) the Pool Balance as of the close of business on the
last day of the preceding Collection Period;
(iv) the Outstanding Amount of the Notes, the Note Pool
Factor, the Certificate Balance and the Certificate Pool Factor as of the
close of business on the last day of the preceding Collection Period,
after giving effect to payments allocated to principal reported under
clause (i) above;
(v) the amount of the Servicing Fee paid to the Servicer,
and the amount of the Backup Servicing Fee paid to the Backup Servicer,
each with respect to the related Collection Period;
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(vi) the amount of aggregate Realized Losses, if any, with
respect to the related Collection Period;
(vii) the aggregate Principal Balance of Receivables that are
30 to 59 days, 60 to 89 days and 90 days or more delinquent;
(viii) the Average Three Month Delinquency Ratio and the
Cumulative Realized Loss Ratio of the last day of the related Collection
Period;
(ix) the Noteholders' Interest Carryover Shortfall, the
Noteholders' Principal Carryover Shortfall, the Certificateholders'
Interest Carryover Shortfall and the Certificateholders' Principal
Carryover Shortfall, if any, after giving effect to payments on such
Distribution Date, and the changes in such amounts from the preceding
statement;
(x) the aggregate Purchase Amounts for Receivables, if any,
that were purchased by NAL or the Servicer during the related Collection
Period;
(xi) the balance, if any, of the Reserve Account after giving
effect to deposits and withdrawals to be made on such Distribution Date,
and the change in such balance from the preceding statement; and
(xii) the aggregate Payahead Balance.
Each amount set forth under clauses (i), (ii), (v) and (ix) above shall
be expressed as a dollar amount per $1,000 of original principal balance of a
Certificate or Note, as applicable.
(b) On or prior to the 15th day of each month that is not a
month in which a Distribution Date occurs and on or prior to each
Distribution Date, the Indenture Trustee shall forward to each
Noteholder of record and the Owner Trustee shall forward to each
Certificateholder of record the Servicer's Certificate provided to it
pursuant to Section 4.09 (except that on any Distribution Date
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information otherwise provided to such holder pursuant to clause (a) of
this Section 5.08 need not have been included in such certificate).
SECTION 5.08. Transfer of the Notes. In the event any Holder of the
Notes shall wish to transfer such Note, the Servicer shall provide to such
Holder and any prospective transferee designated by such Holder information
regarding the Notes and the Receivables and such other information as shall be
necessary to satisfy the condition to eligibility set forth in Rule 144A(d)(4)
for transfer of any such Note without registration thereof under the Securities
Act of 1933, as amended, pursuant to the exemption from registration provided by
Rule 144A.
SECTION 5.09. Dealer Reserve Account. (a) On the Closing
Date, the Owner Trustee will deposit, on behalf of the Depositor,
an amount equal to $106,822.93 into the Dealer Reserve Account.
(b) On each Distribution Date, the Servicer shall be entitled to
withdraw from the Dealer Reserve Account for payment to NAL, an amount equal to
the amount payable or paid by NAL to Dealers (other than SFI and AA) during the
related Collection Period in respect of dealer reserves on the Receivables and
amounts to which NAL may be entitled from such dealer reserves under NAL's
agreements with such Dealers. After payment in full, or the provision for such
payment, of all amounts payable to Dealers (other than SFI and AA) in respect of
dealer reserves on the Receivables, any funds remaining on deposit in the Dealer
Reserve Account will be paid to the Depositor. Amounts on deposit in the Dealer
Reserve Account will not be available to make payments on the Securities or for
any other purpose other than that set forth above in this clause (b).
SECTION 5.10. Backup Servicer Account. (a) The Servicer, for the
benefit of the Backup Servicer, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account (the "Backup Servicer Account")
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Backup Servicer. The Backup Servicer Account shall
not be an asset of the Trust.
(b) Funds on deposit in the Backup Servicer Account shall be invested
at the direction of the Servicer by the Indenture Trustee in Eligible
Investments described in clause (d) of the definition thereof that will mature
not later than 30 days.
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(c) Funds on deposit in the Backup Servicer Account shall be used
solely to reimburse the Backup Servicer for its expenses relating to its
appointment as successor Servicer pursuant to Section 8.01 or 8.02. Amounts on
deposit in the Backup Servicer Account will not be available to make payments on
the Securities or for any other purpose other than that set forth in this clause
(d).
(d) Following the payment in full of (i) all amounts described under
subsection (d) hereof and (ii) the aggregate Outstanding Amount of the Notes and
the Certificate Balance and of all other amounts owing or to be distributed
hereunder or under the Indenture or the Trust Agreement to Noteholders and
Certificateholders and the termination of the Trust, any amount remaining on
deposit in the Backup Servicer Account shall be distributed to the Depositor.
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ARTICLE VI
The Depositor
SECTION 6.01. Representations of Depositor. The Depositor makes the
following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Depositor is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Delaware, with the corporate power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the corporate
power, authority and legal right to acquire and own the Receivables.
(b) Due Qualification. The Depositor is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease of
its property or the conduct of its business shall require such qualifications.
(c) Power and Authority. The Depositor has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; the
Depositor has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Issuer, and the Depositor shall have
duly authorized such sale and assignment to the Issuer by all necessary
corporate action; and the execution, delivery and performance of this Agreement
has been duly authorized by the Depositor by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Depositor enforceable in accordance with its terms.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the certificate of
incorporation or bylaws of the Depositor, or any indenture, agreement or other
instrument to which the Depositor is a party or by which it is bound; or result
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in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); or violate any law or, to the best of the
Depositor's knowledge, any order, rule or regulation applicable to the Depositor
of any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the Depositor or
its properties.
(f) No Proceedings. There are no proceedings or investigations pending,
or to the Depositor's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (i) asserting the invalidity
of this Agreement, the Receivables Purchase Agreement, the Indenture or any of
the other Basic Documents, the Notes or the Certificates, (ii) seeking to
prevent the issuance of the Notes or the Certificates or the consummation of any
of the transactions contemplated by this Agreement, the Receivables Purchase
Agreement, the Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement, the Receivables Purchase Agreement, the
Indenture, any of the other Basic Documents, the Notes or the Certificates or
(iv) which might adversely affect the federal or state income tax attributes of
the Notes or the Certificates.
(g) Principal Place of Business. The principal place of business and
chief executive office of the Depositor are located at the place set forth in
Section 10.03(a) and such location has not changed since the date the Depositor
was incorporated.
(h) Use of Names. The legal name of the Depositor is the name used by
it in this Agreement and the Depositor has not changed its name since the date
of its incorporation and does not have trade names, fictitious names, assumed
names or "doing business" names.
(i) Solvency. The Depositor is solvent and will not become insolvent
after giving effect to the transactions contemplated in this Agreement; the
Depositor is paying its debts, if any, as they become due; the Depositor, after
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giving effect to the transactions contemplated in this Agreement, will have
adequate capital to conduct its business.
SECTION 6.02. Corporate Existence. (a) During the term of this
Agreement, the Depositor will keep in full force and effect its existence,
rights and franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
(b) During the term of this Agreement, the Depositor shall observe the
applicable legal requirements for the recognition of the Depositor as a legal
entity separate and apart from its Affiliates, including the following:
(i) the Depositor shall maintain corporate records and
books of account separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the
Depositor shall not commingle its assets and funds with those of its
Affiliates;
(iii) the Depositor shall hold such appropriate meetings of
its board of directors as are necessary to authorize all the Depositor's
corporate actions required by law to be authorized by the board of
directors, shall keep minutes of such meetings and of meetings of its
stockholder(s) and observe all other customary corporate formalities (and
any successor Depositor not a corporation shall observe similar
procedures in accordance with its governing documents and applicable
law);
(iv) the Depositor shall at all times hold itself out to the
public under the Depositor's own name as a legal entity separate and
distinct from its Affiliates;
(v) all transactions and dealings between the Depositor and
its Affiliates will be conducted on an arm's-length basis;
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(vi) except as provided for by the Basic Documents, the
Depositor shall not utilize NAL as its agent and shall not agree to act
as the agent of any other Person; and
(vii) the Depositor shall at all times have at least one
director that is an "Independent Director" as such term is defined in the
certificate of incorporation.
SECTION 6.03. Liability of Depositor; Indemnities. (a) The Depositor
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Depositor under this Agreement.
(b) The Depositor shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Certificateholders and the
Noteholders and any of the officers, directors, employees and agents of the
Issuer, the Owner Trustee and the Indenture Trustee from and against any loss,
liability or expense incurred by reason of (i) the Depositor's willful
misfeasance, bad faith or negligence in the performance of its duties under this
Agreement or by reason of reckless disregard of its obligations and duties under
this Agreement and (ii) the Depositor's or the Issuer's violation of federal or
state securities laws in connection with the offering and sale of the Notes and
the Certificates.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee and the termination of
this Agreement and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Depositor shall have made any indemnity payments
pursuant to this Section and the Person to or on behalf of whom such payments
are made thereafter shall collect any of such amounts from others, such Person
shall promptly repay such amounts to the Depositor, without interest.
SECTION 6.04. Merger or Consolidation of, or Assumption of the
Obligations of, Depositor. Any Person (a) into which the Depositor may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Depositor shall be a party or (c) which may succeed to the properties and
assets of the Depositor substantially as a whole, which Person in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Depositor under this Agreement, shall be the successor to the Depositor
hereunder without the execution or filing of any document or any further act by
any of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 3.01 shall have been breached and no Servicer Default, and
no event that, after notice or lapse of time, or both, would become a Servicer
Default shall have occurred and be continuing, (ii) the Depositor shall have
delivered to the Owner Trustee and the Indenture Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, (iii) the Rating Agency
Condition shall have been satisfied with respect to such transaction and (iv)
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the Depositor shall have delivered to the Owner Trustee and the Indenture
Trustee an Opinion of Counsel stating that, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary fully to preserve and
protect the interest of the Owner Trustee and Indenture Trustee, respectively,
in the Receivables and reciting the details of such filings, or (B) no such
action shall be necessary to preserve and protect such interests.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with clauses (i), (ii), (iii) and (iv)
above shall be conditions to the consummation of the transactions referred to in
clause (a), (b) or (c) above.
SECTION 6.05. Limitation on Liability of Depositor and Others. The
Depositor and any director, officer, employee or agent of the Depositor may rely
in good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement and that in its opinion may involve it in any
expense or liability.
SECTION 6.06. Depositor May Own Certificates or Notes. The Depositor
and any Affiliate thereof may in its individual or any other capacity become the
owner or pledgee of Certificates or Notes with the same rights as it would have
if it were not the Depositor or an Affiliate thereof, except as expressly
provided herein or in any Basic Document.
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SECTION 6.07. Sale of Receivables. The Depositor shall take no actions
inconsistent with the Trust's ownership of the Receivables. The Depositor shall
promptly respond to any third-party inquiries regarding the Receivables by
indicating that ownership thereof has been transferred to the Trust.
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ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer. The Servicer makes the
following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the state
of its incorporation, with the corporate power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the corporate power, authority and legal right to acquire, own, sell and
service the Receivables.
(b) Due Qualification. The Servicer is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; and
the execution, delivery and performance of this Agreement have been duly
authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer enforceable in accordance with its terms.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof shall not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement or other
instrument to which the Servicer is a party or by which it is bound; or result
in the creation or imposition of any Lien upon any of its properties pursuant to
VII-1
the terms of any such indenture, agreement or other instrument (other than this
Agreement); or violate any law or any order, rule or regulation applicable to
the Servicer of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Servicer or its properties.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the Servicer's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties: (i) asserting the invalidity
of this Agreement, the Receivables Purchase Agreement, the Indenture, any of the
other Basic Documents, the Notes or the Certificates, (ii) seeking to prevent
the issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Receivables Purchase Agreement,
the Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement, the Receivables Purchase Agreement, the
Indenture, any of the other Basic Documents, the Notes or the Certificates or
(iv) relating to the Servicer and which might adversely affect the federal or
state income tax attributes of the Notes or the Certificates.
(g) No Insolvent Obligors. As of the Cutoff Date, no Obligor on a
Receivable is shown on the Receivable Files as the subject of a bankruptcy
proceeding.
SECTION 7.02. Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement:
(a) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Noteholders,
the Certificateholders, and the Depositor, their respective officers, directors,
employees and agents from and against any and all costs, expenses, losses,
VII-2
damages, claims and liabilities, arising out of or resulting from the use,
ownership or operation by the Servicer or any Affiliate thereof of a Financed
Vehicle.
(b) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Backup Servicer and the Depositor
and their respective officers, directors, employees and agents from and against
any taxes that may at any time be asserted against any such Person with respect
to the transactions contemplated herein and in the Basic Documents, including
any sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but, in the case of the Issuer, not including any
taxes asserted with respect to, and as of the date of, the sale of the
Receivables to the Issuer or the issuance and original sale of the Certificates
and the Notes, or asserted with respect to ownership of the Receivables, or
federal or other income taxes arising out of distributions on or transfers of
the Certificates or the Notes) and costs and expenses in defending against the
same.
(c) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Depositor,
the Certificateholders and the Noteholders and their respective officers,
directors, employees and agents from and against any and all costs, expenses,
losses, claims, damages and liabilities to the extent that such cost, expense,
loss, claim, damage or liability arose out of, or was imposed upon any such
Person through, the negligence, willful misfeasance or bad faith of the Servicer
in the performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
(d) The Servicer shall indemnify, defend and hold harmless the Owner
Trustee and the Indenture Trustee and their respective officers, directors,
employees and agents from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties herein and in the Trust
Agreement contained, in the case of the Owner Trustee, and in the Indenture
contained, in the case of the Indenture Trustee, except to the extent that such
cost, expense, loss, claim, damage or liability: (i) in the case of the Owner
Trustee, shall be due to the willful misfeasance, bad faith or negligence
(except for errors in judgment) of the Owner Trustee or, in the case of the
VIII-3
Indenture Trustee, shall be due to the willful misfeasance, bad faith or
negligence (except for errors in judgment) of the Indenture Trustee; or (ii) in
the case of the Owner Trustee, shall arise from the breach by the Owner Trustee
of any of its representations or warranties set forth in Section 7.03 of the
Trust Agreement.
(e) The Servicer shall pay any and all taxes levied or assessed upon
all or any part of the Owner Trust Estate.
For purposes of this Section, in the event of the termination of the
rights and obligations of NAL (or any successor thereto pursuant to Section
7.03) as Servicer pursuant to Section 8.01, or a resignation by such Servicer
pursuant to this Agreement, such Servicer shall be deemed to be the Servicer
pending appointment of a successor Servicer (other than the Indenture Trustee)
pursuant to Section 8.02.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement and shall include reasonable fees and expenses of counsel and expenses
of litigation. If the Servicer shall have made any indemnity payments pursuant
to this Section and the Person to or on behalf of whom such payments are made
thereafter collects any of such amounts from others, such Person shall promptly
repay such amounts to the Servicer, without interest.
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (a) into which the Servicer may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Servicer shall be a party, (c) which may succeed to the properties and
assets of the Servicer substantially as a whole or (d) with respect to the
Servicer's obligations hereunder, which is a corporation 50% or more of the
voting stock of which is owned, directly or indirectly, by NAL, which Person
executed an agreement of assumption to perform every obligation of the Servicer
hereunder, shall be the successor to the Servicer under this Agreement without
further act on the part of any of the parties to this Agreement; provided,
however, that (i) immediately after giving effect to such transaction, no
Servicer Default and no event which, after notice or lapse of time, or both,
would become a Servicer Default shall have occurred and be continuing, (ii) the
Servicer shall have delivered to the Owner Trustee and the Indenture Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions precedent provided for in this Agreement
relating to such transaction have been complied with, (iii) the Rating Agency
Condition shall have been satisfied with respect to such transaction, (iv)
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immediately after giving effect to such transaction, the successor to the
Servicer shall become the Administrator under the Administration Agreement in
accordance with Section 8 of such Agreement and (v) the Servicer shall have
delivered to the Owner Trustee and the Indenture Trustee an Opinion of Counsel
stating that, in the opinion of such counsel, either (A) all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and the Indenture Trustee, respectively, in the Receivables and
reciting the details of such filings or (B) no such action shall be necessary to
preserve and protect such interests. Notwithstanding anything herein to the
contrary, the execution of the foregoing agreement of assumption and compliance
with clauses (i), (ii), (iii), (iv) and (v) above shall be conditions to the
consummation of the transactions referred to in clause (a), (b) or (c) above.
SECTION 7.04. Limitation on Liability of Servicer and Others. Neither
the Servicer nor any of the directors, officers, employees or agents of the
Servicer shall be under any liability to the Issuer, the Noteholders or the
Certificateholders, except as provided under this Agreement, for any action
taken or for refraining from the taking of any action pursuant to this Agreement
or for errors in judgment; provided, however, that this provision shall not
protect the Servicer or any such person against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties or by reason of reckless disregard of obligations
and duties under this Agreement. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document of any
kind prima facie properly executed and submitted by any person respecting any
matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be incidental to its duties to service the Receivables in accordance with this
Agreement and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of this Agreement and the Basic
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Documents and the rights and duties of the parties to this Agreement and the
Basic Documents and the interests of the Certificateholders under the Trust
Agreement and the Noteholders under the Indenture.
SECTION 7.05. NAL Not To Resign as Servicer. Subject to the provisions
of Section 7.03, NAL shall not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement except upon a determination that
the performance of its duties under this Agreement shall no longer be
permissible under applicable law. Notice of any such determination permitting
the resignation of NAL shall be communicated to the Owner Trustee and the
Indenture Trustee at the earliest practicable time (and, if such communication
is not in writing, shall be confirmed in writing at the earliest practicable
time) and any such determination shall be evidenced by an Opinion of Counsel to
such effect delivered to the Owner Trustee and the Indenture Trustee
concurrently with or promptly after such notice. No such resignation shall
become effective until the Indenture Trustee or a successor Servicer shall (i)
have assumed the responsibilities and obligations of NAL in accordance with
Section 8.02 and (ii) have become the Administrator under the Administration
Agreement in accordance with Section 8 of such Agreement.
SECTION 7.06. Representations of Backup Servicer. The Backup Servicer
makes the following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Backup Servicer is duly
organized and validly existing as a California corporation in good standing
under the laws of the state of its incorporation, with the corporate power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at all
relevant times, and has, the corporate power, authority and legal right to
acquire, own, sell and service the Receivables.
(b) Due Qualification. The Backup Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property
VII-6
or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Backup Servicer has the corporate power
and authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement have been duly
authorized by the Backup Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Backup Servicer enforceable in accordance with its
terms.
SECTION 7.07. Merger or Consolidation of, or Assumption of the
Obligations of, Backup Servicer. Any Person (a) into which the Backup Servicer
may be merged or consolidated, (b) which may result from any merger or
consolidation to which the Backup Servicer shall be a party, (c) which may
succeed to the properties and assets of the Backup Servicer substantially as a
whole or (d) with respect to the Backup Servicer's obligations hereunder, shall
be the successor to the Backup Servicer under this Agreement without further act
on the part of any of the parties to this Agreement.
SECTION 7.08. Resignation as Backup Servicer. Subject to the provisions
of Section 7.07, the Backup Servicer may resign or the Servicer may remove the
Backup Servicer upon 30 days' written notice to the Indenture Trustee, the Owner
Trustee, the Backup Servicer (in the case of a removal of the Backup Servicer)
and the Servicer (in the case of a resignation of the Backup Servicer). Upon
such resignation or removal, the Servicer shall appoint a successor Backup
Servicer; provided, however, that no such resignation or removal shall become
effective unless and until a successor reasonably acceptable to the Servicer and
the Owner Trustee shall have assumed the responsibilities and obligations of the
Backup Servicer and the Rating Agency Condition shall have been satisfied in
connection therewith; provided, further, that if the Backup Servicer shall have
resigned after its determination that the performance of its duties under this
Agreement shall no longer be permissible under applicable law as evidenced by an
Opinion of Counsel to such effect delivered to the Owner Trustee and the
Indenture Trustee, then, in the event a successor Backup Servicer is not
VII-7
appointed within 30 days after such a resignation, the Backup Servicer may
petition a court for its removal.
VII-8
ARTICLE VIII
Default
SECTION 8.01. Servicer Default. If any one of the following events
(a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deliver or cause to be delivered to
the Owner Trustee or the Indenture Trustee, as applicable, for deposit in any of
the Trust Accounts or the Certificate Distribution Account any required payment
or to direct the Owner Trustee or the Indenture Trustee, as applicable, to make
any required distributions therefrom, which failure continues unremedied for a
period of five Business Days after discovery of such failure by an officer of
the Servicer, or after the date on which written notice of such failure shall
have been given (A) to the Servicer by the Owner Trustee or the Indenture
Trustee, as applicable, or (B) to the Servicer, and to the Owner Trustee and the
Indenture Trustee, as applicable, by the Holders of Notes, evidencing not less
than 25% of the Outstanding Amount of the Notes or, if the Notes have been paid
in full, by Holders of Certificates evidencing not less than 25% of the
outstanding Certificate Balance; or
(b) failure by the Servicer duly to observe or to perform in any
material respect any other covenants or agreements of the Servicer set forth in
this Agreement or any other Basic Document, which failure shall (i) materially
and adversely affect the rights of Certificateholders or Noteholders and (ii)
continue unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
(A) to the Servicer by the Owner Trustee or the Indenture Trustee or (B) to the
Servicer, and to the Owner Trustee and the Indenture Trustee by the Holders of
Notes or Certificates, as applicable, evidencing not less than 25% of the
Outstanding Amount of the Notes or 25% of the outstanding Certificate Balance;
or
(c) the occurrence of an Insolvency Event with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Holders of Notes evidencing
not less than 25% of the Outstanding Amount of the Notes, by notice then given
in writing to the Servicer (and to the Indenture Trustee and the Owner Trustee
if given by the Noteholders) may terminate all the rights and obligations (other
VIII-1
than the obligations set forth in Section 7.02 hereof) of the Servicer under
this Agreement. On or after the receipt by the Servicer of such written notice,
all authority and power of the Servicer under this Agreement, whether with
respect to the Notes, the Certificates or the Receivables or otherwise, shall,
without further action, pass to and be vested in the Backup Servicer or such
successor Servicer as may be appointed under Section 8.02; and, without
limitation, the Indenture Trustee and the Owner Trustee are hereby authorized
and empowered to execute and deliver, for the benefit of the predecessor
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Receivables and related documents,
or otherwise. The predecessor Servicer shall cooperate with the successor
Servicer, the Indenture Trustee and the Owner Trustee in effecting the
termination of the responsibilities and rights of the predecessor Servicer under
this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
predecessor Servicer for deposit, or shall thereafter be received by it with
respect to any Receivable. All reasonable costs and expenses (including, without
limitation, attorneys' fees and any expenses relating to the conversion of
computer files) incurred in connection with transferring the Receivable Files to
the successor Servicer and amending this Agreement to reflect such succession as
Servicer pursuant to this Section shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses. Upon
receipt of notice of the occurrence of a Servicer Default, the Owner Trustee
shall give notice thereof to the Rating Agency.
SECTION 8.02. Appointment of Successor. (a) Upon the Servicer's receipt
of notice of termination pursuant to Section 8.01 or the Servicer's resignation
in accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in the case
of termination, only until the date specified in such termination notice or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the later of (i) the date 45 days
from the delivery to the Owner Trustee, the Indenture Trustee and the Backup
VIII-2
Servicer of written notice of such resignation (or written confirmation of such
notice) in accordance with the terms of this Agreement and (ii) the date upon
which the predecessor Servicer shall become unable to act as Servicer, as
specified in the notice of resignation and accompanying Opinion of Counsel. In
the event of the Servicer's termination or resignation hereunder, the Backup
Servicer shall become the successor Servicer, and the Backup Servicer shall
accept such appointment (including its appointment as Administrator under the
Administration Agreement as set forth in Section 8.02(b)) by a written
assumption in form acceptable to the Owner Trustee and the Indenture Trustee. In
such event, the Backup Servicer shall be the successor in all respects to the
Servicer in its capacity as Servicer under this Agreement and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof; provided, however, that the Backup Servicer
shall not be liable for any acts or omissions of the Servicer occurring prior to
such succession or for any breach by the Servicer of any of its representations
and warranties contained herein or in any related document or agreement.
Notwithstanding the above, if the Backup Servicer is legally unable to act as
Servicer, the Backup Servicer will appoint another successor Servicer to act as
Servicer, the effectiveness of which appointment shall be subject to
confirmation from the Rating Agency that such appointment will not result in the
withdrawal or downgrade of the then current ratings of the Notes and the
Certificates. In the event that such successor Servicer has not been appointed
at the time that the predecessor Servicer has ceased to act as Servicer in
accordance with this Section, the Backup Servicer shall petition a court of
competent jurisdiction to appoint any established institution, having a net
worth of not less than $50,000,000 and whose regular business shall include the
servicing of automotive receivables, as the successor to the Servicer under this
Agreement. As compensation for acting as successor Servicer, the Backup Servicer
or other successor Servicer shall be entitled to receive the Servicing Fee.
(b) Promptly upon its appointment as successor Servicer, the Backup
Servicer shall appoint a successor Backup Servicer that shall (after
confirmation by the Rating Agency that such appointment will not result in the
withdrawal or downgrade of the then current ratings of the Notes or the
Certificates) be the successor in all respects to the predecessor Backup
VIII-3
Servicer and shall be subject to all the responsibilities, duties and
liabilities arising thereafter relating thereto placed on the predecessor Backup
Servicer and shall be entitled to the Backup Servicing Fee and all the rights
granted to the predecessor Backup Servicer by the terms and provisions of this
Agreement.
(c) The Servicer may not resign unless it is prohibited from serving
as such by law.
SECTION 8.03. Notification to Noteholders and Certificateholders.
Upon any termination of, or appointment of a successor to the Servicer pursuant
to this Article VIII, the Owner Trustee shall give prompt written notice thereof
to Certificateholders, and the Indenture Trustee shall give prompt written
notice thereof to Noteholders and the Rating Agency.
SECTION 8.04. Waiver of Past Defaults. The Holders of Notes evidencing
not less than a majority of the Outstanding Amount of the Notes or the Holders
of Certificates evidencing not less than a majority of the outstanding
Certificate Balance (in the case of any default which does not adversely affect
the Indenture Trustee or the Noteholders) may, on behalf of all Noteholders and
Certificateholders, waive in writing any default by the Servicer in the
performance of its obligations hereunder and its consequences, except a default
in making any required deposits to or payments from any of the Trust Accounts in
accordance with this Agreement or in respect of a covenant or the Servicer or
provision herein that cannot be waived without the consent of each
Securityholder (which event the related waiver will require the approval of the
Holders of all Securities). Upon any such waiver of a past default, such default
shall cease to exist, and any Servicer Default arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.
VIII-4
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables. (a) As of the last
day of any Collection Period immediately preceding a Distribution Date as of
which the then outstanding Pool Balance is 5% or less of the Original Pool
Balance, the Servicer shall have the option to purchase the Owner Trust Estate,
other than the Trust Accounts and the Certificate Distribution Account. To
exercise such option, the Servicer shall deposit pursuant to Section 5.04 in the
Collection Account an amount equal to the aggregate Purchase Amount for the
Receivables (including defaulted Receivables), plus the appraised value of any
such other property held by the Trust other than the Trust Accounts and the
Certificate Distribution Account, such value to be determined by an appraiser
mutually agreed upon by the Servicer, the Owner Trustee and the Indenture
Trustee, and shall succeed to all interests in and to the Trust. Notwithstanding
the foregoing, the Servicer shall not be permitted to exercise such option
unless the amount to be deposited in the Collection Account pursuant to the
preceding sentence is greater than or equal to the sum of the Outstanding Amount
of the Notes and the Certificate Balance and all accrued but unpaid interest
(including any overdue interest) thereon to and including the last day of the
Collection Period immediately preceding the redemption date.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.02
of the Trust Agreement, the Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "Insolvency Proceeds") in the Collection Account. On the
Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Distribution
Date, on the Distribution Date immediately following such deposit), the Servicer
shall instruct the Indenture Trustee to make the following deposits (after the
application on such Distribution Date of the Total Distribution Amount and funds
on deposit in the Reserve Account pursuant to Sections 5.05 and 5.06) from the
Insolvency Proceeds and any funds remaining on deposit in the Reserve Account
IX-1
(including the proceeds of any sale of investments therein as described in the
following sentence):
(i) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited into
the Note Distribution Account on such Distribution Date;
(ii) to the Certificate Distribution Account, any portion of
the Certificateholders' Interest Distributable Amount not otherwise
deposited into the Certificate Distribution Account on such Distribution
Date;
(iii) to the Note Distribution Account, the Outstanding Amount
of the Notes (after giving effect to the reduction in the Outstanding
Amount of the Notes to result from the deposits made in the Note
Distribution Account on such Distribution Date and on prior Distribution
Dates); and
(iv) to the Certificate Distribution Account, the Certificate
Balance (after giving effect to the reduction in the Certificate Balance
to result from the deposits made in the Certificate Distribution Account
on such Distribution Date and on prior Distribution Dates).
Any investments on deposit in the Reserve Account or Note Distribution Account
which will not mature on or before such Distribution Date shall be sold by the
Indenture Trustee at such time as will result in the Indenture Trustee receiving
the proceeds from such sale not later than the Payment Determination Date
preceding such Distribution Date. Any Insolvency Proceeds remaining after the
deposits described above shall be paid to the Depositor.
(c) As described in Article IX of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner Trustee and
the Indenture Trustee as soon as practicable after the Servicer has received
notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement.
IX-2
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment. This Agreement may be amended by the
Depositor, the Servicer and the Issuer, with the consent of the Indenture
Trustee, but without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Owner Trustee and the Indenture
Trustee, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor,
the Servicer and the Issuer, with the consent of the Indenture Trustee, the
consent of the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes and the consent of the Holders (as defined in
the Trust Agreement) of outstanding Certificates evidencing not less than a
majority of the outstanding Certificate Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions that shall be
required to be made for the benefit of the Noteholders or the Certificateholders
or (b) reduce the aforesaid percentage of the Outstanding Amount of the Notes
and the Certificate Balance, the Holders of which are required to consent to any
such amendment, without the consent of the Holders of all the outstanding Notes
and the Holders (as defined in the Trust Agreement) of all the outstanding
Certificates.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and the
Rating Agency.
X-1
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
10.02(i)(1). The Owner Trustee and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's or
the Indenture Trustee's, as applicable, own rights, duties or immunities under
this Agreement or otherwise. No amendment to this Agreement will have any effect
on the rights and obligations of the Backup Servicer hereunder unless the Backup
Servicer shall consent thereto in writing.
SECTION 10.02. Protection of Title to Trust. (a) The Depositor shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Issuer and of the Indenture Trustee in the Receivables and in the proceeds
thereof. The Depositor shall deliver (or cause to be delivered) to the Owner
Trustee and the Indenture Trustee file-stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following such
filing.
(b) Neither the Depositor nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of (section)
9-402(7) of the UCC, unless it shall have given the Owner Trustee and the
Indenture Trustee at least five days' prior written notice thereof and shall
have promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(c) Each of the Depositor and the Servicer shall have an obligation to
give the Owner Trustee and the Indenture Trustee at least 60 days' prior written
notice of any relocation of its principal executive office if, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
X-2
of any new financing statement and shall promptly file any such amendment or new
financing statement. The Servicer shall at all times maintain each office from
which it shall service Receivables, and its principal executive office, within
the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
and the Payahead Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables, the Servicer's
master computer records (including any backup archives) that refer to a
Receivable shall indicate clearly the interest of the Issuer and the Indenture
Trustee in such Receivable and that such Receivable is owned by the Issuer and
has been pledged to the Indenture Trustee. Indication of the Issuer's and the
Indenture Trustee's interest in a Receivable shall be deleted from or modified
on the Servicer's computer systems when, and only when, the related Receivable
shall have been paid in full or repurchased.
(f) If at any time the Depositor or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Issuer and has been pledged to the Indenture Trustee.
(g) The Servicer shall permit the Indenture Trustee, the Backup
Servicer and their agents at any time during normal business hours to inspect,
audit and make copies of and abstracts from the Servicer's records regarding any
Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee or to
the Indenture Trustee, within five Business Days, a list of all Receivables (by
contract number and name of Obligor) then held as part of the Trust, together
X-3
with a reconciliation of such list to the Schedule of Receivables and to each of
the Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee:
(1) promptly after the execution and delivery of this
Agreement and of each amendment hereto, an Opinion of Counsel stating
that, in the opinion of such counsel, either (A) all financing
statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the
Owner Trustee and the Indenture Trustee in the Receivables, and
reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (B) no such action shall be
necessary to preserve and protect such interest; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Closing Date, an Opinion of Counsel, dated as of a date
during such 90-day period, stating that, in the opinion of such
counsel, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and the
Indenture Trustee in the Receivables, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details
are given, or (B) no such action shall be necessary to preserve and
protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above shall specify any
action necessary (as of the date of such opinion) to be taken in the following
year to preserve and protect such interest.
SECTION 10.03. Notices. All demands, notices, communications and
instructions upon or to the Depositor, the Servicer, the Owner Trustee, the
Indenture Trustee or the Rating Agency under this Agreement shall be in writing,
personally delivered or mailed by certified mail, return receipt requested, and
shall be deemed to have been duly given upon receipt (a) in the case of the
X-4
Depositor, to NAL Acceptance Corporation, 000 Xxxxxxx Xxxxx Xxxx Xxxx, Xxxxx
000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000, Telephone: 000-000-0000; Fax: 000-000-0000,
Attention: Xxxxxx XxXxxxx, (b) in the case of the Servicer, to NAL Acceptance
Corporation, 000 Xxxxxxx Xxxx Xxxx, Xxxxx 000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000,
(c) in the case of the Issuer or the Owner Trustee, at the Corporate Trust
Office (as defined in the Trust Agreement), (d) in the case of the Indenture
Trustee, at the Corporate Trust Office, (e) in the case of the Backup Servicer,
to LSI Financial Group, 00000 Xxxxxx Xxxxxxx, Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx
Xxxx, Xxxxxxxx 00000: Attention: Xxxxxx Xxxx, (f) in the case of the Rating
Agency, to Fitch Investors Service, L.P., Xxx Xxxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000; or, as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
SECTION 10.04. Assignment by the Depositor or the Servicer.
Notwithstanding anything to the contrary contained herein, except as provided in
the remainder of this Section, as provided in Sections 6.04 and 7.03 herein and
as provided in the provisions of this Agreement concerning the resignation of
the Servicer, this Agreement may not be assigned by the Depositor or the
Servicer.
SECTION 10.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Depositor, the Servicer, the Backup
Servicer, the Issuer, the Owner Trustee, the Certificateholders, the Indenture
Trustee and the Noteholders, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 10.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 10.07. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
X-5
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 10.08. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 10.09. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 10.10. Assignment by Issuer. The Depositor and the Servicer
hereby acknowledge and consent to any mortgage, pledge, assignment and grant of
a security interest by the Issuer to the Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders of all right, title and interest of
the Issuer in, to and under the Receivables and the assignment of any or all of
the Issuer's rights and obligations hereunder to the Indenture Trustee.
SECTION 10.11. Nonpetition Covenants. (a) Notwithstanding any prior
termination of this Agreement, the Servicer, the Backup Servicer and the
Depositor shall not, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Issuer or the Depositor,
acquiesce, petition or otherwise invoke or cause the Issuer or the Depositor to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer or the Depositor under any
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or the Depositor or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the Issuer
or the Depositor.
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee. (a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or,
except as expressly provided in the Trust Agreement, as beneficial owner of the
Issuer have any liability for the
X-6
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer. For all purposes of this Agreement, in the performance of its
duties or obligations hereunder or in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by Bankers Trust Company, not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
X-7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
NAL AUTO TRUST 1997-2
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Owner Trustee on behalf of the
Trust
By:
-------------------------------
Name:
Title:
AUTORICS II, Inc.,
Depositor
By:
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
NAL ACCEPTANCE CORPORATION, Servicer
By:
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
LSI FINANCIAL GROUP, Backup
Servicer
By:
-------------------------------
Name: Xxxxxx Xxxx
Title: Senior Vice President
Acknowledged and accepted as of the day and year
first above written:
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
By:
--------------------------------
Name:
Title:
X-8
SCHEDULE A
Schedule of Receivables
EXHIBIT A
NAL Acceptance Corporation
NAL Auto Trust 1997-2 Distribution Date Statement to Noteholders
--------------------------------------------------------------------------------
Principal Distribution Amount
($ per $1,000 original principal amount)
Interest Distribution Amount
($ per $1,000 original principal amount)
Pool Balance
Note Balance
Note Pool Factor
Certificate Balance
Servicing Fee
Servicing Fee Per $1,000 original principal amount
Backup Servicing Fee
Backup Servicing Fee Per $1,000 original principal amount
Realized Losses
Noteholders' Interest Carryover Shortfall per $1,000 original
principal amount
Noteholders' Principal Carryover Shortfall per $1,000 original
principal amount
Purchase Amounts
Reserve Account Balance
Payahead Balance
A-1
Average Three Month Delinquency Ratio
Cumulative Realized Loss Ratio
Delinquency Trigger Event [YES] [NO]
Loss Trigger Event [YES] [NO]
Delinquent Receivables
30 days
60 days
90 days
A-2
EXHIBIT B
NAL Acceptance Corporation
NAL Auto Trust 1997-2 Distribution Date Statement to
Certificateholders
-------------------------------------------------------------------------------
Principal Distribution Amount
Principal Per $1,000 Initial Certificate Balance
Interest Distribution Amount
Interest Per $1,000 Initial Certificate Balance
Pool Balance
Note Balance
Note Pool Factor
Certificate Balance
Certificate Pool Factor
Servicing Fee
Servicing Fee Per $1,000 Initial Certificate Balance
Backup Servicing Fee
Backup Servicing Fee Per $1,000 Initial Certificate Balance
Realized Losses
Noteholders' Interest Carryover Shortfall per $1,000 original
Note principal amount
Noteholders' Principal Carryover Shortfall per $1,000 original
Note principal amount
Certificateholders' Interest Carryover Shortfall per $1,000
Initial Certificate Balance
Certificateholders' Principal Carryover Shortfall per $1,000
Initial Certificate Balance
Purchase Amounts
B-1
Reserve Account Balance
Payahead Balance
Average Three Month Delinquency Ratio
Cumulative Realized Loss Ratio
Delinquency Trigger Event [YES] [NO]
Loss Trigger Event [YES] [NO]
Delinquent Receivables
30 days
60 days
90 days
--------------------------------------------------------------------------------
B-2
EXHIBIT C
Form of Servicer's Certificate
NAL Acceptance Corporation
NAL Auto Trust 1997-2 Monthly Servicer's Certificate(1)
[___________, 199__]
Dates Covered: From & Incl. _____ To & Incl. _______
I. Collections
Principal Payments Received.......................................... $
Interest Payments Received........................................... $
Liquidation Proceeds................................................. $
Recoveries on Previously Liquidated Receivables...................... $
Aggregate Purchase Amount for Purchased Receivables.................. $
Amount Attributable to Interest............................. $
Amount Attributable to Principal ........................... $
Investment Earnings ................................................. $
Total Collections ....................................................$
II. Distributions*
Total Required Principal Reduction of the Securities $
Principal Distribution Amount
Notes ($_________ per $1,000 original principal amount)
Certificates ($____ per $1,000 original principal
amount)
Interest Distribution Amount
Notes ($_________ per $1,000 original principal amount)
Certificates ($_________ per $1,000 original principal
amount)
Total Distributable Amount
Notes ($_________ per $1,000 original principal amount)
Certificates ($_________ per $1,000 original principal
amount)
-------------------
(1) Items that are marked with an * will be delivered quarterly.
C-1
Additional Required Distributions
Servicing Fee(1)............................................ $
Backup Servicing Fee(1) .................................... $
Deposit to the Reserve Account.............................. $
Reserve Account
Withdrawals for this Distribution Date...................... $
Cumulative Withdrawals...................................... $
III. Payahead Account Information
Beginning Period Balance.................................... $
Amounts Deposited into Payahead Account..................... $
Amounts Withdrawn from Payahead Account..................... $
Ending Balance.............................................. $
IV. Pool Balance and Portfolio Information
Beginning End of
............................. of Period Period
--------- ------
Pool Balance......................... $ $
Note Balance*........................ $ $
Note Pool Factor* ...................
Certificate Balance*................. $ $
Certificate Pool Factor*.............
Remaining Number of Receivables......
Weighted Average A/R.................
Weighted Average Remaining Term......
V. Reconciliation of the Reserve Account
Beginning Balance........................................... $
Withdrawals from Reserve Account............................ $
Amounts Available for Deposit
to Reserve Account....................................... $
Specified Reserve Account Balance........................... $
Amounts Deposited to Reserve Account........................ $
Ending Balance.............................................. $
VI. Loss and Delinquency Report Activity
Realized Losses for Collection Period....................... $
Liquidated Receivables
Aggregate Principal Balance......................... $
Liquidation Proceeds................................ $
Recoveries on Previously
Liquidated Receivables............................ $
Cumulative Realized Losses.......................... $
--------
(1) On or after the Servicing Fee Commencement Date.
C-2
Delinquency
30-59 days
Principal Amount.................................... $
Number of Receivables...............................
60-89 days
Principal Amount.................................... $
Number of Receivables...............................
90 days or more
Principal Amount.................................... $
Number of Receivables...............................
Total Amount
Principal Amount.................................... $
Number of Receivables...............................
VII. Original Deal Parameter Inputs
Aggregate Principal Balance of the
Receivables as of the Cutoff Date.................................. $
Weighted Average APR of the Receivables
as of the Cutoff Date.............................................. %
Weighted Average Remaining Term of the
Receivables as of the Cutoff Date.................................. months
Number of Receivables................................................
Initial Reserve Account Balance...................................... $
C-3
EXHIBIT D
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(RIGHT SIDE OF FILE)
RISK
NAME:___________________ CODE:__________________ ACCOUNT #:______________
===================================================================================================================================
(X) (X)
UNDER EXCEPTIONS INT DOCUMENTATION AUDIT COMMENTS
-----------------------------------------------------------------------------------------------------------------------------------
Application
-----------------------------------------------------------------------------------------------------------------------------------
Credit Report
-----------------------------------------------------------------------------------------------------------------------------------
Explanation
Derogatory Credit
-----------------------------------------------------------------------------------------------------------------------------------
Credit Decision Notification
-----------------------------------------------------------------------------------------------------------------------------------
Investigation Work
A) Home Address Verified
B) Employment Verified
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1040's/W-2/Paystubs
-----------------------------------------------------------------------------------------------------------------------------------
Current Telephone Xxxx in
Applicant's Name and Address
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Reference Sheet (5 included)
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Other Stips - Specify
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Insurance Confirmation
by NAL Insurance Dept.
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Loan/Lease Worksheet
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Copy of Funding Check
-----------------------------------------------------------------------------------------------------------------------------------
Collections/Other
Correspondence
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Approved Dealer
-----------------------------------------------------------------------------------------------------------------------------------
D-1
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GE Approval
===================================================================================================================================
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Signature - Funder Date
------------------------------ -----------------------------------
Signature - Auditor Date
D-2
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(LEFT SIDE OF FILE)
NAME:__________________ CODE:______________ ACCOUNT #:______________
====================================================================================================================================
(X) (X)
UNDER EXCEPTIONS INT DOCUMENTATION AUDIT COMMENTS
------------------------------------------------------------------------------------------------------------------------------------
Contract:
A) Trade-In/Down Payment
B) Note Rate
C) Term
D) Monthly Payment
E) Add's Approved
F) Dealer Advance Per Approval
------------------------------------------------------------------------------------------------------------------------------------
Original Assignment
------------------------------------------------------------------------------------------------------------------------------------
Copy of Application for
Certificate of Title
------------------------------------------------------------------------------------------------------------------------------------
Certificate of Origin (MSO)(New)
Copy of Title (Used)
------------------------------------------------------------------------------------------------------------------------------------
Lien Guarantee/
Lien Registration
------------------------------------------------------------------------------------------------------------------------------------
Xxxx of Sale/
Buyer's Order Signed
------------------------------------------------------------------------------------------------------------------------------------
Manufacturers Invoice (New)
------------------------------------------------------------------------------------------------------------------------------------
Copy Black Book/
NADA Valuation
------------------------------------------------------------------------------------------------------------------------------------
Odometer Statement (Used)
------------------------------------------------------------------------------------------------------------------------------------
Photocopy of Driver's License
------------------------------------------------------------------------------------------------------------------------------------
Add's Documentation
------------------------------------------------------------------------------------------------------------------------------------
Notice to Cosigner
------------------------------------------------------------------------------------------------------------------------------------
Signed Disclosure Form for
A & H Insurance (if applicable)
------------------------------------------------------------------------------------------------------------------------------------
Customer Phone Interview
Correspondence
====================================================================================================================================
D-3
------------------------------ -----------------------------------
Signature - Funder Date
------------------------------ -----------------------------------
Signature - Auditor Date
D-4
EXHIBIT E
Form of Assignment
Reference is made to the Sale and Servicing Agreement dated as of June
1, 1997 (the "Sale and Servicing Agreement") among NAL Auto Trust 1997-2,
Autorics II, Inc. ("Autorics II"), NAL Acceptance Corporation ("NAL") and
Bankers Trust Company. All capitalized terms used herein without definition
shall have the respective meanings specified in the Sale and Servicing
Agreement.
[NAL] [Autorics, Inc.] [Autorics II] hereby assigns to ____________,
for which the Custodian is acting as custodian and bailee under the terms of the
Custodial Agreement all right, title and interest of [NAL] [Autorics, Inc.]
[Autorics II] in and to (but none of [NAL] [Autorics, Inc.] [Autorics II]'s
obligations with respect to):
(1) the Receivables and all moneys received thereon on and after the
Cutoff Date plus all Payaheads as of the Cutoff Date;
(2) the security interests in the Financed Vehicles granted by Obligors
pursuant to the Receivables, any other right to realize upon property securing a
Receivable and any other interest of [NAL] [Autorics, Inc.] [Autorics II] in
such Financed Vehicles including [NAL] [Autorics, Inc.] [Autorics II]'s right,
title and interest in the lien on the Financed Vehicles in the name of the
Depositor's agent, Autorics, Inc., NAL or SFI;
(3) any proceeds with respect to the Receivables from claims on any
Insurance Policies relating to Financed Vehicles or Obligors;
(4) proceeds of any recourse (but none of the obligations) to Dealers
on Receivables;
(5) any Financed Vehicle that shall have secured a Receivable and shall
have been acquired by or on behalf of the Seller, the Depositor, the Servicer,
or the Trust;
(6) the Receivable Files;
(7) all right, title and interest of [Autorics, Inc.] [Autorics II]
under the Receivables Purchase Agreement, including, without limitation, the
E-1
right of [Autorics, Inc.] [Autorics II] to cause NAL to purchase Receivables
under certain circumstances;
(8) the Trust Accounts; and
(9) the proceeds of any and all of the foregoing.
[NAL] [AUTORICS, INC.] [AUTORICS II, INC.]
By:
----------------------------------------
Name:
Title:
E-2
