<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 1997
REGISTRATION NO. 333-22327
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
NATIONSCREDIT GRANTOR TRUST 1997-1
(Issuer with respect to the Certificates)
NATIONSCREDIT SECURITIZATION CORPORATION
(Exact name of Registrant as specified in its charter)
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<S> <C>
DELAWARE 75-2655744
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
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225 E. JOHN CARPENTER FREEWAY
IRVING, TEXAS 75062-2731
(972) 506-5026
(Address, including zip code and telephone number, including area code, of
registrant's principal executive offices)
JOHN STOCKTON, ESQ.
NATIONSCREDIT MANAGEMENT CORPORATION
ONE CANTERBURY GREEN
STAMFORD, CONNECTICUT 06901
(203) 352-4134
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
REED D. AUERBACH
STROOCK & STROOCK & LAVAN LLP
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable on or after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE(3)
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<S> <C> <C> <C> <C>
NationsCredit Grantor Trust Marine
Receivable-Backed Certificates..... $181,781,125.63 100.00% $181,781,125.63 $55,085.19
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(1) This Registration Statement also relates to market-making transactions that
will be made by NationsBanc Capital Markets, Inc., an affiliate of the
Registrant.
(2) Estimated solely for purposes of calculating the registration fee.
(3) $303.03 of which has been previously paid.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1993 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
EXPLANATORY NOTE
THIS REGISTRATION STATEMENT CONTAINS (I) A PROSPECTUS RELATING TO A PUBLIC
OFFERING BY NATIONSCREDIT GRANTOR TRUST 1997-1 (THE "TRUST") OF $181,781,125.63
AGGREGATE PRINCIPAL AMOUNT OF % MARINE RECEIVABLE-BACKED CERTIFICATES (THE
"CERTIFICATES"); AND (II) CERTAIN PAGES OF A SECOND PROSPECTUS TO BE USED IN
CONNECTION WITH OFFERS AND SALES RELATING TO MARKET-MAKING TRANSACTIONS IN THE
CERTIFICATES BY AN AFFILIATE OF THE REGISTRANT. THE PROSPECTUS RELATING TO THE
CERTIFICATES FOLLOWS IMMEDIATELY AFTER THIS EXPLANATORY NOTE. FOLLOWING SUCH
PROSPECTUS ARE ALTERNATE PAGES OF THE MARKET-MAKING PROSPECTUS RELATING TO THE
CERTIFICATES. ALL OTHER PAGES OF THE PUBLIC OFFERING PROSPECTUS FOR THE
CERTIFICATES ARE ALSO TO BE USED FOR THE MARKET-MAKING PROSPECTUS.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 12, 1997
PROSPECTUS
[NATIONSCREDIT GRANTOR LOGO]
NATIONSCREDIT GRANTOR TRUST 1997-1
$181,781,125.63
% MARINE RECEIVABLE-BACKED CERTIFICATES
NATIONSCREDIT SECURITIZATION CORPORATION
DEPOSITOR
NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA
SERVICER
Each % Marine Receivable-Backed Certificate (the "Certificates") offered
hereby will represent a fractional undivided interest in the NationsCredit
Grantor Trust 1997-1 (the "Trust"). The Trust will be formed pursuant to a
Pooling and Servicing Agreement (the "Agreement") to be entered into among
NationsCredit Securitization Corporation, as Depositor (the "Depositor"),
NationsCredit Commercial Corporation of America, as Servicer (the "Servicer"),
and Bankers Trust Company, as Trustee and as Collateral Agent (in such
capacities, the "Trustee" and the "Collateral Agent", respectively). The
property of the Trust will include a pool of marine retail installment sale
contracts secured by new and used boats, boat motors and any accompanying boat
trailers (the "Receivables"), all payments received or due thereunder after
April 30, 1997 (the "Cutoff Date"), security interests in the boats and marine
equipment financed thereby, an irrevocable surety bond (the "Surety Bond"),
guaranteeing the Monthly Interest Payment (as defined herein) and the Monthly
Principal Payment (as defined herein), issued by Capital Markets Assurance
Corporation (the "Surety Bond Issuer") and certain other property. The Servicer
will be responsible for servicing and maintaining custody of the Receivables.
The aggregate principal balance of the Receivables (the "Pool Balance") as of
the Cutoff Date was $181,781,125.63 (the "Initial Pool Balance").
The Certificate Balance (as defined herein) as of the Closing Date will
equal $181,781,125.63. Principal and interest to the extent of the Pass-Through
Rate of % per annum on the Certificates will be distributed to holders of
the Certificates ("Certificateholders") as of the day prior to each Distribution
Date (each a "Record Date") on the 15th day of each month (or, if such day is
not a business day, the next following business day), beginning June 16, 1997
(each a "Distribution Date"). The Final Scheduled Distribution Date on the
Certificates will be on August 15, 2013 (the "Final Scheduled Distribution
Date").
FOR INFORMATION CONCERNING THE RISKS OF AN INVESTMENT IN THE CERTIFICATES,
SEE "RISK FACTORS" COMMENCING ON PAGE 7.
---------------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF NATIONSCREDIT SECURITIZATION CORPORATION,
NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA OR ANY AFFILIATE THEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT TRUST(1)(2)
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Per Certificate.................... % % %
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Total.............................. $ $ $
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(1) Plus interest calculated at the Pass-Through Rate from May 15, 1997.
(2) Before deducting expenses payable by the Depositor estimated at $489,564.19.
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The Certificates are offered subject to receipt and acceptance by the
Underwriters, to prior sale, and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Certificates will be made in book-entry form
through the facilities of The Depository Trust Company, on or about May ,
1997.
NATIONSBANC CAPITAL MARKETS, INC. BEAR, STEARNS & CO. INC.
May , 1997
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Depositor has filed a Registration Statement under the Securities Act
of 1933, as amended (the "Securities Act") with the Securities and Exchange
Commission (the "Commission") with respect to the Certificates offered pursuant
to this Prospectus. For further information reference is made to the
Registration Statement and amendments thereof and exhibits thereto, which are
available for inspection without charge at the office of the Commission at 450
Fifth Street N.W., Washington, D.C. 20549; Natwest Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048; and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of the Registration Statement and amendments thereof and exhibits thereto
can be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates and electronically
through the Commission's Electronic Gathering and Retrieval System at the
Commission's Web Site (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of
NationsCredit Grantor Trust 1997-1, pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates shall be deemed to be incorporated by reference
into this Prospectus and to be part hereof. Any statement contained herein or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to NationsCredit Commercial Corporation of America, 225 E.
John Carpenter Freeway, Irving, Texas 75062-2731, Attn: Lawrence Angelilli.
Telephone requests for such copies should be directed to NationsCredit
Commercial Corporation of America at (972) 506-5026.
REPORTS TO CERTIFICATEHOLDERS BY THE TRUSTEE
Bankers Trust Company, as Trustee for the Certificateholders under the
Pooling and Servicing Agreement, including the Standard Terms and Conditions of
the Agreement (the "Agreement"), dated as of April 30, 1997, among the
Depositor, the Servicer, the Trustee and the Collateral Agent, will provide to
The Depository Trust Company ("DTC") for distribution to beneficial owners of
the Certificates (each a "Certificate Owner") monthly and annual reports
concerning the Receivables. See "The Certificates -- Statements to
Certificateholders".
2
<PAGE> 5
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Reference is made
to the Index for the location herein of the definitions of certain capitalized
terms used herein.
Issuer:.................... NationsCredit Grantor Trust 1997-1 (the "Trust")
will be formed by the Depositor. The assets of the
Trust shall consist of a pool of certain marine
retail installment sale contracts acquired after
February 1, 1993 by NationsCredit Commercial
Corporation of America, a wholly-owned subsidiary
of NationsCredit Corporation (the "Receivables"),
all payments received or due thereunder after April
30, 1997 (the "Cutoff Date"), security interests in
new and used boats, boat motors and boat trailers
financed thereby (collectively, "Boats"), certain
bank accounts and the proceeds thereof, the Surety
Bond described below, and certain other property.
See "The Trust," "NationsCredit Commercial's
Portfolio of Marine Contracts" and "Certain Legal
Aspects of the Receivables -- Lack of Perfected
Security Interests in Boats".
The Depositor shall cause the Trust to purchase the
Receivable directly or indirectly from
NationsCredit Commercial (as defined below) or its
affiliates on or prior to the date of issuance of
the Certificates (the "Closing Date").
Depositor:................. NationsCredit Securitization Corporation (the
"Depositor"), a wholly-owned subsidiary of
NationsCredit Commercial Corporation of America
("NationsCredit Commercial"), which in turn is an
indirect wholly-owned subsidiary of NationsCredit
Corporation ("NationsCredit"). See "The Depositor".
Servicer:.................. NationsCredit Commercial (sometimes referred to
herein as the "Servicer"), an indirect wholly-owned
subsidiary of NationsCredit. See "The Servicer".
Securities Offered:........ Each % Marine Receivable-Backed Certificate (a
"Certificate") represents a fractional undivided
interest in the Trust. The Certificates will be
issued pursuant to the Agreement in book-entry form
and shall be available in denominations of $1,000
and integral multiples thereof.
The Certificates will be represented initially by
global certificates registered in the name of Cede
& Co., as nominee of DTC. See "The
Certificates -- General," "-- Book-Entry
Registration" and "-- Definitive Certificates".
Pass-Through Rate:......... % per annum, payable monthly at one-twelfth of
the annual rate.
Interest:.................. On each Distribution Date, the Trustee shall
provide for a pro rata distribution to the
Certificateholders of record at the close of
business on the day prior to such Distribution Date
(the "Record Date") of interest in an aggregate
amount equal to one-twelfth of the product of the
Pass-Through Rate and the Certificate Balance as of
the close of business on the prior Distribution
Date (or in case of the first Distribution Date,
the Certificate Balance as of the Closing Date)
(the "Monthly Interest Payment"). See "The
Certificates -- Distributions on Certificates".
Principal:................. The Trustee shall provide for a pro rata
distribution to the Certificateholders of record as
of the related Record Date (x) on each Distribution
Date (except the Final Scheduled Distribution
Date), an amount equal to the sum of (a) that
portion of all collections received by the Servicer
during the related Collection Period on Receivables
allocable to principal (which
3
<PAGE> 6
shall not include the principal portion of proceeds
from any recoveries or liquidations in respect of
any Defaulted Receivables received in any
Collection Period following the Collection Period
in which such Receivable became a Defaulted
Receivable), (b) Purchase Amounts allocable to
principal and paid by the Depositor or the Servicer
and (c) the principal balance of Defaulted
Receivables, which became Defaulted Receivables
during the related Collection Period and (y) on the
Final Scheduled Distribution Date after giving
effect to the distribution of the amounts set forth
in clauses (a) through (c) above, an amount
necessary to reduce the Certificate Balance to zero
on such Distribution Date (collectively, the
"Monthly Principal Payment"). See "The
Certificates -- Distributions on Certificates".
Certificate Balance:....... The "Certificate Balance" shall equal on the
Closing Date, $181,781,125.63 and thereafter shall
equal the Certificate Balance as of the Closing
Date reduced by all principal distributions on the
Certificates.
Distribution Date:......... The 15th day of each month (or if such 15th day is
not a business day, the next following business
day) commencing June 16, 1997.
Monthly Servicing Fee:..... On each Distribution Date, the Servicer shall
receive a monthly fee equal to the product of
one-twelfth of 0.75% (the "Servicing Fee Rate") and
the Pool Balance as of the last day of the prior
Collection Period (or in the case of the first
Distribution Date, the Initial Pool Balance), plus
certain late fees, prepayment charges and other
administrative fees or similar charges. See "The
Certificates -- Distributions on Certificates".
Surety Bond:............... The Servicer has obtained, for the benefit of the
Trust, the Surety Bond, which will unconditionally
guarantee the Monthly Interest Payment and the
Monthly Principal Payment and under certain
circumstances the Monthly Servicing Fee to the
extent described herein. See "The
Certificates -- The Surety Bond".
Reserve Account:........... The Depositor will establish and maintain with the
Collateral Agent an account (the "Reserve
Account"). The Reserve Account will not be part of
the Trust, but will be pledged to the Trustee for
the benefit of the Certificateholders and the
Surety Bond Issuer. On the Closing Date an initial
deposit will be made into the Reserve Account and
thereafter on each Distribution Date, the Reserve
Account will be augmented from payments in respect
of Receivables allocable to interest on deposit in
the Certificate Account with respect to the
preceding Collection Period after distributions
thereof in respect of the Monthly Interest Payment,
the Monthly Servicing Fee (to the extent described
herein), the principal balance of any Defaulted
Receivables, and any amounts owing to the Surety
Bond Issuer under the Insurance and Reimbursement
Agreement, dated as of April 30, 1997, among the
Surety Bond Issuer, the Depositor and the Servicer
(the "Insurance Agreement") and the Agreement, and
not paid, until the amount on deposit in the
Reserve Account is equal to a specified amount to
be determined by the Surety Bond Issuer and the
Rating Agencies (the "Specified Reserve Account
Requirement"). Amounts, if any, on deposit in the
Reserve Account on any Distribution Date (after
giving effect to all distributions to be made on
such Distribution Date) in excess of the Specified
Reserve Account Requirement will be released to the
Depositor. The Specified Reserve Account
Requirement and amounts on deposit or to be
deposited into the Reserve Account may be
4
<PAGE> 7
reduced, including to zero, or distributed in a
different manner than described herein with the
consent of the Surety Bond Issuer, as long as such
reduction or change does not cause a downgrading or
withdrawal of the then-current rating of the
Certificates by a Rating Agency, but without prior
notice to or the consent of the Certificateholders.
Prospective purchasers of the Certificates should
not rely on any amounts being deposited into or
available from the Reserve Account in making a
decision as to whether to purchase the
Certificates. See "The Certificates -- The Reserve
Account" and "-- Distributions on Certificates".
Optional Purchase:......... The Servicer may purchase all the Receivables in
the Trust as of any Record Date on which the Pool
Balance shall decline to 5% or less of the Initial
Pool Balance, at a purchase price equal to the
aggregate Purchase Amount of the Receivables as of
the beginning of the Collection Period related to
such Record Date less the amount of all collections
on the Receivables received by the Servicer during
such Collection Period; provided, however, that the
Servicer may not make any such purchase on any date
on which there are outstanding draws under the
Surety Bond which have not been reimbursed to the
Surety Bond Issuer. See "The
Certificates -- Termination."
Surety Bond Issuer:........ Capital Markets Assurance Corporation ("CapMAC" or
the "Surety Bond Issuer"), a monoline stock
insurance company incorporated under the laws of
the State of New York. See "The Surety Bond
Issuer".
Trustee:................... Bankers Trust Company, a New York banking
corporation (the "Trustee").
Lack of Perfected Security
Interests in Boats:...... Pursuant to the Agreement, the Servicer will
represent and warrant that each Receivable created
a first priority perfected security interest in the
Boat financed thereby in favor of NationsCredit
Commercial. In connection with the sale of the
Receivables, the security interests of
NationsCredit Commercial in the Boats financed by
the Receivables will be assigned to the Trust. Due
to the administrative burden and expense, the
certificates of title, in the case of Boats
financed in states where security interests in
boats are subject to certificate of title statutes,
will not be endorsed to the Trust and the UCC-1
financing statements, in the case of Boats financed
in states where security interests in boats are
perfected by filing a UCC-1 financing statement,
will not be amended to reflect the assignment to
the Trust. In the absence of such procedures, the
Trust may not have a perfected security interest in
the Boats financed in certificate of title or UCC
states, but the failure to make such endorsements,
filings or recordations will not affect the
validity of the original security interest as
against the Obligor in UCC states. With respect to
Boats licensed in certificate of title states, the
validity of the security interest against the
original Obligor is less clear. In the event that
any required payments under the Surety Bond are not
made and Certificateholders have to rely on
enforcement of their rights under Receivables in
default, this and other factors, including various
Federal and state laws, depreciation in the value
of boats and a limited resale market for boats,
could limit the amount which the Trust could
realize to less than the amount due on such
Receivables. See "Risk Factors -- Lack of Perfected
Security Interests in Boats" and "Certain Legal
Aspects of the Receivables".
5
<PAGE> 8
Tax Status:................ The Trust will be treated as a grantor trust for
Federal income tax purposes, and will not be
subject to Federal income tax. Certificateholders
will report their pro rata shares of all income of
the Trust, and, subject to certain limitations in
the case of an individual Certificateholder, may
deduct their pro rata shares of reasonable
servicing and other fees of the Trust. Because tax
consequences may vary based on the status or tax
attributes of the Certificate Owner, prospective
investors should consult their own tax advisors to
determine the Federal, state, local and other tax
consequences of the purchase, ownership and
disposition of Certificates. See "Certain Federal
Income Tax Consequences".
ERISA Considerations:...... The Certificates may be purchased by employee
benefit plans that are subject to the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), upon satisfaction of certain conditions
described herein. Any benefit plan fiduciary
considering the purchase of the Certificates
should, among other things, consult with counsel in
determining whether all required conditions have
been satisfied. See "ERISA Considerations".
Rating:.................... As a condition of issuance, the Certificates shall
be rated "Aaa" by Moody's Investors Service, Inc.
("Moody's") and "AAA" by Standard & Poor's Ratings
Services, a Division of The McGraw-Hill Companies
("S&P") (each a "Rating Agency" and together, the
"Rating Agencies"). The ratings are based primarily
on the credit rating of the Surety Bond Issuer and
the value of the underlying Receivables. Any rating
assigned to the Certificates by a Rating Agency
will reflect such Rating Agency's assessment of the
likelihood that Certificateholders will receive the
payments of interest and principal required to be
made under the Agreement. The ratings take into
consideration the characteristics of the
Receivables and the structural, legal and tax
aspects associated with the Certificates. The
ratings on the Certificates do not represent any
assessment of the likelihood or rate of principal
prepayments. The ratings are not a recommendation
to purchase, hold or sell Certificates, inasmuch as
such rating does not comment as to market price or
suitability for a particular investor. There is no
assurance that the ratings will remain for any
given period of time or that the ratings will not
be lowered or withdrawn entirely by the Rating
Agencies if in their judgment circumstances in the
future so warrant. See "Risk Factors -- Limitation
on Credit Rating".
6
<PAGE> 9
RISK FACTORS
Prospective purchasers of the Certificates should consider carefully the
following discussion of certain risks associated with an investment in the
Certificates, as well as the other information set forth in this Prospectus.
Limited Liquidity. There is currently no market for the Certificates.
NationsBanc Capital Markets, Inc. and Bear, Stearns & Co. Inc. (each, an
"Underwriter") expect, but are not obligated, to make a market in the
Certificates. There can be no assurance that a secondary market will develop or,
if a secondary market does develop, that it will provide holders of the
Certificates with liquidity of investment or that it will continue for the life
of the Certificates.
Limited Obligations. The Certificates will not represent an interest in or
obligation of the Depositor, the Trustee, the Underwriters, NationsCredit
Commercial or any of their respective affiliates. Neither the Receivables nor
the Certificates will be insured or guaranteed by any governmental agency or
instrumentality, the Depositor, the Underwriter, the Servicer, the Trustee or
any of their respective affiliates and the Certificates will be payable only
from assets of the Trust, the Reserve Account or paid pursuant to the Surety
Bond.
The Depositor will not be obligated in any way in respect of the
Certificates. The obligations of the Servicer with respect to the Certificates
will be limited to its contractual servicing obligations. The Depositor and
NationsCredit Commercial will, however, make certain representations and
warranties in respect of the Receivables. In the event of an uncured breach of
any such representation or warranty that materially adversely affects the
interests of the Certificateholders or the Surety Bond Issuer, the Depositor or
NationsCredit Commercial, as applicable, may, under certain circumstances, be
obligated to repurchase such Receivable, as described under "The
Certificates -- Sale and Assignment of Receivables" herein.
Lack of First Priority Security Interests in the Receivables. The sale of
the Receivables to the Trust is subject to the perfection requirements of the
Uniform Commercial Code (the "UCC") in effect in the States of Texas and
Georgia. Pursuant to the Agreement, the Servicer will represent and warrant that
the Trust has been assigned a valid, first priority perfected security or
ownership interest in each Receivable conveyed to the Trust on the Closing Date.
Moreover, such representations and warranties relate solely to the Receivables
themselves and do not include the Boats that secure such Receivables. Certain
liens, including landlords', warehousemens' and materialmens' liens and certain
tax liens, may, as a matter of law, have priority over perfected, first priority
liens. In addition, if another person purchased any of the Receivables for new
value without knowledge of the Trust's security interest and acquired possession
of the Receivables in the ordinary course of such person's business, the
purchaser's interest would be superior to the interest of the Trust. To
facilitate servicing and to minimize administrative burden and expense, the
Servicer will maintain possession of all of the Receivables. If NationsCredit
Commercial sells and delivers any of the Receivables to another party, there is
a risk that the purchaser could acquire an interest in the Receivables having
priority over the Trust's interest. NationsCredit Commercial will covenant that
it will not sell, pledge, transfer, deliver or otherwise dispose of any
Receivable, except as provided under the Agreement. As provided in the
Agreement, any breach of this covenant by NationsCredit Commercial that
materially and adversely affects the Trust's interest in the Receivables and
remains uncured will result in an obligation of NationsCredit Commercial to
repurchase the affected Receivables. Pursuant to the Agreement, NationsCredit
Commercial or the Servicer will be obligated to purchase any Receivable if there
is a breach of a representation and warranty made by it that materially
adversely affects the Trust's interest in such Receivable, unless such breach is
cured as provided in the Agreement by the second Record Date following the
discovery of such breach.
Lack of Perfected Security Interests in Boats. When originated, each
Receivable includes a security interest in the Boat financed thereby, such
interest is perfected under state law. The Servicer will make certain
representations and warranties to the Trust with respect to the perfection and
priority of the security interests of NationsCredit Commercial in the Boats,
which representations and warranties will be subject to any statutory liens
arising after the Closing Date. Due to the administrative burden and expense
(estimated by NationsCredit Commercial to be $400,000, excluding associated
labor costs) of (i) endorsing the certificate of title of each Boat to reflect
the Trust's interest therein and delivering each such certificate of title to
the Trustee for filing (and the payment of related filing fees), in the case of
Boats licensed in states where security interests in boats are subject to
certificate of title statutes; and (ii) filing amendments to UCC-1 financing
statements relating to each Boat (and
7
<PAGE> 10
the payment of related filing fees) to reflect the Trust's interest therein, in
the case of Boats licensed in states where security interests in boats are
perfected by filing a UCC-1 financing statement; none of such certificates of
title will be endorsed, delivered and filed, or UCC-1 financing statements
amended. In the absence of such procedures the Trust may not have a perfected
security interest in the Boats licensed in certificate of title or UCC states,
but the failure to make such endorsements, filings or recordations will not
affect the validity of the original security interest as against the retail
purchaser (the "Obligor") under a Receivable in UCC states. With respect to
Boats documented under certificate of title states, the validity of the security
interest against the Obligor is less clear. Approximately 70.58% of the Initial
Pool Balance ($128,304,277.06) relates to Receivables which are billed to
Obligors in certificate of title states and approximately 29.39% of the Initial
Pool Balance ($53,432,375.92) relates to Receivables which are billed to
Obligors in UCC states. Boats are not necessarily registered in the states where
Obligors are billed. Additionally, because NationsCredit Commercial will not
make the necessary endorsements, filings or recordations, there is a substantial
risk that the Trust will not have a security interest in Boats registered in
California, which represents 17.65% of the Initial Pool Balance (based on the
billing address of the Obligors), and if the absence of such security interest
is asserted by an Obligor (or its representative), the Trust will not be
entitled to any liquidation proceeds with respect to the related Boat. As a
result, the Certificateholders may be subject to delays in payments and may
incur losses with respect to the Receivables if any required payments under the
Surety Bond are not made. Boats registered in California may not relate to the
geographic concentration of Receivables in California because the concentration
of such Receivables is based solely on the billing address of the related
Obligor. Moreover, statutory liens for repairs or unpaid taxes may have priority
over security interests in Boats perfected under state law.
Risk of Defenses and Risk Related to Repossession and Liquidation. Various
Federal and state laws impose requirements and restrictions applicable to the
origination and servicing of the Receivables. Violations of certain of those
laws may give rise to claims and defenses by an Obligor against the Servicer or
the Trust. In addition, an Obligor may be entitled to assert against the
Servicer or the Trust claims and defenses which the Obligor has against the
seller of the Boat (the "Dealer"). The Servicer pursuant to the Agreement, will
represent and warrant as of the Closing Date that no such claims or defenses
have been asserted or threatened with respect to the Receivables and that all
requirements of applicable laws with respect to the Receivables have been
satisfied. State laws and court decisions also impose requirements and
restrictions relating to repossession sales of boats and on obtaining deficiency
judgments following such sales. Even if a Boat securing a Receivable is
successfully repossessed and sold, the full amount due on the Receivable may not
be realized because of depreciation of or damage to the Boat or because the
resale value of the Boat may vary significantly due to the limited markets for
used boats, seasonal factors and other economic and social factors. In sum, the
Trust may not realize the full amount due on a Receivable because of the failure
to endorse the certificate of title or to amend a UCC-1 financing statement, as
the case may be, or the application of requirements and restrictions on
repossession sales and deficiency judgments, or because of depreciation, damage
or loss of a Boat, the application of Federal and state bankruptcy and
insolvency laws, or other factors. As a result, the Certificateholders may be
subject to delays in payments and losses if any required payments under the
Surety Bond are not made. See "Certain Legal Aspects of the Receivables".
Concentration Risk. Based on the Initial Pool Balance, 17.65% of the
Receivables are billed to Obligors with billing addresses in California. An
economic downturn in California may have an adverse effect on the ability of
Obligors in such state to meet their payment obligations under the Receivables.
Because of the concentration of Receivables with Obligors with billing addresses
in this state, losses on the related Receivables may be higher than would be the
case if there were more geographic diversification among the Receivables and
thus may result in accelerated payments of principal and reinvestment risk to
the Certificateholders.
Prepayment Considerations. Full or partial prepayments on the Receivables
will have the effect of reducing the weighted average life of the Certificates,
while delinquencies under the Receivables by the Obligors and extensions of
Receivables by the Servicer will have the effect of increasing the weighted
average life (but not the final maturity) of the Certificates. The Receivables
may be prepaid at any time without penalty. Prepayments may result from, among
other things, the sale, refinancing, insured loss or other disposition of a
Boat, the Receivables becoming Defaulted Receivables, the purchase of
Receivables due to material breaches of the
8
<PAGE> 11
Depositor's or NationsCredit Commercial's representations and warranties or the
exercise by the Servicer of its option to purchase all the Receivables as of any
Record Date on which the Pool Balance shall decline to 5% or less of the Initial
Pool Balance. The actual maturity of the Certificates could occur earlier than
the Final Scheduled Distribution Date since the rate of payments on the
Certificates will depend on the rate of payments on the Receivables. No
prediction can be made as to the actual rate of prepayments in respect of the
Receivables. Prepayments are affected by numerous social, economic and other
factors, including, for example, the seasonal nature of the marine retail
financing business. Certificateholders will bear all reinvestment risk resulting
from prepayment of the Receivables. See "The Receivables Pool -- Maturity and
Prepayment Assumptions".
Commingling Risk. While NationsCredit Commercial or an entity (a) into
which NationsCredit Commercial is merged or consolidated, (b) which succeeds to
the properties and assets of the Servicer substantially as a whole or (c) more
than 50% of the voting stock of which is owned by NationsBank Corporation, which
has executed an agreement of assumption to perform the obligations of the
Servicer under the Insurance Agreement and the Agreement, is the Servicer, the
Servicer may commingle collections held by it and may use such funds for its own
purposes prior to the business day preceding each Distribution Date provided
that all of the following conditions are satisfied: (i) there exists no Event of
Default (as described below), (ii) if the Servicer does not have a short term
debt rating or deposit rating, as applicable, of at least A-1 from S&P and P-1
from Moody's, a guaranty, letter of credit, surety bond or other similar
instrument is issued covering collections held by NationsCredit Commercial or
such successor servicer, which is acceptable to the Rating Agencies and the
Surety Bond Issuer and issued by an entity which has a short term debt or
deposit rating, of at least A-1 from S&P and P-1 from Moody's, and (iii) the
Servicer, the Trustee, the Depositor or the Surety Bond Issuer shall not have
received notice from S&P or Moody's that failure to separate such funds will
result in a reduction or withdrawal of the then current rating on the
Certificates by either S&P or Moody's. If all the conditions contained in the
preceding sentence are not met, the Servicer will deposit all payments on
Receivables (from whatever source) and all proceeds of Receivables collected
during each Collection Period into the Certificate Account not later than the
second business day after receipt. In the event that the Servicer commingles
collections, the Certificateholders will be subject to the risk of loss of such
collections, including as a result of the bankruptcy or insolvency of the
Servicer. It is anticipated that on the Closing Date NationsBank Corporation
will furnish a guaranty that will permit NationsCredit Commercial to commingle
funds.
Limitation on Credit Rating. As a condition of issuance, the Certificates
shall be rated "Aaa" by Moody's and "AAA" by S&P. The ratings are based
primarily on the credit rating of the Surety Bond Issuer and the value of the
underlying Receivables. Any rating assigned to the Certificates by a Rating
Agency will reflect such Rating Agency's assessment of the likelihood that
Certificateholders will receive the timely payments of interest and principal
required to be made under the Agreement. The ratings take into consideration the
Surety Bond, the characteristics of the Receivables and the structural, legal
and tax aspects associated with the Certificates. The ratings on the
Certificates do not represent any assessment of the likelihood or rate of
principal prepayments. The ratings are not a recommendation to buy, sell or hold
securities and there is no assurance that the ratings will remain for any given
period of time or that the ratings will not be lowered or withdrawn entirely by
the Rating Agencies if in their judgment circumstances in the future so warrant.
Any downgrade of the credit rating of the Surety Bond Issuer will likely result
in a downgrade of the Certificates. None of the Depositor, NationsCredit
Commercial or any of its affiliates have any obligation to maintain the credit
rating of the Certificates. In the event the Surety Bond Issuer's claims paying
ratings have been reduced by any of the Rating Agencies, the Depositor may, but
it is not obligated to, upon payment of all amounts required to be paid to the
Surety Bond Issuer pursuant to the Insurance Agreement and the Agreement either
(i) replace the Surety Bond with a financial guaranty insurance policy issued by
another surety bond issuer, provided that the ratings on the claims paying
ability of such replacement surety bond issuer are higher than those of the
surety bond issuer sought to be replaced (after giving effect to such reduction)
or (ii) eliminate or provide another form of credit enhancement;
provided that in the case of clause (ii), the Rating Agencies consent thereto
and confirmation that the ratings of the Certificates will be increased from
their then current levels (after giving effect to such reduction) as a result of
such action shall have been obtained.
9
<PAGE> 12
THE TRUST
The Depositor will establish the Trust prior to the Closing Date and cause
the Trust to directly or indirectly purchase the Receivables from NationsCredit
Commercial or its affiliates with the proceeds of the sale of the Certificates.
The Servicer will initially service the Receivables pursuant to the Agreement,
and will be compensated for acting as the Servicer. See "The
Certificates -- Servicing Compensation". To facilitate servicing and to minimize
any administrative burden and expense, the Servicer will be appointed custodian
for all the Receivables by the Trustee, but will not stamp the Receivables to
reflect the sale and assignment of the Receivables to the Trust, nor amend the
UCC-1 financing statements relating to the Boats nor amend the certificates of
title of the Boats. NationsCredit Commercial will, however, indicate in its
computer records that the Receivables have been sold and assigned to the Trust.
See "Risk Factors -- Lack of Perfected Security Interests in Boats," "-- Lack of
First Priority Security Interests in the Receivables" and "Certain Legal Aspects
of the Receivables". The Servicer has obtained the Surety Bond for the benefit
of the Trust. The Surety Bond will unconditionally guarantee the Monthly
Interest Payment and the Monthly Principal Payment and under certain
circumstances the Monthly Servicing Fee to the extent described herein. See "The
Certificates -- The Surety Bond" and "-- Distributions on Certificates."
Each Certificate represents a fractional undivided interest in the Trust.
The assets of the Trust include, among other things, the Receivables, and all
payments received thereunder, in the case of simple interest Receivables and all
payments due thereunder, in the case of precomputed Receivables, after the
Cutoff Date. The Receivables were originated by the Dealers and purchased by
NationsCredit Commercial pursuant to agreements with the Dealers ("Dealer
Agreements"), are serviced by the Servicer, and evidence indirect financings
made available to the Obligors. During the term of the Agreement, the Servicer
may not substitute any other marine retail installment sale contract for any
Receivable sold to the Trust. The assets of the Trust also include (i) such
amounts as from time to time may be held in one or more trust accounts
(collectively, the "Certificate Account") which will be established and
maintained by the Servicer pursuant to the Agreement, as described below; (ii)
the interest of NationsCredit Commercial in the security interests in the Boats;
(iii) the Surety Bond; (iv) the interest of NationsCredit Commercial in any
proceeds from recourse to Dealers on Receivables; (v) the interest of
NationsCredit Commercial in any proceeds from claims on physical damage, credit
life or disability insurance policies covering the Boats or the Obligors, as the
case may be; (vi) any property that shall have secured a Receivable and that
shall have been acquired by the Trustee and (vii) the proceeds of all of the
foregoing.
NATIONSCREDIT COMMERCIAL'S PORTFOLIO OF MARINE CONTRACTS
GENERAL
The following describes certain general origination, servicing and
collection policies and procedures applied by NationsCredit Commercial with
respect to marine retail installment sale contracts ("marine contracts").
As of April 30, 1997, NationsCredit Commercial has purchased marine
contracts directly or indirectly from approximately 1,500 retail boat dealers or
finance subsidiaries of manufacturers who regularly initiate and sell contracts
to NationsCredit Commercial pursuant to the terms of approved dealer agreements.
NationsCredit Commercial services such contracts. No marine contract is
purchased from a dealer until the credit application from the obligor is
submitted to NationsCredit Commercial and is reviewed, evaluated, and approved
by one of NationsCredit Commercial's credit analysts in accordance with
NationsCredit Commercial's underwriting policies and procedures. NationsCredit
Commercial's evaluation of credit applicants is intended to assess the
applicant's willingness and ability to repay the amounts due on the contract and
the adequacy of the boat (which usually includes the boat, motor and trailer)
or, in a small minority of cases, the boat motor or trailer by itself, as
collateral. References to "boats" herein include the boat motor and trailer with
respect to each boat, and the separately financed boat motors or trailers,
unless the context otherwise indicates.
The credit application, which requests the liabilities, income, and credit
and employment history of the applicant, is reviewed for completeness and
compliance with NationsCredit Commercial's credit guidelines for marine
contracts purchased from Dealers. In response to recessionary forces that
adversely impacted marine collateral values in 1990, 1991, and 1992,
NationsCredit Commercial (as its predecessor company) instituted
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<PAGE> 13
tighter underwriting criteria in 1992, including an increase in the downpayment
requirements on both new and used boats. Also, in 1992 NationsCredit Commercial
completed a process of reducing the number of its offices and the number of its
employees with credit authority as a means to improve consistency and control
over credit approvals. In December of 1993, NationsCredit Commercial instituted
an upfront scoring system which has resulted in more consistent underwriting
standards and has provided more management control over decisions effecting
credit approvals. NationsCredit Commercial's current guidelines, which are based
on credit scoring criteria, are intended to provide a basis for credit
decisions, but are not meant to supersede the credit judgment of the credit
analysts in both approval and denial decisioning. Consequently, certain marine
contracts may not comply with all NationsCredit Commercial guidelines, but will
be within prescribed limits for which exceptions to the guidelines are
permitted. In all cases, NationsCredit Commercial will review a current credit
report issued by an independent credit reporting agency, and will generally
confirm income and employment data, on each applicant.
Each marine contract arises from a credit sale of a new or used boat. In
most cases, NationsCredit Commercial will not purchase a marine contract
relating to a new boat if the amount financed under the marine contract exceeds
the sum of (a) 110% of the manufacturer's invoice price of the boat to the
dealer, plus (b) the cost to the customer of any dealer-installed options,
extended warranty plans and credit life and disability insurance, less a 10%
downpayment by the obligor.
NationsCredit Commercial will not purchase a marine contract secured by a
used boat if the amount financed under the marine contract exceeds 100% of the
"NADA (National Automobile Dealers Association) Wholesale Price" less a
downpayment by the obligor of at least 10%. It is the policy of NationsCredit
Commercial not to purchase a used boat marine contract if the amount financed
under the marine contract exceeds the total sales price of the boat to the
obligor. While NationsCredit Commercial reviews the sales price of each used
boat financed, resale prices for used boats vary significantly based upon
individual circumstances, and there can be no assurance that a ready secondary
market will exist for any used boat.
Each Dealer from which NationsCredit Commercial purchases marine contracts
has been selected by NationsCredit Commercial based on such Dealer's financial
and operating history. Such Dealers have made representations and warranties to
NationsCredit Commercial with respect to the marine contracts and the security
interests in the boats relating thereto. These representations and warranties do
not relate to the creditworthiness of the obligors or the collectibility of the
contracts. NationsCredit Commercial has a right of recourse against such Dealers
who breach such representations and warranties to require them to repurchase
such marine contracts. In determining whether to exercise such right,
NationsCredit Commercial considers the prior performance of the Dealer and other
business and commercial considerations. NationsCredit Commercial is obligated to
enforce such rights with respect to Dealer Agreements relating to the
Receivables only to the extent of such customary practices.
Once NationsCredit Commercial has purchased a marine contract from a dealer
it may, on a case-by-case basis, permit an extension with respect to the due
date of the marine contract. NationsCredit Commercial's policy sets certain
guidelines on such extensions which include the following: (a) generally a
marine contract may not be extended during the first six months of its term; (b)
each extension of a marine contract shall be for a period not to exceed one
month; (c) a marine contract may not be extended more than three times in any
twelve-month period; and (d) a marine contract may not be extended for more than
fourteen one-month periods during its life. Pursuant to the Agreement, the
Servicer will not be permitted to extend, rewrite or otherwise modify the
payment terms of a Receivable; provided, however, that the Servicer may, with
certain limitations set forth in the Agreement, extend a Receivable for credit
related reasons that would be acceptable to the Servicer with respect to
comparable marine contracts that it services for itself and others and in
accordance with its customary standards, policies and procedures if the
cumulative extensions with respect to any Receivable shall not cause the term of
such Receivable to extend beyond the last day of the Collection Period preceding
the Final Scheduled Distribution Date.
Extensions represent the deferral of a monthly payment until the month
after the final maturity date of the marine contract. The fee payable by the
obligor which will effect such a deferral varies by state in accordance with
each state's applicable laws. Such fees, if any, will be included as part of the
Trust's assets; provided
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<PAGE> 14
however that the Trustee will agree to hold any such amounts for the benefit of
the Servicer and any payments received with respect thereto will not be passed
through to Certificateholders, but will instead be promptly remitted to the
Servicer upon receipt.
NationsCredit Commercial will also permit one deferral known as a
"delinquency cure" over the life of a marine contract. A delinquency cure will
permit the obligor to postpone the due date of past-due monthly installments of
principal and interest when three consecutive regularly scheduled payments are
received on a timely basis, and will extend the final maturity date of the
marine contract by the number of months equal to the number of payments
deferred, unless the extended final maturity date goes beyond the last day of
the Collection Period preceding the Final Scheduled Distribution Date.
NationsCredit Commercial does not receive a fee from the obligor for a
delinquency cure.
Collection activities with respect to delinquent contracts are performed in
a centralized environment by collection personnel and under current practices,
collection personnel generally initiate contact, by mail, with obligors whose
marine contracts have become more than five days delinquent. In the event that
such mail contact fails to resolve the delinquency, NationsCredit Commercial
generally begins to contact the obligor periodically by telephone after the
marine contract becomes ten days delinquent. After a marine contract has been
delinquent for 60 days, a process to repossess the collateral is commenced.
After repossession, the obligor generally has an additional 15 days (subject to
variance under state law) to satisfy the obligor's obligations under the marine
contract before the boat is subject to resale.
Losses may occur in connection with delinquent contracts and can arise in
several ways, such as the inability of NationsCredit Commercial to locate the
boat to be repossessed or costs incurred by NationsCredit Commercial in
effecting repossession. NationsCredit Commercial uses the following rules for
recognizing losses on delinquent marine contracts: within the first 91 days that
a marine contract becomes past due, the fair market value of the boat is
reviewed and established for management purposes, to determine the appropriate
carrying value, defined as the NADA Wholesale Price, or the manager's assessment
of the collateral value, whichever is less. At the time of repossession, the
boat is again evaluated for its collateral value, and the status of the account
is updated to reflect this valuation. In the event that the valuation of the
boat at the time of repossession is less than the total balance outstanding on
the marine contract, then a charge-off of that difference is incurred at that
time. If a repossessed boat that secures a marine contract with a balance of
$10,000 or less is not resold within 90 days of repossession or within 180 days,
in the case of a marine contract with a balance of greater than $10,000, the
entire carrying value of the boat will be charged-off, and the marine contract
will be written off in its entirety. If a repossessed boat is resold within 90
or 180 days, as the case may be, of repossession for less than the carrying
value of the boat, then a charge-off of such difference is incurred at that
time. When the boat is eventually resold, the proceeds from the sale, less the
expenses associated with collection, repossession, and sale, where permitted by
law, will represent a recovery on the final disposition of the marine contract.
Upon repossession of the boat, any deficiency remaining will be pursued to the
extent deemed practical and to the extent permitted by law. Prior to January
1996, NationsCredit Commercial's charge-off policy was to write down marine
contracts to fair market value of the collateral at the time of repossession and
charge-off marine contract balances related to repossessed collateral not sold
within 90 days of repossession. The charge-off policies and the servicing and
collection practices of NationsCredit Commercial may change again over time in
accordance with NationsCredit Commercial's business judgment.
The marine contract requires the obligor to maintain insurance covering
physical damage to the boat. Such insurance typically names NationsCredit
Commercial as loss payee and insures the boat against loss or damage due to
fire, theft and other physical damage and marine risks. Since obligors may
choose their own insurers to provide the required coverage, the specific terms
and conditions of their policies may vary. Prior to May 1, 1997, in the event an
obligor does not maintain adequate insurance coverage and the outstanding
balance and months remaining to maturity on the marine contract are greater than
$10,000 and 6 months, respectively, NationsCredit Commercial will purchase a
collateral protection insurance policy on behalf of the obligor. The obligor is
billed monthly by NationsCredit Commercial for such policy. The principal
balance of certain of the Receivables will include the outstanding amount of
premiums of collateral protection insurance purchased by NationsCredit
Commercial on behalf of any Obligors on or prior to the Cutoff Date. Such
amounts amortize over a period of twelve months rather than over the remaining
term of the Receivable. On or after May 1, 1997, NationsCredit
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<PAGE> 15
Commercial will not purchase collateral protection insurance on behalf of
Obligors, but NationsCredit Commercial will still require Obligors to maintain
insurance covering physical damage to the boat. On or after May 1, 1997,
NationsCredit Commercial will not, however, during the term of any marine
contract verify if such insurance has been maintained by the Obligor.
NationsCredit Commercial's practices regarding the purchase of collateral
protection insurance on behalf of obligors may change again over time in
accordance with changes in applicable law or its business judgment.
In accordance with NationsCredit Commercial's normal practices and
procedures, payments by or on behalf of obligors are allocated first to late
payment fees and extension fees, second to interest accrued on the marine
contracts, third to principal due on the marine contracts, fourth to collateral
protection insurance premiums and certain other amounts due on physical damage
insurance policies, fifth to administrative charges, if any, and sixth to the
remaining principal balance. Late payment and extension fees, if any, and other
administrative fees will be recorded to the credit of the Servicer.
The marine contracts generally provide for equal monthly payments which
amortize the full amount of the marine contracts in accordance with a
pre-determined amortization schedule. The first payment can be deferred beyond
forty-five days under certain specialized programs. Generally, the marine
contracts have an original term of up to 15 years. The marine contracts can be
prepaid at any time without prepayment penalty. All the marine contracts are
either simple interest or precomputed contracts. As payments are received under
a simple interest contract, the finance charges accrued to date are paid first
and the remaining amount of the payment is applied to reduce the unpaid amount
financed. Accordingly, if an obligor pays the fixed monthly payment on a simple
interest contract in advance of the due date, the portion of the payment
allocable to finance charges for the period since the preceding payment will be
less than it would be if the payment were made on the due date, and the portion
of the payment allocable to reduce the amount financed will be correspondingly
greater. Conversely, if the obligor pays the fixed monthly payment on a simple
interest contract after its due date, the portion of the payment allocable to
finance charges for the period since the last payment will be greater than it
would be if the payment were made on the due date, and the portion of the
payment allocable to reduce the amount financed will be correspondingly smaller.
Adjustments are made in the amount of the final scheduled payment with respect
to each simple interest contract to reflect the larger or smaller allocations of
payments to the amount financed under the contract as a result of early or late
payments. On a precomputed contract the allocation of principal and interest is
consistently applied to the obligor's balance in accordance with a
pre-determined schedule regardless of when the payment is received. A late fee
may be charged on a precomputed contract for each payment received following a
grace period after the due date. Precomputed contracts that are not paid in full
by their final scheduled payment date typically will accrue finance charges
thereafter until payment in full, but not necessarily at the contract annual
percentage rate ("APR").
DELINQUENCY AND LOSS EXPERIENCE
The tables set forth below indicate the delinquency and loss experience for
each of the last three calendar years and for each of the three months ended
March 31, 1997 and March 31, 1996, for marine contracts that were purchased by
NationsCredit Commercial from Dealers, and prior to January 1, 1993, were not
securitized (the "Marine Contract Portfolio"). The delinquency experience and
credit loss experience percentages may be affected by the size and relative lack
of seasoning of the marine contracts originated in 1995 and 1996 and the first
quarter of 1997. Accordingly, the information should not be considered as a
basis for assessing the likelihood, amount or severity of delinquency or losses
on the Receivables in the future and no assurances can be given that the
delinquency and loss experience presented in the tables below will be indicative
of such experience of the Receivables.
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<PAGE> 16
DELINQUENCY AND LOSS EXPERIENCE FOR THE MARINE CONTRACT PORTFOLIO
<TABLE>
<CAPTION>
DELINQUENCY EXPERIENCE (DOLLARS IN THOUSANDS)
---------------------------------------------------------------------------
AS OF MARCH 31, AS OF DECEMBER 31,
------------------------------------------------- -----------------------
1997 1996 1996(1)
----------------------- ----------------------- -----------------------
NUMBER AGGREGATE NUMBER AGGREGATE NUMBER AGGREGATE
OF PRINCIPAL OF PRINCIPAL OF PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES BALANCE RECEIVABLES BALANCE
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Portfolio.............. 36,215 $400,484 32,200 $359,951 34,207 $368,306
Period of Delinquency
30-59 Days........... 542 $ 5,933 452 $ 5,007 1,043 $ 11,221
60-89 Days........... 101 1,036 85 755 231 2,211
90 Days or More...... 243 2,833 56 597 286 3,275
------ -------- ------ -------- ------ --------
Total Delinquency...... 886 $ 9,802 593 $ 6,359 1,560 $ 16,707
Total Delinquency as a
Percent of the
Portfolio............ 2.45% 1.77% 4.54%
<CAPTION>
DELINQUENCY EXPERIENCE (DOLLARS IN THOUSANDS)
-------------------------------------------------
AS OF DECEMBER 31,
-------------------------------------------------
1995 1994
----------------------- -----------------------
NUMBER AGGREGATE NUMBER AGGREGATE
OF PRINCIPAL OF PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES BALANCE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Portfolio.............. 31,836 $359,681 32,267 $361,237
Period of Delinquency
30-59 Days........... 695 $ 7,962 597 $ 5,674
60-89 Days........... 171 1,947 159 1,344
90 Days or More...... 195 2,178 142 1,197
------ -------- ------ --------
Total Delinquency...... 1,061 $ 12,087 898 $ 8,215
Total Delinquency as a
Percent of the
Portfolio............ 3.36% 2.27%
</TABLE>
- ---------------
(1) A third party vendor error in billing statement distribution contributed to
a one month increase in delinquencies in December 1996.
<TABLE>
<CAPTION>
CREDIT LOSS EXPERIENCE (DOLLARS IN THOUSANDS)
----------------------------------------------------
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average Portfolio During the Period............... $384,395 $359,816 $364,836 $366,736 $322,413
Average Number of Marine Contracts Outstanding
During the Period............................... 35,211 32,018 32,975 32,270 27,324
Net Losses........................................ $ 1,101 $ 1,288 $ 3,455 $ 3,645 $ 2,745
Annualized Net Losses as a Percent of Average
Amount Outstanding.............................. 1.15% 1.43% 0.95% 0.99% 0.85%
</TABLE>
THE RECEIVABLES POOL
The Receivables include marine contracts originated subsequent to February
1, 1993 from NationsCredit Commercial's Marine Contract Portfolio (other than
marine contracts sold in a securitization transaction in February 1996) meeting
the following criteria as of the Cutoff Date: (i) each Receivable provides for
level monthly payments (provided that the payment in the first or last month in
the life of the Receivable may be minimally different from the level payment)
that fully amortize the principal amount of such Receivable (as long as each
scheduled payment is made when due) by maturity and pay interest at the APR;
(ii) each Receivable provides for, in the event that such contract is prepaid, a
prepayment that fully pays the Principal Balance and includes accrued but unpaid
interest through the date of prepayment in an amount at least equal to the APR;
(iii) each Receivable has a fixed APR of not less than 8.246% and not greater
than 21.902%; (iv) each Receivable has an original maturity of not more than 180
months; (v) each Receivable has a remaining maturity of not more than 180
months; (vi) each Receivable has a remaining principal balance of not greater
than $49,694.18; (vii) each Receivable is denominated in U.S. dollars in the
United States; (viii) with respect to each Receivable, the related Obligor has
obtained physical damage insurance covering the Boat and such Obligor is
required under the terms of the Receivable to maintain such insurance; (ix) each
Receivable constitutes "chattel paper" under the UCC; and (x) no Boat related to
any Receivables shall be required to be documented under the Ship Mortgage Act
of 1920, as amended (the "Ship Mortgage Act").
As of the Cutoff Date, (i) approximately 89.61% of the number of the
Receivables, constituting approximately 91.52% of the Initial Pool Balance,
represents the financing of new Boats; the remainder of the Receivables
represent the financing of used Boats; (ii) approximately 79.94% of the number
of Receivables, constituting approximately 83.05% of the Initial Pool Balance,
are simple interest contracts; (iii) approximately
14
<PAGE> 17
20.06% of the number of Receivables, constituting approximately 16.95% of the
Initial Pool Balance are precomputed contracts; (iv) approximately 0.04% of the
number of Receivables constituting approximately 0.05% of the Initial Pool
Balance are related to Boats which have been repossessed by the Servicer; (v)
approximately 0.98% of the number of Receivables constituting approximately
0.85% of the Initial Pool Balance are 30 to 59 days overdue; (vi) approximately
0.17% of the number of Receivables constituting approximately 0.17% of the
Initial Pool Balance are 60 to 89 days overdue; and (vii) approximately 0.34% of
the number of Receivables constituting approximately 0.32% of the Initial Pool
Balance are 90 or more days overdue. All statistical information set forth in
the tables below is given as of the Cutoff Date.
15
<PAGE> 18
COMPOSITION OF THE RECEIVABLES
<TABLE>
<CAPTION>
AGGREGATE AVERAGE
WEIGHTED PRINCIPAL NUMBER OF PRINCIPAL WEIGHTED AVERAGE WEIGHED AVERAGE
AVERAGE APR BALANCE RECEIVABLES BALANCE ORIGINAL TERM REMAINING TERM
- ----------- --------------- ----------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
10.94% $181,781,125.63 15,962 $11,388.37 122 mos. 109 mos.
</TABLE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES
<TABLE>
<CAPTION>
PERCENT OF
TOTAL AGGREGATE PERCENT OF
NUMBER OF NUMBER OF PRINCIPAL INITIAL POOL
STATE(1) RECEIVABLES RECEIVABLES(2) BALANCE BALANCE(2)
- -------- ----------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Alabama................................................. 798 5.00% $ 9,323,340.86 5.13%
Alaska.................................................. 4 0.03 21,679.13 0.01
Arizona................................................. 810 5.07 12,744,949.20 7.01
Arkansas................................................ 236 1.48 2,479,385.03 1.36
California.............................................. 2,120 13.28 32,078,917.72 17.65
Colorado................................................ 138 0.86 1,829,890.76 1.01
Connecticut............................................. 104 0.65 955,002.09 0.53
Delaware................................................ 39 0.24 380,177.81 0.21
District of Columbia.................................... 7 0.04 111,045.01 0.06
Florida................................................. 1,426 8.93 15,903,353.61 8.75
Georgia................................................. 1,036 6.49 11,854,512.72 6.52
Hawaii.................................................. 1 0.01 7,227.99 0.00(3)
Idaho................................................... 3 0.02 37,967.30 0.02
Illinois................................................ 234 1.47 2,428,941.28 1.34
Indiana................................................. 37 0.23 424,020.51 0.23
Iowa.................................................... 30 0.19 326,398.36 0.18
Kansas.................................................. 117 0.73 1,247,956.75 0.69
Kentucky................................................ 152 0.95 1,538,649.68 0.85
Louisiana............................................... 86 0.54 828,542.66 0.46
Maine................................................... 166 1.04 1,025,746.07 0.56
Maryland................................................ 477 2.99 5,099,203.16 2.81
Massachusetts........................................... 424 2.66 3,707,097.28 2.04
Michigan................................................ 46 0.29 465,705.55 0.26
Minnesota............................................... 41 0.26 259,729.12 0.14
Mississippi............................................. 171 1.07 2,048,498.98 1.13
Missouri................................................ 419 2.62 4,352,922.44 2.39
Montana................................................. 4 0.03 16,321.36 0.01
Nebraska................................................ 37 0.23 424,058.87 0.23
Nevada.................................................. 276 1.73 3,648,309.85 2.01
New Hampshire........................................... 76 0.48 760,836.56 0.42
New Jersey.............................................. 501 3.14 4,714,421.68 2.59
New Mexico.............................................. 183 1.15 2,441,575.41 1.34
New York................................................ 261 1.64 2,705,638.68 1.49
North Carolina.......................................... 1,571 9.84 15,079,530.28 8.30
North Dakota............................................ 2 0.01 11,325.75 0.01
Ohio.................................................... 46 0.29 535,391.63 0.29
Oklahoma................................................ 183 1.15 2,177,791.96 1.20
Oregon.................................................. 299 1.87 2,723,553.58 1.50
Pennsylvania............................................ 374 2.34 3,687,148.94 2.03
Rhode Island............................................ 67 0.42 560,792.24 0.31
South Carolina.......................................... 428 2.68 4,089,115.97 2.25
South Dakota............................................ 5 0.03 60,018.97 0.03
Tennessee............................................... 347 2.17 3,576,822.20 1.97
Texas................................................... 1,488 9.32 16,016,768.45 8.81
Utah.................................................... 28 0.18 488,953.42 0.27
Vermont................................................. 4 0.03 73,942.91 0.04
Virginia................................................ 386 2.42 3,941,941.78 2.17
Washington.............................................. 168 1.05 1,510,411.30 0.83
West Virginia........................................... 77 0.48 685,878.24 0.38
Wisconsin............................................... 14 0.09 137,935.63 0.08
Wyoming................................................. 12 0.08 194,534.24 0.11
Other................................................... 3 0.02 37,244.66 0.02
------ ------ --------------- ------
Total........................................... 15,962 100.00% $181,781,125.63 100.00%
====== ====== =============== ======
</TABLE>
- ---------------
(1) Based on the current billing addresses of the Obligors on the Receivables.
(2) The sum of the individual percentages may not add to 100% because of
rounding.
(3) Less than 0.005% but greater than zero percent.
16
<PAGE> 19
DISTRIBUTION BY APR
<TABLE>
<CAPTION>
PERCENT OF
TOTAL AGGREGATE PERCENT OF
NUMBER OF NUMBER OF PRINCIPAL INITIAL POOL
APR(%) RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ------ ----------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
8.001 - 9.000.............................. 703 4.40% $ 11,298,115.09 6.22%
9.001 - 10.000.............................. 3,287 20.59 46,594,157.05 25.63
10.001 - 11.000.............................. 4,512 28.27 58,476,931.12 32.17
11.001 - 12.000.............................. 3,276 20.52 35,691,269.92 19.63
12.001 - 13.000.............................. 1,911 11.97 16,813,914.36 9.25
13.001 - 14.000.............................. 1,120 7.02 7,703,245.64 4.24
14.001 - 15.000.............................. 694 4.35 3,517,982.51 1.94
15.001 - 16.000.............................. 273 1.71 1,038,206.24 0.57
16.001 - 17.000.............................. 120 0.75 448,211.34 0.25
17.001 - 18.000.............................. 60 0.38 187,218.89 0.10
18.001 - 19.000.............................. 2 0.01 1,544.66 0.00(2)
19.001 - 20.000.............................. 3 0.02 9,044.50 0.00(2)
21.001 - 22.000.............................. 1 0.01 1,284.31 0.00(2)
------ ------ --------------- ------
Total.............................. 15,962 100.00% $181,781,125.63 100.00%
====== ====== =============== ======
</TABLE>
- ---------------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
(2) Less than 0.005% but greater than zero percent.
DISTRIBUTION BY ORIGINAL TERM
<TABLE>
<CAPTION>
PERCENT OF
TOTAL AGGREGATE PERCENT OF
NUMBER OF NUMBER OF PRINCIPAL INITIAL POOL
ORIGINAL TERM (MONTHS) RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ---------------------- ----------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
1 - 12.................................... 48 0.30% $ 46,045.99 0.03%
13 - 24.................................... 386 2.42 732,585.23 0.40
25 - 36.................................... 562 3.52 1,878,381.32 1.03
37 - 48.................................... 1,344 8.42 4,807,275.82 2.64
49 - 60.................................... 1,148 7.19 7,834,265.00 4.31
61 - 72.................................... 573 3.59 5,276,269.12 2.90
73 - 84.................................... 2,988 18.72 23,103,801.07 12.71
85 - 96.................................... 271 1.70 3,424,380.82 1.88
97 - 108.................................... 60 0.38 646,992.49 0.36
109 - 120.................................... 5,080 31.83 62,342,820.75 34.30
121 - 132.................................... 10 0.06 168,233.30 0.09
133 - 144.................................... 2,513 15.74 44,776,907.85 24.63
145 - 156.................................... 7 0.04 117,607.94 0.06
157 - 168.................................... 8 0.05 188,410.99 0.10
169 - 180.................................... 964 6.04 26,437,147.94 14.54
------ ------ --------------- ------
Total.............................. 15,962 100.00% $181,781,125.63 100.00%
====== ====== =============== ======
</TABLE>
- ---------------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
17
<PAGE> 20
DISTRIBUTION BY REMAINING TERM
<TABLE>
<CAPTION>
PERCENT OF
TOTAL AGGREGATE PERCENT OF
NUMBER OF NUMBER OF PRINCIPAL INITIAL POOL
REMAINING TERM (MONTHS) RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ----------------------- ----------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
0- 12...................................... 464 2.91% $ 471,809.42 0.26%
13- 24...................................... 709 4.44 1,851,298.58 1.02
25- 36...................................... 1,092 6.84 4,454,720.25 2.45
37- 48...................................... 1,696 10.63 8,999,319.08 4.95
49- 60...................................... 862 5.40 7,457,620.48 4.10
61- 72...................................... 1,420 8.90 12,988,087.89 7.14
73- 84...................................... 2,328 14.58 22,661,469.69 12.47
85- 96...................................... 399 2.50 5,447,638.26 3.00
97-108...................................... 1,294 8.11 17,586,676.40 9.67
109-120...................................... 2,755 17.26 36,847,207.08 20.27
121-132...................................... 391 2.45 7,174,849.95 3.95
133-144...................................... 1,695 10.62 32,427,974.51 17.84
145-156...................................... 21 0.13 552,622.14 0.30
157-168...................................... 140 0.88 3,795,976.84 2.09
169-180...................................... 696 4.36 19,063,855.06 10.49
------ ------ --------------- ------
Total.............................. 15,962 100.00% $181,781,125.63 100.00%
====== ====== =============== ======
</TABLE>
- ---------------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
DISTRIBUTION BY ORIGINAL RECEIVABLE PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENT OF
TOTAL AGGREGATE PERCENT OF
NUMBER OF NUMBER OF PRINCIPAL INITIAL POOL
ORIGINAL RECEIVABLE PRINCIPAL BALANCE ($) RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ----------------------------------------- ----------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
0.01- 5,000.00.......................... 1,670 10.46% $ 3,601,677.49 1.98%
5,000.01-10,000.00.......................... 3,680 23.05 21,826,530.25 12.01
10,000.01-15,000.00.......................... 5,369 33.64 56,787,494.03 31.24
15,000.01-20,000.00.......................... 3,042 19.06 46,848,820.16 25.77
20,000.01-25,000.00.......................... 1,226 7.68 24,887,105.93 13.69
25,000.01-30,000.00.......................... 603 3.78 15,314,749.43 8.42
30,000.01-35,000.00.......................... 198 1.24 6,004,814.56 3.30
35,000.01-40,000.00.......................... 102 0.64 3,516,078.51 1.93
40,000.01-45,000.00.......................... 47 0.29 1,861,982.49 1.02
45,000.01-50,000.00.......................... 25 0.16 1,131,872.78 0.62
------ ------ --------------- ------
Total.............................. 15,962 100.00% $181,781,125.63 100.00%
====== ====== =============== ======
</TABLE>
- ---------------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
18
<PAGE> 21
DISTRIBUTION BY REMAINING RECEIVABLE PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENT OF
TOTAL AGGREGATE PERCENT OF
NUMBER OF NUMBER OF PRINCIPAL INITIAL POOL
REMAINING RECEIVABLE PRINCIPAL BALANCE ($) RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ------------------------------------------ ----------- -------------- ------------------- ------------
<S> <C> <C> <C> <C>
0.00 - 5,000.00...................... 3,142 19.68% $ 8,362,206.80 4.60%
5,000.01 - 10,000.00....................... 4,251 26.63 32,584,957.33 17.93
10,000.01 - 15,000.00....................... 4,436 27.79 54,571,985.38 30.02
15,000.01 - 20,000.00....................... 2,363 14.80 40,603,685.20 22.34
20,000.01 - 25,000.00....................... 993 6.22 22,121,137.24 12.17
25,000.01 - 30,000.00....................... 475 2.98 12,852,032.84 7.07
30,000.01 - 35,000.00....................... 175 1.10 5,646,047.38 3.11
35,000.01 - 40,000.00....................... 72 0.45 2,645,581.98 1.46
40,000.01 - 45,000.00....................... 38 0.24 1,595,940.14 0.88
45,000.01 - 50,000.00....................... 17 0.11 797,551.34 0.44
------ ------ --------------- ------
Total............................. 15,962 100.00% $181,781,125.63 100.00%
====== ====== =============== ======
</TABLE>
- ---------------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
DISTRIBUTION BY AGE
<TABLE>
<CAPTION>
PERCENT OF
TOTAL AGGREGATE PERCENT OF
NUMBER OF NUMBER OF PRINCIPAL INITIAL POOL
MONTHS SINCE ORIGINATION RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ------------------------ ----------- -------------- ------------------- ------------
<S> <C> <C> <C> <C>
0 ..................................... 1,881 11.78% $ 25,708,897.92 14.14%
1 - 6..................................... 4,153 26.02 54,901,677.88 30.20
7 - 12..................................... 4,312 27.01 47,153,017.66 25.94
13 - 18..................................... 1,914 11.99 20,475,426.31 11.26
19 - 24..................................... 21 0.13 127,929.70 0.07
25 - 30..................................... 9 0.06 88,364.07 0.05
31 - 36..................................... 310 1.94 3,054,133.89 1.68
37 - 42..................................... 438 2.74 4,345,267.32 2.39
43 - 48..................................... 2,396 15.01 21,320,127.80 11.73
49 - 54..................................... 528 3.31 4,606,283.08 2.53
------ ------ --------------- ------
Total............................. 15,962 100.00% $181,781,125.63 100.00%
====== ====== =============== ======
</TABLE>
- ---------------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
19
<PAGE> 22
DISTRIBUTION BY QUARTER OF ORIGINATION
<TABLE>
<CAPTION>
PERCENT OF
TOTAL AGGREGATE PERCENT OF
NUMBER OF NUMBER OF PRINCIPAL INITIAL POOL
ORIGINATION QUARTER (YEAR/QUARTER) RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ---------------------------------- ----------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
93/1................................... 528 3.31% $ 4,606,283.08 2.53%
93/2................................... 1,192 7.47 10,488,877.74 5.77
93/3................................... 1,204 7.54 10,831,250.06 5.96
93/4................................... 380 2.38 3,720,575.86 2.05
94/1................................... 58 0.36 624,691.46 0.34
94/2................................... 291 1.82 2,889,330.98 1.59
94/3................................... 19 0.12 164,802.91 0.09
94/4................................... 2 0.01 47,123.03 0.03
95/1................................... 7 0.04 41,241.04 0.02
95/2................................... 10 0.06 47,029.05 0.03
95/3................................... 11 0.07 80,900.65 0.04
95/4................................... 128 0.80 1,420,329.61 0.78
96/1................................... 1,786 11.19 19,055,096.70 10.48
96/2................................... 2,719 17.03 28,928,120.88 15.91
96/3................................... 1,593 9.98 18,224,896.78 10.03
96/4................................... 690 4.32 7,651,372.50 4.21
97/1................................... 3,463 21.70 47,250,305.38 25.99
97/2................................... 1,881 11.78 25,708,897.92 14.14
------ ------ --------------- ------
Total........................ 15,962 100.00% $181,781,125.63 100.00%
====== ====== =============== ======
</TABLE>
- ---------------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
DISTRIBUTION BY NEW AND USED COLLATERAL
<TABLE>
<CAPTION>
PERCENT OF
TOTAL AGGREGATE PERCENT OF
NUMBER OF NUMBER OF PRINCIPAL INITIAL POOL
NEW OR USED COLLATERAL RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ---------------------- ----------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
New.................................... 14,303 89.61% $166,371,090.17 91.52%
Used................................... 1,659 10.39 15,410,035.46 8.48
------ ------ --------------- ------
Total........................ 15,962 100.00% $181,781,125.63 100.00%
====== ====== =============== ======
</TABLE>
- ---------------
(1) The sum of the individual percentages may not add to 100% because of
rounding.
MATURITY AND PREPAYMENT ASSUMPTIONS
Full and partial prepayments on the Receivables will have the effect of
reducing the weighted average life of the Certificates, while delinquencies by
Obligors under the Receivables, as well as extensions and deferrals on the
Receivables, will have the effect of increasing the weighted average life of the
Certificates. The Receivables may be prepaid at any time without penalty and the
mandatory prepayment of a Receivable may result from, among other things, the
sale, insured loss or other disposition of the Boat financed by the Receivable
or the Receivable becoming a Defaulted Receivable. While no assurance can be
given as to the rate of prepayments or as to whether there will be a significant
amount of prepayments, NationsCredit Commercial has experienced substantial
levels of prepayments on its portfolios of marine contracts in the past. Based
on the historical performance of NationsCredit Commercial's portfolio of marine
contracts, the average effective term of such contracts is approximately
one-third of their scheduled contractual term. NationsCredit Commercial's
historical prepayment experience on its portfolio of marine contracts has also
reflected seasonal variations due to the seasonal nature of the retail marine
finance business, with higher levels of prepayments in the beginning of the
boating season during the spring and early summer. Although NationsCredit
Commercial expects significant levels of prepayments to continue, no assurance
can be given as to the level or timing of prepayments because prepayments are
affected by numerous social, economic and other factors and because historical
prepayment
20
<PAGE> 23
experience is not necessarily indicative of future prepayments.
Certificateholders will bear all reinvestment risk resulting from prepayments on
the Receivables.
CERTIFICATE FACTORS AND TRADING INFORMATION
The "Certificate Factor" is a seven-digit decimal figure, which the
Servicer will compute each month, equal to the Certificate Balance on such date
of determination, divided by the initial Certificate Balance. The Certificate
Factor will be 1.0000000 as of the Cutoff Date; thereafter, the Certificate
Factor will decline to reflect reductions in the Certificate Balance. The amount
of a Certificateholder's pro rata share of the Certificate Balance for a given
month can be determined by multiplying the original denomination of such
holder's Certificate by the Certificate Factor for that month. The Certificate
Factor will be made available on the eighth business day of each month (the
"Determination Date").
Pursuant to the Agreement, Certificateholders will receive monthly reports
concerning the payments received on the applicable Receivables, the Certificate
Balance, the Certificate Factor, and various other items of information.
Certificateholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law. See "The Certificates -- Statements to Certificateholders".
USE OF PROCEEDS
The net proceeds to be received by the Trust from the sale of the
Certificates will be applied to the purchase of the Receivables.
THE DEPOSITOR
The Depositor, NationsCredit Securitization Corporation, is a wholly-owned
subsidiary of NationsCredit Commercial Corporation of America, which, in turn,
is indirectly wholly-owned by NationsCredit Corporation ("NationsCredit"). The
Depositor was incorporated in Delaware in 1995. The Depositor is organized for
the limited purpose of purchasing, among other things, retail marine installment
sale contracts and transferring such contracts to third parties and any
activities incidental to and necessary or convenient for the accomplishment of
such purposes. The principal executive offices of the Depositor are located at
225 E. John Carpenter Freeway, Irving, TX 75062-2731 and its telephone number is
(972) 506-5026.
The Depositor will take steps in structuring the transaction contemplated
hereby that are intended to ensure that the voluntary or involuntary application
for relief by NationsCredit Commercial under the United States Bankruptcy Code
or similar applicable state law ("Insolvency Laws") will not result in
consolidation of the assets and liabilities of the Depositor with those of
NationsCredit Commercial. These steps include or will include the creation of
the Depositor as a separate, limited-purpose subsidiary pursuant to a
certificate of incorporation or an amendment thereto containing certain
limitations, including restricting the nature of the Depositor's business,
requiring the Depositor to maintain records and books of account separate from
those of NationsCredit Commercial, to refrain from commingling its assets with
those of NationsCredit Commercial and to refrain from holding itself out as
having agreed to pay, or being liable for, the debts of NationsCredit
Commercial. In addition, the Depositor's certificate of incorporation will
contain a restriction on the Depositor's ability to commence a voluntary case or
proceeding under any Insolvency Law without the prior unanimous affirmative vote
of all of its directors, including at least one outside director. The Depositor
intends to follow these and other procedures related to maintaining its separate
corporate identity. However, there can be no assurance that a court would not
conclude that the assets and liabilities of the Depositor should be consolidated
with those of NationsCredit Commercial. If a court were to reach such a
conclusion, or a filing were made under any Insolvency Law by or against the
Depositor, or if an attempt were made to litigate any of the foregoing issues,
delays in distributions on the Certificates (and possible reductions in the
amount of such distributions) could occur.
21
<PAGE> 24
THE SERVICER
The Servicer, NationsCredit Commercial Corporation of America
("NationsCredit Commercial") was incorporated in 1992 under the laws of the
State of North Carolina. NationsCredit Commercial engages in the financing of
dealer inventory of consumer goods which include such products as boats, boat
motors and trailers, musical instruments, consumer electronics and appliances,
residential heating and air conditioning equipment, lawn and garden equipment,
manufactured housing units, and recreational vehicles. In support of its
inventory financing of boat dealers, NationsCredit Commercial purchases marine
installment sale contracts. NationsCredit Commercial is an indirect wholly-owned
subsidiary of NationsCredit, which in turn is a wholly-owned subsidiary of
NationsBank Corporation.
On February 1, 1993, NationsBank Corporation, through its subsidiary
NationsBanc Financial Services Corporation, acquired certain of the assets and
assumed certain of the liabilities of Chrysler First Inc., a subsidiary of
Chrysler Financial Corporation. NationsCredit Commercial represents operations
which were formerly subsidiaries of Chrysler First Inc. None of the Receivables
were originated prior to the acquisition of the assets and liabilities of
Chrysler First Inc.
The principal office of the Servicer is located at 3350 Cumberland Circle,
N.W., Suite 1000 Atlanta, GA 30339.
THE SURETY BOND ISSUER
CapMAC is a New York-domiciled monoline stock insurance company which
engages only in the business of financial guarantee and surety insurance. CapMAC
is licensed in 50 states in addition to the District of Columbia, the
Commonwealth of Puerto Rico and the territory of Guam. CapMAC insures structured
asset-backed, corporate, municipal and other financial obligations in the U.S.
and international capital markets. CapMAC also provides financial guarantee
reinsurance for structured asset-backed, corporate, municipal and other
financial obligations written by other major insurance companies.
CapMAC's claims-paying ability is rated "Aaa" by Moody's, "AAA" by S&P,
"AAA" by Duff & Phelps Credit Rating Co. ("Duff & Phelps") and "AAA" by Nippon
Investors Service Inc. Such ratings reflect only the views of the respective
rating agencies, are not recommendations to buy, sell or hold securities and are
subject to revision or withdrawal at any time by such rating agencies.
CapMAC is a wholly-owned subsidiary of CapMAC Holdings Inc. ("Holdings").
NEITHER HOLDINGS NOR ANY OF ITS STOCKHOLDERS IS OBLIGATED TO PAY ANY CLAIMS
UNDER ANY SURETY BOND ISSUED BY CAPMAC OR ANY DEBTS OF CAPMAC OR TO MAKE
ADDITIONAL CAPITAL CONTRIBUTIONS.
CapMAC is regulated by the Superintendent of Insurance of the State of New
York. In addition, CapMAC is subject to regulation by the insurance laws and
regulations of the other jurisdictions in which it is licensed. Such insurance
laws regulate, among other things, the amount of net exposure per risk that
CapMAC may retain, capital transfers, dividends, investment of assets, changes
in control, transactions with affiliates and consolidations and acquisitions.
CapMAC is subject to periodic regulatory examinations by the same regulatory
authorities.
CapMAC's obligations under the Surety Bond may be reinsured. Such
reinsurance does not relieve CapMAC of any of its obligations under the Surety
Bond.
THE SURETY BOND IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY
FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK STATE INSURANCE LAW.
As of December 31, 1996 and 1995, CapMAC had qualified statutory capital
(which consists of policyholders' surplus and contingency reserve) of
approximately $260 million and $240 million, respectively, and had not incurred
any debt obligations. Article 69 of the New York State Insurance Law requires
CapMAC to establish and maintain the contingency reserve, which is available to
cover claims under surety bonds issued by CapMAC.
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The financial statements of CapMAC prepared in accordance with generally
accepted accounting principles as of December 31, 1996 and 1995 and for each of
the years in the three-year period ended December 31, 1996 are made part of this
Prospectus. Copies of CapMAC's financial statements prepared in accordance with
statutory accounting standards, which differ from generally accepted accounting
principles, and filed with the Insurance Department of the State of New York are
available upon request from CapMAC.
CapMAC is located at 885 Third Avenue, New York, New York 10022, and its
telephone number is (212) 755-1155.
THE CERTIFICATES
The Certificates offered hereby will be issued pursuant to the Agreement.
Copies of the Agreement (without exhibits) may be obtained by Certificateholders
upon request in writing to the Trustee at Bankers Trust Company, 4 Albany
Street, New York, New York 10006; Attn: Corporate Trust and Agency Group
Structured Transactions. The following summary does not purport to be complete
and is subject to and qualified in its entirety by reference to the Agreement.
GENERAL
The Certificates will be available for purchase in book-entry form in
minimum denominations representing $1,000 of initial principal balance of the
Receivables and in integral multiples thereof, and will represent an undivided
fractional interest in the Trust equal to the percentage obtained by dividing
the denomination of the Certificate by such initial principal balance.
In general, it is intended that Certificateholders receive, on each
Distribution Date, the aggregate payments of principal, consisting of the
aggregate collected principal payments, full and partial prepayments on the
Receivables (other than Receivables for which the Servicer or NationsCredit
Commercial has made a payment of the Purchase Amount in a Collection Period
prior to the related Collection Period) received by the Servicer during the
preceding calendar month (the "Collection Period"), the principal balance of
Defaulted Receivables which became Defaulted Receivables during the related
Collection Period and interest at one-twelfth the Pass-Through Rate on the
Certificate Balance as of the close of business on the prior Distribution Date.
A prepayment of a Receivable may be made by or on behalf of the respective
Obligor by application of certain insurance proceeds, as a result of a
repurchase by NationsCredit Commercial or a purchase by the Servicer, as a
result of payments made in respect of Defaulted Receivables under the Reserve
Account, the Surety Bond, or, if payments are not made as required under the
Surety Bond, upon the repossession of the Boat, or other enforcement measure
taken with respect to a Defaulted Receivable. See "The Certificates -- Sale and
Assignment of Receivables", "-- The Surety Bond", "-- The Reserve Account" and
"-- Servicing Procedures".
The Certificates will initially be represented by one or more certificates
registered in the name of the nominee of The Depository Trust Company ("DTC",
and together with any successor depository selected by the Depositor, the
"Depository") except as set forth below. The Depositor has been informed by DTC
that DTC's nominee will be Cede & Co. ("Cede"). Accordingly, Cede is expected to
be the holder of record of the Certificates. Unless and until Definitive
Certificates are issued under the limited circumstances described herein, no
Certificate Owner will be entitled to receive a certificate representing such
person's interest in the Certificates. All references herein to action by
Certificateholders shall refer to actions taken by DTC upon instructions from
its participating organizations (the "Participants") and all references herein
to distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Certificates, as the case may be, for distribution to
Certificate Owners in accordance with DTC procedures. See "-- Book-Entry
Registration" and "-- Definitive Certificates".
BOOK-ENTRY REGISTRATION
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC
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was created to hold securities for its participating organizations ("Direct
Participants") and to facilitate the clearance and settlement of securities
transactions between Direct Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. Direct
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly (the
"Indirect Participants").
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificate Owners will receive all distributions of principal and
interest from the Trustee through Direct Participants and Indirect Participants.
Under a book-entry format Certificateholders may experience some delay in their
receipt of principal and interest distributions with respect to the Certificates
since distributions with respect to the Certificateholders will be forwarded by
Bankers Trust Company as paying agent, or its successor in such capacity (the
"Paying Agent") to Cede, the nominee of DTC will then forward such distributions
to its Direct Participants who in turn will forward them to Indirect
Participants or Certificate Owners. It is anticipated that the only
"Certificateholder" will be Cede, as nominee of DTC. Certificate Owners will not
be recognized by the Trustee as Certificateholders, as such term is used in the
Agreement and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and its Direct Participants and
Indirect Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers among
Direct Participants and is required to receive and transmit distributions of
principal of, and interest on, the Certificates. Direct Participants and
Indirect Participants with which Certificate Owners have accounts with respect
to the Certificates similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Certificate
Owners.
Because DTC can only act on behalf of Direct Participants, who in turn act
on behalf of Indirect Participants and certain banks, trust companies and other
persons approved by it the ability of a Certificate Owner to pledge Certificates
to persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such Certificates, may be limited due to the absence
of physical certificates for such Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Certificateholder under the Agreement only at the direction of one or
more Direct Participants to whose accounts with DTC the Certificates are
credited. Additionally, DTC has advised the Depositor that it will take such
actions with respect to specified percentages of the Certificate Balance only at
the direction of and on behalf of Participants whose holdings include undivided
interests that satisfy such specified percentages. DTC may take conflicting
actions with respect to other undivided interests to the extent that such
actions are taken on behalf of Direct Participants whose holdings include such
undivided interests.
DEFINITIVE CERTIFICATES
The Certificates will be issued in fully registered, certificated form (the
"Definitive Certificates"), to Certificate Owners or their nominees rather than
to DTC or its nominee, only if (i) the Depositor advises the Trustee in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as Depository with respect to the Certificates, and the Trustee or the Depositor
is unable to locate a qualified successor, (ii) the Depositor, at its option,
elects to terminate the book-entry system through DTC, or (iii) after the
occurrence of an Event of Default, Certificate Owners representing in the
aggregate not less than 50% of the Certificate Balance advise the Trustee and
DTC through Direct Participants in writing that the continuation of a book-entry
system through any Depository is no longer in the best interest of the
Certificate Owners.
Upon the occurrence of any events described in the immediately preceding
paragraph, the Trustee shall notify all Certificate Owners through DTC of the
occurrence of any such event and of the availability through DTC of Definitive
Certificates. Upon surrender by DTC of the global certificates representing the
Certificates and instructions for re-registration, the Trustee will issue the
Certificates as Definitive Certificates, and thereafter the
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Trustee will recognize the registered holders of such Definitive Certificates as
Certificateholders under the Agreement (the "Holders").
If Definitive Certificates are issued, distributions of principal of, and
interest on, the Definitive Certificates will be made by the Trustee directly to
Holders in accordance with the procedures set forth herein and in the Agreement.
Distributions of principal and interest on each Distribution Date will be made
to Holders in whose names the Definitive Certificates were registered at the
close of business on the preceding Record Date. Such distributions will be made
by check mailed to the address of such Holder as it appears on the register
maintained by the Trustee. The final payment on any Definitive Certificate,
however, will be made only upon presentation and surrender of such Definitive
Certificate at the office or agency specified in the notice of final
distribution mailed to Holders.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee in New York, New York. No service charge will be imposed
for any registration of transfer or exchange, but the Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith. Bankers Trust Company will initially be
designated as the registrar for the Certificates.
Certificates held by the Depositor or the Servicer shall not be counted in
any vote or action requiring the consent of Certificateholders under the
Agreement.
SALE AND ASSIGNMENT OF RECEIVABLES
On the date of issuance of the Certificates (the "Closing Date"), the
Depositor will cause the Trust to purchase the Receivables directly or
indirectly from NationsCredit Commercial or its affiliates. Each Receivable
purchased by the Trust will be identified in a schedule appearing as an exhibit
to the Agreement. The Trustee will, concurrently with such purchase, execute,
authenticate and deliver the Certificates.
The representations and warranties, with respect to the Receivables made by
either NationsCredit Commercial or the Depositor shall include, among others,
that such Receivable (a) shall have been originated in the United States by a
Dealer for the retail sale of a Boat in the ordinary course of such Dealer's
business, shall have been fully and properly executed by the parties thereto,
shall be denominated in U.S. dollars, (b) shall have created or shall create a
valid, subsisting and enforceable first priority perfected security interest in
favor of NationsCredit Commercial in the related Boat, (other than in the case
of boat motors subject to certificate of title statutes that provide for
perfection of the security interests in such boat motors by the filing of a
UCC-1 financing statement), which security interest has been assigned to the
Depositor and shall be validly assignable by the Depositor to the Trustee, (c)
shall contain customary and enforceable provisions such that the rights and
remedies of the holder thereof shall be adequate for realization against the
collateral of the benefits of the security, (d) shall provide for level monthly
payments (provided that the payment in the first or last month in the life of
the Receivable may be minimally different from the level payment) that fully
amortize the Amount Financed by maturity and yield interest at the Annual
Percentage Rate, (e) shall provide for, in the event that such contract is
prepaid, a prepayment that fully pays the Principal Balance and includes accrued
but unpaid interest due through the date of prepayment in an amount at least
equal to the Annual Percentage Rate, (f) and the sale of the related Boat shall
have complied at the time it was originated or made, and at the date of issuance
of the Certificates shall comply, in all material respects with all requirements
of applicable Federal, State, and local laws and regulations thereunder,
including, without limitation, usury laws, the Federal Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Trade Commission Credit
Practices Rule, State unfair and deceptive trade practice laws, and State
adaptations of the National Consumer Act and of the Uniform Consumer Credit
Code, and any other applicable consumer credit, equal credit opportunity and
disclosure laws, and (g) shall represent the genuine, legal, valid and binding
payment obligation in writing of the Obligor, enforceable by the holder thereof
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance and similar laws relating to creditors'
rights generally and subject to general principles of equity. As of the second
(or, at the Depositor's or NationsCredit Commercial's option, as applicable, the
first) Record Date following the discovery by or notice to the Depositor or
NationsCredit Commercial of a breach of any representation or warranty made by
the Depositor or
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NationsCredit Commercial, as applicable, that materially and adversely affects
the interests of the Certificateholders in a Receivable, the Depositor or
NationsCredit Commercial, as applicable, unless it cures the breach, will
repurchase or purchase the Receivable from the Trustee, at a price equal to the
unpaid principal balance owed by the Obligor plus accrued interest calculated at
a rate equal to the sum of the Pass-Through Rate plus the Servicing Fee Rate
(the "Purchase Amount"). The repurchase and the purchase obligations are a
general and unsecured obligation of the Depositor and NationsCredit Commercial,
respectively, and will constitute the sole remedy available to the
Certificateholders or the Trustee for any such uncured breach. Any failure on
the part of NationsCredit Commercial or the Depositor to pay the Purchase Amount
of any Receivable when required will not be covered by collections from
Receivables or payments under the Surety Bond.
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Trustee, on behalf of the Trust, will appoint
NationsCredit Commercial as custodian of all the Receivables. NationsCredit
Commercial's and its applicable affiliate's accounting records and computer
systems will reflect the ultimate sale and assignment of the Receivables to the
Trustee. UCC-1 financing statements reflecting the sale and assignment of the
Receivables to the Trustee will be filed. Because the Receivables will remain in
NationsCredit Commercial's possession and will not be stamped or otherwise
marked to reflect the assignment to the Trustee, if a subsequent purchaser were
able to take physical possession of the Receivables in the ordinary course of
its business without knowledge of the assignment, the Trustee's interest in the
Receivables could be defeated. See "Risk Factors -- Lack of First Priority
Security Interests in the Receivables." Due to the administrative burden and
expense: the certificates of title, in the case of Boats financed in states
where security interests in boats are subject to certificate of title statutes,
will not be endorsed; and the UCC-1 financing statements, in the case of Boats
financed in states where security interests in boats are perfected by filing a
UCC-1 financing statement, will not be amended. In the absence of such
procedures, the Trust may not have a perfected security interest in the Boats
financed in certificate of title or UCC states, but the failure to make such
endorsements, filings or recordations will not affect the validity of the
original security interest as against the Obligor in UCC states. With respect to
Boats documented under certificate of title states, the validity of the security
interest against the original Obligor is less clear. See "Risk Factors -- Lack
of Perfected Security Interests in Boats."
ACCOUNTS
The Servicer will establish and maintain with the Trustee one or more
accounts, in the name of the Trustee on behalf of the Certificateholders, into
which all payments made on or with respect to the Receivables will be deposited,
and from which all distributions with respect to the Receivables and the
Certificates will be made (collectively, the "Certificate Account"). The
Certificate Account shall be maintained with the Trustee so long as (i) the
Trustee's deposits have a rating acceptable to each Rating Agency or (ii) the
Certificate Account is maintained as a fully segregated trust account. If at any
time the conditions in clauses (i) or (ii) above are not satisfied, the Servicer
shall, with the Trustee's assistance as necessary, cause the Certificate Account
to be moved to a bank which can satisfy such conditions.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables and, in a manner consistent with the Agreement, will
perform such collection procedures as it follows with respect to marine
contracts that it services for itself and others. See "Certain Legal Aspects of
the Receivables." Consistent with the Agreement, the Servicer may, in its
discretion, arrange with the Obligor on a Receivable to extend, rewrite or
otherwise modify the payment terms of a Receivable; provided, however, that the
Servicer may, with certain limitations set forth in the Agreement, extend a
Receivable for credit related reasons that would be acceptable to the Servicer
with respect to comparable marine contracts that it services for itself and
others and in accordance with its customary standards, policies and procedures
if the cumulative extensions with respect to any Receivable shall not cause the
term of such Receivable to extend beyond the last day of the Collection Period
preceding the Final Scheduled Distribution Date. See "NationsCredit Commercial's
Portfolio of Marine Contracts." Such arrangements may result in the Servicer
purchasing the Receivable for its Purchase Amount. If required payments under
the Surety Bond are not made, the Servicer would follow such normal collection
practices and procedures as it deems necessary or advisable to realize upon any
Receivable with respect to which
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the Servicer determines that eventual payment in full is unlikely. The Servicer
may sell the Boat securing the Receivable at a public or private sale, or take
any other action permitted by applicable law.
The Servicer will covenant in the Agreement that: (i) the Servicer will not
release a Boat from the security interest granted by the related Receivable in
whole or in part, except upon payment in full by the related Obligor; (ii) the
Servicer will not impair the rights of the Certificateholders in any
Receivables; (iii) the Servicer will not increase or decrease the amount of any
scheduled payment on a Receivable or the principal amount of a Receivable
(except with respect to a prepayment of a scheduled payment that does not result
in a deferral of any other scheduled payment); (iv) the Servicer will not change
the APR of any Receivable; (v) the Servicer will not sell, pledge, transfer,
deliver or otherwise dispose of any Receivable, except as provided in the
Agreement; (vi) the Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Receivables as and
when the same shall become due and shall follow such collection procedures as it
follows with respect to all comparable marine contracts that it services for
itself and others; and (vii) the Servicer will not extend, rewrite or otherwise
modify the payment terms of a Receivable; provided, however, that the Servicer
may, with certain limitations set forth in the Agreement, extend a Receivable
for credit related reasons that would be acceptable to the Servicer with respect
to comparable marine contracts that it services for itself and others and in
accordance with its customary standards, policies and procedures if the
cumulative extensions with respect to any Receivable shall not cause the term of
such Receivable to extend beyond the last day of the Collection Period preceding
the Final Scheduled Distribution Date.
In the event of a breach by the Servicer of any covenant described above
that materially and adversely affects the interests of the Certificateholders
and the Surety Bond Issuer in a Receivable, the Servicer, unless such breach has
been cured by the second Record Date (or, at the Servicer's election, the first
Record Date) following the date on which the Servicer becomes aware of, or
receives written notice of such breach or earlier in certain circumstances, will
be required to purchase the Receivable from the Trustee on the business day
prior to the Distribution Date related to such Record Date or earlier under
certain circumstances. The purchase price will be the Purchase Amount as of the
last day of the Collection Period preceding the date of such purchase. The
purchase obligation is a general unsecured obligation of the Servicer and will
constitute the sole remedy available to the Certificateholders, the Trust or the
Trustee against the Servicer for any such uncured breach, except with respect to
certain indemnities of the Servicer under the Agreement related thereto. Any
failure of the Servicer to pay the Purchase Amount of any Receivable when
required will not be covered by collections from Receivables or payments under
the Surety Bond.
COLLECTIONS ON RECEIVABLES
While NationsCredit Commercial or an entity (a) into which NationsCredit
Commercial is merged or consolidated, (b) which succeeds to the properties and
assets of the Servicer substantially as a whole or (c) more than 50% of the
voting stock of which is, directly or indirectly, owned by NationsBank
Corporation, which has executed an agreement of assumption to perform the
obligations of the Servicer under the Insurance Agreement and the Agreement, is
the Servicer, the Servicer may commingle collections held by it and may use such
funds for its own purposes prior to the business day preceding each Distribution
Date provided that all of the following conditions are satisfied: (i) there
exists no Event of Default (as described below); (ii) if the Servicer does not
have a short-term rating or deposit rating of at least A-1 from S&P and P-1 from
Moody's, a guaranty, letter of credit, surety bond or other similar instrument
is issued covering collections held by NationsCredit Commercial or such
successor, which is acceptable to the Rating Agencies and the Surety Bond Issuer
and is issued by an entity which has a short-term debt or deposit rating, as
applicable, of at least A-1 from S&P and P-1 from Moody's; and (iii) the
Servicer, the Trustee, the Depositor and the Surety Bond Issuer shall not have
received notice from S&P or Moody's that failure to separate such funds will
result in a reduction or withdrawal of the then current rating on the
Certificates by either S&P or Moody's. If all the conditions contained in the
preceding sentence are not met, the Servicer will deposit all payments on
Receivables (from whatever source) and all proceeds of Receivables collected
during each Collection Period into the Certificate Account not later than the
second business day after receipt. It is anticipated that on the Closing Date,
NationsBank Corporation will furnish a guaranty that will permit NationsCredit
Commercial to commingle funds. The Depositor or the Servicer, as applicable,
will deposit the aggregate Purchase Amount of Receivables repurchased by the
Depositor or
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purchased by the Servicer into the Certificate Account on or before the business
day preceding the applicable Distribution Date. Pending deposit into the
Certificate Account, collections may be invested by the Servicer at its own risk
and for its own benefit, and will not be segregated from funds of the Servicer.
See "Risk Factors -- Commingling Risk."
In accordance with NationsCredit Commercial's normal practices and
procedures, payments made by or on behalf of an Obligor on a Receivable during a
Collection Period shall be applied first to late payment fees and extension
fees, second to interest accrued on the Receivable, third to principal due on
the Receivable, fourth to administrative charges, if any, and fifth to the
remaining principal balance. Late payment and extension fees, if any, and other
administrative fees will be included as part of the Trust's assets; provided
however that the Trustee will agree to hold any such amounts for the benefit of
the Servicer and any payments received with respect thereto will not be passed
through to Certificateholders, but will instead be promptly remitted to the
Servicer upon receipt.
SERVICING COMPENSATION
The Servicer will be entitled to receive the Monthly Servicing Fee with
respect to each Distribution Date, equal to the product of one-twelfth the
Servicing Fee Rate multiplied by the Pool Balance as of the last day of the
prior Collection Period (or, in the case of the first Distribution Date, the
Initial Pool Balance). The Trustee, as provided above, will remit to the
Servicer any late fees, prepayment charges and other administrative fees or
similar charges allowed by applicable law with respect to the Receivables.
Payments by or on behalf of Obligors will be allocated to payments of principal,
interest and late fees in accordance with the Servicer's normal practices and
procedures.
The Monthly Servicing Fee will compensate the Servicer for performing the
functions of a third party servicer of marine retail installment sale contracts
as an agent for their beneficial owner, including collecting and posting all
payments, responding to inquiries of Obligors on the Receivables, investigating
delinquencies, sending payment statements to Obligors, reporting tax information
to Obligors, paying costs of disposition of defaults, and monitoring the
collateral. The Monthly Servicing Fee also will compensate the Servicer for
administering the Receivables, including accounting for collections and
furnishing monthly and annual statements to the Trustee with respect to
distributions, and providing information to the appropriate party relating to
Federal income taxes. The Monthly Servicing Fee also will reimburse the Servicer
for certain taxes, accounting fees, outside auditor fees, data processing costs
and other costs incurred in connection with administering the Receivables. The
Trust will not be responsible for fees and expenses of any subservicer.
DISTRIBUTIONS ON CERTIFICATES
On or before the Determination Date, the Servicer will inform the Trustee
of the amount of aggregate collections on the Receivables (other than
Receivables purchased by the Servicer or repurchased by NationsCredit
Commercial) including all refunds received by the Servicer with respect to any
refunded portion of any extended warranty protection plan costs, or of physical
damage, credit life or disability insurance premiums included in the principal
amount of the Receivables; the aggregate Purchase Amount of Receivables required
to be repurchased by NationsCredit Commercial or required to be purchased by the
Servicer; the aggregate amounts to be drawn on the Reserve Account; the
aggregate payments to be made under the Surety Bond; and the Monthly Servicing
Fee; all with respect to the preceding Collection Period.
On the Distribution Date, the Trustee will distribute from the Certificate
Account pro rata to the Certificateholders of record as of the preceding Record
Date, the Servicer, the Surety Bond Issuer, the Collateral Agent and the
Depositor the following amounts in the following order of priority:
(i) to the Certificateholders, an amount equal to one-twelfth of the
product of (x) the Pass-Through Rate and (y) the Certificate Balance as of
the close of business on the prior Distribution Date (the "Monthly Interest
Payment"), and any carry-over Monthly Interest Payment from prior
Distribution Dates;
(ii) if NationsCredit Commercial or an affiliate thereof is not the
Servicer, to the Servicer, an amount equal to one-twelfth of the product of
(x) the Servicing Fee Rate and (y) the Pool Balance as of the last day
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of the prior Collection Period (or, in the case of the first Distribution
Date, the Initial Pool Balance) ("Monthly Servicing Fee") and any
carry-over Monthly Servicing Fee from prior Distribution Dates;
(iii) to the Certificateholders, (x) on any Distribution Date, except
the Final Scheduled Distribution Date (a) that portion of all collections
received by the Servicer during the related Collection Period on
Receivables allocable to principal (which shall not include the principal
portion of proceeds from any recoveries or liquidations in respect of
Defaulted Receivables), (b) Purchase Amounts allocable to principal and
paid by the Depositor or the Servicer, (c) the principal balance of
Defaulted Receivables, which became Defaulted Receivables during the
related Collection Period and (y) on the Final Scheduled Distribution Date,
after giving effect to the distribution of amounts set forth in (a) through
(c) of this clause (iii), an amount necessary to reduce the Certificate
Balance to zero on such Distribution Date (collectively, the "Monthly
Principal Payment") and any carry-over Monthly Principal Payment from prior
Distribution Dates;
(iv) if NationsCredit Commercial or an affiliate thereof is the
Servicer, to the Servicer, the Monthly Servicing Fee and any carry-over
Monthly Servicing Fee from prior Distribution Dates;
(v) to the Surety Bond Issuer, any amounts owing to the Surety Bond
Issuer under the Insurance Agreement and the Agreement and not paid;
(vi) to the Collateral Agent, an amount up to the Specified Reserve
Account Requirement for deposit into the Reserve Account; and
(vii) to the Depositor, any remaining amounts.
"Defaulted Receivable" means a Receivable as to which either (x) the
Servicer has determined, in accordance with its customary servicing procedures,
that eventual payment in full is unlikely or (y) (i) 90 or more days have
elapsed since the related Boat has been repossessed by the Servicer, in the case
of any Receivable with a Principal Balance of $10,000 or less as of the day such
Boat was repossessed by the Servicer or (2) 180 or more days have elapsed since
the related Boat has been repossessed by the Servicer, in the case of any
Receivable with a Principal Balance of greater than $10,000 as of the day such
Boat was repossessed by the Servicer.
The aggregate amount of Monthly Principal Payments will not exceed the
unpaid principal balance of the Certificates.
The Surety Bond Issuer will unconditionally and irrevocably guarantee
payment of the distributions described in clauses (i) through (iii). See "-- The
Surety Bond."
The Monthly Interest Payment is calculated on the Certificate Balance,
which shall decline by the amount of principal distributions made on the
Certificates. To the extent that payments on the Receivables and amounts on
deposit in the Reserve Account are not sufficient to cover the entire principal
amount of Defaulted Receivables and payments under the Surety Bond are not made,
Certificateholders will incur a loss and interest will not be paid on the amount
of such loss.
As an administrative convenience, the Servicer will be permitted to make
the deposit of (a) collections and the aggregate Purchase Amount for or with
respect to the Collection Period and (b) the Purchase Amount for any optional
purchase of the Receivables (as described herein) net of distributions to be
made to the Servicer with respect to the Collection Period. The Servicer,
however, will account for the amount of any such purchase to the Trustee and to
the Certificateholders as if all deposits, distributions and transfers were made
individually.
Any amounts released to the Depositor pursuant to clause (vii) above shall
not be property of the Trust thereafter, and the Depositor shall have no
obligation to return such amounts to the Trust in the event insufficient funds
are available on any subsequent Distribution Date to distribute to
Certificateholders the Monthly Interest Payment, any carry-over Monthly Interest
Payment, the Monthly Principal Payment or any carry-over Monthly Principal
Payment.
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The following chart sets forth the application of the foregoing provisions
to the June 1997 distribution:
May 1-May 31............... Collection Period. The Servicer receives monthly
payments, prepayments and other proceeds in respect
of the Receivables.
June 11.................... Determination Date. The Servicer notifies the
Trustee of the amounts to be distributed on the
Distribution Date.
June 13.................... Record Date. Distributions on the Distribution Date
are made to Certificateholders of record at the
close of business on this date.
June 16.................... Distribution Date. The Trustee distributes to
Certificateholders amounts payable in respect of
the Certificates as described in clauses (i) and
(iii) above, and transfers the balance as described
in clause (vii) above.
THE SURETY BOND
On or before the Closing Date, the Depositor will cause the Surety Bond to
be issued by the Surety Bond Issuer pursuant to the provisions of the Agreement
and the Insurance and Reimbursement Agreement (the "Insurance Agreement") among
the Depositor, the Servicer and the Surety Bond Issuer. The Surety Bond will
unconditionally and irrevocably guarantee the timely payment of (i) the Monthly
Interest Payment, (ii) if NationsCredit Commercial or an affiliate thereof is
not the Servicer, the Monthly Servicing Fee and (iii) the Monthly Principal
Payment.
The Trustee will demand payment under the Surety Bond (or the Surety Bond
Issuer will otherwise make available) with respect to any Distribution Date to
the extent there are not sufficient amounts available from collections on
Receivables or on deposit in the Reserve Account, to make distributions in
respect of (i) the Monthly Interest Payment, (ii) if NationsCredit Commercial or
an affiliate thereof is not the Servicer, the Monthly Servicing Fee and (iii)
the Monthly Principal Payment.
Without duplication of any of the foregoing, on the Final Scheduled
Distribution Date, the Surety Bond will unconditionally guarantee the payment of
the outstanding Certificate Balance (after giving effect to all other amounts
distributed and allocable to principal on such Distribution Date).
In the event the Reserve Account is exhausted or otherwise unavailable, in
the absence of payments under the Surety Bond, Certificateholders will directly
bear the credit and other risks associated with their undivided interest in the
Trust.
In the event the Surety Bond Issuer's claims paying ratings have been
reduced by any of the Rating Agencies, the Depositor may, but it is not
obligated to, upon payment of all amounts required to be paid to the Surety Bond
Issuer pursuant to the Insurance Agreement and the Agreement either (i) replace
the Surety Bond with a financial guaranty insurance policy issued by another
surety bond issuer, provided that the ratings on the claims paying ability of
such replacement surety bond issuer are higher than those of the surety bond
issuer sought to be replaced (after giving effect to such reduction) or (ii)
eliminate or provide another form of credit enhancement; provided that in the
case of clause (ii), the Rating Agencies consent thereto and confirmation that
the ratings of the Certificates will be increased from their then current levels
(after giving effect to such reduction) as a result of such action shall have
been obtained.
So long as a Surety Bond Issuer Default has occurred and is continuing, any
provision giving the Surety Bond Issuer the right to direct, appoint or consent
to, approve of, or take any action under this Agreement shall be inoperative
during the period of such Surety Bond Issuer Default and such right shall
instead vest in the Trustee acting at the direction of the Certificateholders
evidencing not less than 51% of the Certificate Balance as of the most recent
Record Date.
"Surety Bond Issuer Default" means the failure of the Surety Bond Issuer to
make a payment required under the Surety Bond in accordance with its terms.
Payment of claims under the Surety Bond will be made by the Surety Bond
Issuer following Receipt by the Surety Bond Issuer of the appropriate notice for
payment on the later to occur of (a) 11:00 a.m., New York City
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time, on the second Business Day following Receipt of such notice for payment,
and (b) 11:00 a.m., New York City time, on the Business Day immediately
preceding the relevant Distribution Date.
The terms "Receipt" and "Received," with respect to the Surety Bond, means
actual delivery to the Surety Bond Issuer, prior to 2:00 p.m., New York City
time, on a Business Day; delivery either on a day that is not a Business Day or
after 2:00 p.m., New York City time, shall be deemed to be Receipt on the next
succeeding Business Day.
If a payment guaranteed by the Surety Bond Issuer is voided pursuant to a
final and non-appealable order (a "Preference Event") under any applicable
bankruptcy, insolvency, receivership or similar law in an Insolvency Proceeding,
and, as a result of such a Preference Event, the Trustee is required to return
such voided payment, or any portion of such voided payment, made in respect of
the Certificates (an "Avoided Payment"), the Surety Bond Issuer will pay an
amount equal to such Avoided Payment, upon receipt by the Surety Bond Issuer
from the Trustee of (x) a certified copy of a final order of a court exercising
jurisdiction in such Insolvency Proceeding to the effect that the Trustee is
required to return any such payment or portion thereof during the term of the
Surety Bond because such payment was voided under applicable law, with respect
to which order the appeal period has expired without an appeal having been filed
(the "Final Order"), (y) an assignment, in form reasonably satisfactory to the
Surety Bond Issuer, irrevocably assigning to the Surety Bond Issuer all rights
and claims of the Trustee relating to or arising under such Avoided Payment and
(z) a notice for payment appropriately completed and executed by the Trustee.
Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order and not
to the Trustee directly.
Notwithstanding the foregoing, in no event shall the Surety Bond Issuer be
obligated to make any payment in respect of any Avoided Payment, which payment
represents a payment of the principal amount of the Certificates, prior to the
time the Surety Bond Issuer would have been required to make a payment in
respect of such principal in the absence of such Preference Event.
The Surety Bond Issuer shall make payments due in respect of Avoided
Payments prior to 1:00 p.m., New York City time, on the second Business Day
following the Surety Bond Issuer's Receipt of the documents required under
clauses (x) through (z) of the second preceding paragraph.
Under the Surety Bond, "Business Day" means any day other than (i) a
Saturday or Sunday or (ii) a day on which banking institutions in the City of
New York, New York and the State of Georgia are authorized or obligated by law
or executive order to be closed.
"Insolvency Proceeding" means the commencement, after the Closing Date, of
any bankruptcy, insolvency, readjustment of debt, reorganization, marshaling of
assets and liabilities or similar proceedings by or against any person, or the
commencement, after the Closing Date, of any proceedings by or against any
Person for the winding up or liquidation of its affairs, or the consent after
the date hereof to the appointment of a trustee, conservator, receiver or
liquidator in any bankruptcy, insolvency, readjustment of debt, reorganization,
marshaling of assets and liabilities or similar proceedings of or relating to
any Person.
The terms of the Surety Bond cannot be modified, altered or affected by any
other agreement or instrument, or by the merger, consolidation or dissolution of
the Trust, the Depositor or the Servicer. The Surety Bond by its terms may not
be canceled or revoked prior to the time it is terminated in accordance with its
express terms. The Surety Bond is governed by the laws of the State of New York.
THE SURETY BOND IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE FUND
SPECIFIED IN ARTICLE 76 OF THE NEW YORK STATE INSURANCE LAW.
THE RESERVE ACCOUNT
The Depositor will establish and maintain with the Collateral Agent an
account (the "Reserve Account"). The Reserve Account will not be part of the
Trust, but will be pledged to the Trustee for the benefit of the
Certificateholders and the Surety Bond Issuer. On the Closing Date an initial
deposit will be made into the Reserve Account and thereafter will be augmented
on each Distribution Date from payments on Receivables allocable to interest on
deposit in the Certificate Account with respect to the preceding Collection
Period after
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distributions on such Distribution Date in respect of the Monthly Interest
Payment and any carry-over Monthly Interest Payment, the Monthly Servicing Fee
and any carry-over Monthly Servicing Fee (if NationsCredit Commercial or an
affiliate thereof is not the Servicer), the Monthly Principal Payment and any
carry-over Monthly Principal Payment and any amounts owing to the Surety Bond
Issuer under the Insurance Agreement and the Agreement and not paid, until the
amount on deposit in the Reserve Account is equal to a specified amount to be
determined by the Surety Bond Issuer and the Rating Agencies (the "Specified
Reserve Account Requirement"). Amounts, if any, on deposit in the Reserve
Account on any Distribution Date (after giving effect to all distributions to be
made on such Distribution Date) in excess of the Specified Reserve Account
Requirement will be released to the Depositor. The Specified Reserve Account
Requirement and amounts on deposit or to be deposited into the Reserve Account
may be reduced, including to zero, or distributed in a different manner than
described herein with the consent of the Surety Bond Issuer as long as such
reduction or change does not cause a downgrade or withdrawal of the then-current
rating of the Certificates by either Moody's or S&P, but without prior notice to
or the consent of the Certificateholders. Prospective purchasers of the
Certificates should not rely on any amounts being deposited into or being
available from the Reserve Account in making a decision on whether to purchase
the Certificates.
STATEMENTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will include with each distribution
to each Certificateholder of record, a statement to Certificateholders furnished
pursuant to the Agreement, setting forth for the Collection Period relating to
such Distribution Date the following information (stated in the case of items
(i), (ii) and (iii), on the basis of $1,000 initial principal amount) as of such
Distribution Date:
(i) the amount of the Certificateholder's distribution which
constitutes the Monthly Principal Payment (including any carry-over Monthly
Principal Payment);
(ii) the amount of the Certificateholder's distribution which
constitutes the Monthly Interest Payment (including any carry-over Monthly
Interest Payment);
(iii) the Certificateholder's pro rata portion of the Monthly
Servicing Fee (including any carry-over Monthly Servicing Fee);
(iv) the Certificate Balance and the Certificate Factor as of the
close of business on such Distribution Date; and
(v) the Pool Balance as of the last day of the Collection Period.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the Agreement, the Trustee shall
mail to each Person who at any time during such calendar year shall have been a
Certificateholder of record a statement containing the annual total for the
amounts described in (i) through (iii) above for the purposes of such
Certificateholder's preparation of Federal income tax returns. See "Certain
Federal Income Tax Consequences."
EVIDENCE AS TO COMPLIANCE
The Agreement will provide that a firm of independent public accountants
will furnish to the Trustee and the Surety Bond Issuer on or before March 31 of
each year, beginning March 31, 1998, a statement as to compliance by the
Servicer during the preceding twelve months ended December 31 of the preceding
year with certain standards relating to the servicing of the Receivables.
The Agreement will also provide for delivery to the Trustee and the Surety
Bond Issuer, on or before March 31 of each year, commencing March 31, 1998 of a
certificate signed by an officer of the Servicer stating that the Servicer has
fulfilled its obligations under such Agreement throughout the preceding twelve
months ended December 31 or, if there has been a default in the fulfillment of
any such obligation, describing each such default. The Servicer has agreed to
give the Trustee notice of certain Events of Default under the Agreements.
Copies of such statements and certificates may be obtained by
Certificateholders by a request in writing addressed to the Trustee.
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CERTAIN MATTERS REGARDING THE SERVICER
The Agreement will provide that NationsCredit Commercial may not resign
from its obligations and duties as Servicer thereunder, except upon
determination that the performance of such duties by NationsCredit Commercial is
no longer permissible under applicable law. No such resignation will become
effective until the Trustee or a successor servicer has assumed NationsCredit
Commercial's servicing obligations and duties under the Agreement. The Servicer
may delegate all or any part of its servicing obligations under the Agreement to
another person provided that no such delegation shall relieve the Servicer of
any of its obligations or liabilities under the Agreement. NationsCredit
Commercial employs NationsCredit Financial Services Corporation to collect on
charged-off marine contracts including in respect of any Receivables.
The Agreement will further provide that neither the Servicer nor any of its
directors, officers, employees and agents shall be under any liability to the
Trust or the Certificateholders for taking any action or for refraining from
taking any action pursuant to the Agreement, or for errors in judgment;
provided, however, that neither the Servicer nor any such person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of its duties or
by reason of reckless disregard of obligations and duties thereunder. In
addition, the Agreement will provide that the Servicer is under no obligation to
appear in, prosecute or defend any legal action that is not incidental to its
servicing responsibilities under such Agreement and that, in its opinion, may
involve it in any expense or liability. The Servicer may, however, undertake any
reasonable action that it may deem necessary or desirable in respect of the
Agreement and the rights and duties of the parties thereto and the interests of
the Certificateholders thereunder.
Under the circumstances specified in the Agreement, any entity into which
the Servicer may be merged or consolidated, or any entity resulting from any
merger or consolidation to which the Servicer is a party, or any entity
succeeding to the business of the Servicer, or, with respect to its obligations
as Servicer, any corporation 50% or more of the voting stock of which is owned,
directly or indirectly, by NationsBank Corporation, which corporation or other
entity in each of the foregoing cases assumes the obligations of the Servicer,
will be the successor of the Servicer under the Agreement.
EVENTS OF DEFAULT
"Events of Default" under the Agreement will consist of: (i) any failure by
the Servicer to deliver to the Trustee for distribution to the
Certificateholders any proceeds or payment required to be delivered under the
terms of the Certificates and the Agreement, which failure continues unremedied
for three business days after written notice from the Trustee is received by the
Servicer or after discovery by an officer of the Servicer; (ii) any failure by
the Servicer or the Depositor, as the case may be, duly to observe or to perform
in any material respect any other covenant or agreement set forth in the
Certificates or the Agreement which failure materially and adversely affects the
rights of Certificateholders and which continues unremedied for 60 days after
the giving of written notice of such failure (1) to the Servicer or the
Depositor, as the case may be, by the Trustee or (2) to the Servicer or the
Depositor, as the case may be, and to the Trustee by the Surety Bond Issuer;
(iii) certain events of bankruptcy, insolvency, readjustment of debt, marshaling
of assets and liabilities, or similar proceedings with respect to the Servicer
or the Depositor and certain actions by the Servicer or the Depositor indicating
its insolvency, reorganization pursuant to bankruptcy proceedings, or inability
to pay its obligations and (iv) any representation or warranty by the Servicer
in the Agreement shall prove to have been incorrect in any material respect when
made which continues to be incorrect in any material respect for a period of 60
days after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by the Surety Bond Issuer, and as a result of which the
interests hereunder of Certificateholders are materially and adversely affected.
The Surety Bond Issuer may give the Trustee notice of any Event of Default under
the Agreement.
RIGHTS UPON EVENT OF DEFAULT; SERVICER TRANSFER
As long as an Event of Default under the Agreement remains unremedied, the
Surety Bond Issuer may terminate all the rights and obligations of the Servicer
under the Agreement (a "Servicer Transfer") in each case with the consent of the
Surety Bond Issuer, whereupon a successor servicer appointed by the Trustee and
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consented to by the Surety Bond Issuer in writing or the Trustee will succeed to
all the responsibilities, duties and liabilities of the Servicer under the
Agreement and will be entitled to similar compensation arrangements. In the
event that the Trustee is unwilling or unable so to act, it may appoint, or
petition a court of competent jurisdiction for the appointment of, a successor
with a net worth of at least $50,000,000 and whose regular business includes the
servicing of marine retail installment sale contracts. The Trustee may make such
arrangements for compensation to be paid on each Distribution Date, which shall
be negotiated on an arms-length basis, but in no event may be greater than the
product of one-twelfth of 1.0% and the Certificate Balance as of such
Distribution Date.
In addition, the Agreement will also provide that the Surety Bond Issuer,
with notice in writing to the Servicer, may effect a Servicer Transfer upon the
occurrence of any of the following events: (a) the Depositor or Servicer, as the
case may be, shall fail to pay when due any amount payable by it or for the
benefit of the Surety Bond Issuer; (b) an Event of Default occurs under the
Agreement; (c) the Surety Bond Issuer determines that the performance of the
Servicer under the Agreement is not, in the opinion of the Surety Bond Issuer,
in conformity with the Servicing Standards; (d) if, with respect to any
Distribution Date, the average of the Net Credit Loss Ratio for the three
preceding calendar months exceeds 3.5%; (e) the Servicer shall enter into any
merger, consolidation or other corporate transaction pursuant to which the debt
of the surviving entity (or if such debt is not rated, the debt of its ultimate
parent) is rated below investment grade by either Rating Agency; (f) NationsBank
Corporation ceases to maintain a majority ownership interest in NationsCredit
Corporation and the debt of the new holder of the majority ownership interest in
NationsCredit Corporation is rated below investment grade by either Rating
Agency; (g) NationsCredit Corporation shall enter into any merger, consolidation
or other corporate transaction pursuant to which the debt of the surviving
entity (or if such debt is not rated, the debt of its ultimate parent) is rated
below investment grade by either Rating Agency; or (h) NationsCredit Corporation
ceases to maintain a direct or indirect majority ownership interest in the
Servicer and the debt of the new holder of the majority ownership interest in
the Servicer is rated below investment grade by either Rating Agency.
"Net Credit Loss Ratio" means, for any Collection Period, an amount
expressed as an annualized percentage equal to (i) the aggregate gross losses
with respect to the Receivables recognized in such Collection Period, as
determined in accordance with the Servicer's normal practices, less any
recoveries received during such Collection Period, divided by (ii) the average
of the Pool Balances as of the last day of the prior Collection Period and as of
the last day of such Collection Period.
"Servicing Standards" means, at any time, the quality of the Servicer's (or
in the event that a subservicer performs servicing operations on behalf of the
Servicer, such subservicer's) performance with respect to (i) compliance with
the terms and conditions of the Agreement, and (ii) adequacy, measured in
accordance with industry standards and current and historical standards of the
Servicer (or such subservicer) in respect of all receivables serviced by the
Servicer (or such subservicer), regardless of whether such receivables are owned
by the Servicer (or such subservicer), of the Servicer's (or such subservicer's)
servicing of the Receivables. The Surety Bond Issuer may audit the Servicer's
books, records and procedures to determine the Servicer's compliance with the
Agreement.
WAIVER OF PAST DEFAULTS
So long as no Surety Bond Issuer Default has occurred and is continuing,
the Surety Bond Issuer may, on behalf of all the Certificateholders, waive any
default by the Servicer in the performance of its obligations under the
Agreement and its consequences, except a default in making any required deposits
to or payments to the respective Certificate Account in accordance with the
Agreement. No such waiver shall impair such Certificateholders' rights or the
Surety Bond Issuer's rights with respect to subsequent defaults.
AMENDMENT
The Agreement may be amended by the Depositor, the Servicer and the
Trustee, without the consent of the Certificateholders or the Surety Bond
Issuer, to cure any ambiguity, correct or supplement any provision therein,
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or to add any other provisions with respect to matters or questions arising
under the Agreement which are not inconsistent with the provisions of the
Agreement; provided that such action will not, in the opinion of counsel
satisfactory to the Trustee, materially and adversely affect the interest of any
Certificateholder or the Surety Bond Issuer. The Agreement may also be amended
by the Depositor, the Servicer and the Trustee with the consent of the Surety
Bond Issuer and Certificateholders evidencing not less than 51% of the
Certificate Balance as of the most recent Record Date for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of the Agreement or of modifying in any manner the rights of the
Certificateholders or the Surety Bond Issuer; provided, however, that no such
amendment may (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on Receivables or distributions
that are required to be made on any Certificate or (ii) reduce the aforesaid
percentage required to consent to any such amendment, in each case without the
consent of the holders of all Certificates then outstanding.
LIST OF CERTIFICATEHOLDERS
Upon written request of the Servicer or the Surety Bond Issuer, the Trustee
will provide to the Servicer or the Surety Bond Issuer within 15 days after
receipt of such request, a list of the names and addresses of all
Certificateholders of record of the Trust as of the most recent Record Date.
Upon written request by three or more Certificateholders or by Holders of
Certificates evidencing not less than 25% of the Certificate Balance as of the
most recent Record Date, and upon compliance by such Certificateholders with
certain other provisions of the Agreement, the Trustee will afford such
Certificateholders access during business hours to the current list of
Certificateholders for purposes of communicating with other Certificateholders
with respect to their rights under the Agreement.
The Agreement will not provide for the holding of any annual or other
meetings of Certificateholders. TERMINATION
The respective obligations of the Servicer, the Depositor, the Trustee and
the Trust created pursuant to the Agreement will terminate upon (i) the payment
in full or other liquidation of the last Receivable and the disposition of any
amounts received upon liquidation of any remaining Receivables or (ii) the
payment to the Certificateholders of all amounts required to be paid to them
pursuant to the Agreement and the payment to the Surety Bond Issuer of all
amounts required to be paid to it pursuant to the Agreement and the
Reimbursement Agreement or (iii) disposition of all property held by the Trust.
In order to avoid excessive administrative expense, the Servicer or its
successor may purchase all the Receivables in the Trust as of any Record Date on
which the Pool Balance shall decline to 5% or less of the Initial Pool Balance,
at a purchase price equal to the aggregate Purchase Amount of the Receivables,
as of the beginning of the Collection Period related to such Record Date plus
the appraised value of any other property held by the Trust less the amount of
all collections on the Receivables received by the Servicer during such
Collection Period; provided however that the Servicer may not make any such
purchase on any date on which there are outstanding amounts under the
Reimbursement Agreement and the Agreement, which have not been paid to the
Surety Bond Issuer. Exercise of such right will effect early retirement of the
Certificates. The Trustee will give written notice of termination to each
Certificateholder of record of the Trust. The final distribution to any
Certificateholder will be made only upon surrender and cancellation of such
Holder's Certificate at any office or agency of the Trustee specified in the
notice of termination. Any funds remaining in the Trust, after the Trustee has
taken certain measures to locate a Certificateholder and such measures have
failed, will be distributed to the United Way of Metropolitan Dallas.
DUTIES OF THE TRUSTEE
The Trustee makes no representations as to the validity or sufficiency of
the Agreement, the Certificates (other than the authentication of the
Certificates), or any Receivables or related documents, and is not accountable
for the use or application by the Depositor or the Servicer of any funds paid to
the Depositor or the Servicer in respect of the Certificates or the Receivables,
or the investment of any monies by the Servicer before such monies are deposited
into a Certificate Account. The Trustee has not independently verified the
Receivables. If no Event of Default has occurred, the Trustee is required to
perform only those duties specifically required of it under the Agreement.
Generally, those duties are limited to the receipt of the various certificates,
reports or other instruments required to be furnished to the Trustee under the
Agreement, in which case it is only required to
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examine them to determine whether they conform to the requirements of the
Agreement. The Trustee shall not be charged with knowledge of a failure by the
Servicer to perform its duties under the Agreement which failure constitutes an
Event of Default unless the Trustee obtains actual knowledge of such failure as
specified in the Agreement.
The Trustee is under no obligation to exercise any of the rights or powers
vested in it by the Agreement or to make any investigation of matters arising
thereunder or to institute, conduct or defend any litigation thereunder or in
relation thereto at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby. No Certificateholder will have any
right under the Agreement to institute any proceeding with respect to the
Agreement, unless such holder previously has given to the Trustee written notice
of default and unless the Certificateholders evidencing not less than 25% of the
Certificate Balance as of the most recent Record Date have made written request
upon the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity and the Trustee
for 30 days has neglected or refused to institute any such proceedings.
THE TRUSTEE
Bankers Trust Company is the Trustee under the Agreement. The Trustee, in
its individual capacity or otherwise, may hold Certificates in its own name or
as pledgee. For the purpose of meeting the legal requirements of certain
jurisdictions, the Servicer and the Trustee acting jointly (or in some
instances, the Trustee acting alone) shall have the power to appoint co-trustees
or separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by the Agreement shall be conferred or imposed upon the Trustee
and such separate trustee or co-trustee jointly, or, in any jurisdiction in
which the Trustee shall be incompetent or unqualified to perform certain acts,
singly upon such separate trustee or co-trustee who shall exercise and perform
such rights, powers, duties and obligations solely at the direction of the
Trustee.
The Trustee may resign at any time. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement, becomes legally unable to act, or becomes insolvent. In any such
circumstances, the Servicer will be obligated to appoint a successor trustee.
Any such successor must be an eligible Servicer or an affiliate of an eligible
Servicer, which eligible Servicer is willing to act as Servicer upon a Servicer
Transfer, and such successor or affiliate must have a net worth of at least
$50,000,000 and its regular business must include the servicing of marine retail
installment sale contracts. Any resignation or removal of the Trustee and
appointment of a successor trustee does not become effective until acceptance of
the appointment by the successor trustee and with the prior written consent of
the Surety Bond Issuer.
The Agreement will provide that the Servicer will pay the Trustee's fees.
The Agreement will further provide that the Trustee will be entitled to
indemnification by the Depositor and the Servicer for, and will be held harmless
against, any loss, liability, fee, disbursement or expense incurred by the
Trustee not resulting from the Trustee's own willful misfeasance, bad faith or
negligence (other than by reason of a breach of any of its representations or
warranties set forth in the Agreement). The Agreement will further provide that
the Depositor and the Servicer will indemnify the Trustee for certain taxes that
may be asserted in connection with the transaction.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
LACK OF FIRST PRIORITY SECURITY INTERESTS IN THE RECEIVABLES
The Receivables are "chattel paper" as defined in the UCC in effect in the
States of Texas and Georgia. Pursuant to the UCC, for most purposes, a sale of
chattel paper is treated in a manner similar to a transaction creating a
security interest in chattel paper. The Servicer will cause the filing of an
appropriate UCC-1 financing statement to be made with the appropriate
governmental authorities in the States of Texas and Georgia and other
appropriate jurisdictions to give notice of the Trust's purchase of the
Receivables. Certain liens, including a lien arising prior in time to the
recording and endorsement of a preferred mortgage on a vessel, landlords'
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warehouses' and materialmens' liens and certain tax liens, may, as a matter of
law, have priority over perfected, first priority liens. In addition, if another
person purchased any of the Receivables for new value without knowledge of the
Trust's security interest and acquired possession of the Receivables in the
ordinary course of such person's business, the Purchaser's interest would be
superior to the interest of the Trust.
Pursuant to the Agreement, the Servicer will have custody of the
Receivables following the sale of the Receivables to the Trust. The original
Receivables will not be physically marked to indicate that such Receivables have
been sold to the Trust. If, through inadvertence or otherwise, another party
purchased (including the taking of a security interest in) the Receivables for
new value in the ordinary course of its business, without actual knowledge of
the Trust's interest and took possession of the Receivables, the purchaser may
acquire an interest in the Receivables superior to the interest of the Trust.
The Servicer will, however, indicate in its computer records that the
Receivables have been sold and assigned to the Trust.
Under the Agreement, the Servicer will be obligated from time to time to
take such actions as are necessary to protect and perfect the Trust's interest
in the Receivables and their proceeds. See "Risk Factors -- Lack of First
Priority Security Interests in the Receivables".
LACK OF PERFECTED SECURITY INTERESTS IN BOATS
The Receivables were originated by Dealers. NationsCredit Commercial
acquired the Receivables directly or indirectly from Dealers or finance
subsidiaries of manufacturers and directly or indirectly sold the Receivables to
the Trust. NationsCredit Commercial is the assignee and secured party under the
Receivables. NationsCredit Commercial takes actions as it deems prudent under
the laws of the state in which the Boat is located to perfect NationsCredit
Commercial's security interest in the Boat. In connection with the sale of the
Receivables to the Trust, NationsCredit Commercial's rights as secured party
have been assigned to the Trust. Because NationsCredit Commercial continues to
service the Receivables, the Obligors on the Receivables are not notified of the
purchase of the Receivables by the Trust and no action is taken to record the
transfer of the security interests from NationsCredit Commercial to the Trust.
Generally, security interests in boats may be perfected in one of three
ways: in "title" states, a security interest is perfected by notation of the
secured party's lien on the certificate of title issued by an applicable state
motor vehicle department or other appropriate state agency; in other states, a
security interest may be perfected by filing a UCC-1 financing statement,
however, a purchase money lien in consumer goods is perfected without any filing
requirement and if a boat is required to be documented under Federal law, a
preferred mortgage may be obtained under the Ship Mortgage Act by filing the
mortgage with the Coast Guard, which is the exclusive method for perfectly
securing interests in documented boats. The Servicer will represent and warrant
in the Agreement that none of the Boats are required to be documented under the
Ship Mortgage Act.
NationsCredit Commercial takes such measures as it deems prudent to perfect
its security interest in each Boat under the laws of the state in which the Boat
is registered. Typically, a Dealer will make proper and prompt application to
any applicable state motor vehicle department or other appropriate state agency
to have a notation of the lien made on the certificate of title of each Boat at
the time of sale if the Boat is subject to a title statute. When a UCC-1
financing statement is filed, the Dealer is required to obtain the necessary
signature on the UCC-1 financing statement to allow filing by NationsCredit
Commercial. Where under state law a filing or other action is required to
perfect a security interest and if NationsCredit Commercial, because of clerical
error or otherwise, has failed to take such action with respect to a Boat,
NationsCredit Commercial will not have a perfected security interest in the Boat
under such law and its security interest may be subordinate to the interest of,
among others, subsequent purchasers of the Boat, holders of perfected security
interests and the bankruptcy trustee of the Obligor. NationsCredit Commercial's
state law security interest may also be subordinate to such third parties in the
event of fraud or forgery by the Obligor or administrative error by state
recording officials. In addition, under certain certificate of title statutes
NationsCredit Commercial must perfect its security interest in boat motors
otherwise subject to certificate of title statutes under the UCC. NationsCredit
Commercial as a general matter does not separately perfect its interest in such
boat motors under the UCC and therefore NationsCredit Commercial does not
generally have a perfected security interest in motors used on Boats where the
perfection of a security interest in the Boats themselves are otherwise
determined under certificate of title statutes.
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Approximately 70.58% of the Initial Pool Balance ($128,304,277.06) relates to
Receivables which are billed to Obligors in certificate of title states and
approximately 29.39% of the Initial Pool Balance ($53,432,375.92) relates to
Receivables which are billed to Obligors in UCC states. Boats are not
necessarily registered in the states where Obligors are billed.
Security interests perfected under state law may have to be refiled if the
Obligor moves to a state other than the state in which a security interest is
originally perfected and in addition if the security interest is perfected under
the UCC, a new filing must be made under the UCC in order to continue the
perfected security interest.
If the security interest in the Boat is perfected under a title statute and
an Obligor moves to a state other than the state in which the Boat is
registered, under the laws of most title states the perfection of the security
interest in the Boat would continue for a brief period of time after such
relocation. A majority of states issuing certificates of title on boats require
surrender of a certificate of title to re-register a boat. In those states that
also provide for possession of the certificate of title by the secured party,
NationsCredit Commercial must surrender possession of the certificate of title
for the Boat to be re-registered. Some states do not give the secured party
possession of the certificate of title, but indicate the secured party on the
certificate of title and provide notice to such secured party of surrender of
the certificate of title by another person. If either NationsCredit Commercial
is in possession of a certificate of title that must be surrendered to
re-register the Boat or NationsCredit Commercial receives notice of any
surrender of the certificate of title by another person, NationsCredit
Commercial would then have the opportunity to continue the perfection of the
security interest in the Boat in the state of registration. If the Obligor moves
to a state which does not require surrender of a certificate of title for
re-registration of a Boat, re-registration could defeat perfection. In the
ordinary course of servicing its portfolio of marine contracts, NationsCredit
Commercial generally takes steps to effect such perfection upon receipt of
notice of surrender or information from the Obligor as to relocation in those
states that require any action to be taken. Similarly, when an Obligor sells a
Boat, under the laws of many states, the purchaser cannot re-register the Boat
unless NationsCredit Commercial surrenders possession of the certificate of
title and accordingly NationsCredit Commercial will have an opportunity to
require satisfaction of the related Receivable before release of the lien.
If NationsCredit Commercial has perfected NationsCredit Commercial's
security interest by the filing of a UCC-1 financing statement, or the Obligor
moves from a title state to a non-title state, NationsCredit Commercial files a
UCC-1 financing statement in the new state of the Obligor as soon as possible
after receiving notice of the Obligor's change of residence. UCC-1 financing
statements expire after five years. When the term of a loan exceeds five years,
the filing must be continued in order to maintain NationsCredit Commercial's
perfected security interest. NationsCredit Commercial takes steps to effect such
continuation. In the event that an Obligor moves to a state other than the state
in which the UCC-1 financing statement is filed or in certain states to a
different county in such state, under the laws of most states the perfection of
the security interest in the Boat would continue for four months after such
relocation, unless the perfection in the original jurisdiction would have
expired earlier. A new financing statement must be filed in the state of
relocation or, if such state is a title state, a notation on the certificate of
title must be made in order to continue NationsCredit Commercial's security
interest. NationsCredit Commercial generally takes steps to effect such
re-perfection upon notification of an address change. Generally, in both title
states and in non-title states, NationsCredit Commercial will not re-perfect a
state law security interest which has expired or where the Obligor has moved if
the Receivable has a small balance, a short remaining term and the Obligor has a
good payment record.
Under the laws of many states, liens for storage and repairs performed on a
boat and certain tax liens take priority even over a perfected state law
security interest. The Servicer will represent and warrant in the Agreement with
respect to the Receivables sold to the Trust that, as of the Closing Date, to
the best of the Servicer's knowledge, no such liens or claims are pending or
threatened with respect to a Boat which may be or become prior to or equal with
the lien of the related Receivable. In the event of a material adverse breach of
such warranty, the only recourse of the Trust would be to require the Servicer
to repurchase the Receivable secured by such Boat.
Due to the administrative burden and expense (estimated by NationsCredit
Commercial to be $400,000, excluding associated labor costs) of (i) endorsing
the certificate of title of each Boat to reflect the Trust's interest therein
and delivering each such certificate of title to the Trustee for filing (and the
payment of related filing fees),
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in the case of Boats licensed in states where security interests in boats are
subject to certificate of title statutes; and (ii) filing amendments to UCC-1
financing statements relating to each Boat (and the payment of related filing
fees) to reflect the Trust's interest therein, in the case of Boats licensed in
states where security interests in boats are perfected by filing a UCC-1
financing statement, none of such certificates of title will be endorsed,
delivered and filed, or UCC-1 financing statements amended. In the absence of
such procedures, the Trust may not have a perfected security interest in the
Boats licensed in certificate of title or UCC states, but the failure to make
such endorsements, filings or recordations will not affect the validity of the
original security interest as against the Obligor under a Receivable in UCC
states.
NationsCredit Commercial's security interests in the Boats will be assigned
to the Trust. However, because of the administrative burden and expense, the
certificates of title relating to the Boats will not be endorsed to reflect the
Trust's interest therein, nor will any certificates of title in NationsCredit
Commercial's possession be delivered to the Trust. Accordingly, NationsCredit
Commercial will continue to be named as the secured party on the certificates of
title relating to the Boats registered in "title" states. In most such states,
such an assignment would be an effective conveyance of such a security interest
and the new secured party would succeed to NationsCredit Commercial's rights as
the secured party. In the absence of fraud or forgery by the Obligor or
administrative error by Federal, state or local recording officials, the
notation of the lien of NationsCredit Commercial's on the certificate of title
will be sufficient to protect the Trust against the rights of subsequent
purchasers of a Boat or subsequent lenders who take a security interest in the
Boat. There exists a risk, however, in not identifying the Trust as the new
secured party on the certificate of title, that the Trust may in some states
(such as California) be subordinate to claims of creditors or the receiver of
NationsCredit Commercial in the event of the insolvency of NationsCredit
Commercial and that, through fraud or negligence, the security interest of such
Trust could be released by NationsCredit Commercial as security holder of
record.
The Servicer will represent and warrant in the Agreement with respect to
the Trust that there shall exist a valid, subsisting and enforceable first
priority perfected security interest in each Boat in favor of the Trust, as of
the Closing Date, and that such security interest will be assigned to the Trust.
In the event of a material adverse breach of such warranty, the only recourse of
the Trust against the Servicer would be to require the Servicer to repurchase
the Receivable secured by the Boat involved. See "The Certificates -- Sale and
Assignment of Receivables".
ENFORCEMENT OF SECURITY INTEREST IN BOATS
In the event that required payments under the Surety Bond are not made, the
Servicer on behalf of such Trust may take action to enforce the security
interest in Boats securing Defaulted Receivables by repossession and resale of
the Boats. Under the UCC and consumer protection laws applicable in most states,
a creditor can, without prior notice to the debtor, repossess a boat securing a
defaulted contract by the obligor's voluntary surrender, by "self-help"
repossession that does not involve a breach of the peace and by judicial
process. However, some jurisdictions require that the obligor be notified of the
default and be given a time period within which the obligor may cure the default
prior to repossession. Generally, this right to cure may be exercised a limited
number of times in any one-year period.
The UCC and other state laws place restrictions on repossession sales,
including requirements that the secured party provide the obligor with
reasonable notice of the date, time and place of any public sale and/or the date
after which any private sale of the collateral may be held and that any such
sale be conducted in a commercially reasonable manner.
The obligor has the right to redeem the collateral prior to actual sale by
paying the secured party the delinquent payments of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus in some jurisdictions, reasonable
attorneys' fees, or in some states, by payment of the unpaid balance.
In the event of such a repossession and resale of a Boat, the Servicer, on
behalf of the Trust, would be entitled to be paid the full amount of the
Obligor's indebtedness out of the sale proceeds before such proceeds could be
applied to the payment of the claims of the holders of junior security interests
in the Boats, unsecured creditors, or thereafter, to the debtor.
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Under the UCC and laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from an obligor for any deficiency on repossession
and resale of the boat securing the unpaid balance of such obligor's contract.
However, some states may impose prohibitions or limitations on deficiency
judgments. If a deficiency judgment were granted, the judgment would be a
personal judgment against the obligor for the shortfall, and a defaulting
obligor may have very little capital or sources of income available following
repossession. Therefore, in many cases it may not be useful to seek a deficiency
judgment or, if one is obtained, it may be settled at a significant discount.
Certain statutory provisions, including Federal and state bankruptcy and
insolvency laws, may also limit the ability of the Servicer to repossess and
resell collateral or obtain a deficiency judgment. Certain other factors,
including the value of a repossessed Boat, may limit the amount realized on the
sale of the collateral to less than the amount due on a Receivable.
CONSUMER PROTECTION LAWS
Numerous Federal and state consumer protection laws and related regulations
impose requirements upon creditors and servicers involved in consumer financing
applicable to the origination and servicing of the Receivables. These laws and
regulations include the Truth-in-Lending Act, the Equal Credit Opportunity Act,
the Federal Trade Commission Act, the Fair Credit Billing Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Board's Regulations B and Z, the Federal Trade
Commission Credit Practices Rule, state unfair and deceptive trade practice
laws, state adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code and state motor vehicle retail installment sales acts, retail
installment sales acts, and other similar laws. Also, state laws may impose
finance charge ceilings and other restrictions on consumer credit transactions
and require contract disclosures in addition to those required under Federal
law. These requirements impose specific statutory liabilities upon creditors who
fail to comply with their provisions. In some cases, this liability could affect
the ability of an assignee such as the Trustee to enforce consumer finance
contracts such as the Receivables.
The so-called "Holder-in-Due-Course-Rule" of the Federal Trade Commission
(the "FTC Rule"), has the effect of subjecting any assignee of the seller in a
consumer credit transaction to all claims and defenses which the obligor in the
credit sale transaction could assert against the seller of the goods. Liability
under the FTC Rule is limited to the amounts paid by the obligor under the
contract, and the holder of the contract may also be unable to collect any
balance remaining due thereunder from the obligor. The FTC Rule is generally
duplicated by the Uniform Consumer Credit Code, other state statutes or the
common law in certain states. Most of the Receivables will be subject to the
requirements of the FTC Rule. Accordingly, NationsCredit Commercial, as assignee
of the Dealers, and the Trust, as indirect assignee of NationsCredit Commercial
and as holder of the Receivables, will be subject to any claims or defenses that
the Obligor who purchased the related financed Boat may assert against the
Dealer who sold the financed Boat.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections of the 14th Amendment to the Constitution of the United States.
Courts have generally either upheld the notice provisions of the UCC and related
laws as reasonable or have found that the creditor's repossession and resale do
not involve sufficient state action to afford constitutional protection to
consumers.
NationsCredit Commercial will represent and warrant that each Receivable
complies with all requirements of law in all material respects. Accordingly, if
an Obligor has a claim against the Trustee for violation of any law and such
claim materially and adversely affects the Trustee's interest in a Receivable,
such violation would constitute a breach of warranty under the related Agreement
and would create an obligation of NationsCredit Commercial to repurchase the
Receivable unless the breach were cured. In the event of such a material adverse
breach of warranty, the only recourse of a Trust against NationsCredit
Commercial would be to require
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NationsCredit Commercial to repurchase each Receivable involved. See "The
Certificates -- Sale and Assignment of Receivables".
OTHER MATTERS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a creditor to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the Federal bankruptcy law, a court may prevent a
creditor from repossessing a boat or recreational vehicle and, as a part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the market
value of the boat or recreational vehicle at the time of bankruptcy (as
determined by the court), leaving the party providing financing as a general
unsecured creditor for the remainder of the indebtedness. A bankruptcy court may
also reduce the monthly payments due under an installment sale contract or
change the rate of interest and time of repayment of the indebtedness.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material Federal income tax consequences
of the purchase, ownership, and disposition of Certificates. This summary is
based upon laws, regulations, rulings, and decisions currently in effect, all of
which are subject to change. The discussion does not deal with all Federal tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. In addition, this summary is generally limited to
investors who will hold the Certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code"). Prospective investors should note
that no rulings have been or will be sought from the Internal Revenue Service
(the "IRS") with respect to any of the Federal income tax consequences discussed
below, and no assurance can be given that the IRS will not take contrary
positions. However, Special Federal Tax Counsel (as defined below) is of the
opinion that the statements in this Prospectus under the headings "Prospectus
Summary -- Tax Status" and "Certain Federal Income Tax Consequences," accurately
describe the material federal income tax consequences generally applicable to
investors.
BECAUSE TAX CONSEQUENCES MAY VARY BASED ON THE STATUS OR TAX ATTRIBUTES OF
THE CERTIFICATE OWNER, INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS TO
DETERMINE THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP, AND DISPOSITION OF THE CERTIFICATES RESULTING FROM
INDIVIDUAL CHARACTERISTICS OR CIRCUMSTANCES.
TAX STATUS OF THE TRUST; SCOPE OF TAX OPINION
In the opinion of Stroock & Stroock & Lavan LLP, special federal tax
counsel to the Depositor ("Special Federal Tax Counsel"), the Trust will not be
classified as an association taxable as a corporation for Federal income tax
purposes, but will be classified as a grantor trust, and each Certificate Owner
will be subject to Federal income taxation as if it owned directly its interest
in each asset owned by the Trust and paid directly its share of reasonable
expenses paid by the Trust.
TREATMENT OF CERTIFICATE OWNERS' INTEREST IN TRUST ASSETS
Each Certificate Owner could be considered to own either (i) an undivided
interest in a single debt obligation held by the Trust and having a principal
amount equal to the total stated principal amount of the Receivables and an
interest rate equal to the Pass-Through Rate, or (ii) an interest in each of the
Receivables and in the other assets of the Trust. The Agreement will express the
intent of the Depositor to cause the Trust to purchase the Receivables (other
than the Retained Yield (as defined below)) and the Depositor, the
Certificateholders, and each Certificate Owner, by accepting a beneficial
interest in a Certificate, will agree to treat the Certificates as ownership
interests in the Receivables.
Treatment as Debt Obligation. If a Certificate Owner were considered to
own an undivided interest in a single debt obligation, rather than reporting its
share of the interest accrued on each Receivable it would, in
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general, be required to include in income interest accrued or received on the
principal amount of its Certificates at the Pass-Through Rate in accordance with
its usual method of accounting.
The Certificates would be subject to the original issue discount ("OID")
rules, generally in the manner discussed below. However, in determining whether
such OID is de minimis, the weighted average life of the Certificates would be
determined using a reasonable assumption regarding anticipated prepayments (a
"Prepayment Assumption"). OID includible in income for any accrual period
(generally, the period between payment dates) would generally be calculated
using a Prepayment Assumption and an anticipated yield established as of the
date of initial sale of the Certificates, and would increase or decrease to
reflect prepayments at a faster or slower rate than anticipated. The
Certificates would also be subject to the market discount provisions of the
Code, to the extent that a Certificate Owner purchased such Certificates at a
discount from the initial issue price (as adjusted to reflect prior accruals of
original issue discount).
Income on Receivables. The remainder of the discussion herein assumes and
Special Federal Tax Counsel is of the opinion that a Certificate Owner will be
treated as owning an interest in each Receivable (and the proceeds thereof).
For Federal income tax purposes, the Depositor will be treated as having
retained a fixed portion of the interest due on each Receivable equal to the
difference between (x) the APR of the Receivable and (y) the sum of the
Pass-Through Rate and the Servicing Fee (the "Retained Yield"). The Retained
Yield will be treated as "stripped coupons" within the meaning of section 1286
of the Code, and the Receivables will be treated as "stripped bonds".
Accordingly, each Certificate Owner will be treated as owning its pro rata
percentage interest of the principal payable on each Receivable (the "Receivable
Principal") and its pro rata percentage interest of the interest payable on each
Receivable minus the Retained Yield (the "Receivable Interest", and as to each
Receivable, the respective Receivable Principal and Receivable Interest referred
to herein as a "Stripped Receivable"). Accordingly, each Certificate Owner will
be treated as owning its pro rata percentage interest in the principal of, and
interest payable on, each Stripped Receivable (minus the Retained Yield).
Each Certificate Owner will be required to report on its Federal income tax
return its share of the gross income of the Trust, including interest and
certain other charges accrued on the Stripped Receivables, original issue
discount, investment earnings on amounts held pending distribution, and any gain
upon collection or disposition of the Stripped Receivables. Such income (other
than original issue discount) would be includible in income in accordance with a
Certificate Owner's usual method of accounting. Accordingly, interest would be
includible in a Certificate Owner's gross income at the time it accrues on the
Stripped Receivables, or, in the case of Certificate Owners who are cash basis
taxpayers, when received by the Servicer on behalf of Certificate Owners.
Because (i) interest accrues on the Stripped Receivables over differing monthly
periods and is paid in arrears and (ii) interest collected on a Stripped
Receivable is generally paid to Certificate Owners in the following month, the
amount of interest accruing to or received by the Servicer on behalf of a
Certificate Owner during any month will not equal the interest distributed in
that month. Any amounts received by a Certificate Owner from the Surety Bond or
the Reserve Account will be treated, for Federal income tax purposes, as having
the same characteristics as the payments they replace.
A Certificate Owner will be entitled to deduct, consistent with its method
of accounting, its pro rata share of reasonable servicing fees and other fees
paid or incurred by the Trust as provided in Section 162 or 212 of the Code. If
a Certificate Owner is an individual, estate or trust, the deduction for such
holder's share of such fees will be allowed only to the extent that all of such
holder's miscellaneous itemized deductions, including such holder's share of
such fees, exceed 2% of such holder's adjusted gross income. In addition, in the
case of Certificate Owners who are individuals, certain otherwise allowable
itemized deductions will be reduced, but not by more than 80%, by an amount
equal to 3% of such holder's adjusted gross income in excess of a statutorily
defined threshold. The Servicer will not report to Certificate Owners the amount
of income or deductions attributable to interest earned on collections (which is
includible in gross income, but deduction of which is subject to the foregoing
limitations) and, accordingly, such a holder will not have sufficient
information from the report itself to accurately reflect the holder's net
taxable income.
For administrative convenience, the Servicer intends to report information
with respect to the Certificates on an aggregate basis (as though all of the
Stripped Receivables were a single obligation), rather than on an asset-by-
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asset basis. The amount and, in some instances, character, of the income
reported to a Certificate Owner may differ under this method for a particular
period from that which would be reported if income were reported on a precise
asset-by-asset basis. Accordingly, the IRS could require that a Certificate
Owner calculate its income either (i) on an asset-by-asset basis, accounting
separately for each Receivable or (ii) aggregating all Stripped Receivables
under the aggregation rule described below. See Original Issue Discount.
The remainder of the disclosure generally describes the Code provisions
governing reporting of income on the Stripped Receivables on a separate basis.
DISCOUNT AND PREMIUM
In determining whether a Certificate Owner has purchased a Receivable with
OID or market discount, a portion of the purchase price of a Certificate should
be allocated to the Certificate Owner's undivided interest in accrued but unpaid
interest and to amounts collected at the time of purchase but not distributed.
As a result, the portion of the purchase price allocable to a Certificate
Owner's undivided interest in the Stripped Receivables (the "Purchase Price")
will be decreased and the potential OID on the Receivables could be increased.
Original Issue Discount. Because the Stripped Receivables represent
stripped bonds, Stripped Receivables will be subject to the OID rules of the
Code. Under Treasury Regulations issued under Section 1286 of the Code (the
"Section 1286 Regulations"), it appears that the portion of the interest on each
Stripped Receivable payable to the Certificate Owners may be treated as
"qualified stated interest". As a result, the amount of OID on a Stripped
Receivable (or Stripped Receivables) will equal the amount by which the Purchase
Price is less than the portion of the remaining principal balance of the
Stripped Receivable (or Stripped Receivables) allocable to the interest
acquired.
The Underwriters will calculate OID, if any, on all of the Stripped
Receivables on an aggregate basis and without the use of a prepayment
assumption. Regulations issued under the OID provisions of the Code (the "OID
Regulations"), suggest that all payments on each Stripped Receivable allocable
to the Certificates may be aggregated in determining whether each Stripped
Receivable will be treated as having OID. In addition, it is not clear whether
use of a prepayment assumption is required in computing OID. If the Servicer
were to require that OID be computed on a Stripped Receivable-by-Stripped
Receivable basis, or that a prepayment assumption be used, the character and
timing of a Certificate Owner's income could be adversely affected. Because
under the stripped bond rules, each sale of a Certificate results in a
recalculation of OID, a Certificate Owner will not be subject to the market
discount provisions of the Code with respect to Stripped Receivables.
The tax treatment of a Stripped Receivable (or the Stripped Receivables in
the aggregate) will depend upon whether the amount of OID on the Stripped
Receivable or Stripped Receivables in the aggregate is less than a statutorily
defined de minimis amount. In general, under the Section 1286 Regulations the
amount of OID on a Stripped Receivable (or Receivables in the aggregate) will be
de minimis if it is less than 1/4 of one percent for each full year of weighted
average maturity remaining after the purchase date until the maturity of the
Stripped Receivable (or Receivables in the aggregate) (although it is not clear
whether expected prepayments are taken into account). If the amount of OID is de
minimis under this rule, a Stripped Receivable (or Receivables in the aggregate)
would not be treated as having OID. The actual amount of discount on a Stripped
Receivable would be includible in income as principal payments are received on
the Stripped Receivable, in the proportion that each principal payment bears to
the total principal amount of the Stripped Receivable.
If the OID on a Stripped Receivable (or Receivables in the aggregate) is
not treated as being de minimis, in addition to the amounts described above, a
Certificate Owner will be required to include in income any OID as it accrues on
a daily basis, regardless of when cash payments are received, using a method
reflecting a constant yield to maturity on the Stripped Receivable (or
Receivables in the aggregate). Accrued OID would increase a Certificate Owner's
tax basis in the Certificate (and the applicable Stripped Receivables).
Distributions of principal and other items attributable to accrued OID (other
than payments of interest on the Stripped Receivables at the sum of the
Pass-Through Rate and the Servicing Fee) would reduce a Certificate Owner's tax
basis. Application of the OID rules, particularly if a prepayment assumption is
required and the Stripped Receivables are not aggregated, would be complex and
could significantly affect the timing of inclusion of income on a Certificate.
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The Underwriters intend to account for OID, if any, reportable by
Certificateholders by reference to the price paid for a Certificate by an
initial purchaser, although the amount of OID will differ for subsequent
purchasers. Such subsequent purchasers should consult their tax advisors
regarding the proper calculation of OID on the interest in the Stripped
Receivables represented by the Certificates.
Premium. In the event that a Stripped Receivable is treated as purchased
at a premium (i.e., its Purchase Price exceeds the portion of the remaining
principal balance of such Receivable allocable to the Certificate Owner), such
premium will be amortizable by the Certificate Owner as an offset to interest
income (with a corresponding reduction in the Certificate Owner's basis) under a
constant yield method over the term of the Stripped Receivable if an election
under Section 171 of the Code is made with respect to the interests in the
Stripped Receivables represented by the Certificates or was previously in
effect. Any such election will also apply to all debt instruments held by the
Certificate Owner during the year in which the election is made and all debt
instruments acquired thereafter.
RULE OF 78'S RECEIVABLES
The annual statement regularly furnished to Certificateholders for Federal
income tax purposes will include information based on the actuarial method of
accounting for interest and principal on certain of the Stripped Receivables,
and for a portion of the amount of the fees paid to the Servicer and others.
Certificate Owners should generally be permitted to account for interest on such
Stripped Receivables using the actuarial method. However, these Stripped
Receivables provide that, upon a prepayment in full, the amount payable by the
Obligor will be determined under the Rule of 78's (the "Rule of 78's
Receivables"). Prospective investors should consult their tax advisors as to
whether they may be required or permitted to use the Rule of 78's method to
account for interest on the Rule of 78's Receivables. A Certificateholder will
be furnished information for Federal income tax purposes enabling him to report
interest on the Stripped Receivables under the Rule of 78's method of accounting
only upon written request to the Trustee, and payment of the actual costs of
producing the same.
If a Rule of 78's Receivable is prepaid, any amount received by the Trust
upon prepayment in excess of the account balance using the actuarial method
would constitute income to a Certificate Owner who had reported income with
respect to such Rule of 78's Receivable on the actuarial method, and an amount
equal to such excess will be paid to the Servicer and will be deductible only to
the extent described above.
SALE OF A CERTIFICATE
If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale and the Certificate Owner's
adjusted basis in the Stripped Receivables and any other assets held by the
Trust. A Certificate Owner's adjusted basis will equal the Certificate Owner's
cost for the Certificate, increased by any discount previously included in
income, and decreased by any deduction previously allowed for accrued premium
and by the amount of principal payments previously received on the Stripped
Receivables. Any gain or loss not attributable to accrued interest will be
capital gain or loss if the Certificate was held as a capital asset.
FOREIGN CERTIFICATE OWNERS
Interest attributable to Stripped Receivables which is payable to a foreign
Certificate Owner will generally not be subject to the 30% withholding tax
generally imposed with respect to such payments, provided that such Certificate
Owner is not engaged in a trade or business in the United States and that such
Certificate Owner fulfills certain certification requirements. Under such
certification requirements, the Certificate Owner must certify, under penalties
of perjury, that it is not a "United States person" and that it is the
beneficial owner of the Certificates, and must provide its name and address. For
this purpose, "United States person" means a citizen or resident of the United
States, a corporation, partnership, or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or an
estate or trust treated as a U.S. person under Code Section 7701.
44
<PAGE> 47
BACKUP WITHHOLDING
In general, if the Certificate Owner fails to comply with certain reporting
procedures and is not an exempt recipient under applicable provisions of the
Code, payments made on the Certificates and proceeds from the sale of
Certificates will be subject to a "backup" withholding tax of 31%.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans and certain
other retirement plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and collective investment funds and separate
accounts in which such plans, accounts or arrangements are invested that are
subject to ERISA and the Code (all of which are hereinafter referred to as a
"Plan") and on persons who are fiduciaries with respect to such Plans. Moreover,
based on the reasoning of the United States Supreme Court in John Hancock Life
Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517 (1993), an insurance
company's general account may be deemed to include assets of the Plans investing
in the general account (e.g., through the purchase of an annuity contract), and
the insurance company might be treated as a fiduciary with respect to such plans
by virtue of such investment. In accordance with ERISA's general fiduciary
standards, before investing in a Certificate, a Plan fiduciary should determine
whether such an investment is permitted under the governing Plan instruments and
is appropriate for the Plan in view of its overall investment policy and the
composition and diversification of its portfolio. Other provisions of ERISA and
the Code prohibit certain transactions involving the assets of a Plan and
persons who have certain specified relationships to the Plan ("parties in
interest" within the meaning of ERISA or "disqualified persons" within the
meaning of the Code). Thus, a Plan fiduciary considering an investment in
Certificates should also consider whether such an investment might constitute or
give rise to a prohibited transaction under ERISA or the Code.
An investment in Certificates by a Plan might result in the assets of the
Trust being deemed to constitute Plan assets, which in turn might mean that
certain aspects of such investment, including the operation of the Trust, might
be prohibited transactions under ERISA and the Code. There may also be an
improper delegation of the responsibility to manage Plan assets if Plans that
purchase the Certificates are deemed to own an interest in the underlying assets
of the Trust. Neither ERISA nor the Code defines the term "plan assets". Under
Section 2510.3-101 of the United States Department of Labor ("DOL") regulations
(the "Regulation"), a Plan's assets may include an interest in the underlying
assets of an entity (such as a trust) for certain purposes, including the
prohibited transaction provisions of ERISA and the Code, if the Plan acquires an
"equity interest" in such entity.
EXEMPTION FOR CERTIFICATES
The DOL has issued an individual exemption, Prohibited Transaction
Exemption 93-31, to NationsBank Corporation and its affiliates (the
"Exemption"). Pursuant to the Exemption a Plan may purchase, hold and transfer
the Certificates. The Exemption generally exempts from the application of the
prohibited transaction provisions of Section 406 of ERISA and the excise taxes
imposed on such prohibited transactions pursuant to Section 4975(a) and (b) of
the Code and Section 502(i) of ERISA certain transactions relating to the
initial purchase, holding and subsequent resale by Plans of certificates in
pass-through trusts that consist of certain receivables, loans and other
obligations that meet the conditions and requirements set forth in the
Exemption. The receivables covered by the Exemption include fixed rate simple
interest retail marine installment sale contracts and retail marine installment
loans such as the Receivables. The Exemption will apply to the acquisition,
holding and resale of the Certificates by a Plan, provided that specified
conditions (certain of which are described below) are met. The Depositors
believe that the Exemption will apply to the acquisition and holding of the
Certificates by a Plan and that all conditions of the Exemption other than those
within the control of the investors have been or will be met.
45
<PAGE> 48
The Exemption sets forth six general conditions that must be satisfied for
a transaction involving the acquisition of the Certificates by a Plan to be
eligible for the exemptive relief thereunder:
(1) the acquisition of the Certificates by a Plan is on terms
(including the price for the Certificates) that are at least as favorable
to the Plan as they would be in an arms'-length transaction with an
unrelated party;
(2) the rights and interests evidenced by the Certificates acquired by
a Plan are not subordinated to the rights and interests evidenced by other
certificates of the Trust;
(3) the Certificates acquired by the Plan have received a rating at
the time of such acquisition that is in one of the three highest generic
rating categories of S&P, Moody's, Duff & Phelps or Fitch Investors
Service, L.P.;
(4) the Trustee is not an affiliate of any other member of the
"Restricted Group," which consists of the Underwriter, the Depositor, the
Servicer, the Trustee, the Surety Bond Issuer and any Obligor with respect
to the Receivables included in the Trust constituting more than 5% of the
aggregate unamortized principal balance of the assets of the Trust as of
the date of initial issuance of the Certificates, and any affiliate of such
parties;
(5) the sum of all payments made to and retained by the Underwriter in
connection with the distribution or placement of the Certificates
represents not more than reasonable compensation for underwriting or
placing the Certificates. The sum of all payments made to and retained by
the Depositor pursuant to the sale of the Receivables to the Trust
represents not more than the fair market value of such Receivables. The sum
of all payments made to and retained by the Servicer represents not more
than reasonable compensation for the Servicer's services under the
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith; and
(6) the Plan investing in the Certificates must be an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Commission
under the Securities Act.
In addition the Trust must satisfy the following requirements:
(a) the corpus of the Trust must consist solely of assets of the
type which have been included in other investment pools.
(b) certificates in such other investment pools must have been
rated in one of the three highest generic rating categories of S&P,
Moody's, Duff & Phelps or Fitch Investors Service, L.P. for at least one
year prior to the Plan's acquisition of the Certificates, and
(c) certificates evidencing interests in such other investments
pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of the Certificates.
If the general conditions of the Exemption are satisfied, the Exemption may
provide relief from the restrictions imposed by Sections 406(a) and 407(a) of
ERISA as well as the excise taxes imposed by Sections 4975(a) and (b) of the
Code by reason of Sections 4975(c)(1)(A) through (D) of the Code, in connection
with the direct or indirect sale, exchange, transfer or holding of the
Certificates by a Plan. However, no exemption is provided from the restrictions
of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or
holding of a Certificate on behalf of an "Excluded Plan" by any person who has
discretionary authority or renders investment advice with respect to the assets
of such Excluded Plan. For purposes of the Certificates, an Excluded Plan is a
Plan sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide relief from the restrictions imposed by Sections 406(b)(1)
and (b)(2) and 407(a) of ERISA and the taxes imposed by Sections 4975(a) and (b)
of the Code by reason of Section 4975(c)(1)(E) of the Code in connection with
the direct or indirect sale, exchange, transfer or holding of the Certificates
in the initial issuance of the Certificates between the Depositor or Underwriter
and a Plan other than an Excluded Plan when the person who has discretionary
authority or renders investment advice with respect to the investment of Plan
assets in the Certificates is (a) an Obligor with respect to 5% or less of the
fair market value of the Receivables or (b) an affiliate of such person.
46
<PAGE> 49
The Exemption also applies to transactions in connection with the
servicing, management and operation of the Trust, provided that, in addition to
the general requirements described above, (a) such transactions are carried out
in accordance with the terms of a binding pooling and servicing agreement and
(b) the pooling and servicing agreement is provided to, or described in all
material respects in the prospectus provided to, investing Plans before their
purchase of the Certificates issued by the Trust. The Agreement is a pooling and
servicing agreement as defined in the Exemption. All transactions relating to
the servicing, management and operations of the Trust will be carried out in
accordance with the Agreement. See "The Certificates."
The Exemption also may provide relief from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA and the taxes imposed by Sections
4975(c)(1)(A) through (D) of the Code if such restrictions are deemed to
otherwise apply merely because a person is deemed to be a party in interest or a
disqualified person with respect to an investing Plan by virtue of providing
services to a Plan (or by virtue of having certain specified relationships to
such a person) solely as a result of such Plan's ownership of the Certificates.
Any Plan fiduciary considering whether to purchase a Certificate on behalf
of a Plan should consult with experienced legal counsel regarding the
applicability of the Exemption and other applicable issues and whether the
Certificates are an appropriate investment for a Plan under ERISA and the Code.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") dated May , 1997, between the Depositor and the
Underwriters, the Depositor has agreed to sell to the Underwriters, and the
Underwriters have agreed to purchase, the principal amount of the Certificates
set forth on the cover page of this Prospectus.
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Certificates offered
hereby if any Certificates are purchased. The Depositor has been advised by the
Underwriters that the Underwriters propose initially to offer the Certificates
to the public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of % of the principal amount of the Certificates. The Underwriters may
allow and such dealers may reallow a concession not in excess of % of such
principal amount. After the initial public offering, the public offering price
and such concessions may be changed.
The Underwriting Agreement provides that the Depositor will indemnify the
Underwriters against certain liabilities, including liabilities under applicable
securities laws, or contribute to payments the Underwriters may be required to
make in respect thereof.
NationsBanc Capital Markets, Inc. ("NCMI"), one of the Underwriters, is an
affiliate of the Depositor. Under Section 2720 of the National Association of
Securities Dealers Conduct Rules ("Section 2720"), when a National Association
of Securities Dealers, Inc. (the "NASD") member, such as NCMI, participates in
the distribution of an affiliated company's securities, the offering must be
conducted in accordance with the applicable provisions of Section 2720. The
Depositor is considered to be an "affiliate" (as such term is defined in Section
2720) of NCMI. The offer and sale of any Certificates by NCMI will comply with
the requirements of Section 2720 regarding the underwriting of securities of
affiliates. Pursuant to such compliance, it is contemplated that only securities
rated "investment grade" by a rating service acceptable to the NASD will be
offered hereby. In addition, such offers and sales will comply with any
restrictions as may be imposed on NCMI by the Federal Reserve Board. Under
Section 2720, no NASD member participating in offers and sales of the
Certificates may execute a transaction in the Certificates in a discretionary
account without the specific prior written approval of the member's customer.
While NCMI is an affiliate of the Depositor, NCMI is a registered
broker/dealer. Any obligations of NCMI are the sole responsibility of NCMI and
do not create any obligation or guarantee on the part of any affiliate of NCMI.
47
<PAGE> 50
EXPERTS
The financial statements of Capital Markets Assurance Corporation as of
December 31, 1996 and 1995 and for each of the years in the three-year period
ended December 31, 1996 are included herein beginning on page F-3 and have been
audited by KPMG Peat Marwick LLP, independent certified public accountants, as
set forth in their report thereon and are included in reliance upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Depositor and the Underwriters by Stroock & Stroock & Lavan LLP, Special
Counsel of the Depositor and the Underwriters. Certain legal matters relating to
the Federal tax consequences of the issuance and ownership of the Certificates
will be passed upon by Stroock & Stroock & Lavan LLP.
48
<PAGE> 51
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
accredited investor......................................... 46
APR......................................................... 13
Agreement................................................... 1
Avoided Payment............................................. 31
Boats....................................................... 3
Business Day................................................ 31
CapMAC...................................................... 5
Cede........................................................ 23
Certificate................................................. 3
Certificate(s).............................................. 1
Certificate Account......................................... 10
Certificate Balance......................................... 4
Certificate Factor.......................................... 21
Certificateholders.......................................... 1
Certificate Owner........................................... 2
Closing Date................................................ 25
Code........................................................ 41
Collateral Agent............................................ 1
Collection Period........................................... 23
Commission.................................................. 2
Cutoff Date................................................. 1
Dealer...................................................... 8
Dealer Agreements........................................... 10
Defaulted Receivable........................................ 29
Definitive Certificates..................................... 24
delinquency cure............................................ 12
Depositor................................................... 1
Depository.................................................. 23
Determination Date.......................................... 21
Direct Participants......................................... 24
disqualified persons........................................ 45
Distribution Date........................................... 1
DOL......................................................... 45
DTC......................................................... 2
Duff & Phelps............................................... 22
ERISA....................................................... 6
Events of Default........................................... 33
Exchange Act................................................ 2
Excluded Plan............................................... 46
Exemption................................................... 45
Final Order................................................. 31
Final Scheduled Distribution Date........................... 1
FTC Rule.................................................... 41
Holders..................................................... 25
Holdings.................................................... 22
Income on Receivables....................................... 42
Indirect Participants....................................... 24
Initial Pool Balance........................................ 1
Insolvency Laws............................................. 21
Insolvency Proceeding....................................... 31
Insurance Agreement......................................... 4
IRS......................................................... 41
marine contracts............................................ 10
Marine Contract Portfolio................................... 10
Monthly Interest Payment.................................... 3
Monthly Principal Payment................................... 4
Monthly Servicing Fee....................................... 31
Moody's..................................................... 6
NASD........................................................ 47
</TABLE>
49
<PAGE> 52
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NCMI........................................................ 47
NationsCredit............................................... 3
NationsCredit Commercial.................................... 3
Net Credit Loss Ratio....................................... 34
Obligor..................................................... 8
OID......................................................... 42
OID Regulations............................................. 43
Original Issue Discount..................................... 43
Participants................................................ 23
Parties in interest......................................... 45
Paying Agent................................................ 24
Plan........................................................ 45
Pool Balance................................................ 1
Preference Event............................................ 31
Prepayment Assumption....................................... 42
Purchase Amount............................................. 26
Purchase Price.............................................. 43
Rating Agencies............................................. 6
Rating Agency............................................... 6
Receipt..................................................... 31
Received.................................................... 31
Receivable Interest......................................... 42
Receivable Principal........................................ 42
Receivables................................................. 1
Record Date................................................. 1
Regulation.................................................. 45
Reserve Account............................................. 4
Restricted Group............................................ 46
Retained Yield.............................................. 42
Rule of 78's Receivables.................................... 44
Rules....................................................... 24
S&P......................................................... 6
Section 2720................................................ 47
Securities Act.............................................. 2
Section 1286 Regulations.................................... 43
Servicer.................................................... 1
Servicer Transfer........................................... 33
Servicing Fee Rate.......................................... 4
Servicing Standards......................................... 34
Ship Mortgage Act........................................... 15
Special Federal Tax Counsel................................. 41
Specified Reserve Account Requirement....................... 4
Stripped Receivable......................................... 42
Surety Bond................................................. 1
Surety Bond Issuer.......................................... 1
Surety Bond Issuer Default.................................. 30
Trust....................................................... 1
Trustee..................................................... 1
UCC......................................................... 7
Underwriter(s).............................................. 7
Underwriting Agreement...................................... 47
United States person........................................ 44
</TABLE>
50
<PAGE> 53
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS:
Independent Auditors' Report........................... F-2
Consolidated Balance Sheets as of December 31, 1996 and
December 31, 1995..................................... F-3
Consolidated Statements of Income for each of the years
in the three-year period ended December 31, 1996...... F-4
Consolidated Statements of Stockholder's Equity for
each of the years in the three-year period ended
December 31, 1996..................................... F-5
Consolidated Statements of Cash Flows for each of the
years in the three-year period ended December 31,
1996.................................................. F-6
Notes to Financial Statements.......................... F-7
</TABLE>
F-1
<PAGE> 54
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
Independent Auditors' Report
The Board of Directors
Capital Markets Assurance Corporation:
We have audited the accompanying balance sheets of Capital Markets Assurance
Corporation as of December 31, 1996 and 1995 and the related statements of
income, stockholder's equity and cash flows for each of the years in the
three-year period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Capital Markets Assurance
Corporation as of December 31, 1996 and 1995 and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1996 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
January 29, 1997
F-2
<PAGE> 55
CAPITAL MARKETS ASSURANCE CORPORATION
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
------
December 31 December 31
1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS:
Bonds at fair value (amortized cost $294,861 at December 31, 1996
and $210,651 at December 31, 1995) $297,893 215,706
Short-term investments (at amortized cost which approximates fair
value) 16,810 68,646
- --------------------------------------------------------------------------------------------------
Total investments 314,703 284,352
- --------------------------------------------------------------------------------------------------
Cash 371 344
Accrued investment income 3,807 3,136
Deferred acquisition costs 45,380 35,162
Premiums receivable 5,141 3,540
Prepaid reinsurance 18,489 13,171
Other assets 6,424 3,428
- --------------------------------------------------------------------------------------------------
TOTAL ASSETS $394,315 343,133
==================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
LIABILITIES:
Unearned premiums $ 68,262 45,767
Reserve for losses and loss adjustment expenses 10,985 6,548
Ceded reinsurance 1,738 2,469
Accounts payable and other accrued expenses 8,019 10,844
Current income taxes 679 136
Deferred income taxes 15,139 11,303
- --------------------------------------------------------------------------------------------------
Total liabilities 104,822 77,067
- --------------------------------------------------------------------------------------------------
STOCKHOLDER'S EQUITY:
Common stock - $1.00 par value per share; 15,000,000 shares are
authorized, issued and outstanding at December 31, 1996 and 1995 15,000 15,000
Additional paid-in capital 208,475 205,808
Unrealized appreciation on investments, net of tax 1,970 3,286
Retained earnings 64,048 41,972
- --------------------------------------------------------------------------------------------------
Total stockholder's equity 289,493 266,066
- --------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $394,315 343,133
==================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 56
CAPITAL MARKETS ASSURANCE CORPORATION
STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31,1995 December 31, 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Direct premiums written $ 71,752 56,541 43,598
Assumed premiums written 1,086 935 1,064
Ceded premiums written (15,104) (15,992) (11,069)
- -------------------------------------------------------------------------------------------------
Net premiums written 57,734 41,484 33,593
Increase in unearned premiums (17,177) (12,242) (10,490)
- -------------------------------------------------------------------------------------------------
Net premiums earned 40,557 29,242 23,103
Net investment income 16,992 11,953 10,072
Net realized capital gains 236 1,301 92
Other income 146 2,273 120
- -------------------------------------------------------------------------------------------------
Total revenues 57,931 44,769 33,387
- -------------------------------------------------------------------------------------------------
EXPENSES:
Losses and loss adjustment expenses 4,815 3,141 1,429
Underwriting and operating expenses 14,613 13,808 11,833
Policy acquisition costs 7,824 7,203 4,529
- -------------------------------------------------------------------------------------------------
Total expenses 27,252 24,152 17,791
- -------------------------------------------------------------------------------------------------
Income before income taxes 30,679 20,617 15,596
- -------------------------------------------------------------------------------------------------
INCOME TAXES:
Current income tax 5,235 2,113 865
Deferred income tax 3,368 3,102 2,843
- -------------------------------------------------------------------------------------------------
Total income taxes 8,603 5,215 3,708
- -------------------------------------------------------------------------------------------------
Net Income $ 22,076 15,402 11,888
=================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 57
CAPITAL MARKETS ASSURANCE CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31,1996 December 31, 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK:
Balance at beginning of year $ 15,000 15,000 15,000
- ------------------------------------------------------------------------------------------------------
Balance at end of year 15,000 15,000 15,000
- ------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year 205,808 146,808 146,808
Capital contribution 2,667 59,000 -
- ------------------------------------------------------------------------------------------------------
Balance at end of year 208,475 205,808 146,808
- ------------------------------------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS, NET OF TAX:
Balance at beginning of year 3,286 (5,499) 3,600
Unrealized appreciation (depreciation)
on investments (1,316) 8,785 (9,099)
- ------------------------------------------------------------------------------------------------------
Balance at end of year 1,970 3,286 (5,499)
- ------------------------------------------------------------------------------------------------------
RETAINED EARNINGS:
Balance at beginning of year 41,972 26,570 14,682
Net income 22,076 15,402 11,888
- ------------------------------------------------------------------------------------------------------
Balance at end of year 64,048 41,972 26,570
- ------------------------------------------------------------------------------------------------------
Total stockholder's equity $289,493 266,066 182,879
======================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 58
CAPITAL MARKETS ASSURANCE CORPORATION
STATEMENTS OF CASH FLOWS
(DOLLAR IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 22,076 15,402 11,888
- ------------------------------------------------------------------------------------------------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES:
Reserve for losses and loss adjustment expenses 4,437 1,357 1,429
Unearned premiums, net 22,496 19,862 15,843
Deferred acquisition costs (10,218) (10,302) (9,611)
Premiums receivable (1,601) (161) (2,103)
Accrued investment income (671) (390) (848)
Income taxes payable 3,911 3,621 2,611
Net realized capital gains (236) (1,301) (92)
Accounts payable and other accrued expenses 1,020 472 3,726
Prepaid reinsurance (5,318) (7,620) (5,352)
Other, net (3,396) 992 689
- ------------------------------------------------------------------------------------------------------
Total adjustments 10,424 6,530 6,292
- ------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 32,500 21,932 18,180
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (199,989) (158,830) (77,980)
Proceeds from sales of investments 57,210 49,354 39,967
Proceeds from maturities of investments 110,306 28,803 19,665
- ------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (32,473) (80,673) (18,348)
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution - 59,000 -
- ------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 59,000 -
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 27 259 (168)
Cash balance at beginning of year 344 85 253
- ------------------------------------------------------------------------------------------------------
CASH BALANCE AT END OF YEAR $ 371 344 85
======================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $ 4,525 1,450 1,063
======================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 59
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1) BACKGROUND
Capital Markets Assurance Corporation ("CapMAC" or "the Company") is a
New York-domiciled monoline stock insurance company which engages only
in the business of financial guarantee and surety insurance. CapMAC
is a wholly owned subsidiary of CapMAC Holdings Inc. ("Holdings").
CapMAC is licensed in all 50 states in addition to the District of
Columbia, the Commonwealth of Puerto Rico and the territory of Guam.
CapMAC insures structured asset-backed, corporate, municipal and other
financial obligations in the U.S. and international capital markets.
CapMAC also provides financial guarantee reinsurance for structured
asset-backed, corporate, municipal and other financial obligations
written by other major insurance companies.
CapMAC's claims-paying ability is rated "Aaa" by Moody's Investors
Service, Inc. ("Moody's"), "AAA" by Standard & Poor's Ratings Group
("S&P"), "AAA" by Duff & Phelps Credit Rating Co. ("Duff & Phelps"),
and "AAA" by Nippon Investors Service, Inc., a Japanese rating agency.
Such ratings reflect only the views of the respective rating agencies,
are not recommendations to buy, sell or hold securities and are
subject to revision or withdrawal at any time by such rating agencies.
2) SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the
accompanying financial statements are as follows:
A) BASIS OF PRESENTATION
The accompanying financial statements are prepared on the
basis of generally accepted accounting principles ("GAAP").
Such accounting principles differ from statutory reporting
practices used by insurance companies in reporting to state
regulatory authorities.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Management believes the most
significant estimates relate to deferred acquisition costs,
reserve for losses and loss adjustment expenses and
disclosures of financial guarantees outstanding. Actual
results could differ from those estimates.
B) INVESTMENTS
As of December 31, 1996 and 1995, all of the Company's
securities have been classified as available- for-sale.
Available-for-sale securities are recorded at fair value.
Fair value is generally based upon quoted market prices.
Unrealized holding gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from
earnings and are reported as a separate component of
stockholder's equity until realized. Transfers of securities
between categories are recorded at fair value at the date of
transfer. A decline in the fair value of any
available-for-sale security below cost that is deemed other
than temporary is charged to earnings resulting in the
establishment of a new cost basis for the security.
F-7
<PAGE> 60
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Short-term investments are those investments having a maturity
of less than one year at purchase date. Short-term
investments are carried at amortized cost which approximates
fair value.
Premiums and discounts are amortized or accreted over the life
of the related security as an adjustment to yield using the
effective interest method. Dividend and interest income are
recognized when earned. Realized gains and losses are
included in earnings and are derived using the FIFO (first-in,
first-out) method for determining the cost of securities sold.
C) PREMIUM REVENUE RECOGNITION
Premiums which are payable monthly to CapMAC are reflected in
income when due, net of amounts payable to reinsurers.
Premiums which are payable quarterly, semi-annually or
annually are reflected in income, net of amounts payable to
reinsurers, on an equal monthly basis over the corresponding
policy term. Premiums that are collected as a single premium
at the inception of the policy and have a term longer than one
year are earned, net of amounts payable to reinsurers, by
allocating premium to each bond maturity based on the
principal amount and earning it straight-line over the term of
each bond maturity. For the years ended December 31, 1996 and
1995, 91% of net premiums earned were attributable to premiums
payable in installments and 9% were attributable to premiums
collected on an up-front basis.
D) DEFERRED ACQUISITION COSTS
Certain costs incurred by CapMAC, which vary with and are
primarily related to the production of new business, are
deferred. These costs include direct and indirect expenses
related to underwriting, marketing and policy issuance, rating
agency fees and premium taxes, net of reinsurance ceding
commissions. The deferred acquisition costs are amortized
over the period in proportion to the related premium earnings.
The actual amount of premium earnings may differ from
projections due to various factors such as renewal or early
termination of insurance contracts or different run-off
patterns of exposure resulting in a corresponding change in
the amortization pattern of the deferred acquisition costs.
E) RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
The reserve for losses and loss adjustment expenses consists
of a supplemental loss reserve ("SLR") and a case basis loss
reserve. The SLR is established for expected levels of losses
resulting from credit failures on currently insured issues and
reflects the estimated portion of earned premiums required to
cover those losses.
A case basis loss reserve is established for insured
obligations when, in the judgment of management, a default in
the timely payment of debt service is imminent. For defaults
considered temporary, a case basis loss reserve is established
in an amount equal to the present value of the anticipated
defaulted debt service payments over the expected period of
default. If the default is judged not to be temporary, the
present value of all remaining defaulted debt service payments
is recorded as a case basis loss reserve. Anticipated salvage
recoveries are considered in establishing case basis loss
reserves when such amounts are reasonably estimable. Case
basis loss reserves may be allocated from any SLR outstanding
at the time the case basis reserves are established.
F-8
<PAGE> 61
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Management believes that the current level of reserves is
adequate to cover the ultimate net cost of claims and the
related expenses with respect to financial guarantees issued
by CapMAC. The establishment of the appropriate level of loss
reserves is an inherently uncertain process involving
estimates and subjective judgments by management, and
therefore there can be no assurance that ultimate losses in
CapMAC's insured portfolio will not exceed the current
estimate of loss reserves.
F) DEPRECIATION
Leasehold improvements, furniture, fixtures and electronic
data processing equipment are being amortized or depreciated
over the lease term or useful life, whichever is shorter,
using the straight-line method.
G) INCOME TAXES
Deferred income taxes are provided with respect to temporary
differences between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in the period that includes the
enactment date.
F-9
<PAGE> 62
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
3) INSURED PORTFOLIO
At December 31, 1996 and 1995, the principal amount of financial
obligations insured by CapMAC was $24.5 billion and $16.9 billion,
respectively, and net of reinsurance (net principal outstanding), was $19.7
billion and $12.6 billion, respectively, with a weighted average life of 6.4
years and 6.0 years, respectively. CapMAC's insured portfolio was broadly
diversified by geographic distribution and type of insured obligations, with
no single insured obligation in excess of statutory single risk limits,
after giving effect to any reinsurance and collateral, which are a function
of CapMAC's statutory qualified capital (the sum of statutory capital and
surplus and mandatory contingency reserve). At December 31, 1996 and 1995,
the statutory qualified capital was approximately $260 million and $240
million, respectively.
<TABLE>
<CAPTION>
Net Principal Outstanding
December 31, 1996 December 31, 1995
--------------------- ---------------------
Type of Obligations Insured ($ in millions) Amount % Amount %
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer receivables $10,362 52.8 $ 6,959 55.1
Trade and other corporate
obligations 8,479 43.1 4,912 38.9
Municipal/government obligations 814 4.1 757 6.0
- --------------------------------------------------------------------------------------------------------
TOTAL $19,655 100.0 $12,628 100.0
========================================================================================================
</TABLE>
At December 31, 1996 and 1995, the principal and interest amount of
financial obligations insured by CapMAC was $29.8 billion and $20.3 billion,
respectively, and net of reinsurance (net principal and interest
outstanding) was $23.3 billion and $15.1 billion, respectively. At December
31, 1996, approximately 93% of CapMAC's insured portfolio was comprised of
structured asset-backed transactions. Under these structures, a pool of
assets covering at least 100% of the principal amount guaranteed under its
insurance contract is sold or pledged to a special purpose bankruptcy remote
entity. CapMAC's primary risk from such insurance contracts is the
impairment of cash flows due to delinquency or loss on the underlying
assets. CapMAC, therefore, evaluates all the factors affecting past and
future asset performance by studying historical data on losses,
delinquencies and recoveries of the underlying assets. Each transaction is
reviewed to ensure that an appropriate legal structure is used to protect
against the bankruptcy risk of the originator of the assets. Along with the
legal structure, an additional level of first loss protection is also
created to protect against losses due to credit or dilution. This first
level of loss protection is usually available from reserve funds, excess
cash flows, overcollateralization, or recourse to a third party. The level
of first loss protection depends upon the historical losses and dilution of
the underlying assets, but is typically several times the normal historical
loss experience for the underlying type of assets.
During 1995, the Company sold without recourse its interest in
potential cash flows from transactions included in its insured portfolio and
recognized $2,200,000 of income which has been included in other income in
the accompanying financial statements.
The following entities each accounted for, through referrals and
otherwise, 10% or more of total revenues for each of the periods presented:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
% of % of % of
Revenues Revenues Revenues
----------------- ----------------- -----------------
<S> <C> <C> <C>
Citicorp 14.5 15.2 16.3
</TABLE>
F-10
<PAGE> 63
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
4) INVESTMENTS
The amortized cost, gross unrealized gains, gross unrealized losses
and estimated fair value for available-for- sale securities by major
security type at December 31, 1996 and 1995 were as follows ($ in
thousands):
<TABLE>
<CAPTION>
December 31, 1996
- --------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Securities Available-for-sale Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury obligations $ 4,059 10 - 4,069
Mortgage-backed securities of
U.S. government instrumentalities
and agencies 109,436 265 1,160 108,541
Obligations of states, municipalities
and political subdivisions 177,811 4,602 555 181,858
Corporate and asset-backed
securities 20,365 23 153 20,235
- --------------------------------------------------------------------------------------------------
TOTAL $311,671 4,900 1,868 314,703
==================================================================================================
<CAPTION>
December 31, 1995
- --------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Securities Available-for-sale Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury obligations $ 4,153 55 - 4,208
Mortgage-backed securities of
U.S. government instrumentalities and
agencies 100,628 313 79 100,862
Obligations of states, municipalities
and political subdivisions 166,010 4,809 82 170,737
Corporate and asset-backed
securities 8,506 45 6 8,545
- --------------------------------------------------------------------------------------------------
TOTAL $279,297 5,222 167 284,352
==================================================================================================
</TABLE>
F-11
<PAGE> 64
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
The amortized cost and estimated fair value of investments in debt securities at
December 31, 1996 by contractual maturity are shown below ($ in thousands):
<TABLE>
<CAPTION>
December 31, 1996
- -------------------------------------------------------------------------------------------------
Amortized Estimated
Securities Available-for-sale Cost Fair Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 11,627 11,644
Due after one year through five years 31,821 32,815
Due after five years through ten years 76,450 78,200
Due after ten years 82,337 83,503
- -------------------------------------------------------------------------------------------------
Sub-total 202,235 206,162
Mortgage-backed securities 109,436 108,541
- -------------------------------------------------------------------------------------------------
TOTAL $311,671 314,703
=================================================================================================
</TABLE>
Actual maturities may differ from contractual maturities because borrowers may
call or prepay obligations with or without call or prepayment penalties.
Proceeds from sales of investment securities were approximately $57.2 million,
$49.3 million and $39.9 million in 1996, 1995 and 1994, respectively. Gross
realized capital gains of $772,000, $1,320,000 and $714,000, and gross realized
capital losses of $536,000, $19,000 and $622,000 were realized on those sales
for the years ended December 31, 1996, 1995 and 1994, respectively.
Investments include bonds having a fair value of approximately $3,884,000 and
$3,985,000 which are on deposit at December 31, 1996 and 1995, respectively,
with state regulators as required by law.
Investment income is comprised of interest and dividends, net of related
expenses, and is applicable to the following sources:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
$ in thousands December 31, 1996 December 31, 1995 December 31, 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds $15,726 11,105 9,193
Short-term investments 1,534 1,245 484
Mutual funds - (162) 579
Investment expenses (268) (235) (184)
- -------------------------------------------------------------------------------------------------
TOTAL $16,992 11,953 10,072
=================================================================================================
</TABLE>
F-12
<PAGE> 65
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
The change in unrealized appreciation (depreciation) on
available-for-sale securities is included as a separate component of
stockholder's equity as shown below:
<TABLE>
<CAPTION>
Year Ended Year Ended
$ in thousands December 31, 1996 December 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of year $ 3,286 (5,499)
Change in unrealized (depreciation) appreciation (2,024) 13,386
Income tax effect 708 (4,601)
- -------------------------------------------------------------------------------------------------
Net change (1,316) 8,785
- -------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 1,970 3,286
=================================================================================================
</TABLE>
No single issuer, except for investments in U.S. Treasury and U.S.
government agency securities, exceeds 2% of stockholder's equity as of
December 31, 1996 and 1995, respectively.
5) DEFERRED ACQUISITION COSTS
The following table reflects acquisition costs deferred by CapMAC and
amortized in proportion to the related premium earnings:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
$ in thousands December 31, 1996 December 31, 1995 December 31, 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $35,162 24,860 15,249
Additions 18,042 17,505 14,140
Amortization (policy
acquisition costs) (7,824) (7,203) (4,529)
- -------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $45,380 35,162 24,860
=================================================================================================
</TABLE>
6) EMPLOYEE BENEFITS
CapMAC has a service agreement with CapMAC Financial Services, Inc. ("CFS").
Under the service agreement, CFS has agreed to provide various services,
including underwriting, reinsurance, marketing, data processing and other
services to CapMAC in connection with the operation of CapMAC's insurance
business. CapMAC pays CFS a fee for providing such services, but not in
excess of CFS's cost for such services. CFS incurred, on behalf of CapMAC,
total compensation expenses, excluding bonuses, of $13,374,000, $13,484,000
and $11,081,000 in 1996, 1995 and 1994, respectively.
The Company, through CFS, maintains an incentive compensation plan for
its employees. The plan is an annual discretionary bonus award. For the
years ended December 31, 1996, 1995 and 1994, the Company had provided
approximately $8,810,000, $7,804,000 and $5,253,000, respectively, for the
plan. CFS also provides health and welfare benefits to substantially all of
its employees. The Company incurred $551,943, $598,530, and $562,508 of
expense for the years ended December 31, 1996, 1995 and 1994, respectively,
for such plan. The Company also has a defined contribution retirement plan
which allows participants to make voluntary contributions by salary reduction
pursuant to section 401 (k) of the Internal Revenue Code. The Company
provides for the administrative cost for the 401 (k) plan.
F-13
<PAGE> 66
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
On June 25, 1992, certain officers of CapMAC were granted 182,633
restricted stock units ("RSU") at $13.33 a share in respect of certain
deferred compensation. On December 7, 1995, the RSU's were converted to cash
in the amount of approximately $3.7 million, and such officers agreed to
defer receipt of such cash amount in exchange for receiving the same number
of new shares of restricted stock of Holdings as the number of RSU's such
officers previously held. During 1995 and 1994, the expense was $1.3 million
and $0.1 million, respectively. During 1996, Holdings assumed the liability
of $3.7 million less the related deferred tax asset of $1.1 million as
capital contribution. The cash amount is held by Holdings and invested in
accordance with certain guidelines. Such amount, including the investment
earnings thereon, will be paid to each officer upon the occurrence of certain
events but no later than December 2000.
7) EMPLOYEE STOCK OWNERSHIP PLAN
Holdings maintains an Employee Stock Ownership Plan ("ESOP") to provide
its employees the opportunity to obtain beneficial interests in the stock of
Holdings through a trust (the "ESOP Trust"). Compensation expense related to
the ESOP and allocated to CapMAC was approximately $2,764,000, $2,087,000 and
$2,086,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
F-14
<PAGE> 67
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
8) RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
The reserve for losses and loss adjustment expenses consists of a case
basis loss reserve and the SLR.
In 1995, CapMAC incurred its first claim on a financial guarantee
policy. Based on its current estimate, the Company expects the aggregate
amount of claims and related expenses not to exceed $2.7 million, although no
assurance can be given that such claims and related expenses will not exceed
that amount. Such loss amount was covered through a recovery under a quota
share reinsurance agreement of $0.2 million and a reduction in the SLR of
$2.5 million. The portion of such claims and expenses not covered under the
quota share agreement is being funded through payments to CapMAC from the
Lureco Trust Account (see note 12).
The following is a summary of the activity in the case basis loss
reserve account and the components of the reserve for losses and loss
adjustment expenses ($ in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASE BASIS LOSS RESERVE:
Net balance at January 1 $ 620 - -
- -------------------------------------------------------------------------------------------------
INCURRED RELATED TO:
Current year - 2,473 -
Prior years - - -
- -------------------------------------------------------------------------------------------------
Total incurred - 2,473 -
- -------------------------------------------------------------------------------------------------
PAID RELATED TO:
Current year - 1,853 -
Prior years 309 - -
- -------------------------------------------------------------------------------------------------
Total paid 309 1,853 -
- -------------------------------------------------------------------------------------------------
Net balance at December 31 311 620 -
Reinsurance recoverable - 69 -
- -------------------------------------------------------------------------------------------------
GROSS BALANCE AT DECEMBER 31 311 689 -
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL LOSS RESERVE
Balance at January 1 5,859 5,191 3,762
- -------------------------------------------------------------------------------------------------
Additions to supplemental loss reserve 4,815 3,141 1,429
Allocated to case basis reserve - (2,473) -
- -------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31 10,674 5,859 5,191
- -------------------------------------------------------------------------------------------------
TOTAL RESERVE FOR LOSSES AND LOSS ADJUSTMENT
EXPENSES $10,985 6,548 5,191
=================================================================================================
</TABLE>
F-15
<PAGE> 68
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
9) INCOME TAXES
Pursuant to a tax sharing agreement with Holdings, the Company is included in
Holdings' consolidated U.S. Federal income tax return. The Company's annual
Federal income tax liability is determined by computing its pro rata share of
the consolidated group Federal income tax liability.
Total income tax expense differed from the amount computed by applying
the U.S. Federal income tax rate of 35% in 1996 and 1995 and 34% in 1994:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31,1995 December 31, 1994
$ in thousands Amount % Amount % Amount %
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Expected tax expense computed at
the statutory rate $10,738 35.0 $7,216 35.0 $5,303 34.0
Increase (decrease) in tax
resulting from:
Tax-exempt interest (2,916) (9.5) (2,335) (11.3) (1,646) (10.6)
Other, net 781 2.5 334 1.6 51 0.4
- -------------------------------------------------------------------------------------------------
TOTAL INCOME TAX EXPENSE $ 8,603 28.0 $5,215 25.3 $3,708 23.8
=================================================================================================
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred Federal income tax liability are as follows:
<TABLE>
<CAPTION>
$ in thousands December 31, 1996 December 31, 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Deferred compensation $ 200 1,901
Losses and loss adjustment expenses 1,527 1,002
Unearned premiums 866 852
Other, net 96 98
- ------------------------------------------------------------------------------------------------
Total gross deferred tax assets 2,689 3,853
- ------------------------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Deferred acquisition costs 15,883 12,307
Unrealized capital gains on investments 1,061 1,769
Other, net 884 1,080
- ------------------------------------------------------------------------------------------------
Total gross deferred tax liabilities 17,828 15,156
- ------------------------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITY $15,139 11,303
================================================================================================
</TABLE>
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax assets will not be realized. Management believes
that the deferred tax assets will be fully realized in the future.
F-16
<PAGE> 69
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
10) INSURANCE REGULATORY RESTRICTIONS
CapMAC is subject to insurance regulatory requirements of the State of
New York and other states in which it is licensed to conduct business.
Generally, New York insurance laws require that dividends be paid from
earned surplus and restrict the amount of dividends in any year that may be
paid without obtaining approval for such dividends from the Superintendent
of Insurance to the lower of (i) net investment income as defined or (ii)
10% of statutory surplus as of December 31 of the preceding year. No
dividends were paid by CapMAC to Holdings during the years ended December
31, 1996, 1995 and 1994. No dividends could be paid during these periods
because CapMAC had negative earned surplus. Statutory surplus at December
31, 1996 and 1995 was approximately $193,726,000 and $195,018,000,
respectively. Statutory surplus differs from stockholder's equity
determined under GAAP principally due to the mandatory contingency reserve
required for statutory accounting purposes and differences in accounting for
investments, deferred acquisition costs, SLR and deferred taxes provided
under GAAP. Statutory net income was $18,737,000, $9,000,000 and $4,543,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
Statutory net income differs from net income determined under GAAP
principally due to deferred acquisition costs, SLR and deferred income
taxes.
11) COMMITMENTS AND CONTINGENCIES
The Company's lease agreement for the space occupied in New York expires
on November 20, 2008. CapMAC has a lease agreement for its London office,
which expires on October 1, 2002. As of December 31, 1996, future minimum
payments under the lease agreements are as follows:
<TABLE>
<CAPTION>
$ in thousands Payment
- --------------------------------------------------------------------------------------------------
<S> <C>
1997 $ 2,647
1998 2,715
1999 3,077
2000 3,152
2001 and thereafter 28,660
- --------------------------------------------------------------------------------------------------
TOTAL $40,251
==================================================================================================
</TABLE>
Rent expense, commercial rent taxes and electricity for the years ended
December 31, 1996, 1995 and 1994 amounted to $1,618,000, $1,939,000 and
$2,243,000, respectively.
CapMAC has available a $150,000,000 standby corporate liquidity facility
(the "Liquidity Facility") scheduled to terminate in September 1999. The
Liquidity Facility is provided by a consortium of banks, headed by Bank of
Montreal, as agent, which is rated "A-1+" and "P-1" by S&P and Moody's,
respectively. Under the Liquidity Facility, CapMAC will be able, subject to
satisfying certain conditions, to borrow funds from time to time in order to
enable it to fund any claim payments or payments made in settlement or
mitigation of claim payments under its insurance contracts. There have been
no draws under the Liquidity Facility.
CapMAC has agreed to make an investment of 50 million French Francs
(approximately $10 million U.S. dollars) in CapMAC Assurance, S.A., an
insurance subsidiary to be established in Paris, France. This investment is
anticipated to be made in 1997.
F-17
<PAGE> 70
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
12) REINSURANCE
In the ordinary course of business, CapMAC cedes exposure under various
treaty and facultative reinsurance contracts, both on a pro rata and excess
of loss basis, primarily designed to minimize losses from large risks and
protect the capital and surplus of CapMAC.
The effect of reinsurance on premiums written and earned was as follows:
<TABLE>
<CAPTION>
Years Ended December 31
1996 1995 1994
------------------- ------------------- -------------------
$ in thousands Written Earned Written Earned Written Earned
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Direct $ 71,752 48,835 56,541 36,853 43,598 28,561
Assumed 1,086 1,508 935 761 1,064 258
Ceded (15,104) (9,786) (15,992) (8,372) (11,069) (5,716)
- -------------------------------------------------------------------------------------------------
Net premiums $ 57,734 40,557 41,484 29,242 33,593 23,103
=================================================================================================
</TABLE>
The reinsurance of risk does not relieve the ceding insurer of its
original liability to its policyholders. A contingent liability exists with
respect to the aforementioned reinsurance arrangements, which may become a
liability of CapMAC in the event the reinsurers are unable to meet
obligations assumed by them under the reinsurance contracts. At December
31, 1996 and 1995, CapMAC had ceded loss reserves of $0 and $69,000,
respectively, and had ceded unearned premiums of $18,489,000 and
$13,171,000, respectively.
In 1994, CapMAC entered into a reinsurance agreement (the "Lureco
Treaty") with Luxembourg European Reinsurance LURECO S.A. ("Lureco"), a
European-based reinsurer. The agreement is renewable annually at the
Company's option, subject to satisfying certain conditions. The agreement
reinsured and indemnified the Company for any loss incurred by CapMAC during
the agreement period up to the limits of the agreement. The Lureco Treaty
provides that the annual reinsurance premium payable by CapMAC to Lureco,
after deduction of the reinsurer's fee payable to Lureco, be deposited in a
trust account (the "Lureco Trust Account") to be applied by CapMAC, at its
option, to offset losses and loss expenses incurred by CapMAC in connection
with incurred claims. Amounts on deposit in the Lureco Trust Account which
have not been applied against claims are contractually due to CapMAC at the
termination of the treaty.
The premium deposit amounts in the Lureco Trust Account have been
reflected as assets by CapMAC during the term of the agreement. Premiums in
excess of the deposit amounts have been recorded as ceded premiums in the
statements of income. For the 1996 policy year, the agreement provides $7
million of loss coverage in excess of the premium deposit amount of $5
million retained in the Lureco Trust Account. Additional coverage is
provided for losses incurred in excess of 200% of the net premiums earned up
to $4 million for any one agreement year. In September 1995, a claim of
approximately $2.5 million on an insurance policy was applied against the
Lureco Trust Account.
F-18
<PAGE> 71
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
In addition to its capital (including statutory contingency reserves),
CapMAC has other reinsurance available to pay claims under its insurance
contracts. Effective November 30, 1995, CapMAC entered into a Stop-loss
Reinsurance Agreement with Mitsui Marine and Fire Insurance Co. (the "Mitsui
Stop-loss Agreement"). Under the Mitsui Stop-loss Agreement, Mitsui Marine
and Fire Insurance Co. ("Mitsui") will be required to pay any losses in
excess of $100 million in the aggregate incurred by CapMAC during the term
of the Mitsui Stop-loss Agreement on the insurance policies in effect on
December 1, 1995 and written during the one-year period thereafter, up to an
aggregate limit payable under the Mitsui Stop-loss Agreement of $50 million.
The Mitsui Stop-loss Agreement has a term of seven years and is subject to
early termination by CapMAC in certain circumstances. Effective January 1,
1997 the stop-loss reinsurance coverage increased to $75 million in excess
of incurred losses of $150 million increasing annually based on increases in
CapMAC's statutory qualified capital. The new stop-loss reinsurance is
provided by Mitsui, AXA Re Finance S.A. ("AXA Re") and Munchener
Ruckversicherungs- Gesellschaft ("Munich Re").
On November 30, 1995, CapMAC canceled the quota share reinsurance
agreement with Winterthur Swiss Insurance Company ("Winterthur") pursuant to
which Winterthur had the right to reinsure on a quota share basis 10% of
each policy written by CapMAC. As a result, CapMAC reassumed approximately
$1.4 billion of principal insured by Winterthur on January 1, 1996. In
connection with the commutation, Winterthur returned $2.0 million of
unearned premiums, net of ceding commission and Federal excise tax.
13) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair
values of the Company's financial instruments at December 31, 1996 and
1995. The fair value amounts were determined by the Company using
independent market information when available, and appropriate valuation
methodologies when market information was not available. Such valuation
methodologies require significant judgment and are not necessarily
indicative of the amount the Company could recognize in a current market
exchange.
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Carrying Estimated Carrying Estimated
$ in thousands Amount Fair Value Amount Fair Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSESTS:
Available-for-sale securities $314,703 314,703 284,352 284,352
- -------------------------------------------------------------------------------------------------
OFF-BALANCE-SHEET INSTRUMENTS:
Financial guarantees outstanding $ - 219,989 - 147,840
Less: ceding commission - 65,997 - 44,352
- -------------------------------------------------------------------------------------------------
Net financial guarantees outstanding $ - 153,992 103,488
=================================================================================================
</TABLE>
F-19
<PAGE> 72
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments summarized above:
AVAILABLE-FOR-SALE SECURITIES
The fair values of fixed maturities are based upon quoted market prices.
The fair value of short-term investments approximates amortized cost.
FINANCIAL GUARANTEES OUTSTANDING
The fair value of financial guarantees outstanding consists of (1) the
current unearned premium reserve, net of prepaid reinsurance and (2) the
fair value of installment revenue which is derived by calculating the
present value of the estimated future cash inflow to CapMAC of policies in
force having installment premiums, net of amounts payable to reinsurers, at
a discount rate of 7% at December 31, 1996 and 1995. The amount calculated
is assumed to be equivalent to the consideration that would be paid by
CapMAC under market conditions prevailing at the reporting dates to transfer
CapMAC's financial guarantee business to a third party under reinsurance and
other agreements. Ceding commission represents the expected amount that
would be paid to CapMAC to compensate CapMAC for originating and servicing
the insurance contracts. In constructing estimated future cash inflows,
management makes assumptions regarding prepayments for amortizing
asset-backed securities which are consistent with relevant historical
experience. For revolving programs, assumptions are made regarding program
utilization based on discussions with program users. The amount of future
installment revenue actually realized by the Company could be reduced in the
future due to factors such as early termination of insurance contracts,
accelerated prepayments of underlying obligations or lower than anticipated
utilization of insured structured programs, such as commercial paper
conduits. Although increases in future installment revenue earnings due to
renewals of existing insurance contracts historically have been greater than
reductions in future installment revenue due to factors such as those
described above, there can be no assurance that future circumstances might
not cause a material net reduction in the future installment revenue.
14) CAPITALIZATION
In 1995, $59.0 million of the proceeds received by Holdings from the
sale of shares in connection with an initial public offering and private
placements were contributed to CapMAC.
F-20
<PAGE> 73
============================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. NEITHER THE
DELIVERY OF THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE DEPOSITOR OR THE RECEIVABLES SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................... 2
Incorporation of Certain Documents by
Reference................................ 2
Reports to Certificateholders by the
Trustee.................................. 2
Prospectus Summary......................... 3
Risk Factors............................... 7
The Trust.................................. 10
NationsCredit Commercial's Portfolio of
Marine Contracts......................... 10
The Receivables Pool....................... 14
Certificate Factors and Trading
Information.............................. 21
Use of Proceeds............................ 21
The Depositor.............................. 21
The Servicer............................... 22
The Surety Bond Issuer..................... 22
The Certificates........................... 23
Certain Legal Aspects of the Receivables... 36
Certain Federal Income Tax Consequences.... 41
ERISA Considerations....................... 45
Underwriting............................... 47
Experts.................................... 48
Legal Matters.............................. 48
Index...................................... 49
Index to Financial Statements.............. F-1
</TABLE>
Until , 1997, all dealers effecting transactions in the
Certificates, whether or not participating in this distribution, may be required
to deliver a Prospectus. This delivery requirement is in addition to the
obligation of dealers to deliver a Prospectus when acting as Underwriters and
with respect to their unsold allotments or subscriptions.
============================================================
============================================================
[NATIONSCREDIT GRANTOR LOGO]
NATIONSCREDIT
GRANTOR TRUST 1997-1
$181,781,125.63
% MARINE RECEIVABLE-
BACKED CERTIFICATES
NATIONSCREDIT
SECURITIZATION CORPORATION
DEPOSITOR
NATIONSCREDIT COMMERCIAL
CORPORATION OF AMERICA
SERVICER
-------------------
PROSPECTUS
-------------------
NATIONSBANC CAPITAL MARKETS, INC.
BEAR, STEARNS & CO. INC.
Dated May , 1997
============================================================
<PAGE> 74
[NATIONSCREDIT GRANTOR LOGO] [ALTERNATE PAGE]
NATIONSCREDIT GRANTOR TRUST 1997-1
$181,781,125.63
% MARINE RECEIVABLE-BACKED CERTIFICATES
NATIONSCREDIT SECURITIZATION CORPORATION
DEPOSITOR
NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA
SERVICER
Each % Marine Receivable-Backed Certificate (the "Certificates")
offered hereby will represent a fractional undivided interest in the
NationsCredit Grantor Trust 1997-1 (the "Trust"). the Trust will be formed
pursuant to a Pooling and Servicing Agreement (the "Agreement") to be entered
into among NationsCredit Securitization Corporation, as Depositor (the
"Depositor"), NationsCredit Commercial Corporation of America, as Servicer (the
"Servicer"), and Bankers Trust Company, as Trustee and as Collateral Agent (in
such capacities, the "Trustee" and the "Collateral Agent", respectively). The
property of the Trust will include a pool of marine retail installment sale
contracts secured by new and used boats, boat motors and any accompanying boat
trailers (the "Receivables"), all payments received or due thereunder after
April 30, 1997 (the "Cutoff Date"), security interests in the boats and marine
equipment financed thereby, an irrevocable surety bond (the "Surety Bond"),
guaranteeing the Monthly Interest Payment (as defined herein) and the Monthly
Principal Payment (as defined herein), issued by Capital Markets Assurance
Corporation (the "Surety Bond Issuer") and certain other property. The Servicer
will be responsible for servicing and maintaining custody of the Receivables.
The aggregate principal balance of the Receivables (the "Pool Balance") as of
the Cutoff Date was $181,781,125.63 (the "Initial Pool Balance").
The Certificate Balance (as defined herein) as of the Closing Date will
equal $181,781,125.63. Principal and interest to the extent of the Pass-Through
Rate of % per annum on the Certificates will be distributed to holders of
the Certificates ("Certificateholders") as of the day prior to each Distribution
Date (each a "Record Date") on the 15th day of each month (or, if such day is
not a business day, the next following business day), beginning June 16, 1997
(each a "Distribution Date"). The Final Scheduled Distribution Date on the
Certificates will be on August 15, 2013, (the "Final Scheduled Distribution
Date").
FOR INFORMATION CONCERNING THE RISKS OF AN INVESTMENT IN THE CERTIFICATES,
SEE "RISK FACTORS" COMMENCING ON PAGE 7.
---------------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF NATIONSCREDIT SECURITIZATION CORPORATION,
NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA OR ANY AFFILIATE THEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS IS TO BE USED BY NATIONSBANC CAPITAL MARKETS, INC. ("NCMI") AN
AFFILIATE OF THE SELLER IN CONNECTION WITH OFFERS AND SALES RELATED TO
MARKET-MAKING TRANSACTIONS IN THE CERTIFICATES IN WHICH NCMI ACTS AS PRINCIPAL.
NCMI MAY ALSO ACT AS AGENT IN SUCH TRANSACTIONS. SALES WILL BE MADE AT PRICES
RELATED TO THE PREVAILING PRICES AT THE TIME OF SALE.
---------------------
May , 1997
<PAGE> 75
[ALTERNATE PAGE]
UNDERWRITING
This Prospectus is to be used by the Underwriter, an affiliate of the
Seller, in connection with offers and sales related to market-making
transactions in the Certificates in which the Underwriter acts as principal. The
Underwriter may also act as agent in such transactions. Sales will be made at
prices related to the prevailing prices at the time of sale. Any obligations of
the Underwriter are the sole obligations of the Underwriter and do not create
any obligations on the part of any affiliate of the Underwriter.
EXPERTS
The financial statements of Capital Markets Assurance Corporation as of
December 31, 1996 and 1995 and for each of the years in the three-year period
ended December 31, 1996 are included herein beginning on page F-3 and have been
audited by KPMG Peat Marwick LLP, independent certified public accountants, as
set forth in their report thereon and are included in reliance upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Depositor and the Underwriters by Stroock & Stroock & Lavan LLP, Special
Counsel of the Depositor and the Underwriters. Certain legal matters relating to
the Federal tax consequences of the issuance and ownership of the Certificates
will be passed upon by Stroock & Stroock & Lavan LLP.
<PAGE> 76
[ALTERNATE PAGE]
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. NEITHER THE
DELIVERY OF THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE DEPOSITOR OR THE RECEIVABLES SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................... 2
Incorporation of Certain Documents by
Reference................................ 2
Reports to Certificateholders by the
Trustee.................................. 2
Prospectus Summary......................... 3
Risk Factors............................... 7
The Trust.................................. 10
NationsCredit Commercial's Portfolio of
Marine Contracts......................... 10
The Receivables Pool....................... 14
Certificate Factors and Trading
Information.............................. 21
Use of Proceeds............................ 21
The Depositor.............................. 21
The Servicer............................... 22
The Surety Bond Issuer..................... 22
The Certificates........................... 23
Certain Legal Aspects of the Receivables... 36
Certain Federal Income Tax Consequences.... 41
ERISA Considerations....................... 45
Underwriting............................... 47
Experts.................................... 48
Legal Matters.............................. 48
Index...................................... 49
Index to Financial Statements.............. F-1
</TABLE>
Until , 1997, all dealers effecting transactions in the
Certificates, whether or not participating in this distribution, may be required
to deliver a Prospectus. This delivery requirement is in addition to the
obligation of dealers to deliver a Prospectus when acting as Underwriters and
with respect to their unsold allotments or subscriptions.
============================================================
============================================================
[NATIONSCREDIT GRANTOR LOGO]
NATIONSCREDIT
GRANTOR TRUST 1997-1
$181,781,125.63
% MARINE RECEIVABLE-
BACKED CERTIFICATES
NATIONSCREDIT
SECURITIZATION CORPORATION
DEPOSITOR
NATIONSCREDIT COMMERCIAL
CORPORATION OF AMERICA
SERVICER
-------------------
PROSPECTUS
-------------------
NATIONSBANC CAPITAL MARKETS, INC.
Dated May , 1997
============================================================
<PAGE> 77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the offering of the Certificates, other than underwriting
discounts and commissions:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 55,085.19
Printing and Engraving...................................... $ 59,000.00
Legal Fees and Expenses..................................... $205,000.00
Blue Sky Fees............................................... $ 15,000.00
Accounting Fees and Expenses................................ $ 30,000.00
Trustee Fees and Expenses................................... $ 5,500.00
Rating Agency Fees.......................................... $ 99,979.00
Miscellaneous............................................... $ 20,000.00
-----------
Total............................................. $489,564.19
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware provides as follows:
145. Indemnification of Officers, Directors, Employees and Agents;
Insurance --
(a) A Corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only
to the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the Court of Chancery or such other
court shall deem proper.
II-1
<PAGE> 78
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct
set forth in subsections (a) and (b) of this section. Such determination
shall be made (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, event though less than a
quorum, or (2) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the corporation as authorized in
this section. Such expenses (including attorneys' fees) incurred by
other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
a serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position
under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any
employee benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to
be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has
II-2
<PAGE> 79
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. The Court of Chancery may summarily determine a corporation's
obligation to advance expenses (including attorneys' fees).
Article 11 of the Certificate of Incorporation of the Registrant
provides as follows:
No director shall have any personal liability to the Corporation or
its stockholders for any monetary damages for breach of fiduciary duty
as a director, except that this Article 11 shall not eliminate or limit
the liability of each director:
(i) for any breach of such director's duty of loyalty to the
corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law,
or
(iv) for any transaction from which such director derived an
improper personal benefit.
If the Delaware Corporate law is amended to authorize corporate
action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the furthest extent of the Delaware Corporate
Law, as so amended. Any repeal or modification of this provision shall
not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
Article VI of the Registrant's Bylaws provides that:
The Registrant will indemnify any person who was a director,
officer, employee or agent of the Registrant to the fullest extent and
in the manner set forth in and as provided by the General Corporation
Law of Delaware.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement
3.1 -- Amended and Restated Certificate of Incorporation of the
Seller.
3.2 -- Amended and Restated By-Laws of the Seller.
4.1 -- Form of Pooling and Servicing Agreement among the Seller,
the Servicer and the Trustee.
4.2 -- Form of Standard Terms and Conditions of Agreement between
the Seller and the Servicer.
4.3 -- Form of Surety Bond.
4.4 -- Form of Dealer Agreement.
4.5 -- Assignment and Release Agreement
5.1 -- Opinion of Stroock & Stroock & Lavan LLP with respect to
legality.
8.1 -- Opinion of Stroock & Stroock & Lavan LLP with respect to tax
matters (included as part of Exhibit 5.1).
23.1 -- Consent of Stroock & Stroock & Lavan LLP (included as part
of Exhibit 5.1).
23.2 -- Consent of KPMG Peat Marwick LLP.
24.1 -- Power of Attorney.*
</TABLE>
- ---------------
* Previously filed.
II-3
<PAGE> 80
(b) Financial Statement Schedules:
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer,
or controlling person in connection with the securities being registered,
such Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in such Act and will be governed by the final
adjudication of such issue;
(5) to provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser;
(6) that for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective; and
(7) that for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing of Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Irving and State of Texas, on the
12th day of May, 1997.
NATIONSCREDIT SECURITIZATION CORPORATION
(Registrant)
BY: *
---------------------------------------
Joseph A. Cutrona
Chief Executive Officer, President and
Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
* Chief Executive Officer, May 12, 1997
- ----------------------------------------------------- President
Joseph A. Cutrona and Director (principal
executive officer)
* Treasurer and Director May 12, 1997
- ----------------------------------------------------- (principal financial officer)
John E. Mack
* Director May 12, 1997
- -----------------------------------------------------
James H. Luther
* Senior Vice President and Chief May 12, 1997
- ----------------------------------------------------- Accounting Officer (principal
Karin Hirtler-Garvey accounting officer)
*By: /s/ JOHN E. MACK
-----------------------------------------------
John E. Mack
Attorney-in-fact
</TABLE>
II-5
<PAGE> 82
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Certificate of Incorporation of the
Seller.
3.2 -- Amended and Restated By-Laws of the Seller.
4.1 -- Form of Pooling and Servicing Agreement among the Seller,
the Servicer and the Trustee.
4.2 -- Form of Standard Terms and Conditions of Agreement between
the Seller and the Servicer.
4.3 -- Form of Surety Bond.
4.4 -- Form of Dealer Agreement.
4.5 -- Assignment and Release Agreement.
5.1 -- Opinion of Stroock & Stroock & Lavan LLP with respect to
legality.
8.1 -- Opinion of Stroock & Stroock & Lavan LLP with respect to tax
matters (included as part of Exhibit 5.1).
23.1 -- Consent of Stroock & Stroock & Lavan LLP (included as part
of Exhibit 5.1).
23.2 -- Consent of KPMG Peat Marwick LLP.
24.1 -- Power of Attorney.*
</TABLE>
- ---------------
* Previously filed
<PAGE> 1
EXHIBIT 1.1
NATIONSCREDIT SECURITIZATION CORPORATION
DEPOSITOR
NATIONSCREDIT GRANTOR TRUST 1997-1
UNDERWRITING AGREEMENT
New York, New York
May __, 1997
NationsBanc Capital Markets, Inc.,
as Representative of the several underwriters
NationsBank Corporate Center
100 North Tryon Street, NC1-007-10-01
Charlotte, North Carolina 28255
Ladies and Gentlemen:
NationsCredit Securitization Corporation, a Delaware corporation (the
"Company"), proposes to form a trust entitled the NationsCredit Grantor Trust
1997-1 (the "Trust") pursuant to the terms of a proposed Pooling and Servicing
Agreement, including the Standard Terms and Conditions of Agreement, to be
dated as of April 30, 1997, among the Company, as Depositor, NationsCredit
Commercial Corporation of America, as Servicer (the "Servicer" or
"NationsCredit Commercial"), and Bankers Trust Company, as Trustee and
Collateral Agent (the "Pooling and Servicing Agreement"), pursuant to which
certain ____% Marine Receivable-Backed Certificates (the "Certificates") will
be issued. Each Certificate will evidence a fractional, undivided percentage
interest in the Trust. The property of the Trust includes a pool of marine
retail installment sale contracts secured by new and used boats, boat motors
and boat trailers (the "Receivables"), certain monies received under the Simple
Interest Receivables and certain monies due under the Precomputed Receivables,
in each case, on or after April 30, 1997, security interests in the boats and
marine equipment financed thereby, an irrevocable surety bond, guaranteeing
payments of interest and principal on the Certificates (the "Surety Bond"),
issued by Capital Markets Assurance Corporation (the "Surety Bond Issuer"),
such amounts as from time to time may be held in one or more trust accounts
which will be established and maintained by the Servicer pursuant to the
Pooling and Servicing Agreement, the rights of the
<PAGE> 2
Company under that certain Purchase Agreement, dated as of April 30, 1997,
between the Company and the Servicer, the proceeds from any recourse rights of
the Servicer against any seller of new and used boats, boat motors and boat
trailers financed by the Receivables (a "Dealer") pursuant to any agreement
with a Dealer, the right to proceeds from claims on physical damage, credit
life and disability insurance policies relating to the Receivables, and any
property that shall have secured a Receivable and that shall have been acquired
by the Trustee. To the extent not defined herein, capitalized terms used
herein shall have the meanings specified in the Pooling and Servicing
Agreement.
The Company proposes to sell to the underwriters identified on Schedule I
hereto (the "Underwriters") for whom you are acting as representative (the
"Representative") the principal amount of the Certificates identified in
Schedule I hereto.
1. Representations and Warranties. The Company represents and warrants
to, and agrees with, each Underwriter that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933, as amended (the "Act"), and has filed with the
Securities and Exchange Commission (the "Commission") a registration
statement on such form, registration number 333-______, under the Act,
which has become effective, for the registration under the Act of the
Certificates. The Company proposes to file with the Commission pursuant
to Rule 424 under the Act a final prospectus relating to the Certificates
and the plan of distribution thereof and has previously advised the
Representative of all further information (financial and other) with
respect to the Company to be set forth therein. Such registration
statement, including the exhibits thereto, as amended to the date of this
agreement, is hereinafter called the "Registration Statement"; such
prospectus in the form in which it appears in the Registration Statement
is hereinafter called the "Preliminary Prospectus"; and such final form
of prospectus, in the form in which it shall be filed with the Commission
pursuant to Rule 424 under the Act, is hereinafter called the "Final
Prospectus."
(b) As of the date hereof, when the Final Prospectus is first filed
pursuant to Rule 424 under the Act, when, prior to the Closing Date (as
hereinafter defined in Section 3), any amendment to the Registration
Statement becomes effective (including the filing of any document
incorporated by reference in the Registration Statement), when any
supplement to the Final Prospectus is filed with the Commission and at
the Closing Date, (i) the Registration Statement, as amended as of any
such time, and the Final Prospectus, as amended or supplemented as of any
such time, will comply in all material respects with the applicable
requirements of the Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the respective rules thereunder, (ii)
the Registration Statement, as amended as of any such time, will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading, and (iii) the Final Prospectus as
amended or supplemented as of any such time, will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary in
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<PAGE> 3
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to the information
contained in or omitted from the Registration Statement or the Final
Prospectus or any amendment thereof or supplement thereto in reliance
upon and in conformity with information furnished in writing to the
Company by or on behalf of any information furnished in writing to the
Company by or on behalf of any Underwriter through the Representative
specifically for use in connection with the preparation of the
Registration Statement and the Final Prospectus.
(c) The Company has been duly incorporated and is validly existing
as a corporation under the laws of the State of Delaware and has
corporate and other power and authority to own its properties and conduct
is business, as now conducted by it, and to enter into and perform its
obligations under this Agreement and each of the Purchase Agreement, the
Reimbursement Agreement and the Pooling and Servicing Agreement.
(d) The Company is not aware of (i) any request by the Commission
for any further amendment of the Registration Statement or for any
additional information or (ii) the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement.
(e) (i) This Agreement and each of the Purchase Agreement, the
Reimbursement Agreement and the Pooling and Servicing Agreement
have been duly authorized by the Company, and this Agreement and
each of the Purchase Agreement, the Reimbursement Agreement and the
Pooling and Servicing Agreement have been duly executed and
delivered by the Company, and each of this Agreement, the Purchase
Agreement, the Reimbursement Agreement and the Pooling and
Servicing Agreement, when executed and delivered by the Company,
does or will, as the case may be, constitute a legal, valid and
binding agreement of the Company, enforceable against the Company
in accordance with its terms, subject, as to the enforcement
of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium, receivership and similar laws affecting creditors' rights
generally and to general principles of equity (regardless of
whether the enforcement of such remedies is considered in a
proceeding in equity or at law); and (ii) the Certificates have
been duly authorized by the Company, and when duly executed by the
Trustee on behalf of the Trust, authorized by the Trustee and
delivered in accordance with the Pooling and Servicing Agreement
and delivered and paid for as provided herein, will be validly
issued and outstanding and entitled to the benefits and security
afforded by the Pooling and Servicing Agreement.
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties set forth herein, the Company
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Company, the principal amount of the
Certificates set forth opposite such Underwriter's name in Schedule I hereto
at the purchase price of ______% of the principal amount of such Certificates,
plus, in each case, interest calculated from and including May 15, 1997
through and including the date prior to the Closing Date.
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<PAGE> 4
3. Delivery and Payment. Delivery of and payment for the
Certificates shall be made at the offices of Stroock & Stroock & Lavan LLP, 180
Maiden Lane, New York, New York 10038, at 10:00 a.m. New York time on
__________, 1997 or such other place as shall be agreed by the Company and the
Underwriters, and which date and time may be postponed by agreement between the
Representative and the Company or as provided in Section 9 hereof (such date
and time of delivery and payment for the Certificates being herein called the
"Closing Date"). Delivery of the Certificates shall be made to the
Representative for the respective accounts of the several Underwriters against
payment by the several Underwriters through the Representative of the purchase
price thereof by one or more wires of immediately available funds to an account
designated by the Company. Delivery of the Certificates shall be made through
the facilities of The Depository Trust Company.
4. Representations, Warranties and Covenants of the Underwriters.
The Underwriters agree with the Company that:
(a) Each Underwriter represents and warrants to the Company that it
will not, in connection with the offering and sale of the Certificates,
use (i) any "Computational Materials" within the meaning of the no-action
letter, dated May 20, 1994, issued by the Division of Corporation Finance
of the Commission to Kidder, Peabody Acceptance Corporation I, Kidder,
Peabody & Co. Incorporated, and Kidder Structured Asset Corporation and
the no-action letter, dated May 27, 1994, issued by the Division of
Corporation Finance of the Commission to the Public Securities
Association or (ii) any "ABS Term Sheets" within the meaning of the
no-action letter, dated February 17, 1995, issued by the Division of
Corporation Finance of the Commission to the Public Securities
Association; and
(b) None of the Underwriters will institute against, or join any
other Person in instituting against, the Company any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or
other proceeding under any federal or state bankruptcy or similar law,
until [ ].
5. Agreements. The Company agrees with the several Underwriters that:
(a) Prior to the termination of the offering of the Certificates,
the Company will not file any amendment to the Registration Statement or
supplement to the Final Prospectus unless the Company has furnished the
Representative a copy of such amendment or supplement for their review
prior to filing and will not file any such proposed amendment or
supplement to which the Representative reasonably objects. Subject to
the foregoing sentence, the Company will cause the Final Prospectus to be
filed with the Commission pursuant to Rule 424. The Company will advise
the Representative promptly (i) when the Final Prospectus shall have been
filed with the Commission pursuant to Rule 424, (ii) when any amendment
to the Registration Statement relating to the Certificates shall have
become effective, (iii) of any request by the Commission for any
amendment of the Registration Statement or amendment of or supplement to
the Final Prospectus or for any additional information, (iv) of the
issuance
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<PAGE> 5
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose, and (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Certificates for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. The Company will use its
best efforts to prevent the issuance of any such stop order and, if
issued, to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Certificates
is required to be delivered under the Act, any event occurs as a result
of which the Final Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or if it
shall be necessary to amend or supplement the Final Prospectus to comply
with the Act or the Exchange Act or the respective rules thereunder. The
Company promptly will prepare and file with the Commission, subject to
the first sentence of paragraph (a) of this Section 5, an amendment or
supplement which will correct such statement or omission or an amendment
which will effect such compliance and will use its best efforts to cause
any required post-effective amendment to the Registration Statement
containing such amendment to be made effective as soon as possible.
(c) The Company will make generally available to its security
holders and to the Representative as soon as practicable, but not later
than 60 days after the close of the period covered thereby, an earnings
statement with respect to the Trust (in form complying with the
provisions of Rule 158 of the regulations under the Act) covering a
twelve-month period beginning not later than the first day of the
Company's fiscal quarter next following the "effective date" (as defined
in said Rule 158) of the Registration Statement.
(d) The Company will furnish to the Representative and counsel for
the Underwriters, without charge, executed copies of the Registration
Statement (including exhibits thereto) and each amendment thereto which
shall become effective on or prior to the Closing Date and, so long as
delivery of a prospectus by an Underwriter or dealer may be required by
the Act, as many copies of any Preliminary Prospectus and the Final
Prospectus and any amendments thereof and supplements thereto as the
Representative may reasonably request. The Company will pay the expenses
of printing all documents relating to the initial offering, provided that
any additional expenses incurred in connection with the requirement of
delivery of a market-making prospectus will be borne by the
Representative.
(e) The Company will make available to the Representative the
Certificate Factor for each month as soon as possible after the Company
has received such Certificate Factor from the Servicer pursuant to
Section 13.9 of the Pooling and Servicing Agreement.
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<PAGE> 6
(f) The Company will arrange for the qualification of the
Certificates for sale under the laws of such jurisdictions as the
Representative may reasonably designate, will maintain such
qualifications in effect so long as required for the distribution of the
Certificates and will arrange for the determination of the legality of
the Certificates for purchase by institutional investors; provided,
however, that the Company shall not be required to qualify to do business
in any jurisdiction where it is not now so qualified or to take any
action which would subject it to general or unlimited service of process
in any jurisdiction where it is not now so subject.
6. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Certificates shall be subject
to the accuracy of the representations and warranties on the part of the
Company contained herein as of the date hereof, as of the date of the
effectiveness of any amendment to the Registration Statement filed prior to the
Closing Date (including the filing of any document incorporated by reference
therein) and as of the Closing Date, to the accuracy of the statements of the
Company made in any certificates delivered pursuant to the provisions hereof,
to the performance by the Company of its obligations hereunder and to the
following additional conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued, and no
proceedings for that purpose shall have been instituted or threatened;
and the Final Prospectus shall have been filed or mailed for filing with
the Commission within the time period prescribed by the Commission.
(b) The Company shall have furnished to the Representative the
opinion of Stroock & Stroock & Lavan LLP, special counsel for the
Company, dated the Closing Date, to the effect of paragraphs (i), (ii),
(iii), (iv), (vi), (vii), (viii), (ix), (x) and (xi) below, and the
opinion of a member of the office of the General Counsel of NationsBank
Corporation, special counsel for the Company, dated the Closing Date, to
the effect of paragraph (v) below:
(i) the Company is a duly organized and validly existing
corporation in good standing under the laws of the State of
Delaware and has the corporate power and authority to perform its
obligations under this Agreement, the Purchase Agreement, the
Reimbursement Agreement and the Pooling and Servicing Agreement,
and the issuance and sale of the Certificates have been duly
authorized by the Company;
(ii) each of this Agreement, the Purchase Agreement, the
Reimbursement Agreement and the Pooling and Servicing Agreement has
been duly authorized, executed and delivered by the Company;
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<PAGE> 7
(iii) the Certificates, the Purchase Agreement and the Pooling
and Service Agreement conform in all material respects to the
description thereof contained in the Final Prospectus;
(iv) assuming due authorization, execution and delivery by
the other parties thereto, each of this Agreement, the Purchase
Agreement, the Reimbursement Agreement and the Pooling and
Servicing Agreement constitutes a legal, valid and binding
agreement of the Company, enforceable in accordance with their
respective terms against the Company, as the case may be, subject
(a) to the effect of bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto, (b) to
the understanding that no opinion is expressed as to the
application of equitable principles in any proceeding, whether at
law or in equity, and (c) to limitations of public policy under
applicable securities laws as to rights of indemnity and
contribution thereunder;
(v) to the best knowledge of such counsel, there is
no pending or threatened action, suit or proceeding before any
court or governmental agency, authority or body or any arbitrator
involving the Company of a character required to be disclosed in
the Registration Statement which is not adequately disclosed
therein and in the Final Prospectus;
(vi) to the best knowledge of such counsel, there is no
franchise, contract or other document of a character required to be
described in the Registration Statement or Final Prospectus, or to
be filed as an exhibit, which is not described or filed as
required;
(vii) the Registration Statement has become effective under
the Act; to the best knowledge of such counsel no stop order
suspending the effectiveness of the Registration Statement has been
issued, and no proceedings for that purpose have been instituted or
threatened; the Registration Statement, the Final Prospectus and
each amendment thereof or supplement thereto (other than (i)
financial, numerical, statistical and quantitative information
contained therein and (ii) the information under the heading "The
Surety Bond Issuer," as to which such counsel need express no view)
comply as to form in all material respects with the applicable
requirements of the Act and the Exchange Act and the respective
rules thereunder;
(viii) no consent, approval, authorization or order of any
court or governmental agency or body is required, with respect to
the Company, for the consummation of the transactions contemplated
herein, or in the Purchase Agreement, the Reimbursement Agreement
or the Pooling and Servicing Agreement, except such as have been
obtained under the Act and such as may be required under the blue
sky laws of any jurisdiction in connection with the
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<PAGE> 8
purchase and distribution of the Certificates by the Underwriters
and such other a approvals (specified in such opinion) as have been
obtained;
(ix) neither the issue and sale of the Certificates, nor the
consummation of any other of the transactions herein contemplated
or in the Purchase Agreement, the Reimbursement Agreement or the
Pooling and Servicing Agreement, nor the fulfillment of the terms
hereof or thereof will conflict with, result in a breach of, or
constitute a default under the certificate of incorporation or
by-laws of the Company or, to the best knowledge of such counsel,
the terms of any indenture or other agreement or instrument known
to such counsel and to which the Company is a party or bound, or
any order or regulation known to such counsel to be applicable to
the Company of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the
Company;
(x) the Pooling and Servicing Agreement will not be required
to be qualified under the Trust Indenture Act of 1939, as amended,
and the Trust is not, and immediately following the sale of the
Certificates pursuant hereto, will not, be required to be
registered under the Investment Company Act of 1940, as amended;
and
(xi) the issuance, offer and sale of the Certificates have
been duly authorized by the Company, and when issued, authenticated
in accordance with the Pooling and Servicing Agreement and paid for
pursuant to this Agreement, the Certificates will be validly issued
and entitled to the benefits of the Pooling and Servicing
Agreement.
Stroock & Stroock & Lavan LLP, special counsel for the Company, shall also
state that it has no reason to believe that the Registration Statement or any
amendment thereof at the time it became effective contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading or
that the Final Prospectus, as amended or supplemented, as of its date and as of
the Closing Date, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading (other
than (i) financial, numerical, statistical and quantitative information
contained therein and (ii) the information under the heading "The Surety Bond
Issuer," as to which such counsel need express no view).
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than (i) the United
States or the general corporation laws of the State of Delaware, (ii) with
respect to the office of the General Counsel of NationsBank Corporation, the
State of Pennsylvania, and (iii) with respect to Stroock & Stroock & Lavan LLP,
the State of New York, to the extent deemed proper and specified in such
opinion, upon the opinion of other counsel of good standing believed to be
reliable and who are
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<PAGE> 9
satisfactory to counsel for the Underwriters; and (B) as to matters of fact,
to the extent deemed proper, on certificates of responsible officers of the
Company or its affiliates and public officials.
(c) The Servicer shall have furnished to the Representative the
opinion of a member of the office of the General Counsel of NationsBank
Corporation, special counsel for NationsCredit Commercial, dated the
Closing Date, to the effect of paragraphs (i), (ii), (iv), (v) and (vi)
below, and the opinion of Stroock & Stroock & Lavan LLP, special counsel
for the Servicer, dated the Closing Date, to the effect of paragraph
(iii) below:
(i) NationsCredit Commercial is a duly organized and validly
existing corporation in good standing under the laws of the State
of North Carolina and has the corporate power and authority to
perform its obligations under the Pooling and Servicing Agreement,
the Purchase Agreement and the Indemnification Agreement;
(ii) each of the Pooling and Servicing Agreement, the Purchase
Agreement and the Indemnification Agreement has been duly
authorized, executed and delivered by NationsCredit Commercial;
(iii) assuming due authorization, execution and delivery by
the other parties thereto, each of the Pooling and Servicing
Agreement, the Purchase Agreement and the Indemnification Agreement
constitutes a legal, valid and binding agreement of NationsCredit
Commercial, enforceable in accordance with their respective terms
against NationsCredit Commercial, as the case may be, subject (a)
to the effect of bankruptcy, insolvency, reorganization, moratorium
and similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, (b) to the
understanding that no opinion is expressed as to the application of
equitable principles in any proceeding, whether at law or in
equity, and (c) to limitations of public policy under applicable
securities laws as to rights of indemnity and contribution
thereunder;
(iv) to the best knowledge of such counsel, there is no
pending or threatened action, suit or proceeding before any court
or governmental agency, authority or body or any arbitrator
involving NationsCredit Commercial of a character required to be
disclosed in the Registration Statement which is not adequately
disclosed therein and in the Final Prospectus;
(v) neither the consummation of any of the transactions
contemplated in the Pooling and Servicing Agreement, the Purchase
Agreement or the Indemnification Agreement, nor the fulfillment of
the terms thereof will conflict with, result in a breach of, or
constitute a default under the articles of incorporation or by-laws
of NationsCredit Commercial; and
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<PAGE> 10
(vi) neither the consummation of any of the transactions
contemplated in the Pooling and Servicing Agreement, the Purchase
Agreement or the Indemnification Agreement, nor the fulfillment of
the terms thereof will conflict with, result in a breach of, or
constitute a default under the terms of any indenture or other
agreement or instrument known to such counsel and to which
NationsCredit Commercial is a party or bound, or any order or
regulation known to such counsel to be applicable to NationsCredit
Commercial of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over
NationsCredit Commercial.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than (i) the United
States or the general corporation laws of the State of Delaware. (ii) with
respect to the office of the General Counsel of NationsBank Corporation, the
State of Pennsylvania, and (iii) with respect to Stroock & Stroock & Lavan LLP,
the State of New York, to the extent deemed proper and specified in such
opinion, upon the opinion of other counsel of good standing believed to be
reliable and who are satisfactory to counsel for the Underwriters; and (B) as
to matters of fact, to the extent deemed proper, on certificates of responsible
officers of NationsCredit Commercial or its affiliates and public officials.
(d) The Company shall have furnished to the Representative an
opinion of Stroock & Stroock & Lavan LLP, special counsel for the Company, dated
the Closing Date, to the effect that:
(i) the statements in the Final Prospectus under the heading
"Certain Federal Income Tax Consequences" and the summary thereof
under the heading "Prospectus Summary--Tax Status," to the extent
they constitute matters of Federal law or legal conclusions with
respect thereto, have been reviewed by such counsel and are correct
in all material respects; and
(ii) the statements in the Final Prospectus under the headings
"Certain Legal Aspects of the Receivables" and "ERISA
Considerations," to the extent they constitute matters of Federal
law or legal conclusions with respect thereto, have been reviewed
by such counsel and are correct in all material respects.
(e) The Company shall have furnished to the Representative (i) an
opinion or opinions of Stroock & Stroock & Lavan LLP, special counsel for the
Company, dated the Closing Date, to the effect that (A) the separate corporate
existence of the Company would not be disregarded so as to include the assets
and liabilities of the Company in the bankruptcy estate of NationsCredit
Commercial in the event of a bankruptcy proceeding with respect thereto; and (B)
the Receivables were sold and transferred from the NationsCredit Commercial to
the Company in a manner such that the Receivables would not be considered to be
property of the bankruptcy estate of NationsCredit Commercial in the event of a
bankruptcy proceeding with respect thereto; and (ii) opinions of local counsel
to the Company, dated the Closing Date, with respect to the
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<PAGE> 11
perfection of the Trust's interest in the Receivables, in each case in a form
previously approved by the Representative and its counsel. In addition, the
Representative shall have received a reliance letter with respect to any
opinion that the Company is required to deliver to each Rating Agency.
(f) The Representative shall have received from Mayer, Brown & Platt,
special counsel for Receivables Capital Corporation ("RCC"), an opinion dated
the Closing Date, to the effect that:
(i) RCC is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware
and has the corporate power and authority to perform its obligations
under the Assignment;
(ii) the Assignment has been duly authorized, executed
and delivered by RCC;
(iii) the Assignment constitutes a legal, valid and
binding agreement of RCC, enforceable in accordance with their
respective terms against RCC, as the case may be, subject (a) to the
effect of bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, (b) to the understanding
that no opinion is expressed as to the application of equitable
principles in any proceeding, whether at law or in equity, and (c)
to limitations of public policy under applicable securities laws as
to rights of indemnity and contribution thereunder;
(iv) neither the consummation of any of the transactions
contemplated in the Assignment, nor the fulfillment of the terms
thereof will conflict with, result in a breach of, or constitute a
default under the articles of incorporation or by-laws of RCC; and
(v) neither the consummation of any of the transactions
contemplated in the Assignment, nor the fulfillment of the terms
thereof will conflict with, result in a breach of, or constitute a
default under the terms of any indenture or other agreement or
instrument known to such counsel and to which RCC is a party or
bound, or any order or regulation known to such counsel to be
applicable to RCC of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over
RCC.
(g) The Representative shall have received an opinion of counsel to
the Trustee, dated the Closing Date, to the effect that:
(i) the Trustee has been duly incorporated and is
validly existing as a banking corporation under the laws of the
State of New York and has the power and authority to enter into and
to perform all actions required of it under the Pooling and
Servicing Agreement;
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<PAGE> 12
(ii) the Pooling and Servicing Agreement has been duly
authorized, executed and delivered by the Trustee, and constitutes a
legal, valid and binding obligation of the Trustee, enforceable
against the Trustee in accordance with its terms except as such
enforceability may be limited by (A) bankruptcy, insolvency,
liquidation, reorganization, moratorium, conservatorship,
receivership or other similar laws now or hereafter in effect
relating to the enforcement of creditors' rights in general, as such
laws would apply in the event of a bankruptcy, insolvency,
liquidation, reorganization, moratorium, conservatorship,
receivership or similar occurrence affecting the Trustee, and (B)
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) as
well as concepts of reasonableness, good faith and fair dealing;
(iii) the Certificates have been duly executed on behalf
of the Trust, authenticated and delivered by the Trustee;
(iv) the execution and delivery of the Pooling and
Servicing Agreement and, on behalf of the Trust, the Certificates,
by the Trustee and the performance by the Trustee of the terms
thereof do not conflict with or result in a violation of (A) any law
or regulation of the United States or the State of New York
governing the banking or trust powers of the Trustee, or (B) the
certificate of incorporation or articles of association or by-laws
of the Trustee; and
(v) no approval, authorization or other action by, or
filing with, any governmental authority of the United States or the
State of New York having jurisdiction over the banking or trust
powers of the Trustee is required in connection with the execution
and delivery by the Trustee of the Pooling and Servicing Agreement
and, on behalf of the Trust, the Certificates, or the performance by
the Trustee thereunder.
(h) The Representative shall have received an opinion of Shaw, Pittman,
Potts & Trowbridge, special counsel for the Surety Bond Issuer, dated the
Closing Date, to the effect that:
(i) the Surety Bond Issuer is a New York domiciled
monoline stock insurance company which engages only in the business of
financial guaranty insurance and is duly incorporated and validly existing
under the laws of the State of New York and has the full power and
authority (corporate and otherwise) to issue, and to take all action
required of it under, the Surety Bond;
(ii) the execution, delivery and performance by the
Surety Bond Issuer of the Surety Bond have been duly authorized by all
necessary corporate action on the part of the Surety Bond Issuer;
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<PAGE> 13
(iii) the execution, delivery and performance by the
Surety Bond Issuer of the Surety Bond do not require the consent or
approval of, the giving of notice to, the prior registration with, or the
taking of any other action in respect of any state or other governmental
agency or authority which has not previously been obtained or effected;
provided, however, the New York State Insurance Law requires that policy
forms and any amendments thereto shall be filed with the Superintendent of
the New York State Insurance Department within thirty (30) days of their
use by the insurer if not previously so filed;
(iv) the Surety Bond has been duly authorized, executed
and delivered by the Surety Bond Issuer and constitutes the legally valid
and binding obligation of the Surety Bond Issuer, enforceable in
accordance with its terms subject, as to enforcement, to (a) bankruptcy,
reorganization, insolvency, moratorium and other laws relating to or
affecting the enforcement of creditors' rights generally, including,
without limitation, laws relating to fraudulent transfers or conveyances,
preferences and equitable subordination, presently or from time to time in
effect and general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law) and (b) the
qualification that the remedy of specific performance may be subject to
equitable defenses and to the discretion of the court before which any
proceedings with respect thereto may be brought;
(v) the obligations of the Surety Bond Issuer under the
Security Bond will rank equally with general obligations and all other
unsecured indebtedness of the Surety Bond Issuer outstanding on the
Closing Date or thereafter which are not contractually subordinated to the
payment of such obligations under the Surety Bond; and
(vi) the Surety Bond is not required to be registered
under the Securities Act of 1933, as amended, in connection with the offer
and sale of the Certificates in the manner contemplated by the Final
Prospectus.
(i) The Surety Bond Issuer shall have furnished to the
Representative a certificate of the Surety Bond Issuer, signed by
any of a Managing Director or General Counsel, dated the Closing
Date, to the effect that the signer of such certificate has
carefully examined the Registration Statement (excluding any
documents incorporated by reference therein), the Final Prospectus
and this Agreement and that, to the best of his knowledge:
(i) any information with respect to the Surety Bond Issuer
in the Registration Statement or any amendment thereof at the time
it became effective did not contain any untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
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<PAGE> 14
(ii) any information with respect to the Surety Bond Issuer in
the Final Prospectus, as amended or supplemented, as of its date and
as of the Closing Date, did not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and
(iii) there has been no change in the financial condition of the
Surety Bond Issuer since December 31, 1996 which would have a
material adverse effect on the Surety Bond Issuer's ability to meet
its obligations under the Surety Bond.
(j) The Company shall have furnished to the Representative a
certificate of the Company, signed by (i) any of the Chairman of the
Board, the President or any Vice President, and (ii) any of the principal
treasury officer, the principal financial officer or the principal
accounting officer of the Company, dated the Closing Date, to the effect
that the signers of such certificate have carefully examined the
Registration Statement (excluding any documents incorporated by reference
therein), the Final Prospectus and this Agreement and that, to the best of
their knowledge:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or
prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement, as amended, has been issued, and no
proceedings for that purpose have been instituted or threatened; and
(iii) since the respective dates as of which information is given
in the Final Prospectus, there has been no material adverse change
in the condition (financial or other), earnings, business or
properties of the Company, whether or not arising from transactions
in the ordinary course of business, except as set forth in or
contemplated in the Final Prospectus.
(k) On the date hereof and on the Closing Date, Price Waterhouse LLP
and/or any other firm of certified independent public accountants acceptable to
the Representative shall have furnished to the Representative a letter, dated
the date hereof and the date of the Closing Date, respectively, in form and
substance satisfactory to the Representative, confirming that they are
independent accountants within the meaning of the Act and the Exchange Act and
the respective applicable published rules and regulations thereunder, and
stating in effect that using the assumptions and methodology used by the
Company, all of which shall be described in such letter, they have recalculated
such numbers and percentages set forth in the Final Prospectus as the
Representative may reasonably request and agreed to by Price Waterhouse LLP,
compared the results of their calculations to the corresponding items in the
Final Prospectus, and found
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<PAGE> 15
each such number and percentage set forth in the Final Prospectus to be in
agreement with the results of such calculations. To the extent historical
financial information with respect to the Company and/or historical financial,
delinquency or related information with respect to one or more Servicers is
included in the Final Prospectus, such letter or letters shall also relate to
such information.
(l) The Certificates shall have received the rating of "AAA"
from Standard & Poor's Rating Services and "Aaa" from Moody's Investors
Service, Inc.
(m) On the Closing Date, [ ] shall have
furnished to the Representative a letter, dated the Closing Date, in form
and substance satisfactory to the Representative, indicating that the
Company and the Underwriters are entitled to rely upon the audited
financial statements of the Surety Bond Issuer prepared by them.
(n) On or prior to the Closing Date, NationsCredit Commercial
shall have executed the Indemnification Agreement, substantially in the
form of Exhibit A hereto.
(o) Prior to the Closing Date, the Company shall have furnished
to the Representative such further information, certificates and documents
as the Representative may reasonably request.
If any of the conditions specified in this Section G shall not
have been fulfilled in all material respects when and as provided in this
Agreement or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representative and its counsel, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representative. Notice of such
cancellation shall be given to the Company in writing or by telephone or
telegraph confirmed in writing.
7. Reimbursement of Underwriters' Expenses. If the sale of the
Certificates provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied
or because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof other than by
reason of a default by any of the Underwriters, the Company will reimburse,
subject to paragraph (e) of Section 8 below, the Underwriters severally upon
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the proposed purchase and sale of the Certificates.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person who controls any Underwriter within the meaning of
either the Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages
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<PAGE> 16
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement for the registration of the Certificates as
originally filed or in any amendment thereof, or in any Preliminary Prospectus
or the Final Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each such
indemnified party for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that (i) the Company will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter through the Representative specifically for use in connection
with the preparation thereof and (ii) such indemnity with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter (or
any person controlling such Underwriter) from whom the person asserting any
such loss, claim, damage or liability purchased the Certificates which are the
subject thereof if such person did not receive a copy of the Final Prospectus
(or the Final Prospectus as amended or supplemented) at or prior to the
confirmation of the sale of such Certificates to such person in any case where
such delivery is required by the Act and the untrue statement or omission of a
material fact contained in any Preliminary Prospectus was corrected in the
Final Prospectus (or the Final Prospectus as amended or supplemented). This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Underwriter, but only with
reference to written information relating to such Underwriter furnished to the
Company by or on behalf of such Underwriter through the Representative
specifically for use in the preparation of the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any Underwriter may otherwise have. The Company acknowledges
that the statements set forth under the heading "Underwriting" constitute the
only information furnished in writing by or on behalf of the several
Underwriters for inclusion in the documents referred to in the foregoing
indemnity, and you, as the Representative, confirm that such statements are
correct.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 8. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to
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<PAGE> 17
participate therein, and, to the extent that it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not
be liable to such indemnified party under this Section 8 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed separate
counsel in connection with the assertion of legal defenses in accordance with
the proviso to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by the Representative in the case of subparagraph
(a), representing the indemnified parties under subparagraph (a) who are
parties to such action), (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action or
(iii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party; and except that if
clause (i) or (iii) is applicable, such liability shall be only in respect of
the counsel referred to in such clause (i) or (iii). After such notice from
the indemnifying party to such indemnified party, the indemnifying party will
not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the consent of the indemnifying
party, which will not be unreasonably withheld, unless such indemnifying party
waived its rights under this Section 8 in writing in which case the indemnified
party may effect such a settlement without such consent. No indemnifying party
may avoid its duty to indemnify under this Section 8 if such indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of or consent to the entry of any judgment in, any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on all claims that are the subject
matter of such action. An indemnifying party shall not be liable for any
settlement of any claim effected without its consent unless its right to
consent under this Section 8 has been waived in writing
(d) To provide for just and equitable contribution in circumstances in
which the indemnification provided for in paragraph (a) or (b) of this Section 8
is due in accordance with its terms but is for any reason held by a court to be
unavailable from the Company or the Underwriters on the grounds of policy or
otherwise, the Company and the Underwriters shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same) to which
the
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<PAGE> 18
Company and one or more of the Underwriters may be subject, in such proportion
so that the Underwriters are responsible for that portion represented by the
percentage that the underwriting discount bears to the sum of such discount and
the purchase price of the Certificates specified in Schedule I hereto and the
Company is responsible for the balance; provided, however, that in no case
shall any Underwriter (except as may be provided in any agreement among
underwriters relating to the offering of the Certificates) be responsible for
any amount in excess of the underwriting discount applicable to the
Certificates purchased by such Underwriter hereunder.
Notwithstanding anything to the contrary in this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 8, each
person who controls an Underwriter within the meaning of either the Act or the
Exchange Act shall have the same rights to contribution as such Underwriter,
and each person who controls the Company within the meaning of either the Act
or the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the preceding
sentence of this paragraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this paragraph (d), notify such
party or parties from whom contribution may be, sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this paragraph (d).
9. Default by an Underwriter. If any one or more Underwriters
shall fail to purchase and pay for any of the Certificates agreed to be
purchased by such Underwriter or Underwriters hereunder and such failure to
purchase shall constitute a default in the performance of its or their
obligations under this Agreement, the remaining Underwriters shall be obligated
severally to take up and pay for (in the respective proportions which the
amount of Certificates set forth opposite their names in Schedule I hereto bear
to the aggregate amount of Certificates set forth opposite the names of all the
remaining Underwriters) the Certificates which the defaulting Underwriter or
Underwriters agreed but failed to purchase; provided, however, that in the
event that the aggregate amount of Certificates which the defaulting
Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of
the aggregate amount of Certificates set forth in Schedule I hereto, the
remaining Underwriters shall have the right to purchase all, but shall not be
under any obligation to purchase any, of the Certificates, and if such
nondefaulting Underwriters do not purchase all the Certificates, this Agreement
will terminate without liability to any nondefaulting Underwriter or the
Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representative shall determine in order that the required
changes in the Registration Statement and the Final Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company and any nondefaulting Underwriter for damages occasioned by its default
hereunder.
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<PAGE> 19
10. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Representative, by notice given to the Company
prior to delivery of and payment for the Certificates, if prior to such time (i)
trading in securities generally on the New York Stock Exchange shall have been
suspended or limited or minimum prices shall have been established on such
Exchange, or (ii) there shall have occurred any outbreak or material escalation
of hostilities or other calamity or crisis the effect of which on the financial
markets of the United States is such as to make it, in the judgment of the
Representative, impracticable to market the Certificates.
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Certificates. The provisions
of Section 7 and 8 hereof and this Section 11 shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representative, will be mailed,
delivered or telegraphed to NationsBanc Capital Markets, Inc., NationsBank
Corporate Center, NC1-007-07-01, 100 North Tryon Street, Charlotte, North
Carolina 28255, Attention: Russell C. Albers, Director, and to any other
Representative at such address, if any, as is specified in writing to the
Company for notices hereunder; or, if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at NationsBank Corporate Center,
NC1-007-23-01, 100 North Tryon Street, Charlotte, North Carolina, 28255,
Attention: John E. Mack, Senior Vice President, with a copy to: NationsBank
Corporation, Legal Department, NC1-007-20-01, NationsBank Corporate Center, 100
North Tryon Street, Charlotte, North Carolina, 28255, Attention: Paul J.
Polking, General Counsel.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICT OF LAWS.
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<PAGE> 20
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the several Underwriters.
Very truly yours,
NATIONSCREDIT SECURITIZATION
CORPORATION
By:_______________________________
John E. Mack
Senior Vice President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first written
above.
NATIONSBANC CAPITAL MARKETS, INC.,
as Representative
By: NATIONSBANC CAPITAL MARKETS, INC.
By:________________________
Russell C. Albers
Director
For themselves and as Representative
for the other several Underwriters,
if any named in Schedule I to the
foregoing Agreement
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<PAGE> 21
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Certificates to
Underwriters be Purchased
- ------------ ------------------
<S> <C>
NationsBanc Capital Markets, Inc., ............... $____________
....................................... $____________
Total ......................................... $____________
</TABLE>
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<PAGE> 22
EXHIBIT A
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is entered into between NationsCredit
Commercial Corporation of America, a North Carolina corporation
("NationsCredit"), and NationsBanc Capital Markets, Inc., in its individual
capacity and as representative of the underwriters identified on Schedule I
hereto (collectively, the "Underwriters"), dated as of May __, 1997.
The Underwriters and NationsCredit Securitization Corporation, a
Delaware corporation (the "Company"), have entered into an Underwriting
Agreement (the "Underwriting Agreement"), dated as of May __, 1997, providing
for the sale by the Company to the Underwriters of the ___% Marine
Receivable-Backed Certificates (the "Certificates") of the NationsCredit
Grantor Trust 1997-1 (the "Trust"). The Certificates represent beneficial
interests in a pool of marine retail installment sale contracts secured by new
and used boats, boat motors and boat trailers (the "Receivables"), sold by
NationsCredit to the Company pursuant to the Purchase Agreement (the "Purchase
Agreement"), dated as of April 30, 1997, and certain monies received under the
Simple Interest Receivables and certain monies due under the Precomputed
Receivables, in each case, on or after May 1, 1997, security interests in the
boats and marine equipment financed thereby, an irrevocable surety bond,
limited in amount, covering certain payments under the Receivables (the "Surety
Bond"), issued by Capital Markets Assurance Corporation (the "Surety Bond
Issuer"), such amounts as from time to time may be held in one or more trust
accounts which will be established and maintained by the Servicer pursuant to
the Pooling and Servicing Agreement, the fights of the Company under that
certain Purchase Agreement dated as of April 30, 1997 between the Company and
the Servicer, the proceeds from any recourse rights of the Servicer against any
seller of new and used boats, boat motors and boat trailers financed by the
Receivables (a "Dealer") pursuant to any agreement with a Dealer, the right to
proceeds from claims on physical damage, credit life and disability insurance
policies relating to the Receivables, and any property that shall have secured a
Receivable and that shall have been acquired by the Trustee. The Certificates
will be issued pursuant to a Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of April 30, 1997, among the Company as
Depositor, NationsCredit as Servicer and Bankers Trust Company as Trustee.
This Indemnification Agreement is being entered into by the parties hereto as a
condition to the execution of Underwriting Agreement and to induce the
Underwriters to execute the same. Capitalized terms used but not defined herein
shall have the meanings ascribed thereto in the Underwriting Agreement.
1. Indemnification. (a) NationsCredit agrees to indemnify and hold
harmless each Underwriter and each person who controls any Underwriter within
the meaning of either the Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Act, the Exchange Act or other Federal
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<PAGE> 23
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement for the registration
of the Certificates as originally filed or in any amendment thereof, or in any
Preliminary Prospectus or the Final Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that (i)
NationsCredit will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished
to the Company or NationsCredit by or on behalf of any Underwriter through the
Representatives specifically for use in connection with the preparation thereof
and (ii) such indemnity with respect to any Preliminary Prospectus shall not
inure to the benefit of any Underwriter (or any person controlling such
Underwriter) from whom the person asserting any such loss, claim. damage or
liability purchased the Certificates which are the subject thereof if such
person did not receive a copy of the Final Prospectus (or the Final Prospectus
as amended or supplemented) at or prior to the confirmation of the sale of such
Certificates to such person in any case where such delivery is required by the
Act and the untrue statement or omission of a material fact contained in any
Preliminary Prospectus was corrected in the Final Prospectus (or the Final
Prospectus as amended or supplemented). This indemnity agreement will be in
addition to any liability which NationsCredit may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
NationsCredit, each of its directors, and each person who controls
NationsCredit within the meaning of either the Act or the Exchange Act, to the
same extent as the foregoing indemnity from NationsCredit to each Underwriter,
but only with reference to written information relating to such Underwriter
furnished to the Company or NationsCredit by or on behalf of such Underwriter
through the Representatives specifically for use in the preparation of the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise have.
NationsCredit acknowledges that the statements set forth under the heading
"Underwriting" constitute the only information furnished in writing by or on
behalf of the several Underwriters for inclusion in the documents referred to
in the foregoing indemnity, and the Representatives confirm that such
statements are correct.
(c) Promptly after receipt by an indemnified party under this
Indemnification Agreement of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Indemnification Agreement, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party otherwise than under this Indemnification
Agreement. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the
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<PAGE> 24
commencement thereof, the indemnifying party will be entitled to participate
therein, and, to the extent that it may elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel satisfactory to
such indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the light to select separate counsel to
assert such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Indemnification Agreement for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel
in connection with the assertion of legal defenses in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by the Representatives in the case of subparagraph
(a) and approved by NationsCredit in the case of subparagraph (b), representing
the indemnified parties under Subparagraph (a) who are parties to such action),
(ii) the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense
of the indemnifying party; and except that if clause (i) or (iii) is
applicable, such liability shall be only in respect of the counsel referred to
in such clause (i) or (iii). After such notice from the indemnifying party to
such indemnified party, the indemnifying party will not be liable for the costs
and expenses of any settlement of such action effected by such indemnified
party without the consent of the indemnifying party, which will not be
unreasonably withheld, unless such indemnifying party waived its rights under
this Indemnification Agreement in writing in which case the indemnified party
may effect such a settlement without such consent. No indemnifying party may
avoid its duty to indemnify under this Indemnification Agreement if such
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of any
judgment in, any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on all
claims that are the subject matter of such action. An indemnifying party shall
not be liable for any settlement of any claim effected without its consent
unless its right to consent under this Indemnification Agreement has been
waived in writing.
2. Contribution. To provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section l (a) or l
(b) of this Indemnification Agreement is due in accordance with its terms but
is for any a reason held by a court to be unavailable from NationsCredit or the
Underwriters on the grounds of policy or otherwise, NationsCredit and the
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<PAGE> 25
Underwriters shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) to which NationsCredit and one
or more of the Underwriters may be subject, in such proportion so that the
Underwriters are responsible for that portion represented by the percentage
that the underwriting discount bears to the sum of such discount and the
purchase price of the Certificates specified in Schedule I hereto and
NationsCredit is responsible for the balance; provided, however, that in no
case shall any Underwriter (except as may be provided in any agreement among
underwriters relating to the offering of the Certificates) be responsible for
any amount in excess of the underwriting discount applicable to the
Certificates purchased by such Underwriter hereunder.
Notwithstanding anything to the contrary in this Section 2, no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Indemnification
Agreement, each person who controls an Underwriter within the meaning of either
the Act or the Exchange Act shall have the same rights to contribution as such
Underwriter, and each person who controls NationsCredit within the meaning of
either the Act or the Exchange Act and each director of NationsCredit shall
have the same rights to contribution as NationsCredit, subject in each case to
the preceding sentence of this Section 2. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 2, notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this Section 2.
3. No Termination. NationsCredit agrees that it shall not terminate,
amend or modify the Purchase Agreement or the Pooling and Servicing Agreement
or in each case any portion thereof without the prior written consent of each
Underwriter.
4. Notices. All communications hereunder will be in writing and effective
only on receipt, and, if sent to the Representatives, will be mailed, delivered
or telegraphed to NationsBanc Capital Markets, Inc., NationsBank Corporate
Center, NC1-007-07-01, 100 North Tryon Street, Charlotte, North Carolina 28255,
Attention: Russell C. Albers, Director, and to any other Representative at such
address, if any, as is specified in writing to NationsCredit for notices
hereunder; or, if sent to NationsCredit, will be mailed, delivered or
telegraphed and confirmed to it at NationsBank Corporate Center, NC1-007-23-01,
100 North Tryon Street, Charlotte, North Carolina, 28255, Attention: John E.
Mack, Senior Vice President, with a copy to: NationsBank Corporation, Legal
Department, NC1-007-20-01,. NationsBank Corporate Center, 100 North Tryon
Street, Charlotte, North Carolina, 28255, Attention: Paul J. Polking, General
Counsel.
5. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling
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<PAGE> 26
persons referred to in Section 1 hereof, and no other person will have any
right or obligation hereunder.
6. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES
OF CONFLICT OF LAWS.
7. Counterparts. This Indemnification Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original, but all of such counterparts shall together constitute one
instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among NationsCredit and the several Underwriters.
NATIONSCREDIT COMMERCIAL
CORPORATION OF AMERICA
By:______________________________
John E. Mack
Senior Vice President
NATIONSBANC CAPITAL MARKETS, INC.,
as Representative
By: NATIONSBANC CAPITAL MARKETS,
INC.
By:______________________________
Russell C. Albers
Director
-26-
<PAGE> 27
SCHEDULE I
Underwriters
NationsBanc Capital Markets, Inc.
-27-
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
NATIONSCREDIT SECURITIZATION CORPORATION
--------------------------------------------------
Adopted in accordance with the provisions
of Section 245 of the
Delaware General Corporation Law
--------------------------------------------------
NATIONSCREDIT SECURITIZATION CORPORATION, a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
Pursuant to the provisions of Section 245 of Chapter 1, Title 8 of the
Delaware Code (known, identified and referred to as the "General Corporation
Law of the State of Delaware", which for purposes of this Amended and Restated
Certificate of Incorporation shall include the acts amendatory thereof and
supplemental thereto.
1. The name of the corporation is Nationscredit Securitization
Corporation The date of filing of its original Certificate of Incorporation with
the Secretary of State was December 21, 1995.
2. This Amended and Restated Certificate of Incorporation restates
and integrates and further amends the Certificate of Incorporation of this
corporation by adding certain provisions to ensure that the corporation is a
special purpose corporation and that an independent director serves on the Board
of Directors.
3. The Certificate of Incorporation is hereby amended and restated in
its entirety as follows:
1. The name of the corporation is NationsCredit Securitization
Corporation (the "Corporation").
<PAGE> 2
2. The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, City of Wilmington, County of
New Castle, 19801. The name of the registered agent at such registered
office is The Corporation Trust Company.
3. The purpose for which the Corporation is organized is to
engage in the following activities:
(a) to acquire, issue, cause to be issued, dispose of and or
hold certificates or other evidences of interests (the "Certificates") in,
or to issue notes or other evidences of indebtedness ("Notes," and
together with the Certificates, the "Securities") that may be secured by
certain payment obligations of dealers in consumer, commercial and capital
products ("Dealers") or payment obligations of buyers of such products or
of obligors under any notes, mortgages, installment contracts or other
payment obligations (collectively, "Obligors") secured by such products,
including but not limited to, new and used automobiles and trucks,
recreational vehicles, new and used boats, boat motors, boat trailers,
manufactured housing, industrial machinery, musical instruments,
agricultural, household and garden equipment, or payment obligations under
notes, mortgages, installment contracts, or other payment obligations,
including but not limited to, leases, home equity lines of credit, second
mortgages, unsecured credit cards, or other installment obligations
(collectively, "Receivables");
(b) to acquire, own, hold, service, sell, assign, pledge and
otherwise deal with Receivables, related insurance policies and insurance
certificates, the group of writings evidencing payment obligations of
Dealers or Obligors and the security interests created in connection
therewith and agreements with Dealers, Obligors and other originators or
services of Receivables; and
(c) to engage in any activity and to exercise any powers
permitted to corporations under the Laws of the State of Delaware that are
incident to the foregoing and necessary or convenient to accomplish the
foregoing.
4. The total number of shares of stock that the
Corporation shall have authority to issue is 1,000 shares
<PAGE> 3
of Common Stock, $.01 par value.
5. Election of directors need not be by ballot unless
the By-laws of the Corporation shall so provide. The books of the
Corporation may (subject to any statutory requirements) be kept at such
place whether within or outside the State of Delaware as may be designated
by the Board of Directors or in the By-Laws of the Corporation.
6. (a) The affairs of the Corporation shall be
managed by a Board of Directors (the "Board" or the "Board of Directors"),
which shall at all times include at least one Outside Director. The
number of directors of the Corporation shall be from time to time fixed
by, or in the manner provided in, the By-laws of the Corporation with the
initial Board consisting of three members. Notwithstanding anything to
the contrary contained herein or in the Corporation's By-laws, as promptly
as practicable but in any event within thirty (30) days following the
occurrence of a Rating Event, the authorized number of directors shall be
increased by the excess, if any, of two over the number of directors who
are then Outside Directors and any such vacancy shall be filled by an
additional Outside Director. At all times during the existence of any
Rating Event, the Board shall include at least two Outside Directors. A
rating event (a "Rating Event") shall be deemed to have occurred upon the
earlier to occur of (a) the downgrading of the short-term unsecured debt
of NationsBank Corporation ("NationsBank") to or below (i) A-2 by Standard
& Poor's Corporation ("S&P") or (ii) P-2 by Moody's Investors Service,
Inc. ("Moody's" and together with S&P, the "Rating Agencies"), or (b) the
downgrading of NationsBank's senior long-term debt to or below (i) A- by
S&P or (ii) A3 by Moody's, and shall be deemed to exist as long as
NationsBank's short-term unsecured debt or senior long-term debt is rated
at or below any such rating by either Rating Agency. In the event and at
the time that a Rating Event is no longer continuing, the Board may
include only one Outside Director. An "Outside Director" shall be an
individual who, for at least eighteen (18) months prior to being appointed
by the Board, shall not have been, a director, officer or employee of, or
indirect beneficial owner of 5% or more of the voting securities of, or
member of the immediate family of any such director, officer, employee or
beneficial owner of, NationsCredit Corporation
<PAGE> 4
("NationsCredit"), or any corporate affiliate of NationsCredit.
Notwithstanding the foregoing, an Outside Director may be a director or
officer of one or more other corporations that is an affiliate or are
affiliates of NationsCredit, provided that (i) each such corporation is
or was formed with limited purposes similar to the Corporation and (ii)
such person does not earn, in the aggregate, material compensation for
serving in such positions. For the purposes of the foregoing, an
"affiliate" of an entity is an entity controlling, controlled by, or
under common control with such entity. Notwithstanding any other
provision of this Certificate of Incorporation or any other provision of
law that so empowers the Corporation, in the event of the death,
incapacity, or resignation of an Outside Director or such position is
otherwise vacated, a successor Outside Director shall be appointed by the
remaining directors of the Corporation and no action requiring the
unanimous affirmative vote of the Board of Directors of the Corporation
shall be taken until a successor Outside Director is elected and
qualified and approves such action.
(b) The Corporation shall maintain a separate principal
office through which its business shall be conducted, which office may be
located in identifiable space within the headquarters of NationsBank of
Texas, National Association at 901 East Main Street, Dallas, Texas
pursuant to a lease on commercially reasonable terms.
(c) The Corporation shall maintain corporate records and
books of account and shall not commingle its corporate records and books
of account with the corporate records and books of account of
NationsCredit or any other entity.
(d) The Board of Directors of the Corporation shall hold
appropriate meetings to authorize all of its corporate actions.
(e) The funds and other assets of the Corporation shall
not be commingled with those of any other entity.
(f) The Corporation shall pay its own expenses and shall
not guarantee or hold itself out as
<PAGE> 5
being liable for the debts of any other party.
(g) The Corporation shall not form, or cause to be
formed, any subsidiaries.
(h) The Corporation shall act solely in its corporate
name and through its duly authorized officers or agents in the conduct of
its business, and shall conduct its business so as not to mislead others
as to the identity of the entity with which they are concerned.
(i) Meetings of the stockholders of the Corporation
shall be held not less frequently than one time per annum.
(j) The Corporation shall operate in such a manner that
it would not be substantively consolidated with any other entity.
7. In furtherance and not in limitation of the powers
conferred upon the Board of Directors by law, the Board of Directors shall
have the power to adopt, amend and repeal from time to time the By-laws of
the Corporation.
8. Notwithstanding any other provision of this Certificate of
Incorporation and any provision of law that otherwise so empowers the
Corporation, the Corporation shall not, without (a) the prior written
consent of each trustee from time to time ("Trustee") under any pooling
and servicing agreement, indenture or similar agreement ("Agreement")
between the Corporation, a Trustee and a servicer and/or master servicer,
if any, pursuant to which the Corporation shall issue, and (b) the
unanimous approval of the Board of Directors of the Corporation (which,
following the occurrence and during the continuation of a Rating Event,
shall include the approval of at least two Outside Directors), do any of
the following:
i) engage in any business or activity other than in
connection with or relating to facilitating the issuance of
Certificates principally representing an interest in Receivables or
Notes principally secured by Receivables;
<PAGE> 6
ii) incur any indebtedness, or assume or guaranty any
indebtedness of any other entity, other than in connection with the
issuance of Securities by the Corporation pursuant to Agreements;
iii) dissolve or liquidate, in whole or in part;
iv) merge or consolidate with or into any other entity
or convey or transfer its properties and assets substantially as an
entirety to an entity, unless:
(a) the entity (if other than the Corporation)
formed or surviving the consolidation or merger or which
acquires the properties and assets of the Corporation is
organized under the laws of the State of Delaware,
expressly assumes the due and punctual payment of, and all
obligations of the Corporation in connection with the
indebtedness of the Corporation, and has a Certificate
of Incorporation containing provisions identical to the
provisions of Articles 3, 6, 10 and this Article 8; and
(b) immediately after giving effect to the
transaction, no default or event of default has occurred
and is continuing under any indebtedness of the
Corporation or any agreements relating to such
indebtedness;
v) sell all or substantially all of the assets of the
Corporation;
vi) institute proceedings to be adjudicated a bankrupt
or insolvent, or consent to the institution of bankruptcy or
insolvency proceedings against it, or file a petition or answer or
consent seeking reorganization or relief under the Federal
bankruptcy laws, or consent to the filing of any such petition or
to the appointment of a receiver, liquidator, assignee, trustee,
conservator, sequestrator (or
<PAGE> 7
other similar official) of the Corporation or of any substantial
part of the Corporation's property, or make an assignment for the
benefit of creditors, or admit in writing its inability to pay its
debts generally as they become due, or take corporate action in
furtherance of any such action; or
vii) amend this Certificate of Incorporation to alter in
any manner or delete Article 3, Article 6, Article 10 or this
Article 8.
9. The Corporation is to have perpetual existence.
10. The Corporation shall not, without the prior written
consent of each Trustee under any Agreement and without the prior written
confirmation of each nationally recognized rating agency which has rated
the Securities issued pursuant to an Agreement at the request of the
Corporation or the underwriter of the Securities that such rating agency
will not lower the then-current rating of the Securities, alter, change or
repeal Articles 3, 6, 8 or this Article 10 of the Certificate of
Incorporation. Subject to the foregoing limitation, the Corporation
reserves the right to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
11. No director shall have any personal liability to the
Corporation or its stockholders for any monetary damages for breach of
fiduciary duty as a director, except that this Article 11 shall not
eliminate or limit the liability of each director (i) for any breach of
such director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which
such director derived an improper personal benefit. If the Delaware
General Corporation Law is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of
<PAGE> 8
a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so
amended. Any repeal or modification of this provision shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
12. The incorporator of the Corporation is Michael A.
Golden, whose mailing address is c/o Stroock & Stroock & Lavan, 7 Hanover
Square, New York, New York 10004.
4. This Amended and Restated Certificate of Incorporation was
duly adopted by the Board of Directors in accordance with Sections 242 and 245
of the General Corporation Law of the State of Delaware.
5. This Restated Certificate of Incorporation shall be
effective upon filing.
IN WITNESS WHEREOF, said NationsCredit Securitization Corporation has
caused this Certificate to be signed by Joseph A. Cutrona, its Chief Executive
Officer and President, this ____ day of February, 1996.
--------------------------------------
Name: Joseph A. Cutrona
Title: Chief Executive Officer
and President
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
NATIONSCREDIT SECURITIZATION CORPORATION
(A Delaware corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK.
(a) Every holder of stock in the Corporation shall be entitled to have a
certificate signed by, or in the name of, the Corporation by the Chairman or
Vice-Chairman of the Board of Directors, if any, or by the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation representing the number of shares
owned by such person in the Corporation. If such certificate is countersigned
by a transfer agent other than the Corporation or its employee or by a
registrar other than the Corporation or its employee, any other signature on
the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature
<PAGE> 2
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
(b) Whenever the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
Corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
(c) The Corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Board of Directors may require the owner of any lost, stolen
or destroyed certificate, or such person's legal representative, to give the
Corporation a bond sufficient to indemnify the Corporation against any claim
that may be made against it on account of the
-2-
<PAGE> 3
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate.
2. FRACTIONAL SHARE INTERESTS.
The Corporation may, but shall not be required to, issue fractions of a
share.
3. STOCK TRANSFERS.
Upon compliance with provisions restricting the transfer or registration
of transfer of shares of stock, if any, transfers or registration of transfer
of shares of stock of the Corporation shall be made only on the stock ledger of
the Corporation by the registered holder thereof, or by such person's attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary of the Corporation or with a transfer agent or a registrar, if any,
and on surrender of the certificate or certificates for such shares of stock
properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS.
(a) In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of
-3-
<PAGE> 4
stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty nor less than ten days before
the date of such meeting. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record
-4-
<PAGE> 5
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more than
sixty days prior to such action. If no record date has been fixed, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
5. MEANING OF CERTAIN TERMS.
As used herein in respect of the right to notice of a meeting of
stockholders or a waiver thereof or to participate or vote thereat or to
consent or dissent in writing in lieu of a meeting, as the case may be, the
term "share" or "shares" or "share of stock" or "shares of stock" or
"stockholder" or "stockholders" refers to an outstanding share or shares of
stock and to a holder or holders of record of outstanding shares of stock when
the Corporation is authorized to issue only one class of shares of stock, and
said reference is also intended to include any outstanding share or shares of
stock and any holder or holders of record of outstanding shares of stock of any
class upon which or upon whom the Certificate of Incorporation confers such
rights where there are two or more classes or series of
-5-
<PAGE> 6
shares of stock or upon which or upon whom the General Corporation Law confers
such rights notwithstanding that the Certificate of Incorporation may provide
for more than one class or series of shares of stock, one or more of which are
limited or denied such rights thereunder; provided, however, that no such right
shall vest in the event of an increase or a decrease in the authorized number
of shares of stock of any class or series which is otherwise denied voting
rights under the provisions of the Certificate of Incorporation, including any
preferred stock which is denied voting rights under the provisions of the
resolution or resolutions adopted by the Board of Directors with respect to the
issuance thereof.
6. STOCKHOLDER MEETINGS.
(a) TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the Board of Directors. A special meeting shall be
held on the date and at the time fixed by the Board of Directors.
(b) PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the Board of Directors may,
from time to time, fix. Whenever the Board of Directors shall fail to fix such
place, the meeting
-6-
<PAGE> 7
shall be held at the registered office of the Corporation in the State of
Delaware.
(c) CALL. Annual meetings and special meetings may be called by the
Board of Directors or by any officer instructed by the Board of Directors to
call the meeting.
(d) NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date and hour of the meeting. The notice of an
annual meeting shall state that the meeting is called for the election of
Directors and for the transaction of other business which may properly come
before the meeting, and shall (if any other action which could be taken at a
special meeting is to be taken at such annual meeting), state such other action
or actions as are known at the time of such notice. The notice of a special
meeting shall in all instances state the purpose or purposes for which the
meeting is called. If any action is proposed to be taken which would, if taken,
entitle stockholders to receive payment for their shares of stock, the notice
shall include a statement of that purpose and to that effect. Except as
otherwise provided by the General Corporation Law, a copy of the notice of any
meeting shall be given, personally or by mail, not less than ten days nor more
than sixty days before the date of the meeting, unless the lapse
-7-
<PAGE> 8
of the prescribed period of time shall have been waived, and directed to each
stockholder at such person's address as it appears on the records of the
Corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States mail. If a meeting is adjourned
to another time, not more than thirty days hence, and/or to another place, and
if an announcement of the adjourned time and place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the Board
of Directors, after adjournment, fixes a new record date for the adjourned
meeting. Notice need not be given to any stockholder who submits a written
waiver of notice before or after the time stated therein. Attendance of a
person at a meeting of stockholders shall constitute a waiver of notice of such
meeting, except when the stockholder attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders need be specified in any written waiver of notice.
(e) STOCKHOLDER LIST. There shall be prepared and made,
-8-
<PAGE> 9
at least ten days before every meeting of stockholders, a complete list of the
stockholders, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list
required by this section or the books of the Corporation, or to vote at any
meeting of stockholders.
(f) CONDUCT OF MEETING. Meetings of the stockholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting: the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice President, a chairman for the meeting chosen
-9-
<PAGE> 10
by the Board of Directors or, if none of the foregoing is in office and present
and acting, by a chairman to be chosen by the stockholders. The Secretary of
the Corporation or, in such person's absence, an Assistant Secretary, shall act
as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the chairman for the meeting shall appoint a secretary of
the meeting.
(g) PROXY REPRESENTATION. Every stockholder may authorize another person
or persons to act for such stockholder by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by such
person's attorney-in-fact. No proxy shall be voted or acted upon after three
years from its date unless such proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and,
if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A proxy may be made irrevocable regardless of
whether the interest with which it is coupled is an interest in the stock
itself or an interest in the Corporation generally.
-10-
<PAGE> 11
(h) INSPECTORS AND JUDGES. The Board of Directors, in advance of any
meeting, may, but need not, appoint one or more inspectors of election or
judges of the vote, as the case may be, to act at the meeting or any
adjournment thereof. If an inspector or inspectors or judge or judges are not
appointed by the Board of Directors, the person presiding at the meeting may,
but need not, appoint one or more inspectors or judges. In case any person who
may be appointed as an inspector or judge fails to appear or act, the vacancy
may be filled by appointment made by the person presiding thereat. Each
inspector or judge, if any, before entering upon the discharge of such person's
duties, shall take and sign an oath faithfully to execute the duties of
inspector or judge at such meeting with strict impartiality and according to
the best of his ability. The inspectors or judges, if any, shall determine the
number of shares of stock outstanding and the voting power of each, the shares
of stock represented at the meeting, the existence of a quorum and the validity
and effect of proxies, receive votes, ballots or consents, hear and determine
all challenges and questions arising in connection with the right to vote,
count and tabulate all votes, ballots or consents, determine the result, and do
such other acts as are proper to conduct the election or vote
-11-
<PAGE> 12
with fairness to all stockholders. On request of the person presiding at the
meeting, the inspector or inspectors or judge or judges, if any, shall make a
report in writing of any challenge, question or matter determined by such
person or persons and execute a certificate of any fact so found.
(i) QUORUM. Except as the General Corporation Law or these By-Laws may
otherwise provide, the holders of a majority of the outstanding shares of stock
entitled to vote shall constitute a quorum at a meeting of stockholders for the
transaction of any business. The stockholders present may adjourn the meeting
despite the absence of a quorum. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any shareholders.
(j) VOTING. Each stockholder entitled to vote in accordance with the
terms of the Certificate of Incorporation and of these By-Laws, or, with
respect to the issuance of preferred stock, in accordance with the terms of a
resolution or resolutions of the Board of Directors, shall be entitled to one
vote, in person or by proxy, for each share of stock entitled to vote held by
such stockholder. In the election of Directors, a plurality of the votes
present at the meeting shall elect. Any other action shall be authorized by a
majority of the votes cast
-12-
<PAGE> 13
except where the Certificate of Incorporation or the General Corporation Law
prescribes a different percentage of votes and/or a different exercise of
voting power.
Voting by ballot shall not be required for corporate action except as
otherwise provided by the General Corporation Law.
7. STOCKHOLDER ACTION WITHOUT MEETINGS.
Any action required to be taken, or any action which may be taken, at any
annual or special meeting of stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of the
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing
and shall be delivered to the Corporation by delivery to its registered office
in Delaware, its principal place of business or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
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stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION.
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors of the Corporation. The use of the
phrase "whole Board" herein refers to the total number of Directors which the
Corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER.
A Director need not be a stockholder, a citizen of the United States, or a
resident of the State of Delaware. The initial Board of Directors shall
consist of three persons. Thereafter the number of Directors constituting the
whole board shall be at least one. Subject to the foregoing limitation and
except for the first Board of Directors, such number may be fixed from time to
time by action of the stockholders or of the
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Board of Directors, or, if the number is not fixed, the number shall be three.
The number of Directors may be increased or decreased by action of the
stockholders or of the Board of Directors. At least one director of the
Corporation (the "Outside Director") shall not be, and for at least eighteen
months prior thereto shall not have been, a director, officer or employee of,
or direct or indirect beneficial owner of 5% or more of the voting securities
of, or member of the immediate family of any such director, officer, employee
or beneficial owner of, NationsCredit Corporation (formerly Nations Financial
Holdings Corporation) ("NationsCredit"), or any corporate affiliate of
NationsCredit. Notwithstanding the foregoing, an Outside Director may be a
director of one or more other corporations that is an affiliate or are
affiliates of NationsCredit, provided that (i) each such corporation is or was
formed with limited purposes similar to the Corporation and (ii) such person
does not earn, in the aggregate, material compensation for serving in such
positions. For the purposes of the foregoing, an "affiliate" of an entity is
an entity controlling, controlled by, or under common control with such entity.
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3. ELECTION AND TERM.
The first Board of Directors, unless the members thereof shall have been
named in the Certificate of Incorporation, shall be elected by the incorporator
or incorporators and shall hold office until the first annual meeting of
stockholders and until their successors have been elected and qualified or
until their earlier resignation or removal. Any Director may resign at any
time upon written notice to the Corporation. Thereafter, Directors who are
elected at an annual meeting of stockholders, and Directors who are elected in
the interim to fill vacancies and newly created Directorships, shall hold
office until the next annual meeting of stockholders and until their successors
have been elected and qualified or until their earlier resignation or removal.
In the interim between annual meetings of stockholders or of special meetings
of stockholders called for the election of Directors and/or for the removal of
one or more Directors and for the filling of any vacancies in the Board of
Directors, including vacancies resulting from the removal of Directors for
cause or without cause, any vacancy in the Board of Directors may be filled by
the vote of a majority of the remaining Directors then in office, although less
than a quorum, or by the sole remaining Director. Should any Outside Director
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resign, die, become disabled or incapacitated, or be prevented from acting, the
affairs of the Corporation shall and may be managed by the remaining directors,
who shall promptly replace the aforementioned Outside Director with a person
meeting the requirement set forth above.
4. MEETINGS.
(a) TIME. Regular meetings shall be held at such time as the Board shall
fix. Special meetings may be called upon notice.
(b) FIRST MEETING. The first meeting of each newly elected Board may be
held immediately after each annual meeting of the stockholders at the same
place at which the meeting is held, and no notice of such meeting shall be
necessary to call the meeting, provided a quorum shall be present. In the
event such first meeting is not so held immediately after the annual meeting of
the stockholders, it may be held at such time and place as shall be specified
in the notice given as provided for special meetings of the Board of Directors,
or at such time and place as shall be fixed by the consent in writing of all of
the Directors.
(c) PLACE. Meetings, both regular and special, shall be held at such
place within or without the State of Delaware as
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shall be fixed by the Board.
(d) CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, or the President, or of a majority of the Directors.
(e) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required
for regular meetings for which the time and place have been fixed. Written,
oral or any other mode of notice of the time and place shall be given for
special meetings at least twenty-four hours prior to the meeting; notice may be
given by telephone or telecopy (in which case it is effective when given) or by
mail (in which case it is effective seventy-two hours after mailing by prepaid
first class mail). The notice of any meeting need not specify the purpose of
the meeting. Any requirement of furnishing a notice shall be waived by any
Director who signs a written waiver of such notice before or after the time
stated therein. Attendance of a Director at a meeting of the Board shall
constitute a waiver of notice of such meeting, except when the Director attends
a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
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lawfully called or convened.
(f) QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevent such majority, whereupon a
majority of the Directors in office shall constitute a quorum, provided that
such majority shall constitute at least one-third (1/3) of the whole Board.
Any Director may participate in a meeting of the Board by means of a conference
telephone or similar communications equipment by means of which all Directors
participating in the meeting can hear each other, and such participation in a
meeting of the Board shall constitute presence in person at such meeting. A
majority of the Directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
act of the Board shall be the act by vote of a majority of the Directors
present at a meeting, a quorum being present. The quorum and voting provisions
herein stated shall not be construed as conflicting with any provisions of the
General Corporation Law and these By-Laws which govern a meeting of Directors
held to fill vacancies and newly created Directorships in the Board.
(g) CHAIRMAN OF THE MEETING. The Chairman of the Board,
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if any and if present and acting, shall preside at all meetings. Otherwise,
the Vice-Chairman of the Board, if any and if present and acting, or the
President, if present and acting, or any other Director chosen by the Board,
shall preside.
5. REMOVAL OF DIRECTORS.
Any or all of the Directors may be removed for cause or without cause by
the stockholders.
6. COMMITTEES.
The Board of Directors may, by resolution passed by a majority of the
whole Board, designate one or more committees, each committee to consist of one
or more of the Directors of the Corporation. The Board may designate one or
more Directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. Any such
committee, to the extent provided in the resolution of the Board, shall have
and may exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it. In the absence
or disqualification of any member of any such committee or
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committees, the members thereof present at any meeting and not disqualified
from voting, whether or not they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
7. ACTION IN WRITING.
Any action required or permitted to be taken at any meeting of the Board
of Directors or any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
ARTICLE III
OFFICERS
1. EXECUTIVE OFFICERS.
The Board of Directors may elect or appoint a Chairman of the Board of
Directors, a President, one or more Vice Presidents (which may be denominated
with additional descriptive titles), a Secretary, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers and such other
officers as it may
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determine. Any number of offices may be held by the same person.
2. TERM OF OFFICE: REMOVAL.
Unless otherwise provided in the resolution of election or appointment,
each officer shall hold office until the meeting of the Board of Directors
following the next annual meeting of stockholders and until such officer's
successor has been elected and qualified or until the earlier resignation or
removal of such officer. The Board of Directors may remove any officer for
cause or without cause.
3. AUTHORITY AND DUTIES.
All officers, as between themselves and the Corporation, shall have such
authority and perform such duties in the management of the Corporation as may
be provided in these By-Laws, or, to the extent not so provided, by the Board
of Directors.
4. THE CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board of Directors, if present and acting, shall
preside at all meetings of the Board of Directors,
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otherwise, the President, if present, shall preside, or if the President does
not so preside, any other Director chosen by the Board shall preside.
5. THE PRESIDENT.
The President shall be the chief executive officer of the Corporation.
6. VICE PRESIDENTS.
Any Vice President that may have been appointed, in the absence or
disability of the President, shall perform the duties and exercise the powers
of the President, in the order of their seniority, and shall perform such other
duties as the Board of Directors shall prescribe.
7. THE SECRETARY.
The Secretary shall keep in safe custody the seal of the Corporation and
affix it to any instrument when authorized by the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors. The
Secretary (or in such officer's absence, an Assistant Secretary, but if neither
is present another person selected by the Chairman for
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the meeting) shall have the duty to record the proceedings of the meetings of
the stockholders and Directors in a book to be kept for that purpose.
8. THE TREASURER.
The Treasurer shall have the care and custody of the corporate funds, and
other valuable effects, including securities, and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation
and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board of Directors. The Treasurer shall disburse the funds of the Corporation
as may be ordered by the Board, taking proper vouchers for such disbursements,
and shall render to the President and Directors, at the regular meetings of the
Board, or whenever they may require it, an account of all transactions as
Treasurer and of the financial condition of the Corporation. If required by
the Board of Directors, the Treasurer shall give the Corporation a bond for
such term, in such sum and with such surety or sureties as shall be
satisfactory to the Board for the faithful performance of the duties of such
office and for the restoration to the
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Corporation, in case of such person's death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in such person's possession or under such person's control
belonging to the Corporation.
ARTICLE IV
CORPORATE SEAL
AND
CORPORATE BOOKS
The corporate seal shall be in such form as the Board of Directors shall
prescribe. The books of the Corporation may be kept within or without the
State of Delaware, at such place or places as the Board of Directors may, from
time to time, determine.
ARTICLE V
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
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ARTICLE VI
INDEMNITY
(a) Any person who was or is a party or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he or she is or was a
Director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(including employee benefit plans) (hereinafter an "indemnitee"), shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification than
permitted prior thereto), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such indemnitee in connection with such action, suit or proceeding,
if the indemnitee acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation, and
with respect to any criminal action or proceeding, had no reasonable
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cause to believe such conduct was unlawful. The termination of the proceeding,
whether by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
believe such conduct was unlawful.
(b) Any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the Corporation to procure a judgment in its favor by reason of the fact that
he or she is or was a Director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another Corporation, partnership, joint venture, trust or
other enterprise (including employee benefit plans) shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the
General Corporation Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide
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<PAGE> 28
broader indemnification than permitted prior thereto), against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court in which such suit or action was
brought, shall determine, upon application, that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) All reasonable expenses incurred by or on behalf of the indemnitee in
connection with any suit, action or proceeding, may be advanced to the
indemnitee by the Corporation.
(d) The rights to indemnification and to advancement of expenses
conferred in this article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the Certificate of
Incorporation, a By-Law of the
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Corporation, agreement, vote of stockholders or disinterested Directors or
otherwise.
(e) The indemnification and advancement of expenses provided by this
article shall continue as to a person who has ceased to be a Director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
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EXHIBIT 4.1
NATIONSCREDIT SECURITIZATION CORPORATION,
Depositor,
NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA,
Servicer,
and
BANKERS TRUST COMPANY,
Trustee and Collateral Agent.
POOLING AND SERVICING AGREEMENT
Dated as of April 30, 1997
$___________________
NationsCredit Grantor Trust 1997-1
_____% Marine Receivable-Backed Certificates
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
<S> <C> <C>
SECTION 1.1. CREATION OF TRUST ............................................... 1
ARTICLE II
SECTION 2.1. CONVEYANCE OF DEPOSITOR RECEIVABLES AND RCC RECEIVABLES ......... 1
ARTICLE III
SECTION 3.1. SURETY BOND ..................................................... 3
ARTICLE IV
SECTION 4.1. ACCEPTANCE BY TRUSTEE ........................................... 3
ARTICLE V
SECTION 5.1. INCORPORATION OF STANDARD TERMS AND CONDITIONS OF AGREEMENT ..... 3
ARTICLE VI
SECTION 6.1. SPECIAL DEFINITIONS AND TERMS ................................... 3
ARTICLE VII
SECTION 7.1. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR ...... 5
ARTICLE VIII
SECTION 8.1. NATIONSCREDIT COMMERCIAL NOT TO RESIGN AS SERVICER .............. 6
ARTICLE IX
SECTION 9.1. AGENTS FOR SERVICE .............................................. 6
ARTICLE X
SCHEDULE A .................................................................... 1
SCHEDULE B .................................................................... 1
SCHEDULE C .................................................................... 1
ARTICLE XI
DEFINITIONS
SECTION 11.1. DEFINITIONS .................................................... 1
SECTION 11.2. USAGE OF TERMS ................................................. 12
SECTION 11.3. CUTOFF DATE AND RECORD DATE .................................... 12
SECTION 11.4. SECTION REFERENCES ............................................. 13
ARTICLE XII
THE RECEIVABLES
SECTION 12.1. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR .................... 13
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 12.2. REPURCHASE UPON BREACH ......................................... 16
SECTION 12.3. CUSTODY OF RECEIVABLE FILES .................................... 16
SECTION 12.4. DUTIES OF SERVICER AS CUSTODIAN ................................ 16
SECTION 12.5. INSTRUCTIONS; AUTHORITY TO ACT ................................. 17
SECTION 12.6. CUSTODIAN'S INDEMNIFICATION .................................... 17
SECTION 12.7. EFFECTIVE PERIOD AND TERMINATION ............................... 17
ARTICLE XIII
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 13.1 DUTIES OF SERVICER ............................................. 18
SECTION 13.2 COLLECTION OF RECEIVABLES PAYMENTS ............................. 18
SECTION 13.3 REALIZATION UPON RECEIVABLES ................................... 19
SECTION 13.4 PHYSICAL DAMAGE INSURANCE ...................................... 19
SECTION 13.5 MAINTENANCE OF SECURITY INTERESTS IN BOATS ..................... 19
SECTION 13.6 COVENANTS OF SERVICER .......................................... 19
SECTION 13.7 PURCHASE OF RECEIVABLES UPON BREACH ............................ 20
SECTION 13.8 SERVICING FEE .................................................. 20
SECTION 13.9 SERVICER'S CERTIFICATE ......................................... 21
SECTION 13.10 ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT ........... 21
SECTION 13.11 ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT ........ 22
SECTION 13.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES........................................ 22
SECTION 13.13 SERVICER EXPENSES .............................................. 22
SECTION 13.14 APPOINTMENT OF SUB-SERVICER .................................... 22
SECTION 13.15 REPRESENTATIONS AND WARRANTIES OF THE SERVICER
WITH RESPECT TO THE RCC
RECEIVABLES ................................................................... 23
ARTICLE XIV
DISTRIBUTIONS: STATEMENTS TO CERTIFICATEHOLDERS
SECTION 14.1. ACCOUNTS ....................................................... 25
SECTION 14.2. COLLECTIONS .................................................... 27
SECTION 14.3. APPLICATION OF COLLECTIONS ..................................... 28
SECTION 14.4. ADDITIONAL DEPOSITS ............................................ 28
SECTION 14.5. DISTRIBUTIONS .................................................. 29
SECTION 14.6. NET DEPOSITS ................................................... 30
SECTION 14.7. STATEMENTS TO CERTIFICATEHOLDERS ............................... 31
ARTICLE XIV A
THE SURETY BOND
SECTION 14A.1. THE SURETY BOND ................................................ 31
SECTION 14A.2. PREFERENCE EVENTS .............................................. 31
SECTION 14A.3. SURRENDER OF SURETY BOND ....................................... 32
SECTION 14A.4. REPLACEMENT SURETY BOND ........................................ 32
ARTICLE XV
THE CERTIFICATES
SECTION 15.1. THE CERTIFICATES ............................................... 32
SECTION 15.2. AUTHENTICATION OF CERTIFICATES ................................. 33
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 15.3. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES .......... 33
SECTION 15.4. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES .............. 34
SECTION 15.5. PERSONS DEEMED OWNERS .......................................... 34
SECTION 15.6. ACCESS TO LIST OF CERTIFICATEHOLDERS NAMES AND ADDRESSES ....... 34
SECTION 15.7. MAINTENANCE OF OFFICE OR AGENCY ................................ 35
SECTION 15.8. BOOK-ENTRY CERTIFICATES ........................................ 35
SECTION 15.9. NOTICES TO CLEARING AGENCY ..................................... 36
SECTION 15.10. DEFINITIVE CERTIFICATES ........................................ 36
ARTICLE XVI
THE DEPOSITOR
SECTION 16.1. REPRESENTATIONS OF DEPOSITOR ................................... 36
SECTION 16.2. LIABILITY OF DEPOSITOR; INDEMNITIES ............................ 38
SECTION 16.3. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF DEPOSITOR...................................... 39
SECTION 16.4. LIMITATION ON LIABILITY OF DEPOSITOR AND OTHERS ................ 39
SECTION 16.5. DEPOSITOR MAY OWN CERTIFICATES ................................. 39
SECTION 16.6. DEPOSITOR'S INTEREST IN RESERVE ACCOUNT; NO TRANSFER ........... 40
ARTICLE XVII
THE SERVICER
SECTION 17.1. REPRESENTATIONS OF SERVICER .................................... 40
SECTION 17.2. LIABILITY OF SERVICER; INDEMNITIES ............................. 42
SECTION 17.3. MERGER OR CONSOLIDATION OF OR ASSUMPTION OF THE
OBLIGATIONS OF THE SERVICER .................................... 43
SECTION 17.4. LIMITATION ON LIABILITY OF SERVICER AND OTHERS ................. 44
ARTICLE XVIII
DEFAULT
SECTION 18.1. EVENTS OF DEFAULT .............................................. 44
SECTION 18.2. APPOINTMENT OF SUCCESSOR ....................................... 46
SECTION 18.3. NOTIFICATION TO CERTIFICATEHOLDERS ............................. 47
SECTION 18.4. WAIVER OF PAST DEFAULTS ........................................ 47
ARTICLE XIX
THE TRUSTEE
SECTION 19.1 DUTIES OF TRUSTEE ............................................ 47
SECTION 19.2 TRUSTEE'S CERTIFICATE ........................................ 50
SECTION 19.3 TRUSTEE'S ASSIGNMENT OF PURCHASED RECEIVABLES ................ 50
SECTION 19.4 CERTAIN MATTERS AFFECTING TRUSTEE ............................ 50
SECTION 19.5 TRUSTEE NOT LIABLE FOR CERTIFICATES OR RECEIVABLES ........... 52
SECTION 19.6 TRUSTEE MAY OWN CERTIFICATES ................................. 53
SECTION 19.7 TRUSTEE'S FEES AND EXPENSES .................................. 53
SECTION 19.8 REPRESENTATIONS AND WARRANTIES OF TRUSTEE .................... 54
SECTION 19.9 ELIGIBILITY REQUIREMENTS FOR TRUSTEE ......................... 54
SECTION 19.10 RESIGNATION OR REMOVAL OF TRUSTEE ............................ 54
SECTION 19.11 SUCCESSOR TRUSTEE AND COLLATERAL AGENT ....................... 55
SECTION 19.12 MERGER OR CONSOLIDATION OF TRUSTEE ........................... 56
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 19.13. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE ................. 56
ARTICLE XX
TERMINATION
SECTION 20.1. TERMINATION OF THE TRUST ....................................... 57
SECTION 20.2. OPTIONAL PURCHASE OF ALL RECEIVABLES ........................... 58
ARTICLE XXI
MISCELLANEOUS PROVISIONS
SECTION 21.1. AMENDMENT ...................................................... 59
SECTION 21.2. PROTECTION OF TITLE TO TRUST ................................... 60
SECTION 21.3. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS ..................... 62
SECTION 21.4. GOVERNING LAW .................................................. 63
SECTION 21.5. NOTICES ........................................................ 63
SECTION 21.6. SEVERABILITY OF PROVISIONS ..................................... 64
SECTION 21.7. ASSIGNMENT ..................................................... 64
SECTION 21.8. CERTIFICATES NONASSESSABLE AND FULLY PAID ...................... 64
SECTION 21.9. NO PETITION .................................................... 64
SECTION 21.10. SURETY BOND ISSUER AS CONTROLLING PARTY ........................ 64
EXHIBIT A ..................................................................... 1
EXHIBIT B: FORM OF CERTIFICATE ................................................ 1
EXHIBIT C ..................................................................... 1
EXHIBIT D: MONTHLY SERVICER REPORT ............................................ 1
EXHIBIT E: CERTIFICATEHOLDER STATEMENT ........................................ 1
EXHIBIT F: TRUSTEE'S CERTIFICATE .............................................. 1
</TABLE>
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<PAGE> 6
This Pooling and Servicing Agreement, dated as of April 30, 1997, is
made with respect to the formation of the NationsCredit Grantor Trust 1997-1,
among NATIONSCREDIT SECURITIZATION CORPORATION, a Delaware corporation, as
Depositor (the "Depositor"), NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA, a
North Carolina corporation, as Servicer ("NationsCredit Commercial" or the
"Servicer"), and BANKERS TRUST COMPANY, as Trustee (the "Trustee") and as
Collateral Agent (the "Collateral Agent").
WITNESSETH THAT: In consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
SECTION 1.1. Creation of Trust. Upon the execution of this Agreement
by the parties hereto, there is hereby created the NationsCredit Grantor Trust
1997-l.
ARTICLE II
SECTION 2.1. Conveyance of Depositor Receivables and RCC Receivables.
(a) In consideration of the Trustee's delivery, on behalf of the Trust, to or
upon the order of the Depositor of Certificates (the "Certificates") in an
aggregate principal amount equal to $___________, the Depositor does hereby
sell, transfer, assign and otherwise convey to the Trustee, in trust for the
benefit of the Certificateholders and the Surety Bond Issuer, without recourse:
(i) all right, title and interest of the Depositor in and to
the Depositor Receivables and all payments received thereunder, in the
case of Simple Interest Receivables which are Depositor Receivables
and due thereunder in the case of Precomputed Receivables which are
Depositor Receivables, in each case, after the Cutoff Date;
(ii) the interest of the Depositor in the security interests
in the Boats related to Depositor Receivables granted by Obligors
pursuant to the Depositor Receivables;
(iii) the Purchase Agreement, including the right of the
Depositor to cause NationsCredit Commercial to repurchase Depositor
Receivables from the Depositor under certain circumstances;
(iv) the interest of the Depositor in any proceeds from
claims on any physical damage, credit life or disability insurance
policies covering Boats related to Depositor Receivables or Obligors;
(v) the interest of the Depositor in any proceeds from
recourse to Dealers on Depositor Receivables; and
<PAGE> 7
(vi) any proceeds of the foregoing.
The Depositor intends that the assignment and transfer herein
contemplated constitute a sale of the Depositor Receivables, conveying good
title thereto free and clear of any liens and encumbrances, from the Depositor
to the Trustee and that such property not be part of the Depositor's estate or
property of the Depositor in the event of any insolvency by the Depositor and
the Trustee acquiesces in such characterization. In the event that such
conveyance is deemed to be, or to be made as security for, a loan, the Depositor
hereby grants to the Trustee a first priority perfected security interest in all
of the Depositor's right, title and interest in and to the Receivables and the
other property conveyed hereby, and this Agreement shall constitute a security
agreement under applicable law.
(b) The Depositor shall cause RCC, pursuant to the Assignment, on
the date hereof to sell, transfer, assign and otherwise convey to the Trustee,
in trust for the benefit of the Certificateholders and the Surety Bond Issuer,
without recourse:
(i) any and all right and interest of RCC in and to the RCC
Receivables and all payments received thereunder, in the case of
Simple Interest Receivables which are RCC Receivables and due
thereunder in the case of Precomputed Receivables which are RCC
Receivables, in each case, after the Cutoff Date;
(ii) the security interest of RCC in the RCC Receivables;
(iii) any interest of RCC in the security interests in the
Boats related to RCC Receivables granted by Obligors pursuant to
the RCC Receivables;
(iv) any interest of RCC in any proceeds from claims on any
physical damage, credit life or disability insurance policies
covering Boats related to RCC Receivables or Obligors related to
RCC Receivables;
(v) any interest of RCC in any proceeds from recourse to
Dealers on RCC Receivables; and
(vi) any proceeds of the foregoing.
(c) The Depositor shall cause NationsCredit Marine, pursuant to the
Assignment, on the date hereof to sell, transfer, assign and otherwise convey to
the Trustee, in trust for the benefit of the Certificateholders and the Surety
Bond Issuer, without recourse:
(i) certain representations and warranties under the Purchase
and Sale Agreement, including the right of NationsCredit Marine to
cause NationsCredit
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<PAGE> 8
Commercial to repurchase the RCC Receivables for breaches of such
representations and warranties; and
(ii) any proceeds of the foregoing.
SECTION 2.2 The Trustee agrees to hold any amounts received in respect
of the Receivables and allocable to late payment and extension fees,
administrative charges and the premiums of collateral protection insurance
purchased by the Servicer in trust for the benefit of the Depositor and agrees
to promptly remit any such amounts to the Depositor upon receipt thereof as
directed in writing in the relevant Servicer's Certificate.
ARTICLE III
SECTION 3.1. Surety Bond. The Servicer shall, simultaneously with the
execution and delivery of this Agreement, obtain the Surety Bond for the benefit
of the Trust in accordance with the respective terms thereof and deliver it to
the Trustee.
ARTICLE IV
SECTION 4.1. Acceptance by Trustee. The Trustee does hereby accept all
consideration conveyed by the Depositor pursuant to Section 2.1, and declares
that the Trustee shall hold such consideration and the Surety Bond and any
proceeds of any draws thereunder upon the trusts herein set forth for the
benefit of all present and future Certificateholders, subject to the terms and
provisions of this Agreement.
ARTICLE V
SECTION 5.1. Incorporation of Standard Terms and Conditions of
Agreement. This Agreement does hereby incorporate by reference the Standard
Terms and Conditions of Agreement for the NationsCredit Grantor Trust dated as
of April 30, 1997 (the "Standard Terms and Conditions of Agreement"), in the
form attached hereto.
ARTICLE VI
SECTION 6.1. Special Definitions and Terms. Whenever used in the
Standard Terms and Conditions of Agreement and in this Agreement, the following
words and phrases shall have the following meanings:
"Avoided Payment" shall have the meaning set forth in Section 14A.2 of
the Standard Terms and Conditions.
The "Assignment" is the Assignment dated as of April 30, 1997 among
RCC, NationsCredit Marine and the Trustee, substantially in the form of Exhibit
G.
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<PAGE> 9
The "Corporate Trust Office" at the date of the execution hereof is
located at: Bankers Trust Company, Four Albany Street, 10th Floor, New York, New
York 10006, Attn: Corporate Trust and Agency Group.
The "Cutoff Date" shall be the close of business on April 30, 1997.
The first "Distribution Date" shall be June 16, 1997.
"Final Order" shall have the meaning set forth in Section 14A.2 of the
Standard Terms and Conditions.
"Final Scheduled Distribution Date" means _________________.
"Insolvency Proceeding" means the commencement, after the Closing
Date, of any bankruptcy, insolvency, readjustment of debt, reorganization,
marshalling of assets and liabilities or similar proceedings by or against any
person, or the commencement, after the Closing Date, of any proceedings by or
against any Person for the winding up or liquidation of its affairs, or the
consent after the date hereof to the appointment of a trustee, conservator,
receiver or liquidator in any bankruptcy, insolvency, readjustment of debt,
reorganization, marshalling of assets and liabilities or similar proceedings of
or relating to any Person.
"Notice of Payment" shall have the meaning set forth in Section 14A.2
of the Standard Terms and Conditions.
The "Optional Purchase Percentage" shall be 5%.
The "Original Certificate Balance" is $_____________.
The "Original Pool Balance" is $____________.
The "Pass-Through Rate" is ______% per annum.
The "Permitted Investments" shall be, at anytime, any one or more of
the obligations and securities set forth in Schedule B hereto.
The "Reimbursement Agreement" is the Insurance and Reimbursement
Agreement dated as of April 30, 1997, among the Surety Bond Issuer, the
Depositor and the Servicer.
The "Required Deposit Rating" shall be a rating on short-term deposits
of "Prime-l" by Moody's and "A-1" by S & P or any other rating acceptable to
each of the Rating Agencies; and any requirement that deposits have the
"Required Deposit Rating" shall mean that
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<PAGE> 10
such deposits have the foregoing ratings from each of such rating agencies or
such other rating which is acceptable to the Rating Agencies.
The "Reserve Account" means the account designated as such,
established and maintained pursuant to Section 14.1(b) of the Standard Terms and
Conditions of Agreement.
The "Servicing Fee Rate" shall be ______% per annum.
The "Surety Bond" means the unconditional, irrevocable surety bond,
substantially in the form attached hereto as Exhibit A, to be issued by the
Surety Bond Issuer and naming the Trustee as beneficiary.
The "Surety Bond Issuer" shall be Capital Markets Assurance
Corporation.
ARTICLE VII
SECTION 7.1. Additional Representations and Warranties of the
Depositor. The Depositor does hereby make the following representations and
warranties on which the Trustee, on behalf of the Trust, relies in accepting the
Depositor Receivables in trust and executing and authenticating the
Certificates:
(i) Original Maturity of Depositor Receivables. Each
Depositor Receivable shall have an original maturity of not more
than 180 months.
(ii) Remaining Maturity of Depositor Receivables. As of the
Cutoff Date, each Depositor Receivable shall have a remaining
maturity of not more than 180 months.
(iii) Annual Percentage Rate. Each Depositor Receivable shall
have a fixed Annual Percentage Rate of not less than ____% and not
greater than ______%.
(iv) Location of Receivable Files. The Depositor Receivable
Files shall be kept at the offices of NationsCredit Commercial
Corporation at 1000 Holcomb Woods Parkway, Roswell, Georgia 30076
and at 2260 Douglas Boulevard, Suite 100, Roseville, California
95061.
(v) Maximum Balance. No Depositor Receivable has a Principal
Balance greater than $__________.
(vi) No Repossessions. As of the Cutoff Date, no Boat
securing any Depositor Receivable is in repossession status.
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<PAGE> 11
(vii) No Bankruptcies. As of the Cutoff Date, no Obligor on a
Depositor Receivable was noted in the related Receivable File as
the subject of any bankruptcy proceeding.
The foregoing representations and warranties shall (i) speak as of the Closing
Date, but shall survive the sale, transfer and assignment of the Depositor
Receivables to the Trustee and (ii) be subject to the notice and repurchase
provisions set forth in Section 12.2 of the Standard Terms and Conditions of
Agreement in the same manner and to the same extent as if they were set forth
in Section 12.1 thereof.
ARTICLE VIII
SECTION 8.1. NationsCredit Commercial Not to Resign as Servicer.
Except as a result of the operation of Section 17.3 of the Standard Terms and
Conditions of Agreement, NationsCredit Commercial shall not resign from the
obligations and duties hereby imposed on it as Servicer under this Agreement
except upon determination that the performance of its duties under this
Agreement shall no longer be permissible under applicable law. Notice of any
such determination permitting the resignation of NationsCredit Commercial shall
be communicated to the Trustee at the earliest practicable time (and, if such
communication is not in writing, shall be confirmed in writing at the earliest
practicable time) and any such determination shall be evidenced by an Opinion of
Counsel to such effect delivered to the Trustee concurrently with or promptly
after such notice. No such resignation shall become effective until the Trustee
or a successor Servicer shall have assumed the responsibilities and obligations
of NationsCredit Commercial in accordance with Section 18.2 of the Standard
Terms and Conditions of Agreement.
ARTICLE IX
SECTION 9.1. Agents for Service. The agent for service for the
Depositor shall be John B. Stockton, NationsCredit Management Corporation, 1
Canterbury Green, 201 Broad Street, Stamford, Connecticut 06901.
ARTICLE X
[RESERVED]
IN WITNESS WHEREOF, the Depositor, the Servicer, the Trustee and the
Collateral Agent have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.
NATIONSCREDIT SECURITIZATION
CORPORATION, as Depositor
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<PAGE> 12
By: ______________________
Name:
Title:
NATIONSCREDIT COMMERCIAL CORPORATION OF
AMERICA, as Servicer
By: _______________________
Name:
Title:
BANKERS TRUST COMPANY, as Trustee
and as Collateral Agent
By: _______________________
Name:
Title:
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<PAGE> 13
SCHEDULE A
Schedule of Depositor Receivables
(Delivered on [ ])
A-1
<PAGE> 14
SCHEDULE B
Schedule of RCC Receivables
(Delivered on [ ])
B-1
<PAGE> 15
SCHEDULE C
Schedule of Permitted Investments
"Permitted Investments" are any of the following, which shall
mature on or prior to the next succeeding Deposit Date:
(i) any direct obligations of, and obligations fully
guaranteed by, the United States of America, the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, or
any agency or instrumentality of the United States of America the
obligations of which are backed by the full faith and credit of the
United States of America;
(ii) (A) demand and time deposits in, certificates of deposit
of, bankers' acceptances issued by, or Federal funds sold by any
depository institution or trust company incorporated under the laws
of the United States of America or any state thereof and subject to
supervision and examination by Federal and/or state authorities or
under the laws of any other jurisdiction, so long as at the time of
such investment or contractual commitment providing for such
investment the commercial paper or other short-term debt
obligations of such depository institution or trust company have
the highest credit rating available from each Rating Agency or (B)
any other demand or time deposit or certificate of deposit which is
fully insured by the Federal Deposit Insurance Corporation;
(iii) repurchase obligations with respect to (A) any security
described in clause (i) above or (B) any other security issued or
guaranteed by an agency or instrumentality of the United States of
America, in either case entered into with a depository institution
or trust company (acting as principal) described in clause (ii) (A)
above or with any money market funds maintained by a broker which
has, at the time of such investment, the highest credit rating from
each Rating Agency;
(iv) commercial paper having a rating of at least "A-1" by S&P
and "Prime-l" by Moody's at the time of such investment, including
commercial paper having such rating issued by the Trustee or
NationsCredit Corporation;
(v) money market funds or money market mutual funds (other
than closed-end funds), including funds for which Bankers Trust
Company is investment manager or advisor, which (A) maintain a
constant net asset value and (B) have at the time of such
investment a rating by AAAm or AAAmg by S&P or Aaa by Moody's;
(vi) if the Trustee does not receive written investment
instructions, the investments referred to in (v) above; or
(vii) any other investment approved in writing by each Rating
Agency.
C-1
<PAGE> 1
EXHIBIT 4.2
NATIONSCREDIT SECURITIZATION CORPORATION,
Depositor,
NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA,
Servicer.
NationsCredit Grantor Trust 1997-1
Standard Terms and Conditions of Agreement
Dated as of April 30, 1997
<PAGE> 2
NATIONSCREDIT GRANTOR TRUST 1997-1
STANDARD TERMS AND CONDITIONS OF AGREEMENT
DATED AS OF APRIL 30, 1997
INTRODUCTION
These Standard Terms and Conditions of Agreement shall be applicable
to NationsCredit Grantor Trust 1997-1 formed on the date hereof, with respect to
which a Pooling and Servicing Agreement incorporating by reference these
Standard Terms and Conditions of Agreement shall have been executed.
ARTICLE XI
Definitions
SECTION 11.1. Definitions. Whenever used in the Agreement (including
these Standard Terms and Conditions of Agreement) the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
"Account Property" means all amounts and investments held from time to
time in the Reserve Account, as the case may be (whether in the form of deposit
accounts, Physical Property, book-entry securities, uncertificated securities,
securities entitlements, investment property or otherwise), and all proceeds of
the foregoing.
"Agreement" means the Pooling and Servicing Agreement executed by the
Depositor, the Servicer, the Trustee and the Collateral Agent as of the Cutoff
Date, into which these Standard Terms and Conditions of Agreement shall be
incorporated by reference, and all amendments and supplements thereto.
"Amount Financed" with respect to a Receivable means the original
amount advanced under the Receivable toward the purchase price of the Boat and
any cost to the related Obligor of any dealer installed options, extended
warranty plans and credit life and disability insurance, including any amount
allocable to the premium of collateral protection insurance purchased by
NationsCredit Commercial prior to the Cutoff Date.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
rate of finance charges stated in the Receivable.
"Available Funds" means, for any Distribution Date, the sum of (i) all
Collections received by the Servicer during the related Collection Period, (ii)
all refunds received by the Servicer with respect to any refunded portion of
extended warranty protection plan costs, or of physical damage, credit life or
disability insurance premiums included in the Amount Financed unless such refund
must be paid to the Obligor, (iii) the Purchase Amount of all Receivables
purchased or repurchased under the Agreement on the Business Day prior to the
Distribution
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<PAGE> 3
Date, (iv) Liquidation Proceeds received by the Servicer during the related
Collection Period and (v) all net income and gain realized on funds deposited
into the Collection Account or the Certificate Account and invested in
Permitted Investments during the related Collection Period.
"Boat" means (i) a new or used boat and any accompanying boat trailer
or boat motor or (ii) any boat motor, securing an Obligor's indebtedness under
the respective Receivable.
"Book-Entry Certificates" shall mean beneficial interests in the
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 15.8.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in New York, New York shall be authorized or
obligated by law, executive order or governmental decree to be closed.
"Carry-Over Monthly Interest" means, for any Distribution Date, the
aggregate Monthly Interest Payments for prior Distribution Dates which have not
been paid, after giving effect to any payment of the Reserve Account Withdrawal
Amount or any Surety Drawing Amount on such Distribution Date made pursuant to
Section 14.5(a)(ii) and (iii), respectively.
"Carry-Over Monthly Principal" means, for any Distribution Date, the
aggregate Monthly Principal Payments for prior Distribution Dates which have not
been paid, after giving effect to any payment of the Reserve Account Withdrawal
Amount or any Surety Drawing Amount on such Distribution Date made pursuant to
Section 14.5(a)(ii) and (iii), respectively.
"Carry-Over Servicing Fee" means, for any Distribution Date, the
aggregate Servicing Fees for prior Distribution Dates which have not been paid
after giving effect to any Reserve Account Interest Withdrawal or any Surety
Interest Drawing made on such Distribution Date pursuant to Section 14.5(a)(ii)
and (iii), respectively.
"Certificate" means a certificate executed by the Trust and
authenticated by the Trustee substantially in the form of Exhibit B hereto.
"Certificate Account" means the account designated as such,
established and maintained pursuant to Section 14.1(a).
"Certificate Balance" means, as of any date of determination, the
Original Certificate Balance, as specified on the Agreement, reduced by all
amounts previously distributed to Certificateholders and allocable to principal.
"Certificate Factor" means, as of the close of business on a
Distribution Date, a seven-digit decimal figure equal to the Certificate Balance
as of such Distribution Date divided by the Original Certificate Balance.
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<PAGE> 4
"Certificate Owner" shall mean, with respect to a Book-Entry
Certificate, the Person who is the owner of such Book-Entry Certificate, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).
"Certificate Register" and "Certificate Registrar" mean the register
maintained and the registrar appointed pursuant to Section 15.3.
"Certificateholder" or "Holder" means the Person in whose name the
respective Certificate shall be registered in the Certificate Register, except
that, solely for the purposes of giving any consent, waiver, request or demand
pursuant to the Agreement, the interest evidenced by any Certificate registered
in the name of the Depositor or the Servicer, or any Person controlling,
controlled by, or under common control with the Depositor or the Servicer, shall
not be taken into account in determining whether the requisite percentage
necessary to effect any such consent, waiver, request or demand shall have been
obtained.
"Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Collateral Agent" means the Person acting as Collateral Agent under
this Agreement, its successor in interest, and any successor Collateral Agent
appointed pursuant to Section 19.10.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 14.1(a).
"Collection Period" means each calendar month.
"Collections" shall mean, with respect to a Collection Period, all
payments by or on behalf of the Obligors made during such Collection Period
other than Liquidation Proceeds on the Receivables (other than a Purchased
Receivable or a Defaulted Receivable).
"Corporate Trust Office" means the office of the Trustee at which its
corporate trust business shall be administered, which office at the date of the
Agreement shall be specified therein.
"Cutoff Date" means the date specified as such in Section 6.1 of the
Agreement.
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<PAGE> 5
"Dealer" means the dealer who sold a Boat, and who originated and
assigned the respective Receivable to NationsCredit Commercial under an existing
agreement between such dealer and NationsCredit Commercial.
"Defaulted Receivable" means a Receivable as to which either (x) the
Servicer has determined, in accordance with its customary servicing procedures,
that eventual payment in full is unlikely or (y) (1) 90 or more days have
elapsed since the related Boat has been repossessed by the Servicer, in the case
of any Receivable with a Principal Balance of $10,000 or less as of the day such
Boat was repossessed by the Servicer or (2) 180 or more days have elapsed since
the related Boat has been repossessed by the Servicer, in the case of any
Receivable with a Principal Balance of greater than $10,000 as of the day such
Boat was repossessed by the Servicer.
"Definitive Certificates" means the Certificates specified in Section
15.8.
"Delivery" or "Deliver" when used with respect to Account Property
means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i)
of the Relevant UCC and are susceptible to physical delivery,
transfer thereof to the Trustee or its nominee, agent or custodian
by physical delivery to the Trustee or its nominee, agent or
custodian endorsed to, or registered in the name of, the Trustee,
as trustee for the benefit of the Certificateholders, or its
nominee, agent or custodian or endorsed in blank, and, with respect
to a certificated security (as defined in Section 8-102 of the
Relevant UCC) transfer thereof (i) by delivery of such certificated
security endorsed to, or registered in the name of, the Trustee, as
trustee for the benefit of the Certificateholders, or its nominee,
agent or custodian or endorsed in blank to a financial intermediary
(as defined in Section 8-313 of the Relevant UCC) and the making by
such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the
Trustee, as trustee for the benefit of the Certificateholders, or
its nominee, agent or custodian and the sending by such financial
intermediary of a confirmation of the purchase of such certificated
security by the Trustee or its nominee, agent or custodian, or (ii)
by delivery thereof to a "clearing corporation" (as defined in
Section 8-102(3) of the Relevant UCC) and the making by such
clearing corporation of appropriate entries on its books reducing
the appropriate securities account of the transferor and increasing
the appropriate securities account of a financial intermediary by
the amount of such certificated security, the identification by the
clearing corporation of the certificated securities for the sole
and exclusive account of the financial intermediary, the
maintenance of such certificated securities by such clearing
corporation or a "custodian bank" (as defined in Section 8102(4) of
the Relevant UCC) or the nominee of either subject to the clearing
corporation's exclusive control, the sending of a confirmation by
the financial intermediary of the
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<PAGE> 6
purchase by the Trustee, as trustee for the benefit of the
Certificateholders, or its nominee, agent or custodian of such
securities and the making by such financial intermediary of entries
on its books and records identifying such certificated securities
as belonging to the Trustee, as trustee for the benefit of the
Certificateholders, as applicable, or its respective nominee, agent
or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be
in the name of the Trustee, as trustee for the benefit of the
Certificateholders, or its nominee, agent or custodian; and such
additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any
such Account Property (as defined herein) to the Trustee, as
trustee for the benefit of the Certificateholders, or its nominee,
agent or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or by the
Federal National Mortgage Association that is a book-entry security
held through the Federal Reserve System pursuant to Federal
book-entry regulations, the following procedures, all in accordance
with applicable law, including applicable federal regulations and
Articles 8 and 9 of the Relevant UCC: book-entry registration of
such Account Property to an appropriate book-entry account
maintained with a Federal Reserve Bank by a financial intermediary
which is also a "depository" pursuant to applicable federal
regulations and issuance by such financial intermediary of a
deposit advice or other written confirmation of such book-entry
registration to the Trustee or its nominee, agent or custodian of
the purchase by the Trustee, as trustee for the benefit of the
Certificateholders, or its nominee or custodian of such book-entry
securities; the making by such financial intermediary of entries in
its books and records identifying such book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations as belonging to the Trustee, as trustee for the benefit
of the Certificateholders, or its nominee, agent or custodian and
indicating that such custodian holds such Account Property solely
as agent for the Trustee, as trustee for the benefit of the
Certificateholders, or its nominee, agent or custodian; and such
additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such
Account Property to the Trustee or its nominee, agent or custodian,
consistent with changes in applicable law or regulations or the
interpretation thereof; and
(c) with respect to any item of Account Property that is an
uncertificated security under Article 8 of the Relevant UCC and
that is not governed by clause (b) above, registration on the books
and records of the issuer thereof in the name of the financial
intermediary, the sending of a confirmation by the financial
intermediary of the purchase by the Trustee, as trustee for the
benefit
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<PAGE> 7
of the Certificateholders, or its nominee, agent or custodian of such
uncertificated security, and the making by such financial intermediary
of entries on its books and records identifying such uncertificated
certificates as belonging to the Trustee, as trustee for the benefit
of the Certificateholders, or its nominee, agent or custodian.
"Deposit Date" means the Business Day preceding each Distribution
Date.
"Depositor" means NationsCredit Securitization Corporation, a
corporation organized under the laws of the State of Delaware, as the depositor
of the Depositor Receivables under the Agreement, and each successor to
NationsCredit Securitization Corporation (in the same capacity) pursuant to
Section 16.3.
"Depositor Receivables" means the marine retail installment sales
contracts listed on Schedule A.
"Depositor Receivables Files" means the documents specified in Section
12.3 that relate to Depositor Receivables.
"Depository Agreement" means the agreement among the Depositor, the
Trustee and the initial Clearing Agency, dated May __, 1997, substantially in
the form attached hereto as Exhibit C.
"Determination Date" means the earlier of the eighth Business Day of
each month and the eleventh calendar day of the month.
"Distribution Date" means, for each Collection Period, the 15th of the
following month, or if the 15th is not a Business Day, the next following
Business Day, commencing with the date specified in the Agreement.
"Event of Default" means an event specified in Section 18.1.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind other than tax liens, mechanics' liens and any liens
which attach to the respective Receivable by operation of law.
"Liquidation Proceeds" means, with respect to any Collection Period,
the monies (including recoveries) collected from whatever source, during such
Collection Period on a Defaulted Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor plus any amounts
required by law to be remitted to the Obligor.
"Monthly Interest Payment" means, as of any Distribution Date,
one-twelfth of the product of the Pass-Through Rate and the Certificate Balance
as of the close of business on
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<PAGE> 8
the prior Distribution Date or, in the case of the first Distribution Date,
one-twelfth of the product of the Pass-Through Rate and the Original
Certificate Balance.
"Monthly Principal Payment" means, (x) as of any Distribution Date
(except for the Final Scheduled Distribution Date), an amount equal to (i) the
portion of all collections received by the Servicer during the related
Collection Period on Receivables allocable to principal (which shall not include
any Liquidation Proceeds received in respect of any Defaulted Receivable in any
Collection Period following the Collection Period in which such Receivable
became a Defaulted Receivable), (ii) Purchase Amounts allocable to principal and
paid by the Depositor to the Servicer or by the Servicer and (iii) the principal
balance of Defaulted Receivables, which became Defaulted Receivables during the
related Collection Period and (y) as of the Final Scheduled Distribution Date,
an amount after giving effect to the distribution of the amounts set forth in
(i) through (iii) of clause (x) necessary to reduce the Certificate Balance to
zero on such Distribution Date.
"Moody's" means Moody's Investors Service, Inc.
"NationsCredit Commercial" means NationsCredit Commercial Corporation
of America, a corporation organized under the laws of North Carolina, or its
successors.
"NationsCredit Marine" means NationsCredit Marine Funding Corporation,
a Delaware corporation.
"Net Credit Loss Ratio" means, for any Collection Period, an amount
expressed as an annualized percentage equal to (i) the aggregate gross losses
with respect to the Receivables recognized in such Collection Period, as
determined in accordance with the Servicer's normal practices, less any
Liquidation Proceeds for such Collection Period, divided by (ii) the average of
the Pool Balances as of the last day of the Collection Period prior to such
Collection Period and as of the last day of such Collection Period.
"Obligor" on a Receivable means the purchaser or the co-purchasers of
the Boat or any other Person who owes payments under the Receivable.
"Officer's Certificate" means a certificate signed by the chairman of
the board, the president, any vice chairman of the board, any vice president,
the treasurer, any assistant treasurer or the controller of the Depositor, the
Servicer or the Surety Bond Issuer, as appropriate.
"Opinion of Counsel" means a written opinion of counsel who may but
need not be counsel to the Depositor or Servicer, which opinion shall be
acceptable to the Trustee, and provided that any opinion relating to the tax
status of the Trust shall be rendered by Stroock & Stroock & Lavan LLP or such
other independent outside counsel acceptable to the Trustee.
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<PAGE> 9
"Optional Purchase Percentage" means the percentage specified as such
in the Agreement.
"Original Certificate Balance" means the Certificate Balance as of the
Closing Date, as specified in the Agreement.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date,
as specified in the Agreement.
"Pass-Through Rate" means the interest rate payable to
Certificateholders, as specified in the Agreement.
"Permitted Investments" means those investments specified in Schedule
C of the Agreement.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
or government or any agency or political subdivision thereof.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Pool Balance" means as the last day of any Collection Period, the
aggregate Principal Balance of the Receivables.
"Precomputed Receivable" means any Receivable under which the portion
of a payment allocable to earned interest (which may be referred to in the
Receivable as an add-on finance charge) and the portion allocable to the Amount
Financed is determined according to the sum of periodic balances or the sum of
monthly balances or any equivalent method or are monthly actuarial receivables.
"Principal Balance" of a Receivable, as of the last day of a
Collection Period, means the Amount Financed minus the sum of (a) that portion
of all Collections received on or prior to such day by the Servicer allocable as
a payment of principal pursuant to Section 14.3 hereof, (b) any refunded portion
of extended warranty protection plan costs, or of physical damage, credit life
or disability insurance premiums included in the Amount Financed which is
applied during the related Collection Period unless such refund must be paid to
the Obligor, and (c) the principal portion of all Purchase Amounts paid by the
Depositor or the Servicer, in respect of such Receivable, after the preceding
Distribution Date but prior to the related Distribution Date.
"Purchase Agreement" means the Purchase Agreement executed by the
Depositor and NationsCredit Commercial as of the Cutoff Date.
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"Purchase Amount" means the amount, as of the last day of a Collection
Period, required to prepay in full the Principal Balance of a Receivable plus
accrued interest thereon at one-twelfth the sum of the Pass-Through Rate plus
the Servicing Fee Rate to the last day of the month of purchase.
The "Purchase and Sale Agreement" means the Purchase and Sale
Agreement, dated December 18, 1996 between NationsCredit Commercial and
NationsCredit Marine.
"Purchased Receivable" means a Receivable purchased as of the last day
of a Collection Period by the Servicer pursuant to Section 13.7 or by the
Depositor pursuant to Section 12.2 or 20.2.
"Rating Agency" means S&P, Moody's or any other nationally recognized
rating agency initially contracted by the Depositor to rate the Certificates.
"RCC" means Receivables Capital Corporation, a Delaware corporation.
"RCC Receivable Files" means the documents specified in Section 12.3
that relate to RCC Receivables.
"RCC Receivables" means the marine retail installment sales contracts
listed on Schedule B.
"Receivables" means the Depositor Receivables and the RCC Receivables.
"Receivables Files" means the Depositor Receivable Files and the RCC
Receivable Files.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement, dated as of December 18, 1996 among NationsCredit Marine, RCC,
NationsCredit Commercial and Bank of America National Trust and Savings
Association, as Administrator.
"Record Date" means for any Distribution Date the close of business on
the Business Day prior to such Distribution Date.
"Reimbursement Agreement" means the agreement relating to the Surety
Bond, which agreement is further defined in Section 6.1 of the Agreement.
"Required Deposit Rating" means the rating specified in Section 6.1 of
the Agreement.
"Reserve Account Initial Deposit" shall equal $______________.
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"Reserve Account Withdrawal Amount" shall have the meaning in Section
14.5(a)(ii).
"Residual Certificate" means the Certificate specified in Section
15.1.
"Scheduled Payment" on a Receivable means that portion of the payment
required to be made by the Obligor during the respective Collection Period
sufficient to amortize at level monthly payments the Principal Balance and to
provide interest at the APR.
"Servicer" means NationsCredit Commercial and each successor to
NationsCredit Commercial (in the same capacity) pursuant to Section 17.3.
"Servicer's Certificate" means a certificate completed and executed by
the Servicer by its chairman of the board, its president, any vice chairman of
the board, any vice president, the treasurer, any assistant treasurer or the
controller of the Servicer pursuant to Section 13.9, substantially in the form
of Exhibit D.
"Servicing Fee" means the fee payable to the Servicer for services
rendered during each Collection Period, determined pursuant to Section 13.8.
"Servicing Standards" means, at any time, the quality of the
Servicer's (or in the event that a subservicer performs servicing operations on
behalf of the Servicer, such subservicer's) performance with respect to (i)
compliance with the terms and conditions of the Agreement, and (ii) adequacy,
measured in accordance with industry standards and current and historical
standards of the Servicer (or such subservicer) in respect of all receivables
serviced by the Servicer (or such subservicer), regardless of whether such
receivables are owned by the Servicer (or such subservicer), of the Servicer's
(or such subservicer's) servicing of the Receivables.
"Ship Mortgage Act" means the Ship Mortgage Act of 1920, as amended.
"Simple Interest Method" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the fixed rate of
interest multiplied by the unpaid principal balance multiplied by the number of
days elapsed since the preceding payment of interest was made.
"Simple Interest Receivable" means any Receivable under which the
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"Specified Reserve Account Requirement" shall be with respect to any
Distribution Date, the Specified Reserve Account Requirement shall equal the
greater of (i)
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$_______________ or (ii) ______% of the Pool Balance as of the last day of the
related Collection Period. The Specified Reserve Account Requirement may be
reduced without the consent of the Certificateholders to a lesser amount,
including to zero, as determined by the Depositor; provided that such reduction
is consented to in writing by the Surety Bond Issuer and does not adversely
affect the rating of the Certificates assigned by any Rating Agency; provided,
however, only upon the occurrence and continuance of the event specified in
Section 18.1(b)(iv), the Specified Reserve Account Requirement shall be
unlimited and all amounts available under Section 14.5(b)(v) shall be deposited
to the Reserve Account.
"S&P" means Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies.
"State" means any state of the United States of America or the
District of Columbia.
"Statement to Certificateholders" means a certificate completed and
executed by the Servicer by its the chairman of the board, its president, any
vice chairman of the board, any vice president, the treasurer, any assistant
treasurer or the controller of the Servicer pursuant to Section 14.7,
substantially in the form of Exhibit E.
"Surety Bond" means the unconditional, irrevocable surety bond
designated as such in the Agreement.
"Surety Bond Issuer" means the Person specified as such in Section 6.1
of the Agreement.
"Surety Bond Issuer Default" means the failure of the Surety Bond
Issuer to make a payment required under the Surety Bond in accordance with its
terms.
"Surety Drawing Amount" shall have the meaning set forth in Section
14.5(a)(iii).
"Trust" means the trust created by the Agreement, the estate of which
shall consist of the Receivables (other than Purchased Receivables) and all
payments received thereunder, in the case of Simple Interest Receivables and all
payments due thereunder, in the case of Precomputed Receivables, in each case,
after the Cutoff Date; funds deposited in the Collection Account and the
Certificate Account; the interest of the Depositor in the security interests in
the Boats granted by Obligors pursuant to the Receivables; the Purchase
Agreement; the Surety Bond; any property (including the right to receive future
Liquidation Proceeds) that shall have secured a Receivable and that shall have
been acquired by or on behalf of the Trustee; the interest of the Depositor in
any proceeds from claims on any physical damage, credit life or disability
insurance policies covering Boats or Obligors; and the interest of the Depositor
in any proceeds from recourse to Dealers; and any proceeds of any and all of the
foregoing.
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"Trustee" means the Person acting as Trustee under the Agreement, its
successor in interest, and any successor trustee pursuant to Section 19.11.
"Trustee Officer" means any officer assigned to the Corporate Trust
Office, including any vice president, any assistant vice president, any
assistant secretary, any assistant treasurer, any trust officer or any other
officer of the Corporate Trust Office of the Trustee customarily performing
functions similar to those performed by persons who at the time shall be such
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Trustee's Certificate" means a certificate completed and executed by
the Trustee by a Trustee Officer pursuant to Section 19.2, substantially in the
form of, in the case of an assignment to the Depositor, Exhibit F-1, and in the
case of an assignment to the Servicer, Exhibit F-2.
"UCC" means the Uniform Commercial Code as in effect in the respective
jurisdiction.
"Unsold Contract" means any retail installment contract serviced by
NationsCredit Commercial other than the Receivables.
SECTION 11.2. Usage of Terms. With respect to all terms in the
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other 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 the Agreement; references to
Persons include their permitted successors and assigns; and the term "including"
means "including without limitation."
SECTION 11.3. Cutoff Date and Record Date. All references to the
Record Date prior to the first Record Date in the life of the Trust shall be to
the Cutoff Date.
SECTION 11.4. Section References. All section references shall be to
Sections in these Standard Terms and Conditions of Agreement.
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ARTICLE XII
The Receivables
SECTION 12.1. Representations and Warranties of Depositor. The
Depositor makes the following representations and warranties as to the Depositor
Receivables on which the Trustee relies in accepting the Depositor Receivables
in trust and executing and authenticating the Certificates. Such representations
and warranties speak as of the Closing Date, but shall survive the sale,
transfer and assignment of the Depositor Receivables to the Trustee.
(i) Characteristics of Depositor Receivables. Each Depositor
Receivable (a) shall have been originated in the United States by a
Dealer for the retail sale of a Boat in the ordinary course of such
Dealer's business, shall have been fully and properly executed by the
parties thereto, shall be denominated in U.S. dollars, (b) shall have
created or shall create a valid, subsisting and enforceable first
priority perfected security interest in favor of NationsCredit
Commercial in the related Boat (other than in the case of boat motors
subject to certificate of title statutes that provide for perfection
of the security interests in such boat motors by the filing of a UCC-1
financing statement), which security interest has been assigned to the
Depositor and shall be validly assignable by the Depositor to the
Trustee, (c) shall contain customary and enforceable provisions such
that the rights and remedies of the holder thereof shall be adequate
for realization against the collateral of the benefits of the
security, (d) shall provide for level monthly payments (provided that
the payment in the first or last month in the life of the Receivable
may be minimally different from the level payment) that fully amortize
the Amount Financed by maturity and yield interest at the Annual
Percentage Rate, and (e) shall provide for, in the event that such
contract is prepaid, a prepayment that fully pays the Principal
Balance and includes accrued but unpaid interest due through the date
of prepayment in an amount at least equal to the Annual Percentage
Rate.
(ii) Schedule of Depositor Receivables. The information set
forth in Schedule A to the Agreement shall be true and correct in all
material respects as of the close of business on the Cutoff Date, and
no selection procedures believed to be adverse to the
Certificateholders shall have been utilized in selecting the Depositor
Receivables.
(iii) Compliance with Law. Each Depositor Receivable and the
sale of the related Boat shall have complied at the time it was
originated or made, and at the date of issuance of the Certificates
shall comply, in all material respects with all requirements of
applicable Federal, State, and local laws and regulations thereunder,
including, without limitation, usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal
Trade Commission Act, the Fair Credit Billing Act, the Fair Credit
Reporting Act, the
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Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act,
the Federal Trade Commission Credit Practices Rule, State unfair and
deceptive trade practice laws, and State adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code, and any other
applicable consumer credit, equal credit opportunity and disclosure
laws.
(iv) Binding Obligation. Each Depositor Receivable shall
represent the genuine, legal, valid and binding payment obligation in
writing of the Obligor, enforceable by the holder thereof in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and similar laws
relating to creditors' rights generally and subject to general
principles of equity.
(v) No Government Obligor. None of the Depositor
Receivables shall be due from the United States of America or any
State or local government or from any agency, department or
instrumentality of the United States of America, any State or local
government.
(vi) Depositor Receivables in Force. No Depositor
Receivable shall have been satisfied, subordinated or rescinded, nor
shall any Boat have been released from the security interests granted
by the related Depositor Receivable in whole or in part.
(vii) No Waiver. No provision of a Depositor Receivable
shall have been waived.
(viii) No Defenses. Except for the security interests in
favor of the Depositor and the Trustee, the Depositor Receivables are
free and clear of all security interests, liens, charges, and
encumbrances and to the best knowledge of the Depositor no right of
rescission, setoff, counterclaim or defense shall have been asserted
or threatened with respect to any Depositor Receivable.
(ix) No Liens. No liens or claims shall have been filed
for work, labor or materials relating to a Boat that shall be liens
prior to, or equal to the security interest in the Boat granted by the
Depositor Receivable.
(x) Insurance. The Obligor has obtained physical damage
insurance covering the Boat and the Obligor is required under the
terms of the Depositor Receivable to maintain such insurance.
(xi) Title. It is the intention of the Depositor that the
sale and assignment herein contemplated constitute a sale of the
Depositor Receivables from the Depositor to the Trust and that the
beneficial interest in and title to the
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Depositor Receivables not be part of the debtor's estate in the event
of the filing of a bankruptcy petition by or against the Depositor
under any bankruptcy law. No Depositor Receivable has been sold,
transferred, assigned or pledged by the Depositor to any Person other
than the Trustee. Immediately prior to the sale and assignment herein
contemplated, the Depositor had good and marketable title to each
Depositor Receivable free and clear of all Liens, and, immediately
upon the sale and assignment contemplated hereby, the Trustee for the
benefit of the Certificateholders and the Surety Bond Issuer shall
have good and marketable title to each Depositor Receivable, free and
clear of all Liens, encumbrances, security interests and rights of
others; and the sale and assignment has been perfected under the UCC.
(xiii) Lawful Assignment. No Depositor Receivable shall
have been originated in, or shall be subject to the laws of any
jurisdiction under which the sale, transfer and assignment of such
Depositor Receivable under the Agreement or pursuant to transfers of
the Certificates shall be unlawful, void or voidable.
(xiv) Security Interest. Upon the Depositor Receivables
being conveyed to the Trust pursuant to Section 2.1 of the Agreement,
the Trust shall have a perfected security interest under the UCC in
the Depositor Receivables.
(xv) One Original. There shall be in existence one, and
only one, original executed copy of each Depositor Receivable.
(xvi) UCC Characterization. Each Depositor Receivable
constitutes "Chattel Paper" under the UCC.
(xvii) Ship Mortgage Act. No Boat related to any Depositor
Receivable meets the requirements for documentation under the Ship
Mortgage Act.
(xviii) No Default. Except for payment defaults continuing
for a period of less than 60 days as of the Cutoff Date, no default,
breach, violation or event permitting acceleration under the terms of
any Depositor Receivable shall have occurred and neither NationsCredit
Commercial nor the Depositor shall have waived any of the foregoing.
SECTION 12.2. Repurchase Upon Breach. The Depositor, the Servicer or
the Trustee, as the case may be, shall inform the other parties promptly, in
writing, upon the discovery of any breach of the Depositor's representations and
warranties pursuant to Section 12.1. Unless the breach shall have been cured by
the second Record Date following the discovery, the Depositor shall repurchase
any Depositor Receivable, which as a result of such breach would materially and
adversely affect the interests of the Certificateholders or the Surety Bond
Issuer, as of such Record Date (or, at the Depositor's option, the first Record
Date
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following the discovery). In consideration of the purchase of the Depositor
Receivable, the Depositor shall remit the Purchase Amount in the manner
specified in Section 14.4(a) on the Deposit Date. The sole remedy of the
Trustee, the Trust or the Certificateholders with respect to a breach of the
Depositor's representations and warranties pursuant to Section 12.1 shall be to
require the Depositor to repurchase Depositor Receivables pursuant to this
Section 12.2.
SECTION 12.3. Custody of Receivable Files. To assure uniform quality
in servicing the Receivables and to reduce administrative costs, the Trustee, on
behalf of the Trust, upon the execution and delivery of the Agreement, hereby
revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act as the agent of the Trustee as custodian of the following
documents or instruments which are hereby constructively delivered to the Trust
on behalf of the Trust, with respect to each Receivable:
(i) The original of the Receivable fully executed by the
Obligor.
(ii) The original credit application fully executed by the
Obligor.
(iii) The original certificate of title or such documents
that the Servicer or the Depositor shall keep on file, in accordance
with its customary procedures, evidencing the security interest of
NationsCredit Commercial in the Boat.
(iv) Any and all other documents that the Servicer shall
keep on file, in accordance with its customary procedures, relating to
a Receivable, an Obligor or a Boat.
The Trustee shall have no duty to monitor the performance of the
Servicer and shall have no liability in connection with the Servicer's
performance hereunder.
SECTION 12.4. Duties of Servicer as Custodian. (a) Safekeeping. The
Servicer shall hold the Receivable Files on behalf of the Trust for the use and
benefit of all Certificateholders and the Surety Bond Issuer, and maintain such
accurate and complete accounts, records and computer systems pertaining to each
Receivable File as shall enable the Trustee to comply with these Standard Terms
and Conditions of Agreement. In performing its duties as custodian the Servicer
shall act with reasonable care, using that degree of skill and attention that
the Servicer exercises with respect to the receivable files relating to all
comparable receivables that the Servicer services for itself or others. The
Servicer shall conduct, or cause to be conducted, periodic audits of the
Receivable Files held by it under the Agreement, and of the related accounts,
records and computer systems, in such a manner as would enable the Trustee to
verify the accuracy of the Servicer's record keeping. The Servicer shall
promptly report to the Trustee any failure on its part to hold the Receivable
Files and maintain its accounts, records and computer systems as herein provided
and promptly take appropriate action to remedy any such failure. Nothing herein
shall be deemed to require an initial review or any periodic review by the
Trustee of the Receivable Files.
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(b) Maintenance of and Access to Records. The Servicer shall maintain
each Receivable File at one of its offices specified in Section 7.1(iv) of the
Agreement, or at such other office as shall be specified to the Trustee by
written notice not later than 90 days after any change in location. The Servicer
shall make available to the Trustee or its duly authorized representatives,
attorneys or auditors a list of locations of the Receivable Files, and shall
also so make available the Receivable Files themselves, and the related
accounts, records and computer systems maintained by the Servicer, at such times
as the Trustee shall reasonably instruct.
(c) Release of Documents. Upon instruction from the Trustee, the
Servicer shall release any Receivable File to the Trustee, the Trustee's agent
or the Trustee's designee, as the case may be, at such place or places as the
Trustee may designate, as soon as practicable.
SECTION 12.5. Instructions; Authority to Act. The Servicer shall be
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written instructions signed by a Trustee Officer.
SECTION 12.6. Custodian's Indemnification. The Servicer as custodian
shall indemnify the Trustee for any and all liabilities, obligations, losses,
compensatory damages, payments, costs or expenses of any kind whatsoever that
may be imposed on, incurred or asserted against the Trustee as the result of any
improper act or omission in any way relating to the maintenance and custody by
the Servicer as custodian of the Receivable Files; provided, however, that the
Servicer shall not be liable for any portion of any such amount resulting from
the willful misfeasance, bad faith or negligence of the Trustee.
SECTION 12.7. Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Cutoff Date and shall
continue in full force and effect until terminated pursuant to this Section
12.7. If NationsCredit Commercial shall resign as Servicer in accordance with
the provisions of the Agreement or if all the rights and obligations of the
Servicer shall have been terminated under Section 18.1, the appointment of the
Servicer as custodian may be terminated by the Surety Bond Issuer, in the same
manner as the Surety Bond Issuer may terminate the rights and obligations of the
Servicer under Section 18.1. The Trustee shall, if required by the Surety Bond
Issuer following the occurrence and during the continuation of a Trigger Event
(as defined in the Reimbursement Agreement) or an Event of Default or the
Trustee, on behalf of the Trust, may terminate the Servicer's appointment as
custodian, with cause or as required by law at any time upon written
notification to the Servicer. As soon as practicable after any termination of
such appointment, the Servicer shall deliver the Receivable Files to the Trustee
or the Trustee's agent at such place or places as the Trustee may reasonably
designate.
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ARTICLE XIII
Administration and Servicing of Receivables
SECTION 13.1. Duties of Servicer. The Servicer as agent for the Trust
(to the extent provided herein) shall manage, service, administer and make
collections on the Receivables (other than Purchased Receivables) with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable receivables that it services for itself
or others. The Servicer's duties shall include collection and posting of all
payments, responding to inquiries of Obligors on such Receivables, investigating
delinquencies, sending payment statements to Obligors, reporting tax information
to Obligors, accounting for collections and furnishing monthly and annual
statements to the Trustee with respect to distributions. The Servicer shall
follow its customary standards, policies and procedures in performing its duties
as Servicer. Without limiting the generality of the foregoing, the Servicer is
authorized and empowered by the Trustee to execute and deliver, on behalf of
itself, the Trust, the Certificateholders, or the Trustee or any of them, any
and all instruments of satisfaction or cancellation, or partial or full release
or discharge, and all other comparable instruments, with respect to such
Receivables or to the Boats securing such Receivables. If the Servicer shall
commence a legal proceeding to enforce a Receivable, a Defaulted Receivable, the
Trustee (in the case of a Receivable other than a Purchased Receivable) shall
thereupon be deemed to have automatically assigned, solely for the purpose of
collection on behalf of the party retaining an interest in such Receivable, such
Receivable to the Servicer. If in any enforcement suit or legal proceeding it
shall be held that the Servicer may not enforce a Receivable on the ground that
it shall not be a real party in interest or a holder entitled to enforce the
Receivable, the Trustee shall, at the Servicer's expense and direction, take
steps to enforce the Receivable, including bringing suit in its name or the name
of the Certificateholders or the Surety Bond Issuer. To enable the Servicer to
carry out its servicing and administrative duties hereunder, the Trustee hereby
irrevocably appoints the Servicer as its attorney-in-fact, such appointment
being coupled with an interest, to execute on its behalf such documents or
instruments as are necessary to accomplish the foregoing.
SECTION 13.2. 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 procedures as it follows with respect to all comparable
receivables that it services for itself or others. The Servicer may grant
extensions, rebates or adjustments on a Receivable subject to the provisions of
Section 13.6. The Servicer may in its discretion waive any late payment charge
or any other fees that may be collected in the ordinary course of servicing a
Receivable.
SECTION 13.3. Realization Upon Receivables. On behalf of the Trust,
the Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of the Boat securing
any Receivable as to which the Servicer shall have determined eventual payment
in full is unlikely. The Servicer shall follow such customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of marine receivables, which may include reasonable efforts to realize
upon any recourse to Dealers and selling the Boat at public or private sale. The
foregoing shall be subject to the provision that, in any case in which the Boat
shall have suffered damage, the Servicer shall
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not expend funds in connection with the repair or the repossession of such Boat
unless it shall determine in its discretion that such repair and/or
repossession will increase the Liquidation Proceeds by an amount greater than
the amount of such expenses.
SECTION 13.4. Physical Damage Insurance. The Servicer, in accordance
with its customary servicing procedures, shall require that each Obligor shall
have obtained physical damage insurance covering the related Boat as of the date
of execution of the related Receivable.
SECTION 13.5. Maintenance of Security Interests in Boats. The Servicer
shall, in accordance with its customary servicing procedures, take such steps as
are necessary to maintain perfection of NationsCredit Commercial's security
interest created by each Receivable in the related Boat. The Trustee, on behalf
of the Trust, hereby authorizes the Servicer to take such steps as are necessary
to perfect such security interest on behalf of the Trust in the event of the
relocation of a Boat or for any other reason.
SECTION 13.6. Covenants of Servicer. The Servicer shall make within
the required time periods under the UCC all filings necessary in any
jurisdiction to give the Trustee a first priority perfected ownership interest
in the Receivables. The Servicer shall not release the Boat securing each
Receivable from the security interest granted by such Receivable in whole or in
part except in the event of payment in full by the Obligor thereunder. The
Servicer shall not impair the rights of the Certificateholders in any
Receivable. The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Receivables as and when the
same shall become due and shall follow such collection procedures as it follows
with respect to all comparable marine receivables that it services for itself
and others. The Servicer shall not sell, pledge, transfer, deliver or otherwise
dispose of any Receivable, except as provided in the Agreement. The Servicer
will not increase or decrease the number or amount of any Scheduled Payment, or
the Principal Balance of a Receivable (except with respect to a prepayment of a
scheduled payment that does not result in a deferral of any other scheduled
payment) or the APR of a Receivable, or extend, rewrite or otherwise modify the
payment terms of a Receivable; provided, however, that the Servicer may extend a
Receivable for credit related reasons that would be acceptable to the Servicer
with respect to comparable marine receivables that it services for itself and
others and in accordance with its customary standards, policies and procedures
if the cumulative extensions with respect to any Receivable shall not cause the
term of such Receivable to extend beyond the last day of the Collection Period
which is related to the Final Schedule Distribution Date; provided, further,
that such extensions will not be made if, in the reasonable opinion of the
Servicer, the extensions would modify the terms of such Receivable in such a
manner as to constitute a cancellation of such Receivable and the creation of a
new receivable for federal income tax purposes. In the event that the Servicer
fails to comply with the provisions of the preceding sentence or with respect to
the second proviso of the preceding sentence, notwithstanding having acted
according to its reasonable opinion, or if there is a final determination that
the Servicer has modified the terms of a Receivable in such a manner as to
constitute a cancellation of such Receivable and the creation of a new
Receivable for federal income tax purposes, the Servicer shall be required to
purchase the Receivable or Receivables
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affected thereby, for the Purchase Amount, in the manner specified in Section
13.7 as of the first day of the Collection Period following the Collection
Period in which such failure occurs.
SECTION 13.7. Purchase of Receivables Upon Breach. The Servicer or the
Trustee shall inform the other party promptly, in writing, upon the discovery of
any breach pursuant to Section 13.6 or Section 13.15. Notice of any breach
pursuant to Section 13.6 or Section 13.15 may be given to the Servicer and the
Trustee by the Surety Bond Issuer. Unless the breach shall have been cured by
the second Record Date following such discovery (or, at the Servicer's election,
the first following Record Date), the Servicer shall purchase any Receivable (or
in the case of any representation and warranty in Section 13.15 stated in terms
of maximum aggregate percentage amounts, purchase Receivables that after giving
effect to such Purchase, the related representation or warranty would be
complied with), which as a result of such breach would materially and adversely
affect the interests of the Certificateholders or the Surety Bond Issuer, as of
such Record Date. In consideration of the purchase of such Receivable, the
Servicer shall remit the Purchase Amount in the manner specified in Section 14.4
on the Deposit Date. The sole remedy of the Trustee, the Trust or the
Certificateholders with respect to a breach pursuant to Section 13.6 or Section
13.15 shall be to require the Servicer to repurchase Receivables pursuant to
this Section 13.7.
SECTION 13.8. Servicing Fee. The Servicing Fee for a Collection Period
shall equal the product of one twelfth times the Servicing Fee Rate times the
Initial Pool Balance, in the case of the initial Collection Period, and
thereafter, the Pool Balance as of the last day of the prior Collection Period
(except that in the case of a successor Servicer, the Servicing Fee shall equal
such amount as is arranged in accordance with Section 18.2). The Servicer shall
also be entitled to all late payment and extension fees, prepayment charges and
other administrative fees or similar charges allowed by applicable law with
respect to Receivables, collected (from whatever source) on the Receivables;
provided, however, such late payment and other fees shall not form a part of the
Servicing Fee and the Servicer shall be entitled to such fees as and when
collected.
SECTION 13.9. Servicer's Certificate. On or before the Determination
Date, the Servicer shall deliver to the Trustee a Servicer's Certificate,
containing all information necessary to make the transfers and distributions
pursuant to Section 14.5 for the Collection Period immediately preceding the
date of such Servicer's Certificate. The Servicer shall also deliver the
Certificate Factor in writing to NationsBanc Capital Markets, Inc. on the same
day as it delivers the Servicer's Certificate to the Trustee. If on any Deposit
Date there is a default by the Depositor or the Servicer in respect of any
Purchase Amounts to be deposited into the Collection Account pursuant to Section
14.4 hereof, the Servicer shall recalculate all of the amounts described in the
Servicer's Certificate to reflect such default and deliver to the Trustee a
revised Servicer's Certificate reflecting such recalculations on such Deposit
Date.
SECTION 13.10. Annual Statement as to Compliance; Notice of Default.
(a) The Servicer shall deliver to the Trustee and the Surety Bond Issuer, on or
before March 31
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of each year, beginning March 31, 1998, an Officer's Certificate, dated as of
December 31 of the preceding year, stating that (i) a review of the activities
of the Servicer during the preceding 12-month period (or such shorter period
from the date of initial issuance of the Certificates to December 31 of such
year) and of its performance under the Agreement has been made under such
officer's supervision and (ii) to the best of such officer's knowledge, based
on such review, the Servicer has fulfilled all its obligations under the
Agreement throughout such year (or such shorter period, as the case may be),
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. A copy of such certificate and the report referred to in Section
13.11 may be obtained by any Certificateholder by a request in writing to the
Trustee addressed to the Corporate Trust Office.
(b) The Servicer shall deliver to the Trustee and the Surety Bond
Issuer promptly after having obtained knowledge thereof, but in no event later
than 5 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 an Event of Default under clause (i) or (ii) of Section 18.1. The
Depositor shall deliver to the Trustee and the Surety Bond Issuer promptly after
having obtained knowledge thereof, but in no event later than 5 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 an Event of Default
under clause (ii) of Section 18.1.
SECTION 13.11. Annual Independent Certified Public Accountant's
Report. The Servicer shall cause a firm of independent certified public
accountants (who may also render other services to the Servicer and the
Depositor) to deliver to the Trustee on or before March 31 of each year
commencing March 31, 1998, a report to the effect that such firm has conducted
an examination, substantially in compliance with attestation standards
established by the American Institute of Certified Public Accountants, of
certain documents and records relating to the servicing procedures under this
Agreement and that, on the basis of such examination, such firm is of the
opinion that such servicing was conducted in compliance with the sections of
this Agreement with which independent public accountants generally possess
adequate professional knowledge and which are reasonably subject to positive
assurance by them, except for such exceptions as they believe to be immaterial
and such other exceptions as shall be set forth in such report.
SECTION 13.12. Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide to the Certificateholders
access to the Receivables Files in such cases where the Certificateholder shall
be required by applicable statutes or regulations to review such documentation.
Access shall be afforded without charge, but only upon reasonable request and
during the normal business hours at the respective offices of the Servicer.
Nothing in this Section 13.12 shall affect 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 to information as a
result of such obligation shall not constitute a breach of this Section 13.12.
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SECTION 13.13. Servicer Expenses. The Servicer shall be required to
pay all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of independent accountants, taxes imposed on
the Servicer and expenses incurred in connection with distributions and reports
to Certificateholders.
SECTION 13.14. Appointment of Sub-servicer. The Servicer may at any
time appoint a sub-servicer to perform all or any portion of its obligations as
Servicer hereunder; provided however, that the Servicer shall remain obligated
and be liable to the Trustee and the Certificateholders for the servicing and
administering of the Receivables in accordance with the provisions hereof
without diminution of such obligation and liability by virtue of the appointment
of such sub-servicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of the sub-servicer shall be as agreed
between the Servicer and its sub-servicer from time to time and neither the
Trust, the Trustee nor the Certificateholders shall have any responsibility
therefor.
SECTION 13.15. Representations and Warranties of the Servicer with
respect to the Receivables. The Servicer does hereby make the following
representations and warranties on which the Trustee on behalf of the Trust,
relies in accepting the Receivables pursuant to this Agreement and the
Assignment and executing and authenticating the Certificates. Such
representations and warranties speak as of the Closing Date, but shall survive
the sale, transfer and assignment of the Receivables to the Trustee.
(i) Characteristics of RCC Receivables. Each RCC Receivable
(a) shall be denominated in U.S. dollars, (b) shall have an original
maturity of not more than 180 months, (c) as of the Cutoff Date, shall
have a remaining maturity of not more than 180 months, (d) shall
contain customary and enforceable provisions such that the rights and
remedies of the holder thereof shall be adequate for realization
against the collateral benefits of the security, (e) shall be kept at
the offices of NationsCredit Commercial Corporation at 1000 Holcolmb
Woods Parkway, Roswell, Georgia 30076 and at 2260 Douglas Boulevard,
Suite 100, Roseville, California 95061, (f) shall be adequate for
realization against the collateral of the benefits of the security,
(g) shall provide for level monthly payments (provided that the
payment in the first or last month in the life of the Receivable may
be minimally different from the level payment) that fully amortize the
Amount Financed by maturity and yield interest at the Annual
Percentage Rate, and (h) shall provide for, in the event that such
contract is prepaid, a prepayment that fully pays the Principal
Balance and includes accrued but unpaid interest due through the date
of prepayment in an amount at least equal to the Annual Percentage
Rate.
(ii) Schedule of RCC Receivables. The information set forth
in Schedule B to the Agreement shall be true and correct in all
material respects as
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of the close of business on the Cutoff Date, and no selection
procedures believed to be adverse to the Certificateholders shall have
been utilized in selecting the RCC Receivables.
(iii) No Government Obligor. None of the RCC Receivables
shall be due from the United States of America or any State or local
government or from any agency, department or instrumentality of the
United States of America, any State or local government.
(iv) RCC Receivables in Force. No RCC Receivable shall
have been satisfied, subordinated or rescinded, nor shall any Boat
have been released from the security interests granted by the related
RCC Receivable in whole or in part.
(v) No Waiver. No provision of a RCC Receivable shall
have been waived.
(vi) No Defenses. Except for the security interests in
favor of the NationsCredit Marine, RCC and the Depositor and the
Trustee, the RCC Receivables are free and clear of all security
interests, liens, charges, and encumbrances and to the best knowledge
of the Servicer no right of rescission, setoff, counterclaim or
defense shall have been asserted or threatened with respect to any RCC
Receivable.
(vii) No Liens. No liens or claims shall have been filed
for work, labor or materials relating to a Boat that shall be liens
prior to, or equal to the security interest in the Boat granted by the
RCC Receivable.
(viii) Insurance. The Obligor has obtained physical damage
insurance covering the Boat and the Obligor is required under the
terms of the RCC Receivable to maintain such insurance.
(ix) Lawful Assignment. No RCC Receivable shall have been
originated in, or shall be subject to the laws of any jurisdiction
under which the sale, transfer and assignment of such RCC Receivable
under the Agreement or pursuant to transfers of the Certificates shall
be unlawful, void or voidable.
(x) Security Interest. Upon the RCC Receivables being
conveyed to the Trust pursuant to the Assignment, the Trust shall have
a perfected security interest under the UCC in the RCC Receivables.
(xi) Ship Mortgage Act. No Boat related to any RCC
Receivable shall be required to be documented under the Ship Mortgage.
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(xii) Compliance with Law. Each RCC Receivable complies in
all material respects with all requirements of applicable Federal,
State, and local laws and regulations thereunder, including, without
limitation, usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair
Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Magnuson-Moss Warranty Act, the Federal
Trade Commission Credit Practices Rule, State unfair and deceptive
trade practice laws, and State adaptations of the National Consumer
Act and of the Uniform Consumer Credit Code, and any other applicable
consumer credit, equal credit opportunity and disclosure laws.
(xiii) Title. Immediately upon the sale and assignment
contemplated by the Assignment, the Trustee for the benefit of the
Certificateholders and the Surety Bond Issuer shall have good and
marketable title to each RCC Receivable, free and clear of all Liens,
encumbrances, security interests and rights of others; and the sale
and assignment has been perfected under the UCC.
(xiv) As of the Cutoff Date, not more than (a) ___% of the
number of Receivables, constituting approximately __% of the Initial
Pool Balance are related to Boats which have been repossessed by the
Servicer, (b) __% of the number of Receivables, constituting
approximately ___% of the Initial Pool Balance are 30 to 59 days
delinquent, (c) __% of the number of Receivables, constituting
approximately __% of the Initial Pool Balance are related to Boats
which are 60 to 89 days delinquent and (d) ___% of the number of
Receivables, constituting approximately __% of the Initial Pool
Balance are related to Boats which are 90 or more days delinquent.
(xv) Each Receivable creates a first priority perfected
security interest in the Boat financed thereby in favor of
NationsCredit Commercial (other than in the case of boat motors
subject to certificate of title statutes that provide for perfection
of the security interests in such boat motors by the filing of a UCC-1
financing statement).
(xvi) To the best of the Servicers knowledge, no such Liens
or claims are pending or threatened with respect to a Boat which may
be or become prior to or equal with the lien of the related
Receivable.
ARTICLE XIV
Distributions; Statements to
Certificateholders
SECTION 14.1. Accounts. (a) The Servicer shall establish and maintain
the Collection Account and the Certificate Account in the name of the Trustee
for the benefit of the
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Certificateholders and, to the extent herein provided, for the benefit of the
Surety Bond Issuer. The Collection Account shall be a segregated,
non-interest-bearing trust account initially established with the Trustee and
maintained with the Trustee so long as (i) the deposits of the Trustee have the
Required Deposit Rating or (ii) the Collection Account is maintained as a fully
segregated trust account. All amounts held in the Collection Account (other
than Purchase Amounts) shall be invested in Permitted Investments by the
Trustee, at the written direction of the Servicer, in each case such
investments maturing not later than the Deposit Date following the Collection
Period in which such amounts are so invested. Purchase Amounts deposited on a
Deposit Date shall not be invested. Such written direction shall certify that
any such investment is authorized by this Section 14.1 and complies with the
requirements of Permitted Investments as set forth in Schedule C. The
Certificate Account shall be a segregated, non-interest-bearing trust account
initially established with the Trustee and maintained with the Trustee for so
long as (x) the deposits of the Trustee have the Required Deposit Rating or (y)
the Certificate Account is maintained as a fully segregated trust account. The
amounts in the Certificate Account shall not be invested. Should the deposits
of the Trustee no longer have the Required Deposit Rating and the Collection
Account or the Certificate Account, as applicable, shall not be maintained as a
fully segregated trust account, then the Servicer shall, with the Trustee's
assistance as necessary, cause the Certificate Account and/or the Collection
Account to be moved, within 60 days after the occurrence of the later of the
loss of the Required Deposit Rating or the cessation of such accounts being
maintained as fully segregated trust accounts, to a bank or trust company
organized under the laws of the United States of any state thereof, the
deposits of which shall have the Required Deposit Rating.
(b) (i) The Depositor shall establish the Reserve Account in the
name of the Collateral Agent for the benefit of the
Certificateholders and the Surety Bond Issuer and shall clearly
indicate that such account has been pledged to the Collateral Agent
for the benefit of the Certificateholders and the Surety Bond
Issuer. The Reserve Account shall be a segregated,
non-interest-bearing trust account initially established and
maintained with the Trustee for so long as (x) the deposits of the
Trustee have the Required Deposit Rating or (y) the Reserve Account
is maintained as a fully segregated trust account. The Reserve
Account shall not be property of the Trust. All amounts held in
the Reserve Account shall be invested in Permitted Investments by
the Collateral Agent, at the written direction of the Depositor, in
each case such investments maturing not later than the Deposit Date
following the Collection Period in which such amounts are so
invested. Such written direction shall certify that any such
investment is authorized by this Section 14.1 and comply with the
requirements of Permitted Investments as set forth in Schedule C.
Should the deposits of the Collateral Agent no longer have the
Required Deposit Rating and the Reserve Account shall not be
maintained as a fully segregated trust account, then the Depositor
shall, with the Collateral Agent's assistance as necessary, cause
the Reserve Account to be moved, within 60 days after the
occurrence of the later of the loss of the Required Deposit Rating
or the cessation of such accounts being maintained as
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fully segregated trust accounts, to a bank or trust company
organized under the laws of the United States or any state thereof,
the deposits of which shall have the Required Deposit Rating.
(ii) On the date of the issuance of the Certificates, the
Depositor shall deposit the Reserve Account Initial Deposit into the
Reserve Account. The Depositor hereby grants to the Collateral Agent
for the benefit of the Certificateholders and the Surety Bond Issuer a
security interest in and to the Reserve Account and any and all
Account Property credited thereto from time to time, including, but
not limited to, Permitted Investments, to secure payment of the
Certificates according to their terms. Amounts held from time to time
in the Reserve Account will continue to be held by the Collateral
Agent for the benefit of the Certificateholders and the Surety Bond
Issuer, but the Reserve Account shall not be an asset of the Trust.
Funds held in the Reserve Account shall be remitted to the Depositor
upon the Depositor's written request upon the termination of the
Trust. By acceptance of their Certificates or interest therein and by
execution and delivery of the Reimbursement Agreement by the Surety
Bond Issuer, the Certificateholders and Certificate Owners and the
Surety Bond Issuer, respectively, shall be deemed to have appointed
Bankers Trust Company as Collateral Agent. Bankers Trust Company
hereby accepts such appointment as Collateral Agent.
(iii) With respect to the Account Property in respect of the
Reserve Account, the Collateral Agent agrees that:
A. any Account Property that is held in deposit accounts
shall be held solely in a bank with the Required Deposit Rating; and
each such bank with the Required Deposit Rating shall be subject to
the exclusive custody and control of the Collateral Agent, and the
Collateral Agent shall have sole signature authority with respect
thereto;
B. any Account Property that constitutes Physical Property
shall be delivered to the Collateral Agent in accordance with
paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Collateral Agent, or a
financial intermediary (as such term is defined in Section 8-313(4) of
the Relevant UCC) acting solely for the benefit of the
Certificateholders;
C. any Account Property that is a book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations shall be delivered to the Collateral Agent in accordance
with paragraph (b) of the definition of "Delivery" and shall be
maintained by the Collateral Agent, pending
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maturity or disposition, through continued book-entry registration of
such Account Property as described in such paragraph; and
D. any Account Property that is an "uncertificated
security" under Article 8 of the Relevant UCC and that is not governed
by clause (C) above shall be delivered to the Collateral Agent in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Collateral Agent, pending maturity or
disposition, through continued registration of the Collateral Agent's
(or its nominee's) ownership of such security.
Effective upon Delivery of any Account Property in the form
of Physical Property, book-entry securities or uncertificated
securities, the Collateral Agent shall be deemed to have purchased
such Account Property for value, in good faith and without notice of
any adverse claim thereto.
(iv) The Depositor and the Servicer agree to take or cause
to be taken such further actions, to execute, deliver and file or
cause to be executed, delivered and filed such further documents and
instruments (including, without limitation, any financing statements
under the Relevant UCC or this Agreement) as may be determined to be
necessary, in order to perfect the interests created by this Section
14.1(b) and otherwise effectuate the purposes, terms and conditions of
this Section 14.1(b).
SECTION 14.2. Collections. The Servicer shall remit to the Collection
Account within two Business Days after receipt thereof all Collections, any
amounts referred to in clauses (ii) and (iv) of the definition of Available
Funds, each as collected during the Collection Period; provided, however, that
so long as NationsCredit Commercial is acting as the Servicer, the Servicer
shall be permitted to make remittances of Collections, any amounts referred to
in clause (ii) of the definition of Available Funds and Liquidation Proceeds to
the Collection Account in next-day funds or immediately available funds by 12:30
p.m. New York City time on the Deposit Date immediately following such
Collection Period if the specific terms and conditions set forth below in this
Section 14.2 are satisfied and only for so long as such terms and conditions are
satisfied:
(i) the Servicer shall be NationsCredit Commercial or any
other Successor Servicer pursuant to Section 17.3;
(ii) there exists no Event of Default (as described below);
(iii) if the Servicer does not have a short term debt rating
or deposit rating, as applicable, of at least A-1 from S&P and P-1
from Moody's, a guaranty, letter of credit, surety bond or other
similar instrument is issued covering Collections, any amounts
referred to in clause (ii) of the definition of Available
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Funds and Liquidation Proceeds held by NationsCredit Commercial or its
Successor, which is acceptable to the Rating Agencies and the Surety
Bond Issuer and issued by an entity, which has a short-term debt or
deposit rating, as applicable, of at least A-1 from S&P and P-1 from
Moody's; and
(iv) the Servicer, the Trustee, the Depositor and the Surety
Bond Issuer shall not have received any notice from S&P or Moody's
that failure to deposit such funds more frequently will result in a
reduction or withdrawal of the then current rating on the Certificates
by either S&P or Moody's.
The Trustee shall not be deemed to have knowledge of any event or
circumstance under clause (ii) above that would require remittance by the
Servicer of Collections and Liquidations Proceeds to the Collection Account two
Business Days after receipt thereof unless the Trustee has received notice of
such event or circumstance from the Depositor, the Servicer or the Surety Bond
Issuer in an Officer's Certificate or from the Holders of Certificates
evidencing not less than 25% of the Certificate Balance.
SECTION 14.3. Application of Collections. As of each Determination
Date, all Collections for the related Collection Period shall be applied as
follows:
With respect to each Receivable (other than a Purchased Receivable or
a Defaulted Receivable), payments by or on behalf of the Obligor shall be
applied first to late payment and extension fees, second to interest accrued on
the Receivable, third to principal due on the Receivable during the related
Collection Period, fourth to insurance premiums or amounts due on loans to the
Obligors to finance the payment of insurance premiums for collateral protection
insurance purchased by the Servicer, and fifth to administrative charges, if
any. Last, any excess shall be applied to prepay the Principal Balance of the
Receivable.
SECTION 14.4. Additional Deposits. (a) The Servicer and/or the
Depositor shall deposit in the Collection Account the aggregate Purchase Amount
with respect to Purchased Receivables and the Servicer shall deposit therein all
amounts to be paid under Section 12.2, 13.7 and 20.2. All such deposits shall be
made in immediately available funds by 12:30 p.m. New York City Time on the
Deposit Date relating to the Collection Period during which such repurchase,
purchase or other obligation arose. The Trustee shall deposit in the Certificate
Account the aggregate of any amounts received from the Surety Bond Issuer
pursuant to Section 14.5(a)(iii) on the date of receipt thereof.
(b) If the Servicer shall be required pursuant to Section 14.2 to
remit Collections to the Collection Account two Business Days after receipt
rather than on a monthly basis, then, if the Servicer is NationsCredit
Commercial or an affiliate thereof is the servicer it may remit payments
collected on Unsold Contracts as well as payments collected on Receivables and
Liquidation Proceeds to the Collection Account. Upon receipt of an Officer's
Certificate of the Servicer identifying the amount of funds in the Collection
Account representing Collections
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attributable to Unsold Contracts, the Trustee shall transfer such funds in
accordance with the instructions contained in such Officer's Certificate.
SECTION 14.5. Distributions. (a) (i) on each Deposit Date, the Trustee
shall transfer all amounts on deposit in the Collection Account to the
Certificate Account, in immediately available funds, less any funds identified
in an Officer's Certificate of the Servicer as proceeds (x) of Unsold Contracts
and (y) of Collections on the Receivables allocable to late payment and
extension fees, administrative charges and the premiums of collateral protection
insurance purchased by the Servicer, provided, however, that in the event that
the Servicer is required to make deposits to the Collection Account two Business
Days after receipt pursuant to Section 14.2, the amount of Available Funds
transferred from the Collection Account to the Certificate Account will include
only those funds that were deposited into the Collection Account in the
Collection Period relating to such Distribution Date. The amount of the transfer
from the Collection Account to the Certificate Account shall be set forth in the
Servicer's Certificate for such Distribution Date.
(ii) on each Deposit Date, the Trustee shall transfer from
the Reserve Account to the Certificate Account an amount equal to the
lesser of (x) the amount on deposit in the Reserve Account and (y) an
amount equal to the shortfall, if any, between, (A) Available Funds
for such Collection Period and (B) the sum of (1) the Monthly Interest
Payment and any Carry-Over Monthly Interest, (2) the Monthly Servicing
Fee and any Carry-Over Servicing Fee to be distributed to the Servicer
pursuant to Section 14.5(b)(ii) and (3) the Monthly Principal Payment
and any Carry-Over Monthly Principal Payment, each for the related
Distribution Date (collectively "Priority Distributions") (the amount
transferred pursuant to this clause (ii) is the "Reserve Account
Withdrawal Amount" for such Deposit Date).
The Reserve Account Withdrawal Amount shall be set forth in the
Servicer's Certificate with respect to each Distribution Date.
(iii) If on any Determination Date the Servicer has reported
to the Trustee in the Servicer's Certificate that the Servicer has
determined that Available Funds for the related Distribution Date
together with any Reserve Account Withdrawal Amount for such
Distribution Date are insufficient to provide for the Priority
Distribution on such Distribution Date (the amount of such
insufficiency is referred to as the "Surety Drawing Amount" for such
Distribution Date, then, after receipt of such Servicer's Certificate,
the Trustee shall promptly (and in any event not later than three
Business Days prior to the Distribution Date) deliver a completed
demand for payment under the Surety Bond to the Surety Bond Issuer
requesting payment in an amount equal to the Surety Drawing Amount for
such Distribution Date. The Surety Bond Issuer shall pay or cause to
be paid the amount of such demand for payment to the Trustee for
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credit to the Certificate Account no later than the later of 11:00
a.m. on the Deposit Date and the [second] Business Day after the
Surety Bond Issuer receives a demand for payment.
(b) on each Distribution Date, as set forth in the Servicer's
Certificate for such Distribution Date, the Trustee will make the following
distributions from the Certificate Account in the following order of priority:
(i) to the Certificateholders of record as of the related
Record Date, the Monthly Interest Payment and any Carry-Over Monthly
Interest;
(ii) if the Servicer is not NationsCredit Commercial or an
affiliate thereof, to the Servicer, the Servicing Fee and any
Carry-Over Servicing Fee;
(iii) to the Certificateholders of record as of the related
Record Date, the Monthly Principal Payment and any Carry-Over Monthly
Principal;
(iv) if NationsCredit Commercial or an affiliate thereof is
the Servicer, to the Servicer, the Servicing Fee and any Carry-Over
Servicing Fee;
(v) to the Surety Bond Issuer, any amounts owing to the
Surety Bond Issuer hereunder and pursuant to the Reimbursement
Agreement and not paid;
(vi) to the Collateral Agent, an amount up to the Specified
Reserve Account Requirement for deposit into the Reserve Account; and
(vii) to the Depositor, any remaining amounts.
Distributions to Certificateholders, except in the case of
distributions under Section 20.1, shall be made by check mailed by the Trustee
to each Certificateholder's respective address of record on the Certificate
Register (or, where a Clearing Agency is the Certificateholder, by delivery of
immediately available funds) and distributions to the Servicer, the Surety Bond
Issuer, the Collateral Agent or the Depositor shall be made by wire transfer of
immediately available funds.
SECTION 14.6. Net Deposits. For so long as the Servicer shall be
entitled pursuant to Section 14.2 to remit Collections on a monthly basis rather
than more frequently, the Servicer may make the remittances pursuant to Sections
14.2 and 14.4 above net of amounts to be distributed to the Servicer pursuant to
Section 14.5(b). Nonetheless, the Servicer shall account for all the above
described remittances and distributions in the Servicer's Certificate as if the
amounts were deposited and/or transferred separately.
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SECTION 14.7. Statements to Certificateholders. (a) On each
Distribution Date, the Servicer shall provide to the Trustee the Statement to
Certificateholders, setting forth for the Collection Period relating to such
Distribution Date the following information (stated in the case of items (i),
(ii) and (iii), on the basis of $1,000 initial principal amount) as of such
Distribution Date a copy of which shall be forwarded by the Trustee to each
Certificateholder on such Distribution Date:
(i) The amount of the Certificateholder's distribution which
constitutes the Monthly Principal Payment (including any Carry-Over
Monthly Principal);
(ii) The amount of the Certificateholder's distribution
which constitutes the Monthly Interest Payment (including any
Carry-Over Monthly Interest);
(iii) The Certificateholder's pro rata portion of the
Servicing Fee (including any Carry-Over Servicing Fee);
(iv) The Certificate Balance and the Certificate Factor as
of the close of business on such Distribution Date.
(b) Within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of the Agreement, the
Trustee shall mail, to each Person who at any time during such calendar year
shall have been a Certificateholder, a statement containing the sum of the
amounts determined in each of clauses (i) through (iii), for such calendar year
or, in the event such Person shall have been a Certificateholder during a
portion of such calendar year, for the applicable portion of such year.
ARTICLE XIV A
The Surety Bond
SECTION 14A.1. The Surety Bond. The Servicer and the Transferor agree,
simultaneously with the execution and delivery of this Agreement, to cause the
Surety Bond Issuer to issue the Surety Bond to the Trustee for the benefit of
the Trust in accordance with the terms thereof.
SECTION 14A.2. Preference Events. If the payment of a Surety Drawing
Amount pursuant to the Surety Bond is voided (a "Preference Event") under any
applicable bankruptcy, insolvency, receivership or similar law in an Insolvency
Proceeding and, as a result of such a Preference Event, the Trustee is required
to return such voided payment, or any portion of such voided payment, in its
possession made in respect of the Certificates (an "Avoided Payment"), the
Trustee shall furnish to the Surety Bond Issuer (x) a certified copy of a final
order of a court exercising jurisdiction in such Insolvency Proceeding to the
effect that the Trustee is required to
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return any such payment or portion thereof during the term of the Surety Bond
because such payment was voided under applicable law, with respect to which
order the appeal period has expired without an appeal having been filed (the
"Final Order"), (y) an assignment, in form reasonably satisfactory to the
Surety Bond Issuer, irrevocably assigning to the Surety Bond Issuer all rights
and claims of the Trustee relating to or arising under such Avoided Payment and
(z) a Notice for Payment appropriately completed and executed by the Trustee.
Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order and not
to the Trustee directly unless the Trustee has previously paid such amounts
pursuant to a court order or otherwise. The Trustee is not permitted to make a
claim on the Trust or on any Certificateholder for payments made to
Certificateholders under the Surety Bond which are characterized as preference
payments by any bankruptcy court having jurisdiction over any bankrupt Obligor
unless ordered to do so by such bankruptcy court.
SECTION 14A.3. Surrender of Surety Bond. The Trustee shall surrender
the Surety Bond to the Surety Bond Issuer for cancellation upon its expiration
in accordance with the terms thereof.
SECTION 14A.4. Replacement Surety Bond. In the event the rating of the
Surety Bond Issuer is downgraded by any Rating Agency such that the rating of
the Certificates is reduced, suspended or withdrawn, the Servicer shall be
permitted, in accordance with the terms of the Reimbursement Agreement, but
shall not be obligated, to substitute a new surety bond for the Surety Bond or
may arrange for any other form of credit enhancement; provided, however, that,
in each case, the rating of the Certificates following any such substitution
shall be the highest rating available for each of the Rating Agencies and
provided further that the Surety Bond Issuer is reimbursed for all amounts due
under this Agreement and the Reimbursement Agreement. It shall be a condition to
substitution of any such new surety bond or other form of credit enhancement
that there be delivered to the Trustee (i) an Officer's Certificate by the
Servicer stating that the conditions to such substitution set forth in this
Section 14A.04 (other than in clause (ii)) have been satisfied and (ii) a legal
opinion, acceptable in form to the Trustee, from counsel to the provider of such
surety bond or other form of credit enhancement with respect to the
enforceability thereof and such other matters as the Trustee may require. Upon
receipt of written notice of any such substitution from the Servicer and the
taking of physical possession of the replacement surety bond or other form of
credit enhancement, the Trustee shall, within five (5) Business Days following
receipt of such notice and such taking of physical possession, deliver the
Surety Bond marked "Cancelled" to the Surety Bond Issuer, and the Surety Bond
Issuer will have no further liability under the Surety Bond.
ARTICLE XV
The Certificates
SECTION 15.1. The Certificates. The Certificates shall be issued in
book-entry form in minimum denominations representing $1,000 of initial
principal balance of the
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Receivables and in integral multiples thereof; provided, however, that one
Certificate may be issued in a denomination that includes any residual amount
and that such Certificate shall be retained by the Depositor (the "Residual
Certificate"). The Certificates shall be executed by the Trustee on behalf of
the Trust solely in its capacity as Trustee by manual or facsimile signature of
a Trustee Officer. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be valid and binding
obligations of the Trust, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of such
Certificates.
SECTION 15.2. Authentication of Certificates. The Trustee shall cause
the Certificates to be executed on behalf of the Trust, authenticated and
delivered to or upon the written order of the Depositor, signed by the
Depositor's chairman of the board, the president, any vice chairman of the
board, any vice president, the treasurer, any assistant treasurer or the
controller of the Depositor, without further corporate action by the Depositor,
in authorized denominations, pursuant to the Agreement. No Certificate shall
entitle its holder to any benefit under the Agreement, or shall be valid for any
purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit B hereto executed
by the Trustee by manual signature; such authentication shall constitute
conclusive evidence that such Certificate shall have been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication.
SECTION 15.3. Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 15.7, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. The Trustee shall be the initial Certificate
Registrar.
(b) Upon surrender for registration of transfer of any Certificate at
the Corporate Trust Office, the Trustee shall execute, authenticate and deliver,
in the name of the designated transferee or transferees, one or more new
Certificates in authorized denominations of a like aggregate amount dated the
date of authentication by the Trustee. At the option of a Holder, Certificates
may be exchanged for other Certificates of authorized denominations of a like
aggregate amount upon surrender of the Certificates to be exchanged at the
Corporate Trust Office.
(c) Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Certificate Registrar duly executed by
the Holder or his attorney duly authorized in writing. Each Certificate
surrendered for registration of transfer and exchange shall be canceled and
subsequently disposed of by the Trustee.
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(d) No service charge shall be made for any registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
SECTION 15.4. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate shall be surrendered to the Certificate Registrar,
or if the Certificate Registrar shall receive evidence to its satisfaction of
the destruction, loss or theft of any Certificate and (b) there shall be
delivered to the Certificate Registrar or the Trustee such security or indemnity
as may be required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
the Trustee on behalf of the Trust shall execute and the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
denomination. In connection with the issuance of any new Certificate under this
Section 15.4, the Trustee and the Certificate Registrar may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate Certificate issued pursuant to
this Section 15.4 shall Constitute conclusive evidence of ownership in the
Trust, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
SECTION 15.5. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee or the Certificate
Registrar may treat the Person in whose name any Certificate shall be registered
as the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 14.5 and for all other purposes whatsoever, and neither the
Trustee nor the Certificate Registrar shall be bound by any notice to the
contrary.
SECTION 15.6. Access to List of Certificateholders Names and
Addresses. At such time as the Certificates exist as Definitive Certificates,
the Trustee shall furnish or cause to be furnished to the Servicer and the
Surety Bond Issuer, within 15 days after receipt by the Trustee of a request
therefor from the Servicer or the Surety Bond Issuer in writing, a list, of the
names and addresses of the Certificateholders as of the most recent Record Date.
If three or more Certificateholders, or one or more Holders of Certificates
aggregating not less than 25% of the Certificate Balance, apply in writing to
the Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under the
Agreement or under the Certificates and such application shall be accompanied by
a copy of the communication that such applicants propose to transmit, then the
Trustee shall, within five Business Days after the receipt of such application,
afford such applicants access during normal business hours to the current list
of Certificateholders. Each Holder, by receiving and holding a Certificate,
shall be deemed to have agreed to hold neither the Servicer nor the Trustee
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
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SECTION 15.7. Maintenance of Office or Agency. The Trustee shall
maintain in the Borough of Manhattan, the City of New York, an office or offices
or agency or agencies where Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustee in
respect of the Certificates and the Agreement may be served. The Trustee
initially designates the Corporate Trust Office as specified in the Agreement as
its office for such purposes. The Trustee shall give prompt written notice to
the Servicer and to Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 15.8. Book-Entry Certificates. The Certificates, upon original
issuance (except for the Residual Certificate), will be issued in the form of
one or more global Certificates registered in the name of the nominee of The
Depository Trust Company, the initial Clearing Agency, by or on behalf of the
Depositor. The Certificates delivered to The Depository Trust Company shall
initially be registered on the Certificate Register in the name of CEDE & CO.,
the nominee of the initial Clearing Agency, and no Certificate Owner will
receive a physical certificate representing such Certificate Owner's interest in
the Certificates, except as provided in Section 15.10. Unless and until
definitive, fully registered Certificates (the "Definitive Certificates") have
been issued to Certificate Owners pursuant to Section 15.10:
(i) the provisions of this Section 15.8 shall be in full
force and effect;
(ii) the Depositor, the Servicer, the Certificate Registrar
and the Trustee may deal with the Clearing Agency for all purposes
(including the making of distributions on the Certificates) as the
authorized representative of the Certificate Owners;
(iii) to the extent that the provisions of this Section 15.8
conflict with any other provisions of the Agreement, the provisions of
this Section 15.8 shall control;
(iv) the rights of Certificate Owners shall be exercised
only through the Clearing Agency and shall be limited to those
established by law and agreements between such Certificate Owners and
the Clearing Agency and/or the Clearing Agency Participants. Pursuant
to the Depository Agreement, unless and until Definitive Certificates
are issued pursuant to Section 15.10, the initial Clearing Agency will
make book-entry transfers among the Clearing Agency Participants and
receive and transmit distributions of principal and interest on the
Certificates to such Clearing Agency Participants; and
(v) whenever the Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Certificates
evidencing a specified percentage of the Pool Balance the Clearing
Agency will take such actions with respect to specified percentages of
the Pool Balance only at the
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direction of and on behalf of Clearing Agency Participants whose
holdings include undivided interests that satisfy such specified
percentages. DTC may take conflicting actions with respect to other
undivided interests to the extent that such actions are taken on
behalf of Clearing Agency Participants whose holdings include such
undivided interests.
SECTION 15.9. Notices to Clearing Agency. Whenever notice or other
communication to the Certificateholders is required under the Agreement, other
than to the Holder of the Residual Certificate, unless and until Definitive
Certificates shall have been issued to Certificate Owners pursuant to Section
15.10, the Trustee and the Servicer shall give all such notices and
communications specified herein to be given to Holders of the Certificates to
the Clearing Agency.
SECTION 15.10. Definitive Certificates. If (i) the Depositor advises
the Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities as Depository with respect to the
Certificates and the Trustee or the Depositor is unable to locate a qualified
successor, (ii) the Depositor, at its option, elects to terminate the book-entry
system through the Clearing Agency, or (iii) after the occurrence of an Event of
Default, Certificate owners representing beneficial interests aggregating not
less than 51% of the Certificate Balance advise the Trustee and the Clearing
Agency through the Clearing Agency Participants in writing that the continuation
of a book-entry system through the Clearing Agency is no longer in the best
interests of the Certificate Owners, then the Trustee through the Clearing
Agency shall notify all Certificate Owners of the occurrence of any such event
and of the availability through the Clearing Agency of Definitive Certificates.
Upon surrender by the Clearing Agency of the global Certificates representing
the Certificates and instructions for re-registration, the Trustee shall issue
the Definitive Certificates and deliver such Definitive Certificates in
accordance with the instructions of the Clearing Agency. Neither the Depositor,
the Certificate Registrar nor the Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates, the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder. The Trustee shall not be liable if
the Trustee or the Depositor is unable to locate a qualified successor Clearing
Agency.
ARTICLE XVI
The Depositor
SECTION 16.1. Representations of Depositor. The Depositor makes the
following representations on which the Trustee relies in accepting the
Receivables in trust and executing and authenticating the Certificates.
(i) Organization and Good Standing. The Depositor shall have
been duly organized and shall be validly existing as a corporation in
good standing under the laws of the State of Delaware, with power and
authority to own its
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properties and to conduct its business as such properties shall be
currently owned and such business is presently conducted, and had at
all relevant times, and shall have, power, authority and legal right
to acquire and own the Receivables.
(ii) Due Qualification. The Depositor shall be duly
qualified to do business as a foreign corporation in good standing,
and shall have obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of property or the
conduct of its business shall require such qualifications.
(iii) Principal Place of Business. The Depositor's
principal place of business is located in the State of Texas.
(iv) Power and Authority. The Depositor shall have the
power and authority to execute and deliver the Agreement and to carry
out its terms; the Depositor shall have full power and authority to
sell and assign the property to be sold and assigned to and deposited
with the Trustee as part of the Trust and shall have duly authorized
such sale and assignment to the Trustee by all necessary corporate
action; and the execution, delivery and performance of the Agreement
shall have been duly authorized by the Depositor by all necessary
corporate action.
(v) Valid Sale; Binding Obligations. The Agreement shall
evidence (A) a valid sale, transfer and assignment of the Receivables,
enforceable against creditors of and purchasers from the Depositor,
and (B) a legal, valid and binding obligation of the Depositor
enforceable in accordance with its terms.
(vi) No Violation. The consummation of the transactions
contemplated by the Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time
or both) a default under, the articles of incorporation or by-laws of
the Depositor, or any indenture, agreement or other instrument to
which the Depositor is a party or by which it shall be bound; nor
result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or
other instrument (other than the Agreement); nor violate any law or,
to the best of the Depositor's knowledge, any order, rule or
regulation applicable to the Depositor of any court or of any Federal
or State regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its
properties.
(vii) No Proceedings. There are no proceedings or
investigations pending, or to the Depositor's best knowledge,
threatened, before any court, regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the
Depositor or its properties: (A) asserting the
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invalidity of the Agreement or the Certificates; (B) seeking to
prevent the issuance of the Certificates or the consummation of any of
the transactions contemplated by the Agreement; (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity
or enforceability of, the Agreement or the Certificates; or (D)
relating to the Depositor and which might adversely affect the Federal
income tax attributes of the Certificates.
(viii) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental
body or official required in connection with the execution and
delivery by the Depositor of the Agreement, the Reimbursement
Agreement and the Certificates, the performance by the Depositor of
the transactions contemplated by the Agreement, the Reimbursement
Agreement and the Certificates, and the fulfillment by the Depositor
of the terms hereof, have been obtained; provided, however, that the
Depositor makes no representation or warranty regarding State
securities or "blue sky" laws in connection with the distribution of
the Certificates.
SECTION 16.2. Liability of Depositor; Indemnities. The Depositor shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Depositor under the Agreement:
(i) The Depositor shall indemnify, defend and hold harmless
the Trustee (which for purposes of this Section 16.2 shall include its
directors, employees, officers and agents) and the Trust from and
against any taxes that may at any time be asserted against the Trustee
or the Trust with respect to, and as of the date of, the sale of the
Receivables to the Trustee or the issuance and original sale of the
Certificates, including any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes
(but, in the case of the Trust, not including any taxes asserted with
respect to ownership of the Receivables or Federal or other income
taxes arising out of the transactions contemplated by the Agreement)
and costs and expenses in defending against the same.
(ii) The Depositor shall indemnify, defend and hold harmless
the Trustee (which for purposes of this Section 16.2 shall include its
directors, employees, officers and agents) and the Trust from and
against any loss, liability or expense incurred by reason of (a) the
Depositor's willful misfeasance, bad faith or negligence in the
performance of its duties under the Agreement, or by reason of
reckless disregard of its obligations and duties under the Agreement,
(b) the Depositor's violation of Federal or State securities laws in
connection with the registration of the sale of the Certificates or
(c) any action taken by the Trustee at the direction of the Servicer
pursuant to Section 13.1 or otherwise.
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Indemnification under this Section 16.2 shall survive the termination
of the Agreement and the resignation or removal of the Trustee, and shall
include, without limitation, reasonable fees and expenses of counsel and
expenses of litigation. If the Depositor shall have made any indemnity payments
to the Trustee pursuant to this Section 16.2 and the Trustee thereafter shall
collect any of such amounts from others, the Trustee shall repay such amounts to
the Depositor, without interest.
SECTION 16.3. Merger or Consolidation of, or Assumption of the
Obligations of Depositor. Any Person (a) into which the Depositor may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Depositor shall be a party, or (c) which may succeed to the properties and
assets of the Depositor substantially as a whole, which Person in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Depositor under the Agreement and the Reimbursement Agreement, shall be
the successor to the Depositor hereunder without the execution or filing of any
document or any further act by any of the parties to the Agreement; provided,
however, that (i) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 12.1 shall have been
breached and no Event of Default, and no event that, after notice or lapse of
time or both, would become an Event of Default, shall have happened and be
continuing, (ii) the Depositor shall have delivered to the Trustee 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
16.3 and (iii) the Depositor shall have delivered an Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Trustee in the
Receivables, and reciting the details of such filings, or (B) stating that, in
the opinion of such counsel, no such action shall be necessary to preserve and
protect such interest. The Depositor shall provide notice of any merger,
consolidation or succession pursuant to this Section 16.3 to each Rating Agency
and the Surety Bond Issuer. Notwithstanding anything herein to the contrary, the
Depositor shall not consummate any transaction of a type referred to in clauses
(a), (b) or (c) above unless at such time or prior thereto the foregoing
agreement of assumption shall have been executed and the conditions described in
clauses (i), (ii) and (iii) shall have been satisfied.
SECTION 16.4. Limitation on Liability of Depositor and Others. The
Depositor and any director or officer or employee or agent of the Depositor may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under the Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 16.5. Depositor May Own Certificates. The Depositor and any
Person controlling, controlled by or under common control with, the Depositor
may in its individual or any other capacity become the owner or pledgee of
Certificates with the same rights as it would
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have if it were not the Depositor or an affiliate thereof, except as otherwise
provided in the definition of "Certificateholder" specified in Section 11.1.
Certificates so owned by or pledged to the Depositor or such controlling or
commonly controlled Person shall have an equal and proportionate benefit under
the provisions of the Agreement, without preference, priority or distinction as
among all the Certificates.
SECTION 16.6. Depositor's Interest in Reserve Account; No Transfer.
The Depositor hereby acknowledges that the Reserve Account shall not be a part
of the Trust. The Depositor hereby acknowledges that any amounts on deposit in
the Reserve Account (and any investment earnings thereon) is owned directly by
it, and the Depositor agrees to treat the same as its assets (and earnings) for
federal tax and all other purposes. Funds deposited therein shall be
distributable to the Collection Account, the Surety Bond Issuer and the
Depositor as described in this Agreement and in the Reimbursement Agreement.
ARTICLE XVII
The Servicer
SECTION 17.1. Representations of Servicer. The Servicer makes the
following representations on which the Trustee relies in accepting the
Receivables in trust and executing and authenticating the Certificates. The
representations speak as of the execution and delivery of the Agreement and
shall survive the sale of the Receivables to the Trustee.
(i) Organization and Good Standing. The Servicer shall have
been duly organized and shall be validly existing as a corporation in
good standing under the laws of the State of its incorporation, with
power and authority to own its properties and to conduct its business
as such properties shall be currently owned and such business is
presently conducted, and had at all relevant times, and shall have,
power, authority and legal right to acquire, own, sell and service the
Receivables and to hold the Receivable Files as custodian on behalf of
the Trustee.
(ii) Due Qualification. The Servicer shall be duly qualified
to do business as a foreign corporation in good standing, and shall
have obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of property or the
conduct of its business (including the servicing of the Receivables as
required by the Agreement) shall require such qualifications.
(iii) Power and Authority. The Servicer shall have the power
and authority to execute and deliver the Agreement and to carry out
its terms; and the executions delivery and performance of the
Agreement shall have been duly authorized by the Servicer by all
necessary corporate action.
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(iv) Valid Sale; Binding Obligations. The sale of the
Receivables by NationsCredit Commercial to the Depositor constitutes a
valid sale, transfer and assignment of the Receivables, enforceable
against creditors of and purchasers from NationsCredit Commercial; and
the Agreement shall constitute a legal, valid and binding obligation
of the Servicer enforceable in accordance with its terms.
(v) No Violation. The consummation of the transactions
contemplated by the Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time
or both) a default under, the articles of incorporation or by-laws of
the Servicer, or any indenture, agreement or other instrument to which
the Servicer is a party or by which it shall be bound; nor result in
the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other
instrument (other than the Agreement); nor violate any law or, any
order, rule or regulation applicable to the Servicer of any court or
of any Federal or State regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over the
Servicer or its properties.
(vi) No Proceedings. There are no proceedings or
investigations pending, or, to the Servicer's knowledge, threatened,
before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or
its properties: (A) asserting the invalidity of the Agreement or the
Certificates; (B) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by the
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, the Agreement
or the Certificates; or (D) relating to the Servicer and which might
adversely affect the Federal income tax attributes of the
Certificates.
(vii) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental
body or official required in connection with the execution and
delivery by the Servicer of the Agreement and the Reimbursement
Agreement, the performance by the Servicer of the transactions
contemplated by the Agreement, the Reimbursement Agreement and the
Certificates, and the fulfillment by the Servicer of the terms hereof,
have been obtained; provided, however, that the Servicer makes no
representation or warranty regarding State securities or "blue sky"
laws in connection with the distribution of the Certificates.
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SECTION 17.2. Liability of Servicer; Indemnities. The Servicer shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under the Agreement:
(i) The Servicer shall defend, indemnify and hold harmless
the Trustee (which for purposes of this Section 17.2 shall include its
directors, officers, employees and agents), the Trust, the Certificate
holders and the Surety Bond Issuer from and against any and all costs,
expenses, losses, damages, claims and liabilities, arising out of or
resulting from the use, ownership or operation by the Servicer or any
affiliate thereof of a Boat.
(ii) The Servicer shall indemnify, defend and hold harmless
the Trustee, (which for purposes of this Section 17.2 shall include
its directors, officers, employees and agents), the Trust and the
Surety Bond Issuer from and against any taxes that may at any time be
asserted against the Trustee, the Trust or the Surety Bond Issuer with
respect to the transactions contemplated herein or in the
Reimbursement Agreement, including, without limitation, any sales,
gross receipts, general corporation, tangible personal property,
privilege or license taxes (but, in the case of the Trust, not
including any taxes asserted with respect to, and as of the date of,
the sale of the Receivables to the Trust or the issuance and original
sale of the Certificates, or asserted with respect to ownership of the
Receivables, or Federal or other income taxes arising out of
distributions on the Certificates) and costs and expenses in defending
against the same.
(iii) The Servicer shall indemnify, defend and hold harmless
the Trustee (which for purposes of this Section 17.2 shall include its
directors, officers, employees and agents), the Trust, and the
Certificateholders from and against any and all costs, expenses,
losses, claims, damages and liabilities to the extent that such cost,
expense, loss, claim, damage or liability arose out of, or was imposed
upon the Trustee, the Trust, the Surety Bond Issuer or the
Certificateholders through, the negligence, willful misfeasance or bad
faith of the Servicer in the performance of its duties under the
Agreement or the Reimbursement Agreement or by reason of reckless
disregard of its obligations and duties under the Agreement or the
Reimbursement Agreement.
(iv) The Servicer shall indemnify, defend and hold harmless
the Trustee (which for purposes of this Section 17.2 shall include its
directors, officers, employees and agents), from and against all
costs, expenses, losses, claims, damages and liabilities arising out
of or incurred in connection with the acceptance or performance of the
trusts and duties, including any action by the Trustee at the
direction of the Servicer taken pursuant to Section 13.1, herein
contained and the trusts and duties contained in the Reimbursement
Agreement, except to the extent that such cost, expense, loss, claim,
damage or liability: (a)
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shall be due to the willful misfeasance, bad faith or negligence
(except for errors in judgment) of the Trustee; (b) relates to any tax
other than the taxes with respect to which either the Depositor or the
Servicer shall be required to indemnify the Trustee; (c) shall arise
from Trustee's breach of any of its representation or warranties set
forth in Section 19.8; (d) shall be one as to which the Depositor is
required to indemnify the Trustee; or (e) shall arise out of or be
incurred in connection with the acceptance or performance by the
Trustee of the duties of successor Servicer hereunder unless such
cost, expense, loss, claim, damage or liability was caused by the act
or omission of the predecessor Servicer.
For purposes of this Section 17.2, in the event of the termination of
the rights and obligations of NationsCredit Commercial (or any successor thereto
pursuant to Section 17.3) as Servicer pursuant to Section 18.1, or a resignation
by such Servicer pursuant to the Agreement, such Servicer shall be deemed to be
the Servicer pending appointment of a successor Servicer (other than the
Trustee) pursuant to Section 18.2.
Indemnification under this Section 17.2 shall survive termination of
the Agreement and the resignation or removal of the Trustee and shall include,
without limitation, reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer shall have made any indemnity payments pursuant to
this Section 17.2 and the recipient thereafter collects any of such amounts from
others, the recipient shall promptly repay such amounts to the Servicer, without
interest.
SECTION 17.3. Merger or Consolidation of, or Assumption of the
Obligations of the Servicer. Any Person (a) into which the Servicer may be
merged or consolidated, (b) which may result from any merger or consolidation to
which the Servicer shall be a party, or (c) which may succeed to the properties
and assets of the Servicer substantially as a whole, or any Person, more than
50% of the voting stock of which is, directly or indirectly, owned by
NationsBank Corporation, which Person executed an agreement of assumption to
perform every obligation of the Servicer hereunder and under the Reimbursement
Agreement, shall be the successor to the Servicer under the Agreement without
further act on the part of any of the parties to the Agreement; provided,
however, that (i) immediately after giving effect to such transaction, no Event
of Default, and no event which, after notice or lapse of time or both, would
become an Event of Default shall have happened and be continuing, (ii) the
Servicer shall have delivered to the Trustee 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 17.3, and (iii) the
Servicer shall have delivered to the Trustee an Opinion of Counsel either (A)
stating that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Trustee in the
Receivables, and reciting the details of such filings, or (B) stating that, in
the opinion of such counsel, no such action shall be necessary to preserve and
protect such interest. The Servicer shall provide notice of any merger,
consolidation or succession pursuant to this Section 17.3 to each Rating Agency
and the Surety Bond Issuer.
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Notwithstanding anything herein to the contrary, the Servicer shall not
consummate any transaction of a type referred to in clauses (a), (b) or (c)
above unless at or prior thereto the foregoing agreement of assumption shall
have been executed and the conditions described in clauses (i), (ii) and (iii)
shall have been satisfied.
SECTION 17.4. Limitation on Liability of Servicer and Others. (a)
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Trust or the
Certificateholders, except as provided under the Agreement, for any action taken
or for refraining from the taking of any action pursuant to the Agreement;
provided, however, that this provision shall not protect the Servicer or any
such person against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under the Agreement. The
Servicer and any director or officer or employee or agent of the Servicer may
rely in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under the Agreement.
(b) Except as provided in the Agreement, the Servicer shall not be
under any obligation to appear in, prosecute, or defend any legal action that
shall not be incidental to its duties to service the Receivables in accordance
with the Agreement, and that in its opinion may involve it in any expense or
liability; provided, however, that the Servicer may undertake any reasonable
action that it may deem necessary or desirable in respect of the Agreement and
the rights and duties of the parties to the Agreement and the interests of the
Certificateholders under the Agreement.
ARTICLE XVIII
Default
SECTION 18.1. Events of Default. (a) If any one of the following
events (each an "Event of Default") shall occur and be continuing:
(i) Any failure by the Servicer to deliver to the Trustee
for distribution to Certificateholders any proceeds or payment
required to be so delivered under the terms of the Certificates and
the Agreement that shall continue unremedied for a period of three
Business Days after written notice from the Trustee is received by the
Servicer as specified in the Agreement or after discovery of such
failure by an officer of the Servicer; or
(ii) Failure on the part of the Servicer or the Depositor
duly to observe or to perform in any material respect any other
covenants or agreements of the Servicer or the Depositor (as the case
may be) set forth in the Certificates or in the Agreement, which
failure shall (a) materially adversely affect the rights of
Certificates and (b) continue unremedied for a period of 60 days after
the date on which written notice of such failure, requiring the same
to be remedied, shall have
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been given (1) to the Servicer or the Depositor (as the case may be),
by the Trustee, or (2) to the Servicer or the Depositor (as the case
may be) and to the Trustee by either the Holders of Certificates
evidencing in the aggregate not less than 51% of the Certificate
Balance and the Surety Bond Issuer; or
(iii) The entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver or liquidator for the Servicer
or the Depositor in any bankruptcy, insolvency, readjustment of debt,
marshaling of assets and liabilities, or similar proceedings, or for
the winding up or liquidation of their respective affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
(iv) The consent by the Servicer or the Depositor to the
appointment of a conservator or receiver or liquidator in any
bankruptcy, insolvency, readjustment of debt, marshaling of assets and
liabilities, or similar proceedings of or relating to the Servicer or
the Depositor or relating to substantially all their property; or the
Servicer or the Depositor shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations; or
(v) Any representation or warranty by the Servicer in the
Agreement shall prove to have been incorrect in any material respect
when made or when delivered, which continues to be incorrect in any
material respect for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by either the Holders of Certificates
evidencing not less than 25% of the Certificate Balance or the Surety
Bond Issuer and as a result of which the interests hereunder of
Certificateholders are materially and adversely affected;
then, and in each and every case, so long as an Event of Default shall not have
been remedied, either the Trustee, or the Holders of Certificates evidencing
not less than 51% of the Certificate Balance, in each case with the consent of
the Surety Bond Issuer (unless a Surety Bond Issuer Default shall have occurred
and be continuing), by notice then given in writing to the Servicer (and to the
Trustee and the Surety Bond Issuer if given by the Certificateholders) may
terminate all the rights and obligations of the Servicer under the Agreement (a
"Servicer Transfer").
(b) In addition to a Servicer Transfer effected pursuant to clause (a)
of this Section 18.1, the Surety Bond Issuer (unless a Surety Bond Issuer
Default shall have occurred and be continuing) with notice in writing to the
Servicer, may effect a Servicer Transfer upon the occurrence of any of the
following events: (i) the Depositor or Servicer, as the case may be, shall
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fail to pay when due any amount payable by it for the benefit of the Surety
Bond Issuer; (ii) an Event of Default occurs under this Agreement, (iii) the
Surety Bond Issuer determines that the performance of the Servicer is not, in
the opinion of the Surety Bond Issuer, in conformity with the Servicing
Standards; (iv) if, with respect to any Distribution Date, the average of the
Net Credit Loss Ratio for the three preceding calendar months exceeds ___%; or
(v) any Trigger Event (as defined in the Reimbursement Agreement).
(c) On or after the receipt by the Servicer of such written notice
which effects a Servicing Transfer, all authority and power of the Servicer
under the Agreement, whether with respect to the Certificates or the Receivables
or otherwise, shall, without further action, pass to and be vested in the
Trustee or such successor Servicer as may be appointed under Section 18.2
pursuant to and under this Section 18.1; and, without limitation, the Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the
predecessor Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Receivables and related
documents, or otherwise. The predecessor Servicer shall cooperate with the
successor Servicer and the Trustee in effecting the termination of the
responsibilities and rights of the predecessor Servicer under the Agreement,
including the transfer to the successor Servicer for administration by it of all
cash amounts that shall at the time be held by the predecessor Servicer for
deposit, or shall thereafter be received with respect to a Receivable. All
reasonable costs and expenses (including attorneys' fees and disbursements)
incurred in connection with transferring the Receivable Files to the successor
Servicer and amending the Agreement and the Reimbursement Agreement to reflect
such succession as Servicer pursuant to this Section 18.1 shall be paid by the
predecessor Servicer upon presentation of reasonable documentation of such costs
and expenses.
SECTION 18.2. Appointment of Successor. (a) Upon the Servicer's
receipt of notice of termination pursuant to Section 18.1 or the Servicer's
resignation in accordance with the terms of the Agreement, the predecessor
Servicer shall continue to perform its functions as Servicer under the
Agreement, in the case of termination, only until the date specified in such
termination notice or, if no such date is specified in a notice of termination,
until receipt of such notice and, in the case of resignation, until the later of
(x) the date 45 days from the delivery to the Trustee of written notice of such
resignation (or written confirmation of such notice of resignation) in
accordance with the terms of the Agreement and (y) the date upon which the
predecessor Servicer shall become unable to act as Servicer, as specified in the
notice of resignation and an accompanying Opinion of Counsel. In the event of
the Servicer's resignation or termination hereunder, a successor Servicer
appointed by the Trustee and consented to by the Surety Bond Issuer (unless a
Surety Bond Issuer Default shall have occurred and be continuing) in writing
which consent shall not be unreasonably withheld or the Trustee (unless it is
unwilling or legally unable to do so) will succeed to all the responsibilities,
duties and liabilities of the Servicer under the Agreement and will be entitled
to similar compensation arrangements. The successor Servicer shall accept its
appointment by a written assumption in form acceptable to the Trustee and the
Surety Bond Issuer (unless a Surety Bond Issuer Default shall have occurred and
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be continuing). Notwithstanding the above, the Trustee, if it is unwilling or
unable so to act, shall appoint or petition a court of competent jurisdiction
to appoint, an established institution, having a net worth of at least
$50,000,000 and whose regular business shall include the servicing of marine
retail installment sale contracts, as the successor to the Servicer under the
Agreement.
(b) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Servicer, and shall be entitled to the Servicing Fee
and other fees payable to the Servicer pursuant to Section 13.8 hereof, and all
the rights granted to the predecessor Servicer, by the terms and provisions of
the Agreement. No such appointment shall make the successor Servicer responsible
for any liabilities of the predecessor Servicer incurred prior to such
appointment or for any acts, omissions or misrepresentations of such predecessor
Servicer.
(c) In connection with such appointment, the Trustee may, with the
consent of the Surety Bond Issuer, make such arrangements for the compensation
of such successor Servicer out of payments on Receivables as it and such
successor Servicer shall negotiate on an arms-length basis, but in no event
shall the Servicing Fee Rate be greater than ___%.
SECTION 18.3. Notification to Certificateholders. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article
XVIII, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register and to each Rating Agency.
SECTION 18.4. Waiver of Past Defaults. So long as no Surety Bond
Issuer Default shall have occurred and be continuing, the Surety Bond Issuer
(or, if a Surety Bond Issuer Default shall have occurred and be continuing, the
Holders of Certificates evidencing in the aggregate not less than a majority of
the Certificate Balance as of the most recent Record Date) may, on behalf of all
the Holders of Certificates, waive any default by the Servicer in the
performance of its obligations hereunder and its consequences, except a default
in making any required deposits to or payments from the Certificate Account in
accordance with the Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been remedied for every purpose of the Agreement. No such
waiver shall impair such Certificateholders' rights or the Surety Bond Issuer's
rights with respect to subsequent defaults.
ARTICLE XIX
The Trustee
SECTION 19.1. Duties of Trustee. (a) The Trustee, both prior to the
occurrence of an Event of Default and after an Event of Default shall have been
cured or waived, shall undertake to perform only such duties as are specifically
set forth in the Agreement. If an Event of Default shall have occurred and shall
not have been cured or waived and, the Trustee has
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received notice of such Event of Default pursuant to Section 13.10(b), the
Trustee shall exercise such of the rights and powers vested in it by the
Agreement, and shall use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct
of his own affairs; provided, however, that if the Trustee shall assume the
duties of the Servicer pursuant to Section 18.2, the Trustee in performing such
duties shall use the degree of skill and attention customarily exercised by a
servicer with respect to comparable receivables that it services for itself or
others. For purposes of this Article XIX, an Event of Default shall be deemed
to have been cured upon the appointment of a successor Servicer (including the
Trustee in such capacity).
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that shall be specifically required to be furnished pursuant to
any provision of the Agreement, shall examine them to determine whether they
conform to the requirements of the Agreement.
(c) The Trustee shall take and maintain custody of the Schedule of
Receivables included as an exhibit to the Agreement and shall retain all
Servicer's Certificates identifying Receivables that become Purchased
Receivables.
(d) No provision of the Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act (other than errors in judgment) or its own bad faith; provided, however,
that:
(i) Prior to the occurrence of an Event of Default (or in
the case of an Event of Default described in clause (i) of Section
18.1, before the Trustee has received notice of such Event of Default
pursuant to Section 13.10(b)), and after the curing or waiving of all
such Events of Default that may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of the Agreement, the Trustee shall not be liable except
for the performance of such duties and obligations as shall be
specifically set forth in the Agreement, no implied covenants or
obligations shall be read into the Agreement against the Trustee and,
in the absence of bad faith or willful misfeasance on the part of the
Trustee, the Trustee may conclusively rely on the truth of the
statements and the correctness of the opinions expressed in any
certificates or opinions furnished to the Trustee and conforming to
the requirements of the Agreement;
(ii) The Trustee shall not be liable for an error of
judgment made in good faith by a Trustee Officer, unless it shall be
proved that the Trustee shall have been negligent in ascertaining the
pertinent facts;
(iii) The Trustee shall not be liable with respect to any
action taken, suffered or omitted to be taken in good faith in
accordance with the Agreement or
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at the direction of the Holders of Certificates evidencing not less
than 25% of the Certificate Balance relating to the time, method and
place of continuing any proceeding for any remedy available to the
Trustee, or relating to the exercise of any trust power conferred upon
the Trustee, under the Agreement;
(iv) The Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the Servicer
referred to in clauses (i) or (ii) of Section 18.1, or of any failure
by the Depositor to comply with the obligations of the Depositor
referred to in clause (ii) of Section 18.1, or of any incorrect
representation or warranty referred to in clause (v) of Section 18.1,
unless a Trustee Officer assigned to the Corporate Trust receives
written notice of such failure or incorrectness from the Servicer or
the Depositor, as the case may be, from the Surety Bond Issuer or from
the Holders of Certificates evidencing not less than 25% of the
Certificate Balance, it being understood that knowledge of the
Servicer or the Servicer as custodian, in its capacity as agent for
the Trustee, is not attributable to the Trustee;
(v) Without limiting the generality of this Section 19.1 or
Section 19.4, the Trustee shall have no duty (i) to see to any
recording, filing or depositing of the Agreement or any agreement
referred to therein or any financing statement or continuation
statement evidencing a security interest in the Receivables or the
Boats, or to see to the maintenance if any such recording or filing or
depositing or to any rerecording, refiling or redepositing of any
thereof, (ii) to see to any insurance of the Boats or Obligors or to
effect or maintain any such insurance, (iii) to see to the payment or
discharge of any tax, assessment or other governmental charge or any
Lien or encumbrance of any kind owing with respect to, assessed or
levied against, any part of the Trust, (iv) to confirm or verify the
contents of any reports or certificates of the Servicer delivered to
the Trustee pursuant to the Agreement believed by the Trustee to be
genuine and to have been signed or presented by the proper party or
parties, (v) to inspect the Boats at any time or ascertain or inquire
as to the performance or observance of any of the Depositor's or the
Servicer's representations, warranties or covenants or the Servicer's
duties and obligations as Servicer and as custodian of the Receivable
Files under the Agreement, or (vi) to prepare or make any filings with
the Securities and Exchange Commission with respect to the Trust; and
(vi) The Trustee shall not be deemed to be a fiduciary for
the Surety Bond Issuer in its capacity as such, and the Trustee's sole
responsibility with respect to the Surety Bond Issuer, in its capacity
as such, shall be to perform those duties with respect to the Surety
Bond Issuer as are specifically set forth herein and no implied
covenants shall be read into the Agreement against the Trustee with
respect to the Surety Bond Issuer.
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(e) Neither the Trustee nor the Collateral Agent shall be required to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, and the Trustee shall have no
liability in connection with losses on Permitted Investments made pursuant to
this Agreement or in the exercise of any of its rights or powers, and none of
the provisions contained in the Agreement shall in any event require the Trustee
to perform, or be responsible for the manner of performance of, any of the
obligations of the Servicer under the Agreement except during such time, if any,
as the Trustee shall be the successor to, and be vested with the rights, duties,
powers and privileges of, the Servicer in accordance with the terms of the
Agreement.
(f) Notwithstanding anything to the contrary contained herein, the
Collateral Agent shall have the same rights and protections afforded the
Trustee.
SECTION 19.2 Trustee's Certificate. On or as soon as practicable after
each Distribution Date on which Receivables shall be assigned to the Depositor
or the Servicer, as applicable, pursuant to Section 19.3, the Trustee shall
execute a Trustee's Certificate, based on the information contained in the
Servicer's Certificate for the related Collection Period, amounts deposited to
the Certificate Account and notices received pursuant to the Agreement,
identifying the Receivables repurchased by the Depositor pursuant to Section
12.2, purchased by the Servicer pursuant to Section 13.7 or 20.2 during such
Collection Period, and shall deliver such Trustee's Certificate, accompanied by
a copy of the Servicer's Certificate for such Collection Period to the Depositor
or the Servicer, as the case may be. The Trustee's Certificate submitted with
respect to such Distribution Date shall operate, as of such Distribution Date,
as an assignment, without recourse, representation or warranty, to the Depositor
or the Servicer, as the case may be, of all the Trustee's right, title and
interest in and to such repurchased Receivable, and all security and documents
relating thereto, such assignment being an assignment outright and not for
security.
SECTION 19.3. Trustee's Assignment of Purchased Receivables. With
respect to all Receivables repurchased by the Depositor pursuant to Section 12.2
or purchased by the Servicer pursuant to Section 13.7 or 20.2, the Trustee shall
by a Trustee's Certificate assign, without recourse, representation or warranty,
to the Depositor or the Servicer (as the case may be) all the Trustee's right,
title and interest in and to such Receivables, and all security interests and
documents relating thereto.
SECTION 19.4. Certain Matters Affecting Trustee. Except as otherwise
provided in Section 19.1:
(i) The Trustee may rely conclusively and shall be protected
in acting or refraining from acting upon any resolution, Officer's
Certificate, Servicer's Certificate, certificate of auditors, or any
other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond, or other paper or
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document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
(ii) The Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
under the Agreement in good faith and in accordance with such advice
or Opinion of Counsel.
(iii) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by the Agreement, or to
institute, conduct or defend any litigation under the Agreement or in
relation to the Agreement, at the request, order or direction of any
of the Certificateholders pursuant to the provisions of the Agreement,
unless such Certificateholders shall have offered to the Trustee
security or indemnity satisfactory to it against the costs, expenses
and liabilities that may be incurred therein or thereby.
(iv) The Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by the Agreement.
(v) Prior to the occurrence of an Event of Default (or in
the case of an Event of Default described in clause (i) of Section
18.1, before the Trustee has received notice of such Event of Default
pursuant to Section 13.10(b)), and after the curing or waiving of all
Events of Default that may have occurred, the Trustee shall not be
bound to make any investigation into the facts of matters stated in
any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond, or other paper or
document, unless requested in writing so to do by the Surety Bond
Issuer or by Holders of Certificates evidencing not less than 25% of
the Certificate Balance; provided, however, that if the payment within
a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation shall
be, in the opinion of the Trustee, not assured to the Trustee by the
security afforded to it by the terms of the Agreement, the Trustee may
require indemnity satisfactory to it against such cost, expense or
liability as a condition to so proceeding. The expense of every such
examination shall be paid by the Servicer or, if paid by the Trustee,
shall be reimbursed by the Servicer upon demand. Nothing in this
clause (v) shall affect the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the
Obligors.
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties under the Agreement either directly or
by or through agents or attorneys or a custodian. The Trustee shall
not be responsible for any misconduct
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or negligence of any such agent or custodian appointed with due care
by it hereunder or of the Servicer in its capacity as Servicer or
custodian.
(vii) Subsequent to the sale of the Receivables by the
Depositor to the Trustee, on behalf of the Trust, the Trustee shall
have no duty of independent inquiry, except as may be required by
Section 19.1, and the Trustee may rely upon the representations and
warranties and covenants of the Depositor and the Servicer contained
in the Agreement with respect to the Receivables and the Receivable
Files.
SECTION 19.5. Trustee Not Liable for Certificates or Receivables. (a)
The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the Depositor or the Servicer, as the case may be, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee shall make no
representations as to the validity or sufficiency of the Agreement or of the
Certificates (other than the certificate of authentication on the Certificates),
or of any Receivable or related document.
(b) The Trustee shall at no time have any responsibility or liability
for or with respect to the legality, validity and enforceability of any security
interest in any Boat or any Receivable, or the perfection and priority of such a
security interest or the maintenance of any such perfection and priority, or for
or with respect to the efficacy of the Trust or its ability to generate the
payments to be distributed to Certificateholders under the Agreement, including,
without limitation: the existence, condition, location and ownership of any
Boat; the review of any Receivable File; the existence and enforceability of any
physical damage insurance thereon; the existence and contents of any Receivable
or Receivable File or any computer or other record thereof; the validity of the
assignment of any Receivable to the Trust or of any intervening assignment; the
completeness of any Receivable or Receivable File; the performance or
enforcement of any Receivable; the compliance by the Depositor or the Servicer
with any warranty or representation made under the Agreement or in any related
document and the accuracy of any such warranty or representation prior to the
Trustee's receipt of notice or other discovery of any noncompliance therewith or
any breach thereof; any investment of monies by the Servicer or any loss
resulting therefrom; the acts or omissions of the Depositor, the Servicer or any
Obligor; any action of the Servicer taken in the name of the Trustee; or any
action by the Trustee taken at the instruction of the Servicer; provided,
however, that the foregoing shall not relieve the Trustee of its obligation to
perform its duties under the Agreement.
(c) Except with respect to a claim based on the failure of the Trustee
to perform its duties under the Agreement or based on the Trustee's negligence
or willful misconduct, no recourse shall be had for any claim based on any
provision of the Agreement, the Certificates or any Receivable or assignment
thereof against the Trustee in its individual capacity, the Trustee shall not
have any personal obligation, liability or duty whatsoever to any
Certificateholder or any other Person with respect to any such claim, and any
such claim shall be
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asserted solely against the Trust or any indemnitor who shall furnish indemnity
as provided in the Agreement.
(d) The Trustee shall not be accountable for the use or application by
the Depositor of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Servicer in
respect of the Receivables.
(e) Any obligation of the Trustee to give any notice or statement to
any rating agency hereunder shall constitute only a best efforts obligation and
such notice or statement shall be so provided only as a matter of courtesy and
accommodation, the Trustee having no liability to any rating agency or any other
Person for any failure to so provide such notice or statement. The Depositor
hereby certifies to the Trustee that each Rating Agency is rating the
Certificates and that each Rating Agency's address is as set forth in Section
21.5. The Trustee may rely on the accuracy of such certification until it
receives from the Depositor an Officer's Certificate superseding such
certification.
SECTION 19 .6. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
and may deal with the Depositor and the Servicer in banking transactions with
the same rights as it would have if it were not Trustee.
SECTION 19.7. Trustee's Fees and Expenses. (a) The Servicer shall pay
to the Trustee, and the Trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
and in the execution of the trusts created by the Agreement, and in the exercise
and performance of any of the Trustee's powers and duties under the Agreement.
The Servicer shall pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) incurred or made by the Trustee in
accordance with any provisions of the Agreement except any such expense,
disbursement or advance as may be attributable to its willful misfeasance,
negligence or bad faith.
(b) The Depositor shall indemnify the Trustee (which for purposes of
this subsection (b) shall include its directors, officers, employees and agents)
for, and shall hold it harmless against, any loss, liability or expense incurred
without willful misfeasance, negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of the Agreement and the
Trust and the trusts created by the Reimbursement Agreement, including the costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties under the
Agreement or the Reimbursement Agreement. Additionally, the Depositor, pursuant
to Section 16.2, and the Servicer, pursuant to Section 17 .2, respectively,
shall indemnify the Trustee with respect to certain matters, and
Certificateholders, pursuant to Section 19.4, shall upon the circumstances
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therein set forth, indemnify the Trustee under certain circumstances. In the
event that the Depositor fails to pay the amounts it is obligated to pay to the
Trustee pursuant to this Section 19.7(b), the Trustee shall be entitled to
receive such amounts from the Servicing Fee prior to the payment thereof to the
Servicer. The indemnification provided under this Section 19.7 shall survive
termination of the Agreement and removal or resignation of the Trustee.
SECTION 19.8. Representations and Warranties of Trustee. The Trustee
shall make the following representations and warranties on which the Depositor
and Certificateholders shall rely:
(i) The Trustee is a banking corporation duly organized,
validly existing and in good standing under the laws of the State of
New York.
(ii) The Trustee has full corporate power, authority and
legal right to execute, deliver and perform its duties and obligations
under the Agreement, and shall have taken all necessary action to
authorize the execution, delivery and performance by it of the
Agreement.
(iii) The Agreement shall have been duly executed and
delivered by the Trustee.
SECTION 19.9. Eligibility Requirements for Trustee. The Trustee under
the Agreement shall at all times: be a corporation having an office in the same
State as the location of the Corporate Trust Office as specified in the
Agreement; be organized and doing business under the laws of such State or the
United States of America; be authorized under such laws to exercise corporate
trust powers; have a combined capital and surplus of at least $50,000,000; and
be subject to supervision or examination by Federal or State authorities.
If the Trustee shall publish reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section 19.9, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section l9.9, the Trustee shall resign immediately in the
manner and with the effect specified in Section 19.10.
SECTION 19.10. Resignation or Removal of Trustee. (a) The Trustee and
the Collateral Agent may at any time resign and be discharged from the trusts
hereby created by giving not less than 60 days' prior written notice thereof to
the Servicer; provided, however, that any such resignation in either capacity
shall be deemed a resignation as both Trustee and Collateral Agent. Upon
receiving such notice of resignation, the Servicer with the consent of the
Surety Bond Issuer (unless a Surety Bond Issuer Default shall have occurred and
be continuing) shall promptly appoint a successor Trustee and Collateral Agent
by written instrument, in
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duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and Collateral Agent and one copy to the successor Trustee and
Collateral Agent. If no successor Trustee and Collateral Agent shall have been
so appointed and have accepted appointment within 60 days after the giving of
such notice of resignation, the resigning Trustee and Collateral Agent may
petition any court of competent jurisdiction for the appointment of a successor
Trustee and Collateral Agent.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 19.9 and shall fail to resign after
written request there for by the Servicer, or if at any time the Trustee shall
be legally unable to act, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Servicer may remove the Trustee and Collateral Agent. If it shall remove the
Trustee and Collateral Agent under the authority of the immediately preceding
sentence, the Servicer shall promptly appoint a successor trustee and collateral
agent acceptable to the Surety Bond Issuer by written instrument, in duplicate,
one copy of which instrument shall be delivered to the Trustee and Collateral
Agent so removed and one copy to the successor Trustee and Collateral Agent.
(c) Any resignation or removal of the Trustee and Collateral Agent and
appointment of a successor Trustee and Collateral Agent pursuant to any of the
provisions of this Section 19.10 shall not become effective until acceptance of
appointment by the successor Trustee pursuant and Collateral Agent pursuant to
Section 19.11 and payment of all fees and expenses owed to the outgoing Trustee
and Collateral Agent. The Servicer shall provide notice of such resignation or
removal of the Trustee to each Rating Agency.
SECTION 19.11. Successor Trustee and Collateral Agent. (a) Any
successor Trustee or Collateral Agent appointed pursuant to Section 19.10 be
approved as both Trustee and Collateral Agent and shall execute, acknowledge and
deliver to the Servicer and to its predecessor Trustee and Collateral Agent an
instrument accepting such appointment under the Agreement, and thereupon the
resignation or removal of the predecessor Trustee and Collateral Agent shall
become effective and such successor Trustee and Collateral Agent, without any
further act, deed or conveyance, shall become fully vested with all the rights,
powers, duties and obligations of its predecessor under the Agreement, with like
effect as if originally named as Trustee and Collateral Agent. The predecessor
Trustee and Collateral Agent shall deliver to the successor Trustee and
Collateral Agent all documents, statements and monies held by it under the
Agreement; and the Servicer and the predecessor Trustee and Collateral Agent
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Trustee and Collateral Agent all such rights, powers, duties and
obligations.
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(b) No successor Trustee and Collateral Agent shall accept appointment
as provided in this Section 19.11, unless at the time of such acceptance such
successor Trustee shall be eligible pursuant to Section 19.9.
(c) Upon acceptance of appointment by a successor Trustee and
Collateral Agent pursuant to this Section 19.11, the Servicer shall mail notice
of the successor of such Trustee and Collateral Agent under the Agreement to all
Holders of Certificates at their addresses as shown in the Certificate Register.
If the Servicer shall fail to mail such notice within 10 days after acceptance
of appointment by the successor Trustee and Collateral Agent, the successor
Trustee and Collateral Agent shall cause such notice to be mailed at the expense
of the Servicer.
SECTION 19.12. Merger or Consolidation of Trustee. Any corporation
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be eligible pursuant to Section 19.9, without the execution or
filing of any instrument or any further act on the part of any of the parties
hereto; anything herein to the contrary notwithstanding.
SECTION 19.13. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of the Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Boat may at the time be located, the Servicer and the
Trustee acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of the Trust, and to vent in such Person, in such capacity
and for the benefit of the Certificateholders, such title to the Trust, or any
part thereof, and, subject to the other provisions of this Section 19.13, such
powers, duties, obligations, rights and trusts as the Servicer and the Trustee
may consider necessary or desirable. If the Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in the case an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee under the Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 19.9 and no notice of a
successor trustee pursuant to Section 19.11 and no notice to Certificateholders
of the appointment of any co-trustee or separate trustee shall be required
pursuant to Section 19.11.
(b) Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred upon and exercised or
performed by the Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co trustee
is not authorized to act separately without the
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Trustee joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee under the Agreement or as successor to
the Servicer under the Agreement), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the
Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Trustee;
(ii) No trustee under the Agreement shall be personally
liable by reason of any act or omission of any other trustee under the
Agreement; and
(iii) The Servicer and the Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or
co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to the Agreement and the conditions
of this Article XIX. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trusts or separately,
as may be provided therein, subject to all the provisions of the Agreement,
specifically including every provision of the Agreement relating to the conduct
of, affecting the liability of, or affording protection to the Trustee. Each
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer.
(d) Any separate trustee or co-trustee may at any time appoint the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of the
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall become incapable of acting, resign or be removed, all its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee. Notwithstanding anything to the contrary in the Agreement,
the appointment of any separate trustee or co-trustee shall not relieve the
Trustee of its obligations and duties hereunder.
ARTICLE XX
Termination
SECTION 20.1. Termination of the Trust. (a) The respective obligations
and responsibilities of the Depositor, the Servicer, the Trustee and the Trust
created hereby shall terminate upon (i) the maturity or other liquidation of the
last Receivable and the disposition of any amounts received upon liquidation of
any remaining Receivables, including Defaulted Receivables, (ii) the payment to
the Certificateholders of all amounts required to be paid to them
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pursuant to the Agreement and the payment to the Surety Bond Issuer of all
amounts required to be paid to it pursuant to the Agreement and the
Reimbursement Agreement and disposition of all property held by the Trust or
(iii) the purchase as of the last day of any Collection Period by the Servicer
at its option, pursuant to Section 20.2, of the corpus of the Trust; provided,
however, that in no event shall the trust created by the Agreement continue
beyond the expiration of 21 years from the date hereof. The Servicer shall
promptly notify the Trustee of any prospective termination pursuant to this
Section 20.1.
(b) Notice of any termination, specifying the Distribution Date upon
which the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee by letter to Certificateholders mailed not earlier than the 15th day
and not later than the 25th day of the month next preceding the specified
Distribution Date stating (A) the Distribution Date upon which final payment of
the Certificates shall be made upon presentation and surrender of the
Certificates at the office of the Trustee therein designated, (B) the amount of
any such final payment, and (C) if applicable, that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office of the Trustee
therein specified. The Trustee shall give such notice to the Certificate
Registrar (if other than the Trustee) at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Certificates, the
Trustee shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to Section 14.5.
(c) In the event that all the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice all the Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to the Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall be distributed by the Trustee upon written direction of the
Servicer delivered to the Trustee to the United Way of Metropolitan Dallas.
As soon as practicable after the Distribution Date specified for the
final distribution or upon such other date upon which all amounts to be paid to
Certificateholders pursuant to the Agreement have been paid, the Trustee shall
deliver a letter to the Surety Bond Issuer in substantially the form of Exhibit
C to the Surety Bond.
SECTION 20.2. Optional Purchase of All Receivables. On the last day of
any Collection Period as of which the Pool Balance shall decline to 5% or less
of the Original Pool Balance, the Servicer shall have the option to purchase the
corpus of the Trust. To exercise such
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option, the Servicer shall deposit pursuant to Section 14.4 in the Collection
Account an amount equal to the aggregate Purchase Amount for the Receivables as
of such day, plus the appraised value of any other property held by the Trust;
less the amount of all Collections, any amounts referred to in clause (ii) of
the definition of Available Funds, and Liquidation Proceeds received by the
Servicer during such Collection Period, and shall succeed to all interests in
and to the Trust provided, however, that without the consent of the Surety Bond
Issuer the Servicer may not make any such purchase if, after giving effect to
such purchase and the distributions on the related Distribution Date there
would be outstanding amounts under the Reimbursement Agreement and the
Agreement, which have not been paid to the Surety Bond Issuer.
ARTICLE XXI
Miscellaneous Provisions
SECTION 21.1. Amendment. (a) The Agreement may be amended by the
Depositor, the Servicer and the Trustee, without the consent of the
Certificateholders or the Surety Bond Issuer, to cure any ambiguity, to correct
or supplement any provisions in the Agreement, or to add any other provisions
with respect to matters or questions arising under the Agreement that shall not
be inconsistent with the provisions of the Agreement; provided, however, that
such action will not, in the opinion of counsel satisfactory to the Trustee,
materially and adversely affect the interest of any Certificateholder or the
Surety Bond Issuer.
(b) The Agreement may also be amended by the Depositor, the Servicer
and the Trustee, with the consent of the Surety Bond Issuer and the Holders of
Certificates (which consent of any Holder of a Certificate given pursuant to
this Section 21.1 or pursuant to any other provision of the Agreement shall be
conclusive and binding on such Holder and on all future Holders of such
Certificate and of any Certificate issued upon the transfer thereof or in
exchange thereof or in lieu thereof whether or not notation of such consent is
made upon the Certificate) evidencing not less than 51% of the Certificate
Balance as of the most recent Record Date, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Agreement, or of modifying in any manner the rights of the
Certificateholders or the Surety Bond Issuer; provided, however, that no such
amendment may (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, Collections of payments on Receivables or distributions
that are required to be made on any Certificate, or (ii) reduce the aforesaid
percentage required to consent to any such amendment, in each case without the
consent of the holders of all Certificates then outstanding.
(c) Prior to the execution of any such amendment or consent, the
Servicer shall furnish written notification of the substance of such amendment
or consent to each Rating Agency. Promptly after the execution of any such
amendment or consent, the Trustee shall forward such written notification
provided to the Trustee by the Servicer of the substance of such amendment or
consent to each Certificateholder.
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(d) It shall not be necessary for the consent of Certificateholders
pursuant to this Section 21.1 to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe, including
the establishment of record dates pursuant to the Depository Agreement.
(e) Prior to the execution of any amendment to the Agreement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by the Agreement
and the Opinion of Counsel referred to in Section 21.2(h)(i)(1). The Trustee
may, but shall not be obligated to, enter into any such amendment which affects
the Trustees own rights, duties or immunities under the Agreement or otherwise.
(f) The provisions combined in clauses (a) and (b) of this Section
21.1 shall not apply to an amendment to the definition of "Specified Reserve
Account Requirement."
SECTION 21.2. Protection of Title to Trust. (a) The Depositor shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Certificateholders and the Trustee in the Receivables and in the proceeds
thereof. The Depositor shall deliver (or cause to be delivered) to the Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither the Depositor nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed by the Depositor in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Trustee at least 30
days' prior written notice thereof and shall have promptly filed appropriate
amendments to all previously filed financing statements or continuation
statements.
(c) The Depositor and the Servicer shall give the Trustee at least 30
days' prior written notice of any relocation of its principal executive office
if, as a result of such relocation, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement, and shall promptly
file any such amendment. The Servicer shall at all times maintain each office
from which it shall service Receivables, and its principal executive office,
within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature
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of each) and (ii) reconciliation between payments or recoveries on (or with
respect to) each Receivable and the amounts from time to time deposited in the
Collection Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under the Agreement of the Receivables to the Trustee,
the Servicer's master computer records (including any back-up archives) that
refer to a Receivable shall indicate clearly with reference to the particular
grantor trust that such Receivable is owned by the Trustee. Indication of the
Trustee's ownership of a Receivable, on behalf of the Trust, shall be deleted
from or modified on the Servicer's computer systems when, and only when, the
Receivable shall have been paid in full or repurchased.
(f) If at any time the Depositor or the Servicer shall propose to
sell, grant a security interest in, or otherwise transfer any interest in marine
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or print-outs (including any restored from back-up
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Trustee.
(g) The Servicer shall permit the Trustee and its agents at any time
during normal business hours to inspect, audit and make copies of and abstracts
from the Servicer's records regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the Trustee, within
five Business Days, a list of all Receivables (by contract number and name of
Obligor) then held as part of the Trust, together with a reconciliation of such
list to the Schedule of Receivables and to each of the Servicer's Certificates
furnished before such request indicating removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Trustee:
(1) promptly after the execution and delivery of the
Agreement and of each amendment thereto, an Opinion of Counsel either
(a) stating that, in the opinion of such counsel, all financing
statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the
Trustee in the Receivables, and reciting the details of such filings
or referring to prior Opinions of Counsel in which such details are
given, or (b) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interest; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three
months after the Cutoff Date, an Opinion of Counsel, dated as of a
date during such 90-day period, either
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(a) stating that, in the opinion of such counsel, all financing
statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the
Trustee, on behalf of the Trust, in the Receivables, and reciting the
details of such filings or referring to prior Opinions of Counsel in
which such details are given, or (b) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and
protect such interest.
Each Opinion of Counsel referred to in clause (i)(l) or (i)(2) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.
(j) The Depositor shall, to the extent required by applicable law,
cause the Certificates to be registered with the Securities and Exchange
Commission pursuant to Section 12(b) or Section 12(g) of the Securities Exchange
Act of 1934, as amended, within the time periods specified in such sections, and
shall prepare and make all filings required by such Act with respect to the
Trust.
(k) For the purpose of facilitating the execution of the Agreement and
for other purposes, the 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 21.3. Limitation on Rights of Certificateholders. (a) The
death or incapacity of any Certificateholder shall not operate to terminate the
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties to
the Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as
provided in Section 21.1 or 18.4) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties to the
Agreement, nor shall anything in the Agreement set forth or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third person by
reason of any action taken pursuant to any provision of the Agreement.
(c) No Certificateholder shall have any right by virtue or by availing
itself of any provisions of the Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to the Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Certificates evidencing not less than 25% of the
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Certificate Balance shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee under the
Agreement and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee, for 30 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute
any such action, suit or proceeding and during such 30-day period no direction
inconsistent with such written request has been given to the Trustee pursuant
to this Section 21.3 or Section 18.4; no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
them selves of any provisions of the Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or
seek to obtain priority over or preference to any other such Holder, or to
enforce any right, under the Agreement except in the manner provided in the
Agreement and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of
this Section 21.3, each Certificateholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
SECTION 21.4. GOVERNING LAW. THE AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 21.5. Notices. All demands, notices and communications under
the Agreement shall be in writing, personally delivered or mailed by certified
mail, return receipt requested, or by overnight courier or telecopied (with the
original followed by mail within 24 hours) and shall be deemed to have been duly
given upon receipt (a) in the case of the Depositor, to the agent for service as
specified in the Agreement, at the following address: NationsCredit
Securitization Corporation, 225 E. John Carpenter Freeway, Irving, Texas 75062,
Telecopy (972) 506-5096, or at such other address as shall be designated by the
Depositor in a written notice to the Trustee, (b) in the case of the Servicer,
to the agent for service as specified in the Agreement, at the following
address: NationsCredit Commercial Corporation of America, 225 E. John Carpenter
Freeway, Irving, Texas 75062, Telecopy (972) 506-5096, or at such other address
as shall be designated by the Servicer in a written notice to the Trustee, (c)
in the case of the Trustee, at the Corporate Trust Office, Telecopy (212)
250-6439 and (d) in the case of the Surety Bond Issuer, at the following
address: Capital Markets Assurance Corporation, 885 Third Avenue, New York, New
York 10022, Attention: Managing Director-Consumer Structured Finance, Telecopy
(212) 755-5462. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in the Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder shall
receive such notice. All communications and copies of all notices and reports
from the Trustee or the Servicer shall be mailed to each Rating Agency at the
following addresses:
Moody's Investors Services, Inc.
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99 Church Street (4th Floor)
New York, New York 10007
Telephone No.: (212) 553-0300
Telecopy No.: (212) 553-0881
Attention: ABS Monitoring Department
Standard & Poor's Ratings Services
26 Broadway (l0th Floor)
New York, New York 10004
Telephone No.: (212) 208-8925
Telecopy No.: (212) 208-8208
Attention: Asset-Backed Surveillance Group
SECTION 21.6. Severability of Provisions. If any or more of the
covenants, agreements, provisions or terms of the 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 the Agreement and shall in no way affect the validity or
enforceability of the other provisions of the Agreement or of the Certificates
or the rights of the Holders thereof.
SECTION 21.7. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 16.3 and 17.3 and as provided
in the provisions of the Agreement concerning the resignation of the Servicer,
the Agreement may not be assigned by the Depositor or the Servicer without the
prior written consent of the Trustee, the Holders of Certificates evidencing not
less than 66% of the Certificate Balance and the Surety Bond Issuer, provided
that the consent of Surety Bond Issuer shall not be unreasonably withheld.
SECTION 21.8. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and, upon
authentication thereof by the Trustee pursuant to Section 15.2 or 15.3,
Certificates shall be deemed fully paid.
SECTION 21.9. No Petition. Neither the Trustee nor the Servicer will
not institute against, or join any other Person in instituting against, the
Depositor or the Trust any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceeding, or other proceeding under any federal or state
bankruptcy or similar law, until __________________.
SECTION 21.10. Surety Bond Issuer as Controlling Party. Each
Certificateholder by purchase of the Certificates held by it acknowledges that
the Trustee on behalf of the Trust, as partial consideration of the issuance of
the Surety Bond, has agreed that
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<PAGE> 66
the Surety Bond Issuer shall have certain rights hereunder for so long as no
Surety Bond Issuer Default shall have occurred and be continuing. So long as a
Surety Bond Issuer Default has occurred and is continuing, any provision giving
the Surety Bond Issuer the right to direct, appoint or consent to, approve of,
or take any action under this Agreement shall be inoperative during the period
of such Surety Bond Issuer Default and such right shall instead vest in the
Trustee acting at the direction of the Certificateholders. The Surety Bond
Issuer may disclaim any of its rights and powers under this Agreement (but not
its duties and obligations under the Surety Bond or the Reimbursement
Agreement) upon delivery of a written notice to the Trustee. The Surety Bond
Issuer may give or withhold any consent hereunder in its reasonable discretion.
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<PAGE> 67
EXHIBIT A
A-1
<PAGE> 68
EXHIBIT B: FORM OF CERTIFICATE
[Front]
NATIONSCREDIT GRANTOR TRUST 1997-1
NATIONSCREDIT GRANTOR TRUST 1997-1 _____% MARINE
RECEIVABLE-BACKED CERTIFICATE
evidencing a fractional undivided interest in
the Trust, as defined below, the property of
which includes a pool of retail installment sale
contracts secured by new and used boats, boat
motors and boat trailers, and sold or caused to
be sold to the Trust by NationsCredit
Securitization Corporation.
(This Certificate does not represent an interest
in or obligation of NationsCredit Commercial
Corporation of America, NationsCredit
Securitization Corporation or any affiliate
thereof, except to the extent described below.)
NUMBER CUSIP
CERTIFICATE MATURITY
DATE: $________________
THIS CERTIFIES THAT _________________is the registered owner of a
$________ dollars nonassessable, fully-paid, fractional undivided interest in
the NationsCredit Grantor Trust 1997-1 (the "Trust") formed by NationsCredit
Securitization Corporation, a Delaware corporation (the "Depositor"). The Trust
was created pursuant to a Pooling and Servicing Agreement, including the
Standard Terms and Conditions of Agreement incorporated by reference therein,
dated as of April 30, 1997 (the "Agreement") among the Depositor, NationsCredit
Commercial Corporation of America, as Servicer, and Bankers Trust Company, as
Trustee (the "Trustee") and as Collateral Agent (the "Collateral Agent"), a
summary of certain of the pertinent provisions of which is set forth below. To
the extent not otherwise defined herein, the capitalized terms used herein have
the meanings assigned to them in the Agreement. This Certificate is one of the
duly authorized Certificates designated as "NationsCredit Grantor Trust 1997-1
___% Marine Receivable-Backed Certificates" (herein called the "Certificates").
This Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement, as amended from time to time,
the holder of this Certificate by virtue of the acceptance hereof assents and by
which such holder is bound. The property of the
B-1
<PAGE> 69
Trust includes a pool of retail installment sale contracts (the "Receivables")
secured by new and used boats, boat motors and any accompanying boat trailers
("Boats"), all payments (other than late fees and certain other amounts)
received thereunder, in the case of Simple Interest Receivables, and due
thereunder, in the case of Precomputed Receivables after April 30, 1997, the
interest of the Depositor in the security interests in the Boats, such amounts
as may be held from time to time in certain trust accounts, the Surety Bond,
any property that shall have secured a Receivable and that shall have been
acquired by the Trustee, the Purchase Agreement, proceeds from claims on
physical damage, credit life and disability insurance policies covering Boats,
or the Obligors as the case may be, the interests of the Depositor in any
proceeds from recourse to Dealers on the Receivables, and the proceeds of all
of the foregoing.
Under the Agreement, there will be distributed on the 15th day of each
month or, if such 15th day is not a Business Day, the next Business Day (the
"Distribution Date"), commencing on June 16, 1997, to the person in whose name
this Certificate is registered at the close of business on the Business Day
prior to such Distribution Date (the "Record Date"), such Certificateholder's
fractional undivided interest in the Monthly Interest Payment, any Carry-Over
Monthly Interest, the Monthly Principal Payment and any Carry-Over Monthly
Principal, all as more specifically set forth in the Agreement. On the
Certificate Maturity Date, each Certificateholder shall be entitled to receive
an amount equal to such Certificateholder's fractional undivided interest in the
aggregate principal balance of the Receivables as of the last day of the related
Collection Period.
Distributions on this Certificate will be made by the Trustee by check
or money order mailed to the Person entitled thereto without the presentation or
surrender of this Certificate or the making of any notation hereon. Except as
otherwise provided in the Agreement and notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency maintained for that purpose by the
Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
[Unless this Certificate is presented by an authorized representative
of The Depository Trust Company to the Trustee or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of CEDE & CO. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment is made to CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL since the registered owner hereof, CEDE & CO., has an
interest herein.]
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<PAGE> 70
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee on behalf of the Trust and not in its
individual capacity has caused this Certificate to be duly executed.
DATED: NATIONSCREDIT GRANTOR
TRUST 1997-1
By: BANKERS TRUST COMPANY,
as Trustee
By: ____________________________
Title:
Authenticated:
BANKERS TRUST COMPANY,
as Trustee
By: ______________________
Title:
B-3
<PAGE> 71
[Reverse]
The Certificates do not represent an obligation of, or an interest in,
the Depositor, the Servicer, the Trustee or any affiliate of any of them. The
Certificates are limited in right of payment as more specifically set forth in
the Agreement. A copy of the Agreement may be examined during normal business
hours at the principal office of the Depositor, and at such other places, if
any, designated by the Depositor, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Agreement at any
time by the Depositor and the Trustee with the consent of the Surety Bond Issuer
and of the Holders of Certificates evidencing not less than 51% of the Pool
Balance. Any such consent by the Holder of this Certificate shall be conclusive
and binding on such Holder and on all future Holders of this Certificate and of
any Certificate issued upon the transfer hereof or in exchange here for or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Holders of any of the
Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Trustee in its capacity as
Certificate Registrar, or by any successor Certificate Registrar, in the Borough
of Manhattan, The City of New York, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or such holder's attorney duly authorized in
writing, and thereupon one or more new certificates of authorized denominations
evidencing the same aggregate interest in the Trust will be issued to the
designated transferee. The Certificates are issuable only as registered
Certificates without coupons in denominations of $1,000 and integral multiples
hereof. As provided in the Agreement and subject to certain limitations therein
set forth, Certificates are exchangeable for new Certificates of authorized
denominations evidencing the same aggregate denomination, as requested by the
holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or governmental charges payable in connection
therewith.
The Trustee, the Certificate Registrar and any agent of the Trustee or
the Certificate Registrar may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trustee, the
Certificate Registrar, nor any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held as part of the
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<PAGE> 72
Trust. The Servicer may at its option purchase the corpus of the Trust at a
price specified in the Agreement, and such purchase of the Receivables and
other property of the Trust will effect early retirement of the Certificates;
however, such right of purchase is exercisable only as of the last day of a
Collection Period as of which the Pool Balance is equal to or less than 5% of
the Original Pool Balance.
B-5
<PAGE> 73
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
(Please print or typewrite name and address, including postal zip
code, and taxpayer I.D. or Social Security Number of assignee)
the within certificate, and all rights thereunder, hereby irrevocably
constituting and appointing __________________________ Attorney to transfer
said Certificate on the books of the Certificate Registrar, with full power of
substitution in the premises.
Dated: *
Signature Guaranteed:
*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member of the New York Stock Exchange or a commercial bank or
trust company.
B-6
<PAGE> 74
EXHIBIT C
C-1
<PAGE> 75
EXHIBIT D
NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA
MONTHLY SERVICER REPORT
CURRENT DATE:
I. Monthly Principal Payment:
(A) Principal received from Obligors:
(1) Total principal collected
(2) Percent relating to Unsold Contracts
(3) Principal owed to Trust
(B) Purchased Receivables
(C) Liquidation Proceeds:
(D) Collections on Defaulted Receivables
II. Principal to Investors:
(A) Principal Balance at beginning of month
(B) Certificate Factor at beginning of month
(C) Principal Balance at end of month
(D) Monthly principal due investors
(E) Carry-over Monthly Principal
III. Monthly Interest Payment:
(A) Principal Balance at beginning of month
(B) Pass-Through Rate %
(C) Monthly Interest Payment
(D) Carry-over Monthly Interest
IV. Draw on Reserve Account and Surety Bond
(A) Total Available Funds:
(1) Principal received from Obligors (or Dealers and
insurers on non-Defaulted Receivables)
(2) Interest received from Obligors
(3) Cash received from Depositor/Servicer on
Purchased Receivables
(4) Collections on Defaulted Receivables
(5) Liquidation Proceeds
(6) Total Cash received
D-1
<PAGE> 76
(B) Distributions:
(1) Carry-over Monthly Interest
(2) Carry-over Monthly Principal
(3) Monthly Interest Payment
(4) Monthly Principal Payment
(5) Servicing Fee
(C) Total Surplus/(Deficiency)
(D) Amounts paid to Reserve Account under the Pooling and Servicing
Agreement and the Reimbursement Agreement
(E) Reserve Account balance
(F) Reserve Account withdrawal
(G) Surety Bond demand
V. Reconciliation of Reserve Account:
(A) Beginning Reserve Account balance
(B) Interest on Reserve Account
(C) Interest on Collection Account
(D) Amounts paid to Reserve Account under Reimbursement Agreement:
(1) Available Funds
(2) Less: distributions
(3) Surety Bond demands
(4) Excess funds available
(E) Reserve Account withdrawal
(F) Reserve Account prior to release of excess
(G) Required Reserve Account balance:
(1) As percent of Principal Balance
(2) Minimum Reserve Account balance
(3) Required amount
(H) Release of excess
(I) Ending Reserve Account balance
VI. Delinquency/Charge-off Experience:
(A) Principal Balance at end of month
(B) Number of Units
(C) Delinquency $ #
30-59 Days $0.00 0
60-89 Days $0.00 0
90+ Days $0.00 0
TOTAL $0.00 0
(D) As % of EOM Outstanding
D-2
<PAGE> 77
(E) Receivables charged-off
during month $0.00 0
(F) Recoveries of Receivables previously charged-off
(G) Net loss during month
(H) Annualized monthly net loss rate
D-3
<PAGE> 78
EXHIBIT E
NATIONSCREDIT COMMERCIAL CORPORATION OF AMERICA
CERTIFICATEHOLDER STATEMENT
A-C (Per $1,000 Initial Balance):
<TABLE>
<S> <C>
(A) The amount of the Certificateholder's
distribution which constitutes the Monthly
Principal Payment (including any Carry-
Over Monthly Principal) ........................ $________
(B) The amount of the Certificateholder's
distribution which constitutes the Monthly
Interest Payment (including any Carry-
Over Monthly Interest) ......................... $________
(C) The Certificateholder's pro rata portion of
the Servicing Fee (including any Carry-
Over Monthly Servicing Fee) .................... $________
(D) Certificate Balance as of Record Date ......... $________
(E) Certificate Factor as of Record Date .......... $________
</TABLE>
E-1
<PAGE> 79
EXHIBIT F-1
Trustee's Certificate
pursuant to Section 19.3 of
the Pooling and Servicing Agreement
Bankers Trust Company, as trustee (the "Trustee") of the NationsCredit
Grantor Trust 1997-1 created pursuant to the Pooling and Servicing Agreement
(including the Standard Terms and Conditions of Agreement incorporated by
reference therein, the "Agreement") dated as of April 30, 1997, among
NationsCredit Securitization Corporation, as Depositor (the "Depositor"),
NationsCredit Commercial Corporation of America, as Servicer, and the Trustee,
does hereby sell, transfer, assign and otherwise convey to the Depositor,
without recourse, representation or warranty, all the Trustee's right, title and
interest in and to all the Receivables (as defined in the Agreement) identified
in the attached Servicer's Certificate as "Purchased Receivables," which are to
be repurchased by the Depositor pursuant to Section 12.2 of the Agreement and
all security and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this ________day of
199_.
___________________________________
Title:
F-1-1
<PAGE> 80
EXHIBIT F-2
Trustee's Certificate
pursuant to Section 19.3 of
the Pooling and Servicing-Agreement
Bankers Trust Company, as trustee (the "Trustee") of she NationsCredit
Grantor Trust 1996-1 created pursuant to the Pooling and Servicing Agreement
(including the Standard Terms and Conditions of Agreement incorporated by
reference therein, the "Agreement") dated as of April 30, 1997, among
NationsCredit Securitization Corporation, as Depositor, NationsCredit Commercial
Corporation of America, as Servicer (the "Servicer"), and the Trustee, does
hereby sell, transfer, assign and otherwise convey to the Servicer, without
recourse, representation or warranty, all the Trustee's right, title and
interest in and to all the Receivables (as defined in the Agreement) identified
in the attached Servicer's Certificate as "Purchased Receivables," which are to
be purchased by the Servicer pursuant to Section 13.7 or Section 20.2 of the
Agreement, and all security and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this __________day of
19_.
___________________________________
Title:
F-2-1
<PAGE> 1
EXHIBIT 4.3
[FORM OF SURETY BOND]
[DATE]
SURETY BOND NO. SB____
RE: NATIONSCREDIT GRANTOR TRUST 1997-1 (THE "TRUST")
$_______________ ___% MARINE RECEIVABLE-BACKED
CERTIFICATES, (THE "CERTIFICATES")
INSURED OBLIGATION: OBLIGATION OF THE TRUST TO PAY INTEREST ON AND
PRINCIPAL OF THE CERTIFICATES AND THE MONTHLY
SERVICING FEE IN THE EVENT NATIONSCREDIT COMMERCIAL
CORPORATION OF AMERICA OR AN AFFILIATE THEREOF IS NOT
THE SERVICER
BENEFICIARY: BANKERS TRUST COMPANY, AS TRUSTEE OF THE TRUST,
TOGETHER WITH ANY SUCCESSOR TRUSTEE DULY QUALIFIED
UNDER THE POOLING AND SERVICING AGREEMENT (AS DEFINED
HEREIN) (THE "TRUSTEE"), FOR THE BENEFIT OF THE
HOLDERS OF THE CERTIFICATES
CAPITAL MARKETS ASSURANCE CORPORATION ("CapMAC"), for consideration
received and subject to the terms of this surety bond (the "Surety Bond"), does
hereby unconditionally and irrevocably guarantee to the Beneficiary, payment of
the Insured Obligation. CapMAC agrees to pay to the Beneficiary, in respect of
each Distribution Date, an amount equal to the amount, if and, by which (i) the
Priority Distributions exceeds (ii) the sum of Available Funds and the amount on
deposit in the Reserve Account on such Distribution Date;
provided, however, that in no event shall the aggregate amount of payments made
hereunder in respect of principal of the Certificates exceed the Insured
Principal Amount.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Pooling and Servicing Agreement dated
as of April 30, 1997 (the "Pooling and Servicing Agreement") by and among
NationsCredit Securitization Corporation, as Depositor, NationsCredit Commercial
Corporation of America, as servicer, the Trustee and the Collateral Agent.
"Insured Principal Amount" means $__________.
CapMAC will pay or cause to be paid to the Beneficiary, irrevocably and
unconditionally and without the prior assertion of any defenses to payment,
including fraud in inducement or fact, the amount demanded in a Notice for
Payment in the form of Exhibit A hereto ("Notice for Payment"), appropriately
completed and executed by the Beneficiary, not to exceed the sum of
<PAGE> 2
the amount calculated pursuant to the first paragraph of this Surety Bond for
the Distribution Date relating to the Notice for Payment, in immediately
available funds on the later of (a) 11:00 a.m. New York City time on the second
Business Day following Receipt of such notice for payment and, (b) 11:00 a.m.
New York City time on the Business Day immediately preceding the related
Distribution Date.
A Notice for Payment under this Surety Bond must be received by CapMAC
by 2:00 p.m. New York City time on any Business Day by (i) delivery of the
original Notice for Payment to CapMAC at its address set forth below, or (ii)
facsimile transmission of the original Notice for Payment to CapMAC at its
facsimile number set forth below. If presentation is made by facsimile
transmission, the Beneficiary shall (i) simultaneously confirm transmission by
telephone to CapMAC at its telephone number set forth below, and (ii) as soon as
reasonably practicable, deliver the original Notice for Payment to CapMAC at its
address set forth below. Any Notice for Payment received by CapMAC after 2:00
p.m. New York City time, on a Business Day, or on any day that is not a Business
Day, will be deemed to be received by CapMAC at 9:00 a.m., New York City time,
on the next succeeding Business Day.
The terms "Receipt" and "Received," with respect to the Surety Bond,
mean actual delivery to CapMAC, prior to 2:00 p.m., New York City time, on a
Business Day; delivery either on a day that is not a Business Day or after 2:00
p.m., New York City time, shall be deemed to be Received on the next succeeding
Business Day.
Subject to the foregoing, if any payments guaranteed by the first
paragraph above are voided (a "Preference Event") pursuant to a final and
non-appealable order under any applicable bankruptcy, insolvency, receivership
or similar law in an Insolvency Proceeding (as defined herein), and, if as a
result of such a Preference Event, the Beneficiary is required to return such
voided payment, or any portion of such voided payment, made in respect of the
Certificates (the "Avoided Payment"), CapMAC will pay on the guarantee described
in the first paragraph hereof, an amount equal to such Avoided Payment,
irrevocably, absolutely and unconditionally and without the assertion of any
defenses to payment, including fraud in the inducement or fact or any other
circumstances that would have the effect of discharging a surety in law or in
equity, upon receipt by CapMAC from the Beneficiary of (x) a certified copy of a
final order of a court exercising jurisdiction in such Insolvency Proceeding to
the effect that the Beneficiary is required to return any such payment or
portion thereof prior to the Surety Bond Termination Date (as defined below)
because such payment was voided under applicable law, with respect to which
order the appeal period has expired without an appeal having been filed (the
"Final Order"), (y) an assignment, in form reasonably satisfactory to CapMAC,
irrevocably assigning to CapMAC all rights and claims of such Beneficiary
relating to or arising under such Avoided Payment and (z) a Notice for Payment
in form of Exhibit A hereto appropriately completed and executed by the Trustee.
Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order and not
to the Beneficiary directly.
Notwithstanding the foregoing, in no event shall CapMAC be obligated to
make any payment in respect of any Avoided Payment, which payment represents a
payment of principal
2
<PAGE> 3
amount of the Certificates, prior to the time CapMAC would have been required to
make a payment in respect of principal pursuant to the first paragraph hereof
or, which payment represents a payment of principal amount of the Certificates,
exceeding the Insured Principal Amount less all amounts paid with respect to
principal hereunder or from the Reserve Account.
CapMAC shall make payments due in respect of Avoided Payments prior to
1:00 p.m., New York City time, on the second Business Day following CapMAC's
Receipt of the documents required under clauses (x) through (z) of the second
preceding paragraph.
Under the Surety Bond, "Business Day" means any day other than (i) a
Saturday or Sunday or (ii) a day on which banking institutions in the City of
New York, New York and the States of [ ] are authorized or obligated by law or
executive order to be closed.
"Insolvency Proceeding" means the commencement, after the Closing Date,
of any bankruptcy, insolvency, readjustment of debt, reorganization, marshaling
of assets and liabilities or similar proceedings by or against any Person, or
the commencement, after the Closing Date, of any proceedings by or against any
Person for the winding up or liquidation of its affairs, or the consent after
the date hereof to the appointment of a trustee, conservator, receiver or
liquidator in any bankruptcy, insolvency, readjustment of debt, reorganization,
marshaling of assets and liabilities or similar proceedings of or relating to
any Person.
CapMAC hereby waives and agrees not to assert any and all rights to
require the Beneficiary to make demand on or to proceed against any person,
party or security prior to demanding payment under this Surety Bond.
No defenses, set-offs and counterclaims of any kind available to CapMAC
so as to deny payment of any amount due in respect of this Surety Bond will be
valid and CapMAC hereby waives and agrees not to assert any and all such
defenses, set-offs and counterclaims, including, without limitation, any such
rights acquired by subrogation, assignment or otherwise.
Any rights of subrogation acquired by CapMAC as a result of any payment
made under this Surety Bond shall, in all respects, be subordinate and junior in
right of payment to the prior indefeasible payment in full of all amounts due
the Trustee on account of payments due under the Certificates.
This Surety Bond is neither transferable nor assignable except, in
whole but not in part, to a successor Trustee duly appointed and qualified under
the Pooling and Servicing Agreement. Such transfer and assignment shall be
effective upon receipt by CapMAC of a copy of the instrument effecting such
transfer and assignment signed by the transferor and by the transferee, and a
certificate, properly completed and signed by the transferor and the transferee,
in the form of Exhibit B hereto (which shall be conclusive evidence of such
transfer and assignment), and, in such case, the transferee instead of the
transferor shall, without the necessity of further action, be entitled to all
the benefits of and rights under this Surety Bond in the transferor's place,
provided that, in such case, the Notice for Payment presented hereunder shall be
a certificate of the
3
<PAGE> 4
transferee and shall be signed by one who states therein that he is a duly
authorized officer of the transferee.
All notices, presentations, transmissions, deliveries and
communications made by the Beneficiary to CapMAC with respect to this Surety
Bond shall specifically refer to the number of this Surety Bond and shall be
made to CapMAC at:
Capital Markets Assurance Corporation
885 Third Avenue, 14th Floor
New York, N.Y. 10022
Attention: Managing Director,
Credit Enhancement
Telephone: (212) 891-4271
Facsimile: (212) 755-5462
or such other address, officer, telephone number or facsimile number as CapMAC
may designate to the Beneficiary in writing from time to time. Each such notice,
presentation, delivery and communication shall be effective only upon actual
receipt by CapMAC.
The obligations of CapMAC under this Surety Bond are irrevocable,
primary, absolute and unconditional (except as expressly provided herein) and
neither the failure of the Trustee, the Depositor, the Servicer or any other
person, to perform any covenant or obligation in favor of CapMAC (or otherwise),
nor the failure or omission to make a demand permitted hereunder, nor the
commencement of any bankruptcy, debtor or other insolvency proceeding by or
against the Trustee, the Depositor, the Servicer or any other person shall in
any way affect or limit CapMAC's obligations under this Surety Bond. If an
action or proceeding to enforce this Surety Bond is brought, the Beneficiary
shall be entitled to recover from CapMAC costs and expenses reasonably incurred,
including without limitation reasonable fees and expenses of counsel.
There shall be no acceleration payment due under this Surety Bond
unless such acceleration is at the sole option of CapMAC.
[This Surety Bond and the obligations of CapMAC hereunder shall
terminate upon the earlier to occur of (a) the payment in full of all amounts
payable to Certificateholders with respect to the Certificates; and (b) the date
that CapMAC receives written notice from the Trustee, substantially in the form
of Exhibit C hereto, stating that the termination of the Trust has occurred.]
This Surety Bond shall be returned to CapMAC on the Surety Bond
Termination Date.
THIS SURETY BOND IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE FUND
SPECIFIED IN ARTICLE SEVENTY-SIX OF THE NEW YORK STATE INSURANCE LAW.
4
<PAGE> 5
This Surety Bond sets forth in full the undertaking of CapMAC, and
shall not be modified, altered or affected by any other agreement or instrument,
including any modification or amendment to any other agreement or instrument, or
by the merger, consolidation or dissolution of the Trust or any other Person and
may not be canceled or revoked prior to the time it is terminated in accordance
with the express terms hereof.
5
<PAGE> 6
THIS SURETY BOND SHALL BE CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES OR
THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
IN WITNESS WHEREOF, CapMAC has caused this Surety Bond to be executed
on the date first written above.
CAPITAL MARKETS ASSURANCE CORPORATION
By:
------------------------
6
<PAGE> 1
EXHIBIT 4.4
MARINE RETAIL SALES FINANCING AGREEMENT
THIS AGREEMENT, between NATIONSCREDIT ______________________________________,
("NationsCredit") and the undersigned marine product dealer ("Dealer"), whose
names and addresses are set forth herein, sets forth the terms under which
NationsCredit may purchase Contracts (as hereinafter defined) from Dealer and
the rights and obligations between NationsCredit and Dealer with regard to such
Contracts.
1. SALE AND PURCHASE OF CONTRACTS.
a. NationsCredit may, from time to time, purchase from Dealer such
Contracts (as hereinafter defined) offered by Dealer as shall be
written on forms satisfactory to NationsCredit and otherwise
acceptable to NationsCredit. All such purchases shall be at purchase
prices to be determined as provided in Paragraph (c) below. For
purposes of this Agreement, the term "Contract" shall mean any retail
installment contract, security agreement or other document providing
for the payment by a Buyer (as hereinafter defined) to Dealer of
monies in connection with a retail credit sale by Dealer to such Buyer
and the term "Buyer" shall mean any person (including an individual or
another legal entity) which purchases a marine product from Dealer,
including any co-purchaser.
b. To the extent permitted by applicable law, Dealer shall communicate to
NationsCredit or its designee all such credit information concerning a
Buyer (and any other person named by a Buyer in his credit application)
as Dealer may have. NationsCredit will make a decision as to whether
NationsCredit will purchase each Contract offered to it by Dealer if
documentation (including credit information) satisfactory to
NationsCredit has been received. If NationsCredit decides that
NationsCredit will purchase such a Contract after receipt of such
documentation, Dealer shall (i) execute an assignment of the Contract
to NationsCredit, (ii) deliver the original executed Contract (and
counterparts thereof), to NationsCredit, (iii) file and record all
such documents, and take all such action, as may be necessary, under
the Uniform Commercial Code and other applicable law, to convey to
NationsCredit (and to record such conveyance of) the Contract, and to
perfect a valid and enforceable first priority security interest in
favor of NationsCredit in the marine product to which the Contract
relates and (iv) if required by applicable law, send to the Buyer a
notice that such Dealer has assigned the Contract to NationsCredit.
c. NationsCredit shall only purchase Contracts which comply with the
criteria announced from time to time by NationsCredit with respect to
the amounts which NationsCredit will finance, the aggregate of which
amounts shall not exceed the "amount financed," as set forth in any
Contract. If NationsCredit determines to purchase any Contract, it
will do so at a price equal to such "amount financed." Such price
shall be paid to Dealer upon NationsCredit's receipt of satisfactory
documentation. In addition, NationsCredit shall credit to a
non-interest-earning accounting record established by NationsCredit in
respect of Dealer (the "Dealer Reserve Account") an amount equal to
the "finance charge" set forth in the Contract in excess of the amount
of NationsCredit's then applicable buy rate/sell rate. Dealer hereby
grants a security interest in favor of NationsCredit in all amounts
credited to the Dealer Reserve Account to secure all obligations of
Dealer to NationsCredit. All amounts so credited to the Dealer Reserve
Account shall be held by NationsCredit. The Dealer Reserve Account
shall from time to time be debited, and amounts held therein shall
from time to time be paid, as follows:
(i) at NationsCredit's discretion, the Dealer Reserve Account
shall be debited by an amount equal to the amount of any
indebtedness of Dealer to NationsCredit arising under this
Agreement or otherwise;
(ii) upon prepayment of a Contract, the Dealer Reserve Account
shall be debited by an amount equal to the same percentage of
the original credit to the Dealer Reserve Account in respect
of the Contract as the amount of NationsCredit's finance
charge refund under the Contract to the Buyer bears to the
original finance charge; and debited by the full amount of any
refunds NationsCredit must give to the Buyer for unearned
insurance premiums, charges for extended warranty, mechanical
breakdown protection, or similar items; and
(iii) to pay Dealer at such time or times as NationsCredit shall
determine, any then remaining balance of the Dealer Reserve
Account in excess of $__________.
Notwithstanding anything to the contrary set forth herein, Dealer shall be
responsible for Dealer's proportionate share of any unearned finance
charges, insurance premiums and/or charges for extended warranty,
mechanical breakdown or comparable programs, whether or not the amount of
the Dealer Reserve Account is sufficient to cover such share and whether or
not this Agreement has theretofore been terminated.
2. INSURANCE
Dealer will provide NationsCredit or its agent with written evidence that
there is insurance acceptable to NationsCredit covering each marine product
which is the subject of a Contract purchased by NationsCredit hereunder
(together with all related accessories and equipment, a "Boat"), against
fire and theft at the time the Contract is purchased by NationsCredit and
that NationsCredit is named as the loss payee. If such written evidence is
provided to NationsCredit or its agent, NationsCredit will assume
responsibility for Buyer's compliance with insurance requirements
thereafter.
3. PAYMENTS FROM BUYER
After purchase of a Contract by NationsCredit, Dealer shall forward to
NationsCredit any payments on the Contract received by Dealer. In the event
such payment is made by check or other instrument payable to Dealer, Dealer
shall endorse such check or other instrument to NationsCredit. Dealer shall
not make any payment in respect of any Contract on behalf of any Buyer
without the prior written consent of NationsCredit.
4. DEALER'S REPRESENTATIONS AND WARRANTIES
As to each Contract sold by Dealer to NationsCredit, Dealer warrants and
represents that, as of the time of such sale:
a. Dealer will have satisfied all requirements of the Federal Truth in
Lending Act, the Federal Equal Credit Opportunity Act and all other
federal, state, local and other laws, regulations or rules including,
but not limited to, consumer protection laws, regulations or rules
applicable to the extension of credit or otherwise applicable to the
Contract;
b. Dealer will have the right to make such sales;
c. Dealer will have received the down payment specified in the Contract
and will not have made a loan to the Buyer, or assisted the Buyer in
obtaining a loan from any third party, to be used as a part or all of
such down payment or any other payment on a Contract, except (in any
such case) as may be specifically indicated on the face of the
Contract;
d. The Boat sold under the Contract will have been actually delivered to
Buyer and will be free from all liens and encumbrances except those in
favor of NationsCredit;
<PAGE> 2
e. The Contract will be valid and enforceable according to its terms; and
f. All owners of the Boat will have signed the Contract either as Buyers
or as parties agreeing to the security interest in favor of Dealer or
its assignee;
provided, however, that the foregoing warranties and representations shall
not be deemed to constitute warranties or representations as to any act or
omission of Dealer in accordance with any written instruction of
NationsCredit.
5. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATIONS
a. If any Dealer representation, warranty or covenant made in connection
with a Contract is breached or is untrue, or if Dealer has failed to
perform any obligation it may have under a Contract or this Agreement,
or if the Buyer asserts any claim arising out of the purchase of a
Boat from Dealer under a Contract sold to NationsCredit, then Dealer
shall promptly pay NationsCredit any or all of the following amounts
at the election of NationsCredit: (i) the unpaid balance, as
determined by NationsCredit, of all Contracts affected by such breach
or misrepresentation or claim; (ii) Dealer's portion of any unearned
finance charges; (iii) all losses and expenses incurred by
NationsCredit as a result of such breach or misrepresentation or
claim; and (iv) all out-of-pocket expenses (including, but not limited
to, attorney's fees and costs) paid or incurred by NationsCredit in
connection with the collection of any amount due under any such
Contract. If Dealer breaches this Agreement in any other respect,
Dealer shall reimburse NationsCredit for all losses and expenses
incurred by NationsCredit as a result of such breach. In addition,
Dealer shall indemnify and hold NationsCredit harmless for all losses
or expenses, including reasonable attorneys' fees and legal costs,
suffered or incurred by NationsCredit in any judicial, administrative,
or any other proceeding because of any claim or defense asserted
against NationsCredit as a result of any act or omission on the part
of Dealer, including, at the election of NationsCredit, the unpaid
balance of the Contract, as determined by NationsCredit.
b. Notwithstanding anything to the contrary set forth herein, Dealer
hereby guarantees to NationsCredit the payment in full of all amounts
owing to NationsCredit from time to time under any Contract purchased
by NationsCredit from Dealer in respect of which the Buyer was, at the
time of such purchase, an officer, director, partner or employee of
Dealer (or a member of the immediate family of any such person
associated with the Dealership.)
6. DEALER LIABILITY
Dealer liability under the retail program will be on a non-recourse basis.
7. BOOKS AND RECORDS
Dealer agrees to maintain complete and accurate books and records in
accordance with generally accepted accounting principles concerning the
sale of each Boat, including but not limited to records of all other
transactions affecting the Boat. Dealer will, upon request by
NationsCredit, promptly deliver any such books and records or furnish a
copy thereof or abstracts therefrom to NationsCredit or its agent.
NationsCredit's representatives may from time to time inspect Dealer's
books and records. Dealer shall furnish to NationsCredit such information
concerning Dealer's financial and business affairs as NationsCredit may
request.
8. AGENCY
Neither this Agreement nor any action pursuant hereto shall make Dealer the
agent, representative or employee of NationsCredit for any purpose. Dealer
is not granted any express or implied right to bind NationsCredit in any
manner whatsoever. Wherever in this Agreement reference is made to an agent
of NationsCredit, such reference is intended to mean any third party that
NationsCredit may from time to time appoint to fulfill any of its
obligations under this Agreement.
9. FAILURE TO EXERCISE REMEDIES
The exercise of any right or remedy available to NationsCredit shall not
operate as a waiver of any other right or remedy. The failure of
NationsCredit to exercise or a delay by NationsCredit in exercising any
right or remedy shall not operate as a waiver of such right or any other
right. All of NationsCredit's rights and remedies shall be cumulative and
may be exercised singularly or concurrently.
10. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and shall inure to the benefit of the
parties to this Agreement and their respective successors and assigns,
provided, however, that this Agreement and all rights and obligations under
this Agreement may not be assigned or transferred by Dealer without
NationsCredit's prior written consent and any purported assignment or
transfer without such consent shall be void and without effect. Any
obligation of NationsCredit, or any function to be performed by
NationsCredit, under this Agreement may, at the sole option of
NationsCredit, be delegated to, and performed by, an agent of
NationsCredit, which agent shall have such power and authority as
NationsCredit shall delegate to it. Any right or remedy granted to
NationsCredit under this Agreement may be assigned to an agent of
NationsCredit.
11. TERMINATION
NationsCredit or Dealer may terminate this Agreement upon written notice to
the other party, such termination to be effective on the date set out in
such notice. The termination of this Agreement shall not release
NationsCredit or Dealer from any obligations incurred with regard to any
Contracts purchased prior to the effective date of such notice, and all
such obligations shall remain in full force and effect until fully
satisfied in accordance with the terms and conditions of this Agreement.
12. VALIDITY, COMPLETE AGREEMENT, AMENDMENTS
Any invalidity, in whole or in part, of any provision of this Agreement
shall not affect the validity of any other provision hereof. This Agreement
constitutes the complete understanding between the parties and supersedes
all prior oral, written or implied discussions or understandings with
respect to the subject matter hereof between the parties. No alteration,
amendment or modification of any of the terms and provisions hereof shall
be valid unless made pursuant to an instrument in writing signed by both of
said parties.
13. NOTICE
Except as otherwise provided in this Agreement, all notices and other
communications hereunder shall be in writing and shall be deemed duly given
if and when personally delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, to the address of the party
shown below. Either party may change the address to which each such notice
or communication shall be sent by giving written notice of such address
in the manner provided herein to the other party.
<PAGE> 3
14. GENDER, NUMBER, PARAGRAPH HEADINGS
Unless the context of this Agreement otherwise requires, the masculine,
feminine or neuter gender each shall include the other genders, and the
singular shall include the plural. The paragraph headings contained in this
Agreement are for convenience of reference only and shall not limit or
define the text hereof.
NATIONSCREDIT
------------------------ ---------------------------------------
DEALER
- ------------------------------------- ---------------------------------------
PRINTED NAME AND TITLE PRINTED NAME AND TITLE
DATE: BY DATE: BY
--------- -------------------- ---------- ---------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
---------------------------------------
STREET ADDRESS OF DEALER
NATIONSCREDIT COMMERCIAL CORP.
1000 HOLCOMB WOODS PARKWAY, SUITE 240
ROSWELL, GA 30076 ---------------------------------------
CITY AND STATE
- -------------------------------------
(INSERT BRANCH ADDRESS STAMP ABOVE)
<PAGE> 1
EXHIBIT 4.5
This ASSIGNMENT AND RELEASE AGREEMENT, dated as of April 30, 1997, is
made among NATIONSCREDIT MARINE FUNDING CORPORATION, a Delaware corporation
("NCMF"), RECEIVABLES CAPITAL CORPORATION, a Delaware corporation ("RCC"), and
BANKERS TRUST COMPANY, as Trustee of the NationsCredit Grantor Trust 1997-1 (the
"Trustee").
WITNESSETH THAT: In consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
Capitalized but undefined terms shall have the meanings set forth in
the Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"),
dated as of April 30, 1997, among NationsCredit Securitization Corporation, a
Delaware corporation, as Depositor (the "Depositor"), NationsCredit Commercial
Corporation of America, a North Carolina corporation, as Servicer
("NationsCredit Commercial" or the "Servicer"), and Bankers Trust Company, as
Trustee and as Collateral Agent.
SECTION 1. Conveyance of Interests in RCC Receivables. In
consideration of the payment by the Trust to RCC of the Release Amount set
forth in Section 2 (a) and the release of certain obligations of NCMF set forth
in Section 2(b): (a) NCMF does hereby sell, transfer, assign and otherwise
convey to the Trustee, in trust for the benefit of the Certificateholders and
the Surety Bond Issuer, without recourse:
(i) all right, title and interest of NCMF in and to
the RCC Receivables and all payments received thereunder, in
the case of Simple Interest Receivables which are RCC Receivables and
due thereunder in the case of Precomputed Receivables which are RCC
Receivables, in each case, after the Cutoff Date;
(ii) the interest of NCMF in the security interests in the
Boats related to RCC Receivables granted by Obligors pursuant to the
RCC Receivables;
(iii) the right of NCMF pursuant to Section 1.7 of the
Purchase and Sale Agreement to cause NationsCredit Commercial to
repurchase RCC Receivables from NCMF for breaches of the
representations and warranties contained in paragraphs (h) or (i) of
Exhibit II to the Purchase and Sale Agreement provided that paragraph
(i) shall be limited to paragraphs (iii), (vi), (xiii) and (xxiii) of
the definition of Eligible Receivable (as such term is defined in the
Purchase and Sale Agreement));
(iv) the interest of NCMF in any proceeds from claims on any
physical damage, credit life or disability insurance policies covering
Boats related to RCC Receivables or Obligors related to RCC
Receivables;
(v) the interest of NCMF in any proceeds from recourse to
Dealers on RCC Receivables; and
<PAGE> 2
(vi) any proceeds of the foregoing.
The interests set forth in clauses (i)-(vi) of this Section
1(a) are hereinafter referred to as the "NCMF Interests."
(b) RCC does hereby sell, transfer, assign and otherwise convey to the
Trustee, in trust for the benefit of the Certificateholders and the Surety Bond
Issuer, without recourse:
(i) any and all right and interest of RCC in and to the RCC
Receivables and all payments received thereunder, in the case of Simple
Interest Receivables which are RCC Receivables and due thereunder in
the case of Precomputed Receivables which are RCC Receivables, in each
case, after the Cutoff Date;
(ii) any security interest of RCC in the RCC Receivables;
(iii) any interest of RCC in the security interests in the
Boats related to RCC Receivables granted by Obligors pursuant to the
RCC Receivables;
(iv) any interest of RCC in any proceeds from claims on any
physical damage, credit life or disability insurance policies covering
Boats related to RCC Receivables or Obligors related to RCC
Receivables;
(v) any interest of RCC in any proceeds from recourse to
Dealers on RCC Receivables; and
(vi) any proceeds of the foregoing.
The interests set forth in clauses (i)-(vi) of this Section
1(b) are hereinafter referred to as the "RCC Interests."
In furtherance of the foregoing, it is hereby agreed that
none of the RCC Receivables shall be included in the definition of Pool
Receivable (as such term is defined in the Receivables Purchase Agreement) for
purposes of the Receivables Purchase Agreement and the Servicing Agreement,
dated as of December 18, 1996 among the Servicer, NCMF and Bank of America
National Trust and Saving Association or any other purpose, except that such
exclusion shall have no effect on the obligation of NationsCredit Commercial
to, repurchase any RCC Receivable pursuant to Section 1.7 of the Purchase and
Sale Agreement for a breach of any representation and warranty described in
Section 1(a)(iii) hereof.
SECTION 2. Payment of Release Amount. (a) On the Closing Date the
Trustee shall pay to RCC $___________ ("the Release Amount").
(b) Simultaneously with the payment by the Trustee to RCC of the
Release Amount and without any further action by any other Person, (i) NCMF
shall be released from
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<PAGE> 3
any and all of its obligations under the Receivables Purchase Agreement
(including, but not limited to, Section 3.1 thereof), relating to the RCC
Receivables, and (ii) RCC shall be released from any and all obligations under
the Receivables Purchase Agreement, relating to the RCC Receivables.
SECTION 3. Deliveries at Closing (a) on the Closing Date NCMF shall
deliver to the Trustee the following:
(i) A Certificate of Good Standing of NCMF in the State of
Delaware;
(ii) A Secretary's Certificate of NCMF, which has as exhibits
thereto the Certificate of Incorporation and By-laws of NCMF and
resolutions of the Board of Directors of NCMF authorizing the
transactions contemplated by this Assignment and Release Agreement;
(iii) An Officer's Certificate of NCMF relating to the
incumbency of officers of NCMF;
(iv) UCC-1 Financing Statements executed by NCMF with respect
to the grant of the security interest set forth in Section 2(b)(ii) to
be filed with _______________; and
(v) An opinion of Counsel with respect to certain corporate
matters of NCMF in form and substance reasonably satisfactory to the
Trustee.
(b) On the Closing Date RCC shall deliver to the Trustee the following:
(i) a Certificate of Good Standing of RCC in the State of
Delaware;
(ii) A Secretary's Certificate of RCC, which has as exhibits
thereto the Certificate of Incorporation and By-laws of RCC and
resolutions of the Board of Directors of RCC authorizing the
transactions contemplated by this Assignment and Release Agreement;
(iii) An Officer's Certificate of RCC relating to the
incumbency of officers of RCC;
(iv) UCC-3 Financing Statements executed by RCC with respect
to the security interest sold, transferred and assigned to the Trust
pursuant to Section 1(b)(ii) to be filed with _______________; and
(v) An opinion of Counsel with respect to certain corporate
matters of RCC in form and substance reasonably satisfactory to the
Trustee.
-3-
<PAGE> 4
SECTION 4. Representations and Warranties of NCMF. NCMF hereby makes
the following representations and warranties to the Trustee on behalf of the
Certificateholders and the Surety Bond Issuer:
(a) Organization and Good Standing. NCMF has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is now
conducted, and had at all relevant times, and shall have, power, authority and
legal right to acquire, own and sell the Receivables. NCMF's principal place of
business as of the Closing Date is in Texas.
(b) Due Qualification. NCMF is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business requires such qualifications, licenses or
approvals, except where the lack of such qualifications or approvals would not
have a material adverse effect on the business or properties of NCMF.
(c) Power and Authority. NCMF has the power and authority to execute
and deliver this Assignment and Release Agreement and to carry out its terms;
and the execution, delivery, and performance of this Assignment and Release
Agreement has been duly authorized by NCMF by all necessary corporate action.
(d) Valid Sale; Binding Obligations. The sale, transfer and assignment
of the NCMF Interests by NCMF to the Trust, pursuant to Section 1(a),
constitutes a valid sale, transfer and assignment of the NCMF Interests,
enforceable against creditors of and purchasers from NCMF and (b) a legal valid
and binding obligation of NCMF enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and
similar laws relating to creditors' rights generally and subject to general
principles of equity.
(e) No violation. The consummation of the transactions contemplated by
this Assignment and Release Agreement and the fulfillment of the terms hereof
does not and will not conflict with, result in any breach of any of the terms
and provisions of, nor constitute (with or without notice or lapse of time or
both) a default under, the articles of incorporation or by-laws of NCMF, or any
indenture, agreement, or other instrument to which NCMF is a party or by which
it shall be bound; nor result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture, agreement, or
other instrument; nor violate any law or any order, rule, or regulation
applicable to NCMF of any court or of any Federal or state regulatory body,
administrative agency, or other governmental instrumentality having jurisdiction
over NCMF or its properties.
(f) No Proceedings. There are no proceedings or investigations pending
or threatened, before any court, regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over RCC or its
properties: (A) asserting the invalidity of this Assignment and Release
Agreement; (B) seeking to prevent the consummation of any of the
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<PAGE> 5
transactions contemplated by this Assignment and Release Agreement; or (C)
seeking any determination or ruling that might materially and adversely affect
the performance by NCMF of its obligations under, or the validity or
enforceability of this Assignment and Release Agreement.
(g) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any governmental body or official
required in connection with the execution and delivery by; and NCMF of this
Assignment and Release Agreement, the performance by NCMF of the transactions
contemplated by this Assignment and Release Agreement, and the fulfillment by
NCMF of the terms hereof, have been obtained.
(h) Title. It is the intention of NCMF that the sale, transfer and
assignment of the NCMF Interests contemplated by Section 1(a) constitute a sale,
transfer and assignment of the NCMF Interests from NCMF to the Trust and that
the beneficial interest in and title to the NCMF Interests not be part of the
debtor's estate in the event of the filing of a bankruptcy petition by or
against NCMF under any bankruptcy law. In the event that such sale, transfer and
assignment is deemed to be made as security for a loan, NCMF hereby grants to
the Trustee a first priority security interest in all of NCMF's right title and
interest in and to the NCMF Interests and this Assignment and Release Agreement
shall constitute a security agreement under applicable law. No Interest in any
portion of the NCMF Interests has been sold, transferred, assigned, or pledged
by NCMF to any person other than RCC and the Trust. Immediately prior to the
sale, transfer and assignment contemplated by Section 1(a), NCMF had good title
to each RCC Receivable subject only to the interests of RCC under the
Receivables Purchase Agreement.
SECTION 5. Representations and Warranties of RCC. RCC hereby makes the
following representations and warranties to the Trustee on behalf of the
Certificateholders and the Surety Bond Issuer.
(a) Organization and Good Standing. RCC has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is now
conducted, and had at all relevant times, and shall have, power, authority and
legal right to acquire, own and sell the Receivables. RCC's principal place of
business as of the Closing Date is in _________.
(b) Due Qualification. RCC is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business requires such qualifications, licenses or
approvals, except where the lack of such qualifications or approvals would not
have a material adverse effect on the business or properties of RCC.
(c) Power and Authority. RCC has the power and authority to execute and
deliver this Assignment and Release Agreement and to carry out its terms; and
the execution,
-5-
<PAGE> 6
delivery, and performance of this Assignment and Release Agreement has been duly
authorized by RCC by all necessary corporate action.
(d) Valid Sale; Binding Obligations. The sale, transfer and assignment
of the RCC Interests by RCC to the Trust, pursuant to Section 1(a), constitutes
a valid sale, transfer and assignment of the RCC Interests, enforceable against
creditors of and purchasers from RCC and (b) a legal valid and binding
obligation of RCC enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and
similar laws relating to creditors' rights generally and subject to general
principles of equity.
(e) No violation. The consummation of the transactions contemplated by
this Assignment and Release Agreement and the fulfillment of the terms hereof
does not and will not conflict with, result in any breach of any of the terms
and provisions of, nor constitute (with or without notice or lapse of time or
both) a default under, the articles of incorporation or by-laws of RCC, or any
indenture, agreement, or other instrument to which RCC is a party or by which it
shall be bound; nor result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement, or other
instrument; nor violate any law or any order, rule, or regulation applicable to
RCC of any court or of any Federal or state regulatory body, administrative
agency, or other governmental instrumentality having jurisdiction over RCC or
its properties.
(f) No Proceedings. There are no proceedings or investigations pending
or threatened, before any court, regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over RCC or its
properties: (A) asserting the invalidity of this Assignment and Release
Agreement; (B) seeking to prevent the consummation of any of the transactions
contemplated by this Assignment and Release Agreement; or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by RCC of its obligations under, or the validity or enforceability
of this Assignment and Release Agreement.
(g) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any governmental body or official
required in connection with the execution and delivery by RCC of this Assignment
and Release Agreement, the performance by RCC of the transactions contemplated
by this Assignment and Release Agreement, and the fulfillment by RCC of the
terms hereof, have been obtained; and
(h) Security Interests. Except as provided in Section 1(b), RCC has not
sold, transferred, assigned or otherwise conveyed any interest in the RCC
Receivables, has not granted any security interests in the RCC Receivables and
has not taken any action which would impair RCC's perfected security interest in
the RCC Receivables.
SECTION 6. Governing Law. THIS ASSIGNMENT AND RELEASE AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK.
-6-
<PAGE> 7
SECTION 7. Counterparts. This Assignment and Release Agreement may be
executed in two or more counterparts and by different parties on separate
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
Section 8. Further Assurances. Consistent with the terms and conditions
hereof, each party hereto will execute and deliver such instruments,
certificates and other documents and take such other action as any party may
reasonably require in order to carry out this Agreement and the transactions
contemplated hereby.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereby have caused this Assignment and
Release Agreement to be executed by their respective officers thereunto duly
authorized as of the date and year first above written.
NATIONSCREDIT MARINE FUNDING
CORPORATION
By:
-------------------------------------
Name:
Title:
RECEIVABLES CAPITAL CORPORATION
By:
-------------------------------------
Name:
Title:
BANKERS TRUST COMPANY, as Trustee of
NationsCredit Grantor Trust 1997-1
By:
-------------------------------------
Name:
Title:
The provisions of the final paragraph of
Section 1 of the foregoing Assignment
and Release are hereby acknowledged and agreed to:
NationsCredit Commercial Corporation
of America
By:
----------------------------------
Name:
Title:
Bank of America National Trust and Savings Association
By:
----------------------------------
Name:
Title:
-8-
<PAGE> 1
EXHIBIT 5.1
May 12, 1997
NationsCredit Securitization Corporation
225 E. John Carpenter Freeway
Irving, Texas 75062-2731
Re: NationsCredit Grantor Trust 1997-1
Ladies and Gentlemen:
We have been asked to deliver this opinion in connection with the preparation of
the registration statement on Form S-3 (No. 333-22327) (the "Registration
Statement") relating to the issuance by NationsCredit Grantor Trust 1997-1 (the
"Trust") of a class of Marine Receivable-Backed Certificates (the
"Certificates") pursuant to a Pooling and Servicing Agreement, including the
Standard Terms and Conditions of Agreement, dated as of April 30, 1997 (the
"Agreement"), among NationsCredit Securitization Corporation, as depositor (the
"Depositor"), NationsCredit Commercial Corporation of America ("NationsCredit
Commercial"), as servicer, and Bankers Trust Company, as trustee (in such
capacity, the "Trustee") and collateral agent. The Registration Statement has
been filed with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"). All capitalized terms used
but not specifically defined herein have the meaning assigned to such terms in
the Agreement.
In connection with this opinion, we have examined original, reproduced or
certified copies of the Certificate of Incorporation and By-Laws of the Seller,
each as amended to
<PAGE> 2
NationsCredit Securitization Corporation
May 12, 1997
Page 2
date, the Registration Statement, records of actions taken by the Board of
Directors of the Seller and a form of the Agreement. We have also examined such
other documents, papers, statutes and authorities as we have deemed necessary as
a basis for the opinions hereinafter set forth. In all such examinations made by
us in connection with this opinion, we have assumed the genuineness of all
signatures, the completeness and authenticity of all records and all documents
submitted to us as originals, and the conformity with the originals of all
documents submitted to us as copies thereof. As to various matters of fact
relevant to the opinions hereinafter expressed, we have relied, to the extent we
deemed appropriate, upon representations, statements and certificates of
officers and representatives of NationsCredit Commercial, the Seller and others.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not express any opinion herein concerning
any law other than the federal laws of the United States of America and the laws
of the State of New York.
Based upon and subject to the foregoing, we are of the opinion that:
1. When the Certificates have been duly executed and delivered,
authenticated by the Trustee and sold as described in the Registration
Statement, such Certificates will (i) constitute valid and binding obligations
of the Trust in accordance with their terms and the terms of the Agreement and
(ii) will be legally issued, fully paid and non-assessable. This opinion is
subject to the effect of bankruptcy, insolvency, moratorium, fraudulent
conveyance and similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto and we express no opinion
with respect to the application of equitable principles or remedies in any
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NationsCredit Securitization Corporation
May 12, 1997
Page 3
proceeding, whether at law or in equity.
2. Assuming compliance with the Agreement, the Trust will be classified
for federal income tax purposes as a grantor trust under subpart E, part I of
subchapter J of the Internal Revenue Code of 1986, as amended (the "Code"), and
not as a partnership, an association taxable as a corporation, or a taxable
mortgage pool.
3. Each Certificateholder will be treated for federal income tax
purposes as the owner of an undivided pro rata interest in each of the assets
owned by the Trust.
4. The statements set forth in the Registration Statement under the
headings "Prospectus Summary--Tax Status" and "Certain Federal Income Tax
Consequences," to the extent that they constitute statements of matters of law
or legal conclusions with respect thereto, are correct.
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NationsCredit Securitization Corporation
May 12, 1997
Page 4
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the captions
"Certain Federal Income Tax Consequences" and "Legal Matters" in the Prospectus
which forms a part of the Registration Statement. In giving such consent, we do
not admit hereby that we come within the category of persons whose consent is
required under Section 7 of the Act or the Rules and Regulations of the
Commission thereunder.
Very truly yours,
/s/ Stroock & Stroock & Lavan LLP
STROOCK & STROOCK & LAVAN LLP
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Capital Markets Assurance Corporation:
We consent to the use of our report included in the NationsCredit
Securitization Corporation Form S-3 and to the reference to our firm under the
heading "Experts" in the prospectus filed in connection with the registration
of NationsCredit Grantor Trust 1997-1.
/s/ KPMG Peat Marwick LLP
New York, New York
May 9, 1997
