EXHIBIT 10.18
SERVICING AGREEMENT
RELATING TO
N.A.F. AUTO LOAN TRUST
among
N.A.F. AUTO LOAN TRUST
as Borrower
J-HAWK SERVICING CORPORATION
as Servicer
NATIONAL AUTO FUNDING CORPORATION
and
CONTITRADE SERVICES L.L.C.
as Lender
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Dated as of May 17, 1996
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS............................................... 1
Section 1.1. Definitions........................................ 1
Section 1.2. Usage of Terms..................................... 4
Section 1.3. Calculations....................................... 5
Section 1.4. Section References................................. 5
Section 1.5. No Recourse........................................ 5
ARTICLE II ADMINISTRATION AND SERVICING OF CONTRACTS................. 5
Section 2.1. Duties of the Servicer............................. 5
Section 2.2. Collection of Contract Payments; Modification and
Amendment of Contracts; Lockbox Agreements......... 6
Section 2.3. Realization Upon Contracts......................... 8
Section 2.4. Insurance.......................................... 9
Section 2.5. Maintenance of Security Interests in Vehicles...... 10
Section 2.6. Covenants, Representations and Warranties of
Servicer........................................... 10
Section 2.7. Indemnification.................................... 13
Section 2.8. Servicing Fee; Payment of Certain Expenses by
Servicer........................................... 13
Section 2.9. Servicer's Certificate............................. 13
Section 2.10. Quarterly Statement as to Compliance; Notice of
Servicer Termination Event......................... 13
Section 2.11. Annual Independent Accountants' Report............. 14
Section 2.12. Access to Certain Documentation and Information
Regarding Contracts................................ 15
Section 2.13. Provision of Information........................... 15
Section 2.14. Fidelity Bond...................................... 16
Section 2.15. Sub-Servicing Agreements Between Servicer and
Sub-Servicers...................................... 16
Section 2.16. Successor Sub-Servicers............................ 16
Section 2.17. Liability of Servicer.............................. 17
Section 2.18. No Contractual Relationship Between Sub-Servicer and
Trust, the Backup Servicer, the Lender, or the
Collateral Agent................................... 17
Section 2.19. Assumption or Termination of Sub-Servicing Agreement
by Backup Servicer................................. 17
ARTICLE III LIABILITY AND INDEMNITIES................................. 18
Section 3.1. Liability of Servicer; Indemnities................. 18
Section 3.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer.... 18
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Section 3.3. Limitation on Liability of Servicer, Backup Servicer
and Others......................................... 20
Section 3.4. Delegation of Duties............................... 20
Section 3.5. Servicer and Backup Servicer Not to Resign......... 20
ARTICLE IV SERVICER TERMINATION EVENTS............................... 21
Section 4.1. Servicer Termination Event......................... 21
Section 4.2. Consequences of a Servicer Termination Event....... 22
Section 4.3. Appointment of Successor........................... 23
Section 4.4. Waiver of Past Defaults............................ 24
ARTICLE V MISCELLANEOUS PROVISIONS.................................. 24
Section 5.1. Amendment.......................................... 24
Section 5.2. Governing Law...................................... 24
Section 5.3. Severability of Provisions......................... 24
Section 5.4. Assignment......................................... 25
Section 5.5. Governing Law; Waiver.............................. 25
Section 5.6. Counterparts....................................... 26
Section 5.7. Notices............................................ 26
Section 5.8. Successors and Assigns............................. 26
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THIS SERVICING AGREEMENT ("this Agreement"), dated as of May 17,
1996, among N.A.F. AUTO LOAN TRUST, (the "Trust"), a Delaware business trust
formed pursuant to the Amended and Restated Trust Agreement dated as of November
10, 1994 (the "Trust Agreement") among National Auto Funding I, L.P., a Texas
limited partnership, National Auto Funding II, L.P., a Texas limited partnership
and Delaware Trust Company, not in its individual capacity unless expressly
stated therein but solely as owner trustee, (the "Owner Trustee"), J-HAWK
SERVICING CORPORATION, a Texas corporation ("J-Hawk") (in its capacity as
Servicer, the "Servicer"), NATIONAL AUTO FUNDING CORPORATION, a Delaware
corporation ("NAF Corp."), CONTITRADE SERVICES L.L.C., a Delaware limited
liability company, as Lender (the "Lender") and, on and after the Backup
Servicer Effective Date, the Backup Servicer.
WHEREAS, the Borrower is entering into a Warehouse Credit
Agreement dated as of May 10, 1996 (the "Credit Agreement") with the Lender.
WHEREAS, the Servicer has agreed to service the Contracts,
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Borrower, the Servicer, and the Backup Servicer
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, defined terms
have their respective meanings as set forth in the Definitions List attached to
the Credit Agreement, or as set forth below:
Accountants' Report: The report of a firm of nationally recognized
independent accountants described in Section 2.11.
Backup Servicer: On and after the Backup Servicer Effective Date,
the Person identified in writing by the Servicer with the approval of the
Lender.
Backup Servicer Effective Date: The date on which the Back-up
Servicer assumes its duties and obligations hereunder. The Backup Servicer will
join as a party pursuant to a joinder agreement among the Backup Servicer and
the parties hereto, the terms of which shall be consented to by the Lender.
Basic Servicing Fee: With respect to any Collection Period, the
fee payable to the Servicer for services rendered during such Collection Period,
which shall be equal to one-twelfth of the Basic Servicing Fee Rate multiplied
by the sum of the Principal Balances for all
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Contracts (other than any Contract which was 120 or more days delinquent as of
the first day of such Collection Period) as of the first day of the Collection
Period.
Basic Servicing Fee Rate: 2.10% per annum, payable monthly at
one-twelfth of the annual rate.
Blanket Policy: Shall have the meaning set forth in Section
2.4(c).
Collected Funds: With respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the
Contracts during the related Collection Period, including all Recoveries
collected during the related Collection Period.
Collection Account: The account designated as the Collection
Account in, and which is established and maintained pursuant to, the Paying
Agent Agreement.
Collection Records: Computer generated records relating to
collection efforts, payment histories and account activity with respect to the
Contracts.
Cram Down Loss: With respect to a Contract, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Contract or otherwise modifying or restructuring
the scheduled payments to be made on a Contract, an amount equal to the excess
of the principal balance of such Contract immediately prior to such order over
the principal balance of such Contract as so reduced. A "Cram Down Loss" shall
be deemed to have occurred on the date of issuance of such order.
Dealer: A seller of new or used automobiles or light trucks that
originated one or more of the Contracts and sold the respective Contract,
directly or indirectly, to NAF Corp.
Electronic Ledger: The electronic master record of the retail
installment sales contracts or installment loans of the Servicer.
Eligible Servicer: J-Hawk, the Backup Servicer or another Person
which at the time of its appointment as Servicer, (i) is servicing a portfolio
of motor vehicle retail installment sales contracts and/or motor vehicle
installment loans, (ii) is legally qualified and has the capacity to service the
Contracts, (iii) has demonstrated the ability professionally and competently to
service a portfolio of motor vehicle retail installment sales contracts and/or
motor vehicle installment loans similar to the Contracts with reasonable skill
and care, and (iv) is qualified and entitled to use, pursuant to a license or
other written agreement, and agrees to maintain the confidentiality of, the
software which the Servicer uses in connection with performing its duties and
responsibilities under this Agreement or otherwise has available software which
is adequate to perform its duties and responsibilities under this Agreement.
Independent Accountants: Shall have the meaning set forth in
Section 2.11(a).
Insurance Policies: All insurance policies covering physical
damage, theft, mechanical breakdown or similar event with respect to a Vehicle
or loss of such Vehicle or
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credit life or credit disability insurance with respect to payments due on a
Contract or otherwise benefiting the holder of the Contracts.
J-Hawk: J-Hawk Servicing Corporation, a Texas corporation.
Lien Certificate: With respect to a Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Vehicle is recorded on the original
certificate of title. In any jurisdiction in which the original certificate of
title is required to be given to the Obligor, the term "Lien Certificate" shall
mean only a certificate or notification issued to a secured party.
Lockbox Bank: Marine National Bank or any other depository
institution named by the Servicer and acceptable to the Lender and NAF Corp..
N.A.F. Program Administration Manual: The N.A.F. Program
Administration Manual in effect as of the date hereof, as modified from time to
time.
Opinion of Counsel: A written opinion of counsel reasonably
acceptable to the Lender, which opinion is acceptable in form and substance to
the Lender.
Paying Agent: TCB, acting in its capacity as paying agent under
the Paying Agent Agreement.
Paying Agent Agreement: The Paying Agent Agreement dated as of May
17, 1996 among Borrower, Lender and the Paying Agent.
Recoveries: With respect to a Liquidated Contract, all amounts
realized with respect to such Contract net of amounts that are legally required
to be refunded to the Obligor on such Contract and net of the Servicer's
expenses in connection with such liquidation; provided, however, that the
Recoveries with respect to any Contract shall in no event be less than zero.
Registrar of Titles: With respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
Servicer: J-Hawk Servicing Corporation, a Texas corporation.
Servicing Procedures Manual: The servicing manual previously
delivered to the Lender, as amended from time to time.
Servicing Records: All records and data maintained in electronic
form by the Servicer with respect to the Contracts, including the following with
respect to each Contract: the account number; the originating Dealer; Obligor
name; Obligor address; Obligor home phone number; Obligor business phone number;
original Principal Balance; original term; Annual Percentage Rate; current
Principal Balance; current remaining term; origination date;
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first payment date; final scheduled payment date; next payment due date; date of
most recent payment; new/used classification; Collateral description; days
currently delinquent; number of contract extensions (months) to date; amount of
Scheduled Payment; current Insurance Policy expiration date; and past due late
charges.
Servicer's Certificate: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in accordance
with Section 2.9, substantially in the form attached hereto as Exhibit A.
Simple Interest Method: The method of allocating a fixed level
payment on an obligation between principal and interest, pursuant to which the
portion of such payment that is allocated to interest is equal to (a) the
product of the fixed rate of interest on such obligation multiplied by the
period of time (expressed as a fraction of a year, based on the actual number of
days in the calendar month and 365 days in the calendar year) elapsed since the
preceding payment under the obligation was made plus (b) accrued and unpaid
interest.
Sub-Servicer: Any Sub-Servicer appointed by the Servicer pursuant
to Section 2.15.
Sub-Servicing Agreement: Any Sub-Servicing Agreement entered into
pursuant to Section 2.15. The terms of such Sub-Servicing Agreement shall be
approved by the Lender.
Supplemental Servicing Fee: With respect to any Collection Period
all administrative fees, expenses and charges paid by or on behalf of Obligors,
including late fees, prepayment fees and liquidation fees collected on the
Contracts during such Collection Period which have been approved by NAF Corp.
for payment to the Servicer.
Section 1.2. Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
words importing any gender include the other gender; references to "writing"
include printing, typing, lithography, and other means of reproducing words in a
visible form; references to agreements and other contractual instruments include
all subsequent amendments thereto or changes therein entered into in accordance
with their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."
Vehicle: A new or used automobile or light truck, van or mini-van
together with all accessories thereto, securing or purporting to secure an
Obligor's indebtedness under a Contract.
Section 1.3. Calculations. All calculations of the amount of the
Basic Servicing Fee shall be made on the basis of a 360-day year consisting of
twelve 30-day months.
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Section 1.4. Section References. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
Section 1.5. No Recourse. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing delivered
in connection herewith or therewith, against any stockholder, officer, or
director, as such, of the Borrower, NAF Corp., the Servicer or the Lender or of
any such stockholder, officer or director of any predecessor or successor of any
of them.
ARTICLE II
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 2.1. Duties of the Servicer. (a) The Servicer, either
directly or through one or more Sub-Servicers, is hereby authorized to act as
agent for the Borrower and in such capacity shall manage, service, administer
and make collections on the Contracts, and perform the other actions required by
the Servicer under this Agreement. The Servicer agrees that its servicing of the
Contracts shall be carried out in accordance with customary and usual procedures
of institutions which service motor vehicle retail installment sales contracts
and, to the extent more exacting, the degree of skill and attention that the
Servicer exercises from time to time with respect to all comparable motor
vehicle receivables that it services for itself or others in accordance with
N.A.F.'s Program Administration Manual as in effect at the current time for
servicing all its other comparable motor vehicle receivables or, if not
addressed therein, then in the Servicing Procedures Manual. The Servicer's
duties shall include, without limitation, collection and posting of all
payments, responding to inquiries of Obligors on the Contracts, investigating
delinquencies, sending payment statements to Obligors, reporting any required
tax information to Obligors, policing the Collateral, complying with the terms
of the Lockbox Agreement, accounting for collections and furnishing monthly and
annual statements to the Collateral Agent and the Lender with respect to
distributions, monitoring the status of Insurance Policies with respect to the
Vehicles, providing information as required hereby, cooperating with the
reasonable requests of the Lender and performing the other duties specified
herein. The Servicer shall also administer and enforce all rights and
responsibilities of the holder of the Contracts provided for in the Loan
Origination Agreements, the Dealer Assignments and the Insurance Policies, to
the extent that such Loan Origination Agreements, Dealer Assignments and
Insurance Policies relate to the Contracts, the Vehicles or the Obligors.
The Servicer may, and is hereby authorized to, perform any of its
servicing responsibilities with respect to all or certain of the Contracts
through a Sub-Servicer as it may from time to time designate with the approval
of the Lender, but no such designation of a Sub-Servicer shall serve to release
the Servicer from any of its obligations under this Agreement. Such Sub-Servicer
shall have all the rights and powers of the Servicer with respect to such
Contracts under this Agreement.
To the extent consistent with the standards, policies and
procedures otherwise required hereby, the Servicer shall follow its customary
standards, policies, and procedures
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and shall have full power and authority, acting alone, to do any and all things
in connection with such managing, servicing, administration and collection that
it may deem necessary or desirable. Without limiting the generality of the
foregoing, the Servicer is hereby authorized and empowered by the Borrower to
execute and deliver, on behalf of the Borrower, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Contracts and with respect
to the Vehicles; provided, however, that notwithstanding the foregoing, the
Servicer shall not, except pursuant to an order from a court of competent
jurisdiction, release an Obligor from payment of any unpaid amount under any
Contract or waive the right to collect the unpaid balance of any Contract from
the Obligor, except that the Servicer may forego collection efforts if the
amount reasonably expected to be recovered by the Servicer (net of the
Servicer's expenses) is de minimis and if it would forego collection in
accordance with its customary procedures. The Servicer is hereby authorized to
commence, in its own name or in the name of the Borrower, a legal proceeding to
enforce a Contract pursuant to Section 2.3 or to commence or participate in any
other legal proceeding (including, without limitation, a bankruptcy proceeding)
relating to or involving a Contract, an Obligor or a Vehicle. If the Servicer
commences or participates in such a legal proceeding in its own name, the
Collateral Agent shall thereupon be deemed to have automatically assigned such
Contract to the Servicer solely for purposes of commencing or participating in
any such proceeding as a party or claimant, and the Servicer is authorized and
empowered by the Borrower to execute and deliver in the Servicer's name any
notices, demands, claims, complaints, responses, affidavits or other documents
or instruments in connection with any such proceeding.
Section 2.2. Collection of Contract Payments; Modification and
Amendment of Contracts; Lockbox Agreements. (a) Consistent with the standards,
policies and procedures required by this Agreement, the Servicer shall make
reasonable efforts to collect all payments called for under the terms and
provisions of the Contracts as and when the same shall become due, and shall
follow such collection procedures as it follows with respect to all comparable
automobile receivables that it services for itself or others and otherwise act
with respect to the Contracts, the Loan Origination Agreements, the Dealer
Assignments, the Insurance Policies and the other Collateral in such manner as
will, in the reasonable judgment of the Servicer, maximize the amount to be
received by the Borrower with respect thereto. The Servicer is authorized in its
discretion to waive any prepayment charge, late payment charge or any other
similar fees that may be collected in the ordinary course of servicing any
Contract.
(b) (i) The Servicer may at any time agree to a modification or
amendment of a Contract in order to (x) change the Obligor's regular due date to
a date within 30 days in which such due date occurs or (y) re-amortize the
scheduled payments on the Contract following a partial prepayment of principal.
(ii) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Contract (including those modifications
permitted by Section 2.2(b)) in accordance with its customary procedures if the
Servicer believes in good faith that such extension, modification or amendment
is necessary to avoid a default on such Contract, will maximize the amount to be
received by the Borrower with respect to such Contract, and is otherwise in the
best interests of the Borrower.
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Notwithstanding the foregoing, no Contract which has previously
been modified may be modified pursuant to this Section without the Lender's
prior written consent.
Any Contract which is modified pursuant to this Section is
referred to as a "Modified Contract."
(c) The Servicer shall use its best efforts to cause Obligors to
make all payments on the Contracts, whether by check or through the Automated
Clearing House (ACH) system, to be made directly to one or more Lockbox Banks,
acting as agent for the Lender pursuant to a Lockbox Agreement. The Servicer
shall use its best efforts to cause any Lockbox Bank to deposit all payments on
the Contracts in the Lockbox Account on the Business Day of receipt, and to
cause all amounts credited to the Lockbox Account on account of such payments to
be transferred to the Collection Account, no later than the second Business Day
after receipt of such payments. The Lockbox Account shall be a demand deposit
account held by the Lockbox Bank, or at the request of the Lender an Eligible
Deposit Account satisfying clause (i) of the definition thereof.
The Servicer has notified each Obligor with respect to the
Contracts Serviced by the Servicer on the Closing Date to make such payments
thereafter directly to the Lockbox Bank.
Notwithstanding any Lockbox Agreement, or any of the provisions of
this Agreement relating to the Lockbox Agreement, the Servicer shall remain
obligated and liable to the Borrower and the Lender for servicing and
administering the Contracts and the other Collateral in accordance with the
provisions of this Agreement without diminution of such obligation or liability
by virtue thereof.
In the event the Servicer shall for any reason no longer be acting
as such, the Backup Servicer or successor Servicer shall thereupon assume all of
the rights and, from the date of assumption, all of the obligations of the
outgoing Servicer under the Lockbox Agreement. The Backup Servicer or any other
successor Servicer shall not be liable for any acts, omissions or obligations of
the Servicer prior to such succession. In such event, the successor Servicer
shall be deemed to have assumed all of the outgoing Servicer's interest therein
and to have replaced the outgoing Servicer as a party to each such Lockbox
Agreement to the same extent as if such Lockbox Agreement had been assigned to
the successor Servicer, except that the outgoing Servicer shall not thereby be
relieved of any liability or obligations on the part of the outgoing Servicer to
the Lockbox Bank under such Lockbox Agreement. The outgoing Servicer shall, upon
request of the Borrower, but at the expense of the outgoing Servicer, deliver to
the successor Servicer all documents and records relating to each such Agreement
and an accounting of amounts collected and held by the Lockbox Bank and
otherwise use its best efforts to effect the orderly and efficient transfer of
any Lockbox Agreement to the successor Servicer. In the event that the Lender
elects to change the identity of the Lockbox Bank, the Servicer, at its expense,
shall cause the Lockbox Bank to deliver, at the direction of the Lender, to the
Collateral Agent or a successor Lockbox Bank, all documents and records relating
to the Contracts and all amounts held (or thereafter received) by the Lockbox
Bank (together with an accounting of such amounts) and shall otherwise use its
best efforts to effect the orderly and efficient transfer of the lockbox
arrangements and the
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Servicer shall notify the Obligors to make payments to the Lockbox Account
established by the successor.
(d) The Servicer shall remit all payments by or on behalf of the
Obligors received directly by the Servicer to the Lockbox Account, without
deposit into any intervening account as soon as practicable, but in no event
later than the Business Day after receipt thereof.
Section 2.3. Realization Upon Contracts. (a) Consistent with the
standards, policies and procedures required by this Agreement, the N.A.F.
Program Administration Manual and the Servicing Procedures Manual, the Servicer
shall use its best efforts to repossess (or otherwise comparably convert the
ownership of) and liquidate any Vehicle securing a Contract with respect to
which the Servicer has determined that payments thereunder are not likely to be
resumed, as soon as is practicable after default on such Contract.
The Servicer is authorized to follow such customary practices and
procedures as it shall deem necessary or advisable, consistent with the standard
of care required by Section 2.1, which practices and procedures may include
reasonable efforts to realize upon any recourse to Dealers, selling the related
Vehicle at public or private sale, the submission of claims under an Insurance
Policy and other actions by the Servicer in order to realize upon such a
Contract. The foregoing is subject to the provision that, in any case in which
the Vehicle shall have suffered damage, the Servicer shall not expend funds in
connection with any repair or towards the repossession of such Vehicle unless it
shall determine in its discretion that such repair and/or repossession shall
increase the proceeds of liquidation of the related Contract by an amount
greater than the amount of such expenses. All amounts received upon liquidation
of a Vehicle shall be remitted directly by the Servicer to the Lockbox Account
without deposit into any intervening account as soon as practicable, but in no
event later than the Business Day after receipt thereof. The Servicer shall be
entitled to recover all reasonable expenses incurred by it in the course of
repossessing and liquidating a Vehicle, which expenses shall be properly
documented by the Servicer and reviewed by NAF Corp., but only out of the cash
proceeds of such Vehicle, any deficiency obtained from the Obligor or any
amounts received from the related Dealer, as set forth in Section 2.03(a)(iii)
of the Paying Agent Agreement to the extent of such expenses. The Servicer shall
recover such reasonable expenses based on the information contained in the
Servicer's Certificate delivered on the related Determination Date. The Servicer
shall pay on behalf of the Borrower any personal property taxes assessed on
repossessed Vehicles; the Servicer shall be entitled to reimbursement of any
such tax from Recoveries with respect to such Contract, as set forth in Section
2.03(a)(iii) of the Paying Agent Agreement.
(b) If the Servicer elects to commence a legal proceeding to
enforce a Loan Origination Agreement or Dealer Assignment, the act of
commencement shall be deemed to be an automatic assignment from the Collateral
Agent to the Servicer of the rights under such Loan Origination Agreement and
Dealer Assignment for purposes of collection only. If, however, in any
enforcement suit or legal proceeding, it is held that the Servicer may not
enforce a Loan Origination Agreement or Dealer Assignment on the grounds that it
is not a real party in interest or a Person entitled to enforce the Loan
Origination Agreement or Dealer
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Assignment, the Collateral Agent, at the Borrower's expense, shall take such
steps as the Servicer deems necessary to enforce the Loan Origination Agreement
or Dealer Assignment, including bringing suit in its name. All amounts recovered
shall be remitted directly by the Servicer to the Lockbox Account without
deposit into any intervening account as soon as practicable, but in no event
later than the Business Day after receipt thereof.
Section 2.4. Insurance. (a) The Servicer shall monitor the status
of the Insurance Policies in accordance with its customary servicing procedures.
If the Servicer shall determine that an Obligor has failed to obtain or maintain
a physical loss and damage insurance policy covering the related Vehicle
(including during the repossession of such Vehicle) the Servicer shall be
diligent in carrying on its customary servicing procedures to enforce the rights
of the holder of the Contract thereunder to ensure that the Obligor obtains such
physical loss and damage insurance.
(b) The Servicer may sue to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Borrower. If the
Servicer elects to commence a legal proceeding to enforce an Insurance Policy,
the act of commencement shall be deemed to be an automatic assignment of the
rights of the Borrower under such Insurance Policy to the Servicer for purposes
of collection only.
(c) NAF Corp. shall cause to be maintained a vendor's single
interest or other Collateral protection insurance policy with respect to all
Vehicles ("Blanket Policy") which policy by its terms insures against physical
damage in the event any Obligor fails to maintain physical damage insurance with
respect to the related Vehicle. The Borrower will be the named insured and loss
payee under all policies of Blanket Policy. Each Vehicle shall be covered by
Blanket Policy providing coverage upon repossession of such Vehicle.
(d) The Premiums incurred by the Borrower in maintaining such
Blanket Policy shall be paid by the Borrower as set forth in Section 2.03(a)(vi)
of the Paying Agent Agreement.
Section 2.5. Maintenance of Security Interests in Vehicles.
Consistent with the policies and procedures required by this Agreement, the
Servicer shall take such steps as are necessary to maintain perfection of the
security interest created by each Contract in the related Vehicle on behalf of
the Borrower, including but not limited to obtaining the execution by the
Obligors and the recording, registering, filing, re-recording, re-filing, and
re-registering of all security agreements, financing statements and continuation
statements as are necessary to maintain the security interest granted by the
Obligors under the respective Contracts. The Lender hereby authorizes the
Servicer, and the Servicer agrees, to take any and all steps necessary to
re-perfect such security interest on behalf of the Borrower as necessary because
of the relocation of a Vehicle or for any other reason.
Section 2.6. Covenants, Representations and Warranties of
Servicer. The Servicer hereby makes the following representations, warranties
and covenants to the other parties hereto and the Lender on which the Collateral
Agent shall rely in accepting the Contracts.
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(a) The Servicer covenants as follows:
(i) Liens in Force. The Vehicle securing each Contract shall not
be released in whole or in part from the security interest granted by the
Contract, except upon payment in full of the Contract or as otherwise
contemplated herein;
(ii) No Impairment. The Servicer shall do nothing to impair the
rights of the Borrower in the Contracts, the Loan Origination Agreements,
the Dealer Assignments, the Insurance Policies or the other Collateral;
(iii) No Amendments. The Servicer shall not extend or otherwise
amend the terms of any Contract, except in accordance with Section 2.2;
(iv) Servicing of Contracts. The Servicer shall service the
Contracts as required by the terms of this Agreement and in material
compliance with the current Servicing Procedures Manual for servicing all
its other comparable motor vehicle receivables;
(v) Credit Bureaus. The Servicer shall supply such customary
payment history information to credit reporting bureaus on a monthly basis
as is permissible under applicable law;
(vi) The Servicer shall obtain and maintain all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business (involving the servicing of the
Contracts as required by this Agreement) requires;
(vii) The Servicer shall hold all Collateral items in its
possession as custodian on behalf of the Lender;
(viii) The Servicer, as requested by the Lender, shall deliver to
the Lender any Lien Certificate, credit application, Contract, or other
Collateral item which is in possession of the Servicer, within three
Business Days of the Lender's request. To the extent that the Servicer
does not so deliver any requested item with respect to any Contract by the
opening of business on the fourth Business Day following such request, the
Servicer shall deposit on the Lockbox Account an amount not less than 85%
of such Contract's Outstanding Contract Balance;
(ix) The Servicer shall track receipt of all Lien Certificates
received by it, and shall report to NAF Corp. and the Lender on each
Determination Date all Lien Certificates received by it during the prior
Collection Period, together with all Lien Certificates not yet received as
of the end of the prior Collection Period, as well as the origination
dates of the related Contracts; and
(x) The Servicer shall send to the Collateral Agent a copy of each
Lien Certificate received by the Servicer.
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(b) The Servicer represents and warrants to the Borrower and the
Collateral Agent as of the Closing Date as to itself:
(i) Organization and Good Standing. The Servicer has been duly
organized and is validly existing and in good standing under the laws of
the State of Texas, with power, authority and legal right to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority and legal right to enter into and
perform its obligations under this Agreement;
(ii) 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 as shall require
such qualification; in which the ownership or lease of property or the
conduct of its business (involving the servicing of the Contracts as
required by this Agreement) requires;
(iii) Power and Authority. The Servicer has the power and
authority to execute and deliver this Agreement and any Sub-Servicing
Agreement and to carry out its terms and their terms, respectively, and
the execution, delivery and performance of this Agreement and any
Sub-Servicing Agreement have been duly authorized by the Servicer by all
necessary corporate action;
(iv) Binding Obligation. This Agreement and the Servicer's
Facility Agreements shall constitute legal, valid and binding obligations
of the Servicer enforceable in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(v) No Violation. The consummation of the transactions
contemplated by this Agreement and any Sub-Servicing Agreement, and the
fulfillment of the terms of this Agreement and any Sub-Servicing
Agreement, 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 certificate of incorporation or bylaws of the
Servicer, or any indenture, agreement, mortgage, deed of trust or other
instrument to which the Servicer is a party or by which it is bound or any
of its properties are subject, or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement, or violate any law, order, rule or regulation
applicable to the Servicer of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or any of its
properties, or in any way materially adversely affect the interest of the
Borrower in any Contract, or affect the Servicer's ability to perform its
obligations under this Agreement;
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(vi) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Servicer or
its properties (A) asserting the invalidity of this Agreement or any
Sub-Servicing Agreement, (B) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement or any Sub-Servicing
Agreement, (C) seeking any determination or ruling that might materially
and adversely affect the performance by the Servicer of its obligations
under, or the validity or enforceability of, this Agreement or any
Sub-Servicing Agreement, or (D) that could have a material adverse effect
on the Contracts.
(vii) Approvals. All approvals, authorizations, consents, orders
or other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official, required in connection
with the execution and delivery by the Servicer of this Agreement and the
consummation of the transactions contemplated hereby have been or will be
taken or obtained on or prior to the Closing Date.
(viii) No Consents. The Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement;
(ix) Chief Executive Office. The chief executive office of the
Servicer is located at 6400 Imperial Drive, Waco, Texas 76712.
Section 2.7. Indemnification. The Servicer shall indemnify the
Lender, the Backup Servicer, the Collateral Agent, NAF Corp. and the Borrower
against all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to a breach of the covenants or representations and
warranties set forth in Section 2.5(a) or 2.6.
Section 2.8. Servicing Fee; Payment of Certain Expenses by
Servicer. (a) On each Distribution Date, the Servicer shall be entitled to
receive out of the Collection Account the Basic Servicing Fee for the related
Collection Period pursuant to the Paying Agent Agreement. The Servicer may
retain any Supplemental Servicing Fee, or may receive such amounts from the
Collection Account payable pursuant to the Paying Agent Agreement.
(b) The Servicer shall be required to pay all expenses incurred by
it in connection with its activities under this Agreement. The Servicer shall be
liable for the fees and expenses of each Sub-Servicer, the Lockbox Bank (and any
fees under the Lockbox Agreement) and the Independent Accountants.
Section 2.9. Servicer's Certificate. No later than 10:00 a.m.
Eastern time on each Determination Date, the Servicer shall deliver to the
Collateral Agent, the Backup Servicer, NAF Corp. and the Lender a Servicer's
Certificate executed by a Responsible Officer of the Servicer substantially in
the form of Exhibit A hereto.
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Section 2.10. Quarterly Statement as to Compliance; Notice of
Servicer Termination Event. (a) The Servicer shall deliver to the Borrower, the
Backup Servicer, NAF Corp., the Lender and the Collateral Agent, on or before
the last day of that quarter beginning on the date that is three months after
the Closing Date, an Officer's Certificate, stating that (i) a review of the
activities of the Servicer during the preceding 3-month period (or such other
period as shall have elapsed from the Closing Date to the date of the first such
certificate) and of its performance under this Agreement has been made under
such officer's supervision, and (ii) to such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such period, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and the
nature and status thereof.
(b) The Servicer shall deliver to the Borrower, the Backup
Servicer, the Collateral Agent and the Lender, promptly after having obtained
knowledge thereof, but in no event later than two Business Days thereafter,
written notice in an Officer's Certificate of any event which with the giving of
notice or lapse of time, or both, would become a Servicer Termination Event
under Section 4.1.
Section 2.11. Annual Independent Accountants' Report. (a) The
Servicer shall, at its expense, cause a firm of nationally recognized
independent certified public accountants (the "Independent Accountants"), who
may also render other services to the Servicer, to deliver to the Borrower, the
Backup Servicer, NAF Corp. and the Lender, on or before April 30 (or 120 days
after the end of the Servicer's fiscal year, if other than December 31) of each
year, beginning on April 30, 1997, a statement (the "Accountant's Report")
addressed to the Board of Directors of the Servicer, to the Borrower, the Backup
Servicer, the Lender and to the Collateral Agent, to the effect that such firm
has audited the financial statements of the Servicer and issued its report
thereon and that such audit (1) was made in accordance with generally accepted
auditing standards, and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered necessary in
the circumstances; (2) included an examination of documents and records relating
to the servicing of automobile installment sales contracts under servicing
agreements substantially similar one to another (such statement to have attached
thereto a schedule setting forth the servicing agreements covered thereby,
including this Agreement); (3) included an examination of the delinquency and
loss statistics relating to the Servicer's portfolio of automobile installment
sales contracts; and (4) except as described in the statement, disclosed no
exceptions or errors in the records relating to automobile and light truck loans
serviced for others that, in the firm's opinion, generally accepted auditing
standards requires such firm to report. The Accountants' Report shall further
state that (1) a review in accordance with agreed upon procedures was made of
three randomly selected Servicer's Certificates for the Borrower; (2) except as
disclosed in the Report, no exceptions or errors in the Servicer's Certificates
so examined were found; and (3) the delinquency and loss information relating to
the Contracts contained in the Servicer Certificates were found to be accurate.
(b) The Accountants' Report shall 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.
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Section 2.12. Access to Certain Documentation and Information
Regarding Contracts. The Servicer shall provide to representatives of the
Borrower, the Backup Servicer, the Lender and the Collateral Agent reasonable
access to the documentation regarding the Contracts. Each of the Servicer will
permit any authorized representative or agent designated by the Lender to visit
and inspect any of the properties of the Borrower or the Servicer, as the case
may be, to examine the corporate books and financial records of the Borrower or
Servicer, as the case may be, its records relating to the Contracts, and make
copies thereof or extracts therefrom and to discuss the affairs, finances, and
accounts of the Borrower or Servicer, as the case may be, with its principal
officers, as applicable, and its independent accountants. Any expense incidental
to the exercise by the Lender of any right under this Section 2.12 shall be
borne by the Servicer. Such access shall be afforded without charge but only
upon reasonable request and during normal business hours. Nothing in this
Section 2.12 shall derogate from the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Servicer to provide access as provided in this Section 2.12
as a result of such obligation shall not constitute a breach of this Section
2.12.
Section 2.13. Provision of Information. On or prior to the Backup
Servicer Effective Date the Servicer shall supply the Backup Servicer with the
Servicing Records as of a date at least as recent as the close of business on
the second Business Day prior to the Backup Servicer Effective Date.
On the first Business Day of each week, the Servicer will deliver
to the Backup Servicer a computer tape or a diskette (or any other electronic
transmission acceptable to the Backup Servicer) in a format reasonably
acceptable to the Backup Servicer containing the Collection Records with respect
to the Contracts as of the last Business Day of the prior week. The Backup
Servicer shall use such tapes or diskettes (or other electronic transmission
acceptable to the Backup Servicer) (x) to maintain an up-dated, parallel set of
servicing records with respect to the Contracts and (y) to verify each monthly
Servicer's Certificate delivered by the Servicer.
The Backup Servicer shall certify to the Lender that it has
verified each monthly Servicer's Certificate in accordance with this Section
2.13 and shall notify the Servicer and the Lender of any discrepancies, in each
case, on or before the second Business Day following the Determination Date. In
the event that the Backup Servicer reports any discrepancies, the Servicer and
the Backup Servicer shall attempt to reconcile such discrepancies prior to the
related Distribution Date, but in the absence of a reconciliation, the
Servicer's Certificate shall control for the purpose of calculations and
distributions with respect to the related Distribution Date. In the event that
the Backup Servicer and the Servicer are unable to reconcile discrepancies with
respect to a Servicer's Certificate by the related Distribution Date, the
Servicer shall cause the Independent Accountants, at the Servicer's expense, to
audit the Servicer's Certificate and, prior to the fourth Business Day, but in
no event later than the fifth calendar day, of the following month, reconcile
the discrepancies. The effect, if any, of such reconciliation shall be reflected
in the Servicer's Certificate for such next succeeding Determination Date.
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In addition, the Servicer shall, if so requested by the Lender,
deliver to the Backup Servicer the Collection Records (as of the close of
business on any Business Day) within one Business Day of demand therefor.
Other than the duties specifically set forth in this Agreement,
the Backup Servicer shall have no obligations hereunder, including, without
limitation, to supervise, verify, monitor or administer the performance of the
Servicer. The Backup Servicer shall have no liability for any actions taken or
omitted by the Servicer. The duties and obligations of the Backup Servicer shall
be determined solely by the express provisions of this Agreement and no implied
covenants or obligations shall be read into this Agreement against the Backup
Servicer.
Section 2.14. Fidelity Bond. The Servicer shall maintain a
fidelity bond in such form and amount as is customary in the industry for
entities acting as servicers of consumer contracts on behalf of institutional
investors, which amount shall provide coverage of not less than $4,000,000 in
the aggregate and single-occurrence coverage of $2,000,000.
Section 2.15. Sub-Servicing Agreements Between Servicer and
Sub-Servicers. The Servicer may enter into Sub-Servicing Agreements for any
servicing and administration of any Contracts with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Sub-Servicing Agreement and as to which the Lender, NAF
Corp. and the Borrower have each given their prior written consent. The Servicer
shall give notice to the Borrower, the Backup Servicer and the Collateral Agent
of the appointment of any Sub-Servicer. For purposes of this Agreement, the
Servicer shall be deemed to have received payments on any Contracts when any
Sub-Servicer has received such payments. Any such Sub-Servicing Agreement shall
be consistent with and not violate the provisions of this Agreement.
Section 2.16. Successor Sub-Servicers. Each Sub-Servicing
Agreement shall expressly provide that the Servicer, the Lender or the Backup
Servicer shall be entitled to terminate any Sub-Servicing Agreement in
accordance with the terms and conditions of such Sub-Servicing Agreement and to
either itself directly service the related Contracts or enter into a
Sub-Servicing Agreement with a successor Sub-Servicer. None of the Lender, the
Collateral Agent nor the Backup Servicer shall have any duty or obligation to
monitor or supervise the performance of any Sub-Servicer.
In the event of termination of any Sub-Servicer by the Servicer,
all servicing obligations of such Sub-Servicer shall be assumed simultaneously
by the Servicer without any act or deed on the part of such Sub-Servicer or the
Servicer, and the Servicer either shall service directly the related Contracts
or shall enter into a Sub-Servicing Agreement with a successor Sub-Servicer. The
Servicer shall give written notice to the Lender and to the Backup Servicer of
the termination of any Sub-Servicer.
Any Sub-Servicing Agreement shall include (a) the provision that
such agreement may be immediately terminated, without cause and without payment
of any penalty or fee, by (x) the Backup Servicer or (y) the Lender, in either
case in the event that the Servicer shall, for any reason, no longer be the
Servicer (including termination due to an Event of Servicer Termination or an
Event of Default), together with (b) a provision stating that none
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of the Backup Servicer, the Lender, the Collateral Agent or the Borrower (i)
shall be deemed a party thereto and (ii) shall have any claims, rights,
obligations, duties or liabilities with respect to any Sub-Servicer, except as
set forth herein.
Section 2.17. Liability of Servicer. The Servicer shall not be
relieved of its obligations under this Agreement notwithstanding any
Sub-Servicing Agreement or any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer and a Sub-Servicer or otherwise,
and the Servicer shall be obligated to the same extent and under the same terms
and conditions as if it alone were servicing and administering the Contracts.
The Servicer shall be entitled to enter into any agreement with a Sub-Servicer
for indemnification of the Servicer by such Sub-Servicer and nothing contained
in such SubServicing Agreement shall be deemed to limit or modify this
Agreement.
Section 2.18. No Contractual Relationship Between Sub-Servicer and
Trust, the Backup Servicer, the Lender, or the Collateral Agent. Any
Sub-Servicing Agreement and any other transactions or services relating to the
Contracts involving a Sub-Servicer shall be deemed to be between the
Sub-Servicer and the Servicer alone and the Borrower, the Backup Servicer, the
Lender and the Collateral Agent shall not be deemed parties thereto and shall
have no claims, rights, obligations, duties or liabilities with respect to any
Sub-Servicer except as set forth in Section 2.19.
Section 2.19. Assumption or Termination of Sub-Servicing Agreement
by Backup Servicer. In connection with the assumption of the responsibilities,
duties and liabilities and of the authority, power and rights of the Servicer
hereunder pursuant to Section 4.2, it is understood and agreed that the
Servicer's rights and obligations under any Sub-Servicing Agreement then in
force between the Servicer and a Sub-Servicer may be assumed or terminated by
the assuming party at its option.
The Servicer shall, upon request of the Lender or of the Backup
Servicer, but at the expense of the Servicer, deliver to the assuming party
documents and records relating to each Sub-Servicing Agreement and an accounting
of amounts collected and held thereunder and otherwise use its best reasonable
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.
ARTICLE III
LIABILITY AND INDEMNITIES
Section 3.1. Liability of Servicer; Indemnities. (a) The Servicer
shall be liable hereunder only to the extent of the obligations in this
Agreement specifically undertaken by the Servicer and the representations made
by the Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the
Borrower, the Backup Servicer, the Collateral Agent, NAF Corp., the Lender and
their respective officers, directors, agents and employees from and against any
and all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of
16
litigation arising out of or resulting from the use, ownership or operation by
the Servicer or any Affiliate thereof of any Vehicle;
(c) The Servicer shall indemnify, defend and hold harmless the
Borrower, the Backup Servicer, the Lender, NAF Corp., and the Collateral Agent,
their respective officers, directors, agents and employees from and against any
and all costs, expenses, losses, claims, damages, and liabilities to the extent
that such cost, expense, loss, claim, damage, or liability arose out of, or was
imposed upon the Borrower, the Backup Servicer, the Collateral Agent or the
Lender through the breach of this Agreement, the negligence, willful
misfeasance, or bad faith of the Servicer in the performance of its duties under
this Agreement or by reason of reckless disregard of its obligations and duties
under this Agreement;
(d) For purposes of this Section 3.1, in the event of the
termination of the rights and obligations of the Servicer (or any successor
thereto pursuant to Section 3.2) as Servicer pursuant to Section 4.1, 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 pursuant
to Section 4.3. The provisions of this Section 3.1(f) shall in no way affect the
survival pursuant to Section 3.1(g) of the indemnification by the Servicer
provided by Sections 3.1(b) through 3.1(e); and
(e) Indemnification under this Article shall survive 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 Article and the recipient thereafter
collects any of such amounts from others, the recipient shall promptly repay
such amounts collected to the Servicer, without interest. Notwithstanding any
other provision of this Agreement, the obligations of the Servicer described in
this Section shall not terminate or be deemed released upon the resignation or
termination of J-Hawk Servicing Corporation as the Servicer and shall survive
any termination of this Agreement.
Section 3.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer. (a) The Servicer shall not
merge or consolidate with any other Person, convey, transfer or lease
substantially all its assets as an entirety to another Person, or permit any
other Person to become the successor to the Servicer's business unless, after
the merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity shall be an Eligible Servicer and shall be capable
of fulfilling the duties of the Servicer contained in this Agreement. Any Person
(i) into which the Servicer may be merged or consolidated, (ii) resulting from
any merger or consolidation to which the Servicer shall be a party, (iii) which
acquires by conveyance, transfer, or lease substantially all of the assets of
the Servicer, or (iv) succeeding to the business of the Servicer, in any of the
foregoing cases shall execute an agreement of assumption to perform every
obligation of the Servicer under this Agreement and, whether or not such
assumption agreement is executed, shall be the successor to the Servicer under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties to this Agreement, anything in this Agreement
to the contrary notwithstanding; provided, however, that nothing contained
herein shall be deemed to release the Servicer from any obligation. The Servicer
shall provide notice of any merger, consolidation or succession pursuant to this
Section 3.2(a) to the Borrower, NAF Corp. and the Collateral Agent.
Notwithstanding the foregoing, as a condition to the
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consummation of the transactions referred to in clauses (i), (ii), (iii) and
(iv) above, (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 2.6 shall have been breached
(for purposes hereof, such representations and warranties shall speak as of the
date of the consummation of such transaction), (y) the Servicer shall have
delivered to the Borrower, the Collateral Agent and the Lender an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
3.2(a) and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, and (z) the Servicer shall
have delivered to the Borrower, the Collateral Agent, NAF Corp., and the Lender,
stating, 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 to preserve and protect the interest of the Collateral Agent in
the Collateral and reciting the details of the filings or (B) no such action
shall be necessary to preserve and protect such interest.
(b) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Backup Servicer, or (iv)
succeeding to the business of the Backup Servicer, in any of the foregoing cases
shall execute an agreement of assumption to perform every obligation of the
Backup Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this Agreement to the
contrary notwithstanding; provided, however, that nothing contained herein shall
be deemed to release the Backup Servicer from any obligation.
Section 3.3. Limitation on Liability of Servicer, Backup Servicer
and Others. Neither the Servicer, the Backup Servicer nor any of the directors
or officers or employees or agents of the Servicer or Backup Servicer shall be
under any liability to the Borrower, the Lender or NAF Corp., except as provided
in this Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement; provided, however, that this provision shall
not protect the Servicer, the Backup Servicer or any such person against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence (excluding errors in judgment) in the performance of duties
(including negligence with respect to the Servicer's indemnification obligations
hereunder), by reason of reckless disregard of obligations and duties under this
Agreement or any violation of law by the Servicer, Backup Servicer or such
person, as the case may be; further provided, that this provision shall not
affect any liability to indemnify the Collateral Agent for costs, taxes,
expenses, claims, liabilities, losses or damages paid by the Collateral Agent in
its individual capacity. The Servicer, the Backup Servicer and any director,
officer, employee or agent of the Servicer or Backup Servicer 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
under this Agreement. 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
18
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.
Section 3.4. Delegation of Duties. So long as J-Hawk Servicing
Corporation is the Servicer, the Servicer may delegate duties under this
Agreement to an Affiliate of JHawk Servicing Corporation with the prior written
consent of the NAF Corp., the Lender, the Borrower and the Backup Servicer. The
Servicer also may at any time perform the specific duty of repossession of
Vehicles through sub-contractors who are in the business of repossessing
vehicles which secure automotive receivables, and may perform other specific
duties through such sub-contractors with the prior written consent of the
Lender, provided, however, that no such delegation or subcontracting duties by
the Servicer shall relieve the Servicer of its responsibility with respect to
such duties. Neither J-Hawk Servicing Corporation nor any other party acting as
Servicer hereunder shall appoint any subservicer hereunder without the prior
written consent of the Collateral Agent, the Borrower, the Lender and the Backup
Servicer.
Section 3.5. Servicer and Backup Servicer Not to Resign. (a)
Subject to the provisions of Section 3.2, neither the Servicer nor the Backup
Servicer shall resign from the obligations and duties imposed on it by this
Agreement as Servicer or Backup Servicer except with the prior written consent
of the Lender. No resignation of the Servicer shall become effective until, the
Backup Servicer or an entity acceptable to the Lender shall have assumed the
responsibilities and obligations of the Servicer. No resignation of the Backup
Servicer shall become effective until, an entity acceptable to the Lender shall
have assumed the responsibilities and obligations of the Backup Servicer;
provided, however, that in the event a successor Backup Servicer is not
appointed within 60 days after the Backup Servicer has given notice of its
resignation as permitted by this Section 3.5, the Backup Servicer may petition a
court for its removal.
(b) The Borrower may, with the prior written consent of the Lender
upon 45 days' notice to the Servicer, terminate the Servicer as Servicer
hereunder without cause.
ARTICLE IV
SERVICER TERMINATION EVENTS
Section 4.1. Servicer Termination Event. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to deliver to the Lockbox or to
the Collateral Agent for distribution any proceeds or payment required to
be so delivered under the terms hereof that continues unremedied for a
period of two Business Days after written notice is received by the
Servicer or after discovery of such failure by a Responsible Officer of
the Servicer;
(b) Failure by the Servicer (i) to deliver the Servicer's
Certificate required by Section 2.9 within five (5) days after the date
such certificate is required to be delivered
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or (ii) to deliver to the Backup Servicer the Weekly Collection Records
required by Section 2.9 within two (2) days after the date such records
are required to be delivered;
(c) Failure on the part of the Servicer to observe its covenants
and agreements set forth in Section 3.2(a);
(d) Failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the Servicer
which failure continues unremedied for a period of 30 days after the date
on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Collateral Agent or
the Lender;
(e) The entry of a decree or order for relief by a court or
regulatory authority having jurisdiction in respect of the Servicer in an
involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or another present or future, federal or state, bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Servicer
or of any substantial part of their respective properties or ordering the
winding up or liquidation of the affairs of the Servicer and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days or the commencement of an involuntary case
under the federal bankruptcy laws, as now or hereinafter in effect, or
another present or future federal or state bankruptcy, insolvency or
similar law and such case is not dismissed within 60 days; or
(f) The commencement by the Servicer of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other
present or future, federal or state, bankruptcy, insolvency or similar
law, or the consent by the Servicer to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer or of any
substantial part of its property or the making by the Servicer of an
assignment for the benefit of creditors or the failure by the Servicer
generally to pay its debts as such debts become due or the taking of
corporate action by the Servicer in furtherance of any of the foregoing;
(g) Any representation, warranty or statement of the Servicer made
in this Agreement or any certificate, report or other writing delivered
pursuant hereto shall prove to be incorrect in any material respect as of
the time when the same shall have been made, and the incorrectness of such
representation, warranty or statement has a material adverse effect on the
Borrower or the Lender and, within 30 days after written notice thereof
shall have been given to the Servicer by the Lender, the circumstances or
condition in respect of which such representation, warranty or statement
was incorrect shall not have been eliminated or otherwise cured;
(h) A material adverse change from the date hereof in the
business, properties, operations, prospects or financial or other
condition of the Servicer, as determined by Lender in its reasonable, good
faith business judgment; or
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(i) The occurrence of an "Event of Default" under the Credit
Agreement which is not waived by the Lender.
Section 4.2. Consequences of a Servicer Termination Event. If a
Servicer Termination Event shall occur and be continuing the Lender shall
thereafter have the right to direct all activities of the Servicer with respect
to the Collateral, including the right to direct the Servicer to deliver any
portion of the Collateral then held by the Servicer to the location designated
by the Lender; in addition, by notice given in writing to the Servicer may
terminate all of the rights and obligations of the Servicer under this
Agreement. On or after the receipt by the Servicer of such written notice, all
authority, power, obligations and responsibilities of the Servicer under this
Agreement automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer; provided, however, that the Backup
Servicer (i) shall have no liability with respect to any obligation which was
required to be performed by the prior Servicer prior to the date that the Backup
Servicer becomes the Servicer or any claim of a third party based on any alleged
action or inaction of the prior Servicer and (ii) shall have no duty or
obligation with respect to the Servicer's obligations set forth in Sections
2.8(b). The Backup Servicer is authorized and empowered by this Agreement to
execute and deliver, on behalf of the prior 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
Contracts and the other Collateral and related documents to show the Collateral
Agent as lienholder or secured party on the related Lien Certificates, or
otherwise. The prior Servicer agrees to cooperate with the Backup Servicer in
effecting the termination of the responsibilities and rights of the prior
Servicer under this Agreement, including, without limitation, the transfer to
the Backup Servicer for administration by it of all cash amounts that shall at
the time be held by the prior Servicer for deposit, or have been deposited by
the prior Servicer, in the Collection Account or thereafter received with
respect to the Contracts and the delivery to the Backup Servicer of all Contract
Files, Servicing Records and Collection Records and a computer tape in readable
form containing all information necessary to enable the Backup Servicer or a
successor Servicer to service the Contracts and the other Collateral. If
requested by the Lender, the Backup Servicer or successor Servicer shall
terminate the Lockbox Agreement and direct the Obligors to make all payments
under the Contracts directly to the successor Servicer (in which event the
successor Servicer shall process such payments in accordance with Section
2.2(e)), or to a lockbox established by the successor Servicer at the direction
of the Lender, at the prior Servicer's expense. The Backup Servicer may set off
and deduct any amounts owed by the terminated Servicer from any amounts payable
to the terminated Servicer pursuant to the preceding sentence. The terminated
Servicer shall grant the Collateral Agent, the Backup Servicer and the Lender
reasonable access to the terminated Servicer's premises at the terminated
Servicer's expense.
Section 4.3. Appointment of Successor. (a) On and after (i) the
time the Servicer receives a notice of termination pursuant to Section 4.2 or
(ii) upon the resignation of the Servicer pursuant to Section 3.5, 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
in this Agreement, and shall be subject to all the responsibilities,
restrictions, duties, liabilities and termination provisions relating thereto
placed on the Servicer by the
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terms and provisions of this Agreement; provided, however, that the Backup
Servicer (i) shall not be liable for any acts, omissions or obligations of the
Servicer prior to such succession or for any breach by the Servicer of any of
its representations and warranties contained in this Agreement or in any related
document or agreement and (ii) shall have no duty or obligation with respect to
the Servicer's obligations set forth in Section 2.8(b). The Backup Servicer and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession. If a successor Servicer is
acting as Servicer hereunder, it shall be subject to termination under Section
4.2 upon the occurrence of any Servicer Termination Event applicable to it as
Servicer. Notwithstanding the above, if the Backup Servicer shall be legally
unable or unwilling to act as Servicer, the Backup Servicer may petition a court
of competent jurisdiction to appoint any Eligible Servicer as the successor to
the Servicer. Pending such appointment, the Backup Servicer shall act as
successor Servicer unless it is legally unable to do so, in which event the
outgoing Servicer shall continue to act as Servicer until a successor has been
appointed and accepted such appointment. Subject to Section 3.5, no provision of
this Agreement shall be construed as relieving the Backup Servicer of its
obligation to succeed as successor Servicer upon the termination of the Servicer
pursuant to Section 4.2 or the resignation of the Servicer pursuant to Section
3.5. If upon the termination of the Servicer pursuant to Section 4.2 or the
resignation of the Servicer pursuant to Section 3.5, the Lender appoints a
successor Servicer other than the Backup Servicer, the Backup Servicer shall not
be relieved of its duties as Backup Servicer hereunder.
(b) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under the Agreement if the Servicer had not resigned
or been terminated hereunder. If any successor Servicer is appointed for any
reason, the Lender and such successor Servicer may agree on additional
compensation to be paid to such successor Servicer, which additional
compensation shall be payable out of funds on deposit in the Collection Account.
In addition, any successor Servicer shall be entitled, out of funds in the
Collection Account, to reasonable transition expenses incurred in acting as
successor Servicer.
Section 4.4. Waiver of Past Defaults. The Lender may waive any
default by the Servicer in the performance of its obligations hereunder and its
consequences. Upon any such waiver of a past default, such default shall cease
to exist, and any Servicer Termination Event arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.1. Amendment. This Agreement may be amended from time to
time by the parties hereto only by a written instrument executed by all such
parties and consented to by the Lender.
Section 5.2. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to the
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principles of conflicts of laws thereof and the obligations, rights and remedies
of the parties under this Agreement shall be determined in accordance with such
laws.
Section 5.3. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 5.4. Assignment. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 3.2 and as provided
in the provisions of the Agreement concerning the resignation of the Servicer
and the Backup Servicer, this Agreement may not be assigned by any party hereto
without the prior written consent of the other parties hereto.
Section 5.5. Governing Law; Waiver. (a) This Servicing Agreement
and the rights and obligations of the parties hereunder shall be governed by,
and construed and interpreted in accordance with the law of the State of New
York, without regard to the conflicts of law principles thereof.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(I) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER FACILITY AGREEMENTS TO WHICH
IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT OF THE COURTS
OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(II) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT
IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD
OR CLAIM THE SAME;
(III) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS
ADDRESS SET FORTH IN SECTION 5.7 OR AT SUCH OTHER ADDRESS OF WHICH ALL OF THE
OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(IV) AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER
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PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER
JURISDICTION;
(V) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED
TO IN THIS SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES;
AND
(VI) EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS SERVICING
AGREEMENT OR ANY OTHER FACILITY AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
Section 5.6. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute but
one and the same instrument.
Section 5.7. Notices. All demands, notices and communications 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 Servicer, the Servicer, at the following address:
J-Hawk Servicing Corporation, 6400 Imperial Drive, Waco, Texas 76712, P.O. Box
8216, Waco, Texas 76712-8216, phone 817-751-1750, fax 817-751-1208, Attention:
James T. Sartain, (b) in the case of the Borrower or NAF Corp., at the following
address: N.A.F. Auto Loan Trust, 4545 Fuller Drive, Suite 101, Irving, Texas
75038, Attention: Jim W. Moore, (c) in the case of the Collateral Agent, at the
following address: Texas Commerce Bank, 2200 Ross Avenue, Dallas, Texas 75201,
Attention: Structured Capital, fax 214-965-3577, and (d) in the case of the
Lender, at the following address: ContiTrade Services L.L.C., 277 Park Avenue,
New York, New York 10172, phone 212-207-2822, fax 212-207-2935, Attention: Chief
Counsel, or at such other address as shall be designated by any such party in a
written notice to the other parties.
Section 5.8. Successors and Assigns. This Agreement shall be binding
upon the parties hereto and their respective successors and assigns, and shall
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns permitted hereunder. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Borrower, the Backup Servicer, NAF Corp., the Lender and the Collateral
Agent and their respective permitted successors and assigns, if any.
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IN WITNESS WHEREOF, the Borrower, the Servicer, NAF Corp. and the
Lender have caused this Servicing Agreement to be duly executed by their
respective officers, effective as of the day and year first above written.
N.A.F. AUTO LOAN TRUST
By: DELAWARE TRUST COMPANY, not
in its individual capacity, but solely
as Owner Trustee on behalf of N.A.F.
AUTO LOAN TRUST
By /s/ Richard N. Smith
Name: Richard N. Smith
Title: Vice President
J-HAWK SERVICING CORPORATION
By /s/ Matt A. Landry, Jr.
Name: Matt A. Landry, Jr.
Title: Executive Vice President
NATIONAL AUTO FUNDING
CORPORATION
By /s/ Jim W. Moore
Name: Jim W. Moore
Title: President
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CONTITRADE SERVICES L.L.C.
By /s/ Susan E. O'Donovan
Name: Susan E. O'Donovan
Authorized Signatory
By /s/ Jerome M. Perelson
Name: Jerome M. Perelson
Authorized Signatory
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EXHIBIT A
FORM OF SERVICER'S CERTIFICATE
J-HAWK SERVICING CORPORATION
Monthly Servicing Report:
N.A.F. Auto Loan Trust
Collection Period Ending: dd/mm/yy
1