<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 13, 1997
-------------
REPUBLIC INDUSTRIES, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Delaware
--------
(State or other jurisdiction of incorporation)
0-9787 73-1105145
------ ----------
(Commission (IRS Employer
File Number) Identification No.)
450 East Las Olas Boulevard
Ft. Lauderdale, FL 33301
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (954) 713-5200
--------------
N.A.
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS
REPORTING OF CERTAIN FINANCIAL AND OTHER INFORMATION FOR REGISTRATION AND OTHER
PURPOSES
In connection with the consummation of certain acquisitions of individually
insignificant businesses which, in the aggregate, are significant and in
accordance with Rule 3-05 of Regulation S-X, the Registrant is filing herewith
certain historical and pro forma financial information relating to such
consummated acquisitions. In addition, the Registrant is filing herewith: (1)
audited consolidated financial statements which have been restated for the
acquisitions of National Car Rental System, Inc., Maroone Automotive Group,
Wallace Automotive Group, Taormina Industries, Inc. and Carlisle Motors, Inc.
all of which the Company acquired during the first quarter of 1997 and have been
accounted for under the pooling of interests method of accounting; and (2)
audited supplemental consolidated financial statements which give retroactive
effect to the acquisitions of Flemington Car and Truck Country and certain
related dealerships, Spirit Rent-A-Car, Inc. and subsidiary, Chesrown Automotive
Group and Bledsoe Dodge, Inc. all of which have been accounted for under the
pooling of interests method of accounting. Such financial information is
attached hereto as Exhibit 99 and incorporated herein by reference. Exhibit 99
is hereby incorporated by reference into the Registrant's Registration
Statements on Form S-3, file numbers 33-61649, 33-62489, 33-63735, 33-65289,
333-01757, 333-04269, 333-08479, 333-18009, 333-20667 and 333-23415; on Form
S-4, file number 333-17915; and on Form S-8, file numbers 33-93742, 333-07623,
333-19453 and 333-20669.
The Registrant also is filing herewith certain instruments relating to certain
of its debt (including certain subsidiary debt), which instruments are attached
hereto as exhibits.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The financial statements of AutoNation Incorporated ("AutoNation") and
Grubb Automotive ("Grubb") required by this Item 7(a) are incorporated
by reference to Exhibit 99 attached hereto.
(b) The pro forma financial information of AutoNation and Grubb required by
this Item 7(b) are incorporated by reference to the unaudited condensed
consolidated pro forma financial statements included in Exhibit 99
attached hereto.
(c) Exhibits.
The Exhibits to this Report are listed in the Exhibit Index set forth
elsewhere herein.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REPUBLIC INDUSTRIES, INC.
By: /s/ Michael S. Karsner
----------------------------------
Michael S. Karsner
Senior Vice President
and Chief Financial Officer
Date: June 13, 1997
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<PAGE> 4
REPUBLIC INDUSTRIES, INC.
EXHIBIT INDEX
Number and
Description of Exhibit
- ----------------------
1. None
2. None
3. None
4.1 Base Indenture, dated as of April 30, 1996 ("Base Indenture"),
between National Car Rental Financing Limited Partnership, as
Issuer, and The Bank of New York, as Trustee.
4.2 Series 1996-1 Supplement to Base Indenture, dated as of
April 30, 1996, between National Car Rental Financing Limited
Partnership, as Issuer, and The Bank of New York, as Trustee.
4.3 Supplement and Amendment to Base Indenture, dated as of
December 20, 1996, between National Car Rental Financing
Limited Partnership and The Bank of New York, as Trustee.
4.4 Series 1996-2 Supplement to Base Indenture, dated as of
December 20, 1996, between National Car Rental Financing
Limited Partnership, as Issuer, and The Bank of New York, as
Trustee.
4.5 Consent and Amendment to Series 1996-2 Supplement and Second
Master Motor Vehicle Lease and Servicing Agreement, dated as of
February 19, 1997, among National Car Rental Financing Limited
Partnership, National Car Rental System, Inc., The Bank of New
York, as Trustee, National Fleet Funding Corporation, Credit
Suisse First Boston, as Collateral Agent, Citibank, N.A., as
Liquidity Agent, Deutsche Bank AG, General Motors
Corporation, The Bank of New York and Caisse Nationale De
Credit Agricole ("Credit Agricole").
4.6 Second Consent and Amendment to Series 1996-2 Supplement
dated May 7, 1997 among National Car Rental Financing Limited
Partnership, National Car Rental System, Inc., The Bank of New
York, as Trustee, National Fleet Funding Corporation, Credit
Suisse First Boston, as Collateral Agent, Citibank, N.A., as
Liquidity Agent, Deutsche Bank AG, General Motors Corporation,
The Bank of New York and Credit Agricole.
4.7 Liquidity Agreement, dated June 7, 1995, among National Fleet
Funding Corporation, certain financial institutions as
Liquidity Lenders, and Citibank, N.A., as Liquidity Agent,
including Definitions List dated June 7, 1995 and annexed to the
Liquidity Agreement as Annex A.
4.8 Consent and Amendment to Liquidity Agreement, dated as of
December 15, 1995, between National Fleet Funding Corporation
and Citibank, N.A., as Liquidity Agent.
4.9 Amendment to Liquidity Agreement dated as of May 29, 1996
between National Fleet Funding Corporation and Citibank, N.A.,
as Liquidity Agent.
4.10 Extension of Scheduled Liquidity Commitment Termination Date,
dated as of May 29, 1996 among National Fleet Funding
Corporation, certain financial institutions as Liquidity
Lenders, and Citibank, N.A. as Liquidity Agent.
4.11 Second Amendment to Liquidity Agreement, dated as of December
20, 1996, among National Fleet Funding Corporation, certain
financial institutions as liquidity lenders and Citibank, N.A.,
as Liquidity Agent.
4.12 Collateral Agreement, dated as of June 7, 1995, among National
Fleet Funding Corporation, General Motors Corporation, Citibank,
N.A., as Liquidity Agent, Placement Agent and Depository, Credit
Suisse, and CS First Boston Corporation.
4.13 Letter Agreement dated July 13, 1995 between National Fleet
Funding Corporation and Goldman Sachs Money Markets, L.P.
4.14 A Support Intercreditor Agreement dated as of May 29, 1996 by
and among General Motors Corporation and The Bank of New York,
National Fleet Funding Corporation, and National Car Rental
System, Inc.
4.15 Assignment and Assumption Agreement dated as of May 29, 1996
among Citibank, Credit Suisse and Credit Agricole.
4.16 Letter Agreement dated November 20, 1996 among Citicorp
Securities, Inc. (as a Dealer), National Fleet Funding
Corporation, and the other parties to the Collateral Agreement.
4.17 Supplement and Amendment to Collateral Agreement, dated as of
December 20, 1996, among National Fleet Funding Corporation,
General Motors Corporation, The Bank of New York, Credit
Agricole, Citibank, N.A., Credit Suisse, CS First Boston
Corporation, Goldman Sachs & Co., and Citicorp Securities, Inc.
4.18 Amended and Restated Master Collateral Agency Agreement, dated
as of April 30, 1996, among National Car Rental System, Inc.,
National Car Rental Financing Limited Partnership, The Bank of
New York, National Fleet Funding Corporation, General Motors
Corporation, Citibank, N.A., and Credit Suisse.
4.19 Supplement and Amendment to Amended and Restated Master
Collateral Agency Agreement, dated as of December 20, 1996,
among National Car Rental System, Inc., National Car Rental
Financing Limited Partnership, Citibank, N.A., National Fleet
Funding Corporation, General Motors Corporation, The Bank of New
York, Credit Agricole, and Credit Suisse.
4.20 Master Motor Vehicle Lease and Servicing Agreement, dated as of
April 30, 1996, between National Car Rental Financing Limited
Partnership, as lessor, and National Car Rental System, Inc.,
as lessee.
4.21 Second Master Motor Vehicle Lease and Servicing Agreement,
dated as of December 20, 1996, between National Car Rental
Financing Limited Partnership, as lessor, and National Car
Rental System, Inc., as lessee.
4.22 Credit Facilities and Reimbursement Agreement, dated as of
April 23, 1997, by and among Republic Industries, Inc. and
Republic Resources Company, as Borrowers, NationsBank National
Association (South), as agent, and the lenders named therein.
4.23 Fourth Amendment, dated as of March 28, 1997, to Loan
Agreement, dated June 20, 1994, between Alamo Rent-A-Car, Inc.
and Alamo Funding, L.P.
4.24 Third Amendment, dated as of March 28, 1997, to Liquidity Loan
Agreement, dated as of June 20, 1994, among Alamo Funding,
L.P., AFL Fleet Funding, Inc., certain financial institutions,
as liquidity lenders, and Citibank N.A., as Liquidity Agent.
4.25 Third Amendment, dated as of March 28, 1997, to Letter of Credit
Reimbursement Agreement, dated as of June 20, 1994, among Alamo
Rent-A-Car, Inc., Alamo Funding, L.P., AFL Fleet Funding, Inc.,
and Credit Suisse.
15. None
16. None
17. None
21. None
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Coopers & Lybrand L.L.P.
23.5 Consent of Cohen & Company
23.6 Consent of Bailey Saetveit & Co. P.C.
23.7 Consent of Turner & Vedrenne CPA
23.8 Consent of Ehrenkrantz, Sterling & Co. LLC
23.9 Consent of George B. Jones & Co., P.C.
24. None
27.1 Financial Data Schedule for the Year Ended December 31, 1995
(Restated) (for SEC use only)
27.2 Financial Data Schedule for the Year Ended December 31, 1996
(Restated) (for SEC use only)
99. Financial Information
<PAGE> 1
Exhibit 4.1
EXECUTION COPY
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP,
as Issuer,
and
THE BANK OF NEW YORK,
as Trustee
-------------------------------
BASE INDENTURE
Dated as of April 30, 1996
-------------------------------
Rental Car Asset Backed Notes
(Issuable in Series)
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Cross References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. Accounting and Financial Determinations;
No Duplication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2.
THE NOTES
2.1. Designation and Terms of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2. Notes Issuable in Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3. Supplement For Each Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5. Form of Notes; Book Entry Provisions; Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.6. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.7. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.8. Noteholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.9. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.10. Legending of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.11. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.12. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.13. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.14. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.15. Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.16. Book-Entry Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.17. Notices to Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.18. Definitive Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.19. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.20. Certain Purchaser Representations and
Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 3.
SECURITY
3.1. Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2. Certain Rights and Obligations of NFLP Unaffected . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.3. Performance of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.4. Release of Lien on Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.5. Stamp, Other Similar Taxes and Filing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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ARTICLE 4.
REPORTS
4.1. Agreement of Servicer to Provide Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 5.
ALLOCATION AND APPLICATION OF COLLECTIONS
5.1. Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.2. Collections and Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.3. Determination of Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.4. Determination of Monthly Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.5. Paired Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 6.
DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS
6.1. Distributions in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2. Distributions to Retained Distribution Account . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.3. Optional Repurchase of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.4. Monthly Noteholders' Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES
7.1. Legal Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.2. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.3. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7,4. Financial Information; Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.6. No ERISA Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.7. Tax Filings and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.8. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.9. Investment Company Act; Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.10. Regulations G, T, U and X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.11. No Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.12. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7,13. Ownership; Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.14. Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.15. Binding Effect of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.16. Non-Existence of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.17. Manufacturer Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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7.18. Other Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 8.
COVENANTS
8.1. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.3. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8,4. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.5. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8,6. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.7. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.8. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.9. Compliance with Related Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.10. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.11. Notice of Material Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.12. Further Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.13. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8,14. Manufacturer Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.15. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.16. Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.17. Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.18. Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.19. Acquisition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.20. Dividends, Officers' Compensation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.21. Name; Principal Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.22. Organizational Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.23. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.24. No Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.25. Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.26. Maintenance of Separate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8,27. Rule 144A Information Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8,28. Use of Proceeds of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.29. Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.30. Amendments to Exchange Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.31. Demand Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 9.
AMORTIZATION EVENTS AND REMEDIES
9.1. Amortization Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.2. Rights of the Trustee upon Amortization Event or
Certain Other Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.3. Special Provisions Concerning Remedies Upon
Liquidation Event of Default in Conjunction with
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a Manufacturer Event of Default or Inability to
Turn Back under Manufacturer Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.4. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.5. Waiver of Past Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.6. Control by Requisite Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.7. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.8. Unconditional Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . 72
9.9. Collection Suit by the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
9.10. The Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
9.11. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.12. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.13. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9,14. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.15. Reassignment of Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE 10.
THE TRUSTEE
10.1. Duties of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.2. Rights of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.3. Individual Rights of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.4. Notice of Amortization Events and Potential
Amortization Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.5. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.6. Replacement of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.7. Successor Trustee by Merger, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.8. Eligibility Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.9. Appointment of Co-Trustee or Separate Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.10. Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE 11.
DISCHARGE OF INDENTURE
11.1. Termination of NFLP's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
11.2. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
11.3. Repayment to NFLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE 12.
AMENDMENTS
12.1. Without Consent of the Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
12.2. With Consent of the Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
12.3. Supplements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
12.4. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
</TABLE>
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<TABLE>
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12.5. Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
12.6. The Trustee to Sign Amendments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE 13.
MISCELLANEOUS
13.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
13.2. Communication by Noteholders With Other Noteholders . . . . . . . . . . . . . . . . . . . . . . . . 90
13.3. Certificate as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
13.4. Statements Required in Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
13.5. Rules by the Trustee and the Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
13.6. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
13.7. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
13.8. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
13.9. Payment on Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
13.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
13.11. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
13.12. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
13.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
13.14. Counterpart Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
13.15. Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
13.16. Termination; Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
13.17. No Bankruptcy Petition Against NFLP or the General
Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
13.18. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
EXHIBITS AND SCHEDULES
SCHEDULE 1 DEFINITIONS LIST (Section 1.1)
EXHIBIT A-1 FORM OF TRANSFER CERTIFICATE (Section 2.8)
EXHIBIT A-2 RESERVED
EXHIBIT A-3 FORM OF TRANSFER CERTIFICATE FOR EXCHANGE OR TRANSFER FROM RESTRICTED GLOBAL NOTE TO TEMPORARY GLOBAL
NOTE (Section 2.9)
EXHIBIT A-4 FORM OF TRANSFER CERTIFICATE FOR EXCHANGE OR TRANSFER FROM RESTRICTED GLOBAL NOTE TO PERMANENT GLOBAL NOTE
(Section 2.9)
EXHIBIT A-5 FORM OF TRANSFER CERTIFICATE FOR TRANSFER OR EXCHANGE FROM TEMPORARY GLOBAL NOTE TO RESTRICTED GLOBAL
NOTE (Section 2.9)
EXHIBIT B FORM OF CLEARING SYSTEM CERTIFICATE
</TABLE>
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<TABLE>
<S> <C>
EXHIBIT C FORM OF CERTIFICATE OF BENEFICIAL OWNERSHIP
EXHIBIT D FORM OF REPRESENTATION LETTERS
EXHIBIT E FORM OF MONTHLY TRUSTEE'S CERTIFICATE
</TABLE>
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<PAGE> 8
BASE INDENTURE, dated as of April 30, 1996, between NATIONAL CAR RENTAL
FINANCING LIMITED PARTNERSHIP, a special purpose Delaware limited partnership,
as issuer ("NFLP"), and THE BANK OF NEW YORK, a New York banking corporation,
as trustee (in such capacity, the "Trustee").
W I T N E S S E T H:
WHEREAS, NFLP has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of one or more series
of NFLP's Rental Car Asset Backed Notes (the "Notes"), issuable as provided in
this Indenture;
WHEREAS, all things necessary to make this Indenture a legal, valid and
binding agreement of NFLP, in accordance with its terms, have been done, and
NFLP proposes to do all the things necessary to make the Notes, when executed
by NFLP and authenticated and delivered by the Trustee hereunder and duly
issued by NFLP, the legal, valid and binding obligations of NFLP as hereinafter
provided;
NOW, THEREFORE, for and in consideration of the premises and the receipt
of the Notes by the Noteholders, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Noteholders, as follows:
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
Certain capitalized terms used herein (including the preamble and the
recitals hereto) shall have the meanings assigned to such terms in the
Definitions List attached hereto as Schedule I (the "Definitions List"), as
such Definitions List may be amended or modified from time to time in
accordance with the provisions hereof.
Section 1.2. Cross-References.
Unless otherwise specified, references in this Indenture and in each other
Related Document to any Article or Section are references to such Article or
Section of this Indenture or such other Related Document, as the case may be
and, unless otherwise specified, references in any Article, Section or
definition to any clause are references to such clause of such Article, Section
or definition.
<PAGE> 9
Section 1.3. Accounting and Financial Determinations; No Duplication.
Where the character or amount of any asset or liability or item of income
or expense is required to be determined, or any accounting computation is
required to be made, for the purpose of this Indenture, such determination or
calculation shall be made, to the extent applicable and except as otherwise
specified in this Indenture, in accordance with GAAP. When used herein, the
term "financial statement" shall include the notes and schedules thereto. All
accounting determinations and computations hereunder or under any other Related
Documents shall be made without duplication.
Section 1.4. Rules of Construction.
In this Indenture, unless the context otherwise requires:
(i) the singular includes the plural and vice versa;
(ii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Indenture, and reference to any Person in a particular
capacity only refers to such Person in such capacity;
(iii) reference to any gender includes the other gender;
(iv) reference to any Requirement of Law means such
Requirement of Law as amended, modified, codified or reenacted, in whole
or in part, and in effect from time to time;
(v) "including" (and with correlative meaning "include")
means including without limiting the generality of any description
preceding such term; and
(vi) with respect to the determination of any period of time,
"from" means "from and including" and "to" means "to but excluding".
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<PAGE> 10
ARTICLE 2.
THE NOTES
Section 2.1. Designation and Terms of Notes.
Each Series of Notes shall be substantially in the form specified
in the applicable Supplement and shall bear, upon its face, the designation for
such Series to which it belongs so selected by NFLP. Except as specified in
any Supplement for a related Series, all Notes of any Series shall be equally
and ratably entitled as provided herein to the benefits hereof without
preference, priority or distinction on account of the actual time or times of
authentication and delivery, all in accordance with the terms and provisions of
this Indenture and the applicable Supplement. The aggregate principal amount
of Notes which may be authenticated and delivered under this Indenture is
unlimited. The Notes shall be in denominations of $250,000 and integral
multiples of $1,000 in excess thereof.
Section 2.2. Notes Issuable in Series.
The Notes may be issued in one or more Series. Each Series of
Notes shall be created by a Supplement. Notes of a new Series may from time to
time be executed by NFLP and delivered to the Trustee for authentication and
thereupon the same shall be authenticated and delivered by the Trustee upon the
receipt by the Trustee of a Company Request at least two (2) Business Days in
advance of the Closing Date for such Series and upon delivery by NFLP to the
Trustee, and receipt by the Trustee, of the following:
(a) a Company Order authorizing and directing the
authentication and delivery of the Notes of such new Series by the Trustee
and specifying the designation of such new Series, the aggregate principal
amount of Notes of such new Series to be authenticated and the Note Rate
(or the method for allocating interest payments or other cash flow) with
respect to such new Series;.
(b) a Supplement in form satisfactory to the Trustee executed
by NFLP, the General Partner and the Trustee and specifying the Principal
Terms of such new Series;
(c) the related Enhancement Agreement, if any, executed by
each of the parties thereto, other than the Trustee;
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<PAGE> 11
(d) written confirmation that the Rating Agency Condition
shall have been satisfied with respect to such issuance;
(e) an Officer's Certificate of NFLP dated as of the
applicable Closing Date to the effect that (i) no Amortization Event, Asset
Amount Deficiency, Enhancement Agreement Event of Default, if applicable,
Lease Event of Default, Manufacturer Event of Default, Potential
Amortization Event, Potential Enhancement Agreement Event of Default,
Potential Lease Event of Default, or Potential Manufacturer Event of
Default is continuing or will occur as a result of the issuance of the new
Series of Notes, (ii) the aggregate Market Value of all Non-Program
Vehicles on such date (including all Non-Program Vehicles to be acquired,
financed or refinanced on the Closing Date for such Series) equals or
exceeds the aggregate Net Book Value of such Non-Program Vehicles as of
such date, (iii) the issuance of the new Series of Notes will not result
in any breach of any of the terms, conditions or provisions of or
constitute a default under any indenture, mortgage, deed of trust or other
agreement or instrument to which NFLP is a party or by which it or its
property is bound or any order of any court or administrative agency
entered in any suit, action or other judicial or administrative proceeding
to which NFLP is a party or by which it or its property may be bound or to
which it or its property may be subject, (iv) all conditions precedent
provided in this Base Indenture and the related Supplement with respect to
the authentication and delivery of the new Series of Notes have been
complied with and (v) if such new Series of Notes is a Segregated Series,
the criteria used to select the Series-Specific Collateral will not have a
material adverse effect on the quality of the Collateral securing any
other outstanding Series of Notes;
(f) unless otherwise specified in the related Supplement, an
Opinion of Counsel, subject to the assumptions and qualifications stated
therein, and in a form substantially acceptable to the Trustee, dated the
applicable Closing Date, substantially to the effect that:
(i) (x) the new Series of Notes will be treated as
indebtedness of NFLP for Federal and Minnesota state income tax
purposes and (y) the issuance of such Series will not adversely
affect the Federal or Minnesota
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<PAGE> 12
state income tax characterization of the Outstanding Notes of any
Series;
(ii) all instruments furnished to the Trustee conform
in all material respects to the requirements of this Base
Indenture and the related Supplement and constitute all the
documents required to be delivered hereunder and thereunder for
the Trustee to authenticate and deliver the new Series of Notes,
and all conditions precedent provided for in this Base Indenture
and the related Supplement with respect to the authentication and
delivery of the new Series of Notes have been complied with in
all material respects;
(iii) (x) NFLP is a limited partnership duly organized
under the laws of the jurisdiction of its organization and has
the partnership power and authority to execute and deliver the
related Supplement (and, in the case of the first Series to be
authenticated hereunder, this Base Indenture and each other
Related Document to which it is a party) and to issue the new
Series of Notes, (y) the General Partner is duly incorporated
under the jurisdiction of its incorporation and has the corporate
power and authority to execute and deliver the related Supplement
(and, in the case of the first Series to be authenticated
hereunder, this Base Indenture and each other Related Document to
which it is a party) and to issue the new Series of Notes and (z)
National, in its capacity as Lessee and as Servicer is duly
incorporated in the jurisdiction of its incorporation and, as of
the date of this Indenture, has the corporate power and authority
to execute and deliver each of the Related Documents to which it
is a party;
(iv) the related Supplement, this Base Indenture and
each of the other Related Documents to which NFLP, the General
Partner, the Lessee or the Servicer is a party have been duly
authorized, executed and delivered by NFLP, the General Partner,
the Lessee or the Servicer, as the case may be;
(v) the new Series of Notes has been duly authorized
and executed and, when
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<PAGE> 13
authenticated and delivered in accordance with the provisions of
this Base Indenture and the related Supplement, will constitute a
valid, binding and enforceable obligation of NFLP entitled to the
benefits of this Base Indenture and the related Supplement,
subject, in the case of enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting
creditor's rights generally and to general principles of equity;
(vi) this Base Indenture, the related Supplement and
each of the other Related Documents to which NFLP, the General
Partner, the Lessee or the Servicer is a party are legal, valid
and binding agreements of NFLP, the General Partner, the Lessee
or the Servicer, as the case may be, enforceable in accordance
with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting
creditors' rights generally and to general principles of equity;
(vii) NFLP is not, and is not controlled by, an
"investment company" within the meaning of, and is not required
to register as an "investment company" under, the Investment
Company Act of 1940, and this Base Indenture and the related
Supplement are not required to be registered under the Trust
Indenture Act;
(viii) the offer and sale of the new Series of Notes is
not required to be registered under the Securities Act; and
(ix) as to the new Series of Notes and any
Outstanding Series of Notes, the opinions of counsel relating to
(A) the validity, perfection and priority of security interests,
(B) the nature of the lease of Acquired Vehicles pursuant to the
Lease as a true operating lease and not as a financing, (C) the
analysis of substantive consolidation of the assets of NFLP or
the General Partner with the assets of the Lessee in the event of
the insolvency of the Lessee, (D) the status of NFLP as not being
an investment company or controlled by an investment company
under the
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<PAGE> 14
Investment Company Act, as furnished by counsel retained by NFLP
in connection with the issuance of the initial Series of Notes,
are reaffirmed in all respects.
(g) such other documents, instruments, certifications,
agreements or other items as the Trustee may reasonably require.
Upon satisfaction of such conditions, the Trustee shall authenticate and
deliver, as provided above, such Series of Notes.
Section 2.3. Supplement For Each Series.
(a) In conjunction with the issuance of a new Series, the
parties hereto shall execute a Supplement, which shall specify the
relevant terms with respect to such new Series of Notes, which shall
include, as applicable: (i) its name or designation, (ii) the aggregate
principal amount of Notes of such Series, (iii) the Note Rate (or the
method for calculating such Note Rate) with respect to such Series, (iv)
the interest payment date or dates and the date or dates from which
interest shall accrue, (v) the method of allocating Collections with
respect to such Series and the method by which the principal amount of
Notes of such Series shall amortize or accrete, (vi) the names of any
accounts to be used by such Series and the terms governing the operation
of any such account, (vii) the Servicing Fee Percentage, (viii) the terms
of any Enhancement, (ix) the Enhancement Provider, if any, (x) whether the
Notes may be issued in bearer form and any limitations imposed thereon,
(xi) the Series Termination Date, (xii) whether the Notes will be issued
in multiple classes and, if so, the method of allocating Collections among
such classes, (xiii) whether such Series of Notes shall have the benefit
of Series-Specific Collateral and (xiv) any other relevant terms of such
Series of Notes that do not (subject to Section 2.3(b) and Article 12
hereof) change the terms of any Outstanding Series of Notes or otherwise
materially conflict with the provisions of this Indenture and that do not
prevent the satisfaction of the Rating Agency Condition with respect to
the issuance of such new Series (all such terms, the "Principal Terms" of
such Series);
(b) (i) A Supplement may specify that the related Series of
Notes (each, a "Segregated Series") will have Collateral that is to be
solely for the benefit of the Noteholders of such Segregated Series of
Notes (such Collateral being referred to as "Series-Specific Collateral");
provided, however, that no such Segregated
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<PAGE> 15
Series of Notes will be issued unless (x) the Rating Agency Condition is
met, (y) NFLP shall have delivered to the Trustee an Officer's Certificate
to the effect that the issuance of such Segregated Series of Notes will
not have a material adverse effect upon the Noteholders of any Series of
Notes outstanding at the time of the issuance of the Segregated Series of
Notes, and (z) the applicable Supplement provides, in form satisfactory to
the Trustee, for the changes and modifications to the Indenture and the
other Related Documents as are described in clause (ii) below.
(ii) In the event any Segregated Series of Notes is
issued, the related Supplement will provide that (A) the
Servicer, the Master Collateral Agent and the Trustee will
identify the Collateral for such Segregated Series of Notes such
that (x) the Series-Specific Collateral will secure only the
Segregated Series of Notes to which such Series-Specific
Collateral is applicable and (y) the Noteholders with respect to
any other Series of Notes will not be entitled to the benefit of
such Series-Specific Collateral, (B) the Trustee will adjust the
allocations and distributions to be made under the Indenture at
the direction of the Servicer so that the Noteholders with
respect to the Segregated Series of Notes will be entitled to all
allocations and distributions arising from the Series-Specific
Collateral applicable to such Segregated Series of Notes and the
Noteholders with respect to the non-Segregated Series of Notes
will be entitled to allocations and distributions arising solely
from the non-Series-Specific Collateral, (C) the Trustee will act
as collateral agent under the Indenture (and in such capacity the
Trustee, together with the Master Collateral Agent, shall (x)
establish and maintain a master collection account, and one or
more segregated collection accounts, into which Collections
allocated to all Series of Notes will be deposited and, after
such deposit, further allocated among one or more Segregated
Series of Notes and the non-Segregated Series of Notes and (y)
hold its lien encumbering the non-Series-Specific Collateral for
the benefit of the non-Segregated Series of Notes and hold its
lien encumbering the Series-Specific Collateral for the benefit
of the Segregated Series of Notes), (D) the Servicer and the
Master Collateral Agent each will designate on its computer
system the source of the funds for the financing of each Vehicle
(as between one or more Segregated Series of Notes and the
non-Segregated Series of Notes, the "Financing Provider" with
respect to such Series of Notes), (E) the
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<PAGE> 16
Noteholders of any Segregated Series of Notes will, subject to
the limitations contained in this Base Indenture and the
applicable Supplement, be entitled to cause the Trustee and the
Master Collateral Agent to exercise the remedies under the
Indenture and the Master Collateral Agency Agreement, as
applicable, each solely on behalf of such Segregated Series of
Notes, (F) separate monthly reports and other information will
be furnished under the Indenture by the Trustee for the
Series-Specific Collateral, which monthly reports and other
information will contain substantially the same type of
information as the monthly reports provided under the Indenture
prior to the issuance of such Segregated Series of Notes, (G) a
separate segregated Master Motor Vehicle Lease and Servicing
Agreement pertaining, as applicable, solely or in part to the
Series-Specific Collateral will be executed and delivered by
NFLP, as lessor, and National, as lessee, (H) to the extent
specified in the Supplement for such Segregated Series of Notes,
NFLP and the Servicer will take such actions as are necessary to
perfect (1) the Master Collateral Agent's interest in the portion
of the Series-Specific Collateral that would constitute Master
Collateral and to designate NFLP as the "Financing Source" and
the Trustee, on behalf of the Noteholders of such Series, as the
"Beneficiary" under the Master Collateral Agency Agreement with
respect to the Series-Specific Collateral and (2) the Trustee's
interest on behalf of the Noteholders of such Series in the
Series-Specific Collateral, (1) amendments will be made to this
Indenture and the other Related Documents, if necessary, to
reflect the foregoing, which amendments will, among other things,
provide for revisions to the terms "Aggregate Asset Amount",
"Required Asset Amount", "Collateral", "Collection Account",
"NFLP Agreements", "Lease", "Related Documents", "Aggregate
Invested Amount" and "Requisite Investors" and such other terms
as may be appropriate to reflect the creation of the Segregated
Series, provided that any such amendment shall not have a
material adverse effect on the Noteholders or Note Owners of any
Series unless the Required Noteholders of such Series shall have
given their prior written consent thereto (and, with respect to
each Series, the Trustee may rely on an Officer's Certificate of
the Servicer as sufficient evidence of such lack of a material
adverse effect) and (J) references herein to "all" Series of
Notes (other than as specifically stated herein) shall be
modified to refer to all Series of Notes other than any
Segregated Series of Notes which may hereafter be issued.
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Section 2.4. Execution and Authentication.
(a) An Authorized Officer shall sign the Notes for NFLP by
manual or facsimile signature. If an Authorized Officer whose signature
is on a Note no longer holds that office at the time the Note is
authenticated, the Note shall nevertheless be valid.
(b) At any time and from time to time after the execution and
delivery of this Indenture, NFLP may deliver Notes of any particular
Series executed by NFLP to the Trustee for authentication, together with
one or more Company Orders for the authentication and delivery of such
Notes, and the Trustee, in accordance with such Company Order and this
Indenture, shall authenticate and deliver such Notes.
(c) No Note shall be entitled to any benefit under this
Indenture or be valid for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for
herein, duly executed by the Trustee by the manual signature of a Trust
Officer (and the Luxembourg agent (the "Luxembourg Agent"), if such Notes
are listed on the Luxembourg Stock Exchange). Such signatures on such
certificate shall be conclusive evidence, and the only evidence, that the
Note has been duly authenticated under this Indenture. The Trustee may
appoint an authenticating agent acceptable to NFLP to authenticate Notes.
Unless limited by the term of such appointment, an authenticating agent
may authenticate Notes whenever the Trustee may do so. Each reference in
this Indenture to authentication by the Trustee includes authentication by
such agent. An authenticating agent has the same rights as an Agent to
deal with NFLP or an Affiliate of NFLP. The Trustee's certificate of
authentication shall be in substantially the following form:
This is one of the Notes of a series issued under the within
mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:
-----------------------------------
Authorized Signatory
(d) Each Note shall be dated and issued as of the date of its
authentication by the Trustee,
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(e) Notwithstanding the foregoing, if any Note shall have
been authenticated and delivered hereunder but never issued and sold by
NFLP, and NFLP shall deliver such Note to the Trustee for cancellation as
provided in Section 2.14 together with a written statement (which need not
comply with Section 13.3 and need not be accompanied by an Opinion of
Counsel) stating that such Note has never been issued and sold by NFLP,
for all purposes of this Indenture such Note shall be deemed never to have
been authenticated and delivered hereunder and shall not be entitled to
the benefits of this Indenture.
Section 2.5. Form of Notes; Book Entry Provisions; Title.
(a) Restricted Global Note. Any Series of Notes, or any
class of such Series to be issued in the United States will be in
registered form and sold initially to institutional accredited investors
within the meaning of Regulation D under the Securities Act in reliance on
an exemption from the registration requirements of the Securities Act and
thereafter to qualified institutional buyers within the meaning of, and in
reliance on, Rule 144A under the Securities Act ("Rule 144A") as provided
in the applicable Supplement and shall be issued in the form of and
represented by one or more permanent global Notes in fully registered form
without interest coupons (each, a "Restricted Global Note"), substantially
in the form set forth in the applicable Supplement, with such legends as
may be applicable thereto, which shall be deposited on behalf of the
subscribers for the Notes represented thereby with a custodian for DTC,
and registered in the name of DTC or a nominee of DTC, duly executed by
NFLP and authenticated by the Trustee as provided in Section 2.4 for
credit to the accounts of the subscribers at DTC. The aggregate initial
principal amount of a Restricted Global Note may from time to time be
increased or decreased by adjustments made on the records of the custodian
for DTC, DTC or its nominee, as the case may be, as hereinafter provided.
(b) Temporary Global Note; Permanent Global Note. Any Series
of Notes, or any class of such Series, offered and sold outside of the
United States will be offered and sold in reliance on Regulation S
("Regulation S") under the Securities Act and shall initially be issued in
the form of one or more temporary global Notes (each, a "Temporary
Global Note") in fully registered form without interest coupons
substantially in the form set forth in the applicable Supplement with such
legends as may be applicable thereto, registered in the name of DTC or a
nominee of DTC, duly executed by NFLP and authenticated by the Trustee as
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provided in Section 2.4, for credit to the subscribers' accounts at Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of
Euroclear or Cedel. Interests in a Temporary Global Note will be
exchangeable, in whole or in part, for interests in a permanent global
note (a "Permanent Global Note") in fully registered form without interest
coupons, representing Notes of the same Series, substantially in the form
set forth in the applicable Supplement, in accordance with the
provisions of the Temporary Global Note and this Indenture. Until the
Exchange Date, interests in a Temporary Global Note may only be held by
the agent members of Euroclear and Cedel. The aggregate initial principal
amount of the Temporary Global Note and the Permanent Global Note may from
time to time be increased or decreased by adjustments made on the records
of the custodian for DTC, DTC or its nominee, as the case may be, as
hereinafter provided.
Section 2.6. Registrar and Paying Agent.
(a) NFLP shall maintain (i) an office or agency where Notes
may be presented for registration of transfer or for exchange
("Registrar") and (ii) an office or agency where Notes may be presented
for payment ("Paying Agent"). The Registrar shall keep a register of the
Notes and of their transfer and exchange (the "Note Register"). NFLP may
appoint one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent and
the term "Registrar" includes any co-registrars. NFLP may change any
Paying Agent or Registrar without prior notice to any Noteholder. NFLP
shall notify the Trustee in writing of the name and address of any Agent
not a party to this Indenture. The Trustee is hereby initially appointed
as the Registrar, Paying Agent and agent for service of notices and
demands in connection with the Notes.
(b) NFLP shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. Such agency agreement shall
implement the provisions of this Indenture that relate to such Agent.
NFLP shall notify the Trustee in writing of the name and address of any
such Agent. If NFLP fails to maintain a Registrar or Paying Agent and the
Trustee has knowledge of such failure, or if NFLP fails to give the
foregoing notice, the Trustee shall act as such, and shall be entitled to
appropriate compensation in accordance with this Indenture, until NFLP
shall appoint a replacement Registrar and Paying Agent.
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Section 2.7. Paying Agent to Hold Money in Trust.
(a) NFLP will cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee (and if the Trustee acts as Paying
Agent, it hereby so agrees), subject to the provisions of this Section,
that such Paying Agent will:
(i) hold all sums held by it for the payment of
amounts due with respect to the Notes in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and pay
such sums to such Persons as herein provided;
(ii) give the Trustee notice of any default by NFLP
(or any other obligor under the Notes) of which it has actual
knowledge in the making of any payment required to be made with
respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay
to the Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and
forthwith pay to the Trustee all sums held by it in trust for the
payment of Notes if at any time it ceases to meet the standards
required to be met by a Trustee hereunder at the time of its
appointment; and
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any
Notes of any applicable withholding taxes imposed thereon and
with respect to any applicable reporting requirements in
connection therewith.
(b) NFLP may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Company Order direct any Paying Agent to pay to the Trustee all sums held
in trust by such Paying Agent, such sums to be held by the Trustee upon
the same trusts as those upon which the sums were held by such Paying
Agent; and upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to
such money.
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(c) Subject to applicable laws with respect to escheat of
funds, any money held by the Trustee or any Paying Agent or a Clearing
Agency in trust for the payment of any amount due with respect to any Note
and remaining unclaimed for two years after such amount has become due and
payable shall be discharged from such trust and be paid to NFLP on Company
Request; and the Holder of such Note shall thereafter, as an unsecured
general creditor, look only to NFLP for payment thereof (but only to the
extent of the amounts so paid to NFLP), and all liability of the Trustee
or such Paying Agent with respect to such trust money shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before
being required to make any such repayment, may at the expense of NFLP
cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general
circulation in New York City and, if the related Series of Notes has
been listed on the Luxembourg Stock Exchange, and if the Luxembourg Stock
Exchange so requires, in a newspaper customarily published on each
Luxembourg business day and of general circulation in Luxembourg City,
Luxembourg, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date
of such publication, any unclaimed balance of such money then remaining
will be repaid to NFLP. The Trustee may also adopt and employ, at the
expense of NFLP, any other reasonable means of notification of such
repayment.
Section 2.8. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders of each Series of Notes. If the Trustee is not the Registrar, NFLP
shall furnish to the Trustee at least seven Business Days before each
Distribution Date and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Noteholders of each Series of Notes.
Section 2.9. Transfer and Exchange.
(a) No Note may be resold, pledged or transferred (including,
without limitation, by pledge or hypothecation) unless such sale or
transfer is (1) to NFLP (upon redemption thereof or otherwise), (2) to any
person the transferor reasonably believes is a qualified institutional
buyer (as defined in Rule 144A) in a transaction meeting the requirements
of Rule 144A, (3) outside the United States to a person who is not a U.S.
Person (as such term is defined in Regulation S) in a transaction meeting
the requirements
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of Regulation S, (4) in a transaction complying with or exempt from the
registration requirements of the Securities Act. Subject to provisions of
clauses (i) through (vii) of this Section 2.9(a), when a request to
register a transfer or exchange of global Notes is presented to the
Registrar or co-registrar or, in the case of Definitive Notes, when
Definitive Notes of any particular Series are presented to the Registrar
or a co-registrar with a request to register a transfer or to exchange
them for an equal principal amount of Notes of other authorized
denominations of the same Series, the Registrar shall register the
transfer or make the exchange if its requirements for such transaction are
met; provided, however, that the Notes surrendered for transfer or
exchange (a) shall be duly endorsed or accompanied by a written instrument
of transfer in form satisfactory to NFLP and the Registrar duly executed
by the holder thereof or its attorney, duly authorized in writing and (b)
shall be transferred or exchanged in compliance with the following
provisions:
(i) Transfer of Restricted Global Notes.
(A) if such Note is being acquired for the account of such
Holder, without transfer, a certification from such Holder to that effect
(in substantially the form of Exhibit A-1 hereto); or
(B) if such Note is being transferred to a qualified
institutional buyer (as defined in Rule 144A) in accordance with Rule 144A
or pursuant to an exemption from registration in accordance with
Regulation S, a certification to that effect (in substantially the form of
Exhibit A-1 hereto); or
(C) if such Note is being transferred in reliance on another
exemption from the registration requirements of the Securities Act, a
certification to that effect (in substantially the form of Exhibit A-1
hereto) and an opinion of counsel in form and substance acceptable to NFLP
and to the Registrar to the effect that such transfer is in compliance
with the Securities Act.
(ii) Temporary Global Note to Permanent Global Note.
Interests in a Temporary Global Note as to which the Trustee has
received from Euroclear or Cedel, as the case may be, a
certificate substantially in the form of Exhibit B to the effect
that Euroclear or Cedel, as applicable, has received a
certificate substantially in the form of Exhibit C from the
holder of a beneficial interest in such Note, will be exchanged,
on and after the 40th day after the
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completion of the distribution of the relevant Series (the
"Exchange Date"), for interests in a Permanent Global Note. To
effect such exchange NFLP shall execute and the Trustee shall
authenticate and deliver to DTC, or its nominee, for credit to
the respective accounts of the holders of Notes, a duly executed
and authenticated Permanent Global Note, representing the
principal amount of interests in the Temporary Global Note
initially exchanged for interests in the Permanent Global Note.
The delivery to the Trustee by Euroclear or Cedel of the
certificate or certificates referred to above maybe relied upon
by NFLP and the Trustee as conclusive evidence that the
certificate or certificates referred to therein has or have been
delivered to Euroclear or Cedel pursuant to the terms of this
Indenture and the Temporary Global Note. Upon any exchange of
interests in a Temporary Global Note for interests in a Permanent
Global Note, the Trustee shall endorse the Temporary Global Note
to reflect the reduction in the principal amount represented
thereby by the amount so exchanged and shall endorse the
Permanent Global Note to reflect the corresponding increase in
the amount represented thereby. The Temporary Global Note or the
Permanent Global Note shall also be endorsed upon any
cancellation of principal amounts upon surrender of Notes
purchased by NFLP or any of its respective subsidiaries or
affiliates or upon any repayment of the principal amount
represented thereby or any payment of interest in respect of such
Notes.
(iii) Restricted Global Note to Temporary Global Note
Prior to the Exchange Date. If, prior to the Exchange Date, a
holder of a beneficial interest in a Restricted Global Note
registered in the name of DTC or its nominee wishes at any time
to exchange its interest in such Restricted Global Note for an
interest in a Temporary Global Note or to transfer its interest
in such Restricted Global Note to a Person who wishes to take
delivery thereof in the form of an interest in a Temporary Global
Note, such holder may, subject to the rules and procedures of
DTC, exchange or cause the exchange or transfer of such interest
for an equivalent beneficial interest in the Temporary Global
Note. Upon receipt by the Registrar of (1) instructions given in
accordance with DTC's procedures from an agent member directing
the Trustee as Registrar to credit or cause to be credited a
beneficial interest in the Temporary Global Note in an amount
equal to the beneficial interest in the Restricted Global Note to
be exchanged or transferred, (2) a written order given in
accordance
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with DTC's procedures containing information regarding the
Euroclear or Cedel account to be credited with such increase and
the name of such account, and (3) a certificate in the form of
Exhibit A-3 attached hereto given by the holder of such
beneficial interest stating that the exchange or transfer of such
interest has been made in compliance with the transfer
restrictions applicable to the Notes and pursuant to and in
accordance with Regulation S, the Registrar shall instruct DTC to
reduce the Restricted Global Note by the aggregate principal
amount of the beneficial interest in the Restricted Global Note
to be so exchanged or transferred and the Registrar, shall
instruct DTC, concurrently with such reduction, to increase the
principal amount of the Temporary Global Note by the aggregate
principal amount of the beneficial interest in the Restricted
Global Note to be so exchanged or transferred, and to credit or
cause to be credited to the account of the person specified in
such instructions (who shall be the agent member of Euroclear or
Cedel, or both, as the case may be) a beneficial interest in the
Temporary Global Note equal to the reduction in the principal
amount of the Restricted Global Note.
(iv) Restricted Global Note to Permanent Global Note
After the Exchange Date. If, after the Exchange Date, a holder of
a beneficial interest in the Restricted Global Note registered in
the name of DTC or its nominee wishes at any time to transfer its
interest in such Restricted Global Note to a Person who wishes to
take delivery thereof in the form of an interest in a Permanent
Global Note, such holder may, subject to the rules and procedures
of DTC, exchange or cause the exchange or transfer of such
interest for an equivalent beneficial interest in such Permanent
Global Note. Upon receipt by the Registrar of (1) instructions
given in accordance with DTC's procedures from an agent member
directing the Trustee to credit or cause to be credited a
beneficial interest in the applicable Permanent Global Note in an
amount equal to the beneficial interest in the applicable
Restricted Global Note to be exchanged or transferred, (2) a
written order given in accordance with DTC's procedures
containing information regarding the participant account with DTC
and, in the case of a transfer pursuant to and in accordance with
Regulation S, the Euroclear or Cedel account to be credited with
such increase and (3) a certificate in the form of Exhibit A-4
attached hereto given by the holder of such beneficial interest
stating that the exchange or
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transfer of such interest has been made in compliance with the
transfer restrictions applicable to the Notes (A) and pursuant to
and in accordance with Regulation S or (B) and that the Note
being exchanged or transferred is not a "restricted security" as
defined in Rule 144, the Trustee shall instruct DTC to reduce
such Restricted Global Note by the aggregate principal amount of
the beneficial interest in such Restricted Global Note to be so
exchanged or transferred and the Registrar shall instruct DTC,
concurrently with such reduction, to increase the principal
amount of the applicable Permanent Global Note by the aggregate
principal amount of the beneficial interest in such Restricted
Global Note to be so exchanged or transferred, and to credit or
cause to be credited to the account of the person specified in
such instructions a beneficial interest in the applicable
Permanent Global Note equal to the reduction in the principal
amount of such Restricted Global Note.
(v) Temporary Global Note to Restricted Global Note.
If a holder of a beneficial interest in a Temporary Global Note
registered in the name of DTC or its nominee wishes at any time
to exchange its interest in such Temporary Global Note for an
interest in a Restricted Global Note, or to transfer its interest
in such Temporary Global Note to a Person who wishes to
take delivery thereof in the form of an interest in a Restricted
Global Note, such holder may, subject to the rules and procedures
of Euroclear or Cedel and DTC, as the case may be, exchange or
cause the exchange or transfer of such interest for an equivalent
beneficial interest in a Restricted Global Note. Upon receipt by
the Registrar of (1) instructions from Euroclear or Cedel or DTC,
as the case may be, directing the Registrar to credit or cause to
be credited a beneficial interest in a Restricted Global Note
equal to the beneficial interest in a Temporary Global Note to be
exchanged or transferred, such instructions to contain
information regarding the agent member's account with DTC to be
credited with such increase, and, with respect to an exchange or
transfer of an interest in a Temporary Global Note after the
Exchange Date, information regarding the agent member's account
with DTC to be debited with such decrease, and (2) with respect
to an exchange or transfer of an interest in a Temporary Global
Note for an interest in a Restricted Global Note prior to the
Exchange Date, a certificate in the form of Exhibit A-5 attached
hereto given by the holder of such beneficial interest and
stating that the Person transferring such interest in such
Temporary
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Global Note reasonably believes that the Person acquiring such
interest in the applicable Restricted Global Note is a Qualified
Institutional Buyer (as defined in Rule 144A) and is obtaining
such beneficial interest in a transaction meeting the
requirements of Rule 144A, Euroclear or Cedel or the Registrar,
as the case may be, shall instruct DTC to reduce such Temporary
Global Note by the aggregate principal amount of the beneficial
interest in such Temporary Global Note to be exchanged or
transferred, and the Registrar shall instruct DTC, concurrently
with such reduction, to increase the principal amount of such
Restricted Global Note by the aggregate principal amount of the
beneficial interest in such Temporary Global Note to be so
exchanged or transferred, and to credit or cause to be credited
to the account of the Person specified in such instructions a
beneficial interest in such Restricted Global Note equal to the
reduction in the principal amount of such Temporary Global Note.
(vi) Permanent Global Note to Restricted Global Note.
Interests in a Permanent Global Note may not be transferred for
interests in a Restricted Global Note.
(vii) Other Transfers or Exchanges, In the event that
a Global Note is exchanged for Notes in definitive registered
form without interest coupons, pursuant to Section 2.18 hereof,
such Notes may be exchanged or transferred for one another only
in accordance with such procedures as are substantially
consistent with the provisions of clauses (i) through (vi) above
(including the certification requirements intended to insure that
such exchanges or transfers comply with Rule 144A or Regulation
S, as the case may be) and as may be from time to time adopted by
NFLP and the Trustee.
(b) The Registrar shall not register the exchange of
interests in a Global Note for a Definitive Note or the transfer of or
exchange of a Note during the period beginning on any Record Date and
ending on the next following Distribution Date.
(c) NFLP or the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any exchange or registration of transfer of
Notes. No service charge shall be made for any such transaction.
(d) If the Notes are listed on the Luxembourg Stock Exchange,
the Trustee or the Luxembourg Agent, as the case
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may be, shall send to NFLP upon any transfer or exchange of any Note
information reflected in the copy of the register for the Notes maintained
by the Registrar or the Luxembourg Agent, as the case may be.
(e) To permit registrations of transfers and exchanges, NFLP
shall execute and the Trustee shall authenticate Notes, subject to such
rules as the Trustee may reasonably require. No service charge to the
Noteholder shall be made for any registration of transfer or exchange
(except as otherwise expressly permitted herein), but the Registrar may
require payment of a sum sufficient to cover any transfer tax or similar
government charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges
pursuant to Section 2.13 hereof in which event the Registrar will be
responsible for the payment of any such taxes.)
(f) All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of NFLP, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Notes surrendered upon such registration of transfer or exchange.
(g) Prior to due presentment for registration of transfer of
any Note, the Trustee, any Agent and NFLP may deem and treat the Person in
whose name any Note is registered (as of the day of determination) as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Note and for all other purposes
whatsoever, whether or not such Note is overdue, and neither the
Trustee, any Agent nor NFLP shall be affected by notice to the contrary.
(h) Notwithstanding any other provision of this Section 2.9,
the typewritten Note or Notes representing Book-Entry Notes for any Series
may be transferred, in whole but not in part, only to another nominee of
the Clearing Agency for such Series, or to a successor Clearing Agency for
such Series selected or approved by NFLP or to a nominee of such successor
Clearing Agency, only if in accordance with this Section 2.9 and Section
2.18.
(i) By its acceptance of a Note, each Noteholder and Note
Owner shall be deemed to have represented and warranted that its purchase
and holding of the Note will not, throughout the term of its holding an
interest therein, constitute a non-exempt "prohibited transaction" under
Section 406(a) of ERISA or Section 4975 of the Code.
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Section 2.10. Legending of Notes.
Unless otherwise provided for in a Supplement and except as
permitted by the following sentence, in addition to any legend required by
Section 2.16, each Note shall bear a legend in substantially the following
form:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES OR "BLUE SKY"
LAWS, THE HOLDER HEREOF, BY PURCHASING THIS CLASS A-1 NOTE, AGREES FOR THE
BENEFIT OF NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP (THE "ISSUER")
THAT THIS CLASS A-1 NOTE IS BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A
VIEW TO DISTRIBUTION AND MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(1) TO THE ISSUER (UPON REDEMPTION THEREOF OR OTHERWISE), (2) TO A PERSON WHO
THE "TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (3) OUTSIDE THE UNITED STATES TO A NON U.S. PERSON
(AS DEFINED IN REGULATION S OF THE SECURITIES ACT) IN A TRANSACTION IN
COMPLIANCE WITH REGULATION S OF THE SECURITIES ACT, OR (4) IN A TRANSACTION
COMPLYING WITH OR EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE RESALE RESTRICTIONS SET FORTH ABOVE.
Upon any transfer, exchange or replacement of Notes bearing such legend, or if
a request is made to remove such legend on a Note, the Notes so issued shall
bear such legend, or such legend shall not be removed, as the case may be,
unless there is delivered to NFLP and the Trustee or the Luxembourg Agent, if
the Notes are listed on the Luxembourg Exchange, such satisfactory evidence,
which may include an opinion of counsel, as may be reasonably required by NFLP
that neither such legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of Rule
144A, Rule 144 or Regulation S. Upon provision of such satisfactory evidence,
the Trustee, at the direction of NFLP, shall authenticate and deliver a Note
that does not bear such legend.
Section 2.11. Replacement Notes.
(a) If (i) any mutilated Note is surrendered to the Trustee,
or the Trustee receives evidence to its satisfaction of the destruction,
loss or theft of any Note, and (ii) there is delivered to the Trustee such
security or indemnity as may be required by it to hold NFLP and the
Trustee harmless then, in the absence of notice to NFLP, the Registrar or
the Trustee that such Note has been acquired by a bona fide purchaser, and
provided that the requirements of Section 8-405 of the UCC (which
generally permit NFLP to
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impose reasonable requirements) are met, NFLP shall execute and upon its
request the Trustee shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Note, a replacement
Note; provided, however, that if any such destroyed, lost or stolen Note,
but not a mutilated Note, shall have become or within seven days shall be
due and payable, instead of issuing a replacement Note, NFLP may pay such
destroyed, lost or stolen Note when so due or payable without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, NFLP
and the Trustee shall be entitled to recover such replacement Note (or
such payment) from the Person to whom it was delivered or any Person
taking such replacement Note from such Person to whom such replacement
Note was delivered or any assignee of such Person, except a bona fide
purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense
incurred by NFLP or the Trustee in connection therewith.
(b) Upon the issuance of any replacement Note under this
Section, the Registrar, the Trustee or NFLP may require the payment by the
Holder of such Note of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trustee)
connected therewith.
(c) Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note shall be
entitled to all the benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
(d) The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect
to the replacement or payment of mutilated, destroyed, lost or stolen
Notes.
Section 2.12. Treasury Notes.
In determining whether the Noteholders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by NFLP or any Affiliate of NFLP shall be considered as though they are not
Outstanding, except that for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes of which the Trustee has received written notice of such
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ownership shall be so disregarded. Absent written notice to the Trustee of
such ownership, the Trustee shall not be deemed to have knowledge of the
identity of the individual beneficial owners of the Notes.
Section 2.13. Temporary Notes.
(a) Pending the preparation of Definitive Notes issued under
Section 2.18 hereof, NFLP may prepare and the Trustee, upon receipt of a
Company Order, shall authenticate and deliver temporary Notes of such
Series. Temporary Notes shall be substantially in the form of Definitive
Notes of like Series but may have variations that are not inconsistent
with the terms of this Indenture as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.
(b) If temporary Notes are issued pursuant to Section 2.13(a)
above, NFLP will cause Definitive Notes to be prepared without
unreasonable delay. After the preparation of Definitive Notes, the
temporary Notes shall be exchangeable for Definitive Notes upon surrender
of the temporary Notes at the office or agency of NFLP to be maintained as
provided in Section 8.2, without charge to the Noteholder. Upon surrender
for cancellation of any one or more temporary Notes, NFLP shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of Definitive Notes of authorized denominations. Until
so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as Definitive Notes.
Section 2.14. Cancellation.
NFLP may at any time deliver to the Trustee for cancellation any
Notes previously authenticated and delivered hereunder which NFLP may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
cancelled by the Trustee. The Registrar and Paying Agent shall forward to the
Trustee any Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation. NFLP may not issue
new Notes to replace Notes that it has redeemed or paid or that have been
delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be disposed of in accordance with the Trustee's standard
disposition procedures unless by a written order, signed by two Authorized
Officers, NFLP shall direct that cancelled Notes be returned to it.
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Section 2.15. Principal and Interest.
(a) The principal of each Series of Notes shall be payable at
the times and in the amount set forth in the related Supplement in
accordance with Section 6.1.
(b) Each Series of Notes shall accrue interest as provided in
the related Supplement and such interest shall be payable on each
Distribution Date for such Series in accordance with Section 6.1 and the
related Supplement.
(c) Except as provided in the following sentence, the person
in whose name any Note is registered at the close of business on any
Record Date with respect to a Distribution Date for such Note shall be
entitled to receive the principal and interest payable on such
Distribution Date notwithstanding the cancellation of such Note upon any
registration of transfer, exchange or substitution of such Note subsequent
to such Record Date. Any interest payable at maturity shall be paid to
the Person to whom the principal of such Note is payable.
(d) If NFLP defaults in the payment of interest on the Notes
of any Series, such interest, to the extent paid on any date that is more
than five (5) Business Days after the applicable due date, shall at the
option of NFLP, cease to be payable to the persons who were Noteholders of
such series at the applicable Record Date and, in such case, NFLP shall
pay the defaulted interest in any lawful manner, plus, to the extent
lawful, interest payable on the defaulted interest, to the persons who are
Noteholders of such Series on a subsequent special record date which date
shall be at least five (5) Business Days prior to the payment date, at the
rate provided in this Indenture and in the Notes of such Series. NFLP
shall fix or cause to be fixed each such special record date and payment
date, and at least fifteen (15) days before the special record date, NFLP
(or, if so requested by NFLP, the Trustee in the name of and at the
expense of NFLP) shall mail to Noteholders of such Series a notice that
states the special record date, the related payment date and the amount of
such interest to be paid.
Section 2.16. Book-Entry Notes.
(a) For each Series of Notes to be issued in registered form,
NFLP shall duly execute the Notes, and the Trustee shall, in accordance
with Section 2.4 hereof, authenticate and deliver initially one or more
Global Notes that (a) shall be registered on the Note Register in the name
of DTC or DTC's nominee, and (b) shall bear legends substantially to the
following effect:
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UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OR
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO NFLP OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. ("CEDE") OR SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE, HAS AN INTEREST HEREIN.
So long as DTC or its nominee is the registered owner or holder
of a Global Note, DTC or its nominee, as the case may be, will be considered
the sole owner or holder of the Notes represented by such Global Note for
purposes of this Indenture, and such Notes. Members of, or participants in,
DTC shall have no rights under this Indenture with respect to any Global Note
held on their behalf by DTC, and DTC may be treated by NFLP, the Trustee, the
Registrar, any Paying Agent and any agent of such entities as the absolute
owner of such Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent NFLP, the Trustee, the Registrar, any
Paying Agent and any agent of such entities from giving effect to any written
certification, proxy or other authorization furnished by DTC or impair, as
between DTC and its agent members, the operation of customary practices
governing the exercise of the rights of a holder of any Note.
(b) The provisions of the "Operating Procedures of the
Euroclear System" and the "Terms and Conditions Governing Use of
Euroclear" and the "Management Regulations" and "Instructions to
Participants" of Cedel, respectively, shall be applicable to the Global
Note insofar as interests in a Global Note are held by the agent members
of Euroclear or Cedel (which shall only occur in the case of the Temporary
Global Note and the Permanent Global Note). Account holders or
participants in Euroclear and Cedel shall have no rights under this
Indenture with respect to such Global Note, and the registered holder may
be treated by NFLP, the Trustee, the Registrar, the Paying Agent and any
agent of NFLP or any such entity as the owner of such Global Note for all
purposes whatsoever.
(c) Title to the Notes shall pass only by registration in the
Note Register maintained by the Registrar pursuant to Section 2.6.
(d) Any typewritten Note or Notes representing Book-Entry
Notes shall provide that they represent the aggregate or a specified
amount of Outstanding Notes from time to time
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endorsed thereon and may also provide that the aggregate amount of
Outstanding Notes represented thereby may from time to time be reduced to
reflect exchanges. Any endorsement of a typewritten Note or Notes
representing Book-Entry Notes to reflect the amount, or any increase or
decrease in the amount, or changes in the rights of Note Owners
represented thereby, shall be made in such manner and by such Person or
Persons as shall be specified therein or in the Company Order to be
delivered to the Trustee pursuant to Section 2.4, Subject to the
provisions of Section 2.5, the Trustee shall deliver and redeliver any
typewritten Note or Notes representing Book-Entry Notes in the manner and
upon instructions given by the Person or Persons specified therein or in
the applicable Company Order. Any instructions by NFLP with respect to
endorsement or delivery or redelivery of a typewritten Note or Notes
representing the Book-Entry Notes shall be in writing but need not comply
with Section 13.3 hereof and need not be accompanied by an Opinion of
Counsel.
(e) Unless and until definitive, fully registered Notes
("Definitive Notes") have been issued to Note Owners pursuant to Section
2.18:
(i) the provisions of this Section 2.16 shall be in
full force and effect;
(ii) the Paying Agent, the Registrar and the Trustee
may deal with the Clearing Agency and the Clearing Agency
Participants for all purposes of this Indenture (including the
making of payments on the Notes and the giving of instructions or
directions hereunder) as the authorized representatives of the
Note Owners;
(iii) to the extent that the provisions of this
Section 2.16 conflict with any other provisions of this
Indenture, the provisions of this Section 2.16 shall control;
(iv) whenever this Indenture requires or permits
actions to be taken based upon instructions or directions of
Holders of Notes evidencing a specified percentage of the
Outstanding principal amount of the Notes, the applicable
Clearing Agency shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect
from Note Owners and/or their related Clearing Agency
Participants owning or representing, respectively, such required
percentage of the beneficial
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interest in the Notes and has delivered such instructions to the
Trustee; and
(v) the rights of Note Owners shall be exercised only through
the applicable Clearing Agency and their related Clearing Agency
Participants and shall be limited to those established by law and
agreements between such Note Owners and their related Clearing Agency
and/or the Clearing Agency Participants. Unless and until Definitive
Notes are issued pursuant to Section 2.18, the applicable Clearing
Agencies will make book-entry transfers among their related Clearing
Agency Participants and receive and transmit payments of principal and
interest on the Notes to such Clearing Agency Participants.
Section 2.17. Notices to Clearing Agency.
Whenever notice or other communication to the Noteholders is
required under this Indenture, unless and until Definitive Notes shall have
been issued to Note Owners pursuant to Section 2.18, the Trustee, the Servicer
and NFLP shall give all such notices and communications specified herein to be
given to Noteholders to the applicable Clearing Agency for further distribution
to the Note Owners in accordance with the customary practices and procedures of
such Clearing Agency and Clearing Agency Participants.
Section 2.18. Definitive Notes.
(a) Conditions for Issuance. Interests in a Restricted
Global Note or Permanent Global Note deposited with DTC or a custodian of
DTC pursuant to Section 2.5 shall be transferred to the beneficial owners
thereof in the form of definitive registered Notes only if such transfer
complies with Section 2.9 and (x) DTC notifies NFLP that it is unwilling
or unable to continue as depositary for such Restricted Global Note or
Permanent Global Note or at any time ceases to be a "clearing agency"
registered under the Exchange Act, and, in either case, a successor
depositary so registered is not appointed by NFLP within 90 days of such
notice or (y) NFLP determines that the Restricted Global Note or Permanent
Global Notes with respect to the relevant Series of Notes shall be
exchangeable for definitive registered Notes, in which case Definitive
Notes shall be issuable or exchangeable only in respect of such Global
Notes or the category of Definitive Notes represented thereby or (z) any
Note Owner or purchaser or transferee of a beneficial interest in a
Restricted Global Note or a Permanent Global Note requests the same in the
form of a
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Definitive Note and NFLP, in its sole discretion, consents to such request
(in which case a Definitive Note shall be issuable or transferable only to
such Noteholder, purchaser or transferee), NFLP will deliver Notes in
definitive registered form, without interest coupons, in exchange for the
Restricted Global Notes or the Permanent Global Notes or, in the case of
an exchange or transfer described in clause (z) above, in exchange for the
applicable beneficial interest in one or more Global Notes. Definitive
registered Notes shall be issued without coupons in amounts of
U.S.$1,000,000 and integral multiples of U.S.$1,000, subject to compliance
with all applicable legal and regulatory requirements.
(b) Issuance. If interests in any Restricted Global Note or
Permanent Global Note, as the case may be, are to be transferred to the
beneficial owners thereof in the form of Definitive Notes pursuant to this
Section 2.18, such Restricted Global Note or Permanent Global Note, as the
case may be, shall be surrendered by DTC or its custodian or agent to the
office or agency of the Registrar located in the Borough of Manhattan, the
City of New York, or if the Notes are listed on the Luxembourg Stock
Exchange, to the applicable Luxembourg Agent in Luxembourg, to be so
transferred, without charge. If interests in any Permanent Global Note
are to be transferred to the beneficial owners thereof in the form of
Definitive Notes pursuant to this Section 2.18, such Permanent Global Note
shall be surrendered by DTC or its custodian or agent to the Registrar or
its agent located in London to be so transferred, without charge. The
Trustee shall authenticate and deliver, upon such transfer of interests in
such Restricted Global Note or Permanent Global Note, an equal aggregate
principal amount of Definitive Notes of authorized denominations;
provided, that in the case of an interest in a Restricted Global Note, no
such interest will be transferred except upon delivery of a certificate
substantially in the form of Exhibit A-1 hereto. The Definitive Notes
transferred pursuant to this Section 2.18 shall be executed, authenticated
and delivered only in the denominations specified in paragraph (a) above
or in the related Supplement, and Definitive Notes shall be registered in
such names as DTC shall direct in writing. The Registrar shall have at
least 30 days from the date of its receipt of Definitive Notes and
registration information to authenticate and deliver such Definitive
Notes. Any Definitive Note delivered in exchange for an interest in a
Restricted Global Note or Permanent Global Note shall, except as otherwise
provided by Section 2.10, bear, and be subject to, the legend regarding
transfer restrictions set forth in Section 2.10. NFLP will promptly make
available to
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the Registrar a reasonable supply of Definitive Notes. NFLP shall bear
the costs and expenses of printing or preparing any Definitive Notes.
(c) Transfer of Definitive Notes. Subject to the terms of
this Indenture, the Holder of any Definitive Note may transfer the same in
whole or in part, in an amount equivalent to an authorized denomination,
by surrendering at the office maintained by the Registrar for such purpose
in the Borough of Manhattan, The City of New York, such Note with the form
of transfer endorsed on it duly completed and executed by, or accompanied
by a written instrument of transfer in form satisfactory to NFLP and the
Registrar by, the holder thereof and accompanied by a certificate
substantially in the form of Exhibit A-1 hereto. In exchange for any
Definitive Note properly presented for transfer, NFLP shall execute and
the Trustee shall promptly authenticate and deliver or cause to be
authenticated and delivered in compliance with applicable law, to the
transferee at such office, or send by mail (at the risk of the
transferee) to such address as the transferee may request, Definitive
Notes for the same aggregate principal amount as was transferred. In the
case of the transfer of any Definitive Note in part, NFLP shall execute
and the Trustee shall also promptly authenticate and deliver or cause to
be authenticated and delivered to the transferor at such office, or send
by mail (at the risk of the transferor) to such address as the transferor
may request, Definitive Notes for the aggregate principal amount that was
not transferred. No transfer of any Definitive Note shall be made unless
the request for such transfer is made by the registered Holder at such
office.
(d) Neither NFLP nor the Trustee shall be liable for any
delay in delivery of transfer instructions and may conclusively rely on,
and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Notes for such Series, the Trustee shall recognize
the Holders of the Definitive Notes as Noteholders of such Series.
Section 2.19. Tax Treatment.
NFLP has structured this Indenture and the Notes have been (or
will be) issued with the intention that the Notes will qualify under applicable
tax law as indebtedness of NFLP and any entity acquiring any direct or indirect
interest in any Note by acceptance of its Notes (or, in the case of a Note
Owner, by virtue of such Note Owner's acquisition of a beneficial interest
therein) agrees to treat the Notes (or beneficial interests therein) for
purposes of Federal, state and local and income or franchise taxes and any
other tax imposed on or measured by
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income, as indebtedness of NFLP. Each Noteholder agrees that it will cause any
Note Owner acquiring an interest in a Note through it to comply with this
Indenture as to treatment as indebtedness for such tax purposes.
Section 2.20. Certain Purchaser Representations and Certifications.
(a) Prior to any sale or transfer of the Notes described in clause (2) of
Section 2.9(a) above, each prospective purchaser of the Notes shall be deemed
to have represented and agreed as follows:
(1) It is a qualified institutional buyer as defined in Rule 144A,
it is aware that any sale of the Notes to it will be made in reliance on
Rule 144A and it is acquiring the Notes for its own institutional account
of for the account of a qualified institutional buyer.
(2) The purchaser understands that the Notes are being offered in
a transaction not involving any public offering in the United States
within the meaning of the Securities Act, that the Notes have not been
registered under the Securities Act and that (A) such Notes may be offered,
resold, pledged or otherwise transferred only (i) to the Issuer, (ii) to a
person who the seller reasonably believes is a qualified institutional
buyer (as defined in Rule 144A) in a transaction meeting the requirements
of Rule 144A, (iii) outside the United States to a person other than a U.S.
Person (as defined in Regulation S) in a transaction meeting the
requirements of Regulation S under the Securities Act, (iv) in a
transaction exempt from the registration requirements of the Securities Act
and the applicable securities laws of any State of the United States and
any other jurisdiction or (v) pursuant to an effective registration
statement under the Securities Act, in each such case in accordance with the
Indenture and any applicable securities laws of any State of the United
States and (B) the purchaser will, and each subsequent holder of a Note is
required to, notify any subsequent purchaser of a Note of the resale
restrictions set forth in (A) above.
(b) Prior to (a) (i) any direct placement of the Notes from the
Issuer or (ii) any placement by a placement agent selected by the Issuer, to
an institutional accredited investor or (b) any sale or transfer of the Notes
described in clause (4) of Section 2.9(a) above, each such prospective
purchaser of the Notes shall represent and agree as follows:
(i) to the restrictions on transfer set forth in clause (a) (2)
above, (ii) that it is (w) a qualified
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institutional buyer within the meaning of Rule 144A or an accredited
investor as defined in Rule 501(a)(1), (2),(3) or (7) under the Securities
Act; (x) acquiring Notes having a minimum purchase price of not less than
$250,000 for its own account or for any separate account for which it is
acting; (y) acquiring such Notes for its own institutional account or the
account of an accredited investor as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act or a qualified institutional buyer within the
meaning of Rule 144A; and (z) not acquiring the Notes with a view to
distribution thereof or with any present intention of offering or selling
any of the Notes in a transaction that would violate the Securities Act or
the securities laws of any State of the United States or any other
applicable jurisdiction, (iii) that the registrar and transfer agent for
the Notes will not be required to accept for registration of transfer any
Notes acquired by them, except upon presentation of evidence satisfactory
to the transfer agent that the restrictions on transfer set forth in clause
(a) (2) above have been complied with and (iv) to execute and deliver to
the Issuer and the Trustee a Purchaser Representation Letter in the form of
Exhibit D hereto.
(c) In addition, NFLP shall require such prospective purchaser to
provide additional information or certifications, as shall be reasonably
requested by the Trustee, the Issuer or the Initial Purchasers, to support
the truth and accuracy of the foregoing acknowledgements, representations and
agreements, it being understood that such additional information is not
intended to create additional restrictions on the transfer of the Notes. NFLP,
the Initial Purchasers and the Trustee are not obligated, in their individual
capacities or as a group, to register the Notes under the Securities Act or any
state securities laws.
ARTICLE 3.
SECURITY
Section 3.1. Grant of Security Interest.
(a) To secure the NFLP Obligations, NFLP hereby pledges, assigns,
conveys, delivers, transfers and sets over to the Trustee, for the benefit
of the Noteholders and the Note Owners (the Noteholders and the Note
Owners being referred to as the "Secured Parties"), and hereby grants to
the Trustee, for the benefit of the Secured Parties, a security interest
in all of the right, title and interest in and to all of the following
assets, property and interests in property of NFLP whether now owned or
hereafter acquired or created (all of such right, title and interest,
together
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with the portion of the Master Collateral with respect to which the Trustee is
named as a Beneficiary, being referred to as the "Collateral"):
(i) all right, title and interest of NFLP in, to and under the
NFLP Agreements, including, without limitation, all rights of NFLP arising
thereunder in respect of the National Master Collateral, all monies due and
to become due to NFLP from the Lessee or the Servicer under or in
connection with NFLP Agreements, whether payable as rent, guaranty
payments, supplemental payments, fees, expenses, costs, indemnities,
insurance recoveries, damages for the breach of any of NFLP Agreements or
otherwise, and all rights, remedies, powers, privileges and claims of NFLP
against any other party under or with respect to NFLP Agreements (whether
arising pursuant to the terms of such NFLP Agreements or otherwise
available to NFLP at law or in equity), the right to enforce any of the
NFLP Agreements as provided herein and to give or withhold any and all
consents, requests, notices, directions, approvals, extensions or waivers
under or with respect to NFLP Agreements or the obligations of any party
thereunder; and
(ii) (a) the Collection Account (including any accounts designated
in a Supplement or otherwise as a subaccount thereof), (b) all funds on
deposit therein from time to time, (c) all certificates and instruments, if
any, representing or evidencing any or all of the Collection Account or any
subaccount thereof or the funds on deposit therein from time to time, and
(d) all Permitted Investments made at any time and from time to time with
the moneys in the Collection Account or any subaccount thereof (including
income thereon); and
(iii) all right, title and interest of NFLP in, to and under the
Master Collateral Agency Agreement with respect to the portion of the Master
Collateral for which NFLP is designated as a Financing Source and the
Trustee is designated as a Beneficiary thereunder; and
(iv) all additional property that may from time to time hereafter
(pursuant to the terms of any Supplement or otherwise) be subjected to the
grant and pledge hereof by NFLP or by anyone on its behalf; and
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(v) all proceeds, products, rents or profits of any and
all of the foregoing including, without limitation, payments under
insurance (whether or not the Master Collateral Agent or the Trustee
is the loss payee thereof) or Vehicle warranties and cash.
(b) To secure the NFLP Obligations, NFLP hereby confirms the
grant, pledge, hypothecation, assignment, conveyance, delivery and
transfer to the Master Collateral Agent under the Master Collateral Agency
Agreement for the benefit of the Trustee of a continuing first priority
perfected Lien on all right, title and interest of NFLP in, to and under
all the NFLP Master Collateral.
(c) Notwithstanding anything to the contrary contained in (a) and
(b) above, the Collateral shall not include the Retained Distribution
Account, any funds on deposit therein from time to time, any certificates or
instruments, if any, representing or evidencing any or all of the Retained
Distribution Account or the funds on deposit therein from time to time, or
any Permitted Investments made at any time and from time to time with the
funds on deposit in the Retained Distribution Account (including the income
thereon); provided, further, the Collateral shall not include any right,
title or interest in the Fleet Finance Agreement or the NFLP Fleet Finance
Agreement and payments thereunder.
(d) The foregoing grant is made in trust to secure the NFLP
Obligations and to secure compliance with the provisions of this Indenture
and any Supplement, all as provided in this Indenture. The Trustee, as
Trustee on behalf of the Secured Parties, acknowledges such grant, accepts
the trusts under this Indenture in accordance with the provisions of this
Indenture and agrees to perform its duties required in this Indenture to
the best of its abilities to the end that the interests of the Noteholders
may be adequately and effectively protected. The Collateral shall secure
the Notes equally and ratably without prejudice, priority (except, with
respect to any Series of Notes, as otherwise stated in the applicable
Supplement) or distinction.
Section 3.2. Certain Rights and Obligations of NFLP Unaffected.
(a) Notwithstanding the assignment and security interest so
granted to the Trustee, NFLP shall nevertheless be permitted, subject to
the Trustee's right to revoke such permission in the event of an
Amortization Event and subject
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to the provisions of Section 3.3 hereof, to give all consents, requests,
notices, directions, approvals, extensions or waivers, if any, which are
required to be given in the normal course of business (which does not include
waivers of defaults under any of the NFLP Agreements or any of the Manufacturer
Programs or revocation of powers of attorney to the Lessee) to the Lessee by
NFLP and by National to the Manufacturers by the specific terms of the Lease
and each Manufacturer Program, respectively.
(b) The grant of a security interest in the Collateral to the
Trustee shall not (i) relieve NFLP from the performance of any term, covenant,
condition or agreement on NFLP's part to be performed or observed under or in
connection with any of the NFLP Agreements or any of the Manufacturer Programs
or from any liability to National or the Manufacturers, as the case may be,
subject to the limitations contained in Section 13.18, or (ii) impose any
obligation on the Trustee or any of the Secured Parties to perform or observe
any such term, covenant, condition or agreement on NFLP's part to be so
performed or observed or impose any liability on the Trustee or any of the
Secured Parties for any act or omission on the part of NFLP or from any breach
of any representation or warranty on the part of NFLP. NFLP hereby agrees to
indemnify and hold harmless the Trustee, each Noteholder and each Note Owner
(including, in each case, their respective directors, officers, employees and
agents) from and against any and all losses, liabilities (including liabilities
for penalties), claims, demands, actions, suits, judgments, out-of-pocket costs
and expenses arising out of or resulting from the security interest granted
hereby or by any Assignment Agreement, whether arising by virtue of any act or
omission on the part of NFLP or otherwise, including, without limitation,
out-of-pocket costs, expenses, and disbursements (including reasonable
attorneys' fees and expenses) incurred by the Trustee, any of the Noteholders
and any of the Note Owners in enforcing this Indenture or preserving any of
their respective rights to, or realizing upon, any of the Collateral; provided,
however, the foregoing indemnification shall not extend to any action by the
Trustee, a Noteholder or a Note Owner which constitutes negligence or willful
misconduct by the Trustee, such Noteholder, such Note Owner or any other
Indemnified Person hereunder. The indemnification provided for in this Section
3.2 shall survive the removal of, or a resignation by, such Person as Trustee
as well as the termination of this Indenture, any Supplement or any Assignment
Agreement.
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Section 3.3. Performance of Agreement.
Upon the occurrence of a Limited Liquidation Event of Default or
Liquidation Event of Default, promptly following a request from the Trustee or
the Master Collateral Agent to do so and at NFLP's expense, NFLP agrees to take
all such lawful action as permitted under this Indenture as the Trustee or the
Master Collateral Agent may request to compel or secure the performance and
observance by: (i) National or by any other party to any of the NFLP Agreements
or any other Related Document of its obligations to NFLP, and (ii) a
Manufacturer under a Manufacturer Program of its obligations to the Lessor or
the Lessee, or the Master Collateral Agent, as assignee, in each case in
accordance with the applicable terms thereof, and to exercise any and all
rights, remedies, powers and privileges lawfully available to NFLP to the
extent and in the manner directed by the Trustee or the Master Collateral
Agent, as applicable, including, without limitation, the transmission of
notices of default and the institution of legal or administrative actions or
proceedings to compel or secure performance by National (or such party to any
NFLP Agreement or any other Related Document) or by a Manufacturer under a
Manufacturer Program, of their respective obligations thereunder. If NFLP or
National shall have failed, within 30 days of receiving the direction of the
Trustee or the Master Collateral Agent, as applicable, to take commercially
reasonable action to accomplish such directions of the Trustee or the Master
Collateral Agent, as applicable, the Trustee or the Master Collateral Agent, as
applicable, may take such previously directed action and any related action
permitted under this Indenture which the Trustee or the Master Collateral
Agent, as applicable, thereafter determines is appropriate, without the need
under this provision or any other provision under the Indenture to direct NFLP
to take such action) on behalf of NFLP and the Noteholders.
Section 3.4. Release of Lien on Vehicles.
The Lien of the Trustee on the Vehicles shall automatically be deemed
to be released concurrently with any release thereof as provided in the Lease,
or Sections 2.3 or 2.7 of the Master Collateral Agency Agreement.
Section 3.5. Stamp, Other Similar Taxes and Filing Fees.
NFLP shall indemnify and hold harmless the Trustee, the Master
Collateral Agent and each Noteholder from any present or future claim for
liability for any stamp or other similar tax and any penalties or interest with
respect thereto, that may be assessed, levied or collected by any jurisdiction
in connection with this Indenture or any Collateral. NFLP shall pay, or
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reimburse the Trustee for, any and all amounts in respect Of, all search,
filing, recording and registration fees, taxes, excise taxes and other similar
imposts that may be payable or determined to be payable in respect of the
execution, delivery, performance and/or enforcement of this Indenture.
ARTICLE 4.
REPORTS
Section 4.1. Agreement of Servicer to Provide Reports.
(a) Pursuant to the Lease and the Master Collateral Agency
Agreement, the Servicer has agreed to provide certain reports specified
therein. This Noteholders by their acceptance of the Notes consent to the
provision of such reports by the Servicer in lieu of the Trustee or NFLP.
(b) The Trustee and the Paying Agent shall promptly follow the
instructions of the Servicer given pursuant to the Lease to withdraw funds from
the Collection Account and make drawings under any Enhancement, as provided in
the applicable Supplement.
ARTICLE 5.
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 5.1. Collection Account.
(a) Establishment of Collection Account. The Trustee shall
establish and maintain in the name of the Trustee for the benefit of
the Secured Parties, or cause to be established and maintained, an account
(the "Collection Account"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Secured
Parties. The Collection Account shall be maintained (i) with a Qualified
Institution, or (ii) as a segregated trust account with the corporate
trust department of a depository institution or trust company having
corporate trust powers and acting as trustee for funds deposited in the
Collection Account. If the Collection Account is not maintained in
accordance with the previous sentence, then within 10 Business Days after
obtaining knowledge of such fact, the Trustee shall establish a new
Collection Account which complies with such sentence and transfer into the
new Collection Account all cash and investments from the nonqualifying
Collection Account. Initially, the Collection Account will be established
with the Trustee.
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(b) Establishment of Retained Distribution Account. The Trustee
shall establish and maintain in the name of the Retained
Interestholder, for the benefit of the Retained Interestholder, or cause
to be established and maintained, an account (the "Retained Distribution
Account") bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Retained Interestholder.
Unless otherwise instructed by NFLP, the Retained Distribution Account
shall be maintained (i) with a Qualified Institution, or (ii) as a
segregated trust account with the corporate trust department of a
depository institution or trust company having corporate trust powers and
acting as trustee for funds deposited in the Retained Distribution
Account. If the Retained Distribution Account is not maintained in
accordance with the previous sentence, then within ten (10) Business Days
after obtaining knowledge of such fact, the Trustee shall establish a new
Retained Distribution Account which complies with such sentence and
transfer into the new Retained Distribution Account all cash and
investments from the non-qualifying Retained Distribution Account.
Initially, the Retained Distribution Account will be established with the
Trustee.
(c) Establishment of Additional Accounts. To the extent specified
in the Supplement with respect to any Series of Notes, the Trustee may
establish and maintain one or more additional accounts and/or
administrative subaccounts to facilitate the proper allocation of
Collections in accordance with the terms of such Supplement.
(d) Administration of the Collection Account. NFLP shall instruct
the institution maintaining the Collection Account to invest funds on
deposit in the Collection Account (including any administrative subaccount
thereof) at all times in Permitted Investments selected by NFLP; provided,
however, that any such investment shall mature not later than the Business
Day prior to the Distribution Date following the date on which such funds
were so invested, except for any Permitted Investment held in the
Collection Account, which is in an investment made by the Paying Agent
institution, in which event such investment may mature on such
Distribution Date and such funds shall be available for withdrawal on or
prior to such Distribution Date provided, further, that any such
investment described in clause (iv) of the definition of "Permitted
Investments" need not mature on or prior to such Distribution Date but
need only permit withdrawals therefrom not less frequently than on each
Distribution Date. The Trustee shall hold, for the benefit of the Secured
Parties, possession of any negotiable instruments or securities evidencing
the Permitted Investments until their maturity.
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(e) Earnings from Collection Account. Subject to the restrictions
set forth above, NFLP shall have the authority to instruct the Trustee (which
instructions shall be in writing) with respect to (i) the investment of funds
on deposit in the Collection Account and (ii) liquidation of such investments.
All interest and earnings (net of losses and investment expenses) paid on funds
on deposit in the Collection Account shall be deemed to be available and on
deposit for distribution.
(f) Earnings from Retained Distribution Account. Subject to the
restrictions set forth above, the Servicer shall have the authority to
instruct the Trustee with respect to the investment of funds on deposit in the
Retained Distribution Account. All interest and earnings (net of losses and
investment expenses) on funds on deposit in the Retained Distribution Account
shall be deemed to be available and on deposit for distribution to the Retained
Interestholder.
Section 5.2. Collections and Allocations.
(a) Collections in General. Until this Indenture is terminated
pursuant to Section 11.1, NFLP shall, and the Trustee is authorized to, cause
all Collections due and to become due to NFLP or the Trustee, as the case may
be, (i) under or in connection with the Master Collateral for which NFLP is
designated as a Financing Source and the Trustee is designated as a Beneficiary
under the Master Collateral Agency Agreement (including, without limitation,
amounts due from Manufacturers under their Manufacturer Programs with respect
to Vehicles other than Exchanged Vehicles but excluding amounts representing
the proceeds from sales of Vehicles by the Lessee or the Lessor to third
parties other than the Manufacturers, warranty payments and insurance proceeds)
to be paid directly to the Master Collateral Agent for deposit into the Master
Collateral Account; (ii) with respect to amounts representing the proceeds from
sales of Vehicles (other than Exchanged Vehicles) by the Lessee or the Lessor
to third parties other than the Manufacturers (including proceeds from sales of
Vehicles at Auction which are due from third parties other than the
Manufacturer) to be deposited by the Lessee or the Lessor, as applicable,
within two Business Days of its receipt thereof into the Master Collateral
Account; (iii) under the Lease to be paid directly to the Trustee for deposit
into the Collection Account; and (iv) from any other source (other than
Collections excluded from deposit into the Master Collateral Account under
clause (i) above) to be paid either (a) directly into the Collection Account at
such times as such amounts are due or (b) by the Lessee or the Lessor, as
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applicable, into the Collection Account within two Business Days of its receipt
thereof (and, in each case, NFLP represents to the Trustee for the benefit of
the Secured Parties that it has instructed the Lessee, the Servicer, the
Manufacturers, and that it will instruct any other source of Collections, as
applicable, to so remit such amounts). Upon the occurrence and during the
continuance of an Amortization Event or Potential Amortization Event, insurance
proceeds, (with respect to Vehicles other than Exchanged Vehicles) will be
deposited in the Master Collateral Account within two Business Days of their
receipt by the Lessee, the Lessor or the Servicer, as applicable; provided,
however, upon the delivery of an Officer's Certificate of the Servicer to the
Trustee (upon which it may conclusively rely) certifying (i) that a Vehicle for
which insurance proceeds have been received in the Collection Account has been
repaired and (ii) as to the dollar amount of such repairs, the Trustee shall
release to National insurance proceeds in such dollar amount. NFLP agrees that
if any such monies, instruments, cash or other proceeds shall be received by
NFLP in an account other than the Master Collateral Account or the Collection
Account or in any other manner, such monies, instruments, cash and other
proceeds will not be commingled by NFLP with any of its other funds or
property, if any, but will be held separate and apart therefrom and shall be
held in trust by NFLP for, and immediately paid over to, but in any event
within two Business Days from receipt, the Trustee or the Master Collateral
Agent, as applicable, with any necessary endorsement. All amounts on deposit
in the Master Collateral Account shall be allocated and distributed to the
Trustee and other Beneficiaries as provided in the Master Collateral Agency
Agreement. All monies, instruments, cash and other proceeds received by the
Trustee pursuant to this Indenture (including amounts received from the Master
Collateral Agent) shall be immediately deposited in the Collection Account and
shall be applied as provided in this Article 5. Notwithstanding the foregoing,
to the extent that the aggregate amount of proceeds received in the Collection
Account with respect to any Financed Vehicle exceeds the Termination Value of
such Vehicle, the Trustee shall, upon the written direction (on which it may
conclusively rely) of NFLP delivered by 12:00 noon (New York City time) on a
Business Day, release such excess to the Lessee on such Business Day, or, if
such written direction is received by the Trustee after 12:00 noon (New York
City time) on a Business Day, on the next succeeding Business Day.
(b) Disqualification of Institution Maintaining Collection
Account. In the event the Qualified Institution maintaining the Collection
Account ceases to be such, then,
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upon the occurrence of such event and the establishment of a new Collection
Account with a Qualified Institution or qualified corporate trust department
pursuant to Section 5.1(a) and thereafter, the Servicer, the Lessee and NFLP
shall deposit or cause to be deposited all Collections as set forth in Section
5.2(a) into the new Collection Account, and in no such event shall deposit or
cause to be deposited any Collections thereafter into any account established,
held or maintained with the institution formerly maintaining the Collection
Account (unless it later becomes a Qualified Institution or qualified corporate
trust department). NFLP will instruct the Lessee and the Servicer as to the
foregoing requirements of this subsection (b).
(c) Right of Servicer to Deduct Fees. Notwithstanding anything in
this Indenture to the contrary but subject to any limitations set forth in the
applicable Supplement, as long as the Servicer is National or an Affiliate of
National and the Retained Interest Amount equals or exceeds zero, the Servicer
(i) may make or cause to be made deposits to the Collection Account net of any
amounts which are allocable to the Retained Distribution Account and represent
amounts due and owing to the Servicer or National, and (ii) need not deposit or
cause to be deposited any amounts to be paid to the Servicer or National
pursuant to this Section 5.2 and such amounts will be deemed paid to National
or the Servicer, as the case may be, pursuant to this Section 5.2.
(d) Sharing Collections. To the extent that Principal Collections
that are allocated to any Series on a Distribution Date are not needed to make
payments to Noteholders of such Series or required to be deposited in a
Distribution Account for such Series on such Distribution Date, such Principal
Collections may at the direction of the Servicer, be applied to cover principal
payments due to or for the benefit of Noteholders of another Series. Any such
reallocation will not result in a reduction of the Principal Balance or
Invested Amount of the Series to which such Principal Collections were
initially allocated.
(e) Unallocated Principal Collections. If, after giving effect to
Section 5.2(d), Principal Collections allocated to any Series on any
Distribution Date are in excess of the amount required to be paid in respect of
such Series on such Distribution Date, then any such excess Principal
Collections shall be allocated to the Retained Distribution Account, to the
extent that the Retained Interest Amount, calculated as of such Distribution
Date, equals or exceeds zero and such payment will not violate any restriction
contained in this Indenture.
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Section 5.3. Determination of Monthly Interest.
Monthly interest with respect to each Series of Notes shall be
determined, allocated and distributed in accordance with the procedures set
forth in the applicable Supplement.
Section 5.4. Determination of Monthly Principal.
Monthly principal with respect to each Series of Notes shall be
determined, allocated and distributed in accordance with the procedures set
forth in the applicable Supplement. However, all principal or interest with
respect to any Series of Notes shall be due and payable no later than the
Series Termination Date with respect to such Series.
Section 5.5. Paired Series.
To the extent provided in a Supplement, any Series of Notes may be
paired with one or more other Series (each, a "Paired Series"). Each Paired
Series may be pre-funded with an initial deposit to a pre-funding account in an
amount up to the initial principal balance of such Paired Series, primarily
from the proceeds of the sale of such Paired Series, or will have a variable
principal amount. Any such pre-funding account will be held for the benefit of
such Paired Series and not for the benefit of the Noteholders of the Series
paired therewith. As funds are accumulated in a principal funding account or
paid to Noteholders either (i) in the case of a pre-funded Paired Series, an
equal amount of funds on deposit in any pre-funding account for such pre-funded
Paired Series will be released and paid to NFLP or (ii) in the case of a Paired
Series having a variable principal amount, an interest in such variable Paired
Series in an equal or lesser amount may be sold by NFLP and, in either case,
the invested amount of such Paired Series will increase by up to a
corresponding amount. Upon payment in full of the Series paired to the Paired
Series, the aggregate invested amount of such related Paired Series will have
been increased by an amount up to an aggregate amount equal to the Invested
Amount of such Series paid to the Noteholders thereof. The issuance of a
Paired Series may be subject to certain conditions described in the related
Supplement.
[THE REMAINDER OF ARTICLE 5 IS RESERVED AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
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ARTICLE 6.
DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS
Section 6.1. Distributions in General.
(a) Unless otherwise specified in the applicable Supplement, on
each Distribution Date with respect to each Outstanding Series, (i) the Paying
Agent shall deposit (in accordance with the Monthly Certificate delivered by
the Servicer to the Trustee) in the Distribution Account for each such Series
the amounts on deposit in the Collection Account allocable to Noteholders of
such Series as interest and, if during an Amortization Period, principal, and
(ii) to the extent provided for in the applicable Supplement, the Trustee (in
accordance with the Monthly Certificate or other instructions of the Servicer)
shall deposit in the Distribution Account for each such Series the amount of
Enhancement for such Series drawn in connection with such Distribution Date.
(b) Unless otherwise specified in the applicable Supplement, on
each Distribution Date, the Paying Agent shall distribute to the Noteholders of
each Series, to the extent amounts are on deposit in the Distribution Account
for such Series, an amount sufficient to pay all principal and interest due on
such Series on such Distribution Date. Such distribution shall be to each
Noteholder of record of such Series on the preceding Record Date based on such
Noteholder's pro rata share of the aggregate principal amount of the Notes of
such Series held by such Noteholder; provided, however, that, the final
principal payment due on a Note shall only be paid to the holder of a Note on
due presentment of such Note for cancellation in accordance with the provisions
of the Note.
(c) Unless otherwise specified in the applicable Supplement,
amounts distributable to a Noteholder pursuant to this Section 6.1 shall be
payable by check mailed first-class postage prepaid to such Noteholder at the
address for such Noteholder appearing in the Note Register except that with
respect to Notes registered in the name of a Clearing Agency or its nominee,
such amounts shall be payable by wire transfer of immediately available funds
released by the Paying Agent from the Distribution Account no later than 2:00
p.m. (New York City time) for credit to the account designated by such Clearing
Agency or its nominee, as applicable.
(d) Unless otherwise specified in the applicable Supplement (i) all
distributions to Noteholders of all
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classes within a Series of Notes will have the same priority and (ii) in the
event that on any date of determination the amount available to make payments
to the Noteholders of a Series is not sufficient to pay all sums required to be
paid to such Noteholders on such date, then each class of Noteholders will
receive its ratable share (based upon the aggregate amount due to such class of
Noteholders) of the aggregate amount available to be distributed in respect of
the Notes of such Series.
(e) All distributions in respect of Notes represented by a
Temporary Global Note will be made only with respect to that portion of the
Temporary Global Note in respect of which Euroclear or Cedel shall have
delivered to the Trustee a certificate or certificates substantially in the
form of Exhibit B. The delivery to the Trustee by Euroclear or Cedel of the
certificate or certificates referred to above may be relied upon by NFLP and
the Trustee as conclusive evidence that the certificate or certificates
referred to therein has or have been delivered to Euroclear or Cedel pursuant
to the terms of this Indenture and the Temporary Global Note. No payments of
interest will be made on a Temporary Global Note after the Exchange Date
therefor.
Section 6.2. Distributions to Retained Distribution Account.
Subject to the terms and conditions of the related Supplement or
Supplements, at any time and from time to time upon receipt of a duly executed
Company Order, the Trustee will transfer funds from the Collection Account to
the Retained Distribution Account; provided, however, that the Trustee will not
make any such transfer on any date other than on a Distribution Date unless the
Trustee receives an Officer's Certificate from the Servicer stating that, on
the date such transfer is made and, in the reasonable anticipation of the
Servicer, on the next Distribution Date, (i) the transfer of such funds from
the Collection Account to the Retained Distribution Account will not cause an
Asset Amount Deficiency to exist and (ii) the transfer of such funds from the
Collection Account to the Retained Distribution Account will not violate any
restriction contained in this Indenture or any Supplement.
Section 6.3. Optional Repurchase of Notes.
On any Distribution Date occurring on or after the date on which the
aggregate Principal Balance of any Series or class of such Series is equal to
or less than the Repurchase Amount (if any) for such series or class set forth
in the Supplement related to such Series, or at such other time otherwise
provided for in the Supplement relating to such Series, NFLP shall have the
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option to purchase all Outstanding Notes of such Series, or class of such
Series, at a purchase price (determined after giving effect to any payment of
principal and interest on such Distribution Date) equal to (unless otherwise
specified in the related Supplement) the Principal Balance of such Series or
class, as applicable, on such Distribution Date, plus accrued and unpaid
interest on the unpaid Principal Balance of the Notes of such Series or class
(calculated at the applicable Note Rate of such Series or class) through the
day immediately prior to the date of such purchase plus, if provided for in the
related Supplement, any premium payable at such time. NFLP shall give the
Trustee at least 30 days prior written notice of the date on which NFLP intends
to exercise such option to purchase. Not later than 12:00 noon, New York City
time, on such Distribution Date, the purchase price of the Notes being
repurchased on such Distribution Date and the amount of accrued and unpaid
interest with respect to such Notes and any applicable premium will be
deposited into the Distribution Account for such Series in immediately
available funds. The funds deposited into such Distribution Account or
distributed to the Paying Agent will be passed through in full to the
Noteholders on such Distribution Date.
Section 6.4. Monthly Noteholders' Statement.
(a) On each Distribution Date, the Paying Agent shall forward to
each Noteholder of record of all outstanding Series, the Rating Agencies, the
Trustee (if other than the Paying Agent) and any Enhancement Provider the
Monthly Noteholders' Statement prepared by the Servicer pursuant to the Lease.
(b) Annual Noteholders' Tax Statement. On or before January 31 of
each calendar year, beginning with calendar year 1997, the Paying Agent shall
furnish to each Person who at any time during the preceding calendar year was a
Noteholder a statement prepared by the Servicer containing the information
prepared by the Servicer which is required to be contained in the Monthly
Noteholders' Statement aggregated for such calendar year or the applicable
portion thereof during which such Person was an Noteholder, together with such
other customary information (consistent with the treatment of the Notes as
debt) as the Servicer deems necessary or desirable to enable the Noteholders to
prepare their tax returns (each such statement, an "Annual Noteholders' Tax
Statement"). Such obligations of the Servicer to prepare and the Paying Agent
to distribute the Annual Noteholders' Tax Statement shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Paying Agent pursuant
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to any requirements of the Code as from time to time in effect.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES
NFLP hereby represents and warrants, for the benefit of the Trustee
and the Noteholders, as follows as of each Closing Date:
Section 7.1. Legal Existence and Power.
(a) NFLP (i) is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware, (ii) is
duly qualified to do business as a foreign limited partnership and in good
standing under the laws of each jurisdiction where the character of its
property, the nature of its business or the performance of its obligations make
such qualification necessary, and (iii) has all partnership powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted and for purposes of the transactions
contemplated by this Indenture and the other Related Documents; except that
NFLP may not have all required authorizations to purchase, rent and sell
vehicles in all states where it operates but NFLP has applied for all such
authorizations and expects to receive them within 90 days after the initial
Closing Date.
(b) The General Partner (i) is the sole general partner of NFLP,
(ii) is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, (iii) is duly qualified to do business
as a foreign corporation and in good standing under the laws of each
jurisdiction where the character of its property, the nature of its business or
the performance of its obligations make such qualification necessary and (iv)
has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted and for purposes of the transactions contemplated by this Indenture
and the other Related Documents.
Section 7.2. Authorization.
The execution, delivery and performance by NFLP of this Indenture, the
related Supplement and the other Related Documents to which it is a party (a)
is within NFLP's partnership powers, has been duly authorized by all necessary
partnership action, (b) requires no action by or in respect of, or filing with,
any governmental body, agency or official which has not been obtained
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and (c) does not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of limited partnership or
partnership agreement of NFLP or of any law or governmental regulation, rule,
contract, agreement, judgment, injunction, order, decree or other instrument
binding upon NFLP or any of its Assets or result in the creation or imposition
of any Lien on any Asset of NFLP, except for Liens created by this Indenture,
the Master Collateral Agency Agreement or the other Related Documents. This
Indenture and each of the other Related Documents to which NFLP is a party has
been executed and delivered by a duly authorized officer of NFLP.
Section 7.3. Binding Effect.
This Indenture and each other Related Document is a legal, valid and
binding obligation of NFLP enforceable against NFLP in accordance with its
terms (except as such enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally or by general equitable principles,
whether considered in a proceeding at law or in equity and by an implied
covenant of good faith and fair dealing).
Section 7.4. Financial Information; Financial Condition.
All balance sheets, all statements of operations, of shareholders'
equity and of cash flow, and other financial data (other than projections) of
NFLP which have been or shall hereafter be furnished by NFLP to the Trustee and
the Rating Agencies pursuant to Section 8.3 have been and will be prepared in
accordance with GAAP (to the extent applicable) and do and will present fairly
the financial condition of the entities involved as of the dates thereof and
the results of their operations for the periods covered thereby, subject, in
the case of all unaudited statements, to normal year-end adjustments and lack
of footnotes and presentation items.
Section 7.5. Litigation.
There is no action, suit or proceeding pending against or, to the
knowledge of NFLP, threatened against NFLP before any court or arbitrator or
any Governmental Authority with respect to which there is a reasonable
possibility of an adverse decision that could materially adversely affect the
financial position, results of operations, business, properties, performance,
or condition (financial or otherwise) of NFLP or which in any manner draws into
question the validity or enforceability of this Indenture, any Supplement or
any other Related Document or the ability of NFLP to perform its obligations
hereunder or thereunder.
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Section 7.6. No ERISA Plan.
NFLP has not established and does not maintain or contribute
to any Pension Plan that is covered by Title IV of ERISA and will not do so,
as long as any Notes are Outstanding.
Section 7.7. Tax Filings and Expenses.
NFLP has filed all federal, state and local tax returns and
all other tax returns which, to the knowledge of NFLP, are required to be filed
(whether informational returns or not), and has paid all taxes due, if any,
pursuant to said returns or pursuant to any assessment received by NFLP, except
such taxes, if any, as are being contested in good faith and for which adequate
reserves have been set aside on its books. NFLP has paid all fees and expenses
required to be paid by it in connection with the conduct of its business, the
maintenance of its partnership existence and its qualification as a foreign
partnership authorized to do business in each State in which it is required to
so qualify, except where the failure to pay any such fees and expenses is not
reasonably likely to have a Material Adverse Effect.
Section 7.8. Disclosure.
The Private Placement Memorandum does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. All certificates, reports, statements,
documents and other information furnished to the Trustee by or on behalf of
NFLP pursuant to any provision of this Indenture or any Related Document, or in
connection with or pursuant to any amendment or modification of, or waiver
under, this Indenture or any Related Document, shall, at the time the same are
so furnished, be complete and correct to the extent necessary to give the
Trustee true and accurate knowledge of the subject matter thereof in all
material respects, and the furnishing of the same to the Trustee shall
constitute a representation and warranty by NFLP made on the date the same are
furnished to the Trustee to the effect specified herein.
Section 7.9. Investment Company Act; Securities Act.
NFLP is not, and is not "controlled" by, an "investment
company" within the meaning of, and is not required to register as an
"investment company" under, the Investment Company Act of 1940. It is not
necessary in connection with the issuance and sale of the Notes under the
circumstances contemplated in the Private Placement Memorandum, any Placement
Memorandum Supplement thereto and in any note purchase or similar agreement to
register
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any security under the Securities Act or to qualify any indenture under the
Trust Indenture Act.
Section 7.10. Regulations G, T, U and X.
The proceeds of the Notes will not be used to purchase or
carry any "margin stock" (as defined or used in the regulations of the Board of
Governors of the Federal Reserve System, including Regulations G, T, U and X
thereof). NFLP is not engaged in the business of extending credit for the
purpose of purchasing or carrying any margin stock.
Section 7.11. No Consent.
No consent, action by or in respect of, approval or other
authorization of, or registration, declaration or filing with, any Governmental
Authority or other Person is required for the execution and delivery of this
Indenture or any Supplement or for the performance of any of NFLP's obligations
hereunder or thereunder or under any other Related Document other than such
consents, approvals, authorizations, registrations, declarations or filings as
shall have been obtained by NFLP prior to the initial Closing Date or as
contemplated in Section 7.14, or in the case of NFLP's authorization to
purchase, rent and sell vehicles in each state in which it operates, within 90
days after the initial Closing Date.
Section 7.12. Solvency.
Both before and after giving effect to the transactions
contemplated by this Indenture and the other Related Documents, NFLP is solvent
within the meaning of the Bankruptcy Code and NFLP is not the subject of any
voluntary or involuntary case or proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any bankruptcy or
insolvency law and no Event of Bankruptcy has occurred with respect to NFLP.
Section 7.13. Ownership; Subsidiary.
The sole general partner of NFLP is the General Partner and
the sole limited partner of NFLP is National, all of the issued and outstanding
common stock of the General Partner is owned by National, all of which common
stock has been validly issued, is fully paid and non-assessable and is owned of
record by such corporation. NFLP has no subsidiaries and owns no capital stock
of, or other interest in, any other Person.
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Section 7.14. Security Interests.
(a) All action necessary (including the filing of UCC-1
financing statements and the notation on the Certificates of Title for
all Vehicles (other than Initial Vehicles) of the Master Collateral
Agent's Lien for the benefit of NFLP and the Trustee) to protect and
perfect the Trustee's security interest in the Collateral and the
Master Collateral Agent's security interest in the Master Collateral
now in existence and hereafter acquired or created has been duly and
effectively taken.
(b) No security agreement, financing statement,
equivalent security or lien instrument or continuation statement
listing NFLP as debtor covering all or any part of the Collateral is
on file or of record in any jurisdiction, except such as may have been
filed, recorded or made by NFLP in favor of the Trustee in connection
with this Indenture or the Master Collateral Agent in connection with
the Master Collateral Agency Agreement.
(c) This Indenture constitutes a valid and continuing
Lien on the Collateral in favor of the Trustee, which Lien will be
prior to all other Liens (other than Permitted Liens), and the Master
Collateral Agency Agreement constitutes a valid and continuing Lien on
the Master Collateral in favor of the Master Collateral Agent prior to
all other Liens (other than Permitted Liens) and, in each case, will
be enforceable as such as against creditors of and purchasers from
NFLP in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally or by general equitable principles, whether
considered in a proceeding at law or in equity and by an implied
covenant of good faith and fair dealing. All action necessary to
perfect such prior security interest has been duly taken.
(d) NFLP's principal place of business and chief
executive office shall be at: 7700 France Avenue South, Minneapolis,
Minnesota 55435, and the place where its records concerning the
Collateral are kept is at: 7700 France Avenue South, Minneapolis,
Minnesota 55435. NFLP does not transact, and has not transacted,
business under any other name.
(e) All authorizations in this Indenture for the Trustee
to endorse checks, instruments and securities and to execute financing
statements, continuation statements, security agreements, Certificates
of Title, and other
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instruments with respect to the Collateral are powers coupled with an
interest and are irrevocable.
Section 7.15. Binding Effect of Lease.
The Lease is in full force and effect and there are no
existing Lease Events of Default or Manufacturer Events of Default thereunder
nor have events occurred which with the giving of notice, the passage of time
or both would constitute a Lease Event of Default or Manufacturer Event of
Default.
Section 7.16. Non-Existence of Other Agreements.
As of the date of the issuance of the first Series of Notes,
other than as permitted by Section 8.24 and Section 8.26 hereof (i) NFLP is not
a party to any contract or agreement of any kind or nature and (ii) NFLP is not
subject to any obligations or liabilities of any kind or nature in favor of any
third party, including, without limitation, Contingent Obligations.
Section 7.17. Manufacturer Programs.
Each Manufacturer and Manufacturer Program in respect of which
Vehicles will be acquired or financed under the Lease is an Eligible
Manufacturer and Eligible Manufacturer Program, respectively, and each of NFLP
and National is an Authorized Fleet Purchaser under each such Manufacturer
Program.
Section 7.18. Other Representations.
All representations and warranties of NFLP made in each
Related Document to which it is a party are true and correct (in all material
respects to the extent any such representations and warranties do not
incorporate a materiality limitation in their terms) and are repeated herein as
though fully set forth herein.
ARTICLE 8.
COVENANTS
NFLP and, where specified, the General Partner, hereby
covenants, to the Trustee for the benefit of the Secured Parties, as follows:
Section 8.1. Payment of Notes.
NFLP shall pay the principal of (and premium, if any) and
interest on the Notes pursuant to the provisions of this Indenture and any
applicable Supplement. Principal and interest
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shall be considered paid on the date due if the Paying Agent holds on that date
money designated for and sufficient to pay all principal and interest then due.
Section 8.2. Maintenance of Office or Agency.
NFLP will maintain an office or agency (which may be an office
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or exchange, where notices and demands to or upon NFLP
in respect of the Notes and this Indenture may be served, and where, at any
time when NFLP is obligated to make a payment of principal and premium upon the
Notes, the Notes may be surrendered for payment. NFLP will give prompt written
notice to the Trustee of the location, and any change in the location of such
office or agency. If at any time NFLP shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee.
NFLP may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations. NFLP
will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
NFLP hereby designates, the Corporate Trust Office of the
Trustee as one such office or agency of NFLP.
Section 8.3. Information.
NFLP will deliver or cause to be delivered to the Trustee and
each Rating Agency (provided that, if Duff & Phelps is then a Rating Agency,
the Trustee, not NFLP, will deliver such items to Duff & Phelps promptly upon
receipt of same from NPLP):
(a) promptly upon the delivery by the Servicer to NFLP, a
copy of the financial information and other materials required to be
delivered by the Servicer to NFLP and the Master Collateral Agent
pursuant to Section 24.6(i) of the Lease;
(b) promptly upon the delivery by the Servicer to NFLP,
copies of the financial information and other materials required to be
delivered by the Servicer to NFLP and the Master Collateral Agent
pursuant to Section 24.6(ii) of the Lease;
(c) promptly upon the delivery by the Servicer to NFLP,
the financial information and other materials required
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to be delivered by the Servicer pursuant to Section 24.6(vi) of the
Lease;
(d) promptly upon the delivery by the Servicer to NFLP,
the financial information and other materials required to be delivered
by the Servicer pursuant to Section 24.6(ix) of the Lease;
(e) promptly upon the delivery by the Servicer to NFLP,
the financial information and other materials required to be delivered
by the Servicer pursuant to Section 24.6(x) of the Lease;
(f) promptly upon the delivery by the Servicer to NFLP,
the financial information and other materials required to be delivered
by the Servicer pursuant to Section 24.6(xi) of the Lease;
(g) from time to time such additional information
regarding the financial position, results of operations or business of
National and its Subsidiaries as the Trustee may reasonably request to
the extent that National delivers such information to NFLP pursuant to
Section 24.6(xii) of the Lease;
(h) at the time of delivery of the items described in
clauses (a) through (g) above, a certificate of an officer of NFLP
that, except as provided in any certificate delivered in accordance
with Section 8.10, no Amortization Event, Lease Event of Default or
(to the best of such officer's knowledge) Potential Amortization Event
or Potential Lease Event of Default has occurred or is continuing
during such fiscal quarter;
(i) on or prior to June 30 of each year, a certificate of
the chief financial officer of NFLP certifying that (i) the ratings
assigned by the Rating Agencies in respect of any outstanding Series
of Notes have not been withdrawn or downgraded since the date of the
related Supplement, (ii) no change in the Manufacturer Program of any
Manufacturer in respect of any new model year shall have given rise to
any request on the part of the Rating Agencies that any modification
be made to the Lease or any other Related Document, and (iii) NFLP has
apprised the Rating Agencies of all material changes in the
Manufacturer Programs occurring since the date of this Indenture;
(j) on or prior to the twentieth day of each month (or if
such day is not a Business Day, on the next succeeding Business Day),
a copy of the Monthly Vehicle Statement relating to the Collateral as
of the last Business Day of
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the immediately preceding month received by NFLP from the Servicer
pursuant to Section 24.6(iv) of the Lease; and
(k) promptly following the introduction of any
prospective change in any Manufacturer Program or the introduction of
any new Manufacturer Program by an existing Manufacturer, or, if
later, the date NFLP or National obtains notice thereof, notice of the
same and notice thereof to the Rating Agencies describing the
principal terms thereof, and at least annually a copy of each
Manufacturer Program to the Rating Agencies.
Section 8.4. Payment of Obligations.
NFLP will pay and discharge at or before maturity, all of its
respective material obligations and liabilities, including, without limitation,
tax liabilities and other governmental claims, except where the same may be
contested in good faith by appropriate proceedings, and will maintain, in
accordance with GAAP, reserves as appropriate for the accrual of any of the
same.
Section 8.5. Reserved.
Section 8.6. Conduct of Business and Maintenance of Existence.
NFLP will maintain its corporate existence as a corporation
validly existing and in good standing under the laws of the State of Delaware
and duly qualified as a foreign corporation licensed under the laws of each
state in which the failure to so qualify would have a material adverse effect
on the business and operations of NFLP.
Section 8.7. Compliance with Laws.
NFLP will comply in all respects with all Requirements of Law
(including, without limitation, ERISA and the rules and regulations thereunder)
except where such noncompliance would not materially and adversely affect the
condition, financial or otherwise, operations, performance, properties of NFLP
or its ability to carry out the transactions contemplated in this Indenture and
each other Related Document; provided, however, such noncompliance will not
result in a Lien (other than a Permitted Lien) on any Assets of NFLP.
Section 8.8. Inspection of Property, Books and Records.
NFLP will keep proper books of record and account in which
full, true and correct entries shall be made of all
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dealings and transactions in relation to its Assets, business and activities
in accordance with GAAP; and will permit the Trustee to visit and inspect any
of its properties, to examine and make abstracts from any of its books and
records and to discuss its affairs, finances and accounts with its officers,
directors, employees and independent public accountants, all at such reasonable
times upon reasonable notice and as often as may reasonably be requested.
Section 8.9. Compliance with Related Documents.
NFLP will perform and comply with each and every obligation,
covenant and agreement required to be performed or observed by it in or
pursuant to this Indenture and each other Related Document to which it is a
party, subject to the grace periods set forth therein, and will not take any
action which would permit the Lessee, the Servicer or National to have the
right to refuse to perform any of its obligations under any Related Document.
NFLP will not amend the Lease, except in accordance with Section 22 thereof.
Section 8.10. Notice of Defaults.
(a) Promptly upon becoming aware of any Potential
Amortization Event, Amortization Event, Lease Event of Default or
Potential Lease Event of Default, NFLP shall give the Trustee, each
Enhancement Provider and the Rating Agencies notice thereof, together
with a certificate of the President, Vice President or principal
financial officer of NFLP setting forth the details thereof and any
action with respect thereto taken or contemplated to be taken by NFLP,
and
(b) Promptly upon becoming aware of any default under any
Related Document or under any Manufacturer Program, NFLP shall give
the Trustee, each Enhancement Provider and the Rating Agencies notice
thereof.
Section 8.11. Notice of Material Proceedings.
Promptly upon becoming aware thereof, NFLP shall give the
Trustee and the Rating Agencies written notice of the commencement or existence
of any, proceeding by or before any Governmental Authority against or affecting
NFLP which is reasonably likely to have a material adverse effect on the
business, condition (financial or otherwise), results of operations, properties
or performance of NFLP or the ability of NFLP to perform its obligations under
this Indenture or under any other Related Document to which it is a party.
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Section 8.12. Further Requests.
NFLP will promptly furnish to the Trustee, each Enhancement
Provider and the Rating Agencies such other information as, and in such form
as, the Trustee or such Enhancement Provider or the Rating Agencies may
reasonably request in connection with the transactions contemplated hereby.
Section 8.13. Further Assurances.
(a) NFLP shall do such further acts and things, and shall
execute and deliver to the Trustee such additional assignments,
agreements, powers and instruments, as the Trustee or the Required
Noteholders reasonably determine to be necessary to carry into effect
the purposes of this Indenture or the other Related Documents or to
better assure and confirm unto the Trustee or the Noteholders their
rights, powers and remedies hereunder including, without limitation,
the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to
the liens and security interests granted hereby and pursuant to the
Master Collateral Agency Agreement. NFLP also hereby acknowledges
that the Trustee has the right but not the obligation to file any such
financing statement or continuation statement without the signature of
NFLP to the extent permitted by applicable law. If any amount payable
under or in connection with any of the Collateral shall be or become
evidenced by any promissory note, chattel paper or other instrument,
such note, chattel paper or instrument shall be deemed to be held in
trust and immediately pledged to the Trustee hereunder, and shall,
subject to the rights of any Person in whose favor a prior Lien has
been perfected, be duly endorsed in a manner satisfactory to the
Trustee and delivered to the Trustee promptly. Without limiting the
generality of the foregoing provisions of this Section 8.13(a), NFLP
shall take all actions that are required to maintain the security
interest of the Trustee in the Collateral and of the Master Collateral
Agent in the Master Collateral as a perfected security interest
subject to no prior Liens, including, without limitation (i) filing
all Uniform Commercial Code financing statements, continuation
statements and amendments thereto necessary to achieve the foregoing,
(ii) causing the Lien of the Master Collateral Agent to be noted on
all Certificates of Title (other than with respect to Initial
Vehicles) and (iii) causing the Servicer, as agent for the Master
Collateral Agent, to maintain possession of the Certificates of Title
for the benefit of the Master Collateral Agent pursuant to Section
[2.6] of the Master Collateral Agency Agreement.
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(b) NFLP will warrant and defend the Trustee's right,
title and interest in and to the Collateral and the income,
distributions and proceeds thereof, for the benefit of the Noteholders
and the Trustee, against the claims and demands of all Persons
whomsoever.
(c) If so requested by Noteholders holding 10% or in
excess of 10% of the aggregate Invested Amount of any Series of Notes
(excluding for the purposes of making the foregoing calculation, any
Notes held by National or any Affiliate of National), NFLP will
provide, no more frequently than annually and, without the request of
Noteholders on the fifth anniversary of the date hereof, an Opinion of
Counsel to the effect that no UCC financing or continuation statements
are required to be filed with respect to any of the Collateral in
which a security interest may be perfected by the filing of UCC
financing statements.
Section 8.14. Manufacturer Programs.
(a) Prior to acquiring or financing the acquisition of
any Program Vehicles under the Lease for any model year after the 1996
model year, (i) NFLP will have received an executed Assignment
Agreement with respect to National's rights under such Manufacturer
Program for such model year (to the extent National will be acquiring
Financed Vehicles (other than Texas Vehicles) under the Lease under
such Manufacturer Program), (ii) NFLP shall have delivered an executed
Assignment Agreement with respect to NFLP's rights under such
Manufacturer Program for such model year, (iii) if any Series of Notes
is then being rated by Standard & Poor's and/or Duff & Phelps, NFLP
shall have received a written confirmation from Standard & Poor's
and/or Duff & Phelps, as applicable, that the acquisition of Vehicles
pursuant to such Manufacturer Program will not result in the reduction
or withdrawal of any rating issued by Standard & Poor's and/or Duff &
Phelps, as applicable, in respect of any outstanding Series of Notes
and (iv) if there is a material change to a Manufacturer Program
during a model year, NFLP shall have received written confirmation
from Standard & Poor's and/or Duff & Phelps, as applicable, that the
acquisition of Vehicles pursuant to such Manufacturer Program will not
result in the reduction or withdrawal of any rating issued by Standard
& Poor's and/or Duff & Phelps, as applicable, in respect of any
outstanding Series of Notes. A copy of the rating confirmations set
forth in clauses (iii) and (iv) will promptly be delivered to the
Trustee for delivery to the Noteholders of any outstanding Series of
Notes.
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(b) NFLP will (a) provide the Trustee with at least 30
days' prior written notice of its intention to finance Vehicles from
any new Manufacturer, (b) provide the Trustee with a copy of the final
Manufacturer Program of such Manufacturer promptly upon its being
available and (c) certify to the Trustee and the Noteholders that such
new Manufacturer is an Eligible Manufacturer and that such
Manufacturer Program is an Eligible Manufacturer Program at such time.
In no event shall NFLP agree, to the extent any consent of NFLP is
solicited or required by the Manufacturer or any assignor of such
Manufacturer Program, to any change in any Manufacturer Program that
is reasonably likely to materially adversely affect its rights or the
rights of the Noteholders with respect to any Vehicle previously
purchased or financed under such Manufacturer Program.
(c) On the date of acquisition by NFLP of each Acquired
Vehicle (and each Texas Vehicle) which is a Program Vehicle, NFLP
shall be an Authorized Fleet Purchaser under the related Manufacturer
Program and on the date of financing under the Lease of any Financed
Vehicle which is a Program Vehicle (other than any Texas Vehicle),
National shall be an Authorized Fleet Purchaser under the related
Manufacturer Program.
Section 8.15. Liens.
NFLP will not create, incur, assume or permit to exist any
Lien upon any of its Assets (including the Collateral), other than (i) Liens in
favor of the Trustee for the benefit of the Secured Parties, (ii) Liens upon
Exchanged Vehicle Repurchase Rights and Exchanged Vehicle Insurance Payments in
favor of the Exchange Lender and (iii) Liens created by or permitted under the
Related Documents.
Section 8.16. Other Indebtedness.
Neither NFLP nor the General Partner will create, assume,
incur, suffer to exist or otherwise become or remain liable in respect of any
Indebtedness other than (i) Indebtedness hereunder, (ii) Indebtedness permitted
under any other Related Document, (iii) Indebtedness to an Exchange Lender for
the purchase of Replacement Vehicles, which Indebtedness is non-recourse to NFLP
or any Master Collateral, and is created pursuant to an Exchange Financing
Agreement and (v) Indebtedness permitted under NFLP's certificate of limited
partnership or under the General Partner's certificate of incorporation.
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Section 8.17. Mergers.
Neither NFLP nor the General Partner will merge or consolidate
with or into any other Person.
Section 8.18. Sales of Assets.
NFLP will not sell, lease, transfer, liquidate or otherwise
dispose of any Assets, except as contemplated by the Related Documents and
provided that the proceeds received by NFLP are paid directly to the Collection
Account or the Master Collateral Account or deposited by NFLP into the
Collection Account or the Master Collateral Account within 2 Business Days
after receipt thereof by NFLP (except that amounts payable to NFLP with respect
to Exchanged Vehicles by the related Manufacturer under its Manufacturer
Program shall be paid into the Exchange Account).
Section 8.19. Acquisition of Assets.
Neither NFLP nor the General Partner will acquire, by
long-term or operating lease or otherwise, any Assets except in accordance with
to the terms of the Related Documents.
Section 8.20. Dividends, Officers' Compensation, etc.
(a) NFLP may make any distribution (by reduction of
capital or otherwise, whether in cash, property, securities or a
combination thereof), with respect to any partnership interest in NFLP
and directly or indirectly redeem, purchase, retire or otherwise
acquire for value any such partnership interest or set aside any
amount for such purpose, as permitted by its agreement of limited
partnership; except to the extent that an Amortization Event or
Potential Amortization Event has occurred and is continuing, or would
result therefrom.
(b) The General Partner will not (i) declare or pay any
dividends on any shares of its capital stock or make any other
distribution on, or any purchase, redemption or other acquisition of,
any shares of its capital stock or (ii) pay any wages or salaries or
other compensation to officers, directors, employees or others except,
in each case, to the extent no Amortization Event or Potential
Amortization Event has occurred and is continuing or would result
therefrom.
Section 8.21. Name; Principal Office.
NFLP will neither (a) change the location of its chief
executive office or principal place of business (within the meaning of the
applicable UCC) without sixty (60) days', prior notice to the Trustee and the
Master Collateral Agent nor
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(b) change its name without prior notice to the Trustee and the Master
Collateral Agent sufficient to allow the Trustee and the Master Collateral
Agent to make all filings (including filings of financing statements on form
UCC-1) and recordings necessary to maintain the perfection of the interest of
the Trustee in the Collateral pursuant to this Indenture and the perfection of
the interest of the Master Collateral Agent in the Master Collateral pursuant
to the Master Collateral Agency Agreement. In the event that NFLP desires to
so change its office or change its name, NFLP will make any required filings
and prior to actually changing its office or its name NFLP will deliver to the
Trustee and the Master Collateral Agent (i) an Officer's Certificate and
(except with respect to a change of the location of NFLP's chief executive
office or principal place of business to a new location in the same county) an
Opinion of Counsel confirming that all required filings have been made to
continue the perfected interest of the Trustee in the Collateral and the
perfected interest of the Master Collateral Agent in the Master Collateral in
respect of the new office or new name of NFLP and (ii) copies of all such
required filings with the filing information duly noted thereon by the office
in which such filings were made.
Section 8.22. Organizational Documents.
Neither NFLP nor the General Partner will amend any of its
organizational documents, including the certificate of limited partnership and
the limited partnership of NFLP and the Certificate of Incorporation and
By-Laws of the General Partner, unless, prior to such amendment, each Rating
Agency confirms that after such amendment the Rating Agency Condition will be
met.
Section 8.23. Investments.
Neither NFLP nor the General Partner will make, incur, or
suffer to exist any loan, advance, extension of credit or other investment in
any Person other than (in the case of NFLP), pursuant to the Demand Note or as
permitted by the Lease and this Indenture and with respect to Permitted
Investments and (in the case of the General Partner) in NFLP and, in addition,
without limiting the generality of the foregoing, NFLP will not cause the
Trustee to make any Permitted Investments on NFLP's behalf that would have the
effect of causing NFLP to be an "investment company" within the meaning of the
Investment Company Act.
Section 8.24. No Other Agreements.
NFLP will not (a) enter into or be a party to any agreement or
instrument other than any Related Document, any documents related to any
Enhancement, an Exchange Agreement, a Master Deposit Agreement, an Exchange
Financing Agreement and documents and agreements incidental to any of the
foregoing or
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entered into as contemplated in Section 8.26 or (b) except as provided for in
Sections 12.1 or 12.2, amend, modify or waive any provision of any Related
Document to which it is a party, or (c) give any approval or consent or
permission provided for in any Related Document, except as permitted in Section
3.2(a).
Section 8.25. Other Business.
Neither NFLP nor the General Partner will engage in any
business or enterprise or enter into any transaction other than (in the case of
NFLP) the acquisition, financing, refinancing, leasing and disposition of
Vehicles pursuant to the Lease and pursuant to the other Related Documents, the
related exercise of its rights as lessor thereunder, the making of loans to
National pursuant to the Demand Note, the incurrence and payment of ordinary
course operating expenses, the issuing and selling of the Notes and other
activities related to or incidental to either of the foregoing (including
transactions contemplated in Sections 8.24 and 8.26) and (in the case of the
General Partner) executing and entering into NFLP's limited partnership
agreement and performing the obligations of the General Partner thereunder.
Section 8.26. Maintenance of Separate Existence.
Each of NFLP and the General Partner will do all things
necessary to maintain its corporate or partnership existence separate and apart
from that of National and Affiliates of National including, without limitation,
(i) practicing and adhering to corporate or partnership formalities, such as
maintaining appropriate corporate or partnership books and records; (ii) in the
case of the General Partner, maintaining at least two corporate directors who
are not officers, directors or employees of any of its Affiliates; (iii) owning
or leasing (including through shared arrangements with Affiliates) all office
furniture and equipment necessary to operate its business; (iv) not (A)
guaranteeing or otherwise becoming liable for any obligations of any of its
Affiliates, (B) having obligations guaranteed by any of its Affiliates, (C)
holding itself out as responsible for debts of any of its Affiliates or for
decisions or actions with respect to the affairs of any of its Affiliates and
(D) being directly or indirectly named as a direct or contingent beneficiary or
loss payee on any insurance policy of any Affiliate other than as required by
the Related Documents with respect to insurance on the Vehicles; (v) other than
as provided in the Related Documents, maintaining its deposit and other bank
accounts and all of its assets separate from those of any other Person; (vi)
maintaining its financial records and books of account separate and apart from
those of any other Person; (vii) compensating all its employees, officers,
consultants and agents for services provided to it by such Persons, or
reimbursing any of its Affiliates in respect of
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services provided to it by employees, officers, consultants and agents of such
Affiliate, out of its own funds; (viii) maintaining office space separate and
apart from that of any of its Affiliates (even if such office space is
subleased from or is on or near premises occupied by any of its Affiliates) and
a telephone number separate and apart from that of any of its Affiliates; (ix)
accounting for and managing all of its liabilities separately from those of any
of its Affiliates; (x) allocating, on an arm's-length basis, all shared
corporate or partnership operating services, leases and expenses, including,
without limitation, those associated with the services of shared consultants
and agents and shared computer and other office equipment and software; (xi)
refraining from filing or otherwise initiating or supporting the filing of a
motion in any bankruptcy or other insolvency proceeding involving NFLP, the
General Partner, National or any Affiliate of National, to substantively
consolidate NFLP or the General Partner with National or any Affiliate of
National; (xii) remaining solvent and (xiii) conducting all of its business
(whether written or oral) solely in its own name. Each of NFLP and the General
Partner acknowledges its receipt of a copy of that certain opinion letter
issued by Mayer, Brown & Platt dated the date of issuance of the initial Series
of Notes addressing the issue of substantive consolidation as it may relate to
National, the General Partner and NFLP. NFLP and the General Partner hereby
agree to maintain in place all policies and procedures, and take and continue
to take all action, described in the factual assumptions set forth in such
opinion letter and relating to NFLP or the General Partner. On an annual
basis, NFLP will provide to the Rating Agencies, the Trustee and the Master
Collateral Agent, an Officer's Certificate certifying that it is in compliance
with its obligations under this Section 8.26.
Section 8.27. Rule 144A Information Requirement.
For so long as any of the Notes remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, NFLP covenants and agrees that it shall, during any period in
which it is not subject to Section 13 or 15(d) under the Exchange Act, make
available to any Noteholder in connection with any sale thereof and any
prospective purchaser of Notes from such Noteholder in each case upon request,
the information specified in, and meeting the requirements of, Rule 144A(d)(4)
under the Securities Act.
Section 8.28. Use of Proceeds of Notes.
NFLP shall use the proceeds of Notes solely for one or more of
the following purposes: (a) to pay amortizing Notes when due, in accordance
with this Indenture; and (b) to acquire,
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finance or refinance the acquisition of Eligible Vehicles in accordance with
the Lease.
Section 8.29. Vehicles.
NFLP shall use commercially reasonable efforts to maintain,
and to cause the Lessee to maintain good, legal and marketable title to the
Vehicles leased under the Lease, free and clear of all Liens except for
Permitted Liens.
Section 8.30. Amendments to Exchange Documents. NFLP shall
not agree to any amendment of or waiver under (a) any Exchange Agreement,
except such amendments or waivers as will not, in the aggregate, result in a
material adverse effect on the interest of the Noteholders of any Series, or
(b) any Master Deposit Agreement or Exchange Financing Agreement, except such
amendments or waivers as are made only to cure any ambiguity, defect or
inconsistency in, or to correct or supplement any provision of, this Indenture,
unless, prior to the effectiveness of any such amendment or waiver, each Rating
Agency has confirmed in writing that such amendment or waiver will not result
in the reduction or withdrawal of the then current rating of any outstanding
Series of Notes.
Section 8.31. Demand Note. NFLP shall not reduce the amount
of the Demand Note or forgive amounts payable thereunder unless NFLP has first
delivered to the Trustee an Opinion of Counsel (from counsel that is nationally
recognized as to tax matters) that such reduction or forgiveness will not have
an adverse effect on the tax characterization of any Series of Notes.
ARTICLE 9.
AMORTIZATION EVENTS AND REMEDIES
Section 9.1. Amortization Events.
If any one of the following events shall occur during the
Revolving Period, the Accumulation Period or the Controlled Amortization Period
with respect to any Series of Notes:
(a) NFLP defaults in the payment of any interest on any
Note of such Series when the same becomes due and payable and such
default continues for a period of five (5) days;
(b) NFLP defaults in the payment of any principal or
premium on any Note of such Series when the same becomes due and
payable and such default continues for a period of five (5) Business
Days;
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(c) NFLP fails to comply with any of its other agreements
or covenants in, or provisions of, the Notes of a Series or this
Indenture and the failure to so comply materially and adversely
affects the interests of the Noteholders of any Series and continues
to materially and adversely affect the interests of the Noteholders of
such Series for a period of 60 days after the earlier of (i) the date
on which a Responsible Officer of NFLP obtains knowledge thereof or
(ii) the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to NFLP by the Trustee or
to NFLP or by the Required Noteholders of such Series;
(d) there occurs an Event of Bankruptcy, with respect to
NFLP, the General Partner or National;
(e) (i) any Lease Event of Default described in Section
17.1.1(i) or 17.1.5 of the Lease shall occur, whether or not
subsequently waived by NFLP or (ii) any other Lease Event of Default
shall occur, whether or not subsequently waived by NFLP;
(f) subject to the provisions of Section 9.2(g) , any
Asset Amount Deficiency exists and continues for a period of ten (10)
days;
(g) NFLP shall have become an "investment company" or
shall have become under the "control" of an "investment company" under
the Investment Company Act of 1940, as amended;
(h) the Lease is terminated for any reason;
(i) any representation made by NFLP or National in this
Base Indenture or any Related Document is false and such false
representation materially and adversely affects the interests of the
Noteholders of any Series of Notes and such false representation is
not cured for a period of 60 days after the earlier of (i) the date on
which a Responsible Officer of NFLP or National (as applicable)
obtains knowledge thereof or (ii) the date that written notice thereof
is given to NFLP or National (as applicable) by the Trustee or to NFLP
or National (as applicable) and the Trustee by the Required
Noteholders of such Series; or
(j) any other event shall occur which may be specified in
any Supplement as an "Amortization Event";
then (i) in the case of any event described in clause (a), (b), (c) or (i)
above, either the Trustee, by written notice to NFLP,
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or the Required Noteholders of the applicable Series of Notes,by written
notice to NFLP and the Trustee, may declare that an amortization event
("Amortization Event") has occurred with respect to such Series as of the
date of the notice, or (ii) in the case of any event described in clause (j)
above, an Amortization Event may be declared in a manner specified in the
related Supplement, or (iii) in the case of any event described in clause
(e)(ii) above, either the Trustee, by written notice to NFLP, or the Required
Noteholders of any Series of Notes, by written notice to NFLP and the Trustee,
may declare that an Amortization Event has occurred with respect to such Series
as of the date of the notice, or (iv) in the case of any event described in
clause (d), (e)(i), (f), (g) or (h) above, an Amortization Event with respect
to all Series of Notes then outstanding shall immediately occur without any
notice or other action on the part of the Trustee or any Noteholders; provided,
however, that the Trustee shall have no liability in connection with any action
or inaction taken, or not taken by it upon the occurrence of an Amortization
Event unless the Trustee has actual knowledge of such Amortization Event;
provided, further, however, the provisions of this sentence shall not insulate
the Trustee from liability arising out of its negligence or willful misconduct.
Section 9.2. Rights of the Trustee upon Amortization Event or
Certain Other Events of Default.
(a) General. If and whenever an Amortization Event, or
certain events of default under any Enhancement Agreement (as
specified in the applicable Supplement) shall have occurred and be
continuing, the Trustee may and, at the direction of the Requisite
Investors shall, exercise (or direct the Master Collateral Agent to
exercise) from time to time any rights and remedies available to it
under applicable law or any Related Document; provided, however that
if such Amortization Event is based solely on an event described in
clauses (a), (b), (c), (e)(ii), (i) or (j) of Section 9.1, then the
Trustee's rights and remedies pursuant to the provisions of this
Section 9.2 shall, to the extent not detrimental to the rights of the
holders of the applicable Series of Notes, be limited to rights and
remedies pertaining only to those Series of Notes with respect to
which such Amortization Event has occurred. Any amounts obtained by
the Trustee (or by the Master Collateral Agent at the direction of the
Trustee) on account of or as a result of the exercise by the Trustee
of any right shall be held by the Trustee as additional collateral for
the repayment of NFLP Obligations and shall be applied as provided in
Article 5 hereof.
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(b) Lease. If a Liquidation Event of Default or a
Limited Liquidation Event of Default shall have occurred and be
continuing, the Trustee, at the direction of the Requisite Investors
(in the case of a Liquidation Event of Default) or the Required
Noteholders (in the case of a Limited Liquidation Event of Default),
shall direct NFLP and the Master Collateral Agent to exercise (and
NFLP agrees to exercise) all rights, remedies, powers, privileges and
claims of NFLP against National and National's Franchisees under or in
connection with the Lease, the Subleases, the Master Collateral Agency
Agreement and any of the Related Documents and against any party to
any Related Document, including the right or power to take any action
to compel performance or observance by National, National's
Franchisees, or any such party of its obligations to NFLP, the right
to take possession of any of the Vehicles, and to give any consent,
request, notice, direction, approval, extension or waiver in respect
of the Lease, and any right of NFLP to take such action independent of
such direction shall be suspended.
(c) Manufacturer Programs. If a Liquidation Event of
Default or a Limited Liquidation Event of Default shall have occurred
and be continuing, the Trustee may, and at the direction of the
Requisite Investors (in the case of a Liquidation Event of Default) or
at the direction of the Required Noteholders (in the case of a Limited
Liquidation Event of Default) shall, direct the Master Collateral
Agent, to exercise or cause NFLP or the Lessee, as applicable, to
exercise all rights, remedies, powers, privileges and claims of NFLP,
the Lessee or the Master Collateral Agent against the Manufacturers
under or in connection with the Manufacturer Programs. Upon the
occurrence of a Liquidation Event of Default, the Trustee shall
promptly instruct the Master Collateral Agent to return or to cause
NFLP or the Lessee, as applicable, to return the Program Vehicles to
the related Manufacturers (after the minimum holding period specified
in the Manufacturer's Manufacturer Program) and then, to the extent
any Manufacturer fails to accept any such Vehicles under the terms of
the applicable Manufacturer Program, to direct the Master Collateral
Agent to liquidate or to cause NFLP or the Lessee, as applicable, to
liquidate the Vehicles in accordance with the rights of NFLP under the
Lease and to otherwise sell or cause to be sold to third parties all
Non-Program Vehicles in accordance with the rights of NFLP under the
Lease. Upon the occurrence of a Limited Liquidation Event of Default,
the Trustee shall promptly instruct the Master Collateral Agent to
return or to cause NFLP or the Lessee, as applicable, to return
Program Vehicles to the related Manufacturers and to use commercially
reasonable efforts to sell Non-Program Vehicles
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or cause Non-Program Vehicles to be sold to third parties to generate
proceeds in an amount sufficient to pay all interest and principal on
the related Series of Notes, and to the extent that any Manufacturer
fails to accept any such Program Vehicles under the terms of the
applicable Manufacturer Program, to direct the Master Collateral Agent
to return or to cause NFLP or the Lessee, as applicable to liquidate
the Vehicles in accordance with the rights of NFLP under the Lease.
(d) NFLP Fleet Finance Agreement. Notwithstanding
anything to the contrary contained herein, if a Liquidation Event of
Default or a Limited Liquidation Event of Default shall have occurred
and be continuing, the Trustee shall take such action to cause
Vehicles manufactured by GM to be turned back to GM in such manner as
NFLP has instructed the Trustee in writing (and NFLP hereby agrees to
provide such instructions) to preserve any and all of NFLP's right to
receive payments from GM under the NFLP Fleet Finance Agreement in
respect of deficiencies in the sale prices of such Vehicles as
described thereunder; provided that the Trustee shall not return such
Vehicles to GM if it is instructed not to do so by Holders of Notes
evidencing 66-2/3% or more of the Aggregate Invested Amount; provided
further, that the Noteholders shall not be entitled to direct the
Trustee to cause Vehicles manufactured by GM to be turned back or sold
in any manner that would not preserve NFLP's rights under the NFLP
Fleet Finance Agreement described above.
(e) Failure of NFLP, the Lessee or the Master Collateral
Agent to Take Action. If NFLP, National or the Master Collateral
Agent shall have failed, within 15 Business Days of receiving the
direction of the Trustee, to take commercially reasonable action to
accomplish directions of the Trustee given pursuant to clauses (b) or
(c) above, the Trustee may (and at the direction of the Required
Noteholders of the affected Series of Notes (with respect to any
Limited Liquidation Event of Default) or the Requisite Investors (with
respect to any Amortization Event or any Liquidation Event of Default)
shall, take such previously directed action (and any related action as
permitted under this Indenture thereafter determined by the Trustee to
be appropriate without the need under this provision or any other
provision under this Indenture to direct NFLP, National or the Master
Collateral Agent to take such action) on behalf of NFLP and the
Noteholders.
(f) Right to Appointment of Receiver. In the event that
the Trustee determines to take action pursuant to the provisions of
clause (e) above, the Trustee may, without
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notice to NFLP, the Servicer or the Lessee, direct the Master
Collateral Agent to take legal proceedings for the appointment of a
receiver to take possession of Acquired Vehicles pending the sale
thereof and in any such event the Trustee shall be entitled to the
appointment of a receiver, and neither NFLP, the Servicer or the
Lessee shall object to such appointment.
(g) Right of NFLP to Cure Asset Amount Deficiency.
Notwithstanding anything to the contrary contained in this Article 9,
if (i) a Rapid Amortization Period commences with respect to any
Series of Notes as a result of an Amortization Event described in
Section 9.1(f), (ii) during such Rapid Amortization Period (but prior
to the Series Termination Date with respect to such Series of Notes)
the Asset Amount Deficiency is cured, (iii) no other Amortization
Event then exists and is continuing, and (iv) NFLP delivers to the
Trustee an Officer's Certificate stating that such Asset Amount
Deficiency has been cured and requesting that such Rapid Amortization
Period terminate, then such Rapid Amortization Period shall
automatically terminate as of the date the foregoing conditions are
satisfied and the applicable Revolving Period, Accumulation Period or
Controlled Amortization Period that would have been in effect if such
Rapid Amortization Period had not commenced shall commence or
recommence; provided, however, (x) no Revolving Period, Accumulation
Period or Controlled Amortization Period shall be extended as a result
of such Rapid Amortization Period interrupting the applicable
Revolving Period, Accumulation Period or Controlled Amortization
Period, (y) no Controlled Amortization Amount shall change as a result
of such Rapid Amortization Period changing the timing or amounts of
payments made during any applicable Controlled Amortization Period and
NFLP shall be obligated to pay the full amount of all Controlled
Distribution Amounts (provided that, with respect to each Series of
Notes, the payments of principal received by the Noteholders of such
Series during the terminated Rapid Amortization Period will be
credited against the controlled amortization payments scheduled to be
made during the Controlled Amortization Period for such Series
(whether such controlled amortization payments were originally
scheduled to be made during the period of time in which the terminated
Rapid Amortization Period was occurring or are scheduled to be made
thereafter) such that the Controlled Amortization Period for such
Series will not terminate sooner than originally contemplated), and
(z) if at the time of the termination of such Rapid Amortization
Period pursuant to the provisions of this Section 9.2 such Series of
Notes would otherwise be in a Rapid Amortization Period, then such
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Rapid Amortization Period will not terminate but shall continue
uninterrupted.
(h) If on the Series Termination Date any Notes of a
Series are Outstanding and all Collateral and Master Collateral
allocable to such Series has been liquidated and the amount of all
proceeds reasonably expected to be received by the Trustee on account
of such liquidation has been determined, the Trustee shall direct NFLP
to, and NFLP shall, draw on the Demand Note in an amount equal to the
Invested Amount of the Notes of the applicable Series which will
remain Outstanding after receipt of all such liquidation proceeds.
Section 9.3. Special Provisions Concerning Remedies Upon
Liquidation Event of Default in Conjunction with a Manufacturer Event of
Default or Inability to Turn Back under Manufacturer Program.
(a) Upon the occurrence of a Liquidation Event of Default
in conjunction with a Manufacturer Event of Default, the Trustee shall
have the right to (and shall, upon the direction of the Requisite
Investors) direct the Master Collateral Agent to, or cause NFLP, the
Lessee or the Servicer to, take such reasonable actions at reasonable
expense necessary to sell any or all of the Program Vehicles
manufactured by such Manufacturer at a public or private sale. If the
Master Collateral Agent, NFLP, the Lessee or the Servicer shall have
failed, within 15 Business Days of receiving the direction of the
Trustee, to take commercially reasonable action to accomplish such
directions of the Trustee, the Trustee may take such previously
directed action (and any related action as permitted under this
Indenture thereafter determined by the Trustee to be appropriate
without the need under this provision or any other provision under
this Indenture to direct NFLP to take such action) on behalf of NFLP
and the Noteholders. The Trustee may institute legal proceedings for
the appointment of a receiver or receivers (to which the Trustee shall
be entitled as a matter of right) to take possession of the Vehicles
pending the sale thereof pursuant either to the powers of sale granted
by this Indenture or to a judgment, order or decree made in any
judicial proceeding for the foreclosure or involving the enforcement
of this Indenture.
(b) Upon any sale of any of the Collateral directly by
the Trustee, or by the Master Collateral Agent at the direction of the
Trustee, whether made under the power of sale given under Section
9.2(c), this Section 9.3 or under judgment, order or decree in any
judicial proceeding for the
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foreclosure or involving the enforcement of this Indenture:
(i) the Trustee, any Noteholder and/or any
Enhancement Provider may bid for and purchase the property
being sold, and upon compliance with the terms of sale may
hold, retain and possess and dispose of such property in its
own absolute right without further accountability;
(ii) the Trustee, or the Master Collateral Agent
at the direction of the Trustee, may make and deliver to the
purchaser or purchasers a good and sufficient deed, bill of
sale and instrument of assignment and transfer of the property
sold;
(iii) the Trustee is hereby irrevocably appointed
the true and lawful attorney-in-fact of NFLP, in its name and
stead, to make all necessary deeds, bills of sale and
instruments of assignment and transfer of the property of NFLP
thus sold and for such other purposes as are necessary or
desirable to effectuate the provisions (including, without
limitation, this Section 9.3) of this Indenture, and for that
purpose it may execute and deliver all necessary deeds, bills
of sale and instruments of assignment and transfer, and may
substitute one or more Persons with like power, NFLP hereby
ratifying and confirming all that its said attorney, or such
substitute or substitutes, shall lawfully do by virtue hereof,
but if so requested by the Trustee or by any purchaser, NFLP
shall ratify and confirm any such sale or transfer by
executing and delivering to the Trustee or to such purchaser
all such property, deeds, bills of sale, instruments of
assignment and transfer and releases as may be designated in
any such request;
(iv) all right, title, interest, claim and demand
whatsoever, either at law or in equity or otherwise, of NFLP
of, in and to the property so sold shall be divested; and such
sale shall be a perpetual bar both at law and in equity
against NFLP, its successors and assigns, and against any and
all Persons claiming or who may claim the property sold or any
part thereof from, through or under NFLP, its successors or
assigns;
(v) the receipt of the Trustee or of the officer
thereof making such sale shall be a sufficient discharge to
the purchaser or
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purchasers at such sale for his or their purchase money, and such
purchaser or purchasers, and his or their assigns or personal
representatives, shall not, after paying such purchase money and
receiving such receipt of the Trustee or of such officer therefor,
be obliged to see to the application of such purchase money or be in
any way answerable for any loss, misapplication or non-application
thereof; and
(vi) to the extent that it may lawfully do so, NFLP agrees
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any appraisal,
valuation, stay, extension or redemption laws, or any law permitting
it to direct the order in which the Vehicles shall be sold, now or
at any time hereafter in force, which may delay, prevent or
otherwise affect the performance or enforcement of this Indenture or
any of the Related Documents.
(c) In addition to any rights and remedies now or hereafter
granted hereunder or under applicable law with respect to the Collateral,
the Trustee shall (subject to the foregoing provisions in respect of the
Vehicles) have all of the rights and remedies of a secured party under the
UCC as enacted in any applicable jurisdiction.
Section 9.4. Other Remedies.
Subject to the terms and conditions of this Indenture, if an
Amortization Event occurs and is continuing, the Trustee may pursue any remedy
available under applicable law or in equity to collect the payment of principal
or interest on the Notes (or the applicable Series of Notes, in the case of an
Amortization Event that affects only one Series of Notes) or to enforce the
performance of any provision of the Notes, this Indenture or any Supplement.
If an Amortization Event has occurred in accordance with Section 9.1, the
Trustee shall instruct NFLP to cease issuing Notes and the right of NFLP to
issue Notes shall automatically terminate. In addition, the Trustee may, or
shall at the direction of the Requisite Investors (or the Required Noteholders,
in the case of an Amortization Event that affects only one Series of Notes),
direct NFLP or the Master Collateral Agent to exercise any rights or remedies
available under any Related Document or under applicable law or authorized by a
court of equity.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in
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the proceeding, and any such proceeding instituted by the Trustee shall be in
its own name as trustee. All remedies are cumulative to the extent permitted
by law.
Section 9.5. Waiver of Past Events.
Subject to Section 12.2 hereof, the Noteholders of any Series owning
an aggregate principal amount of Notes in excess of 66-2/3% of the aggregate
principal amount of the Outstanding Notes of such Series, by notice to the
Trustee, may waive any existing Potential Amortization Event or Amortization
Event related to clauses (a), (b), (c), (e)(ii), (i) and (j) of Section 9.1
which relate to such Series and its consequences except a continuing Potential
Amortization Event or Amortization Event in the payment of the principal of or
interest on any Note. Upon any such waiver, such Potential Amortization Event
shall cease to exist with respect to such Series, and any Amortization Event
with respect to such Series arising therefrom shall be deemed to have been
cured for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Potential Amortization Event or impair any right
consequent thereon. A Potential Amortization Event or an Amortization Event
related to clauses (d), (e)(i), (f), (g), or (h) of Section 9.1 shall not be
subject to waiver.
Section 9.6. Control by Requisite Investors.
The Requisite Investors (or, to the extent such remedy relates only
to a particular Series of Notes, the Required Noteholders of such Series) may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee. However, subject to Section 10.1, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of other Noteholders, or
that may involve the Trustee in personal liability.
Section 9.7. Limitation on Suits.
Any other provision of this Indenture to the contrary
notwithstanding, a Noteholder may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) The Noteholder gives to the Trustee written notice of a
continuing Amortization Event;
(b) The Noteholders of at least 25% in principal amount of all
then Outstanding Notes of such Series make a written request to the
Trustee to pursue the remedy;
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(c) Such Noteholder or Noteholders offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any
loss, liability or expense;
(d) The Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) During such 60-day period the Required Noteholders do not give
the Trustee a direction inconsistent with the request.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over another Noteholder.
Section 9.8. Unconditional Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Noteholder of a Note to receive payment of principal and interest on the
Note, on or after the respective due dates expressed in the Note, or to bring
suit for the enforcement of any such payment on or after such respective dates,
is absolute and unconditional and shall not be impaired or affected without the
consent of the Noteholder.
Section 9.9. Collection Suit by the Trustee.
If any Amortization Event specified in clauses (a) or (b) of Section
9.1 occurs and is continuing, the Trustee is authorized to recover judgment in
its own name and as trustee of an express trust against NFLP for the whole
amount of principal and interest remaining unpaid on the Notes and interest on
overdue principal and, to the extent lawful, interest and such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
Section 9.10. The Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Noteholders allowed in any judicial proceedings relative to NFLP (or
any other obligor upon the Notes), its creditors or its property, and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on
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any such claims and any custodian in any such judicial proceeding is hereby
authorized by each Noteholder to make such payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Noteholders, to pay the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 10.5 hereof.
To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 10.5 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, Notes and other properties which the Noteholders of the Notes
may be entitled to receive in such proceeding whether in liquidation or under
any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to
or accept or adopt on behalf of any Noteholder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Noteholder thereof, or to authorize the Trustee to vote in respect of the claim
of any Noteholder in any such proceeding.
Section 9.11. Priorities.
If the Trustee collects any money pursuant to this Article, the
Trustee shall pay out the money in accordance with the provisions of Article 5
of this Indenture.
Section 9.12. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of any undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Noteholder
pursuant to Section 9.7, or a suit by Noteholders of more than 10% in principal
amount of all then outstanding Notes.
Section 9.13. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee
or to the holders of Notes is intended to be exclusive of any other right or
remedy, and every right or remedy shall, to the extent permitted by law, be
cumulative and in
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addition to every other right and remedy given under this Indenture or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy under this Indenture, or otherwise, shall not
prevent the concurrent assertion or employment of any other appropriate right
or remedy.
Section 9.14. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any holder of any Note to
exercise any right or remedy accruing upon any Amortization Event shall impair
any such right or remedy or constitute a waiver of any such Amortization Event
or an acquiescence therein. Every right and remedy given by this Article 9 or
by law to the Trustee or to the holders of Notes may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the holders
of Notes, as the case may be.
Section 9.15. Reassignment of Surplus.
After termination of this Indenture and the payment in full of NFLP
Obligations, any proceeds of all the Collateral received or held by the Trustee
shall be turned over to NFLP and the Collateral shall be reassigned to NFLP by
the Trustee without recourse to the Trustee and without any representations,
warranties or agreements of any kind.
ARTICLE 10.
THE TRUSTEE
Section 10.1. Duties of the Trustee.
(a) If an Amortization Event has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and 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 the Trustee shall have no
liability in connection with any action or inaction taken, or not taken,
by it upon the deemed occurrence of an Amortization Event of which a Trust
Officer has not received notice; provided, further, however, that the
preceding sentence shall not have the effect of insulating the Trustee
from liability arising out of the Trustee's negligence or willful
misconduct.
(b) Except during the occurrence and continuance of an
Amortization Event:
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(i) The Trustee undertakes to perform only those duties that
are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This clause does not limit the effect of clause (b) of
this Section 10.1.
(ii) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 9.4.
(iv) The Trustee shall not be charged with knowledge of any
default by the Servicer or the Lessee in the performance of its
obligations under any Related Document, unless a Trust Officer of
the Trustee (a) receives written notice of such failure from
National or any Holders of Notes evidencing not less than 10% of the
aggregate principal amount of the Notes of any Series adversely
affected thereby or (b) otherwise has actual knowledge thereof.
(d) Notwithstanding anything to the contrary contained in this
Indenture or any of the Related Documents, no provision of this Indenture
shall require the Trustee to expend or risk its own funds or incur any
liability if there is reasonable ground (as determined by the Trustee in
its sole discretion) for believing that the repayment of such funds is not
reasonably assured to it by the security
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afforded to it by the terms of this Indenture. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives
indemnity satisfactory to it against any loss, liability or expense.
(e) In the event that the Paying Agent or the Transfer Agent and
Registrar shall fail to perform any obligation, duty or agreement in the
manner or on the day required to be performed by the Paying Agent or the
Transfer Agent and Registrar, as the case may be, under this Indenture,
the Trustee shall be obligated as soon as practicable upon actual
knowledge of a Trust Officer thereof and receipt of appropriate records
and information, if any, to perform such obligation, duty or agreement in
the manner so required.
(f) Subject to Section 10.3, all moneys received by the Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated from
other funds except to the extent required by law or the Related Documents.
The Trustee may allow and credit to NFLP interest agreed upon by NFLP and
the Trustee from time to time as may be permitted by law.
Section 10.2. Rights of the Trustee.
Except as otherwise provided by Section 10.1:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting based upon any document believed by it to be
genuine and to have been signed or presented by the proper person.
(b) The Trustee may consult with counsel of its selection and the
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through agents, custodians and nominees
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within
its rights or powers conferred upon it by the Indenture.
(e) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture or any Supplement, or
to institute,
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conduct or defend any litigation hereunder or in relation hereto, at the
request, order or direction of any of the Noteholders, pursuant to the
provisions of this Indenture or any Supplement, unless such Noteholders
shall have offered to the Trustee reasonable security or indemnity
satisfactory to the Trustee against the costs, expenses and liabilities
which may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligations, upon the occurrence of a
default by the Servicer or NFLP (which has not been cured), to exercise
such of the rights and powers vested in it by this Indenture or any
Supplement, and to 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.
(f) 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 Required Noteholders of any Series which could be adversely affected
if the Trustee does not perform such acts; provided, however, that within
two Business Days of its receipt of any Monthly Certificate, the Trustee
shall verify the mathematical computations contained therein on the form
attached hereto as Exhibit E, based solely on the information and amounts
received, and calculations required to be made, by the Trustee pursuant to
the Indenture, and shall notify the Servicer and each of the Rating
Agencies of the accuracy of such computations or of any discrepancies
therein, provided that the rounding of numbers will not constitute a
discrepancy, whereupon the Servicer shall deliver to the Rating Agencies
within 5 Business Days thereafter a certificate describing the nature and
cause of any such discrepancies and the action that the Servicer proposes
to take with respect thereto. Concurrently with its notice to each of the
Rating Agencies referred to above, the Trustee shall provide the Rating
Agencies with a certificate, signed by an authorized officer of the
Trustee, disclosing whether or not the Trustee has actual knowledge of any
Amortization Event (and, if it does have actual knowledge of any
Amortization Event, specifying the nature of that event).
(g) The Trustee shall not be liable for any losses or liquidation
penalties in connection with Permitted
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Investments, unless such losses or liquidation penalties were incurred
through the Trustee's own willful misconduct, negligence or bad faith.
(h) The Trustee shall have the right, but not the obligation to
file or record any document or instrument necessary or advisable to
evidence the security interest in the Collateral granted pursuant to this
Indenture.
Section 10.3. Individual Rights of the Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with NFLP or an Affiliate of
NFLP with the same rights it would have if it were not Trustee. Any Paying
Agent may do the same with like rights. However, the Trustee is subject to
Section 10.8.
Section 10.4. Notice of Amortization Events and Potential
Amortization Events.
If an Amortization Event or a Potential Amortization Event occurs
and is continuing and if a Trust Officer of the Trustee receives written notice
thereof, the Trustee shall promptly provide the Noteholders with notice of such
Amortization Event or the Potential Amortization Event, if such Notes are
represented by a Global Note, by telephone and facsimile, and, if such Notes
are represented by Definitive Notes, by first class mail.
Section 10.5. Compensation.
(a) NFLP shall cause the Servicer to promptly pay to the Trustee
from time to time compensation for its acceptance of this Indenture and
services hereunder as set forth in the letter agreement dated as of April
30, 1996 between the Servicer and the Trustee, as may be amended from time
to time. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. NFLP shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances
and expenses incurred or made by it in addition to the compensation for
its services. Such expenses shall include (i) the reasonable
compensation, disbursements and expenses of the Trustee's agents and
counsel and (ii) the reasonable expenses of the Trustee's agents in
administering the Collateral.
(b) The indemnification provisions in favor of the Trustee and its
officers, directors, agents and employees provided for in the Lease are
hereby incorporated by reference with the same force and effect as if set
forth herein in full. NFLP shall not be required to reimburse any
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expense or indemnify the Trustee against any loss, liability, or expense
incurred by the Trustee through the Trustee's own willful misconduct,
negligence or bad faith.
(c) When the Trustee incurs expenses or renders services after an
Amortization Event occurs, the expenses and the compensation for the
services are intended to constitute expenses of administration under the
Bankruptcy Code.
(d) The provisions of this Section 10.5 shall survive the
termination of this Indenture and the resignation and removal of the
Trustee.
Section 10.6. Replacement of the Trustee.
(a) A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
(b) The Trustee may, after giving sixty (60) days prior written
notice to NFLP and to each Noteholder, resign at any time and be
discharged from the trust hereby created by so notifying NFLP and the
Servicer; provided, however, that no such resignation of the Trustee shall
be effective until a successor trustee has assumed the obligations of the
Trustee hereunder. The Requisite Investors may remove the Trustee by so
notifying the Trustee, the Servicer and NFLP. NFLP or the Servicer may
remove the Trustee if:
(i) the Trustee fails to comply with Section 10.8;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee as a debtor
under the Bankruptcy Code;
(iii) a custodian or public officer takes charge of the
Trustee or its property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of the Trustee for any reason, NFLP shall promptly appoint a successor
Trustee.
(c) If a successor Trustee does not take office within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee,
the Servicer, NFLP or any Secured
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Party may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(d) If the Trustee, after written request by any Noteholder who
has been a Noteholder for at least six months, fails to comply with Section
10.8, such Noteholder may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee, the Servicer and NFLP, Thereupon the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture and any Supplement. The successor Trustee
shall mail a notice of its succession to Noteholders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee; provided, however, that all sums owing to the Trustee
hereunder have been paid. Notwithstanding replacement of the Trustee
pursuant to this Section 10.6, NFLP's obligations under Section 10.5
hereof shall continue for the benefit of the retiring Trustee.
Section 10.7. Successor Trustee by Merger, etc.
Subject to Section 10.8, if the Trustee consolidates, merges or
converts into, or transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation without any further
act shall be the successor Trustee.
Section 10.8. Eligibility Disqualification.
(a) There shall at all times be a Trustee hereunder which shall be
(i) a corporation organized and doing business under the laws of the
United States of America or of any state thereof authorized under such
laws to exercise corporate trustee power, (ii) subject to supervision or
examination by Federal or state authority and shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition, and (iii) if such Trustee is
other than The Bank of New York as the original Trustee hereunder,
acceptable to the Requisite Investors.
(b) At any time the Trustee shall cease to satisfy the eligibility
requirements of clauses (a)(i) or (a)(ii) above, the Trustee shall resign
immediately in the manner and with the effect specified in Section 10.6.
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Section 10.9. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Indenture or any
Supplement, at any time, for the purpose of meeting any legal requirements
of any jurisdiction in which any part of the Collateral may at the time be
located, the Trustee shall have the power and may execute and deliver all
instruments to appoint one or more persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part
of the Collateral, and to vest in such Person or Persons, in such capacity
and for the benefit of the Noteholders, such title to the Collateral, or
any part thereof, and, subject to the other provisions of this Section
10.9, such powers, duties, obligations, rights and trusts as the Trustee
may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 10.8 of and no notice to Noteholders of
the appointment of any co-trustee or separate trustee shall be required
under Section 10.6 of this Base Indenture. No co-trustee shall be
appointed without the consent of the Servicer unless such appointment is
required as a matter of state law or to enable the Trustee to perform its
functions hereunder.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) The Notes of each Series shall be authenticated and
delivered solely by the Trustee or an authenticating agent appointed
by the Trustee;
(ii) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee
or co-trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any
law of any jurisdiction in which any particular act or acts are to
be performed, the Trustee shall be incompetent on unqualified to
perform, such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Assets
or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate
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trustee or co-trustee, but solely at the direction of the Trustee;
(iii) No trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder; and
(iv) The Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other waiting given to the Trustee
shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee shall refer to
this Indenture and the conditions of this Article 10. Each separate
trustee and co-trustee, upon its acceptance of the trusts conferred, shall
be vested with the estates or property specified in its instrument of
appointment, either jointly with the Trustee or separately, as may be
provided therein, subject to all the provisions of this Indenture and any
Supplement, specifically including every provision of this Indenture or
any Supplement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Every 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 constitute
the Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in
respect to this Indenture or any Supplement on its behalf and in its name.
If any separate trustee or co-trustee shall die, become incapable of
acting, resign or be removed, all of its estates, properties, rights,
remedies and trusts shall vest in and be exercised by the Trustee, to the
extent permitted by law, without the appointment of a new or successor
trustee.
(e) In connection with the appointment of a co-trustee, the
Trustee may, at any time, at the Trustee's sole cost and expense, without
notice to the Noteholders, delegate its duties under this Base Indenture
and any Supplement to any Person who agrees to conduct such duties in
accordance with the terms hereof; provided, however, that no such
delegation shall relieve the Trustee of its obligations and
responsibilities hereunder with respect to any such delegated duties.
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Section 10.10. Representations and Warranties of Trustee.
The Trustee represents and warrants that:
(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 power, authority and right
to execute, deliver and perform this Indenture and any Supplement
issued concurrently with this Indenture and to authenticate the
Notes, and has taken all necessary action to authorize the
execution, delivery and performance by it of this Indenture and
any Supplement issued concurrently with this Indenture and to
authenticate the Notes;
(iii) This Indenture has been duly executed and
delivered by the Trustee; and
(iv) The Trustee meets the requirements of
eligibility as a trustee hereunder set forth in Section 10.8
hereof.
ARTICLE 11.
DISCHARGE OF INDENTURE
Section 11.1. Termination of NFLP's Obligations.
(a) This Indenture shall cease to be of further effect
(except that NFLP's obligations under Section 10.5 and NFLP's, the
Trustee's and Paying Agent's obligations under Section 11.3 shall survive)
when all Outstanding Notes theretofore authenticated and issued have been
delivered (other than destroyed, lost or stolen Notes which have been
replaced or paid) to the Trustee for cancellation and NFLP has paid all
sums payable hereunder.
(b) In addition, except as may be provided to the contrary in
any Supplement, NFLP may terminate all of its obligations under this
Indenture if:
(i) NFLP irrevocably deposits in trust with the
Trustee or at the option of the Trustee, with a trustee
reasonably satisfactory to the Trustee and NFLP under the terms
of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, money or U.S. Government Obligations
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sufficient to pay when due principal and interest on the Notes to
maturity or redemption, as the case may be, and to pay all other
sums payable by it hereunder; provided, however, that (1) the
trustee of the irrevocable trust shall have been irrevocably
instructed to pay such money or the proceeds of such U.S.
Government Obligations to the Trustee and (2) the Trustee shall
have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to the payment of
said principal and interest with respect to the Notes;
(ii) NFLP delivers to the Trustee an Officer's
Certificate stating that all conditions precedent to satisfaction
and discharge of this Indenture have been complied with, and an
Opinion of Counsel and a certificate from a firm of certified
public accountants to the same effect; and
(iii) NFLP delivers to the Trustee an Officer's
Certificate stating that no Potential Amortization Event or
Amortization Event, in either case, described in Section 9.1(d)
shall have occurred and be continuing on the date of such
deposit.
Then, this Indenture shall cease to be of further effect (except as provided in
this paragraph), and the Trustee, on demand of NFLP, shall execute proper
instruments acknowledging confirmation of and discharge under this Indenture.
(c) After such irrevocable deposit made pursuant to Section
11.1(b) and satisfaction of the other conditions set forth herein, the
Trustee upon request shall acknowledge in writing the discharge of NFLP's
obligations under this Indenture except for those surviving obligations
specified above.
In order to have money available on a payment date to pay
principal or interest on the Notes, the U.S. Government Obligations shall be
payable as to principal or interest at least one Business Day before such
payment date in such amounts as will provide the necessary money. U.S.
Government Obligations shall not be callable at the issuer's option.
"U.S. Government Obligations" means direct obligations of the
United States of America, or any agency or instrumentality thereof for the
payment of which the full faith and credit of the United States of America is
pledged.
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Section 11.2. Application of Trust Money.
The Trustee or a trustee satisfactory to the Trustee and NFLP
shall hold in trust money or U.S. Government Obligations deposited with it
pursuant to Section 11.1. The Trustee shall apply the deposited money and the
money from U.S. Government Obligations through the Paying Agent in accordance
with this Indenture to the payment of principal and interest on the Notes.
The provisions of this Section shall survive the expiration or
earlier termination of this Indenture.
Section 11.3. Repayment to NFLP.
The Trustee and the Paying Agent shall promptly pay or return to
NFLP upon written request any excess money or, pursuant to Sections 2.11 and
2.14, any Notes held by them at any time.
Subject to Section 2.7(c), the Trustee and the Paying Agent shall
pay to NFLP upon written request any money held by them for the payment of
principal or interest that remains unclaimed for two years after the date upon
which such payment shall have become due.
The provisions of this Section shall survive the expiration or
earlier termination of this Indenture.
ARTICLE 12.
AMENDMENTS
Section 12.1. Without Consent of the Noteholders.
Without the consent of any Noteholder but with the consent of the
Rating Agencies, NFLP, the Trustee, and any applicable Enhancement Provider, at
any time and from time to time, may enter into one or more Supplements hereto,
in form satisfactory to the Trustee, for any of the following purposes;
(a) to create a new Series of Notes (including, without
limitation, making such modifications to the Indenture and the other
Related Documents as may be required to issue a Segregated Series of
Notes; provided, however, that the creation of any Segregated Series of
Notes shall not result in a material adverse effect on the Noteholders or
Note Owners of any Series unless the Required Noteholders of such Series
shall have given their prior written consent to the creation thereof);
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(b) to add to the covenants of NFLP for the benefit of the
Noteholders of all or any Series of Notes (and if such covenants are to be
for the benefit of less than all Series of Notes, stating that such
covenants are expressly being included solely for the benefit of such
Series) or to surrender any right or power herein conferred upon NFLP
(provided, however, that NFLP will not pursuant to this subsection 12.1(b)
surrender any right or power it has against the Servicer, the Lessee or
any Manufacturer);
(c) to mortgage, pledge, convey, assign and transfer to the
Trustee any property or assets as security for the Notes and to specify
the terms and conditions upon which such property or assets are to be held
and dealt with by the Trustee and to set forth such other provisions in
respect thereof as may be required by the Indenture or as may, consistent
with the provisions of the Indenture, be deemed appropriate by NFLP and
the Trustee, or to correct or amplify the description of any such property
or assets at any time so mortgaged, pledged, conveyed and transferred to
the Trustee;
(d) to cure any mistake, ambiguity, defect, or inconsistency
or to correct or supplement any provision contained herein or in any
Supplement or in any Notes issued hereunder;
(e) to provide for uncertificated Notes in addition to
certificated Notes;
(f) to add to or change any of the provisions of the
Indenture to such extent as shall be necessary to permit or facilitate the
issuance of Notes in bearer form, registrable or not registrable as to
principal, and with or without interest coupons;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes of one or more
Series and to add to or change any of the provisions of the Indenture as
shall be necessary to provide for or facilitate the administration of the
trusts hereunder by more than one Trustee; or
(h) to correct or supplement any provision herein which may
be inconsistent with any other provision herein or to make any other
provisions with respect to matters or questions arising under this
Indenture;
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provided, however, that, as evidenced by an Opinion of Counsel, such action
shall not adversely affect in any material respect the interests of any
Noteholders. Upon the request of NFLP, accompanied by a resolution of the
Board of Directors authorizing the execution of any Supplement to effect such
amendment, and upon receipt by the Trustee and National of the documents
described in Section 2.2 hereof, the Trustee shall join with NFLP in the
execution of any Supplement authorized or permitted by the terms of this
Indenture and shall make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee shall not be obligated to enter
into such Supplement which affects its own rights, duties or immunities under
this Indenture or otherwise.
Section 12.2. With Consent of the Noteholders.
Except as provided in Section 12.1, the provisions of this
Indenture and any Supplement (unless otherwise provided in such Supplement) and
each other Related Document to which NFLP is a party may from time to time be
amended, modified or waived, if such amendment, modification or waiver is in
writing and consented to in writing by NFLP, National, the Trustee, any
applicable Enhancement Provider, the Rating Agencies, and the Requisite
Investors (or the Required Noteholders of a Series of Notes, in respect of any
amendment, modification or waiver of or to this Indenture, the Supplement with
respect to such Series of Notes or any Related Document which affects only the
Noteholders of such Series of Notes and does not affect the Noteholders of any
other Series of Notes, as substantiated by an opinion of Counsel to such
effect, which Opinion of Counsel may, to the extent same is based on any
factual matter, rely upon an Officer's Certificate as to the truth of such
factual matter). Notwithstanding the foregoing:
(i) any modification of this Section 12.2, any
requirement hereunder that any particular action be taken by
Noteholders holding the relevant percentage in principal amount
of the Notes or any change in the definition of the terms
"Aggregate Asset Amount" or "Asset Amount Deficiency" (other than
in connection with the issuance of a Segregated Series of Notes),
"Eligible Manufacturer" or "Eligible Manufacturer Program" (other
than in connection with a waiver of such eligibility requirement
by the Noteholders of any Series of Notes, but only to the extent
so provided in the related Supplement in respect of such Series
of Notes), "Invested Amount", "Invested Percentage", or the
applicable amount of Enhancement or any defined term used for the
purpose of any such definitions shall require the consent of each
affected Noteholder; and
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(ii) any amendment, waiver or other modification that
would (a) extend the due date for, or reduce the amount of any
scheduled repayment or prepayment of principal of or interest on
any Note (or reduce the principal amount of or rate of interest
on any Note) shall require the consent of each affected
Noteholder; (b) approve the assignment or transfer by NFLP of any
of its rights or obligations hereunder or under any other Related
Document to which it is a party except pursuant to the express
terms hereof or thereof shall require the consent of each
Noteholder; (c) release any obligor under any Related Document to
which it is a party except pursuant to the express terms of such
Related Document shall require the consent of each Noteholder;
provided, however, that the Liens on Vehicles may be released as
provided in Section 3.5; (d) affect adversely the interests,
rights or obligations of any Noteholder individually in
comparison to any other Noteholder shall require the consent of
such Noteholder; or (e) amend or otherwise modify any
Amortization Event shall require the consent of each affected
Noteholder.
No failure or delay on the part of any Noteholder or the Trustee in exercising
any power or right under this Indenture or any other Related Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise thereof or the
exercise of any other power or right.
Section 12.3. Supplements.
Each amendment or other modification to this Indenture or the
Notes shall be set forth in a Supplement. Each Supplement shall require the
consent of the Rating Agencies. In addition to the manner provided in Sections
12.1 and 12.2, each Supplement may be amended as provided for in such
Supplement.
Section 12.4. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it
by a Noteholder of a Note is a continuing consent by the Noteholder and every
subsequent Noteholder of a Note or portion of a Note that evidences the same
debt as the consenting Noteholder's Note, even if notation of the consent is
not made on any Note. However, any such Noteholder or subsequent Noteholder
may revoke the consent as to his Note or portion of a Note if the Trustee
receives written notice of revocation before the date the amendment or waiver
becomes effective. An amendment or waiver becomes effective in accordance with
its terms and thereafter
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binds every Noteholder. NFLP may fix a record date for determining which
Noteholders must consent to such amendment or waiver.
Section 12.5. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment
or waiver on any Note thereafter authenticated. NFLP in exchange for all Notes
may issue and the Trustee shall authenticate new Notes that reflect the
amendment or waiver. Failure to make the appropriate notation or issue a new
Note shall not affect the validity and effect of such amendment or waiver.
Section 12.6. The Trustee to Sign Amendments, etc.
The Trustee shall sign any Supplement authorized pursuant to this
Article 12 if the Supplement does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does have such adverse effect,
the Trustee may, but need not, sign it. In signing such Supplement, the
Trustee shall be entitled to receive, if requested, an indemnity reasonably
satisfactory to it and to receive and, subject to Section 10.1, shall be fully
protected in relying upon, an Officer's Certificate and an Opinion of Counsel
as conclusive evidence that such Supplement is authorized or permitted by this
Indenture and that it will be valid and binding upon NFLP in accordance with
its terms. NFLP may not sign a Supplement until its Board of Directors
approves it.
ARTICLE 13.
MISCELLANEOUS
Section 13.1. Notices.
(a) Any notice or communication by NFLP, the General Partner
or the Trustee to the others shall be in writing and delivered in person
or mailed by first-class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next
day delivery, to the other parties' respective addresses:
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If to NFLP:
National Car Rental Financing Limited Partnership
7700 France Avenue South
Minneapolis, Minnesota 55435
Attn: Michael J. Becker
Phone: (612) 830-2522
Fax: (612) 830-2413
If to the General Partner:
National Car Rental Financing Corporation
7700 France Avenue South
Minneapolis, Minnesota 55435
Attn: Michael J. Becker
Phone: (612) 830-2133
Fax: (612) 830-2413
If to the Trustee:
The Bank of New York
101 Barclay Street
Floor 12 East
New York, New York 10286
Attn: Corporate Trust Division
Phone: (212) 815-5218
Fax: (212) 815-5999
NFLP, the General Partner or the Trustee by notice to the other
parties may designate additional or different addresses for subsequent notices
or communications; provided, however, NFLP may not at any time designate more
than a total of three (3) addresses to which notices must be sent in order to
be effective.
Any notice (i) given in person shall be deemed delivered on the
date of delivery of such notice, (ii) given by first class mail shall be deemed
given five (5) days after the date that such notice is mailed, (iii) delivered
by telex or telecopier shall be deemed given on the date of delivery of such
notice, and (iv) delivered by overnight air courier shall be deemed delivered
one Business Day after the date that such notice is delivered to such overnight
courier.
Notwithstanding any provisions of this Indenture to the contrary,
the Trustee shall have no liability based upon or arising from the failure to
receive any notice required by or relating to this Indenture or the Notes.
If NFLP mails a notice or communication to Noteholders, it shall
mail a copy to the Trustee and the Master Collateral Agent at the same time.
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(b) Where the Indenture provides for notice to Noteholders of
any event, such notice shall be sufficiently given (unless otherwise
herein expressly provided) if sent in writing and mailed, first-class
postage prepaid, to each Noteholder affected by such event, at its address
as it appears in the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed (if any) for the giving of
such notice. In any case where notice to Noteholder is given by mail,
neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Noteholder shall affect the sufficiency of such
notice with respect to other Noteholders, and any notice which is mailed
in the manner herein provided shall be conclusively presumed to have been
duly given. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Noteholders shall be
filed with the Trustee, but such filing shall not be a condition precedent
to the validity of any action taken in reliance upon such waiver.
In the case by reason of the suspension of regular mail service
or by reason of any other cause it shall be impracticable to give such notice
by mail, then such notification as shall be made that is satisfactory to the
Trustee shall constitute a sufficient notification for every purpose hereunder.
Section 13.2. Communication by Noteholders With Other Noteholders.
Noteholders may communicate with other Noteholders with respect
to their rights under this Indenture or the Notes.
Section 13.3. Certificate as to Conditions Precedent.
Upon any request or application by NFLP to the Trustee to take
any action under this Indenture, NFLP shall furnish to the Trustee an Officer's
Certificate in form and substance reasonably satisfactory to the Trustee (which
shall include the statements set forth in Section 13.4) stating that, in the
opinion of the signers, all conditions precedent and covenants, if any,
provided for in this Indenture relating to the proposed action have been
complied with.
Section 13.4. Statements Required in Certificate.
Each certificate with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
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(a) a statement that the Person giving such certificate has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements contained in such
certificate are based;
(c) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
Section 13.5. Rules by the Trustee and the Paying Agent.
The Trustee may make reasonable rules for action by or at a
meeting of Noteholders.
Section 13.6. No Recourse Against Others.
A director, Authorized Officer, employee or stockholder of NFLP,
as such, shall not have any liability for any obligations of NFLP under the
Notes or this Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. Each Noteholder by accepting a Note
waives and releases all such liability.
Section 13.7. Duplicate Originals.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
Section 13.8. Benefits of Indenture.
Nothing in this Indenture or in the Notes, expressed or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under the Indenture.
Section 13.9. Payment on Business Day.
In any case where any Distribution Date, redemption date or
maturity date of any Note shall not be a Business Day, then (notwithstanding
any other provision of this Indenture) payment of interest or principal (and
premium, if any), as the case may be, need not be made on such date but may be
made on the
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next succeeding Business Day with the same force and effect as if made on the
Distribution Date, redemption date, or maturity date; provided, however, that
no interest shall accrue for the period from and after such redemption date, or
maturity date, as the case may be to and including such next Business Day.
Section 13.10. Governing Law.
The laws of the State of New York, including, without limitation,
the UCC, but excluding any conflicts of laws, shall govern and be used to
construe this Indenture and the Notes and the rights and duties of the Trustee,
Registrar, Paying Agent, Noteholders and Note Owners.
Section 13.11. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of NFLP or an Affiliate of NFLP. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
Section 13.12. Successors.
All agreements of NFLP in this Indenture and the Notes shall bind
its successor; provided, however, NFLP may not assign its obligations or rights
under this Indenture or any Related Document. All agreements of the Trustee in
this Indenture shall bind its successor.
Section 13.13. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 13.14. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
Section 13.15. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
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<PAGE> 101
Section 13.16. Termination; Collateral.
This Indenture, and any grants, pledges and assignments
hereunder, shall become effective concurrently with the issuance of the first
Series of Notes and shall terminate when (a) all NFLP Obligations shall have
been fully paid and satisfied, (b) the obligations of each Enhancement Provider
under any Enhancement and related documents have terminated, and (c) any
Enhancement shall have terminated, at which time the Trustee, at the request of
NFLP and upon receipt of an Officer's Certificate from NFLP to the effect that
the conditions in clauses (a), (b) and (c) above have been complied with and
upon receipt of a certificate from the Trustee and each Enhancement Provider to
the effect that the conditions in clauses (a), (b) and (c) above relating to
NFLP Obligations to the Noteholders and each Enhancement Provider have been
complied with, shall reassign (without recourse upon, or any warranty
whatsoever by, the Trustee) and deliver all Collateral and documents then in
the custody or possession of the Trustee promptly to NFLP.
NFLP and the Secured Parties hereby agree that, if any Deposited
Funds remain on deposit in the Collection Account after the termination of this
Indenture, such amounts shall be released by the Trustee and paid to NFLP.
Section 13.17. No Bankruptcy Petition Against NFLP or the General
Partner.
Each of the Secured Parties, the Servicer, the Retained
Interestholder and the Trustee hereby covenants and agrees that, prior to the
date which is one year and one day after the payment in full of the latest
maturing Note, it will not institute against, or join with any other Person in
instituting, against NFLP or the General Partner any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings, under any Federal or state bankruptcy or similar law; provided,
however, that nothing in this Section 13.17 shall constitute a waiver of any
right to indemnification, reimbursement or other payment from NFLP or the
General Partner pursuant to this Indenture. In the event that any such Secured
Party, the Servicer, the Retained Interestholder or the Trustee takes action in
violation of this Section 13.17, NFLP or the General Partner, as applicable,
shall file an answer with the bankruptcy court or otherwise properly contesting
the filing of such a petition by any such Secured Party, the Servicer, the
Retained Interestholder or the Trustee against NFLP or the General Partner or
the commencement of such action and raising the defense that such Secured
Party, the Servicer, the Retained Interestholder or the Trustee has agreed in
writing not to take such action and should be estopped and precluded therefrom
and such other defenses, if any, as its counsel advises that it may assert.
The provisions of this Section 13.17 shall survive the
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<PAGE> 102
termination of this Indenture, and the resignation or removal of the Trustee.
Nothing contained herein shall preclude participation by any Secured Party, the
Servicer, the Retained Interestholder or the Trustee in the assertion or
defense of its claims in any such proceeding involving NFLP or the General
Partner.
Section 13.18. No Recourse.
The obligations of NFLP under this Indenture are solely the
obligations of NFLP and are payable solely from the assets of NFLP. No
recourse shall be had for the payment of any amount owing in respect of any fee
hereunder or any other obligation or claim arising out of or based upon this
Indenture against any limited partner of NFLP or against the capital or any
other asset of the General Partner or against any stockholder, employee,
officer, director or incorporator of the General Partner. Fees, expenses or
costs payable by NFLP hereunder shall be payable by NFLP to the extent and only
to the extent that NFLP is reimbursed therefor pursuant to the Lease or the
Related Documents, or funds are then available or thereafter become available
for such purpose pursuant to Article 5.
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<PAGE> 103
IN WITNESS WHEREOF, the Trustee and NFLP have caused this Base
Indenture to be duly executed by their respective duly authorized officers as
of the day and year first written above.
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP,
as Issuer
By: NATIONAL CAR RENTAL FINANCING
CORPORATION,
its General Partner
By: /s/
----------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By: /s/
-----------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP,
as Issuer,
and
THE BANK OF NEW YORK,
as Trustee
--------------------------
SERIES 1996-1 SUPPLEMENT
dated as of April 30, 1996
to
BASE INDENTURE
dated as of April 30, 1996
--------------------------
Rental Car Asset Backed Notes
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C> <C>
PRELIMINARY STATEMENT....................... 1
ARTICLE 1
DESIGNATION............................ 1
ARTICLE 2
DEFINITIONS............................ 2
Section 2.1 Incorporation of Schedule 1, Etc..................... 2
Section 2.2 Defined Terms........................................ 2
ARTICLE 3
SERIES 1996-1 ALLOCATIONS....................... 43
Section 3.1 Establishment of Series 1996-1 Collection Account,
Series 1996-1 Excess Funding Account and......... 43
Series 1996-1 Accrued Interest Account........... 43
Section 3.2 Allocations with respect to the Series 1996-1
Notes............................................ 43
Section 3.3 Monthly Payments..................................... 53
Section 3.4 Payment of Note Interest............................. 56
Section 3.5 Payment of Note Principal............................ 58
Section 3.6 Retained Distribution Account........................ 68
Section 3.7 The Servicer's Failure to Instruct the Trustee to
Make a Deposit or Payment........................ 68
Section 3.8 Draw on Letter of Credit............................. 68
Section 3.9 Letter of Credit Termination Demand.................. 69
Section 3.10 The Cash Collateral Account.......................... 70
Section 3.11 Class A Distribution Account......................... 73
Section 3.12 Class B Distribution Account......................... 74
Section 3.13 Class B Notes Subordinate to Class A Notes........... 76
ARTICLE 4
AMORTIZATION EVENTS......................... 76
ARTICLE 5
RIGHT TO WAIVE MAXIMUM
NON-PROGRAM VEHICLE AMOUNT AND
MAXIMUM MANUFACTURER AMOUNT..................... 78
Section 5.1 Request for Waiver................................... 78
Section 5.2 Consents............................................. 79
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE 6
<S> <C> <C> <C> <C>
FORM OF SERIES 1996-1 NOTES..................... 82
Section 6.1 Class A Notes........................................ 82
Section 6.2 Class B Notes........................................ 83
ARTICLE 7
GENERAL............................... 84
Section 7.1 Optional Repurchase.................................. 84
Section 7.2 Conditions to Exchanges.............................. 84
Section 7.3 Minimum Overcollateralization........................ 86
Section 7.4 Maintenance of Rating; Payment of Rating Agency
Fees............................................. 86
Section 7.5 Exhibits............................................. 86
Section 7.6 Ratification of Base Indenture....................... 86
Section 7.7 Counterparts......................................... 87
Section 7.8 Governing Law........................................ 87
Section 7.9 Amendments........................................... 87
Section 7.10 Discharge of Indenture............................... 89
Section 7.11 Inspection of Property, Books and Records............ 89
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit A-1 - Form of Restricted Global Class A Note
Exhibit A-2 - Form of Temporary Global Class A Note
Exhibit A-3 - Form of Permanent Global Class A Note
Exhibit B-1 - Form of Restricted Global Class B Note
Exhibit B-2 - Form of Temporary Global Class B Note
Exhibit B-3 - Form of Permanent Global Class B Note
Exhibit C - Form of Consent
</TABLE>
- ii -
<PAGE> 4
SERIES 1996-1 SUPPLEMENT, dated as of April 30, 1996 (this
"Supplement"), is between NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP, a
special purpose Delaware limited partnership ("NFLP") and THE BANK OF NEW YORK,
a New York banking corporation (together with its successors in trust thereunder
as provided in the Base Indenture referred to below, the "Trustee"), to the Base
Indenture, dated as of April 30, 1996, between NFLP and the Trustee (as amended,
supplemented or otherwise modified from time to time and in effect, exclusive of
Supplements creating a new Series of Notes, the "Base Indenture").
PRELIMINARY STATEMENT
WHEREAS, Sections 2.2 and 12.1 of the Base Indenture provide, among
other things, that NFLP and the Trustee may at any time and from time to time
enter into a supplement to the Base Indenture for the purpose of authorizing the
issuance of one or more Series of Notes.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DESIGNATION
There is hereby created a Series of Notes to be issued pursuant to the
Base Indenture and this Supplement and such Series of Notes shall be designated
generally as Rental Car Asset Backed Notes, Series 1996-1. The Series 1996-1
Notes (as defined below) shall be issued in four classes of Class A Notes, the
Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4
Notes, and three classes of Class B Notes, the Class B-1 Notes, the Class B-2
Notes and the Class B-3 Notes. The Class A-1 Rental Car Asset Backed Notes, the
Class A-2 Rental Car Asset Backed Notes, the Class A-3 Rental Car Asset Backed
Notes and the Class A-4 Rental Car Asset Backed Notes are designated generally
herein as the "Class A Notes" and the Class B-1 Rental Car Asset Backed Notes,
the Class B-2 Rental Car Asset Backed Notes and the Class B-3 Rental Car Asset
Backed Notes are designated generally herein as the "Class B Notes". The Class A
Notes and the Class B Notes are referred to collectively as the "Series 1996-1
Notes".
The Class B Notes are subordinated in right of payment to the Class A
Notes to the extent set forth herein.
The proceeds from the sale of the Series 1996-1 Notes shall be
deposited in the Collection Account (and allocated to the Series 1996-1 Excess
Funding Account) and shall be used (i) on the Series 1996-1 Closing Date, to
refinance the Refinanced Vehicles, (ii) from the Series 1996-1 Closing Date to
the 90th
<PAGE> 5
day after the Series 1996-1 Closing Date, to finance the acquisition by National
of additional Eligible Vehicles for leasing in states in which NFLP as of the
time of acquisition shall not have obtained all licenses and qualifications
necessary to conduct its leasing business, (iii) on and after the Series 1996-1
Closing Date, to acquire Texas Vehicles, (iv) on and after the Series 1996-1
Closing Date, to acquire Acquired Vehicles from certain Eligible Manufacturers,
and (v) in certain circumstances, to pay principal on amortizing Notes of other
Series or principal of and interest on the Series 1996-1 Notes.
The Series 1996-1 Notes are a non-Segregated Series of Notes (as more
fully described in the Base Indenture). Accordingly, all references in this
Supplement to "all" Series of Notes (and all references in this Supplement to
terms defined in the Base Indenture that contain references to "all" Series of
Notes) shall refer to all Series of Notes other than Segregated Series of Notes.
ARTICLE 2
DEFINITIONS
Section 2.1 Incorporation of Schedule 1, Etc. All capitalized terms
not otherwise defined herein are defined in the Definitions List attached to the
Base Indenture as Schedule 1 thereto. All references to "Articles", "Sections"
or "Subsections" herein shall refer to Articles, Sections or Subsections of the
Base Indenture, except as otherwise provided herein. Unless otherwise stated
herein, as the context otherwise requires or if such term is otherwise defined
in the Base Indenture, each capitalized term used or defined herein shall relate
only to the Series 1996-1 Notes and not to any other Series of Notes issued by
NFLP.
Section 2.2 Defined Terms. The following words and phrases shall have
the following meanings with respect to the Series 1996-1 Notes and the
definitions of such terms are applicable to the singular as well as the plural
form of such terms and to the masculine as well as the feminine and neuter
genders of such terms:
"Additional Manufacturer Vehicle Enhancement Percentage" means, with
respect to each Manufacturer (other than GM and Chrysler) that has become an
Eligible Manufacturer and has an Eligible Manufacturer Program, the percentage
approved by each Rating Agency then rating the Series 1996-1 Notes at the
request of National and NFLP for such Manufacturer.
- 2 -
<PAGE> 6
"Additional Manufacturer Vehicle Percentage" means, as of any date of
determination, with respect to each Manufacturer (other than GM and Chrysler)
that has become an Eligible Manufacturer and has an Eligible Manufacturer
Program, the product of (i) a fraction, expressed as a percentage, (a) the
numerator of which is the aggregate Net Book Value of all Program Vehicles
manufactured by such Manufacturer as of such day and (b) the denominator of
which is an amount equal to the Aggregate Invested Amount on such day and (ii)
the Series 1996-1 Invested Percentage as of such date.
"Additional Overcollateralization Amount" means, as of any date of
determination, an amount equal to (a) the Overcollateralization Portion on such
date divided by the Series 1996-1 Enhancement Factor as of such date minus (b)
the Overcollateralization Portion.
"Base Indenture" has the meaning set forth in the preamble.
"Cash Collateral Account" has the meaning specified in Section 3.9(a)
of this Supplement.
"Cash Collateral Account Surplus" means, as of any date of
determination subsequent to the establishment and funding of the Cash Collateral
Account pursuant to Section 3.10 of this Supplement, the amount, if any, by
which the Letter of Credit Amount exceeds the Required Enhancement Amount.
"Certificate of Credit Demand" means a certificate in the form of
Annex A to the Letter of Credit.
"Certificate of Termination Demand" means a certificate in the form of
Annex B to the Letter of Credit.
"Chrysler Vehicle Percentage" means, as of any date of determination,
the product of (a) a fraction, expressed as a percentage, (i) the numerator of
which is the aggregate Net Book Value of all Program Vehicles manufactured by
Chrysler as of such date and (ii) the denominator of which is an amount equal to
the Aggregate Invested Amount on such date and (b) the Series 1996-1 Invested
Percentage as of such date.
"Class A Carryover Controlled Amortization Amount" means any or all of
the Class A-1 Carryover Controlled Amortization Amount, the Class A-2 Carryover
Controlled Amortization Amount, the Class A-3 Carryover Controlled Amortization
Amount and the Class A-4 Carryover Controlled Amortization Amount.
- 3 -
<PAGE> 7
"Class A Collateral" means the Collateral, the Master Collateral
allocable to the Class A Notes and the Class A Distribution Account Collateral.
"Class A Controlled Distribution Amount" means any or all of the Class
A-1 Controlled Distribution Amount, the Class A-2 Controlled Distribution
Amount, the Class A-3 Controlled Distribution Amount and the Class A-4
Controlled Distribution Amount, as the context requires.
"Class A Controlled Distribution Amount Deficiency" means any or
all of the Class A-1 Controlled Distribution Amount Deficiency, the Class A-2
Controlled Distribution Amount Deficiency, the Class A-3 Controlled Distribution
Amount Deficiency and the Class A-4 Controlled Distribution Amount Deficiency,
as the context requires.
"Class A Deficiency Amount" means any or all of the Class A-1
Deficiency Amount, the Class A-2 Deficiency Amount, the Class A-3 Deficiency
Amount and the Class A-4 Deficiency Amount, as the context requires.
"Class A Distribution Account" has the meaning specified in Section
3.11(a) of this Supplement.
"Class A Distribution Account Collateral" has the meaning specified in
Section 3.11(d) of this Supplement.
"Class A Expected Final Distribution Date" means any or all of the
Class A-1 Expected Final Distribution Date, the Class A-2 Expected Final
Distribution Date, the Class A-3 Expected Final Distribution Date and the Class
A-4 Expected Final Distribution Date, as the context requires.
"Class A Initial Invested Amount" means any or all of the Class A-1
Initial Invested Amount, the Class A-2 Initial Invested Amount, the Class A-3
Initial Invested Amount and the Class A-4 Initial Invested Amount, as the
context requires.
"Class A Interest Rate" means any of the Class A-1 Interest Rate, the
Class A-2 Interest Rate, the Class A-3 Interest Rate or the Class A-4 Interest
Rate, as the context requires.
"Class A Invested Amount" means, when used with respect to any date,
an amount equal to (a) the aggregate Class A Initial Invested Amount minus (b)
the amount of principal payments made to Class A Noteholders on or prior to such
date minus (c) all Losses allocated to the Class A Noteholders on or prior to
such
- 4 -
<PAGE> 8
date plus (d) all Recoveries allocated to the Class A Noteholders on or prior to
such date.
"Class A Invested Percentage" means, on any date of determination, the
sum of the Class A-1 Invested Percentage, the Class A-2 Invested Percentage, the
Class A-3 Invested Percentage and the Class A-4 Invested Percentage for such
date of determination.
"Class A Investor Monthly Servicing Fee" means, on any Distribution
Date, an amount equal to the product of 1/12th of 0.50% of the Class A Invested
Amount as of the preceding Distribution Date (or, in the case of the initial
Distribution Date, the aggregate Class A Initial Invested Amount), after giving
effect to any payments of principal on such preceding Distribution Date;
provided, however, that if a Rapid Amortization Period shall occur and be
continuing and if National is no longer the Servicer, the Class A Investor
Monthly Servicing Fee shall equal the greater of (a) the product of (i) a
fraction, the numerator of which is the Class A Invested Amount on such
Distribution Date and the denominator of which is the aggregate invested amounts
for all outstanding Series of Notes on such Distribution Date, (ii) $20 and
(iii) the number of Vehicles as of the last day of the Related Month, and (b)
the amount described in the first clause of this definition.
"Class A Monthly Interest" means (a) with respect to the first
Distribution Date and with respect to any or all of the classes of Class A
Notes, as the context requires, an amount equal to the product of (i) a fraction
the numerator of which is the number of days from and including the date of
issuance of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes or the
Class A-4 Notes (as applicable) to but excluding the first Distribution Date and
the denominator of which is 360, (ii) the Class A Interest Rate for the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes (as
applicable) and (iii) the Class A Initial Invested Amount for the Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes (as
applicable) and (b) with respect to each other Distribution Date, an amount
equal to one-twelfth of the product of (A) the Class A Interest Rate for the
Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes
(as applicable) and (B) the Class A Principal Balance for the Class A-1 Notes,
the Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes (as applicable)
as of the preceding Distribution Date (determined after giving effect to all
payments, deposits and withdrawals on such preceding Distribution Date).
"Class A Monthly Interest Shortfall" means as of any Distribution Date
and with respect to any or all of the classes
- 5 -
<PAGE> 9
of Class A Notes, as the context requires, the excess, if any, of the Class A
Monthly Interest for the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes or the Class A-4 Notes (as applicable) and any unpaid Class A Deficiency
Amounts for the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes or the
Class A-4 Notes (as applicable) (together with accrued interest on such unpaid
Class A Deficiency Amounts) over the amount withdrawn from the Series 1996-1
Accrued Interest Account and deposited in the Class A Distribution Account on
such Distribution Date pursuant to Section 3.2(a) of this Supplement.
"Class A Monthly Supplemental Servicing Fee" means, on any
Distribution Date, the product of the Supplemental Servicing Fee accrued during
the related Series 1996-1 Interest Period times a fraction, the numerator of
which is the Class A Invested Amount on such Distribution Date and the
denominator of which is the aggregate invested amounts for all outstanding
Series of Notes on such Distribution Date.
"Class A Noteholder" means a Person in whose name a Class A Note is
registered in the Note Register.
"Class A Notes" means any or all of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes or the Class A-4 Notes, in each case executed by NFLP
and authenticated and delivered by or on behalf of the Trustee, substantially in
the form of Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit A-4, Exhibit A-5,
Exhibit A-6, Exhibit A-7, Exhibit A-8, Exhibit A-9, Exhibit A-10, Exhibit A-11
or Exhibit A-12 to this Supplement (as applicable). Definitive Class A Notes
shall have such insertions and deletions as are necessary to give effect to the
provisions of Section 2.18 of the Base Indenture.
"Class A Principal Balance" means, as of any date of determination, an
amount equal to the Class A Initial Invested Amount minus the aggregate amount
of payments of principal distributed to the Class A Noteholders prior to such
date.
"Class A Repurchase Amount" has the meaning specified in Section
7.1(a) of this Supplement.
"Class A Waiver Deficiency Adjustment Prepayments" has the meaning
specified in Section 5.2(b) of this Supplement.
"Class A-1 Carryover Controlled Amortization Amount" means, with
respect to the Class A-1 Notes for any Related Month during the Class A-1/A-2
Controlled Amortization Period, the amount, if any, by which the portion of the
Monthly Total Principal Allocation allocable to the Class A-1 Noteholders on a
pro rata basis with the Class A-2 Noteholders for the previous
- 6 -
<PAGE> 10
Related Month plus any amounts drawn from the Series 1996-1 Excess Funding
Account on account of the Class A-1 Controlled Distribution Amount was less than
the Class A-1 Controlled Distribution Amount for such previous Related Month;
provided, however, that for the first Related Month in the Class A-1 Controlled
Amortization Period, the Class A-1 Carryover Controlled Amortization Amount
shall be zero.
"Class A-1 Controlled Amortization Amount" means $23,950,000.
"Class A-1 Controlled Distribution Amount" means, with respect to any
Related Month during the Class A-1/A-2 Controlled Amortization Period, an amount
equal to the sum of the Class A-1 Controlled Amortization Amount and any Class
A-1 Carryover Controlled Amortization Amount for such Related Month.
"Class A-1 Controlled Distribution Amount Deficiency" has the meaning
set forth in Section 3.5(a)(i)(A) of this Supplement.
"Class A-1 Deficiency Amount" means, with respect to any Distribution
Date, the amount by which the Class A Monthly Interest payable in respect of the
Class A-1 Notes exceeds the amount available to pay such interest on such
Distribution Date.
"Class A-1 Expected Final Distribution Date" means the July 1999
Distribution Date.
"Class A-1 Initial Invested Amount" means an aggregate initial
principal amount of $143,700,000.
"Class A-1 Interest Rate" means a rate per annum equal to the sum of
(a) LIBOR plus (b) .50% per annum, calculated on the basis of the actual number
of days elapsed in the related Interest Period divided by 360.
"Class A-1 Invested Amount" means, when used with respect to any date,
an amount equal to (a) the Class A-1 Initial Invested Amount minus (b) the
amount of principal payments made to Class A-1 Noteholders on or prior to such
date minus (c) all Losses allocated to the Class A-1 Noteholders on or prior to
such date plus (d) all Recoveries allocated to the Class A-1 Noteholders on or
prior to such date.
"Class A-1 Invested Percentage" means on any date of determination:
(a) when used with respect to Principal Collections, the percentage
equivalent of a fraction the numerator of
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<PAGE> 11
which will be equal to the Class A-1 Invested Amount, determined during the
Series 1996-1 Revolving Period as of the end of the Related Month (or, if
prior to the end of the initial Related Month, as of the Series 1996-1
Closing Date), or, during the Series 1996-1 Controlled Amortization Period
and the Series 1996-1 Rapid Amortization Period, as of the end of the Series
1996-1 Revolving Period, and the denominator of which shall be the greater
of (A) the Aggregate Asset Amount as of the end of the Related Month or,
until the end of the initial Related Month, as of the Series 1996-1 Closing
Date, and (B) as of the same date as in clause (A), the sum of the
numerators used to determine (i) invested percentages for allocations with
respect to Principal Collections (for all classes of all Series of Notes)
and (ii) available subordinated amount percentages for allocations with
respect to Principal Collections (for all Series of Notes that provide for
credit enhancement in the form of overcollateralization);
(b) when used with respect to Interest Collections, the percentage
equivalent of a fraction the numerator of which shall be the Accrued Amounts
with respect to the Class A-1 Notes on such date of determination, and the
denominator of which shall be the aggregate Accrued Amounts with respect to
all Series of Notes on such date of determination;
(c) when used with respect to Losses, the percentage equivalent of a
fraction, the numerator of which will be the Class A-1 Invested Amount as of
the end of the Related Month and the denominator of which will be the
greater of (A) the Aggregate Asset Amount as of the end of the Related Month
and (B) as of the same date as in clause (A), the sum of the numerators used
to determine (i) invested percentages for allocations with respect to Losses
(for all Series of Notes and all classes of such Series of Notes) and (ii)
available subordinated amount percentages for allocations with respect to
Losses (for all Series of Notes that provide for credit enhancement in the
form of overcollateralization); and
(d) when used with respect to Recoveries, the percentage equivalent of
a fraction, the numerator of which will be the cumulative amount of all
unreimbursed Losses allocated to the Class A-1 Noteholders as of the end of
the Related Month and the denominator of which will be the cumulative amount
of all unreimbursed Losses for the Noteholders of all Series of Notes and
the Retained Interestholder (including all unreimbursed Losses in respect of
available subordinated amounts, if any, for all Series) as of the end of
such Related Month.
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<PAGE> 12
"Class A-1 Noteholders" means the holders of the Class A-1 Notes.
"Class A-1 Notes" means the Series 1996-1 Floating Rate Rental Car
Asset Backed Notes, Class A-1, executed by NFLP and authenticated and delivered
by or on behalf of the Trustee, substantially in the form of Exhibit A-1,
Exhibit A-5 or Exhibit A-9, as the context requires.
"Class A-1/A-2 Controlled Amortization Period" means a period
commencing on January 1, 1999, and ending on the earliest to occur of (a) the
date on which the Class A-1 Notes and the Class A-2 Notes are paid in full, (b)
the Series 1996-1 Termination Date for the Class A-1 Notes and the Class A-2
Notes and (c) the commencement of the Series 1996-1 Rapid Amortization Period.
"Class A-2 Carryover Controlled Amortization Amount" means, with
respect to the Class A-2 Notes for any Related Month during the Class A-1/A-2
Controlled Amortization Period, the amount, if any, by which the portion of the
Monthly Total Principal Allocation allocable to the Class A-2 Noteholders on a
pro rata basis with the Class A-1 Noteholders for the previous Related Month
plus any amounts drawn from the Series 1996-1 Excess Funding Account on account
of the Class A-2 Controlled Distribution Amount was less than the Class A-2
Controlled Distribution Amount for such previous Related Month; provided,
however, that for the first Related Month in the Class A-2 Controlled
Amortization Period, the Class A-2 Carryover Controlled Amortization Amount
shall be zero.
"Class A-2 Controlled Amortization Amount" means $23,950,000.
"Class A-2 Controlled Distribution Amount" means, with respect to any
Related Month during the Class A-1/A-2 Controlled Amortization Period, an amount
equal to the sum of the Class A-2 Controlled Amortization Amount and any Class
A-2 Carryover Controlled Amortization Amount for such Related Month.
"Class A-2 Controlled Distribution Amount Deficiency" has the meaning
set forth in Section 3.5(a)(i)(B) of this Supplement.
"Class A-2 Deficiency Amount" means, with respect to any Distribution
Date, the amount by which the Class A Monthly Interest payable in respect of the
Class A-2 Notes exceeds the amount available to pay such interest on the
Distribution Date.
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<PAGE> 13
"Class A-2 Expected Final Distribution Date" means the July 1999
Distribution Date.
"Class A-2 Initial Invested Amount" means an aggregate initial
principal amount of $143,700,000.
"Class A-2 Interest Rate" means an interest rate equal to 6.80% per
annum, calculated on the basis of a 360-day year of twelve 30-day months.
"Class A-2 Invested Amount" means, when used with respect to any date,
an amount equal to (a) the Class A-2 Initial Invested Amount minus (b) the
amount of principal payments made to Class A-2 Noteholders on or prior to such
date minus (c) all Losses allocated to the Class A-2 Noteholders on or prior to
such date plus (d) all Recoveries allocated to the Class A-2 Noteholders on or
prior to such date.
"Class A-2 Invested Percentage" means on any date of determination:
(a) when used with respect to Principal Collections, the percentage
equivalent of a fraction the numerator of which will be equal to the Class
A-2 Invested Amount, determined during the Series 1996-1 Revolving Period as
of the end of the Related Month (or, if prior to the end of the initial
Related Month, as of the Series 1996-1 Closing Date), or, during the Series
1996-1 Controlled Amortization Period and the Series 1996-1 Rapid
Amortization Period, as of the end of the Series 1996-1 Revolving Period,
and the denominator of which shall be the greater of (A) the Aggregate Asset
Amount as of the end of the Related Month or, until the end of the initial
Related Month, as of the Series 1996-1 Closing Date, and (B) as of the same
date as in clause (A), the sum of the numerators used to determine (i)
invested percentages for allocations with respect to Principal Collections
(for all classes of all Series of Notes) and (ii) available subordinated
amount percentages for allocations with respect to Principal Collections
(for all Series of Notes that provide for credit enhancement in the form of
overcollateralization);
(b) when used with respect to Interest Collections, the percentage
equivalent of a fraction the numerator of which shall be the Accrued Amounts
with respect to the Class A-2 Notes on such date of determination, and the
denominator of which shall be the aggregate Accrued Amounts with respect to
all Series of Notes on such date of determination;
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<PAGE> 14
(c) when used with respect to Losses, the percentage equivalent of a
fraction, the numerator of which will be the Class A-2 Invested Amount as of
the end of the Related Month and the denominator of which will be the
greater of (A) the Aggregate Asset Amount as of the end of the Related Month
and (B) as of the same date as in clause (A), the sum of the numerators used
to determine (i) invested percentages for allocations with respect to Losses
(for all Series of Notes and all classes of such Series of Notes) and (ii)
available subordinated amount percentages for allocations with respect to
Losses (for all Series of Notes that provide for credit enhancement in the
form of overcollateralization); and
(d) when used with respect to Recoveries, the percentage equivalent of
a fraction, the numerator of which will be the cumulative amount of all
unreimbursed Losses allocated to the Class A-2 Noteholders as of the end of
the Related Month and the denominator of which will be the cumulative amount
of all unreimbursed Losses for the Noteholders of all Series of Notes and
the Retained Interestholder (including all unreimbursed Losses in respect of
available subordinated amounts, if any, for all Series) as of the end of
such Related Month.
"Class A-2 Noteholders" means the holders of the Class A-2 Notes.
"Class A-2 Notes" means the Series 1996-1 6.80% Rental Car Asset
Backed Notes, Class A-2, executed by NFLP and authenticated and delivered by or
on behalf of the Trustee, substantially in the form of Exhibit A-2, Exhibit A-6
or Exhibit A-10, as the context requires.
"Class A-3 Carryover Controlled Amortization Amount" means, with
respect to the Class A-3 Notes for any Related Month during the Class A-3
Controlled Amortization Period, the amount, if any, by which the Monthly Total
Principal Allocation for the previous Related Month plus any amounts drawn from
the Series 1996-1 Excess Funding Account was less than the Class A-3 Controlled
Distribution Amount for such previous Related Month; provided, however, that for
the first Related Month in the Class A-3 Controlled Amortization Period, the
Class A-3 Carryover Controlled Amortization Amount shall be zero.
"Class A-3 Controlled Amortization Amount" means $51,891,667.
"Class A-3 Controlled Amortization Period" means a period commencing
on January 1, 2001, and ending on the earliest to occur of (a) the date on which
the Class A-3 Notes are paid in
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<PAGE> 15
full, (b) the Series 1996-1 Termination Date for the Class A-3 Notes and (c) the
commencement of the Series 1996-1 Rapid Amortization Period.
"Class A-3 Controlled Distribution Amount" means, with respect to
any Related Month during the Class A-3 Controlled Amortization Period, an amount
equal to the sum of the Class A-3 Controlled Amortization Amount and any Class
A-3 Carryover Controlled Amortization Amount for such Related Month.
"Class A-3 Controlled Distribution Amount Deficiency" has the meaning
set forth in Section 3.5(a)(i)(C) of this Supplement.
"Class A-3 Deficiency Amount" means, with respect to any Distribution
Date, the amount by which the Class A Monthly Interest that is payable in
respect of the Class A-3 Notes exceeds the amount available to pay such interest
on such Distribution Date.
"Class A-3 Expected Final Distribution Date" means the July 2001
Distribution Date.
"Class A-3 Initial Invested Amount" means an aggregate initial
principal amount of $311,350,000.
"Class A-3 Interest Rate" means a interest rate equal to 7.10% per
annum, calculated on the basis of a 360-day year of twelve 30-day months.
"Class A-3 Invested Amount" means, when used with respect to any date,
an amount equal to (a) the Class A-3 Initial Invested Amount minus (b) the
amount of principal payments made to Class A-3 Noteholders on or prior to such
date minus (c) all Losses allocated to the Class A-3 Noteholders on or prior to
such date Plus (d) all Recoveries allocated to the Class A-3 Noteholders on or
prior to such date.
"Class A-3 Invested Percentage" means on any date of determination:
(a) when used with respect to Principal Collections, the percentage
equivalent of a fraction the numerator of which will be equal to the Class
A-3 Invested Amount, determined during the Series 1996-1 Revolving Period as
of the end of the Related Month (or, if prior to the end of the initial
Related Month, as of the Series 1996-1 Closing Date), or, during the Series
1996-1 Controlled Amortization Period and the Series 1996-1 Rapid
Amortization Period, as of the end of the Series 1996-1 Revolving Period,
and the
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<PAGE> 16
denominator of which shall be the greater of (A) the Aggregate Asset Amount
as of the end of the Related Month or, until the end of the initial Related
Month, as of the Series 1996-1 Closing Date, and (B) as of the same date as
in clause (A), the sum of the numerators used to determine (i) invested
percentages for allocations with respect to Principal Collections (for all
classes of all Series of Notes) and (ii) available subordinated amount
percentages for allocations with respect to Principal Collections (for all
Series of Notes that provide for credit enhancement in the form of
overcollateralization);
(b) when used with respect to Interest Collections, the percentage
equivalent of a fraction the numerator of which shall be the Accrued Amounts
with respect to the Class A-3 Notes on such date of determination, and the
denominator of which shall be the aggregate Accrued Amounts with respect to
all Series of Notes on such date of determination;
(c) when used with respect to Losses, the percentage equivalent of a
fraction, the numerator of which will be the Class A-3 Invested Amount as of
the end of the Related Month and the denominator of which will be the
greater of (A) the Aggregate Asset Amount as of the end of the Related Month
and (B) as of the same date as in clause (A), the sum of the numerators used
to determine (i) invested percentages for allocations with respect to Losses
(for all classes of all Series of Notes) and (ii) available subordinated
amount percentages for allocations with respect to Losses (for all Series of
Notes that provide for credit enhancement in the form of
overcollateralization); and
(d) when used with respect to Recoveries, the percentage equivalent of
a fraction, the numerator of which will be the cumulative amount of all
unreimbursed Losses allocated to the Class A-3 Noteholders as of the end of
the Related Month and the denominator of which will be the cumulative amount
of all unreimbursed Losses for the Noteholders of all Series of Notes and
the Retained Interestholder (including all unreimbursed Losses in respect of
available subordinated amounts, if any, for all Series) as of the end of
such Related Month.
"Class A-3 Noteholders" means the holders of the Class A-3 Notes.
"Class A-3 Notes" means the Series 1996-1 7.10% Rental Car Asset
Backed Notes, Class A-3, executed by NFLP and authenticated and delivered by or
on behalf of the Trustee,
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<PAGE> 17
substantially in the form of Exhibit A-3, Exhibit A-7 or Exhibit A-11, as the
context requires.
"Class A-4 Carryover Controlled Amortization Amount" means, with
respect to the Class A-4 Notes for any Related Month during the Class A-4
Controlled Amortization Period, the amount, if any, by which the Monthly Total
Principal Allocation for the previous Related Month plus any amounts drawn from
the Series 1996-1 Excess Funding Account was less than the Class A-4 Controlled
Distribution Amount for such previous Related Month; provided, however, that for
the first Related Month in the Class A-4 Controlled Amortization Period, the
Class A-4 Carryover Controlled Amortization Amount shall be zero.
"Class A-4 Controlled Amortization Amount" means $27,941,667.
"Class A-4 Controlled Amortization Period" means a period commencing
on January 1, 2003, and ending on the earliest to occur of (a) the date on which
the Class A-4 Notes are paid in full, (b) the Series 1996-1 Termination Date for
the Class A-4 Notes and (c) the commencement of the Series 1996-1 Rapid
Amortization Period.
"Class A-4 Controlled Distribution Amount" means, with respect to
any Related Month during the Class A-4 Controlled Amortization Period, an amount
equal to the sum of the Class A-4 Controlled Amortization Amount and any Class
A-4 Carryover Controlled Amortization Amount for such Related Month.
"Class A-4 Controlled Distribution Amount Deficiency" has the meaning
set forth in Section 3.5(a)(i)(D) of this Supplement.
"Class A-4 Deficiency Amount" means, with respect to any Distribution
Date, the amount by which the Class A Monthly Interest that is payable in
respect of the Class A-4 Notes exceeds the amount available to pay such interest
on such Distribution Date.
"Class A-4 Expected Final Distribution Date" means the July 2003
Distribution Date.
"Class A-4 Initial Invested Amount" means an aggregate initial
principal amount of $167,650,000.
"Class A-4 Interest Rate" means an interest rate equal to 7.35% per
annum, calculated on the basis of a 360-day year of twelve 30-day months.
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<PAGE> 18
"Class A-4 Invested Amount" means, when used with respect to any date,
an amount equal to (a) the Class A-4 Initial Invested Amount minus (b) the
amount of principal payments made to Class A-4 Noteholders on or prior to such
date minus (c) all Losses allocated to the Class A-4 Noteholders on or prior to
such date plus (d) all Recoveries allocated to the Class A-4 Noteholders on or
prior to such date.
"Class A-4 Invested Percentage" means on any date of determination:
(a) when used with respect to Principal Collections, the percentage
equivalent of a fraction the numerator of which will be equal to the Class
A-4 Invested Amount, determined during the Series 1996-1 Revolving Period
as of the end of the Related Month (or, if prior to the end of the initial
Related Month, as of the Series 1996-1 Closing Date), or, during the Series
1996-1 Controlled Amortization Period and the Series 1996-1 Rapid
Amortization Period, as of the end of the Series 1996-1 Revolving Period,
and the denominator of which shall be the greater of (A) the Aggregate Asset
Amount as of the end of the Related Month or, until the end of the initial
Related Month, as of the Series 1996-1 Closing Date, and (B) as of the same
date as in clause (A), the sum of the numerators used to determine (i)
invested percentages for allocations with respect to Principal Collections
(for all classes of all Series of Notes) and (ii) available subordinated
amount percentages for allocations with respect to Principal Collections
(for all Series of Notes that provide for credit enhancement in the form of
overcollateralization);
(b) when used with respect to Interest Collections, the percentage
equivalent of a fraction the numerator of which shall be the Accrued Amounts
with respect to the Class A-4 Notes on such date of determination, and the
denominator of which shall be the aggregate Accrued Amounts with respect to
all Series of Notes on such date of determination;
(c) when used with respect to Losses, the percentage equivalent of a
fraction, the numerator of which will be the Class A-4 Invested Amount as of
the end of the Related Month and the denominator of which will be the
greater of (A) the Aggregate Asset Amount as of the end of the Related Month
and (B) as of the same date as in clause (A), the sum of the numerators used
to determine (i) invested percentages for allocations with respect to Losses
(for all classes of all Series of Notes) and (ii) available subordinated
amount percentages for allocations with respect to Losses (for all
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<PAGE> 19
Series of Notes that provide for credit enhancement in the form of
overcollateralization); and
(d) when used with respect to Recoveries, the percentage equivalent of
a fraction, the numerator of which will be the cumulative amount of all
unreimbursed Losses allocated to the Class A-4 Noteholders as of the end of
the Related Month and the denominator of which will be the cumulative amount
of all unreimbursed Losses for the Noteholders of all Series of Notes and
the Retained Interestholder (including all unreimbursed Losses in respect of
available subordinated amounts, if any, for all Series) as of the end of
such Related Month.
"Class A-4 Noteholders" means the holders of the Class A-4 Notes.
"Class A-4 Notes" means the Series 1996-1 7.35% Rental Car Asset
Backed Notes, Class A-4, executed by NFLP and authenticated and delivered by or
on behalf of the Trustee, substantially in the form of Exhibit A-4, Exhibit A-8
or Exhibit A-12, as the context requires.
"Class B Carryover Controlled Amortization Amount" means any and all
of the Class B-1 Carryover Controlled Amortization Amount, the Class B-2
Carryover Controlled Amortization Amount and the Class B-3 Carryover Controlled
Amortization Amount.
"Class B Collateral" means the Collateral, the Master Collateral
allocable to the Class B Notes and the Class B Distribution Account Collateral.
"Class B Controlled Distribution Amount" means any or all of the Class
B-1 Controlled Distribution Amount, the Class B-2 Controlled Distribution Amount
and the Class B-3 Controlled Distribution Amount, as the context requires.
"Class B Controlled Distribution Amount Deficiency" means the sum of
the Class B-1 Controlled Distribution Amount Deficiency, the Class B-2
Controlled Distribution Amount Deficiency, the Class B-3 Controlled Distribution
Amount Deficiency and the Class B-4 Controlled Distribution Amount Deficiency.
"Class B Deficiency Amount" has means any or all of the Class B-1
Deficiency Amount, the Class B-2 Deficiency Amount and the Class B-3 Deficiency
Amount, as the context requires.
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<PAGE> 20
"Class B Distribution Account" has the meaning specified in Section
3.12(a) of this Supplement.
"Class B Distribution Account Collateral" has the meaning specified in
Section 3.12(d) of this Supplement.
"Class B Enhancement Amount" means the sum of (a) the Series 1996-1
Available Subordinated Amount plus (b) the Letter of Credit Amount.
"Class B Expected Final Distribution Date" means any or all of the
Class B-1 Expected Final Distribution Date, the Class B-2 Expected Final
Distribution Date and the Class B-3 Expected Final Distribution Date, as the
context requires.
"Class B Initial Invested Amount" means any or all of the Class B-1
Initial Invested Amount, the Class B-2 Initial Invested Amount or the Class B-3
Initial Invested Amount, as the context requires.
"Class B Interest Rate" means any of the Class B-1 Interest Rate, the
Class B-2 Interest Rate or the Class B-3 Interest Rate, as the context requires.
"Class B Invested Amount" means, when used with respect to any date,
an amount equal to (a) the Class B Initial Invested Amount minus (b) the amount
of principal payments made to Class B Noteholders on or prior to such date minus
(c) all Losses allocated to the Class B Noteholders on or prior to such date
Plus (d) all Recoveries allocated to the Class B Noteholders on or prior to such
date.
"Class B Invested Percentage" means on any date of determination, the
sum of the Class B-1 Invested Percentage, the Class B-2 Invested Percentage and
the Class B-3 Invested Percentage for such date of determination.
"Class B Investor Monthly Servicing Fee" means, on any Distribution
Date, an amount equal to the product of 1/12th of 0.50% of the Class B Invested
Amount as of the preceding Distribution Date (or, in the case of the initial
Distribution Date, the Class B Initial Invested Amount), after giving effect to
any payments of principal on such preceding Distribution Date; provided,
however, that if a Rapid Amortization Period shall occur and be continuing and
if National is no longer the Servicer, the Class B Investor Monthly Servicing
Fee shall equal the greater of (x) the product of (i) a fraction, the numerator
of which is the Class B Invested Amount on such Distribution Date and the
denominator of which is the aggregate invested amounts for all outstanding
Series of Notes on such Distribution Date,
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<PAGE> 21
(ii) $20 and (iii) the number of Vehicles as of the last day of the Related
Month, and (y) the amount described in the first clause of this definition.
"Class B Monthly Interest" means (a) with respect to the first
Distribution Date and with respect to any of all of the classes of Class B
Notes, as the context requires, an amount equal to the product of (i) a
fraction the numerator of which is the number of days from and including the
date of issuance of the Class B-1 Notes, the Class B-2 Notes or the Class B-3
Notes (as applicable) to but excluding the first Distribution Date and the
denominator of which is 360, (ii) the Class B Interest Rate for the Class B-1
Notes, the Class B-2 Notes or the Class B-3 Notes (as applicable) and (iii) the
Class B Initial Invested Amount for the Class B-1 Notes, the Class B-2 Notes or
the Class B-3 Notes (as applicable) and (b) with respect to each other
Distribution Date, an amount equal to one-twelfth of the product of (A) the
Class B Interest Rate for the Class B-1 Notes, the Class B-2 Notes or the Class
B-3 Notes (as applicable) and (B) the Class B Principal Balance for the Class
B-1 Notes, the Class B-2 Notes or the Class B-3 Notes (as applicable) as of the
preceding Distribution Date (determined after giving effect to all payments,
deposits and withdrawals on such preceding Distribution Date).
"Class B Monthly Interest Shortfall" means as of any Distribution Date
and with respect to any or all of the classes of Class B Notes, as the context
requires, the excess, if any, of the Class B Monthly Interest for the Class B-1
Notes, the Class B-2 Notes or the Class B-3 Notes (as applicable) and any unpaid
Class B Deficiency Amounts for the Class B-1 Notes, the Class B-2 Notes or the
Class B-3 Notes (as applicable) (together with accrued interest on such unpaid
Class B Deficiency Amounts) over the amount withdrawn from the Series 1996-1
Accrued Interest Account and deposited in the Class B Distribution Account on
such Distribution Date pursuant to Section 3.2(b) of this Supplement.
"Class B Monthly Supplemental Servicing Fee" means, on any
Distribution Date, the product of the Supplemental Servicing Fee accrued during
the related Series 1996-1 Interest Period times a fraction, the numerator of
which is the Class B Invested Amount on such Distribution Date and the
denominator of which is the aggregate of the invested amounts for all
outstanding Series of Notes on such Distribution Date.
"Class B Noteholder" means a Person in whose name a Class B Note is
registered in the Note Register.
"Class B Notes" means any or all of the Class B-1 Notes, the Class B-2
Notes or the Class B-3 Notes, in each case
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<PAGE> 22
executed by NFLP and authenticated and delivered by or on behalf of the Trustee,
substantially in the form of Exhibit B-1, Exhibit B-2, Exhibit B-3, Exhibit B-4,
Exhibit B-5, Exhibit B-6 Exhibit B-7, Exhibit B-8 or Exhibit B-9 of this
Supplement (as applicable). Definitive Class B Notes shall have such insertions
and deletions as are necessary to give effect to the provisions of Section 2.18
of the Base Indenture.
"Class B Principal Balance" means, as of any date of determination, an
amount equal to the Class B Initial Invested Amount minus the aggregate amount
of payments of principal distributed to the Class B Noteholders prior to such
date.
"Class B Repurchase Amount" has the meaning specified in Section
7.1(a) of this Supplement.
"Class B-1 Carryover Controlled Amortization Amount" means, with
respect to the Class B-1 Notes for any Related Month during the Class B-1
Controlled Amortization Period, the amount, if any, by which the Monthly Total
Principal Allocation for the previous Related Month plus any amounts drawn from
the Series 1996-1 Excess Funding Account was less than the sum of the Class A-1
Controlled Distribution Amount, the Class A-2 Controlled Distribution Amount and
the Class B-1 Controlled Distribution Amount for such previous Related Month;
provided, however, that for the first Related Month in the Class B-1 Controlled
Amortization Period, the Class B-1 Carryover Controlled Amortization Amount
shall be zero.
"Class B-1 Controlled Amortization Amount" means $12,600,000.
"Class B-1 Controlled Amortization Period" means a period commencing
on the later to occur of (a) July 1, 1999, and (b) the date on which the Class
A-1 Notes and the Class A-2 Notes are paid in full, and ending on the earliest
to occur of (i) the date on which the Class B-1 Notes are paid in full, (b) the
Series 1996-1 Termination Date for the Class B-1 Notes and (c) the commencement
of the Series 1996-1 Rapid Amortization Period.
"Class B-1 Controlled Distribution Amount" means, with respect to any
Related Month during the Class B-1 Controlled Amortization Period, an amount
equal to the sum of the Class B-1 Controlled Amortization Amount and any Class
B-1 Carryover Controlled Amortization Amount for such Related Month.
"Class B-1 Controlled Distribution Amount Deficiency" has the meaning
set forth in Section 3.5(b)(i)(A) of this Supplement.
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<PAGE> 23
"Class B-1 Deficiency Amount" means, with respect to any Distribution
Date, the amount by which the Class B Monthly Interest that is payable in
respect of the Class B-1 Notes exceeds the amount available to pay such interest
on such Distribution Date.
"Class B-1 Expected Final Distribution Date" means the August 1999
Distribution Date.
"Class B-1 Initial Invested Amount" means an aggregate initial
principal amount of $12,600,000.
"Class B-1 Interest Rate" means an interest rate equal to 7.35% per
annum, calculated on the basis of a 360-day year of twelve 30-day months.
"Class B-1 Invested Amount" means, when used with respect to any date,
an amount equal to (a) the Class B-1 Initial Invested Amount minus (b) the
amount of principal payments made to Class B-1 Noteholders on or prior to such
date minus (c) all Losses allocated to the Class B-1 Noteholders on or prior to
such date plus (d) all Recoveries allocated to the Class B-1 Noteholders on or
prior to such date.
"Class B-1 Invested Percentage" means on any date of determination:
(a) when used with respect to Principal Collections during the Series
1996-1 Revolving Period, the percentage equivalent of a fraction the
numerator of which will be equal to the Class B-1 Invested Amount,
determined during the Series 1996-1 Revolving Period as of the end of the
Related Month (or, if prior to the end of the initial Related Month, as of
the Series 1996-1 Closing Date), and, during the Series 1996-1 Controlled
Amortization Period or the Series 1996-1 Rapid Amortization Period, as of
the end of the Series 1996-1 Revolving Period and the denominator of which
shall be the greater of (A) the Aggregate Asset Amount as of the end of the
Related Month or, until the end of the initial Related Month, as of the
Series 1996-1 Closing Date, and (B) as of the same date as in clause (A),
the sum of the numerators used to determine (i) invested percentages for
allocations with respect to Principal Collections (for all classes of all
Series of Notes) and (ii) available subordinated amount percentages for
allocations with respect to Principal Collections (for all Series of Notes
that provide for credit enhancement in the form of overcollateralization);
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<PAGE> 24
(b) when used with respect to Interest Collections, the percentage
equivalent of a fraction the numerator of which shall be the Accrued Amounts
with respect to the Class B-1 Notes on such date of determination, and the
denominator of which shall be the aggregate Accrued Amounts with respect to
all Series of Notes on such date of determination;
(c) when used with respect to Losses, the percentage equivalent of a
fraction, the numerator of which will be the Class B-1 Invested Amount as of
the end of the Related Month and the denominator of which will be the
greater of (A) the Aggregate Asset Amount as of the end of the Related Month
and (B) as of the same date as in clause (A), the sum of the numerators used
to determine (i) invested percentages for allocations with respect to Losses
(for all classes of all Series of Notes) and (ii) available subordinated
amount percentages for allocations with respect to Losses (for all Series of
Notes that provide for credit enhancement in the form of
overcollateralization); and
(d) when used with respect to Recoveries, the percentage equivalent of
a fraction, the numerator of which will be the cumulative amount of all
unreimbursed Losses allocated to the Class B-1 Noteholders as of the end of
the Related Month and the denominator of which will be the cumulative amount
of all unreimbursed Losses for the Noteholders of all Series of Notes and
the Retained Interestholder (including all unreimbursed Losses in respect of
available subordinated amounts, if any, for all Series) as of the end of
such Related Month.
"Class B-1 Noteholders" means the holders of the Class B-1 Notes.
"Class B-1 Notes" means the Series 1996-1 7.35% Rental Car Asset
Backed Notes, Class B-1, executed by NFLP and authenticated and delivered by or
on behalf of the Trustee, substantially in the form of Exhibit B-1, Exhibit B-4
or Exhibit B-7, as the context requires.
"Class B-2 Carryover Controlled Amortization Amount" means, with
respect to the Class B-2 Notes for any Related Month during the Class B-2
Controlled Amortization Period, the amount, if any, by which the Monthly Total
Principal Allocation for the previous Related Month plus any amounts drawn from
the Series 1996-1 Excess Funding Account was less than the sum of the Class A-3
Controlled Distribution Amount and the Class B-2 Controlled Distribution Amount
for such previous Related Month; provided, however, that for the first Related
Month in the
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<PAGE> 25
Class B-2 Controlled Amortization Period, the Class B-2 Carryover Controlled
Amortization Amount shall be zero.
"Class B-2 Controlled Amortization Amount" means $13,650,000.
"Class B-2 Controlled Amortization Period" means a period commencing
on the later to occur of (a) July 1, 2001, and (b) the date on which the Class
A-3 Notes are paid in full, and ending on the earliest to occur of (i) the date
on which the Class B-2 Notes are paid in full, (b) the Series 1996-1 Termination
Date for the Class B-2 Notes and (c) the commencement of the Series 1996-1 Rapid
Amortization Period.
"Class B-2 Controlled Distribution Amount" means, with respect to any
Related Month during the Class B-2 Controlled Amortization Period, an amount
equal to the sum of the Class B-2 Controlled Amortization Amount and any Class
B-2 Carryover Controlled Amortization Amount for such Related Month.
"Class B-2 Controlled Distribution Amount Deficiency" has the meaning
set forth in Section 3.5(b)(i)(B) of this Supplement.
"Class B-2 Deficiency Amount" means, with respect to any Distribution
Date, the amount by which the Class B Monthly Interest that is payable in
respect of the Class B-2 Notes exceeds the amount available to pay such interest
on such Distribution Date.
"Class B-2 Expected Final Distribution Date" means the August 2001
Distribution Date.
"Class B-2 Initial Invested Amount" means an aggregate initial
principal amount of $13,650,000.
"Class B-2 Interest Rate" means an interest rate equal to 7.70% per
annum, calculated on the basis of a 360-day year of twelve 30-day months.
"Class B-2 Invested Amount" means, when used with respect to any date,
an amount equal to (a) the Class B-2 Initial Invested Amount minus (b) the
amount of principal payments made to Class B-2 Noteholders on or prior to such
date minus (c) all Losses allocated to the Class B-2 Noteholders on or prior to
such date plus (d) all Recoveries allocated to the Class B-2 Noteholders on or
prior to such date.
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<PAGE> 26
"Class B-2 Invested Percentage" means on any date of determination:
(a) when used with respect to Principal Collections during the Series
1996-1 Revolving Period, the percentage equivalent of a fraction the
numerator of which will be equal to the Class B-2 Invested Amount,
determined during the Series 1996-1 Revolving Period as of the end of the
Related Month (or, if prior to the end of the initial Related Month, as of
the Series 1996-1 Closing Date), and, during the Series 1996-1 Controlled
Amortization Period or the Series 1996-1 Rapid Amortization Period, as of
the end of the Series 1996-1 Revolving Period and the denominator of which
shall be the greater of (A) the Aggregate Asset Amount as of the end of the
Related Month or, until the end of the initial Related Month, as of the
Series 1996-1 Closing Date, and (B) as of the same date as in clause (A),
the sum of the numerators used to determine (i) invested percentages for
allocations with respect to Principal Collections (for all classes of all
Series of Notes) and (ii) available subordinated amount percentages for
allocations with respect to Principal Collections (for all Series of Notes
that provide for credit enhancement in the form of overcollateralization);
(b) when used with respect to Interest Collections, the percentage
equivalent of a fraction the numerator of which shall be the Accrued Amounts
with respect to the Class B-2 Notes on such date of determination, and the
denominator of which shall be the aggregate Accrued Amounts with respect to
all Series of Notes on such date of determination;
(c) when used with respect to Losses, the percentage equivalent of a
fraction, the numerator of which will be the Class B-2 Invested Amount as of
the end of the Related Month and the denominator of which will be the
greater of (A) the Aggregate Asset Amount as of the end of the Related Month
and (B) as of the same date as in clause (A), the sum of the numerators used
to determine (i) invested percentages for allocations with respect to Losses
(for all classes of all Series of Notes) and (ii) available subordinated
amount percentages for allocations with respect to Losses (for all Series of
Notes that provide for credit enhancement in the form of
overcollateralization); and
(d) when used with respect to Recoveries, the percentage equivalent of
a fraction, the numerator of which will be the cumulative amount of all
unreimbursed Losses
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allocated to the Class B-2 Noteholders as of the end of the Related Month
and the denominator of which will be the cumulative amount of all
unreimbursed Losses for the Noteholders of all Series of Notes and the
Retained Interestholder (including all unreimbursed Losses in respect of
available subordinated amounts, if any, for all Series) as of the end of
such Related Month.
"Class B-2 Noteholders" means the holders of Class B-2 Notes.
"Class B-2 Notes" means the Series 1996-1 Floating Rate Rental Car
Asset Backed Notes, Class B-2, executed by NFLP and authenticated and delivered
by or on behalf of the Trustee, substantially in the form of Exhibit B-2,
Exhibit B-5 or Exhibit B-8, as the context requires.
"Class B-3 Carryover Controlled Amortization Amount" means, with
respect to the Class B-3 Notes for any Related Month during the Class B-3
Controlled Amortization Period, the amount, if any, by which the Monthly Total
Principal Allocation for the previous Related Month plus any amounts drawn from
the Series 1996-1 Excess Funding Account was less than the sum of the Class A-4
Controlled Distribution Amount and the Class B-3 Controlled Distribution Amount
for such previous Related Month; provided, however, that for the first Related
Month in the Class B-3 Controlled Amortization Period, the Class B-3 Carryover
Controlled Amortization Amount shall be zero.
"Class B-3 Controlled Amortization Amount" means $7,350,00.
"Class B-3 Controlled Amortization Period" means a period commencing
on the later to occur of (a) July 1, 2003, and (b) the date on which the Class
A-4 Notes are paid in full, and ending on the earliest to occur of (i) the date
on which the Class B-3 Notes are paid in full, (ii) the Series 1996-1
Termination Date for the Class B-3 Notes and (iii) the commencement of the
Series 1996-1 Rapid Amortization Period.
"Class B-3 Controlled Distribution Amount" means, with respect to any
Related Month during the Class B-3 Controlled Amortization Period, an amount
equal to the sum of the Class B-3 Controlled Amortization Amount and any Class
B-3 Carryover Controlled Amortization Amount for such Related Month.
"Class B-3 Controlled Distribution Amount Deficiency" has the meaning
set forth in Section 3.5(b)(i)(C) of this Supplement.
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"Class B-3 Deficiency Amount" means, with respect to any Distribution
Date, the amount by which the Class B Monthly Interest that is payable in
respect of the Class B-3 Notes exceeds the amount available to pay such interest
on such Distribution Date.
"Class B-3 Expected Final Distribution Date" means the August 2003
Distribution Date.
"Class B-3 Initial Invested Amount" means an aggregate initial
principal amount of $7,350,000.
"Class B-3 Interest Rate" means an interest rate equal to 7.80% per
annum, calculated on the basis of a 360-day year of twelve 30-day months.
"Class B-3 Invested Amount" means, when used with respect to any date,
an amount equal to (a) the Class B-3 Initial Invested Amount minus (b) the
amount of principal payments made to Class B-3 Noteholders on or prior to such
date minus (c) all Losses allocated to the Class B-3 Noteholders on or prior to
such date plus (d) all Recoveries allocated to the Class B-3 Noteholders on or
prior to such date.
"Class B-3 Invested Percentage" means on any date of determination:
(a) when used with respect to Principal Collections during the Series
1996-1 Revolving Period, the percentage equivalent of a fraction the
numerator of which will be equal to the Class B-3 Invested Amount,
determined during the Series 1996-1 Revolving Period as of the end of the
Related Month (or, if prior to the end of the initial Related Month, as of
the Series 1996-1 Closing Date), and, during the Series 1996-1 Controlled
Amortization Period or the Series 1996-1 Rapid Amortization Period, as of
the end of the Series 1996-1 Revolving Period and the denominator of which
shall be the greater of (A) the Aggregate Asset Amount as of the end of the
Related Month or, until the end of the initial Related Month, as of the
Series 1996-1 Closing Date, and (B) as of the same date as in clause (A),
the sum of the numerators used to determine (i) invested percentages for
allocations with respect to Principal Collections (for all classes of all
Series of Notes) and (ii) available subordinated amount percentages for
allocations with respect to Principal Collections (for all Series of Notes
that provide for credit enhancement in the form of overcollateralization);
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(b) when used with respect to Interest Collections, the percentage
equivalent of a fraction the numerator of which shall be the Accrued Amounts
with respect to the Class B-3 Notes on such date of determination, and the
denominator of which shall be the aggregate Accrued Amounts with respect to
all Series of Notes on such date of determination;
(c) when used with respect to Losses, the percentage equivalent of a
fraction, the numerator of which will be the Class B-3 Invested Amount as of
the end of the Related Month and the denominator of which will be the
greater of (A) the Aggregate Asset Amount as of the end of the Related Month
and (B) as of the same date as in clause (A), the sum of the numerators used
to determine (i) invested percentages for allocations with respect to Losses
(for all classes of all Series of Notes) and (ii) available subordinated
amount percentages for allocations with respect to Losses (for all Series of
Notes that provide for credit enhancement in the form of
overcollateralization); and
(d) when used with respect to Recoveries, the percentage equivalent of
a fraction, the numerator of which will be the cumulative amount of all
unreimbursed Losses allocated to the Class B-3 Noteholders as of the end of
the Related Month and the denominator of which will be the cumulative amount
of all unreimbursed Losses for the Noteholders of all Series of Notes and
the Retained Interestholder (including all unreimbursed Losses in respect of
available subordinated amounts, if any, for all Series) as of the end of
such Related Month.
"Class B-3 Noteholders" means the holders of the Class B-3 Notes.
"Class B-3 Notes" means the Series 1996-1 Floating Rate Rental Car
Asset Backed Notes, Class B-3, executed by NFLP and authenticated and delivered
by or on behalf of the Trustee, substantially in the form of Exhibit B-3,
Exhibit B-6 or Exhibit B-9, as the context requires.
"Consent" has the meaning specified in Section 5.1(c) of this
Supplement.
"Consent Period Expiration Date" has the meaning specified in Section
5.1(c) of this Supplement.
"Deposit Date" means each Business Day on which Collections are
deposited into the Collection Account.
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"Designated Amounts" has the meaning specified in Section 5.1(b) of
this Supplement.
"Enhancement" means the Class B Invested Amount, the Letter of Credit,
the Cash Collateral Account and the Series 1996-1 Available Subordinated Amount.
"Enhancement Amount" means, as of any date of determination, the sum
of (a) the Class B Invested Amount as of such date, plus (b) the Letter of
Credit Amount as of such date plus (c) the Series 1996-1 Available Subordinated
Amount as of such date.
"Excess Collections" has the meaning specified in Section 3.3(d) of
this Supplement.
"Expected Final Distribution Date" means any Class A Expected Final
Distribution Date or Class B Expected Final Distribution Date, as the context
requires.
"GM Vehicle Percentage" means, as of any date of determination, the
product of (a) a fraction, expressed as a percentage, (i) the numerator of which
is the aggregate Net Book Value of all Program Vehicles manufactured by GM as of
such day and (ii) the denominator of which is an amount equal to the Aggregate
Invested Amount on such day and (b) the Series 1996-1 Invested Percentage as of
such date.
"Index Maturity" means, with respect to LIBOR, (a) during the Series
1996-1 Revolving Period, three months and (b) during the Series 1996-1
Controlled Amortization Period or the Series 1996-1 Rapid Amortization Period,
one month.
"Interest Period" means (a) in the case of the initial Distribution
Date, the period from the Series 1996-1 Closing Date to but excluding the
initial Distribution Date and (b) thereafter, a period from the then preceding
Distribution Date to the next Distribution Date.
"Interest Reset Date" means the first day of the applicable Interest
Period.
"Invested Amount" means, with respect to the Series 1996-1 Notes, the
Series 1996-1 Invested Amount.
"Lease Payment Losses" means as of any Distribution Date, the amount
of payments due from the Lessee under the Lease with respect to the Related
Month which were not paid when due (including by application of amounts drawn on
the Letter of Credit).
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"Lease Payment Recoveries" means, as of any day, an amount equal to
all payments made by the Lessee under the Lease and applications of amounts
drawn on the Letter of Credit on such day on account of past due payments under
the Lease.
"Letter of Credit" means the irrevocable letter of credit issued by
the Letter of Credit Provider in favor of the Trustee for the benefit of the
Series 1996-1 Noteholders pursuant to the Letter of Credit Reimbursement
Agreement.
"Letter of Credit Amount" means, as of any date of determination,
the amount (a) available to be drawn on such date under the Letter of Credit, as
specified therein or (b) if the Cash Collateral Account has been established and
funded pursuant to Section 3.10, the amount on deposit in the Cash Collateral
Account on such date.
"Letter of Credit Expiration Date" means the date the Letter of Credit
expires as specified in the Letter of Credit.
"Letter of Credit Provider" means Deutsche Bank AG, New York Branch.
"LIBOR" means an interest rate for each Interest Period in respect of
the Class A-1 Notes which is be determined by the Trustee as follows:
(i) On each LIBOR Determination Date, until the principal amounts of
the Class A-1 Notes are paid in full, the Trustee will determine the
arithmetic mean of the offered rates (rounded upwards to the nearest one
sixty-fourth of one percent (1/64%)) for deposits in U.S. dollars for the
period of the applicable Index Maturity, commencing on such Interest Reset
Date, which appear on the Reuters Screen LIBO Page at approximately 11:00
a.m., London time, on such LIBOR Determination Date. If at least two such
offered rates appear on the Reuters Screen LIBO Page, for such Interest
Period will be the arithmetic mean of such offered rates (rounded upwards to
the nearest one sixty-fourth of one percent (1/64%)) as determined by the
Trustee for each such Series 1996-1 Notes.
(ii) If fewer than two offered rates appear on the Reuters Screen LIBO
Page on such LIBOR Determination Date, "LIBOR" will be the London interbank
offered rate for U.S. dollar deposits for the period of the applicable Index
Maturity that appears on the Telerate Page 3750 as of 11:00 a.m., London
time, on such LIBOR Determination Date. "Telerate Page 3750" means the
display designated as page "3750" on the Telerate Service (or such other
page as may
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replace the 3750 page on that service or such other service or services as
may be nominated by the British Bankers, Association for the purpose of
displaying London interbank offered rates for U.S. dollar deposits). With
respect to a LIBOR Determination Date on which no rate appears on the
Reuters Screen LIBO Page or Telerate Page 3750, the Trustee will request the
principal London offices of each of four major banks in the London interbank
market selected by the Trustee to provide the Trustee with offered
quotations for deposits in U.S. dollars for the period of the specified
Index Maturity, commencing on such Interest Reset Date, to prime banks in
the London interbank market at approximately 11:00 a.m., London time, on
such LIBOR Determination Date and in a principal amount equal to an amount
of not less than $250,000 that is representative of a single transaction in
such market at such time. If at least two such quotations are provided,
"LIBOR" for such Interest Period will be the arithmetic mean of such
quotations (rounded upwards to the nearest one sixty-fourth of one percent
(1/64%)). If fewer than two such quotations are provided, "LIBOR" for such
Interest Period will be the arithmetic mean of rates quoted by three major
banks in the City of New York selected by the Trustee at approximately 11:00
a.m., New York City time, on such LIBOR Determination Date for loans in U.S.
dollars to leading European banks, for the period of the specified Index
Maturity, commencing on such Interest Reset Date, and in a principal amount
equal to an amount of not less than $250,000 that is representative of a
single transaction in such market at such time; provided, however, that if
the banks selected as aforesaid by such Trustee are not quoting rates as
mentioned in this sentence, "LIBOR" for such Interest Period will be the
same as "LIBOR" for the immediately Preceding Interest Period.
"LIBOR Determination Date" means, with respect to any Interest Period,
the second London Banking Day prior to the Interest Reset Date for such Interest
Period.
"London Banking Day" means, for purposes of calculating LIBOR, any
business day on which dealings in deposits in United States dollars are
transacted in the London interbank market.
"Losses"' means, with respect to any Related Month, the sum (without
duplication) of the following with respect to Acquired Vehicles (other than any
Exchanged Vehicles): (a) all Manufacturer Late Payment Losses, Manufacturer
Event of Default Losses and Purchaser Late Payment Losses for such Related Month
plus (b) with respect to Disposition Proceeds received during Related Month from
the sale or other disposition of Acquired Vehicles (other than pursuant to a
Manufacturer Program), the
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excess, if any, of (i) the Net Book Values of such Acquired Vehicles calculated
on the Disposition Date, over (ii) the aggregate amount of such Disposition
Proceeds received during the Related Month in respect thereof by NFLP, the
Master Collateral Agent or the Trustee (including by deposit into the Collection
Account or the Master Collateral Account) plus any Termination Payments that are
past due with respect to such Vehicles.
"Manufacturer Event of Default Losses" with respect to any Related
Month, means, after the occurrence of a Manufacturer Event of Default with
respect to any Manufacturer, all payments that are required to be made (but are
not made) by such Manufacturer to NFLP with respect to Acquired Vehicles that
are either sold at Auction or returned to such Manufacturer under its
Manufacturer Program; provided that the grace or other similar period for the
determination of such Manufacturer Event of Default expires during such Related
Month.
"Manufacturer Late Payment Losses" means with respect to any Related
Month, the amount of all payments required to be made by Manufacturers under
Manufacturer Programs with respect to Acquired Vehicles, which are more than
ninety (90) days past due as of the end of such Related Month; provided that
such amount shall be net of amounts that are the subject of a good faith dispute
as evidenced in writing by the Manufacturer questioning the accuracy of the
amounts paid or payable in respect of any such Acquired Vehicles.
"Market Value" means, with respect to any Non-Program Vehicle as of
any date of determination, the market value of such Non-Program Vehicle as
specified in the Related Month's published National Automobile Dealers
Association, Official Used Car Guide, Central Edition (the "NADA Guide") for the
model class and model year of such Vehicle based on the average equipment and
the average mileage of each Vehicle of such model class and model year. If such
Vehicle is not listed in the NADA Guide published in the Related Month preceding
such date of determination, then the Black Book Official Finance/Lease Guide
(the "Lease Guide") shall be used to estimate the wholesale price of the
Vehicle, based on the Vehicle's model class and model year or the closest model
class and model year thereto, for purposes of such months for which the
wholesale price of such Vehicle is not so published in the NADA Guide; provided,
however, if the NADA Guide was not published in the Related Month, then the
Lease Guide shall be relied upon in its place, and if the Lease Guide is
unavailable, the Market Value of such Vehicle shall be based on an independent
third-party data source approved by each Rating Agency that is rating any Series
of Notes at the request of NFLP or National based on the average equipment and
average mileage of each
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Vehicle of such model class and model year or based upon such other methodology
approved by each such Rating Agency.
"Market Value Adjustment Amount" means, as of any day on or after the
third Determination Date after the Series 1996-1 Closing Date, an amount equal
to the product of (a) the Series 1996-1 Invested Percentage for such day and (b)
the greater of (i) the amount by which (A) the aggregate Net Book Value of
Non-Program Vehicles leased under the Lease as of the preceding Determination
Date exceeds (B) the average of the aggregate Market Value of such Non-Program
Vehicles as of such preceding Determination Date and the two Determination Dates
precedent thereto and (ii) the Measurement Month Shortfall for the most recently
ended Measurement Month.
"Maximum Manufacturer Amount" means with respect to the Series 1996-1
Notes, as of any day, the greater of (i) $40 million and (ii) 4% of the
aggregate Net Book Value of all Vehicles leased under the Lease on such day.
"Maximum Non-Program Vehicle Amount" means with respect to the Series
1996-1 Notes, as of any day, the greater of (i) $80 million and (ii) 10% of the
aggregate Net Book Value of all Vehicles leased under the Lease on such day.
"Measurement Month" with respect to any date, means the three calendar
months preceding such date.
"Measurement Month Shortfall" means, with respect to any Measurement
Month, the amount by which (a) the aggregate Net Book Value (as of the date of
their respective sales) of all Non-Program Vehicles sold at Auction or otherwise
during such Measurement Month exceeds (b) the aggregate amount of Disposition
Proceeds received from the sale of such Non-Program Vehicles.
"Minimum Class B Enhancement Amount" means, as of any day, the sum of
(a) 13.5% of the product of (i) the Non-Program Vehicle Percentage as of such
date and (ii) the Series 1996-1 Invested Amount as of such date plus (b) 6.5% of
the product of (i) the GM Vehicle Percentage as of such date and (ii) the Series
1996-1 Invested Amount as of such date plus (c) 7.5% of the product of (i) the
Chrysler Vehicle Percentage as of such date and (ii) the Series 1996-1 Invested
Amount as of such date plus (d) with respect to each Eligible Manufacturer of
Program Vehicles (other than GM and Chrysler) the applicable Additional
Manufacturer Enhancement Percentage of the product of (i) the applicable
Additional Manufacturer Vehicle Percentage as of such date and (ii) the Series
1996-1 Invested Amount allocable to the Class B Notes as of such date.
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"Monthly Total Principal Allocation" means the sum of all Series
1996-1 Principal Allocations and Series 1996-1 Available Subordinated Amount
Allocations with respect to a Related Month.
"Non-Program Acquired Vehicle Percentage" means, as of any date of
determination, the product of (a) a fraction, expressed as a percentage, (i) the
numerator of which is the aggregate Net Book Value of all Non-Program Vehicles
that are Acquired Vehicles as of such day and (ii) the denominator of which is
an amount equal to the Aggregate Invested Amount on such day and (b) the Series
1996-1 Invested Percentage as of such date.
"Non-Program Vehicle Percentage" means, as of any date of
determination, the product of (a) a fraction, expressed as a percentage, (i) the
numerator of which is the aggregate Net Book Value of all Non-Program Vehicles
as of such day and (ii) the denominator of which is an amount equal to the
Aggregate Invested Amount on such day and (b) the Series 1996-1 Invested
Percentage as of such date.
"Overcollateralization Portion" means, as of any date of
determination, (i) the sum of the amounts determined pursuant to clauses (a),
(b), (c), (d), (e), and (f) of the definition of the Required Enhancement Amount
as of such date minus (ii) the Letter of Credit Amount as of such date.
"Permanent Global Class A Note" means any Permanent Global Class A-1
Note, Permanent Global Class A-2 Note, Permanent Global Class A-3 Note or
Permanent Global Class A-4 Note.
"Permanent Global Class A-1 Note" means a permanent Global Class A-1
Note in registered form without interest coupons, substantially in the form of
Exhibit A-9 hereto.
"Permanent Global Class A-2 Note" means a permanent Global Class A-2
Note in registered form without interest coupons, substantially in the form of
Exhibit A-10 hereto.
"Permanent Global Class A-3 Note" means a permanent Global Class A-3
Note in registered form without interest coupons, substantially in the form of
Exhibit A-11 hereto.
"Permanent Global Class A-4 Note" means a permanent Global Class A-4
Note in registered form without interest coupons, substantially in the form of
Exhibit A-12 hereto.
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"Permanent Global Class B Note" means any Permanent Global Class B-1
Note, Permanent Global Class B-2 Note or Permanent Global Class B-3 Note.
"Permanent Global Class B-1 Note" means a permanent Global Class B-1
Note in registered form without interest coupons, substantially in the form of
Exhibit B-7 hereto.
"Permanent Global Class B-2 Note" means a permanent Global Class B-2
Note in registered form without interest coupons, substantially in the form of
Exhibit B-8 hereto.
"Permanent Global Class B-3 Note" means a permanent Global Class B-3
Note in registered form without interest coupons, substantially in the form of
Exhibit B-9 hereto.
"Purchase Agreement" means the Purchase Agreement dated April 17, 1996
among NFLP, National, CS First Boston Corporation and Citicorp Securities, Inc.
by which CS First Boston Corporation and Citicorp Securities, Inc. agree to act
as initial purchasers of the Series 1996-1 Notes.
"Purchaser Late Payment Losses" means, with respect to any Related
Month, the amount of all payments required to be made during such Related Month
by any Person in connection with the sale or other final disposition of Acquired
Vehicles which are more than sixty (60) days past due as of the end of such
Related Month.
"Rating Agency" means, with respect to the Series 1996-1 Notes,
Standard & Poor's and Duff & Phelps.
"Recoveries" means, with respect to any Related Month, the sum
(without duplication) of (i) all amounts received by any of NFLP, the Master
Collateral Agent or the Trustee (including by deposit into the Collection
Account or the Master Collateral Account) from any Person during such Related
Month in respect of Losses, plus (ii) the excess, if any, of (x) the aggregate
amount of Disposition Proceeds received during such Related Month by NFLP, the
Master Collateral Agent or the Trustee (including by deposit into the Collection
Account or the Master Collateral Account) during such Related Month and
resulting from the sale or other final disposition of Acquired Vehicles (other
than pursuant to Manufacturer Programs), plus any Termination Payments that have
been paid with respect to such Vehicles over (y) the Net Book Values of such
Vehicles, calculated on the dates of the respective sales or dispositions
thereof.
"Repurchase Date" shall have the meaning specified in Section 7.1(a)
of this Supplement.
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"Required Enhancement Amount" means, as of any date of determination,
the sum of (a) 19.5% of the product of (i) the Non-Program Vehicle Percentage as
of such date and (ii) the Series 1996-1 Invested Amount as of such date plus (b)
10.5% of the product of (i) the GM Vehicle Percentage as of such date and (ii)
the Series 1996-1 Invested Amount as of such date plus (c) 11.5\ of the product
of (i) the Chrysler Vehicle Percentage as of such date and (ii) the Series
1996-1 Invested Amount as of such date Plus (d) with respect to each Eligible
Manufacturer of Program Vehicles (other than GM and Chrysler) the applicable
Additional Manufacturer Vehicle Enhancement Percentage of the product of (i) the
applicable Additional Manufacturer Vehicle Percentage as of such date and (ii)
the Series 1996-1 Invested Amount as of such date plus (e) the Market Value
Adjustment Amount for such day plus (f) the aggregate of all amounts contributed
by NFLP to the Series 1996-1 Excess Funding Account during the preceding 12
month period to increase the Series 1996-1 Available Subordinated Amount in
order to cure a Series 1996-1 Enhancement Deficiency (but not including any
increase in the Series 1996-1 Available Subordinated Amount through Recoveries)
plus (g) the Additional Overcollateralization Amount as of such date.
"Requisite Series 1996-1 Noteholders" means Series 1996-1 Noteholders
holding Notes which evidence 25% or more of the Series 1996-1 Invested Amount.
"Restricted Global Class A Note" means any Restricted Global Class A-1
Note, Restricted Global Class A-2 Note, Restricted Global Class A-3 Note or
Restricted Global Class A-4 Note.
"Restricted Global Class A-1 Note" means a permanent global Class A-1
Note in fully registered form without interest coupons, substantially in the
form set forth in Exhibit A-1 hereto.
"Restricted Global Class A-2 Note" means a permanent global Class A-2
Note in fully registered form without interest coupons, substantially in the
form set forth in Exhibit A-2 hereto.
"Restricted Global Class A-3 Note" means a permanent global Class A-3
Note in fully registered form without interest coupons, substantially in the
form set forth in Exhibit A-3 hereto.
"Restricted Global Class A-4 Note" means a permanent global Class A-4
Note in fully registered form without interest coupons, substantially in the
form set forth in Exhibit A-4 hereto.
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"Restricted Global Class B Note" means any Restricted Global Class B-1
Note, Restricted Global Class B-2 Note or Restricted Global Class B-3 Note.
"Restricted Global Class B-1 Note" means a permanent global Class B-1
Note in fully registered form without interest coupons, substantially in the
form set forth in Exhibit B-1 hereto.
"Restricted Global Class B-2 Note" means a permanent global Class B-2
Note in fully registered form without interest coupons, substantially in the
form set forth in Exhibit B-2 hereto.
"Restricted Global Class B-3 Note" means a permanent global Class B-3
Note in fully registered form without interest coupons, substantially in the
form set forth in Exhibit B-3 hereto.
"Retained Interest Percentage" means, on any date of determination,
when used with respect to Principal Collections, Recoveries and Losses, an
amount equal to one hundred percent (100%) minus the sum of (a) the invested
percentages for all outstanding classes of all Series of Notes and (b) the
available subordinated amount percentages for all Series Of Notes that provide
for credit enhancement in the form of overcollateralization, in each case as
such percentages are calculated on such date with respect to Principal
Collections, Recoveries or Losses, as applicable.
"Reuters Screen LIBO Page" means the display designated as page "LIBO"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London interbank
offered rates of major banks).
"Series 1996-1 Accrued Interest Account" has the meaning specified in
Section 3.1(c) of this Supplement.
"Series 1996-1 Amortization Event" means the events described in
Article 4 of this Supplement.
"Series 1996-1 Available Subordinated Amount" means for any
Determination Date, an amount equal to (a) the Series 1996-1 Available
Subordinated Amount for the preceding Determination Date (or, in the case of the
initial Determination Date, as of the Series 1996-1 Closing Date) minus (b) the
Series 1996-1 Available Subordinated Amount Incremental Losses for the Related
Month plus (c) all Series 1996-1 Incremental Recoveries for the Related Month,
minus (d) the Series 1996-1 Lease Payment Losses
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accrued since the preceding Determination Date, plus (e) the Series 1996-1 Lease
Payment Recoveries received since the preceding Determination Date plus (f)
additional amounts, if any, contributed by NFLP since the preceding
Determination Date (or, in the case of the first Determination Date, since the
Series 1996-1 Closing Date) to the Series 1996-1 Excess Funding Account for
allocation to the Series 1996-1 Available Subordinated Amount, minus (g) any
amounts withdrawn from the Series 1996-1 Excess Funding Account since the
preceding Determination Date (or, in the case of the first Determination Date,
since the Series 1996-1 Closing Date) for allocation to the Retained
Distribution Account. The "Series 1996-1 Available Subordinated Amount" for the
first Determination Date means $42,388,000.
"Series 1996-1 Available Subordinated Amount Allocation" is defined in
Section 3.2(a)(x)(ii).
"Series 1996-1 Available Subordinated Amount Incremental Losses"
means, for any Related Month, the sum of all Losses that became Losses during
such Related Month and which were allocated to the Series 1996-1 Available
Subordinated Amount.
"Series 1996-1 Available Subordinated Amount Incremental Recoveries"
means, for any Related Month, the sum of all Recoveries that became Recoveries
during such Related Month and which were allocated to the Series 1996-1
Available Subordinated Amount.
"Series 1996-1 Available Subordinated Amount Maximum Increase" means
10' of the sum of (x) the total of the Initial Invested Amounts of all
outstanding Series of Notes plus (y) the sum of the minimum available
subordinated amounts of all outstanding Series of Notes that provide for credit
enhancement in the form of overcollateralization; provided, however, that if (i)
a Series 1996-1 Enhancement Deficiency arises out of any Losses and (ii) the
Rating Agencies shall have notified NFLP and the Trustee in writing that, if
such Series 1996-1 Enhancement Deficiency is cured, the Class A Notes and the
Class B Notes will each receive the same rating from the Rating Agencies as they
received prior to the occurrence of such Series 1996-1 Enhancement Deficiency,
then the Series 1996-1 Available Subordinated Amount Maximum Increase shall not
be limited in amount, to the extent necessary to cure such Series 1996-1
Enhancement Deficiency.
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"Series 1996-1 Available Subordinated Amount Percentage" means on any
date of determination:
(a) when used with respect to Principal Collections during the Series
1996-1 Revolving Period, the percentage equivalent of a fraction the
numerator of which shall be equal to the Series 1996-1 Available
Subordinated Amount as of the end of the Related Month or, until the end of
the initial Related Month, on the Series 1996-1 Closing Date and the
denominator of which is the greater of (A) the Aggregate Asset Amount as of
the end of the Related Month or, until the end of the initial Related Month,
as of the Series 1996-1 Closing Date, and (B) as of the same date as in
clause (A), the sum of the numerators used to determine (i) Invested
Percentages for allocations with respect to Principal Collections (for all
classes of all Series of Notes) and (ii) available subordinated amount
percentages for allocations with respect to Principal Collections (for all
Series of Notes that provide for credit enhancement in the form of
overcollateralization);
(b) when used with respect to Principal Collections during the Series
1996-1 Controlled Amortization Period and the Series 1996-1 Rapid
Amortization Period, the percentage equivalent of a fraction the numerator
of which shall be the Series 1996-1 Available Subordinated Amount as of the
end of the Series 1996-1 Revolving Period, and the denominator of which
shall be the greater of (A) the Aggregate Asset Amount as of the end of the
Related Month and (B) as of the same date as in clause (A), the sum of the
numerators used to determine (i) Invested Percentages for allocations with
respect to Principal Collections (for all Series of Notes and all classes of
such Series of Notes) and (ii) available subordinated amount percentages for
allocations with respect to Principal Collections (for all Series of Notes
that provide for credit enhancement in the form of overcollateralization);
(c) when used with respect to Losses, the percentage equivalent of a
fraction, the numerator of which shall be the Series 1996-1 Available
Subordinated Amount as of the end of the Related Month and the denominator
of which shall be the greater of (A) the Aggregate Asset Amount as of the
end of the Related Month or, until the end of the second Related Month, as
of the Series 1996-1 Closing Date, and (B) as of the same date as in clause
(A), the sum of the numerators used to determine (i) invested percentages
for allocations with respect to Losses for all classes of all Series of
Notes and (ii) available subordinated amount percentages for allocations
with respect to Losses (for all
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Series of Notes that provide for credit enhancement in the form of
overcollateralization); and
(d) when used with respect to Recoveries, the percentage equivalent of
a fraction, the numerator of which shall be the cumulative amount of all
unreimbursed Losses allocated to the Series 1996-1 Available Subordinated
Amount as of the end of the Related Month and the denominator of which shall
be the cumulative amount of all unreimbursed Losses for the Noteholders of
all Series of Notes and the Retained Interestholder (including all
unreimbursed Losses in respect of available subordinated amounts, if any,
for all Series) as of the end of such Related Month.
"Series 1996-1 Closing Date" means April 30, 1996.
"Series 1996-1 Collection Account" is defined in Section 3.1(b) of
this Supplement.
"Series 1996-1 Controlled Amortization Period" means any or all of the
Class A-1/A-2 Controlled Amortization Period, the Class A-3 Controlled
Amortization Period, the Class A-4 Controlled Amortization Period, the Class B-1
Controlled Amortization Period, the Class B-2 Controlled Amortization Period or
the Class B-3 Controlled Amortization Period, as the context requires.
"Series 1996-1 Deposit Date" is defined in Section 3.2 of this
Supplement.
"Series 1996-1 Enhancement Deficiency" means, on any day, (a) the
amount by which the Enhancement Amount is less than the Required Enhancement
Amount or (b) the Class B Enhancement Amount is less than the Minimum Class B
Enhancement Amount.
"Series 1996-1 Enhancement Factor" means, as of any date of
determination, 100% minus the percentage calculated pursuant to clause (a) of
the definition of "Series 1996-1 Enhancement Percentage" on such date.
"Series 1996-1 Enhancement Percentage" means, as of any date of
determination, (a) the percentage equivalent of a fraction, the numerator of
which is the sum of the amounts determined pursuant to clauses (a), (b), (c),
(d), (e) and (f) of the definition of "Required Enhancement Amount" as of such
date and the denominator of which is the Series 1996-1 Invested Amount as of
such date minus (b) the percentage equivalent of a fraction, the numerator of
which is the Letter of Credit Amount as of such date and the denominator of
which is the Series 1996-1 Invested Amount as of such date.
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"Series 1996-1 Excess Funding Account" is defined in Section 3.1(b) of
this Supplement.
"Series 1996-1 Interest Period" means a period commencing on and
including a Distribution Date and ending on the day preceding the next
succeeding Distribution Date; provided, however, that the initial Series 1996-1
Interest Period shall commence on the Series 1996-1 Closing Date and end on the
day preceding the May 1996 Distribution Date.
"Series 1996-1 Invested Amount" means, as of any day, the sum of the
Class A Invested Amount and the Class B Invested Amount on such day.
"Series 1996-1 Invested Percentage" means, as of any day, the sum of
(i) the Class A Invested Percentage as of the last day of the Related Month (for
allocations with respect to Principal Collections) plus (ii) the Class B
Invested Percentage as of the last day of the Related Month (for allocations
with respect to Principal Collections) plus (iii) the Series 1996-1 Available
Subordinated Amount Percentage as of the last day of the Related Month (for
allocations with respect to Principal Collections).
"Series 1996-1 Lease Payment Deficit" means on any Distribution Date,
an amount equal to the deficit, if any, of the aggregate amount of Principal
Collections and Interest Collections with respect to the Related Month which
were actually allocated in respect of Series 1996-1 Notes, and the aggregate
amount of Principal Collections and Interest Collections that would have been
allocated with respect to the Related Month in respect of Series 1996-1 Notes,
if all payments required to be made under the Lease with respect to the Related
Month were paid in full.
"Series 1996-1 Lease Payment Losses" means, for any Distribution Date,
an amount equal to the excess, if any, of (a) the Series 1996-1 Lease Payment
Deficit on such Distribution Date over (b) amounts drawn on the Letter of Credit
and/or the Cash Collateral Account with respect to such Series 1996-1 Lease
Payment Deficit.
"Series 1996-1 Lease Payment Recoveries" means, for any day, the
Series 1996-1 Lease Payment Recoveries Percentage of all Lease Payment
Recoveries on such day.
"Series 1996-1 Lease Payment Recoveries Percentage" means the
percentage equivalent of a fraction, (a) the numerator of which is the
cumulative amount of all unreimbursed Series 1996-1 Lease Payment Losses as of
the last day of the
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Related Month and (b) the denominator of which is the cumulative amount of all
unreimbursed Lease Payment Losses for all Series as of the last day of the
Related Month.
"Series 1996-1 Limited Liquidation Event of Default" means, so long as
such event or condition continues, any event or condition of the type specified
in Section 4(a) through (d) of this Supplement that continues for thirty (30)
days or more (without double counting any cure periods provided for in Sections
4(a) through (d) of this Supplement; provided, however, that such event or
condition shall not constitute a Series 1996-1 Limited Liquidation Event of
Default if (i) within such thirty (30) day period, NFLP or National shall have
cured such Series 1996-1 Amortization Event and (ii) the Rating Agency shall
have notified NFLP, National and the Trustee in writing that after such cure of
such Series 1996-1 Amortization Event is provided for, the Class A Notes and the
Class B Notes will each receive the same rating from the Rating Agency as they
received prior to the occurrence of such Series 1996-1 Amortization Event.
"Series 1996-1 Liquidity Amount" means, as of any day during the
Series 1996-1 Controlled Amortization Period, an amount in cash equal to the sum
of (a) the Class A Controlled Distribution Amount for the next Distribution Date
plus (b) the Class B Controlled Distribution Amount for the next Distribution
Date.
"Series 1996-1 Minimum Overcollateralization Deficit" means, as of any
day, that (a) the Overcollateralization Portion on such day is less than (b)
19.5` of the product of (i) the Non-Program Acquired Vehicle Percentage as of
such date and (ii) the Series 1996-1 Invested Amount as of such date.
"Series 1996-1 Monthly Servicing Fee" means the sum of (a) the Class A
Investor Monthly Servicing Fee, plus (b) the Class B Investor Monthly Servicing
Fee, plus (c) the Class A Monthly Supplemental Servicing Fee, plus (d) the Class
B Monthly Supplemental Servicing Fee.
"Series 1996-1 Note Prepayment Premium" has the meaning specified in
Section 7.1(c).
"Series 1996-1 Noteholders" means the Class A Noteholders and the
Class B Noteholders.
"Series 1996-1 Notes" has the meaning set forth in Article 1 of this
Supplement.
"Series 1996-1 Principal Allocation" is defined in Section
3.2(a)(x)(ii) of this Supplement.
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"Series 1996-1 Principal Balance" means, as of any date of
determination, an amount equal to the sum of the Class A Principal Balance on
such day and the Class B Principal Balance on such day.
"Series 1996-1 Rapid Amortization Period" means the period beginning
at the close of business on the Business Day immediately preceding the day on
which an Amortization Event is deemed to have occurred with respect to the
Series 1996-1 Notes and ending upon the earlier to occur of (a) the date on
which the Series 1996-1 Notes are paid in full and (b) the Series 1996-1
Termination Date.
"Series 1996-1 Revolving Period" means, with respect to any Class A
Note or Class B Note, the period from and including the Series 1996-1 Closing
Date to the earlier of (i) the commencement of the Series 1996-1 Controlled
Amortization Period for such class of Series 1996-1 Notes and (ii) the
commencement of the Series 1996-1 Rapid Amortization Period.
"Series 1996-1 Termination Date" means (a) with respect to the Class
A-1 Notes, the Class A-2 Notes and the Class B-1 Notes, the April 2000
Distribution Date, (b) with respect to the Class A-3 Notes and the Class B-2
Notes, the April 2002 Distribution Date and (c) with respect to the Class A-4
Notes and the Class B-3 Notes, the October 2003 Distribution Date.
"Servicing Fee" shall have the meaning specified in Section 3.3(c) of
this Supplement.
"Support Credit Enhancer" means General Motors Corporation.
"Support Letter of Credit Reimbursement Agreement" means the Support
Letter of Credit Reimbursement Agreement, dated as of April 30, 1996, between
the Support Credit Enhancer and National, as amended, modified or supplemented
from time to time in accordance with the terms thereof.
"Temporary Global Class A Note" means any Temporary Global Class A-1
Note, Temporary Global Class A-2 Note, Temporary Global Class A-3 Note or
Temporary Global Class A-4 Note.
"Temporary Global Class A-1 Note" means a temporary global Class A-1
Note in registered form without interest coupons, substantially in the form of
Exhibit A-5 hereto.
"Temporary Global Class A-2 Note" means a temporary global Class A-2
Note in registered form without interest coupons, substantially in the form of
Exhibit A-6 hereto.
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"Temporary Global Class A-3 Note" means a temporary global Class A-3
Note in registered form without interest coupons, substantially in the form of
Exhibit A-7 hereto.
"Temporary Global Class A-4 Note" means a temporary global Class A-4
Note in registered form without interest coupons, substantially in the form of
Exhibit A-8 hereto.
"Temporary Global Class B Note" any Temporary Global Class B-1 Note,
Temporary Global Class B-2 Note or Temporary Global Class B-3 Note.
"Temporary Global Class B-1 Note" means a temporary global Class B-1
Note in registered form without interest coupons, substantially in the form of
Exhibit B-4 hereto.
"Temporary Global Class B-2 Note" means a temporary global Class B-2
Note in registered form without interest coupons, substantially in the form of
Exhibit B-5 hereto.
"Temporary Global Class B-3 Note" means a temporary global Class B-3
Note in registered form without interest coupons, substantially in the form of
Exhibit B-6 hereto.
"Waiver Deficiency" means, as of any determination date, the amount by
which the aggregate principal balance of Class A Notes held by consenting Class
A Noteholders exceeds 89% of the sum of (a) the aggregate principal balance of
Class A Notes held by consenting Class A Noteholders, Plus (b) the aggregate
principal amount of Class B Notes held by consenting Class B Noteholders, plus
(c) the Series 1996-1 Available Subordinated Amount, plus (d) the Letter of
Credit Amount.
"Waiver Event" means the occurrence of the delivery of a Waiver
Request and the subsequent waiver of the eligibility requirements for any
Eligible Manufacturer Program in accordance with the provisions of Article 5 of
this Supplement.
"Waiver Request" shall have the meaning specified in Section 5.1(a) of
this Supplement.
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ARTICLE 3
SERIES 1996-1 ALLOCATIONS
With respect to the Series 1996-1 Notes only, the following shall
apply:
Section 3.1 Establishment of Series 1996-1 Collection Account. Series
1996-1 Excess Funding Account and Series 1996-1 Accrued Interest Account.
(a) All Collections allocable to the Class A Notes and the
Class B Notes shall be allocated to the Collection Account.
(b) The Trustee will create two administrative sub-accounts
within the Collection Account for the benefit of the Series 1996-1 Noteholders:
the Series 1996-1 Collection Account (such sub-account, the "Series 1996-1
Collection Account") and the Series 1996-1 Excess Funding Account (such
sub-account, the "Series 1996-1 Excess Funding Account").
(c) The Trustee will further divide the Series 1996-1
Collection Account by creating an additional administrative sub-account for the
Series 1996-1 Noteholders (such sub-account, the "Series 1996-1 Accrued Interest
Account").
Section 3.2 Allocations with respect to the Series 1996-1 Notes. The
proceeds from the sale of the Series 1996-1 Notes, together with not less than
$42,388,000 deposited by National with NFLP as a contribution to capital, will
initially be deposited by the Trustee into the Collection Account and,
concurrently with such initial deposit, allocated by the Trustee to the Series
1996-1 Excess Funding Account. On each Business Day on which Collections are
deposited into the Series 1996-1 Collection Account (each such date, a "Series.
1996-1 Deposit Date"), the Servicer will direct the Trustee in writing pursuant
to the Lease to allocate all amounts deposited into the Series 1996-1 Collection
Account in accordance with the provisions of this Section 3.2.
(a) Allocations During the Series 1996-1 Revolving Period. During the
Series 1996-1 Revolving Period, the Servicer will direct the Trustee pursuant to
the Lease to allocate on each day, prior to 1:00 p.m. (New York City time) on
each Series 1996-1 Deposit Date, all amounts deposited into the Collection
Account as set forth below:
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(x) with respect to all Collections (including Recoveries, all of
which Recoveries shall be treated as Principal Collections):
(i) allocate to the Series 1996-1 Collection Account an amount
equal to the sum of (A) the Class A Invested Percentage (as of
such day) of the aggregate amount of Interest Collections on such
day and (B) the Class B Invested Percentage (as of such day) of
the aggregate amount of Interest Collections on such day. All such
amounts allocated to the Series 1996-1 Collection Account shall be
further allocated to the Series 1996-1 Accrued Interest Account;
(ii) allocate to the Series 1996-1 Excess Funding Account an
amount equal to the sum of (A) the Class A Invested Percentage (as
of such day) of the aggregate amount of Principal Collections on
such day plus (B) the Class B Invested Percentage (as of such day)
of the aggregate amount of Principal Collections on such day (for
any such day, the sum of (A) and (B) (the "Series 1996-1 Principal
Allocation")) plus (C) the Series 1996-1 Available Subordinated
Amount Percentage (as of such day) of the aggregate amount of
Principal Collections on such day (for any such day, the amount
set forth in (C), the "Series 1996-1 Available Subordinated Amount
Allocation"); provided, however, that if a Waiver Event shall have
occurred, then such allocation shall be modified as provided in
Article 5 of this Supplement; and
(iii) allocate to the Retained Distribution Account an amount
equal to (x) the applicable Retained Interest Percentage (as of
such day) of the aggregate amount of Principal Collections on such
date, minus (y) any amounts, other than Monthly Servicing Fees,
which have been withheld by the Servicer pursuant to Section
5.2(c) of the Base Indenture to the extent such amounts withheld
under Section 5.2(c) of the Base Indenture constitute all or part
of the Retained Interest Amount;
(y) with respect to all Recoveries:
(i) allocate an amount equal to the sum of (A) the Class A
Invested Percentage (as of such
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day) of the aggregate amount of Recoveries on such day, plus (B)
the Class B Invested Percentage (as of such day) of the aggregate
amount of Recoveries on such day, plus (C) the Series 1996-1
Available Subordinated Amount Percentage (as of such day) of the
aggregate amount of Recoveries on such day, first, to increase the
Class A-1 Invested Amount, the Class A-2 Invested Amount, the
Class A-3 Invested Amount and the Class A-4 Invested Amount on a
pro rata basis (to the extent that the Class A-1 Invested Amount,
the Class A-2 Invested Amount, the Class A-3 Invested Amount and
the Class A-4 Invested Amount have theretofore been reduced as a
result of any Losses allocated thereto pursuant to clause (z)
below and not increased pursuant to this clause (y)); second, to
increase the Class B-1 Invested Amount, the Class B-2 Invested
Amount and the Class B-3 Invested Amount on a pro rata basis (to
the extent that the Class B-1 Invested Amount, the Class B-2
Invested Amount and the Class B-3 Invested Amount have theretofore
been reduced as a result of any Losses allocated thereto pursuant
to clause (z) below and not increased pursuant to this clause by);
and, third, to increase the Series 1996-1 Available Subordinated
Amount (to the extent that the Series 1996-1 Available
Subordinated Amount has theretofore been reduced as a result of
any Losses allocated thereto pursuant to clause (z) below and not
increased pursuant to this clause (y); and
(ii) allocate to the Retained Interest Amount an amount equal
to the Retained Interest Percentage (as of such day) of the
aggregate amount of Recoveries on such date (to the extent that
the Retained Interest Amount has theretofore been reduced as a
result of any Losses allocated thereto pursuant to clause (z)
below and not increased pursuant to this clause (y);
(z) with respect to all Losses:
(i) allocate an amount equal to the sum of (A) the Class A
Invested Percentage (as of such day) of the aggregate amount of
Losses on such day, plus (B) the Class B Invested Percentage (as
of such day) of the aggregate amount of Losses on such day, plus
(C) the Series 1996-1 Available Subordinated Amount Percentage (as
of such day) of
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the aggregate amount of Losses on such day, to reduce the Series
1996-1 Available Subordinated Amount and, if the Series 1996-1
Available Subordinated Amount has been reduced to zero, to reduce
the Class B-1 Invested Amount, the Class B-2 Invested Amount and
the Class B-3 Invested Amount on a pro rata basis and, if the
Class B-1 Invested Amount, the Class B-2 Invested Amount and the
Class B-3 Invested Amount have been reduced to zero, to reduce the
Class A-1 Invested Amount, the Class A-2 Invested Amount, the
Class A-3 Invested Amount and the Class A-4 Invested Amount on a
pro rata basis; and
(ii) allocate to the Retained Interest Amount an amount equal
to the Retained Interest Percentage (as of such day) of the
aggregate amount of such Losses on such day.
(b) Allocations During the Series 1996-1 Controlled Amortization
Period. During the Series 1996-1 Controlled Amortization Period, the Servicer
will direct the Trustee pursuant to Lease to allocate, prior to 1:00 p.m. (New
York City time) on each Series 1996-1 Deposit Date, all amounts deposited into
the Collection Account as set forth below:
(x) with respect to all Collections (including Recoveries, all of
which Recoveries shall be treated as Principal Collections):
(i) allocate to the Series 1996-1 Collection Account an amount
determined as set forth in Section 3.2(a)(x)(i) above for such
day, which amount shall be further allocated to the Series 1996-1
Accrued Interest Account;
(ii) (A) during the Class A-1/A-2 Controlled Amortization
Period, allocate to the Series 1996-1 Collection Account an
amount equal to the sum of (1) the Series 1996-1 Principal
Allocation for such day, which amount shall be used to make
principal payments in respect of the Class A-1 Notes and the
Class A-2 Notes on a pro rata basis, and (2) and the Series
1996-1 Available Subordinated Amount Allocation for such day;
provided, however, that if the Monthly Total Principal
Allocation exceeds the sum of the Class A-1 Controlled
Distribution Amount and the Class A-2 Controlled Distribution
Amount, then the amount of such excess will be allocated to
the
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Series 1996-1 Excess Funding Account; provided, further, however,
that if a Waiver Event shall have theretofore occurred, then such
allocation shall be modified in accordance with Article 5 of this
Supplement;
(B) during the Class A-3 Controlled Amortization Period,
allocate to the Series 1996-1 Collection Account an amount equal
to the sum of (1) the Series 1996-1 Principal Allocation for such
day, which amount shall be used to make principal payments in
respect of the Class A-3 Notes, and (2) the Series 1996-1
Available Subordinated Amount Allocation for such day; provided,
however, that if the Monthly Total Principal Allocation exceeds
the Class A-3 Controlled Distribution Amount, then such excess
will be allocated to the Series 1996-1 Excess Funding Account;
Provided, further, however, that if a Waiver Event shall have
theretofore occurred, then such allocation shall be modified as
provided in Article 5 of this Supplement;
(C) during the Class A-4 Controlled Amortization Period,
allocate to the Series 1996-1 Collection Account an amount equal
to the sum of (1) the Series 1996-1 Principal Allocation for such
day, which amount shall be used to make principal payments in
respect of the Class A-4 Notes, and (2) the Series 1996-1
Available Subordinated Amount Allocation for such day; provided,
however, that if the Monthly Total Principal Allocation exceeds
the Class A-4 Controlled Distribution Amount, then such excess
will be allocated to the Series 1996-1 Excess Funding Account;
provided, further, however, that if a Waiver Event shall have
theretofore occurred, then such allocation shall be modified as
provided in Article 5 of this Supplement;
(D) during the Class B-1 Controlled Amortization Period,
allocate to the Series 1996-1 Collection Account an amount equal
to the sum of (1) the Series 1996-1 Principal Allocation for such
day, which amount shall be used to make principal payments in
respect of the Class 13-1 Notes, and (2) the Series 1996-1
Available Subordinated Amount Allocation for such day; provided,
however, that if the Monthly Total Principal Allocation exceeds
the Class B-1
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Controlled Distribution Amount, then such excess will be allocated
to the Series 1996-1 Excess Funding Account; provided, further,
however, that if a Waiver Event shall have theretofore occurred,
then such allocation shall be modified as provided in Article 5 of
this Supplement;
(E) during the Class B-2 Controlled Amortization Period,
allocate to the Series 1996-1 Collection Account an amount equal
to the sum of (1) the Series 1996-1 Principal Allocation for such
day, which amount shall be used to make principal payments in
respect of the Class B-2 Notes, and (2) the Series 1996-1
Available Subordinated Amount Allocation for such day; Provided,
however, that if the Monthly Total Principal Allocation exceeds
the Class B-2 Controlled Distribution Amount, then such excess
will be allocated to the Series 1996-1 Excess Funding Account;
provided, further, however, that if a Waiver Event shall have
theretofore occurred, then such allocation shall be modified as
provided in Article 5 of this Supplement; and
(F) during the Class B-3 Controlled Amortization Period,
allocate to the Series 1996-1 Collection Account an amount equal
to the sum of (1) the Series 1996-1 Principal Allocation for such
day, which amount shall be used to make principal payments in
respect of the Class B-3 Notes, and (2) the Series 1996-1
Available Subordinated Amount Allocation for such day; provided,
however, that if the Monthly Total Principal Allocation exceeds
the Class B-3 Controlled Distribution Amount, then such excess
will be allocated to the Series 1996-1 Excess Funding Account;
provided, further, however, that if a Waiver Event shall have
theretofore occurred, then such allocation shall be modified as
provided in Article 5 of this Supplement; and
(iii) allocate to the Retained Distribution Account an amount
determined as set forth in Section 3.2(a)(x)(iii) above for such
day;
(y) with respect to all Recoveries:
(i) increase the Class A Invested Amount, the Class B Invested
Amount and the Series 1996-1 Available Subordinated Amount as and
to the extent
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provided in Section 3.2(a)(y)(i) above for such day; and
(ii) allocate to the Retained Interest Amount an amount
determined as set forth in Section 3.2(a)(y)(ii) above for such
day;
(z) with respect to all Losses:
(i) decrease the Class A Invested Amount, the Class B
Invested Amount and the Series 1996-1 Available Subordinated
Amount as and to the extent provided in Section 3.2(a)(z)(i) above
for such day; and
(ii) allocate to the Retained Interest Amount an amount
determined as set forth in Section 3.2(a)(z)(ii) above for such
day, which amount shall reduce the Retained Interest Amount.
(c) Allocations During the Series 1996-1 Rapid Amortization
Period. During the Series 1996-1 Rapid Amortization Period, the Servicer will
direct the Trustee pursuant to the Lease to allocate, prior to 1:00 p.m. (New
York City time) on any Deposit Date, all amounts deposited into the Collection
Account as set forth below:
(x) with respect to all Collections (including Recoveries, all of
which Recoveries shall be treated as Principal Collections):
(i) allocate to the Series 1996-1 Collection Account an amount
determined as set forth in Section 3.2(a)(x)(i) above for such
day, which amount shall be further allocated to the Series 1996-1
Accrued Interest Account;
(ii) (A) allocate to the Series 1996-1 Collection Account an
amount equal to the Series 1996-1 Principal Allocation for such
day and (B) allocate to the Series 1996-1 Excess Funding Account
an amount equal to the Series 1996-1 Available Subordinated Amount
Allocation for such day, which amounts shall be used, to the
extent described in Section 3.5(a)(iii), to make principal
payments in respect of the Class A Notes and, after the Class A
Notes have been paid in full; to make principal payments in
respect of the Class B Notes: and
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(iii) allocate to the Retained Distribution Account an amount
determined as set forth in Section 3.2(a)(x)(iii) above for such
day;
(y) with respect to all Recoveries:
(i) increase the Class A Invested Amount, the Class B
Invested Amount and the Series 1996-1 Available Subordinated
Amount as and to the extent provided in Section 3.2(a)(y)(i) above
for such day; and
(ii) allocate to the Retained Interest Amount an amount
determined as set forth in Section 3.2(a)(y)(ii) above for such
day; and
(z) with respect to all Losses:
(i) decrease the Class A Invested Amount, the Class B Invested
Amount and the Series 1996-] Available Subordinated Amount as and
to the extent provided in Section 3.2(a)(z)(i) above for such day;
and
(ii) allocate to the Retained Interest Amount an amount
determined as set forth in Section 3.2(a)(z)(ii) above for
such day, which amount shall reduce the Retained Interest
Amount.
(d) Allocation Adjustments. Notwithstanding the foregoing provisions
of this Section 3.2:
(i) provided the Series 1996-1 Rapid Amortization Period has
not commenced, amounts in excess of the Series 1996-1 Liquidity
Amount (if applicable) allocated to the Series 1996-1 Excess
Funding Account that are not required to make payments under the
Series 1996-1 Notes pursuant hereto may, as and to the extent
permitted in the related Supplements, be used to pay the principal
amount of other Series of Notes that are then in amortization and,
after such payment, any remaining funds in excess of the Series
1996-1 Liquidity Amount (if applicable) may, at NFLP's option, be
(i) used to finance or acquire Vehicles (other than Replacement
Vehicles), to the extent Eligible Vehicles have been requested by
the Lessee or (ii) transferred, on any Distribution Date, to the
Retained Distribution Account, to the extent that the Retained
Interest Amount equals or
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exceeds zero after giving effect to such payment and so long as no
Series 1996-1 Enhancement Deficiency, Series 1996-1 Minimum
Overcollateralization Deficit or Asset Amount Deficiency exists or
would result therefrom; provided, however, that funds in excess of
the Series 1996-1 Liquidity Amount (if applicable) may be
transferred to the Retained Distribution Account on a day other
than a Distribution Date if the Servicer furnishes to the Trustee
an Officer's Certificate to the effect that such transfer will not
cause any of the foregoing deficiencies to occur either on the
date that such transfer is made or, in the reasonable anticipation
of the Servicer, on the next Distribution Date. Funds in the
Retained Distribution Account shall, at the option of NFLP, be
available to finance or acquire Vehicles, to the extent Eligible
Vehicles have been requested by the Lessee, or for distribution to
the Retained Interestholder (including as an advance made under
the Demand Note);
(ii) in the event that the Servicer is not National
or an Affiliate of National, the Servicer shall not be entitled to
withhold any amounts pursuant to Section 5.2(c) of the Base
Indenture and the Trustee shall deposit amounts payable to
National in the Collection Account pursuant to the provisions of
Section 5.2 of the Base Indenture on each Series 1996-1 Deposit
Date;
(iii) any amounts withheld by the Servicer and not
deposited in the Collection Account pursuant to Section 5.2 (c) of
the Base Indenture shall be deemed to be deposited in the
Collection Account on the date such amounts are withheld for
purposes of determining the amounts to be allocated pursuant to
this Section 3.2;
(iv) if there is more than one Series of Notes
outstanding, then Sections 3.2 (a) (x) (iii), 3.2 (b) (x) (iii)
and 3.2 (c) (x) (iii) above shall not be duplicative with any
similar provisions contained in any other Supplement and the
Retained Interestholder shall only be paid such amount once with
respect to any Distribution Date;
(v) on any day on which the Market Value Adjustment Amount
exceeds zero and a Series 1996-1 Enhancement Deficiency exists,
NFLP shall provide
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funds to the Trustee in an amount equal to the Market Value
Adjustment Amount for deposit in the Series 1996-1 Excess Funding
Account and allocation to the Series 1996-1 Available Subordinated
Amount; and
(vi) NFLP may, from time to time in its sole
discretion, increase the Series 1996-1 Available Subordinated
Amount by (i) depositing funds into the Series 1996-1 Excess
Funding Account by transfer from the Retained Distribution Account
or otherwise, and (ii) delivering to the Servicer and the Trustee
an Officer's Certificate setting forth the amount of such funds
and stating that such funds shall be allocated to the Series
1996-1 Available Subordinated Amount; provided, however, that (x),
except as otherwise provided in clause (v) above, NFLP shall have
no obligation to so increase the Series 1996-1 Available
Subordinated Amount at any time and (y) NFLP may not increase the
Series 1996-1 Available Subordinated Amount at any time if the
amount of such increase, together with the sum of the amounts of
all prior increases, if any, of the Series 1996-1 Available
Subordinated Amount would exceed the Series 1996-1 Available
Subordinated Amount Maximum Increase, excluding from such
calculation (1) any increase in the Series 1996-1 Available
Subordinated Amount through Recoveries or from funds constituting
repayments of principal under the Demand Note, (2) any increase in
the Series 1996-1 Available Subordinated Amount relating to an
increase in the Required Enhancement Amount that results from
changes in the relative proportions of Non-Program Vehicles and/or
Program Vehicles leased under the Lease, or (3) any increase in
the Series 1996-1 Available Subordinated Amount due to payments by
NFLP into the Series 1996-1 Excess Funding Account on account of
the Market Value Adjustment Amount.
(vii) NFLP shall not permit any additional Non-Program
Vehicle to be leased under the Lease if, on the Lease
Commencement Date with respect to such Vehicle, (a) the
percentage equivalent of a fraction (I) the numerator of which
is the sum of (A) the Series 1996-1 Invested Percentage of the
sum of (1) the amount determined as of such day pursuant to
clause (a) of the definition of "Required Enhancement Amount"
(taking account of
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the leasing of such Non-Program Vehicle and all other Non-Program
Vehicles to be leased on such day) and (2) the Market Value
Adjustment Amount as of such day plus (B) the Class B Invested
Amount as of such day and (II) the denominator of which is the
Series 1996-1 Invested Amount as of such day, would exceed (b)
25%.
Section 3.3 Monthly Payments. On each Determination Date, as
provided below, the Servicer shall instruct the Paying Agent pursuant to the
Lease to withdraw, and on the following Distribution Date the Paying Agent,
acting in accordance with such instructions, shall withdraw the amounts required
to be withdrawn from the Collection Account pursuant to Sections 3.3 (a), (b),
(c) and (d) below in respect of all funds available from Interest Collections
processed since the preceding Distribution Date and allocated to the holders of
the Series 1996-1 Notes.
(a) Note Interest with respect to the Class A Notes. On each
Determination Date, the Servicer shall instruct the Trustee or the Paying Agent
pursuant to the Lease as to the amount to be withdrawn from the Series 1996-1
Accrued Interest Account to the extent funds will be available from Interest
Collections allocable to the Class A Notes which will have been processed from
but not including the preceding Distribution Date through the succeeding
Distribution Date, which amount shall be withdrawn in respect of (x) first, an
amount equal to the sum of (i) the Class A Monthly Interest for the Class A-1
Notes for such Distribution Date, (ii) the Class A Monthly Interest for the
Class A-2 Notes for such Distribution Date, (iii) the Class A Monthly Interest
for the Class A-3 Notes for such Distribution Date and (iv) the Class A Monthly
Interest for the Class A-4 Notes for such Distribution Date, and (y) then, an
amount equal to the sum of (1) the amount of any unpaid Class A Deficiency
Amounts (as defined below) for the Class A-1 Notes, (2) the amount of any unpaid
Class A Deficiency Amounts for the Class A-2 Notes, (3) the amount of any unpaid
Class A Deficiency Amounts for the Class A-3 Notes and (4) the amount of any
unpaid Class A Deficiency Amounts for the Class A-4 Notes, in each case, as of
the preceding Distribution Date (in each case, together with any accrued
interest on such Class A Deficiency Amounts). If the amounts described in this
Section 3.3(a) are insufficient, after taking into account any portion of the
Letter of Credit Amount applied as described in Section 3.4(a) of this
Supplement and any amounts available in the Series 1996-1 Excess Funding
Account, to pay such interest on any Distribution Date, payments of interest
(A) to the Class A-1 Noteholders will be reduced by the amount of the Class A
Deficiency Amount for the Class A-1 Notes, (B) to the Class A-2 Noteholders will
be reduced by the amount of the
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Class A Deficiency Amount for the Class A-2 Notes, (C) to the Class A-3
Noteholders will be reduced by the amount of the Class A Deficiency Amount for
the Class A-3 Notes and (D) to the Class A-4 Noteholders will be reduced by the
amount of the Class A Deficiency Amount for the Class A-4 Notes. Interest shall
accrue on the Class A Deficiency Amount for the Class A-1 Notes at the Class A-1
Interest Rate, on the Class A Deficiency Amount for the Class A-2 Notes at the
Class A-2 Interest Rate, on the Class A Deficiency Amount for the Class A-3
Notes at the Class A-3 Interest Rate and on the Class A Deficiency Amount for
the Class A-4 Notes at the Class A-4 Interest Rate.
On the related Distribution Date, the Trustee shall withdraw the
Class A Monthly Interest for the Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes and the Class A-4 Notes and the Class A Deficiency Amounts for the
Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4
Notes (in each case, together with accrued interest thereon) from the Series
1996-1 Accrued Interest Account and, to the extent provided in Section 3.4(a),
any applied portion of the Letter of Credit Amount and amounts withdrawn from
the Series 1996-1 Excess Funding Account, and deposit such amount in the Class A
Distribution Account; provided that the sum of the amounts to be withdrawn from
the Series 1996-1 Excess Funding Account pursuant to this Section 3.3(a) and
Section 3.3(b) shall not exceed for any Determination Date the Series 1996-1
Available Subordinated Amount at such time.
(b) Note Interest with respect to the Class B Notes. On each
Determination Date, subject to Section 3.12 of this Supplement, provided that
all payments on account of interest that are required to be made to the Class A
Noteholders are available in the Class A Distribution Account, the Servicer
shall instruct the Trustee or the Paying Agent pursuant to the Lease as to the
amount to be withdrawn from the Series 1996-1 Accrued Interest Account to the
extent funds will be available from Interest Collections allocable to the Class
B Notes which will have been processed from but not including the preceding
Distribution Date through the succeeding Distribution Date, which amount shall
be withdrawn in respect of (x) first, an amount equal to the sum of (i) the
Class B Monthly Interest for the Class B-1 Notes for such Distribution Date,
(ii) the Class B Monthly Interest for the Class B-2 Notes for such Distribution
Date and (iii) the Class B Monthly Interest for the Class B-3 Notes for such
Distribution Date, and (y) then, an amount equal to the sum of (1) the amount of
any unpaid Class B Deficiency Amounts (as defined below) for the Class B-1
Notes, (2) the amount of any unpaid Class B Deficiency Amounts for the Class B-2
Notes and (3) the amount of any unpaid Class B Deficiency Amounts for the Class
B-3 Notes, in each case, as of the preceding
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Distribution Date (in each case, together with any accrued interest on such
Class B Deficiency Amounts). If the amounts described in this Section 3.3(b) are
insufficient, after taking into account any portion of the Letter of Credit
Amount applied as described in Section 3.4(b) of this Supplement and any amounts
available in the Series 1996-1 Excess Funding Account (and subject to the
provisions of Section 3.13 of this Supplement), to pay such interest on any
Distribution Date, payments of interest (A) to the Class B-1 Noteholders will be
reduced by the amount of the Class B Deficiency Amount for the Class B-1 Notes,
(B) to the Class B-2 Noteholders will be reduced by the amount of the Class B
Deficiency Amount for the Class B-2 Notes and (C) to the Class B-3 Noteholders
will be reduced by the amount of the Class B Deficiency Amount for the Class B-3
Notes. Interest shall accrue on the Class B Deficiency Amount for the Class B-1
Notes at the Class B-1 Interest Rate, on the Class B Deficiency Amount for the
Class B-2 Notes at the Class B-2 Interest Rate and on the Class B Deficiency
Amount for the Class B-3 Notes at the Class B-3 Interest Rate. On the related
Distribution Date, provided that all payments on account of interest that are
required to be made to the Class A Noteholders are available in the Class A
Distribution Account (including, without limitation, all accrued interest, all
Class A Deficiency Amounts, and all interest accrued on all such Class A
Deficiency Amounts), the Trustee shall withdraw the Class B Monthly Interest for
the Class B-1 Notes, the Class B-2 Notes and the Class B-3 Notes and the Class B
Deficiency Amounts for the Class B-1 Notes, the Class B-2 Notes and the Class
B-3 Notes (in each case, together with accrued interest thereon) from the Series
1996-1 Accrued Interest Account and, to the extent provided in Section 3.4(b),
any applied portion of the Letter of Credit Amount and amounts withdrawn from
the Series 1996-1 Excess Funding Account, and deposit such amount in the Class B
Distribution Account; provided that the sum of the amounts to be withdrawn from
the Series 19961 Excess Funding Account pursuant to Section 3.3(a) and this
Section 3.3(b) shall not exceed for any Determination Date the Series 1996-1
Available Subordinated Amount at such time.
(c) Servicing Fee. On each Distribution Date, the Servicer shall,
after making all deposits to the Class A Distribution Account and the Class B
Distribution Account required to be made pursuant to Sections 3 3(a) and (b), or
in the event that on the related Determination Date National shall no longer be
the Servicer, prior to such deposits being made, instruct the Trustee or the
Paying Agent to withdraw from the Series 1996-1 Accrued Interest Account an
amount equal to (i) the Class A Investor Monthly Servicing Fee (and any Class A
Monthly Supplemental Servicing Fee) accrued during the preceding Series 1996-1
Interest Period, plus (ii) the Class B Investor Monthly Servicing Fee (and any
Class B Monthly Supplemental Servicing
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Fee) accrued during the preceding Series 1996-1 Interest Period, plus (iii) all
accrued and unpaid Class A Investor Monthly Servicing Fees (and any accrued and
unpaid Class A Monthly Supplemental Servicing Fees) and all accrued and unpaid
Class B Investor Monthly Servicing Fees (and any accrued and unpaid Class B
Monthly Supplemental Servicing Fees) in respect of previous periods. On each
such Distribution Date, the Trustee or the Paying Agent shall withdraw such
amount from the Series 19961 Accrued Interest Account and remit such amount to
the Servicer.
(d) Balance. On each Distribution Date, the Servicer shall
instruct the Trustee or the Paying Agent pursuant to the Lease as to the balance
(after making the deposits required in Sections 3.3 (a), (b) and (c) of this
Supplement), if any, of the Interest Collections allocated to holders of the
Series 1996-1 Notes since the preceding Distribution Date ("Excess
Collections"). On such Distribution Date, the Paying Agent shall withdraw such
balance from the Collection Account and pay such balance to the Retained
Distribution Account, to the extent that, after giving effect to such transfer,
the Retained Interest Amount exceeds zero and provided that such payment will
not cause an Asset Amount Deficiency, a Series 1996-1 Minimum
Overcollateralization Deficit or a Series 1996-1 Enhancement Deficiency to
exist.
Section 3.4 Payment of Note Interest.
(a) Class A Notes. On each Distribution Date, (i) if amounts have
been drawn on the Letter of Credit and deposited into the Series 1996-1
Collection Account pursuant to Section 3.8 of this Supplement, the Servicer
shall instruct the Trustee or the Paying Agent to withdraw from the Series
1996-1 Collection Account on such Distribution Date the lesser of (A) the amount
on deposit in the Series 1996-1 Collection Account representing such amount
drawn on the Letter of Credit and (B) the amount of the Class A Monthly Interest
Shortfall and deposit such amount in the Class A Distribution Account to pay the
Class A Monthly Interest and any unpaid Class A Deficiency Amounts with respect
to such Class A Monthly Interest (together with accrued interest on all such
unpaid Class A Deficiency Amounts) and (ii) to the extent any such Class A
Monthly Interest Shortfall remains after the deposits required pursuant to
Section 3.2(a) and Section 3.4(a)(i) have been made, the Servicer shall instruct
the or the Paying Agent to withdraw from the Series 1996-1 Excess Funding
Account an amount equal to the lesser of (A) the amount on deposit in the Series
1996-1 Excess Funding Account on such Distribution Date in an amount not to
exceed the Series 1996-1 Available Subordinated Amount at such time, and (B) the
remaining amount of the Class A Monthly Interest Shortfall, and deposit such
amount in the Class A Distribution Account to pay the
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Class A Monthly Interest and any unpaid Class A Deficiency Amounts with respect
to such Class A Monthly Interest (together with accrued interest on all such
unpaid Class A Deficiency Amounts). On each Distribution Date, the Paying Agent
shall, in accordance with Section 6.1 of the Base Indenture, pay to the Class A
Noteholders from the Class A Distribution Account the amount deposited in the
Class A Distribution Account for the payment of interest pursuant to Section
3.3(a) of this Supplement and clauses (i) and (ii) of this Section 3.4(a).
(b) Class B Notes. On each Distribution Date, (i) if amounts have
been drawn on the Letter of Credit and deposited into the Series 1996-1
Collection Account pursuant to Section 3.8 of this Supplement, the Servicer
shall instruct the Trustee or the Paying Agent to withdraw from the Series
1996-1 Collection Account on such Distribution Date the lesser of (A) the amount
on deposit in the Series 1996-1 Collection Account representing such draw on the
Letter of Credit (after application of any amounts pursuant to Section 3.4(a) of
this Supplement) and (B) the amount of the Class B Monthly Interest Shortfall
and deposit such amount in the Class B Distribution Account to pay the Class B
Monthly Interest and any unpaid Class B Deficiency Amounts with respect to such
Class B Monthly Interest (together with accrued interest on all such unpaid
Class B Deficiency Amounts) and (ii) to the extent any such Class B Monthly
Interest Shortfall remains after the deposits required pursuant to Section
3.2(b) and Section 3.4(b)(i) have been made, the Servicer shall instruct the
Trustee or the Paying Agent to withdraw from the Series 1996-1 Excess Funding
Account an amount equal to the lesser of (A) the amount on deposit in the Series
1996-1 Excess Funding Account on such Distribution Date (after application of
any amounts pursuant to Section 3.4(a) in an amount not to exceed the Series
1996-1 Available Subordinated Amount at such time, and (B) the remaining amount
of the Class B Monthly Interest Shortfall, and deposit such amount in the Class
B Distribution Account to pay the Class B Monthly Interest and any unpaid Class
B Deficiency Amounts with respect to such Class B Monthly Interest (together
with accrued interest on all such unpaid Class B Deficiency Amounts). On each
Distribution Date, the Paying Agent shall, in accordance with Section 6.1 of the
Base Indenture but subject to Section 3.13 of this Supplement, pay to the Class
B Noteholders from the Class B Distribution Account the amount deposited in the
Class B Distribution Account for the payment of interest pursuant to Section
3.3(b) of this Supplement and clauses (i) and (ii) of this Section 3.4(b).
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Section 3.5 Payment of Note Principal.
(a) Class A Notes.
(i) Commencing on the second Determination Date after the
commencement of the Class A-1/A-2 Controlled Amortization Period, the
Class A-3 Controlled Amortization Period or the Class A-4 Controlled
Amortization Period (as the case may be) or the first Determination
Date after the commencement of the Series 1996-1 Rapid Amortization
Period, the Servicer shall instruct the Trustee or the Paying Agent
pursuant to the Lease as to the following:
(A)(1) during the Class A-1/A-2 Controlled Amortization
Period with respect to the Class A-1 Notes, the Class A-1
Controlled Distribution Amount for the Related Month, (2) the
amount allocated to the Class A-1 Notes during the Related Month
pursuant to Section 3.2(b)(x)(ii) or 3.2(c)(x)(ii), as applicable,
and (3) the amount, if any, by which the amount in clause (A)(1)
above exceeds the amount in clause (A)(2) above (the amount of
such excess the "Class A-1 Controlled Distribution Amount
Deficiency");
(B)(1) during the Class A-1/A-2 Controlled Amortization Period
with respect to the Class A-2 Notes, the Class A-2 Controlled
Distribution Amount for the Related Month, (2) the amount
allocated to the Class A-2 Notes during the Related Month pursuant
to Section 3.2(b)(x)(ii) or 3,2(c)(x)(ii), as applicable, and (3)
the amount, if any, by which the amount in clause (B)(1) above
exceeds the amount in clause (B)(2) above (the amount of such
excess the "Class A-2 Controlled Distribution Amount Deficiency");
(C)(1) during the Class A-3 Controlled Amortization Period,
the Class A-3 Controlled Distribution Amount for the Related
Month, (2) the amount allocated to the Class A-3 Notes during the
Related Month pursuant to Section 3.2(b)(x)(ii) or 3.2(c)(x)(ii),
as applicable, and (3) the amount, if any, by which the amount in
clause (C)(1) above exceeds the amount in clause (C)(2) above (the
amount of such excess the "Class A-3 Controlled Distribution
Amount Deficiency"); and
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(D)(1) during the Class A-4 Controlled Amortization Period,
the Class A-4 Controlled Distribution Amount for the Related
Month, (2) the amount allocated to the Class A-4 Notes during the
Related Month pursuant to Section 3.2(b)(x)(ii) or 3.2(c)(x)(ii),
as applicable, and (3) the amount, if any, by which the amount in
clause (D)(1) above exceeds the amount in clause (D)(2) above
(the amount of such excess the "Class A-4 Controlled Distribution
Amount Deficiency").
(ii) (A) Commencing on the second Distribution Date after the
commencement of the Class A-1/A-2 Controlled Amortization Period,
the Trustee shall, in respect of the Class A-1 Notes, (1) withdraw
from the Series 1996-1 Collection Account an amount equal to the
lesser of the amounts specified in clauses (A)(1) and (A)(2) of
Section 3.5(a)(i), and (2) if amounts have been drawn on the
Letter of Credit and deposited into the cries 1996-1 Collection
Account pursuant to Section 3.8 of this Supplement, the Servicer
shall instruct the Trustee or the Paying Agent to withdraw from
the Series 1996-1 Collection Account on such Distribution Date the
lesser of (x) the amount on deposit in the Series 1996-1
Collection Account representing such draw on the Letter of Credit
(after application of any portion thereof pursuant to Sections
3.4(a) and 3.4(b)) and (y) he amount of the Class A-1 Controlled
Distribution Amount Deficiency (if any), and deposit such amount
in the Class A Distribution account to be paid, pro rata, to the
Class A-1 Noteholders on account of the Class A-1 Controlled
Distribution Amount and (3) to the extent any Class A-1 Controlled
Distribution Amount Deficiency still remains after application of
the mounts specified in clauses (1) and (2), the Servicer shall
instruct the Trustee or the Paying Agent to withdraw from the
Series 1996-1 Excess Funding Account an amount equal to the lesser
of (v) the amount on deposit in the Series 1996-1 Excess Funding
Account on such Distribution Date after application of any amounts
pursuant to Sections 3.4(a) and 3.4(b)) in an amount not to exceed
the Series 1996-1 Available Subordinated Amount at such time and
(w) the remaining amount of the Class A-1 Controlled Distribution
Amount Deficiency and deposit such amount in the Class A
Distribution Account to be paid, pro rata, to the
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Class A-1 Noteholders on account of the Class A-1 Controlled
Distribution Amount; provided that, the aggregate of all amounts
allocated to the Class A-1 Notes pursuant to Section 3.5(a)(i)(A)
and all amounts allocated to the Class A-2 Notes pursuant to
Section 3.5(a)(i)(B) shall be aggregated and distributed to the
Class A-1 Notes and the Class A-2 Notes pursuant to Sections
3.5(a)(ii)(A) and (B) on a pro rata basis.
(B) Commencing on the second Distribution Date after the
commencement of the Class A-1/A-2 Controlled Amortization Period,
the Trustee shall, in respect of the Class A-2 Notes, (1) withdraw
from the Series 1996-1 Collection Account an amount equal to the
lesser of the amounts specified in clauses (B)(1) and (B)(2) of
Section 3.5(a)(i), and (2) if amounts have been drawn on the
Letter of Credit and deposited into the Series 1996-1 Collection
Account pursuant to Section 3.8 of this Supplement, the Servicer
shall instruct the Trustee or the Paying Agent to withdraw from
the Series 1996-1 Collection Account on such Distribution Date the
lesser of (x) the amount on deposit in the Series 1-996-1
Collection Account representing such draw on the Letter of Credit
(after application of any portion thereof pursuant to Sections
3.4(a) and 3.4(b)) and (y) the amount of the Class A-2 Controlled
Distribution Amount Deficiency (if any), and deposit such amount
in the Class A Distribution Account to be paid, pro rata, to the
Class A-2 Noteholders on account of the Class A-2 Controlled
Distribution Amount and (3) to the extent any Class A-2 Controlled
Distribution Amount Deficiency still remains after application of
the amounts specified in clauses (1) and (2), the Servicer shall
instruct the Trustee or the Paying Agent to withdraw from the
Series 1996-1 Excess Funding Account an amount equal to the lesser
of (v) the amount on deposit in the Series 1996-1 Excess Funding
Account on such Distribution Date (after application of any
amounts pursuant to Sections 3.4(a) and 3.4(b)) in an amount not
to exceed the Series 1996-1 Available Subordinated Amount at such
time and (w) the remaining amount of the Class A-2 Controlled
Distribution Amount Deficiency and deposit such amount in the
Class A Distribution Account to be paid, pro rata, to the Class
A-2 Noteholders on account of the Class A-2
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Controlled Distribution Amount; provided that, the aggregate of
all amounts allocated to the Class A-1 Notes pursuant to Section
3.5(a)(i)(A) and all amounts allocated to the Class A-2 Notes
pursuant to Section 3.5(a)(i)(B) shall be aggregated and
distributed to the Class A-1 Notes and the Class A-2 Notes
pursuant to Sections 3.5(a)(ii)(A) and (B) on a pro rata basis.
(C) Commencing on the second Distribution Date after the
commencement of the Class A-3 Controlled Amortization Period, the
Trustee shall (1) withdraw from the Series 1996-1 Collection
Account an amount equal to the lesser of the amounts specified in
clauses (C)(1) and (C)(2) of Section 3.5(a)(i), and (2) if amounts
have been drawn on the Letter of Credit and deposited into the
Series 1996-1 Collection Account pursuant to Section 3 8 of this
Supplement, the Servicer shall instruct the Trustee or the Paying
Agent to withdraw from the Series 1996-1 Collection Account on
such Distribution Date the lesser of (x) the amount on deposit in
the Series 1996-1 Collection Account representing such draw on the
Letter of Credit (after application of any portion thereof
pursuant to Sections 3.4(a) and 3.4(b)) and (y) the amount of the
Class A-3 Controlled Distribution Amount Deficiency (if any), and
deposit such amount in the Class A Distribution Account to be
paid, pro rata, to the Class A-3 Noteholders on account of the
Class A-3 Controlled Distribution Amount and (3) to the extent any
Class A-3 Controlled Distribution Amount Deficiency still remains
after application of the amounts specified in clauses (1) and (2),
the Servicer shall instruct the Trustee or the Paying Agent to
withdraw from the Series 1996-1 Excess Funding Account an amount
equal to the lesser of (v) the amount on deposit in the Series
1996-1 Excess Funding Account on such Distribution Date (after
application of any amounts pursuant to Sections 3.4(a) and 3.4(b))
in an amount not to exceed the Series 1996-1 Available
Subordinated Amount at such time and (w) the remaining amount of
the Class A-3 Controlled Distribution Amount Deficiency and
deposit such amount in the Class A Distribution Account to be
paid, pro rata, to the Class A-3 Noteholders on account of the
Class A-3 Controlled Distribution Amount.
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(D) Commencing on the second Distribution Date after the
commencement of the Class A-4 Controlled Amortization Period, the
Trustee shall (1) withdraw from the Series 1996-1 Collection
Account an amount equal to the lesser of the amounts specified in
clauses (D)(1) and (D)(2) of Section 3.5(a)(i), and (2) if amounts
have been drawn on the Letter of Credit and deposited into the
Series 1996-1 Collection Account pursuant to Section 3.8 of this
Supplement, the Servicer shall instruct the Trustee or the Paying
Agent to withdraw from the Series 1996-1 Collection Account on
such Distribution Date the lesser of (x) the amount on deposit in
the Series 1996-1 Collection Account representing such draw on the
Letter of Credit (after application of any portion thereof
pursuant to Sections 3.4(a) and 3.4(b)) and (y) the amount of the
Class A-4 Controlled Distribution Amount Deficiency (if any), and
deposit such amount in the Class A Distribution Account to be
paid, pro rata, to the Class A-4 Noteholders on account of the
Class A-4 Controlled Distribution Amount and (3) to the extent any
Class A-4 Controlled Distribution Amount Deficiency still remains
after application of the amounts specified in clauses (1) and (2),
the Servicer shall instruct the Trustee or the Paying Agent to
withdraw from the Series 1996-1 Excess Funding Account an amount
equal to the lesser of (v) the amount on deposit in the Series
1996-1 Excess Funding Account on such Distribution Date (after
application of any amounts pursuant to Sections 3.4(a) and 3.4(b))
in an amount not to exceed the Series 1996-1 Available
Subordinated Amount at such time and (w) the remaining amount of
the Class A-4 Controlled Distribution Amount Deficiency and
deposit such amount in the Class A Distribution Account to be
paid, pro rata, to the Class A-4 Noteholders on account of the
Class A-4 Controlled Distribution Amount
(iii) Commencing on the first Distribution Date after the
commencement of the Series 1996-1 Rapid Amortization Period, the
Trustee shall (1) withdraw from the Series 1996-1 Collection Account
the amount allocated thereto pursuant to Section 3.2(c)(x)(ii) and (2)
if amounts have been drawn on the Letter of Credit and deposited into
the Series 1996-1 Collection Account pursuant to Section 3.3 of this
Supplement, the Servicer shall instruct the Trustee or the Paying Agent
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to withdraw from the Series 1996-1 Collection Account on such
Distribution Date the lesser of (x) the amount on deposit in the Series
1996-1 Collection Account representing such draw on the Letter of
Credit (after application of any portion thereof pursuant to Sections
3.4(a) and 3.4(b)) and (y) the excess of the Class A Invested Amount
over the amount described in clause (1) and deposit such amount in the
Class A Distribution Account to be paid, pro rata, to the Class A
Noteholders and (3) to the extent any portion of the Class A Invested
Amount still remains unpaid after application of the amounts specified
in clauses (1) and ~M, the Servicer shall instruct the Trustee or the
Paying Agent to withdraw from the Series 1996-1 Excess Funding Account
an amount equal to the lesser of (v) the amount on deposit in the
Series 1996-1 Excess Funding Account on such Distribution Date (after
application of any amounts pursuant to Sections 3.4(a), and 3.4(b)) in
an amount not to exceed the Series 1996-1 Available Subordinated Amount
at such time and (w) the unpaid portion of the Class A Invested Amount
and deposit such amount in the Class A Distribution Account to be paid,
pro rata, to the Class A Noteholders; provided, however, that on the
final Distribution Date for the Class A Notes, the Trustee shall
withdraw from the Series 1996-1 Collection Account, as provided above,
an amount which is no greater than the Class A Invested Amount as of
such date. The Invested Amount of each Outstanding Class of Class A
Notes shall be due and payable on the Series 1996-1 Termination Date
for such Class.
(iv) On each Distribution Date occurring on or after the date
a withdrawal is made pursuant to Section 3.5(a)(ii) or (iii) of this
Supplement, the Paying Agent shall, in accordance with Section 6.1 of
the Base Indenture, pay to the applicable Class A Noteholders specified
in Section 3.5(a)(ii) or (iii), as applicable, pro rata, the amount
deposited in the Class A Distribution Account for the payment of
principal pursuant to Section 3.5(a)(ii) or (iii), as applicable, of
this Supplement.
(b) Class B Notes.
(i) Commencing on the first Determination Date after the
commencement of the Class B-1 Controlled Amortization Period, the Class
B-2 Controlled Amortization Period or the Class B-3 Controlled
Amortization Period (as the case may be) or the first
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Determination Date after the commencement of the Series 1996-1
Rapid Amortization Period, provided that the Class A Notes shall have
then been paid in full, the Servicer shall instruct the Trustee or the
Paying Agent pursuant to the Lease as to the following:
(A)(1) during the Class B-l Controlled Amortization Period,
the Class B-l Controlled Distribution Amount for the Related Month, (2)
the amount allocated to the Class B-l Notes during the Related Month
pursuant to Section 3.2(b)(x)(ii) or 3.2(c)(x)(ii), as applicable, and
(3) the amount, if any, by which the amount in clause (A)(l) above
exceeds the amount in clause (A)(2) above (the amount of such excess,
the "Class B-l Controlled Distribution Amount Deficiency");
(B)(1) during the Class B-2 Controlled Amortization Period,
the Class B-2 Controlled Distribution Amount for the Related Month, (2)
the amount allocated to the Class B-2 Notes during the Related Month
pursuant to Section 3.2(b)(x)(ii) or 3.2(c)(x)(ii), as applicable, and
(3) the amount, if any, by which the amount in clause (B)(1) above
exceeds the amount in clause (B)(2) above (the amount of such excess,
the Class B-2 Controlled Distribution Amount Deficiency); and
(C)(1) during the Class B-3 Controlled Amortization Period,
the Class B-3 Controlled Distribution Amount for the Related Month, (2)
the amount allocated to the Class B-3 Notes during the Related Month
pursuant to Section 3.2(b)(x)(ii) or 3.2(c)(x)(ii), as applicable, and
(3) the amount, if any, by which the amount in clause (C)(1) above
exceeds the amount in clause (C)(2) above (the amount of such excess,
the "Class B-3 Controlled Distribution Amount Deficiency").
(ii) (A) Commencing on the second Distribution Date after the
commencement of the Class B-1 Controlled Amortization Period, the
Trustee shall, subject to Section 3.13, (l) withdraw from the Series
1996-1 Collection Account an amount equal to the lesser of the amounts
specified in clauses (A)(1) and (A)(2) of Section 3.5(b)(i), and (2) if
amounts have been drawn on the Letter of Credit and deposited into the
Series 1996-1 Collection Account pursuant to Section 3.8 of this
Supplement, the Servicer shall instruct the Trustee or the Paying Agent
to withdraw from the
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Series 1996-1 Collection Account on such Distribution Date the lesser
of (x) the amount on deposit in the Series 1996-1 Collection Account
representing such draw on the Letter of Credit (after application of
any portion thereof pursuant to Sections 3.4(a), 3.4(b) and 3.5(a)) and
(y) the amount of the Class B-1 Controlled Distribution Amount
Deficiency (if any), and deposit such amount in the Class B
Distribution Account to be paid, pro rata, to the Class B-1 Noteholders
on account of the Class B-1 Controlled Distribution Amount and (3) to
the extent any Class B-1 Controlled Distribution Amount Deficiency
still remains after application of the amounts specified in clauses (1)
and (2), the Servicer shall instruct the Trustee or the Paying Agent to
withdraw from the Series 1996-1 Excess Funding Account an amount equal
to the lesser of (v) the amount on deposit in the Series 1996-1 Excess
Funding Account on such Distribution Date (after application of any
amounts pursuant to Sections 3.4(a), 3.4(b) and 3.5(a)) in an amount
not to exceed the Series 1996-1 Available Subordinated Amount at such
time and (w) the remaining amount of the Class B-1 Controlled
Distribution Amount Deficiency and deposit such amount in the Class B
Distribution Account to be paid, pro rata, to the Class B-1 Noteholders
on account of the Class B-1 Controlled Distribution Amount.
(B) Commencing on the second Distribution Date after the
commencement of the Class B-2 Controlled Amortization Period, the
Trustee shall, subject to Section 3.13, (1) withdraw from the Series
1996-1 Collection Account an amount equal to the lesser of the amounts
specified in clauses (B)(1) and (B)(2) of Section 3.5(b)(i), and (2) if
amounts have been drawn on the Letter of Credit and deposited into the
Series 1996-1 Collection Account pursuant to Section 3.8 of this
Supplement, the Servicer shall instruct the Trustee or the Paying Agent
to withdraw from the Series 1996-1 Collection Account on such
Distribution Date the lesser of (x) the amount on deposit in the Series
1996-1 Collection Account representing such draw on the Letter of
Credit (after application of any portion thereof pursuant to Sections
3.4(a), 3.4(b) and 3.5(a)) and (y) the amount of the Class B-2
Controlled Distribution Amount Deficiency (if any), and deposit such
amount in the Class B Distribution Account to be paid, pro rata, to the
Class B-2 Noteholders on account of the Class B-2 Controlled
Distribution Amount and (3) to the extent any Class B-2 Controlled
Distribution Amount Deficiency still remains after application of
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the amounts specified in clauses (1) and (2), the Servicer shall
instruct the Trustee or the Paying Agent to withdraw from the Series
1996-1 Excess Funding Account an amount equal to the lesser of (v) the
amount on deposit in the Series 1996-1 Excess Funding Account on such
Distribution Date (after application of any amounts pursuant to
Sections 3.4(a), 3.4(b) and 3.5(a)) in an amount not to exceed the
Series 1996-1 Available Subordinated Amount at such time and (w) the
remaining amount of the Class B-2 Controlled Distribution Amount
Deficiency and deposit such amount in the Class B Distribution Account
to be paid, pro rata, to the Class B-2 Noteholders on account of the
Class B-2 Controlled Distribution Amount.
(C) Commencing on the second Distribution Date after the
commencement of the Class B-3 Controlled Amortization Period, the
Trustee shall, subject to Section 3 13, (1) withdraw from the Series
1996-1 Collection Account an amount equal to the lesser of the amounts
specified in clauses (C)(1) and (C)(2) of Section 3.5(b)(i), and (2) if
amounts have been drawn on the Letter of Credit and deposited into the
Series 1996-1 Collection Account pursuant to Section 3.8 of this
Supplement, the Servicer shall instruct the Trustee or the Paying Agent
to withdraw from the Series 1996-1 Collection Account on such
Distribution Date the lesser of (x) the amount on deposit in the Series
1996-1 Collection Account representing such draw on the Letter of
Credit (after application of any portion thereof pursuant to Sections
3.4(a), 3.4(b) and 3.5(a)) and (y) the amount of the Class B-3
Controlled Distribution Amount Deficiency (if any), and deposit such
amount in the Class B Distribution Account to be paid, pro rata, to the
Class B-3 Noteholders on account of the Class B-3 Controlled
Distribution Amount and (3) to the extent any Class B-3 Controlled
Distribution Amount Deficiency still remains after application of the
amounts specified in clauses (1) and (2), the Servicer shall instruct
the Trustee or the Paying Agent to withdraw from the Series 1996-1
Excess Funding Account an amount equal to the lesser of (v) the amount
on deposit in the Series 1996-1 Excess Funding Account on such
Distribution Date (after application of any amounts pursuant to
Sections 3.4(a), 3.4(b) and 3.5(a)) in an amount not to exceed the
Series 1996-1 Available Subordinated Amount at such time and (w) the
remaining amount of the Class B-3 Controlled Distribution Amount
Deficiency and deposit such amount in the Class B Distribution Account
to be paid, pro rata, to the
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Class B-3 Noteholders on account of the Class B-3 Controlled
Distribution Amount.
(iii) (A) Commencing on the first Distribution Date after the
commencement of the Series 1996-1 Rapid Amortization Period, provided
that the Class A Notes shall have then been paid in full, the Trustee
shall (1) withdraw from the Series 1996-1 Collection Account the amount
allocated thereto pursuant to Section 3.2(c)(x)(ii) and (2) if amounts
have been drawn on the Letter of Credit and deposited into the Series
1996-1 Collection Account pursuant to Section 3.8 of this Supplement,
the Servicer shall instruct the Trustee or the Paying Agent to withdraw
from the Series 1996-1 Collection Account on such Distribution Date the
lesser of (x) the amount on deposit in the Series 1996-1 Collection
Account representing such draw on the Letter of Credit (after
application of any portion thereof pursuant to Sections 3.4(a), 3.4(b)
and 3.5(a)) and (y) the excess of the Class B Invested Amount over the
amount described in clause (1) and deposit such amount in the Class B
Distribution Account to be paid, pro rata, to the Class B Noteholders
and (3) to the extent any portion of the Class B Invested Amount still
remains unpaid after application of the amounts specified in clauses
(1) and by, the Servicer shall instruct the Trustee or the Paying Agent
to withdraw from the Series 1996-1 Excess Funding Account an amount
equal to the lesser of (v) the amount on deposit in the Series 1996-1
Excess Funding Account on such Distribution Date (after application of
any amounts pursuant to Sections 3.4(a), 3.4(b) and 3.5(a)) in an
amount not to exceed the Series 1996-1 Available Subordinated Amount at
such time and (w) the unpaid portion of the Class B Invested Amount and
deposit such amount in the Class B Distribution Account to be paid, pro
rata, to the Class B Noteholders; provided, however, that on the final
Distribution Date for the Class B Notes, the Trustee shall withdraw
from the Series 1996-1 Collection Account, as provided above, an
aggregate amount which is no greater than the Class B Invested Amount
as of such date. Subject to Section 3.13, the Invested Amount of each
Outstanding Class of Class B Notes shall be due and payable on the
Series 1996-1 Termination Date for such Class.
(iv) On each Distribution Date occurring on or after the date
a withdrawal is made pursuant to Section 3.5(b)(ii) or (iii) of this
Supplement, the Paying Agent shall, in accordance with Section 6.1 of
the Base
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Indenture, pay to the applicable Class B Noteholders specified in
Section 3.5(b)(ii) and/or (iii), as applicable, pro rata, the amount
deposited in the Class B Distribution Account for the payment of
principal pursuant to Section 3.s(b)(ii) and/or (iii) of this
Supplement.
Section 3.6 Retained Distribution Account. On each Distribution Date,
the Servicer shall instruct the Trustee to instruct the Paying Agent to transfer
to the Retained Distribution Account (established pursuant to Section 5.1(b) of
the Base Indenture) (i) all funds in excess of the Series 1996-1 Liquidity
Amount which are in the Collection Account that have been allocated to the
Retained Distribution Account as of such Distribution Date and (ii) all funds
that were previously allocated to the Retained Distribution Account but not
transferred to the Retained Distribution Account.
Section 3.7 The Servicer's Failure to Instruct the Trustee to Make a
Deposit or Payment. If the Servicer fails to give notice or instructions to make
any payment from or deposit into the Collection Account required to be given by
the Servicer, at the time specified in the Lease or any other Related Document
(including applicable grace periods), and such failure is known by the Trustee,
the Trustee shall make such payment or deposit into or from the Collection
Account without such notice or instruction from the Servicer. Pursuant to the
Lease, the Servicer has agreed that it shall, upon request of the Trustee,
promptly provide the Trustee with all information necessary to allow the Trustee
to make such a payment or deposit.
Section 3.8 Draw on Letter of Credit.
(a) At or before 12:00 p.m. (New York City time) on each Distribution
Date, the Servicer shall notify the Trustee pursuant to the Lease of the amount
of the Series 1996-1 Lease Payment Deficit, such notification to be in the form
of Exhibit E to the Lease.
(b) So long as the Letter of Credit shall not have been terminated, on
any Business Day that a Series 1996-1 Lease Payment Deficit exists, the Trustee
shall, by 2:00 p.m. (New York City time) on the same Business Day, draw on the
Letter of Credit by presenting a draft in the amount equal to the lesser of the
Series 1996-1 Lease Payment Deficit and the amount available to be drawn on the
Letter of Credit on such Business Day accompanied by a Certificate of Credit
Demand in the form of Annex A to the Letter of Credit. The proceeds of such draw
shall be deposited in the Series 1996-1 Collection Account for further
allocation to
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the Class A Distribution Account and/or the Class B Distribution Account in
accordance with the instructions of the Servicer.
Section 3.9 Letter of Credit Termination Demand.
(a) If prior to the date which is 30 days prior to the then scheduled
Letter of Credit Expiration Date,
(i) there shall not have been appointed a successor institution to act
as Letter of Credit Provider, or
(ii) the payments to be made by the Lessee under the Lease shall not
have otherwise been credit enhanced with (A) the funding of the Cash Collateral
Account with cash in the amount of the Letter of Credit Amount, (B) other cash
collateral accounts, overcollateralization or subordinated securities or (C)
with the consent of the Required Noteholders, a surety bond or other similar
arrangements; provided, however, that
(1) any such successor institution or other form of substitute
credit enhancement referred to in the foregoing clauses (i) and (ii)
shall be approved by each Rating Agency; and
(2) any such successor institution or other form of substitute
credit enhancement referred to in the foregoing clauses (i) or (ii)(C)
shall, if the ratings with respect to such substitute credit
enhancement, if applicable, are less than A-1 or the equivalent from
Standard & Poor's (and if Duff & Phelps is then a Rating Agency, a
comparable rating by Duff & Phelps, if any), be approved by the
Required Noteholders;
then the Servicer shall notify the Trustee pursuant to the Lease no later than
one Business Day prior to the Letter of Credit Expiration Date of (i) the
principal balance of all Outstanding Series 1996-1 Notes on such date, and (ii)
the amount available to be drawn on the Letter of Credit on such date. Upon
receipt of such notice by the Trustee on or prior to 10:00 a.m. (New York City
time) on any Business Day, the Trustee shall, by 2:00 p.m (New York City time)
on such Business Day (or, in the case of notice given to the Trustee after 10:00
a.m. (New York City time), by 2:00 p.m. (New York City time) on the next
following Business Day), draw the lesser of the amounts set forth in clauses (i)
and (ii) above on the Letter of Credit by presenting a draft accompanied by a
Certificate of Termination Demand in the form of Annex B to the Letter of Credit
and shall deposit the proceeds of the disbursement resulting therefrom in a
special deposit account (the "Cash Collateral Account").
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(b) The Servicer shall notify the Trustee pursuant to the Lease within
one Business Day of becoming aware that the long-term debt credit rating of the
Letter of Credit Provider has fallen below "A" as determined by Standard &
Poor's and Duff & Phelps. At such time the Servicer shall also notify the
Trustee of (i) the principal balance of all Outstanding Series 1996-1 Notes on
such date, and (ii) the Letter of Credit Amount on such date. Upon receipt of
such notice by the Trustee on or prior to 10:00 a.m. (New York City time) on any
Business Day, the Trustee shall, by 2:00 p.m. (New York City time) on such
Business Day (or, in the case of any notice given to the Trustee after 10:00
a.m. (New York City time), by 2:00 p.m. (New York City time) on the next
following Business Day), draw on the Letter of Credit in an amount equal to the
lesser of the principal balance of all Outstanding Series 1996-1 Notes on such
Business Day and the amount available to be drawn on the Letter of Credit on
such Business Day by presenting a draft accompanied by a Certificate of
Termination Demand in the form of Annex B to the Letter of Credit and shall
deposit the proceeds of the disbursement resulting therefrom in the Cash
Collateral Account.
Section 3.10 The Cash Collateral Account.
(a) Upon receipt of notice of a draw on the Letter of Credit pursuant
to Section 3.8 or 3.9, the Trustee shall establish and maintain in the name of
the Trustee for the benefit of the Series 1996-1 Noteholders, or cause to be
established and maintained, the Cash Collateral Account bearing a designation
clearly indicating that the funds deposited therein are held for the Series
1996-1 Noteholders. The Cash Collateral Account shall be maintained (i) with a
Qualified Institution, or (ii) as a segregated trust account with the corporate
trust department of a depository institution or trust company having corporate
trust powers and acting as trustee for funds deposited in the Cash Collateral
Account. If the Cash Collateral Account is not maintained in accordance with the
prior sentence, then within 10 Business Days after obtaining knowledge of such
fact, National has agreed pursuant to the Lease that it shall establish a new
Cash Collateral Account which complies with such sentence and shall instruct the
Trustee to transfer into the new Cash Collateral Account all cash and
investments from the non qualifying Cash Collateral Account. When established,
the Cash Collateral Account is intended to function in all respects as the
replacement for, and the equivalent of, the Letter of Credit. Accordingly,
following its creation, each reference to a draw on the Letter of Credit shall
refer to withdrawals from the Cash Collateral Account and references to similar
terms shall mean and be a reference to actions taken with respect to the Cash
Collateral Account that correspond to actions that otherwise would have been
taken with respect to the Letter of Credit.
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Without limiting the generality of the foregoing, upon funding of the Cash
Collateral Account, the Trustee shall, at all times when otherwise required to
make a draw under the Letter of Credit pursuant to Sections 3.8 or 3.9 of this
Supplement, make a draw from the Cash Collateral Account in the amount and at
such time as a draw would be made under the Letter of Credit pursuant to
Sections 3.8 or 3.9 of this Supplement. The Trustee shall provide written notice
to National of any draw from the Cash Collateral Account pursuant to Sections
3.8 or 3.9 of this Supplement.
(b) In order to secure and provide for the repayment and payment of the
NFLP Obligations with respect to the Series 1996-1 Notes (but not the other
Notes), NFLP hereby assigns, pledges, grants, transfers and sets over to the
Trustee, for the benefit of the Series 1996-1 Noteholders, all of NFLP,s right,
title and interest in and to the following (whether now or hereafter existing
and whether now owned or hereafter acquired): (i) the Cash Collateral Account;
(ii) all funds on deposit therein from time to time; (iii) all certificates and
instruments, if any, representing or evidencing any or all of the Cash
Collateral Account or the funds on deposit therein from time to time; (iv) all
Permitted Investments made at any time and from time to time with the monies in
the Cash Collateral Account; and (v) all proceeds of any and all of the
foregoing, including, without limitation, cash. The Trustee shall possess all
right, title and interest in all funds on deposit from time to time in the Cash
Collateral Account and in all proceeds thereof. The Cash Collateral Account
shall be under the sole dominion and control of the Trustee for the benefit of
the Series 1996-1 Noteholders, the Letter of Credit Provider and the Support
Credit Enhancer, as their interests appear herein, which interest in the case of
the Letter of Credit Provider and the Support Credit Enhancer shall be subject
to the interests of the holders of Series 1996-1 Notes as provided herein.
(c) Funds on deposit in the Cash Collateral Account shall at the
direction of the Servicer given pursuant to the Lease be invested by the Trustee
in Permitted Investments. Funds on deposit in the Cash Collateral Account on any
Distribution Date, after giving effect to any deposits to or withdrawals from
the Cash Collateral Account on such Distribution Date, shall be invested in
Permitted Investments that will mature at such time that such funds will be
available for withdrawal on or prior to the following Distribution Date. The
proceeds of any such investment, to the extent not distributed on such
Distribution Date, shall be invested in Permitted Investments that will mature
at such time that such funds will be available for withdrawal on or prior to the
Distribution Date immediately following the date of such investment. The Trustee
shall maintain for the benefit
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of the Series 1996-1 Noteholders, the Letter of Credit Provider and the Support
Credit Enhancer as their interests appear herein, which interest in the case of
the Letter of Credit Provider and the Support Credit Enhancer shall be subject
to the interests of the holders of the Series 1996-1 Notes as provided herein,
possession of the negotiable instruments or securities evidencing the Permitted
Investments from the time of purchase thereof until the time of sale or
maturity. On each Distribution Date, all interest and earnings (net of losses
and investment expenses) accrued since the preceding Distribution Date on funds
on deposit in the Cash Collateral Account shall be paid in the following order
of priority, first, to the Letter of Credit Provider to the extent of any
unreimbursed draws on the Letter of Credit and, second, to the Support Credit
Enhancer for application in accordance with the Support Letter of Credit
Reimbursement Agreement. Subject to the restrictions set forth above, National,
or a Person designated in written notification thereof to the Trustee, shall
have the authority to instruct the Trustee with respect to the investment of
funds on deposit in the Cash Collateral Account. For purposes of determining
the availability of funds or the balances in the Cash Collateral Account for
any reason under the Indenture, all investment earnings on such funds shall be
deemed not to be available or on deposit.
(d) Cash Collateral Account Surplus. In the event that the Cash
Collateral Account Surplus on any Distribution Date, after giving effect to all
withdrawals from the Cash Collateral Account, is greater than zero, the Trustee,
acting in accordance with the instructions of the Servicer, shall withdraw from
the Cash Collateral Account an amount equal to the Cash Collateral Amount
Surplus and shall pay such amount in the following order of priority: first, to
the Letter of Credit Provider, an amount equal to the amount of unreimbursed
draws under the Letter of Credit and, second, to the Support Credit Enhancer, an
amount equal to the remainder of the Cash Collateral Account Surplus for
application in accordance with the provisions of the Support Letter of Credit
Reimbursement Agreement.
(e) Termination of Cash Collateral Account. Upon the later to occur of
(i) the termination of the Indenture pursuant to Section 11.1 of the Base
Indenture and (ii) the Business Day immediately following the Letter of Credit
Expiration Date, the Trustee, acting in accordance with the instructions of the
Servicer, after the prior payment of all amounts owing to the the Cash
Collateral from the Cash Series 1996-1 Noteholders and payable from Account as
provided herein, shall withdraw Collateral Account all amounts on deposit
therein for payments in the following order of priority: first, to the Letter of
Credit Provider to the extent of unreimbursed draws on the Letter of
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Credit and, second, to the Support Credit Enhancer, an amount equal to the
remainder of such amounts on deposit in the Cash Collateral Account for
application in accordance with the Support Letter of Credit Reimbursement
Agreement.
Section 3.11 Class A Distribution Account.
(a) Establishment of Class A Distribution Account. The Trustee shall
establish and maintain in the name of the Trustee for the benefit of the Class A
Noteholders, or cause be established and maintained, an account (the "Class A
Distribution Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Class A Noteholders. The Class
A Distribution Account shall be maintained (i) with a Qualified Institution, or
(ii) as a segregated trust account with the corporate trust department of a
depository institution or trust company having corporate trust powers and acting
as trustee for funds deposited in the Class A Distribution Account. If the Class
A Distribution Account is not maintained in accordance with the previous
sentence, the Servicer shall establish a new Class A Distribution Account,
within ten (10) Business Days after obtaining knowledge of such fact, which
complies with such sentence, and shall instruct the Trustee to transfer all cash
and investments from the non-qualifying Class A Distribution Account into the
new Class A Distribution Account. Initially, the Class A Distribution Account
will be established with the Trustee.
(b) Administration of the Class A Distribution Account. The Servicer
shall instruct the institution maintaining the Class A Distribution Account to
invest funds on deposit in the Class A Distribution Account at all times in
Permitted Investments; provided, however, that any such investment shall mature
not later than the Business Day prior to the Distribution Date following the
date on which such funds were received, unless any Permitted Investment held in
the Class A Distribution Account is held with the Paying Agent, then such
investment may mature on such Distribution Date and such funds shall be
available for withdrawal on or prior to such Distribution Date. The Trustee
shall hold, for the benefit of the Class A Noteholders, possession of any
negotiable instruments or securities evidencing Permitted Investments from the
time of purchase thereof until the time of maturity.
(c) Earnings from Class A Distribution Account. Subject to the
restrictions set forth above, the Servicer shall have the authority to instruct
the Trustee with respect to the investment of funds on deposit in the Class A
Distribution Account. All interest and earnings (net of losses and investment
expenses) paid on funds on deposit in the Class A Distribution
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Account shall be deemed to be on deposit and available for distribution.
(d) Class A Distribution Account Constitutes Additional Collateral for
Class A Notes. In order to secure and provide for the payment of the NFLP
Obligations with respect to the Class A Notes (but not the other Notes), NFLP
hereby assigns, pledges, grants, transfers and sets over to the Trustee, for the
benefit of the Class A Noteholders, all of NFLP's right, title and interest in
and to the following (whether now or hereafter existing and whether now owned or
hereafter acquired): (i) the Class A Distribution Account; (ii) all funds on
deposit therein from time to time; (iii) all certificates and instruments, if
any, representing or evidencing any or all of the Class A Distribution Account
or the funds on deposit therein from time to time; (iv) all Permitted
Investments made at any time and from time to time with monies in the Class A
Distribution Account; and (v) all proceeds of any and all of the foregoing,
including, without limitation, cash (the items in the foregoing clauses (i)
through (v) are referred to, collectively, as the "Class A Distribution Account
Collateral"). The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Class A Distribution Account and in
all proceeds thereof. The Class A Distribution Account Collateral shall be under
the sole dominion and control of the Trustee for the benefit of the Class A
Noteholders.
Section 3.12 Class B Distribution Account.
(a) Establishment of Class B Distribution Account. The Trustee shall
establish and maintain in the name of the Trustee for the benefit of the Class B
Noteholders, or cause to be established and maintained, an account (the "Class B
Distribution Account"), bearing a designation clearly indicating I'd--- Me funds
deposited therein are held for the benefit of the Class B Noteholders. The Class
B Distribution Account shall be maintained (i) with a Qualified Institution, or
(ii) as a segregated trust account with the corporate trust department of a
depository institution or trust company having corporate trust powers and acting
as trustee for funds deposited in the Class B Distribution Account. If the Class
B Distribution Account is not maintained in accordance with the previous
sentence, the Servicer shall establish a new Class B Distribution Account,
within ten (10) Business Days after obtaining knowledge of such fact, which
complies with such sentence, and shall instruct the Trustee to transfer all cash
and investments from the non-qualifying Class B Distribution Account into the
new Class B Distribution Account. Initially, the Class B Distribution Account
will be established with the Trustee.
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(b) Administration of the Class B Distribution Account. The Servicer
has agreed pursuant to the Lease that it shall instruct the institution
maintaining the Class B Distribution Account to invest funds on deposit in the
Class B Distribution Account at all times in Permitted Investments; provided,
however, that any such investment shall mature not later than the Business Day
prior to the Distribution Date following the date on which such funds were
received, unless any Permitted Investment held in the Class B Distribution
Account is held with the Paying Agent, then such investment may mature on such
Distribution Date and such funds shall be available for withdrawal on or prior
to such Distribution Date. The Trustee shall hold, for the benefit of the Class
B Noteholders and National, possession of any negotiable instruments or
securities evidencing Permitted Investments from the time of purchase thereof
until the time of maturity.
(c) Earnings from Class B Distribution Account. Subject to the
restrictions set forth above, the Servicer shall have the authority to instruct
the Trustee with respect to the investment of funds on deposit in the Class B
Distribution Account. All interest and earnings (net of losses and investment
expenses) paid on funds on deposit in the Class B Distribution Account shall be
deemed to be on deposit and available for distribution.
(d) Class B Distribution Account Constitutes Additional Collateral for
Class B Notes. In order to secure and provide for the repayment and payment of
the NFLP Obligations with respect to the Class B Notes (but not the other
Notes), NFLP hereby assigns, pledges, grants, transfers and sets over to the
Trustee, for the benefit of the Class B Noteholders, all of NFLP's right, title
and interest in and to the following (whether now or hereafter existing and
whether now owned or hereafter acquired): (i) the Class B Distribution Account;
(ii) all funds on deposit therein from time to time; (iii) all certificates and
instruments, if any, representing or evidencing any or all of the Class B
Distribution Account or the funds on deposit therein from time to time; (iv) all
Permitted Investments made at any time and from time to time with monies in the
Class B Distribution Account; and (v) all proceeds of any and all of the
foregoing, including, without limitation, cash (the items in the foregoing
clauses (i) through (v) are referred to, collectively, as the "Class B
Distribution Account Collateral"). The Trustee shall possess all right, title
and interest in all funds on deposit from time to time in the Class B
Distribution Account and in all proceeds thereof. The Class B Distribution
Account Collateral shall be under the sole dominion and control of the Trustee
for the benefit of the Class B Noteholders.
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Section 3.13 Class B Notes Subordinate to Class A Notes.
Notwithstanding anything to the contrary contained herein or in any other
Related Document, the Class B Notes will be subordinate in all respects to the
Class A Notes. Except as provided in Article 5 of this Supplement, no payments
on account of interest shall be made with respect to the Class B Notes until all
payments of interest then due and payable with respect to the Class A Notes
(including, without limitation, all accrued interest, all interest accrued on
such accrued interest, and all Class A Deficiency Amounts) have been made in
full. The Class B-1 Notes will be subordinated to the Class A-1 Notes and the
Class A-2 Notes, such that no payments on account of principal shall be made
with respect to the Class B-1 Notes until the Class A-1 Notes and the Class A-2
Notes have been paid in full (except as may otherwise be required in connection
with a Waiver Event). The Class B-2 Notes will be subordinated to the Class A-3
Notes, such that no payments on account of principal shall be made with respect
to the Class B-2 Notes until the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes have been paid in full (except as may otherwise be required in connection
with a Waiver Event). The Class B-3 Notes will be subordinated to the Class A-4
Notes, such that no payments on account of principal shall be made with respect
to the Class B-3 Notes until the Class A-1 Notes, Class A-2 Notes, Class A-3
Notes and Class A-4 Notes have been paid in full (except as may otherwise be
required in connection with a Waiver Event); provided, however, that with
respect to (x) allocations and payments on account of principal during a Series
1996-1 Rapid Amortization Period, and (y) allocation of Losses and Recoveries at
any time, all of the Class B Notes will be subordinated to the Class A Notes, as
specified herein.
ARTICLE 4
AMORTIZATION EVENTS
In addition to the Amortization Events set forth in Section 9.1 of the
Base Indenture, the following shall be Amortization Events with respect to the
Series 1996-1 Notes (without notice or other action on the part of the Trustee
or any Series 1996-1 Noteholders) and shall not be waived by the Trustee without
the prior written consent of each Series 1996-1 Noteholder:
(a) a Series 1996-1 Enhancement Deficiency or Series 1996-1 Minimum
Overcollateralization Deficit shall occur and continue for at least two (2)
Business Days; provided, however, that such event or condition shall not be
an Amortization Event if (i) during such two (2) Business
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Day period the Lessee shall have increased the Letter of Credit Amount or
NFLP shall have contributed to the Series 1996-1 Excess Funding Account
funds to increase the Series 1996-1 Available Subordinated Amount, in
either case, so that there no longer exists a Series 1996-1 Enhancement
Deficiency or Series 1996-1 Minimum Overcollateralization Deficit and (ii)
the amount of any increase in the Letter of Credit Amount pursuant to
clause (i) and any amount contributed to the Series 1996-1 Excess Funding
Account pursuant to clause (i) above, together with all previous increases
in the Letter of Credit Amount pursuant to clause ~ above and contributions
to the Series 1996-1 Excess Funding Account made pursuant to clause (i)
above or otherwise made to increase the Letter of Credit Amount or the
Series 1996-1 Available Subordinated Amount, does not exceed the Series
1996-1 Available Subordinated Amount Maximum Increase;
(b) at any time prior to the funding of the Cash Collateral Account
pursuant to Section 3.9 of this Supplement, the Letter of Credit shall not
be in full force and effect;
(c) from and after the funding of the Cash Collateral Account pursuant
to Section 3.9 of this Supplement, the Cash Collateral Account shall be
subject to an injunction, estoppel or other stay or a Lien (other than
Liens permitted under the Related Documents);
(d) unless (i) (A) the inclusion of the Letter of Credit Amount in the
Enhancement Amount is not necessary for the Enhancement Amount to equal or
exceed the Required Enhancement Amount and (B) the inclusion of the Letter
of Credit Amount in the Class B Enhancement Amount is not necessary for the
Class B Enhancement Amount to equal or exceed the Minimum Class B
Enhancement Amount, or (ii) the Cash Collateral Account shall theretofore
have been funded to the full extent required hereunder and under the Letter
of Credit Reimbursement Agreement, an Event of Bankruptcy shall have
occurred with respect to the Letter of Credit Provider or the Letter of
Credit Provider repudiates the Letter of Credit or refuses to honor a
proper draw thereon; and
(e) all principal and interest of the Class A-1 Notes is not paid in
full on or before the Class A-1 Expected Final Distribution Date, all
principal and interest in respect of the Class A-2 Notes is not paid in
full on or before the Class A-2 Expected Final Distribution Date, all
principal and interest of the Class A-3 Notes is not paid in
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full on or before the Class A-3 Expected Final Distribution Date, all
principal and interest in respect of the Class A-4 Notes is not paid in
full on or before the Class A-4 Expected Final Distribution Date, all
principal and interest in respect of the Class B-1 Notes is not paid in
full on or before the Class B-1 Expected Final Distribution Date, all
principal and interest in respect of the Class B-2 Notes is not paid in
full on or before the Class B-2 Expected Final Distribution Date or all
principal and interest in respect of the Class B-3 Notes is rot paid in
full on or before the Class B-3 Expected Final Distribution Date.
ARTICLE 5
RIGHT TO WAIVE MAXIMUM
NON-PROGRAM VEHICLE AMOUNT AND
MAXIMUM MANUFACTURER AMOUNT
Section 5.1 Request for Waiver. (a) Notwithstanding any provision to
the contrary in the Indenture or the Related Documents, upon the Trustee's
receipt of notice from National or NFLP to the effect that a Manufacturer
Program is no longer an Eligible Manufacturer Program and that, as a result, the
Maximum Non-Program Vehicle Amount and/or the Maximum Manufacturer Amount is or
will be exceeded (such notice, a "Waiver Request"), each Series 1996-1
Noteholder may, at its option, waive the Maximum Non-Program Vehicle Amount
and/or the Maximum Manufacturer Amount if (i) no Amortization Event exists and
(ii) the Requisite Series 1996-1 Noteholders consent to such waiver.
(b) From and after the Consent Period Expiration Date (provided that
the Series 1996-1 Rapid Amortization Period has not theretofore commenced and is
continuing), all Series 1996-1 Principal Allocations allocated to the Series
1996-1 Excess Funding Account and all Series 1996-1 Available Subordinated
Amount Allocations (collectively, the "Designated Amounts") will be held by the
Trustee in the Series 1996-1 Collection Account for ratable distribution as
described below.
(c) Within ten (10) Business Days after the Trustee receives a Waiver
Request, the Trustee shall furnish notice thereof to the Series 1996-1
Noteholders, which notice shall be accompanied by a form of consent (each a
"Consent") in the form of Exhibit C, by which the Series 1996-1 Noteholders may,
on or before the Consent Period Expiration Date, consent to waiver of the
Maximum Non-Program Vehicle Amount and/or the Maximum Manufacturer Amount, as
applicable. If the Trustee receives Consents from the Requisite Series 1996-1
Noteholders agreeing to waiver of the Maximum Non-Program Vehicle Amount and/or
the
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Maximum Manufacturer Amount, as applicable, within forty-five (45) days after
the Trustee notifies the Series 1996-1 Noteholders of a Waiver Request (the day
on which such forty-five (45) day period expires, the "Consent Period Expiration
Date"), (i) the Maximum Non-Program Vehicle Amount and/or the Maximum
Manufacturer Amount, as applicable, shall be deemed waived by the consenting
Series 1996-1 Noteholders, (ii) the Trustee will distribute the Designated
Amounts as set forth below and (iii) the Trustee shall promptly (but in any
event within two days) provide each Rating Agency with notice of such waiver.
Any Class A or Class ~ Noteholder from whom the Trustee has not received a
Consent on or before the Consent Period Expiration Date will be deemed not to
have consented to such waiver of the requirements of the Maximum Non-Program
Vehicle Amount and/or the Maximum Manufacturer Amount, as applicable.
Section 5.2 Consents. (a) If the Trustee receives Consents from the
Requisite Series 1996-1 Noteholders on or before the Consent Period Expiration
Date and a Waiver Deficiency exists, then the Class A Noteholders that consent
to waive will (as described in the following two paragraphs) receive early
prepayment (in part) of the principal amount of their Notes (such prepayment to
be paid to each such Class A Noteholder pro rata in the ratio that the aggregate
principal amount of Class A Notes held by such consenting Class A Noteholder
bears to the aggregate principal amount of all Class A Notes held by all
consenting Class A Noteholders) until the Waiver Deficiency no longer exists
(such prepayments, "Class A Waiver Deficiency Adjustment Prepayments").
(b) If the Trustee receives Consents from the Requisite Series 1996-1
Noteholders on or before the Consent Period Expiration Date, then (whether or
not a Waiver Deficiency exists) on the immediately following Distribution Date,
the Trustee will pay the Designated Amounts as follows:
(i) to the non-consenting Class A Noteholders, any, pro rata
up to the amount required to pay all Class A Notes held by such
non-consenting Class A Noteholders in full;
(ii) any remaining Designated Amounts, to the consenting
Class A Noteholders, if any, pro rata up the amount required to pay
all Class A Waiver Deficiency Adjustment Prepayments, if any, in full;
(iii) any remaining Designated Amounts, to the
non-consenting Class B Noteholders, if any, pro rata up to the amount
required to pay all Class B Notes held by such non-consenting Class B
Noteholders in full; and
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(iv) any remaining Designated Amounts, to the Series 1996-1
Excess Funding Account.
(c) If the amounts paid pursuant to clauses (i), (ii) or (iii) of
Section 5.2(b) are insufficient to pay in full all non-consenting Class A
Noteholders, Waiver Deficiency Adjustment Prepayments or non-consenting Class B
Noteholders, then on each day following such Distribution Date, the Servicer
will allocate to the Series 1996-1 Collection Account on a daily basis all
Designated Amounts collected on such day. On each following Distribution Date,
the Trustee will withdraw a portion of such Designated Amounts from the Series
1996-1 Collection Account and deposit the same in the Class A Distribution
Account and, to the extent the Designated Amounts available exceed the amounts
required to be distributed to the Class A Noteholders, in the Class B
Distribution Account, for distribution as follows:
(i) to the non-consenting Class A Noteholders, if any, pro rata
an amount equal to the sum of (1) the Class A Invested Percentage
of the Designated Amounts in the Series 1996-1 Collection Account as
of the applicable Determination Date plus (2) the Class B Invested
Percentage of the Designated Amounts in the Series 1996-1 Collection
Account as of the applicable Determination Date, plus (3) the Series
1996-1 Available Subordinated Amount Percentage of the Designated
Amounts in the Series 1996-1 Collection Account as of the applicable
Determination Date (each of such invested percentages and available
subordinated amount percentages determined as during a Rapid
Amortization Period, but, if the Waiver Event has occurred during the
Revolving Period, determined by reference to the invested amounts and
the Series 1996-1 Available Subordinated Amount as of the close of
business on the Consent Period Expiration Date) up to the AGGREGATE
OUTSTANDING PRINCIPAL BALANCE of the Class A Notes held by the
non-consenting Class A Noteholders;
(ii) any remaining Designated Amounts, to the consenting Class A
Noteholders, if any, pro rata an amount equal to the sum of (1) the
Class A Invested Percentage of the Designated Amounts remaining after
payment of the amounts required in clause (i) above as of the
applicable Determination Date plus (2) the Class B Invested Percentage
of such Designated Amounts remaining after payment of the amounts
required in clause (i) above as of the applicable Determination Date,
plus (3) the Series 1996-1 Available Subordinated Amount percentage of
the Designated Amounts remaining
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after payment of the amounts required in clause (i) above as of the
applicable Determination Date (each of such invested percentages
determined as during a Rapid Amortization Period, but, if the Waiver
Event has occurred during the Revolving Period, determined by
reference to the invested amounts and the Series 1996-1 Available
Subordinated Amount as of the close of business on the Consent Period
Expiration Date) up to the amount required to pay any Class A Waiver
Deficiency Adjustment Prepayments in full;
(iii) any remaining Designated Amounts, to the non-consenting
Class B Noteholders, if any, pro rata an amount equal to the sum of
(1) the Class A Invested Percentage of the Designated Amounts
remaining after payment of the amounts required in clauses (i) and
(ii) above as of the applicable Determination Date plus (2) the Class
B Invested Percentage of such Designated Amounts remaining after
payment of the amounts required in clauses (i) and (ii) above as of
the applicable Determination Date, plus (3) the Series 1996-1
Available Subordinated Amount Percentage of the Designated Amounts
remaining after payment of the amounts required in clauses (i) and
(ii) above as of the applicable Determination Date (each of such
invested percentages and available subordinated amount percentages
determined as during a Rapid Amortization Period, but, if the Waiver
Event has occurred during the Revolving Period, determined by
reference to the invested amounts and the Series 1996-1 Available
Subordinated Amount as of the close of business on the Consent Period
Expiration Date) up to the aggregate outstanding principal balance of
the Class B Notes held by the non-consenting Class B Noteholders; and
(iv) any remaining Designated Amounts, to the Series 1996-1
Excess Funding Account.
If the Requisite Series 1996-1 Noteholders do not timely consent to
such waiver, the Designated Amounts will be allocated to the Series 1996-1
Excess Funding Account.
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ARTICLE 6
FORM OF SERIES 1996-1 NOTES
Section 6.1 Class A Notes.
(a) Restricted Global Class A Note. Class A Notes to be issued in the
United States will be issued in book-entry form of and represented by a
Restricted Global Class A Note, substantially in the form of Exhibit A-1,
Exhibit A-2, Exhibit A3, or Exhibit A-4 (as applicable) appended hereto, with
such legends as may be applicable thereto as set forth in the Base Indenture,
and will be sold initially to institutional accredited investors within the
meaning of Regulation D under the Securities Act in reliance on an exemption
from the registration requirements of the Securities Act and thereafter to
qualified institutional buyers within the meaning of, and in reliance on, Rule
144A under the Securities Act and shall be deposited on behalf of the purchasers
of the Class A Notes represented thereby, with a custodian for DTC, and
registered in the name of Cede as DTC's nominee, duly executed by NFLP and
authenticated by the Trustee in the manner set forth in Section 2.4 of the Base
Indenture.
(b) Temporary Global Class A Note: Permanent Global Class A Note.
Class A Notes to be issued outside the United States will be issued and sold in
transactions outside the United States in reliance on Regulation S under the
Securities Act, as provided in the applicable placement agreement, and shall
initially be issued in the form of a Temporary Global Class A Note,
substantially in the form of Exhibit A-5, Exhibit A-6, Exhibit A-7 or Exhibit
A-8 (as applicable) appended hereto, which shall be deposited on behalf of the
purchasers of the Class A Notes represented thereby with a custodian for, and
registered in the name of a nominee of DTC, for the accounts of Morgan Guaranty
Trust Company of New York, Brussels office, as operator of Euroclear and for
Cedel, duly executed by NFLP and authenticated by the Trustee in the manner set
forth in Section 2.4 of the Base Indenture. Interests in a Temporary Global
Class A Note will be exchangeable, in whole or in part, for interests in
Permanent Global Class A Note, substantially in the form of Exhibit A-9, Exhibit
A-10, Exhibit A-ll, or Exhibit A-12 (as applicable) appended hereto, in
accordance with the provisions of such Temporary Global Class A Note and the
Base Indenture (as modified by this Supplement). Interests in a Permanent Global
Class A Note will be exchangeable for definitive Class A Notes in accordance
with the provisions of such Permanent Global Class A Note and the Base Indenture
(as modified by this Supplement).
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Section 6.2 Class B Notes.
(a) Restricted Global Class B Note. Class B Notes to be issued in the
United States will be issued in book-entry form of and represented by a
Restricted Global Class B Note, substantially in the form of Exhibit B-1,
Exhibit B-2 or Exhibit B-3 (as applicable) appended hereto, with such legends as
may be applicable thereto as set forth in the Base Indenture, and will be sold
initially to institutional accredited investors within the meaning of Regulation
D under the Securities Act in reliance on an exemption from the registration
requirements of the Securities Act and thereafter to qualified institutional
buyers within the meaning of, an in reliance on, Rule 144A under the Securities
Act and shall be deposited on behalf of the purchasers of the Class B Notes
represented thereby, with a custodian for DTC, and registered in the name of
Cede as DTC's nominee, duly executed by NFLP and authenticated by the Trustee in
the manner set forth in Section 2.4 of the Base Indenture.
(b) Temporary Global Class B Note: Permanent Global Class B Note.
Class B Notes to be issued outside the United States will be issued and sold in
transactions outside the United States in reliance on Regulation S under the
United States Securities Act, as provided in the applicable placement agreement,
and shall initially be issued in a form of Temporary Global Class B Note,
substantially in the form of Exhibit B-4, Exhibit B-5, or Exhibit B-6 (as
applicable) appended hereto, which shall be deposited on behalf of the
purchasers of the Class B Notes represented thereby with a custodian for, and
registered in the name of a nominee of, DTC, for the accounts of Morgan Guaranty
Trust Company of New York, Brussels office, as operator of Euroclear and for
Cedel, duly executed by NFLP and authenticated by the Trustee in the manner set
forth in Section 2.4 of the Base Indenture. Interests in a Temporary Global
Class B Note will be exchangeable, in whole or in part, for interests in a
Permanent Global Class B Note, substantially in the form of Exhibit B-7, Exhibit
B-8 or Exhibit B-9 (as applicable) appended hereto, in accordance with the
provisions of such Temporary Global Class B Note and the Base Indenture (as
modified by this Supplement). Interests in a Permanent Global Class B Note will
be exchangeable for definitive Class B Notes in accordance with the provisions
of such Permanent Global Class B Note and the Base Indenture.
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ARTICLE 7
GENERAL
Section 7.1 Optional Repurchase. Class A Notes and Class B Notes shall
be subject to repurchase in whole, but not in part, by NFLP at its option in
accordance with Section 6.3 of the Base Indenture, as follows:
(a) with respect to the Class A Notes, on any Distribution Date on or
after which the Class A Principal Balance is reduced to an amount less than
or equal to 10` of the Class A Initial Invested Amount (the "Class A
Repurchase Amount"), and with respect to the Class B Notes, on any
Distribution Date on or after which the Class A Notes have been paid in
full and the Class B Principal Balance has been reduced to an amount less
than or equal to 10` of the Class B Initial Invested Amount (the "Class B
Repurchase Amount") (such Distribution Date, a "Repurchase Date"). The
repurchase price for the Class A Notes shall equal the Class A Principal
Balance (determined after giving effect to any payments of principal and
interest on such Distribution Date), plus accrued and unpaid interest on
such outstanding Class A Principal Balance. The repurchase price for the
Class B Notes shall equal the Class B Principal Balance (determined after
giving effect to any payments of principal and interest on such
Distribution Date), plus accrued and unpaid interest on such outstanding
Class B Principal Balance.
(b) A prepayment premium (the "Series 1996-1 Note Prepayment Premium")
will be payable to the Series 1996-1 Noteholders upon (i) any repurchase of
the Series 1996-1 Notes by NFLP other than as described in Section 7.1(a)
and (ii) a prepayment in connection with a Waiver Request made other than
by reason of a Manufacturer Event of Default or the unavailability of
sufficient Vehicles subject to an Eligible Manufacturer Program. The Series
1996-1 Note Prepayment Premium with respect to the Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes, Class B-1 Notes, Class B-2 Notes and Class B-3
Notes will be the excess, if any, of (A) the amount of interest that would
have accrued on such repurchased Series 1996-1 Notes at the Class A-2 Rate,
Class A-3 Rate, Class A-4 Rate, Class B-1 Rate, Class B-2 Rate or Class B-3
Rate (as applicable) during the period from and including the Distribution
Date on which the repurchase price for such Series 1996-1 Notes is required
to be distributed to such Series 1996-1 Noteholders to but excluding the
Expected Final Distribution Date for the Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes, Class B-1
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Notes, Class B-2 Notes, and Class B-3 Notes (taking account of the
scheduled reductions in the aggregate principal balance of such Class A
Notes and Class B Notes during the related Series 1996-1 Controlled
Amortization Period), over (B) the amount of interest that would have
accrued on an amount equal to the Principal Balance (taking account of the
scheduled reductions in such aggregate principal balance during the related
Series 1996-1 Controlled Amortization Period) of the repurchased Series
1996-1 Notes over the same period at an annual interest rate equal to the
yield to maturity on the Determination Date preceding such Distribution
Date on (1) in the case of the Class A-2 Notes, the 6-1/2% United States
Treasury Notes maturing April 1999, (2) in the case of the Class A-3 Notes,
the 5-5/8% United States Treasury Notes maturing February 2001, (3) in the
case of the Class A-4 Notes, the 6-1/4% Treasury Notes due February 2003
and (4) in the case of the Class B-1 Notes, the 6-7/8% United States
Treasury Notes maturing August 1999, (5) in the case of the Class B-2
Notes, the 7-7/8% United States Treasury Notes maturing August 2001 and (6)
in the case of the Class B-3 Notes, the 5-3/4% United States Treasury Notes
maturing August 2003. Such excess, if any, will be discounted to present
value as of such Distribution Date at the related yield described in
subclause (B) above.
(c) The Series 1996-1 Note Prepayment Premium in respect of the Class
A-1 Notes will equal the amount of interest that would have accrued on the
aggregate principal balance of the Class A-1 Notes for the period
commencing on the Distribution Date on which the repurchase price for the
Class A-1 Notes to be distributed to the Class A-1 Noteholders and ending
on the Expected Final Distribution Date applicable to the Class A-1 Notes,
at a rate of interest equal to 0.5t discounted to present value at an
interest rate per annum equal to the corporate bond equivalent yield to
maturity on the Determination Date preceding such Distribution Date on the
6-1/2% United States Treasury Notes maturing April 1999.
Section 7.2 Conditions to Exchanges. During the Series 1996-1
Controlled Amortization Period, neither NFLP nor the Servicer shall have any
authority to release the Lien of the Master Collateral Agent on any Designated
Vehicle pursuant to Section 3.4(b) of the Base Indenture unless on such day
there are funds on deposit in the Series 1996-1 Excess Funding Account in an
amount equal to or greater than the Series 1996-1 Liquidity Amount.
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Section 7.3 Minimum Overcollateralization. NFLP agrees and covenants
with the Trustee that it shall not permit the sum of (a) the
Overcollateralization Portion on any day plus (b) the Additional
Overcollateralization Amount on such day to be less than an amount equal to 4.0%
of the sum of (x) the Class A Invested Amount on such day plus (y) the Class B
Invested Amount on such day.
Section 7.4 Maintenance of Rating; Payment of Rating Agency Fees. NFLP
agrees and covenants with the Trustee to use commercially reasonable efforts to
maintain the initial rating of the 1996-1 Notes issued by any Rating Agency.
NFLP agrees and covenants with National and the Trustee to pay all reasonable
fees and expenses of the Rating Agency and to promptly provide all documents and
other information that the Rating Agency may reasonably request.
Section 7.5 Exhibits. The following exhibits attached hereto
supplement the exhibits included in the Indenture:
Exhibit A-1: Form of Restricted Global Class A-1 Note
Exhibit A-2: Form of Restricted Global Class A-2 Note
Exhibit A-3: Form of Restricted Global Class A-3 Note
Exhibit A-4: Form of Restricted Global Class A-4 Note
Exhibit A-5: Form of Temporary Global Class A-1 Note
Exhibit A-6: Form of Temporary Global Class A-2 Note
Exhibit A-7: Form of Temporary Global Class A-3 Note
Exhibit A-8: Form of Temporary Global Class A-4 Note
Exhibit A-9: Form of Permanent Global Class A-1 Note
Exhibit A-10: Form of Permanent Global Class A-2 Note
Exhibit A-11: Form of Permanent Global Class A-3 Note
Exhibit A-12: Form of Permanent Global Class A-4 Note
Exhibit B-1: Form of Restricted Global Class B-1 Note
Exhibit B-2: Form of Restricted Global Class B-2 Note
Exhibit B-3: Form of Restricted Global Class B-3 Note
Exhibit B-4: Form of Temporary Global Class B-1 Note
Exhibit B-5: Form of Temporary Global Class B-2 Note
Exhibit B-6: Form of Temporary Global Class B-3 Note
Exhibit B-7: Form of Permanent Global Class B-1 Note
Exhibit B-8: Form of Permanent Global Class B-2 Note
Exhibit B-9: Form of Permanent Global Class B-3 Note
Exhibit C: Form of Consent
Section 7.6 Ratification of Base Indenture. As supplemented by this
Supplement, the Base Indenture is in all respects ratified and confirmed and the
Base Indenture as so supplemented by this Supplement shall be read, taken, and
construed as one and the same instrument.
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Section 7.7 Counterparts. This Supplement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all of such counterparts shall together constitute but one and the
same instrument.
Section 7.8 Governing Law. This Supplement shall be construed in
accordance with the law of the State of New York (without giving effect to the
provisions thereof regarding conflicts of laws), and the obligations, rights and
remedies of the parties hereto shall be determined in accordance with such law.
Section 7.9 Amendments. This Supplement may be modified or amended
from time to time in accordance with the terms of the Base Indenture; provided,
however, that the consent of the Support Credit Enhancer shall be required for
any amendment to this Indenture or the Lease which modifies the definition of
"Lease Event of Default", "Series 1996-1 Lease Payment Deficit", "Rent",
"Monthly Base Rent", "Monthly Variable Rent" or "Monthly Supplemental Rent", or
any amendment that affects the conditions for, or the method of, drawing on the
Letter of Credit; provided, however, that if, pursuant to the terms of the Base
Indenture or this Supplement, the consent of the Required Noteholders is
required for an amendment or modification of this Supplement, such requirement
shall be satisfied if such amendment or modification is consented to by
Noteholders representing more than 50% of the Series 1996-1 Principal Balance;
Provided, further, however, if the consent the Required Noteholders is required
for an amendment or modification of this Supplement that (a) affects only the
Class A-1 Notes (and does not affect in any material respect the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes or the Class B Notes, as
evidenced by an Opinion of Counsel to such effect), then such requirement shall
be satisfied if such amendment or modification is consented to by Class A-1
Noteholders representing more than 50% of the aggregate outstanding principal
amount of the Class A-1 Notes (without the necessity of obtaining the consent of
the Required Noteholders in respect of the Class A-2 Notes, the Class A-3 Notes,
the Class A-4 Notes or the Class B Notes), (b) affects only the Class A-2 Notes
(and does not affect in any material respect the Class A-1 Notes, the Class A-3
Notes, the Class A-4 Notes or the Class B Notes, as evidenced by an Opinion of
Counsel to such effect), then such requirement shall be satisfied if such
amendment or modification is consented to by Class A-2 Noteholders representing
more than 50% of the aggregate outstanding principal amount of the Class A-2
necessity of obtaining the consent of the Required Noteholders respect of the
Class A-1 Notes, the Class A-3 Notes, the Class A-4 Notes or the Class B Notes),
(c) affects only the
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<PAGE> 91
Class A-3 Notes (and does not affect in any material respect the Class A-1
Notes, the Class A-2 Notes, the Class A-4 Notes or the Class B Notes, as
evidenced by an Opinion of Counsel to such effect), then such requirement shall
be satisfied if such amendment or modification is consented to by Class A-3
Noteholders representing more than 50% of the aggregate outstanding principal
amount of the Class A-3 Notes (without the necessity of obtaining the consent of
the Required Noteholders in respect of the Class A-1 Notes, the Class A-2 Notes,
the Class A-4 Notes or the Class B Notes), (d) affects only the Class A-4 Notes
(and does not affect in any material respect the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes or the Class B Notes, as evidenced by an Opinion of
Counsel to such effect), then such requirement shall be satisfied if such
amendment or modification is consented to by Class A-4 Noteholders representing
more than 50` of the aggregate outstanding principal amount of the Class A-4
Notes (without the necessity of obtaining the consent of the Required
Noteholders in respect of the Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes or the Class B Notes), (e) affects only the Class A Notes (and does
not affect in any material respect the Class B Notes, as evidenced by an Opinion
of Counsel to such effect), then such requirement shall be satisfied if such
amendment or modification is consented to by Class A Noteholders representing
more than 50% of the Class A Principal Balance (without the necessity of
obtaining the consent of the Required Noteholders in respect of the Class B
Notes), (f) affects only the Class B-1 Notes (and does not affect in any
material respect the Class A Notes, the Class B-3 Notes or the Class B-2 Notes,
as evidenced by an Opinion of Counsel to such effect), then such requirement
shall be satisfied if such amendment or modification is consented to by Class
B-1 Noteholders representing more than 50` of the aggregate outstanding
principal amount of the Class B1 Notes (without the necessity of obtaining the
consent of the Required Noteholders in respect of the Class A, the Class B-2
Notes or the Class B-3 Notes), (g) affects only the Class B-2 Notes (and does
not affect in any material respect the Class A Notes, the Class B-1 Notes or the
Class B-3 Notes, as evidenced by an Opinion of Counsel to such effect), then
such requirement shall be satisfied if such amendment or modification is
consented to by Class B-2 Noteholders representing more than 50% of the
aggregate outstanding amount of the Class B-2 Notes (without the necessity of
obtaining the consent of the Required Noteholders in respect of the Class A
Notes, the Class B-1 Notes or the Class B-3 Notes), (h) affects only the Class
B-3 Notes (and does not affect in any material respect the Class A Notes, the
Class B-1 Notes or the Class B-2 Notes, as evidenced by an Opinion of Counsel to
such effect), then such requirement shall be satisfied if such amendment or
modification is consented to by Class B-3 Noteholders representing more than 50`
of the aggregate
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<PAGE> 92
outstanding principal amount of the Class B-3 Notes (without the necessity of
obtaining the consent of the Required Noteholders in respect of the Class A
Notes, the Class E-1 Notes or the Class B-2 Notes) or (i) affects only the Class
B Notes (and does not affect in any material respect the Class A Notes, as
evidenced by an Opinion of Counsel to such effect), then such requirement shall
be satisfied if such amendment or modification is consented to by Class B
Noteholders representing more than 50\ of the Class B Principal Balance (without
the necessity of obtaining the consent of the Required Noteholders in respect of
the Class A Notes).
Section 7.10 Discharge of Indenture. Notwithstanding anything to the
contrary contained in the Base Indenture, no discharge of the Indenture pursuant
to Section ll.l(b) of the Base Indenture will be effective as to the Series
1996-1 Notes without the consent of the Required Noteholders of the Series
1996-1 Notes.
Section 7.11 Inspection of Property. Books and Records. At the
written request of Series 1996-1 Noteholders evidencing 10% or more of the
Series 1996-1 Invested Amount (which request shall specify the matters to be
investigated with reasonable specificity), but in no event more than
semi-annually, the Trustee shall investigate such matters as permitted under
Section 8.8 of the Base Indenture.
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<PAGE> 93
IN WITNESS WHEREOF, NFLP and the Trustee have caused this Supplement
to be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP
By: NATIONAL CAR RENTAL FINANCING
CORPORATION, its General Partner
By: /s/
----------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Trustee
By: /s/
--------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 4.3
SUPPLEMENT AND AMENDMENT TO BASE INDENTURE, dated as of
December 20, 1996 (this "Amendment"), between NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP, a special purpose Delaware limited partnership ("NFLP"),
and THE BANK OF NEW YORK, a New York banking corporation, as trustee (the
"Trustee"), to the Base Indenture, dated as of April 30, 1996, between NFLP and
the Trustee (the "Base Indenture").
PRELIMINARY STATEMENTS
WHEREAS, NFLP and the Trustee have entered into that certain
Series 1996-2 Supplement, dated as of December 20, 1996 (the "Series 1996-2
Supplement"), to the Base Indenture, creating the Floating Rate Rental Car
Asset Backed Variable Funding Note, Series 1996-2 (the "Series 1996-2 Note"),
which Series is a Segregated Series of Notes; and
WHEREAS, Section 2.3(b)(ii)(I) of the Base Indenture provides
that in connection with the issuance of a Segregated Series of Notes,
amendments will be made to the Base Indenture and the other Related Documents,
if necessary, to provide for the creation of such Segregated Series;
NOW, THEREFORE, in consideration of the premises and
agreements, provisions and covenants herein contained, the parties hereto
hereby agree, upon the terms and subject to the conditions set forth below, as
follows:
SECTION 1. Defined Terms. Capitalized terms used but
not defined in this Amendment, including the preamble and the recitals (WHEREAS
clauses) hereof, shall have the meanings assigned to such term in the Base
Indenture.
SECTION 2. Amendments to Base Indenture. The Base
Indenture is, effective as of the date hereof and subject to the satisfaction
of the conditions precedent set forth in Section 3 hereof, hereby amended as
follows:
(a) Clause (x) of Section 2.2(f)(i) of the Base Indenture
is amended in its entirety to read as follows:
"(x) the new Series of Notes will be treated as indebtedness of
NFLP (or, in the case of the Series 1996-2 Note, indebtedness of NFLP
or National) for Federal and Minnesota state income tax purposes and".
<PAGE> 2
2
(b) Section 2.3(b)(i) of the Base Indenture is amended by
adding after the proviso thereto the following additional proviso:
"; provided, further, however, that no Series of Shared Collateral
Series Notes (as defined in the Series 1996-2 Supplement) may be
issued unless, in addition to the other conditions set forth in this
Section 2.3 and otherwise in this Indenture, the NFC Collateral Agent,
the Liquidity Agent and each Series 1996-2 Support Credit Enhancer (in
each case as defined in the Series 1996-2 Supplement) shall have (A)
received an Opinion of Counsel, in a form substantially acceptable to
the NFC Collateral Agent, the Liquidity Agent and each Series 1996-2
Support Credit Enhancer, dated the applicable Closing Date, to the
effect that such issuance will not have a material adverse effect upon
the Series 1996-2 Note, or any other Noteholder of any Shared
Collateral Series Notes, or any assignee of any thereof, and (B)
consented in writing to such issuance."
(c) Section 2.5 of the Base Indenture is amended in its
entirety to read as follows:
"Section 2.5. Form of Notes; Book Entry Provisions; Title.
(a) Restricted Global Note. Any Series of Notes (other
than Variable Funding Notes), or any class of such Series to be issued
in the United States will be in registered form and sold initially to
institutional accredited investors within the meaning of Regulation D
under the Securities Act in reliance on an exemption from the
registration requirements of the Securities Act and thereafter to
qualified institutional buyers within the meaning of, and in reliance
on, Rule 144A under the Securities Act ("Rule 144A") as provided in
the applicable Supplement and shall be issued in the form of and
represented by one or more permanent global Notes in fully registered
form without interest coupons (each, a "Restricted Global Note"),
substantially in the form set forth in the applicable Supplement, with
such legends as may be applicable thereto, which shall be deposited on
behalf of the subscribers for the Notes represented thereby with a
custodian for DTC, and registered in the name of DTC or a nominee of
DTC, duly executed by NFLP and authenticated by the Trustee as
provided in Section 2.4 for credit to the accounts of the subscribers
at DTC. The aggregate initial principal amount of a Restricted Global
Note may from time to time be increased or decreased by adjustments
made on the records of the custodian for DTC, DTC or its nominee, as
the case may be, as hereinafter provided.
(b) Temporary Global Note; Permanent Global Note. Any
Series of Notes (other than Variable Funding Notes), or any class of
such Series, offered and sold outside of the United States will be
offered and sold in reliance on Regulation S ("Regulation S") under
the Securities Act and shall initially be issued in the form of
<PAGE> 3
3
one or more temporary global Notes (each, a "Temporary Global Note")
in fully registered form without interest coupons substantially in the
form set forth in the applicable Supplement with such legends as may
be applicable thereto, registered in the name of DTC or a nominee of
DTC, duly executed by NFLP and authenticated by the Trustee as
provided in Section 2.4, for credit to the subscribers' accounts at
Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of Euroclear or Cedel. Interests in a Temporary Global Note
will be exchangeable, in whole or in part, for interests in a
permanent global note (a "Permanent Global Note") in fully registered
form without interest coupons, representing Notes of the same Series,
substantially in the form set forth in the applicable Supplement, in
accordance with the provisions of the Temporary Global Note and this
Indenture. Until the Exchange Date, interests in a Temporary Global
Note may only be held by the agent members of Euroclear and Cedel.
The aggregate initial principal amount of the Temporary Global Note
and the Permanent Global Note may from time to time be increased or
decreased by adjustments made on the records of the custodian for DTC,
DTC or its nominee, as the case may be, as hereinafter provided.
(c) Variable Funding Note. Any Series of Variable
Funding Notes shall initially be sold to investors in reliance on an
exemption from the registration requirements of the Securities Act.
Such Series of Notes shall be issued in the form of one or more
Variable Funding Notes (each, a "Variable Funding Note") in fully
registered form without interest coupons substantially in the form set
forth in the applicable Supplement with such legends as may be
applicable thereto, duly executed by NFLP and authenticated by the
Trustee as provided in Section 2.4. The aggregate initial principal
amount of a Variable Funding Note may from time to time be increased
or decreased in accordance with the applicable Supplement by
adjustments made on the records of the Note Register."
(d) Section 2.9(a) of the Base Indenture is amended by
renumbering clause (vii) thereof as clause (viii), and by adding immediately
prior to such clause (viii) a new clause (vii) to read as follows:
"(vii) Transfers of Variable Funding Notes. The Variable
Funding Notes shall not be transferable except in the limited
circumstances, if any, described in the applicable Supplement;
provided, however, that the Variable Funding Note issued under the
Series 1996-2 Supplement may be pledged as security (and transferred)
in accordance with the terms of the NFC Collateral Agreement and the
Related Documents."
<PAGE> 4
4
(e) Section 2.10 of the Base Indenture is amended in its
entirety to read as follows:
"Section 2.10. Legending of Notes.
(a) Unless otherwise provided for in a Supplement and
except as permitted by the following sentence, in addition to any
legend required by Section 2.16, each Note (other than any Variable
Funding Note) shall bear a legend in substantially the following form:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES OR "BLUE SKY" LAWS. THE HOLDER HEREOF,
BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF NATIONAL
CAR RENTAL FINANCING LIMITED PARTNERSHIP (THE "ISSUER") THAT
THIS CLASS A-1 NOTE IS BEING ACQUIRED FOR ITS OWN ACCOUNT AND
NOT WITH A VIEW TO DISTRIBUTION AND MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1) TO THE ISSUER (UPON REDEMPTION
THEREOF OR OTHERWISE), (2) TO A PERSON WHO THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) OUTSIDE
THE UNITED STATES TO A NON U.S. PERSON (AS DEFINED IN
REGULATION S OF THE SECURITIES ACT) IN A TRANSACTION IN
COMPLIANCE WITH REGULATION S OF THE SECURITIES ACT, OR (4) IN
A TRANSACTION COMPLYING WITH OR EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT
OF THE RESALE RESTRICTIONS SET FORTH ABOVE.
Upon any transfer, exchange or replacement of Notes bearing such
legend, or if a request is made to remove such legend on a Note, the
Notes so issued shall bear such legend, or such legend shall not be
removed, as the case may be, unless there is delivered to NFLP and the
Trustee or the Luxembourg Agent, if the Notes are listed on the
Luxembourg Exchange, such satisfactory evidence, which may include an
opinion of counsel, as may be reasonably required by NFLP that neither
such legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions
of Rule 144A, Rule 144 or Regulation S. Upon provision of such
satisfactory evidence, the Trustee, at the direction of NFLP, shall
authenticate and deliver a Note that does not bear such legend.
<PAGE> 5
5
(b) Unless otherwise provided for in a Supplement, each
Variable Funding Note shall bear a legend in substantially the
following form:
THIS VARIABLE FUNDING NOTE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS. THE HOLDER
HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF
NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP (THE
"COMPANY") THAT THIS NOTE IS BEING ACQUIRED FOR ITS ACCOUNT
AND NOT WITH A VIEW TO DISTRIBUTION. THIS VARIABLE FUNDING
NOTE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED OR OTHERWISE
PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE
INDENTURE REFERRED TO HEREIN."
(f) Section 2.16(a) of the Base Indenture is amended by
adding after the words "For each Series of Notes to be issued in registered
form" at the beginning thereof the parenthetical "(other than any Variable
Funding Notes)".
(g) Section 6.1(c) of the Base Indenture is amended in
its entirety to read as follows:
"(c) Unless otherwise specified in the applicable
Supplement, amounts distributable to a Noteholder pursuant to this
Section 6.1 shall be payable by check mailed first-class postage
prepaid to such Noteholder at the address for such Noteholder
appearing in the Note Register except that with respect to (i) Notes
registered in the name of a Clearing Agency or its nominee, such
amounts shall be payable by wire transfer of immediately available
funds released by the Paying Agent from the Distribution Account no
later than 2:00 p.m. (New York City time) for credit to the account
designated by such Clearing Agency or its nominee, as applicable, or
(ii) any Series of Segregated Notes, such amounts shall be payable by
wire transfer of immediately available funds released by the Paying
Agent from the Distribution Account no later than 2:00 p.m. (New York
City time) for credit to the account designated by or on behalf of
each Noteholder thereof or its nominee, as applicable."
(h) Section 7.15 of the Base Indenture is amended in its
entirety to read as follows:
"Section 7.15. Binding Effect of Lease. In the case of each
Series of Notes, the Lease applicable thereto is in full force and
effect and there is no existing Lease Event of Default or Manufacturer
Event of Default thereunder nor has any event
<PAGE> 6
6
occurred which with the giving of notice, the passage of time or both
would constitute a Lease Event of Default or Manufacturer Event of
Default."
(i) Section 8.3 of the Base Indenture is amended by:
(i) amending subsection (a) thereof by adding after the
words "Section 24.6(i) of the Lease" at the end thereof the words "or,
in the case of the Series 1996-2 Lease, Section 24.7(i) thereof",
(ii) amending subsection (b) thereof by adding after the
words "Section 24.6(ii) of the Lease" at the end thereof the words
"or, in the case of the Series 1996-2 Lease, Section 24.7(ii)
thereof",
(iii) amending subsection (c) thereof by adding after the
words "Section 24.6(vi) of the Lease" at the end thereof the words
"or, in the case of the Series 1996-2 Lease, Section 24.7(vi)
thereof",
(iv) amending subsections (d), (e) and (f) thereof by
adding after the words "of the Lease" at the end thereof the words
"other than in the case of the Series 1996-2 Lease", and
(v) amending subsection (g) thereof by adding after the
words "Section 24.6(xii) of the Lease" at the end thereof the words
"or, in the case of the Series 1996-2 Lease, Section 24.7(xi)
thereof".
(j) Section 8.14(a) of the Base Indenture is amended in
its entirety to read as follows:
"(a) Prior to acquiring or financing the acquisition of
any Program Vehicles under any Lease for any model year after the 1996
model year, (i) NFLP will have received an executed Assignment
Agreement with respect to National's rights under such Manufacturer
Program for such model year (to the extent National will be acquiring
Financed Vehicles (other than Texas Vehicles) under such Lease under
such Manufacturer Program), (ii) NFLP shall have delivered an executed
Assignment Agreement with respect to NFLP's rights under such
Manufacturer Program for such model year, (iii) if any series of Notes
or, in the case of the Series 1996-2 Note, any Commercial Paper Notes
are then being rated by Standard & Poor's and/or Duff & Phelps and/or
Moody's, NFLP shall have received a written confirmation from Standard
& Poor's and/or Duff & Phelps and/or Moody's, as applicable, that the
acquisition of Vehicles pursuant to such Manufacturer Program will not
result in the reduction or withdrawal of any rating issued by Standard
& Poor's and/or Duff & Phelps and/or Moody's, as applicable, in
respect of any outstanding Series of Notes
<PAGE> 7
7
or any outstanding Commercial Paper Notes and (iv) if there is a
material change to a Manufacturer Program during a model year, NFLP
shall have received written confirmation from Standard & Poor's and/or
Duff & Phelps and/or Moody's, as applicable, that the acquisition of
Vehicles pursuant to such Manufacturer Program will not result in the
reduction or withdrawal of any rating issued by Standard & Poor's
and/or Duff & Phelps and/or Moody's, as applicable, in respect of any
outstanding Series of Notes or any outstanding Commercial Paper Notes.
A copy of the rating confirmations set forth in clauses (iii) and (iv)
will promptly be delivered to the Trustee for delivery to the
Noteholders of any outstanding Series of Notes."
(k) Section 8.18 of the Base Indenture is amended in its
entirety to read as follows:
"Section 8.18. Sales of Assets. NFLP will not sell, lease,
transfer, liquidate or otherwise dispose of any Assets, except as
contemplated by the Related Documents and provided that the proceeds
received by NFLP are paid directly to the Collection Account to which
such proceeds are applicable or the Master Collateral Account or
deposited by NFLP into the Collection Account to which such proceeds
are applicable or the Master Collateral Account within 2 Business Days
after receipt thereof by NFLP (except that amounts payable to NFLP
with respect to Exchanged Vehicles by the related Manufacturer under
its Manufacturer Program shall be paid into the Exchange Account)."
(l) Section 8.21 of the Base Indenture is amended in its
entirety to read as follows:
"Section 8.21. Name; Principal Office.
NFLP will neither (a) change the location of its chief
executive office or principal place of business (within the meaning of
the applicable UCC) without sixty (60) days' prior notice to the
Trustee, the Master Collateral Agent and the Rating Agencies nor (b)
change its name without prior notice to the Trustee, the Master
Collateral Agent and the Rating Agencies sufficient to allow the
Trustee and the Master Collateral Agent to make all filings (including
filings of financing statements on form UCC-1) and recordings
necessary to maintain the perfection of the interest of the Trustee in
the Collateral pursuant to this Indenture and the perfection of the
interest of the Master Collateral Agent in the Master Collateral
pursuant to the Master Collateral Agency Agreement. In the event that
NFLP desires to so change its office or change its name, NFLP will
make any required filings and prior to actually changing its office or
its name NFLP will deliver to the Trustee, the Master Collateral Agent
and the Rating Agencies (i) an Officer's Certificate and (except with
respect to a change of the location of NFLP's chief executive office
or principal place of business to a new location in the same county)
an Opinion of Counsel confirming
<PAGE> 8
8
that all required filings have been made to continue the perfected
interest of the Trustee in the Collateral and the perfected interest
of the Master Collateral Agent in the Master Collateral in respect of
the new office or new name of NFLP and (ii) copies of all such
required filings with the filing information duly noted thereon by the
office in which such filings were made."
(m) Section 8.28 of the Base Indenture is amended in its
entirety to read as follows:
"Section 8.28. Use of Proceeds of Notes. NFLP shall use the
proceeds of Notes solely for one or more of the following purposes:
(a) other than in the case of any proceeds of the Series 1996-2 Note,
to pay amortizing Notes when due, in accordance with this Indenture;
(b) to acquire, finance or refinance the acquisition of Eligible
Vehicles applicable to such Notes in accordance with the Lease
applicable to such Notes; and (c) in the case of the issuance of the
Series 1996-2 Note, to refinance the aggregate outstanding principal
amount of the Loans referred to in Section 3.1(a) of the Series 1996-2
Supplement as contemplated by such Section."
(n) Section 9.1(e) of the Base Indenture is amended in
its entirety to read as follows:
"(e)(i) any Lease Event of Default described in Section
17.1.1(i) or 17.1.5 of any Lease shall occur, whether or not
subsequently waived by NFLP, or (ii) any other Lease Event of Default
shall occur under any Lease whether or not subsequently waived by
NFLP;".
(o) Section 9.1(h) of the Base Indenture is amended in
its entirety to read as follows:
"(h) in the case of any Series of Notes, the Lease applicable
thereto is terminated for any reason;".
(p) Section 9.2(d) of the Base Indenture is amended in
its entirety to read as follows:
"(d) NFLP Fleet Finance Agreement. Notwithstanding
anything to the contrary contained herein, if a Liquidation Event of
Default or a Limited Liquidation Event of Default shall have occurred
and be continuing, the Trustee shall take such action to cause
Vehicles manufactured by GM to be turned back to GM in such manner as
NFLP has instructed the Trustee in writing (and NFLP hereby agrees to
provide such instructions) to preserve any and all rights of the party
entitled thereto to receive payments from GM under the NFLP Fleet
Finance Agreement in respect of
<PAGE> 9
9
deficiencies in the sale prices of such Vehicles as described
thereunder; provided that the Trustee shall not return such Vehicles
to GM if it is instructed not to do so by Holders of Notes evidencing
66-2/3% or more of the Aggregate Invested Amount; provided further,
that the Noteholders shall not be entitled to direct the Trustee to
cause Vehicles manufactured by GM to be turned back or sold in any
manner that would not preserve the rights of the party entitled
thereto to receive payments under the NFLP Fleet Finance Agreement
described above."
(q) Section 12.1 of the Base Indenture is amended by
replacing the phrase "Without the consent of any Noteholder but with the
consent of the Rating Agencies, NFLP, the Trustee, and any applicable
Enhancement Provider," contained therein with the phrase "Without the consent
of any Noteholder but with the consent of the Rating Agencies (or, in the case
of any Rating Agency, the confirmation by such Rating Agency that upon giving
effect to each such Supplement the Rating Agency Condition will be met with
respect to such Rating Agency), NFLP, the Trustee, and any applicable
Enhancement Provider, and, in the case of each such Supplement that relates to
or will affect the Series 1996-2 Note, the NFC Collateral Agent and the
Liquidity Agent (in each case as defined in the series 1996-2 Supplement),".
(r) The first sentence of Section 12.2 of the Base
Indenture is amended in its entirety to read as follows:
"Except as provided in Section 12.1, the provisions of this
Indenture and any Supplement (unless otherwise provided in such
Supplement) and each other Related Document to which NFLP is a party
may from time to time be amended, modified or waived, if such
amendment, modification or waiver is in writing and consented to in
writing by NFLP, National, the Trustee, any applicable Enhancement
Provider, the Rating Agencies (unless, in the case of any Rating
Agency, such Rating Agency shall have instead confirmed in writing
that upon giving effect to such amendment, modification or waiver the
Rating Agency Condition will be met with respect to such Rating
Agency), and the Requisite Investors (or the Required Noteholders of a
Series of Notes, in respect of any amendment, modification or waiver
of or to this Indenture, the Supplement with respect to such Series of
Notes or any Related Document which affects only the Noteholders of
such Series of Notes and does not affect the Noteholders of any other
Series of Notes, as substantiated by an Opinion of Counsel to such
effect, which Opinion of Counsel may, to the extent same is based on
any factual matter, rely upon an Officer's Certificate as to the truth
of such factual matter) and, to the extent relating to or affecting
the Series 1996-2 Note, the NFC Collateral Agent and the Liquidity
Agent (in each case as defined in the Series 1996-2 Supplement)."
<PAGE> 10
10
(s) The Definitions List set forth in Schedule I to the
Base Indenture is amended by adding to the beginning thereof, below the heading
"DEFINITIONS LIST", the following:
"In the case of any term, including without limitation each of
the terms "Amortization Commencement Date", "Amortization Event",
"Capitalized Cost", "Casualty", "Depreciation Charge", "Designated
Period", "Eligible Manufacturer", "Eligible Vehicle", "Excluded
Payments", "Federal Funds Rate", "Financed Vehicle", "Liquidation
Event of Default", "Missing Equipment Charges", "Refinanced Vehicles"
and "Termination Value", which is defined below but is otherwise
defined in any Supplement creating or otherwise relating to any Series
of Segregated Notes, each Article, Section, subsection, other
definition or other provision of the Base Indenture containing such
term shall (unless the context otherwise requires) apply to such
Segregated Series with such term having the meaning set forth in such
Supplement."
(t) The Definitions List set forth in Schedule I to the
Base Indenture is further amended by amending in their entirety the following
definitions as set forth below:
"'Aggregate Asset Amount' means, on any date of determination
for any Series, without duplication, the sum of (i) the Net Book Value
of all Eligible Vehicles leased under the Lease for such Series as of
such date pursuant to Section 3.1 of such Lease, plus, (ii) all
amounts receivable, as of such date, by NFLP or National from Eligible
Manufacturers under and in accordance with their respective Eligible
Manufacturer Programs (other than Excluded Payments), with respect to
Eligible Vehicles (other than Exchanged Vehicles) applicable to such
Series at any time owned, financed or refinanced by NFLP, plus (iii)
all amounts (other than amounts specified in clause (ii) above)
receivable, as of such date, by NFLP or National from any person or
entity in connection with the Auction, sale or other disposition of
Eligible Vehicles applicable to such Series at any time leased under
such Lease (other than Excluded Payments), plus (iv) all accrued and
unpaid Monthly Base Rent and Monthly Supplemental Payments (other than
amounts specified in clauses (ii) and (iii) above) under such Lease,
plus (v) cash and Permitted Investments on deposit in the Collection
Account applicable to such Series, minus (vi) any Ineligible Asset
Amount applicable to such Series."
"'Aggregate Invested Amount' means, with respect to any Series
of Notes then Outstanding, the sum of the Invested Amounts with
respect to such Series and all other Series of Related Collateral
Series Notes applicable to such Series."
"'Amortization Event' with respect to each Series of Notes
unless such term is otherwise defined in the Supplement relating to
such Series, has the meaning specified in Section 9.1 of the Base
Indenture."
<PAGE> 11
11
"'Amortization Period' means, with respect to any Series of
Notes unless such term is otherwise defined in the Supplement relating
to such Series, the period following the Revolving Period (as defined
in any related Supplement) which shall be the Accumulation Period, the
Controlled Amortization Period, or the Rapid Amortization Period, each
as defined in the related Supplement."
"'Annual Certificate' is defined in Section 24.6(ix) of the
Lease (other than in the case of the Series 1996-2 Lease)."
"'Available Subordinated Amount Losses' with respect to a
Series to which such term is applicable shall have the meaning
specified in the related Supplement."
"'Availability Payment', in the case of any Lease to which
such term is applicable, is defined in Section 5.2 of such Lease."
"'Base Indenture' means the Base Indenture, dated as of April
30, 1996, between NFLP and the Trustee, as supplemented and amended by
the Supplement and Amendment to the Base Indenture, dated as of
December 20, 1996, and as further amended, supplemented, restated or
otherwise modified from time to time in accordance with its terms,
exclusive of Supplements creating a new Series of Notes."
"'Base Lease' means (i) other than in connection with any
Series of Segregated Notes, the Master Motor Vehicle Lease and
Servicing Agreement, dated as of April 30, 1996, between NFLP, as the
lessor thereunder, and National, as the lessee and servicer
thereunder, and (ii) in connection with any Series of Segregated
Notes, the 'Base Lease' as defined in the Supplement relating to such
Series, in each case of clauses (i) and (ii) as the same may be
amended, modified or supplemented from time to time in accordance with
its terms, exclusive of Lease Annexes."
"'Business Day' means any day other than (i) a Saturday,
Sunday, or (ii) any other day on which banks are authorized by law to
close in New York City, New York or Minneapolis, Minnesota, or (iii)
in connection with any Series of Notes, any other day not designated
as a "Business Day" in the Supplement relating to such Series."
"'Carryover Controlled Amortization Amount' means, with
respect to each Series of Note to which such term is applicable, the
amount specified as such in the related Supplement."
"'Collateral' (i) is defined in Section 3.1 of the Base
Indenture, other than in connection with any Series of Segregated
Notes, and (ii) in connection with any Series of Segregated Notes, is
defined in the Supplement relating thereto."
<PAGE> 12
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"'Collection Account' (i) is defined in Section 5.1 of the
Base Indenture, other than in connection with any Series of Segregated
Notes, (ii) in connection with the Series 1996-2 Note and any other
Shared Collateral Series Note (as defined in the Series 1996-2
Supplement), means the NFC Collection Account under and as defined in
the Series 1996-2 Supplement, and (iii) in connection with any Series
of Segregated Notes other than the Series 1996-2 Note and any other
Shared Collateral Series Notes, is defined in the Supplement relating
thereto."
"'Collections' means for any Series (i) all payments
(including, without limitation, Recoveries) and prepayments by, or on
behalf of National under the Lease for such Series other than, in the
case of the Series 1996-2 Lease, any such payments under Section 15
thereof to or for the account of any Person other than NFLP, (ii) all
payments on the Master Collateral applicable to such Series allocable
to the Trustee or the NFC Collateral Agent (as defined in the Series
1996-2 Supplement) as a Beneficiary, including payments (other than
Excluded Payments) made by, or on behalf of, any Manufacturer or
auction dealer, under the related Manufacturer Program (other than
payments thereunder with respect to Exchanged Vehicles), (iii) all
payments by, or on behalf of, any other Person as proceeds from the
sale of Vehicles applicable to such Series (other than Exchanged
Vehicles) or payments of insurance proceeds which are required to be
deposited into the Master Collateral Account applicable to such
Series, whether such payments are in the form of cash, checks, wire
transfers or other forms of payments and whether in respect of
principal, interests, repurchase price, fees, expenses or otherwise,
and (iv) all amounts earned on Permitted Investments of funds in the
Collection Account applicable to such Series. To the extent so
specified in a Supplement, Collections shall also include all proceeds
from the sale of the Notes issued under such Supplement.
"'Controlled Amortization Period' means, with respect to any
Series of Notes to which such term is applicable, the period specified
in the applicable Supplement."
"'Controlled Distribution Amount' means, with respect to any
Class of Notes to which such term is applicable, the amount (or
amounts) specified in the applicable Supplement."
"'Daily Report' is defined in Section 24.6(v) (or, in the case
of the Series 1996-2 Lease, 24.7(v)) of the Base Lease."
"'Definitions List' means this Definitions List, as
supplemented and amended by the Supplement and Amendment to the Base
Indenture, dated as of December 20, 1996, and as further amended or
modified from time to time in accordance with the terms of the
Indenture."
<PAGE> 13
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"'Deposited Funds' with respect to any Series of Notes, means
(i) to the extent relating to any Collateral applicable to such
Series, all funds on deposit in the Collection Account applicable to
such Series, and (ii) in the case of any such Series that is a Series
of Segregated Notes, and to the extent relating to any Assigned
Collateral (as defined in the Supplement relating to such Series)
applicable to such Series, the "Deposit Account" as defined in the
Related Document in which any Noteholder of any such Segregated Notes
grants a security interest in such Assigned Collateral."
"'Distribution Date' means, unless otherwise specified in any
Supplement for the related Series of Notes, the twentieth day of each
calendar month, or, if such day is not a Business Day, the next
succeeding Business Day, commencing (i) May 20, 1996 or (ii) in the
case of any Series created after the date hereof, the first such
twentieth day to occur after the Closing Date for such Series."
"'Expected Final Distribution Date' means, with respect to any
Series of Notes to which such term is applicable, the date stated in
the related Supplement as the date on which such Series of Notes is
expected to be paid in full."
"'Financing Lease' means, with respect to any Series of Notes,
the Base Lease applicable to such Series supplemented by Annex B to
such Lease."
"'Fleet Finance Agreement' means the Fleet Financing Support
Agreement dated as of June 7, 1995 between GM and the B Support Credit
Enhancer under and as defined in the Series 1996-2 Supplement (as
assignee of Citibank and Credit Suisse), as amended, supplemented,
restated or otherwise modified or replaced from time to time, together
with any other fleet financing support agreement between such parties
covering the same subject matter (including, among other vehicles (if
applicable), any Vehicles for the Series 1996-2 Note) as such Fleet
Financing Support Agreement."
"'Indebtedness', as applied to any Person, means, without
duplication, (a) all indebtedness for borrowed money, (b) that portion
of obligations with respect to any lease of any property (whether
real, personal or mixed) that is properly classified as a liability on
a balance sheet in conformity with GAAP, (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money, (d) any obligation owed for all or any
part of the deferred purchase price for property or services, which
purchase price is (i) due more than six months from the date of the
incurrence of the obligation in respect thereof or (ii) evidenced by a
note or similar written instrument, (e) all indebtedness secured by
any Lien on any property or asset owned by the Person regardless of
whether the indebtedness secured thereby shall have been assumed by
that Person or is nonrecourse to the credit of that Person, (f) all
Contingent Obligations of such Person in respect of any
<PAGE> 14
14
of the foregoing, and (g) to the extent the term 'Indebtedness'
appears in the Series 1996-2 Lease or the Series 1996-2 Supplement,
all Liabilities of National under the Series 1996-2 Lease and all
other Leases."
"'Initial Vehicles' means, in the case of any Series other
than any Series of Segregated Notes, the Vehicles acquired by National
from Old National under the Asset Purchase Agreement on April 4, 1995."
"'Intercreditor Agreement' means the Intercreditor and
Subordination Agreement, dated as of June 7, 1995, among National,
certain subordinated creditors listed on Schedule A thereto and
certain senior creditors listed on Schedule B thereto, as modified by
the Joinder by Senior Debt Holder, executed by The Bank of New York as
of April 30, 1996, the Acceptance by Subordinated Debt Holder,
executed by GM as of April 30, 1996, the Acceptance by Subordinated
Debt Holder, executed by the B Support Credit Enhancer as of May 24,
1996, and the Acceptance by Subordinated Debt Holder, executed by The
Bank of New York as of May 29, 1996, and as amended by the Amendment
to Intercreditor and Subordination Agreement, dated as of December 20,
1996, and as further amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof."
"'Interest Collections' means on any date of determination for
any Series of Notes, all Collections applicable to such Series which,
pursuant to the Lease relating to such Series, represent Monthly
Variable Rent, Monthly Finance Rent or the Availability Payment, plus
any amounts earned on Permitted Investments in the Collection Account
applicable to such Series which are available for distribution on such
date."
"'Interest Period' means (i) with respect to any Series of
Notes other than the Series 1996-2 Note, the period specified in the
related Supplement between, with respect to the initial Interest
Period, the Closing Date and the first Distribution Date, and
thereafter, between Distribution Dates during which interest will
accrue, and (ii) with respect to the Series 1996-2 Note, the Series
1996-2 Interest Period under and as defined in the Series 1996-2
Supplement."
"'Lease' means, for any Series of Notes, the Base Lease
applicable to such Series together with all Lease Annexes applicable
thereto, in each case as the same may be amended, modified or
supplemented from time to time in accordance with its terms."
"'Lease Annex' means, with respect to any Series of Notes,
Annex A or Annex B to the Base Lease applicable to such Series, as the
same may be amended, supplemented or modified from time to time in
accordance with its terms."
<PAGE> 15
15
"'Market Value', with respect to any Series of Notes to which
such term is applicable, shall have the meaning specified in the
applicable Supplement."
"'Material Adverse Effect' means, with respect to any
occurrence, event or condition:
(i) a materially adverse effect on the financial
condition, business, assets or operations of National and its
Consolidated Subsidiaries taken as a whole, other than a materially
adverse effect on the business prospects of National and its
Consolidated Subsidiaries taken as a whole that have similarly
affected National's major competitors;
(ii) a materially adverse effect on the ability of (a)
National to perform its material obligations under any of the Related
Documents or (b) the Lessor to perform its material obligations under
any of the Related Documents;
(iii) in the case of any Series of Notes, an adverse effect
on (a) the enforceability of the Lease applicable thereto or (b) on
the priority or perfection of the Trustee's or the Master Collateral
Agent's Lien on a material portion of the Collateral applicable
thereto or the Master Collateral applicable thereto; and
(iv) in the case of any Series of Segregated Notes, any
other occurrence, event or condition defined as being a "Material
Adverse Effect" in the related Supplement."
"'Maximum Lease Commitment' means, on any date of
determination with respect to any Series of Notes, the sum (without
duplication) of (i) the Aggregate Invested Amount on such date for
such Series and all other Series of Related Collateral Series Notes
applicable to such Series, plus (ii) with respect to all such Series
of Notes that provide for Enhancement in the form of
overcollateralization, the sum of the available subordinated amounts
on such date for each such Series of Notes, plus (iii) the aggregate
Net Book Values of all Vehicles leased under the Lease applicable to
such Series on such date that were acquired, financed or refinanced
with funds representing any portion of the Retained Interest, if any
(other than available subordinated amounts), plus (iv) any amounts
held in the Retained Distribution Account, if any, that the Lessor
commits on or prior to such date to invest in new Vehicles (as
evidenced by a Company Order) in accordance with the terms of such
Lease and the Indenture."
"'Maximum Manufacturer Amount' with respect to a Series of
Notes to which such term is applicable is defined in the related
Supplement."
<PAGE> 16
16
"'Maximum Non-Program Vehicle Amount' with respect to a Series
of Notes to which such term is applicable is defined in the related
Supplement."
"'Monthly Certificate' is defined in Section 24.6(vi) (or, in
the case of the Series 1996-2 Lease, 24.7(vi)) of the Lease."
"'Monthly Vehicle Statement' is defined in Section 24.6(iv)
(or, in the case of the Series 1996-2 Lease, 24.7(iv)) of the Lease."
"'NFLP Agreements' means, for any Series of Notes, the Lease
relating to such Series, the Subleases (if applicable) relating to
such Lease, the Assignment Agreements relating to such Series, the
Indenture, the Master Collateral Agency Agreement, any Enhancement
Agreement relating to such Series and any other agreements to which
NFLP is a party and relating to such Series (other than such ordinary
course agreements as are permitted pursuant to Sections 8.24 and 8.26
of the Base Indenture and other than Exchange Documents)."
"'NFLP Fleet Finance Agreement' means one or more (as in
effect from time to time) fleet financing support agreements among GM,
the Master Collateral Agent and NFLP and/or any Enhancement Provider
which cover, among other vehicles (if applicable), any Vehicles for
the Series 1996-1 Notes."
"'NFLP Obligations' means, for any Series of Notes, all
principal and interest, at any time and from time to time, owing by
NFLP on such Notes and on all other Related Collateral Series Notes
applicable to such Series, and all costs, fees and expenses payable
by, or obligations of, NFLP under the Indenture and/or the Related
Documents applicable to such Series and such other Series."
"'Non-Program Vehicle Report', in the case of any Lease to
which such term is applicable, is defined in Section 24.6(xi) of such
Lease."
"'Non-Program Vehicle Termination Payment', in the case of any
Lease to which such term is applicable, is defined in Section 12.3 of
such Lease."
"'Operating Lease' means, with respect to any Series of Notes,
the Base Lease applicable to such Series as supplemented by Annex A to
such Lease."
"'Principal Collections' means, for any Series of Notes, any
Collections applicable to such Series other than Interest
Collections."
"'Qualified Institution' means a depositary institution or
trust company (which may include the Trustee) organized under the laws
of the United States of America or
<PAGE> 17
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any one of the states thereof or the District of Columbia; provided,
however, that at all times such depositary institution or trust
company is a member of the FDIC and has (i) from Standard & Poor's and
Moody's a long-term indebtedness rating not lower than AA and Aa2,
respectively, and a short-term indebtedness rating of A-1+ and P-1,
respectively (and not lower than the comparable ratings from Duff &
Phelps, if Duff & Phelps is a Rating Agency and provides such ratings
with respect to such institution or company), or (ii) such other
rating which has been approved by the Rating Agencies."
"'Rating Agency' means, with respect to each outstanding
Series of Notes, any rating agency or agencies then issuing a rating
for such Series of Notes at the request of NFLP or National or, if
applicable, any 'Rating Agency' under and as defined in the Supplement
relating to such Series."
"'Rating Agency Condition' means, with respect to any action,
that each Rating Agency shall have notified NFLP, National, any
Enhancement Provider and the Trustee (or in the case of any Commercial
Paper Notes shall have notified National) in writing that such action
will not result in a reduction or withdrawal of the rating (in effect
immediately before the taking of such action) of any outstanding
Series of Notes or Commercial Paper Notes with respect to which it is
a Rating Agency and, with respect to the issuance of a Series of
Notes, the 'Rating Agency Condition' also means that each Rating
Agency that is referred to in the related Supplement as being required
to deliver its rating with respect to such Series of Notes or the
related Commercial Paper Notes, if any, shall have notified NFLP,
National, any Enhancement Provider and the Trustee (or in the case of
any Commercial Paper Notes shall have notified National) in writing
that such rating has been issued by such Rating Agency."
"'Related Documents' means, collectively, for any Series of
Notes, the Indenture, the Notes for such Series and all other Series
of Related Collateral Series Notes applicable to such Series, any
Enhancement Agreement relating to such Series, the Lease relating to
such Series, the Master Collateral Agency Agreement, the Assignment
Agreements relating to such Series, the Intercreditor Agreement, any
Purchase Agreement relating to such Series or to any other Series of
Related Collateral Series Notes applicable to such Series, any
agreements relating to the purchase of any of the Notes for such
Series or any other Related Collateral Series Notes applicable to such
Series, and, in the case of any Series of Segregated Notes, any other
'Related Documents' under and as defined in the Supplement relating
thereto."
"'Required Asset Amount' means, at any date of determination
for any Series of Notes, the sum of (i) the Invested Amounts for all
Series of Notes that do not
<PAGE> 18
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provide for Enhancement in the form of overcollateralization and
including, as applicable, such Series and all other Series of Related
Collateral Series Notes applicable to such Series, plus (ii) the
aggregate amount, with respect to all Series of Notes that provide for
Enhancement in the form of overcollateralization and including, as
applicable, such Series and all other Series of Related Collateral
Series Notes applicable to such Series, of (a) the Invested Amount for
each such Series of Notes (less the Invested Amount of any
subordinated class of Notes constituting a portion of such Series of
Notes) divided (in the case only of clause (ii) above) by (b) 100%
minus the Enhancement Percentage for such Series of Notes."
"'Required Noteholders' means, in connection with any Series
of Notes, Noteholders holding in excess of 50% of the aggregate
Invested Amount of such Series of Notes (excluding, for the purposes
of making the foregoing calculation, any Notes held by National, or
any Affiliate of National other than, in connection with any Series of
Segregated Notes, NFC)."
"'Requisite Investors' means, in connection with any Series of
Notes, Noteholders holding in excess of 50% of the aggregate Invested
Amount of such Series and of all other outstanding Series of Related
Collateral Series Notes applicable to such Series (excluding, for the
purposes of making the foregoing calculation, any notes held by
National, or any Affiliate of National other than, in connection with
any Series of Segregated Notes, NFC)."
"'Secured Parties' (i) is defined in Section 3.1 of the Base
Indenture, other than in connection with any Series of Segregated
Notes, and (ii) in connection with any Series of Segregated Notes, is
defined in the Supplement relating thereto or means the Secured Party
under and as defined in such Supplement, as applicable."
"'Texas Vehicle' means (i) an Eligible Vehicle acquired by
National on or after the Lease Commencement Date for lease in the
State of Texas, or (ii) in the case of any Series of Segregated Notes,
a National Vehicle under and as defined in the Supplement related to
such Series."
"'Vehicle' means, for any Series of Notes, a passenger
automobile or light truck purchased, financed or refinanced by NFLP
under the Lease applicable to such Series and pledged under the Master
Collateral Agency Agreement for the benefit of the Trustee (on behalf
of the applicable Noteholders), but solely during the Vehicle Term for
such Vehicle."
(n) The Definitions List set forth in Schedule I to the
Base Indenture is further amended by adding thereto in alphabetical order the
following definitions:
<PAGE> 19
19
"'all Notes' means (i) other than in connection with any
Segregated Notes, all Notes other than any Segregated Notes, and (ii)
in connection with any Segregated Notes in any Series, all Notes of
such Series and all Related Collateral Series Notes applicable to such
Series."
"'all Series of Notes' means (i) other than in connection with
any Series of Segregated Notes, all Series of Notes other than any
Segregated Notes, and (ii) in connection with any Series of Segregated
Notes, such Series and all other Series of Related Collateral Series
Notes applicable to such Series."
"'Commercial Paper Notes', if applicable to any Series of
Notes, has the meaning specified in the Supplement relating thereto."
"'Moody's' means Moody's Investors Service, Inc., or any
successor thereto."
"'NFC' means National Fleet Funding Corporation, a Delaware
corporation."
"'Related Collateral Series Notes' means, for any Series of
Notes, any other Notes the NFLP Obligations with respect to which are
identified in the Base Indenture or any Supplement relating to such
Series as being secured by the same Collateral as secures such
Series."
"'Series 1996-2 Lease' means the Lease applicable to the
Series 1996-2 Note."
"'Series 1996-2 Supplement' means the Series 1996-2
Supplement, dated as of December 20, 1996, to the Base Indenture,
creating the Floating Rate Rental Car Asset Backed Variable Funding
Note, Series 1996-2."
"'Variable Funding Note' is defined in Section 2.5(c) of the
Base Indenture."
(o) The Definitions List set forth in Schedule I to the
Base Indenture is further amended by amending the definitions of the terms
"Approved Non-Program Vehicle Manufacturer", "Eligible Franchisee", "Exchange
Account", "Exchange Agreement", "Exchange Assignment Agreement", "Exchange
Financing Agreement", "Exchange Documents", "Exchange Lender", "Exchanged
Vehicle", "Exchanged Vehicle Insurance Proceeds", "Exchanged Vehicle Repurchase
Rights", "Lessee Agreements", "Non-Program Vehicle", "Retained Interest",
"Retained Interest Amount", "Retained Interestholder", "Replacement Vehicle",
"Sublease" and "Sublessee" by adding to the beginning of each such definition,
after the word "means", the words ", in the case of any Series of Notes to
which such term is applicable,".
<PAGE> 20
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(p) The Definitions List set forth in Schedule I to the
Base Indenture is further amended by amending the definition of the term
"Eligible Manufacturer Program" by adding to the end thereof the following
proviso:
"provided, however, that if applicable to any Series of
Segregated Notes, "Eligible Manufacturer Program" shall, in connection
with such Series, mean, an Eligible Repurchase Program as defined in
the Supplement relating to such Series".
(q) The Definitions List set forth in Schedule I to the
Base Indenture is further amended by amending the definition of the term
"Manufacturer Event of Default" by adding to the end thereof the following
proviso:
"provided, however, that if applicable to any Series of
Segregated Notes, "Manufacturer Event of Default" shall, in connection
with such Series, mean a Manufacturer Default as defined in the
Supplement relating to such Series".
(r) The Definitions List set forth in Schedule I to the
Base Indenture is further amended by amending the definition of the term
"Manufacturer Program" by adding to the end thereof the following proviso:
"provided, however, that if applicable to any Series of
Segregated Notes, "Manufacturer Program" shall, in connection with
such Series, mean a Repurchase Program as defined in the Supplement
relating to such Series".
(s) The Definitions List set forth in Schedule I to the
Base Indenture is further amended by amending the definition of the term
"Permitted Investment" by adding to the end thereof the following proviso:
"provided, however, that if applicable to any Series of
Segregated Notes, "Permitted Investment" shall, in connection with
such Series, mean a Eligible Investment as defined in the Supplement
relating to such Series".
(t) The Definitions List set forth in Schedule I to the
Base Indenture is further amended by amending the definition of the term
"Potential Manufacturer Event of Default" by adding to the end thereof the
following proviso:
"provided, however, that if applicable to any Series of
Segregated Notes, "Potential Manufacturer Event of Default" shall, in
connection with such Series, mean a Potential Manufacturer Default as
defined in the Supplement relating to such Series".
<PAGE> 21
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SECTION 3. Conditions of Effectiveness. This Amendment shall
become effective when, and only when, the Master Collateral Agent, the Trustee,
the Liquidity Agent (as defined in the Series 1996-2 Supplement) and the NFC
Collateral Agent (as defined in the Series 1996-2 Supplement) shall have
received counterparts of this Amendment executed by NFLP and the Trustee, and
Sections 2 and 3 hereof shall become effective when:
(a) The Master Collateral Agent, the Trustee, the Liquidity
Agent and the NFC Collateral Agent shall have additionally received all of the
following documents, each document (unless otherwise indicated) being dated, or
dated as of, the Series 1996-2 Closing Date (as defined in the Series 1996-2
Supplement) and in form and substance satisfactory to the Master Collateral
Agent, the Trustee, the Liquidity Agent and the NFC Collateral Agent:
(i) The written consent of the Rating Agencies and all
applicable Enhancement Providers to this Amendment,
(ii) Each of the documents set forth in Section 2.2 of the
Base Indenture, Section 3.1(b) of the Series 1996-2 Supplement and
Section 35 of the Lease (as defined in Schedule I to the Base
Indenture giving effect to this Amendment) with respect to the Series
1996-2 Note, it being understood that the Trustee shall receive
original Counterpart No. 1 of the Lease relating to the Series 1996-2
Note (as set forth on the cover page and signature page of such Lease);
(iii) A copy of the limited partnership agreement of NFLP,
together with all other organizational documents of NFLP, duly
certified by a Responsible Officer of NFLP;
(iv) Copies of resolutions of the Board of Directors of
the General Partner of NFLP authorizing or ratifying the execution,
delivery and performance of this Amendment, the Base Indenture as
amended hereby, and the other Related Documents to which NFLP is
party, duly certified by the Secretary or Assistant Secretary of such
General Partner;
(v) Certified copies of all documents evidencing any
necessary corporate or partnership action, as applicable, by the
General Partner of NFLP or NFLP, as applicable, consents and
governmental approvals (if any) with respect to this Amendment, the
Base Indenture as amended hereby, and the other Related Documents to
which NFLP is party;
(vi) A certificate of each of the Secretary or an
Assistant Secretary of the General Partner of NFLP, certifying the
names of the individual or individuals authorized to sign this
Amendment and the other Related Documents to which NFLP is party,
together with a sample of the true signature of each such individual
(the
<PAGE> 22
22
Master Collateral Agent, the Trustee, the Liquidity Agent and the NFC
Collateral Agent may conclusively rely on each such certificate until
formally advised by a like certificate of any changes therein);
(vii) The favorable opinion of Faegre & Benson LLP, counsel
for NFLP and the General Partner of NFLP, addressed to National, the
Trustee, the NFC Collateral Agent, the Master Collateral Agent, the
Series 1996-2 Fronting Credit Enhancers, the Series 1996-2 Support
Credit Enhancers, the Liquidity Agent, the Depositary, the Placement
Agents, the Dealers and the Rating Agencies; and the favorable opinion
of counsel to the Trustee addressed to NFLP, National, NFC, the NFC
Collateral Agent, the Master Collateral Agent, the Liquidity Agent,
the Series 1996-2 Fronting Credit Enhancers, the Series 1996-2 Support
Credit Enhancers and the Rating Agencies; in each case, satisfactory
in form and substance to the addressees thereof and including, among
other things, in the case of the opinion of Faegre & Benson LLP, the
opinion that NFLP's execution and delivery of this Amendment and its
performance of the Base Indenture as amended hereby does not, and will
not, adversely affect in any material respect the interests of any
Noteholder;
(viii) Certificates of good standing for each of the General
Partner of NFLP and NFLP in the jurisdiction of its organization and
the jurisdiction of its principal place of business;
(ix) A written search report from a Person satisfactory to
the Master Collateral Agent, the Trustee, the Liquidity Agent and the
NFC Collateral Agent listing all effective financing statements that
name NFLP as debtor or assignor and that are filed in the
jurisdictions in which filings were made pursuant to clause (x) below,
together with copies of such financing statements, and tax and
judgment lien search reports from a Person satisfactory to the Master
Collateral Agent, the Trustee, the Liquidity Agent and the NFC
Collateral Agent showing no evidence of such liens filed against NFLP
(other than in connection with any Related Documents);
(x) Executed, proper financing statements on Form UCC-1,
(i) naming NFLP as debtor and the Master Collateral Agent as secured
party, or other, similar instruments or documents, as may be necessary
or, in the reasonable opinion of the Master Collateral Agent, the
Trustee, the Liquidity Agent or the NFC Collateral Agent, desirable
under the UCC of all applicable jurisdictions to perfect the Master
Collateral Agent's interest in the Master Collateral with respect to
which the NFC Collateral Agent is designated as the Beneficiary, and
(ii) naming NFLP as debtor and the Trustee as secured party, as may be
necessary or, in the reasonable opinion of the Trustee, the Liquidity
Agent or the NFC Collateral Agent, desirable under the UCC of all
applicable jurisdictions to perfect the Trustee's interest in the
Collateral;
<PAGE> 23
23
(xi) A certificate of the Lessee and Servicer, executed by
a Responsible Officer thereof, setting forth the representation and
warranty of the Lessee and Servicer that, as of the effective date
hereof, there are no Initial Vehicles that are part of the Refinanced
Vehicles under any Lease; and
(xii) Such other documents as the Master Collateral Agent,
the Trustee, the Liquidity Agent or the NFC Collateral Agent may
reasonably request;
(b) All conditions to the effectiveness of the Series
1996-2 Supplement and the issuance of the Series 1996-2 Note thereunder shall
have been satisfied in all respects;
(c) All conditions to the effectiveness of the Second
Amendment to Liquidity Agreement, dated as of December 20, 1996, shall have
been satisfied in all respects; and
(d) All conditions to the effectiveness of the Lease
relating to the Series 1996-2 Note shall have been satisfied in all respects.
SECTION 4. Reference to and Effect on the Related Documents.
(a) Upon the effectiveness of this Amendment, including Section 2 hereof, on
and after the date hereof each reference in the Base Indenture to "this
Indenture", "hereunder", "hereof" or words of like import referring to the Base
Indenture, and each reference in the other Related Documents to "the Base
Indenture" or "the Indenture", "thereunder", "thereof" or words of like import
referring to the Base Indenture, shall mean and be a reference to the Base
Indenture as supplemented and amended hereby, and each reference in the Related
Documents to "the Definitions List attached to the Base Indenture as Schedule I
thereto" or words of like import shall mean and be a reference to the
"Definitions List" as defined in the Base Indenture as supplemented and amended
by this Amendment.
(b) Except as specifically supplemented and amended above
or as contemplated by Section 3 above, the Base Indenture and all other Related
Documents are and shall continue to be in full force and effect and are hereby
in all respects ratified and confirmed. Without limiting the generality of the
foregoing, the Base Indenture and all of the Collateral described therein do
and shall continue to secure the payment of all NFLP Obligations to which such
Collateral is applicable (giving effect to this Amendment).
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of any party thereto under any of the Related
Documents, nor constitute a waiver of any provision of any of the Related
Documents.
<PAGE> 24
24
SECTION 5. Costs and Expenses. NFLP agrees to pay on demand
all costs and expenses of the Master Collateral Agent, the Trustee, the
Liquidity Agent and the NFC Collateral Agent in connection with the
preparation, execution, delivery and administration of this Amendment and the
other instruments and documents to be delivered under, or as contemplated by,
Section 3 hereof, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Master Collateral Agent, the Trustee,
the Liquidity Agent and the NFC Collateral Agent with respect thereto and with
respect to advising the Master Collateral Agent, the Trustee, the Liquidity
Agent and the NFC Collateral Agent as to their respective rights and
responsibilities hereunder and thereunder.
SECTION 6. No Recourse. The obligations of NFLP under this
Amendment are solely the obligations of NFLP and are payable solely from the
assets of NFLP. No recourse shall be had for the payment of any amount owing
in respect of any fee hereunder or any other obligation or claim arising out of
or based upon this Amendment against any limited partner of NFLP or against the
capital or any other asset of the General Partner or against any stockholder,
employee, officer, director or incorporator of the General Partner. Fees,
expenses or costs payable by NFLP hereunder shall be payable by NFLP to the
extent and only to the extent that NFLP is reimbursed therefor pursuant to any
Lease (as defined giving effect to this Amendment) or the Related Documents (as
defined giving effect to this Amendment), or funds are then available or
thereafter become available for such purpose pursuant to Article 5 of the Base
Indenture.
SECTION 7. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement. Delivery of an executed counterpart of a signature
page to this Amendment by telefacsimile shall constitute delivery of a manually
executed counterpart of this Amendment.
SECTION 8. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York
excluding (to the greatest extent a New York court would permit) any rule of
law that would cause application of the laws of any jurisdiction other than the
State of New York.
<PAGE> 25
25
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP
By: NATIONAL CAR RENTAL
FINANCING CORPORATION,
its General Partner
By: /s/ M.J. Becker
-----------------------------------------
Name: M.J. Becker
Title: Asst. Secretary and Treasurer
THE BANK OF NEW YORK,
as Trustee
By: /s/ Cheryl L. Laser
-----------------------------------------
Name: Cheryl L. Laser
Title: Assistant Vice President
<PAGE> 1
Exhibit 4.4
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP,
as Issuer
and
THE BANK OF NEW YORK,
as Trustee
------------------
SERIES 1996-2 SUPPLEMENT
dated as of December 20, 1996
to
BASE INDENTURE
dated as of April 30, 1996
------------------
Rental Car Asset Backed Variable Funding Note
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1
DESIGNATION
ARTICLE 2
DEFINITIONS
<TABLE>
<S> <C>
Section 2.1. Incorporation of Schedule 1, Etc.............................. 2
Section 2.2. Defined Terms................................................ 2
ARTICLE 3
ISSUANCE OF SERIES 1996-2 NOTE AND INCREASES AND DECREASES
Section 3.1. Procedure for Issuance of Series 1996-2 Note and
Increasing the Series 1996-2 Invested Amount...................... 49
Section 3.2. Procedure for Decreasing the Series 1996-2
Invested Amount................................................... 52
ARTICLE 4
SERIES 1996-2 ALLOCATIONS
Section 4.1. Establishment of NFC Collection Account, Series 1996-2
Collection Account and Series 1996-2 Accrued Interest Account..... 53
Section 4.2. Allocations with Respect to the Series 1996-2 Note........... 54
Section 4.3. Monthly Payments............................................. 56
Section 4.4. Payment of Note Interest from a Series 1996-2 Fronting
Letter of Credit.................................................. 57
Section 4.5. Payment of Note Principal.................................... 58
Section 4.6. Servicer's Failure to Instruct the Trustee to Make a
Deposit or Payment....................... 59
Section 4.7. Series 1996-2 Distribution Account ...........................59
Section 4.8. Notice of Series 1996-2 Lease Payment Deficit................ 60
ARTICLE 5
SECURITY
Section 5.1. Grant of Security Interest.................................. 61
</TABLE>
i
<PAGE> 3
ARTICLE 6
AMORTIZATION EVENTS
<TABLE>
<S> <C>
Section 6.1................................................................. 63
ARTICLE 7
FORM OF SERIES 1996-2 NOTE
Section 7.1................................................................. 63
ARTICLE 8
GENERAL
Section 8.1. Maintenance of Rating; Payment of Rating Agency Fees......... 64
Section 8.2. Exhibits......................................................64
Section 8.3. Ratification of Base Indenture................................64
Section 8.4. Counterparts..................................................64
Section 8.5. Governing Law.................................................64
Section 8.6. Amendments....................................................65
Section 8.7. Discharge of Indenture........................................65
Section 8.8. Inspection of Property, Books and Records.....................65
Section 8.9. Acknowledgment of Trustee.....................................65
</TABLE>
ii
<PAGE> 4
Series 1996-2 SUPPLEMENT, dated as of December 20, 1996 (this
"Supplement"), between NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP, a
special purpose Delaware limited partnership ("NFLP"), and THE BANK OF NEW YORK,
a New York banking corporation, as trustee (together with its successors in
trust thereunder as provided in the Base Indenture referred to below, the
"Trustee"), to the Base Indenture, dated as of April 30, 1996, between NFLP and
the Trustee (as amended by the Supplement and Amendment to Base Indenture, dated
as of December 20, 1996, and as further amended, supplemented or otherwise
modified from time to time and in effect, exclusive of Supplements creating a
new Series of Notes, the "Base Indenture").
PRELIMINARY STATEMENT
WHEREAS, Sections 2.2 and 12.1 of the Base Indenture provide,
among other things, that NFLP and the Trustee may at any time and from time to
time enter into a supplement to the Base Indenture for the purpose of
authorizing the issuance of one or more Series of Notes.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DESIGNATION
There is hereby created a Series of Notes to be issued
pursuant to the Base Indenture and this Supplement and such Series of Notes
shall be designated generally as the Floating Rate Rental Car Asset Backed
Variable Funding Note, Series 1996-2.
The Series 1996-2 Note (as defined herein) shall be issued on
the Series 1996-2 Closing Date to refinance the Refinanced Vehicles and shall be
in the initial principal amount equal to the aggregate principal amount of the
Loans outstanding under and as defined in the Loan Agreement on such date
(giving effect to the payment by National of all amounts payable by it on such
date under the Loan Agreement, and with the unpaid interest accrued thereon
being paid by National on the day of such repayment), and the proceeds from any
further Series 1996-2 Advance (as defined herein) shall be deposited in the NFC
Collection Account and shall be used by NFLP to finance the acquisition by
National of National Vehicles, and to acquire Acquired Vehicles, from certain
Eligible Manufacturers.
The Series 1996-2 Note is a Segregated Series of Notes (as
more fully described in the Base Indenture). Accordingly, all references in this
Supplement to "all" Series of Notes (and all references in this Supplement to
terms defined in the Base Indenture that contain references to "all" Series of
Notes) shall refer to the Series 1996-2 Note and any other Shared Collateral
Series Notes.
<PAGE> 5
2
ARTICLE 2
DEFINITIONS
Section 2.1. Incorporation of Schedule 1, Etc. All capitalized
terms not otherwise defined herein are defined in the Definitions List attached
to the Base Indenture as Schedule 1 thereto. All references to "Articles",
"Sections" or "Subsections" herein shall refer to Articles, Sections or
Subsections of the Base Indenture, except as otherwise provided herein. Unless
otherwise stated herein, as the context otherwise requires or if such term is
otherwise defined in the Base Indenture, each capitalized term used or defined
herein shall relate only to the Series 1996-2 Note and not to any other Series
of Notes issued by NFLP. Furthermore, in the case of any term which is defined
in the Base Indenture but is otherwise defined in this Supplement, each Article,
Section, subsection, other definition or other provision of the Base Indenture
containing such term shall (unless the context otherwise requires) apply to the
Series 1996-2 Note with such term having the meaning set forth in this
Supplement. All references herein and in any Related Document to the "Series
1996-2 Supplement" shall mean the Base Indenture, as supplemented hereby.
Section 2.2. Defined Terms. The following words and phrases
shall have the following meanings with respect to the Series 1996-2 Note and the
definitions of such terms are applicable to the singular as well as the plural
form of such terms and to the masculine as well as the feminine and neuter
genders of such terms:
"A Credit Demand" means a demand for an A LOC Credit
Disbursement under the A Letter of Credit pursuant to a Certificate of A Credit
Demand.
"A Credit Enhancer" means Deutsche Bank AG, a German banking
corporation, and any successor thereto as issuer of the A Letter of Credit.
"A Credit Enhancer's Office" is defined in the A Letter of
Credit.
"A Letter of Credit" means the Irrevocable Letter of Credit
No. 839-53422 issued on June 8, 1995 in favor of the NFC Collateral Agent for
the account of the A Support Credit Enhancers by the A Credit Enhancer, as
amended by Amendment No. 1 to Irrevocable Letter of Credit, dated April 30,
1996, Amendment No. 2 to Irrevocable Letter of Credit, dated May 29, 1996, and
Amendment No. 3 to Irrevocable Letter of Credit, dated December 20, 1996, and as
the same may be further amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof, and any replacement thereof.
"A Letter of Credit Amount" means, as of any date of
determination, the amount (i) available to be drawn on such date under the A
Letter of Credit as specified
<PAGE> 6
3
therein, or (ii) on deposit in the Cash Collateral Account A on such date less
the amount of any A Support Reduction Disbursement to be paid as of such date to
any A Support Credit Enhancer by National pursuant to Section 2.1(d)(y) (or, in
the case of any such payment to any Reduction Support Credit Enhancer, Section
2.2(d)(y)) of the applicable A Support Reimbursement Agreement.
"A Letter of Credit Expiration Date" means the date on which
the A Letter of Credit or any replacement enhancement in whatever form expires
in accordance with its terms.
"A Liquidity Deficiency" is defined in the Certificate of A
Liquidity Demand attached as Annex B to the A Letter of Credit.
"A Liquidity Demand" means a demand for an A LOC Liquidity
Disbursement under the A Letter of Credit pursuant to a Certificate of A
Liquidity Demand.
"A LOC Credit Disbursement" means an amount drawn under the A
Letter of Credit pursuant to a Certificate of A Credit Demand.
"A LOC Liquidity Disbursement" means an amount drawn under the
A Letter of Credit pursuant to a Certificate of A Liquidity Demand.
"A LOC Reduction Disbursement" means an amount drawn under the
A Letter of Credit pursuant to a Certificate of A Reduction Demand.
"A LOC Termination Disbursement" means an amount drawn under
the A Letter of Credit pursuant to a Certificate of A Termination Demand. The
amount of such A LOC Termination Disbursement shall be the amount so drawn or
thereafter, if greater, the amount of the Deposited Funds in the Series 1996-2
Cash Collateral Accounts.
"A Reduction Demand" means a demand for an A LOC Reduction
Disbursement under the A Letter of Credit pursuant to a Certificate of A
Reduction Demand.
"A Support Commitment" means as of any day (a) with respect to
GM, the GM Letter of Credit Commitment, and (b) with respect to any Reduction
Support Credit Enhancer, the amount of credit support such Reduction Support
Credit Enhancer has agreed to provide to the A Credit Enhancer pursuant to its
Reduction Support Agreement.
"A Support Credit Demand" means either (a) the "A Support
Credit Demand" as defined in Section 1(a) of the A Support Letter of Credit
Agreement or (b) the "Reduction A Support Credit Demand" as defined in a
Reduction Support Agreement.
<PAGE> 7
4
"A Support Credit Disbursement" means an amount paid under an
A Support Letter of Credit pursuant to a Certificate of A Support Credit Demand.
"A Support Credit Enhancer" means GM, and any successor
thereto or replacement thereof or addition thereto pursuant to the A Support
Letter of Credit Agreement, or any Reduction Support Credit Enhancer.
"A Support Credit Enhancer Agents" means, for any A Support
Credit Enhancer, those officers, employees and agents of such A Support Credit
Enhancer whose signatures and incumbency shall have been certified to the NFC
Collateral Agent pursuant to clause (d) of Section 3.01 of the NFC Collateral
Agreement or in such other certificates as may be delivered by such A Support
Credit Enhancer to the NFC Collateral Agent from time to time as duly authorized
to act, and to give instructions and notices, on behalf of such A Support Credit
Enhancer, under the NFC Collateral Agreement.
"A Support Credit Enhancer Incumbency Certificate" is defined
in Section 3.01(d) of the NFC Collateral Agreement.
"A Support Disbursements" means, collectively, the A Support
Credit Disbursements, the A Support Liquidity Disbursements, the A Support
Termination Disbursements, the A Support Event of Default Disbursements and the
A Support Reduction Disbursements.
"A Support Event of Default" means (a) with respect to GM, an
"A Support Event of Default" as defined in Section 2.9 of its A Support
Reimbursement Agreement, and (b) with respect to a Reduction Support Credit
Enhancer, a Reduction A Support Event of Default.
"A Support Event of Default Disbursement" means an amount paid
under an A Support Letter of Credit as a result of an Event of Default by an A
Support Credit Enhancer as defined in such A Support Letter of Credit.
"A Support Intercreditor Agreement" means the A Support
Intercreditor Agreement, dated as of May 29, 1996, among GM, The Bank of New
York, NFC, National, and the other Reduction Support Credit Enhancers party
thereto from time to time, as amended by the Amendment to A Support
Intercreditor Agreement, dated as of December 20, 1996, and as such agreement
may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"A Support Letter of Credit" means the A Support Letter of
Credit Agreement or a Reduction Support Agreement.
<PAGE> 8
5
"A Support Letter of Credit Agreement" means the Letter of
Credit Agreement, dated as of June 7, 1995, between GM and the A Credit
Enhancer, providing for the reimbursement of the A Credit Enhancer for draws
under the A Letter of Credit, as amended by the First Amendment to the A Support
Letter of Credit Agreement, dated as of April 30, 1996, and as such agreement
may be further amended, supplemented, restated or otherwise modified from time
to time in accordance with the terms thereof.
"A Support Liquidity Demand" means either (a) the "A Support
Liquidity Demand" as defined in Section 1(b) of the A Support Letter of Credit
Agreement or (b) the "Reduction A Support Liquidity Demand" as defined in a
Reduction Support Agreement.
"A Support Liquidity Disbursement" means an amount paid under
an A Support Letter of Credit pursuant to a Certificate of A Support Liquidity
Demand.
"A Support Reduction Amount", in the case of GM, is defined in
Section 2.1(c) of its A Support Reimbursement Agreement.
"A Support Reduction Demand" means either (a) the "A Support
Reduction Demand" as defined in Section l(d) of the A Support Letter of Credit
Agreement or (b) the "Reduction A Support Reduction Demand" as defined in a
Reduction Support Agreement.
"A Support Reduction Disbursement" means an amount drawn under
an A Support Letter of Credit pursuant to a Certificate of A Support Reduction
Demand.
"A Support Reimbursement Agreement" means (a) the A Support
Reimbursement Agreement, dated as of June 7, 1995, among National, NFC and GM,
as amended by the Amendment to A Support Reimbursement Agreement, dated as of
April 30, 1996, and the Second Amendment to A Support Reimbursement Agreement,
dated as of December 20, 1996, and as such agreement may be further amended,
supplemented, restated or otherwise modified from time to time in accordance
with the terms thereof, or (b) a Reduction A Support Reimbursement Agreement.
"A Support Termination Demand" means either (a) the "A Support
Termination Demand" as defined in Section l(c) of the A Support Letter of Credit
Agreement or (b) the "Reduction A Support Termination Demand" as defined in a
Reduction A Support Agreement.
"A Support Termination Disbursement" means an amount paid
under an A Support Letter of Credit pursuant to a Certificate of A Support
Termination Demand.
<PAGE> 9
6
"A Termination Demand" means a demand for an A LOC Termination
Disbursement under the A Letter of Credit pursuant to a Certificate of A
Termination Demand.
"Accounts" is defined in Section 5.01 of the NFC Collateral
Agreement.
"Affected Liquidity Lender" is defined in clause (a) of
Section 5.9 of the Liquidity Agreement.
"Aggregate A Support Commitment" as of any day means the
aggregate of all A Support Commitments as of such day.
"Aggregate Face Amount" means, on any date, with respect to
Commercial Paper Notes issued at a discount, the aggregate face amount of all
such Commercial Paper Notes Outstanding on such date and, with respect to
interest bearing Commercial Paper Notes, the aggregate face amount of all such
Commercial Paper Notes Outstanding on such date plus the accrued and unpaid
interest thereon and interest that will accrue prior to maturity.
"Aggregate Liquidity Commitment" means, as of any date of
determination, the sum of the Liquidity Lenders' Liquidity Commitments on such
date.
"Aggregate Outstanding CP" means, as of any date, the
Aggregate Face Amount of Commercial Paper Notes Outstanding on such date, net of
any amounts on deposit on such date in the NFC Collection Account and/or the NFC
Collateral Account and/or the Commercial Paper Account and/or the Termination
Advance Account, in each case to the extent such amounts shall have been set
aside for the repayment of the principal of, or interest on, Commercial Paper
Notes.
"Aggregate Outstandings" means, as of any date, the sum of (i)
the aggregate principal amount of and accrued interest on all Liquidity Advances
Outstanding on such date, (ii) the aggregate principal amount of and accrued
interest on Support Liquidity Disbursements Outstanding on such date and (iii)
the Aggregate Outstanding CP on such date, net of any amounts on deposit on such
date in the NFC Collection Account and/or the NFC Collateral Account and/or the
Termination Advance Account and/or the Liquidity Lender Account, in each case to
the extent such amounts shall have been set aside for the repayment of the
principal of, or interest on, Liquidity Advances or Support Liquidity
Disbursements.
"Amortization Commencement Date" means the earliest to occur
of (a) the occurrence of an Amortization Event described in Section 9.1.7 with
respect to NFC or NFLP or National, or Section 9.1.13 or 9.1.15, in each case,
of the Liquidity Agreement, or
<PAGE> 10
7
(b) the date of declaration of the commencement of the Amortization Period by
written notice to NFC pursuant to Section 9.2 of the Liquidity Agreement, or (c)
the Amortization Commencement Date under and as defined in the Base Indenture.
"Amortization Event" is defined in Section 9.1 of the
Liquidity Agreement.
"Amortization Period" means the period commencing on the
Amortization Commencement Date and ending on the date Liquidity Commitments have
been terminated and all amounts due and payable to the Liquidity Agent, the
Liquidity Lenders, the Series 1996-2 Support Credit Enhancers (with respect to
Support Disbursements and other amounts payable by NFC under the A Support
Reimbursement Agreements and the B Support Letter of Credit Reimbursement
Agreement, as applicable) and the Holders with respect to the Commercial Paper
Notes have been paid in full.
"Applicable Law" means all applicable provisions of all (a)
constitutions, statutes, treaties, rules, regulations and orders of governmental
bodies, (b) governmental approvals and (c) orders, decisions, judgments and
decrees of all courts and arbitrators.
"Assets" means any interest of any kind in any assets or
property of any kind (including, without limitation, the Vehicles), tangible or
intangible, real, personal or mixed, now owned or hereafter acquired by NFC or
such other Person as the context may require.
"Assigned Collateral" is defined in Section 4.01 of the NFC
Collateral Agreement.
"Assignee Lender" is defined in Section 11.11.1 of the
Liquidity Agreement.
"Authenticating Representatives" is defined in Section 2 of
the Depositary Agreement.
"Authorized Officer" means (a) as to NFC, any of those
officers, employees and agents of NFC whose signatures and incumbency shall have
been certified to the Liquidity Agent and the Liquidity Lenders pursuant to
Section 6.1.1 of the Liquidity Agreement or in such other certificates as may be
delivered by NFC to the Liquidity Agent from time to time as duly authorized to
execute and deliver the Liquidity Agreement, any other Liquidity Document and
any other Related Document to which NFC is a party and any instruments or
documents in connection therewith on behalf of NFC and to take, from time to
time, all other actions on behalf of NFC in connection therewith or (b) any
Authorized Officer under and as defined in the Base Indenture.
"Authorized Representatives" is defined in Section 2 of the
Depositary Agreement.
<PAGE> 11
8
"Authorized Signatories" is defined in Section 2 of the
Depositary Agreement.
"B Credit Demand" means a demand for a B LOC Credit
Disbursement under the B Letter of Credit pursuant to a Certificate of B Credit
Demand.
"B Credit Draw Amount" is defined in Section 5.05 of the NFC
Collateral Agreement.
"B Credit Enhancer" means Deutsche Bank AG, a German banking
corporation, and any successor thereto or replacement thereof or addition
thereto pursuant to the B Letter of Credit Reimbursement Agreement.
"B Credit Enhancer's Office" is defined in the B Letter of
Credit.
"B Letter of Credit" means the Irrevocable Letter of Credit
No. 839-53755 issued on April 30, 1996 in favor of the NFC Collateral Agent by
the B Credit Enhancer, as amended by Amendment No. 1 to Irrevocable Letter of
Credit, dated as of May 29, 1996, and Amendment No. 2 to Irrevocable Letter of
Credit, dated as of December 20, 1996, and as the same may be further amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, and any replacement thereof provided pursuant to the B Letter of
Credit Reimbursement Agreement.
"B Letter of Credit Amount" means, as of any date of
determination, the amount (i) available to be drawn on such date under the B
Letter of Credit as specified therein, or (ii) on deposit in the Cash Collateral
Account B on such date.
"B Letter of Credit Expiration Date" means the date on which
the B Letter of Credit or any replacement enhancement in whatever form expires
or terminates in accordance with its terms.
"B Letter of Credit Reimbursement Agreement" means the B
Letter of Credit Reimbursement Agreement, dated as of June 7, 1995, among
National, NFC and the B Credit Enhancer, as amended by the Amendment to B Letter
of Credit Reimbursement Agreement, dated as of April 30, 1996, and the Second
Amendment to B Letter of Credit Reimbursement Agreement, dated as of December
20, 1996, and as such agreement may be further amended, supplemented, restated
or otherwise modified from time to time in accordance with the terms thereof.
"B Liquidity Demand" means a demand for a B LOC Liquidity
Disbursement under the B Letter of Credit pursuant to a Certificate of B
Liquidity Demand.
<PAGE> 12
9
"B Liquidity Draw Amount" is defined in Section 5.06(c) of the
NFC Collateral Agreement.
"B LOC Cash Collateral" is defined in Section 5.3 of the B
Letter of Credit Reimbursement Agreement.
"B LOC Cash Collateral Credit Shortfall" is defined in Section
2.3(a) of the B Letter of Credit Reimbursement Agreement.
"B LOC Cash Collateral Liquidity Shortfall" is defined in
Section 2.3(a) of the B Letter of Credit Reimbursement Agreement.
"B LOC Cash Collateral Termination Shortfall" is defined in
Section 2.3(a) of the B Letter of Credit Reimbursement Agreement.
"B LOC Credit Disbursement" means an amount drawn under the B
Letter of Credit pursuant to a Certificate of B Credit Demand.
"B LOC Liquidity Disbursement" means an amount drawn under the
B Letter of Credit pursuant to a Certificate of B Liquidity Demand.
"B LOC Termination Disbursement" means an amount drawn under
the B Letter of Credit pursuant to a Certificate of B Termination Demand. The
amount of such B LOC Termination Disbursement shall be the amount so drawn or
thereafter, if greater, the amount of the Deposited Funds in the Series 1996-2
Cash Collateral Accounts.
"B Support Credit Demand" means a demand for a B Support LOC
Credit Disbursement under the B Support Letter of Credit pursuant to a
Certificate of B Support Credit Demand.
"B Support Credit Enhancer" means Caisse Nationale de Credit
Agricole, and any successors thereto or replacements thereof or addition thereto
pursuant to the B Support Letter of Credit Reimbursement Agreement.
"B Support Credit Enhancer Agents" means those officers,
employees and agents of the B Support Credit Enhancer whose signatures and
incumbency shall have been certified to the NFC Collateral Agent pursuant to
clause (d) of Section 3.01 of the NFC Collateral Agreement or in such other
certificates as may be delivered by the B Support Credit Enhancer to the NFC
Collateral Agent from time to time as duly authorized to act, and to give
instructions and notices, on behalf of the B Support Credit Enhancer, under the
NFC Collateral Agreement.
<PAGE> 13
10
"B Support Credit Enhancer Incumbency Certificate" is defined
in Section 3.01(c) of the NFC Collateral Agreement.
"B Support Credit Enhancer's Office" is defined with respect
to the B Support Credit Enhancer in the B Support Letter of Credit.
"B Support Letter of Credit" means the Irrevocable Letter of
Credit No. 59786 issued on May 29, 1996 in favor of the B Credit Enhancer for
the account of National and NFC, as the case may be, by the B Support Credit
Enhancer, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof, and any replacements thereof
provided pursuant to the B Support Letter of Credit Reimbursement Agreement.
"B Support Letter of Credit Amount" means, as of any date of
determination, the amount (i) available to be drawn on such date under the B
Support Letter of Credit as specified therein, or (ii) on deposit in the Cash
Collateral Account B.
"B Support Letter of Credit Expiration Date" is defined in
Section 2.1 of the B Support Letter of Credit Reimbursement Agreement.
"B Support Letter of Credit Reimbursement Agreement" means the
B Support Letter of Credit Reimbursement Agreement, dated as of June 7, 1995,
among National, NFC and the B Support Credit Enhancer (as assignee of Citibank
and Credit Suisse), as modified by the Assignment and Assumption Agreement,
dated as of May 29, 1996, among the B Support Credit Enhancer, Citibank and
Credit Suisse, the Amendment to B Support Letter of Credit Reimbursement
Agreement, dated as of April 30, 1996, the Second Amendment to B Support Letter
of Credit Reimbursement Agreement, dated as of May 29, 1996, and the Third
Amendment to B Support Letter of Credit Reimbursement Agreement, dated as of
December 20, 1996, as such agreement may be further amended, supplemented,
restated or otherwise modified from time to time in accordance with the terms
thereof.
"B Support Liquidity Demand" means a demand for a B Support
LOC Liquidity Disbursement under the B Support Letter of Credit pursuant to a
Certificate of B Support Liquidity Demand.
"B Support LOC Credit Disbursement" means an amount drawn
under the B Support Letter of Credit pursuant to a Certificate of B Support
Credit Demand.
"B Support LOC Liquidity Disbursement" means an amount drawn
under the B Support Letter of Credit pursuant to a Certificate of B Support
Liquidity Demand.
<PAGE> 14
11
"B Support LOC Termination Disbursement" means an amount drawn
under the B Support Letter of Credit pursuant to a Certificate of B Support
Termination Demand. The amount of such B Support LOC Termination Disbursement
shall be the amount so drawn or thereafter, if greater, the amount of the
Deposited Funds in the NFC Cash Collateral Accounts.
"B Support Termination Demand" means a demand for a B Support
LOC Termination Disbursement under the B Support Letter of Credit pursuant to a
Certificate of B Support Termination Demand.
"B Termination Demand" means a demand for a B LOC Termination
Disbursement under the B Letter of Credit pursuant to a Certificate of B
Termination Demand.
"Base Lease" means the Second Master Motor Vehicle Lease and
Servicing Agreement, dated as of December 20, 1996, between NFLP, as the lessor
thereunder, and National, as the lessee and servicer thereunder, as the same may
be amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof, exclusive of Lease Annexes.
"Base Rate" means, on any date and with respect to any Base
Rate Advance, a fluctuating rate of interest per annum equal to the higher of
(a) the Prime Rate for such day; and
(b) the Federal Funds Rate plus 0.25% per annum.
Changes in the rate of interest on that portion of any Liquidity Advance or
Support Disbursement maintained as Base Rate Advances will take effect
simultaneously with each change in the Base Rate.
"Base Rate Advance" means a Liquidity Advance under the
Liquidity Agreement or a Disbursement under any Series 1996-2 Fronting Letter of
Credit bearing interest at a fluctuating rate determined by reference to the
Base Rate.
"Book Entry CP Holder" is defined in Section 6(e) of the
Depositary Agreement.
"Book Entry CP Notes" is defined in Section 6(a) of the
Depositary Agreement.
"Book Entry Issuance Instruction" is defined in Section 3(ii)
of the Depositary Agreement.
<PAGE> 15
12
"Book Entry Procedures" is defined in Section 6(a) of the
Depositary Agreement.
"Borrowing" means the Liquidity Advances of the same type and,
in the case of LIBOR Advances, having the same Interest Period, and either (i)
made by all Liquidity Lenders on the same Business Day pursuant to the same
Borrowing Request in accordance with Sections 3.1.1 or 3.1.2 of the Liquidity
Agreement or (ii) made by the Swing Line Lender pursuant to a Borrowing Request
in accordance with Section 3.1.3 of the Liquidity Agreement.
"Borrowing Base" means, as of any date of determination, an
amount equal to the sum of (without duplication) (a) the Series 1996-2 Invested
Amount as of such date, plus (b) in the case of that portion, if any, of the
principal amount of the Series 1996-2 Note funded by Commercial Paper Notes,
interest accrued and unpaid on such portion of such principal amount as of such
date and interest that will accrue on such portion of such principal amount
through the maturity date of the Commercial Paper Notes issued to fund the
Series 1996-2 Note, plus (c) in the case of that portion, if any, of the
principal amount of the Series 1996-2 Note not funded by Commercial Paper Notes,
interest accrued and unpaid on such portion of such principal amount as of such
date, plus (d) the outstanding principal amount of Eligible Investments and cash
(other than any amounts on deposit on such date in the NFC Collection Account or
the NFC Collateral Account, in each case to the extent such amounts shall have
been set aside for the repayment of the principal of, or interest on, Liquidity
Advances, Support Liquidity Disbursements, or Commercial Paper Notes) then held
by the Trustee in the NFC Collection Account and the NFC Collateral Agent in the
NFC Collateral Account, respectively, minus (e) any Borrowing Base Decline.
"Borrowing Base Decline" means, as of any date, the aggregate
amount of the Series 1996-2 Lease Payment Deficit for such date (if such date is
a Distribution Date) and all prior Series 1996-2 Lease Payment Deficits (in each
case other than to the extent relating to any amount (i) the maturity of which
has been accelerated as contemplated by Section 17.2 of the Base Lease or clause
(b) of the definition of the term "Amortization Commencement Date" contained in
this Section 2.2, and (ii) payable in connection with any payment by the Lessee
pursuant to clause (ii)(a)(y) or (ii)(b)(2) of the definition of the term
"Monthly Supplemental Payment" contained in Section 6 of Annex B to the Base
Lease), which have not been reimbursed by (x) a draw under a Series 1996-2
Fronting Letter of Credit or the Series 1996-2 Cash Collateral Accounts or (y) a
payment by the Lessee under the Lease in respect of such Series 1996-2 Lease
Payment Deficit.
"Borrowing Base Deficiency" means, with respect to any date of
determination, the amount by which the Aggregate Outstandings on such date
exceeds the Borrowing Base on such date.
<PAGE> 16
13
"Borrowing Request" means a request and certificate for
Liquidity Advances, substantially in the form of Exhibit C to the Liquidity
Agreement.
"Business Day" means, with respect to the Related Documents,
(a) any day other than a Saturday, Sunday or other day on
which banks are authorized or required by law to be closed in New York
City, New York or Minneapolis, Minnesota and
(b) relative to the making, continuing, prepaying or repaying
of LIBOR Advances, any day on which dealings in Dollars are carried on
in the London interbank market.
"Capitalized Cost" means, with respect to each Vehicle, the
price paid for such Vehicle by the Lessee or the Lessor to the dealer selling
such Vehicle, including dealer profit and delivery charges but excluding taxes
and any registration or titling fees.
"Capitalized Lease Obligations" means Indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of such debt shall be
the capitalized amount of such obligations determined in accordance with such
principles.
"Cash" means cash and cash equivalents (including marketable
securities and short-term investments).
"Cash Collateral Account A" is defined in Section 5.07(a) of
the NFC Collateral Agreement.
"Cash Collateral Account B" is defined in Section 5.07(b) of
the NFC Collateral Agreement.
"Cash Equivalents" means (i) units of money market funds rated
at least A-1 by S&P or at least P-1 by Moody's or otherwise acceptable to the B
Credit Enhancer and the B Support Credit Enhancer, and (ii) certificates of
deposit of Deutsche Bank AG.
"Cash Flow" means, for any period, the Consolidated Net Income
plus the sum of (a) amounts that have been deducted for Total Net Interest of
National and its Consolidated Subsidiaries in determining Consolidated Net
Income for such period, plus (b) amounts (without duplication) that have been
deducted for the provision for income tax expense, depreciation of plant and
equipment (excluding depreciation of revenue-earning assets), amortization of
Indebtedness discount and Indebtedness issuance costs, amortization of
capitalized acquisition transaction costs, and amortization of interest rate cap
expense of
<PAGE> 17
14
National and its Consolidated Subsidiaries in determining Consolidated Net
Income for such period.
"Casualty" means, with respect to any Vehicle, that (i) such
Vehicle is lost, converted or stolen for a period of at least 90 days, (ii) such
Vehicle is destroyed, seized or otherwise rendered permanently unfit or
unavailable for use, (iii) the return of such Vehicle to the applicable
Manufacturer during the applicable Repurchase Period cannot be, or is not,
effected for any reason (other than as a result of the occurrence and
continuance of an Event of Bankruptcy with respect to such Manufacturer or
otherwise as a result of the creditworthiness of such Manufacturer) or (iv) the
applicable Manufacturer did not accept such Vehicle for repurchase for any
reason (other than as a result of the occurrence and continuance of an Event of
Bankruptcy with respect to such Manufacturer or otherwise as a result of the
creditworthiness of such Manufacturer) unless the Lessee reasonably believes
such Manufacturer will accept such Vehicle for repurchase upon a subsequent
return.
"Certificate of A Credit Demand" means a certificate in the
form of Annex A to the A Letter of Credit.
"Certificate of A Liquidity Demand" means a certificate in the
form of Annex B to the A Letter of Credit.
"Certificate of A Reduction Demand" means a certificate in the
form of Annex F to the A Letter of Credit.
"Certificate of A Termination Demand" means a certificate in
the form of Annex C to the A Letter of Credit.
"Certificate of A Support Credit Demand" means a certificate
in the form of Annex A to the applicable A Support Letter of Credit.
"Certificate of A Support Liquidity Demand" means a
certificate in the form of Annex B to the applicable A Support Letter of Credit.
"Certificate of A Support Reduction Demand" means a
certificate in the form of Annex D to the applicable A Support Letter of Credit.
"Certificate of A Support Termination Demand" means a
certificate in the form of Annex C to the applicable A Support Letter of Credit.
"Certificate of B Credit Demand" means a certificate in the
form of Annex A to the B Letter of Credit.
<PAGE> 18
15
"Certificate of B Liquidity Demand" means a certificate in the
form of Annex B to the B Letter of Credit.
"Certificate of B Termination Demand" means a certificate in
the form of Annex C to the B Letter of Credit.
"Certificate of B Support Credit Demand" means a certificate
in the form of Annex A to the B Support Letter of Credit.
"Certificate of B Support Liquidity Demand" means a
certificate in the form of Annex B to the B Support Letter of Credit.
"Certificate of B Support Termination Demand" means a
certificate in the form of Annex C to the B Support Letter of Credit.
"Certificate of Reduction A Support Event of Default Demand"
means a certificate in the form of Annex D to any Reduction Support Agreement.
"Certificated Notes" is defined in Section 2 of the Depositary
Agreement.
"Change of Control" means (i) a transaction or series of
transactions whereby any Person or group within the meaning of Section 13(d)(3)
of the Exchange Act and the rules and regulations promulgated thereunder (other
than William E. Lobeck, Jr. or a group which is managed by William E. Lobeck,
Jr.) acquires beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of National (or other
securities convertible into such securities) representing 40% of the combined
voting power of all securities of National entitled to vote in the election of
directors (a "Controlling Person") or (ii) at any time, a majority of National's
directors are persons who were not (A) in office on June 7, 1995, (B) initially
nominated by a group which is managed by William E. Lobeck, Jr., or (C)
successor directors whose nomination for election by the stockholders of
National was approved by a vote of a majority of the directors then still in
office. For this purpose, a Person or group shall not be a Controlling Person if
such Person or group holds voting power in good faith and not for the purpose of
circumventing the effect of the occurrence of a Change of Control as an agent,
bank, broker, nominee, trustee, or holder of revocable proxies given in response
to a solicitation pursuant to the Exchange Act, for one or more beneficial
owners who do not individually, or, if they are a group acting in concert, as a
group, have the voting power specified in the previous sentence.
"Citibank" means Citibank, N.A., a national banking
association.
"Collateral" is defined in Section 5.1(a) of this Supplement.
<PAGE> 19
16
"Commercial Paper Account" is defined in clause (a) of Section
2.4 of the Liquidity Agreement.
"Commercial Paper Deficit" is defined in Section 3.6.2 of the
Liquidity Agreement.
"Commercial Paper Notes" means the promissory notes of NFC
issued by NFC in the commercial paper market pursuant to the Depositary
Agreement.
"Commitment Fee" is defined in Section 4.5(a) of the Liquidity
Agreement.
"Commitment Termination Date Liquidity Advance" means a
Liquidity Advance made by a Liquidity Lender on the Scheduled Liquidity
Commitment Termination Date with respect to such Liquidity Lender, pursuant to
Section 3.6.4 of the Liquidity Agreement.
"Consolidated Net Income" means and refers to, for any period,
the net income (or deficit) of National and its Consolidated Subsidiaries,
determined on a consolidated basis for such period; provided, however that there
shall be excluded from Consolidated Net Income (a) the income (or deficit) of
any Person accrued prior to the date it becomes a Consolidated Subsidiary of
National or is merged into or consolidated with National or such Person's assets
are acquired by National, and (b) any income or gain resulting from any write-up
or revaluation of the assets of National and its Consolidated Subsidiaries.
"Consolidated Subsidiary" means, at any time, any Subsidiary
or other entity the accounts of which would be consolidated with those of
National in its consolidated financial statements as of such time.
"Continuation/Conversion Notice" means a notice of
continuation or conversion and certificate, duly executed by an Authorized
Officer of NFC, substantially in the form of Exhibit D to the Liquidity
Agreement.
"Controlling Person" shall have the meaning set forth in the
definition of Change of Control.
"Conversion" is defined in Section 5.08 of the NFC Collateral
Agreement.
"Credit Enhancer Commitment" means, (i) as to any Series
1996-2 Fronting Credit Enhancer, the amount of such Series 1996-2 Fronting
Credit Enhancer's commitment to provide credit support for National's
obligations under the Lease and/or liquidity support for the Commercial Paper
Notes, and (ii) as to any Series 1996-2 Support Credit Enhancer, the amount of
such Series 1996-2 Support Credit Enhancer's commitment to provide support
<PAGE> 20
17
for obligations of the related Series 1996-2 Fronting Credit Enhancer's
obligations under its Credit Enhancer Commitment.
"Dealer Agreement" means the Dealer Agreement, dated as of
June 7, 1995, between CS First Boston Corporation, as the initial Dealer,
National and NFC, as modified by the Letter Agreement, dated as of July 13,
1995, between NFC and Goldman, Sachs & Co. (successor organization to Goldman
Sachs Money Markets, L.P.), as an additional Dealer, and the Letter Agreement,
dated as of November 20, 1996, between NFC and Citicorp Securities, Inc., as an
additional Dealer, and as amended by the Amendment to Dealer Agreement, dated as
of December 20, 1996, and as further amended, supplemented, restated or
otherwise modified from time to time in accordance with the terms thereof.
"Dealers" means CS First Boston Corporation, a Massachusetts
corporation, Goldman, Sachs & Co., a New York limited partnership (successor
organization to Goldman Sachs Money Markets, L.P., a Delaware limited
partnership), and Citicorp Securities, Inc., a Delaware corporation, and/or (as
applicable) any other dealer of Commercial Paper Notes engaged by NFC from time
to time and who becomes a party to the NFC Collateral Agreement, for so long as
such Person is so engaged by NFC.
"Decreases" is defined in Section 3.2 of this Supplement.
"Deficiency Amount" is defined in Section 4.3(a)(ii) of this
Supplement.
"Depositary" means Citibank, or such other banking institution
as NFC shall appoint, with the prior written consent of the Required Liquidity
Providers (which consent shall not be unreasonably withheld or delayed), as
issuing and paying agent for Commercial Paper Notes under the Depositary
Agreement and as agent for the Holders thereof.
"Depositary Agents" means those officers, employees and agents
of the Depositary whose signatures and incumbency shall have been certified to
the NFC Collateral Agent pursuant to clause (b) of Section 3.01 of the NFC
Collateral Agreement or in such other certificates as may be delivered by the
Depositary to the NFC Collateral Agent from time to time as duly authorized to
act, and to give instructions and notices, on behalf of the Depositary, under
the NFC Collateral Agreement.
"Depositary Agreement" means the Depositary Agreement, dated
as of June 7, 1995, between NFC and the Depositary, as amended by the Amendment
to Depositary Agreement, dated as of December 20, 1996, and as further amended,
supplemented, restated or otherwise modified from time to time in accordance
with the terms thereof.
"Depositary Authorization Letter" is defined in Section 2 of
the Depositary Agreement.
<PAGE> 21
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"Depositary Incumbency Certificate" is defined in Section
3.01(b) of the NFC Collateral Agreement.
"Deposited Funds" (a) to the extent relating to any
Collateral, has the meaning set forth in Schedule 1 to the Base Indenture, and
(b) to the extent relating to any Assigned Collateral, is defined in Section
5.01 of the NFC Collateral Agreement.
"Depreciation Charge" means, with respect to (a) any Vehicle
manufactured by GM and subject to GM's Matrix Repurchase Program, the rate
determined by dividing (x) 100% minus the repurchase price percentage specified
in respect of such Vehicle pursuant to the terms of such Repurchase Program for
the Designated Period applicable to such Vehicle by (y) the number of days in
such Designated Period (or, if such Vehicle is held past the Designated Period
set forth in the related Vehicle Acquisition Schedule, the applicable
depreciation charge set forth in such Repurchase Program for such Vehicle
calculated on a daily basis), and (b) any other Vehicle (including any other
Vehicle subject to any other Repurchase Program of GM), the applicable
depreciation charge set forth in the related Repurchase Program for such Vehicle
with respect to such Vehicle calculated on a daily basis. If such charge is
expressed as a percentage, the Depreciation Charge for such Vehicle shall be
such percentage times the Capitalized Cost for such Vehicle calculated on a
daily basis. For Vehicles not held for a full month in the month of acquisition,
the Depreciation Charges shall be prorated by multiplying the applicable
depreciation amount by a fraction, the numerator of which is the number of days
from the date depreciation begins related to such Vehicle to the first day of
the next month and the denominator of which is the number of days in such month.
For the month in which such Vehicle is turned back to the applicable
Manufacturer, the Depreciation Charge shall be prorated by multiplying the
applicable depreciation amount by a fraction, the numerator of which is the
number of days from the first day of such month to the Turnback Date for such
Vehicle and the denominator of which is the number of days in such month. In the
event a Vehicle is sold (other than pursuant to the Repurchase Program of a
Manufacturer) instead of turned back to the applicable Manufacturer, the
Depreciation Charge shall be prorated by multiplying the applicable depreciation
amount by a fraction, the numerator of which is the number of days from the
first day of such month to the date proceeds were received by the NFC Collateral
Agent on the sale of such Vehicle and the denominator of which is the number of
days in such month.
"Designated Period" shall mean, with respect to any Vehicle
subject to GM's Matrix Repurchase Program, the period (up to a maximum of 15
months) designated by the Servicer in the applicable Vehicle Acquisition
Schedule relating to such Vehicle as the period of time for which the Servicer
expects such Vehicle to be subject to the Lease.
"Designated Persons" is defined in Section 2 of the Depositary
Agreement.
<PAGE> 22
19
"Disbursement" shall mean any LOC Liquidity Disbursement, any
LOC Credit Disbursement or any LOC Termination Disbursement, or other
disbursement by a Series 1996-2 Fronting Credit Enhancer under a Credit Enhancer
Commitment, or any combination thereof, as the context may require.
"Distributions" means (i) contributions, loans or other
distributions made by National to a profit sharing or pension plan not made in
the ordinary course of the operation of such Plan (other than company
contributions made to a 401(k) plan from time to time, in each case with the
approval of National's Board of Directors) and (ii) all fees, rents and other
compensation or payments paid or made by National or its Subsidiaries to any
stockholder of National except for such fees, rents or other compensation or
payments paid or made in exchange for actual services rendered to National on an
arm's length basis by such stockholder.
"Dividends" is defined in Section 25.8 of the Lease.
"Domestic Office" shall mean, relative to any Liquidity Lender
or Series 1996-2 Support Credit Enhancer, as the case may be, the office of such
Liquidity Lender or Series 1996-2 Support Credit Enhancer, as the case may be,
designated as such below its signature to the Liquidity Agreement, the A Support
Reimbursement Agreements or the B Support Letter of Credit Reimbursement
Agreement, as applicable, or such other office of such Liquidity Lender or
Series 1996-2 Support Credit Enhancer, as the case may be, within the United
States as may be designated from time to time by notice from such Liquidity
Lender or Series 1996-2 Support Credit Enhancer, as the case may be, to each
other Person party to the Liquidity Agreement, the A Support Reimbursement
Agreements or the B Support Letter of Credit Reimbursement Agreement, as
applicable.
"EBIT" means, for any period, the Consolidated Net Income for
such period plus the sum of (a) amounts that have been deducted for Total Net
Interest of National and its Consolidated Subsidiaries in determining
Consolidated Net Income for such period, and (b) amounts (without duplication)
that have been deducted for the provision for income tax expense, amortization
of Indebtedness issuance costs, and depreciation of plant and equipment
(excluding depreciation of revenue-earning assets) of National and its
Consolidated Subsidiaries in determining Consolidated Net Income for such
period.
"Eligible Credit Enhancer" means (a) a commercial bank having
total assets in excess of $500,000,000, (b) a finance company, insurance company
or other financial institution that in the ordinary course of business enters
into transactions of a type similar to that entered into by the Series 1996-2
Fronting Credit Enhancers under the Series 1996-2 Fronting Letter of Credits or
the B Support Credit Enhancer under the B Support Letter of Credit Reimbursement
Agreement and has total assets in excess of $200,000,000, and whose becoming an
assignee would not constitute a prohibited transaction under Section 4975 of
<PAGE> 23
20
ERISA and (c) any other financial institution, in each case reasonably
satisfactory to National and NFC having a short-term rating or an equivalent
long-term debt rating from S&P and Moody's at least equal to A-1, or better, by
S&P and P-1 by Moody's; provided, however, that any Person who does not have
either a short-term rating from S&P or Moody's shall be deemed to have the
required rating set forth above if such Rating Agency confirms in writing that
such Person, if its short-term debt obligations were rated, would be assigned
such required rating.
"Eligible Investments" means:
(a) Government Obligations;
(b) Participation certificates (excluding strip mortgage
securities which are purchased at prices exceeding their principal
amounts) and senior debt obligations of the Federal Home Loan Mortgage
Corporation, consolidated system wide bonds and notes of the Farm
Credit System, senior debt obligations and mortgage-backed securities
(excluding stripped mortgage securities which are purchased at prices
exceeding their principal amounts) of the Federal National Mortgage
Association which, in the case of mortgage-backed securities, are rated
at least AA by S&P and Aa by Moody's, senior debt obligations
(excluding securities that have no fixed value and/or whose terms do
not promise a fixed dollar amount at maturity or call date) of the
Student Loan Marketing Association and debt obligations of the
Resolution Funding Corp. (collectively, "Agency Obligations");
(c) Direct obligations of any state of the United States of
America or any subdivision or agency thereof whose short-term unsecured
general obligation debt has ratings from S&P of at least A-1 and
Moody's of at least P-1 or any obligation that has ratings from S&P and
Moody's at least equivalent to A-1 and P-1, respectively, and which is
fully and unconditionally guaranteed by any state, subdivision or
agency whose short term, unsecured general obligation debt has ratings
from S&P and Moody's at least equivalent to A-1 and P-1, respectively;
(d) Commercial paper maturing in not more than three hundred
sixty-five (365) days and having ratings from S&P and Moody's of A-1
and P-1, respectively;
(e) Deposits, federal funds or bankers acceptances (maturing
in not more than three hundred sixty-five (365) days) of any domestic
bank (including a branch office of a foreign bank which branch office
is located in the United States, provided that the NFC Collateral Agent
shall have received a legal opinion or opinions to the effect that full
timely payment of such deposit or similar obligation is enforceable
against the principal office or any branch of such bank), which:
<PAGE> 24
21
(i) has an unsecured, uninsured and unguaranteed
obligation which has ratings from S&P and Moody's of A-1 and
P-1, respectively, or
(ii) is the lead bank of a parent bank holding company
with an uninsured, unsecured and unguaranteed obligation
meeting the rating requirements in (i) above;
(f) Deposits of any bank or savings and loan association which
has combined capital, surplus and undivided profits of not less than
$100 million, provided such deposits are fully insured by the Federal
Deposit Insurance Corporation, the Banking Insurance Fund or the
Savings Association Insurance Fund;
(g) Investments in a money-market fund which may be a 12b-1
fund as registered under the Investment Company Act and is rated at
least AAm or AAm-G by S&P and Aa by Moody's;
(h) Repurchase agreements with a term of six (6) months or
less with any institution having short-term, unsecured debt rated at
least A-1 by S&P and P-1 by Moody's;
(i) Repurchase agreements collateralized by Government
Obligations or Agency Obligations (the "Collateral Securities") with
any registered broker-dealer which is under the jurisdiction of the
Securities Investors Protection Corp. or any commercial bank, if such
broker-dealer or bank has uninsured, unsecured and unguaranteed debt
rated at least A-1 by S&P and P-1 by Moody's, provided that:
(A) a master repurchase agreement or other specific
written repurchase agreement governs the transaction;
(B) the Collateral Securities are held free and clear of
any other Lien by the NFC Collateral Agent or an
independent third party acting solely as agent for the NFC
Collateral Agent, provided that any such third party (A) is
(1) a Federal Reserve bank, (2) a bank which is a member of
the Federal Deposit Insurance Corporation and which has
combined capital, surplus and undivided profits of not less
that $25 million, or (3) a bank approved in writing for such
purpose by the Required Liquidity Providers, and (B) certifies
in writing to the NFC Collateral Agent (or delivers to the NFC
Collateral Agent a written opinion of counsel to such third
party) that such third party holds the Collateral Securities
free and clear of any Lien, as agent for the NFC Collateral
Agent;
<PAGE> 25
22
(C) a perfected first security interest
under the Uniform Commercial Code is created in, or book entry
procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R.
350.0 et seq. (or any successor regulations) are followed with
respect to, the Collateral Securities for the benefit of the
NFC Collateral Agent;
(D) such repurchase agreement has a term of
thirty (30) days or less, or the NFC Collateral Agent will
value the Collateral Securities no less frequently than
monthly and will liquidate the Collateral Securities if any
deficiency in the required collateral percentage is not
restored within two (2) business days of such valuation;
(E) such repurchase agreement matures (or
permits the NFC Collateral Agent to withdraw all or any
portion of the invested funds) at least ten (10) days (or
other appropriate liquidation period) prior to each Payment
Date;
(F) the fair market value of the Collateral
Securities in relation to the amount of the repurchase
obligation, including principal and interest, is equal to at
least one hundred and three percent (103%); and
(G) the NFC Collateral Agent obtains an
opinion of counsel to such broker-dealer or bank to the effect
that such repurchase agreement is a legal, valid, binding and
enforceable agreement of such broker-dealer or bank (and, in
the case of a bank which is a branch of a foreign bank, of
such foreign bank) in accordance with its terms; and
(j) Other investment instruments approved in
writing by the Majority Banks and offered by financial
institutions that have a combined capital and surplus and undivided
profits of not less than $250,000,000 and with respect to which the
NFC Collateral Agent shall have received written confirmation of the
Rating Agencies that inclusion of any such investment instrument as an
Eligible Investment will not result in the downgrading or withdrawal
of the then current ratings of the Commercial Paper Notes by the
Rating Agencies.
"Eligible Liquidity Lender" means (a) a commercial bank having
total assets in excess of $500,000,000, (b) a finance company, insurance company
or other financial institution that in the ordinary course of business enters
into transactions of a type similar to that entered into by the Liquidity
Lenders under the Liquidity Agreement and has total assets in excess of
$200,000,000, and whose becoming an assignee would not constitute a prohibited
transaction under Section 4975 of ERISA and (c) any other financial institution
satisfactory to NFC, the B Support Credit Enhancer and the Liquidity Agent, in
each case
<PAGE> 26
23
having a short-term rating or an equivalent long-term debt rating from S&P and
Moody's at least equal to the then current rating of the Commercial Paper Notes,
but in any event not less than a rating of A-2 by S&P and P-2 by Moody's;
provided, however, that any Person who does not have either a short-term rating
from S&P or Moody's shall be deemed to have the required rating set forth above
if such Rating Agency confirms in writing that such Person, if its short-term
debt obligations were rated, would be assigned such required rating.
"Eligible Manufacturer" means any Manufacturer (including GM
and Chrysler) that (i) maintains an Eligible Repurchase Program and (ii) has
been approved by the Required Liquidity Providers (other than in the case of GM
and Chrysler); provided that upon the occurrence of a Manufacturer Ineligibility
Event with respect to such Manufacturer, such Manufacturer shall no longer
qualify as an Eligible Manufacturer.
"Eligible Repurchase Program" means, at any time, a Repurchase
Program that is in full force and effect with an Eligible Manufacturer (a)
pursuant to which the Repurchase Price is at least equal to (i) with respect to
GM's Matrix Repurchase Program, a specified percentage of the Capitalized Cost
of each Vehicle, such percentage being determined for each Vehicle based upon
the model year of such Vehicle and the calendar month in which such Vehicle is
returned to GM, minus (A) Excess Mileage Charges, (B) Excess Damage Charges and
(C) Missing Equipment Charges, or (ii) with respect to any other Manufacturer or
any other Repurchase Program of GM, the Capitalized Cost of each Vehicle, minus
(A) all Depreciation Charges accrued with respect to such Vehicle prior to the
date that the Vehicle is submitted for repurchase, (B) Excess Mileage Charges,
(C) Excess Damage Charges and (D) Missing Equipment Charges, (b) that cannot be
amended or terminated with respect to any Vehicle after the purchase of that
Vehicle, and (c) under which, with respect to Acquired Vehicles, NFLP is an
Authorized Fleet Purchaser or, with respect to Financed Vehicles, National is an
Authorized Fleet Purchaser and, in each case, the assignment of the benefits of
which to the Master Collateral Agent for the benefit of the Trustee (on behalf
of the Series 1996-2 Noteholder) and the NFC Collateral Agent (on behalf of the
NFC Secured Parties) has been acknowledged in writing by the related
Manufacturer, and NFLP, the Master Collateral Agent, the Trustee and the NFC
Collateral Agent have been provided with an opinion of counsel reasonably
satisfactory to them that NFLP (and the Master Collateral Agent on behalf of
NFLP, the Trustee and the NFC Collateral Agent) can enforce the applicable
Manufacturer's obligations thereunder; provided that (a) with respect to any new
Repurchase Program (including a new model year Repurchase Program of an Eligible
Manufacturer and a Repurchase Program of a new Manufacturer) that is proposed
for consideration after the date hereof as an Eligible Repurchase Program, prior
to such new Repurchase Program constituting an "Eligible Repurchase Program"
hereunder, the Rating Agencies have been given 30 days notice (or such shorter
period of time as shall be acceptable to the Rating Agencies) of a draft of such
new Repurchase Program as it then exists at the time of such notice (and shall
be provided a final copy of such Repurchase Program promptly upon its being
available) and shall have consented to the inclusion of such
<PAGE> 27
24
new Repurchase Program as an "Eligible Repurchase Program" hereunder and (b)
with respect to any change (other than as specified in proviso clause (a)) in
the terms of any existing Eligible Repurchase Program, prior to such Repurchase
Program constituting an "Eligible Repurchase Program" hereunder, the Rating
Agencies shall have been notified of such change and shall have approved such
change; provided further that in either case described in proviso clause (a) or
(b), (1) if and to the extent required by the Ratings Agencies in order for NFC
to preserve the then current credit ratings from S&P and Moody's, and, in any
event, a rating of not less than A-2 by S&P and P-2 by Moody's, in respect of
its Commercial Paper Notes, NFC shall have caused the face amount of the Series
1996-2 Fronting Letters of Credit (or other then existing credit enhancement) to
have been increased or (2) if such new Repurchase Program or such change in the
terms of an existing Repurchase Program would have a material adverse effect on
the interests of the Secured Parties or the NFC Secured Parties, prior to any
such Repurchase Program constituting an "Eligible Repurchase Program", NFLP
shall have obtained the written consent of the NFC Collateral Agent thereto.
"Eligible Vehicle" means an automobile or light truck (other
than a light truck manufactured by Chrysler and that is subject to a 9 month or
longer minimum hold period under the Guaranteed Depreciation Program with
Chrysler) (i) that at the time of purchase or financing by NFLP is eligible for
repurchase under an Eligible Repurchase Program, (ii) that is owned by National
or NFLP free and clear of all Liens other than Permitted Liens, (iii) with
respect to which the Master Collateral Agent is noted as the first lienholder on
the Certificate of Title therefor, or the Certificate of Title has been
submitted to the appropriate state authorities for such notation, and (iv) that
is a Related Vehicle with the Trustee (for the benefit of the Series 1996-2
Noteholder) and the NFC Collateral Agent (for the benefit of the NFC Secured
Parties), respectively, designated as the Beneficiaries pursuant to the Master
Collateral Agency Agreement.
"Environmental Laws" shall mean all federal, state and local
laws, statutes, regulations, rules and ordinances and those orders, judgments
and decrees which specifically apply to National's operations or facilities
concerning pollution or protection of human health or the environment.
"Event of Default" is defined in Section 5.1 of the B Support
Letter of Credit Reimbursement Agreement.
"Excess Collections" is defined in Section 4.3(c) of this
Supplement.
"Excluded Payments" means the following amounts payable to
National or NFLP pursuant to the Repurchase Programs: (i) all incentive payments
payable to National or NFLP to purchase vehicles under the Repurchase Programs,
(ii) all amounts payable to National or NFLP as compensation for the preparation
by National or NFLP of newly
<PAGE> 28
25
delivered Vehicles under the Repurchase Programs, (iii) all amounts payable to
National or NFLP in reimbursement for warranty work performed by National or
NFLP on the Vehicles under the Repurchase Programs and (iv) all amounts payable
to National under Section 6.11 of the Asset Purchase Agreement.
"Federal Funds Rate" means, with respect to any day, an
interest rate per annum equal to
(a) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York or,
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day for such
transactions received by the Liquidity Agent from three federal funds
brokers of recognized standing selected by it.
"Fee Letter" means the fee letter, dated as of June 8, 1995,
from the NFC Collateral Agent, addressed to, and acknowledged and agreed to by,
NFC, as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"Financed Vehicle" means an Eligible Vehicle that is (a) a
Refinanced Vehicle or (b) a National Vehicle.
"GM Event of Default" means an Event of Default as defined in
the A Support Letter of Credit Agreement.
"GM Letter of Credit Commitment" is defined in Section 2.1 of
GM's A Support Reimbursement Agreement.
"GM Letter of Credit Expiration Date" is defined in Section
2.1 of GM's A Support Reimbursement Agreement.
"GM LOC Reduction Amount" means, as of any date, the lesser
of an A Support Reduction Amount or the A Letter of Credit Amount.
"GM's Matrix Repurchase Program" means the General Motors
Corporation Passenger Car and Light Duty Truck 100% Repurchase Program for Daily
Rental Operators - Program No. 97-02, and any substantially similar Repurchase
Program for any other model years, and pursuant to which the repurchase price
for any Vehicle is calculated
<PAGE> 29
26
based upon a specified percentage of the Capitalized Cost of such Vehicle as
set forth in such Program.
"GM Note" means the Promissory Note in the original principal
amount of $47,000,000 issued on June 1, 1995 by NCR Acquisition Corp. in favor
of GM.
"Government Obligations" means direct obligations of, or
obligations the timely payment of principal of and interest on which is fully
and unconditionally guaranteed by, the United States of America and U.S.
Treasury REFCORPS.
"Guaranteed Depreciation Program" means a guaranteed
depreciation program pursuant to which a Manufacturer has agreed with National
or NFLP to (a) cause Vehicles manufactured by it or one of its Affiliates that
are turned back during the specified Repurchase Period to be sold by an auction
dealer, (b) cause the proceeds of any such sale to be paid to National or NFLP,
as applicable, by such auction dealer within seven days of such sale and (c) pay
to National or NFLP, as applicable, the excess, if any, of the guaranteed
payment amount with respect to any such Vehicle calculated as of the Turnback
Date in accordance with the provisions of such guaranteed depreciation program
over the amount paid to National or NFLP, as applicable, by an auction dealer
pursuant to clause (b) above.
"Guaranteed Repurchase Program" means a program pursuant to
which a Manufacturer has agreed with National or NFLP to repurchase Vehicles
manufactured by it or one of its Affiliates during the specified Repurchase
Period.
"Hazardous Substance" means any waste, pollutant, contaminant,
hazardous or toxic material, substance or waste, chemical, petroleum,
petroleum-based or petroleum-derived substance or waste, or asbestos-containing
material with respect to which liability or standards of conduct are imposed, or
which are regulated, pursuant to any Environmental Laws.
"Holder" (a) with respect to any Commercial Paper Note, means
the holder from time to time of such Commercial Paper Note, and (b) with respect
to any Note, has the meaning set forth in Schedule 1 to the Base Indenture.
"Increases" is defined in Section 3.1(a) of this Supplement.
"Incumbency Certificate" is defined in Section 2 of the
Depositary Agreement.
"Indemnified Liabilities" is defined for purposes of the
Liquidity Agreement in Section 11.4 thereof.
"Indemnified Parties" is defined in Section 11.4 of the
Liquidity Agreement.
<PAGE> 30
27
"Independent Director" means a director who is not, and never
was, (a) a stockholder, director, officer, employee, affiliate, associate,
customer or supplier of, or any Person that has received any benefit (excluding,
however, any compensation received by the directors, in such Person's capacity
as such director) in any form whatsoever from, or any Person that has provided
any service (excluding, however, any service provided by such director, in such
Person's capacity as such director) in any form whatsoever to, Old National or
National or any of their Affiliates or associates, or (b) any Person owning
beneficially, directly or indirectly, any outstanding shares of common stock of
Old National or National or any of their Affiliates, or a stockholder, director,
officer, employee, affiliate, associate, customer or supplier of, or any Person
that has received any benefit (excluding, however, any compensation received by
such director, in such Person's capacity as such director) in any form
whatsoever from, or any Person that has provided any service (excluding,
however, any service provided by such director, in such Person's capacity as
such director) in any form whatsoever to, such beneficial owner or any of such
beneficial owner's Affiliates or associates, provided that the ownership of up
to 5% of any class of stock (other than stock of NFC) listed on a national
securities exchange shall not prevent an individual from meeting the foregoing
requirements.
"Initial Aggregate Liquidity Commitment" means the amount of
the Aggregate Liquidity Commitment as of the Series 1996-2 Closing Date.
"Instruction to Transfer" means a notice in the form of (i)
Annex D to the A Letter of Credit, (ii) Annex D to the B Letter of Credit or
(iii) Annex D to the B Support Letter of Credit, as the case may be.
"Intercreditor Agreement" means the Intercreditor and
Subordination Agreement, dated as of June 7, 1995, among National, certain
subordinated creditors listed on Schedule A thereto and certain senior creditors
listed on Schedule B thereto, as modified by the Joinder by Senior Debt Holder,
executed by The Bank of New York as trustee under the Base Indenture as of April
30, 1996, the Acceptance by Subordinated Debt Holder, executed by GM as of April
30, 1996, the Acceptance by Subordinated Debt Holder, executed by the B Support
Credit Enhancer as of May 24, 1996, and the Acceptance by Subordinated Debt
Holder, executed by The Bank of New York as of May 29, 1996, and as amended by
the Supplement and Amendment to Intercreditor and Subordination Agreement, dated
as of December 20, 1996, and as further amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Interest Period" means (a), with respect to any LIBOR
Advance, a one-week (only in the case of Swing Line Advances), or a one-, two-,
three- or six-month period commencing on the date of such LIBOR Advance, as
selected by NFC in its Borrowing Request or its written election under Section
2.4 of the applicable A Support Reimbursement Agreement or Section 2.11 of the B
Support Letter of Credit Reimbursement Agreement, as
<PAGE> 31
28
applicable; and (b), with respect to any Base Rate Advance, a period commencing
on the date of such Base Rate Advance and ending on a Business Day no later than
180 days after such date, as selected by NFC in its Borrowing Request or its
written election under Section 2.4 of the applicable A Support Reimbursement
Agreement or Section 2.11 of the B Support Letter of Credit Reimbursement
Agreement, as applicable; provided, however, that if any such period would
otherwise end on a day which is not a Business Day, the Interest Period shall
instead end on the next succeeding Business Day; and provided, further, that in
the case of the Interest Period for a LIBOR Advance, if such extension would
cause the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on the next
preceding Business Day.
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business);
(b) any Contingent Obligation of such Person; and
(c) any ownership or similar interest held by such Person in
any other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"Issuer" means NFC, in its capacity as the issuer under the
Depositary Agreement.
"L.A. Agents" means those officers, employees and agents of
the Liquidity Agent whose signatures and incumbency shall have been certified to
the NFC Collateral Agent pursuant to clause (d) of Section 3.01 of the NFC
Collateral Agreement or in such other certificates as may be delivered by the
Liquidity Agent to the NFC Collateral Agent from time to time as duly authorized
to act, and to give instructions and notices, on behalf of the Liquidity Agent,
under the NFC Collateral Agreement.
"Letter" is defined in Section 6(a) of the Depositary
Agreement.
"Liabilities" means all obligations to the Lessor of the
Lessee arising under or in connection with the Lease, in each case howsoever
created, arising or evidenced, whether
<PAGE> 32
29
direct or indirect, joint or several, absolute or contingent, or now or
hereafter existing, or due or to become due including, without limitation,
interest accruing after the filing of a bankruptcy petition whether or not
allowed as a claim.
"LIBOR" means, relative to any Interest Period for any LIBOR
Advance: (i) the rate for deposits in Dollars for a period equal to such
Interest Period which appears on Telerate Page 3750 as of 11:00 a.m., London
time, on the day that is two Business Days preceding the first day of such
Interest Period, or (ii) if such rate does not appear on Telerate Page 3750, the
rate of interest equal to the average (rounded upwards, if necessary, to the
nearest 1/16 of 1%) of the rates per annum at which Dollar deposits are offered
by each Reference Lender's LIBOR Office in the London interbank market to prime
banks as at or about 11:00 a.m., London time, on a day that is two Business Days
preceding the first day of such Interest Period for delivery on such first day
and for a period equal to such Interest Period. If either Reference Lender fails
to provide its offered quotation to the Liquidity Agent, LIBOR shall be
determined on the basis of the offered quotation by the other Reference Lender.
"LIBOR Advance" means a Liquidity Advance under the Liquidity
Agreement or a Support Disbursement bearing interest, at all times during the
Interest Period applicable thereto, at a fixed rate of interest determined by
reference to LIBOR.
"LIBOR Office" means, relative to any Reference Lender,
Liquidity Lender, the NFC Collateral Agent or B Support Credit Enhancer, as the
case may be, the office of such Reference Lender, Liquidity Lender, the NFC
Collateral Agent or B Support Credit Enhancer, as the case may be, designated as
such below its signature to the Liquidity Agreement or the B Support Letter of
Credit Reimbursement Agreement, respectively, or such other office of such
Reference Lender, Liquidity Lender, the NFC Collateral Agent or B Support Credit
Enhancer, as the case may be, as designated from time to time by notice from
such Reference Lender, Liquidity Lender, the NFC Collateral Agent or B Support
Credit Enhancer, as the case may be, to NFC and the Liquidity Agent, whether or
not outside the United States, which shall be making or maintaining LIBOR
Advances of such Reference Lender, Liquidity Lender or B Support Credit
Enhancer, as the case may be, under the Liquidity Agreement or the B Support
Letter of Credit, respectively.
"LIBOR Reserve Percentage" means, relative to any Interest
Period for LIBOR Advances of any Liquidity Lender, the reserve percentage
(expressed as a decimal) equal to the aggregate reserve requirements of such
Liquidity Lender (including all basic, emergency, supplemental, marginal and
other reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements) specified under regulations issued
from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as then
currently defined in
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30
Regulation D of the F.R.S. Board, having a term approximately equal or
comparable to such Interest Period.
"Limited Amortization Event" is defined in Section 9.3 of the
Liquidity Agreement.
"Liquidation Event of Default" means (a) any event or
condition with respect to National or NFC of the type described in Section 9.1.7
of the Liquidity Agreement or (b) any event or condition of the type specified
in Section 9.1.8 or Section 9.1.9 of the Liquidity Agreement or (c) any
Liquidation Event of Default under and as defined in the Base Indenture.
"Liquidity Advance" means any Revolving Advance, any Refunding
Advance, any Commitment Termination Date Liquidity Advance or any Swing Line
Advance, or any combination thereof, as the context may require.
"Liquidity Advance Notes" means, with respect to any Liquidity
Lender, the Revolving Note and the Refunding Note issued to such Liquidity
Lender by NFC.
"Liquidity Agent" means Citibank, as agent for the Liquidity
Lenders, or such other Person as shall have subsequently been appointed as the
successor Liquidity Agent pursuant to Section 10.4 of the Liquidity Agreement.
"Liquidity Agent Incumbency Certificate" is defined in Section
3.01(d) of the NFC Collateral Agreement.
"Liquidity Agreement" means the Liquidity Agreement, dated as
of June 7, 1995, among NFC, the Liquidity Lenders and the Liquidity Agent, as
modified by the Consent and Amendment to Liquidity Agreement, dated as of
December 15, 1995, the Consent of Liquidity Lenders (to change the Liquidity
Commitments reflected in the respective Revolving Notes, and Refunding Notes,
dated as of May 29, 1996), and the Extension of Scheduled Liquidity Commitment
Termination Date, dated as of May 29, 1996, the Amendment to Liquidity
Agreement, dated as of May 29, 1996, and the Second Amendment to Liquidity
Agreement, dated as of December 20, 1996, and as such Agreement may be further
amended, supplemented, restated or otherwise modified from time to time in
accordance with the terms thereof.
"Liquidity Commitment" means, as to any Liquidity Lender, the
amount set forth on the signature pages of the Liquidity Agreement for such
Liquidity Lender as its Liquidity Commitment or set forth in its Liquidity
Lender Assignment Agreement, as such amount may be increased or decreased from
time to time pursuant to Section 3.3, 3.4, 5.9 or 11.11.1 of the Liquidity
Agreement.
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31
"Liquidity Commitment Agreement" means a Liquidity Commitment
Agreement substantially in the form of Exhibit M to the Liquidity Agreement.
"Liquidity Commitment Termination Date" means the earlier to
occur of
(a) the date on which the Aggregate Liquidity Commitment has
been terminated in full or reduced to zero pursuant to Section
3.3 or 9.2 of the Liquidity Agreement; and
(b) the Scheduled Liquidity Commitment Termination Date.
"Liquidity Demand" means a demand for an LOC Liquidity
Disbursement under a Series 1996-2 Fronting Letter of Credit pursuant to a
Certificate of Liquidity Demand.
"Liquidity Documents" means the Liquidity Agreement, the
Liquidity Advance Notes, any Borrowing Request, any Continuation/Conversion
Notice, any Liquidity Commitment Agreement, any Liquidity Lender Assignment
Agreement, the Series 1996-2 Closing Date Certificate, and each other agreement,
instrument, certificate or other document
delivered in connection therewith.
"Liquidity Lender Account" means the account established
pursuant to Section 5.01 of the NFC Collateral Agreement.
"Liquidity Lender Assignment Agreement" means a Liquidity
Lender Assignment Agreement substantially in the form of Exhibit F to the
Liquidity Agreement.
"Liquidity Lenders" is defined in the preamble of the
Liquidity Agreement, and, unless otherwise indicated, shall include any
Liquidity Lender acting in the capacity of Swing Line Lender.
"Liquidity Participant" is defined in Section 11.11.2 of the
Liquidity Agreement.
"Loan Agreement" means the Loan Agreement, dated as of June 7,
1995, between National, as the borrower thereunder, and NFC, as the lender
thereunder, as amended, supplemented or otherwise modified from time to time to
and in effect on the date hereof.
"LOC Credit Disbursements" means collectively, the A LOC
Credit Disbursements and the B LOC Credit Disbursements.
<PAGE> 35
32
"LOC Liquidity Disbursements" means collectively, the A LOC
Liquidity Disbursements and the B LOC Liquidity Disbursements.
"LOC Termination Disbursements" means collectively, the A LOC
Termination Disbursements and the B LOC Termination Disbursements.
"Majority Banks" means, at any time, Liquidity Lenders
holding, in the aggregate, Liquidity Commitments equaling or exceeding 66-2/3%
of the Aggregate Liquidity Commitment; provided, however, that any Liquidity
Lender that has defaulted in making a Liquidity Advance, shall (if such default
is then continuing) be considered to have a Liquidity Commitment equal to its
unreimbursed Liquidity Advances; provided further that the Liquidity Commitment
of any Liquidity Lender whose Liquidity Commitment has been drawn, terminated
and not repaid shall equal the unpaid or unreimbursed balance of its Liquidity
Advances.
"Mandatorily Redeemable Obligations" means, as applied to a
Person, an obligation of such Person to the extent that it is redeemable,
payable or required to be purchased or otherwise retired or extinguished (a) at
a fixed or determinable date, whether by operation of a sinking fund or
otherwise, (b) at the option of any Person other than such Person or (c) upon
the occurrence of a condition not solely within the control of such Person, such
as a redemption required to be made out of future earnings.
"Manufacturer Default" means, with respect to (a) (i) a
Manufacturer whose Repurchase Program is a Guaranteed Depreciation Program, the
failure by such Manufacturer or any related auction dealers to pay any amount
due under such Manufacturer's Repurchase Program with respect to a Vehicle
turned in to such Manufacturer and such failure continues for more than 90 days
after such amount shall have been due and payable and (ii) any other
Manufacturer, the failure by such Manufacturer to pay any amount due under its
Repurchase Program with respect to a Vehicle turned in to such Manufacturer and
such failure continues for more than 90 days following the Turnback Date for
such Vehicle (in either case, a "Past Due Amount") and the aggregate Past Due
Amounts relating to such Manufacturer are in excess of $25 million under its
Repurchase Program in respect of Vehicles that are subject to the Lease, in each
case net of Past Due Amounts, aggregating no more than $50 million, that are the
subject of a good faith dispute as evidenced by a writing by National or NFLP,
as applicable, or the Manufacturer questioning the accuracy of amounts paid or
payable in respect of certain Vehicles tendered for repurchase under a
Repurchase Program (as distinguished from any dispute relating to the
repudiation by such Manufacturer generally of its obligations under such
Repurchase Program or the assertion by such Manufacturer of the invalidity or
unenforceability as against it of such Repurchase Program) or (b) the occurrence
of an Event of Bankruptcy with respect to such Manufacturer.
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"Manufacturer Ineligibility Event" shall mean (i) an event
with respect to a Manufacturer as set forth in Section 9.3.1(b) of the Liquidity
Agreement, or (ii) the Manufacturer shall be the subject of an Event of
Bankruptcy.
"Master Note" means the form of Commercial Paper Note attached
to the Depositary Agreement as Exhibit E thereto.
"Material Adverse Effect" means, with respect to any
occurrence, event or condition:
(i) a materially adverse effect on the financial condition,
business, assets, operations or business prospects of National and its
Consolidated Subsidiaries taken as a whole, other than a materially
adverse effect on the business prospects of National and its
Consolidated Subsidiaries taken as a whole that have similarly affected
National's major competitors;
(ii) a materially adverse effect on the ability of (a)
National to perform its material obligations under any of the Related
Documents or (b) NFLP to perform its material obligations under any of
the Related Documents or (c) NFC to perform its material obligations
under any of the Related Documents; or
(iii) an adverse effect on (a) the enforceability of the Lease
or (b) on the priority or perfection of the Trustee's, the NFC
Collateral Agent's or the Master Collateral Agent's Lien on a material
portion of the Collateral or Assigned Collateral.
"Missing Equipment Charges" means, with respect to any
Vehicle, the amount charged to National or NFLP, or deducted from the Repurchase
Price, by the Manufacturer of such Vehicle due to missing equipment at the time
such Vehicle is turned in to such Manufacturer or its agent for repurchase
pursuant to the applicable Repurchase Program.
"Monthly Total Principal Allocation" means the sum of all
Series 1996-2 Principal Allocations with respect to a Related Month.
"Moody's" means Moody's Investors Service, Inc., or any
successor thereto.
"National Agents" means those officers, employees and agents
of National whose signatures and incumbency shall have been certified to the
Master Collateral Agent pursuant to clause (e) of Section 3.5 of the Master
Collateral Agency Agreement or in such other certificates as may be delivered by
National to the Master Collateral Agent from time to time as duly authorized to
act, and to give instructions and notices, on behalf of National, under the
Master Collateral Agency Agreement.
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34
"National Equity" means the $30 million of equity financing
committed to National by its principal stockholders on or prior to June 7, 1995.
"National Event of Default Reimbursement Share", in the case
of GM's A Support Reimbursement Agreement, is defined in Section 2.3(d) thereof.
"National Incumbency Certificate" is defined in Section 3.5 of
the Master Collateral Agency Agreement.
"National Liability" means any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), obligation or commitment of National and its Subsidiaries,
including any liability for taxes.
"National Reimbursement Share" (a) with respect to GM's A
Support Reimbursement Agreement, means, collectively, the National Event of
Default Reimbursement Share and the National Termination Reimbursement Share,
and (b) with respect to a Reduction Support Credit Enhancer's A Support
Reimbursement Agreement and the B Support Letter of Credit Reimbursement
Agreement, is defined in Section 2.3(c) thereof.
"National Termination Reimbursement Share", in the case of
GM's A Support Reimbursement Agreement, is defined in Section 2.3 thereof.
"National Vehicle" means an Eligible Vehicle acquired by
National on or after the Lease Commencement Date.
"NFC" means National Fleet Funding Corporation, a Delaware
corporation.
"NFC Agents" means those officers, employees and agents of NFC
whose signatures and incumbency shall have been certified to the NFC Collateral
Agent pursuant to clause (a) of Section 3.01 of the NFC Collateral Agreement or
in such other certificates as may be delivered by NFC to the NFC Collateral
Agent from time to time as duly authorized to act, and to give instructions and
notices, on behalf of NFC, under the NFC Collateral Agreement.
"NFC Agreements" means the Series 1996-2 Note, the Series
1996-2 Supplement, the Base Indenture, the Assignment Agreements, the Liquidity
Agreement, the A Support Letter of Credit Agreements, the A Support
Reimbursement Agreement, the B Letter of Credit Reimbursement Agreement, the B
Support Letter of Credit Reimbursement Agreement and any other Related Document
to which NFC is a party.
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35
"NFC Collateral Account" means the "Collateral Account" as
defined in Section 5.01 of the NFC Collateral Agreement.
"NFC Collateral Agent" means Credit Suisse, in its capacity as
collateral agent under the NFC Collateral Agreement, and any successor thereto.
"NFC Collateral Agreement" means the Collateral Agreement,
dated as of June 7, 1995, among NFC, the NFC Collateral Agent, the Liquidity
Agent, the Depositary, the Placement Agents, the Dealers, the A Support Credit
Enhancers and the B Support Credit Enhancer, as modified by the A Support
Intercreditor Agreement, and as amended by the Supplement and Amendment to
Collateral Agreement, dated as of December 20, 1996, and as such agreement may
be further amended, supplemented, restated or otherwise modified from time to
time in accordance with the terms thereof and of the Liquidity Agreement.
"NFC Collateral Sharing Agreement" means the Amended and
Restated Collateral Sharing Agreement, dated as of December 20, 1996, among the
NFC Collateral Agent, National, NFLP, NFC and the Series 1996-2 Support Credit
Enhancers, as such agreement may be amended, supplemented, restated or otherwise
modified from time to time in accordance with the terms thereof.
"NFC Collection Account" is defined in Section 4.1(a) of this
Supplement.
"NFC Event of Default Reimbursement Share", in the case of
GM's A Support Reimbursement Agreement, is defined in Section 2.3 thereof.
"NFC Incumbency Certificate" is defined in Section 3.01 of the
NFC Collateral Agreement.
"NFC Obligations" is defined in Section 2.01 of the NFC
Collateral Agreement.
"NFC Reimbursement Share" (a) with respect to GM's A Support
Reimbursement Agreement, means, collectively, the NFC Event of Default
Reimbursement Share and the NFC Termination Reimbursement Share, and (b) with
respect to a Reduction Support Credit Enhancer's A Support Reimbursement
Agreement and the B Support Letter of Credit Reimbursement Agreement, is defined
in Section 2.3(c) thereof.
"NFC Secured Parties" means the "Secured Parties" as defined
in Section 4.01 of the NFC Collateral Agreement.
"NFC Termination Reimbursement Share", in the case of GM's A
Support Reimbursement Agreement, is defined in Section 2.3 thereof.
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"Notice of Conversion" means, as applicable, a notice
substantially in the form of (i) Exhibit A to the A Support Reimbursement
Agreements, (ii) Exhibit C to the A Support Letter of Credit Agreement and (iii)
Exhibit B to the B Support Letter of Credit Reimbursement Agreement.
"Obligations" means all obligations (monetary or otherwise,
including fixed and contingent obligations) of NFC arising under or in
connection with the Liquidity Agreement, the Liquidity Advance Notes, each other
Liquidity Document, the A Support Reimbursement Agreements, the B Letter of
Credit Reimbursement Agreement and the B Support Letter of Credit Reimbursement
Agreement.
"Offering Memorandum" means the offering memorandum of NFC
used by NFC, the Placement Agents or the Dealers from time to time in connection
with the offering and sale of the Commercial Paper Notes, as the same may be
amended, supplemented or modified.
"Officer's Certificate" means a certificate signed by an
Authorized Officer of NFC or National or NFLP, as appropriate.
"Organic Document" means, with respect to any Person, its
certificate or articles of incorporation, its by-laws and all shareholder
agreements, voting trusts and similar arrangements applicable to any of its
authorized shares of capital stock.
"Outstanding" (a) with respect to Commercial Paper Notes,
means all Commercial Paper Notes issued at any time under the Depositary
Agreement, except (i) Commercial Paper Notes which have been paid through the
Depositary, (ii) matured Commercial Paper Notes which have not been presented
for payment but funds for the payment of which are on deposit in the Commercial
Paper Account established with respect thereto and are available for payment of
such Commercial Paper Notes or (iii) matured Commercial Paper Notes with respect
to which a Borrowing Request has been honored but funds for the payment of which
have not yet been deposited in the Commercial Paper Account; (b) with respect to
Liquidity Advances and Support Liquidity Disbursements, means all Liquidity
Advances or Support Liquidity Disbursements made or deemed made by the Agent or
the Liquidity Lenders or the Series 1996-2 Support Credit Enhancers, as the case
may be, pursuant to the Liquidity Agreement, the A Support Letter of Credit
Agreements or the Series 1996-2 Support Letters of Credit and not repaid by NFC,
except Liquidity Advances or Support Liquidity Disbursements to be repaid from
the proceeds of Commercial Paper Notes being issued on the date of such
repayment; and (c) with respect to any Note, has the meaning set forth in
Schedule 1 to the Base Indenture.
"Overall Percentage" means, relative to any Liquidity Lender
or Series 1996-2 Fronting Credit Enhancer, a fraction (expressed as a
percentage), the numerator of which is
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37
the Liquidity Commitment or the Credit Enhancer Commitment, respectively, of
such Person, and the denominator of which is the sum of the Aggregate Liquidity
Commitment and the Series 1996-2 Fronting Letter of Credit Amount.
"Percentage" means, relative to any Liquidity Lender, a
fraction (expressed as a percentage) obtained by dividing (i) the Liquidity
Commitment of such Liquidity Lender by (ii) the Aggregate Liquidity Commitment.
"Placement Agency Agreement" means the Placement Agency
Agreement, dated as of June 7, 1995, among the Placement Agents, National and
NFC, substantially in the form of Exhibit N to the Liquidity Agreement, as
amended, supplemented, restated or otherwise modified from time to time in
accordance with the terms thereof.
"Placement Agents" means any placement agent for Commercial
Paper Notes engaged by NFC from time to time and who becomes a party to the
Placement Agency Agreement, for so long as such Person is so engaged by NFC.
"Potential Amortization Event" means any occurrence or event
which, after notice or lapse of time or both, would constitute an Amortization
Event.
"Potential A Support Event of Default" means an event which,
with the giving of notice or lapse of time or both, would constitute an A
Support Event of Default under either A Support Reimbursement Agreement.
"Potential Event of Default" means an event which, with the
giving of notice or lapse of time or both would constitute an Event of Default
under the B Support Letter of Credit Reimbursement Agreement.
"Potential GM Event of Default" means an event which, with the
giving of notice or lapse of time or both would constitute a GM Event of Default
under the A Support Letter of Credit Agreement.
"Potential Manufacturer Default" means an event which, with
the giving of notice, the passage of time or both, would constitute a
Manufacturer Default.
"Potential Reduction A Support Event of Default" means an
event which, with the giving of notice or lapse of time or both, would
constitute a Reduction A Support Event of Default.
"Program Size" means, as of any date of determination, the
sum of (a) the Aggregate Liquidity Commitment on such date (or, if the Liquidity
Commitments of the Liquidity Lenders shall have been terminated pursuant to
Section 9.2 of the Liquidity
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38
Agreement, the Aggregate Liquidity Commitment in effect immediately prior to
such termination) plus (b) the stated amount of the Series 1996-2 Fronting
Letters of Credit.
"Rating Agencies" means, collectively, S&P, Moody's and any
other nationally recognized rating agency approved by the Liquidity Agent, the B
Support Credit Enhancer, National and the Required Liquidity Providers.
"Rating Downgrade" means, with respect to any Person, that the
rating assigned to such Person's short-term unsecured debt securities or
short-term deposits by any Rating Agency shall be lower than the rating then
assigned by such Rating Agency to the Commercial Paper Notes, or in any event, a
rating lower than A-2 by S&P or P-2 by Moody's.
"Reduction A Support Event of Default", with respect to any
Reduction A Support Reimbursement Agreement, shall have the meaning specified in
such Reduction A Support Reimbursement Agreement.
"Reduction A Support Letter of Credit" means the Irrevocable
Letter of Credit No. S00034356 issued on May 29, 1996 in favor of the A Credit
Enhancer for the account of National and NFC by The Bank of New York, as amended
by Amendment No. 1 to Reduction A Support Letter of Credit, dated December 20,
1996, and as the same may be further amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof, and any replacement
thereof.
"Reduction A Support Reimbursement Agreement" means (a) the
Reduction A Support Reimbursement Agreement, dated as of May 29, 1996, among
National, NFC and The Bank of New York, as amended by the Amendment to Reduction
A Support Reimbursement Agreement, dated as of December 20, 1996, and as such
agreement may be further amended, supplemented, restated or otherwise modified
from time to time in accordance with its terms, or (b) any agreement among any
other Reduction Support Credit Enhancer, National and NFC pursuant to which
National and NFC agree to reimburse such Reduction Support Credit Enhancer for
amounts paid by such Reduction Support Credit Enhancer pursuant to a Reduction
Support Agreement.
"Reduction Amount Credit Support", in the case of GM, is
defined in Section 2.1(c) of its A Support Reimbursement Agreement.
"Reduction Amount Letter of Credit Agreement", in the case of
GM, is defined in Section 2.1(c) of its A Support Reimbursement Agreement.
"Reduction Date", in the case of GM, is defined in Section
2.1(c) of its A Support Reimbursement Agreement.
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39
"Reduction Support Agreement" means the Reduction A Support
Letter of Credit or any other Reduction Amount Letter of Credit Agreement or
other agreement by a Reduction Support Credit Enhancer to provide Reduction
Amount Credit Support.
"Reduction Support Credit Enhancer" means The Bank of New York
or any other party that has entered into a Reduction Amount Letter of Credit
Agreement or otherwise agreed to provide Reduction Amount Credit Support.
"Reference Lenders" means Citibank and Credit Suisse.
"Refinanced Vehicle Collateral" means the Refinanced Vehicles
and all Assigned Collateral relating thereto.
"Refinanced Vehicles" means Eligible Vehicles owned by
National prior to the Series 1996-2 Closing Date which are subject to the Lien
of the NFC Collateral Agent and refinanced by NFLP under the Financing Lease.
"Refunding Advance" is defined in Section 3.1.2 of the
Liquidity Agreement.
"Refunding Note" means, with respect to any Liquidity Lender,
a promissory note issued to such Liquidity Lender by NFC, substantially in the
form of Exhibit B to the Liquidity Agreement, evidencing the Refunding Advances
by such Liquidity Lender to NFC, and all other promissory notes accepted from
time to time in substitution therefor or renewal thereof.
"Regulatory Change" means any Applicable Law, interpretation,
directive, request or guideline (whether or not having the force of law), or any
change therein or in the administration or enforcement hereof, that becomes
effective or is implemented or first required or expected to be complied with
after June 7, 1995, whether the same is (i) the result of an enactment by a
government or any agency or political subdivision thereof, a determination of a
court, regulatory authority or monetary authority, or any other action or (ii)
enacted, adopted, issued or proposed before or after June 7, 1995, including any
such that imposes, increases or modifies tax, reserve requirement, insurance
charge, special deposit requirement, assessment or capital adequacy requirement
but excluding any such that imposes, increases or modifies any income or
franchise tax imposed upon any Series 1996-2 Fronting Credit Enhancer or the B
Support Credit Enhancer by any jurisdiction (or any political subdivision
thereof) in which such Series 1996-2 Enhancement Provider or any branch or
office thereof which is providing credit or liquidity support to National or NFC
or NFLP, as the case may be, is located.
"Related Documents" means, collectively, the Series 1996-2
Note, the Series 1996-2 Supplement, the Base Indenture, the Liquidity Documents,
the Series 1996-2 Fronting
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40
Letters of Credit, the B Support Letter of Credit, the A Support Letter of
Credit Agreement, the A Support Reimbursement Agreements, the B Letter of Credit
Reimbursement Agreement, the B Support Letter of Credit Reimbursement Agreement,
the NFC Collateral Sharing Agreement, the NFC Collateral Agreement, the
Depositary Agreement, the Dealer Agreement, the Placement Agency Agreement, the
Assignment Agreements, the Intercreditor Agreement, and the Fee Letter, and any
other Related Documents under and as defined in the Base Indenture.
"Repurchase Period" means, with respect to any Vehicle, the
period during which such Vehicle may be turned in to the Manufacturer thereof
for repurchase pursuant to the applicable Repurchase Program.
"Repurchase Price", with respect to any Vehicle (i) subject to
a Guaranteed Repurchase Program, means the price paid or payable by the
Manufacturer thereof to repurchase such Vehicle pursuant to its Repurchase
Program and (ii) subject to a Guaranteed Depreciation Program, means the amount
which the Manufacturer thereof guarantees will be paid to National or NFLP as
the seller of such vehicle by such Manufacturer and/or the related auction
dealers upon the disposition of such Vehicle pursuant to its Repurchase Program.
"Repurchase Program" means any Guaranteed Repurchase Program
or Guaranteed Depreciation Program.
"Required Liquidity Providers" means, at any time, Liquidity
Lenders and the B Support Credit Enhancer holding, in the aggregate, Liquidity
Commitments and Credit Enhancer Commitments, respectively, such that the
aggregate amount of such commitments equals or exceeds 66-2/3% of the sum of the
Aggregate Liquidity Commitment and the aggregate Credit Enhancer Commitments
with respect to such B Support Credit Enhancer; provided, however, that any
Liquidity Lender or B Support Credit Enhancer that has defaulted in making a
Liquidity Advance or making a Support Disbursement (if at such time such default
is continuing), shall be considered to have a Liquidity Commitment or Credit
Enhancer Commitment equal to the unpaid or unreimbursed balance of its Liquidity
Advances or Support Disbursements, as applicable; and provided further that the
Liquidity Commitment or Credit Enhancer Commitment of any Liquidity Lender or
Series 1996-2 Credit Enhancer whose commitment has been drawn, terminated and
not repaid, shall equal the unpaid or unreimbursed balance of its Liquidity
Advances or Support Disbursements, as applicable.
"Revolving Advance" is defined in Section 3.1.1 of the
Liquidity Agreement.
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41
"Revolving Advance Commitment Termination Date" means the
earlier to occur of
(a) the Liquidity Commitment Termination Date; and
(b) the Amortization Commencement Date.
"Revolving Note" means, with respect to any Liquidity Lender,
a promissory note issued to such Liquidity Lender by NFC, substantially in the
form of Exhibit A to the Liquidity Agreement, evidencing the Revolving Advances
by such Liquidity Lender to NFC, and all other promissory notes accepted from
time to time in substitution therefor or renewal thereof.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw- Hill Companies, Inc., or any successor thereto.
"Scheduled Amortization Event" means any Amortization Event
set forth in Section 9.1.15 of the Liquidity Agreement.
"Scheduled A Letter of Credit Expiration Date" is defined in
the A Letter of Credit.
"Scheduled A Support Letter of Credit Expiration Date" means
(a) with respect to GM, the "GM Letter of Credit Expiration Date" as defined in
Section 2.1 of its A Support Reimbursement Agreement, or (b) with respect to a
Reduction Support Credit Enhancer, the "Scheduled Reduction A Support Letter of
Credit Expiration Date" as defined in Section 2.1 of its A Support Reimbursement
Agreement.
"Scheduled B Letter of Credit Expiration Date" is defined in
Section 2.1 of the B Letter of Credit Reimbursement Agreement.
"Scheduled Liquidity Commitment Termination Date" means, for
any Liquidity Lender, May 28, 1997, as such date may be extended from time to
time pursuant to Section 3.5 of the Liquidity Agreement.
"Scheduled Maturity Date" means
(i) with respect to any Liquidity Advances except any
Commitment Termination Date Liquidity Advance, the last day of the
relevant Interest Period therefor, but in any event not later than the
date that occurs eighteen (18) months after the applicable Scheduled
Liquidity Commitment Termination Date; provided, however, that after
the occurrence of an Amortization Event, the Scheduled Maturity
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Date shall mean the date eighteen (18) months after the Amortization
Commencement Date; and
(ii) with respect to Commitment Termination Date Liquidity
Advances, the date that occurs eighteen (18) months after the date on
which such Commitment Termination Date Liquidity Advance is made.
"Secured Party" is defined in Section 5.1(a) of this
Supplement.
"Series 1996-2 Account Surplus" means, as of any date of
determination subsequent to the establishment and funding of any NFC Cash
Collateral Account pursuant to Section 5.07 of the NFC Collateral Agreement, the
amount, if any, by which the Series 1996-2 Fronting Letter of Credit Amount
exceeds the Series 1996-2 Required Enhancement Amount.
"Series 1996-2 Accrued Interest Account" is defined in Section
4.1(c) of this Supplement.
"Series 1996-2 Advance" is defined in Section 3.1(a) of this
Supplement.
"Series 1996-2 Cash Collateral Accounts" means the Cash
Collateral Account A and Cash Collateral Account B.
"Series 1996-2 Closing Date" means December 20, 1996 or such
later date, if any, as shall be agreed to by NFLP, the Trustee, the NFC
Collateral Agent, the Liquidity Agent and the Series 1996-2 Support Credit
Enhancers.
"Series 1996-2 Closing Date Certificate" means a certificate,
substantially in the form of Exhibit Q to the Liquidity Agreement, duly
completed and executed by an Authorized Officer of NFC, addressed to the
Liquidity Lenders, the Liquidity Agent and the B Support Credit Enhancer.
"Series 1996-2 Collateral" means the Collateral.
"Series 1996-2 Collection Account" is defined in Section
4.1(c) of this Supplement.
"Series 1996-2 Deposit Date" is defined in Section 4.2 of this
Supplement.
"Series 1996-2 Distribution Account" is defined in Section
4.7(a) of this Supplement.
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"Series 1996-2 Distribution Account Collateral" is defined in
Section 5.1(a)(iii) of this Supplement.
"Series 1996-2 Enhancement" means the Series 1996-2 Fronting
Letters of Credit and the Series 1996-2 Cash Collateral Accounts.
"Series 1996-2 Enhancement Agreement" means an A Support
Reimbursement Agreement or the B Support Letter of Credit Reimbursement
Agreement.
"Series 1996-2 Enhancement Agreement Event of Default" means
an A Support Event of Default or a B Support Event of Default.
"Series 1996-2 Enhancement Deficiency" means, on any day, the
amount by which the Series 1996-2 Fronting Letter of Credit Amount available for
A LOC Credit Disbursements and B LOC Credit Disbursements plus the amount of
Support Liquidity Disbursements available for Conversion to Support Credit
Disbursements is less than the Series 1996-2 Required Enhancement Amount.
"Series 1996-2 Enhancement Percentage" means, as of any date
of determination, the percentage equivalent of a fraction, the numerator of
which is the Series 1996-2 Required Enhancement Amount as of such date and the
denominator of which is the Series 1996-2 Invested Amount as of such date.
"Series 1996-2 Enhancement Provider" means a Series 1996-2
Fronting Credit Enhancer or a Series 1996-2 Support Credit Enhancer.
"Series 1996-2 Fronting Credit Enhancers" means the A Credit
Enhancer and the B Credit Enhancer.
"Series 1996-2 Fronting Letter of Credit Amount" means an
amount equal to the sum of the A Letter of Credit Amount and the B Letter of
Credit Amount.
"Series 1996-2 Fronting Letters of Credit" means the A Letter
of Credit and the B Letter of Credit.
"Series 1996-2 Initial Invested Amount" means the initial
outstanding principal amount of the Series 1996-2 Note, which is $1,075,000,000.
"Series 1996-2 Interest Period" means a period from, with
respect to the initial Series 1996-2 Interest Period, the Series 1996-2 Closing
Date to and including the last day of the calendar month in which the Series
1996-2 Closing Date occurs, and each calendar month
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44
thereafter, provided, however, that the final Series 1996-2 Interest Period
shall end on the date all amounts due under the Series 1996-2 Note shall be paid
in full.
"Series 1996-2 Invested Amount" means, when used with respect
to any date, an amount equal to (a) the Series 1996-2 Initial Invested Amount
minus (b) the amount of principal payments made pursuant to Section 4.5 of this
Agreement to the Series 1996-2 Noteholder on or prior to such date plus (c) any
Increases pursuant to Section 3.1 minus (d) any Decreases pursuant to Section
3.2.
"Series 1996-2 Invested Percentage" means, on any date of
determination:
(a) if and so long as the Series 1996-2 Note is the only
Shared Collateral Series Note, 100%, and
(b) if and so long as the Series 1996-2 Note is not the
only Shared Collateral Series Note,
(i) when used with respect to Principal Collections
during the Series 1996-2 Revolving Period, the percentage
equivalent of a fraction the numerator of which shall be equal
to the Series 1996-2 Invested Amount for such day and the
denominator of which is the sum of the numerators used to
determine (1) Invested Percentages for allocations with
respect to Principal Collections (for all Shared Collateral
Series Notes and all classes of such Shared Collateral Series
Notes) and (2) available subordinated amount percentages for
allocations with respect to Principal Collections (for all
Shared Collateral Series Notes that provide for credit
enhancement in the form of overcollateralization) as of such
day;
(ii) when used with respect to Principal Collections
during the Series 1996-2 Rapid Amortization Period, the
percentage equivalent of a fraction the numerator of which
shall be the Series 1996-2 Invested Amount as of the end of
the Series 1996-2 Revolving Period and the denominator of
which is the sum of the numerators used to determine (1)
Invested Percentages for allocations with respect to Principal
Collections (for all Shared Collateral Series Notes and all
classes of such Shared Collateral Series Notes) and (2)
available subordinated amount percentages for allocations with
respect to Principal Collections (for all Shared Collateral
Series Notes that provide for credit enhancement in the form
of overcollateralization) as of such day; and
(iii) when used with respect to Interest Collections,
the percentage equivalent of a fraction the numerator of which
shall be the Accrued Amounts with respect to the Series 1996-2
Note on such date of determination, and the
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denominator of which is the aggregate Accrued Amounts with
respect to all Shared Collateral Series Notes on such date of
determination;
provided, that in the case of each of clauses (i), (ii) and (iii)
individually, the sum of the percentage equivalent set forth in such
clause for the Series 1996-2 Note, plus the percentage equivalent set
forth in the corresponding provision in each of the Supplements
relating to the other Shared Collateral Series Notes, shall not exceed
100%.
"Series 1996-2 Lease Payment Deficit" means, with respect to
any Distribution Date, an amount equal to the deficit, if any, of the aggregate
amount of Principal Collections and Interest Collections with respect to the
applicable Related Month which were actually allocated by the Trustee in respect
of the Series 1996-2 Note, and withdrawn and paid by the Trustee or the Paying
Agent, in each case pursuant to Article 4 of this Supplement and other than to
the extent payable to NFLP, National or any Affiliate (other than the Series
1996-2 Noteholder) thereof, in relation to the aggregate amount of Principal
Collections and Interest Collections that would have been so allocated and, if
applicable, withdrawn and paid with respect to the applicable Related Month in
respect of the Series 1996-2 Note, if all payments required to be made under the
Lease by the Lessee (and under Article 4 hereof with respect to such payments)
with respect to the applicable Related Month were paid in full (exclusive of any
amount payable by the Lessee pursuant to clause (ii)(a)(y) or (ii)(b)(2) of the
definition of the term "Monthly Supplemental Payment" contained in Section 6 of
Annex B to the Base Lease).
"Series 1996-2 Limited Liquidation Event of Default" means, so
long as such event or condition continues, any event or condition of the type
specified in Section 6(a) of this Supplement or Section 9.1.8 or 9.1.9 of the
Liquidity Agreement that continues for thirty (30) days or more (without double
counting any cure periods provided for in Section 6(a) of this Supplement or
Section 9.1.8 or 9.1.9 of the Liquidity Agreement); provided, however, that such
event or condition shall not constitute a Series 1996-2 Limited Liquidation
Event of Default if (i) within such thirty (30) day period, NFLP or National
shall have cured such Amortization Event and (ii) each Rating Agency shall have
notified NFLP, National, NFC and the Trustee in writing that after such cure of
such Amortization Event is provided for, the Commercial Paper Notes will receive
the same rating from the Rating Agencies as they received prior to the
occurrence of such Amortization Event.
"Series 1996-2 Maximum Invested Amount" means, as of any date,
the Program Size less the aggregate discount on Commercial Paper Notes
Outstanding on such date.
"Series 1996-2 Monthly Interest" means, for any Series 1996-2
Interest Period and the Distribution Date immediately following the last day
thereof, the aggregate of the
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46
amounts described in clauses (i) through (iv) of the definition of the term
"Series 1996-2 Note Rate" for such Series 1996-2 Interest Period.
"Series 1996-2 Monthly Interest Shortfall" means, as of any
Distribution Date, the excess, if any, of the Series 1996-2 Monthly Interest for
such Distribution Date (and the preceding Series 1996-2 Interest Period) and any
unpaid Deficiency Amounts (together with accrued interest on such unpaid
Deficiency Amounts) over the amount withdrawn from the Series 1996-2 Accrued
Interest Account and deposited in the Series 1996-2 Distribution Account on such
Distribution Date pursuant to Section 4.2(a) of this Supplement.
"Series 1996-2 Monthly Servicing Fee" means, on any
Distribution Date, an amount equal to the product of 1/12th of 0.50% of the
Series 1996-2 Invested Amount as of the first day of the Series 1996-2 Interest
Period preceding such Distribution Date; provided, however, that if a Series
1996-2 Rapid Amortization Period shall occur and be continuing and if National
is no longer the Servicer, the Series 1996-2 Monthly Servicing Fee shall equal
the greater of (a) the product of (i) a fraction, the numerator of which is the
Series 1996-2 Invested Amount as of the first day of the Series 1996-2 Interest
Period preceding such Distribution Date and the denominator of which is the
aggregate invested amounts for all outstanding Shared Collateral Series Notes as
of the first day of such Series 1996-2 Interest Period, (ii) $20 and (iii) the
number of Vehicles as of the first day of such Series 1996-2 Interest Period,
and (b) the amount described in the first clause of this definition.
"Series 1996-2 Monthly Supplemental Servicing Fee" means, on
any Distribution Date, the product of the Supplemental Servicing Fee accrued
during the preceding Series 1996-2 Interest Period times a fraction, the
numerator of which is the Series 1996-2 Invested Amount as of the last day of
such Series 1996-2 Interest Period and the denominator of which is the aggregate
invested amounts for all outstanding Shared Collateral Series Notes as of the
last day of such Series 1996-2 Interest Period.
"Series 1996-2 Note" means the Series 1996-2 Floating Rate
Rental Car Asset Backed Variable Funding Note, executed by NFLP and
authenticated and delivered by or on behalf of the Trustee, substantially in the
form of Exhibit A.
"Series 1996-2 Note Rate" means, for any Series 1996-2
Interest Period, that interest rate per annum which will result in the interest
on the average daily Series 1996-2 Invested Amount for such Series 1996-2
Interest Period being equal to the sum of (i) interest payable by NFC during
such Series 1996-2 Interest Period on the Outstanding Commercial Paper Notes
(based on the weighted-average commercial paper rate), Liquidity Advances,
Support Liquidity Disbursements and other Obligations (including, in each case,
any post- default interest with respect to such Obligations), plus (ii) the
portion of the quarterly fees payable by NFC for such Series 1996-2 Interest
Period pursuant to Section 4.5(a) of the Liquidity Agreement and the quarterly
fees payable by NFC under Section 2.5 of the B Letter of Credit Reimbursement
Agreement, Section 2.4 of the B Support Letter of Credit
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Reimbursement Agreement and Section 2.11 of the Reduction A Support
Reimbursement Agreement, plus (iii) the portion of all other operating expenses
of NFC (other than amounts payable by National pursuant to Section 15 of the
Lease) for such Series 1996-2 Interest Period, plus (iv) an amount equal to the
late charge payable by National during such Series 1996-2 Interest Period under
Section 5.4 of the Lease. The Series 1996-2 Note Rate shall be determined
pursuant to Section 4.3(a)(i).
"Series 1996-2 Noteholder" means the Person in whose name the
Series 1996-2 Note is registered in the Note Register.
"Series 1996-2 Principal Allocation" is defined in Section
4.2(a)(ii) of this Supplement.
"Series 1996-2 Rapid Amortization Period" means the period
beginning at the close of business on the Business Day immediately preceding the
day on which an Amortization Event is deemed to have occurred and ending upon
the date on which the Series 1996-2 Note is fully paid.
"Series 1996-2 Required Enhancement Amount" shall mean, (i) on
any day prior to the occurrence of an Amortization Event, 9.5% (or such other
percentage as shall then be required by the Rating Agencies to maintain the then
current rating (but not less than A-1 by S&P and not less than P-1 by Moody's)
on the Commercial Paper Notes) of the Program Size in effect on such day, and
(ii) on any day from and after the occurrence of an Amortization Event, the
amount described in clause (i) that shall have been in effect on the day
immediately preceding the occurrence of such Amortization Event.
"Series 1996-2 Revolving Period" means the period from and
including the Series 1996-2 Closing Date to the commencement of the Series
1996-2 Rapid Amortization Period.
"Series 1996-2 Support Credit Enhancers" means the A Support
Credit Enhancers and the B Support Credit Enhancer.
"Series 1996-2 Termination Date" means the Scheduled Liquidity
Commitment Termination Date.
"Shared Collateral Series Notes" means the Series 1996-2 Note
and any other Series of Notes the NFLP Obligations with respect to which are
identified as being secured by the Series 1996-2 Collateral in the Supplement
relating to such other Series of Notes.
"Shortfall" means (a) if a Borrowing Request is submitted for
Revolving Advances, the aggregate amount of the proposed Borrowing requested
with respect thereto in
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such Borrowing Request; provided, however, that such Shortfall shall not exceed
the principal amount of the Series 1996-2 Advance to be made by NFC on the date
such Borrowing is to be made, or (b) if a Borrowing Request is submitted for
Refunding Advances, the aggregate amount of the proposed Borrowing requested
with respect thereto in such Borrowing Request; provided, however, that such
Shortfall shall not exceed the Commercial Paper Deficit on the date such
Borrowing is to be made.
"Support Credit Disbursements" means, collectively, the A
Support Credit Disbursements and B Support LOC Credit Disbursements.
"Support Disbursements" means, collectively, the Support
Credit Disbursements, Support Liquidity Disbursements and Support Termination
Disbursements.
"Support Liquidity Disbursements" means, collectively, the A
Support Liquidity Disbursements and B Support LOC Liquidity Disbursements.
"Support Termination Disbursements" means, collectively, the A
Support Termination Disbursement and B Support LOC Termination Disbursement.
"Swing Line Advance" means any Refunding Advance made pursuant
to Section 3.1.3 of the Liquidity Agreement by Citibank in its capacity as Swing
Line Lender (or any successor thereto in such capacity).
"Swing Line Lender" means Citibank in its capacity as swing
line lender, or any successor thereto in such capacity.
"Taxes" is defined (i) for the purposes of the Liquidity
Agreement in Section 5.6 thereof, (ii) for purposes of the B Letter of Credit
Reimbursement Agreement in Section 2.8 thereof, and (iii) for purposes of the B
Support Letter of Credit Reimbursement Agreement in Section 2.7 thereof.
"Termination Advance Account" is defined in Section 5.01 of
the NFC Collateral Agreement.
"Termination Demand" means a demand for a LOC Termination
Disbursement under a Letter of Credit pursuant to a Certificate of Termination
Demand.
"Total Fixed Charges" means, for any period, the sum of (i)
Total Net Interest of National and its Consolidated Subsidiaries, determined on
a consolidated basis for such period, and (ii) capital expenditures for plant
and equipment (excluding revenue-earning assets) of National and its
Consolidated Subsidiaries, determined on a consolidated basis, for such period.
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"Total Net Interest" means, for any period, the remainder of
(i) all interest (including payments made during such period with respect to
Capitalized Lease Obligations to the extent properly classifiable as interest
and, in the case of the Lease for the Series 1996-2 Note, all Monthly Variable
Rent, all Monthly Finance Rent, and all late charges payable by National under
Section 5.4 of such Lease) paid or accrued on all Indebtedness and other
liabilities of National and its Consolidated Subsidiaries, determined on a
consolidated basis, for such period minus (ii) all interest income earned by
National and its Consolidated Subsidiaries, determined on a consolidated basis,
for such period.
"Turnback Date" means, with respect to any Vehicle, the date
on which such Vehicle is accepted for return by a Manufacturer or its agent
pursuant to its Repurchase Program and the Depreciation Charges cease to accrue
pursuant to its Repurchase Program.
"type" means, relative to any Liquidity Advance under the
Liquidity Agreement or any Disbursement under the Series 1996-2 Fronting Letters
of Credit, the portion thereof, if any, being maintained as a Base Rate Advance
or a LIBOR Advance.
"Variable Funding Note" is defined in Section 7.1 of this
Supplement.
"Welfare Plan" means any "employee welfare benefit plan", as
such term is defined in ERISA.
ARTICLE 3
ISSUANCE OF SERIES 1996-2 NOTE AND INCREASES AND DECREASES
Section 3.1. Procedure for Issuance of Series 1996-2 Note and
Increasing the Series 1996-2 Invested Amount. (a) Subject to satisfaction of the
conditions precedent set forth in subsection (b) of this Section 3.1, (i) on the
Series 1996-2 Closing Date, NFLP may issue the Series 1996-2 Note having an
initial principal amount outstanding thereunder, and NFC shall be deemed to make
an advance to NFLP in such principal amount, equal to the aggregate principal
amount of the Loans outstanding under and as defined in the Loan Agreement on
the Series 1996-2 Closing Date (giving effect to the payment by National of all
amounts payable by it on such date under the Loan Agreement), which Series
1996-2 Note shall be issued to NFC (and pledged to the NFC Collateral Agent
pursuant to the NFC Collateral Agreement) in consideration for NFLP's leasing
the Refinanced Vehicles to the Lessee under the Lease for the Series 1996-2
Note, commencing on the Series 1996-2 Closing Date, and the Master Collateral
Agent redesignating its Lien on the Refinanced Vehicle Collateral from securing
National's obligations arising under or in connection with the Loan Agreement or
the Loan Note referred to therein to securing the Liabilities, and (ii) on any
Business Day during the Series 1996-2 Revolving Period, NFLP may, upon request
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by National under the Lease and upon receipt of confirmation from NFC of its
ability to issue Commercial Paper Notes and/or, as applicable, obtain funds from
Liquidity Advances pursuant to the Liquidity Agreement in an aggregate amount
equal to such Increase (as defined below), increase the outstanding principal
amount of the Series 1996-2 Note (each such increase in such outstanding
principal amount being an "Increase") by making additional advances to NFLP
evidenced by the Series 1996-2 Note (such deemed advance and each such
additional advance being a "Series 1996-2 Advance"). Proceeds from any Increase
shall be deposited into the NFC Collection Account and allocated in accordance
with Article 4 hereof. Upon such issuance and each such Increase, the Trustee
shall, or shall cause the Registrar to, indicate in the Note Register such
Increase.
(b) The Series 1996-2 Note may be issued on the Series 1996-2
Closing Date, and any Increase may occur on any Business Day during the
Series 1996-2 Revolving Period, in each case pursuant to subsection (a)
above, only upon satisfaction of each of the following conditions with
respect to such issuance and each proposed Increase, respectively:
(i) In the case of such issuance, on the date
thereof the unpaid interest accrued through such date
on the Loans outstanding under and as defined in the Loan
Agreement shall have been paid by National to NFC;
(ii) The amount of each of such issuance and such
Increase, respectively, shall be equal to or greater than
$100,000;
(iii) After giving effect to each of such issuance
and such Increase, respectively, the Series 1996-2 Invested
Amount shall not exceed the Series 1996-2 Maximum Invested
Amount;
(iv) There does not exist, and neither such issuance
nor such Increase shall result in the occurrence of, (1) an
Amortization Event, a Liquidation Event of Default or a Series
1996-2 Limited Liquidation Event of Default, or (2) an event
or occurrence, which, with the passing of time or the giving
of notice thereof, or both, would become an Amortization
Event, a Liquidation Event of Default or a Series 1996-2
Limited Liquidation Event of Default;
(v) All conditions precedent (1) to the Lessor's
making Vehicles available to the Lessee for lease under the
Lease and (2) to the issuance of Commercial Paper Notes under
the Depositary Agreement and the Liquidity Agreement and/or,
as applicable, the making of Revolving Advances pursuant to
the Liquidity Agreement have, in each case, been satisfied;
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(vi) NFLP or National, as applicable, shall have
good and marketable title to each Vehicle purchased or
financed by NFLP with the proceeds from the issuance of the
Series 1996-2 Note and Series 1996-2 Advances hereunder from
time to time, free and clear of all Liens other than
Permitted Liens; and each Repurchase Program shall be in full
force and effect, and shall be enforceable against the
related Manufacturer;
(vii) National and NFLP shall have granted to the
Trustee, for the benefit of the Series 1996-2 Noteholder, and
to the NFC Collateral Agent, for the benefit of the NFC
Secured Parties, a first priority security interest in all
Vehicles now or hereafter purchased or financed by NFLP with
the proceeds from the issuance of the Series 1996-2 Note and
Series 1996-2 Advances hereunder from time to time and all
other Master Collateral for the Series 1996-2 Note, and
National, NFLP, the Master Collateral Agent and the Trustee
shall have executed and delivered, and the Trustee shall have
in its possession original counterparts of, Supplements to
Amended and Restated Master Collateral Agency Agreement, in
each case in substantially the form of Exhibit A to the Master
Collateral Agency Agreement, designating NFLP and NFC,
respectively, in each case in connection with this Supplement,
as additional Financing Sources, and the Trustee, for the
benefit of the Series 1996-2 Noteholder, and the NFC
Collateral Agent, for the benefit of the NFC Secured Parties,
respectively, as additional Beneficiaries;
(viii) NFLP shall have granted to the Trustee, for
the benefit of the Series 1996-2 Noteholder, a first priority
security interest in its right, title and interest in and to
the Lease and all other Collateral;
(ix) NFC shall have granted to the NFC Collateral
Agent, for the benefit of the NFC Secured Parties, a first
priority security interest in its right, title and interest in
and to the Assigned Collateral;
(x) The Trustee shall have received executed
counterparts of the Assignment Agreements related to the
assignment of rights under each Repurchase Program relating to
the Master Collateral for the Series 1996-2 Note, dated as of
the Series 1996-2 Closing Date, duly executed thereby and by
National, NFLP and each Eligible Manufacturer in connection
with the Series 1996-2 Note;
(xi) The Trustee shall have received from National
a copy of each Repurchase Program under which Vehicles will
be or have been purchased and are proposed to be
included in the Aggregate Asset Amount on the date of such
issuance or Increase, as applicable, and an Officer's
Certificate, dated the
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Series 1996-2 Closing Date (or, if later, the date on which
such Repurchase Program becomes an Eligible Repurchase
Program), and duly executed by an Authorized Officer of
National, certifying that each such copy is true, correct and
complete as of the Series 1996-2 Closing Date (or, if later,
the date on which such Repurchase Program becomes an Eligible
Repurchase Program);
(xii) The Master Collateral Agent shall have
received evidence (which, in the case of the filing of
financing statements on form UCC-1, may be telephonic
confirmation of such filing) that NFLP has caused or is
causing the Master Collateral Agent's name to be noted on
each Vehicle's Certificate of Title as a lienholder in
accordance with the Lease and all filings (including filings
of financing statements on form UCC-1) and recordings have
been or are in the process of being accomplished as may be
required by law and pursuant to the requirements of the Lease
to establish, perfect, protect and preserve the rights,
titles, interests, remedies, powers, privileges, licenses and
security interest of the Master Collateral Agent in such
Vehicles and other Collateral for the benefit of the Series
1996-2 Noteholder and the NFC Secured Parties;
(xiii) Notice of such Increase shall have been
delivered to the Trustee, the NFC Collateral Agent and the
Liquidity Agent;
(xiv) All representations and warranties set forth
in Section 23 of the Lease, in Article VII of the Liquidity
Agreement, in Article 7 of the Base Indenture, in Section 3.02
of the NFC Collateral Agreement, and in the applicable
Sections of the other Related Documents to which National,
NFLP and/or NFC is a party, respectively, shall be true and
correct (in all material respects to the extent any such
representations and warranties do not incorporate a
materiality limitation in their terms), before and after
giving effect to each of such issuance and such Increase and
to the application of the proceeds therefrom, as though made
on and as of the date thereof except to the extent that they
expressly relate to a date prior to such date; and
(xv) On the Series 1996-2 Closing Date, National
shall have delivered to the Trustee original Counterpart No. 1
of the Lease (as set forth on the cover page and signature
page of the Lease).
Section 3.2. Procedure for Decreasing the Series 1996-2
Invested Amount. On any Business Day NFLP may, upon request by National (a copy
of which request shall have been delivered to the Trustee), reduce the
outstanding principal amount of the Series 1996-2 Note (each such reduction in
such outstanding principal amount being a "Decrease") by withdrawing from the
Series 1996-2 Collection Account and depositing into the Series 1996-2
Distribution Account, and distributing to the Series 1996-2 Noteholder in
respect of
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principal on the Series 1996-2 Note, an amount equal to the amount of such
Decrease in accordance with Section 4.5(b) hereof. Upon each Decrease, the
Trustee shall, or shall cause the Registrar to, indicate in the Note Register
such Decrease. The amount of any Decrease shall not exceed the amount on deposit
in the Series 1996-2 Collection Account and available for distribution to the
Series 1996-2 Noteholder in respect of principal on the Series 1996-2 Note.
ARTICLE 4
SERIES 1996-2 ALLOCATIONS
With respect to the Series 1996-2 Note only, the following
shall apply:
Section 4.1. Establishment of NFC Collection Account, Series
1996-2 Collection Account and Series 1996-2 Accrued Interest Account.
(a) The Trustee shall establish and maintain in the name of
the Trustee for the benefit of the Series 1996-2 Noteholder, or cause to be
established and maintained, an account (the "NFC Collection Account"), bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Series 1996-2 Noteholder. The NFC Collection Account shall be
maintained (i) with a Qualified Institution, or (ii) as a segregated trust
account with the corporate trust department of a depository institution or trust
company having corporate trust powers and acting as trustee for funds deposited
in the NFC Collection Account (so long as such depositary institution or trust
company has a credit rating for its unsecured long-term debt not lower than Baa3
by Moody's and not lower than investment grade by Standard & Poor's). If the NFC
Collection Account is not maintained in accordance with the previous sentence,
then within 10 Business Days after obtaining knowledge of such fact, the Trustee
shall establish a new NFC Collection Account which complies with such sentence
and transfer into the new NFC Collection Account all cash and investments from
the non-qualifying NFC Collection Account. Initially, the NFC Collection Account
will be established with the Trustee.
(b) All Collections allocable to the Series 1996-2 Note shall
be deposited to the NFC Collection Account (unless such Collections shall have
been deposited directly to the Series 1996-2 Collection Account or the Series
1996-2 Accrued Interest Account, as applicable and as specified in Section 4.2
below).
(c) The Trustee will create two administrative subaccounts
within the NFC Collection Account for the benefit of the Series 1996-2
Noteholder: the Series 1996-2 Collection Account (such sub-account, the "Series
1996-2 Collection Account") and the
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Series 1996-2 Accrued Interest Account (such sub-account, the "Series 1996-2
Accrued Interest Account").
Section 4.2. Allocations with Respect to the Series 1996-2
Note. The proceeds from the issuance of the Series 1996-2 Note and any Series
1996-2 Advance, respectively, will be deposited into the NFC Collection Account.
On each Business Day on which proceeds from any Increase or Collections are
deposited into the NFC Collection Account (each such date, a "Series 1996-2
Deposit Date") the Servicer will direct the Trustee in writing pursuant to the
Lease to allocate all amounts deposited into the NFC Collection Account in
accordance with the provisions of this Section 4.2.
(a) Allocations During the Series 1996-2 Revolving Period.
During the Series 1996-2 Revolving Period, the Servicer will direct the Trustee
in writing pursuant to the Lease to allocate on each day, prior to 1:00 p.m.
(New York City time) on each Series 1996-2 Deposit Date, all amounts deposited
into the NFC Collection Account (including without limitation amounts deposited
directly to the Series 1996-2 Collection Account or the Series 1996-2 Accrued
Interest Account) as set forth below:
(i) allocate to the Series 1996-2 Collection Account
an amount equal to the Series 1996-2 Invested Percentage (as of such
day) of the aggregate amount of Interest Collections on such day. All
such amounts allocated to the Series 1996-2 Collection Account shall be
further allocated to Series 1996-2 Accrued Interest Account; and
(ii) allocate to the Series 1996-2 Collection Account
an amount equal to the sum of (A) the Series 1996-2 Invested Percentage
(as of such day) of the aggregate amount of Principal Collections on
such day (for any such day, the "Series 1996-2 Principal Allocation")
plus (B) the proceeds from any Increase, which may be used by NFLP to
finance or acquire Vehicles pursuant to the Lease, to the extent
Eligible Vehicles have been requested by the Lessee pursuant to the
Lease and provided that the representations and warranties contained in
Article 7 of the Base Indenture are true and correct (in all material
respects to the extent any such representations and warranties do not
incorporate a materiality limitation in their terms) on and as of the
date of such financing or acquisition with the same effect as though
made on and as of such date and shall be deemed to be made by NFLP on
such date.
(b) Allocations During the Series 1996-2 Rapid Amortization
Period. With respect to the Series 1996-2 Rapid Amortization Period, the
Servicer will direct the Trustee in writing pursuant to the Lease to allocate,
prior to 1:00 p.m. (New York City time) on any Deposit Date, all amounts
deposited into the NFC Collection Account (including without limitation
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amounts deposited directly to the Series 1996-2 Collection Account or the Series
1996-2 Accrued Interest Account) as set forth below:
(i) allocate to the Series 1996-2 Collection Account
an amount determined as set forth in Section 4.2(a)(i) above for such
day, which amount shall be further allocated to the Series 1996-2
Accrued Interest Account; and
(ii) allocate to the Series 1996-2 Collection Account
an amount equal to the Series 1996-2 Principal Allocation for such day,
which amount shall be used to make principal payments in respect of the
Series 1996-2 Note until the Series 1996-2 Note has been paid in full.
(c) Allocation Adjustments. Notwithstanding the foregoing
provisions of this Section 4.2:
(i) provided the Series 1996-2 Rapid Amortization
Period has not commenced, amounts allocated to the Series 1996-2
Collection Account that are not required to make payments under the
Series 1996-2 Note may, as and to the extent permitted in the related
Supplements, be used to pay the principal amount of other Shared
Collateral Series Notes, if any, that are then in amortization and,
after such payment, any remaining funds shall be paid to NFLP and used
to finance or acquire Vehicles pursuant to the Lease, to the extent
Eligible Vehicles have been requested by the Lessee pursuant to the
Lease and provided that the representations and warranties contained in
Article 7 of the Base Indenture are true and correct (in all material
respects to the extent any such representations and warranties do not
incorporate a materiality limitation in their terms) on and as of the
date of such financing or acquisition with the same effect as though
made on and as of such date and shall be deemed to be made by NFLP on
such date;
(ii) in the event that the Servicer is not National
or an Affiliate of National, the Servicer shall not be entitled to
withhold any amounts pursuant to Section 5.2(c) of the Base Indenture
and the Trustee shall deposit amounts payable to National in the NFC
Collection Account pursuant to the provisions of Section 5.2 of the
Base Indenture on each Series 1996-2 Deposit Date; and
(iii) any amounts withheld by the Servicer and not
deposited in the NFC Collection Account pursuant to Section 5.2(c) of
the Base Indenture shall be deemed to be deposited in the NFC
Collection Account on the date such amounts are withheld for purposes
of determining the amounts to be allocated pursuant to this Section
4.2.
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Section 4.3. Monthly Payments.
On each Determination Date, as provided below, the Servicer
shall instruct the Paying Agent pursuant to the Lease to withdraw, and on the
following Distribution Date the Paying Agent, acting in accordance with such
instructions, shall withdraw, the amounts required to be withdrawn from the NFC
Collection Account pursuant to Sections 4.3(a) and (b) below in respect of all
funds available from Interest Collections processed since the preceding
Distribution Date and allocated to the Series 1996-2 Noteholder.
(a) Note Interest with respect to the Series 1996-2 Note.
(i) On or before the Determination Date following each Series
1996-2 Interest Period, the Servicer shall notify the Series 1996-2
Noteholder and the NFC Collateral Agent of the interest rate that is
the Series 1996-2 Note Rate for such Series 1996-2 Interest Period;
provided that if the Servicer shall subsequently (by the Distribution
Date following such Series 1996-2 Interest Period) determine, and
notify the Series 1996-2 Noteholder and the NFC Collateral Agent, that
such Series 1996-2 Note Rate is an interest rate other than that of
which the Series 1996-2 Noteholder and the NFC Collateral Agent were
previously notified for such Series 1996-2 Interest Period, the Series
1996-2 Note Rate for such Series 1996-2 Interest Period shall be such
other rate and the Series 1996-2 Monthly Interest for such Series
1996-2 Interest Period shall be determined based on such other rate;
and provided, further, however, that the Series 1996-2 Note Rate shall
be calculated from time to time by the NFC Collateral Agent in
accordance with the definition of the term "Series 1996-2 Note Rate",
this clause (i) and the applicable provisions of the other Related
Documents, which calculation shall be conclusive, absent demonstrable
error, and in the event of any conflict between such calculation of the
Series 1996-2 Note Rate and the applicable notification by the Servicer
of the Series 1996-2 Note Rate to the Series 1996-2 Noteholder and the
NFC Collateral Agent from time to time, the NFC Collateral Agent shall
control the determination of such Series 1996-2 Note Rate provided that
the NFC Collateral Agent shall have furnished the Servicer with a
written notice setting forth such calculation.
(ii) On or before each Distribution Date, the Servicer shall
instruct the Trustee or the Paying Agent pursuant to the Lease as to
the amount to be withdrawn from the Series 1996-2 Accrued Interest
Account to the extent funds will be available from Interest Collections
allocable to the Series 1996-2 Note which will have been processed from
but not including the preceding Distribution Date through the
succeeding Distribution Date in respect of (x) first, an amount equal
to the Series 1996-2 Monthly Interest for the Series 1996-2 Note for
such Distribution Date, and (y) then, an amount equal to the amount of
any unpaid Deficiency Amounts (as defined below) as of the preceding
Distribution Date (together with any accrued
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interest on such Deficiency Amounts). If the amounts described in this
Section 4.3(a)(ii) are insufficient, after taking into account any
portion of the Series 1996-2 Fronting Letter of Credit Amount applied
pursuant to Section 5.05 of the NFC Collateral Agreement, to pay such
interest on any Distribution Date, payments of interest to the Series
1996-2 Noteholder will be reduced by the amount of such deficiency. The
amount, if any, of such deficiency on any Distribution Date shall be
referred to as the "Deficiency Amount". Interest shall accrue on the
Deficiency Amount at the Series 1996-2 Note Rate. On the related
Distribution Date, the Trustee shall withdraw the accrued interest on
the Series 1996-2 Note (as determined above) and the Deficiency Amount
(together with accrued interest thereon) from the Series 1996-2 Accrued
Interest Account and deposit such amount in the Series 1996-2
Distribution Account.
(b) Servicing Fee. On each Distribution Date, the Servicer
shall, after making all deposits to the Series 1996-2 Distribution Account
required to be made pursuant to Section 4.3(a) or, in the event that on the
related Determination Date National shall no longer be the Servicer, prior to
such deposits being made, instruct the Trustee or the Paying Agent to withdraw
from the Series 1996-2 Accrued Interest Account an amount (to the extent the
Servicer has not withheld such amount pursuant to Section 5.2(c) of the Base
Indenture) equal to the sum of (i) the Series 1996-2 Monthly Servicing Fee (and
any Series 1996-2 Monthly Supplemental Servicing Fee) accrued during the
preceding Series 1996-2 Interest Period plus (ii) all accrued and unpaid Series
1996-2 Monthly Servicing Fees (and any accrued and unpaid Series 1996-2 Monthly
Supplemental Servicing Fees) in respect of previous periods. On each such
Distribution Date, the Trustee or the Paying Agent shall withdraw such amount
from the Series 1996-2 Accrued Interest Account and remit such amount to the
Servicer.
(c) Balance. On each Distribution Date, the Servicer shall
instruct the Trustee or the Paying Agent pursuant to the Lease as to the balance
(after making the deposits required in Section 4.3(a) and (b) of this
Supplement), if any, of the Interest Collections allocated to the Series 1996-2
Noteholder since the preceding Distribution Date ("Excess Collections"). On such
Distribution Date, the Paying Agent shall withdraw such balance from the NFC
Collection Account and pay such balance to NFLP, to the extent that, after
giving effect to such transfer, such payment will not cause an Asset Amount
Deficiency or a Series 1996-2 Enhancement Deficiency to exist.
Section 4.4. Payment of Note Interest from a Series 1996-2
Fronting Letter of Credit.
On each Distribution Date, if amounts have been drawn on a
Series 1996-2 Fronting Letter of Credit and deposited into the Series 1996-2
Collection Account pursuant to Section 5.05 of the NFC Collateral Agreement, the
Servicer shall instruct the Trustee or the
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Paying Agent to withdraw from the Series 1996-2 Collection Account on such
Distribution Date the lesser of (i) the amount on deposit in the Series 1996-2
Collection Account representing such amount drawn on such Series 1996-2 Fronting
Letter of Credit and (ii) the amount of the Series 1996-2 Monthly Interest
Shortfall and deposit such amount in the Series 1996-2 Distribution Account to
pay the Series 1996-2 Monthly Interest and unpaid Deficiency Amounts (together
with accrued interest on all such unpaid Deficiency Amounts). On each
Distribution Date, the Paying Agent shall, in accordance with Section 6.1 of the
Base Indenture, pay to the Series 1996-2 Noteholder from the Series 1996-2
Distribution Account the amount deposited in the Series 1996-2 Distribution
Account for the payment of interest pursuant to Section 4.3(a) of this
Supplement and this Section 4.4.
Section 4.5. Payment of Note Principal.
(a) Monthly Payments During Rapid Amortization Period. (i)
Subject to subsection (b) below, commencing on the first Determination
Date after the commencement of the Series 1996-2 Rapid Amortization
Period, (A) the Trustee shall withdraw from the Series 1996-2
Collection Account the amount allocated thereto pursuant to Section
4.2(b)(ii) and (B) if amounts have been drawn on any Series 1996-2
Fronting Letter of Credit and deposited into the Series 1996-2
Collection Account pursuant to Section 5.05 of the NFC Collateral
Agreement, the Servicer shall instruct the Trustee or the Paying Agent
pursuant to the Lease to withdraw from the Series 1996-2 Collection
Account on such Distribution Date the lesser of (x) the amount on
deposit in the Series 1996-2 Collection Account representing such draw
on such Series 1996-2 Fronting Letter of Credit (after application of
any portion thereof pursuant to Section 4.4) and (y) the excess of the
Series 1996-2 Invested Amount over the amount described in clause (A)
and deposit such amount in the Series 1996-2 Distribution Account to be
paid to the Series 1996-2 Noteholder. Commencing on the first
Distribution Date after the commencement of the Series 1996-2 Rapid
Amortization Period the Trustee shall withdraw such amount from the
Series 1996-2 Collection Account and deposit such amount in the Series
1996-2 Distribution Account, to be paid to the Series 1996-2
Noteholder; provided, however, that on the final Distribution Date, the
Trustee shall withdraw from the Series 1996-2 Collection Account, as
provided above, an amount which is no greater than the Series 1996-2
Invested Amount as of such date. The entire principal amount of the
Series 1996-2 Note shall be due and payable on the Series 1996-2
Termination Date.
(ii) Subject to subsection (b) below, on each Distribution
Date occurring on or after the date a withdrawal is made pursuant to
Section 4.5(a) of this Supplement, the Paying Agent shall, in
accordance with Section 6.1 of the Base Indenture, pay to the Series
1996-2 Noteholder the amount deposited in the Series 1996-2
Distribution Account for the payment of principal pursuant to Section
4.5(a)(i) of this Supplement.
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(b) Decreases. (i) On any Business Day during the Series
1996-2 Revolving Period on which a Decrease pursuant to Section 3.2
shall be declared, the Trustee shall withdraw from the Series 1996-2
Collection Account an amount equal to the lesser of (i) the sum of (A)
all Series 1996-2 Principal Allocations plus (B) any other funds on
deposit in the Series 1996-2 Collection Account (excluding any Interest
Collections but including proceeds from any Increase) and (ii) the
amount of such Decrease, and deposit such amount in the Series 1996-2
Distribution Account, to be paid to the Series 1996-2 Noteholder.
(ii) On each Business Day occurring on or after the date a
withdrawal is made pursuant to Section 4.5(b)(i) of this Supplement,
the Paying Agent shall, in accordance with Section 6.1 of the Base
Indenture, pay to the Series 1996-2 Noteholder the amount deposited in
the Series 1996-2 Distribution Account for the payment of principal
pursuant to Section 4.5(b)(i) of this Supplement.
Section 4.6. Servicer's Failure to Instruct the Trustee to
Make a Deposit or Payment.
If the Servicer fails to give notice or instructions to make
any payment from or deposit into the NFC Collection Account required to be given
by the Servicer, at the time specified in the Lease or any other Related
Document (including applicable grace periods), and such failure is known by the
Trustee, the Trustee shall make such payment or deposit into or from the NFC
Collection Account without such notice or instruction from the Servicer.
Pursuant to the Lease, the Servicer has agreed that it shall, upon request of
the Trustee, promptly provide the Trustee with all information necessary to
allow the Trustee to make such a payment or deposit.
Section 4.7. Series 1996-2 Distribution Account.
(a) Establishment of Series 1996-2 Distribution Account. The
Trustee shall establish and maintain in the name of the Trustee for the benefit
of the Series 1996-2 Noteholder, or cause to be established and maintained, an
account (the "Series 1996-2 Distribution Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Series 1996-2 Noteholder. The Series 1996-2 Distribution Account shall be
maintained (i) with a Qualified Institution, or (ii) as a segregated trust
account with the corporate trust department of a depository institution or trust
company having corporate trust powers and acting as trustee for funds deposited
in the Series 1996-2 Distribution Account (so long as such depositary
institution or trust company has a credit rating for its unsecured long-term
debt not lower than Baa3 by Moody's and not lower than investment grade by
Standard & Poor's). If the Series 1996-2 Distribution Account is not maintained
in accordance with the previous sentence, the Servicer shall
<PAGE> 63
60
establish a new Distribution Account, within ten (10) Business Days after
obtaining knowledge of such fact, which complies with such sentence, and shall
instruct the Trustee to transfer all cash and investments from the
non-qualifying Series 1996-2 Distribution Account into the new Series 1996-2
Distribution Account. Initially, the Series 1996-2 Distribution Account will be
established with the Trustee.
(b) Administration of the Series 1996-2 Distribution Account.
The Servicer shall instruct the institution maintaining the Series 1996-2
Distribution Account to invest funds on deposit in the Series 1996-2
Distribution Account at all times in Eligible Investments; provided, however,
that any such investment shall mature not later than the Business Day prior to
the Distribution Date following the date on which such funds were received,
unless any Eligible Investment held in the Series 1996-2 Distribution Account is
held with the Paying Agent, then such investment may mature on such Distribution
Date and such funds shall be available for withdrawal on or prior to such
Distribution Date. The Trustee shall hold possession of or otherwise control, in
such a manner that the security interest of the Trustee for the benefit of the
Series 1996-2 Noteholder under Section 5.1 shall at all times be perfected under
Article 8 or 9 of the UCC of the applicable jurisdiction, any instruments,
securities (certificated or uncertificated), security entitlements or securities
accounts evidencing the Eligible Investments from the time of purchase thereof
until the time of maturity.
(c) Earnings from Series 1996-2 Distribution Account. Subject
to the restrictions set forth above, the Servicer shall have the authority to
instruct the Trustee with respect to the investment of funds on deposit in the
Series 1996-2 Distribution Account. All interest and earnings (net of losses and
investment expenses) paid on funds on deposit in the Series 1996-2 Distribution
Account shall be deemed to be on deposit and available for distribution.
(d) Series 1996-2 Distribution Account Constitutes Additional
Collateral for Series 1996-2 Note. The Trustee shall possess all right, title
and interest in all funds on deposit from time to time in the Series 1996-2
Distribution Account and in all proceeds thereof. The Series 1996-2 Distribution
Account Collateral shall be under the sole dominion and control of the Trustee
for the benefit of the Series 1996-2 Noteholder.
Section 4.8. Notice of Series 1996-2 Lease Payment Deficit.
The Trustee shall notify the NFC Collateral Agent of any Series 1996-2 Lease
Payment Deficit no later than one Business Day after obtaining knowledge
thereof.
<PAGE> 64
61
ARTICLE 5
SECURITY
Section 5.1. Grant of Security Interest.
(a) To secure the NFLP Obligations with respect to the Series
1996-2 Note, NFLP hereby pledges, assigns, conveys, delivers, transfers and sets
over to the Trustee, for the benefit of the Series 1996-2 Noteholder (the
"Secured Party") (but not for the benefit of any Holders of any other Notes,
other than any other Shared Collateral Series Notes, if any, as contemplated by
the Supplement relating thereto), and hereby grants to the Trustee, for the
benefit of the Secured Party (but not for the benefit of any Holders of any
other Notes, other than any other Shared Collateral Series Notes, if any, as
contemplated by the Supplement relating thereto), a security interest in, all of
the right, title and interest in, and to all of the following assets, property
and interests in property of NFLP whether now owned or existing or hereafter
acquired or created (all of such right, title and interest, together with the
portion of the Master Collateral with respect to which the Trustee (on behalf of
the Series 1996-2 Noteholder) and the NFC Collateral Agent (on behalf of the NFC
Secured Parties), respectively, are named as Beneficiaries, being the
"Collateral"):
(i) all right, title and interest of NFLP in, to and under
the NFLP Agreements, including, without limitation, all rights of NFLP
arising thereunder in respect of the National Master Collateral, all
monies due and to become due to NFLP from the Lessee or the Servicer
under or in connection with NFLP Agreements, whether payable as rent,
guaranty payments, supplemental payments, fees, expenses, costs,
indemnities, insurance recoveries, damages for the breach of any of
NFLP Agreements or otherwise, and all rights, remedies, powers,
privileges and claims of NFLP against any other party under or with
respect to NFLP Agreements (whether arising pursuant to the terms of
such NFLP Agreements or otherwise available to NFLP at law or in
equity), the right to enforce any of the NFLP Agreements as provided
herein and to give or withhold any and all consents, requests, notices,
directions, approvals, extensions or waivers under or with respect to
NFLP Agreements or the obligations of any party thereunder; and
(ii) (A) the NFC Collection Account (including the Series
1996-2 Collection Account, the Series 1996-2 Accrued Interest Account
and any other accounts designated in this Supplement or otherwise as a
subaccount of the NFC Collection Account), (B) all funds on deposit
therein from time to time, (C) all certificates and instruments, if
any, representing or evidencing any or all of the NFC Collection
Account or any subaccount thereof or the funds on deposit therein from
time to time, and (D) all instruments, securities (whether certificated
or uncertificated), security entitlements, securities accounts and
other investments
<PAGE> 65
62
acquired at any time and from time to time with the moneys in the NFC
Collection Account or any subaccount thereof (including income
thereon); and
(iii) (A) the Series 1996-2 Distribution Account; (B) all
funds on deposit therein from time to time; (C) all certificates and
instruments, if any, representing or evidencing any or all of the
Series 1996-2 Distribution Account or the funds on deposit therein from
time to time; (D) all instruments, securities (whether certificated or
uncertificated), security entitlements, securities accounts and other
investments acquired at any time and from time to time with monies in
the Series 1996-2 Distribution Account; and (E) all proceeds of any and
all of the foregoing, including, without limitation, cash (the items in
the foregoing clauses (A) through (E) being, collectively, the "Series
1996-2 Distribution Account Collateral"); and
(iv) all right, title and interest of NFLP in, to and under
the Master Collateral Agency Agreement with respect to the portion of
the Master Collateral for which NFLP and NFC, respectively, are
designated as Financing Sources and the Trustee (on behalf of the
Series 1996-2 Noteholder) and the NFC Collateral Agent (on behalf of
the NFC Secured Parties), respectively, are designated as Beneficiaries
thereunder; and
(v) all additional property that may from time to time
hereafter (pursuant to the terms of any Supplement or otherwise) be
subjected to the grant and pledge hereof by NFLP or by anyone on its
behalf; and
(vi) all proceeds, products, rents or profits of any and all
of the foregoing including, without limitation, payments under
insurance (whether or not the Master Collateral Agent or the Trustee or
the NFC Collateral Agent is the loss payee thereof) or Vehicle
warranties and cash.
No Noteholder other than the Series 1996-2 Noteholder and Holders of other
Shared Collateral Series Notes, if any, as contemplated by the Supplement
relating thereto, will be entitled to the benefit of any Collateral.
(b) To secure the NFLP Obligations with respect to the
Series 1996-2 Note, NFLP hereby confirms the grant, pledge,
hypothecation, assignment, conveyance, delivery and transfer to the Master
Collateral Agent under the Master Collateral Agency Agreement for the benefit
of the Trustee (on behalf of the Series 1996-2 Noteholder) and the NFC
Collateral Agent (on behalf of the NFC Secured Parties), respectively, of a
continuing first priority perfected Lien on all right, title and interest of
NFLP in, to and under all the NFLP Master Collateral.
<PAGE> 66
63
(c) Notwithstanding anything to the contrary contained in (a)
and (b) above, the Collateral shall not include any right, title or interest in
the Fleet Finance Agreement or the NFLP Fleet Finance Agreement and payments
thereunder.
(d) The foregoing grant is made in trust to secure the NFLP
Obligations with respect to the Series 1996-2 Note and to secure compliance with
the provisions of the Base Indenture, this Supplement and any other Supplement
relating to the Series 1996-2 Note, all as provided in the Base Indenture and
this Supplement. The Trustee, as Trustee on behalf of the Series 1996-2
Noteholder, acknowledges such grant, accepts the trusts under this Supplement
and the Base Indenture in accordance with the provisions of this Supplement and
the Base Indenture and agrees to perform its duties required in this Supplement
and the Base Indenture to the best of its abilities to the end that the
interests of the Series 1996-2 Noteholder may be adequately and effectively
protected.
ARTICLE 6
AMORTIZATION EVENTS
Section 6.1. In addition to the Amortization Events set forth
in Section 9.1 of the Base Indenture and the Liquidity Agreement, respectively,
the following shall be Amortization Events with respect to the Series 1996-2
Note (without notice or other action on the part of the Trustee or the Series
1996-2 Noteholder) and shall not be waived by the Trustee without the prior
written consent of the Series 1996-2 Noteholder, the Liquidity Agent, the NFC
Collateral Agent and, so long as it is an A Support Credit Enhancer, GM:
(a) from and after the funding of any Series 1996-2 Cash
Collateral Account pursuant to Section 5.07 of the NFC Collateral Agreement,
such Series 1996-2 Cash Collateral Account shall be subject to an injunction,
estoppel or other stay or a Lien (other than Liens permitted under the Related
Documents).
ARTICLE 7
FORM OF SERIES 1996-2 NOTE
Section 7.1. The Series 1996-2 Note will be issued in fully
registered form without interest coupons (the "Variable Funding Note"),
substantially in the form set forth in Exhibit A hereto, with such legend as may
be applicable thereto as set forth in the Base Indenture, and will be issued
initially to NFC and shall be duly executed by NFLP and authenticated by the
Trustee in the manner set forth in Section 2.4 of the Base Indenture.
<PAGE> 67
64
The Variable Funding Note is not permitted to be transferred, assigned,
exchanged or otherwise pledged or conveyed except to the NFC Collateral Agent
pursuant to the NFC Collateral Agreement or otherwise in compliance with the
terms of the Base Indenture. The Variable Funding Note shall bear a face amount
equal to the Series 1996-2 Maximum Invested Amount. The Trustee shall, or shall
cause the Registrar to, record any Increases or Decreases from time to time and
all payments from time to time to the Series 1996-2 Noteholder in respect of the
principal amount of the Series 1996-2 Note such that the Note Register
accurately reflects the Series 1996-2 Invested Amount (and the outstanding
principal amount of the Series 1996-2 Note) from time to time.
ARTICLE 8
GENERAL
Section 8.1. Maintenance of Rating; Payment of Rating Agency
Fees. NFLP agrees and covenants with the Trustee to use commercially reasonable
efforts to maintain the initial rating of the Commercial Paper Notes issued by
any Rating Agency. NFLP agrees and covenants with the Trustee to pay all
reasonable fees and expenses of each Rating Agency and to promptly provide all
documents and other information that each Rating Agency may reasonably request.
Section 8.2. Exhibits. The following exhibits attached hereto
supplement the exhibits included in the Indenture.
Exhibit A: Form of Variable Funding Note
Section 8.3. Ratification of Base Indenture. As supplemented
by this Supplement, the Base Indenture is in all respects ratified and confirmed
and the Base Indenture as so supplemented by this Series Supplement shall be
read, taken, and construed as one and the same instrument.
Section 8.4. Counterparts. This Supplement may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all of such counterparts shall together constitute but one and the
same instrument.
Section 8.5. Governing Law. This Supplement shall be construed
in accordance with the law of the State of New York (without giving effect to
the provisions thereof regarding conflicts of laws), and the obligations, rights
and remedies of the parties hereto shall be determined in accordance with such
law.
<PAGE> 68
65
Section 8.6. Amendments. This Supplement may be modified or
amended from time to time in accordance with the terms of the Base Indenture;
provided, however, that no amendment or modification of any provision of this
Supplement shall in any event be effective unless (i) the same shall be in
writing and signed and delivered by NFLP and the Trustee and consented to in
writing by the Liquidity Agent, the NFC Collateral Agent and, so long as it is
an A Support Credit Enhancer, GM and (ii) the Issuer shall have received in
writing confirmation of each of the Rating Agencies that its then current rating
of the Commercial Paper Notes will not be reduced or withdrawn as a result
thereof; and, provided, further, however that if, pursuant to the terms of the
Base Indenture, the consent of the Required Noteholders is required for an
amendment or modification of this Supplement, such requirement shall be
satisfied if such amendment or modification is consented to by the Series 1996-2
Noteholder, the Liquidity Agent, the NFC Collateral Agent and, so long as it is
an A Support Credit Enhancer, GM.
Section 8.7. Discharge of Indenture. Notwithstanding anything
to the contrary contained in the Base Indenture, no discharge of the Indenture
pursuant to Section 11.1(b) of the Base Indenture will be effective as to the
Series 1996-2 Note without the consent of the Series 1996-2 Noteholder, the
Liquidity Agent, the NFC Collateral Agent and GM.
Section 8.8. Inspection of Property, Books and Records. At the
written request of the Series 1996-2 Noteholder (which request shall specify the
matters to be investigated with reasonable specificity) or the NFC Collateral
Agent, but in no event more than semi-annually, the Trustee shall investigate
such matters as permitted under Section 8.8 of the Base Indenture.
Section 8.9. Acknowledgment of Trustee. The Trustee hereby
acknowledges and consents to NFC's assignment to the NFC Collateral Agent under
the NFC Collateral Agreement for the benefit of the NFC Secured Parties of all
of NFC's right, title and interest as the Series 1996-2 Noteholder in and to the
Series 1996-2 Note, the Master Collateral for the Series 1996-2 Note and the
Collateral from time to time.
<PAGE> 69
66
IN WITNESS WHEREOF, NFLP and the Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP
By: NATIONAL CAR RENTAL
FINANCING CORPORATION,
its General Partner
By: /s/ M.J. Becker
-------------------------------
Name: M.J. Becker
Title: Asst. Secretary and Treasurer
THE BANK OF NEW YORK,
as Trustee
By: /s/ Cheryl L. Laser
-------------------------------
Name: CHERYL L. LASER
Title: Assistant Vice President
<PAGE> 1
Exhibit 4.5
CONSENT AND AMENDMENT TO SERIES 1996-2 SUPPLEMENT AND SECOND
MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT, dated as of February 19,
1997 (this "Amendment"), among NATIONAL CAR RENTAL FINANCING LIMITED
PARTNERSHIP, a special purpose Delaware limited partnership ("NFLP"), NATIONAL
CAR RENTAL SYSTEM, INC., a Delaware corporation ("National"), THE BANK OF NEW
YORK, a New York banking corporation ("BONY"), as trustee (the "Trustee"),
NATIONAL FLEET FUNDING CORPORATION, a Delaware corporation (the "Series 1996-2
Noteholder"), CREDIT SUISSE FIRST BOSTON (formerly Credit Suisse), a Swiss
banking corporation acting through its New York Branch, as collateral agent (the
"NFC Collateral Agent"), CITIBANK , N.A., a national banking association, as
liquidity agent (the "Liquidity Agent"), and DEUTSCHE BANK AG, a German banking
corporation acting through its New York branch ("Deutsche Bank"), GENERAL MOTORS
CORPORATION, a Delaware corporation ("GM"), BONY, and CAISSE NATIONALE DE CREDIT
AGRICOLE, a French banking corporation acting through its Chicago Branch
(collectively with Deutsche Bank, GM and BONY, being the "Series 1996-2
Enhancement Providers").
PRELIMINARY STATEMENTS
WHEREAS, NFLP and the Trustee have entered into that certain
Series 1996-2 Supplement, dated as of December 20, 1996 (the "Series 1996-2
Supplement"), to the Base Indenture, dated as of April 30, 1996 (said Base
Indenture, as amended by the Supplement and Amendment to Base Indenture, dated
as of December 20, 1996, and as supplemented by the Series 1996-2 Supplement,
being the "Base Indenture"), creating the Floating Rate Rental Car Asset Backed
Variable Funding Note, Series 1996-2 (the "Series 1996-2 Note"); and
WHEREAS, NFLP and National have entered into that certain
Second Master Motor Vehicle Lease and Servicing Agreement, dated as of December
20, 1996 (the "Lease"), relating to the Series 1996-2 Note;
WHEREAS, National and NFLP have requested that the other
parties hereto consent to the amendment of Section 17.1.6 of the Lease made by
amending the definition of the term "Change of Control", contained in Section
2.2 of the Series 1996-2 Supplement, to permit the acquisition by Republic
Industries, Inc., a Delaware corporation, of the beneficial ownership of all of
the issued and outstanding shares of common stock, par value $.01 per share, of
National and all of the issued and outstanding shares of Series A Preferred
Stock,
<PAGE> 2
2
par value $.01 per share, of National; and such other parties are, on the terms
and conditions set forth below, willing to grant such request;
NOW, THEREFORE, in consideration of the premises and
agreements, provisions and covenants herein contained, the parties hereto hereby
agree, upon the terms and subject to the conditions set forth below, as follows:
SECTION 1. Defined Terms. Capitalized terms used but not
defined in this Amendment, including the preamble and the recitals (WHEREAS
clauses) hereof, shall have the meanings assigned to such term in the Base
Indenture.
SECTION 2. Amendment to Series 1996-2 Supplement. NFLP and the
Trustee agree that the Series 1996-2 Supplement is, effective as of the time,
and subject to the satisfaction of the conditions precedent, set forth in
Section 4 hereof, hereby amended by amending the definition of the term "Change
of Control" contained in Section 2.2 to read as follows:
"'Change of Control' means (i) a transaction or series of
transactions whereby any Person or group within the meaning of Section
13(d)(3) of the Exchange Act and the rules and regulations promulgated
thereunder (other than Republic Industries, Inc., a Delaware
corporation ("Republic"), or an Affiliate of Republic) acquires
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange
Act), directly or indirectly, of securities of National (or other
securities convertible into such securities) representing 40% of the
combined voting power of all securities of National entitled to vote in
the election of directors (a "Controlling Person") or (ii) at any time,
a majority of National's directors are persons who were not (A)
initially nominated by Republic or an Affiliate of Republic, or (B)
successor directors whose nomination for election by the stockholders
of National was approved by a vote of a majority of the directors then
still in office. For this purpose, a Person shall not be a Controlling
Person if such Person holds voting power in good faith and not for the
purpose of circumventing the effect of the occurrence of a Change of
Control as an agent, bank, broker, nominee, trustee, or holder of
revocable proxies given in response to a solicitation pursuant to the
Exchange Act, for one or more beneficial owners who do not
individually, or, if they are a group acting in concert, as a group,
have the voting power specified in the previous sentence."
SECTION 3. Consent of NFLP, National, Trustee, Series 1996-2
Noteholder, NFC Collateral Agent, Liquidity Agent and Series 1996-2 Enhancement
Providers to Amendment of Series 1996-2 Supplement and Lease. Effective as of
the time, and subject to the satisfaction of the conditions precedent, set forth
in Section 4 hereof, each of NFLP, National, the Trustee, the Series 1996-2
Noteholder, the NFC Collateral Agent, the Liquidity
<PAGE> 3
3
Agent and the Series 1996-2 Enhancement Providers hereby consents to (i) the
amendment of the Lease effected by the amendment of Section 2.2 of the Series
1996-2 Supplement effected by Section 2 hereof, and (ii) such amendment of the
Series 1996-2 Supplement effected by Section 2 hereof.
SECTION 4. Conditions of Effectiveness. This Amendment shall
become effective simultaneously with the consummation of the Acquisition under
and as defined in the Share Exchange Agreement dated as of January 5, 1997 among
Republic Industries, Inc., National, Santa Anna Holdings, Inc. and Emerald
Investors, L.L.C. when, and only when, the Trustee, the NFC Collateral Agent and
the Liquidity Agent shall have received counterparts of this Amendment executed
by NFLP, National, the Trustee, the NFC Collateral Agent, the Liquidity Agent,
the Series 1996-2 Noteholder, and the Series 1996-2 Enhancement Providers, and
counterparts of the Consent hereto executed by the Dealers and the Liquidity
Lenders, and Sections 2 and 3 hereof shall become effective when, and only when,
(I) such Acquisition shall have been consummated (it being understood and agreed
by the parties hereto that Sections 2 and 3 hereof shall become effective
simultaneously with such consummation) and (II) the Trustee, the NFC Collateral
Agent and the Liquidity Agent shall have received all of the following
documents, each document (unless otherwise indicated) being dated, or dated as
of, the date hereof and in form and substance satisfactory to the Trustee, the
NFC Collateral Agent and the Liquidity Agent:
(i) The written consent of the Rating Agencies to this
Amendment or, as to any Rating Agency, the written confirmation by such
Rating Agency that, upon giving effect to this Amendment, the Rating
Agency Condition will be met with respect to such Rating Agency;
(ii) A certificate of the Secretary or an Assistant Secretary
of each of the General Partner of NFLP, National and the Series 1996-2
Noteholder, certifying the names of the individual or individuals
authorized to sign this Amendment, together with a sample of the true
signature of each such individual; and
(iii) An opinion of counsel for NFLP, which counsel is
acceptable to the Trustee, stating that the amendment of the Lease and
the Series 1996-2 Supplement made by this Amendment does not affect any
Noteholder other than the Series 1996-2 Noteholder (which opinion may,
to the extent the same is based on any factual matter, rely upon an
Officer's Certificate as to the truth of such factual matter).
SECTION 5. Reference to and Effect on the Related Documents.
(a) Upon the effectiveness of this Amendment, including Sections 2 and 3 hereof,
each reference in the Series 1996-2 Supplement or the Lease to "this Supplement"
or "this Agreement" or "this Lease", "hereunder", "hereof" or words of like
import referring to the Series 1996-2 Supplement or the Lease, respectively, and
each reference in the Lease, the Series 1996-2 Supplement or the other Related
Documents to "the Series 1996-2 Supplement" or "the
<PAGE> 4
4
Lease", "thereunder", "thereof" or words of like import referring to the Series
1996-2 Supplement or the Lease, shall mean and be a reference to the Series
1996-2 Supplement, or the Lease, in each case as amended hereby.
(b) Except as specifically amended above, the Base Indenture,
the Series 1996-2 Supplement, the Lease and all other Related Documents are and
shall continue to be in full force and effect and are hereby in all respects
ratified and confirmed. Without limiting the generality of the foregoing, the
Base Indenture and all of the Collateral described therein do and shall continue
to secure the payment of all NFLP Obligations to which such Collateral is
applicable (giving effect to this Amendment).
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of any party thereto under any of the Related
Documents, nor constitute a waiver of any provision of any of the Related
Documents.
SECTION 6. Costs and Expenses. NFLP agrees to pay on demand
all reasonable costs and expenses of the Trustee, the Liquidity Agent and the
NFC Collateral Agent in connection with the preparation, execution, delivery and
administration of this Amendment and the other instruments and documents to be
delivered under, or as contemplated by, Section 4 hereof, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Trustee, the Liquidity Agent and the NFC Collateral Agent with respect thereto
and with respect to advising the Trustee, the Liquidity Agent and the NFC
Collateral Agent as to their respective rights and responsibilities hereunder
and thereunder.
SECTION 7. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement. Delivery of an executed counterpart of a signature
page to this Amendment by telefacsimile shall constitute delivery of a manually
executed counterpart of this Amendment.
<PAGE> 5
5
SECTION 8. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York excluding
(to the greatest extent a New York court would permit) any rule of law that
would cause application of the laws of any jurisdiction other than the State of
New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP
By: NATIONAL CAR RENTAL
FINANCING CORPORATION,
its General Partner
By: /s/ M.J. Becker
------------------------------
Name: M.J. BECKER
Title: TREASURER
NATIONAL CAR RENTAL
SYSTEM, INC.
By: /s/ E.A. Zintek
------------------------------
Name: E.A. ZINTEK
Title: EVP
THE BANK OF NEW YORK,
as Trustee and as an A Support Credit
Enhancer
By: /s/ Richard Raffetto
------------------------------
Name: RICHARD A. RAFFETTO
Title: ASSISTANT VICE PRESIDENT
<PAGE> 6
6
NATIONAL FLEET FUNDING
CORPORATION
By /s/ M.J. Becker
------------------------------
Name: M.J. BECKER
Title: TREASURER
CREDIT SUISSE FIRST BOSTON (formerly
Credit Suisse), NEW YORK BRANCH, as
NFC Collateral Agent
By /s/ Roger W. Saylor
------------------------------
Name: ROGER W. SAYLOR
Title: ASSOCIATE
By /s/ Thomas G. Muoio
------------------------------
Name: THOMAS G. MUOIO
Title: ASSOCIATE
CITIBANK, N.A., as Liquidity Agent
By /s/ Annette M. Marsula
------------------------------
Name: ANNETTE M. MARSULA
Title: SENIOR TRUST OFFICER
DEUTSCHE BANK AG, as A Credit
Enhancer and B Credit Enhancer
By /s/ Hans-Josef Thiele
------------------------------
Name: Hans-Josef Thiele
Title: Vice President
By /s/ Belinda Wheeler
------------------------------
Name: Belinda Wheeler
Title: Assistant Vice President
<PAGE> 7
7
GENERAL MOTORS CORPORATION,
as an A Support Credit Enhancer
By /s/ Eric P. Plumb
------------------------------
Name: Eric P. Plumb
Title: Attorney-in-fact
CAISSE NATIONALE DE CREDIT
AGRICOLE, as B Support Credit
Enhancer
By /s/ Katherine L. Abbott
------------------------------
Name: KATHERINE L. ABBOTT
Title: FIRST VICE PRESIDENT
<PAGE> 8
CONSENT
Dated as of February 19, 1997
Each of the undersigned, a Liquidity Lender under the
Liquidity Agreement (as defined in the Series 1996-2 Supplement referred to in
the foregoing Amendment) or a Dealer under the Dealer Agreement (as defined in
said Series 1996-2 Supplement), as applicable, hereby consents to the foregoing
Amendment, and hereby confirms and agrees that the Liquidity Agreement, the
Dealer Agreement and each other Related Document to which it is a party, is, and
shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects except that, upon the effectiveness of, and on and
after the date of, the said Amendment, each reference in the Liquidity
Agreement, the Dealer Agreement or such other Related Document to the Series
1996-2 Supplement or the Lease, "thereunder", "thereof" or words of like import
shall mean and be a reference to the Series 1996-2 Supplement or the Lease as
amended by the said Amendment.
Liquidity Lenders
ABN AMRO BANK, N.V.
By /s/ Christine E. Holmes
------------------------------
Name: CHRISTINE E. HOLMES
Title: VICE PRESIDENT
By /s/ Angela Reitz
------------------------------
Name: ANGELA REITZ
Title: Vice President
BANK AUSTRIA AKTIENGESELLSCHAFT
By /s/ Jeanine Ball
------------------------------
Name: Jeanine Ball
Title: Assistant Vice President
Bank Austria
By /s/ J. Anthony Seay
------------------------------
Name: J. Anthony Seay
Title: Vice President
Bank Austria
<PAGE> 9
2
BANK BRUSSELS LAMBERT,
NEW YORK BRANCH
By /s/ John Kippax
------------------------------
Name: John Kippax
Title: Vice President & Manager
By /s/ Dominick H. J. Vangaever
------------------------------
Name: Dominick H. J. Vangaever
Title: Senior Vice President
Credit
BANK OF IRELAND
By /s/ Niamh O'Flynn
------------------------------
Name: NIAMH O'FLYNN
Title: MANAGER
By /s/ R.A. Wyer
------------------------------
Name: R.A. Wyer
Title:
BANK OF MONTREAL
By /s/ Edward P. McGuire
------------------------------
Name: EDWARD P. MCGUIRE
Title: DIRECTOR
THE BANK OF NEW YORK
By: /s/ Richard Raffetto
------------------------------
Name: Richard A. Raffetto
Title: Assistant Vice President
<PAGE> 10
3
THE BANK OF NOVA SCOTIA
By /s/ F.C.H. Ashby
------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
THE BANK OF TOKYO-MITSUBISHI,
LTD., CHICAGO BRANCH
By /s/ Jeffrey R. Arnold
------------------------------
Name: Jeffrey R. Arnold
Title: Vice President
BANQUE ET CAISSE D'EPARGNE DE
L'ETAT
By /s/ John Dhur
------------------------------
Name: John DHUR
Title: Sous-Directeur
By /s/ Carlo Matagne
------------------------------
Name: Carlo MATAGNE
Title: Chof ______ Servico
Correspondent Banking
BANQUE NATIONALE DE PARIS,
CHICAGO BRANCH
By /s/ Arnaud Collin du Bocage
------------------------------
Name: ARNAUD COLLIN du BOCAGE
Title: Executive Vice President
and General Manager
<PAGE> 11
4
BAYERISCHE HYPOTHEKEN-UND
WECHSEL - BANK
AKTIENGESELLSCHAFT, NEW YORK
BRANCH
By /s/ R. Vogel
------------------------------
Name: R. Vogel
Title: A.T.
By /s/ R. G. Pankuch
------------------------------
Name: R. G. Pankuch
Title: F&P
CAISSE NATIONALE DE CREDIT
AGRICOLE
By /s/ Katherine L. Abbott
------------------------------
Name: KATHERINE L. ABBOTT
Title: FIRST VICE PRESIDENT
CANADIAN IMPERIAL BANK OF
COMMERCE
By /s/ Kent Davis
------------------------------
Name: Kent Davis
Title: Authorized Signatory
CITIBANK, N.A.
By /s/ Elizabeth A. Palermo
------------------------------
Name: Elizabeth A. Palermo
Title: Attorney-In-Fact
<PAGE> 12
5
COMMERZBANK AG,
CHICAGO BRANCH
By /s/ Paul Karlin
------------------------------
Name: PAUL KARLIN
Title: Assistant Treasurer
By /s/ Dr. Tollner
------------------------------
Name: Dr. HELMUT R. TOLLNER
Title: Executive Vice President
CREDIT SUISSE FIRST BOSTON (formerly
Credit Suisse), NEW YORK BRANCH
By /s/ Roger W. Saylor
------------------------------
Name: ROGER W. SAYLOR
Title: ASSOCIATE
By /s/ Thomas G. Muoio
------------------------------
Name: THOMAS G. MUOIO
Title: ASSOCIATE
<PAGE> 13
6
DEN DANSKE BANK AKTIESELSKAB,
NEW YORK BRANCH
By /s/ Stephen B. Shea
-----------------------------
Name: Stephen B. Shea
Title: Vice President
By /s/ John A. O'Neill
------------------------------
Name: JOHN A. O'NEILL
Title: VICE PRESIDENT
DRESDNER BANK AG, NEW YORK
BRANCH AND GRAND CAYMAN
BRANCH
By /s/ Christopher E. Sarisky
------------------------------
Name: CHRISTOPHER E. SARISKY
Title: Assistant Treasurer
By /s/ Thomas J. Nadramla
------------------------------
Name: Thomas J. Nadramla
Title: Vice President
FIRST BANK NATIONAL
ASSOCIATION
By /s/ Elliot J. Jaffee
------------------------------
Name: Elliot J. Jaffee
Title: Vice President
<PAGE> 14
7
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, CHICAGO BRANCH
By /s/ Hiroki Yamada
------------------------------
Name: Hiroki Yamada
Title: General Manager
ING BARING (U.S.) CAPITAL
MARKETS, INC.
By /s/ Michael Plunkett
------------------------------
Name: Michael Plunkett
Title: Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ Richard A. Burke
------------------------------
Name: Richard A. Burke
Title: Vice President
NORDDEUTSCHE LANDESBANK
GIROZENTRALE
By /s/ Stephen K. Hunter
------------------------------
Name: Stephen K. Hunter
Title: Senior Vice President
By /s/ Petra Frank-Witt
------------------------------
Name: Petra Frank-Witt
Title: VP
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/
------------------------------
Name:
Title:
<PAGE> 15
8
PNC BANK, NATIONAL
ASSOCIATION
By /s/ Gregory T. Gaschler
------------------------------
Name: Gregory T. Gaschler
Title: Vice President
THE SANWA BANK, LIMITED
CHICAGO BRANCH
By /s/ Tomomi Omura
------------------------------
Name: Tomomi Omura
Title: Assistant General Manager
THE SUMITOMO BANK,
LIMITED
By /s/ H Iwami
------------------------------
Name: Hiroyuki Iwami
Title: Joint General Manager
SVENSKA HANDELSBANKEN,
NEW YORK BRANCH
By /s/
------------------------------
Name:
Title:
By /s/ Ralph C. Dabisio
------------------------------
Name: Ralph C. Dabisio
Title: Vice President
<PAGE> 16
9
UNITED STATES NATIONAL BANK
OF OREGON
By /s/ Roger H. Weis
------------------------------
Name: Roger H. Weis
Title: Vice President
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK
BRANCH
By /s/ Michael F. McWalters
------------------------------
Name: MICHAEL F. McWALTERS
Title: MANAGING DIRECTOR
By /s/ C.D. Rockey
------------------------------
Name: C.D. Rockey
Title: Associate
Dealers
CREDIT SUISSE FIRST BOSTON
CORPORATION (formerly CS First Boston
Corporation), as a Dealer
By /s/ Bruce T Miller
------------------------------
Name: Bruce T Miller
Title: Director
<PAGE> 17
10
GOLDMAN, SACHS & CO. (successor
organization to Goldman Sachs Money
Markets, L.P.), as a Dealer
By: /s/ John P. Heanue
------------------------------
Name: John P. Heanue
Title: Authorized Signatory
CITICORP SECURITIES, INC., as a Dealer
By /s/ J. Darrell Thomas
------------------------------
Name: J. Darrell Thomas
Title: Vice President
<PAGE> 1
EXHIBIT 4.6
SECOND CONSENT AND AMENDMENT TO SERIES 1996-2 SUPPLEMENT,
dated as of May 7, 1997 (this "AMENDMENT"), among NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP, a special purpose Delaware limited partnership ("NFLP"),
NATIONAL CAR RENTAL SYSTEMS, INC., a Delaware corporation ("NATIONAL"), THE
BANK OF NEW YORK, a New York banking corporation ("BONY"), as trustee (the
"TRUSTEE"), NATIONAL FLEET FUNDING CORPORATION, a Delaware corporation (the
"SERIES 1996-2 NOTEHOLDER"), CREDIT SUISSE FIRST BOSTON (formerly Credit
Suisse), a Swiss banking corporation acting through its New York Branch, as
collateral agent (the "NFC COLLATERAL AGENT"), CITIBANK, N.A., a national
banking association, as liquidity agent (the "LIQUIDITY AGENT"), and DEUTSCHE
BANK, AG, a German banking corporation acting through its New York branch
("DEUTSCHE BANK"), GENERAL MOTORS CORPORATION, a Delaware corporation ("GM"),
BONY and CAISSE NATIONALE DE CREDIT AGRICOLE, a French banking corporation
acting through its Chicago Branch (collectively with Deutsche Bank, GM and BONY
being the "SERIES 1996-2 ENHANCEMENT PROVIDERS").
PRELIMINARY STATEMENTS
WHEREAS, NFLP and the Trustee have entered into that certain
Series 1996-2 Supplement, dated as of December 20, 1996, as amended by the
Consent and Amendment to Series 1996-2 Supplement and Second Master Motor
Vehicle Lease and Servicing Agreement, dated as of February 19, 1997 (said
Series 1996-2 Supplement, as so amended, being the "SERIES 1996-2 SUPPLEMENT"),
to the Base Indenture, dated as of April 30, 1996 (said Base Indenture, as
amended by the Supplement and Amendment to Base Indenture, dated as of December
20, 1996, and as supplemented by the Series 1996-2 Supplement, being the "BASE
INDENTURE"), creating the Floating Rate Rental Car Asset Backed Variable
Funding Note, Series 1996-2 (the "SERIES 1996-2 NOTE");
WHEREAS, National and NFLP have requested that the other
parties hereto consent to the amendment of the definition of the term
"Scheduled Liquidity Commitment Termination Date" to extend such date to May 6,
1998; and such other parties are, on the terms and conditions set forth below,
willing to grant such request; and
WHEREAS, National, the Series 1996-2 Noteholder and GM have
requested that the other parties hereto consent to the amendment of Section
2.1(c)(ii) of the A Support Reimbursement Agreement, dated as of June 7, 1995,
as amended by the Amendment to A Support Reimbursement Agreement, dated as of
April 30, 1996, and the 2nd Amendment to A Support Reimbursement Agreement,
dated as of December 20, 1996, whereby National, the Series 1996-2 Noteholder
and GM have agreed to waive the 30 day prior delivery requirement contained
therein; and such other parties are, on the terms and conditions set forth
below, willing to grant such request.
NOW, THEREFORE, in consideration of the premises and
agreements, provisions and covenants herein contained, the parties hereto
hereby agree, upon the terms and subject to the conditions set forth below, as
follows:
<PAGE> 2
SECTION 1. DEFINED TERMS. Capitalized terms used but not
defined in this Amendment, including the preamble and the recitals (WHEREAS
clauses) hereof, shall have the meanings assigned to such term in the Base
Indenture.
SECTION 2. AMENDMENT TO SERIES 1996-2 SUPPLEMENT. NFLP and
the Trustee agree that the Series 1996-2 Supplement is, effective as of the
date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 4 hereof, hereby amended as follows:
(a) "'SCHEDULED LIQUIDITY COMMITMENT TERMINATION DATE' means,
for any Liquidity Lender, May 6, 1998, as such date may be extended
from time to time pursuant to Section 3.5 of the Liquidity Agreement."
SECTION 3. CONSENT OF NFLP, NATIONAL, TRUSTEE, SERIES 1996-2
NOTEHOLDER, NFC COLLATERAL AGENT, LIQUIDITY AGENT AND SERIES 1996-2 ENHANCEMENT
PROVIDERS TO AMENDMENT OF SERIES 1996-2 SUPPLEMENT. Effective as of the date
hereof and subject to the satisfaction of the conditions precedent set forth in
Section 4 hereof, each of NFLP, National, the Trustee, the Series 1996-2
Noteholder, the NFC Collateral Agent, the Liquidity Agent and the Series 1996-2
Enhancement Providers hereby consents to the amendment of the Series 1996-2
Supplement effected by Section 2 hereof.
SECTION 4. WAIVER OF 30 DAY PRIOR DELIVERY REQUIREMENT.
National, the Series 1996-2 Noteholder and GM agree to waive the 30 day prior
delivery requirement imposed by Section 2.1(c)(ii) of the A Support
Reimbursement Agreement, dated as of June 7, 1995, as amended by the Amendment
to A Support Reimbursement Agreement, dated as of April 30, 1996, and the 2nd
Amendment to A Support Reimbursement Agreement, dated as of December 20, 1996.
SECTION 5. CONDITIONS AND EFFECTIVENESS. This Amendment shall
become effective as of the date hereof when, and only when, the Trustee, the
NFC Collateral Agent and the Liquidity Agent shall have received counterparts
of this Amendment executed by NFLP, National, the Trustee, the NFC Collateral
Agent, the Liquidity Agent, the Series 1996-2 Noteholder, and the Series 1996-2
Enhancement Providers, and counterparts of the Consent hereto executed by the
Dealers and the Liquidity Lenders; and Sections 2 and 3 hereof shall become
effective when, and only when, the Trustee, the NFC Collateral Agent and the
Liquidity Agent shall have also received all of the following documents, each
document (unless otherwise indicated) being dated, or dated as of, the date
hereof and in form and substance satisfactory to the Trustee, the NFC
Collateral Agent and the Liquidity Agent:
(a) The written consent of the Rating Agencies to this Amendment or,
as to any Rating Agency, the written confirmation by such Rating Agency that,
upon giving effect to this Amendment, the Rating Agency Condition will be met
with respect to such Rating Agency;
(b) An executed copy of all those amendments to the other Related
Documents that are to be entered into in connection with this Amendment,
including, without limitation, the following amendments:
2
<PAGE> 3
(i) Amendment No. 4 to the A Letter of Credit, in
substantially the form of Exhibit A hereto;
(ii) Amendment No. 3 to the B Letter of Credit, in
substantially the form of Exhibit B hereto;
(iii) Amendment No. 2 to the Reduction A Letter of Credit, in
substantially the form of Exhibit C hereto; and
(iv) Second Amendment to Reduction A Support Reimbursement
Agreement, in substantially the form of Exhibit D hereto;
(c) A Certificate of the Secretary or an Assistant Secretary of each
of the General Partner of NFLP, National and the Series 1996-2 Noteholder,
certifying the names of the individual or individuals authorized to sign this
Amendment, together with a sample of the true signature of each such
individual;
(d) An opinion of counsel for NFLP, which counsel is acceptable to the
Trustee, stating that the amendment of the Lease and the Series 1996-2
Supplement made by this Amendment does not affect any Noteholder other than the
Series 1996-2 Noteholder (which opinion may, to the extent the same is based on
any factual matter, rely upon an Officer's Certificate as to the truth of such
factual matter).
SECTION 6. CONTINUATION OF REPRESENTATIONS AND WARRANTIES.
National and NFLP each hereby represents and warrants that (i) the
representations and warranties in Article 7 of the Base Indenture and Section
23 of the Series 1996-2 Lease, giving effect to this Amendment, are true and
correct (in all material respects to the extent any such representations and
warranties do not incorporate a materiality limitation in their terms) on and
as of the date hereof with the same effect as if made on and as of the date
hereof (unless stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct (in all material
respects to the extent any such representations and warranties do not
incorporate a materiality limitation in their terms) as of such earlier date),
and (ii) on the date hereof, no Amortization Event or Potential Amortization
Event has occurred and is continuing.
SECTION 7. REFERENCE TO AND EFFECT ON THE RELATED DOCUMENTS.
(a) Upon the effectiveness of this Amendment, including Sections 2 and 3
hereof, each reference in the Series 1996-2 Supplement to "this Supplement" or
"this Agreement", "hereunder", "hereof" or words of like import referring to
the Series 1996-2 Supplement, and each reference in the other Related Documents
to "the Series 1996-2 Supplement", "thereunder", "thereof" or words of like
import referring to the Series 1996-2 Supplement, shall mean and be a reference
to the Series 1996-2 Supplement as amended hereby.
(b) Except as specifically amended above, the Base Indenture, the
Series 1996-2 Supplement and all other Related Documents are and shall continue
to be in full force and effect and
3
<PAGE> 4
are hereby in all respects ratified and confirmed. Without limiting the
generality of the foregoing, the Base Indenture and all of the Collateral
described therein do and shall continue to secure the payment of all NFLP
Obligations to which such Collateral is applicable (giving effect to this
Amendment).
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any party thereto under any of the Related Documents, nor
constitute a waiver of any provision of any of the Related Documents.
SECTION 8. COSTS AND EXPENSES. NFLP agrees to pay on demand
all reasonable costs and expenses of the Trustee, the Liquidity Agent and the
NFC Collateral Agent in connection with the preparation, execution, delivery
and administration of this Amendment and the other instruments and documents to
be delivered under, or as contemplated by, Section 5 hereof, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Trustee, the Liquidity Agent and the NFC Collateral Agent with respect thereto
and with respect to advising the Trustee, the Liquidity Agent and the NFC
Collateral Agent as to their respective rights and responsibilities hereunder
and thereunder.
SECTION 8.5 EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement. Delivery of an executed counterpart of a signature
page to this Amendment by telefacsimile shall constitute delivery of a mutually
executed counterpart of this Amendment.
4
<PAGE> 5
SECTION 9. GOVERNING LAW. This Amendment shall be governed
by, and construed in accordance with the laws of the State of New York
excluding (to the greatest extent a New York court would permit) any rule of
law that would cause application of the laws of any jurisdiction other than the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP
By: NATIONAL CAR RENTAL
FINANCING CORPORATION,
its General Partner
By: /s/
-----------------------------
Name:
Title:
NATIONAL CAR RENTAL
SYSTEM, INC.
By: /s/
-------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By: /s/ Cheryl L. Laser
-------------------------------------
Name: Cheryl L. Laser
Title: Assistant Vice President
5
<PAGE> 6
NATIONAL FLEET FUNDING
CORPORATION
By: /s/
------------------------------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON (formerly
Credit Suisse), NEW YORK BRANCH, as
NFC Collateral Agent
By: /s/ Roger W. Saylor
------------------------------------------------------
Name: Roger W. Saylor
Title: Associate
By: /s/ Matt Moser
------------------------------------------------------
Name: Matt Moser
Title: Associate
CITIBANK, N.A., as Liquidity Agent
By: /s/ Annette Marsula
------------------------------------------------------
Name: Annette Marsula
Title: Senior Trust Officer
DEUTSCHE BANK AG, as A Credit
Enchancer and B Credit Enhancer
By: /s/ Hans-Josef Thiele /s/Belinda Wheeler
------------------------------------------------------
Name: Hans Josef-Thiele Belinda J. Wheeler
Title: Director Vice President
6
<PAGE> 7
GENERAL MOTORS CORPORATION,
as an A Support Credit Enhancer
By: /s/ David A. Robson
-----------------------------------------
Name: David A. Robson
Title: Attorney-in-fact
CAISSE NATIONALE DE CREDIT
AGRICOLE, as B Support Credit
Enhancer
By: /s/ Katherine L. Abbot
-----------------------------------------
Name: Katherine L. Abbott
Title: First Vice President
7
<PAGE> 8
THE BANK OF NEW YORK,
as an A Support Credit Enhancer
By: /s/ Mark T. Familo
-----------------------------------------
Name: Mark T. Familo
Title: Assistant Vice President
8
<PAGE> 1
Exhibit 4.7
EXECUTION COPY
LIQUIDITY AGREEMENT,
Dated as of June 7, 1995,
among
NATIONAL FLEET FUNDING CORPORATION.
CERTAIN FINANCIAL INSTITUTIONS,
as the Liquidity Lenders
and
CITIBANK, N.A.,
as the Liquidity Agent for
the Liquidity Lenders
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<S> <C> <C>
SECTION 1.1. Definitions ...................................... 2
SECTION 1.2. Cross-References.................................. 2
SECTION 1.3. Accounting and Financial Determinations;
No Duplication................................... 2
</TABLE>
<TABLE>
<CAPTION>
ARTICLE II
COMMERCIAL PAPER OPERATIONS
<S> <C> <C>
SECTION 2.1. Issuance of Commercial Paper Notes................ 3
SECTION 2.2. Conditions to the Issuance of Commercial
Paper Notes...................................... 4
SECTION 2.2.1. Representations and Warranties.................... 4
SECTION 2.2.2. No Amortization Event............................. 5
SECTION 2.2.3. Available Liquidity Commitment.................... 5
SECTION 2.2.4. No Borrowing Base Deficiency...................... 5
SECTION 2.2.5. Borrowing Base Certificate........................ 5
SECTION 2.2.6. Non-Prepayment of Loans........................... 5
SECTION 2.3. Commercial Paper Notes............................ 5
SECTION 2.4. Commercial Paper Account; Payment of Commercial
Paper Notes...................................... 6
</TABLE>
<TABLE>
<CAPTION>
ARTICLE III
LIQUIDITY COMMITMENTS, BORROWING PROCEDURES,
LIQUIDITY ADVANCES AND NOTES
<S> <C> <C>
SECTION 3.1. Liquidity Commitments............................. 6
SECTION 3.1.1. Revolving Advance Commitment...................... 7
SECTION 3.1.2. Refunding Advance Commitment...................... 7
SECTION 3.1.3. Swing Line Commitment............................. 7
SECTION 3.1.4. Use of Proceeds................................... 8
SECTION 3.2 Liquidity Lenders Not Required to Make Certain
Liquidity Advances............................... 8
SECTION 3.2.1. Revolving Advances................................ 8
SECTION 3.2.2. Refunding and Swing Line Advances................. 8
SECTION 3.2.3. Failure to Fund................................... 8
SECTION 3.3. Termination and Reduction of the Liquidity
Commitments...................................... 9
SECTION 3.4. Increase of the Aggregate Liquidity
Commitment....................................... 10
SECTION 3.5. Extensions of Scheduled Liquidity Commitment
Termination Date................................. 10
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.6. Borrowing Procedures.............................. 10
SECTION 3.6.1. Revolving Advances................................ 10
SECTION 3.6.2. Refunding Advances................................ 11
SECTION 3.6.3. Swing Line Advances............................... 12
SECTION 3.6.4. Commitment Termination Date Liquidity Advances.... 13
SECTION 3.6.5. Nature of Funding Obligations..................... 13
SECTION 3.6.6. Failure to Fund by Lender......................... 14
SECTION 3.7. Disbursement of Funds............................. 14
SECTION 3.8. Continuation and Conversion Elections............. 15
SECTION 3.9. LIBOR Funding..................................... 16
SECTION 3.10. Liquidity Advance Notes........................... 16
</TABLE>
ARTICLE IV
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES, ETC.
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 4.1. Repayments and Prepayments........................ 17
SECTION 4.1.1. Voluntary Prepayments............................. 17
SECTION 4.1.2. Mandatory Prepayments............................. 17
SECTION 4.2. Interest Provisions............................... 18
SECTION 4.2.1. Rates............................................. 18
SECTION 4.2.2. Post Default Rates................................ 19
SECTION 4.3. Payments of Interest.............................. 20
SECTION 4.4. Computation Basis................................. 20
SECTION 4.5. Fee............................................... 20
</TABLE>
<TABLE>
<CAPTION>
ARTICLE V
CERTAIN LIBOR AND OTHER PROVISIONS
<S> <C> <C>
SECTION 5.1. LIBOR Lending Unlawful............................ 21
SECTION 5.2. Deposits Unavailable.............................. 21
SECTION 5.3. Increased Costs, etc.............................. 22
SECTION 5.4. Funding Losses.................................... 22
SECTION 5.5. Increased Capital Costs........................... 23
SECTION 5.6. Taxes............................................. 24
SECTION 5.7. Payments, Computations, etc....................... 25
SECTION 5.8. Sharing of Payments............................... 26
SECTION 5.9. Replacement of Liquidity Lenders.................. 27
SECTION 5.10. Order and Priority................................ 28
</TABLE>
ARTICLE VI
<TABLE>
<CAPTION>
CONDITIONS PRECEDENT
<S> <C> <C>
SECTION 6.1. Conditions to Effectiveness....................... 28
SECTION 6.1.1. Organic Documents, Resolutions.................... 28
SECTION 6.1.2. Liquidity Agreement............................... 29
SECTION 6.1.3. Liquidity Advance Notes........................... 29
SECTION 6.1.4. Master Collateral Agency Agreement; Collateral
Sharing Agreement and Collateral Agreement....... 29
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6.1.5. Loan Agreement.................................... 30
SECTION 6.1.6. Letter of Credit Agreements....................... 30
SECTION 6.1.7. Depositary Agreement.............................. 30
SECTION 6.1.8. Dealer Agreement; Placement Agency Agreement...... 31
SECTION 6.1.9. Closing Date Certificate.......................... 31
SECTION 6.1.10. Accounts.......................................... 31
SECTION 6.1.11. Rating Letters.................................... 31
SECTION 6.1.12. Vehicles, Repurchase Programs, etc................ 31
SECTION 6.1.13. Assignments....................................... 32
SECTION 6.1.14. Board of Directors................................ 32
SECTION 6.1.15. Solvency Certificates............................. 32
SECTION 6.1.16. Closing Fees and Expenses......................... 32
SECTION 6.1.17. Certified Copy of Repurchase Program.............. 32
SECTION 6.1.18. Opinions.......................................... 32
SECTION 6.1.19. Notation of Liens................................. 32
SECTION 6.1.20. Offering Materials................................ 33
SECTION 6.1.21. Satisfactory Legal Form........................... 33
SECTION 6.1.22. Credit Rating of Initial Liquidity Lenders........ 33
SECTION 6.1.23. Vehicle Title Nominee Agreement; GM Guaranty...... 33
SECTION 6.1.24. Assignment of GMAC Lien; Filing of UCC
Termination Statements........................... 33
SECTION 6.2. Conditions to the Making of Each Revolving
Advance.......................................... 34
SECTION 6.2.1. Representations and Warranties.................... 34
SECTION 6.2.2. No Amortization Event; Loan Event of Default...... 34
SECTION 6.2.3. No Borrowing Base Deficiency...................... 34
SECTION 6.2.4. Availability...................................... 34
SECTION 6.2.5. Attachments....................................... 35
SECTION 6.2.6. Receipt of Monthly Report......................... 35
SECTION 6.2.7. Borrowing Request................................. 35
SECTION 6.2.8. Borrowing Base Certificate........................ 35
SECTION 6.3. Conditions Precedent to the Making of
Each Refunding Advance........................... 35
SECTION 6.3.1. No Bankruptcy..................................... 35
SECTION 6.3.2. Availability...................................... 36
SECTION 6.3.3. No Borrowing Base Deficiency...................... 36
SECTION 6.3.4. Borrowing Request................................. 36
SECTION 6.3.5. Borrowing Base Certificate........................ 36
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
SECTION 7.1. Existence and Power............................... 36
SECTION 7.2. Authorization..................................... 37
SECTION 7.3. Binding Effect.................................... 37
SECTION 7.4. Financial Information; Financial Condition........ 37
SECTION 7.5. Litigation........................................ 37
SECTION 7.6. No ERISA Plan..................................... 38
SECTION 7.7. Tax Filings and Expenses.......................... 38
SECTION 7.8. Disclosure........................................ 38
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 7.9. Investment Company Act; Securities Act............ 38
SECTION 7.10. Margin Regulations................................ 38
SECTION 7.11. No Consent........................................ 38
SECTION 7.12. No Violation of Laws, etc......................... 39
SECTION 7.13. Ownership; Subsidiaries........................... 39
SECTION 7.14. Solvency.......................................... 39
SECTION 7.15. No Security Interest.............................. 39
SECTION 7.16. Repurchase Programs............................... 40
SECTION 7.17. Other Representations............................. 40
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VIII
COVENANTS
<S> <C> <C>
SECTION 8.1. Affirmative Covenants............................. 40
SECTION 8.1.1. Information....................................... 40
SECTION 8.1.2. Compliance with Covenants......................... 42
SECTION 8.1.3. Payment of Obligations............................ 42
SECTION 8.1.4. [Reserved]........................................ 42
SECTION 8.1.5. Maintenance of Existence.......................... 42
SECTION 8.1.6. Compliance with Laws.............................. 42
SECTION 8.1.7. Inspection of Property, Books and Records......... 42
SECTION 8.1.8. Absence of Certain Actions........................ 42
SECTION 8.1.9. Notice of Default................................. 43
SECTION 8.1.10. Notice of Material Proceedings.................... 43
SECTION 8.1.11. Further Requests.................................. 43
SECTION 8.1.12. [Reserved]........................................ 43
SECTION 8.1.13. Further Assurances................................ 43
SECTION 8.1.14. Repurchase Programs............................... 43
SECTION 8.1.15. Use of Proceeds of Commercial Paper Notes......... 44
SECTION 8.1.16. Vehicles.......................................... 44
SECTION 8.2. Negative Covenants................................ 44
SECTION 8.2.1. Liens............................................. 44
SECTION 8.2.2. Other Indebtedness................................ 44
SECTION 8.2.3. Consolidations and Mergers........................ 45
SECTION 8.2.4. Sales of Assets................................... 45
SECTION 8.2.5. Acquisition of Assets............................. 45
SECTION 8.2.6. Dividends, Officers' Compensation, etc............ 45
SECTION 8.2.7. Name; Chief Executive Office...................... 45
SECTION 8.2.8. Organic Documents................................. 45
SECTION 8.2.9. Investments....................................... 45
SECTION 8.2.10. No Other Agreements; Amendments to Related
Documents........................................ 45
SECTION 8.2.11. Other Business.................................... 46
SECTION 8.2.12. Maintenance of Separate Existence................. 46
SECTION 8.2.13. Offering Document................................. 47
</TABLE>
ARTICLE IX
AMORTIZATION EVENTS
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.1. Amortization Event................................ 48
SECTION 9.1.1. Non-Payment of Obligations........................ 48
SECTION 9.1.2. Breach of Warranty................................ 48
SECTION 9.1.3. Non-Performance of Other Covenants and
Obligations...................................... 48
SECTION 9.1.4. Non-Performance of Other Covenants and
Obligations...................................... 49
SECTION 9.1.5. [Reserved]........................................ 49
SECTION 9.1.6. Judgments........................................ 49
SECTION 9.1.7. Bankruptcy, Insolvency, etc....................... 49
SECTION 9.1.8. Letters of Credit................................. 49
SECTION 9.1.9. Insolvency of Fronting Credit Enhancers........... 49
SECTION 9.1.10. Independent Directors............................. 50
SECTION 9.1.11. Enforceability of or Default under Related
Documents........................................ 50
SECTION 9.1.12. Investment Company................................ 50
SECTION 9.1.13. Termination of Loan Commitment.................... 50
SECTION 9.1.14. Program Downgrade................................. 50
SECTION 9.1.15. Termination of Liquidity Commitments or
Reduction of Aggregate Liquidity Commitment...... 50
SECTION 9.2. Action if Amortization Event...................... 50
SECTION 9.3. Limited Amortization Events .........................51
SECTION 9.3.1. Ineligibility of Manufacturer or
Repurchase Program............................... 52
SECTION 9.3.2. Termination of Liquidity Commitment............... 52
SECTION 9.3.3. Rating Downgrade of Liquidity Lender.............. 52
SECTION 9.4. Action Upon Limited Amortization Event............ 52
</TABLE>
<TABLE>
<CAPTION>
ARTICLE X
THE LIQUIDITY AGENT
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SECTION 10.1. Actions........................................... 53
SECTION 10.2. Collateral Agreement.............................. 54
SECTION 10.3. Exculpation....................................... 54
SECTION 10.4. Successor......................................... 55
SECTION 10.5. Liquidity Advances by Citibank.................... 55
SECTION 10.6. Credit Decisions.................................. 56
SECTION 10.7. Copies, etc....................................... 56
</TABLE>
<TABLE>
<CAPTION>
ARTICLE XI
MISCELLANEOUS PROVISIONS
<S> <C> <C>
SECTION 11.1. Waivers, Amendments, etc.......................... 56
SECTION 11.2. Notices........................................... 58
SECTION 11.3. Payment of Costs and Expenses..................... 59
SECTION 11.4. Indemnification................................... 60
SECTION 11.5. Survival.......................................... 61
SECTION 11.6. Severability...................................... 61
SECTION 11.7. Headings.......................................... 61
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 11.8. Execution in Counterparts........................ 61
SECTION 11.9. Governing Law; Entire Agreement.................. 61
SECTION 11.10. Successors and Assigns........................... 61
SECTION 11.11. Sale and Transfer of Liquidity Advances
and Notes; Participations in Loans and Notes.... 62
SECTION 11.11.1. Assignments..................................... 62
SECTION 11.11.2. Participations.................................. 64
SECTION 11.12. Other Transactions............................... 65
SECTION 11.13. Bankruptcy Petition Against NFC.................. 65
SECTION 11.14. Limited Recourse to NFC; No Recourse............. 66
SECTION 11.15. Survival of Representations and Warranties....... 66
SECTION 11.16. Confidentiality.................................. 66
SECTION 11.17. Jurisdiction; Consent to Service of Process...... 67
SECTION 11.18. Waiver of Jury Trial............................. 68
SECTION 11.19. Waiver of Set-Off................................ 68
</TABLE>
EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
EXHIBIT A - Form of Revolving Liquidity Advance Note
EXHIBIT B - Form of Refunding Liquidity Advance Note
EXHIBIT C - Form of Borrowing Request
EXHIBIT D - Form of Continuation/Conversion Notice
EXHIBIT E - [Reserved]
EXHIBIT F - Form of Liquidity Lender Assignment
Agreement
EXHIBIT G - Form of Closing Date Certificate
EXHIBIT H - Form of Loan Agreement
EXHIBIT I-1 - [Reserved]
EXHIBIT I-2 - Form of A Support Letter of Credit
Agreement
EXHIBIT I-3 - Form of A Support Reimbursement Agreement
EXHIBIT I-4 - Form of B Letter of Credit Reimbursement
Agreement
EXHIBIT I-5 - Form of B Support Letter of Credit
Reimbursement Agreement
EXHIBIT J - Form of Collateral Agreement
EXHIBIT K - Form of Depositary Agreement
EXHIBIT L - Form of Dealer Agreement
EXHIBIT M - Form of Liquidity Commitment Agreement
EXHIBIT N - Form of Placement Agency Agreement
ANNEXES
ANNEX A - Definitions
ANNEX B - Disclosure Materials
</TABLE>
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<PAGE> 8
LIQUIDITY AGREEMENT
THIS LIQUIDITY AGREEMENT, dated as of June 7, 1995 (as amended,
supplemented, restated or otherwise modified from time to time, this
"Liquidity Agreements"), among NATIONAL FLEET FUNDING CORPORATION, a
Delaware corporation ("NFC"), the financial institutions listed on the
signature pages hereof under the heading "Liquidity Lenders (each such
financial institution, together with each of the financial institutions
that has become party hereto pursuant to Section 11.11.1, including any
such financial institution acting in the capacity of Swing Line Lender,
being a "Liquidity Lender" and, collectively, the "Liquidity Lenders")
and CITIBANK, N.A., a national banking association ("Citibank"), as
liquidity agent (in such capacity, together with any successors and
assigns thereto, the "Liquidity Agent") for the Liquidity Lenders.
WITNESSETH:
WHEREAS, NFC proposes to make Loans (such capitalized term,
together with all other capitalized terms used herein, shall have the
meaning assigned thereto in Section 1.1) to National pursuant to the Loan
Agreement, the proceeds of which are to be used by National to purchase
Vehicles from authorized dealers of Manufacturers or to finance vehicles
previously purchased by National;
WHEREAS, National proposes to assign to the Master Collateral
Agent for the benefit of NFC, with the acknowledgement of each
Manufacturer, all of its right, title and interest in and to certain
rights under Repurchase Programs of such Manufacturer as such Repurchase
Programs relate to the Vehicles;
WHEREAS, NFC proposes to issue and sell its Commercial Paper Notes
in the commercial paper market and use the net proceeds thereof to, among
other things, make Loans;
WHEREAS, NFC desires to obtain Liquidity Commitments from the
Liquidity Lenders to make Liquidity Advances in an aggregate principal
amount not to exceed the Aggregate Liquidity Commitment at any one time
outstanding to NFC from time to time prior to the Liquidity Commitment
Termination Date; and
WHEREAS, the Liquidity Lenders are willing, on the terms and
subject to the conditions hereinafter set forth (including Article VI),
to provide such Liquidity Commitments and make such Liquidity Advances to
NFC;
<PAGE> 9
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Definitions. Capitalized terms used but not defined
herein (including the preamble and the recitals hereto) shall have the
meanings assigned to such terms in the Definitions List, dated as of June
7, 1995 and annexed hereto as Annex A, as such Definitions List may be
amended or modified from time to time in accordance with the provisions
hereof (the Definitions List" ) .
SECTION 1.2. Cross-References. Unless otherwise specified,
references in this Liquidity Agreement and in each other Related Document
to any Article or Section are references to such Article or Section of
this Liquidity Agreement or such other Related Document, as the case may
be, and, unless otherwise specified, references in any Article, Section
or definition to any clause are references to such clause of such
Article, Section or definition.
SECTION 1.3. Accounting and Financial Determinations; No
Duplication. Unless otherwise specified, (i) all accounting terms used
herein shall be interpreted, all accounting determinations and
computations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in conformity with
GAAP, and (ii) all accounting determinations and computations hereunder
or under any other Related Documents shall be made without duplication;
provided, that if any change in GAAP in itself materially affects any
such determination, computation or financial statement, NFC may by notice
to the Liquidity Agent and the Agent, or alternatively the Liquidity
Agent or the Agent may by notice to NFC, require that any such
determination, computation or financial statement thereafter be made in
accordance with GAAP as in effect, and applied by NFC, immediately before
such change in GAAP occurs. Each of the Liquidity Agent, NFC and the
Agent agrees to enter into negotiations in good faith to modify the
financial representations and covenants and other applicable provisions
contained herein in a manner which reflects any such change in GAAP
without adversely affecting the rights of the Liquidity Agent, the
Liquidity Lenders and the Agent.
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ARTICLE II
COMMERCIAL PAPER OPERATIONS
SECTION 2.1. Issuance of Commercial Paper Notes. On the terms and
subject to the provisions of this Liquidity Agreement and the other
Related Documents, NFC may from time to time on or after the Closing Date
and prior to the Liquidity Commitment Termination Date, issue and sell
Commercial Paper Notes; provided, however, that NFC shall not issue and
sell Commercial Paper Notes if
(a) NFC and the Depositary have received instructions
then in effect from the Liquidity Agent (copies of which will also
be sent to the Placement Agents and the Dealers), given in
accordance with this Section 2.1, not to issue or deliver
Commercial Paper Notes because (i) the Liquidity Commitment
Termination Date shall have occurred, or (ii) the Commercial Paper
Account or any funds on deposit in, or otherwise to the credit of,
the Commercial Paper Account shall be subject to any stay, writ,
judgment, warrant of attachment, execution or similar process;
provided, however, that if any such stay, writ, judgment, warrant
of attachment, execution or similar process is removed or
dismissed, NFC may recommence the issuance and sale of Commercial
Paper Notes,
(b) the issuance of Commercial Paper Notes is prohibited
by Sections 2.1, 2.2, 9.2 or 9.4 hereof, Sections 3 or 10 of the
Depositary Agreement or Section 5.01 of the Collateral Agreement,
(c) after giving effect to such issuance and the use of
proceeds thereof, Aggregate Outstandings would exceed the
Borrowing Base,
(d) after giving effect to such issuance and the use of
proceeds thereof, the weighted average interest rate of the
Outstanding Commercial Paper Notes, Liquidity Advances and Support
Liquidity Disbursements would be in excess of 10% per annum,
unless (i) NFC and the Liquidity Agent shall have given their
written consent to a weighted average interest rate in excess of
10% per annum, (ii) the Fronting Letter of Credit Amount shall be
increased if required by the Rating Agencies in connection
therewith and (iii) the Rating Agencies shall have confirmed that
such weighted average interest rate will not result in the
downgrading or withdrawal of the then current ratings of the
Commercial Paper Notes; provided, however, that if the ratings of
the Commercial Paper Notes by S&P and Moody's will be less than
A-1 and P-1, respectively, after giving effect to such
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<PAGE> 11
weighted average interest rate in excess of 10% per Annum, such
Commercial Paper Notes will not be issued unless the Majority
Banks shall have given their written consent thereto, or
(e) NFC and the Depositary shall have received
instructions then in effect from the Liquidity Agent not to issue
or deliver Commercial Paper Notes because any of the conditions
set forth in clauses (b) through (d) of this Section 2.1 shall be
true.
The Liquidity Agent shall have no obligation to deliver any instructions
set forth in clause (a) or clause (e) of this Section 2.1 except upon the
instructions of the Majority Banks and any delivery by the Liquidity
Agent of any such instructions shall be subject to the provisions of
Section 10.3 and the rights of the Liquidity Agent hereunder and shall
not relieve NFC, the Agent or the Depositary of any of their respective
obligations under any Related Document or with respect to the issuance of
Commercial Paper Notes. Any instructions from the Liquidity Agent to NFC
and the Depositary in accordance with clause (a) or clause (e) of this
Section 2.1 shall specify the reason(s) to cease issuing and delivering
Commercial Paper Notes. Without prior instruction as set forth above, the
Liquidity Agent agrees that it shall only instruct NFC and the Depositary
not to issue and sell Commercial Paper Notes if there shall have occurred
an event described in subclause (i) of clause (a) of this Section 2.1.
Concurrently with the giving of any such instructions to NFC and the
Depositary, the Liquidity Agent shall give notice thereof to the
Liquidity Lenders, the Agent, the Placement Agents, the Dealers, and the
rating agency or agencies known to it to have provided investment ratings
with respect to the Commercial Paper Notes, but failure to do so shall
not impair the effect of such instructions and the giving of such notice
shall be subject to Section 10.3.
SECTION 2.2. Conditions to the Issuance of Commercial Paper Notes.
The right of NFC to issue Commercial Paper Notes (whether such Commercial
Paper Notes are to be issued to refinance Commercial Paper Notes maturing
on the day such Commercial Paper Notes are to be issued or to increase
the Aggregate Face Amount over that of the preceding day) is subject to
the satisfaction of the following conditions:
SECTION 2.2.1. Representations and Warranties. With respect to the
issuance of any Commercial Paper Note and after giving effect thereto,
the representations and warranties of NFC set forth in Article VII
hereof, or in any other Related Document to which NFC is a party, shall
be true and correct (in all material respects to the extent any such
representations and warranties do not incorporate a materiality
limitation in their
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<PAGE> 12
terms) with the same effect as if then made (unless stated to relate
solely to an earlier date, in which case such representations and
warranties shall be true and correct (in all material respects to the
extent any such representations and warranties do not incorporate a
materiality limitation in their terms) as of such earlier date).
SECTION 2.2.2. No Amortization Event. (a) At the time of such
issuance and after giving effect thereto, no Amortization Event (and no
Potential Amortization Event with respect to NFC under Section 9.1.7 and,
in the case of any increase in the Aggregate Face Amount over that of the
day preceding the day of such issuance, no other Potential Amortization
Event) shall have occurred and be continuing.
(b) Such issuance of Commercial Paper Notes shall not be
prohibited by Section 9.4.
SECTION 2.2.3. Available Liquidity Commitment. At the time of the
issuance of each Commercial Paper Note and after giving effect thereto
and to the use of proceeds thereof on such day, the sum of the Aggregate
Liquidity Commitment and the Fronting Letter of Credit Amount shall be
equal to or greater than the sum of the Aggregate Outstanding CP and the
aggregate principal amount of Liquidity Advances Outstanding net of any
amounts on deposit at such time in the Collateral Account set aside for
the repayment of the principal of Liquidity Advances.
SECTION 2.2.4. No Borrowing Base Deficiency. With respect to the
issuance of any Commercial Paper Note, a Borrowing Base Deficiency shall
not exist and the issuance of such Commercial Paper Note, after giving
effect to the repayment of any Commercial Paper Notes, Liquidity Advances
and Support Liquidity Disbursements made with the proceeds thereof, would
not result in a Borrowing Base Deficiency.
SECTION 2.2.5. Borrowing Base Certificate. The Liquidity Agent
shall have received an Officer's Certificate, dated the date of such
issuance, duly executed and delivered by an Authorized Officer of NFC,
certifying the amount of the Borrowing Base as of the close of business
of the day immediately preceding such date.
SECTION 2.2.6. Non-Payment of Loans. At the time of such issuance
and after giving effect thereto, no Potential Loan Event of Default under
Section 12.1.1 of the Loan Agreement shall have occurred and be
continuing.
SECTION 2.3. Commercial Paper Notes. NFC agrees that each
promissory note constituting Commercial Paper Notes shall (a) be
substantially in the form of Exhibit A to the Depositary
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<PAGE> 13
Agreement or in the form of the Master Note attached to the Depositary
Agreement, and be completed in accordance with this Liquidity Agreement
and the Depositary Agreement (including any provisions for book-entry
securities contained therein), (b) be dated the date of issuance thereof,
(c) be made payable to the order of a named payee or bearer, (d) have a
maturity date which shall not be later than the earlier of (i) three
Business Days prior to the earliest of the Scheduled Liquidity Commitment
Termination Date, the A Letter of Credit Expiration Date and the B Letter
of Credit Expiration Date in effect on the date of issuance thereof and
(ii) the date which is 58 days after the date of issuance thereof, (e) be
in a face amount of at least $100,000 and an integral multiple of $1,000,
and (f) be exempt from the registration requirements of the Securities
Act of 1933, as amended, pursuant to Section 3(a)(3) thereof. Subject to
the provisions of the Depositary Agreement, all Commercial Paper Notes
shall be delivered and issued against payment therefor in immediately
available funds on the date of issuance, and otherwise in accordance with
the terms of this Liquidity Agreement and the Depositary Agreement.
SECTION 2.4. Commercial Paper Account: Payment of Commercial Paper
Notes. (a) Contemporaneously with the execution and delivery by NFC of
the Depositary Agreement, and for the purposes of this Liquidity
Agreement and the Depositary Agreement, NFC shall cause the Depositary to
establish at its office at 120 Wall Street, 13th Floor, New York, New
York 10043, a segregated trust account in its corporate trust department
for the exclusive benefit of the Holders of the outstanding Commercial
Paper Notes (the "Commercial Paper Accounts"), over which the Depositary
shall have exclusive control and sole right of withdrawal.
(b) Proceeds of the sale of Commercial Paper Notes shall be
deposited in the Commercial Paper Account only to the extent necessary to
pay matured and concurrently maturing Commercial Paper Notes, whether or
not presented to the Depositary for payment; otherwise proceeds of the
sale of Commercial Paper Notes shall be applied according to the terms of
the Collateral Agreement.
ARTICLE III
LIQUIDITY COMMITMENTS, BORROWING PROCEDURES,
LIQUIDITY ADVANCES AND NOTES
SECTION 3.1. Liquidity Commitments. Subject to and in accordance
with the terms and the conditions of this Liquidity Agreement (including
Article VI), each Liquidity Lender severally and not jointly agrees to
make Revolving Advances and Refunding
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Advances, and the Swing Line Lender agrees to make Swing Line Advances
(relative to such Liquidity Lender, or to the Swing Line Lender, as the
case may be, collectively, together with its Commitment Termination Date
Liquidity Advance, its "Liquidity Advances"), to NFC pursuant to this
Section 3.1.
SECTION 3.1.1. Revolving Advance Commitment. Subject to and in
accordance with the terms and conditions hereof (including, without
limitation, the terms and conditions set forth in Section 6.2), each
Liquidity Lender severally and not jointly agrees to make, from time to
time, on or before the earlier to occur of such Liquidity Lender's
Scheduled Liquidity Commitment Termination Date and the Revolving Advance
Commitment Termination Date, advances for the purposes set forth in
Section 3.1.4(a) (relative to such Liquidity Lender, its "Revolving
Advances") to NFC equal to such Liquidity Lender's Percentage of the
aggregate amount of the Borrowing of Revolving Advances requested by NFC
to be made on such day. On the terms and subject to the conditions
hereof, NFC may from time to time borrow, prepay and reborrow Revolving
Advances.
SECTION 3.1.2. Refunding Advance Commitment. Subject to and in
accordance with the terms and conditions hereof (including, without
limitation, the terms and conditions set forth in Section 6.3), each
Liquidity Lender severally and not jointly agrees to make, from time to
time, on or before such Liquidity Lender's Liquidity Commitment
Termination Date, advances for the purposes set forth in Section 3.1.4(b)
(relative to such Liquidity Lender (including its Commitment Termination
Date Liquidity Advance), its "Refunding Advances") to NFC equal to (a) in
the case of Refunding Advances (other than any Commitment Termination
Date Liquidity Advance), such Liquidity Lender's Percentage of the
aggregate amount of the Borrowing of Refunding Advances requested by NFC
or the Agent, as attorney-in-fact for NFC, to be made on such day, and
(b) in the case of Commitment Termination Date Liquidity Advances, such
Liquidity Lender's Overall Percentage of the Aggregate Face Amount on
the date of such Commitment Termination Date Liquidity Advance. On the
terms and subject to the conditions hereof, NFC may from time to time
borrow, prepay and reborrow Refunding Advances (other than Commitment
Termination Date Liquidity Advances).
SECTION 3.1.3. Swing Line Commitment. Subject to and in accordance
with the terms and conditions hereof (including, without limitation, the
terms and conditions set forth in Section 6.3), the Swing Line Lender
agrees to make, from time to time, on or before such Liquidity Lender's
Liquidity Commitment Termination Date, Swing Line Advances equal to the
aggregate amount of the Borrowing of Swing Line Advances requested by NFC
or the Agent, as attorney-in-fact for NFC, to be made on such day. On the
terms and subject to the conditions hereof, NFC may
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<PAGE> 15
from time to time borrow, prepay and reborrow Swing Line Advances.
SECTION 3.1.4. Use of Proceeds. Proceeds from the Liquidity
Advances shall be applied by NFC as follows:
(a) Proceeds from each Revolving Advance shall be used
by NFC to: (i) make Loans pursuant to the Loan Agreement or (ii)
to repay matured Liquidity Advances (other than any Commitment
Termination Date Liquidity Advance).
(b) Proceeds of each Refunding Advance and each Swing
Line Advance shall be deposited by NFC into the Commercial Paper
Account and proceeds of each Commitment Termination Date Liquidity
Advance shall be deposited by NFC into the Termination Advance
Account, in each case, for the repayment of maturing Commercial
Paper Notes.
NFC shall not use the proceeds of any Liquidity Advance for any other
purpose.
SECTION 3.2. Liquidity Lenders Not Required to Make Certain
Liquidity Advances.
SECTION 3.2.1. Revolving Advances. No Liquidity Lender shall be
required to make a Revolving Advance to the extent that if after giving
effect to such Revolving Advance, (i) the aggregate principal amount of
all Liquidity Advances (including any Swing Line Advances) Outstanding
would exceed the Aggregate Liquidity Commitment, or (ii) the aggregate
principal amount of such Liquidity Lender's Liquidity Advances
(including, in the case of the Swing Line Lender, any Swing Line
Advances) Outstanding would exceed such Liquidity Lender's Liquidity
Commitment.
SECTION 3.2.2. Refunding and Swing Line Advances. No Liquidity
Lender shall be required to make a Refunding Advance (including, in the
case of the Swing Line Lender, a Swing Line Advance) to the extent that
if after giving effect to such Refunding Advance (or Swing Line Advance,
as the case may be), (i) the aggregate principal amount of all Liquidity
Advances (including any Swing Line Advances) Outstanding would exceed the
Aggregate Liquidity Commitment or (ii) the aggregate principal amount of
such Liquidity Lender's Liquidity Advances (including, in the case of the
Swing Line Lender, any Swing Line Advances) Outstanding would exceed such
Liquidity Lender's Liquidity Commitment.
SECTION 3.2.3. Failure To Fund. The provisions of this Section
3.2.3 shall only be operative at any time when the number of Liquidity
Lenders whose respective Liquidity Commitments have
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not expired or been terminated and the number of Fronting Credit
Enhancers whose respective Credit Enhancer Commitments have not expired
shall exceed 10 in the aggregate.
Subject to Sections 3.2.1 and 3.2.2, in the event that one or more
Liquidity Lenders fails to fund its or their Percentage of the Liquidity
Advances to be provided by the Liquidity Lenders by 2:00 p.m., New York
City time, on any Business Day (other than a Commitment Termination Date
Liquidity Advance or a Revolving Advance the proceeds of which are to be
used to repay maturing Liquidity Advances), the Liquidity Agent shall
notify each of the other Liquidity Lenders not later than 3:00 p.m., New
York City time, on such Business Day and each of the other Liquidity
Lenders shall, before 5:00 p.m., New York City time, on such Business
Day, make available to the Liquidity Agent at the Liquidity Agent's
address specified for such purpose, in immediately available funds, a
Liquidity Advance in a principal amount equal to such unfunded amount
multiplied by a fraction, the numerator of which is the Liquidity
Commitment of such Liquidity Lender and the denominator of which is the
Aggregate Liquidity Commitment (less the Liquidity Commitments of the
defaulting Liquidity Lenders). After the Liquidity Agent's receipt of
such funds and upon fulfillment of the applicable conditions set forth in
Article VI, the Liquidity Agent will make such funds available to NFC by
5:45 p.m., New York City time. Any Liquidity Advance made pursuant to
this Section 3.2.3 shall be a Base Rate Advance subject to conversion in
accordance with the provisions of Section 3.8 hereof.
SECTION 3.3. Termination and Reduction of the Liquidity
Commitments. (a) NFC may, upon at least three Business Days' prior
written notice to the Liquidity Agent (who shall give prompt written
notice thereof to each Liquidity Lender, the Dealers and the Depositary),
irrevocably terminate or reduce ratably in part the Aggregate Liquidity
Commitment; provided, however, that the Aggregate Liquidity Commitment
shall not be reduced on any day in an amount such that the Aggregate
Liquidity Commitment would be less than the sum of (i)(x) the Aggregate
Outstanding CP on such day, less (y) the Fronting Letter of Credit
Amount, plus (ii) the aggregate principal amount of all Liquidity
Advances (including any Swing Line Advances) Outstanding (other than
Commitment Termination Date Liquidity Advances) on such day net of any
amounts on deposit on such day in the Collateral Account set aside for
the repayment of the principal of Liquidity Advances; provided, further,
that any partial reduction shall be at least $5,000,000 and in an
integral multiple of $1,000,000. Any such reduction of the Aggregate
Liquidity Commitment shall reduce ratably the Liquidity Commitment of
each Liquidity Lender.
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(b) The Liquidity Agent shall give notice to the Placement
Agents and the Dealers as to any change in the Aggregate Liquidity
Commitment promptly after any reduction thereof.
(c) No termination or reduction of the Aggregate Liquidity
Commitment by NFC pursuant to this Section 3.3 shall be effective unless
the Liquidity Agent or NFC shall have given notice to S&P and Moody's of
such termination or reduction.
SECTION 3.4. Increase of the Aggregate Liquidity Commitment. The
Aggregate Liquidity Commitment may be increased from time to time to an
amount greater than the amount of the Aggregate Liquidity Commitment on
the Closing Date through the increase of a Liquidity Lender's Liquidity
Commitment or the addition of one or more Eligible Liquidity Lenders as a
party to this Liquidity Agreement; provided, however, that no such
increase shall become effective unless all of the following conditions
shall have been satisfied:
(a) NFC and the Liquidity Agent shall have given their
written consent thereto;
(b) such Liquidity Lender or Eligible Liquidity Lender,
as the case may be, and NFC shall have executed and delivered to
the Liquidity Agent a Liquidity Commitment Agreement;
(c) the Fronting Letter of Credit Amount shall be
increased to the Required Enhancement Amount immediately after
giving effect to the increase in the Aggregate Liquidity
Commitment; and
(d) the Rating Agencies confirm in writing that such
increase in the Aggregate Liquidity Commitment will not result in
the downgrading below A-1 by S&P and P-1 by Moody's or withdrawal
of the ratings of the Commercial Paper Notes.
SECTION 3.5. Extensions of Scheduled Liquidity Commitment
Termination Date. Each Liquidity Lender's Scheduled Liquidity Commitment
Termination Date may be extended from time to time by a written agreement
among NFC, such Liquidity Lender and the Liquidity Agent.
SECTION 3.6. Borrowing Procedures. Borrowings of Revolving
Advances, Refunding Advances, Commitment Termination Date Liquidity
Advances and Swing Line Advances shall be made in accordance with this
Section 3.6.
SECTION 3.6.1. Revolving Advances. By delivering a Borrowing
Request to the Liquidity Agent for a borrowing
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consisting of Revolving Advances, which will be accompanied by telephonic
notification, NFC may irrevocably request, (a) in the case of LIBOR
Advances, not later than 11:15 a.m., New York City time, on not less than
three nor more than five Business Days, prior notice, that a Borrowing be
made in a minimum amount of $5,000,000 and an integral multiple of
$1,000,000, or (b) in the case of Base Rate Advances, not later than
11:30 a.m., New York City time, on the date of such borrowing and, in any
case, on not more than five Business Days' prior notice (which notice
shall be given in writing), that a Borrowing be made in a minimum amount
of $5,000,000 and an integral multiple of $1,000,000. On the terms and
subject to the conditions of this Liquidity Agreement, each such
Borrowing shall be comprised of Liquidity Advances of the same type (and,
in the case of LIBOR Advances, shall have same Interest Period), and
shall be made on the Business Day, specified in such Borrowing Request.
SECTION 3.6.2. Refunding Advances. Upon receipt from the
Depositary of notice (not later than 11:15 a.m., New York City time)
pursuant to Section 5(b) of the Depositary Agreement that, on any
Business Day that any Commercial Paper Notes mature, the amount required
to pay in full all Commercial Paper Notes maturing on such Business Day
will be more than the net amount obtained by the issuance of Commercial
Paper Notes on such day plus the amount available for payment of such
Commercial Paper Notes in the Commercial Paper Account (the amount of
such excess, the "Commercial Paper Deficit"), the Agent shall, if such
notice contains an instruction from the Depositary to the Agent to
deliver a Borrowing Request, by delivering a Borrowing Request to the
Liquidity Agent (who will notify the other Liquidity Lenders of such
Borrowing Request not later than 12:00 noon, New York City time) for a
Borrowing consisting of Refunding Advances, irrevocably request, not
later than 11:30 a.m., New York City time, on the date of a proposed
Borrowing, that a Borrowing be made in an aggregate principal amount
equal to the excess of (i) the Commercial Paper Deficit over (ii) the sum
of the aggregate amount, if any, applied or to be applied on such
Business Day to the Commercial Paper Deficit from amounts available
therefor in the Collateral Account and the Termination Advance Account
that are allocated to the payment of maturing Commercial Paper Notes and
from the proceeds of Swing Line Advances being made on such day. On the
terms and subject to the conditions of this Liquidity Agreement, each
such Borrowing shall be initially comprised of Base Rate Advances
(subject to conversion in accordance with the provisions of Section 3.8)
and shall be made on the Business Day specified in such Borrowing
Request. For the purposes of this Section, Commercial Paper Notes
maturing on any day which have been paid from an advance made by the
Depositary shall nonetheless be deemed to be unpaid.
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SECTION 3.6.3. Swing Line Advances. If on any Business Day that
NFC or the Agent, as the case may be, determines that there exists a
Commercial Paper Deficit, and the excess of such Commercial Paper Deficit
over the sum of the aggregate amount, if any, applied or to be applied on
such Business Day to the Commercial Paper Deficit from amounts available
therefor in the Collateral Account and the Termination Advance Account
that are allocated to the payment of maturing Commercial Paper Notes is
equal to or less than $5,000,000, NFC or the Agent, as the case may be,
shall promptly (and in no case later than 10:30 a.m. on the date of such
discovery) notify the Depositary of such Commercial Paper Deficit and NFC
or the Agent, as attorney-infact for NFC, may, or the Agent, upon the
instruction of the Depositary pursuant to Section 5(b) of the Depositary
Agreement, shall by delivering a Borrowing Request to the Liquidity Agent
for forwarding to the Swing Line Lender for a Borrowing consisting of a
Swing Line Advance, irrevocably request, not later than 11:30 a.m., New
York City time, on the date of a proposed Borrowing, that a Borrowing be
made in an aggregate principal amount equal to the least of
(a) $5,000,000 minus the aggregate principal amount of
all Swing Line Advances then outstanding;
(b) the excess, if any, of the Swing Line Lenders
Liquidity Commitment as a Liquidity Lender over the aggregate
principal amount of all of its Liquidity Advances Outstanding on
the date of such proposed Borrowing (without giving effect to such
proposed Borrowing); and
(c) the excess of the Commercial Paper Deficit over the
sum of the aggregate amount, if any, applied or to be applied on
such Business Day to the Commercial Paper Deficit from amounts
available therefor in the Collateral Account and the Termination
Advance Account that are allocated to the payment of maturing
Commercial Paper Notes.
On the terms and subject to the conditions of this Liquidity Agreement,
each such Borrowing shall be a Base Rate Advance (subject to conversion
in accordance with the provisions of Section 3.8), and shall be made on
the Business Day specified i such Borrowing Request. For the purposes of
this Section, Commercial Paper Notes maturing on any day which have been
paid from an advance made by the Depositary that has not been reimbursed
shall nonetheless be deemed to be unpaid. If, after giving effect to any
Swing Line Advance requested pursuant to this Section 3.6.3 (provided
that the conditions thereto set forth in Section 6.3 are satisfied), (a)
the aggregate principal amount of Swing Line Advances would be greater
than $5,000,000, or (b) the aggregate principal amount of Swing Line
Advances is less than or equal to $5,000,000 and such Swing Line Advances
are
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not repaid within five Business Days or (c) the aggregate principal
amount of all Liquidity Advances Outstanding made by the Swing Line
Lender would exceed its Liquidity Commitment, then in any such case each
Liquidity Lender shall immediately and unconditionally, upon written
notice thereof by the Swing Line Lender, make Liquidity Advances to NFC,
the proceeds of which will be applied to the repayment of Swing Line
Advances made by the Swing Line Lender, in an amount equal to such
Liquidity Lender's Percentage of the aggregate principal amount of the
Swing Line Advances Outstanding. Notwithstanding Section 6.3, the
obligation of the Liquidity Lenders to make Liquidity Advances under this
Section 3.6.3 shall be unconditional. The Swing Line Advances and
Liquidity Advances made pursuant to this Section 3.6.3 shall be comprised
of Base Rate Advances, subject to conversion in accordance with the
provisions of Section 3.8 hereof.
SECTION 3.6.4. Commitment Termination Date Liquidity Advances. NFC
may request each Liquidity Lender, on the Scheduled Liquidity Commitment
Termination Date with respect to such Liquidity Lender's Liquidity
Commitment, to make a Refunding Advance to NFC on the terms and subject
to the conditions of this Liquidity Agreement. Any such Commitment
Termination Date Liquidity Advance shall not exceed such Liquidity
Lender's Overall Percentage of the Aggregate Face Amount on the date of
such Commitment Termination Date Liquidity Advance and the aggregate
amount of any previously made Liquidity Advances of such Liquidity Lender
that are outstanding on such date shall be converted into, and for all
purposes of this Agreement shall be treated as, a Commitment Termination
Date Liquidity Advance.
SECTION 3.6.5. Nature of Funding Obligations. The obligations of
the Liquidity Lenders hereunder are several and not joint. All Liquidity
Advances (other than Swing Line Advances and Commitment Termination Date
Liquidity Advances) under this Liquidity Agreement shall be made by the
Liquidity Lenders simultaneously and proportionately to their respective
Percentages, it being understood that, subject to Section 3.2.3, no
Liquidity Lender shall be responsible for any failure by any other
Liquidity Lender to perform its obligation to make a Liquidity Advance
hereunder and that the Liquidity Commitment of any Liquidity Lender shall
not be increased or decreased as a result of the failure by any other
Liquidity Lender to perform its obligation to make a Liquidity Advance.
The failure of any Liquidity Lender to make available to the Liquidity
Agent its ratable share of any Borrowing shall not relieve any other
Liquidity Lender of its obligation hereunder to make available to the
Liquidity Agent such other Liquidity Lender's pro rata share of such
Borrowing on the date such funds are to be made available pursuant to the
terms of this Liquidity Agreement. Notwithstanding the foregoing, each
Liquidity Lender shall
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continue to be obligated to make Liquidity Advances upon a default by a
Liquidity Lender as required by Section 3.2.3.
SECTION 3.6.6. Failure to Fund by Lender. Unless the Liquidity
Agent shall have been notified by any Liquidity Lender prior to 1:00
p.m., New York City time, on the date of any Borrowing in respect of any
Liquidity Advances that such Liquidity Lender does not intend to make
available to the Liquidity Agent such Liquidity Lender's Liquidity
Advances on such date of Borrowing, the Liquidity Agent may assume that
such Liquidity Lender has made such amount available to the Liquidity
Agent on such date of Borrowing and the Liquidity Agent in its sole
discretion may, but shall not be obligated to, make available to NFC a
corresponding amount on such date of Borrowing. If such corresponding
amount is not in fact made available to the Liquidity Agent by such
Liquidity Lender on or prior to a date of Borrowing, such Liquidity
Lender agrees to pay to the Liquidity Agent forthwith on demand such
corresponding amount together with interest thereon, and NFC agrees to
repay to the Liquidity Agent forthwith on the Business Day immediately
following the date of demand therefor such corresponding amount together
with interest thereon, for each day from the date such amount is made
available to NFC until the date such amount is paid or repaid to the
Liquidity Agent, at (a) in the case of such Liquidity Lender, the Federal
Funds Rate for the first Business Day and thereafter at the Base Rate,
and (b) in the case of NFC, the interest rate that would be applicable at
the time to a Borrowing of Base Rate Advances made on such date of
Borrowing. If such Liquidity Lender shall pay to the Liquidity Agent such
corresponding amount, such amount so paid shall constitute such Liquidity
Lender's Liquidity Advance, and if both such Liquidity Lender and NFC
shall have paid and repaid, respectively, such corresponding amount, the
Liquidity Agent shall promptly pay over to NFC such corresponding amount
in same day funds, but NFC shall remain obligated for all interest
thereon. To the extent any such amount due to the Liquidity Agent under
this Section 3.6.6 has not been paid in full, the Liquidity Agent may
make a demand on the Agent to pay such amount in accordance with Sections
2.01 and 5.02(b) of the Collateral Agreement.
SECTION 3.7. Disbursement of Funds. (a) Upon receipt of each
Borrowing Request for Refunding Advances or for Revolving Advances, the
Liquidity Agent shall give to each Liquidity Lender prompt notice thereof
and of such Liquidity Lender's share of the Borrowing requested thereby.
On or before 1:30 p.m., New York City time, on the proposed Borrowing
date, each Liquidity Lender shall deposit with the Liquidity Agent same
day funds in an amount equal to such Liquidity Lender's Percentage of the
requested Borrowing. Such deposit will be made to a segregated trust
account (Account No. 102478) established by the Liquidity Agent or such
other account which the Liquidity Agent shall
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specify from time to time by notice to the Liquidity Lenders. No
Liquidity Lender's obligation to make any Revolving Advances or Refunding
Advances, as the case may be, shall be diminished by any other Liquidity
Lender's failure to make any Revolving Advances or Refunding Advances, as
the case may be.
(b) Upon receipt of a Borrowing Request for a Swing Line
Advance, the Liquidity Agent shall give the Swing Line Lender prompt
notice thereof and of the amount of the Borrowing requested thereby. On
or before 1:30 p.m., New York City time, on the date of the proposed
Borrowing, the Swing Line Lender shall deposit with the Liquidity Agent
same day funds in an amount equal to the requested Borrowing. Such
deposit shall be made to an account which the Liquidity Agent shall
specify from time to time by notice to the Swing Line Lender.
(c) Unless the Liquidity Agent determines that any condition
specified in Section 6.2, in the case of Revolving Advances, or Section
6.3, in the case of Refunding Advances or Swing Line Advances, has not
been satisfied, the Liquidity Agent will remit the aggregate of the
amounts of (i) Refunding Advances or Swing Line Advances so made
available by the Liquidity Lenders (or, in the case of any Swing Line
Advance, the Swing Line Lender) to the Commercial Paper Account, (ii)
Commitment Termination Date Liquidity Advances so made available by the
Liquidity Lenders to the Termination Advance Account and (iii) Revolving
Advances so made available by the Liquidity Lenders to the Collateral
Account, in each case not later than 2:30 p.m., New York City time.
SECTION 3.8. Continuation and Conversion Elections. By delivering
a Continuation/Conversion Notice to the Liquidity Agent (which will give
prompt notice to the Liquidity Lenders) on or before 11:15 a.m., New York
City time, on a Business Day, NFC may from time to time irrevocably elect
that all or any portion in an aggregate minimum amount of $5,000,000 and
an integral multiple of $1,000,000 of any Liquidity Advances be
(a) in the case of Base Rate Advances, (i) on not less
than three nor more than five Business Days' prior notice,
converted into LIBOR Advances, or (ii) continued as Base Rate
Advances; or
(b) in the case of LIBOR Advances, (i) on prior notice
given not less than three nor more than five Business Days prior
to the end of the related Interest Period, continued as LIBOR
Advances or (ii) converted into Base Rate Advances.
In the absence of delivery of a Continuation/Conversion Notice at least
three Business Days prior to the last day of the related Interest Period,
in the case of any LIBOR Advance, such LIBOR
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Advance shall, on such last day, automatically convert to a Base Rate
Advance. In the absence of delivery of a Continuation/Conversion Notice
at least three Business Days prior to the last day of the related
Interest Period, in the case of any Base Rate Advance, such Base Rate
Advance shall automatically continue as a Base Rate Advance. No portion
of the principal amount of any Liquidity Advances Outstanding may be
continued as, or be converted into, LIBOR Advances when any Amortization
Event or Potential Amortization Event has occurred and is continuing.
SECTION 3.9. LIBOR Funding. (a) Bach Liquidity Lender may, if it
so elects, fulfill its obligation to make, continue or convert LIBOR
Advances hereunder by causing one of its foreign branches or Affiliates
(or an international banking facility created by such Liquidity Lender)
to make or maintain such LIBOR Advance; provided, however, that such
LIBOR Advance shall nonetheless be deemed to have been made and to be
held by such Liquidity Lender, and the obligation of NFC to repay such
LIBOR Advance shall nevertheless be to such Liquidity Lender for the
account of such foreign branch, Affiliate or international banking
facility.
(b) NFC shall not be permitted to request, and the Liquidity
Lenders shall not be required to maintain, any number of Interest Periods
with respect to LIBOR Advances in effect at any time hereunder in excess
of 20.
SECTION 3.10. Liquidity Advance Notes. Each Liquidity Lender's
Revolving Advances and Refunding Advances (including its Commitment
Termination Date Liquidity Advance and, in the case of the Swing Line
Lender, any Swing Line Advances) under its Liquidity Commitment shall be
evidenced by a Revolving Note and a Refunding Note, respectively, each
duly executed on behalf of NFC, and each payable to the order of such
Liquidity Lender in a maximum principal amount equal in each case to such
Liquidity Lender's original Liquidity Commitment. NFC hereby irrevocably
authorizes each Liquidity Lender to make (or cause to be made)
appropriate notations on the grid attached to such Liquidity Lender's
Liquidity Advance Notes (or on any continuation of such grid), which
notations, if made, shall evidence, inter alia, the date of, the
outstanding principal of, and the interest rate and Interest Period
applicable to the Liquidity Advances evidenced thereby. Such notations
shall be conclusive and binding on NFC absent manifest error; provided,
however, that the failure of any Liquidity Lender to make any such
notation or any error in any such notation shall not limit or otherwise
affect any Obligations of NFC.
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ARTICLE IV
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES, ETC.
SECTION 4.1. Repayments and Prepayments. NFC shall repay in full
the unpaid principal amount of each Liquidity Advance on the earlier to
occur of (i) the Scheduled Maturity Date and (ii) the date all
Obligations are declared or otherwise become due and payable under
Section 9.2. Prior thereto, NFC shall make repayments and prepayments in
accordance with this Section 4.1.
SECTION 4.1.1. Voluntary Prepayments. From time to time on any
Business Day, NFC may make a voluntary prepayment, in whole or in part,
of the outstanding principal amount of any Liquidity Advance; provided,
however, that
(a) NFC shall, in the case of the voluntary prepayment
of any LIBOR Advance, give the Liquidity Agent at least three but
no more than five Business Days' prior written notice of its
intent to prepay such LIBOR Advance and NFC shall specify in such
prior written notice the amount of such prepayment;
(b) all such voluntary prepayments which are partial
prepayments shall be in a minimum aggregate principal amount equal
to $1,000,000 and in an integral multiple of $100,000;
(c) all such voluntary prepayments shall be applied,
unless otherwise specified by NFC, to the payment of, first, pro
rata among Base Rate Advances and then, pro rata among LIBOR
Advances having the same Interest Period in the inverse order of
their maturities; and
(d) no such voluntary prepayment of any LIBOR Advance
may be made on any day other than the last day of the Interest
Period for such LIBOR Advance unless, as required by Section 5.4,
breakage fees are paid in connection with such prepayment.
SECTION 4.1.2. Mandatory Prepayments. (a) Concurrently with any
partial reduction or termination of the Aggregate Liquidity Commitment
pursuant to Section 3.3, all funds available on such day in the
Collateral Account for the payment of Liquidity Advances, as provided in
Section 2.01 or 5.02, as applicable, of the Collateral Agreement, shall
be applied to repay as much of the Liquidity Advances (and interest
accrued thereon) as shall be necessary so that the sum of the aggregate
principal amount of Liquidity Advances Outstanding (other than Commitment
Termination Date Liquidity Advances) plus the Aggregate Face Amount will
not exceed the Aggregate Liquidity Commitment plus the Fronting Letter of
Credit Amount after giving
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effect to such termination or reduction and, to the extent such funds are
not sufficient to pay such excess (and interest accrued thereon), all
funds subsequently deposited in the Collateral Account and allocated to
the payment of Liquidity Advances in accordance with the priorities set
forth in Section 2.01 or 5.02, as applicable, of the Collateral Agreement
shall be applied to pay such excess (and interest accrued thereon) until
so paid.
(b) If, on any Business Day, a Borrowing Base Deficiency
exists, all funds available for the payment of Commercial Paper Notes,
Liquidity Advances or Support Liquidity Disbursements on such day in the
Collateral Account, as provided in Section 2.01 or 5.02, as applicable,
of the Collateral Agreement, shall be (i) first, deposited in the
Commercial Paper Account for application to the payment of maturing
Commercial Paper Notes (and, in the case of deposits made pursuant to
Section 2.01 of the Collateral Agreement, unmatured Commercial Paper
Notes) and (ii) second, applied to repay Liquidity Advances and Support
Liquidity Disbursements (and interest accrued thereon) pro rata in
accordance with their outstanding principal amount, in each case, as
shall be necessary so that after giving effect to such application there
shall be no such Borrowing Base Deficiency and, to the extent such funds
or other amounts are not sufficient therefor, all funds subsequently
deposited in the Collateral Account and allocated to the payment of
Liquidity Advances and Support Liquidity Disbursements in accordance with
the priorities set forth in Section 2.01 or 5.02, as applicable, of the
Collateral Agreement shall be applied or set aside for the pro rata
application to Liquidity Advances Outstanding and Support Liquidity
Disbursements Outstanding until there shall be no such Borrowing Base
Deficiency.
(c) Each mandatory payment required by clause (a) (in the case
of a reduction or termination pursuant to Section 3.3) or clause (b)
above shall, for purposes of Section 9.1.1 and all other provisions of
this Liquidity Agreement, be due and payable in full on the Business Day
on which such reduction or termination or such Borrowing Bane Deficiency
exists, whether or not sufficient funds are then available to make such
payment.
SECTION 4.2. Interest Provisions. Interest on the principal amount
of Liquidity Advances Outstanding shall accrue and be payable in
accordance with this Section 4.2.
SECTION 4.2.1. Rates. (a) Pursuant to an appropriately delivered
Borrowing Request or Continuation/Conversion Notice, NFC may elect that
Liquidity Advances comprising a Borrowing accrue interest at a rate per
annum:
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(i) on that portion maintained from time to time as a
Base Rate Advance, equal to the Base Rate from time to time in
effect; or
(ii) on that portion maintained as a LIBOR Advance,
during each Interest Period applicable thereto, equal to the sum
of the LIBOR for such Interest Period plus a margin of 0.75% per
annum.
(b) If any Liquidity Lender shall determine in good faith that
reserves under Regulation D of the Board of Governors of the Federal
Reserve System ("Regulation D") are required to be maintained by it in
respect of, or that a portion of its costs of maintaining reserves under
Regulation D is properly attributable to, one or more of its LIBOR
Advances, NFC shall pay to such Liquidity Lender additional interest on
the unpaid principal amount of each such LIBOR Advance from the date such
reserves were required to be maintained until such principal amount is
paid in full or converted into a Base Rate Advance, at an interest rate
per annum equal at all times to the remainder obtained by subtracting (i)
LIBOR for the Interest Period for such LIBOR Advance from (ii) the rate
obtained by dividing such LIBOR by an amount equal to one minus the LIBOR
Reserve Percentage (expressed as a decimal) of such Liquidity Lender for
such LIBOR Interest Period. Any Liquidity Lender claiming any additional
interest payable pursuant to this clause (b) shall provide a written
certificate to the Liquidity Agent, NFC and the Rating Agencies setting
forth the amount of such additional interest and reasonable detail as to
the calculation thereof. NFC shall pay such Liquidity Lender the amount
shown as due on any such certificate within 30 days following the date on
which such certificate was delivered to NFC.
SECTION 4.2.2. Post Default Rates. Without giving effect to
Section 5.10 hereof, after the date on which any amount of any Liquidity
Advance is due and payable (whether on the last day of an Interest
Period, on the Scheduled Maturity Date, when a mandatory prepayment
initially becomes due or upon acceleration or otherwise), or after any
other monetary Obligation of NFC shall have become due and payable, NFC
shall pay, but only to the extent permitted by law, interest (after as
well as before judgment) on the principal amount of Liquidity Advances
then outstanding (whether or not the same shall then be due and payable)
and each other monetary Obligation hereunder (but only if the same shall
then be due and payable in accordance with the terms of this Liquidity
Agreement) at a rate per annum equal to a margin of 1%t per annum plus
(i) in the case of any Liquidity Advances then outstanding and in respect
of which Interest Periods remain in effect, the respective interest rates
then applicable to such Liquidity Advances, and (ii) in all other
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cases, a rate per annum equal to the rate per annum that would then be in
effect with respect to a Ease Rate Advance.
SECTION 4.3. Payments of Interest. Accrued interest in respect of
each Liquidity Advance shall be payable in arrears (whether by
acceleration, demand or otherwise) on each payment date set forth below:
(a) with respect to any Base Rate Advance, on the third
Business Day following the end of each calendar quarter, beginning
with the first such date to occur after such Base Rate Advance is
made;
(b) with respect to any LIBOR Advance, on the last day
of each applicable Interest Period (and, if such Interest Period
shall exceed three months, on the three-month anniversary of the
commencement of such Interest Period);
(c) in the case of any payment or prepayment, in whole
or in part, of principal outstanding on any Liquidity Advance, on
the amount and on the date of such payment or prepayment;
(d) with respect to any Base Rate Advance converted into
a LIBOR Advance on a day when interest would not otherwise have
been payable pursuant to clause (a), on the date of such
conversion; and
(e) on that portion of any Liquidity Advance which is
accelerated pursuant to Section 9.2, immediately upon such
acceleration.
Interest accrued on Liquidity Advances or other monetary Obligations
arising under this Liquidity Agreement or any other Related Document
after the date such amount is due and payable shall be payable upon
demand.
SECTION 4.4. Computation Basis. Interest accruing based on the
Base Rate shall be computed on the basis of the actual number of days
elapsed and a 365 (or, if applicable, 366) day year. Interest accruing
based on LIBOR shall be computed on the basis of the actual number of
days elapsed and a 360 day year.
SECTION 4.5. Fees. (a) Commitment Fee. NFC agrees to pay to the
Liquidity Agent for the account of each Liquidity Lender an ongoing
commitment fee (the "Commitment Fee") equal to 0.225% per annum of the
average daily unused portion of each such Liquidity Lender's Liquidity
Commitment, such fee to accrue from the Closing Date until the Liquidity
Commitment Termination Date. The Commitment Fee shall be computed based
on the actual number of days elapsed and a year of 365 days. The
Commitment Fee shall
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be payable in arrears on the last Business Day of each calendar quarter
occurring after the Closing Date and on the Liquidity Commitment
Termination Date.
(b) Upfront Fee. NFC agrees to pay to the Liquidity Agent for
the account of each Liquidity Lender, as applicable, an upfront fee (the
"Upfront Fee") equal to (i) 0.075% of the initial Liquidity Commitment of
such Liquidity Lender if such initial Liquidity Commitment is equal to or
greater than $75,000,000, (ii) 0.05% of the initial Liquidity Commitment
of such Liquidity Lender if such initial Liquidity Commitment is equal to
or greater than $50,000,000 and less than $75,000,000 and (iii) 0.03% of
the initial Liquidity Commitment of such Liquidity Lender if such initial
Liquidity Commitment is equal to or greater than $25,000,000 and less
than $50,000,000, which shall be payable immediately upon the Closing
Date. In the event that (i) a Liquidity Lender's short-term credit rating
is reduced to below A-1 by S&P or below P-1 by Moody's prior to its
Liquidity Commitment Termination Date, and (ii) NFC elects to replace
such Liquidity Lender pursuant to the teems of this Agreement, then such
Liquidity Lender shall reimburse NFC for an amount equal to the unearned
portion of the Upfront Fee (based on the remaining period from the date
of such replacement to such Liquidity Lender's Scheduled Commitment
Termination Date).
ARTICLE V
CERTAIN LIBOR AND OTHER PROVISIONS
SECTION 5.1. LIBOR Lending Unlawful. If any Liquidity Lender shall
reasonably determine (which determination shall, upon notice thereof to
NFC and the other Liquidity Lenders, be conclusive and binding on NFC)
that the introduction of or any change in or in the interpretation of any
law or regulation makes it unlawful, or any central bank or other
Governmental Authority asserts that it is unlawful, for such Liquidity
Lender to make, continue or maintain any Liquidity Advance as, or to
convert any Liquidity Advance into, a LIBOR Advance, the obligation of
such Liquidity Lender to make, continue or maintain or convert any such
Liquidity Advance as a LIBOR Advance shall, upon such determination,
forthwith be suspended until such Liquidity Lender shall notify the
Liquidity Agent and NFC that the circumstances causing such suspension no
longer exist, and NFC shall immediately convert (in the manner provided
for in Section 3.8) all LIBOR Advances of such Liquidity Lender into Base
Rate Advances at the end of the then current Interest Periods with
respect thereto or sooner, if required by such law or assertion.
SECTION 5.2. Deposits Unavailable. If the Liquidity Agent shall
have reasonably determined that
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(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to all Reference
Lenders in the relevant market; or
(b) by reason of circumstances affecting all Reference
Lenders' relevant market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBOR
Advances; or
(c) the Majority Banks have notified the Liquidity Agent
that, with respect to any interest rate otherwise applicable
hereunder to any LIBOR Advances the Interest Period for which has
not then commenced, such interest rate will not adequately reflect
the cost to such Majority Banks of making, funding or maintaining
their respective LIBOR Advances for such Interest Period.
then, upon notice from the Liquidity Agent to NFC and the Liquidity
Lenders, the obligations of all Liquidity Lenders under Section 3.6 and
Section 3.8 to make or continue any Liquidity Advance as, or to convert
any Liquidity Advances into, LIBOR Advances shall forthwith be suspended
until the Liquidity Agent shall notify NFC and the Liquidity Lenders that
the circumstances causing such suspension no longer exist.
SECTION 5.3 . Increased Costs. etc. NFC agrees to reimburse each
Liquidity Lender if any change in, or the introduction, adoption,
interpretation or reinterpretation or phase-in of, any law or regulation,
directive, guideline, decision or request (whether or not having the
force of law) of any court, central bank, regulator or other Governmental
Authority of competent jurisdiction increases or would increase the cost
to such Liquidity Lender of, or reduces or would reduce the amount of any
sum receivable by such Liquidity Lender in respect of, making, continuing
or maintaining (or its obligation to make, continue or maintain) any
Liquidity Advance as, or of converting (or of its obligation to convert)
any Liquidity Advance into, a LIBOR Advance and such amount is not
otherwise recoverable by such Liquidity Lender under Section 4.2.1.(b)
hereof. Such Liquidity Lender shall promptly notify the Liquidity Agent,
NFC and the Rating Agencies in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons therefor
and the additional amount required fully to compensate such Liquidity
Lender for such increased costs or reduced amount. Such additional
amounts shall be payable by NFC directly to such Liquidity Lender within
five days of its receipt of such notice and such notice shall, in the
absence of demonstrable error, be conclusive and binding on NFC.
SECTION 5.4. Funding Losses. In the event any Liquidity Lender
shall incur any loss or expense (including any loss or
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expense incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by such Liquidity Lender to make, continue or
maintain any portion of the principal amount of any Liquidity Advance as,
or to convert any portion of the principal amount of any Liquidity
Advance into, a LIBOR Advance) as a result of
(a) any conversion or repayment or prepayment (for any
reason, including, without limitation, as a result of the
acceleration of the maturity of a LIBOR Advance or the assignment
of a LIBOR Advance pursuant to Section 5.9 hereof) of the
principal amount of any LIBOR Advance on a date other than the
scheduled last day of the Interest Period applicable thereto;
(b) any Liquidity Advance not being made as a LIBOR
Advance in accordance with the Borrowing Request therefor; or
(c) any Liquidity Advance not being continued as, or
converted into, a LIBOR Advance in accordance with the
Continuation/Conversion Notice therefor,
then, after notice by such Liquidity Lender of such loss or expense to
NFC (with a copy to the Liquidity Agent and the Rating Agencies), NFC
shall, within five Business Days of its receipt thereof, pay directly to
such Liquidity Lender such amount as will (in the reasonable
determination of such Liquidity Lender) reimburse such Liquidity Lender
for such loss or expense. Such written notice (which shall include
calculations in reasonable detail) shall, in the absence of demonstrable
error, be conclusive and binding on NFC.
SECTION 5.5. Increased Capital Costs. If any change in, or the
introduction, adoption, interpretation or reinterpretation or phase-in
of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank,
regulator or other Governmental Authority of competent jurisdiction
affects or would affect the amount of capital required or reasonably
expected to be maintained by any Liquidity Lender or any Person directly
or indirectly controlling such Liquidity Lender, and such Liquidity
Lender reasonably determines (in its sole and absolute discretion) that
the rate of return on its or such controlling Person's capital as a
consequence of its Liquidity Commitment or the Liquidity Advances made by
such Liquidity Lender is reduced to a level below that which such
Liquidity Lender or such controlling Person would have achieved but for
the occurrence of any such circumstance, then, in any such case after
notice from time to time by such Liquidity Lender to NFC and the Rating
Agencies, NFC shall pay within five Business Days of demand
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directly to such Liquidity Lender or to such controlling Person
additional amounts sufficient to compensate such Liquidity Lender or such
controlling Person for such reduction in rate of return. A statement of
such Liquidity Lender as to any such additional amount or amounts
(including calculations thereof in reasonable detail), shall, in the
absence of demonstrable error, be conclusive and binding on NFC. In
determining such amount, such Liquidity Lender may use any method of
averaging and attribution that it (in its reasonable discretion) shall
deem applicable.
SECTION 5.6. Taxes. All payments by NFC of principal of, and
interest on, the Liquidity Advances and all other amounts payable
hereunder shall be made free and clear of and without deduction for any
present or future income, excise, stamp or franchise taxes and other
taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding franchise and
other taxes imposed on or measured by any Liquidity Lender's net income
by the United States of America or any jurisdiction under the laws of
which such Liquidity Lender is organized or maintains an office (such
non-excluded items being called "Taxes"). In the event that any
withholding or deduction from any payment to be made by NFC hereunder is
required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then NFC will
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Liquidity Agent an official
receipt or other documentation satisfactory to the Liquidity Agent
evidencing such payment to such authority; and
(c) pay to the Liquidity Agent for the account of the
Liquidity Lenders such additional amount or amounts as is
necessary to ensure that the net amount actually received by each
Liquidity Lender will equal the full amount such Liquidity Lender
would have received had no such withholding or deduction been
required.
Moreover, if any Taxes are directly asserted against the Liquidity Agent
or any Liquidity Lender with respect to any payment received by the
Liquidity Agent or such Liquidity Lender hereunder, the Liquidity Agent
or such Liquidity Lender may pay such Taxes and NFC will promptly pay
such additional amounts (including any penalties, interest or expenses)
as is necessary in order that the net amount received by such person
after the payment of such Taxes (including any Taxes on such additional
amount) shall equal the amount such person would have received had not
such Taxes been asserted.
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If NFC fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Liquidity Agent, for the account of
the respective Liquidity Lenders, the required receipts or other required
documentary evidence, NFC shall indemnify the Liquidity Lenders and the
Liquidity Agent for any incremental Taxes, interest or penalties that may
become payable by any Liquidity Lender or the Liquidity Agent as a result
of any such failure. For purposes of this Section 5.6, a distribution
hereunder by the Liquidity Agent or any Liquidity Lender to or for the
account of any Liquidity Lender shall be deemed a payment by NFC.
Each Liquidity Lender that is organized under the laws of a
jurisdiction other than the United States shall, prior to the initial due
date of any payments hereunder and (to the extent permissible under then
current law) on or about the first scheduled payment date in each
calendar year thereafter, execute and deliver to NFC and the Liquidity
Agent, one or more (as NFC or the Liquidity Agent may reasonably request)
United States Internal Revenue Service Forms 4224 or Forms 1001 or such
other forms or documents (or successor forms or documents), appropriately
completed, as may be applicable to establish the extent, if any, to which
a payment to such Liquidity Lender is exempt from withholding or
deduction of Taxes. NFC shall not, however, be required to pay any
increased amount under this Section 5.6 to any Liquidity Lender that is
organized under the laws of a jurisdiction other than the United States
if such Liquidity Lender fails to comply with the requirements set forth
in this paragraph.
SECTION 5.7. Payments, Computations, etc. Unless otherwise
expressly provided, all payments by NFC pursuant to this Liquidity
Agreement, the Liquidity Advance Notes and any other Liquidity Document
shall be made by NFC to the Liquidity Agent for the pro rata account, on
the basis of Liquidity Advances Outstanding, or if no Liquidity Advances
are outstanding, on the basis of Liquidity Commitments, of the Liquidity
Lenders entitled to receive such payment. All such payments required to
be made to the Liquidity Agent by NFC shall be made, without setoff,
deduction or counterclaim on the date due, in same day or immediately
available funds, to the account established pursuant to Section 3.7(a) or
such other account as the Liquidity Agent shall specify from time to time
by notice to NFC. The Liquidity Agent shall promptly upon receipt thereof
remit in same day funds to each Liquidity Lender its share, if any, of
such funds received by the Liquidity Agent for the account of such
Liquidity Lender. Whenever any payment to be made shall otherwise be due
on a day which is not a Business Day, such payment shall (except as
otherwise required by the second proviso of the definition of the term
"Interest Period" with respect to LIBOR Advances) be made on the next
succeeding Business Day and such extension of
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time shall be included in computing interest in connection with such
payment.
SECTION 5.8. Sharing of Payments. If any Liquidity Lender shall
obtain any payment or other recovery (whether voluntary or involuntary)
on account of any Liquidity Advance (other than pursuant to the terms of
Sections 5.3, 5.4, 5.5 and 5.6) in excess of its pro rata share of
payments, on the basis of Liquidity Advances Outstanding, or if no
Liquidity Advances are outstanding, on the basis of Liquidity
Commitments, then or therewith obtained by all Liquidity Lenders, such
Liquidity Lender shall purchase from the other Liquidity Lenders such
participation in Liquidity Advances made by them as shall be necessary to
cause such purchasing Liquidity Lender to share the excess payment or
other recovery with each of them on a Pro rata basis, computed on the
basis of each Liquidity Lender's Liquidity Advances Outstanding or
Liquidity Commitment, as the case may be, on the date of such
computation; Provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing
Liquidity Lender, the purchase shall be rescinded and each Liquidity
Lender which has sold a participation to the purchasing Liquidity Lender
shall repay to the purchasing Liquidity Lender the purchase price to the
ratable extent of such recovery together with an amount equal to such
selling Liquidity Lender's ratable share (according to the proportion of
(a) the amount of such selling Liquidity Lenders
required repayment to the purchasing Liquidity Lender
to
(b) the total amount so recovered from the purchasing
Liquidity Lender)
of any interest or other amount paid or payable by the purchasing
Liquidity Lender in respect of the total amount so recovered. NFC agrees
that any Liquidity Lender so purchasing a participation from another
Liquidity Lender pursuant to this Section may, to the fullest extent
permitted by law, exercise all its rights of payment with respect to such
participation as fully as if such Liquidity Lender were the direct
creditor of NFC in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law, any Liquidity
Lender receives a secured claim to which this Section applies, such
Liquidity Lender shall, to the extent practicable, exercise its rights in
respect of such secured claim in a manner consistent with the rights of
the Liquidity Lenders entitled under this Section to share in the
benefits of any recovery on such secured claim.
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SECTION 5.9. Replacement of Liquidity Lenders. (a) If at any time the
credit rating assigned to the short-term obligations of any Liquidity Lender (an
"Affected Liquidity Lender") is withdrawn or downgraded below the rating then
assigned by S&P or Moody's, respectively, to the Commercial Paper Notes, NFC
may, upon five Business Days' prior written notice given to the Liquidity Agent
and such Affected Liquidity Lender, replace such Affected Liquidity Lender with
an Eligible Liquidity Lender or a Liquidity Lender already party to this
Liquidity Agreement and such replacement shall be made in accordance with clause
(a) of Section 11.11.1 and the proviso of clause (b) of this Section 5.9;
provided, however, that no such replacement pursuant to this clause (a) shall be
effective unless S&P and Moody's shall have confirmed in writing to NFC and the
Liquidity Agent that such replacement (i) would not result in a withdrawal or
reduction of the rating by S&P or Moody's of the Commercial Paper Notes below
the rating then assigned by such Rating Agency to the Commercial Paper Notes or
(ii) if the Commercial Paper Notes are then rated less than A-1 by S&P or P-1 by
Moody's, would result in an upgrade of the rating by S&P or Moody's of the
Commercial Paper Notes over the rating then assigned by such Rating Agency to
the Commercial Paper Notes.
(b) In the event that (i) any Liquidity Lender shall have notified the
Liquidity Agent or NFC (and shall not have retracted such notification) that its
compliance with any of its obligations hereunder would be unlawful, (ii) any
Liquidity Lender fails to extend its Liquidity Commitment upon request, (iii)
NFC is required pursuant to Section 4.2.1(b) or Sections 5.3 through 5.6 to make
any payment to or on behalf of any Liquidity Lender (or would be so required on
or prior to the next following date on which a payment hereunder (other than
pursuant to Section 5.6) is required to be made to or for any such Liquidity
Lender) or (iv) any Liquidity Lender shall have failed to fund any Liquidity
Advance when required hereunder, then NFC shall have the right, at its own
expense, upon notice to such Liquidity Lender and the Liquidity Agent, to
require such Liquidity Lender, and such Liquidity Lender hereby agrees, to
transfer and assign without recourse (in accordance with and subject to the
restrictions contained in Section 11.11) all the interests, rights and
obligations of such Liquidity Lender to an Eligible Liquidity Lender provided by
NFC; provided, however, that (w) no such assignment shall conflict with any law,
rule, regulation or order of any Governmental Authority, (x) such assignment
shall be without recourse, representation and warranty and shall be on terms and
conditions reasonably satisfactory to such replaced Liquidity Lender and such
replacement Eligible Liquidity Lender, (y) the purchase price paid by such
replacement Eligible Liquidity Lender shall be in an amount equal to the
aggregate amount of all Liquidity Advances owed to such replaced Liquidity
Lender, and (z) NFC or such Eligible Liquidity Lender,
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as the case may be, shall pay to such replaced Liquidity Lender in same day
funds on the date of such assignment the principal of and interest accrued to
the date of payment on the Liquidity Advances made by such replaced Liquidity
Lender hereunder and all other amounts accrued for such replaced Liquidity
Lender's account or owed to it hereunder, including those amounts owed pursuant
to Section 4.2.l(b) and Sections 5.3 through 5.6.
SECTION 5.10. Order and Priority. Notwithstanding any other provision of
this Liquidity Agreement (other than Section 4.2.2.), the Liquidity Agent and
the Liquidity Lenders agree that the Obligations of NFC to the Liquidity Agent
and the Liquidity Lenders hereunder shall be payable in the order and priority
net forth in Section 2.01 and 5.02(b), as applicable, of the Collateral
Agreement. The Liquidity Agent and the Liquidity Lenders agree that, during any
period prior to the 18 month anniversary of the Amortization Commencement Date
that Commercial Paper Notes shall be outstanding (any such period being a
"Specified Period"), the Obligations shall be due and payable only to the extent
that NFC's assets and the Fronting Letter of Credit Amount are sufficient to pay
the same. If, during any Specified Period, the Liquidity Lenders shall exercise
their rights, pursuant to Section 9.2(ii), to accelerate the Obligations, such
acceleration shall have the limited effect of (i) causing the interest rates
contemplated in Section 4.2.2 to become effective with respect to the
outstanding Obligations and (ii) allowing the Liquidity Lenders, in any
determination of the Liquidity Lenders' allocative share of any disbursement to
be made to Secured Parties under the Collateral Agreement or otherwise among
creditors of NFC, to treat all of the Obligations as then being due and payable.
No claims of the Liquidity Lenders arising under or in connection with this
Liquidity Agreement are intended to be impaired or waived by this Section 5.10.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Effectiveness. This Liquidity Agreement shall
become effective on the date (the "Closing Date") when all of the conditions set
forth in Section 6.1 have been satisfied (and each Liquidity Lender's signature
hereto evidences that such conditions have been satisfied with respect to such
Liquidity Lender).
SECTION 6.1.1 Organic Documents, Resolutions. The Liquidity Agent shall
have received: (1) a copy of NFC's certificate of incorporation, including all
amendments thereto, certified as a recent date by the Secretary of State of the
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State of Delaware, and a certified copy of all other Organic Documents of NFC,
and such certificate, articles or Organic Documents shall be in form and
substance satisfactory to the Liquidity Agent and its counsel, and a certificate
as to the good standing of NFC as of a recent date, from such Secretary of
State; (ii) a certificate of the Secretary or Assistant Secretary of NFC dated
the Closing Date and certifying (A) that attached thereto is a true and complete
copy of the Bylaws of NFC as in effect on the Closing Date and at all times
since a date prior to the date of the resolutions described in clause (B) below,
(B) that attached thereto is a true and complete copy of resolutions in form and
substance satisfactory to the Liquidity Agent and its counsel and duly adopted
by the Board of Directors of NFC authorizing the execution, delivery and
performance of this Liquidity Agreement and each of the other Related Documents
to which NFC is a party and the transactions contemplated hereby and thereby,
and that such resolutions have not been modified, rescinded or amended and are
in full force and effect, (C) that the certificate of incorporation of NFC has
not been amended since the date of the last amendment thereto shown on the
certificate of good standing furnished pursuant to clause (i) above and (D) as
to the incumbency and specimen signature of each officer executing this
Liquidity Agreement and each of the other Related Documents to which NFC is a
party or any other document delivered in connection herewith or therewith on
behalf of NFC; (iii) a certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing the
certificate pursuant to clause (ii) above; and (iv) such other documents as the
Liquidity Agent may reasonably request.
SECTION 6.1.2. Liquidity Agreement. The Liquidity Agent shall have received
executed counterparts of this Liquidity Agreement, duly executed by NFC, the
Liquidity Agent, and each Liquidity Lender.
SECTION 6.1.3. Liquidity Advance Notes. The Liquidity Agent shall have
received, for the account of each Liquidity Lender, such Liquidity Lender's
Liquidity Advance Notes duly executed and delivered by NFC.
SECTION 6.1.4. Master Collateral Agency Agreement; Collateral Sharing
Agreement and Collateral Agreement. (a) The Liquidity Agent shall have received
executed counterparts of the Collateral Agreement, dated as of the Closing Date,
duly executed by NFC, the Agent, the Liquidity Agent, the Depositary, the
Placement Agent, the Dealer, the A Support Credit Enhancer and the B Support
Credit Enhancers.
(b) The Liquidity Agent shall have received executed counterparts of the
Collateral Sharing Agreement, dated as of the
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Closing Date, duly executed by the Agent and the B Support Credit Enhancers.
(c) The Liquidity Agent shall have received executed counterparts of the
Master Collateral Agency Agreement, dated as of the Closing Date, duly executed
by NFC, National, the Agent and the Master Collateral Agent, in the form of
Exhibit D to the Loan Agreement, designating NFC as a "Financing Source" and the
Agent as a "Beneficiary thereunder with respect to Vehicles financed with the
proceeds of Loans pursuant to the Loan Agreement and the Supplement thereto,
dated as of the Closing Date, duly executed by NFC, National, the Master
Collateral Agent and the B Support Credit Enhancers designating the B Support
Credit Enhancers as a "Beneficiary" of NFC.
SECTION 6.1.5. Loan Agreement. The Liquidity Agent shall have received
executed counterparts of the Loan Agreement, dated as of the Closing Date, duly
executed by NFC and National, and copies of all documents and opinions required
to be delivered to NFC thereunder, and all conditions to the effectiveness
thereof set forth therein shall have been satisfied in all respects.
SECTION 6.1.6. Letter of Credit Agreements. The Liquidity Agent shall have
received executed counterparts of (i) the A Letter of Credit Issuance Agreement,
dated as of the Closing Date, duly executed by NFC, National and the A Credit
Enhancer, (ii) the A Support Letter of Credit Agreement dated as of the A
Closing Date, duly executed by the A Credit Enhancer Support Credit Enhancer,
(iii) the A Support Reimbursement Agreement, dated as of the Closing Date, duly
executed by NFC, National and the A Support Credit Enhancer, (iv) the B Letter
of Credit Reimbursement Agreement, dated as of the Closing Date, duly executed
by NFC, National and the B Credit Enhancer and (v) the B Support Letter of
Credit Reimbursement Agreement, dated as of the Closing Date, duly executed by
NFC, National and the B Support Credit Enhancers, and, in each case, all
conditions to the effectiveness thereof set forth therein shall have been
satisfied in all respects. The A Letter of Credit in an amount equal to
$85,000,000 shall have been delivered to the Agent and shall be in full force
and effect, and the A Credit Enhancer shall not have a short-term rating lower
than A-1 from S&P and P-1 from Moody's. The B Letter of Credit in an amount
equal to $60,000,000 shall have been delivered to the Agent and shall be in full
force and effect, and the B Credit Enhancer shall not have a short-term rating
lower than A-1 from S&P and P-1 from Moody's.
SECTION 6.1.7. Depositary Agreement. The Liquidity Agent shall have
received executed counterparts of the Depositary Agreement, dated as of the
Closing Date, duly executed by NFC and the Depositary, and all of the conditions
to the effectiveness
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thereof set forth therein shall have been satisfied in all respects.
SECTION 6.1.8. Dealer Agreement; Placement Agency Agreement. The Liquidity
Agent shall have received executed counterparts of the Dealer Agreement, dated
as of the Closing Date, duly executed by NFC and each Dealer, and all of the
conditions to the effectiveness thereof set forth therein shall have been
satisfied in all respects. The Liquidity Agent shall have received executed
counterparts of the Placement Agency Agreement, dated as of the Closing Date,
duly executed by NFC and each Placement Agent, and all of the conditions to the
effectiveness thereof set forth therein shall have been satisfied in all
respects.
SECTION 6.1.9. Closing Date Certificate. The Liquidity Agent shall have
received a Closing Date Certificate, dated the Closing Date, duly executed and
delivered by an Authorized Officer of NFC, in which NFC shall have represented
and warranted that the representations and warranties of NFC in the Related
Documents are true and correct (in all material respects to the extent any such
representations and warranties do not incorporate a materiality limitation in
their terms) as of the Closing Date and that no Amortization Event, Limited
Amortization Event, Loan Event of Default or, to the best of such Authorized
Officer's knowledge, Potential Amortization Event or Potential Loan Event of
Default has occurred and is continuing, and, at the time such certificate is
delivered, the Liquidity Agent shall be satisfied that such statements are in
fact true and correct (in all material respects to the extent that any such
statements do not incorporate a materiality limitation in their terms).
SECTION 6.1.10. Accounts. The Commercial Paper Account, the Master
Collateral Account, the Termination Advance Account, the Cash Reserve Account
and the Collateral Account shall have been established and shall be in full
force and effect.
SECTION 6.1.11. Rating Letters. The Liquidity Agent shall have received as
of the Closing Date a confirmation letter from each of S&P and Moody's to the
effect that the Commercial Paper Notes shall have been given a rating of at
least A-1 by S&P and P-1 by Moody's, which ratings shall be in full force and
effect.
SECTION 6.1.12. Vehicles; Repurchase Programs. etc. National shall have
good and marketable title to each Vehicle purchased or financed by it with the
proceeds of the Loans, free and clear of all Liens and encumbrances, other than
any Permitted Liens. Each Repurchase Program shall be in full force and effect,
and shall be enforceable against the related Manufacturer.
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SECTION 6.1.13. Assignments. (a) National shall have granted to the Master
Collateral Agent, for the benefit of NFC and the Agent on behalf of the Secured
Parties, a first priority security interest in all Vehicles now or hereafter
purchased by National with the proceeds of Loans.
(b) NFC shall have granted to the Agent a first priority security
interest in its right, title and interest in and to the Assigned Collateral.
(c) The Liquidity Agent shall have received executed counterparts of
the Assignment Agreements related to the assignment of rights under each
Repurchase Program, dated as of the Closing Date, duly executed by NFC,
National, the Master Collateral Agent and each Eligible Manufacturer.
SECTION 6.1.14. Board of Directors. The Liquidity Agent shall consent to
the composition of NFC's Board of Directors (including the independent
directors), which consent shall not be unreasonably withheld.
SECTION 6.1.15. Solvency Certificate. The Liquidity Agent shall have
received a certificate, dated the Closing Date, and duly executed by a Financial
Officer of NFC, in scope and substance satisfactory to the Liquidity Agent, to
the effect that NFC will be solvent after giving effect to the transactions
contemplated by this Liquidity Agreement, each of the other Related Documents
and the issuance and sale of the Commercial Paper Notes.
SECTION 6.1.16. Closing Fees and Expenses. The Liquidity Agent shall have
received for its own account and for the account of the Liquidity Lenders any
fees and expenses due and payable pursuant to Sections 4.5 and 11.3 and any fees
and expenses due and payable pursuant to any fee letters or commitment letters
entered into with any Liquidity Lender and/or the Liquidity Agent.
SECTION 6.1.17. Certified Copy of Repurchase Program. The Liquidity Agent
shall have received from NFC a copy of the materials delivered to NFC by
National pursuant to Section ll.l(p) of the Loan Agreement.
SECTION 6.1.18. Opinions. The Liquidity Agent shall have received opinions
of counsel, addressed to the Liquidity Agent and the Liquidity Lenders hereto,
reasonably satisfactory in form and substance to the Liquidity Agent and the
Liquidity Lenders.
SECTION 6.1.19. Notation of Liens. The Liquidity Agent shall have received
evidence (which, in the case of the filing of financing statements on form
UCC-1, may be telephonic
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confirmation of such filing) that all filings (including filings of financing
statements on form UCC-1) and recordings have been accomplished as may be
required by law to establish, perfect, protect and preserve the rights, titles,
interests, remedies, powers, privileges, licenses and security interest of (a)
the Master Collateral Agent in the Loan Collateral and (b) the Agent in the
Assigned Collateral for the benefit of the Secured Parties.
SECTION 6.1.20. Offering Materials. Each offering circular, offering
memorandum (including, without limitation, the Offering Memorandum) or
information circular to be used by NFC, the Placement Agents or the Dealers in
connection with the offer or sale of Commercial Paper Notes, insofar as it
describes or refers to the Liquidity Agent or any Liquidity Lender, shall be
reasonably satisfactory to the Liquidity Agent or such Liquidity Lender,
respectively.
SECTION 6.1.21. Savory Legal Form. This Liquidity Agreement, each of the
other Related Documents and all other documents executed or submitted pursuant
hereto or thereto by or on behalf of NFC shall be satisfactory in form and
substance to the Liquidity Agent and its counsel; and the Liquidity Agent and
its counsel shall have received all information, approvals, opinions, documents
or instruments as the Liquidity Agent or its counsel may have reasonably
requested not later than 3 Business Days prior to the Closing Date.
SECTION 6.1.22. Credit Rating of Initial Liquidity Lenders. As of the
Closing Date, each initial Liquidity Lender shall have a credit rating assigned
to its short-term obligations of at least A-1 by S&P and P-1 by Moody's.
SECTION 6.1.23. Vehicle Title Nominee Agreement; GM Guaranty. The Liquidity
Agent shall have received an executed copy of the Vehicle Title Nominee
Agreement substantially in the form of Exhibit F to the Loan Agreement. The
Liquidity Agent shall have received an executed copy of the GM Guaranty
substantially in the form of Exhibit G to the Loan Agreement.
SECTION 6.1.24. Assignment of GMAC Lien: Filing of UCC Termination
Statements. The Liquidity Agent shall have received: (a) an executed copy of an
assignment agreement, pursuant to which GMAC has assigned its Lien with respect
to the Initial Vehicles to the Master Collateral Agent; and (b) evidence (which
may be telephonic) of the filing of proper financing statements (form UCC-3)
necessary to release all security interests and other rights of GMAC in the
Initial Vehicles previously granted by Old National to GMAC.
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SECTION 6.2. Conditions to the Making of Each Revolving Advance. The
obligation of any Liquidity Lender to make any Revolving Advance (including any
continuation or conversion thereof pursuant to Section 3.8 except as otherwise
specified below) hereunder is subject to the satisfaction of the following
conditions:
SECTION 6.2.1. Representations and Warranties. On the date of the making of
such Revolving Advance (other than any continuation or conversion thereof
pursuant to Section 3.8) and after giving effect thereto, the representations
and warranties of NFC set forth in Article VII hereof, or in any other Related
Document to which NFC in a party, shall be true and correct (in all material
respects to the extent any such representations and warranties do not
incorporate a materiality limitation in their terms) with the same effect as if
then made (unless stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct (in all material
respects to the extent any such representations and warranties do not
incorporate a materiality limitation in their terms) as of such earlier date).
SECTION 6.2.2. No Amortization Event; Loan Event of Default. (a) On the
date of the making of such Revolving Advance, continuation or conversion, and
after giving effect thereto, no Amortization Event or Loan Event of Default
shall have occurred and be continuing.
(b) On the date of the making of such Revolving Advance (other than any
continuation or conversion thereof pursuant to Section 3.8), and after giving
effect thereto, no Potential Amortization Event or Potential Loan Event of
Default shall have occurred and be continuing.
SECTION 6.2.3. No Borrowing Base Deficiency. A Borrowing Base Deficiency
shall not exist after giving effect to the application of funds in accordance
with Section 5.2 of the Collateral Agreement and the making of such Revolving
Advance, continuation or conversion would not result in a Borrowing Base
Deficiency.
SECTION 6.2.4. Availability. (a) The amount available to be drawn under the
Fronting Letters of Credit or on deposit in the Cash Collateral Accounts shall
not have been reduced to zero.
(b) The aggregate amount of all Borrowings of Liquidity Advances requested
by NFC to be made on such day shall not exceed the lesser of (i) the Aggregate
Liquidity Commitment minus Outstanding Liquidity Advances (other than Commitment
Termination Date Liquidity Advances) net of any amounts on deposit on such day
in the Collateral Account set aside for the repayment of the
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principal of, or interest on, Liquidity Advances, and (ii) the Borrowing Base
(after giving effect to the use of the proceeds of such Liquidity Advances)
minus the sum of (A) the aggregate Support Liquidity Disbursements Outstanding
plus (B) the Aggregate Outstanding CP plus (c) the Outstanding Liquidity
Advances net of any amounts on deposit on such day in the Collateral Account set
aside for the repayment of the principal of, or interest on, Liquidity Advances
or Support Liquidity Disbursements.
SECTION 6.2.5. Attachments. Anything herein to the contrary
notwithstanding, NFC shall not request (and the Agent on its behalf shall not be
permitted to request) Revolving Advances after NFC has received notice that any
of the Accounts, the Master Collateral Account, the Commercial Paper Account or
the Cash Collateral Accounts or any funds on deposit in, or otherwise to the
credit of any thereof aggregating $100,000 or more are or have become subject to
any stay, writ, judgment, warrant of attachment, execution or similar process;
provided, however, that if any such stay, writ, judgment, warrant of attachment,
execution or similar process is removed or dismissed, NFC may recommence the
requesting of Revolving Advances.
SECTION 6.2.6. Receipt of Monthly Report. The Liquidity Agent shall have
received, on or prior to the twentieth day of each month (or if not a Business
Day, on the next succeeding Business Day), a Monthly Report relating to the
Assigned Collateral as of the last Business Day of the immediately preceding
month occurring on or immediately preceding such date.
SECTION 6.2.7. Borrowing Request. The Liquidity Agent shall have received a
Borrowing Request for such Borrowing.
SECTION 6.2.8. Borrowing Base Certificate. The Liquidity Agent shall have
received an Officer's Certificate, dated the date of the making of such
Revolving Advance, duly executed and delivered by an Authorized Officer of NFC,
certifying the amount of the Borrowing Base as of the close of business on the
day immediately preceding such date.
SECTION 6.3. Conditions Precedent to the Making of Each Refunding Advance.
The obligation of any Liquidity Lender to make any Refunding Advance (including
any Commitment Termination Date Liquidity Advance) and of the Swing Line Lender
to make any Swing Line Advance shall be subject to the satisfaction of the
following conditions at the time of making of such Refunding Advance or Swing
Line Advance:
SECTION 6.3.1. No Bankruptcy. (i) No Event of Bankruptcy of the type
described in clauses (a) or (b) of the definition thereof with respect to NFC
shall have occurred and be continuing
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and (ii) no Event of Bankruptcy of the type described in clauses (a) or (b) of
the definition thereof with respect to (1) the A Credit Enhancer shall have
occurred and be continuing at any time prior to the funding in full of the Cash
Collateral Account A and (2) the B Credit Enhancer shall have occurred and be
continuing at any time prior to the funding in full of the Cash Collateral
Account B and the Cash Collateral Account C.
SECTION 6.3.2. Availability. The sum of (a) the amount available to be
drawn under the Fronting Letters of Credit for LOC Credit Disbursements plus the
amount of Support Liquidity Disbursements available for Conversion to Support
Credit Disbursements and (b) the amount on deposit in the Cash Collateral
Accounts for LOC Credit Disbursements, shall not have been reduced to zero.
SECTION 6.3.3. No Borrowing Base Deficiency. A Borrowing Base Deficiency
shall not exist after giving effect to the application of such Refunding Advance
or Swing Line Advance; provided, however, that this provision shall not release
the Liquidity Lenders from the obligation (upon receipt of a Borrowing Request
in the appropriate amount) to make Refunding Advances or Swing Line Advances up
to the amount of the then current Borrowing Base that would not cause a
Borrowing Base Deficiency to exist.
SECTION 6.3.4. Borrowing Request. The Liquidity Agent shall have received a
Borrowing Request for such Borrowing.
SECTION 6.3.5. Borrowing Base Certificate. The Liquidity Agent shall have
received an Officer's Certificate, dated the date of the making of such
Refunding Advance or Swing Line Advance, duly executed and delivered by an
Authorized Officer of NFC, certifying the amount of the Borrowing Base as of the
close of business on the day immediately preceding such date.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
To induce the Liquidity Lenders and the Liquidity Agent to enter into this
Liquidity Agreement and to make Liquidity Advances hereunder, NFC represents and
warrants to the Liquidity Agent and each Liquidity Lender as set forth in this
Article VII.
SECTION 7.1. Existence and Power. NFC is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
is duly qualified to do business as a foreign corporation and in good standing
under the laws of each jurisdiction where the character of its property,
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the nature of its business or the performance of its obligations make such
qualification necessary, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
There have been no amendments to the Organic Documents of NFC since the
respective dates of the certified copies furnished to the Liquidity Agent
pursuant to Section 6.1.1, other than amendments, if any, not prohibited by this
Liquidity Agreement (copies of which have been furnished to the Liquidity
Agent).
SECTION 7.2. Authorization. The execution, delivery and performance by NFC
of this Liquidity Agreement and each of the other Related Documents to which it
is a party are within NFC's corporate powers and have been duly authorized by
all necessary corporate action. This Liquidity Agreement and each other Related
Document to which NFC is a party have been duly executed and delivered by NFC.
SECTION 7.3. Binding Effect. This Liquidity Agreement and each other
Related Document to which NFC is a party constitutes a legal, valid and binding
obligation of NFC enforceable against NFC in accordance with its respective
terms (except as may be limited by bankruptcy, moratorium or other laws
affecting creditors' rights generally and subject to limitations imposed by
equitable principles).
SECTION 7.4. Financial Information: Financial Condition. All balance
sheets, all statements of operations, of shareholders' equity and of cash flow,
and other financial data (other than projections) which have been or shall
hereafter be furnished by NFC to Liquidity Lenders pursuant to Section 8.1.1
have been and will be Prepared in accordance with GAAP (to the extent
applicable) and do and will present fairly the financial condition of the
entities involved as of the dates thereof and the results of their operations
for the periods covered thereby, subject, in the case of all unaudited
statements, to normal year-end adjustments and lack of footnotes and
presentation items.
SECTION 7.5. Litigation. There is no action, suit or proceeding pending
against or, to the knowledge of NFC, threatened against NFC before any court or
arbitrator or any Governmental Authority in which there is a reasonable
possibility of an adverse decision that could materially adversely affect the
consolidated financial position, consolidated results of operations, business,
properties, performance, prospects or condition (financial or otherwise) of NFC
or which in any manner draws into question the validity or enforceability of
this Liquidity Agreement or any other Related Document or the ability of NFC to
comply with any of the respective terms thereunder.
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SECTION 7.6. No ERISA Plan. NFC has not established and does not maintain
or contribute to any employee benefit plan that is covered by Title IV of ERISA,
and will not do so, so long as the Liquidity Commitment Termination Date has not
occurred, or any amount is owing to a Liquidity Lender hereunder.
SECTION 7.7. Tax Filings and Expenses. NFC has filed all federal, state and
local tax returns and all other tax returns which, to the knowledge of NFC, are
required to be filed (whether informational returns or not), and has paid all
taxes due, if any, pursuant to said returns or pursuant to any assessment
received by NFC, except such taxes, if any, as are being contested in good faith
and for which adequate reserves have been set aside on its books. NFC has paid
all fees and expenses required to be paid by it in connection with the conduct
of its business, the maintenance of its corporate existence and its
qualification as a foreign corporation authorized to do business in each State
in which it is required to so qualify, except where the failure to pay any such
fees and expenses is not reasonably likely to have a Material Adverse Effect.
SECTION 7.8. Disclosure. The materials listed on Annex B hereto and
furnished to the Liquidity Agent or any Liquidity Lender in connection with this
Liquidity Agreement were at the time the same were so furnished, complete and
correct in all material respects.
SECTION 7.9. Investment Company Act; Securities Act. NFC is not controlled
by an "investment company" and is not required to register as an "investment
company" under the Investment Company Act. The Commercial Paper Notes are exempt
from registration under Section 3(a)(3) of the Securities Act of 1933, as
amended. It is not necessary in connection with the issuance of the Commercial
Paper Notes under the circumstances contemplated by this Liquidity Agreement and
the other Related Documents to qualify any indenture under the Trust Indenture
Act of 1939, as amended.
SECTION 7.10. Margin Regulations. No proceeds of any Liquidity Advance or
the sale of any Commercial Paper Note will be used to purchase or carry any "as
"margin stock" (as defined or used in Regulation G, T, U or X of the F.R.S.
Board or any successor thereto) or to extend credit to others for such purpose.
NFC is not engaged in the business of extending credit for the purpose of
purchasing or carrying any margin stock.
SECTION 7.11. No Consent. No consent, action by or in respect of, approval
or other authorization of, or registration, declaration or filing with, any
Governmental Authority or other Person is required for the valid execution and
delivery and performance of this Liquidity Agreement or any other Related
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Document by NFC for the payment of any amounts by NFC hereunder or thereunder or
for the performance of any of NFC's obligations hereunder or thereunder other
the" such consents, approvals, authorizations, registrations, declarations or
filings as shall have been obtained by NFC prior to the Closing Date.
SECTION 7.12. No Violation of Laws, etc. The execution and delivery of this
Liquidity Agreement and each of the other Related Documents, compliance with the
provisions hereof and thereof and the consummation of the transactions
contemplated herein and therein will not result in (a) a breach or violation of,
and do not contravene, or constitute a default under, (i) any law or
governmental rule or regulation applicable to NFC now in effect, (ii) any
provision of any Organic Document of NFC, (iii) any judgment, injunction, order
or decree of any Governmental Authority against NFC or any of its assets, or
(iv) any agreement, contract or instrument to which NFC is a party or by which
it or any of its assets is bound, (b) the acceleration of any obligations of
NFC, or (c) the creation or imposition of any Lien on any assets of NFC other
than in favor of the Agent or the Master Collateral Agent or as permitted by the
Related Documents.
SECTION 7.13. Ownership; Subsidiaries. As of the Closing Date, 100% of the
common stock of NFC is owned by National. As of the Closing Date, NFC has no
Subsidiaries and owns no capital stock of, or other interest in, any other
Person.
SECTION 7.14. Solvency. Both before and after giving effect to the
transactions contemplated by this Liquidity Agreement and the other Related
Documents, NFC is solvent and NFC is not the subject of any voluntary or
involuntary case or proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy or insolvency
law, or of any other event of the type described in Section 9.1.7 hereof.
SECTION 7.15. No Security Interest. (A) There is no effective financing
statement listing NFC as debtor (other than any which may have been filed on
behalf of the Agent) covering any of the Assigned Collateral that is on file in
any public office; (B) at the date of each deposit of Deposited Funds in the
Commercial Paper Account there are no Liens on the Deposited Funds or the
Commercial Paper Account, except the assignment made pursuant to the Collateral
Agreement in favor of the Agent; and (C) NFC is and will be the lawful owner of
(with good and marketable title to), and has and will have beneficial ownership
of (or the benefit, through the Master Collateral Agent, of a first priority
perfected security interest, in the case of the Vehicles and the Repurchase
Programs), all Assigned Collateral, free and clear of all Liens except Permitted
Liens.
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SECTION 7.16. Repurchase Programs. On the date of each Borrowing, each
Manufacturer and each Repurchase Program in respect of which any portion of the
Borrowing Base is calculated (including any portion of the Borrowing Base
comprising the value of any Loans used to purchase Vehicles from such
Manufacturer or finance Vehicles of such Manufacturer) shall be an Eligible
Manufacturer and Eligible Repurchase Program, respectively.
SECTION 7.17. Other Representations. All representations and warranties of
NFC made in each Related Document to which it is a party are true and correct
(in all material respects to the extent any such representations and warranties
do not incorporate a materiality limitation in their terms) and are repeated
herein as though fully set forth herein.
ARTICLE VIII
COVENANTS
SECTION 8.1. Affirmative Covenants. NFC covenants and agrees with the
Liquidity Agent and each Liquidity Lender that, until all Liquidity Commitments
have terminated and all Obligations have been paid or performed in full, unless
the Majority Banks shall otherwise consent in writing, NFC will perform the
covenants set forth in this Section 8.1.
SECTION 8.1.1. Information. NFC will deliver to the Liquidity Agent, each
Rating Agency, the Placement Agents and the Dealers:
(a) promptly upon the delivery by National to NFC, a copy of the
financial information and other materials required to be delivered by
National to NFC and the Agent pursuant to Section 9.7(i) of the Loan
Agreement;
(b) promptly upon the delivery by National to NFC, copies of the
financial information and other materials required to be delivered by
National to NFC and the Agent pursuant to Section 9.7(ii) of the Loan
Agreement;
(c) from time to time such additional information regarding the
financial position, results of operations or business of National and its
Subsidiaries as the Liquidity Agent may reasonably request to the extent
that National delivers such information to NFC pursuant to Section 9.7(vi)
of the Loan Agreement;
(d) at the time of delivery of the items described in clauses (a) and
(b) above, a consolidating balance sheet and statement of earnings in
respect of National and its
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Subsidiaries as of such date or for the year to date period ending on such
date;
(e) at the time of delivery of the items described in clauses (a) and
(b) above, a certificate of an officer of NFC that, except as provided in
any certificate delivered in accordance with Section 8.1.9, no Amortization
Event, Loan Event of Default or (to the best of such officer's knowledge)
Potential Amortization Event or Potential Loan Event of Default has
occurred or is continuing during such fiscal quarter;
(f) on or prior to June 30 of each year, a certificate of the chief
financial officer of NFC certifying that (i) the ratings assigned by the
Rating Agencies in respect of the commercial paper issued by NFC have not
been withdrawn or downgraded below A-1 by S&P or P-1 by Moody's since the
date of thin Liquidity Agreement, (ii) no Rating Agency has determined that
the face amount of either of the Fronting Letters of Credit must be
increased, (iii) no change in the Repurchase Program of any Manufacturer in
respect of any new model year shall have given rise to any request on the
part of the Rating Agencies that any modification be made to the Loan
Agreement or any other Related Document, and (iv) NFC has apprised the
Rating Agencies of all material changes in the Repurchase Programs
occurring since the date of this Liquidity Agreement;
(g) promptly following the introduction of any prospective change in
any Repurchase Program or the introduction of any new Repurchase Program by
an existing Manufacturer, notice and a copy of the same;
(h) on or prior to the twentieth day of each month (or if such day is
not a Business Day, on the next succeeding Business Day), a copy of the
Monthly Report relating to the Assigned Collateral as of the last Business
Day of the immediately preceding month received by NFC from National
pursuant to Section 9.7(iv) of the Loan Agreement; and
(i) on each Business Day when any Liquidity Advance is outstanding NFC
shall cause the Agent to provide to the Liquidity Agent a statement setting
forth (A) the maturity date and face amount of each outstanding Commercial
Paper Note and (B) the aggregate principal amount of outstanding Liquidity
Advances (or, at NFC's option, a statement updating any statement
previously provided by NFC to the Liquidity Agent which contained such
information as of a prior date);
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SECTION 8.1.2. Compliance with Covenants. NFC will comply with all
covenants made by it and contained in each Related Document to which it is a
party (subject to the grace periods set forth therein).
SECTION 8.1.3. Payment of Obligations. NFC will pay and discharge, at or
before maturity, all of its respective obligations and liabilities, including,
without limitation, tax liabilities and other governmental claims, except where
the same may be contested in good faith by appropriate proceedings, and will
maintain, in accordance with GAAP, reserves as appropriate for the accrual of
any of the same.
SECTION 8.1.4. [Reserved].
SECTION 8.1.5. Maintenance of Existence. NFC will maintain its existence as
a corporation validly existing and in good standing under the laws of the State
of Delaware and duly qualified as a foreign corporation licensed under the laws
of each state in which the failure to 80 qualify would have a material adverse
effect on the business and operations of NFC.
SECTION 8.1.6. Compliance with Laws. NFC will comply with all applicable
laws, ordinances, rules, regulations, and requirements of Governmental
Authorities (including, without limitation, ERISA and the rules and regulations
thereunder) except where the failure to comply therewith is not reasonably
likely to have a material adverse effect on the business and operations of NFC.
SECTION 8.1.7. Inspection of Property, Books and Records. NFC will keep
proper books of record and account in which full, true and correct entries shall
be made of all dealings and transactions in relation to its Assets, business and
activities in accordance with GAAP; and will permit representatives of the
Liquidity Agent and, if an Amortization Event shall have occurred and is
continuing, representatives of any Liquidity Lender, at NFC's expense, to visit
and inspect any of its properties, to examine and make abstracts from any of its
books and records and to discuss its affairs, finances and accounts with its
officers, directors, employees and independent public accountants, all at such
reasonable times and as often as the Liquidity Agent or such Liquidity Lender
may reasonably deem appropriate (but not more often than once a month in the
case (i) of any Liquidity Lender and (ii) of the Liquidity Agent prior to the
occurrence of an Amortization Event).
SECTION 8.1.8. Absence of Certain Actions. NFC will not take any action
which would permit National to have the right to refuse to perform any of its
obligations under the Loan Agreement.
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SECTION 8.1.9. Notice of Default. Promptly upon becoming aware of any
Potential Amortization Event, Potential Loan Event of Default, Loan Event of
Default or Amortization Event, NFC shall give the Liquidity Agent, the Dealers
and each Rating Agency notice thereof, together with a certificate of the
President, vice President or the principal financial officer of NFC setting
forth the details thereof and any action with respect thereto taken or
contemplated to be taken by NFC.
SECTION 8.1.10. Notice of Material Proceedings. Promptly upon becoming
aware thereof, NFC shall give the Liquidity Agent, the Dealers and each Rating
Agency written notice of the commencement or existence of any proceeding by or
before any Governmental Authority against or affecting NFC which is reasonably
likely to have a material adverse effect on the business, condition (financial
or otherwise), results of operations, properties or performance of NFC or the
ability of NFC to perform its obligations under this Liquidity Agreement or
under any other Related Document to which it is a party.
SECTION 8.1.ll. Further Requests. NFC will promptly furnish to the
Liquidity Agent and each Rating Agency such other information as, and in such
form as, the Liquidity Agent or any Rating Agency may reasonably request.
SECTION 8.1.12. [Reserved].
SECTION B.1.13. Further Assurances. NFC agrees to do such further acts and
things, and to execute and deliver to the Liquidity Agent such additional
assignments, agreements, powers and instruments, as the Liquidity Agent
reasonably determines to be necessary to carry into effect the purposes of this
Liquidity Agreement or to better assure and confirm unto the Liquidity Agent its
rights, powers and remedies hereunder.
SECTION 8.1.14. Repurchase Programs. NFC agrees that it will (i) provide
the Liquidity Agent, the Dealers and each Rating Agency with at least 30 days'
prior written notice of its intention to make Loans to National under the Loan
Agreement for the purchase or financing of Vehicles manufactured by any new
Manufacturer, (ii) provide the Liquidity Agent, the Dealers and each Rating
Agency with a copy of the draft Repurchase Program of such Manufacturer as it
then exists at the time of such notice and a copy of the final Repurchase
Program promptly upon its being available and (iii) certify to the Liquidity
Agent and the Liquidity Lenders that such new Manufacturer is an Eligible
Manufacturer and that such Repurchase Program is an Eligible Repurchase Program
at such time. In no event shall NFC agree, to the extent any consent of NFC is
solicited or required by the Manufacturer or any assignor of such Repurchase
Program, to any change in any Repurchase Program that is reasonably likely to
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materially adversely affect its rights or the rights of the Secured Parties with
respect to any Vehicle previously purchased under such Repurchase Program.
SECTION 8.1.15. Use of Proceeds of Commercial Paper Notes. NFC shall use
the proceeds of the Commercial Paper Notes solely for one or more of the
following purposes: (a) to pay matured Commercial Paper Notes when due, in
accordance with the Depositary Agreement; (b) to fund Loaner and (c) to pay
principal of, or interest on, any Liquidity Advance or any other amount payable
by NFC under this Liquidity Agreement or to reimburse the Support Credit
Enhancers or the Cash Reserve Account for any Support Liquidity Disbursement and
any interest thereon or the Cash Collateral Accounts for any LOC Liquidity
Disbursement and any interest thereon.
Notwithstanding any provision of this Liquidity Agreement, on any day when
any Liquidity Advance is outstanding, NFC shall not use the net proceeds of the
issuance of Commercial Paper Notes to fund Loans.
SECTION 8.1.16. Vehicles. NFC shall use commercially reasonable efforts to
cause National to maintain good, legal and marketable title to the Vehicles
purchased with proceeds of Loans, free and clear of all Liens except for
Permitted Liens.
SECTION 8.2. Negative Covenants. NFC covenants and agrees with the
Liquidity Agent and each Liquidity Lender that until all Liquidity Commitments
have been terminated and all Obligations have been paid or performed in full,
unless the Majority Banks otherwise consent in writing, NFC will perform the
obligations set forth in this Section 8.2.
SECTION 8.2.1. Liens. NFC will not create, incur, assume or permit to exist
any Lien upon any of its Assets (including the Assigned Collateral), the
Accounts, the Commercial Paper Account, the Cash Collateral Accounts or the
Deposited Funds, other than Liens created by or permitted under the Related
Documents.
SECTION 8.2.2. Other Indebtedness. Without (a) the prior written consent of
the Majority Banks and (b) the prior receipt of written confirmation of the
Rating Agencies that any such action will not result in the downgrading or
withdrawal of the then current rating. of the Commercial Paper Notes by the
Rating Agencies, NPC will not create, assume, incur, suffer to exist or
otherwise become or remain liable in respect of any Indebtedness other than
Indebtedness under this Liquidity Agreement, Indebtedness evidenced by the
Commercial Paper Notes and Indebtedness under or permitted under any other
Related Document.
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SECTION 8.2.3. Consolidations and Mergers . NFC will not, except as may be
permitted by the express written approval of the Majority Banks and upon the
receipt of written confirmation of the Rating Agencies that such action will not
result in the downgrading on withdrawal of the then current ratings on the
Commercial Paper Notes of the Rating Agencies, merge with or into, enter into
any joint venture or other association with, or consolidate with, any other
Person.
SECTION 8.2.4. Sales of Assets. NFC will not sell, lease, transfer,
liquidate or otherwise dispose of any Assets, except as contemplated by the
Related Documents and provided that the proceeds thereof are paid directly to
the Collateral Account.
SECTION 8.2.5. Acquisition of Assets. NFC will not acquire, by long-term or
operating lease or otherwise, any Assets, except pursuant to the terms of the
Related Documents.
SECTION 8.2.6. Dividends, Officers' Compensation. etc. NFC will not declare
or pay any dividends on any shares of its capital stock or make any other
distribution on, or any purchase, redemption or other acquisition of, any shares
of its capital stock, or pay any wages or salaries or other compensation to
officers, directors, employees or others except out of earnings computed in
accordance with GAAP.
SECTION 8.2.7. Name; Chief Executive Office. NFC will neither (i) change
the location of its chief executive office (within the meaning of the UCC)
without sixty (60) days' prior notice to the Agent, the Liquidity Agent and each
Rating Agency nor (ii) change its name without prior notice to the Agent, the
Liquidity Agent and each Rating Agency sufficient to allow the Agent to make all
filings (including filings of financing statements on form UCC-1) and recordings
necessary to perfect the interest of the Agent in the Assigned Collateral
pursuant to the Collateral Agreement.
SECTION 8.2.8. Organic Documents. NFC will not amend any of its Organic
Documents without the written consent of the Majority Banks and each of the
Rating Agencies.
SECTION 8.2.9. Investments. NFC will not make, incur, or suffer to exist
any loan, advance, extension of credit to, or other investment in, any Person
other than pursuant to the Loan Agreement and with respect to Eligible
Investments.
SECTION 8.2.10. No Other Agreements; Amendments to Related Documents. NFC
will not, without the prior written consent of the Majority Banks and GM, (i)
enter into or be a party to any material agreement or instrument other than any
Related Document or documents and agreements incidental thereto or (ii) amend,
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modify, waive or give any approval, consent or permission under, any provision
of any Related Document to which it is a party other than, in the case of the
Loan Agreement, A Support Reimbursement Agreement, B Letter of Credit
Reimbursement Agreement, B Support Letter of Credit Reimbursement Agreement or
the Depositary Agreement, such amendments that relate to minor administrative
matters that do not amend or modify (A) the amount or timing of any payments (or
priorities for payments) to be made under the Related Documents, (B) any rights
in the Assigned Collateral (or any priorities or rights or restrictions on
encumbrances with respect thereto), or (C) any prohibition or restriction on the
incurrence of any Indebtedness under the Related Documents. Notwithstanding the
foregoing provisions of this Section 8.2.10, NFC may, at any time and from time
to time, without the consent of the Majority Banks, enter into any amendment,
supplement or other modification to any Related Document, in form and substance
satisfactory to the Liquidity Agent, to cure any apparent ambiguity or to
correct or supplement any inconsistent provisions therein; provided, however,
that (i) any such action shall not have a materially adverse effect on the
interests of the Liquidity Lenders and (ii) a copy of such amendment, supplement
or other modification is furnished to the Liquidity Lenders and each of the
Rating Agencies in accordance with the notice provisions hereof not later than
ten days prior to the execution thereof.
SECTION 8.2.11. Other Business. NFC will not engage in any business or
enterprise or enter into any transaction other than the making of Loans to
National under the Loan Agreement, the related exercise of its rights as a
secured creditor, the issuance of Commercial Paper Notes, the incurrence of
Indebtedness under thin Liquidity Agreement, the A Support Reimbursement
Agreement, the B Letter of Credit Reimbursement Agreement and the B Support
Letter of Credit Reimbursement Agreement, the incurrence and payment of ordinary
course operating expenses and as otherwise contemplated by the Related
Documents.
SECTION 8.2.12. Maintenance of Separate Existence. NFC will do all things
necessary to maintain its corporate existence separate and apart from that of
National and Affiliates of National including, without limitation, (i)
practicing and adhering to corporate formalities, such as maintaining
appropriate corporate books and records; (ii) maintaining at least two corporate
directors who are Independent Directors; (iii) owning or leasing (including
through shared arrangements with Affiliates) all office furniture and equipment
necessary to operate its business; (iv) not (A) guaranteeing or otherwise
becoming liable for any obligations of any of its Affiliates, (B) having
obligations guaranteed by any of its Affiliates, (C) holding itself out as
responsible for debts of any of its
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Affiliates or for decisions or actions with respect to the affairs of any of its
Affiliates and (D) being directly or indirectly named as a direct or contingent
beneficiary or loss payee on any insurance policy of any Affiliate other than as
required by the Related Documents with respect to insurance on the Vehicles; (v)
other than as provided in the Related Documents, maintaining its deposit and
other bank accounts and all of its assets separate from those of any other
Person; (vi) maintaining its financial records separate and apart from those of
any other Person; (vii) compensating all its employees, officers, consultants
and agents for services provided to it by such Persons, or reimbursing any of
its Affiliates in respect of services provided to it by employees, officers,
consultants and agents of such Affiliate, out of its own funds; (viii)
maintaining office space separate and apart from that of any of its Affiliates
(even if such office space is subleased from or is on or near premises occupied
by any of its Affiliates) and a telephone number separate and apart from that of
any of its Affiliates; (ix) accounting for and managing all of its liabilities
separately from those of any of its Affiliates; (x) allocating, on an
arm's-length basis, all shared corporate operating services, leases and
expenses, including, without limitation, those associated with the services of
shared consultants and agents and shared computer and other office equipment and
software; (xi) refraining from filing or otherwise initiating or supporting the
filing of a motion in any bankruptcy or other insolvency proceeding involving
NFC, National or any Affiliate of National, to substantively consolidate NFC
with National or any Affiliate; (xii) remaining solvent and (xiii) conducting
all of its business (whether written or oral) solely in its own name. NFC
acknowledges its receipt of a copy of that certain opinion letter issued by
Mayer, Brown & Platt dated June 7, 1995 and addressing the issue of substantive
consolidation as it may relate to National, each Affiliate of National and NFC.
NFC hereby agrees to maintain in place all policies and procedures, and take and
continue to take all action, described in the factual assumptions set forth in
such opinion letter and relating to NFC.
SECTION 8.2.13. Offering Document. NFC will not include in any offering
document for the Commercial Paper Notes any information regarding any Liquidity
Lender which was not approved or furnished by such Liquidity Lender.
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ARTICLE IX
AMORTIZATION EVENTS
SECTION 9.1. Amortization Event. Each of the following events or
occurrences described in this Section 9.1 shall constitute an
"Amortization Event".
SECTION 9.1.1. Non-Payment of Obligations. NFC shall (a) fail to
repay maturing Commercial Paper Notes when due; (b) fail to make a
payment within two Business Days of the Scheduled Maturity Date or
prepayment (as a result of a mandatory prepayment requirement under
Section 4.1.2) of principal of any Liquidity Advance within two Business
Days of the date on which such payment is due; or (c) fail to make a
payment of any interest on any Liquidity Advance, any fees or any other
amounts payable hereunder within five Business Days of the date on which
such payment is due.
SECTION 9.1.2. Breach of Warranty. Any representation or warranty
made by NFC herein or in any other Related Document to which it is a
party shall have been incorrect in any material respect (to the extent
that any such representation or warranty does not incorporate a
materiality limitation in its terms) as of the date such representation
or warranty is made and, which continues to be incorrect in any material
respect (to the extent that any such representation or warranty does not
incorporate a materiality limitation in its terms) for a period of 30
days after the earlier of (i) the date on which written notice thereof
shall have been given to NFC by the Liquidity Agent or any Liquidity
Lender and (ii) the date on which NFC obtains actual knowledge thereof,
or any certificate, financial statement or any other material writing
furnished by NFC pursuant to this Liquidity Agreement or any such other
Related Document shall have been incorrect in any material respect when
made (or deemed made) and, which continues to be incorrect in any
material respect for a period of 10 days (other than with respect to any
Officer's Certificate delivered with respect to the Borrowing Base, for
which such period is one Business Day) after the earlier of (a) the date
on which written notice thereof shall have been given to NFC by the
Liquidity Agent or any Liquidity Lender and (b) the date on which NFC
obtains actual knowledge thereof.
SECTION 9.1.3. Non-Performance of Certain Covenants and
Obligations. NFC shall default in the due performance and observance of
any of its obligations under Section 8.2 and such default shall continue
unremedied for a period of ten days after the earlier of (i) the date on
which written notice thereof shall have been given to NFC by the
Liquidity Agent or any Liquidity Lender and (ii) the date on which NFC
obtains actual knowledge thereof.
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SECTION 9.1.4. Non-Performance of Other Covenants and Obligations.
NFC shall default in the due performance and observance of any covenant
or agreement contained herein or in any other Related Document to which
it is a party (other than those specified in Sections 9.1.1, 9 1.2 and
9.1.3), and, in the case of defaults other than with respect to Section
8.1.8 or 8.1.9, such default shall continue unremedied for a period of 30
days after notice thereof shall have been given to NFC by the Liquidity
Agent or any Liquidity Lender or, in the case of Section 8.1.8 or 8.1.9,
such default shall continue unremedied for a period of 30 days after NFC
initially becomes aware of such failure to perform or comply with such
covenant.
SECTION 9.1.5. [Reserved].
SECTION 9.1.6. Judgments. Any final and unappealable (or, if
capable of appeal, such appeal is not being diligently pursued or
enforcement thereof has not been stayed) judgment or order for the
payment of money in excess of $100,000, shall be rendered against NFC and
such judgment or order shall continue unsatisfied and unstayed for a
period of 30 days.
SECTION 9.1.7. Bankruptcy. Insolvency. etc. The occurrence of any
Event of Bankruptcy with respect to NFC or National.
SECTION 9.1.8. Letters of Credit. Any of the following shall
occur: (a) the A Letter of Credit or the B Letter of Credit shall not be
in full force or effect unless the aggregate amount on deposit in the
Cash Collateral Accounts is equal to the amount described in clause
(c)(i) or (ii) below, as applicable; (b) (1) the A Letter of Credit
Expiration Date shall have occurred without renewal or extension, an A
LOC Termination Disbursement has not been made and no cash collateral
account or other substitute enhancement has been provided or (2) the B
Letter of Credit Expiration Date shall have occurred without renewal or
extension, a B LOC Termination Disbursement has not been made and no cash
collateral account or other substitute enhancement has been provided; or
(c) the Fronting Letter of Credit Amount available for A LOC Credit
Disbursements and B LOC Credit Disbursements plus the amount of Support
Liquidity Disbursements available for Conversion to Support Credit
Disbursements is, for a period of one business day, less than (i) the
Required Enhancement Amount in effect on such day or (ii) from and after
the occurrence of an Amortization Event, the amount described in clause
(c)(i) that shall have been in effect on the day immediately preceding
the occurrence of such Amortization Event.
SECTION 9.1.9. Insolvency of Fronting Credit Enhancers. (a) Unless
the Cash Collateral Account A shall theretofore have been funded to the
full extent required under the terms of the
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Collateral Agreement upon an A Termination Demand, an Event of Bankruptcy
shall have occurred with respect to the A Credit Enhancer or the A Credit
Enhancer shall have repudiated the A Letter of Credit or shall have
refused to honor a proper draw thereon or (b) unless the Cash Collateral
Account B and the Cash Collateral Account C shall theretofore have been
funded to the full extent required under the terms of the Collateral
Agreement upon a B Termination Demand, an Event of Bankruptcy shall have
occurred with respect to the B Credit Enhancer or the B Credit Enhancer
shall have repudiated the B Letter of Credit or shall have refused to
honor a proper draw thereon.
SECTION 9.1.10. Independent Directors. NFC shall fail to have two
or more Independent Directors on its board and such failure shall have
continued for a period of 30 days.
SECTION 9.1.11. Enforceability of or Default under Related
Documents. (a) Any of the Related Documents or any portion thereof shall
not be in full force and effect, enforceable in accordance with its terms
or NFC, National or any Manufacturer shall so assert in writing or (b)
any Loan Event of Default or Event of Default shall occur.
SECTION 9.1.12. Investment Company. NFC shall have become an
"investment company" or shall have become under the "control" of an
"investment company" under the Investment Company Act.
SECTION 9.1.13. Termination of Loan Commitment. The Loan
Commitment Termination Date shall have occurred.
SECTION 9.1.14. Program Downgrade. The rating on the Commercial
Paper Notes shall have been downgraded to A-2 by S&P or P-2 by Moody's,
or less, or withdrawn and all of the Liquidity Lenders shall have a
rating of A-1, or better, by S&P and P-1 by Moody's.
SECTION 9.1.15. Termination of Liquidity Commitments or Reduction
of Aggregate Liquidity Commitment. The Liquidity Commitment Termination
Date with respect to all Liquidity Lenders shall have occurred or the
Aggregate Liquidity Commitment is reduced due to the failure of certain
Liquidity Lenders to renew their Liquidity Commitments on any date to 50%
or less than the Aggregate Liquidity Commitment in effect immediately
prior to such reduction.
SECTION 9.2. Action if Amortization Event. If any Amortization
Event set forth in Sections 9.1.1, 9.1.6, 9.1.8, 9.1.9, 9.1.10, 9 1.12,
9.1.13, 9.1.14 or 9.1.15 shall have occurred and be continuing, the
Agent, upon having actual knowledge thereof, without the request or
consent of the Liquidity Agent or the Majority Banks, in every such event
and at
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any time thereafter during the continuance of such event, shall, and if
any Amortization Event has occurred, the Agent, at the request or with
the consent of the Majority Banks conveyed through the Liquidity Agent,
shall, in every such event and at any time thereafter during the
continuance of such event, by notice to NFC and National, at the same or
different times, notify the Depositary, the Placement Agents and the
Dealers of the occurrence of such Amortization Event, and instruct NFC
and the Depositary to cease issuing Commercial Paper Notes and the right
of NFC to issue Commercial Paper Notes shall automatically terminate. If
any Amortization Event occurs under Section 9.1.7, without giving effect
to any grace periods included in the definition of Event of Bankruptcy,
the Liquidity Agent will instruct the Depositary and NFC to cease issuing
Commercial Paper Notes. In addition, the Liquidity Agent may, (i) upon
the occurrence of any Amortization Event, terminate the Liquidity
Commitments hereunder if such Amortization Event is pursuant to Section
9.1.7 with respect to NFC or Section 9.1.8(a) (unless another form of
Credit Enhancement is available); (ii) upon the occurrence of any event
specified in Sections 9.1.1 through 9.1.12 or 9.1.14 at the request, or
with the consent, of Liquidity Lenders then holding, in the aggregate,
Liquidity Commitments in excess of 50% of the Aggregate Liquidity
Commitment (or, if the Aggregate Liquidity Commitment shall have been
terminated, Liquidity Lenders then holding, in the aggregate in excess of
50% of the principal amount of Liquidity Advances then outstanding), by
notice to NFC, declare the aggregate principal amount of any Liquidity
Advances then outstanding, together with accrued interest and all fees
and other Obligations hereunder, immediately due and payable whereupon
all such principal, accrued interest, fees and other Obligations
hereunder shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by NFC; provided, however, that in the case
of any Amortization Event under Section 9.1.7 with respect to NFC, (A)
the Liquidity Commitment of each Liquidity Lender shall automatically be
terminated and (B) all such principal, interest, fees and other
Obligations shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are
hereby expressly waived by NFC; (iii) instruct NFC to terminate the Loan
Commitment and cease funding the purchase or financing of Vehicles under
the Loan Agreement; and (iv) pursue any other right or remedy under this
Liquidity Agreement and the other Related Documents or under applicable
law or otherwise.
SECTION 9.3. Limited Amortization Events. Each of the following
events or occurrences described in this Section 9.3 shall constitute a
"Limited Amortization Event".
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SECTION 9.3.1. Ineligibility of Manufacturer or Repurchase
Program. (a) Any Manufacturer or any Repurchase Program shall cease to be
an Eligible Manufacturer or an Eligible Repurchase Program, respectively,
(b) a Manufacturer whose Repurchase Program is a Guaranteed Depreciation
Program and/or any related auction dealers, or any other Manufacturer,
shall fail to pay an aggregate amount in excess of the lesser of $25
million and the aggregate amount of repurchase obligations of such
Manufacturer under its Repurchase Program in respect of Vehicles that are
subject to Loans (or such other amount as shall have been agreed to for
this purpose by NFC and the Majority Banks at the time that NFC proposes
such Manufacturer for consideration as an "Eligible Manufacturer under
the Related Documents), in each case, owed by it in respect of any
Vehicles turned back in accordance with the terms of the related
Repurchase Program and such failure shall continue for 90 days after the
respective Turnback Dates for such Vehicles or (c) any Event of
Bankruptcy shall have occurred with respect to any Manufacturer.
SECTION 9.3.2. Termination of Liquidity Commitment. The Liquidity
Commitment of any Liquidity Lender shall have been terminated and NFC
shall have failed to replace any such Liquidity Lender.
SECTION 9.3.3. Rating Downgrade of Liquidity Lender. A Rating
Downgrade below A-2 by S&P or P-2 by Moody's shall occur and be
continuing for 60 days (or such other period permitted by the Rating
Agencies) with respect to any Liquidity Lender and such Liquidity Lender
shall not have been replaced pursuant to Section 5.9 hereof.
SECTION 9.4. Action Upon Limited Amortization Event.
(a) If any Limited Amortization Event set forth in
Section 9.3.1 shall have occurred and be continuing with respect
to any Manufacturer, NFC shall not make any further Loans under
the Loan Agreement to fund the purchase or financing of Vehicles
of such Manufacturer, no Commercial Paper Notes shall be issued to
finance any such purchase or financing and no Liquidity Lender
shall be required to make any Revolving Advance or Swing Line
Advance with respect to any such purchase or financing.
(b) If any Limited Amortization Event set forth in
Section 9.3.2 shall have occurred and be continuing, then NFC
shall not issue Commercial Paper Notes to the extent that after
giving effect to such issuance (and the use of proceeds thereof),
the Aggregate Face Amount shall exceed the Program Size (reduced
by the aggregate Liquidity
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Commitments of the Liquidity Lenders that have been terminated).
(c) If any Limited Amortization Event set forth in
Section 9.3.3 shall have occurred and be continuing, then NFC
shall not issue Commercial Paper Notes to the extent that after
giving effect to such issuance (and the use of proceeds thereof),
the Aggregate Face Amount shall exceed the Program Size (reduced
by the aggregate Liquidity Commitments of the Affected Liquidity
Lenders).
ARTICLE X
THE LIQUIDITY AGENT
SECTION 10.1. Actions. Each Liquidity Lender hereby appoints
Citibank as its Liquidity Agent under and for purposes of this Liquidity
Agreement, the Liquidity Advance Notes and each other Related Document.
Each Liquidity Lender hereby authorizes the Liquidity Agent to act on
behalf of such Liquidity Lender under this Liquidity Agreement, the
Liquidity Advance Notes and each other Related Document and, in the
absence of other written instructions from the Majority Banks received
from time to time by the Liquidity Agent (with respect to which the
Liquidity Agent agrees that it will comply, except as otherwise provided
in this Section or as otherwise advised by counsel), to exercise such
powers hereunder and thereunder as are specifically delegated to or
required of the Liquidity Agent by the terms hereof and thereof, together
with such powers as may be reasonably incidental thereto. Each Liquidity
Lender hereby indemnifies (which indemnity shall survive any termination
of this Liquidity Agreement) the Liquidity Agent, pro rata according to
such Liquidity Lender's Percentage, from and against any and all
liabilities, obligations, losses, damages, claims, costs or expenses of
any kind or nature whatsoever which may at any time be imposed on,
incurred by, or asserted against, the Liquidity Agent in any way relating
to or arising out of this Liquidity Agreement, the Liquidity Advance
Notes and any other Related Document, including reasonable attorneys'
fees (including the allocated costs of in-house counsel), and as to which
the Liquidity Agent is not reimbursed by NFC; provided, however, that no
Liquidity Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, claims, costs or expenses
which are determined by a court of competent jurisdiction in a final
proceeding to have resulted from the Liquidity Agent's gross negligence
or wilful misconduct. The Liquidity Agent shall not be required to take
any action hereunder, under the Liquidity Advance Notes or under any
other Related Document, or to prosecute or defend any suit in respect of
this Liquidity Agreement, the Liquidity Advance Notes or any
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other Related Document, unless it is indemnified hereunder to its
satisfaction. If any indemnity in favor of the Liquidity Agent shall be
or become, in the Liquidity Agent's determination, inadequate, the
Liquidity Agent may call for additional indemnification from the
Liquidity Lenders and cease to do the acts indemnified against hereunder
until such additional indemnity is given.
SECTION 10.2. Collateral Agreement. Without limiting the
authorizations otherwise set forth in this Article X, each Liquidity
Lender hereby authorizes the Liquidity Agent to execute and deliver the
Collateral Agreement and each of the other Related Documents as Liquidity
Agent and on behalf of such Liquidity Lender, with the same effect as if
such Liquidity Lender had executed the Collateral Agreement or such
Related Document in its own name. Each Liquidity Lender acknowledges that
the Collateral Agreement contains certain provisions, including, without
limitation, Section 7.02 thereof, which give rise to indemnification
obligations in respect of the Agent on the part of such Liquidity Lender
and such Liquidity Lender hereby agrees to be bound by such provisions,
as the same may from time to time be modified in accordance with the
terms of the Collateral Agreement and this Liquidity Agreement.
SECTION 10.3. Exculpation. Neither the Liquidity Agent nor any of
its directors, officers, employees or agents shall be liable to any
Liquidity Lender for any action taken or omitted to be taken by it under
this Liquidity Agreement or any other Related Document, or in connection
herewith or therewith, except for its own wilful misconduct or gross
negligence, nor responsible for any recitals or warranties herein or
therein, nor for the effectiveness, enforceability, validity or due
execution of this Liquidity Agreement or any other Related Document, nor
for the creation, perfection or priority of any Liens purported to be
created by any of the Related Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of any collateral
security, nor to make any inquiry respecting the performance by NFC of
its obligations hereunder or under any other Related Document. Any such
inquiry which may be made by the Liquidity Agent shall not obligate it to
make any further inquiry or to take any action. The Liquidity Agent shall
be entitled to rely upon advice of counsel concerning legal matters and
upon any notice, consent, certificate, statement or writing which the
Liquidity Agent believes to be genuine and to have been presented by a
proper Person. As to any matters not expressly provided for in this
Liquidity Agreement or any other Related Document, the Liquidity Agent
shall not be required to exercise any discretion or take any action, but
shall be required to act or refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions
of the Majority Banks.
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SECTION 10.4. Successor. The Liquidity Agent may resign as such at
any time upon at least 30 days' prior written notice to NFC and all
Liquidity Lenders, and the Liquidity Agent may be removed at any time
with cause by the Majority Banks. If the Liquidity Agent at any time
shall resign or be removed, the Majority Banks may appoint (with, if no
Potential Amortization Event or Amortization Event (other than a
Scheduled Amortization Event) then exists, the consent of NFC, which
consent shall not be unreasonably withheld or delayed) another Liquidity
Lender as a successor Liquidity Agent which shall thereupon become the
Liquidity Agent hereunder. If no successor Liquidity Agent shall have
been so appointed by the Majority Banks, and shall have accepted such
appointment, within 30 days after the retiring Liquidity Agent's giving
notice of resignation or the Majority Banks' removal of the retiring
Liquidity Agent, then the retiring Liquidity Agent may, on behalf of the
Liquidity Lenders, appoint a successor Liquidity Agent, which shall be
one of the Liquidity Lenders or an Eligible Liquidity Lender. The
resignation or removal of the Liquidity Agent shall not become effective
until a successor Liquidity Agent has been appointed and shall have
accepted such appointment. Upon the acceptance of any appointment as
Liquidity Agent hereunder by a successor Liquidity Agent, such successor
Liquidity Agent shall be entitled to receive from the retiring Liquidity
Agent such documents of transfer and assignment as such successor
Liquidity Agent may reasonably request, and shall thereupon succeed to
and become vested with all rights, powers, privileges and duties of the
retiring Liquidity Agent, and the retiring Liquidity Agent shall be
discharged from its duties and obligations under this Liquidity Agreement
and all other Related Documents. After any retiring Liquidity Agent's
resignation or removal hereunder as the Liquidity Agent, the provisions
of
(a) this Article X shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the
Liquidity Agent under this Liquidity Agreement; and
(b) Section 11.3 and Section 11.4 shall continue to
inure to its benefit.
SECTION 10.5. Liquidity Advances by Citibank. Citibank (and any
successor thereto in its capacity as Liquidity Agent, that is also a
Liquidity Lender) shall have the same rights and powers with respect to
(x) the Liquidity Advances made by it or any of its Affiliates, and (y)
the Liquidity Advance Notes held by it or any of its Affiliates as any
other Liquidity Lender and may exercise the same as if it were not the
Liquidity Agent. Citibank (and such successor) and its Affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with NFC or any Affiliate of NFC as if Citibank (and such
successor) were not the Liquidity Agent hereunder.
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SECTION 10.6. Credit Decisions. Each Liquidity Lender acknowledges
that it has, independently of the Liquidity Agent and each other
Liquidity Lender, and based on such Liquidity Lender's review of the
financial information of NFC and National, this Liquidity Agreement, the
other Related Documents (the terms and provisions of which being
satisfactory to such Liquidity Lender) and such other documents,
information and investigations as such Liquidity Lender has deemed
appropriate, made its own credit decision to extend its Liquidity
Commitment. Each Liquidity Lender also acknowledges that it will,
independently of the Liquidity Agent and each other Liquidity Lender, and
based on such other documents, information and investigations as it shall
deem appropriate at any time, continue to make its own credit decisions
as to exercising or not exercising from time to time any rights and
privileges available to it under this Liquidity Agreement or any other
Related Document.
SECTION 10.7. Copies, etc. The Liquidity Agent shall give prompt
notice to each Liquidity Lender of each notice or request required or
permitted to be given to the Liquidity Agent by NFC pursuant to the terms
of this Liquidity Agreement (unless concurrently delivered to the
Liquidity Lenders by NFC). The Liquidity Agent will distribute to each
Liquidity Lender each document or instrument received for its account and
copies of all other communications received by the Liquidity Agent from
NFC for distribution to the Liquidity Lenders by the Liquidity Agent in
accordance with the terms of this Liquidity Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Waivers, Amendments, etc. The provisions of this
Liquidity Agreement and each other Related Document to which NFC is a
party may from time to time be amended, modified or waived, if (i) prior
written notice of such amendment, modification or waiver is given to each
of the Rating Agencies, the Placement Agents and the Dealers, (ii)
subject to Section 8.2.10 hereof as it relates to amendments of the
Related Documents other than the Liquidity Agreement, such amendment,
modification or waiver is in writing and consented to in writing by NFC,
GM and the Majority Banks and (iii) such amendment, modification or
waiver shall not, as evidenced by written confirmation of the Rating
Agencies, result in the downgrading or withdrawal of the then current
ratings of the Commercial Paper Notes by the Rating Agencies; provided,
however, that such written confirmation will not be required in
connection with the extension of a Liquidity Lender's Scheduled Liquidity
Commitment Termination Date pursuant to Section 3.5; provided further,
however, that any modification of Section 6.3 or this Section
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11.1, any requirement hereunder that any particular action be taken by
all the Liquidity Lenders or by the Majority Banks or any change in the
definition of the term "Required Liquidity Providers", "Borrowing Base
Deficiency", "Eligible Manufacturers", "Eligible Repurchase Program",
"Event of Bankruptcy" or "Majority Banks" or any defined term used for
the purpose of any such definition shall require the consent of each
Liquidity Lender and the B Support Credit Enhancers; and further provided
that any amendment, waiver or other modification that would
(a) increase the Liquidity Commitment or the Percentage
of any Liquidity Lender or reduce any fees described in Article IV
payable to any Liquidity Lender shall require the consent of such
Liquidity Lender;
(b) amend the definition of the Scheduled Maturity Date,
the Scheduled Liquidity Commitment Termination Date, or the
Liquidity Commitment Termination Date shall require the consent of
each Liquidity Lender affected thereby;
(c) extend the due date for, or reduce the amount of,
any scheduled repayment or prepayment of principal of or interest
on any Liquidity Advance of any Liquidity Lender (or reduce the
principal amount of or rate of interest on any Liquidity Advance
of any Liquidity Lender) shall require the consent of each
Liquidity Lender affected thereby;
(d) modify or waive the conditions precedent to the
effectiveness of this Liquidity Agreement set forth in Article VI
shall require the consent of each Liquidity Lender;
(e) approve the assignment or transfer by NFC of any of
its rights or obligations hereunder or under any other Related
Document to which it is a party except pursuant to the express
terms hereof or thereof shall require the consent of each
Liquidity Lender;
(f) release any of the Assigned Collateral from the Lien
under the Collateral Agreement or the Master Collateral Agency
Agreement, or release any obligor under any Related Document to
which it in a party except pursuant to the express terms of such
Related Document shall require the consent of each Liquidity
Lender, provided, however, that the Agent or the Master Collateral
Agent may release liens on Vehicles in accordance with the Master
Collateral Agency Agreement or the Collateral Agreement;
(g) affect adversely the interests, rights or
obligations of any Liquidity Lender individually in
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comparison to other Liquidity Lenders shall require the consent of
such Liquidity Lender;
(h) affect adversely the interests, rights or
obligations of either the Liquidity Agent or the Agent in its
capacity as such shall require the consent of the Liquidity Agent
or the Agent, as the case may be;
(i) amend or otherwise modify any Amortization Event
shall require the consent of each Liquidity Lender; and
(j) amend or waive any condition precedent to the
issuance of the Commercial Paper Notes set forth in Section 2.2
shall require written confirmation from each of S&P and Moody's
that such amendment or waiver will not result in the downgrading
or withdrawal of the then current ratings of the Commercial Paper
Notes by each of S&P and Moody's.
Notwithstanding the foregoing provisions of this Section 11.1, NFC
and the Liquidity Agent may, at any time and from time to time, without
the consent of the Liquidity Lenders, enter into any amendment,
supplement or other modification to this Agreement to cure any apparent
ambiguity or to correct or supplement any provision in this Agreement
that may be inconsistent with any other provision herein; provided,
however, that (i) any such action shall not have a materially adverse
effect on the interests of the Liquidity Lenders and (ii) a copy of such
amendment, supplement or other modification is furnished to each
Liquidity Lender and each Rating Agency in accordance with the notice
provisions hereof not later than ten days prior to the execution thereof
by NFC and the Liquidity Agent.
No failure or delay on the part of the Liquidity Agent, any Liquidity
Lender or the holder of any Liquidity Advance Note in exercising any
power or right under this Liquidity Agreement or any other Related
Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice
to or demand on NFC in any case shall entitle it to any notice or demand
in similar or other circumstances. No waiver or approval by the Liquidity
Agent, any Liquidity Lender or the holder of any Liquidity Advance Note
under this Liquidity Agreement or any other Related Document shall,
except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder
shall require any similar or dissimilar waiver or approval thereafter to
be granted hereunder.
SECTION 11.2. Notices. All notices, amendments, waivers, consents
and other communications provided to and party hereto
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under this Liquidity Agreement or any other Related Document shall be in
writing and addressed, delivered or transmitted to such party at its
address or facsimile number set forth below its signature hereto or set
forth in the Liquidity Lender Assignment Agreement or at such other
address or facsimile number as may be designated by such party in a
notice to the other parties. Any notice, if mailed and properly addressed
with postage prepaid or if properly addressed and sent by pre-paid
courier service, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given when transmitted upon
receipt of electronic confirmation of transmission.
SECTION 11.3. Payment of Costs and Expenses. NFC agrees to pay on
demand all reasonable expenses of the Liquidity Agent (including the
reasonable fees and out-of-pocket expenses of counsel to the Liquidity
Agent and of local counsel, if any, who may be retained by counsel to the
Liquidity Agent) in connection with
(a) the negotiation, preparation, execution, delivery
and administration of this Liquidity Agreement and of each other
Related Document, including schedules and exhibits, and any
amendments, waivers, consents, supplements or other modifications
to this Liquidity Agreement or any other Related Document as may
from time to time hereafter be required, whether or not the
transactions contemplated hereby or thereby are consummated,
(b) the filing, recording, refiling or rerecording of
the Collateral Agreement or the Master Collateral Agency Agreement
and/or any UCC financing statements relating thereto and all
amendments, supplements and modifications to any thereof and any
and all other documents or instruments of further assurance
required to be filed or recorded or refiled or rerecorded by the
terms hereof or of the Collateral Agreement or the Master
Collateral Agency Agreement,
(c) the preparation and review of the form of any
document or instrument relevant to this Liquidity Agreement or any
other Related Document,
(d) the transactions contemplated by this Liquidity
Agreement and any of the other Related Documents, and
(e) the preparation and negotiation of the legal
opinions of counsel to each Liquidity Lender up to $1500 per
Liquidity Lender.
NFC further agrees to pay, and to save the Liquidity Agent and the
Liquidity Lenders harmless from all liability for (i) any
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breach by NFC of any of its obligations under this Liquidity Agreement,
(ii) all reasonable costs incurred by the Liquidity Agent or the
Liquidity Lenders in enforcing this Liquidity Agreement and (iii) any
stamp, documentary or other taxes which may be payable in connection with
the execution or delivery of this Liquidity Agreement, any Borrowing
hereunder, or the issuance of the Liquidity Advance Notes or any other
Related Documents. NFC also agrees to reimburse the Liquidity Agent or
such Liquidity Lender upon demand for all reasonable out-of-pocket
expenses incurred by the Liquidity Agent or such Liquidity Lender in
connection with (x) the negotiation of any restructuring or "work-out",
whether or not consummated, of any Obligations and (y) the enforcement of
any Obligations.
SECTION 11.4. Indemnification. In consideration of the execution
and delivery of this Liquidity Agreement by each Liquidity Lender and the
extension of the Liquidity Commitments, NFC hereby indemnifies and holds
the Liquidity Agent and each Liquidity Lender and each of their
respective officers, directors, employees and agents (collectively, the
"Indemnified Parties") harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and
reasonable expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought and including, without limitation,
any liability in connection with the offering and sale of the Commercial
Paper Notes), including reasonable attorneys' fees and disbursements
(collectively, the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any
Liquidity Advance; or
(b) the entering into and performance of this Liquidity
Agreement and any other Related Document by any of the Indemnified
Parties,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified
Party's gross negligence or wilful misconduct and provided that NFC
hereby indemnifies the Indemnified Parties, in connection with
prosecuting or defending any such claims, for reasonable attorneys' fees
and expenses. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, NFC hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The indemnity set
forth in this Section 11.4 shall in no event include indemnification for
any Taxes (which
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indemnification is provided in Section 5.6). NFC shall give notice to the
Rating Agencies of any claim for Indemnified Liabilities made under this
Section.
SECTION 11.5. Survival. The obligations of NFC under Sections 5.3,
5.4, 5.5, 5.6, 11.3 and ll.4, and the obligations of the Liquidity
Lenders under Sections 10.1 and 10.2, shall in each case survive any
termination of this Liquidity Agreement, the payment in full of all the
Obligations and the termination of all Liquidity Commitments.
SECTION 11.6. Severability. Any provision of this Liquidity
Agreement or any other Related Document which is prohibited or
unenforceable in any jurisdiction shall, as to such provision and such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Liquidity Agreement or such Related Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 11.7. Headings. The various headings of this Liquidity
Agreement and of each other Related Document are inserted for convenience
only and shall not affect the meaning or interpretation of this Liquidity
Agreement or such other Related Document or any provisions hereof or
thereof.
SECTION 11.8. Execution in Counterparts. This Liquidity Agreement
may be executed by the parties hereto in several counterparts, each of
which shall be executed by NFC and the Liquidity Agent and be deemed to
be an original and all of which shall constitute together but one and the
same agreement.
SECTION 11.9. Governing Law: Entire Agreement. THIS LIQUIDITY
AGREEMENT AND EACH OTHER RELATED DOCUMENT SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Liquidity
Agreement, the Liquidity Advance Notes and the other Related Documents
constitute the entire understanding among the parties hereto with respect
to the subject matter hereof and supersede any prior agreements, written
or oral, with respect thereto.
SECTION 11.10. Successors and Assigns. This Liquidity Agreement
shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns; provided, however,
that:
(a) NFC may not assign or transfer its rights or
obligations hereunder, other than pursuant to the Collateral
Agreement, without (i) the prior written consent of the Liquidity
Agent and all Liquidity Lenders and (ii) written
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confirmation from each of the Rating Agencies that its then
current rating of the Commercial Paper Notes will not be reduced
or withdrawn as a result thereof; and
(b) the rights of sale, assignment and transfer of the
Liquidity Lenders are subject to Section 11.11.
SECTION 11.11. Sale and Transfer of Liquidity Advances and Notes;
Participations in Loans and Notes. Each Liquidity Lender may assign, or
sell participations in, its Liquidity Advances and Liquidity Commitment
to one or more other Persons in accordance with this Section 11.11.
SECTION 11.11.1. Assignments. (a) Any Liquidity Lender,
(i) with notice to the Rating Agencies and the Dealers
and the written consent of NFC (which consent shall not be
unreasonably withheld) and the Liquidity Agent may at any time
assign and delegate to an Eligible Liquidity Lender, and
(ii) with ten days' prior notice to the Rating Agencies,
NFC, the Liquidity Agent, the Placement Agents and the Dealers,
may assign and delegate to any of its Affiliates with a credit
rating assigned to its short-term obligations by each Rating
Agency that is not lower than the rating then assigned by such
Rating Agency to the Commercial Paper Notes, and with the written
consent of NFC (which consent shall not be unreasonably withheld)
may at any time assign and delegate to any other Liquidity Lender
(each Person described in either of the foregoing clauses as being the
Person to whom such assignment and delegation is to be made, being
hereinafter referred to as an "Assignee Lender"), all or any fraction of
such Liquidity Lender's total Liquidity Advances and Liquidity Commitment
(which assignment and delegation shall be of a constant, and not a
varying, percentage of all the assigning Liquidity Lender's Liquidity
Advances and Liquidity Commitment) in a minimum aggregate amount of
$10,000,000; provided, however, that (x) any such Assignee Lender will
comply, if applicable, with the provisions contained in the last
paragraph of Section 5.6 and (y) the minimum aggregate amount of total
Liquidity Commitment and Liquidity Advances, if any, retained by such
Liquidity Lender shall be $10,000,000; provided, further, however, that,
NFC and the Liquidity Agent shall be entitled to continue to deal solely
and directly with such Liquidity Lender in connection with the interests
so assigned and delegated to an Assignee Lender until
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(A) such Assignee Lender shall have executed and
delivered to NFC and the Liquidity Agent a Liquidity Lender
Assignment Agreement, accepted by the Liquidity Agent;
(B) the processing fees described below shall have been
paid; and
(C) such Assignee Lender shall have delivered an opinion
of counsel acceptable to the Rating Agencies regarding the
enforceability of such Assignee Lender's Liquidity Commitment.
From and after the date that the Liquidity Agent accepts such Liquidity
Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be
deemed automatically to have become a party hereto and to the extent that
rights and obligations hereunder have been assigned and delegated to such
Assignee Lender in connection with such Liquidity Lender Assignment
Agreement, shall have the rights and obligations of a Liquidity Lender
hereunder and under the other Related Documents, and (y) the assignor
Liquidity Lender, to the extent that rights and obligations hereunder
have been assigned and delegated by it in connection with such Liquidity
Lender Assignment Agreement, shall be released from its obligations
hereunder and under the other Related Documents. Within five Business
Days after its receipt of notice that the Liquidity Agent has received an
executed Liquidity Lender Assignment Agreement, NFC shall, upon receipt
of the Liquidity Advance Notes evidencing such assignor Liquidity
Lender's Liguidity Advance and Liquidity Commitment, execute and deliver
to the Liquidity Agent (for delivery to the relevant Assignee Lender) new
Liquidity Advance Notes evidencing such Assignee Lender's assigned
Liquidity Advances and Liquidity Commitment and, if the assignor
Liquidity Lender has retained a portion of its Liquidity Advances and
Liquidity Commitment hereunder, replacement Liquidity Advance Notes in
the principal amount of the Liquidity Advances and Liquidity Commitment
so retained by the assignor Liquidity Lender hereunder (such Liquidity
Advance Notes to be in exchange for, but not in payment of, those
Liquidity Advance Notes then held by such assignor Liquidity Lender).
Each such Liquidity Advance Note shall be dated the date of the
predecessor Liquidity Advance Notes. The assignor Liquidity Lender shall
mark the predecessor Liquidity Advance Notes "exchanged" and deliver them
to NFC. Accrued interest on that part of the predecessor Liquidity
Advance Notes evidenced by the new Liquidity Advance Notes, and accrued
fees, shall be paid as provided in the Liquidity Lender Assignment
Agreement. Accrued interest on that part of the predecessor Liquidity
Advance Notes evidenced by the replacement Liquidity Advance Notes shall
be paid to the assignor Liquidity Lender. Accrued interest and accrued
fees shall be paid at the same time or times provided in the predecessor
Liquidity Advance Notes and
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in this Liquidity Agreement. Such assignor Liquidity Lender or such
Assignee Lender must also pay a processing fee to the Liquidity Agent
upon delivery of any Liquidity Lender Assignment Agreement in the amount
of $2,500. Such assignor Liquidity Lender and such Assignee Lender (and
not NFC) shall pay any legal expenses incurred by the Liquidity Agent in
the review, documentation and closing of such assignment. Any attempted
assignment and delegation not made in accordance with this Section
11.11.1 shall be null and void.
(b) Notwithstanding any other provision set forth in this
Liquidity Agreement, any Liquidity Lender may at any time create a
security interest in all or any portion of its rights under this
Liquidity Agreement (including, without limitation, the Liquidity
Advances owing to it and the Note held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of
the Federal Reserve System.
SECTION 11.11.2. Participations. Any Liquidity Lender may at any
time sell to one or more commercial banks or other financial institutions
(each of such commercial banks and financial institutions being herein
called a "Liquidity Participant") participating interests in any of the
Liquidity Advances, Liquidity Commitment, or other interests of such
Liquidity Lender hereunder; provided, however, that
(a) no participation contemplated in thin Section
11.11.2 shall relieve such Liquidity Lender from its Liquidity
Commitment or its other obligations hereunder or under any other
Related Document to which such Liquidity Lender is a party;
(b) each participation shall be in a minimum aggregate
amount of $10,000,000 or a smaller amount as may be agreed to by
NFC;
(c) such Liquidity Lender shall remain solely
responsible for the performance of its Liquidity Commitment and
such other obligations;
(d) NFC and the Liquidity Agent shall continue to deal
solely and directly with such Liquidity Lender in connection with
such Liquidity Lender's rights and obligations under this
Liquidity Agreement and each of the other Related Documents to
which such Liquidity Lender is a party;
(e) no Liquidity Participant, unless such Liquidity
Participant is an Affiliate of such Liquidity Lender, or is itself
a Liquidity Lender, shall be entitled to require such Liquidity
Lender to take or refrain from taking any action hereunder or
under any other Related Document, except that
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such Liquidity Lender may agree with any Liquidity Participant
that such Liquidity Lender will not, without such Liquidity
Participant's consent, take any actions of the type described in
the first proviso of Section 11.1 or clauses (a) through (g) and
clauses (i) and (j) of Section 11.1; and
(f) NFC shall not be required to pay any amount under
this Liquidity Agreement that is greater than the amount which it
would have been required to pay had no participating interest been
sold.
NFC acknowledges and agrees that, to the extent permitted by applicable
law, each Liquidity Participant, subject to clauses (d) and (f) above,
for purposes of Sections 5.3, 5.4, 5.5, 5.6, 5.8, 11.3, 11.4, 11.13 and
11.16 shall be considered a Liquidity Lender. No Liquidity Participant
shall have direct rights against NFC.
SECTION 11.12. Other Transactions. Nothing contained herein shall
preclude the Liquidity Agent or any other Liquidity Lender from engaging
in any transaction, in addition to those contemplated by this Liquidity
Agreement or any other Related Document, with NFC or any of its
Affiliates in which NFC or such Affiliate is not restricted hereby from
engaging with any other Person.
SECTION 11.13. Bankruptcy Petition Against NFC. The Liquidity
Agent and each Liquidity Lender hereby covenants and agrees that, prior
to the date which is one year and one day after the payment in full of
all Commercial Paper Notes Outstanding, it will not institute against, or
join any other Person in instituting against, NFC, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or
other similar proceeding under the laws of the United States or any state
of the United States. In the event that any Liquidity Lender takes action
in violation of this Section 11.13, NFC agrees, for the benefit of the
Holders, that it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such a petition by the Liquidity
Lender against NFC or the commencement of such action and raise the
defense that such Liquidity Lender has agreed in writing not to take such
action and should be estopped and precluded therefrom and such other
defenses, if any, as its counsel advises that it may assert; and such
Liquidity Lender acting in violation of this Section 11.13 shall be
liable for and pay the costs and expenses of NFC incurred in connection
therewith. The provisions of this Section 11.13 shall survive the
termination of this Liquidity Agreement, and, with respect to the
Liquidity Agent, the resignation or removal of the Liquidity Agent and,
with
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respect to any Liquidity Lender, the replacement of such
Liquidity Lender.
SECTION 11.14. Limited Recourse to NFC; No Recourse. (a) The
Liquidity Agent and each Liquidity Lender agree that the Obligations of
NFC to the Liquidity Agent and such Liquidity Lender hereunder shall be
payable in the order and priority set forth in Section 2.01 and 5.02(b),
as applicable, of the Collateral Agreement. Such obligations shall be due
and payable only to the extent that NFC's assets and the Fronting Letter
of Credit Amount are sufficient to pay such obligations. No claims of the
Liquidity Agent or any Liquidity Lender arising under or in connection
with the Collateral Agreement are intended to be impaired or waived by
this Section 11.14 (a).
(b) Without limitation to the obligations of NFC hereunder, no
recourse shall be had for the payment of any amount owing in respect of
Liquidity Advances or for the payment of any fee hereunder or any other
obligation or claim arising out of or based upon this Liquidity
Agreement, the Liquidity Advance Notes or any other Related Document
against any stockholder, employee, officer, director, affiliate or
incorporator of NFC based on their status as such or their actions in
connection therewith. The provisions of this Section 11.14 shall survive
the termination of this Liquidity Agreement, and with respect to the
Liquidity Agent the resignation or removal of the Liquidity Agent and
with respect to any Liquidity Lender the replacement of such Liquidity
Lender.
SECTION 11.15. Survival of Representations and Warranties. All
covenants, agreements, representations and warranties made by NFC herein
and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Liquidity Agreement or any other
Related Document shall be considered to have been relied upon by the
Liquidity Lenders and shall survive the execution and delivery of this
Liquidity Agreement and the making by the Liquidity Lenders of the
Liquidity Advances, and the execution and delivery to the Liquidity
Lenders of the Liquidity Advance Notes evidencing such Liquidity
Advances, regardless of any investigation made by the Liquidity Lenders
or on their behalf and shall continue so long as and until such time as
all Obligations hereunder and all Indebtedness under the Commercial Paper
Notes shall have been paid in full and the Liquidity Lenders no longer
have any Liquidity Commitments hereunder.
SECTION 11.16. Confidentiality. Each Liquidity Lender agrees that
it shall not disclose any Confidential Information to any Person without
the prior written consent of NFC or National, other than (a) to the
Liquidity Lender's Affiliates and their officers, directors, employees,
agents and advisors and to actual
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or prospective assignees and participants, and then only on a
confidential basis, (b) as required by any law, rule or regulation or
judicial process of which NFC or National, as the case may be, has
knowledge; provided that a Liquidity Lender may disclose Confidential
Information as required by any law, rule or regulation or judicial
process of which NFC or National, as the case may be, does not have
knowledge if such Liquidity Lender is prohibited by law from disclosing
such requirement to NFC or National, as the case may be, or (c) in the
course of litigation with NFC or National, the Liquidity Agent or any
other Liquidity Lender.
"Confidential Information" means information that NFC or National
furnishes to a Liquidity Lender on a confidential basis, but does not
include any such information that is or becomes generally available to
the public other than as a result of a disclosure by any Liquidity Lender
or other Person to which a Liquidity Lender delivered such information or
that is or becomes available to such Liquidity Lender from a source other
than NFC or National, provided that such source is not (1) known to such
Liquidity Lender to be bound by a confidentiality agreement with NFC or
National, as the case may be, or (2) known to such Liquidity Lender to be
otherwise prohibited from transmitting the information by a contractual,
legal or fiduciary obligation.
SECTION 11.17. Jurisdiction; Consent to Service of Process. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST NFC OR ANY LIQUIDITY LENDER WITH
RESPECT TO THIS LIQUIDITY AGREEMENT OR ANY OTHER RELATED DOCUMENT MAY BE
BROUGHT IN ANY STATE OR (TO EXTENT PERMITTED BY LAW) FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY EXECUTION AND
DELIVERY OF THIS LIQUIDITY AGREEMENT NFC AND EACH LIQUIDITY LENDER
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS,
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGEMENT RENDERED THEREBY IN
CONNECTION WITH THIS LIQUIDITY AGREEMENT. NFC DESIGNATES AND APPOINTS,
AND EACH LIQUIDITY LENDER DESIGNATES AND APPOINTS, CT CORPORATION SYSTEM,
1633 BROADWAY, NEW YORK, NEW YORK 10019, AND SUCH OTHER PERSONS AS MAY
HEREAFTER BE SELECTED BY NFC OR SUCH LIQUIDITY LENDER IRREVOCABLY
AGREEING IN WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF,
SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY NFC AND EACH LIQUIDITY LENDER TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO NFC OR SUCH LIQUIDITY LENDER
SO SERVED AT ITS ADDRESS PROVIDED IN THE APPLICABLE SIGNATURE PAGE
HERETO, EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY
FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS. IF ANY AGENT APPOINTED BY NFC OR SUCH LIQUIDITY LENDER REFUSES
TO ACCEPT SERVICE, NFC AND EACH LIQUIDITY LENDER HEREBY AGREES THAT
SERVICE
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UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF ANY LIQUIDITY LENDER OR THE AGENT TO BRING
PROCEEDINGS AGAINST NFC IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 11.18. Waiver Of Jury Trial. THE LIQUIDITY AGENT, THE
LIQUIDITY LENDERS AND NFC HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JULY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS LIQUIDITY AGREEMENT OR ANY OTHER RELATED DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE AGENT, THE LIQUIDITY LENDERS OR NFC IN CONNECTION
HEREWITH OR THEREWITH. NFC ACKNOWLEDGES AND AGREES THAT IT WAS RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER
PROVISION OF EACH OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LIQUIDITY AGENT AND THE
LIQUIDITY LENDERS ENTERING INTO THIS LIQUIDITY AGREEMENT AND EACH SUCH
OTHER RELATED DOCUMENT.
SECTION 11.19. Waiver of Set-Off. Each Liquidity Lender hereby
waives and relinquishes any right that it has or may have to set-off or
to exercise any banker's lien or any right of attachment or garnishment
with respect to any funds at any time and from time to time on deposit
in, or otherwise to the credit of, any account and any claims of NFC
therein or with respect to any right to payment from NFC, it being
understood, however, that nothing contained in this Section 11.19 shall,
or is intended to, derogate from the assignment and security interest
granted to the Agent under the Collateral Agreement or to the Master
Collateral Agent under the Master Collateral Agency Agreement or impair
any rights of the Liquidity Lenders, the Liquidity Agent, the Agent or
the Master Collateral Agent thereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Liquidity
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
NATIONAL FLEET FUNDING CORPORATION
By: /s/ M.J. Becker
------------------------------------
Name: M.J. Becker
Title:
Address: 7700 France Avenue South
Minneapolis, Minnesota 54435
Attention:
Facsimile No.:
Telephone No.:
CITIBANK, N.A.
as Liquidity Agent
By: /s/ Tara J. Coffey
------------------------------------
Name: Tara J. Coffey
Title: Senior Trust Officer
Address: 120 Wall Street, 13th Floor
New York, New York 10043
Attention: Structured Finance Group
Facsimile No.: (212) 480-1615
Telephone No.: (212) 412-6230
<PAGE> 77
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$75,000,000 ABN AMRO BANK N.V.
By: /s/ Bernard J. McGuigan Robert J. Graff
---------------------------------------------
Name: Bernard J. McGuigan Robert J. Graff
Title:Group Vice President Vice President
District
Office: 135 South Lasalle Street
Suite 425
Chicago, IL 60674-9135
Attention: Barney McGuigan
Facsimile No.: (312) 606-8425
Telephone No.: (312) 904-2662
LIBOR
Office: 135 South LaSalle Street
Suite 425
Chicago, IL 60674-9135
Attention: Barney McGuigan
Facsimile No.: (312) 606-8425
Telephone No.: (312) 904-2662
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$15,000,000 BANK OF IRELAND
By: /s/ R.H. Wyer (1541) K. Rockett (3068)
---------------------------------------
Name: R.H. Wyer K. Rockett
Title:
Domestic
Office: 640 5th Avenue
New York, NY 10019
Attention: Carmel Queenan
Facsimile No.: (212) 586-7552
Telephone No.: (212) 397-1758
LIBOR
Office: La Touche House
International Financial
Services Center
Custom House Docks
Dublin 1
IRELAND
Attention: Niamh O'Flynn
Facsimile No.: 011-353-18290129
Telephone No.: 011-353-16700600
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$50,000,000 BANK OF MONTREAL
By: /s/ Lynn A. Durning
---------------------------------------
Name: LYNN A. DURNING
Title: DIRECTOR
Domestic
Office: 115 South LaSalle Street
Chicago, IL 60603
Attention: Debra Sandt
Facsimile No.: (312) 750-4344
Telephone No.: (312) 750-4312
LIBOR
Office: 115 South LaSalle Street
Chicago, IL 60603
Attention: Debra Sandt
Facsimile No.: (312) 750-4344
Telephone No.: (312) 750-4312
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$75,000,000 THE BANK OF NEW YORK
By: /s/ Richard A. Raffetto
---------------------------------------
Name: RICHARD A. RAFFETTO
Title: ASSISTANT VICE PRESIDENT
Domestic
Office: One Wall Street
New York, NY 10286
Attention: Yvonne Forbes
Facsimile No.: (212) 635-1208
Telephone No.: (212) 635-6691
LIBOR
Office: One Wall Street
New York, NY 10286
Attention: Yvonne Forbes
Facsimile No.: (212) 635-1208
Telephone No.: (212) 635-6691
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$75,000,000 THE BANK OF NOVA SCOTIA
By: /s/ F. C. H. Ashby
---------------------------------------
Name: F. C. H. Ashby
Title: Sr. Manager Loan Operation
Domestic
Office: 600 Peachtree Street, N.E.
Suite 2700
Atlanta, GA 30308
Attention: F.C.H. Ashby
Facsimile No.: (404) 888-8998
Telephone No.: (404) 877-1500
LIBOR
Office: 600 Peachtree Street, N.E.
Suite 2700
Atlanta, GA 30308
Attention: F.C.H. Ashby
Facsimile No.: (404) 888-8998
Telephone No.: (404) 877-1500
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$25,000,000 THE BANK OF TOKYO, LTD, NEW YORK
AGENCY
By: /s/ Joseph P. Devoe
---------------------------------------
Name: Joseph P. Devoe
Title: Attorney-in-Fact
Domestic
Office: 1251 Avenue of the Americas
New York, NY 10116
Attention: Wink Mora
Facsimile No.: (212) 782-6440
Telephone No.: (212) 782-4321
LIBOR
Office: 1251 Avenue of the Americas
New York, NY 10116
Attention: Wink Mora
Facsimile No.: (212) 782-6440
Telephone No.: (212) 782-4321
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
BANQUE ET CAISSE D'EPARGNE DE L'ETAT,
$10,000,000 LUXEMBOURG
By: /s/John DHUR Rene REIFF
-------------------------------------------------
Name: John DHUR Rene REIFF
Title: Sous-Directeur Inspecteur de Direction
Domestic
Office: 1 Place de Metz
L-1930 Luxembourg
Grand Duchy of Lexembourg
Attention: Pina Girardi
Facsimile No.: 011-352-4015-4284
Telephone No.: 011-352-4015-4284
LIBOR
Office: 1 Place de Metz
L-1930 Lexembourg
Grand Duchy of Lexembourg
Attention: Pina Girardi
Facsimile No.: 011-352-4015-4284
Telephone No.: 011-352-4015-4349
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$15,000,000 BANQUE NATIONAL DE PARIS - CHICAGO
BRANCH
By:/s/ ARNAUD COLLIN du BOCAGE
---------------------------------------
Name: ARNAUD COLLIN du BOCAGE
Title: Executive Vice President
and General Manager
Domestic
Office: 209 South LaSalle Street
Chicago, IL 60604
Attention: Christine Howatt
Facsimile No.: (312) 977-1380
Telephone No.: (312) 977-1383
LIBOR
Office: 209 South LaSalle Street
Chicago, IL 60604
Attention: Christine Howatt
Facsimile No.: (312) 977-1380
Telephone No.: (312) 977-1383
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$25,000,000 BAYERISCHE HYPOTHEKEN-UND WECHSEL -
BANK AKTIENGESELLSCHAFT, NEW YORK
BRANCH
By: /s/ Constance Madden
---------------------------------------
Name: Constance Madden
Title: A.V.P.
By: /s/ R.G. Pankuch
---------------------------------------
Name: R.G. Pankuch
Title: FVP
Domestic
Office: Financial Square
32nd Floor
New York, NY 10005
Attention: Constance Madden
Facsimile No.: (212) 440-0741
Telephone No.: (212) 440-0750
LIBOR
Office: Financial Square
32nd Floor
New York, NY 10005
Attention: Constance Madden
Facsimile No.: (212) 440-0741
Telephone No.: (212) 440-0750
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$75,000,000 CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Kent Davis
---------------------------------------
Kent Davis
Authorized Signatory
Domestic
Office: Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
Attention: Junior Williams
Facsimile No.: (404) 319-4950
Telephone No.: (404) 319-4820
LIBOR
Office: Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, GA 30339
Attention: Junior Williams
Facsimile No.: (404) 319-4950
Telephone No.: (404) 319-4820
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$50,000,000 CAISSE NATIONALE DE CREDIT AGRICOLE
By:/s/ Katherine L. Abbott
---------------------------------------
Name: KATHERINE L. ABBOTT
Title: FIRST VICE PRESIDENT
Domestic
Address: 55 East Monroe
Chicago, IL 60603
Attention: Kimberly Wilp
Facsimile No.: (312) 372-4421
Telephone No.: (312) 917-7450
LIBOR
Office: 55 East Monroe
Chicago, IL 60603
Attention: Kimberly Wilp
Facsimile No.: (312) 372-4421
Telephone No.: (312) 917-7450
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$132,500,000 CITIBANK, N.A.
By:/s/ Kyle L. Miller
---------------------------------------
Name: Kyle L. Miller
Title: Vice President
Domestic
Office: 399 Park Avenue
6th Floor, Zone 3
New York, NY 10043
Attention: Kyle L. Miller
Facsimile No.: (212) 793-3728
Telephone No.: (212) 559-7492
LIBOR
Office: 399 Park Avenue
6th Floor, Zone 3
New York, NY 10043
Attention: Kyle L. Miller
Facsimile No.: (212) 793-3728
Telephone No.: (212) 559-7492
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$75,000,000 COMMERZBANK AG, CHICAGO BRANCH
By:/s/ WB Peterson
---------------------------------------
Name: WILLIAM BRENT PETERSON
Title: Assistant Vice President
By:/s/ Dr. Tollner
---------------------------------------
Name: DR. HELMUT R. TOLLNER
Title: Executive Vice President
Domestic
Office: 2 World Financial Center
New York, NY 10281
Attention: Christine Scaffidi
Facsimile No.: (212) 266-7235
Telephone No.: (212) 266-7235
LIBOR
Office: 2 World Financial Center
New York, NY 10281
Attention: Christine Scaffidi
Facsimile No.: (212) 266-7235
Telephone No.: (212) 266-7235
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$132,500,000 CREDIT SUISSE
By:/s/ Carl Jackson
---------------------------------------
Name: CARL JACKSON
Title: MEMBER OF SENIOR
MANAGEMENT
By:/s/ Roger Saylor
---------------------------------------
Name: Roger Saylor
Title: Associate
Domestic
Office: 12 East 49th Street
42nd Floor
New York, NY 10017
Attention: Carl Jackson
Roger Saylor
Facsimile No.: (212) 238-5332
Telephone No.: (212) 238-5370
LIBOR
Office: 12 East 49th Street
42nd Floor
New York, NY 10017
Attention: Carl Jackson
Roger Saylor
Facsimile No.: (212) 238-5332
Telephone No.: (212) 238-5370
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$25,000,000 DEN DANSKE BANK AKTIESELSKAB, NEW YORK
BRANCH
By:/s/ /s/Stephen B. Shea
---------------------------------------
Name: Stephen B. Shea
Title:Vice President Vice President
Domestic
Office: 280 Park Avenue
New York, NY 10017
Attention: Miguel Montalvo
Facsimile No.: (212) 370-9239
Telephone No.: (212) 984-8430
LIBOR
Office: 280 Park Avenue
New York, NY 10017
Attention: Miguel Montalvo
Facsimile No.: (212) 370-9239
Telephone No.: (212) 984-8430
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$50,000,000 DRESDNER BANK AG CHICAGO BRANCH AND
GRAND CAYMAN BRANCH
By:/s/ H. Garabedian
---------------------------------------
Name: Haig C. Garabedian
Title: Vice President
By:/s/ Ronald Holder
---------------------------------------
Name: E. Ronald Holder
Title: Senior Vice President
Domestic
Office: 75 Wall Street
New York, NY 10005
Attention: Feixiao Dai
Facsimile No.: (212) 574-0130
Telephone No.: (212) 574-0130
LIBOR
Office: 75 Wall Street
New York, NY 10005
Attention: Feixiao Dai
Facsimile No.: (212) 574-0130
Telephone No.: (212) 574-0269
</TABLE>
<PAGE> 93
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$25,000,000 FIRST BANK NATIONAL ASSOCIATION
By:/s/ Terese A. Radford
---------------------------------------
Name: Terese A. Radford
Title: Commercial Banking Officer
Domestic
Office: 601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Yvonne Brenne
Facsimile No.: (612) 973-0825
Telephone No.: (612) 973-0537
LIBOR
Office: 601 Second Avenue South
Minneapolis, MN 55402-4302
Attention: Yvonne Brenne
Facsimile No.: (612) 973-0825
Telephone No.: (612) 973-0537
</TABLE>
<PAGE> 94
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
THE INDUSTRIAL BANK OF JAPAN, LIMITED
CHICAGO BRANCH
By:/s/ H. Yamada
---------------------------------------
Name: Hiroki Yamada
Title: General Manager
Domestic
Address: 227 West Monroe
Suite 2600
Chicago, IL 60606
Attention: Mary Osako
Facsimile No.: (312) 855-8200
Telephone No.: (312) 855-8261
LIBOR
Office: 227 West Monroe
Suite 2600
Chicago, IL 60606
Attention: Stephanie Matsura
Facsimile No.: (312) 855-8200
Telephone No.: (312) 855-8446
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
INTERNATIONALE NEDERLANDEN (U.S.)
$150,000,000 CAPITAL MARKET, INC.
By:/s/ Michael Plunkett
---------------------------------------
Name: Michael Plunkett
Title:
Domestic
Office: 135 East 57th Street
New York, NY 10022
Attention: Laurel Choate
Facsimile No.: (212) 593-3362
Telephone No.: (212) 446-0967
LIBOR
Office: 135 East 57th Street
New York, NY 10022
Attention: Laurel Choate
Facsimile No.: (212) 593-3362
Telephone No.: (212) 446-0967
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$50,000,000 J.P. MORGAN DELAWARE
By:/s/ Robert J. Henchey
---------------------------------------
Name: Robert J. Henchey
Title: Vice President
Domestic
Office: 500 Stanton-Christiana Road
Newark, DE 19713-2107
Attention: Loan Department
Facsimile No.: 302-634-1091
Telephone No.: 302-634-1923
LIBOR
Office: 5500 Stanton-Christiana Road
Newark, Delaware 19713-2107
Attention: Loan Department
Facsimile No.: 302-634-1091
Telephone No.: 302-634-1923
</TABLE>
<PAGE> 97
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
MITSUBISHI BANK, LIMITED, CHICAGO
$50,000,000 BRANCH
By:/s/ Noboru Kobayashi
---------------------------------------
Name: NOBORU KOBAYASHI
Title: JOINT GENERAL MANAGER
Domestic
Office: 115 S. LaSalle Street
Suite 2100
Chicago, IL 60603
Attention: Marcela Melendez
Facsimile No.: (312) 263-2555
Telephone No.: (312) 269-0747
LIBOR
Office: 115 S. LaSalle Street
Suite 2100
Chicago, IL 60603
Attention: Marcela Melendez
Facsimile No.: (312) 263-2555
Telephone No.: (312) 269-0747
</TABLE>
<PAGE> 98
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$25,000,000 PNC BANK, NATIONAL ASSOCIATION
By:/s/ James N. DeVries
---------------------------------------
Name: James N. DeVries
Title: Vice President
Domestic
Office: 500 West Madison Avenue
Suite 3140
Chicago, IL 60661
Attention: Tammy Dunn
Facsimile No.: (312) 906-3420
Telephone No.: (312) 906-3403
LIBOR
Office: 55 West Madison Avenue
Suite 3140
Chicago, IL 60661
Attention: Tammy Dunn
Facsimile No.: (312) 906-3420
Telephone No.: (312) 906-3403
</TABLE>
<PAGE> 99
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$50,000,000 THE SANWA BANK, LIMITED, CHICAGO
BRANCH
By:/s/ Takashi Nobuto
---------------------------------------
Name: Takashi Nobuto
Title: Deputy General Manager
Domestic
Office: 10 South Wacker Drive
Suite 3115
Chicago, Il 60606
Attention: Jeff Orr
Facsimile No.: (312) 346-6677
Telephone No.: (312) 368-3088
LIBOR
Office: 10 South Wacker Drive
Suite 3115
Chicago, IL 60606
Attention: Jeff Orr
Facsimile No.: (312) 346-6677
Telephone No.: (312) 9368-3088
</TABLE>
<PAGE> 100
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
25,000,000 THE SUMITOMO BANK, LIMITED
By:/s/ H. Iwami
---------------------------------------
Name: HIROYUKI IWAMI
Title: JOINT GENERAL MANAGER
Domestic
Office: 233 South Wacker Drive
Suite 4800
Chicago, IL 606063
Attention: Hitoshi Minami
Facsimile No.: (312) 876-6436
Telephone No.: (312) 876-7799
LIBOR
Office: 233 South Wacker Drive
Suite 4800
Chicago, IL 60606
Attention: John Byrd
Facsimile No.: (312) 876-1490
Telephone No.: (312) 876-2460
</TABLE>
<PAGE> 101
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$10,000,000 SVENSKA HANDELSBANKEN
By:/s/ Ralph C. Daloisio Geoffrey Walker
------------------------------------------------
Name: Ralph C. Daloisio Senior Vice President
Title: AVP
Domestic
Office: 153 East 53rd Street
37th Floor
New York, NY 10022
Attention: Ralph Trombetta
Facsimile No.: (212) 326-5147
Telephone No.: (212) 326-5196
LIBOR
Office: 153 East 53rd Street
37th Floor
New York, NY 10022
Attention: Ralph Trombetta
Facsimile No.: (212) 326-5147
Telephone No.: (212) 326-5196
</TABLE>
<PAGE> 102
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
- -------------------- ----------------
<S> <C>
$15,000,000 UNITED STATES NATIONAL BANK OF OREGON
By: /s/ Aaron J. Gordon
---------------------------------------
Name: Aaron J. Gordon
Title: Assistant Relationship Manager
Domestic
Office: 555 S.W. Oak Street
Suite 400
Portland, OR 97204
Attention: Virginia Cochran
Facsimile No.: (503) 275-5428
Telephone No.: (503) 275-4667
LIBOR
Office: 55 S.W. Oak Street
Suite 400
Portland, OR 97204
Attention: Virginia Cochran
Facsimile No.: (503) 275-5428
Telephone No.: (503) 274-4667
</TABLE>
<PAGE> 1
Exhibit 4.8
CONSENT AND AMENDMENT TO LIQUIDITY AGREEMENT
THIS CONSENT AND AMENDMENT TO LIQUIDITY AGREEMENT (this "Consent and
Amendment") is dated as of December 15, 1995 among NATIONAL FLEET FUNDING
CORPORATION, a Delaware corporation ("NFC"), the Liquidity Lenders, as such term
is defined in the Liquidity Agreement (defined herein) and CITIBANK, N.A., a
national banking association ("Citibank"), as liquidity agent (in such capacity,
together with any successors and assigns thereto, the "Liquidity Agent") for the
Liquidity Lenders.
WITNESSETH:
WHEREAS, NFC, the Liquidity Lenders and the Liquidity Agent are
parties to that certain Liquidity Agreement, dated as of June 7, 1995, among
NFC, certain financial institutions that are or may become party thereto and the
Liquidity Agent (the "Liquidity Agreement"); and
WHEREAS, NFC desires (i) to include Chrysler Corporation as an
Eligible Manufacturer and (ii) to amend the Liquidity Agreement to, among other
things, modify the conditions for the issuance of Commercial Paper Notes and
provide for the making of Refunding Advances in the event that the weighted
average interest rate of the Outstanding Commercial Paper Notes, Outstanding
Liquidity Advances and Outstanding Support Liquidity Disbursements at any time
exceeds 10% per annum and certain conditions (including the provision of
increased credit enhancement, if required by the Rating Agencies) are not
satisfied;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereby agree, upon the
terms and subject to the conditions set forth below, as follows:
SECTION 1. Defined Terms. Capitalized terms used but not defined
herein (including in the preamble and the recitals hereto) shall have the
meanings assigned to such terms in the Definitions List, dated as of June 7,
1995 and annexed to the Liquidity Agreement as Annex A, as such Definitions List
may be amended or modified from time to time in accordance with the provisions
of the Liquidity Agreement (the "Definitions List").
SECTION 2. Inclusion of Chrysler Corporation as an Eligible
Manufacturer. Each Liquidity Lender, by its execution of this Consent and
Amendment, hereby consents to the inclusion of Chrysler Corporation as an
Eligible Manufacturer.
<PAGE> 2
SECTION 3. Amendments to the Liquidity Agreement.
(a) Section 2.1(d) of the Liquidity Agreement is hereby amended and
restated in its entirety to read as follows:
"(d) after giving effect to such issuance and the use of
proceeds thereof, the weighted average interest rate of the
Outstanding Commercial Paper Notes, Liquidity Advances and Support
Liquidity Disbursements would be in excess of 10% per annum, unless
(i) NFC shall have given its written consent to a weighted average
interest rate in excess of 10% per annum, (ii) if required by
the Rating Agencies in connection therewith, the Fronting Letter of
Credit Amount shall be increased and/or a letter of credit on terms
substantially similar to the Fronting Letters of Credit shall be
provided by an Eligible Credit Enhancer and/or an additional cash
collateral account shall be funded, and (iii) the Rating Agencies
shall have confirmed that such weighted average interest rate will not
result in the downgrading or withdrawal of the then current ratings of
the Commercial Paper Notes. Notwithstanding anything to the contrary
contained in this Agreement (other than in the proviso to this
sentence) NFC shall not be required to obtain the consent of any
Liquidity Lender or the Liquidity Agent to any such (1) increase in
the Fronting Letter of Credit Amount pursuant to this Section 2.1(d),
(2) provision of a letter of credit pursuant to this Section 2.1(d) or
(3) funding of an additional cash collateral account pursuant to this
Section 2.1(d); provided, however, that if the ratings of the
Commercial Paper Notes by S&P or Moody's will be less than A-1 or P-1,
respectively, after giving effect to such weighted average interest
rate in excess of 10% per annum and such increase in the Fronting
Letter of Credit Amount, provision of a letter of credit and/or
funding of an additional cash collateral account, such Commercial
Paper Notes will not be issued unless the Majority Banks shall have
given their written consent thereto. NFC shall notify the Liquidity
Agent and the Agent in writing no later than 11:00 a.m. (New York City
time) on any Business Day on which the weighted average interest rate
of the Outstanding Commercial Paper Notes, Liquidity Advances and
Support Liquidity Disbursements exceeds 10% per annum, or".
(b) Section 3.6.2 of the Liquidity Agreement is hereby amended and
restated in its entirety to read as follows:
-2-
<PAGE> 3
"SECTION 3.6.2. Refunding Advances. (a) Upon receipt from
the Depositary of notice (not later than 11:15 a.m., New York City
time) pursuant to Section 5(b) of the Depositary Agreement that, on
any Business Day that any Commercial Paper Notes mature, the amount
required to pay in full all Commercial Paper Notes maturing on such
Business Day will be more than the net amount obtained by the issuance
of Commercial Paper Notes on such day plus the amount available for
payment of such Commercial Paper Notes in the Commercial Paper Account
(the amount of such excess, the "Commercial Paper Deficit"), the Agent
shall, if such notice contains an instruction from the Depositary to
the Agent to deliver a Borrowing Request, by delivering a Borrowing
Request to the Liquidity Agent (who will notify the other Liquidity
Lenders of such Borrowing Request not later than 12:00 noon, New York
City time) for a Borrowing consisting of Refunding Advances,
irrevocably request, not later than 11:30 a.m., New York City time, on
the date of a proposed Borrowing, that a Borrowing be made in an
aggregate principal amount equal to the excess of (i) the Commercial
Paper Deficit over (ii) the sum of the aggregate amount, if any,
applied or to be applied on such Business Day to the Commercial Paper
Deficit from amounts available therefor in the Collateral Account and
the Termination Advance Account that are allocated to the payment of
maturing Commercial Paper Notes and from the proceeds of Swing Line
Advances being made on such day.
(b) If on any Business Day in a Related Month the weighted
average interest rate of the Outstanding Commercial Paper Notes,
Outstanding Liquidity Advances and Outstanding Support Liquidity
Disbursements exceeds 10% per annum, then, unless the requirements for
the continued issuance of Commercial Paper Notes set forth in Section
2.1(d) shall have been complied with not later than 11:00 a.m. (New
York City time) on the last Business Day before the Payment Date with
respect to such Related Month, the Agent (provided NFC shall have
delivered the notice required pursuant to the last sentence of Section
2.1(d)) shall, by delivering a Borrowing Request to the Liquidity
Agent (who will notify the other Liquidity Lenders of such Borrowing
Request not later than 12:00 noon, New York City time) for a Borrowing
consisting of Refunding Advances, irrevocably request, not later than
11:30 a.m., New York City time, on such last Business Day before such
Payment Date, that such Borrowing be made in an aggregate principal
amount equal to the lesser of
-3-
<PAGE> 4
(i) the Aggregate Liquidity Commitment on such date minus
the aggregate principal amount of all Liquidity Advances (including
any Swing Line Advances) outstanding on such date as determined
immediately prior to such Borrowing Request and (ii) the Aggregate
Outstanding CP on such date.
(c) On the terms and subject to the conditions of this
Liquidity Agreement, each Borrowing under this Section shall be
initially comprised of Base Rate Advances (subject to conversion in
accordance with the provisions of Section 3.8) and shall be made on
the Business Day specified in such Borrowing Request. For the purposes
of this Section, Commercial Paper Notes maturing on any day which have
been paid from an advance made by the Depositary shall nonetheless be
deemed to be unpaid.
SECTION 4. Conditions of Effectiveness. The following constitute
conditions precedent to the effectiveness of this Consent and Amendment:
(a) NFC shall have delivered prior written notice of this
Consent and Amendment to each Rating Agency, each Placement Agent and
each Dealer;
(b) Each of NFC and the Liquidity Agent shall have received
a copy of each Rating Agency's written confirmation that this Consent
and Amendment will not result in the downgrading or withdrawal of the
then current ratings of the Commercial Paper Notes;
(c) This Consent and Amendment shall have been consented to
by GM, the Majority Banks, the Agent and each B Support Credit
Enhancer as evidenced by their respective delivery of executed
counterparts of this Consent and Amendment to the Liquidity Agent;
(d) This Consent and Amendment shall have been duly executed
and delivered by NFC and the Liquidity Agent; and
(e) The Liquidity Agent shall have received from NFC (i) a
copy of the resolutions of its Board of Directors, certified as of the
date hereof by the Secretary thereof, authorizing the execution,
delivery and performance of this Consent and Amendment and (ii) an
incumbency certificate thereof with respect to its officers, agents or
other representatives authorized to execute this Consent and
Amendment.
-4-
<PAGE> 5
SECTION 5. Reference to and Effect on the Related Documents;
Ratification. (a) Upon the effectiveness hereof, on and after the date hereof
each reference in the Liquidity Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Liquidity Agreement, and each
reference in any other Related Document to "the Liquidity Agreement",
"thereunder", "thereof" or words of like import referring to the Liquidity
Agreement, shall mean and be a reference to the Liquidity Agreement as amended
hereby.
(b) Except as specifically amended above, the Liquidity Agreement is
and shall continue to be in full force and effect and is hereby in all respects
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Consent and
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of any party hereto under the Liquidity Agreement,
nor constitute a waiver of any provision of any of the Related Documents.
SECTION 6. Execution in Counterparts. This Consent and Amendment may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument. Delivery of an executed counterpart of a signature
page to this Consent and Amendment by facsimile transmission shall be as
effective as delivery of a manually executed counterpart of this Consent and
Amendment.
SECTION 7. Governing Law. THIS CONSENT AND AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Consent and
Amendment to be executed by their respective officers thereunto duly authorized.
as of the date first above written.
NATIONAL FLEET FUNDING CORPORATION
By: /s/ M.J. Becker
--------------------------------
Name: M.J. Becker
Title: Treasurer
CITIBANK, N.A.
as Liquidity Agent
By: /s/ Tara Coffey
--------------------------------
Name: Tara Coffey
Title: Senior Trust Officer
ACKNOWLEDGED AND AGREED:
GENERAL MOTORS CORPORATION
By: /s/ G.R. Frink
---------------------------
Name: G.R. Frink
Title: Executive Director, NAO Fleet Operations
CREDIT SUISSE, NEW YORK BRANCH,
as Agent and B Support
Credit Enhancer
By: /s/ ROGER W. SAYLOR
---------------------------
Name: ROGER W. SAYLOR
Title: Associate
By: /s/ Ann F. Lopez
---------------------------
Name: Ann F. Lopez
Title: Member of Senior Management
CITIBANK, N.A., as
B Support Credit Enhancer
By: /s/ William G. McKnight
---------------------------
Name: William G. McKnight
Title: Vice President
-6-
<PAGE> 7
<TABLE>
<CAPTION>
LIQUIDITY COMMITMENT LIQUIDITY LENDER
<S> <C>
$60,000,000 ABN AMRO BANK N.Y.
By:/s/ Bernard J. McGulgan
-----------------------------------
Name: Bernard J. McGulgan
Title: Group Vice President
By:/s/ Christine E. Holmes
-----------------------------------
Name: Christine E. Holmes
Title: Vice President
$15,000,000 BANK AUSTRIA AKTIENGESELLSCHAFT
By:/s/ Jeanine Ball
-----------------------------------
Name: Jeanine Ball
Title: AVP
By:/s/ J.A. Seay
-----------------------------------
Name: J.A. Seay
Title: VP
$50,000,000 BANK BRUSSELS LAMBERT - NEW YORK BRANCH
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
</TABLE>
-7-
<PAGE> 8
<TABLE>
<S> <C>
$15,000,000 BANK OF IRELAND
By: /s/ N.O. Flynn
-----------------------------------
Name: N.O. Flynn
Title: Manager
By: /s/
-----------------------------------
Name:
Title:
$50,000,000 BANK OF MONTREAL
By:/s/ LYNN A. DURNING
-----------------------------------
Name: LYNN A. DURNING
Title: DIRECTOR
$75,000,000 THE BANK OF NEW YORK
By:/s/ Richard A. Raffetto
-----------------------------------
Name: Richard A. Raffetto
Title: Assistant Vice President
$75,000,000 THE BANK OF NOVA SCOTIA
By:/s/ F.C.H. Ashby
-----------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
$25,000,000 THE BANK OF TOKYO, LTD., NEW YORK AGENCY
By:
-----------------------------------
Name:
Title:
</TABLE>
-8-
<PAGE> 9
<TABLE>
<S> <C>
$10,000,000 BANQUE ET CAISSE D'EPARGENE DE L'ETAT,
LUXEMBOURG
By: /s/
-----------------------------------
Name:
Title:
By: /s/ John Dhur
-----------------------------------
Name: John Dhur
Title: Directeur
$15,000,000 BANQUE NATIONALE DE PARIS - CHICAGO
BRANCH
By: /s/ ARNAUD COLLIN DU BOCAGE
-----------------------------------
Name: ARNAUD COLLIN DU BOCAGE
Title: Executive Vice President
and General Manager
$25,000,000 BAYERISCHE HYPOTHEKEN-UND WECHSEL - BANK
AKTIENGESELLSCHAFT, NEW YORK BRANCH
By: /s/ R.G. Pankuch
-----------------------------------
Name: R.G. Pankuch
Title: FVP
By:/s/ Constance Madden
-----------------------------------
Name: Constance Madden
Title: V.P.
</TABLE>
-9-
<PAGE> 10
<TABLE>
<S> <C>
$50,000,000 CAISSE NATIONALE DE CREDIT AGRICOLE
By:/s/ KATHERINE L. ABBOTT
-----------------------------------
Name: KATHERINE L. ABBOTT
Title: FIRST VICE PRESIDENT
$75,000,000 CANADIAN IMPERIAL BANK OF COMMERCE
By:/s/
-----------------------------------
Name: KENT S. DAVIS
Title: Authorized Signatory
$82,500,000 CITIBANK, N.A.
By:/s/ William G. McKnight
-----------------------------------
Name: William G. McKnight
Title: Vice President
$75,000,000 COMMERZBANK AG, CHICAGO BRANCH
By:/s/ WILLIAM BRENT PETERSON
-----------------------------------
Name: WILLIAM BRENT PETERSON
Title: Assistant Vice President
By:/s/ MARK MONSON
-----------------------------------
Name: MARK MONSON
Title: Vice President
</TABLE>
-10-
<PAGE> 11
<TABLE>
<S> <C>
$82,500,000 CREDIT SUISSE, NEW YORK BRANCH
By:/s/ ROGER W. SAYLOR
-----------------------------------
Name: ROGER W. SAYLOR
Title: Associate
By:/s/ Ann F. Lopez
-----------------------------------
Name: Ann F. Lopez
Title: Member of Senior Management
$25,000,000 DEN DANSKE BANK AKTIESELSKAB, NEW YORK
BRANCH
By:/s/ Stephen B. Shea
-----------------------------------
Name: Stephen B. Shea
Title: Vice President
By:/s/
-----------------------------------
Name:
Title: V.P.
$50,000,000 DRESDNER BANK AG CHICAGO BRANCH AND
GRAND CAYMAN BRANCH
By:/s/ Haig C. Garabedian
-----------------------------------
Name: Haig C. Garabedian
Title: Vice President
By:/s/ William J. Murray
-----------------------------------
Name: William J. Murray
Title: Vice President
</TABLE>
-11-
<PAGE> 12
<TABLE>
<S> <C>
$25,000,000 FIRST BANK NATIONAL ASSOCIATION
By:/s/ Terese A. Radford
-----------------------------------
Name: Terese A. Radford
Title: Commercial Banking Officer
$75,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED
CHICAGO BRANCH
By:/s/ Hiroki Yamada
-----------------------------------
Name: Hiroki Yamada
Title: General Manager
$150,000,000 INTERNATIONAL NEDERLANDEN (U.S.)
CAPITAL MARKET, INC.
By:/s/ Michael Plunkett
-----------------------------------
Name: Michael Plunkett
Title: Vice President
$50,000,000 J.P. MORGAN DELAWARE
By:
-----------------------------------
Name:
Title:
$50,000,000 MITSUBISHI BANK, LIMITED, CHICAGO BRANCH
By:/s/ Jeffrey R. Arnold
-----------------------------------
Name: Jeffrey R. Arnold
Title: Vice President
</TABLE>
-12-
<PAGE> 13
<TABLE>
<S> <C>
$25,000,000 PNC BANK, NATIONAL ASSOCIATION
By:/s/ Charles Shoemake
-----------------------------------
Name: Charles Shoemake
Title: Vice President
$50,000,000 THE SANWA BANK, LIMITED, CHICAGO BRACH
By:
-----------------------------------
Name:
Title:
$25,000,000 THE SUMITOMO BANK, LIMITED
By:/s/ KATSUYASU IWASAWA
-----------------------------------
Name: KATSUYASU IWASAWA
Title: JOINT GENERAL MANAGER
$10,000,000 SVENSKA HANDELSBANKEN
By:/s/ Geoffrey Walker
-----------------------------------
Name: Geoffrey Walker
Title: Senior Vice President
By:/s/ Ralph C. Daloisio
-----------------------------------
Name: Ralph C. Daloisio
Title: AVP
</TABLE>
-13-
<PAGE> 14
<TABLE>
<S> <C>
$15,000,000 UNITED STATES NATIONAL BANK OF OREGON
By:
-----------------------------------
Name:
Title:
$50,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH AND CAYMAN ISLANDS
BRANCH
By:/s/ S. Gattinelli
-----------------------------------
Name: S. Gattinelli
Title: V.P.
By:/s/ C.D. ROCKEY
-----------------------------------
Name: C.D. ROCKEY
Title: ASSOCIATE
</TABLE>
-14-
<PAGE> 1
Exhibit 4.9
EXECUTION COPY
AMENDMENT TO
LIQUIDITY AGREEMENT
THIS AMENDMENT TO LIQUIDITY AGREEMENT (this "Amendment") is dated as
of May 29, 1996 among NATIONAL FLEET FUNDING CORPORATION, a Delaware corporation
("NFC") and CITIBANK, N.A., as the Liquidity Agent for the Liquidity Lenders
(the "Liquidity Agent").
WITNESSETH:
WHEREAS, NFC and the Liquidity Agent are parties to that certain
Liquidity Agreement dated as of June 7, 1995 (the "Liquidity Agreement");
WHEREAS, NFC and the Liquidity Agent desire to amend certain defined
terms set forth in the Definitions List attached as Annex A to the Liquidity
Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereby agree, upon the
terms and subject to the conditions set forth below, as follows:
Section 1. Defined Terms. All capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth for such terms in the
Definitions List dated as of June 7, 1995 and annexed to the Liquidity Agreement
as Annex A, as such Definitions List may be further amended, supplemented,
restated or otherwise modified from time to time (the "Definitions List").
Section 2. Amendments to the Definitions List. (a) The definition of
each of the terms set forth below is amended and restated in its entirety as set
forth below:
"A Support Credit Disbursement" means an amount paid under an A
Support Letter of Credit Agreement pursuant to a Certificate of A Support Credit
Demand.
"A Support Credit Enhancer" means GM, and any successor thereto or
replacement thereof or addition thereto pursuant to the A Support Letter of
Credit Agreement and any Reduction Support Credit Enhancer.
<PAGE> 2
"A Support Event of Default" shall, with respect to GM, have the
meaning specified in Section 2.9 of the A Support Reimbursement Agreement with
GM and, with respect to any Reduction Support Credit Enhancer, shall have the
meaning specified in the applicable Reduction Support Agreement.
"A Support Event of Default Disbursement" means an amount paid under
an A Support Letter of Credit Agreement as a result of an Event of Default by
the A Support Credit Enhancer as defined in such A Support Letter of Credit
Agreement.
"A Support Letter of Credit Agreement" means the Letter of Credit
Agreement, dated as of June 7, 1995, between GM and the A Credit Enhancer,
providing for the reimbursement of the A Credit Enhancer for draws under the A
Letter of Credit and any Reduction Support Agreement.
"A Support Liquidity Disbursement" means an amount paid under an A
Support Letter of Credit Agreement pursuant to a Certificate of A Support
Liquidity Demand.
"A Support Reimbursement Agreement" means (a) the A Support
Reimbursement Agreement, dated as of June 7, 1995, among National, NFC and GM,
substantially in the form of Exhibit I-3 to the Liquidity Agreement and (b) any
Reduction Support Reimbursement Agreement, in each case, as such agreement
referred to in (a) or (b) may be amended, supplemented, restated or otherwise
modified from time to time in accordance with the terms thereof.
"A Support Termination Disbursement" means an amount paid under an A
Support Letter of Credit Agreement pursuant to a Certificate of A Support
Termination Demand.
"Certificate of A Support Credit Demand" means a certificate in the
form of Annex A to the applicable A Support Letter of Credit Agreement.
"Certificate of A Support Liquidity Demand" means a certificate in the
form of Annex B to the applicable A Support Letter of Credit Agreement.
"Certificate of A Support Reduction Demand" means a certificate in the
form of Annex D to the A Support Letter of Credit Agreement with GM.
"Certificate of A Support Termination Demand" means a certificate in
the form of Annex C to the applicable A Support Letter of Credit Agreement.
-2-
<PAGE> 3
(b) The following terms are hereby added to the Definitions List:
"A Support Commitment" means as of any day (a) with respect to GM, the
GM Letter of Credit Commitment, and (b) with respect to any Reduction Support
Credit Enhancer, the amount of credit support such Reduction Support Credit
Enhancer has agreed to provide to the A Credit Enhancer pursuant to its
Reduction Support Agreement.
"Aggregate A Support Commitment" as of any day means the aggregate of
all A Support Commitments as of such day.
"Certificate of Reduction A Support Event of Default Demand" means a
certificate in the form of Annex D to any Reduction Support Agreement.
"Potential Reduction A Support Event of Default" means an event which,
with the giving of notice or lapse of time or both would constitute a Reduction
A Support Event of Default.
"Reduction Support Agreement" means a Reduction Amount Letter of
Credit Agreement or other agreement by a Reduction Support Credit Enhancer to
provide Reduction Amount Credit Support.
"Reduction Support Credit Enhancer" means a party that has entered
into a Reduction Amount Letter of Credit Agreement or otherwise agreed to
provide Reduction Amount Credit Support.
"Reduction A Support Event of Default" with respect to any Reduction
Support Reimbursement Agreement, shall have the meaning specified in such
Reduction Support Reimbursement Agreement.
"Reduction Support Reimbursement Agreement" means an agreement among a
Reduction Support Credit Enhancer, National and NFC pursuant to which National
and NFC agree to reimburse such Reduction Support Credit Enhancer for amounts
paid by such Reduction Support Credit Enhancer pursuant to a Reduction Support
Agreement.
Section 3. Conditions of Effectiveness. The following constitute
conditions precedent to the effectiveness of this Amendment:
(a) The Liquidity Agent, NFC and National shall have received as of
the date hereof a copy of the written confirmation delivered to NFC by each
of S&P and Moody's to the effect that this Amendment will not result in the
-3-
<PAGE> 4
downgrading or withdrawal of the then current ratings of the Commercial
Paper Notes;
(b) The Liquidity Agent shall have received from NFC (i) a copy of the
resolutions of its Board of Directors, certified as of the date hereof
by the Secretary thereof, authorizing the execution, delivery and
performance of this Amendment and (ii) an incumbency certificate thereof
with respect to its officers, agents or other representatives authorized
to execute this Amendment;
(c) GM shall have delivered written consent to this Amendment;
(d) The Majority Banks shall have delivered written consent to this
Amendment;
(e) NFC shall have delivered written notice of this Amendment to each
Placement Agent and each Dealer;
(f) The Liquidity Agent shall have received an Opinion of Counsel NFC
to the effect that (i) this Amendment has been duly authorized,
executed and delivered and is the legal, valid and binding obligation of
NFC, enforceable against each of them in accordance with its terms,
subject to the exceptions set forth therein;
Section 4. Reference to and Effect on the Related Documents;
Ratification. (a) Upon the effectiveness hereof, on and after the date hereof
each reference in the Related Documents and any other document to the
"Definitions List" or words of like import referring to the Definitions List
shall mean and be a reference to the Definitions List as amended hereby and each
reference to any of the defined terms referred to in this Amendment shall mean
and refer to such defined terms as amended hereby.
(b) Except as specifically amended above, the Definitions List is and
shall continue to be in full force and effect and is hereby ratified and
confirmed in all respects.
Section 5. Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature page to this
Amendment by facsimile transmission shall be as effective as delivery of a
manually executed counterpart of this Amendment.
-4-
<PAGE> 5
Section 6. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers "hereunto duly authorized, as of the
date first above written.
NATIONAL FLEET FUNDING CORPORATION
By: /s/ Michael J. Becker
-------------------------------
Name: Michael J. Becker
Title:
CITIBANK, N.A., as Liquidity Agent
By: /s/ Annette M. Marsula
-------------------------------
Name: Annette M. Marsula
Title: Senior Trust Officer
ACKNOWLEDGED AND AGREED:
GENERAL MOTORS CORPORATION
By: /s/ Mark Newman
-----------------------
Name: Mark Newman
Title: Attorney-in-Fact
CREDIT SUISSE, A SWISS BANKING
CORPORATION ACTING THROUGH ITS
NEW YORK BRANCH, As Agent
By:/s/ ROGER W. SAYLOR
-----------------------
Name: ROGER W. SAYLOR
Title: ASSOCIATE
By:/s/ CARL JACKSON
-----------------------
Name: CARL JACKSON
Title: MEMBER OF SENIOR
MANAGEMENT
<PAGE> 1
Exhibit 4.10
EXTENSION OF
SCHEDULED LIQUIDITY COMMITMENT
TERMINATION DATE
THIS AGREEMENT, dated as of May 29, 1996 is entered into among
National Fleet Funding Corporation ("NFC"), the undersigned financial
institutions (the "Liquidity Lenders"), and Citibank, N.A., as Liquidity Agent.
WITNESSETH:
WHEREAS, the undersigned are parties to that certain Liquidity
Agreement dated as of June 7, 1995 (the "Liquidity Agreement") among NFC, the
Liquidity Lenders and Citibank, N.A., as Liquidity Agent;
WHEREAS, the undersigned desire to extend the Scheduled Liquidity
Termination Date from June 7, 1996 to May 28, 1997;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. Definitions. Capitalized terms used but not defined herein
shall have the meanings assigned to such terms in the Definitions List dated as
of June 7, 1995 and annexed to the Liquidity Agreement as Annex A, as such
Definitions List may be amended or modified from time to time in accordance with
the provisions of the Liquidity Agreement.
Section 2. Extension. Pursuant to Section 3.5 of the Liquidity
Commitment, the Scheduled Liquidity Commitment Termination Date is hereby
extended until May 28, 1997.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized.
<TABLE>
<S> <C>
NATIONAL FLEET FUNDING CORPORATION
By: /s/ Mike Becker
------------------------------------
Name: Mike Becker
Title:
CITIBANK, N.A.
as Liquidity Agent
By: /s/ Annette M. Marsula
------------------------------------
Name: Annette M. Marsula
Title: Senior Trust Officer
LIQUIDITY COMMITMENT LIQUIDITY LENDER
$28,521,739 ABN AMRO BANK N.V.
By: /s/ CHRISTINE E. HOLMES
------------------------------------
Name: CHRISTINE E. HOLMES
Title: VICE PRESIDENT
By: /s/ ANGELA REITZ
------------------------------------
Name: ANGELA REITZ
Title: Assistant Vice President
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
$7,130,435 BANK AUSTRIA AKTIENGESELLSCHAFT
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
$23,768,116 BANK OF BRUSSELS LAMBERT
- NEW YORK BRANCH
By: /s/ Dominick H.J. Vangaever
------------------------------------
Name: Dominick H.J. Vangaever
Title: Vice President
Credit Department
By: /s/ John Kippax
------------------------------------
Name: John Kippax
Title: Vice President
$7,130,435 BANK OF IRELAND
By: /s/ Niamh O'Flynn
------------------------------------
Name: Niamh O'Flynn
Title: Manager
By: /s/ KIERAN ROCKETT
------------------------------------
Name: KIERAN ROCKETT
Title: SENIOR EXECUTIVE
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
$23,768,116 BANK OF MONTREAL
By: /s/ MICHAEL P. JOYCE
------------------------------------
Name: MICHAEL P. JOYCE
Title: DIRECTOR
$62,294,174 THE BANK OF NEW YORK
By: /s/ RICHARD A. RAFFETTO
------------------------------------
Name: RICHARD A. RAFFETTO
Title: ASST. VICE PRESIDENT
$62,294,174 THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. Ashby
------------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
$11,884,058 THE BANK OF TOKYO, LTD.,
NEW YORK AGENCY
By:
------------------------------------
Name:
Title:
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
$4,753,623 BANQUE ET CAISSE D'EPARGNE
DEL L'ETAT, LUXEMBOURG
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
$7,130,435 BANQUE NATIONALE DE PARIS
- CHICAGO BRANCH
By: /s/ ARNAUD COLLIN du BOCAGE
------------------------------------
Name: ARNAUD COLLIN du BOCAGE
Title: Executive Vice President
and General Manager
$11,884,058 BAYERISCHE HYPOTHEKEN-UND WECHSEL -
BANK AKTIENGESSELLSCHAFT, NEW YORK
BRANCH
By: /s/ R.G. Pankuch
------------------------------------
Name: R.G. Pankuch
Title: FVP
By: /s/ R. Vogel
------------------------------------
Name: R. Vogel
Title: Banking Officer
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
$23,768,116 CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ KATHERINE L. ABBOTT
------------------------------------
Name: KATHERINE L. ABBOTT
Title: FIRST VICE PRESIDENT
$35,652,174 CANADIAN IMPERIAL BANK OF
COMMERCE
By: /s/ KENT DAVIS
------------------------------------
Name: KENT DAVIS
Title: Authorized Signatory
$39,217,391 CITIBANK, N.A.
By: /s/ SUZANNE E. MACCAGNAN
------------------------------------
Name: SUZANNE E. MACCAGNAN
Title: V.P.
$35,652,174 COMMERZBANK AG, CHICAGO BRANCH
By: /s/ ROGER TODEBUSH
------------------------------------
Name: ROGER TODEBUSH
Title: Assistant Cashier
By: /s/ MARK MONSON
------------------------------------
Name: MARK MONSON
Title: Vice President
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
$68,524,391 CREDIT SUISSE, NEW YORK BRANCH
By: /s/ ROGER W. SAYLOR
------------------------------------
Name: ROGER W. SAYLOR
Title: ASSOCIATE
By: /s/ CARL JACKSON
------------------------------------
Name: CARL JACKSON
Title: MEMBER OF SENIOR
MANAGEMENT
$11,884,058 DEN DANSKE BANK AKTIESELSKAB,
NEW YORK BRANCH
By: /s/ MOGENS SONDERGAARD
------------------------------------
Name: MOGENS SONDERGAARD
Title: VICE PRESIDENT
By: /s/ JOHN A. O'NEILL
------------------------------------
Name: JOHN A. O'NEILL
Title: VICE PRESIDENT
$23,768,116 DRESDNER BANK AG CHICAGO BRANCH
AND GRAND CANYON BRANCH
By: /s/ Thomas Nadramia
------------------------------------
Name: Thomas Nadramia
Title: Vice President
By: /s/ JOHN W. SWEENEY
------------------------------------
Name: JOHN W. SWEENEY
Title: ASSISTANT VICE PRESIDENT
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
$11,884,058 FIRST BANK NATIONAL ASSOCIATION
By: /s/ Elliot J. Jaffee
------------------------------------
Name: Elliot J. Jaffee
Title: Vice President
$35,652,174 THE INDUSTRIAL BANK OF JAPAN,
LIMITED, CHICAGO BRANCH
By: /s/ Hiroki Yamada
------------------------------------
Name: Hiroki Yamada
Title: General Manager
$124,588,348 INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL MARKET, INC.
By: /s/ Michael G. Plunkett
------------------------------------
Name: Michael G. Plunkett
Title: Vice President
$23,768,116 J.P. MORGAN DELAWARE
By: /s/ Richard A. Burke
------------------------------------
Name: Richard A. Burke
Title: Associate
$23,768,116 MITSUBISHI BANK, LIMITED, CHICAGO
BRANCH
By:
------------------------------------
Name:
Title:
</TABLE>
<PAGE> 9
<TABLE>
<S> <C>
$11,884,058 PCN BANK, NATIONAL ASSOCIATION
By: /s/
------------------------------------
Name:
Title: Vice President
$23,768,116 THE SANWA BANK, LIMITED, CHICAGO
BRANCH
By: /s/ Seiji Daito
------------------------------------
Name: Seiji Daito
Title: Vice President and Manager
$11,884,058 THE SUMITOMO BANK, LIMITED
By: /s/ HIROYUKI IWAMI
------------------------------------
Name: HIROYUKI IWAMI
Title: JOINT GENERAL MANAGER
$4,753,623 SVENSKA HANDELSBANKEN
By: /s/ Geoffrey Walker
------------------------------------
Name: Geoffrey Walker
Title: Senior Vice President
By: /s/ Ralph C. Daloisio
------------------------------------
Name: Ralph C. Daloisio
Title: VP
</TABLE>
<PAGE> 10
<TABLE>
<S> <C>
$35,652,174 THE BANK OF TOKYO-MISUBISHI, LTD.,
CHICAGO BRANCH
By: /s/ Jeffrey R. Arnold
------------------------------------
Name: Jeffrey R. Arnold
Title: Vice President
</TABLE>
<PAGE> 11
<TABLE>
<S> <C>
$7,130,435 UNITED STATES NATIONAL BANK OF
OREGON
By: /s/ Chris J. Karlin
------------------------------------
Name: CHRIS J. KARLIN
Title: VICE PRESIDENT
$23,768,116 WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
AND CAYMAN ISLANDS BRANCH
By: /s/ Salvatore Battinelli
------------------------------------
Name: Salvatore Battinelli
Title: Vice President
Credit Department
By: /s/ C.D. Rockey
------------------------------------
Name: C.D. Rockey
Title: Associate
</TABLE>
<PAGE> 1
Exhibit 4.11
SECOND AMENDMENT TO
LIQUIDITY AGREEMENT
THIS SECOND AMENDMENT TO LIQUIDITY AGREEMENT, dated as of
December 20, 1996 (this "Amendment"), among NATIONAL FLEET FUNDING CORPORATION,
a Delaware corporation ("NFC"), the financial institutions listed on the
signature pages hereof under the heading "Liquidity Lenders" (collectively the
"Liquidity Lenders" and individually a "Liquidity Lender") and CITIBANK, N.A.,
a national banking association ("Citibank"), as liquidity agent (in such
capacity, the "Liquidity Agent") for the Liquidity Lenders.
W I T N E S S E T H :
WHEREAS, NFC, the Liquidity Lenders and the Liquidity Agent
have entered into the Liquidity Agreement, dated as of June 7, 1995, as amended
or modified by Consent and Amendment to Liquidity Agreement, dated as of
December 15, 1995, Amendment to Liquidity Agreement, dated as of May 29, 1996,
Consent of Liquidity Lenders (to change the Liquidity Commitments reflected in
the respective Revolving Notes, and Refunding Notes, dated as of May 29, 1996),
and Extension of Scheduled Liquidity Commitment Termination Date, dated as of
May 29, 1996 (such Liquidity Agreement as so amended or modified being the
"Liquidity Agreement");
WHEREAS, NFC proposes (i) to enable National Car Rental
Financing Limited Partnership, a special purpose Delaware limited partnership
("NFLP"), to refinance the Refinanced Vehicles on the Series 1996-2 Closing Date
by (A) accepting the Series 1996-2 Floating Rate Rental Car Asset Backed
Variable Funding Note (the "Series 1996-2 Note") to be issued to NFC by NFLP in
the initial principal amount of the then outstanding principal amount of the
Loan Note under and as defined in the Loan Agreement and to be authenticated and
delivered by or on behalf of The Bank of New York, a New York banking
corporation, as trustee (the "Trustee") under the Base Indenture, dated as of
April 30, 1996, as amended by the Supplement and Amendment to Base Indenture,
dated as of December 20, 1996 (such Base Indenture as so amended being the "Base
Indenture," and such Supplement and Amendment to Base Indenture being the
"Supplement and Amendment to Base Indenture"), and as supplemented by the Series
1996-2 Supplement, dated as of December 20, 1996 (the "Series 1996-2
Supplement," and together with the Base Indenture, the "Indenture"), between
NFLP and the Trustee, and (B) cancelling, upon the payment to NFC by National of
the unpaid accrued interest on the Loan Note and upon the satisfaction of the
other conditions precedent set forth in Section 4 hereof, the Loan Note, and
(ii) thereafter to make further Series 1996-2 Advances to NFLP from time to
time, the Indebtedness arising from which is to be evidenced by the Series
1996-2 Note, to enable NFLP to acquire Acquired Vehicles, and to finance the
acquisition by National of National Vehicles, from certain Eligible
Manufacturers;
<PAGE> 2
2
WHEREAS, contemporaneously with the execution and delivery of
this Amendment, NFLP as lessor and National as lessee are entering into the
Second Master Motor Vehicle Lease and Servicing Agreement, dated as of December
20, 1996 (the "Lease"), pursuant to which NFLP will refinance the Refinanced
Vehicles, and will acquire Acquired Vehicles, and will finance the acquisition
of National Vehicles, in each case for leasing to National for use in National's
domestic daily rental business; and to secure the NFLP Obligations with respect
to the Series 1996-2 Note, NFLP will, under the Series 1996-2 Supplement, grant
to the Trustee, for the benefit of the Series 1996-2 Noteholder, a first
priority perfected security interest in all of NFLP's right, title and interest
in, among other things, the Lease;
WHEREAS, contemporaneously with the execution and delivery of
this Amendment, NFC and the NFC Collateral Agent are entering into a Supplement
dated as of the date hereof (the "Master Collateral Agency Agreement
Supplement") to the Master Collateral Agency Agreement, pursuant to which (i) as
security for the payment of the respective obligations from time to time owing
by National to NFLP and other Financing Sources (or any Beneficiary as assignee
thereof) under the Lease and other related Financing Documents (as defined
therein), National will grant to the Master Collateral Agent for the benefit of
the NFC Secured Parties a first priority perfected security interest in such
Refinanced Vehicles and National Vehicles and the other National Master
Collateral for the Series 1996-2 Note, and (ii) as security for the payment of
the respective obligations from time to time owing by NFLP to the Trustee for
the benefit of the Series 1996-2 Noteholder (or any Beneficiary as assignee
thereof) under the Series 1996-2 Note and other related Financing Documents,
NFLP will grant to the Master Collateral Agent for the benefit of the NFC
Secured Parties a first priority perfected security interest in such Acquired
Vehicles and the other NFLP Master Collateral for the Series 1996-2 Note;
WHEREAS, contemporaneously with the execution and delivery of
this Amendment, NFC, the Series 1996-2 Support Credit Enhancers, the Liquidity
Agent, the Depositary and the NFC Collateral Agent are entering into a
Supplement and Amendment to Collateral Agreement dated as of the date hereof
(the "NFC Collateral Agreement Amendment"), pursuant to which, as security for
the payment of the NFC Obligations, NFC will grant to the NFC Collateral Agent
for the benefit of the NFC Secured Parties a security interest in the Series
1996-2 Note as well as the other Assigned Collateral; and
WHEREAS, National, NFLP and NFC have requested that the
Liquidity Lenders agree to amend the Liquidity Agreement to permit the Revolving
Advances to be used by NFC to make Series 1996-2 Advances pursuant to the Series
1996-2 Supplement and otherwise to implement the proposed refinancing described
above; and the Liquidity Lenders are, on the terms and conditions set forth
below, willing to grant such request;
<PAGE> 3
3
NOW, THEREFORE, in consideration of the premises and
agreements, provisions and covenants herein contained, the parties hereto hereby
agree, upon the terms and subject to the conditions set forth below, as follows:
SECTION 1. Defined Terms. Capitalized terms used but not
defined in this Amendment, including the recitals (WHEREAS clauses) hereof,
shall have the meanings assigned to such terms in the Indenture.
SECTION 2. Amendments to Liquidity Agreement. The Liquidity
Agreement is, effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 5 hereof, hereby amended as
follows:
(a) The recitals (WHEREAS clauses) are amended in full to
read:
"WHEREAS, NFC will (i) enable National Car Rental Financing
Limited Partnership, a special purpose Delaware limited partnership
("NFLP"), to refinance the Refinanced Vehicles (such capitalized term,
together with each other capitalized term used herein and not otherwise
defined herein, shall have the meanings assigned thereto in Section
1.1) on the Series 1996-2 Closing Date by (A) accepting the Series
1996-2 Note to be issued to NFC by NFLP under the Series 1996-2
Supplement in the initial principal amount of the then outstanding
principal amount of the Loan Note under and as defined in the Loan
Agreement and (B) cancelling, upon the payment to NFC by National of
the unpaid accrued interest on the Loan Note and upon the satisfaction
of certain other conditions, the Loan Note, and (ii) thereafter make
further Series 1996-2 Advances to NFLP from time to time, the
Indebtedness arising from which will be evidenced by the Series 1996-2
Note, to enable NFLP to acquire Acquired Vehicles, and to finance the
acquisition by National of National Vehicles, from Eligible
Manufacturers;
"WHEREAS, NFLP as lessor and National as lessee are entering
into the Lease, pursuant to which NFLP will refinance the Refinanced
Vehicles, and will acquire Acquired Vehicles, and will finance the
acquisition of National Vehicles, in each case for leasing to National
for use in National's domestic daily rental business; and to secure the
NFLP Obligations with respect to the Series 1996-2 Note, NFLP will,
under the Series 1996-2 Supplement, grant to the Trustee, for the
benefit of the Series 1996-2 Noteholder, a first priority perfected
security interest in all of NFLP's right, title and interest in, among
other things, the Lease;
"WHEREAS, NFC and the NFC Collateral Agent are entering into a
Supplement dated as of December 20, 1996 to the Master Collateral
Agency Agreement, pursuant to which (i) as security for the payment of
the respective obligations from time to time owing by National to NFLP
and other Financing Sources (or any Beneficiary as assignee thereof)
under the Lease and other related Financing Documents (as defined
therein),
<PAGE> 4
4
National will grant to the Master Collateral Agent for the benefit of
the NFC Secured Parties a first priority perfected security interest in
such Refinanced Vehicles and National Vehicles and the other National
Master Collateral for the Series 1996-2 Note, and (ii) as security for
the payment of the respective obligations from time to time owing by
NFLP to the Trustee for the benefit of the Series 1996-2 Noteholder (or
any Beneficiary as assignee thereof) under the Series 1996-2 Note and
other related Financing Documents, NFLP will grant to the Master
Collateral Agent for the benefit of the NFC Secured Parties a first
priority perfected security interest in such Acquired Vehicles and the
other NFLP Master Collateral for the Series 1996-2 Note;
"WHEREAS, NFC, the Series 1996-2 Support Credit Enhancers, the
Liquidity Agent, the Depositary and the NFC Collateral Agent are
entering into a Supplement and Amendment to Collateral Agreement, dated
as of December 20, 1996, amending the NFC Collateral Agreement,
pursuant to which, as security for the payment of the NFC Obligations
(including, without limitation, obligations of NFC under this Liquidity
Agreement, the Revolving Notes, and the Refunding Notes), NFC will
grant to the NFC Collateral Agent for the benefit of the NFC Secured
Parties (including, without limitation, the Liquidity Lenders and the
Liquidity Agent) a security interest in the Series 1996-2 Note as well
as the other Assigned Collateral;
"WHEREAS, NFC will issue and sell its Commercial Paper Notes
in the commercial paper market and use the net proceeds thereof to,
among other things, make Series 1996-2 Advances;
"WHEREAS, NFC desires to obtain Liquidity Commitments from the
Liquidity Lenders to make Liquidity Advances in an aggregate principal
amount not to exceed the Aggregate Liquidity Commitment at any one time
outstanding to NFC from time to time prior to the Liquidity Commitment
Termination Date; and
"WHEREAS, the Liquidity Lenders are willing, on the terms and
subject to the conditions hereinafter set forth (including Article VI),
to provide such Liquidity Commitments and make such Liquidity Advances
to NFC;"
(b) Section 1.1. is amended in full to read:
"SECTION 1.1. Definitions. Capitalized terms used but
not defined herein (including the preamble and the recitals hereto)
shall have the meanings assigned to such terms in the Base Indenture,
dated as of April 30, 1996, as amended by the Supplement and Amendment
to Base Indenture, dated as of December 20, 1996, and as supplemented
by the Series 1996-2 Supplement, dated as of December 20, 1996, between
National Car Rental Financing Limited Partnership, a special purpose
Delaware limited partnership ("NFLP"), and The Bank of New York, a New
York banking corporation,
<PAGE> 5
5
as trustee (together with its successors in trust thereunder as
provided in such Base Indenture, the "Trustee"), as the same may be
further amended, supplemented or otherwise modified from time to time
in accordance with the provisions thereof (the "Base Indenture" or the
"Series 1996-2 Supplement"). The definitions of such terms in the Base
Indenture or the Series 1996-2 Supplement shall be referred to herein
and in all other Related Documents as the "Definitions List"."
and Annex A to the Liquidity Agreement (Definitions List dated as of June 7,
1995) is deleted in its entirety.
(c) The terms used in the Liquidity Agreement set forth below
shall be changed to the terms, respectively, set opposite such terms below:
<TABLE>
<CAPTION>
TERMS USED IN THE LIQUIDITY AGREEMENT CHANGED TO
------------------------------------- ----------
<S> <C>
Agent NFC Collateral Agent
Cash Collateral Accounts Series 1996-2 Cash Collateral
Accounts
Collateral Account NFC Collateral Account
Collateral Agreement NFC Collateral Agreement
Collateral Sharing Agreement NFC Collateral Sharing Agreement
Credit Enhancer Series 1996-2 Enhancement Provider
Fronting Credit Enhancers Series 1996-2 Fronting Credit
Enhancers
Fronting Letter of Credit Amount Series 1996-2 Fronting Letter of
Credit Amount
Fronting Letters of Credit Series 1996-2 Fronting Letters of
Credit
</TABLE>
<PAGE> 6
6
<TABLE>
<CAPTION>
TERMS USED IN THE LIQUIDITY AGREEMENT CHANGED TO
------------------------------------- ----------
<S> <C>
Interest Period Series 1996-2 Interest Period
Loan Agreement Series 1996-2 Supplement and/or the
Lease, as applicable
Obligations NFC Obligations
Required Enhancement Amount Series 1996-2 Required Enhancement
Amount
Secured Parties NFC Secured Parties
Support Credit Enhancers Series 1996-2 Support Credit
Enhancers
</TABLE>
(d) All references to "Loan Event of Default" and "Potential
Loan Event of Event of Default" throughout the Liquidity Agreement are deleted.
(e) Section 2.2.1 is amended in full to read:
"SECTION 2.2.1. Representations and Warranties. With
respect to the issuance of any Commercial Paper Note and after giving
effect thereto, the representations and warranties of NFC set forth in
Article VII hereof, or in any other Related Document to which NFC is a
party, and the representations and warranties of NFLP set forth in
Article 7 of the Base Indenture, or in any other Related Document to
which NFLP is a party, shall be true and correct (in all material
respects to the extent any such representations and warranties do not
incorporate a materiality limitation in their terms) with the same
effect as if then made (unless stated to relate solely to an earlier
date, in which case such representations and warranties shall be true
and correct (in all material respects to the extent any such
representations and warranties do not incorporate a materially
limitation in their terms) as of such earlier date)."
(f) Section 2.2.6 is amended in full to read:
"SECTION 2.2.6. Non-Payment of Series 1996-2 Note.
At the time of such issuance and after giving effect thereto, no
Potential Amortization Event under
<PAGE> 7
7
Section 9.1(a) or (b) of the Base Indenture or under Section 17.1.1 (i)
or (ii) of the Lease shall have occurred and be continuing."
(g) Section 3.1.4 is amended in full to read:
"SECTION 3.1.4. Use of Proceeds. Proceeds from the
Liquidity Advances shall be applied by NFC as follows:
(a) Proceeds from each Revolving Advance
shall be used by NFC to: (i) make Series 1996-2 Advances
pursuant to the Series 1996-2 Supplement or (ii) to repay
matured Liquidity Advances (other than any Commitment
Termination Date Liquidity Advance).
(b) Proceeds of each Refunding Advance and
each Swing Line Advance shall be deposited by NFC into the
Commercial Paper Account and proceeds of each Commitment
Termination Date Liquidity Advance shall be deposited by NFC
into the Termination Advance Account, in each case, for the
repayment of maturing Commercial Paper Notes.
NFC shall not use the proceeds of any Liquidity Advance for any other
purpose."
(h) Section 4.4 is amended by adding thereto a new sentence
that reads:
"The Liquidity Agent will give notice promptly to NFC, the Series
1996-2 Support Credit Enhancers and the NFC Collateral Agent of changes
in LIBOR."
(i) Section 6.2.1 is amended in full to read:
"SECTION 6.2.1. Representations and Warranties. On
the date of the making of such Revolving Advance (other than any
continuation or conversion thereof pursuant to Section 3.8) and after
giving effect thereto, the representations and warranties of NFC set
forth in Article VII hereof, or in any other Related Document to which
NFC is a party, and the representations and warranties of NFLP set
forth in Article 7 of the Base Indenture, or in any other Related
Document to which NFLP is a party, shall be true and correct (in all
material respects to the extent any such representations and warranties
do not incorporate a materiality limitation in their terms) with the
same effect as if then made (unless stated to relate solely to an
earlier date, in which case such representations and warranties shall
be true and correct (in all material respects to the extent any such
representations and warranties do not incorporate a materiality
limitation in their terms) as of such earlier date)."
<PAGE> 8
8
(j) Section 6.3.1 is amended by deleting from the end thereof
the words "and the Cash Collateral Account C".
(k) Section 7.16 is amended in full to read:
"SECTION 7.16. Repurchase Programs. On the date of
each Borrowing, each Manufacturer and each Repurchase Program in
respect of which any portion of the Borrowing Base is calculated
(including any portion of the Borrowing Base comprising the amount of
the Series 1996-2 Invested Amount used to refinance, finance or
purchase Vehicles of or from such Manufacturer) shall be an Eligible
Manufacturer and Eligible Repurchase Program, respectively."
(l) Clauses (a) through (h) of Section 8.1.1 are amended in
full to read:
"(a) promptly upon the delivery by National to NFC,
copies of the financial information and other materials required to be
delivered by National to NFC pursuant to Section 24.7(i) of the Lease;
(b) promptly upon the delivery by National to NFC,
copies of the financial information and other materials required to be
delivered by National to NFC pursuant to Section 24.7(ii) of the Lease;
(c) [reserved];
(d) from time to time such additional information
regarding the condition, financial or otherwise, or operations of
National as the Liquidity Agent may reasonably request to the extent
that National delivers such information to NFC pursuant to Section
24.7(xi) of the Lease;
(e) at the time of delivery of the items described in
clauses (a) and (b) above, a certificate of an officer of NFC that,
except as provided in any certificate delivered in accordance with
Section 8.1.9, no Amortization Event or (to the best of such officer's
knowledge) Potential Amortization Event has occurred or is continuing
during such fiscal quarter;
(f) on or prior to June 30 of each year, a
certificate of the chief financial officer of NFC certifying that (i)
the ratings assigned by the Rating Agencies in respect of the
commercial paper issued by NFC have not been withdrawn or downgraded
below A-1 by S&P or P-1 by Moody's since the date of this Liquidity
<PAGE> 9
9
Agreement, (ii) the face amount of each Series 1996-2 Fronting Letter
of Credit satisfies the requirements of each Rating Agency, (iii) no
change in the Repurchase Program of any Manufacturer in respect of any
new model year shall have given rise to any request on the part of the
Rating Agencies that any modification be made to the Series 1996-2
Note, the Series 1996-2 Supplement, the Lease or any other Related
Document, and (iv) NFC has apprised the Rating Agencies of all material
changes in the Repurchase Programs occurring since the date of this
Liquidity Agreement;
(g) promptly following the introduction of any
prospective change in any Repurchase Program or the introduction of
any new Repurchase Program by an existing Manufacturer, notice and a
copy of the same;
(h) on or prior to each Distribution Date, a copy of
the Monthly Certificate as of the last Business Day of the immediately
preceding month received by NFC from National pursuant to Section
24.7(vi) of the Lease;"
(m) Section 8.1.8 is amended in full to read:
"SECTION 8.1.8. Absence of Certain Actions. NFC will
not take any action which would permit National to have the right to
refuse to perform any of its obligations under the Lease or permit NFLP
to have the right to refuse to perform any of its obligations under the
Series 1996-2 Note or the Series 1996-2 Supplement."
(n) Sections 8.1.14, 8.1.15 and 8.1.16 are amended in
full to read, respectively:
"SECTION 8.1.14. Repurchase Programs. NFC agrees that
it will (i) provide the Liquidity Agent, the Dealers and each Rating
Agency with at least 30 days' prior written notice of its intention to
make Series 1996-2 Advances to NFLP under the Series 1996-2 Supplement
for the purchase or financing of Vehicles manufactured by any new
Manufacturer, (ii) provide the Liquidity Agent, the Dealers and each
Rating Agency with a copy of the draft Repurchase Program of such
Manufacturer as it then exists at the time of such notice and a copy of
the final Repurchase Program promptly upon its being available and
(iii) certify to the Liquidity Agent and the Liquidity Lenders that
such new Manufacturer is an Eligible Manufacturer and that such
Repurchase Program is an Eligible Repurchase Program at such time. In
no event shall NFC agree, to the extent any consent of NFC is solicited
or required by the Manufacturer or any assignor of such Repurchase
Program, to any change in any Repurchase Program that is reasonably
likely to materially adversely affect its rights or the rights of the
NFC Secured Parties with
<PAGE> 10
10
respect to any Vehicles (except for an immaterial number of Vehicles)
previously purchased under such Repurchase Program.
"SECTION 8.1.15. Use of Proceeds of Commercial Paper
Notes. NFC shall use the proceeds of the Commercial Paper Notes solely
for one or more of the following purposes: (a) to pay matured
Commercial Paper Notes when due, in accordance with the Depositary
Agreement; (b) to fund Series 1996-2 Advances; and (c) to pay principal
of, or interest on, any Liquidity Advance or any other amount payable
by NFC under this Liquidity Agreement or to reimburse the Series 1996-2
Support Credit Enhancers for any Support Liquidity Disbursement and any
interest thereon or the Series 1996-2 Cash Collateral Accounts for any
LOC Liquidity Disbursement and any interest thereon.
"Notwithstanding any provision of this Liquidity Agreement, at
any time when any Liquidity Advance is outstanding, NFC shall not use
the net proceeds of the issuance of Commercial Paper Notes to fund
further Series 1996-2 Advances.
"SECTION 8.1.16. Vehicles. NFC shall use commercially
reasonable efforts to cause (i) National to maintain good, legal and
marketable title to the Refinanced Vehicles, and to the National
Vehicles purchased with the proceeds of Series 1996-2 Advances, free
and clear of all Liens except for Permitted Liens and (ii) NFLP to
maintain good, legal and marketable title to the Acquired Vehicles
purchased with the proceeds of the Series 1996-2 Advances, free and
clear of all Liens except for Permitted Liens."
(o) Section 8.2.10 (No Other Agreements; Amendments to Related
Documents) is amended by changing the phrase "without the prior written consent
of the Majority Banks and GM" contained in the first sentence thereof to read:
"without the prior written consent of the Majority Banks, GM and National".
(p) Section 8.2.11 is amended in full to read:
"SECTION 8.2.11. Other Business. NFC will not engage
in any business or enterprise or enter into any transaction other than
the making of Series 1996-2 Advances to NFLP under the Series 1996-2
Supplement, the related exercise of its rights as a secured creditor,
the issuance of Commercial Paper Notes, the incurrence of Indebtedness
under this Liquidity Agreement, the A Support Reimbursement Agreements,
the B Letter of Credit Reimbursement Agreement and the B Support Letter
of Credit Reimbursement Agreement, the incurrence and payment of
ordinary course operating expenses and as otherwise contemplated by the
Related Documents."
<PAGE> 11
11
(q) Section 9.1.7 is amended in full to read:
"SECTION 9.1.7. Bankruptcy, Insolvency, etc. The
occurrence of any Event of Bankruptcy with respect to NFC or National
or NFLP or the General Partner."
(r) Clause (b) of Section 9.1.9 is amended to delete the words
"and the Cash Collateral Account C" therein.
(s) Section 9.1.11 is amended in full to read:
"SECTION 9.1.11. Enforceability of or Default under Related
Documents. (a) Any of the Related Documents or any portion thereof
shall not be in full force and effect, enforceable in accordance with
its terms or NFC, National, NFLP or any Manufacturer shall so assert in
writing or (b) any Event of Default shall occur or (c) any
"Amortization Event" as defined in 9.1 of the Base Indenture shall
occur."
(t) Section 9.1.13 is amended in full to read:
"SECTION 9.1.13. Termination under the Series
1996-2 Note. The Series 1996-2 Termination Date shall have occurred."
(u) Clause (iii) of Section 9.2 is amended in full to read:
"(iii) instruct NFC to terminate making Series 1996-2 Advances and
cease funding the purchase or financing of Vehicles under the Series
1996-2 Supplement and the Lease;"
(v) Clause (b) of Section 9.3.1 is amended in full to read:
"(b) a Manufacturer whose Repurchase Program is a Guaranteed
Depreciation Program and/or any related auction dealers, or any other
Manufacturer, shall fail to pay an aggregate amount in excess of $25
million under its Repurchase Program in respect of Vehicles that
constitute Master Collateral for the Series 1996-2 Note (or such other
amount as shall have been agreed to for this purpose by NFC and the
Majority Banks at the time that NFC proposes such Manufacturer for
consideration as an "Eligible Manufacturer" under the Related
Documents), in each case, owed by it in respect of any such Vehicles
turned back in accordance with the terms of the related Repurchase
Program and such failure shall continue for 90 days after such
aggregate amount shall have become due and payable or"
(w) Subsection (a) of Section 9.4 is amended in full to read:
<PAGE> 12
12
"(a) If any Limited Amortization Event set forth in Section 9.3.1 shall
have occurred and be continuing with respect to any Manufacturer, NFC
shall not make any further Series 1996-2 Advances under the Series
1996-2 Supplement to fund the purchase or financing of Vehicles of such
Manufacturer, no Commercial Paper Notes shall be issued to finance any
such purchase or financing and no Liquidity Lender shall be required to
make any Revolving Advance or Swing Line Advance with respect to any
such purchase or financing."
(x) Exhibit G (Form of Closing Date Certificate) is amended in
full to read in the form of Exhibit G hereto.
SECTION 3. Amendment to Notes. Each of the Refunding Notes and
of the Revolving Notes is, effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 5 hereof, hereby
amended by changing the reference "the Definitions List annexed as Annex A to
the Liquidity Agreement" contained in the last sentence of the first paragraph
thereof to the reference "the Definitions List as defined and referred to in the
Liquidity Agreement."
SECTION 4. Consent of Liquidity Lenders and the Liquidity
Agent to Amendments of Other Related Documents. Effective as of the date hereof
and subject to the satisfaction of the conditions precedent set forth in Section
5 hereof, the Liquidity Lenders and the Liquidity Agent hereby consent to the
Series 1996-2 Supplement, the Lease (including, without limitation, the
termination of the Loan Agreement pursuant to Section 6 of the Lease), and the
amendments of other Related Documents referred to in subsection (e) of Section 5
hereof.
SECTION 5. Conditions of Effectiveness. This Amendment shall
become effective when, and only when, the Liquidity Agent shall have received
counterparts of this Amendment executed by NFC and the Liquidity Lenders and
counterparts of the Consent hereto executed by GM, and Sections 2, 3 and 4
hereof shall become effective when, and only when, (I) NFC shall have received
from National all unpaid interest accrued through the Series 1996-2 Closing Date
on the Loan Note under and as defined in the Loan Agreement and (II) the
Liquidity Agent shall have additionally received all of the following documents,
each document (unless otherwise indicated) being dated, or dated as of, the
Series 1996-2 Closing Date and in form and substance, satisfactory to the
Liquidity Agent:
(a) Evidence of the delivery of notice of this Amendment to
each of the Rating Agencies and the Dealers.
<PAGE> 13
13
(b) Written confirmation of the Rating Agencies that this
Amendment and the amendment of the other Related Documents referred to
in subsection (e) below will not result in the downgrading or
withdrawal of the then current ratings of the Commercial Paper Notes by
the Rating Agencies.
(c) An executed copy of (i) the Lease and (ii) the Series
1996-2 Supplement.
(d) An executed copy of all documents required to be furnished
both (i) pursuant to Section 35 of the Lease so as to make effective
the Lease pursuant to said Section 35 and (ii) pursuant to Section 3 of
the Supplement and Amendment to Base Indenture so as to make effective
the Supplement and Amendment to Base Indenture pursuant to said Section
3.
(e) An executed copy of all those amendments to the other
Related Documents that are required to implement the refinancing
contemplated by the Series 1996-2 Supplement -- namely, the following
amendments:
(i) the Supplement and Amendment to Base
Indenture, in substantially the form of Exhibit A hereto;
(ii) the Master Collateral Agency Agreement
Amendment, in substantially the form of Exhibit B hereto;
(iii) the NFC Collateral Agreement Amendment, in
substantially the form of Exhibit C hereto;
(iv) Amendment No. 3 to the A Letter of Credit,
in substantially the form of Exhibit D hereto;
(v) Amendment No. 2 to the B Letter of Credit,
in substantially the form of Exhibit E hereto;
(vi) Amendment No. 1 to the Reduction A Support
Letter of Credit, in substantially the form of Exhibit F
hereto;
(vii) Second Amendment to A Support Reimbursement
Agreement, in substantially the form of Exhibit G hereto;
(viii) Amendment to Reduction A Support
Reimbursement Agreement, in substantially the form of Exhibit
H hereto;
<PAGE> 14
14
(ix) Amendment to A Support Intercreditor
Agreement, in substantially the form of Exhibit I hereto;
(x) Second Amendment to B Letter of Credit
Reimbursement Agreement, in substantially the form of Exhibit
J hereto;
(xi) Third Amendment to B Support Letter of
Credit Reimbursement Agreement, in substantially the form of
Exhibit K hereto;
(xii) Supplement and Amendment to Intercreditor
and Subordination Agreement, in substantially the form of
Exhibit L hereto;
(xiii) Amended and Restated Collateral Sharing
Agreement, in substantially the form of Exhibit M hereto;
(xiv) Amendment to Depositary Agreement, in
substantially the form of Exhibit N hereto; and
(xv) Amendment to Dealer Agreement, in
substantially the form of Exhibit O hereto.
(f) Evidence that (i) the conditions precedent set forth in
Section 3.1(b) of the Series 1996-2 Supplement for the issuance of the
Series 1996-2 Note have been satisfied, (ii) NFLP has issued the Series
1996-2 Note to NFC pursuant to Section 3.1 of the Series 1996-2
Supplement in an initial principal amount equal to the outstanding
principal amount of the Loan Note (under and as defined in the Loan
Agreement) on the Series 1996-2 Closing Date, giving effect to any
payment made by National in respect of such principal amount on the
Series 1996-2 Closing Date, and (iii) NFC has delivered to the NFC
Collateral Agent the executed and authenticated Series 1996-2 Note
registered in the name of NFC, together with a blank undated written
instrument of transfer (covering the Series 1996-2 Note) duly executed
by NFC.
(g) Evidence that all filings have been made, and all other
steps have been taken, to perfect the security interest of the NFC
Collateral Agent in the Assigned Collateral under the NFC Collateral
Agreement, including, without limitation:
(i) executed Form UCC-1 and Form UCC-3 (amendment)
financing statements, naming NFC as "debtor" and the NFC
Collateral Agent as "secured party", covering the rights of
NFC in and to the Series 1996-2 Note now owned and hereafter
acquired, the Series 1996-2 Supplement and the Lease and the
other
<PAGE> 15
15
Assigned Collateral and to be filed under the UCC of the State
of Minnesota and the UCC of each other jurisdiction that the
Liquidity Agent or the NFC Collateral Agent may reasonably
deem necessary in order to perfect such security interest; and
(ii) copies of completed requests for UCC information
(or a UCC search report certified by any Person reasonably
acceptable to the Liquidity Agent), dated a date reasonably
near to the Series 1996-2 Closing Date, listing all effective
UCC financing statements which name NFC as debtor and which
are filed in the jurisdiction in which filings are and are to
be made pursuant to subclause (i) above, together with copies
of such financing statements (none of which shall cover any
Assigned Collateral now or hereafter existing).
(h) A certificate of the Secretary or Assistant Secretary of
NFC certifying, and attaching a copy of, (i) the resolutions of the
Board of Directors of NFC authorizing the execution, delivery and
performance of this Amendment and the amendments of the other Related
Documents referred to in subsection (e) above and (ii) the names and
the signatures of officers of NFC authorized to execute this Amendment
and the amendments of such other Related Documents.
(i) A favorable opinion of Faegre & Benson LLP, counsel to
NFC, in substantially the form of Exhibit P hereto.
(j) Series 1996-2 Closing Certificate, in substantially the
form of Exhibit Q hereto, executed by an Authorized officer of NFC.
SECTION 6. Reference to and Effect on the Related Documents.
(a) Upon the effectiveness of this Amendment, including Sections 2, 3
and 4 hereof, (i) the Loans then outstanding under and as defined in
the Loan Agreement will be deemed paid in full by National to NFC, (ii)
the Loan Note as defined in, and issued by National under, the Loan
Agreement will be deemed cancelled and of no force or effect, and (iii)
the Loan Agreement will terminate and be of no force or effect.
(b) Upon the effectiveness of this Amendment, including
Sections 2, 3 and 4 hereof, on and after the date hereof each reference
in the Liquidity Agreement to "this Agreement", "hereunder", "hereof"
or words of like import referring to the Liquidity Agreement, and each
reference in the other Related Documents to "the Liquidity Agreement",
"thereunder", "thereof" or words of like import referring to the
Liquidity Agreement, shall mean and be a reference to the Liquidity
Agreement as amended hereby.
<PAGE> 16
16
(c) Except as specifically amended above or as contemplated by
Section 5(e) hereof, the Liquidity Agreement and all other Related
Documents are and shall continue to be in full force and effect and are
hereby in all respects ratified and confirmed. Without limiting the
generality of the foregoing, the NFC Collateral Agreement and all of
the Assigned Collateral described therein do and shall continue to
secure the payment of all NFC Obligations.
(d) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of any Liquidity Lender or the
Liquidity Agent under any of the Related Documents, nor constitute a
waiver of any provision of any of the Related Documents.
SECTION 7. Costs and Expenses. NFC agrees to pay on demand all
costs and expenses of the Liquidity Agent in connection with the preparation,
execution and delivery of this Amendment and the other instruments and documents
to be delivered under, or as contemplated to be delivered by, Section 5 hereof,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Liquidity Agent with respect thereto and with respect to
advising the Liquidity Agent as to its rights and responsibilities hereunder and
thereunder.
SECTION 8. Limited Recourse to NFC; No Recourse. (a) The
Liquidity Agent and each Liquidity Lender agree that the obligations of NFC to
the Liquidity Agent and such Liquidity Lender hereunder shall be payable in the
order and priority set forth in Section 2.01 and 5.02(b), as applicable, of the
NFC Collateral Agreement. Such obligations shall be due and payable only to the
extent that NFC's assets and the Series 1996-2 Fronting Letter of Credit Amount
are sufficient to pay such obligations. No claims of the Liquidity Agent or any
Liquidity Lender arising under or in connection with the NFC Collateral
Agreement are intended to be impaired or waived by this Section 8.
(b) Without limitation to the obligations of NFC hereunder, no
recourse shall be had for the payment of any fee hereunder or any other
obligation or claim arising out of or based upon this Amendment or any amendment
to any other Related Document against any stockholder, employee, officer,
director, affiliate or incorporator of NFC based on their status as such or
their actions in connection therewith. The provisions of this Section 8 shall
survive the termination of this Amendment.
SECTION 9. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement. Delivery of an executed counterpart
<PAGE> 17
17
of a signature page to this Amendment by telefacsimile shall constitute delivery
of a manually executed counterpart of this Amendment.
SECTION 10. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York
excluding (to the greatest extent a New York court would permit) any rule of law
that would cause application of the laws of any jurisdiction other than the
State of New York.
<PAGE> 18
18
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
NATIONAL FLEET FUNDING
CORPORATION
By /s/ M.J. Baker
-----------------------------
Name: M.J. Baker
Title:
CITIBANK, N.A., as Liquidity Agent
By /s/ Annette Marsula
-----------------------------
Name: Annette Marsula
Title: Senior Trust Officer
Liquidity Lenders
ABN AMRO BANK, N.V.
By /s/ Christine E. Holmes
-----------------------------
Name: Christine E. Holmes
Title: Vice President
By /s/ David C. Sagers
-----------------------------
Name: David C. Sagers
Title: Vice President
<PAGE> 19
19
BANK AUSTRIA
AKTIENGESELLSCHAFT
By /s/ J. Anthony Seay
------------------------------
Name: J. Anthony Seay
Title: Vice President
BANK AUSTRIA
/s/ Jeanine Ball
------------------------------
Assistant Vice President
BANK AUSTRIA
BANK BRUSSELS LAMBERT,
NEW YORK BRANCH
By /s/ John Kippix
------------------------------
Name: John Kippix
Title: Vice President
By /s/ Dominick H.J. Vangaever
------------------------------
Name: Dominick H.J. Vangaever
Title: Senior Vice President
Credit
BANK OF IRELAND
By /s/ Nibanks O'Flynn
------------------------------
Name: Nibanks O'Flynn 1365
Title: Manager
By /s/ R.H. Wyer
------------------------------
Name: R.H. Wyer (1541)
Title:
<PAGE> 20
20
BANK OF MONTREAL
By /s/ Edward P. McGuire
----------------------------
Name: Edward P. McGuire
Title: Director
THE BANK OF NEW YORK
By /s/ Richard A. Raffetto
----------------------------
Name: Richard A. Raffetto
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By /s/ A.S. Norsworthy
----------------------------
Name: A.S. Norsworthy
Title: Sr. Team Leader-Loan
Operations
THE BANK OF TOKYO-MITSUBISHI,
LTD., CHICAGO BRANCH
By /s/ Jeffrey R. Arnold
----------------------------
Name: Jeffrey R. Arnold
Title: Vice President
BANQUE ET CAISSE D'EPARGNE DE
L'ETAT
By /s/ Paul Guillaume
----------------------------
Name: Paul Guillaume
Title: Consellor de Director
By /s/ Guy Queude
----------------------------
Name: Guy Queude
Title: Chief du Service
Correspondent
<PAGE> 21
21
BANQUE NATIONALE DE PARIS,
CHICAGO BRANCH
By /s/ Arnaud Collin de Bocage
------------------------------
Name: Arnaud Collin de Bocage
Title: Executive Vice President
and General Manager
BAYERISCHE HYPOTHEKEN-UND
WECHSEL - BANK
AKTIENGESELLSCHAFT, NEW YORK
BRANCH
By /s/ Constance Madden
------------------------------
Name: Constance Madden
Title: Vice President
By /s/
------------------------------
Name:
Title: First Vice President
CAISSE NATIONALE DE CREDIT
AGRICOLE
By /s/ Katherine L. Abbott
------------------------------
Name: Katherine L. Abbott
Title: First First President
<PAGE> 22
22
CANADIAN IMPERIAL BANK OF
COMMERCE
By /s/ Kent S. Davis
------------------------------
Name: Kent S. Davis
Title: As Agent
CITIBANK, N.A.
By /s/ Elizabeth A. Palermo
------------------------------
Name: Elizabeth A. Palermo
Title: Attorney-in-fact
COMMERZBANK AG,
CHICAGO BRANCH
By /s/ William Brent Peterson
------------------------------
Name: William Brent Peterson
Title: Assistant Vice President
By /s/ Dr. Helmut R. Tollner
------------------------------
Name: Dr. Helmut R. Tollner
Title: Executive Vice President
<PAGE> 23
23
CREDIT SUISSE, NEW YORK
BRANCH
By /s/ Roger W. Saylor
------------------------------
Name: Roger W. Saylor
Title: Associate
By /s/ Carl Jackson
------------------------------
Name: Carl Jackson
Title: Member of Senior
Management
DEN DANSKE BANK AKTIESELSKAB,
NEW YORK BRANCH
By /s/ Stephen B. Shea
------------------------------
Name: Stephen B. Shea
Title: Vice President
By /s/ John A. O'Neil
------------------------------
Name: John A. O'Neil
Title: Vice President
DRESDNER BANK AG, NEW YORK
BRANCH AND GRAND CAYMAN
BRANCH
By /s/ Thomas J. Nadramia
------------------------------
Name: Thomas J. Nadramia
Title: Vice President
By /s/ John S. Runnion
------------------------------
Name: John S. Runnion
Title: Vice President
<PAGE> 24
24
FIRST BANK NATIONAL
ASSOCIATION
By /s/ Elliot Jaffee
------------------------------
Name: Elliot Jaffee
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, CHICAGO BRANCH
By /s/ Hiroki Yamada
------------------------------
Name: Hiroki Yamada
Title: General Manager
ING BARING (U.S.) CAPITAL
MARKETS, INC.
By /s/ Michael G. Plunkett
------------------------------
Name: Michael G. Plunkett
Title: Vice President
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ Richard P. Burke
------------------------------
Name: Richard P. Burke
Title: Vice President
<PAGE> 25
25
NORDDEUTSCHE LANDESBANK
GIROZENTRALE
By /s/ Stephen K. Hunter
------------------------------
Name: Stephen K. Hunter
Title: Senior Vice President
By /s/ Stephanie IIoever
------------------------------
Name: Stephanie IIoever
Title: Vice President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By /s/ Bradley E. Carson
------------------------------
Name: Bradley E. Carson
Title: Corporate Banking Officer
PNC BANK, NATIONAL
ASSOCIATION
By /s/ Gregory T. Gaschler
------------------------------
Name: Gregory T. Gaschler
Title: Vice President
THE SANWA BANK, LIMITED
CHICAGO BRANCH
By /s/ Seiji Daito
------------------------------
Name: Seiji Daito
Title: Vice President &
Manager
<PAGE> 26
26
THE SUMITOMO BANK,
LIMITED
By /s/ Hiroyuki Iwami
------------------------------
Name: Hiroyuki Iwami
Title: Joint General Manager
SVENSKA HANDELSBANKEN,
NEW YORK BRANCH
By /s/ Geoffrey Walker
------------------------------
Name: Geoffrey Walker
Title: Senior Vice President
By /s/ H.N. Bacon
------------------------------
Name: H.N. Bacon
Title: Vice President
UNITED STATES NATIONAL BANK
OF OREGON
By /s/ Roger H. Weis
------------------------------
Name: Roger H. Weis
Title: Vice President
<PAGE> 27
27
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK
BRANCH
By /s/ S. Battinelli
----------------------
Name: Salavatore Batinelli
Title: Vice President
Credit Department
By /s/ C.D. Rockey
----------------------
Name: C.D. Rockey
Title: Associate
<PAGE> 28
CONSENT
Dated as of December 20, 1996
The undersigned, GENERAL MOTORS CORPORATION, a Delaware
corporation, as an A Support Credit Enhancer under the A Support Letter of
Credit Agreement (as defined in Series 1996-2 Supplement referred to in the
foregoing Amendment) and hereby consents to the foregoing Amendment and hereby
confirms and agrees that the A Support Letter of Credit Agreement, as amended,
is, and shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects except that, upon the effectiveness of, and on and
after the date of, the said Amendment, each reference in the A Support Letter of
Credit Agreement to the Liquidity Agreement, "thereunder", "thereof" or words of
like import shall mean and be a reference to the Liquidity Agreement as amended
by the said Amendment.
GENERAL MOTORS CORPORATION
By /s/ David A. Robson
----------------------------
Name: David A. Robson
Title: Attorney-in-fact
<PAGE> 1
Exhibit 4.12
EXECUTION COPY
COLLATERAL AGREEMENT
dated as of June 7, 1995
among
NATIONAL FLEET FUNDING CORPORATION,
GENERAL MOTORS CORPORATION,
as A Support Credit Enhancer,
CITIBANK, N.A. and CREDIT SUISSE, NEW YORK BRANCH,
as B Support Credit Enhancers
CITIBANK, N.A.,
as Liquidity Agent, Placement Agent and Depositary
CREDIT SUISSE, NEW YORK BRANCH,
as Agent
and
CS FIRST BOSTON CORPORATION,
as Dealer
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C> <C>
ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions.......................................... 4
ARTICLE II.
OBLIGATIONS COLLATERALIZED
SECTION 2.01. Obligations Collateralized Hereby.................... 4
ARTICLE III.
AGENTS; REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 3.01. NFC and Other Agents................................. 7
SECTION 3.02. Representations and Warranties of NFC................ 8
SECTION 3.03. Additional Representations, Warranties and
Covenants of NFC..................................... 9
SECTION 3.04. Representations and Warranties of the Agent.......... 10
ARTICLE IV.
ASSIGNMENT
SECTION 4.01. Assignment............................................. 11
SECTION 4.02. Application of Assigned Collateral and Deposited
Funds................................................ 13
SECTION 4.03. Performance of Agreement............................... 14
SECTION 4.04. Amendments; Waivers; Declaration of Default............ 16
SECTION 4.05. Notice of Default...................................... 17
ARTICLE V.
COLLATERAL ACCOUNT, LIQUIDITY LENDER ACCOUNT,
AND CREDIT ENHANCER ACCOUNT
SECTION 5.01. Establishment of Collateral Account, etc............. 17
SECTION 5.02. Assignment of Accounts, etc.......................... 19
SECTION 5.03. Application of Deposited Funds and Assigned
Collateral......................................... 24
SECTION 5.04. Eligible Investments................................. 25
SECTION 5.05. Credit Demand........................................ 26
SECTION 5.06. Liquidity Demand; Commitment Termination Demand;
Reductions......................................... 27
SECTION 5.07. Termination Demand................................... 29
SECTION 5.08. Conversion........................................... 31
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C> <C>
SECTION 5.09. The Cash Collateral Accounts......................... 32
ARTICLE VI.
DEFAULT
SECTION 6.01. Rights of the Agent upon Amortization Event,
Loan Event of Default and Event of Default......... 35
SECTION 6.02. Special Provisions Concerning Remedies and Sale
If Manufacturer Default or Inability to Turn
Back under Repurchase Program........................ 36
ARTICLE VII.
THE AGENT, THE LIQUIDITY LENDERS,
THE SUPPORT CREDIT ENHANCERS AND THE HOLDERS
OF COMMERCIAL PAPER NOTES
SECTION 7.01. Appointment and Powers of Agent...................... 38
SECTION 7.02. Agents and Employees of the Agent.................... 40
SECTION 7.03. Waiver of Jury Trial................................. 42
SECTION 7.04. Successor Agent...................................... 43
SECTION 7.05. Qualifications of Agent.............................. 44
SECTION 7.06. Instructions of the Required Liquidity Providers
and Other Parties.................................. 44
ARTICLE VIII.
AMENDMENTS, MODIFICATIONS, WAIVERS AND CONSENTS
SECTION 8.01. Execution of Amendments, etc......................... 45
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. Further Assurances................................... 46
SECTION 9.02. No Waiver; Cumulative Remedies....................... 46
SECTION 9.03. Notice of Amendments; Waivers; Notice of LIBOR....... 46
SECTION 9.04. Notices, etc......................................... 46
SECTION 9.05. Fee, Costs and Expenses, etc......................... 49
SECTION 9.06. Agent Appointed Attorney-in-Fact..................... 50
SECTION 9.07. Termination; Assigned Collateral..................... 50
SECTION 9.08. Governing Law; Binding Character; Assignment......... 51
SECTION 9.09. Severability of Provisions........................... 51
SECTION 9.10. No Bankruptcy Petition Against NFC................... 51
SECTION 9.11. No Recourse.......................................... 52
SECTION 9.12. Confidentiality...................................... 52
SECTION 9.13. Headings............................................. 53
-ii-
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 9.14. Execution in Counterparts............................ 53
SECTION 9.15. Limited Recourse to NFC.............................. 53
SECTION 9.16. Waiver of Set-Off With Respect to NFC................ 53
</TABLE>
-iii-
<PAGE> 5
Master Collateral Agent are entering into the Master Collateral Agency Agreement
and National, the Agent, the Master Collateral Agent, NFC and the Support Credit
Enhancers are entering into a supplement thereto, providing for, among other
things, (i) the grant by National to the Master Collateral Agent for the benefit
of various Financing Sources and Beneficiaries named thereunder of a first
priority security interest in the Vehicles owned by National, certain rights
under the Repurchase Programs and other documents, including warranties and
insurance policies, as they relate to such Vehicles, its rights under the
Vehicle Title Nominee Agreement as they relate to such Vehicles and its rights
under the GM Guaranty and (ii) the designation of NFC and the Support Credit
Enhancers as "Financing Sources" and the Agent, the A Support Credit Enhancer
and the B Support Credit Enhancers as "Beneficiaries" thereunder (in the case of
the Agent, to secure the NFC Obligations, in the case of the A Support Credit
Enhancer, to secure the obligations of National to the A Support Credit Enhancer
under the A Support Reimbursement Agreement and, in the case of the B Support
Credit Enhancers, to secure the obligations of National to the B Support Credit
Enhancers under the B Support Letter of Credit Reimbursement Agreement) with
respect to (a) Vehicles owned by National and financed with Loans made under the
Loan Agreement, (b) the Repurchase Programs and other documents, including
warranties and insurance policies, as they relate to such Vehicles, (c) amounts
received under the Vehicle Title Nominee Agreement with respect to such Vehicles
and (d) amounts received under the GM Guaranty with respect to such Vehicles.
4. Contemporaneously with the execution and delivery of this Collateral
Agreement, National, NFC and the Support Credit Enhancers are entering into the
Collateral Sharing Agreement dated as of June 7, 1995, (as it may be amended or
otherwise modified from time to time, the "Collateral Sharing Agreement"),
pursuant to which the Support Credit Enhancers will agree that their interest as
Financing Sources in the collateral described in paragraph 3 above is subject
and subordinate to the interest therein of NFC as a Financing Source and the A
Support Credit Enhancer will agree that its interest as a Financing Source in
such collateral is subject and subordinate to the interest therein of the B
Support Credit Enhancers as Financing Sources.
5. Contemporaneously with the execution and delivery of this COLLATERAL
AGREEMENT, NFC, the Liquidity Agent and the Liquidity Lenders are entering into
the Liquidity Agreement dated as of June 7, 1995 (as it may be amended or
otherwise modified from time to time, the "Liquidity Agreement"), providing for,
among other things, the Liquidity Commitments of the Liquidity Lenders to make
Liquidity Advances on behalf of NFC from time to time.
-2-
<PAGE> 6
Agreement, pursuant to which National assigns to the Master Collateral Agent for
the benefit of NFC and the Agent certain of Nationals rights under the
Repurchase Program offered by such Eligible Manufacturer.
13. NFC is entering into this Collateral Agreement with Support Credit
Enhancers, the Liquidity Agent, the Depositary, the Agent, the Placement Agents
and the Dealers for the purpose of, among other things, providing for the
repayment or payment of all amounts at any time and from time to time owing by
NFC to the Liquidity Lenders or the Liquidity Agent under or in connection with
the Liquidity Agreement or this Collateral Agreement and all amounts owing at
any time and from time to time by NFC to the A Support Credit Enhancer under or
in connection with the A Support Reimbursement Agreement or this Collateral
Agreement or owing by NFC to the B support Credit Enhancers under or in
connection with the B Support Letter of Credit Reimbursement Agreement or this
Collateral Agreement or owing by NFC to the Cash Reserve Account under or in
connection with the L Letter of Credit Reimbursement Agreement or this
Collateral Agreement or owing by NFC to the Holders of the Commercial Paper
Notes or the Depositary or owing to the Agent hereunder or owing to the Dealers
under the Dealer Agreement or owing to the Placement Agents under the Placement
Agency Agreement.
NOW, THEREFORE, in consideration of the premises and agreements herein
contained, each of NFC, the Support Credit Enhancers, the Liquidity Agent, the
Depositary, the Agent, the Placement Agents and the Dealers agrees as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions. As used in this Collateral Agreement and
unless the context requires a different meaning, capitalized terms not otherwise
defined herein shall have the meanings assigned to such terms in the Definitions
List, dated as of June 7, 1995 (the "Definitions Lists), attached as Annex A to
the Liquidity Agreement, as such Definitions List may be amended or modified in
accordance with the terms thereof.
ARTICLE II.
OBLIGATIONS COLLATERALIZED
SECTION 2.01. Obligations Collateralized Hereby. This Collateral Agreement
is made to provide for repayment and payment of the following Indebtedness and
liabilities of NFC (such
-4-
<PAGE> 7
Indebtedness and liabilities being herein called the "NFC Obligations"). Upon
the occurrence, and during the continuance, of an Amortization Event or a Loan
Event of Default, the NFC Obligations will be paid in the order of priority
indicated below:
First, the repayment of all amounts advanced or expended by the Agent,
in its capacity as Agent, for the account of NFC hereunder and the payment
of all reasonable out-of-pocket costs and expenses at any time and from
time to time payable hereunder to the Agent, in its capacity as such, in
connection with the administration or enforcement of this Collateral
Agreement or any Related Document (including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel employed by the Agent
in connection therewith) and the payment of all indemnities at any time and
from time to time due by NFC hereunder to the Agent in its capacity as such
up to an aggregate amount equal to $25,000 per annum;
Second, subject to the last sentence of Section 5.02(f), THE PAYMENT
OF ALL INDEBTEDNESS, AT any time and from time to time, due from NFC on the
Outstanding Commercial Paper Notes issued pursuant to and in accordance
with the Depositary Agreement;
Third, the payment of all (a) operating and ordinary course expenses
of NFC up to an aggregate amount equal to $250,000 per annum and (b) fees
and expenses at any time and from time to time due to the Depositary
pursuant to Section 9(a) of the Depositary Agreement;
Fourth, the payment of all amounts at any time and from time to time
due to the Liquidity Agent as notified to the Agent pursuant to Section
3.6.6 of the Liquidity Agreement;
Fifth, first, the payment, pro rata, of all principal Indebtedness
(including Commitment Termination Date Liquidity Advances), at any time and
from time to time, due (in the case of a Commitment Termination Date
Liquidity Advance, such Advance will be deemed to be due for purposes of
this clause Fifth on the date such Advance is made) from NFC (a) to the
Liquidity Lenders in connection with the Liquidity Advances made pursuant
to the Liquidity Agreement, (b) to the A Support Credit Enhancer in
connection with A Support Liquidity Disbursements made pursuant to the A
Support Letter of Credit Agreement, (c) to the Cash Reserve Account in
connection with Cash Reserve Support Liquidity Disbursements made pursuant
to the B Letter of Credit Reimbursement Agreement, (d) to the B Support
Credit Enhancers in connection with B Support LOC Liquidity
-5-
<PAGE> 8
Disbursements made under the B Support Letters of Credit and, (e) if applicable,
to the Cash Collateral Accounts in connection with moneys withdrawn from such
Accounts to fund any LOC Liquidity Disbursements, together with all amounts
payable in respect of interest on any of the foregoing; and second, the payment,
pro rata, of the NFC Reimbursement Share of any A Support Termination
Disbursement, A Support Event of Default Disbursement or B Support LOC
Termination Disbursements, together with all amounts payable in respect of
interest on any of the foregoing;
Sixth, the payment, pro rata, of all other Indebtedness (including, but not
limited to fees, reimbursements, funding indemnities, taxes and increased costs,
but excluding amounts referenced in clause Eighth below), at any time and from
time to time, due to the Liquidity Lenders, the Liquidity Agent, the A Support
Credit Enhancer (solely with respect to amounts due from NFC under the A Support
Reimbursement Agreement) and the B Support Credit Enhancers (solely with respect
to amounts due from NFC under the B Support Letter of Credit Reimbursement
Agreement), pro rata, for the payment of any other amounts (excluding those
referenced in clause Eighth below) at any time and from time to time due from
NFC to any of them under or in respect of the Liquidity Agreement, the A Support
Reimbursement Agreement, the B Support Letters of Credit or the B Support Letter
of Credit Reimbursement Agreement, as the case may be, together with all amounts
due from NFC in respect of interest thereon, and the payment, pro rata, of all
indemnities at any time and from time to time due from NFC hereunder to the
Liquidity Lenders and the Support Credit Enhancers, it being understood that
amounts payable under this clause Sixth shall relate exclusively to costs and
expenses incurred in or in connection with the procurement and handling of funds
and the making of such funds available to or for the account or benefit of NFC
and shall not include amounts payable in connection with general indemnity to
the use by NFC , the A Credit Enhancer or the B Credit Enhancers of the proceeds
of such financial accommodations (other than, in the event such actions give
rise to breakage costs, any action in the nature of a prepayment by NFC) or
actions taken or omitted to be taken by NFC under the Related Documents and not
directly related to the procurement of funds, all of which shall be covered by
clause Eighth below;
Seventh, the repayment of reasonable amounts owing to the Agent referred to
in clause First above in excess of $25,000 per annum;
-6-
<PAGE> 9
Eighth, the repayment, pro rata, of all reasonable amounts advanced or
expended by any Liquidity Lender or any Support Credit Enhancer under this
Collateral Agreement or under the Liquidity Agreement, the A Support
Reimbursement Agreement (solely with respect to amounts due from NFC
thereunder), the B Support Letters of Credit or the B Support Letter of
Credit Reimbursement Agreement (solely with respect to amounts due from NFC
thereunder), as the case may be, and any other amounts and reasonable
out-of-pocket costs and expenses due from NFC to any party under in
connection with the Liquidity Agreement, the A Support Reimbursement
Agreement (solely with respect to amounts due from NFC thereunder), the B
Support Letters of Credit, the B Support Letter of Credit Reimbursement
Agreement (solely with respect to amounts due from NFC thereunder), the
Depositary Agreement, the Placement Agency Agreement, the Dealer Agreement
or any other Related Document whether in respect of indemnities thereunder
or otherwise; and
Ninth, the payment of all other expenses of NFC referred to in clause
Third above in excess of $250,000 per annum.
ARTICLE III.
AGENTS; REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 3.01. NFC and Other Agents. (a) With the delivery of this
Collateral Agreement, NFC is furnishing to the Agent, and from time to time
thereafter may furnish to the Agent, a certificate (the "NFC Incumbency
Certificates) certifying the incumbency and specimen signatures of
officers, employees, agents or representatives of NFC (the "NFC Agents")
authorized to act, and to give instructions and notices, on behalf of NFC
hereunder. Until the Agent receives a subsequent NFC Incumbency
Certificate, the Agent shall be entitled to rely on the last such NFC
Incumbency Certificate delivered to it for purposes of determining the
authorized NFC Agents.
(b) With the delivery of this Collateral Agreement, NFC shall cause
the Depositary to furnish to the Agent, and from time to time thereafter
may cause the Depositary to furnish to the Agent, a certificate (the
"Depositary Incumbency Certificates) certifying as to the incumbency and
specimen signatures of officers of the Depositary (the "Depositary Agents")
authorized to act, and to give instructions and notices, on behalf of the
Depositary hereunder. Until the Agent receives a subsequent Depositary
Incumbency Certificate, the Agent shall be entitled to rely on the last
such Depositary Incumbency Certificate delivered
-7-
<PAGE> 10
to it for purposes of determining the authorized Depositary Agents.
(c) With the delivery of this Collateral Agreement and from time to
time thereafter, each of the 3 Support Credit Enhancers shall furnish to
the Agent a certificate (each, a "B Support Credit Enhancer Incumbency
Certificate") certifying as to the incumbency and specimen signatures of
officers of each such Support Credit Enhancer (in each case, the "13
Support Credit Enhancer Agents") authorized to act, and to give
instructions and notices, on behalf of each such B Support Credit Enhancer
hereunder. Until the Agent receives a subsequent B Support Credit Enhancer
Incumbency Certificate from a ~ Support Credit Enhancer, the Agent shall be
entitled to rely on the last such B Support Credit Enhancer Incumbency
Certificate delivered to it from such ~ Support Credit Enhancer for
purposes of determining the AUTHORIZED B Support Credit Enhancer Agents for
such B Support Credit Enhancer.
(d) With the delivery of this Collateral Agreement and from time to
time thereafter, the A Support Credit Enhancer shall furnish to the Agent a
certificate (the "A Support Credit Enhancer Incumbency Certificate")
certifying as to the incumbency and specimen signatures of officers of the
A Support Credit Enhancer (the "A Support Credit Enhancer Agents")
authorized to act, and to give instructions and notices, on behalf of the A
Support Credit Enhancer hereunder. Until the Agent receives a subsequent A
Support Credit Enhancer Incumbency Certificate, the Agent shall be entitled
to rely on the last such A Support Credit Enhancer Incumbency Certificate
delivered to it for purposes of determining the authorized A Support Credit
Enhancer Agents.
(e) With the delivery of this Collateral Agreement and from time to
time thereafter, the Liquidity Agent shall furnish to the Agent a
certificate (the "Liquidity Agent Incumbency Certificate") certifying as
to the incumbency and specimen signatures of officers of the Liquidity
Agent (the "L.A. Agents") authorized to act, and to give instructions and
notices, on behalf of the Liquidity Agent hereunder. Until the Agent
receives a subsequent Liquidity Agent Incumbency Certificate, the Agent
shall be entitled to rely on the last such Liquidity Agent Incumbency
CERTIFICATE delivered to it for purposes of determining the authorized L.A.
Agents.
SECTION 3.02. Representation and Warranties of NFC. NFC reaffirms
and repeats its representations and warranties contained in the Liquidity
Agreement, the A Support Reimbursement Agreement and the B Support Letter
of Credit Reimbursement Agreement and agrees that the Secured Parties may
rely on such representations and warranties as though set forth herein in
full.
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SECTION 3.03. Additional Representations. Warranties and Covenants of NFC.
NFC hereby makes the following representations, warranties and covenants to the
Agent, the Depositary, the Liquidity Agent, the Support Credit Enhancers, the
Holders, the Liquidity Lenders, the Placement Agents and the Dealers:
(a) All action necessary Concluding one filing of UCC-1 financing
statements, the assignment of certain rights under the Repurchase Programs,
the Vehicle Title Nominee Agreement and the GM Guaranty to the Master
Collateral Agent, the execution and delivery of an assignment agreement,
pursuant to which GMAC has assigned its Lien with respect to the Initial
Vehicles to the Master Collateral Agent and the notation on the Vehicle
certificates of title of the Master Collateral Agent's lien or the
assignment of an existing lien) to protect and perfect the agent's security
interest on behalf of the Secured Parties in the Assigned Collateral now in
existence and hereafter acquired or created, the Cash Collateral Accounts
and the Deposited Funds has been duly and effectively taken.
(b) No security agreement, financing statement, equivalent security or
lien instrument or continuation statement listing NFC as debtor covering
all or any part of the Assigned Collateral is on file or of record in any
jurisdiction, except such as may have been filed, recorded or made by NFC
in favor of the Agent pursuant to this Collateral Agreement.
(c) This Collateral Agreement creates a valid and continuing Lien on
the Assigned Collateral in favor of the Agent on behalf of the Secured
Parties, which Lien is prior to all other Liens, except for Permitted
Liens, and is enforceable as such as against creditors of and purchasers
from NFC. All action necessary or desirable to protect and perfect such
prior security interest has been duly taken.
(d) NFC's principal place of business and chief executive office shall
be at: 7700 France Avenue South, Minneapolis, Minnesota 55435 and the place
where its records concerning the Assigned Collateral are kept is at 7700
France Avenue South, Minneapolis, Minnesota 55435. NFC will not change its
name or such principal place of business or chief executive office or
remove such records without 60 days prior written notice to the Agent.
(e) At any time and from time to time, upon the written request of the
Agent, and at the sole expense of NFC, NFC will promptly and duly execute
and deliver any and all such further instruments and documents and take
such
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further action as the Agent may reasonably deem necessary in obtaining the
full benefits of this Collateral Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing
or continuation statements under the Uniform Commercial Code in effect in
any jurisdiction with respect to the liens and security interests granted
hereby. NFC also hereby authorizes the Agent to file any such financing or
continuation statement without the signature of NFC to the extent permitted
by applicable law. If any amount payable under or in connection with any of
the Assigned Collateral shall be or become evidenced by any promissory
note, chattel paper or other instrument, such note, chattel paper or
instrument shall be deemed to be held in trust and immediately pledged (i)
if subject to the Master Collateral Agency Agreement, to the Master
Collateral Agent or (ii) if not subject to the Master Collateral Agency
Agreement, to the agent hereunder, and shall, subject to the rights of any
Person in whose favor a prior Lien has been perfected, be duly endorsed in
a manner satisfactory to the Master Collateral Agent or Agent, as
applicable, and delivered to the Master Collateral Agent or Agent, as
applicable, promptly.
(f) NFC will warrant and defend the Agent's right, title and interest
in and to the Assigned Collateral and the income, distributions and
proceeds thereof, for the benefit of the Secured Parties against the claims
and demands of all Persons whomsoever.
(g) All authorizations in this Collateral Agreement for the Agent to
endorse checks, instruments and securities and to execute financing
statements, continuation statements, security agreements and other
instruments with respect to the Assigned Collateral are powers coupled with
an interest and are irrevocable.
SECTION 3.04. Representations and warranties of the Agent. The Agent
hereby represents, warrants and covenants to the Secured Parties that this
Collateral Agreement has been duly authorized, executed and delivered by the
Agent and constitutes a legal, valid and binding obligation of the Agent,
enforceable against the Agent in accordance with its terms, except as such
enforceability may be subject to bankruptcy or insolvency laws, creditors'
rights generally and general principles of equity.
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ARTICLE IV.
ASSIGNMENT
SECTION 4.01. Assignment. (a) In order to Secure and provide for the
payment and repayment of the NFC Obligations, NFC hereby pledges, assigns,
conveys, delivers, transfers and sets over to the Agent, for the ratable benefit
of the Agent, the Liquidity Lenders, the Liquidity Agent, the Support Credit
Enhancers, the Depositary, the Placement Agents, the Dealers and the Holders of
the Commercial Paper Notes (the foregoing being referred to as the "Secured
Parties") as their respective interests appear, and hereby grants to the Agent,
for the benefit of the Secured Parties, a security interest in all of NFC's
right, title and interest in and to all assets, property and interests in
property (other than as specified below) whether now owned or hereafter acquired
or created (all of the foregoing being referred to as the "Assigned Collateral"
), including without limitation, all of the following property and interests in
property:
(i) the NFC Agreements, including, without limitation, all monies due
and to become due to NFC from National under or in connection with the NFC
Agreements, whether payable as principal, interest, fees, expenses, costs,
indemnities, insurance recoveries, damages for the breach of any of the NFC
Agreements or otherwise, and all rights, remedies, powers, privileges and
claims of NFC against any other party under or with respect to the NFC
Agreements (whether arising pursuant to the terms of such NFC Agreements or
otherwise available to NFC at law or in equity), the right to enforce any
of the NFC Agreements as provided herein and to give or withhold any and
all consents, requests, notices, directions, approvals, extensions or
waivers under or with. respect to the NFC Agreements or the obligations of
any party thereunder; and
(ii) all right, title and interest of NFC in, to and under any
Repurchase Programs as they relate to Vehicles financed with the proceeds
of Loans and all monies due and to become due in respect of such Vehicles
from the Manufacturers under or in connection with the Repurchase Programs
(other than Excluded Payments) whether payable as Vehicle repurchase
prices, auction sales proceeds, fees, expenses, costs, indemnities,
insurance recoveries, damages for breach of the Repurchase Programs or
otherwise and all rights to compel performance and otherwise exercise
remedies thereunder; and
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<PAGE> 14
(iii) all right, title and interest of NFC in, to and under the
Vehicle Title Nominee Agreement as it relates to vehicles financed
with the proceeds of Loans; and
(iv) all right, title and interest of NFC in, to and under the GM
Guaranty as it relates to Vehicles financed with the proceeds of
Loans; and
(v) all other right, title and interest of NFC in, to and under
the Master Collateral Agency Agreement, including, without limitation,
the portion of the Master Collateral for which NFC is designated as a
Financing Source and the Agent is designated as a Beneficiary
thereunder; and
(vi) all additional property that may from time to time hereafter
be subjected to the grant and pledge hereof by NFC or by anyone on its
behalf; and
(vii) all property assigned to the Agent pursuant to Section 5.02
hereof, including the Accounts, the Cash Collateral Accounts and the
Deposited Funds; and
(viii) all proceeds of any and all of the foregoing including,
without limitation, payments under insurance (whether or not the
Master Collateral Agent or the Agent is the loss payee thereof) or
Vehicle warranties and cash; Provided that in no event shall any of
the foregoing include any right, title or interest in the Fleet
Finance Agreement and payments thereunder.
Notwithstanding the foregoing, upon the disbursement by the Agent of any amount
distributable to NFC in accordance with the terms of Section 2.01 or 5.02(b) for
the payment of NFC's operating and ordinary course expenses, the security
interest in such amount granted in favor of the Agent shall be released.
(b) Notwithstanding the assignment and security interest so granted to the
Agent, NFC shall nevertheless be permitted, subject to the Agent's right to
revoke such permission in the event of an Amortization Event (other than a
Scheduled Amortization Event) or a Liquidation Event of Default and the
provisions of Section 4.03 hereof, to give all consents, requests, notices,
directions, approvals, extensions or waivers, if any, which are required to be
given in the normal course of business (which does not include waivers of
defaults under any of the NFC Agreements or revocation of powers of attorney to
National) to National by NFC by the specific terms of the Loan Agreement or to
any other obliger under the Assigned Collateral, and the assignment of the
Assigned Collateral to the Agent shall not (i) relieve NFC from the performance
of any term, covenant, condition or agreement on NFC's part to be performed or
observed
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<PAGE> 15
under or in connection with any of the NFC Agreements or from any liability to
National, the Master Collateral Agent or the Manufacturers, as the case may be,
or (ii) impose any obligation on any of the Secured Parties to perform or
observe any such term, covenant, condition or agreement on NFC's part to be so
performed or observed or impose any liability on any of the Secured Parties for
any act or omission on the part of NFC or from any breach of any representation
or warranty on the part of NFC. NFC hereby agrees to indemnify and hold harmless
each Secured Party from and against any and all losses, liabilities (including
liabilities for penalties), claims, demands, actions, suits, judgments,
reasonable out-of-pocket costs and expenses arising out of or resulting from the
assignment granted hereby by virtue of any act or omission on the part of NFC
including, without limitation, the reasonable out-of-pocket costs, expenses, and
disbursements (including reasonable attorneys' fees and expenses) incurred by
any of the secured parties in enforcing this Collateral Agreement or preserving
any of their respective rights to, or realizing upon, any of the Assigned
Collateral.
SECTION 4.02. Application of Assigned Collateral and Deposited Funds. NFC
hereby acknowledges and agrees that, until this Collateral Agreement is
terminated, NFC shall, and the Agent is authorized to, cause (i) all monies,
instruments, cash and other proceeds due and to become due to NFC or the Agent
under or in connection with the Master Collateral for which NFC and the Support
Credit Enhancers are designated as Financing Sources and the Agent, Support
Credit Enhancers are designated as Beneficiaries under the Master Collateral
Agency Agreement (including, without limitation, amounts due from Manufacturers
under their Repurchase Programs but excluding amounts representing the proceeds
from sales of Vehicles by National at auction to third parties other than the
Manufacturers, warranty payments and insurance proceeds) to be paid directly to
the Master Collateral Agent for deposit into the Master Collateral Account; (ii)
amounts representing the proceeds from sales of Vehicles by National at auction
to third parties other than the Manufacturers to be deposited by National within
two Business Days of its receipt thereof into the Master Collateral Account; and
(iii) all Loan payments made by National under the Loan Agreement to be made
directly to the Agent for deposit into the Collateral Account (and, in each
case, NFC represents to the Secured Parties that it has instructed National and
the Manufacturers, as applicable, to so remit such amounts). Upon the occurrence
and during the continuance of an Amortization Event or Potential Amortization
Event, insurance proceeds will be deposited in the Master Collateral Account
within two Business Days of their receipt by National; provided, however, upon
the delivery of an Officer's Certificate of National to the Agent (upon which it
may conclusively rely) certifying (i) that a Vehicle for which insurance
proceeds have been received in the
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Collateral Account has been repaired and (ii) as to the dollar amount of such
repairs, the Agent shall release to National insurance proceeds in such dollar
amount (to the extent not previously applied hereunder). NFC agrees that if any
such monies, instruments, cash or other proceeds shall be received by NFC in an
account other than the Master Collateral Account or the Collateral Account or in
any other manner, such monies, instruments, cash and other proceeds will not be
commingled by NFC with any of its other funds or property, if any, but will be
held separate and apart therefrom and shall be held in trust by NFC for, and
immediately paid over to, but in any event within two Business Days from
receipt, the Agent or the Master Collateral Agent, as applicable, with any
necessary endorsement. Provided that the Collateral Account or any funds on
deposit in, or otherwise to the credit of, the Collateral Account are not then
subject to any writ, order, judgment, warrant of attachment, execution OR
similar process, all monies, instruments, cash and other proceeds received by
the Agent pursuant to this Article IV shall be immediately deposited in the
Collateral Account, and, unless and until an amortization event or loan event of
Default shall have occurred and be continuing, shall be applied as provided in
Section 5.02(b) hereof. All monies, instruments, cash and other proceeds held or
deposited in the Collateral Account after the occurrence and during the
continuance of an Amortization Event or Loan Event of Default, and all monies,
instruments, cash and other proceeds received by the Agent pursuant to this
Article IV while the Collateral Account or any funds on deposit in, or otherwise
to the credit of, the Collateral Account are subject to any writ, order,
judgment, warrant of attachment, execution or similar process, shall be applied
by the Agent (to the extent permitted by law) to the payment or repayment in
full of all outstanding NFC Obligations, in the appropriate order of priority
specified in Section 2.01 of this Collateral Agreement. Notwithstanding the
foregoing, to the extent that the aggregate amount of proceeds relating to any
Vehicle it received in the Collateral Account exceeds the Termination Value of
such Vehicle, the Collateral Agent shall, upon the written direction of NFC (on
which it may conclusively rely), release such excess (to the extent not
previously applied hereunder) to National within two Business Days after the
receipt of written instructions from the Servicer referred to in Section 2.5(b)
of the Master Collateral Agency Agreement.
SECTION 4.03. Performance of Agreement. (a) Upon the occurrence of a
Liquidation Event of Default, promptly following a request from the Agent to do
so and at NFC's own expense, NFC agrees to take all such lawful action and as
permitted under this Collateral Agreement as the Agent may reasonably request to
compel or secure the performance and observance by National or by any other
party to any NFC Agreement or any other Related Document of its obligations to
NFC in accordance with the
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<PAGE> 17
applicable terms thereof, and to exercise any and all rights, remedies, powers
and privileges lawfully available to NFC to the extent and in the manner
reasonably directed by the Agent, including, without limitation, the
transmission of notices of default and the giving of directions, or the
institution of legal or administrative actions or proceedings to compel or
secure performance by National (or such party to any NFC Agreement or any other
Related Document), of their respective obligations thereunder; provided,
however, that if NFC shall have failed, within 15 Business Days of receiving the
direction by the Agent, to accomplish such directions of the Agent, the Agent
may, but shall not be obligated to, take such previously directed action (and
any related action as permitted under this Collateral Agreement thereafter
determined by the Agent to be appropriate without the need under this provision
or any other provision hereunder to direct NFC to take such action) on behalf of
NFC and the secured parties. Upon the occurrence of a liquidation event of
Default, the Agent may, and upon written direction from the Required Liquidity
Providers shall, take all lawful action at NFC's expense (for reasonable costs
and expenses), to exercise any and all rights, remedies, powers and privileges
lawfully available to the Agent to the extent and in the manner directed by the
Required Liquidity Providers or, in the absence of such direction, by the Agent
itself, including, without limitation, the transmission of notices of default
and the institution of legal or administrative actions or proceedings to compel
or secure performance by National, NFC or any obliger with respect to the
Assigned Collateral (including, without limitation, any Manufacturer under a
Repurchase Program), including, without limitation, the giving of directions to
the Master Collateral Agent to exercise rights and remedies under the Master
Collateral Agency Agreement with respect to the Master Collateral for which the
Agent and the Support Credit Enhancers are designated as Beneficiaries and to
exercise any other remedies available to a secured party.
Subject to Section 4.01(b), NFC further agrees that it will not,
without the prior written consent of the Agent, exercise any right, remedy,
power or privilege available to it with respect to any obligor under the
Assigned Collateral (other than Old National or the A Support Credit Enhancer
under the Vehicle Title Nominee Agreement or the GM Guaranty, respectively),
take any action to compel or secure performance or observance by any obligor of
its obligations to NFC (other than Old National or the A Support Credit Enhancer
under the Vehicle Title Nominee Agreement or the GM Guaranty, respectively), or
give any consent, request, notice, direction, approval, extension or waiver with
respect to any obligor (other than Old National or the A Support Credit Enhancer
under the Vehicle Title Nominee Agreement or the GM Guaranty, respectively).
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<PAGE> 18
In the event of a Liquidation Event of Default, the Required Liquidity
Providers shall be deemed to have directed that the Agent, NFC, the Master
Collateral Agent and National return each Vehicle to the related Manufacturer
under the related Repurchase Program at the end of the minimum holding period
(if any) for such Vehicle under the related Repurchase Program, unless the
Required Liquidity Providers specifically waive such direction in writing.
(b) Unless otherwise specifically directed by the Required Liquidity
Providers in writing, in the event that there has occurred a Manufacturer
Default, and the Agent shall have received written notice thereof from any
Secured Party, the Agent agrees at NFC's expense to direct the Master Collateral
Agent to sell any and all Vehicles covered by the related Repurchase Program of
such Manufacturer for the highest purchase price offered at a PUBLIC OR PRIVATE
SALE AND, PROMPTLY UPON RECEIPT, to deposit the proceeds of such sale into the
Collateral Account for application in accordance with Section 5.02(b) or 2.01,
as applicable.
SECTION 4.04. Amendments; Waivers; Declaration of Default. Without
intending in any manner to derogate from the absolute nature of the assignment
granted to the Agent by this Collateral Agreement or the rights of the Agent
hereunder, NFC agrees that it will not, without giving prior written notice to
the Rating Agencies, the Placement Agents and the Dealers and without the prior
written consent of the Required Liquidity Providers and the Agent (to the extent
the rights or duties of the Agent are affected thereby), amend, modify,
supplement, terminate or surrender, or agree to any amendment, modification,
supplement, termination or surrender of, the terms of any Assigned Collateral,
or waive timely performance or observance by any obligor of its obligations
under the Assigned Collateral, or any default on the part of any obliger under
the Assigned Collateral; provided, however, that NFC may amend the terms of any
Assigned Collateral if such amendment is effected only to cure any ambiguity, to
correct or supplement any provision therein which may be inconsistent with any
other provision therein or which is otherwise defective, or to make any other
provisions with respect to matters or questions arising under such Assigned
Collateral which shall not be inconsistent with the provisions of such Assigned
Collateral; provided, such action pursuant to this clause shall not adversely
affect the interests of a Secured Party in any material respect. NFC will not
agree to any such amendment, waiver or other change (with respect to a
Repurchase Program, only to the extent any consent of NFC is solicited or
required by the Manufacturer or any assignor of such Repurchase Program), (i) if
such amendment, waiver or other change would materially adversely affect the
rights of the Holders of the Commercial Paper Notes or (ii) if the Agent shall
not have
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received written confirmation of the Rating Agencies that such amendment, waiver
or other change will not result in the downgrading or withdrawal of the then
current ratings of the Commercial Paper Notes by the Rating Agencies. If any
such amendment, modification, supplement or waiver shall be so consented to by
the Agent (to the extent required), the Required Liquidity Providers, NFC
agrees, promptly following a request by the Agent or the Liquidity Agent to do
so, to execute and deliver, in its own name and at its own expense, such
agreements, instruments, consents and other documents as any of them may deem
necessary or appropriate in the circumstances. No consent by the Agent or any
other Secured Party to any such amendment, modification, supplement or waiver
shall be deemed to be a determination by the Agent that such amendment,
modification, supplement or waiver will not adversely affect the rights of any
Holder of Commercial Paper Notes.
Upon the occurrence of a Loan Event of Default, the Agent, upon direction
by the Required Liquidity Providers, shall direct NFC to declare that the Loan
Commitments are terminated and, if no Commercial Paper Notes are then
outstanding, the Loan Note immediately due and payable.
SECTION 4.05. Notice of Default. Promptly upon becoming aware thereof, NFC
agrees to give the Liquidity Agent, the Liquidity Lenders, the Support Credit
Enhancers, the Depositary, the Placement Agents, the Dealers, the Agent, the
Master Collateral Agent and each Rating Agency prompt written notice (and in no
case more the-. two days after NFC has actual knowledge thereof) of each default
on the part of National of its obligations under the Loan Agreement or of any
Manufacturer under any Repurchase Program that comes to NFC's attention.
ARTICLE V.
COLLATERAL ACCOUNT, LIQUIDITY LENDER ACCOUNT,
AND CREDIT ENHANCER ACCOUNT
SECTION 5.01. Establishment of Collateral Account. etc. For purposes of the
Liquidity Agreement, the A Support Reimbursement Agreement, the B Support Letter
of Credit Reimbursement Agreement and the Depositary Agreement, the Agent shall
at all times during the term of this Collateral Agreement maintain at a U.S.
branch or agency of Credit Suisse (i) a demand deposit account for the benefit
of the Secured Parties (said account being herein called the "Collateral
Accounts and being identified as Account No. 360821-03), (ii) a demand deposit
account for the benefit of the Secured Parties (said account being herein called
the "Termination Advance Account" and being identified as Account No.
360821-05) and (iii) a demand deposit
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account for the Liquidity Lenders and the Liquidity Agent (said account being
herein called the "Liquidity Lender Account" and being identified as Account
No. 36-0821-02), the operation of each of which shall be governed by this
Article V (the Collateral Account, the Termination Advance Account and the
Liquidity Lender Account are collectively referred to herein as the "Accounts"
); provided, however, if at any time the short-term credit rating of the Agent
from S&P and Moody's shall be reduced below A-1 or P-1, respectively, the Agent
shall, within 30 days of such reduction, convert each of the Accounts to a
segregated trust account in the corporate trust department of a financial
institution.
It is understood and agreed by NFC and the Secured Parties that on any
Business Day there shall be deposited in the Collateral Account the following
monies, instruments, cash and proceeds received by the Agent or NFC at any time
and from time to time: (a) from the Depositary from the sale of Commercial Paper
Notes, (b) from the Master Collateral Agent pursuant to the Master Collateral
Agency Agreement, (c) from National under the Loan Agreement, (d) from the sale
of Vehicles in accordance with Section 4.03(b) hereof, (e) any other proceeds of
the Assigned Collateral, (f) from the Fronting Credit Enhancers as LOC Liquidity
Disbursements, (g) from the Fronting Credit Enhancers as LOC Credit
Disbursements, (h) from the Cash Collateral Accounts pursuant to Section 5.09
and (i) any and all monies at any time and from time to time received on behalf
of NFC, and required by the terms of this Collateral Agreement, the Loan
Agreement, the Master Collateral Agency Agreement, the Repurchase Programs or
any other Related Document to be deposited in the Collateral Account.
It is further understood and agreed by NFC and the Secured Parties that
there shall be deposited in the Termination Advance Account the monies,
instruments, cash and proceeds received by the Agent or NFC at any time and from
time to time from any Liquidity Lender pursuant to Section 3.6.4 of the
Liquidity Agreement.
It is further understood and agreed by NFC and the Secured Parties that
there shall be deposited in the Liquidity Lender Account or the Commercial Paper
Account the following monies, instruments, cash and proceeds received by the
Agent or NFC at any time and from time to time: (a) from any Liquidity Lender
pursuant to Section 3.6.1, 3.6.2 or 3.6.3 of the Liquidity Agreement and (b) any
and all monies at any time and from time to time received on behalf of NFC, and
required by the terms of this Collateral Agreement, the Liquidity Agreement or
any other Related Document to be deposited in the Liquidity Lender Account or
the Commercial Paper Account.
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All monies, instruments, cash and proceeds deposited at any time and from
time to time in any and all of the Accounts and the Cash Collateral Accounts
(other than amounts on deposit in the Cash Collateral Accounts constituting
earnings on investments or interest on withdrawals and any amounts in excess of
the Required Enhancement Amount that are to be released pursuant to Section
5.09(b)) are referred to as "Deposited Funds"; provided that Deposited Funds in
the Cash Collateral Accounts may only be used for the purposes provided in
Section 5.09 and the Deposited Funds in the Termination Advance Account may only
be used to make payments pursuant to clause Second of Section 2.01 or Section
5.02(b)(i) hereof. Subject to Section 5.09, Deposited Funds may, at NFC's
discretion upon NFC's written direction and at NFC's expense, be invested in
Eligible Investments; provided that if an Amortization Event (other than a
Scheduled Amortization Event) or Loan Event of Default shall have occurred and
be continuing or any NFC Obligations then due shall be unpaid, NFC's rights to
invest shall terminate and the Agent shall have the right (but not the
obligation) to invest funds at NFC's expense in Eligible Investments.
In addition, NFC agrees that it will not, and will not permit any Person on
behalf of NFC to, issue Commercial Paper Notes after NFC has received notice
that any of the Accounts, the Cash Collateral Accounts or the Commercial Paper
Account is subject to any stay, writ, judgment, warrant of attachment, execution
or other similar process; provided that if any such writ, order, judgment,
warrant of attachment, execution or other similar process is removed or
dismissed, NFC may recommence issuing, and permitting any Person on behalf of
NFC to issue, Commercial Paper Notes.
SECTION 5.02. Assignment of Accounts. etc. (a) In order to secure and
provide for the repayment and payment of the NFC Obligations, NFC hereby
assigns, pledges, grants, transfers and sets over to the Agent, for the benefit
of the Secured Parties, all of NFC's right, title and interest in and to the
following (whether now or hereafter existing and whether now owned or hereafter
acquired): (I) THE ACCOUNTS AND the Cash Collateral Accounts and all claims of
NFC in and to the Accounts and the Cash Collateral Accounts, (ii) the Deposited
Funds and all claims of NFC in and to the Deposited Funds, (iii) all
certificates and instruments, if any, representing or evidencing any or all of
the Accounts or the Cash Collateral Accounts, (iv) all interest, dividends,
cash, instruments and other property from time to time, received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Accounts or the Cash Collateral Accounts, the Deposited Funds or the Eligible
Investments and all claims of NFC therein and thereto, (v) all Eligible
Investments made at any time and from time to time with the moneys in any and
all of the Accounts or the Cash Collateral
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<PAGE> 22
Accounts and all claims of NFC therein and thereto and (vi) all proceeds of any
and all of the foregoing, including, without limitation, cash. Throughout the
term of this Collateral Agreement, the Agent shall be a pledges in possession of
the Deposited Funds and shall have the sole and exclusive right to withdraw or
order a transfer of Deposited Funds from the Accounts or the Cash Collateral
Accounts subject to the provisions of the next succeeding paragraph, and NFC
hereby appoints the Agent the true and lawful attorney of NFC, with full power
of substitution, for the purpose of making any such withdrawal or ordering any
such transfer of Deposited Funds from any of the Accounts and from the Cash
Collateral Accounts, which appointment is coupled with an interest and is
irrevocable.
(b) So long as no Amortization Event or Loan Event of Default shall have
occurred and then be continuing, NFC, with respect to clauses (ii) and (iv)
through (viii) below, and the Depositary with respect to clause (i) below, and
the Liquidity Agent, on behalf of the Liquidity Lenders, with respect to clause
(iii) below, shall have the right to instruct the Agent to withdraw or allocate
and retain, or order the transfer of, Deposited Funds from any of the Accounts
(subject to the penultimate paragraph of Section 5.01 with respect to the
Termination Advance Account), from time to time as necessary, for the following
purposes in the following priority:
(i) the payment of all Indebtedness, at any time and from time to
time due from NFC to the Holders of the Outstanding Commercial Paper Notes
issued pursuant to and in accordance with the Depositary Agreement;
(ii) the payment of all (a) operating and ordinary course expenses of
NFC up to an aggregate amount equal to $250,000 per annum and (b) fees and
expenses at any time and from time to time due to the Depositary pursuant
to Section 8(a) of the Depositary Agreement or due to the Agent hereunder
to the extent no Borrowing Base Deficiency results;
(iii) the payment of all amounts at any time and from time to time
notified by the Liquidity Agent to the Agent pursuant to Section 3.6.6 of
the Liquidity Agreement;
(iv) first, the payment, pro rata, of all principal Indebtedness
(including Commitment Termination Date Liquidity Advances) at any time and
from time to time due (in the case of a Commitment Termination Date
Liquidity Advance, such Advance will be deemed to be due for purposes of
this Section 5.02(b)(iv) on the date such Advance is made) from NFC (a) to
the Liquidity Lenders in connection with the Liquidity Advances made
pursuant to the Liquidity
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Agreement, (b) to the A Support Credit Enhancer in connection with A Support
Liquidity Disbursements made pursuant to the A Letter of Credit Reimbursement
Agreement, (c) to the Cash Reserve Account in connection with Cash Reserve
Support Liquidity Disbursements made pursuant to the B Letter of Credit
Reimbursement Agreement, (d) to the B Support Credit Enhancers in connection
with B Support LOC Liquidity Disbursements made under the B Support Letters of
Credit and, (e) if applicable, to the Cash Collateral Accounts in connection
with moneys withdrawn from such Accounts to fund any LOC Liquidity
Disbursements, together with all amounts payable in respect of interest on any
of the foregoing; and second, the payment, pro rata, of the NFC Reimbursement
Share of any A Support Termination Disbursement, A Support Event of Default
Disbursement or B Support LOC Termination Disbursement, together with all
amounts payable in respect of interest on any of the foregoing;
(v) to the extent no Borrowing Base Deficiency results therefrom, the
payment, pro rata, of all other Indebtedness (including, but not limited to,
fees, reimbursements, indemnities, taxes and increased costs, but excluding
amounts referenced in clause (vi) below) at any time and from time to time due
and owing to the Liquidity Lenders, the Liquidity Agent, the A Support Credit
Enhancer (solely with respect to amounts due from NFC under the A Support
Reimbursement Agreement), the B Support Credit Enhancers (solely with respect to
amounts due from NFC under the B Support Letter of Credit Reimbursement
Agreement) and the Agent and for the payment, pro rata, of any other amounts
(excluding those referenced in clause (vi) below) at any time and from time to
time due from NFC to any of them under or in respect of the Liquidity Agreement,
the A Support Reimbursement Agreement, the B Support Letters of Credit, the B
Support Letter of Credit Reimbursement Agreement and this Collateral Agreement,
together with all amounts due from NFC in respect of interest thereon, and the
payment, pro rata, of all indemnities at any time and from time to time due from
NFC hereunder to the liquidity Lenders and the Support Credit Enhancers, it
being understood that amounts payable under this clause (v) shall relate
exclusively to costs and expenses incurred in or in connection with this
Collateral Agreement, the procurement and handling of funds and the making of
such funds available to or for the account or benefit of NFC and shall not
include amounts payable in connection with general indemnity claims relating to
the use by NFC, the A Credit Enhancer or the B Credit Enhancers of the proceeds
of such financial accommodations (other than, in the event such actions give
rise to breakage costs, any action in the nature of a prepayment by NFC) or
actions
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taken or omitted to be taken by NFC under the Related Documents and not
directly related to the procurement of funds, all of which shall be covered
by clause (vi) below;
(vi) to the extent no Borrowing Base Deficiency results therefrom, the
repayment, pro rata, of all reasonable amounts advanced or expended by the
Agent, the Liquidity Agent, any Liquidity Lender or the Support Credit
Enhancers hereunder or in connection with the Liquidity Agreement, the A
Support Reimbursement Agreement (solely with respect to amounts due from
NFC thereunder), the B Support Letters of Credit or the B Support Letter of
Credit Reimbursement Agreement (solely with respect to amounts due from NFC
under the B Support Letter of Credit Reimbursement Agreement), as the case
may be, and any other amounts and reasonable out-of-pocket costs and
expenses due from NFC to any Secured Party under or in connection with this
Collateral Agreement, the Liquidity Agreement, the A Support Reimbursement
Agreement (solely with respect to amounts due from NFC thereunder), the B
Support Letters of Credit, the B Support Letter of Credit Reimbursement
Agreement (solely with respect to amounts due from NFC thereunder), the
Depositary Agreement, the Placement Agency Agreement or the Dealer
Agreement whether in respect of indemnities thereunder or otherwise;
(vii) to the extent no Borrowing Base Deficiency results therefrom,
the payment of all other expenses of NFC in excess of the amounts paid
under clause (ii) above;
(viii) the making of new Loans by NFC under the Loan Agreement for the
purchase or financing by National of additional Vehicles of the
Manufacturers; and
(ix) the balance of such Deposited Funds shall be retained in the
appropriate Account and invested pursuant to Section 5.04 in Eligible
Investments.
(c) The Agent shall apply moneys as provided in Section 5.02(b) promptly
upon receipt of written or telephonic instructions from an NFC Agent or, with
respect to clause (b)(i) above, a Depositary Agent, or with respect to clause
(b)(iii) above, the Liquidity Agent. Any telephonic instructions shall be
promptly confirmed in writing. The Agent shall make the required withdrawals and
transfers on the same day provided that it shall have received instructions
prior to 3:00 p.m. (New York City time) on such day. Absent manifest error, the
Agent shall have no responsibility for verifying that moneys being transferred
pursuant to this Section 5.02 are in the proper amounts or that any conditions
to such transfers are complied with. All instructions furnished to the Agent
pursuant to this Section
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5.02(c) or 5.03 shall specify the account to which moneys are to be transferred;
provided that moneys payable to any Liquidity Lender shall be transferred to the
Liquidity Agent for distribution to such Liquidity Lender.
(d) The Agent shall, with the cooperation of the Depositary, the Liquidity
Agent and the Support Credit Enhancers monitor the amount of Commercial Paper
Notes Outstanding, Liquidity Advances Outstanding, Support LOC Liquidity
Disbursements Outstanding and the current Borrowing Base, and determine whether
or not a Borrowing Base Deficiency exists on any Business Day. In this regard,
NFC hereby agrees to provide the Agent, on the twentieth day of each month, a
statement reflecting the Borrowing Base (as of the close of business on the last
day of the immediately preceding Related Month), which statement shall be
certified by the chief financial officer of NFC. NFC shall provide copies of
such monthly statement to each Rating Agency, the Placement Agents and the
Dealers. Upon each occasion that NFC delivers a Borrowing Base Certificate to
the Liquidity Agent in accordance with the Liquidity Agreement, NFC shall
provide a copy of such Certificate to the Agent hereunder. The Agent may
conclusively rely on such certified statement or certificate at all times from
and after the issuance thereof until issuance of a new such certified statement
or certificate, without any obligation on the part of the Agent to confirm the
truth, accuracy or completeness of such certified statement or certificate and
without any obligation on the part of the Agent to undertake any other inquiry
with respect thereto. The Agent may at any time request that NFC, and NFC
thereafter shall, provide the Agent with a statement as to the Borrowing Base
upon each LOC Liquidity Disbursement. Upon each occasion that NFC delivers
information relating to the Borrowing Base to the Depositary in accordance with
Section 3(a) of the Depositary Agreement, NFC shall provide a copy of the notice
containing such information to the Agent hereunder. NFC agrees to notify the
Agent promptly, and in any event within one Business Day, upon its obtaining
knowledge of the existence of any Borrowing Base Deficiency.
(e) The Agent shall from time to time, but at least monthly, provide NFC
with statements of account relating to the Accounts and the Cash Collateral
Accounts in accordance with the Agent's customary practices and in a form
reasonably satisfactory to the Agent and NFC.
(f) Upon the occurrence and during the continuance of an Amortization Event
or a Loan Event of Default, all rights of NFC to request the Agent to withdraw
or order the transfer of Deposited Funds from the Accounts or the Cash
Collateral Accounts shall cease, and the Agent, at the direction (which
direction shall be in writing or by telephone (confirmed in writing
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promptly thereafter)) of the Required Liquidity Providers shall (subject to
Section 7.01 hereof), at any time and from time to time, to appropriate and
apply the Deposited Funds then, or at any time thereafter, on deposit in the
Accounts or the Cash Collateral Accounts to the payment or prepayment in full of
all outstanding NFC Obligations, whether or not then due, in the order of
priority specified in Section 2.01 hereof (or in the case of the Cash Collateral
Accounts, in accordance with Section 5.09). The Agent shall make all payments
with respect to Commercial Paper Notes Outstanding pursuant to clause Second of
Section 2.01 to the Depositary for application to the pro rata payment, in
accordance with their terms and subject to the provisions of the Depositary
Agreement, of the face amount of matured and unmatured Commercial Paper Notes,
whether or not such Commercial Paper Notes have been presented to the Depositary
for payment.
SECTION 5.03. Application of Deposited Funds and Assigned Collateral. For
purposes of determining the payment to be made to any Person of any Assigned
Collateral and Deposited Funds pursuant to Sections 2.01 and 5.02 hereof, the
Agent may rely on certificates or statements furnished to or by it in accordance
with the provisions of this Section 5.03; Provided, however, to the extent that
the Agent has previously received telephonic or written instructions with
respect to determining the payment to be made to any Person of any Assigned
Collateral and Deposited Funds pursuant to Section 5.02(c), the Agent may
conclusively rely on such previously received instructions. For purposes of
determining the application to be made of Deposited Funds and any Assigned
Collateral to any Holder pursuant to clause Second of Section 2.01 and clause
(i) of Section 5,02(b) or to the Depositary pursuant to subclause (b) of clause
Third, clause Eighth of Section 2.01 or Section 5.02 (b)(ii)(b), the Agent may
rely exclusively upon a certificate or other statement (a copy of which shall at
the same time also be provided to NFC) of the Depositary as to the amount then
owing to such Holder. For purposes of determining the application to be made of
Deposited Funds and any assigned collateral to any Liquidity Lender, the
Liquidity Agent, the A Support Credit Enhancer or the L Support Credit
Enhancers, as the case may be, pursuant to clause Fourth, Fifth, Sixth or Eighth
of Section 2.01 hereof (and the corresponding provisions under Section 5.02(b)),
the Agent may rely exclusively upon a certificate or other statement (a copy of
which shall at the same time also be provided to NFC) of the Liquidity Agent
(with respect to amounts owing to it or any Liquidity Lender), an A Support
Credit Enhancer Agent or a Support Credit Enhancer Agent, as the case may be, as
to the amount then owing to any such Liquidity Lender, the Liquidity Agent, or
Support Credit Enhancer, as the case may be. Any application to be made of
Deposited Funds and Assigned Collateral to the Agent pursuant to clause First or
Seventh of Section 2.01
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hereof (and the corresponding provisions under Section 5.02(b)) may be made upon
the Agent's own certificate or statement delivered to NFC, the Liquidity Agent
and the Support Credit Enhancers, setting forth in reasonable detail the nature
of the Agent's claim and the amount owing to the Agent on account thereof. For
purposes of determining the application to be made of Deposited Funds and
Assigned Collateral to NFC pursuant to clause Third or Ninth of Section 2.01 or
the corresponding provisions under Section 5.02(b) hereof or to any Placement
Agent, Dealer or any other Person (other than any party hereto or any Liquidity
Lender) pursuant to clause Eight of Section 2.01 or the corresponding
provisions under Section 5.02(b) hereof, the Agent may rely conclusively upon
a certificate or other statement of NFC as to the amount then owing to NFC or
such other party. The Agent SHALL NOT be liable for any application of the
Deposited Funds in accordance with any certificate or direction delivered
pursuant to this Section 5.03 or 5.02(c); provided, however, that no
application of the Deposited Funds and Assigned Collateral in accordance
with any certificate or statement delivered pursuant to this Section 5.03 or
5.02(c) shall be deemed to restrict or limit the right of the Agent, NFC, the
Support Credit Enhancers, the Liquidity Agent, the Depositary, any Liquidity
Lender, any Placement Agent of any Dealer to contest with the purported obligee
its respective rights in respect of the amount set forth in such certificate or
statement.
SECTION 5.04. Eligible Investments. So long as no Amortization Event (other
than a Scheduled Amortization Event) or Loan Event of Default shall have
occurred and be continuing and all NFC Obligations due and owing by NFC have
been paid, monies held in the Accounts shall be invested daily, and the proceeds
of investments shall be reinvested daily, by the Agent in overnight Eligible
Investments pursuant to the written direction of NFC and, in all other cases,
such monies and proceeds shall be invested daily and reinvested daily by the
Agent in accordance with the direction of the Liquidity Agent. The Agent shall
direct the investment of monies held in the Cash Collateral Accounts in
overnight Eligible Investments (or, Eligible Investments having longer
maturities if (i) the A Support Credit Enhancer has consented thereto in the
case of the Cash Collateral Account A (or National has consented, if the A
Support Credit Enhancer has been fully reimbursed), (ii) the B Support Credit
Enhancers have consented thereto in the case of the Cash Collateral Account B
(or National has consented, if the B Support Credit Enhancers have been fully
reimbursed), (iii) National has consented thereto in the case of the Cash
Collateral Account C and (iv) the Agent shall have received written confirmation
of the Rating Agencies that Eligible Investments having such longer
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maturities will not result in the downgrading or withdrawal of the then current
ratings of the Commercial Paper Notes by the Rating Agencies) at the direction
of the A Support Credit Enhancer with respect to the Cash Collateral Account A
(or National, to the extent of any funds on deposit therein not attributable to
an unreimbursed A Support Termination Disbursement or an unreimbursed A Support
Event of Default Disbursement), the B Support Credit Enhancers with respect to
the Cash Collateral Account B (or National, to the extent of any funds on
deposit therein not attributable to an unreimbursed 8 Support Termination
Disbursement) or National with respect to the Cash Collateral Account C;
Provided, however, that so long as an Amortization Event (other than a Scheduled
Amortization Event) or a Loan Event of Default shall have occurred and be
continuing, the Agent shall direct the investment of such monies (other than
monies as to which the applicable Support Credit Enhancer (or National, if such
Support Credit Enhancer has been fully reimbursed) directs investment pursuant
to Section 2 3 of the A Support Reimbursement Agreement or the B SUPPORT Letter
of Credit Reimbursement Agreement, as applicable) only in accordance with the
direction of the Liquidity Agent. The Agent shall not be responsible or liable
for any loss resulting from the investment performance of any investment or
reinvestment of monies held in the Accounts, the Cash Collateral Accounts or any
other account maintained by the Agent for the purposes of this Collateral
Agreement or in Eligible Investments or from the sale or liquidation of any
Eligible Investments in accordance with this Collateral Agreement. All Eligible
Investments shall be made in the name of, and shall be payable to, the Agent,
and all investment costs and expenses shall be reimbursed to the Agent by NFC.
SECTION 5.05. Credit Demand. (a) On or prior to the Business Day preceding
each Payment Date, NFC shall provide the Agent with a copy of the monthly
statement provided to NFC by National pursuant to Section 9.7(iv) of the Loan
Agreement. The Agent shall be entitled to rely on such monthly statement as
evidence of the amount of payments with respect to Loans due on such Payment
Date. The Agent shall calculate as of 11:00 a.m. (New York City time) on each
Payment Date the Credit Payment Deficit, if any, on such Payment Date.
(b) So long as the A Letter of Credit shall not have been terminated on any
Business Day that a Credit Payment Deficit exists, the Agent shall, by 12:00
noon (New York City time) on the same Business Day, draw on the A Letter of
Credit in an amount equal TO THE LESSER OF (i) such Credit Payment Deficit and
(ii) the full amount available to be drawn under the A Letter of Credit on such
Business Day by presenting a draft accompanied by a Certificate of A Credit
Demand in the form of Annex A to the A Letter of Credit. The Agent shall
promptly notify each Rating
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Agency in writing of the occurrence of any such draw on the A Letter of Credit.
(c) To the extent the Credit Payment Deficit exceeds the A Letter of Credit
Amount and A Liquidity Disbursements are Outstanding, the Agent shall effect an
A Conversion in accordance with the provisions of Section 5.09.
(d) If and only if, on any such Business Day that a Credit Payment Deficit
exists, the amount available to be drawn under the A Letter of Credit and the
amount of an A Conversion is less than such Credit Payment Deficit (such
deficiency is referred to as a "B Credit Draw Amount") and the B Letter of
Credit shall not have been terminated, the Agent shall, by 12:00 noon (New York
City time) on the same Business Day, draw on the B Letter of Credit in an amount
equal to the lesser of (i) such B Credit Draw Amount and (ii) the full amount
available to be drawn under the B Letter of Credit on such Business Day by
presenting a draft accompanied by a Certificate of B Credit Demand in the form
of Annex A to the B Letter of Credit. The Agent shall promptly notify each
Rating Agency in writing of the occurrence of any such draw on the B Letter of
Credit.
SECTION 5.06. Liquidity Demand: Commitment Termination Demand: Reductions.
(a) Upon receipt by the Agent on or prior to 11:15 a.m. (New York City time) of
a written notice from the Depositary notifying the Agent of the existence and
amount of a Commercial Paper Deficit and instructing the Agent to deliver a
Borrowing Request, the Agent shall, by 11:30 a.m. (New York City time) on the
date of such notice (or, in the case of any notice given to the Agent after
11:15 a.m. (New York City time), by 11:30 a.m. (New York City time) on the next
following Business Day), deliver a Borrowing Request in the form of Exhibit C to
the Liquidity Agreement to the Liquidity Agent for a Borrowing in the aggregate
in the amount of such Commercial Paper Deficit; provided that if on the date any
Borrowing Request is to be delivered by the Agent, Deposited Funds are available
in the Termination Advance Account, the Agent shall immediately transfer to the
Commercial Paper Account such Deposited Funds (up to the amount of the relevant
Commercial Paper Deficit) and reduce the amount demanded in the Borrowing
Request by the amount of the Deposited Funds so transferred.
(b) So long as the A Letter of Credit shall not have been terminated, upon
receipt by the Agent on or prior to 11:30 a.m. (New York City time) of a written
notice from the Depositary notifying the Agent of the existence and amount of an
A Liquidity Deficiency and directing the Agent to make a draw under the A Letter
of Credit, the Agent shall, by 12:00 noon (New York City time) on the date of
such notice (or, in the case of any notice given to the Agent after 11:30 a.m.
(New York City time), by
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12:00 noon (New York City time) on the next following Business Day), draw on the
A Letter of Credit in an amount equal to the lesser of (i) such A Liquidity
Deficiency and (ii) the full amount available to be drawn under the A Letter of
Credit on such date by presenting a draft accompanied by a Certificate of A
Liquidity Demand in the form of Annex B to the A Letter of Credit. No such draw
under the A Letter of Credit shall be made unless as of the date of such draw
and after giving effect to all Liquidity Advances made on such date under the
Liquidity Agreement, the Liquidity Agent shall notify the Agent by telephone
(promptly confirmed in writing) that the Aggregate Liquidity Commitment is fully
drawn under the Liquidity Agreement or is not available for reasons other than a
failure to meet conditions precedent.
(c) If and only if, upon receipt by the Agent on any date of the
notice of the existence and amount of an A Liquidity Deficiency as set forth in
Section 5.06(b) above, the amount available to be drawn under the A Letter of
Credit is less than such A Liquidity Deficiency (such deficiency is referred to
as a "B Liquidity Draw Amount") and the B Letter of Credit shall not have been
terminated, the Agent shall, by 11:30 a.m. (New York City time) on such date
(or, in the case of any notice given to the Agent after 11:30 a.m. (New York
City time) on the next following Business Day), draw on the B Letter of Credit
in an amount equal to the lesser of (i) such B Liquidity Draw Amount and (ii)
the full amount available to be drawn under the B Letter of Credit on such date
by presenting a draft accompanied by a Certificate of B Liquidity Demand in the
form of Annex B to the B Letter of Credit. No such draw under the B Letter of
Credit shall be made unless as of the date of such draw and after giving all
Liquidity Advances made on such date under the Agreement, the Liquidity Agent
shall notify the Agent by telephone (promptly confirmed in writing) that the
Aggregate Liquidity Commitment is fully drawn under the Liquidity Agreement or
is not available for reasons other than a failure to meet conditions precedent.
(d) Upon receipt by the Agent on or prior to 11:15 a.m. (New York City
time) of a written notice from NFC directing the Agent to request a Commitment
Termination Date Liquidity Advance from a particular Liquidity Lender, the Agent
shall by 11:30 a.m. (New York City time) on the date of such notice (or, in the
case of any notice given to the Agent after 11:15 a.m. (New York City time), by
11:30 a.m. (New York City time) on the next following Business Day), deliver a
Borrowing Request in the form of Exhibit C to the Liquidity Agreement to the
Liquidity Agent for a Borrowing in the aggregate in the amount of such
Commitment Termination Date Liquidity Advance. NFC agrees to give the Agent
notice of such direction so the Agent's Borrowing Request will be delivered to
the Liquidity Agent not less than three nor more
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than five Business Days' before such Liquidity Lender's Scheduled Liquidity
Commitment Termination Date.
(e) To the extent National and NFC are unable to deliver (or cause the
delivery of) a Reduction Amount Letter of Credit or otherwise provide Reduction
Amount Credit Support in accordance with Section 2.1(c)(ii) of the A Support
Reimbursement Agreement with respect to any Reduction Date, the Agent shall
deliver to the A Credit Enhancer a Certificate of A Reduction Demand two
Business Days prior to such Reduction Date and thereby draw on the A Letter of
Credit in an amount equal to the A Support Reduction Amount and, upon receipt of
an A LOC Reduction Disbursement from the A Credit Enhancer, deposit the proceeds
of such A LOC Reduction Disbursement in the Cash Collateral Account A.
SECTION 5.07. Termination Demand. (a) If prior to the date which is 30
days prior to the then Scheduled A Letter of Credit Expiration Date,
(1) there shall not have been appointed a successor
institution to act as A Credit Enhancer or, in the alternative,
(2) the Loan payments to be made by National shall not have
otherwise been credit enhanced with (A) the funding of the Cash
Collateral Account A with cash in the amount of the A Letter of Credit
Amount, (B) other cash collateral accounts, overcollateralization or
subordinated securities or (C) with the consent of the Majority Banks,
a surety bond or other similar arrangements; provided, however, that
(x) any such successor institution or other form of
substitute credit enhancement referred to in the foregoing
clauses (1) and (2) shall be approved by the Rating Agencies
and
(y) any such successor institution or other form of
substitute credit enhancement referred to in the foregoing
CLAUSES (1) OR (2)(B) shall, if the ratings with respect to
such substitute credit enhancement, if applicable, are less
than A-1 or the equivalent from S&P and P-1 or the equivalent
from Moody's, be approved by the Majority Banks;
then the Agent has the right to make an A Termination Demand under the
A Letter of Credit, one Business Day prior to such Scheduled A Letter
of Credit Expiration Date in an amount equal to the A Letter of Credit
Amount. Upon receipt by the Agent of written notice from a National
Agent or NFC Agent on or prior to 11:30 a.m. (New York City time) to
make an A Termination Demand
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under the A Letter of Credit, the Agent shall (or, if the Agent shall
independently determine the existence of the relevant facts that would have
given rise to the right to making an A Termination Demand, the Agent may, but
shall not be required to), by 12:00 noon (New York City time) on the date of
such notice (or, in the case of any notice given to the Agent after 11:30 a.m.
(New York City time), by 12:00 noon (New York City time) on the next following
Business Day), draw on the A Letter of Credit by presenting a draft accompanied
by an A Certificate of Termination Demand in the form of Annex C to the A Letter
of Credit and shall deposit the proceeds of the A LOC Termination Disbursement
resulting therefrom in a demand deposit account established and maintained by
the Agent with a U.S. branch or agency of Credit Suisse (the "Cash Collateral
Account A"); provided, however, if at any time the short-term credit rating of
the Agent from S&P and Moody's shall be reduced below A-1 or P-1, respectively,
the Agent shall, within 30 days of such reduction, convert the Cash Collateral
Account A to a segregated trust account. The Agent shall promptly notify each
Rating Agency in writing of the occurrence of any such draw on the A Letter of
Credit.
(b) Upon receipt by the Agent of written notice from a National Agent
or NFC Agent on or prior to 11:30 a.m. (New York City time) pursuant to Section
2.1(e) or 2.1(f) of the B Letter of Credit Reimbursement Agreement directing the
Agent to make a draw under the B Letter of Credit, the Agent shall (or, if the
Agent shall independently determine the existence of the relevant facts that
would have given rise to the right to make such B Termination Demand, the Agent
may, but shall not be required to), by 12:00 noon (New York City time) on the
date of such notice (or, in the case of any notice given to the Agent after
11:30 a.m. (New York City time), by 12:00 noon (New York City time) on the next
following Business Day), draw on the B Letter of Credit by presenting a draft
accompanied by a B Certificate of Termination Demand in the form of Annex C to
the B Letter of Credit and shall deposit the proceeds of the B LOC Termination
Disbursement resulting therefrom (i) into a demand deposit account established
and maintained by the Agent with a U.S. branch or agency of Credit Suisse (the
"Cash Collateral Account B") to the extent that such B LOC Termination
Disbursement of the B Credit Enhancer is reimbursable by draws under the B
Support Letters of Credit and (ii) into a demand deposit account established and
maintained by the Agent with a U.S. branch or agency of Credit Suisse (the "Cash
Collateral Account C; together with the Cash Collateral Account A and the Cash
Collateral Account B, the "Cash Collateral Accounts") to the extent that such
B LOC Termination Disbursement of the B Credit Enhancer is reimbursable by
withdrawals from the Cash Reserve Account; provided, however, if at any time the
short-term credit rating of the Agent from S&P and Moody's shall be reduced
below
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A-1 or P-1, respectively, the Agent shall, within 30 days of such reduction,
convert the Cash Collateral Account B and the Cash Collateral Account C to
segregated trust accounts. The Agent shall promptly notify each Rating Agency in
writing of the occurrence of any such draw on the B Letter of Credit.
(c) Upon the payment in full of all obligations under or in respect of
the Commercial Paper Notes and the Liquidity Agreement (in respect of interest,
principal and commitment fees), all Deposited Funds on deposit in the Cash
Collateral Account A shall be paid to the A Support Credit Enhancer or National
(as the A Support Credit Enhancer may direct), in accordance with Section 2.3(g)
of the A Support Reimbursement Agreement.
(d) Upon the payment in full of all obligations under or in respect of
the Commercial Paper Notes and the Liquidity Agreement (in respect of interest,
principal and commitment fees), all Deposited Funds on deposit in the Cash
Collateral Account B shall be paid to B Support Credit Enhancers or National (as
the B Support Credit Enhancers may direct), in accordance with Section 2.3 of
the B Support Letter of Credit Reimbursement Agreement.
(e) Upon the payment in full of all obligations under or in respect of
the Commercial Paper Notes and the Liquidity Agreement (in respect of interest,
principal and commitment fees), all Deposited Funds on deposit in the Cash
Collateral Account C shall be paid to National.
SECTION 5.08. Conversion. If on any Business Day there exists a Credit
Payment Deficit, including after any LOC Termination Disbursement has been made
as provided in Section 5.07(a) or (b) above, and if on such day (i) the amount
of such Credit Payment Deficit exceeds the A Letter of Credit Amount on such
day, and (ii) A Support Liquidity Disbursements are Outstanding, then, such
amount of A Support Liquidity Disbursements shall be reduced, and the amount of
A Support Credit Disbursements Outstanding shall be increased in an aggregate
amount equal to the lesser of (a) the amount by which the Credit Payment Deficit
exceeds the A Letter of Credit Amount (which A Letter of Credit Amount shall, in
any event, be drawn, in accordance with the second and third paragraphs of
Section 5.05, as an A Credit Demand) and (b) the aggregate amount of A Support
Liquidity Disbursements, (such reductions and increases shall be referred to as
an "A Conversion"). To the extent that (i) any Credit Payment Deficit remains
after the A Conversion and (ii) such remaining Credit Payment Deficit exceeds
the remaining amounts on deposit in the Cash Reserve Account; and (iii) Cash
Reserve Support Liquidity Disbursements are Outstanding, then the Cash Reserve
Support Liquidity Disbursements shall be reduced by the amount by which the
remaining Credit Payment Deficit exceeds the amount on deposit in the Cash
Reserve Account and the amount
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of Cash Reserve Support Credit Disbursements shall be increased by such amount
(such reductions and increases shall be referred to as a "Cash Reserve
Conversion"). To the extent that (i) any Credit Payment Deficit remains after
the Cash Reserve Conversion and (ii) such remaining Credit Payment Deficit
exceeds the B Letter of Credit Amount and (iii) B Support LOC Liquidity
Disbursements are Outstanding, then the B Support LOC Liquidity Disbursements
shall be reduced by the amount by which the remaining Credit Payment Deficit
exceeds the B Letter of Credit Amount and the amount of B Support LOC Credit
Disbursements shall be increased by such amount (such reductions and increases
shall be referred to as a "B Conversion", and together with an A Conversion and
a Cash Reserve Conversion, a "Conversion"). On the Business Day any such
Conversion is required, the Agent (as soon as it becomes aware of the same)
shall provide the B Letter of Credit Enhancer with a Notice of Conversion in the
form of Exhibit C to the A Letter of Credit Reimbursement Agreement, the A
Support Credit Enhancer with a Notice of Conversion in the form of Exhibit A to
the A Support Reimbursement Agreement and the B Support Credit Enhancers with a
Notice of Conversion in the form of Exhibit B to the Support Letter of Credit
Reimbursement Agreement, as applicable, in each case, by 1:00 p.m. (New York
City time) on such Business Day; Provided, however, that the failure to furnish
such Notice shall not prevent such Conversion from being affected in accordance
with the preceding sentence.
SECTION 5.09. The Cash Collateral Accounts. (a) When established, the Cash
Collateral Accounts are intended to function in all respects as replacements in
whole or in part for, and the equivalent of all or a portion of, the Fronting
Letters of Credit. Accordingly, following their creation, each herein to "LOC
Liquidity Disbursements", "LOC Credit Disbursements", "Conversion" and similar
terms shall mean and be a reference to actions taken with respect to the Cash
Collateral Accounts that correspond to actions that otherwise would have been
taken with respect to the Fronting Letters of Credit. Without limiting the
generality of the foregoing, upon funding of the Cash Collateral Accounts, the
Agent shall, (i) at all times after the funding of any portion of the Cash
Collateral Account A when otherwise required to make a draw under the A Letter
of Credit pursuant to the second paragraph of Section 5.05 or 5.06(b), first,
make a draw from the Cash Collateral Account A in the amount and at such time as
a draw would be made under the A Letter of Credit pursuant to the second
paragraph of Section 5.05 or 5.06(b), as applicable, and second, make a draw
under the A Letter of Credit and (ii) at all times after the funding of any
portion of the Cash Collateral Account 13 or Cash Collateral Account C when
otherwise required to make a draw under the B Letter of Credit pursuant to the
third paragraph of Section 5.05 or 5.06(c), make a draw, first, from the Cash
Collateral Account C, until such Account is exhausted, second, from the Cash
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Collateral Account B, in each case in the amount and at such time as a draw
would be made under the B Letter of Credit pursuant to the third paragraph of
Section 5.05 or 5.06(c), as applicable and third, make a draw under the Letter
of Credit. In addition, when a Conversion is required to occur pursuant to
Section 5.06, a Conversion shall occur in respect of drawings made on the Cash
Collateral Accounts pursuant to Section 5.06(b) or (c). The Agent shall provide
written notice to National, each Rating Agency and the Support Credit Enhancers
of any draw from the Cash Collateral Accounts pursuant to Section 5.05. The Cash
Collateral Account A shall be reimbursed in the amount that would have been paid
to the A Support Credit Enhancer in respect of A Support Liquidity Disbursements
under Section 2.01 and 5.02(b). The Cash Collateral Account B shall be
reimbursed in the amount that would have been paid to the B Support Credit
Enhancers in respect of B Support LOC Liquidity Disbursements under Section 2.01
and 5.02(b). The Cash Collateral Account C shall be reimbursed in the amount
that would have been paid to the Cash Reserve Account in respect of Cash Reserve
Support Liquidity Disbursements under Section 2.01 and 5.02 (b). The Cash
Collateral Accounts shall be reimbursed for any withdrawals made pursuant to
Section 5.05 in the following order of priority: first, the Cash Collateral
Account B shall be reimbursed, second, the Cash Collateral Account C shall be
reimbursed, and third, the Cash Collateral Account A shall be reimbursed. If,
following the occurrence of an Event of Bankruptcy with respect to National, NFC
or any of the Fronting Credit Enhancers, remittance of any amount under clause
Fifth of Section 2.01 or under clause (iv) of Section 5.02(b) in respect of any
Support Liquidity Disbursement (whether such Support Liquidity Disbursement
shall have arisen due to a draw under either of the Fronting Letters of Credit
or from the Cash Collateral Accounts) would not, following application thereof,
immediately reinstate the Fronting Letters of Credit or the Cash Collateral
Accounts to the full extent of the portion of such payment that is in respect of
principal, no remittance shall be made in respect of the principal amount of
such Support Liquidity Disbursement and funds otherwise available for such
purpose shall be remitted, to the extent permitted by law, to the Liquidity
Lenders for ratable application against the principal amount of Liquidity
Advances then outstanding. Any notice required to have been given to the Support
Credit Enhancers shall continue to be given until such time as the Support
Credit Enhancers are reimbursed in full.
(b) Amounts on deposit from time to time in the Cash Collateral
Accounts shall be invested upon written direction in overnight Eligible
Investments (or, Eligible Investments having longer maturities if (i) the A
Support Credit Enhancer has consented thereto in the case of the Cash Collateral
Account A (or National has consented, if the A Support Credit Enhancer has been
fully reimbursed), (ii) the B Support Credit Enhancers have
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consented thereto in the case of the Cash Collateral Account B (or National has
consented, if the B Support Credit Enhancers have been fully reimbursed), (iii)
National has consented thereto in the case of the Cash Collateral Account C and
(iv) the Agent shall have received written confirmation of the Rating Agencies
that Eligible Investments having such longer maturities will not result in the
downgrading or withdrawal of the then current ratings of the Commercial Paper
Notes by the Rating Agencies) in accordance with Section 5.04 hereof, as
directed by the A Support Credit Enhancer with respect to the Cash Collateral
Account A (or National, to the extent of any funds on deposit therein not
attributable to an unreimbursed A Support Termination Disbursement or an
unreimbursed A Support Event of Default Disbursement, the B Support Credit
Enhancers with respect to the Cash Collateral Account B (or National, to the
extent of funds on deposit therein not attributable to an unreimbursed B Support
Termination Disbursement) or National with respect to the Cash Collateral
Account C, and the earnings on such Eligible Investments and interest paid on
withdrawals shall be paid to the A Support Credit Enhancer with respect to the
Cash Collateral Account A, the B Support Credit Enhancers with respect to the
Cash Collateral Account B or National with respect to the Cash Collateral
Account C or, if the applicable Support Credit Enhancer has been reimbursed in
full of all obligations owing to it by NFC and National in respect of the
applicable Cash Collateral Account, to National or NFC (as directed by the
applicable Support Credit Enhancer), in accordance with Section 2.3 of the A
Support Reimbursement Agreement or the B Support Letter of Credit Reimbursement
Agreement, as applicable. Such interest and earnings are not Deposited Funds and
shall not be considered on deposit in the Cash Collateral Accounts. To the
extent the amount on deposit in the Cash Collateral Accounts (other than such
interest and earnings) is in excess of the Required Enhancement Amount (as such
Required Enhancement Amount is notified to the Agent by the Liquidity Agent from
time to time), such excess shall be released in the following order of priority:
first, to the Support Credit Enhancers to be applied in accordance with
Section 2.3(e) of the B Support Letter of Credit Reimbursement Agreement;
second, to National to reimburse National for the amount withdrawn for the Cash
Reserve Account as a Cash Reserve Support Termination Disbursement; third, to
the A Support Credit Enhancer to be applied in accordance with Section 2.3(e) of
the A Support Reimbursement Agreement; and fourth, to National.
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ARTICLE VI.
DEFAULT
SECTION 6.01. Rights of the Agent upon Amortization Event, Loan Event
of Default and Event of Default. (a) (i) Only if and whenever an Amortization
Event or Loan Event of Default shall have occurred and be continuing, the Agent,
at the direction (which direction shall be in writing or by telephone (confirmed
in writing promptly thereafter) specifying the action to be taken) of the
Required Liquidity Providers shall, from time to time, withdraw amounts in the
Accounts or the Cash Collateral Accounts for application as provided in Section
5.02(f) and (ii) only if and whenever an Amortization Event (other than a
Scheduled Amortization Event) or Loan Event of Default shall have occurred and
be continuing, the Agent, at the direction (which direction shall be in writing
or by telephone (confirmed in writing promptly thereafter) specifying the action
to be taken) of the Required Liquidity Providers may also exercise from time to
time any rights and remedies available to it under applicable law or any Related
Document. NFC agrees to enforce any rights it may have under the Related
Documents at the direction of the Agent. Any amounts obtained by the Agent on
account of or as a result of the exercise by the Agent of any right with respect
to any funds at any time and from time to time on deposit in, or otherwise to
the credit of, any of the Accounts, shall be held by the Agent as additional
collateral for the repayment of the NFC Obligations and shall be applied as
provided in Section 2.01 hereof. The Agent agrees to undertake the actions set
forth with respect to the Agent in Section 9.2 of the Liquidity Agreement.
(b) If a Liquidation Event of Default shall have occurred and be
continuing, the Agent, at the direction (which direction shall be in writing or
by telephone (confirmed in writing promptly thereafter) specifying the actions
to be taken) of the Majority Banks and the B Support Credit Enhancers, and upon
receipt of indemnity from the Liquidity Lenders and the B Support Credit
Enhancers reasonably satisfactory to it, shall direct NFC and the Master
Collateral Agent to exercise all rights, remedies, powers, privileges and claims
of NFC and (with respect to the Master Collateral for which the Agent is
designated as a Beneficiary) the Master Collateral Agent against National under
or in connection with the Loan Agreement and the Master Collateral Agency
Agreement and any party to any of the Related Documents, including the right or
power to take any action to compel performance or observance by National or any
such party of its obligations to NFC and the Master Collateral Agent, the right
to take possession of any of the Vehicles, and to give any consent, request,
notice, direction, approval, extension or waiver in respect of the Loan
Agreement, and any right of NFC to take such action shall be suspended. If NFC
shall have failed,
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within 15 Business Days of receiving the directions of the Agent, to accomplish
such directed actions, the Agent may but shall not be obligated to take such
previously directed actions (and any related action, as it would be permitted to
direct NFC to take pursuant to the previous sentence, thereafter determined by
the Agent to be appropriate without the need under this provision or any other
provision hereunder to direct NFC to take such action) on behalf of NFC and the
Secured Parties.
(c) If a Liquidation Event of Default shall have occurred and be
continuing, the Agent may and, at the direction (which direction shall be in
writing or by telephone (confirmed in writing promptly thereafter) specifying
the action to be taken) of the Majority Banks and the B Support Credit
Enhancers, and upon receipt of indemnity satisfactory to it, shall direct NFC
and the Master Collateral Agent to exercise all rights, remedies, powers,
privileges and claims of National, the Master Collateral Agent and NFC against
the Manufacturers under or in connection with the Repurchase Programs. Upon the
occurrence of a Liquidation Event of Default, the Majority Banks and the B
Support Credit Enhancers may direct the Agent to instruct the Master Collateral
Agent to return, or cause National to return, the Vehicles to the related
Manufacturers and then, to the extent any Manufacturer fails to accept any such
Vehicles under the terms of the applicable Repurchase Program, to cause the
Master Collateral Agent to liquidate the Vehicles in accordance with the rights
of NFC and the Secured Parties under the Loan Agreement and the Master
Collateral Agency Agreement. In the event of a Liquidation Event of Default, the
Agent, NFC, the Master Collateral Agent and National shall be deemed to have
been directed to return each Vehicle to the related Manufacturer under the
related Repurchase Program at the end of the minimum holding period (if any) for
such Vehicle under the related Repurchase Program, unless the Majority Banks and
the B Support Credit Enhancers specifically waive such direction in writing.
SECTION 6.02. Special Provisions Concerning Remedies and Sale If
Manufacturer Default or Inability to Turn Back under Repurchase Program. (a)
Upon the occurrence of a Liquidation Event of Default in conjunction with a
Manufacturer Ineligibility Event or the termination of a Repurchase Program, the
Agent shall have the right to direct the Master Collateral Agent to sell any or
all of the Vehicles covered by the related Repurchase Program of such
Manufacturer consistent with the provisions of Section 4.03(b) hereof. In
connection therewith the Agent shall have the right to substitute itself or any
nominee or agent in lieu of NFC as party to any of the NFC Agreements. The Agent
may direct the Master Collateral Agent to take legal proceedings for the
appointment of a receiver or receivers (to which the Agent shall be entitled as
a matter of right) to take possession of the Vehicles pending the sale thereof
pursuant either to the powers
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of sale granted by the Master Collateral Agency Agreement or this Collateral
Agreement or to a judgment, order or decree made in any judicial proceeding for
the foreclosure or involving the enforcement of the Master Collateral Agency
Agreement or this Collateral Agreement. After termination of this Collateral
Agreement and the payment in full of the NFC Obligations, any proceeds of all
the Assigned Collateral received or held by the Agent shall be turned over to
NFC and the Assigned Collateral shall be reassigned to NFC by the Agent without
recourse to the Agent and without any representations, warranties or agreements
of any kind. The Agent shall execute such documents and instruments as NFC may
reasonably request in connection with such reassignment.
(b) Upon any sale of any of the Assigned Collateral directly by the
Agent or the Master Collateral Agent, whether made under the power of sale given
under Section 4.03(b) or 6.02(a) hereof, under the Master Collateral Agency
Agreement, or under judgment, order or decree in any judicial proceeding for the
foreclosure or involving the enforcement of this Collateral Agreement or the
Master Collateral Agency Agreement: (i) the Agent, any Liquidity Lender and/or
any of the Support Credit Enhancers may bid for and purchase the property being
sold, and upon compliance with the terms of sale may hold, retain and possess
and dispose of such property in its own absolute right without further
accountability; (ii) the Agent or the Master Collateral Agent pursuant to the
Master Collateral Agency Agreement may make and deliver to the purchaser or
purchasers a good and sufficient deed, bill of sale and instrument of assignment
and transfer of the property sold; (iii) the Agent is hereby irrevocably
appointed the true and lawful attorney-in-fact of NFC in its name and stead, to
make all necessary deeds, bills of sale, releases and instruments of assignment
and transfer of the property thus sold and for such other purposes as are
necessary or desirable to effectuate the provisions (including, without
limitation, this Section 6.02) of this Collateral Agreement, and for that
purpose it may execute and deliver all necessary deeds, bills of sale, releases
and instruments of assignment and transfer, and may substitute one or more
Persons with like power (including the Master Collateral Agent), NFC hereby
ratifying and confirming all that its said attorney, or such substitute or
substitutes, shall lawfully do by virtue hereof; but if so requested by the
Agent or by any purchaser, NFC shall ratify and confirm any such sale or
transfer by executing and delivering to the Agent or to such purchaser all
property, deeds, bills of sale, instruments of assignment and transfer and
releases as may be designated in any such request; (iv) all right, title,
interest, claim and demand whatsoever, either at law or in equity or otherwise,
of NFC in and to the property so sold shall be divested; and such sale shall be
a perpetual bar both at law and in equity against NFC, its successors and
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assigns, and against any and all Persons claiming or who may claim the property
sold or any part thereof from, through or under NFC, its successors or assigns;
(v) the receipt of the Agent or of the officer thereof making such sale shall be
a sufficient discharge to the purchaser or purchasers at such sale for his or
their purchase money, and such purchaser or purchasers, and his or their assigns
or personal representatives, shall not, after paying such purchase money and
receiving such receipt of the Agent or of such officer therefor, be obliged to
see to the application of such purchase money or be in any way answerable for
any loss, misapplication or non-application thereof; and (vi) to the extent that
it may lawfully do so, NFC agrees that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any appraisal, valuation, stay, extension or redemption laws, or any law
permitting it to direct the order in which the Vehicles shall be sold, now or at
any time hereafter in force, which may delay, prevent or otherwise affect the
performance or enforcement of this Collateral Agreement.
(c) In addition to any rights and remedies now or hereafter granted
hereunder or under applicable law with respect to the Assigned Collateral, the
Agent shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code as enacted in any applicable jurisdiction.
ARTICLE VII.
THE AGENT, THE LIQUIDITY LENDERS,
THE SUPPORT CREDIT ENHANCERS AND THE HOLDERS
OF COMMERCIAL PAPER NOTES
SECTION 7.01. Appointment and Powers of Agent. The Secured Parties
hereby appoint the Agent their agent hereunder, and hereby authorize the Agent
to take such action on their behalf and to exercise such rights, remedies,
powers and privileges hereunder as are specifically authorized to be exercised
by the Agent by the terms hereof, together with such rights, remedies, powers
and privileges as are reasonably incidental thereto. NFC has appointed the Agent
its "Beneficiary" under and for the purposes of the Master Collateral Agency
Agreement. The parties hereto agree that the Agent shall not be required to
exercise any discretion or take any action or refrain from taking any action in
its capacity as Beneficiary for the Secured Parties and NFC, but shall only be
required to act or refrain from acting in such capacity (and shall be fully
protected in so acting or refraining from acting) upon the instruction of the
Required Liquidity Providers or NFC, as the case may be, as provided herein. The
Agent may execute any of its duties as agent hereunder by or through agents or
employees and shall be entitled to retain
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experts and to act in reliance upon the advice of such experts concerning all
matters pertaining to the agencies hereby created and its duties hereunder, and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such experts selected by it. The
relationship between the Agent, and each of the Secured Parties is that of agent
and principal only, and nothing herein shall be deemed to constitute the Agent a
trustee for any of the Secured Parties or impose on the Agent any obligations
other than those for which express provision is made herein.
If the Agent receives unclear or conflicting instructions, it shall be
entitled to refrain from taking action until clear or non-conflicting
instructions are received, but shall inform the instructing party or parties
promptly of its decision to refrain from taking such action. Except as required
by the specific terms of this Collateral Agreement, the Agent shall have no duty
to exercise any rights, power, remedy or privilege granted to it hereby, or to
take any affirmative action hereunder or thereunder, unless directed to do so by
the Required Liquidity Providers (and shall be fully protected in acting or
refraining from acting pursuant to such directions which shall be binding on the
Secured Parties), and shall not, without the prior approval of the Required
Liquidity Providers, waive any default on the part of NFC, National or the
Manufacturers with respect to the Assigned Collateral or amend, modify,
supplement or terminate, or agree to any surrender of, this Collateral Agreement
or the Assigned Collateral. Notwithstanding anything herein to the contrary, the
Agent shall not be required to take any action which the Agent has reasonably
determined that a reasonable likelihood exists that such action will expose the
Agent to personal or financial liability, unless indemnified to its
satisfaction, or which is contrary to this Collateral Agreement, or any other
agreement or instrument relating to the Assigned Collateral or applicable law.
None of the Secured Parties nor any of its or their respective
directors, officers, employees or agents, shall be liable to any Secured Party
or any other Person for any action taken or omitted to be taken by it or them
hereunder, or in connection herewith, except for its or their own gross
negligence or willful misconduct; nor (except for its own due execution and
delivery thereof) shall the Agent be responsible to any Secured Party for the
validity, effectiveness, value, sufficiency or enforceability against National
or NFC of this Collateral Agreement or any other document furnished pursuant
hereto or in connection herewith (including the Master Collateral Agency
Agreement), or of the Assigned Collateral (or any part thereof), the Eligible
Investments (or any part thereof) or the Deposited Funds (or any part thereof).
Without limiting the generality of the foregoing, the Agent: (i) makes no
warranty or
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representation to any Secured Party and shall not be responsible to any Secured
Party for any statements, warranties or representations made by any other Person
in or in connection with this Collateral Agreement, the Loan Agreement, the
Repurchase Programs, the Liquidity Agreement, the Master Collateral Agency
Agreement, the A Support Reimbursement Agreement, the B Support Letter of Credit
Reimbursement Agreement or any other document relating to the Assigned
Collateral; and (ii) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of
this Collateral Agreement, the A Support Reimbursement Agreement, the B Support
Letter of Credit Reimbursement Agreement, the Loan Agreement, the Repurchase
Programs, the Liquidity Agreement, the Master Collateral Agency Agreement or any
other agreements or instruments relating to the Assigned Collateral on the part
of any party hereto or thereto or to inspect any books and records relating to
the Assigned Collateral other than as it determines necessary in the fulfillment
of its own obligations hereunder.
The Agent shall be entitled to rely on any communication, instrument,
paper or other document reasonably believed by it to be genuine and correct and
to have been given, signed or sent by the proper Person or Persons. The Agent
shall be entitled to assume that no Amortization Event or Loan Event of Default
shall have occurred and be continuing and that the Accounts, and any funds on
deposit in or to the credit of such Accounts, are not subject to any writ,
order, judgment, warrant of attachment, execution or similar process
(collectively a "writ"), unless (i) in the case of any writ, an officer in the
asset finance department of the Agent has actual knowledge thereof or (ii) the
Agent has received written notice from the Liquidity Agent or National under the
Loan Agreement or any of the B Support Credit Enhancers that the Majority Banks
or the B Support Credit Enhancers, as the case may be, consider that such an
Amortization Event or Loan Event of Default has occurred or such writ has been
issued and continues to be in effect, which notice specifies the nature thereof.
The Agent may accept deposits from, lend money to and generally engage in any
kind of business with NFC, any Manufacturer, National and their respective
affiliates as if it were not the agent of the Liquidity Lenders, the Support
Credit Enhancers and the Holders of Commercial Paper Notes. The Agent shall have
the right to refrain from taking any action under Article VI hereof unless it
has received written directions from the appropriate parties to take such
action.
SECTION 7.02. Agents and Employees of the Agent. (a) Each Liquidity
Lender hereby agrees, in accordance with its pro rata percentage of the sum of
the Aggregate Liquidity Commitment under the Liquidity Agreement, and each of
the Support Credit Enhancers agrees, subject to the limitations set forth in
this clause (a), to indemnify and hold harmless the Agent (to the extent not
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reimbursed by NFC), from and against any and all losses (other than the Agent's
loss of profit), liabilities (including, liabilities for penalties), actions,
suits, judgments, demands, damages, out-of-pocket costs and expenses of any kind
whatsoever (including, without limitation, reasonable fees and expenses of
counsel and other experts) incurred or suffered by the Agent in its capacity as
agent hereunder (including as Beneficiary under the Master Collateral Agency
Agreement) as a result of any action taken or omitted to be taken by the Agent
in such capacity or otherwise incurred or suffered by, made upon, or assessed
against the Agent in such capacity to the extent not reimbursed by NFC or by
application of the Assigned Collateral; provided that neither the Support Credit
Enhancers nor any Liquidity Lender shall be liable for any portion of any such
losses, liabilities, actions, suits, judgments, demands, costs or expenses
resulting from or attributable to gross negligence or willful misconduct on the
part of the Agent or its agents or employees. Without limiting the generality of
the foregoing, each Liquidity Lender hereby agrees, in the ratio aforesaid, and
each of the Support Credit Enhancers agrees to reimburse the Agent promptly
following its demand for any out-of-pocket expenses (including, without
limitation, reasonable fees and expenses of counsel) incurred by the Agent
hereunder and not promptly reimbursed to the Agent by NFC or by application of
the Assigned Collateral. The obligations of each Liquidity Lender and the
Support Credit Enhancers under this paragraph shall survive the termination of
this Collateral Agreement, the Liquidity Agreement, the A Support Reimbursement
Agreement and the B Support Letter of Credit Reimbursement Agreement,
respectively, and the discharge of NFC's obligations thereunder. The aggregate
liability of the Liquidity Lenders hereunder for any claim shall be limited to a
percentage of the indemnity owing equal to the percentage that the Aggregate
Liquidity Commitment are of the Program Size minus the initial amount on deposit
in the Cash Reserve Account and the liability of each Support Credit Enhancer
shall be limited to a percentage of the indemnity owing equal to the percentage
that its Letter of Credit Enhancer Commitment is of the Program Size minus the
initial amount on deposit in the Cash Reserve Account. If at any time, following
its demand therefor, the Agent shall not be reimbursed by NFC or by the
Liquidity Lenders and the Support Credit Enhancers, the Agent is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all amounts at any time held by the Agent for
the benefit of the Liquidity Lenders or the Support Credit Enhancers, including
without limitation any such amounts designated for disbursement to the Liquidity
Lenders and/or the Support Credit Enhancers in accordance with Section 2.01 or
Section 5.02(b), against any and all of the obligations of the Liquidity Lenders
and the Support Credit Enhancers to the Agent now or hereafter existing under
this Collateral Agreement. The Agent agrees promptly to notify each Liquidity
Lender and the
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Support Credit Enhancers after any such set-off and application made by the
Agent, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Agent under this
Section are in addition to other rights and remedies which the Agent may have.
Any such set-off against amounts owed to Liquidity Lenders by the Agent shall
not cause a payment default of NFC on amounts due to such Liquidity Lenders to
the extent funds are available in the Accounts to be allocated to the payment of
all amounts due to the Liquidity Lenders in accordance with Section 2.01 or 5.02
(b), as applicable.
(b) No provision of this Collateral Agreement shall require the Agent
to expend or risk its own funds or otherwise incur any financial or other
liability in the performance of any duties hereunder or in the exercise of any
rights and powers hereunder.
(c) Any action or proceeding alleging any breach by the Agent of
duties under this Collateral Agreement shall be prosecuted only in the courts of
the State of New York or in the United States District Court for the Southern
District of New York. The Agent shall have the right at any time to seek
instructions from any court of competent jurisdiction. The Agent may rely on the
advice of counsel and shall be held harmless for actions taken in reliance
thereon.
(d) The Agent makes no representation as to, and shall have no
responsibility for, the correctness of any statement contained in, or the
validity or sufficiency of, this Collateral Agreement or any documents or
instruments referred to in this Collateral Agreement or the sufficiency or
effectiveness of any collateral assigned by this Collateral Agreement or as to
or for the validity or collectibility of any obligation contemplated by this
Collateral Agreement. The Agent shall not be accountable for the use or
application by any person of disbursements properly made by the Agent in
conformity with the provisions of this Collateral Agreement.
(e) The Agent may exercise any of its duties hereunder by or through
agents or employees. The possession of the Assigned Collateral by such agents or
employees shall be deemed to be the possession of the Agent.
(f) The provisions of this Section 7.02 shall survive the termination
of this Collateral Agreement or the resignation of the Agent hereunder.
SECTION 7.03. Waiver of Jury Trial. EACH OF THE PARTIES HERETO
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH,
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THIS COLLATERAL AGREEMENT OR ANY OTHER RELATED DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE PARTIES HERETO IN CONNECTION HEREWITH OR THEREWITH. EACH OF THE PARTIES
HERETO ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER RELATED
DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES HERETO ENTERING INTO THIS COLLATERAL AGREEMENT AND
EACH OTHER RELATED DOCUMENT.
SECTION 7.04. Successor Agent. The Agent acting hereunder at any time
may resign by an instrument in writing addressed and delivered, 60 days prior to
the effectiveness of such resignation, to each Liquidity Lender, the Liquidity
Agent, the Support Credit Enhancers, the Placement Agents, the Dealers, NFC,
each Rating Agency and the Depositary, and may be removed at any time with or
without cause by an instrument in writing duly executed by or on behalf of the
Required Liquidity Providers with written notice to each of the Rating Agencies.
Subject to the provisions hereof, the Required Liquidity Providers shall
appoint, subject to the written consent of NFC (which consent shall not be
unreasonably withheld), a successor to the Agent upon any such resignation or
removal, by an instrument of substitution complying with the requirements of
applicable law, or, in the absence of any such requirements, without any
formality other than appointment and designation in writing. Upon the making and
acceptance of such appointment, the execution and delivery by such successor
Agent of a ratifying instrument pursuant to which such successor Agent agrees to
assume the duties and obligations imposed on the Agent by the terms of this
Collateral Agreement, and the delivery to such successor Agent of the Assigned
Collateral, the Deposited Funds and documents and instruments then held by the
retiring Agent, such successor Agent shall thereupon succeed to and become
vested with all the estate, rights, powers, remedies, privileges, immunities,
indemnities, duties and obligations hereby granted to or conferred or imposed
upon the retiring Agent named herein, and one such appointment and designation
shall not exhaust the right to appoint and designate further successor Agents
hereunder. No removal or resignation of the Agent shall be effective unless and
until a successor Agent has been duly appointed, and the appointment of such
successor Agent has been accepted by such successor Agent. No Agent shall be
discharged from its duties or obligations hereunder until the Assigned
Collateral, the Deposited Funds and documents and instruments then held by such
retiring Agent shall have been transferred or delivered to the successor Agent
in its capacity as bank or trust company, until all Deposited Funds held in the
Accounts and the Cash Collateral Accounts maintained with or in the name of the
retiring Agent shall have been transferred to the new Collateral Account and
until such retiring Agent shall have executed and delivered to the successor
Agent appropriate
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<PAGE> 46
instruments substituting such successor Agent as Beneficiary of NFC for purposes
of the Master Collateral Agency Agreement and assigning the retiring Agent's
interest in the Assigned Collateral, the Accounts, the Cash Collateral Accounts,
the Deposited Funds and Eligible Investments to the successor Agent. If no
successor Agent shall be appointed, as aforesaid, or, if appointed, shall not
have accepted its appointment, within 30 days after notice of resignation or
removal of the retiring Agent, then, subject to the provisions hereof, the
retiring Agent may appoint a successor Agent with the written consent of the
Liquidity Agent, the Support Credit Enhancers and (so long as no Amortization
Event (other than a Scheduled Amortization Event) or Loan Event of Default then
exists) NFC, which consent shall not be unreasonably withheld. Each such
successor Agent shall provide NFC, each Liquidity Lender, the Liquidity Agent,
the Depositary and the Support Credit Enhancers with its address, and telephone,
telecopy, telex, E-Mail (if applicable) and two numbers, to be used for purposes
of Section 9.04 hereof, in a notice complying with the terms of said Section.
Notwithstanding the resignation or removal of any Agent hereunder, the
provisions of this Article VII shall continue to inure to the benefit of such
retiring Agent in respect of any action taken or omitted to be taken by such
retiring Agent in its capacity as such while it was Agent under this Collateral
Agreement. NFC shall provide prompt notice to each Rating Agency of the
appointment of a successor Agent.
SECTION 7.05. Qualifications of Agent. Any Agent at any time acting
hereunder must at all times be (i) the corporate trust department of a bank or
trust company having its principal office in the District of Columbia or one of
the states located in the United States, or (ii) a bank or trust company having
its principal office in the District of Columbia or one of the states located in
the United States, authorized to accept deposits, or a branch office or agency
of a foreign bank located in the District of Columbia or one of the states of
the United States, in each case having short-term ratings from Moody's and S&P
at least equal to the rating such Rating Agency then assigns to the Commercial
Paper Notes.
SECTION 7.06. Instructions of the Required Liquidity Providers and
Other Parties. In any instance in which the Agent is permitted to take action
hereunder, the Agent shall, except as expressly provided herein or in the
Liquidity Agreement, act in accordance with the written instructions received,
if any, from the Required Liquidity Providers. Without limitation of the
foregoing, the Agent is authorized to give instructions to the Master Collateral
Agent under the Master Collateral Agency Agreement with respect to release of
any funds (for which the Agent is a Beneficiary) upon the direction of the
Required Liquidity Providers. All instructions and notices from the
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<PAGE> 47
Required Liquidity Providers shall be submitted to the Agent through the
Liquidity Agent and the Support Credit Enhancer Agents. All instructions
hereunder required to be given by the Majority Banks and the B Support Credit
Enhancers shall be submitted to the Agent through the Liquidity Agent and the B
Support Credit Enhancer Agents.
ARTICLE VIII.
AMENDMENTS, MODIFICATIONS, WAIVERS AND CONSENTS
SECTION 8.01. Execution of Amendments, etc. No amendment, modification,
supplement, termination or waiver of or to any provision of this Collateral
Agreement or the defined terms used herein and set forth in the Definitions
List, nor any consent to any departure by NFC from any provision of this
Collateral Agreement, shall be effective unless the same shall be in writing and
signed on behalf of the Agent, the Liquidity Agent on behalf of the Majority
Banks, the Depositary, the B Support Credit Enhancers, the A Support Credit
Enhancer and NFC; provided, however, that (i) the written consent of all
Liquidity Lenders and the Support Credit Enhancers shall be necessary to the
extent that any such amendment, modification, supplement, termination, waiver or
consent (a) releases the assignment given hereunder in respect of any of the
Assigned Collateral or (b) affects this Section 8.01 or Section 2.01 or 5.02 and
(ii) such amendment, modification, supplement, termination or waiver shall not
result in the downgrading or the withdrawal of the then current ratings of the
Commercial Paper Notes provided by the Rating Agencies as evidenced by written
confirmation from the Rating Agencies. Any waiver of any provision of this
Collateral Agreement, and any consent to any departure by NFC from the terms of
any provision of this Collateral Agreement, shall be effective only in the
specific instance and for the specific purpose for which given. No notice to or
demand upon NFC in any instance hereunder shall entitle NFC to any other or
further notice or demand in similar or other circumstances.
Notwithstanding the foregoing provisions of this Section 8.01, NFC, the
Liquidity Agent, the Agent and the Support Credit Enhancers may, at any time and
from time to time, without the consent of the other Secured Parties, enter into
any amendment, supplement or other modification to this Agreement to cure any
apparent ambiguity or to correct or supplement any provision in this Agreement
that may be inconsistent with any other provision herein; provided, however,
that (i) any such action shall not have a materially adverse effect on the
interests of the Liquidity Lenders and (ii) a copy of any such amendment,
supplement or other modification is furnished the
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<PAGE> 48
other Secured Parties, in accordance with the notice provisions hereof not later
than ten days prior to the execution thereof.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. Further Assurances. NFC (i) from time to time, at its
expense, will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary, as reasonably
requested by the Agent, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Agent to exercise and
enforce its rights and remedies hereunder with respect to any Assigned
Collateral, including without limitation, the execution of financing or
continuation statements, or amendments thereto and (ii) hereby authorizes the
Agent to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Assigned Collateral without the
signature of NFC, where permitted by law. A carbon photographic or other
reproduction of this Assigned Collateral Agreement or any financing statement
covering the Assigned Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
SECTION 9.02. No Waiver; Cumulative Remedies. No failure on the part of
the Agent to exercise, and no delay on the part of the Agent in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy by the Agent
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies that may be available to the Agent, whether at
law, in equity or otherwise.
SECTION 9.03. Notice of Amendments; Waivers; Notice of LIBOR. Notice of
any amendment, waiver or other change of the terms of the Assigned Collateral
(including, without limitation any model year changes in any Repurchase Program)
shall be sent by NFC, promptly upon becoming aware thereof, to each Rating
Agency which shall be required to confirm their ratings on the Commercial Paper
Notes prior to the effectiveness thereof.
SECTION 9.04. Notices, etc. Except where telephonic instructions or
notices are authorized herein to be given, all notices, demands, directions,
instructions and other communications required or permitted to be given to any
party hereto shall be in writing and addressed, delivered or transmitted to such
party at its address or facsimile number set
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forth below, or at any other address or facsimile number, as the case may be, as
such party may notify to the other parties hereto in accordance with the
provisions of this Section 9.04; provided, however, all monthly statements
provided for in Section 5.02(c) hereof shall be sent by first class mail. Any
notice, if mailed and properly addressed with postage prepaid or if properly
addressed and sent by pre-paid courier service, shall be deemed given when
received; any notice, if transmitted by facsimile, shall be deemed given when
transmitted upon receipt of electronic confirmation of transmission.
If to NFC:
National Fleet Funding Corporation
7700 France Avenue South
Minneapolis, Minnesota 55435
Attention: Michael J. Becker
Telephone No.: (612) 830-2102
Facsimile No.: (612) 893-6143
If to the Agent:
Credit Suisse
12 East 49th Street
New York, New York 10017
Attention: Asset Finance
Tel. No.: (212) 238-5370
Telecopy No. (212) 238-5332
If to the A Support Credit Enhancer:
General Motors Corporation
767 Fifth Avenue
New York, New York 10153
Attention: Assistant Treasurer
Tel. No.: (212) 418-3502
Telecopy No.: (212) 418-3695
with a copy to:
Attn: Anne Larin
3031 West Grand Blvd.
Detroit, Michigan 48202
Tel. No.: (313) 974-1969
Telecopy No.: (313) 974-0685
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<PAGE> 50
If to Citibank, N.A. as a B Support Credit Enhancer:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attention: Autos Group, 8th Floor, Zone 12
Telephone No.: (212) 559-8852
Facsimile No.: (212) 826-2375
If to Credit Suisse, as a B Support Credit Enhancer:
Credit Suisse
12 East 49th Street
New York, New York 10017
Attention: Asset Finance
Telephone: (212) 238-5370
Telecopier: (212) 238-5332
If to the Liquidity Agent:
Citibank, N.A.
120 Wall Street, 13th Floor
New York, New York 10043
Attention: Autos Group, 8th Floor, Zone 12
Tel. No.: (212) 559-8852
Telecopy No.: (212) 826-2375
If to the Depositary:
CITIBANK, N.A.
120 Wall Street
13th Floor
New York, New York 10043
Attention: Structured Finance Group
Tel. No.: (212) 412-6230
Telecopy No.: (212) 480-1615
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<PAGE> 51
If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Tel. No.: (212) 553-0300
Telecopy No.: (212) 553-4773
If to S&P:
Standard & Poor's Ratings Group
25 Broadway
New York, New York 10001
Attention: Asset-Backed Surveillance Group
If to the other Liquidity Lenders, at the addresses set forth below
their signatures on the signature pages of the Liquidity Agreement, as such
addresses may be revised from time to time by written notice from such Liquidity
Lenders.
SECTION 9.05. Fee; Costs and Expenses, etc. NFC shall pay to the Agent
as its fee for its services and the amounts set forth in the Fee Letter. NFC
hereby agrees to reimburse the Agent for all reasonable out-of-pocket costs and
expenses (including counsel fees and expenses, but excluding costs and expenses
solely attributable to administrative overhead) incurred by the Agent in
connection with the administration and enforcement of this Collateral Agreement
and agrees to indemnify and hold harmless the Agent, the Support Credit
Enhancers, the Depositary, the Liquidity Agent and the Liquidity Lenders from
and against any and all losses (other than loss of profit), liabilities
(including liabilities for penalties), actions, suits, judgments, demands,
reasonable out-of-pocket costs and expenses (including, without limitation,
reasonable attorney's fees and expenses but excluding costs and expenses
attributable solely to administrative overhead) incurred by the Agent (in its
capacity as Agent (including as Beneficiary under the Master Collateral Agency
Agreement), the Depositary, the Liquidity Lenders, the Liquidity agent or the
support Credit Enhancers in connection with the administration or enforcement of
this Collateral Agreement or the Master Collateral Agency Agreement and also
agrees to pay, indemnify, and to hold each Liquidity Lender, the Agent, the
Liquidity Agent, the Depositary and the Support Credit Enhancers harmless from,
any and all recording and filing fees and any and all liabilities with respect
to, or resulting from any delay in paying, stamp and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by, or any
amendment, supplement or
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modification of, or any waiver or consent under or in respect of, this
Collateral Agreement or the Master Collateral Agency Agreement; provided,
however, that NFC shall not be required to indemnify any Secured Party for any
such loss, liability, action, suit, judgment, demand, cost or expense due to
willful misconduct or gross negligence on the part of such Secured Party or its
respective agents or employees. If NFC shall fail to do any act or thing which
it has covenanted to do hereunder or any representation or warranty on the part
of NFC contained herein or repeated and reaffirmed herein shall be breached, the
Agent may, with the consent of the Required Liquidity Providers, but shall not
be required, to, do the same or cause it to be done or remedy any such breach,
and may expend its funds for such purpose. Any and all amounts so expended by
the Agent shall be repayable to it by NFC upon the Agent's demand therefor. The
obligations of NFC under this Section 9.05 shall survive the termination of this
Collateral Agreement and the discharge of the other obligations of NFC hereunder
and shall also survive the termination of the Aggregate Liquidity Commitment of
the Liquidity Lenders and the termination of the Fronting Letters of Credit in
accordance with the provisions of the Liquidity Agreement and of the Fronting
Letters of Credit, respectively.
SECTION 9.06. Agent Appointed Attorney-in-Fact. NFC hereby appoints the
Agent its attorney-in-fact, with full power of substitution, for the purpose of
taking such action (including, without limitation any action pursuant to Section
4.03 hereof) and executing agreements, instruments and other documents, in the
name of NFC, as the Agent or the Required Liquidity Providers may deem necessary
or advisable to accomplish the purposes hereof, which appointment is coupled
with an interest and is irrevocable.
SECTION 9.07. Termination; Assigned Collateral. This Collateral Agreement,
and any grants, pledges and assignments hereunder, shall terminate when (a) all
NFC Obligations shall have been fully paid and satisfied, (b) the Aggregate
Liquidity Commitment of the Liquidity Lenders under the Liquidity Agreement, the
A Letter of Credit Commitment, the B Letter of Credit Commitment, the B Support
Letter of Credit Commitments, the A Support Reimbursement Agreement and related
documents have terminated, and (c) the Fronting Letters of Credit and the B
Support Letters of Credit shall have terminated, at which time the Agent, at the
request of NFC and upon receipt of a certificate from NFC to the effect that the
conditions in clauses (a), (b) and (c) above have been complied with and upon
receipt of a certificate from the Liquidity Agent, the Depositary and the
Support Credit Enhancers, to the effect that the conditions in clauses (a), (b)
and (c) relating to NFC Obligations to the Liquidity Lenders, the Holders of
Commercial Paper Notes and the Support Credit Enhancers have been complied with,
shall reassign (without recourse upon, or any warranty whatsoever by, the
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Agent), deliver at NFC's expense all Assigned Collateral and documents then in
the custody or possession of the Agent promptly to NFC and execute such
documents and instruments as NFC may reasonably request in connection with such
reassignment.
NFC and the Secured Parties hereby agree that, if any Deposited Funds
remain on deposit in the Collateral Account after the termination of this
Collateral Agreement, such amounts shall be released by the Agent and paid to
NFC.
SECTION 9.08. Governing Law: Binding Character: Assignment. THIS COLLATERAL
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO OTHERWISE APPLICABLE PRINCIPLES OF CONFLICTS
OF LAW. This Collateral Agreement shall be binding upon and shall inure to the
benefit of NFC, the Liquidity Lenders, the Liquidity Agent, the Support Credit
Enhancers, the Depositary, the Holders of Commercial Paper Notes and the Agent,
and their respective successors and assigns; provided, however, that NFC may not
assign any of its right hereunder or in connection herewith or any interest
herein (voluntarily, by operation of law or otherwise) without the prior written
consent of all of the Liquidity Lenders and the Support Credit Enhancers. This
Collateral Agreement shall not be construed so as to confer any right or benefit
upon any Person other than the parties to this Collateral Agreement, the
Liquidity Lenders and the Holders of the Commercial Paper Notes and each of
their respective successors and assigns.
SECTION 9.09. Severability of Provisions. Any provision of this Collateral
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 9.10. No Bankruptcy Petition Against NFC. Each of the Secured
Parties hereby covenants and agrees that, prior to the date which is one year
and one day after the payment in full of the latest maturing Commercial Paper
Note, it will not institute against, or join with any other Person in
instituting against, NFC, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any Federal or
state bankruptcy or similar law; provided, however, that nothing in this Section
9.10 shall constitute a waiver of any right to indemnification, reimbursement or
other payment from NFC pursuant to this Collateral Agreement. In the event that
any such Secured Party takes action in violation of this Section 9.10, NFC
agrees that it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of
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such a petition by any such Secured Party against NFC or the commencement of
such action and raise the defense that such Secured Party has agreed in writing
not to take such action and should be estopped and precluded therefrom and such
other defenses, if any, as its counsel advises that it may assert. The
provisions of this Section 9.10 shall survive the termination of this Collateral
Agreement, and the resignation or removal of the Agent, the Liquidity Agent, the
Depositary or the Support Credit Enhancers. Nothing contained herein shall
preclude participation by any Secured Party in assertion or defense of its
claims in any such proceeding involving NFC.
SECTION 9.11. No Recourse. The obligations of NFC under this Collateral
Agreement are solely the corporate obligations of NFC. No recourse shall be had
for the payment of any amount owing in respect of Section 9.05 hereof or for the
payment of any fee hereunder or any other obligation or claim arising out of or
based upon this Collateral Agreement against any stockholder, employee, officer,
director, affiliate or incorporator of NFC; provided, however, that nothing in
this Section 9.11 shall relieve any of the foregoing Persons from any liability
which such Person may otherwise have for its gross negligence or willful
misconduct. The provisions of this Section 9.11 shall survive the termination of
this Collateral Agreement.
SECTION 9.12. Confidentiality. Each party hereto (other than NFC) agrees
that it shall not disclose any Confidential Information to any Person without
the prior written consent of National or NFC, other than (a) to any Secured
Party, and then only on a confidential basis, (b) as required by any law, rule
or regulation or any judicial process of which NFC or National, as the case may
be, has knowledge; provided that any party hereto may disclose Confidential
Information as required by law, rule or regulation or any judicial process of
which NFC or National, as the case may be, does not have knowledge if such party
is prohibited by law from disclosing such requirement to NFC or National, as the
case may be, and (c) in the course of litigation with NFC or National, or any
Secured Party.
"Confidential Information" means information that National or NFC furnishes
to a Secured Party on a confidential basis, but does not include any such
information that is or becomes generally available to the public other than as a
result of a disclosure by such Secured Party or other person to which Secured
Party delivered such information or that is or becomes available to such Secured
Party from a source other than National or NFC, provided that such source is not
(1) known to such Secured Party to be bound by a confidentiality agreement with
NFC or National, as the case may be, or (2) known to such Secured Party to be
otherwise prohibited from transmitting the information by a contractual, legal
or fiduciary obligation.
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<PAGE> 55
SECTION 9.13. Headings. Article and Section headings used in this
Collateral Agreement are for convenience of reference only and shall not affect
the construction of this Collateral Agreement.
SECTION 9.14. Execution in Counterparts. This Collateral Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute one and the same Collateral Agreement.
SECTION 9.15. Limited Recourse to NFC. The Agent agrees that the
obligations of NFC to the Agent hereunder shall be payable in the order and
priority set forth in Section 2.01 and 5.02(b), as applicable, of this
Collateral Agreement. Such obligations shall be due and payable only to the
extent that NFC's assets and the Fronting Letters of Credit Amount are
sufficient to pay such obligations. No claims of the Agent arising under or in
connection with this Collateral Agreement are intended to be impaired or waived
by this Section 9.15.
SECTION 9.16. Waiver of Set-Off With Respect to NFC. Each of the Agent, the
Depositary, the Liquidity Agent, and each of the Support Credit Enhancers hereby
waives and relinquishes any right that it has or may have to set-off or to
exercise any banker's lien or any right of attachment or garnishment with
respect to any funds at any time and from time to time on deposit in or
otherwise to the credit of, any account and any claims of NFC therein or with
respect to any right to payment from NFC, it being understood, however, that
nothing contained in this Section 9.16 shall, or is intended to, derogate from
the assignment and security interest granted to the Agent or the Master
Collateral Agent under this Collateral Agreement and the Master Collateral
Agency Agreement or impair any rights of the Secured Parties, the Agent or the
Master Collateral Agent hereunder or thereunder.
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<PAGE> 56
IN WITNESS WHEREOF, NFC, the Support Credit Enhancers, the Depositary, the
Agent, Liquidity Agent, the Placement Agents and the Dealers have caused this
Collateral Agreement to be duly executed by their respective officers all as of
the day and year first above written.
NATIONAL FLEET FUNDING CORPORATION
By: /s/ Michael J. Becker
------------------------------------
Name: Michael J. Becker
Title: Assistant Secretary and Treasurer
CITIBANK, N.A.,
as Liquidity Agent and Depositary
By: /s/
------------------------------------
Name:
Title:
CITIBANK, N.A.,
as B Support Credit Enhancer and
Placement Agent
By: /s/ Kyle L. Miller
------------------------------------
Name: Kyle L. Miller
Title: Authorized Signatory
CREDIT SUISSE, NEW YORK BRANCH,
as Agent and B Support Credit
Enhancer
By: /s/ Carl Jackson
------------------------------------
Name: Carl Jackson
Title: Member of Senior Management
By: /s/ RP Saylor
------------------------------------
Name: Roger Saylor
Title: Associate
<PAGE> 57
GENERAL MOTORS CORPORATION,
as A Support Credit Enhancer
By: Anne T. Larin
------------------------------------
Name: Anne T. Larin
Title: Attorney-in-fact for Heidi Kun
Vice President
CS FIRST BOSTON CORPORATION,
as Dealer
By: /s/ Scott E. Zoellner
------------------------------------
Name: Scott E. Zoellner
Title: Vice President
<PAGE> 1
Exhibit 4.13
LETTER AGREEMENT
Letter Agreement, dated as of July 13, 1995 (this "Letter Agreement"),
between NATIONAL FLEET FUNDING CORPORATION, a Delaware corporation ("NFC") and
GOLDMAN SACHS MONEY MARKETS, L.P., a Delaware limited partnership ("GSMN LP").
W I T N E S S E T H:
WHEREAS, NFC desires, in connection with that certain Dealer Agreement,
dated as of June 7, 1995 (the "Dealer Agreement") among NFC, National Care
Rental System, Inc., a Delaware Corporation ("National") and CS First Boston
Corporation, a Massachusetts corporation ("CSFB"), to appoint GSMM LP to act as
Dealer for the Notes (as defined in the Dealer Agreement) and GSMN LP desires to
accept such appointment as a Dealer;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereby agree, upon the
terms and subject to the conditions set forth below, as follows:
SECTION 1. Defined Terms. All capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth for such terms in
Annex A to the Liquidity Agreement, dated as of June 7, 1995, among NFC,
certain financial institutions listed on the signature pages thereto and
Citibank, N.A., as liquidity agent, as such agreement may be amended,
supplemented, restated or otherwise modified from time to time.
SECTION 2. Appointment as Dealer. NFC hereby appoints GSMM LP to act
as a dealer for the Notes in accordance with the terms and conditions of the
Dealer Agreement and acknowledges that GSMM LP shall have the right to assist
NFC in the sale or placement of the Notes during the term of the Dealer
Agreement in accordance with the terms and conditions of the Dealer Agreement.
GSMM LP hereby accepts such appointment and by its signature hereto shall
become a Dealer under the Dealer Agrement with the same force and effect as if
originally named therein as a Dealer and GSMM LP hereby agrees to all terms and
provisions of the Dealer Agreement applicable to it as a Dealer thereunder.
SECTION 3. Notices; Delivery of Certificated Notes. (a) Unless
otherwise indicated in the Dealer Agreement, all notices required to be provided
to GSMM LP as a Dealer under the terms and provisions of the Dealer Agreement
shall be in writing, either delivered by hand, by mail (postage prepaid), or by
telex, telecopier or telegram, and any such notice shall be effective when
received by GSMM LP at the address specified below.
<PAGE> 2
Goldman Sachs Money Markets, L.P.
85 Broad Street
New York, New York 10004
Attention: Blanton Neill
Telephone No.: (212) 902-0346
Facsimile No,: (212) 357-8680
(b) Pursuant to the Dealer Agreement, if Notes sold or placed by
GSMM LP are evidenced by Certificated Notes, NFC will instruct the Depositary
to deliver executed and countersigned Certificated Notes to Goldman Sachs Money
Markets, L.P., Note and Discount, 85 Broad Street, New York, New York 10021,
prior to 2:15 p.m., New York City time, on the date of issuance.
SECTION 4. Conditions of Effectiveness. This Letter
Agreement shall become effective on the date hereof, if, and only if, on or
prior to the date hereof, counterparts of this Letter Agreement shall have been
duly executed and delivered by NFC and GSMM LP and counterparts of this Letter
Agreement shall have been duly acknowledged and delivered by National and CSFB.
SECTION 5. Execution in Counterparts. This Letter Agreement
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument. Delivery of an executed counterpart of a
signature page to this Letter Agreement by facsimile transmission shall be as
effective as delivery of a manually executed counterpart of this Letter
Agreement.
SECTION 6. Governing Law. THIS LETTER AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Letter
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
NATIONAL FLEET FUNDING CORPORATION
By: /s/ Michael S. Becker
----------------------------------------
Name: Michael S. Becker
Title: Treasurer
GOLDMAN SACHS MONEY MARKETS, L.P.,
a Delaware limited partnership
By: GSMM Corp., as sole general partner
By: /s/ John P. Heanue
----------------------------------------
Name: John P. Heanue
Title: Corp. Officer
ACKNOWLEDGED BY:
NATIONAL CAR RENTAL SYSTEM, INC.
By: /s/ Ervin A. Zater
----------------------------------------
Name: Ervin A. Zater
Title: Corporate Vice President
CS FIRST BOSTON CORPORATION
By: /s/ Richard W. Kulz
----------------------------------------
Name: Richard W. Kulz
Title: Director
<PAGE> 1
Exhibit 4.14
EXECUTION COPY
A SUPPORT INTERCREDITOR AGREEMENT
THIS A SUPPORT INTERCREDITOR AGREEMENT (this "Agreement"), dated as of May
29, 1996, is entered into by and among GENERAL MOTORS CORPORATION, a Delaware
corporation ("GM") and THE BANK OF NEW YORK, a New York banking corporation
(such party, and each other party that shall execute a Joinder Agreement in the
form of Annex A hereto, a Reduction A Support Credit Enhancer"), NATIONAL FLEET
FUNDING CORPORATION, a Delaware corporation ("NFC"), and NATIONAL CAR RENTAL
SYSTEM, INC., a Delaware corporation ("National").
BACKGROUND
A. Pursuant to the A Support Letter of Credit Agreement dated as of June
7, 1995 (the "A Support Letter of Credit Agreement"), GM has agreed to reimburse
the A Credit Enhancer (defined below) for amounts drawn under a letter of credit
(the "A Letter of Credit") issued by the A Credit Enhancer.
B. Pursuant to the A Support Reimbursement Agreement dated as of June 7,
1995 (the "A Support Reimbursement Agreement") among GM, National and NFC,
National and NFC have agreed to reimburse GM for amounts paid by GM pursuant to
the A Support Letter of Credit Agreement.
C. The maximum amount of GM's obligations to the A Credit Enhancer
pursuant to the A Support Letter of Credit Agreement is reduced by an amount
equal to the A Support Reduction Amount (as defined below) on June 7 of each
year.
D. Pursuant to the A Support Reimbursement Agreement, National and NFC
are obligated to deliver to the A Credit Enhancer a Reduction Amount Letter of
Credit Agreement (as defined below) or Reduction Amount Credit Support (as
defined below), in either case, an amount equal to the A Support Reduction
Amount.
E. Each Reduction A Support Credit Enhancer has entered into a Reduction
Support Agreement (as defined below) pursuant to which it has agreed to provide
such additional credit support to the A Credit Enhancer.
F. In order to prioritize the claims of GM and the various Reduction A
Support Credit Enhancers with respect to
<PAGE> 2
reimbursement by National and NFC and amounts payable pursuant to the Collateral
Agreement (as defined below), the parties are entering into this Agreement.
G. Accordingly, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and subject to the terms and conditions hereof,
GM, National, NFC and each Reduction A Support Credit Enhancer hereby agree as
follows:
Section 1. Certain Definitions. Capitalized terms not otherwise defined
herein shall have the meanings assigned to such terms in the Definitions List
attached as Annex A to the Liquidity Agreement, dated as of June 7, 1995 among
National Fleet Funding Corporation, the liquidity lenders set forth therein, and
Citibank, N.A., as liquidity agent, as in effect on the date hereof and as such
Annex A may be amended or modified from time to time in accordance with the
terms of the Liquidity Agreement (the "Definitions List").
Section 2. Assignment of Rights Under Collateral Agreement. GM hereby
transfers, assigns, grants and conveys to each Reduction Support Credit Enhancer
all GM's right, title and interest as an A Support Credit Enhancer under the
Collateral Agreement but only to the extent of the A Support Reduction Amount in
respect of which such Reduction Support Credit Enhancer has entered into a
Reduction Support Agreement. From and after such assignment, for purposes of the
Collateral Agreement, GM and each Reduction Support Credit Enhancer shall each
be deemed to be an A Support Credit Enhancer, each to the extent of and in
accordance with the proportion that the amount of its A Support Commitment bears
to the Aggregate A Support Commitment.
Section 3. Priorities With Respect to National Reimbursement Obligations.
GM agrees that its right to receive payment from National on account of any A
Support Credit Disbursement, A Support Termination Disbursement or A Support
Event of Default Disbursement made by GM, is and shall be expressly subordinate
and junior in right of payment to the prior payment in full of all amounts then
due and payable by National to any Reduction A Support Credit Enhancer on
account of any A Support Credit Disbursement, A Support Termination Disbursement
or A Support Event of Default Disbursement made by such Reduction A Support
Credit Enhancer.
Section 4. Priorities With Respect to NFC Reimbursement Obligations. GM and
each Reduction A Support Credit Enhancer agrees that amounts payable (i) by NFC
to GM and the Reduction A Support Credit Enhancers and (ii) pursuant to the
Collateral Agreement, in each case, on account of any A Support Liquidity
Disbursements, A Support Termination Disbursements and A Support
<PAGE> 3
Event of Default Disbursements shall be allocated among GM and the Reduction A
Support Credit Enhancers on a pro-rata basis based on each party's A Support
Disbursements outstanding.
Section 5. Allocations Among Reduction A Support Credit Enhancers. Each
Reduction A Support Credit Enhancer agrees that amounts payable (i) by National
or NFC to the Reduction A Support Credit Enhancers and (ii) pursuant to the
Collateral Agreement, in either case, on account of any A Support Disbursements
made by the Reduction A Support Credit Enhancers shall be allocated among the
Reduction A Support Credit Enhancers on a pro-rata basis based on each Reduction
A Support Credit Enhancer's outstanding A Support Disbursements (to the extent
reimbursable by NFC). If any Reduction A Support Credit Enhancer shall obtain
any payment or other recovery (whether voluntary or involuntary) in connection
with this Agreement (other than with respect to collateral specifically pledged
to such Reduction A Support Credit Enhancer as provided in Section 5) in excess
of the pro rata share of such Reduction A Support Credit Enhancer, such
Reduction A Support Credit Enhancer shall purchase from the other Reduction A
Support Credit Enhancers such participating interest as shall be necessary to
cause such purchasing Reduction A Support Credit Enhancer to share the excess
payment or other recovery with the other Reduction A Support Credit Enhancers on
a pro rata basis; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Reduction
A Support Credit Enhancer, the purchase shall be rescinded and each Reduction A
Support Credit Enhancer shall repay to the purchasing Reduction A Support Credit
Enhancer the purchase price to the ratable extent of such recovery together with
an amount equal to such selling Reduction A Support Credit Enhancer's ratable
share according to the proportion of (a) the amount of such selling Reduction A
Support Credit Enhancer's required repayment to the purchasing Reduction A
Support Credit Enhancer to (b) the total amount so recovered from the purchasing
Reduction A Support Credit Enhancer of any interest or other amount paid or
payable by the purchasing Reduction A Support Credit Enhancer in respect of the
total amount so recovered. National and NFC agree that any Reduction A Support
Credit Enhancer so purchasing a participation from another Reduction A Support
Credit Enhancer pursuant to this Section may, to the fullest extent not
prohibited by law, exercise all its rights of payment with respect to such
participation as fully as if such Reduction A Support Credit Enhancer were the
direct creditor of National or NFC in the amount of such participation. If under
any applicable bankruptcy, insolvency or other similar law, any Reduction A
Support Credit Enhancer receives a secured claim to which this Section applies,
such Reduction A Support Credit Enhancer shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent
with the rights of the
<PAGE> 4
Reduction A Support Credit Enhancer entitled under this Section to share in the
benefits of any recovery on such secured claim.
Section 6. Rights to Specific Collateral. Nothing herein contained shall
affect the rights of any Reduction A Support Credit Enhancer in any collateral
specifically pledged, assigned, granted or otherwise provided to such Reduction
A Support Credit Enhancer under such Reduction A Support Credit Enhancer's
Reduction Support Reimbursement Agreement; provided, however, that, (a) to the
extent that it is a condition to the reinstatement of the amount of any
Reduction Support Agreement after any draws thereon that National replenish or
replace such specific collateral, National shall not replenish or replace such
specific collateral (and such Reduction A Support Credit Enhancer shall not be
entitled to retain any collateral delivered by National to replenish or replace
such specific collateral) unless and until all amounts then due and payable to
GM by National under the A Support Reimbursement Agreement with GM have been
paid and (b) to the extent that it is a condition to the reinstatement of the
amount of any Reduction Support Agreement after any draws thereon that NFC
replenish or replace such specific collateral, NFC shall not replenish or
replace such specific collateral (and such Reduction A Support Credit Enhancer
shall not be entitled to retain any collateral delivered by NFC to replenish or
replace such specific collateral) unless and until all amounts then due and
payable to GM by NFC under the A Support Reimbursement Agreement with GM have
been paid.
Section 7. Agreement to Hold in Trust. If any party hereto shall receive
payment of any amount which such party is aware (by notice or otherwise) is in
violation hereof, it shall not commingle such payment with such holder's assets
generally, and it shall hold such payment in trust for the benefit of the party
entitled thereto and promptly pay it over to such party entitled thereto.
Section 8. Joinder by Reduction A Support Credit Enhancers. Any party
hereafter entering into a Reduction Amount Letter of Credit Agreement or
otherwise agreeing to provide Reduction Amount Credit Support which has not
theretofore become a party hereto shall sign and deliver to National, NFC, GM
and the Agent, with copies for each other Reduction A Support Credit Enhancer, a
Joinder Agreement substantially in the form of Annex A hereto.
Section 9. Acceptance by Transferees. No A Support Credit Enhancer will
transfer, sell or otherwise dispose of its interest as an A Support Credit
Enhancer except to a party that agrees to be bound by the terms of this
Agreement in a writing delivered to National, NFC, GM, each Reduction A Support
Credit Enhancer and the Agent concurrently with such transfer, sale or
<PAGE> 5
disposition; notwithstanding the foregoing, any party becoming an A Support
Credit Enhancer shall be conclusively deemed to have accepted and agreed to all
the terms and provisions hereof and to have become a party to this Agreement.
Section 10. Amendments. This Agreement may be amended and the terms hereof
may be waived only with the written consent of National, NFC, GM and each
Reduction A Support Credit Enhancer.
Section 11. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of State of New York, without regard to principles
of conflicts of laws.
Section 12. Jurisdiction. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST GM, ANY
REDUCTION A SUPPORT CREDIT ENHANCER, NATIONAL OR NFC WITH RESPECT TO THIS
AGREEMENT MAY BE BROUGHT IN ANY STATE OR (TO THE EXTENT PERMITTED BY LAW
FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT GM, EACH REDUCTION A SUPPORT CREDIT
ENHANCER, NATIONAL AND NFC EACH ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COSTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT.
Section 13. Severability. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 14. Term. This Agreement shall remain in full force and effect
until the reimbursement of all A Support Disbursements by National or NFC, as
the case may be, and the payment by National or NFC, as the case may be, of all
other amounts payable under any A Support Letter of Credit Agreement,
notwithstanding the earlier termination of any A Support Letter of Credit
Agreement.
Section 15. Successors and Assigns. This Agreement shall be binding upon
GM, each Reduction A Support Credit Enhancer, National and NFC, and the
respective successors and assigns of each of them.
Section 16. Counterparts. This Agreement may be executed in any number of
counterparts, and by the different parties hereto on the same or separate
counterparts, each of which
<PAGE> 6
counterparts, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute one and the same
agreement.
<PAGE> 7
IN WITNESS WHEREOF, GM, The Bank of New York, National and NFC have caused
this Agreement to be duly executed by their duly authorized officers, as of the
day and year first above written.
GENERAL MOTORS CORPORATION
By: /s/ Mark Newman
------------------------------------
Name: Mark Newman
Title: Attorney-in-Fact
THE BANK OF NEW YORK
By: /s/ Richard A. Raffetto
------------------------------------
Name: Richard A. Raffetto
Title: Assistant Vice President
NATIONAL CAR RENTAL SYSTEM, INC.
By: /s/ Mike Becker
------------------------------------
Name: Mike Becker
Title:
NATIONAL FLEET FUNDING CORPORATION
By: /s/ Mike Becker
------------------------------------
Name: Mike Becker
Title:
<PAGE> 8
ANNEX A
JOINDER BY REDUCTION A SUPPORT CREDIT ENHANCER
Reference is made to the A Support Intercreditor Agreement (the "A Support
Intercreditor Agreement"), dated as of May 29, 1996 among National Car Rental
System, Inc., National Fleet Funding Corporation, General Motors Corporation and
the Reduction A Support Credit Enhancers from time to time becoming parties
thereto. By execution of this Joinder Agreement, the undersigned agrees to
become a Reduction A Support Credit Enhancer and be bound by all the provisions
of, the A Support Intercreditor Agreement with the same force and effect as if
the undersigned were a signatory party thereof.
[ ]
By:
---------------------------
Name:
Title:
Date:
------------------------
<PAGE> 1
Exhibit 4.15
EXECUTION COPY
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is dated
as of May 29, 1996 among CITIBANK, N.A. ("Citibank"), CREDIT SUISSE, a Swiss
banking corporation acting through its New York Branch ("CS") and CAISSE
NATIONALE DE CREDIT AGRICOLE ("Credit Agricole").
WITNESSETH:
WHEREAS, Citibank and CS are parties to that certain B Support Letter
of Credit Reimbursement Agreement dated as of June 7, 1995, among Citibank, CS,
National Fleet Funding Corporation and National Car Rental System, Inc.
("National") (as such agreement may be amended or modified from time to time,
the "B Support Letter of Credit Reimbursement Agreement");
WHEREAS, Citibank and CS each desire to assign and Credit Agricole
desires to acquire and assume all of Citibank's and CS's respective rights,
interests and obligations in and under the B Support Letter of Credit
Reimbursement Agreement;
WHEREAS, Credit Agricole intends to issue a $32,125,000 irrevocable
letter of credit which will replace the existing B Support Letters of Credit
issued by Citibank and Credit Suisse pursuant to the B Support Letter of Credit
Reimbursement Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereby agree, upon the
terms and subject to the conditions set forth below, as follows:
Section 1. Defined Terms. All capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth for such terms in the
B Support Letter of Credit Reimbursement Agreement.
Section 2. Assignment and Assumption. (a) Citibank and CS each hereby
assign, transfer and convey to Credit Agricole all of their respective right,
title and interest, and delegate all their duties and obligations, in, to and
under the B Support Letter of Credit Reimbursement Agreement and under all
Related Documents as B Support Credit Enhancers, with the exception of the
indemnification rights of Citibank and CS pursuant to Section
<PAGE> 2
6.2 of the B Support Letter of Credit Reimbursement Agreement for the period
during which Citibank and CS were B Support Credit Enhancers, which rights are
specifically being retained by Citibank and CS (the "Indemnification Rights")
and (b) Credit Agricole hereby accepts the foregoing assignment, transfer and
conveyance of all such right, title and interest of Citibank and CS and assumes
all of Citibank's and CS's respective obligations and duties, under the B
Support Letter of Credit Reimbursement Agreement, with the exception of the
Indemnification Rights, and hereby becomes a party thereunder. Each of Citibank
and CS hereby represents and warrants that it is the legal and beneficial owner
of all the right, title and interest being assigned by it hereunder and such
right, title and interest are free and clear of any lien, encumbrance or adverse
claim arising through Citibank or CS.
Section 3. Conditions to Effectiveness. This Agreement shall not be
effective until (a) Citibank and CS shall have returned to them their undrawn B
Support Letters of Credit, (b) National shall have paid all accrued fees and
expenses of Citibank and CS payable under the B Support Letter of Credit
Reimbursement Agreement, and (c) Credit Agricole shall have issued a B Support
Letter of Credit.
Section 4. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile transmission shall be as effective as delivery of a
manually executed counterpart of this Agreement.
Section 5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
CITIBANK, N.A.
By: /s/ Susan Maccagnan
-------------------------------------
Name: Susan Maccagnan
Title: Vice President
CREDIT SUISSE, NEW YORK BRANCH
By: /s/ ROGER W. SAYLOR CARL JACKSON
-----------------------------------------
Name: ROGER W. SAYLOR CARL JACKSON
Title: ASSOCIATE MEMBER OF SENIOR
MANAGEMENT
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ KATHERINE L. ABBOTT
------------------------------------
Name: KATHERINE L. ABBOTT
Title: FIRST VICE PRESIDENT
Acknowledged and consented to
DEUTSCHE BANK AG, NEW YORK BRANCH,
as B Credit Enhancer
By: /s/ STEVEN B. ROBERTS
-----------------------------
Name: STEVEN B. ROBERTS
Title: ATTORNEY-IN-FACT
By: /s/ GREGORY V. PETRETTI
-----------------------------
Name: GREGORY V. PETRETTI
Title: ATTORNEY-IN-FACT
<PAGE> 1
Exhibit 4.16
LETTER AGREEMENT
Letter Agreement dated as of November 20, 1996 (this "Letter
Agreement"), between NATIONAL FLEET FUNDING CORPORATION, a Delaware corporation
("NFC") and CITICORP SECURITIES, INC., a Delaware corporation ("Citi").
WITNESSETH:
WHEREAS, NFC desires, in connection with that certain Dealer
Agreement, dated as of June 7, 1995 (as heretofore amended, the "Dealer
Agreement") among NFC, National Car Rental System, Inc., a Delaware corporation
("National"), CS First Boston Corporation, a Massachusetts corporation ("CSFB"),
and Goldman, Sachs & Co., a New York limited partnership (successor organization
to Goldman Sachs Money Markets, L.P., a Delaware limited partnership) ("GSC"),
to appoint Citi to act as a Dealer for the Notes (as defined In the Dealer
Agreement) and Citi desires to accept such appointment as a Dealer;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree, upon the terms and subject to the conditions set forth
below, as follows:
SECTION 1. Defined Terms. All capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth for such terms in
Annex A to the Liquidity Agreement, dated as of June 7, 1995, among NFC, certain
financial institutions listed on the signature pages thereto and Citibank, N.A.,
as liquidity agent, as such agreement may be amended, supplemented, restated or
otherwise modified from time to time.
SECTION 2. Appointment as Dealer. NFC hereby appoints Citi to act as a
dealer for the Notes in accordance with the terms and conditions of the Dealer
Agreement and acknowledges that Citi shall have the right to assist NFC in the
sale or placement of the Notes during the terms and conditions of the Dealer
Agreement. Citi hereby accepts such appointment and by its signature hereto
shall become a Dealer under the Dealer Agreement with the same force and effect
as if originally named therein as a Dealer and Citi hereby agrees to be bound by
the terms and provisions of the Dealer Agreement.
SECTION 3. Notices. Unless otherwise indicated in the Dealer
Agreement, all notices required to be provided to Citi as a Dealer under the
terms and provisions of the Dealer Agreement shall be in writing, either
delivered by hand, by mail (postage prepaid), or by telex, telecopier or
telegram, and any such notice shall be effective when received by Citi at the
address specified below.
<PAGE> 2
Citicorp Securities, Inc.
399 Park Avenue
New York, New York 10043
Attention: J. Darrell Thomas
Telephone No.: (212)291-4096
Facsimile No.: (212)291-3910
SECTION 4. Conditions of Effectiveness. This Letter Agreement shall
become effective on the date hereof, if, and only if, on or prior to the date
hereof, counterparts of this Letter Agreement shall have been duly executed and
delivered by NFC and Citi and counterparts of this Letter Agreement shall have
been duly acknowledged and delivered by National, CSFB and GSC.
SECTION 5. Execution in Counterparts. This Letter Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument. Delivery of an executed counterpart of a signature
page to this Letter Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Letter Agreement.
SECTION 6. Governing Law. THIS LETTER AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF TO STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Letter
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
NATIONAL FLEET FUNDING
CORPORATION
By: /s/ MJ Becker
-------------------------------------
Name: MJ Becker
-------------------------------
Title: Asst. Secretary and Treasurer
-------------------------------
2
<PAGE> 3
CITICORP SECURITIES, INC.
By
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
ACKNOWLEDGED BY:
NATIONAL CAR RENTAL SYSTEM, INC.
By /s/ E.A. Zinter
-----------------------------
Name: E.A. Zinter
------------------------
Title: EVP
-----------------------
CS FIRST BOSTON CORPORATION
By
-----------------------------
Name:
------------------------
Title:
-----------------------
GOLDMAN, SACHS & CO.
By
-----------------------------
Name:
------------------------
Title: Authorized Signatory
3
<PAGE> 1
Exhibit 4.17
SUPPLEMENT AND AMENDMENT TO COLLATERAL AGREEMENT, dated as of
December 20, 1996 (this "Amendment"), among NATIONAL FLEET FUNDING CORPORATION,
a Delaware corporation ("NFC"), GENERAL MOTORS CORPORATION, a Delaware
corporation ("GM"), as an A Support Credit Enhancer, THE BANK OF NEW YORK, a
New York banking corporation ("BONY"), as an A Support Credit Enhancer, CAISSE
NATIONALE DE CREDIT AGRICOLE ("Credit Agricole"), as the B Support Credit
Enhancer, CITIBANK, N.A., a national banking corporation ("Citibank"), as
Liquidity Agent (the "Liquidity Agent") for the Liquidity Lenders and as
Depositary (the "Depositary") under the Depositary Agreement acting on its own
and on behalf of the Holders of Commercial Paper Notes, CREDIT SUISSE, a Swiss
banking corporation acting through its New York branch ("Credit Suisse"), as
collateral agent (the "NFC Collateral Agent") for itself and the Liquidity
Lenders, the Liquidity Agent, the Depositary and the Series 1996-2 Support
Credit Enhancers, and, as Dealers, CS FIRST BOSTON CORPORATION, a Massachusetts
corporation ("CSFB"), GOLDMAN, SACHS & CO., a New York limited partnership
(successor organization to Goldman Sachs Money Markets, L.P., a Delaware
limited partnership) ("GS & Co."), and CITICORP SECURITIES, INC., a Delaware
corporation ("Citicorp", and together with CSFB and GS & Co. collectively the
"Dealers").
W I T N E S S E T H :
WHEREAS, NFC, GM, Citibank, Credit Suisse, the Liquidity
Agent, the Depositary, the NFC Collateral Agent and the Dealers have entered
into the Collateral Agreement, dated as of June 7, 1995, as modified by (i) the
letter agreement dated July 13, 1995 from GS & Co. as a Dealer to the other
parties to such Collateral Agreement, (ii) the A Support Intercreditor
Agreement dated as of May 29, 1996 (under which GM assigned to BONY all GM's
right, title and interest as an A Support Credit Enhancer under such
Collateral Agreement, but only to the extent of the A Support Reduction Amount
in respect of which BONY as Reduction Support Credit Enhancer has entered into
a Reduction Support Agreement), (iii) the Assignment and Assumption Agreement
dated as of May 29, 1996 among Citibank, Credit Suisse and Credit Agricole
(under which Citibank and Credit Suisse assigned to Credit Agricole all their
respective rights, titles and interests, and delegated all their respective
duties and obligations, in, to and under such Collateral Agreement and other
Related Documents) and (iv) the letter agreement dated November 20, 1996 from
Citicorp as a Dealer to the other parties to such Collateral Agreement (such
Collateral Agreement as so modified being the "NFC Collateral Agreement");
WHEREAS, NFC proposes (i) to enable National Car Rental
Financing Limited Partnership, a special purpose Delaware limited partnership
("NFLP"), to refinance the Refinanced Vehicles on the Series 1996-2 Closing
Date by (A) accepting the Series 1996-
<PAGE> 2
2
2 Floating Rate Rental Car Asset Backed Variable Funding Note (the "Series
1996-2 Note") to be issued to NFC by NFLP in the initial principal amount of
the then outstanding principal amount of the Loan Note under and as defined in
the Loan Agreement and to be authenticated and delivered by or on behalf of The
Bank of New York, a New York banking corporation, as trustee (the "Trustee")
under the Base Indenture, dated as of April 30, 1996, as amended by the
Supplement and Amendment to Base Indenture, dated as of December 20, 1996 (the
"Base Indenture"), and as supplemented by the Series 1996-2 Supplement, dated
as of December 20, 1996 (the "Series 1996-2 Supplement," and together with the
Base Indenture, the "Indenture"), between NFLP and the Trustee, and (B)
cancelling, upon the payment to NFC by National of the unpaid accrued interest
on the Loan Note and upon the satisfaction of certain other conditions, the
Loan Note, and (ii) thereafter to make further Series 1996-2 Advances to NFLP
from time to time, the Indebtedness arising from which is to be evidenced by
the Series 1996-2 Note, to enable NFLP to acquire Acquired Vehicles, and to
finance the acquisition by National of National Vehicles, from certain Eligible
Manufacturers;
WHEREAS, contemporaneously with the execution and delivery of
this Amendment, NFLP as lessor and National as lessee are entering into the
Second Master Motor Vehicle Lease and Servicing Agreement, dated as of December
20, 1996 (the "Lease"), pursuant to which NFLP will refinance the Refinanced
Vehicles, and will acquire Acquired Vehicles, and will finance the acquisition
of National Vehicles, in each case for leasing to National for use in
National's domestic daily rental business; and to secure the NFLP Obligations
with respect to the Series 1996-2 Note, NFLP will, under the Series 1996-2
Supplement, grant to the Trustee, for the benefit of the Series 1996-2
Noteholder, a first priority perfected security interest in all of NFLP's
right, title and interest in, among other things, the Lease;
WHEREAS, contemporaneously with the execution and delivery of
this Amendment, NFC and the NFC Collateral Agent are entering into a Supplement
dated as of the date hereof to the Master Collateral Agency Agreement, pursuant
to which (i) as security for the payment of the respective obligations from
time to time owing by National to NFLP and other Financing Sources (or any
Beneficiary as assignee thereof) under the Lease and other related Financing
Documents (as defined therein), National will grant to the Master Collateral
Agent for the benefit of the NFC Secured Parties a first priority perfected
security interest in such Refinanced Vehicles and National Vehicles and the
other National Master Collateral for the Series 1996-2 Note, and (ii) as
security for the payment of the respective obligations from time to time owing
by NFLP to the Trustee for the benefit of the Series 1996-2 Noteholder (or any
Beneficiary as assignee thereof) under the Series 1996-2 Note and other related
Financing Documents, NFLP will grant to the Master Collateral Agent for the
benefit of the NFC Secured Parties a first priority perfected security interest
in such Acquired Vehicles and the other NFLP Master Collateral for the Series
1996-2 Note;
<PAGE> 3
3
WHEREAS, NFC, the Liquidity Lenders and the Liquidity Agent
have entered into the Liquidity Agreement, and, contemporaneously with the
execution and delivery of this Amendment, are entering into the Second
Amendment to Liquidity Agreement, dated as of the date hereof (the "Liquidity
Agreement Amendment"), among NFC, the Liquidity Lenders and the Liquidity Agent
under which the Liquidity Agreement is being amended to implement the proposed
refinancing described above;
WHEREAS, National, NFLP and NFC have requested that the Series
1996-2 Support Credit Enhancers, the Liquidity Agent, the Depositary and the
NFC Collateral Agent agree to amend the NFC Collateral Agreement to cause NFC
to pledge and assign under the NFC Collateral Agreement all of NFC's right,
title and interest in and to the Series 1996-2 Note, and otherwise to implement
the proposed refinancing described above; and such parties are, on the terms
and conditions set forth below, willing to grant such request;
NOW, THEREFORE, in consideration of the premises and
agreements, provisions and covenants herein contained, the parties hereto
hereby agree, upon the terms and subject to the conditions set forth below, as
follows:
SECTION 1. Defined Terms. Capitalized terms used but
not defined in this Amendment, including the preamble and the recitals (WHEREAS
clauses) hereof, shall have the meanings assigned to such terms in the
Indenture.
SECTION 2. Amendments to NFC Collateral Agreement. The
NFC Collateral Agreement is, effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 3 hereof, hereby
amended as follows:
(a) The preamble and the recitals (WHEREAS clauses) and
Article I are amended in full to read:
"THIS COLLATERAL AGREEMENT, dated as of June 7, 1995, as
amended by Supplement and Amendment, dated as of December 20, 1996
(this "Collateral Agreement"), is entered into by and among NATIONAL
FLEET FUNDING CORPORATION, a Delaware corporation ("NFC"), GENERAL
MOTORS CORPORATION, a Delaware corporation ("GM"), as an A Support
Credit Enhancer, THE BANK OF NEW YORK, a New York banking corporation
("BONY"), as a Reduction Support Credit Enhancer and also an A Support
Credit Enhancer, CAISSE NATIONALE DE CREDIT AGRICOLE ("Credit
Agricole"), as the B Support Credit Enhancer, CITIBANK, N.A., a
national banking association, as Liquidity Agent (the "Liquidity
Agent") for the Liquidity Lenders and as Depositary (the "Depositary")
under the Depositary Agreement, acting on its own behalf and on behalf
of the Holders of Commercial Paper Notes, CREDIT SUISSE, a Swiss
banking corporation acting through its New York branch ("Credit
Suisse"), as collateral agent (the "NFC
<PAGE> 4
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Collateral Agent") for itself and the Liquidity Lenders, the Liquidity
Agent, the Depositary on behalf of the Holders of Commercial Paper
Notes, and the Series 1996-2 Support Credit Enhancers, and CS FIRST
BOSTON CORPORATION, a Massachusetts corporation ("CSFB"), GOLDMAN,
SACHS & CO., a New York limited partnership (successor organization to
Goldman Sachs Money Markets, L.P., a Delaware limited partnership)
("GS & Co.") and CITICORP SECURITIES, INC., a Delaware corporation
("Citicorp", together with CSFB, GS & Co. and any other dealers for
Commercial Paper Notes engaged by NFC from time to time that agree to
become parties to the Dealer Agreement and this Agreement, the
"Dealers") as Dealers, and any placement agents for Commercial Paper
Notes engaged by NFC from time to time that agree to become parties to
the Placement Agency Agreement and this Agreement (the "Placement
Agents").
"BACKGROUND
1. NFC is issuing and selling its Commercial Paper Notes
(such capitalized term, together with each other capitalized term used
herein, shall have the meaning assigned thereto in Section 1.01) in
the commercial paper market and has obtained the Liquidity Commitments
of the Liquidity Lenders to make Liquidity Advances to NFC.
2. Upon and after the execution and delivery of the
Supplement and Amendment to Collateral Agreement, dated as of December
20, 1996 (the "NFC Collateral Agreement Amendment"), among the parties
hereto, NFC will (i) enable National Car Rental Financing Limited
Partnership, a special purpose Delaware limited partnership ("NFLP"),
to refinance the Refinanced Vehicles on the Series 1996-2 Closing Date
by (A) accepting the Series 1996-2 Note to be issued to NFC by NFLP
under the Series 1996-2 Supplement in the initial principal amount of
the then outstanding principal amount of the Loan Note under and as
defined in the Loan Agreement and (B) cancelling, upon the payment to
NFC by National of the unpaid accrued interest on the Loan Note and
upon the satisfaction of certain other conditions, the Loan Note, and
(ii) thereafter make further Series 1996-2 Advances to NFLP from time
to time, the Indebtedness arising from which will be evidenced by the
Series 1996-2 Note, to enable NFLP to acquire Acquired Vehicles, and
to finance the acquisition by National of National Vehicles, from
Eligible Manufacturers.
3. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, NFLP as lessor and National as
lessee are entering into the Lease, pursuant to which NFLP will
refinance the Refinanced Vehicles, and will acquire Acquired Vehicles,
and will finance the acquisition of National Vehicles, in each case
for leasing to National for use in National's domestic daily rental
business; and to secure the NFLP Obligations with respect to the
Series 1996-2 Note,
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NFLP will under the Series 1996-2 Supplement, grant to the Trustee,
for the benefit of the Series 1996-2 Noteholder, a first priority
perfected security interest in all of NFLP's right, title and interest
in, among other things, the Lease.
4. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, NFC and the NFC Collateral
Agent are entering into a Supplement dated as of the date thereof to
the Master Collateral Agency Agreement, pursuant to which (i) as
security for the payment of the respective obligations from time to
time owing by National to NFLP and other Financing Sources (or any
Beneficiary as assignee thereof) under the Lease and other related
Financing Documents (as defined therein), National will grant to the
Master Collateral Agent for the benefit of the NFC Secured Parties a
first priority perfected security interest in such Refinanced Vehicles
and National Vehicles and the other National Master Collateral for the
Series 1996-2 Note, and (ii) as security for the payment of the
respective obligations from time to time owing by NFLP to the Trustee
for the benefit of the Series 1996-2 Noteholder (or any Beneficiary as
assignee thereof) under the Series 1996-2 Note and other related
Financing Documents, NFLP will grant to the Master Collateral Agent
for the benefit of the NFC Secured Parties a first priority perfected
security interest in such Acquired Vehicles and the other NFLP Master
Collateral for the Series 1996-2 Note.
5. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, National, NFC and the Series
1996-2 Support Credit Enhancers are entering into an Amended and
Restated Collateral Sharing Agreement, dated as of the date thereof,
amending and restating the predecessor agreement to the NFC Collateral
Sharing Agreement and pursuant to which the Series 1996-2 Support
Credit Enhancers will agree that their respective interests as
Financing Sources in the Master Collateral for the Series 1996-2
Noteholder is subject and subordinate to the interest therein of NFC
as a Financing Source and the A Support Credit Enhancers will agree
that their respective interests as a Financing Source in such Master
Collateral is subject and subordinate to the interest therein of the B
Support Credit Enhancer as a Financing Source.
6. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, NFC, the Liquidity Lenders and
the Liquidity Agent are entering into a Second Amendment to Liquidity
Agreement, dated as of the date thereof, providing for, among other
things, the Liquidity Commitments of the Liquidity Lenders to make, on
the terms and subject to the conditions set forth therein, Revolving
Advances to NFC from time to time to enable NFC to make Series 1996-2
Advances to NFLP from time to time and to make other Liquidity
Advances to NFC from time to time.
<PAGE> 6
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7. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, the A Credit Enhancer is
amending its A Letter of Credit as partial credit support for certain
amounts owing by National under the Lease and as liquidity support for
maturing Commercial Paper Notes.
8. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, BONY as an A Support Credit
Enhancer (and also as the Reduction Support Credit Enhancer) is
amending its Reduction A Support Letter of Credit as partial support
for certain amounts drawn under the A Letter of Credit.
9. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, (a) NFC, National and GM as an
A Support Credit Enhancer are amending the A Support Reimbursement
Agreement pursuant to which NFC and National, to the extent set forth
in such Agreement, will reimburse such A Support Credit Enhancer for
amounts paid by it to the A Credit Enhancer for reimbursement of draws
made under the A Letter of Credit and (b) NFC, National and BONY as an
A Support Credit Enhancer (and also as the Reduction Support Credit
Enhancer) are amending the Reduction A Support Reimbursement Agreement
pursuant to which NFC and National, to the extent set forth in such
Agreement, will reimburse such A Support Credit Enhancer for amounts
drawn under the Reduction A Support Letter of Credit.
10. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, the B Credit Enhancer is
amending its B Letter of Credit as partial credit support for certain
amounts owing by National under the Lease and as liquidity support for
maturing Commercial Paper Notes.
11. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, NFC, National and the B Credit
Enhancer are amending the B Letter of Credit Reimbursement Agreement
pursuant to which NFC and National, to the extent set forth in such
Agreement, will reimburse the B Credit Enhancer for amounts drawn
under its B Letter of Credit.
12. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, the B Support Credit Enhancer
is amending its B Support Letter of Credit to provide the B Credit
Enhancer support for its obligations under the B Letter of Credit.
13. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, NFC, National and the B
Support Credit Enhancer are amending the B Support Letter of Credit
Reimbursement Agreement pursuant to
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which NFC and National, to the extent set forth in such Agreement,
will reimburse the B Support Credit Enhancer for amounts drawn under
its B Support Letter of Credit.
14. Contemporaneously with the execution and delivery of
the NFC Collateral Agreement Amendment, NFC and the Depositary are
entering into an Amendment dated as of the date thereof to the
Depositary Agreement, which provides for the issuance of Commercial
Paper Notes.
15. Contemporaneously with the execution and delivery of
this Collateral Agreement, and on or prior to the inclusion of an
additional Manufacturer as an Eligible Manufacturer, NFC, National,
NFLP, the Master Collateral Agent and such Eligible Manufacturer
selling Vehicles to National or NFLP financed or refinanced with the
proceeds from Series 1996-2 Advances made by NFC, have entered into,
or will enter into, an Assignment Agreement, pursuant to which
National and NFLP each assigns to the Master Collateral Agent for the
benefit of NFC and the NFC Collateral Agent certain of National's and
NFLP's rights under the Repurchase Program offered by such Eligible
Manufacturer.
16. NFC is entering into this Collateral Agreement with
Series 1996-2 Support Credit Enhancers, the Liquidity Agent, the
Depositary, the NFC Collateral Agent, the Placement Agents and the
Dealers for the purpose of, among other things, providing for the
repayment or payment of all amounts at any time and from time to time
owing by NFC to the Liquidity Lenders or the Liquidity Agent under or
in connection with the Liquidity Agreement or this Collateral
Agreement and all amounts owing at any time and from time to time by
NFC to the A Support Credit Enhancers under or in connection with the
A Support Reimbursement Agreement or this Collateral Agreement or
owing by NFC to the B Support Credit Enhancer under or in connection
with the B Support Letter of Credit Reimbursement Agreement or this
Collateral Agreement or owing by NFC to the Holders of the Commercial
Paper Notes or the Depositary or owing by NFC to the NFC Collateral
Agent hereunder or owing by NFC to the Dealers under the Dealer
Agreement or owing by NFC to the Placement Agents under the Placement
Agency Agreement.
"NOW, THEREFORE, in consideration of the premises and
agreements herein contained, each of NFC, the Series 1996-2 Support
Credit Enhancers, the Liquidity Agent, the Depositary, the Agent, the
Dealers and the Placement Agents agrees as follows:
<PAGE> 8
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"ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions. Capitalized terms used but not
defined herein (including the preamble and the recitals hereto) shall
have the meanings assigned to such terms in the Base Indenture, dated
as of April 30, 1996, as amended by the Supplement and Amendment to
Base Indenture, dated as of December 20, 1996, and as supplemented by
the Series 1996-2 Supplement, dated as of December 20, 1996, between
National Car Rental Financing Limited Partnership, a special purpose
Delaware limited partnership ("NFLP"), and The Bank of New York, a New
York banking corporation, as trustee (together with its successors in
trust thereunder as provided in such Base Indenture, the "Trustee"),
as the same may be further amended, supplemented or otherwise modified
from time to time in accordance with the provisions thereof (the "Base
Indenture" or the "Series 1996-2 Supplement"). The definitions of
such terms in the Base Indenture or the Series 1996-2 Supplement shall
be referred to herein and in all other Related Documents as the
"Definitions List"."
(b) The terms used in the NFC Collateral Agreement set
forth below shall be changed to the terms, respectively, set opposite such
terms below:
<TABLE>
<CAPTION>
TERMS USED IN THE NFC COLLATERAL AGREEMENT CHANGED TO
------------------------------------------ ----------
<S> <C>
A Support Credit Enhancer A Support Credit Enhancers
A Support Reimbursement Agreement A Support Reimbursement Agreements
Agent NFC Collateral Agent
B Support Credit Enhancers B Support Credit Enhancer
B Support Letters of Credit B Support Letter of Credit
Collateral Agreement NFC Collateral Agreement
Collateral Sharing Agreement NFC Collateral Sharing Agreement
</TABLE>
<PAGE> 9
9
<TABLE>
<CAPTION>
TERMS USED IN THE NFC COLLATERAL AGREEMENT CHANGED TO
------------------------------------------ ----------
<S> <C>
Credit Enhancer Series 1996-2 Enhancement Provider
Credit Payment Deficit Series 1996-2 Lease Payment Deficit
Fronting Credit Enhancers Series 1996-2 Fronting Credit Enhancers
Fronting Letter of Credit Amount Series 1996-2 Fronting Letter of Credit
Amount
Fronting Letters of Credit Series 1996-2 Fronting Letters of Credit
Interest Period Series 1996-2 Interest Period
Loan Agreement Series 1996-2 Supplement and/or the Lease, as
applicable
National National and/or NFLP, as applicable
Obligations NFC Obligations
Required Enhancement Amount Series 1996-2 Required Enhancement Amount
Support Credit Enhancers Series 1996-2 Support Credit Enhancers
</TABLE>
(c) All references to "Loan Event of Default" and
"Potential Loan Event of Event of Default" throughout the NFC Collateral
Agreement are deleted.
(d) (i) All references to "Vehicles" and "Repurchase
Programs" throughout the NFC Collateral Agreement shall mean
and refer to those
<PAGE> 10
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Vehicles and Repurchase Programs, respectively, that are part
of the Master Collateral for the Series 1996-2 Note.
(ii) All references to "the Master Collateral for
which NFC and the Support Credit Enhancers are designated as
Financing Sources and the Agent and the Support Credit
Enhancers are designated as Beneficiaries" throughout the NFC
Collateral Agreement include, without limitation, the Master
Collateral for the Series 1996-2 Note.
(e) Clause Fifth of Section 2.01 is amended in full to
read:
"Fifth, first, the payment, pro rata, of all principal
Indebtedness (including Commitment Termination Date Liquidity Advances),
at any time and from time to time, due (in the case of a Commitment
Termination Date Liquidity Advance, such Advance will be deemed to be
due for purposes of this clause Fifth on the date such Advance is made)
from NFC (a) to the Liquidity Lenders in connection with the Liquidity
Advances made pursuant to the Liquidity Agreement, (b) to the A Support
Credit Enhancers in connection with A Support Liquidity Disbursements,
(c) to the B Support Credit Enhancer in connection with B Support LOC
Liquidity Disbursements made under the B Support Letter of Credit and
(d) if applicable, to the Series 1996-2 Cash Collateral Accounts in
connection with moneys withdrawn from such Accounts to fund any LOC
Liquidity Disbursements, together with all amounts payable in respect of
interest on any of the foregoing; and second, the payment, pro rata, of
the obligations of NFC in connection with A Support Credit
Disbursements, A Support Reduction Disbursements, and B Support LOC
Credit Disbursements and the NFC Reimbursement Share of any A Support
Termination Disbursement, A Support Event of Default Disbursement or B
Support LOC Termination Disbursements, together with all amounts payable
in respect of interest on any of the foregoing;"
(f) Subsection (a) of Section 3.03 is amended in full to
read:
"(a) All action necessary (including, without limitation,
the filing of UCC-1 financing statements, the delivery of the Series
1996-2 Note to the NFC Collateral Agent, the assignment and delivery of
the Lease to the Trustee, the assignment of certain rights under the
Repurchase Programs to the Master Collateral Agent, and the notation on
the Vehicle certificates of title of the Master Collateral Agent's lien
or the assignment of an existing lien) to protect and perfect the NFC
Collateral Agent's security interest on behalf of the Secured Parties in
the Assigned Collateral now in existence and hereafter acquired or
created, the Cash Collateral Accounts and the
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Deposited Funds has been duly and effectively taken or, in the case of
such notation on such Vehicle certificates of title, is being diligently
taken."
(g) Clauses (i) through (viii) of Section 4.01(a)
(describing the Assigned Collateral) are amended in full to read, respectively:
"(i) the NFC Agreements, including, without limitation,
the Series 1996-2 Note, all moneys due and to become due to NFC from
NFLP under or in connection with the NFC Agreements, whether payable as
principal, interest, rents, fees, expenses, costs, indemnities,
insurance recoveries, damages for the breach of any of the NFC
Agreements or otherwise, and all rights, remedies, powers, privileges
and claims of NFC against any other party under or with respect to the
Series 1996-2 Note, the Series 1996-2 Supplement and the other NFC
Agreements (whether arising pursuant to the terms of such NFC Agreements
or otherwise available to NFC at law or in equity), the right to enforce
any of the Series 1996-2 Note, the Series 1996-2 Supplement or other NFC
Agreements as provided herein and to give or withhold any and all
consents, requests, notices, directions, approvals, extensions or
waivers under or with respect to the Series 1996-2 Note, the Series
1996-2 Supplement or other NFC Agreements or the obligations of any
party thereunder; and
(ii) all right, title and interest of NFC in, to and under
any Repurchase Programs as they relate to the Refinanced Vehicles or to
the National Vehicles or Acquired Vehicles financed with the proceeds of
Series 1996-2 Note, and all moneys due and to become due in respect of
such Vehicles from the Manufacturers under or in connection with the
Repurchase Programs (other than Excluded Payments) whether payable as
Vehicle repurchase prices, auction sales proceeds, fees, expenses,
costs, indemnities, insurance recoveries, damages for breach of the
Repurchase Programs or otherwise and all rights to compel performance
and otherwise exercise remedies thereunder; and
(iii) [reserved]; and
(iv) [reserved]; and
(v) all other right, title and interest of NFC in, to and
under the Master Collateral Agency Agreement, including, without
limitation, the portion of the Master Collateral for the Series 1996-2
Note; and
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(vi) all additional property that may from time to time
hereafter be subjected to the grant and pledge hereof by NFC or by
anyone on its behalf; and
(vii) all property assigned to the NFC Collateral Agent
pursuant to Section 5.02 hereof, including the Accounts, the Cash
Collateral Accounts and the Deposited Funds; and
(viii) all proceeds, products and profits of and from any
and all of the foregoing, including, without limitation, payments under
insurance (whether or not the Master Collateral Agent or the NFC
Collateral Agent is the loss payee thereof) or Vehicle warranties and
cash; provided that in no event shall any of the foregoing include any
right, title or interest in the Fleet Finance Agreement and payments
thereunder."
(h) The first sentence of Section 4.02 (concerning the
application of Assigned Collateral) is amended in full to read:
"NFC hereby acknowledges and agrees that, until this Collateral
Agreement is terminated, NFC shall, and the NFC Collateral Agent is
authorized to, cause (i) all moneys, instruments, cash and other
proceeds due and to become due to NFC or the NFC Collateral Agent under
or in connection with the Master Collateral for the Series 1996-2 Note
under the Master Collateral Agency Agreement (including, without
limitation, amounts due from Manufacturers under their Repurchase
Programs but excluding amounts representing the proceeds from sales of
Vehicles by National or NFLP at auction to third parties other than the
Manufacturers, warranty payments and insurance proceeds) to be paid
directly to the Master Collateral Agent for deposit into the Master
Collateral Account; (ii) amounts representing the proceeds from sales of
Vehicles that are part of the Master Collateral for the Series 1996-2
Note by National or NFLP at auction to third parties other than the
Manufacturers to be deposited by National or NFLP within two Business
Days of its receipt thereof into the Master Collateral Account and (iii)
all payments made by or on behalf of NFLP under the Series 1996-2 Note
to be deposited into the NFC Collection Account or such other account as
the NFC Collateral Agent may from time to time specify to the Person
making such payments; and, in each case of clauses (i), (ii) and (iii)
above, NFC represents to the Secured Parties that it has instructed
National, NFLP and the Manufacturers, as applicable, to so remit such
amounts."
(i) The last paragraph of Section 4.04, and Section 4.05,
are amended in full to read, respectively:
<PAGE> 13
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"Upon the occurrence of an Amortization Event, the NFC
Collateral Agent, upon direction by the Required Liquidity Providers,
shall direct NFC (i) not to make any further Series 1996-2 Advances, and
(ii) if no Commercial Paper Notes are then outstanding, to declare, or
to direct the Trustee to declare, the Series 1996-2 Note immediately due
and payable.
"SECTION 4.05. Notice of Default. Promptly upon becoming
aware thereof, NFC agrees to give the Liquidity Agent, the Liquidity
Lenders, the Series 1996-2 Support Credit Enhancers, the Depositary, the
Placement Agents, the Dealers, the NFC Collateral Agent, the Master
Collateral Agent and each Rating Agency prompt written notice (and in no
case more than two days after NFC has actual knowledge thereof) of each
Amortization Event or Potential Amortization Event, and each default on
the part of any Manufacturer under any Repurchase Program, that comes to
NFC's attention."
(j) The second paragraph of Section 5.01 is amended in
full to read:
"It is understood and agreed by NFC and the Secured Parties
that on any Business Day there shall be deposited in the Collateral
Account the following moneys, instruments, cash and proceeds received by
the NFC Collateral Agent or NFC at any time and from time to time: (a)
from the Depositary from the sale of Commercial Paper Notes to the
extent of maturing Commercial Paper Notes, (b) during the Series 1996-2
Rapid Amortization Period, from the Master Collateral Agent pursuant to
the Master Collateral Agency Agreement, (c) from the sale of Vehicles in
accordance with Section 4.03(b) hereof, (d) during the Series 1996-2
Rapid Amortization Period and, to the extent that interest shall be
payable to the applicable NFC Secured Parties, during the Series 1996-2
Revolving Period, any other proceeds of the Assigned Collateral, (e)
from the Series 1996-2 Fronting Credit Enhancers as LOC Liquidity
Disbursements, (f) subject to the provisions of Section 5.05, from the
Series 1996-2 Fronting Credit Enhancers as LOC Credit Disbursements, (g)
subject to the provisions of Section 5.05, from the Cash Collateral
Accounts pursuant to Section 5.09 and (h) any and all moneys at any time
and from time to time received on behalf of NFC, and required by the
terms of this Collateral Agreement, the Master Collateral Agency
Agreement, the Repurchase Programs or any other Related Document to be
deposited in the Collateral Account."
(k) Section 5.02(b) is amended (i) by changing the
wording of Section 5.02(b) that occurs before clauses (i) though (ix) thereof
to read as follows:
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"So long as no Amortization Event shall have occurred and then be
continuing, NFC, with respect to clauses (ii) and (iv) through (viii)
below, and the Depositary with respect to clause (i) below, and the
Liquidity Agent, on behalf of the Liquidity Lenders, with respect to
clause (iii) below, shall have the right to instruct the Agent to
withdraw or allocate and retain, or order the transfer of, Deposited
Funds from any of the Accounts (subject to the penultimate paragraph of
Section 5.01 with respect to the Termination Advance Account), from time
to time as necessary, for deposit into the NFC Collection Account or for
the following purposes in the following priority:"
and (ii) by changing clause (iv) of Section 5.02(b) to read:
"(iv) first, the payment, pro rata, of all principal
Indebtedness (including Commitment Termination Date Liquidity Advances)
at any time and from time to time due (in the case of a Commitment
Termination Date Liquidity Advance, such Advance will be deemed to be
due for purposes of this Section 5.02(b)(iv) on the date such Advance is
made) from NFC (a) to the Liquidity Lenders in connection with the
Liquidity Advances made pursuant to the Liquidity Agreement, (b) to the
A Support Credit Enhancers in connection with A Support Liquidity
Disbursements, (c) to the B Support Credit Enhancer in connection with B
Support LOC Liquidity Disbursements and (d) if applicable, to the Cash
Collateral Accounts in connection with moneys withdrawn from such
Accounts to fund any LOC Liquidity Disbursements, together with all
amounts payable in respect of interest on any of the foregoing; and
second, the payment, pro rata, of the obligations of NFC in connection
with A Support Credit Disbursements, A Support Reduction Disbursements,
and B Support LOC Credit Disbursements and the NFC Reimbursement Share
of any A Support Termination Disbursement, A Support Event of Default
Disbursement or B Support LOC Termination Disbursement, together with
all amounts payable in respect of interest on any of the foregoing."
(l) Clause (viii) of Section 5.02(b) is amended in full
to read:
"(viii) the making of further Series 1996-2 Advances by NFC
under the Series 1996-2 Supplement for the purchase or financing by
National or NFLP of additional Vehicles of the Manufacturers; and"
(m) Section 5.03 is amended by deleting from the fifth
sentence thereof the words "or to the Cash Reserve Account pursuant to clause
fifth of Section 2.01 or the corresponding provisions under Section 5.02(b)
hereof,".
<PAGE> 15
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(n) Section 5.04 is amended by deleting from the second
sentence thereof (i) clause (iii) (concerning Cash Collateral Account C) and
(ii) the words (immediately before the proviso thereto), "or National with
respect to Cash Collateral Account C".
(o) Section 5.05 is amended in full to read:
"SECTION 5.05. Credit Demand. (a) On or prior to the
Business Day preceding each Payment Date, NFC shall provide the NFC
Collateral Agent with a copy of the Monthly Certificate provided to NFC
by National pursuant to Section 24.7(vi) of the Lease. The NFC
Collateral Agent shall be entitled to rely on such Monthly Certificate
as evidence of the amount of payments with respect to Lease due on such
Payment Date. The NFC Collateral Agent shall calculate as of 11:00 a.m.
(New York City time) on each Payment Date the Series 1996-2 Lease
Payment Deficit, if any, on such Payment Date.
(b) So long as the A Letter of Credit shall not have been
terminated on any Business Day that a Series 1996-2 Lease Payment
Deficit exists, the NFC Collateral Agent shall, by 12:00 noon (New York
City time) on the same Business Day, draw on the A Letter of Credit in
an amount equal to the lesser of (i) such Series 1996-2 Lease Payment
Deficit and (ii) the full amount available to be drawn under the A
Letter of Credit on such Business Day, by presenting a draft accompanied
by a Certificate of A Credit Demand in the form of Annex A to the A
Letter of Credit, and shall, during the Series 1996-2 Revolving Period,
deposit the proceeds of such draw in the NFC Collection Account and, at
all other times, deposit the proceeds of such draw in the Collateral
Account. The NFC Collateral Agent shall promptly notify each Rating
Agency in writing of the occurrence of any such draw on the A Letter of
Credit.
(c) To the extent the Series 1996-2 Lease Payment Deficit
exceeds the A Letter of Credit Amount and A Support Liquidity
Disbursements are Outstanding, the NFC Collateral Agent shall effect an
A Conversion in accordance with the provisions of Section 5.08.
(d) If and only if, on any such Business Day that a
Series 1996-2 Lease Payment Deficit exists, the amount available to be
drawn under the A Letter of Credit and the amount of an A Conversion is
less than such Series 1996-2 Lease Payment Deficit (such deficiency is
referred to as a "B Credit Draw Amount") and the B Letter of Credit
shall not have been terminated, the NFC Collateral Agent shall, by 12:00
noon (New York City time) on the same Business Day, draw on the B Letter
of Credit in an amount equal to the lesser of (i) such B Credit Draw
Amount and (ii) the full
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amount available to be drawn under the B Letter of Credit on such
Business Day, by presenting a draft accompanied by a Certificate of B
Credit Demand in the form of Annex A to the B Letter of Credit, and
shall, during a Series 1996-2 Revolving Period, deposit the proceeds of
such draw in the NFC Collection Account and, at all other times, deposit
the proceeds of such draw in the Collateral Account. The NFC Collateral
Agent shall promptly notify each Rating Agency in writing of the
occurrence of any such draw on the B Letter of Credit."
(p) Subsection (e) of Section 5.06 is amended by changing
the term "Reduction Amount Letter of Credit" contained therein to the term
"Reduction Amount Letter of Credit Agreement".
(q) Subsection (a) of Section 5.07 is amended by changing
the term "the Loan payments" contained in clause (2) thereof to the term "the
Lease payments".
(r) Subsection (b) of Section 5.07 is amended by (i)
changing the term "B Certificate of Termination Demand" contained therein to the
term "Certificate of B Termination Demand", (ii) deleting clause (ii) thereof
(creating Cash Collateral Account C), and (iii) deleting the words "and Cash
Collateral Account C" from the proviso thereto.
(s) Section 5.07 is further amended by deleting therefrom
subsection (e) (concerning Cash Collateral Account C).
(t) Section 5.08 is amended by (i) deleting the second
sentence thereof (concerning the Cash Reserve Account), (ii) changing the first
reference to "Cash Reserve Conversion" in the third sentence thereof to "A
Conversion" and (iii) deleting the second reference to "Cash Reserve
Conversion" in the third sentence thereof.
(u) Subsection (a) of Section 5.09 is amended in full to
read:
"(a) When established, the Cash Collateral Accounts are
intended to function in all respects as replacements in whole or in part
for, and the equivalent of all or a portion of, the Series 1996-2
Fronting Letters of Credit. Accordingly, following their creation, each
reference herein to "LOC Liquidity Disbursements", "LOC Credit
Disbursements", "Conversion" and similar terms shall mean and be a
reference to actions taken with respect to the Cash Collateral Accounts
that correspond to actions that otherwise would have been taken with
respect to the Series 1996-2 Fronting Letters of Credit. Without
limiting the generality of the foregoing, upon funding of the Cash
Collateral Accounts, the NFC Collateral Agent shall, (i) at
<PAGE> 17
17
all times after the funding of any portion of the Cash Collateral
Account A when otherwise required to make a draw under the A Letter of
Credit pursuant to the second paragraph of Section 5.05 or 5.06(b),
first, make a draw from the Cash Collateral Account A in the amount and
at such time as a draw would be made under the A Letter of Credit
pursuant to the second paragraph of Section 5.05 or 5.06(b), as
applicable, and second, make a draw under the A Letter of Credit and
(ii) at all times after the funding of any portion of the Cash
Collateral Account B when otherwise required to make a draw under the B
Letter of Credit pursuant to the third paragraph of Section 5.05 or
Section 5.06(c), make a draw, first, from the Cash Collateral Account B,
in each case in the amount and at such time as a draw would be made
under the B Letter of Credit pursuant to the third paragraph of Section
5.05 or 5.06(c), as applicable and, second, make a draw under the B
Letter of Credit. In addition, when a Conversion is required to occur
pursuant to Section 5.08, a Conversion shall occur in respect of
drawings made on the Cash Collateral Accounts pursuant to Section
5.06(b) or (c). The NFC Collateral Agent shall provide written notice
to National, each Rating Agency and the Series 1996-2 Support Credit
Enhancers of any draw from the Cash Collateral Accounts pursuant to
Section 5.05. The Cash Collateral Account A shall be reimbursed in the
amount that would have been paid to the A Support Credit Enhancers in
respect of A Support Liquidity Disbursements under Sections 2.01 and
5.02(b). The Cash Collateral Account B shall be reimbursed in the
amount that would have been paid to the B Support Credit Enhancer in
respect of B Support LOC Liquidity Disbursements under Sections 2.01 and
5.02(b). The Cash Collateral Accounts shall be reimbursed for any
withdrawals made pursuant to Section 5.05 in the following order of
priority: first, the Cash Collateral Account B shall be reimbursed,
and, second, the Cash Collateral Account A shall be reimbursed. If,
following the occurrence of an Event of Bankruptcy with respect to
National, NFLP, NFC or any of the Series 1996-2 Fronting Credit
Enhancers, remittance of any amount under clause Fifth of Section 2.01
or under clause (iv) of Section 5.02(b) in respect of any Support
Liquidity Disbursement (whether such Support Liquidity Disbursement
shall have arisen due to a draw under either of the Series 1996-2
Fronting Letters of Credit or from the Cash Collateral Accounts) would
not, following application thereof, immediately reinstate the Series
1996-2 Fronting Letters of Credit or the Cash Collateral Accounts to the
full extent of the portion of such payment that is in respect of
principal, no remittance shall be made in respect of the principal
amount of such Support Liquidity Disbursement and funds otherwise
available for such purpose shall be remitted, to the extent permitted by
law, to the Liquidity Lenders for ratable application against the
principal amount of Liquidity Advances then outstanding. Any notice
required to have been given to the Support Credit Enhancers shall
continue to be given until such time as the Support Credit Enhancers are
reimbursed in full."
<PAGE> 18
18
(v) Subsection (b) of Section 5.09 is amended by deleting
therefrom (i) clause (iii) thereof (concerning Cash Collateral Account C), (ii)
the words "or National with respect to the Cash Collateral Account C" wherever
such words appear, and (iii) clause second thereof, and by changing clauses
third and fourth thereof to clauses second and third, respectively.
(w) Subsection (a) of Section 7.02 is amended by
restating the fourth sentence thereof to read:
"The aggregate liability of the Liquidity Lenders hereunder for any
claim shall be limited to a percentage of the indemnity owing equal to
the percentage that the Aggregate Liquidity Commitment is of the Program
Size, and the liability of each Series 1996-2 Support Credit Enhancer
shall be limited to a percentage of the indemnity owing equal to the
percentage that its Credit Enhancer Commitment is of the Program Size."
(x) Section 9.04 is amended by changing the address and
facsimile number of each of the NFC Collateral Agent, the A Support Credit
Enhancers and the B Support Credit enhancer to the respective address and
facsimile number set forth below:
"If to the NFC Collateral Agent:
Until January 1, 1997:
Credit Suisse
12 East 49th Street
New York, New York 10017
Attention: Asset Finance
Telephone: (212) 238-5370
Telecopy No.: (212) 238-5332
From and after January 1, 197:
Credit Suisse First Boston
11 Madison Avenue
New York, New York 10010
Attention: Asset Finance
<PAGE> 19
19
Telephone: (212) 325-9078
Telecopy No.: (212) 325-6677
"If to GM as an A Support Credit Enhancer:
General Motors Corporation
767 Fifth Avenue
New York, New York 10153
Attention: Assistant Treasurer
Tel. No.: (212) 418-3502
Telecopy No.: (212) 418-3695
with a copy to:
Attention: Office of the General Counsel
General Motors Corporation
3031 West Grand Boulevard
Detroit, Michigan 48202
Tel. No.: (313) 974-1969
Telecopy No.: (313) 974-0685
"If to BONY as an A Support Credit Enhancer:
The Bank of New York
Central Division
19th Floor
One Wall Street
New York, New York 10286
Attention: Richard A. Raffetto
Tel. No.: (212) 635-8044
Telecopy No.: (212) 635-1208
<PAGE> 20
20
"If to Credit Agricole as the B Support Credit Enhancer:
Caisse Nationale de Credit Agricole
55 East Monroe Street
Chicago, Illinois 60603-5702
Attention: Laurence Grant
Tel. No.: (312) 372-9200
Telecopy No.: (312) 372-2830"
SECTION 3. Conditions of Effectiveness. This Amendment shall
become effective when, and only when, the Liquidity Agent shall have received
counterparts of this Amendment executed by NFC, GM, BONY, Credit Agricole,
Citibank as Liquidity Agent and as Depositary, and Credit Suisse as the NFC
Collateral Agent, and Section 2 hereof shall become effective when, and only
when, the Liquidity Agreement Amendment, including Sections 2, 3 and 4 thereof,
shall have become effective in accordance with Section 5 of the Liquidity
Agreement Amendment.
SECTION 4. Reference to and Effect on the Related Documents.
(a) Upon the effectiveness of this Amendment, including Section 2 hereof, on
and after the date hereof each reference in the NFC Collateral Agreement to
"this Collateral Agreement", "hereunder", "hereof" or words of like import
referring to the NFC Collateral Agreement, and each reference in the other
Related Documents to "the Collateral Agreement", "thereunder", "thereof" or
words of like import referring to the NFC Collateral Agreement, shall mean and
be a reference to the NFC Collateral Agreement as amended hereby, and each
reference in the Related Documents to "the Definitions List annexed as Annex A
to the Liquidity Agreement" or words of like import shall mean and be a
reference to the "Definitions List" as defined in the Liquidity Agreement as
amended by the Liquidity Agreement Amendment.
(b) Except as specifically amended above or as
contemplated by the Liquidity Agreement Amendment and Section 5(e) of the
Liquidity Agreement Amendment, the NFC Collateral Agreement and all other
Related Documents are and shall continue to be in full force and effect and are
hereby in all respects ratified and confirmed. Without limiting the generality
of the foregoing, the NFC Collateral Agreement and all of the Assigned
Collateral described therein do and shall continue to secure the payment of all
NFC Obligations.
<PAGE> 21
21
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of any party thereto under any of the Related
Documents, nor constitute a waiver of any provision of any of the Related
Documents.
SECTION 5. Limited Recourse to NFC; No Recourse. (a) GM,
BONY, Credit Agricole, the Liquidity Agent, the Depositary and the NFC
Collateral Agent agree that the obligations of NFC to such parties hereunder
shall be payable in the order and priority set forth in Section 2.01 and
5.02(b), as applicable, of the NFC Collateral Agreement. Such obligations
shall be due and payable only to the extent that NFC's assets and the Series
1996-2 Fronting Letters of Credit Amount are sufficient to pay such
obligations. No claims of such parties arising under or in connection with the
NFC Collateral Agreement are intended to be impaired or waived by this Section
5.
(b) Without limitation to the obligations of NFC
hereunder, no recourse shall be had for the payment of any fee hereunder or any
other obligation or claim arising out of or based upon this Amendment or any
amendment to any other Related Document against any stockholder, employee,
officer, director, affiliate or incorporator of NFC based on their status as
such or their actions in connection therewith. The provisions of this Section
5 shall survive the termination of this Amendment.
SECTION 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement. Delivery of an executed counterpart of a signature
page to this Amendment by telefacsimile shall constitute delivery of a manually
executed counterpart of this Amendment.
SECTION 7. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York
excluding (to the greatest extent a New York court would permit) any rule of
law that would cause application of the laws of any jurisdiction other than the
State of New York.
<PAGE> 22
22
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
NATIONAL FLEET FUNDING
CORPORATION
By /s/ MJ Becker
---------------------
Name: MJ Becker
Title:
CREDIT SUISSE, NEW YORK
BRANCH, as NFC Collateral Agent
By /s/ Roger W. Saylor
---------------------
Name: ROGER W. SAYLOR
Title: ASSOCIATE
By /s/ Carl Jackson
---------------------
Name: CARL JACKSON
Title: MEMBER OF SENIOR MANAGEMENT
CITIBANK, N.A., as Liquidity Agent
and as Depositary
By /s/ Annette Marsula
---------------------
Name: Anette Marsula
Title: Senior Trust Officer
<PAGE> 23
23
GENERAL MOTORS CORPORATION,
as an A Support Credit Enhancer
By /s/ Marc L. Bourhis
-----------------------
Name: Marc L. Bourhis
Title: Attorney-in-fact
THE BANK OF NEW YORK, as an
A Support Credit Enhancer
By /s/ Richard A. Raffetto
-----------------------
Name: Richard A. Raffetto
Title: Assistant Vice President
<PAGE> 24
24
CAISSE NATIONALE DE CREDIT
AGRICOLE, as B Support Credit
Enhancer
By /s/ Katherine L. Abbott
----------------------------
Name: KATHERINE L. ABBOTT
Title: FIRST VICE PRESIDENT
CS FIRST BOSTON CORPORATION, as a Dealer
By /s/ Mark D. Wolsij
----------------------------
Name: MARK D. WOLSIJ
Title: VICE PRESIDENT
GOLDMAN, SACHS & CO. (successor
organization to Goldman Sachs
Money Markets, L.P.), as a Dealer
By: /s/ John P. Heanne
----------------------------
Name: John P. Heanne
Title: Authorized Signatory
CITICORP SECURITIES, INC., as a Dealer
By /s/ J. Darrell Thomas
----------------------------
Name: J. Darrell Thomas
Title: Vice President
<PAGE> 1
Exhibit 4.18
EXECUTION COPY
AMENDED AND RESTATED
MASTER COLLATERAL AGENCY AGREEMENT
among
NATIONAL CAR RENTAL SYSTEM, INC.,
as a grantor and as Servicer,
NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP,
as a grantor, as a Financing Source and as a Beneficiary
VARIOUS FINANCING SOURCES PARTIES HERETO,
VARIOUS BENEFICIARIES PARTIES HERETO,
and
CITIBANK, N.A.,
not in its individual capacity but solely
as Master Collateral Agent
Dated as of April 30, 1996
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
CERTAIN DEFINITIONS
<S> <C> <C>
1.1. Certain Definitions .................................................3
1.2 Interpretation and Construction ....................................14
ARTICLE II
MASTER COLLATERAL AGENT AS LIENHOLDER
FOR THE BENEFICIARIES
2.1. Security Interest ..................................................14
2.2. Designation of Beneficiaries .......................................17
2.3. Redesignation of Beneficiaries .....................................18
2.4. Servicer's Fleet Report ............................................19
2.5. Master Collateral Account ..........................................19
2.6. Certificates of Title ..............................................22
2.7. Release of Collateral ..............................................22
2.8. Power of Attorney ..................................................24
ARTICLE III
THE SERVICER
3.1. Acceptance of Appointment...........................................24
3.2. Servicer Functions .................................................24
3.3. The Servicer Not to Resign .........................................25
3.4. Servicing Rights of Master Collateral Agent ........................26
3.5. Incumbency Certificate .............................................26
ARTICLE IV
THE MASTER COLLATERAL AGENT
4.1. Appointment.........................................................26
4.2. Representations.....................................................29
4.3. Exculpatory Provisions..............................................29
4.4. Limitations on Duties of the Master Collateral
Agent ............................................................30
4.5. Resignation and Removal of Master Collateral
Agent ............................................................33
4.6. Status of Successors to Master Collateral
Agent ............................................................34
4.7. Merger of the Master Collateral Agent...............................34
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
4.8. Compensation and Expenses...........................................35
4.9. Stamp, Other Similar Taxes and Filing Fees..........................35
4.10. Indemnification.....................................................35
ARTICLE V
MISCELLANEOUS
5.1. Amendments, Supplements and Waivers.................................36
5.2. Notices.............................................................37
5.3. Headings ...........................................................37
5.4. Severability .......................................................37
5.5. Counterparts........................................................37
5.6. Conflicts with Financing Documents; Reservation
of Rights.........................................................37
5.7. Binding Effect......................................................38
5.8. Governing Law.......................................................38
5.9. Effectiveness.......................................................38
5.10. Termination of Beneficiary..........................................38
5.11. Termination of this Agreement.......................................38
5.12. Assignment by Financing Sources.....................................39
5.13. NFC Related Documents; NFLP's Related
Documents.........................................................39
5.14. No Bankruptcy Petition Against Financing
Sources...........................................................39
5.15. Jurisdiction; Consent to Service of Process.........................39
5.16. Waiver of Jury Trail................................................40
5.17. Insurance Notification..............................................40
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
Exhibit A Supplement
Exhibit B Servicer's Fleet Report
Exhibit C Certificate of Title Locations
Exhibit D Power of Attorney
</TABLE>
-ii-
<PAGE> 4
AMENDED AND RESTATED MASTER COLLATERAL AGENCY AGREEMENT
THIS AMENDED AND RESTATED MASTER COLLATERAL AGENCY AGREEMENT, dated as of
April 30, 1996 (amending and restating the Master Collateral Agency Agreement
dated as of June 7, 1995 (the "Original Agreement")) (as further amended,
supplemented, restated or otherwise modified from time to time, this
"Agreement"), among NATIONAL CAR RENTAL SYSTEM, INC., a Delaware corporation
("National"), as servicer (in such capacity, the "Servicer") and as a grantor,
NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP, a Delaware limited
partnership ("NFLP"), as a grantor, THE BANK OF NEW YORK, a New York banking
corporation, not in its individual capacity but solely as trustee for the
benefit of the Noteholders under the NFLP Indenture referred to below (in such
capacity, the "Trustee"), NATIONAL FLEET FUNDING CORPORATION, a Delaware
corporation ("NFC"), GENERAL MOTORS CORPORATION, a Delaware corporation, in its
capacity as Support Credit Enhancer ("GM"), CITIBANK, N.A., a national banking
association ("Citi"), CREDIT SUISSE, a Swiss banking corporation acting through
its New York branch ("Credit Suisse"; and together with NFLP, NFC, GM, Citi and
any other party which from time to time executes a Supplement hereto as a
Financing Source (which may include National) being herein called individually a
"Financing Source" and collectively, the "Financing Sources"), CREDIT SUISSE, a
Swiss banking corporation acting through its New York branch, as collateral
agent under the NFC Collateral Agreement referred to below (in such capacity,
the "NFC Agent" and together with the Trustee, GM, Citi, Credit Suisse and any
other party which from time to time executes a Supplement hereto as a
Beneficiary being herein called individually a "Beneficiary" and collectively,
the "Beneficiaries"), and CITIBANK, N.A., not in its individual capacity but
solely as master collateral agent for the Beneficiaries (in such capacity, the
"Master Collateral Agent").
BACKGROUND
1. The parties to the Original Agreement (such term and all other
capitalized terms used herein having the meanings assigned thereto in Section
1.1 hereof unless otherwise indicated) desire to amend and restate the Original
Agreement in its entirety to provide for, among other things, the addition of
NFLP as a grantor thereunder in connection with the extension of financing by
NFLP to National and the acquisition of Vehicles by NFLP to be leased to
National.
2. National now owns, and will from time to time hereafter acquire or
lease, certain Vehicles for use in its daily domestic rental operations. NFLP
will from time to time acquire and lease
<PAGE> 5
to National, certain Vehicles for use in National's daily domestic rental
operations.
3. Pursuant to the Financing Documents executed by NFC, (i) NFC has made,
and may from time to time hereafter make loans to National secured by, among
other things, Vehicles and related rights, and (ii) NFC has assigned to the NFC
Agent all such loans and related security.
4. Pursuant to the Financing Documents executed by NFLP, (i) NFLP may
from time to time extend financing to National secured by, among other things,
Vehicles and related rights, and (ii) NFLP has assigned to the Trustee all such
obligations of National and related security.
5. Pursuant to the Financing Documents executed by NFLP, (i) NFLP may
from time to time acquire vehicles and lease such Vehicles to National, and (ii)
NFLP is assigning such lease and granting a security interest in the Vehicles
acquired by it and related security to the Master Collateral Agent hereunder for
the benefit of the Trustee.
6. Pursuant to that certain Supplement to Master Collateral Agency
Agreement dated as of June 7, 1995, each of Citi and Credit Suisse was
designated as a Financing Source and a Beneficiary under the Original Agreement
to secure payment of National's obligations from time to time owing to Citi and
Credit Suisse under the B Support Letter of Credit Reimbursement Agreement,
dated as of June 7, 1995, among National, NFC, Citi and Credit Suisse.
7. (a) Pursuant to that certain Supplement to Master Collateral Agency
Agreement dated as of June 7, 1995, GM was designated as a Financing Source and
a Beneficiary under the Original Agreement to secure payment of National's
obligations from time to time owing to GM under the A Support Reimbursement
Agreement, dated as of June 7, 1995, among National, NFC and GM.
(b) Pursuant to section 2.2 of this Agreement, GM is being designated as a
Financing Source and Beneficiary under this Agreement to secure payment of
National's obligations from time to time owing to GM under the Support
Reimbursement Agreement, dated as of April 30, 1996, between National and GM.
8. Each of National and NFLP may from time to time obtain financing with
respect to Vehicles acquired by it or obtain credit enhancement to support such
financing from other Persons (which Persons providing financing to National will
include NFLP) which are or shall hereafter become parties hereto as Financing
Sources or shall hereafter be named as Beneficiaries with respect to a Financing
Source.
-2-
<PAGE> 6
9. Citibank, N.A. has agreed to act as Master Collateral Agent, and in
its capacity as Master Collateral Agent to be named as the lienholder on the
Certificates of Title for the Vehicles, for the benefit of the Beneficiaries
from time to time.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1. Certain Definitions. As used in this Agreement, the following
terms have the respective meanings set forth below or set forth in another
section hereof or in any other agreement as indicated. Capitalized terms not
otherwise defined herein shall have the meanings assigned to such terms in the
Definitions List attached as Schedule 1 to the Base Indenture as in effect on
the date hereof and as such Schedule 1 may be amended, supplemented or modified
from time to time in accordance with the terms of the Base Indenture (the
"Definitions List").
"Affiliate" means, with respect to any specified Person, another Person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Person specified. For purposes
of this definition, "control" means the power to direct the management and
policies of a Person, directly or indirectly, whether through ownership of
voting securities, by contract or otherwise; and "controlled" and "controlling"
have meanings correlative to the foregoing.
"Assignment Agreement" means the agreement with respect to each
Manufacturer and its Manufacturer Program, entered into or to be entered into
among NFLP and/or National, as assignor, and the Master Collateral Agent, as
assignee, and acknowledged by such Manufacturer, assigning to the Master
Collateral Agent certain of NFLP's and/or National's right, title and interest
in such Manufacturer's Manufacturer Program as it relates to Vehicles purchased
from such Manufacturer.
"Base Indenture" shall mean the Base Indenture, dated as of April 30, 1996,
as such agreement may be amended, supplemented, restated or otherwise modified
from time to time in accordance with its terms, between NFLP and The Bank of New
York, as Trustee.
"Beneficiary" has the meaning set forth in the preamble.
-3-
<PAGE> 7
"'Business Day" means any day that is not a Saturday, Sunday or other day
on which commercial banking institutions in New York, New York, Minneapolis,
Minnesota and in the city in which the Corporate Trust Office is located are
authorized or obligated by law or executive order to be closed.
"Capitalized Cost" means, with respect to each Vehicle, the price paid for
such Vehicle by National or NFLP, as applicable, to the dealer or Manufacturer
selling such Vehicle, as more specifically defined in the Financing Documents
related to a Financing Source.
"Certificate of Title" means, with respect to each Vehicle, the certificate
of title applicable to that Vehicle duly issued in accordance with the
certificate of title act or statute covering that Vehicle.
"Chrysler" means Chrysler Corporation, a Delaware corporation.
"Corporate Trust Office" means the principal corporate trust office of the
Master Collateral Agent, located at 120 Wall Street, 13th Floor, New York, New
York, Attn: Structured Finance Group, or at such other address as the Master
Collateral Agent may designate from time to time by notice to National.
"Default" means any event of default or amortization event or any default
or any event, act or condition which with the lapse of time or notice or both
would become an event of default or amortization event (other than any scheduled
amortization event) under any of the Financing Documents.
"Depositary Agreement" means the Depositary Agreement, dated as of June 7,
1995, between NFC and Citibank, N.A., as depositary, as the same may be amended,
supplemented or modified from time to time.
"Depreciation Charge" means with respect to any Vehicle which is a Related
Vehicle of a Beneficiary, Depreciation Charge as defined in the Financing
Documents related to such Beneficiary, and if Depreciation Charge is not defined
in such Financing Documents, "Depreciation Charge" means, with respect to any
Vehicle covered by a Repurchase Program, the scheduled daily depreciation charge
set forth by the Manufacturer in its Repurchase Program for such Vehicle
calculated as set forth in such Repurchase Program.
"Designated Vehicle" means a Vehicle owned by NFLP or National with respect
to which the Servicer, National or NFLP has notified the Master Collateral Agent
in writing that such Vehicle has been designated to be exchanged for one or more
Replacement
-4-
<PAGE> 8
Vehicles or released for exchange pursuant to an Exchange Agreement.
"Duff & Phelps" means Duff & Phelps Credit Rating Co.
"Eligible Investments" means
(a) Government Obligations;
(b) Participation certificates (excluding stripped mortgage
securities which are purchased at prices exceeding their principal amounts)
and senior debt obligations of the Federal Home Loan Mortgage Corporation,
consolidated system wide bonds and notes of the Farm Credit System, senior
debt obligations and mortgage-backed securities (excluding stripped
mortgage securities which are purchased at prices exceeding their principal
amounts) of the Federal National Mortgage Association which, in the case of
mortgage-backed securities, are rated at least AA by S&P and Aa by Moody's
(and, if any securities issued by, or indebtedness of, a Financing Source
is then rated by Duff & Phelps and Duff & Phelps rates such mortgage-backed
securities, are rated at least AA by Duff & Phelps), senior debt
obligations (excluding securities that have no fixed value and/or whose
terms do not promise a fixed dollar amount at maturity or call date) of the
Student Loan Marketing Association and debt obligations of the Resolution
Funding Corp. (collectively, "Agency Obligations");
(c) Direct obligations of any state of the United States of America
or any subdivision or agency thereof whose short-term unsecured general
obligation debt has ratings from Standard & Poor's of at least A-1 and
Moody's of at least P-1 (and at least D-1 from Duff & Phelps, if any
securities issued by or indebtedness of a Financing Source are then rated
by Duff & Phelps and Duff & Phelps rates such investment) or any obligation
that has ratings from S&P and Moody's at least equivalent to A-1 and P-1,
respectively (and at least D-1 from Duff & Phelps, if any securities issued
by or indebtedness of a Financing Source are then rated by Duff & Phelps
and Duff & Phelps rates such investment), and which is fully and
unconditionally guaranteed by any state, subdivision or agency whose
short-term, unsecured general obligation debt has ratings from Standard &
Poor's and Moody's at least equivalent to A-l and P-1, respectively (and at
least D-1 from Duff & Phelps, if any securities issued by or indebtedness
of a Financing Source is then rated by Duff & Phelps and Duff & Phelps
rates such investment);
-5-
<PAGE> 9
(d) Commercial paper maturing in not more that three hundred
sixty-five (365) days and having ratings from Standard & Poor's and Moody's
at least equivalent to A-1 and P-1, respectively (and at least D-1 from
Duff & Phelps, if any securities issued by or indebtedness of a Financing
Source are then rated by Duff & Phelps and Duff & Phelps rates such
investment);
(e) Deposits, federal funds or bankers acceptances (maturing in not
more that three hundred sixty-five (365) days) of any domestic bank
(including a branch office of a foreign bank which branch office is located
in the United States, provided that the Master Collateral Agent shall have
received a legal opinion or opinions to the effect that full timely payment
of such deposit or similar obligation is enforceable against the principal
office or any branch of such bank), which:
(i) has an unsecured, uninsured and unguaranteed obligation
which has ratings from Standard & Poor's and Moody's at least
equivalent to A-1 and P-1, respectively (and at least D-1 from Duff &
Phelps, if any securities issued by or indebtedness of a Financing
Source are then rated by Duff & Phelps and Duff & Phelps rates such
investment), or
(ii) is the lead bank of a parent bank holding company with an
uninsured, unsecured and unguaranteed obligation meeting the rating
requirements in (i) above;
(f) Deposits of any bank or savings and loan association which has
combined capital, surplus and undivided profits of not less than $100
million, provided such deposits are fully insured by the FDIC, the Banking
Insurance Fund or the Savings Association Insurance Fund;
(g) Investments in a money-market fund which may be a 12b-1 fund as
registered under the Investment Company Act and is rated at least the
equivalent of AAm or AAm-G by Standard & Poor's and P-1 by Moody's (and at
least D-1 from Duff & Phelps, if any securities issued by or indebtedness
of a Financing Source are then rated by Duff & Phelps and Duff & Phelps
rates such investment);
(h) Repurchase agreements with any institution having short-term,
unsecured debt rated at least the equivalent of A-1 by Standard & Poor's
and P-1 by Moody's (and at least D-1 from Duff & Phelps, if any securities
issued by or indebtedness of a Financing Source are then rated by Duff &
Phelps and Duff & Phelps rates such investment); and
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(i) Other investment instruments approved in writing by the Majority
Beneficiaries and offered by financial institutions that have a combined
capital and surplus and undivided profits of not less than $250,000,000 and
with respect to which the Master Collateral Agent shall have received
written confirmation of the Rating Agencies that inclusion of any such
investment instrument as an Eligible Investment will not result in the
downgrading or withdrawal of the then current ratings of the Commercial
Paper Notes by the Rating Agencies.
"Eligible Vehicle" means, with respect to each Financing Source, a Vehicle
meeting the requirements for financing under the Financing Documents with
respect to such Financing Source.
"Exchange Agreement" means an agreement among NFLP, National and the
Qualified Intermediary which provides for the assignment by NFLP or National to
the Qualified Intermediary of (i) Exchanged Vehicles, (ii) all Exchanged Vehicle
Repurchase Rights, (iii) all right, title and interest of NFLP or National in,
to and under any contracts for the sale of any Exchanged Vehicle and (iv) all
right, title and interest of NFLP in, to and under any contracts for the
purchase of Replacement Vehicles; provided that any such Exchange Agreement
covering Vehicles financed under any Financing Documents will not become
effective with respect to Vehicles financed under such Financing Documents until
NFLP and National obtain (i) from each Rating Agency written confirmation that
entry into such Exchange Agreement will not result in the reduction or
withdrawal of the then current rating of any outstanding securities or
indebtedness issued by a Financing Source and (ii) opinions of counsel with
respect to perfection, priority and non-consolidation in substantially the same
form as those delivered as of the Closing Date.
"Exchanged Vehicle" means a Designated Vehicle that (i) (a) if subject to a
Repurchase Program, has been accepted for repurchase by the Manufacturer under
the related Repurchase Program or (b) if not subject to a Repurchase Program,
has been sold to a third party, (ii) (a) with respect to which NFLP or National
has received or concurrently receives delivery of one or more Replacement
Vehicles with an aggregate Net Book Value equal to or greater than the
Termination Value of such Designated Vehicle or (b) with respect to which the
release of the lien of the Master Collateral Agent thereon would not cause an
Asset Amount Deficiency to exist and (iii) with respect to which the Lien of the
Master Collateral Agent has been released in accordance with Section 2.7 of this
Agreement; provided that until the NFC Agent provides written notice to the
contrary to the Master Collateral Agent, no Vehicle that is a Related Vehicle
with respect to NFC shall be an Exchanged Vehicle.
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"Exchanged Vehicle Insurance Proceeds" means, with respect to each
Exchanged Vehicle, all payments under insurance policies (whether or not the
Master Collateral Agent is named as the loss payee thereof) or any warranty
payable by reason of loss or damage to, or otherwise with respect to, any
Exchanged Vehicle.
"Exchanged Vehicle Repurchase Rights" means, with respect to each Exchanged
Vehicle that is subject to a Repurchase Program, all right, title and interest
of NFLP or National in, to and under each Repurchase Program associated with any
Exchanged Vehicles, to the extent such right, title and interest relates to such
Exchanged Vehicles, including any amendments thereof and all monies due and to
become due in respect of such Exchanged Vehicle under or in connection with such
Repurchase Program, whether payable as Vehicle repurchase prices, auction sales
proceeds, fees, expenses, costs, indemnities, insurance recoveries, damages for
breach of the Repurchase Program or otherwise and all rights to compel
performance and otherwise exercise remedies thereunder.
"Excluded Payments" means the following amounts payable to National or NFLP
pursuant to the Repurchase Programs: (i) all incentive payments payable to
National or NFLP in respect of purchases of Vehicles under the Repurchase
Programs (but not any amounts payable to National or NFLP by a Manufacturer as
an incentive for selling Program Vehicles outside of the related Repurchase
Program), (ii) all amounts payable to National or NFLP as compensation for the
preparation by National or NFLP of newly delivered vehicles under the Repurchase
Programs, (iii) all amounts payable to National or NFLP in reimbursement for
warranty work performed by National or NFLP on the vehicles under the Repurchase
Programs and (iv) all amounts payable to National under Section 6.11 of the
Asset Purchase Agreement, dated as of April 4, 1995 among GM, Old National and
National.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financing Documents" means any and all agreements, instruments and
contracts evidencing or related to any financing arrangement between National
and/or NFLP and a Financing Source providing for the making of loans to National
or NFLP, the purchase of assets, or undivided interests therein, from National
or NFLP, the lease to National of Vehicles, any other arrangement providing for
the financing of the Vehicles, except any agreement to provide financing to a
Qualified Intermediary and all agreements, indentures, instruments and contracts
pursuant to which any Financing Source grants an interest in any portion of the
Master Collateral to a Beneficiary, in any such case, as such agreements,
indentures, instruments and contracts may be amended, supplemented, extended or
otherwise modified from time to time.
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"Financing Source" has the meaning set forth in the preamble.
"Fleet Report" means the monthly report substantially in the form of
Exhibit B hereto required to be delivered by the Servicer to the Master
Collateral Agent pursuant to Section 2.4 hereof.
"GM" means General Motors Corporation, a Delaware corporation.
"GM Guaranty" means the guaranty issued by GM to National, dated as of June
7, 1995, guaranteeing the obligations of Old National under the Vehicle Title
Nominee Agreement.
"Government Obligations" means direct obligations of, or obligations the
timely payment of principal of and interest on which is fully and
unconditionally guaranteed by, the United States of America and U.S. Treasury
REFCORPS.
"Guaranteed Depreciation Program" means a guaranteed depreciation program
pursuant to which a Manufacturer has agreed with National or NFLP to (a) cause
Vehicles manufactured by it or one of its Affiliates that are turned back during
the specified Repurchase Period to be sold at Auction by an auction dealer, (b)
cause the proceeds of any such sale to be paid to National or NFLP, (or NFLP's
Qualified Intermediary) as applicable, by such auction dealer within seven days
of such sale and (c) pay to National or NFLP, as applicable, the excess, if any,
of the guaranteed payment amount with respect to any such Vehicle calculated as
of the Disposition Date in accordance with the provisions of such guaranteed
depreciation program over the amount paid to National or NFLP, as applicable, by
an auction dealer pursuant to clause (b) above.
"Guaranteed Payment" means the amount payable by a Manufacturer under a
Guaranteed Depreciation Program in respect of any particular vehicle.
"Incumbency Certificate" has the meaning set forth in Section 3.5.
"Initial Vehicles" means the Vehicles financed by National under the NFC
Financing Documents on June 9, 1995.
"Intercreditor Agreement" means the Intercreditor and Subordination
Agreement dated as of June 7, 1995 among National, certain subordinated
creditors listed on Schedule A thereto and certain senior creditors listed on
Schedule B thereto, as the same may be amended, supplemented, modified or waived
from time to time.
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"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Investment Letter" has the meaning set forth in Section 2.5(f) hereof.
"Lien" means, when used with respect to any Person, any interest in any
real or personal property, asset or other right held, owned or being purchased
or acquired by such Person which secures payment or performance of any
obligation, and shall include any mortgage, lien, pledge, encumbrance, charge,
retained security title of a conditional vendor or lessor, or other security
interest of any kind, whether arising under a security agreement, mortgage,
lease, deed of trust, chattel mortgage, assignment, pledge, retention or
security title, financing or similar statement, or notice or arising as a matter
of law, judicial process or otherwise.
"Liquidity Agreement" means the Liquidity Agreement, dated as of June 7,
1995, among NFC, the financial institutions on the signature pages thereof, and
Citibank, N.A., as liquidity agent for such financial institutions, as the same
may be amended, extended, supplemented or modified from time to time.
"Majority Beneficiaries" means, at any time, Beneficiaries (other than
National, if applicable) that hold or represent or act on behalf of Financing
Sources (other than National, if applicable) that hold (including by way of
pledge or assignment) more than 66-2/3% of the outstanding principal amount of
indebtedness of National or NFLP under the Financing Documents at such time
(excluding any such indebtedness held by National or NFLP).
"Manufacturer" means a manufacturer of passenger automobiles and/or light
trucks.
"Master Collateral" has the meaning set forth in Section 2.1
"Master Collateral Account" has the meaning set forth in Section 2.5.
"Master Collateral Agent" has the meaning set forth in the preamble, and
includes any successor to Citibank, N.A. in its capacity as Master Collateral
Agent.
"Moody's" means Moody's Investors Services, Inc.
"National Master Collateral" has the meaning set forth in Section 2.1(a).
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"Net Book Value" means, at any time with respect to each Related Vehicle,
such Vehicles Capitalized Cost minus the aggregate Depreciation Charges, if any,
accrued for such Vehicle through the last day of the Related Month and/or as
more specifically calculated in accordance with the Financing Documents for the
related Financing Source.
"NFC" has the meaning set forth in the preamble.
"NFC Agent" has the meaning set forth in the preamble.
"NFC Collateral Agreement" means the Collateral Agreement dated as of June
7, 1995, among NFC, GM, as A support credit enhancer, Citibank, N.A., as agent
for the financial institutions party to the Liquidity Agreement, as depositary
under the Depositary Agreement, as placement agent and as a B support credit
enhancer, Credit Suisse, as a B support credit enhancer, the NFC Agent and CS
First Boston Corporation, as dealer, as the same may be amended, supplemented or
modified from time to time.
"NFC Loan Agreement" means the Loan Agreement, dated as of June 7, 1995,
between NFC and National, as the same may be amended, supplemented or modified
from time to time.
"NFLP" has the meaning set forth in the preamble.
"NFLP Indenture" means the Base Indenture, dated as of April 30, 1996,
between NFLP and the Trustee, incorporating each of the Series Supplements
thereto executed and delivered from time to time, as such Base Indenture or
Series Supplements may be amended, supplemented or modified from time to time.
"NFLP Master Collateral" has the meaning set forth in Section 2.1(b).
"Officer's Certificate" means, with respect to any Person, a certificate
executed by the President, any Vice President, the Secretary, the Treasurer, the
general partner or any other person designated as an authorized officer by the
board of directors of such Person.
"Old National" means National Car Rental System, Inc., a wholly-owned
subsidiary of GM, as seller under that certain Asset Purchase Agreement, dated
as of April 4, 1995, among Old National, NCR Acquisition Corp., as buyer, and
GM.
"Original Agreement" has the meaning set forth in the preamble.
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"Person" means an individual, partnership, corporation, trust or
unincorporated organization, or government or agency or political subdivision
thereof.
"Pro rata" means, at any time as to any interest or amount with respect to
any Beneficiary, a fraction the numerator of which is the then aggregate
indebtedness and other obligations of each of National and NFLP, as applicable,
then owing to the Financing Source relating to such Beneficiary and the
denominator of which is the then aggregate indebtedness and other obligations of
each of National and NFLP, as applicable, then owing to all Financing Sources;
provided, however, that if a Beneficiary must return any amount paid with
respect to such obligations for any reason, such returned amounts shall be
reinstated as obligations for purposes of the foregoing calculation.
"Qualified Institution" means a depositary institution or trust company
(which may include the Master Collateral Agent) organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia; provided, however, that at all times such depositary institution or
trust company is a member of the FDIC and has a short-term debt rating of at
least A-1 by S&P and P-1 by Moody' s.
"Qualified Intermediary" means a party designated in an Exchange Agreement
as an intermediary for exchanges of Vehicles by NFLP or National pursuant to
such Exchange Agreement.
"Rating Agencies" means any rating agency, to the extent such agency, at
the request of National or NFLP pursuant to the applicable Financing Documents,
is then rating the outstanding securities or indebtedness of any Financing
Source.
"Related Master Collateral" has the meaning set forth in Section 2.2.
"Related Month" means, with respect to any date, the most recently ended
calendar month.
"Related Vehicles" has the meaning set forth in Section 2.2.
"Replacement Vehicle" means an Eligible Vehicle (i) which is owned by NFLP
or National, (ii) with respect to which the Master Collateral Agent is noted as
the first lienholder on the Certificate of Title therefor, (iii) which is
subject to no Liens other than the Lien of the Master Collateral Agent and (iv)
which (a) has been acquired pursuant to an Exchange Agreement as a Replacement
Vehicle for a Designated Vehicle or Designated Vehicles (b)(1) has a Net Book
Value equal to or greater than the aggregate Termination Value of the Designated
Vehicles or Vehicles which it replaces or (2) has a Net Book Value when
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aggregated with the Net Book Value of one or more other Replacement Vehicles
tendered in exchange for a Designated Vehicle equal to or greater than the
Termination Value for such Designated Vehicle and (c) has been designated on the
Servicer's computer system as a Related Vehicle with respect to the Beneficiary
to which the related Designated Vehicle or Designated Vehicles are designated.
"Repurchase Period" means, with respect to any Vehicle covered by a
Repurchase Program, the period during which such Vehicle may be turned in to the
Manufacturer thereof for repurchase pursuant to the applicable Repurchase
Program.
"Repurchase Program" means a (i) program pursuant to which a Manufacturer
has agreed with National or NFLP to repurchase Vehicles manufactured by it or
one of its Affiliates during the specified Repurchase Period or (ii) a
guaranteed depreciation program pursuant to which a Manufacturer has agreed with
National or NFLP to (a) cause Vehicles manufactured by it or one of its
Affiliates that are turned back during the specified Repurchase Period to be
sold by an auction dealer, (b) cause the proceeds of any such sale to be paid to
National or NFLP (or NFLP's Qualified Intermediary) , as applicable, by such
auction dealer within seven days of such sale and (c) pay to National or NFLP,
as applicable, the excess, if any, of the guaranteed payment amount with respect
to any such Vehicle calculated in accordance with the provisions of such
guaranteed depreciation program over the amount paid to National or NFLP, as the
case may be, by an auction dealer pursuant to clause (b) above.
"Series Supplement" means a supplement to the Base Indenture complying (to
the extent applicable) with the terms of Section 2.3 or Article 11 of the Base
Indenture.
"Servicer" has the meaning set forth in the preamble.
"Standard & Poor's" means Standard & Poor's Structured Ratings Group.
"Supplement" means a supplement to this Agreement, substantially in the
form of Exhibit A hereto.
"Termination Value" means, with respect to any Vehicle, as of any date, an
amount equal to (i) the Capitalized Cost of such Vehicle minus (ii) unless
otherwise deducted in the calculation of "Capitalized Cost", all Depreciation
Charges for such Vehicle accrued prior to such date.
"Trustee" means, initially, The Bank of New York, as trustee under the NFLP
Indenture, or any successor trustee thereunder.
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"Uniform Commercial Code" or "UCC" means, with respect to a particular
jurisdiction, the Uniform Commercial Code, as in effect from time to time in
such jurisdiction, or any successor statute thereto.
"Vehicle" means each passenger automobile or light truck owned by National
or NFLP and purchased, financed or refinanced by National or NFLP with proceeds
obtained from a Financing Source including each Initial Vehicle (or otherwise
evidenced by a Certificate of Title showing the Master Collateral Agent as
lienholder), together with any replacement parts and repairs thereto.
"Vehicle Title Nominee Agreement" means the Vehicle Title Nominee
Agreement, dated as of June 7, 1995, between Old National and National.
SECTION 1.2. Interpretation and Construction. Unless the context of this
Agreement otherwise clearly requires, references to the plural include the
singular, to the singular include the plural and to the part include the whole.
The words "hereof", "herein", "hereunder" and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each means "to but
excluding". Sections and other headings contained in this Agreement are for
reference purposes only and shall not control or effect the construction of this
Agreement or the interpretation hereof in any respect. Section, subsection and
exhibit references are to this Agreement unless otherwise specified. As used in
this Agreement, the masculine, feminine or neuter gender shall each be deemed to
include the others whenever the context so indicates.
ARTICLE II
MASTER COLLATERAL AGENT AS LIENHOLDER
FOR THE BENEFICIARIES
SECTION 2.1. Security Interest.
(a) Grant by National. As security for the payment of the respective
obligations from time to time owing by National to each Financing Source (or any
Beneficiary as assignee thereof) under the related Financing Documents, National
hereby (i) confirms its grant, pledge and assignment pursuant to the Original
Agreement and (ii) to the extent not covered under clause (i), hereby grants,
pledges and assigns to the Master Collateral Agent for the benefit of the
Beneficiaries (to the
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extent set forth in Sections 2.2 and 2.3), of a continuing, first priority Lien
on all right, title and interest of National in, to and under the following,
whether existing or acquired as of June 7, 1995 or thereafter (the "National
Master Collateral"):
(i) all Vehicles owned by National and all Certificates of Title with
respect thereto;
(ii) the Master Collateral Account and all funds from time to time
deposited or held therein;
(iii) all investments of funds on deposit in the Master Collateral
Account, and all certificates, instruments and documents related to such
investments;
(iv) each Repurchase Program (other than Excluded Payments) associated
with the Vehicles owned by National to the extent such right, title and
interest relates to such Vehicles, including any amendments thereof and all
monies due and to become due in respect of such Vehicles under or in
connection with each such Repurchase Program whether payable as Vehicle
repurchase prices, auction sales proceeds, fees, expenses, costs,
indemnities, insurance recoveries, damages for breach of the Repurchase
Program or otherwise and all rights to compel performance and otherwise
exercise remedies thereunder;
(v) the Vehicle Title Nominee Agreement;
(vi) the GM Guaranty;
(vii) all payments under insurance policies (whether or not the Master
Collateral Agent is named as the loss payee thereof) or any warranty
payable by reason of loss or damage to, or otherwise with respect to, any
of the Vehicles owned by National; and
(viii) any and all products and proceeds of any of the foregoing;
provided that in no event shall any of the foregoing include any right,
title or interest in the Fleet Finance Agreement or the NFLP Fleet Finance
Agreement and payments made thereunder.
Notwithstanding anything to the contrary contained in this Master Collateral
Agency Agreement, the pledge and security interest granted by National hereunder
is an extension of the pledge and security interest granted under the Original
Agreement.
(b) Grant by NFLP. As security for the payment of the respective
obligations from time to time owing by NFLP to each Financing Source (or any
Beneficiary as assignee thereof) under
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the related Financing Documents, NFLP hereby grants, pledges and assigns to the
Master Collateral Agent for the benefit of the Beneficiaries (to the extent set
forth in Sections 2.2 and 2.3), a continuing, first priority Lien on all NFLP's
right, title and interest in, to and under the following, whether now or
hereafter existing or acquired (the "NFLP Master Collateral" and together with
the National Master Collateral, the "Master Collateral"):
(i) all Vehicles owned by NFLP and all Certificates of Title with
respect thereto;
(ii) the Master Collateral Account and all funds from time to time
deposited or held therein;
(iii) all investments of funds on deposit in the Master Collateral
Account, and all certificates, instruments and documents related to such
investments;
(iv) each Repurchase Program associated with the Vehicles owned by
NFLP to the extent such right, title and interest relates to such Vehicles,
including any amendments thereof and all monies due and to become due in
respect of such Vehicles under or in connection with each such Repurchase
Program (other than Excluded Payments) whether payable as Vehicle
repurchase prices, auction sales proceeds, fees, expenses, costs,
indemnities, insurance recoveries, damages for breach of the Repurchase
Program or otherwise and all rights to compel performance and otherwise
exercise remedies thereunder;
(v) all payments under insurance policies (whether or not the Master
Collateral Agent is named as the loss payee thereof) or any warranty
payable by reason of loss or damage to, or otherwise with respect to, any
of the Vehicles owned by NFLP; and
(vi) all right, title and interest of NFLP in, to and under the
Vehicle Title Nominee Agreement;
(vii) all right, title and interest of NFLP in, to and under the GM
Guaranty;
(viii) any and all products and proceeds of any of the foregoing;
provided that in no event shall any of the foregoing include any right,
title or interest in the Fleet Finance Agreement or the NFLP Fleet Finance
Agreement and payments made thereunder.
Each of National, NFLP, each Financing Source and each Beneficiary hereby
authorizes the Master Collateral Agent to be named as the first lienholder on
the Certificates of Title for
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the Vehicles (other than the Initial Vehicles), in a representative capacity, as
Master Collateral Agent for the Beneficiaries. The Master Collateral Agent
agrees that all of its right, title and interest in and to the Master Collateral
shall be solely for the respective benefit of each Beneficiary.
Each Financing Source and each Beneficiary hereby directs the Master
Collateral Agent to execute and deliver as of the date set forth therein in its
capacity as Master Collateral Agent hereunder each Assignment Agreement
hereafter entered into by National or NFLP.
SECTION 2.2. Designation of Beneficiaries. Each of the NFC Agent, the
Trustee, GM, Citi, Credit Suisse and any party which from time to time executes
a Supplement as a beneficiary is hereby designated as the Beneficiary with
respect to the Vehicles designated on the Servicer's computer system as Vehicles
acquired by or financed with the proceeds advanced by the related Financing
Source or as otherwise provided in a Supplement with respect to such Beneficiary
("Related Vehicles") and the other Master Collateral related thereto (the
"Related Master Collateral"). The designation of Related Vehicles with respect
to each Beneficiary on the Servicer's computer system shall be considered prima
facie evidence of such Beneficiary's rights with respect to such Related
Vehicles and the Related Master Collateral. If at any time a Beneficiary
reasonably believes that such designation by the Servicer is incorrect, it may
dispute such designation by delivering a written notice to the Master Collateral
Agent setting forth its claim as to the correct designation of its Related
Vehicles (each a "Redesignation"). The Master Collateral Agent shall, promptly
upon receipt of such notice, distribute a copy thereof to National, NFLP, each
Financing Source and each Beneficiary (other than the Beneficiary disputing the
Servicer's designation of Related Vehicles). Each such Financing Source and
Beneficiary shall, within 10 Business Days of receipt of such notice from the
Master Collateral Agent, notify the Master Collateral Agent in writing as to
whether it consents to the disputing Beneficiary's Redesignation. If the Master
Collateral Agent receives written notice from each such Beneficiary and
Financing Source containing its consent to the disputing Beneficiary's
Redesignation within the period set forth above, it shall promptly notify the
Servicer and the Servicer shall effect such Redesignation. Each Beneficiary
shall be entitled to the benefits of this Agreement only with respect to its
Related Vehicles and Related Master Collateral. No Beneficiary shall have any
interest in (i) any Vehicle which is not a Related Vehicle as to such
Beneficiary, or (ii) any funds in the Master Collateral Account that are
proceeds of any Vehicle which is not a Related Vehicle as to such Beneficiary,
(iii) rights under any Repurchase Program with respect to any Vehicle which is
not a Related Vehicle as to such Beneficiary or
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(iv) any other Master Collateral which is not Related Master Collateral as to
such Beneficiary, in each case regardless of the time, order, manner or nature
of attachment or perfection of security interests in Vehicles (including the
giving of or failure to give any purchase money security interest or other
notice, or the order of filing financing statements), or any provision of the
Uniform Commercial Code, the federal Bankruptcy Code, or other applicable law.
SECTION 2.3. Redesignation of Beneficiaries. Each of National and NFLP may,
from time to time (i) finance additional Vehicles with proceeds from a Financing
Source, and/or (ii) refinance Vehicles then owned by it and financed by a
Financing Source with proceeds from a different Financing Source. In connection
therewith, the Servicer shall designate on its computer system the Financing
Source the proceeds of which are used to finance or refinance such Vehicles,
and, upon repayment of the Financing Source in the case of refinanced Vehicles
(x) such Vehicles shall automatically constitute Related Vehicles of the
Beneficiary related to such Financing Source, and (y) in the case of a
refinancing, such Vehicles shall cease to be Related Vehicles of the Beneficiary
related to the previous Financing Source. Notwithstanding the foregoing, in
connection with a refinancing the right of the Servicer to designate Vehicles
that will cease to be Related Vehicles with respect to a Beneficiary, shall be
subject to the conditions that immediately after giving effect to such
designation:
(a) no Default shall exist under the Financing Documents related to
such Beneficiary (provided, however, that the Servicer shall have the right
to make such designation for the purpose of curing such Default); and
(b) such Beneficiary shall have designated to it Related Vehicles
with a collateral value (as determined under the Financing Documents
relating to the Financing Source with respect to such Beneficiary) not less
than the collateral value required in such Financing Documents to support
the outstanding loans or securities issued under such Financing Documents.
Each designation or redesignation by the Servicer shall automatically constitute
a representation and warranty for the benefit of such Beneficiary that the
conditions in Sections 2.3(a) and 2.3(b) have been met and that all Related
Vehicles of a Beneficiary meet the eligibility criteria set forth in the
relevant Financing Documents and that, in the case of refinanced Vehicles, the
loans or securities of the original Financing Source with respect to such
refinanced Vehicles have been repaid. Such Vehicles shall be redesignated at
their Net Book Value calculated in accordance with the Financing Documents
relating to
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the Financing Source with respect to the applicable Beneficiary. Except as
provided in Section 2.5(c), no Beneficiary shall have any interest in any
Vehicle or other Master Collateral for which it is no longer designated as the
Beneficiary, it being understood that, subject to the satisfaction of the
conditions set forth in Sections 2.3(a) and 2.3(b) and repayment of the loans or
securities of the original Financing Source with respect to refinanced Vehicles,
any such redesignation shall automatically constitute a release by such
Beneficiary of any interest therein.
SECTION 2.4. Servicer's Fleet Report. Within 20 days after the end of each
calendar month, the Servicer shall furnish to the Master Collateral Agent a
report (which may be on diskette, magnetic tape or other electronic medium
acceptable to the Master Collateral Agent) substantially in the form of Exhibit
B ("Fleet Report") showing for each Beneficiary as of the last day of such
calendar month and after giving effect to the most recent redesignation of
Vehicles (i) the Related Vehicles designated to such Beneficiary identified by
the vehicle identification numbers with respect to such Related Vehicles, (ii)
whether such Related Vehicles are owned by National or NFLP and (iii) the
Capitalized Cost and Net Book Value of such Related Vehicles (calculated in
accordance with the Financing Documents relating to the applicable Financing
Source). The Master Collateral Agent shall make the Fleet Report available for
inspection by any Beneficiary at the Corporate Trust Office, during normal
business hours, upon such Beneficiary's written request.
SECTION 2.5. Master Collateral Account. (a) The Master Collateral Agent
shall establish and maintain in the name of Master Collateral Agent for the
benefit of the Beneficiaries, or cause to be established and maintained, an
account (the "Master Collateral Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the respective benefit
of each Beneficiary. The Master Collateral Account shall be maintained (i) with
a Qualified Institution, or (ii) as a segregated trust account with the
corporate trust department of a depository institution or trust company having
corporate trust powers so long as such institution has a credit rating for its
unsecured long-term debt not lower than Baa3 by Moody's and not lower than
investment grade by Standard & Poor's. If the Master Collateral Account is not
maintained in accordance with the previous sentence, then within 10 Business
Days of obtaining knowledge of such fact, the Master Collateral Agent shall
establish a new Master Collateral Account which complies with such sentence and
transfer into the new Master Collateral Account all funds from the
non-qualifying Master Collateral Account. Initially, the Master Collateral
Account will be established with the Master Collateral Agent.
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(b) National or NFLP may enter into an Exchange Agreement with respect to
Vehicles owned by each of them respectively, an interest in which has been
pledged hereunder; provided that the conditions to effectiveness of any such
Exchange Agreement with respect to such Vehicles specified in the definition
thereof shall have been satisfied. National or NFLP may designate certain
Vehicles as Designated Vehicles to be exchanged, pursuant to an Exchange
Agreement, for one or more Replacement Vehicles. Upon receiving either (i) the
required Replacement Vehicle or Replacement Vehicles as Master Collateral and
confirming their compliance with the requirements set forth in the definition of
"Replacement Vehicle" by receipt of Vehicle Orders and a Vehicle Acquisition
Schedule covering such Replacement Vehicle or Vehicles, or (ii) written
confirmation from the Servicer, dated not more than seven days prior to the
requested release date, to the effect that the release of the Master Collateral
Agent's Lien on such Designated Vehicle and on any Exchanged Vehicle Repurchase
Rights and sales proceeds with respect thereto will not result in the Required
Asset Amount (calculated on such date) exceeding the Aggregate Asset Amount
(calculated on such date, giving effect to all increases in the Ineligible Asset
Amount through such date), the Master Collateral Agent shall release its Lien on
the related Designated Vehicle in accordance with Section 2.7 hereof, and such
Designated Vehicle shall become an Exchanged Vehicle. All proceeds related to
Exchanged Vehicles, whether sale proceeds, amounts due under a Repurchase
Program, or payments from Manufacturers in respect of turned-back Exchange
Vehicles sold at Auction shall no longer be part of the Master Collateral and
shall not be required to be deposited into the Master Collateral Account.
(c) The Servicer and NFLP, as applicable, shall cause payments (i)
representing amounts payable under Repurchase Programs (including Guaranteed
Payments, but not including other proceeds from sales of Program Vehicles at
Auction or amounts payable by Manufacturers under a Repurchase Program with
respect to Exchanged Vehicles) and (ii) relating to the other Master Collateral
(other than sale proceeds from sales of Vehicles other than to or through a
Manufacturer under its Repurchase Program, insurance proceeds and warranty
payments with respect to Vehicles and any amounts payable with respect to
Exchanged Vehicles) to be made directly to the Master Collateral Agent for
deposit into the Master Collateral Account; provided that in the event any
Exchange Agreement is entered into by NFLP and National, a Manufacturer may
cause payments representing amounts payable under Manufacturer Programs
(including Guaranteed Payments) to be deposited into a Master Deposit Account
for further allocation and deposit to (a) the applicable Exchange Account with
respect to such payments relating to Exchanged Vehicles and (b) to the Master
Collateral Account with respect to all other such payments. Within two Business
Days of receipt thereof in
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available funds, National or NFLP will deposit into the Master Collateral
Account proceeds received by National or NFLP from (i) sales of Vehicles other
than to or through a Manufacturer under its Repurchase Program, (ii) sales of
Vehicles at Auction, and (iii) insurance proceeds and warranty payments received
by National or NFLP during the continuance of a default or amortization event
with respect to any Financing Source under its Financing Documents. Each of
National and NFLP will designate the Master Collateral Agent as loss payee on
its physical damage and comprehensive insurance policies on the Vehicles. The
Master Collateral Agent shall promptly notify the Servicer when funds are
deposited in the Master Collateral Account and promptly thereafter, but in no
event more than seven days after the receipt of funds by National or any
Financing Source or receipt of such notice from the Master Collateral Agent, as
the case may be, the Servicer shall instruct the Master Collateral Agent in
writing (upon which instruction the Master Collateral Agent is entitled to
conclusively rely) as to (i) the amount thereof which represents payments
arising from the Related Vehicles and Related Master Collateral of each
Beneficiary and (ii) upon the occurrence and during the continuance of a Default
and as needed under clauses (c) and (d) below, the dollar amount thereof that is
derived from the National Master Collateral and the NFLP Master Collateral,
respectively. The Master Collateral Agent shall promptly after receipt of
instructions from the Servicer (upon which instructions the Master Collateral
Agent may conclusively rely), distribute or cause to be distributed to each
Beneficiary the funds in the Master Collateral Account representing payments
arising from the Related Vehicles and Related Master Collateral of such
Beneficiary to an account previously specified in writing by such Beneficiary to
the Master Collateral Agent, provided, however, that the Servicer shall not
direct the Master Collateral Agent to so remit an amount in respect of National
Master Collateral or NFLP Master Collateral, as the case may be, that would
exceed the amount required to pay all amounts owing to such Beneficiary or to
the Financing Source related to such Beneficiary by National and NFLP,
respectively.
(d) At such time as no further distributions from National or NFLP (as
applicable) to a Financing Source, pursuant to the Financing Documents, are
required or will be required to be made to a Beneficiary pursuant to Section
2.5(b), all remaining funds allocated to such Beneficiary in the Master
Collateral Account shall be distributed to National or NFLP, as their interests
appear upon the written direction of the Servicer.
(e) If at any time the Master Collateral Agent or the Servicer shall
receive any funds to which it is not entitled pursuant to the provisions of this
Agreement, the Servicer shall so advise the Master Collateral Agent (upon which
advice the Master Collateral Agent may conclusively rely) and the Master
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Collateral Agent or the Servicer, as the case may be, shall forthwith take
reasonable steps to ensure that such funds are remitted to the Person so
entitled thereto, such remittance to be made promptly after determination
thereof.
(f) The Servicer may instruct (upon which instruction the Master Collateral
Agent may conclusively rely) the Master Collateral Agent to invest funds on
deposit in the Master Collateral Account in Eligible Investments. Such
investment instructions may be given by any employee of the Servicer as to whom
a National Agent has notified the Master Collateral Agent in writing that such
employee is authorized to deliver such instructions. If the Master Collateral
Agent does not receive instructions from the Servicer prior to 11:00 a.m. on any
day as to the distribution or investment of any funds in the Master Collateral
Account then the Master Collateral Agent shall invest such funds in Eligible
Investments set forth in a letter (the "Investment Letter") previously delivered
by the Servicer to the Master Collateral Agent. All such investments shall be
redeemable or mature on the next Business Day. The Master Collateral Agent shall
not be responsible for any losses incurred on any investments made pursuant to
this paragraph (f).
SECTION 2.6. Certificates of Title. The Servicer shall hold all
Certificates of Title, in trust, as agent of, and custodian for, the Master
Collateral Agent. The Servicer shall (i) hold all such Certificates of Title,
under lock and key, in a safe fireproof location at one or more of the offices
specified in Exhibit C (as the same may be from time to time revised by the
Servicer on 30 days' prior written notice to the parties hereto), and (ii) not
release or surrender any Certificate of Title except in accordance with this
Agreement (and in any event not release or surrender any of the Certificates of
Title other than Certificates of Title as to which the Lien of the Master
Collateral Agent has been released in accordance with this Agreement). The
Servicer shall cause the Certificates of Title with respect to each Vehicle
owned by National (other than the Initial Vehicles) to show National, and each
Vehicle owned by NFLP (other than the Initial Vehicles) to show NFLP, as the
registered owner and Citibank, N.A., as agent, as the first lienholder, at the
address referred to in the next sentence. The Master Collateral Agent has
established a post office box in New York City to be used exclusively as its
address as first lienholder noted on the Certificates of Title. The Master
Collateral Agent shall, on a semi-weekly basis, forward to the Servicer at its
address set forth in Section 5.2 hereof, all Certificates of Title received at
such post office box address titled in the name of National or in the name of
NFLP.
SECTION 2.7. Release of Collateral. (a) Upon receiving the required items
specified in clause (i) or (ii) of Section
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2.5(b) hereof, and upon satisfaction of the following conditions precedent
immediately prior to the release of such Lien: (I) such Designated Vehicles
satisfy all the requirements specified in clause (ii) of the definition of
"Exchanged Vehicle", (II) no Amortization Event, Liquidation Event of Default or
Limited Liquidation Event of Default has occurred and is continuing, (III) all
conditions precedent, if any, specified in any Financing Document with respect
to the release of the related Beneficiary's Lien on such Designated Vehicle have
been satisfied, the Lien of the Master Collateral Agent on a Designated Vehicle,
and on any Exchanged Vehicle Repurchase Rights related thereto and on any sales
proceeds with respect to Exchanged Vehicles that are not subject to a Repurchase
Program will be automatically released.
(b) The Master Collateral Agent hereby grants to the Servicer a power of
attorney, with full power of substitution, to take any and all actions, in the
name of the Master Collateral Agent, (i) to note the Master Collateral Agent as
the holder of a first lien on the Certificates of Title, and/or otherwise ensure
that the first Lien shown on any and all Certificates of Title (other than any
Certificate of Title relating to an Initial Vehicle) is in the name of the
Master Collateral Agent, (ii) to release the Master Collateral Agent's Lien on
any Certificate of Title in connection with the sale or disposition of the
related Vehicle permitted pursuant to the provisions of the Financing Documents
relating to such Vehicle; and (iii) to release the Master Collateral Agent's
Lien on any Certificate of Title with respect to any Vehicle which is not a
Related Vehicle with respect to any Beneficiary. Nothing in this Agreement shall
be construed as authorization from the Master Collateral Agent to the Servicer
to release any Lien on the Certificates of Title except upon compliance with
this Agreement.
(c) Each Beneficiary may cause the Master Collateral Agent to terminate the
power of attorney referred to in Section 2.7(a) (including the related power
granted under Section 2.8) with respect to such Beneficiary's Related Vehicles
after the occurrence, and during the continuance, of a Default (after giving
effect to any cure period or grace period) under the Financing Documents
relating to the Financing Source with respect to such Beneficiary by giving
written notice to such effect to the Servicer and the Master Collateral Agent.
The Master Collateral Agent agrees that upon receipt of any such notice it shall
promptly terminate such power of attorney by giving written notice to such
effect to the Servicer and National. The Master Collateral Agent will follow the
direction (upon which direction the Master Collateral Agent may conclusively
rely) of the Servicer to release liens on Vehicles unless a contrary direction
is received from a Financing Source or Beneficiary or if the
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Financing Documents require direction to be given by another party.
The Servicer will, upon request of the Master Collateral Agent, provide the
Master Collateral Agent or any applicable Beneficiary with a list of Vehicles as
to which the Lien of the Master Collateral Agent has been released during the
Related Month. In connection with any release permitted under this Section 2.7,
the Master Collateral Agent and each Beneficiary agrees to execute such further
documents, if any, as may be reasonably requested by the Servicer to effect such
release.
SECTION 2.8. Power of Attorney. To further evidence the power of attorney
referred to in Section 2.7, the Master Collateral Agent agrees that upon request
of the Servicer it will execute a separate power of attorney substantially in
the form of Exhibit D.
ARTICLE III
THE SERVICER
SECTION 3.1. Acceptance of Appointment. The Master Collateral Agent hereby
appoints National and National hereby agrees to act as the initial Servicer
under this Agreement. Each Financing Source and each Beneficiary hereby appoints
National to act as Servicer.
SECTION 3.2. Servicer Functions. The Servicer shall service and administer
the Vehicles, and without limitation of the foregoing, the Servicer shall: (i)
cause the Master Collateral Agent to be shown as the first lienholder on all
Certificates of Title (other than Certificates of Title relating to the Initial
Vehicles), (ii) in accordance with the requirements of the Financing Documents
related to a Financing Source and as applicable thereunder, either (a) designate
Vehicles as Related Vehicles on its computer system in accordance with Sections
2.2 and 2.3 hereof such that after giving effect thereto each Beneficiary shall
have designated to it Related Vehicles that have been purchased, financed or
refinanced with funds provided from the Financing Source or as otherwise
provided in a Supplement with respect to such Beneficiary, or (b) designate
Vehicles as Related Vehicles on its computer system in accordance with Sections
2.2 and 2.3 hereof such that after giving effect thereto each Beneficiary shall
have designated to it Related Vehicles with a collateral value (as determined
under the relevant Financing Documents relating to the Financing Source with
respect to such Beneficiary) not less than the collateral value required in such
Financing Documents to such Beneficiary to support the outstanding loans or
securities issued under such
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Financing Documents, (iii) direct payments due under the Repurchase Programs
(other than payments with respect to Exchanged Vehicles) and payments with
respect to other Master Collateral (other than insurance proceeds, warranty
payments, amounts payable to NFLP with respect to Exchanged Vehicles and sales
proceeds from sales of Vehicles to third parties (other than under any related
Repurchase Program) or insurance proceeds in respect of Vehicles received
directly by the Servicer) to be deposited directly to the Master Collateral
Account by the Manufacturers and related auction dealers in accordance with this
Agreement and deposit into the Master Collateral Account sale proceeds
(including amounts paid to the Servicer by a Manufacturer as a result of the
Servicer's sale of such Vehicle outside such Manufacturer's Repurchase Program)
or insurance proceeds in respect of the Vehicles (other than Exchanged Vehicles)
received directly by the Servicer, within two Business Days of the Servicer's
receipt thereof, (iv) except as otherwise permitted under the applicable
Financing Documents, turn in Vehicles owned by National and NFLP and covered by
Repurchase Programs to the relevant Manufacturer within the applicable
repurchase period and comply with all of its obligations under the Repurchase
Programs, (v) furnish the Servicer's Fleet Report as provided in Section 2.4,
(vi) instruct the Master Collateral Agent to make distributions, withdrawals and
payments from the Master Collateral Account in accordance with Section 2.5(b),
2.5(c) and 2.5(d), (vii) execute and deliver, for the benefit of the
Beneficiaries, any and all documents with respect to the Vehicles and the
Repurchase Programs and, to the extent permitted under and in compliance with
applicable law and regulations, to commence enforcement proceedings with respect
to such Repurchase Programs, (viii) perform the functions described in Section
2.7, and (ix) otherwise administer and service Vehicles in accordance with the
Financing Documents. The Servicer shall have full power and authority, acting
alone or through any party properly designated by it hereunder, to do any and
all things in connection with its servicing and administration duties which it
may deem necessary or desirable to accomplish such servicing and administration
duties and which does not materially adversely affect the interests of any
Beneficiary or the likelihood of repayment of the indebtedness to the Financing
Sources unless otherwise prohibited by applicable Financing Documents. Nothing
in this Agreement shall at any time prevent the Servicer from in good faith
taking any action to assure that its systems and records relating to the
Vehicles and the Financing Sources are at all times accurate.
SECTION 3.3. The Servicer Not to Resign. Without the prior written consent
of the Master Collateral Agent, each of the Beneficiaries and the Rating
Agencies, the Servicer shall not resign from the obligations and duties hereby
imposed on it hereunder.
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SECTION 3.4. Servicing Rights of Master Collateral Agent. If the Servicer
shall fail to perform any of its obligations hereunder, which failure adversely
affects one or more Beneficiaries, the Master Collateral Agent, at the direction
and at the expense of the Beneficiaries so adversely affected thereby, shall
take such action or cause such action to be taken (pursuant to Section 4.1(d)),
to perform such obligations as shall be so directed by such Beneficiaries,
whereupon the Master Collateral Agent shall have full right and authority to
take or cause to be taken such action so directed, provided, that, such action
or direction is permitted by the related Financing Documents or this Agreement.
SECTION 3.5. Incumbency Certificate. With the delivery of this Agreement
and from time to time thereafter, each of National and NFLP shall furnish to the
Master Collateral Agent a certificate (each, an "Incumbency Certificate")
certifying as to the incumbency and specimen signatures of officers of National,
NFLP and the Servicer, respectively (the "National Agents") authorized to act,
and to give instructions and notices, on behalf of National, NFLP and the
Servicer, respectively, hereunder. Until the Master Collateral Agent receives a
subsequent Incumbency Certificate, the Master Collateral Agent shall be entitled
to rely on the last such National Incumbency Certificate delivered to it for
purposes of determining the authorized National Agents.
ARTICLE IV
THE MASTER COLLATERAL AGENT
SECTION 4.1. Appointment. (a) Each Financing Source and each Beneficiary,
by its execution of this Agreement, appoints Citibank, N.A. as its Master
Collateral Agent under and for purposes of this Agreement. Each Financing Source
and each Beneficiary authorizes the Master Collateral Agent to act on behalf of
such Financing Source and Beneficiary under this Agreement and, in the absence
of other written instructions from a Beneficiary with respect to its Related
Vehicles and Related Master Collateral as may be received from time to time by
the Master Collateral Agent (with respect to which the Master Collateral Agent
agrees that it will comply), subject to the other provisions of this Article IV,
to exercise such powers hereunder as are specifically delegated to or required
of the Master Collateral Agent by the terms hereof and to exercise such powers
as are provided to each Financing Source and Beneficiary with respect to its
Related Vehicles and other Related Master Collateral under the related Financing
Documents and with such powers as may be reasonably incidental thereto. The
Master Collateral Agent is hereby irrevocably appointed the true and
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lawful attorney-in-fact of each of the Beneficiaries' in its name and stead, for
such purposes as are necessary or desirable to effectuate the provisions of this
Agreement, including, without limitation, in exercising remedies upon or
otherwise dealing with the Master Collateral. Each such power of attorney is
irrevocable and coupled with an interest.
(b) If any Beneficiary represents to the Master Collateral Agent that it
has the right to act with respect to its related Master Collateral pursuant to
its related Financing Documents, then the Master Collateral Agent shall exercise
any and all rights, remedies, powers and privileges available to such
Beneficiary with respect to its related Master Collateral to the extent and in
the manner directed by such Beneficiary, at such Beneficiary's expense and
subject to the other provisions of this Agreement (including without limitation
Section 4.4(g)), as permitted under the related Financing Documents, including,
without limitation, the transmission of notices of default, repossession of
Related Vehicles, and the institution of legal or administrative actions or
proceedings. Each of National, NFLP, the Beneficiaries and the Financing Sources
agrees that the Master Collateral Agent may exercise such rights, remedies,
powers and privileges in lieu of a Beneficiary in accordance with the preceding
sentence and agrees that National or NFLP shall reimburse the Master Collateral
Agent for such enforcement expenses only to the same extent that it would be
obligated to reimburse the applicable Beneficiary for such enforcement expenses
pursuant to the related Financing Documents.
(c) Instructions given to the Master Collateral Agent by any Beneficiary
shall comply (and delivery of any such instructions by a Beneficiary to the
Master Collateral Agent shall be deemed to be a representation and warranty by
such Beneficiary that such instructions comply) with the Financing Documents of
such Beneficiary.
(d) The Master Collateral Agent may at any time delegate any duties or
obligations hereunder (including, but not limited to, any duties or obligations
arising pursuant to Section 3.4 or 4.1(b) hereof) to any Person who agrees to
conduct such duties in accordance with the terms hereof. Any such delegation
shall not constitute a resignation within the meaning of Section 4.5 hereof and
the Master Collateral Agent shall not be liable for the acts or omissions of
such Persons so long as such Persons are selected with reasonable care. If any
such delegation occurs, notification thereof shall be given to the Servicer, the
Beneficiaries and the Rating Agencies.
(e) The Master Collateral Agent hereby delegates its duty to enforce the
Vehicle Title Nominee Agreement to the Servicer and grants the Servicer all
necessary power and authority to take
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all lawful action to enforce the rights assigned to the Master Collateral Agent
hereunder with respect to the Vehicle Title Nominee Agreement; provided,
however, that such delegation shall be deemed to be revoked after the
occurrence, and during the continuance, of a Default (after giving effect to any
cure period or grace period) under the Financing Documents relating to a
Financing Source to which rights under the Vehicle Title Nominee Agreement have
been pledged as collateral. In addition, the Servicer hereby agrees to take any
and all lawful and commercially reasonable action it is directed to take, by
written instruction from the Master Collateral Agent, with respect to the
Vehicle Title Nominee Agreement. To the extent the Servicer fails to so act
within a reasonable period of time, the Master Collateral Agent may itself take
such actions as it has directed the Servicer to take with respect to the Vehicle
Title Nominee Agreement.
(f) If, at the time a Default exists under the Financing Documents related
to a Beneficiary, the Master Collateral Agent shall default in its obligation to
exercise the rights, remedies, powers or privileges of a Beneficiary with
respect to its Master Collateral in accordance with the direction of such
Beneficiary (including any rights under Sections 3.4 or 4.1(b), the Master
Collateral Agent shall, upon the written request of such Beneficiary, assign to
such Beneficiary the Master Collateral Agent's security interest in such
Beneficiary's Master Collateral and shall execute those instruments and
documents necessary to effectuate such assignment (including, if necessary, the
execution of documents necessary to change the name of the first lienholder on
Certificates of Title for such Beneficiary's Related Vehicles to such
Beneficiary or its agent or assignee) and such Beneficiary may thereafter direct
that payments that would otherwise be paid into the Master Collateral Account
with respect to its Related Vehicles be paid to another account permitted by the
applicable Financing Documents.
(g) The Master Collateral Agent will, semi-annually, beginning no earlier
than August 28, 1996, cause a title check to be performed on 2% of all Related
Vehicles at such time pursuant to Section 9.14 of the NFC Loan Agreement (at the
expense of National) and any nationally recognized independent auditor shall be
deemed to be a Person acceptable to the Agent to perform such title check
pursuant to such Section. National shall instruct such Person to perform such
title check in a manner that reflects the geographic distribution (by state of
titling) of the Related Vehicles for which the NFC Agent is then designated as a
Beneficiary.
(h) Citibank, N.A., in its individual or in any other capacity, may be a
Beneficiary hereunder and as such shall be entitled to all of the protections
and rights of a Beneficiary
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under this Agreement without regard to its capacity as Master Collateral Agent
hereunder.
(i) Upon receipt by the Master Collateral Agent from a Manufacturer of any
information pertaining to payments made by such Manufacturer or an auction
dealer to the Master Collateral Account in connection with any Repurchase
Program, the Master Collateral Agent shall provide such information to National.
SECTION 4.2. Representations. Citibank, N.A. hereby represents and warrants
that (i) it is a national banking association having trust powers duly
incorporated, validly existing and in good standing under the laws of the United
States and it has all requisite corporate power and authority to enter into and
perform its obligations under this Agreement and (ii) the execution, delivery
and performance by it of this Agreement have been duly authorized by all
necessary corporate action on its part, and this Agreement is the legal, valid
and binding obligation of Citibank, N.A., enforceable against it in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights
generally and by the application of equitable principles.
SECTION 4.3. Exculpatory Provisions. The Master Collateral Agent makes no
representations as to the value or condition of the Master Collateral or any
part thereof, the status or designation of any Vehicle as a Related Vehicle to
any Beneficiary pursuant to Section 2.2 hereof, as to the title of National or
NFLP thereto, as to the protection afforded by this Agreement, as to any
statements, representations or warranties made by any other Person in or in
connection with this Agreement or any Financing Document, as to the validity,
execution (except its own execution), enforceability, priority, perfection,
legality or sufficiency of this Agreement or any Financing Document or any
documents or instruments referred to therein, or the sufficiency or
effectiveness or perfection or priority of any Lien on any collateral described
in this Agreement, or as to the validity or collectibility of any obligation
contemplated by this Agreement, and the Master Collateral Agent shall incur no
liability or responsibility in respect of any such matters. The Master
Collateral Agent shall not be responsible for insuring the Master Collateral or
for the payment of taxes, charges, assessments or Liens upon the Master
Collateral or for perfecting or maintaining the perfection of its security
interest in the Master Collateral purported to be granted hereby or otherwise as
to the maintenance of the Master Collateral. Any reference herein to actual
knowledge of the Master Collateral Agent shall mean actual knowledge of an
officer of the Master Collateral Agent assigned to and working in its Corporate
Trust Office or such other department as the Master Collateral Agent may
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designate from time to time in a notice to National, NFLP and the Beneficiaries.
SECTION 4.4. Limitations on Duties of the Master Collateral Agent. (a) The
Master Collateral Agent undertakes to perform only the duties expressly set
forth herein and no implied duties shall be read into this Agreement. Nothing
herein shall be deemed to constitute the Master Collateral Agent a trustee or
fiduciary for any Financing Source or any Beneficiary.
(b) The Master Collateral Agent may exercise the rights and powers granted
to it by this Agreement, together with such powers as are reasonably incidental
thereto, but only pursuant to the terms of this Agreement.
(c) The Master Collateral Agent's duty of care shall be solely to deal
with the Master Collateral as it would with property of its own, the Master
Collateral Agent shall not be liable for any error of judgment made in good
faith by an officer thereof, or for any action taken or omitted to be taken by
it in accordance with this Agreement.
(d) The Master Collateral Agent shall have no authority to grant, convey
or assign the Certificates of Title or change the notation of a security
interest thereon or deal with the Certificates of Title in any way except as
expressly provided herein.
(e) The Master Collateral Agent shall have no liability or responsibility
for (i) any release of Master Collateral by the Servicer pursuant to Sections
2.7 or 2.8, (ii) any act of the Servicer taken in its own name or the name of
the Master Collateral Agent, or (iii) custody of any Certificates of Title not
delivered to it and required to be held by it in connection with this Agreement.
(f) The Master Collateral Agent shall have no duty to calculate, compute
or verify, and shall not be held in any manner responsible for the content of
the Servicer's Fleet Report, except to verify that the certificate filed
therewith conforms to the form of Exhibit B.
(g) Except as required by the specific terms of this Agreement, the Master
Collateral Agent shall not be required to exercise any discretion and shall have
no duty to exercise or to refrain from exercising any right, power, remedy or
privilege granted to it hereby, or to take any affirmative action or refrain
from taking any affirmative action hereunder, unless directed to do so by
Beneficiaries specified herein as being entitled to direct the Master Collateral
Agent hereunder (and shall be fully protected in acting or refraining from
acting
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pursuant to or in accordance with such directions, which shall be binding on
each of the Financing Sources and Beneficiaries). Notwithstanding anything
herein to the contrary, the Master Collateral Agent shall not be required to
take any action (a) that in its reasonable opinion is or may be contrary to law
or to the terms of this Agreement, any Financing Document or any other agreement
or instrument relating to the Master Collateral, or which might or would in its
reasonable opinion subject it or any of its directors, officers, employees or
agents to personal or financial liability or (b) unless it is indemnified
hereunder to its satisfaction (and if any indemnity should become, in the
determination of the Master Collateral Agent, inadequate, the Master Collateral
Agent may call for additional indemnity and cease to act until such additional
indemnity is given.
(h) Subject to Section 4.8(ii), the Master Collateral Agent may, in its
sole discretion, retain counsel, independent accountants and other experts
selected by it and may act in reliance upon the advice of such counsel,
independent accountants and other experts concerning all matters pertaining to
the agencies hereby created and its duties hereunder, and shall be held harmless
and shall not be liable for any action taken or omitted to be taken by it in
good faith in reliance upon or in accordance with the statements and advice of
such counsel (or counsel to National or NFLP), accountants and other experts. In
the event that the Master Collateral Agent receives conflicting instructions
delivered in accordance with this Agreement, the Master Collateral Agent shall
have the right to seek instructions concerning its duties and actions under this
Agreement from any court of competent jurisdiction.
(i) If the Master Collateral Agent receives unclear or conflicting
instructions, it shall be entitled to refrain from taking action until clear or
non-conflicting instructions are received, but shall inform the instructing
party or parties promptly of its decision to refrain from taking such action.
Without limiting the foregoing, in the event that the Master Collateral Agent
receives unclear or conflicting instructions from Beneficiaries hereunder or
there is any other disagreement between the other parties hereto resulting in
adverse claims and demands being made in connection with the Master Collateral,
or in the event that the Master Collateral Agent in good faith is in doubt as to
what action it should take hereunder, the Master Collateral Agent shall be
entitled to retain the Master Collateral until the Master Collateral Agent shall
have received (i) a final order of a court of competent jurisdiction directing
delivery of the Master Collateral or (ii) a written agreement executed by the
other parties hereto directing delivery of the Master Collateral in which event
the Master Collateral Agent shall disburse the Master Collateral in accordance
with such order or agreement. Upon request of the Master Collateral Agent,
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any such court order shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to the Master Collateral Agent to the effect that
such order is final.
(j) The Master Collateral Agent shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement, any Financing Document or any other agreements or
instruments relating to the Master Collateral on the part of any party hereto or
thereto or to inspect any books and records relating to the Master Collateral
other than as it determines necessary in the fulfillment of its own obligations
hereunder.
(k) The Master Collateral Agent shall be entitled to rely on any
communication, certificate, instrument, opinion, report, notice, paper or other
document reasonably believed by it to be genuine and correct and to have been
signed, given or sent by the proper Person or Persons. The Master Collateral
Agent shall be entitled to assume that no Default shall have occurred and be
continuing and that the Master Collateral Account, and any funds on deposit in
or to the credit of such Master Collateral Account, are not subject to any writ,
order, judgment, warrant of attachment, execution or similar process
(collectively, a "writ"), unless (i) in the case of any writ, the Master
Collateral Agent has actual knowledge thereof or (ii) the Master Collateral
Agent has received written notice from National, a Beneficiary or a Financing
Source that such a Default has occurred or such writ has been issued and, in
each case, continues to be in effect, which notice specifies the nature thereof.
(l) The Master Collateral Agent, in its individual capacity, may accept
deposits from, lend money to and generally engage in any kind of business with
National, NFLP, any Financing Source, any Manufacturer and their respective
affiliates as if it were not the agent of the Beneficiaries or the Financing
Sources.
(m) Any action or proceeding alleging any breach by the Master Collateral
Agent of duties under this Agreement shall be prosecuted only in the courts of
the State of New York or in the United States District Court for the Southern
District of New York.
(n) The Master Collateral Agent shall not be accountable for the use or
application by any person of disbursements properly made by the Master
Collateral Agent in conformity with the provisions of this Agreement.
(o) The Master Collateral Agent may exercise any of its duties hereunder
by or through agents or employees. The possession of the Master Collateral by
such agents or employees
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<PAGE> 36
shall be deemed to be the possession of the Master Collateral Agent. No
provision of this Agreement shall require the Master Collateral Agent to expend
or risk its own funds or otherwise incur any financial or other liability in the
performance of any duties hereunder or in the exercise of any rights and powers
hereunder unless the Master Collateral Agent is provided with an indemnity from
one or more of the Beneficiaries, satisfactory to the Master Collateral Agent in
its sole discretion.
SECTION 4.5. Resignation and Removal of Master Collateral Agent. (a) The
Master Collateral Agent may, at any time with or without cause by giving 60
days' prior written notice to National, NFLP and the Beneficiaries, resign and
be discharged of its responsibilities hereunder created, such resignation to
become effective upon the appointment by National and NFLP of a successor Master
Collateral Agent with the approval of the Majority Beneficiaries, which approval
shall not be unreasonably withheld, and the acceptance of such appointment by
such successor Master Collateral Agent. National shall, promptly upon receipt
thereof, provide a copy of the notice from the Master Collateral Agent referred
to in the preceding sentence to each Rating Agency. The Master Collateral Agent
may be removed by National or NFLP at any time (with or without cause) upon 30
days' written notice by National or NFLP, as the case may be, to the Master
Collateral Agent and each of the Rating Agencies, and the approval of the
successor Master Collateral Agent by the Majority Beneficiaries, which approval
will not be unreasonably withheld; provided, however, that if either National or
NFLP is in default under this Agreement or any Financing Document and such
default has a material adverse effect on the Beneficiaries, then so long as such
default continues, the right of National or NFLP, as applicable, to remove the
Master Collateral Agent shall cease and the non-defaulting grantor shall have,
or if both National and NFLP are then in default, then the Majority
Beneficiaries shall have, the right to remove the Master Collateral Agent (with
or without cause) upon 30 days' written notice to National, NFLP, the Master
Collateral Agent and each of the Rating Agencies; provided, further, that no
removal of the Master Collateral Agent shall be effective until the appointment
of a successor Master Collateral Agent and acceptance of such appointment by
such Master Collateral Agent. Any removed Master Collateral Agent shall be
entitled to its reasonable fees and expenses to the date the successor Master
Collateral Agent assumes the Master Collateral Agent's duties hereunder. The
indemnification of Section 4.10 shall survive the termination of the other
provisions of this Agreement as to the predecessor Master Collateral Agent. If
no successor Master Collateral Agent shall be appointed and approved within 30
days from the date of the giving of the aforesaid notice of resignation or
within 30 days from the date of such notice of removal, the Master Collateral
Agent, on behalf of National, NFLP, each Financing
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<PAGE> 37
Source and each Beneficiary may appoint, or petition a court of competent
jurisdiction to appoint, a successor Master Collateral Agent to act until such
time, if any, as a successor Master Collateral Agent shall be appointed as above
provided. Any successor Master Collateral Agent so appointed by such court shall
immediately without further act supersede any predecessor Master Collateral
Agent. Upon the appointment of a successor Master Collateral Agent hereunder,
the predecessor Master Collateral Agent shall be discharged of and from any and
all further obligations arising in connection with this Agreement.
(b) The appointment and designation referred to in Section 4.5(a) shall,
after any required filing, be full evidence of the right and authority to make
the same and of all the facts therein recited, and this Agreement shall vest in
such successor Master Collateral Agent, without any further act, deed or
conveyance, all of the estate and title of its predecessors and upon such filing
for record the successor Master Collateral Agent shall become fully vested with
all the estates, properties, rights, powers, duties, authority and title of its
predecessors; but any predecessor Master Collateral Agent shall, nevertheless on
payment of its charges and on the written request of the Majority Beneficiaries,
National, NFLP or any successor Master Collateral Agent empowered to act as such
at the time any such request is made, execute and deliver an instrument without
recourse or representation transferring to such successor all the estates,
properties, rights, powers, duties, authority and title of such predecessor
hereunder and shall deliver all securities and moneys held by it to such
successor Master Collateral Agent. Upon the appointment of a successor Master
Collateral Agent hereunder, the predecessor Master Collateral Agent shall be
discharged of and from any and all further obligations arising in connection
with this Agreement.
SECTION 4.6. Status of Successors to Master Collateral Agent. Every
successor to the Master Collateral Agent appointed pursuant to Section 4.5 shall
be a bank or trust company in good standing and having power so to act and
incorporated under the laws of the United States or any State thereof or the
District of Columbia, and shall also have capital, surplus and undivided profits
of not less than $100,000,000 if there be such an institution with such capital,
surplus and undivided profits willing, qualified and able to accept the trust
upon reasonable or customary terms. The Servicer shall give the Rating Agencies
written notice prior to any successor Master Collateral Agent being appointed
pursuant to Section 4.5.
SECTION 4.7. Merger of the Master Collateral Agent. Any corporation into
which the Master Collateral Agent may be merged, or with which it may be
converted or consolidated, or any corporation resulting from any merger,
conversion or
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<PAGE> 38
consolidation to which the Master Collateral Agent shall be a party shall be the
Master Collateral Agent under this Agreement without the execution or filing of
any paper or any further act on the part of the parties hereto. The Master
Collateral Agent shall give the Rating Agencies, National, NFLP and the Servicer
prior written notice of any such merger, conversion or consolidation.
SECTION 4.8. Compensation and Expenses. National shall pay to the Master
Collateral Agent, from time to time (i) compensation for its services hereunder
for administering the Master Collateral as set forth in the fee letter dated as
of June 7, 1995, between National and the Master Collateral Agent, as such
letter may be amended, modified or supplemented from time to time, and (ii) all
reasonable fees and out-of-pocket expenses of the Master Collateral Agent (A)
arising in connection with the preparation, execution, delivery, or modification
of this Agreement and/or the enforcement of any of the provisions hereof or (B)
incurred in connection with the administration of the Master Collateral, the
sale or other disposition of Master Collateral pursuant to any Financing
Document and/or the preservation, protection or defense of the Master Collateral
Agent's rights under this Agreement and in and to the Master Collateral.
SECTION 4.9. Stamp. Other Similar Taxes and Filing Fees. National shall
indemnify and hold harmless the Master Collateral Agent from any present or
future claim for liability for any stamp or other similar tax and any penalties
or interest with respect thereto, that may be assessed, levied or collected by
any jurisdiction in connection with this Agreement or any Master Collateral.
National shall pay, or reimburse the Master Collateral Agent for, any and all
amounts in respect of, all search, filing, recording and registration fees,
taxes, excise taxes and other similar imposts payable in respect of the
execution, delivery, performance and/or enforcement of this Agreement.
SECTION 4.10. Indemnification. National shall pay, and indemnify and hold
the Master Collateral Agent and each of the officers, employees, directors and
agents thereof harmless from and against, any and all liabilities (including
liabilities for penalties and liabilities arising or resulting from actions or
suits), obligations, losses, judgments, demands, damages, claims, costs or
expenses of any kind or nature whatsoever that may at any time be imposed on,
incurred by, or asserted against, the Master Collateral Agent or any such
officers, employees, directors or agents in any way relating to or arising out
of the execution, delivery, amendment, enforcement, performance and/or
administration of this Agreement, including reasonable fees and expenses of
counsel and other experts, and National shall
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<PAGE> 39
reimburse each Beneficiary for any payments made by such Beneficiary to the
Master Collateral Agent or any such officers, employees, directors or agents for
any of the foregoing; provided, however, that National shall not be liable for
the payment of any portion of such liabilities (including liabilities for
penalties and liabilities arising or resulting from actions or suits),
obligations, losses, judgments, demands, damages, claims, costs or expenses of
the Master Collateral Agent or any such officers, employees, directors or agents
which are determined by a court of competent jurisdiction in a final proceeding
to have resulted from the gross negligence or willful misconduct of the Master
Collateral Agent or any such agent.
Each of the Beneficiaries agrees in accordance with its pro rata portion of
the Master Collateral, to indemnify and hold the Master Collateral Agent and
each of its officers, employees, directors and agents harmless to the same
extent as National in accordance with the foregoing paragraph but only to the
extent that the Master Collateral Agent has not been paid by National pursuant
to such paragraph; provided that the Trustee's obligation to indemnify the
Master Collateral Agent shall be limited to actions taken by the Master
Collateral Agent at the direction of the Trustee, it being understood that the
indemnification obligation of the Trustee shall be paid solely out of funds
constituting servicing fees under the NFLP Indenture.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Amendments. Supplements and Waivers. This Agreement may be
amended, waived, terminated, supplemented or otherwise modified pursuant to a
writing executed by the Master Collateral Agent, each Beneficiary, each
Financing Source, National, NFLP, GM and the Servicer; provided, however, that
(i) the consent of each Beneficiary and each Financing Source need not be
obtained in connection with the execution of a supplement or amendment that only
adds a Financing Source or Beneficiary as a party to this Agreement and (ii) an
amendment may be executed without the consent of a Beneficiary or a Financing
Source if such amendment is effected only to cure any ambiguity, to correct or
supplement any provision herein which may be inconsistent with any other
provision herein or which is otherwise defective, or to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement or any
other such Related Document; provided, such action pursuant to this clause shall
not adversely affect the interests of a Beneficiary or a Financing Source in any
material respect.
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<PAGE> 40
Additional Financing Sources or Beneficiaries may from time to time become
parties hereto and Financing Sources or Beneficiaries hereunder by the execution
of a Supplement by such additional Financing Source or Beneficiary, the Master
Collateral Agent, the Servicer, National and NFLP. The Servicer shall give the
Rating Agencies prior written notice of any amendment, supplement, waiver or
modification of this Agreement. Upon execution of a Supplement, the Servicer
shall furnish a copy thereof to the other parties hereto.
SECTION 5.2. Notices. All notices, requests, demands and other
communications provided for or permitted hereunder shall, unless otherwise
stated herein, be in writing (including facsimile communications) and shall be
sent by mail (by registered or certified mail, return receipt requested),
facsimile or hand delivery
(a) if to National, the Servicer, NFC, the Trustee, the NFC Agent,
NFLP, GM, Citi, Credit Suisse or the Master Collateral Agent, at the
address specified for such party on the signature pages hereto; or
(b) if to any other Beneficiary, Financing Source or other Person
specified in a Supplement, at the address specified in such Supplement;
or, in each case, at such other address as shall be designated by it in a
written notice to each other party hereto. Any notice, if mailed and properly
addressed with postage prepaid or if properly addressed and sent by pre-paid
courier service, or if transmitted by facsimile shall be deemed given when
received.
SECTION 5.3. Headings. Section, subsection and other headings used in this
Agreement are for convenience only and shall not affect the construction of this
Agreement.
SECTION 5.4. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 5.5. Counterparts. This Agreement may be executed in separate
counterparts and by the different parties on different counterparts, each of
which shall be an original and all of which taken together shall constitute one
and the same instrument.
SECTION 5.6. Conflicts with Financing Documents; Reservation of Rights. The
parties agree that in the event of
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<PAGE> 41
any conflict between the provisions of this Agreement and the provisions of any
Financing Documents, the provisions of this Agreement shall control. Except as
expressly provided herein, nothing contained in this Agreement is intended to
affect or limit, in any way, the rights that each of the Beneficiaries has
insofar as the rights of such parties and third parties are involved. Except as
expressly provided herein, the Beneficiaries specifically reserve all their
respective rights against National, NFLP, any Financing Source and/or any third
party.
SECTION 5.7. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of each of the parties hereto and their respective successors and
assigns. Nothing herein is intended or shall be construed to give any other
Person any right, remedy or claim under, to or in respect of this Agreement or
the Master Collateral.
SECTION 5.8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
SECTION 5.9. Effectiveness. This Agreement shall become effective on the
execution and delivery hereof and shall remain in effect until no amounts are
owed to any Financing Source under any Financing Document and no Beneficiary or
Financing Source shall have any claim on the Master Collateral.
SECTION 5.10. Termination of Beneficiary. Upon receipt by the Master
Collateral Agent of a notice from a Beneficiary to the effect that (i) (A) such
Beneficiary then has no Related Vehicles hereunder, no amounts are then owing to
the related Financing Source under its Financing Documents and such Financing
Documents have been terminated and are of no further force or effect or (B) the
Master Collateral Agent's security interest has been reassigned to such
Beneficiary pursuant to Sections 4.1(f) or 5.11(b) and (ii) such Beneficiary has
elected to terminate this Agreement, this Agreement shall terminate as to such
Beneficiary.
SECTION 5.11. Termination of this Agreement. At any time that there are no
Beneficiaries, National may terminate this Agreement upon notice to the Master
Collateral Agent, and the Master Collateral Agent shall take all actions
reasonably requested by National, at National's expense, to evidence the
termination of this Agreement and the Master Collateral Agent's interest in the
Master Collateral, including, without limitation, execute such documents and
instruments as National may reasonably request in connection with such
reassignment; provided, however, that Sections 4.3, 4.4(a), (c), and (e) through
(o), 4.8, and the indemnification set forth in Sections 4.9 and 4.10 shall
survive the termination of this Agreement.
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<PAGE> 42
SECTION 5.12. Assignment by Financing Sources. Each Financing Source
acknowledges that it has assigned and does hereby assign to its related
Beneficiary all of its rights and interests under this Agreement and further
acknowledges that its related Beneficiary may exercise all of such Financing
Source's rights hereunder.
SECTION 5.13. NFC Related Documents; NFLP's Related Documents. (a) To the
extent that this Agreement affects the secured parties under NFC's Financing
Documents, it shall be considered a Related Document (as defined in NFC's
Financing Documents) for all purposes except voting provisions.
(b) To the extent that this Agreement affects the secured parties under
NFLP's Financing Documents, it shall be considered a Related Document (as
defined in NFLP's Financing Documents) for all purposes except voting
provisions.
SECTION 5.14. No Bankruptcy Petition Against Financing Sources. The Master
Collateral Agent hereby covenants and agrees that, prior to the date which is
one year and one day after the payment in full of the latest maturing debt
security issued by a Financing Source, it will not institute against, or join
with any other Person in instituting against, such Financing Source, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any Federal or state bankruptcy or similar law;
provided, however, that nothing in this Section 5.14 shall constitute a waiver
of any right to indemnification, reimbursement or other payment from any
Financing Source or Beneficiary pursuant to this Agreement; provided, further,
that this Section 5.14 shall only be effective with respect to a Financing
Source for which the related Financing Documents contain a no bankruptcy
petition provision similar to this Section 5.14. In the event that the Master
Collateral Agent takes action in violation of this Section 5.14, each affected
Financing Source agrees that it shall file an answer with the bankruptcy court
or otherwise properly contest the filing of such a petition by the Master
Collateral Agent against such Financing Source or the commencement of such
action and raise the defense that the Master Collateral Agent has agreed in
writing not to take such action and should be estopped and precluded therefrom
and such other defenses, if any, as its counsel advises that it may assert. The
provisions of this Section 5.14 shall survive the termination of this Agreement,
and the resignation or removal of the Master Collateral Agent.
SECTION 5.15. Jurisdiction; Consent to Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST NATIONAL, ANY FINANCING SOURCE OR ANY BENEFICIARY
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT MAY BE BROUGHT IN
ANY STATE OR (TO THE EXTENT PERMITTED BY LAW) FEDERAL COURT OF COMPETENT
JURISDICTION
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<PAGE> 43
IN THE STATE OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
NATIONAL, EACH FINANCING SOURCE AND EACH BENEFICIARY ACCEPTS FOR ITSELF AN IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. NATIONAL
DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, INC., 1633 BROADWAY, NEW YORK,
NEW YORK 10019, AND EACH FINANCING SOURCE AND EACH BENEFICIARY DESIGNATES AND
APPOINTS CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NEW YORK 10019, AND
SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY NATIONAL, EACH FINANCING
SOURCE AND EACH BENEFICIARY IRREVOCABLY AGREEING IN WRITING TO SERVE, AS ITS
AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS
IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY NATIONAL, EACH
FINANCING SOURCE AND EACH BENEFICIARY TO BE EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED
MAIL TO NATIONAL, SUCH FINANCING SOURCE OR SUCH BENEFICIARY SO SERVED AT ITS
ADDRESS PROVIDED IN THE APPLICABLE SIGNATURE PAGE HERETO, EXCEPT THAT, UNLESS
OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT
AFFECT THE VALIDITY OF SERVICE OR PROCESS. IF ANY AGENT APPOINTED BY NATIONAL,
SUCH FINANCING SOURCE OR SUCH BENEFICIARY REFUSES TO ACCEPT SERVICE, NATIONAL,
EACH FINANCING SOURCE AND EACH BENEFICIARY HEREBY AGREES THAT SERVICE UPON IT BY
MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHTS
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF ANY FINANCING SOURCE OR BENEFICIARY TO BRING PROCEEDINGS AGAINST NATIONAL IN
THE COURTS OF ANY OTHER JURISDICTION.
SECTION 5.16. Waiver of Jury Trial. THE MASTER COLLATERAL AGENT, EACH
FINANCING SOURCE, EACH BENEFICIARY AND NATIONAL HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE MASTER
COLLATERAL AGENT, ANY FINANCING SOURCE, ANY BENEFICIARY OR NATIONAL IN
CONNECTION HEREWITH OR THEREWITH. NATIONAL ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER
PROVISION OF EACH OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE MASTER COLLATERAL AGENT, EACH
FINANCING SOURCE AND EACH BENEFICIARY ENTERING INTO THIS AGREEMENT AND EACH SUCH
OTHER RELATED DOCUMENT.
SECTION 5.17. Insurance Notification. The Master Collateral Agent shall,
promptly upon its receipt of notification of any termination of or proposed
cancellation or nonrenewal of
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<PAGE> 44
any insurance policies required to be maintained under any of the Financing
Documents, notify the Beneficiary thereof of any such termination, proposed
cancellation or nonrenewal.
-41-
<PAGE> 45
IN WITNESS WHEREOF, each party hereto has executed this Agreement or caused
this Agreement to be duly executed by its officer thereunto duly authorized as
of the day and year first above written.
NATIONAL CAR RENTAL SYSTEM, INC.,
as grantor and as Servicer
By: /s/
------------------------------------
Name:
Title:
Address: World Headquarters
7700 France Avenue South
Minneapolis, MN 55435
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP, as grantor
By: NATIONAL CAR RENTAL FINANCING
CORPORATION, its
General Partner
By: /s/
------------------------------------
Name:
Title
Address: 7700 France Avenue South
Minneapolis, MN 55433
CITIBANK, N.A., not in its
individual capacity but solely
as Master Collateral Agent
By: /s/ Annette M. Marsule
------------------------------------
Name: Annette M. Marsule
Title:
Address: 120 Wall Street, 13th Fl.
New York, New York 10043
<PAGE> 46
FINANCING SOURCES
NATIONAL FLEET FUNDING CORPORATION
By: /s/ MJ Becker
------------------------------------
Name:
Title:
Address: 7700 France Avenue South
Minneapolis, MN 55435
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP
By: NATIONAL CAR RENTAL FINANCING
CORPORATION, its
General Partner
By: /s/
------------------------------------
Name:
Title:
Address: 7700 France Avenue South
Minneapolis, MN 55435
CITIBANK, N.A.
By: /s/
------------------------------------
Name:
Title: Vice President
Address: 399 Park Avenue
New York, New York 10043
Attention: Autos Group,
8th Floor, Zone 12
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<PAGE> 47
CREDIT SUISSE, NEW YORK BRANCH
By: /s/ CARL JACKSON
-----------------------------------
Name: CARL JACKSON
Title: MEMBER OF SENIOR
MANAGEMENT
By: /s/ ROGER SAYLOR
------------------------------------
Name: ROGER SAYLOR
Title: ASSOCIATE
Address: 12 East 49th Street
New York, New York 10017
Attention: Asset Finance
GENERAL MOTORS CORPORATION
By: /s/ Marc Bourhis
------------------------------------
Name: Marc Bourhis
Title: Attorney-in-fact
Address: 767 Fifth Avenue
New York, New York 10153
Attention: Assistant
Treasurer
<PAGE> 48
BENEFICIARIES
CREDIT SUISSE, NEW YORK BRANCH, as
NFC Agent
By: /s/ CARL JACKSON
------------------------------------
Name: CARL JACKSON
Title: MEMBER OF SENIOR
MANAGEMENT
By: /s/ ROGER SAYLOR
------------------------------------
Name: ROGER SAYLOR
Title: ASSOCIATE
Address: 12 East 49th Street
New York, New York 10017
Attention: Asset Finance
THE BANK OF NEW YORK, as
Trustee
By: /s/
------------------------------------
Name:
Title:
Address: 101 Barclay Street
Floor 12 East
New York, New York 10286
Attention: Corporate Trust
Division
CITIBANK, N.A.
By: /s/ Suzanne Maccraonan
------------------------------------
Name:
Title: VP
Address: 399 Park Avenue
New York, New York 10043
Attention: Autos Group,
8th Floor Zone 12
<PAGE> 49
CREDIT SUISSE, NEW YORK BRANCH,
By: /s/ CARL JACKSON
------------------------------------
Name: CARL JACKSON
Title: MEMBER OF SENIOR
MANAGEMENT
By: /s/ ROGER SAYLOR
------------------------------------
Name: ROGER SAYLOR
Title: ASSOCIATE
Address: 12 East 49th Street
New York, New York 10017
Attention: Asset Finance
GENERAL MOTORS CORPORATION
By: /s/ Marc Bourhis
------------------------------------
Name: Marc Bourhis
Title: Attorney-in-fact
Address: 767 Fifth Avenue
New York, New York 10153
Attention: Assistant
Treasurer
<PAGE> 1
Exhibit 4.19
SUPPLEMENT AND AMENDMENT TO AMENDED AND RESTATED MASTER
COLLATERAL AGENCY AGREEMENT, dated as of December 20, 1996 (this "Amendment"),
among NATIONAL CAR RENTAL SYSTEM, INC., a Delaware corporation ("National"), as
grantor and as Servicer, NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP, a
special purpose Delaware limited partnership ("NFLP"), as grantor and as a
Financing Source, CITIBANK, N.A., a national banking corporation, as Master
Collateral Agent (the "Master Collateral Agent"), and NATIONAL FLEET FUNDING
CORPORATION, a Delaware corporation ("NFC"), as an additional Financing Source,
GENERAL MOTORS CORPORATION, a Delaware corporation ("GM"), THE BANK OF NEW
YORK, a New York banking corporation ("BONY"), and CAISSE NATIONALE DE CREDIT
AGRICOLE ("Credit Agricole"), in each case of GM, BONY and Credit Agricole as
additional Financing Sources, and CREDIT SUISSE, a Swiss banking corporation
acting through its New York branch, as collateral agent under the NFC
Collateral Agreement (as defined in the Master Collateral Agreement referred to
below) (the "NFC Agent"), BONY, individually and as Trustee, GM and Credit
Agricole, in each case of the NFC Agent, BONY (individually and as Trustee), GM
and Credit Agricole as Beneficiaries.
W I T N E S S E T H :
WHEREAS, National, NFLP and the Master Collateral Agent have
entered into the Amended and Restated Master Collateral Agency Agreement, dated
as of April 30, 1996, as modified by (i) Supplement to Master Collateral Agency
Agreement, dated as of June 7, 1995 (pursuant to which GM was designated as a
Financing Source and a Beneficiary to secure payment of National's obligations
from time to time owing to GM under the existing A Support Reimbursement
Agreement), (ii) Supplement to Amended and Restated Master Collateral Agency
Agreement, dated as of April 30, 1996 (pursuant to which Credit Agricole, as
assignee of Citibank, N.A. and Credit Suisse, was designated as a Financing
Source and Beneficiary to secure payment of National's obligations from time to
time owing to Credit Agricole under the B Support Letter of Credit
Reimbursement Agreement), (iii) Supplement to Amended and Restated Master
Collateral Agency Agreement, dated as of April 30, 1996 (pursuant to which
BONY was designated as a Financing Source and Beneficiary to secure payment of
National's obligations from time to time owing to BONY under the Reduction A
Support Reimbursement Agreement), and (iv) Supplement to Amended and Restated
Master Collateral Agency Agreement, dated as of the date hereof (pursuant to
which NFC is being designated as a Financing Source and the NFC Agent is being
designated as a Beneficiary to secure, among other things, payment of
National's obligations from time to time owing to NFLP under the Lease and
NFLP's obligations under the Series 1996-2 Note), under which NFLP, NFC, GM,
BONY and Credit Agricole have been designated as Financing Sources and the NFC
Agent, BONY, individually and as
<PAGE> 2
2
Trustee, GM and Credit Agricole have been designated as Beneficiaries (such
Amended and Restated Master Collateral Agency Agreement being the "Master
Collateral Agreement");
WHEREAS, NFC proposes to restructure its Financing Documents
(as defined in the Master Collateral Agreement) by (i) enabling NFLP to
refinance the Refinanced Vehicles on the Series 1996-2 Closing Date by (A)
accepting the Series 1996-2 Floating Rate Rental Car Asset Backed Variable
Funding Note (the "Series 1996-2 Note") to be issued to NFC by NFLP in the
initial principal amount of the then outstanding principal amount of the Loan
Note under and as defined in NFC's Loan Agreement and to be authenticated and
delivered by or on behalf of BONY, as Trustee, and (B) cancelling, upon the
payment to NFC by National of the unpaid accrued interest on the Loan Note and
upon the satisfaction of certain other conditions, the Loan Note, and (ii)
thereafter making further Series 1996-2 Advances to NFLP from time to time, the
Indebtedness arising from which is to be evidenced by the Series 1996-2 Note,
to enable NFLP to acquire Acquired Vehicles, and to finance the acquisition by
National of National Vehicles, from certain Eligible Manufacturers;
WHEREAS, contemporaneously with the execution and delivery of
this Amendment, NFLP as lessor and National as lessee are entering into the
Second Master Motor Vehicle Lease and Servicing Agreement, dated as of December
20, 1996 (the "Lease"), pursuant to which NFLP will refinance the Refinanced
Vehicles, and will acquire Acquired Vehicles, and will finance the acquisition
of National Vehicles, in each case for leasing to National for use in
National's domestic daily rental business;
WHEREAS, National, NFLP and NFC have requested that the Master
Collateral Agent, the Financing Sources and the Beneficiaries under the Master
Collateral Agreement implement the proposed refinancing described above; and
such parties are, on the terms and conditions set forth below, willing to grant
such request; and
WHEREAS, as of the date hereof, there are no Initial Vehicles
that are part of the Refinanced Vehicles or otherwise subject to either Lease
and so the National Master Collateral no longer includes the Vehicle Title
Nominee Agreement (relating to the Initial Vehicles) or the GM Guaranty
(guaranteeing obligations under the Vehicle Title Nominee Agreement);
NOW, THEREFORE, in consideration of the premises and
agreements, provisions and covenants herein contained, the parties hereto
hereby agree, upon the terms and subject to the conditions set forth below, as
follows:
SECTION 1. Defined Terms. Capitalized terms used but
not defined in this Amendment, including the preamble and the recitals (WHEREAS
clauses) hereof, shall have the meanings assigned to such terms in the Series
1996-2 Supplement, dated as of
<PAGE> 3
3
December 20, 1996, to Base Indenture, dated as of April 30, 1996, as amended by
the Supplement and Amendment to Base Indenture, dated as of December 20, 1996
(the "Indenture"), between NFLP and the Trustee.
SECTION 2. Amendments to Master Collateral Agreement.
The Master Collateral Agreement is, effective as of the date hereof and subject
to the satisfaction of the conditions precedent set forth in Section 3 hereof,
hereby amended as follows:
(a) The preamble and the recitals (WHEREAS clauses) of
the Master Collateral Agreement are amended in their entirety to read as
follows:
"THIS AMENDED AND RESTATED MASTER COLLATERAL AGENCY AGREEMENT,
dated as of April 30, 1996 (amending and restating the Master
Collateral Agency Agreement dated as of June 7, 1995 (the "Original
Agreement")), as amended by the Supplement and Amendment, dated as of
December 20, 1996 (as so amended and as further amended, supplemented,
restated or otherwise modified from time to time, this "Agreement"),
among NATIONAL CAR RENTAL SYSTEM, INC., a Delaware corporation
("National"), as servicer (in such capacity, the "Servicer") and as a
grantor, NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP, a Delaware
limited partnership ("NFLP"), as a grantor and as a Financing Source,
THE BANK OF NEW YORK, a New York banking corporation ("BONY"), as a
Support Credit Enhancer, and as trustee for the benefit of the
Noteholders under the NFLP Indenture referred to below (in such
capacity, the "Trustee"), NATIONAL FLEET FUNDING CORPORATION, a
Delaware corporation ("NFC"), GENERAL MOTORS CORPORATION, a Delaware
corporation, in its capacity as a Support Credit Enhancer ("GM"),
CAISSE NATIONALE DE CREDIT AGRICOLE, as a Support Credit Enhancer
("Credit Agricole"; and together with NFLP, NFC, BONY, GM and any
other party which from time to time executes a Supplement hereto as a
Financing Source (which may include National) being herein called
individually a "Financing Source" and collectively, the "Financing
Sources"), CREDIT SUISSE, a Swiss banking corporation acting through
its New York branch ("Credit Suisse"), as collateral agent under the
NFC Collateral Agreement referred to below (in such capacity, the "NFC
Agent" and together with the Trustee, BONY, GM, Credit Agricole and
any other party which from time to time executes a Supplement hereto
as a Beneficiary being herein called individually a "Beneficiary" and
collectively, the "Beneficiaries"), and CITIBANK, N.A. ("Citi"), not
in its individual capacity but solely as master collateral agent for
the Beneficiaries (in such capacity, the "Master Collateral Agent").
<PAGE> 4
4
BACKGROUND
1. Pursuant to the Financing Documents executed by NFLP
prior to the date hereof, (i) NFLP has extended, and may from time to
time hereafter extend, financing to National secured by, among other
things, certain Vehicles and related rights, and (ii) NFLP has
assigned to the Trustee all such obligations of National and related
security.
2. Pursuant to such Financing Documents, (i) NFLP has
acquired certain Vehicles and leased such Vehicles to National, and
may from time to time hereafter acquire certain other vehicles and
lease such Vehicles to National, and (ii) NFLP has assigned such lease
and granted a security interest in such Vehicles acquired by it and
related security to the Master Collateral Agent hereunder for the
benefit of the Trustee.
3. Pursuant to the Financing Documents executed by NFC
prior to the date hereof, (i) NFC has made loans to National secured
by, among other things, certain Vehicles and related rights, and (ii)
NFC has assigned to the NFC Agent all such loans and related security.
4. Upon and after the execution and delivery of, among
other things, the Supplement and Amendment to Master Collateral Agency
Agreement, dated as of December 20, 1996 (the "Master Collateral
Agreement Amendment"), among the parties hereto, NFC will (i) enable
NFLP to refinance the Refinanced Vehicles (as defined in the Series
1996-2 Supplement, dated as of December 20, 1996 (the "Series 1996-2
Supplement"), to the Base Indenture) on the Series 1996-2 Closing Date
(as defined in the Series 1996-2 Supplement) by (A) accepting the
Series 1996-2 Note (as defined in the Series 1996-2 Supplement) to be
issued to NFC by NFLP under the Series 1996-2 Supplement in the
initial principal amount of the then outstanding principal amount of
the Loan Note under and as defined in the NFC Loan Agreement and (B)
cancelling, upon the payment to NFC by National of the unpaid accrued
interest on the Loan Note and upon the satisfaction of certain other
conditions, the Loan Note, and (ii) thereafter make further Series
1996-2 Advances to (as defined in the Series 1996-2 Supplement) NFLP
from time to time, the Indebtedness arising from which will be
evidenced by the Series 1996-2 Note, to enable NFLP to acquire
Acquired Vehicles, and to finance the acquisition by National of
National Vehicles (as defined in the Series 1996-2 Supplement), from
Eligible Manufacturers (as defined in the Series 1996-2 Supplement).
5. Pursuant to additional Financing Documents executed
by NFLP contemporaneously herewith, (i) NFLP may from time to time
extend additional financing to National secured by, among other
things, certain other Vehicles and
<PAGE> 5
5
related rights, and (ii) NFLP has assigned to the Trustee all such
additional obligations of National and related security.
6. Pursuant to such additional Financing Documents (i)
NFLP may from time to time acquire certain other Vehicles and lease
such other Vehicles to National, and (ii) NFLP has assigned such lease
and granted a security interest in such Vehicles acquired by it and
related security to the Master Collateral Agent hereunder for the
benefit of the Trustee.
7. (a) Pursuant to that certain Supplement to Master
Collateral Agency Agreement, dated as of June 7,
1995, GM was designated as a Financing Source and a
Beneficiary under this Agreement to secure payment of
National's obligations from time to time owing to GM
under the A Support Reimbursement Agreement, dated as
of June 7, 1995 (as amended, supplemented, restated
or otherwise modified from time to time), among
National, NFC and GM.
(b) Pursuant to Section 2.2 of this Agreement, GM was
designated as a Financing Source and Beneficiary
under this Agreement to secure payment of National's
obligations from time to time owing to GM under the
Support Reimbursement Agreement, dated as of April
30, 1996 (as amended, supplemented, restated or
otherwise modified from time to time), between
National and GM.
(c) Pursuant to that certain Supplement to Amended and
Restated Master Collateral Agency Agreement, dated as
of April 30, 1996, Credit Agricole (as assignee of
Citi and Credit Suisse) was designated as a Financing
Source and Beneficiary under this Agreement to secure
payment of National's obligations from time to time
owing to Credit Agricole under the B Support Letter
of Credit Reimbursement Agreement, dated as of June
7, 1995 (as amended, supplemented, restated or
otherwise modified from time to time), among
National, NFC and Credit Agricole (as assignee of
Citi and Credit Suisse).
(d) Pursuant to that certain Supplement to Amended and
Restated Master Collateral Agency Agreement, dated as
of April 30, 1996, BONY was designated as a Financing
Source and Beneficiary under this Agreement to secure
payment of National's obligations from time to time
owing to BONY under the Reduction A Support
Reimbursement Agreement, dated as of May 29, 1996 (as
amended, supplemented, restated or otherwise modified
from time to time), among National, NFC and BONY.
<PAGE> 6
6
(e) Pursuant to Section 2.2 of this Agreement, and in
connection with the Series 1996-2 Supplement, NFLP
and NFC are being designated as Financing Sources and
the Trustee and the NFC Agent are being designated as
Beneficiaries under this Agreement to secure, among
other things, payment of National's obligations from
time to time owing to NFLP under the Second Master
Motor Vehicle Lease and Servicing Agreement, dated as
of December 20, 1996 (as amended, supplemented,
restated or otherwise modified from time to time),
between National and NFLP and NFLP's obligations
under the Series 1996-2 Note.
8. Each of National and NFLP may from time to time
obtain financing with respect to Vehicles acquired by it or obtain
credit enhancement to support such financing from other Persons (which
Persons providing financing to National will include NFLP) which are
or shall hereafter become parties hereto as Financing Sources or shall
hereafter be named as Beneficiaries with respect to a Financing
Source.
9. Citi has agreed to continue to act as Master
Collateral Agent, and in its capacity as Master Collateral Agent to
continue to be named as the lienholder on the Certificates of Title
for the Vehicles, for the benefit of the Beneficiaries from time to
time.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, and other good and valuable
consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:".
(b) Section 1.1 of the Master Collateral Agreement is
amended by amending in their entirety the following definitions as set forth
below:
"'Base Indenture' means the Base Indenture, dated as of April
30, 1996, between NFLP and BONY, as Trustee, as amended by the
Supplement and Amendment to the Base Indenture, dated as of December
20, 1996, and as further amended, supplemented, restated or otherwise
modified from time to time in accordance with its terms, exclusive of
Supplements creating a new Series of Notes."
"'Business Day' means any day that is not (i) a Saturday,
Sunday, or (ii) any other day on which banks are authorized or
obligated by law or executive order to close in New York City, New
York or Minneapolis, Minnesota or the city in which the Corporate
Trust Office is located, or (iii) in connection with any Financing
<PAGE> 7
7
Document, any other day not designated as a "Business Day" in such
Financing Document."
"'Depositary Agreement' means the Depositary Agreement, dated
as of June 7, 1995, between NFC and Citibank, N.A., as depositary, as
amended by the Amendment to Depositary Agreement, dated as of December
20, 1996, and as the same may be further amended, supplemented or
modified from time to time."
"'Intercreditor Agreement' means the Intercreditor and
Subordination Agreement, dated as of June 7, 1995, among National,
certain subordinated creditors listed on Schedule A thereto and
certain senior creditors listed on Schedule B thereto, as modified by
the Joinder by Senior Debt Holder, executed by BONY as of April 30,
1996, the Acceptance by Subordinated Debt Holder, executed by GM as of
April 30, 1996, the Acceptance by Subordinated Debt Holder, executed
by Credit Agricole as of May 24, 1996, and the Acceptance by
Subordinated Debt Holder, executed by BONY as of May 29, 1996, and as
amended by the Amendment to Intercreditor and Subordination Agreement,
dated as of December 20, 1996, and as further amended, supplemented or
otherwise modified from time to time in accordance with the terms
thereof."
"'Liquidity Agreement' means the Liquidity Agreement, dated as
of June 7, 1995, among NFC, the financial institutions on the
signature pages thereof, and Citibank, N.A., as liquidity agent for
such financial institutions, as modified by the Consent and Amendment
to Liquidity Agreement, dated as of December 15, 1995, the Consent of
Liquidity Lenders, and the Extension of Scheduled Liquidity Commitment
Termination Date, dated as of May 29, 1996, the Amendment to Liquidity
Agreement, dated as of May 29, 1996, and the Second Amendment to
Liquidity Agreement, dated as of December 20, 1996, and as the same
may be further amended, extended, supplemented or modified from time
to time."
"'NFC Collateral Agreement' means the Collateral Agreement,
dated as of June 7, 1995, among NFC, the NFC Agent, Citi, as agent for
the financial institutions party to the Liquidity Agreement and as
depositary under the Depositary Agreement, GM, as an A support credit
enhancer, BONY, as an A support credit enhancer, Credit Agricole, as a
B support credit enhancer, and CS First Boston Corporation, Goldman,
Sachs & Co., and Citicorp Securities, Inc., as dealers, as modified by
the A Support Intercreditor Agreement, dated as of May 29, 1996 (as
amended, supplemented or modified from time to time), among GM, BONY,
NFC and National, and as amended by the Supplement and Amendment to
Collateral Agreement, dated as of December 20, 1996, and as the same
may be further amended, supplemented or modified from time to time."
<PAGE> 8
8
"'NFLP Indenture' mean the Base Indenture, dated as of April
30, 1996, between NFLP and the Trustee, as amended by the Supplement
and Amendment to Base Indenture, dated as of December 20, 1996,
incorporating each of the Series Supplements thereto executed and
delivered from time to time, as such Base Indenture or Series
Supplements may be amended, supplemented or modified from time to
time."
(c) Section 1.1 of the Master Collateral Agreement is
further amended by amending the proviso to the definition of the term
"Exchanged Vehicle" contained therein to read as follows:
; "provided that until the NFC Agent provides written notice to the
contrary to the Master Collateral Agent, no Vehicle that is a Related
Vehicle with respect to NFC or the NFC Agent shall be an Exchanged
Vehicle."
(d) Section 2.1(a) of the Master Collateral Agreement is
amended by deleting the references in clauses (v) and (vi) thereof to "the
Vehicle Title Nominee Agreement" and "the GM Guaranty", respectively, and,
accordingly, amending such clauses to read:
"(v) [reserved];
(vi) [reserved];"
(e) Section 2.1(b) of the Master Collateral Agreement is
amended by deleting the references in clauses (vi) and (vii) thereof to "all
right, title and interest of NFLP in, to and under the Vehicle Title Nominee
Agreement" and "all right, title and interest of NFLP in, to and under the GM
Guaranty", respectively, and, accordingly, amending such clauses to read:
"(vi) [reserved];
(vii) [reserved];"
(f) Section 2.2 of the Master Collateral Agreement is
amended by replacing the words "Citi, Credit Suisse" contained therein with the
words "Credit Agricole, BONY."
(g) The first two sentences of Section 2.5(c) of the
Master Collateral Agreement are amended in their entirety to read as follows:
<PAGE> 9
9
"The Servicer and NFLP, as applicable, shall cause payments (i)
representing amounts payable under Repurchase Programs (including
Guaranteed Payments, but not including other proceeds from sales of
Program Vehicles at Auction or amounts payable by Manufacturers under
a Repurchase Program with respect to Exchanged Vehicles) and (ii)
relating to the other Master Collateral (other than sale proceeds from
sales of Vehicles other than to or through a Manufacturer under its
Repurchase Program, insurance proceeds and warranty payments with
respect to Vehicles and any amounts payable with respect to Exchanged
Vehicles) to be made directly to the Master Collateral Agent for
deposit into the Master Collateral Account (or, in the case of any
such payments relating to the Series 1996-2 Note or any other
Financing Document, or any Vehicle, relating thereto, as otherwise
directed by the NFC Agent pursuant to the NFC Collateral Agreement);
provided that in the event any Exchange Agreement is entered into by
NFLP and National, a Manufacturer may cause payments representing
amounts payable under Manufacturer Programs (including Guaranteed
Payments) to be deposited into a Master Deposit Account for further
allocation and deposit to (a) the applicable Exchange Account with
respect to such payments relating to Exchanged Vehicles and (b) to the
Master Collateral Account (or, in the case of any such payments, if
any, relating to the Series 1996-2 Note or any other Financing
Document, or any Vehicle, relating thereto, as otherwise directed by
the NFC Agent pursuant to the NFC Collateral Agreement) with respect
to all other such payments. By the second Business Day following its
receipt thereof in available funds, National or NFLP will deposit into
the Master Collateral Account (or, in the case of any such proceeds
relating to the Series 1996-2 Note or any other Financing Document, or
any Vehicle, relating thereto, as otherwise directed by the NFC Agent
pursuant to the NFC Collateral Agreement) proceeds received by
National or NFLP from (i) sales of Vehicles other than to or through a
Manufacturer under its Repurchase Program, (ii) sales of Vehicles at
Auction, and (iii) insurance proceeds and warranty payments received
by National or NFLP during the continuance of a default or
amortization event with respect to any Financing Source under its
Financing Documents."
(h) Section 2.4 of the Master Collateral Agreement is
amended by deleting the word "and" before clause (iii) in the first sentence
thereof and substituting therefor a comma and adding after said clause (iii)
the words, "and (iv) the state in which each Vehicle is titled"; and also
Exhibit B to the Master Collateral Agreement is amended by deleting the word
"and" before clause (v) in the first sentence thereof and substituting therefor
a comma and adding after said clause (v) the words, "and (vi) the state in
which each Vehicle is titled".
(i) The fourth and fifth sentences of Section 2.5(c) of
the Master Collateral Agreement are amended by replacing the parenthetical
"(upon which instructions the Master Collateral Agent may conclusively rely)"
contained therein with the parenthetical "(which
<PAGE> 10
10
instructions may be given by any employee of the Servicer as to whom a National
Agent has notified the Master Collateral Agent that such employee is authorized
to deliver such instructions, and upon which instructions the Master Collateral
Agent may conclusively rely)".
(j) Section 2.5(d) of the Master Collateral Agreement is
amended by replacing the reference to "Section 2.5(b)" contained therein with a
reference to "Section 2.5(c)".
(k) The second sentence of Section 2.5(f) of the Master
Collateral Agreement is amended in its entirety to read as follows:
"Such investment instructions may be given by any employee of the
Servicer as to whom a National Agent has notified the Master
Collateral Agent that such employee is authorized to deliver such
instructions."
(l) Section 2.6 of the Master Collateral Agreement is
amended in its entirety to read as follows:
"SECTION 2.6. Certificates of Title. The Servicer shall hold
all Certificates of Title in trust, as agent of, and custodian for,
the Master Collateral Agent. The Servicer shall (i) hold all such
Certificates of Title, under lock and key, in a safe fireproof
location at one or more of the offices specified in Exhibit C (as the
same may be from time to time revised by the Servicer on 30 days'
prior written notice to the parties hereto), and (ii) not release or
surrender any Certificate of Title except in accordance with this
Agreement (and in any event not release or surrender any of the
Certificates of Title other than Certificates of Title as to which the
Lien of the Master Collateral Agent has been released in accordance
with this Agreement). The Servicer shall cause the Certificates of
Title with respect to each Vehicle owned by National to show National,
and each Vehicle owned by NFLP to show NFLP, as the registered owner
and Citibank, N.A., as agent, as the first lienholder, at the address
referred to in the next sentence. The Master Collateral Agent has
established a lock-box in Minneapolis, Minnesota to be used
exclusively as its address as first lienholder noted on the
Certificates of Title, to which lock-box both the Servicer and the
Master Collateral Agent shall have access; provided, however, that the
Master Collateral Agent may, at any time after the occurrence and
during the continuance of any Default under any Financing Document to
which any Vehicles relate, and upon notice to the Servicer, establish
a post office box in New York City thereafter to be used exclusively
thereafter as its address as first lienholder noted on the
Certificates of Title for such Vehicles (in which case) the Master
Collateral Agent shall thereafter, on a semi-weekly basis, forward to
the Servicer at its address set forth in Section 5.2
<PAGE> 11
11
hereof all Certificates of Title received at such post office box
address titled in the name of National or in the name of NFLP)."
(m) Section 2.7(c) of the Master Collateral Agreement is
amended by replacing the reference to "Section 2.7(a)" contained therein with a
reference to "Section 2.7(b)".
(n) Clause (iii) of Section 3.2 of the Master Collateral
Agreement is amended in its entirety to read as follows:
"(iii) direct payments due under the Repurchase Programs (other than
payments with respect to Exchanged Vehicles) and payments with respect
to other Master Collateral (other than insurance proceeds, warranty
payments, amounts payable to NFLP with respect to Exchanged Vehicles
and sales proceeds from sales of Vehicles to third parties (other than
under any related Repurchase Program) or insurance proceeds in respect
of Vehicles received directly by the Servicer) to be deposited
directly to the Master Collateral Account (or, in the case of any such
payments relating to the Series 1996-2 Note or any other Financing
Document, or any Vehicle, relating thereto, as otherwise directed by
the NFC Agent pursuant to the NFC Collateral Agreement) by the
Manufacturers and related auction dealers in accordance with this
Agreement and deposit into the Master Collateral Account (or, in the
case of any such payments relating to the Series 1996-2 Note or any
other Financing Document, or any Vehicle, relating thereto, as
otherwise directed by the NFC Agent pursuant to the NFC Collateral
Agreement) sale proceeds (including amounts paid to the Servicer by a
Manufacturer as a result of the Servicer's sale of such Vehicle
outside such Manufacturer's Repurchase Program) or insurance proceeds
in respect of the Vehicles (other than exchanged Vehicles) received
directly by the Servicer, by the second Business Day following the
Servicer's receipt thereof,".
(o) Section 4.1(g) of the Master Collateral Agreement is
amended by replacing the words "Section 9.14 of the NFC Loan Agreement"
contained therein with the words "Section 24.14 of the Lease for the Series
1996-2 Note".
(p) Section 4.1 of the Master Collateral Agreement is
amended by deleting subsection (e) thereof.
(q) Exhibit B of the Master Collateral Agreement is
amended by amending clause (v) thereof in its entirety to read as follows:
"(v) the monthly reports required pursuant to Section 7.1
of each Fleet Finance Agreement and NFLP Fleet Finance Agreement (in
each case as such term is
<PAGE> 12
12
defined in Schedule 1 to the Base Indenture), to the extent such
Section requires that such reports be prepared by the Servicer".
SECTION 3. Conditions of Effectiveness. This Amendment shall
become effective when, and only when, the Liquidity Agent shall have received
counterparts of this Amendment executed by National, NFLP, NFC, GM, BONY, the
Trustee, Credit Agricole, Citibank as Master Collateral Agent, and Credit
Suisse as the NFC Agent, and Section 2 hereof shall become effective when, and
only when, the Supplement and Amendment to Base Indenture, dated as of December
20, 1996, between NFLP and the Trustee, including Section 2 thereof, shall have
become effective in accordance with Section 3 thereof.
SECTION 4. Reference to and Effect on the Related Documents.
(a) Upon the effectiveness of this Amendment, including Section 2 hereof, on
and after the date hereof each reference in the Master Collateral Agreement to
"this Agreement", "hereunder", "hereof" or words of like import referring to
the Master Collateral Agreement, and each reference in the other Related
Documents to "the Master Collateral Agreement", "thereunder", "thereof" or
words of like import referring to the Master Collateral Agreement, shall mean
and be a reference to the Master Collateral Agreement as amended hereby.
(b) Except as specifically amended above, the Master
Collateral Agreement and all other Related Documents are and shall continue to
be in full force and effect and are hereby in all respects ratified and
confirmed. Without limiting the generality of the foregoing, the Master
Collateral Agreement and all of the Master Collateral described therein do and
shall continue to secure the payment of all National Obligations or NFLP
Obligations, as applicable.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of any party thereto under any of the Related
Documents, nor constitute a waiver of any provision of any of the Related
Documents.
SECTION 5. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement. Delivery of an executed counterpart of a signature
page to this Amendment by telefacsimile shall constitute delivery of a manually
executed counterpart of this Amendment.
SECTION 6. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York
excluding (to the greatest extent a New York court would permit) any rule of
law that would cause application of the laws of any jurisdiction other than the
State of New York.
<PAGE> 13
13
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
NATIONAL CAR RENTAL SYSTEM, INC.
as grantor and as Servicer
By: /s/ E.A. Zinter
-----------------------------------------
Name: E.A. Zinter
Title: EVP
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP,
as grantor and as a Financing Source
By: NATIONAL CAR RENTAL FINANCING
CORPORATION, its General Partner
By: /s/ M.J. Baker
------------------------------------
Name:
Title:
CITIBANK, N.A., as Master Collateral Agent
By: /s/ Annette Marsula
-----------------------------------------
Name: Annette Marsula
Title: Senior Trust Officer
NATIONAL FLEET FUNDING
CORPORATION, as a Financing Source
By /s/ M.J. Baker
-----------------------------------------
Name:
Title:
<PAGE> 14
14
CREDIT SUISSE, NEW YORK
BRANCH, as NFC Agent, as a Beneficiary
By /s/ R. Saylor
-----------------------------------------
Name: ROGER W. SAYLOR
Title: ASSOCIATE
By /s/ Carl Jackson
-----------------------------------------
Name: CARL JACKSON
Title: MEMBER OF SENIOR MANAGEMENT
GENERAL MOTORS CORPORATION,
as a Financing Source and Beneficiary
By /s/ Marc L. Boothis
-----------------------------------------
Name: Marc L. Boothis
Title: Attorney-in-Fact
THE BANK OF NEW YORK,
individually and as Trustee, as
a Financing Source and Beneficiary
By /s/ Cheryl L. Laser
-----------------------------------------
Name: CHERYL L. LASER
Title: Assistant Vice President
CAISSE NATIONALE DE CREDIT
AGRICOLE, as a Financing Source
and Beneficiary
By /s/ Katherine L. Abbott
-----------------------------------------
Name: KATHERINE L. Abbott
Title: FIRST VICE PRESIDENT
<PAGE> 1
Exhibit 4.20
EXECUTION COPY
MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
dated as of April 30, 1996
between
NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP,
as Lessor, and
NATIONAL CAR RENTAL SYSTEM, INC.,
as Lessee and Servicer
AS SET FORTH IN SECTION 27 HEREOF, LESSOR HAS ASSIGNED TO NFLP (AS DEFINED
HEREIN) AND NFLP HAS ASSIGNED TO THE TRUSTEE (AS DEFINED HEREIN) CERTAIN OF ITS
RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE. TO THE EXTENT, IF ANY, THAT THIS
LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM
COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION) NO SECURITY
INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY
COUNTERPART OTHER THAN THE ORIGINAL EXECUTED COUNTERPART, WHICH SHALL BE
IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE
TRUSTEE ON THE SIGNATURE PAGE THEREOF.
<PAGE> 2
TABLE OF CONTENTS
SECTION 1. CERTAIN DEFINITIONS .............................................1
Section 1.1. Certain Definitions ....................................1
Section 1.2. Accounting and Financial ...............................2
Section 1.3. Cross References; Headings .............................2
Section 1.4. Interpretation .........................................2
SECTION 2. GENERAL AGREEMENT ................................................3
Section 2.1. Leasing of Vehicles ....................................3
Section 2.2. Right of Lessee to Act as Lessor's Agent ...............4
Section 2.3. Payment of Purchase Price by Lessor; Certain
Additional Payments to the Servicer ...........................5
Section 2.4. Non-liability of Lessor ................................5
SECTION 3. TERM .............................................................6
Section 3.1. Vehicle Lease Commencement Date ........................6
Section 3.2. Lease Commencement Date ................................6
SECTION 4. CONDITIONS PRECEDENT .............................................7
Section 4.1. No Default .............................................7
Section 4.2. Texas Vehicles .........................................7
Section 4.3. Other Conditions .......................................7
SECTION 5.RENT AND CHARGES ..................................................7
Section 5.1 Payment of Rent ........................................7
Section 5.2. Payment of Availability Payment ........................7
Section 5.3. Payment of Monthly Supplemental Payment ................8
Section 5.4. Payment of Termination Payments, Casualty
Payments, and Late Return Payments ............................8
Section 5.5. Late Payment ...........................................8
SECTION 6. Reserved ........................................................8
SECTION 7. CASUALTY OBLIGATION .............................................8
SECTION 8. VEHICLE USE .....................................................8
SECTION 9. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES
AND FINES ..........................................................10
SECTION 10. MAINTENANCE AND REPAIRS ........................................11
SECTION 11. VEHICLE WARRANTIES .............................................11
SECTION 12. PROGRAM VEHICLE USAGE REQUIREMENTS AND DISPOSITION .............12
Section 12.1. Usage ................................................12
Section 12.2. Disposition Procedure.................................12
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Section 12.3. Termination Payments..................................13
SECTION 13. LATE RETURN PAYMENTS............................................13
SECTION 14. REDESIGNATION OF VEHICLES.......................................14
SECTION 15. GENERAL INDEMNITY...............................................14
Section 15.1. Indemnity of the Lessor...............................14
Section 15.2. Indemnification of the Trustee........................16
Section 15.3. Reimbursement Obligation by the Lessee................17
Section 15.4 Notice to Lessee of Claims ...........................17
Section 15.5 Defense of Claims ....................................17
SECTION 16. SUCCESSORS AND ASSIGNS; ASSIGNMENT..............................18
SECTION 17 DEFAULT AND REMEDIES THEREFOR
Section 17.1 Events of Default.....................................18
Section 17.2. Effect of Lease Event of Default......................18
Section 17.3. Rights of Lessor Upon Lease Event of
Default .......................................................20
Section 17.4. Measure of Damages....................................21
Section 17.5. Application of Proceeds...............................24
SECTION 18. MANUFACTURER EVENTS OF DEFAULT ................................25
SECTION 19. CERTIFICATION OF TRADE OR BUSINESS USE.........................25
SECTION 20. SURVIVAL ......................................................25
SECTION 21. RIGHTS OF LESSOR PLEDGED TO MASTER COLLATERAL AGENT
AND TRUSTEE.........................................................25
SECTION 22. MODIFICATION AND SEVERABILITY ..................................28
SECTION 23. CERTAIN REPRESENTATIONS AND WARRANTIES..........................28
Section 23.1. Organization; Ownership; Power;
Qualification ................................................28
Section 23.2 Authorization; Enforceability ........................28
Section 23.3 Compliance ...........................................29
Section 23.4 Financial Information; Financial Condition ...........29
Section 23.5 Litigation ...........................................30
Section 23.6 Liens ................................................30
Section 23.7 Employee Benefit Plans ...............................31
Section 23.8 Investment Company Act ...............................31
Section 23.9 Regulations G, T, U and X ............................31
Section 23.10 Business Locations; Trade Names .....................31
Section 23.11 Taxes ...............................................32
Section 23.12 Governmental Authorizations .........................32
Section 23.13 Absence of Default ..................................32
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Section 23.14 Compliance with Requirements of Law .................32
Section 23.15 Accuracy of Information .............................32
Section 23.16 Solvency ............................................33
Section 23.17 Stock Ownership .....................................33
Section 23.18 Necessary Actions ...................................33
Section 23.19 Supplemental Documents True and Correct .............33
Section 23.20 Eligible Vehicles; Eligible Franchisees .............33
SECTION 24. CERTAIN AFFIRMATIVE COVENANTS...................................33
Section 24.1 Corporate Existence; Foreign Qualifications .........34
Section 24.2 Books, Records and Inspections ......................34
Section 24.3 Accounting Methods; Financial Records ...............34
Section 24.4 Insurance ...........................................35
Section 24.5 Manufacturer Programs ...............................35
Section 24.6 Reporting Requirements ..............................36
Section 24.7 Taxes and Liabilities ...............................40
Section 24.8 Maintenance of Separate Existence ...................41
Section 24.9 Maintenance of Credit Enhancement ...................41
Section 24.10 Manufacturer Payments; Sales Proceeds ...............41
Section 24.11 Compliance with Requirements of Law .................42
Section 24.12 Delivery of Information .............................42
Section 24.13 Master Collateral Agent as Lienholder ...............42
Section 24.14 Maintenance of the Vehicles .........................42
Section 24.15 Certificates of Title ...............................42
Section 24.16 Release of Collateral ...............................43
Section 24.17 Change of Location or Name ..........................43
Section 24.18 Deliveries; Further Assurances ......................44
Section 24.19 Additional Actions ..................................44
Section 24.20. Subleases ..................................................45
SECTION 25. CERTAIN NEGATIVE COVENANTS ....................................45
Section 25.1 Mergers, Consolidations .............................45
Section 25.2 Regulations G, T, U and X ...........................46
Section 25.3 Liens ...............................................46
Section 25.4 Use of Vehicles .....................................46
Section 25.5 Percentage of Non-Program Vehicles ..................46
Section 25.6 Acquisition and Financing of Vehicles ...............46
SECTION 26. SERVICING COMPENSATION ........................................47
SECTION 27. BANKRUPTCY PETITION AGAINST LESSOR ............................48
SECTION 28. FORUM SELECTION AND CONSENT TO JURISDICTION ...................48
SECTION 29. GOVERNING LAW .................................................49
SECTION 30. JURY TRIAL ....................................................49
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SECTION 31. NOTICES .......................................................49
SECTION 32. HEADINGS ......................................................50
SECTION 33. EXECUTION IN COUNTERPARTS .....................................50
SECTION 34. EFFECTIVENESS .................................................50
SCHEDULES AND ATTACHMENTS
Schedule 23.10 Business Locations
ATTACHMENTS A-1 Information on Refinanced Vehicles
ATTACHMENTS A-2 Vehicle Acquisition Schedule
ATTACHMENTS B Form of Power of Attorney
ATTACHMENTS C Form of Certification of Trade or Business Use
EXHIBITS
EXHIBIT A Form of Monthly Certificate
EXHIBIT B Form of Monthly Noteholders' Statement
EXHIBIT C Form of Annual Certificate
EXHIBIT D Form of Joinder to Intercreditor Agreement
EXHIBIT E Form of Notice of Lease Payment Deficit
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MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
This Master Motor Vehicle Lease and Servicing Agreement (the "Base
Lease" and, as supplemented by the Lease Annexes, this Agreement" or "Lease"),
dated as of April 30, 1996, by and between NATIONAL CAR RENTAL FINANCING LIMITED
PARTNERSHIP, a Delaware corporation (the "'Lessor" or "NFLP"), and NATIONAL CAR
RENTAL SYSTEM, INC., a Delaware corporation ("National"), in its capacity as
lessee (the "Lessee") and as servicer (the "Servicer").
W I T N E S S E T H:
WHEREAS, the Lessor (such capitalized term, together with all other
capitalized terms used herein, shall have the meaning assigned thereto in
Section 1) intends to refinance the Refinanced Vehicles and to purchase, and
finance the purchase of, additional Eligible Vehicles from one or more
Manufacturers with the proceeds obtained by the issuance of its Notes issued
pursuant to the Indenture and with certain other funds; and
WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee desires
to lease from the Lessor, Vehicles for use in the Lessee's domestic daily rental
car operations;
WHEREAS, the Lessee desires to refinance the Refinanced Vehicles and
finance the acquisition of the Financed Vehicles and retain tax ownership of
such Refinanced Vehicles and Financed Vehicles and Lessor desires to facilitate
such financing.
NOW, THEREFORE, in consideration of the foregoing premises, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
Section 1.1. Certain Definitions. As used in this Agreement and unless the
context requires a different meaning, capitalized terms not otherwise defined
herein or in the Annexes hereto shall have the meanings assigned to such terms
in the Definitions List, attached as Schedule 1 to the Base Indenture, dated as
of April 30, 1996 (as such agreement may be amended, supplemented, restated or
otherwise modified from time to time in accordance with its terms, the "Base
Indenture"), between NFLP and The Bank of New York, as trustee, as in effect on
the date hereof and as such Schedule 1 may be amended, supplemented or modified
from time to time in accordance with the terms of the Base Indenture (the
"Definitions List").
<PAGE> 7
Section 1.2. Accounting and Financial Determinations. Where the character
or amount of any asset or liability or item of income or expense is required to
be determined, or any accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall be made, to
the extent applicable and except as otherwise specified in this Agreement, in
accordance with GAAP. When used herein, the term "financial statement" shall
include the notes and schedules thereto.
Section 1.3. Cross References: Headings. The words "hereof", "herein" and
"hereunder" and words of a similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Annex, Section, Schedule and Exhibit references contained in this
Agreement are references to Annexes, Sections, Schedules and Exhibits in or to
this Agreement unless otherwise specified. Any reference in any Section or
definition to any clause is, unless otherwise specified, to such clause of such
Section or definition. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provision hereof.
Section 1.4. Interpretation. In this Agreement, unless the context
otherwise requires:
(a) the singular includes the plural and vice versa;
(b) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to any Person in a particular
capacity only refers to such Person in such capacity;
(c) reference to any gender includes the other gender
(d) reference to any Requirement of Law means such Requirement of Law
as amended, modified, codified or reenacted, in whole or in part, and in
effect from time to time;
(e) "including" (and, with correlative meaning, Include) means
including without limiting the generality of any description preceding such
term;
(f) "or" is not exclusive;
(g) provisions apply to successive events and transactions; and
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(h) with respect to the determination of any period of time, "from" means
"from and including' and "to" means "to but excluding".
SECTION 2. GENERAL AGREEMENT. (a) As specified in the Lease Annexes, the
Lessee and the Lessor intend that this Agreement be (i) an operating lease with
respect to the Acquired Vehicles and (ii) a financing arrangement with respect
to the Financed Vehicles.
(b) If, notwithstanding the intent of the parties to this Agreement, this
Agreement is deemed by any court, tribunal, arbitrator or other adjudicative
authority in any proceeding (each, a "Court") to constitute a financing
arrangement or otherwise not to constitute a "true lease" with respect to the
Acquired Vehicles, then it is the intention of the parties that this Agreement
together with the Master Collateral Agency Agreement, as such agreements apply
to the Acquired Vehicles, shall constitute a security agreement under applicable
law. It is also the intention of the parties that this Agreement together with
the Master Collateral Agency Agreement, as such agreements apply to the Financed
Vehicles, shall in all events constitute a security agreement under applicable
law. The Lessee hereby acknowledges that it has granted to the Master Collateral
Agent, pursuant to the Master Collateral Agency Agreement, for the benefit of
the Trustee, a first priority security interest in all of the Lessee's right,
title and interest in and to the National Master Collateral (as defined therein)
as collateral security for the prompt and complete payment and performance when
due (whether at stated maturity, by acceleration or otherwise) of all of the
obligations and liabilities of the Lessee to the Lessor and the Trustee, whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred (including interest accruing after the Lease
Expiration Date and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding), which may arise under, out of, or in connection with, this
Agreement and any other document made, delivered or given in connection
herewith, whether on account of rent, principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including all fees and
disbursements of counsel to the Lessor or the Trustee that are required to be
paid by the Lessee pursuant to the terms hereof).
Section 2.1. Leasing of Vehicles. From time to time, subject to the terms
and conditions hereof, the Lessor agrees to lease to the Lessee and the Lessee
agrees to lease from the Lessor the Refinanced Vehicles and each additional
Acquired Vehicle or Financed Vehicle identified in vehicle order summaries
(each, a "Vehicle Order") produced from time to time by the Lessee, listing
Vehicles ordered by the Lessee from Eligible
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<PAGE> 9
Manufacturers, for itself or as agent for the Lessor, pursuant to the terms of
any applicable Manufacturer Programs or otherwise. The Lessor shall, subject to
Section 4 and to compliance with the terms of the Indenture, make available to
the Lessee under this Lease, financing for Financed Vehicles (other than Texas
Vehicles) in an aggregate amount, and Acquired Vehicles and Texas Vehicles for
lease to the Lessee hereunder in an aggregate Net Book Value, which collectively
shall not exceed the Maximum Lease Commitment. The Lessee shall make available
to the Lessor (a) a schedule as set forth in Attachment A-1 hereto containing
information concerning the Refinanced Vehicles of a scope agreed upon by the
Lessor and the Lessee, and (b), if requested by the Lessor, each Vehicle Order,
together with a schedule containing the information with respect to the Vehicles
included within such Vehicle Order as is set forth in Attachment A-2 hereto, or
in such form as is otherwise requested by the Lessor (each, a "Vehicle
Acquisition Schedule"). In addition, the Lessee shall provide such other
information regarding such Vehicles as the Lessor may reasonably require from
time to time. The Lessor shall lease to the Lessee, and the Lessee shall lease
from the Lessor, only Vehicles that are Eligible Vehicles. This Agreement,
together with the Manufacturer Programs and any other related documents attached
to this Agreement or submitted with a Vehicle Order (collectively, the
'Supplemental Documents"), will constitute the entire agreement regarding the
leasing of Vehicles by the Lessor to the Lessee.
Section 2.2. Right of Lessee to Act as Lessor's Agent. The Lessor agrees
that the Lessee may act as the Lessor's agent in placing Vehicle Orders on
behalf of the Lessor, as well as filing claims on behalf of the Lessor for
damage in transit, and other Manufacturer delivery claims related to the
Vehicles leased hereunder; provided, however, that the Lessor may hold the
Lessee liable for losses due to the Lessee's actions in performing as the
Lessor's agent hereunder. In addition, the Lessor agrees that the Lessee may
make arrangements for delivery of Vehicles to a location selected by the Lessee
at the Lessee's expense to the extent that any such expense has not been
included in the Capitalized Cost of such Vehicle. The Lessee or the applicable
Sublessee may accept or reject Eligible Vehicles upon delivery in accordance
with the Lessee's or such Sublessee's customary business practices, and any
Eligible Vehicle, if rejected, will be deemed a Casualty hereunder to the extent
the Capitalized Cost thereof has been paid by the Lessor or the Lessee. The
Lessee, acting as agent for the Lessor, shall be responsible for pursuing any
rights of the Lessor with respect to the return of any Eligible Vehicle to the
Manufacturer thereof pursuant to the preceding sentence. The Lessee agrees that
any Vehicles ordered by Lessee on behalf of the Lessor pursuant to this Section
2,2 shall be ordered utilizing the procedures consistent with the applicable
Manufacturer Program or any guidelines of the
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Manufacturer for the ordering or purchasing of Non-Program Vehicles, in each
case as and to the extent applicable.
Section 2.3. Payment of Purchase Price by Lessor: Certain Additional
Payments to the Servicer. (a) Upon receipt of the Manufacturer's invoice and
certificate of origin in respect of any Vehicle other than a Replacement
Vehicle, the Lessor or its agent shall pay or cause to be paid to the dealer or
the related Manufacturer in accordance with such Manufacturer's payment terms,
as applicable, the Capitalized Cost of such Vehicle under the applicable
Manufacturer Program (in the case of a Program Vehicle) or otherwise (in the
case of a Non-Program Vehicle) as established by the invoice of the dealer or
the Manufacturer, as the case may be and the Lessee shall pay all applicable
costs and expenses of freight, packing, handling, storage, shipment and delivery
of such Vehicle to the extent that the same have not been included within the
Capitalized Cost; provided, however, that to the extent a Qualified Intermediary
purchases a Replacement Vehicle on behalf of the Lessee or the Lessor, such
Qualified Intermediary shall pay the Capitalized Cost of such Replacement
Vehicle with funds other than amounts on deposit in the Collection Account or
any subaccount thereof; provided further, however, that solely in the case of
the Refinanced Vehicles, the Lessor shall pay to the Master Collateral Agent on
the Lease Commencement Date, for allocation to National Fleet Funding
Corporation as a Financing Source, an amount equal to the aggregate Net Book
Value as of the Lease Commencement Date of the Refinanced Vehicles.
(b) All amounts paid by the Manufacturer on account of vehicle preparation
services or work covered by warranty performed by National with respect to
Vehicles acquired or financed pursuant to this Agreement or as incentive
payments for maintaining a particular fleet mix shall inure to the benefit of
National and, to the extent any such payments are received by the Lessor, the
Trustee or the Master Collateral Agent, shall promptly be paid over to National.
Section 2.4. Non-liability of Lessor. The Lessor shall not be liable to the
Lessee for any failure or delay in obtaining Vehicles or making delivery
thereof. AS BETWEEN THE LESSOR AND THE LESSEE, ACCEPTANCE FOR LEASE OF THE
VEHICLES SHALL CONSTITUTE THE LESSEE'S ACKNOWLEDGMENT AND AGREEMENT THAT THE
LESSEE HAS FULLY INSPECTED SUCH VEHICLES, THAT THE VEHICLES ARE IN GOOD ORDER
AND CONDITION AND ARE OF THE MANUFACTURE, DESIGN, SPECIFICATIONS AND CAPACITY
SELECTED BY THE LESSEE, THAT THE LESSEE IS SATISFIED THAT THE SAME ARE SUITABLE
FOR THIS USE AND THAT THE LESSOR IS NOT A MANUFACTURER, AN AGENT OF THE
MANUFACTURER OR OTHERWISE ENGAGED IN THE SALE OR DISTRIBUTION OF VEHICLES, AND
HAS NOT MADE AND DOES NOT HEREBY MAKE ANY REPRESENTATION, WARRANTY OR COVENANT,
EXPRESS OR IMPLIED, WITH
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RESPECT TO MERCHANTABILITY, CONDITION, QUALITY, CAPABILITY, WORKMANSHIP,
DURABILITY OR SUITABILITY OF THE VEHICLE IN ANY RESPECT OR IN CONNECTION WITH OR
FOR THE PURPOSES OR USES OF THE LESSEE, OR ANY WARRANTY THAT THE LEASED VEHICLES
WILL SATISFY THE REQUIREMENTS OF ANY LAW OR ANY CONTRACT SPECIFICATION, OR ANY
OTHER REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR CHARACTER, EXPRESS OR
IMPLIED, WITH RESPECT THERETO AND AS BETWEEN THE LESSOR AND THE LESSEE, THE
LESSEE AGREES TO BEAR ALL SUCH RISKS AT ITS SOLE COST AND EXPENSE. THE LESSEE
SPECIFICALLY WAIVES ALL RIGHTS TO MAKE CLAIMS AGAINST THE LESSOR AND ANY LEASED
VEHICLE FOR BREACH OF ANY WARRANTY OF ANY KIND WHATSOEVER AND, AS TO THE LESSOR,
THE LESSEE LEASES THE LEASED VEHICLES "AS IS." The Lessor shall not be liable
for any failure or delay in delivering any Vehicle ordered for lease pursuant to
this Agreement, or for any failure to perform any provision hereof, resulting
from fire or other casualty, natural disaster, riot, strike or other labor
difficulty, governmental regulation or restriction, or any cause beyond the
Lessor's direct control. IN NO EVENT SHALL THE LESSOR BE LIABLE FOR ANY
INCONVENIENCES, LOSS OF PROFITS OR ANY OTHER CONSEQUENTIAL, INCIDENTAL OR
SPECIAL DAMAGES, WHATSOEVER OR HOWSOEVER CAUSED, WHETHER RESULTING FROM ANY
DEFECT IN OR ANY THEFT, DAMAGE, LOSS OR FAILURE OF ANY VEHICLE, OR OTHERWISE,
AND THERE SHALL BE NO ABATEMENT OF RENT BECAUSE OF THE SAME.
SECTION 3. TERM.
Section 3.1. Vehicle Lease Commencement Date. The "Vehicle Lease
Commencement Date" shall mean, (i) for each Refinanced Vehicle, the Closing Date
for the first Series of Notes issued under the Indenture, and (ii) for each
other Vehicle, the date referenced in the Vehicle Acquisition Schedule with
respect to such Vehicle, which in no event shall be later than the date that
funds are expended by the Lessor to acquire or finance the acquisition of such
Vehicle. A vehicle shall be deemed hereunder to be a Vehicle leased under the
Lease on each day during the period (the "Vehicle Term") from and including the
Vehicle Lease Commencement Date to but excluding the Vehicle Lease Expiration
Date.
Section 3.2. Lease Commencement Date. The "Lease Commencement Date" shall
mean the Closing Date for the first Series of Notes issued under the Indenture.
The "Lease Expiration Date" shall mean the later of (i) the date of the payment
in full of all Series of Notes and all outstanding Carrying Charges and (ii) the
Vehicle Lease Expiration Date for the last Vehicle subject to lease by the
Lessee hereunder. The "Term" of this Agreement shall mean the period commencing
on the Lease Commencement Date and ending on the Lease Expiration Date.
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SECTION 4. CONDITIONS PRECEDENT. The agreement of the Lessor to make
available any Acquired Vehicle for lease to the Lessee, and to make available
Texas Vehicles or financing for the acquisition of any other Financed Vehicle
(other than Refinanced Vehicles) for lease to the Lessee upon the Lessee's
placement of a Vehicle Order, for itself or as agent of the Lessor, is subject
to the terms and conditions of the Indenture and subject to the satisfaction of
the conditions to effectiveness specified in Section 34 and the following
conditions precedent as of the Vehicle Lease Commencement Date for such Vehicle:
Section 4.1. No Default. No Potential Lease Event of Default or Lease Event
of Default shall have occurred and be continuing on such date or would result
from the making of such lease.
Section 4.2. Texas Vehicles. The aggregate Net Book Value of Texas Vehicles
on the Lease Commencement Date for any Vehicle shall not exceed 12.5` of the
aggregate Net Book Value of all Vehicles financed under the Lease on such day.
Section 4.3. Other Conditions. The leasing of such Vehicle shall not be
prohibited by the provisions of any Supplement other than a Supplement
establishing a Segregated Series.
SECTION 5. RENT AND CHARGES. The Lessee will pay Rent and certain other
charges on a monthly basis as set forth in this Section 5:
Section 5.1. Payment of Rent. On each Payment Date, the Lessee shall pay to
the Lessor the aggregate of all Rent payable on such Payment Date with respect
to the Vehicles, as provided in the related Lease Annexes.
Section 5.2. Payment of Availability Payment. On each Payment Date, the
Lessee shall pay to the Lessor an amount (the unavailability Payment") in
respect of the unutilized portion of the Maximum Lease Commitment. "Availability
Payment" with respect to each Payment Date shall equal (a) the aggregate
interest due on the Outstanding Notes of all Series as of such Payment Date,
plus (b) an amount equal to all Carrying Charges for the Related Month, less (c)
the sum of (i) any Monthly Variable Rent due on such Payment Date, (ii) any
Monthly Finance Rent due on such Payment Date, and (iii) any earnings on
Permitted Investments (less any portion thereof allocated to the Retained
Interestholder) accruing through the Determination Date occurring prior to such
Payment Date and not included in the calculation of Availability Payments with
respect to any prior Payment Date.
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Section 5.3. Payment of Monthly Supplemental Payment. On each Payment Date,
the Lessee shall pay to the Lessor the Monthly Supplemental Payment that has
accrued during the Related Month with respect to the Financed Vehicles, as
provided in Sections 6 and 7 of Annex B.
Section 5.4. Payment of Termination Payments. Casualty Payments. and Late
Return Payments. On each Payment Date, the Lessee shall pay to the Lessor all
Casualty Payments, Termination Payments and Late Return Payments that have
accrued with respect to the Acquired Vehicles, as provided in, respectively,
Sections 7. 12.3 and 13.
Section 5.5. Late Payment. In the event the Lessee fails to remit payment
of any amount due under the Lease on or before the Payment Date, the amount not
paid will be considered delinquent and the Lessee will pay a late charge equal
to the product of (a) the VFR plus It, times (b) the delinquent amount for the
period from the Payment Date to the date on which such delinquent amount is
received by the Trustee, multiplied by (c) the actual number of days elapsed
during such period divided by 360.
SECTION 6. Reserved.
SECTION 7. CASUALTY OBLIGATION. If a Vehicle becomes a Casualty, then the
Lessee shall (a) promptly notify the Lessor of such occurrence, and (b) in the
case of an Acquired Vehicle, on the Payment Date next succeeding the last day of
the Related Month in which the Lessee obtained actual knowledge that such
Vehicle has become a Casualty, pay to the Lessor an amount (a "Casualty
Payment") equal to the Net Book Value of such Vehicle, calculated as of the
first day of the Related Month in which the Lessee obtained actual knowledge
that such Vehicle became a Casualty (net of Monthly Base Rent and Monthly
Supplemental Payments made in respect of such Vehicle during such Related
Month). Upon payment by the Lessee to the Lessor in accordance herewith of the
Casualty Payment for any Acquired Vehicle that has become a Casualty, (i) the
Lessor, upon request of the Lessee, shall cause title to such Vehicle to be
transferred to the Lessee to facilitate liquidation of such Vehicle by the
Lessee, (ii) the Lessee shall be entitled to any physical damage insurance
proceeds applicable to such Acquired Vehicle (if at such time the Lessee carries
such insurance coverage), and (iii) the Lien of the Master Collateral Agent on
such Vehicle shall automatically be released thereby.
SECTION 8. VEHICLE USE. The Lessee shall use Vehicles leased hereunder
solely for the Lessee's domestic daily rental car operations; provided that the
Lessee may, from time to time, sublease Vehicles to Eligible Franchisees
pursuant to Lessee
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Agreements, including Subleases, used in the ordinary course of the Lessee's
business and such Eligible Franchisees shall rent Vehicles subleased by it to
consumers in the ordinary course of such Eligible Franchisee's domestic daily
rental car operations (provided further, however, that the aggregate Net Book
Value of all Vehicles subject to Subleases on any day shall not exceed an amount
equal to (a) 5` of the aggregate Net Book Value of all Vehicles leased under the
Lease on such day, or (b) such greater amount as each Rating Agency shall have
confirmed in writing will not result in the reduction or withdrawal of the then
current rating of any outstanding Series of Notes). Notwithstanding any such
Lessee Agreement, the Lessee shall remain fully liable for its obligations under
this Agreement and the other Related Documents (including any obligation
hereunder or thereunder that it may cause any Eligible Franchisee to perform or
fulfill). The Lessee shall promptly and duly execute, deliver, file and record
all such documents, statements, filings and registrations, and take such further
actions as the Lessor, the Master Collateral Agent, the Servicer or the Trustee
shall from time to time reasonably request in order to establish, perfect and
maintain the Lessor's title to and interest in the Acquired Vehicles and the
related Certificates of Title as against the Lessee or any third party in any
applicable jurisdiction and to establish, perfect and maintain the Master
Collateral Agent's lien on the Vehicles as noted on the related Certificates of
Title (other than recordation of the Lien of the Master Collateral Agent on the
Certificates of Title for the Initial Vehicles) as a perfected first-priority
lien in any applicable jurisdiction. The Lessee may, at the Lessee's sole
expense, change the place of principal location of any Vehicles. Within 60 days
after any such change of location, the Lessee shall take all actions necessary
(i) to maintain the perfected first-priority Lien of the Master Collateral Agent
on such Vehicles as noted on the Certificates of Title with respect to such
Vehicles (other than recordation of the Lien of the Master Collateral Agent on
the Certificates of Title for the Initial Vehicles) and the Lessor shall
cooperate to the extent required for the Lessee to do so, and (ii) to meet all
material legal requirements applicable to such Vehicles. Following a Lease Event
of Default or Manufacturer Event of Default, and upon the Lessor's request, the
Lessee shall advise the Lessor in writing where all Vehicles leased hereunder as
of such date are principally located. The Lessee shall not knowingly use any
Vehicles, or knowingly permit the same to be used, for any unlawful purpose. The
Lessee shall and shall require the Franchisees to use reasonable precautions to
prevent loss or damage to Vehicles. The Lessee shall or shall cause the
Franchisees to comply in all material respects with all applicable statutes,
decrees, ordinances and regulations regarding acquiring, titling, registering,
leasing, insuring and disposing of Vehicles and shall and shall require the
Franchisees to take reasonable steps to ensure that operators are licensed.
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The Lessee shall or shall cause the Franchisees to perform, at their own
expense, such vehicle preparation and conditioning services with respect to
Vehicles as are customary. The Lessor, the Master Collateral Agent or the
Trustee or any authorized representative of the Lessor, the Master Collateral
Agent or the Trustee may during reasonable business hours from time to time,
upon reasonable prior notice, without disruption of the Lessee's or the
Franchisees' business and subject to applicable law, inspect Vehicles and
registration certificates, Certificates of Title and related documents covering
Vehicles wherever the same be located.
SECTION 9. REGISTRATION: LICENSE: TRAFFIC SUMMONSES: PENALTIES AND FINES.
The Lessee, at its expense, shall be responsible for proper registration and
licensing of Vehicles, and titling of Vehicles in the name of the Lessor (in the
case of Acquired Vehicles and Texas Vehicles) or the Lessee (in the case of all
other Financed Vehicles), in each case (other than with respect to the Initial
Vehicles) with the Lien of the Master Collateral Agent noted thereon, and where
required, the Lessee shall or shall cause the Franchisees to have Vehicles
inspected by any appropriate governmental authority; provided, however, that
notwithstanding the foregoing, unless a Liquidation Event of Default or Limited
Liquidation Event of Default shall have occurred and be continuing, possession
of all Certificates of Title shall remain with the Servicer. The Lessee shall
pay or cause to be paid all registration fees, title fees, license fees, traffic
summonses, penalties, judgments and fines incurred with respect to any Vehicle
during the Vehicle Term for such Vehicle or imposed during the Vehicle Term for
such Vehicle by any governmental authority or any court of law or equity with
respect to Vehicles in connection with the Lessee's operation of Vehicles, and
any such amounts paid by the Lessor on the Lessee's behalf, in its discretion
upon at least 15 days' prior notice to the Lessee, will be reimbursed within
thirty (30) days of the Lessor notifying the Lessee of such payment; provided,
however, that the Lessor shall not pay on the Lessee's behalf any traffic
summons, or any penalty, judgment or fine for so long as such amount is being
contested by the Lessee in good faith and by appropriate proceedings with
respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP and provided that the Lessee has agreed in
writing to indemnify and hold the Lessor harmless from and against all loss,
liability and expense arising out of such unpaid amounts (and, in any case, for
so long as forfeiture of any Vehicles or other Master Collateral will not result
from the failure to pay any such amounts). The Lessor agrees to execute a power
of attorney substantially in the form of Attachment B hereto (a "Power of
Attorney"), and such other documents as may be necessary in order to allow the
Lessee to title, register and dispose of the Acquired Vehicles and the Texas
Vehicles; and the Lessee
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acknowledges and agrees that with respect to the Acquired Vehicles, it has no
right, title or interest in or with respect to any Certificate of Title.
Notwithstanding anything herein to the contrary, the Lessor may terminate such
Power of Attorney as provided in Section 17.3.
SECTION 10. MAINTENANCE AND REPAIRS. The Lessee shall or shall cause the
Franchisees to pay for all maintenance and repairs to keep Vehicles in good
working order and condition, and shall or shall cause the Franchisees to
maintain Vehicles as required in order to keep the Manufacturer's warranty in
force. The Lessee shall or shall cause the Franchisees to return each Vehicle to
an authorized Manufacturer facility or the applicable Manufacturer's authorized
warranty station (which may be a facility of the Lessee) for warranty work. The
Lessee shall or shall cause the Franchisees to comply with any Manufacturer's
recall of any Vehicle. The Lessee shall or shall cause the Franchisees to pay,
or cause to be paid, all usual and routine expenses incurred in the use and
operation of Vehicles including, but not limited to, fuel, lubricants, and
coolants. The Lessor, upon thirty (30) days' prior notice to the Lessee
(including any failure by a Franchisee to pay any such expenses), may pay any
such expenses that have not otherwise been paid by, or on behalf of, the Lessee,
and any expenses incurred by the Lessor on the Lessee's behalf for maintenance,
repair, operation or use by the Lessee of Vehicles will promptly be reimbursed
(in any event no later than the next Payment Date following such payment) by the
Lessee to the Lessor in the amount paid by the Lessor. The Lessee shall not,
without the prior consent of the Lessor, make any material alterations to any
Program Vehicle which would result in a reduction of the Repurchase Price for
such Vehicle or any material alterations to any Non-Program Vehicle. Any
improvements or additions to an Acquired Vehicle shall become and remain the
property of the Lessor, except that any addition or improvement to such a
Vehicle made by the Lessee shall remain the property of the Lessee if it can be
disconnected or removed from the Vehicle without impairing the functioning of or
resale value thereof, other than any function or value provided by such addition
or improvement.
SECTION 11. VEHICLE WARRANTIES. If a Vehicle is covered by a Manufacturer's
warranty, the Lessee, during the Vehicle Term, shall have the right to make any
claims under such warranty which the Lessor could make and to receive related
proceeds directly. As provided in Section 2.4, the Lessor makes no warranty or
representation whatsoever, express or implied, with respect to any Vehicle.
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SECTION 12. PROGRAM VEHICLE USAGE REQUIREMENTS AND DISPOSITION.
Section 12.1. Usage. As used herein, the term "vehicle turn-in condition"
with respect to each Program Vehicle means a set of criteria for evaluating
Program Vehicles upon their delivery at the end of the applicable Vehicle Terms,
which criteria will be determined in accordance with the related Manufacturer
Program. Program Vehicles not meeting the applicable Manufacturer Program's
vehicle turn-in condition requirements will, unless redesignated as a
Non-Program Vehicle in accordance with Section 14, be purchased by the Lessee in
accordance with the Casualty procedure set forth in Section 7 or otherwise
disposed of in accordance with the late delivery procedure set forth in Section
13, as applicable.
Section 12.2. Disposition Procedure: Sale of Program Vehicles Outside of
Manufacturer Program. (a) Except as otherwise permitted pursuant to subsection
(b) below, prior to the end of the Vehicle Term, the Lessee will or will cause
the related Franchisee to deliver each Program Vehicle (other than a Casualty)
to the nearest related Manufacturer official auction or other facility
designated by such Manufacturer at the Lessee's sole expense and in accordance
with the terms of the applicable Manufacturer Program. Any transportation
allowance (for delivery costs) and any rebates or credits applicable to the
unexpired term of any license plates for a Vehicle shall inure to the benefit of
the Lessee and, to the extent received by the Lessor, the Trustee or the Master
Collateral Agent, shall promptly be paid over to the Lessee. The Lessee will
comply with the requirements of law and the requirements of the Manufacturer
Programs in connection with, among other things, the delivery of Certificates of
Title, documents of transfer signed as necessary, signed Condition Reports, and
signed odometer statements for the Program Vehicles.
(b) At the election of any of the Servicer, the Lessee or the Lessor,
Program Vehicles may be sold during the Repurchase Period in a sale which is not
made pursuant to the related Manufacturer Program only (i) if such Program
Vehicle is a Financed Vehicle and the Lessee has theretofore paid to the Lessor
an amount equal to the Net Book Value of such Program Vehicle (plus all unpaid
Rent and Monthly Supplemental Payments in respect of such Vehicle) or (ii) the
purchase price (including any amounts paid by the Manufacturer as an incentive
for selling such Vehicle outside of the related Manufacturer Program), net of
all fees and expenses incurred in connection with such sale, exceed the Net Book
Value of such Vehicle less reasonably predictable Excess Mileage Charges, Excess
Damage Charges, Missing Equipment Charges and other similar charges imposed by
the Manufacturer.
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Section 12.3. Termination Payments. On the Payment Date next succeeding the
earlier of (a) the last day of the Related Month in which the Repurchase Price
with respect to any Acquired Vehicle that is a Program Vehicle is received by
the Lessor, the Master Collateral Agent or the Trustee (including by deposit
into the Collection Account or the Master Collateral Account) and (b) the
thirtieth (30th) day after the expiration of the Repurchase Period for such
Acquired Vehicle, the Lessee shall pay to the Lessor in respect of such Acquired
Vehicle any Excess Damage Charges, Excess Mileage Charges, Missing Equipment
Charges, early turnback surcharges and any other similar charges and penalties
(collectively, a "Program Vehicle Termination Payment") as determined by the
Manufacturer or its agent in accordance with the applicable Manufacturer Program
and on the Payment Date next succeeding the earlier of (i) the last day of the
Related Month in which Disposition Proceeds from the sale or other disposition
of an Acquired Vehicle that is a Non-Program Vehicle, but is not a Casualty, are
received by the Lessor, the Master Collateral Agent or the Trustee (including by
deposit into the Collection Account or the Master Collateral Account), and (ii)
the thirtieth (30th) day after the date which is eighteen (18) months after the
date of the original dealer invoice for such Vehicle sold as a new vehicle, the
Lessee shall pay to the Lessor in respect of such Vehicle an amount (a
"Non-Program Vehicle Termination Payment") equal to the quotient of (x) the sum
of all Program Vehicle Termination Payments for the Related Month, divided by
(y) the number of Acquired Vehicles that were Program Vehicles and with respect
to which, during the Related Month, either the Repurchase Price was received or
there occurred the 30th day after the expiration of the Repurchase Period
(Program Vehicle Termination Payments and Non-Program Vehicle Termination
Payments collectively, "Termination Payments"). The provisions of this Section
12.3 will survive the expiration or earlier termination of the Term.
SECTION 13. LATE RETURN PAYMENTS. If an Acquired Vehicle which is a Program
Vehicle is not returned to the Manufacturer or sold at Auction prior to the
expiration of the Repurchase Period for- such Vehicle in accordance with Section
12.2, the Lessee shall, unless such Vehicle has been redesignated as a
Non-Program Vehicle in accordance with Section 14, (a) promptly notify the
Lessor of its failure to return such Vehicle to the Manufacturer or to sell such
Vehicle at Auction during the Repurchase Period therefor, (b) use commercially
reasonable efforts to sell or otherwise dispose of such Vehicle in a manner
reasonably likely to maximize proceeds from such disposition and consistent with
industry practice, (c) cause the Disposition Proceeds, if any, from any such
sale or disposition to be paid to the Master Collateral Agent, in accordance
with paragraph 10(d) of Annex A, and (d) on the Payment Date next succeeding the
earlier of (i) the last day of the Related Month in which such Disposition
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Proceeds are received by the Lessor, the Master Collateral Agent or the Trustee
(including by deposit into the Collection Account or the Master Collateral
Account), and (ii) the thirtieth (30th) day after the expiration of the
Repurchase Period for such Vehicle, pay to the Lessor an amount (a "Late Return
Payment") equal to the excess of (x) the Net Book Value of such Vehicle,
calculated as of the first day of the calendar month in which such Repurchase
Period expired, over (y) the sum of (A) the dollar amount of such Disposition
Proceeds plus (B) any Monthly Base Rent paid by the Lessee with respect to such
Vehicle in any calendar month after the calendar month in which such Repurchase
Period expired (which dollar amount may be equal to, but not less than, zero
dollars).
SECTION 14. REDESIGNATION OF VEHICLES. At any time, including upon the
occurrence of a Manufacturer Event of Default with respect to the Manufacturer
of any Program Vehicle or a Program Vehicle's becoming ineligible for repurchase
by its Manufacturer or for sale at Auction under the applicable Manufacturer
Program, due to physical damage, repair charges or accrued mileage, in each case
in excess of that permitted under the related Manufacturer Program, or due to
any failure or inability to return the Vehicle to the Manufacturer or the
designated Auction prior to the expiration of the Repurchase Period, or due to
any other event or circumstance, the Servicer may designate the related Vehicle
as a Non-Program Vehicle if such Vehicle, as a Non-Program Vehicle, will be an
Eligible Vehicle, provided that no Amortization Event or Potential Amortization
Event has occurred and is continuing and provided further that no violation of
the requirements of Section 25.5 has occurred and is continuing or would be
caused by such redesignation and no failure or violation of any other condition,
requirement, or restriction specified in any related Series Supplement would be
caused by such redesignation (subject to the right of the Noteholders holding
the requisite Invested Amount of each applicable Series of Notes to waive such
violation, in each case as and to the extent permitted under the related Series
Supplement); provided, in each case, that (x) any additional Monthly Base Rent
due with respect to each such Vehicle, relating to the decrease, if any, of the
Net Book Value of such Vehicle under the newly applicable Depreciation Schedule,
shall be paid on the next succeeding Payment Date, and (y) the minimum level of
Enhancement required under the applicable Series Supplement, after giving effect
to such designation, shall be satisfied on the date of designation.
SECTION 15. GENERAL INDEMNITY.
Section 15.1. Indemnity of the Lessor. The Lessee agrees to indemnify and
hold harmless the Lessor and the Lessor's directors, officers, agents and
employees (collectively, together
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with the Persons subject to indemnity under Section 15.2, the "Indemnified
Persons") against any and all claims, demands and liabilities of whatsoever
nature, and all costs and expenses, relating co or in any way arising out of:
Section 15.1.1. the ordering, delivery, acquisition, title on
acquisition, rejection, installation, possession, titling, retitling,
registration, re-registration, custody by the Lessee of title and
registration documents, use, nonuse, misuse, operation, deficiency, defect,
transportation, repair, control or disposition of any Vehicle leased
hereunder or to be leased hereunder, including, without limitation, any
such Vehicle subleased to a Franchisee. The foregoing shall include,
without limitation, any liability (or any alleged liability) of the Lessor
to any third party arising out of any of the foregoing, including, without
limitation, all legal fees, costs and disbursements arising out of such
liability (or alleged liability);
Section 15.1.2. all (i) federal, state, county, municipal, foreign or
other fees and taxes of whatsoever nature other than income taxes,
including but not limited to license, qualification, registration,
franchise, sales, use, gross receipts, ad valorem, business, property (real
or personal), excise, motor vehicle, and occupation fees and taxes, with
respect to any Vehicle or the acquisition, purchase, sale, lease, sublease,
rental, use, operation, control, ownership or disposition of any Vehicle by
any Person or measured in any way by the value thereof or by the business
of, investment by, or ownership by the Lessor or the Lessee with respect
thereto, (ii) all federal, state, local and foreign income taxes and
penalties and interest thereon, whether assessed, levied against or payable
by the Lessor or otherwise as a result of its being a member of any group
of corporations including the Lessee that file any tax returns on a
consolidated or combined basis, and (iii) documentary, stamp, filing,
recording, mortgage or other taxes, if any, which may be payable by the
Lessor or the Lessee in connection with this Agreement, the other Related
Documents or the Lessee Agreements and any penalties or interest with
respect thereto;
Section 15.1.3. any violation by the Lessee of this Agreement or of
any Related Documents or Lessee Agreements to which the Lessee is a party
or by which it is bound or any laws, rules, regulations, orders, writs,
injunctions, decrees, consents, approvals, exemptions, authorizations,
licenses and withholdings of objection of any governmental or public body
or authority and all other requirements having the force of law applicable
at any time to any
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Vehicle or any action or transaction by the Lessee with respect thereto or
pursuant to this Agreement;
Section 15.1.4. all reasonable out of pocket costs and expenses of the
Lessor (including the reasonable fees and disbursements of counsel for the
Lessor) in connection with the preparation, execution, delivery and
performance of this Agreement and the other Related Documents, including,
without limitation, any and all fees of the Trustee, Paying Agent, Clearing
Agencies and Master Collateral Agent, all fees payable in connection with
any Enhancement, any and all fees payable to Rating Agencies and any
underwriting or placement agency fees incurred in connection with the sale
of the Notes;
Section 15.1.5. all reasonable out of pocket costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by the
Lessor and the Master Collateral Agent, the Trustee or the Noteholders in
connection with the administration, enforcement, waiver or amendment of
this Agreement and any other Related Documents, and all indemnification
obligations of the Lessor under the Related Documents; and
Notwithstanding the foregoing, the Lessee shall have no duty to indemnify
any Indemnified Person for any claims, demands, liabilities, costs, or expenses
to the extent such claim, demand, liability, cost or expense arises out of or is
due to such Person's negligence or willful misconduct.
Section 15.2. Indemnification of the Trustee. The Lessee agrees to
indemnify and hold harmless the Trustee (and its officers, directors, employees
and agents) from and against any loss, liability, expense, damage or injury
suffered or sustained by reason of, or arising out of or in connection with: (i)
any acts or omissions of the Lessee pursuant to this Agreement and (ii) the
Trustee's appointment under the Indenture and the Trustee's performance of its
obligations thereunder, or any document pertaining to any of the foregoing to
which the Trustee is a signatory, including, but not limited to any judgment,
award, settlement, reasonable attorneys' fees and other costs or expenses
incurred in connection with the defense of any actual or threatened action,
proceeding or claim; provided, however, the Lessee shall have no duty to
indemnify the Trustee to the extent such loss, liability, expense, damage or
injury suffered or sustained is due to the Trustee's negligence or willful
misconduct. Any such indemnification shall not be payable from the assets of
NFLP. The provisions of this indemnity shall run directly to and be enforceable
by the Trustee or any other Indemnified Person subject to the limitations
hereof. The indemnification provided for in this Section 15.2 shall be
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addition to any other indemnities available to the Trustee and shall survive the
termination of the duties of the Lessee hereunder and the termination of this
Agreement or a document to which the Trustee is a signatory or the resignation
or removal of the Trustee.
Section 15.3. Reimbursement Obligation by the Lessee. The Lessee shall
forthwith upon demand reimburse the Lessor or the Trustee, as the case may be,
for any sum or sums expended with respect to any of the foregoing, or shall pay
such amounts directly upon request from the Lessor or the Trustee; provided,
however, that, if so requested by the Lessee, the Lessor or the Trustee shall
submit to the Lessee a statement documenting any such demand for reimbursement
or prepayment. To the extent that the Lessee in fact indemnifies the Lessor or
the Trustee under the indemnity provisions of this Agreement, the Lessee shall
be subrogated to the rights of the Lessor or the Trustee, as the case may be, in
the affected transaction and shall have a right to determine the settlement of
claims therein. The obligations of the Lessee contained in this Section 15 shall
survive the expiration or earlier termination of this Agreement or any lease of
any Vehicle hereunder; provided, however, that the factual or legal
circumstances giving rise to the Lessor's exposure to liability occur during the
period that the Lease is in effect as to the Vehicle for which such exposure to
liability arose.
Section 15.4. Notice to Lessee of Claims. The Lessor or the Trustee, as the
case may be, shall notify the Lessee in writing (a "Notice of Claim") of the
pendency of any such claim, action or facts referred to in this Section 15 for
which indemnity may be required.
Section 15.5. Defense of Claims. Defense of any claim referred to in this
Section 15 for which indemnity may be required shall, at the option and request
of the Lessee, be conducted by the Lessee. Following receipt of any Notice of
Claim, the Lessee will inform the Indemnified Person of its election to defend
such claim. Such Indemnified Person may participate in any such defense at its
own expense, provided such participation, in the Lessee's reasonable opinion,
does not interfere with the Lessee's defense. The Lessee agrees that no
Indemnified Person will be liable to the Lessee for any claim caused directly or
indirectly by the inadequacy of any Vehicle for any purpose or any deficiency or
defect therein or the use or maintenance thereof or any repairs, servicing or
adjustments thereto or any delay in providing or failure to provide such or any
interruption or loss of service or use thereof or any loss of business, all of
which shall be the risk and responsibility of the Lessee, except to the extent
that any of the foregoing is caused by the gross negligence or willful
misconduct of such Indemnified Person. The rights and indemnities of each
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Indemnified Person hereunder are expressly made for the benefit of, and will be
enforceable by, each Indemnified Person notwithstanding the fact that such
Indemnified Person is not or is no longer a party to (or entitled to receive the
benefits of) this Agreement. This general indemnity shall not affect any claims
of the type discussed above, or otherwise, which the Lessee may have against the
Manufacturer.
SECTION 16. SUCCESSORS AND ASSIGNS: ASSIGNMENT. This Agreement shall be
binding upon the Lessor, the Lessee and their respective successors and assigns,
and shall inure to the benefit of the Lessee, the Lessor, and the Trustee and
the Master Collateral Agent as third party beneficiaries and their respective
successors and assigns; provided, however, that the Lessee shall not have the
right to assign its rights or delegate its duties under this Agreement without
(i) the Lessor's and the Trustee's prior written consent and (ii) receipt of
written confirmation from each of the Rating Agencies that its then current
rating will not be reduced or withdrawn with respect to any outstanding Series
of Notes as a result thereof; provided, further, however, the Lessee may
sublease certain of the Vehicles under the terms of the Lessee's Subleases to
Eligible Franchisees (subject to the limitations specified in Section 8), and
the Lessee and such Eligible Franchisees may rent such Vehicles to consumers in
the ordinary course of their respective domestic daily rental businesses. Any
purported assignment in violation of this Section 16 shall be void and of no
force or effect. Nothing contained herein shall be deemed to restrict the right
of the Lessee to acquire or dispose of, by purchase, lease, financing, or
otherwise, motor vehicles that are not subject to the provisions of this
Agreement.
SECTION 17. DEFAULT AND REMEDIES THEREFOR.
Section 17.1. Events of Default. Any one or more of the following will
constitute an event of default (a "Lease Event of Default") as that term is used
herein:
Section 17.1.1. the occurrence of (i) a default in the payment of any
Monthly Base Rent, Monthly Variable Rent, Monthly Finance Rent, Termination
Payment, Casualty Payment, Late Return Payment, Monthly Supplemental
Payment or Availability Payment, and the continuance thereof for five (5)
Business Days, or (ii) a default in the payment of any amount payable under
this Agreement (other than amounts described in clause (i) above) and the
continuance thereof for five (5) Business Days;
Section 17.1.2. any unauthorized assignment or transfer of this
Agreement by the Lessee occurs;
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Section 17.1.3. the Lessee fails to comply with or perform any covenant,
condition, agreement or provision of this Agreement (which failure does not
constitute a Lease Event of Default under any of the other provisions of this
Section 17) and the continuance of such failure for 60 days after the earlier of
(i) the date the Lessor, the Master Collateral Agent or the Trustee delivers
written notice thereof to the Lessee and (ii) the date the Lessee obtains actual
knowledge thereof and such failure (to the extent such provision does not
incorporate a materiality limitation in its terms) materially adversely affects
the interests of the Lessor, the Trustee or the Secured Parties;
Section 17.1.4. any representation or warranty made by the Lessee in this
Agreement or any Related Document is incorrect in any respect as of the date
such warranty or representation is made and continues to be incorrect for a
period of 60 days after the earlier of (i) the date on which written notice
thereof shall have been given to the Lessee by the Lessor, the Master Collateral
Agent or the Trustee and (ii) the date on which the Lessee obtains actual
knowledge thereof, and which failure to be correct (to the extent such
representation and warranty does not incorporate a materiality limitation in its
terms) materially adversely affects the interests of the Lessor, the Trustee or
the Secured Parties; or any schedule, certificate, financial statement, report,
notice, or other writing furnished by the Lessee to the Lessor is false or
misleading in any respect on the date as of which the facts therein set forth
are stated or certified, and continues to be incorrect in any respect for a
period of 60 days after the earlier of (a) the date on which written notice
thereof shall have been given to the Lessee by the Lessor, the Master Collateral
Agent or the Trustee and (b) the date on which the Lessee obtains actual
knowledge thereof, and which failure to be correct materially adversely affects
the interests of the Lessor, the Trustee or the Secured Parties;
Section 17.1.5. an Event of Bankruptcy occurs with respect to the Lessee;
Section 17.1.6. all or any portion of any Related Document shall at any
time and for any reason not be in full force and effect or any event shall occur
and be continuing which constitutes an Amortization Event under the Indenture,
and such failure or event materially adversely affects the interests of the
Lessor, the Trustee or the Secured Parties;
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Section 17.1.7. the Pension Benefit Guaranty Corporation or the
Internal Revenue Service shall have filed notice of one or more liens
against the Lessee (unless such lien does not purport to cover the Master
Collateral or any amount payable under this Agreement), and such notice
shall have remained in effect for more than thirty (30) days unless, prior
to the expiration of such period, the Lessee shall have removed such lien
or shall have provided the Lessor with a bond (from a bond provider which
the Rating Agencies shall have approved) in an amount at least equal to the
amount of such liens.
Section 17.2. Effect of Lease Event of Default. (a) If any Lease Event of
Default or Liquidation Event of Default shall occur and be continuing, the
rights of the Lessee to place Vehicle Orders pursuant to this Agreement (but not
otherwise) shall immediately terminate;
(b) If a Lease Event of Default described in Section 17.1.1(i), 17.1.2 or
17.1.5 or a Liquidation Event of Default shall occur, then the Monthly Base
Rent, the Monthly Supplemental Payment, Casualty Payments (in each case
calculated as if all Vehicles had become a Casualty during the Related Month),
the Monthly Variable Rent, the Availability Payment, the Monthly Finance Rent
(in each case calculated as if the full amount of interest, principal and other
charges under all outstanding Series of Notes were then due and payable in
full), Termination Payments and Late Return Payments shall, automatically,
without further action by the Lessor or the Trustee, become immediately due and
payable;
(c) If a Limited Liquidation Event of Default shall occur, then the Monthly
Base Rent, the Monthly Supplemental Payment and Casualty Payments (in each case,
calculated as if each Vehicle with respect to which the Lessor has terminated
the Lessee's right to possession pursuant to Section 17.3(iii) had become a
Casualty during the Related Month) the Monthly Variable Rent, the Availability
Payment and the Monthly Finance Rent (in each case, calculated as if the full
amount of interest, principal and other charges under the applicable Series of
Notes were then due and payable in full), Termination Payments and Late Return
Payments (in each case, with respect to each Vehicle with respect to which the
Lessor has terminated the Lessee's right to possession pursuant to Section
17.3(iii)) shall automatically, without further action by the Lessor or the
Trustee, become immediately due and payable;
(d) If any other Lease Event of Default shall occur, the Lessor or the
Trustee may declare the Rent and all other charges and payments (calculated as
described in paragraph (b) above) to be due and payable, whereupon such Rent and
such other charges
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and payments (as so calculated) shall, subject to Section 17.4, become
immediately due and payable.
Section 17.3. Rights of Lessor Upon Lease Event of Default. Liquidation
Event of Default or Limited Liquidation Event of Default. If a Lease Event of
Default, Liquidation Event of Default or Limited Liquidation Event of Default
shall occur, then the Lessor at its option may:
(i) Only if a Lease Event of Default shall have occurred and be
continuing, proceed by appropriate court action or actions, either at law
or in equity, to enforce performance by the Lessee of the applicable
covenants and terms of this Agreement or to recover damages for the breach
hereof calculated in accordance with Section 17.4; or
(ii) If a Liquidation Event of Default or a Limited Liquidation Event
of Default shall have occurred and be continuing, the Lessor and the
Trustee, to the extent provided in the Indenture, shall have all the rights
against the Lessee and the Collateral provided in the Indenture upon a
Liquidation Event of Default or a Limited Liquidation Event of Default,
including the right to take (under the specified circumstances) possession
of Vehicles (to the extent specified in this Agreement or the Indenture)
immediately; or
(iii) If a Liquidation Event of Default has occurred, by notice in
writing to the Lessee, terminate this Agreement in its entirety and/or the
right of possession hereunder of the Lessee as to the Vehicles, and the
Lessor may direct delivery by the Lessee of documents of title to the
Vehicles, whereupon all rights and interests of the Lessee to the Vehicles
(except as otherwise provided herein) will cease and terminate (but the
Lessee will remain liable hereunder as herein provided, calculated in
accordance with Section 17.4); or, if a Limited Liquidation Event of
Default has occurred, by notice in writing to the Lessee, terminate the
right of possession hereunder of the Lessee as to such number of Vehicles
as will generate proceeds from liquidation in an amount sufficient to pay
all principal of and interest on the related Series of Notes, and the
Lessor may direct delivery by the Lessee of documents of title to such
Vehicles, whereupon all right, title and interest of the Lessee to such
Vehicles (except as otherwise provided herein) will cease and terminate
(but the Lessee will remain liable hereunder as herein provided, calculated
in accordance with Section 17.4); and thereupon, in either such case, the
Lessor or its agents may peaceably enter upon the premises of the Lessee or
other premises where such Vehicles may be located and take possession of
them and thenceforth
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hold, possess and enjoy the same free from any right of the Lessee, or its
successors or assigns, to employ such Vehicles for any purpose whatsoever
consistent with the mitigation of losses and damages, and the Lessor will,
nevertheless, have a right to recover from the Lessee any and all amounts
which under the terms of Section 17.2 (as limited by Section 17.4) of this
Agreement may be then due. The Lessor will provide the Lessee with written
notice of the place and time of any sale of Financed Vehicles pursuant to
this Section 17.3 at least five (5) days prior to the proposed sale, which
notice period shall be deemed commercially reasonable, and the Lessee may
purchase the Vehicle(s) at the sale. Each and every power and remedy hereby
specifically given to the Lessor will be in addition to every other power
and remedy hereby specifically given or now or hereafter existing at law,
in equity or in bankruptcy and each and every power and remedy may be
exercised from time to time and simultaneously and as often and in such
order as may be deemed expedient by the Lessor; provided, however, that the
measure of damages recoverable against the Lessee will in any case be
calculated in accordance with Section 17.4. All such powers and remedies
will be cumulative, and the exercise of one will not be deemed a waiver of
the right to exercise any other or others. No delay or omission of the
Lessor in the exercise of any such power or remedy and no renewal or
extension of any payments due hereunder will impair any such power or
remedy or will be construed to be a waiver of any default or any
acquiescence therein. Any extension of time for payment hereunder or other
indulgence duly granted to the Lessee will not otherwise alter or affect
the Lessor's rights or the obligations hereunder of the Lessee. The
Lessor's acceptance of any payment after it will have become due hereunder
will not be deemed to alter or affect the Lessor's rights hereunder with
respect to any subsequent payments or defaults therein; or
(iv) If the Lessee shall default in the due performance and observance
of any of its obligations under Section 10, 24.4, 24.5, 24.6(iv), 24.9,
25.3 or 25.4 hereof, and such default shall continue unremedied for a
period of 30 days after notice thereof shall have been given to the Lessee
by the Lessor or the Trustee, the Lessor shall have the ability to exercise
all rights, remedies, powers, privileges and claims of the Lessee against
the Manufacturers under or in connection with the Manufacturer Programs
with respect to (i) Vehicles the Lessee has determined to turn back to the
Manufacturers under such Manufacturer Programs and (ii) whether or not the
Lessee shall then have determined to turn back such Vehicles, any
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Vehicles for which the applicable Repurchase Period will end within one
week or less; or
(v) Upon a default in the performance (after giving effect to any
grace periods provided herein) by the Lessee of its obligations under
Section 23.6 or 24.19 hereof with respect to certain Vehicles, the Lessor
or the Trustee shall] have the right to take actions reasonably necessary
to correct such default with respect to the subject Vehicles including the
execution of UCC financing statements with respect to Manufacturer Programs
and other general intangibles and the completion of Vehicle Perfection and
Documentation Requirements on behalf of the Lessee or the Lessor, as
applicable; or
(vi) Upon the occurrence of a Liquidation Event of Default, the
Servicer will return all Program Vehicles to the related Manufacturer and
shall sell all Non-Program Vehicles, in each case, in accordance with the
instructions of the Lessor. Upon the occurrence of a Limited Liquidation
Event of Default, the Servicer will return Program Vehicles to the related
Manufacturer, and shall use commercially reasonable efforts to sell
Non-Program Vehicles, to generate proceeds in an amount sufficient to pay
all interest on and principal of the related Series of Notes, in each case,
in accordance with the instructions of the Lessor. To the extent any
Manufacturer fails to accept any such Vehicles under the terms of the
applicable Manufacturer Program, the Lessor shall have the right to
otherwise dispose of such Vehicles and to direct the Servicer to dispose of
such Vehicles in accordance with its instructions. In addition, the Lessor
shall have all of the rights, remedies, powers, privileges and claims
vis-a-vis the Lessee, necessary or desirable to allow the Trustee to
exercise the rights, remedies, powers, privileges and claims given to the
Trustee pursuant to Sections 9.2 and 2~] of the Base Indenture and the
Lessee acknowledges that it has hereby granted the Lessor all of the
rights, remedies, powers, privileges and claims granted to the Trustee
pursuant to Article 9 of the Base Indenture and that, under certain
circumstances set forth in the Base Indenture, the Trustee may act in lieu
of the Lessor in the exercise of such rights, remedies, powers, privileges
and claims; or
(vii) By notice in writing to the Lessee, terminate the Power of
Attorney (provided, that, after any such termination of the Power of
Attorney, the Lessor will folio; the direction of the Servicer to release
liens on Acquired Vehicles which liens are required to be released under
the terms of this Agreement).
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Section 17.4. Measure of Damages. If a Lease Event of Default occurs and
the Lessor, the Master collateral Agent or the Trustee exercises the remedies
granted to the Lessor, the Master Collateral Agent or the Trustee under this
Section 17 or under Section 9.2 of the Indenture, the amount that the Lessor
shall be permitted to recover shall be equal to:
(i) all Rent and payments under this Agreement (calculated as provided
in Section 17.2); Plus
(ii) any damages and expenses which the Lessor, the Master Collateral
Agent or the Trustee shall have sustained by reason of the Lease Event of
Default, together with reasonable sums for such attorneys' fees and such
expenses as will be expended or incurred in the seizure, storage, rental or
sale of the Vehicles or in the enforcement of any right or privilege
hereunder or in any consultation or action in such connection; plus
(iii) all other amounts due and payable under this Agreement; plus
(iv) interest from time to time on amounts due and unpaid under this
Agreement at the VFR plus 1%, computed from the date of the Lease Event of
Default or the date payments were originally due the Lessor under this
Agreement or from the date of each expenditure by the Lessor which is
recoverable from the Lessee pursuant to this Section 17, as applicable, to
and including the date payments are made by the Lessee; minus
(v) an amount equal to all sums realized by the Lessor, the Master
Collateral Agent and the Trustee from the liquidation of the Financed
Vehicles (other than the Texas Vehicles) leased hereunder (either by
receipt of payment from the Manufacturers under Manufacturer Programs, from
sales of Vehicles to third parties, or otherwise), provided, however, that
if a Financed Vehicle (other than a Texas Vehicle) is delivered to the
Manufacturer or the designated Auction for repurchase by the Manufacturer
or sale at Auction under the applicable Manufacturer Program, and such
Vehicle is accepted for repurchase by such Manufacturer (as evidenced by a
Condition Report indicating that such Vehicle conforms to the requirements
for repurchase under such Manufacturer Program) or is sold by such Auction,
the Lessor and the Trustee shall be deemed to have received, thirty (30)
days after the date of such acceptance or sale, on account of this clause
(v) an amount equal to the Net Book Value of such Vehicle, calculated as of
its Disposition Date (less any Termination Payments payable in respect of
such Vehicle).
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Section 17.5. Application of Proceeds. The proceeds of any sale or other
disposition of any Financed Vehicles pursuant to Section 17.3 shall be applied
in the following order: (i) to the reasonable costs and expenses incurred by the
Lessor in connection with such sale or disposition, including any reasonable
costs associated with repairing such Vehicles, and reasonable attorneys' fees in
connection with the enforcement of this Agreement, (ii) to the payment of
outstanding Rent and payments under the Lease (such proceeds to be applied
first, to outstanding Monthly Variable Rent and Monthly Finance Rent pro rata,
second, to outstanding Availability Payments, third, to outstanding Base Rent
and Monthly Supplemental Payments pro rata, fourth, to outstanding Termination
Payments, Casualty Payments and Late Return Payments pro rata and fifth, to
outstanding late charges pursuant to Sections 5.5 and 17.4(iv), (iii) to the
payment of all other amounts due hereunder and (iv) any remaining proceeds to
the Lessee.
SECTION 18. MANUFACTURER EVENTS OF DEFAULT. Upon the occurrence of a
Manufacturer Event of Default with respect to a Manufacturer, the Lessee on
behalf of the Lessor (a) shall no longer place Vehicle Orders for additional
Program Vehicles from such Manufacturer (each, a "Defaulting Manufacturer") and
(b) shall cancel any Vehicle Order for Program Vehicles of such Defaulting
Manufacturer to which a vehicle identification number (a "VIN") has not been
assigned as of the date such Manufacturer Event of Default occurs (to the extent
such Vehicle Order is cancelable, with or without penalty).
SECTION 19. CERTIFICATION OF TRADE OR BUSINESS USE. Pursuant to Section
7701 of the Code and as set forth in Attachment C hereto, the Lessee will
warrant and certify that (1) the Lessee intends to use the Acquired Vehicles in
a trade or business of the Lessee, and (2) the Lessee has been advised that it
will not be treated as the owner of the Acquired Vehicles for federal income tax
purposes.
SECTION 20. SURVIVAL. In the event that, during the term of this Agreement,
the Lessee becomes liable for the payment or reimbursement of any obligations,
claims or taxes pursuant to any provision hereof, such liability will continue,
notwithstanding the expiration or termination of this Agreement, until all such
amounts are paid or reimbursed by the Lessee.
SECTION 21. RIGHTS OF LESSOR PLEDGED TO MASTER COLLATERAL AGENT AND
TRUSTEE. Notwithstanding anything to the contrary contained in this Agreement,
the Lessee acknowledges that each of the Lessee and the Lessor, pursuant to the
Master Collateral Agency Agreement, has granted a security interest to the
Master Collateral Agent, for the benefit of the Trustee, in all of its right,
title and interest in, to and under the Vehicles, the
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related Manufacturer Programs, the Master Collateral Account and all other
Master Collateral specified in the Master Collateral Agency Agreement as being
pledged by National or NFLP, and further acknowledges that the Lessor, pursuant
to the Indenture, has granted a security interest to the Trustee in all of its
right, title and interest in, to and under the NFLP Agreements, the Collection
Account and the other Collateral described in the Indenture. Accordingly, the
Lessee agrees that:
(i) Subject to the terms of the Indenture, the Trustee shall have all
the rights, powers, privileges and remedies of the Lessor hereunder.
Specifically, the Lessee agrees that, upon the occurrence of an
Amortization Event, the Trustee or, with respect to any Master Collateral,
the Master Collateral Agent (for and on behalf of the Trustee) may exercise
any right or remedy against the Lessee provided for herein or in the
Indenture or the Master Collateral Agency Agreement and the Lessee will not
interpose as a defense that such claim should have been asserted by the
Lessor;
(ii) Upon the delivery by the Master Collateral Agent or the Trustee
of any notice to the Lessee stating that a Lease Event of Default or an
Amortization Event with respect to the Lessee has occurred, then the
Lessee, will, if so requested by the Master Collateral Agent (with respect
to the Master Collateral) or the Trustee (with respect to the Collateral),
treat the Master Collateral Agent or the Trustee or the Master Collateral
Agent's or the Trustee's designee, as the case may be, for all purposes as
the Lessor hereunder and in all respects comply with all obligations under
this Agreement that are asserted by the Master Collateral Agent or the
Trustee as the successor to the Lessor hereunder, irrespective of whether
the Lessee has received any such notice from the Lessor;
(iii) The Lessee acknowledges that pursuant to the Indenture, the
Lessor has irrevocably authorized and directed the Lessee to, and the
Lessee shall, make payments of Rent hereunder directly to the Trustee for
deposit in the Collection Account established by the Trustee for receipt of
such payments pursuant to the Indenture, and such payments shall discharge
the obligation of the Lessee to the Lessor hereunder with respect to Rent
to the extent of such payments. Upon written notice to the Lessee of a sale
or assignment by the Trustee or Master Collateral Agent of its right, title
and interest in moneys due under this Agreement or the Master Collateral
Agency Agreement to a successor Trustee or Master Collateral Agent, the
Lessee shall thereafter make payments of Rent hereunder or payments in
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respect of the Master Collateral, as applicable, to the party specified in
such notice;
(iv) Upon request made by the Master Collateral Agent at any time, the
Lessee will take such actions as are requested by the Master Collateral
Agent to maintain the Master Collateral Agent's perfected first priority
security interest in the Vehicles leased under this Agreement, the
Certificates of Title with respect thereto and the Master Collateral
pursuant to the Master Collateral Agency Agreement;
(v) A security interest in the Lessor's rights under this Agreement
has been granted by the Lessor to the Trustee pursuant to the Indenture as
collateral security only for all Series of Notes that do not provide for
wholly series-specific collateral and, accordingly, all references herein
to "all" Series of Notes shall refer only to all Series of Notes that do
not provide for wholly series-specific collateral;
(vi) The Trustee is hereby irrevocably appointed the true and lawful
attorney-in-fact of the Lessee, in its name and stead, to make all
necessary deeds, bills of sale and instruments of assignment and transfer
of the property of the Lessee sold pursuant to Section 9.3 of the Base
Indenture (including without limitation, any Financed Vehicles) and for
such other purposes as are necessary or desirable to effectuate the
provisions of the Indenture, and for that purpose the Trustee may execute
and deliver all necessary deeds, bills of sale and instruments of
assignment and transfer, and may substitute one or more Persons with like
power, the Lessee hereby ratifying and confirming all that its said
attorney, or Such substitute or substitutes, shall lawfully do by virtue
hereof, but if so requested by the Trustee or by any purchaser, the Lessee
shall ratify and confirm any such sale or transfer by executing and
delivering to the Trustee or to such purchaser all such property, deeds,
bills of sale, instruments of assignment and transfer and releases as may
be designated in any such request; and
(vii) In the event that the Trustee determines to take action pursuant
to the provisions of Section 9.2(e) of the Base Indenture, the Trustee may,
without notice to the Lessor (unless such notice is required by applicable
state law), the Servicer or the Lessee, direct the Master Collateral Agent
to take legal proceedings for the appointment of a receiver to take
possession of Vehicles pending the sale thereof and in any such event the
Trustee shall be entitled to the appointment of a receiver for the
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Vehicles, and none of the Lessor, the Servicer or the Lessee shall
object to such appointment.
SECTION 22. MODIFICATION AND SEVERABILITY. No delay on the part of the
Lessor, the Trustee or the Master Collateral Agent in the exercise of any right,
power or remedy shall operate as a waiver thereof, nor shall any single or
partial exercise by any of them of any right, power or remedy preclude other or
further exercise thereof, or the exercise of any other right, power or remedy.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement shall in any event be effective unless (a) the same
shall be in writing and signed and delivered by the Lessor and the Lessee, (b)
consented to in writing by the Trustee (unless such amendment, modification,
waiver or consent (i) is made only (A) to cure any ambiguity, defect or
inconsistency in, or to correct or supplement any provision of, this Agreement
or (B) to add to the covenants of the Lessee for the benefit of the Lessor or
(C) to provide for additional collateral and (ii) as evidenced by an Opinion of
Counsel delivered by the Lessee to the Trustee, will not materially adversely
affect the interests of the Lessor, the Trustee or the Secured Parties) and (c)
the Lessor shall have received in writing confirmation from each of the Rating
Agencies that its then current rating with respect to any outstanding Series of
Notes will not be reduced or withdrawn as a result thereof.
SECTION 23. CERTAIN REPRESENTATIONS AND WARRANTIES. National, in its
capacity as Lessee and as Servicer represents and warrants to the Lessor that as
of the Closing Date with respect to the first Series of Notes and as of each
other date as may be specified in Section 23.7 hereof (and each of such
representations and warranties will be deemed to be remade as of the Closing
Date with respect to each Series of Notes):
Section 23.1. Organization: Ownership: Power: Qualification. National, in
its capacities as Lessee and as Servicer (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the corporate power and authority to own its properties
and to carry on its business as now being and hereafter proposed to be
conducted, and (iii) is duly qualified, in good standing and authorized to do
business in each jurisdiction in WHICH the character of its properties or the
nature of its businesses requires such qualification or authorization, except
where the failure to so qualify is not reasonably likely to have a Material
Adverse Effect.
Section 23.2. Authorization: Enforceability. National, in its capacities as
Lessee and as Servicer, has the corporate power and has taken all necessary
corporate action to authorize it to
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execute, deliver and perform this Agreement and each of the other Related
Documents to which it is a party in accordance with their respective terms, and
to consummate the transactions contemplated hereby and thereby. This Agreement
has been duly executed and delivered by the Lessee and the Servicer and is, and
each of the other Related Documents to which the Lessee or the Servicer is a
party is, a legal, valid and binding obligation of the Lessee or the Servicer,
as applicable, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
and similar laws affecting creditors generally and by the availability of
equitable remedies.
The execution, delivery and performance by National, in its capacity as the
Lessee and Servicer, of this Agreement does not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation of National or of any rule, contract, agreement,
judgment, injunction, order, decree or other instrument binding upon National or
any of its Assets; except to the extent that any such contravention or default
would not have a Material Adverse Effect.
Section 23.3. Compliance. The execution, delivery and performance, in
accordance with their respective terms, by National, in its capacities as Lessee
and as Servicer of this Agreement and each of the other Related Documents to
which it is a party, and the consummation of the transactions contemplated and
will not (i) require any consent, approval, authorization or registration not
already obtained or effected, except where the failure to obtain any such
consent, approval or authorization or to register is not reasonably likely to
have a Material Adverse Effect, (ii) violate any applicable law with respect to
National, in its capacities as Lessee and as Servicer, as applicable, which
violation is reasonably likely to have a Material Adverse Effect, (iii) conflict
with, result in a breach of, or constitute a default under the certificate of
incorporation or by-laws of National, in its capacities as Lessee and as
Servicer, as applicable, or under any indenture, agreement, or other instrument
to which National, in its capacities as Lessee and as Servicer, as applicable is
a party or by which its properties may be bound, which conflict, breach or
default is reasonably likely to have a Material Adverse Effect, or (iv) result
in or require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by National, in its capacities as
Lessee and as Servicer, as applicable except Permitted Encumbrances.
Section 23.4. Financial Information: Financial Condition. All financial
statements (including the notes thereto) referred to in the following sentence
and all financial statements
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hereafter furnished to the Lessor or the Trustee pursuant to Sections 24.6(i),
(ii) and (xii) hereof have been and will be prepared in accordance with GAAP
and do and will present fairly the financial condition of the entities involved
as of the dates thereof and the results of their operations for the periods
covered thereby, subject, in the case of all unaudited statements, to normal
year-end adjustments and lack of footnotes and other presentation items. Such
financial statements include the following financial statements and reports
which have been furnished to the Lessor and the Trustee on or prior to the date
hereof:
(i) the audited consolidated balance sheets of Old National and its
Consolidated Subsidiaries as of December 31, 1993 and December 31, 1994 and
the related statements of income, changes in stockholders' equity and cash
flow as of and for the fiscal years ending on such dates;
(ii) the audited consolidated balance sheets of Old National and its
Consolidated Subsidiaries as of June 1, 1995 and the related statements of
income, changes in stockholders' equity and cash flow as of and for the
period from January 1, 1995 through May 31, 1995; and
(iii) the audited consolidated balance sheets of National and its
Consolidated Subsidiaries as of November 30, 1995 and the related
statements of income, changes in stockholders' equity and cash flow as of
and for the period from June 1, 1995 through November 30, 1995.
Section 23.5. Litigation. Except for claims as to which the insurer has
admitted coverage in writing and which are fully covered by insurance, no
claims, litigation (including, without limitation, derivative actions),
arbitration, governmental investigation or proceeding or inquiry is pending or,
to the best of the Lessee's knowledge, threatened against the Lessee which is
reasonably likely to have a Material Adverse Effect.
Section 23.6. Liens. The Vehicles and other Collateral are free and clear
of all Liens other than Permitted Liens. The Lessor (or the Master Collateral
Agent on behalf of the Lessor) has obtained, as security for the obligations of
the Lessee under this Agreement, a first priority perfected Lien on all Vehicles
and all the Master Collateral with respect to which the Trustee is designated as
the Beneficiary under the Master Collateral Agency Agreement. All Vehicle
Perfection and Documentation Requirements with respect to all Vehicles on or
after the date hereof have and will continue to be satisfied; except to the
extent that the failure to comply with such requirements does not, in the
aggregate, materially adversely affect either the
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interests of the Lessor, the Master Collateral Agent, the Trustee or the Secured
Parties under the Indenture or the likelihood of payment of all rent and other
amounts due under this Agreement.
Section 23.7. Employee Benefit Plans. (a) During the twelve consecutive
month period prior to (i) the Closing Date and (ii) each Vehicle Lease
Commencement Date: (x) no steps have been taken by the Lessee or any member of
the Controlled Group, or to the knowledge of the Lessee, by any Person, to
terminate any Pension Plan (other than a Pension Plan with no unfunded benefit
liabilities on a termination basis); and (y) no contribution failure has
occurred with respect to any Pension Plan maintained by the Lessee or any member
of the Controlled Group sufficient to give rise to a Lien under Section
302(f)(1) of ERISA in connection with such Pension Plan; and (b) no condition
exists or event or transaction has occurred with respect to any Pension Plan
which could reasonably be expected to result in the incurrence by the Lessee or
any member of the Controlled Group of liabilities, fines or penalties in an
amount that is reasonably likely to have a Material Adverse Effect.
Section 23.8. Investment Company Act. The Lessee is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act, and the Lessee is not subject to any
other statute which would have a material adverse effect on its ability to
perform its obligations under this Agreement or the other Related Documents, and
the entering into or performance by the Lessee of this Agreement does not
violate any provision of such Act and does not require any consent, approval or
authorization of, or registration with, the Securities and Exchange Commission
or any other governmental or public body or authority.
Section 23.9. Regulations G, T, U and X. The Lessee is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System). Neither the Lessee nor any Person acting on its behalf has
taken or will take action to cause the execution, delivery or performance of
this Agreement to violate Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System.
Section 23.10. Business Locations; Trade Names. Schedule 23.10 lists where
the Lessee maintains its chief executive office, principal place of business,
and location of its consolidated business and financial records; and Schedule
23.10 also lists the Lessee's legal name and each name under or by which the
Lessee conducts its business and each state in which the Lessee conducts
business.
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Section 23.11. Taxes. The Lessee has filed all tax returns which have been
required to be filed by it, and has paid or provided adequate reserves for the
payment of all taxes, including, without limitation, all payroll taxes and
federal and state withholding taxes, and all assessments payable by it that have
become due, other than those that are not yet delinquent or that are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been established, and are being maintained, in accordance
with GAAP. As of the Closing Date, there is no ongoing audit (other than routine
sales tax audits and other routine audits) or, to the Lessee's knowledge, other
governmental investigation of the tax liability of the Lessee and there is no
unresolved claim by a taxing authority concerning the Lessee's tax liability for
any period for which returns have been filed or were due other than those
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been established, and are being maintained, in accordance
with GAAP.
Section 23.12. Governmental Authorizations. Each of the Lessee and the
Servicer has all licenses, franchises, permits and other governmental
authorizations necessary for all businesses presently carried on by it
(including owning and leasing the real and personal property owned and leased by
it), except where failure to obtain such licenses, franchises, permits and other
governmental authorizations is not reasonably likely to have a Material Adverse
Effect.
Section 23.13. Absence of Default. No event has occurred or failed to occur
which has not been remedied or waived, the occurrence or non-occurrence which
constitutes, a Lease Event of Default or a Potential Lease Event of Default and
the Lessee is not subject to any judgment, decree or final order pursuant to
which the Lessee or any of its properties may be bound or affected that is
reasonably likely to have a Material Adverse Effect.
Section 23.14. Compliance with Requirements of Law. Each of the Lessee and
the Servicer is in compliance with, and has obtained all qualifications required
under, all applicable Requirements of Law, the failure to comply with which is
reasonably likely to have a Material Adverse Effect.
Section 23.15. Accuracy of Information. All certificates, reports,
statements, documents and other information furnished to the Lessor or the
Trustee by or on behalf of the Lessee pursuant to any provision of any Related
Document, or in connection with or pursuant to any amendment or modification of,
or waiver under, any Related Document, shall, at the time the same are so
furnished, be complete and correct to the extent necessary to give the Lessor or
the Trustee, as the case may be, true and
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accurate knowledge of the subject matter thereof in all material respects, and
the furnishing of the same to the Lessor or the Trustee, as the case may be,
shall constitute a representation and warranty by the Lessee made on the date
the same are furnished to the Lessor or the Trustee, as the case may be, to the
effect specified herein.
Section 23.16. Solvency. As of each Closing Date, the Lessee is not
insolvent (as such term is defined in the Bankruptcy Code), has adequate capital
or assets to carry on its businesses, and intends to and believes that it will
be able to pay its debts as such debts become due.
Section 23.17. Stock Ownership. All common stock of the Lessor owned by the
Lessee is owned free and clear of all Liens.
Section 23.18. Necessary Actions. Upon the Servicer causing the Lien of the
Master Collateral Agent to be noted on the Certificates of Title with respect to
the Vehicles (other than the Initial Vehicles) or as otherwise provided for by
the Master Collateral Agency Agreement or the Indenture, all filings,
registrations and recordings necessary or appropriate to create, preserve,
protect and perfect the security interest granted to the Master Collateral Agent
in respect of the Master Collateral have been accomplished and the security
interest granted to the Master Collateral Agent pursuant to the Master
Collateral Agency Agreement in and to the Master Collateral constitutes a
perfected security interest therein prior to the rights of all other Persons
therein and subject to no other Liens other than Permitted Liens and is entitled
to all rights, priorities and benefits afforded to perfected security interests
by the UCC or other relevant law as enacted in any relevant jurisdiction.
Section 23.19. Supplemental Documents True and Correct. All information
contained in any Vehicle Order or other Supplemental Document which has been
submitted, or which may hereafter be submitted by the Lessee to the Lessor is,
or will be, true, correct and complete in all material respects.
Section 23.20. Eligible Vehicles: Eligible Franchisees Each Vehicle is or
will be on the Vehicle Lease Commencement Date for such Vehicle, an Eligible
Vehicle, and each Franchisee leasing a Vehicle from the Lessor is or will be, as
the case may be, an Eligible Franchisee on the date that the Sublease applicable
to such Vehicle commences.
SECTION 24. CERTAIN AFFIRMATIVE COVENANTS. The Lessee and, as applicable,
the Servicer, each covenants and agrees that, until the expiration or
termination of this Agreement, and thereafter until the obligations of the
Lessee and the Servicer under this Agreement and the Related Documents are
satisfied in
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full, unless at any time the Lessor, the Master Collateral Agent and the Trustee
shall otherwise expressly consent in writing, it will:
Section 24.1. Corporate Existence: Foreign Qualification. Do and cause to
be done at all times all things necessary to (i) maintain and preserve its
corporate existence and corporate power and authority to own its properties and
to carry on its business, and (ii) be duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction where the nature of its
business makes such qualification necessary and the failure to so qualify is
reasonably likely to have a Material Adverse Effect.
Section 24.2. Books. Records and Inspections. (i) Maintain complete and
accurate books and records with respect to Vehicles leased under this Agreement
and the other Master Collateral; (ii) at any time and from time to time during
regular business hours, upon reasonable prior notice from the Lessor, the Master
Collateral Agent or the Trustee and subject to the normal security and
confidentiality procedures of the Lessee or the Servicer, provide reasonable
access to such documentation and permit the Lessor, the Master Collateral Agent
or the Trustee (or such other person who may be designated from time to time by
the Lessor, the Master Collateral Agent or the Trustee), or its agents or
representatives to examine and make copies of such books, records and documents
in the possession or under the control of the Lessee relating to the Vehicles
leased under this Agreement and the other Master Collateral as the Lessor, the
Master Collateral Agent, the Master Collateral Agent, the Trustee or such person
may reasonably request (including in connection with the Lessor's, the Trustee's
or the Master Collateral Agent's satisfaction of any requests of a Manufacturer
performing an audit under its Manufacturer Program); and (iii) permit the
Lessor, the Master Collateral Agent or the Trustee to visit the office (which
office shall be in the continental United States and, if it is not the office
where such materials normally are kept, shall be accessible without unreasonable
effort or expense) and properties of the Lessee for the purpose of examining
such materials, and to discuss matters relating to the Vehicles leased under
this Agreement and the other Master Collateral or the Lessee's performance under
this Agreement with the Lessee's independent public accountants or with any of
the officers or employees of the Lessee having knowledge of such matters.
Section 24.3. Accounting Methods; Financial Records. Maintain, and cause
its material Subsidiaries to maintain, a system of accounting established and
administered in accordance with GAAP, keep, and cause its material Subsidiaries
to keep, adequate records and books of account in which complete entries will be
made in accordance with such accounting principles and
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reflecting all transactions required to be reflected by such accounting
principles and keep, and cause its material Subsidiaries to keep, accurate and
complete records of their respective properties and assets.
Section 24.4. Insurance. (a) Maintain or cause to be maintained, with
financially sound and reputable insurers, (i) personal injury and damage
insurance (including self-insurance) with respect to the Vehicles and (ii)
insurance with respect to its properties and business (including self-insurance)
against loss or damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar businesses and
similarly situated, of such types and in such amounts as are customarily carried
under similar circumstances by such other corporations and the Lessee shall,
from time to time, deliver to the Lessor and the Trustee, as the Lessor or the
Trustee shall request, copies of certificates describing all insurance then in
effect; provided, however, that the Lessee may continue its current practices of
self-insurance setting aside adequate reserves to cover any and all losses: (x)
which would otherwise be covered under any standard comprehensive and collision
policies of insurance; and (y) arising from liability to third parties for
bodily injuries, death, and property damage in an aggregate amount up to Two
Million Dollars ($2,000,000) per occurrence or such greater amount per
occurrence as may be from time to time hereafter approved in writing by the
Lessor and the Trustee (which approval shall not be unreasonably withheld);
provided, further, however, that the Lessee shall obtain excess insurance
coverage in an amount not less than Thirty Million Dollars ($30,000,000) for any
claims of liability against the Lessee relating to its ownership or use of
vehicles.
(b) The Lessee will require that each insurance policy referred to in the
foregoing clause (a) provide for at least thirty (30) days prior written notice
to the Master Collateral Agent and the Lessor of any termination of or proposed
cancellation or nonrenewal of such policy and that each insurance policy
insuring assets pledged to the Master Collateral Agent name the Master
Collateral Agent as an additional insured or additional loss payee, as
appropriate, pursuant to certificates in form and substance reasonably
satisfactory to the Lessor and the Master Collateral Agent.
Section 24.5. Manufacturer Programs. With respect to each Program Vehicle
leased by the Lessee, comply, and cause the related Franchisee to comply, in all
material respects, with all requirements of the applicable Manufacturer Program
relating to such Vehicle.
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Section 24.6. Reporting Requirements. Except as otherwise specified below,
furnish, or cause to be furnished to the Lessor, the Master Collateral Agent and
the Trustee, in the case of item (iii)(b) and item (vi) below, each Rating
Agency and, in the case of item (ii), item (vi) and item (x), to any Note Owner
that has delivered to the Lessor a written request for same:
(i) Audit Report. As soon as available and in any event within 90 days
after the end of each fiscal year of the Lessee, consolidated and
consolidating financial statements consisting of a balance sheet of the
Lessee and its Subsidiaries as at the end of such fiscal year and
statements of income, stockholders' equity and cash flows of the Lessee
and its Subsidiaries for such fiscal year, setting forth in comparative
form the corresponding figures for the preceding fiscal year (if
applicable), certified by and containing an opinion, unqualified as to
scope, of Arthur Andersen & Co. or other independent certified public
accountants of nationally recognized standing selected by the Lessee.
(ii) Quarterly Statements. As soon as available and in any event
within 45 days after the end of each of the first three quarters of each
fiscal year of the Lessee, financial statements consisting of consolidated
and consolidating balance sheets of the Lessee and its Subsidiaries as at
the end of such quarter and statements of income, stockholders' equity and
cash flows of the Lessee and its Subsidiaries for each such quarter,
setting forth in comparative form the corresponding figures for the
corresponding periods of the preceding fiscal year (if applicable), all in
reasonable detail and certified (subject to normal year-end audit
adjustments) by a senior financial officer of the Lessee as having been
prepared in accordance with GAAP.
(iii) Lease Events of Default; Amortization Events. Promptly after
becoming aware thereof, (a) notice of the occurrence of any Potential Lease
Event of Default or Lease Event of Default, together with a written
statement of an Authorized Officer describing such event and the action
that the Lessee proposes to take with respect thereto and (b) notice to the
Lessor, the Trustee, each Enhancement Provider and the Rating Agencies of
any Potential Amortization Event or Amortization Event;
(iv) Monthly Vehicle Statements. On or before each Determination Date,
a monthly vehicle statement (each, a "Monthly Vehicle Statement") in a form
acceptable to the Lessor, which shall specify (i) the last eight digits of
the VIN for each Vehicle leased hereunder during the Related
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Month by the Lessee, (ii) whether such Vehicle is leased under Annex A or
Annex B hereto, (iii) the Capitalized Cost for each such Vehicle and (iv)
the aggregate Net Book Value of such Vehicles as of the end of the Related
Month.
(v) Daily Reports. On each Business Day commencing on the Lease
Commencement Date, prepare and maintain at the office of the Servicer a
record (each, a "Daily Report") setting forth the aggregate of the amounts
deposited in the Collection Account on the immediately preceding Business
Day, which shall consist of: (A) the aggregate amount of payments received
from Manufacturers and/or auction dealers under Manufacturer Programs
related to the Vehicles and deposited in the Collection Account from the
Master Collateral Account, plus (B) the aggregate amount of proceeds
received from third parties (other than Manufacturers and auction dealers)
with respect to the sale of Vehicles and deposited in the Collection
Account from the Master Collateral Account, plus (C) the aggregate amount
of other Collections deposited in the Collection Account. Within one
Business Day after request therefor is made by the Lessor, the Master
Collateral Agent or the Trustee, the Lessee shall deliver a copy of the
Daily Report for any Business Day to the party making such request.
(vi) Monthly Certificate. On each Determination Date, the Servicer
shall forward to the Lessor, the Lessee, the Trustee, the Paying Agent and
the Rating Agencies, an Officer's Certificate of the Servicer substantially
in the form of Exhibit A (each, a "Monthly Certificate") setting forth,
inter alia, the following information (which, in the cases of clauses (c),
(d) and (e) below, will be expressed as a dollar amount per $1,000 of the
original principal amount of the Notes and as a percentage of the
outstanding principal balance of the Notes as of such date): (a) the
aggregate amount of payments received from the Manufacturers and/or auction
dealers under Manufacturer Programs and the aggregate amount of payments
received from third parties (other than Manufacturers and auction dealers)
with respect to the sale of Vehicles and deposited in the Collection
Account from the Master Collateral Account and the aggregate amount of
other Collections deposited in the Collection Account for the Related Month
with respect to such Determination Date; (b) the Invested Percentage on the
last day of the Related Month of each Series of Notes and each class of
each Series; (c) for each Series and each class of each Series, the total
amount to be distributed to Noteholders on the next succeeding Distribution
Date; (d) for each Series and each class of each Series, the amount of such
distribution allocable to principal on the Notes; (e) for each Series and
each class of each Series,
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the amount of such distribution allocable to interest on the Notes; (f) for
each Series and each class of each Series, the amount of Enhancement used
or drawn in connection with the distribution to Noteholders of such Series
or class on the next succeeding Distribution Date, together with the
aggregate amount of remaining Enhancement not theretofore used or drawn;
(g) for each Series, the Series Monthly Servicing Fee for the next
succeeding Payment Date; (h) for each Series and each class of each Series,
the existing Carryover Controlled Amortization Amount, if any; (i) the Pool
Factor with respect to such Related Month for each Series and each class of
each Series; (j) a list of all Acquired Vehicles and Financed Vehicles
leased hereunder at the close of business on the last day of the Related
Month; (k) the Aggregate Asset Amount and the amount of the Aggregate Asset
Amount Deficiency, if any, at the close of business on the last day of the
Related Month; (l) if Enhancement is provided for any Series of Notes or
any class of a Series by means of overcollateralization, the amount of
recoveries and losses for the Related Month, whether an ENHANCEMENT
Deficiency exists with respect to such Series or class and the amount
thereof, or the amount available for such overcollateralization; and (m)
whether, to the knowledge of the Servicer, any Lien exists on any of the
Collateral (other than Liens granted pursuant to the Indenture and the
other Related Documents or permitted thereunder) which is reasonably likely
to have a Material Adverse Effect.
(vii) Monthly Noteholders' Statement. On or before each Distribution
Date, the Servicer shall furnish to the Trustee a Monthly Noteholders'
Statement substantially in the form of Exhibit B.
(viii) Manufacturers. Promptly after obtaining actual knowledge
thereof, notice of any Manufacturer Event of Default or replacement of a
Manufacturer Program.
(ix) Annual Certificate. Annual Officer's Certificates of the Lessee
as follows: The Lessee will deliver to the Lessor, the Trustee, any
applicable Enhancement Provider under the Indenture, and the Rating
Agencies rating any outstanding Series of Notes, on or before August 30 of
each fiscal year, beginning with August 30, 1997, an Officer's Certificate
substantially in the form of Exhibit C (each, an "Annual Certificate") (a)
stating that a review of the activities of the Lessee during the preceding
fiscal year (or during the initial period from the initial Closing Date
until the end of fiscal year 1996) and of its performance under this
Agreement and the other Related Documents to which the Lessee is a party
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was made under the supervision of the officer signing such certificate, (b)
stating that to the best of such officers knowledge, based on such review,
either there has occurred no event which, with the giving of notice or
passage of time or both, would constitute a Lease Event of Default or
Amortization Event and that the Lessee has fully performed all its
obligations under this Agreement and such other Related Documents
throughout such year, or, if there has occurred such event or a Lease Event
of Default or Amortization Event, specifying each such event known to such
officers and the nature and status thereof, and (c) stating (and containing
an Opinion of Counsel to the effect), subject to standard qualifications
and assumptions, that all necessary Uniform Commercial Code continuation
statements and other Uniform Commercial Code filings have been completed
(including, without limitation, any precautionary filings" made by the
Lessees in favor of the Lessor), all necessary Assignment Agreements have
been executed and delivered pursuant to Section 2.1 of the Master
Collateral Agency Agreement, and all other actions, if any, required to
maintain the perfected first priority security interest of the Trustee or
the Master Collateral Agent on behalf of the Trustee in the Collateral and
in the Master Collateral have been taken and that the Trustee or the Master
Collateral Agent continues to have a perfected security interest in the
Collateral and Master Collateral.
(x) Annual Report. Annual reports of independent public accountants as
follows: On or before August 30 of each fiscal year, beginning with August
30, 1997, the Lessee shall cause a firm of nationally recognized
independent public accountants (which may also render other services to the
Servicer) to furnish a report to the Lessor, the Trustee, the Rating
Agencies and any Enhancement Provider to the effect that (i) they have
compared the mathematical calculations of each amount set forth in the
monthly certificates forwarded by the Lessee pursuant to this agreement and
the master collateral agency agreement during the period covered by such
report (which shall be the period from June 1 to and including May 31 of
the prior fiscal year or for the period from the initial Closing Date to
May 31, 1996) with the Lessee's computer reports which were the source of
such amounts and that except for such exceptions as are listed, such
amounts are in agreement, and (ii) they have examined certain documents and
the records relating to the servicing of the Vehicles under this Agreement
and the other Related Documents to which the Lessee is a party and that
with respect to individual items examined, such servicing (including the
allocations of Collections under the Indenture) has been completed in
compliance with all of the terms and conditions set forth in the Indenture,
any
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Supplement, this Agreement and the Master Collateral Agency Agreement,
except for such exceptions as shall be set forth in such report.
(xi) Non-Proqram Vehicle Report. On or before the second Determination
Date after each May 31, beginning with May 31, 1996, the Servicer shall
cause a firm of nationally recognized independent public accountants (which
may also render other services to the Servicer and which is acceptable to
the Rating Agencies) to furnish a report (the "Non-Program Vehicle Report")
to the Lessor, the Trustee, the Rating Agencies, and the Master Collateral
Agent to the effect that they have performed certain agreed upon procedures
with respect to the calculation of Market Value, and Disposition Proceeds
obtained from the sale or other disposition of, all Non-Program Vehicles
(other than Casualties) sold or otherwise disposed of during each Related
Month in the preceding calendar year and compared such calculations of
Market Value and Disposition Proceeds with the corresponding amounts set
forth in the Daily Reports prepared by the Servicer pursuant to clause (v)
above and that on the basis of such comparison such accountants are of the
opinion that such amounts are in agreement, except for such exceptions as
they believe to be immaterial and such other exceptions as shall be set
forth in such report; provided, however, that if on any August 31, November
30, or February 28 the Non-Program Vehicle Percentage equals or exceeds
three percent (3~) then the Servicer shall notify each Rating Agency
thereof in writing and, at the request of any Rating Agency delivered on or
before the fifth (5th) Business Day thereafter, the Servicer shall cause to
be prepared a Non-Program Vehicle Report covering the calendar quarter
ending on such August 31, November 30, or February 28, as applicable, and
shall cause such Non-Program Vehicle Report to be furnished to the Trustee,
the Rating Agencies and the Master Collateral Agent on or before the second
Determination Date after the last day of the quarter to which it relates.
(xii) Other. Promptly, from time to time, such other information,
documents, or reports respecting the Vehicles or the condition, financial
or otherwise, or operations of the Servicer as the Lessor, the Master
Collateral Agent or the Trustee may from time to time reasonably request in
order to protect the interests of the Lessor, the Master Collateral Agent
or the Trustee under or as contemplated by this Agreement or any other
Related Document.
Section 24.7. Taxes and Liabilities. Pay when due all taxes, assessments
and other material (determined on a consolidated basis) liabilities (including
titling fees and
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registration fees payable with respect to Vehicles) except as contested in good
faith and by appropriate proceedings with respect to which adequate reserves
have been established, and are being maintained, in accordance with GAAP if and
so long as forfeiture of any Vehicles or other Master Collateral will not result
from the failure to pay any such taxes, assessments or other material
liabilities during the period of any such contest.
Section 24.8. Maintenance of Separate Existence. The Lessee acknowledges
its receipt of a copy of that certain opinion letter issued by Mayer, Brown &
Platt dated April 30, 1996 addressing the issue of substantive consolidation as
it may relate to the Lessee and the Lessor. The Lessee hereby agrees to maintain
in place all policies and procedures, and take and continue to take all actions,
described in the factual assumptions set forth in such opinion letter and
relating to it. On an annual basis, the Lessee will provide to the Rating
Agencies, the Trustee and the Master Collateral Agent, an Officer's Certificate
certifying that it is in compliance with its obligations under this Section
24.8.
Section 24.9. Maintenance of Credit Enhancement. The Lessee agrees to
maintain a letter of credit or other Enhancement in a stated amount which,
together with all other Enhancement provided for in the applicable Supplement,
is equal to or greater than the Required Enhancement Amount for each Series.
Section 24.10. Manufacturer Payments: Sales Proceeds. Any payments from
Manufacturers in respect of Vehicles other than Exchanged Vehicles (whether
relating to Financed Vehicles or to Acquired Vehicles) received directly by the
Lessee will, within two Business Days of receipt, be deposited into the Master
Collateral Account. Any payments from Manufacturers in respect of Exchanged
Vehicle Repurchase Rights which payments are received directly by the Lessee
will, within two Business Days of receipt, be deposited into the Exchange
Account. The Lessee shall, within two Business Days of receipt thereof, deposit
into the Master Collateral Account all amounts received by the Lessee directly,
which amounts represent the proceeds from sales of Vehicles by auction dealers
under a Guaranteed Depreciation Program and sales of Vehicles (including amounts
paid to the Lessee by a Manufacturer as a result of the Lessee's sale of such
Vehicle outside such Manufacturer's Manufacturer Program) by the Lessee to third
parties (other than under any related Manufacturer Program) and all payments
with respect to other Master Collateral (other than the Master Collateral
described in the last sentence of this paragraph). Insurance proceeds (other
than Exchanged Vehicle Insurance Proceeds) with respect to Vehicles will only be
deposited into the Master Collateral Account if an Amortization Event or
Potential Amortization Event shall have occurred and be continuing.
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Section 24.11. Compliance with Requirements of Law. Maintain in effect all
qualifications required under applicable Requirements of Law and will comply
with all other applicable Requirements of Law, the failure to maintain or comply
with which is reasonably likely to have a Material Adverse Effect.
Section 24.12. Delivery of Information. Provide the Lessor with any
information or materials necessary for the Lessor to comply with its obligations
under the Indenture.
Section 24.13. Master Collateral Agent as Lienholder. Maintain certain
computer records as follows: Concurrently with each leasing of a Vehicle under
this Agreement, the Servicer shall indicate on its computer records that the
Master Collateral Agent as assignee of the Lessor or the Lessee, as the case may
be, is the holder of a Lien on such Vehicle for the benefit of the Trustee
pursuant to the terms of the Master Collateral Agency Agreement. National shall
not utilize selection procedures which it believes are ADVERSE TO THE LESSOR OR
THE TRUSTEE in selecting the Vehicles to be designated to the Lessor as a
Financing Source and the Trustee as a Beneficiary under the Master Collateral
Agreement.
Section 24.14. Maintenance of the Vehicles. The Lessee will maintain and
cause to be maintained in good repair, working order, and condition all of the
Vehicles in accordance with its ordinary business practices with respect to all
other vehicles owned or leased by it and will use its best efforts to maintain
each Program Vehicle as an eligible vehicle under the related Manufacturer
Program, except in each case to the extent that any such failure to comply with
such requirements is not reasonably likely to, in the aggregate, materially
adversely affect the interests of the Lessor, the Master Collateral Agent or the
Trustee on behalf of the Secured Parties under the Indenture or the likelihood
of payment of all amounts due hereunder. National will perform all of its
obligations as Servicer in all material respects as set forth in the Master
Collateral Agency Agreement.
Section 24.15. Certificates of Title. The Servicer shall take, or shall
cause to be taken, such action as shall be necessary to submit all of the
Certificates of Title (other than Certificates of Title with respect to the
Initial Vehicles) to the appropriate state authority for notation of the Master
Collateral Agent's lien thereon. Pursuant to the Master Collateral Agency
Agreement, the original Certificates of Title relating to the Vehicles shall be
held by the Servicer, in trust for the benefit of the Master Collateral Agent
and the Trustee as assignee of the Lessor. The Certificates of Title shall be
subject to all of the provisions of the Master Collateral Agency Agreement.
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Section 24.16. Release of Collateral. The parties agree that pursuant to
the provisions of this Section 24.16 and Sections 2.3 and 2.7 of the Master
Collateral Agency Agreement, any and all the Liens for the benefit of the Lessor
(including the Lien of the Trustee as assignee of the Lessor and as Beneficiary
under the Master Collateral Agency Agreement) on the Vehicles and the
Certificates of Title therefor shall be released or deemed to be released, as
provided below. From and after the earliest of:
(a) in the case of a Program Vehicle, the Disposition Date for such
Vehicle; or
(b) receipt of the purchase price by the Lessee for a Non-Program
Vehicle sold in an ordinary course sale; or
(c) the payment in full of all obligations under this Agreement with
respect to a Vehicle,
any and all Liens for the benefit of the Lessor (including the Lien of the
Trustee as assignee of the Lessor and as Beneficiary under the Master Collateral
Agency Agreement) on such Vehicle and the Certificate of Title therefor shall be
deemed to be released. The Lessor shall, and shall cause the Trustee and the
Master Collateral Agent to, execute such documents and instruments as the Lessee
may reasonably request (including a power of attorney of the Master Collateral
Agent appointing the Lessee to act as the agent of the Master Collateral Agent
in taking such actions as are required to evidence the release of the Lien of
the Master Collateral Agent on Vehicles turned back or sold pursuant to the
provisions of this Section 24.16, which power of attorney shall be revocable
pursuant to Section 2.7(b) of the Master Collateral Agency Agreement).
Section 24.17. Change of Location or Name. During the Term, the Lessee will
not change (a) the location of its principal place of business, chief executive
office or its consolidated records concerning its business and financial
affairs, or (b) its legal name or the name under or by which it conducts its
business, in each case without first giving the Master Collateral Agent, the
Trustee and the Lessor at least 60 days' advance written notice thereof and
having taken any and all action required to maintain and preserve the first
priority perfected Lien of the Master Collateral Agent in the Master Collateral;
provided, however, that notwithstanding the foregoing, the Lessee shall not
change the location of its principal place of business, chief executive office
or its consolidated records concerning its business and financial affairs to any
place outside the United States of America.
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Section 24.18. Deliveries: Further Assurances. The Lessee agrees that it
will, at its sole expense, (i) immediately deliver or cause to be delivered to
the Lessor (or the Master Collateral Agent on the Lessor's behalf), in due form
for transfer (i.e., endorsed in blank), all securities, chattel paper,
instruments and documents, if any, at any time representing all or any of the
Master Collateral with respect to which the Trustee is designated as the
Beneficiary (it being understood that the Certificates of Title shall be held by
the Servicer or the Master Collateral Agent, as the case may be, pursuant to the
provisions of the Master Collateral Agency Agreement), and (ii) execute and
deliver, or cause to be executed and delivered, to the Lessor or the Master
Collateral Agent, as the case may be, in due form for filing or recording (and
pay the cost of filing or recording the same in all public offices reasonably
deemed necessary or advisable by the Lessor or the Master Collateral Agent or
the Trustee, as the case may be), such assignments, security agreements,
mortgages, consents, waivers, financing statements, and other documents, and do
such other acts and things, all as may from time to time be reasonably necessary
or, upon the request of the Lessor or the Master Collateral Agent advisable to
establish and maintain to the satisfaction of the Lessor, the Master Collateral
Agent and the Trustee a valid perfected first priority Lien on and security
interest in all of the Master Collateral with respect to which the Trustee is
designated as the Beneficiary now or hereafter existing or acquired.
Section 24.19. Additional Actions. The Lessor hereby directs, authorizes
and empowers the Servicer to, and the Servicer hereby agrees that it shall:
(a) instruct the Trustee or the Paying Agent, as applicable, to make
withdrawals and payments from the Collection Account, as contemplated in
the Indenture;
(b) at the request of the Trustee as required or permitted upon or
after the occurrence of certain events specified in the Indenture and, to
the extent permitted under and in compliance with applicable laws and
regulations, execute and deliver, for the benefit of the Noteholders under
the Indenture, any and all instruments necessary or appropriate to commence
or maintain enforcement proceedings with respect to Manufacturer Programs
or any Enhancement;
(c) make any filings, reports, notices, applications, or registrations
with, and to seek any consents or authorizations from the Securities and
Exchange Commission and any state securities laws authority on behalf of
the Lessor as may be necessary to comply with any Federal or state
securities laws or reporting requirements or laws;
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(d) upon the occurrence of a Series 1996-1 Lease Payment Deficit,
deliver to the Trustee a notice in the form attached hereto as Exhibit E;
and
(e) perform such other functions and take such other actions as it is
designated to perform or take pursuant to the terms and conditions of any
Related Document.
Section 24.20. Subleases. The Lessee agrees that each Sublease will include
provisions consistent with each contained in Section 28 of the Lease pursuant to
which, inter alia, each Sublessee expressly and irrevocably submits to the
non-exclusive jurisdiction of all federal and state courts of the State of New
York and shall also include a provision whereby each Sublessee agrees to be
bound by the provisions of Section 9.2(b) of the Base Indenture.
SECTION 25. CERTAIN NEGATIVE COVENANTS. Until the expiration or termination
of this Agreement and thereafter until the obligations of the Lessee are paid in
full, the Lessee agrees that, unless at any time the Lessor, the Master
Collateral Agent and the Trustee shall otherwise expressly consent in writing,
it will not:
Section 25.1. Mergers. Consolidations. Be a party to any merger or
consolidation, other than (i) a merger or consolidation of any Affiliate of the
Lessee into or with the Lessee (provided that the Lessee is the surviving
corporation) or (ii) a merger or consolidation of the Lessee into or with
another entity if:
(a) the corporation formed by such consolidation or into or with which
the Lessee is merged shall be a corporation organized and existing under
the laws of the United States of America or any State or the District of
Columbia, and, if the Lessee is not the surviving entity, shall expressly
assume, by an agreement supplemental hereto, executed and delivered to the
Trustee, the Lessor and the Master COLLATERAL AGENT, THE PERFORMANCE of
every covenant and obligation of the Lessee hereunder and under all other
Related Documents;
(b) the Lessee has delivered to the Trustee, the Lessor and the Master
Collateral Agent an officer's certificate and an opinion of counsel each
stating that such consolidation or merger and such supplemental agreement
comply with this Section 25.1 and that all conditions precedent herein
provided for relating to such transaction have been complied with; and
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(c) each Rating Agency has confirmed in writing that such assignment
and succession will not cause the rating of any outstanding series of Notes
to be lowered or withdrawn.
Section 25.2. Regulations G, T, U and X. Use or permit any amounts funded
by the Lessor pursuant to the Financing Lease to be used, either directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
repurchasing or carrying margin stock" within the meaning of Regulations G, T, U
and X of the Board of Governors of the Federal Reserve System, as amended from
time to time.
Section 25.3. Liens. Create or permit to exist any Lien with respect to any
Master Collateral with respect to which the Trustee is designated as the
Beneficiary, whether now or hereafter existing or acquired, except Permitted
Liens.
Section 25.4. Use of Vehicles. Use or contractually permit any Vehicles to
be used in any manner (i) that, with respect to Program Vehicles, would make
such Vehicles ineligible for repurchase or Auction under the related Eligible
Manufacturer Program, (ii) for any illegal purposes or (iii) that could subject
any Vehicles to confiscation.
Section 25.5. Percentage of Non-Program Vehicles. Permit (i) the aggregate
Net Book Value of all Non-Program Vehicles leased hereunder on any day to exceed
any applicable Maximum Non-Program Vehicle Amount or (ii) the aggregate Net Book
Value of Non-Program Vehicles manufactured by a single Manufacturer (other than
an Approved Non-Program Vehicle Manufacturer) to exceed any applicable Maximum
Manufacturer Amount.
Section 25.6. Acquisition and Financing of Vehicles. Other than with
respect to Initial Vehicles use funds on deposit in or required to be deposited
into the Excess Funding Account (as defined in the related Supplement) or the
Retained Distribution Account to acquire or finance Vehicles manufactured by
Chrysler during any calendar month or series of consecutive calendar months if
the Vehicle Ratio (calculated without taking the Initial Vehicles into account)
for such month or series of months exceeds the following amounts:
For any month 30%
For any two consecutive months 50%
For any three consecutive months 70%
For any four consecutive months 80%
For any five consecutive months 90%
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<PAGE> 52
SECTION 26. SERVICING COMPENSATION.
Section 26.1. As compensation for its servicing activities hereunder and
reimbursement for its expenses as set forth in Section 26.2, the Servicer shall
be entitled to receive from the Lessor a monthly servicing fee (the "Monthly
Servicing Fee"), payable in arrears on each Payment Date prior to the
termination of this Lease, the Indenture and the Master Collateral Agency
Agreement in an amount equal to the sum of the monthly servicing fees for all
Series of Notes. Except as otherwise specified in the related Supplement, the
Monthly Servicing Fee for each Series of Notes (each, a "Series Monthly
Servicing Fee") on each Payment Date shall be equal to (i) the portion of the
Supplemental Servicing Fee allocated to such Series of Notes pursuant to the
related Supplement, plus (ii) one-twelfth of the product of (A) the Servicing
Fee Percentage for such Series and (B) the Invested Amount of such Series as of
the preceding Payment Date (after giving effect to any payments of principal on
such date). The Series Monthly Servicing Fee for each Series shall be paid to
the Servicer pursuant to the procedures set forth in the applicable Supplement.
The supplemental servicing fee (the "Supplemental Servicing Fee") for any period
shall be equal to all Carrying Charges comprising payments due from the Servicer
under Section 26.2 hereof.
Section 26.2. The Servicer's expenses include, and the Servicer agrees to
pay, the amounts due to the Trustee pursuant to Section 10.5 of the Indenture,
plus the reasonable fees and disbursements of independent accountants in
connection with reports furnished pursuant to Sections 24.6(i). (ii), (x) and
(xi), plus all other fees, expenses and indemnities incurred by the Servicer or
the Lessor in connection with the Servicer's activities hereunder or under the
Related Documents. The Servicer, however, shall not be liable for any
liabilities, costs or expenses of the Lessor, the Trustee or the Noteholders
arising under any tax law, including without limitation any Federal, state or
local income or franchise taxes or any other tax imposed on or measured by
income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith), except to the extent incurred as a result of the
Servicer's violation of the provisions of this Lease or of the Related
Documents; provided, however, the foregoing provisions of this sentence shall
not affect the indemnification obligations of the Lessee under Section 15 of the
Lease. In the event that the Servicer fails to pay any amount due to the Trustee
pursuant to Section 10.5 of the Base Indenture, the Trustee will be entitled to
receive such amounts due from the Monthly Servicing Fee prior to payment thereof
to the Servicer.
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<PAGE> 53
SECTION 27. BANKRUPTCY PETITION AGAINST LESSOR. The Lessee hereby covenants
and agrees that, prior to the date which is one year and one day after the
payment in full of all Series of Notes, it will not institute against, or join
any other Person in instituting against, the Lessor any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States. In the event that the Lessee takes action in violation of this
Section 27, the Lessor agrees, for the benefit of the Noteholders, that it shall
file an answer with the bankruptcy court or otherwise properly contest the
filing of such a petition by the Lessee against the Lessor or the commencement
of such action and raise the defense that the Lessee has agreed in writing not
to take such action and should be estopped and precluded therefrom and such
other defenses, if any, as its counsel advises that it may assert. The
provisions of this Section 27 shall survive the termination of this Agreement.
SECTION 28. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF THE TRUSTEE, THE LESSOR OR THE LESSEE SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTaBRN DISTRICT OF NEW YORR; PROVIDED, HOWEVER,
TEAT ANY SUIT SEEPING ENFORCEMENT AGAINST ANY VEHICLE OR OTHER PROPERTY MAY BE
BROUGHT, AT THE LESSOR'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
VEHICLE OR OTHER PROPERTY MAY BE FOUND. THE LESSEE HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JUCISDICTION OF ALL FEDERAL AND STATE
COURTS OF THE STATE OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION. THE LESSEE (AND EACH SUBLESSEE) FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS By REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE
LESSEE AND THE LESSOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE LESSEE HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT.
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<PAGE> 54
SECTION 29. GOVERNING LAW. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement. All obligations of the
Lessee and all rights of the Lessor, the Master Collateral Agent or the Trustee
expressed herein shall be in addition to and not in limitation of those provided
by applicable law or in any other written instrument or agreement.
SECTION 30. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT TO WHICH IT IS A PARTY, OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED TRANSACTION, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
SECTION 31. NOTICES. All notices, amendments, waivers, consents and other
communications provided to any party hereto under this Agreement shall be in
writing and addressed, delivered or transmitted to such party at its address or
facsimile number set forth below its signature hereto or at such other address
or facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any notice, if transmitted by facsimile, shall be deemed given
when transmitted upon receipt of electronic confirmation of transmission. In
each case, a copy of all notices, requests and other communications (other than
any such notices, requests and other communications in the ordinary course of
business) that are sent by any party or signatory hereunder shall be sent to the
Trustee at the following address:
THE BANK OF NEW YORK
101 Barclay Street
Floor 12 East
New York, New York 10286
Attention: Corporate Trust Division
Telephone: (212) 815-5218
Facsimile: (212) 815-5999
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<PAGE> 55
SECTION 32. HEADINGS. Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
SECTION 33. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute one and the same Agreement.
SECTION 34. EFFECTIVENESS. This Agreement shall become effective on the
Lease Commencement Date, subject to the prior or concurrent delivery of each of
the following documents (in form and substance satisfactory to the Lessor):
(a) Certificate of Incorporation. The certificate of incorporation of
the Lessee, duly certified by the Secretary of State of the jurisdiction of
its incorporation, together with a copy of its by-laws, duly certified by
the Secretary or an Assistant Secretary of the Lessee;
(b) Resolutions. Copies of resolutions of the Board of Directors of
the Lessee and of the Servicer authorizing or ratifying the execution,
delivery and performance of those documents and matters required of it with
respect to this Agreement, duly certified by the Secretary or Assistant
Secretary of the Lessee;
(c) Consents. etc. Certified copies of all documents evidencing any
necessary corporate action, consents and governmental approvals (if any)
with respect to this Agreement;
(d) Incumbency and Signatures. A certificate of the Secretary or an
Assistant Secretary of the Lessee and of the Servicer certifying the names
of the individual or individuals authorized to sign this Agreement and the
other Related Documents to be executed by it, together with a sample of the
true signature of each such individual (the Lessor, the Master Collateral
Agent and the Trustee may conclusively rely on each such certificate until
formally advised by a like certificate of any changes therein);
(e) Opinions of Counsel. The opinion of Simpson Thacher & Bartlett,
counsel for the Lessee and the Servicer, addressed to the Lessor, the
Trustee, the Master Collateral Agent, the Enhancement Providers, the
Initial Purchasers and the Rating Agencies; the opinion of Mayer, Brown &
Platt, addressed to the Lessee, the Lessor, the Trustee, the Master
Collateral Agent, the Enhancement Providers, the Placement
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<PAGE> 56
Agents and the Rating Agencies; the opinion of each Manufacturer addressed
to the Lessee, the Lessor, the Trustee, the Master Collateral Agent, the
Enhancement Providers and the Rating Agencies; the opinion of counsel to
each Enhancement Provider, addressed to the Lessee, the Lessor, the
Trustee, the Master Collateral Agent, the Placement Agents and the Rating
Agencies; the opinion of Emmet, Marvin & Martin, counsel to the Trustee,
addressed to the Lessee, the Lessor, the Placement Agents, the Master
Collateral Agent and each Enhancement Provider; and the opinion of Briggs
Morgan, Minnesota counsel to the Lessee, addressed to the Lessor, the
Trustee, the Enhancement Providers, the Placement Agents and the Rating
Agencies, in each case, satisfactory in form and substance to the
addressees thereof;
(f) Good Standing Certificates. Certificates of good standing for the
Lessee in the jurisdiction of its organization and the jurisdiction of its
principal place of business;
(g) Search Reports. A written search report from a Person satisfactory
to the Lessor and the Trustee listing all effective financing statements
that name the Lessee as debtor or assignor and that are filed in the
jurisdictions in which filings were made pursuant to subsection (h) below,
together with copies of such financing statements, and tax and judgment
lien search reports from a Person satisfactory to the Lessor and the
Trustee showing no evidence of such liens filed against the Lessee;
(h) Evidence. Evidence of the filing of proper financing statements on
Form WCC-1, (i) naming the Lessee as debtor and the Master Collateral Agent
as secured party or other, similar instruments or documents, as may be
necessary or desirable under the UCC of all applicable jurisdictions to
perfect the Master Collateral Agent's interest in the Master Collateral
with respect to which the Trustee is designated as the Beneficiary and (ii)
naming the Lessee as debtor, the Lessor as secured party and the Master
Collateral Agent as assignee, as may be necessary or desirable under the
UCC of all applicable jurisdictions to perfect the precautionary security
interest of the Lessor hereunder and the assignment of the same to the
Master Collateral Agent;
(i) Master Collateral Agency Agreement. An executed copy of the Master
Collateral Agency Agreement;
(j) Intercreditor Agreement. An executed copy of the Intercreditor
Agreement;
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<PAGE> 57
(k) Joinder to Intercreditor Agreement. An executed copy of the
Joinder Agreement in form attached hereto as Exhibit D;
(l) Vehicle Title Nominee Agreement. An executed copy of the Vehicle
Title Nominee Agreement;
(m) GM Guaranty. An executed copy of the GM Guaranty;
(n) Assignment Agreement. An executed copy of the Assignment Agreement
of each Manufacturer;
(o) Certified Copy of Manufacturer Program. A copy of each
Manufacturer Program relating to Vehicles which will be leased hereunder
and an Officer's Certificate, dated the Closing Date, and duly executed by
an Authorized Officer of the Lessee, certifying that each such copy is
true, correct and complete as of the Closing Date;
(p) Assignment of GMAC Lien: Evidence of Filing of UCC Termination
Statements.
(i) An executed copy of an assignment agreement, pursuant to
which GMAC has assigned its interest in the certificates of title with
respect soothe Initial Vehicles to the Master Collateral Agent; and
(ii) Evidence of the filing of proper financing statements (form
WCC-3) necessary to release all security interests and other rights of
GMAC in the Initial Vehicles previously granted by Old National to
GMAC:
(q) The Indenture, dated the Closing Date, duly executed by the Lessor
and the Trustee, and all conditions to the effectiveness thereof and the
issuance of the Notes thereunder shall have been satisfied in all respects;
(r) A letter of credit, executed by Deutsche Bank AG, New York Branch,
with an initial stated amount of $15,000,000;
(s) The representations and warranties contained in Section 23 shall
be true and correct in all respects (except to the extent any such
representation and warranty does not incorporate a materiality limitation
in its terms and the failure of such representation and warranty to be true
and correct in all respects does not materially adversely affect the
interest of the Lessor, the Trustee or the Secured Parties); and
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<PAGE> 58
(t) Other. Such other documents as the Trustee or the Lessor may
reasonably request.
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<PAGE> 59
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
it to be executed by their respective officers thereunto duly authorized as of
the day and year first above written.
LESSEE AND SERVICER:
NATIONAL CAR RENTAL SYSTEM, INC.
By: /s/
-----------------------------------
Name:
Title:
Address: 7700 France Avenue South
Minneapolis, Minnesota 55435
Facsimile: (612) 893-6143
Telephone: (612) 830-2102
LESSOR:
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP
By: NATIONAL CAR RENTAL FINANCING
CORPORATION,
its General Partner
By: /s/
-----------------------------------
Name:
Title:
Address: 7700 France Avenue South
Minneapolis, Minnesota 55435
Facsimile: (612) 893-6143
Telephone: (612) 830-2133
<PAGE> 60
Acknowledged by:
MASTER COLLATERAL AGENT
CITIBANK. N.A.
By: /s/ Annette M. Marsula
---------------------------------
Name: Annette M. Marsula
Title: Senior Trust Officer
Address: 120 Wall Street, 13th Floor
New York, New York 10043
Attention: Annette Marsula
Telephone: 212-412-6249
Facsimile: 212-480-1615
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<PAGE> 61
ANNEX A
ANNEX
TO THE
MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
Dated as of April 30, 1996
between
NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP,
as Lessor,
and
NATIONAL CAR RENTAL SYSTEM, INC.,
as Lessee
<PAGE> 62
1. Scope of Annex. This Annex A shall apply only to the acquisition,
leasing and servicing of the Acquired Vehicles by NFLP pursuant to the Base
Lease, as supplemented by this Lease Annex (collectively, the "Operating
Lease").
2. General Agreement. Lessor and Lessee intend that for all purposes
(including, but not limited to, financial accounting, regulatory accounting,
federal income tax purposes and all applicable state and local income,
franchise, sales, use and excise tax purposes and for purposes of any foreign
corporation, business registration or doing business statutes), (A) the Lease
with regard to Acquired Vehicles will be treated as an "operating lease"
pursuant to Statement of Financial Accounting Standards No. 13, as amended, as
well as for all tax purposes, (B) Lessor will be treated as the owner and lessor
of the Acquired Vehicles, (C) Lessee will be treated as the lessee of the
Acquired Vehicles, and (D) Lessor will be entitled to all tax benefits
ordinarily available to an owner of property similar to the Acquired Vehicles
for such tax purposes.
3. Operating Lease Commitment. (a) Upon the execution and delivery of this
Operating Lease, the Lessor shall, subject to the terms and conditions of the
Agreement, purchase from time to time on or after the Lease Commencement Date
and prior to the Lease Expiration Date, all Acquired Vehicles identified in
Vehicle Orders placed by the Lessee for a purchase price equal to the
Capitalized Cost thereof, and simultaneously therewith, the Lessor shall under
the Operating Lease enter into operating leases with the Lessee with respect to
such Vehicles; provided, that the aggregate Net Book Value of Acquired Vehicles
leased hereunder on any date shall not exceed (a) the Maximum Lease Commitment,
less (b) the Base Amount as of such date with respect to the Financing Lease.
4. Lease Procedures. In connection with the Lease of any Acquired Vehicles
to be leased on or after the Lease Commencement Date, to evidence the
acquisition of such Acquired Vehicles by the Lessor, the Lessee shall deliver to
the Lessor the following:
(a) a Vehicle Order (including a Vehicle Acquisition Schedule) with
respect to all Acquired Vehicles to be leased by the Lessor on the related
Vehicle Lease Commencement Date;
(b) UCC termination statements terminating, or UCC partial releases
releasing, any security interests and other liens (other than Permitted
Liens) in favor of any Person with respect to each Acquired Vehicle leased
on the Lease Commencement Date and identified in such Vehicle Order, and
any related Manufacturer Programs;
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<PAGE> 63
(c) with respect to the initial lease of Acquired Vehicles, a fully
executed Assignment Agreement covering the related Manufacturer Programs.
The Lessee hereby agrees that each such delivery of a Vehicle Order shall
be deemed hereunder to constitute a representation and warranty by the Lessee,
to and in favor of the Lessor and the Trustee, that all the conditions precedent
to the acquisition and leasing of the Vehicles identified in such Vehicle Order
have been satisfied as of the date of such Vehicle Order.
5. Maximum Vehicle Lease Term. The maximum Vehicle lease term of the
Operating Lease as it relates to each Acquired Vehicle leased hereunder shall be
from the Vehicle Lease Commencement Date to the date that is 18 months from the
Vehicle Lease Commencement Date. On the occurrence of such date for a Vehicle
not previously disposed of, the Lessee shall, (a) on behalf of the Lessor,
promptly dispose of such Vehicle in accordance with the terms hereof and in
accordance with any instructions of the Lessor for such disposition, (b) in each
case, provide that Disposition Proceeds be paid directly to the Master
Collateral Account for the benefit of the Trustee and (c) pay to the Master
Collateral Agent or the Trustee, in accordance with this Operating Lease, any
other amounts unpaid and owing from the Lessee under the Lease in respect of
such Vehicle.
6. Lessee's Rights to Purchase Vehicles. The Lessee will have the option,
exercisable with respect to any Acquired Vehicle during the Vehicle Term with
respect to such Acquired Vehicle, to purchase any Vehicles leased under this
Agreement at the Vehicle Purchase Price, in which event the Lessee will pay the
Vehicle Purchase Price to the Master Collateral Agent on or before the Payment
Date next succeeding such purchase by the Lessee plus all accrued and unpaid
Monthly Base Rent and Monthly Variable Rent with respect to such Vehicle through
the date of such purchase. Upon receipt of such funds by the Master Collateral
Agent, the Lessor shall cause title to any such Vehicle to be transferred to the
Lessee, the lien of the Master Collateral Agent in such Vehicle will
automatically be released and the Servicer shall cause the Master Collateral
Agent to cause the notation of its lien to be removed from the certificate of
title for such Vehicle, concurrently with or promptly after the Vehicle Purchase
Price for such Vehicle (and any unpaid Monthly Base Rent and unpaid Monthly
Variable Rent) is paid by the Lessee to the Master Collateral Agent.
7. Vehicle Disposition. Subject to the Servicer's right to redesignate
Program Vehicles as Non-Program Vehicles under Section 14 of the Base Lease, the
Lessor and the Lessee agree
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<PAGE> 64
that, with respect to Acquired Vehicles, the Lessee shall use commercially
reasonable efforts to deliver each Program Vehicle for sale at Auction or to
return each Program Vehicle to the related Manufacturer during the Repurchase
Period for such Vehicle; provided, however, if for any reason, the Lessee fails
to deliver such a Program Vehicle to the applicable Manufacturer for repurchase
by the Manufacturer or to an Auction for sale, in each case in accordance with
the applicable Manufacturer Program, during the Repurchase Period, the Lessee
shall be obligated to sell or otherwise dispose of such Program Vehicle and pay
a Late Return Payment with respect thereto, in each case as provided in Section
13 of the Base Lease. The Lessee shall, with respect to Acquired Vehicles that
are Program Vehicles, pay the equivalent of the Monthly Base Rent for the
minimum holding period under the applicable Manufacturer Program for Program
Vehicles returned before the expiration of such minimum holding period,
regardless of actual usage, unless such minimum holding period is waived by the
Manufacturer or such a Program Vehicle is a Casualty, in which case, Section 7
of the Base Lease shall apply with respect to such Vehicle. All Repurchase
Prices and Disposition Proceeds due from the disposition of Program Vehicles
pursuant to this Section shall be due and payable to the Lessor. The Lessor and
the Lessee agree, with respect to Acquired Vehicles, that the Lessee shall use
commercially reasonable efforts to dispose of each Non-Program Vehicle (a) in a
manner most likely to maximize proceeds from such disposition and consistent
with industry practice and (b) within eighteen (18) months after the date of the
original dealer invoice for such Vehicle sold as a new vehicle. All Disposition
Proceeds due from the disposition of Non-Program Vehicles pursuant to this
Section shall be due and payable to the Lessor.
8. Lessor's Right to Cause Vehicles to be Sold. Notwithstanding anything to
the contrary contained in the Agreement, the Lessor shall have the right, at any
time after the date fourteen (14) days prior to the expiration of the Repurchase
Period for any Program Vehicle leased under this Annex A, to require that the
Lessee deliver such Program Vehicle to the Manufacturer for repurchase or, as
applicable, to the designated Auction for sale, or exercise commercially
reasonable efforts to arrange for the sale of such Program Vehicle to a third
party for a price greater than the Net Book Value thereof, in which event the
Lessee shall, prior to the expiration of such Repurchase Period, deliver such
Vehicle to its Manufacturer or the designated Auction or arrange for the sale of
such Program Vehicle to a third party for a price greater than the Net Book
Value (or purchase the Program Vehicle itself from the Lessor for the Vehicle
Purchase Price). If a sale of the Program Vehicle is arranged by the Lessee
prior to the expiration of such Repurchase Period, then the Lessee shall deliver
the Program Vehicle to the purchaser thereof, the Lien of the Master Collateral
Agent on the
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<PAGE> 65
Certificate of Title of such Program Vehicle shall be released, and the Lessee
shall cause to be delivered to the Lessor the funds paid for such Program
Vehicle by the purchaser. If the Lessee is unable to arrange for a sale of the
Program Vehicle prior to the expiration of such Repurchase Period, then the
Lessee shall cease attempting to arrange for such a sale and shall return such
Program Vehicle to the applicable Manufacturer or tender such Program Vehicle
for Auction or purchase such Vehicle as herein provided. In no event may any
Program Vehicle be sold pursuant to this Paragraph 8 (other than pursuant to a
Manufacturer Program) unless the funds to be paid to the Lessor arising out of
such sale (including any amounts paid by the Manufacturer as an incentive for
selling such Program Vehicle outside of the related Manufacturer Program) exceed
the Net Book Value of such Vehicle less reasonably predictable Excess Mileage
Charges, Excess Damage Charges, Missing Equipment Charges and other similar
charges imposed by the Manufacturer.
9. Calculation of Rent. Rent shall be due and payable on a monthly basis as
set forth in this paragraph 9:
"Monthly Base Rent", with respect to each Payment Date and each
Acquired Vehicle leased under the Lease on any day during the Related
Month, shall be the sum of all Depreciation Charges that have accrued with
respect to such Vehicle during the Related Month.
"Monthly Variable Rent", with respect to each Payment Date and each
Acquired Vehicle leased under the Lease on any day during the Related
Month, shall equal the sum, without double counting, of (a) the product of
(i) an amount equal to the Net Book Value of such Acquired Vehicle on the
first day contained within both the Related Month and the Vehicle Term with
respect to such Vehicle multiplied by the VFR for the Interest Period
ending on the next succeeding Payment Date and (ii) the quotient obtained
by dividing (A) the number of days contained within both the Related Month
and the Vehicle Term with respect to such Acquired Vehicle by (B) the total
number of days in the Related Month, plus (b) the product of (i) an amount
equal to all Carrying Charges for the Related Month, and (ii) the quotient
obtained by dividing the Net Book Value of such Acquired Vehicle as of the
first day of the Related Month by the Net Book Value of all Vehicles leased
under the Lease as of the first day of the Related Month.
"Rent" means Monthly Base Rent plus Monthly Variable Rent.
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<PAGE> 66
10. Payment of Rent and other Payments.
(a) Monthly Base Rent. On each Payment Date, the Lessee shall pay to
the Lessor the Monthly Base Rents that have accrued during the Related
Month with respect to all Vehicles that were leased under the Operating
Lease on any day during the Related Month;
(b) Monthly Variable Rent. On each Payment Date, the Lessee shall pay
to the Lessor the Monthly Variable Rents that have accrued during the
Related Month with respect to all Vehicles that were leased under the
Operating Lease on any day during the Related Month;
(c) Termination Payments. Casualty Payments and Late Return Payments.
On each Payment Date, the Lessee shall pay to the Lessor all Termination
Payments, Casualty Payments and Late Return Payments as provided in Section
5.4 of the Base Lease; and
(d) Certain Other Payments. The Lessee shall direct all Repurchase
Prices and Disposition Proceeds payable in respect of Acquired Vehicles to
be paid directly to the Master Collateral Agent for the benefit of the
Trustee. The Servicer and the Lessee each agree that in the event that the
Servicer or the Lessee shall receive directly any such payment, including
cash, securities, obligations or other property, the Servicer or the
Lessee, as the case may be, shall accept the same as the Master Collateral
Agent's agent and shall hold the same in trust on behalf of and for the
benefit of the Master Collateral Agent, and shall deposit the same, within
two (2) Business Days after receipt of such property in available funds,
into the Master Collateral Account in the same form received, with the
endorsement of the Servicer or the Lessee, as the case may be, when
necessary or appropriate.
11. Net Lease. THE OPERATING LEASE SHALL BE A NET LEASE, AND THE LESSEE'S
OBLIGATION TO PAY ALL RENT AND OTHER SUMS HEREUNDER SHALL BE ABSOLUTE AND
UNCONDITIONAL, AND SHALL NOT BE SUBJECT TO ANY ABATEMENT OR REDUCTION FOR ANY
REASON WHATSOEVER. The obligations and liabilities of the Lessee hereunder shall
in no way be released, discharged or otherwise affected (except as may be
expressly provided herein including, without limitation, the right of the Lessee
to reject Vehicles pursuant to Section 2.2 of the Base Lease) for any reason,
including without limitation: (i) any defect in the condition, merchantability,
quality or fitness for use of the Vehicles or any part thereof; (ii) any damage
to, removal, abandonment, salvage, loss, scrapping or destruction of or any
requisition or taking of the Vehicles or any part thereof; (iii) any
restriction, prevention
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<PAGE> 67
or curtailment of or interference with any use of the Vehicles or any part
thereof; (iv) any defect in, or any Lien on, title to the Vehicles or any part
thereof; (v) any change, waiver, extension, indulgence or other action or
omission in respect of any obligation or liability of the Lessee or the Lessor;
(vi) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to the Lessee, the
Lessor or any other Person, or any action taken with respect to the Operating
Lease by any trustee or receiver of any Person mentioned above, or by any court;
(vii) any claim that the Lessee has or might have against any Person, including
without limitation the Lessor; (viii) any failure on the part of the Lessor to
perform or comply with any of the terms hereof or of any other agreement; (ix)
any invalidity or unenforceability or disaffirmance of the Operating Lease or
any provision hereof or any of the other Related Documents or any provision of
any thereof, in each case whether against or by the Lessee or otherwise; (x) any
insurance premiums payable by the Lessee with respect to the Vehicles; or (xi)
any other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not the Lessee shall have notice or knowledge of any of the foregoing
and whether or not foreseen or foreseeable. The Operating Lease shall be
noncancelable by the Lessee and, except as expressly provided herein; the
Lessee, to the extent permitted by law, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender the Operating
Lease, or to any diminution or reduction of Rent payable by the Lessee
hereunder. All payments by the Lessee made hereunder shall be final (except to
the extent of adjustments provided for herein), absent manifest error and,
except as otherwise provided herein, the Lessee shall not seek to recover any
such payment or any part thereof for any reason whatsoever, absent manifest
error. If for any reason whatsoever the Operating Lease shall be terminated in
whole or in part by operation of law or otherwise except as expressly provided
herein, the Lessee shall nonetheless pay an amount equal to each Rent payment at
the time and in the manner that such payment would have become due and payable
under the terms of the Operating Lease as if it had not been terminated in whole
or in part. All covenants and agreements of the Lessee herein shall be performed
at its cost, expense and risk unless expressly otherwise stated.
12. Liens. Except for Permitted Liens, the Lessee shall keep all Vehicles
leased by it free of all Liens arising during the Term. Upon the Vehicle Lease
Expiration Date for each Vehicle leased hereunder, the Lessor may, in its
discretion, remove any such Lien and any sum of money that May be paid by the
Lessor in release or discharge thereof, including attorneys' fees and costs,
will be paid by the Lessee upon demand by the Lessor. The Lessor may grant
security interests in the Vehicles to the Master Collateral Agent in accordance
with the Master Collateral
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<PAGE> 68
Agency Agreement and the Indenture without consent of the Lessee. The Lessee
acknowledges that the granting of Liens and the taking of other actions pursuant
to the Indenture and the Related Documents does not interfere with the rights of
the Lessee under the Operating Lease.
13. Non-Disturbance. So long as the Lessee satisfies its obligations
hereunder, its quiet enjoyment, possession and use of the Vehicles will not be
disturbed during the Term subject, however, to paragraph 8 of this Annex A and
except that the Lessor, the Master Collateral Agent and the Trustee each retains
the right, but not the duty, to inspect the Vehicles without disturbing the
ordinary conduct of the Lessee's business. Upon the request of the Lessor, the
Master Collateral Agent or the Trustee, from time to time, the Lessee will make
reasonable efforts to confirm to the Lessor, the Master Collateral Agent and the
Trustee the location, mileage and condition of each Vehicle and to make
available for the Lessor's, the Master Collateral Agent's or the Trustee's
inspection within a reasonable time period, not to exceed forty-five (45) days,
the Vehicles at the location where the Vehicles are normally domiciled. Further,
the Lessee will, during normal business hours and with a notice of three (3)
Business Days, make its records pertaining to the Vehicles available to the
Lessor, the Master Collateral Agent or the Trustee for inspection at the
location where the Lessee's records are normally domiciled.
14. Certain Risks of Loss Borne by Lessee. Upon delivery of each Vehicle to
the Lessee, as between the Lessor and the Lessee, the Lessee assumes and bears
the risk of loss, damage, theft, taking, destruction, attachment, seizure,
confiscation or requisition and all other risks and liabilities with respect to
such Vehicle, including personal injury or death and property damage, arising
with respect to any Vehicle due to the manufacturer, purchase, acceptance,
rejection, delivery, leasing, subleasing, possession, use, inspection,
registration, operation, condition, maintenance, repair or storage of such
Vehicle, howsoever arising.
15. Title. This is an agreement to lease only, and title to the Acquired
Vehicles will at all times remain in the Lessor's name. The Lessee will not have
any rights or interest in such Vehicles whatsoever other than the rights of
possession and use as provided by this Agreement. In addition, the Lessee, by
its execution hereof, acknowledges and agrees that (i) the Lessor is the sole
owner and holder of all right, title and interest in and to the Manufacturer
Programs as they relate to the Vehicles leased hereunder and (ii) the Lessee has
no right, title or interest in any Manufacturer Program as it relates to any
Vehicle leased hereunder. To confirm the foregoing, the Lessee, by its execution
hereof, hereby assigns and transfers to the Lessor any
-8-
<PAGE> 69
rights that the Lessee may have in respect of any Manufacturer Programs as they
relate to the Vehicles leased hereunder.
* * *
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<PAGE> 70
ANNEX B
ANNEX
TO THE
MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
Dated as of April 30, 1996
between
NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP,
as Lessor,
and
NATIONAL CAR RENTAL SYSTEM, INC.,
as Lessee
<PAGE> 71
1. Scope of Annex. This Annex B shall apply only to the acquisition or
financing, leasing and servicing of the Financed Vehicles by the Lessee pursuant
to the Base Lease, as supplemented by this Lease Annex (collectively, the
"Financing Lease It ) .
2. General Agreement. (a) Lessor and Lessee intend (except as explicitly
provided in subparagraph (b) below) that for all purposes (including, but not
limited to, financial accounting, regulatory accounting, federal income tax
purposes and all applicable state and local income, franchise, sales, use and
excise tax purposes and for purposes of any foreign corporation, business
registration or doing business statutes), with respect to the Financed Vehicles,
(A) this Lease will be treated as a financing arrangement, (B) Lessor will be
treated as a lender making loans to Lessee in amounts equal to the Capitalized
Cost of the Financed Vehicles, which loans are secured by the Financed Vehicles,
(c) the Lessee will be treated as making payments of principal and interest
(denominated as Monthly Base Rent and Monthly Supplementary Payments, and
Monthly Finance Rent, respectively) to the Lessor and (D) Lessee will be treated
as the owner of the Financed Vehicles and will be entitled to all tax benefits
ordinarily available to an owner of property similar to the Financed Vehicles
for such tax purposes.
(b) Lessor and Lessee intend that for all purposes (including, but not
limited to, financial accounting, regulatory accounting, federal income tax
purposes and all applicable state and local income, franchise, sales, use and
excise tax purposes and for purposes of any foreign corporation, business
registration or doing business statutes), with respect to the Financed Vehicles,
(A) this Lease, as supplemented by this Lease Annex, will be treated as a
financing arrangement, (B) Lessor will be treated as a lender making loans to
Lessee in amounts equal to the Capitalized Costs of Financed Vehicles, which
loans are secured by the Financed Vehicles, (C) the Lessee will be treated as
making payments of principal and interest (denominated as Monthly Base Rent and
Monthly Supplementary Payments, and Monthly Finance Rent, respectively) to the
Lessor and (D) Lessee will be treated as the owner of the Financed Vehicles and
will be entitled to all tax benefits ordinarily available to an owner of
property similar to the Financed Vehicles for such tax purposes.
3. Financing Lease Commitment. Subject to the terms and conditions of the
Financing Lease, upon execution and delivery of the Financing Lease, the Lessor
shall (i) on the Lease Commencement Date refinance the Refinanced Vehicles in an
amount equal to the aggregate Net Book Value thereof, and (ii) from time to time
on or after the Lease Commencement Date and prior to the Lease Expiration Date
purchase all other Financed Vehicles identified in Vehicle Orders placed by the
Lessee for a purchase
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<PAGE> 72
price equal to the Capitalized Cost thereof, and in each case simultaneously
therewith enter into this Financing Lease with the Lessee with respect to the
Refinanced Vehicles and other Financed Vehicles, as the case may be; provided,
that the aggregate outstanding Base Amount under the Financing Lease shall not
on any date exceed (a) the Maximum Lease Commitment, less (b) the sum of (x) the
sum of the Net Book Values of Acquired Vehicles leased under the Operating Lease
on such date, each such Net Book Value calculated as of the first day contained
within both the calendar month in which such date of determination occurs and
the Vehicle Term for the related Acquired Vehicle, plus (y) accrued and unpaid
Monthly Base Rent under the Operating Lease as of such date.
4. Lease Procedures.
(a) Initial Lease. In connection with the Lease of the Refinanced
Vehicles and any other Financed Vehicles to be leased on the Lease
Commencement Date, to evidence the refinancing of the Refinanced Vehicles
and the acquisition and financing of such other Financed Vehicles by the
Lessor on the Lease Commencement Date and the conveyance on such date of a
security interest in such Financed Vehicles to the Master Collateral Agent,
the Lessee shall deliver to the Lessor on or prior to the Lease
Commencement Date the following:
(i) a schedule concerning the Refinanced Vehicles as specified in
Section 2.1 of the Base Lease, in the case of all Refinanced Vehicles,
or a Vehicle Order (including a Vehicle Acquisition Schedule) with
respect to all other Financed Vehicles to be leased by the Lessor on
the Lease Commencement Date;
(ii) evidence, reasonably satisfactory to the Lessor and the
Trustee that the Lessor has been designated as the Financing Source
and the Trustee has been designated as the Beneficiary under the
Master Collateral Agency Agreement with respect to the Refinanced
Vehicles;
(iii) a fully executed Assignment Agreement with respect to each
related Manufacturer Program; and
(vi) an Officer's Certificate stating that all the conditions
precedent under the Lease to the leasing of such Vehicles on the Lease
Commencement Date have been satisfied.
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<PAGE> 73
(b) Subsequent Leases. In connection with each Lease of a
Financed Vehicle after the Lease Commencement Date, to evidence the
acquisition or financing of such Financed Vehicle by the Lessor and
the conveyance of a security interest in such Financed Vehicles to the
Master Collateral Agent, the Lessee shall deliver to the Lessor a
Vehicle Order (including a Vehicle Acquisition Schedule) with respect
to all Financed Vehicles to be leased by the Lessor on the date
specified therein. The Lessee hereby agrees that each such delivery of
a Vehicle Order shall be deemed hereunder to constitute a
representation and warranty by the Lessee, to and in favor of the
Lessor and the Trustee, that all the conditions precedent to the
acquisition or financing and leasing of the Vehicles identified in
such Vehicle Order have been satisfied as of the date of such Vehicle
Order.
5. Maximum Vehicle Lease Term. The maximum Vehicle lease term of the
Financing Lease as it relates to each Financed Vehicle leased hereunder
shall be from the Vehicle Lease Commencement Date to the date that is 60
months from the Vehicle Lease Commencement Date. On the occurrence of such
date, the Lessee shall pay to the Master Collateral Agent or the Trustee,
in accordance with this Financing Lease, any amounts unpaid and owing under
the Lease in respect of such Vehicle.
6. Calculation of Rent and Monthly Supplemental Payment. Rent and the
Monthly Supplemental Payment shall be due and payable on a monthly basis as
set forth in this paragraph 6:
"Monthly Base Rent", with respect to each Payment Date and each
Financed Vehicle leased under the Lease on any day during the Related
Month, shall be the sum of all Depreciation Charges that have accrued
with respect to such Vehicle during the Related Month.
"Monthly Finance Rent", with respect to each Payment Date and
each Financed Vehicle leased under the Lease on any day during the
Related Month, shall equal the sum, without double counting, of (a)
the product of (i) an amount equal to the Net Book Value of such
Financed Vehicle on the first day contained within both the Related
Month and the Vehicle Term with respect to such Vehicle multiplied by
the VFR for the Interest Period ending on the next succeeding Payment
Date and (ii) the quotient obtained by dividing (A) the number of days
contained within both the Related Month and the Vehicle Term with
respect to such Financed Vehicle by (B) the total number of days in
the Related Month, plus (b) the product of (i) an amount equal to all
Carrying Charges for the Related Month, and (ii) the quotient obtained
by dividing the Net Book Value of such Financed Vehicle as of the
first day of the Related Month by the Net
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<PAGE> 74
Book Value of all Vehicles leased under the Lease as of the first day of the
Related Month.
"Monthly Supplemental Payment" with respect to each Payment Date and all
Vehicles that were leased under the Financing Lease on any day during the
Related Month shall be an amount equal to the sum of (i) the aggregate
Termination Values (each as of the date on which such Financed Vehicle is no
longer an Eligible Vehicle, becomes a Casualty or is sold, as applicable) of all
the Financed Vehicles financed under this Finance Lease at any time during such
Related Month that, without double counting, while so financed either are no
longer Eligible Vehicles, have suffered a Casualty or are sold by the Lessee (it
being understood that the Lessee has agreed to sell Financed Vehicles only in a
manner consistent with the provisions hereof and of the Related Documents) to
any Person (including the Lessee) other than to a Manufacturer pursuant to such
Manufacturer's Manufacturer Program or to a third party pursuant to an Auction
conducted through a Manufacturer's Manufacturer Program, in each case, during
the Related Month, plus (ii) the aggregate Termination Values (each as of the
applicable Disposition Date) of all the Financed Vehicles financed under this
Finance Lease that while so financed were returned by the Lessee to a
Manufacturer pursuant to a Manufacturer Program with respect to which either (x)
the Repurchase Price has been paid by such Manufacturer and/or the related
auction dealers during the Related Month or (y) a Manufacturer Event of Default
has occurred, minus (iii) any amounts received by the Lessor or the Trustee, or
deposited into the Collection Account, during the Related Month representing (a)
Repurchase Prices for repurchases of Financed Vehicles or (b) the sales proceeds
for sales of Financed Vehicles financed at the time of such sale under this
Finance Lease to a third party other than (1) to a Manufacturer or (2) through
an Auction. Solely for determining the amounts payable hereunder with respect to
a Financed Vehicle that is a Program Vehicle that became a Casualty as a result
of such Program Vehicle being held beyond the stated expiration date of the
applicable Repurchase Period and not being redesignated as a Non-Program
Vehicle, such Vehicle will be deemed to have become a Casualty upon such
expiration date.
"Rent" means Monthly Base Rent plus Monthly Finance Rent.
-5-
<PAGE> 75
7. Payment of Rent and Other Payments. (a) On each Payment Date:
(i) Monthly Base Rent. The Lessee shall pay to the Lessor the Monthly
Base Rents that have accrued during the Related Month with respect to all
Vehicles that were leased under the Finance Lease on any day during the
Related Month.
(ii) Monthly Finance Rent. The Lessee shall pay to the Lessor the
Monthly Finance Rents that have accrued during the Related Month with
respect to all Vehicles that were leased under the Finance Lease on any day
during the Related Month.
(iii) Monthly Supplemental Payment. The Lessee shall pay to the Lessor
the Monthly Supplemental Payment that has accrued during the Related Month
with respect to all Vehicles that were leased under the Finance Lease on
any day during the Related Month; provided, however, that in the event that
the Monthly Supplemental Payment accrued during a Related Month is a
negative dollar amount, such amount may be netted against other payments to
be paid on such Payment Date pursuant to this paragraph 7.
(b) On the expiration of the term of the Lease with respect to a Financed
Vehicle, any remaining Base Amount, plus all other amounts payable by the Lessee
under the Financing Lease with respect to such Vehicle shall be immediately due
and payable.
(c) The Lessee may from time to time prepay the Base Amount of the
Financing Lease with respect to a Financed Vehicle, in whole or in part, on any
date, provided that the Lessee shall give the Lessor and the Trustee not less
than one (1) Business Day's prior notice of any prepayment, specifying the date
and amount of such prepayment, and the Financed Vehicles to which such
prepayment relates.
8. Risk of Loss Borne by Lessee. Upon delivery of each Vehicle to the
Lessee, as between the Lessor and the Lessee, the Lessee assumes and bears the
risk of loss, damage, theft, taking, destruction, attachment, seizure,
confiscation or requisition with respect to such Vehicle, however caused or
occasioned, and all other risks and liabilities, including personal injury or
death and property damage, arising with respect to any Vehicle or the
manufacture, purchase, acceptance, rejection, ownership, delivery, leasing,
subleasing, possession, use, inspection, registration, operation, condition,
maintenance, repair, storage, sale, return or other disposition of such Vehicle,
howsoever arising.
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<PAGE> 76
9. Mandatory Repurchase of Texas Vehicles. Prior to the Vehicle Lease
Expiration Date with respect to each Texas Vehicle (other than a Vehicle Lease
Expiration Date arising in connection with the purchase of such Texas Vehicle
pursuant to this paragraph 9) and, in the case of each Texas Vehicle which is a
Program Vehicle, prior to the expiration of the Repurchase Period applicable
thereto (unless such Vehicle has been redesignated as a Non-Program Vehicle in
accordance with Section 14 of the Base Lease), the Lessee shall purchase such
Texas Vehicle (including any such Vehicle which has become a Casualty) at a
purchase price equal to the Net Book Value of such Vehicle calculated as of the
date of purchase (or, in the case of a Casualty, at a purchase price equal to
the Monthly Supplemental Payments accruing in respect of such Casualty during
the Related Month in which such Vehicle became a Casualty), which shall be
payable to the Master Collateral Agent (together with all accrued and unpaid
Rent and other payments due and payable on such Payment Date with respect to
such Texas Vehicle through the date of such purchase) on or prior to the Payment
Date next succeeding such purchase by the Lessee. Upon receipt of such purchase
price by the Lessor or the Master Collateral Agent, the Lessor shall cause title
to each Texas Vehicle to be transferred to the Lessee, the lien of the Master
Collateral Agent in such Texas Vehicle will automatically be released and the
Servicer shall cause the Master Collateral Agent to cause the notation of its
lien to be removed from the Certificate of Title for such Vehicle, concurrently
with or promptly after such purchase price for such Texas Vehicle (and any such
unpaid Rent and payments) is paid by the Lessee to the Master Collateral Agent.
Notwithstanding anything to the contrary in this Agreement, no Texas Vehicle may
be sold or otherwise disposed of (other than pursuant to Section 17.3 of the
Base Lease), including at Auction or by return to its Manufacturer pursuant to a
Manufacturer Program, prior to its purchase by the Lessee pursuant to and in
accordance with this paragraph 9.
***
-7-
<PAGE> 1
Exhibit 4.21
SECOND MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
dated as of December 20, 1996
between
NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP,
as Lessor, and
NATIONAL CAR RENTAL SYSTEM, INC.,
as Lessee and Servicer
AS SET FORTH IN SECTION 21 HEREOF, LESSOR HAS ASSIGNED TO THE TRUSTEE (AS
DEFINED HEREIN) ALL OF LESSOR'S RIGHT, TITLE AND INTEREST IN AND TO THIS LEASE.
TO THE EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM
IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION) NO SECURITY INTEREST IN THIS LEASE MAY BE CREATED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL EXECUTED
COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE
RECEIPT THEREFOR EXECUTED BY THE TRUSTEE ON THE SIGNATURE PAGE THEREOF.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. CERTAIN DEFINITIONS ..................................................................................... 1
Section 1.1. Certain Definitions ......................................................................... 1
Section 1.2. Accounting and Financial Determinations ..................................................... 2
Section 1.3. Cross References; Headings ................................................................... 2
Section 1.4. Interpretation ............................................................................... 2
SECTION 2. GENERAL AGREEMENT ....................................................................................... 3
Section 2.1. Leasing of Vehicles ......................................................................... 4
Section 2.2. Right of Lessee to Act as Lessor's Agent ..................................................... 4
Section 2.3. Payment of Purchase Price by Lessor; Certain Additional Payments
to the Servicer ................................................................................... 5
Section 2.4. Non-liability of Lessor ..................................................................... 5
SECTION 3. TERM ................................................................................................... 6
Section 3.1. Vehicle Lease Commencement Date ............................................................. 6
Section 3.2. Lease Commencement Date ..................................................................... 6
SECTION 4. CONDITIONS PRECEDENT ................................................................................... 6
Section 4.1. No Default ................................................................................... 7
Section 4.2. Funding ..................................................................................... 7
Section 4.3. Other Conditions ............................................................................. 7
SECTION 5. RENT AND CHARGES ....................................................................................... 7
Section 5.1. Payment of Rent ............................................................................. 7
Section 5.2. Payment of Monthly Supplemental Payment ..................................................... 7
Section 5.3. Payment of Termination Payments, Casualty Payments, and Late
Return Payments ................................................................................... 7
Section 5.4. Late Payment ................................................................................. 7
Section 5.5. Making of Payments ........................................................................... 8
SECTION 6. TERMINATION OF LOAN AGREEMENT. ......................................................................... 8
SECTION 7. CASUALTY AND INELIGIBLE AND OTHER VEHICLE OBLIGATION ................................................... 8
SECTION 8. VEHICLE USE ............................................................................................. 9
SECTION 9. REGISTRATION; LICENSE; TRAFFIC SUMMONSES; PENALTIES AND FINES ........................................... 10
SECTION 10. MAINTENANCE AND REPAIRS ............................................................................... 11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 11. VEHICLE WARRANTIES ..................................................................................... 11
SECTION 12. VEHICLE USAGE REQUIREMENTS AND DISPOSITION ............................................................. 11
Section 12.1. Usage ....................................................................................... 11
Section 12.2. Disposition Procedure ....................................................................... 12
Section 12.3. Termination Payments ....................................................................... 12
SECTION 13. LATE RETURN PAYMENTS ................................................................................... 12
SECTION 14. RESERVED ............................................................................................... 13
SECTION 15. GENERAL INDEMNITY ..................................................................................... 13
Section 15.1. Indemnity of the Lessor ..................................................................... 13
Section 15.2. Indemnification of the Trustee ............................................................. 15
Section 15.3. Reimbursement Obligation by the Lessee ..................................................... 15
Section 15.4. Notice to Lessee of Claims ................................................................. 16
Section 15.5. Defense of Claims ........................................................................... 16
SECTION 16. SUCCESSORS AND ASSIGNS; ASSIGNMENT ..................................................................... 16
SECTION 17. DEFAULT AND REMEDIES THEREFOR ......................................................................... 17
Section 17.1. Events of Default ........................................................................... 17
Section 17.2. Effect of Lease Event of Default, etc. ..................................................... 18
Section 17.3. Rights of Lessor, Trustee and NFC Collateral Agent Upon Lease
Event of Default, Liquidation Event of Default or Series 1996-2 Limited
Liquidation Event of Default ....................................................................... 19
Section 17.4. Measure of Damages ......................................................................... 22
Section 17.5. Application of Proceeds ..................................................................... 23
SECTION 18. CERTAIN LIMITED AMORTIZATION EVENTS ................................................................... 23
SECTION 19. CERTIFICATION OF TRADE OR BUSINESS USE ................................................................. 24
SECTION 20. SURVIVAL ............................................................................................... 24
SECTION 21. RIGHTS OF LESSOR PLEDGED TO MASTER COLLATERAL AGENT,
TRUSTEE AND NFC COLLATERAL AGENT ........................................................................... 24
SECTION 22. MODIFICATION AND SEVERABILITY ......................................................................... 26
SECTION 23. CERTAIN REPRESENTATIONS AND WARRANTIES ................................................................. 27
Section 23.1. Organization; Ownership; Power; Qualification ............................................... 27
Section 23.2. Authorization: Enforceability ............................................................... 27
Section 23.3. Compliance ................................................................................. 28
Section 23.4. Financial Information; Financial Condition ................................................. 28
Section 23.5. Litigation ................................................................................. 28
Section 23.6. Liens ....................................................................................... 29
Section 23.7. Employee Benefit Plans ..................................................................... 29
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Section 23.8. Investment Company Act ..................................................................... 29
Section 23.9. Regulations G, T, U and X ................................................................... 29
Section 23.10. Business Locations; Trade Names ........................................................... 30
Section 23.11. Taxes ..................................................................................... 30
Section 23.12. Governmental Authorizations ............................................................... 30
Section 23.13. Absence of Default ......................................................................... 30
Section 23.14. Compliance with Requirements of Law ....................................................... 30
Section 23.15. Eligible Vehicles ......................................................................... 31
Section 23.16. Repurchase Programs ....................................................................... 31
Section 23.17. Title to Assets ........................................................................... 31
Section 23.18. Accuracy of Information ................................................................... 31
Section 23.19. Environmental Matters ..................................................................... 31
Section 23.20. Burdensome Provisions ..................................................................... 32
Section 23.21. Solvency ................................................................................... 32
Section 23.22. Stock Ownership ........................................................................... 32
Section 23.23. Necessary Actions ......................................................................... 32
Section 23.24. Supplemental Documents True and Correct ................................................... 32
Section 23.25. Initial Vehicles ........................................................................... 33
SECTION 24. CERTAIN AFFIRMATIVE COVENANTS ......................................................................... 33
Section 24.1. Corporate Existence; Foreign Qualification ................................................. 33
Section 24.2. Books, Records and Inspections ............................................................. 33
Section 24.3. Maintenance of Properties ................................................................... 34
Section 24.4. Accounting Methods; Financial Records ....................................................... 34
Section 24.5. Insurance ................................................................................... 34
Section 24.6. Repurchase Programs ......................................................................... 35
Section 24.7. Reporting Requirements ..................................................................... 35
Section 24.8. Taxes and Liabilities ....................................................................... 39
Section 24.9. Business ................................................................................... 39
Section 24.10. Maintenance of the Vehicles ............................................................... 39
Section 24.11. Maintenance of Separate Existence ......................................................... 39
Section 24.12. Maintenance of Enhancement ................................................................. 39
Section 24.13. Repurchase Payments; Sales Proceeds ....................................................... 39
Section 24.14. Certificates of Title; Verification of Titles ............................................. 40
Section 24.15. Master Collateral Agency Agreement ......................................................... 41
Section 24.16. Compliance with Laws ....................................................................... 41
Section 24.17. Delivery of Information ................................................................... 41
Section 24.18. Restrictions ............................................................................... 41
Section 24.19. Disclosure of Material Agreements ......................................................... 41
Section 24.20. Cash Audit ................................................................................. 42
Section 24.21. Deliveries; Further Assurances ............................................................. 42
Section 24.22. Additional Actions ......................................................................... 42
SECTION 25. CERTAIN NEGATIVE COVENANTS ............................................................................. 43
Section 25.1. Mergers, Consolidations ..................................................................... 43
Section 25.2. Regulations G, T, U and X ................................................................... 43
Section 25.3. Liens ....................................................................................... 43
Section 25.4. Use of Vehicles ............................................................................. 43
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Section 25.5. Ratio of EBIT to Total Net Interest ......................................................... 43
Section 25.6. Ratio of Cash Flow to Total Fixed Charges ................................................... 44
Section 25.7. Other Indebtedness ......................................................................... 44
Section 25.8. Restrictions on Distributions ............................................................... 44
Section 25.9. Subordinated Promissory Note ............................................................... 45
Section 25.10. Swaps ..................................................................................... 45
Section 25.11. Change of Location or Name ................................................................. 45
SECTION 26. SERVICING COMPENSATION ................................................................................. 45
Section 26.1. ............................................................................................. 45
Section 26.2. ............................................................................................. 46
SECTION 27. RELEASE OF COLLATERAL ................................................................................. 46
SECTION 28. BANKRUPTCY PETITION AGAINST LESSOR ..................................................................... 47
SECTION 29. FORUM SELECTION AND CONSENT TO JURISDICTION ........................................................... 47
SECTION 30. GOVERNING LAW ......................................................................................... 48
SECTION 31. JURY TRIAL ............................................................................................. 49
SECTION 32. NOTICES ............................................................................................... 49
SECTION 33. HEADINGS ............................................................................................... 50
SECTION 34. EXECUTION IN COUNTERPARTS ............................................................................. 50
SECTION 35. EFFECTIVENESS ......................................................................................... 50
</TABLE>
<PAGE> 6
SECOND MASTER MOTOR VEHICLE LEASE AND SERVICING AGREEMENT
This Second Master Motor Vehicle Lease and Servicing Agreement
(the "Base Lease" and, as supplemented by the Lease Annexes, this or the
"Agreement" or this or the "Lease"), dated as of December 20, 1996, is by and
between NATIONAL CAR RENTAL FINANCING LIMITED PARTNERSHIP, a special purpose
Delaware limited partnership (the "Lessor" or "NFLP"), and NATIONAL CAR RENTAL
SYSTEM, INC., a Delaware corporation ("National"), in its capacity as lessee
(the "Lessee") and as servicer (the "Servicer").
W I T N E S S E T H:
WHEREAS, the Lessor (such capitalized term, together with each
other capitalized term used herein, shall have the meaning assigned thereto in
Section 1) intends to refinance the Refinanced Vehicles and to purchase, and
finance the purchase of, additional Eligible Vehicles from one or more
Manufacturers with the proceeds obtained by the issuance of its Series 1996-2
Note (and, if any, other Shared Collateral Series Notes) issued pursuant to the
Indenture and the borrowing of Series 1996-2 Advances from time to time and
with certain other funds; and
WHEREAS, the Lessor desires to lease to the Lessee, and the
Lessee desires to lease from the Lessor, Vehicles for use in the Lessee's
domestic daily rental car operations;
WHEREAS, the Lessee desires to refinance the Refinanced
Vehicles and finance the acquisition of the Financed Vehicles and retain tax
ownership of such Refinanced Vehicles and Financed Vehicles and Lessor desires
to facilitate such financing.
NOW, THEREFORE, in consideration of the foregoing premises,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
Section 1.1. Certain Definitions. As used in this Agreement
and unless the context requires a different meaning, capitalized terms not
otherwise defined herein or in the Annexes hereto shall have the meanings
assigned to such terms in the Definitions List, attached as Schedule 1 to the
Base Indenture, dated as of April 30, 1996 (as supplemented and amended by the
Series 1996-2 Supplement, dated as of December 20, 1996 (such Supplement being
the "Series 1996-2 Supplement"), and as amended by the Supplement and Amendment
to Base Indenture, dated as of December 20, 1996, and as such agreement may be
further amended, supplemented, restated or otherwise modified from time to time
in accordance with its terms, the "Base Indenture"), between NFLP and The Bank
of New
<PAGE> 7
York, as trustee, as in effect on the date hereof and as such Schedule 1 has
been, for purposes of the Series 1996-2 Note, supplemented by the Series 1996-2
Supplement and may be further amended, supplemented or otherwise modified from
time to time in accordance with the terms of the Base Indenture (the
"Definitions List").
Section 1.2. Accounting and Financial Determinations. Where
the character or amount of any asset or liability or item of income or expense
is required to be determined, or any accounting computation is required to be
made, for the purpose of this Agreement, such determination or calculation
shall be made to the extent applicable and except as otherwise specified in
this Agreement, in accordance with GAAP; provided, that if any change in GAAP
in itself materially affects any such calculation or determination, National
may by notice to the NFC Collateral Agent, or alternatively the NFC Collateral
Agent may by notice to National, require that any such determination or
calculation thereafter be made in accordance with GAAP as in effect, and
applied by National, immediately before such change in GAAP occurs. National
and NFLP each agrees to enter into negotiations in good faith to modify the
financial representations and covenants and other applicable provisions
contained herein and in the Base Indenture (to the extent relating to the
Series 1996-2 Note) and the Series 1996-2 Supplement in a manner which reflects
any such change in GAAP without adversely affecting the rights of the Trustee
or the NFC Collateral Agent. When used herein, the term "financial statement"
shall include the notes and schedules thereto.
Section 1.3. Cross References; Headings. The words "hereof",
"herein" and "hereunder" and words of a similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Annex, Section, Schedule and Exhibit references
contained in this Agreement are references to Annexes, Sections, Schedules and
Exhibits in or to this Agreement unless otherwise specified. Any reference in
any Section or definition to any clause is, unless otherwise specified, to such
clause of such Section or definition. The various headings in this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.
Section 1.4. Interpretation. In this Agreement, unless the
context otherwise requires:
(a) the singular includes the plural and vice versa;
(b) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and
assigns are permitted by this Agreement, and reference to any Person
in a particular capacity only refers to such Person in such capacity;
(c) reference to any gender includes the other gender;
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(d) reference to any Requirement of Law means such
Requirement of Law as amended, modified, codified or reenacted, in
whole or in part, and in effect from time to time;
(e) "including" (and, with correlative meaning,
"include") means including without limiting the generality of any
description preceding such term;
(f) "or" is not exclusive;
(g) provisions apply to successive events and
transactions; and
(h) with respect to the determination of any period of
time, "from" means "from and including" and "to" means "to but
excluding".
SECTION 2. GENERAL AGREEMENT. (a) As specified in the Lease
Annexes, the Lessee and the Lessor intend that this Agreement be (i) an
operating lease with respect to the Acquired Vehicles and (ii) a financing
arrangement with respect to the Financed Vehicles.
(b) If, notwithstanding the intent of the parties to this
Agreement, this Agreement is deemed by any court, tribunal, arbitrator or other
adjudicative authority in any proceeding (each, a "Court") to constitute a
financing arrangement or otherwise not to constitute a "true lease" with
respect to the Acquired Vehicles, then it is the intention of the parties that
this Agreement together with the Master Collateral Agency Agreement, as such
agreements apply to the Acquired Vehicles, shall constitute a security
agreement under applicable law. It is also the intention of the parties that
this Agreement together with the Master Collateral Agency Agreement, as such
agreements apply to the Financed Vehicles, shall in all events constitute a
security agreement under applicable law. The Lessee hereby acknowledges that
it has granted to the Master Collateral Agent, pursuant to the Master
Collateral Agency Agreement, for the benefit of the Trustee (on behalf of the
Series 1996-2 Noteholder) and the NFC Collateral Agent (on behalf of the NFC
Secured Parties), respectively, a first priority security interest in all of
the Lessee's right, title and interest in and to the National Master Collateral
(as defined therein) as collateral security for the prompt and complete payment
and performance when due (whether at stated maturity, by acceleration or
otherwise) of all of the obligations and liabilities of the Lessee to the
Lessor, the Trustee and the NFC Collateral Agent, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred (including interest accruing after the Lease Expiration Date and
interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding), which may
arise under, out of, or in connection with, this Agreement and any other
document made, delivered or given in connection herewith, whether on account of
rent, principal, interest, reimbursement obligations, fees, indemnities, costs
or expenses (including all fees and disbursements of counsel to the Lessor or
the Trustee or the NFC Collateral Agent that are required to be paid by the
Lessee pursuant to the terms hereof).
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<PAGE> 9
Section 2.1. Leasing of Vehicles. From time to time, subject
to the terms and conditions hereof, the Lessor agrees to lease to the Lessee
and the Lessee agrees to lease from the Lessor the Refinanced Vehicles and each
additional Acquired Vehicle or Financed Vehicle identified in vehicle order
summaries (each, a "Vehicle Order") produced from time to time by the Lessee,
listing Vehicles ordered by the Lessee from Eligible Manufacturers, for itself
or as agent for the Lessor, pursuant to the terms of any applicable Repurchase
Programs or otherwise. The Lessor shall, subject to Section 4 and to
compliance with the terms of the Indenture, make available to the Lessee under
this Lease, financing for Financed Vehicles in an aggregate amount, and
Acquired Vehicles for lease to the Lessee hereunder in an aggregate Net Book
Value, which collectively shall not exceed the Maximum Lease Commitment. The
Lessee shall make available to the Lessor, by the time and day specified in
Section 2.3(a), (a) a schedule as set forth in Attachment A-1 hereto containing
information concerning the Refinanced Vehicles of a scope agreed upon by the
Lessor and the Lessee, (b) a summary of each additional Vehicle to be leased
hereunder (including, in the case of each Vehicle subject to GM's Matrix
Repurchase Program, the Designated Period for such Vehicle) and, in the case of
each new Vehicle, the total Capitalized Cost thereof as of the Vehicle Funding
Date (as defined in Section 3.1 below) therefor and, in the case of each
Vehicle that is not a new Vehicle, the Net Book Value thereof as of the end of
the Related Month, and (c) if requested by the Lessor (or the NFC Collateral
Agent on behalf of the Lessor), each Vehicle Order, together with a schedule
containing the information with respect to the Vehicles included within such
Vehicle Order as is set forth in Attachment A-2 hereto, or in such form as is
otherwise requested by the Lessor (each a "Vehicle Acquisition Schedule"). In
addition, the Lessee shall provide such other information regarding such
Vehicles as the Lessor may reasonably require from time to time. The Lessor
shall lease to the Lessee, and the Lessee shall lease from the Lessor, only
Vehicles that are Eligible Vehicles. This Agreement, together with the
Repurchase Programs and any other related documents attached to this Agreement
or submitted with a Vehicle Order (collectively, the "Supplemental Documents"),
will constitute the entire agreement regarding the leasing of Vehicles by the
Lessor to the Lessee.
Section 2.2. Right of Lessee to Act as Lessor's Agent. The
Lessor agrees that the Lessee may act as the Lessor's agent in placing Vehicle
Orders on behalf of the Lessor, as well as filing claims on behalf of the
Lessor for damage in transit, and other Manufacturer delivery claims related to
the Vehicles leased hereunder; provided, however, that the Lessor may hold the
Lessee liable for losses due to the Lessee's actions in performing as the
Lessor's agent hereunder. In addition, the Lessor agrees that the Lessee may
make arrangements for delivery of Vehicles to a location selected by the Lessee
at the Lessee's expense to the extent that any such expense has not been
included in the Capitalized Cost of such Vehicle. The Lessee may accept or
reject Eligible Vehicles upon delivery in accordance with the Lessee's
customary business practices, and any Eligible Vehicle, if rejected, will be
deemed a Casualty hereunder to the extent the Capitalized Cost thereof has been
paid by the Lessor or the Lessee. The Lessee, acting as agent for the Lessor,
shall be responsible for pursuing any rights of the Lessor with respect to the
return of any Eligible Vehicle to the Manufacturer thereof pursuant to the
preceding sentence. The Lessee agrees
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<PAGE> 10
that any Vehicles ordered by the Lessee on behalf of the Lessor pursuant to
this Section 2.2 shall be ordered utilizing the procedures consistent with the
applicable Repurchase Program, in each case as and to the extent applicable.
Section 2.3. Payment of Purchase Price by Lessor; Certain
Additional Payments to the Servicer. (a) Upon receipt of the Manufacturer's
invoice, certificate of origin, and other information required in respect of
any Vehicle pursuant to Section 2.1, which receipt shall occur no later than
4:00 p.m., New York City time, on a day that is not less than one, nor more
than five, Business Days prior to the proposed Vehicle Funding Date for such
Vehicle, the Lessor or its agent shall, subject to Section 4, pay or cause to
be paid to the dealer or the related Manufacturer in accordance with such
Manufacturer's payment terms, as applicable, the Capitalized Cost of such
Vehicle under the applicable Repurchase Program and the Lessee shall pay all
applicable costs and expenses of freight, packing, handling, storage, shipment
and delivery of such Vehicle to the extent that the same have not been included
within the Capitalized Cost.
(b) All amounts paid by the Manufacturer on account of
vehicle preparation services or work covered by warranty performed by National
with respect to Vehicles acquired or financed pursuant to this Agreement or as
incentive payments for maintaining a particular fleet mix shall inure to the
benefit of National and, to the extent any such payments are received by the
Lessor, the Trustee, the Master Collateral Agent or the NFC Collateral Agent,
shall promptly be paid over to National.
Section 2.4. Non-liability of Lessor. The Lessor shall not
be liable to the Lessee for any failure or delay in obtaining Vehicles or
making delivery thereof. AS BETWEEN THE LESSOR AND THE LESSEE, ACCEPTANCE FOR
LEASE OF THE VEHICLES SHALL CONSTITUTE THE LESSEE'S ACKNOWLEDGMENT AND
AGREEMENT THAT THE LESSEE HAS FULLY INSPECTED SUCH VEHICLES, THAT THE VEHICLES
ARE IN GOOD ORDER AND CONDITION AND ARE OF THE MANUFACTURE, DESIGN,
SPECIFICATIONS AND CAPACITY SELECTED BY THE LESSEE, THAT THE LESSEE IS
SATISFIED THAT THE SAME ARE SUITABLE FOR THIS USE AND THAT THE LESSOR IS NOT A
MANUFACTURER, AN AGENT OF THE MANUFACTURER OR OTHERWISE ENGAGED IN THE SALE OR
DISTRIBUTION OF VEHICLES, AND HAS NOT MADE AND DOES NOT HEREBY MAKE ANY
REPRESENTATION, WARRANTY OR COVENANT, EXPRESS OR IMPLIED, WITH RESPECT TO
MERCHANTABILITY, CONDITION, QUALITY, CAPABILITY, WORKMANSHIP, DURABILITY OR
SUITABILITY OF THE VEHICLE IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE
PURPOSES OR USES OF THE LESSEE, OR ANY WARRANTY THAT THE LEASED VEHICLES WILL
SATISFY THE REQUIREMENTS OF ANY LAW OR ANY CONTRACT SPECIFICATION, OR ANY OTHER
REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR CHARACTER, EXPRESS OR
IMPLIED, WITH RESPECT THERETO AND AS BETWEEN THE LESSOR AND THE LESSEE, THE
LESSEE AGREES TO BEAR ALL SUCH RISKS AT ITS SOLE COST AND EXPENSE. THE LESSEE
SPECIFICALLY WAIVES ALL RIGHTS TO MAKE CLAIMS AGAINST THE LESSOR AND
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<PAGE> 11
ANY LEASED VEHICLE FOR BREACH OF ANY WARRANTY OF ANY KIND WHATSOEVER AND, AS TO
THE LESSOR, THE LESSEE LEASES THE LEASED VEHICLES "AS IS." The Lessor shall
not be liable for any failure or delay in delivering any Vehicle ordered for
lease pursuant to this Agreement, or for any failure to perform any provision
hereof, resulting from fire or other casualty, natural disaster, riot, strike
or other labor difficulty, governmental regulation or restriction, or any cause
beyond the Lessor's direct control. IN NO EVENT SHALL THE LESSOR BE LIABLE FOR
ANY INCONVENIENCES, LOSS OF PROFITS OR ANY OTHER CONSEQUENTIAL, INCIDENTAL OR
SPECIAL DAMAGES, WHATSOEVER OR HOWSOEVER CAUSED, WHETHER RESULTING FROM ANY
DEFECT IN OR ANY THEFT, DAMAGE, LOSS OR FAILURE OF ANY VEHICLE, OR OTHERWISE,
AND THERE SHALL BE NO ABATEMENT OF RENT BECAUSE OF THE SAME.
SECTION 3. TERM.
Section 3.1. Vehicle Lease Commencement Date. The "Vehicle
Lease Commencement Date" shall mean, (i) for each Refinanced Vehicle, the
Series 1996-2 Closing Date, and (ii) for each other Vehicle, the date
referenced in the Vehicle Acquisition Schedule with respect to such Vehicle,
which in no event shall be later than the date that funds are expended by the
Lessor to acquire or finance the acquisition of such Vehicle (the "Vehicle
Funding Date" for such Vehicle). A vehicle shall be deemed hereunder to be a
Vehicle leased under the Lease on each day during the period (the "Vehicle
Term") from and including the Vehicle Lease Commencement Date to but excluding
the Vehicle Lease Expiration Date.
Section 3.2. Lease Commencement Date. The "Lease
Commencement Date" shall mean the Series 1996-2 Closing Date. The "Lease
Expiration Date" shall mean the later of (i) the date of the final payment in
full of the Series 1996-2 Note and, if any, all other Shared Collateral Series
Notes, and all outstanding Carrying Charges, following the termination of the
ability of the Series 1996-2 Noteholder to make Series 1996-2 Advances and the
ability of the Trustee to make available to the Lessor proceeds from the NFC
Collection Account pursuant to the Series 1996-2 Supplement, and (ii) the
Vehicle Lease Expiration Date for the last Vehicle subject to lease by the
Lessee hereunder. The "Term" of this Agreement shall mean the period
commencing on the Lease Commencement Date and ending on the Lease Expiration
Date.
SECTION 4. CONDITIONS PRECEDENT. The agreement of the
Lessor to make available any Acquired Vehicle for lease to the Lessee,
and to make available financing for the acquisition of any Financed Vehicle for
lease to the Lessee upon the Lessee's placement of a Vehicle Order, for itself
or as agent of the Lessor, is subject to the terms and conditions of the
Indenture and subject to the satisfaction of the conditions to effectiveness
specified in Section 35 and the following conditions precedent as of the
Vehicle Funding Date for such Vehicle:
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Section 4.1. No Default. No Potential Lease Event of Default
or Lease Event of Default shall have occurred and be continuing on such date or
would result from the making of such lease.
Section 4.2. Funding. The aggregate amount of funds to be
expended by the Lessor on the Series 1996-2 Closing Date or on any other one
date to acquire or finance the acquisition of any Vehicles shall not exceed the
sum of (a) the Capitalized Cost of all such Vehicles that are new Eligible
Vehicles plus (b) the Net Book Value of all such Vehicles that are Eligible
Vehicles but are not new.
Section 4.3. Other Conditions. The leasing of such Vehicle
shall not be prohibited by the provisions of the Series 1996-2 Supplement or
any other Supplement, if any, relating to any Shared Collateral Series Notes,
the Liquidity Agreement or any other Related Document to which National, NFLP
or NFC is a party, and sufficient proceeds shall be available therefor under
the Series 1996-2 Supplement as a result of the issuance of the Series 1996-2
Note or, if applicable, any other Shared Collateral Series Notes, the making of
Series 1996-2 Advances from time to time or otherwise from the NFC Collection
Account as provided in and pursuant to the terms of the Series 1996-2
Supplement.
SECTION 5. RENT AND CHARGES. The Lessee will pay Rent and
certain other charges on a monthly basis as set forth in this Section 5:
Section 5.1. Payment of Rent. On each Payment Date, the
Lessee shall pay to the Lessor the aggregate of all Rent payable on such
Payment Date with respect to the Vehicles, as provided in the related Lease
Annexes.
Section 5.2. Payment of Monthly Supplemental Payment. On
each Payment Date, the Lessee shall pay to the Lessor the Monthly Supplemental
Payment that has accrued during the Related Month with respect to the Financed
Vehicles, as provided in Sections 6 and 7 of Annex B.
Section 5.3. Payment of Termination Payments, Casualty
Payments, and Late Return Payments. On each Payment Date, the Lessee shall pay
to the Lessor all Casualty Payments, Termination Payments and Late Return
Payments that have accrued with respect to the Acquired Vehicles, as provided
in, respectively, Sections 7, 12.3 and 13.
Section 5.4. Late Payment. In the event the Lessee fails to
remit payment of any amount due under the Lease on or before the Payment Date
therefor, the amount not paid will be considered delinquent and the Lessee will
pay a late charge for each Interest Period equal to the product of (a) the VFR
for such Interest Period (converted to a rate per annum) plus 1% per annum,
times (b) the delinquent amount during such Interest Period, multiplied by (c)
the actual number of days elapsed during such Interest Period divided by 360.
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<PAGE> 13
Section 5.5. Making of Payments. All payments of Rent and
of all other Liabilities shall be made by the Lessee to, or for the account of,
the Lessor (or, in the case of any payment pursuant to Section 15, the
applicable Indemnified Person) in immediately available Dollars, without
setoff, counterclaim or deduction of any kind. All such payments shall be made
to the NFC Collection Account or, in the case of Section 24.13(iii) and (iv),
the Master Collateral Account (or, in each such case, such other account as the
NFC Collateral Agent may from time to time specify to the Lessee) or, in the
case of any such payment pursuant to Section 15 to, or for the account of, NFC,
to the NFC Collateral Account or, in the case of any such payment pursuant to
Section 15 to, or for the account of, any Indemnified Person other than NFC or
NFLP, to the account designated by such Indemnified Person to National, in each
case with such payment to be made not later than 12:00 noon, New York City
time, on the date due; and funds received after that hour shall be deemed to
have been received by or for the account of the Lessor on the next following
Business Day. The Lessor hereby specifies that all (i) payments made by the
Manufacturers and related auction dealers under the Repurchase Programs, (ii)
amounts representing the proceeds from sales of Vehicles (including amounts
paid to the Lessee by a Manufacturer as a result of the Lessee's sale of such
Vehicle outside such Manufacturer's Repurchase Program) by the Lessee to third
parties (other than under any related Repurchase Program) and (iii) payments
with respect to any other Master Collateral for the Series 1996-2 Note (other
than warranty payments) shall be deposited in the Master Collateral Account (or
as otherwise directed by the NFC Collateral Agent pursuant to the NFC
Collateral Agreement) for the Series 1996-2 Note; provided, however, that,
subject to Section 4.02 of the NFC Collateral Agreement, insurance proceeds
with respect to Vehicles will be deposited in the Master Collateral Account
only if an Amortization Event or a Potential Amortization Event shall have
occurred and be continuing. If any payment of Rent (or other Liability) falls
due on a day which is not a Business Day, then such due date shall be extended
to the next following Business Day and Monthly Finance Rent and Monthly
Variable Rent (as the case may be) shall accrue through such Business Day.
SECTION 6. TERMINATION OF LOAN AGREEMENT. In consideration
for (i) the acceptance by NFC on the Series 1996-2 Closing Date of the Series
1996-2 Note issued to NFC by NFLP and having an initial principal amount
outstanding thereunder equal to the aggregate principal amount of the Loan Note
under and as defined in the Loan Agreement, (ii) the cancellation by NFC on the
Series 1996-2 Closing Date, upon the payment by National to NFC on the Series
1996-2 Closing Date of the amounts payable by National on such date under the
Loan Agreement and the unpaid interest accrued to such date on the Loan Note,
of the Loan Note, (iii) the leasing by the Lessor to the Lessee of the
Refinanced Vehicles under this Lease, commencing on the Lease Commencement
Date, and (iv) the redesignation of the Master Collateral Agent's Lien on the
Refinanced Vehicle Collateral from securing National's obligations arising
under or in connection with the Loan Agreement or the Loan Note to securing the
Lessee's Liabilities, the Lessor and Lessee hereby acknowledge and agree that
the Loan Agreement and NFC's Loan Commitment under and as defined therein are
hereby terminated.
SECTION 7. CASUALTY AND INELIGIBLE AND OTHER VEHICLE
OBLIGATION. If a Vehicle (i) becomes a Casualty or ceases to be an Eligible
Vehicle, or (ii)
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is sold or returned by the Lessee to the related Manufacturer or to a third
party pursuant to an auction conducted through such Manufacturer's Repurchase
Program or to any other Person (including the Lessee), and the aggregate
payments deposited to the Master Collateral Account or the NFC Collection
Account (or as otherwise directed by the NFC Collateral Agent pursuant to the
NFC Collateral Agreement) by or on behalf of such Manufacturer, third party or
other Person or, in the case of any payment made in connection with such
Vehicle pursuant to Section 12.3 or 13, the Lessee in connection with such sale
or return for any reason is less than the Termination Value (as of the
applicable Turnback Date, in the case of a sale or return to such Manufacturer
or third party, or the date of such sale, in the case of a sale to such other
Person) of such Vehicle other than as a result of the occurrence and
continuance of an Event of Bankruptcy with respect to the applicable
Manufacturer or otherwise as a result of the creditworthiness of such
Manufacturer or any similar reason not directly or indirectly relating to any
Vehicle or to the Lessee or the Servicer or any Affiliate thereof or any action
or inaction by the Lessee or the Servicer or such Affiliate, then, in the case
of each of clauses (i) and (ii), the Lessee shall (a) promptly notify the
Lessor of such occurrence, in the case of any such occurrence which, in the
aggregate with all other such occurrences at such time, is not immaterial, or,
in the case of any other such occurrence, cause the Servicer to include notice
of such occurrence in the next Monthly Certificate required to be delivered by
the Servicer under Section 24.7(vi), and (b) on the Payment Date next
succeeding the last day of the Related Month in which the Lessee obtained
actual knowledge that such Vehicle has become a Casualty or ceased to be an
Eligible Vehicle or such Vehicle was so sold or returned, pay to the Lessor an
amount (a "Casualty Payment") equal to (x) in the case of a Vehicle that became
a Casualty or ceased to be an Eligible Vehicle, the Termination Value of such
Vehicle, calculated as of the first day of the Related Month in which the
Lessee obtained actual knowledge that such Vehicle became a Casualty or ceased
to be an Eligible Vehicle, or (y) in the case of any Vehicle so sold or
returned, the excess of the Termination Value (as of the applicable Turnback
Date, in the case of a sale or return to such Manufacturer or third party, or
the date of such sale, in the case of a sale to such other Person) of such
Vehicle over the aggregate payments so deposited as set forth in clause (ii)
above (in each case of clauses (x) and (y) net of Monthly Base Rent and Monthly
Supplemental Payments made in respect of such Vehicle during such Related
Month). Solely for determining the amounts payable under this Section 7, with
respect to a Vehicle that became a Casualty as a result of such Vehicle being
held beyond the stated expiration date of the applicable Repurchase Period,
such Vehicle will be deemed to have become a Casualty upon such expiration
date. Upon payment by the Lessee to the Lessor in accordance herewith of the
Casualty Payment for any Vehicle that has become a Casualty or ceased to be an
Eligible Vehicle, (i) the Lessor, upon request of the Lessee, shall cause title
to any such Vehicle that is an Acquired Vehicle to be transferred to the Lessee
to facilitate liquidation of such Vehicle by the Lessee, (ii) the Lessee shall
be entitled to any physical damage insurance proceeds applicable to such
Vehicle (if at such time the Lessee carries such insurance coverage), and (iii)
the Lien of the Master Collateral Agent on such Vehicle shall automatically be
released thereby.
SECTION 8. VEHICLE USE. The Lessee shall use Vehicles leased
hereunder solely for the Lessee's domestic daily rental car operations. The
Lessee shall promptly and duly execute, deliver, file and record all such
documents, statements, filings and registrations, and
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take such further actions as the Lessor, the Master Collateral Agent, the
Servicer, the NFC Collateral Agent or the Trustee shall from time to time
reasonably request in order to establish, perfect and maintain the Lessor's
title to and interest in the Acquired Vehicles and the related Certificates of
Title as against the Lessee or any third party in any applicable jurisdiction
and to establish, perfect and maintain the Master Collateral Agent's lien on
the Vehicles as noted on the related Certificates of Title as a perfected
first-priority lien in any applicable jurisdiction. The Lessee may, at the
Lessee's sole expense, change the place of principal location of any Vehicles.
Within 60 days after any such change of location, the Lessee shall take all
actions necessary (i) to maintain the perfected first-priority Lien of the
Master Collateral Agent on such Vehicles as noted on the Certificates of Title
with respect to such Vehicles and the Lessor shall cooperate to the extent
required for the Lessee to do so, and (ii) to meet all material legal
requirements applicable to such Vehicles. Following a Lease Event of Default
or Manufacturer Event of Default, and upon the Lessor's request, the Lessee
shall advise the Lessor in writing where all Vehicles leased hereunder as of
such date are principally located. The Lessee shall not knowingly use any
Vehicles, or knowingly permit the same to be used, for any unlawful purpose.
The Lessee shall use reasonable precautions to prevent loss or damage to
Vehicles. The Lessee shall comply in all material respects with all applicable
statutes, decrees, ordinances and regulations regarding acquiring, titling,
registering, leasing, insuring and disposing of Vehicles and shall take
reasonable steps to ensure that operators are licensed. The Lessee shall
perform, at its own expense, such vehicle preparation and conditioning services
with respect to Vehicles as are customary. The Lessor, the Master Collateral
Agent, the NFC Collateral Agent or the Trustee or any authorized representative
of the Lessor, the Master Collateral Agent, the NFC Collateral Agent or the
Trustee may during reasonable business hours from time to time, upon reasonable
prior notice, without disruption of the Lessee's business and subject to
applicable law, inspect Vehicles and registration certificates, Certificates of
Title and related documents covering Vehicles wherever the same may be located.
SECTION 9. REGISTRATION; LICENSE; TRAFFIC SUMMONSES;
PENALTIES AND FINES. The Lessee, at its expense, shall be responsible for
proper registration and licensing of Vehicles, and titling of Vehicles in the
name of the Lessor (in the case of Acquired Vehicles) or the Lessee (in the
case of Financed Vehicles), in each case with the Lien of the Master Collateral
Agent noted thereon, and where required, the Lessee shall have Vehicles
inspected by any appropriate governmental authority; provided, however, that
notwithstanding the foregoing, unless a Liquidation Event of Default or Series
1996-2 Limited Liquidation Event of Default shall have occurred and be
continuing, possession of all Certificates of Title shall remain with the
Servicer. The Lessee shall pay or cause to be paid all registration fees,
title fees, license fees, traffic summonses, penalties, judgments and fines
incurred with respect to any Vehicle during the Vehicle Term for such Vehicle
or imposed during the Vehicle Term for such Vehicle by any governmental
authority or any court of law or equity with respect to Vehicles in connection
with the Lessee's operation of Vehicles, and any such amounts paid by the
Lessor on the Lessee's behalf, in its discretion upon at least 15 days' prior
notice to the Lessee, will be reimbursed within thirty (30) days of the Lessor
notifying the Lessee of such payment; provided, however, that the Lessor shall
not pay on the Lessee's behalf any traffic summons, or any penalty, judgment or
fine for so long as such amount is being contested by the
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Lessee in good faith and by appropriate proceedings with respect to which
adequate reserves have been established, and are being maintained, in
accordance with GAAP and provided that the Lessee has agreed in writing to
indemnify and hold the Lessor harmless from and against all loss, liability and
expense arising out of such unpaid amounts (and, in any case, for so long as
forfeiture of any Vehicles or other Master Collateral will not result from the
failure to pay any such amounts). The Lessor agrees to execute a power of
attorney substantially in the form of Attachment B hereto (a "Power of
Attorney"), and such other documents as may be necessary in order to allow the
Lessee to title, register and dispose of the Acquired Vehicles; and the Lessee
acknowledges and agrees that with respect to the Acquired Vehicles, it has no
right, title or interest in or with respect to any Certificate of Title.
Notwithstanding anything herein to the contrary, the Lessor may terminate such
Power of Attorney as provided in Section 17.3.
SECTION 10. MAINTENANCE AND REPAIRS. The Lessee shall pay
for all maintenance and repairs to keep Vehicles in good working order and
condition, and shall maintain Vehicles as required in order to keep the
Manufacturer's warranty in force. The Lessee shall return each Vehicle to an
authorized Manufacturer facility or the applicable Manufacturer's authorized
warranty station (which may be a facility of the Lessee) for warranty work.
The Lessee shall comply with any Manufacturer's recall of any Vehicle. The
Lessee shall pay, or cause to be paid, all usual and routine expenses incurred
in the use and operation of Vehicles including, but not limited to, fuel,
lubricants, and coolants. The Lessor, upon thirty (30) days' prior notice to
the Lessee, may pay any such expenses that have not otherwise been paid by, or
on behalf of, the Lessee, and any expenses incurred by the Lessor on the
Lessee's behalf for maintenance, repair, operation or use by the Lessee of
Vehicles will promptly be reimbursed (in any event no later than the next
Payment Date following such payment) by the Lessee to the Lessor in the amount
paid by the Lessor. The Lessee shall not, without the prior consent of the
Lessor, make any material alterations to any Vehicle which would result in a
reduction of the Repurchase Price for such Vehicle or make the Vehicle no
longer eligible for repurchase under the applicable Repurchase Program. Any
improvements or additions to an Acquired Vehicle shall become and remain the
property of the Lessor, except that any addition or improvement to such a
Vehicle made by the Lessee shall remain the property of the Lessee if it can be
disconnected or removed from the Vehicle without impairing the functioning of
or resale value thereof, other than any function or value provided by such
addition or improvement.
SECTION 11. VEHICLE WARRANTIES. If a Vehicle is covered by a
Manufacturer's warranty, the Lessee, during the Vehicle Term, shall have the
right to make any claims under such warranty which the Lessor could make and to
receive related proceeds directly. As provided in Section 2.4, the Lessor
makes no warranty or representation whatsoever, express or implied, with
respect to any Vehicle.
SECTION 12. VEHICLE USAGE REQUIREMENTS AND DISPOSITION.
Section 12.1. Usage. As used herein, the term "vehicle
turn-in condition" with respect to each Vehicle means a set of criteria for
evaluating Vehicles upon their delivery at the end of the applicable Vehicle
Terms, which criteria will be determined in accordance with the related
Repurchase Program. Vehicles not meeting the applicable Repurchase Program's
vehicle
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turn-in condition requirements will be purchased by the Lessee in accordance
with the Casualty procedure set forth in Section 7 or otherwise disposed of in
accordance with the late delivery procedure set forth in Section 13, as
applicable.
Section 12.2. Disposition Procedure. Unless the Lessee
exercises its option to purchase such Vehicle as permitted by, and pursuant to
the requirements of, this Agreement, and except as otherwise contemplated by
Section 27, prior to the end of the Vehicle Term, the Lessee will deliver each
Vehicle (other than a Casualty or a Vehicle that has ceased to be an Eligible
Vehicle) to the nearest related Manufacturer official auction or other facility
designated by such Manufacturer at the Lessee's sole expense and in accordance
with the terms of the applicable Repurchase Program. Any transportation
allowance (for delivery costs) and any rebates or credits applicable to the
unexpired term of any license plates for a Vehicle shall inure to the benefit
of the Lessee and, to the extent received by the Lessor, the Trustee, the
Master Collateral Agent or the NFC Collateral Agent, shall promptly be paid
over to the Lessee. The Lessee will comply with the requirements of law and
the requirements of the Repurchase Programs in connection with, among other
things, the delivery of Certificates of Title, documents of transfer signed as
necessary, signed Condition Reports, and signed odometer statements for the
Vehicles.
Section 12.3. Termination Payments. On the Payment Date next
succeeding the earlier of (a) the last day of the Related Month in which the
Repurchase Price with respect to any Acquired Vehicle is received by the
Lessor, the Master Collateral Agent, the Trustee or the NFC Collateral Agent
(including by deposit into the NFC Collection Account or the Master Collateral
Account) and (b) the thirtieth (30th) day after the expiration of the
Repurchase Period for such Acquired Vehicle, the Lessee shall pay to the Lessor
in respect of such Acquired Vehicle any Excess Damage Charges, Excess Mileage
Charges, Missing Equipment Charges, early turnback surcharges and any other
similar charges and penalties (collectively, a "Program Vehicle Termination
Payment" or "Termination Payment") as determined by the Manufacturer or its
agent in accordance with the applicable Repurchase Program. The provisions of
this Section 12.3 will survive the expiration or earlier termination of the
Term.
SECTION 13. LATE RETURN PAYMENTS. If an Acquired Vehicle is
not returned to the Manufacturer or sold at auction in accordance with the
applicable Repurchase Program prior to the expiration of the Repurchase Period
for such Vehicle in accordance with Section 12.2, the Lessee shall (a) promptly
notify the Lessor of its failure so to return such Vehicle to the Manufacturer
or so to sell such Vehicle at auction during the Repurchase Period therefor,
(b) use commercially reasonable efforts to sell or otherwise dispose of such
Vehicle in a manner reasonably likely to maximize proceeds from such
disposition and consistent with industry practice, (c) cause the Disposition
Proceeds, if any, from any such sale or disposition to be paid to the Master
Collateral Agent, in accordance with paragraph 10 (d) of Annex A, and (d) on
the Payment Date next succeeding the earlier of (i) the last day of the Related
Month in which such Disposition Proceeds are received by the Lessor, the Master
Collateral Agent, the Trustee or the NFC Collateral Agent (including by deposit
into the NFC Collection Account or the Master Collateral Account), and (ii) the
thirtieth (30th) day after the expiration of the
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Repurchase Period for such Vehicle, pay to the Lessor an amount (a "Late Return
Payment") equal to the excess of (x) the Net Book Value of such Vehicle,
calculated as of the first day of the calendar month in which such Repurchase
Period expired, over (y) the sum of (A) the dollar amount of such Disposition
Proceeds plus (B) any Monthly Base Rent paid by the Lessee with respect to such
Vehicle in any calendar month after the calendar month in which such Repurchase
Period expired (which dollar amount may be equal to, but not less than, zero
dollars).
SECTION 14. RESERVED.
SECTION 15. GENERAL INDEMNITY.
Section 15.1. Indemnity of the Lessor. The Lessee agrees to
indemnify and hold harmless the Lessor and its successive assigns (including
the Trustee, the Series 1996-2 Noteholder and, if any, the other Shared
Collateral Series Noteholders, the NFC Collateral Agent and the NFC Secured
Parties) and the respective directors, officers, agents and employees of the
Lessor and such successive assigns (collectively, together with the Persons
subject to indemnity under Section 15.2, the "Indemnified Persons") against any
and all claims, demands, actions, causes of action, losses, costs, liabilities
and damages of whatsoever nature, and all reasonable expenses incurred in
connection therewith (including reasonable fees and disbursements of counsel),
relating to or in any way arising out of:
Section 15.1.1. the ordering, delivery, acquisition, title on
acquisition, rejection, installation, possession, ownership, titling,
retitling, registration, re-registration, custody by the Lessee of title and
registration documents, use, non-use, misuse, operation, leasing, deficiency,
defect, transportation, repair, maintenance, control or disposition of any
Vehicle leased hereunder or to be leased hereunder. The foregoing shall
include, without limitation, any liability (or any alleged liability) of the
Lessor or any other Indemnified Person to any third party arising out of any of
the foregoing, including, without limitation, all legal fees, costs and
disbursements arising out of such liability (or alleged liability);
Section 15.1.2. all (i) federal, state, county, municipal,
foreign or other fees and taxes of whatsoever nature other than income taxes,
including but not limited to license, qualification, registration, franchise,
sales, use, gross receipts, ad valorem, business, property (real or personal),
excise, motor vehicle, and occupation fees and taxes, with respect to any
Vehicle or the acquisition, purchase, sale, lease, rental, use, operation,
control, ownership or disposition of any Vehicle by any Person or measured in
any way by the value thereof or by the business of, investment by, or ownership
by the Lessor or the Lessee with respect thereto, (ii) federal, state, local
and foreign income taxes and penalties and interest thereon, whether assessed,
levied against or payable by the Lessor or NFC or otherwise as a result of its
being a member of any group of corporations including the Lessee that file any
tax returns on a consolidated or combined basis, and (iii) documentary, stamp,
filing, recording, mortgage or other taxes (other than net income taxes), if
any, which may be payable by the Lessor, the Lessee or any other Indemnified
Person in connection with the execution, delivery, recording
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or filing of this Agreement or the other Related Documents or the leasing of
any Vehicles hereunder and any penalties or interest with respect thereto;
Section 15.1.3. any violation by the Lessee of this Agreement
or of any Related Documents to which the Lessee is a party or by which it is
bound or any laws, rules, regulations, orders, writs, injunctions, decrees,
consents, approvals, exemptions, authorizations, licenses and withholdings of
objection of any governmental or public body or authority and all other
requirements having the force of law applicable at any time to any Vehicle or
any action or transaction by the Lessee with respect thereto or pursuant to
this Agreement;
Section 15.1.4. all reasonable out of pocket costs and
expenses of the Lessor and NFC (including the reasonable fees and disbursements
of counsel for the Lessor and NFC) in connection with the preparation,
execution, delivery and performance of this Agreement and the other Related
Documents, including, without limitation, costs and expenses payable by the
Lessor or NFC pursuant to Sections 4.2.1(b), 4.5(b), 5.3, 5.4, 5.5, 5.6, 8.1.7,
11.3 and 11.4 of the Liquidity Agreement, those payable pursuant to Sections
2.7, 2.8 and 6.2 of the B Letter of Credit Reimbursement Agreement, those
payable pursuant to Sections 2.6, 2.7, 2.14 and 6.2 of the B Support Letter of
Credit Reimbursement Agreement, those payable pursuant to Sections 2.12, 2.13,
2.17 and 5.2 of the Reduction A Support Reimbursement Agreement, those payable
pursuant to Section 9.05 of the NFC Collateral Agreement, any and all fees of
the Trustee, Paying Agent, Clearing Agencies, Master Collateral Agent, Dealers,
Depository, Liquidity Agent, Placement Agents and NFC Collateral Agent, all
fees payable in connection with any Series 1996-2 Enhancement and, if any, any
other Enhancement relating to any Shared Collateral Series Notes, any and all
fees payable to Rating Agencies and any underwriting or placement agency fees
incurred in connection with the sale of any Commercial Paper Notes or, if
applicable, any Shared Collateral Series Notes (all amounts with respect to any
of the foregoing to be paid by the Lessee within five Business Days of demand
therefor);
Section 15.1.5. all reasonable out of pocket costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred by
the Lessor, the Master Collateral Agent, the Trustee, the NFC Collateral Agent,
the Liquidity Agent, the Series 1996-2 Noteholder or, if any, other Noteholders
of Shared Collateral Series Notes in connection with the administration,
enforcement, waiver or amendment of this Agreement and any other Related
Documents, and all indemnification obligations of the Lessor and NFC under the
Related Documents including, without limitation, those indemnities payable
pursuant to Section 11.4 of the Liquidity Agreement, Section 4.2 of the A
Support Reimbursement Agreement, Section 6.2 of the B Letter of Credit
Reimbursement Agreement, Section 6.2 of the B Support Letter of Credit
Reimbursement Agreement, and Section 5.2 of the Reduction A Support
Reimbursement Agreement (all amounts with respect to any such indemnification
obligations to be paid by the Lessee within ten Business Days of demand
therefor); and
Section 15.1.6 any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the sale of any
Commercial Paper Notes (or
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otherwise of any Shared Collateral Series Notes) or with any Liquidity Advance,
or the entering into, performance and enforcement of the Related Documents by
any of the Indemnified Persons.
All obligations provided for in this Section 15 shall survive any termination
of this Agreement, and, to the extent that any of such obligations are
unenforceable for any reason, the Lessee agrees to the payment and satisfaction
of each such obligation which is permissible under applicable law.
Notwithstanding the foregoing, the Lessee shall have no duty
to indemnify any Indemnified Person for any claims, demands, liabilities,
costs, or expenses to the extent such claim, demand, liability, cost or expense
arises out of or is due to such Person's gross negligence or willful misconduct.
Section 15.2. Indemnification of the Trustee. The Lessee
agrees to indemnify and hold harmless the Trustee (and its officers, directors,
employees and agents) from and against any loss, liability, expense, damage or
injury suffered or sustained by reason of, or arising out of or in connection
with: (i) any acts or omissions of the Lessee pursuant to this Agreement and
(ii) the Trustee's appointment under the Indenture and the Trustee's
performance of its obligations thereunder, or any document pertaining to any of
the foregoing to which the Trustee is a signatory, including, but not limited
to any judgment, award, settlement, reasonable attorneys' fees and other costs
or expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim; provided, however, the Lessee shall have no duty
to indemnify the Trustee to the extent such loss, liability, expense, damage or
injury suffered or sustained is due to the Trustee's negligence or willful
misconduct. Any such indemnification shall not be payable from the assets of
NFLP. The provisions of this indemnity shall run directly to and be
enforceable by the Trustee or any other Indemnified Person subject to the
limitations hereof. The indemnification provided for in this Section 15.2
shall be in addition to any other indemnities available to the Trustee and
shall survive the termination of the duties of the Lessee hereunder and the
termination of this Agreement or a document to which the Trustee is a signatory
or the resignation or removal of the Trustee.
Section 15.3. Reimbursement Obligation by the Lessee. The
Lessee shall forthwith upon demand reimburse each Indemnified Person or the
Trustee, as the case may be, for any sum or sums expended with respect to any
of the foregoing, or shall pay such amounts directly upon request from such
Indemnified Person or the Trustee, as the case may be; provided, however, that,
if so requested by the Lessee, such Indemnified Person or the Trustee, as the
case may be, shall submit to the Lessee a statement documenting any such demand
for reimbursement or payment. To the extent that the Lessee in fact
indemnifies any Indemnified Person or the Trustee under the indemnity
provisions of this Agreement, the Lessee shall be subrogated to the rights of
such Indemnified Person or the Trustee, as the case may be, in the affected
transaction and shall have a right to determine the settlement of claims
therein. The obligations of the Lessee contained in this Section 15 shall
survive the expiration or earlier termination of this Agreement or any lease of
any Vehicle hereunder; provided, however, that the factual or legal
circumstances giving rise to the Lessor's or any other Indemnified Person's
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exposure to liability occur during the period that the Lease is in effect as to
the Vehicle for which such exposure to liability arose.
Section 15.4. Notice to Lessee of Claims. Each applicable
Indemnified Person or the Trustee, as the case may be, shall promptly notify
the Lessee in writing (a "Notice of Claim") of the pendency of any such claim,
action or facts referred to in this Section 15 for which indemnity may be
required.
Section 15.5. Defense of Claims. Defense of any claim
referred to in this Section 15 for which indemnity may be required shall, at
the option and request of the Lessee, be conducted by the Lessee. Following
receipt of any Notice of Claim, the Lessee will inform the Indemnified Person
of its election to defend such claim. Such Indemnified Person may participate
in any such defense at its own expense, provided such participation, in the
Lessee's reasonable opinion, does not interfere with the Lessee's defense. The
Lessee agrees that no Indemnified Person will be liable to the Lessee for any
claim caused directly or indirectly by the inadequacy of any Vehicle for any
purpose or any deficiency or defect therein or the use or maintenance thereof
or any repairs, servicing or adjustments thereto or any delay in providing or
failure to provide such or any interruption or loss of service or use thereof
or any loss of business, all of which shall be the risk and responsibility of
the Lessee, except to the extent that any of the foregoing is caused by the
gross negligence or willful misconduct of such Indemnified Person. The rights
and indemnities of each Indemnified Person hereunder are expressly made for the
benefit of, and will be enforceable by, each Indemnified Person notwithstanding
the fact that such Indemnified Person is not or is no longer a party to (or
entitled to receive the benefits of) this Agreement. This general indemnity
shall not affect any claims of the type discussed above, or otherwise, which
the Lessee may have against the Manufacturer.
SECTION 16. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This
Agreement shall be binding upon the Lessor, the Lessee and their respective
successors and assigns, and shall inure to the benefit of the Lessee, the
Lessor, and the Trustee (for the benefit of the Series 1996-2 Noteholder and,
if any, the other Noteholders of Shared Collateral Series Notes), the Master
Collateral Agent (for the benefit of the Secured Parties), the NFC Collateral
Agent (for the benefit of the NFC Secured Parties) and the Liquidity Agent as
third party beneficiaries and their respective successors and assigns;
provided, however, that the Lessee shall not have the right to assign its
rights or delegate its duties under this Agreement without (i) the Lessor's,
the Trustee's, the Liquidity Agent's, the NFC Collateral Agent's and, so long
as it is an A Support Credit Enhancer, GM's prior written consent and (ii)
receipt of written confirmation from each of the Rating Agencies that its then
current rating will not be reduced or withdrawn with respect to any outstanding
Commercial Paper Notes or, if applicable, Shared Collateral Series Notes as a
result thereof; provided, further, however, the Lessee may rent such Vehicles
to consumers in the ordinary course of its domestic daily rental businesses.
Any purported assignment in violation of this Section 16 shall be void and of
no force or effect. Nothing contained herein shall be deemed to restrict the
right of the Lessee to acquire or dispose of, by purchase, lease, financing, or
otherwise, motor vehicles that are not subject to the provisions of this
Agreement.
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SECTION 17. DEFAULT AND REMEDIES THEREFOR.
Section 17.1. Events of Default. Any one or more of the
following will constitute an event of default (a "Lease Event of Default") as
that term is used herein:
Section 17.1.1. Non-Payment of Liabilities. The occurrence
of (i) a default in the payment when due of any Monthly Base Rent, Monthly
Variable Rent, Monthly Finance Rent, Termination Payment, Casualty Payment,
Late Return Payment or Monthly Supplemental Payment, and the continuance
thereof for, except in the case of any Monthly Variable Rent or Monthly Finance
Rent, two (2) Business Days and, in the case of any Monthly Variable Rent or
Monthly Finance Rent, five (5) Business Days, or (ii) a default in the payment
when due of any amount payable under this Agreement (other than amounts
described in clause (i) above) and the continuance thereof for five (5)
Business Days;
Section 17.1.2. Unauthorized Assignment. Any unauthorized
assignment or transfer of this Agreement by the Lessee occurs;
Section 17.1.3. Non-Performance of Covenants and Obligations.
The Lessee fails to comply with or perform (i) its obligations under Section
25.5 or 25.6 within the time period specified in Section 17.3(vii)(y) hereof,
or (ii) any other covenant, condition, agreement or provision of this Agreement
(which failure does not constitute a Lease Event of Default under any of the
other provisions of this Section 17) and the continuance of such failure under
this clause (ii) (other than any such failure to comply with the provisions of
Section 25.1, 25.2, 25.7, 25.8, or 25.9 hereof) for 30 days after the earlier
of (x) the date the Lessor, the Master Collateral Agent, the Trustee, the
Liquidity Agent or the NFC Collateral Agent delivers written notice thereof to
the Lessee and (y) the date the Lessee obtains actual knowledge thereof;
Section 17.1.4. Incorrect Warranties and Representations.
Any representation or warranty made by the Lessee in this Agreement or any
Related Document is incorrect in any material respect (to the extent that such
representation or warranty does not incorporate a materiality limitation in its
terms) as of the date such warranty or representation is made and continues to
be incorrect in any material respect (to the extent that such warranty or
representation does not incorporate a materiality limitation in its terms) for
a period of 30 days after the earlier of (i) the date on which written notice
thereof shall have been given to the Lessee by the Lessor, the Master
Collateral Agent, the Trustee, the Liquidity Agent or the NFC Collateral Agent
and (ii) the date on which the Lessee obtains actual knowledge thereof; or any
schedule, certificate, financial statement, report, notice, or other material
writing furnished by the Lessee to the Lessor is false or misleading in any
material respect on the date as of which the facts therein set forth are stated
or certified and which continues to be incorrect in any material respect for a
period of 10 days after the earlier of (a) the date on which written notice
thereof shall have been given to the Lessee by the Lessor, the Master
Collateral Agent, the Trustee, the Liquidity Agent or the NFC Collateral Agent
and (b) the date on which the Lessee obtains actual knowledge thereof;
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Section 17.1.5. Event of Bankruptcy. The occurrence of an
Event of Bankruptcy with respect to the Lessee;
Section 17.1.6. Change in Control. The occurrence of a
Change of Control;
Section 17.1.7. Judgments. One or more final judgments shall
be entered by any court or courts against the Lessee for the payment of money
exceeding $5,000,000 in the aggregate which judgment or judgments are not fully
covered by insurance or by reserves shown on the financial statements of the
Lessee and its Consolidated Subsidiaries that have been delivered to the
Trustee, the Liquidity Agent and the NFC Collateral Agent in accordance
herewith; or a warrant of attachment or execution or similar process shall be
issued or levied against property of the Lessee which, together with all other
such property of the Lessee subject to other such process, exceeds in value
$5,000,000 in the aggregate, and if, within thirty (30) days after the entry,
issue or levy thereof, such judgment, warrant or process shall not have been
paid or discharged or stayed pending appeal, or if, after the expiration of any
such stay, such judgment, warrant or process shall not have been paid or
discharged;
Section 17.1.8. Defaults on Indebtedness. The occurrence of
any default under any indenture, agreement or instrument evidencing or securing
Indebtedness of the Lessee in an aggregate principal amount of $5,000,000 or
more as a result of which payment of such Indebtedness shall have become due
prior its stated maturity; or
Section 17.1.9. Invalidity of or Default under Related
Documents. (i) All or any portion of any Related Document (other than the
Dealer Agreement or the Placement Agency Agreement) shall at any time and for
any reason not be in full force and effect or be declared to be null and void,
or a proceeding shall be commenced by the Lessee, or by any governmental
authority having jurisdiction over the Lessee, seeking to establish the
invalidity or unenforceability thereof (exclusive of questions of
interpretation of any provision thereof), or (ii) any event shall occur and be
continuing which constitutes an Amortization Event either (x) of the type set
forth in Sections 9.1 through 9.1.15 (other than clause (c) of Section 9.1.11)
of the Liquidity Agreement, or (y) of the type set forth in Section 9.1 of the
Base Indenture or Article 6 of the Series 1996-2 Supplement, and not otherwise
set forth in Sections 9.1 through 9.1.15 (other than clause (c) of Section
9.1.11) of the Liquidity Agreement, and, in the case of this clause (y), such
event materially adversely affects the interest of the Lessor, the Trustee, the
Secured Parties or the NFC Secured Parties.
Section 17.2. Effect of Lease Event of Default, etc. (a) If
any Lease Event of Default described in Section 17.1.5 or any Liquidation Event
of Default (other than under Section 9.1(a), 9.1(b) or 9.1(e)(i) (other than to
the extent relating to Section 17.1.5 hereof) of the Base Indenture) shall
occur and be continuing, the rights of the Lessee to place Vehicle Orders
pursuant to this Agreement (but not otherwise) shall immediately terminate, and
if any other Lease Event of Default or Liquidation Event of Default shall occur
and be continuing, the rights of the Lessee to place Vehicle Orders pursuant to
this Agreement (but not otherwise) shall terminate if the Lessee is so notified
in writing by the NFC Collateral Agent (if pursuant to the
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Liquidity Agreement the Liquidity Agent shall have terminated the Liquidity
Commitments or shall have notified the Series 1996-2 Noteholder to cease making
Series 1996-2 Advances or the NFC Collateral Agent shall have notified the
Trustee or the Paying Agent to cease making available to the Lessor proceeds
from the NFC Collection Account pursuant to the Series 1996-2 Supplement).
(b) If a Lease Event of Default described in Section
17.1.5 or a Liquidation Event of Default (other than under Section 9.1(a),
9.1(b) or 9.1(e)(i) (other than to the extent relating to Section 17.1.5
hereof) of the Base Indenture) shall occur, then the Monthly Base Rent, the
Monthly Supplemental Payment, Casualty Payments (in each case calculated as if
all Vehicles had become Casualties or had ceased to be Eligible Vehicles during
the Related Month), the Monthly Variable Rent, the Monthly Finance Rent (in
each case calculated as if the full amount of interest, principal and other
charges under the Series 1996-2 Note and, if any, other Shared Collateral
Series Notes were then due and payable in full), Termination Payments and Late
Return Payments shall, automatically, without further action by the Lessor, the
Trustee, the NFC Collateral Agent or the Liquidity Agent, become immediately
due and payable.
(c) If a Series 1996-2 Limited Liquidation Event of
Default shall occur, then the Monthly Base Rent, the Monthly Supplemental
Payment and Casualty Payments (in each case, calculated as if each Vehicle with
respect to which the Lessor has terminated the Lessee's right to possession
pursuant to Section 17.3(iii) had become a Casualty or had ceased to be an
Eligible Vehicle during the Related Month), the Monthly Variable Rent and the
Monthly Finance Rent (in each case calculated as if the full amount of
interest, principal and other charges under the Series 1996-2 Note and, if any,
other applicable Shared Collateral Series Notes were then due and payable in
full), Termination Payments and Late Return Payments (in each case, with
respect to each Vehicle with respect to which the Lessor has terminated the
Lessee's right to possession pursuant to Section 17.3(iii)) shall
automatically, without further action by the Lessor, the Trustee, the NFC
Collateral Agent or the Liquidity Agent, become immediately due and payable.
(d) If any other Lease Event of Default or Liquidation
Event of Default shall occur, the NFC Collateral Agent may declare the Rent and
all other charges and payments (calculated as described in paragraph (b) above)
to be due and payable, whereupon such Rent and such other charges and payments
(as so calculated) shall, subject to Section 17.4, become immediately due and
payable.
Section 17.3. Rights of Lessor, Trustee and NFC Collateral
Agent Upon Lease Event of Default, Liquidation Event of Default or Series
1996-2 Limited Liquidation Event of Default. If a Lease Event of Default,
Liquidation Event of Default or Series 1996-2 Limited Liquidation Event of
Default shall occur:
(i) In the case of a Lease Event of Default that shall
have occurred and be continuing, the Lessor at its option may (or if
and as directed by the NFC Collateral Agent pursuant to the NFC
Collateral Agreement shall) proceed by appropriate court action or
actions, either at law or in equity, to enforce performance by the
Lessee of the applicable covenants and terms of this Agreement or to
recover damages for the breach hereof calculated in accordance with
Section 17.4;
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(ii) In the case of a Liquidation Event of Default or a
Series 1996-2 Limited Liquidation Event of Default that shall have
occurred and be continuing, the Lessor and the Trustee, to the extent
provided in the Indenture, and the NFC Collateral Agent, to the extent
provided in the NFC Collateral Agreement, shall have all the rights
against the Lessee and the Collateral provided in the Indenture and
the NFC Collateral Agreement upon such a Liquidation Event of Default
or a Series 1996-2 Limited Liquidation Event of Default, as the case
may be, including the right to take (under the specified
circumstances) possession of Vehicles (to the extent specified in this
Agreement or the Indenture or the NFC Collateral Agreement, as
applicable) immediately;
(iii) In the case of a Liquidation Event of Default that
has occurred, the NFC Collateral Agent may, by notice in writing to
the Lessee and the other such Persons, terminate this Agreement in its
entirety and/or the right of possession hereunder of the Lessee as to
the Vehicles, and the Lessor (as directed by the NFC Collateral Agent)
may direct delivery by the Lessee of documents of title to the
Vehicles, whereupon all rights and interests of the Lessee to the
Vehicles (except as otherwise provided herein) will cease and
terminate (but the Lessee will remain liable hereunder as herein
provided, calculated in accordance with Section 17.4); and, if a
Series 1996-2 Limited Liquidation Event of Default has occurred, by
notice in writing to the Lessee, terminate the right of possession
hereunder of the Lessee as to such number of Vehicles as will generate
proceeds from liquidation in an amount sufficient to pay all principal
of and interest on the Series 1996-2 Note and, if any, all other
related Shared Collateral Series Notes and the Lessor (as directed by
the NFC Collateral Agent) may direct delivery by the Lessee of
documents of title to such Vehicles, whereupon all right, title and
interest of the Lessee to such Vehicles (except as otherwise provided
herein) will cease and terminate (but the Lessee will remain liable
hereunder as herein provided, calculated in accordance with Section
17.4); and thereupon, in either such case, the Lessor (as directed by
the NFC Collateral Agent) or its agents may peaceably enter upon the
premises of the Lessee or other premises where such Vehicles may be
located and take possession of them and thenceforth hold, possess and
enjoy the same free from any right of the Lessee, or its successors or
assigns, to employ such Vehicles for any purpose whatsoever consistent
with the mitigation of losses and damages, and the Lessor (or the NFC
Collateral Agent on behalf of the Lessor) will, nevertheless, have a
right to recover from the Lessee any and all amounts which under the
terms of Section 17.2 (as limited by Section 17.4) of this Agreement
may be then due. The Lessor (as directed by the NFC Collateral Agent)
will provide the Lessee with written notice of the place and time of
any sale of Financed Vehicles pursuant to this Section 17.3 at least
five (5) days prior to the proposed sale, which notice period shall be
deemed commercially reasonable, and the Lessee may purchase the
Vehicle(s) at the sale. Each and every power and remedy hereby
specifically given to the Lessor or the NFC Collateral Agent will be
in addition to every other power and remedy hereby specifically given
or now or hereafter existing at law, in equity or in bankruptcy and
each and every power and remedy may be exercised from time to time and
simultaneously and as often and in such order as may be deemed
expedient by the Lessor or the NFC Collateral Agent, as applicable;
provided, however,
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that the measure of damages recoverable against the Lessee will in any
case be calculated in accordance with Section 17.4. All such powers
and remedies will be cumulative, and the exercise of one will not be
deemed a waiver of the right to exercise any other or others. No
delay or omission of the Lessor or the NFC Collateral Agent, as
applicable, in the exercise of any such power or remedy and no renewal
or extension of any payments due hereunder will impair any such power
or remedy or will be construed to be a waiver of any default or any
acquiescence therein. Any extension of time for payment hereunder or
other indulgence duly granted to the Lessee will not otherwise alter
or affect the rights of the Lessor or the NFC Collateral Agent or the
obligations hereunder of the Lessee. The acceptance by the Lessor or
the NFC Collateral Agent of any payment after it will have become due
hereunder will not be deemed to alter or affect the rights of the
Lessor or the NFC Collateral Agent hereunder with respect to any
subsequent payments or defaults therein;
(iv) If the Lessee shall default in the due performance
and observance of any of its obligations under Section 10, 24.5, 24.6,
24.7(iv), 24.7(vii), 24.10, 24.12, 25.3 or 25.4 hereof, and such
default shall continue unremedied for a period of 30 days (other than
in the case of a default under Section 24.6, for which the period will
be 10 days) after notice thereof shall have been given to the Lessee
by the NFC Collateral Agent, the NFC Collateral Agent or the Master
Collateral Agent or the Lessor (at the direction of the NFC Collateral
Agent), as applicable, shall have the ability to exercise all rights,
remedies, powers, privileges and claims of the Lessee against the
Manufacturers under or in connection with the Repurchase Programs with
respect to (i) Vehicles the Lessee has determined to turn back to the
Manufacturers under such Repurchase Programs and (ii) whether or not
the Lessee shall then have determined to turn back such Vehicles, any
Vehicles for which the applicable Repurchase Period will end within
two months or less;
(v) Upon a default in the performance (after giving
effect to any grace periods provided herein) by the Lessee of its
obligations under Section 23.6 or 24.21 hereof with respect to certain
Vehicles, the Lessor, the Master Collateral Agent, the Trustee or the
NFC Collateral Agent shall have the right to take actions reasonably
necessary to correct such default with respect to the subject Vehicles
including the execution of UCC financing statements with respect to
Repurchase Programs and other general intangibles and the completion
of Vehicle Perfection and Documentation Requirements on behalf of the
Lessee or the Lessor, as applicable;
(vi) Upon the occurrence of a Liquidation Event of
Default, the Servicer will return all Vehicles to the related
Manufacturer, in each case in accordance with the instructions of the
Lessor (as directed by the NFC Collateral Agent). Upon the occurrence
of a Series 1996-2 Limited Liquidation Event of Default, the Servicer
will return Vehicles to the related Manufacturer to the extent
necessary to generate proceeds in an amount sufficient to pay all
interest on and principal of the Series 1996-2 Note and, if any, all
other related Shared Collateral Series Notes, in each case in
accordance with the instructions of the Lessor (as directed by the NFC
Collateral Agent). To the extent
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any Manufacturer fails to accept any such Vehicles under the terms of
the applicable Repurchase Program, the Lessor (as directed by the NFC
Collateral Agent) shall have the right otherwise to dispose of such
Vehicles and to direct the Servicer to dispose of such Vehicles in
accordance with its instructions. In addition, the Lessor shall have
all of the rights, remedies, powers, privileges and claims vis-a-vis
the Lessee necessary or desirable to allow the Trustee to exercise the
rights, remedies, powers, privileges and claims given to the Trustee
pursuant to Sections 9.2 and 9.3 of the Base Indenture and/or the NFC
Collateral Agent to exercise the rights, remedies, powers, privileges
and claims given to the NFC Collateral Agent pursuant to Sections
4.03, 6.01 and 6.02 of the NFC Collateral Agreement, and the Lessee
acknowledges that it has hereby granted the Lessor all of the rights,
remedies, powers, privileges and claims granted to the Trustee
pursuant to Article 9 of the Base Indenture and to the NFC Collateral
Agent pursuant to Article VI of the NFC Collateral Agreement,
respectively, and that, under certain circumstances set forth in the
Base Indenture and the NFC Collateral Agreement, respectively, the
Trustee or the NFC Collateral Agent may act in lieu of the Lessor in
the exercise of such rights, remedies, powers, privileges and claims;
(vii) If the Lessee shall default in the due performance
and observance of any of its obligations under Section 25.5 or 25.6
hereof, (x) the rights of the Lessee to place Vehicle Orders pursuant
to this Agreement (but not otherwise) shall be suspended until the
Lessee is in compliance with its obligations under such Sections and
(y) if at the end of the following fiscal quarter the Lessee is not in
compliance with its obligations under such Sections as recalculated as
of any day subsequent to the day such non-compliance occurred, such
non-compliance shall be at that time deemed to be a "Lease Event of
Default" as set forth in Section 17.1.3(i) hereof;
(viii) By notice in writing to the Lessee, the NFC
Collateral Agent may terminate the Power of Attorney (provided that,
after any such termination of the Power of Attorney, the Lessor will
follow the direction of the Servicer to release liens on Acquired
Vehicles which liens are required to be released under the terms of
this Agreement); and
(ix) Notwithstanding anything to the contrary contained
herein, in the event that more than one of the Lessor, the Trustee and
the NFC Collateral Agent elect to exercise their respective rights or
remedies hereunder or notify the Lessee of their intent to do so, and
such exercise of such rights or remedies by any such party conflicts
or will conflict with such exercise of such rights or remedies by any
other such party, the Trustee's rights and remedies and its exercise
thereof shall control over those of the Lessor, and the NFC Collateral
Agent's rights and remedies and its exercise thereof shall control
over those of the Lessor and the Trustee.
Section 17.4. Measure of Damages. If a Lease Event of
Default occurs and the Lessor, the Master Collateral Agent, the Trustee or the
NFC Collateral Agent exercises the remedies granted to the Lessor, the Master
Collateral Agent, the Trustee or the NFC Collateral
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Agent under this Section 17 or under Section 9.2 of the Indenture or Article VI
of the NFC Collateral Agreement, the amount that the Lessor shall be permitted
to recover shall be equal to:
(i) all Rent and other charges and payments under this
Agreement (calculated as provided in Section 17.2); plus
(ii) any damages and expenses which the Lessor, the Master
Collateral Agent, the Trustee or the NFC Collateral Agent shall have
sustained by reason of the Lease Event of Default, together with
reasonable sums for such attorneys' fees and such expenses as will be
expended or incurred in the seizure, storage, rental or sale of the
Vehicles or in the enforcement of any right or privilege hereunder or
in any consultation or action in such connection; plus
(iii) all other amounts due and payable under this
Agreement; plus
(iv) interest from time to time on amounts due and unpaid
under this Agreement at the VFR plus 1% per annum computed from the
date of the Lease Event of Default or the date payments were
originally due the Lessor under this Agreement or from the date of
each expenditure by the Lessor, the Master Collateral Agent, the
Trustee or the NFC Collateral Agent, as applicable, which is
recoverable from the Lessee pursuant to this Section 17, as
applicable, to and including the date payments are made by the Lessee;
minus
(v) an amount equal to all sums realized by the Lessor,
the Master Collateral Agent, the Trustee and the NFC Collateral Agent
from the liquidation of the Financed Vehicles leased hereunder (either
by receipt of payment from the Manufacturers under Repurchase
Programs, from sales of Vehicles to third parties, or otherwise).
Section 17.5. Application of Proceeds. The proceeds of any
sale or other disposition of any Financed Vehicles pursuant to Section 17.3
shall be applied in the following order: (i) to the reasonable costs and
expenses incurred by the Lessor or its agent in connection with such sale or
disposition, including any reasonable costs associated with repairing such
Vehicles, and reasonable attorneys' fees in connection with the enforcement of
this Agreement, (ii) to the payment of outstanding Rent and other charges and
payments under the Lease (such proceeds to be applied first, to outstanding
Monthly Variable Rent and Monthly Finance Rent pro rata, second, to outstanding
Base Rent and Monthly Supplemental Payments pro rata, third, to outstanding
Termination Payments, Casualty Payments and Late Return Payments pro rata and
fourth, to outstanding late charges pursuant to Sections 5.4 and 17.4(iv)),
(iii) to the payment of all other amounts due hereunder and (iv) any remaining
proceeds to the Lessee or such Person as may be lawfully entitled thereto.
SECTION 18. CERTAIN LIMITED AMORTIZATION EVENTS. Upon the
occurrence of a Limited Amortization Event of the type set forth in Section
9.3.1 of the
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Liquidity Agreement with respect to a Manufacturer, the Lessee on behalf of the
Lessor (a) shall no longer place Vehicle Orders for additional Vehicles from
such Manufacturer (each, a "Defaulting Manufacturer") and (b) shall cancel any
Vehicle Order for Vehicles of such Defaulting Manufacturer to which a vehicle
identification number (a "VIN") has not been assigned as of the date such
Limited Amortization Event occurs (to the extent such Vehicle Order is
cancelable, with or without penalty).
SECTION 19. CERTIFICATION OF TRADE OR BUSINESS USE. Pursuant
to Section 7701 of the Code and as set forth in Attachment C hereto, the Lessee
will warrant and certify that (1) the Lessee intends to use the Acquired
Vehicles in a trade or business of the Lessee, and (2) the Lessee has been
advised that it will not be treated as the owner of the Acquired Vehicles for
federal income tax purposes.
SECTION 20. SURVIVAL. In the event that, during the term of
this Agreement, the Lessee becomes liable for the payment or reimbursement of
any obligations, claims or taxes pursuant to any provision hereof, such
liability will continue, notwithstanding the expiration or termination of this
Agreement, until all such amounts are paid or reimbursed by the Lessee.
SECTION 21. RIGHTS OF LESSOR PLEDGED TO MASTER COLLATERAL
AGENT, TRUSTEE AND NFC COLLATERAL AGENT. Notwithstanding anything to the
contrary contained in this Agreement, the Lessee acknowledges that each of the
Lessee and the Lessor, pursuant to the Master Collateral Agency Agreement, has
granted a security interest to the Master Collateral Agent, for the benefit of
the Trustee (for the benefit of the Series 1996-2 Noteholder) and the NFC
Collateral Agent (for the benefit of the NFC Secured Parties), respectively, in
all of its right, title and interest in, to and under the Vehicles, the related
Repurchase Programs, the Master Collateral Account and all other Master
Collateral specified in the Master Collateral Agency Agreement as being pledged
by National or NFLP, and further acknowledges that the Lessor, pursuant to the
Series 1996-2 Supplement and the Indenture, has granted a security interest to
the Trustee (for the benefit of the Series 1996-2 Noteholder) in all of its
right, title and interest in, to and under the NFLP Agreements, the NFC
Collection Account and the other Collateral described in the Series 1996-2
Supplement, and NFC, pursuant to the NFC Collateral Agreement, has granted a
security interest to the NFC Collateral Agent (for the benefit of the NFC
Secured Parties) in all of its right, title and interest in, to and under the
Indenture, the Series 1996-2 Supplement and the Series 1996-2 Note, the NFC
Collateral Account and the other Assigned Collateral described in the NFC
Collateral Agreement. Accordingly, the Lessee agrees that:
(i) Subject to the terms of the Indenture and the NFC
Collateral Agreement, respectively, the Trustee and the NFC Collateral
Agent, respectively, shall have all the rights, powers, privileges and
remedies of the Lessor hereunder; provided, however, that the NFC
Collateral Agent shall control the exercise of such rights, powers,
privileges and remedies. Specifically, the Lessee agrees that, upon
the occurrence of an Amortization Event, the NFC Collateral Agent or
the Trustee (at the direction of the NFC Collateral
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Agent) or, with respect to any Master Collateral, the Master
Collateral Agent (for and on behalf of the Trustee and, ultimately,
the NFC Collateral Agent) may exercise any right or remedy against the
Lessee provided for herein or in the Indenture, the NFC Collateral
Agreement or the Master Collateral Agency Agreement, as applicable,
and the Lessee will not interpose as a defense that such claim should
have been asserted by the Lessor;
(ii) Upon the delivery by the Master Collateral Agent or
the NFC Collateral Agent of any notice to the Lessee stating that a
Lease Event of Default or any other Amortization Event has occurred,
then the Lessee, will, if so requested by the Master Collateral Agent
(with respect to the Master Collateral) or the NFC Collateral Agent
(with respect to the Assigned Collateral), treat the Master Collateral
Agent or the NFC Collateral Agent, as the case may be, or the designee
of the Master Collateral Agent or the NFC Collateral Agent, as the
case may be, for all purposes as the Lessor hereunder and in all
respects comply with all obligations under this Agreement that are
asserted by the Master Collateral Agent or the NFC Collateral Agent,
as the case may be, as the successor to the Lessor hereunder,
irrespective of whether the Lessee has received any such notice from
the Lessor;
(iii) The Lessee acknowledges that pursuant to the
Indenture, the Lessor has irrevocably authorized and directed the
Lessee to, and the Lessee shall, make payments of Rent and other
charges and payments hereunder by deposit directly to the NFC
Collection Account established by the Trustee for receipt of such
payments pursuant to the Indenture and the Series 1996-2 Supplement
(or to such other account as the NFC Collateral Agent may from time to
time specify to the Lessee), and such payments shall discharge the
obligation of the Lessee to the Lessor hereunder with respect to Rent
and other charges and payments to the extent of such payments;
(iv) Upon request made by the Master Collateral Agent at
any time, the Lessee will take such actions as are requested by the
Master Collateral Agent to maintain the Master Collateral Agent's
perfected first priority security interest in the Vehicles leased
under this Agreement, the Certificates of Title with respect thereto
and the Master Collateral pursuant to the Master Collateral Agency
Agreement;
(v) A security interest in the Lessor's rights under this
Agreement has been granted by the Lessor to the Trustee pursuant to
the Series 1996-2 Supplement and the Indenture as collateral security
only for the Series 1996-2 Note (but not for the benefit of any
Holders of any other Notes, other than any other Shared Collateral
Series Notes, if any, as contemplated by the Supplement relating
thereto) and, accordingly, all references herein to "all" Series of
Notes shall refer only to the Series 1996-2 Note and, if any, all
other Shared Collateral Series Notes;
(vi) Each of the Trustee and the NFC Collateral Agent is
hereby irrevocably appointed the true and lawful attorney-in-fact of
the Lessee, in its name and stead, to
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make all necessary deeds, bills of sale and instruments of assignment
and transfer of the property of the Lessee sold pursuant to Section
9.3 of the Base Indenture or Article VI of the NFC Collateral
Agreement, respectively (including without limitation, any Financed
Vehicles), and for such other purposes as are necessary or desirable
to effectuate the provisions of the Indenture and the NFC Collateral
Agreement, and for that purpose the Trustee (at the direction of the
NFC Collateral Agent) and/or the NFC Collateral Agent, as applicable,
may execute and deliver all necessary deeds, bills of sale and
instruments of assignment and transfer, and may substitute one or more
Persons with like power, the Lessee hereby ratifying and confirming
all that its said attorney, or such substitute or substitutes, shall
lawfully do by virtue hereof, but if so requested by the Trustee (at
the direction of the NFC Collateral Agent) and/or the NFC Collateral
Agent, as applicable, or by any purchaser, the Lessee shall ratify and
confirm any such sale or transfer by executing and delivering to the
Trustee and/or the NFC Collateral Agent, as applicable, or to such
purchaser all such property, deeds, bills of sale, instruments of
assignment and transfer and releases as may be designated in any such
request;
(vii) In the event that the Trustee (at the direction of
the NFC Collateral Agent) determines to take action pursuant to the
provisions of Section 9.2(e) of the Base Indenture and/or the NFC
Collateral Agent determines to take action pursuant to the last
sentence of Section 6.01(b) of the NFC Collateral Agreement, as
applicable, the Trustee and/or the NFC Collateral Agent, as
applicable, may, without notice to the Lessor (unless such notice is
required by applicable state law), the Servicer or the Lessee, direct
the Master Collateral Agent to take legal proceedings for the
appointment of a receiver to take possession of Vehicles pending the
sale thereof and in any such event the Trustee and/or the NFC
Collateral Agent, as applicable, shall be entitled to the appointment
of a receiver for the Vehicles, and none of the Lessor, the Servicer
or the Lessee shall object to such appointment;
(viii) The Lessee hereby authorizes the Lessor and the NFC
Collateral Agent, as applicable, to give directions to the Master
Collateral Agent to perform any obligation which the Lessee shall have
failed to perform under the Related Documents, including, but not
limited to, any directions permitted by Section 3.4 of the Master
Collateral Agency Agreement; and
(ix) Notwithstanding anything to the contrary contained
herein, in the event that the Trustee and the NFC Collateral Agent
elect to exercise their respective rights or remedies hereunder or
notify the Lessor of their intent to do so, and such exercise of such
rights or remedies by one such party conflicts or will conflict with
such exercise of such rights or remedies by the other such party, the
NFC Collateral Agent's rights and remedies and its exercise thereof
shall control over those of the Trustee.
SECTION 22. MODIFICATION AND SEVERABILITY. No delay on the
part of the Lessor, the Trustee, the Liquidity Agent, the NFC Collateral Agent,
the Master Collateral Agent or, so long as it is an A Support Credit Enhancer,
GM in the exercise of any right, power
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or remedy shall operate as a waiver thereof, nor shall any single or partial
exercise by any of them of any right, power or remedy preclude other or further
exercise thereof, or the exercise of any other right, power or remedy. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement shall in any event be effective unless (a) the same shall be
in writing and signed and delivered by the Lessor and the Lessee, (b) consented
to in writing by the Trustee, the NFC Collateral Agent and, so long as it is an
A Support Credit Enhancer, GM (unless (i) such amendment, modification, waiver
or consent is made only to cure any apparent ambiguity or to correct or
supplement any provision in this Agreement that may be inconsistent with any
other provision herein, (ii) as evidenced by an Officer's Certificate from duly
authorized officers of the Lessor and the Lessee, which shall have been
delivered by the Lessee to the Trustee, the NFC Collateral Agent and, so long
as it is an A Support Credit Enhancer, GM, such amendment, modification, waiver
or consent will not materially adversely affect the interests of the Lessor,
the Trustee, the Secured Parties or the NFC Secured Parties, and (iii) a copy
of such amendment, modification, waiver or consent is furnished to the Trustee,
the NFC Collateral Agent and, so long as it is an A Support Credit Enhancer, GM
no later than ten days prior to the execution thereof by the Lessor and the
Lessee) and (c) the Lessor shall have received in writing confirmation from
each of the Rating Agencies that its then current rating with respect to any
Commercial Paper Notes and, if applicable, any outstanding Shared Collateral
Series Notes, respectively, will not be reduced or withdrawn as a result
thereof.
SECTION 23. CERTAIN REPRESENTATIONS AND WARRANTIES.
National, in its capacity as Lessee and as Servicer, represents and warrants to
the Lessor that as of the Series 1996-2 Closing Date and as of each Vehicle
Funding Date (and each of such representations and warranties will be deemed to
be remade as of the Closing Date with respect to each Series of Shared
Collateral Series Notes):
Section 23.1. Organization; Ownership; Power; Qualification.
National (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
corporate power and authority to own its properties and to carry on its
business as now being and hereafter proposed to be conducted, and (iii) is duly
qualified, in good standing and authorized to do business in each jurisdiction
in which the character of its properties or the nature of its businesses
requires such qualification or authorization, except where the failure to so
qualify is not reasonably likely to have a Material Adverse Effect.
Section 23.2. Authorization: Enforceability. National, in
its capacities as Lessee and as Servicer, has the corporate power and has taken
all necessary corporate action to authorize it to execute, deliver and perform
this Agreement and each of the other Related Documents to which it is a party
in accordance with their respective terms, and to consummate the transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered by the Lessee and the Servicer and is, and each of the other Related
Documents to which the Lessee or the Servicer is a party is, a legal, valid and
binding obligation of the Lessee or the Servicer, as applicable, enforceable in
accordance with its terms, except as the
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enforceability thereof may be limited by bankruptcy, insolvency, reorganization
and similar laws affecting creditors generally and by the availability of
equitable remedies.
Section 23.3. Compliance. (a) The execution, delivery and
performance, in accordance with their respective terms, by National, in its
capacities as Lessee and as Servicer, of this Agreement and each of the other
Related Documents to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not (i) require
any consent, approval, authorization or registration not already obtained or
effected, except where the failure to obtain any such consent, approval or
authorization or to register is not reasonably likely to have a Material
Adverse Effect, (ii) violate any applicable law with respect to National, in
its capacity as Lessee or as Servicer or otherwise, as applicable, which
violation is reasonably likely to have a Material Adverse Effect, (iii)
conflict with, result in a breach of, or constitute a default under the
certificate of incorporation or by-laws of National, or under any indenture,
agreement, or other instrument to which National, in its capacity as Lessee or
as Servicer or otherwise, is a party or by which its properties may be bound,
which conflict, breach or default is reasonably likely to have a Material
Adverse Effect, or (iv) result in or require the creation or imposition of any
Lien upon or with respect to any property now owned or hereafter acquired by
National, in its capacity as Lessee or as Servicer or otherwise, except
Permitted Encumbrances.
(b) To the knowledge of National, National, in its
capacities as Lessee and as Servicer and otherwise, is in compliance with all
applicable laws (including rules and regulations thereunder) of federal, state,
local and foreign governments (and all agencies thereof) other than
Environmental Laws, which are separately addressed in Section 23.19 hereof,
except where the failure to comply is not reasonably likely to have a Material
Adverse Effect.
Section 23.4. Financial Information; Financial Condition.
All financial statements (including the notes thereto) referred to in the
following sentence and hereafter furnished to the Lessor, the Master Collateral
Agent, the Trustee or the NFC Collateral Agent pursuant to Section 24.7 hereof
have been and will be prepared in accordance with GAAP and do and will present
fairly the financial condition of the entities involved as of the dates thereof
and the results of their operations for the periods covered thereby, subject,
in the case of all unaudited statements, to normal year-end adjustments and
lack of footnotes and other presentation items. Such financial statements
include the audited consolidated balance sheet of National and its Consolidated
Subsidiaries as of May 31, 1996 and the related statements of income, changes
in stockholders' equity and cash flow as of and for the fiscal year ending on
such date, which have been furnished to the Lessor, the Trustee and the NFC
Collateral Agent on or prior to the date hereof.
Section 23.5. Litigation. Except for claims as to which the
insurer has admitted coverage in writing and which are fully covered by
insurance, no claims, litigation (including, without limitation, derivative
actions), arbitration, governmental investigation or proceeding or inquiry is
pending or, to the best of the Lessee's knowledge, threatened against the
Lessee which is reasonably likely to have a Material Adverse Effect.
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Section 23.6. Liens. The Vehicles and other Master
Collateral are free and clear of all Liens other than Permitted Liens. The
Lessor (or the Master Collateral Agent on behalf of the Lessor) has obtained,
as security for the Liabilities, a first priority perfected Lien on all
Vehicles and all the Master Collateral with respect to which the Trustee (for
the benefit of the Series 1996-2 Noteholder) and the NFC Collateral Agent (for
the benefit of the NFC Secured Parties), respectively, are designated as the
Beneficiaries under the Master Collateral Agency Agreement. All Vehicle
Perfection and Documentation Requirements with respect to all Vehicles on or
after the date hereof have and will continue to be satisfied; except to the
extent that the failure to comply with such requirements does not, in the
aggregate, materially adversely affect either the interests of the Lessor, the
Master Collateral Agent, the Trustee, the NFC Collateral Agent, the Secured
Parties or the NFC Secured Parties under this Agreement or the Indenture or the
NFC Collateral Agreement or the likelihood of payment of all Rent and other
charges and payments due under this Agreement.
Section 23.7. Employee Benefit Plans. (a) During the twelve
consecutive month period prior to (i) the Series 1996-2 Closing Date and (ii)
each Vehicle Funding Date: (x) no steps have been taken by the Lessee or any
member of the Controlled Group, or to the knowledge of the Lessee, by any
Person, to terminate any Pension Plan (other than a Pension Plan with no
unfunded benefit liabilities on a termination basis); and (y) no contribution
failure has occurred with respect to any Pension Plan maintained by the Lessee
or any member of the Controlled Group sufficient to give rise to a Lien under
Section 302(f)(1) of ERISA in connection with such Pension Plan; and (b) no
condition exists or event or transaction has occurred with respect to any
Pension Plan which could reasonably be expected to result in the incurrence by
the Lessee or any member of the Controlled Group of liabilities, fines or
penalties in an amount that is reasonably likely to have a Material Adverse
Effect.
Section 23.8. Investment Company Act. The Lessee is not an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act, and the Lessee is not subject
to any other statute which would have a material adverse effect on its ability
to perform its obligations under this Agreement or the other Related Documents,
and the entering into or performance by the Lessee of this Agreement does not
violate any provision of such Act and does not require any consent, approval or
authorization of, or registration with, the Securities and Exchange Commission
or any other governmental or public body or authority.
Section 23.9. Regulations G, T, U and X. The Lessee is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System). Neither the Lessee nor any Person acting on its behalf has
taken or will take action to cause the execution, delivery or performance of
this Agreement or the financing or acquisition of the Vehicles to violate
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
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Section 23.10. Business Locations; Trade Names. Schedule
23.10 lists where the Lessee maintains its chief executive office, principal
place of business, and location of its consolidated business and financial
records; and Schedule 23.10 also lists the Lessee's legal name and each name
under or by which the Lessee conducts its business and each state in which the
Lessee conducts business.
Section 23.11. Taxes. The Lessee has filed all tax returns
which have been required to be filed by it, and has paid or provided adequate
reserves for the payment of all taxes, including, without limitation, all
payroll taxes and federal and state withholding taxes, and all assessments
payable by it that have become due, other than those that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been established, and are
being maintained, in accordance with GAAP. As of the Series 1996-2 Closing
Date, there is no ongoing audit (other than routine sales tax audits and other
routine audits) or, to the Lessee's knowledge, other governmental investigation
of the tax liability of the Lessee and there is no unresolved claim by a taxing
authority concerning the Lessee's tax liability for any period for which
returns have been filed or were due other than those contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
established, and are being maintained, in accordance with GAAP.
Section 23.12. Governmental Authorizations. National, in its
capacity as the Lessee and the Servicer and otherwise, has all licenses,
franchises, permits and other governmental authorizations necessary for all
businesses presently carried on by it (including owning and leasing the real
and personal property owned and leased by it), except where failure to obtain
such licenses, franchises, permits and other governmental authorizations is not
reasonably likely to have a Material Adverse Effect.
Section 23.13. Absence of Default. National is in compliance
with all of the provisions of its certificate of incorporation and by-laws and
no event has occurred or failed to occur which has not been remedied or waived,
the occurrence or non-occurrence of which constitutes (i) a Lease Event of
Default or Potential Lease Event of Default, or (ii) an event of default by
National, in its capacity as the Lessee or the Servicer or otherwise, under any
material indenture, agreement or other instrument (other than the Related
Documents) that is reasonably likely to have a Material Adverse Effect, and the
Lessee is not subject to any judgment, decree or final order pursuant to which
National, in its capacity as the Lessee or the Servicer or otherwise, or any of
its properties may be bound or affected that is reasonably likely to have a
Material Adverse Effect.
Section 23.14. Compliance with Requirements of Law. Except
as disclosed in Schedule 23.14 hereto, National, in its capacity as the Lessee
or the Servicer or otherwise: (i) is not in violation of any law, ordinance,
rule, regulation or order of any Governmental Authority applicable to it or its
property, which violation is reasonably likely to have a Material Adverse
Effect, and no such violation has been alleged, (ii) has filed in a timely
manner all reports, documents and other materials required to be filed by it
with any governmental bureau,
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agency or instrumentality (and the information contained in each of such
material filings is true, correct and complete in all material respects),
except where failure to make such filings is not reasonably likely to have a
Material Adverse Effect and (iii) has retained all records and documents
required to be retained by it pursuant to any Requirement of Law, except where
failure to retain such records is not reasonably likely to have a Material
Adverse Effect.
Section 23.15. Eligible Vehicles. Each Vehicle is or will
be, on the Vehicle Funding Date therefor hereunder, an Eligible Vehicle.
Section 23.16. Repurchase Programs. No Manufacturer Default
or Manufacturer Ineligibility Event has occurred and is continuing.
Section 23.17. Title to Assets. National has good, legal and
marketable title to, or a valid leasehold interest in, all of its assets,
except to the extent no Material Adverse Effect is reasonably likely to result.
National's assets are in reasonably good repair and operating condition
(subject to normal wear and tear and normal course reserves and accruals).
Section 23.18. Accuracy of Information. All certificates,
reports, statements, documents and other information furnished to the Lessor,
the Trustee, the Master Collateral Agent, the Liquidity Agent or the NFC
Collateral Agent, by the Lessee pursuant to any provision of any Related
Document, or in connection with or pursuant to any amendment or modification
of, or waiver under, any Related Document, shall, at the time the same are so
furnished, be complete and correct in all material respects to the extent
necessary to give the Lessor, the Trustee, the Master Collateral Agent, the
Liquidity Agent or the NFC Collateral Agent, as the case may be, true and
accurate knowledge of the subject matter thereof, and the furnishing of the
same to the Lessor, the Trustee, the Master Collateral Agent, the Liquidity
Agent or the NFC Collateral Agent, as the case may be, shall constitute a
representation and warranty by the Lessee made on the date the same are
furnished to the Lessor, the Trustee, the Master Collateral Agent, the
Liquidity Agent or the NFC Collateral Agent, as the case may be, to the effect
specified herein.
Section 23.19. Environmental Matters. (a) To the knowledge
of the Lessee, National, in its capacity as the Lessee and the Servicer and
otherwise, is in compliance with all Environmental Laws, except where the
failure to comply would not reasonably be expected to have a Material Adverse
Effect.
(b) To the knowledge of the Lessee, National, in its
capacity as the Lessee and the Servicer and otherwise, has obtained and is in
compliance with, all permits, licenses and other authorizations that are
required pursuant to Environmental Laws for the occupation of its facilities
and the operation of its business, except for such failure to obtain or comply
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.
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(c) To the knowledge of the Lessee, National, in its
capacity as the Lessee or the Servicer or otherwise, has not, since the Series
1996-2 Closing Date, received any written notice, claim, demand, report or
other information that it has not provided to the Lessor, the Trustee, the
Liquidity Agent, the NFC Collateral Agent and each Rating Agency regarding any
violation by National, in its capacity as the Lessee or the Servicer or
otherwise, or Old National of, or National Liabilities under, Environmental
Laws (including without limitation liability for investigatory costs, cleanup
or remediation or removal costs, governmental response costs, natural resource
damages, property damage, personal injury, fines or penalties arising out of or
relating to the presence, discharge, emission, release or threatened release of
any Hazardous Substances at any location), except for any such violation or
National Liability that would not reasonably be expected to have a Material
Adverse Effect.
(d) To the knowledge of the Lessee, National, in its
capacity as the Lessee or the Servicer or otherwise, has not entered into, has
not agreed to, and is not subject to any judgment, decree, or order under any
Environmental Law, including without limitation relating to compliance or to
investigation, cleanup, remediation or removal of Hazardous Substances, which
judgment, decree, or order would reasonably be expected to have a Material
Adverse Effect.
Section 23.20. Burdensome Provisions. National, in its
capacity as the Lessee or the Servicer or otherwise, is not a party to or bound
by any Contractual Obligation that is reasonably likely to have a Material
Adverse Effect.
Section 23.21. Solvency. The Lessee is not insolvent (as
such term is defined in the Bankruptcy Code), has adequate capital or assets to
carry on its businesses, and intends to and believes that it will be able to
pay its debts as such debts become due.
Section 23.22. Stock Ownership. All common stock of the
General Partner of the Lessor owned by the Lessee is owned free and clear of
all Liens.
Section 23.23. Necessary Actions. Upon the Servicer causing
the Lien of the Master Collateral Agent to be noted on the Certificates of
Title with respect to the Vehicles or as otherwise provided for by the Master
Collateral Agency Agreement or the Indenture, all filings, registrations and
recordings necessary or appropriate to create, preserve, protect and perfect
the security interest granted to the Master Collateral Agent in respect of the
Master Collateral have been accomplished and the security interest granted to
the Master Collateral Agent pursuant to the Master Collateral Agency Agreement
in and to the Master Collateral constitutes a perfected security interest
therein prior to the rights of all other Persons therein and subject to no
other Liens other than Permitted Liens and is entitled to all rights,
priorities and benefits afforded to perfected security interests by the UCC or
other relevant law as enacted in any relevant jurisdiction.
Section 23.24. Supplemental Documents True and Correct. All
information contained in any Vehicle Order, any Vehicle Acquisition Schedule or
any other material
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Supplemental Document which has been submitted, or which may hereafter be
submitted by the Lessee to the Lessor is, or will be, true, correct and
complete in all material respects.
Section 23.25. Initial Vehicles. As of the Series 1996-2
Closing Date, there are no Initial Vehicles that are part of the Refinanced
Vehicles.
SECTION 24. CERTAIN AFFIRMATIVE COVENANTS. The Lessee
and, as applicable, the Servicer, each covenants and agrees that, until
the expiration or termination of this Agreement, and thereafter until the
obligations of the Lessee and the Servicer under this Agreement and the Related
Documents are satisfied in full, unless at any time the Lessor, the Master
Collateral Agent, the Trustee, the NFC Collateral Agent and, so long as it is
an A Support Credit Enhancer, GM shall otherwise expressly consent in writing,
it will:
Section 24.1. Corporate Existence; Foreign Qualification.
Do and cause to be done at all times all things necessary to (i)
maintain and preserve its corporate existence and corporate power and authority
to own its properties and to carry on its business, (ii) be duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary and the
failure to so qualify is reasonably likely to have a Material Adverse Effect
and (iii) comply with all Contractual Obligations and Requirements of Law
binding upon it, except to the extent that the failure to comply therewith is
not reasonably likely to, in the aggregate, have a Material Adverse Effect.
Section 24.2. Books, Records and Inspections. (i) Maintain
complete and accurate books and records with respect to Vehicles leased under
this Agreement and the other Master Collateral; (ii) at any time and from time
to time during regular business hours, upon not less than reasonable prior
notice from the Lessor, the Master Collateral Agent, the Trustee or the NFC
Collateral Agent, permit the Lessor, the Master Collateral Agent, the Trustee
or the NFC Collateral Agent (or such other person who may be designated from
time to time by the Lessor, the Master Collateral Agent, the Trustee or the NFC
Collateral Agent), or its agents or representatives to examine and make copies
of such books, records and documents in the possession or under the control of
the Lessee relating to the Vehicles leased under this Agreement and the other
Master Collateral as the Lessor, the Master Collateral Agent, the Trustee, the
NFC Collateral Agent or such person may reasonably request (including in
connection with the Lessor's, the Trustee's, the Master Collateral Agent's or
the NFC Collateral Agent's satisfaction of any requests of a Manufacturer
performing an audit under its Repurchase Program); and (iii) permit the Lessor,
the Master Collateral Agent, the Trustee or the NFC Collateral Agent to visit
the office (which office shall be in the continental United States and, if it
is not the office where such materials normally are kept, shall be accessible
without unreasonable effort or expense) and properties of the Lessee for the
purpose of examining such materials, and to discuss matters relating to the
Vehicles leased under this Agreement and the other Master Collateral or the
Lessee's (or the Servicer's) performance under this Agreement with the Lessee's
independent public accountants or with any of the officers or employees of the
Lessee having knowledge of such matters; provided, however, that in the case of
clauses (ii) and (iii) above, any of the Master Collateral Agent, the Trustee,
the NFC Collateral Agent and/or
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their agents or representatives, as applicable, examining any such material
shall perform such examination at the same time as the other such parties
performing such examination of such material.
Section 24.3. Maintenance of Properties. Maintain or cause
to be maintained (i) in the ordinary course of business in good repair, working
order and condition (reasonable wear and tear excepted) all properties,
including, without limitation, vehicles necessary for the operation of its
businesses, and from time to time make or cause to be made all needed and
appropriate repairs, renewals, replacements, additions, betterments, and
improvements thereto, except to the extent no Material Adverse Effect is
reasonably likely to result, and (ii) good, legal and marketable title to, or a
valid leasehold interest in, all of its assets other than in the case of any
Vehicles or other assets that, in the aggregate, are immaterial.
Section 24.4. Accounting Methods; Financial Records.
Maintain, and cause its material Subsidiaries to maintain, a system of
accounting established and administered in accordance with GAAP, keep, and
cause its material Subsidiaries to keep, adequate records and books of account
in which complete entries will be made in accordance with such accounting
principles and reflecting all transactions required to be reflected by such
accounting principles and keep, and cause its material Subsidiaries to keep,
accurate and complete records of their respective properties and assets.
Section 24.5. Insurance. (a) Maintain or cause to be
maintained, with financially sound and reputable insurers satisfactory to the
Lessor, the Trustee and the NFC Collateral Agent, (i) personal injury and
damage insurance (including self-insurance) with respect to the Vehicles and
(ii) insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by corporations of established
reputation engaged in the same or similar businesses and similarly situated, of
such types and in such amounts as are customarily carried under similar
circumstances by such other corporations and the Lessee shall, from time to
time, deliver to the Lessor, the Trustee and the NFC Collateral Agent, as the
Lessor, the Trustee or the NFC Collateral Agent, as applicable, shall request,
copies of certificates describing all insurance then in effect; provided,
however, that the Lessee may continue its current practices of self-insurance
setting aside adequate reserves to cover any and all losses: (x) which would
otherwise be covered under any standard comprehensive and collision policies of
insurance; and (y) arising from liability to third parties for bodily injuries,
death, and property damage in an aggregate amount up to Two Million Dollars
($2,000,000) per occurrence or such greater amount per occurrence as may be
from time to time hereafter approved in writing by the Lessor, the Trustee and
the NFC Collateral Agent (which approval shall not be unreasonably withheld);
provided, further, however, that the Lessee shall obtain excess insurance
coverage in an amount not less than Thirty Million Dollars ($30,000,000) for
any claims of liability against the Lessee relating to its ownership or use of
vehicles.
(b) The Lessee will require that each insurance policy
referred to in the foregoing clause (a) provide for at least thirty (30) days
prior written notice to the Master Collateral Agent of any termination of or
proposed cancellation or nonrenewal of such policy
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and that each insurance policy insuring assets pledged to the Master Collateral
Agent name the Master Collateral Agent as an additional insured or additional
loss payee, as appropriate, pursuant to certificates in form and substance
reasonably satisfactory to the Master Collateral Agent.
Section 24.6. Repurchase Programs. Turn in each Vehicle
leased by the Lessee to the relevant Manufacturer within the Repurchase Period
therefor pursuant to Section 12.2. (unless the Lessee (i) sells such Vehicle
pursuant to Section 27 and, prior to the end of the Repurchase Period therefor,
causes to be deposited to the Master Collateral Account (or as otherwise
directed by the NFC Collateral Agent pursuant to the NFC Collateral Agreement)
the sales proceeds therefor in cash in an amount pursuant to such Section, (ii)
purchases such Vehicle as permitted by, and pursuant to the requirements of,
this Agreement and, prior to the end of the Repurchase Period therefor,
deposits to the NFC Collection Account (or as otherwise directed by the NFC
Collateral Agent pursuant to the NFC Collateral Agreement) the purchase price
therefor in cash in the amount so required, or (iii) in the case of any Vehicle
that becomes a Casualty or ceases to be an Eligible Vehicle, deposits to the
NFC Collection Account (or as otherwise directed by the NFC Collateral Agent
pursuant to the NFC Collateral Agreement) the Casualty Payment therefor in cash
pursuant to Section 7); and, with respect to each Vehicle leased by the Lessee,
comply in all material respects with all of its obligations under the
Repurchase Program relating to such Vehicle.
Section 24.7. Reporting Requirements. Except as otherwise
specified below, furnish, or cause to be furnished to the Lessor, the Master
Collateral Agent, the Trustee, the NFC Collateral Agent, and, in the case of
items (iii)(b), (vi) and (x) below, each Rating Agency, and, in the case of
items (i), (ii), (vi) and (xi), any Holder of any Shared Collateral Series Note
that has delivered to the Lessor a written request for same:
(i) Audit Report. As soon as available and in any event
within 90 days after the end of each fiscal year of the Lessee, (x)
consolidated and consolidating financial statements consisting of a
balance sheet of the Lessee and its Subsidiaries as at the end of such
fiscal year and statements of income, stockholders' equity and cash
flows of the Lessee and its Subsidiaries for such fiscal year, setting
forth in comparative form the corresponding figures for the preceding
fiscal year (if applicable), certified by and containing an opinion,
unqualified as to scope, of Arthur Andersen & Co. or other
independent certified public accountants of nationally recognized
standing selected by the Lessee and acceptable to the Lessor, the
Trustee and the NFC Collateral Agent, and (y) a letter in customary
form from such accountants addressed to the Lessor, the Trustee, the
Master Collateral Agent and the NFC Collateral Agent stating that, in
the course of their annual audit of the books and records of the
Lessee and its Subsidiaries, no Potential Lease Event of Default or
Lease Event of Default has come to their attention which was
continuing at the close of such fiscal year or on the date of their
letter, or, if such an event has come to the attention of such
accountants and was continuing at the close of such fiscal year or on
the date of their letter, the nature of such event, it being
understood that such accountants shall have no liability to the
Lessor, the Trustee, the
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Master Collateral Agent or the NFC Collateral Agent by reason of the
failure of such accountants to obtain knowledge of the occurrence or
continuance of such a Potential Lease Event of Default or Lease Event
of Default;
(ii) Quarterly Statements. As soon as available and in
any event within 45 days after the end of each of the first three
quarters of each fiscal year of the Lessee, (x) financial statements
consisting of consolidated and consolidating balance sheets of the
Lessee and its Subsidiaries as at the end of such quarter and
statements of income, stockholders' equity and cash flows of the
Lessee and its Subsidiaries for each such quarter, setting forth in
comparative form the corresponding figures for the corresponding
periods of the preceding fiscal year (if applicable), all in
reasonable detail and certified (subject to normal year-end audit
adjustments) by a senior financial officer of the Lessee as having
been prepared in accordance with GAAP, and (y) a letter from such
officer addressed to the Lessor, the Trustee, the Master Collateral
Agent and the NFC Collateral Agent stating that no Potential Lease
Event of Default or Lease Event of Default has come to his attention
which was continuing at the end of such quarter or on the date of his
letter, or, if such an event has come to his attention and was
continuing at the end of such quarter or on the date of his letter,
indicating the nature of such event and the action which the Lessee
proposes to take with respect thereto;
(iii) Lease Events of Default; Amortization Events.
Promptly after becoming aware thereof, (a) notice of the occurrence of
any Potential Lease Event of Default or Lease Event of Default,
together with a written statement of an Authorized Officer of the
Lessee describing such event and the action that the Lessee proposes
to take with respect thereto, and (b) notice of any Potential
Amortization Event or Amortization Event;
(iv) Monthly Vehicle Statements. In the case of the
Master Collateral Agent, on or before each Determination Date, a
monthly vehicle statement (each, a "Monthly Vehicle Statement") in a
form acceptable to the Lessor, which shall specify (i) the last eight
digits of the VIN for each Vehicle leased hereunder during the Related
Month by the Lessee, (ii) whether such Vehicle is leased under Annex A
or Annex B hereto, (iii) the Capitalized Cost for each such Vehicle
and (iv) the aggregate Net Book Value of such Vehicles as of the end
of the Related Month;
(v) Daily Reports. In the case of the Master Collateral
Agent, within one Business Day after a request for any Daily Report
(as defined below) is made by the Master Collateral Agent, a copy of
such Daily Report. On each Business Day commencing on the Lease
Commencement Date, the Servicer shall prepare and maintain at its
office a record (each, a "Daily Report") setting forth the aggregate
of the amounts deposited in the NFC Collection Account on the
immediately preceding Business Day, which shall consist of: (A) the
aggregate amount of payments received from Manufacturers and/or
auction dealers under Repurchase Programs related to the Vehicles and
deposited in the NFC Collection Account (or as otherwise directed by
the NFC Collateral Agent pursuant to the NFC Collateral Agreement)
from the Master Collateral
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Account or otherwise, plus (B) the aggregate amount of proceeds
received from third parties (other than Manufacturers and auction
dealers) with respect to the sale of Vehicles and deposited in the NFC
Collection Account (or as otherwise directed by the NFC Collateral
Agent pursuant to the NFC Collateral Agreement) from the Master
Collateral Account or otherwise, plus (C) the aggregate amount of
other Collections deposited in the NFC Collection Account (or as
otherwise directed by the NFC Collateral Agent pursuant to the NFC
Collateral Agreement);
(vi) Monthly Certificate. On or before each Determination
Date, an Officer's Certificate of the Servicer substantially in the
form of Exhibit A (each, a "Monthly Certificate") setting forth, inter
alia, the following information (which, in the cases of clauses (c),
(d) and (e) below, will be expressed as a dollar amount per $1,000 of
the original principal amount of the Notes and as a percentage of the
outstanding principal balance of the Notes as of such date): (a) the
aggregate amount of payments received from the Manufacturers and/or
auction dealers under Repurchase Programs and the aggregate amount of
payments received from third parties (other than Manufacturers and
auction dealers) with respect to the sale of Vehicles and deposited in
the NFC Collection Account (or as otherwise directed by the NFC
Collateral Agent pursuant to the NFC Collateral Agreement) from the
Master Collateral Account or otherwise and the aggregate amount of
other Collections deposited in the NFC Collection Account (or as
otherwise directed by the NFC Collateral Agent pursuant to the NFC
Collateral Agreement) for the Related Month with respect to such
Determination Date; (b) the Invested Percentage on the last day of the
Related Month of the Series 1996-2 Note and, if any, each other Series
of Shared Collateral Series Notes and each class of each Series of
Shared Collateral Series Note; (c) for the Series 1996-2 Note and, if
any, each other Series of Shared Collateral Series Notes and each
class of each Series of Shared Collateral Series Notes, the total
amount to be distributed to Noteholders on the next succeeding
Distribution Date; (d) for the Series 1996-2 Note and, if any, each
other Series of Shared Collateral Series Note and each class of each
Series of Shared Collateral Series Notes, the amount of such
distribution allocable to principal on the Notes; (e) for the Series
1996-2 Note and, if any, each other Series of Shared Collateral Series
Notes and each class of each Series of Shared Collateral Series Notes,
the amount of such distribution allocable to interest on the Notes;
(f) for the Series 1996-2 Note and, if any, each other Series of
Shared Collateral Series Notes and each class of each Series of Shared
Collateral Series Notes, the amount of Enhancement used or drawn in
connection with the distribution to Noteholders of such Series or
class on the next succeeding Distribution Date, together with the
aggregate amount of remaining Enhancement not theretofore used or
drawn; (g) for the Series 1996-2 Note and, if any, each other Series
of Shared Collateral Series Notes, the Series Monthly Servicing Fee
for the next succeeding Payment Date; (h) for each other Series, if
any, of Shared Collateral Series Notes and each class of each Series
of Shared Collateral Series Notes, the existing Carryover Controlled
Amortization Amount, if any; (i) the Pool Factor with respect to such
Related Month for the Series 1996-2 Note and, if any, each other
Series of Shared Collateral Series Notes and each class of each Series
of Shared Collateral Series Notes; (j) a list of
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all Acquired Vehicles and Financed Vehicles leased hereunder at the
close of business on the last day of the Related Month; (k) the
Aggregate Asset Amount and the amount of the Asset Amount Deficiency,
if any, at the close of business on the last day of the Related Month;
(l) if Enhancement is provided for any other Series, if any, of Shared
Collateral Series Notes or any class of a Series of Shared Collateral
Series Notes by means of overcollateralization, the amount of
recoveries and losses for the Related Month, whether an Enhancement
Deficiency exists with respect to such Series or class and the amount
thereof, or the amount available for such overcollateralization; and
(m) whether, to the knowledge of the Servicer, any Lien exists on any
of the Master Collateral, Collateral or Assigned Collateral (other
than Liens granted pursuant to the Indenture and the other Related
Documents or permitted thereunder) which is reasonable likely to have
a Material Adverse Effect;
(vii) Manufacturers. Promptly after obtaining actual
knowledge thereof, notice of any Manufacturer Default, Manufacturer
Ineligibility Event or termination or replacement of a Repurchase
Program;
(viii) Litigation. Promptly after becoming aware thereof,
notice of any claims, litigation, arbitration, governmental
investigation or proceeding or inquiry that is pending or, to the best
of the Lessee's knowledge, threatened against the Lessee which is
reasonably likely to have a Material Adverse Effect;
(ix) ERISA. Promptly after becoming aware thereof, notice
of (x) the termination of any Pension Plan; (y) the failure to make a
contribution to any Pension Plan maintained by the Lessee or any
member of the Controlled Group sufficient to give rise to a Lien under
Section 302(f)(1) of ERISA; and (z) the existence or occurrence of a
condition, event or transaction with respect to any Pension Plan which
could reasonably be expected to result in the incurrence by the Lessee
or any member of the Controlled Group of liabilities, fines or
penalties in an amount that is reasonably likely to have a Material
Adverse Effect;
(x) Covenant Compliance. For each fiscal quarter of the
Lessee, by the first date following the end of such fiscal quarter by
which the Lessee is required to deliver the information described in
item (i) or (ii), as applicable, above, an Officer's Certificate from
a duly authorized financial officer of the Lessee certifying that the
Lessee is in compliance with its covenants set forth in Sections 25.5
and 25.6 hereof with respect to the period ending on the last day of
such fiscal quarter and specifying the method of calculation used in
determining such compliance; and
(xi) Other. Promptly, from time to time, such other
information, documents, or reports respecting the Vehicles or the
other Master Collateral or the condition, financial or otherwise, or
operations of the Lessee or the Servicer as the Lessor, the Master
Collateral Agent, the Trustee or the NFC Collateral Agent may from
time to time reasonably request in order to protect the interests of
the Lessor, the Master Collateral
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Agent, the Trustee or the NFC Collateral Agent under or as
contemplated by this Agreement or any other Related Document.
Section 24.8. Taxes and Liabilities. Pay when due all taxes,
assessments and other material (determined on a consolidated basis) liabilities
(including titling fees and registration fees payable with respect to Vehicles)
except as contested in good faith and by appropriate proceedings with respect
to which adequate reserves have been established, and are being maintained, in
accordance with GAAP if and so long as forfeiture of any Vehicles or other
Master Collateral will not result from the failure to pay any such taxes,
assessments or other material liabilities during the period of any such contest.
Section 24.9. Business. Engage only in business in
substantially the same or related fields as the business conducted on the date
hereof and such other lines of business which, in the aggregate, do not
constitute a material part of its operations.
Section 24.10. Maintenance of the Vehicles. (i) Maintain and
cause to be maintained in good repair, working order, and condition all of the
Vehicles in accordance with its ordinary business practices with respect to all
other vehicles owned by it and will use its best efforts to maintain each such
Vehicle as an eligible vehicle under the related Repurchase Program, except in
each case to the extent that any such failure to comply with such requirements
is not reasonably likely to, in the aggregate, materially adversely affect the
interests of the Lessor, the Master Collateral Agent, the Trustee or the NFC
Collateral Agent under this Agreement, the Master Collateral Agency Agreement,
the Indenture and Series 1996-2 Supplement, or the NFC Collateral Agreement or
the likelihood of the Lessee's payment of Liabilities; and (ii) perform all of
its obligations as Servicer as set forth in the Master Collateral Agency
Agreement.
Section 24.11. Maintenance of Separate Existence. (i)
Maintain in place all policies and procedures, and take and continue to take
all actions, described in the factual assumptions set forth in that certain
opinion letter issued by Faegre & Benson LLP dated December 20, 1996 addressing
the issue of substantive consolidation as it may relate to the Lessee and the
Lessor (a copy of which opinion letter the Lessee hereby acknowledges it has
received) and relating to it, and (ii) on a semi-annual basis, provide to the
Rating Agencies, the Trustee, the Master Collateral Agent and the NFC
Collateral Agent an Officer's Certificate certifying that it is in compliance
with its obligations under this Section 24.11.
Section 24.12. Maintenance of Enhancement. Maintain the
Series 1996-2 Fronting Letters of Credit or other Enhancement for the Series
1996-2 Note and, if any, other Shared Collateral Series Notes in a stated
amount equal to or greater than the amount required by Moody's and S&P in order
to maintain a rating of not less than A-1 by S&P and P-1 by Moody's on the
Commercial Paper Notes.
Section 24.13. Repurchase Payments; Sales Proceeds. (i)
Direct each Manufacturer to make all payments under the Repurchase Programs
with respect to Vehicles
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leased under this Agreement directly to the Master Collateral Account (or as
otherwise directed by the NFC Collateral Agent pursuant to the NFC Collateral
Agreement); (ii) cause all payments by any other Persons (including payments
contemplated by Section 12.2) with respect to any Master Collateral (other than
the Master Collateral described in the proviso to this Section) to be made
directly to the Master Collateral Account (or as otherwise directed by the NFC
Collateral Agent pursuant to the NFC Collateral Agreement); (iii) in the case
of any such payments with respect to any Master Collateral received directly by
the Lessee, except as described in the proviso to this Section, by the second
Business Day following its receipt thereof, deposit such payments into the
Master Collateral Account (or as otherwise directed by the NFC Collateral Agent
pursuant to the NFC Collateral Agreement); and (iv) within two Business Days of
the Lessee's receipt thereof, deposit all amounts representing the proceeds
from sales by auction dealers under a Guaranteed Depreciation Program and sales
(including amounts paid to the Lessee by a Manufacturer as a result of the
Lessee's sale of such Vehicle outside such Manufacturer's Repurchase Program)
of Vehicles by the Lessee to third parties (other than under any related
Repurchase Program) into the Master Collateral Account (or as otherwise
directed by the NFC Collateral Agent pursuant to the NFC Collateral Agreement);
provided, however, that insurance proceeds with respect to Vehicles will only
be deposited into the Master Collateral Account if an Amortization Event or
Potential Amortization Event shall have occurred and be continuing.
Section 24.14. Certificates of Title; Verification of Titles.
(i) Take, or cause to be taken, such action as shall be necessary to submit all
of the Certificates of Title to the appropriate state authority for notation
of the Master Collateral Agent's lien thereon (it being understood and agreed
that pursuant to the Master Collateral Agency Agreement, the original
Certificates of Title relating to the Vehicles shall be held by the Servicer,
in trust for the benefit of the Master Collateral Agent, the Trustee as
assignee of the Lessor and the NFC Collateral Agent as assignee of the Series
1996-2 Noteholder, and the Certificates of Title shall be subject to all of the
provisions of the Master Collateral Agency Agreement); (ii) no more than
semi-annually, upon the request of any one (but not more than one) of the
Lessor, the Trustee, the Master Collateral Agent or the NFC Collateral Agent,
cause a title check of a representative or random sample of titles (such random
sample to be compiled taking into account the multiple locations at which the
Certificates of Title with respect to the Vehicles are held by the Servicer) by
a Person acceptable to the NFC Collateral Agent on a reasonable number (but in
no event less than 2%) of the Vehicles, including verification that the titles
reflect the pledge to the Master Collateral Agent, and prepare a report of
exceptions with the results of such title check and cause such report to be
furnished to the Lessor, the Trustee, the Master Collateral Agent, the NFC
Collateral Agent and the Rating Agencies (provided, however, if (x) any such
title check reveals that 10% of such sample does not comply with the
requirement that (1) the Master Collateral Agent be noted as the first
lienholder on such titles or (2) the Lessor (or, in the case of Financed
Vehicles, the Lessee) be listed as the registered owner on such titles or (y) a
Potential Lease Event of Default or Lease Event of Default has occurred and is
continuing, then upon the request of the Master Collateral Agent, the Lessor,
the Trustee or the NFC Collateral Agent, the Lessee will cause additional title
checks to be performed (at the Lessee's expense) on a reasonable number of the
Vehicles); and (iii) at any time, upon the request of the Lessor,
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the Trustee, the Master Collateral Agent or the NFC Collateral Agent, cause (at
the requesting party's expense) a title check in accordance with the above
stated procedures to be performed on the Vehicles.
Section 24.15. Master Collateral Agency Agreement.
Concurrently with each leasing of a Vehicle under this Agreement, indicate on
its computer records that the Master Collateral Agent as assignee of the Lessor
or the Lessee, as the case may be, is the holder of a Lien on such Vehicle for
the benefit of the Trustee (and ultimately the NFC Collateral Agent) pursuant
to the terms of the Master Collateral Agency Agreement. The Lessee shall not
utilize selection procedures which it believes are adverse to the Lessor, the
Trustee or the NFC Collateral Agent in selecting the Vehicles to be designated
to NFLP and the Series 1996-2 Noteholder, respectively, as Financing Sources
and the Trustee (for the benefit of the Series 1996-2 Noteholder) and the NFC
Collateral Agent (for the benefit of the NFC Secured Parties), respectively, as
Beneficiaries under the Master Collateral Agreement.
Section 24.16. Compliance with Laws. (i) Not violate any
law, ordinance, rule, regulation or order of any Governmental Authority
applicable to it or its property, which violation is reasonably likely to have
a Material Adverse Effect, (ii) file in a timely manner all reports, documents
and other materials required to be filed by it with any governmental bureau,
agency or instrumentality, except where failure to make such filings is not
reasonably likely to have a Material Adverse Effect and (iii) retain all
records and documents required to be retained by it pursuant to any Requirement
of Law, except where failure to retain such records is not reasonably likely to
have a Material Adverse Effect.
Section 24.17. Delivery of Information. Provide the Lessor
with any information or materials reasonably necessary for the Lessor to comply
with its obligations under the Indenture or the Liquidity Agreement.
Section 24.18. Restrictions. Insure that at least 85% of all
Vehicles leased hereunder will have been manufactured by GM and not more than
15% of all Vehicles leased hereunder will have been manufactured by Chrysler.
Section 24.19. Disclosure of Material Agreements. Provide to
the Lessor, the Trustee, the Master Collateral Agent and the NFC Collateral
Agent, promptly upon the execution or other adoption thereof by the Lessee,
copies of all agreements, contracts, engagements or other types of arrangements
(and any and all amendments, modifications and waivers related thereto) entered
into by the Lessee with (a) any stockholder who (i) is part of a Controlling
Person of the Lessee or (ii) has beneficial ownership (within the meaning of
Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the
Lessee (or other securities convertible into such securities) representing 5%
or more of (A) all securities of the Lessee or (B) the combined voting power of
all securities of the Lessee entitled to vote in the election of directors or
(b) an Affiliate of any such stockholder referred to in clause (a) pursuant to
which any such stockholder or Affiliate of such stockholder may receive
consideration in excess of $500,000.
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Section 24.20. Cash Audit. Cause an annual retroactive cash
analysis to be performed by nationally recognized independent auditors with
respect to at least twenty-five Vehicles (each such twenty-five Vehicles to be
a random sample compiled taking into account the multiple locations of the
Lessee at which Vehicles are located) sold in each month during such annual
period outside of any Repurchase Program, verifying that proceeds from such
sales have been deposited into the Master Collateral Account (or as otherwise
directed by the NFC Collateral Agent pursuant to the NFC Collateral Agreement),
by the second Business Day following the receipt of such funds, and shall cause
such auditors to prepare a report of exceptions to be delivered to the Master
Collateral Agent, the Lessor, the Trustee, the NFC Collateral Agent and the
Rating Agencies.
Section 24.21. Deliveries; Further Assurances. At its sole
expense, (i) immediately deliver or cause to be delivered to the Lessor (or the
Master Collateral Agent on the Lessor's behalf), in due form for transfer
(i.e., endorsed in blank), all securities, chattel paper, instruments and
documents, if any, at any time representing all or any of the Master Collateral
with respect to which the Trustee (for the benefit of the Series 1996-2
Noteholder) and the NFC Collateral Agent (for the benefit of the NFC Secured
Parties), respectively, are designated as the Beneficiaries (it being
understood that the Certificates of Title shall be held by the Servicer or the
Master Collateral Agent, as the case may be, pursuant to the provisions of the
Master Collateral Agency Agreement), and (ii) execute and deliver, or cause to
be executed and delivered, to the Lessor or the Master Collateral Agent, as the
case may be, in due form for filing or recording (and pay the cost of filing or
recording the same in all public offices reasonably deemed necessary or
advisable by the Lessor, the Master Collateral Agent, the Trustee or the NFC
Collateral Agent, as the case may be), such assignments, security agreements,
mortgages, consents, waivers, financing statements, and other documents, and do
such other acts and things, all as may from time to time be reasonably
necessary or desirable to establish and maintain to the satisfaction of the
Lessor, the Master Collateral Agent, the Trustee and the NFC Collateral Agent a
valid perfected first-priority Lien on and security interest in all of the
Master Collateral with respect to which the Trustee (for the benefit of the
Series 1996-2 Noteholder) and the NFC Collateral Agent (for the benefit of the
NFC Secured Parties), respectively, are designated as the Beneficiaries now or
hereafter existing or acquired.
Section 24.22. Additional Actions. In its capacity as
Servicer:
(a) instruct the Trustee or the Paying Agent, as
applicable, to make withdrawals and payments from the NFC Collection
Account, as contemplated in the Indenture;
(b) at the request of the Trustee as required or
permitted upon or after the occurrence of certain events specified in
the Indenture and, to the extent permitted under and in compliance
with applicable laws and regulations, execute and deliver, for the
benefit of the Series 1996-2 Noteholder under the Indenture, any and
all instruments necessary or appropriate to commence or maintain
enforcement proceedings with respect to Repurchase Programs or any
Enhancement;
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(c) make any filings, reports, notices, applications, or
registrations with, and to seek any consents or authorizations from
the Securities and Exchange Commission and any state securities laws
authority on behalf of the Lessor as may be necessary to comply with
any Federal or state securities laws or reporting requirements or
laws;
(d) upon the occurrence of a Series 1996-2 Lease Payment
Deficit, deliver to the Trustee a notice in the form attached hereto
as Exhibit B; and
(e) perform such other functions and take such other
actions as it is designated to perform or take pursuant to the terms
and conditions of any Related Document.
SECTION 25. CERTAIN NEGATIVE COVENANTS. Until the expiration
or termination of this Agreement and thereafter until the Liabilities are paid
in full, the Lessee agrees that, unless at any time the Lessor, the Master
Collateral Agent, the Trustee, the NFC Collateral Agent and, so long as it is
an A Support Credit Enhancer, GM shall otherwise expressly consent in writing,
it will not:
Section 25.1. Mergers, Consolidations. Be a party to any
merger or consolidation, other than a merger or consolidation of any Affiliate
of the Lessee into or with the Lessee (provided that the Lessee is the
surviving corporation).
Section 25.2. Regulations G, T, U and X. Use or permit any
amounts funded by the Lessor pursuant to the Financing Lease to be used, either
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of "purchasing or carrying margin stock" within the meaning of
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System, as amended from time to time.
Section 25.3. Liens. Create or permit to exist any Lien with
respect to any Master Collateral with respect to which the Trustee (for the
benefit of the Series 1996-2 Noteholder) and the NFC Collateral Agent (for the
benefit of the NFC Secured Parties), respectively, are designated as the
Beneficiaries, whether now or hereafter existing or acquired, except Permitted
Liens.
Section 25.4. Use of Vehicles. Use or contractually permit
any Vehicles to be used in any manner (i) that would make such Vehicles
ineligible for repurchase or auction under the related Eligible Repurchase
Program, (ii) for any illegal purposes or (iii) that could subject any Vehicles
to confiscation.
Section 25.5. Ratio of EBIT to Total Net Interest. Permit
the ratio of EBIT to Total Net Interest for any period of four consecutive
fiscal quarters to be less than the ratio of 1.2:1.
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Section 25.6. Ratio of Cash Flow to Total Fixed Charges.
Permit the ratio of Cash Flow to Total Fixed Charges for any period of four
consecutive fiscal quarters to be less than the ratio of 1.0:1.
Section 25.7. Other Indebtedness. Create, assume, incur,
suffer to exist or otherwise become or remain liable in respect of
Indebtedness, other than (i) Indebtedness incurred to finance Vehicles for use
in its daily rental operations, including, without limitation, any Indebtedness
incurred by the Lessee under the Related Documents, (ii) Indebtedness with
respect to letters of credit and surety bonds obtained for use in the ordinary
course of the Lessee's business in connection with its insurance and airport
requirements, (iii) Indebtedness under the Subordinated Promissory Note and the
GM Note, (iv) Indebtedness, the terms of which are reasonably satisfactory to
the Liquidity Agent, of up to $50 million owed to reinsurers of insurance
policies issued in favor of the Lessee and (v) additional Indebtedness in an
aggregate amount not in excess of $75 million at any one time outstanding.
Section 25.8. Restrictions on Distributions. (a) At any time
during the 36-month period commencing with June 7, 1995, take or permit any of
its Subsidiaries to take any of the following actions: (a) declare or pay any
dividends (other than dividends payable solely in common stock of the Lessee or
any such Subsidiary, as the case may be, or dividends payable by any direct or
indirect Subsidiary directly or indirectly to the Lessee) or return any capital
to, its stockholders or authorize or make any other distribution, payment or
delivery of property or Cash to its stockholders as such (other than
distributions by any Subsidiary to the Lessee), or subject to the last sentence
of this Section, redeem, retire, purchase or otherwise acquire, directly or
indirectly, for a consideration, any shares of any class of its capital stock,
now or hereafter outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or set aside any funds
for any of the foregoing purposes, and the Lessee will not permit any of its
Subsidiaries to purchase or otherwise acquire for consideration any shares of
any class of the capital stock of the Lessee or any other Subsidiary, as the
case may be, now or hereafter outstanding (or any options or warrants or stock
appreciation rights, issued by such Person with respect to its capital stock)
(all of the foregoing "Dividends") or (b) make any Distributions, except that
during the 12-month period commencing on June 7, 1996, the Lessee may pay
Dividends to its stockholders and make Distributions in an aggregate amount not
to exceed 62% of the National Equity, and during the 12-month period commencing
on June 7, 1997, the Lessee may pay Dividends to its stockholders and make
Distributions in an aggregate amount not to exceed 100% of the National Equity
less the aggregate amount of (A) all Dividends (regardless of whether such
Dividends represent a return on or a return of the National Equity) previously
paid to the stockholders and (B) all Distributions previously made.
(b) in addition to the foregoing limitations, in no event
(whether during or after the 36-month period referred to in Section 25.8(a)
above) declare or pay any Dividend or make any Distribution on any date (i) if
a Lease Event of Default shall have occurred and be continuing or (ii) if the
aggregate amount of (A) all Dividends (regardless of whether such Dividends
represent a return on or a return of the National Equity) paid by the Lessee to
its stockholders as of such date (including all Dividends paid prior to such
date) and (B)
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Distributions made by the Lessee and its Subsidiaries as of any such date
(including all Distributions made prior to such date) would exceed the
cumulative net income of the Lessee from June 7, 1995 to such date.
Notwithstanding Section 25.8(a) or (b), upon the death or the
retirement or termination from employment with the Lessee of any stockholder of
the Lessee, the Lessee may redeem, retire, purchase or otherwise acquire shares
of any class of its capital stock owned by such stockholder immediately prior
to his or her death, retirement or termination; provided, however, that, in any
calendar year, the Lessee may not redeem, retire, purchase or otherwise acquire
such shares with an aggregate value of more than that sum of (A) $500,000 and
(B) the aggregate amount of consideration received by the Lessee in connection
with the resale of any capital stock of the Lessee so repurchased to employees
or officers of the Lessee during such calendar year.
Section 25.9. Subordinated Promissory Note. Prepay prior to
its original stated maturity the Subordinated Promissory Note until after all
amounts due hereunder have been paid in full.
Section 25.10. Swaps. Incur any indebtedness or obligations
under any swap, cap, collar or other derivative instrument without the prior
written consent of the Trustee and the NFC Collateral Agent.
Section 25.11. Change of Location or Name. Change (a) the
location of its principal place of business, chief executive office or its
consolidated records concerning its business and financial affairs, or (b) its
legal name or the name under or by which it conducts its business, in each case
without first giving the Master Collateral Agent, the Trustee, the NFC
Collateral Agent, the Rating Agencies and the Lessor at least 60 days' advance
written notice thereof and having taken any and all action required to maintain
and preserve the first priority perfected Lien of the Master Collateral Agent
in the Master Collateral; provided, however, that notwithstanding the
foregoing, the Lessee shall not change the location of its principal place of
business, chief executive office or its consolidated records concerning its
business and financial affairs to any place outside the United States of
America.
SECTION 26. SERVICING COMPENSATION.
Section 26.1. As compensation for its servicing activities
hereunder and reimbursement for its expenses as set forth in Section 26.2, the
Servicer shall be entitled to receive from the Lessor a monthly servicing fee
(the "Monthly Servicing Fee"), payable in arrears on each Payment Date prior to
the termination of this Lease, the Indenture and the Master Collateral Agency
Agreement in an amount equal to the sum of the monthly servicing fees for all
Series of Shared Collateral Series Notes. Except as otherwise specified in the
related Supplement, the Monthly Servicing Fee for each Series of Shared
Collateral Series Notes (each, a "Series Monthly Servicing Fee") on each
Payment Date shall be equal to (i) the portion of the Supplemental Servicing
Fee allocated to such Series of Shared Collateral Series Notes pursuant
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to the related Supplement, plus (ii) one-twelfth of the product of (A) the
Servicing Fee Percentage for such Series and (B) the Invested Amount of such
Series as of the preceding Payment Date (after giving effect to any payments of
principal on such date). The Series Monthly Servicing Fee for each Series
shall be paid to the Servicer pursuant to the procedures set forth in the
applicable Supplement. The supplemental servicing fee (the "Supplemental
Servicing Fee") for any period shall be equal to all Carrying Charges
comprising payments due from the Servicer under Section 26.2 hereof.
Section 26.2. The Servicer's expenses include, and the
Servicer agrees to pay, the amounts due to the Trustee pursuant to Section 10.5
of the Indenture, plus the reasonable fees and disbursements of independent
accountants in connection with reports furnished pursuant to Sections 24.7(i)
and (ii), plus all other fees, expenses and indemnities incurred by the
Servicer or the Lessor in connection with the Servicer's activities hereunder
or under the Related Documents. The Servicer, however, shall not be liable for
any liabilities, costs or expenses of the Lessor, the Trustee or the
Noteholders arising under any tax law, including without limitation any
Federal, state or local income or franchise taxes or any other tax imposed on
or measured by income (or any interest or penalties with respect thereto or
arising from a failure to comply therewith), except to the extent incurred as a
result of the Servicer's violation of the provisions of this Lease or of the
Related Documents; provided, however, the foregoing provisions of this sentence
shall not affect the indemnification obligations of the Lessee under Section 15
of the Lease. In the event that the Servicer fails to pay any amount due to
the Trustee pursuant to Section 10.5 of the Base Indenture, the Trustee will be
entitled to receive such amounts due from the Monthly Servicing Fee prior to
payment thereof to the Servicer.
SECTION 27. RELEASE OF COLLATERAL. The parties agree that
pursuant to the provisions of this Section 27 and Sections 2.3 and 2.7 of the
Master Collateral Agency Agreement, any and all Liens for the benefit of the
Lessor (including the Lien of the Trustee as assignee of the Lessor, and of
the NFC Collateral Agent as assignee of the Series 1996-2 Noteholder, and in
each case as Beneficiary under the Master Collateral Agency Agreement) on the
Vehicles and the Certificates of Title therefor shall be released or deemed to
be released, as provided below. From and after the earliest of:
(a) in the case of a Vehicle subject to a Guaranteed
Depreciation Program, the date of the sale of such Vehicle by an
auction dealer to a third party, and in the case of any other Vehicle,
the Turnback Date for such Vehicle; or
(b) receipt of the purchase price by the Servicer or the
Lessee for a Vehicle sold in an ordinary course sale; or
(c) the payment in full of all obligations of the
Servicer and the Lessee under this Agreement with respect to a
Vehicle,
any and all Liens for the benefit of the Lessor (including the Lien of the
Trustee as assignee of the Lessor, and of the NFC Collateral Agent as assignee
of the Series 1996-2 Noteholder, and
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in each case as Beneficiary under the Master Collateral Agency Agreement) on
such Vehicle and the Certificate of Title therefor shall be deemed to be
released. The Lessor or the Servicer, acting as the agent of the Lessor, may
direct the Lessee to sell any Vehicle during the Repurchase Period therefor in
an ordinary course sale, provided that, if such sale is not made pursuant to
the related Repurchase Program, it is made in accordance with the requirements
of this Section 27. The Lessee agrees that for purposes of this Section 27 if
an ordinary course sale occurs during the Repurchase Period with respect to a
Vehicle, the Lessee shall only sell such Vehicle for a purchase price
(including any amounts paid by the Manufacturer as an incentive for selling
such Vehicle outside of the related Repurchase Program), net of all fees and
expenses incurred in connection with such sale, equal to or greater than the
Repurchase Price that it would have received under the related Purchase Program
if it had turned back such Vehicle to the Manufacturer, net of all fees and
expenses that would have been incurred in connection with such turn back less
reasonably predictable Excess Mileage Charges, Excess Damage Charges, Missing
Equipment Charges and other similar charges payable to the Lessee by such
Manufacturer as a result of the Lessee's sale of such Vehicle. In addition,
the Lessee agrees that ordinary course sales of Vehicles occurring during the
Repurchase Period related to such Vehicles will be limited to a maximum number
of Vehicles so sold of 10% per month of the number of Vehicles leased under
this Agreement. The Lessor shall, and shall cause the Trustee, the NFC
Collateral Agent and the Master Collateral Agent to, execute such documents and
instruments as the Lessee may reasonably request (including a power of attorney
of the Master Collateral Agent appointing the Lessee to act as the agent of the
Master Collateral Agent in taking such actions as are required to evidence the
release of the Lien of the Master Collateral Agent on Vehicles turned back or
sold pursuant to the provisions of this Section 27, which power of attorney
shall be revocable pursuant to Section 2.7(b) of the Master Collateral Agency
Agreement).
SECTION 28. BANKRUPTCY PETITION AGAINST LESSOR. The Lessee
hereby covenants and agrees that, prior to the date which is one year and one
day after the payment in full of all Commercial Paper Notes Outstanding, all
Series of Shared Collateral Series Notes and all other obligations of the
Lessor and NFC under the Related Documents, it will not institute against, or
join any other Person in instituting against, the Lessor or NFC any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States. In the event that the Lessee takes action in violation of this
Section 28, the Lessor agrees, for the benefit of the Shared Collateral Series
Noteholders, that it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such a petition by the Lessee against
the Lessor or the commencement of such action and raise the defense that the
Lessee has agreed in writing not to take such action and should be estopped and
precluded therefrom and such other defenses, if any, as its counsel advises
that it may assert. The provisions of this Section 28 shall survive the
termination of this Agreement.
SECTION 29. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER RELATED DOCUMENT,
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OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF THE TRUSTEE, THE LESSOR, THE NFC COLLATERAL AGENT OR THE
LESSEE SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
VEHICLE, OTHER MASTER COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
LESSOR'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH VEHICLE, OTHER
MASTER COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE LESSEE HEREBY EXPRESSLY
AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ALL FEDERAL AND
STATE COURTS OF THE STATE OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. THE LESSEE FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE LESSEE AND THE
LESSOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING
OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND
ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
TO THE EXTENT THAT THE LESSEE HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY IRREVOCABLY WAIVES
SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND ANY OTHER
RELATED DOCUMENT TO WHICH IT IS A PARTY.
SECTION 30. GOVERNING LAW. THIS AGREEMENT SHALL BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. Whenever possible each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement. All obligations of the Lessee and all rights of
the Lessor, the Master Collateral Agent, the Trustee, the NFC Collateral Agent
or, so long as it is an A Support Credit Enhancer, GM expressed herein shall be
in addition to and not in limitation of those provided by applicable law or in
any other written instrument or agreement.
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SECTION 31. JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT TO WHICH
IT IS A PARTY, OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR
ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY
RELATED TRANSACTION, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 32. NOTICES. All notices, amendments, waivers,
consents and other communications provided to any party hereto under this
Agreement shall be in writing and addressed, delivered or transmitted to such
party at its address or facsimile number set forth below its signature hereto
or at such other address or facsimile number as may be designated by such party
in a notice to the other parties. Any notice, if mailed and properly addressed
with postage prepaid or if properly addressed and sent by pre-paid courier
service, shall be deemed given when received; any notice, if transmitted by
facsimile, shall be deemed given when transmitted upon receipt of electronic
confirmation of transmission. In each case, a copy of all notices, requests
and other communications (other than any such notices, requests and other
communications in the ordinary course of business) that are sent by any party
or signatory hereunder shall be sent to the Trustee at the following address:
THE BANK OF NEW YORK
101 Barclay Street
Floor 12 East
New York, New York 10286
Attention: Corporate Trust Division
Telephone: (212) 815-5218
Facsimile: (212) 815-5999
and to the NFC Collateral Agent at the following address:
Until January 1, 1997:
CREDIT SUISSE
12 East 49th Street
New York, New York 10017
Attention: Asset Finance
Telephone: (212) 238-5370
Facsimile: (212) 238-5332
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From and after January 1, 1997:
CREDIT SUISSE FIRST BOSTON
11 Madison Avenue
New York, New York 10010
Attention: Asset Finance
Telephone: (212) 325-9078
Facsimile: (212) 325-6677
SECTION 33. HEADINGS. Section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
SECTION 34. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute one and the same Agreement.
SECTION 35. EFFECTIVENESS. This Agreement shall become
effective on the Lease Commencement Date, subject to the satisfaction of the
following conditions:
(i) The prior or concurrent delivery by the Lessee to the
Lessor, the Master Collateral Agent, the Trustee, the Liquidity Agent and the
NFC Collateral Agent of each of the following documents (in form and substance
satisfactory to the Lessor, the Master Collateral Agent, the Trustee, the
Liquidity Agent and the NFC Collateral Agent:
(a) Resolutions. Copies of resolutions of the Board of
Directors of the Lessee authorizing or ratifying the execution,
delivery and performance of this Agreement and the other Related
Documents to which it is party and those other documents and matters
required of it, in its capacity as Lessee or as Servicer or otherwise,
with respect to this Agreement and such other Related Documents, duly
certified by the Secretary or Assistant Secretary of the Lessee;
(b) Consents, etc. Certified copies of all documents
evidencing any necessary corporate action, consents and governmental
approvals (if any) with respect to this Agreement and the other
Related Documents to which the Lessee is party;
(c) Incumbency and Signatures. A certificate of the
Secretary or an Assistant Secretary of the Lessee certifying the names
of the individual or individuals authorized to sign this Agreement and
the other Related Documents to which it is party, together with a
sample of the true signature of each such individual (the Lessor, the
Master Collateral Agent, the Trustee, the Liquidity Agent and the NFC
Collateral Agent may conclusively rely on each such certificate until
formally advised by a like certificate of any changes therein);
50
<PAGE> 56
(d) Opinions of Counsel. The favorable opinions of
Faegre & Benson LLP, counsel for the Lessee, Kaye, Scholer, Fierman,
Hays & Handler LLP, special New York counsel for the Lessee, and
Wesley C. Fredenburg, Esquire, the General Counsel of the Lessee,
respectively, in each case addressed to the Lessor, the Trustee, the
NFC Collateral Agent, the Master Collateral Agent, the Series 1996-2
Fronting Credit Enhancers, the Series 1996-2 Support Credit Enhancers,
the Liquidity Agent, the Depositary, the Placement Agents, the Dealers
and the Rating Agencies and satisfactory in form and substance to the
addressees thereof;
(e) Good Standing Certificates. Certificates of good
standing for the Lessee in the jurisdiction of its organization and
the jurisdiction of its principal place of business;
(f) Search Reports. A written search report from a
Person satisfactory to the Lessor, the Master Collateral Agent, the
Trustee, the Liquidity Agent and the NFC Collateral Agent listing all
effective financing statements that name the Lessee as debtor or
assignor and that are filed in the jurisdictions in which filings were
made pursuant to subsection (h) below, together with copies of such
financing statements, and tax and judgment lien search reports from a
Person satisfactory to the Lessor, the Master Collateral Agent, the
Trustee, the Liquidity Agent and the NFC Collateral Agent showing no
evidence of such liens filed against the Lessee (other than in
connection with any Related Documents);
(g) Financing Statements. Executed, proper financing
statements on Form UCC-1, (i) naming the Lessee as debtor and the
Master Collateral Agent as secured party, or other, similar
instruments or documents, as may be necessary or, in the reasonable
opinion of the Lessor, the Master Collateral Agent, the Trustee, the
Liquidity Agent or the NFC Collateral Agent, desirable under the UCC
of all applicable jurisdictions to perfect the Master Collateral
Agent's interest in the Master Collateral with respect to which the
Trustee (for the benefit of the Series 1996-2 Noteholder) and the NFC
Collateral Agent (for the benefit of the NFC Secured Parties),
respectively, are designated as the Beneficiaries and (ii) naming the
Lessee as debtor, the Lessor as secured party and the Master
Collateral Agent as assignee, as may be necessary or desirable under
the UCC of all applicable jurisdictions to perfect the precautionary
security interest of the Lessor hereunder and the assignment of the
same to the Master Collateral Agent;
(h) Series 1996-2 Supplement. An executed copy of the
Series 1996-2 Supplement;
(i) Indenture. An executed copy of a supplement and
amendment to the Indenture substantially in the form of Exhibit
ACrompton & Knowles to the Second Amendment to Liquidity Agreement
referred to below;
51
<PAGE> 57
(j) Master Collateral Agency Agreement. An executed copy
of a supplement and amendment to the Master Collateral Agency
Agreement substantially in the form of Exhibit B to the Second
Amendment to Liquidity Agreement referred to below;
(k) Assignment Agreement. An executed copy of the
Assignment Agreement of each Manufacturer;
(l) Certified Copy of Repurchase Program. A copy of each
Repurchase Program relating to Vehicles which will be leased hereunder
and an Officer's Certificate, dated as of the Series 1996-2 Closing
Date, and duly executed by an Authorized Officer of the Lessee,
certifying that each such copy is true, correct and complete as of the
Series 1996-2 Closing Date; and
(m) Other. Such other documents as the Master Collateral
Agent, the Trustee, the Lessor, the Liquidity Agent or the NFC
Collateral Agent may reasonably request;
(ii) All conditions to the effectiveness of the Supplement
and Amendment to Base Indenture, dated as of December 20, 1996, shall have been
satisfied in all respects;
(iii) All conditions to the effectiveness of the Series
1996-2 Supplement and the issuance of the Series 1996-2 Notes thereunder shall
have been satisfied in all respects; and
(iv) All conditions to the effectiveness of the Second
Amendment to Liquidity Agreement dated as of December 20, 1996, attached hereto
as Exhibit C, shall have been satisfied in all respects.
52
<PAGE> 58
IN WITNESS WHEREOF, the parties have executed this Agreement or caused it to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
LESSEE AND SERVICER:
--------------------
NATIONAL CAR RENTAL SYSTEM, INC.
By: /s/ Ed Zinter
----------------------------------------
Name: E.A. Zinter
Title: EVP
Address: 7700 France Avenue South
Minneapolis, Minnesota 55435
Facsimile: (612) 893-6139
Telephone: (612) 830-2121
LESSOR:
-------
NATIONAL CAR RENTAL FINANCING
LIMITED PARTNERSHIP
By: NATIONAL CAR RENTAL FINANCING
CORPORATION,
its General Partner
By: /s/ M.J. Becker
----------------------------------------
Name: M.J. Becker
Title: Asst. Secretary and Treasurer
Address: 7700 France Avenue South
Minneapolis, Minnesota 55435
Facsimile: (612) 893-6143
Telephone: (612) 830-2133
<PAGE> 59
Acknowledged by:
MASTER COLLATERAL AGENT:
- ------------------------
CITIBANK, N.A.
By: /s/ Annette Marsula
--------------------------------
Name: Annette Marsula
Title: Senior Trust Officer
Address: 120 Wall Street, 13th Floor
New York, New York 10043
Attention: Annette Marsula
Telephone: 212-412-6249
Facsimile: 212-480-1615
<PAGE> 1
Exhibit 4.22
CREDIT FACILITIES
AND
REIMBURSEMENT AGREEMENT
by and among
REPUBLIC INDUSTRIES, INC., and
REPUBLIC RESOURCES COMPANY,
as Borrowers,
NATIONSBANK, NATIONAL ASSOCIATION (SOUTH),
as Arranger and Administrative Agent,
BANK OF AMERICA NT & SA,
THE CHASE MANHATTAN BANK,
CITICORP USA, INC.,
as Co-Arrangers,
ABN AMRO BANK NV,
THE BANK OF NOVA SCOTIA,
THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH,
CIBC INC.,
CREDIT SUISSE,
THE FIRST NATIONAL BANK OF CHICAGO,
FIRST UNION NATIONAL BANK OF FLORIDA,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
PNC BANK, KENTUCKY, INC.,
as Co-Agents,
<PAGE> 2
NATIONSBANK, NATIONAL ASSOCIATION (SOUTH),
BANK OF AMERICA NT & SA,
THE CHASE MANHATTAN BANK,
CITICORP USA, INC.,
ABN AMRO BANK NV,
THE BANK OF NOVA SCOTIA,
THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH,
CIBC INC.,
CREDIT SUISSE,
THE FIRST NATIONAL BANK OF CHICAGO,
FIRST UNION NATIONAL BANK OF FLORIDA,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
PNC BANK, KENTUCKY, INC.,
BANK OF MONTREAL,
CAISSE NATIONALE DE CREDIT AGRICOLE,
THE BANK OF NEW YORK,
BARNETT BANK, N.A.,
COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY,
BANCA MONTE DEI PASCHI DI SIENA, SpA,
THE SUMITOMO BANK, LIMITED,
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
as Lenders
April 23, 1997
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
Definitions
<S> <C> <C>
1.01 Definitions..........................................................................................2
1.02 Use of Defined Terms................................................................................22
1.03 Cross References....................................................................................22
1.04 Accounting and Financial Determinations.............................................................22
1.05 General Provisions Relating to Definitions..........................................................23
ARTICLE II
The Loans
2.01 Commitments; Joint and Several Liability............................................................24
2.02 Competitive Bid Loans...............................................................................27
2.03 Payment of Interest.................................................................................32
2.04 Payment of Principal................................................................................32
2.05 Non-Conforming Payments.............................................................................33
2.06 Borrowers' Accounts.................................................................................33
2.07 Notes...............................................................................................33
2.08 Pro Rata Payments...................................................................................34
2.09 Reductions..........................................................................................34
2.10 Increase and Decrease in Amounts....................................................................35
2.11 Conversions and Elections of Subsequent Interest Periods............................................35
2.12 Revolving Credit Facility Fee.......................................................................35
2.13 Deficiency Advances.................................................................................36
2.14 Use of Proceeds.....................................................................................36
2.15 Swing Line..........................................................................................36
ARTICLE III
Letters of Credit
3.01 Letters of Credit...................................................................................38
3.02 Reimbursement.......................................................................................38
3.03 Letter of Credit Fee................................................................................41
3.04 Administrative Fees.................................................................................42
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
ARTICLE IV
Yield Protection and Illegality
<S> <C> <C>
4.01 Additional Costs....................................................................................43
4.02 Suspension of Loans.................................................................................44
4.03 Illegality..........................................................................................45
4.04 Compensation........................................................................................45
4.05 Alternate Loan and Lender...........................................................................46
4.06 Taxes...............................................................................................46
4.07 Replacement Lenders.................................................................................48
ARTICLE V
Conditions to Making Loans and Issuing
Letters of Credit
5.01 Conditions of Initial Advance and Issuance of Letters of Credit.....................................49
5.02 Conditions of Loans.................................................................................50
5.03 Supplements to Schedules............................................................................51
ARTICLE VI
Representations and Warranties
6.01 Representations and Warranties......................................................................52
ARTICLE VII
Affirmative Covenants
7.01 Financial Reports, Etc..............................................................................59
7.02 Maintain Properties.................................................................................60
7.03 Existence, Qualification, Etc.......................................................................60
7.04 Regulations and Taxes...............................................................................60
7.05 Insurance...........................................................................................60
7.06 True Books..........................................................................................61
7.07 Pay Indebtedness to Lenders and Perform Other Covenants.............................................61
7.08 Right of Inspection.................................................................................61
7.09 Observe all Laws....................................................................................61
7.10 Covenants Extending to Subsidiaries.................................................................61
7.11 Officer's Knowledge of Default......................................................................61
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
<S> <C> <C>
7.12 Suits or Other Proceedings..........................................................................62
7.13 Notice of Discharge of Hazardous Material or Environmental Complaint................................62
7.14 Environmental Compliance............................................................................62
7.15 Further Assurances..................................................................................62
7.16 Benefit Plans.......................................................................................62
7.17 Continued Operations................................................................................63
7.18 Use of Proceeds.....................................................................................63
ARTICLE VIII
Negative Covenants
8.01 Indebtedness to Capitalization......................................................................64
8.02 Consolidated Fixed Charge Ratio.....................................................................64
8.03 Indebtedness........................................................................................64
8.04 Liens...............................................................................................65
8.05 Transfer of Assets..................................................................................66
8.06 Investments; Acquisitions...........................................................................66
8.07 Merger or Consolidation.............................................................................67
8.08 Transactions with Affiliates........................................................................67
8.09 Benefit Plans.......................................................................................68
8.10 Fiscal Year.........................................................................................68
8.11 Dissolution, etc....................................................................................68
8.12 Change in Control...................................................................................68
ARTICLE IX
Events of Default and Acceleration
9.01 Events of Default...................................................................................69
9.02 Administrative Agent to Act.........................................................................72
9.03 Cumulative Rights...................................................................................72
9.04 No Waiver...........................................................................................73
9.05 Default.............................................................................................73
9.06 Allocation of Proceeds..............................................................................73
ARTICLE X
The Administrative Agent
10.01 Appointment.........................................................................................74
10.02 Attorneys-in-fact...................................................................................74
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
Page
<S> <C> <C>
10.03 Limitation on Liability.............................................................................74
10.04 Reliance............................................................................................74
10.05 Notice of Default...................................................................................75
10.06 No Representations..................................................................................75
10.07 Indemnification.....................................................................................76
10.08 Lender..............................................................................................76
10.09 Resignation.........................................................................................76
10.10 Sharing of Payments, etc............................................................................77
10.11 One Lender..........................................................................................77
10.12 Additional Fees.....................................................................................77
ARTICLE XI
Miscellaneous
11.01 Assignments and Participations......................................................................78
11.02 Notices.............................................................................................80
11.03 Setoff..............................................................................................81
11.04 Survival............................................................................................81
11.05 Expenses............................................................................................82
11.06 Amendments..........................................................................................82
11.07 Counterparts........................................................................................83
11.08 WAIVERS BY BORROWERS................................................................................83
11.09 Termination.........................................................................................84
11.10 Governing Law.......................................................................................84
11.11 Indemnification.....................................................................................84
11.12 Headings and References.............................................................................86
11.13 Severability........................................................................................86
11.14 Entire Agreement....................................................................................86
11.15 Agreement Controls..................................................................................86
11.16 Usury Savings Clause................................................................................87
11.17 Consents to Renewals, Modifications and Other Actions and Events....................................87
11.18 Confidentiality.....................................................................................88
EXHIBIT A Applicable Commitment Percentages....................................................111
EXHIBIT B Form of Assignment and Acceptance....................................................113
SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE.........................................................118
EXHIBIT C Notice of Appointment (or Revocation) of Authorized
Representative.......................................................................120
EXHIBIT D-1 Form of Borrowing Notice--Revolving Credit Loans.....................................121
EXHIBIT D-2 Form of Borrowing Notice--Swing Line Loans...........................................123
EXHIBIT E Form of Competitive Bid Note.........................................................125
</TABLE>
iv
<PAGE> 7
<TABLE>
<CAPTION>
Page
<S> <S> <C>
EXHIBIT F Permitted Acquisitions Certificate...................................................129
EXHIBIT G-1 Form of Revolving Credit Notes.......................................................134
EXHIBIT G-2 Form of Swing Line Note..............................................................137
EXHIBIT H Interest Rate Selection Notice.......................................................140
EXHIBIT I Form of Competitive Bid Quote Request................................................142
EXHIBIT J Form of Competitive Bid Quote........................................................143
EXHIBIT K Form of Opinion of Borrowers' Counsel................................................145
EXHIBIT L Compliance Certificate...............................................................146
Schedule 1.01 Existing Letters of Credit...........................................................149
Schedule 6.01(d) Subsidiaries and Investments in Other Persons........................................150
Schedule 6.01(f) Contingent Liabilities...............................................................151
Schedule 6.01(g) Liens................................................................................152
Schedule 6.01(j) Litigation...........................................................................153
Schedule 6.01(p) ERISA Matters........................................................................154
Schedule 6.01(r) Environmental Issues.................................................................155
Schedule 7.05 Existing Insurance...................................................................156
Schedule 8.03 Indebtedness.........................................................................157
</TABLE>
v
<PAGE> 8
CREDIT FACILITIES AND REIMBURSEMENT AGREEMENT
THIS CREDIT FACILITIES AND REIMBURSEMENT AGREEMENT, dated as of April
23, 1997 (the "Agreement"), is made by and among:
REPUBLIC INDUSTRIES, INC., a Delaware corporation having its principal
place of business in Ft. Lauderdale, Florida (the "Company"); and
REPUBLIC RESOURCES COMPANY, a Delaware corporation having its principal
place of business in Wilmington, Delaware ("RRC", and together with the Company,
each a "Borrower", and collectively, the "Borrowers"); and
NATIONSBANK, NATIONAL ASSOCIATION (SOUTH), a national banking
association organized and existing under the laws of the United States of
America and having its principal place of business in Miami, Florida
("NationsBank"), each other lender signatory hereto on the Closing Date and each
Eligible Assignee which may hereafter execute and deliver an instrument of
assignment with respect to this Agreement pursuant to Section 11.01 (hereinafter
NationsBank and such other lenders may be referred to individually as a "Lender"
or collectively as the "Lenders"; provided, that for purposes of any
determination with respect to Citicorp USA, Inc. under Section 4.01, 4.02 or
4.03 or the definition of Regulatory Change in Section 1.01, "Lender" or
"Lenders" shall be deemed to include "CitiBank, N.A."); and
NATIONSBANK, NATIONAL ASSOCIATION (SOUTH), in its capacity as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent");
W I T N E S S E T H:
WHEREAS, the Borrowers have requested that the Lenders make available a
revolving credit facility of $1,000,000,000 with a letter of credit sublimit of
$500,000,000 and a swingline sublimit of $50,000,000; and
WHEREAS, the Lenders are willing to make such revolving credit and
letter of credit facilities available to the Borrowers upon the terms and
conditions set forth herein;
NOW, THEREFORE, the Borrowers, the Lenders and the Administrative Agent
hereby agree as follows:
<PAGE> 9
ARTICLE I
Definitions
1.01 Definitions. For the purposes of this Agreement, in addition
to the definitions set forth above, the following terms shall have the
respective meanings set forth below:
"Absolute Rate" has the meaning assigned to such term in
Section 2.02(c)(ii)(C) hereof;
"Advance" means a borrowing under (i) the Revolving Credit
Facility, consisting of the aggregate principal amount of a Base Rate
Loan or a Eurodollar Loan, as the case may be or (ii) the Swing Line
consisting of Base Rate Loans or Swing Line Loans bearing interest at a
rate mutually agreed upon by NationsBank and a Borrower, or (iii) the
Competitive Bid Facility consisting of Competitive Bid Loans;
"Affiliate" means a Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is
under common control with either Borrower; (ii) which beneficially owns
or holds 5% or more of any class of the outstanding voting stock (or in
the case of a Person which is not a corporation, 5% or more of the
equity interest) of either Borrower; or (iii) 5% or more of any class
of the outstanding voting stock (or in the case of a Person which is
not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by either Borrower. The term "control" means
the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether
through ownership of voting stock, by contract or otherwise;
"Applicable Commitment Percentage" means, for each Lender with
respect to the Revolving Credit Facility (including its Participations
and its obligations hereunder to any Issuing Bank or NationsBank to
acquire Participations) (each a type of "credit exposure"), a fraction
(expressed as a percentage), (A) the numerator of which shall be the
then amount of such Lender's Revolving Credit Commitment (which
Revolving Credit Commitment for each Lender as of the Closing Date is
as set forth in Exhibit A attached hereto and incorporated herein by
this reference), and (B) the denominator of which shall be,
respectively, the Total Revolving Credit Commitment; provided that each
Applicable Commitment Percentage of each Lender shall be increased or
decreased to reflect any assignments to or by such Lender effected in
accordance with Section 11.01 hereof and any voluntary or mandatory
reductions in such committed amounts;
"Applicable Margin" means that percent per annum set forth
below, which shall be based upon the ratio of (X) Consolidated Funded
Indebtedness to (Y) Consolidated Total Capitalization for the fiscal
quarterly period of the Company most recently ended as specified below:
2
<PAGE> 10
<TABLE>
<CAPTION>
Funded Indebtedness/
Capitalization Applicable Margin
-------------- -----------------
<S> <C> <C>
a) Less than or Equal to
.20 to 1.00 .20%
b) Less than or Equal to
.30 to 1.00, but Greater
than .20 to 1.00 .275%
c) Equal to or Less than
.40 to 1.00, but Greater
than .30 to 1.00 .40%
</TABLE>
The Applicable Margin shall be established at the end of each fiscal
quarter of the Company (each a "Determination Date"). Any change in the
Applicable Margin following each Determination Date shall be determined
based upon the computations set forth in the certificate furnished to
the Administrative Agent pursuant to Section 7.01(a)(ii) and Section
7.01(b)(ii), subject to review and approval of such computations by the
Administrative Agent, and shall be effective commencing on the date
following the date such certificate is received (or, if earlier, the
date such certificate is required to be delivered) until the date
following the date on which a new certificate is delivered or is
required to be delivered, whichever shall first occur. From the Closing
Date to the first Determination Date, the Applicable Margin shall be
.20%;
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit
executed by the Company from time to time and delivered to the
applicable Issuing Bank to support the issuance of Letters of Credit;
"Assignment and Acceptance" shall mean an Assignment and
Acceptance substantially in the form of Exhibit B (with blanks
appropriately filled in) delivered to the Administrative Agent in
connection with an assignment of a Lender's interest under this
Agreement and the TROL Credit Documents pursuant to Section 11.01;
"Authorized Representative" means any of the Chairman, Vice
Chairmen, President, Executive Vice Presidents or Vice Presidents of
either Borrower and, with respect to financial matters, the Treasurer,
Vice President Finance or Chief Financial Officer of either Borrower or
any other person expressly designated by the Board of Directors of
either Borrower (or the appropriate committee thereof) as an Authorized
Representative of such Borrower, as set forth from time to time in a
certificate in the form attached hereto as Exhibit C;
3
<PAGE> 11
"Automobile Retailing Activities" means new and used vehicle
retailing, wholesaling, renting, leasing, financing, servicing and
related activities;
"AutoNation TROL" means, the amended and restated Tax
Retention Operating Lease facility entered into as of November 18, 1996
between AutoNation USA Corporation and First Security Bank, National
Association (as successor in interest to First Security Bank of Utah,
N.A.) as owner trustee under the AutoNation Trust 1996-1 as such
facility has been or may be amended, amended and restated, supplemented
or otherwise modified from time to time;
"Base Rate" means the greater of (i) the sum of the Federal
Funds Effective Rate plus one-half of one percent (1/2%), or (ii) the
Prime Rate;
"Base Rate Loan" means a Loan for which the rate of interest
is determined by reference to the Base Rate;
"Base Rate Refunding Loan" means a Base Rate Loan or Swing
Line Loan made either to (i) satisfy Reimbursement Obligations arising
from a drawing under a Letter of Credit or (ii) pay NationsBank in
respect of Swing Line Outstandings;
"Board" means the Board of Governors of the Federal Reserve
System (or any successor body);
"Borrower's Account" means (a) with respect to the Company,
demand deposit account number 3750682241, and (b) with respect to RRC,
demand deposit account number 3750794553, or any respective successor
accounts with the Administrative Agent, which may be maintained at one
or more offices of the Administrative Agent or an agent of the
Administrative Agent;
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Revolving Credit
Facility or a Swing Line Loan, in the forms attached hereto as Exhibits
D-1 and D-2, respectively;
"Business Day" means (i) with respect to any Eurodollar Loan
or any Competitive Bid Loan at the Eurodollar Competitive Rate, any day
which is a Business Day, as described below, and on which the relevant
international financial markets are open for the transaction of
business contemplated by this Agreement in London, England and New
York, New York, and (ii) with respect to any other Loan and for any
other purposes hereof, any day which is not a Saturday, Sunday or a day
on which banks in the States of Florida, North Carolina and New York
are authorized or obligated by law, executive order or governmental
decree to be closed;
"Capital Leases" means all leases which have been or should be
capitalized in accordance with Generally Accepted Accounting Principles
as in effect from time to time
4
<PAGE> 12
including Statement No. 13 of the Financial Accounting Standards Board
and any successor thereof;
"Change in Control" means (i) if any Person or group of
Persons acting in concert other than the owners of more than 35% of the
outstanding voting securities of the Company as of the Closing Date
having voting rights in the election of directors, shall own or
control, directly or indirectly, more than 35% of the outstanding
securities (on a fully diluted basis and taking into account any voting
securities or contract rights exercisable, exchangeable or convertible
into equity securities) of the Company having voting rights in the
election of directors; or (ii) the replacement or resignation (other
than by reason of death, illness or incapacity), within any two-year
period, of a majority of the members of the Board of Directors of the
Company (the "Board") or a change in the size of the Board, within any
two-year period, which results in members of the Board who were in
office at the beginning of such two-year period constituting less than
a majority of the members of the Board (unless such replacement,
resignation or change in size of the Board shall have been effected or
initiated by a majority of the members of the Board in office at the
beginning of such two-year period);
"Closing Date" means the date as of which this Agreement is
executed by the Borrowers, the Lenders and the Administrative Agent and
on which the conditions set forth in Section 5.01 have been satisfied;
"Code" means the Internal Revenue Code of 1986, as amended,
any successor provision or provisions and any regulations promulgated
thereunder;
"Competitive Bid Borrowing" has the meaning assigned to such
term in Section 2.02 hereof;
"Competitive Bid Facility" means the facility described in
Section 2.02 hereof providing for Competitive Bid Loans to the
Borrowers;
"Competitive Bid Loan Commitment" means the amount which a
Lender has offered to loan to the Borrowers pursuant to a Competitive
Bid Quote by such Lender, the sum of all Competitive Bid Loans not to
exceed in the aggregate one hundred percent (100%) of the Total
Revolving Credit Commitment;
"Competitive Bid Loans" means the Loans bearing interest at an
Absolute Rate or a Eurodollar Competitive Rate provided for in Section
2.02 hereof;
"Competitive Bid Notes" means, collectively, the promissory
notes of the Borrowers with respect to Competitive Bid Loans provided
for by Section 2.02 hereof executed and delivered to the Lenders as
provided in Section 2.07(c) substantially in the form attached hereto
as Exhibit E and incorporated herein by reference, with appropriate
insertions as to dates and names of Lenders, and all promissory notes
delivered in
5
<PAGE> 13
substitution or exchange therefor, in each case as the same shall be
amended, modified or supplemented and in effect from time to time;
"Competitive Bid Quote" means an offer in accordance with
Section 2.02 hereof by a Lender to make a Competitive Bid Loan with one
single specified interest rate;
"Competitive Bid Quote Request" has the meaning assigned to
such term in Section 2.02 hereof;
"Compliance Certificate" means a certificate in the form of
Exhibit L furnished to the Administrative Agent and Lenders by the
Company pursuant to Section 7.01 hereof;
"Consistent Basis" in reference to the application of
Generally Accepted Accounting Principles means the accounting
principles observed in the period referred to are comparable in all
material respects to those applied in the preparation of the audited
financial statements of the Company referred to in Section 6.01(f)(i)
hereof;
"Consolidated EBITDA" means, with respect to the Company and
its Subsidiaries for any period of computation thereof during such
period, the sum of, without duplication, (i) Consolidated Net Income,
plus (ii) Consolidated Interest Expense during such period, plus (iii)
taxes on income during such period, plus (iv) amortization during such
period, plus (v) depreciation during such period (with the exclusion of
any depreciation related to Vehicles), determined on a consolidated
basis in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis; provided, however, that with respect to
any Permitted Acquisition which is accounted for as a "purchase", for
the Four-Quarter Period following such acquisition, the Consolidated
EBITDA shall include the results of operations of the Person or assets
so acquired which amounts shall be determined on an historical pro
forma basis in form and substance reasonably satisfactory to the
Administrative Agent so long as the Company has furnished to the
Administrative Agent financial information acceptable to the
Administrative Agent with respect to the Person or assets which are the
subject of such Permitted Acquisition;
"Consolidated Fixed Charge Ratio" means, with respect to the
Company and its Subsidiaries for the Four-Quarter Period ending on the
date of computation thereof, the ratio of (a) Consolidated EBITDA to
(b) Consolidated Interest Expense;
"Consolidated Funded Indebtedness" means Funded Indebtedness
of the Company and its Subsidiaries, determined on a consolidated basis
in accordance with Generally Accepted Accounting Principles applied on
a Consistent Basis, provided, Vehicle Secured Indebtedness and Vehicle
Receivables Indebtedness shall be excluded from the calculation of
Consolidated Funded Indebtedness;
"Consolidated Interest Expense" means, with respect to any
period of computation thereof, the gross interest expense of the
Company and its Subsidiaries, including without
6
<PAGE> 14
limitation (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness to the extent included in interest expense and (iii) the
portion of any liabilities incurred in connection with Capital Leases
allocable to interest expense, all determined on a consolidated basis
in accordance with Generally Accepted Accounting Principles applied on
a Consistent Basis, provided, however, Consolidated Interest Expense
shall not include any interest expense classified as cost of goods sold
in accordance with Generally Accepted Accounting Principles;
"Consolidated Net Income" means, for any period of computation
thereof, the gross revenues from operations of the Company and its
Subsidiaries, less all operating and non-operating expenses of the
Company and its Subsidiaries including taxes on income, all determined
on a consolidated basis in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis; but excluding all
non-cash, non-recurring and extraordinary gains or losses, all as
determined in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis;
"Consolidated Shareholders' Equity" means at any time as of
which the amount thereof is to be determined, the sum of the following
in respect of the Company and its Subsidiaries (determined on a
consolidated basis and excluding intercompany items among the Company
and its Subsidiaries and any upward adjustment after December 31, 1996
due to revaluation of assets): (i) the amount of issued and outstanding
share capital, plus (ii) the amount of additional paid-in capital and
retained income (or, in the case of a deficit, minus the amount of such
deficit), minus (iii) the amount of any foreign currency translation
adjustment which is included in the equity section of the consolidated
balance sheet (whether positive or negative), minus (iv) the absolute
value of any treasury stock and the absolute value of any stock
subscription receivables, as determined in accordance with Generally
Accepted Accounting Principles applied on a Consistent Basis;
"Consolidated Total Assets" means assets of the Company and
its Subsidiaries as determined in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis;
"Consolidated Total Capitalization" means, as at any time as
of which the amount thereof is to be determined, the sum of
Consolidated Funded Indebtedness plus Consolidated Shareholders'
Equity;
"Contingent Obligation" of any Person means all contingent
liabilities required (or which, upon the creation or incurring thereof,
would be required) to be included in the consolidated financial
statements (including footnotes) of such Person in accordance with
Generally Accepted Accounting Principles applied on a Consistent Basis,
including Statement No. 5 of the Financial Accounting Standards Board,
and any obligation of such Person guaranteeing or in effect
guaranteeing any Indebtedness, dividend or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, including obligations of such Person however incurred:
7
<PAGE> 15
(1) to purchase such Indebtedness or other obligation
or any property or assets constituting security therefor;
(2) to advance or supply funds in any manner (i) for
the purchase or payment of such Indebtedness or other
obligation, or (ii) to maintain a minimum working capital, net
worth or other balance sheet condition or any income statement
condition of the primary obligor;
(3) to grant or convey any lien, security interest,
pledge, charge or other encumbrance on any property or assets
of such Person to secure payment of such Indebtedness or other
obligation;
(4) to lease property or to purchase securities or
other property or services primarily for the purpose of
assuring the owner or holder of such Indebtedness or
obligation of the ability of the primary obligor to make
payment of such Indebtedness or other obligation; or
(5) otherwise to assure the owner of the Indebtedness
or such obligation of the primary obligor against loss in
respect thereof;
with respect to Contingent Obligations (such as litigation, guarantees
and pension plan liabilities), such liabilities shall be computed at
the amount which, in light of all the facts and circumstances existing
at the time, represent the present value of the amount which can
reasonably be expected to become an actual or matured liability;
"Default" means any event or condition which, with the giving
or receipt of notice or lapse of time or both, would constitute an
Event of Default hereunder;
"Determination Date" means the last day of each fiscal
quarterly period of the Company;
"Dollars" and the symbol "$" means dollars constituting legal
tender for the payment of public and private debts in the United States
of America;
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $500,000,000; (b) a commercial
bank organized under the laws of any other country which is a member of
the Organization for Economic Cooperation and Development (the "OECD"),
or a political subdivision of any such country, and having a combined
capital and surplus of at least $500,000,000, provided that such bank
is acting through a branch or agency located in the country in which it
is organized or another country which is also a member of the OECD
(each of the foregoing being hereinafter referred to as a "Bank" for
purposes of this definition); and (c) a Person that is primarily
engaged in the business
8
<PAGE> 16
of commercial banking and that is (i) a Subsidiary of a Bank, (ii) a
Subsidiary of a Person of which a Bank is a Subsidiary, or (iii) a
Person of which a Bank is a Subsidiary;
"Eligible Securities" means the following obligations and any
other obligations previously approved in writing by the Required
Lenders:
(a) Government Securities;
(b) the following debt securities of the following
agencies or instrumentalities of the United States of America
if at all times the full faith and credit of the United States
of America is pledged to the full and timely payment of all
interest and principal thereof:
(i) all direct or fully guaranteed
obligations of the United States Treasury; and
(ii) mortgage-backed securities and
participation certificates guaranteed by the
Government National Mortgage Association;
(c) the following obligations of the following
agencies or instrumentalities of the United States of America:
(i) participation certificates and debt
obligations of the Federal Home Loan Mortgage
Corporation;
(ii) consolidated debt obligations, and
obligations secured by a letter of credit, of the
Federal Home Loan Banks; and
(iii) debt obligations and mortgage-backed
securities of the Federal National Mortgage
Association which have not had the interest portion
thereof severed therefrom;
(d) obligations of any corporation organized under
the laws of any state of the United States of America or under
the laws of any other nation, payable in the United States of
America, expressed to mature not later than 92 days following
the date of issuance thereof and rated in an investment grade
rating category by S&P and Moody's;
(e) interest bearing demand or time deposits issued
by any Lender or certificates of deposit maturing within one
year from the date of acquisition issued by a bank or trust
company organized under the laws of the United States or of
any state thereof having capital surplus and undivided profits
aggregating at least $400,000,000 and being rated A-3 or
better by S&P or A or better by Moody's;
9
<PAGE> 17
(f) Repurchase Agreements;
(g) Pre-Refunded Municipal Obligations;
(h) shares of mutual funds which invest in
obligations described in paragraphs (a) through (g) above, the
shares of which mutual funds are at all times rated "AAA" by
S&P; and
(i) asset-backed remarketed certificates of
participation representing a fractional undivided interest in
the assets of a trust, which certificates are rated at least
"A-1" by S&P and "P-1" by Moody's.
Obligations listed in paragraphs (a), (b) and (c) above which
are in book-entry form must be held in a trust account with the Federal
Reserve Bank or with a clearing corporation or chain of clearing
corporations which has an account with the Federal Reserve Bank;
"Eligible Special Purpose Entity" means any Person which is
not a Subsidiary of the Company which has been formed by or for the
benefit of the Company or any Subsidiary for the purpose of (i)
financing or refinancing, leasing, selling or securitizing Vehicles or
related receivables and which finances, refinances or securitizes
Vehicles or related receivables of, leases Vehicles to or purchases
Vehicles or related receivables from the Company or any Subsidiary; or
(ii) financing or refinancing consumer receivables, leases, loans or
retail installment contracts;
"Eligible TROL" means the AutoNation TROL and any similar tax
retention operating lease facility entered into by or for the benefit
of the Company or any Subsidiary;
"Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, the Superfund Amendments and Reauthorization Act of 1986, the
Resource Conservation and Recovery Act, the Toxic Substances Control
Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as
amended, any other "Superfund" or "Superlien" law or any other
applicable statute, law, ordinance, code, rule, regulation, order or
decree, of the United States or any foreign nation or any province,
territory, state, protectorate or other political subdivision thereof,
regulating, relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic or dangerous waste, substance or
material;
"ERISA" means, at any date, the Employee Retirement Income
Security Act of 1974, as amended, and the regulations thereunder, all
as the same shall be in effect at such date;
10
<PAGE> 18
"Eurodollar Competitive Rate" means, for the Interest Period
for any Competitive Bid Loan at a Eurodollar Competitive Rate, the rate
of interest per annum determined pursuant to the following formula:
Eurodollar Interbank Offered Rate
Competitive = ----------------------
Rate 1-Eurodollar Reserve +or - a margin
Percentage
"Eurodollar Loan" means a Loan for which the rate of interest
is determined by reference to the Eurodollar Revolver Rate;
"Eurodollar Reserve Percentage" means, for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D or any successor regulation, as the maximum
reserve requirement (including, without limitation, any basic,
supplemental, emergency, special, or marginal reserves) applicable with
respect to Eurocurrency liabilities as that term is defined in
Regulation D (or against any other category of liabilities that
includes deposits by reference to which the interest rate of Eurodollar
Loans or Competitive Bid Loans at the Eurodollar Competitive Rate is
determined), whether or not any Lender has any Eurocurrency liabilities
subject to such requirements without benefits of credits or proration,
exceptions or offsets that may be available from time to time to any
Lender. The Eurodollar Revolver Rate and the Eurodollar Competitive
Rate shall be adjusted automatically on and as of the effective date of
any change in the Eurodollar Reserve Percentage;
"Eurodollar Revolver Rate" means, for the Interest Period for
any Eurodollar Loan, the rate of interest per annum determined pursuant
to the following formula:
Eurodollar Interbank Offered Rate Applicable
Revolver = ---------------------- + Margin
Rate 1-Eurodollar Reserve
Percentage
"Event of Default" means any of the occurrences set forth as
such in Section 9.01 hereof, provided that any requirement for notice
or lapse of time, or both, has been satisfied;
"Existing Facilities" means, the revolving credit facility,
the competitive bid facility and the swing line made available to the
Company pursuant to the Existing Loan Documents;
"Existing Issuing Banks" means those financial institutions
which have issued the Existing Letters of Credit, as described on
Schedule 1.01 attached hereto;
11
<PAGE> 19
"Existing Letters of Credit" means those Letters of Credit
issued by the Existing Issuing Banks, which are outstanding on the
Closing Date and which are described in Schedule 1.01 attached hereto;
"Existing Loan Documents" means, collectively, (i) the Credit
Facilities and Reimbursement Agreement dated as of December 19, 1995,
among the Company, as borrower, the Administrative Agent, as agent, The
First National Bank of Boston, as co- agent, and the lenders party
thereto (as such agreement has been amended, supplemented or otherwise
modified from time to time, the "Existing Credit Agreement"), and (ii)
all instruments, documents and agreements executed and delivered or
issued in connection with the Existing Credit Agreement, as any of such
documents have been amended, supplemented or otherwise modified;
"Facility Fee" means that percent per annum set forth below,
which shall be based upon the ratio of (X) Consolidated Funded
Indebtedness to (Y) Consolidated Total Capitalization for the fiscal
quarterly period of the Company most recently ended as specified below:
<TABLE>
<CAPTION>
Funded Indebtedness/ Facility
Capitalization Fee
-------------- ---
<S> <C> <C>
a) Less than or Equal to
.20 to 1.00 .125%
b) Less than or Equal to
.30 to 1.00, but Greater
than .20 to 1.00 .15%
c) Equal to or Less than
.40 to 1.00, but Greater
than .30 to 1.00 .20%
</TABLE>
The Facility Fee shall be established at the end of each fiscal quarter
of the Company (each a "Determination Date"). Any change in the
Facility Fee following each Determination Date shall be determined
based upon the computations set forth in the certificate furnished to
the Administrative Agent pursuant to Section 7.01(a)(ii) and Section
7.01(b)(ii), subject to review and approval of such computations by the
Administrative Agent and shall be effective commencing on the date
following the date such certificate is received (or, if earlier, the
date such certificate was required to be delivered) until the date
following the date on which a new certificate is delivered or is
required to be delivered, whichever shall first occur. From the Closing
Date to the first Determination Date, the Facility Fee shall be .125%;
12
<PAGE> 20
"Federal Funds Effective Rate" for any day, as used herein,
means the rate per annum (rounded upward to the nearest 1/100 of 1%)
announced by the Federal Reserve Bank of New York (or any successor) on
such day as being the weighted average of the rates on overnight
Federal funds transactions arranged by Federal funds brokers on the
previous trading day, as computed and announced by such Federal Reserve
Bank (or any successor) in substantially the same manner as such
Federal Reserve Bank computes and announces the weighted average it
refers to as the "Federal Funds Effective Rate" as of the date of this
Agreement; provided, if such Federal Reserve Bank (or its successor)
does not announce such rate on any day, the "Federal Funds Effective
Rate" for such day shall be the Federal Funds Effective Rate for the
last day on which such rate was announced;
"Fiscal Year" means the period of the Company beginning on the
first day of January of each calendar year and ending on December 31 of
such calendar year;
"Four-Quarter Period" means a period of four full consecutive
quarterly periods, taken together as one accounting period;
"Funded Indebtedness" means, without duplication, all
indebtedness in respect of money borrowed, including without limitation
all Capital Leases and the deferred purchase price of any property or
asset, evidenced by a promissory note, bond or similar written
obligation for the payment of money (including, but not limited to,
conditional sales or similar title retention agreements), undrawn
amounts of letters of credit and any Reimbursement Obligations, all
determined in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis, provided, Vehicle Secured Indebtedness
and Vehicle Receivables Indebtedness shall be excluded from the
calculation of Funded Indebtedness;
"Generally Accepted Accounting Principles" means those
principles of accounting set forth in pronouncements of the Financial
Accounting Standards Board, the American Institute of Certified Public
Accountants or which have other substantial authoritative support and
are applicable in the circumstances as of the date of a report, as such
principles are from time to time supplemented and amended;
"Government Securities" means direct obligations of, or
obligations the timely payment of principal and interest on which are
fully and unconditionally guaranteed by, the United States of America;
"Governmental Authority" shall mean any Federal, state,
municipal, national or other governmental department, commission,
board, bureau, agency or instrumentality or political subdivision
thereof or any entity or officer exercising executive, legislative or
judicial, regulatory or administrative functions of or pertaining to
any government, any court or any arbitrator, in each case whether a
state of the United States, the United States or foreign nation, state,
province or other governmental instrumentality;
13
<PAGE> 21
"Hazardous Material" means and includes any hazardous, toxic
or dangerous waste, substance or material, the generation, handling,
storage, disposal, treatment or emission of which is subject to any
Environmental Law;
"Indebtedness" means with respect to any Person, without
duplication, all Funded Indebtedness, all Vehicle Secured Indebtedness,
all Vehicle Receivables Indebtedness, all indebtedness for the
acquisition of property, all indebtedness secured by any Lien on the
property of such Person whether or not such indebtedness is assumed,
all liability of such Person by way of endorsements (other than for
collection or deposit in the ordinary course of business), all
Contingent Obligations and other items which in accordance with
Generally Accepted Accounting Principles are classified as a liability
on a balance sheet; but excluding all accounts payable and accruals, in
each case in the ordinary course of business and only so long as
payment therefor is due within one year; provided that in no event
shall the term Indebtedness include partners' capital, surplus and
retained earnings, minority interests in other Persons, lease
obligations (other than pursuant to Capital Leases), reserves for
deferred income taxes and investment credits, other deferred credits
and reserves, and deferred compensation obligations; provided, that
there shall be included in the definition of Indebtedness, for purposes
of Section 9.01(e) only, any indebtedness arising under an Eligible
TROL;
"Interbank Offered Rate" means, with respect to any Eurodollar
Loan or any Competitive Bid Loan at a Eurodollar Competitive Rate, for
the Interest Period applicable thereto, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason
such rate is not available, the term "Interbank Offered Rate" shall
mean, for any Eurodollar Loan or any Competitive Bid Loan at the
Eurodollar Competitive Rate for any Interest Period therefor, the rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered
rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period; provided, however, if more
than one rate is specified on Reuters Screen LIBO Page, the applicable
rate shall be the arithmetic mean of all such rates;
"Interest Period" (a) for each Eurodollar Loan means a period
commencing on the date such Eurodollar Loan is made or converted and
each subsequent period commencing on the last day of the immediately
preceding Interest Period for such Eurodollar Loan, and ending, at the
Borrowers' option, on the date one week or one, two, three or six
months thereafter as notified to the Administrative Agent by the
Authorized Representative three (3) Business Days prior to the
beginning of such Interest Period; provided, that,
(i) if the Authorized Representative fails to notify
the Administrative Agent of the length of an Interest Period
three (3) Business Days prior to the first
14
<PAGE> 22
day of such Interest Period, the Loan for which such Interest
Period was to be determined shall be deemed to be a Base Rate
Loan bearing interest at the Base Rate, as of the first day
thereof;
(ii) if an Interest Period for a Eurodollar Loan
would end on a day which is not a Business Day such Interest
Period shall be extended to the next Business Day (unless such
extension would cause the applicable Interest Period to end in
the succeeding calendar month, in which case such Interest
Period shall end on the next preceding Business Day); and
(iii) on any day, with respect to all Revolving
Credit Loans and Competitive Bid Loans, there shall not be in
effect (x) more than twenty (20) Interest Periods, and (y)
more than one (1) Interest Period having a term of one (1)
week;
(b) for each Competitive Bid Loan at an Absolute Rate means
the period commencing on the date of such Loan and ending on such date
as may be mutually agreed upon by the Borrowers and the Lender or
Lenders making such Competitive Bid Loan or Loans, as the case may be,
comprising such Competitive Bid Loan; provided that no Interest Period
for a Competitive Bid Loan at an Absolute Rate shall be for a period of
less than seven or greater than 90 days;
(c) for each Competitive Bid Loan at a Eurodollar Competitive
Rate means the period commencing on the date such Competitive Bid Loan
is made and ending, at the Borrowers' option, on the date one week or
one, two, three or six months thereafter as notified by the Borrowers
to such Lender by the Authorized Representative three (3) Business Days
prior to the beginning of such Interest Period provided that if an
Interest Period for such Loan would end on a day which is not a
Business Day, such Interest Period shall be extended to the next
Business Day (unless such extension would cause the applicable Interest
Period to end in the succeeding calendar month, in which case such
Interest Period shall end in the next preceding Business Day);
"Issuing Banks" means the Lenders who agree from time to time
to issue (provided that no Lender shall be obligated to do so) Letters
of Credit (including the Existing Issuing Banks) in accordance with
Section 3.01 and "Issuing Bank" means any one of such Issuing Banks. On
any date of determination, no more than four (4) Lenders (not including
any Existing Issuing Banks) may be Issuing Banks hereunder;
"LC Account Agreement" means the LC Account Agreement dated as
of the date hereof between the Company and the Administrative Agent, as
amended, supplemented or otherwise modified from time to time;
"Lending Office" means, as to each Lender, the Lending Office
of such Lender designated on the signature pages hereof or in an
Assignment and Acceptance or such other
15
<PAGE> 23
office of such Lender (or of an affiliate of such Lender) as such
Lender may from time to time specify to the Borrowers and the
Administrative Agent as the office by which its Loans are to be made
and maintained;
"Letter of Credit" means (i) a standby letter of credit issued
by an Issuing Bank for the account of the Company in favor of a Person
advancing credit or securing an obligation on behalf of the Company and
(ii) each of the Existing Letters of Credit;
"Letter of Credit Commitment" means with respect to each
Lender, the obligation of such Lender to acquire Letter of Credit
Participations up to an aggregate stated amount at any one time
outstanding equal to such Lender's Applicable Commitment Percentage of
the Total Letter of Credit Commitment as the same may be increased or
decreased from time to time pursuant to this Agreement;
"Letter of Credit Facility" means the facility described in
Article III hereof providing for the issuance by the Issuing Banks for
the account of the Company of Letters of Credit in an aggregate stated
amount at any time outstanding not exceeding the Total Letter of Credit
Commitment;
"Lien" means any interest in property securing any obligation
owed to, or a claim by, a Person other than the owner of the property,
whether such interest is based on the common law, statute or contract,
and including but not limited to the lien or security interest arising
from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security
purposes. For the purposes of this Agreement, the Company and its
Subsidiaries shall be deemed to be the owners of any property which
either of them have acquired or hold subject to a conditional sale
agreement, financing lease, or other arrangement pursuant to which
title to the property has been retained by or vested in some other
Person for security purposes;
"Loan" or "Loans" means any of the Revolving Credit Loans or
Swing Line Loans or Competitive Bid Loans;
"Loan Documents" means this Agreement, the Notes, the
Applications and Agreements for Letters of Credit, the LC Account
Agreement and all other instruments and documents heretofore or
hereafter executed or delivered to and in favor of any Lender or the
Administrative Agent in connection with the Loans or the Letters of
Credit made, issued or created under this Agreement as the same may be
amended, modified or supplemented from time to time;
"Material Adverse Effect" means a material adverse effect on
(i) the business, properties, operations or condition, financial or
otherwise, of the Company and its Subsidiaries, taken as a whole, (ii)
the ability of any Borrower to pay or perform its respective
obligations, liabilities and indebtedness under the Loan Documents as
such payment or performance becomes due in accordance with the terms
thereof, or (iii) the
16
<PAGE> 24
rights, powers and remedies of the Administrative Agent or any Lender
under any Loan Document or the validity, legality or enforceability
thereof (including for purposes of clauses (ii) and (iii) the
imposition of burdensome conditions thereon);
"Moody's" means Moody's Investors Service, Inc., a Delaware
corporation;
"Multi-employer Plan" means an employee pension benefit plan
covered by Title IV of ERISA and in respect of which the Company or any
Subsidiary is an "employer" as described in Section 4001(b) of ERISA,
which is also a multi-employer plan as defined in Section 4001(a)(3) of
ERISA;
"Notes" means, collectively, the Revolving Credit Notes, the
Swing Line Note and the Competitive Bid Notes which are to be delivered
to the Lenders;
"Obligations" means the obligations, liabilities and
Indebtedness of the Borrowers with respect to (i) the principal and
interest on the Loans, (ii) the Reimbursement Obligations and (iii) the
payment and performance of all other obligations, liabilities and
Indebtedness of the Borrowers to the Lenders or the Administrative
Agent hereunder, under any one or more of the other Loan Documents or
with respect to the Loans;
"Quotation Date" has the meaning assigned to such term in
Section 2.02 hereof;
"Outstanding Credit Obligations" means the sum of (i) the
Revolving Credit Outstandings, (ii) Outstanding Letters of Credit,
(iii) Swing Line Outstandings and (iv) outstanding Competitive Bid
Loans, all as at the date of determination thereof;
"Outstanding Letters of Credit" means all undrawn amounts of
Letters of Credit plus Reimbursement Obligations;
"Participation" means, with respect to any Lender (other than
NationsBank with respect to a Swing Line Loan, and other than the
applicable Issuing Bank with respect to a Letter of Credit), the
extension of credit represented by the participation of such Lender
hereunder in (a) the liability of NationsBank in respect of a Swing
Line Loan made or (b) the liability of the applicable Issuing Bank in
respect of Letters of Credit issued, all in accordance with the terms
hereof;
"Permitted Acquisition" means an acquisition of a Person or
the assets of a Person effected with the consent and approval of the
Board of Directors (or the appropriate committee thereof) or other
applicable governing body of such Person and the duly obtained approval
of such shareholders or other holders of equity interests in such
Person as may be required to be obtained under applicable law, the
charter documents of or any shareholder agreements or similar
agreements pertaining to such Person, which Person derives the majority
of its revenues either (x) from service or service related activities
or engages in other business or owns other assets which support or
compliment these service
17
<PAGE> 25
revenues or (y) from Automobile Retailing Activities, provided that
after giving effect to such acquisition no Default or Event of Default
exists hereunder;
"Person" means an individual, partnership, corporation,
limited liability company, trust, unincorporated organization,
association, joint venture or a government or agency or political
subdivision thereof;
"Pre-Refunded Municipal Obligations" means obligations of any
state of the United States of America or of any municipal corporation
or other public body organized under the laws of any such state which
are rated, based on the escrow, in the highest investment rating
category by both S&P and Moody's and which have been irrevocably called
for redemption and advance refunded through the deposit in escrow of
Government Securities or other debt securities which are (i) not
callable at the option of the issuer thereof prior to maturity, (ii)
irrevocably pledged solely to the payment of all principal and interest
on such obligations as the same becomes due and (iii) in a principal
amount and bear such rate or rates of interest as shall be sufficient
to pay in full all principal of, interest, and premium, if any, on such
obligations as the same becomes due as verified by a nationally
recognized firm of certified public accountants;
"Prime Rate" means the rate of interest per annum announced
publicly by the Administrative Agent as its prime rate from time to
time. The Prime Rate is not necessarily the best or the lowest rate of
interest offered by the Administrative Agent;
"Principal Office" means the office of the Administrative
Agent at Independence Center, Charlotte, North Carolina 28255,
Attention: Corporate Loan Support or such other office and address as
the Administrative Agent may from time to time designate;
"Regulation D" means Regulation D of the Board as the same may
be amended or supplemented from time to time;
"Regulatory Change" means any change effective after the
Closing Date in United States federal or state laws or regulations
(including Regulation D and capital adequacy regulations) or foreign
laws or regulations or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks,
which includes any of the Lenders, under any United States federal or
state or foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with
the interpretation or administration thereof or compliance by any
Lender with any request or directive regarding capital adequacy,
including with respect to "highly leveraged transactions," whether or
not having the force of law, whether or not failure to comply therewith
would be unlawful (but if not unlawful, noncompliance with which would
have the effect in the good faith judgment of the affected Lender of
imposing additional administrative or regulatory burdens or
consequences, costs or other adverse effects on such Lenders) and, to
the knowledge of the affected Lender, not published or proposed prior
to the date hereof;
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"Reimbursement Obligation" shall mean at any time, the
obligation of the Company with respect to any Letter of Credit to
reimburse the Issuing Bank and the Lenders to the extent of their
respective Participations (including by the receipt by the Issuing Bank
of proceeds of Loans pursuant to Section 3.02) for amounts theretofore
paid by the Issuing Bank or the Lenders pursuant to a drawing under
such Letter of Credit;
"Repurchase Agreement" means a repurchase agreement entered
into with any financial institution whose debt obligations or
commercial paper are rated "A" by either of S&P or Moody's or "A-1" by
S&P or "P-1" by Moody's;
"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating at least 51% of
the aggregate Credit Exposures of all the Lenders on such date. For
purposes of the preceding sentence, the amount of the "Credit Exposure"
of each Lender shall be equal at all times (a) other than following the
occurrence and during the continuance of an Event of Default, to its
Revolving Credit Commitment, and (b) following the occurrence and
during the continuance of an Event of Default, the aggregate principal
amount of the Revolving Credit Loans and Competitive Bid Loans owing to
such Lender plus the aggregate unutilized amounts of such Lender's
Revolving Credit Commitment plus the amount of such Lender's Applicable
Commitment Percentage of Swing Line Loans and Outstanding Letters of
Credit and of the Reimbursement Obligations; provided that, if any
Lender shall have failed to pay (x) to NationsBank its Applicable
Commitment Percentage of any Swing Line Loan or (y) to any Issuing Bank
its Applicable Commitment Percentage of any drawing under any Letter of
Credit resulting in an outstanding Reimbursement Obligation, such
Lender's Credit Exposure attributable to Swing Line Loans shall be
deemed to be held by NationsBank for purposes of this definition, and
such Lender's Credit Exposure attributable to Letters of Credit,
Reimbursement Obligations and the Letter of Credit Commitment shall be
deemed to be held by the applicable Issuing Bank for purposes of this
definition;
"Revolving Credit Commitment" means with respect to each
Lender, the obligation of such Lender to make Loans to the Borrowers
and purchase Participations up to an aggregate principal amount at any
one time outstanding, determined with reference to such Lender's
percentage as set forth on Exhibit A attached hereto of the Total
Revolving Credit Commitment as the same may be increased or decreased
from time to time pursuant to this Agreement;
"Revolving Credit Facility" means the facility described in
Section 2.01(a) hereof providing for Loans to the Borrowers by the
Lenders in the aggregate principal amount of the Total Revolving Credit
Commitment less the aggregate amount of Swing Line Outstandings and
Outstanding Letters of Credit and outstanding Competitive Bid Loans;
"Revolving Credit Loan" means a Loan made pursuant to the
Revolving Credit Facility;
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"Revolving Credit Notes" means, collectively, the promissory
notes of the Borrowers evidencing Loans executed and delivered to the
Lenders as provided in Section 2.07(a) hereof substantially in the form
attached hereto as Exhibit G-1, with appropriate insertions as to
amounts, dates and names of Lenders;
"Revolving Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of all Revolving Credit
Loans then outstanding and all interest accrued thereon;
"Revolving Credit Termination Date" means (i) April 22, 2002
or (ii) such earlier date of termination of Lenders' obligations
pursuant to Section 9.01 upon the occurrence of an Event of Default, or
(iii) such date as the Borrowers may voluntarily permanently terminate
the Revolving Credit Facility and the Competitive Bid Facility by
payment in full of all Obligations (including the discharge of all
Obligations of NationsBank, the Issuing Banks and the Lenders with
respect to Letters of Credit, Participations and Competitive Bid
Loans);
"S&P" means Standard & Poor's Rating Group, a division of
McGraw-Hill, Inc.;
"Single Employer Plan" means any employee pension benefit plan
covered by Title IV of ERISA and in respect of which the Company or any
Subsidiary is an "employer" as described in Section 4001(b) of ERISA,
which is not a Multi-employer Plan;
"Solvent" means, when used with respect to any Person, that at
the time of determination:
(i) the fair value of its assets (both at fair
valuation and at present fair saleable value on an orderly
basis) is in excess of the total amount of its liabilities,
including, without limitation, Contingent Obligations; and
(ii) it is then able and expects to be able to pay
its debts as they mature; and
(iii) it has capital sufficient to carry on its
business as conducted and as proposed to be conducted.
"Subsidiary" means any corporation or other entity in which
more than 50% of its outstanding voting stock or more than 50% of all
equity interests is owned directly or indirectly by the Company and/or
by one or more of the Company's Subsidiaries;
"Swing Line" means the revolving line of credit established by
NationsBank in favor of the Borrowers pursuant to Section 2.15;
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"Swing Line Loans" means Loans made by NationsBank to the
Borrowers pursuant to Section 2.15;
"Swing Line Note" means the promissory note of the Borrowers
evidencing Swing Line Loans executed and delivered to NationsBank as
provided in Section 2.07(c) hereof substantially in the form attached
hereto as Exhibit G-2, with appropriate insertions as to amounts, dates
and names;
"Swing Line Outstandings" means, as of any date of
determination, the aggregate principal amount of all Swing Line Loans
then outstanding;
"Total Letter of Credit Commitment" means an amount not to
exceed $500,000,000;
"Total Revolving Credit Commitment" means an amount not to
exceed $1,000,000,000, as reduced from time to time in accordance with
Section 2.09 and Section 2.10, which shall be made available by the
Lenders to the Borrowers during the period from the date hereof until
the Revolving Credit Termination Date;
"TROL Credit Documents" shall have the same meaning as the
meaning assigned to the term 'Credit Documents' under Appendix A to
that certain Amended and Restated Participation Agreement, dated as of
November 18, 1996 among AutoNation USA Corporation, as construction
agent and as lessee, First Security Bank, National Association, as
owner trustee under the AutoNation Trust 1996-1, the various banks and
other lending institutions which are parties thereto from time to time,
as the holders and lenders, and the Administrative Agent, as
administrative agent for the lenders thereunder, as such Participation
Agreement and Appendix A thereto may be or may have been amended,
modified or supplemented from time to time;
"Vehicle Receivables Indebtedness" means Indebtedness incurred
by any Eligible Special Purpose Entity to finance, refinance or
guaranty the financing or refinancing of consumer receivables, leases,
loans or retail installment contracts incurred in the sale, transfer or
lease of Vehicles; provided (x) such Indebtedness shall in accordance
with Generally Accepted Accounting Principles not appear as an asset or
liability on the balance sheet of the Company or any of its
Subsidiaries; (y) no assets other than the Vehicles, consumer
receivables, leases, loans, retail installment contracts or related
proceeds (including, without limitation, proceeds from insurance,
Vehicles and other obligations under such receivables, leases, loans or
retail installment contracts) to be financed or refinanced secure such
Indebtedness; and (z) neither the Company nor any of its Subsidiaries
shall incur any liability with respect to such Indebtedness other than
liability arising by reason of a breach of a representation or warranty
contained in any instrument relating to such Indebtedness;
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"Vehicle Secured Indebtedness" means Indebtedness incurred by
the Company, any Subsidiary or any Eligible Special Purpose Entity to
lease, finance or refinance or guaranty the leasing, financing or
refinancing of Vehicles or related receivables, which Indebtedness is
secured by the Vehicles or related receivables so financed, to the
extent, at any date of determination thereof, the amount of such
Indebtedness does not exceed the depreciated book value of such
Vehicles or the book value of such related receivables as determined in
accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis;
"Vehicles" means all now existing or hereafter acquired new
and used automobiles, sport utility vehicles, trucks and vans of all
types and descriptions, whether held for sale, lease, rental or
operational purposes, which relate to the Borrower's or any
Subsidiary's Automobile Retailing Activities.
1.02 Use of Defined Terms. Terms for which meanings are provided in
this Agreement shall, unless otherwise defined or the context otherwise
requires, have such meanings when used in the Notes, each Borrowing Notice, each
Compliance Certificate, each Loan Document and each notice and other
communication delivered from time to time in connection with this Agreement or
any instrument hereafter executed pursuant hereto.
1.03 Cross References. Unless otherwise specified, references in this
Agreement and in each Loan Document to any Article or Section are references to
such Article or Section of this Agreement or such Loan Document, as the case may
be, and, unless otherwise specified, references in any Article, Section or
definition to any clause are references to such clause of such Section, Article
or definition.
1.04 Accounting and Financial Determinations. Where the character or
amount of any asset or liability or item of income or expense is required to be
determined, or any accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable, be made in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis except insofar as:
(a) the Borrower shall have elected (with the concurrence of
its independent public accountant and upon prior written notification
to the Lenders) to adopt more recently promulgated Generally Accepted
Accounting Principles (which election shall continue to be effective
for subsequent years); and
(b) the Administrative Agent and the Required Lenders shall
have consented to such election (it being understood that such consent
may be conditioned upon the implementation of such changes to Sections
8.01 and 8.02 as are appropriate to reflect such adoption of more
recently promulgated Generally Accepted Accounting Principles and it
being further understood that such consent shall be deemed to have been
given upon the implementation of such changes).
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<PAGE> 30
Upon a change in Generally Accepted Accounting Principles which becomes
effective after the Closing Date which would have a material effect on the
Company's consolidated financial statements and the assets and liabilities
reflected therein or otherwise affect the calculation or the application of the
covenants contained in Article VIII hereof, such change shall not be given
effect for purposes hereof until sixty (60) days from the otherwise effective
date of such change. Prior to such effectiveness the Administrative Agent, the
Lenders and the Borrowers shall in good faith negotiate to amend the pertinent
provisions of this Agreement to account for such change to the extent
appropriate to effect the substance thereof as of the Closing Date. If such an
amendment is not entered into with respect to any such change, such change shall
not be given effect for purposes hereof.
1.05 General Provisions Relating to Definitions. Terms for which
meanings are defined in this Agreement shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The term
"including" means including, without limiting the generality of any description
preceding such term. Each reference herein to any Person shall include a
reference to such Person's successors and assigns. References to any instrument
defined in this Agreement refer to such instrument as originally executed or, if
subsequently varied, replaced or supplemented from time to time, as so varied,
replaced or supplemented and in effect at the relevant time of reference
thereto.
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ARTICLE II
The Loans
2.01 Commitments; Joint and Several Liability
(a) Revolving Credit Commitment. Subject to the terms and conditions of
this Agreement, each Lender severally agrees to make Advances to the Borrowers,
from time to time from the Closing Date until the Revolving Credit Termination
Date, on a pro rata basis as to the total borrowing requested by the Borrowers
under the Revolving Credit Facility on any day determined by its Applicable
Commitment Percentage up to but not exceeding the Revolving Credit Commitment of
such Lender, provided, however, that the Lenders will not be required and shall
have no obligation to make any Advance (i) so long as not all of the conditions
under Section 5.02 hereof have been fulfilled, (ii) so long as a Default or an
Event of Default has occurred and is continuing or (iii) if the Administrative
Agent has accelerated the maturity of the Revolving Credit Notes as a result of
an Event of Default; provided further, however, that immediately after giving
effect to each such Advance, the principal amount of Outstanding Credit
Obligations shall not exceed the Total Revolving Credit Commitment. Within such
limits, the Borrowers may borrow, repay and reborrow hereunder, on a Business
Day in the case of a Base Rate Loan and on a Business Day in the case of a
Eurodollar Loan, from the Closing Date until, but (as to borrowings and
reborrowings) not including, the Revolving Credit Termination Date; provided,
however, that (x) no Eurodollar Loan that is a Revolving Credit Loan shall be
made which has an Interest Period that extends beyond the Revolving Credit
Termination Date and (y) each Eurodollar Loan may, subject to the provisions of
Section 2.11, be repaid only on the last day of the Interest Period with respect
thereto.
(b) Amounts. Except as otherwise permitted by all of the Lenders from
time to time, the aggregate unpaid principal amount of the Outstanding Credit
Obligations shall not exceed at any time an amount equal to the Total Revolving
Credit Commitment. Each Loan under the Revolving Credit Facility, other than a
Swing Line Loan pursuant to Section 2.15 hereof or a Base Rate Refunding Loan,
and each conversion thereof under Section 2.11 shall be in a principal amount of
at least $10,000,000, and, if greater than $10,000,000, an integral multiple of
$1,000,000.
(c) Advances and Rate Selection. (i) An Authorized Representative shall
give the Administrative Agent (1) at least three (3) Business Days' irrevocable
telephonic notice of each Eurodollar Loan (whether representing an additional
borrowing hereunder or the conversion of borrowing hereunder from Base Rate
Loans or other Eurodollar Loans to Eurodollar Loans) prior to 10:30 A.M.,
Charlotte, North Carolina time; and (2) irrevocable telephonic notice of each
Base Rate Loan (other than Base Rate Refunding Loans to the extent the same are
effected without notice pursuant to Section 2.01(c)(iv)) representing an
additional borrowing hereunder prior to 10:30 A.M. Charlotte, North Carolina
time on the day of such proposed Base Rate Loan. Each such borrowing notice,
which shall be effective upon receipt by the Administrative Agent, shall specify
the amount of the borrowing, the type (Base or Eurodollar) of Loan, the date of
borrowing
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and, if a Eurodollar Loan, the Interest Period to be used in the computation of
interest. The Authorized Representative shall provide the Administrative Agent
written confirmation of each such telephonic notice on the same day by
telefacsimile transmission in the form of a Borrowing Notice, for additional
Advances, or in the form attached hereto as Exhibit H as to selection or
conversion of interest rates as to outstanding Loans, in each case with
appropriate insertions, but failure to provide such confirmation shall not
affect the validity of such telephonic notice. The duration of the initial
Interest Period for each Loan that is a Eurodollar Loan shall be as specified in
the initial Borrowing Notice. The Borrowers shall have the option to elect the
duration of subsequent Interest Periods and to convert the Loans (other than
Swing Line Loans) in accordance with Section 2.11 hereof. If the Administrative
Agent does not receive a notice of election of duration of an Interest Period or
to convert by the time prescribed hereby and by Section 2.11 hereof, the
Borrowers shall be deemed to have elected as to any Revolving Credit Loan, to
convert such Loan to (or continue such Loan as) a Base Rate Loan bearing
interest at the Base Rate until either Borrower notifies the Administrative
Agent in accordance with this Section and Section 2.11.
(ii) Notice of receipt of each Borrowing Notice shall be provided by
the Administrative Agent to each Lender by telefacsimile or telephonic notice
with reasonable promptness, but not later than 2:00 P.M., Charlotte, North
Carolina time on the same day as Administrative Agent's receipt of such
Borrowing Notice.
(iii) Not later than 3:00 P.M., Charlotte, North Carolina time on the
date specified for each Advance, each Lender shall, pursuant to the terms and
subject to the conditions of this Agreement, make the amount of the Loan or
Loans to be made by it on such day available to the Administrative Agent, by
depositing or transferring the proceeds thereof in immediately available funds
at the Principal Office. The amount so received by the Administrative Agent
shall, subject to the terms and conditions of this Agreement, be made available
to either Borrower by delivery of the proceeds thereof to the applicable
Borrower's Account or otherwise as shall be directed in the applicable Borrowing
Notice by the Authorized Representative.
(iv) Notwithstanding the foregoing, if a drawing is made under any
Letter of Credit, such drawing is honored by the Issuing Bank thereunder prior
to the Revolving Credit Termination Date, and the Company shall not immediately
fully reimburse such Issuing Bank in respect of such drawing, (A) provided that
the conditions to making a Revolving Credit Loan as herein provided shall then
be satisfied, the Reimbursement Obligation arising from such drawing shall be
paid to such Issuing Bank by the Administrative Agent without the requirement of
notice to or from the Company from immediately available funds which shall be
advanced as a Base Rate Refunding Loan by each Lender under the Revolving Credit
Facility in an amount determined with reference to such Lender's Applicable
Commitment Percentage of such Reimbursement Obligation, and (B) if the
conditions to making a Revolving Credit Loan as herein provided shall not then
be satisfied, each of the Lenders shall fund by payment to the Administrative
Agent (for the benefit of the Issuing Bank) in immediately available funds the
purchase from such Issuing Bank of their respective Participations in the
related Reimbursement Obligation based on their respective Applicable Commitment
Percentages of the Total Letter of Credit Commitment. If a drawing is
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presented under any Letter of Credit in accordance with the terms thereof and
the Company shall not immediately reimburse the Issuing Bank thereunder in
respect thereof, then notice of such drawing or payment shall be provided
promptly by such Issuing Bank to the Administrative Agent and the Administrative
Agent shall provide notice to each Lender by telephone or telefacsimile
transmission. If notice to the Lenders of a drawing under any Letter of Credit
is given by the Administrative Agent at or before 12:00 noon on any Business
Day, each Lender shall, pursuant to the conditions specified in this Section
2.01(c)(iv), either make a Base Rate Refunding Loan or fund the purchase of its
Participation in the amount of such Lender's Applicable Commitment Percentage of
such drawing or payment and shall pay such amount to the Administrative Agent
for the account of the Issuing Bank at the Principal Office in Dollars and in
immediately available funds before 2:30 P.M. on the same Business Day. If notice
to the Lenders of a drawing under a Letter of Credit is given by the
Administrative Agent after 12:00 noon on any Business Day, each Lender shall,
pursuant to the conditions specified in this Section 2.01(c)(iv), either make a
Base Rate Refunding Loan or fund the purchase of its Participation in the amount
of such Lender's Applicable Commitment Percentage of such drawing or payment and
shall pay such amount to the Administrative Agent for the account of the Issuing
Bank at the Principal Office in Dollars and in immediately available funds
before 12:00 noon on the next following Business Day. Any such Base Rate
Refunding Loans shall be advanced as, and shall continue as, a Base Rate Loan
unless and until the Company converts such Base Rate Loan in accordance with the
terms of Section 2.11.
(d) Joint and Several Liability, Contribution Rights.
(i) Notwithstanding any other provision of this Agreement,
each Borrower shall be jointly and severally liable as primary obligor
and not merely as surety for repayment of all Obligations arising under
the Loan Documents. Such joint and several liability shall apply to
each Borrower regardless of whether (x) any Loan was only requested by
or made to the other Borrower or the proceeds of any Loan were used
only by the other Borrower, (y) any interest rate selection was made
only by the other Borrower, or (z) any indemnification obligation or
any other obligation arose only as a result of the actions of the other
Borrower; provided that the liability of RRC under this Agreement, the
Notes and the other Loan Documents shall be limited to the amount of
unpaid principal and interest of Revolving Credit Loans, Swing Line
Loans and Competitive Bid Loans made to RRC and fees, cost and expenses
payable by the Borrowers pursuant to this Agreement.
(ii) If any Borrower makes a payment in respect of the
Obligations it shall have the rights of contribution set forth below
against the other Borrower; provided, that such Borrower shall not
exercise its right of contribution until all the Obligations shall have
been finally paid in full in cash.
(iii) It is the intent of each Borrower, the Administrative
Agent and the Lenders that each Borrower's maximum Obligations shall
be, but not in excess of: (x) in a case or proceeding commenced by or
against such Borrower under the Bankruptcy Code on or within one year
from the date on which any of the Obligations are incurred, the maximum
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<PAGE> 34
amount that would not otherwise cause the Obligations (or any other
obligations of such Borrower to the Administrative Agent and the
Lenders) to be avoidable or unenforceable against such Borrower under
(A) Section 548 of the Bankruptcy Code or (B) any state fraudulent
transfer or fraudulent conveyance act or statute applied in any such
case or proceeding by virtue of Section 544 of the Bankruptcy Code; or
(y) in a case or proceeding commenced by or against such Borrower under
the Bankruptcy Code subsequent to one year from the date on which any
of the Obligations are incurred, the maximum amount that would not
otherwise cause the Obligations (or any other obligations of such
Borrower to the Administrative Agent and the Lenders) to be avoidable
and unenforceable against such Borrower under any state fraudulent
transfer or fraudulent conveyance act or statute applied in any such
case or proceeding by virtue of Section 544 of the Bankruptcy Code; or
(z) in a case or proceeding commenced by or against such Borrower under
any law, statute or regulation other than the Bankruptcy Code
(including, without limitation, any other bankruptcy, reorganization,
arrangement, moratorium, readjustment of debt, dissolution, liquidation
or similar debtor relief laws), the maximum amount that would not
otherwise cause the Obligations (or any other obligations of such
Borrower to the Administrative Agent and the Lenders) to be avoidable
or unenforceable against such Borrower under such law, statute or
regulation including, without limitation, any state fraudulent transfer
or fraudulent conveyance act or statute applied in any such case or
proceeding.
(iv) The Borrowers acknowledge and agree that they have
requested that the Lenders make credit available to the Borrowers with
each Borrower expecting to derive benefit, directly and indirectly,
from the Advances and other credit extended by the Lenders to the
Borrowers.
2.02 Competitive Bid Loans.
(a) In addition to Revolving Credit Loans, at any time prior
to the Revolving Credit Termination Date and provided no Default or Event of
Default exists hereunder, the Borrowers may, as set forth in this Section 2.02,
request the Lenders to make offers to make Competitive Bid Loans to the
Borrowers in Dollars. The Lenders may, but shall have no obligation to, make
such offers and the Borrowers may, but shall have no obligation to, accept any
such offers in the manner set forth in this Section 2.02. There may be no more
than twenty (20) different Interest Periods, plus one (1) one week Interest
Period for both Revolving Credit Loans and Competitive Bid Loans outstanding at
the same time (for which purpose Interest Periods for each Eurodollar Loan and
each Competitive Bid Loan shall be deemed to be different Interest Periods even
if they are coterminous). The aggregate principal amount of all Outstanding
Credit Obligations, shall not exceed the Total Revolving Credit Commitment at
any time. The aggregate principal amount of all outstanding Competitive Bid
Loans shall not exceed one hundred percent (100%) of the Total Revolving Credit
Commitment at any time.
(b) When either Borrower wishes to request offers to make
Competitive Bid Loans, it shall give the Administrative Agent and the Lenders
notice (a "Competitive Bid Quote
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<PAGE> 35
Request") to be received no later than 11:00 a.m. Charlotte, North Carolina time
on (A) the fourth Business Day prior to the date of borrowing proposed therein,
in the case of a Competitive Bid Quote Request for Competitive Bid Loans at the
Eurodollar Competitive Rate or (B) the Business Day prior to the date of
borrowing proposed therein, in the case of a Competitive Bid Quote Request for
Competitive Bid Loans at the Absolute Rate (or, in any such case, such other
time and date as the Borrowers and the Administrative Agent, with the consent of
the Required Lenders, may agree). The Borrowers may request offers to make
Competitive Bid Loans for up to three (3) different Interest Periods in a single
notice; provided that the request for each separate Interest Period shall be
deemed to be a separate Competitive Bid Quote Request for a separate borrowing
(a "Competitive Bid Borrowing") and there shall not be outstanding at any one
time more than six (6) Competitive Bid Borrowings. Each such Competitive Bid
Quote Request shall be substantially in the form of Exhibit I attached hereto
and incorporated herein by reference and shall specify as to each Competitive
Bid Borrowing:
(i) the proposed date of such borrowing, which
shall be a Business Day;
(ii) the aggregate amount of such Competitive Bid
Borrowing, which shall be at least $10,000,000 (or in increments of
$1,000,000 in excess thereof) but shall not cause the limits specified
in Section 2.02(a) hereof to be violated;
(iii) the duration of the Interest Period
applicable thereto;
(iv) whether the Competitive Bid Quote Request
for a particular Interest Period is seeking quotes for Competitive Bid
Loans at the Absolute Rate or the Eurodollar Competitive Rate;
(v) whether a Borrower shall have the right to
prepay a requested Competitive Bid Loan; and
(vi) the date on which the Competitive Bid Quotes
are to be submitted if it is before the proposed date of borrowing (the
date on which such Competitive Bid Quotes are to be submitted is called
the "Quotation Date").
Except as otherwise provided in this Section 2.02(b), no more than two (2)
Competitive Bid Quote Requests shall be given within five (5) Business Days (or
such other number of days as the Borrowers and the Administrative Agent, with
the consent of the Required Lenders, may agree) of any other Competitive Bid
Quote Request.
(c) (i) Each Lender may submit one or more Competitive Bid
Quotes, each containing an offer to make a Competitive Bid Loan in response to
any Competitive Bid Quote Request; provided that, if the Borrowers' request
under Section 2.02(b) hereof specified more than one Interest Period, such
Lender may make a single submission containing one or more Competitive Bid
Quotes for each such Interest Period. Each Competitive Bid Quote must be
submitted to the Borrowers not later than 9:30 a.m. Charlotte, North Carolina
time on (A) the
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third Business Day prior to the proposed date of borrowing, in the case of a
Competitive Bid Quote Request for Competitive Bid Loans at the Eurodollar
Competitive Rate or (B) the Quotation Date, in the case of a Competitive Bid
Quote Request for Competitive Bid Loans at the Absolute Rate (or, in any such
case, such other time and date as the Borrowers and the Administrative Agent,
with the consent of the Required Lenders, may agree) provided that if
NationsBank is receiving quotes as provided in Section 2.02(g), any Competitive
Bid Quote may be submitted by NationsBank (or its applicable Lending Office)
only if NationsBank (or such applicable Lending Office) notifies the Borrowers
of the terms of the offer contained therein not later than 9:15 a.m. Charlotte,
North Carolina time on the Quotation Date. Subject to Articles IV, V and IX
hereof, any Competitive Bid Quote so made shall be irrevocable except with the
consent of the Administrative Agent given on the instructions of the Borrowers.
(ii) Each Competitive Bid Quote shall be
substantially in the form of Exhibit J attached hereto and incorporated herein
by reference and shall specify:
(A) the proposed date of borrowing and the
Interest Period therefor;
(B) the principal amount of the Competitive
Bid Loan for which each such offer is being made, which
principal amount shall be at least $5,000,000 (or in
increments of $1,000,000 in excess thereof); provided that the
aggregate principal amount of all Competitive Bid Loans for
which a Lender submits Competitive Bid Quotes may not exceed
the principal amount of the Competitive Bid Borrowing for a
particular Interest Period for which offers were requested;
(C) in the case of a Competitive Bid Quote
for Competitive Bid Loans at an Absolute Rate, the rate of
interest per annum (rounded upwards, if necessary, to the
nearest 1/10,000th of 1%) offered for each such Competitive
Bid Loan (the "Absolute Rate");
(D) in the case of a Competitive Bid Quote
for Competitive Bid Loans at the Eurodollar Competitive Rate,
the positive or negative margin to be added to or deducted
from the Interbank Offered Rate; and
(E) the identity of the quoting Lender.
Unless otherwise agreed by the Administrative Agent and the Borrowers, no
Competitive Bid Quote shall contain qualifying, conditional or similar language
or propose terms other than or in addition to those set forth in the applicable
Competitive Bid Quote Request and, in particular, no Competitive Bid Quote may
be conditioned upon acceptance by the Borrowers of all (or some specified
minimum) of the principal amount of the Competitive Bid Loan for which such
Competitive Bid Quote is being made. Any subsequent Competitive Bid Quote
submitted by a Lender that amends, modifies or is otherwise inconsistent with a
previous Competitive Bid Quote submitted by such Lender with respect to the same
Competitive Bid Quote Request shall be
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disregarded by the Borrowers unless such subsequent Competitive Bid Quote is
submitted solely to correct a manifest error in such former Competitive Bid
Quote.
(d) The Borrowers shall (A) in the case of a Competitive Bid
Loan at an Absolute Rate, as promptly as practicable after the Competitive Bid
Quote is submitted (but in any event not later than 10:30 a.m. Charlotte, North
Carolina time on the Quotation Date (or such other time and date as the
Borrowers and the Administrative Agent, with the consent of the Required
Lenders, may agree) or (B) in the case of a Competitive Bid Loan at a Eurodollar
Competitive Rate, the third Business Day prior to the proposed date of
borrowing), notify the Administrative Agent and Lenders of (A) the aggregate
principal amount of the Competitive Bid Borrowing for which Competitive Bid
Quotes have been received as well as the ranges of bids submitted for each
Interest Period requested, (B) the respective principal amounts and Absolute
Rates or Eurodollar Competitive Rates, as the case may be, so offered by each
Lender (identifying the Lender that made each Competitive Bid Quote), and (C)
its acceptance or nonacceptance of the Competitive Bid Quotes. In the case of
acceptance, such notice shall specify the aggregate principal amount of offers
for each Interest Period that are accepted. The Borrowers may accept any
Competitive Bid Quote in whole or in part (provided that any Competitive Bid
Quote accepted in part shall be at least $5,000,000 or in increments of
$1,000,000 in excess thereof); provided that:
(i) the aggregate principal amount of each
Competitive Bid Borrowing may not exceed the applicable amount set
forth in the related Competitive Bid Quote Request;
(ii) the aggregate principal amount of each
Competitive Bid Borrowing shall be at least $5,000,000 (or an increment
of $1,000,000 in excess thereof) but shall not cause the limits
specified in Section 2.02(a) hereof to be violated;
(iii) except as provided below, acceptance of
Competitive Bid Quotes for any Interest Period may be made only in
ascending order of Absolute Rates or Eurodollar Competitive Rates, as
the case may be, beginning with the lowest rate so offered; and
(iv) the Borrowers may not accept any Competitive
Bid Quote where such Competitive Bid Quote fails to comply with Section
2.02(c)(ii) hereof or otherwise fails to comply with the requirements
of this Agreement (including, without limitation, Section 2.02(a)
hereof).
Any of the conditions above notwithstanding, the Borrowers may, in their sole
discretion, accept a Competitive Bid Quote that does not contain the lowest
Absolute Rate or Eurodollar Competitive Rates, as the case may be, where
acceptance of the Competitive Bid Quote containing the lowest Absolute Rate or
Eurodollar Competitive Rate, as the case may be, would cause the principal
amount of Outstanding Credit Obligations of a Lender or Lenders offering the
lowest Absolute Rate or Eurodollar Competitive Rate, as the case may be, to
exceed the Total Revolving Credit Commitment.
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If Competitive Bid Quotes are made by two or more Lenders with the same
Absolute Rates or Eurodollar Competitive Rates, as the case may be, for a
greater aggregate principal amount than the amount in respect of which
Competitive Bid Quotes are accepted for the related Interest Period after the
acceptance of all Competitive Bid Quotes, if any, of all lower Absolute Rates or
Eurodollar Competitive Rates, as the case may be, offered by any Lender for such
related Interest Period, the principal amount of Competitive Bid Loans in
respect of which such Competitive Bid Quotes are accepted shall be allocated by
the Borrowers among such Lenders as nearly as possible (in amounts of at least
$1,000,000 or in increments of $100,000 in excess thereof) in proportion to the
aggregate principal amount of such Competitive Bid Quotes. Determinations by the
Borrowers of the amounts of Competitive Bid Loans and the lowest bid after
adjustment as provided in Section 2.02(d)(iii) shall be conclusive in the
absence of manifest error.
(e) Any Lender whose offer to make any Competitive Bid Loan
has been accepted shall, not later than 1:00 p.m. Charlotte, North Carolina time
on the date specified for the making of such Loan, make the amount of such Loan
available to the applicable Borrower at the applicable Borrower's Account or
otherwise as shall be directed by the Authorized Representative in Dollars and
in immediately available funds.
(f) From time to time, the Borrowers shall furnish such
information to the Administrative Agent as the Administrative Agent may request
relating to the making of Competitive Bid Loans, including the amounts, interest
rates, dates of borrowings and maturities thereof.
(g) The Borrowers may request the Administrative Agent to
receive the Competitive Bid Quotes, in which event the Administrative Agent
shall (A) in the case of a Competitive Bid Loan at the Absolute Rate, as
promptly as practicable after the Competitive Bid Quote is submitted (but in no
event later than 10:00 a.m., Charlotte, North Carolina time on the Quotation
Date) or (B) in the case of a Competitive Bid Loan at the Eurodollar Competitive
Rate, by 10:00 a.m. Charlotte, North Carolina time on the date a Competitive
Quote is submitted, notify the Borrowers of the terms of any Competitive Bid
Quote submitted by a Lender that is in accordance with Section 2.02(c) hereof.
The Administrative Agent's notice to the Borrowers shall specify (A) the
aggregate principal amount of the Competitive Bid Borrowing for which
Competitive Bid Quotes have been received and (B) the respective principal
amounts and Absolute Rates or Eurodollar Competitive Rate, as the case may be,
offered by each Lender (identifying the Lender that made each Competitive Bid
Quote). Not later than 10:30 a.m. Charlotte, North Carolina time on (A) the
third Business Day prior to the proposed date of borrowing, in the case of
Competitive Bid Loans at the Eurodollar Competitive Rate or (B) the Quotation
Date (or, in any such case, such other time and date as the Borrowers and the
Administrative Agent, with the consent of the Required Lenders, may agree), the
Borrowers shall notify the Administrative Agent of their acceptance or
nonacceptance of the Competitive Bid Quotes so notified to it (and the failure
of the Borrowers to give such notice by such time shall constitute
nonacceptance) and the Administrative Agent shall promptly notify each affected
Lender. Together with each notice of a request for Competitive Bid Quotes, which
each Borrower requires the Administrative Agent
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to issue pursuant to this paragraph (g), such Borrower shall pay to the
Administrative Agent for the account of the Administrative Agent a bid
administration fee of $1,500.00.
2.03 Payment of Interest. (a) The Borrowers shall pay interest (i) to
the Administrative Agent at the Principal Office for the account of each Lender
on the outstanding and unpaid principal amount of each Revolving Credit Loan
made by such Lender for the period commencing on the date of such Loan until
such Loan shall be due at the Eurodollar Revolver Rate or the Base Rate, as
elected or deemed elected by such Borrower or otherwise applicable to such Loan
as herein provided, (ii) to the Lender at its Lending Office making each
Competitive Bid Loan, at the applicable Absolute Rate or Eurodollar Competitive
Rate, as the case may be, and (iii) to the Administrative Agent in the case of
each Swing Line Loan, at the Base Rate; provided, however, that if any amount
shall not be paid when due (at maturity, by acceleration or otherwise), all
amounts outstanding hereunder shall bear interest thereafter (i) in the case of
a Eurodollar Loan, at a rate of interest per annum of two percent (2%) above the
applicable Eurodollar Revolver Rate for such Eurodollar Loan, (ii) in the case
of a Base Rate Loan, at a rate of interest per annum which shall be two percent
(2%) above the Base Rate, and (iii) in the case of a Competitive Bid Loan, at a
rate of interest per annum which shall be two percent (2%) above the Absolute
Rate or Eurodollar Competitive Rate, as the case may be, for such Competitive
Bid Loan, or (in each case) the maximum rate permitted by applicable law,
whichever is lower, from the date such amount was due and payable until the date
such amount is paid in full.
(b) Interest on the outstanding principal balance of each Loan shall be
computed on the basis of (x) in the case of a Eurodollar Loan or a Competitive
Bid Loan at the Eurodollar Competitive Rate, a year of 360 days and calculated
for the actual number of days elapsed and (y) in the case of a Base Rate Loan, a
year of 365-366 days and calculated for the actual number of days elapsed.
Interest on the outstanding principal balance of each Loan shall be paid (a)
quarterly in arrears, such payment to be made not later than the third (3rd)
Business Day of each April, July, October and January commencing on the third
(3rd) Business Day of July 1997, on each Base Rate Loan, (b) on the last day of
the applicable Interest Period for each Eurodollar Loan and Competitive Bid
Loan, but in no event less frequently than at the end of each three month period
and (c) upon payment in full of the principal amount of such Loan at the
Revolving Credit Termination Date.
2.04 Payment of Principal. The principal amount of the Revolving Credit
Outstandings and all Swing Line Outstandings shall be due and payable to the
Administrative Agent for the benefit of each Lender in full on the Revolving
Credit Termination Date, or earlier as herein expressly provided. The principal
amount of all Competitive Bid Loans shall be due and payable to the Lender
making such Competitive Bid Loan in full on the last day of the Interest Period
therefor, or earlier as herein expressly provided. The principal amount of
Eurodollar Loans may only be prepaid at the end of the applicable Interest
Period, unless the Borrowers shall pay to the Administrative Agent for the
account of the Lenders the amount, if any, required under Section 4.04. The
principal amount of Competitive Bid Loans may only be prepaid at the end of the
applicable Interest Period, unless (i) the applicable Borrower shall have
retained in the Competitive Bid Quote Request with respect to such Competitive
Bid Loans the right of prepayment, and (ii)
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the applicable Borrower shall have paid to the Lender making such Competitive
Bid Loans or to the Administrative Agent, as applicable, the amounts, if any,
required under Section 4.04. Each Borrower shall furnish the Administrative
Agent telephonic notice of its intention to make a principal payment (including
Competitive Bid Loans) prior to 11:00 A.M. Charlotte, North Carolina time on the
date of such payment. All payments of principal on Loans other than Competitive
Bid Loans and Swing Line Loans shall be in the amount of $10,000,000 or such
greater amount which is an integral multiple of $1,000,000.
2.05 Non-Conforming Payments. (a) Each payment of principal (including
any prepayment) and payment of interest (other than principal and interest on
Competitive Bid Loans which shall be paid to the Lender making such Loans) shall
be made to the Administrative Agent at the Principal Office, for the account of
each Lender's applicable Lending Office, in Dollars and in immediately available
funds before 12:30 P.M. Charlotte, North Carolina time on the date such payment
is due. The Administrative Agent may, but shall not be obligated to, debit the
amount of any such payment which is not made by such time to any ordinary
deposit account, if any, of either Borrower with the Administrative Agent.
(b) The Administrative Agent shall deem any payment by or on behalf of
the Borrowers hereunder that is not made both (a) in Dollars and in immediately
available funds and (b) prior to 12:30 P.M. Charlotte, North Carolina time on
the date payment is due to be a non-conforming payment. Any such payment shall
not be deemed to be received by the Administrative Agent until the time such
funds become available funds. Non-conforming payments may constitute or become a
Default or Event of Default. The Administrative Agent shall give prompt
telephonic notice to the Authorized Representative and each of the Lenders
(confirmed in writing) if any payment is non-conforming. Interest shall continue
to accrue on any principal as to which a non-conforming payment is made until
such funds become available funds (but in no event less than the period from the
date of such payment to the next succeeding Business Day) at the respective
rates of interest per annum specified in Section 2.03(a) in respect of late
payments of interest, from the date such amount was due and payable until the
date such amount is paid in full (but in no event less than the period from the
date of such payment to the next succeeding Business Day).
(c) In the event that any payment hereunder or under the Notes becomes
due and payable on a day other than a Business Day, then such due date shall be
extended to the next succeeding Business Day; provided that interest shall
continue to accrue during the period of any such extension.
2.06 Borrowers' Accounts. Each Borrower shall continuously maintain its
Borrower's Account for the purposes herein contemplated.
2.07 Notes. (a) Revolving Credit Loans made by each Lender, shall be
evidenced by, and be repayable with interest in accordance with the terms of,
the Revolving Credit Note payable to the order of such Lender in the amount of
its Applicable Commitment Percentage of the Total Revolving Credit Commitment,
which Revolving Credit Note shall be dated the Closing Date or
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such later date pursuant to an Assignment and Acceptance and shall be duly
completed, executed and delivered by each Borrower.
(b) Competitive Bid Loans made by any Lender shall be evidenced by, and
be repayable with interest in accordance with the terms of, the Competitive Bid
Note payable to the order of such Lender in the amount of the Total Revolving
Credit Commitment (but the aggregate outstanding principal amount of Competitive
Bid Loans may not at any time exceed one hundred percent (100%) of the Total
Revolving Credit Commitment) which shall be dated the Closing Date or such later
date pursuant to an Assignment and Acceptance and shall be duly completed,
executed and delivered by each Borrower.
(c) Swing Line Loans made by NationsBank shall be evidenced by the
Swing Line Note in the principal amount of $50,000,000, and shall be repayable
with interest in accordance with the terms of the Swing Line Note dated the
Closing Date and duly executed and delivered by each Borrower.
2.08 Pro Rata Payments. Except as otherwise provided herein, (a) each
payment and prepayment on account of the principal of and interest on the Loans
(other than Competitive Bid Loans and Swing Line Loans) and the fees described
in Sections 2.12 and 2.13 hereof shall be made to the Administrative Agent in
the aggregate amount payable to the Lenders for the account of the Lenders pro
rata based on their Applicable Commitment Percentages, (b) each payment of
principal and interest on the Competitive Bid Loans shall be made to (i) the
Administrative Agent for the account of the respective Lender making such
Competitive Bid Loan if the Borrowers have elected that the Administrative Agent
act under Section 2.02(g) hereof and (ii) otherwise directly to the Lender
making such Competitive Bid Loan, (c) each payment of principal and interest on
Swing Line Loans shall be made to the Administrative Agent for the account of
NationsBank, (d) all payments to be made by the Borrowers for the account of
each of the Lenders on account of principal, interest and fees, shall be made
without set-off or counterclaim, and (e) the Administrative Agent will
distribute such payments when received to the Lenders as provided for herein and
subject to Section 4.06.
2.09 Reductions. The Borrowers shall, by notice from an Authorized
Representative, have the right from time to time (but not more frequently than
twice during each Fiscal Year), upon not less than three (3) Business Days
irrevocable written notice to the Administrative Agent to reduce the Total
Revolving Credit Commitment. The Administrative Agent shall give each Lender,
within one (1) Business Day, telephonic notice (confirmed in writing) of such
reduction. Each such reduction shall be in the aggregate amount of $10,000,000
or such greater amount which is in an integral multiple of $1,000,000, and shall
permanently reduce the Total Revolving Credit Commitment of the Lenders pro
rata. No such reduction shall be permitted that results in the payment of any
Eurodollar Loan other than on the last day of the Interest Period of such Loan
unless such prepayment is accompanied by amounts due, if any, under Section
4.04. Each reduction of the Total Revolving Credit Commitment shall be
accompanied by payment of the Revolving Credit Notes to the extent that the
aggregate principal amount of Outstanding Credit
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Obligations exceeds the Total Revolving Credit Commitment after giving effect to
such reduction, together with accrued and unpaid interest on the amounts
prepaid.
2.10 Increase and Decrease in Amounts. The amount of the Total
Revolving Credit Commitment which shall be available to the Borrowers shall be
reduced by the aggregate amount of all Swing Line Outstandings, all Outstanding
Letters of Credit and all outstanding Competitive Bid Loans.
2.11 Conversions and Elections of Subsequent Interest Periods. Provided
that no Default or Event of Default shall have occurred and be continuing and
subject to the limitations set forth below and in Sections 4.01(b), 4.02 and
4.03 hereof, the Borrowers may:
(a) upon notice to the Administrative Agent on or before 10:30 A.M.
Charlotte, North Carolina time on any Business Day convert all or a part of
Eurodollar Loans that are Revolving Credit Loans to Base Rate Loans on the last
day of the Interest Period for such Eurodollar Loans; and
(b) on three (3) Business Days' notice to the Administrative Agent on
or before 10:30 A.M. Charlotte, North Carolina time:
(i) elect a subsequent Interest Period for all or a portion
of Eurodollar Loans to begin on the last day of the current
Interest Period for such Eurodollar Loans; or
(ii) convert Base Rate Loans (other than Swing Line Loans) to
Eurodollar Loans on any Eurodollar Business Day.
Notice of any such elections or conversions shall specify the effective
date of such election or conversion and, with respect to Eurodollar Loans, the
Interest Period to be applicable to the Loan as continued or converted. Each
election and conversion pursuant to this Section 2.11 shall be subject to the
limitations on Eurodollar Loans set forth in the definition of "Interest Period"
herein and in Article IV hereof. All such continuations or conversions of Loans
shall be effected pro rata based on the Applicable Commitment Percentages of the
Lenders.
2.12 Revolving Credit Facility Fee. For the period beginning on the
Closing Date and ending on the Revolving Credit Termination Date (or such
earlier date on which the Revolving Credit Facility has terminated), the
Borrowers agree to pay to the Administrative Agent, for the pro rata benefit of
the Lenders based on their Applicable Commitment Percentages of the Revolving
Credit Facility, the Facility Fee. Such payments of fees provided for in this
Section 2.12 shall be payable quarterly in arrears, such payments to be made not
later than the third (3rd) Business Day of each April, July, October and January
beginning on the third (3rd) Business Day of July 1997 to and on the Revolving
Credit Termination Date (or such earlier date on which the Revolving Credit
Facility has terminated). Notwithstanding the foregoing, so long as any Lender
fails to make available any portion of its Revolving Credit Commitment when
requested, such Lender shall not be entitled to receive payment of its pro rata
share of such fee until such Lender
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shall make available such portion. Such fee shall be calculated on the basis of
a year of 365-366 days for the actual number of days elapsed.
2.13 Deficiency Advances. No Lender shall be responsible for any
default of any other Lender in respect to such other Lender's obligation to make
any Loan hereunder nor shall the Revolving Credit Commitment of any Lender
hereunder be increased as a result of such default of any other Lender. Without
limiting the generality of the foregoing, in the event any Lender shall fail to
advance funds to the Borrowers as herein provided, the Administrative Agent may
in its discretion, but shall not be obligated to, advance under the applicable
Note in its favor as a Lender all or any portion of such amount or amounts
(each, a "deficiency advance") and shall thereafter be entitled to payments of
principal of and interest on such deficiency advance in the same manner and at
the same interest rate or rates to which such other Lender would have been
entitled had it made such advance under its applicable Note; provided that, upon
payment to the Administrative Agent from such other Lender of the entire
outstanding amount of each such deficiency advance, together with accrued and
unpaid interest thereon, from the most recent date or dates interest was paid to
the Administrative Agent by the Borrowers on each Loan comprising the deficiency
advance at the interest rate per annum for overnight borrowing by the
Administrative Agent from the Federal Reserve Bank, then such payment shall be
credited against the applicable Note of the Administrative Agent in full payment
of such deficiency advance and the Borrowers shall be deemed to have borrowed
the amount of such deficiency advance from such other Lender as of the date such
deficiency advance is made.
2.14 Use of Proceeds. The proceeds of the Loans made pursuant to the
Revolving Credit Facility, the Competitive Bid Facility, the Swing Line and the
Letters of Credit issued pursuant to the Letter of Credit Facility shall be used
by the Company and its Subsidiaries to finance Permitted Acquisitions and for
working capital and general corporate needs of the Company and its Subsidiaries.
2.15 Swing Line. (a) Notwithstanding any other provision of this
Agreement to the contrary, in order to administer the Revolving Credit Facility
in an efficient manner and to minimize the transfer of funds between the
Administrative Agent and the Lenders, NationsBank, in its individual capacity
and not as Administrative Agent, and subject to the provisions of Section
2.15(c), shall make available Swing Line Loans to either Borrower prior to the
Revolving Credit Termination Date. NationsBank shall not make any Swing Line
Loan pursuant hereto (i) if to the actual knowledge of NationsBank the Borrowers
are not in compliance with all the conditions to the making of Loans set forth
in this Agreement, (ii) if after giving effect to such Swing Line Loan, the
Swing Line Outstandings exceed $50,000,000, or (iii) if after giving effect to
such Swing Line Loan, the principal amount of Outstanding Credit Obligations
exceeds the Total Revolving Credit Commitment. Swing Line Loans shall be limited
to Base Rate Loans unless NationsBank and the Borrowers shall agree otherwise.
The Borrowers may borrow, repay and reborrow under this Section 2.15. Unless
notified to the contrary by NationsBank, borrowings under the Swing Line shall
be made in the minimum amount of $1,000,000 or, if greater, in amounts which are
integral multiples of $100,000, or in the amount necessary to effect a Base Rate
Refunding Loan, upon irrevocable telephonic notice, by an Authorized
Representative of
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Borrowers made to NationsBank not later than 12:30 P.M. on the Business Day of
the requested borrowing. The applicable Borrower shall provide the
Administrative Agent written confirmation of each such telephonic notice on the
same day by telefacsimile transmission in the form of a Borrowing Notice. Each
such Borrowing Notice shall specify the amount of the borrowing and the date of
borrowing, and shall be in the form of Exhibit D-2, with appropriate insertions.
Unless notified to the contrary by NationsBank, each repayment of a Swing Line
Loan shall be in an amount which is an integral multiple of $100,000 or the
aggregate amount of all Swing Line Outstandings. If either Borrower instructs
NationsBank to debit any demand deposit account of such Borrower in the amount
of any payment with respect to a Swing Line Loan, or NationsBank otherwise
receives repayment, after 12:30 P.M. on a Business Day, such payment shall be
deemed received on the next Business Day.
(b) Swing Line Loans shall bear interest at the Base Rate or at any
rate otherwise mutually agreed upon by NationsBank and the Borrowers. The
interest payable on Swing Line Loans is solely for the account of NationsBank,
and all accrued and unpaid interest on Swing Line Loans shall be payable on the
dates and in the manner provided in Sections 2.03 and 2.04 with respect to
interest on Base Rate Loans. The Swing Line Outstandings shall be evidenced by
the Note delivered to NationsBank pursuant to Section 2.07(c).
(c) Upon the making of a Swing Line Loan, each Lender shall be deemed
to have purchased from NationsBank a Participation therein in an amount
determined with reference to that Lender's Applicable Commitment Percentage of
such Swing Line Loan. Upon demand made by NationsBank, each Lender shall,
according to its Applicable Commitment Percentage of such Swing Line Loan,
promptly provide to NationsBank its purchase price therefor in an amount equal
to its Participation therein. Any Advance made by a Lender pursuant to demand of
NationsBank of the purchase price of its Participation shall be deemed (i)
provided that the conditions to making Revolving Credit Loans shall be
satisfied, a Base Rate Refunding Loan under Section 2.01 until the applicable
Borrower converts such Base Rate Loan in accordance with the terms of Section
2.11, and (ii) in all other cases, the funding by each Lender of the purchase
price of its Participation in such Swing Line Loan. The obligation of each
Lender to so provide its purchase price to NationsBank shall be absolute and
unconditional and shall not be affected by the occurrence of a Default, an Event
of Default or any other occurrence or event.
Either Borrower, at its option and subject to the terms hereof, may
request an Advance pursuant to Section 2.01 in an amount sufficient to repay
Swing Line Outstandings on any date and the Administrative Agent shall provide
from the proceeds of such Advance to NationsBank the amount necessary to repay
such Swing Line Outstandings (which NationsBank shall then apply to such
repayment) and credit any balance of the Advance in immediately available funds
in the manner directed by the Borrowers pursuant to Section 2.01(c)(iii). The
proceeds of such Advances shall be paid to NationsBank for application to the
Swing Line Outstandings and the Lenders shall then be deemed to have made Loans
in the amount of such Advances. The Swing Line shall continue in effect until
the Revolving Credit Termination Date, at which time all Swing Line Outstandings
and accrued interest thereon shall be due and payable in full.
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ARTICLE III
Letters of Credit
3.01 Letters of Credit. The Issuing Banks agree, subject to the terms
and conditions of this Agreement, upon request and for the account of the
Company, to issue from time to time Letters of Credit upon delivery to the
Issuing Bank of an Application and Agreement for Letter of Credit in form and
content acceptable to such Issuing Bank; provided, that the Outstanding Letters
of Credit shall not exceed the Total Letter of Credit Commitment. No Letter of
Credit shall be issued by an Issuing Bank with an expiry date or payment date
occurring subsequent to the fifth Business Day preceding the Revolving Credit
Termination Date. No Issuing Bank shall be required to issue any Letter of
Credit if the principal amount of Outstanding Credit Obligations when added to
the face amount of any requested Letter of Credit exceeds the Total Revolving
Credit Commitment. At any one time during the term of this Agreement, not more
than four (4) different Lenders (not including any Existing Issuing Banks) shall
be allowed to act as an Issuing Bank.
3.02 Reimbursement.
(a) The Company hereby unconditionally agrees immediately to pay to the
applicable Issuing Bank on demand at its Lending Office all amounts required to
pay all drafts drawn or purporting to be drawn under any Letters of Credit and
all reasonable expenses incurred by an Issuing Bank in connection with the
Letters of Credit and in any event and without demand to place in possession of
the applicable Issuing Bank (which shall include Advances under the Revolving
Credit Facility if permitted by Section 2.01 hereof) sufficient funds to pay all
debts and liabilities arising under any Letter of Credit. The Company's
obligations to pay an Issuing Bank under this Section 3.02, and such Issuing
Bank's right to receive the same, shall be absolute and unconditional and shall
not be affected by any circumstance whatsoever. Each Issuing Bank agrees to give
the Company prompt written notice of any request for a draw under a Letter of
Credit, but failure to provide such notice shall not affect the parties'
Obligations with respect thereto. Each Issuing Bank may charge any account the
Company may have with it for any and all amounts such Issuing Bank pays under a
Letter of Credit, plus charges and reasonable expenses as from time to time
agreed to by such Issuing Bank and the Company; provided that to the extent
permitted by Section 2.01(c)(iv), such amounts shall be paid pursuant to Swing
Line Loans or Advances under the Revolving Credit Facility. The Company agrees
that an Issuing Bank may, in its sole discretion, accept or pay, as complying
with the terms of any Letter of Credit, any drafts or other documents otherwise
in order which may be signed or issued by an administrator, executor, trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
liquidator, receiver, attorney in fact or other legal representative of a party
who is authorized under such Letter of Credit to draw or issue any drafts or
other documents. The Company agrees to pay an Issuing Bank interest on any
amounts not paid when due hereunder at the Base Rate plus two percent (2%) per
annum, or the maximum rate permitted by applicable law, if lower.
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(b) In accordance with the provisions of Section 2.01 hereof,
each Issuing Bank shall notify the Administrative Agent (and shall also notify
the Company), but failure to provide such notification shall not affect the
parties' Obligations with respect thereto, of any drawing under any Letter of
Credit as promptly as practicable following the receipt by such Issuing Bank of
such drawing.
(c) Each Lender (other than the applicable Issuing Bank) shall
automatically acquire on the date of issuance thereof, a Participation in the
liability of such Issuing Bank in respect of each Letter of Credit in an amount
determined with reference to such Lender's Applicable Commitment Percentage of
such liability, and to the extent that the Company is obligated to pay such
Issuing Bank under Section 3.02(a), each Lender (other than the Issuing Bank)
shall absolutely, unconditionally and irrevocably assume, and shall be
unconditionally obligated to pay to such Issuing Bank as hereinafter described,
its Applicable Commitment Percentage of the liability of such Issuing Bank under
such Letter of Credit. Prior to the Revolving Credit Termination Date, each
Lender (including any Issuing Bank in its capacity as a Lender) shall, subject
to the terms and conditions of Article II, make a Revolving Credit Loan bearing
interest at the Base Rate to the Company by paying to the Administrative Agent
for the account of the applicable Issuing Bank at the Principal Office in
Dollars and in immediately available funds, an amount equal to its Applicable
Commitment Percentage of any drawing under a Letter of Credit, all as described
and pursuant to Section 2.01(c)(iv). With respect to drawings under any of the
Letters of Credit, each Lender, upon receipt from the Administrative Agent of
notice of a drawing in the manner described in Section 2.01(c)(iv), shall
promptly pay to the Administrative Agent for the account of the applicable
Issuing Bank, prior to the applicable time set forth in Section 2.01(c)(iv), its
Applicable Commitment Percentage of such drawing. Simultaneously with the making
of each such payment by a Lender to such Issuing Bank, such Lender shall,
automatically and without any further action on the part of such Issuing Bank or
such Lender, acquire a Participation in an amount equal to such payment
(excluding the portion thereof constituting interest) in the related
Reimbursement Obligation of the Company. The Reimbursement Obligations of the
Company shall be immediately due and payable whether by Advances made in
accordance with Section 2.01(c)(iv) or otherwise. Each Lender's obligation to
make payment to the Administrative Agent for the account of an Issuing Bank
pursuant to this Section 3.02(c), and the right of such Issuing Bank to receive
the same, shall be absolute and unconditional, shall not be affected by any
circumstance whatsoever and shall be made without any offset, abatement,
withholding or reduction whatsoever. If any Lender is obligated to pay but does
not pay amounts to the Administrative Agent for the account of an Issuing Bank
in full upon such request as required by this Section 3.02(c), such Lender
shall, on demand, pay to the Administrative Agent for the account of such
Issuing Bank interest on the unpaid amount for each day during the period
commencing on the date of notice given to such Lender pursuant to Section
2.01(b) until such Lender pays such amount to the Administrative Agent for the
account of such Issuing Bank in full at the interest rate per annum for
overnight borrowing by the Administrative Agent from the Federal Reserve Bank.
(d) As soon as practical following the issuance of a Letter of
Credit, the applicable Issuing Bank shall notify the Administrative Agent, and
the Administrative Agent shall
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notify each Lender, of the date of issuance of such Letter of Credit, the stated
amount and the expiry date of such Letter of Credit. Promptly following the end
of each calendar quarter, each Issuing Bank shall deliver to the Administrative
Agent, and the Administrative Agent shall deliver to each Lender, a notice
describing the aggregate undrawn amount of all Letters of Credit at the end of
such quarter. Upon the request of any Lender from time to time, each Issuing
Bank shall deliver to the Administrative Agent, and the Administrative Agent
shall deliver to such Lender, any other information reasonably requested by such
Lender with respect to each Outstanding Letter of Credit.
(e) Each issuance by an Issuing Bank of a Letter of Credit
shall, in addition to the conditions precedent set forth in Section 5.01 hereof,
be subject to the conditions that such Letter of Credit be in such form and
contain such terms as shall be reasonably satisfactory to the Issuing Bank
consistent with the then current practices and procedures of such Issuing Bank
with respect to similar letters of credit, and the Company shall have executed
and delivered such other instruments and agreements relating to such Letters of
Credit as the Issuing Bank shall have reasonably requested consistent with such
practices and procedures. All Letters of Credit shall be issued pursuant to and
subject to the Uniform Customs and Practice for Documentary Credits, 1993
revision, International Chamber of Commerce Publication No. 500 and all
subsequent amendments and revisions thereto.
(f) Without duplication of Section 10.07 hereof, the Company
hereby agrees to defend, indemnify and hold harmless each Issuing Bank, each
other Lender and the Administrative Agent from and against any and all claims
and damages, losses, liabilities, reasonable costs and expenses which such
Issuing Bank, such other Lenders or the Administrative Agent may incur (or which
may be claimed against such Issuing Bank, such other Lenders or the
Administrative Agent) by any Person by reason of or in connection with the
issuance or transfer of or payment or failure to pay under any Letter of Credit;
provided that the Company shall not be required to indemnify an Issuing Bank,
any other Lender or the Administrative Agent for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, (i) caused
by the willful misconduct or gross negligence of the party to be indemnified
after final adjudication thereof or (ii) caused by the failure of an Issuing
Bank to pay under any Letter of Credit after the presentation to it of a request
strictly complying with the terms and conditions of such Letter of Credit,
unless such payment is prohibited by any law, regulation, court order or decree
or failure to pay is permitted under the terms of the applicable Letter of
Credit. The provisions of this Section 3.02(f) shall survive repayment of the
Obligations, the occurrence of the Revolving Credit Termination Date, and
expiration or termination of this Agreement.
(g) Without limiting the Company's rights to raise claims as
set forth in Section 3.02(f) above, the obligation of the Company to immediately
reimburse an Issuing Bank for drawings made under Letters of Credit shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and such Letters of Credit and the
related applications for any Letter of Credit, including, under the following
circumstances:
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(i) any lack of validity or enforceability of the Letter of
Credit, the obligation supported by the Letter of Credit or any other agreement
or instrument relating thereto (collectively, the "Related Documents");
(ii) any amendment or waiver of or any consent to or
departure from all or any of the Related Documents;
(iii) the existence of any claim, setoff, defense (other than
the defense of payment in accordance with the terms of this Agreement) or other
rights which the Company may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any persons or entities for whom any such
beneficiary or any such transferee may be acting), the Administrative Agent, the
Lenders or any other person or entity, whether in connection with the Loan
Documents, the Related Documents or any unrelated transaction;
(iv) any breach of contract or other dispute between the
Company and any beneficiary or any transferee of a Letter of Credit (or any
persons or entities for whom such beneficiary or any such transferee may be
acting), the Administrative Agent, the Lenders or any other Person;
(v) any draft, statement or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect whatsoever;
(vi) any delay, extension of time, renewal, compromise or
other indulgence or modification granted or agreed to by the Administrative
Agent, with or without notice to or approval by the Company in respect of any of
the Company's Obligations under this Agreement; or
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing;
provided, however, that nothing contained herein shall be deemed to release an
Issuing Bank or any other Lender of any liability for actual loss arising as a
result of its gross negligence or willful misconduct or out of the wrongful
dishonor by an Issuing Bank of a proper demand for payment made under and
strictly complying with the terms of any Letter of Credit.
3.03 Letter of Credit Fee. The Company agrees to pay (i) to the
Administrative Agent, for the pro rata benefit of the Lenders based on their
Applicable Commitment Percentages, a fee on the aggregate amount available to be
drawn on each Outstanding Letter of Credit at a rate equal to the Applicable
Margin as in effect from time to time, and (ii) to the Issuing Bank, as issuer
of each Letter of Credit, an issuance fee in such amount as may be agreed by an
Issuing Bank and the Company from time to time. Such payments of fees provided
for in this Section 3.03 shall be due with respect to each Letter of Credit
quarterly in arrears, such payment to be made not later than the third (3rd)
Business Day of each April, July, October and January, commencing on the
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first such date following the issuance of a Letter of Credit under this
Agreement. Such fees shall be calculated on the basis of a year of 365-366 days
for the actual number of days elapsed.
3.04 Administrative Fees. The Company shall pay to any Issuing Bank
such administrative fee and other fees, if any, in connection with the Letters
of Credit in such amounts and at such times as such Issuing Bank and the Company
shall agree from time to time.
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ARTICLE IV
Yield Protection and Illegality
4.01 Additional Costs. (a) The Borrowers shall promptly pay to the
Administrative Agent for the account of a Lender from time to time, without
duplication, such amounts as such Lender may determine to be necessary to
compensate it for any costs incurred by such Lender which it determines are
attributable to its making or maintaining any Loan or its obligation to make any
Loans, or the issuance or maintenance by an Issuing Bank of or any other
Lender's Participation in any Letter of Credit issued hereunder, or any
reduction in any amount receivable by such Lender under this Agreement, the
Notes or the Letters of Credit in respect of any of such Loans or such
obligation or the Letters of Credit, including reductions in the rate of return
on a Lender's capital (such increases in costs and reductions in amounts
receivable and returns being herein called "Additional Costs"), resulting from
any Regulatory Change which: (i) changes the basis of taxation of any amounts
payable to such Lender under this Agreement or the Notes in respect of any of
such Loans or Letters of Credit (other than taxes imposed on or measured by the
income, revenues or assets of any Lender); or (ii) imposes or modifies any
reserve, special deposit, or similar requirements relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of, such
Lender (other than any such reserve, deposit or requirement reflected in the
Prime Rate, the Federal Funds Effective Rate, the Eurodollar Revolver Rate or
the Eurodollar Competitive Rate, in each case computed in accordance with the
respective definitions of such terms set forth in Section 1.01 hereof); or (iii)
has or would have the effect of reducing the rate of return on capital of any
such Lender or corporation controlling such Lender to a level below that which
the Lender or corporation controlling such Lender could have achieved but for
such Regulatory Change (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy); or (iv) imposes any
other condition adversely affecting the Administrative Agent or the Lenders
under this Agreement, the Notes or the issuance or maintenance of, or any
Lender's Participation in, the Letters of Credit (or any of such extensions of
credit or liabilities). Each Lender will notify the Borrowers and the
Administrative Agent of any event occurring after the Closing Date which would
entitle it to compensation pursuant to this Section 4.01(a) as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation.
(b) Without limiting the effect of the foregoing provisions of this
Section 4.01, in the event that, by reason of any Regulatory Change, any Lender
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
the Lender which includes deposits by reference to which the interest rate on
Eurodollar Loans or Competitive Bid Loans at the Eurodollar Competitive Rate is
determined as provided in this Agreement or a category of extensions of credit
or other assets of any Lender which includes Eurodollar Loans or Competitive Bid
Loans at the Eurodollar Competitive Rate (by way of illustration only and not
limitation, an increase in reserve requirements on a Lender's eurodollar deposit
liabilities above a specified dollar amount percentage of its capital) or (ii)
becomes subject to restrictions on the amount of such a category of liabilities
or assets which it may hold, then, if the Lender so elects by notice to the
other Lenders and the Borrowers, the
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obligation hereunder of such Lender to make, and to convert Base Rate Loans
into, Eurodollar Loans that are the subject of such restrictions shall be
suspended until the date such Regulatory Change ceases to be in effect and
either Borrower shall, on the last day(s) of the then current Interest Period(s)
for outstanding Eurodollar Loans convert such Eurodollar Loans into Base Rate
Loans; provided, however, that the suspension of such obligation and the
conversion of any Eurodollar Loans into Base Rate Loans shall apply only to any
Lender who is affected by such restrictions and who has provided such notice to
the other Lenders, and the obligation of the other Lenders to make, and to
convert Base Rate Loans into Eurodollar Loans shall not be affected by such
restrictions. In the event that the obligation of some, but not all of the
Lenders to make, or to convert Base Rate Loans into Eurodollar Loans or
Competitive Bid Loans at the Eurodollar Competitive Rate is suspended, then any
request by either Borrower during the pendency of such suspension for a
Eurodollar Loan or Competitive Bid Loans at the Eurodollar Competitive Rate
shall be deemed a request for such Eurodollar Loan or Competitive Bid Loans at
the Eurodollar Competitive Rate from the Lender(s) not subject to such
suspension and for a Base Rate Loan or Competitive Bid Loan at an Absolute Rate
from the Lender(s) who are subject to such suspension, as to Eurodollar Loans
and Base Rate Loans, in each case in the respective amounts based on the
Lenders' respective Revolving Credit Commitments.
(c) Determinations by any Lender for purposes of this Section 4.01 of
the effect of any Regulatory Change on its costs of making or maintaining, or
being committed to make, Loans or by an Issuing Bank as issuer of any Letter of
Credit of the effect of any Regulatory Change on its costs in connection with
the issuance or maintenance of, or any other Lender's Participation in, any
Letter of Credit issued hereunder, or on amounts receivable by any Lender in
respect of Loans or Letters of Credit, and of the additional amounts required to
compensate the Lender in respect of any Additional Costs, shall be made on a
reasonable basis taking into account such Lender's reasonable policies as to the
allocation of capital, costs and other items. The Lender requesting such
compensation shall furnish to the Borrowers and the Administrative Agent an
explanation of the Regulatory Change and calculations, in reasonable detail,
setting forth such Lender's determination of any such Additional Costs.
4.02 Suspension of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any interest rate for
any Eurodollar Loan or Competitive Bid Loan at a Eurodollar Competitive Rate for
any Interest Period, the Administrative Agent or, with respect to a Competitive
Bid Loan at the Eurodollar Competitive Rate, any Lender determines (which
determination made on a reasonable basis shall be conclusive absent manifest
error) that:
(a) quotations of interest rates for the relevant deposits
referred to in the definitions of a Eurodollar Revolver Rate or
Eurodollar Competitive Rate in Section 1.01 hereof are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining the rate of interest for such Eurodollar Loan
or Competitive Bid Loan as provided in this Agreement; or
(b) the relevant rates of interest referred to in the
definition of "Interbank Offered Rate" in Section 1.01 hereof upon the
basis of which the Eurodollar Revolver Rate
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or Eurodollar Competitive Rate for such Interest Period is to be
determined do not adequately reflect the cost to the Lenders, or in the
case of a Competitive Bid Loan, to the Lender making such Loan of
making or maintaining such Eurodollar Loan or Competitive Bid Loan for
such Interest Period (which determination shall be made on a reasonable
basis by the Administrative Agent or such Lender, as the case may be,
and the Person making such determination shall furnish the Borrowers
evidence of the facts leading to such determination);
then the Administrative Agent or Lender, as the case may be, shall give the
Borrowers prompt notice thereof, and so long as such condition remains in
effect, the Lenders shall be under no obligation to make Eurodollar Loans or
Competitive Bid Loans at the Eurodollar Competitive Rate that are subject to
such condition, or to convert Loans into Eurodollar Loans, and either Borrower
shall on the last day(s) of the then current Interest Period(s) for outstanding
Eurodollar Loans, as applicable, convert such Eurodollar Loans into another
Eurodollar Loan which is not subject to the same or similar condition, or Base
Rate Loans. The Administrative Agent or such Lender, as the case may be, shall
give the Borrowers notice describing in reasonable detail any event or condition
described in this Section 4.02 promptly following the determination by the
Administrative Agent or such Lender, as the case may be, that the availability
of Eurodollar Loans or Competitive Bid Loans at a Eurodollar Competitive Rate
is, or is to be, suspended as a result thereof.
4.03 Illegality. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Lender to honor its obligation to
make or maintain Eurodollar Loans or Competitive Bid Loans at a Eurodollar
Competitive Rate hereunder, then such Lender shall promptly notify the Borrowers
thereof (with a copy to the Administrative Agent) and such Lender's obligation
to make or continue Eurodollar Loans or Competitive Bid Loans at a Eurodollar
Competitive Rate, or convert Base Rate Loans into Eurodollar Loans, shall be
suspended until such time as such Lender may again make and maintain Eurodollar
Loans or Competitive Bid Loans at a Eurodollar Competitive Rate, and such
Lender's outstanding Eurodollar Loans shall be converted into Base Rate Loans in
accordance with Section 2.11 hereof.
4.04 Compensation. The Borrowers shall promptly pay to each Lender,
upon the request of such Lender, such amount or amounts as shall be sufficient
(in the reasonable determination of Lender) to compensate it for any loss, cost
or expense incurred by it as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Loan
or Competitive Bid Loan at a Eurodollar Competitive Rate on a date
other than the last day of the Interest Period for such Eurodollar Loan
or Competitive Bid Loan at a Eurodollar Competitive Rate, including
without limitation any conversion required pursuant to this Article IV,
the amount of such compensation being the positive difference, if any,
between the Interbank Offered Rate being paid with respect to such
Loans and the Interbank Offered Rate which would be payable on a new
Loan of like amount and for the remaining Interest Period made on the
date of such payment, prepayment or conversion; or
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(b) any failure by either Borrower to borrow, convert or
prepay a Eurodollar Loan or Competitive Bid Loan at a Eurodollar
Competitive Rate on the date for such borrowing, conversion or
prepayment specified in the relevant Borrowing Notice, Competitive Bid
Quote Request, interest rate selection notice or prepayment notice
under Article II hereof, the amount of such compensation to include,
without limitation, an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount not
borrowed for the period from the date of such failure to borrow to the
last day of the then current Interest Period for such Loan at the
applicable rate of interest for such Eurodollar Loan or Competitive Bid
Loan at a Eurodollar Competitive Rate provided for herein over (ii) the
Interbank Offered Rate for Dollar deposits of amounts comparable to
such principal amount and maturities comparable to such period.
A determination of a Lender as to the amounts payable pursuant to this Section
4.04 shall be conclusive, provided that such determinations are made on a
reasonable basis. The Lender requesting compensation under this Section 4.04
shall furnish to the Borrowers and the Administrative Agent calculations in
reasonable detail setting forth such Lender's determination of the amount of
such compensation.
4.05 Alternate Loan and Lender. In the event any Lender suspends the
making of any Eurodollar Loan or any Competitive Bid Loan at the Eurodollar
Competitive Rate pursuant to this Article IV (herein a "Restricted Lender"), the
Restricted Lender's Applicable Commitment Percentage of such Eurodollar Loans or
such Competitive Bid Loans shall bear interest at either the Base Rate, the
Eurodollar Revolver Rate or the Eurodollar Competitive Rate for which the
suspension does not apply, as selected by the Borrowers, until the Restricted
Lender once again makes available the applicable Eurodollar Loan or Competitive
Bid Loan at the Eurodollar Competitive Rate. Notwithstanding the provisions of
Section 2.03(b), interest shall be payable to the Restricted Lender at the time
and manner as paid to those Lenders making available Eurodollar Loans or
Competitive Bid Loans at the Eurodollar Competitive Rate. If the obligation of
any Lender to make Eurodollar Loans or Competitive Bid Loans at the Eurodollar
Competitive Rate is suspended, the Borrowers may, with respect to such Lender,
elect to terminate this Agreement, and in connection therewith, not to borrow at
the Base Rate as provided above; provided, that the Borrowers notify such Lender
through the Administrative Agent of such election at least three Business Days
before any date fixed for such borrowing and (i) repay all of such Lender's
outstanding Loans plus all accrued interest, commitment fees and other amounts
owing to, but not including, the date of repayment at the end of the respective
Interest Periods applicable thereto, and (ii) selects, with the consent of the
Administrative Agent, which shall not be unreasonably withheld, an assignee
which shall assume all the rights and obligations of such Lender as to which
this Agreement has been terminated. Upon receipt by the Administrative Agent of
such notice and the assignment to and assumption of the Revolving Credit
Commitment by a replacement bank, the Revolving Credit Commitment of such Lender
shall terminate.
4.06 Taxes. All payments by the Borrowers of principal of, and interest
on, the Loans and all other amounts payable hereunder shall be made free and
clear of and without deduction for
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any present or future excise, stamp or other taxes, fees, duties, levies,
imposts, charges, deductions, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding (i) franchise taxes,
(ii) any taxes (other than withholding taxes) that would not be imposed but for
a connection between a Lender or the Administrative Agent and the jurisdiction
imposing such taxes (other than a connection arising solely by virtue of the
activities of such Lender or the Administrative Agent pursuant to or in respect
of this Agreement or any other Loan Document), (iii) any withholding taxes
payable with respect to payments hereunder or under any other Loan Document
under laws (including, without limitation, any statute, treaty, ruling,
determination or regulation) in effect on the Closing Date, (iv) any taxes
imposed on or measured by any Lender's assets, net income, receipts or branch
profits and (v) any taxes arising after the Closing Date solely as a result of
or attributable to Lender changing its designated lending office after the date
such Lender becomes a party hereto (such non-excluded items being collectively
called "Taxes"). In the event that any withholding or deduction from any payment
to be made by the Borrowers hereunder is required in respect of any Taxes
pursuant to any applicable law, rule or regulation, then the Borrowers will
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official
receipt or other documentation satisfactory to the Administrative Agent
evidencing such payment to such authority; and
(c) pay to the Administrative Agent for the account of the
Lender such additional amount or amounts as is necessary to ensure that
the net amount actually received by each Lender will equal the full
amount such Lender would have received had no such withholding or
deduction been required.
Prior to the date that any Lender or participant organized under the
laws of a jurisdiction outside the United States becomes a party hereto, such
Person shall deliver to the Borrowers and the Administrative Agent such
certificates, documents or other evidence, as required by the Code or Treasury
Regulations issued pursuant thereto, properly completed, currently effective and
duly executed by such Lender or participant establishing that such payment is
(i) not subject to United States Federal backup withholding tax and (ii) not
subject to United States Federal withholding tax under the Code because such
payment is either effectively connected with the conduct by such Lender or
participant of a trade or business in the United States or totally exempt from
United States Federal withholding tax by reason of the application of the
provisions of a treaty to which the United States is a party or such Lender is
otherwise exempt.
If the Borrowers shall fail to pay any Taxes when due to the
appropriate taxing authority or shall fail to remit to the Administrative Agent,
for the account of the respective Lender, the required receipts or other
required documentary evidence, the Borrowers shall indemnify the Lenders for any
incremental Taxes, interest or penalties that may become payable by any Lender
as a result of any such failure. For purposes of this Section 4.06, a
distribution hereunder by the
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Administrative Agent or any Lender to or for the account of any Lender shall be
deemed a payment by the Borrowers.
4.07 Replacement Lenders. The Borrowers may, in their sole discretion,
on ten (10) Business Days' prior written notice to the Administrative Agent and
a Lender, cause such Lender to (and such Lender shall) assign pursuant to
Section 11.01 hereof, all of its rights and obligations under this Agreement
(other than with respect to outstanding Competitive Bid Loans) and under the
TROL Credit Documents to an Eligible Assignee designated by the Borrowers which
is willing to become a Lender for a purchase price equal to the sum of (i) the
outstanding principal amount of the Loans payable to such Lender, together with
any accrued but unpaid interest on such Loans, any accrued but unpaid fees with
respect to such Lender's Revolving Credit Commitment and any other amounts
payable to such Lender under this Agreement, plus (ii) the outstanding principal
amounts of the Series A Loans and Series B Loans (as such terms are defined in
the TROL Credit Documents, and hereinafter respectively referred to as the
"Series A Loans" and "Series B Loans") payable to such Lender, together with any
accrued but unpaid interest on such Series A Loans and Series B Loans, any
accrued but unpaid fees with respect to such Lender's commitment under the TROL
Credit Documents and any other amounts payable to such Lender under the TROL
Credit Documents; provided, that any expenses or other amounts which would be
owing to such Lender pursuant to any indemnification provision hereunder or
under the TROL Credit Documents shall be payable by the Borrowers as if the
Borrowers had prepaid the Loans, the Series A Loans and the Series B Loans of
such Lender rather than such Lender having assigned its interest thereunder. The
Borrowers or the Eligible Assignee under this Section shall pay the applicable
processing fee under Section 11.01 and any similar processing fees under the
TROL Credit Documents.
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ARTICLE V
Conditions to Making Loans and Issuing
Letters of Credit
5.01 Conditions of Initial Advance and Issuance of Letters of Credit.
The obligation of the Lenders to make Advances and of the Issuing Banks to issue
Letters of Credit is subject to the conditions precedent that the Administrative
Agent shall have received on or before the Closing Date, in form and substance
satisfactory to the Administrative Agent and the Lenders, the following:
(a) executed originals of each of this Agreement, the Notes
and the other Loan Documents, together with all schedules and exhibits
hereto and thereto;
(b) favorable written opinions of special counsel to the
Borrowers dated the Closing Date, addressed to the Administrative Agent
and the Lenders and satisfactory to Smith Helms Mulliss & Moore,
L.L.P., special counsel to the Administrative Agent, substantially in
the form of Exhibit K attached hereto;
(c) resolutions of the board of directors or other appropriate
governing body (or of the appropriate committee thereof) of each
Borrower certified by its secretary or assistant secretary or other
appropriate official as of the Closing Date, approving and adopting the
Loan Documents to be executed, and authorizing the execution and
delivery thereof;
(d) specimen signatures of officers of each Borrower executing
the Loan Documents on behalf of such Borrower, certified by the
secretary or assistant secretary or other appropriate official of such
Borrower;
(e) the charter documents of each Borrower certified as of a
recent date by the Secretary of State of such Borrower's jurisdiction
of incorporation;
(f) the by-laws of each Borrower certified as of the Closing
Date as true and correct by the secretary or assistant secretary of
such Borrower;
(g) certificates issued as of a recent date by the Secretary
of State or other appropriate Governmental Authority of each Borrower's
jurisdiction of incorporation as to the due existence and good standing
of such Borrower therein;
(h) appropriate certificates of qualification to do business,
good standing and, where appropriate, authority to conduct business
under assumed name, issued in respect of each Borrower as of a recent
date by the Secretary of State or other appropriate Governmental
Authority of each jurisdiction in which the failure to be qualified to
do business or authorized so to conduct business could have a Material
Adverse Effect;
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(i) notice of appointment of the Authorized Representatives of
each Borrower in the form of Exhibit C hereto;
(j) certificate of an Authorized Representative dated the
Closing Date demonstrating compliance with the financial covenants
contained in Sections 8.01 and 8.02 as of the immediately preceding
calendar quarter, substantially in the form of Exhibit L attached
hereto;
(k) evidence of insurance required by the Loan Documents;
(l) Borrowing Notices;
(m) all fees payable by the Borrowers on the Closing Date to
the Administrative Agent, any Issuing Banks, NationsBank and the
Lenders;
(n) evidence satisfactory to the Administrative Agent of the
payment in full and termination of each of the Existing Facilities; and
(o) such other documents, instruments, certificates and
opinions as the Administrative Agent or any Lender may reasonably
request on or prior to the Closing Date in connection with the
consummation of the transactions contemplated hereby.
5.02 Conditions of Loans. The obligations of the Lenders to make any
Loans, and of the Issuing Banks to issue Letters of Credit hereunder on or
subsequent to the Closing Date are subject to the satisfaction of the following
conditions:
(a) the Administrative Agent shall have received a notice of
such borrowing or request if required by Article II hereof;
(b) the representations and warranties of the Company and its
Subsidiaries, taken as a whole, set forth in Article VI hereof and in
each of the other Loan Documents shall be true and correct in all
material respects on and as of the date of such Advance or issuance of
such Letters of Credit, as the case may be, with the same effect as
though such representations and warranties had been made on and as of
such date, except to the extent that such representations and
warranties expressly relate to an earlier date and except that the
financial statements referred to in Section 6.01(f)(i) shall be deemed
to be those financial statements most recently delivered to the
Administrative Agent and the Lenders pursuant to Section 7.01 hereof;
(c) in the case of the issuance of a Letter of Credit, the
Company shall have executed and delivered to the applicable Issuing
Bank an Application and Agreement for Letter of Credit in form and
content acceptable to such applicable Issuing Bank together with such
other instruments and documents as it shall request;
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(d) at the time of each such Advance, Swing Line Loan or
issuance of each Letter of Credit, as the case may be, and after giving
effect thereto no Default or Event of Default specified in Article IX
hereof, shall have occurred and be continuing;
(e) immediately after giving effect to a Swing Line Loan, the
aggregate Swing Line Outstandings shall not exceed $50,000,000; and
(f) immediately after giving effect to a Loan or Letter of
Credit the aggregate principal balance of all outstanding Loans and
Participations for each Lender and in the aggregate shall not exceed,
respectively, (i) any of such Lender's Revolving Credit Commitment or
Letter of Credit Commitment or (ii) any of the Total Revolving Credit
Commitment or Total Letter of Credit Commitment.
5.03 Supplements to Schedules. The Borrowers may, from time to time,
amend or supplement the Schedules to this Agreement by delivering (effective
upon receipt) to the Administrative Agent and each Lender a copy of such revised
Schedule or Schedules which shall (i) be dated the date of delivery, (ii) be
certified by an Authorized Representative as true, complete and correct as of
such date and as delivered in replacement for the corresponding Schedule or
Schedules previously in effect, and (iii) show in reasonable detail (by
blacklining or other appropriate graphic means) the changes from each such
corresponding predecessor Schedule. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, in the event that the
Required Lenders determine based upon such revised Schedule (whether
individually or in the aggregate or cumulatively) that there has been a material
adverse change since the Closing Date in the financial condition, business or
operations of the Company and its Subsidiaries, taken as a whole, the Lenders
shall have no further obligation to fund additional Advances hereunder.
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ARTICLE VI
Representations and Warranties
6.01 Representations and Warranties. The Company represents and
warrants with respect to itself and to its Subsidiaries (which representations
and warranties shall survive the delivery of the documents mentioned herein and
the making of Loans and issuance of Letters of Credit), that:
(a) Organization and Authority.
(i) the Company and each Subsidiary is a
corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation or creation;
(ii) the Company and each Subsidiary (x) has the
requisite power and authority to own its properties and assets
and to carry on its business as now being conducted and as
contemplated in the Loan Documents, and (y) is qualified to do
business in every jurisdiction in which failure so to qualify
would have a Material Adverse Effect;
(iii) the Company and RRC have the power and
authority to execute, deliver and perform this Agreement and
the Notes, and to borrow hereunder, and to execute, deliver
and perform each of the other Loan Documents to which they are
a party; and
(iv) when executed and delivered, each of the Loan
Documents to which the Company and RRC are a party will be the
legal, valid and binding obligation or agreement of the
Company and RRC, enforceable against the Company and RRC in
accordance with their terms, subject to the effect of any
applicable bank ruptcy, moratorium, insolvency, reorganization
or other similar law affecting the enforceability of
creditors' rights generally and to the effect of general
principles of equity which may limit the availability of
equitable remedies (whether in a proceeding at law or in
equity);
(b) Loan Documents. The execution, delivery and performance by
the Company and RRC of each of the Loan Documents to which they are a
party:
(i) have been duly authorized by all requisite
corporate action (including any required shareholder approval)
of the Company and RRC required for the lawful execution,
delivery and performance thereof;
(ii) do not violate any provisions of (1) applicable
law, rule or regulation, (2) any order of any court or other
agency of government binding on
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the Company or RRC or their properties, or (3) the charter
documents, documents of creation or by-laws of the Company or
RRC;
(iii) will not be in conflict with, result in a
breach of or constitute an event of default, or an event
which, with notice or lapse of time, or both, would constitute
an event of default, under any indenture, agreement or other
instrument to which the Company or RRC is a party, or by which
the properties or assets of the Company or RRC are bound;
(iv) will not result in the creation or imposition
of any Lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the
Company or RRC.
(c) Solvency. The Company and each Subsidiary will remain
Solvent after giving effect to the transactions contemplated by this
Agreement and the other Loan Documents.
(d) Subsidiaries and Stockholders. As of the date hereof, the
Company has no Subsidiaries other than those Persons listed as
Subsidiaries on Schedule 6.01(d) hereto; Schedule 6.01(d) to this
Agreement states as of the date hereof the authorized and issued
capitalization of each Subsidiary listed thereon, the number of shares
or other equity interests of each class of capital stock or interest
issued and outstanding of each such Subsidiary and the number and/or
percentage of outstanding shares or other equity interest (including
options, warrants and other rights to acquire any interest) of each
such class of capital stock or equity interest owned by the Company or
by any such Subsidiary; as of the date hereof, the outstanding shares
or other equity interests of each such Subsidiary have been duly
authorized and validly issued and are fully paid and nonassessable;
and, as of the date hereof, the Company and each such Subsidiary owns
beneficially and of record all the shares and other interests it is
listed as owning in Schedule 6.01(d), free and clear of any Lien other
than the Liens permitted under Section 8.04.
(e) Ownership Interests. As of the date hereof, the Company
owns no interest in any Person having an aggregate book value of
$1,000,000 or more other than the Persons listed in Schedule 6.01(d)
hereto;
(f) Financial Condition. (i) The Company has heretofore
furnished to each Lender an audited consolidated balance sheet of the
Company and its Subsidiaries as at December 31, 1996 and the notes
thereto and the related consolidated statements of operations, cash
flows, and changes in stockholders' equity for the Fiscal Year then
ended as examined and certified by Arthur Andersen L.L.P. Except as set
forth therein, such financial statements (including the notes thereto)
present fairly the financial condition of the Company and its
Subsidiaries as of the end of such Fiscal Year and results of their
operations and the changes in their stockholders' equity for the Fiscal
Year then ended, all
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in conformity with Generally Accepted Accounting Principles applied on
a Consistent Basis;
(ii) since December 31, 1996, there has been no material
adverse change in the condition, financial or otherwise, of the Company
and its Subsidiaries or in the businesses, properties and operations of
the Company and its Subsidiaries, considered as a whole, nor have such
businesses or properties, taken as a whole, been materially adversely
affected as a result of any fire, explosion, earthquake, accident,
strike, lockout, combination of workers, flood, embargo or act of God;
(iii) except as set forth in the financial statements referred
to in Section 6.01(f)(i) or in Schedule 6.01(f) or Schedule 6.01(j)
attached hereto, neither the Company nor any Subsidiary has incurred,
other than in the ordinary course of business, any material
indebtedness, obligations, commitments or other material liability
contingent or otherwise which remain outstanding or unsatisfied;
(g) Title to Properties. The Company and its Subsidiaries have
title to all their respective owned real and personal properties,
subject to no transfer restrictions or Liens of any kind, except for
(x) the transfer restrictions and Liens described in Schedule 6.01(g)
attached hereto, and (y) Liens permitted under Section 8.04 hereof;
(h) Taxes. The Company and its Subsidiaries have filed or
caused to be filed all federal, state, local and foreign tax returns
which are required to be filed by them and except for taxes and
assessments being contested in good faith and against which reserves
satisfactory to the Company's independent certified public accountants
have been established, and have paid or caused to be paid all taxes as
shown on said returns or on any assessment received by them, to the
extent that such taxes have become due;
(i) Other Agreements. Neither the Company nor any Subsidiary
is
(i) a party to any judgment, order, decree or any
agreement or instrument or subject to restrictions which could
have a Material Adverse Effect; or
(ii) in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which the Company
or any Subsidiary is a party, which default has, or if not
remedied within any applicable grace period could have, a
Material Adverse Effect;
(j) Litigation. Except as set forth in Schedule 6.01(j)
attached hereto, there is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or agency or
arbitral body pending, or, to the knowledge of the Company or RRC,
threatened by or against the Company or any Subsidiary or affecting the
Company
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or any Subsidiary or any properties or rights of the Company or any
Subsidiary, which could reasonably be expected to have a Material
Adverse Effect;
(k) Margin Stock. Neither the Company nor any Subsidiary owns
any "margin stock" as such term is defined in Regulation U, as amended
(12 C.F.R. Part 221), of the Board. The proceeds of the borrowings made
pursuant to Article II hereof will be used by the Company and its
Subsidiaries only for the purposes set forth in Section 2.14 hereof.
None of such proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin stock or for the purpose
of reducing or retiring any Indebtedness which was originally incurred
to purchase or carry margin stock or for any other purpose which might
constitute any of the Loans under this Agreement a "purpose credit"
within the meaning of said Regulation U or Regulation X (12 C.F.R. Part
224) of the Board. Neither the Borrowers nor any agent acting in their
behalf has taken or will take any action which might cause this
Agreement or any of the documents or instruments delivered pursuant
hereto to violate any regulation of the Board or to violate the
Securities Exchange Act of 1934, as amended, or the Securities Act of
1933, as amended, or any state securities laws, in each case as in
effect on the date hereof;
(l) Investment Company. Neither the Company nor any Subsidiary
is an "investment company," or an "affiliated person" of, or "promoter"
or "principal underwriter" for, an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended (15
U.S.C. ss. 80a-1, et seq.). The application of the proceeds of the
Loans and repayment thereof by the Borrowers and the performance by the
Borrowers of the transactions contemplated by this Agreement will not
violate any provision of said Act, or any rule, regulation or order
issued by the Securities and Exchange Commission thereunder, in each
case as in effect on the date hereof;
(m) Patents, Etc. The Company and its Subsidiaries own or have
the right to use, under valid license agreements or otherwise, all
material patents, licenses, franchises, trademarks, trademark rights,
trade names, trade name rights, trade secrets and copyrights necessary
to the conduct of their businesses as now conducted, without known
conflict with any patent, license, franchise, trademark, trade secrets
and confidential commercial or proprietary information, trade name,
copyright, rights to trade secrets or other proprietary rights of any
other Person;
(n) No Untrue Statement. Neither this Agreement nor any other
Loan Document or certificate or document executed and delivered by or
on behalf of the Company or any Subsidiary in accordance with or
pursuant to any Loan Document contains any misrepresentation or untrue
statement of material fact or omits to state a material fact necessary,
in light of the circumstance under which it was made, in order to make
any such representation or statement contained herein or therein not
misleading in any material respect;
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(o) No Consents, Etc. Neither the respective businesses or
properties of the Company or any Subsidiary, nor any relationship
between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the execution, delivery and performance
of the Loan Documents and the transactions contemplated thereby is such
as to require a consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority or other
authority or any other Person on the part of the Company or any
Subsidiary as a condition to the execution, delivery and performance
of, or consummation of the transactions contemplated by, this Agreement
or the other Loan Documents or if so, such consent, approval,
authorization, filing, registration or qualification has been obtained
or effected, as the case may be and is in full force and effect;
(p) Benefit Plans.
(i) None of the employee benefit plans maintained at any
time by the Company or any Subsidiary or the trusts created
thereunder has engaged in a prohibited transaction which could subject
any such employee benefit plan or trust to a material tax or penalty
on prohibited transactions imposed under Internal Revenue Code Section
4975 or ERISA;
(ii) None of the employee benefit plans maintained at any
time by the Company or any Subsidiary which are employee pension
benefit plans and which are subject to Title IV of ERISA or the
trusts created thereunder has been terminated so as to result in a
material liability, fine or penalty of either Borrower under ERISA nor
has any such employee benefit plan of the Company or any Subsidiary
incurred any material liability, fine or penalty to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, other than
for required insurance premiums which have been paid or are not yet
due and payable; neither the Company nor any Subsidiary has withdrawn
from or caused a partial withdrawal to occur with respect to any
Multi-employer Plan resulting in any assessed and unpaid withdrawal
liability; the Company and the Subsidiaries have made or provided for
all contributions to all such employee pension benefit plans which
they maintain and which are required as of the end of the most recent
fiscal year under each such plan; neither the Company nor any
Subsidiary has incurred any accumulated funding deficiency with
respect to any such plan, whether or not waived; nor has there been
any reportable event, or other event or condition, which presents a
material risk of termination of any such employee benefit plan by such
Pension Benefit Guaranty Corporation;
(iii) Except as set forth in Schedule 6.01(p), the present
value of all vested accrued benefits under the employee pension benefit
plans which are subject to Title IV of ERISA, maintained by the Company
or any Subsidiary, did not, as of the most recent valuation date for
each such plan, exceed the then current value of the assets of such
employee benefit plans allocable to such benefits;
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(iv) The consummation of the Loans and the issuance of the
Letters of Credit provided for in Article II and Article III will not
involve any prohibited transaction under ERISA which is not subject to
a statutory or administrative exemption;
(v) To the best of the Company's knowledge, each employee
pension benefit plan subject to Title IV of ERISA, maintained by the
Company or any Subsidiary, has been administered in accordance with its
terms in all material respects and is in compliance in all material
respects with all applicable requirements of ERISA and other applicable
laws, regulations and rules;
(vi) There has been no material withdrawal liability
incurred and unpaid with respect to any Multi-employer Plan to
which the Company or any Subsidiary is or was a contributor;
(vii) As used in this Agreement, the terms "employee benefit
plan," "employee pension benefit plan," "accumulated funding
deficiency," "reportable event," and "accrued benefits" shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Code Section 4975
and ERISA;
(viii) Except as set forth in Schedule 6.01(p), neither the
Company nor any Subsidiary has any liability not disclosed on any of
the financial statements furnished to the Lenders pursuant to Section
7.01(f) hereof, contingent or otherwise, under any plan or program or
the equivalent for unfunded post-retirement benefits, including
pension, medical and death benefits, which liability would have a
Material Adverse Effect.
(q) No Default. There does not exist any Default or Event of
Default hereunder;
(r) Hazardous Materials. Except as set forth in Schedule
6.01(r), the Company and each Subsidiary is in compliance with all
applicable Environmental Laws in all material respects and neither the
Company nor any Subsidiary has been notified of any action, suit,
proceeding or investigation which alleges material non-compliance by
the Company or any Subsidiary with any Environmental Laws or which
primarily seeks to suspend, revoke or terminate any license, permit or
approval necessary for the generation, handling, storage, treatment or
disposal of any Hazardous Material;
(s) RICO. Neither the Company nor any Subsidiary is engaged in
or has engaged in any course of conduct that could subject any of their
respective properties to any Lien, seizure or other forfeiture under
any criminal law, racketeer influenced and corrupt organizations law,
civil or criminal, or other similar laws;
(t) Employment Matters. Except as disclosed on Schedule
6.01(j) hereto, the Company and all Subsidiaries are in compliance in
all material respects with all applicable
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laws, rules and regulations pertaining to labor or employment matters,
including without limitation those pertaining to wages, hours,
occupational safety and taxation the noncompliance with which might
have a Material Adverse Effect and there is neither pending nor, to the
knowledge of either the Company or RRC, threatened any litigation,
administrative proceeding or investigation, in respect of such matters,
an adverse ruling or determination in which could have a Material
Adverse Effect.
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ARTICLE VII
Affirmative Covenants
Until the Obligations have been paid and satisfied in full and this
Agreement has been terminated in accordance with the terms hereof, unless the
Required Lenders shall otherwise consent in writing, the Company will:
7.01 Financial Reports, Etc. (a) as soon as practical and in any event
within 120 days after the end of each Fiscal Year of the Company, deliver or
cause to be delivered to the Administrative Agent and each Lender (i) the
consolidated balance sheets of the Company and its Subsidiaries, with the notes
thereto, the related consolidated statements of operations, cash flows, and
shareholders' equity and the respective notes thereto for such Fiscal Year,
setting forth comparative financial statements for the preceding Fiscal Year,
all prepared in accordance with Generally Accepted Accounting Principles applied
on a Consistent Basis and containing opinions of Arthur Andersen L.L.P., or
other such independent certified public accountants selected by the Company and
approved by the Administrative Agent, which are unqualified as to the scope of
the audit performed and as to the "going concern" status of the Company; and
(ii) a certificate of an Authorized Representative as to the existence of any
Default or Event of Default and demonstrating compliance with Sections 8.01 and
8.02 of this Agreement, which certificate shall be in the form attached hereto
as Exhibit L;
(b) as soon as practical and in any event within 60 days after the end
of each quarterly period (except the last reporting period of the Fiscal Year),
deliver to the Administrative Agent and each Lender (i) the consolidated balance
sheet of the Company and its Subsidiaries as of the end of such reporting
period, the related consolidated statements of operations, cash flows, and
shareholders' equity for such reporting period and for the period from the
beginning of the Fiscal Year through the end of such reporting period,
accompanied by a certificate of an Authorized Representative to the effect that
such financial statements present fairly the financial position of the Company
and its Subsidiaries as of the end of such reporting period and the results of
their operations and the changes in their financial position for such reporting
period, in conformity with the standards set forth in Section 6.01(f)(i) with
respect to interim financials, and (ii) a certificate of an Authorized
Representative as to the existence of any Default or Event of Default and
containing computations for such quarter comparable to that required pursuant to
Section 7.01(a)(ii);
(c) together with each delivery of the financial statements required by
Section 7.01(a)(i) hereof, if the accountants specified in Section 7.01(a)(i)
shall have obtained knowledge of a Default or Event of Default in the
fulfillment of the terms and provisions of this Agreement insofar as they relate
to financial statements (which at the date of such statements remains uncured),
deliver to the Administrative Agent and the Lenders a statement specifying the
nature and period of existence thereof and the action the Company has taken or
proposes to take with respect thereto;
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(d) promptly upon their becoming available to the Company, the Company
shall deliver to the Administrative Agent and each Lender a copy of (i) all
regular or special reports or effective registration statements which the
Company or any Subsidiary shall file with the Securities and Exchange Commission
(or any successor thereto) or any securities exchange, (ii) any proxy statement
distributed by the Company to its shareholders, bondholders or the financial
community in general, and (iii) any management letter or other report submitted
to the Company or any of its Subsidiaries by independent accountants in
connection with any annual, interim or special audit of the Company or any of
its Subsidiaries; and
(e) promptly, from time to time but not less frequently than once
during each calendar quarter but in any case promptly following a written
request after the occurrence and during the continuation of a Default or Event
of Default, deliver or cause to be delivered to the Administrative Agent and
each Lender (x) an updated Schedule 6.01(d) in substantially the same form as
provided under Section 6.01(d) hereof, and (y) such other information regarding
Company's and each Subsidiary's operations, business affairs and financial
condition as the Administrative Agent or such Lender may reasonably request. The
Administrative Agent and the Lenders are hereby authorized to deliver a copy of
any such financial information delivered hereunder to the Lenders (or any
affiliate of any Lender) or to the Administrative Agent, to any regulatory
authority having jurisdiction over any of the Lenders pursuant to any written
request therefor, or, subject to Section 11.01(f) hereof, to any other Person
who shall acquire or consider the acquisition of a participation interest in or
assignment of any Loan or Letter of Credit permitted by this Agreement.
7.02 Maintain Properties. Maintain in all material respects all
properties necessary to its operations in good working order and condition
(ordinary wear and tear excepted) and make in all material respects all needed
repairs, replacements and renewals as are necessary to conduct its business in
accordance with customary business practices.
7.03 Existence, Qualification, Etc. Do or cause to be done all things
necessary to preserve and keep in full force and effect its existence and all
material rights and franchises, trade names, trademarks and permits, except to
the extent conveyed in connection with a transaction permitted under Section
8.05 hereof, and maintain its license or qualification to do business as a
foreign corporation and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such license
or qualification necessary.
7.04 Regulations and Taxes. Comply in all material respects with all
statutes and governmental regulations and pay all taxes, assessments,
governmental charges, claims for labor, supplies, rent and any other obligation
which, if unpaid, might become a Lien against any of its properties except
liabilities being contested in good faith and against which adequate reserves
have been established.
7.05 Insurance. (i) Keep all of its insurable properties adequately
insured at all times with responsible insurance carriers against loss or damage
by fire and other hazards as are customarily insured against by similar
businesses owning such properties similarly situated, (ii)
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maintain general public liability insurance at all times with responsible
insurance carriers against liability on account of damage to persons and
property having such limits, deductibles, exclusions and co-insurance and other
provisions providing no less coverage than that specified in Schedule 7.05
attached hereto, such insurance policies to be in form reasonably satisfactory
to the Administrative Agent, and (iii) maintain insurance under all applicable
workers' compensation laws (or in the alternative, maintain required reserves if
self-insured for workers' compensation purposes).
7.06 True Books. Keep true books of record and account in which full,
true and correct entries will be made of all of its dealings and transactions in
accordance with customary business practices, and set up on its books such
reserves as may be required by Generally Accepted Accounting Principles with
respect to doubtful accounts and all taxes, assessments, charges, levies and
claims and with respect to its business in general, and include such reserves in
interim as well as year-end financial statements.
7.07 Pay Indebtedness to Lenders and Perform Other Covenants. (a) Make
full and timely payment of the principal of and interest on the Notes and all
other Obligations whether now existing or hereafter arising; and (b) duly comply
with all the terms and covenants contained in all Loan Documents and other
instruments and documents given to the Administrative Agent or the Lenders
pursuant hereto or thereto.
7.08 Right of Inspection. Permit any Person designated by any Lender or
the Administrative Agent at the Lender's or Administrative Agent's expense, as
the case may be, to visit and inspect any of the properties, corporate books and
financial reports of the Company and its Subsidiaries, and to discuss their
respective affairs, finances and accounts with their principal officers and
independent certified public accountants, all at reasonable times, at reasonable
intervals and with reasonable prior notice.
7.09 Observe all Laws. Conform to and duly observe in all material
respects all laws, rules and regulations and all other valid requirements of any
regulatory or governmental authority with respect to the conduct of its business
the non-compliance with which might have a Material Adverse Effect.
7.10 Covenants Extending to Subsidiaries. Cause each of its
Subsidiaries to do with respect to itself, its business and its assets, each of
the things required of the Company in Sections 7.02 through 7.09, inclusive to
the extent the failure to do so could have a Material Adverse Effect.
7.11 Officer's Knowledge of Default. Upon either Borrowers' obtaining
knowledge of any Default or Event of Default hereunder, cause an Authorized
Representative to promptly notify the Administrative Agent of the nature
thereof, the period of existence thereof, and what action the Borrowers propose
to take with respect thereto.
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7.12 Suits or Other Proceedings. Upon either Borrowers' obtaining
knowledge of any litigation or other proceedings being instituted against the
Company or any Subsidiary, or any attachment, levy, execution or other process
being instituted against any assets of the Company or any Subsidiary, in an
aggregate stated or claimed amount greater than $10,000,000 not otherwise
covered by insurance, promptly deliver to the Administrative Agent written
notice thereof stating the nature and status of such litigation, dispute,
proceeding, levy, execution or other process.
7.13 Notice of Discharge of Hazardous Material or Environmental
Complaint. Promptly provide to the Administrative Agent true, accurate and
complete copies of any and all notices, complaints, orders, directives, claims,
or citations received by the Company or any Subsidiary relating to any material
(a) violation or alleged violation by the Company or any Subsidiary of any
applicable Environmental Laws or OSHA; (b) release or threatened release by the
Company or any Subsidiary of any Hazardous Material, except where occurring
legally; or (c) liability or alleged liability of the Company or any Subsidiary
for the costs of cleaning up, removing, remediating or responding to a release
of Hazardous Materials.
7.14 Environmental Compliance. If the Company or any Subsidiary shall
receive notice from any Governmental Authority that the Company or any
Subsidiary has violated any applicable Environmental Laws in any material
respect, the Borrowers shall promptly (and in any event within the time period
permitted by the applicable Governmental Authority) remove or remedy, or the
Company shall cause the applicable Subsidiary to remove or remedy, such
violation.
7.15 Further Assurances. At its cost and expense, upon request of the
Administrative Agent, duly execute and deliver or cause to be duly executed and
delivered, to the Administrative Agent such further instruments, documents,
certificates, agreements and do and cause to be done such further acts that may
be reasonably necessary or advisable in the reasonable opinion of the
Administrative Agent to carry out more effectively the provisions and purposes
of this Agreement and the other Loan Documents.
7.16 Benefit Plans. Comply in all material respects with all
requirements of ERISA applicable to it and furnish to the Administrative Agent
as soon as possible and in any event (i) within thirty (30) days after the
Borrowers know or have reason to know that any reportable event with respect to
any employee benefit plan maintained by the Company or any Subsidiary which
could give rise to termination or the imposition of any material tax or penalty
has occurred, written statement of an Authorized Representative describing in
reasonable detail such reportable event and any action which the Company or
applicable Subsidiary proposes to take with respect thereto, together with a
copy of the notice of such reportable event given to the Pension Benefit
Guaranty Corporation or a statement that said notice will be filed with the
annual report of the United States Department of Labor with respect to such plan
if such filing has been authorized, (ii) promptly after receipt thereof, a copy
of any notice that the Company or any Subsidiary may receive from the Pension
Benefit Guaranty Corporation relating to the intention of the Pension Benefit
Guaranty Corporation to terminate any employee benefit plan or plans of the
Company or any Subsidiary or to appoint a trustee to administer any such plan,
and (iii) within 10 days after
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a filing with the Pension Benefit Guaranty Corporation pursuant to Section
412(n) of the Code of a notice of failure to make a required installment or
other payment with respect to a plan, a certificate of an Authorized
Representative setting forth details as to such failure and the action that the
Company or its affected Subsidiary, as applicable, proposes to take with respect
thereto, together with a copy of such notice given to the Pension Benefit
Guaranty Corporation.
7.17 Continued Operations. Continue at all times (i) to conduct its
business and engage principally in the same or complementary line or lines of
business substantially as heretofore conducted (subject to the right to dispose
of assets in transactions permitted under Section 8.05 hereof and to make
Permitted Acquisitions), and (ii) preserve, protect and maintain free from Liens
(other than Liens permitted under Section 8.04 hereof) its material patents,
copyrights, licenses, trademarks, trademark rights, trade names, trade name
rights, trade secrets and know-how necessary or reasonably required in the
conduct of its operations.
7.18 Use of Proceeds. Use the proceeds of the Loans solely for the
purposes specified in Section 2.14 hereof.
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ARTICLE VIII
Negative Covenants
Until the Obligations have been paid and satisfied in full and this
Agreement has been terminated in accordance with the terms hereof, unless the
Required Lenders shall otherwise consent in writing, the Company will not:
8.01 Indebtedness to Capitalization. Permit at any time the ratio of
Consolidated Funded Indebtedness to Consolidated Total Capitalization to be
greater than .40 to 1.00.
8.02 Consolidated Fixed Charge Ratio.
(i) Permit as at the end of the second, third and fourth
calendar quarters of 1997 of the Company and its Subsidiaries, for any
such calendar quarters then elapsed, taken together, the Consolidated
Fixed Charge Ratio to be less than 2.00 to 1.00; and
(ii) Permit as at the end of each calendar quarter
thereafter, for the Four-Quarter Period most recently ended of the
Company and its Subsidiaries, the Consolidated Fixed Charge Ratio to be
less than 2.00 to 1.00.
8.03 Indebtedness. Incur, create, assume or permit to exist any
Indebtedness of the Company or any of its Subsidiaries, howsoever evidenced,
except
(i) Indebtedness existing as of the date hereof and as
set forth in Schedule 8.03 attached hereto and incorporated herein by
reference and any refinancing or replacement thereof on substantially
the same or more favorable terms to the Company or its Subsidiaries;
(ii) the guaranty by the Company of any Indebtedness or
lease obligations of its Subsidiaries, or of Indebtedness or lease
obligations arising under the AutoNation TROL or any Eligible TROL;
(iii) the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
business;
(iv) secured Indebtedness of the Company and its
Subsidiaries, other than Vehicle Secured Indebtedness or Vehicle
Receivables Indebtedness, in an aggregate outstanding amount not to
exceed at any time fifteen percent (15%) of Consolidated Shareholders'
Equity;
(v) unsecured Indebtedness of the Borrowers;
(vi) unsecured Indebtedness of the Subsidiaries (other
than RRC) of the Company (other than Vehicle Secured Indebtedness or
Vehicle Receivables Indebtedness) in an outstanding amount, when
aggregated with any outstanding secured Indebtedness of
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such Subsidiaries under Section 8.03(iv), not to exceed fifteen percent
(15%) of Consolidated Shareholders' Equity;
(vii) Vehicle Receivables Indebtedness; and
(viii) Vehicle Secured Indebtedness of the Company and its
Subsidiaries; provided, however, to the extent the amount of
Indebtedness secured by Vehicles or related receivables of the Company
and its Subsidiaries is in excess of the depreciated book value of such
Vehicles or the book value of such related receivables, such excess
amount will be considered for purposes of this Agreement as
Indebtedness other than Vehicle Secured Indebtedness, of either the
Company or such Subsidiaries.
8.04 Liens. Incur, create or permit to exist any Lien of any nature
whatsoever with respect to any property or assets now owned or hereafter
acquired by the Company or any of its Subsidiaries, other than
(i) Liens existing as of the date hereof and as set forth
in Schedule 6.01(g) attached hereto;
(ii) Liens imposed by law for taxes, assessments or
charges of any Governmental Authority for claims not yet due or, Liens
for judgments or levies, in each case which are being contested in good
faith by appropriate proceedings diligently pursued and with respect to
which adequate reserves or other appropriate provisions are being
maintained in accordance with Generally Accepted Accounting Principles;
(iii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business and in existence less than
120 days from the date of creation thereof for amounts not yet due or
which are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves or other appropriate provisions
are being maintained in accordance with Generally Accepted Accounting
Principles;
(iv) Liens incurred or deposits made in the ordinary
course of business (including, without limitation, surety bonds and
appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, leases, contracts (other than for the
repayment of Indebtedness), self insurance general liability insurance
programs, statutory obligations and other similar obligations or
arising as a result of progress payments under government contracts;
(v) easements (including, without limitation, reciprocal
easement agreements and utility agreements), rights-of-way, covenants,
consents, reservations, encroachments, variations and zoning and other
restrictions, charges or encumbrances (whether or not recorded), which
do not interfere materially with the ordinary conduct of the business
of the Company or any Subsidiary and which do not materially detract
from the value of the
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property to which they attach or materially impair the use thereof to
the Company or any Subsidiary;
(vi) Liens on any airport concession agreements or permits
maintained by the Company or any Subsidiary to secure loans extended to
finance tenant improvements used in connection with the concession
agreement or permit subject to such Lien;
(vii) Liens to secure the refinancing of any Indebtedness
permitted under Section 8.03(i) hereof to the extent such Liens
encumber substantially the same assets in substantially the same manner
as the Liens securing the debt being refinanced or to the extent such
Liens constitute Liens permitted under this Section 8.04;
(viii) Liens on claims of the Company or any Subsidiary
against Persons renting or leasing Vehicles, Persons damaging Vehicles
or Persons issuing applicable insurance coverage for such Persons,
which claims relate to damage to Vehicles, to the extent that such
damage exceeds the render's or lessee's collision damage waiver
limitation or insurance deductible; and
(ix) Liens securing Indebtedness permitted under Section
8.03(iv), 8.03(vii) or 8.03(viii).
8.05 Transfer of Assets. Other than in the ordinary course of business
(which shall include, without limitation, sales, leases and rentals of Vehicles
and sales of receivables relating to Vehicles) sell, lease, transfer or
otherwise dispose of any property or assets of the Company or any Subsidiary if
the aggregate book value or sales price of such property and assets so disposed
of during the term of this Agreement would exceed twenty percent (20%) of the
Consolidated Total Assets (determined as of the most recently ended Fiscal
Year).
8.06 Investments; Acquisitions. Purchase, own, invest in or otherwise
acquire, directly or indirectly, any stock or other securities or all or
substantially all of the assets, or make or permit to exist any interest
whatsoever in any other Person or permit to exist any loans or advances to any
Person; provided, the Company and its Subsidiaries may maintain investments or
invest in or acquire
(i) Eligible Securities;
(ii) all or substantially all of the stock or other equity
interests, or all or substantially all of the assets of another Person
(or a line of business or division of such other Person) constituting a
Permitted Acquisition; provided, however, that if the Person or the
assets so acquired on a pro forma historical basis as at the date of
the acquisition or for the Four-Quarter Period most recently ended
preceding the date of acquisition owned assets or generated income,
which when consolidated with the assets and income of the Company and
its Subsidiaries, constitute ten percent (10%) or more of Consolidated
Total Assets or Consolidated Net Income, then the Company shall furnish
to the Administrative Agent prior to completing such acquisition a
certificate in the form of Exhibit F attached hereto containing
information required therein demonstrating that on a historical pro
forma
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basis that after giving effect to such acquisition no Default or Event
of Default exists hereunder;
(iii) investments existing as of the date hereof and as set
forth in Schedule 6.01(d) attached hereto;
(iv) accounts receivable arising and trade credit granted
in the ordinary course of business and any securities received in
satisfaction or partial satisfaction thereof in connection with
accounts of financially troubled Persons to the extent reasonably
necessary in order to prevent or limit loss;
(v) loans and advances to and investments in
Subsidiaries;
(vi) loans and advances to and investments in Persons
(other than as permitted under this Section 8.06) in an aggregate
outstanding amount not exceeding at any time fifteen percent (15%) of
Consolidated Shareholders' Equity;
(vii) any security or debt instrument retained by the
Company or any Subsidiary in connection with the creation of Vehicle
Receivables Indebtedness or Vehicle Secured Indebtedness which security
or debt instrument represents a residual interest in assets sold or
transferred to an Eligible Special Purpose Entity; and
(viii) consumer loans and leases entered into, purchased or
otherwise acquired by the Company or its Subsidiaries, as lender,
lessor or assignee, as applicable, related to Automobile Retailing
Activities.
8.07 Merger or Consolidation. Other than as permitted under Section
8.06(ii) hereof (a) consolidate with or merge into any other Person, or (b)
permit any other Person to merge into it, or (c) liquidate, wind-up or dissolve
or sell, transfer or lease or otherwise dispose of all or a substantial part of
its assets (other than sales in the ordinary course of business); provided,
however, (i) any Subsidiary of the Company may merge or transfer all or
substantially all of its assets into or consolidate with any wholly-owned
Subsidiary of the Company, and (ii) any Person may merge with the Company if the
Company shall be the survivor thereof and such merger shall not cause, create or
result in the occurrence of any Default or Event of Default hereunder.
8.08 Transactions with Affiliates. Other than transactions permitted
under Section 8.07 hereof, enter into any transaction after the date hereof,
including, without limitation, the purchase, sale, leasing or exchange of
property, real or personal, or the rendering of any service, with any Affiliate
of the Company, except (a) that such Persons may render services to the Company
or its Subsidiaries for compensation at the same rates generally paid by Persons
engaged in the same or similar businesses for the same or similar services and
(b) in the ordinary course of and pursuant to the reasonable requirements of the
Company's (or any Subsidiary's) business consistent with past practice of the
Company and its Subsidiaries and upon fair and reasonable terms no less
favorable to the Company (or any Subsidiary) than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate.
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8.09 Benefit Plans. With respect to all employee pension benefit plans
maintained by the Company or any Subsidiary:
(i) terminate any of such employee pension benefit plans
so as to incur any liability to the Pension Benefit Guaranty
Corporation established pursuant to ERISA;
(ii) allow or suffer to exist any prohibited transaction
involving any of such employee pension benefit plans or any trust
created thereunder which would subject the Company or a Subsidiary to a
tax or penalty or other liability on prohibited transactions imposed
under Internal Revenue Code Section 4975 or ERISA;
(iii) fail to pay to any such employee pension benefit plan
any contribution which it is obligated to pay under the terms of such
plan;
(iv) except as set forth in Schedule 6.01(p), allow or
suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee pension benefit plan;
(v) allow or suffer to exist any occurrence of a
reportable event or any other event or condition, which presents a
material risk of termination by the Pension Benefit Guaranty
Corporation of any such employee pension benefit plan that is a Single
Employer Plan, which termination could result in any liability to the
Pension Benefit Guaranty Corporation; or
(vi) incur any material withdrawal liability with respect
to any Multi-employer Plan.
8.10 Fiscal Year. Change either Borrower's Fiscal Year without
prior notification to the Administrative Agent.
8.11 Dissolution, etc. Wind up, liquidate or dissolve (voluntarily
or involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with the merger or
consolidation of Subsidiaries into each other or into the Company permitted
pursuant to Section 8.07.
8.12 Change in Control. Permit at any time a Change in Control.
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ARTICLE IX
Events of Default and Acceleration
9.01 Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body), that is to say:
(a) if default shall be made in the due and punctual payment
of the principal of any Loan or Reimbursement Obligation, when and as
the same shall be due and payable whether pursuant to any provision of
Article II or Article III hereof, at maturity, by acceleration or
otherwise; or
(b) if default shall be made in the due and punctual payment
of any amount of interest on any Loan or of any fees or other amounts
payable to the Lenders, the Administrative Agent, any Issuing Banks or
NationsBank under the Loan Documents on the date on which the same
shall be due and payable and such failure to pay shall continue for a
period of three days; or
(c) if default shall be made in the performance or observance
of any covenant set forth in Sections 7.06, 7.07(a), 7.11 or Article
VIII hereof; or
(d) if a default shall be made in the performance or
observance of, or shall occur under, any covenant, agreement or
provision contained in this Agreement or the Notes (other than as
described in clauses (a), (b) or (c) above) and such default shall
continue for 30 or more days after the earlier of receipt of notice of
such default by the Authorized Representative from the Administrative
Agent or either Borrower becomes aware of such default, or if a default
shall be made in the performance or observance of, or shall occur
under, any covenant, agreement or provision contained in any of the
other Loan Documents (beyond any applicable grace period, if any,
contained therein) or in any instrument or document evidencing or
creating any obligation in favor of the Administrative Agent or the
Lenders or delivered to the Administrative Agent or the Lenders in
connection with or pursuant to this Agreement or any of the
Obligations, or if any Loan Document ceases to be in full force and
effect (other than by reason of any action by the Administrative
Agent), or if without the written consent of the Administrative Agent
and the Lenders, this Agreement or any other Loan Document shall be
disaffirmed or shall terminate, be terminable or be terminated or
become void or unenforceable for any reason whatsoever (other than in
accordance with its terms in the absence of default or by reason of any
action by the Administrative Agent or any Lender); or
(e) if a default shall occur, which is not waived, (i) in the
payment of any principal, interest, premium or other amounts with
respect to any Indebtedness (other than the Loans) of the Company or of
any Subsidiary in an outstanding aggregate amount not less than
$20,000,000, or (ii) in the performance, observance or fulfillment of
any term or covenant contained in any agreement or instrument under or
pursuant to which any such
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Indebtedness may have been issued, created, assumed, guaranteed or
secured by the Company or any Subsidiary, and such default shall
continue for more than the period of grace, if any, therein specified,
or if such default shall permit the holder of any such Indebtedness to
accelerate the maturity thereof; provided, however, that if the
Borrowers are contesting the payment amount on any such Indebtedness or
the date such payment is due in good faith and the Borrowers establish
reserves on their books if required by and in accordance with Generally
Accepted Accounting Principles applied on a Consistent Basis, then such
nonpayment, in and of itself, shall not, absent an acceleration of such
Indebtedness constitute an Event of Default; or
(f) if any representation, warranty or other statement of fact
contained herein or any other Loan Document or in any writing,
certificate, report or statement at any time furnished to the
Administrative Agent or any Lender by or on behalf of the Company or
any Subsidiary pursuant to or in connection with this Agreement or the
other Loan Documents, or otherwise, shall be false or misleading in any
material respect when given or made or deemed given or made; or
(g) if the Company or any Subsidiary shall be unable to pay
its debts generally as they become due; file a petition to take
advantage of any insolvency, reorganization, bankruptcy, receivership
or similar law, domestic or foreign; make an assignment for the benefit
of its creditors; commence a proceeding for the appointment of a
receiver, trustee, liquidator or conservator of itself or of the whole
or any substantial part of its property; file a petition or answer
seeking reorganization or arrangement or similar relief under the
federal bankruptcy laws or any other applicable law or statute,
federal, state or foreign; or
(h) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of the Company or any Subsidiary or of the
whole or any substantial part of its properties and such order,
judgment or decree continues unstayed and in effect for a period of
sixty (60) days, or approve a petition filed against the Company or any
Subsidiary seeking reorganization or arrangement or similar relief
under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state or foreign
country, province or other political subdivision, which petition is not
dismissed within sixty (60) days; or if, under the provisions of any
other law for the relief or aid of debtors, a court of competent
jurisdiction shall assume custody or control of the Company or any
Subsidiary or of the whole or any substantial part of its properties,
which control is not relinquished within sixty (60) days; or if there
is commenced against the Company or any Subsidiary any proceeding or
petition seeking reorganization, arrangement or similar relief under
the federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state or foreign country, province
or other political subdivision which proceeding or petition remains
undismissed for a period of thirty (30) days; or if the Company or any
Subsidiary takes any action to indicate its consent to or approval of
any such proceeding or petition; or
(i) if (i) any judgments where the aggregate amount not
covered by insurance (or the amount as to which the insurer denies
liability) is in excess of $15,000,000 are
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rendered against the Company or any Subsidiary, or (ii) there are
attachments, injunctions or executions against any of the Company's or
any Subsidiary's properties for an aggregate amount in excess of
$15,000,000; and such judgments, attachments, injunctions or executions
remain unpaid, unstayed, undischarged, unbonded or undismissed for a
period of thirty (30) days; or
(j) if the Company or any Subsidiary shall, other than as
permitted under Section 8.07 hereof or in the ordinary course of
business (as determined by past practices), suspend (other than for a
period not to exceed twenty (20) days by reason of force majeure) all
or any part of its operations material to the conduct of the business
of the Company or such Subsidiaries, taken as a whole; or
(k) if (i) the Company or any Subsidiary shall engage in any
prohibited transaction (as described in Section 8.09(ii) hereof), which
is not subject to a statutory or administrative exemption, involving
any employee pension benefit plan of the Company or any Subsidiary,
(ii) any accumulated funding deficiency (as referred to in Section
8.09(iv) hereof), whether or not waived, shall exist with respect to
any Single Employer Plan, (iii) a reportable event (as referred to in
Section 8.09(v) hereof) (other than a reportable event for which the
statutory notice requirement to the Pension Benefit Guaranty
Corporation has been waived by regulation) shall occur with respect to,
or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed to administer or to terminate, any Single Employer
Plan, which reportable event or institution or proceedings is, in the
reasonable opinion of the Required Lenders, likely to result in the
termination of such Single Employer Plan for purposes of Title IV of
ERISA, and in the case of such a reportable event, the continuance of
such reportable event shall be unremedied for sixty (60) days after
notice of such reportable event pursuant to Section 4043(a), (c) or (d)
of ERISA is given, as the case may be, (iv) any Single Employer Plan
shall terminate for purposes of Title IV of ERISA, and such termination
results in a material liability of the Company or any Subsidiary to
such Single Employer Plan or the Pension Benefit Guaranty Corporation,
(v) the Company or any Subsidiary shall withdraw from a Multi-employer
Plan for purposes of Title IV of ERISA, and, as a result of any such
withdrawal, the Company or any Subsidiary shall incur material
withdrawal liability to such Multi-employer Plan, or (vi) any other
event or condition shall occur or exist; and in each case in clauses
(i) through (vi) of this Section 9.01(k), such event or condition,
together with all other such events or conditions, if any, could
subject the Company or any Subsidiary to any tax, penalty or other
liabilities, and in each such case the event or condition is not
remedied to the satisfaction of the Required Lenders within ninety (90)
days after the earlier of (i) receipt of notice of such event or
condition by the Authorized Representative from the Administrative
Agent or (ii) the Company becomes aware of such event or condition;
then, and in any such event and at any time thereafter, if such Event of Default
or any other Event of Default shall have not been waived,
(A) either or both of the following actions may be
taken: (i) the Administrative Agent may, and at the direction
of the Required Lenders shall, declare any obligation of the
Lenders to make further Loans or of the Issuing Banks
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to issue Letters of Credit terminated, whereupon the
obligation of each Lender to make further Loans or of the
Issuing Banks to issue Letters of Credit, hereunder shall
terminate immediately, and (ii) the Administrative Agent shall
at the direction of the Required Lenders, at their option,
declare by notice to the Borrowers any or all of the
Obligations to be immediately due and payable, and the same,
including all interest accrued thereon and all other
obligations of the Borrowers to the Administrative Agent, the
Lenders and the Issuing Banks, shall forthwith become
immediately due and payable without presentment, demand,
protest, notice or other formality of any kind, all of which
are hereby expressly waived, anything contained herein or in
any instrument evidencing the Obligations to the contrary
notwithstanding; provided, however, that notwithstanding the
above, if there shall occur an Event of Default under clause
(g) or (h) above, then the obligation of the Lenders to lend
and of the Issuing Banks to issue Letters of Credit hereunder
shall automatically terminate and any and all of the
Obligations shall be immediately due and payable without the
necessity of any action by the Administrative Agent or the
Required Lenders or notice to the Administrative Agent or the
Lenders;
(B) The Company shall, upon demand of the
Administrative Agent or the Required Lenders, deposit cash
with the Administrative Agent in accordance with the LC
Account Agreement in an amount equal to the amount of any
Letters of Credit remaining undrawn or unpaid, as collateral
security for the repayment of any future drawings or payments
under such Letters of Credit and the Company shall forthwith
deposit and pay such amounts and such amounts shall be held by
the Administrative Agent pursuant to the terms of the
applicable Application and Agreement for Letter of Credit;
(C) the Administrative Agent and the Lenders shall
have all of the rights and remedies available under the Loan
Documents or under any applicable law.
9.02 Administrative Agent to Act. In case any one or more Events of
Default shall occur and not have been waived, the Administrative Agent may, and
at the direction of the Required Lenders shall, proceed to protect and enforce
their rights or remedies either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant, agreement or other
provision contained herein or in any other Loan Document, or to enforce the
payment of the Obligations or any other legal or equitable right or remedy.
9.03 Cumulative Rights. No right or remedy herein conferred upon the
Lenders or the Administrative Agent is intended to be exclusive of any other
rights or remedies contained herein or in any other Loan Document, and every
such right or remedy shall be cumulative and shall be in addition to every other
such right or remedy contained herein and therein or now or hereafter existing
at law or in equity or by statute, or otherwise.
9.04 No Waiver. No course of dealing between the Borrowers and any
Lender or the Administrative Agent or any failure or delay on the part of any
Lender or the Administrative Agent in exercising any rights or remedies under
any Loan Document or otherwise available to it shall operate as a waiver of any
rights or remedies and no single or partial exercise of any rights
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or remedies shall operate as a waiver or preclude the exercise of any other
rights or remedies hereunder or of the same right or remedy on a future
occasion.
9.05 Default. The Administrative Agent and the Lenders shall have no
right to accelerate any of the Loans upon, or to institute any action or
proceeding before any court to realize upon collateral as a result of, the
occurrence of any Default which shall not also constitute an Event of Default;
provided, however, nothing contained in this sentence shall in any respect
impair or adversely affect the right, power and authority of the Administrative
Agent and the Lenders (i) to take any action expressly required or permitted to
be taken under the Loan Documents upon the occurrence of any Default (and
including any action or proceeding which the Administrative Agent may determine
to be necessary or appropriate in furtherance of any such expressly authorized
action) and (ii) to take any action provided under the Loan Documents or
otherwise available by statute, at law or in equity upon the occurrence of any
Default.
9.06 Allocation of Proceeds. If an Event of Default has occurred and
not been waived, and the maturity of the Notes has been accelerated pursuant to
Article IX hereof, all payments received by the Administrative Agent hereunder,
in respect of any principal of or interest on the Obligations or any other
amounts payable by the Borrowers hereunder (other than amounts deposited with
the Administrative Agent pursuant to Section 9.01(B) which shall be applied
first to payment of draws under Letters of Credit) shall be applied by the
Administrative Agent in the following order:
(i) amounts due to the Issuing Banks, NationsBank and the
Lenders pursuant to Sections 2.12, 2.15, 3.02(f), 3.03, 11.05 and 11.11 hereof;
(ii) amounts due to (A) any Issuing Bank pursuant to
Section 3.04 hereof, and (B) to any Issuing Bank, NationsBank and/or the
Administrative Agent pursuant to Section 10.12 hereof;
(iii) payments of interest on Loans, to be applied for the
ratable benefit of the Lenders;
(iv) payments of principal on Loans, to be applied for the
ratable benefit of the Lenders;
(v) payment of cash amounts to the Administrative Agent
in respect of Outstanding Letters of Credit pursuant to Section 9.01(B) hereof;
(vi) payments of all remaining Obligations, if any, to be
applied for the ratable benefit of the Lenders; and
(vii) any surplus remaining after application as provided
for herein, to the Borrowers or otherwise as may be required by applicable law.
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ARTICLE X
The Administrative Agent
10.01 Appointment. Each Lender (including (x) NationsBank in its
capacity as maker of Swing Line Loans and (y) any Issuing Bank, as issuer of
Letters of Credit) hereby irrevocably designates and appoints NationsBank as the
Administrative Agent of the Lenders under this Agreement and each other Loan
Document, and each of the Lenders hereby irrevocably authorizes NationsBank as
the Administrative Agent for such Lender, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers as are expressly delegated to the Administrative Agent by
the terms of this Agreement, together with such other powers as are reasonably
incidental thereto. The Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any of the Lenders, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Administrative Agent.
10.02 Attorneys-in-fact. The Administrative Agent may execute any of
its duties under this Agreement by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. The Administrative Agent shall not be responsible to the Lenders for the
negligence, gross negligence or willful misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
10.03 Limitation on Liability. Neither the Administrative Agent nor any
of its officers, directors, employees, agents or attorneys-in-fact shall be
liable to the Lenders for any action lawfully taken or omitted to be taken by it
or them under or in connection with this Agreement except for its or their own
gross negligence or willful misconduct. Neither the Administrative Agent nor any
of its affiliates shall be responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Company or
any of its Subsidiaries, or any officer or representative thereof contained in
this Agreement or in any of the other Loan Documents, or in any certificate,
report, statement or other document referred to or provided for in or received
by the Administrative Agent under or in connection with this Agreement, or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any of the other Loan Documents, or for any failure of the
Borrowers to perform their obligations thereunder, or for any recitals,
statements, representations or warranties made, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any collateral. The
Administrative Agent shall not be under any obligation to any of the Lenders to
ascertain or to inquire as to the observance or performance of any of the terms,
covenants or conditions of this Agreement or any of the other Loan Documents on
the part of the Borrowers or to inspect the properties, books or records of the
Company or its Subsidiaries.
10.04 Reliance. The Administrative Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent certificate, affidavit, letter, cablegram, telegram, telecopy or telex
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrowers), independent accountants and other experts
selected by the
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Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless an Assignment and
Acceptance shall have been filed with and accepted by the Administrative Agent.
The Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement unless it shall first receive advice or
concurrence of the Lenders or the Required Lenders as provided in this Agreement
or it shall first be indemnified to its satisfaction by the Lenders against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
in accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all present and future holders of the Notes.
10.05 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender, an
Authorized Representative or the Borrowers referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the Administrative Agent receives such a
notice, the Administrative Agent shall promptly give notice thereof to the
Lenders. The Administrative Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Event of Default as it shall deem advisable in the best interests of the
Lenders.
10.06 No Representations. Each Lender expressly acknowledges that
neither the Administrative Agent nor any of its affiliates has made any
representations or warranties to it and that no act by the Administrative Agent
hereafter taken, including any review of the affairs of the Company or any of
its Subsidiaries, shall be deemed to constitute any representation or warranty
by the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the financial condition, creditworthiness, affairs, status
and nature of the Company and its Subsidiaries and made its own decision to
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement and to make such
investigation as it deems necessary to inform itself as to the status and
affairs, financial or otherwise, of the Company and its Subsidiaries. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, the Administrative Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the affairs, financial condition or business of the
Company or any of its Subsidiaries which may come into the possession of the
Administrative Agent or any of its affiliates.
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10.07 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrowers and without limiting any obligations of the Company or any
Subsidiary so to do), including its employees, directors, officers and agents,
ratably according to the respective outstanding principal amount of the Notes
held by them (or, if no Notes are outstanding, ratably in accordance with their
respective Applicable Commitment Percentages as then in effect) from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may at any time (including without limitation at any time
following the payment of the Notes) be imposed on, incurred by or asserted
against the Administrative Agent, including its employees, directors, officers
and agents, in any way relating to or arising out of this Agreement or any other
document contemplated by or referred to herein or the transactions contemplated
hereby or any action taken or omitted by the Administrative Agent under or in
connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent's gross negligence or willful
misconduct. The agreements in this subsection shall survive the payment of the
Obligations and the termination of this Agreement.
10.08 Lender. The Administrative Agent and its affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the Company and its Subsidiaries as though it were not the Administrative Agent
hereunder. With respect to its Loans made or renewed by it and any Note issued
to it, the Administrative Agent shall have the same rights and powers under this
Agreement as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity.
10.09 Resignation. If the Administrative Agent shall resign as
Administrative Agent under this Agreement, then the Required Lenders may
appoint, with the consent, so long as there shall not have occurred and be
continuing a Default or Event of Default, of the Borrowers, which consent shall
not be unreasonably withheld, a successor Administrative Agent for the Lenders,
which successor Administrative Agent shall be a commercial bank organized under
the laws of the United States or any state thereof, having a combined surplus
and capital of not less than $500,000,000, whereupon such successor
Administrative Agent shall succeed to the rights, powers and duties of the
former Administrative Agent and the obligations of the former Administrative
Agent shall be terminated and canceled, without any other or further act or deed
on the part of such former Administrative Agent or any of the parties to this
Agreement; provided, however, that the former Administrative Agent's resignation
shall not become effective until such successor Administrative Agent has been
appointed and has succeeded of record to all right, title and interest in any
collateral held by the Administrative Agent; provided, further, that if the
Required Lenders and, if applicable, the Borrowers cannot agree as to a
successor Administrative Agent within ninety (90) days after such resignation,
the Administrative Agent shall appoint a successor Administrative Agent which
satisfies the criteria set forth above in this Section 10.09 for a successor
Administrative Agent and the parties hereto agree to execute whatever documents
are necessary to effect such action under this Agreement or any other document
executed pursuant to this Agreement; provided, however that in such event all
provisions of this Agreement and the Loan Documents, shall remain in full force
and effect. After any retiring Administrative Agent's
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resignation hereunder as Administrative Agent, the provisions of this Article X
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.
10.10 Sharing of Payments, etc. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, set-off, counterclaim or
otherwise, obtain payment with respect to its Obligations (other than pursuant
to Article IV) which results in its receiving more than its pro rata share of
the aggregate payments with respect to all of the Obligations (other than any
payment pursuant to Article IV), then (A) such Lender shall be deemed to have
simultaneously purchased from the other Lenders a share in their Obligations so
that the amount of the Obligations held by each of the Lenders shall be pro rata
and (B) such other adjustments shall be made from time to time as shall be
equitable to insure that the Lenders share such payments ratably; provided,
however, that for purposes of this Section 10.10 the term "pro rata" shall be
determined with respect to both the Revolving Credit Commitment of each Lender
and to the Total Revolving Credit Commitment after subtraction in each case of
amounts, if any, by which any such Lender has not funded its share of the
outstanding Revolving Credit Loans and Reimbursement Obligations. If all or any
portion of any such excess payment is thereafter recovered from the Lender which
received the same, the purchase provided in this Section 10.10 shall be
rescinded to the extent of such recovery, without interest. The Borrowers
expressly consent to the foregoing arrangements and agree that each Lender so
purchasing a portion of the other Lenders' Obligations may exercise all rights
of payment (including, without limitation, all rights of set-off, banker's lien
or counterclaim) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
10.11 One Lender. Notwithstanding anything to the contrary contained
herein or in any of the Loan Documents, if at any time NationsBank shall be the
sole Lender, all references to and rights, powers and privileges exercisable by
the "Administrative Agent" shall be deemed to refer to NationsBank.
10.12 Additional Fees. In addition to any fees otherwise described in
this Agreement, the Borrowers agree to pay to the Administrative Agent, any
Issuing Bank or NationsBank such other fees as may be agreed to in a separate
writing or writings.
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ARTICLE XI
Miscellaneous
11.01 Assignments and Participations.
(a) At any time after the Closing Date each Lender may, with the prior
consent of the Administrative Agent, which consent shall not be unreasonably
withheld, and so long as no Default or Event of Default exists or is continuing,
with the prior consent of the Borrowers, which consent shall not be unreasonably
withheld (it being understood that consent may be withheld by the Borrowers if
such assignment would subject the Borrowers to the payment of any additional
amounts pursuant to the provisions of Section 4.06 hereof), assign to an
Eligible Assignee all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of any Note payable
to its order), provided, each such Lender shall assign the same percentage of
its interest under the TROL Credit Documents to the same Eligible Assignee;
provided, further, that (i) each such assignment shall be of a constant, and not
a varying, percentage of the assigning Lender's rights and obligations
(including Loans and Participations but excluding outstanding Competitive Bid
Loans) under this Agreement, (ii) for each assignment involving the issuance and
transfer of a Note, the assigning Lender shall execute an Assignment and
Acceptance and the Borrowers hereby consent to execute a replacement Note or
Notes to be exchanged for any surrendered Note or Notes of the assigning Lender
to give effect to the assignment, (iii) except in the case of an assignment to
another Lender or an assignment of all of a Lender's rights and obligations
under this Agreement and the TROL Credit Documents, the minimum Revolving Credit
Commitment, plus the prorated commitment under the TROL Credit Documents, which
shall be assigned is $10,000,000 (together with which the assigning Lender's
applicable portion of Participations and the Letter of Credit Commitment shall
also be assigned), (iv) such Eligible Assignee shall have an office located in
the United States, (v) an assignment (other than an assignment of 100% of its
interest) by NationsBank shall not include any portion of the Swing Line, and
(vi) an assignment (other than an assignment of 100% of its interest) by an
Issuing Bank shall not include any obligation to issue Letters of Credit. Upon
such execution, delivery, approval and acceptance, from and after the effective
date specified in each Assignment and Acceptance, (x) the Eligible Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder or under such Note have been assigned or negotiated to it
pursuant to such Assignment and Acceptance have the rights and obligations of a
Lender hereunder and a holder of such Notes and (y) the assignor thereunder
shall, to the extent that rights and obligations hereunder or under such Notes
have been assigned or negotiated by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from that portion of its
Obligations under this Agreement applicable to the rights so assigned; provided
that such assignor shall not be released from liability to the Borrowers for any
acts or omissions of such assignor prior to such assignment. Any Lender who
makes an assignment shall pay to the Administrative Agent a one-time
administrative fee of $3,500.00 which fee shall not be reimbursed by the
Borrowers.
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the Eligible Assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) the
assignment made under such Assignment and Acceptance
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is made under such Assignment and Acceptance without recourse; (ii) such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Company or any
Subsidiary or the performance or observance by the Company or any Subsidiary of
any of its obligations under any Loan Document or any other instrument or
document furnished pursuant hereto; (iii) such Eligible Assignee confirms that
it has received a copy of this Agreement, together with copies of the financial
statements delivered pursuant to Section 6.01(f) or Section 7.01, as the case
may be, and such other Loan Documents and other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (iv) such Eligible Assignee will,
independently and without reliance upon the Administrative Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such Eligible Assignee
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement, the Notes and the
other Loan Documents as are delegated to the Administrative Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto; and (vi) such Eligible Assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender and a holder of such
Notes.
(c) The Administrative Agent shall maintain at its address referred to
herein a copy of each Assignment and Acceptance delivered to and accepted by it.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender, the Administrative Agent shall give prompt notice thereof to
Borrowers.
(e) Nothing herein shall prohibit any Lender from pledging or
assigning, without notice to or consent of the Borrowers and without the payment
of the administrative fee referred to in Section 11.01(a), any Note to any
Federal Reserve Bank in accordance with applicable law.
(f) Each Lender may sell participations at its expense without the
consent of the Borrowers or the Administrative Agent, to one or more banks or
other entities as to all or a portion of its rights and obligations under this
Agreement; provided, that (i) such Lender's obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) such Lender
shall remain the holder of any Notes issued to it for the purpose of this
Agreement, (iv) such participations shall be in a minimum amount of $5,000,000
and, in the case of a participation in the Revolving Credit Facility, shall
include an allocable portion of such Lender's Participation, (v) the Borrowers,
the Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and with regard to any and all payments to be
made under this Agreement; provided, that the participation agreement between a
Lender and its participants may provide that such Lender will obtain the
approval of such participant prior to such Lender's agreeing to any amendment or
waiver of any provisions of this Agreement which would (A) extend the maturity
of any Note, (B) reduce the interest rate hereunder, (C) change the amount of or
the due date of any scheduled payment of principal, or (D) increase the
Revolving Credit Commitment of the
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Lender granting the participation other than as permitted by Section 2.10, and
(vi) the sale of any such participations which require the Borrowers to file a
registration statement with the United States Securities and Exchange Commission
or under the securities regulations or laws of any state shall not be permitted.
11.02 Notices. All notices shall be in writing, except as to telephonic
notices expressly permitted or required herein, and written notices shall be
delivered by hand delivery, telegram, telex, telefacsimile, overnight courier or
certified or registered mail. Any notice shall be conclusively deemed to have
been received by any party hereto and be effective on the day on which delivered
to such party (against (except as to telephonic or telefacsimile notice) receipt
therefor or, in the case of telex, verification by return) at the address set
forth below or such other address as such party shall specify to the other
parties in writing, or if sent prepaid by certified or registered mail return
receipt requested on the third Business Day after the day on which mailed,
addressed to such party at said address:
(a) if to the respective Borrowers:
Republic Industries, Inc.
450 E. Las Olas Boulevard
Suite 1200
Ft. Lauderdale, Florida 33301
Attention: Richard L. Handley
Telephone: (954) 713-5221
Telefacsimile: (954) 713-2120
Republic Resources Company
900 Market Street, Suite 200
Wilmington, Delaware 19801
Attention: Francis E. Jacobs, II
Telephone: (302) 421-7432
Telefacsimile: (302) 421-7378
(b) if to the Administrative Agent:
NationsBank, National Association (South)
100 S.E. Second Street, 14th Floor
Miami, Florida 33131
Attention: Richard M. Starke
Telephone: (305) 533-2435
Telefacsimile: (305) 533-2437
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with a copy to:
NationsBank, National Association (South)
One Independence Center
101 North Tryon Street
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services, Jamie McCotter
Telephone: (704) 388-2374
Telefacsimile: (704) 386-9923
(c) if to NationsBank in its capacity as issuer of the
Letters of Credit:
NationsBank, National Association (South)
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Attention: Letter of Credit Department, Jamie
McCotter
Telephone: (704) 388-2374
Telefacsimile: (704) 386-9923
(d) if to the Lenders:
At the addresses set forth on the signature pages
hereof and on the signature page of each Assignment
and Acceptance.
11.03 Setoff. Upon the occurrence or continuation of a Default or Event
of Default, each Lender at any time or times with or without prior notice to the
Borrowers may apply any deposits or balances of the Borrowers or any part
thereof held by the Administrative Agent or any Lender or any Affiliate thereof
to such of the Obligations of the Borrowers to the Lenders then past due and in
such amounts as they may elect, and whether or not the collateral or the
responsibility of other Persons primarily, secondarily or otherwise liable may
be deemed adequate. For the purposes of this paragraph, all remittances and
property shall be deemed to be in the possession of the Administrative Agent or
such Lender as soon as the same may be put in transit to it by mail or carrier
or by other bailee.
11.04 Survival. All covenants, agreements, representations and
warranties made herein shall survive the making by the Lenders of the Loans and
the expiration of the Letters of Credit and the execution and delivery to the
Lenders of this Agreement and the Notes and shall continue in full force and
effect so long as any of the Obligations remain outstanding or any Lender has
any commitment hereunder. Whenever in this Agreement, any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
permitted assigns of such party and all covenants, provisions and agreements by
or on behalf of the Borrowers which are contained in this Agreement, the Notes
and the other Loan Documents shall inure to the benefit of the successors and
permitted assigns of the Lenders or any of them.
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11.05 Expenses. The Borrowers agree (a) to pay or reimburse the
Administrative Agent for all its reasonable and customary out-of-pocket costs
and expenses incurred in connection with the preparation, negotiation and
execution of, and any amendment, supplement or modification to, this Agreement
or any of the other Loan Documents (including travel expenses relating to
closing), and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the reasonable and customary fees and
disbursements of counsel to the Administrative Agent, (b) to pay or reimburse
the Administrative Agent and the Lenders for all their reasonable costs and
expenses incurred in connection with the enforcement (only from and after the
occurrence of a Default or Event of Default) or preservation of any rights under
this Agreement and the other Loan Documents, including without limitation, the
reasonable fees and disbursements of their counsel and any payments in
indemnification or otherwise payable by the Lenders to the Administrative Agent
pursuant to the Loan Documents, (c) to pay, indemnify and hold the
Administrative Agent and the Lenders harmless from any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
failure to pay or delay in paying, documentary, stamp, excise and other similar
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of this Agreement or any other Loan Documents,
or consummation of any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement or any other Loan Documents,
and (d) to pay, indemnify, and hold the Administrative Agent and the Lenders
(and their respective agents, employees, directors and officers) harmless from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and the other Loan Documents or
in any respect relating to the transactions contemplated hereby or thereby (all
the foregoing, collectively, the "Indemnified Liabilities"); provided, however,
that the Borrowers shall have no obligation hereunder with respect to
Indemnified Liabilities arising from (i) the willful misconduct or gross
negligence of or the willful breach of the Loan Documents by the party seeking
indemnification but only after the final adjudication of willful misconduct,
gross negligence or breach of Loan Documents by such Person, (ii) legal
proceedings commenced against the Administrative Agent or any Lender by any
security holder or creditor thereof arising out of and based upon rights
afforded any such security holder or creditor solely in its capacity as such,
(iii) any taxes imposed upon the Administrative Agent or any Lender other than
the documentary, stamp, excise and similar taxes described in clause (c) above
or any tax resulting from any Regulatory Change, which tax would be payable to
Lenders by the Borrowers pursuant to Article IV hereof, or (iv) taxes imposed
and costs and expenses incurred as a result of a transfer or assignment of any
Note, participation or assignment of a portion of its rights. The agreements in
this subsection shall survive repayment of the Notes and all other Obligations
hereunder. The reimbursement obligations of the Borrowers contained in this
paragraph also do not include the obligation to reimburse Lender or the
Administrative Agent for any expenses and fees incurred in any dispute between
any Lender and the Administrative Agent arising out of the Loans.
11.06 Amendments. No amendment, modification or waiver of any provision
of this Agreement or any of the Loan Documents and no consent by the Lenders to
any departure therefrom by the Borrowers shall be effective unless such
amendment, modification or waiver shall be in writing and signed by the
Borrowers and the Administrative Agent, but only upon having received the
written consent of the Required Lenders, and the same shall then be effective
only
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for the period and on the conditions and for the specific instances and purposes
specified in such writing; provided, however, that, no such amendment,
modification or waiver
(i) which changes, extends or waives any provision of
Section 10.10 or this Section 11.06, the amount of or the due date of
any scheduled installment of any Obligation or the amount of the Total
Revolving Credit Commitment, which decreases the rate of interest
payable on any Obligation, decreases fees stated herein, changes the
definition of Required Lenders, which permits an assignment by the
Borrowers of their Obligations hereunder, which reduces the required
consent of Lenders provided hereunder, which increases, decreases or
extends the Revolving Credit Maturity Date or the Revolving Credit
Commitment of any Lender, which releases any Obligations, which
increases or extends the Letter of Credit Facility or which waives any
condition to the making of any Loan shall be effective unless in
writing and signed by each of the Lenders; provided, however, the
Required Lenders may in their sole discretion waive any Default or
Event of Default (other than any Event of Default under Section
9.01(a), (b), (g) or (h) which shall require the agreement of each
Lender); or
(ii) which affects the rights, privileges, immunities or
indemnities of the Administrative Agent shall be effective unless in
writing and signed by the Administrative Agent.
Notwithstanding any provision of the other Loan Documents to the contrary, as
between the Administrative Agent and the Lenders, execution by the
Administrative Agent shall not be deemed conclusive evidence that the
Administrative Agent has obtained the written consent of the Required Lenders.
No notice to or demand on the Borrowers in any case shall entitle the Borrowers
to any other or further notice or demand in similar or other circumstances,
except as otherwise expressly provided herein. No delay or omission on any
Lender's or the Administrative Agent's part in exercising any right, remedy or
option shall operate as a waiver of such or any other right, remedy or option or
of any Default or Event of Default.
11.07 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
11.08 WAIVERS BY BORROWERS. IN ANY LITIGATION IN ANY COURT WITH RESPECT
TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE LOANS, ANY OF THE
NOTES, ANY OF THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS, OR ANY INSTRUMENT OR
DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR
THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF, OR
ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING BETWEEN THE BORROWERS AND THE
LENDERS OR THE ADMINISTRATIVE AGENT; THE BORROWERS AND EACH LENDER AND THE
ADMINISTRATIVE AGENT HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
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11.09 Termination. The termination of this Agreement shall not affect
any rights of the Borrowers, the Lenders or the Administrative Agent or any
obligation of the Borrowers, the Lenders or the Administrative Agent, arising
prior to the effective date of such termination, and the provisions hereof shall
continue to be fully operative until all transactions entered into or rights
created or obligations incurred prior to such termination have been fully
disposed of, concluded or liquidated and the Obligations arising prior to or
after such termination have been irrevocably paid in full. The rights granted to
the Administrative Agent for the benefit of the Lenders hereunder and under the
other Loan Documents shall continue in full force and effect, notwith standing
the termination of this Agreement, until all of the Obligations have been paid
in full after the termination hereof (other than Obligations in the nature of
continuing indemnities or expense reimbursement obligations not yet due and
payable) or the Borrowers have furnished the Lenders and the Administrative
Agent with an indemnification satisfactory to the Administrative Agent and each
Lender with respect thereto. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until payment
in full of the Obligations unless otherwise provided herein. Notwithstanding the
foregoing, if after receipt of any payment pursuant to the Loan Documents of all
or any part of the Obligations, any Lender is for any reason compelled to
surrender such payment to any Person because such payment is determined to be
void or voidable as a preference, impermissible setoff, a diversion of trust
funds or for any other reason, this Agreement shall continue in full force and
the Borrowers shall be liable to, and shall indemnify and hold such Lender
harmless for, the amount of such payment surrendered until such Lender shall
have been finally and irrevocably paid in full. The provisions of the foregoing
sentence shall be and remain effective notwithstanding any contrary action which
may have been taken by the Lenders in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to the Lenders' rights under
this Agreement and shall be deemed to have been conditioned upon such payment
having become final and irrevocable.
11.10 Governing Law. ALL DOCUMENTS EXECUTED PURSUANT TO THE
TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING, WITHOUT LIMITATION, THIS AGREEMENT
AND EACH OF THE LOAN DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER, AND
FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS AND
JUDICIAL DECISIONS OF THE STATE OF FLORIDA. THE BORROWERS HEREBY SUBMIT TO THE
JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE
PURPOSES OF RESOLVING DISPUTES HEREUNDER OR FOR THE PURPOSES OF COLLECTION.
11.11 Indemnification. (a) In consideration of the execution and
delivery of this Agreement by the Administrative Agent and each Lender and the
extension of the Letter of Credit Commitments, the Swing Line and Revolving
Credit Commitments, the Borrowers hereby indemnify, exonerate and hold the
Administrative Agent, each Lender and any Affiliate thereof and each of their
respective officers, directors, employees and agents (collectively, the
"Indemnified Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and expenses
incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (collectively, the
"Indemnified Liabilities"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
any Loan or supported by any Letter of Credit, except for any such Indemnified
Liabilities arising for the account of a particular
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Indemnified Party by reason of the final adjudication of bad faith, gross
negligence or willful misconduct with respect to such Indemnified Party or an
officer, director, employee or agent of such Indemnified Party, and if and to
the extent that the foregoing undertaking may be unenforceable for any reason,
the Borrowers hereby agree to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. The provisions of this Section 11.11(a) shall survive repayment
of the Obligations, the occurrence of the Revolving Credit Termination Date, and
expiration or termination of this Agreement.
(b) If a claim is to be made by a party entitled to indemnification
under this Section 11.11 against the indemnifying party, the party entitled to
such indemnification shall give written notice to the indemnifying party
promptly after the party entitled to indemnification receives actual notice of
any claim, action, suit, loss, cost, liability, damage or expense incurred or
instituted for which the indemnification is sought. If requested by the
Borrowers in writing, and so long as no Default or Event of Default shall have
occurred and be continuing, such Indemnified Party shall contest at the expense
of the Borrowers the validity, applicability and/or amount of such suit, action,
or cause of action to the extent such contest may be conducted in good faith on
legally supportable grounds. If any lawsuit or enforcement action is filed
against any party entitled to the benefit of indemnity under this Section 11.11,
written notice thereof shall be given to the indemnifying party as soon as
practicable (and in any event within 20 days after the service of the citation
or summons). Notwithstanding the foregoing, the failure so to notify the
indemnifying party as provided in this Section will relieve the indemnifying
party from liability hereunder only if and to the extent that such failure
results in the forfeiture by the indemnifying party of any substantive rights or
defenses and only to the extent of such forfeiture. After such notice, if the
indemnifying party shall acknowledge in writing to the Indemnified Party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then, so long as no Default
or Event of Default shall occur and be continuing, the indemnifying party shall
be entitled, if it so elects, to take control of the defense and investigation
of such lawsuit or action and to employ and engage counsel of its own choice
reasonably acceptable to the Indemnified Party to handle and defend the same, at
the indemnifying party's cost, risk and expense, provided, however, that the
indemnifying party and its counsel shall proceed with diligence and in good
faith with respect thereto. If (i) the engagement of such counsel by the
indemnifying party would present a conflict of interest which would prevent such
counsel from effectively defending such action on behalf of the Indemnified
Party, (ii) the defendants in, or targets of, any such lawsuit or action include
both the Indemnified Party and indemnifying party, and the Indemnified Party
reasonably concludes that there may be legal defenses available to it that are
different from or in addition to those available to the indemnifying party,
(iii) the indemnifying party fails to assume the defense of the lawsuit or
action or to employ counsel reasonably satisfactory to such Indemnified Party,
in either case in a timely manner, or (iv) a Default or Event of Default shall
occur and be continuing, then such Indemnified Party may employ separate counsel
to represent or defend it in any such action or proceeding and the indemnifying
party will pay the fees and disbursements of such counsel, provided, however,
that each Indemnified Party shall endeavor, but shall not be obligated, in
connection with any matter covered by this Section 11.11 which also involves
other Indemnified Parties, to use reasonable efforts to avoid unnecessary
duplication of efforts by counsel for all Indemnified Parties and provided
further, that in no event shall the Borrowers be liable for the fees and
expenses of more
85
<PAGE> 93
than one separate firm for the Indemnified Parties. The Indemnified Party shall
cooperate (with all out of pocket costs and expenses associated therewith to be
paid by the indemnifying party) in all reasonable respects with the indemnifying
party and such attorneys in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom; provided, however, that the
Indemnified Party may, at its own cost (except as set forth in, and in
accordance with, the foregoing sentence), participate in the investigation,
trial and defense of such lawsuit or action and any appeal arising therefrom. If
the indemnifying party has acknowledged to the Indemnified Party its obligation
to indemnify hereunder, the Indemnified Party, so long as no Default or Event of
Default shall have occurred and be continuing, shall not settle such lawsuit or
enforcement action without the prior written consent of the indemnifying party
and, if the indemnifying party has not so acknowledged its obligation, the
Indemnified Party shall not settle such lawsuit or enforcement action without
giving 20 days' prior written notice of such settlement and its terms to the
indemnifying party. Notwithstanding anything herein to the contrary, (x) if an
Indemnified Party decides to forego any right to indemnification hereunder with
respect to any pending lawsuit or enforcement action, such Indemnified Party
shall be entitled to settle such lawsuit or enforcement action with respect to
any indemnification rights foregone, and (y) if either Borrower ,or the
Borrowers jointly assume control over any pending lawsuit or enforcement action,
neither Borrower shall agree to any dismissal or settlement of such litigation
without the written consent of any Indemnified Party if such dismissal or
settlement would require any admission or acknowledgment of culpability or
wrongdoing by such Indemnified Party or provide for any non-monetary relief to
be performed by such Indemnified Party.
11.12 Headings and References. The headings of the Articles and
Sections of this Agreement are inserted for convenience of reference only and
are not intended to be a part of, or to affect the meaning or interpretation of
this Agreement. Words such as "hereof", "hereunder", "herein" and words of
similar import shall refer to this Agreement in its entirety and not to any
particular Section or provisions hereof, unless so expressly specified. As used
herein, the singular shall include the plural, and the masculine shall include
the feminine or a neutral gender, and vice versa, whenever the context requires.
11.13 Severability. If any provision of this Agreement or the other
Loan Documents shall be determined to be illegal or invalid as to one or more of
the parties hereto, then such provision shall remain in effect with respect to
all parties, if any, as to whom such provision is neither illegal nor invalid,
and in any event all other provisions hereof shall remain effective and binding
on the parties hereto.
11.14 Entire Agreement. This Agreement, together with the other Loan
Documents, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto.
11.15 Agreement Controls. In the event that any term of any of the Loan
Documents other than this Agreement conflicts with any term of this Agreement,
the terms and provisions of this Agreement shall control.
86
<PAGE> 94
11.16 Usury Savings Clause. Notwithstanding any other provision herein,
the aggregate interest rate charged under any of the Notes, including all
charges or fees in connection therewith deemed in the nature of interest under
Florida law, shall not exceed the Highest Lawful Rate (as such term is defined
below). If the rate of interest (determined without regard to the preceding
sentence) under this Agreement at any time exceeds the Highest Lawful Rate (as
defined below), the outstanding amount of the Loans made hereunder shall bear
interest at the Highest Lawful Rate until the total amount of interest due
hereunder equals the amount of interest which would have been due hereunder if
the stated rates of interest set forth in this Agreement had at all times been
in effect. In addition, if when the Loans made hereunder are repaid in full the
total interest due hereunder (taking into account the increase provided for
above) is less than the total amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect, then to the extent permitted by law, the Borrowers shall
pay to the Administrative Agent an amount equal to the difference between the
amount of interest paid and the amount of interest which would have been paid if
the Highest Lawful Rate had at all times been in effect. Notwithstanding the
foregoing, it is the intention of the Lenders and the Borrowers to conform
strictly to any applicable usury laws. Accordingly, if any Lender contracts for,
charges, or receives any consideration which constitutes interest in excess of
the Highest Lawful rate, then any such excess shall be canceled automatically
and, if previously paid, shall at such Lender's option be applied to the
outstanding amount of the Loans made hereunder or be refunded to the Borrowers.
As used in this paragraph, the term "Highest Lawful Rate" means the maximum
lawful interest rate, if any, that at any time or from time to time may be
contracted for, charged, or received under the laws applicable to such Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
11.17 Consents to Renewals, Modifications and Other Actions and Events.
This Agreement and all of the obligations of the Borrowers hereunder shall
remain in full force and effect without regard to and shall not be released,
affected or impaired by: (a) any amendment, assignment, transfer, modification
of or addition or supplement to the Obligations, this Agreement, any Note or any
other Loan Document; (b) any extension, indulgence, increase in the Obligations
or other action or inaction in respect of any of the Loan Documents or otherwise
with respect to the Obligations, or any acceptance of security for, or
guaranties of, any of the Obligations or Loan Documents, or any surrender,
release, exchange, impairment or alteration of any such security or guaranties
including without limitation the failing to perfect a security interest in any
such security or abstaining from taking advantage or of realizing upon any
guaranties or upon any security interest in any such security; (c) any default
by any Borrower under, or any lack of due execution, invalidity or
unenforceability of, or any irregularity or other defect in, any of the Loan
Documents; (d) any waiver by the Lenders or any other person of any required
performance or otherwise of any condition precedent or waiver of any requirement
imposed by any of the Loan Documents, any guaranties or otherwise with respect
to the Obligations; (e) any exercise or non-exercise of any right, remedy, power
or privilege in respect of this Agreement or any of the other Loan Documents;
(f) any sale, lease, transfer or other disposition of the assets of any Borrower
or any consolidation or merger of any Borrower with or into any other person,
corporation, or entity, or any transfer or other disposition by any Borrower or
any other holder of any shares of capital stock of any Borrower; (g) any
bankruptcy, insolvency, reorganization or similar proceedings involving or
affecting any Borrower; (h) the
87
<PAGE> 95
release or discharge of any Borrower from the performance or observance of any
agreement, covenant, term or condition under any of the Obligations or contained
in any of the Loan Documents by operation of law; or (i) any other cause whether
similar or dissimilar to the foregoing which, in the absence of this provision,
would release, affect or impair the obligations, covenants, agreements and
duties of any Borrower hereunder, including without limitation any act or
omission by the Administrative Agent, any Lender or any other person which
increases the scope of such Borrower's risk, and in each case described in this
paragraph whether or not any Borrower shall have notice or knowledge of any of
the foregoing, each of which is specifically waived by each Borrower. Each
Borrower warrants to the Administrative Agent and the Lenders that it has
adequate means to obtain from each other Borrower on a continuing basis
information concerning the financial condition and other matters with respect to
the Borrowers and that it is not relying on the Administrative Agent or the
Lenders to provide such information either now or in the future.
11.18 Confidentiality. Except as provided in Section 7.01(e) hereof,
the Lenders shall hold all non-public information obtained pursuant to the
requirements of this Agreement in accordance with their customary procedures for
handling confidential information of this nature but may, in any event, make
disclosures reasonably required in connection with the contemplated transfer or
assignment of any of the Loans or participations or as required or requested by
any legal process or applicable regulatory agency or to its attorneys or
accountants in the ordinary course of business; provided that, unless
specifically prohibited by applicable law or court order, each Lender shall use
all reasonable efforts to notify the Borrowers of any request under legal
process by any governmental agency or representative thereof for disclosure of
such information unless prohibited by such legal process but the failure to
notify Borrower shall not affect the Borrowers' obligations to make payment to
the Lenders hereunder and under the Notes.
[Remainder of Page Intentionally Left Blank.]
88
<PAGE> 96
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be made, executed and delivered by their duly authorized officers as of the day
and year first above written.
REPUBLIC INDUSTRIES, INC.
WITNESS: By: /s/ Courtland D. Peddy
-------------------------------------
Name: Courtland D. Peddy
Title: Vice President and Treasurer
/s/ Kimberly Saltrell
- ------------------------
/s/ Lucy L. Tate
- ------------------------
REPUBLIC RESOURCES COMPANY
WITNESS: By: /s/ Courtland D. Peddy
-------------------------------------
Name: Courtland D. Peddy
Title: Assistant Secretary
/s/ Kimberly Saltrell
- ------------------------
/s/ Lucy L. Tate
- ------------------------
89
<PAGE> 97
NATIONSBANK, NATIONAL ASSOCIATION (SOUTH),
as Administrative Agent for the Lenders
By: /s/ Richard M. Starke
-----------------------------------------
Name: Richard M. Starke
Title: Vice President
NATIONSBANK, NATIONAL ASSOCIATION (SOUTH)
By: /s/ Richard M. Starke
-----------------------------------------
Name: Richard M. Starke
Title: Vice President
Lending Office:
101 North Tryon Street
Charlotte, North Carolina 28255
Wire Transfer Instructions:
NationsBank, National Association (South)
Charlotte, North Carolina
ABA# 063100277
Reference: Republic Industries
Attention: Agency Services
Account No.: __________
REF: Republic Industries, Inc.
90
<PAGE> 98
BANK OF AMERICA NT & SA
By: /s/ Laurens F. Schaad, Jr.
-----------------------------------------
Name: Laurens F. Schaad, Jr.
---------------------------------------
Title: Vice President
--------------------------------------
Lending Office:
1230 Peachtree Street
Suite 3800
Atlanta, Georgia 30309
Wire Transfer Instructions:
Bank of America NT & SA
231 S. LaSalle
Chicago, Illinois 60690
ABA #071000039
For credit to Acct. #47-03421
Reference: Republic Industries
Attention: Sheila Johnson
91
<PAGE> 99
THE CHASE MANHATTAN BANK
By: /s/ Carol A. Ulmer
-----------------------------------------
Name: CAROL A. ULMER
---------------------------------------
Title: VICE PRESIDENT
--------------------------------------
Lending Office:
270 Park Avenue, 10th Floor
New York, New York 10017
Wire Transfer Instructions:
The Chase Manhattan Bank
4 New York Plaza
New York, New York 10005
ABA #021000021
Reference: Republic Industries
Attention: Loan Document
92
<PAGE> 100
CITICORP USA, INC.
By: /s/ Flavio Regende Barbosa
-----------------------------------------
Name: Flavio Regende Barbosa
---------------------------------------
Title: Vice President
--------------------------------------
Lending Office:
400 Perimeter Center Terrace
Suite 600
Atlanta, Georgia 30346
Wire Transfer Instructions:
Citibank N.A.
399 Park Avenue
New York, New York 10043
ABA #021000089
Account #4058 0628
Reference: Republic Industries, Inc.
93
<PAGE> 101
ABN AMRO BANK NV
By: /s/ Cheryl J. Steffens
-----------------------------------------
Name: Chery J. Steffens
---------------------------------------
Title: Vice President
--------------------------------------
Lending Office:
200 S. Biscayne Boulevard
Suite 200
Miami, Florida 33131
Wire Transfer Instructions:
ABN AMRO Bank NV
200 S. Biscayne Boulevard
Miami, Florida 33131
ABA #0660 1086 9
Account #5111 806 36610
Attention: Credit Department
Reference: Republic Industries
94
<PAGE> 102
THE BANK OF NOVA SCOTIA
By: /s/ W.I. BROWN
-----------------------------------------
Name: W.I. BROWN
---------------------------------------
Title: VICE PRESIDENT
--------------------------------------
Lending Office:
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Wire Transfer Instructions:
The Bank of Nova Scotia, New York Agency
1 Liberty Plaza
New York, New York 10006
ABA #026002532
Account #0606634
Attention: Atlanta Agency
Reference: Republic Industries, Inc.
95
<PAGE> 103
THE BANK OF TOKYO-MITSUBISHI,
LTD., NEW YORK BRANCH
By: /s/ Joseph P. Devoe
-----------------------------------------
Name: Joseph P. Devoe
---------------------------------------
Title: Attorney-in-Fact
--------------------------------------
Lending Office:
1251 Avenue of the Americas, 12th Floor
New York, New York 10020-1104
Wire Transfer Instructions:
The Bank of Tokyo-Mitsubishi, Ltd.,
New York Branch
ABA #0260-0963-2
Short Name: BK Tokyo Mitsubishi Ltd.
Further Credit to: Loan Operations Dept.
CIF #97770191
96
<PAGE> 104
CIBC INC.
By: /s/ Roger Colden
-----------------------------------------
Name: Roger Colden
---------------------------------------
Title: DIRECTOR, CIBC WOOD GUNDY
--------------------------------------
SECURITY CORP. AS AGENT
Lending Office:
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
Wire Transfer Instructions:
Morgan Guaranty
New York, New York
ABA #021-000-238
Account #630-00-480
Attention: Atlanta Operations
97
<PAGE> 105
CREDIT SUISSE
By: /s/ R. Finney /s/ E. Whalen
-----------------------------------------
Name: R. Finney E. Whalen
---------------------------------------
Title: MANAGING DIRECTOR ASSOCIATE
--------------------------------------
Lending Office:
11 Madison Avenue
New York, New York 10016
Wire Transfer Instructions:
Credit Suisse
11 Madison Avenue
New York, New York 10016
ABA #026009179
Account #904996-02
Attention: Loan Department Clearing Account
98
<PAGE> 106
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Courtney R. Wood
-----------------------------------------
Name: Courtney R. Wood
---------------------------------------
Title: Vice President
--------------------------------------
Lending Office:
One First National Plaza
Suite 0167 1-10
Chicago, Illinois 60670
Wire Transfer Instructions:
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
ABA #071000013
Account #7521-7653
Attention: DES Incoming Clearing Account
99
<PAGE> 107
FIRST UNION NATIONAL BANK OF FLORIDA
By: /s/ Ralph L. Kelly
-----------------------------------------
Name: Ralph L. Kelly
---------------------------------------
Title: Vice President
--------------------------------------
Lending Office:
225 Water Street
Jacksonville, Florida 32202
Wire Transfer Instructions:
First Union National Bank
Jacksonville, Florida
ABA #063000021
Account #GL 145916
Attention: Cindy Petry
100
<PAGE> 108
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ Adam J. Silver
-----------------------------------------
Name: ADAM J. SILVER
---------------------------------------
Title: ASSOCIATE
--------------------------------------
Lending Office:
60 Wall Street
New York, New York 10260-0060
Wire Transfer Instructions:
Morgan Guaranty Trust Company of New York
New York, New York
ABA #021000238
For Credit to: Loan Department
Account #999-99-090
Attention: Module 0002
Reference: Republic Industries, Inc.
101
<PAGE> 109
PNC BANK, KENTUCKY, INC.
By: /s/ James D. Neil
-----------------------------------------
Name: James D. Neil
---------------------------------------
Title: Vice President
--------------------------------------
Lending Office:
500 W. Jefferson Street
Louisville, Kentucky 40202
Wire Transfer Instructions:
PNC Bank, Kentucky, Inc.
500 W. Jefferson Street
Louisville, Kentucky 40202
ABA #083000108
Account #3000991434
Attention: Commercial Loan Operations
Reference: Republic Industries, Inc.
102
<PAGE> 110
BANK OF MONTREAL
By: /s/ Edward P. McGuire
-----------------------------------------
Name: EDWARD P. MCGUIRE
---------------------------------------
Title: DIRECTOR
--------------------------------------
Lending Office:
115 S. LaSalle, 13W
Chicago, Illinois 60603
Wire Transfer Instructions:
Harris Bank
115 S. LaSalle Street
Chicago, Illinois 60603
ABA #071000288
Account #124-856-6 N/O Bank of Montreal
Reference: Republic Industries, Inc.
103
<PAGE> 111
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ David Bouhl
-----------------------------------------
Name: DAVID BOUHL, F.V.P.
---------------------------------------
Title: HEAD OF CORPORATE BANKING CHICAGO
--------------------------------------
Lending Office:
555 E. Monroe Street
Suite 4700
Chicago, Illinois 60603
Wire Transfer Instructions:
Morgan Guaranty Trust Company
New York, New York
ABA #021-000-238
Reference: Republic Industries, Inc.
Account #630-00-205
Account Name: CNCA--Chicago Branch
Attention: James Barrett
104
<PAGE> 112
THE BANK OF NEW YORK
By: /s/ Alan F. Lyster, Jr.
-----------------------------------------
Name: ALAN F. LYSTER, JR.
---------------------------------------
Title: VICE PRESIENT
--------------------------------------
Lending Office:
One Wall Street, 22nd Floor
New York, New York 10286
Wire Transfer Instructions:
The Bank of New York
101 Barclay Street
New York, New York 10007
ABA #021000018
Commercial Loan Servicing Department
GLA #111556
Reference: Republic Industries, Inc.
105
<PAGE> 113
BARNETT BANK, N.A.
By: /s/ Michael Cooney
-----------------------------------------
Name: Michael Cooney
---------------------------------------
Title: Vice President
--------------------------------------
Lending Office:
One E. Broward Boulevard, 4th Floor
Ft. Lauderdale, Florida 33301
Wire Transfer Instructions:
Barnett Bank, N.A.
9000 Southside Boulevard, Bldg. 600
Jacksonville, Florida 32232-5264
ABA #063000047
Account #00900052234
Reference: Republic Industries, Inc.
Attention: Commercial Loan Accounting
106
<PAGE> 114
COMMERZBANK AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By: /s/ Andreas Bremer /s/ Mary Smith
-----------------------------------------
Name: Andreas Bremer Mary Smith
---------------------------------------
Title: SVP & Manager AVB
--------------------------------------
Lending Office:
1230 Peachtree Street, N.E.
Suite 3500
Atlanta, Georgia 30309
Wire Transfer Instructions:
Commerzbank AG
Two World Financial Center
New York, New York 10281-1050
ABA #026008044
For Credit to: Commerzbank AG, Atlanta Agency
Reference: Republic Industries, Inc.
Account #153-2000339
Trust Account #153-2000321
107
<PAGE> 115
BANCA MONTE DEI PASCHI DI SIENA, SpA
By: /s/ G. Natalicchi
-----------------------------------------
Name: G. Natalicchi
---------------------------------------
Title: Senior Vice President
--------------------------------------
By: /s/ Brian R. Landy
-----------------------------------------
Name: Brian R. Landy
---------------------------------------
Title: Vice President
--------------------------------------
Lending Office:
245 Park Avenue, 26th Floor
New York, New York 10167
Wire Transfer Instruction:
Chase Manhattan Bank
--------------------------------------------
New York , New York
--------- ---------
ABA #021000021
---------
Attention:
----------------------------------
Reference:
----------------------------------
Credit to account of Banca Monte dei Paschi
di Siena, SpA, New York Branch
Account no. 544-7-78865
108
<PAGE> 116
THE SUMITOMO BANK, LIMITED
By: /s/ Masayuki Fukushima
------------------------------------------
Name: Masayuki Fukushima
Title: Joint General Manager
Lending Office:
277 Park Avenue
New York, New York 10172
Wire Transfer Instructions:
Morgan Guaranty Trust Company of New York
Account #631-28-256 (The Sumitomo Bank, Ltd.)
Routing Transit/ABA #021000238
Attention: Loan Operations
Reference: Republic Industries, Inc.
109
<PAGE> 117
WESTDEUTSCHE LANDESBANK GIROZENTRALE
By: /s/ A. S. Bovy
-----------------------------------------
Name: A. S. Bovy
---------------------------------------
Title: XXXXXXXXXXXXXX
--------------------------------------
By: /s/ Savatore Battinelli
-----------------------------------------
Name: Savatore Battinelli
---------------------------------------
Title: Vice President Credit Department
--------------------------------------
Lending Office:
1211 Avenue of the Americas
New York, New York 10036
Wire Transfer Instructions:
Chase Manhattan Bank
Chase Manhattan Plaza New
York, New York ABA
#021000021 WestLB New York
Branch Account #9201060663
Reference: AGCO Corp.
110
<PAGE> 1
Exhibit 4.23
EXECUTION COPY
FOURTH AMENDMENT TO
LOAN AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AGREEMENT (this "AMENDMENT") is
dated as of March 28, 1997 among ALAMO RENT-A-CAR, INC., a Florida corporation
("ALAMO"), and ALAMO FUNDING, L.P., a limited partnership organized under the
laws of the State of New York (the "LENDER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Alamo and the Lender are parties to that certain
Loan Agreement dated as of June 20, 1994 (as amended, restated or modified from
time to time, the "LOAN AGREEMENT");
WHEREAS, Alamo and the Lender are parties to that certain
Amendment to Loan Agreement, dated as of December 29, 1994;
WHEREAS, Alamo and the Lender are parties to that certain
Second Amendment to Loan Agreement, dated as of June 11, 1996;
WHEREAS, Alamo and the Lender are parties to that certain
Third Amendment to Loan Agreement, dated as of November 25, 1996;
WHEREAS, Alamo and the Lender desire to amend certain
provisions of the Loan Agreement;
NOW, THEREFORE, the parties to this Amendment hereby agree as
follows:
Section 01. DEFINED TERMS. All capitalized terms used herein
(including in the preamble and in the recitals) and not otherwise defined
herein shall have the meanings set forth for such terms in the Loan Agreement.
Section 02. AMENDMENTS TO THE LOAN AGREEMENT.
(a) AMENDMENT TO SECTION 1.1. The following term is
added to Section 1.1:
<PAGE> 2
"REPUBLIC GUARANTY" has the meaning
assigned thereto in the Definitions List
annexed to the Liquidity Loan Agreement.
(b) AMENDMENT TO SECTION 9.8(i). Section 9.8(i) of
the Loan Agreement is hereby amended to read in its
entirety as follows:
"(i) QUARTERLY FINANCIAL STATEMENTS AND
INFORMATION. In the event the Republic
Guaranty is terminated in accordance with
Section 13 thereof, within sixty (60) days
after the last day of each of the first
three calendar quarters in each fiscal year
of Alamo, the balance sheet of Alamo as at
the end of such quarter, and the related
statement of income, retained earnings, and
cash flows of Alamo, and a reconciliation
of stockholders' equity with respect to
Alamo for such quarter and for the elapsed
portion of the year ended with the last day
of such quarter, which shall be in
comparative form with respect to the
financial results of Alamo for the
corresponding calendar quarter of the
preceding year, and which shall be
certified by the president, chief financial
officer, the treasurer or the comptroller
of Alamo, to be, in his or her opinion,
complete and correct in all material
respects and to present fairly, in
accordance with generally accepted
accounting principles consistently applied,
the financial position of Alamo, as at the
end of such period and the results of
operations for such period, and for the
elapsed portion of the year ended with the
last day of such period, subject only to
the normal year-end adjustments, and which
shall be accompanied by a certificate of
Arthur Andersen LLP, or another "Big Six"
accounting firm, stating that such
accountants have reviewed such financial
statements."
(c) AMENDMENT TO SECTION 9.8(ii). Section 9.8(ii) of
the Loan Agreement is hereby amended to read in its
entirety as follows:
"(ii) ANNUAL FINANCIAL STATEMENTS AND
INFORMATION; CERTIFICATE OF NO DEFAULT.
In the event the Republic Guaranty is
terminated in accordance with Section 13
thereof, within ninety (90) days after the
end of each
-2-
<PAGE> 3
calendar year, the audited balance sheet of
Alamo, as at the end of such fiscal year,
and the related audited statements of
income, retained earnings and cash flows of
Alamo, and a reconciliation of
stockholders' equity with respect to Alamo
for such fiscal year, which financial
statements shall set forth in comparative
form such figures as at the end of and for
the previous fiscal year, and shall be
accompanied by an unqualified opinion of
Arthur Andersen LLP or another "Big Six"
accounting firm, together with a statement
of such accountants certifying (i) that no
default or Loan Event of Default was
detected during the examination of Alamo,
and (ii) that such accountants have
authorized Alamo to deliver such financial
statements and opinion thereon to the Agent
and the Lender pursuant to this Agreement."
(d) AMENDMENT TO ARTICLE XII. Article XII of the Loan
Agreement is hereby amended by adding the following new Section 12.1.6
immediately following Section 12.1.5:
"SECTION 12.1.6. DEFAULT UNDER THE REPUBLIC
GUARANTY AND/OR OTHER AGREEMENTS OR
COVENANTS. Default in the payment when due
of any payments required under the Republic
Guaranty, and the continuance thereof for
two (2) Business Days after the occurrence
thereof or the default in the performance
of any other agreement or covenant
(financial or otherwise) in the Republic
Guaranty, and the continuance thereof for
thirty (30) days after written notice
thereof from the Lender."
Section 03. CONDITIONS OF EFFECTIVENESS. The following
constitute conditions precedent to the effectiveness of this Amendment:
(a) The Lender shall have received written confirmation from
the Rating Agencies that this Amendment will not result in the
downgrading or withdrawal of the then current ratings of the
Commercial Paper Notes by any Rating Agency;
(b) Each Liquidity Lender and the Credit Enhancer shall have
delivered written consent to this Amendment evidenced by their
execution of ANNEX A to the Third
-3-
<PAGE> 4
Amendment to the Liquidity Loan Agreement, dated as of March
__, 1997 (the "CONSENT");
(c) Execution and delivery of this Amendment by the
Lender and Alamo;
(d) The Lender and Alamo shall have delivered prior written
notice of this Amendment to the Rating Agencies, the Depositary, the
Agent, the Liquidity Agent and each Dealer;
(e) The Lender and Alamo shall have delivered fully executed
copies of this Amendment to the Rating Agencies, the Depositary, the
Agent, the Liquidity Agent and each Dealer;
(f) The Lender shall have received from Alamo (i) a copy of
the resolutions of its Board of Directors, certified as of the date
hereof by the Secretary thereof, authorizing the execution, delivery
and performance of this Amendment and (ii) an incumbency certificate
from the Secretary thereof with respect to its officers, agents or
other representatives authorized to execute this Amendment; and
(g) The Lender shall have received an Opinion of Counsel to
Alamo to the effect that this Amendment has been duly authorized,
executed and delivered and is the legal, valid and binding obligation
of Alamo, enforceable against it in accordance with its terms, subject
to the exceptions set forth therein.
Section 04. CONTINUATION OF REPRESENTATIONS AND WARRANTIES.
Alamo represents and warrants to the Lender as to itself and as to each
Borrower, that the representations and warranties in Article VIII of the Loan
Agreement, as amended by this Amendment, are true and correct on and as of the
date hereof with the same effect as if made on and as of the date hereof
(except to the extent such representations and warranties expressly refer to an
earlier date, in which case they shall be true and correct as of such earlier
date).
Section 05. REFERENCE TO AND EFFECT ON THE RELATED DOCUMENTS;
RATIFICATION.
(a) Upon the effectiveness hereof, on and after the date
hereof each reference in the Related Documents and any other document
to the "Loan Agreement" or words of like import referring to the Loan
Agreement shall mean and be a reference to the Loan Agreement as
amended hereby and each reference to any of the defined terms referred
to in this Amendment shall mean and refer to such defined terms as
amended hereby.
-4-
<PAGE> 5
(b) The Loan Agreement, as amended above, is and shall
continue to be in full force and effect and is hereby ratified and
confirmed in all respects.
Section 06. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument. Delivery of an executed counterpart of a signature
page to this Amendment by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Amendment.
Section 07. GOVERNING LAW. THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
ALAMO RENT-A-CAR, INC.
By: /s/ Dana Egan Sullenberger
------------------------------
Name: Dana Egan Sullenberger
Title: Authorized Signatory
ALAMO FUNDING, L.P.
By: AFL FLEET FUNDING, INC.,
its General Partner
By: /s/ Richard L. Taiano
------------------------------
Name: Richard L. Taiano
Title: Vice President
<PAGE> 1
Exhibit 4.24
EXECUTION COPY
THIRD AMENDMENT TO
LIQUIDITY LOAN AGREEMENT
------------------------
THIS THIRD AMENDMENT TO LIQUIDITY LOAN AGREEMENT (this
"AMENDMENT") is dated as of March 28, 1997 among ALAMO FUNDING, L.P., a limited
partnership organized under the laws of the State of New York ("AFL"), AFL
FLEET FUNDING, INC., a New York corporation (the "GENERAL PARTNER"), and
CITIBANK, N.A., as the Liquidity Agent for the Liquidity Lenders (the
"LIQUIDITY AGENT").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, AFL, the General Partner, the Liquidity Agent and
the Liquidity Lenders are parties to that certain Liquidity Loan Agreement
dated as of June 20, 1994 (as amended, restated, or modified from time to time,
the "LIQUIDITY LOAN AGREEMENT");
WHEREAS, AFL, the General Partner, the Liquidity Agent and
the Liquidity Lenders are parties to that certain Amendment to the Liquidity
Loan Agreement dated as of June 11, 1996;
WHEREAS, AFL, the General Partner, the Liquidity Agent and
the Liquidity Lenders are parties to that certain Second Amendment to the
Liquidity Loan Agreement dated as of November 25, 1996;
WHEREAS, AFL, the General Partner, the Liquidity Agent and
the Liquidity Lenders desire to amend certain provisions of the Liquidity Loan
Agreement;
NOW, THEREFORE, the parties to this Amendment hereby agree as
follows:
Section 1. DEFINED TERMS. All capitalized terms used herein
(including in the preamble and in the recitals) and not otherwise defined
herein shall have the meanings set forth for such terms in the Definitions List
dated as of June 20, 1994 and annexed to the Liquidity Loan Agreement as ANNEX
A, as such Definitions List may be further amended, supplemented, restated or
otherwise modified from time to time.
-1-
<PAGE> 2
Section 2. AMENDMENTS TO THE LIQUIDITY LOAN AGREEMENT.
(a) AMENDMENT TO SECTION 1.1. ANNEX A to the
Liquidity Loan Agreement as referenced in Section 1.1
thereto is hereby amended as follows:
(1) The following term is hereby added:
"REPUBLIC GUARANTY" means the Guaranty dated
March 27, 1997 by Republic Industries, Inc.
in favor of AFL, as amended, supplemented or
otherwise modified from time to time in
accordance with the terms thereof."
(2) The definition of "SCHEDULED LIQUIDITY
COMMITMENT TERMINATION DATE" is hereby deleted in its
entirety and replaced with the following:
"SCHEDULED LIQUIDITY COMMITMENT TERMINATION
DATE" means, for any Liquidity Lender, the
date that is 364 days from the date of the
Third Amendment to Liquidity Loan
Agreement, as such date may be extended
from time to time."
(3) The definition of "RELATED DOCUMENTS" is hereby
amended by adding the phrase "the Republic Guaranty,"
immediately following the phrase "the Loan Agreement,".
(b) AMENDMENT TO SECTION 8.1.1(a). Section 8.1.1(a)
of the Liquidity Loan Agreement is hereby amended to read in
its entirety as follows:
"(a) In the event the Republic Guaranty is
terminated in accordance with Section 13
thereof, as soon as available and in any
event within 90 days after the end of each
fiscal year of Alamo, a copy of the
consolidated and consolidating balance
sheets of Alamo and its Subsidiaries as at
the end of such fiscal year, together with
the related statements of earnings,
stockholders' equity and cash flows for
such fiscal year, prepared in reasonable
detail and in accordance with GAAP,
certified without a going concern or like
qualification by Arthur Andersen LLP & Co.
(or such other independent certified public
accountants of recognized national standing
as shall be selected by Alamo);"
-2-
<PAGE> 3
(c) AMENDMENT TO SECTION 8.1.1(b). Section 8.1.1(b)
of the Liquidity Loan Agreement is hereby amended to read in
its entirety as follows:
"(b) In the event the Republic Guaranty is
terminated in accordance with Section 13
thereof, as soon as available, but in any
event within 60 days after the end of each
fiscal quarter (except the fourth fiscal
quarter) of Alamo, copies of the unaudited
consolidated and consolidating balance
sheets of Alamo and its Subsidiaries as at
the end of such fiscal quarter and the
related unaudited statements of earnings,
stockholders' equity and cash flows for the
portion of the fiscal year through such
fiscal quarter and as to the statements of
earnings for such fiscal quarter, in each
case setting forth in comparative form the
figures for the corresponding periods of
the previous fiscal year, prepared in
reasonable detail and in accordance with
GAAP and certified by the chief financial
or accounting officer of Alamo as
presenting fairly the financial condition
and results of operations of Alamo (subject
to normal year-end adjustments);"
(d) AMENDMENT TO SECTION 8.1.1(d). Section 8.1.1(d)
of the Liquidity Loan Agreement is hereby amended to read in
its entirety as follows:
"(d) In the event the Republic Guaranty is
terminated in accordance with Section 13
thereof, at the time of delivery of the
items described in clauses (a) and (b)
above, a consolidating balance sheet and
statement of earnings in respect of Alamo
and its Subsidiaries as of such date or for
the year to date period ending on such
date;"
Section 3. CONDITIONS OF EFFECTIVENESS. The following
constitute conditions precedent to the effectiveness of this
Amendment:
(a) Execution and delivery of this Amendment by AFL,
the General Partner and the Liquidity Agent;
(b) The Liquidity Agent and AFL shall have received as of the
date hereof a copy of the written confirmation delivered to AFL by
each of S&P and Moody's to the effect
-3-
<PAGE> 4
that this Amendment will not result in the downgrading or
withdrawal of the then current ratings of the Commercial
Paper Notes;
(c) Each Liquidity Lender and the Credit Enhancer shall each
have delivered written consent to this Amendment evidenced by their
execution of ANNEX A hereto;
(d) AFL shall have delivered prior written notice of this
Amendment to the Rating Agencies, the Depositary, the Agent, the
Liquidity Agent and each Dealer;
(e) AFL shall have delivered a fully executed copy of this
Amendment to the Rating Agencies, the Depositary, the Agent, the
Liquidity Agent and each Dealer;
(f) The Liquidity Agent shall have received (i) from AFL
evidence that all necessary partnership action has been taken to
authorize the execution, delivery and performance of this Amendment
and (ii) from the General Partner (x) a copy of the resolutions of its
Board of Directors, certified as of the date hereof by the Secretary
thereof, authorizing the execution, delivery and performance of this
Amendment and (y) an incumbency certificate thereof with respect to
its officers, agents or other representatives authorized to execute
this Amendment; and
(g) The Liquidity Agent shall have received an Opinion of
Counsel to AFL to the effect that this Amendment has been duly
authorized, executed and delivered and is the legal, valid and binding
obligation of AFL, enforceable against it in accordance with its
terms, subject to the exceptions set forth therein.
Section 4. CONTINUATION OF REPRESENTATIONS AND WARRANTIES.
AFL represents and warrants to the Liquidity Agent and each Liquidity Lender
that the representations and warranties in Article VII of the Liquidity Loan
Agreement, as amended by this Amendment, are true and correct on and as of the
date hereof with the same effect as if made on and as of the date hereof
(except to the extent such representations and warranties expressly refer to an
earlier date, in which case they shall be true and correct as of such earlier
date).
Section 5. REFERENCE TO AND EFFECT ON THE RELATED
DOCUMENTS; RATIFICATION.
(a) Upon the effectiveness hereof, on and after the date
hereof each reference in the Related Documents and any other document
to the "Liquidity Loan Agreement" or words of like import referring to
the Liquidity Loan Agreement shall
-4-
<PAGE> 5
mean and be a reference to the Liquidity Loan Agreement as amended
hereby and each reference to any of the defined terms referred to in
this Amendment shall mean and refer to such defined terms as amended
hereby.
(b) The Liquidity Loan Agreement, as amended above, is and
shall continue to be in full force and effect and is hereby ratified and
confirmed in all respects.
Section 6. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument. Delivery of an executed counterpart of a signature
page to this Amendment by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Amendment.
Section 7. GOVERNING LAW. THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
ALAMO FUNDING, L.P.
By: AFL FLEET FUNDING, INC.,
its General Partner
By: /s/ Richard L. Taiano
--------------------------------
Name: Richard L. Taiano
Title: Vice President
AFL FLEET FUNDING, INC.
By: /s/ Richard L. Taiano
--------------------------------
Name: Richard L. Taiano
Title: Vice President
CITIBANK, N.A., as Liquidity Agent
By: /s/ Jenny Cheng
--------------------------------
Name: Jenny Cheng
Title: Assistant Vice President
<PAGE> 7
ANNEX A
CONSENT OF LIQUIDITY LENDERS AND CREDIT ENHANCER TO
THIRD AMENDMENT TO LIQUIDITY LOAN AGREEMENT,
THIRD AMENDMENT TO LETTER OF CREDIT REIMBURSEMENT
AGREEMENT, AND FOURTH AMENDMENT TO LOAN AGREEMENT
The undersigned, as Liquidity Lenders under the Liquidity
Loan Agreement dated as of June 20, 1994 among Alamo Funding, L.P., AFL Fleet
Funding, Inc., certain financial institutions party thereto and Citibank, N.A.,
as Liquidity Agent, as amended from time to time prior to the date hereof (the
"LIQUIDITY AGREEMENT"), and as Credit Enhancer under the Letter of Credit
Reimbursement Agreement, dated as of June 20, 1994, among Alamo Rent-A-Car,
Inc., AFL Fleet Funding, Inc., Alamo Funding, L.P. and Credit Enhancer, as
amended from time to time prior to the date hereof (the "L/C AGREEMENT"),
hereby consent to the execution and delivery by the parties thereto of (i) the
Fourth Amendment, dated March 28, 1997, to the Loan Agreement, dated as of June
20, 1994, between Alamo Rent-A-Car, Inc. and Alamo Funding, L.P., as such Loan
Agreement has been amended from time to time prior to the date hereof (the
"LOAN AGREEMENT"), (ii) the Third Amendment to the L/C Agreement, dated as of
March 28, 1997 and (iii) the Third Amendment to the Liquidity Loan Agreement,
dated as of March 28, 1997.
<PAGE> 8
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March __, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$15,000,000 BANK BRUSSELS LAMBERT,
NEW YORK BRANCH
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
<PAGE> 9
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$50,000,000 BANK OF MONTREAL
By: /s/ Edward P. McGuire
------------------------
Name: Edward P. McGuire
Title: Director
<PAGE> 10
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$50,000,000 THE BANK OF NEW YORK
By: /s/ David C. Siegal
-------------------------------
Name: David C. Siegal
Title: Assistant Vice President
<PAGE> 11
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$200,000,000 THE BANK OF TOKYO-MITSUBISHI,
LTD., NEW YORK BRANCH
By: /s/
-----------------------------
Name:
Title:
<PAGE> 12
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$30,000,000 BAYERISCHE HYPOTHEKEN-UND
WECHSEL-BANK
AKTIENGESELLSCHAFT,
NEW YORK BRANCH
By: /s/ Ron Vogel
--------------------------
Name: Ron Vogel
Title:
By: /s/ R.G. Pankuch
--------------------------
Name: R.G. Pankuch
Title: FVP
<PAGE> 13
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$25,000,000 BOATMEN'S NATIONAL BANK
OF ST. LOUIS
By: /s/ Richard M. Starke
--------------------------
Name: Richard M. Starke
Title: Vice President
<PAGE> 14
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$421,000,000 CITIBANK, N.A.
By: /s/ John Scheng
-----------------------
Name: John Scheng
Title: Attorney-in-fact
<PAGE> 15
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$50,000,000 COMMERZBANK AG, ATLANTA AGENCY
By: /s/ Andreas Bremer
-------------------------------
Name: Andreas Bremer
Title: SVP & Manager
By: /s/ Mary Smith
-------------------------------
Name: Mary Smith
Title: AVP
<PAGE> 16
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$30,000,000 COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By: /s/ Angela R. Reilly
-------------------------
Name: Angela R. Reilly
Title: Vice President
By: /s/
-------------------------
Name:
Title: Deputy General Manager
<PAGE> 17
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March __, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$50,000,000 DRESDNER BANK AG NEW YORK BRANCH
AND GRAND CAYMAN BRANCH
By: ________________________
Name:
Title:
By: ________________________
Name:
Title:
<PAGE> 18
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March __, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$50,000,000 FIRST UNION NATIONAL BANK
OF FLORIDA
By: ________________________
Name:
Title:
<PAGE> 19
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$10,000,000 KREDIETBANK N.V.
By: /s/
----------------------------
Name:
Title:
<PAGE> 20
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$50,000,000 ING (U.S.) CAPITAL CORPORATION
By: /s/ Michael G. Plunkett
------------------------------
Name: Michael G. Plunkett
Title: Vice President
<PAGE> 21
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$50,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Jeffrey Hwang
------------------------
Name: Jeffrey Hwang
Title: Vice President
<PAGE> 22
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
LIQUIDITY LOAN COMMITMENT LIQUIDITY LENDER
- ------------------------- ----------------
$15,000,000 SOCIETE GENERALE
By: /s/ Ralph Saheb
--------------------------
Name: Ralph Saheb
Title: Vice President, Manager
<PAGE> 23
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
CREDIT SUISSE
NEW YORK BRANCH,
as Credit Enhancer
By: /s/ Roger W. Saylor
--------------------------
Name: Roger W. Saylor
Title: Associate
By: /s/ R.N. Finney
--------------------------
Name: R.N. Finney
Title: Managing Director
<PAGE> 24
IN WITNESS WHEREOF, the undersigned have caused this Consent
to be executed and delivered as of March 28, 1997 by their respective officers
thereunto duly authorized.
$271,000,000 NATIONSBANK, N.A. (SOUTH)
By: /s/ Richard M. Starke
-----------------------------
Name: Richard M. Starke
Title: Vice President
<PAGE> 1
Exhibit 4.25
EXECUTION COPY
THIRD AMENDMENT TO
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
----------------------------------------
THIS THIRD AMENDMENT TO LETTER OF CREDIT REIMBURSEMENT
AGREEMENT (this "AMENDMENT") is dated as of March 28, 1997 among ALAMO
RENT-A-CAR, INC., a Florida corporation ("ALAMO"), ALAMO FUNDING, L.P., a New
York limited partnership ("AFL"), AFL FLEET FUNDING, INC., a New York
corporation (the "GENERAL PARTNER"), and CREDIT SUISSE, a Swiss banking
corporation acting through its New York Branch (the "CREDIT ENHANCER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Alamo, AFL, the General Partner and the Credit
Enhancer are parties to that certain Letter of Credit Reimbursement Agreement
dated as of June 20, 1994 (as amended, restated or modified from time to time,
the "LETTER OF CREDIT REIMBURSEMENT AGREEMENT");
WHEREAS, Alamo, AFL, the General Partner and the Credit
Enhancer are parties to that certain Amendment to the Letter of Credit
Reimbursement Agreement, dated as of December 29, 1994;
WHEREAS, Alamo, AFL, the General Partner and the Credit
Enhancer are parties to that certain Second Amendment to the Letter of Credit
Reimbursement Agreement, dated as of November 25, 1996;
WHEREAS, Alamo, AFL, the General Partner and the Credit
Enhancer desire to amend certain provisions of the Letter of Credit
Reimbursement Agreement;
NOW, THEREFORE, the parties to this Amendment hereby agree as
follows:
Section 01. DEFINED TERMS. As used in this Amendment and
unless the context requires a different meaning, capitalized terms used but not
defined herein shall have the meanings assigned to such terms in (i) the
Definitions List, dated as of June 20, 1994, attached as ANNEX A to the
Liquidity Loan Agreement dated as of June 20, 1994, as such ANNEX A may be
amended or modified and (ii) the Letter of Credit Reimbursement Agreement.
<PAGE> 2
Section 02. AMENDMENTS TO THE LETTER OF CREDIT
REIMBURSEMENT AGREEMENT.
(a) AMENDMENT TO SECTION 3.2(h)(i). Section 3.2(h)(i) of the
Letter of Credit Reimbursement Agreement is hereby amended to read in
its entirety as follows:
"(i) QUARTERLY FINANCIAL STATEMENTS AND INFORMATION.
In the event the Republic Guaranty is terminated in
accordance with Section 13 thereof, within sixty
(60) days after the last day of each of the first
three calendar quarters in each fiscal year of
Alamo, the balance sheet of Alamo as at the end of
such quarter, and the related statements of income,
retained earnings, and cash flows of Alamo, and a
reconciliation of stockholders' equity with respect
to Alamo for such quarter and for the elapsed
portion of the year ended with the last day of such
quarter, which shall be in comparative form with
respect to the financial results of Alamo for the
corresponding calendar quarter of the preceding
year, and which shall be certified by the president,
chief financial officer, the treasurer or the
comptroller of Alamo, to be, in his or her opinion,
complete and correct in all material respects and to
present fairly, in accordance with generally
accepted accounting principles consistently applied,
the financial position of Alamo, as at the end of
such period and the results of operations for such
period, and for the elapsed portion of the year
ended with the last day of such period, subject only
to normal year-end adjustments, and which shall be
accompanied by a report of Arthur Andersen LLP, or
another "Big Six" accounting firm, stating that such
accountants have reviewed such financial
statements."
(b) AMENDMENT TO SECTION 3.2(h)(ii). Section 3.2(h)(ii) of
the Letter of Credit Reimbursement Agreement is hereby amended to read
in its entirety as follows:
"(ii) ANNUAL FINANCIAL STATEMENTS AND INFORMATION;
CERTIFICATE OF NO DEFAULT. In the event the Republic
Guaranty is terminated in accordance with Section 13
thereof, within ninety (90) days after the end of
each calendar year, the audited balance sheet of
Alamo, as at the end of such fiscal year, and the
related audited statements of income, retained
earnings and cash flows of Alamo, and a
-2-
<PAGE> 3
reconciliation of stockholders' equity with respect
to Alamo for such fiscal year, which financial
statements shall set forth in comparative form such
figures as at the end of and for the previous fiscal
year, and shall be accompanied by an unqualified
opinion of Arthur Andersen LLP or another "Big Six"
accounting firm, together with a statement of such
accountants certifying (A) that no Event of Default
was detected during the examination of Alamo and (B)
that such accountants have authorized Alamo to
deliver such financial statements and opinion
thereon to the Credit Enhancer pursuant to this
Agreement."
(c) AMENDMENT TO SECTION 3.2(h)(iii). Section
3.2(h)(iii) of the Letter of Credit Reimbursement Agreement is hereby
amended by deleting the section in its entirety and not replacing it.
Section 03. CONDITIONS OF EFFECTIVENESS. The
following constitute conditions precedent to the effectiveness of
this Amendment:
(a) Execution and delivery of this Amendment by Alamo,
AFL, the General Partner and the Credit Enhancer;
(b) AFL shall have received as of the date hereof a copy of
the written confirmation delivered to AFL by each of S&P and Moody's
to the effect that this Amendment will not result in the downgrading
or withdrawal of the then current ratings of the Commercial Paper
Notes;
(c) Each Liquidity Lender shall have delivered written
consent to this Amendment evidenced by their execution of ANNEX A to
the Third Amendment to the Liquidity Loan Agreement, dated March 28,
1997;
(d) AFL shall have delivered prior written notice of this
Amendment to the Rating Agencies, the Depositary, the Agent, the
Liquidity Agent and each Dealer;
(e) AFL shall have delivered a fully executed copy of this
Amendment to the Rating Agencies, the Depositary, the Agent, the
Liquidity Agent and each Dealer and shall have delivered to each
Dealer a revised Private Placement Memorandum (as such term is defined
in the Dealer Agreement) which reflects this Amendment;
(f) AFL shall have received from Alamo (i) a copy of
the resolutions of its Board of Directors, certified as of
-3-
<PAGE> 4
the date hereof by the Secretary thereof, authorizing the execution,
delivery and performance of this Amendment and (ii) an incumbency
certificate from the Secretary thereof with respect to its officers,
agents or other representatives authorized to execute this Amendment;
and
(g) AFL shall have received an Opinion of Counsel to Alamo to
the effect that this Amendment has been duly authorized, executed and
delivered and is the legal, valid and binding obligation of Alamo,
enforceable against it in accordance with its terms, subject to the
exceptions set forth therein.
Section 04. CONTINUATION OF REPRESENTATIONS AND WARRANTIES.
Alamo represents and warrants to the Credit Enhancer that the representations
and warranties in Article III of the Letter of Credit Reimbursement Agreement,
as amended by this Amendment, are true and correct on and as of the date hereof
with the same effect as if made on and as of the date hereof (except to the
extent such representations and warranties expressly refer to an earlier date,
in which case they shall be true and correct as of such earlier date).
Section 05. REFERENCE TO AND EFFECT ON THE RELATED
DOCUMENTS; RATIFICATION.
(a) Upon the effectiveness hereof, on and after the date
hereof each reference in the Related Documents and any other document
to the "Letter of Credit Reimbursement Agreement" or words of like
import referring to the Letter of Credit Reimbursement Agreement shall
mean and be a reference to the Letter of Credit Reimbursement
Agreement as amended hereby and each reference to any of the defined
terms referred to in this Amendment shall mean and refer to such
defined terms as amended hereby.
(b) The Letter of Credit Reimbursement Agreement, as amended
above, is and shall continue to be in full force and effect and is
hereby ratified and confirmed in all respects.
Section 06. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument. Delivery of an executed counterpart of a signature
page to this Amendment by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Amendment.
-4-
<PAGE> 5
Section 07. GOVERNING LAW. THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
-5-
<PAGE> 6
IN WITNESS WHEREOF, Alamo, AFL, the General Partner and the Credit Enhancer
have caused this Amendment to be duly executed by their duly authorized
officers, as of the day and year first above written.
ALAMO RENT-A-CAR, INC.
By: /s/ Dana Egan Sullenberger
------------------------------
Name: Dana Egan Sullenberger
Title: Authorized Signatory
ALAMO FUNDING, L.P.
By: AFL FLEET FUNDING, INC.,
its General Partner
By: /s/ Richard L. Taiano
----------------------------
Name: Richard L. Taiano
Title: Vice President
AFL FLEET FUNDING, INC.
By: /s/ Richard L. Taiano
----------------------------
Name: Richard L. Taiano
Title: Vice President
CREDIT SUISSE
NEW YORK BRANCH,
the Credit Enhancer
By: /s/ Roger V. Saylor
----------------------------
Name: Roger V. Saylor
Title: Associate
By: /s/ R.N. Finney
----------------------------
Name: R.N. Finney
Title: Managing Director
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our reports included in this Form 8-K, into the previously
filed Registration Statements of Republic Industries, Inc. on Forms S-3
(Registration Nos. 33-61649, 33-62489, 33-63735, 33-65289, 333-01757,
333-04269, 333-08479, 333-18009, 333-20667 and 333-23415), Form S-4
(Registration No. 333-17915) and Forms S-8 (Registration Nos. 33-93742,
333-07623, 333-19453 and 333-20669).
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
June 10, 1997.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the previously filed
Registration Statements of Republic Industries, Inc. on Form S-3 (Nos.
33-61649, 33-62489, 33-63735, 33-65289, 333-01757, 333-04269, 333-08479,
333-18009, 333-20667 and 333-23415), Form S-4 (No. 333-17915), and Form S-8
(Nos. 33-93742, 333-07623, 333-19453 and 333-20669) of our report dated March
31, 1997, with respect to the combined financial statements of Grubb Automotive,
Inc., Jack Sherman Chevrolet, Inc., Lou Grubb Chevrolet, Inc., Lou Grubb Ford,
Inc., Lou Grubb Saturn, Inc., and Saturn of Tempe, Inc. as of and for the year
ended December 31, 1996 included in this Current Report on Form 8-K.
ERNST & YOUNG LLP
Phoenix, Arizona
June 10, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Shad Management Company and Consolidated Investees:
We consent to the incorporation by reference in the registration statements
(Nos. 33-61649, 33-62489, 33-63735, 33-65289, 333-01757, 333-04269, 333-08479,
333-18009, 333-20667 and 333-23415) on Form S-3, (No. 333-17915) on Form S-4 and
(Nos. 33-93742, 333-07623, 333-19453 and 333-20669) on Form S-8 of Republic
Industries, Inc. of our report dated February 12, 1997 (except as to note 7,
which is as of February 23, 1997) with respect to the consolidated balance sheet
of Shad Management Company and Consolidated Investees as of December 31, 1996,
and the related consolidated statements of operations, retained earnings and
cash flows for the period April 1, 1996 to December 31, 1996, which report
appears in the Form 8-K of Republic Industries, Inc. dated June 13, 1997.
KPMG PEAT MARWICK LLP
Jacksonville, Florida
June 13, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation of our report dated February 21, 1997 of our
audits of Bledsoe Dodge, Inc. as of and for the years ended December 31, 1996
and 1995 included in this Form 8-K, into the previously filed Registration
Statements of Republic Industries, Inc. on Form S-3 (Registration Nos. 33-61649,
33-62489, 33-63735, 33-65289, 333-01757, 333-04269, 333-08479, 333-18009,
333-20667 and 333-23415), Form S-4 (Registration No. 333-17915) and Forms S-8
(Registration Nos. 33-93742, 333-07623, 333-19453 and 333-20669).
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas,
June 10, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report in this Form 8-K into the previously filed
Registration Statements of Republic Industries, Inc. on Forms S-3 (Registration
Nos. 33-61649, 33-62489, 33-63735, 33-65289, 333-01757, 333-04269, 333-08479,
333-18009, 333-20667 and 333-23415), Form S-4 (Registration No. 333-17915) and
Forms S-8 (Registration Nos. 33-93742, 333-07623, 333-19453 and 333-20669).
COHEN & COMPANY
Cleveland, Ohio
June 10, 1997
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 8-K, into the previously
filed Registration Statements of Republic Industries, Inc. on Forms S-3
(Registration Nos. 33-61649, 33-62489, 33-63735, 33-65289, 333-01757,
333-04269, 333-08479, 333-18009, 333-20667 and 333-23415), Form S-4
(Registration No. 333-17915) and Forms S-8 (Registration Nos. 33-93742,
333-07623, 333-19453 and 333-20669).
BAILEY SAETVEIT & CO. P.C.
Englewood, Colorado
June 10, 1997
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 8-K, into the previously
filed Registration Statements of Republic Industries, Inc. on Forms S-3
(Registration Nos. 33-61649, 33-62489, 33-63735, 33-65289, 333-01757,
333-04269, 333-08479, 333-18009, 333-20667 and 333-23415), Form S-4
(Registration No. 333-17915) and Forms S-8 (Registration Nos. 33-93742,
333-07623, 333-19453 and 333-20669).
TURNER & VEDRENNE CPA
Dallas, Texas
June 10, 1997
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 8-K, into the previously
filed Registration Statements of Republic Industries, Inc. on Form S-3
(Registration Nos. 33-61649, 33-62489, 33-63735, 33-65289, 333-01757,
333-04269, 333-08479, 333-18009, 333-20667 and 333-23415), Form S-4
(Registration No. 333-17915) and Form S-8 (Registration Nos. 33-93742,
333-07623, 333-19453 and 333-20669).
EHRENKRANTZ, STERLING & CO. LLC
Roseland, NJ
June 10, 1997
<PAGE> 1
EXHIBIT 23.9
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 8-K, into the previously
filed Registration Statements of Republic Industries, Inc. on Forms S-3
(Registration No. 33-61649, 33-62489, 33-63735, 33-65289, 333-01757,
333-04269, 333-08479, 333-18009, 333-20667 and 333-23415), Form S-4
(Registration No. 333-17915) and Forms S-8 (Registration No. 33-93742,
333-07623, 333-19453 and 333-20669).
GEORGE B. JONES & CO., P.C.
Memphis, TN
June 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 345,600
<SECURITIES> 0
<RECEIVABLES> 438,700
<ALLOWANCES> 10,000
<INVENTORY> 178,700
<CURRENT-ASSETS> 4,021,600
<PP&E> 1,071,500
<DEPRECIATION> 281,500
<TOTAL-ASSETS> 5,040,800
<CURRENT-LIABILITIES> 3,818,700
<BONDS> 293,700
0
0
<COMMON> 2,500
<OTHER-SE> 715,300
<TOTAL-LIABILITY-AND-EQUITY> 5,040,800
<SALES> 1,000,300
<TOTAL-REVENUES> 3,386,900
<CGS> 872,300
<TOTAL-COSTS> 2,717,400
<OTHER-EXPENSES> 3,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,500
<INCOME-PRETAX> 56,000
<INCOME-TAX> 31,300
<INCOME-CONTINUING> 24,700
<DISCONTINUED> (25,100)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (400)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 299,500
<SECURITIES> 0
<RECEIVABLES> 551,700
<ALLOWANCES> 16,000
<INVENTORY> 185,400
<CURRENT-ASSETS> 4,913,100
<PP&E> 1,463,700
<DEPRECIATION> 398,700
<TOTAL-ASSETS> 6,370,300
<CURRENT-LIABILITIES> 3,660,000
<BONDS> 1,147,600
0
0
<COMMON> 3,000
<OTHER-SE> 1,349,000
<TOTAL-LIABILITY-AND-EQUITY> 6,370,300
<SALES> 1,410,500
<TOTAL-REVENUES> 4,764,100
<CGS> 1,269,900
<TOTAL-COSTS> 3,881,000
<OTHER-EXPENSES> 38,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,900
<INCOME-PRETAX> 42,000
<INCOME-TAX> 43,000
<INCOME-CONTINUING> (1,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (31,600)
<CHANGES> 0
<NET-INCOME> (32,600)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
<PAGE> 1
EXHIBIT 99
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) HISTORICAL FINANCIAL INFORMATION
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants........................ F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995 (Restated)... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 (Restated)............................. F-4
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1996, 1995 and 1994 (Restated)............................. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 (Restated)............................. F-6
Notes to Consolidated Financial Statements (Restated)..................... F-7
Supplemental Consolidated Balance Sheets as of March 31, 1997
(Unaudited) and December 31, 1996 and 1995.............................. F-28
Supplemental Consolidated Statements of Operations for the Three Months
Ended March 31, 1997 and 1996 (Unaudited) and for the Years Ended
December 31, 1996, 1995 and 1994........................................ F-29
Supplemental Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994............................ F-30
Supplemental Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996 (Unaudited) and for the Years Ended
December 31, 1996, 1995 and 1994........................................ F-31
Notes to Supplemental Consolidated Financial Statements................... F-32
AUTONATION INCORPORATED AND SUBSIDIARIES
Report of Independent Certified Public Accountants........................ F-53
Consolidated Balance Sheets as of December 29, 1996 and
December 31, 1995....................................................... F-54
Consolidated Statements of Operations for the 52-Week Period Ended
December 29, 1996 and for the Period from Inception (September 12,
1995) to December 31, 1995.............................................. F-55
Consolidated Statements of Stockholders' (Deficit) Equity for the 52-Week
Period Ended December 29, 1996 and for the Period from Inception
(September 12, 1995) to December 31, 1995............................... F-56
Consolidated Statements of Cash Flows for the 52-Week Period Ended
December 29, 1996 and for the Period from Inception (September 12, 1995)
to December 31, 1995.................................................... F-57
Notes to Consolidated Financial Statements................................ F-58
GRUBB AUTOMOTIVE
Report of Independent Auditors............................................ F-66
Combined Balance Sheets as of December 31, 1996 and 1995.................. F-67
Combined Statements of Income for the Years Ended December 31, 1996
and 1995................................................................ F-68
Combined Statements of Shareholders' Equity for the Years Ended
December 31, 1996 and 1995.............................................. F-69
Combined Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995.............................................. F-70
Notes to Combined Financial Statements.................................... F-71
SHAD MANAGEMENT COMPANY AND CONSOLIDATED INVESTEES
Independent Auditors' Report.............................................. F-85
Consolidated Balance Sheets as of March 31, 1997 (Unaudited) and
December 31, 1996....................................................... F-86
Consolidated Statements of Operations and Retained Earnings for the
Period from January 1, to March 31, 1997 and 1996 (Unaudited) and for
the Period from April 1, 1996 to December 31, 1996...................... F-88
Consolidated Statements of Cash Flows for the Period from January 1, to
March 31, 1997 and 1996 (Unaudited) and for the Period from April 1,
1996 to December 31, 1996............................................... F-89
Notes to Consolidated Financial Statements................................ F-91
BLEDSOE DODGE, INC.
Report of Independent Accountants......................................... F-97
Balance Sheets as of March 31, 1997 (Unaudited) and
December 31, 1996 and 1995.............................................. F-98
Statements of Operations for the Three Months Ended March 31, 1997
and 1996 (Unaudited) and for the Years Ended December 31, 1996
and 1995................................................................ F-99
Statements of Shareholders' Equity for the Years Ended December 31, 1996
and 1995................................................................ F-100
Statements of Cash Flows for the Three Months Ended March 31, 1997
and 1996 (Unaudited) and for the Years Ended December 31, 1996
and 1995................................................................ F-101
Notes to Financial Statements............................................. F-102
SPIRIT RENT-A-CAR, INC. AND SUBSIDIARY
Independent Auditors' Report.............................................. F-108
Consolidated Balance Sheets as of March 31, 1997 (Unaudited)
and December 31, 1996 and 1995.......................................... F-109
Consolidated Statements of Income for the Three Months Ended March 31,
1997 and 1996 (Unaudited) and for the Years Ended December 31, 1996
and 1995................................................................ F-110
Consolidated Statements of Shareholders' Equity for the Three Months Ended
March 31, 1997 (Unaudited) and for the Years Ended December 31, 1996
and 1995................................................................ F-111
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1997 and 1996 (Unaudited) and for the Years Ended
December 31, 1996 and 1995.............................................. F-112
Notes to the Consolidated Financial Statements............................ F-113
CHESROWN AUTOMOTIVE GROUP
Independent Auditors' Report.............................................. F-118
Balance Sheets as of December 31, 1996 and March 31, 1997 (Unaudited)..... F-119
Statements of Income and Accumulated Deficit for the Year Ended
December 31, 1996 and for the Three Months Ended March 31, 1997
and 1996 (Unaudited).................................................... F-120
Statements of Cash Flows for the Year Ended December 31, 1996 and for the
Three Months Ended March 31, 1997 and 1996 (Unaudited).................. F-121
Notes to Financial Statements............................................. F-122
BANKSTON AUTOMOTIVE GROUP
Report of Independent Auditors............................................ F-129
Combined Balance Sheet as of March 31, 1997............................... F-130
Combined Statement of Operations for the Year Ended March 31, 1997........ F-132
Combined Statement of Owners' Deficit for the Year Ended March 31, 1997... F-133
Combined Statement of Cash Flows for the Year Ended March 31, 1997........ F-134
Notes to Combined Financial Statements.................................... F-135
DITSCHMAN/FLEMINGTON FORD-LINCOLN-MERCURY, INC. AND RELATED ENTITIES
Report of Independent Public Accountants.................................. F-141
Combined Balance Sheets as of March 31, 1997 (Unaudited) and
December 31, 1996....................................................... F-142
Combined Statements of Income for the Three Months Ended March 31, 1997
and 1996 (Unaudited) and for the Year Ended December 31, 1996........... F-143
Combined Statements of Changes In Owners' Equity for the Three Months
Ended March 31, 1997 (Unaudited) and the Year Ended
December 31, 1996....................................................... F-144
Combined Statement of Cash Flows for the Three Months Ended March 31, 1997
and 1996 (Unaudited) and the Year Ended December 31, 1996............... F-145
Notes to Combined Financial Statements.................................... F-146
JOHN LANCE COMPANY
Independent Auditors' Report.............................................. F-156
Combined Balance Sheets as of March 31, 1997 (Unaudited) and
December 31, 1996....................................................... F-157
Combined Statements of Operations for the Three Month Periods Ended
March 31, 1997 and 1996 (Unaudited) and for the Year Ended
December 31, 1996....................................................... F-159
Combined Statement of Stockholders' and Members' Equity for the Three
Month Period Ended March 31, 1997 (Unaudited) and for the Year Ended
December 31, 1996........................................................ F-160
Combined Statements of Cash Flows for the Three Month Periods Ended
March 31, 1997 and 1996 (Unaudited) and for the Year Ended
December 31, 1996....................................................... F-161
Notes to Combined Financial Statements.................................... F-163
(b) PRO FORMA FINANCIAL INFORMATION
REPUBLIC INDUSTRIES, INC., AUTONATION INCORPORATED, ED MULLINAX, INC., GRUBB
AUTOMOTIVE, KENDALL AUTOMOTIVE GROUP, AAA DISPOSAL SERVICE, INC., YORK WASTE
DISPOSAL, INC., SHAD MANAGEMENT COMPANY, BANKSTON AUTOMOTIVE GROUP AND
JOHN LANCE COMPANY
Unaudited Condensed Consolidated Pro Forma Financial Statements........... F-169
Unaudited Condensed Consolidated Pro Forma Balance Sheet as of
March 31, 1997.......................................................... F-170
Unaudited Condensed Consolidated Pro Forma Statement of Operations for
the Three Months Ended March 31, 1997................................... F-171
Unaudited Condensed Consolidated Pro Forma Statement of Operations for
the Year Ended December 31, 1996........................................ F-172
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements.. F-173
(c) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (RESTATED).................................... F-174
</TABLE>
<PAGE> 2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Republic Industries, Inc.:
We have audited the accompanying consolidated balance sheets (restated) of
Republic Industries, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity and cash flows (restated) 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Republic
Industries, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
We have also made similar audits of the accompanying supplemental
consolidated balance sheets of Republic Industries, Inc. and subsidiaries as of
December 31, 1996 and 1995, and the related supplemental consolidated
statements of operations, shareholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996. The supplemental
consolidated statements give retroactive effect to the mergers with Flemington
Car and Truck Country and certain related dealerships on May 29, 1997, Spirit
Rent-A-Car, Inc. and subsidiary on May 9, 1997, Chesrown Automotive Group on
May 12, 1997 and Bledsoe Dodge, Inc. on May 8, 1997, which have been accounted
for under the pooling of interests method of accounting as described in Note 1.
These supplemental financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these supplemental
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 supplemental consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Republic Industries, Inc. and its subsidiaries as of December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1996, after giving retroactive
effect to the mergers with Flemington Car and Truck Country and certain related
dealerships, Spirit Rent-A-Car, Inc. and subsidiary, Chesrown Automotive Group
and Bledsoe Dodge, Inc. as described in Note 1, all in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
June 10, 1997.
F-2
<PAGE> 3
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (RESTATED)
AS OF DECEMBER 31,
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 299.5 $ 345.6
Receivables, net.......................................... 535.7 428.7
Revenue earning vehicles, net............................. 3,495.2 2,922.8
Advances to affiliate..................................... 247.5 --
Inventory................................................. 185.4 178.7
Other current assets...................................... 149.8 145.8
-------- --------
Total Current Assets.............................. 4,913.1 4,021.6
PROPERTY AND EQUIPMENT, NET................................. 1,065.0 790.0
INTANGIBLE ASSETS, NET...................................... 260.1 156.9
INVESTMENT IN SUBSCRIBER ACCOUNTS, NET...................... 92.4 42.2
OTHER ASSETS................................................ 39.7 30.1
-------- --------
$6,370.3 $5,040.8
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 270.7 $ 221.2
Accrued liabilities....................................... 200.0 158.4
Estimated liability insurance claims...................... 222.2 119.2
Revenue earning vehicle debt.............................. 2,688.8 3,040.7
Notes payable and current maturities of long-term debt.... 184.1 197.7
Other current liabilities................................. 94.2 81.5
-------- --------
Total Current Liabilities......................... 3,660.0 3,818.7
LONG-TERM DEBT, NET OF CURRENT MATURITIES................... 348.0 293.7
LONG-TERM REVENUE EARNING VEHICLE DEBT...................... 799.6 --
OTHER LIABILITIES........................................... 210.7 210.6
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; 5,000,000
shares authorized; none issued......................... -- --
Common stock, par value $.01 per share; 500,000,000 and
350,000,000 shares authorized, respectively;
296,829,054 and 248,013,006 shares issued and
outstanding, respectively.............................. 3.0 2.5
Additional paid-in capital................................ 1,343.0 629.1
Retained earnings......................................... 6.0 86.2
-------- --------
Total Shareholders' Equity........................ 1,352.0 717.8
-------- --------
$6,370.3 $5,040.8
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 4
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (RESTATED)
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
REVENUE:
Automotive rentals....................................... $2,567.1 $1,886.4 $1,222.3
Automotive sales......................................... 1,410.5 1,000.3 858.3
Solid waste services..................................... 701.2 450.4 317.9
Electronic security services............................. 85.3 49.8 41.9
-------- -------- --------
4,764.1 3,386.9 2,440.4
EXPENSES:
Automotive rental operating expenses..................... 2,061.4 1,517.0 910.3
Cost of automotive sales................................. 1,269.9 872.3 743.7
Cost of solid waste services............................. 512.4 307.5 213.6
Cost of electronic security services..................... 37.3 20.6 20.6
Selling, general and administrative...................... 795.2 602.8 467.4
Restructuring and merger expenses........................ 38.3 3.3 --
-------- -------- --------
OPERATING INCOME .......................................... 49.6 63.4 84.8
INTEREST INCOME............................................ 30.8 21.0 6.4
INTEREST EXPENSE........................................... (43.9) (33.5) (20.2)
OTHER INCOME (EXPENSE), NET................................ 5.5 5.1 (2.6)
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES AND EXTRAORDINARY CHARGE........................... 42.0 56.0 68.4
PROVISION FOR INCOME TAXES................................. 43.0 31.3 29.8
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY CHARGE..................................... (1.0) 24.7 38.6
EXTRAORDINARY CHARGE RELATED TO EARLY EXTINGUISHMENT OF
DEBT, NET OF BENEFIT FOR INCOME TAXES OF $15.0........... (31.6) -- --
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS................... (32.6) 24.7 38.6
-------- -------- --------
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations, net of income
taxes................................................. -- 5.4 (2.8)
Loss on disposal of segment, net of income tax benefit... -- (30.5) --
-------- -------- --------
Loss from discontinued operations........................ -- (25.1) (2.8)
-------- -------- --------
NET INCOME (LOSS).......................................... $ (32.6) $ (.4) $ 35.8
======== ======== ========
FULLY DILUTED INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Income (loss) from continuing operations before
extraordinary charge.................................. $ -- $ .11 $ .25
Extraordinary charge..................................... (.12) -- --
Discontinued operations.................................. -- (.12) (.02)
-------- -------- --------
Net income (loss)........................................ $ (.12) $ -- $ .23
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 5
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (RESTATED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
COMMON ADDITIONAL RETAINED
STOCK PAID-IN CAPITAL EARNINGS
------ --------------- ---------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993................................ $1.5 $ 230.3 $103.6
Sales of common stock..................................... .1 16.5 --
Distributions to former owners of pooled companies........ -- -- (25.7)
Other..................................................... -- 21.1 1.2
Net income................................................ -- -- 35.8
---- -------- ------
BALANCE AT DECEMBER 31, 1994................................ 1.6 267.9 114.9
Sales of common stock and warrants........................ .4 262.0 --
Stock issued in acquisitions.............................. .2 83.9 --
Exercise of stock options and warrants.................... -- 15.7 --
Reclassification of additional paid-in capital to effect
the spin-off........................................... -- (36.3) 36.3
Spin-off of Republic Environmental Systems, Inc........... -- -- (23.6)
Contributions to capital from former owners
of pooled companies.................................... -- 29.8 --
Distributions to former owners of pooled companies........ -- -- (41.0)
Other..................................................... .3 6.1 --
Net loss.................................................. -- -- (.4)
---- -------- ------
BALANCE AT DECEMBER 31, 1995................................ 2.5 629.1 86.2
Sales of common stock..................................... .2 550.7 --
Stock issued in acquisitions.............................. .2 101.2 --
Exercise of stock options and warrants.................... .1 43.7 --
Contributions to capital from former owners of pooled
companies.............................................. -- 21.9 --
Distributions to former owners of pooled companies........ -- -- (48.2)
Other..................................................... -- (3.6) .6
Net loss.................................................. -- -- (32.6)
---- -------- ------
BALANCE AT DECEMBER 31, 1996................................ $3.0 $1,343.0 $ 6.0
==== ======== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 6
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (RESTATED)
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING
OPERATIONS:
Income (loss) from continuing operations.............. $ (32.6) $ 24.7 $ 38.6
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by continuing
operations:
Restructuring, merger and other non-recurring
expenses......................................... 95.5 3.3 --
Loss on extinguishment of debt, net of income
taxes............................................ 31.6 -- --
Depreciation and amortization...................... 847.6 629.7 415.2
Changes in assets and liabilities, net of effects
from business acquisitions:
Receivables...................................... (102.3) (29.3) (37.2)
Inventory........................................ (1.4) (41.5) (12.0)
Other assets..................................... (47.9) 3.0 9.7
Accounts payable and accrued liabilities......... 68.9 84.4 6.0
Other liabilities................................ 128.7 22.8 8.8
--------- --------- ---------
988.1 697.1 429.1
--------- --------- ---------
CASH PROVIDED BY DISCONTINUED OPERATIONS................ -- 6.1 12.2
--------- --------- ---------
CASH USED IN INVESTING ACTIVITIES:
Purchases of revenue earning vehicles from third party
suppliers.......................................... (3,999.1) (2,806.0) (2,762.6)
Purchases of revenue earning vehicles from related
party suppliers.................................... (631.3) (351.7) (551.2)
Sales of revenue earning vehicles..................... 3,356.4 2,841.6 2,673.7
Purchases of property and equipment................... (251.7) (221.9) (153.4)
Advances to affiliate................................. (243.4) -- --
Investment in subscriber accounts..................... (41.4) (16.0) (17.5)
Cash used in business acquisitions.................... (47.0) (1,331.7) (11.8)
Other................................................. 46.5 90.7 147.1
--------- --------- ---------
(1,811.0) (1,795.0) (675.7)
--------- --------- ---------
CASH PROVIDED BY FINANCING ACTIVITIES:
Payments of revenue earning vehicle financing......... (17,414.3) (9,972.4) (3,071.3)
Proceeds from revenue earning vehicle financing....... 17,732.5 11,094.3 3,348.8
Payments of long-term debt and notes payable.......... (563.7) (211.4) (200.2)
Proceeds from long-term debt and notes payable........ 512.1 188.2 129.0
Sales of common stock................................. 550.9 262.4 16.5
Other................................................. (40.7) 31.0 11.9
--------- --------- ---------
776.8 1,392.1 234.7
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (46.1) 300.3 .3
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........ 345.6 45.3 45.0
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............. $ 299.5 $ 345.6 $ 45.3
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 7
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
(ALL TABLES IN MILLIONS EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying Consolidated Financial Statements include the
accounts of Republic Industries, Inc. and its subsidiaries ("Republic" or the
"Company"). All significant intercompany accounts and transactions have been
eliminated. In 1995, the Company implemented a formal plan to dispose of all of
its mining and citrus operations. In 1994, the Board of Directors authorized
management to pursue a plan to distribute its hazardous waste services segment,
Republic Environmental Systems, Inc. ("RESI"), now known as International
Alliance Services, Inc., to Republic shareholders. Accordingly, as discussed in
Note 11, Discontinued Operations, these segments have been accounted for as
discontinued operations and the accompanying Consolidated Financial Statements
presented herein have been restated to report separately the operating results
of these discontinued operations.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously reported
financial statements in order to conform with the financial statement
presentation of the current period.
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
The accompanying Consolidated Financial Statements include the financial
position and results of operations of National Car Rental System, Inc.
("National"), Maroone Automotive Group ("Maroone"), Wallace Automotive Group
("Wallace") and Taormina Industries, Inc. ("Taormina"), which the Company
acquired in February 1997, and Carlisle Motors, Inc. ("Carlisle") which the
Company acquired in January 1997. These transactions were accounted for under
the pooling of interests method of accounting and, accordingly, the Consolidated
Financial Statements have been restated as if the Company and National, Maroone,
Wallace, Taormina and Carlisle had operated as one entity since inception. See
Note 2, Business Combinations, for further discussion of these transactions.
All per share data and numbers of shares of the Company's common stock, par
value $.01 per share ("Common Stock") for all periods included in the financial
statements and notes thereto have been adjusted to reflect a two-for-one stock
split in the form of a 100% stock dividend that became effective in June 1996,
as more fully described in Note 6, Shareholders' Equity.
RECEIVABLES
Receivables include trade accounts receivable from the Company's various
operating business segments which consist of amounts due from retail and service
customers and travel agents and tour operators. Receivables also include vehicle
receivables from automobile manufacturers which consist of amounts due under
vehicle repurchase and incentive programs and from vehicle renters for damages
incurred on revenue earning vehicles.
F-7
<PAGE> 8
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
The components of receivables, net of allowance for doubtful accounts at
December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Trade....................................................... $286.3 $219.7
Vehicle..................................................... 226.6 185.2
Contracts in transit........................................ 19.3 16.9
Other....................................................... 19.5 16.9
------ ------
551.7 438.7
Less: allowance for doubtful accounts....................... (16.0) (10.0)
------ ------
$535.7 $428.7
====== ======
</TABLE>
INVESTMENTS
Investments have a maturity of one year or less, are classified as
held-to-maturity securities and are recorded at amortized cost adjusted for the
amortization or accretion of premiums or discounts, which approximate market
value. Investments are included in other current assets in the accompanying
Consolidated Balance Sheets.
Investments at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Eurodollar deposits......................................... $ -- $26.7
Repurchase agreements....................................... 20.2 24.0
Certificates of deposit..................................... 1.0 13.5
Other....................................................... 1.7 3.8
----- -----
$22.9 $68.0
===== =====
</TABLE>
Repurchase agreements are restricted for the settlement of specific
estimated auto liability claims.
REVENUE EARNING VEHICLES AND DEPRECIATION
Revenue earning vehicles are stated at cost less accumulated depreciation
and allowances for stolen vehicles. The straight-line method is used to
depreciate revenue earning vehicles to their estimated residual values over the
anticipated periods of use based on the Company's fleet plan, typically ranging
from four to twenty months in the United States and from four to nine months in
Canada and Europe. Depreciation expense also includes those costs relating to
losses from damaged vehicles, and gains and losses on revenue earning vehicle
sales in the ordinary course of business. Depreciation expense related to
revenue earning vehicles was $732.3 million, $545.7 million, and $352.5 million
for the years ended December 31, 1996, 1995 and 1994, respectively, and is
included as a component of vehicle rental operating expenses in the accompanying
Consolidated Statements of Operations.
A summary of revenue earning vehicles at December 31 is as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revenue earning vehicles.................................... $3,906.4 $3,245.2
Less: accumulated depreciation.............................. (411.2) (322.4)
-------- --------
$3,495.2 $2,922.8
======== ========
</TABLE>
Revenue earning vehicles with depreciated cost of $2.9 billion at December
31, 1996 were acquired under programs that allow the Company to require
counterparties to repurchase vehicles held for periods of up to twenty-four
months. The agreements contain varying mileage and damage limitations.
F-8
<PAGE> 9
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
The Company also leases vehicles under operating lease agreements which
require the Company to provide normal maintenance and liability coverage. The
agreements generally have terms of four to twelve months. Many agreements
provide for an option to terminate the leases early and allow for the purchase
of leased vehicles subject to certain restrictions. Most leases provide for an
initial minimum monthly charge, with contingent rental charges for changes in
interest rates and adjustments for wear, damage and mileage in excess of
stipulated amounts. Contingent rental charges were $1.8 million, $13.2 million
and $2.8 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
INVENTORY
Inventory consists primarily of retail vehicles held for sale valued using
the specific identification method. Cost includes acquisition expenses,
including reconditioning and transportation costs. Parts and accessories are
valued at the lower of cost or market, using the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for major
additions and improvements are capitalized, while minor replacements,
maintenance and repairs are charged to expense as incurred. When property is
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected in the
Consolidated Statements of Operations.
The Company revises the estimated useful lives of property and equipment
acquired through its business acquisitions to conform with its policies
regarding property and equipment. Depreciation is provided over the estimated
useful lives of the assets involved using the straight-line method. The
estimated useful lives are: twenty to forty years for buildings and
improvements, three to fifteen years for trucks and equipment and five to ten
years for furniture and fixtures.
Landfills are stated at cost and are depleted based on consumed airspace.
Landfill improvements include direct costs incurred to obtain a landfill permit
and direct costs incurred to construct and develop the site. These costs are
depleted based on consumed airspace. No general and administrative costs are
capitalized as landfills and landfill improvements.
Interest costs are capitalized in connection with the construction of
automotive rental facilities and landfill sites. Interest capitalized was $2.4
million, $3.3 million, and $2.7 million for the years ended December 31, 1996,
1995 and 1994, respectively.
Depreciation, amortization and depletion expense related to property and
equipment was $93.2 million, $71.4 million and $54.6 million in 1996, 1995 and
1994, respectively.
A summary of property and equipment at December 31 is as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Land, landfills and improvements............................ $ 451.5 $ 376.0
Furniture, fixtures, trucks and equipment................... 657.1 408.3
Buildings and improvements.................................. 355.1 287.2
-------- --------
1,463.7 1,071.5
Less: accumulated depreciation, amortization and
depletion................................................. (398.7) (281.5)
-------- --------
$1,065.0 $ 790.0
======== ========
</TABLE>
F-9
<PAGE> 10
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
INTANGIBLE ASSETS
Intangible assets consist primarily of the cost of acquired businesses in
excess of the fair value of net tangible assets acquired. The cost in excess of
the fair value of net tangible assets is amortized over periods ranging from
fifteen to forty years on a straight-line basis. Amortization expense related to
intangible assets was $12.8 million, $8.2 million and $4.7 million, in 1996,
1995 and 1994, respectively. Accumulated amortization of intangible assets was
$47.6 million and $30.4 million at December 31, 1996 and 1995, respectively.
The Company continually evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of intangible
assets or whether the remaining balance of intangible assets should be evaluated
for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the intangible assets in
measuring their recoverability.
INVESTMENT IN SUBSCRIBER ACCOUNTS
Investment in subscriber accounts consists of certain capitalized costs
associated with new monitoring systems installed by the Company's electronic
security service business and the cost of acquired subscriber accounts.
The costs are amortized over ten years (based on estimated and historical
customer attrition rates) on a straight-line basis. Amortization expense related
to investment in subscriber accounts was $9.3 million, $4.4 million and $3.4
million in 1996, 1995 and 1994, respectively. Accumulated amortization of
investment in subscriber accounts was $20.7 million and $11.4 million at
December 31, 1996 and 1995, respectively.
ACCRUED ENVIRONMENTAL AND LANDFILL COSTS
Accrued environmental and landfill costs are included in other liabilities
and include landfill site closure and post-closure costs. Landfill site closure
and post-closure costs include estimated costs to be incurred for final closure
of the landfills and estimated costs for providing required post-closure
monitoring and maintenance of landfills. These costs are accrued based on
consumed airspace. Estimated aggregate closure and post-closure costs are to be
fully accrued for these landfills at the time that such facilities cease to
accept waste and are closed. Excluding existing accruals at December 31, 1996,
approximately $53.7 million of such costs are to be expensed over the remaining
lives of these facilities. The Company estimates its future cost requirements
for closure and post-closure monitoring and maintenance for its solid waste
facilities based on its interpretation of the technical standards of the United
States Environmental Protection Agency's Subtitle D regulations. These estimates
do not take into account discounts for the present value of such total estimated
costs.
In addition to the Company's solid waste collection and disposal
operations, the Company's vehicle rental operations also involve the storage and
dispensing of petroleum products, primarily gasoline. The Company records as
expense, on a current basis, costs associated with remediation of environmental
pollution. The Company also accrues for its proportionate share of costs
associated with the remediation of environmental pollution when it becomes
probable that a liability has been incurred and the amount can be reasonably
estimated. Estimated costs include anticipated site testing, consulting,
remediation, disposal, post-remediation monitoring and legal fees, as
appropriate. The liability does not reflect possible recoveries from insurance
companies or reimbursement of remediation costs.
The Company periodically reassesses its method and assumptions used to
estimate such accruals for environmental and landfill costs and adjusts such
accruals accordingly. Such factors considered are changing regulatory
requirements, the effects of inflation, changes in operating climates in the
regions in which the Company's facilities are located and the expectations
regarding costs of securing environmental services.
F-10
<PAGE> 11
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
As discussed in Note 8, Commitments and Contingencies, the Company is
involved in litigation and is subject to ongoing environmental investigations by
certain regulatory agencies, as well as other claims and disputes that could
result in additional litigation which are in the normal course of business.
LIABILITY INSURANCE
The Company retains up to $1.0 million of risk per claim under its various
liability insurance programs for property damage and bodily injury claims. Costs
in excess of $1.0 million per claim are insured under various contracts with
insurance carriers. The costs of these retained insurance risks are estimated by
management and by actuarial evaluation based on historical claims experience,
adjusted for current trends and changes in claims-handling procedures. In 1996,
the Company changed its method of accounting for estimated auto rental liability
insurance claims by no longer discounting such liability. The effect of this
change was not material to the Company's consolidated financial position or
results of operations.
REVENUE RECOGNITION
Revenue from the Company's automotive rental operations consists primarily
of fees from rentals and the sale of related rental products from the leisure
and business travel segments. Revenue from the Company's automotive retailing
operations consists of sales of new and used vehicles, parts and service.
Revenue from the Company's solid waste services operations consists of
collection fees from residential, commercial and industrial customers and
landfill disposal fees charged to third parties. Revenue from the Company's
electronic security services business results from monitoring contracts for
security systems and fees charged for the sale and installation of such systems.
The Company recognizes revenue over the period vehicles are rented, services are
provided or products are sold.
FINANCIAL INSTRUMENTS
The Company utilizes interest rate swaps in the management of interest rate
risk. The differentials between the amounts paid and received from these swaps
are recognized over the terms of the agreements and are recorded as adjustments
to interest expense. Amounts receivable or payable under the agreements are
included in receivables or accrued liabilities in the Consolidated Balance
Sheets and were not material at December 31, 1996 or 1995.
ADVERTISING
The Company expenses the cost of advertising as incurred or when such
advertising initially takes place. No advertising costs were capitalized at
December 31, 1996 or 1995. Advertising expense was $138.6 million, $108.4
million and $78.8 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
STATEMENTS OF CASH FLOWS
The Company considers all highly liquid investments with purchased
maturities of three months or less to be cash equivalents unless the investments
are legally or contractually restricted for more than three months. The effect
of non-cash transactions related to business combinations, as discussed in Note
2, Business Combinations, and other non-cash transactions are excluded from the
Statements of Cash Flows.
NEW ACCOUNTING PRONOUNCEMENT
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 96-1, "Environmental Remediation
Liabilities," effective for fiscal years beginning after December 15, 1996. This
statement provides that environmental remediation liabilities should be accrued
when the criteria of Statement of Financial Accounting Standards ("SFAS") No. 5,
"Accounting for Contingencies,"
F-11
<PAGE> 12
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
are met, and it includes benchmarks to aid in the determination of when
environmental remediation liabilities should be recognized. SOP 96-1 also states
that an accrual for environmental liabilities should include incremental direct
costs of the remediation effort and costs of compensation and benefits for those
employees who are expected to devote a significant amount of time directly to
the remediation effort. The Company early adopted SOP 96-1 in 1996 without
material impact on its consolidated results of operations or financial position.
2. BUSINESS COMBINATIONS
PENDING ACQUISITIONS
In June 1997, the Company signed a definitive agreement to acquire the
Appleway Automotive Group ("Appleway"), which owns and operates eight
franchised automotive dealerships. The Company will issue Common Stock valued
at approximately $42.6 million in this transaction, which will be accounted for
under the purchase method of accounting. The closing of the transaction is
subject to customary conditions, including manufacturer and regulatory
approvals.
In May 1997, the Company signed a definitive agreement to acquire Desert
Buick-GMC Automotive Group ("Desert"), which owns and operates four franchised
automotive dealerships. The Company will issue Common Stock valued at
approximately $38.0 million in this transaction, which will be accounted for
under the pooling of interests method of accounting. The closing of the
transaction is subject to customary conditions, including manufacturer and
regulatory approvals.
In May 1997, the Company signed a definitive agreement to acquire Gulf
Management, Inc. ("Gulf"), which owns and operates two franchised automotive
dealerships. The Company will issue Common Stock valued at approximately $45.0
million in this transaction, which will be accounted for under the purchase
method of accounting. The closing of the transaction is subject to customary
conditions, including manufacturer and regulatory approvals.
In April 1997, the Company signed a definitive agreement to acquire De La
Cruz Auto Group ("De La Cruz"), which owns and operates four franchised
automotive dealerships. The Company will issue Common Stock valued at
approximately $40.0 million in this transaction, which will be accounted for
under the pooling of interests method of accounting. The closing of the
transaction is subject to customary conditions, including manufacturer and
regulatory approvals.
In March 1997, the Company signed a definitive agreement to acquire Tempe
Toyota and related entities ("Tempe"), which operate one franchised automotive
dealership and two used automotive dealerships. The Company will issue Common
Stock valued at approximately $48.0 million in this transaction, which will be
accounted for under the pooling of interests method of accounting. The closing
of the transaction is subject to customary conditions, including manufacturer
and regulatory approvals.
Additionally, the Company has signed definitive agreements to acquire
various other businesses in the automotive retail industry which are not
material to the Company. The Company will issue cash and/or Common Stock valued
in the aggregate at approximately $129.8 million in such transactions which will
be accounted for under the purchase method of accounting. These transactions are
subject to customary conditions, including manufacturer and regulatory
approvals.
COMPLETED ACQUISITIONS
Significant businesses acquired through March 31, 1997 and accounted for
under the pooling of interests method of accounting have been included
retroactively in the Supplemental Consolidated Financial Statements as if the
companies had operated as one entity since inception. Businesses acquired
through December 31, 1996 and accounted for under the purchase method of
accounting are included in the Supplemental Consolidated Financial Statements
from the date of acquisition.
In May 1997, the Company acquired Flemington Car and Truck Country and
certain related dealerships ("Flemington"), which own and operate twelve
franchised automotive dealerships. The Company issued approximately 2.3 million
shares of Common Stock in this transaction, which has been accounted for under
the pooling of interests method of accounting.
In May 1997, the Company acquired Spirit Rent-A-Car, Inc. ("Spirit"),
which operates a vehicle rental business. The Company issued 3.1 million shares
of Common Stock in this transaction, which has been accounted for under the
pooling of interests method of accounting.
In May 1997, the Company acquired Chesrown Automotive Group ("Chesrown"),
which owns and operates seven franchised automotive dealerships. The Company
issued approximately 2.5 million shares of Common Stock in this transaction,
which has been accounted for under the pooling of interests method of
accounting.
In May 1997, the Company acquired Bledsoe Dodge, Inc. ("Bledsoe"), which
operates three franchised automotive dealerships. The Company issued
approximately 1.7 million shares of Common Stock in this transaction, which has
been accounted for under the pooling of interests method of accounting.
The Company's unaudited pro forma consolidated results of operations assuming
the acquisitions of Flemington, Spirit, Chesrown and Bledsoe had been
consummated as of December 31, 1996 are as follows:
Years Ended December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
Revenue ................. $5,644.1 $4,088.1 $3,039.3
======== ======== ========
Net income (loss) ....... $ (29.5) $ 6.4 $ 38.8
======== ======== ========
Net income (loss) per
common and common
equivalent share...... $ (.10) $ .03 $ .23
======== ======== ========
In May 1997, the Company acquired Bankston Automotive Group ("Bankston"),
which owns and operates four franchised automotive dealerships. The Company
issued approximately 1.4 million shares of Common Stock in this transaction,
which has been accounted for under the purchase method of accounting.
In February 1997, the Company acquired National, which operates a vehicle
rental business. The Company issued approximately 21.7 million shares of Common
Stock in this transaction, which has been accounted for under the pooling of
interests method of accounting. National was formed in April 1995 to acquire the
operating assets and certain liabilities of a predecessor company ("Old
National") from General Motors Corporation as further discussed below.
In February 1997, the Company acquired Maroone, which owns and operates
five franchised automotive dealerships. The Company issued approximately 6.1
million shares of Common Stock in this transaction, which has been accounted for
under the pooling of interests method of accounting.
In February 1997, the Company acquired Wallace, which owns and operates
three franchised automotive dealerships. The Company issued approximately 1.7
million shares of Common Stock in this transaction, which has been accounted for
under the pooling of interests method of accounting.
In February 1997, the Company acquired Taormina, which provides waste
collection services and owns and operates a materials recycling facility. The
Company issued approximately 7.4 million shares of Common Stock in this
transaction, which has been accounted for under the pooling of interests method
of accounting.
In February 1997, the Company acquired Kendall Automotive Group
("Kendall"), which owns and operates three franchised automotive dealerships.
The Company issued approximately 1.2 million shares of Common Stock in this
transaction, which has been accounted for under the purchase method of
accounting.
In January 1997, following approval by the Company's stockholders at a
special meeting, the Company acquired AutoNation Incorporated ("AutoNation"),
which is developing a chain of used vehicle megastores. The Company issued
approximately 17.5 million shares of Common Stock in this transaction, which
has been accounted for under the purchase method of accounting.
F-12
<PAGE> 13
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
In January 1997, the Company acquired Carlisle which owns and operates
three franchised automotive dealerships. The Company issued approximately 1.0
million shares of Common Stock in this transaction, which has been accounted for
under the pooling of interests method of accounting.
In January 1997, the Company acquired Grubb Automotive ("Grubb"), which
owns and operates seven franchised automotive dealerships. The Company issued
approximately 4.0 million shares of Common Stock in this transaction, which has
been accounted for under the purchase method of accounting.
In January 1997, the Company acquired Ed Mullinax, Inc. and subsidiaries
("Mullinax"), which owns and operates six franchised automotive dealerships.
The Company issued approximately 3.6 million shares of Common Stock in this
transaction, which has been accounted for under the purchase method of
accounting.
In addition, subsequent to December 31, 1996, the Company acquired various
other businesses in the automotive retail, solid waste services and electronic
security services industries which were not material to the Company. The Company
issued an aggregate of approximately 3.0 million shares of Common Stock and paid
approximately $40.4 million of cash in such transactions which have been
accounted for under the purchase method of accounting, and issued an aggregate
of approximately 8.9 million shares of Common Stock in such transactions which
have been accounted for under the pooling of interests method of accounting.
Details of the results of operations of the Company and National, Maroone,
Wallace, Taormina and Carlisle (collectively, the "Pooled Entities") for the
periods before the pooling of interests combinations were consummated are as
follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
The Company.................................. $2,365.5 $1,791.4 $1,595.8
Pooled Entities.............................. 2,398.6 1,595.5 844.6
-------- -------- --------
$4,764.1 $3,386.9 $2,440.4
======== ======== ========
Net income (loss):
The Company.................................. $ (59.5) $ (26.6) $ 27.2
Pooled Entities.............................. 26.9 26.2 8.6
-------- -------- --------
$ (32.6) $ (.4) $ 35.8
======== ======== ========
</TABLE>
In December 1996, the Company acquired Addington Resources, Inc.
("Addington"), which primarily provides solid waste disposal services. The
Company issued approximately 13.7 million shares of Common Stock in this
transaction, which has been accounted for under the pooling of interests method
of accounting. In December 1996, the Company acquired Continental Waste
Industries, Inc. ("Continental"), which provides integrated solid waste
services. The Company issued approximately 12.4 million shares of Common Stock
in this transaction, which has been accounted for under the pooling of interests
method of accounting. In November 1996, the Company acquired Alamo Rent-A-Car,
Inc. ("Alamo"), which operates a vehicle rental business. The Company issued
approximately 22.6 million shares of Common Stock in this transaction, which has
been accounted for under the pooling of interests method of accounting. In
August 1996, the Company acquired the net assets of CarChoice, Inc.
("CarChoice"), which operates used vehicle superstores similar to those being
developed by AutoNation. The Company issued approximately 3.9 million shares of
Common Stock in this transaction, which has been accounted for under the pooling
of interests method of accounting. In February 1996, the Company acquired
Incendere, Inc. ("Incendere"), which provides solid waste collection, recycling
and medical waste hauling services. The Company issued approximately 3.3 million
shares of Common Stock in connection with this acquisition which has been
accounted for under the pooling of interests method of accounting. In February
1996, the Company acquired The Denver Fire Reporter and Protective Co. ("Denver
Alarm"), which provides electronic security services. The Company issued
approximately 2.5 million shares of Common
F-13
<PAGE> 14
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
Stock in this transaction, which has been accounted for under the pooling of
interests method of accounting.
During the year ended December 31, 1996, the Company also acquired various
other businesses in the solid waste services, electronic security services and
automotive retailing industries which were not material to the Company. The
Company issued an aggregate of approximately 9.1 million shares of Common Stock
and paid $47.0 million of cash in such transactions which have been accounted
for under the purchase method of accounting, and issued an aggregate of
approximately 13.0 million shares of Common Stock in such transactions which
have been accounted for under the pooling of interests method of accounting.
These acquisitions accounted for under the pooling of interests method of
accounting were not material in the aggregate and, consequently, prior period
financial statements were not restated for such acquisitions.
In November 1995, the Company acquired J.C. Duncan Company, Inc.
("Duncan"), Garbage Disposal Service, Inc. ("GDS"), Fennell Container Co., Inc.
("Fennell") and Scott Security Systems ("Scott"). Duncan provides solid waste
collection and recycling services and also operates two landfills. GDS provides
solid waste collection and recycling services. Fennell provides solid waste
collection and recycling services and also owns a landfill. Scott provides
electronic security services. In October 1995, the Company acquired United Waste
Service, Inc. ("United") and Southland Environmental Services, Inc.
("Southland"). United provides solid waste collection, transfer and recycling
services. Southland provides solid waste collection services. In August 1995,
the Company acquired Kertz Security Systems, Inc. ("Kertz"), which provides
electronic security services. The Company issued an aggregate of approximately
36.3 million shares of Common Stock for the above acquisitions. These
acquisitions have been accounted for under the pooling of interests method of
accounting and, accordingly, the accompanying Consolidated Financial Statements
have previously been restated as if the Company and Duncan, GDS, Fennell, Scott,
United, Southland and Kertz had operated as one entity since inception.
In August 1995, the Company acquired Hudson Management Corporation and
Envirocycle, Inc. (collectively, "HMC"). HMC provides solid waste collection and
recycling services. The Company issued 16.0 million shares of Common Stock to
acquire HMC. The acquisition of HMC has been accounted for under the purchase
method of accounting. The pro forma effect of this acquisition is not material
to the Company's Consolidated Results of Operations.
In June 1995, National acquired all of the operating assets and assumed
certain liabilities of Old National for a total cash purchase price of
approximately $1.3 billion. This acquisition was accounted for under the
purchase method of accounting. The Company's unaudited pro forma consolidated
results of operations for the years ended December 31, assuming the acquisition
of Old National had occurred on January 1, 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Revenue........................................ $3,732.4 $3,187.8
======== ========
Income from continuing operations.............. $ 23.9 $ 54.8
======== ========
Fully diluted income from continuing
operations per common and common equivalent
share........................................ $ .10 $ .31
======== ========
</TABLE>
The unaudited pro forma consolidated results of operations are presented
for informational purposes only and may not necessarily reflect the future
results of operations of the Company or what results of operations would have
been had the Company owned and operated Old National as of January 1, 1994.
During the years ended December 31, 1995 and 1994, the Company entered into
several other business combinations which have been accounted for under the
purchase method of accounting, which were not material to the Company.
F-14
<PAGE> 15
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
The preliminary purchase price allocations for business combinations
accounted for under the purchase method of accounting (including historical
accounts of immaterial acquisitions accounted for under the pooling of interests
method of accounting) for the years ended December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- ------
<S> <C> <C> <C>
Revenue earning vehicles.............................. $ 79.3 $1,455.2 $ --
Property and equipment................................ 114.2 99.3 45.3
Investment in subscriber accounts..................... 18.1 -- --
Intangible assets..................................... 105.0 100.1 18.8
Working capital (deficiency), net of cash acquired.... (19.1) 16.8 (10.5)
Long-term debt assumed................................ (127.5) (124.3) (15.5)
Other liabilities, net................................ (21.6) (131.3) (17.9)
Common stock issued................................... (101.4) (84.1) (8.4)
------- -------- ------
Cash used in acquisitions............................. $ 47.0 $1,331.7 $ 11.8
======= ======== ======
</TABLE>
3. REVENUE EARNING VEHICLE DEBT
Revenue earning vehicle debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Amounts under $1.4 billion loan agreement with termination
date of March 1998; secured by eligible vehicle
collateral and vehicle receivable balances; interest based
on market dictated commercial paper rates................. $ 1,396.9 $ 579.0
Senior secured notes payable with interest at fixed rates
ranging from 5.58% to 7.08% with various maturity dates
secured by eligible vehicle collateral and vehicle
receivable balances; repaid in 1996....................... -- 445.5
Amounts under $1.1 billion ($1.5 billion at December 31,
1995) commercial paper program terminating May 1998;
secured by eligible vehicle collateral and vehicle
receivable balances; weighted average interest rate
was 5.47% and 5.81% in 1996 and 1995, respectively........ 856.3 1,429.2
Medium term notes payable, interest payable monthly at
floating or fixed rates (average fixed rate at December
31, 1996 was 7.12% and floating rate based on 3 month
LIBOR plus .5% was 5.97% at December 31, 1996), due in
July 2001................................................. 799.6 --
Amounts under $250.0 million loan agreement with termination
date of September 19, 1997; secured by eligible vehicle
collateral and vehicle receivable balances; interest based
on market dictated commercial paper rates; repaid in
1996...................................................... -- 236.4
Amounts under various uncommitted revolving lease facilities
with financing institutions in United Kingdom; secured by
eligible vehicle collateral; interest based on an as
quoted basis dictated by market competition; no stated
expiration dates, reviewed annually....................... 143.5 157.1
Other, including amounts to be financed after period end,
under various revolving credit agreements and lease
facilities................................................ 292.1 193.5
--------- --------
3,488.4 3,040.7
Less: long-term portion..................................... (799.6) --
--------- --------
$ 2,688.8 $3,040.7
========= ========
</TABLE>
In November 1996, the Company refinanced a substantial portion of Alamo's
notes payable and lines of credit secured by revenue earning vehicles through an
increase in its commercial paper loan agreement from $580.0 million to $1.4
billion. Certain of the notes payable and lines of credit secured by revenue
earning vehicles contain various restrictive covenants, including provisions
relating to the maintenance of tangible net worth
F-15
<PAGE> 16
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
and debt to tangible net worth ratios, incurrence of additional indebtedness,
and limitations on the payment of dividends and certain investments. The
effective economic interest rate on notes payable and lines of credit secured by
revenue earning vehicles was 6.66%, 6.78% and 6.02% at December 31, 1996, 1995
and 1994, respectively. Interest expense on notes payable and lines of credit
secured by revenue earning vehicles is included as a component of vehicle rental
operating expenses in the accompanying Consolidated Statements of Operations.
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Interest protection
agreements with several counterparties are used to manage the impact of interest
rate changes. At December 31, 1996 and 1995, the Company effectively converted
interest rates on the following notional principal amounts:
<TABLE>
<CAPTION>
LATEST
1996 1995 MATURITY
-------- -------- -----------
<S> <C> <C> <C>
Variable-rate (capped) into fixed-rate
obligations....................................... $150.0 $175.0 August 1998
Variable-rate into fixed-rate obligations........... 651.9 350.0 December 2006
------ ------
Aggregate notional principal........................ $801.9 $525.0
====== ======
</TABLE>
4. LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt and notes payable at December 31 is as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
$250.0 million revolving credit facility; interest payable
monthly using either a competitive bid feature or LIBOR
based rate; matures December 1998; unsecured........................ $ 150.0 $ --
Mortgages payable to GMAC and predecessor agreements with
interest at 9.19% or 1% above prime; payable in monthly
installments; secured by real property; repaid in 1997............. 25.2 110.5
Revolving credit facility, secured by the stock of certain
of the Company's subsidiaries, interest at prime or at a
Eurodollar rate plus 0% to 2.75%, repaid in 1996.................... -- 16.4
Amounts under United Kingdom $17.1 million revolving credit
commitment due on demand with 90-day notice; interest
based on Sterling LIBOR plus 125 basis points or base rate
plus 125 basis points; secured by non-vehicle equipment
and leaseholds...................................................... 6.0 11.4
Bonds payable under loan agreements with California Pollution
Control Financing Authority; interest varies weekly as
determined by remarketing agent (3.15% at December 31,
1996)............................................................... 44.0 29.7
Note payable to Ford Motor Credit Company; interest at
2.75%-3.00% above commercial paper rate or 1.25% above
prime; secured by assets of certain of the Company's subsidiaries;
due 2000-2004....................................................... 26.6 28.2
Amounts due under line of credit with Ford Motor Credit
Company; interest at 1%-1.75% above prime or commercial
paper rate; collateralized by the assets of certain of the Company's
subsidiaries........................................................ 19.7 4.0
Mortgages payable to Ford Motor Credit Company; interest at
.75% above prime or 3.0% above commercial paper rate;
secured by assets of certain of the Company's subsidiaries; maturing
through 2011........................................................ 8.5 3.8
Notes to banks and financial institutions, secured by real
property, equipment and other assets, interest ranging
from 4.8% to 14.0%, maturing through 2015........................... 99.0 99.6
Vehicle inventory credit facilities secured by the Company's
vehicle inventory, interest at LIBOR plus 2.75% or 1%
above prime......................................................... 114.3 130.7
Note payable to bank with interest based on LIBOR or prime
paid quarterly; secured by a building; repaid in 1996............... -- 8.7
Other notes, secured by equipment and other assets, interest
ranging from 0% to 21%, maturing through 2010....................... 38.8 48.4
------- -------
532.1 491.4
Less: current portion................................................. (184.1) (197.7)
------- -------
$ 348.0 $ 293.7
======= =======
</TABLE>
F-16
<PAGE> 17
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
In December 1996, the Company completed a tender offer and consent
solicitation resulting in the repurchase of approximately $100.0 million
aggregate principal amount 11.75% senior notes due 2006 ("Senior Notes"), which
were issued in February 1996. The Company recorded an extraordinary charge of
$31.6 million, net of income taxes, during 1996 related to the early
extinguishment of the Senior Notes and certain other debt. Included in this
charge are bond redemption premiums, the write-off of debt issue costs,
prepayment penalties and other fees related to the tender offer and the
repayment of other debt.
In December 1995, the Company entered into a credit agreement (the "Credit
Agreement") with certain banks pursuant to which such banks have agreed to
advance the Company on an unsecured basis an aggregate of $250.0 million for a
term of 36 months. Outstanding advances, if any, are payable at the expiration
of the 36-month term. The Credit Agreement requires, among other items, that the
Company maintain certain financial ratios and comply with certain financial
covenants. Interest is payable monthly and generally determined using either a
competitive bid feature or a LIBOR based rate. As of December 31, 1996, $150.0
million was outstanding and the Company was in compliance with all covenants
under the Credit Agreement.
At December 31, 1996, aggregate maturities of long-term debt were as
follows:
<TABLE>
<S> <C>
1997........................................................ $184.1
1998........................................................ 180.1
1999........................................................ 20.3
2000........................................................ 28.7
2001........................................................ 14.7
Thereafter.................................................. 104.2
------
$532.1
======
</TABLE>
The Company made interest payments on revenue earning vehicle financing and
notes payable and long-term debt of approximately $274.2 million, $204.4
million, and $129.0 million in 1996, 1995 and 1994, respectively.
In April 1997, the Company replaced its existing $250.0 million credit
facility with a new $1.0 billion unsecured revolving credit facility (the
"Credit Facility") with certain banks for a term of five years. Outstanding
advances, if any, are payable at the expiration of the five year term. The
Credit Facility requires, among other items, that the Company maintain certain
financial ratios and comply with certain financial covenants. Interest is
determined using either a competitive bid feature or a LIBOR based rate.
In March 1997, the Company entered into a $300.0 million unsecured credit
facility with a bank. The proceeds from this facility were used to acquire 15.0
million common shares of ADT Limited ("ADT") as discussed in Note 12. In April
1997, the Company refinanced amounts borrowed under this facility with proceeds
from the Credit Facility.
5. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the recognition of
revenue and expenses for financial and income tax reporting purposes and between
the tax basis of assets and liabilities and their reported amounts in the
financial statements.
The Company files a consolidated federal income tax return which includes
the operations of businesses acquired for periods subsequent to the dates of the
acquisitions. Certain businesses acquired which were accounted for under the
pooling of interests method of accounting were subchapter S corporations for
income tax purposes prior to their acquisition by the Company. For purposes of
these Consolidated Financial Statements, federal and state income taxes have
been provided as if these companies had filed subchapter C corporation tax
returns for the pre-acquisition periods, and the current income tax expense is
reflected as an increase to additional paid-in capital. The subchapter S
corporation status of these companies was terminated effective with the closing
date of the acquisitions.
F-17
<PAGE> 18
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
The components of the provision (benefit) for income taxes related to
continuing operations for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ----- -----
<S> <C> <C> <C>
Current:
Federal................................................... $ 41.8 $11.2 $12.3
State..................................................... 4.0 2.5 2.9
Federal and state deferred.................................. (11.9) 15.7 17.2
Foreign deferred............................................ (8.9) (1.4) (2.6)
Change in valuation allowance............................... 18.0 3.3 --
------ ----- -----
Provision for income taxes.................................. $ 43.0 $31.3 $29.8
====== ===== =====
</TABLE>
A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate for the years ended December 31 is shown below:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate........................... 35.0% 35.0% 35.0%
Amortization of intangible assets........................... 3.0 1.3 .4
Non-deductible expenses..................................... 14.6 1.9 1.3
State income taxes, net of federal benefit.................. 6.0 4.4 4.7
Change in valuation allowance............................... 42.8 5.9 --
Foreign income tax benefit at other than U.S. rates......... (3.0) (.1) --
Other, net.................................................. 4.0 7.5 2.2
----- ----- -----
Effective tax rate........................................ 102.4% 55.9% 43.6%
===== ===== =====
</TABLE>
Components of the net deferred income tax liability included in other
liabilities in the accompanying Consolidated Balance Sheets at December 31 are
as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Deferred income tax liabilities:
Book basis in property over tax basis..................... $ 260.8 $213.7
Deferred costs............................................ 15.9 17.8
Deferred income tax assets:
Net operating losses...................................... (102.1) (43.6)
Deferred revenue.......................................... (14.4) (14.9)
Accruals not currently deductible......................... (91.1) (89.6)
Valuation allowance......................................... 62.1 41.9
------- ------
Net deferred income tax liability........................... $ 131.2 $125.3
======= ======
</TABLE>
At December 31, 1996, the Company had available domestic net operating loss
carryforwards of approximately $253.9 million which begin to expire in the year
2006 and foreign net operating loss carryforwards of approximately $47.9
million, the majority of which have an indefinite carryforward. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The Company has provided a valuation allowance to offset a portion of
the deferred tax assets due to uncertainty surrounding the future realization of
such deferred tax assets. The Company adjusts the valuation allowance in the
period management determines it is more likely than not that deferred tax assets
will or will not be realized.
F-18
<PAGE> 19
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
The foreign component of income (loss) from continuing operations before
income taxes and extraordinary charge for the years ended December 31, 1996,
1995 and 1994 was $(22.0) million, $(20.8) million and $.8 million,
respectively.
The Company made income tax payments of approximately $13.5 million, $11.6
million and $2.6 million in 1996, 1995 and 1994, respectively.
6. SHAREHOLDERS' EQUITY
In May 1997, the Company's Certificate of Incorporation was amended to
increase the number of authorized shares of Common Stock from 500.0 million
shares to 1.5 billion shares.
In January 1997, the Company sold 15.8 million shares of Common Stock in a
private placement transaction resulting in net proceeds of approximately $552.7
million.
In November 1996, the Company sold 12.1 million shares of Common Stock in a
private placement transaction resulting in net proceeds of approximately $353.3
million.
In May 1996, the Company sold 9.9 million shares of Common Stock in a
private placement transaction resulting in net proceeds of approximately $197.6
million.
In May 1996, the Board of Directors declared a two-for-one split of the
Company's Common Stock in the form of a 100% stock dividend, payable June 8,
1996, to holders of record on May 28, 1996.
In May 1996, the Company's Certificate of Incorporation was amended to
increase the number of authorized shares of Common Stock from 350.0 million
shares to 500.0 million shares.
In October 1995, Continental completed a secondary public offering of
approximately 2.6 million equivalent shares of Common Stock resulting in net
proceeds of approximately $30.1 million.
In September 1995, the Company sold 10.0 million shares of Common Stock in
a private placement transaction resulting in net proceeds of approximately $99.0
million.
In August 1995, the Company sold an aggregate of 16.7 million shares of
Common Stock and warrants to purchase an additional 33.4 million shares of
Common Stock to H. Wayne Huizenga, Westbury (Bermuda) Ltd. (a Bermuda
corporation controlled by Michael G. DeGroote, former Chairman of the Board,
President and Chief Executive Officer of Republic), Harris W. Hudson, and
certain of their assigns for an aggregate purchase price of $37.5 million. Mr.
Huizenga is the Chairman of the Board and Co-Chief Executive Officer of the
Company; Mr. DeGroote is a Director of the Company and Mr. Hudson is Vice
Chairman of the Board of the Company. The warrants are exercisable at prices
ranging from $2.25 to $3.50 per share. In August 1995, the Company issued and
sold an additional 2.0 million shares of Common Stock each to Mr. Huizenga and
John J. Melk (a Director of the Company) for aggregate proceeds of approximately
$26.5 million.
In July 1995, the Company sold 10.8 million shares of Common Stock in a
private placement transaction resulting in net proceeds of approximately $69.3
million.
The Company has 5.0 million authorized shares of preferred stock, par value
$.01 per share, none of which are issued or outstanding. The Board of Directors
has the authority to issue the preferred stock in one or more series and to
establish the rights, preferences and dividends.
7. STOCK OPTIONS AND WARRANTS
The Company has various stock option plans under which shares of Common
Stock may be granted to key employees and directors of the Company. Options
granted under the plans are non-qualified and are granted at a price equal to
the fair market value of the Common Stock at the date of grant. Generally,
options granted will have a term of ten years from the date of grant, and will
vest in increments of 25% per year over a four year period on the yearly
anniversary of the grant date.
F-19
<PAGE> 20
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
A summary of stock option and warrant transactions for the years ended
December 31 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- ----------------------- -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Options and warrants
outstanding at beginning
of year.................. 49.6 $ 4.87 8.1 $4.54 7.2 $ 4.45
Granted.................... 8.7 21.86 45.1 4.92 1.3 4.96
Exercised.................. (5.6) 4.03 (2.9) 4.14 -- --
Canceled................... (.2) 9.44 (.7) 7.49 (.4) 4.07
---- ---- ---
Options and warrants
outstanding at end of
year..................... 52.5 7.63 49.6 4.87 8.1 4.54
==== ==== ===
Options and warrants
exercisable at
year-end................. 38.5 4.12 39.9 3.50 4.3 4.33
Options available for
future grants............ 7.9 4.3 5.7
</TABLE>
The following table summarizes information about outstanding and
exercisable stock options and warrants at December 31, 1996:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
-------------------------------------------- -------------------------
WEIGHTED-AVERAGE
REMAINING WEIGHTED-AVERAGE WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES SHARES CONTRACTUAL LIFE EXERCISE PRICE SHARES EXERCISE PRICE
- ------------------------ ------ ---------------- ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
$ 1.05 - $ 2.75.......... 24.1 1.22 $ 2.37 23.3 $ 2.40
2.95 - 12.38.......... 17.8 5.15 7.28 14.1 6.10
12.88 - 33.75.......... 10.6 9.38 20.21 1.1 15.76
---- ----
1.05 - 33.75.......... 52.5 4.20 7.63 38.5 4.12
==== ====
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" in accounting for stock-based employee
compensation arrangements whereby no compensation cost related to stock options
is deducted in determining net income (loss). Had compensation cost for the
Company's stock option plans been determined pursuant to SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's pro forma net loss and
pro forma net loss per share would have increased accordingly. Using the
Black-Scholes option pricing model for all options granted after December 31,
1994, the Company's pro forma net loss, pro forma net loss per share and pro
forma weighted average fair value of options granted, with related assumptions,
are as follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Pro forma net loss................................... $(50.4) $ (8.4)
Pro forma net loss per share......................... (.18) (.04)
Pro forma weighted average fair value of options
granted............................................ 9.80 5.28
Risk free interest rates............................. 5.98% - 6.17% 5.98% - 6.17%
Expected lives....................................... 5-7 years 5-7 years
Expected volatility.................................. 40% 40%
</TABLE>
F-20
<PAGE> 21
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
In 1992, the Company received notices from Imperial County, California (the
"County") and the California Department of Toxic Substances Control ("DTSC")
that spent filter elements (the "Filters") from geothermal power plants, which
had been deposited at the Company's Imperial Landfill for approximately five
years, were classified as hazardous waste under California environmental
regulations. Under United States EPA regulations, the Filters are not deemed
hazardous waste as they are associated with the production of geothermal energy.
The Company is currently conducting active discussions with all appropriate
California regulatory agencies in order to obtain a variance under California
regulations to reclassify the Filters as a special waste so they may be left in
the landfill. If this occurs, the State, regional and local regulatory agencies
may nevertheless require that the affected area of the landfill be capped and
closed. In the event that the variance is not granted, remedial measures may be
required based on the Filters' classification as a California hazardous waste.
One of those measures could include the removal of the Filters or the closure of
a portion of the landfill.
Management is currently unable to determine (i) whether the waste will
ultimately be classified as hazardous, (ii) if so, what action, if any, will be
required as a result of this issue or (iii) what liability, if any, the Company
will have as a result of this inquiry. In January 1994, the Company filed suit
in the United States District Court for the Southern District of California
against the known past and present owners and operators of the geothermal power
plants for all losses, fines and expenses incurred by the Company associated
with the resolution of this matter. This suit was settled in November 1996
without material impact on the Company's consolidated financial position,
results of operations or cash flows.
The Company's solid waste and environmental services activities are
conducted in the context of a developing and changing statutory and regulatory
framework, aggressive government enforcement and a highly visible political
environment. Governmental regulation of the waste management industry requires
the Company to obtain and retain numerous governmental permits to conduct
various aspects of its operations. These permits are subject to revocation,
modification or denial. The costs and other capital expenditures which may be
required to obtain or retain the applicable permits or comply with applicable
regulations could be significant.
By letter dated January 11, 1996, Acme Commercial Corp. d/b/a CarMax, The
Auto Superstore, ("CarMax") accused AutoNation of infringing CarMax's trademark
rights by using the marks AutoNation USA and "The Better Way to Buy a Car."
AutoNation denied such allegations and on February 5, 1996, filed suit in the
U.S. District Court for the Southern District of Florida seeking a declaratory
judgment that AutoNation's use and registration of such marks do not violate any
of the rights of CarMax. On or about October 11, 1996, CarMax filed a
counterclaim against AutoNation seeking unspecified damages and an order
enjoining AutoNation from using certain marks, including the marks AutoNation
USA and "The Better Way to Buy a Car." In February 1997, AutoNation filed a
motion for partial summary judgment on CarMax's dilution claim under Florida
law. A trial has been set for June 1998. Although it is impossible to predict
the outcome of this litigation, the Company believes that AutoNation has a valid
basis for its complaint and that CarMax's allegations and counterclaims are
without merit.
While the results of the legal and environmental proceedings described
above and other proceedings which arose in the normal course of business cannot
be predicted with certainty, management believes that losses, if any, resulting
from the ultimate resolution of these matters will not have a material adverse
effect on the Company's consolidated results of operations, consolidated cash
flows or consolidated financial position. However, unfavorable resolution of
each matter individually or in the aggregate could affect the consolidated
results of operations or cash flows for the quarterly periods in which they are
resolved.
F-21
<PAGE> 22
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
The Company maintains general liability and property insurance and an
umbrella and excess liability policy in amounts it considers adequate and
customary for businesses of its kind. However, there can be no assurance that
the Company will not experience legal claims in excess of its insurance coverage
or claims which are ultimately not covered by insurance.
LEASE COMMITMENTS
The Company and its subsidiaries lease real property, equipment and
software under various operating leases with terms from 1 to 20 years. The
Company has also entered into various airport concession and permit agreements
which generally provide for payment of a percentage of revenue from vehicle
rentals with a guaranteed minimum lease obligation.
Expenses under real property, equipment and software leases and airport
concession agreements (excluding amounts charged through to customers) for the
years ended December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Real property.......................................... $ 45.6 $ 36.1 $ 25.6
Equipment and software................................. 23.8 24.9 22.9
Airport concession and permit fees:
Minimum fixed obligations............................ 89.6 68.0 36.3
Additional amounts, based on revenue from vehicle
rentals........................................... 94.5 60.1 27.6
------ ------ ------
Total........................................ $253.5 $189.1 $112.4
====== ====== ======
</TABLE>
Future minimum lease obligations under noncancelable real property,
equipment and software leases and airport agreements with initial terms in
excess of one year at December 31, 1996 are as follows:
<TABLE>
<S> <C>
Year Ending December 31:
1997................................................... $ 99.6
1998................................................... 80.5
1999................................................... 53.7
2000................................................... 33.7
2001................................................... 20.6
Thereafter............................................. 117.6
------
$405.7
======
</TABLE>
In August 1995, the Company entered into a ten-year lease agreement for
Alamo's Fort Lauderdale, Florida corporate headquarters facility. In December
1996, the Company acquired the headquarters facility for approximately $23.5
million, including the assumption of debt totaling approximately $22.7 million
which was repaid by the Company in January 1997.
OTHER MATTERS
In the normal course of business, the Company is required to post
performance bonds, letters of credit, and/or cash deposits as a financial
guarantee of the Company's performance. To date, the Company has satisfied
financial responsibility requirements for regulatory agencies by making cash
deposits, obtaining bank letters of credit or by obtaining surety bonds. At
December 31, 1996, letters of credit and surety bonds totaling $283.3 million
expire through October 1999.
9. INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Income (loss) per common and common equivalent share are based on the
combined weighted average number of common shares and common share equivalents
outstanding which include, where appropriate, the assumed exercise or conversion
of warrants and options. In computing income per common and common equivalent
share from continuing operations before extraordinary charge, the Company has
utilized the treasury stock method.
F-22
<PAGE> 23
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
The computation of weighted average common and common equivalent shares
used in the calculation of fully diluted income per share from continuing
operations before extraordinary charge, which is substantially the same as
the computation used to calculate primary income per share from continuing
operations before extraordinary charge, for the years ended December 31 is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Common shares outstanding................................. 296.8 248.0 157.8
Common equivalent shares.................................. 58.1 53.8 1.2
Weighted average treasury shares purchased................ (15.2) (7.6) .3
Effect of using weighted average common and common
equivalent shares outstanding........................... (25.8) (74.1) (3.3)
----- ----- -----
313.9 220.1 156.0
===== ===== =====
</TABLE>
For the years ended December 31, 1996 and 1995, the weighted-average
effect of common stock equivalents of approximately 37.1 million and
17.4 million shares, respectively, has been excluded from the computations of
the extraordinary charge per share and net loss per share in 1996 and the net
loss from discontinued operations per share in 1995 since they are
anti-dilutive.
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" which
establishes standards for computing and presenting earnings per share ("EPS").
This Statement replaces primary and fully diluted EPS with basic and diluted
EPS. Basic EPS excludes dilution and is computed by dividing net income by the
weighted average common shares outstanding during the period. Diluted EPS is
computed similar to fully diluted EPS pursuant to Accounting Principles Board
Opinion No. 15. SFAS No. 128 is effective for both interim and annual periods
ending after December 15, 1997. Earlier application is not permitted. The
Company's pro forma basic and diluted EPS computed under SFAS No. 128 are as
follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Basic:
Income (loss) from continuing operations ..... $(.12) $.12 $.25
Net income (loss)............................. (.12) -- .23
Diluted:
Income (loss) from continuing operations...... $(.12) $.11 $.25
Net income (loss)............................. (.12) -- .23
</TABLE>
10. RESTRUCTURING, MERGER AND OTHER NON-RECURRING EXPENSES
During the year ended December 31, 1996, the Company recorded one-time
pre-tax charges of approximately $95.5 million related primarily to the
integration of the operations of Alamo into those of the Company. Also included
in these charges are merger expenses associated with the acquisitions of Alamo,
Addington and Continental. Approximately $38.3 million of such expenses appear
as restructuring and merger expenses with the remainder of approximately $57.2
million included in automotive rental operating expenses and selling, general
and administrative expenses in the Company's Consolidated Statements of
Operations for the year ended December 31, 1996. These costs primarily include
asset write-offs, severance benefits, accounting and legal merger costs and
changes in various estimated reserve requirements.
In 1995, the Company recorded a $3.3 million pre-tax charge related to the
closing of a subsidiary's headquarters office in Indianapolis, Indiana. The
major components of the charge include severance costs, future contractual
payments required under pre-existing contracts and other costs related to the
write-off of equipment and other obligations related to the physical closure of
the office.
11. DISCONTINUED OPERATIONS
In 1995, the Company implemented a formal plan to dispose of all of its
mining and citrus operations. These discontinued operations consisted primarily
of the following: coal mining, mining equipment manufacturing and licensing,
citrus properties in Belize, precious and industrial metals mining and
incidental limestone properties. The Company initially recorded a loss on the
disposal of the discontinued operations of approximately $30.5 million (net of
income tax benefits of approximately $10.0 million) which represents the
estimated loss on the disposal of such operations and a provision of
approximately $2.0 million for expected operating losses through the final
disposition of such operations. See Note 14, Related Party Transactions, for
discussion of the disposition of the Company's mining and citrus operations.
In 1994, the Company announced the contemplation of a plan to spin-off
RESI, its hazardous waste services segment. In April 1995, Republic shareholders
received one share of common stock of RESI for every ten shares of Common Stock
of Republic owned in connection with the spin-off of RESI. Approximately 5.4
million RESI shares were distributed to Republic shareholders (the
"Distribution"). In connection with the Distribution, the Company contributed
the intercompany balance to RESI's equity and contributed approximately $2.5
million to RESI to repay RESI's indebtedness and to provide working capital to
RESI. Additionally, the Company reclassified approximately $36.3 million to
retained earnings from additional paid-in capital to effect the spin-off under
Delaware law. As a result of these transactions, the Company's equity at the
date of the Distribution was reduced by approximately $23.6 million.
The Company has sold or spun-off all of its subsidiaries included in
discontinued operations, hence fully disposing of all mining and citrus and
hazardous waste operations. Upon ultimate disposal of its discontinued
operations, the Company determined its initial estimates did not require
adjustment. The recorded transactions reflect the disposal of all of the
Company's hazardous waste and mining and citrus segments and,
F-23
<PAGE> 24
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
accordingly, the operating results of these segments have been classified as
discontinued operations for all periods presented in the accompanying
Consolidated Financial Statements.
12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, investments, receivables,
other assets (excluding goodwill, intangibles and deferred costs), accounts
payable and accrued liabilities (nonderivatives) approximates fair value because
of the short maturity of these instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment, and therefore cannot be determined with precision. The assumptions
used have a significant effect on the estimated amounts reported.
The Company has interest protection agreements with several counterparties
to manage the impact of interest rate changes. The estimated fair values of the
interest protection agreements were determined from dealer quotations and
represent the discounted future cash flows through maturity or expiration using
current rates, and are effectively the amounts the Company would pay or receive
to terminate the agreements. The estimated fair values of the interest rate
protection agreements at December 31, 1996 and 1995 was a net payable position
of $.7 million and $9.7 million, respectively.
The estimated fair value of mortgages payable at December 31, 1996 and
1995 was approximately $34.0 million and $114.0 million, respectively which
approximates the carrying value. The estimated fair values were derived by
discounting expected cash flows at the rates then offered to the Company for
debt of similar terms and remaining maturities. The fair value of the
Company's medium-term notes payable is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities. The estimated fair value of
the medium-term notes payable was $792.8 million as of December 31, 1996. The
carrying amount of the remaining debt approximates fair value because interest
rates are variable and, accordingly, approximate current market rates.
In September 1996, the Agreement and Plan of Amalgamation, dated as of July
1, 1996 and amended as of July 15, 1996 (the "ADT Agreement") by and among the
Company, R.I./Triangle, Ltd. and ADT, which provided for the acquisition of ADT
by the Company, was terminated by mutual agreement of the parties. In connection
with the execution of the ADT Agreement, ADT granted to the Company a warrant
(the "ADT Warrant") to purchase 15.0 million common shares of ADT at a purchase
price $20 per share (which approximated fair market value). The Company
estimated the fair value of the ADT Warrant at December 31, 1996 to be
approximately $5.7 million based upon an option pricing model calculation, which
approximated the carrying value. In March 1997, the Company exercised the ADT
Warrant resulting in the purchase of 15.0 million common shares of ADT at $20
per share. In May 1997, the Company sold the ADT common shares to certain
institutional investors for $27.50 per share resulting in a gain of
approximately $100.0 million, net of fees and expenses.
13. BUSINESS AND CREDIT CONCENTRATIONS
AUTOMOTIVE RENTAL INDUSTRY
At December 31, 1996 the Company had 406 corporate owned vehicle rental
facilities throughout the United States. The Company also had 31 corporate owned
vehicle rental facilities in the United Kingdom, 25 in Germany, 4 in
Switzerland, 82 in Canada, 1 in Belgium and 2 in The Netherlands. In addition to
its corporate owned locations, the Company's licensee network operates 284
locations throughout Europe, Latin America, the Caribbean, and the Pacific. The
automotive rental industry in which the Company operates is highly seasonal.
Trade receivables at December 31, 1996 and 1995 include $68.3 million and
$59.3 million, respectively from travel agents and tour operators. Of the travel
agent and tour operator receivable balances, $25.4 million
F-24
<PAGE> 25
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
and $25.6 million at December 31, 1996 and 1995, respectively, are maintained
outside the United States. The Company holds minimum collateral in the form of
cash, letters of credit or insurance from most of these vendors. The Company
continually evaluates the credit risk of these customers and believes that the
allowance for doubtful accounts relative to its trade receivables is adequate.
At December 31, 1996 and 1995, the Company had vehicle receivables from
manufacturers of $125.4 million and $65.0 million, respectively. Of the
receivable balances from manufacturers, $16.9 million and $12.7 million are
maintained outside the United States. Vehicle receivables also include amounts
due from renters for damages incurred on revenue earning vehicles.
The Company enters into vehicle repurchase programs with one principal
vehicle manufacturer, as well as other vehicle manufacturers. During model year
1996, the Company purchased 71% of its vehicle fleet under repurchase programs
with one vehicle manufacturer.
AUTOMOTIVE RETAIL, SOLID WASTE SERVICES AND ELECTRONIC SECURITY SERVICES
INDUSTRIES
Concentrations of credit risk with respect to trade receivables related to
the Company's automotive retail, solid waste services and electronic security
services segments are limited due to the wide variety of customers and markets
in which the Company's products are sold and services are provided as well as
their dispersion across many different geographic areas in the United States. As
a result, at December 31, 1996, the Company does not consider itself to have any
significant concentrations of credit risk in the solid waste services,
electronic security services and automotive retailing segments.
14. RELATED PARTY TRANSACTIONS
As of December 31, 1996, approximately $247.5 million was due from
AutoNation pursuant to a loan agreement whereby the Company agreed to provide
advances at an interest rate of LIBOR plus 2% to fund AutoNation's cash flow
requirements. Interest income recognized on such advances was approximately $5.6
million for the year ended December 31, 1996. In addition, on behalf of
AutoNation, the Company has guaranteed certain lease obligations and the
residual value related to a portfolio of properties leased by AutoNation under a
$150.0 million operating lease facility. At December 31, 1996, annual lease
obligations were approximately $2.6 million through the year 2001 and the
residual value guaranty was approximately $37.6 million. In April 1997, the
operating lease facility was increased to $500.0 million.
The Company purchased approximately $631.3 million, $351.7 million and
$551.2 million of revenue earning vehicles from a group of automotive
dealerships owned primarily by a former director of Alamo during the years ended
December 31, 1996, 1995 and 1994, respectively. Pursuant to an automobile
purchase agreement, the Company agreed to purchase and/or lease a minimum number
of vehicles and pay to these automotive dealerships a specific amount (in
addition to the manufacturer's sales price) for each vehicle purchased.
In September 1995, the Company entered into a stock purchase agreement with
Addington Enterprises, Inc. (a company f/k/a Addington Acquisition Company,
Inc., owned by certain former shareholders of Addington; collectively, the
"Addington Brothers") whereby the Company would receive $30.0 million, subject
to a working capital adjustment, in exchange for all the issued and outstanding
shares of common stock of its subsidiaries, Addington Mining, Inc., Mining
Technologies Inc., Addwest Mining, Inc. and Addington Coal Holding, Inc. This
transaction closed in November 1995, at which time the proceeds received were
used by the Company to pay down certain borrowings under a revolving line of
credit.
Included in the transaction described above and pursuant to an option
agreement, in August 1995 the Company sold to the Addington Brothers all the
issued and outstanding shares of common stock of its subsidiary, Tennessee
Mining, Inc. According to the terms of the option agreement, the Addington
Brothers will pay the Company a royalty based on tons of coal delivered under a
certain coal sales contract, up to a maximum aggregate royalty of $12.5 million.
F-25
<PAGE> 26
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
In September 1995, the Company entered into an agreement to sell all of the
issued and outstanding shares of common stock of its subsidiary, Belize River
Fruit Co., to the Addington Brothers in exchange for .9 million shares of Common
Stock of the Company owned by such shareholders. This transaction was
consummated in November 1995, at which time the Company acquired and retired the
.9 million shares valued at $13.6 million. The Company retained no obligations
in connection with the sales and has fully divested its investment in its citrus
operations.
15. OPERATIONS BY INDUSTRY SEGMENT
The Company is a diversified holding company with major business operations
in the automotive rental, automotive retail, solid waste services and electronic
security services industries. The Company operates primarily in the United
States.
The following table presents financial information regarding the Company's
different industry segments as of and for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Automotive rental................................ $2,567.1 $1,886.4 $1,222.3
Automotive retail................................ 1,410.5 1,000.3 858.3
Solid waste services............................. 701.2 450.4 317.9
Electronic security services..................... 85.3 49.8 41.9
-------- -------- --------
$4,764.1 $3,386.9 $2,440.4
======== ======== ========
Operating income (loss):
Automotive rental................................ $ (30.7) $ (19.3) $ 30.2
Automotive retail................................ 3.9 15.3 12.4
Solid waste services............................. 93.7 63.1 42.7
Electronic security services..................... 14.5 8.6 2.4
Corporate........................................ (31.8) (4.3) (2.9)
-------- -------- --------
$ 49.6 $ 63.4 $ 84.8
======== ======== ========
Depreciation and amortization:
Automotive rental................................ $ 772.9 $ 576.2 $ 372.6
Automotive retail................................ 4.9 4.0 3.5
Solid waste services............................. 59.0 44.6 35.0
Electronic security services..................... 10.8 4.9 4.1
-------- -------- --------
$ 847.6 $ 629.7 $ 415.2
======== ======== ========
Capital expenditures, purchases of revenue earning
vehicles and investment in subscriber accounts:
Automotive rental................................ $4,691.3 $3,197.3 $3,347.9
Automotive retail................................ 38.0 34.8 5.8
Solid waste services............................. 141.2 146.0 112.7
Electronic security services..................... 53.0 17.5 18.3
-------- -------- --------
$4,923.5 $3,395.6 $3,484.7
======== ======== ========
Assets:
Automotive rental................................ $4,625.4 $3,838.2 $2,310.4
Automotive retail................................ 392.1 318.6 230.3
Solid waste services............................. 1,309.2 840.2 466.1
Electronic security services..................... 43.6 43.8 34.5
Net assets of discontinued operations............ -- -- 86.2
-------- -------- --------
$6,370.3 $5,040.8 $3,127.5
======== ======== ========
</TABLE>
F-26
<PAGE> 27
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) -- (CONTINUED)
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The Company's automotive rental operations and particularly the leisure
travel segment is highly seasonal. In these operations, the third quarter which
includes the peak summer travel months has historically been the strongest
quarter of the year. During the peak season the Company increases its rental
fleet and workforce to accommodate increased rental activity. As a result, any
occurrence that disrupts travel patterns during the summer period could have a
material adverse effect on the annual performance of this segment. The first
quarter for the Company's automotive rental operations is generally the weakest,
when there is limited leisure family travel and a greater potential for adverse
weather conditions. Many of the operating expenses such as rent, general
insurance and administrative personnel are fixed and cannot be reduced during
periods of decreased rental demand.
The third and fourth quarters of 1996 included one-time pre-tax charges of
approximately $7.6 million and $87.9 million, respectively, as described in Note
10, Restructuring, Merger and Other Non-Recurring Expenses. The fourth quarter
of 1996 also included an extraordinary charge of approximately $31.6 million,
net of income tax benefit, related to the early extinguishment of debt as
described in Note 4, Long-Term Debt and Notes Payable.
The following is an analysis of certain items in the Consolidated
Statements of Operations by quarter for 1996 and 1995. Quarterly amounts have
been restated from amounts previously reported in Form 10-Q for significant
business combinations accounted for under the pooling of interests method of
accounting.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Revenue................................. 1996 $1,016.0 $1,210.3 $1,254.7 $ 1,283.1
1995 618.1 745.3 1,010.0 1,013.5
Operating income (loss)................. 1996 $ 25.8 $ 46.3 $ 70.3 $ (92.8)
1995 (7.9) 11.2 69.1 (9.0)
Income (loss) from continuing operations
before extraordinary charge........... 1996 $ 12.4 $ 23.7 $ 37.4 $ (74.5)
1995 (8.1) 3.1 37.1 (7.4)
Income (loss) per share from
continuing operations before
extraordinary charge.................. 1996 $ .04 $ .08 $ .12 $ (.26)
1995 (.05) .02 .16 (.03)
Net income (loss)....................... 1996 $ 12.4 $ 23.7 $ 37.4 $ (106.1)
1995 (6.6) 5.4 9.3 (8.5)
</TABLE>
F-27
<PAGE> 28
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
December 31,
March 31, -----------------------
1997 1996 1995
----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 222.7 $ 321.4 $ 361.8
Marketable securities..................................... 375.0 -- --
Receivables, net.......................................... 543.5 558.5 448.4
Revenue earning vehicles, net............................. 4,018.2 3,583.3 2,977.7
Advances to affiliate..................................... -- 247.5 --
Inventory................................................. 607.4 298.6 276.0
Other current assets...................................... 151.5 151.3 146.8
-------- -------- --------
Total Current Assets.............................. 5,918.3 5,160.6 4,210.7
PROPERTY AND EQUIPMENT, NET................................. 1,542.5 1,106.1 813.5
INTANGIBLE ASSETS, NET...................................... 736.7 262.0 158.8
INVESTMENT IN SUBSCRIBER ACCOUNTS, NET...................... 108.6 92.4 42.2
OTHER ASSETS................................................ 30.9 42.4 32.4
-------- -------- --------
$8,337.0 $6,663.5 $5,257.6
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 279.2 $ 277.1 $ 228.1
Accrued liabilities....................................... 309.8 217.5 165.8
Estimated liability insurance claims...................... 222.5 222.2 119.3
Revenue earning vehicle debt.............................. 2,834.2 2,732.0 3,070.0
Notes payable and current maturities of long-term debt.... 686.6 294.7 290.6
Other current liabilities................................. 81.3 96.5 84.1
-------- -------- --------
Total Current Liabilities......................... 4,413.6 3,840.0 3,957.9
LONG-TERM DEBT, NET OF CURRENT MATURITIES................... 344.3 367.2 304.3
LONG-TERM REVENUE EARNING VEHICLE DEBT...................... 860.1 844.8 26.6
OTHER LIABILITIES........................................... 231.0 237.4 226.8
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; 5,000,000
shares authorized; none issued......................... -- -- --
Common stock, par value $.01 per share; 500,000,000,
500,000,000 and 350,000,000 shares authorized,
respectively; 358,747,632, 306,336,304 and
257,520,256 shares issued and outstanding,
respectively........................................... 3.6 3.1 2.6
Additional paid-in capital................................ 2,412.4 1,361.3 643.8
Unrealized gain on marketable securities.................. 43.7 -- --
Retained earnings......................................... 28.3 9.7 95.6
-------- -------- --------
Total Shareholders' Equity........................ 2,488.0 1,374.1 742.0
-------- -------- --------
$8,337.0 $6,663.5 $5,257.6
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-28
<PAGE> 29
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31,
---------------------------- ----------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
Automotive rentals....................................... $ 649.9 $ 565.9 $2,618.4 $1,919.5 $1,245.2
Automotive sales......................................... 865.2 500.1 2,239.2 1,668.4 1,434.3
Solid waste services..................................... 175.4 136.9 701.2 450.4 317.9
Electronic security services............................. 26.6 15.5 85.3 49.8 41.9
-------- -------- -------- -------- --------
1,717.1 1,218.4 5,644.1 4,088.1 3,039.3
EXPENSES:
Automotive rental operating expenses..................... 495.4 443.7 2,092.2 1,517.0 924.0
Cost of automotive sales................................. 764.7 437.5 2,001.3 1,482.6 1,253.9
Cost of solid waste services............................. 148.1 97.4 512.4 307.5 213.6
Cost of electronic security services..................... 11.6 6.1 37.3 20.6 20.7
Selling, general and administrative...................... 251.6 199.7 892.8 677.5 527.9
Restructuring and merger expenses........................ -- -- 38.3 3.3 --
-------- -------- -------- -------- --------
OPERATING INCOME .......................................... 45.7 34.0 69.8 79.6 99.2
INTEREST INCOME............................................ 7.3 5.1 30.9 21.1 6.4
INTEREST EXPENSE........................................... (4.9) (9.5) (49.3) (37.0) (22.4)
OTHER INCOME (EXPENSE), NET................................ 2.4 2.9 4.4 8.3 (1.9)
-------- -------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES AND EXTRAORDINARY CHARGE........................... 50.5 32.5 55.8 72.0 81.3
PROVISION FOR INCOME TAXES................................. 18.6 15.8 53.7 40.5 39.7
-------- -------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY CHARGE..................................... 31.9 16.7 2.1 31.5 41.6
EXTRAORDINARY CHARGE RELATED TO EARLY EXTINGUISHMENT OF
DEBT, NET OF BENEFIT FOR INCOME TAXES OF $15.0........... -- -- (31.6) -- --
-------- -------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS................... 31.9 16.7 (29.5) 31.5 41.6
-------- -------- -------- -------- --------
DISCONTINUED OPERATIONS:
Income (loss) from discontinued operations, net of income
taxes................................................. -- -- -- 5.4 (2.8)
Loss on disposal of segment, net of income tax benefit... -- -- -- (30.5) --
-------- -------- -------- -------- --------
Loss from discontinued operations........................ -- -- -- (25.1) (2.8)
-------- -------- -------- -------- --------
NET INCOME (LOSS).......................................... $ 31.9 $ 16.7 $ (29.5) $ 6.4 $ 38.8
======== ======== ======== ======== ========
FULLY DILUTED INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Income from continuing operations before
extraordinary charge.................................. $ .08 $ .06 $ .01 $ .14 $ .25
Extraordinary charge..................................... -- -- (.11) -- --
Discontinued operations.................................. -- -- -- (.12) (.02)
-------- -------- -------- -------- --------
Net income (loss)........................................ $ .08 $ .06 $ (.10) $ .03 $ .23
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-29
<PAGE> 30
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
COMMON ADDITIONAL RETAINED
STOCK PAID-IN CAPITAL EARNINGS
------ --------------- ---------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993................................ $1.6 $ 235.8 $116.0
Sales of common stock..................................... .1 16.5 --
Distributions to former owners of pooled companies........ -- -- (29.7)
Other..................................................... -- 24.2 1.1
Net income................................................ -- -- 38.8
---- -------- ------
BALANCE AT DECEMBER 31, 1994................................ 1.7 276.5 126.2
Sales of common stock and warrants........................ .4 262.0 --
Stock issued in acquisitions.............................. .2 83.9 --
Exercise of stock options and warrants.................... -- 15.7 --
Reclassification of additional paid-in capital to effect
the spin-off........................................... -- (36.3) 36.3
Spin-off of Republic Environmental Systems, Inc........... -- -- (23.6)
Contributions to capital from former owners
of pooled companies.................................... -- 29.8 --
Distributions to former owners of pooled companies........ -- -- (49.7)
Other..................................................... .3 12.2 --
Net income................................................ -- -- 6.4
---- -------- ------
BALANCE AT DECEMBER 31, 1995................................ 2.6 643.8 95.6
Sales of common stock..................................... .2 550.7 --
Stock issued in acquisitions.............................. .2 101.2 --
Exercise of stock options and warrants.................... .1 43.7 --
Contributions to capital from former owners of pooled
companies.............................................. -- 21.9 --
Distributions to former owners of pooled companies........ -- -- (57.7)
Other..................................................... -- -- 1.3
Net loss.................................................. -- -- (29.5)
---- -------- ------
BALANCE AT DECEMBER 31, 1996................................ $3.1 $1,361.3 $ 9.7
==== ======== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-30
<PAGE> 31
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
------------------------- ---------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING
OPERATIONS:
Income (loss) from continuing operations.............. $ 31.9 $ 16.7 $ (29.5) $ 31.5 $ 41.6
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by continuing
operations:
Restructuring, merger and other non-recurring
expenses......................................... -- -- 95.5 3.3 --
Loss on extinguishment of debt, net of income
taxes............................................ -- -- 31.6 -- --
Depreciation and amortization...................... 209.0 174.0 866.1 641.7 423.5
Changes in assets and liabilities, net of effects
from business acquisitions:
Receivables...................................... 83.4 (19.3) (107.3) (36.2) (40.5)
Inventory........................................ (33.0) 22.8 (9.7) (38.1) (21.3)
Other assets..................................... 33.0 (14.1) (50.4) 1.2 8.5
Accounts payable and accrued liabilities......... (89.3) 55.1 78.7 88.4 8.1
Other liabilities................................ 16.6 23.9 141.3 30.4 18.2
--------- --------- --------- --------- ---------
251.6 259.1 1,016.3 722.2 438.1
--------- --------- --------- --------- ---------
CASH PROVIDED BY DISCONTINUED OPERATIONS................ -- -- -- 6.1 12.2
--------- --------- --------- --------- ---------
CASH USED IN INVESTING ACTIVITIES:
Purchases of revenue earning vehicles from third party
suppliers.......................................... (1,465.4) (1,271.4) (4,064.0) (2,843.7) (2,790.8)
Purchases of revenue earning vehicles from related
party suppliers.................................... -- (200.0) (631.3) (351.8) (551.2)
Sales of revenue earning vehicles..................... 844.0 864.6 3,356.4 2,841.6 2,673.7
Purchases of property and equipment................... (115.0) (44.5) (240.8) (214.9) (143.6)
Purchases of marketable securities.................... (300.0) -- -- -- --
Advances to affiliate................................. (50.0) -- (243.4) -- --
Investment in subscriber accounts..................... (13.1) -- (41.4) (16.0) (17.5)
Cash used in business acquisitions.................... (40.4) (2.2) (47.0) (1,333.7) (11.8)
Other................................................. 1.2 1.4 34.8 81.6 143.3
--------- --------- --------- --------- ---------
(1,138.7) (652.1) (1,876.7) (1,836.9) (697.9)
--------- --------- --------- --------- ---------
CASH PROVIDED BY FINANCING ACTIVITIES:
Payments of revenue earning vehicle financing......... (3,033.8) (3,449.0) (17,452.0) (9,990.9) (3,087.1)
Proceeds from revenue earning vehicle financing....... 3,160.4 3,774.9 17,802.7 11,134.4 3,379.4
Payments of long-term debt and notes payable.......... (770.2) (77.1) (568.0) (225.3) (204.5)
Proceeds from long-term debt and notes payable........ 874.4 125.2 536.1 200.6 140.8
Sales of common stock................................. 552.7 -- 550.9 262.4 16.6
Other................................................. 4.9 .3 (49.7) 31.5 8.5
--------- --------- --------- --------- ---------
788.4 374.3 820.0 1,412.7 253.7
--------- --------- --------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (98.7) (18.7) (40.4) 304.1 6.1
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........ 321.4 361.8 361.8 57.7 51.6
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............. $ 222.7 $ 343.1 $ 321.4 $ 361.8 $ 57.7
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-31
<PAGE> 32
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABLES IN MILLIONS EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying Supplemental Consolidated Financial Statements include the
accounts of Republic Industries, Inc. and its subsidiaries ("Republic" or the
"Company"). All significant intercompany accounts and transactions have been
eliminated. In 1995, the Company implemented a formal plan to dispose of all of
its mining and citrus operations. In 1994, the Board of Directors authorized
management to pursue a plan to distribute its hazardous waste services segment,
Republic Environmental Systems, Inc. ("RESI"), now known as International
Alliance Services, Inc., to Republic shareholders. Accordingly, as discussed in
Note 11, Discontinued Operations, these segments have been accounted for as
discontinued operations and the accompanying Supplemental Consolidated
Financial Statements presented herein have been restated to report separately
the operating results of these discontinued operations.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously reported
financial statements in order to conform with the financial statement
presentation of the current period.
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
In the opinion of management, the Unaudited Supplemental Consolidated
Financial Statements contain all material adjustments, consisting of only
normal recurring adjustments, necessary to present fairly the supplemental
consolidated financial position of the Company at March 31, 1997, and the
supplemental consolidated results of its operations and cash flows for the
three months ended March 31, 1997 and 1996. Operating results for these interim
periods are not necessarily indicative of the results that can be expected for
a full year.
The accompanying Supplemental Consolidated Financial Statements include the
financial position and results of operations of National Car Rental System, Inc.
("National"), Maroone Automotive Group ("Maroone"), Wallace Automotive Group
("Wallace") and Taormina Industries, Inc. ("Taormina") which the Company
acquired in February 1997, and Carlisle Motors, Inc. ("Carlisle") which the
Company acquired in January 1997. These transactions were accounted for under
the pooling of interests method of accounting and, accordingly, the Supplemental
Consolidated Financial Statements have been previously restated as if the
Company and National, Maroone, Wallace, Taormina and Carlisle had operated as
one entity since inception. See Note 2, Business Combinations, for further
discussion of these transactions.
All per share data and numbers of shares of the Company's common stock, par
value $.01 per share ("Common Stock") for all periods included in the financial
statements and notes thereto have been adjusted to reflect a two-for-one stock
split in the form of a 100% stock dividend that became effective in June 1996,
as more fully described in Note 6, Shareholders' Equity.
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
The accompanying Supplemental Consolidated Financial Statements give
retroactive effect to the acquisitions of Flemington Car and Truck Country and
certain related dealerships ("Flemington"), Spirit Rent-A-Car, Inc. ("Spirit"),
Chesrown Automotive Group ("Chesrown") and Bledsoe Dodge, Inc. ("Bledsoe") all
of which the Company acquired in May 1997. The acquisitions of Flemington,
Spirit, Chesrown and Bledsoe have been accounted for under the pooling of
interests method of accounting. See Note 2, Business Combinations, for further
discussion of these transactions.
RECEIVABLES
Receivables include trade accounts receivable from the Company's various
operating business segments which consist of amounts due from retail and service
customers and travel agents and tour operators. Receivables also include vehicle
receivables from automobile manufacturers which consist of amounts due under
vehicle repurchase and incentive programs and from vehicle renters for damages
incurred on revenue earning vehicles.
F-32
<PAGE> 33
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of receivables, net of allowance for doubtful accounts are
as follows:
<TABLE>
<CAPTION>
December 31,
March 31, -----------------------
1997 1996 1995
----------- -------- --------
(Unaudited)
<S> <C> <C> <C>
Trade....................................................... $272.5 $294.9 $226.7
Vehicle..................................................... 174.2 226.6 185.2
Contracts in transit........................................ 53.7 27.8 23.7
Other....................................................... 63.5 26.5 23.7
------ ------ ------
563.9 575.8 459.3
Less: allowance for doubtful accounts....................... (20.4) (17.3) (10.9)
------ ------ ------
$543.5 $558.5 $448.4
====== ====== ======
</TABLE>
MARKETABLE SECURITIES
Marketable securities at March 31, 1997 consist of 15.0 million common
shares of ADT Limited ("ADT") which were acquired in March 1997 upon exercise
of a warrant (the "ADT Warrant") to purchase such shares at a purchase price of
$20 per share. The ADT Warrant, which was received in July 1996 upon execution
of a definitive agreement to acquire ADT, became exercisable upon termination
of such agreement in September 1996. The ADT shares are classified as
available-for-sale and are stated at fair value with unrealized gains, net of
tax, reported as a separate component of shareholders' equity. As of March 31,
1997, the cost, unrealized gain and market value of the ADT common shares were
$305.7 million, $69.3 million and $375.0 million, respectively.
In May 1997, the Company sold the ADT common shares to certain
institutional investors for $27.50 per share resulting in a gain of
approximately $100.0 million, net of fees and expenses.
INVESTMENTS
Investments have a maturity of one year or less, are classified as
held-to-maturity securities and are recorded at amortized cost adjusted for the
amortization or accretion of premiums or discounts, which approximate market
value. Investments are included in other current assets in the accompanying
Supplemental Consolidated Balance Sheets.
Investments at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Eurodollar deposits......................................... $ -- $26.7
Repurchase agreements....................................... 20.2 24.0
Certificates of deposit..................................... 1.0 13.5
Other....................................................... 1.7 3.8
----- -----
$22.9 $68.0
===== =====
</TABLE>
Repurchase agreements are restricted for the settlement of specific
estimated auto liability claims.
REVENUE EARNING VEHICLES AND DEPRECIATION
Revenue earning vehicles are stated at cost less accumulated depreciation
and allowances for stolen vehicles. The straight-line method is used to
depreciate revenue earning vehicles to their estimated residual values over the
anticipated periods of use based on the Company's fleet plan, typically ranging
from four to twenty months in the United States and from four to nine months in
Canada and Europe. Depreciation expense also includes those costs relating to
losses from damaged vehicles, and gains and losses on revenue earning vehicle
sales in the ordinary course of business. Depreciation expense related to
revenue earning vehicles was $747.8 million, $555.0 million and $358.6 million
for the years ended December 31, 1996, 1995 and 1994, respectively, and is
included as a component of vehicle rental operating expenses in the accompanying
Supplemental Consolidated Statements of Operations.
A summary of revenue earning vehicles is as follows:
<TABLE>
<CAPTION>
December 31,
March 31, --------------------
1997 1996 1995
----------- --------- ---------
(Unaudited)
<S> <C> <C> <C>
Revenue earning vehicles.................................... $ 4,446.2 $ 4,011.5 $ 3,311.2
Less: accumulated depreciation.............................. (428.0) (428.2) (333.5)
--------- --------- ---------
$ 4,018.2 $ 3,583.3 $ 2,977.7
========= ========= =========
</TABLE>
Revenue earning vehicles with depreciated cost of $2.9 billion at December
31, 1996 were acquired under programs that allow the Company to require
counterparties to repurchase vehicles held for periods of up to twenty-four
months. The agreements contain varying mileage and damage limitations.
F-33
<PAGE> 34
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company also leases vehicles under operating lease agreements which
require the Company to provide normal maintenance and liability coverage. The
agreements generally have terms of four to twelve months. Many agreements
provide for an option to terminate the leases early and allow for the purchase
of leased vehicles subject to certain restrictions. Most leases provide for an
initial minimum monthly charge, with contingent rental charges for changes in
interest rates and adjustments for wear, damage and mileage in excess of
stipulated amounts. Contingent rental charges were $1.8 million, $13.2 million
and $2.8 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
INVENTORY
Inventory consists primarily of retail vehicles held for sale valued using
the specific identification method. Cost includes acquisition expenses,
including reconditioning and transportation costs. Parts and accessories are
valued at the lower of cost or market, using the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for major
additions and improvements are capitalized, while minor replacements,
maintenance and repairs are charged to expense as incurred. When property is
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected in the
Supplemental Consolidated Statements of Operations.
The Company revises the estimated useful lives of property and equipment
acquired through its business acquisitions to conform with its policies
regarding property and equipment. Depreciation is provided over the estimated
useful lives of the assets involved using the straight-line method. The
estimated useful lives are: twenty to forty years for buildings and
improvements, three to fifteen years for trucks and equipment and five to ten
years for furniture and fixtures.
Landfills are stated at cost and are depleted based on consumed airspace.
Landfill improvements include direct costs incurred to obtain a landfill permit
and direct costs incurred to construct and develop the site. These costs are
depleted based on consumed airspace. No general and administrative costs are
capitalized as landfills and landfill improvements.
Interest costs are capitalized in connection with the construction of
automotive rental facilities and landfill sites. Interest capitalized was $2.6
million, $3.3 million and $2.7 million for the years ended December 31, 1996,
1995 and 1994, respectively.
Depreciation, amortization and depletion expense related to property and
equipment was $96.2 million, $74.0 million and $56.8 million in 1996, 1995 and
1994, respectively.
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
December 31,
March 31, --------------------
1997 1996 1995
----------- --------- ---------
(Unaudited)
<S> <C> <C> <C>
Land, landfills and improvements............................ $ 633.8 $ 464.5 $ 383.5
Furniture, fixtures, trucks and equipment................... 780.6 675.5 422.2
Buildings and improvements.................................. 565.4 377.7 300.9
--------- --------- ---------
1,979.8 1,517.7 1,106.6
Less: accumulated depreciation, amortization and
depletion................................................. (437.3) (411.6) (293.1)
--------- --------- ---------
$ 1,542.5 $ 1,106.1 $ 813.5
========= ========= =========
</TABLE>
F-34
<PAGE> 35
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INTANGIBLE ASSETS
Intangible assets consist primarily of the cost of acquired businesses in
excess of the fair value of net tangible assets acquired. The cost in excess of
the fair value of net tangible assets is amortized over periods ranging from
fifteen to forty years on a straight-line basis. Amortization expense related to
intangible assets was $12.8 million, $8.3 million and $4.7 million, in 1996,
1995 and 1994, respectively. Accumulated amortization of intangible assets was
$47.6 million and $30.5 million at December 31, 1996 and 1995, respectively.
The Company continually evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of intangible
assets or whether the remaining balance of intangible assets should be evaluated
for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the intangible assets in
measuring their recoverability.
INVESTMENT IN SUBSCRIBER ACCOUNTS
Investment in subscriber accounts consists of certain capitalized costs
associated with new monitoring systems installed by the Company's electronic
security service business and the cost of acquired subscriber accounts.
The costs are amortized over ten years (based on estimated and historical
customer attrition rates) on a straight-line basis. Amortization expense related
to investment in subscriber accounts was $9.3 million, $4.4 million and $3.4
million in 1996, 1995 and 1994, respectively. Accumulated amortization of
investment in subscriber accounts was $20.7 million and $11.4 million at
December 31, 1996 and 1995, respectively.
ACCRUED ENVIRONMENTAL AND LANDFILL COSTS
Accrued environmental and landfill costs are included in other liabilities
and include landfill site closure and post-closure costs. Landfill site closure
and post-closure costs include estimated costs to be incurred for final closure
of the landfills and estimated costs for providing required post-closure
monitoring and maintenance of landfills. These costs are accrued based on
consumed airspace. Estimated aggregate closure and post-closure costs are to be
fully accrued for these landfills at the time that such facilities cease to
accept waste and are closed. Excluding existing accruals at December 31, 1996,
approximately $53.7 million of such costs are to be expensed over the remaining
lives of these facilities. The Company estimates its future cost requirements
for closure and post-closure monitoring and maintenance for its solid waste
facilities based on its interpretation of the technical standards of the United
States Environmental Protection Agency's Subtitle D regulations. These estimates
do not take into account discounts for the present value of such total estimated
costs.
In addition to the Company's solid waste collection and disposal
operations, the Company's vehicle rental operations also involve the storage and
dispensing of petroleum products, primarily gasoline. The Company records as
expense, on a current basis, costs associated with remediation of environmental
pollution. The Company also accrues for its proportionate share of costs
associated with the remediation of environmental pollution when it becomes
probable that a liability has been incurred and the amount can be reasonably
estimated. Estimated costs include anticipated site testing, consulting,
remediation, disposal, post-remediation monitoring and legal fees, as
appropriate. The liability does not reflect possible recoveries from insurance
companies or reimbursement of remediation costs.
The Company periodically reassesses its method and assumptions used to
estimate such accruals for environmental and landfill costs and adjusts such
accruals accordingly. Such factors considered are changing regulatory
requirements, the effects of inflation, changes in operating climates in the
regions in which the Company's facilities are located and the expectations
regarding costs of securing environmental services.
F-35
<PAGE> 36
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As discussed in Note 8, Commitments and Contingencies, the Company is
involved in litigation and is subject to ongoing environmental investigations by
certain regulatory agencies, as well as other claims and disputes that could
result in additional litigation which are in the normal course of business.
LIABILITY INSURANCE
The Company retains up to $1.0 million of risk per claim under its various
liability insurance programs for property damage and bodily injury claims. Costs
in excess of $1.0 million per claim are insured under various contracts with
insurance carriers. The costs of these retained insurance risks are estimated by
management and by actuarial evaluation based on historical claims experience,
adjusted for current trends and changes in claims-handling procedures. In 1996,
the Company changed its method of accounting for estimated auto rental liability
insurance claims by no longer discounting such liability. The effect of this
change was not material to the Company's supplemental consolidated financial
position or results of operations.
REVENUE RECOGNITION
Revenue from the Company's automotive rental operations consists primarily
of fees from rentals and the sale of related rental products from the leisure
and business travel segments. Revenue from the Company's automotive retailing
operations consists of sales of new and used vehicles, parts and service.
Revenue from the Company's solid waste services operations consists of
collection fees from residential, commercial and industrial customers and
landfill disposal fees charged to third parties. Revenue from the Company's
electronic security services business results from monitoring contracts for
security systems and fees charged for the sale and installation of such systems.
The Company recognizes revenue over the period vehicles are rented, services are
provided or products are sold.
FINANCIAL INSTRUMENTS
The Company utilizes interest rate swaps in the management of interest rate
risk. The differentials between the amounts paid and received from these swaps
are recognized over the terms of the agreements and are recorded as adjustments
to interest expense. Amounts receivable or payable under the agreements are
included in receivables or accrued liabilities in the Supplemental Consolidated
Balance Sheets and were not material at December 31, 1996 or 1995.
ADVERTISING
The Company expenses the cost of advertising as incurred or when such
advertising initially takes place. No advertising costs were capitalized at
December 31, 1996 or 1995. Advertising expense was $149.0 million, $116.6
million and $85.3 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
STATEMENTS OF CASH FLOWS
The Company considers all highly liquid investments with purchased
maturities of three months or less to be cash equivalents unless the investments
are legally or contractually restricted for more than three months. The effect
of non-cash transactions related to business combinations, as discussed in Note
2, Business Combinations, and other non-cash transactions are excluded from the
Statements of Cash Flows.
NEW ACCOUNTING PRONOUNCEMENT
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 96-1, "Environmental Remediation
Liabilities," effective for fiscal years beginning after December 15, 1996. This
statement provides that environmental remediation liabilities should be accrued
when the criteria of Statement of Financial Accounting Standards ("SFAS") No. 5,
"Accounting for Contingencies,"
F-36
<PAGE> 37
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are met, and it includes benchmarks to aid in the determination of when
environmental remediation liabilities should be recognized. SOP 96-1 also states
that an accrual for environmental liabilities should include incremental direct
costs of the remediation effort and costs of compensation and benefits for those
employees who are expected to devote a significant amount of time directly to
the remediation effort. The Company early adopted SOP 96-1 in 1996 without
material impact on its supplemental consolidated results of operations or
financial position.
2. BUSINESS COMBINATIONS
PENDING ACQUISITIONS
In June 1997, the Company signed a definitive agreement to acquire the
Appleway Automotive Group ("Appleway"), which owns and operates eight
franchised automotive dealerships. The Company will issue Common Stock valued
at approximately $42.6 million in this transaction, which will be accounted for
under the purchase method of accounting. The closing of the transaction is
subject to customary conditions, including manufacturer and regulatory
approvals.
In May 1997, the Company signed a definitive agreement to acquire Desert
Buick-GMC Automotive Group ("Desert"), which owns and operates four franchised
automotive dealerships. The Company will issue Common Stock valued at
approximately $38.0 million in this transaction, which will be accounted for
under the pooling of interests method of accounting. The closing of the
transaction is subject to customary conditions, including manufacturer and
regulatory approvals.
In May 1997, the Company signed a definitive agreement to acquire Gulf
Management, Inc. ("Gulf"), which owns and operates two franchised automotive
dealerships. The Company will issue Common Stock valued at approximately $45.0
million in this transaction, which will be accounted for under the purchase
method of accounting. The closing of the transaction is subject to customary
conditions, including manufacturer and regulatory approvals.
In April 1997, the Company signed a definitive agreement to acquire De La
Cruz Auto Group ("De La Cruz"), which owns and operates four franchised
automotive dealerships. The Company will issue Common Stock valued at
approximately $40.0 million in this transaction, which will be accounted for
under the pooling of interests method of accounting. The closing of the
transaction is subject to customary conditions, including manufacturer and
regulatory approvals.
In March 1997, the Company signed a definitive agreement to acquire Tempe
Toyota and related entities ("Tempe"), which operate one franchised automotive
dealership and two used automotive dealerships. The Company will issue Common
Stock valued at approximately $48.0 million in this transaction, which will be
accounted for under the pooling of interests method of accounting. The closing
of the transaction is subject to customary conditions, including manufacturer
and regulatory approvals.
Additionally, the Company has signed definitive agreements to acquire
various other businesses in the automotive retail industry which are not
material to the Company. The Company will issue cash and/or Common Stock valued
in the aggregate at approximately $129.8 million in such transactions which will
be accounted for under the purchase method of accounting. These transactions are
subject to customary conditions, including manufacturer and regulatory
approvals.
COMPLETED ACQUISITIONS
Significant businesses acquired and accounted for under the pooling of
interests method of accounting have been included retroactively in the
Supplemental Consolidated Financial Statements as if the companies had operated
as one entity since inception. Businesses acquired through March 31, 1997 and
accounted for under the purchase method of accounting are included in the
Supplemental Consolidated Financial Statements from the date of acquisition.
In May 1997, the Company acquired Flemington, which owns and operates
twelve franchised automotive dealerships. The Company issued approximately
2.3 million shares of Common Stock in this transaction, which has been
accounted for under the pooling of interests method of accounting.
In May 1997, the Company acquired Spirit, which operates a vehicle rental
business. The Company issued 3.1 million shares of Common Stock in this
transaction, which has been accounted for under the pooling of interests
method of accounting.
In May 1997, the Company acquired Chesrown, which owns and operates seven
franchised automotive dealerships. The Company issued approximately 2.5
million shares of Common Stock in this transaction, which has been accounted
for under the pooling of interests method of accounting.
In May 1997, the Company acquired Bledsoe, which operates three franchised
automotive dealerships. The Company issued approximately 1.7 million shares of
Common Stock in this transaction, which has been accounted for under the
pooling of interests method of accounting.
In May 1997, the Company acquired Bankston Automotive Group ("Bankston"),
which owns and operates four franchised automotive dealerships. The Company
issued approximately 1.4 million shares of Common Stock in this transaction,
which has been accounted for under the purchase method of accounting.
In February 1997, the Company acquired National, which operates a vehicle
rental business. The Company issued approximately 21.7 million shares of Common
Stock in this transaction, which has been accounted for under the pooling of
interests method of accounting. National was formed in April 1995 to acquire the
operating assets and certain liabilities of a predecessor company ("Old
National") from General Motors Corporation as further discussed below.
In February 1997, the Company acquired Maroone, which owns and operates
five franchised automotive dealerships. The Company issued approximately 6.1
million shares of Common Stock in this transaction, which has been accounted for
under the pooling of interests method of accounting.
In February 1997, the Company acquired Wallace, which owns and operates
three franchised automotive dealerships. The Company issued approximately 1.7
million shares of Common Stock in this transaction, which has been accounted for
under the pooling of interests method of accounting.
In February 1997, the Company acquired Taormina, which provides waste
collection services and owns and operates a materials recycling facility. The
Company issued approximately 7.4 million shares of Common Stock in this
transaction, which has been accounted for under the pooling of interests method
of accounting.
In February 1997, the Company acquired Kendall Automotive Group
("Kendall"), which owns and operates three franchised automotive dealerships.
The Company issued approximately 1.2 million shares of Common Stock in this
transaction, which has been accounted for under the purchase method of
accounting.
In January 1997, following approval by the Company's stockholders at a
special meeting, the Company acquired AutoNation Incorporated ("AutoNation"),
which is developing a chain of used vehicle megastores. The Company issued
approximately 17.5 million shares of Common Stock in this transaction, which
has been accounted for under the purchase method of accounting.
F-37
<PAGE> 38
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In January 1997, the Company acquired Carlisle which owns and operates
three franchised automotive dealerships. The Company issued approximately 1.0
million shares of Common Stock in this transaction, which has been accounted for
under the pooling of interests method of accounting.
In January 1997, the Company acquired Grubb Automotive ("Grubb"), which
owns and operates seven franchised automotive dealerships. The Company issued
approximately 4.0 million shares of Common Stock in this transaction, which has
been accounted for under the purchase method of accounting.
In January 1997, the Company acquired Ed Mullinax, Inc. and subsidiaries
("Mullinax"), which owns and operates six franchised automotive dealerships.
The Company issued approximately 3.6 million shares of Common Stock in this
transaction, which has been accounted for under the purchase method of
accounting.
In addition, subsequent to December 31, 1996, the Company acquired various
other businesses in the automotive retailing, solid waste services and
electronic security services industries which were not material to the Company.
The Company issued an aggregate of approximately 3.0 million shares of Common
Stock and paid approximately $40.4 million of cash in such transactions which
have been accounted for under the purchase method of accounting, and issued an
aggregate of approximately 8.9 million shares of Common Stock in such
transactions which have been accounted for under the pooling of interests method
of accounting.
Details of the results of operations of the Company and Flemington, Spirit,
Chesrown, Bledsoe, National, Maroone, Wallace, Taormina and Carlisle
(collectively, the "Pooled Entities") for the periods before the pooling of
interests combinations were consummated are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
---------------------- ------------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
The Company.................................. $ 908.1 $ 446.1 $2,365.5 $1,791.4 $1,595.9
Pooled Entities.............................. 809.0 772.3 3,278.6 2,296.7 1,443.4
-------- -------- -------- -------- --------
$1,717.1 $1,218.4 $5,644.1 $4,088.1 $3,039.3
======== ======== ======== ======== ========
Net income (loss):
The Company.................................. $ 15.7 $ 3.5 $ (59.5) $ (26.6) $ 27.2
Pooled Entities.............................. 16.2 13.2 30.0 33.0 11.6
-------- -------- -------- -------- --------
$ 31.9 $ 16.7 $ (29.5) $ 6.4 $ 38.8
======== ======== ======== ======== ========
</TABLE>
In December 1996, the Company acquired Addington Resources, Inc.
("Addington"), which primarily provides solid waste disposal services. The
Company issued approximately 13.7 million shares of Common Stock in this
transaction, which has been accounted for under the pooling of interests method
of accounting. In December 1996, the Company acquired Continental Waste
Industries, Inc. ("Continental"), which provides integrated solid waste
services. The Company issued approximately 12.4 million shares of Common Stock
in this transaction, which has been accounted for under the pooling of interests
method of accounting. In November 1996, the Company acquired Alamo Rent-A-Car,
Inc. ("Alamo"), which operates a vehicle rental business. The Company issued
approximately 22.6 million shares of Common Stock in this transaction, which has
been accounted for under the pooling of interests method of accounting. In
August 1996, the Company acquired the net assets of CarChoice, Inc.
("CarChoice"), which operates used vehicle superstores similar to those being
developed by AutoNation. The Company issued approximately 3.9 million shares of
Common Stock in this transaction, which has been accounted for under the pooling
of interests method of accounting. In February 1996, the Company acquired
Incendere, Inc. ("Incendere"), which provides solid waste collection, recycling
and medical waste hauling services. The Company issued approximately 3.3 million
shares of Common Stock in connection with this transaction, which has been
accounted for under the pooling of interests method of accounting. In February
1996, the Company acquired the Denver Fire Reporter and Protective Co. ("Denver
Alarm"), which provides electronic security services. The Company issued
approximately 2.5 million shares of Common
F-38
<PAGE> 39
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock in this transaction, which has been accounted for under the pooling of
interests method of accounting.
During the year ended December 31, 1996, the Company also acquired various
other businesses in the solid waste services, electronic security services and
automotive retailing industries which were not material to the Company. The
Company issued an aggregate of approximately 9.1 million shares of Common Stock
and paid $47.0 million of cash in such transactions which have been accounted
for under the purchase method of accounting, and issued an aggregate of
approximately 13.0 million shares of Common Stock in such transactions which
have been accounted for under the pooling of interests method of accounting.
These acquisitions accounted for under the pooling of interests method of
accounting were not material in the aggregate and, consequently, prior period
financial statements were not restated for such acquisitions.
In November 1995, the Company acquired J.C. Duncan Company, Inc.
("Duncan"), Garbage Disposal Service, Inc. ("GDS"), Fennell Container Co., Inc.
("Fennell") and Scott Security Systems ("Scott"). Duncan provides solid waste
collection and recycling services and also operates two landfills. GDS provides
solid waste collection and recycling services. Fennell provides solid waste
collection and recycling services and also owns a landfill. Scott provides
electronic security services. In October 1995, the Company acquired United Waste
Service, Inc. ("United") and Southland Environmental Services, Inc.
("Southland"). United provides solid waste collection, transfer and recycling
services. Southland provides solid waste collection services. In August 1995,
the Company acquired Kertz Security Systems, Inc. ("Kertz"), which provides
electronic security services. The Company issued an aggregate of approximately
36.3 million shares of Common Stock for the above acquisitions. These
acquisitions have been accounted for under the pooling of interests method of
accounting and, accordingly, the accompanying Supplemental Consolidated
Financial Statements have previously been restated as if the Company and Duncan,
GDS, Fennell, Scott, United, Southland and Kertz had operated as one entity
since inception.
In August 1995, the Company acquired Hudson Management Corporation and
Envirocycle, Inc. (collectively, "HMC"). HMC provides solid waste collection and
recycling services. The Company issued 16.0 million shares of Common Stock to
acquire HMC. The acquisition of HMC has been accounted for under the purchase
method of accounting. The pro forma effect of this acquisition is not material
to the Company's Supplemental Consolidated Results of Operations.
In June 1995, National acquired all of the operating assets and assumed
certain liabilities of Old National for a total cash purchase price of
approximately $1.3 billion. This acquisition was accounted for under the
purchase method of accounting. The Company's unaudited pro forma supplemental
consolidated results of operations for the years ended December 31, assuming
the acquisition of Old National had occurred on January 1, 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Revenue........................................ $4,433.6 $3,786.6
======== ========
Income from continuing operations.............. $ 30.8 $ 57.7
======== ========
Fully diluted income from continuing
operations per common and common equivalent
share........................................ $ .13 $ .31
======== ========
</TABLE>
The unaudited pro forma supplemental consolidated results of operations are
presented for informational purposes only and may not necessarily reflect the
future results of operations of the Company or what results of operations would
have been had the Company owned and operated Old National as of January 1, 1994.
During the years ended December 31, 1995 and 1994, the Company entered into
several other business combinations which have been accounted for under the
purchase method of accounting, which were not material to the Company.
F-39
<PAGE> 40
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The preliminary purchase price allocations for business combinations
accounted for under the purchase method of accounting (including historical
accounts of immaterial acquisitions accounted for under the pooling of interests
method of accounting) were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
--------------------- ----------------------------------
1997 1996 1996 1995 1994
---- ---- ------- -------- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue earning vehicles.............................. $ -- $ -- $ 79.4 $1,455.2 $ --
Property and equipment................................ 350.7 22.5 114.2 99.3 45.3
Investment in subscriber accounts..................... 6.9 3.3 18.0 -- --
Intangible assets..................................... 480.2 49.5 105.0 101.3 18.8
Working capital deficiency, net of cash acquired...... (18.9) (7.9) (19.1) 16.8 (10.5)
Long-term debt assumed................................ (284.2) (11.7) (127.5) (123.5) (15.5)
Other liabilities, net................................ (14.6) (.7) (21.6) (131.3) (17.9)
Common stock issued................................... (479.7) (52.8) (101.4) (84.1) (8.4)
------- ----- ------- -------- ------
Cash used in acquisitions............................. $ 40.4 $ 2.2 $ 47.0 $1,333.7 $ 11.8
======= ===== ======= ======== ======
</TABLE>
The Company's unaudited pro forma supplemental consolidated results of
operations assuming the acquisitions of Kendall, AutoNation, Grubb and Mullinax,
all of which have been accounted for under the purchase method of accounting,
had occurred on January 1, 1996 are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended
--------------------- December 31,
1997 1996 1996
---- ---- ------------
<S> <C> <C> <C>
Revenue ................................................. $1,842.9 $1,586.9 $7,180.4
======== ======== ========
Net income (loss) ....................................... $ 25.5 $ 17.0 $ (23.4)
======== ======== ========
Fully diluted net income (loss) per common
and common equivalent share ......................... $ .07 $ .05 $ (.06)
======== ======== ========
</TABLE>
The unaudited pro forma supplemental results of operations are presented
for informational purposes only and may not necessarily reflect the future
results of operations of the Company or what the results of operations would
have been had the Company owned and operated these businesses as of January 1,
1996.
3. REVENUE EARNING VEHICLE DEBT
Revenue earning vehicle debt consists of the following:
<TABLE>
<CAPTION>
December 31,
March 31, --------------------------
1997 1996 1995
----------- ---------- ----------
(Unaudited)
<S> <C> <C> <C>
Amounts under $1.4 billion loan agreement with termination
date of March 1998; secured by eligible vehicle
collateral and vehicle receivable balances; interest based
on market dictated commercial paper rates................. $ 1,397.0 $ 1,396.9 $ 579.0
Senior secured notes payable with interest at fixed rates
ranging from 5.58% to 7.08% with various maturity dates
secured by eligible vehicle collateral and vehicle
receivable balances; repaid in 1996....................... -- -- 445.5
Amounts under $1.1 billion ($1.5 billion at December 31,
1995) commercial paper program terminating May 1998;
secured by eligible vehicle collateral and vehicle
receivable balances; weighted average interest rate was
5.47% and 5.81% in 1996 and 1995, respectively............ 963.0 856.3 1,429.2
Medium term notes payable, interest payable monthly at
floating or fixed rates (average fixed rate at December
31, 1996 was 7.12% and floating rate based on 3 month
LIBOR plus .5% was 5.97% at December 31, 1996), due in
July 2001................................................. 799.6 799.6 --
Amounts under $250.0 million loan agreement with termination
date of September 19, 1997; secured by eligible vehicle
collateral and vehicle receivable balances; interest based
on market dictated commercial paper rates; repaid in
1996...................................................... -- -- 236.4
Amounts under various uncommitted revolving lease facilities
with financing institutions in United Kingdom; secured by
eligible vehicle collateral; interest based on an as
quoted basis dictated by market competition; no stated
expiration dates, reviewed annually....................... 195.4 143.5 157.1
Other, including amounts to be financed after period end,
under various revolving credit agreements and lease
facilities................................................ 339.3 380.5 249.4
--------- --------- --------
3,694.3 3,576.8 3,096.6
Less: long-term portion..................................... (860.1) (844.8) (26.6)
--------- --------- --------
$ 2,834.2 $ 2,732.0 $3,070.0
========= ========= ========
</TABLE>
In November 1996, the Company refinanced a substantial portion of Alamo's
notes payable and lines of credit secured by revenue earning vehicles through an
increase in its commercial paper loan agreement from $580.0 million to $1.4
billion. Certain of the notes payable and lines of credit secured by revenue
earning vehicles contain various restrictive covenants, including provisions
relating to the maintenance of tangible net worth
F-40
<PAGE> 41
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and debt to tangible net worth ratios, incurrence of additional indebtedness,
and limitations on the payment of dividends and certain investments. The
effective economic interest rate on notes payable and lines of credit secured by
revenue earning vehicles was 6.69%, 6.81% and 6.07% at December 31, 1996, 1995
and 1994, respectively. Interest expense on notes payable and lines of credit
secured by revenue earning vehicles is included as a component of vehicle rental
operating expenses in the accompanying Supplemental Consolidated Statements of
Operations.
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Interest protection
agreements with several counterparties are used to manage the impact of interest
rate changes. At December 31, 1996 and 1995, the Company effectively converted
interest rates on the following notional principal amounts:
<TABLE>
<CAPTION>
LATEST
1996 1995 MATURITY
-------- -------- -----------
<S> <C> <C> <C>
Variable-rate (capped) into fixed-rate
obligations....................................... $150.0 $175.0 August 1998
Variable-rate into fixed-rate obligations........... 651.9 350.0 December 2006
------ ------
Aggregate notional principal........................ $801.9 $525.0
====== ======
</TABLE>
4. LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt and notes payable is as follows:
<TABLE>
<CAPTION>
December 31,
March 31, ------------------
1997 1996 1995
--------- -------- ------
(Unaudited)
<S> <C> <C> <C>
$300.0 million revolving credit facility; interest payable
quarterly at LIBOR plus 30 basis points, repaid in
April 1997.......................................................... $ 300.0 $ -- $ --
$250.0 million revolving credit facility; interest payable
monthly using either a competitive bid feature or LIBOR
based rate; matures December 1998; unsecured........................ 190.0 150.0 --
Mortgages payable to GMAC and predecessor agreements with
interest at 9.19% or 1% above prime; payable in monthly
installments; secured by real property............................. 8.6 32.1 115.4
Revolving credit facility, secured by the stock of certain
of the Company's subsidiaries, interest at prime or at a
Eurodollar rate plus 0% to 2.75%, repaid in 1996.................... -- -- 16.4
Amounts under United Kingdom $17.1 million revolving credit
commitment due on demand with 90-day notice; interest
based on Sterling LIBOR plus 125 basis points or base rate
plus 125 basis points; secured by non-vehicle equipment
and leaseholds...................................................... -- 6.0 11.4
Bonds payable under loan agreements with California Pollution
Control Financing Authority; interest varies weekly as
determined by remarketing agent (3.15% at December 31,
1996)............................................................... 43.8 44.0 29.7
Note payable to Ford Motor Credit Company; interest at
2.75%-3.00% above commercial paper rate or 1.25% above
prime; secured by assets of certain of the Company's subsidiaries;
due 2000-2004....................................................... -- 26.6 28.2
Amounts due under line of credit with Ford Motor Credit
Company; interest at 0%-1.75% above prime or commercial
paper rate; collateralized by the assets of certain of the Company's
subsidiaries........................................................ 1.2 20.9 4.0
Mortgages payable to Ford Motor Credit Company; interest at
.75% above prime or 2.75%-3.0% above commercial paper rate;
secured by assets of certain of the Company's subsidiaries; maturing
through 2011........................................................ 1.2 9.8 5.2
Notes to banks and financial institutions, secured by real
property, equipment and other assets, interest ranging
from 4.8% to 14.0%, maturing through 2015........................... 78.0 110.0 102.5
Vehicle inventory credit facilities secured by the Company's
vehicle inventory and certain accounts receivable, interest at
LIBOR plus 2.75% or 1% above prime.................................. 338.4 218.0 218.0
Note payable to bank with interest based on LIBOR or prime
paid quarterly; secured by a building; repaid in 1996............... -- -- 8.7
Other notes, secured by equipment and other assets, interest
ranging from 0% to 21%, maturing through 2010....................... 69.7 44.5 55.4
-------- ------- -------
1,030.9 661.9 594.9
Less: current portion................................................. (686.6) (294.7) (290.6)
-------- ------- -------
$ 344.3 $ 367.2 $ 304.3
======== ======= =======
</TABLE>
F-41
<PAGE> 42
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In December 1996, the Company completed a tender offer and consent
solicitation resulting in the repurchase of approximately $100.0 million
aggregate principal amount 11.75% senior notes due 2006 ("Senior Notes"), which
were issued in February 1996. The Company recorded an extraordinary charge of
$31.6 million, net of income taxes, during 1996 related to the early
extinguishment of the Senior Notes and certain other debt. Included in this
charge are bond redemption premiums, the write-off of debt issue costs,
prepayment penalties and other fees related to the tender offer and the
repayment of other debt.
In December 1995, the Company entered into a credit agreement (the "Credit
Agreement") with certain banks pursuant to which such banks have agreed to
advance the Company on an unsecured basis an aggregate of $250.0 million for a
term of 36 months. Outstanding advances, if any, are payable at the expiration
of the 36-month term. The Credit Agreement requires, among other items, that the
Company maintain certain financial ratios and comply with certain financial
covenants. Interest is payable monthly and generally determined using either a
competitive bid feature or a LIBOR based rate. As of December 31, 1996, $150.0
million was outstanding and the Company was in compliance with all covenants
under the Credit Agreement.
At December 31, 1996, aggregate maturities of long-term debt were as
follows:
<TABLE>
<S> <C>
1997........................................................ $ 294.7
1998........................................................ 183.9
1999........................................................ 23.0
2000........................................................ 31.6
2001........................................................ 16.3
Thereafter.................................................. 112.4
-------
$ 661.9
=======
</TABLE>
The Company made interest payments on revenue earning vehicle financing and
notes payable and long-term debt of approximately $289.2 million, $213.2
million, and $135.6 million in 1996, 1995 and 1994, respectively.
In April 1997, the Company replaced its existing $250.0 million credit
facility with a new $1.0 billion unsecured revolving credit facility (the
"Credit Facility") with certain banks for a term of five years. Outstanding
advances, if any, are payable at the expiration of the five year term. The
Credit Facility requires, among other items, that the Company maintain certain
financial ratios and comply with certain financial covenants. Interest is
determined using either a competitive bid feature or a LIBOR based rate.
In March 1997, the Company entered into a $300.0 million unsecured credit
facility with a bank. The proceeds from this facility were used to acquire 15.0
million common shares of ADT as discussed in Note 1. In April 1997, the Company
refinanced amounts borrowed under this facility with proceeds from the Credit
Facility.
5. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the recognition of
revenue and expenses for financial and income tax reporting purposes and between
the tax basis of assets and liabilities and their reported amounts in the
financial statements.
The Company files a consolidated federal income tax return which includes
the operations of businesses acquired for periods subsequent to the dates of the
acquisitions. Certain businesses acquired which were accounted for under the
pooling of interests method of accounting were subchapter S corporations for
income tax purposes prior to their acquisition by the Company. For purposes of
these Consolidated Financial Statements, federal and state income taxes have
been provided as if these companies had filed subchapter C corporation tax
returns for the pre-acquisition periods, and the current income tax expense is
reflected as an increase to additional paid-in capital. The subchapter S
corporation status of these companies was terminated effective with the closing
date of the acquisitions.
F-42
<PAGE> 43
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision (benefit) for income taxes related to
continuing operations for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Current:
Federal................................................... $44.9 $15.9 $16.3
State..................................................... 4.7 3.1 3.6
Federal and state deferred.................................. (7.5) 19.7 20.7
Foreign deferred............................................ (8.7) (1.4) (2.6)
Change in valuation allowance............................... 20.3 3.2 1.7
----- ----- -----
Provision for income taxes.................................. $53.7 $40.5 $39.7
===== ===== =====
</TABLE>
A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate for the years ended December 31 is shown below:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate........................... 35.0% 35.0% 35.0%
Amortization of intangible assets........................... 2.3 1.0 .4
Non-deductible expenses..................................... 11.2 1.6 1.2
State income taxes, net of federal benefit.................. 6.2 4.4 4.8
Change in valuation allowance............................... 36.3 4.5 2.2
Foreign income tax benefit at other than U.S. rates......... (2.3) (.1) --
Other, net.................................................. 7.5 9.9 5.2
---- ---- ----
Effective tax rate........................................ 96.2% 56.3% 48.8%
==== ==== ====
</TABLE>
Components of the net deferred income tax liability included in other
liabilities in the accompanying Supplemental Consolidated Balance Sheets at
December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred income tax liabilities:
Book basis in property over tax basis..................... $ 282.9 $228.5
Deferred costs............................................ 17.7 19.0
Deferred income tax assets:
Net operating losses...................................... (103.3) (43.8)
Deferred revenue.......................................... (14.4) (14.9)
Accruals not currently deductible......................... (96.1) (92.2)
Valuation allowance......................................... 66.3 43.7
------- ------
Net deferred income tax liability........................... $ 153.1 $140.3
======= ======
</TABLE>
At December 31, 1996, the Company had available domestic net operating loss
carryforwards of approximately $253.9 million which begin to expire in the year
2006 and foreign net operating loss carryforwards of approximately $47.9
million, the majority of which have an indefinite carryforward. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The Company has provided a valuation allowance to offset a portion of
the deferred tax assets due to uncertainty surrounding the future realization of
such deferred tax assets. The Company adjusts the valuation allowance in the
period management determines it is more likely than not that deferred tax assets
will or will not be realized.
F-43
<PAGE> 44
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The foreign component of income (loss) from continuing operations before
income taxes and extraordinary charge for the years ended December 31, 1996,
1995 and 1994 was $(22.0) million, $(20.8) million and $.8 million,
respectively.
The Company made income tax payments of approximately $15.1 million, $13.2
million and $3.6 million in 1996, 1995 and 1994, respectively.
6. SHAREHOLDERS' EQUITY
In May 1997, the Company's Certificate of Incorporation was amended to
increase the number of authorized shares of Common Stock from 500.0 million to
1.5 billion shares.
In January 1997, the Company sold 15.8 million shares of Common Stock in a
private placement transaction resulting in net proceeds of approximately $552.7
million.
In November 1996, the Company sold 12.1 million shares of Common Stock in a
private placement transaction resulting in net proceeds of approximately $353.3
million.
In May 1996, the Company sold 9.9 million shares of Common Stock in a
private placement transaction resulting in net proceeds of approximately $197.6
million.
In May 1996, the Board of Directors declared a two-for-one split of the
Company's Common Stock in the form of a 100% stock dividend, payable June 8,
1996, to holders of record on May 28, 1996.
In May 1996, the Company's Certificate of Incorporation was amended to
increase the number of authorized shares of Common Stock from 350.0 million
shares to 500.0 million shares.
In October 1995, Continental completed a secondary public offering of
approximately 2.6 million equivalent shares of Common Stock resulting in net
proceeds of approximately $30.1 million.
In September 1995, the Company sold 10.0 million shares of Common Stock in
a private placement transaction resulting in net proceeds of approximately $99.0
million.
In August 1995, the Company sold an aggregate of 16.7 million shares of
Common Stock and warrants to purchase an additional 33.4 million shares of
Common Stock to H. Wayne Huizenga, Westbury (Bermuda) Ltd. (a Bermuda
corporation controlled by Michael G. DeGroote, former Chairman of the Board,
President and Chief Executive Officer of Republic), Harris W. Hudson, and
certain of their assigns for an aggregate purchase price of $37.5 million. Mr.
Huizenga is the Chairman of the Board and Co-Chief Executive Officer of the
Company; Mr. DeGroote is a Director of the Company and Mr. Hudson is Vice
Chairman of the Board of the Company. The warrants are exercisable at prices
ranging from $2.25 to $3.50 per share. In August 1995, the Company issued and
sold an additional 2.0 million shares of Common Stock each to Mr. Huizenga and
John J. Melk (a Director of the Company) for aggregate proceeds of approximately
$26.5 million.
In July 1995, the Company sold 10.8 million shares of Common Stock in a
private placement transaction resulting in net proceeds of approximately $69.3
million.
The Company has 5.0 million authorized shares of preferred stock, par value
$.01 per share, none of which are issued or outstanding. The Board of Directors
has the authority to issue the preferred stock in one or more series and to
establish the rights, preferences and dividends.
7. STOCK OPTIONS AND WARRANTS
The Company has various stock option plans under which shares of Common
Stock may be granted to key employees and directors of the Company. Options
granted under the plans are non-qualified and are granted at a price equal to
the fair market value of the Common Stock at the date of grant. Generally,
options granted will have a term of ten years from the date of grant, and will
vest in increments of 25% per year over a four year period on the yearly
anniversary of the grant date.
F-44
<PAGE> 45
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of stock option and warrant transactions is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
----------------------- ---------------------------------------------------------------------------
1997 1996 1995 1994
----------------------- ----------------------- ----------------------- -----------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ -------------- ------ -------------- ------ --------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Options and warrants
outstanding at beginning
of period................ 52.5 $ 7.63 49.6 $ 4.87 8.1 $4.54 7.2 $ 4.45
Granted.................... 9.1 27.70 8.7 21.86 45.1 4.92 1.3 4.96
Exercised.................. (4.3) 3.87 (5.6) 4.03 (2.9) 4.14 -- --
Canceled................... (.1) 18.16 (.2) 9.44 (.7) 7.49 (.4) 4.07
---- ---- ---- ---
Options and warrants
outstanding at end of
period................... 57.2 11.26 52.5 7.63 49.6 4.87 8.1 4.54
==== ==== ==== ===
Options and warrants
exercisable at
period-end............... 36.4 5.33 38.5 4.12 39.9 3.50 4.3 4.33
Options available for
future grants............ 19.3 7.9 4.3 5.7
</TABLE>
The following table summarizes information about outstanding and
exercisable stock options and warrants at December 31, 1996:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
-------------------------------------------- -------------------------
WEIGHTED-AVERAGE
REMAINING WEIGHTED-AVERAGE WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES SHARES CONTRACTUAL LIFE EXERCISE PRICE SHARES EXERCISE PRICE
- ------------------------ ------ ---------------- ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
$ 1.05 - $ 2.75.......... 24.1 1.22 $ 2.37 23.3 $ 2.40
2.95 - 12.38.......... 17.8 5.15 7.28 14.1 6.10
12.88 - 33.75.......... 10.6 9.38 20.21 1.1 15.76
---- ----
1.05 - 33.75.......... 52.5 4.20 7.63 38.5 4.12
==== ====
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" in accounting for stock-based employee
compensation arrangements whereby no compensation cost related to stock options
is deducted in determining net income (loss). Had compensation cost for the
Company's stock option plans been determined pursuant to SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's supplemental pro forma
net loss and pro forma net loss per share would have increased accordingly.
Using the Black-Scholes option pricing model for all options granted after
December 31, 1994, the Company's supplemental pro forma net loss, supplemental
pro forma net loss per share and supplemental pro forma weighted average fair
value of options granted, with related assumptions, are as follows for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Supplemental pro forma net loss.... ................. $(47.3) $(1.6)
Supplemental pro forma net loss per share ........... (.17) (.01)
Supplemental pro forma weighted average fair value
of options granted................................. 9.80 5.28
Risk free interest rates............................. 5.98% - 6.17% 5.98% - 6.17%
Expected lives....................................... 5-7 years 5-7 years
Expected volatility.................................. 40% 40%
</TABLE>
F-45
<PAGE> 46
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
In 1992, the Company received notices from Imperial County, California (the
"County") and the California Department of Toxic Substances Control ("DTSC")
that spent filter elements (the "Filters") from geothermal power plants, which
had been deposited at the Company's Imperial Landfill for approximately five
years, were classified as hazardous waste under California environmental
regulations. Under United States EPA regulations, the Filters are not deemed
hazardous waste as they are associated with the production of geothermal energy.
The Company is currently conducting active discussions with all appropriate
California regulatory agencies in order to obtain a variance under California
regulations to reclassify the Filters as a special waste so they may be left in
the landfill. If this occurs, the State, regional and local regulatory agencies
may nevertheless require that the affected area of the landfill be capped and
closed. In the event that the variance is not granted, remedial measures may be
required based on the Filters' classification as a California hazardous waste.
One of those measures could include the removal of the Filters or the closure of
a portion of the landfill.
Management is currently unable to determine (i) whether the waste will
ultimately be classified as hazardous, (ii) if so, what action, if any, will be
required as a result of this issue or (iii) what liability, if any, the Company
will have as a result of this inquiry. In January 1994, the Company filed suit
in the United States District Court for the Southern District of California
against the known past and present owners and operators of the geothermal power
plants for all losses, fines and expenses incurred by the Company associated
with the resolution of this matter. This suit was settled in November 1996
without material impact on the Company's supplemental consolidated financial
position, results of operations or cash flows.
The Company's solid waste and environmental services activities are
conducted in the context of a developing and changing statutory and regulatory
framework, aggressive government enforcement and a highly visible political
environment. Governmental regulation of the waste management industry requires
the Company to obtain and retain numerous governmental permits to conduct
various aspects of its operations. These permits are subject to revocation,
modification or denial. The costs and other capital expenditures which may be
required to obtain or retain the applicable permits or comply with applicable
regulations could be significant.
By letter dated January 11, 1996, Acme Commercial Corp. d/b/a CarMax, The
Auto Superstore, ("CarMax") accused AutoNation of infringing CarMax's trademark
rights by using the marks AutoNation USA and "The Better Way to Buy a Car."
AutoNation denied such allegations and on February 5, 1996, filed suit in the
U.S. District Court for the Southern District of Florida seeking a declaratory
judgment that AutoNation's use and registration of such marks do not violate any
of the rights of CarMax. On or about October 11, 1996, CarMax filed a
counterclaim against AutoNation seeking unspecified damages and an order
enjoining AutoNation from using certain marks, including the marks AutoNation
USA and "The Better Way to Buy a Car." In February 1997, AutoNation filed a
motion for partial summary judgment on CarMax's dilution claim under Florida
law. A trial has been set for June 1998. Although it is impossible to predict
the outcome of this litigation, the Company believes that AutoNation has a valid
basis for its complaint and that CarMax's allegations and counterclaims are
without merit.
While the results of the legal and environmental proceedings described
above and other proceedings which arose in the normal course of business cannot
be predicted with certainty, management believes that losses, if any, resulting
from the ultimate resolution of these matters will not have a material adverse
effect on the Company's supplemental consolidated results of operations, cash
flows or financial position. However, unfavorable resolution of each matter
individually or in the aggregate could affect the supplemental consolidated
results of operations or cash flows for the quarterly periods in which they are
resolved.
F-46
<PAGE> 47
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company maintains general liability and property insurance and an
umbrella and excess liability policy in amounts it considers adequate and
customary for businesses of its kind. However, there can be no assurance that
the Company will not experience legal claims in excess of its insurance coverage
or claims which are ultimately not covered by insurance.
LEASE COMMITMENTS
The Company and its subsidiaries lease real property, equipment and
software under various operating leases with terms from 1 to 20 years. The
Company has also entered into various airport concession and permit agreements
which generally provide for payment of a percentage of revenue from vehicle
rentals with a guaranteed minimum lease obligation.
Expenses under real property, equipment and software leases and airport
concession agreements (excluding amounts charged through to customers) for the
years ended December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Real property.......................................... $ 51.6 $ 40.2 $ 28.9
Equipment and software................................. 23.8 24.9 22.9
Airport concession and permit fees:
Minimum fixed obligations............................ 89.6 68.0 36.3
Additional amounts, based on revenue from vehicle
rentals........................................... 94.5 60.1 27.6
------ ------ ------
Total........................................ $259.5 $193.2 $115.7
====== ====== ======
</TABLE>
Future minimum lease obligations under noncancelable real property,
equipment and software leases and airport agreements with initial terms in
excess of one year at December 31, 1996 are as follows:
<TABLE>
<S> <C>
Year Ending December 31:
1997................................................... $102.6
1998................................................... 83.2
1999................................................... 55.5
2000................................................... 35.0
2001................................................... 21.8
Thereafter............................................. 125.4
------
$423.5
======
</TABLE>
In August 1995, the Company entered into a ten-year lease agreement for
Alamo's Fort Lauderdale, Florida corporate headquarters facility. In December
1996, the Company acquired the headquarters facility for approximately $23.5
million, including the assumption of debt totaling approximately $22.7 million
which was repaid by the Company in January 1997.
OTHER MATTERS
In the normal course of business, the Company is required to post
performance bonds, letters of credit, and/or cash deposits as a financial
guarantee of the Company's performance. To date, the Company has satisfied
financial responsibility requirements for regulatory agencies by making cash
deposits, obtaining bank letters of credit or by obtaining surety bonds. At
December 31, 1996, letters of credit and surety bonds totaling $284.1 million
expire through October 1999.
9. INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Income (loss) per common and common equivalent share are based on the
combined weighted average number of common shares and common share equivalents
outstanding which include, where appropriate, the assumed exercise or conversion
of warrants and options. In computing income per common and common equivalent
share from continuing operations before extraordinary charge, the Company has
utilized the treasury stock method.
F-47
<PAGE> 48
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The computation of weighted average common and common equivalent shares
used in the calculation of fully diluted income per share from continuing
operations before extraordinary charge, which is substantially the same as
the computation used to calculate primary income per share from continuing
operations before extraordinary charge is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
------------------ -------------------------
1997 1996 1996 1995 1994
------- ------- ----- ----- -----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Common shares outstanding................................. 358.7 265.4 306.3 257.5 167.3
Common equivalent shares.................................. 61.6 49.6 58.1 53.8 1.2
Weighted average treasury shares purchased................ (22.6) (16.5) (15.2) (7.6) .3
Effect of using weighted average common and common
equivalent shares outstanding........................... (14.3) (5.7) (25.8) (74.1) (3.2)
----- ----- ----- ----- -----
383.4 292.8 323.4 229.6 165.6
===== ===== ===== ===== =====
</TABLE>
For the years ended December 31, 1996 and 1995, the weighted-average
effect of common stock equivalents of approximately 37.1 million and
17.4 million shares, respectively, has been excluded from the computations of
the extraordinary charge per share and net loss per share in 1996 and the net
loss from discontinued operations per share in 1995 since they are
anti-dilutive.
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" which
establishes standards for computing and presenting earnings per share ("EPS").
This Statement replaces primary and fully diluted EPS with basic and diluted
EPS. Basic EPS excludes dilution and is computed by dividing net income by the
weighted average common shares outstanding during the period. Diluted EPS is
computed similar to fully diluted EPS pursuant to Accounting Principles Board
Opinion No. 15. SFAS No. 128 is effective for both interim and annual periods
ending after December 15, 1997. Earlier application is not permitted. The
Company's pro forma basic and diluted EPS computed under SFAS No. 128 are as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
------------------ -------------------------
1997 1996 1996 1995 1994
----- ----- ------ ----- -----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Basic:
Income (loss) from continuing operations................ $ .09 $ .06 $ (.10) $ .15 $ .25
Net income (loss)....................................... .09 .06 (.10) .03 .24
Diluted:
Income (loss) from continuing operations................ $ .08 $ .06 $ (.10) $ .14 $ .25
Net income (loss)....................................... .08 .06 (.10) .03 .23
</TABLE>
10. RESTRUCTURING, MERGER AND OTHER NON-RECURRING EXPENSES
During the year ended December 31, 1996, the Company recorded one-time
pre-tax charges of approximately $95.5 million related primarily to the
integration of the operations of Alamo into those of the Company. Also included
in these charges are merger expenses associated with the acquisitions of Alamo,
Addington and Continental. Approximately $38.3 million of such expenses appear
as restructuring and merger expenses with the remainder of approximately $57.2
million included in automotive rental operating expenses and selling, general
and administrative expenses in the Company's Supplemental Consolidated
Statements of Operations for the year ended December 31, 1996. These costs
primarily include asset write-offs, severance benefits, accounting and legal
merger costs and changes in various estimated reserve requirements.
In 1995, the Company recorded a $3.3 million pre-tax charge related to the
closing of a subsidiary's headquarters office in Indianapolis, Indiana. The
major components of the charge include severance costs, future contractual
payments required under pre-existing contracts and other costs related to the
write-off of equipment and other obligations related to the physical closure of
the office.
11. DISCONTINUED OPERATIONS
In 1995, the Company implemented a formal plan to dispose of all of its
mining and citrus operations. These discontinued operations consisted primarily
of the following: coal mining, mining equipment manufacturing and licensing,
citrus properties in Belize, precious and industrial metals mining and
incidental limestone properties. The Company initially recorded a loss on the
disposal of the discontinued operations of approximately $30.5 million (net of
income tax benefits of approximately $10.0 million) which represents the
estimated loss on the disposal of such operations and a provision of
approximately $2.0 million for expected operating losses through the final
disposition of such operations. See Note 14, Related Party Transactions, for
discussion of the disposition of the Company's mining and citrus operations.
In 1994, the Company announced the contemplation of a plan to spin-off
RESI, its hazardous waste services segment. In April 1995, Republic shareholders
received one share of common stock of RESI for every ten shares of Common Stock
of Republic owned in connection with the spin-off of RESI. Approximately 5.4
million RESI shares were distributed to Republic shareholders (the
"Distribution"). In connection with the Distribution, the Company contributed
the intercompany balance to RESI's equity and contributed approximately $2.5
million to RESI to repay RESI's indebtedness and to provide working capital to
RESI. Additionally, the Company reclassified approximately $36.3 million to
retained earnings from additional paid-in capital to effect the spin-off under
Delaware law. As a result of these transactions, the Company's equity at the
date of the Distribution was reduced by approximately $23.6 million.
The Company has sold or spun-off all of its subsidiaries included in
discontinued operations, hence fully disposing of all mining and citrus and
hazardous waste operations. Upon ultimate disposal of its discontinued
operations, the Company determined its initial estimates did not require
adjustment. The recorded transactions reflect the disposal of all of the
Company's hazardous waste and mining and citrus segments and,
F-48
<PAGE> 49
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accordingly, the operating results of these segments have been classified as
discontinued operations for all periods presented in the accompanying
Supplemental Consolidated Financial Statements.
12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, investments, receivables,
other assets (excluding goodwill, intangibles and deferred costs), accounts
payable and accrued liabilities (nonderivatives) approximates fair value because
of the short maturity of these instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment, and therefore cannot be determined with precision. The assumptions
used have a significant effect on the estimated amounts reported.
The Company has interest protection agreements with several counterparties
to manage the impact of interest rate changes. The estimated fair values of the
interest protection agreements were determined from dealer quotations and
represent the discounted future cash flows through maturity or expiration using
current rates, and are effectively the amounts the Company would pay or receive
to terminate the agreements. The estimated fair values of the interest rate
protection agreements at December 31, 1996 and 1995 was a net payable position
of $.7 million and $9.7 million, respectively.
The estimated fair value of fixed rate mortgages payable at December
31, 1996 and 1995 was approximately $34.0 million and $114.0 million,
respectively which approximates the carrying value. The estimated fair values
were derived by discounting expected cash flows at the rates then offered to
the Company for debt of similar terms and remaining maturities. The fair value
of the Company's medium-term notes payable is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities. The estimated fair
value of the medium-term notes payable was $792.8 million as of December 31,
1996. The carrying amount of the remaining debt approximates fair value
because interest rates are variable and, accordingly, approximate current
market rates.
In September 1996, the Agreement and Plan of Amalgamation, dated as of July
1, 1996 and amended as of July 15, 1996 (the "ADT Agreement") by and among the
Company, R.I./Triangle, Ltd. and ADT, which provided for the acquisition of ADT
by the Company, was terminated by mutual agreement of the parties. In connection
with the execution of the ADT Agreement, ADT granted to the Company the ADT
Warrant to purchase 15.0 million common shares of ADT at a purchase price $20
per share (which approximated fair market value). The Company estimated the fair
value of the ADT Warrant at December 31, 1996 to be approximately $5.7 million
based upon an option pricing model calculation, which approximated the carrying
value. In March 1997, the Company exercised the ADT Warrant. See Note 1, Summary
of Significant Accounting Policies--Marketable Securities.
13. BUSINESS AND CREDIT CONCENTRATIONS
AUTOMOTIVE RENTAL INDUSTRY
At December 31, 1996 the Company had 491 corporate owned vehicle rental
facilities throughout the United States. The Company also had 31 corporate owned
vehicle rental facilities in the United Kingdom, 25 in Germany, 4 in
Switzerland, 82 in Canada, 1 in Belgium and 2 in The Netherlands. In addition to
its corporate owned locations, the Company's licensee network operates 284
locations throughout Europe, Latin America, the Caribbean, and the Pacific. The
automotive rental industry in which the Company operates is highly seasonal.
Trade receivables at December 31, 1996 and 1995 include $68.3 million and
$59.3 million, respectively from travel agents and tour operators. Of the travel
agent and tour operator receivable balances, $25.4 million
F-49
<PAGE> 50
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and $25.6 million at December 31, 1996 and 1995, respectively, are maintained
outside the United States. The Company holds minimum collateral in the form of
cash, letters of credit or insurance from most of these vendors. The Company
continually evaluates the credit risk of these customers and believes that the
allowance for doubtful accounts relative to its trade receivables is adequate.
At December 31, 1996 and 1995, the Company had vehicle receivables from
manufacturers of $125.4 million and $65.0 million, respectively. Of the
receivable balances from manufacturers, $16.9 million and $12.7 million are
maintained outside the United States. Vehicle receivables also include amounts
due from renters for damages incurred on revenue earning vehicles.
The Company enters into vehicle repurchase programs with one principal
vehicle manufacturer, as well as other vehicle manufacturers. During model year
1996, the Company purchased 71% of its vehicle fleet under repurchase programs
with one vehicle manufacturer.
AUTOMOTIVE RETAIL, SOLID WASTE SERVICES AND ELECTRONIC SECURITY SERVICES
INDUSTRIES
Concentrations of credit risk with respect to trade receivables related to
the Company's automotive retail, solid waste services and electronic security
services segments are limited due to the wide variety of customers and markets
in which the Company's products are sold and services are provided as well as
their dispersion across many different geographic areas in the United States. As
a result, at December 31, 1996, the Company does not consider itself to have any
significant concentrations of credit risk in the solid waste services,
electronic security services and automotive retailing segments.
14. RELATED PARTY TRANSACTIONS
As of December 31, 1996, approximately $247.5 million was due from
AutoNation pursuant to a loan agreement whereby the Company agreed to provide
advances at an interest rate of LIBOR plus 2% to fund AutoNation's cash flow
requirements. Interest income recognized on such advances was approximately $5.6
million for the year ended December 31, 1996. In addition, on behalf of
AutoNation, the Company has guaranteed certain lease obligations and the
residual value related to a portfolio of properties leased by AutoNation under a
$150.0 million operating lease facility. At December 31, 1996, annual lease
obligations were approximately $2.6 million through the year 2001 and the
residual value guaranty was approximately $37.6 million. In April 1997, the
operating lease facility was increased to $500.0 million.
The Company purchased approximately $631.3 million, $351.8 million and
$551.2 million of revenue earning vehicles from a group of automotive
dealerships owned primarily by a former director of Alamo during the years ended
December 31, 1996, 1995 and 1994, respectively. Pursuant to an automobile
purchase agreement, the Company agreed to purchase and/or lease a minimum number
of vehicles and pay to these automotive dealerships a specific amount (in
addition to the manufacturer's sales price) for each vehicle purchased.
In September 1995, the Company entered into a stock purchase agreement with
Addington Enterprises, Inc. (a company f/k/a Addington Acquisition Company,
Inc., owned by certain former shareholders of Addington; collectively, the
"Addington Brothers") whereby the Company would receive $30.0 million, subject
to a working capital adjustment, in exchange for all the issued and outstanding
shares of common stock of its subsidiaries, Addington Mining, Inc., Mining
Technologies Inc., Addwest Mining, Inc. and Addington Coal Holding, Inc. This
transaction closed in November 1995, at which time the proceeds received were
used by the Company to pay down certain borrowings under a revolving line of
credit.
Included in the transaction described above and pursuant to an option
agreement, in August 1995 the Company sold to the Addington Brothers all the
issued and outstanding shares of common stock of its subsidiary, Tennessee
Mining, Inc. According to the terms of the option agreement, the Addington
Brothers will pay the Company a royalty based on tons of coal delivered under a
certain coal sales contract, up to a maximum aggregate royalty of $12.5 million.
F-50
<PAGE> 51
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In September 1995, the Company entered into an agreement to sell all of the
issued and outstanding shares of common stock of its subsidiary, Belize River
Fruit Co., to the Addington Brothers in exchange for .9 million shares of Common
Stock of the Company owned by such shareholders. This transaction was
consummated in November 1995, at which time the Company acquired and retired the
.9 million shares valued at $13.6 million. The Company retained no obligations
in connection with the sales and has fully divested its investment in its citrus
operations.
15. OPERATIONS BY INDUSTRY SEGMENT
The Company is a diversified holding company with major business operations
in the automotive rental, automotive retail, solid waste services and
electronic security services industries. The Company operates primarily in the
United States.
The following table presents financial information regarding the Company's
different industry segments as of and for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Automotive rental................................ $ 2,618.4 $ 1,919.5 $ 1,245.2
Automotive retail................................ 2,239.2 1,668.4 1,434.3
Solid waste services............................. 701.2 450.4 317.9
Electronic security services..................... 85.3 49.8 41.9
---------- ---------- ----------
$ 5,644.1 $ 4,088.1 $ 3,039.3
========== ========== ==========
Operating income (loss):
Automotive rental................................ $ (20.6) $ (11.1) $ 36.2
Automotive retail................................ 14.0 23.3 20.9
Solid waste services............................. 93.7 63.1 42.7
Electronic security services..................... 14.5 8.6 2.4
Corporate........................................ (31.8) (4.3) (3.0)
---------- ---------- ----------
$ 69.8 $ 79.6 $ 99.2
========== ========== ==========
Depreciation and amortization:
Automotive rental................................ $ 789.3 $ 586.0 $ 379.0
Automotive retail................................ 7.1 6.2 5.4
Solid waste services............................. 58.9 44.6 35.0
Electronic security services..................... 10.8 4.9 4.1
---------- ---------- ----------
$ 866.1 $ 641.7 $ 423.5
========== ========== ==========
Capital expenditures, purchases of revenue earning
vehicles and investment in subscriber accounts:
Automotive rental................................ $ 4,740.4 $ 3,217.8 $ 3,363.6
Automotive retail................................ 55.9 45.1 8.5
Solid waste services............................. 128.2 146.0 112.7
Electronic security services..................... 53.0 17.5 18.3
---------- ---------- ----------
$ 4,977.5 $ 3,426.4 $ 3,503.1
========== ========== ==========
Assets:
Automotive rental................................ $ 4,736.0 $ 3,906.5 $ 2,352.5
Automotive retail................................ 1,309.2 467.1 357.3
Solid waste services............................. 574.7 840.2 466.1
Electronic security services..................... 43.6 43.8 34.4
Net assets of discontinued operations............ -- -- 86.2
---------- ---------- ----------
$ 6,663.5 $ 5,257.6 $ 3,296.5
========== ========== ==========
</TABLE>
F-51
<PAGE> 52
REPUBLIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The Company's automotive rental operations and particularly the leisure
travel segment is highly seasonal. In these operations, the third quarter which
includes the peak summer travel months has historically been the strongest
quarter of the year. During the peak season the Company increases its rental
fleet and workforce to accommodate increased rental activity. As a result, any
occurrence that disrupts travel patterns during the summer period could have a
material adverse effect on the annual performance of this segment. The first
quarter for the Company's automotive rental operations is generally the weakest,
when there is limited leisure family travel and a greater potential for adverse
weather conditions. Many of the operating expenses such as rent, general
insurance and administrative personnel are fixed and cannot be reduced during
periods of decreased rental demand.
The third and fourth quarters of 1996 included one-time pre-tax charges of
approximately $7.6 million and $87.9 million, respectively, as described in Note
10, Restructuring, Merger and Other Non-Recurring Expenses. The fourth quarter
of 1996 also included an extraordinary charge of approximately $31.6 million,
net of income tax benefit, related to the early extinguishment of debt as
described in Note 4, Long-Term Debt and Notes Payable.
The following is an analysis of certain items in the Supplemental
Consolidated Statements of Operations by quarter for 1996 and 1995. Quarterly
amounts have been restated from amounts previously reported in Form 10-Q for
significant business combinations accounted for under the pooling of interests
method of accounting.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue................................. 1996 $ 1,218.4 $ 1,422.8 $ 1,440.0 $ 1,562.9
1995 771.9 922.6 1,198.0 1,195.6
Operating income (loss)................. 1996 $ 34.0 $ 56.6 $ 78.9 $ (99.7)
1995 (3.1) 17.2 75.2 (9.7)
Income (loss) from continuing operations
before extraordinary charge........... 1996 $ 16.7 $ 28.7 $ 41.2 $ (84.5)
1995 (7.8) 4.7 38.9 (4.3)
Income (loss) per share from
continuing operations before
extraordinary charge.................. 1996 $ .06 $ .09 $ .13 $ (.28)
1995 (.05) .02 .16 (.02)
Net income (loss)....................... 1996 $ 16.7 $ 28.7 $ 41.2 $ (116.1)
1995 (6.3) 7.0 11.1 (5.4)
</TABLE>
F-52
<PAGE> 53
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To AutoNation Incorporated:
We have audited the accompanying consolidated balance sheets of AutoNation
Incorporated (a Florida corporation and wholly owned subsidiary of Republic
Industries, Inc.) and subsidiaries as of December 29, 1996 and December 31,
1995 and the related consolidated statements of operations, stockholders'
(deficit) equity and cash flows for the 52-week period ended December 29, 1996
and for the period from inception (September 12, 1995) to December 31, 1995.
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AutoNation
Incorporated and subsidiaries as of December 29, 1996 and December 31, 1995 and
the results of their operations and their cash flows for the 52-week period
ended December 29, 1996 and for the period from inception (September 12, 1995)
to December 31, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
February 28, 1997.
F-53
<PAGE> 54
AUTONATION INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
------
December 29, December 31,
1996 1995
--------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,545,787 $ 11,486,865
Accounts receivable 12,096,256 -
Vehicle inventories, net 66,257,779 -
Other current assets 547,533 -
--------------- -------------
Total current assets 80,447,355 11,486,865
PROPERTY and EQUIPMENT, at cost:
Land 96,474,167 -
Buildings and improvements 51,830,652 -
Furniture, fixtures and equipment 27,896,787 444,480
Construction in progress 21,660,776 1,395,407
--------------- -------------
197,862,382 1,839,887
Less: accumulated depreciation and amortization (1,197,714) -
--------------- -------------
Net property and equipment 196,664,668 1,839,887
--------------- -------------
$ 277,112,023 $ 13,326,752
=============== =============
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
----------------------------------------------
CURRENT LIABILITIES:
Cash overdraft $ 18,760,740 $ -
Accounts payable 5,495,512 741,230
Accrued liabilities 11,678,586 44,754
Loan payable to related party 247,472,082 -
--------------- -------------
Total current liabilities 283,406,920 785,984
STOCKHOLDERS' (DEFICIT) EQUITY:
Common stock, $.001 par value per share; 200,000,000 shares
authorized and 80,200,000 and 79,300,000 shares issued and
outstanding as of December 29, 1996 and December 31, 1995,
respectively 80,200 79,300
Additional paid-in capital 52,049,800 79,220,700
Accumulated deficit (58,424,897) (3,063,732)
--------------- -------------
(6,294,897) 76,236,268
Less: Subscription receivable - (63,695,500)
--------------- -------------
(6,294,897) 12,540,768
--------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 8)
$ 277,112,023 $ 13,326,752
=============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-54
<PAGE> 55
AUTONATION INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period From
Inception
52-Week (September 12,
Period Ended 1995) to
December 29, December 31,
1996 1995
------------- -------------
<S> <C> <C>
SALES $ 31,464,424 $ -
COSTS OF SALES, including floor plan interest expense
for the 52-week period ended December 29, 1996 of
$583,721 42,801,095 -
------------- -------------
Gross margin (11,336,671) -
OPERATING EXPENSES
Selling and store operating 11,837,751 -
Store pre-opening 1,759,928 -
General and administrative 24,863,967 3,063,732
------------- -------------
Total operating expenses 38,461,646 3,063,732
------------- -------------
Operating loss (49,798,317) -
------------- -------------
INTEREST EXPENSE 5,562,848 -
------------- -------------
NET LOSS $ (55,361,165) $ (3,063,732)
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-55
<PAGE> 56
AUTONATION INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE 52-WEEK PERIOD ENDED DECEMBER 29, 1996 AND
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 12, 1995) TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- Paid-In Accumulated Subscription
Shares Amount Capital Deficit Receivable Total
------------ ------------ ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
INITIAL CAPITALIZATION,
September 12, 1995 79,300,000 $ 79,300 $ 79,220,700 $ -- $(79,300,000) $ --
CAPITAL CONTRIBUTIONS -- -- -- -- 15,604,500 15,604,500
NET LOSS -- -- -- (3,063,732) -- (3,063,732)
----------- ------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1995 79,300,000 79,300 79,220,700 (3,063,732) (63,695,500) 12,540,768
ADDITIONAL CONTRIBUTIONS 900,000 900 899,100 -- (900,000) --
CAPITAL CONTRIBUTIONS -- -- -- -- 36,525,500 36,525,500
CANCELLATION OF SUBSCRIPTION
RECEIVABLE -- -- (28,070,000) -- 28,070,000 --
NET LOSS -- -- -- (55,361,165) -- (55,361,165)
----------- ------------ ------------ ------------ ------------ ------------
BALANCE, December 29, 1996 80,200,000 $ 80,200 $ 52,049,800 $(58,424,897) $ -- $ (6,294,897)
=========== ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-56
<PAGE> 57
AUTONATION INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period From
Inception
52-Week (September 12,
Period Ended 1995) to
December 29, December 31,
1996 1995
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (55,361,165) $ (3,063,732)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,197,714 -
Increase in vehicle inventories (66,257,779) -
Increase in accounts receivable (12,096,256) -
Increase in other current assets (547,533) -
Increase in cash overdraft 18,760,740 -
Increase in accounts payable 4,754,282 741,230
Increase in accrued liabilities 15,705,914 44,754
------------- -------------
Net cash used in operating activities (93,844,083) (2,277,748)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (196,022,495) (1,839,887)
------------- -------------
Net cash used in investing activities (196,022,495) (1,839,887)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan payable to related party 243,400,000 -
Capital contributions 36,525,500 15,604,500
Proceeds from vehicle financing with related party 40,309,941 -
Repayment of vehicle financing with related party (40,309,941) -
------------- -------------
Net cash provided by financing activities 279,925,000 15,604,500
------------- -------------
Net increase(decrease) in cash and equivalents (9,941,078) 11,486,865
------------- -------------
CASH AND EQUIVALENTS, beginning of period 11,486,865 -
------------- -------------
CASH AND EQUIVALENTS, end of period $ 1,545,787 $ 11,486,865
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-57
<PAGE> 58
AUTONATION INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 29, 1996
(1) ORGANIZATION:
AutoNation Incorporated and subsidiaries (collectively, the "Company") is a
Florida corporation, which had been in the development stage during the period
September 12, 1995 ("Inception") to March 1, 1996. The Company was formed
pursuant to a Stockholders' Agreement among the Company, H. Wayne Huizenga
("Huizenga"), JM Family Enterprises, Inc. ("Enterprises") and Steven R. Berrard
("Berrard"), collectively, the "Shareholders", and certain subscribers
discussed further in Note 4. The Company is engaged in developing, establishing
and operating a nationwide chain of retail stores to purchase, recondition,
sell, finance and service used vehicles.
Since Inception, the Company has been principally engaged in organizational and
business activities associated with the opening of several retail stores in the
future, the first opening of which occurred in March 1996. In connection with
these activities, the Company has purchased and/or entered into lease
agreements for certain land sites which will serve as locations for future
retail stores. As of December 29, 1996, the Company had eight retail locations
in operation. The eight sites that have opened and are operating as of December
29, 1996 are as follows:
Type Location Date Opened
---- -------- -----------
ValuStop Orlando, FL 1st Quarter, 1996
ValuStop Arlington, TX 2nd Quarter, 1996
ValuStop Ft. Lauderdale, FL 3rd Quarter, 1996
AutoNation USA (TM) Ft. Lauderdale, FL 4th Quarter, 1996
AutoNation USA (TM) Houston, TX 4th Quarter, 1996
AutoNation USA (TM) Houston, TX 4th Quarter, 1996
AutoNation USA (TM) Dallas, TX 4th Quarter, 1996
AutoNation USA (TM) Phoenix, AZ 4th Quarter, 1996
In May 1996, the Company and the Shareholders' entered into a definite Merger
Agreement (the "Agreement") with Republic Industries, Inc. ("Republic") and a
wholly owned subsidiary of Republic. Republic's Chairman and Co-Chief Executive
Officers and certain other officers and directors of Republic are stockholders
of the Company. On January 16, 1997, a Special Meeting of Stockholders of
Republic was held in which the merger of the Company into Republic was
approved. Pursuant to the Agreement, an aggregate of 17,467,248 shares of $.01
par value per share, Republic common stock was issued in exchange for all of
the issued and outstanding shares of common stock of the Company. Based on
80,200,000 shares of the Company's common stock issued and outstanding as of
the Closing, each share of the Company's common stock has been converted into a
0.217796 share of Republic's common stock.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FISCAL YEAR
The Company's fiscal year is a 52- or 53-week period ending on the Sunday
nearest to December 31. Fiscal year 1996, which ended December 29, 1996,
consisted of 52 weeks.
F-58
<PAGE> 59
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
balances have been eliminated in consolidation.
CASH EQUIVALENTS
The Company considers all highly liquid investments with purchased maturities
of three months or less to be cash equivalents.
VEHICLE INVENTORIES
Vehicle inventories consist of retail vehicles held for sale using the specific
identification method. Cost includes the cost of the vehicle, including
acquisition, reconditioning and transportation costs. Parts and accessories are
valued at the lower of cost or market, using the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for major additions
and improvements are capitalized, while minor replacements, maintenance and
repairs are charged to expense as incurred. The Company's buildings and
improvements, and furniture, fixtures and equipment are depreciated using the
straight-line method over the estimated useful lives of the assets. The
estimated lives are: 40 years for buildings and improvements, and 5 to 10 years
for furniture, fixtures and equipment. The cost of purchased software and
associated consulting fees is amortized on a straight-line basis over periods
ranging from 3 to 10 years, the estimated useful lives of the related software.
REVENUE RECOGNITION
Revenue consists of sales of used vehicles and parts and service. The Company
recognizes revenue when products are sold or services are provided.
STORE PRE-OPENING COSTS
Non-capital expenditures associated with opening new stores are charged to
expense as incurred.
ADVERTISING
The Company expenses the cost of advertising as incurred or when such
advertising initially takes place. No advertising costs were capitalized at
December 29, 1996 or December 31, 1995. Advertising expense was $6,396,925 for
the 52-week period ended December 29, 1996.
USE OF ESTIMATES
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 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.
Actual results could differ from those estimates.
F-59
<PAGE> 60
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments primarily consist of cash, accounts
receivable, accounts payable, accrued liabilities and loan payable to related
party, each of which approximates fair market value due to their short-term
nature.
RECLASSIFICATIONS
Certain reclassifications have been made to the consolidated balance sheet as
of December 31, 1995 to conform to the December 29, 1996 presentation.
(3) CAPITALIZATION:
Pursuant to the Stockholders' Agreement and related subscription agreements
discussed in Note 4, the Board of Directors (the "Board") of the Company
determined the amount of capital required by the Company to commence
operations. The Stockholders and the Subscribers (see Note 4) (together, the
"Investors") were obligated to make capital contributions not to exceed
$80,200,000 in the aggregate, consistent with the business plan budgets adopted
by the Stockholders. The Investors have made capital contributions of
$52,130,000 and $15,604,500 for the 52-week period ended December 29, 1996 and
for the period from inception to December 31, 1995, respectively.
In the event any investor failed to make any additional capital contributions
described above (the "Defaulting Investor"), the Stockholders (other than a
Stockholder which is a Defaulting Investor) had the right, but not the
obligation, to contribute, in proportion to their respective common shares or as
mutually agreed, the additional funds required to be contributed by the
Defaulting Investor.
If such default occurred when the total capital of the Company contributed by
the Investors was less than $80,200,000 (and with respect to all required
additional capital up to $80,200,000), all funds then contributed to the Company
by the contributing Investors were treated as equity and/or debt, as determined
by the Board.
The Company legally issued 80,200,000 and 79,300,000 shares of common
stock which were outstanding at December 29, 1996 and December 31, 1995,
respectively. The Stockholders were obligated to make capital contributions for
58,195,000 of the issued and outstanding shares, of which 20,368,250 and
45,756,250 at December 29, 1996 and December 31, 1995, respectively, of such
issued and outstanding shares were being held in escrow pursuant to subscription
agreements to be released from escrow to the respective Stockholders as payments
were made. The Subscribers signed subscription commitments for 22,005,000 and
21,105,000 shares (see Note 4).
(4) CAPITAL SUBSCRIPTION COMMITMENTS:
The Stockholders of the Company assigned to certain subscribers a portion of
their rights to acquire shares of the Company's common stock at the same price
paid by the assigning Stockholder. In addition to these subscribers, certain key
executive officers, management and consultants (collectively, the "Subscribers")
signed Subscription Agreements to acquire shares of the Company's common stock.
F-60
<PAGE> 61
As of December 29, 1996 and December 31, 1995, the Subscribers had subscription
commitments for 22,005,000 and 21,105,000 shares, respectively, of which
7,701,750 and 17,939,250 at December 29, 1996 and December 31, 1995,
respectively, of such issued and outstanding shares were being held in escrow
pursuant to subscription agreements and were released from escrow to the
respective subscribers as payments are made. The Subscribers were required
to pay 15% of the commitment at the time the Subscription Agreement was
finalized. At December 29, 1996 and December 31, 1995, all Subscription
Agreements have been signed and the Company has received $14,303,250 and
$3,165,750, respectively. As a result of the consummation of the Agreement,
these subscription commitments were no longer required and are reflected as
canceled as of December 29, 1996.
(5) STOCK OPTION PLAN:
The Company adopted the 1995 Employee Stock Option Plan (the "Plan") which
is a qualified, incentive stock option plan offering certain present and future
key employees and officers and independent contractors an opportunity to become
Investors of the Company. The Board is responsible for the administration of
the Plan and may grant options to purchase shares of the Company's common stock
and issue shares upon exercise of such options as provided in the Plan.
The Board may grant options to purchase up to 3,200,000 shares of common stock.
The maximum number of shares subject to option that can be granted to any
executive officer is 1,000,000 during the first ten years after the effective
date of the Plan and 500,000 shares per year thereafter. The Plan also provides
that the option price will not be less than the fair market value at the time
the option is granted.
Each option shall have a term of not less than five nor more than ten years and
shall become exercisable with respect to 25% of the total number of shares
subject to the options twelve months after the date of its grant and with
respect to each additional 25% at the end of each twelve month period
thereafter during the succeeding three years.
A summary of stock option transactions for the 52-week period ended December
29, 1996 is as follows:
<TABLE>
<CAPTION>
Weighted-
Average
Shares Exercise Price
--------------- ----------------
<S> <C> <C>
Options outstanding at beginning of period 1,105,000 $ 1.00
Granted 872,891 3.37
Exercised - -
Canceled 85,700 3.00
-------------
Options outstanding at end of period 1,892,191 1.96
=============
Options exercisable at period-end 284,500 1.02
Options available for future grants 1,222,109
</TABLE>
F-61
<PAGE> 62
The following table summarizes information about outstanding and exercisable
stock options at December 29, 1996:
<TABLE>
<CAPTION>
Outstanding Exercisable
---------------------------------------------------------------------------------
Weighted-
Average
Remaining Weighted- Weighted-
Contractual Average Average
Shares Life Exercise Price Shares Exercise Price
------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Exercise price:
$1.00 1,340,000 8.82 $ 1.00 282,000 $ 1.00
$3.00 253,866 9.20 3.00 2,500 3.00
$5.36 298,325 9.58 5.36 - 0.00
------------- -----------
$1.00 - $5.36 1,892,191 8.99 1.96 284,500 1.02
============= ===========
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" in accounting for stock-based employee compensation
arrangements whereby no compensation cost related to stock options is deducted
in determining net income (loss). Had compensation cost for the Company's stock
option plan been determined pursuant to SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company's pro forma net loss would have
increased accordingly. Using the Black-Scholes option pricing model for all
options granted after December 31, 1994, the Company's pro forma loss and pro
forma weighted average fair value of options granted, with related assumptions,
are as follows for the 52-week period ended December 29, 1996:
Pro forma net loss $(55,668,194)
Pro forma weighted average fair value of
options granted $1.62
Risk free interest rates 5.98% - 6.17%
Expected lives 5 - 7 years
Expected volatility 40%
In connection with the Merger Agreement, each option granted under the Plan
shall be converted into an option to acquire 0.217796 of a share of Republic
Common Stock. The exercise price per share of Republic Common Stock for all
such converted options equals the product of the exercise price of each option
multiplied by 4.59145. Pursuant to the Merger Agreement, the Plan shall
continue with the same provisions, including vesting schedules, that were in
effect prior to the merger. As of January 16, 1997, in connection with the
approval of the merger of the Company with Republic, all outstanding options to
acquire shares of the Company's common stock were converted to options to
acquire Republic common stock.
(6) INCOME TAXES:
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the recognition of
revenue and expenses for financial and income tax reporting purposes and
between the tax basis of assets and liabilities and their reported amounts in
the financial statements.
F-62
<PAGE> 63
Components of the net deferred income tax asset as of December 29, 1996 and
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Deferred income tax liabilities:
Book basis of property over tax basis $ (174,118) $ -
Deferred income tax assets:
Start-up costs not currently deductible 1,152,750 820,000
Accruals not currently deductible 3,386,225 -
Net operating losses 17,387,841 308,566
------------- -------------
21,752,698 1,128,566
Valuation allowance (21,752,698) (1,128,566)
------------- -------------
Net deferred income tax asset $ - $ -
============= =============
</TABLE>
At December 29, 1996, the Company had available federal net operating loss
carryforwards of approximately $47 million which begin to expire in the year
2010. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The Company has provided a valuation
allowance to offset all of the deferred tax assets due to the uncertainty
surrounding the future realization of such deferred tax assets. Accordingly, no
income tax benefit has been recorded in the accompanying consolidated
statements of operations. The Company adjusts the valuation allowance in the
period management determines it is more likely than not that deferred tax
assets will or will not be realized.
(7) RELATED PARTY TRANSACTIONS:
In connection with the Agreement (see Note 1), the Company has entered into a
Loan Agreement with Republic to provide advances to the Company up to the
amounts specified in a cash flow needs projection delivered by the Company to
Republic. Such advances carry an interest rate of LIBOR plus 2%. The advances
are collateralized by the common stock of AutoNation USA Corporation pledged by
the Company to Republic, all trademarks and other intellectual property of the
Company, and the Company's subscription commitments discussed in Notes 3 and 4.
The advances pursuant to the Loan Agreement mature on June 30, 1997. At
December 29, 1996, the Company had outstanding $247,472,082 pursuant to the
Loan Agreement, including accrued interest payable at $4,072,082 and has
incurred $5,562,848 of interest expense since inception of the Loan Agreement.
The Company made interest payments on these advances of $1,490,766 during the
52-week period ended December 29, 1996.
Pursuant to a management agreement with Republic, the Company manages the
operations of CarChoice, Inc., ("CarChoice") a subsidiary of Republic engaged
in developing and operating used car superstores. In connection with Republic's
acquisition of CarChoice, Republic entered into a Management Agreement with the
Company to manage and operate CarChoice and use the CarChoice facilities for
certain developmental activities until the acquisition of CarChoice was
consummated. Also, pursuant to the Management Agreement, the Company is
required to absorb certain expenses relating to the operations of CarChoice.
For the 52-week period ended December 29, 1996, the Company earned $250,000 in
management fees from Republic and absorbed $1,276,306 of expenses from
CarChoice. Such Agreement was terminated upon consummation of the merger
between the Company and Republic.
F-63
<PAGE> 64
The accounts receivable balance in the accompanying consolidated balance sheet
includes $6,201,331 due from CarChoice, resulting from the procurement of
vehicles on behalf of CarChoice and vehicle sales in the ordinary course of
business.
Enterprises is a diversified automotive corporation engaged in the distribution
of Toyota vehicles in the southeastern United States and other automotive
related services, including retail automotive leasing, retail installment
lending, wholesale floor plan and commercial lending, third-party servicing,
warranty and maintenance contracts, direct write and reinsurance of credit life
and accident and health policies. Pursuant to the Stockholders' Agreement and
the Agreement discussed in Note 1, Enterprises, or its affiliates, has a two
year arrangement to be the "preferred" provider and servicer to the Company of
all retail finance products, vehicle service contracts and insurance products
sold by or through the Company and the preferred provider of wholesale
inventory financing to the Company. Enterprises and its affiliates will
continue to be the preferred provider of these products and services so long as
such products and services are provided on terms which are competitive with
those of third-party providers.
During 1996, the Company entered into a financing arrangement with World Omni
Financial Corp., a wholly owned subsidiary of Enterprises. The financing
arrangement provided up to $50 million in financing at LIBOR plus 2.75% to be
used to finance vehicle inventory and is required to be repaid within a maximum
of 120 days. On October 24, 1996, the Company repaid $40,309,941, to World Omni
Financial Corp., the entire amount due under their vehicle financing
arrangement as of that date. Interest paid under this financing arrangement
totaled $583,721 during the 52-week period ended December 29, 1996. This
financing arrangement has been terminated and the Company intends to finance
its vehicle inventory through the Republic Loan Agreement. Through December 31,
1995, Enterprises did not provide to the Company any of the products or
services described above.
Prior to the formation and capitalization of the Company, Huizenga and
Enterprises incurred direct expenses in connection with the development of the
business. Such expenses of $774,663 have been reimbursed by the Company and are
included in the accompanying consolidated financial statements.
(8) COMMITMENTS AND CONTINGENCIES:
Lease Agreements
The approximate future minimum lease payments under operating leases at
December 29, 1996 are as follows:
1997 $ 2,259,930
1998 2,313,820
1999 2,211,453
2000 2,098,367
2001 1,675,594
Thereafter 2,325,760
--------------
$ 12,884,924
==============
Rent expense for the 52-week period ended December 29, 1996 totaled $962,988.
F-64
<PAGE> 65
During 1996, the Company entered into nine operating lease agreements in which
the Company will lease certain retail locations. The initial lease terms are two
years, with three annual renewal options. Lease payments will began once the
related assets are placed into service and will be equal to the financing costs
of the related leased assets. No locations under these agreements were placed in
service as of December 29, 1996. These leases provide for substantial residual
value guarantees by both the Company and Republic and include purchase options
at the cost of the related leased assets. At December 31, 1996, based upon
current the finance costs of the related leased assets, annual lease obligations
are projected to be $2.6 million and the residual value guarantee was
approximately $37.6 million. The maximum amount of the residual value guarantees
relative to the assets under these leases is projected to be $88 million. In
February 1997, the operating lease facility was increased to $150 million.
LAND PURCHASE AGREEMENTS
The Company has entered into commitments to purchase land sites. At December
29, 1996 these commitments totaled $149,145,229, all of which are contracted to
close in 1997.
LITIGATION
By letter dated January 11, 1996, Acme Commercial Corp. d/b/a CarMax, The Auto
Superstore, ("CarMax") accused the Company of infringing CarMax's trademark
rights by using the marks AutoNation USA and "The Better Way to Buy a Car." The
Company denied such allegations and on February 5, 1996, filed suit in the U.S.
District Court for the Southern District of Florida seeking a declaratory
judgment that the Company's use and registration of such marks do not violate
any of the rights of CarMax. On or about October 11, 1996, CarMax filed a
counterclaim against the Company seeking unspecified damages and an order
enjoining the Company from using certain marks, including the marks AutoNation
USA and "The Better Way to Buy a Car." In February 1997, the Company filed a
motion for partial summary judgment on CarMax's dilution claim under Florida
law. A trial has been set for June 1998. Although it is impossible to predict
the outcome of this litigation, the Company believes it has a valid basis for
its complaint and that CarMax's allegations and counterclaims are without
merit.
F-65
<PAGE> 66
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Grubb Automotive, Inc.
Jack Sherman Chevrolet, Inc.
Lou Grubb Chevrolet, Inc.
Lou Grubb Ford, Inc.
Lou Grubb Saturn, Inc.
Saturn of Tempe, Inc.
We have audited the accompanying combined balance sheets of the corporations
listed in Note 1 (the Company) as of December 31, 1996 and 1995 and the related
combined statements of income, shareholders' equity and cash flows for the years
then ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
corporations listed in Note 1 at December 31, 1996 and 1995, and the combined
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Phoenix, Arizona,
March 31, 1997
F-66
<PAGE> 67
Grubb Automotive
Combined Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
--------------------------
(In thousands)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 5,864 $ 7,471
Receivables, net 10,586 11,817
Due from shareholders -- 654
Inventories 47,586 45,255
Advances to affiliates -- 200
Other current assets 82 152
-------- --------
Total current assets 64,118 65,549
Land, buildings, equipment, and rental and lease vehicles, net 13,685 11,584
Land held for development 875 1,755
Cash surrender value of officers' life insurance, less policy
loans of approximately $294,000 in 1996 and $240,000 in 1995 598 550
Other assets 203 103
-------- --------
$ 79,479 $ 79,541
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 47,718 $ 51,306
Accounts payable 2,448 2,444
Accrued expenses 5,455 4,020
Notes payable to shareholders due within one year 3,650 3,250
Long-term debt due within one year 381 370
-------- --------
Total current liabilities 59,652 61,390
Deferred compensation 740 550
Notes payable to shareholders due after one year 2,575 2,575
Long-term debt due after one year 3,794 4,127
Shareholders' equity:
Common stock 3,025 3,025
Additional paid-in capital 646 646
Retained earnings 10,347 8,528
Less treasury stock, at cost (1,300) (1,300)
-------- --------
Total shareholders' equity 12,718 10,899
-------- --------
$ 79,479 $ 79,541
======== ========
</TABLE>
See accompanying notes.
F-67
<PAGE> 68
Grubb Automotive
Combined Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995
--------------------------
(In thousands)
<S> <C> <C>
REVENUES
Vehicle sales $ 375,338 $ 339,087
Parts and service sales 56,811 51,084
Finance fees and insurance commissions 5,792 5,176
Other revenue 2,410 2,463
--------- ---------
440,351 397,810
COSTS AND EXPENSES
Vehicles cost of sales 349,225 317,448
Parts and service cost of sales 36,282 32,988
Selling, general and administrative expenses 45,752 40,744
Depreciation and amortization 1,501 1,451
--------- ---------
432,760 392,631
OTHER INCOME (EXPENSE)
Interest income 2,636 2,784
Interest expense (4,669) (4,704)
--------- ---------
(2,033) (1,920)
--------- ---------
Net income $ 5,558 $ 3,259
========= =========
</TABLE>
See accompanying notes.
F-68
<PAGE> 69
Grubb Automotive
Combined Statements of Shareholders' Equity
Years ended December 31, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
GRUBB LOU GRUBB
AUTOMOTIVE, INC. JACK SHERMAN CHEVROLET, INC. CHEVROLET, INC.
------------------ ------------------------------------------ --------------------
ADDITIONAL
COMMON RETAINED COMMON PAID-IN RETAINED TREASURY COMMON RETAINED
STOCK EARNINGS STOCK CAPITAL EARNINGS STOCK STOCK EARNINGS
------ -------- ------ ---------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1995 $ 11 $ (1) $ 1 $ 403 $ 2,229 $(1,300) $ 463 $ 3,949
Net income (loss) -- (8) -- -- 395 -- -- 84
Shareholder
distributions -- -- -- -- (1,079) -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Balances at December 31, 1995 11 (9) $ 1 403 1,545 (1,300) 463 4,033
Net income -- 8 -- -- 1,097 -- -- 1,169
Shareholder distributions -- -- -- -- (659) -- -- (824)
------- ------- ------- ------- ------- ------- ------- -------
Balances at
December 31, 1996 $ 11 $ (1) $ 1 $ 403 $ 1,983 $(1,300) $ 463 $ 4,378
======= ======= ======= ======= ======= ======= ======= =======
<CAPTION>
LOU GRUBB LOU GRUBB SATURN OF
FORD, INC. SATURN, INC. TEMPE, INC.
---------------------------- ----------------- -------------------
ADDITIONAL
COMMON PAID-IN RETAINED COMMON RETAINED COMMON RETAINED
STOCK CAPITAL EARNINGS STOCK EARNINGS STOCK EARNINGS TOTAL
----- ------- -------- ----- -------- ----- -------- -----
Balances at January 1, 1995 $ 750 $ 243 $ 95 $ 800 $ 706 $ 1,000 $ 741 $10,090
Net income (loss) -- -- 959 -- 602 -- 1,227 3,259
Shareholder
distributions -- -- (645) -- (246) -- (480) (2,450)
------ ---- ------- ------ ------- ------- ------ -------
Balances at December 31, 1995 750 243 409 800 1,062 1,000 1,488 10,899
Net income -- -- 1,288 -- 663 -- 1,333 5,558
Shareholder distributions -- -- (623) -- (667) -- (966) (3,739)
------ ---- ------- ------ ------- ------- ------ -------
Balances at
December 31, 1996 $ 750 $243 $ 1,074 $ 800 $ 1,058 $ 1,000 $1,855 $12,718
====== ==== ======= ====== ======= ======= ====== =======
</TABLE>
See accompanying notes.
F-69
<PAGE> 70
Grubb Automotive
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995
-----------------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,558 $ 3,259
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,501 1,451
Provision for chargeback allowances 2,501 1,704
Loss on sale of assets 128 3
Increase in cash surrender value of officers' life insurance (48) (47)
Changes in operating assets and liabilities:
Receivables 1,231 (3,570)
Inventories (1,738) (7,703)
Other current assets 70 8
Other assets (100) 12
Accounts payable 4 753
Accrued expenses (1,066) 583
Deferred compensation 190 50
------- --------
Net cash provided by (used in) operating activities 8,231 (3,497)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of land, buildings, equipment, and rental and lease vehicles (3,477) (1,280)
Purchase of land held for development -- (875)
Proceeds from disposal of land, buildings, equipment, and rental and lease
vehicles 34 222
Decrease (increase) in advances to affiliates 200 (200)
------- --------
Net cash used in investing activities (3,243) (2,133)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (payments) on short-term borrowings (3,588) 14,030
Repayment of long-term debt (322) (345)
Increase in notes payable to shareholders 400 --
Shareholder distributions (3,085) (2,450)
------- --------
Net cash provided by (used in) financing activities (6,595) 11,235
------- --------
Increase (decrease) in cash and cash equivalents (1,607) 5,605
Cash and cash equivalents, beginning of year 7,471 1,866
------- --------
Cash and cash equivalents, end of year $ 5,864 $ 7,471
======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 4,714 $ 4,665
======= ========
</TABLE>
See accompanying notes.
F-70
<PAGE> 71
Grubb Automotive
Notes to Combined Financial Statements
December 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying combined financial statements reflect the combined operations
of Grubb Automotive, Inc. (Grubb), Jack Sherman Chevrolet, Inc. (JSC), Lou Grubb
Chevrolet, Inc. (LGC), Lou Grubb Ford, Inc. (LGF), Lou Grubb Saturn, Inc. (LGS),
and Saturn of Tempe, Inc. (SOT) (collectively, the Company or Grubb Automotive).
The Company operates in one business segment - the retail sales of new and used
automobiles and the service thereof. The company has two Chevrolet dealerships,
two Saturn dealerships and a Ford dealership. The dealerships are located in
metropolitan Phoenix, Arizona, except for one Chevrolet dealership which is
located in Midland, Texas.
The accompanying combined financial statements include the accounts of the
corporations listed above. All material intercompany accounts and transactions
have been eliminated.
The financial information included in the combined financial statements may not
necessarily reflect the financial position, results of operations and cash flows
of the Company in the future or what the financial position, results of
operations and cash flows would have been if the separate dealerships had
continued to be separate, stand-alone dealerships during the period presented.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, cash on deposit with a
manufacturer, and all highly liquid investments with maturities of three months
or less when purchased.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
last-in, first-out (LIFO) for new and used vehicles, and factory list price for
parts and accessories, which approximates first-in, first-out (FIFO).
F-71
<PAGE> 72
Grubb Automotive
Notes to Combined Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LAND, BUILDINGS, EQUIPMENT, AND RENTAL AND LEASE VEHICLES
Land, buildings, equipment, and rental and lease vehicles are stated at cost.
Depreciation is provided using the straight-line method for buildings and
improvements and declining-balance methods for equipment, furniture and
fixtures, and vehicles. The estimated useful lives of the assets for
depreciation purposes are:
Buildings and improvements 15 to 39 years
Parts equipment 5 to 8 years
Machinery and shop equipment 5 to 8 years
Furniture and fixtures 5 to 8 years
Service vehicles 3 to 5 years
Rental and lease vehicles 3 to 5 years
When depreciable assets are sold or retired, the related cost and accumulated
depreciation are removed from the accounts. Major additions and betterments are
capitalized. Maintenance and repairs which do not materially improve or extend
the lives of the respective assets are charged to operating expenses as
incurred.
LAND HELD FOR DEVELOPMENT
Land held for development, which represents land acquired for development of
additional dealerships in metropolitan Phoenix, Arizona, is carried at cost,
which is not in excess of fair value.
UNEARNED INCOME
Unearned income on receivables is recognized over the term of the receivable on
the interest method.
REVENUES
Revenues from vehicle and parts sales and from service operations are recognized
at the time the vehicle is delivered to the customer or service is completed.
F-72
<PAGE> 73
Grubb Automotive
Notes to Combined Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCE FEES AND INSURANCE COMMISSIONS
Finance fees represent revenue earned by the Company for notes placed with
financial institutions in connection with customer vehicle financing. Finance
fees are recognized in income upon acceptance of the credit by the financial
institution. Insurance income represents commissions earned on credit life,
accident and disability insurance sold in connection with the vehicle on behalf
of third-party insurance companies. Insurance commissions are recognized in
income upon customer acceptance of the insurance terms as evidenced by contract
execution.
The Company is charged back for a portion of these fees and commissions should
the customer terminate the finance contract prior to its scheduled maturity. The
estimated allowance for these chargebacks (chargeback allowance) is based upon
the Company's historical experience for prepayments or defaults on the finance
contracts.
OTHER REVENUE
Other revenue consists primarily of license and title fees.
ADVERTISING AND PROMOTIONAL COSTS
Advertising and promotional costs are expensed as incurred and are included in
selling, general and administrative expense in the accompanying combined
statements of income. Total advertising and promotional expenses were
approximately $4,263,000 and $3,874,000 in 1996 and 1995, respectively.
INCOME TAXES
The Company elected, with the consent of its shareholders, to have its income
taxed directly to its shareholders as S corporations under the provisions of the
Internal Revenue Code. Accordingly, the Company is generally not subject to
income taxes as the taxable income and related losses are allocated and taxed
directly to the shareholders.
F-73
<PAGE> 74
Grubb Automotive
Notes to Combined Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
In 1996, the Company adopted Financial Accounting Standard (FAS) No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF (FAS 121), which requires that long-lived assets (i.e., property,
plant and equipment and goodwill) held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the net
book value of the asset may not be recoverable. An impairment loss will be
recognized if the sum of the expected future cash flows (undiscounted and before
interest) from the use of the asset is less than the net book value of the
asset. Generally, the amount of the impairment loss is measured as the
difference between the net book value of the assets and the estimated fair value
of the related assets. The adoption of this statement did not have a significant
impact on the Company's results of operations or its financial position.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by reference to various
market data and other valuation techniques, as appropriate. Unless otherwise
disclosed, the fair value of financial instruments approximates their recorded
values due primarily to the short-term nature of their maturities.
2. RECEIVABLES
Receivables are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
--------------------------
(In thousands)
<S> <C> <C>
Contracts in transit and vehicle receivables $ 6,454 $ 7,450
Trade receivables 2,383 2,354
Due from automakers 1,361 1,716
Note receivables from customers 732 867
Other 300 261
------- -------
11,230 12,648
Less: allowance for doubtful accounts (521) (708)
Less: unearned income (123) (123)
------- -------
$10,586 $11,817
======= =======
</TABLE>
F-74
<PAGE> 75
Grubb Automotive
Notes to Combined Financial Statements (continued)
2. RECEIVABLES (CONTINUED)
Contracts in transit and vehicle receivables primarily represent receivables
from financial institutions such as General Motor Acceptance Corporation (GMAC),
and regional banks which provide funding for customer vehicle financing. These
receivables are normally collected in less than 30 days of the sale of the
vehicle. Trade receivables primarily relate to the sale of parts to commercial
customers. Due from automakers represent receivables for parts and service work
performed on vehicles pursuant to the automakers' warranty coverages and amounts
due in connection with the purchase of vehicles (holdbacks) pursuant to the
dealership agreement. Such holdbacks are generally remitted to the Company on a
quarterly basis. Note receivables from customers are derived from certain sales
of used vehicles at JSC under which the dealership finances the sale and carries
the related note.
3. DUE FROM SHAREHOLDERS
Due from shareholders represents cash advances made to shareholders of the
Company. The due from shareholder amounts were paid in 1996 by the offset of
shareholder distributions.
4. INVENTORIES
The components of inventory are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
---------------------------
(In thousands)
<S> <C> <C>
New vehicles, at cost determined under the specific identification method $ 46,170 $ 45,799
Used vehicles, at cost determined under the specific identification method 10,659 9,475
Parts and accessories, at cost determined by the latest factory invoice
price, which approximates the FIFO method 7,456 6,208
--------- ---------
64,285 61,482
Less adjustment to reduce new vehicles inventories to cost determined under
the LIFO method (14,422) (13,852)
Less adjustment to reduce used vehicles inventories to cost determined under
the LIFO method (2,277) (2,375)
--------- ---------
$ 47,586 $ 45,255
========= =========
</TABLE>
F-75
<PAGE> 76
Grubb Automotive
Notes to Combined Financial Statements (continued)
4. INVENTORIES (CONTINUED)
While the Company believes that the LIFO method of accounting provides a better
matching of costs and revenues, if the FIFO method of accounting had been used
by the Company, net income would have increased by approximately $472,000 and
$2,418,000 in 1996 and 1995, respectively. During the year ended December 31,
1996, the Company realized a liquidation of certain LIFO inventory pools which
resulted in an increase to net income of approximately $1,200,000.
5. LAND, BUILDINGS, EQUIPMENT, AND RENTAL AND LEASE VEHICLES
Land, buildings, equipment, and rental and lease vehicles, consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
-------------------------
(In thousands)
<S> <C> <C>
Land $ 5,295 $ 5,295
Buildings and improvements 6,221 6,192
Furniture and fixtures 3,067 2,897
Machinery and shop equipment 1,236 1,212
Parts equipment 937 762
Rental and lease vehicles 758 695
Service vehicles 951 880
Construction in progress 2,589 -
------- -------
21,054 17,933
Less accumulated depreciation and amortization (7,369) (6,349)
------- -------
$13,685 $11,584
======= =======
</TABLE>
During the year ended December 31, 1996, the Company transferred approximately
$593,000 at net book value in service vehicles previously included in land,
buildings, equipment, and rental and lease vehicles to used inventories. At
December 31, 1996, the construction in progress amount includes land and
building and related construction costs for the addition of a new dealership in
metropolitan Phoenix, Arizona.
F-76
<PAGE> 77
Grubb Automotive
Notes to Combined Financial Statements (continued)
6. SHORT-TERM BORROWINGS
Short-term borrowings consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
------------------------
(In thousands)
<S> <C> <C>
$24,000,000 line of credit with a bank, interest payable monthly at the lower of
the bank's prime rate plus 0.50 percent or the 30-day LIBOR rate plus 2.50
percent, maturing July 1997, and collateralized by all inventories and
accounts receivable of LGF. The line of credit is guaranteed by a
shareholder of LGF up to $3,000,000. $15,387 $18,349
$18,000,000 line of credit with a bank, interest payable monthly at the lower of
the bank's prime rate plus 0.50 percent or the 30-day LIBOR rate plus 2.50
percent, maturing July 1997, and collateralized by all inventories and
accounts receivable of LGC. The line of credit is guaranteed by a
shareholder of LGC up to $3,000,000. 16,265 17,574
$14,000,000 line of credit with General Motors Acceptance Corporation, interest
payable monthly at prime plus 1.00 percent on new stock vehicles and prime
plus 1.50 percent on demo vehicles, no stated maturity date, and
collateralized by new vehicles inventories of JSC. 5,383 10,160
$6,000,000 line of credit with a bank, interest payable monthly at the lower of
the bank's prime rate plus 0.50 percent or the 30-day LIBOR rate plus 2.50
percent, maturing July 1997, and collateralized by all inventories and
accounts receivable of SOT. The line of credit is guaranteed by a
shareholder of SOT up to $4,700,000. 4,997 2,307
$5,000,000 line of credit with a bank, interest payable monthly at the lower of
the bank's prime rate plus 0.50 percent or the 30-day LIBOR rate plus 2.50
percent, maturing July 1997, and collateralized by all inventories and
accounts receivable of LGS. The line of credit is guaranteed by a
shareholder of LGS up to $2,000,000. 4,722 1,910
$700,000 line of credit with Ford Motor Credit Company, interest payable monthly
at prime plus 1.00 percent on new vehicles and prime plus 1.50 percent on
demo vehicles, no stated maturity date, and collateralized by new vehicles
inventories of JSC. The line of credit was overdrawn on the allowable line of
credit at December 31, 1996 and such amounts are immediately due and payable
upon the request of Ford Motor Credit Company. 896 918
Other 68 88
------- -------
$47,718 $51,306
======= =======
</TABLE>
F-77
<PAGE> 78
Grubb Automotive
Notes to Combined Financial Statements (continued)
6. SHORT-TERM BORROWINGS (CONTINUED)
As a result of the dealership acquisition described in Note 16, the guaranties
of the above line of credits by a shareholder of the various dealerships were
waived by the bank.
LGF has an additional $1,500,000 line of credit available for the acquisition of
used vehicles and other short-term needs. The line of credit is at prime and
expires July 1997. LGC has $500,000 and $250,000 lines of credit available at
prime plus 0.50 percent and prime plus 1.50 percent, respectively. The lines
expire July 1997. At December 31, 1996 and 1995, no amounts had been drawn on
these lines of credit.
The weighted average interest rate on short-term borrowings outstanding as of
December 31, 1996 and 1995 was approximately 7.73 percent and 8.70 percent,
respectively. Interest expense on short-term borrowings during 1996 and 1995 was
approximately $3,468,000 and $3,496,000, respectively.
7. NOTES PAYABLE TO SHAREHOLDERS
Notes payable to shareholders consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
-------------------------
(In thousands)
<S> <C> <C>
Unsecured note payable to shareholder, interest payable monthly at
prime, due on demand $ 1,750 $ 1,750
Unsecured notes payable to shareholders, interest payable monthly at
prime plus 1.00 percent, due on demand 1,900 1,500
Unsecured notes payable to shareholder, interest payable monthly at
8.50 percent, due on demand 2,575 2,575
------- -------
6,225 5,825
Less portion due within one year (3,650) (3,250)
------- -------
$ 2,575 $ 2,575
======= =======
</TABLE>
At December 31, 1996, the $2,575,000 unsecured notes payable to shareholder is
classified as noncurrent as the shareholder has represented that there were no
intentions to require payment within one year. In connection with the subsequent
event discussed in Note 16, these notes were paid off. Since current assets of
the Company were not used to pay these notes, the $2,575,000 has continued to be
classified as noncurrent.
F-78
<PAGE> 79
Grubb Automotive
Notes to Combined Financial Statements (continued)
7. NOTES PAYABLE TO SHAREHOLDERS (CONTINUED)
Interest expense on notes payable to shareholders during 1996 and 1995 was
approximately $622,000 and $567,000, respectively.
8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
-------------------------
(In thousands)
<S> <C> <C>
Mortgage note payable to a bank payable in monthly installments of $12,500 plus
interest at prime, due and payable in full in January 1998, and
collateralized by first deed of trust on property. Guaranteed by a
shareholder of SOT. $ 2,113 $ 2,263
$3,500,000 line of credit with a bank, interest payable monthly at prime,
maturing July 1997 at which time the amount outstanding will be termed out
over five years, and collateralized by all assets of LGF until July 2002 at
which time the line of credit will be collateralized by a first deed of trust
on the property. Guaranteed by a shareholder of the LGF. 1,626 1,626
Mortgage note payable to a bank payable in 60 monthly installments of $15,667
plus interest at prime through October 1998, and collateralized by all
inventories and accounts receivable of LGC, second behind the $18,000,000
line of credit. 345 533
Other 91 75
-------- --------
4,175 4,497
Less portion due within one year (381) (370)
-------- --------
$ 3,794 $ 4,127
======== ========
</TABLE>
At December 31, 1996, the aggregate maturities on long-term debt are as follows:
1997 $ 381
1998 3,775
1999 19
------
$4,175
======
F-79
<PAGE> 80
Grubb Automotive
Notes to Combined Financial Statements (continued)
8. LONG-TERM DEBT (CONTINUED)
Interest expense on long-term debt during 1996 and 1995 was approximately
$579,000 and $641,000, respectively.
9. SHAREHOLDERS' EQUITY
The common stock par value and authorized, issued, and outstanding shares for
each of the corporations is summarized as of December 31, 1996 and 1995 as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------------------------------------
PAR VALUE AUTHORIZED ISSUED OUTSTANDING
--------- ---------- ------ -----------
(In thousands, except par value)
<S> <C> <C> <C> <C>
Grubb Automotive, Inc. $ 1.00 1,000 11 11
Jack Sherman Chevrolet, Inc. 0.01 1,500 40 40
Lou Grubb Chevrolet, Inc. 100.00 250 5 5
Lou Grubb Ford, Inc. 1.00 2,000 750 750
Lou Grubb Saturn, Inc. 1.00 1,000 800 800
Saturn of Tempe, Inc. 1.00 2,000 1,000 1,000
</TABLE>
At December 31, 1996 and 1995, JSC holds $1,300,000 in treasury stock resulting
from the purchase of 16,800 shares common stock, at cost, from a previous
shareholder.
10. PENSION AND DEFERRED COMPENSATION PLANS
The Company has a 401(k) defined contribution retirement savings plan for
employees. The Company is required to contribute an amount equal to 50 percent
of each participating employee's deferred cash contribution, limited to a
maximum deferred contribution of two percent. The Company's funding policy is to
make quarterly contributions to the plan. Participants may elect to contribute
to the plan. Total expense recognized by the Company was $786,000 and $624,000
in 1996 and 1995, respectively.
F-80
<PAGE> 81
Grubb Automotive
Notes to Combined Financial Statements (continued)
10. PENSION AND DEFERRED COMPENSATION PLANS (CONTINUED)
The Company has executed a deferred compensation agreement with an officer of
the Company. The agreement provides supplemental salary continuation benefits to
this officer or his beneficiaries upon normal retirement for 15 years at $8,333
per month. Upon death, early retirement or termination, the officer will receive
a reduced level of benefits as defined in the agreement. Subsequent to year-end,
the agreement was amended whereby upon death of the officer, the officer's
beneficiaries will receive full benefits. The agreement also amended the normal
retirement date of the officer with no loss of benefits from September 1, 2004
to September 1, 1999, which resulted in an increase of approximately $140,000 to
the deferred compensation liability. At December 31, 1996 and 1995, the benefits
are unfunded and the Company has accrued $740,000 and $550,000, respectively,
discounted at 7.50 percent, as a long-term liability. The projected benefit
obligation was estimated using the 1980 Commissioners Standard Ordinary
Mortality table. Total expense recognized by the Company was approximately
$190,000 and $50,000 in 1996 and 1995, respectively. The agreement also provides
for disability benefits should the officer become permanently and totally
disabled and the amount of benefits will be determined by the Board of Directors
at the time of disability.
11. MAJOR SUPPLIERS AND FRANCHISE AGREEMENTS
The Company owns and operates two Chevrolet, two Saturn, and one Ford automobile
dealerships. The Company enters into agreements (Dealer Agreements) with the
automakers that supply new vehicles and parts to its dealerships. The Company's
overall sales could be impacted by the automakers' ability or unwillingness to
supply the dealerships with an adequate supply of popular models. The Company's
existing Chevrolet Dealer Agreements have remaining terms of approximately four
years expiring in October 2000. The Saturn and Ford Dealership Agreements have
no stated expiration date. Management currently believes that it will be able to
renew all the Chevrolet Dealer Agreements upon expiration; however, there can be
no assurance that the Chevrolet Dealer Agreements will be renewed.
The Dealer Agreements generally limit locations of dealerships and retain
automaker approval rights over changes in dealership management. The Dealer
Agreement with Chevrolet stipulates that the Company could lose its Chevrolet
dealership upon any change in ownership of a controlling number of shares in the
Company. Each automaker also is entitled to terminate the dealership agreement
if the dealership is in material breach of the terms.
The Company's ability to expand operations depends, in part, on obtaining the
consent of the automakers to the acquisition or establishment of additional
dealerships.
F-81
<PAGE> 82
Grubb Automotive
Notes to Combined Financial Statements (continued)
12. CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject the Company to concentration of
credit risk, consist principally of cash and cash equivalents and receivables.
The Company invests a substantial portion of its excess cash with GMAC and, to a
lesser extent, with financial institutions with strong credit ratings. Cash
investments with GMAC can be withdrawn at any time. At December 31, 1996 and
1995, amounts invested with GMAC approximated $2,050,000 and $1,500,000,
respectively, with an interest rate of prime plus one percent. At times, amounts
invested with financial institutions may be in excess of FDIC insurance limits.
As of December 31, 1996 and 1995, the Company has not experienced any losses on
its cash equivalents.
Concentrations of credit risk with respect to customer receivables are limited
primarily to automakers and financial institutions such as GMAC and regional
banks. Credit risk arising from receivables from commercial customers is minimal
due to the large number of customers comprising the Company's customer base.
However, they are concentrated in the Company's two market areas in metropolitan
Phoenix, Arizona and Midland, Texas.
13. PROVISION FOR FINANCE FEES AND INSURANCE COMMISSION CHARGEBACKS
Presented below is the change in the allowance for estimated finance fees and
insurance commission chargebacks:
YEAR ENDED DECEMBER 31
1996 1995
-------------------------
(In thousands)
Beginning balance $ 1,593 $ 1,406
Provision 2,501 1,704
Actual chargebacks (2,145) (1,517)
------- -------
Ending balance $ 1,949 $ 1,593
======= =======
14. COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal actions arising in the ordinary course
of its business. The liability, if any, associated with these matters was not
determinable at December 31, 1996 and 1995. While it is not feasible to
determine the outcome of these actions, the Company's information, including
discussions with legal counsel, at this time does not indicate that these
matters will have a material adverse effect upon financial condition, results of
operations or cash flows.
F-82
<PAGE> 83
Grubb Automotive
Notes to Combined Financial Statements (continued)
14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is also subject to federal and state environmental regulations,
including rules relating to air and water pollution and the storage and disposal
of gasoline, oil, other chemicals and waste. Local, state and federal
regulations also affect automobile dealerships' advertising, sales, service and
financing activities. The Company believes that it complies with all applicable
laws relating to its business.
In general, the Company is required to pay for all vehicles purchased from the
automakers upon completion of the vehicle, upon which time a draw upon the
Company's available bank lines of credit is made directly by the automakers. A
regional bank provides the financing for all new vehicles except at JSC where
GMAC and Ford Motor Credit Company provide financing for all new vehicles and
certain used vehicles. These types of financings are known as "floor plan
financing" or "flooring." Under the arrangement with GMAC, the Company may
deposit funds with GMAC in an amount up to 75 percent of the amount of the floor
plan financing. Such funds earn interest at the same rate charged by GMAC to the
Company for its flooring. From time to time, certain shareholders will advance
funds to the Company primarily for the purpose of investing their excess cash
with GMAC. The Company acts only as an intermediary in this process. Aggregate
amounts outstanding pursuant to these arrangements at December 31, 1996 and 1995
are included in notes payable to shareholders in the accompanying combined
balance sheets.
15. LEASES
The Company leases from outside parties, under operating leases, land and
buildings relating to certain of its dealership properties and certain computer
equipment. The property and equipment leases expire in 1997 through 1999. Total
related rental expense with outside parties was approximately $502,000 and
$499,000 in 1996 and 1995, respectively.
LGF leases land and buildings from a shareholder under an operating lease for
$690,000 per annum. The lease is currently under an extension period through
1998 and can be extended through 2013. LGS also leases land and holdings from a
shareholder under an operating lease for $118,800 per annum expiring in 2001.
Total related rental expense with shareholders was approximately $846,000 and
$837,000 in 1996 and 1995, respectively.
F-83
<PAGE> 84
Grubb Automotive
Notes to Combined Financial Statements (continued)
15. LEASES (CONTINUED)
The aggregate minimum rental commitments for all noncancelable operating leases
are as follows:
LEASES WITH LEASES WITH
OTHERS SHAREHOLDERS
-----------------------------
(In thousands)
1997 $ 294 $ 809
1998 201 809
1999 22 119
2000 34 119
2001 - 119
------- ------
$ 551 $1,975
======= ======
16. SUBSEQUENT EVENT
In January 1997, an unrelated third party purchased the assets, properties, and
business of Grubb, JSC and LGC; LGF and SOT were merged with and into a
subsidiary of the acquiring company with the dealerships being the surviving
corporations in the merger and becoming a wholly owned subsidiary of the
acquiring company; and 50 percent of the outstanding capital stock of LGS was
sold to the acquiring company in exchange for common stock of the acquiring
company.
The Company has received approval for the acquisitions and mergers from all
manufacturers except Saturn, and there can be no assurance as to whether this
manufacturer's approval can be obtained and what impact it will have on the
transaction.
In connection with the transaction, the acquiring company paid off the
outstanding balances of long-term debt and notes payable to shareholders in
stock and cash. In addition, certain of the properties leased to the Company by
a shareholder were purchased by the acquiring Company directly from the
shareholder and the related leases were terminated. Also as a result of the
acquisitions and mergers, the guaranties by a shareholder on the short-term
borrowings were waived by the bank.
F-84
<PAGE> 85
Independent Auditors' Report
----------------------------
The Board of Directors
Shad Management Company:
We have audited the accompanying consolidated balance sheets of Shad Management
Company and consolidated investees as of December 31, 1996, and the related
consolidated statements of operations and retained earnings, and cash flows for
the period from April 1, 1996 to December 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Shad Management
Company and consolidated investees as of December 31, 1996, and the results of
their operations and their cash flows for the period from April 1, 1996 to
December 31, 1996 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Jacksonville, Florida
February 12, 1997,
except as to note 7, which
is as of February 23, 1997
F-85
<PAGE> 86
SHAD MANAGEMENT COMPANY
AND CONSOLIDATED INVESTEES
Consolidated Balance Sheets
March 31, 1997 (UNAUDITED) and December 31, 1996
<TABLE>
<CAPTION>
Assets 1997 1996
------ ---- ----
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash $ 1,724,287 1,225,408
Accounts receivable:
Customers 3,975,474 3,739,963
Factory 661,715 928,128
Finance contracts 111,006 77,983
Officers, employees and other 447,838 129,697
------------ ------------
5,196,033 4,875,771
Less allowance for doubtful accounts 7,675 9,058
------------ ------------
5,188,358 4,866,713
------------ ------------
Notes receivable, current portion, net of unearned
interest and allowance for doubtful accounts of
$108,806 and $109,905, respectively 487,861 561,968
Inventories, less LIFO reserve of $4,406,686 and
$4,607,318, respectively 10,471,245 15,252,387
Prepaid expenses 213,117 156,611
------------ ------------
Total current assets 18,084,868 22,063,087
------------ ------------
Property, plant and equipment:
Land 3,402,886 3,417,437
Buildings 3,482,818 3,475,907
Leasehold improvements 823,103 838,302
Furniture and fixtures 1,990,301 1,790,034
Construction in progress 213,364 224,465
------------ ------------
9,912,472 9,746,145
Less accumulated depreciation (1,866,172) (1,767,663)
------------ ------------
Net property, plant and equipment 8,046,300 7,978,482
------------ ------------
Notes receivable, noncurrent portion, net of unearned
interest and allowance for doubtful accounts of
$46,631 and $47,102, respectively 209,066 240,844
Cash surrender value of life insurance -- 446,060
Goodwill and other assets 1,185,374 1,263,988
------------ ------------
1,394,440 1,950,892
------------ ------------
Total assets $ 27,525,608 31,992,461
============ ============
</TABLE>
(Continued)
F-86
<PAGE> 87
SHAD MANAGEMENT COMPANY
AND CONSOLIDATED INVESTEES
Consolidated Balance Sheets, Continued
March 31, 1997 (UNAUDITED) and December 31, 1996
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1997 1996
- ------------------------------------ ---- ----
(UNAUDITED)
<S> <C> <C>
Current liabilities:
Notes payable - floor plan $16,750,295 20,250,115
Current installments of long-term debt 792,723 1,004,971
Accounts payable 990,248 971,868
Accrued expenses and other current liabilities 1,278,117 1,332,693
----------- -----------
Total current liabilities 19,811,383 23,559,647
----------- -----------
Long-term debt, excluding current installments:
Mortgage notes payable 6,003,352 6,093,852
Notes payable to bank 245,004 262,500
Notes payable, related party -- 426,603
Notes payable, other 177,190 172,039
----------- -----------
Total long-term debt 6,425,546 6,954,994
----------- -----------
Minority interest 446,477 452,362
Deferred compensation -- 555,120
----------- -----------
Total liabilities 26,683,406 31,522,123
----------- -----------
Stockholders' equity:
Common stock, $.10 par value; 70,000 shares
authorized, 1,000 issued and outstanding 100 100
Additional paid-in capital 369,391 369,391
Retained earnings 472,711 100,847
----------- -----------
Total stockholders' equity 842,202 470,338
----------- -----------
Commitments (notes 5, 6 and 7)
$27,525,608 31,992,461
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-87
<PAGE> 88
SHAD MANAGEMENT COMPANY
AND CONSOLIDATED INVESTEES
Consolidated Statements of Operations
and Retained Earnings
For the period from January 1, to March 31, 1997 and 1996 (UNAUDITED) and
April 1, 1996 to December 31, 1996
<TABLE>
<CAPTION>
April 1, to
January 1, to March 31, December 31,
---------------------------- ------------
1997 1996 1996
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Sales:
Vehicles $30,774,470 24,875,182 81,852,983
Parts and service 3,386,558 2,741,383 9,633,792
----------- ----------- -----------
34,161,028 27,616,565 91,486,775
----------- ----------- -----------
Cost of goods sold 30,343,303 24,931,685 82,777,591
----------- ----------- -----------
Gross profit 3,817,725 2,684,880 8,709,184
----------- ----------- -----------
Finance company income:
Finance charges, fees and other interest 36,591 104,846 286,614
Interest expense 13,080 16,307 45,372
----------- ----------- -----------
Net interest income 23,511 88,539 241,242
Provision for credit losses 6,000 44,000 138,032
----------- ----------- -----------
Net interest income after provision for credit losses 17,511 44,539 103,210
----------- ----------- -----------
Other operating income:
Finance and insurance income, net 175,587 295,403 825,291
Other income 50,016 50,528 189,917
----------- ----------- -----------
Gross profit, finance company and
other operating income 4,060,839 3,075,350 9,827,602
----------- ----------- -----------
Operating expenses 3,694,860 3,040,084 9,383,431
----------- ----------- -----------
Income from operations 365,979 35,266 444,171
----------- ----------- -----------
Minority interest 5,885 -- (21,301)
----------- ----------- -----------
Income before income tax expense 371,864 35,266 422,870
Income tax expense -- (12,424) (408,035)
----------- ----------- -----------
Net income 371,864 22,842 14,835
Retained earnings, beginning of period 100,847 63,170 86,012
----------- ----------- -----------
Retained earnings, end of period $ 472,711 86,012 100,847
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-88
<PAGE> 89
SHAD MANAGEMENT COMPANY
AND CONSOLIDATED INVESTEES
Consolidated Statement of Cash Flows
For the period from January 1, to March 31, 1997 and 1996 (UNAUDITED) and
April 1, 1996 to December 31, 1996
<TABLE>
<CAPTION>
April 1, to
January 1, to March 31, December 31,
------------------------------- ------------
1997 1996 1996
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 33,259,379 27,616,565 92,740,514
Cash paid to suppliers and employees (28,032,378) (27,556,989) (90,587,425)
Interest paid (318,928) (215,208) (491,228)
Income taxes paid -- -- (35,049)
------------ ------------ ------------
Net cash provided by (used in) operating activities 4,908,073 (155,632) 1,626,812
------------ ------------ ------------
Cash flows from investing activities:
Payments for purchase of equipment and
leasehold improvements (167,678) (129,819) (2,509,462)
Cash paid for assets of automobile dealership -- -- (1,378,887)
Loss on sale of fixed assets -- -- 19,236
Gain on sale of marketable securities -- -- 294,487
------------ ------------ ------------
Net cash used in investing activities (167,678) (129,819) (3,574,626)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds (payments) under notes payable to bank (12,345) (476,397) 3,442,280
Proceeds (payments) under notes payable to related party (426,603) (98,916) 300,000
Repayment of long-term debt (302,748) (95,490) (1,324,391)
Net increase (decrease) in notes payable - floor plan (3,499,820) 1,525,458 (616,688)
Contributed capital -- -- 353,000
------------ ------------ ------------
Net cash provided by (used in) financing activities (4,241,516) 854,655 2,154,201
------------ ------------ ------------
Net increase in cash 498,879 569,204 206,387
Cash at beginning of period 1,225,408 449,817 1,019,021
------------ ------------ ------------
Cash at end of period $ 1,724,287 1,019,021 1,225,408
============ ============ ============
Supplemental disclosures - non-cash transactions:
Direct financed equipment purchases $ -- -- 126,466
============ ============ ============
Note receivable contributed by Shad General Partner, Inc. $ -- -- 78,061
============ ============ ============
</TABLE>
(Continued)
F-89
<PAGE> 90
SHAD MANAGEMENT COMPANY
AND CONSOLIDATED INVESTEES
Consolidated Statements of Cash Flows, Continued
For the period from January 1, to March 31, 1997 and 1996 (UNAUDITED) and
April 1, 1996 to December 31, 1996
<TABLE>
<CAPTION>
April 1, to
January 1, to March 31, December 31,
---------------------------- ------------
1997 1996 1996
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Reconciliation of net income to net cash provided by (used in)
operating activities:
Net income $ 371,864 22,842 14,835
Minority interest (5,885) -- 21,301
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 85,691 81,627 250,682
Increase (decrease) in LIFO reserve (200,632) 168,179 169,801
Gain on sale of investment -- -- (44,489)
Provision for deferred income tax -- 10,512 408,035
Changes in assets and liabilities:
Accounts receivable (321,645) (98,649) (864,204)
Inventories, at current cost 4,981,774 (1,028,982) 368,825
Prepaid expenses (56,506) 48,677 163,926
Notes receivable 105,885 43,380 912,287
Cash surrender value of life insurance 446,060 -- (52,440)
Other assets, net 92,783 175,142 56,294
Accounts payable and accrued expenses (36,196) 421,640 72,839
Deferred compensation (555,120) -- 55,512
Income taxes receivable -- -- 93,608
----------- ----------- -----------
Net cash provided by (used in)
operating activities $ 4,908,073 (155,632) 1,626,812
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-90
<PAGE> 91
SHAD MANAGEMENT COMPANY
AND CONSOLIDATED INVESTEES
Notes to Consolidated Financial Statements
March 31, 1997 (UNAUDITED) and December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION
Shad Management Company (the Company) was organized on April 1,
1986 and incorporated under the laws of the State of Florida. Its
principal activity is to provide management services to its
subsidiaries.
On March 20, 1996, Shad General Partner, Inc., an S Corporation,
was created. On March 27, 1996, the Company's former subsidiaries,
Southside Motor Company, Inc. (d/b/a Mike Shad Ford), and North
Florida Financial Services, Inc. (North Florida), contributed all
of their net assets to newly formed partnerships in exchange for
limited partnership interests. Immediately thereafter, these two
former subsidiaries were liquidated into the Company, resulting in
the Company becoming the owner of the limited partnership
interests. Shad General Partner, Inc. also contributed assets to
the newly formed partnerships in exchange for limited partnership
interests.
On June 30, 1996, North Florida ceased to provide financing for
used vehicles purchased at Mike Shad Ford. Also effective October
13, 1996, North Florida purchased certain assets and assumed
certain liabilities of a competing automobile dealership for
approximately $3,222,000 and will operate the franchise d/b/a Mike
Shad Chrysler Plymouth Jeep-Eagle. The acquisition was financed
from internal cash, debt and the sale of approximately 27% of
North Florida partnership interests for $353,000. Goodwill of
approximately $1.1 million was recorded in connection with the
acquisition.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Shad
Management Company and the following limited partnerships (former
subsidiaries) in which it holds a controlling interest (with
ownership percentages):
o Mike Shad Ford, Ltd., a franchised Ford dealership
operating in Jacksonville, Florida (99%).
o North Florida Financial Services, Ltd., a franchised
Chrysler Plymouth Jeep Eagle dealership also operating in
Jacksonville (72% effective October 1996).
All significant intercompany transactions and balances have been
eliminated in consolidation.
F-91
<PAGE> 92
SHAD MANAGEMENT COMPANY
AND CONSOLIDATED INVESTEES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
(c) INVENTORIES
Inventories are stated at the lower of cost or market. Cost of new
and used vehicles and parts is determined on a last-in, first-out
(LIFO) basis.
(d) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is
calculated over the useful lives of the assets using a method
which approximates the straight-line method. Leasehold
improvements are depreciated over the shorter of the lease term or
the estimated useful life of the asset.
(e) GOODWILL
Goodwill is amortized on a straight-line basis over 15 years.
(f) REVENUE RECOGNITION
Revenue from the sale of vehicles is recognized on customer
acceptance and completed financing arrangements. Revenue from
parts sales and service are recognized as the service is
completed.
Finance income represents the difference between the interest rate
negotiated with a customer and that granted by the financial
institution underwriting the finance contract, and is recognized
upon the assignment of the finance contract to the financial
institution which occurs at the time of sale of the underlying
vehicle. Insurance and warranty income represents commissions
recognized upon the sale of such contracts. Chargebacks of
finance, insurance and warranty income result from customers who
default or pay off their loans before maturity.
The Company recognizes a reserve for chargebacks based on past
operating history. During April of 1994, the Company negotiated a
new contract with its primary financial institutions, whereby the
financial institutions accept full responsibility for all future
finance contracts, thus eliminating all future related chargebacks
to the Company.
F-92
<PAGE> 93
SHAD MANAGEMENT COMPANY
AND CONSOLIDATED INVESTEES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
(g) INCOME TAXES
Effective April 1, 1996, the Company made an election for a
voluntary change in tax status from a taxable C Corporation to an
S Corporation. As a result, the taxes on income of the Company
became the responsibility of the Stockholders.
The change in tax status is reflected in the December 31, 1996
financial statements. This change has resulted in the elimination
of all deferred tax assets and liabilities and a net charge to
income tax expense of $408,035 effective April 1, 1996.
(h) ESTIMATES
The preparation of financial statements in conformity with
generally acceptable accounting principals requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and 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. Actual results could differ from those estimates.
(i) RECLASSIFICATION
Certain amounts in the 1996 financial statements have been
reclassified to conform with the 1997 presentation.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------
Current LIFO Inventory at
cost reserve LIFO value
----------- ----------- ------------
<S> <C> <C> <C>
New vehicles and demonstrators $16,555,564 3,677,391 12,878,173
Used vehicles 2,541,219 668,933 1,872,286
Parts, accessories and other 762,922 260,994 501,928
----------- ----------- -----------
$19,859,705 4,607,318 15,252,387
=========== =========== ===========
</TABLE>
F-93
<PAGE> 94
SHAD MANAGEMENT COMPANY
AND CONSOLIDATED INVESTEES
Notes to Consolidated Financial Statements
(2) INVENTORIES, Continued
<TABLE>
<CAPTION>
March 31, 1997 (UNAUDITED)
----------------------------------------------
Current LIFO Inventory at
cost reserve LIFO value
----------- ---------- ------------
<S> <C> <C> <C>
New vehicles and demonstrators $11,798,269 3,490,098 8,308,171
Used vehicles 2,310,699 657,778 1,652,921
Parts, accessories and other 768,963 258,810 510,153
----------- ---------- ----------
$14,877,931 4,406,686 10,471,245
=========== ========== ==========
</TABLE>
(3) NOTES PAYABLE - FLOOR PLAN
Notes payable - floor plan consists of a line of credit with Ford Motor
Credit Company and a line of credit with Chrysler Financial for new and
reconditioned vehicles. Principal payments are due as associated vehicles
are sold and interest is payable monthly at prime plus 1%. The notes are
collateralized by new and reconditioned vehicles, customer receivables
arising from the sale of new and reconditioned vehicles and new vehicle
factory discounts receivable.
(4) LONG-TERM DEBT
Long-term debt at March 31, 1997 and December 31, 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Mortgage note payable to bank, bearing interest at 3.5% over the
commercial paper rate, due in monthly installments
of $46,263 including interest $ 4,152,039 4,232,319
Mortgage note payable to bank, bearing interest at 8.125%, due in
monthly installments of $16,884 including interest, secured
by land and building with a net book value of $1,842,805 1,983,525 1,993,744
Note payable to bank, bearing interest at prime plus 1.00%, due in
monthly installments of $5,833 including interest,
collateralized by parts inventory and furniture and fixtures 316,410 332,500
</TABLE>
F-94
<PAGE> 95
SHAD MANAGEMENT COMPANY
AND CONSOLIDATED INVESTEES
Notes to Consolidated Financial Statements
(4) LONG-TERM DEBT, Continued
<TABLE>
<CAPTION>
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Note payable to bank, bearing interest at prime, due in monthly
installments of $75,000, collateralized by notes receivable
in the amount of $802,812 $ 484,999 710,000
Unsecured demand notes payable to related parties, bearing
interest at prime plus 1.00% - 426,603
Other notes payable on equipment purchases
payable in monthly installments of $7,739
including interest; collateralized by equipment 281,296 264,799
----------- ----------
Total long-term debt 7,218,269 7,959,965
Less current installments 792,723 1,004,971
----------- ----------
Long-term debt excluding current installments $ 6,425,546 6,954,994
=========== ==========
</TABLE>
The aggregate maturities of long-term debt over the next five years are
as follows:
1997 $ 792,723
1998 320,691
1999 234,912
2000 234,912
2001 234,912
Thereafter 5,400,119
----------
$7,218,269
==========
F-95
<PAGE> 96
SHAD MANAGEMENT COMPANY
AND CONSOLIDATED INVESTEES
Notes to Consolidated Financial Statements
(5) OPERATING LEASES
The Company has a noncancellable operating lease for an off-site Ford
AutoCare Service facility that expires February 1, 2005. Rent is payable
in monthly installments of $6,632. The Company also has a noncancellable
operating lease for an off-site office facility that expires in May 1997.
Rent is payable in monthly installments of $1,098. The operating expenses
for 1996 include $92,764 for rental of such facilities.
Future minimum lease payments, prior to such adjustment, over the next
five fiscal years are as follows:
1997 $ 85,074
1998 79,584
1999 79,584
2000 79,584
2001 79,584
--------
$403,410
========
(6) DEFERRED COMPENSATION PLAN
At December 1996, the Company had deferred compensation agreements with
certain officers of the consolidated investees. Under the terms of these
agreements the Company was to pay, upon normal retirement or death,
certain benefits to the named employee or beneficiary for a period of ten
years. A liability of $555,120 as of December 31, 1996 has been recorded.
Although the Company is not required to fund these agreements, it has
purchased universal life insurance contracts that may be used for such
purposes.
Prior to closing of the agreement described in note 7, the deferred
compensation agreements were terminated and participants forgave all
claims to receive future benefits in exchange for the distribution of the
related life insurance policies. The net effect of these transactions
resulted in a reduction in operating expenses of approximately $109,000
during the period from January 1, to March 31, 1997 (UNAUDITED).
(7) CHANGE IN OWNERSHIP
On February 23, 1997, stockholders of the Company signed a definitive
agreement to sell the stock of Shad Management Company to Republic
Industries.
F-96
<PAGE> 97
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Bledsoe Dodge, Inc.
Arlington, Texas
We have audited the accompanying balance sheets of Bledsoe Dodge, Inc. as of
December 31, 1996 and 1995, and the related statements of operations,
shareholders' equity, and cash flows for the years then ended. 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 Bledsoe Dodge, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Fort Worth, Texas
February 21, 1997
F-97
<PAGE> 98
BLEDSOE DODGE, INC.
BALANCE SHEETS
MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
December 31,
March 31, ----------------------------
1997 1996 1995
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,295,544 $ 4,901,958 $ 4,870,543
Accounts receivable 2,857,943 3,797,801 3,255,272
Inventories 16,122,873 15,244,019 12,137,437
Prepaid expenses 125,737 161,018 166,872
----------- ----------- -----------
Total current assets 26,402,097 24,104,796 20,430,124
----------- ----------- -----------
Property, equipment and leasehold improvements:
Buildings 33,390 33,390 36,120
Equipment 2,063,066 2,066,894 1,925,854
Leasehold improvements 890,471 885,816 823,602
----------- ----------- -----------
2,986,927 2,986,100 2,785,576
Less accumulated depreciation and amortization (1,507,905) 1,431,853 1,228,938
----------- ----------- -----------
1,479,022 1,554,247 1,556,638
----------- ----------- -----------
Other assets 135,326 135,537 122,434
----------- ----------- -----------
Total assets $28,016,445 $25,794,580 $22,109,196
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,376,952 $ 1,689,075 $ 1,259,017
Customer deposits and other advances 17,394 23,605 31,742
Accrued expenses 2,421,316 1,407,496 1,404,919
Notes payable, flooring 14,526,074 13,384,712 9,440,766
Notes payable -- -- 1,975,000
----------- ----------- -----------
Total current liabilities 18,341,736 16,504,888 14,111,444
----------- ----------- -----------
Commitments and contingencies (Notes 6 and 7)
Shareholders' equity:
Common stock, $100 par value; 2,500 shares
authorized; 560 shares issued and
outstanding 56,000 56,000 56,000
Paid-in capital in excess of par value 567,682 567,682 567,682
Retained earnings 9,051,027 8,666,010 7,374,070
----------- ----------- -----------
Total shareholders' equity 9,674,709 9,289,692 7,997,752
----------- ----------- -----------
Total liabilities and shareholders'
equity $28,016,445 $25,794,580 $22,109,196
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-98
<PAGE> 99
BLEDSOE DODGE, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
AND THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Three Months Ended Years Ended
March 31, December 31,
---------------------------------- ------------------------------
1997 1996 1996 1995
--------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Sales 37,360,974 35,576,346 $148,659,966 $130,231,299
Cost of sales 33,659,397 31,528,134 131,196,561 113,617,636
---------- ---------- ------------ ------------
Gross profit 3,701,577 4,048,212 17,463,405 16,613,663
Dealer finance, insurance, and service
contract income 1,307,741 1,127,321 5,386,441 4,779,732
Interest income, net 28,292 80,779 450,241 193,547
---------- ---------- ------------ ------------
5,037,610 5,256,312 23,300,087 21,586,942
Expenses:
Selling, general and administrative expenses 4,605,657 4,421,482 18,884,862 17,254,687
---------- ---------- ------------ ------------
Income before state franchise taxes 431,953 834,830 4,415,225 4,332,255
Provision for state franchise taxes 46,936 37,567 198,285 178,262
---------- ---------- ------------ ------------
Net income 385,017 797,263 $ 4,216,940 $ 4,153,993
========== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-99
<PAGE> 100
BLEDSOE DODGE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND
THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Paid-in
Common Stock Capital in Total
----------------------------- Excess of Retained Shareholders'
Shares Amount Par Value Earnings Equity
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 560 $ 56,000 $567,682 $ 6,520,524 $ 7,144,206
Distributions to shareholders (3,300,447) (3,300,447)
Net income for the year ended December 31, 1995 4,153,993 4,153,993
----------- ----------- -------- ----------- -----------
Balance, December 31, 1995 560 56,000 567,682 7,374,070 7,997,752
Distributions to shareholders (2,925,000) (2,925,000)
Net income for the year ended December 31, 1996 4,216,940 4,216,940
----------- ----------- -------- ----------- -----------
Balance, December 31, 1996 560 56,000 567,682 8,666,010 9,289,692
Net income for the period
ended March 31, 1997 (unaudited) 385,017 385,017
----------- ----------- -------- ----------- -----------
Balance, March 31, 1997 (unaudited) 560 $ 56,000 $567,682 $ 9,051,027 $ 9,674,709
=========== =========== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-100
<PAGE> 101
BLEDSOE DODGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND 1996 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Three Months Years Ended
Ended March 31, December 31,
------------------------- --------------------------
1997 1996 1996 1995
---------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows provided by operating activities:
Net income $ 385,017 $ 797,263 $ 4,216,940 $ 4,153,993
---------- ----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 76,052 51,834 331,534 337,994
Loss on disposal of assets -- -- 27,501 4,322
Changes in assets and liabilities:
Accounts receivable 939,858 308,333 (542,529) (1,017,662)
Inventories (878,854) (3,166,256) (2,865,926) 560,785
Prepaid expenses 35,281 127,840 5,854 9,348
Other assets 211 6,240 (13,103) (32,535)
Accounts payable (312,123) (151,490) 430,058 305,232
Customer deposits and other advances (6,211) (5,751) (8,137) 21,617
Accrued expenses 1,013,820 890,307 2,577 407,257
Notes payable, flooring (net) 1,141,362 5,079,409 3,609,182 (2,025,625)
---------- ----------- ----------- -----------
Total adjustments 2,009,396 3,140,466 977,011 (1,429,267)
---------- ----------- ----------- -----------
Net cash provided by operating activities 2,394,413 3,937,729 5,193,951 2,724,726
---------- ----------- ----------- -----------
Cash flows used in investing activities:
Capital expenditures (827) (168,348) (262,536) (368,682)
---------- ----------- ----------- -----------
Net cash flows used in investing activities (827) (168,348) (262,536) (368,682)
---------- ----------- ----------- -----------
Cash flows used in financing activities:
Distributions to shareholders -- -- (2,925,000) (3,300,447)
Principal payments on notes payable -- -- (1,975,000) --
Proceeds from issuance of notes payable -- -- -- 1,975,000
---------- ----------- ----------- -----------
Net cash used in financing activities -- -- (4,900,000) (1,325,447)
---------- ----------- ----------- -----------
Net increase in cash and cash equivalents 2,393,586 3,769,381 31,415 1,030,597
Cash and cash equivalents, beginning of year 4,901,958 4,870,543 4,870,543 3,839,946
---------- ----------- ----------- -----------
Cash and cash equivalents, end of year 7,295,544 8,639,924 $ 4,901,958 $ 4,870,543
========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest 337,082 323,516 $ 1,000,710 $ 1,080,206
Cash paid during the period for state franchise taxes -- -- 201,458 142,328
Supplemental schedule of noncash activity:
Transfers to inventories from equipment -- -- 240,656 347,425
Equipment additions via notes payable, flooring -- -- 334,764 358,011
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-101
<PAGE> 102
BLEDSOE DODGE, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
OPERATIONS
Bledsoe Dodge, Inc. (the "Company") is primarily engaged in the
business of selling and servicing automobiles, vans and trucks,
principally in the greater Dallas-Fort Worth market. The Company is a
franchised dealer for Chrysler Motor Corporation and maintains three
franchises located in the Dallas-Fort Worth metroplex.
The Company purchases substantially all of its new vehicles and parts
and accessories from Chrysler Motor Corporation.
In the opinion of management, the unaudited consolidated financial
statements contain all material adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the consolidated
financial position of the Company at March 31, 1997, and the
consolidated results of its operations and cash flows for the three
months ended March 31, 1997 and 1996. Operating results for these
interim periods are not necessarily indicative of the results that can
be expected for a full year.
CASH AND CASH EQUIVALENTS
The Company considers cash and cash equivalents to include cash on
hand, cash in banks, and contracts in transit.
INVENTORIES
Inventories are valued at the lower of cost or market with cost
determined using the last-in, first-out (LIFO) method.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS AND RELATED
DEPRECIATION AND AMORTIZATION
Property, equipment, and leasehold improvements are carried at cost
less accumulated depreciation. Renewals and betterments which extend
the useful lives of the assets are capitalized. Maintenance and repairs
are charged against operations as incurred. The cost of assets sold or
retired and the related accumulated depreciation are removed from the
accounts at the time of disposition, and any resulting gain or loss is
included in operations.
Depreciation and amortization expense is provided using the
straight-line method over the estimated useful lives of the related
assets. These lives are 3-5 years for furniture, equipment, company and
rental vehicles, 15 years for buildings, and 31.5 years or the
remaining life of the lease, whichever is less, for leasehold
improvements.
REVENUE RECOGNITION OF FINANCE AND INSURANCE INCOME
The Company includes income from finance and insurance commissions in
dealer finance, insurance, and service contract income, and maintains a
reserve for future finance and insurance chargebacks based on past
history of the Company.
F-102
<PAGE> 103
BLEDSOE DODGE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued:
FEDERAL AND STATE INCOME TAXES
The Company's shareholders have elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. Accordingly,
the financial statements do not include a provision for federal income
taxes because the Company does not incur federal income taxes. Instead,
the shareholders include their respective shares of the Company's
taxable income on their individual federal income tax returns. The
Company incurs state franchise taxes and the financial statements
include a provision for the franchise tax effect of transactions
reported in the financial statements.
ESTIMATES AND ASSUMPTIONS
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 at the date of the financial statements and the reported
amounts of revenues and expenses in the reporting period. Actual
results could differ from those estimates.
2. ACCOUNTS RECEIVABLE:
Accounts receivable consist of the following at December 31, 1996 and
1995:
1996 1995
---------- ----------
Trade accounts $2,586,121 $2,072,842
Chrysler Corporation 300,997 440,880
Financial institutions and
insurance companies 422,583 410,098
Factory and warranty claims 488,100 331,452
---------- ----------
$3,797,801 $3,255,272
========== ==========
The Company earns a portion of the interest charged on consumer
contracts that are assigned to financial institutions. The financial
institutions retain a percentage of the interest earned by the Company
against which repossession charges and the Company's share of interest
on contracts paid off prior to maturity are charged.
F-103
<PAGE> 104
BLEDSOE DODGE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. INVENTORIES:
Inventories consist of the following at December 31, 1996 and 1995:
1996 1995
----------- -----------
Demonstrators $ 1,413,014 $ 912,806
New vehicles 9,880,738 6,593,944
Used vehicles 2,673,853 3,348,513
Parts and accessories and other 1,276,414 1,282,174
----------- -----------
$15,244,019 $12,137,437
=========== ===========
The cost of new and demonstrator vehicles using the LIFO method was
less than the approximate current cost of new vehicles by $2,483,000
and $2,213,000 as of December 31, 1996 and 1995, respectively.
The cost of used vehicles using the LIFO method was less than
approximate current cost of used vehicles by $72,000 and $32,000 as of
December 31, 1996 and 1995, respectively.
The cost of parts and accessories using the LIFO method was less than
the approximate current cost of parts and accessories by $127,000 and
$77,400 as of December 31, 1996 and 1995, respectively.
During 1996, used vehicle inventories were reduced resulting in the
liquidation of LIFO inventory layers carried at lower costs in prior
years as compared to the current cost of inventory. These inventory
liquidations reduced cost of sales by approximately $9,000 for 1996.
4. NOTES PAYABLE, FLOORING:
Notes payable, flooring are amounts payable to a financial institution
for financing purchases of new, demonstrator, used, and dealer lease
vehicles, and are collateralized by the underlying vehicles purchased
via this financing arrangement. The notes are due when the vehicles are
sold. The difference between the notes payable, flooring and the
F-104
<PAGE> 105
BLEDSOE DODGE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. NOTES PAYABLE, FLOORING, Continued:
related vehicle inventories collateralizing the notes payable, flooring
is primarily due to accessories added at the dealership and the LIFO
reserve. The amount due to the financial institution as of December 31,
1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Obligations, bearing interest of 8.78% and 10% at December 31, 1996
and 1995, respectively, to a financial institution for financed new
vehicles and demonstrators which are included in
inventory as of year-end. $12,950,405 $8,872,756
Obligations, bearing interest of 9.10% and 10% at December 31, 1996
and 1995, respectively, to a financial institution for financed used
vehicles which are included in inventory
as of year-end. 53,475 193,325
Obligations, bearing interest of 9.25% to 9.75% and 8.75% to 10% at
December 31, 1996 and 1995, respectively, to a financial institution
for financed dealer lease vehicles, which are
included in equipment as of year-end. 380,832 374,685
----------- ----------
$13,384,712 $9,440,766
=========== ==========
</TABLE>
Interest expense on the notes payable, flooring for the year ended
December 31, 1996 and 1995, was approximately $1,096,108 and
$1,088,700, respectively. The Company receives assistance on its notes
payable, flooring from Chrysler Motor Corporation. Assistance amounts
received from Chrysler Motor Corporation are recorded as a reduction of
interest expense. The total assistance received in 1996 and 1995 was
approximately $1,453,248 and $1,242,300, respectively.
F-105
<PAGE> 106
BLEDSOE DODGE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. NOTES PAYABLE:
Notes payable consists of the following at December 31, 1995:
<TABLE>
<S> <C>
Capital loan payable to a financial institution. The loan represents outstanding
principal on a $2,500,000 line of credit, which bears interest at prime plus 1%
(the rate was 9.5% at December 31, 1995), requires monthly interest-only
payments, is collateraIized by certain life insurance policies owned by the
Company, is guaranteed by the shareholders and is due on demand. $1,500,000
Promissory note bearing interest at 10.5%, payable to shareholder, due on demand. 150,000
Promissory note bearing interest at 10.5%, payable to shareholder, due on demand. 325,000
----------
Notes payable $1,975,000
==========
</TABLE>
These notes payable were paid in full during 1996. As of December 31,
1996, the Company had no borrowings under the line of credit.
6. COMMITMENTS AND CONTINGENCIES:
The Company leases all of its dealership facilities in the Dallas-Fort
Worth metroplex and substantially all of its computer equipment under
operating leases. The original lease terms range from five to twenty
years. Under the lease agreements, the Company is to pay for all
maintenance, taxes and insurance for the dealership facilities.
The Company leases equipment under several operating leases expiring
through 1999. In addition, two of the Company's facilities are leased
from Bledsoe Properties, Ltd., which is owned by several of the
Company's shareholders. Rent expense under all leases totaled
approximately $969,600 in 1996 and $942,100 in 1995, of which $328,105
and $228,000 for 1996 and 1995, respectively, was paid to this related
party. Future minimum rental commitments under the noncancelable,
operating leases are as follows:
Nonrelated Related
Party Party Total
---------- ---------- -----------
1997 $ 620,225 $ 468,252 $ 1,088,477
1998 618,265 506,252 1,124,517
1999 213,877 513,852 727,729
2000 20,425 513,852 534,277
2001 513,852 513,852
Thereafter 6,233,135 6,233,135
---------- ---------- -----------
Total $1,472,792 $8,749,195 $10,221,987
========== ========== ===========
F-106
<PAGE> 107
BLEDSOE DODGE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. COMMITMENTS AND CONTINGENCIES, Continued:
There are various claims incident to the business operations of the
Company. In the opinion of management, the Company's potential
liability in all pending claims, in the aggregate, is not material.
7. CONCENTRATION OF CREDIT RISK:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and accounts
receivable.
The Company has cash on deposit with financial institutions and limits
the amount of credit exposure to any one financial institution. The
Company regularly maintains deposits in excess of federal insurance
coverage.
The Company grants credit to certain customers, substantially all of
which are located in the Dallas-Fort Worth metroplex. In addition, all
factory and warranty claims are due from Chrysler Motor Corporation.
The Company has not experienced significant losses from these
receivables.
8. RELATED PARTY TRANSACTIONS:
The Company permits shareholders and a former shareholder to loan money
to the Company, which it places on deposit with the financial
institution through which the notes payable, flooring are held. These
deposits result in decreased interest expense due to the financial
institution. The interest savings is remitted to the related parties
who loaned money to the Company. Total amounts remitted to related
parties under this arrangement were approximately $274,000 and $70,000
for 1996 and 1995, respectively.
F-107
<PAGE> 108
Independent Auditors' Report
----------------------------
BOARD OF DIRECTORS
SPIRIT RENT-A-CAR, INC.
We have audited the accompanying consolidated balance sheets of Spirit
Rent-A-Car, Inc. and Subsidiary as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated 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 audits 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Spirit Rent-A-Car, Inc. and Subsidiary as of December 31, 1996 and 1995, and
the results of its operations and cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Cohen & Company
January 31, 1997 (except for Notes 7 and 9 which are dated as of May 6, 1997)
Cleveland, Ohio
F-108
<PAGE> 109
SPIRIT RENT-A-CAR, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of As of December 31,
March 31, ---------------------------------
1997 1996 1995
------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 11,192,510 $ 10,008,747 $ 6,834,892
TRADE ACCOUNTS RECEIVABLE - Net of allowance
for doubtful accounts of $685,540, $721,330 and $465,675 4,035,519 4,535,201 2,988,180
OTHER RECEIVABLES 1,099,930 942,311 609,297
PREPAID EXPENSES 852,871 756,745 529,542
REFUNDABLE INCOME TAXES 444,876 1,754,081
------------- ------------- --------------
17,625,706 17,997,085 10,961,911
------------- ------------- --------------
PROPERTY AND EQUIPMENT - AT COST
Rental automobiles 113,233,320 105,090,205 65,968,144
Other property and equipment 6,021,100 5,346,533 3,205,378
------------- ------------- --------------
119,254,420 110,436,738 69,173,522
Less: Accumulated depreciation and amortization 20,217,126 18,230,104 12,137,522
------------- ------------- --------------
99,037,294 92,206,634 57,036,000
------------- ------------- --------------
OTHER ASSETS 454,280 359,834 239,602
------------- ------------- --------------
$ 117,117,280 $ 110,563,553 $ 68,237,513
============= ============= ==============
LIABILITIES
ACCOUNTS PAYABLE $ 1,081,839 $ 910,340 $ 324,711
AUTOMOBILE OBLIGATIONS 94,089,600 88,451,581 55,913,959
ACCRUED EXPENSES AND TAXES 5,661,183 5,085,478 3,640,913
DEFERRED INCOME TAXES PAYABLE 4,863,000 4,863,000 1,996,000
------------- ------------- --------------
COMMITMENTS AND CONTINGENCIES 105,695,622 99,310,399 61,875,583
------------- ------------- --------------
SHAREHOLDERS' EQUITY
COMMON STOCK
No par value
Authorized - 750 shares
Issued and outstanding - 489 shares 288,210 288,210 288,210
RETAINED EARNINGS 11,133,448 10,964,944 6,073,720
------------- ------------- --------------
11,421,658 11,253,154 6,361,930
------------- ------------- --------------
$ 117,117,280 $ 110,563,553 $ 68,237,513
============= ============= ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
F-109
<PAGE> 110
SPIRIT RENT-A-CAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Years Ended
Ended March 31, December 31,
------------------------------- -------------------------------
1997 1996 1996 1995
------------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUE
Automobile rentals $ 15,217,648 $ 10,901,911 $ 51,312,009 $ 33,101,339
------------- ------------- ------------- -------------
COST AND EXPENSES
Direct operating 1,409,121 836,072 3,562,362 2,911,738
Depreciation and amortization 4,940,797 2,865,022 13,991,240 8,505,983
Salaries and employee benefits 4,249,547 2,943,267 13,249,615 8,682,179
General and administrative 2,353,601 1,281,228 6,394,554 4,223,078
Advertising and promotion 385,919 203,056 1,009,010 600,036
------------- ------------- ------------- -------------
13,338,985 8,128,645 38,206,781 24,923,014
------------- ------------- ------------- -------------
INCOME FROM OPERATIONS 1,878,663 2,773,266 13,105,228 8,178,325
INTEREST EXPENSE 1,596,364 1,104,771 5,399,998 3,487,163
------------- ------------- ------------- -------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 282,299 1,668,495 7,705,230 4,691,162
------------- ------------- ------------- -------------
Provision (credit) for income taxes
Current 113,795 673,361 (52,994) 798,500
Deferred 2,867,000 1,078,000
------------- ------------- ------------- -------------
113,795 673,361 2,814,006 1,876,500
------------- ------------- ------------- -------------
NET INCOME $ 168,504 $ 995,134 $ 4,891,224 $ 2,814,662
============= ============= ============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
F-110
<PAGE> 111
SPIRIT RENT-A-CAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED SHAREHOLDERS'
STOCK EARNINGS EQUITY
------------- ------------- --------------
<S> <C> <C> <C>
BALANCE - JANUARY 1, 1995 $ 185,250 $ 3,259,058 $ 3,444,308
NET INCOME 2,814,662 2,814,662
ISSUANCE OF COMMON STOCK 102,960 102,960
------------- ------------- --------------
BALANCE - DECEMBER 31, 1995 288,210 6,073,720 6,361,930
NET INCOME 4,891,224 4,891,224
------------- ------------- --------------
BALANCE - DECEMBER 31, 1996 288,210 10,964,944 11,253,154
NET INCOME 168,504 168,504
------------- ------------- --------------
BALANCE - MARCH 31, 1997 (Unaudited) $ 288,210 $ 11,133,448 $ 11,421,658
============= ============= ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
F-111
<PAGE> 112
SPIRIT RENT-A-CAR, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Years Ended
Ended March 31, December 31,
------------------------------- -------------------------------
1997 1996 1996 1995
------------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOW PROVIDED FROM
OPERATING ACTIVITIES
Net income $ 168,504 $ 995,134 $ 4,891,224 $ 2,814,662
Noncash items included in income
Depreciation and amortization 5,373,366 3,261,868 16,336,725 9,825,438
Deferred income taxes 2,867,000 1,078,000
Gain on disposals of property and equipment (432,568) (396,846) (2,406,260) (1,784,535)
Increase (decrease) in cash caused by
changes in operating assets
Trade accounts receivable - Net 499,682 205,304 (1,547,021) (1,206,562)
Other receivables (157,619) (35,669) (333,014) 18,030
Prepaid expenses (96,126) (29,086) (227,203) (189,140)
Refundable income taxes 1,309,205 673,362 (1,754,081)
Accounts payable 171,499 34,649 585,629 55,791
Accrued expenses and taxes 575,705 302,378 1,444,565 634,793
------------- ------------- ------------- -------------
Net cash flow provided from operations 7,411,648 5,011,094 19,857,564 11,246,477
------------- ------------- ------------- -------------
CASH FLOW USED IN INVESTING ACTIVITIES
Acquisition of rental automobiles (17,155,277) (3,303,185) (64,883,509) (37,697,980)
Acquisition of other property and equipment (674,567) (25,915) (3,237,626) (1,339,168)
Proceeds from disposals of property and equipment 6,058,386 2,582,473 19,020,036 9,145,440
Increase in other assets (94,446) 26,770 (120,232) (27,164)
------------- ------------- ------------- -------------
(11,865,904) (719,857) (49,221,331) (29,918,872)
------------- ------------- ------------- -------------
CASH FLOW PROVIDED FROM (USED IN)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 17,597,718 2,862,819 70,208,675 40,071,502
Principal payments of long-term borrowings (11,959,699) (7,091,280) (37,671,053) (18,542,398)
Proceeds from issuance of common stock 102,960
------------- ------------- ------------- -------------
5,638,019 (4,228,461) 32,537,622 21,632,064
------------- ------------- ------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,183,763 62,781 3,173,855 2,959,669
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 10,008,747 6,834,892 6,834,892 3,875,223
------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 11,192,510 $ 6,897,668 $ 10,008,747 $ 6,834,892
============= ============= ============= =============
SUPPLEMENTAL INFORMATION
Interest paid $ 1,835,197 $ 1,291,508 $ 5,977,857 $ 3,293,879
============= ============= ============= =============
Income taxes paid None None $ 1,319,679 $ 1,325,000
============= ============= ============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
F-112
<PAGE> 113
SPIRIT RENT-A-CAR, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Spirit Rent-A-Car, Inc. and Subsidiary ("Spirit") are primarily engaged
in the insurance replacement automobile rental business.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements
of Spirit Rent-A-Car, Inc. and its wholly-owned subsidiary, Spirit
Leasing, Inc. All significant intercompany balances and transactions
have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
At March 31, 1997 and December 31, 1996 and 1995, Spirit maintained
cash balances at a financial institution and a captive finance
company which exceeded the amount insured by the Federal Deposit
Insurance Corporation.
Spirit considers all highly liquid instruments with a maturity of three
months or less to be cash equivalents. At March 31, 1997 and
December 31, 1996 and 1995, cash and cash equivalents included
amounts on deposit with a captive finance company of approximately
$10,333,000, $8,879,000 and $5,401,000, respectively.
Interest income for the three months ended March 31, 1997 and 1996
amounted to $185,162 and $149,228, respectively, and for the years
ended December 31, 1996 and 1995 amounted to $700,138 and $312,117,
respectively, and is netted against interest expense in the
accompanying consolidated statement of income.
PROPERTY AND EQUIPMENT
Rental automobiles are stated at cost, less related purchase discounts
and incentives. Rental automobiles are depreciated over their
estimated economic useful lives using the straight-line method at a
rate of 1.6% per month. Other property and equipment consists
primarily of trucks, tow dollies, office equipment and leasehold
improvements and is depreciated and amortized using the
straight-line method over estimated useful lives of three to seven
years.
During 1995, Spirit changed its estimate of the useful lives of its
rental automobiles. This change increased net income for 1995 by
$204,000, net of a related tax effect of $136,000.
Gains or losses realized from vehicle disposals are recorded as an
adjustment to depreciation expense. Gains on vehicle disposals
amounted to $434,792 and $401,100 for the three months ended March
31, 1997 and 1996, respectively, and amounted to $2,327,539 and
$1,859,526 for the years ended December 31, 1996 and 1995,
respectively.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Spirit and its subsidiary file a consolidated Federal income tax
return.
F-113
<PAGE> 114
SPIRIT RENT-A-CAR, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
USE OF ACCOUNTING ESTIMATES
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the reported revenue and expenses.
Actual results could vary from the estimates that were used.
ADVERTISING AND PROMOTIONAL COSTS
Advertising and promotional costs are generally expensed as incurred.
UNAUDITED FINANCIAL STATEMENTS
The financial statements as of March 31, 1997 and for the three months
ended March 31, 1997 and 1996 are unaudited; however, in the opinion
of management, all material normal recurring adjustments necessary
for a fair presentation of the financial statements for these
interim periods have been included. The results of the interim
periods are not necessarily indicative of the results for the full
year.
2. AUTOMOBILE OBLIGATIONS
A captive finance company of an automobile manufacturer and a bank
have provided Spirit with long-term credit facilities totaling $110
million, $110 million and $69 million at March 31, 1997 and December
31, 1996 and 1995, respectively, for the purchase of new
automobiles. Subsequent to March 31, 1997, available credit
facilities were increased to $130 million. Outstanding borrowings of
$94,089,600, $88,451,581 and $55,913,959 bear interest at a weighted
average interest rate of 7.9%, 8.0% and 9.2% at March 31, 1997, and
December 31, 1996 and 1995, respectively, and are collateralized by
the rental automobiles and their related receivables.
Future maturities of automobile obligations at March 31, 1997 are as
follows (unaudited):
1997 $ 33,723,500
1998 50,450,320
1999 9,915,783
-------------
$ 94,089,603
=============
Future maturities of automobile obligations at December 31, 1996 are as
follows:
1997 $ 43,250,461
1998 45,201,120
-------------
$ 88,451,581
=============
Maturities of automobile obligations at December 31, 1995 were as
follows:
1996 $ 29,279,165
1995 26,634,794
-------------
$ 55,913,959
=============
The credit agreement with a bank requires, among other things, that
Spirit maintain certain financial ratios, and imposes restrictions
on additional indebtedness and on compensation of non-executive
employees. The credit agreement with the finance company requires,
among other things, that Spirit maintain a certain net worth ratio.
F-114
<PAGE> 115
SPIRIT RENT-A-CAR, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. AUTOMOBILE OBLIGATIONS (Continued)
In addition, at March 31, 1997 and December 31, 1996, Spirit had an
available $750,000 line of credit from General Motors Acceptance
Corporation. Interest, computed at .75% above a bank's prime rate,
is payable monthly with any unpaid principal balance due on November
30, 1997. Such agreement is collateralized by substantially all
assets of Spirit, excluding rental automobiles. There were no
outstanding borrowings at March 31, 1997 and December 31, 1996.
The carrying amount of automobile obligations approximates the fair
value of the obligations since, in the opinion of management, Spirit
could borrow funds with similar remaining maturities at similar
interest rates.
3. PROFIT SHARING PLAN
Effective January 1, 1995, Spirit adopted a 401(k) profit sharing plan
covering substantially all employees. Spirit matches certain amounts
contributed by the employees up to a maximum percentage of
compensation. Discretionary company contributions can also be
authorized by the Board of Directors annually. Spirit's matching
contribution authorized for the three months ended March 31, 1997
and 1996 amounted to $14,689 and $10,498, respectively, and for the
years ended December 31, 1996 and 1995 amounted to $44,428 and
$33,580, respectively. No discretionary contributions were
authorized for the three months ended March 31, 1997 and 1996 or for
the years ended December 31, 1996 and 1995.
4. COMMON STOCK
During 1995, Spirit issued 42 shares of its common stock for $102,960.
5. COMMITMENTS AND CONTINGENCIES
Spirit is obligated under various leases, primarily for office space,
that expire at various dates during the next four years.
Future minimum lease payments under noncancellable operating leases
(with initial lease terms in excess of one year) as of December 31,
1996 are as follows:
1997 $ 1,162,000
1998 950,000
1999 577,000
2000 353,000
2001 270,000
Thereafter 444,000
-------------
$ 3,756,000
=============
Rent expense for such operating leases for the three months ended March
31, 1997 and 1996 amounted to $349,976 and $197,146, respectively,
and for the years ended December 31, 1996 and 1995 amounted to
$945,528 and $619,210, respectively.
F-115
<PAGE> 116
SPIRIT RENT-A-CAR, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. INCOME TAXES
Spirit's provision for income taxes differs from the amount that would
be determined using the statutory rate of 34%. The following is a
reconciliation of the income tax provision and the amount computed
by applying the statutory Federal income tax rate:
<TABLE>
<CAPTION>
As of March 31, As of December 31,
------------------------------- -------------------------------
1997 1996 1996 1995
------------- -------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
Tax provision computed at the
statutory rate $ 95,982 $ 567,288 $ 2,619,780 $ 1,594,995
Deferred tax provision for state and
local income taxes 374,600 145,400
Current tax provision for state and
local income taxes 17,813 106,073 105,300
Non-deductible expenses 25,300 13,800
Under- (over-) accrual from prior period (310,974) 122,305
------------- -------------- ------------- --------------
$ 113,795 $ 673,361 $ 2,814,006 $ 1,876,500
============= ============== ============= ==============
</TABLE>
The tax effects of temporary differences and carryforwards that give
rise to significant portions of the deferred tax liabilities and
deferred tax assets at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
As of December 31,
-------------------------------
1996 1995
------------- --------------
<S> <C> <C>
Deferred Tax Assets
Accounting for bad debts under the allowance
method for financial reporting purposes $ 282,000 $ 182,000
Accrual for self-insurance claims not deductible
until paid for tax purposes 607,000 587,000
Alternative minimum tax credit carryforwards 1,214,000 216,000
Other 5,000 25,000
------------- -------------
2,108,000 1,010,000
------------- -------------
Deferred Tax Liabilities
Excess of tax over financial accounting
depreciation (6,778,000) (3,006,000)
Accounting for prepaid expenses,
deductible when paid for tax purposes (193,000)
------------- -------------
(6,971,000) (3,006,000)
------------- -------------
Net deferred tax liability $ (4,863,000) $ (1,996,000)
============= =============
</TABLE>
There was no valuation allowance required to reduce the above deferred
tax assets at December 31, 1996 and 1995.
F-116
<PAGE> 117
SPIRIT RENT-A-CAR, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. CONTINGENT LIABILITIES
Spirit is insured for bodily injury and physical property damage
liability claims up to $1,000,000 per occurrence. Spirit has a
$100,000 ($50,000 prior to September 30, 1996) deductible per
occurrence. A funding arrangement with an outside third-party
administrator, which investigates, settles and processes each claim,
requires Spirit to maintain specific cash reserves on deposit. At
March 31, 1997 and December 31, 1996 and 1995, the cash reserve on
deposit with the administrator of $50,000 has been included in
prepaid expenses in the accompanying consolidated financial
statements. Provisions for actual and estimated claims included in
accrued expenses and taxes are as follows:
<TABLE>
<CAPTION>
As of As of December 31,
March 31, ------------------------------
1997 1996 1995
------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C>
Provision for actual and estimated
claims submitted $ 1,154,922 $ 1,199,306 $ 709,060
Provision for unsubmitted estimated claims 741,640 351,360 795,740
------------- ------------- -------------
Balance - End of period $ 1,896,562 $ 1,550,666 $ 1,504,800
============= ============= =============
</TABLE>
Spirit is self-insured for all physical property damage to its
vehicles. Net reserves for estimated losses on known self-insurance
claims at March 31, 1997 and December 31, 1996 and 1995 were
approximately $251,000, $34,000 and $96,000, respectively.
At March 31, 1997 and December 31, 1996, Spirit had a $750,000
irrevocable letter of credit with General Motors Acceptance
Corporation as a guarantee for payment of liability insurance
premiums. As of March 31, 1997 and December 31, 1996, such letter of
credit was unused.
Spirit was named co-defendant in an action alleging infringements of a
shareholder's rights. Spirit filed a counter-claim against the
shareholder alleging, among other things, breach of fiduciary duty.
Subsequent to December 31, 1996, both Spirit and the shareholder
dropped all litigation claims against each other.
8. VULNERABILITY DUE TO CONCENTRATIONS
Spirit purchases substantially all of its rental automobiles and
finances the majority of them from one automobile manufacturer and
financing subsidiary. Vehicle purchase commitments are finalized for
the entire model year at least six months before any vehicles are
produced. Management believes that there would be sufficient time to
purchase and finance its vehicles on comparable terms with
alternative sources, if need be. However, if it were necessary to
change suppliers, there is a possibility it could result in a loss
of revenue.
9. SUBSEQUENT EVENT - BUSINESS REORGANIZATION PLAN
On April 22, 1997, Spirit and Republic Industries, Inc. entered into a
merger agreement whereby shareholders of Spirit have agreed to
exchange all of the outstanding shares of common stock of Spirit for
shares of Republic Industries, Inc., valued at $80 million, in a
business combination accounted for as a pooling of interests.
F-117
<PAGE> 118
Independent Auditors' Report
----------------------------
Boards of Directors
Chesrown Automotive Group
Denver, Colorado
We have audited the accompanying combined balance sheet of Chesrown Automotive
Group as of December 31, 1996 and the related statements of income and
accumulated deficit and cash flows for the year then ended. These financial
statements are the responsibility of the Group's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides 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 Chesrown Automotive Group as
of December 31, 1996, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
The accompanying balance sheet of Chesrown Automotive Group as of March 31, 1997
and the related statements of income and accumulated deficit and cash flows for
the three months ended March 31, 1997 and 1996 are presented for the purposes of
additional analysis and are not a required part of the basic financial
statements. Such information has not been subjected to the auditing procedures
applied in the audit of the basic financial statements, and accordingly, we
express no opinion on it.
BAILEY SAETVEIT & CO., P.C.
Englewood, Colorado,
February 13, 1997
F-118
<PAGE> 119
CHESROWN AUTOMOTIVE GROUP
Combined Balance Sheets
<TABLE>
<CAPTION>
ASSETS
------
(Unaudited)
December 31, March 31,
1996 1997
------------ -----------
<S> <C> <C>
Current assets:
Cash $ 1,745,771 $ 825,215
Receivables (net of allowance for
doubtful accounts of $102,095 in
1996 and 1997) 4,170,726 3,132,593
Notes receivable - related parties 2,251,860 2,251,860
Inventories 38,082,593 33,605,008
Prepaid expenses 22,895 25,460
----------- -----------
Total current assets 46,273,845 39,840,136
Property and equipment 23,969,890 27,948,334
Goodwill (net of amortization of
$92,985 and $105,663 in 1996 and
1997, respectively) 1,935,784 1,923,106
Other assets 187,721 82,697
----------- -----------
$72,367,240 $69,794,273
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Bank overdraft $ 563,881 $ 935,609
Current maturities of long-term debt 2,172,471 2,779,397
Notes payable - floor plan 39,554,358 35,633,740
Notes payable - other 2,930,000 3,610,000
Accounts payable 1,738,155 1,488,769
Accrued liabilities 3,178,603 2,242,591
----------- -----------
Total current liabilities 50,137,468 46,690,106
----------- -----------
Long-term debt 15,339,543 16,569,416
----------- -----------
Unearned income and reserves 4,344,774 4,628,129
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, 60,000 shares of no par
value authorized, 24,000 shares issued
and outstanding 2,120,814 2,120,814
Additional paid-in capital 1,294,496 1,594,496
Accumulated deficit (869,855) (1,808,688)
----------- -----------
Total stockholders' equity 2,545,455 1,906,622
----------- -----------
$72,367,240 $69,794,273
=========== ===========
</TABLE>
See notes to combined financial statements.
F-119
<PAGE> 120
CHESROWN AUTOMOTIVE GROUP
Combined Statements of Income and Accumulated Deficit
<TABLE>
<CAPTION>
(Unaudited)
March 31,
December 31, ------------------------------
1996 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Sales $299,781,300 $ 63,954,436 $ 74,431,446
Cost of sales 258,788,097 55,170,626 63,344,216
------------ ------------ ------------
Gross profit 40,993,203 8,783,810 11,087,230
Selling, general and
administrative expenses 36,858,883 7,893,529 9,002,351
------------ ------------ ------------
Operating income 4,134,320 890,281 2,084,879
Other income, less other deductions 693,335 509,945 708,157
------------ ------------ ------------
Income before cumulative effects of
accounting change 4,827,655 1,400,226 2,793,036
Cumulative effect of accounting change
on years prior to 1996 (1,592,714) -0- -0-
------------ ------------ ------------
Net income 3,234,941 1,400,226 2,793,036
Dividend distributions (4,525,392) (2,339,059) (2,073,654)
Retained earnings (accumulated
deficit), beginning 420,596 (869,855) 4,257,543
------------ ------------ ------------
Accumulated deficit, end $ (869,855) $ (1,808,688) $ 4,976,925
============ ============ ============
</TABLE>
See notes to combined financial statements.
F-120
<PAGE> 121
CHESROWN AUTOMOTIVE GROUP
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
(Unaudited)
March 31,
December 31, --------------------------------
1996 1997 1996
------------ --------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 3,234,941 $ 1,400,226 $ 2,793,036
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 989,363 304,263 126,127
Net change in assets and liabilities:
Receivables (2,066,410) (1,228,822) 664,108
Inventories, net of floor plan 897,197 (1,596,239) (3,060,219)
Prepaid expenses 78 (2,565) 3,552
Other assets 16,892 65,312 75,204
Accounts payable (217,365) (725,337) (881,308)
Other liabilities 3,878,389 (590,417) 502,761
----------- ----------- -----------
Net cash provided (used) by
operating activities 6,733,085 (2,373,579) 223,261
----------- ----------- -----------
Investing activities:
Purchases of property and equipment (15,396,485) (4,894,003) (4,578,155)
Proceeds from sales of property
and equipment 1,077,819 23,974 928,320
----------- ----------- -----------
Net cash used by investing
activities (14,318,666) (4,870,029) (3,649,835)
----------- ----------- -----------
Financing activities:
Proceeds from long-term debt
and notes payable 13,404,700 8,191,487 1,169,262
Additional paid-in capital 19,496 300,000 --
Payments of long-term debt
and notes payable (775,629) (201,104) 4,340,864
Proceeds from issuance of common stock 10,000 -0- 35,000
Dividends paid (4,525,392) (2,339,059) (2,176,140)
----------- ----------- -----------
Net cash provided by
financing activities 8,133,175 5,951,324 3,368,986
----------- ----------- -----------
Net increase (decrease) in cash 547,594 (1,292,284) (57,588)
Cash, beginning of year/period 634,296 1,181,890 634,296
----------- ----------- -----------
Cash, (bank overdraft) end of year/period $ 1,181,890 $ (110,394) $ 576,708
=========== =========== ===========
Cash, end of year/period:
Cash $ 1,745,771 $ 825,215 $ 576,708
Bank overdraft (563,881) (935,609) --
----------- ----------- -----------
$ 1,181,890 $ (110,394) $ 576,708
=========== =========== ===========
Supplemental disclosure of cash flow
information - cash paid during the
year/period for:
Interest $ 4,250,955 $ 972,374 $ 656,310
Income taxes $ -0- -0- -0-
</TABLE>
See notes to combined financial statements.
F-121
<PAGE> 122
CHESROWN AUTOMOTIVE GROUP
Notes to Combined Financial Statements
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements include the accounts of
the following entities: Chesrown Chevrolet, Inc., Marshall Ford, Inc.,
Chesrown's Friendly Ford, Inc., Chesrown's Southwest Dodge, Inc.,
Total Care, Inc., Chesrown Collision Center, Inc., and Chesrown Auto
Group, Inc. (the "Companies"). The Companies have been presented on a
combined basis due to their related operations, common ownership and
common management control. All significant intercompany balances and
transactions have been eliminated in combination.
The Chesrown Automotive Group is engaged in the retail and commercial
sale of new and used motor vehicles, finance and insurance products,
vehicle service and parts, after-market products and in selling third
party financing contracts on new and used vehicle sales originated by
dealerships within the group. The Companies operate in the Denver and
Boulder, Colorado areas.
In the opinion of management, the unaudited combined financial
statements contain all material adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the combined
financial position of the Companies at March 31, 1997 and the combined
results of its operations and cash flows for the three months ended
March 31, 1997 and 1996. Operating results for these interim periods
are not necessarily indicative of the results that can be expected for
a full year.
INVENTORIES
The cost of new vehicle inventories is computed using the last-in,
first-out (LIFO) cost method. If the first-in, first-out (FIFO) method
of inventory accounting had been used by the Companies, inventories,
net working capital and total stockholder's equity would have been
$4,601,085 higher than reported at December 31, 1996 and net income
for the year ended December 31, 1996 would have been $764,138 higher
than reported.
Used vehicle and parts and accessories inventories are stated at the
lower of cost or market. Cost is determined by the first-in, first-out
method, and market represents the lower of replacement cost or
estimated net realizable value.
PROPERTY AND EQUIPMENT AND RELATED DEPRECIATION
Property and equipment are recorded at cost. Depreciation is provided
using the declining balance and straight-line methods. Estimated
useful lives of the assets used in the computation of depreciation are
as follows:
F-122
<PAGE> 123
CHESROWN AUTOMOTIVE GROUP
Notes to Combined Financial Statements, Continued
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES, Continued
Years
--------
Building and improvements 5 - 10
Furniture, equipment and vehicles 5 - 7
FINANCE CONTRACTS
Finance income is recognized when finance contracts are sold. The
Companies provide an estimated reserve for finance income chargebacks.
Finance contracts sold to customers through some lenders on vehicles
which are at least six years old are sold with recourse. In the event
of a default by a customer, the finance institution will repossess the
vehicle and the Companies must purchase the vehicle for the balance
due on the customer's contract. Repossession losses are recorded as
incurred. Such repossession losses in 1996 totaled $34,633.
EXTENDED WARRANTIES
Warranty income and related claims expense are recognized ratably over
customers' periods of coverage as provided in the individual extended
service contracts. The Companies provide an estimated reserve for
warranty claims.
INCOME TAXES
The Companies have elected S-Corporation status and income taxes on
the profits are a liability of the shareholders. Accordingly, there is
no provision for income taxes or income tax liability reflected in
these combined financial statements.
CASH
The Companies consider all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash.
ADVERTISING COSTS
The Companies expense non-direct advertising costs as incurred. The
Companies did not incur any direct advertising costs in 1996 to be
capitalized and deferred to future periods. Total advertising expense
in 1996 was approximately $4,225,000.
F-123
<PAGE> 124
CHESROWN AUTOMOTIVE GROUP
Notes to Combined Financial Statements, Continued
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES, Continued
ESTIMATES
The preparation of combined 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 disclosure of contingent assets and liabilities at
the date of the combined financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
2. NOTES RECEIVABLE - RELATED PARTIES
Notes receivable - related parties at December 31, 1996 consist of the
following, which are due on demand and bear interest at rates ranging
from 8% to 10%:
Colorado National Speedway, Inc. $ 1,100,000
Chesrown Racing, Inc. 350,000
CAG Investments, Inc. 801,860
-----------
$ 2,251,860
===========
3. PROPERTY AND EQUIPMENT
Following is a summary of property and equipment at December 31, 1996:
Land $ 9,541,771
Buildings and improvements 10,892,071
Furniture, equipment and vehicles 5,950,575
-----------
26,384,417
Less accumulated depreciation (2,414,527)
-----------
$23,969,890
===========
Depreciation expense for 1996 was $953,122.
4. NOTES PAYABLE - FLOOR PLAN
The Companies have line of credit commitments with General Motors
Acceptance Corporation (GMAC) and Ford Motor Credit Company (FMCC) to
finance new vehicle inventory and program vehicles (included in used
vehicles). Principal reductions are required as vehicles are sold and
interest is due monthly at 1% over prime. The lenders retain a
security interest in all units financed and all other assets of the
dealerships. The notes are guaranteed by the shareholder.
Interest expense relating to notes payable - floor plan for 1996 was
approximately $3,120,000.
F-124
<PAGE> 125
CHESROWN AUTOMOTIVE GROUP
Notes to Combined Financial Statements, Continued
December 31, 1996
5. NOTES PAYABLE - OTHER
The Companies have line of credit commitments with GMAC and FMCC which
mature during 1997 under which the Companies may borrow up to
$3,550,000 at 1.00% to 1.25% above the lenders' prime interest rate.
Principal is due at maturity with interest due monthly. The notes are
collateralized by all the assets of the dealership and guaranteed by
the majority shareholder.
6. LONG-TERM DEBT
Long-term debt at December 31, 1996 consists of the following:
GMAC $ 4,442,167
Real estate construction loan commitment
of $4,950,000 of which $1,800,000 was
drawn to purchase the land. Payable,
interest only through September 1996 and
thereafter in monthly installments of
$27,500 plus interest at prime plus 1%
through August 2001. Principal and
interest balloon payment due September
2001. The note is collateralized by real
property, machinery and equipment located
at the future site of the Chesrown
Chevrolet facilities.
GMAC 2,305,628
Payable in monthly installments of $19,373
plus interest at prime plus 1% through
December 2006. The note is collateralized
by real property, machinery and equipment
located at the Companies' new collision
center.
GMAC 3,644,334
Payable in monthly installments of $31,417
plus interest at prime plus 1% through
September 2006. The note is collater-
alized by real property, machinery and
equipment located at the Companies' new
Marshall Ford facility.
GMAC 4,343,625
Payable in monthly installments of $37,125
plus interest at prime plus 1% through
October 2006. The note is collateralized
by real property, machinery and equipment
located at the Companies' Chesrown's
Southwest Dodge facility.
F-125
<PAGE> 126
CHESROWN AUTOMOTIVE GROUP
Notes to Combined Financial Statements, Continued
December 31, 1996
6. LONG-TERM DEBT, CONTINUED
Others 2,776,260
-----------
17,512,014
Less current maturities (2,172,471)
-----------
Long-term debt $15,339,543
===========
Maturities of long-term debt are as follows:
Year Ended
December 31, Amount
----------------- ---------------
1997 $ 2,172,471
1998 2,031,136
1999 2,051,974
2000 1,824,567
2000 and thereafter 9,431,866
-----------
$17,512,014
===========
The Companies follow the policy of capitalizing interest as a
component of the cost of property, plant, and equipment constructed
for its own use. In 1996, total interest incurred for long-term debt
was $1,254,812, of which $132,718 was capitalized, and $1,122,094 was
charged to operations.
7. PROFIT SHARING PLAN
The Companies have adopted a 401(k) plan in which all full-time
employees who meet certain eligibility requirements may participate.
The Companies may match a portion of the employees' salary reduction
contributions. The contribution for 1996 was $55,321. The Companies
have no obligation to make a contribution to the plan in any year.
8. CHANGE IN ACCOUNTING PRINCIPLE
During 1996 the Companies changed their method of recognizing warranty
income and related claims expense from the point of sale method to a
method in which the income and related claims expense are recognized
ratably over the customers' periods of coverage, as provided in the
individual extended service contracts. The effect of the change was to
decrease income by $2,376,374 for 1996. The cumulative effect of the
change on prior years of $1,592,714 is a one time change to income.
F-126
<PAGE> 127
CHESROWN AUTOMOTIVE GROUP
Notes to Combined Financial Statements, Continued
December 31, 1996
9. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Companies lease a dealership facility under an operating lease for
$35,000 per month through March 1, 2005. The lease is a "triple net"
lease requiring the Companies to pay real estate taxes, insurance, and
repairs. The lease also requires cost of living increases calculated
every year based on the Consumer Price Index.
Following is a schedule by years of the future minimum rental payments
under the operating lease as of December 31, 1996 based on the present
actual rate:
Year Ended
December 31, Amount
---------------- ---------------
1997 $ 420,000
1998 420,000
1999 420,000
2000 420,000
2001 and thereafter 1,750,000
-----------
$ 3,430,000
===========
Rent expense for the period ended December 31, 1996 was $523,100.
CONCENTRATION OF CREDIT RISK
The Companies maintain checking accounts at high credit quality
financial institutions. The balances, at times, may exceed federally
insured limits. At December 31, 1996 the balances exceeded the
federally insured limit by approximately $760,000.
GOVERNMENTAL REGULATION
The Companies' facilities are subject to federal, state and local
regulations relating to the discharge of materials into the
environment. Compliance with these provisions has not had, nor do the
Companies expect such compliance to have, any material effect upon its
capital expenditures, net income, financial condition or competitive
position. Management believes that its current practices and
procedures for the control and disposition of such wastes comply with
applicable federal and state requirements.
10. RELATED PARTY TRANSACTIONS
The Companies have transactions with its major shareholder, Marshall
R. Chesrown, and with three other corporations which he owns:
Chesrown Racing, Inc. (a motor sport promotion company); Colorado
National Speedway (a race track promotion company); and CAG
Investments, Inc. (a real estate investment company).
F-127
<PAGE> 128
CHESROWN AUTOMOTIVE GROUP
Notes to Combined Financial Statements, Concluded
December 31, 1996
10. RELATED PARTY TRANSACTIONS, continued
Mr. Chesrown is a guarantor of substantially all of the Companies'
debt.
The Companies have notes receivable from the three corporations (note
2).
The Companies leased racing equipment to Chesrown Racing, Inc. in
1996 for $240,000. In addition, the Companies paid $480,000 in
sponsorship fees to Chesrown Racing, Inc. in 1996.
The Companies collected management fees in 1996 from Colorado
National Speedway, Inc. and Chesrown Racing, Inc. of $120,000 and
$60,000, respectively.
The Companies rent an office building from CAG Investments, Inc. on
a month-to-month basis. Total rent paid to CAG Investments, Inc. in
1996 was $90,000.
F-128
<PAGE> 129
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Bankston Automotive Group
Dallas, Texas
We have audited the accompanying combined balance sheet of Bankston Automotive
Group as of March 31, 1997, and the related combined statements of operations,
owners' deficit and cash flows for the year then ended. These financial
statements are the responsibility of the Group's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Bankston Automotive
Group as of March 31, 1997, and the combined results of their operations and
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Turner & Vedrenne
Dallas, Texas
May 22, 1997
F-129
<PAGE> 130
BANKSTON AUTOMOTIVE GROUP
COMBINED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 2,932,750
Accounts receivable, less allowance for doubtful accounts of
$178,461 (Note 2) 12,133,095
Inventories (Note 2):
New and demonstrator vehicles 21,325,586
Used vehicles 6,927,542
Parts, accessories, and supplies 2,033,240
------------
30,286,368
Prepaid expenses 125,193
Deferred tax asset (Note 5) 34,693
------------
Total current assets 45,512,099
Other assets:
Investment in tax benefits (Note 3) 120,461
Amounts withheld by financing institutions to apply against
prepayments and losses on conditional sales contracts 601,130
Deferred tax asset (Note 5) 1,121,112
Miscellaneous 565,924
------------
2,408,627
Advances to shareholder and affiliates (Note 6) 1,198,140
Net assets excluded from merger (Note 8) 2,040,996
Property, equipment and leasehold improvements, at cost (Note 4):
Land 14,326,723
Building and leasehold improvements 8,860,853
Furniture and equipment 5,959,289
Construction in progress 1,511,815
------------
30,658,680
Allowance for depreciation and amortization (8,983,247)
------------
21,675,433
------------
$ 72,835,295
============
</TABLE>
SEE ACCOMPANYING NOTES.
F-130
<PAGE> 131
<TABLE>
<S> <C>
LIABILITIES AND OWNERS' DEFICIT
Current liabilities:
Obligations to financing institutions for new and used
vehicles (Note 2) $ 41,155,009
Current portion of long-term debt (Note 4) 1,779,731
Trade accounts payable 4,351,213
Accrued payroll and commissions 952,674
Other accrued expenses 1,020,832
Taxes, other than Federal income taxes 784,342
Federal income taxes payable (Note 5) 454,312
------------
Total current liabilities 50,498,113
Long-term debt, less current portion (Note 4) 28,249,745
Commitments and contingencies (Note 9)
Minority interest 344,066
Owners' deficit:
Common stock 51,612
Additional paid-in capital 752,383
Accumulated deficit (2,991,735)
Partners' deficit (4,068,889)
------------
Total owners' deficit (6,256,629)
------------
$ 72,835,295
============
</TABLE>
SEE ACCOMPANYING NOTES.
F-131
<PAGE> 132
BANKSTON AUTOMOTIVE GROUP
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997
<TABLE>
<S> <C>
Net sales:
Vehicles $ 233,501,373
Parts and service 45,336,363
-------------
278,837,736
-------------
Cost of sales:
Vehicles 218,735,938
Parts and service 26,190,993
-------------
244,926,931
-------------
Gross margin 33,910,805
Other income:
Finance and extended warranty 4,787,206
Miscellaneous 2,096,626
-------------
6,883,832
-------------
Expenses:
Selling 19,591,938
Administrative and general 12,965,492
Depreciation and amortization 765,524
Interest 3,983,654
-------------
37,306,608
-------------
Minority interest in net income of combined entity (183,085)
-------------
Income before Federal income taxes 3,304,944
Federal income taxes (Note 5) 99,284
-------------
Net income $ 3,205,660
=============
</TABLE>
SEE ACCOMPANYING NOTES.
F-132
<PAGE> 133
BANKSTON AUTOMOTIVE GROUP
COMBINED STATEMENT OF OWNERS' DEFICIT
FOR THE YEAR ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Additional
Common paid-in Accumulated Partners'
stock capital deficit deficit Total
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1996 $ 51,612 $ 751,883 $(5,186,425) $(4,769,561) $(9,152,491)
Net income -- -- 2,334,690 870,970 3,205,660
Capital contributions -- 500 -- 836,991 837,491
Dividends and distributions -- -- (140,000) (1,007,289) (1,147,289)
----------- ----------- ----------- ----------- -----------
Balance at March 31, 1997 $ 51,612 $ 752,383 $(2,991,735) $(4,068,889) $(6,256,629)
=========== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-133
<PAGE> 134
BANKSTON AUTOMOTIVE GROUP
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1997
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 3,205,660
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 765,524
Gain on sale of minority interest (21,649)
Increase in LIFO reserves 484,578
Provision for deferred income taxes (490,542)
Minority interest in net income of combined entity 183,085
Changes in assets and liabilities:
Accounts receivable (995,375)
Inventories (FIFO) 1,042,367
Prepaid expenses and miscellaneous other assets (242,559)
Trade accounts payable and other current liabilities 951,287
Federal income taxes payable 467,610
Amounts withheld by financing institutions 116,560
Net assets excluded from merger 100,572
-----------
Net cash provided by operating activities 5,567,118
-----------
INVESTING ACTIVITIES
Purchase of property, equipment and leasehold improvements (5,876,852)
Proceeds from sale of minority interest in combined subsidiary 25,000
Proceeds from sale of equipment 72,215
-----------
Net cash used in investing activities (5,779,637)
-----------
FINANCING ACTIVITIES
Decrease in obligations to financing institutions for new and
used vehicles (1,735,078)
Proceeds from long-term debt 5,003,131
Proceeds from line of credit 2,365,000
Payments on line of credit (3,245,673)
Principal payments on long-term debt (2,091,574)
Capital contributions 837,491
Dividends paid to shareholder (140,000)
Distributions to partners and minority interest (1,127,289)
Decrease in advances to shareholder and affiliates 598,528
-----------
Net cash provided by financing activities 464,536
-----------
Net increase in cash 252,017
Cash at beginning of year 2,680,733
-----------
Cash at end of year $ 2,932,750
===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-134
<PAGE> 135
BANKSTON AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Bankston Automotive Group (the Group) operates in Dallas, Texas and the
surrounding suburbs. The Group serves customers principally in the
Dallas and Fort Worth metropolitan area. The Group offers a broad range
of products and services including new and used car and light truck
sales, vehicle financing and warranty products, and replacement parts
and service. At its five locations the Group offers four makes of new
vehicles, including Ford, Nissan, Lincoln-Mercury and SAAB.
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of W.O. Bankston
Enterprises, Inc. and subsidiaries and certain other partnerships and
joint ventures. The partnerships and joint ventures all have a December
31 fiscal year-end. There have been no transactions from January 1, 1997
to March 31, 1997 related to these entities that have a material effect
on the financial position or results of operations of the Group.
All significant intercompany accounts and transactions have been
eliminated in the combined financial statements.
MAJOR SUPPLIER AND DEALER AGREEMENTS
The Group purchases substantially all of its new vehicles and parts and
accessories inventories from Ford Motor Company, Nissan Motor
Corporation and SAAB Cars USA, Inc. at the prevailing prices charged to
all franchised dealers. The Group's overall sales could be impacted by a
manufacturer's inability or unwillingness to supply the Group with an
adequate supply or mix of inventory.
The Group enters into Dealer Agreements with each manufacturer. The
Dealer Agreements limit the location of the dealership and give the
manufacturer rights to approve changes in the dealership's ownership. A
manufacturer may terminate the Dealer Agreement if the Group is in
breach of its terms.
REVENUE RECOGNITION
Revenue from the sale of vehicles is recognized upon acceptance by the
customer and completed financing arrangements. Revenue from parts sales
and service are recognized when the parts are delivered or the service
work is performed. Finance, insurance and extended warranty contracts
are recognized upon the sale of the contract.
F-135
<PAGE> 136
BANKSTON AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Group defines cash
equivalents as cash and short-term highly liquid investments that: (a)
are readily convertible to known amounts of cash and (b) are so near to
maturity that they present insignificant risk of changes in value
because of changes in interest rates.
INVENTORIES
New, demonstrator and used vehicles are stated at the lower of cost or
market, with cost being determined by the last-in, first-out (LIFO)
method. If the specific unit method of inventory accounting had been
used, the new, demonstrator and used vehicle inventory would have
increased by $10,585,254 and $1,770,643 at March 31, 1997, respectively.
Parts, accessories, and supplies are stated at the lower of cost or
market, with cost being determined by the LIFO method. If the inventory
had been priced using manufacturer's catalogue replacement prices, the
inventory would have increased by $1,684,310 at March 31, 1997.
Quantities in various LIFO inventory pools were reduced in 1997,
resulting in liquidation of LIFO layers carried at lower costs
prevailing in prior years as compared with the cost of current year
purchases. The effect of the liquidation was to increase net income by
$354,360 in 1997.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are provided using accelerated methods for
substantially all furniture and equipment. The straight-line method is
used for building and leasehold improvements in amounts sufficient to
amortize the cost of the assets over their estimated useful lives.
INCOME TAXES
The Group uses an asset and liability approach to recognize deferred
income tax assets and liabilities for the future tax return consequences
of temporary differences between the financial statement carrying
amounts and the tax basis of assets and liabilities. Valuation
allowances are established, if necessary, to reduce deferred tax assets
to the amount that will more likely than not be realized. The Company's
deferred taxes relate primarily to the allowance for doubtful accounts
(deductible for financial statement purposes but not for income tax
purposes), investments in affiliates (recorded on the cost method for
financial statement purposes), deductible loss carryforwards, and tax
credit carryforwards.
ADVERTISING
The Group expenses production and other costs of advertising as
incurred. Advertising expense for the year ended March 31, 1997 was
$2,451,217.
F-136
<PAGE> 137
BANKSTON AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
CONCENTRATION OF CREDIT RISK
The financial instruments that potentially subject the Group to
concentrations of credit risk consist primarily of cash and accounts
receivable. The Group has cash on deposit with financial institutions
and limits the amount of credit exposure to any one financial
institution. At times, the Group's cash balances exceeds the federally
insured limit of $100,000. The Group routinely assesses the financial
strength of its customers. Consequently, the Group believes that its
accounts receivable credit risk exposure is limited.
ESTIMATES
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 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. Actual results could differ from those
estimates.
2. OBLIGATIONS TO FINANCING INSTITUTIONS
At March 31, 1997, obligations to financing institutions for new and
used vehicles have as collateral accounts receivable of $3,117,872,
substantially all new and demonstrator vehicles, and $4,367,392 of used
vehicles. Payment is generally due upon the sale of the related vehicle.
These obligations bear interest at prime plus 1%. Total interest expense
for these obligations for the year ended March 31, 1997 was $1,468,152
and is net of floor plan assistance of $1,886,256.
3. INVESTMENT IN TAX BENEFITS
During the year ended March 31, 1984, the Group acquired Federal income
tax benefits under the safe harbor leasing provisions of the Economic
Recovery Tax Act of 1981 from The Greater Cleveland Regional Transit
Authority for $520,000. The tax benefits consisted of accelerated cost
recovery system (ACRS) deductions on $2.8 million of light rail
vehicles. The purchase has been recorded as an investment in tax
benefits. The investment in tax benefits is being amortized over the
life of the related lease.
F-137
<PAGE> 138
BANKSTON AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
4. LONG-TERM DEBT
Long-term debt consists of the following at March 31, 1997:
<TABLE>
<S> <C>
Mortgages payable to Ford Motor Credit Company; interest at
prime plus 1% to 1.5% or the commercial paper rate plus
3.95% or 4.45%; secured by assets of certain of the Group's
subsidiaries; maturing through 2005 $ 23,226,465
Notes payable to Ford Motor Credit Company; interest at prime
plus 1.5%; secured by assets of certain of the Group's
subsidiaries; maturing through 2006 2,253,170
$1,500,000 line of credit; interest at prime plus
1.5%; secured by certain furniture and
equipment; due on demand 300,000
Mortgages payable to Nissan Motor Acceptance Corporation;
interest at prime plus 1%; secured by assets of certain of
the Group's subsidiaries; maturing through 2010 3,181,321
Mortgage payable to bank; interest at 9.25%;
secured by assets of certain of the Group's
subsidiaries; matures in April 1997 554,000
Other notes payable 514,520
------------
30,029,476
Less current portion (1,779,731)
------------
$ 28,249,745
============
</TABLE>
Maturities of long-term debt are as follows: 1998 - $1,779,731; 1999 -
$5,434,603; 2000 - $20,118,164; 2001 - $366,056 and 2002 - $365,799.
The Group made interest payments of $4,066,265 in 1997, of which
$112,807 was capitalized.
F-138
<PAGE> 139
BANKSTON AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
5. FEDERAL INCOME TAXES
Certain members of the Group are treated as partnerships for income tax
purposes. Accordingly, the accompanying financial statements reflect no
provision for income taxes for these entities since the taxable income
or loss of the entities are reported by the individual partners.
For the remaining members of the Group, the provision for income taxes
consist of the following for the year ended March 31, 1997:
Current $ 589,826
Deferred (490,542)
---------
$ 99,284
=========
The Group's taxable income for the year ended March 31, 1997 was
$1,888,166. The Group was subject to alternative minimum tax (AMT)
resulting in AMT expense of $25,395 for the year ended March 31, 1997.
The provision for income taxes at the Group's effective tax rate of 34%
differed from the provision for income taxes at the statutory rate as
follows:
<TABLE>
<S> <C>
Computed tax at the expected statutory rate $ 1,123,681
Partnerships not subject to entity level tax (296,072)
Utilization of net operating loss carryforward (327,900)
Nondeductible expenses (34,648)
Alternative minimum tax 25,395
Other, net 99,370
-----------
$ 589,826
===========
</TABLE>
The Group's total deferred tax assets and deferred tax liabilities
consist of the following at March 31, 1997:
Total deferred tax assets $ 1,334,827
Total deferred tax liabilities (179,022)
-----------
Net deferred tax asset $ 1,155,805
===========
At March 31, 1997, the Group has safe harbor lease deduction
carryforwards of $1,965,289 available to offset future taxable income
and alternative minimum tax credit carryforwards of $624,497 available
to offset future taxes payable. Such carryforwards have an indefinite
expiration under present tax laws.
F-139
<PAGE> 140
BANKSTON AUTOMOTIVE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
6. RELATED PARTY TRANSACTIONS
Included in advances to shareholder and affiliates at March 31, 1997, is
an interest-bearing advance to an affiliated company, Dallas North
Acceptance Corporation (DNAC), totaling $776,403. DNAC functions as a
finance company that provides credit to selected customers of the Group.
The advance bears interest at 7%, with no specified repayment terms.
7. EMPLOYEE BENEFIT PLAN
The Group sponsors a defined contribution profit sharing plan covering
substantially all full-time employees. If a participant decides to
contribute, a portion of the contribution may be matched by the Group at
the Group's discretion. Amounts expensed for this plan totaled $101,052
for the year ended March 31, 1997.
8. SUBSEQUENT EVENT
On March 8, 1997, the stockholders and partners of the Group entered
into a Merger Agreement with Republic Industries, Inc. Under the terms
of the Merger Agreement, Republic Industries, Inc. will acquire 100%
ownership of the Group. Prior to the closing of the Merger Agreement,
certain nonautomotive assets of the Group will be purchased at fair
market value by the stockholders and partners of the Group. The closing
of the Merger Agreement occurred on May 14, 1997.
9. COMMITMENTS AND CONTINGENCIES
The Group is exposed to various asserted and unasserted potential claims
encountered in the normal course of business. In the opinion of
management, the resolution of these matters will not have a material
effect on the Group's financial position or results of operations.
F-140
<PAGE> 141
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Ditschman/Flemington Ford-
Lincoln-Mercury, Inc. and Related Entities
Flemington, New Jersey
We have audited the accompanying combined balance sheet of Ditschman/Flemington
Ford-Lincoln-Mercury, Inc. and related entities as of December 31, 1996, and
the related combined statements of income, changes in owners' equity and cash
flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the combined financial position of
Ditschman/Flemington Ford-Lincoln-Mercury, Inc. and related entities as of
December 31, 1996 and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
As discussed in Notes 1 and 17, an agreement has been reached for
Ditschman/Flemington Ford-Lincoln-Mercury, Inc. and related entities to be
acquired.
EHRENKRANTZ STERLING & CO. LLC
Roseland, New Jersey,
May 28, 1997
F-141
<PAGE> 142
DITSCHMAN/FLEMINGTON FORD-LINCOLN-MERCURY, INC.
AND RELATED ENTITIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 4,192,767 $ 5,331,706
Accounts and factory receivables 7,793,053 6,959,890
Finance receivables, net of allowances of $283,000
at March 31, 1997 and December 31, 1996 114,901 21,071
Mortgages and notes receivable, current portion 203,343 198,766
Inventories 50,418,319 46,480,163
Sundry assets 128,013 107,952
Deferred taxes 148,270 148,270
----------- -----------
TOTAL CURRENT ASSETS 62,998,666 59,247,818
----------- -----------
PROPERTY AND EQUIPMENT, net 12,001,661 11,544,978
----------- -----------
OTHER ASSETS
Mortgages and notes receivable, non-current portion 100,982 118,629
Due from related parties -- 4,200
Sundry 124,288 142,242
----------- -----------
225,270 265,071
----------- -----------
$75,225,597 $71,057,867
=========== ===========
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 941,340 $ 657,835
Notes payable, floor plan 54,753,031 50,764,635
Accounts payable 1,386,392 1,566,319
Accrued expenses 3,945,886 4,643,173
Due to related parties 1,573,098 271,051
Sundry 1,326,800 1,962,713
----------- -----------
TOTAL CURRENT LIABILITIES 63,926,547 59,865,726
----------- -----------
LONG-TERM DEBT, less current maturities 4,596,624 5,068,913
----------- -----------
OWNERS' EQUITY
Common stock 2,645,071 2,645,071
Partners' equity 2,306,758 2,026,929
Retained earnings 1,750,597 1,451,228
----------- -----------
6,702,426 6,123,228
----------- -----------
$75,225,597 $71,057,867
=========== ===========
</TABLE>
See notes to combined financial statements.
F-142
<PAGE> 143
DITSCHMAN/FLEMINGTON FORD-LINCOLN-MERCURY, INC.
AND RELATED ENTITIES
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended
--------------------------------- December 31,
1997 1996 1996
------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C>
SALES $ 95,238,295 $ 80,438,666 $ 374,884,828
COST OF SALES 85,971,945 72,336,033 342,681,304
------------- ------------- -------------
GROSS PROFIT 9,266,350 8,102,633 32,203,524
------------- ------------- -------------
EXPENSES
Selling expenses (including advertising
expenses of $309,899, $396,219 and
$2,966,263) 2,723,582 2,448,119 9,475,022
General and administrative expenses 4,686,576 4,266,189 22,563,653
------------- ------------- -------------
7,410,158 6,714,308 32,038,675
------------- ------------- -------------
INCOME FROM OPERATIONS 1,856,192 1,388,325 164,849
------------- ------------- -------------
OTHER INCOME (DEDUCTIONS)
Floor plan assistance 1,070,361 923,741 3,666,806
Interest expense, net (874,708) (928,194) (3,929,143)
Factory incentives -- -- 422,477
Miscellaneous 404,233 285,649 285,873
------------- ------------- -------------
599,886 281,196 446,013
------------- ------------- -------------
INCOME BEFORE INCOME TAXES 2,456,078 1,669,521 610,862
INCOME TAXES -- -- 56,825
------------- ------------- -------------
NET INCOME $ 2,456,078 $ 1,669,521 $ 554,037
============= ============= =============
</TABLE>
See notes to combined financial statements.
F-143
<PAGE> 144
DITSCHMAN/FLEMINGTON FORD-LINCOLN-MERCURY, INC.
AND RELATED ENTITIES
COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
----------------------------- Retained Total
Partners' Equity Shares Issued Amount Earnings Equity
---------------- ------------- ------ -------- ------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $ 1,938,599 3,600 $ 2,645,071 $ 2,320,630 $ 6,904,300
Net income 444,174 -- -- 109,863 554,037
Cash dividends -- -- -- (979,265) (979,265)
Partners' contributions 810,760 -- -- -- 810,760
Partners' withdrawals (1,166,604) -- -- -- (1,166,604)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 2,026,929 3,600 2,645,071 1,451,228 6,123,228
Net Income 500,709 -- -- 1,955,369 2,456,078
Cash dividiends -- -- -- (1,656,000) (1,656,000)
Partners' contributions 100,000 -- -- -- 100,000
Partners' withdrawals (320,880) -- -- -- (320,880)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1997
(unaudited) $ 2,306,758 3,600 $ 2,645,071 $ 1,750,597 $ 6,702,426
=========== =========== =========== =========== ===========
</TABLE>
See notes to combined financial statements.
F-144
<PAGE> 145
DITSCHMAN/FLEMINGTON FORD-LINCOLN-MERCURY, INC.
AND RELATED ENTITIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended
----------------------------- December 31,
1997 1996 1996
----------- ----------- -----------
(unaudited)
-----------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,456,078 $ 1,669,521 $ 554,037
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 141,722 258,137 783,079
Amortization 1,308 1,413 10,148
Deferred income taxes -- 56,118 (60,725)
Allowance for doubtful accounts -- -- 301,750
(Increase) decrease in operating assets
Accounts and factory receivables (833,163) 783,429 (917,738)
Inventories (3,938,156) 3,538,149 (4,988,190)
Sundry assets (3,415) (519,198) 105,468
Finance receivables (93,830) (142,359) 105,474
Increase in operating liabilities
Notes payable, floor plan, net 3,988,396 (2,596,716) 5,066,947
Accounts payable and accrued expenses (384,149) (1,148,880) 3,073,382
Sundry liabilities (1,128,976) (183,142) 493,254
----------- ----------- -----------
Net cash provided by operating activities 205,815 1,716,472 4,526,886
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment, net of dispositions (598,405) (274,467) (3,271,179)
Payment on note receivable 13,070 770,402 797,211
Issuance of notes receivable -- (74,250) (154,700)
Loans from related parties, net 1,306,245 778,458 636,713
----------- ----------- -----------
Net cash provided by (used in) investing activities 720,910 1,200,143 (1,991,955)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short-term borrowings -- (326,000) (326,000)
Proceeds from long-term borrowings -- 600,000 1,918,000
Repayment of long-term debt (188,784) (185,909) (1,250,529)
Partners' withdrawals (320,880) (76,120) (1,166,604)
Partners' contributions 100,000 -- 810,760
Dividends paid (1,656,000) (121,347) (979,265)
----------- ----------- -----------
Net cash used in financing activities (2,065,664) (109,376) (993,638)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (1,138,939) 2,807,239 1,541,293
CASH, beginning of period 5,331,706 3,790,413 3,790,413
----------- ----------- -----------
CASH, end of period $ 4,192,767 $ 6,597,652 $ 5,331,706
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for
Interest $ 1,013,637 $ 1,126,264 $ 3,754,213
Taxes -- -- 3,839
</TABLE>
See notes to combined financial statements.
F-145
<PAGE> 146
DITSCHMAN/FLEMINGTON FORD-LINCOLN-MERCURY, INC.
AND RELATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ORGANIZATION AND PRINCIPLES OF COMBINATION
The combined financial statements of Ditschman/Flemington
Ford-Lincoln-Mercury, Inc. and related entities ("The Companies")
include all the separate entities which are substantially controlled
by Steven Kalafer, as presented below. The Companies are comprised of
automobile dealerships, selling new and used automobiles to customers
in New Jersey and surrounding states. In addition, the real estate
entities lease property to the operating entities. All significant
balances and transactions between the combined entities have been
eliminated.
The Companies reached an agreement in 1997 to be acquired by Republic
Industries, Inc. for a purchase price of approximately $55 million
which will be accounted for as a pooling of interest. The acquisition
is expected to close in 1997 (See Note 17).
<TABLE>
<CAPTION>
ENTITY Form of Interest Interest
- ------ Commercial Business of of
OPERATING COMPANIES Abbreviation Operations Operation Steven Kalafer Others
- ------------------- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ditschman/Flemington Ditschman-
Ford-Lincoln-Mercury, Inc. Ford 1976 S-Corporation 100%
Flemington Nissan/BMW, Inc. Flemington Nissan 1980 S-Corporation 100%
Circle Buick/GMC, Inc. Circle Buick 1983 S-Corporation 25% 75% Byron
Brisby
Princeton's Nassau/Conover
Ford-Lincoln Mercury, Inc. Princeton Ford 1994 S-Corporation 100%
SNDK, Inc. Porsche
Audi/BMW 1992 S-Corporation 70% 30% Norman
Denbigh
Flemington Subaru, Inc. Flemington Subaru 1985 S-Corporation 100%
Flemington Infiniti, Inc. Flemington Infiniti 1989 S-Corporation 100%
Sabek, Inc. Flemington
Mitsubishi 1989 S-Corporation 100%
JJSS, INC. Flemington Mazda 1988 S-Corporation 100%
Flemington Chrysler-Plymouth- Flemington
Dodge-Jeep Eagle, Inc. Chrysler 1982 S-Corporation 100%
Ditschman/Flemington Pontiac Inc. Flemington Pontiac 1990 S-Corporation 100%
Land Rover/Princeton, L.L.C. Land Rover 1996 Limited 100%
Liability Co.
</TABLE>
(Continued on Following Page)
F-146
<PAGE> 147
Notes to Combined Financial Statements
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BUSINESS ORGANIZATION AND PRINCIPLES OF COMBINATION
<TABLE>
<CAPTION>
Form of Interest Interest
Commercial Business of of
Abbreviation Operations Operations Steven Kalafer Others
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REAL ESTATE ENTITIES
- --------------------
Flemington Equities -- 1982 Partnership 100%
Flemington Equities II -- 1983 Partnership 100%
Flemington Equities V -- 1983 Partnership 100%
Flemington Equities VI -- 1986 Partnership 100%
Flemington Equities 9, L.L.C. -- 1996 Partnership 100%
Flemington Equities 2000 -- 1992 Partnership 100%
Ditschman/Flemington Property
Rentals, Inc. -- 1990 S-Corporation 100%
</TABLE>
REVENUE RECOGNITION OF FINANCE INCOME
The Companies include income from finance income in sales, and
recognize a reserve of future finance chargebacks based on industry
estimates.
INVENTORIES
The Company's new car and truck inventory is stated at the lower of
cost (last-in, first-out method) or market. All other inventories are
stated at the lower of cost (first-in, first-out method) or market.
PROPERTY AND EQUIPMENT, AT COST
Property and equipment are depreciated principally on accelerated
methods over the estimated useful lives of the property.
INTERIM FINANCIAL RESULTS
In the opinion of management, the unaudited combined Financial
Statements contain all material adjustments, consisting of only
normal recurring adjustments, necessary to present fairly the
combined financial position of the Company at March 31, 1997, and the
results of its operations and cash flows for the three months ended
March 31, 1997 and 1996. Operations results for these interim periods
are not necessarily indicative of the results that can be expected
for a full year.
ESTIMATES
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 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. Actual results
could differ from those estimates.
MAJOR SUPPLIER
The Company purchases substantially all of its new vehicles and parts
from several automobile manufacturers at the prevailing prices
charged by the distributor to all franchised dealers.
F-147
<PAGE> 148
Notes to Combined Financial Statements
Note 2: INVENTORIES
Inventories consist of the following:
New cars and trucks $36,278,162
Used cars and trucks 3,985,057
Rental vehicles 3,907,643
Parts, accessories, etc 2,309,301
-----------
$46,480,163
===========
New vehicle inventories would have been approximately, $6,144,480
higher than reported at December 31, 1996 if the dealership had used
the first-in, first-out method of inventory accounting. The use of
the last-in, first-out method resulted in a reduction of net income
by $221,853 in 1996.
Note 3: PROPERTY AND EQUIPMENT, AT COST
Property and equipment summarized by major classifications are as
follows:
December 31, March 31,
1996 1997
------------ -----------
Land $ 3,395,596 $ 2,956,744
Building and improvements 7,403,576 7,522,967
Machinery and equipment 2,648,955 3,912,081
Furniture and fixtures 2,501,248 2,083,047
Leasehold improvements 2,583,668 3,207,890
Company vehicles 162,989 28,420
Construction in Progress 426,712 10,000
----------- -----------
19,122,744 19,721,149
Less: Accumulated depreciation 7,577,766 7,719,488
----------- -----------
$11,544,978 $12,001,661
=========== ===========
Note 4: MORTGAGES AND NOTES RECEIVABLE
Mortgages and notes receivable consist of the following:
<TABLE>
<S> <C>
Note receivable, repaid in May, 1997. $151,200
Note receivable, employee, requiring monthly payments
of $1,000 including interest at 8% commencing
February, 1995. 84,220
Various employee receivables maturing at various
dates with no stated interest. 35,227
</TABLE>
(Continued on Following Page)
F-148
<PAGE> 149
Notes to Combined Financial Statements
Note 4: MORTGAGES AND NOTES RECEIVABLE (CONTINUED)
<TABLE>
<S> <C>
Note receivable, requiring monthly payments of $534
including interest at 7% commencing July 1, 1995 and
maturing June, 1998. The note is collateralized
by certain automobiles of the borrowers as well as a
$53,500 personal guarantee. $ 53,500
Note receivable, requiring monthly payments of $1,667 plus
interest at prime plus 1%. A security interest in property
is collateral for the notes. 74,998
--------
399,145
Less: Reserve for doubtful accounts 81,750
--------
317,395
Less: Current maturities 198,766
--------
$118,629
========
</TABLE>
Scheduled maturities of mortgages and notes receivable are as
follows:
1997 $198,766
1998 80,021
1999 31,199
2000 26,694
2001 7,265
Thereafter 55,200
--------
$399,145
========
Note 5: NOTES PAYABLE, FLOOR PLAN
The Companies' floor plan lines are payable to Ford Motor Credit
Company and General Motors Acceptance Corporation. Obligations under
the lines are collateralized by new car and truck inventories and
accounts receivable arising from the sale of new motor vehicles.
Interest is initially charged at 1% over the prime rate as defined,
however the rate is subject to reduction based upon various lender
and manufacturer incentives.
F-149
<PAGE> 150
Notes to Combined Financial Statements
Note 6: LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ---------
<S> <C> <C>
Lines of credit with two dealerships through Ford Motor,
Credit Company totaling $1,600,000 at December 31,
1996. Outstanding borrowings under the lines bear
interest at prime, as defined, and are secured by
the receivables and equipment of the two
dealerships as well as guaranteed by the
Companies' shareholder and spouse. Upon the
termination of these agreements by either party,
amortization of principal, based on a sixty month
payout, commences over a twenty-three month period
with a balloon payment on the maturity date. $1,250,000 $1,220,000
Mortgage payable, Ford Motor Credit Company
requiring monthly installments of $13,831,
including interest at the Company's commercial
paper rate plus 2.75%. The mortgage matures on
July 1, 1998, at which time a balloon payment is
due. The mortgage is collateralized by the land
and building of a dealership and is personally
guaranteed by the primary shareholder of the
Company. 1,233,867 1,204,314
Mortgage payable, General Motors Acceptance
Corporation, payable in monthly installments of
$10,617 including interest at prime plus 1%. The
note is collateralized by the Companies' used car
lot and prep center, in addition to being
guaranteed by the partners of a real estate
entity. 313,859 297,129
Mortgage payable, General Motors Acceptance
Corporation, payable in monthly installments of
$30,926 including interest at prime plus 1%. The
note is collateralized by land and building
occupied by Flemington Chrysler-Plymouth-Dodge-Jeep
Eagle, Inc., in addition to being guaranteed by the
partners of a real estate entity. 1,590,397 1,545,570
</TABLE>
(Continued on Following Page)
F-150
<PAGE> 151
Notes to Combined Financial Statements
Note 6: LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ---------
<S> <C> <C>
Mortgage payable, General Motors Acceptance
Corporation, payable in monthly installments of
$16,894, including interest at prime plus 1%. The
note is collateralized by land and building
occupied by Circle Buick/GMC, Inc., in addition to
being guaranteed by the partners of a real estate
entity. 636,632 608,968
Notes payable to finance companies, payable in
monthly installments of $3,127, including interest
at rates ranging from 7.9% to 9.65%, and maturing
at various dates through December, 1999. The
obligations are collateralized by the equipment
being financed. 51,993 35,407
Mortgage payable to a bank, payable in monthly
installments of $10,131, including interest at
8.0% through December 2003. The note is
collateralized by substantially all of a
dealership's assets. 650,000 626,576
---------- ----------
5,726,748 5,537,964
Less: Current maturities 657,835 941,340
---------- ----------
$5,068,913 $4,596,624
========== ==========
</TABLE>
Maturities of long-term debt are as follows:
December 31, March 31,
1996 1997
------------ ---------
1997 $ 657,835 $ --
1998 1,791,852 941,340
1999 651,323 1,506,720
2000 1,052,436 751,601
2001 99,296 814,150
2002 -- 442,974
Thereafter 1,474,006 1,081,179
---------- ----------
$5,726,748 $5,537,964
========== ==========
F-151
<PAGE> 152
Notes to Combined Financial Statements
Note 7: OWNERS' EQUITY
The common stock (no par value) of the Companies as of December 31,
1996 is as follows:
<TABLE>
<CAPTION>
Shares
Shares Issued and
Company Authorized Outstanding Amount
------- ---------- ----------- ------
<S> <C> <C> <C>
Ditschman Ford 1,000 100 $ 55,200
Flemington Nissan 1,000 100 55,000
Flemington Mitsubishi 2,500 100 200,000
Flemington Chrysler 1,000 100 100,000
Flemington Mazda 2,500 2,500 450,000
Flemington Infiniti 2,500 100 332,800
Flemington Pontiac 2,500 100 535,000
Flemington Subaru 2,500 100 100,000
Circle Buick 1,000 100 206,000
Porsche/Audi/BMW 1,000 100 510,971
Princeton Ford 1,000 100 100,000
Ditschman Property Rentals 1,000 100 100
------ ----- ----------
19,500 3,600 $2,645,071
====== ===== ==========
</TABLE>
Note 8: INCOME TAXES
The operating companies have elected to be "S" Corporations, whereby
the stockholders account for their share of the Companies' earnings,
losses, deductions and credits on their individual income tax
returns. Accordingly, these statements do not include any provision
for Federal income taxes. Certain companies have elected to be taxed
as "S" Corporations for State income tax reporting, which subjects
those companies to a reduced tax rate.
Income tax expense is summarized as follows:
Current $ 105,522
Deferred (48,697)
---------
$ 56,825
=========
The Companies under provisions of Statement of Financial Accounting
Standards No. 109, "Accounting For Income Taxes" have provided for
future realization of net operating losses and certain non-deductible
reserves in a deferred tax asset.
For state income tax reporting purposes, the Companies have net
operating loss carryforwards of approximately $978,687 available to
offset future state taxable income. The carryforwards expire as
follows:
Year Amount
---- ------
2000 $328,986
2002 539,175
2003 98,132
2004 12,394
--------
$978,687
========
F-152
<PAGE> 153
Notes to Combined Financial Statements
Note 9: LEASES
The Companies lease various real estate located in the Flemington,
New Jersey and Princeton, New Jersey areas as well as equipment,
accounted for as operating leases, that expire at various dates
through 2002. Real estate leases contain provisions whereby the
automobile dealerships are required to pay for all operating expenses
of the premises, including but not limited to real estate taxes and
insurance. In addition, the lessors (real estate entities) have
options in certain instances to purchase the premises.
Minimum rental commitments are as follows:
Total Real Estate Equipment
----- ----------- ---------
1997 $ 778,682 $ 483,710 $294,972
1998 641,028 423,710 217,318
1999 450,093 279,710 170,383
2000 411,175 262,085 149,090
2001 349,517 244,460 105,057
Thereafter 1,174,955 1,135,645 39,310
---------- ---------- --------
$3,805,450 $2,829,320 $976,130
========== ========== ========
Note 10: RELATED PARTY
Amounts due from (to) related parties are on open account and do not
bear interest. Real estate entities noted below are owned and
operated by Steven Kalafer, who owns and controls substantially all
of the operating entities. Such amounts are comprised of the
following items:
Due from related parties
Real estate entities $ 4,200
========
Due to related parties
Owners $260,151
Related business 10,900
--------
$271,051
========
Note 11: PROFIT-SHARING PLAN
The Companies have a non-contributory profit-sharing plan covering
substantially all full time employees with more than one year of
service. Discretionary contributions to the plan are determined by
the Board of Directors. No contribution was made for the year ended
December 31, 1996.
The Companies also maintain an employee deferred compensation plan
which qualifies under Section 401 (k) of the Internal Revenue Code
covering substantially all employees after they have completed one
year of service. Circle Buick which maintains a separate qualified
retirement plan, converted to a 401K retirement plan in 1996.
Contributions to the Plans totaled $103,572 for the year ended
December 31, 1996.
F-153
<PAGE> 154
Notes to Combined Financial Statements
Note 12: ACCOUNTS AND FACTORY RECEIVABLES
Accounts and factory receivables consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ---------
<S> <C> <C>
Accounts receivable $1,767,827 $ 872,018
Contracts in transit 2,640,087 4,487,936
Factory receivables 2,912,976 2,794,099
---------- ----------
7,320,890 8,154,053
Less: Allowance for doubtful accounts 361,000 361,000
---------- ----------
$6,959,890 $7,793,053
========== ==========
</TABLE>
Note 13: ACCRUED EXPENSES
Accrued expenses consist of the following:
Deferred compensation $2,600,000
Accrued wages 813,808
Accrued interest 405,024
Accrued professional fees 399,166
Accrued advertising 129,194
Accrued other 295,981
----------
$4,643,173
==========
Note 14: SUNDRY LIABILITIES
Sundry liabilities consist of the following:
Payroll and sales taxes $1,046,757
Customer deposits 355,281
Due to employees 459,452
Income taxes payable 101,223
----------
$1,962,713
==========
Note 15: DEFERRED COMPENSATION
Effective January, 1996 the Companies implemented a deferred
compensation program, whereby should the Companies be sold, certain
key employees will be paid compensation in recognition of prior
service in an amount totaling $2,600,000. As of December 31, 1996
such amount was provided for in the financial statements due to the
pending sale of the Company (See Note 17).
F-154
<PAGE> 155
Notes to Combined Financial Statements
Note 16: CONCENTRATION OF CREDIT RISK
The Companies maintain several cash balances at banks which are
insured up to $100,000 by the Federal Deposit Insurance Corporation.
In addition, the Companies have cash management accounts with vehicle
manufacturers which are not covered by any insurance.
Note 17: SUBSEQUENT EVENT
Effective May 28, 1997 the Companies were acquired by Republic
Industries, Inc. in a transaction accounted for as a pooling of
interest. The selling price, totaling approximately $55,000,000,
includes all of the operating companies and related real estate,
except for the items noted below:
<TABLE>
<CAPTION>
Company
-------
<S> <C> <C>
Flemington Equities, a partnership Land and building $431,002
Flemington Equities, a partnership Mortgage receivable 151,000
--------
$582,002
========
</TABLE>
On April 14, 1997, Hunterdon BMW, Inc., a newly formed corporation
purchased the assets and location of an existing BMW franchise
located in Clinton, New Jersey for $2,364,000.
F-155
<PAGE> 156
INDEPENDENT AUDITORS' REPORT
Shareholders and Members
John Lance Company
Westlake, Ohio
We have audited the accompanying combined balance sheet of the John Lance
Company ("the Company") as of December 31, 1996, and the related combined
statements of operations, stockholders' and members' equity and cash flows for
the year then ended. These combined financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these combined financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the John Lance
Company as of December 31, 1996 and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
GEORGE B. JONES & CO., P.C.
Memphis, Tennessee
May 9, 1997
F-156
<PAGE> 157
John Lance Company
COMBINED BALANCE SHEETS
December 31, 1996 and March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash on hand and in bank $ 506,279 $ 150,593
Contracts in transit 614,123 1,376,953
----------- -----------
Total cash and cash equivalents 1,120,402 1,527,546
Accounts and factory receivables--less allowance for
doubtful accounts of $39,207 695,302 1,331,700
Inventories 4,611,873 5,567,492
Prepaid expenses 23,470 19,590
----------- -----------
Total Current Assets 6,451,047 8,446,328
LOANER VEHICLES--at cost less accumulated
depreciation 486,054 438,945
PROPERTY AND EQUIPMENT--at cost less
accumulated depreciation 1,991,073 2,019,386
OTHER ASSETS 63,612 7,351
----------- -----------
TOTAL ASSETS $ 8,991,786 $10,912,010
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-157
<PAGE> 158
<TABLE>
<CAPTION>
LIABILITIES
March 31, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Notes payable--vehicles financed $ 1,108,104 $ 3,340,527
Current portion--mortgage payable 3,725 3,480
Loans from stockholders 758,004 762,236
Accounts payable--trade 62,509 593,063
Salaries and bonuses payable 185,827 189,936
Taxes payable 318,389 275,654
Other expenses payable 113,959 153,043
Estimated contingent losses 100,000 100,000
----------- -----------
Total Current Liabilities 2,650,517 5,417,939
LONG-TERM MORTGAGE, excluding current portion 76,164 77,249
COMMITMENTS -- --
----------- -----------
Total Liabilities 2,726,681 5,495,188
----------- -----------
STOCKHOLDERS' AND MEMBERS' EQUITY
STOCKHOLDERS' EQUITY
Capital stock 10,500 10,500
Additional paid-in capital 30,365 30,365
Retained earnings 6,079,101 5,224,323
MEMBERS' EQUITY 145,139 151,634
----------- -----------
Total Stockholders' and Members' Equity 6,265,105 5,416,822
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' AND
MEMBERS' EQUITY $ 8,991,786 $10,912,010
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-158
<PAGE> 159
John Lance Company
COMBINED STATEMENTS OF OPERATIONS
For The Year Ended December 31, 1996
and Three-Month Periods Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996 1996
----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C>
Sales $19,132,172 $14,370,496 $65,747,044
Cost of Sales 16,545,655 12,183,572 55,948,326
----------- ----------- -----------
Gross Profit 2,586,517 2,186,924 9,798,718
Operating expenses
Variable selling expenses 210,518 182,204 780,293
Semi-fixed expenses 931,121 795,887 3,399,655
Fixed expenses (including interest of $84,246) 694,763 621,672 3,689,454
----------- ----------- -----------
Income before other income 750,115 587,161 1,929,316
Other income 98,168 16,370 80,755
----------- ----------- -----------
NET INCOME $ 848,283 $ 603,531 $ 2,010,071
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-159
<PAGE> 160
John Lance Company
COMBINED STATEMENTS OF STOCKHOLDERS'
AND MEMBERS' EQUITY
For the Year Ended December 31, 1996
and the Three-Month Period Ended March 31, 1997
<TABLE>
<CAPTION>
Additional
Capital Paid-In Retained Members'
Stock Capital Earnings Equity Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1995 $ 10,500 $ 30,365 $ 3,740,328 $ 143,373 $ 3,924,566
Distributions to stockholders -- -- (517,815) -- (517,815)
1996 Net income -- -- 2,001,810 8,261 2,010,071
----------- ----------- ----------- ----------- -----------
Balance,
December 31, 1996 10,500 30,365 5,224,323 151,634 5,416,822
Unaudited:
March 31, 1997 net income -- -- 854,778 (6,495) 848,283
----------- ----------- ----------- ----------- -----------
Balance,
March 31, 1997 $ 10,500 $ 30,365 $ 6,079,101 $ 145,139 $ 6,265,105
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-160
<PAGE> 161
John Lance Company
COMBINED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 1996
and the Three-Month Periods Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996 1996
----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 848,283 $ 603,531 $ 2,010,071
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation 71,667 59,047 298,033
Provision for losses on accounts receivable 39,128
Provision for contingent losses 31,247 49,109 111,666
(Increase) decrease in operating assets:
Accounts and factory receivables 636,398 (53,303) (771,631)
Inventories 875,117 362,390 79,422
Prepaid expenses (3,880) (5,700) 8,244
Other assets (56,261) (34,306) (4,306)
Increase (decrease) in operating liabilities:
Notes payable--vehicles financed (2,232,423) (1,071,090) (808,458)
Accounts payable--trade (530,554) (1,049) 423,355
Salaries and bonuses payable (4,109) 74,775 (24,549)
Taxes payable 42,735 68,797 10,058
Other expenses payable (39,084) 16,694 83,789
Charges against estimated contingent losses (31,247) (49,109) (54,271)
----------- ----------- -----------
Net Cash Provided By
(Used In) Operating Activities (392,111) 19,786 1,400,551
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (9,961) (34,561) (294,241)
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-161
<PAGE> 162
John Lance Company
COMBINED STATEMENTS OF CASH FLOWS - Continued
For the Year Ended December 31, 1996
and the Three-Month Periods Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996 1996
------------ ----------- -------------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages payable (840) (39,319) (313,140)
Increases in loans from stockholders 29,240 - 20,000
Principal payments on loans from stockholders (33,472) (4,970) (247,190)
Distributions to stockholders - (40,000) (246,118)
------------ ------------ ------------
Net Cash Used In Financing Activities (5,072) (84,289) (786,448)
------------ ------------ ------------
Net change in cash and cash equivalents (407,144) (99,064) 319,862
Cash and cash equivalents at beginning of period 1,527,546 1,207,684 1,207,684
------------ ------------ ------------
Cash and cash equivalents at end of period $ 1,120,402 $ 1,108,620 $ 1,527,546
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 26,187 $ 87,518 $ 284,534
============ ============ ============
Property acquired by debt:
Land $ - $ 82,124 $ 82,124
============ ============ ============
Distributions:
Accounts receivable in lieu of cash $ - $ - $ 271,697
============ ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-162
<PAGE> 163
John Lance Company
NOTES TO THE COMBINED FINANCIAL STATEMENTS
For The Year Ended December 31, 1996
and the Three-Month Periods Ended March 31, 1997 and 1996
NOTE 1 - DESCRIPTION OF BUSINESS
John Lance Company (the Company) consists of the following:
John Lance Ford, Inc. began operations on October 1, 1914, and is an
Ohio Sub Chapter S corporation which was incorporated on June 29,
1962. It is a franchised dealer for Ford Motor Company, and its
principal place of business is in Westlake, Ohio.
MLF Insurance Agency, Inc. is an Ohio Sub Chapter S corporation
organized on May 2, 1969. It sells credit life insurance to John
Lance Ford, Inc., and its principal place of business is in Westlake,
Ohio.
Lance Children, Ltd. is an Ohio limited liability company organized
on December 27, 1994. It holds rental real estate, and its principal
place of business is in Westlake, Ohio.
All significant intercompany transactions and balances have been
eliminated in the combination of the financial statements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS - The Company considers contracts in transit to be cash
equivalents because the contracts are normally purchased by a financial
institution for face value within several business days.
CONCENTRATIONS OF CREDIT RISK ARISING FROM CASH DEPOSITS IN EXCESS OF
INSURED LIMITS - The Company maintains its cash balances in one financial
institution. The balances are insured by the Federal Deposit Insurance
Corporation up to $100,000.
ACCOUNTS RECEIVABLE - The Company grants credit to the franchisor and to
customers, substantially all of whom are local businesses. The Company
believes it maintains an adequate allowance for any uncollectible
accounts.
F-163
<PAGE> 164
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
INVENTORIES - New vehicles, used vehicles and parts inventories are stated
at cost (determined on the Last-In, First-Out method) while all other
inventories are valued at the lower of cost or market.
LOANER VEHICLES - Loaner vehicles are stated at cost. Depreciation is
computed using the straight-line method.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Expenditures which materially increase the values or extend the useful
lives of the respective assets are capitalized, while replacements,
maintenance and repairs which do not improve the values or extend the
useful lives of the respective assets are charged against income as
incurred.
The cost of property and equipment is depreciated over the estimated
useful lives of the assets. Depreciation is computed using the
straight-line and accelerated methods.
INCOME TAXES - Except for Lance Children, Ltd., each company has elected
by consent of its stockholders to be treated as an S Corporation under
Internal Revenue Code and Ohio provisions. Under those provisions, the
company does not pay Federal or State corporate income taxes on its
taxable income. Instead, the stockholders are liable for individual income
taxes on their respective share of the company's taxable income.
Lance Children, Ltd. is a limited liability company. The company does not
pay Federal and State corporate income taxes on its taxable income.
Instead, the members are liable for individual income taxes on their
respective share of the company's taxable income.
INTEREST EXPENSE - Interest expense resulting from the floorplanning of
vehicle inventories has been reduced by the floorplan assistance rebates
offered by Ford Motor Company.
ADVERTISING - Advertising costs are charged to operations when incurred.
The amount expensed for advertising totaled $667,754 in 1996.
ESTIMATES - 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 disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those
estimates.
FINANCIAL INSTRUMENTS - The fair values of the Company's financial
instruments approximate carrying values.
UNAUDITED INTERIM FINANCIAL INFORMATION - In the opinion of management,
all adjustments, consisting only of normal recurring adjustments that are
necessary for a fair presentation, have been included in the unaudited
financial information for the interim periods ended March 31, 1997 and
1996.
F-164
<PAGE> 165
NOTE 3 - INVENTORIES
Inventories consist of the following:
New vehicles (including new cars, new trucks,
and demonstrators) $ 5,946,148
Used vehicles (including used cars and used trucks) 1,056,785
Parts and accessories 293,669
-------------
Totals 7,296,602
Less LIFO Reserve (1,731,301)
-------------
Total Inventories Valued at LIFO 5,565,301
Other inventories at the lower of cost or market 2,191
-------------
Total Inventories $ 5,567,492
=============
If the specific identification cost method of inventory valuation had been
used for new and used vehicles and parts, inventories would have been
$1,731,301 higher at December 31, 1996 compared to $1,779,828 higher at
December 31, 1995.
NOTE 4 - LOANER VEHICLES
Loaner vehicles consist of the following:
Loaner vehicles $ 541,995
Less accumulated depreciation (103,050)
-------------
Net carrying amount $ 438,945
=============
Depreciation expense relating to loaner vehicles totaled $136,308 for
1996.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Land $ 417,319
Buildings and improvements 2,232,891
Machinery and shop equipment 422,965
Furniture and fixtures 253,592
Service vehicles 32,174
-------------
Subtotal (carried forward) 3,358,941
F-165
<PAGE> 166
NOTE 5 - PROPERTY AND EQUIPMENT - Continued
Subtotal (brought forward) 3,358,941
Less accumulated depreciation (1,339,555)
-----------
Total $ 2,019,386
===========
Depreciation expense relating to property and equipment totaled $161,725 for
1996.
NOTE 6 - NOTES PAYABLE - VEHICLES FINANCED
The Company has a floorplan financing agreement with Huntington National
Bank which allows for total borrowings of up to $7,000,000. The floorplan
agreement, which is secured by all vehicles, accounts receivable, cash
accounts and fixed assets, is payable on demand and bears interest at the
prime rate, which was 8.25% at December 31, 1996.
NOTE 7 - LOANS FROM STOCKHOLDERS
Loans from stockholders consist of advances from several stockholders that
are due on demand, unsecured, and bear interest at 8.25% at December 31,
1996.
NOTE 8 - EMPLOYEE BENEFIT PLANS
The Company has a 401(k) and pension plan that covers all full-time
employees having one year of continuous service and who are at least 21
years of age at the specified entry dates. Participants contribute up to
15% of their gross base salary. The Company makes contributions of such
sums which are necessary to meet the plans' funding requirements. Expense
for 1996 totaled $86,802.
NOTE 9 - MORTGAGE PAYABLE
Mortgage payable consists of the following:
Mortgage payable to First Federal Savings and
Loan Association of Lakewood, due in monthly
installments of $725 including interest through
March 1, 2011, secured by land and buildings $ 80,729
Less current portion (3,480)
----------
Total long-term debt $ 77,249
==========
F-166
<PAGE> 167
NOTE 9 - MORTGAGE PAYABLE - Continued
Annual maturities are as follows:
Year ending December 31, Amount
------------------------ ----------
1997 $ 3,480
1998 3,798
1999 4,053
2000 4,324
2001 4,614
Subsequent to 2002 60,460
----------
Total $ 80,729
==========
NOTE 10 - LEASE COMMITMENTS
The following is a list of operating leases in effect:
Description Annual
Lessor of Assets Lease Terms Rental
-------------------------- --------- ----------- ------
Standard Office Systems Copier 60 months $ 2,388
Automatic Data Processing Computer 60 months 22,260
Konica Business Machines Copier 60 months 2,436
Ford Dealer Computer
Services Equipment 60 months 29,172
Rent expense relating to these leases totaled $54,847 during 1996.
Future minimum lease commitments are summarized as follows:
Year ending December 31, Amount
------------------------ -----------
1997 $ 56,256
1998 56,256
1999 41,416
2000 21,841
2001 1,409
-----------
Total $ 177,178
===========
NOTE 11 - ESTIMATED CONTINGENT LOSSES
The Company is contingently liable for finance and certain other
chargebacks due to repossessions and early payoffs of notes on vehicles
financed for customers, substantially all of whom are local residents. The
Company has estimated losses based on loss experience and outstanding
contingencies.
F-167
<PAGE> 168
NOTE 12 - CAPITAL STOCK
At December 31, 1996 capital stock was comprised of the following:
<TABLE>
<CAPTION>
Shares
Shares Issued and Par Total
Corporate Name Authorized Outstanding Value Capital
-------------- ---------- ----------- ----- ---------
<S> <C> <C> <C> <C>
John Lance Ford, Inc. 20,000 10,000 No Par $ 10,000
MLF Insurance Agency, Inc. 1,000 1,000 No Par 500
---------
Total $ 10,500
=========
</TABLE>
NOTE 13 - SUBSEQUENT EVENTS
An agreement in principle was reached with Republic Industries, Inc. on
April 25, 1997 for the acquisition of John Lance Companies in a
transaction treated as a purchase in conformity with generally accepted
accounting principles. The transaction has not been completed as of the
date of the auditors' report.
F-168
<PAGE> 169
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
REPUBLIC INDUSTRIES, INC., AUTONATION INCORPORATED, ED MULLINAX, INC.,
GRUBB AUTOMOTIVE, KENDALL AUTOMOTIVE GROUP, AAA DISPOSAL SERVICE, INC.,
YORK WASTE DISPOSAL, INC., SHAD MANAGEMENT COMPANY, BANKSTON
AUTOMOTIVE GROUP AND JOHN LANCE COMPANY
The following Unaudited Condensed Consolidated Pro Forma Financial
Statements include the supplemental consolidated financial statements of
Republic Industries, Inc. and subsidiaries (the "Company") which include the
results of operations of Flemington Car and Truck Country and certain related
dealerships ("Flemington"), Spirit Rent-A-Car, Inc. ("Spirit"), Chesrown
Automotive Group ("Chesrown") and Bledsoe Dodge, Inc. ("Bledsoe") which the
Company acquired in May 1997. These transactions have been accounted for under
the pooling of interests method of accounting and, accordingly, the Company's
supplemental consolidated financial statements have been retroactively adjusted
as if the Company and Flemington, Spirit, Chesrown and Bledsoe had operated as
one entity since inception. The supplemental consolidated financial statements
also include the results of operations of National Car Rental System, Inc.
("National"), Maroone Automotive Group ("Maroone"), Wallace Automotive Group
("Wallace") and Taormina Industries, Inc. ("Taormina") which the Company
acquired in February 1997 and Carlisle Motors, Inc. ("Carlisle") which the
Company acquired in January 1997. These transactions have been accounted for
under the pooling of interests method of accounting and, accordingly, the
Company's historical consolidated financial statements have been restated as if
the Company, National, Maroone, Wallace, Taormina and Carlisle had operated as
one entity since inception.
The following Unaudited Condensed Consolidated Pro Forma Balance Sheet
presents the pro forma financial position of the Company as of March 31, 1997
as if the acquisitions of Shad Management Company ("Shad") and Bankston
Automotive Group ("Bankston"), which were acquired in May 1997, and the John
Lance Company ("Lance"), which was acquired in June 1997, had been
consummated as of March 31, 1997.
The following Unaudited Condensed Consolidated Pro Forma Statements of
Operations for the three months ended March 31, 1997 and for the year ended
December 31, 1996 present the pro forma results of operations of the Company as
if the acquisitions of Shad, Bankston and Lance, as well as the acquisitions of
AutoNation Incorporated ("AutoNation"), Ed Mullinax, Inc. and subsidiaries
("Mullinax") and Grubb Automotive ("Grubb"), which were acquired in January
1997, and Kendall Automotive Group ("Kendall"), AAA Disposal Service, Inc.
("AAA") and York Waste Disposal, Inc. ("York"), which were acquired in February
1997, had been consummated as of January 1, 1996. The pro forma statement of
operations for the year ended December 31, 1996 also contains pro forma
adjustments related to certain equity transactions in 1996 and 1997 which
resulted in net proceeds to the Company of approximately $1.1 billion (the
"Equity Transactions").
The unaudited pro forma income per common and common equivalent share is
based on the combined weighted average number of common shares and common share
equivalents outstanding which include, where appropriate, the assumed exercise
or conversion of warrants and options. In computing the unaudited pro forma
income per common and common equivalent share, the Company utilizes the treasury
stock method. Primary income per share is not presented as it does not
significantly differ from fully diluted income per share.
These Unaudited Condensed Consolidated Pro Forma Financial Statements
should be read in conjunction with the respective historical consolidated or
combined financial statements and notes thereto of the Company, Flemington,
Spirit, Chesrown, Bledsoe, AutoNation, Mullinax, Grubb, Kendall, AAA, York,
Shad, Bankston and Lance. These Unaudited Condensed Consolidated Pro Forma
Financial Statements were prepared utilizing the accounting policies of the
respective entities as outlined in their historical financial statements except
as described in the accompanying notes. The acquisitions of AutoNation,
Mullinax, Grubb, Kendall, York, Shad, Bankston and Lance have been accounted for
under the purchase method of accounting. Accordingly, the Unaudited Condensed
Consolidated Pro Forma Financial Statements reflect the Company's preliminary
allocations of the purchase prices of such acquisitions which will be subject to
further adjustments as the Company finalizes the allocations of the purchase
prices in accordance with generally accepted accounting principles. The
acquisition of AAA has been accounted for under the pooling of interests method
of accounting and, accordingly, has been included in the Company's historical
results of operations for the three months ended March 31, 1997. Such
acquisition was not material and consequently prior period financial statements
have not been restated and pro forma statements of operations for 1995 and 1994
have not been included herein. The unaudited condensed consolidated pro forma
results of operations do not necessarily reflect actual results which would have
occurred if the acquisitions or the Equity Transactions had taken place on the
assumed dates, nor are they necessarily indicative of the results of future
combined operations.
F-169
<PAGE> 170
REPUBLIC INDUSTRIES, INC.
SHAD MANAGEMENT COMPANY, BANKSTON AUTOMOTIVE GROUP AND
JOHN LANCE COMPANY
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1997
(In millions)
<TABLE>
<CAPTION>
SUPPLEMENTAL
REPUBLIC SHAD BANKSTON LANCE COMBINED
------------- ---- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 222.7 $ 1.7 $ 2.9 $ .5 $ 227.8
Receivables, net 543.5 5.2 12.1 1.3 562.1
Inventory 607.4 10.5 30.3 4.6 652.8
Revenue earning vehicles, net 4,018.2 -- -- -- 4,018.2
Other current assets 526.5 .7 .2 -- 527.4
-------- ----- ----- ------- --------
Total current assets 5,918.3 18.1 45.5 6.4 5,988.3
Property and equipment, net 1,542.5 8.0 21.7 2.5 1,574.7
Intangible assets 736.7 -- -- -- 736.7
Investment in subscribers 108.6 -- -- -- 108.6
Other assets 30.9 1.4 5.6 .1 38.0
-------- ----- ----- ------- --------
$8,337.0 $27.5 $72.8 $ 9.0 $8,446.3
======== ===== ===== ======= ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 811.5 $ 2.3 $ 7.6 $ .7 $ 822.1
Current portion of long-term
debt and notes payable 3,520.8 17.5 42.9 1.9 3,583.1
Other current liabilities 81.3 -- -- -- 81.3
-------- ----- ----- ------- --------
Total current liabilities 4,413.6 19.8 50.5 2.6 4,486.5
Long-term debt, net of current
maturities 1,204.4 6.4 28.2 .1 1,239.1
Other liabilities 231.0 .4 .3 -- 231.7
-------- ----- ----- ------- --------
Total liabilities 5,849.0 26.6 79.0 2.7 5,957.3
-------- ----- ----- ------- --------
Shareholders' equity:
Common stock 3.6 -- -- -- 3.6
Additional paid-in capital 2,412.4 .4 .8 .2 2,413.8
Unrealized gain on marketable securities 43.7 -- -- -- 43.7
Retained earnings 28.3 .5 (7.0) 6.1 27.9
-------- ----- ----- ------- --------
Total shareholders' equity 2,488.0 .9 (6.2) 6.3 2,489.0
-------- ----- ----- ------- --------
$8,337.0 $27.5 $72.8 $ 9.0 $8,446.3
======== ===== ===== ======= ========
<CAPTION>
PRO FORMA
ADJUSTMENTS
---------------------------------
DR. CR. PRO FORMA
--------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 227.8
Receivables, net 562.1
Inventory $ 20.2(a) 673.0
Revenue earning vehicles, net 4,018.2
Other current assets 527.4
--------- -------- --------
Total current assets 20.2 6,008.5
Property and equipment, net 1,574.7
Intangible assets 35.2(b) 771.9
Investment in subscribers 108.6
Other assets 38.0
--------- -------- --------
$ 55.4 $8,501.7
========= ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 822.1
Current portion of long-term
debt and notes payable 3,583.1
Other current liabilities 81.3
--------
Total current liabilities 4,486.5
Long-term debt, net of current
maturities 1,239.1
Other liabilities 231.7
--------
Total liabilities 5,957.3
Shareholders' equity:
Common stock 3.6
Additional paid-in capital $ 1.4(c) $ 56.4(d) 2,468.8
Unrealized gain on marketable securities 43.7
Retained earnings .4(c) 28.3
-------- -------- --------
1.4 56.8 2,544.4
-------- -------- --------
Total shareholders' equity $ 1.4 $ 56.8 $8,501.7
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-170
<PAGE> 171
REPUBLIC INDUSTRIES, INC.,
AUTONATION INCORPORATED, GRUBB AUTOMOTIVE,
KENDALL AUTOMOTIVE GROUP, YORK WASTE DISPOSAL, INC.,
SHAD MANAGEMENT COMPANY, BANKSTON AUTOMOTIVE GROUP AND
JOHN LANCE COMPANY
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(In millions, except per share data)
<TABLE>
<CAPTION>
SUPPLEMENTAL
REPUBLIC AUTONATION(1) GRUBB(2) KENDALL(2) YORK(2) SHAD BANKSTON LANCE COMBINED
--------- ---------- -------- --------- ------- ---- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $ 1,717.1 $ 14.2 $ 42.0 $ 69.6 $ 6.9 $34.4 $68.0 $19.1 $1,971.3
Expenses:
Cost of operations 1,419.8 15.1 37.8 63.1 5.2 30.4 59.3 16.5 1,647.2
Selling, general and
administrative 251.6 8.9 3.8 5.4 .9 3.7 7.6 1.8 283.7
Other (income) expense:
Interest and other income (9.7) -- (.2) (.2) (.1) (.1) (.3) (.1) (10.7)
Interest expense 4.9 1.1 -- .3 .1 -- .2 -- 6.6
---------- ------ ------ ------ ------ ----- ----- ----- --------
1,666.6 25.1 41.4 68.6 6.1 34.0 66.8 18.2 1,926.8
---------- ------ ------ ------ ------ ----- ----- ----- --------
Income before income taxes 50.5 (10.9) .6 1.0 .8 .4 1.2 .9 44.5
Provision for income taxes 18.6 -- -- -- -- -- -- -- 18.6
---------- ------ ------ ------ ------ ----- ----- ----- --------
Net income $ 31.9 $(10.9) $ .6 $ 1.0 $ .8 $ .4 $ 1.2 $ .9 $ 25.9
========== ====== ====== ====== ====== ===== ===== ===== ========
Fully-diluted:
Income per share $ .08
==========
Weighted average shares
outstanding 383.4 17.5 4.0 1.2 1.1 .5 1.4 .8 409.9
========== ====== ====== ====== ====== ===== ===== ===== =======
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
-------------------------
DR. CR. PRO FORMA
---------- ---------- ------------
<S> <C> <C> <C>
Revenue $ 1,971.3
Expenses:
Cost of operations $ 1.1(f) 1,648.3
Selling, general and
administrative 283.7
Other (income) expense:
Interest and other income 1.1(e) (9.6)
Interest expense $ 1.1(e) 5.5
------ ------ ---------
2.2 1.1 1,927.9
------ ------ ---------
Income before income taxes 2.2 1.1 43.4
Provision for income taxes 2.6(h) 16.0
------ ------ ---------
Net income $ 2.2 $ 3.7 $ 27.4
====== ====== =========
Fully-diluted:
Income per share $ .07
=========
Weighted average shares
outstanding (19.1)(i) 390.8
====== =========
- ---------------------
(1) Represents the pre-acquisition results of operations for the month of January 1997.
(2) Represents the pre-acquisition results of operations for the months of January and
February 1997.
</TABLE>
The accompanying notes are an integral part of these statements.
F-171
<PAGE> 172
REPUBLIC INDUSTRIES, INC.,
AUTONATION INCORPORATED, ED MULLINAX, INC.,
GRUBB AUTOMOTIVE, KENDALL AUTOMOTIVE GROUP,
AAA DISPOSAL SERVICE, INC., YORK WASTE DISPOSAL, INC.,
SHAD MANAGEMENT COMPANY, BANKSTON AUTOMOTIVE GROUP AND
JOHN LANCE COMPANY
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In millions, except per share data)
<TABLE>
<CAPTION>
SUPPLEMENTAL
REPUBLIC AUTONATION MULLINAX GRUBB KENDALL AAA YORK SHAD BANKSTON(1) LANCE COMBINED
--------- ---------- -------- ------ ------- ----- ----- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $5,644.1 $ 31.5 $659.0 $440.0 $405.8 $32.4 $39.3 $92.4 $ 285.7 $65.7 $7,695.9
Expenses:
Cost of operations 4,643.2 42.8 589.8 384.8 367.1 23.7 31.8 82.8 247.2 56.0 6,469.2
Selling, general and
administrative 892.8 38.5 54.5 46.9 34.3 5.1 4.6 9.4 32.7 7.8 1,126.6
Restructuring and merger
expenses 38.3 -- -- -- -- -- -- -- -- -- 38.3
Other (income) expense:
Interest and other income (35.3) -- -- (2.0) (.7) (.2) (.3) (.2) -- (.1) (38.8)
Interest expense 49.3 5.6 .9 4.3 1.3 .5 .7 -- 2.5 -- 65.1
-------- ------ ------ ------ ------ ----- ----- ----- ------- ----- --------
5,588.3 86.9 645.2 434.0 402.0 29.1 36.8 92.0 282.4 63.7 7,660.4
-------- ------ ------ ------ ------ ----- ----- ----- ------- ----- --------
Income before
income taxes and
extraordinary charge 55.8 (55.4) 13.8 6.0 3.8 3.3 2.5 .4 3.3 2.0 35.5
Provision for income taxes 53.7 -- -- -- -- -- -- .4 .1 -- 54.2
-------- ------ ------ ------ ------ ----- ----- ----- ------- ----- --------
Income before
extraordinary charge $ 2.1 $(55.4) $ 13.8 $ 6.0 $ 3.8 $ 3.3 $ 2.5 $ -- $ 3.2 $ 2.0 $ (18.7)
======== ====== ====== ====== ====== ===== ===== ===== ======= ===== ========
Fully-diluted:
Income per share before
extraordinary charge $ 0.01
========
Weighted average shares
outstanding 323.4 17.5 3.6 4.0 1.2 2.9 1.1 .5 1.4 .8 356.4
======== ====== ====== ====== ====== ===== ===== ===== ====== ===== =======
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
-------------------------
DR. CR. PRO FORMA
---------- ---------- -----------
<S> <C> <C> <C>
Revenue $7,695.9
Expenses:
Cost of operations $ 11.3(f) $ 1.4(a) 6,434.4
44.7(g)
Selling, general and
administrative 1,126.6
Restructuring and merger
expenses 38.3
Other (income) expense:
Interest and other income 5.6(e) (33.2)
Interest expense 59.5(g)
5.6(e) --
------ ------ --------
16.9 111.2 7,566.1
------ ------ --------
Income before
income taxes and
extraordinary charge 16.9 111.2 129.8
Provision for income taxes 27.4(h) 81.6
------ ------ --------
Income before
extraordinary charge $ 44.3 $111.2 $ 48.2
====== ====== ========
Fully-diluted:
Income per share
before extraordinary charge $ .12
========
Weighted average shares
outstanding 29.9(i) 386.3
====== ========
- ------------------
(1) Represents the fiscal year ended March 31, 1997.
</TABLE>
The accompanying notes are an integral part of these statements.
F-172
<PAGE> 173
REPUBLIC INDUSTRIES, INC., AUTONATION INCORPORATED,
ED MULLINAX, INC., GRUBB AUTOMOTIVE, KENDALL AUTOMOTIVE GROUP,
AAA DISPOSAL SERVICE, INC., YORK WASTE DISPOSAL, INC., SHAD MANAGEMENT COMPANY,
BANKSTON AUTOMOTIVE GROUP AND JOHN LANCE COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
(a) Represents an entry to conform the inventory accounting policies of
acquired companies from LIFO to the specific identification method.
(b) Represents an entry to record intangible assets resulting from the
preliminary allocations of the purchase prices for the acquisitions of
Shad, Bankston and Lance as follows (in millions):
<TABLE>
<S> <C>
Shares of Republic Common Stock to be issued............... 2.7
Value of Republic Common Stock consideration............... $ 56.4
Historical net assets...................................... (1.0)
Write-up of inventory to fair value........................ (20.2)
------
Allocation to intangible assets............................ $ 35.2
======
</TABLE>
(c) Represents an entry to eliminate the historical equity balances of
Shad, Bankston and Lance.
(d) Represents the recording of equity resulting from the Company's issuance of
Common Stock to effect the acquisitions of Shad, Bankston and Lance.
(e) Represents an entry to eliminate interest on advances from the Company to
AutoNation.
(f) Represents an adjustment to record amortization, on a straight-line basis,
of the intangible assets resulting from the preliminary purchase price
allocations of AutoNation, Mullinax (1996 only), Grubb, Kendall, York,
Shad, Bankston and Lance. Intangible assets resulting from these purchases
are being amortized over a 40 year life which approximates the estimated
useful life.
(g) Represents the assumed interest savings on the payoff of a portion of the
existing indebtedness outstanding as of January 1, 1996 of the combined
entity with the proceeds from the 1996 and 1997 Equity Transactions which
are also assumed to have occurred as of January 1, 1996.
(h) Represents the incremental change in the combined entity's provision for
income taxes as a result of the pre-tax income (loss) of AutoNation,
Mullinax, Grubb, Kendall, York, AAA, Shad, Bankston and Lance and
all pro forma adjustments as described above.
(i) Includes the weighted average effect of shares issued in the acquisitions
and/or the 1996 and 1997 Equity Transactions.
F-173
<PAGE> 174
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (RESTATED)
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of Republic Industries,
Inc. (the "Company") which are included elsewhere herein. The historical
financial statements of the Company include the financial position and results
of operations of National Car Rental System, Inc. ("National"), Maroone
Automotive Group ("Maroone"), Wallace Automotive Group ("Wallace") and Taormina
Industries, Inc. ("Taormina"), which the Company acquired in February 1997 and
Carlisle Motors, Inc. ("Carlisle") which the Company acquired in January 1997.
These transactions have been accounted for under the pooling of interests
method of accounting, and accordingly, these historical financial statements
have been restated as if the companies had operated as one entity since
inception. All references to historical share and per share data of the
Company's common stock, par value $.01 per share ("Common Stock"), have been
retroactively adjusted to reflect the two-for-one stock split that occurred in
June 1996, which is more fully described in Note 6, Shareholders' Equity, of
Notes to Consolidated Financial Statements.
BUSINESS COMBINATIONS
The Company makes its decisions to acquire or invest in businesses based
on financial and strategic considerations.
PENDING ACQUISITIONS
In June 1997, the Company signed a definitive agreement to acquire the
Appleway Automotive Group ("Appleway"), which owns and operates eight
franchised automotive dealerships. The Company will issue Common Stock valued
at approximately $42.6 million in this transaction, which will be accounted for
under the purchase method of accounting. The closing of the transaction is
subject to customary conditions, including manufacturer and regulatory
approvals.
In May 1997, the Company signed a definitive agreement to acquire Desert
Buick-GMC Automotive Group ("Desert"), which owns and operates four franchised
automotive dealerships. The Company will issue Common Stock valued at
approximately $38.0 million in this transaction, which will be accounted for
under the pooling of interests method of accounting. The closing of the
transaction is subject to customary conditions, including manufacturer and
regulatory approvals.
In May 1997, the Company signed a definitive agreement to acquire Gulf
Management, Inc. ("Gulf"), which owns and operates two franchised automotive
dealerships. The Company will issue Common Stock valued at approximately $45.0
million in this transaction, which will be accounted for under the purchase
method of accounting. The closing of the transaction is subject to customary
conditions, including manufacturer and regulatory approvals.
In April 1997, the Company signed a definitive agreement to acquire De La
Cruz Auto Group ("De La Cruz"), which owns and operates four franchised
automotive dealerships. The Company will issue Common Stock valued at
approximately $40.0 million in this transaction, which will be accounted for
under the pooling of interests method of accounting. The closing of the
transaction is subject to customary conditions, including manufacturer and
regulatory approvals.
In March 1997, the Company signed a definitive agreement to acquire Tempe
Toyota and related entities ("Tempe"), which operate one franchised automotive
dealership and two used automotive dealerships. The Company will issue Common
Stock valued at approximately $48.0 million in this transaction, which will be
accounted for under the pooling of interests method of accounting. The closing
of the transaction is subject to customary conditions, including manufacturer
and regulatory approvals.
Additionally, the Company has signed definitive agreements to acquire
various other businesses in the automotive retail industry which are not
material to the Company. The Company will issue cash and/or Common Stock valued
in the aggregate at approximately $129.8 million in such transactions which will
be accounted for under the purchase method of accounting. These transactions are
subject to customary conditions, including manufacturer and regulatory
approvals.
COMPLETED ACQUISITIONS
Significant businesses acquired through March 31, 1997 and accounted for
under the pooling of interests method of accounting have been included
retroactively in the Consolidated Financial Statements as if the companies had
operated as one entity since inception. Businesses acquired through December 31,
1996 and accounted for under the purchase method of accounting are included in
the Consolidated Financial Statements from the date of acquisition.
In May 1997, the Company acquired Flemington Car and Truck Country and
certain related dealerships ("Flemington"), which own and operate twelve
franchised automotive dealerships. The Company issued approximately 2.3 million
shares of Common Stock in this transaction, which has been accounted for under
the pooling of interests method of accounting.
In May 1997, the Company acquired Spirit Rent-A-Car, Inc. ("Spirit"),
which operates a vehicle rental business. The Company issued 3.1 million shares
of Common Stock in this transaction, which has been accounted for under the
pooling of interests method of accounting.
In May 1997, the Company acquired Chesrown Automotive Group ("Chesrown"),
which owns and operates seven franchised automotive dealerships. The Company
issued approximately 2.5 million shares of Common Stock in this transaction,
which has been accounted for under the pooling of interests method of
accounting.
In May 1997, the Company acquired Bledsoe Dodge, Inc. ("Bledsoe"), which
operates three franchised automotive dealerships. The Company issued
approximately 1.7 million shares of Common Stock in this transaction, which has
been accounted for under the pooling of interests method of accounting.
In May 1997, the Company acquired Bankston Automotive Group ("Bankston"),
which owns and operates four franchised automotive dealerships. The Company
issued approximately 1.4 million shares of Common Stock in this transaction,
which has been accounted for under the purchase method of accounting.
In February 1997, the Company acquired National, which operates a vehicle
rental business. The Company issued approximately 21.7 million shares of Common
Stock in this transaction, which has been accounted for under the pooling of
interests method of accounting. National was formed in April 1995 to acquire the
operating assets and certain liabilities of a predecessor company ("Old
National") from General Motors Corporation as further discussed below.
In February 1997, the Company acquired Maroone, which owns and operates
five franchised automotive dealerships. The Company issued approximately 6.1
million shares of Common Stock in this transaction, which has been accounted for
under the pooling of interests method of accounting.
In February 1997, the Company acquired Wallace, which owns and operates
three franchised automotive dealerships. The Company issued approximately 1.7
million shares of Common Stock in this transaction, which has been accounted for
under the pooling of interests method of accounting.
In February 1997, the Company acquired Taormina, which provides waste
collection services and owns and operates a materials recycling facility. The
Company issued approximately 7.4 million shares of Common Stock in this
transaction, which has been accounted for under the pooling of interests method
of accounting.
In February 1997, the Company acquired Kendall Automotive Group
("Kendall"), which owns and operates three franchised automotive dealerships.
The Company issued approximately 1.2 million shares of Common Stock in this
transaction, which has been accounted for under the purchase method of
accounting.
In January 1997, following approval by the Company's stockholders at a
special meeting, the Company acquired AutoNation Incorporated ("AutoNation"),
which is developing a chain of used vehicle megastores. The Company issued
approximately 17.5 million shares of Common Stock in this transaction, which
has been accounted for under the purchase method of accounting.
F-174
<PAGE> 175
In January 1997, the Company acquired Carlisle which owns and operates
three franchised automotive dealerships. The Company issued approximately 1.0
million shares of Common Stock in this transaction, which has been accounted for
under the pooling of interests method of accounting.
In January 1997, the Company acquired Grubb Automotive ("Grubb"), which
owns and operates seven franchised automotive dealerships. The Company issued
approximately 4.0 million shares of Common Stock in this transaction, which has
been accounted for under the purchase method of accounting.
In January 1997, the Company acquired Ed Mullinax, Inc. and subsidiaries
("Mullinax"), which owns and operates six franchised automotive dealerships.
The Company issued approximately 3.6 million shares of Common Stock in this
transaction, which has been accounted for under the purchase method of
accounting.
In addition, subsequent to December 31, 1996, the Company acquired various
other businesses in the automotive retail, solid waste services and electronic
security services industries which were not material to the Company. The Company
issued an aggregate of approximately 3.0 million shares of Common Stock and paid
approximately $40.4 million of cash in such transactions which have been
accounted for under the purchase method of accounting, and issued an aggregate
of approximately 8.9 million shares of Common Stock in such transactions which
have been accounted for under the pooling of interests method of accounting.
In December 1996, the Company acquired Addington Resources, Inc.
("Addington"), which primarily provides solid waste disposal services. The
Company issued approximately 13.7 million shares of Common Stock in this
transaction, which has been accounted for under the pooling of interests method
of accounting. In December 1996, the Company acquired Continental Waste
Industries, Inc. ("Continental"), which provides integrated solid waste
services. The Company issued approximately 12.4 million shares of Common Stock
in this transaction, which has been accounted for under the pooling of interests
method of accounting. In November 1996, the Company acquired Alamo Rent-A-Car,
Inc. ("Alamo"), which operates a vehicle rental business. The Company issued
approximately 22.6 million shares of Common Stock in this transaction, which has
been accounted for under the pooling of interests method of accounting. In
August 1996, the Company acquired the net assets of CarChoice, Inc.
("CarChoice"), which operated used vehicle superstores similar to those being
developed by AutoNation. The Company issued approximately 3.9 million shares of
Common Stock in this transaction, which has been accounted for under the pooling
of interests method of accounting. In February 1996, the Company acquired
Incendere, Inc. ("Incendere"), which provides solid waste collection, recycling
and medical waste hauling services. The Company issued approximately 3.3 million
shares of Common Stock in connection with this acquisition which has been
accounted for under the pooling of interests method of accounting. In February
1996, the Company acquired The Denver Fire Reporter and Protective Co. ("Denver
Alarm"), which provides electronic security services. The Company issued
approximately 2.5 million shares of Common Stock in this transaction, which has
been accounted for under the pooling of interests method of accounting.
During the year ended December 31, 1996, the Company also acquired various
other businesses in the solid waste services, electronic security services and
automotive retailing industries which were not material to the Company. The
Company issued an aggregate of approximately 9.1 million shares of Common Stock
and paid $47.0 million of cash in such transactions which have been accounted
for under the purchase method of accounting, and issued an aggregate of
approximately 13.0 million shares of Common Stock in such transactions which
have been accounted for under the pooling of interests method of accounting.
These acquisitions accounted for under the pooling of interests method of
accounting were not material in the aggregate and, consequently, prior period
financial statements were not restated for such acquisitions.
In November 1995, the Company acquired J.C. Duncan Company, Inc.
("Duncan"), Garbage Disposal Service, Inc. ("GDS"), Fennell Container Co., Inc.
("Fennell") and Scott Security Systems ("Scott"). Duncan provides solid waste
collection and recycling services and also operates two landfills. GDS provides
solid waste collection and recycling services. Fennell provides solid waste
collection and recycling services and also owns a landfill. Scott provides
electronic security services. In October 1995, the Company acquired United Waste
Service, Inc. ("United") and Southland Environmental Services, Inc.
("Southland"). United provides solid waste collection, transfer and recycling
services. Southland provides solid waste collection services. In August 1995,
the Company acquired Kertz Security Systems, Inc. ("Kertz"), which provides
electronic security services. The Company issued an aggregate of approximately
36.3 million shares of Common Stock for the above acquisitions. These
acquisitions have been accounted for under the pooling of interests method of
accounting and, accordingly, the accompanying Consolidated Financial Statements
have previously been restated as if the Company and Duncan, GDS, Fennell, Scott,
United, Southland and Kertz had operated as one entity since inception.
In August 1995, the Company acquired Hudson Management Corporation and
Envirocycle, Inc. (collectively, "HMC"). HMC provides solid waste collection and
recycling services. The Company issued 16.0 million shares of Common Stock to
acquire HMC. The acquisition of HMC has been accounted for under the purchase
method of accounting.
In June 1995, National acquired all of the operating assets and assumed
certain liabilities of Old National for a total cash purchase price of
approximately $1.3 billion. This acquisition was accounted for under the
purchase method of accounting.
During the years ended December 31, 1995 and 1994, the Company entered into
several other business combinations which have been accounted for under the
purchase method of accounting, which were not material to the Company.
Termination of ADT Agreement
In September 1996, the Agreement and Plan of Amalgamation, dated as of July
1, 1996 and amended as of July 15, 1996 (the "ADT Agreement") by and among the
Company, R.I./Triangle, Ltd. and ADT Limited, a Bermuda Corporation ("ADT"),
which provided for the acquisition of ADT by the Company, was terminated by
mutual agreement of the parties. In connection with the execution of the ADT
Agreement, ADT granted to the Company a warrant ("the ADT Warrant") to purchase
15.0 million common shares of ADT at a purchase price of $20 per share (which
approximated fair market value). In March 1997, the Company exercised the ADT
Warrant resulting in the purchase of 15.0 million common shares of ADT at $20
per share. In May 1997, the Company sold the ADT common shares to certain
institutional investors for $27.50 per share resulting in a gain of
approximately $100.0 million, net of fees and expenses.
F-175
<PAGE> 176
BUSINESS SEGMENT INFORMATION
The following table sets forth revenue with percentages of total revenue,
and sets forth cost of operations, selling, general and administrative
expenses, restructuring and merger expenses and operating income (loss) with
percentages of the applicable segment revenue, for each of the Company's
various business segments for the years ended December 31 (in millions):
<TABLE>
<CAPTION>
1996 % 1995 % 1994 %
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Automotive rental...................... $2,567.1 54 $1,886.4 56 $1,222.3 50
Automotive retail...................... 1,410.5 29 1,000.3 30 858.3 35
Solid waste services................... 701.2 15 450.4 13 317.9 13
Electronic security services........... 85.3 2 49.8 1 41.9 2
-------- -------- --------
4,764.1 3,386.9 2,440.4
Cost of Operations:
Automotive rental...................... 2,061.4 80 1,517.0 80 910.3 74
Automotive retail...................... 1,269.9 90 872.3 87 743.7 87
Solid waste services................... 512.4 73 307.5 68 213.6 67
Electronic security services........... 37.3 44 20.6 41 20.6 49
-------- -------- --------
3,881.0 2,717.4 1,888.2
-------- -------- --------
Selling, General and Administrative:
Automotive rental...................... 512.9 20 388.7 21 281.8 23
Automotive retail...................... 136.7 10 112.7 11 102.2 12
Solid waste services................... 86.3 12 76.5 17 61.6 19
Electronic security services........... 33.5 39 20.6 41 18.9 45
Corporate.............................. 25.8 -- 4.3 -- 2.9 --
-------- -------- --------
795.2 602.8 467.4
-------- -------- --------
Restructuring and Merger Expenses:
Automotive rental...................... 23.5 1 -- -- -- --
Solid waste services................... 8.8 1 3.3 1 -- --
Corporate.............................. 6.0 -- -- -- -- --
-------- -------- --------
38.3 3.3 --
-------- -------- --------
Operating Income (Loss):
Automotive rental...................... (30.7) (1) (19.3) (1) 30.2 2
Automotive retail...................... 3.9 -- 15.3 2 12.4 1
Solid waste services................... 93.7 13 63.1 14 42.7 13
Electronic security services........... 14.5 17 8.6 17 2.4 6
Corporate.............................. (31.8) -- (4.3) -- (2.9) --
-------- -------- --------
$ 49.6 $ 63.4 $ 84.8
======== ======== ========
</TABLE>
CONSOLIDATED RESULTS OF OPERATIONS
The Company's consolidated revenue increased 41% to $4.8 billion for the
year ended December 31, 1996 and 39% to $3.4 billion for the year ended December
31, 1995 due to growth in all four of the Company's business segments.
Consolidated operating income was $49.6 million, $63.4 million and $84.8 million
for the years ended December 31, 1996, 1995 and 1994, respectively. Net income
(loss) was $(32.6) million, $(.4) million and $35.8 million for the years ended
December 31, 1996, 1995 and 1994, respectively. Net income (loss) per common and
common equivalent share was $(.12), $-- and $.23 for the years ended December
31, 1996, 1995 and 1994, respectively. The year ended December 31, 1996 was
impacted by one-time pre-tax charges of approximately $95.5 million and an
extraordinary charge of approximately $31.6 million, both of which are more
fully discussed below. Excluding these charges, operating results of the
Company's automotive rental segment for the year ended December 31, 1996
improved significantly over 1995. Operating results of the Company's automotive
retail operations during the year ended December 31, 1996 were negatively
impacted by start-up costs associated with the Company's used vehicle megastore
operations related to the CarChoice acquisition. The Company's solid waste
services and electronic security services segments experienced significant
F-176
<PAGE> 177
improvement over 1995. The operating results for each of the Company's various
business segments are discussed below.
Restructuring, Merger and Other Non-Recurring Expenses
During the year ended December 31, 1996, the Company took one-time pre-tax
charges of approximately $95.5 million related primarily to the integration of
the operations of Alamo into those of the Company. Also included in these
charges are merger expenses associated with the acquisitions of Alamo, Addington
and Continental. Approximately $38.3 million of such expenses appear as
restructuring and merger expenses on the Company's Consolidated Statement of
Operations for the year ended December 31, 1996 with the remainder of
approximately $57.2 million included in automotive rental operating expenses and
selling, general and administrative expenses. These costs primarily include
asset write-offs, severance benefits, accounting and legal merger costs and
changes in various estimated reserve requirements.
Extraordinary Charge
During the year ended December 31, 1996, in connection with refinancing
Alamo's debt at substantially lower interest rates, the Company took an
extraordinary charge of approximately $31.6 million, net of income taxes.
Included in this charge are bond redemption premiums, the write-off of debt
issue costs, prepayment penalties and other related fees. See Note 4, Long-Term
Debt and Notes Payable, of Notes to Consolidated Financial Statements for
further discussion of this charge.
Discontinued Operations
During the year ended December 31, 1995, the Company disposed of its mining
and citrus operations and spun-off its hazardous waste services segment
resulting in a loss from discontinued operations of approximately $25.1 million,
net of income taxes. Operating results have been reclassified in the
Consolidated Financial Statements from the historical classification in order to
properly identify them as discontinued operations. See Note 11, Discontinued
Operations, of Notes to Consolidated Financial Statements, for further
discussion of these transactions.
AUTOMOTIVE RENTAL
Revenue from the Company's automotive rental operations consists primarily
of rental fees and sales of related rental products from the leisure and
business travel segments. Rental revenue for the year ended December 31, 1996
increased 36% to $2.6 billion from $1.9 billion in 1995, while 1995 revenue
increased 54% from $1.2 billion in 1994. These increases are primarily a result
of National's acquisition of Old National in July 1995 which was accounted for
under the purchase method of accounting.
Operating income (loss) from the Company's automotive rental operations has
fluctuated during the three years ended December 31, 1996, 1995 and 1994 due to
restructuring, merger and other non-recurring expenses and the level of vehicle
rental operating expenses as discussed below. Operating income (loss) was
$(30.7) million for the year ended December 31, 1996 as compared to $(19.3)
million in 1995 and income of $30.2 million in 1994. Approximately $75.7 million
of the Company's 1996 restructuring, merger and other non-recurring expenses
relate to the operations of Alamo as discussed above. Without these charges,
operating income from the Company's automotive rental business would have been
approximately $45.0 million in 1996.
Automotive rental operating expenses consist primarily of vehicle
depreciation, interest and lease expenses and other direct operating expenses
including personnel, insurance, fleet maintenance and rental location occupancy
costs. Automotive rental operating expenses were $2.1 billion, $1.5 billion and
$910.3 million or, as percentages of automotive rental revenue, 80%, 80% and 74%
for the years ended December 31, 1996, 1995 and 1994, respectively. The
increases in aggregate dollars are attributed primarily to National's
acquisition of Old National as described above. The 1995 increase in such
expenses as a percentage of revenue over 1994 was primarily a result of
increased vehicle depreciation due to unfavorable changes to manufacturers'
repurchase programs
F-177
<PAGE> 178
and the Company's decision to accelerate the removal of certain higher cost
vehicles from its fleet. Additionally, vehicle lease costs and interest costs
increased as percentages of revenue due to an increase in the number of vehicles
under lease and an increase in market interest rates, respectively.
Selling, general and administrative expenses related to the Company's
automotive rental operations consist primarily of administrative personnel,
marketing costs and agent and tour operator commissions. Such expenses were
$512.9 million, $388.7 million and $281.8 million or, as percentages of
automotive rental revenue, 20%, 21% and 23% for the years ended December 31,
1996, 1995 and 1994, respectively. The increases in aggregate dollars are
primarily due to National's acquisition of Old National as described above. The
decreases in such expenses as percentages of revenue are primarily due to
implementation of a cost reduction plan in late 1995 which included downsizing
certain administrative functions and reductions in advertising expenses.
AUTOMOTIVE RETAIL
Revenue from the Company's automotive retail operations consists of sales
of new and used vehicles, parts and service. Automotive retail revenue was $1.4
billion, $1.0 billion and $858.3 million for the years ended December 31, 1996,
1995 and 1994, respectively. These increases are primarily attributed to higher
fleet sales, acquisitions of new franchised automotive dealerships and increases
in manufacturer pricing. The Company has aggressively expanded its automotive
retail business through the acquisition of AutoNation and several new car
dealerships during 1997 and currently plans to continue this expansion for the
remainder of 1997 and beyond. In this regard, the Company has established
framework agreements with each of Ford Motor Company and General Motors
Corporation which will allow the Company to acquire franchised automotive
dealerships nationwide.
Cost of operations of the Company's automotive retail operations was
$1.3 billion, $872.3 million and $743.7 million or, as percentages of
automotive retail revenue, 90%, 87% and 87% for the years ended December 31,
1996, 1995 and 1994, respectively, and consists primarily of the cost of
vehicles sold, including the cost of reconditioning used vehicles, the cost of
parts and accessories and interest expense related to vehicle inventory
financing. The increases in aggregate dollars are attributed to higher volume of
vehicle sales during the periods. The increase in cost of operations as a
percentage of revenue in 1996 is primarily due to a higher mix of fleet sales
which generate lower margins than retail sales and 1996 start-up costs
associated with the initial development of the Company's used vehicle
megastore operations.
Selling, general and administrative expenses consist primarily of sales
salaries and commissions, marketing expense and office salaries. Such expenses
were $136.7 million, $112.7 million and $102.2 million or, as percentages of
automotive retail revenue, 10%, 11% and 12% for the years ended December 31,
1996, 1995 and 1994, respectively. The increases in aggregate dollars primarily
reflect the Company's expanded operations through the acquisition of new
franchised automotive dealerships as well as 1996 start-up costs associated with
the initial development of the Company's used vehicle megastore operations. The
decreases in such expenses as percentages of revenue are primarily due to
increased fleet sales as described above which generate minimal incremental
administrative costs. As the Company opens AutoNation stores and reconditioning
centers during 1997 and beyond, such operations will incur fixed operating and
administrative costs immediately while revenue volume will tend to grow more
gradually. Consequently, the Company anticipates it will take approximately nine
months for an average AutoNation store to generate operating income.
SOLID WASTE SERVICES
Revenue from the Company's solid waste services operations consists of
collection fees from residential, commercial and industrial customers and
landfill disposal fees charged to third parties. Solid waste revenue was $701.2
million, $450.4 million and $317.9 million for the years ended December 31,
1996, 1995 and 1994, respectively. These increases in revenue are a result of
acquisitions as well as the expansion of the Company's existing business.
Cost of solid waste services includes disposal, labor and equipment
operating costs related to waste collection operations and the cost of operating
the Company's landfills which consist of daily operating expenses, legal and
administrative costs of ongoing environmental compliance and site closure and
post-closure costs. Certain direct landfill development costs, such as
engineering, upgrading, cell construction and permitting costs, are capitalized
and depleted based on consumed airspace. All indirect landfill development
costs, such as executive salaries, general corporate overhead, public affairs
and other corporate services are expensed as incurred. Cost of solid waste
services was $512.4 million, $307.5 million and $213.6 million or, as
percentages of solid waste revenue, 73%, 68% and 67% for the years ended
December 31, 1996, 1995 and 1994, respectively. The increases in aggregate
dollars are a result of the expansion of the Company's solid waste services
operations through acquisition and internal growth. The 1996 increase in cost of
solid waste services as a percentage of solid waste revenue is primarily a
result of certain of the Company's acquired collection companies which had
higher levels of operating costs than the Company's historical operations. The
Company also incurred various operating costs in 1996 related to its plan to
realign certain collection routes in an effort to make its collection process
more efficient. Also, the Company incurred various costs related to upgrading
several of its landfills during 1996.
Selling, general and administrative expenses related to the Company's solid
waste services operations consist primarily of office salaries, supervisor
salaries and office expenses. Such expenses were $86.3 million, $76.5 million
and $61.6 million or, as percentages of solid waste revenue, 12%, 17% and 19%
for the years ended December 31, 1996, 1995 and 1994, respectively. The
increases in aggregate dollars from year to year primarily reflects the growth
of the Company's business through acquisitions. The decreases in selling,
general and administrative expenses as percentages of revenue in each of the
years are primarily due to the reduction of administrative expenses for acquired
businesses and growth in revenue.
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ELECTRONIC SECURITY SERVICES
Revenue from the Company's electronic security services operations results
from monitoring contracts for security systems and fees charged for the sale and
installation of such systems. Electronic security revenue was $85.3 million,
$49.8 million and $41.9 million for the years ended December 31, 1996, 1995 and
1994, respectively. These increases in revenue are principally a result of the
installation of new monitoring systems and acquisitions of subscriber accounts
during the periods.
Cost of electronic security services primarily consists of the labor and
equipment associated with the sale, installation and monitoring of security
systems. Cost of electronic security services was $37.3 million, $20.6 million
and $20.6 million or, as percentages of electronic security revenue, 44%, 41%
and 49% for the years ended December 31, 1996, 1995 and 1994, respectively. The
1996 increase in aggregate dollars from 1995 is a result of the installation of
new monitoring systems and acquisitions of subscriber accounts. The 1996
increase in cost of electronic security services as a percentage of electronic
security revenue is primarily a result of the Company's expansion in 1996
through the opening of additional branch offices which have not yet reached the
revenue volume of a mature branch office, yet have attained a full level of
operating costs and expenses. The 1995 decrease from 1994 in cost of electronic
security services as a percentage of electronic security revenue is primarily a
result of 1995 acquisitions of monitoring accounts which were integrated into
the Company's existing operations with the addition of substantially no
incremental cost of operations.
Selling, general and administrative expenses related to the Company's
electronic security services operations consist primarily of office salaries,
office expenses and marketing expenses. Such expenses were $33.5 million, $20.6
million and $18.9 million or, as percentages of electronic security revenue,
39%, 41% and 45% for the years ended December 31, 1996, 1995, and 1994,
respectively. The increases in aggregate dollars primarily reflect the Company's
expanded operations through the growth of its existing business. The decreases
in selling, general and administrative expenses as percentages of revenue are
primarily due to the reduction of administrative expenses for acquired
businesses and growth in revenue.
CORPORATE ACTIVITIES
Corporate selling, general and administrative expenses consist primarily of
office salaries for corporate employees, professional and regulatory fees,
office expenses and the cost of business travel. Such expenses were $25.8
million, $4.3 million and $2.9 million for the years ended December 31, 1996,
1995 and 1994, respectively. The 1996 increase over 1995 is a result of the
growth experienced by the Company during the year.
INTEREST INCOME
Interest income was $30.8 million, $21.0 million and $6.4 million for the
years ended December 31, 1996, 1995 and 1994, respectively. The increase in
1996 over 1995 is due to the increase in interest income from proceeds from
sales of Common Stock and interest income on advances to AutoNation
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made during 1996. The increase in 1995 over 1994 is a result of interest income
from operating cash flows generated by National subsequent to the acquisition of
Old National in July 1995 as described above and increased interest income on
proceeds from 1995 sales of Common Stock. For further discussion of the sales of
Common Stock, see Note 6, Shareholders' Equity, of Notes to the Consolidated
Financial Statements.
INTEREST EXPENSE
Interest expense was incurred on general corporate debt and the debt
assumed in acquisitions. Interest expense was $43.9 million, $33.5 million and
$20.2 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The increases in 1996 over 1995 and 1995 over 1994 are primarily
due to higher average outstanding borrowings used to fund the Company's growth
and debt assumed in acquisitions. Interest expense related to revenue earning
vehicle financing in the Company's automotive rental operations is included in
vehicle rental operating expenses and interest expense related to the vehicle
inventory financing in the Company's automotive retailing operations is included
in cost of vehicle sales.
INCOME TAXES
The provision for income taxes was $43.0 million, $31.3 million and $29.8
million for the years ended December 31, 1996, 1995 and 1994, respectively. The
effective income tax rate was 102%, 56% and 44% for the years ended December 31,
1996, 1995 and 1994, respectively. The increases in the effective income tax
rates for 1996 and 1995 are primarily due to the Company providing valuation
allowances on certain deferred tax assets of acquired pooled entities,
non-deductible acquisition related costs and varying historical effective income
tax rates of acquired businesses accounted for under the pooling of interests
method of accounting.
ENVIRONMENTAL AND LANDFILL MATTERS
The Company provides for accrued environmental and landfill costs which
include landfill site closure and post-closure costs. Landfill site closure and
post-closure costs include estimated costs to be incurred for final closure of
the landfills and estimated costs for providing required post-closure monitoring
and maintenance of landfills. These costs are accrued based on consumed
airspace. The Company estimates its future cost requirements for closure and
post-closure monitoring and maintenance for its solid waste facilities based on
its interpretation of the technical standards of the Environmental Protection
Agency's Subtitle D regulations. These estimates do not take into account
discounts for the present value of such total estimated costs. Excluding
existing accruals at December 31, 1996, approximately $53.7 million of such
costs are to be expensed over the remaining lives of these facilities.
Environmental costs are accrued by the Company through a charge to income
in the period such liabilities become probable and can be reasonably estimated.
The Company periodically reassesses its methods and assumptions used to
estimate such accruals for environmental and landfill costs and adjusts such
accruals accordingly. Such factors considered are changing regulatory
requirements, the effects of inflation, changes in operating climates in the
regions in which the Company's facilities are located and the expectations
regarding costs of securing environmental services.
FINANCIAL CONDITION
At December 31, 1996, the Company had $299.5 million in cash and
approximately $92.6 million of availability under its $250.0 million revolving
credit facility which may be used for general corporate purposes. In April 1997,
the Company replaced its existing $250.0 million credit facility with a new $1.0
billion unsecured revolving credit facility (the "Credit Facility"). The Company
believes that its financial condition is strong and that it has sufficient
operating cash flow and other financial resources necessary to meet its
anticipated capital requirements and obligations as they come due.
In March 1997, the Company entered into a $300.0 million unsecured credit
facility with a bank. The proceeds of this facility were used to acquire 15.0
million shares of ADT as described above. In April 1997, the Company refinanced
amounts borrowed under this facility with proceeds from the Credit Facility.
In January 1997, the Company sold approximately 15.8 million shares of
Common Stock to certain institutional investors in a private placement
transaction resulting in net proceeds of approximately $552.7 million.
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In connection with the Company's automotive rental operations, the Company,
through separate special purpose entities, may issue up to $2.5 billion of
commercial paper, the proceeds of which may be used solely to purchase or
finance rental fleet vehicles that are subject to manufacturer repurchase
programs or to refinance repurchase receivables due from vehicle manufacturers
under repurchase programs. The Company has also issued $800.0 million of medium
term notes, the proceeds of which were used to finance rental fleet vehicles.
The Company has various other credit facilities to finance its current vehicle
rental operations in Europe and other foreign markets. In connection with the
development of the AutoNation megastores, AutoNation is the lessee under a
$500.0 million operating lease facility established to acquire and develop
properties used in its business. The Company has guaranteed the residual value
of the properties under this facility which guarantee totaled approximately
$74.6 million at March 31, 1997.
Working Capital
Working capital at December 31, 1996 was $1.3 billion as compared to $202.9
million at December 31, 1995. The increase in working capital primarily results
from the 1996 refinancing of a portion of the Company's revenue earning vehicle
debt with $800.0 million of medium term notes due in 2001. The increase in
working capital also results from sales of Common Stock in May and November of
1996 in private placement transactions resulting in net proceeds to the Company
of approximately $550.6 million. Such proceeds were used to repay a portion of
revenue earning vehicle debt and to make advances to AutoNation pursuant to a
loan agreement. The Company believes working capital may decline in 1997 to
lower levels as additional capital is used for the continued expansion of the
Company's businesses including acquisitions and the development of the
AutoNation business.
Receivables, net at December 31, 1996 were $535.7 million as compared to
$428.7 million at December 31, 1995. Receivables consist primarily of amounts
due from retail and service customers, travel agents and tour operators and
amounts due under vehicle repurchase and incentive programs. The increase is
primarily attributed to various business acquisitions and expansion of the
Company's existing businesses.
Revenue earning vehicles, net consist of the Company's vehicle rental
fleet, net of accumulated depreciation, and were $3.5 billion at December 31,
1996 as compared to $2.9 billion at December 31, 1995. The increase is primarily
a result of increased vehicle purchases in 1996 over 1995 to support additional
rental volume. Revenue earning vehicles with depreciated cost of $2.9 billion at
December 31, 1996 were acquired under programs that allow the Company to require
counterparties to repurchase vehicles held for periods of up to 24 months.
Advances to affiliate of $247.5 million includes advances made to
AutoNation and accrued interest thereon pursuant to a loan agreement whereby the
Company agreed to provide a line of credit to AutoNation for the development of
new and used vehicle megastores.
Accounts payable and accrued liabilities at December 31, 1996 were $470.7
million as compared to $379.6 million at December 31, 1995. The increase is
primarily attributed to various business acquisitions and expansion of the
Company's existing businesses.
Revenue earning vehicle debt consists of the Company's obligations to
various financial institutions secured by the Company's vehicle rental fleet.
Such debt was $2.7 billion at December 31, 1996 and $3.0 billion at December 31,
1995. The Company expects to continue to fund its purchases of revenue earning
vehicles with secured vehicle financings.
Property and Equipment
Property and equipment increased $392.2 million during 1996 primarily as a
result of various business acquisitions and increased capital expenditures
resulting from expansion of the Company's existing businesses.
Intangible Assets
Intangible assets increased $120.4 million during 1996 primarily as a
result of the acquisition of various businesses accounted for under the purchase
method of accounting during the period. See Note 1, Summary
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of Significant Accounting Policies -- Intangible Assets, of Notes to
Consolidated Financial Statements for further discussion of intangible assets.
Investment in Subscriber Accounts
Investment in subscriber accounts represents certain capitalized costs
associated with the installation of new electronic security systems and the cost
of acquired subscriber accounts. Investment in subscriber accounts increased
$59.5 million during 1996 primarily as a result of growth in electronic security
system installations and acquisitions of subscriber accounts.
Notes Payable and Long-Term Debt Including Current Maturities
Notes payable and long-term debt including current maturities increased to
$532.1 million at December 31, 1996 from $491.4 million at December 31, 1995.
The increase is primarily attributed to borrowings under the Company's $250.0
million revolving credit facility to fund the Company's investing activities.
Shareholders' Equity
Shareholders' equity increased $634.2 million during the year ended
December 31, 1996 primarily due to the May and November 1996 sales of
approximately 9.9 million and 12.1 million shares of Common Stock, respectively,
which resulted in aggregate net proceeds of approximately $550.9 million. Also
contributing to this increase were 1996 acquisitions of various businesses
accounted for under the purchase method of accounting.
CASH FLOWS
Cash and cash equivalents decreased by $46.1 million during the year ended
December 31, 1996 and increased $300.3 million during the year ended December
31, 1995. The major components of these changes are discussed below.
Cash Provided by Operating Activities
The Company's net cash flows from operating activities increased by $291.0
million during the year ended December 31, 1996 primarily as a result of various
business acquisitions and expansion of the Company's existing businesses.
Cash Used in Investing Activities
Capital additions were approximately $1.5 billion, $538.0 million and
$793.5 million during the years ended December 31, 1996, 1995 and 1994,
respectively, which included the purchases of revenue earning vehicles (net of
sales) and property and equipment and the expansion of landfill sites. The
decrease in 1995 is primarily a result of the Company's utilization of a greater
percentage of leased vehicles in its rental fleet during the year. During 1996,
the Company returned to a policy which resulted in a greater percentage of owned
vehicles in its fleet. The Company also made capital expenditures of
approximately $41.4 million, $16.0 million and $17.5 million during the years
ended December 31, 1996, 1995 and 1994, respectively, related to the expansion
of its electronic security services business through installations of new
monitoring systems and acquisitions of subscriber accounts.
During the year ended December 31, 1996, Republic advanced $243.4 million
to AutoNation under the AutoNation loan agreement as previously discussed.
During the year ended December 31, 1995, the Company paid approximately
$1.3 billion in cash for business acquisitions, principally for National's
acquisition of Old National as previously discussed.
The Company expects capital expenditures to increase substantially during
the remainder of 1997 and in the foreseeable future due to the development of
the AutoNation business as well as continued internal growth of existing
businesses and future acquisitions. The Company intends to finance capital
expenditures through cash on hand, revolving credit facilities, lease facilities
and other financings.
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Cash Provided by Financing Activities
Cash flows from financing activities during the years ended December 31,
1996, 1995, and 1994 included revenue earning vehicle financing, commercial bank
borrowings, repayments of debt and issuances of Common Stock. In May 1996, the
Company sold 9.9 million shares of Common Stock in a private placement
transaction resulting in net proceeds of approximately $197.6 million. In
November 1996, the Company sold 12.1 million shares of Common Stock in a private
placement transaction resulting in net proceeds of approximately $353.3 million.
These financing activities combined with cash provided by operating activities
were used to fund capital additions and the expansion of the Company's business
during these years.
In August 1995, the Company issued and sold an aggregate of 16.7 million
shares of Common Stock and warrants to purchase an additional 33.4 million
shares of Common Stock to H. Wayne Huizenga, Westbury (Bermuda) Ltd. (a Bermuda
corporation controlled by Michael G. DeGroote), Harris W. Hudson, and certain of
their assigns for an aggregate purchase price of approximately $37.5 million.
The warrants are exercisable at prices ranging from $2.25 to $3.50 per share. In
August 1995, the Company issued and sold an additional 2.0 million shares of
Common Stock each to Mr. Huizenga and John J. Melk, for aggregate proceeds of
approximately $26.5 million.
In July 1995, the Company sold 10.8 million shares of Common Stock in a
private placement transaction resulting in net proceeds of approximately $69.3
million. In September 1995, the Company sold 10.0 million shares of Common Stock
in an additional private placement transaction resulting in net proceeds of
approximately $99.0 million. In October 1995, Continental completed a secondary
public offering of approximately 2.6 million equivalent shares of Common Stock
resulting in net proceeds of approximately $30.1 million.
SEASONALITY
The Company's automotive rental operations and particularly the leisure
travel segment is highly seasonal. In these operations, the third quarter, which
includes the peak summer travel months, has historically been the strongest
quarter of the year. During the peak season, the Company increases its rental
fleet and workforce to accommodate increased rental activity. As a result, any
occurrence that disrupts travel patterns during the summer period could have a
material adverse effect on the annual performance of this segment. The first
quarter for the Company's automotive rental operations is generally the weakest,
when there is limited leisure family travel and a greater potential for adverse
weather conditions. Many of the operating expenses such as rent, general
insurance and administrative personnel are fixed and cannot be reduced during
periods of decreased rental demand.
FORWARD-LOOKING STATEMENTS
Certain statements and information included herein constitute
"forward-looking statements" within the meaning of the Federal Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance, or achievements of the Company to be materially
different from any future results, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, the ability to develop and implement operational and financial systems
to manage rapidly growing operations; competition in the Company's lines of
business; the ability to integrate and successfully operate acquired businesses
and the risks associated with such businesses; the ability to obtain financing
on acceptable terms to finance the Company's growth strategy and for the Company
to operate within the limitations imposed by financing arrangements; the
Company's limited history of operations in automotive retailing; the dependence
on vehicle manufacturers to approve dealership acquisitions; the possibility of
unfavorable changes to the cost or financing of the Company's vehicle rental
fleet; the Company's dependence on key personnel; and other factors referenced
herein.
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