RECEIVABLES PURCHASE AGREEMENT

Exhibit 99.2

 

EXECUTION COPY

 

RECEIVABLES PURCHASE AGREEMENT

 

dated as of April 29, 2005

 

among

 

NAVISTAR FINANCIAL RETAIL RECEIVABLES CORPORATION, as Seller,

 

NAVISTAR FINANCIAL CORPORATION, as Servicer,

 

THUNDER BAY FUNDING, LLC,

 

as Company,

 

and

 

ROYAL BANK OF CANADA,

 

as Agent

TABLE OF CONTENTS

 

 

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EXHIBITS

 

 

SCHEDULES

 

 

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NAVISTAR FINANCIAL RETAIL RECEIVABLES CORPORATION

RECEIVABLES PURCHASE AGREEMENT

 

This Receivables Purchase Agreement dated as of April 29, 2005, is among Navistar Financial Retail Receivables Corporation, a Delaware corporation (“ Seller ” or “ NFRRC ”), Navistar Financial Corporation, a Delaware corporation (“ NFC ”), as Servicer (the Servicer together with the Seller, the “ Seller Parties ” and each a “ Seller Party ”), Thunder Bay Funding, LLC (the “ Company ”), and Royal Bank of Canada, as agent for the Purchasers hereunder or any successor agent hereunder (together with its successors and assigns hereunder, the “ Agent ”). Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I .

 

PRELIMINARY STATEMENTS

 

Seller desires to transfer and assign an undivided ownership interest in a specified pool of Receivables (as defined herein) to the Company on the date of this Agreement (as defined herein) which it acquired from NFC, and the Company desires to acquire such interest on the date of this Agreement, in each case subject to the terms of this Agreement.

 

The Seller, the Company, and the Agent desire to appoint NFC as the Servicer under this Agreement, and NFC desires to act as Servicer, in consideration of the fees and other benefits and subject to the terms and conditions set forth in this Agreement.

 

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ARTICLE I

PURCHASE ARRANGEMENTS

 

Section 1.1 Purchase of Purchaser Interest .

 

(a) Upon the terms and subject to the conditions hereof, on the date hereof Seller hereby sells and assigns the Purchaser Interest to the Agent for the benefit of the Purchasers.

 

(b) The aggregate Purchase Price for the Purchaser Interest conveyed hereunder shall be $417,729,756.64, which is payable by wire transfer of immediately available funds to a bank account of Seller designated in writing by Seller to the Agent.

 

Section 1.2 Transfers and Assignments; Custody of Receivables Files .

 

(a) On the date hereof, the Seller shall deposit the Initial Reserve Account Deposit into the Reserve Account.

 

(b) Within two Business Days after the date hereof, the Servicer shall cause to be deposited into the Collection Account all Collections (from whatever source) on or with respect to Receivables received by the Servicer on or after the Cutoff Date and on or prior to the date hereof.

 

(c) In connection with the sale, transfer and assignment of Receivables to the Seller from NFC pursuant to the Sale Agreement, the Seller, simultaneously with the execution and delivery of this Agreement, shall enter into the Custodian Agreement with the Custodian, pursuant to which the Seller shall revocably appoint the Custodian, and the Custodian shall accept such appointment, to act as Custodian.

 

(d) The Purchasers acknowledge and agree that (a) the rights pursuant to the International Purchase Obligations are personal to NFC, and only the proceeds of such rights are being assigned to the Purchasers pursuant to the terms hereof, (b) the Purchasers are not, and are not intended to be, third party beneficiaries of such rights, and (c) accordingly such rights are not exercisable by, enforceable by, or for the benefit of, or preserved for the benefit of, the Purchasers. The Purchasers hereby agree to and accept the appointment and authorization of NFC as Servicer hereunder subject to the terms and conditions set forth in this Agreement.

 

Section 1.3 Payment Requirements . All amounts to be paid or deposited by the Seller or the Servicer to the Agent or any Purchaser pursuant to any provision of this Agreement shall be paid or deposited in immediately available funds in accordance with the terms hereof no later than 11:00 a.m. (Chicago time) on the day when due; provided however, that (i) with respect to any intrabank transfer from any Designated Account to the Agent, the Purchasers or another Designated Account, it will be sufficient if the Servicer shall provide the Agent with notice that such transfer should be made, no later than 12:30 p.m. (Chicago time) on the day when due, and (ii) with respect to any transfer into the Collection Account, it shall be sufficient if such transfer is received by the Securities Intermediary at any time on the day it is

 

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due, it being understood that if such transfer into the Collection Account is received by the Securities Intermediary after its internal payment deadline, Investment Earnings may not be credited to the Collection Account for that night for such late arriving funds. Amounts payable to the Agent shall be paid to the Agent by deposit into Account No. 003-63-610, Account Name: Thunder Bay Funding, LLC at Deutsche Bank Trust Company Americas, ABA #021-001-033, Reference Kim Sukedo/Navistar Pool 2005-RBC, until otherwise notified by the Agent. Except as otherwise provided herein, all computations of Yield, per annum fees hereunder and per annum fees under the Fee Letter shall be made on the basis of a year of 360 days for the actual number of days elapsed; provided however , that computations of interest at the Base Rate shall be made on the basis of a year of 365 days or 366 days, as applicable, for the actual number of day elapsed. If any amount hereunder shall be payable on a day which is not a Business Day, such amount shall be payable on the next succeeding Business Day.

 

Section 1.4 Establishment of Designated Accounts .

 

(a) The Servicer, for the benefit of the Agent and the Purchasers, shall establish and maintain in the name of the Agent, an account titled “Royal Bank of Canada, as Agent-Navistar Financial 2005-RBC Collection Account” (the “ Collection Account ”) and an account titled “Royal Bank of Canada, as Agent-Navistar Financial 2005-RBC Reserve Account” (the “ Reserve Account ”), each of which will be an Eligible Account bearing a designation that the funds deposited therein are held for the benefit of the Agent and Purchasers. The Designated Accounts and any Eligible Investments on deposit in the Designated Accounts shall be subject to the exclusive custody and control of the Agent and the Agent shall have sole signature authority with respect thereto.

 

(b) The Securities Intermediary when requested by the Servicer shall invest the funds in the Reserve Account in Eligible Investments selected by the Servicer, held in the name of the Securities Intermediary for the benefit of the Agent and the Purchasers. Funds deposited in the Reserve Account shall be invested in Eligible Investments which mature on or prior to the next Settlement Date. Any Investment Earnings on funds in the Reserve Account shall be deposited into the Collection Account one Business Day prior to each Settlement Date and shall be treated as a part of Collected Interest for the Monthly Period related to such Settlement Date. The Servicer shall determine the Specified Reserve Account Balance for each Settlement Date.

 

(c) The Securities Intermediary when requested by the Servicer shall invest the funds in the Collection Account in Eligible Investments selected by the Servicer, held in the name of the Securities Intermediary for the benefit of the Agent and the Purchasers, which shall mature no later than the Business Day preceding the Settlement Date. Any income or other gain from such Eligible Investments in the Collection Account shall be retained in the Collection Account and shall be treated as a part of Collected Interest for the Monthly Period related to such Settlement Date.

 

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ARTICLE II

PAYMENTS AND COLLECTIONS

 

Section 2.1 General Settlement Procedures .

 

(a) The Servicer shall remit to the Collection Account all Collections including all Insurance Proceeds, all Liquidation Proceeds, proceeds from any Dealer Liability, and proceeds from any International Purchase Obligations, within two Business Days after receipt thereof. The Agent shall notify the Servicer of the Yield and Net Swap Amount with respect to any Settlement Period within three (3) Business Days after the end of such Settlement Period. On or before each Determination Date, with respect to the preceding Monthly Period and the related Settlement Date, the Servicer shall calculate the Total Available Amount, Collected Interest, Collected Principal, the Total Servicing Fee, and, provided that the Agent has supplied the Servicer with the Yield and Net Swap Amount for the related Settlement Period, other amounts required to determine the amounts to be deposited in or paid from each of the Collection Account and the Reserve Account on the next succeeding Settlement Date. If at any time the Seller receives any Collections, the Seller shall promptly pay such Collections to the Servicer and, at all times prior to such payment, such Collections shall be held in trust by the Seller for the exclusive benefit of the Purchasers and the Agent.

 

(b) On or before (but not more than two Business Days before) the Business Day preceding each Settlement Date, the Servicer shall cause to be made (including, in the case of clause (ii), by instructing the Securities Intermediary in accordance with Section 2.2 (a)) the following withdrawals, deposits, transfers and distributions in the amounts set forth in the Monthly Report for such Settlement Date:

 

(i) from the Collection Account to the Servicer, in immediately available funds, reimbursement of Outstanding Monthly Advances pursuant to Section 6.7 , payments of Liquidation Expenses with respect to Receivables which became Liquidating Receivables during the related Monthly Period pursuant to Section 6.3 and any unpaid Liquidation Expenses from prior periods;

 

(ii) from the Reserve Account to the Collection Account, the lesser of (A) the amount of cash or other immediately available funds therein on such date and (B) the amount, if any, by which (I) the sum of the Total Servicing Fee with respect to the preceding Monthly Period, the Yield for such Settlement Period and the Net Swap Amount for the related Settlement Period, the Facility Fee with respect to the related Settlement Period, and the Principal Distributable Amount for the related Settlement Date, exceeds (II) the Available Amount for such Settlement Date; and

 

(iii) the Servicer shall deposit, out of its own funds, the Net Swap Adjustment Amount into the Collection Account and Reserve Account as follows: (A) into the Collection Account, the excess, if any, of the amount specified in clause (B) of Section 2.1(b)(ii) over the amount specified in clause (A) of Section 2.1(b)(ii) and (B) the remainder, if any, into the Reserve Account.

 

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(c) On each Settlement Date, the Agent at the request of the Servicer shall apply amounts on deposit in the Collection Account, to the extent of the Total Available Amount, as follows:

 

(i) first , if the Servicer is not the Seller or an Affiliate of the Seller, to pay the Total Servicing Fee to the Servicer with respect to the related Monthly Period,

 

(ii) second , to the reimbursement of the Agent’s costs of collection and enforcement of this Agreement,

 

(iii) third , to pay the Agent for distribution to the Purchasers an amount equal to the sum of (A) the sum of the Yield for the related Settlement Period and the Net Swap Amount for the related Settlement Period and (B) the Facility Fee for such Settlement Period,

 

(iv) fourth , if the Servicer is the Seller or an Affiliate of the Seller, to pay the Total Servicing Fee to the Servicer with respect to the related Monthly Period,

 

(v) fifth , to pay to the Agent for distribution to the Purchasers, an amount equal to the Principal Distributable Amount for such Settlement Date to be applied to reduce the Capital of the Purchaser Interest,

 

(vi) sixth , to pay to the Reserve Account, an amount equal to the excess, if any, of the Specified Reserve Account Balance over the amount of funds then on deposit in the Reserve Account,

 

(vii) seventh , for payment of all other Obligations which are payable on or before such Settlement Date to the Agent or the Purchasers and which have not otherwise been paid (other than Warranty Payments owed by NFC or the Servicer and Optional Purchase Proceeds), and

 

(viii) eighth , if no Servicer Default has occurred and is continuing, the remaining balance, if any, to the Seller, unless there is a Servicer Default, at which time the remaining balance shall be used to reduce the Capital and any other Aggregate Unpaids.

 

(d) All payments by or on behalf of an Obligor with respect to a Receivable (excluding Supplemental Servicing Fees) shall be applied (i) first , to reduce Outstanding Monthly Advances, if any, with respect to such Receivable, as described in Section 6.7 , (ii) second , to the Scheduled Payment for such Monthly Period with respect to such Receivable, and (iii) third , the remainder shall constitute, with respect to such Receivable, a Full Prepayment or Partial Prepayment.

 

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(e) A Partial Prepayment made on a Receivable is applied to reduce the final Scheduled Payment and will thereafter, to the extent the Partial Prepayment exceeds the final Scheduled Payment, reduce Scheduled Payments in reverse chronological order beginning with the penultimate Scheduled Payment. The Rebate related to such Partial Prepayment will reduce the final Scheduled Payment and will thereafter, to the extent the Rebate exceeds the final Scheduled Payment, reduce Scheduled Payments in reverse chronological order beginning with the penultimate Scheduled Payment.

 

Section 2.2 Withdrawals from Reserve Account .

 

(a) The Servicer shall notify (with a copy to the Agent) the Securities Intermediary of the amount of, and the Securities Intermediary shall make, the withdrawals from the Reserve Account required pursuant to Sections 1.4(b) and 2.1(b)(ii) . On each Settlement Date, to the extent that the funds in the Reserve Account exceed the Specified Reserve Account Balance and so long as no Servicer Default shall have occurred and be continuing, the Servicer may notify (with a copy to the Agent) the Securities Intermediary of the amount of, and the Securities Intermediary shall withdraw the amount of, such excess from the Reserve Account and distribute the same to the Seller. Upon the occurrence of a Servicer Default, the Servicer shall notify (with a copy to the Agent) the Securities Intermediary of the amount of, and the Securities Intermediary shall withdraw, all amounts on deposit in the Reserve Account for application in accordance with Section 2.1(c) . To the extent that any funds remain in the Reserve Account after the Aggregate Unpaids have been indefeasibly reduced to zero, such funds shall be withdrawn and distributed to, or as directed by, the Seller. Each Monthly Report shall specify the amount, if any, which is scheduled to be withdrawn from the Reserve Account and distributed to the Seller on the next succeeding Settlement Date.

 

(b) If the Servicer, pursuant to Section 6.7 , determines on any Settlement Date that it is required to make a Monthly Advance and does not do so from its own funds, the Servicer shall notify (with a copy to the Agent) the Securities Intermediary of the amount of such shortfall, and the Securities Intermediary shall withdraw, funds from the Reserve Account up to the amount of such shortfall and deposit them in the Collection Account to cover any such shortfall. Such payment shall be deemed to have been made by the Servicer pursuant to Section 2.1 for purposes of making distributions pursuant to this Agreement, but shall not otherwise satisfy the Servicer’s obligation to deliver the amount of the Monthly Advances to the Collection Account, and the Servicer shall within two Business Days replace any funds in the Reserve Account so used. The Servicer shall not be entitled to reimbursement for any such deemed Monthly Advances unless and until the Servicer shall have replaced such funds in the Reserve Account.

 

Section 2.3 Payment Rescission . No payment of any of the Aggregate Unpaids shall be considered paid or applied hereunder to the extent that, at any time, all or any portion of such payment or application is rescinded by application of law or judicial authority, or

 

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must otherwise be returned or refunded for any reason. Seller shall remain obligated for the amount of any payment or application so rescinded, returned or refunded, and shall promptly pay to the Agent (for application to the Person or Persons who suffered such rescission, return or refund) the full amount thereof, plus the Default Fee from the date of any such rescission, return or refunding.

 

Section 2.4 Clean Up Call . As of the last day of any Monthly Period as of which the Capital is 10% or less of the Initial Aggregate Receivables Balance, the Servicer shall have the option to purchase all (but not less than all) of the Purchaser Interest (the “ Clean-up Call ”); provided, however, that the Servicer may not exercise the Clean-up Call if the Optional Purchase Proceeds are insufficient to repay all Aggregate Unpaids. To exercise such option, the Servicer shall provide the Agent with not less than 10 Business Days’ prior written notice of its intention to do so (the “ Clean-up Call Notice ”). On or before the day preceding the related Settlement Date, the Servicer shall deposit in the Collection Account an amount equal to the aggregate Administrative Purchase Payments for the Receivables (including Liquidating Receivables), included in the Purchaser Interest (less the Liquidation Expenses to be incurred in connection with the recovery thereof). The foregoing amounts (the “ Optional Purchase Proceeds ”) shall be paid by the Servicer into the Collection Account for distribution to the Agent and the Purchasers in accordance with Section 2.1 .

 

Section 2.5 Monthly Report Not later than 10:00 a.m. (Chicago time) on each Determination Date, the Servicer shall deliver to the Agent a Monthly Report with respect to the immediately preceding Monthly Period, executed by any Authorized Officer of the Servicer, containing all information necessary for making the calculations, withdrawals, deposits, transfers and distributions required by this Article II .

 

Section 2.6 Deposits Net of Total Servicing Fee . Any provision herein to the contrary notwithstanding, for so long as (i) NFC is the Servicer hereunder and (ii) no Servicer Default has occurred and is continuing, the deposits into the Collection Account pursuant to Section 2.1(a) may be made net of the Total Servicing Fee to be distributed to the Servicer pursuant to Sections 2.1(c)(iv) (so long as Collected Interest not yet distributed is sufficient therefor). Nonetheless, the Servicer shall account for the Total Servicing Fee in the Monthly Report as if such amount had been deposited into the Collection Account and/or transferred separately.

 

Section 2.7 Investment Policy and Procedure . Investments in Eligible Investments shall be made in the name of the Securities Intermediary, and such investments shall not be sold or disposed of prior to their maturity. The Servicer shall from time to time appoint a person, which shall initially be JPMorgan Chase Bank, to act as “ Securities Intermediary ”, who shall qualify as a “securities intermediary” within the meaning of Section 8-102 of the UCC in effect in the State of New York. The Servicer shall provide notice of such appointment to the Agent and shall use reasonable efforts to obtain the express agreement of such Person to the obligations of the Securities Intermediary set forth in Sections 1.4, 2.1, 2.2, 2.7 and 6.12 , a copy of which agreement shall be delivered to the Agent.

 

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(a) With respect to the Designated Account Property, the Securities Intermediary agrees, by its acceptance hereof, that:

 

(i) The Designated Accounts are accounts to which Financial Assets will be credited and are “securities accounts” within the meaning of Section 8-501 of the UCC.

 

(ii) All securities or other property underlying any Financial Assets credited to the Designated Accounts shall be registered in the name of the Securities Intermediary, indorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary and in no case will any Financial Asset credited to any of the Designated Accounts be registered in the name of the Agent, the Company, the Servicer or the Seller, payable to the order of the Agent, the Company, the Servicer or the Seller or specially indorsed to the Agent, the Company, the Servicer or the Seller except to the extent the foregoing have been specially indorsed to the Securities Intermediary or in blank.

 

(iii) All property delivered to the Securities Intermediary pursuant to this Agreement will be promptly credited to the appropriate Designated Account as directed by the Servicer or as otherwise provided herein.

 

(iv) Each item of property (whether investment property, Financial Asset, security, instrument or cash) credited to a Designated Account shall be treated as a “financial asset” within the meaning of Section 8-102(a)(9) of the New York UCC.

 

(v) If at any time the Securities Intermediary shall receive any order from the Agent directing transfer or redemption of any Financial Asset relating to the Securities Accounts, the Securities Intermediary shall comply with such entitlement order without further consent by the Financial Institutions, the Company, the Servicer, the Seller or any other Person.

 

(vi) The Designated Accounts shall be governed by the laws of the State of New York, regardless of any provision in any other agreement. For purposes of the UCC, New York shall be deemed to be the Securities Intermediary’s jurisdiction and the Designated Accounts (as well as the Securities Entitlements related thereto) shall be governed by the laws of the State of New York.

 

(vii) The Securities Intermediary has not entered into, and until the termination of this Agreement will not enter into, any agreement with any other Person relating to the Designated Accounts and/or any Financial Assets credited thereto pursuant to which it has agreed to comply with entitlement orders (as defined in Section 8-102(a)(8) of the New York UCC) of such other

 

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Person and the Securities Intermediary has not entered into, and until the termination of this Agreement will not enter into, any agreement with the Financial Institutions, any Company, the Seller, the Servicer or the Agent purporting to limit or condition the obligation of the Securities Intermediary to comply with entitlement orders as set forth in Section 2.7(a)(v) above.

 

(viii) Except for the claims and interest of the Agent, and the Company in the Designated Accounts, the Securities Intermediary knows of no claim to, or interest in, the Designated Accounts or in any Financial Asset credited thereto. If any other person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Designated Accounts or in any Financial Asset carried therein, the Securities Intermediary will promptly notify the Agent, the Company, and the Servicer thereof.

 

(ix) The Securities Intermediary will promptly send copies of all statements, confirmations and other correspondence concerning the Designated Accounts and/or any Designated Account Property simultaneously to each of the Servicer and the Agent at the addresses set forth in the signature pages hereof.

 

(b) The Servicer shall have the right, revocable by the Agent to notify the Securities Intermediary (with a copy to the Agent) of the amounts to be withdrawn and paid, and the Securities Intermediary shall make such withdrawals and payments, from the Designated Accounts for the purpose of permitting the Servicer to carry out its duties hereunder or permitting the Agent to carry out its duties hereunder.

 

(c) The Agent shall possess all right, title and interest in and to all funds on deposit from time to time in the Designated Accounts and in all proceeds thereof. The Designated Accounts shall be under the sole dominion and control of the Agent for the benefit of the Agent and the Purchasers.

 

(d) The Servicer shall not direct the Securities Intermediary to make any investment of any funds or to sell any investment held in any of the Designated Accounts unless the security interest granted and perfected in such account shall continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person, and, in connection with any direction to the Agent to make any such investment or sale, if requested by the Securities Intermediary, the Servicer shall deliver to the Securities Intermediary an opinion of counsel, acceptable to the Securities Intermediary, to such effect.

 

(e) The Seller shall pay all fees and expenses of the Securities Intermediary. The Securities Intermediary shall have no right of offset against amounts in the Designated Accounts.

 

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Section 2.8 Default Fees . If any Person fails to pay any of the Obligations when due, such Person agrees to pay, on demand, the Default Fee in respect thereof until paid. Notwithstanding the foregoing, no provision of this Agreement or the Fee Letter shall require the payment or permit the collection of any amounts hereunder in excess of the maximum permitted by applicable law.

 

Section 2.9 Distributions by Agent . All distributions to the Agent under any clause of Section 2.1(c) or any other provision of this Agreement in respect of amounts owing to the Agent and the Purchasers shall be allocated and paid by the Agent to the Purchasers as the Agent and the Purchasers shall agree.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

Section 3.1 Representations and Warranties of Seller Parties . As of the date hereof (or with respect to representations and warranties that speak expressly as of another date, then as of such other date), each Seller Party hereby represents and warrants to the Agent and the Purchasers, as to itself, that:

 

(a) Corporate Existence and Powe r. Such Seller Party is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, and is duly qualified to do business and is in good standing as a foreign corporation, and has and holds all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted.

 

(b) Power and Authority; Due Authorization Execution and Delivery . The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder and, in the case of Seller only, Seller’s use of the proceeds of sales made hereunder, are within its corporate powers and authority and have been duly authorized by all necessary corporate action on its part. This Agreement and each other Transaction Document to which such Seller Party is a party has been duly executed and delivered by such Seller Party.

 

(c) No Conflict . The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder do not contravene or violate (i) its certificate or articles of incorporation or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any material agreement, contract or instrument to which it is a party or by which it or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property.

 

(d) Governmental Authorization . Other than the filing of the financing statements required hereunder, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereunder.

 

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(e) Actions, Suits . There are no actions, suits or proceedings pending, or to the best of such Seller Party’s knowledge, threatened, against or affecting such Seller Party, or any of its properties, in or before any court, arbitrator or other body, that would result in a Material Adverse Change.

 

(f) Binding Effect . This Agreement and each other Transaction Document to which such Seller Party is a party constitute the legal, valid and binding obligations of such Seller Party enforceable against such Seller Party in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

(g) Use of Proceeds . No proceeds of any sale hereunder will be used (i) for a purpose that violates, or would be inconsistent with, Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time or (ii) to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.

 

(h) Good Title . Immediately prior to each purchase hereunder, the Seller shall be the legal and beneficial owner of the Receivables and Related Security with respect thereto, free and clear of any Adverse Claim. All necessary actions have been taken, including the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller’s ownership interest in each Receivable and the Related Security.

 

(i) Perfection . This Agreement, together with the filing of the financing statements contemplated hereby, is effective to, and shall transfer to the Agent for the benefit of the Purchaser (and the Agent for the benefit of the Purchaser shall acquire from Seller) a valid and perfected first priority undivided ownership interest in each Receivable existing or hereafter arising and in the Related Security with respect thereto, free and clear of any Adverse Claim. All necessary actions have been taken, including the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions, to perfect the Agent’s (on behalf of the Purchaser) ownership interest in the Receivables and, the Related Security.

 

(j) Places of Business . The principal place of business and chief executive office of such Seller Party and the offices where it keeps all of its Records are located at the address(es) listed on Exhibit II or such other locations of which the Agent has been notified in accordance with Section 5.2(a) in jurisdictions where all action required to continue the perfection of the Agent’s security interest in the Receivables and the Related Security has been taken and completed. Seller’s Federal Employer Identification Number is correctly set forth on Exhibit II .

 

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(k) Not a Holding Company or an Investment Company . Such Seller Party is not a “ holding company ” or a “ subsidiary holding company ” of a “ holding company ” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any successor statute. Such Seller Party is not an “ investment company ” within the meaning of the Investment Company Act of 1940, as amended, or any successor statute.

 

(l) Taxes . Such Seller Party will do nothing to materially impair the rights, title and interest of any Purchaser in and to the Purchaser Interest and will pay when due (or contest in good faith) any taxes, including without limitation any sales tax, excise tax or other similar tax or charge, payable in connection with the Receivables and their creation and satisfaction.

 

(m) Financial Condition . In the case of the Seller only, the Seller is solvent and able to pay its debts when due, and is not the subject of any case or proceeding, domestic or foreign, relating to bankruptcy, insolvency, reorganization, arrangement, adjustment of debts, winding-up, liquidation, dissolution, composition, receivership, trusteeship, custodianship, or any other proceeding regarding relief of debtors or enforcement of creditors’ rights; Seller shall not take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing cases or proceedings; and Seller is not a defendant in any case, proceeding or other action seeking issuance of a writ or warrant of attachment, execution, distraint or similar process against all or any part of its assets.

 

ARTICLE IV

CONDITIONS OF PURCHASES

 

Section 4.1 Conditions Precedent to Purchase . The purchase of a Purchaser Interest under this Agreement is subject to the conditions precedent that (a) the Agent shall have received on or before the date of such purchase those documents listed on Schedule A and (b) the Agent shall have received all fees and expenses required to be paid on such date pursuant to the terms of this Agreement and the Fee Letter.

 

ARTICLE V

COVENANTS

 

Section 5.1 Affirmative Covenants of the Seller Parties . Until the date on which the Aggregate Unpaids have been indefeasibly paid in full and this Agreement terminates in accordance with its terms, each Seller Party hereby covenants, as to itself, as set forth below:

 

(a) Financial Reporting . Such Seller Party will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to the Agent:

 

(i) Annual Reportin g. Within 120 days after the close of its fiscal year, the annual report for Servicer for such fiscal year on Form 10-K, in the form filed with the Securities and Exchange Commission.

 

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(ii) Quarterly Reporting . Within 45 days after the close of the first three (3) quarterly periods of its fiscal year, the quarterly reports for Servicer on Form 10-Q, in the form filed with the Securities and Exchange Commission, as at the close of each such period.

 

(iii) Other Information . Promptly, from time to time, such other information, documents, records or reports relating to the Receivables or the condition or operations, financial or otherwise, of such Seller Party as the Agent may from time to time reasonably request in order to protect the interests of the Agent and the Purchasers under or as contemplated by this Agreement.

 

(b) Notices . Such Seller Party will notify the Agent in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto:

 

(i) Servicer Defaults . The occurrence of each Servicer Default, by a statement of an Authorized Officer of such Seller Party.

 

(ii) Sale Agreement . Any request for waivers, consents or modifications of the Sale Agreement.

 

(c) Compliance with Laws and Preservation of Corporate Existence . Such Seller Party will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject. Such Seller Party will preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where its business is conducted, except where the failure to so preserve and maintain or qualify would not result in a Material Adverse Change.

 

(d) Audits . Such Seller Party will furnish to the Agent from time to time such information with respect to it and the Receivables as the Agent may reasonably request. Such Seller Party shall permit the Agent and its agents and representatives, at their own expense (unless a Servicer Default has occurred and is continuing ( including , without limitation , by reason of a failure to deliver the reports required by Section 6.9 or Section 6.10 and the expiration of the grace period specified in Section 7.1(c) ), in which case, at the expense of the Servicer) during normal business hours on 48 hours prior notice: (i) to examine and make copies of and abstracts from all Records in the possession or under the control of such Person relating to the Receivables and the Related Security, including, without limitation, the related Contracts, and (ii) to visit the offices and properties of such Person for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to such Person’s financial condition or the Receivables and the Related Security or any Person’s performance under any of

 

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the Transaction Documents or any Person’s performance under the Contracts and, in each case, with the executive officers of Seller or the Servicer. Nothing in this Section 5.1(d) shall affect the obligations of the Servicer to observe any applicable law prohibiting the disclosure of information regarding the Obligors, and the failure of the Servicer to provide access to information as a result of this obligation shall not constitute a breach of this Section 5.1(d) .

 

(e) Keeping and Marking of Records and Books . The Servicer will keep proper books and records of account containing full, true and correct entries in conformity with GAAP (to the extent applicable). The Servicer will ensure that its computer files are at all times marked in the fashion specified in Section 4.01(c) of the Sale Agreement.

 

(f) Taxes on Receivables . Seller will pay when due any taxes payable in connection with the Receivables, exclusive of taxes on or measured by income or gross receipts of the Company, the Agent or any Financial Institution.

 

(g) Ownership . Seller shall take all necessary action to (i) vest legal and equitable title to the Designated Receivables, and the Related Security purchased under the Sale Agreement irrevocably in Seller, free and clear of any Adverse Claims other than Adverse Claims in favor of the Agent and the Purchasers ( including , without limitation , the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller’s interest in such Designated Receivables and Related Security and such other action to perfect, protect or more fully evidence the interest of Seller therein as the Agent may reasonably request), and (ii) establish and maintain, in favor of the Agent, for the benefit of the Purchasers, a valid and perfected first priority undivided ownership interest (and/or a valid and perfected first priority security interest) in all Receivables and Related Security, free and clear of any Adverse Claims other than Adverse Claims in favor of the Agent for the benefit of the Purchasers ( including , without limitation , the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Agent’s (for the benefit of the Purchasers) interest in such Receivables and Related Security and such other action to perfect, protect or more fully evidence the interest of the Agent for the benefit of the Purchasers as the Agent may reasonably request).

 

(h) Representations and Warranties as to the Receivables . As collateral security for the performance by the Seller of all the terms, covenants and agreements on the part of the Seller (whether as Seller or otherwise) to be performed under this Agreement or any document delivered in connection with this Agreement in accordance with the terms thereof, including the punctual payment when due of all obligations of the Seller hereunder or thereunder, whether for indemnification payments, fees, expenses or otherwise, the Seller hereby assigns to the Agent for its benefit and the ratable benefit of the Purchasers a security interest in, all of the Seller’s right, title and interest in, to and under (but none of the Seller’s obligations under) all of the following, whether now or hereafter existing or arising:

 

(i) the Sale Agreement, including, without limitation, (a) all rights of the Seller to receive moneys due or to become due under or

 

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pursuant to the Sale Agreement, (b) all security interests and property subject thereto from time to time purporting to secure payment of monies due or to become due under or pursuant to the Sale Agreement, (c) all rights of the Seller to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the Sale Agreement, (d) claims of the Seller for damages arising out of or for breach of or default under the Sale Agreement, and (e) the right of the Seller to compel performance and otherwise exercise all remedies thereunder;

 

(ii) all Receivables, the Related Security with respect thereto and the Collections not otherwise purchased or scheduled to be purchased under this Agreement;

 

(iii) to the extent not included in the foregoing, all proceeds of any and all of the foregoing.

 

Such assigned right, title and interest includes the representations and warranties of NFC made to the Seller pursuant to Sections 3.01 and 3.02 of the Sale Agreement. The Seller hereby represents and warrants to the Purchasers that the Seller has taken no action which would cause such representations and warranties to be false in any material respect as of the date of this Agreement. The Seller further acknowledges that each Purchaser relies on the representations and warranties of the Seller under this Agreement and of NFC under the Sale Agreement in accepting the Receivables. The foregoing representation and warranty speaks as of the date of this Agreement, but shall survive the sale, transfer and assignment of the Receivables to the Purchasers.

 

(i) Repurchase of Receivables Upon Breach of Warranty . Upon discovery by the Seller or the Servicer of a breach of any of the representations and warranties in Section 3.01 of the Sale Agreement (and, with respect to Subsection 3.01(j) of the Sale Agreement, irrespective of any limitation regarding knowledge of NFC) or in Article III of this Agreement that materially and adversely affects the interests of a Purchaser in any Receivable, the party discovering such breach shall give prompt written notice thereof to the Agent and the Purchasers. As of the second Settlement Date following its discovery or its receipt of notice of such a breach (or, if a Servicer Default has occurred and is continuing, or, at the applicable Seller Party’s election, the first Accounting Date following such discovery), unless such breach shall have been cured in all material respects, the applicable Seller Party shall repurchase the interests of the Purchasers in such Receivable from the Purchasers on the related Settlement Date. A Purchaser shall have no affirmative duty to conduct any investigation as to the occurrence of any event requiring the repurchase of any Receivable pursuant to this Section 5.1(i) .

 

The repurchase price to be paid by any Warranty Purchaser shall be an amount equal to the Warranty Payment. It is understood and agreed that the obligations of the Warranty Purchaser to repurchase any Receivable as to which a breach has occurred and is continuing, shall, if such repurchase obligations are fulfilled, constitute the sole remedy against the Seller, the Servicer or NFC for such breach available to any Person. The Servicer acknowledges its obligations to repurchase Administrative Receivables from the Purchaser pursuant to Section 5.2(b) hereof and to repurchase Warranty Receivables pursuant to Section 5.04 of the Sale Agreement.

 

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(j) Corporate Separateness . Seller will maintain its corporate separateness and distinctiveness from NFC and all other Affiliates through observation of the following covenants:

 

(i) Seller shall at all times restrict its activities to (i) providing financing facilities through the purchase of any instalment sale contracts, loans, notes, leases, accounts or other rights to payment from retail customers in respect of trucks, buses, trailers and related equipment (including notes of dealers and other persons that finance the acquisition by such dealer or other person of a truck, bus, trailer or related equipment that is leased to a third person or persons) from NFC and (ii) conducting any ancillary business or activity as it deems necessary or appropriate to accomplish its primary purpose. Seller will not amend its certificate of incorporation (“ Certificate of Incorporation ”) in any manner which would affect such restrictions on Seller’s activities.

 

(ii) Seller shall keep separate books and records such that its own separate financial statements may be readily prepared and presented apart from any financial statements consolidated to include NFC or any subsidiary or affiliate of NFC other than Seller. Any financial statements of NFC which are presented on a consolidated basis to include Seller shall contain notes clearly stating that the Receivables have been sold to a third party and are not assets of the consolidated group.

 

(iii) Seller shall conduct its business solely in its individual corporate name and otherwise so as not to mislead others with whom it deals regarding its independent identity and existence.

 

(iv) Seller has and will maintain its own separate mailing address, telephone number and stationery.

 

(v) Seller will cause to be elected and compensate its Independent Directors as described in Section 5.1 (j)(xi ) below.

 

(vi) Any allocations of direct, indirect or overhead expenses for items shared between Seller on the one hand and NFC on the other hand have been and will be made to the extent practical on the basis of actual use or value of services rendered and otherwise on a basis reasonably related to actual use or the value of services rendered.

 

(vii) Seller has paid and will pay its own operating expenses and liabilities from its own funds, except NFC shall pay a portion of the expenses of Seller incurred in connection with the transactions contemplated by

 

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the Transaction Documents. Such payment by NFC shall be treated by NFC as Advances under the Amended and Restated Intercompany Advance Agreement (the “ Intercompany Advance Agreement ”) dated as of May 3, 1994, between NFC and Seller.

 

(viii) Seller shall not commingle or pool its funds or other assets with those of NFC or any other subsidiary or affiliate of NFC except as specifically provided in transaction documents executed in connection with past pools of receivables and in the Amended and Restated Operating Agreement dated as of May 3, 1994 (the “ Operating Agreement ”) between NFC and Seller. Except as provided in the Operating Agreement, Seller shall not maintain joint bank accounts or other depository accounts to which NFC or any other Affiliate of NFC, other than NFC in its capacity as Servicer, has independent access.

 

(ix) Seller is not named, and has not entered any agreement to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy covering the property of NFC or of any other subsidiary or Affiliate of NFC.

 

(x) Each officer and director of Seller shall discharge his or her respective fiduciary duties and obligations in accordance with all applicable laws.

 

(xi) Seller has, and shall continue at all times to have, at least two Independent Directors (as defined in Seller’s restated Certificate of Incorporation as in effect on the date hereof) on its board of directors.

 

(k) Taxes . Such Seller Party shall file all tax returns and reports required by law to be filed by it and shall promptly pay all taxes and governmental charges at any time owing, except any such taxes which are not yet delinquent or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with generally accepted accounting principles shall have been set aside on its books.

 

(l) Transfers, Liens, Etc . Except for the Lien in favor of a Purchaser created by this Agreement, the Seller Parties shall not transfer, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Lien (including, without limitation, the filing of any financing statement) upon or with respect to any Receivable or Related Security.

 

(m) Liens in Force . Except as contemplated in Sections 6.1, 6.4 or 6.5 of this Agreement, the Seller Parties shall not release in whole or in part any Financed Vehicle or related insurance contract rights from the security interest securing the Receivable.

 

(n) No Impairment . The Seller Parties shall do nothing to impair the rights of the Seller or any Purchasers in and to the Receivables.

 

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(o) No Modifications . The Seller Parties shall not amend or otherwise modify any Receivable such that the Initial Receivable Balance, the Annual Percentage Rate or the total number of Scheduled Payments is altered or such that the final scheduled payment on such Receivable will be due later than April 30, 2012. Any such extension of the final scheduled payment will be made by the Servicer in accordance with its customary servicing procedures.

 

(p) Sale Agreement . The Seller Parties shall not grant any waiver or consent under, amend or otherwise modify, or terminate the Sale Agreement without the prior written consent of the Agent.

 

(q) Name Change . No Seller Party shall change its (i) name, identity, or corporate structure in any manner that would make any financing statement or continuation statement filed by it in connection with the Transaction Documents seriously misleading within the meaning of Section 9-506(b) of the UCC, or (ii) jurisdiction of formation, unless it shall have given the Agent at least 60 days prior written notice thereof and shall file such financing statements or amendments as may be necessary to continue the perfection of the Agent’s security interest in the Receivables and the Related Security.

 

Section 5.2 Covenants of the Servicer . At all times from the date hereof to the date on which the Aggregate Unpaids shall be equal to zero, unless the Agent shall otherwise consent in writing:

 

(a) Conduct of Business . The Servicer will do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and will maintain all requisite authority to conduct its business in each jurisdiction in which its business requires such authority except where the failure to so preserve and maintain or qualify would not result in a Material Adverse Change.

 

(b) Purchase of Receivables Upon Breach of Covenant . Upon discovery by any of the Seller or the Servicer, the Agent and the Purchasers of a breach of any of the covenants set forth in Section 6.5 and Sections 5.1 (m) , (n) or (o) , the party discovering such breach shall give prompt written notice thereof to the Agent and the Purchasers. As of the second Accounting Date following its discovery or receipt of notice of such breach (or, at the Servicer’s election, the first Accounting Date so following), the Servicer shall, unless it shall have cured such breach in all material respects, purchase from the Purchasers their interests in any Receivable materially and adversely affected by such breach and, on the related Settlement Date, the Servicer shall pay the Administrative Purchase Payment. It is understood and agreed that the obligation of the Servicer to purchase any Receivable with respect to which such a breach has occurred and is continuing shall, if such obligation is fulfilled, constitute the sole remedy against the Servicer for such breach available to any Person.

 

(c) Servicing Procedures . The Servicer shall not change or amend its customary servicing procedures in any manner that would reasonably be expected to materially and adversely affect the collectibility of the Receivables generally.

 

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Section 5.3 Covenant of the Agent . Until this Agreement has terminated, the Agent shall maintain the Schedule of Receivables at its office set forth on the signature page hereof for inspection during normal business hours by interested parties.

 

Section 5.4 Replacement of Financial Institutions . In the event that the Discount Rate applicable to any portion of the Purchaser Interest is calculated using the Base Rate as a result of clause (a) of the definition of “Discount Rate,” the Agent, Seller and Servicer will cooperate to have such Financial Institution replaced with a Financial Institution that would be able to fund using the LIBO Rate.

 

ARTICLE VI

ADMINISTRATION AND COLLECTION

 

Section 6.1 General Duties of the Servicer . The Servicer is hereby appointed and authorized by the Agent and the Purchasers to act as agent for the Agent and the Purchasers and in such capacity shall manage, service, administer and make collections on the Receivables with reasonable care using that degree of skill and attention that the Servicer exercises with respect to comparable medium and heavy duty truck, bus and trailer receivables that it services for itself or others. The Servicer hereby accepts such appointment and authorization and agrees to perform the duties of Servicer with respect to the Receivables set forth herein. The Servicer’s duties shall include collection and posting of all payments, responding to inquiries of Obligors on the Receivables, investigating delinquencies, sending payment coupons to Obligors, reporting tax information to Obligors, policing the collateral, accounting for collections and furnishing monthly and annual statements to the Purchasers with respect to distributions, generating federal income tax information and performing the other duties specified herein. Subject to the provisions of Section 6.2 , the Servicer shall follow its customary standards, policies and procedures 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 Agent and the Purchasers, pursuant to this Section 6.1 , to execute and deliver, on behalf of the Agent and the Purchasers, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Receivables and the Financed Vehicles. The Servicer is hereby authorized to commence in the name of the Agent and the Purchasers or, to the extent necessary, in its own name, a legal proceeding to enforce a Liquidating Receivable as contemplated by Section 6.3 , to enforce all obligations of NFC and Seller in its capacity as the Seller or otherwise, under each of the Sale Agreement and this Agreement or to commence or participate in a legal proceeding (including a bankruptcy proceeding) relating to or involving a Receivable or a Liquidating Receivable. If the Servicer commences or participates in such a legal proceeding in its own name, the Agent and the Purchasers shall thereupon be deemed to have automatically assigned such Receivable to the Servicer for purposes of commencing or participating in any such proceeding as a party or claimant. The Servicer is hereby authorized and empowered by the Agent and the Purchasers to execute and deliver in the Servicer’s name any notices, demands,

 

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claims, complaints, responses, affidavits or other documents or instruments in connection with any such proceeding. The Agent and each Purchaser, upon the written request of the Servicer, shall furnish the Servicer with any powers of attorney and other documents and take any other steps which the Servicer may deem necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement and the Purchase Agreement. Except to the extent required by the preceding two sentences, the authority and rights granted to the Servicer in this Section 6.1 shall be nonexclusive and shall not be construed to be in derogation of the retention by the Agent or the Purchasers of equivalent authority and rights.

 

Section 6.2 Collection of Receivables 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 practices, policies and procedures as it follows with respect to comparable medium and heavy duty truck, bus and trailer receivables that it services for itself or others. Except as provided in Section 5.1(o) , the Servicer is hereby authorized to grant extensions, rebates or adjustments on a Receivable without the prior consent of the Agent or the Purchasers and to rewrite, in its ordinary course of business, a Receivable with respect to any remaining Financed Vehicle or Vehicles to reflect the Full Prepayment of the portion of such Receivable relating to one or more of the Financed Vehicles securing such Receivable without the prior consent of the Agent or the Purchasers. The Servicer is authorized in its discretion to waive any prepayment charge, late payment charge or any other fees that may be collected in the ordinary course of servicing the Receivables.

 

Section 6.3 Realization Upon Liquidating Receivables . The Servicer shall use reasonable efforts, consistent with its customary servicing procedures, to repossess or otherwise comparably convert the ownership of each Financed Vehicle that it has reasonably determined should be repossessed or otherwise converted following a default under the Receivable secured by each such Financed Vehicle. The Servicer is authorized to follow such practices, policies and procedures as it shall deem necessary or advisable and as shall be customary and usual in its servicing of medium and heavy duty truck, bus and trailer receivables that it services for itself or others, which practices, policies and procedures may include reasonable efforts to realize upon or obtain benefits of any lease assignments, proceeds from any Dealer Liability, proceeds from any International Purchase Obligations, proceeds from any Insurance Policies and proceeds from any Guaranties, in each case with respect to the Receivables, selling the related Financed Vehicle or Financed Vehicles at public or private sale or sales and other actions by the Servicer in order to realize upon such a Receivable. The foregoing is subject to the provision that, in any case in which the Financed Vehicle shall have suffered damage, the Servicer shall not be required to expend funds in connection with any repair or towards the repossession of such Financed Vehicle unless it shall determine in its discretion that such repair and/or repossession is reasonably likely to increase the proceeds of liquidation of the related Receivable by an amount greater than the amount of such expenses. The Servicer shall be entitled to receive Liquidation Expenses from Collections with respect to each Liquidating Receivable at such time as the Receivable becomes a Liquidating Receivable in accordance with Section 2.1(b) . Following the occurrence and continuation of a Servicer Default, the Agent may, but shall have no obligation to take any action or commence any proceeding to realize upon any Liquidating Receivable, any

 

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such action or commencement of proceeding to be at the sole expense of the Servicer. At such time as the Servicer or the Seller, as the case may be, has any obligation to pursue the collection of Receivables and the Agent or a Purchaser possesses any documents necessary therefor, the Agent or such Purchaser, as the case may be, agrees to furnish such documents to the Servicer or the Seller, as the case may be, to the extent and for the period necessary for the Servicer or the Seller, as the case may be, to comply with its obligations hereunder.

 

Section 6.4 Maintenance of Insurance Policies . The Servicer shall, in accordance with its customary servicing procedures, require that each Obligor shall have obtained physical damage insurance covering each Financed Vehicle as of the execution of the related Receivable, unless the Servicer has in accordance with its customary servicing procedures permitted an Obligor to self-insure the Financed Vehicle or Financed Vehicles securing such Receivable. The Servicer shall, in accordance with its customary servicing procedures, monitor such physical damage insurance with respect to each Financed Vehicle that secures each Receivable.

 

Section 6.5 Maintenance of Security Interests in Vehicles . The Servicer shall, in accordance with its customary servicing procedures and at its own expense, take such steps as are necessary to maintain perfection of the first priority security interest created by each Receivable in the related Financed Vehicle or Financed Vehicles. The Purchasers hereby authorize the Servicer to re-perfect such security interest as necessary because of the relocation of a Financed Vehicle or for any other reason.

 

Section 6.6 Total and Supplemental Servicing Fees; Payment of Certain Expenses by Servicer . The Servicer is entitled to receive the Total Servicing Fee and Supplemental Servicing Fees out of Collections as provided herein. Subject to any limitation on the Servicer’s liability hereunder, the Servicer shall be required to pay all expenses incurred by it in connection with its activities under this Agreement (including fees and disbursements of the Purchaser, the Financial Institution, the Agent, and any independent accountants, taxes imposed on the Servicer, expenses incurred in connection with distributions and reports to the Agent and the Purchasers and all other fees and expenses not expressly stated under this Agreement to be for the account of the Purchasers, but excluding federal, state and local income and franchise taxes, if any, of any Purchaser). The Servicer will not have any obligation to deposit Supplemental Serv