As filed with the Securities and Exchange Commission on January 30, 1996
Registration No. 33-97948
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-------------------
NAL FINANCIAL GROUP INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 6141 23-2455294
(State or other jurisdiction of (Primary Standard Classification (I.R.S. Employer Identification
incorporation or organization) Code Number) Number)
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500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
-------------------------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive office
and principal place of business)
Mr. Robert R. Bartolini
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
(305) 938-8200
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
with copy to:
Stephen M. Cohen, Esquire
Clark, Ladner, Fortenbaugh & Young
One Commerce Square
2005 Market Street, 22nd Floor
Philadelphia, PA 19103
(215) 241-1868
--------------------
Approximate date of proposed sale to the public: As soon as practicable
following the date on which this Registration Statement becomes effective.
--------------------
<PAGE>
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended, check the following box. [x]
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
NAL FINANCIAL GROUP INC.
CROSS REFERENCE SHEET
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Registration Statement Item Number and Caption Location in Prospectus or Page
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1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..........................Forepart of the Registration Statement; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus...................................................Inside Front and Outside Back Cover Pages of Prospectus
3. Summary Information and Risk Factors............................Prospectus Summary; Summary Financial Information; Risk
Factors
4. Use of Proceeds.................................................Use of Proceeds
5. Determination of Offering Price.................................Cover Page of Prospectus; Plan of Distribution
6. Dilution........................................................N/A
7. Selling Security Holders........................................Selling Security Holders
8. Plan of Distribution............................................Cover Page of Prospectus; Plan of Distribution
9. Legal Proceedings...............................................Business of the Company - Legal Proceedings
10. Directors, Executive Officers, Promoters and Control Persons....Management; Certain Transactions
11. Security Ownership of Certain Beneficial Owners and Management..Principal Stockholders
12. Description of Securities.......................................Description of Securities
13. Interest of Named Experts and Counsel...........................N/A
14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities......................................Statement on Indemnification; Part II; Item 24 -
Indemnification of Directors and Officers
15. Organization within Last Five Years............................Business of the Company
16. Description of Business........................................Business of the Company
17. Management's Discussion and Analysis of Plan of Operation......Management's Discussion and Analysis of Financial Condition
and Results of Operations
18. Description of Property........................................Business of the Company
19. Certain Relationships and Related Transactions.................Certain Transactions
20. Market for Common Equity and Related Stockholder Matters.......Market for Common Equity and Related Stockholder Matters
21. Executive Compensation.........................................Management
22. Financial Statements...........................................Summary Financial Information; Capitalization; Financial
Statements
23. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................N/A
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<PAGE>
Subject to Completion January 30, 1996
PRELIMINARY PROSPECTUS
NAL FINANCIAL GROUP INC.
-------------------------
79,849 Shares of Common Stock
Offered by Certain Selling Security Holders
as Offered by Prospectus dated December 15, 1995
613,581 shares of Common Stock
Offered by Certain Selling Security Holders
------------------------
This Prospectus relates to the sale by certain "Selling Security
Holders" identified in this Prospectus ("Selling Security Holders") of 79,849
shares of Common Stock, previously issued by NAL Financial Group Inc. (the
"Company") in private placement transactions. Such shares of Common Stock were
previously included within the Company's Prospectus dated December 15, 1995,
which is superseded by this Prospectus.
This Prospectus also relates to the sale by certain Selling Security
Holders of 613,581 shares of Common Stock, which consist of: (i) 261,600 shares
issuable, if at all, upon conversion of the principal and interest due under
certain outstanding convertible debentures ("Debentures"); (ii) 120,000 shares
issuable, if at all, upon the exercise of certain common stock purchase warrants
("Warrants") and (iii) 231,981 shares previously issued by the Company, all of
which Debentures, Warrants and shares of Common Stock were issued by the
Company in private placement transactions. See
"SELLING SECURITY HOLDERS" and "DESCRIPTION OF SECURITIES."
The Company will not receive any proceeds from the sale of shares of
Common Stock by the Selling Security Holders. The Company will, however, bear
all expenses in connection with the preparation and filing of a Registration
Statement of which this Prospectus forms a part. Sales of shares of Common Stock
may be made in negotiated transactions, or otherwise, at market prices
prevailing at the time of sale or at negotiated prices. See "PLAN OF
DISTRIBUTION."
------------------------
The Common Stock is traded on The NASDAQ National MarketSM under the
symbol "NALF." On January 25, 1996, the closing price of the Common Stock on The
NASDAQ National MarketSM was $13.38.
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
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=============================================================================================================================
Underwriting Discounts Proceeds to the Selling
Class of Security Price to Public and Commissions Security Holders
- -----------------------------------------------------------------------------------------------------------------------------
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Shares of
Common Stock _____ -(1)- $9,278,093(2)
=============================================================================================================================
</TABLE>
(1) This does not take into account the costs of this Offering, including
among others, printing, blue sky and professional fees, estimated at
$100,000, which will be borne entirely by the Company.
(2) Represents the anticipated sale by the Selling Security Holders at
$13.38 per share, the last reported sales price reported on The NASDAQ
National MarketSM on January 25, 1996. There can be no assurances,
however, that the Selling Security Holders will be able to sell their
shares at this price, or that a liquid market will exist for the
Company's Common Stock. The Company will receive no proceeds upon the
sale of shares of Common Stock by the Selling Security Holders.
The date of this Prospectus is January __, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Copies of these reports may be inspected and copied at the
Public Reference Facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, DC 20549, and at the Commission's regional offices at
7 World Trade Center, Suite 1300, New York, New York 10048, and at Northwest
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained upon written request addressed to the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, DC
20549, at prescribed rates.
The Company will provide a report to stockholders, at least annually,
which will include audited financial statements of the Company.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus.
THE COMPANY
The Company
NAL Financial Group Inc. (hereinafter, the "Company" or "NAL")
commenced operations during June 1991 as a specialized finance company for the
purpose of engaging in consumer finance transactions involving the origination,
purchase, remarketing and servicing of consumer and mortgage loans and auto
lease receivables.
Because of the opportunities presented by the insolvency and
reorganization of many financial institutions at the time, from inception
through the second quarter of 1994, the Company's principal activities involved
the bulk purchase and servicing of seasoned portfolios of consumer and mortgage
loans and auto lease receivables that had been administered by the Resolution
Trust Corporation ("RTC") or Federal Deposit Insurance Corporation ("FDIC").
In response to the decreasing availability of seasoned portfolios,
since the second quarter of 1994 the Company's principal focus has shifted to
other segments of the consumer finance industry, particularly auto finance.
Although opportunistic purchases of seasoned auto related portfolios may still
be considered by management, the principal focus of the Company's business since
June 1994, has been the acquisition and servicing of automotive leases and loans
originated by dealers in connection with sales or leases to persons with
sub-prime credit. In addition, management expects to complete sales of
receivables through securitization transactions from time to time. However,
there can be no assurances to such effect.
The Company services its own portfolio of receivables as well as
portfolios sold through securitization transactions. The Company's principal
revenue sources are interest income and fees earned on loans held in portfolio,
realized gains and servicing fees from loans sold in securitization
transactions, and remarketing efforts to consumers.
The Company operates its business through six wholly-owned
subsidiaries, NAL Acceptance Corporation ("NAC"), NAL Mortgage
3
<PAGE>
Corporation ("NMC"), NAL Insurance Services, Inc. ("NIS"), Performance Cars
of South Florida, Inc. ("PCSF"), Autorics, Inc. ("Autorics") and Autorics II,
Inc. ("Autorics II"). (Unless otherwise specified, references to the Company
shall include NAC, NMC, NIS, Autorics, Autorics II, and/or PCSF).
The Company became publicly held by virtue of a merger with and into
Corporate Financial Ventures, Inc. ("COFVI") on November 30, 1994 (the
"Merger"). COFVI was incorporated in Delaware on November 14, 1986 and completed
a small public offering on June 14, 1988. With the exception of a short-term
venture that was discontinued during the fourth quarter of 1993, COFVI had
remained principally an inactive company since inception.
Pursuant to the Merger, NAL was merged with and into COFVI and the
historic stockholders of NAL received 3,160,000 newly issued restricted
securities, which constituted approximately 56% of the issued and outstanding
COFVI stock. Effective upon completion of the Merger, the Company assumed the
historic operations of NAL and changed its name to "NAL Financial Group Inc."
The Company's principal executive office is located at 500
Cypress Creek Road West, Suite 590, Fort Lauderdale, Florida
33309.
THE OFFERING
Securities Being Offered: This Prospectus relates to the
- ------------------------- sale by certain "Selling
Security Holders" identified in
this Prospectus ("Selling
Security Holders") of 79,849
shares of Common Stock,
previously issued by NAL
Financial Group Inc. (the
"Company") in private placement
transactions. Such shares of
Common Stock were previously
included within the Company's
Prospectus dated December 15,
1995, which is superseded by
this Prospectus.
This Prospectus also relates to
the sale by certain Selling
Security Holders of 613,581 shares
of Common Stock, which consist of:
(i) 261,600 shares issuable, if at
all, upon conversion of the
4
<PAGE>
principal and interest due under
certain outstanding convertible
debentures ("Debentures"); (ii)
120,000 shares issuable, if at all,
upon the exercise of certain common
stock purchase warrants ("Warrants")
and (iii) 231,981 shares, all of
which Debentures, Warrants and
Common Stock were issued by the
Company in private placement
transactions. See "SELLING SECURITY
HOLDERS" and "DESCRIPTION OF
SECURITIES."
The shares of Common Stock offered
by the Selling Security Holders may be
offered for sale from time to time
by the holders in regular brokerage
transactions, either directly or
through brokers or to dealers, in
private sales or negotiated
transactions, or otherwise, at
prices related to then prevailing
market prices. The Company will not
receive any proceeds from the
sale of shares of Common Stock by
the Selling Security Holders.
All expenses of the registration
of such securities are, however,
being borne by the Company. The
Selling Security Holders, and not
the Company, will pay or assume such
brokerage commissions as may
be incurred in the sale of their
securities. See "SELLING SECURITY
HOLDERS."
The Company's Common Stock is
listed on The NASDAQ National
MarketSM under the symbol "NALF." On
January 25, 1996, the closing price
of the Commn Stock was $13.38.
5
<PAGE>
Total number of shares of
Common Stock outstanding..........................................6,700,041(1)
Total number of shares of
Common Stock being offered
by Selling Security Holders ..........................................693,430
- ---------------------------
(1) As of January 25, 1996.
- ---------------------------
Use of Proceeds: The Company will not receive
any proceeds from the sale of
shares of Common Stock by the
Selling Security Holders.
Risk Factors: The securities offered in this
- ------------- Prospectus are speculative in
nature and involve a high
degree of risk. Prior to
making an investment decision,
prospective investors should
carefully review the risk
factors enumerated in this
Prospectus, including, among
others, the dependence of the
Company on sources of
financing, possible volatility
of stock prices, risks
associated with the sub-prime
market, control by certain
stockholders, reliance on key
personnel and additional
possible dilution. See "RISK
FACTORS" and "BUSINESS OF THE
COMPANY - Legal Proceedings."
Trading Symbol: Common Stock "NALF."
6
<PAGE>
SUMMARY FINANCIAL INFORMATION
Set forth below is the historical summary financial information with
respect to the Company for the three years ended December 31, 1994, 1993 and
1992 and the nine months ended September 30, 1995 and 1994.
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<CAPTION>
Nine Months Ended September 30, Year Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Information:
Revenue $12,368,194 $6,197,710 $8,133,200 $9,287,091 $13,232,846
Income Before Provision for Taxes, 1,725,473 748,619 657,666 1,320,804 2,428,849
Extraordinary Loss and Minority
Interest(1)
Net Income 1,069,793 454,755 394,323 471,239 1,399,333
Net Income per Share:(2)
Primary:
Income Before Provision for Taxes,
Extraordinary Loss
and Minority Interest 0.29 0.14 0.13 0.25 0.47
Net Income 0.18 0.09 0.08 0.09 0.27
Fully Diluted:
Income Before Provision for Taxes,
Extraordinary Loss
and Minority Interest 0.29 0.13 0.12 0.24 0.43
Net Income 0.18 0.08 0.07 0.08 0.25
Weighted Average Shares
Outstanding
Primary 5,875,228 5,192,968 5,192,968 5,192,968 5,192,968
Fully Diluted 6,013,263 5,592,968 5,592,968 5,592,968 5,592,968
Balance Sheet Information:
(at end of period)
Total assets 112,206,308 21,550,845 34,321,546 27,652,315 38,059,273
Borrowings 86,977,416 18,087,565 22,502,041 22,840,167 28,203,796
Stockholders' Equity 21,028,876 3,463,280 10,855,807 3,808,083 5,582,203
See Footnotes Next Page
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7
<PAGE>
- ------------------------
(1) Includes an extraordinary loss on extinguishment of debt
of $326,949 (net of taxes) and a minority interest of
$87,516 for the years ended December 31, 1993 and 1992,
respectively. Also includes a non-cash charge of $80,000
for the nine months ended September 30, 1995 for common
stock earned pursuant to a voting trust agreement
established in connection with the Merger.
(2) Primary and fully diluted net income per share for the years
ended December 31, 1994 and 1993, and for the nine months
ended September 30, 1994 has been calculated assuming
5,192,968 and 5,592,968 shares have been outstanding during
the entire periods, respectively.
8
<PAGE>
RISK FACTORS
The securities offered hereby are speculative in nature, involve a high
degree of risk and an investment in the Common Stock should not be made by any
investor who cannot afford the loss of his entire investment. Prior to making an
investment decision with respect to the Common Stock offered by this Prospectus,
prospective investors should carefully consider, along with the other matters
discussed in this Prospectus, the following risk factors:
1. Declining Historic Results of Operation.
The Company experienced a trend toward decreasing results of operations
during fiscal 1993 and 1994, which management believes was attributable to
diminished gains on loan sales and rates of return, and increased competition
incurred in connection with its more recent purchases of seasoned portfolios of
consumer and mortgage loans and auto leases. During each quarter during the
three quarters ended September 30, 1995, the Company reported a trend of
increased profits compared to the prior quarter.
Management believes that the yields to be derived from interest, rental
income and fees generated by originated and acquired contracts will provide a
profitable spread over the costs of its borrowings. In view of the early stage
of the Company's auto finance business segment, however, management is uncertain
these yields will compare with yields experienced in the past. In addition,
management expects to complete sales of automotive contracts through
securitization transactions from time to time which will generate realized gains
and future servicing fee revenue to the Company. However, there can be no
assurances to that effect. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
2. Dependence upon Adequate Sources of Financing.
Historically, a substantial portion of the Company's working capital
has been provided through the sale of debt participation interests and revolving
lines of credit provided by the Company's principal lenders. During the period
from April 1995 through December 1995 the Company secured additional funding
through warehouse credit facilities and through the sale of Debentures and
shares of Common Stock in private placement transactions. During the fourth
quarter of 1995, the Company secured additional funding through the sale of
approximately $40 million of automotive loans in a privately-placed
securitization transaction. The proceeds from the transaction were used to pay
down warehouse lines of credit, thereby making the warehouse facilities
available to fund acquisitions of additional automotive contracts. The Company
9
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expects to complete future securitizations from time to time. However,
there can be no assurances to that effect. See "RISK FACTOR #3."
The Company utilizes these sources of funding to finance the purchase
of its consumer loans and lease receivables. Accordingly, the Company's ability
to maintain and expand its portfolio of loan and lease receivables, while
dependent upon a number of factors, relies predominantly upon the availability
of adequate capital at rates and upon terms acceptable to the Company. There can
be no assurances that such sources of financing will continue to remain
available to the Company, or that the Company will be able to secure increased
sources of financing or complete additional securitizations. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
The Company remains in compliance with the terms of its existing lines
of credit and debt participation interests. A default under any of these
arrangements in the future could have a materially adverse effect on the
Company's finances. The Company's ability to keep these financing sources in
place depends upon its continued compliance with the terms thereof. The
Company's ability to obtain successor facilities or similar financing will
depend on, among other things, the willingness of financial institutions to
participate in funding sub-prime credits and the Company's future financial
condition and results of operations.
3. Continuing Ability To Securitize Loans.
In the fourth quarter of 1995, the Company completed the sale of
approximately $40 million of automobile loans in a privately-placed
securitization transaction. Securitization enables the Company to sell
automobile contracts on a regular basis, while continuing to receive servicing
fees and excess cash flow, and to use the proceeds from such sales to acquire
additional contracts.
The Company intends to use the proceeds from securitization sales to
pay down warehouse lines of credit. Under the terms of a $50 million warehouse
repurchase facility established with a lending institution, the Company is
obligated to securitize at least $250 million of loans to be financed under the
facility over a two year period, with at least $100 million securitized in any
365 day period. Failure to complete a sufficient level of securitization
transactions could result in termination of the line of credit.
10
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4. Growth Dependent upon Expansion of Dealer Base.
To a large extent, the Company's business depends on identifying
dealers who meet certain qualifications, executing master dealer agreements with
such dealers, training such dealers to utilize the Company's services
effectively and monitoring such dealers' compliance with Company guidelines.
There can be no assurance that the Company will be successful in increasing the
number of participating dealers or maintaining its existing dealer base or that
such dealers will continue to generate a volume of contracts comparable to the
volume of contracts historically generated by such dealers. See "BUSINESS OF THE
COMPANY - Dealer Program" and "Competition."
5. Substantial Additional Dilution.
The Company is presently authorized to issue 50,000,000 shares
of Common Stock of which 6,700,041 shares are outstanding as of the date of this
Prospectus. During the period from April 1995 through December 31, 1995, the
Company sold $21,325,000 principal amount of convertible debentures in private
placement transactions. The Debentures were sold in Units together with common
stock purchase warrants (the "Warrants"). At December 31, 1995, the Company's
outstanding Common Stock included 930,523 shares previously issued upon the
conversion of $8,260,000 principal amount of the Debentures. The Company may be
caused to issue approximately 1,410,112 additional shares upon the conversion,
if at all, of the principal and interest due under the remaining Debentures and
1,961,125 shares upon the exercise, if at all, of the Warrants; thus increasing
the number of shares outstanding from 6,700,041 to 10,071,278. See "DESCRIPTION
OF SECURITIES."
Conversion of all of the remaining Debentures, if at all, would,
however, have the effect of releasing the Company from its obligation to repay
$13.0 million principal amount of the Debentures and recharacterizing such
indebtedness to equity on the Company's financial books and records. In
addition, exercise of all of the Warrants, if at all, would have the effect of
securing for the Company additional working capital of up to $20,909,375.
As its rate of growth continues, the Company must continue to secure
increasing amounts of financing to fund the acquisition of additional automotive
finance contracts. This may entail the sale of additional shares of Common Stock
or Common Stock equivalents which would have the effect of further increasing
the number of shares outstanding.
In connection with other business matters deemed appropriate by the
Company's management, there can be no assurances that the
11
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Company will not, in fact, undertake the issuance of more shares of Common Stock
without notice to then existing stockholders. This may be done in order to,
among others, facilitate a business combination, acquire assets or stock of
another business, compensate employees or consultants or for other valid
business reasons in the discretion of the Company's Board of Directors. The
Company has a Stock Option Plan which is presently authorized to grant options
for the sale of up to 600,000 shares of Common Stock. In December 1994 and
December 1995, the Company granted options to purchase an aggregate of 557,500
shares of Common Stock. See "MANAGEMENT - Executive Compensation."
6. Possible Volatility Associated with Anticipated Offering
by Selling Security Holders.
As of the date of this Prospectus, the Company had outstanding
6,700,041 shares of Common Stock of which approximately 2,453,009 were eligible
for public trading. After giving effect to the resale of the shares covered by
this Prospectus, and by virtue of certain registration rights granted to the
holders of the Debentures and Warrants, an issuance of shares upon the
conversion of the Debentures and/or exercise of the Warrants would have the
effect of substantially increasing the number of shares eligible for public
trading. See "DESCRIPTION OF SECURITIES - Registration Rights." Although it is
impossible to predict market influences and prospective values for securities,
it is possible that, in and of itself, the increase in the number of shares
available for public trading could have a depressive effect upon the trading
value of the Company's Common Stock.
7. Effect of Outstanding Debentures and Warrants.
For the respective terms of the Debentures and Warrants, the holders
thereof are given an opportunity to profit from a rise in the trading price of
the Company's Common Stock, with a resulting dilution in the interest of the
other stockholders. The holders of such Debentures may exercise their rights of
conversion, and the holders of such Warrants may chose to exercise such
Warrants, each at prices below the current trading price of the Company's Common
Stock and at a time when the Company might be able to obtain additional capital
through a new offering of securities at prevailing market prices. The terms on
which the Company may obtain additional financing during this period may be
adversely affected by the existence of such below market Debentures and
Warrants.
12
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8. Sensitivity to Interest Rates and General Economic Conditions.
The Company's business is affected by a number of factors beyond its
control, including sales activity in the new and used automobile retail market,
which may be affected by the general condition of the economy and interest rate
levels. The Company's profitability is determined largely by the difference, or
"spread", between the rate of interest on the funds borrowed under its existing
credit facilities, and the rate of interest (or effective yield in the case of
bulk purchase portfolios) charged to and collected from its customers on their
contracts. There can be no assurance that the Company's cost of funds will not
rise to a level that adversely affects its ability to maintain profitability
with respect to the contracts it originates and/or holds. In addition, high
interest rate environments also adversely affect the financing capacity of the
Company's sub-prime customers, particularly for new vehicles. Moreover, the
Company has entered into a master repurchase facility with a lending institution
which, under its terms, gives the institution the right to make margin calls in
the event of a decrease in the market value in the contracts held for
repurchase. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS."
9. Risks Associated with the Sub-Prime Market.
The principal focus of the Company's business is upon automotive leases
or loans that have been secured by persons with sub-prime credit. The sub-prime
market is comprised of customers who are deemed to be relatively high credit
risks due to various factors, including, among other things, the manner in which
they have handled previous credit, the absence or limited extent of their prior
credit history, or their limited financial resources. Consequently, the
contracts acquired or loans originated by the Company may bear a higher rate of
interest but also involve a higher probability of default, may involve higher
delinquency rates and may involve greater servicing costs. The Company's
profitability depends upon its ability to properly evaluate the credit
worthiness of customers and efficiently service its contracts. There can be no
assurance that the credit performance of its customers will be maintained, that
the Company's systems and controls will continue to be adequate, or that the
rate of future defaults and/or losses will be consistent with prior experience
or at levels that will maintain the Company's profitability.
10. Reliance on Systems and Controls.
The Company's operations rely upon non-proprietary processes and
controls that are available generally, however, have been
13
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specifically developed to meet the needs of the Company. These processes and
controls support the evaluation, acquisition, servicing and administration of
the Company's loan and lease portfolios, as well as its general corporate and
management oversight functions. There can be no assurance that the Company's
processes, controls or automated systems will continue to be adequate, or that
they will be sufficient for the Company's expansion plans. A failure of the
Company's automated systems could have a material adverse effect upon the
Company's business and financial condition.
11. Control by Directors and Officers.
The Company's officers and directors own approximately 41% of the
Common Stock of the Company. See "PRINCIPAL STOCKHOLDERS." By virtue of the
concentration of a substantial block of shares in the hands of the Company's
directors and officers, and in view of the absence of cumulative voting rights,
these stockholders will be in a position to elect all of the Company's directors
and control the outcome of other corporate matters without the approval of the
Company's other stockholders. In addition, applicable statutory provisions and
the ability of the Board of Directors to issue one or more series of Preferred
Stock without stockholder approval could deter or delay unsolicited changes in
control of the Company by discouraging open market purchases of the Company's
stock or a non-negotiated tender or exchange offer for such stock, which may be
disadvantageous to a majority of the Company's stockholders who may otherwise
desire to participate in such a transaction and receive a premium for their
shares. See "DESCRIPTION OF SECURITIES."
12. Reliance on Key Personnel.
The Company is dependent upon the services of its executive officers.
Should one or more of these individuals cease to be affiliated with the Company
before acceptable replacements are found, there could be a material adverse
effect on the Company's business and prospects. Mr. Robert R. Bartolini, the
Company's Chairman and Chief Executive Officer, is the only executive officer
with whom the Company has an employment agreement. Should any of the Company's
executive officers elect to terminate their employment, there can be no
assurance that suitable replacements could be hired without the Company
incurring substantial additional costs. The Company does not presently maintain
key-man insurance on any of its executives, other than a life insurance policy
on Mr. Bartolini in the amount of $2,000,000. This policy is maintained as a
condition of the Company's credit facility with Congress Financial Corporation.
The proceeds from the policy are primarily to be applied to reduce the Company's
debt to Congress Financial
14
<PAGE>
Corporation, and upon payment of that debt, the remaining proceeds shall be
payable to the Company. The Company's continued success is also dependent upon
its ability to attract and retain a sufficient number of qualified employees to
support its growth strategy. There can be no assurance that the Company will be
able to recruit and retain such personnel. See "MANAGEMENT."
13. Competition.
In general, the automotive finance industry is characterized by intense
competition. Existing and potential competitors include well-established
financial institutions, such as banks, savings and loans, small loan companies,
industrial thrifts, leasing companies and captive finance companies owned by
automobile manufacturers and others. Many of these competitors have greater
financial, technical and marketing resources than the Company. There can be no
assurance that the Company will be able to compete successfully with such
competitors in the future.
Many of the larger banks, financial institutions and captive finance
arms of automotive manufactures have not consistently sought to do business in
the sub-prime market. These organizations have traditionally elected to limit
their activities to the higher credit quality customers. As a result, the
sub-prime credit market tends to be primarily serviced by smaller and
independent finance organizations.
The Company's business strategy is designed to capitalize on the
absence of consistent institutional sources of financing in the sub-prime
market. The competition in the sub-prime market would be significantly increased
should the large finance organizations seek to compete consistently in the
sub-prime market.
14. Regulation.
The Company's business is subject to numerous federal and state
consumer protection laws and regulations, which, among other things, require the
Company to: (i) obtain and maintain certain licenses and qualifications; (ii)
limit the interest rates, fees and other charges the Company is allowed to
charge; (iii) limit or prescribe certain other terms of the Company's contracts;
(iv) provide specified disclosures; and (v) define the Company's rights to
repossess and sell collateral. An adverse change in existing laws or
regulations, or in the interpretation thereof, or the promulgation of any
additional laws or regulations could have an adverse effect on the Company's
business. See "BUSINESS OF THE COMPANY - Government Regulation."
15
<PAGE>
15. General Economic Conditions.
The Company is subject to risks generally inherent in the operation of
a business. These include, for example, inflation and increases or decreases in
interest rates which may have an effect upon the overall volume of auto sales or
leases. The Company believes, however, that because of its customer profile, and
the need of its customers for basic transportation, such factors are not likely
to have a material adverse impact on the Company's business.
16. Collections and Repossessions.
The Company finances automobiles in a relatively high-risk market and
anticipates that a portion of its automobile loans will become seriously
delinquent and that in those circumstances the Company's only practical
alternative will be repossession of the automobile. The Company monitors the
rate of delinquent automobile loans and repossessions and maintains reserves to
absorb anticipated losses from repossessions. The Company will use its best
efforts to minimize its losses in that regard, although it believes its reserves
are adequate to account for any such losses. The Company's loss reserves rely to
a great extent, however, upon historical experience, which has been limited.
Changes from the historical experience caused by changes in economic conditions
or other factors could adversely affect the Company's operations.
17. Priority Liens in Financed Vehicles.
Statutory liens for repairs or unpaid taxes may have priority even over
a perfected security interest in financed automobiles, and certain state and
federal laws permit the confiscation of motor vehicles used in unlawful activity
which may result in the loss of a secured party's perfected security interest in
a confiscated motor vehicle. Liens for repairs or taxes, or the confiscation of
a financed automobile, could arise or occur at any time during the term. No
notice may necessarily be given to the Company in the event such a lien arises
or confiscation occurs.
18. Bankruptcies and Deficiency Judgments.
Certain statutory provisions, including federal and state bankruptcy
and insolvency laws, may limit or delay the ability of the Company to repossess
and resell financed automobiles or enforce a deficiency judgment. In addition,
the Company may determine in its discretion that a deficiency judgment is not an
appropriate or economically viable remedy, or may settle at a significant
discount any deficiency judgment that it does obtain. In the event that
deficiency judgments are not obtained, are not satisfied, are
16
<PAGE>
satisfied at a discount or are discharged, in whole or in part, in bankruptcy
proceedings, the loss will be borne by the Company and may adversely affect the
ability of the Company to repay its outstanding credit facilities.
19. Future Sales of Common Stock.
A substantial influx of shares into the market may have a depressive
effect upon the trading price of the Company's Common Stock. This may occur upon
the public resale of the shares issuable upon the conversion of outstanding
Debentures or upon the exercise of outstanding Warrants pursuant to existing
registration rights granted by the Company (See "RISK FACTOR #6") or upon the
public resale of outstanding shares that formerly constituted "restricted
securities", as that term is defined under Rule 144 of the Securities Act of
1933, as amended (the "Act").
After taking into account resale of the shares covered by this
Prospectus, and the anticipated registration of certain additional shares issued
upon conversion of the Debentures, approximately 3,400,000 shares of the
Company's outstanding Common Stock will continue to remain and in the future may
be sold without registration upon compliance with Rule 144. A person (including
a group of persons whose shares are aggregated) who has satisfied a two year
holding period for restricted securities, including an affiliate of the Company,
may sell an amount of restricted securities up to 1% of the Company's
outstanding Common Stock in each three month period thereafter. Persons who are
not affiliated with the Company and who have owned the restricted securities for
at least three years are not subject to the 1% limitation. Of the 3,400,000
shares which constitute restricted securities, approximately 2,535,978 are
presently held by persons who may be deemed "affiliates" of the Company. These
individuals acquired their shares during November 1994. Accordingly, resales may
occur as early as November 1996. Provided these individuals remain "affiliates",
their resales would be limited to 1% of the Company's outstanding Common Stock
in each three month period thereafter. Of the 3,400,000 shares which constitute
restricted securities, 864,022 are presently held by non-affiliates. These
shares were acquired during November 1994. Accordingly, resales can occur as
early as November 1996 (limited to 1% of the Company's outstanding common stock
per quarter) and unlimited resales can occur as early as November 1997.
Any substantial sale of restricted securities under Rule 144 may in the
future have a depressive effect upon the price of the Company's Common Stock in
any market that may develop therefor.
17
<PAGE>
20. Dividends.
From inception through November 30, 1994, NAL as the predecessor to the
Company paid dividends of $1,069,460. No dividends had been paid by COFVI, nor
have there been any dividends paid by NAL following its Merger with COFVI. The
payment of dividends is not contemplated in the foreseeable future. The payment
of future dividends will be directly dependent upon the earnings of the Company,
its financial needs and other similarly unpredictable factors. Earnings are
expected to be retained to finance and develop the Company's business.
USE OF PROCEEDS
The Company will not realize any proceeds from the sale of shares of
Common Stock by the Selling Security Holders. See "SELLING SECURITY HOLDERS."
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior to the Merger on November 30, 1994, virtually no trading of the
Company's Common Stock had occurred since 1990. During December 1994, the
Company's Common Stock began trading on the over-the-counter market through the
OTC Bulletin Board under the symbol "NALF." In May 1995, the Company's Common
Stock commenced trading on the NASDAQ National MarketSM under the same symbol.
The following table sets forth the high and low market prices of the
Common Stock for the period from December 1994 through December 1995.
1994 High Low
- ---- ------ ------
Fourth Quarter $9.75 $7.50
December 1994
1995 High Low
- ---- ------ ------
First Quarter $12.00 $10.30
Second Quarter $12.49 $10.50
Third Quarter $17.87 $11.97
Fourth Quarter $17.38 $ 9.75
The closing price on January 25, 1996 was $13.38.
Records of the Company's stock transfer agent indicate that as of
January 25, 1996, the Company had 160 holders of record of its Common Stock.
Since a number of the shares of the Company are held by financial institutions
in "street name," it is likely that the
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<PAGE>
Company has more stockholders than indicated above. To date, the Company has
been unable to accurately ascertain this information.
From inception through November 30, 1994, NAL as the predecessor to the
Company paid dividends of $1,069,460. No dividends had been paid by COFVI, nor
have there been any dividends paid by NAL following its Merger with COFVI. The
payment of dividends is not contemplated in the foreseeable future. The payment
of future dividends will be directly dependent upon the earnings of the Company,
its financial needs and other similarly unpredictable factors. Earnings are
expected to be retained to finance and develop the Company's business.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1995.
Borrowings $ 86,977,416
------------
Stockholders' Equity:
Preferred Stock, $1,000 par value
10,000,000 shares authorized;
none issued and outstanding - 0 -
Common Stock, $0.15 par value
50,000,000 shares authorized;
6,550,347 issued and outstanding 982,552
Paid in capital 17,443,384
Retained earnings 2,602,940
------------
Total stockholders' equity 21,028,876
------------
Total capitalization $108,006,292
============
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of the Company included in
this Prospectus.
Background
NAL commenced operations during June 1991 as a specialized finance
company for the purpose of engaging in consumer finance transactions involving
the origination, purchase, remarketing and servicing of consumer and mortgage
loans and auto lease receivables.
Because of the opportunities presented by the insolvency and
reorganization of many financial institutions at the time, from inception
through the second quarter of 1994, the Company's principal activities involved
the bulk purchase and servicing of seasoned auto related portfolios of consumer
and mortgage loans and auto lease receivables that had been administered by the
RTC or FDIC.
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<PAGE>
In response to the decreasing availability of seasoned portfolios,
since the second quarter of 1994 the Company's principal focus has shifted to
other segments of the consumer finance industry, particularly auto finance.
Although opportunistic purchases of seasoned portfolios may still be considered
by management, the principal focus of the Company's business since June 1994,
has been the acquisition and servicing of automotive leases and loans originated
by dealers in connection with sales or leases to persons with sub-prime credit.
Management expects to complete sales of contracts through securitization
transactions from time to time. However, there can be no assurances to that
effect. See "RISK FACTORS."
The Company became publicly held by virtue of the Merger with COFVI on
November 30, 1994. COFVI had been an inactive public company at the time of the
Merger. Since, as a result of the Merger, the stockholders of historic NAL
acquired a controlling interest in COFVI, the Merger has been accounted for as a
"reverse acquisition". Accordingly, for financial statement presentation
purposes, NAL is viewed as the continuing entity and the related business
combination is viewed as a recapitalization of NAL, rather than an acquisition
by COFVI.
In conjunction with the Merger, COFVI changed its name to "NAL
Financial Group Inc."
Results of Operations - Historical Overview
The Company's results of operations from inception in 1991 through the
second quarter of 1994 principally reflected the Company's investment earnings
and gains realized from the sale of seasoned portfolios of consumer and mortgage
loans acquired at significant discounts from their principal balances. The rate
of return on these portfolios included both interest earned on loans and leases,
as well as the purchase discount accretion which reflected the increase in the
value of the portfolio as it approached maturity.
Gains on sales of loan pools and loans sold to correspondents have
historically constituted a significant element of the Company's results of
operations. During 1992, 1993 and 1994, the Company realized gains on sales of
loan pools of $1,127,000, $2,131,000 and $2,292,000, respectively. These sales
consisted primarily of loan pools, principally longer-term, fixed rate loans,
which had been purchased at discounts and sold within a short time period after
purchase, or after a period during which the deficiencies of previous servicers
were corrected.
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<PAGE>
Due to an increase in competition for, and a decrease in availability
of, seasoned portfolios, the Company found it necessary to increase the prices
it paid for newly acquired portfolios over the two and a half year period. The
increase in prices paid for the portfolios decreased the Company's effective
earnings yield, from 38.29% during the year ended December 31, 1992, to 27.06%
during the year ended December 31, 1993, and further to 22.53% for the year
ended December 31, 1994. Although the Company reduced its cost of borrowings
during this period through refinancing and expansion of its borrowing base with
less expensive financing, thereby reducing its cost of borrowings rate from
14.55% during 1992, to 11.62% during 1993, and further to 9.73% during 1994, the
cost of funds reduction was less than the decrease in the earnings yield.
Accordingly, the Company's net interest spread rate, or the difference between
the effective yield earned on its interest-earning assets and the effective rate
paid on its interest-bearing liabilities, decreased from 23.74% in 1992 to
15.44% in 1993, and further to 12.80% during 1994.
In view of the shifting of the principal focus of the Company's
business to other segments of the consumer finance industry, particularly, the
acquisition and servicing of automotive leases and loans, management anticipates
that substantially all of its earnings for the year ending December 31, 1995 and
thereafter will be derived from interest, rental income and fees earned on
sub-prime leases and loans. Management believes that the yields to be derived
from interest, discount and fees to be charged on sub-prime credit automobile
leases and loans will provide a profitable spread over the costs of its
borrowings. In view of the early stage of the Company's auto finance business
segment, however, management is uncertain these yields will compare with yields
experienced in the past.
Revenues generated from purchase discount accretion and gains on sales
of loans which had historically constituted the principal component of the
Company's earnings will likely decrease significantly after 1994. Management is,
however, currently evaluating the feasibility of pooling its portfolio of
originated automobile loans and leases for resale through securitization
programs. To the extent that such programs are undertaken in the future, the
composition of the Company's earnings may shift to some extent to include gains
on sale of loan and lease pools.
To a large extent, the Company's ability to generate profitable results
of operations in the future will depend upon, among other things, its ability
to: (i) continue the expansion of its program with dealers and other sources of
auto loans and leases (see "BUSINESS OF THE COMPANY - Dealer Program"); (ii)
maintain operations and extend credit in a manner which minimizes
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<PAGE>
delinquency experience and credit losses; and (iii) develop adequate sources of
capital (on terms and at rates that provide an acceptable interest spread) from
which to finance the growth of the Company's business. The Company's experience
in this business segment since June 1994 has not yet presented sufficient
historical information upon which reasonable trends can be identified by
management.
Nine Months Ended September 30, 1995 compared to Nine Months Ended
September 30, 1994
The Company reported net income of $1,069,800 for the nine months ended
September 30, 1995 on revenues of $12,368,000. This compares to net income of
$455,000 on revenues of $6,198,000 for the nine months ended September 30, 1994.
The Company's results of operations for the nine months ended September
30, 1995 principally reflected net interest and fees earned on its expanded
portfolio of sub-prime automobile contracts receivable. The results of
operations for the nine months ended September 30, 1994 principally reflected
interest and discount earned on bulk purchased portfolios and gains from the
sale of these portfolios.
The Company's level of sub-prime automobile contracts acquired
continues to increase when comparing the current interim period to the
comparable interim period of the preceding year. Contracts acquired in the 1995
period totalled $108,427,000 compared to $10,372,000 for the 1994 period. The
significant increase reflects the Company's success in the establishment and
continual expansion of its network of automobile dealerships participating in
the Company's financing programs.
Net Interest Spread
The following table presents net interest spread information for the
nine months ended September 30, 1995 and 1994:
Nine Months Ended September 30,
1995 1994
----------- -----------
Net investment in loans and
leases - average balance $64,589,000 $16,704,000
Interest income and purchase
discount accretion 10,999,000 3,821,000
Annualized effective earnings rate 22.71% 30.50%
Participations and notes payable -
average balance $55,667,000 $14,776,000
Interest expense 4,636,000 1,410,000
Annualized effective cost rate 11.10% 12.72%
Net interest spread rate 11.61% 17.78%
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<PAGE>
During the nine months ended September 30, 1995, the Company's net
interest spread rate, or the difference between the effective rate earned on
interest - earning assets and the effective rate paid on interest - bearing
borrowings, decreased 6.17%, from 17.78% to 11.61%, when compared to the same
period of the preceding year. This decrease was due primarily to a 7.79%
decrease in the effective rate earned on interest earning assets, from 30.50% to
22.71%. The decrease in the earnings rate was offset by a decrease in the
Company's effective cost rate from 12.72% to 11.10%, or 1.62%.
During the nine months ended September 30, 1994, a greater portion of
the Company's earnings was derived from purchase discount accretion than during
the equivalent 1995 period. During the 1994 period, purchase discount accretion
was $1,801,000 compared to $599,000 for the 1995 period. This resulted in a
higher effective earnings rate for the 1994 period. The decrease in purchase
discount accretion reflects the Company's shift in focus from acquiring bulk
loan and lease portfolios at significant discounts to acquiring and servicing
sub-prime automotive loan and lease contracts receivable. Although the
automotive contracts do not provide as much earnings from purchase discount
accretion as the bulk purchase portfolios, the coupon interest rate earned on
the contracts is higher.
Interest income increased from $2,020,000 for the nine months ended
September 30, 1994 to $10,400,000 for the nine months ended September 30, 1995.
This increase was due to higher contractual rates earned on sub-prime contracts
and an increase in the average balance of loan and lease receivables from
$16,704,000 in the 1994 period to $64,589,000 in the 1995 period. Substantially
all of the increase in the balance of loan and lease receivables is attributable
to acquired automotive contracts.
The decrease in the Company's effective cost rate was attributable to
an increase in borrowings to finance the expansion of the automotive contracts
portfolio. For the most part, the Company has financed its acquisitions of
automotive contracts with borrowings which have had interest rates which were
established at the time of financing based on the prime rate or LIBOR rate in
effect at the time. These borrowings had rates which were lower than the rates
on borrowings utilized during the 1994 period to finance bulk-purchase
portfolios. At September 30, 1995, the Company had borrowed approximately
$67,195,000 under arrangements in which the interest rates were fixed at the
time of financing,
24
<PAGE>
and approximately $11,682,000 under lines of credit and warehouse arrangements
which bear interest at variable rates tied to the prime rate or LIBOR.
Management believes that the effective cost rate will decrease in
future periods as an increasingly greater number of contracts are financed using
the warehouse line established in September 1995, with a lower cost of funds
than financing arrangements utilized previously.
Gains on Sales of Loans
Gains on sales of loans totalled $2,137,000 during the nine months
ended September 30, 1994 compared to $128,000 for the nine months ended
September 30, 1995. Prior to 1995, gains on sales of loans constituted a
significant element of the Company's results of operations. The sales consisted
primarily of loan pools which had been purchased at discounts and sold within a
short period after purchase. Unless it elects to initiate a broad-based
securitization program presently under consideration, it is the Company's
current intention to hold principally all of its present portfolio until
maturity. Given that intention, the Company may not experience gains on the
sales of loan pools as it has in the past.
Other Income
Other income increased $1,001,000 from $240,000 during the nine months
ended September 30, 1994 to $1,241,000 during the nine months ended September
30, 1995, due primarily to the commissions earned by the Company's insurance
brokerage services from placing insurance policies and late fees charged on the
automotive portfolio of loans and leases.
Provision for Possible Credit Losses
The provision for possible credit losses totalled $1,412,000 for the
nine months ended September 30, 1995, or $1,056,000 more than the $356,000
reported for the equivalent 1994 period. This increase related primarily to
provisions recorded for an estimate of possible losses which may be incurred for
new automotive contracts acquired during the 1995 period.
Beginning with the fourth quarter of 1995, management has decided to
cease the amortization to earnings of the non-refundable acquisition discount on
purchased automotive finance contracts and allocate this discount to the reserve
available for credit losses. Management believes that this decision, although
not totally
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<PAGE>
eliminating the need for future provisions, will ultimately result in lower
provisions for credit losses on purchased contracts.
Management periodically reviews the adequacy of the reserve for loan
and lease losses and considers whether the level of reserve is sufficient to
cover any losses of the carrying value of the collateral pledged for the loans
and leases receivable, an analysis of the equity invested in the collateral by
the borrowers, delinquency data and historical loss experience, and any recourse
arrangements the Company has with dealers or other sellers of contracts and
portfolios.
Operating and Other Expenses
Operating and other expenses increased $830,000 from $3,684,000 during
the nine months ended September 30, 1994 period to $4,514,000 during the nine
months ended September 30, 1995, due primarily to increased overhead and costs
associated with the Company's automotive contract financing business. This
increase was attributable to, among other things, an increase in compensation
and employee benefits paid due to an expansion of the Company's work force.
Additional personnel were hired to assist with underwriting, collecting and
servicing of the Company's expanding portfolio of automotive contracts.
Management expects that operating expenses will increase as the size of
its automotive contract portfolio increases, but does not expect the growth of
expenses to be disproportionate with the growth of revenues from the portfolio.
Year ended December 31, 1994 compared to year ended December 31,
1993
The Company reported net income of $394,000 for the twelve months ended
December 31, 1994 on revenues of $8,133,000. This compares to net income of
$471,000 on revenues of $9,287,000 for the twelve months ended December 31,
1993.
The results of operations for the twelve months ended December 31, 1994
and December 31, 1993 principally reflect net interest and discount accretion
earned on its loan and lease portfolios purchased from the RTC or FDIC.
26
<PAGE>
Net Interest Spread
<TABLE>
<CAPTION>
Year Ended
December 31,
1994 1993
----------- -----------
<S> <C> <C>
Net investment in loans and
leases - average balance $23,917,000 $27,093,000
Interest income and purchase
discount accretion 5,387,000 7,331,000
Annualized effective earnings rate 22.53% 27.06%
Participations and notes payable -
average balance $20,109,000 $25,522,000
Interest expense 1,957,000 2,966,000
Annualized effective cost rate 9.73% 11.62%
Net interest spread rate 12.80% 15.44%
</TABLE>
During the twelve months ended December 31, 1994, the Company's net
interest spread rate decreased 2.64%, from 15.44% to 12.80%, when compared to
the same period of the preceding year. This decrease was primarily due to a
4.53% decrease in the effective rate earned on interest earning assets from
27.06% to 22.53%. The decrease in the earnings rate was offset by a decrease in
the Company's effective cost rate from 11.62% to 9.73%, or 1.89%.
The decrease in the effective earnings rate was attributable to a
decrease in interest income and purchase discount accretion.
Interest income from loans and direct finance leases decreased
$1,049,000, or approximately 24%, from $4,371,000 in 1993 to $3,322,000 in 1994.
Although total loans and leases outstanding at December 31, 1994 of $29,787,000
exceeded that outstanding at December 31, 1993 of $24,038,000, the average
balance outstanding during 1994 was less than that for 1993. During 1994, the
average balance of total loans and leases decreased approximately 12%, from
$27,093,000 in 1993 to $23,917,000 in 1994. Although the Company acquired
$41,027,000 of new leases and loans during 1994, these acquisitions occurred
primarily in the last two quarters of the year. During 1994, the Company
received principal payments on its portfolios totalling $23,640,000, and sold
loans with a total book value of $11,963,000.
Also, included in the average balance of loans and leases for 1994 were
two underperforming portfolios purchased during the first
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<PAGE>
half of 1994 at deep discounts. The purchased principal balance and purchase
price of these portfolios totalled $10,212,000 and $3,423,000, respectively. The
Company's expectations for these portfolios is to realize income from
collections in excess of the total purchase cost of the loans. Although the
expectations are that some individual loans in the portfolios will be deemed
fully uncollectible, and others will be only partially collectible, estimates
are that the total of all collections will exceed the total cost of the
portfolios, thereby yielding an overall gain from the investments. A portion of
these two portfolios is being accounted for using the cost recovery method,
under which earnings are recognized after the Company's investment has been
recovered. Excluding the carrying value of these loans from the average balance
of earning assets, the balance would have been $21,686,000 for 1994, which, when
compared to the average balance for 1993, represented a 20% decrease.
The decrease in purchase discount accretion, from $2,959,000 in 1993 to
$2,065,000 in 1994, reflected the maturing during 1994 of discounted portfolios
previously purchased by the Company, which were replaced in 1994 with
acquisitions of bulk-purchase portfolios and loan and lease originations which
did not have as large an amount of purchase discount as realized in the past,
and with the purchase of the two under-performing portfolios which were
partially accounted for using the cost recovery method.
Interest expense decreased from $2,966,000 in 1993 to $1,957,000 in
1994. This decrease corresponded to a decrease in the average balance of
participations and notes payable, from $25,522,000 in 1993 to $20,109,000 in
1994, consistent with the decrease in the average balance of loans and lease
receivables outstanding during the year. In addition, during 1994, the Company
realized a full year's benefit of the refinancing of its participations in 1993,
together with benefits of obtaining less expensive financing for new loan
purchases and originations.
Gains on Sales of Loans
Gains on sales of loans increased from $1,925,000 in 1993 to $2,292,000
in 1994. During 1994, the Company sold loan portfolios with a book value of
$11,963,000, which compares to sales during 1993 of loans with a book value of
$6,527,000.
Gains on mortgage loan sales to correspondents decreased from $206,000
in 1993 to none in 1994, reflecting the decision by the Company to cease
operations of its mortgage origination business in order to concentrate on the
automobile finance business.
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<PAGE>
Other Income
Other income increased $410,000, due primarily to an increase in late
fee income of $177,000, due to fees collected primarily from the underperforming
portfolios, and commission income of $47,000 from the Company's insurance
brokerage activities.
Provision for Possible Credit Losses
During 1994, the Company recorded a provision for loan losses of
$573,000. This provision was due primarily to two factors: the settlement during
the year of several delinquent loans previously purchased as part of performing
loan packages, and the determination during the year of the portion of the
purchase price of the two underperforming portfolios acquired during 1994 which
was deemed not collectible.
Management periodically reviews the adequacy of the reserve for loan
losses and considers whether the level of the reserve is sufficient to cover any
losses of the carrying value of its existing portfolios. This review includes an
evaluation of the value of the collateral pledged for the loans and leases
receivable, an analysis of the equity invested in the collateral by borrowers,
delinquency data and historical loss experience, and any recourse arrangements
the Company has with the sellers of portfolios.
Prior to 1994, the Company's portfolio acquisitions consisted primarily
of performing loans and leases which were acquired at discounted prices. The
Company's experience with these portfolios was that, in general, it recovered
its discounted investment in the portfolios through diligent collection efforts.
Accordingly, no additional provision for losses was considered necessary for
1993, based on management's review.
During the last quarter of the year, management was able to fully
evaluate the collectibility of the two underperforming portfolios acquired
during the earlier part of the year. This evaluation determined that the
purchase cost of several of the loans would not be fully collectible, and, under
generally accepted accounting principles, the portion deemed uncollectible was
charged off. However, management expects that the collections from each of the
two portfolios taken as a whole will exceed their respective total purchase
costs.
Operating and Other Expenses
Operating and other expenses decreased $55,000 from $5,000,000 during
the twelve months ended December 31, 1993 to $4,945,000
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<PAGE>
during the twelve months ended December 31, 1994, due primarily to a decrease in
servicing expense. Servicing expense decreased from $320,000 in 1993 to $80,000
in 1994, resulting from the Company's decision to transfer the data processing
function for servicing its portfolios from an outside service bureau to an
in-house system. This transfer was made to enhance the efficiency of the
Company's operations and to reduce its operating expenses. This transfer did not
have a material effect on the liquidity and capital resources of the Company,
nor did it have a material effect on the results of operations.
Other operating expense categories increased $297,000, due primarily to
increased overhead and sales costs incurred in establishing the Company in its
new business focus.
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Delinquency Experience
The following table summarizes the Company's delinquency experience on
accounts over 30 days past due on both a number of contracts and dollar basis.
The table excludes two underperforming portfolios which were purchased during
the year ended December 31, 1994 at substantial discounts. The Company is
accounting for a portion of these portfolios using the cost recovery method.
Under this method, income is recognized only for the excess of collections
received over the purchase price basis of the loans. At December 31, 1994 and
September 30, 1995, the principal balance and book value of these two portfolios
totalled $2,271,000 and $897,000, and $690,000 and $234,000, respectively,
principally all of which was delinquent 30 days or more. It is management's
estimate that the Company will collect at least its net book value of the
portfolios.
<TABLE>
<CAPTION>
===================================================================================================
9/30/95
- ---------------------------------------------------------------------------------------------------
Dollars Contracts
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Principal Outstanding $104,148,000 9,322
Delinquencies:
30-59 Days 6,822,000 654
60-89 Days 2,410,000 251
90 Days or more 2,790,000 230
- ---------------------------------------------------------------------------------------------------
Total Delinquencies over 30
Days as a % of
Principal/Contracts 12,022,000 1,135
11.54% 12.18%
- ---------------------------------------------------------------------------------------------------
Total Delinquencies over 60
Days as a % of
Principal/Contracts 5,200,000 481
4.99% 5.16%
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================================
12/31/94 12/31/93
- ----------------------------------------------------------------------------------------------------------------------------
Dollars #Contracts Dollars #Contracts
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Principal Outstanding $33,165,000 3,560 $29,834,000 1,557
Delinquencies:
30-59 days 2,549,000 311 1,181,000 76
60-89 days 215,000 19 296,000 15
90 days or more 423,000 27 882,000 36
- ----------------------------------------------------------------------------------------------------------------------------
Total Delinquencies over 30 Days 3,187,000 357 2,359,000 127
as a % of Principal/Contracts 9.61% 10.03% 7.91% 8.16%
- ----------------------------------------------------------------------------------------------------------------------------
Total Delinquencies over 60 days 638,000 46 1,178,000 51
as a % of Principal/Contracts 1.92% 1.29% 3.95% 3.28%
============================================================================================================================
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================
12/31/92
- ------------------------------------------------------------------------------------------------------
Dollars # Contracts
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Principal Outstanding $38,847,000 4,168
Delinquencies:
30-59 days 1,931,000 160
60-89 days 664,000 58
90 days or more 545,000 43
- ------------------------------------------------------------------------------------------------------
Total Delinquencies over 30 Days 3,140,000 261
as a % of Principal/Contracts 8.08% 6.26%
- ------------------------------------------------------------------------------------------------------
Total Delinquencies over 60 Days 1,209,000 101
as a % of Principal/Contracts 3.11% 2.42%
======================================================================================================
</TABLE>
Total delinquencies over 60 days, expressed as a percentage of total
principal balance, were 3.11%, 3.95%, 1.92% and 4.99% at December 31, 1992,
1993, 1994 and September 30, 1995, respectively. The totals for 1992 and 1993
reflect delinquency experience for bulk-purchased portfolios. The Company's
delinquency percentage of over 60 days loan principal at December 31, 1995 did
not represent a significant change from the percentage at September 30, 1995.
In the past, the Company had purchased portfolios which, prior to their
purchase, had received servicing of differing degrees of quality. Accordingly,
the Company's historic delinquency experience was influenced to some extent by
the portfolios it purchased, and the time required to correct any previous
servicing deficiencies. Similarly, the Company's charge-off experience had been
affected by charge-offs of loans which were included in purchased portfolios at
discounts. The discounted prices paid for some of the portfolios reflected an
evaluation of the potential problem loans.
The historic delinquency experience of the Company identified in the
chart provided above through December 31, 1994 was accumulated during periods in
which the Company's business focused principally upon the bulk purchase and
servicing of portfolios of mortgage, lease and consumer receivables. In view of
its recent shift to the automotive finance business, the Company's past
delinquency experience may not be indicative of future results. At December 31,
1994, the dollar amount of the Company's portfolios consisted of approximately
76% of new contracts originated through its sub-prime credit program and 24% of
previously acquired bulk purchase portfolios. At September 30, 1995, the
Company's portfolios consisted of 93% of new contracts originated and 7% of
previously acquired bulk purchase portfolios. Management expects that
future delinquency rates for sub-prime automobile leases and loans will differ
from that experienced for purchased, bulk portfolios.
32
<PAGE>
The Company has prepared analyses of its automotive finance contracts,
based on its own credit experience and available industry data, to identify the
relationship between loan delinquency and default rates at the various stages of
a contract's repayment term. The results of these analyses, suggest that the
probability of a contract becoming delinquent or going into default is highest
during the "seasoning period" which begins 3-4 months, and ends 12-14 months,
after the origination date. The Company believes that the increase in the over
60 days delinquency percentage of number of contracts from 1.29% at December 31,
1994 to 5.16% at September 30, 1995, is primarily the result of an increase in
the percentage of automotive finance contracts in the "seasoning period," rather
than any change in the underlying average credit characteristics of the
Company's portfolio.
If the rate of the Company's volume continues to escalate, an
increasingly greater portion of the Company's portfolio is expected to fall into
the "seasoning period" described above, causing a rise in the overall portfolio
delinquency and default rates, without regard to underwriting performance.
Assuming no changes in any other factors that may affect delinquency and default
rates, the Company believes this trend should stabilize or reverse when the
volume of mature contracts (with lower delinquency and default rates) is
sufficient to offset the total portfolio delinquency and default rates.
The Company's collections staff monitors the contracts and typically
takes action within 24 hours of delinquency if the first payment on a contract
is missed, and within 48 hours if the second or subsequent payment is missed,
and generally repossesses the automobile within 20 days of any uncured
delinquency. While average periods of delinquency may decrease, actual results
of operations will only be enhanced provided the Company's net credit loss
experience does not deteriorate. See "Net Credit Loss Experience."
Net Credit Loss Experience
An allowance for uncollectible interest has been provided for loans 90
days or more delinquent. A reserve for credit losses has been maintained at a
level that management considers adequate to provide for potential losses based
upon an evaluation of known and inherent risks in the portfolios. Management's
periodic evaluation is based upon an analysis of the portfolios, historical loss
experience, current economic conditions and other relevant factors. Future
adjustments to the reserve may be necessary if economic
33
<PAGE>
conditions differ substantially from the assumptions used in making
the evaluation.
The following table summarizes the Company's net credit loss and losses
from lease termination experience for the nine month period ended September 30,
1995 and for the years ended December 31, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
NINE
MONTHS
ENDED YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------------------------------------------------------
September
1995 1994 1993 1992
---- ---- ---- ----
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Principal Outstanding $105,498,280 $33,165,177 $29,834,483 $38,846,847
- --------------------------------------------------------------------------------------------------------------------------------
Average Principal O/S 69,331,729 29,069,075 34,340,665 42,335,373
- --------------------------------------------------------------------------------------------------------------------------------
Charge-offs and Lease Termination Losses Net 673,285 648,835 243,327 355,460
of Recoveries
- --------------------------------------------------------------------------------------------------------------------------------
Net Losses % Principal O/S(1) 0.85% 1.96% 0.82% 0.92%
- --------------------------------------------------------------------------------------------------------------------------------
Net Losses % Avg Principal(1) 1.29% 2.23% 0.71% 0.84%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------
(1) The percentage set forth for the nine-months ended September
30, 1995 is annualized in order to present comparable data for a full
twelve-month period.
Net credit losses, representing charge-offs of loan and lease credit
losses, either to previously established reserves or directly to loss expenses,
net of recoveries, were 0.71% and 0.84% as a percentage of total average
principal outstanding for the years ended December 31, 1993 and 1992,
respectively. This percentage increased to 2.23% for the year ended December 31,
1994, due primarily to two factors: charge-offs of $456,792 representing the net
purchase price allocated to loans included in the under performing portfolios
which were determined to be non-collectible, and charge-offs of the portion of
the carrying value of loans acquired in other bulk purchases which were settled
during the year. The percentage decreased to 1.29% for the nine months ended
September 30, 1995. For 1992, 1993 and 1994, the table reflects activity during
a period in which the Company primarily purchased loan and lease portfolios on a
bulk basis. In view of the shifting of the Company's business principally to the
origination of automotive loan and lease contracts, management expects that the
34
<PAGE>
Company's past net credit loss experience will not be indicative of future
results.
Due to the limited historical experience reflecting results of the
Company's program of auto loan and lease acquisitions, management is
continuously assessing the level or extent of future credit losses. Credit
losses in the future will be dependent on the Company's credit criteria, advance
rates in relation to the value of the secured automobiles, and the value
received from the disposition of any repossessed automobiles in relation to the
outstanding balance of the lease or loan.
However, management believes that its policy of underwriting contracts
on an individual basis, the effectiveness of its collection efforts, and its
knowledge of collateral values and of the industry will contribute positively to
the Company's charge-off experience. Management also anticipates that the
opening of the Company's sales lot will improve charge-off experience by
reducing the losses realized upon the disposition of repossessed automobiles.
Liquidity and Capital Resources
Current Operations
The Company's business requires substantial cash to support its growth
in the rate of acquisition and origination of automotive finance contracts. The
following chart presents the growth in both the number and dollar amount of
contracts acquired since June 1994.
<TABLE>
<CAPTION>
===================================================================================================================================
Quarter Ended
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
June September December March June September December
1994 1994 1994 1995 1995 1995 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Contracts Acquired $3.26 $7.12 $14.76 $29.66 $34.79 $43.97 $50.61
($ in millions)
- -----------------------------------------------------------------------------------------------------------------------------------
Number 423 848 1,490 2,657 2,889 3,524 3,965
===================================================================================================================================
</TABLE>
As a general matter, the Company finances the acquisition of its
automotive finance contracts by drawing against its available lines of credit
and warehouse facilities. Under the terms of these facilities, funding is
provided between 80-90% of the acquisition price of the contracts. Accordingly,
the Company must secure the remainder of the acquisition price from equity or
other funding sources.
As the rate of growth of contract acquisition continues to increase,
the Company must secure additional equity or other
35
<PAGE>
sources to fund these requirements. The Company's growth, therefore, is governed
by its ability to gain access to additional financing sources. The Company's
growth during the year ended December 31, 1995 has been facilitated by its
ability to successfully complete private placements of debt and equity
securities and gain access to increasing sources of financing.
During 1995, the Company had secured its principal sources of working
capital through a series of debt participation interests, unsecured advances,
revolving lines of credit and the proceeds from the sale of convertible
subordinated debentures and shares of common stock in private placement
transactions. As of December 31, 1995, the respective outstanding balances
provided by these sources of working capital were as follows:
Lines of Credit and Warehouse
Facility................................................. $36,072,000
Debt Participation Interests................................$40,444,000
Private Placement of Convertible
Subordinated Debentures
Issued: $21,325,000
Less: Converted to Common Stock (8,260,000) $13,065,000
-----------
Private Placement of Common Stock............................$2,101,000
Unsecured Advances...........................................$3,137,000
Lines of Credit and Warehouse Facilities
In March 1993, the Company entered into a $20,000,000 three-year
revolving credit facility with Congress Financial Corporation (the "Congress
Credit Facility"). The Congress Credit Facility bears interest at 2% over the
prime rate of CoreStates Bank, N.A. (10.75% at December 31, 1995), payable
monthly, is secured by certain lease contracts receivable and consumer and
mortgage loans receivable. As of December 31, 1995, the Company had no advances
outstanding and had an available borrowing base of $20,000,000 under the
Congress Credit Facility for the financing of additional loan and lease
portfolio purchases which meet certain credit guidelines established by
Congress, in its sole discretion.
During February 1994, the Company entered into a $5,000,000 one-year
revolving credit facility with GECC (the "GECC Credit Facility"). In September
1994, the GECC Credit Facility was increased to $10,000,000. The GECC Credit
Facility bears interest payable monthly at rates fixed at the time of financing
and is secured by certain lease contracts receivable and consumer and
36
<PAGE>
mortgage loans receivable. In March 1995, the GECC Credit Facility available
line was increased to $25,000,000 and at December 31, 1995, the Company had
drawn down approximately $22,010,000 under the facility. The GECC Credit
Facility is automatically renewed annually unless GECC provides the Company with
notice of termination 90 days prior to such renewal.
The Company has recently entered into a $50 million repurchase facility
(the "Repurchase Facility") with an additional lending institution (the
"Lender"). Under the terms of the Repurchase Facility, the Lender purchases loan
and lease contracts receivable from the Company at approximately ninety percent
of the outstanding principal balance. The Company repurchases the receivables
from the Lender at approximately ninety percent of the outstanding principal
balance at the time of repurchase plus a premium for accrued interest at a rate
of 2.25% over 30 day LIBOR. The Repurchase Facility also provides that if the
market value of contracts sold to the Lender (market value being determined by
an independent third party) is less than the Lender's margin amount (market
value multiplied by the advance rate), the Lender may require the Company to
transfer money or additional contracts to the Lender until the margin amount is
satisfied. Market value may be affected by, among other things, sudden changes
in interest rates, delinquency rates and credit losses. Although management
believes that this is unlikely to occur to any significant degree, a margin call
could require an allocation of certain of the Company's liquidity and capital
resources. The term of the Repurchase Facility is for one year, automatically
renewable for an additional year. The Company intends to use the Repurchase
Facility to fund additional growth in loan and lease receivables with the intent
to eventually pool and securitize these receivables.
The advances pursuant to the Repurchase Facility will be accounted for
as financing transactions characterized as borrowings.
The Repurchase Facility includes certain financial and operational
covenants including, among other things, the required maintenance of a minimum
net worth of $30 million dollars, prohibition upon debt to equity ratio in
excess of 8 to 1 and the maintenance of certain loan portfolio performance
criteria. For the purpose of the Repurchase Facility, net worth has been defined
as total stockholders' equity plus subordinated indebtedness not due within 90
days. Management continues to closely monitor the performance of its loan
portfolios in order to insure compliance with all operational covenants. Based
upon its present and anticipated financial position, management believes it will
be able to maintain compliance with these covenants. At December 31, 1995,
37
<PAGE>
the Company had $14,061,000 outstanding under the Repurchase Facility and was in
compliance with the financial and operational covenants.
During the fourth quarter of 1995, the Company completed the sale of
approximately $40 million of automotive loans in a privately-placed
securitization transaction. The proceeds from the transaction were used to pay
down the Repurchase Facility, thereby making the Repurchase Facility available
to fund acquisitions of additional automotive contracts. See "Securitization of
Loans."
Debt Participation Interests
Since inception, the Company has secured a significant amount of its
working capital through debt participation interests. As of December 31, 1995,
the Company had an existing series of borrowings under participation
arrangements outstanding with Fairfax Savings, a Federal Savings Bank
("Fairfax") in the approximate amount of $40,444,000. The participations bear
interest at prime plus 2.5% fixed at the time of financing, with principal and
interest due monthly. In general, under the terms of the participation
agreements, payments on the agreements are tied to the payments received from
the secured contracts and loans receivable.
The participation with Fairfax specifies the distribution of cash flows
from the loans receivable. The order of distributions of cash flows received is
as follows:
(1) Payment to Fairfax for principal and interest due on the
participations.
(2) Payment of any amounts payable to Fairfax which may have arisen due to
the Company's failure to perform its obligation under the participation
agreement, at which time Fairfax would have assumed and incurred
expenses to perform these responsibilities.
(3) An amount equal to 25% to 50% of the remaining cash balance, if any,
will be deposited into segregated interest bearing accounts at Fairfax
(the reserve accounts) until the balances in the reserve accounts equal
25% to 50% of the principal balances of the participation agreements.
(4) Payment to the Company of the remaining cash in the operating
account, if any, including all payments and reimbursements due
under the servicing agreement.
Under the Company's participation agreements, collections received from
loans securing the participations are deposited into
38
<PAGE>
restricted, trust bank accounts pending distributions to participation holders.
Distributions generally are disbursed to participants once each month for the
previous month's collections.
Distributions under some participation agreements with Fairfax include
deposits of a portion of the collections into segregated, interest-bearing
reserve accounts held for the benefit of the Company at Fairfax. These reserve
accounts are returned to the Company once their balances equal 25% to 50% of the
principal balances of the participation agreements.
The balances of the trust account pending settlement with participants
and the balance of the reserve accounts on deposit with Fairfax are reflected on
the Company's balance sheet as Restricted Cash.
Private Placement of Convertible Subordinated Debentures,
Warrants and Common Stock
The Company has secured a significant component of its working capital
through the private placement of debt and equity securities. During the fourth
quarter of 1994, the Company raised approximately $8,298,000 (net proceeds of
$7,723,000), in a private placement transaction of 1,549,667 shares of its
Common Stock in conjunction with the Merger. Also during the period from April
1995 through December 31, 1995, the Company completed the offering and sale in
private placement transactions of $21,325,000 of 9% Convertible Subordinated
Debentures (the "Debentures") and 1,961,125 Common Stock Purchase Warrants (the
"Warrants"), as well as 176,500 shares of its common stock which yielded net
proceeds of $2,100,950. See "DESCRIPTION OF SECURITIES."
The Debentures are convertible into shares of Common Stock at the
option of the holders thereof. Once the stock achieves certain average trading
prices, the Company has the right to serve notice of the redemption of the
Debentures for the principal amount thereof (together with accrued interest).
See "DESCRIPTION OF SECURITIES." A notice to redeem would likely yield
conversion of the Debentures (since the average trading price of the stock
necessary to redeem would yield a greater profit to the Debenture holders upon a
conversion rather than a redemption).
A conversion of the Debentures would obviate the requirement to pay
further interest and repay the principal amount due thereunder. Any such
conversions would have a positive effect upon the Company's liquidity and
capital resources. Through December 31, 1995, an aggregate of $8,260,000
principal amount of Debentures was converted into 930,523 shares of Common
Stock. Management is
39
<PAGE>
optimistic that a substantial number of the remaining Debentures would be
subject to conversion prior to their maturity.
The Warrants entitle the holders thereof for a period of three (3)
years to purchase shares of Common Stock at exercise prices that range from
$9.00 through $15.00. The Warrants also contain features that permit redemption
(at $.001 per Warrant) based upon average trading prices of the Company's Common
Stock between $15.00 and $25.00. Any call for redemption would have the likely
effect of causing the exercise of the Warrants.
There can be no assurances that a material number of the Warrants will
be exercised in the near term, if at all, or that the trading price of the
Company's Common Stock will be sufficient to effectuate a redemption of the
Warrants. A complete exercise of the Warrants, if at all, would provide gross
proceeds of $20,909,375 to the Company.
Securitization of Loans
During the fourth quarter of 1995, the Company completed the sale of
approximately $40 million of automotive loans in a privately-placed
securitization transaction. The transaction resulted in the issuance of
asset-backed securities which received a rating of "A", "BBB" and "BB" by Duff &
Phelps Audit Rating Co. and Fitch Investors Services L.P. The proceeds from the
transaction were used to pay down warehouse lines of credit, thereby making the
warehouse facilities available to fund acquisition of additional automotive
contracts. The Company expects to complete future securitizations from time to
time. However, there can be no assurances to that effect. See "RISK FACTORS #3."
In securitization transactions, the Company transfers automobile loans
to a newly-formed securitization trust, which issues one or more classes of
asset-backed securities. The asset-backed securities are simultaneously sold to
investors. Each quarter, collections of principal and interest on the loans are
paid to holders of the related asset-backed securities by the trustee. The
Company continues to act as the servicer of the automobile loans held in the
trust in return for a monthly fee.
To further credit enhance the asset-backed securities and thereby to
improve the level of profitability from the sale of securitized loans, the
Company has set aside a portion of the proceeds from the sale in a reserve
account to be held in the trust. Withdrawals may be made from the reserve
account to the extent that collections from the loans held in the trust are not
sufficient to cover periodic distributions to holders of the
40
<PAGE>
trust's asset-backed securities. At periodic dates, amounts on deposit in the
reserve account in excess of certain specified percentages of the principal
balance of the loans held in the trust are returned to the Company.
Other Potential Uses of Working Capital
In the short term, the Company may be required to repay advances from its
chief executive officer, the balance of which was $2,919,000 as of December 31,
1995. See "CERTAIN TRANSACTIONS."
The Company may potentially be caused to allocate certain capital
resources in the future towards the purchase of the business of Special Finance,
Inc. ("SFI"). SFI is a Florida based auto finance broker that at December 31,
1995 accounted for approximately 35% of the Company's loan and lease
receivables. Pursuant to an option agreement entered into on August 1, 1995 (the
"SFI Purchase Option"), the Company has an option through August 1, 2000 to
purchase the business of SFI for the purchase price of $1,000,000, plus 125,000
shares of the Company's Common Stock and options to purchase 65,000 shares of
Common Stock at $6.00 per share. An option price of $250,000 paid to SFI on
August 1, 1995 is to be credited against the purchase price.
In the event the Company decides to exercise the SFI Purchase Option,
the Company has agreed to register the shares of Common Stock to be distributed
in the transaction, and pending such registration, the Company has agreed to
lend up to $900,000 to the sole stockholder of SFI at then prevailing market
rates of interest, with such loan being secured by a security interest in up to
120,000 shares until such time as the shares are registered.
Management is currently evaluating the economic benefits of exercising
the SFI Purchase Option and to date, has made no determination on the likelihood
of whether or when such a purchase may occur, if at all. In the interim, the SFI
Purchase Option provides the Company with a right of first refusal to purchase
all of the finance contracts acquired or originated by SFI.
Historic Operations
Prior to 1995, working capital had principally been utilized to finance
the bulk acquisition of portfolios of consumer and mortgage loans and auto lease
receivables, repay borrowings and to make certain distributions to the Company's
former principal stockholder, including the redemption of its stock in the
Company in 1993 and 1994. See "CERTAIN TRANSACTIONS."
41
<PAGE>
From June 1991 through June 1994, the Company acquired for $108.4
million a series of 27 portfolios of consumer and mortgage loans and auto lease
receivables bearing an aggregate principal balance of $145.2 million. From July
1994 through March 1995, the Company acquired for $6.9 million an aggregate of 6
portfolios bearing an aggregate principal balance of $7.9 million.
Payments to FTM Holdings, Inc. ("FTM"), the Company's former principal
stockholder, consumed a significant amount of the Company's working capital from
inception through 1994. By virtue of a combination of Company redemption and
stockholder purchase of FTM's interest in the Company during 1993 and 1994,
payments of this nature are not expected to recur in the future. In 1991, the
Company entered into an agreement with FTM, a principal stockholder at the time,
to provide the Company with consulting and other business related services.
Under the agreement and subsequent extensions of the agreement, the Company
agreed to pay FTM $50,000 per month through March 1995. The payments for
consulting services continued through May 1994, whereupon the Company made a
lump sum settlement with FTM through a final payment of $475,000 under the
agreement. This final payment reflected a $75,000 discount from the cumulative
payments required under the agreement. Payments to FTM under the agreement for
each of the years 1991 through 1994 were as follows:
1991 $ 90,000
1992 600,000
1993 600,000
1994 675,000
During 1994, the Company paid FTM an additional sum of $428,000 as a
commission on the sale of certain loan portfolios.
On April 30, 1993, the Company redeemed 5,928 shares of Common Stock
held by FTM for $2,400,000 which, in management's opinion, did not exceed the
fair value of the shares. A portion of the proceeds of the redemption were
applied to the cancellation of a $841,417 receivable from FTM to the Company,
representing advances by the Company to FTM during 1992. As part of the
redemption, FTM agreed to file a consolidated tax return with the Company
through April 30, 1993. Through utilization of FTM's tax net operating loss
carryforwards, the Company reduced its tax liability accrued through the date of
redemption by $1,900,000. This utilization of FTM's tax net operating loss
carryforwards was reflected as a capital contribution by FTM in 1993.
In October 1993, the Company financed the purchase by Mr. Bartolini of the
remaining shares held by FTM for a purchase price of $2,034,000. This
transaction increased Mr. Bartolini's
42
<PAGE>
ownership to 95%. In June 1994, the shares acquired by Mr. Bartolini from
FTM were redeemed by the Company for $2,034,000 and the receivable in the form
of a note from Mr. Bartolini was cancelled. See "CERTAIN TRANSACTIONS."
Given the Company's dependence on its present sources of financing for
current cash flow and continued growth, loss of such sources would have a
material adverse impact on the Company's conduct of business and prospects.
Management is presently evaluating additional sources of financing through a
continuation and expansion of its existing practices; that is, through offering
debt participation interests to institutional investors, traditional lines of
credit, and through additional equity placements. In addition, the Company
intends to continue utilizing alternative financing sources and structures, such
as securitizations of loans in order to maximize profitability and make
available sufficient funds to continue implementation of the Company's growth
strategy over the long term. See "Securitization of Loans." However, there can
be no assurances that the Company will secure additional sources of financing.
By virtue of the Company's status as a public company, management will likely
seek to gain access to equity or debt capital through a sale of securities
either through the public market or to institutional investors. Management is
currently engaged in negotiations with certain institutional brokerage firms for
the purpose of obtaining additional working capital through an underwritten
public sale of the Company's securities that is anticipated to occur during
1996. These negotiations remain preliminary in nature, accordingly, the precise
terms of any such offering have not yet been established, nor can there be any
assurances as to when or if such an offering will occur.
Any funding provided by the sale of securities, if at all, would be
used directly to acquire additional automobile finance contracts, or would
enhance the Company's borrowing base so as to facilitate increased lines of
credit or participation agreements.
Management believes that the Company's current cash flow from
operations, proceeds from private placement transactions, as well as advances on
its credit facilities and debt participation interests, is adequate to meet the
Company's liquidity requirements for its existing operations. The terms of the
borrowings under the participation agreements and the credit facilities provide
for repayments of principal and interest to the lenders in amounts which, in
general, correspond with and are exceeded by the scheduled repayment of the
secured loans and leases receivable.
43
<PAGE>
Effects of Inflation
Inflationary pressures may have an effect on the Company's internal
operations and on its overall business. The Company's operating costs are
subject to general economic and inflationary pressures. While operating costs
have increased during the past years, the Company does not believe that its
operations have been significantly affected by inflation. The Company's business
is subject to risk of inflation. Significant increases in interest rates that
are normally associated with strong periods of inflation may have an impact upon
the number of individuals that are likely or able to afford the purchase of an
automobile through consumer finance or lease transactions. The Company believes,
however, that because of its customer profile, and the need of its customers for
basic transportation, such factors are not likely to have a material adverse
impact on the Company's business.
BUSINESS OF THE COMPANY
Background
The Company commenced operations during June 1991 as a specialized
finance company for the purpose of engaging in consumer finance transactions
involving the origination, purchase, remarketing and servicing of consumer loan
and mortgage loans and auto lease receivables.
Because of the opportunities presented by the insolvency and
reorganization of many financial institutions at the time, from inception
through the second quarter of 1994, the principal activities of the Company
involved the bulk purchase and servicing of seasoned portfolios of consumer and
mortgage loans and lease receivables acquired principally from the FDIC and the
RTC. Most of these portfolios were purchased at substantial discounts.
In response to the decreasing availability of seasoned portfolios,
since the second quarter of 1994 the Company's principal focus has shifted to
other segments of the consumer finance industry, particularly auto finance.
Although opportunistic purchases of seasoned auto related portfolios may still
be considered by management, the principal focus of the Company's business since
June 1994, has been the acquisition and servicing of automotive leases and loans
originated by dealers in connection with sales or leases to persons with
sub-prime credit.
The Company became publicly held by virtue of the Merger with COFVI on
November 30, 1994. COFVI was incorporated in Delaware on November 14, 1986 and
completed a small public offering on June 14, 1988. With the exception of a
short-term venture that was
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discontinued during the fourth quarter of 1993, COFVI had remained
principally inactive.
Pursuant to the Merger, NAL was merged with and into COFVI and the
historic stockholders of NAL received 3,160,000 newly issued restricted
securities, which constituted approximately 56% of the issued and outstanding
COFVI stock. Effective upon completion of the Merger, the Company assumed the
historic operations of NAL and changed its name to "NAL Financial Group Inc."
Current Plan of Operations
The Company's auto finance business primarily consists of the
evaluation, acceptance and purchase of finance contracts which are either
originated by participating dealers in connection with the sale or lease of new
and used vehicles to sub-prime consumers or purchased in bulk receivables
portfolios. After a finance contract is evaluated and accepted by the Company,
the purchase contract or lease is executed by the dealer and the customer. The
vehicle is then delivered to the customer and the title to the vehicle is
transferred into the name of the customer and held by the Company with a lien in
its favor (in the case of a purchased vehicle), or to the Company (in the case
of a lease). Under the standard master dealer agreement utilized by the Company,
upon delivery of the title to the Company, the Company receives an assignment of
the contract and pays the dealer a "dealer advance" which is calculated on the
basis of a pre-determined formula and typically does not exceed a percentage of
the wholesale value for a used vehicle or manufacturer's invoice for a new
vehicle.
The Company also occasionally enters into customized dealer agreements,
which differ from the standard master dealer agreement utilized by the Company.
Under these agreements, the Company purchases finance contracts from dealers
from time to time at a stated percentage of the financed amount. Typically a
portion of the purchase discount is placed in a reserve account which is used to
offset any credit losses experienced by the Company. Periodically, the amounts
in the reserve account in excess of an agreed upon minimum are paid over to the
dealer. Pursuant to these agreements, the dealer typically retains many of the
collection and servicing functions, including monthly billing, repossession
and/or disposal of the vehicle. These agreements are typically with recourse to
the dealer. At December 31, 1995, the Company as a percentage of principal had
in place approximately 15% of these types of agreements.
The Company's shifting focus to the auto finance segment can most
readily be reflected by analysis of the increases in its
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dealer base and origination of finance contracts from such dealers since
September 1994.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
12/94 3/95 6/95 9/95 12/95
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
No. of
Participating
Dealers 196 296 406 787 909
- -----------------------------------------------------------------------------------------------------------------------
No. of
Contracts
Originated 1,490 1,731 1,998 2,002 3,965
(By Quarter)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Contract Origination
Dealers
The Company's auto finance segment involves the purchase of auto loan
and lease finance contracts in connection with the purchase or lease of new and
used vehicles. Dealer relationships generally begin with the Company's dealer
development representative contacting a dealer to explain the Company's
financing program. The Company's representative presents the dealer with a sales
package, including promotional material containing current rates being offered
by the Company to dealerships, copies of the Company's master dealer agreement,
examples of monthly reports and samples of the Company's documentation
requirements. A dealer desiring to utilize the Company's financing program must
enter into a non-exclusive master dealer agreement with the Company. As a
condition to entering into such an agreement, a dealer must provide satisfactory
financial and other information. A dealer must also make representations and
warranties to the Company with respect to the contracts to be assigned. Upon
completion of this master agreement, the Company's representative provides the
dealership with necessary documentation for origination of contracts and trains
dealership personnel in the use of such documentation.
The master dealer agreement may be terminated by the Company or the
dealer (so long as there is no event of default) upon 10 days prior written
notice. Events of default include, (i) the dealer's failure to perform or
observe covenants in the master dealer agreement; (ii) the dealer's breach of
representations or warranties in the master dealer agreement; (iii) a
misrepresentation by the dealer relating to an installment contract
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<PAGE>
submitted to the Company or the related vehicle or purchaser; (iv) an assignment
for the benefit of creditors or the appointment of a receiver for, or filing
for, bankruptcy or insolvency of, the dealer; (v) liquidation or dissolution of
a dealer; (vi) the death of a principal stockholder of a dealer; and (vii) a
decrease in the shares of stock owned by the principal stockholder of a dealer.
Under the master dealer agreement, the dealer is also obligated to
repurchase any contracts identified by the Company in the event that dealer
representations and warranties prove to have been untrue at the time the Company
purchased the contract, or in the event that the purchase of the contract by the
Company from the dealer was on a recourse basis and a lessee or borrower
defaults under the contract. Examples of defaults which require a dealer to
repurchase a finance contract include, (i) dealer promises to install optional
equipment (represents that the price is included in the lease) at a later date,
then reneges; (ii) dealer does not witness proper identification of a customer,
which results in a husband signing his wife's name; and (iii) dealer
misrepresents that adequate insurance is in force at the time of delivery of the
vehicle. The majority of these occurrences are prevented when the contract is
sent to the Company for funding by virtue of the Company's credit procedures
which typically include telephoning each customer to confirm contract terms at
the time of funding. Occasionally, however, the dealer is required to repurchase
the contract upon discovery of the default by the Company. The dealer also
indemnifies the Company for any liabilities and costs (including attorney's
fees) arising from any act or omission by the dealer required to be performed
under the master dealer agreement or any contract.
Retail car buyers are customarily directed to a dealership's finance
and insurance department to finalize their purchase or lease agreement and to
review potential financing sources and rates available from the dealer. If the
customer elects to pursue financing at the dealership, an application is taken
for submission to the dealer's financing sources. Typically, a dealership will
submit the purchaser's application to more than one financing source for review.
Once the responses are received by the dealership, the dealer will decide which
source will finance the purchase or lease.
When presented with an application, the Company strives to notify the
dealer of its decision within 2-4 hours. The buyer's purchase generally is not
completed until the Company approves the contract. If approved, the buyer enters
into a contract with the dealer on a form prepared and provided to the dealer by
the Company, which is then assigned to the Company.
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<PAGE>
Dealer Program
One of the critical elements for the growth of the Company's auto
finance segment is to establish, maintain and expand its relationships with new
and used automobile dealers. The Company has developed programs for dealers that
are designed to meet the dealer's needs for customer financing. These programs
offer four major advantages to the dealers:
Flexibility. Unlike most traditional lending institutions and
captive finance companies, the Company employs multi-tiered
credit underwriting criteria offering a financing source not
generally available for sub-prime auto loans and leases
elsewhere to dealerships' sub-prime borrowers. The Company
believes this flexibility facilitates access to prime
borrowers as well and solidifies the dealer relationship.
Responsiveness. The Company is responsive to the needs of auto
dealers by providing rapid and complete service. When
presented with an application, the Company attempts to notify
the dealer within 2-4 hours whether it will approve the
purchase of the contract from the dealer. Staff members are
trained specialists in credit analysis, documentation,
collection and administration.
Service Orientation. In addition to offering a reliable source
of financing for qualified buyers, the Company identifies
particular service needs of dealers. Dealer development
representatives maintain frequent contact to determine whether
needs are being met, and will recommend service enhancements
when appropriate. Examples of such enhancements may include
courier delivery of documents or loan processing on dealer
premises during peak promotions.
Training. The Company provides training to dealers both at the
dealership and on the Company's premises. This training
covers, among other things, the Company's origination program,
underwriting guidelines and the processing of loan and lease
applications. The dealership receives a certificate evidencing
completion of the training program.
The Company's relationship with auto dealers has for the most part been
established on a dealer-by-dealer basis as a result of the efforts of the
Company's marketing personnel. One of the Company's sales and marketing goals is
to develop and/or expand relationships with dealers and finance agencies that
will provide
48
<PAGE>
the Company more efficient access to greater numbers of dealer networks. See
"Marketing." Towards that end, during September 1994, the Company entered into a
test marketing arrangement with General Electric Capital Auto Lease, Inc.
("GECAL"). During the test period, the Company evaluated applications which did
not meet GECAL's prime underwriting criteria for 74 of GECAL's 400+ dealers
located in Florida. The Company, using its own underwriting model, then approved
or declined these submissions resulting in over $7,000,000 of lease volume
during the test phase. The results of the program led to a permanent two year
agreement automatically renewable for successive one-year periods thereafter,
which was executed on July 1, 1995. The program has been rolled-out to the
balance of the GECAL's Florida dealers during a recent campaign completed on
September 21, 1995. Early results indicate the volume of applications has
significantly increased since the program has been made available to all Florida
dealers.
The Company and GECAL have also agreed to target North and South
Carolina and Tennessee for the next roll-out phase. Planning began in October
1995, with the campaign to be completed by the second quarter of 1996. The long
term plan is to roll-out the program in the entire southeast by December 1996.
While not an exclusive arrangement, the Company believes it continues
to be the only sub-prime company operating this program with GECAL in the
southeast. There is no contractual agreement to this effect, however, and no
assurance may be made that the Company would continue to be the only such
arrangement with GECAL.
Historically, GECC has not been active in the sub-prime market. The
Company's arrangements with GECAL and GECC give GECAL the ability to offer
customers of its dealerships a financing source through the Company which GECC
does not generally offer directly to sub-prime borrowers. In addition, the
arrangements give GECC access to the sub-prime market without GECC incurring the
evaluation, credit and servicing risks generally associated with financing to
sub-prime borrowers. This relationship with GECAL gives the Company access to
GECAL's network of 1,500 dealerships in 11 southeastern states.
As of December 31, 1995, the GECAL dealers with whom the Company has
financed automotive loans and leases constituted approximately 8% of the
Company's overall volume of loan and lease receivables. With the exception of
one dealer and an auto finance broker that account for approximately 5% and 35%,
respectively, of the Company's loan and lease receivables, no single dealer or
brokerage source accounts for more than 3% of the Company's loan and lease
receivables.
49
<PAGE>
SFI, a Florida-based auto finance broker, utilizes the Company to
finance automotive loans secured through its relationship with dealers. At
December 31, 1995, the SFI referred dealers had provided the Company with
approximately 35% of its loan and lease receivables.
On August 1, 1995, the Company entered into a five (5) year option to
purchase the business of SFI (the "SFI Purchase Option"), during which term the
Company has secured a right of first refusal to purchase all of the finance
contracts acquired or originated by SFI. The option to purchase remains subject
to management's evaluation of the transaction. Management is currently
evaluating the economic benefits of exercising the SFI Purchase Option and to
date, has made no determination on the likelihood of whether or when such a
purchase may occur, if at all. An election by the Company to purchase the
business of SFI would require the Company to complete payment of the purchase
price provided for in the SFI Purchase Option. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
The Company also intends to pursue arrangements with other
organizations such as dealership networks and credit unions as a means of
expanding its dealer and consumer bases. The marketing company has relationships
with several Florida credit unions whereby they provide an automobile buying
service. Through this agreement, the Company will be introduced to the credit
unions for the purpose of providing sub-prime financing and servicing of prime
contracts. The Company will earn interest and fee income as well as servicing
fees.
Bulk Purchase Portfolios
From inception through June 1994, the Company's business focused on the
purchase of seasoned portfolios of mortgage loans and consumer loans and leases,
including auto loans and leases. From June 1991 through June 1994, the Company
acquired for an aggregate price of $108.4 million, a series of 27 portfolios
representing consumer loans and receivables bearing an aggregate principal
amount of $145.2 million. From July 1994 through December 1995, the Company
acquired for an aggregate price of $6.9 million 6 portfolios bearing an
aggregate principal amount of $7.9 million.
While its focus since July 1994 has been the origination of auto loan
and lease receivables, the Company may continue to make opportunistic purchases
of seasoned auto-related portfolios.
50
<PAGE>
The following tables set forth the portfolio acquisitions of the
Company from inception through December 1995, and the loan and lease receivables
attributable to each type of portfolio.
PORTFOLIO ACQUISITIONS
JUNE 1991 THROUGH DECEMBER 1995
Principal
Amount
Date Portfolio Type (in Millions)
- ---- -------------- -------------
JUNE 1991 AUTO LEASES $48.1
JULY 1991 AUTO LEASES 10.5
NOVEMBER 1991 MORTGAGES 4.9
JANUARY 1992 AUTO LEASES 2.1
FEBRUARY 1992 CONSUMER LOANS 4.4
FEBRUARY 1992 CONSUMER LOANS 9.5
FEBRUARY 1992 MORTGAGE LOANS 1.9
FEBRUARY 1992 CONSUMER LOANS 8.2
JULY 1992 CONSUMER LOANS 7.4
OCTOBER 1992 CONSUMER/MORTGAGE LOANS 6.1
DECEMBER 1992 MORTGAGE LOANS 8.2
JANUARY 1993 CONSUMER LOANS 2.6
FEBRUARY 1993 CONSUMER LOANS 5.5
MARCH 1993 CONSUMER LOANS 0.2
APRIL 1993 CONSUMER/MORTGAGE LOANS 0.4
APRIL 1993 CONSUMER LOANS 2.1
MAY 1993 MORTGAGE LOANS 2.1
JULY 1993 MORTGAGE LOANS 8.3
SEPTEMBER 1993 CONSUMER LOANS 0.4
SEPTEMBER 1993 MORTGAGE LOANS 1.3
NOVEMBER 1993 MORTGAGE LOANS 1.0
DECEMBER 1993 MORTGAGE LOANS 5.1
DECEMBER 1993 MORTGAGE LOANS 0.8
MARCH 1994(1) CONSUMER LOANS 0.2
JUNE 1994 CONSUMER LOANS 0.5
JUNE 1994 CONSUMER LOANS 2.4
JUNE 1994 CONSUMER LOANS 1.0
JULY 1994 CONSUMER LOANS .5
OCTOBER 1994 AUTO LEASES 1.6
NOVEMBER 1994 AUTO LEASES 2.0
NOVEMBER 1994 CONSUMER LOANS .5
JANUARY 1995 AUTO LOANS 1.8
MARCH 1995 CONSUMER LEASES 1.5
$153.1
======
- --------------------
(1) In March and May 1994, the Company purchased for $3.4 million
two portfolios of underperforming and matured auto, real
estate and equipment loans. The principal balance of the two
portfolios was $10.2 million in the aggregate.
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<PAGE>
Bulk purchase portfolios are subject to the same type of detailed
evaluation process as finance contracts originated by dealers. During the
evaluation of bulk purchase portfolios, the Company develops loss estimates
which are based, in part, on the value of the underlying collateral and a review
of the contract files. The Company's purchase price for the bulk purchase
portfolios includes, among other valuation adjustments for credit and other
risks, an initial loss allowance for the contracts. The bulk purchase
receivables are generally subject to the same asset servicing and collection
activities, policies and procedures as dealer originated finance contract
receivables. See "Asset Servicing and Collections."
The following table sets forth information regarding the Company's loan
and lease receivables segmented by type of contract financed.
LOAN, LEASE RECEIVABLES AND VEHICLES
HELD UNDER OPERATING LEASES
<TABLE>
<CAPTION>
9/30/95 12/31/94
------------- ------------
<S> <C> <C>
Automotive finance contracts
Gross contracts receivable $104,556,879 $26,795,132
Less: Unearned interest (6,277,920) (2,004,435)
Deferred acquisition fees (105,485) ---
Unamortized acquisition discount --- (815,768)
------------- -----------
98,173,474 23,974,929
------------- -----------
Net investment in automotive operating 3,318,035 1,230,647
leases ------------- -----------
Consumer contracts receivable
Gross contracts receivable 3,087,354 2,333,016
Less: Unearned interest (435,030) ---
Unearned acquisition discount (351,349) (841,322)
------------- -----------
2,300,975 1,491,694
------------- -----------
Mortgage loans receivable
Gross loans receivable 2,545,423 6,041,464
Less: Unamortized acquisition discount (684,281) (1,218,797)
------------ -----------
1,861,142 4,822,667
------------- -----------
Net loan and lease receivables $105,653,626 $31,519,937
============ ===========
</TABLE>
Lease contracts receivable set forth above represents the total amount
of minimum scheduled payments to be received under the contracts. Included in
the payments receivable balance is the income portion of the payments, which is
recognized into earnings
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<PAGE>
over the life of the contracts using the level yield method. The Company's net
carrying value of its lease portfolio consists of the balance of lease contracts
receivable less unearned income.
Advances to dealers represent amounts funded by the Company to auto
dealerships which are collateralized by loan and lease receivables of the dealer
serviced for a fee by the Company. The Company advances to the dealer
approximately 60% of the outstanding principal balance of the collateralized
receivables.
Several of the Company's loan and lease portfolios were purchased at
prices which represented a discount from the contracts' par principal balance.
The excess of the contracts' principal balance, in the case of loan contracts,
or net investment balance, in the case of lease contracts, over the purchase
price represents additional earnings to the Company. Prior to September 30,
1995, this discount was amortized to earnings using the level yield method over
the estimated life of the contracts. However, beginning with the fourth quarter
1995, management has decided to cease the amortization to earnings of the
discount on purchased automotive finance contracts and allocate this discount to
the reserve available for credit losses. Management believes that this decision,
although not totally eliminating the need for future provisions, will ultimately
result in lower provisions for credit losses on purchased contracts.
During December 1995, the Company completed the sale of approximately
$40 million of automotive loans in a privately-placed securitization
transaction. The Company expects to complete future securitizations from time to
time. However, there can be no assurances to that effect.
For a discussion of the Company's delinquency experience and credit
loss experience for the bulk purchase portfolios, and the securitization of
loans by the Company, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
Underwriting
The Company purchases each contract in accordance with its underwriting
standards and procedures. These underwriting procedures are intended to assess
the applicant's ability to repay the amounts due and the adequacy of the vehicle
as collateral. Each candidate for credit is required to complete and sign an
application which lists assets, liabilities, income, credit and employment
history, and other pertinent information. The Company has a staff of 12 persons
who provide underwriting services and conduct credit evaluations. Upon receipt
of the credit
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<PAGE>
application, the Company orders a credit bureau report on the applicant to
document his or her credit history. The credit report presents a history of the
applicant's credit performance and, if applicable, contains information on such
matters as past-due credit, previous repossessions, prior loans charged off by
other lenders, real estate liens or wage attachments, and bankruptcy. The
application and credit report are given to one of the Company's underwriters for
evaluation and tier placement.
Conventional credit ratings divide credit risk into four tiers: "A",
"B", "C" and "D". "A" credit represents the highest quality risk and "D", the
lowest. "A" credit risk is associated with certain essential elements: excellent
job and residence stability; an unblemished credit record with equivalent,
seasoned high credit experience; very low debt-to-income ratio (under 30%). "B"
credit risk lacks one or more of these essentials, but still reflects a good
credit history and a debt-to-income ratio under 40%. "C" credit lacks two or
more essentials, however, current credit may indicate non-serious past due
payments and a debt-to- income ratio under 50%. "D" credit lacks two or more
essentials, includes recent slow payments, may contain judgments, collection
agency activity, discharged bankruptcy or previous repossession, and
debt-to-income ratio at or above 50%.
While traditional auto financing sources limit their risk to "A"
borrowers, the Company believes that extending sub-prime credit based upon
strict underwriting standards is prudent, with proper precautions and careful
management. To mitigate risk, the Company:
o prices each category progressively higher.
o requires progressively larger down-payments.
o requires considerably more client information for lower
grades, for purposes of skip-tracing, etc.
o initiates collection and repossession activity more
quickly for lower grades.
Upon completion of the credit analysis, the Company will decide whether
to approve the applicant as stated and at which tier, decline the applicant, or
condition approval of the loan. A decision to decline an applicant may be based
upon one or more of the following: failure to meet the Company's underwriting
standards, debt-to-income ratios, payment-to-income ratios, loan-to-value ratios
or the financing specialist's subjective judgment. Conditioning approval of the
applicant involves amending the proposed terms of the contract in order to
qualify the applicant according to the Company's guidelines. Typical areas that
the
54
<PAGE>
Company might require to be amended include, but are not limited to, proving
additional income, requiring a co-applicant, amending the length of the proposed
term, requiring additional down-payment, substantiation of credit information
and requiring proof of resolution of certain credit deficiencies as noted on the
customer's credit history. Approved, declined or conditioned applicant decisions
are promptly communicated to the dealership by phone and facsimile.
Additionally, the applicant is informed of any credit denial or other adverse
action by mail, in compliance with statutory requirements.
The Company regularly reviews the quality of loans which it
purchases and conducts internal reviews on a monthly basis in an
effort to ensure compliance with its established policies and
procedures. See "Asset Servicing and Collections."
Asset Servicing and Collections
The Company has a staff of persons engaged in contract servicing and
performing collection services. The Company has expanded its collection and
servicing staff to a level which provides for approximately 1 collector for
every 450 contracts serviced. Management believes that the ratio of its
collectors to contracts serviced compares favorably to industry averages.
The Company's management team has extensive experience in consumer
financing services and utilizes a state-of-the-art PC network-based computer
system. Whether part of the origination process or routine monthly servicing,
data is immediately available for evaluation and processing, providing speedy
turnaround as a valuable tool for marketing to the Company's dealership network
and maximizing the Company's cash flow from collections.
The Company's servicing and collection activities include, (i)
conducting an initial telephone interview with customers; (ii) collection of
payments; (iii) accounting for payments received; (iv) customer relations and
inquiries; (v) perfection and maintenance of security interest in vehicles and
other collateral; (vi) monitoring and investigation of delinquencies; (vii) tax
reporting on accounts serviced; (viii) initiation and monitoring of repossession
of vehicle; and (ix) disposition of vehicles upon lease termination.
The Company's collections staff monitors all contracts and typically
takes action within 24 hours of delinquency if the first payment is missed and
within 48 hours if the payment missed is the second payment or thereafter,
significantly earlier than is customary in the industry. The Company's policy
permits contracts to be extended or revised payment schedules to be made on a
case by
55
<PAGE>
case basis as determined by its experienced collections staff. Accounts that
have not complied with the initial or revised collection program are turned over
to outside agencies for repossession, generally after five-ten days of
non-compliance with the revised agreement. Repossessed vehicles may be
re-marketed through the participating dealer who originated the contract, or
sold by the Company through wholesale auctions or re-marketed through the
Company's used vehicle facility. See "Used Vehicle Operation." The Company's
experience indicates that historically many repossessions are redeemed and the
majority of these customers do not become delinquent again.
The Company charges off delinquent accounts between 30 and 90 days of
delinquency, depending on the individual circumstances. Recovery of charge off
balances begins with the Company's collection specialists. If results are not
obtained within a reasonable time frame, the account is either turned over to a
collection agency or an attorney for action, including wage garnishment,
judgement and asset search.
When a vehicle is repossessed and not redeemed by the customer in the
prescribed time, the Company re-markets the vehicle and recognizes the loss, if
any, at that time. Vehicles in inventory are reviewed by management and
periodically written down to their actual value, if necessary. The Company
applies for insurance and extended warranty rebates, which are applied to the
customer balance. A net loss is the difference between the net customer balance,
adjusted for rebates, etc., and the net proceeds of the sale or re-lease of the
vehicle. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Net Credit Loss Experience."
Contracts acquired as a result of a bulk purchase are subject to the
same asset servicing and collection activities, policies and procedures. The
Company's initial tolerance for delinquencies in excess of 60 days is based upon
the condition of the portfolio at the time of purchase and the effectiveness of
the seller's servicing activity. This tolerance level is reduced typically over
a period of between three to twelve months as customers adjust to the Company's
collection policies and procedures. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Delinquency Experience." As bulk
purchased receivables are charged-off, the losses are charged to the related
valuation loss reserve until such reserve is fully depleted. See "Bulk Purchase
Portfolios." These valuation loss reserves have been sufficient to date to cover
all losses incurred on bulk purchase portfolios. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Provision for
Possible Credit Losses."
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<PAGE>
Used Vehicle Operation
The Company incorporated a wholly-owned subsidiary, PCSF, in January
1995 for the purpose of conducting its used vehicle operation. The Company
signed a lease for a used car lot located in Palm Beach County, Florida with a
capacity for storing approximately 100 vehicles. Effective January 15, 1995, the
Company entered into an agreement with J.D. Byrider Systems, Inc. to license the
J.D. Byrider name, trademarks and business system. The Company intends to
operate the car lot as a franchise of J.D. Byrider. The Company began retail
sale of used cars in August 1995. It is expected that a majority of the
Company's repossessed and returned vehicles will be sold at retail from this
location. Vehicles which are not in retail condition will be sold at auction to
the highest bidder. The Company has been registered with, and has routinely sold
cars through, the major national auction companies since its inception.
Management believes that the used car market is an expanding market and
offers the Company an opportunity to enhance its vehicle financing
opportunities, and to increase its recovery on vehicles.
Insurance Services
The Company's wholly-owned subsidiary, NIS, is a full service insurance
agency selling its products to the public as well as to the Company's customers.
The staff of NIS verifies insurance at the time leases and loans are funded,
assures that the customer maintains adequate insurance during the term of the
contract, solicits the sale of other insurance products, and sells a package of
insurance services to the Company's dealers. The Company has the ability to add
insurance and bill its customer at any time during the contract. Insurance
policies are issued through unaffiliated, major insurers with whom the Company
has established brokerage agreements, with the exception of GAP Protection. See
"GAP Protection Plan." Insurance commissions are earned as received from the
insurer.
GAP Protection Plan
The Company offers the debtor of a finance contract an opportunity to
participate in the Company's guaranteed auto protection ("GAP") plan. In the
event of an insurance loss, GAP Protection pays the Company the difference
between the actual cash value protection afforded by the insurer and the
customer balance due the Company, if any. The Company's risk in these situations
is eliminated through reinsurance. The Company pays a flat premium per contract
to unaffiliated major insurers to reinsure this risk.
57
<PAGE>
Industry Overview - The Sub-Prime Credit Market
The sub-prime credit market, upon which the Company's business
currently focuses, is comprised primarily of individuals who are deemed by
certain industry participants to be relatively high credit risks due to various
factors, including, among other things, the manner in which they have handled
previous credit, the absence or limited extent of their prior credit history, or
their limited financial resources.
The sub-prime credit market is highly fragmented and historically has
been serviced by a variety of financial entities, including captive finance arms
of major automotive manufacturers, banks, savings and loans, independent finance
companies, small loan companies, industrial thrifts and leasing companies. Many
of these financial organizations do not consistently solicit business in, or
have withdrawn from, this credit market. The Company believes that increased
regulatory oversight and capital requirements imposed by market conditions and
governmental agencies have limited the activities of many banks and savings and
loans in this credit market. In many cases those organizations electing to
remain in the auto finance business have migrated toward higher credit quality
customers to allow reductions in their overhead cost structures. The Company
believes that as a result, the sub-prime credit market is primarily serviced by
smaller finance organizations that solicit business when and as their capital
resources permit.
The Company's strategy is designed to capitalize on the market's lack
of a major, consistent financing source. See "Business Strategy." The Company's
business strategy capitalizes upon the overly-broad classification of a great
number of individuals as "sub-prime" borrowers. Many of these individuals, in
the view of management, actually may be "prime" borrowers who by clerical
categorization have been given "sub-prime" designations. The Company's
management has substantial experience in the consumer finance field and by
virtue of that experience, has been successful in selecting and assessing the
true credit categories of potential borrowers.
Business Strategy
The Company's growth relies on the following strategies:
o Product Flexibility. The Company believes that its
ability to offer sub-prime leases as well as sub-
prime loans differentiates it from the competition.
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<PAGE>
o Multi-tiered Credit. The Company believes its
policy of extending credit to sub-prime borrowers
utilizing strict underwriting guidelines for
protection differentiates the Company from other
competitors in the industry and provides a
significant impetus for growth. It is this
philosophy which resulted in the Company's
arrangements with GECAL and GECC. See "Contract
Origination - Dealer Program" and "Marketing."
o Expansion of Dealership Base in Existing Markets. The
Company is aggressively pursuing additional dealer
relationships within existing markets with dealers
that meet the Company's criteria. Management believes
existing markets can contribute to growth objectives
without compromising credit underwriting standards.
o Geographic Expansion. The Company intends to increase
volume by hiring additional sales representatives in
markets which meet its economic and demographic
criteria, primarily in the southeastern United
States, in the near term, with a view towards a
national market in the long term. See "Marketing."
o Affinity Marketing. The Company plans to expand its
financing activities through development of special
programs aimed at credit unions, trade associations
and affinity groups, such as gasoline credit card
companies and special interest organizations.
o Emphasis on Dealer Service. The Company is
committed to service as the cornerstone of its
growth strategy. Responsiveness to dealer needs is
paramount.
o Operating Efficiency. The Company will continue to
enhance its systems and operations to further
improve operating efficiencies in contract
processing, servicing and dealer communications.
o Continued Acquisition of Seasoned Portfolios. The
Company has experienced success in purchasing
receivable portfolios. While the Company's focus is
presently on the development and expansion of its
auto finance contract segments, the Company will
continue to make opportunistic purchases.
59
<PAGE>
Marketing
Dealers
The Company's marketing efforts focus principally on dealer-related
programs, dealership network arrangements and affinity marketing programs. These
programs are directed at existing dealership networks, independent dealerships,
credit unions and trade associations, among others. See "Contract Origination-
Dealer Program" and "Business Strategy."
The Company's marketing efforts are undertaken by a staff which
includes sales representatives, a sales manager and a sales coordinator. The
sales representatives operate in particular geographic areas within Florida,
Tennessee, North Carolina and South Carolina for a combination of salary and
commission. In addition, the Company augments its in-house staff through
exclusive agreements with companies operating in Louisiana, Georgia and Texas
which provide the Company with additional sales representatives on an
independent contractor basis. These representatives market the Company's
services primarily through personal contacts, and participating dealer
referrals, which are augmented by the distribution of marketing materials and
advertising in trade journals and industry-related publications. Pursuant to the
Company's dealer arrangements, participating dealers engage in training sessions
designed to increase the dealer's familiarity with the Company's evaluation and
servicing procedures. See "Contract Origination - Dealer Program." The Company
continues to increase its marketing efforts in conjunction with its focus on the
indirect auto loan and lease market through the hiring of additional sales
representatives. As part of its expanded marketing program, the Company has also
entered into an arrangement with a company which originates and brokers finance
contracts with markets in Georgia, whereby the Company has agreed to purchase
loan receivables as originated by such company which meet Company credit and
origination guidelines. Through such arrangements the Company is able to
increase its access to such markets without significantly increasing its staff.
The Company's marketing program with GECAL offers yet another,
indirect, avenue for purchase of auto leases. Sub-prime contracts presented to
GECAL from its 1,500 southeastern dealers may be offered to the Company for
purchase and, if accepted by the Company's underwriting standards, will be
funded by GECC. This arrangement effectively allows GECAL to maintain its
relationship with its dealership network while giving the Company access to
dealers outside the Company's established territory. The Company intends to seek
similar relationships with other dealer networks
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<PAGE>
and affinity groups such as credit unions as a method of increasing its dealer
and consumer bases.
Geographic Expansion of Auto Finance Segment
As of December 31, 1995, the Company had relationships with 909 dealers
which have yielded finance contracts in the southeastern United States. Florida
represents the Company's largest market for lease and loan receivables
originated by participating dealers. Management estimates that there are
approximately 1,100 dealers in Florida and approximately 5,600 dealers within
the southeastern United States, which represents the Company's target market in
the near term.
Competition
Competition in the retail automobile financing industry is intense.
Competitors include well-established financial institutions, such as banks,
savings and loans institutions, small loan companies and credit unions,
industrial thrifts, leasing companies as well as the major automobile
manufacturers' captive finance companies such as Ford Motor Credit Corporation,
Chrysler Credit Corporation and General Motors Acceptance Corporation. Many of
these competitors have greater financial, technical and marketing resources than
the Company. Furthermore, many of these competitors offer other forms of
financing to dealers, including, but not limited to, vehicle floor plan
financing and leasing. All of these competitors offer some degree of service to
dealerships.
Many of the larger banks, financial institutions and captive finance
arms of automotive manufacturers have not consistently sought to do business in
the sub-prime market. These organizations have traditionally elected to limit
their activities to the higher credit quality customers. As a result, the
sub-prime credit market tends to be primarily serviced by smaller and
independent finance organizations.
The Company's business strategy is designed to capitalize on the
absence of consistent institutional sources of financing in the sub-prime
market. The competition in the sub-prime market would be significantly increased
should the large finance organizations seek to compete consistently in the
sub-prime market.
Based on experience and expertise, the Company's competitive strategy
is six-fold:
o offer product variety in the form of sub-prime leases and
loans;
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<PAGE>
o offer a multi-tiered underwriting program that recognizes
credit of varying qualified levels;
o provide rapid response to credit application submissions;
o follow through with timely funding;
o establish and maintain strong dealer relationships
through on-site training programs and continued sales
assistance and support;
o offer a total insurance package, including life, accident and
health, GAP, auto, boat, homeowners, etc.
Employees
The Company employs personnel experienced in all areas of loan
origination, documentation, collection and administration. As of December 31,
1995, the Company had approximately 204 full-time employees.
Facilities
As of the date of this Prospectus, the Company's executive offices and
operations occupy approximately 27,000 square feet of leased office space in The
Uptown Office Park at 500 Cypress Creek Road West, Suite 590, Fort Lauderdale,
Florida 33309 for which the Company pays an aggregate of base rent and common
area maintenance of $52,300 per month pursuant to three leases, with annual
increases of 2% beginning on January 1 of each year. The leases expire in 2002.
The Company subleases approximately 1,500 square feet of its
space to FTM, a former principal stockholder, for rent of $4,500
per month. See "CERTAIN TRANSACTIONS."
The Company's lease agreement offers rights of first refusal on
available space adjacent to the original offices, which the Company has used to
accommodate the staff required for continued growth. There can be no assurance
that any additional space will be available on terms favorable to the Company.
Management believes that the Company's facilities are appropriate for its needs.
The Company through PCSF leases a used car lot in Palm Beach County at
a base rent of $11,500 per month. The term of the lease is five years. See
"Used Vehicle Operation."
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<PAGE>
Legal Proceedings
NAL Acceptance Corporation v. Thousand Adventures, Inc., et al., Case
No. 94-7858 (4), in the Circuit Court in and for Broward County, Florida. NAC
has sued Thousand Adventures, Inc. ("TAI") for the payment of a $500,000 release
fee due NAL under an agreement wherein NAL had obtained an exclusive option to
purchase certain receivables from TAI. These receivables could be sold by TAI to
third parties during this exclusivity period as long as TAI paid the Company
this release fee. TAI sold the receivables, but did not pay the fee. NAL is also
suing TAI for interference with its contractual rights to purchase certain
receivables from TAI. NAL is seeking in excess of $1,000,000 in damages. TAI
counterclaimed against the Company for fraud, negligent misrepresentation and
fraud in the inducement in connection with the agreement referenced above on
September 21, 1994.
The Company is the plaintiff in numerous collection matters, all of
which are considered to be in the ordinary course of business.
Government Regulation
The Company's operations are subject to federal and state laws and
regulations, including the Federal Consumer Credit Protection Act, Fair Debt
Collection Practices Act, Fair Credit Reporting Act, FTC Preservation of
Consumer Claims and Defenses Rule, Truth in Lending Act, Truth in Leasing Act,
Equal Credit Opportunity Act, FTC Credit Practices Rule, state insurance laws
and state vehicle disposal laws. Consumer lending laws generally require
licensing of the lender and adequate disclosure of loan terms and impose
limitations on the terms of consumer loans and on collection policies and
creditor remedies. Federal consumer credit statutes primarily require
disclosures of credit terms in consumer finance transactions. In general, the
Company's business is conducted under licenses issued by individual states, and
the Company is subject to periodic examination by the individual states. State
licenses are generally revocable for cause. The Company believes that it is in
compliance with all applicable laws and regulations, and maintains an internal
compliance staff to stay abreast of changes in applicable law and to act as
liaison between the Company and the various attorneys it has retained in each of
the states in which it conducts its business. See "RISK FACTORS."
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<PAGE>
MANAGEMENT
Directors and Executive Officers
The present members of the Board of Directors and executive officers,
their respective ages and positions with the Company are set forth below:
<TABLE>
<CAPTION>
Positions with
Name Age the Company
- ---- --- ---------------
<S> <C> <C>
Robert R. Bartolini 51 Chairman of the Board,
President and Chief
Executive Officer of NAL;
Chairman and Chief
Executive Officer of NAC
John T. Schaeffer 48 Director of NAL;
Director, President and
Chief Operating Officer of
NAC
Robert J. Carlson 40 Vice President-Finance
and Principal Accounting
Officer of NAL and NAC
Dennis R. LaVigne 51 Vice President and
Treasurer of NAL
Andrew P. Panzo 31 Director
Abraham Bernstein 63 Director
</TABLE>
The following is a summary of the business experience of the Company's
directors and executive officers during the past five years and their
directorships, if any, with companies with a class of securities registered with
the Securities and Exchange Commission:
Robert R. Bartolini
Mr. Bartolini has been Chairman and Chief Executive Officer of NAL
since its inception in 1991 and has maintained those positions, with the
addition of the office of the President, following the Merger with COFVI on
November 30, 1994. Prior to founding NAL Financial Group Inc., he was President
and Chief Operating Officer of Financial Federal Savings & Loan Association
("FinFed" - Miami, Florida), a $1.8 billion mutual savings and loan. From 1984
to
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<PAGE>
1987, Mr. Bartolini was Executive Vice President at CenTrust Savings Bank, an
$11 billion institution based in Miami, Florida, with 60 branches. Prior to
that, Mr. Bartolini was with First Pennsylvania Bank, NA (assets of $6 billion;
75 branches), where he served as Senior Vice President.
John T. Schaeffer
Mr. Schaeffer has been President and Chief Operating Officer of NAC
since its inception and has maintained those positions, with the addition of the
office of director of NAL following the Merger with COFVI. Prior to joining NAL,
Mr. Schaeffer was President and Chief Operating Officer of FinancialFed
Services, Inc. ("FFS"), the automobile lease origination and servicing unit of
FinFed. From 1986 through 1989, Mr. Schaeffer was Executive Vice President and
Chief Operating Officer of CenTrust Leasing Corporation, the leasing unit of
CenTrust Savings Bank, where he was responsible for the overall activities of
the leasing subsidiary.
Robert J. Carlson
Mr. Carlson has been Vice President-Finance and Principal Accounting
Officer of NAL since April 1992. Prior to joining the Company in 1992, Mr.
Carlson served 4 years as Senior Vice President-Controller of FinFed. Prior to
that, he served as Senior Vice President and Chief Financial Officer at Miami
Savings Bank, a $175 million asset savings institution in Miami, Florida. Mr.
Carlson also served 3 years at CenTrust, where he held the position of Vice
President-Accounting Operations and Reporting.
Dennis R. LaVigne
Mr. LaVigne has been Vice President and Treasurer of NAL since August
1995. Mr. LaVigne has substantial experience in the automotive finance industry,
having served as Senior Vice-President of Union Acceptance Corporation (an
automotive finance company) from December 1993 to September 1994; remaining an
independent consultant to the industry from October 1994 to August 1995; and
having previously served as Senior Vice-President Asset/Liability Manager of
Union Federal Savings Bank of Indianapolis from 1989 to December 1993. Prior to
joining Union Federal, Mr. LaVigne held positions with Columbia Savings, a
federal savings and loan association, from 1981 to 1989, including Senior Vice
President, Chief Investment Officer, Treasurer and Asset/Liability Committee
Chairman. Mr. LaVigne holds a Ph.D. in Economics from the University of
Illinois.
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<PAGE>
Andrew P. Panzo
Mr. Panzo served as President and Chairman of the Board of COFVI since
December 1993 and resigned from such positions in conjunction with the Merger in
November 1994. He was subsequently reappointed as a director of the Company in
August 1995. Mr. Panzo is the managing director of American Maple Leaf Financial
Corporation ("AMLF") in Bala Cynwyd, Pennsylvania, an investment banking advisor
to the Company which specializes in emerging growth companies. He is also a
director of two public companies: Sector Associates, Ltd. and The Eastwind
Group, Inc. Mr. Panzo was a director of Florida West Airlines, Inc. from July
through December 1993. Mr. Panzo was formerly Executive Vice President of HMA
Investments, Inc., an investment banking firm at which he managed certain
diversified securities investments. He is formerly an associate with Venture
Partners, Ltd. of Middletown, Connecticut, a venture capital firm. Mr. Panzo is
a graduate of the University of Connecticut and has a masters degree in
international business and finance from Temple University.
Abraham Bernstein
Mr. Bernstein has been a director of the Company since August 1995. He
has been Managing Director of The Rittenhouse Group, Inc. a privately held
consulting firm since January 1994. Mr. Bernstein, prior to forming The
Rittenhouse Group, Inc., was Vice Chairman and CEO of Tokai Financial Services,
Inc., an asset-based lender and equipment lessor from 1988 to 1993, and
President and Director of Masterlease Corporation, an equipment lessor from
1982-1988.
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<PAGE>
Executive Compensation
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
===================================================================================================================================
Long Term
Annual Compensation(1) Compensation
- -----------------------------------------------------------------------------------------------------------------------------------
Securities
Salary Bonus Underlying
Name and Position Year ($) ($) Options/SARs (#)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert R. Bartolini 1995 $300,000 $0 50,000(4)
Chairman of the Board, President and Chief 1994 $281,916 $298,985 75,000(2)
Executive Officer of NAL; 1993 $250,000 $1,248,100 0
Chairman and Chief Executive Officer of NAC
- -----------------------------------------------------------------------------------------------------------------------------------
John T. Schaeffer 1995 $160,000 $0 25,000(4)
Director of NAL; 1994 $160,000 $0 40,000(3)
President and Chief Operating Officer of NAC 1993 $160,000 $161,302 0
- -----------------------------------------------------------------------------------------------------------------------------------
Robert J. Carlson 1995 $80,000 $0 15,000(4)
Vice President-Finance and Principal Accounting 1994 $74,231 $86,015 15,000(3)
Officer of NAL 1993 $72,500 $18,124 0
- -----------------------------------------------------------------------------------------------------------------------------------
Dennis R. LaVigne 1995 $48,461 $0 25,000(5)
Vice President and Treasurer of NAL
===================================================================================================================================
</TABLE>
(1) Based upon the fiscal years ended December 31, 1995, 1994, and
1993.
(2) Stock Options granted as of December 15, 1994 pursuant to the Company's
Stock Option Plan of which 66,666 Options vest pro-rata over four years
commencing January 1, 1996 and 8,334 Options vest pro-rata over three
years commencing January 1, 1996.
(3) Stock Options granted as of December 15, 1994 pursuant to the Company's
Stock Option Plan, which vest pro-rata over three years commencing
January 1, 1996.
(4) Stock Options granted as of December 6, 1995 pursuant to the Company's
Stock Option Plan, which vest pro-rata over three years commencing
January 1, 1997.
(5) Stock Options granted as of December 6, 1995 pursuant to the Company's
Stock Option Plan, which vest upon December 6, 1998.
67
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARs EXERCISE EXPIRATION
UNDERLYING GRANTED TO OR DATE
OPTION/SARs EMPLOYEES IN BASE PRICE
NAME GRANTED(#) FISCAL YEAR(1) ($/Share)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert R. Bartolini 50,000(2) 15.22% $16.50 December 6, 2005
Chairman of the Board, President and Chief
Executive Officer of NAL;
Chairman and Chief Executive Officer of NAC
- -----------------------------------------------------------------------------------------------------------------------------------
John T. Schaeffer 25,000(2) 7.61% $15.00 December 6, 2005
Director of NAL;
President and Chief Operating Officer of NAC
- -----------------------------------------------------------------------------------------------------------------------------------
Robert J. Carlson 15,000(2) 4.57% $15.00 December 6, 2005
Vice President-Finance and
Principal Accounting Officer of NAL
- -----------------------------------------------------------------------------------------------------------------------------------
Dennis R. LaVigne 25,000(3) 7.61% $13.25 December 6, 2005
Vice President and Treasurer of NAL
===================================================================================================================================
</TABLE>
(1) Based upon the grant during the last fiscal year of options to purchase an
aggregate of 328,000 shares of Common Stock pursuant to the Company's Stock
Option Plan.
(2) Stock Options granted as of December 6, 1995 pursuant to the Company's Stock
Option Plan, which vest pro-rata over three years commencing January 1,
1997.
(3) Stock Options granted as of December 6, 1995 pursuant to the Company's Stock
Option Plan, which vest upon December 6, 1998.
68
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
- ----------------------------------------------------------------------------------------------------------------------------------
==================================================================================================================================
Number of Securities Underlying Value
Unexercised Options/SARs of Unexercised
Shares Acquired at FY-End (#) In-the-Money Options/SARs
Name on Exercise(#) Value Realized Exercisable/Unexercisable(1) at FY-End($)
Exercisable/Unexercisable(1)
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert R. Bartolini, -0- -0- 19,445(E)/105,555(U) $138,365(E)/$393,885(U)
Chairman of the Board, President
and Chief Executive Officer of
NAL;
Chairman and Chief Executive
Officer of NAC
- ----------------------------------------------------------------------------------------------------------------------------------
John T. Schaeffer -0- -0- 13,333(E)/51,667(U) $101,731(E)/$203,469(U)
Director of NAL;
President and Chief Operating
Officer of NAC
- ----------------------------------------------------------------------------------------------------------------------------------
Robert J. Carlson -0- -0- 5,000(E)/25,000(U) $38,150(E)/$76,300(U)
Vice President-Finance and
Principal Accounting Officer of
NAL
- ----------------------------------------------------------------------------------------------------------------------------------
Dennis R. LaVigne -0- -0- 0(E)/25,000(U) $0(E)/$9,500(U)
Vice President and Treasurer of
NAL
==================================================================================================================================
</TABLE>
(1) Based upon the closing price of the Company's Common Stock ($13.63 per
share) as of December 29, 1995 as traded on The NASDAQ National MarketSM.
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<PAGE>
Employment Arrangements
Upon the closing of the Merger, the Company entered into an employment
agreement with Mr. Robert Bartolini. Such agreement, as subsequently amended by
resolution of the Company's Board of Directors, provides for a base salary of
$300,000 per year together with discretionary bonuses, if any, to be declared by
the Board of Directors. The agreement also provides for certain benefits
including vacation, life insurance, certain expenses and stock option plan
participation, as well as a restrictive covenant in favor of the Company. See
"Summary Compensation Table." The agreement is annually renewable for successive
three year periods, however, Mr. Bartolini may terminate the agreement upon
written notice on the earlier of one year from the date of such notice or 90
days after his replacement is hired by the Company. Mr. Bartolini may not cause
the agreement to terminate prior to three years from the date of the agreement.
Directors' Fees
The employee-directors of the Company receive no fees or other
compensation in connection with their service as directors. Mr. Bernstein in
conjunction with his appointment to the Board was granted Warrants to purchase
20,000 shares of Common Stock. Mr. Bernstein also receives $1,000 for each
meeting of the Board of Directors and each meeting of the Audit Committee
attended in person and $500 for each meeting attended telephonically.
Stock Option Plan
The Company has adopted a stock option plan (the "Plan") covering
600,000 shares of the Company's Common Stock, pursuant to which officers,
directors, key employees and consultants of the Company are eligible to receive
incentive as well as non-qualified stock options and stock appreciation rights
("SARs"). The Plan will be administered by the Board of Directors or a committee
consisting of no less than three members designated by the Board of Directors.
Incentive stock options granted under the Plan are exercisable for a period of
up to 10 years from the date of grant and at an exercise price which is not less
than the fair market value of the Common Stock on the date of the grant, except
that the term of an incentive stock option granted under the Plan to a
stockholder owning more than 10% of the outstanding Common Stock may not exceed
five years and the exercise price of an incentive stock option granted to such
stockholder may not be less than 110% of the fair market value of the Common
Stock on the date of the grant. Non-qualified stock options may be granted on
terms determined by the Board of Directors or a committee designated by the
Board of Directors. SARs which give the holder the privilege
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<PAGE>
of surrendering such rights for the appreciation in the Company's Common Stock
between the time of grant and the surrender, may be granted on any terms
determined by the Board of Directors or committee designated by the Board of
Directors.
Incentive stock options granted under the Plan are non-transferable,
except upon death, by will or by operation of the laws of descent and
distribution, and may be exercised during the employee's lifetime only by the
optionee. There is no limit on the number of shares with respect to which
options may be granted under the Plan to any participating employee. However,
under the terms of the Plan, the aggregate fair market value (determined as of
the date of grant) of the shares of Common Stock with respect to which incentive
stock options are exercisable for the first time by an employee during any
calendar year (under all such plans of the Company and any parent and subsidiary
corporation of the Company) may not exceed $100,000.
Options granted under the Plan may be exercised within 12 months after
the date of an optionee's termination of employment by reason of his death or
disability, or within three months after the date of termination by reason of
retirement or voluntary termination approved by the Board of Directors, but only
to the extent the option was otherwise exercisable at the date of termination.
The Plan will expire on November 1, 2004, unless terminated earlier by
the Board of Directors. The Plan may be amended by the Board of Directors
without stockholder approval, except that no amendment which increases the
maximum aggregate number of shares which may be issued under the Plan or changes
the class of employees who are eligible to participate in the Plan, shall be
made without the approval of a majority of the stockholders of the Company.
Effective as of December 15, 1994, 229,000 options were granted under
the Plan; 99,000 of which were granted to non-management employees and 130,000
of which were granted to management. Effective as of December 6, 1995, 328,500
additional options were granted under the Plan; 213,500 of which were granted to
non-management employees and 115,000 of which were granted to management. See
"Options/SAR Grants in Last Fiscal Year Table."
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<PAGE>
CERTAIN TRANSACTIONS
Loan to the Company
Robert R. Bartolini advanced $1,098,165 to the Company on June 30, 1995
in order to provide it with additional working capital. The Company's obligation
to repay this loan was evidenced by a promissory note dated August 31, 1995.
Under the terms of this promissory note, principal and interest are due on March
31, 1996, with interest accruing at 9%. In December, 1995, the principal balance
of this loan was increased to $2,919,000 by an additional advance from Mr.
Bartolini of $1,820,835 under the same terms and conditions. The indebtedness
evidenced by the promissory note is subordinated to the prior payment, when due
of the principal and interest on all senior indebtedness of the Company.
Transactions with Affiliate of Director
Following the Merger, AMLF, an affiliate of Mr. Panzo, rendered certain
investment banking advisory services to the Company for which AMLF received
33,000 common stock purchase warrants. The Warrants permit the purchase of
additional shares at an exercise price of $9.00 per share through May 1996.
During October 1994, the Company sold 333,333 shares of Common Stock to
AMLF in a private placement transaction for consideration of $19,999.
During April 1995, AMLF purchased $1,200,000 Principal Amount of 9%
Convertible Subordinated Debenture Units for an aggregate purchase price of
$1,200,000. See "DESCRIPTION OF SECURITIES."
Sale of Portfolio to Executive Officer
As of November 30, 1994, the Company sold a portfolio of 14 unsecured
installment loans with a total principal balance of $1,055,000 to Mr. Robert R.
Bartolini, Chairman and Chief Executive Officer of the Company, in consideration
for $590,965. The portfolio of which this portfolio was a part was purchased by
the Company in March 1994 from the FDIC at a purchase price equal to 22.5% of
principal balance. The purchase price paid by Mr. Bartolini was equal to 56% of
principal balance, which in management's opinion, was the approximate fair
market value of the loans determined from a review of the expected
collectibility of the loans. This price was considered by the Company to be
equal to their fair market value and was based on the estimated cash flows
anticipated for the portfolio. The method used for estimating the cash flows was
the same used by the Company in evaluating the fair value of all of its
portfolio acquisitions.
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<PAGE>
Sale of Boat to Executive Officer
In October 1994, the Company sold a repossessed boat to John T.
Schaeffer, a director of NAL and President and Chief Operating Officer of NAC,
in consideration for a note in the amount of $89,000 which bears interest at 10%
per annum for a period of 1 year, and the offset by the Company of $21,000
payable to Mr. Schaeffer. The note was repaid prior to June 30, 1995. In
management's opinion the sale was at the approximate fair market value of the
boat.
Transactions with Former Principal Stockholder
In 1991, the Company entered into an agreement with FTM, a former
principal stockholder, to provide the Company with consulting and other business
related services. Under the agreement, the Company agreed to pay FTM $50,000 per
month through March 1995. The payments for consulting services continued through
May 1994, whereupon the Company made a lump sum settlement with FTM through a
final payment of $475,000 under this agreement. This reflected a $75,000
discount from the cumulative payments required under the agreement. Including
the lump sum settlement, payments of $675,000 were made to FTM in 1994. Payments
of $600,000 were made to FTM in 1993.
During 1994, the Company paid FTM $428,000 as a commission on the sale
of certain loan portfolios.
On April 30, 1993, the Company redeemed 5,928 shares of Common Stock
held by FTM for $2,400,000. A portion of the proceeds was applied to the
cancellation of the receivable of $841,417 due from FTM to the Company.
In October 1993, Mr. Bartolini purchased the remaining shares of the
Company's stock held by FTM for a purchase price of $2,034,000. This purchase
was financed by the Company as described below. See "Purchase of Shares of
Common Stock." After the purchase, Mr. Bartolini's ownership percentage of
outstanding stock was increased to 95%. The financial statements at December 31,
1993 reflect the receivable from Mr. Bartolini as a reduction of stockholders'
equity.
The Company previously sub-leased a portion of the space occupied by
its headquarters at 500 Cypress Creek Road West, Fort Lauderdale, Florida from
FTM. However, in January 1995, the Company entered into a lease directly with
the landlord for such space. Thereafter, the Company entered into a sublease
with FTM by which FTM subleases from the Company certain space which it
previously leased directly from the landlord.
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<PAGE>
Purchase of Shares of Common Stock
In April 1993, the Company issued 214 shares to Mr. John Schaeffer,
president of NAC, in exchange for his 10% ownership of the common stock of NAC.
After the issuance, the Company owned 100% of the outstanding shares of NAC, and
Mr. Schaeffer owned 5% of the Company's Common Stock.
In October 1993, Mr. Bartolini, Chairman, Chief Executive Officer and
principal stockholder of the Company, purchased 2,143 shares representing all
outstanding shares not previously owned by Mr. Bartolini or Mr. Schaeffer to
provide him with 95% ownership of the Company as of such date. Mr. Bartolini
financed the entire purchase price of such shares through a loan from the
Company represented by a note in the amount of $2,034,638 which bore interest at
5% per annum and was reflected as a "Note Receivable from a Stockholder" as a
reduction of stockholders' equity on the Company's consolidated balance sheet as
of December 31, 1993. In June 1994, the Company redeemed the 2,143 shares from
Mr. Bartolini in consideration for cancelling the note.
Employment Arrangement
The Company has entered into an employment agreement with Robert R.
Bartolini, its Chairman, Chief Executive Officer and principal stockholder.
See "MANAGEMENT - Employment Arrangements."
Grant of Options and Warrants
In December 1994 and December 1995, the Company granted certain options
to purchase shares of the Company's Common Stock to executive officers under the
Company's Stock Option Plan. See "MANAGEMENT - Summary Compensation Table" and
"Stock Option Plan." In conjunction with his appointment to the Board of
Directors on August 7, 1995, the Company granted to Mr. Bernstein 20,000 common
stock purchase warrants with an exercise price of $13.50 per share.
See "PRINCIPAL STOCKHOLDERS."
Travel Services
IYS Travel, Inc. ("IYS"), a travel agency of which Mr. Robert Bartolini
is a principal stockholder, provides business and personal travel services to
the Company and its employees at prevailing market prices. IYS receives
customary industry commission for services provided. During the nine months
ended September 30, 1995 and the years ended December 31, 1994 and 1993, the
Company paid IYS approximately $78,000, $84,000 and $84,000, respectively, for
airline tickets booked by IYS for travel by the Company's employees at the
prevailing prices charged by the airlines.
74
<PAGE>
During 1994, the Company advanced to IYS approximately $66,000 for
payroll, which IYS subsequently repaid.
Mr. Bartolini receives only indirect benefits as a principal
stockholder of IYS through profits of IYS, if any.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of January 25, 1996, information
with respect to the securities holdings of all persons which the Company,
pursuant to filings with the Securities and Exchange Commission, has reason to
believe may be deemed the beneficial owners of more than 5% of the Company's
outstanding Common Stock. Also set forth in the table is the beneficial
ownership of all shares of the Company's outstanding stock, as of such date, of
all officers and directors, individually and as a group.
<TABLE>
<CAPTION>
==========================================================================================================================
Shares Owned
Beneficially and of Percentage of
Name Record(1) Outstanding Shares(1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert R. Bartolini 2,235,647(2) 33.18%
500 Cypress Creek Road West
Suite 590
Ft. Lauderdale, FL 33309
- --------------------------------------------------------------------------------------------------------------------------
John T. Schaeffer 302,913(3) 4.50%
500 Cypress Creek Road West
Suite 590
Ft. Lauderdale, FL 33309
- --------------------------------------------------------------------------------------------------------------------------
Robert J. Carlson 65,196(4) *
500 Cypress Creek Road West
Suite 590
Ft. Lauderdale, FL 33309
- --------------------------------------------------------------------------------------------------------------------------
Dennis R. LaVigne ---(5) *
500 Cypress Creek Road West
Suite 590
Ft. Lauderdale, FL 33309
- --------------------------------------------------------------------------------------------------------------------------
Andrew P. Panzo 276,368(6) 4.00%
401 City Avenue, Suite 725
Bala Cynwyd, PA 19004
- --------------------------------------------------------------------------------------------------------------------------
Abraham Bernstein ---(7) *
1830 Rittenhouse Square
Philadelphia, PA 19103
- --------------------------------------------------------------------------------------------------------------------------
Florence Karp(8) 964,166(9) 12.58%
3418 Sansom Street
Philadelphia, PA 19104
- --------------------------------------------------------------------------------------------------------------------------
Rozel International Holdings Limited 362,318(10) 5.13%
P.O. Box 3151
Road Town
Tortola, B.V.I.
- --------------------------------------------------------------------------------------------------------------------------
All Directors and Officers 2,822,124(11) 40.67%
as a group (6 persons)
==========================================================================================================================
</TABLE>
75
<PAGE>
- ------------------------
*Represents less than 1%
(1) Except as otherwise indicated, includes total number of shares
outstanding and the number of shares which each person has the
right to acquire, within 60 days through the exercise of
options, warrants or debentures, pursuant to Item 403 of
Regulation S-B and Rule 13d-3(d)(1), promulgated under the
1934 Act. Also reflects 6,700,041 shares of the Company's
Common Stock outstanding as of the date of this Prospectus.
(2) Includes 1,647,004 shares held by Robert R. Bartolini and
Marcia G. Bartolini, Co-Trustees of the Robert R. Bartolini
Revocable Trust dated July 27, 1992, 210,000 shares of which
are subject to options granted by Mr. Bartolini during May
1995. Also includes 305,176 shares presently held by English,
McCaughan & O'Bryan, P.A. pursuant to the terms of the Voting
Trust Agreement. See "Material Voting Arrangements."
Includes 264,022 shares held by Marcia G. Bartolini and Robert
R. Bartolini, Co-Trustees of the Marcia G. Bartolini Revocable
Trust dated July 27, 1992. Does not include 50,000 shares
owned beneficially by Edward M. Bartolini, the adult brother
of Robert R. Bartolini. Also does not include 264,022 shares
held by George Schnabel, Trustee of the Robert R. Bartolini
and Marcia G. Bartolini Irrevocable Trust dated July 27, 1992.
Includes Incentive Stock Options to purchase 19,445 shares of
Common Stock granted December 1994 which vested as of January
1, 1996. Does not include Incentive Stock Options to purchase
105,555 shares of Common Stock granted December 1994 and
December 1995, which have not vested. See "MANAGEMENT -
Executive Compensation."
(3) Includes 34,628 shares held by English McCaughan & O'Bryan,
P.A. for the benefit of Mr. Schaeffer pursuant to the terms of
the Voting Trust Agreement. See "Material Voting
Arrangements." Includes 13,333 Incentive Stock Options
granted to Mr. Shaeffer in December 1994 which vested as of
January 1, 1996. Does not include 51,667 Incentive Stock
Options granted to Mr. Schaeffer in December 1994 and December
76
<PAGE>
1995 which remain subject to vesting. Includes 4,952 shares
held by Mr. Schaeffer's spouse. See "MANAGEMENT - Executive
Compensation" and "Stock Option Plan."
(4) Includes 60,196 shares held by English, McCaughan & O'Bryan,
P.A. for the benefit of Mr. Carlson pursuant to the terms of
the Voting Trust Agreement. See "Material Voting
Arrangements." Includes 5,000 Incentive Stock Options granted
to Mr. Carlson in December 1994 which vested as of January 1,
1996. Does not include 25,000 Incentive Stock Options granted
to Mr. Carlson in December 1994 and December 1995 which remain
subject to vesting. See "MANAGEMENT - Executive Compensation"
and "Stock Option Plan."
(5) Does not include 25,000 Incentive Stock Options granted to Mr.
LaVigne in December 1995 which remain subject to vesting. See
"MANAGEMENT - Executive Compensation" and "Stock Option Plan."
(6) Includes 12,110 shares of Common Stock held by Mr. Panzo.
Also includes 47,233 shares of Common Stock (43,333 shares
representing principal and 3,900 shares representing interest
at maturity) issuable to AMLF upon conversion of certain
Debentures, if at all. Also includes 153,333 shares issuable
upon the exercise of the Warrants, if at all, and Options to
purchase 33,000 shares granted by Robert Bartolini to AMLF.
Also includes 5,692 shares of Common Stock held by AMLF. See
"SELLING SECURITY HOLDERS." Also includes Options to purchase
25,000 shares granted by Mr. Bartolini to APP Investments,
Inc., an affiliate of Mr. Panzo. See "CERTAIN TRANSACTIONS -
Grant of Options and Warrants."
(7) Does not include Warrants to purchase 20,000 shares of Common
Stock at an exercise price of $13.50 per share granted in
conjunction with appointment as a director on August 7, 1995,
which have not vested. See "CERTAIN TRANSACTIONS - Grant of
Options and Warrants."
(8) As custodian for Ms. Karp's minor grandchildren.
(9) Includes 450,000 shares of Common Stock issuable upon the
exercise, if at all, of Warrants. Also includes 514,166
shares of Common Stock (416,666 shares representing principal
and 97,500 shares representing interest at maturity) issuable
upon the conversion, if at all, of Debentures. See
"DESCRIPTION OF SECURITIES."
(10) Includes 128,818 shares issuable, if at all, upon conversion of
outstanding Debentures and 233,500 shares issuable, if at all,
upon the exercise of outstanding Warrants.
77
<PAGE>
(11) Does not include Options to purchase 33,000 shares granted by Robert
Bartolini to AMLF and Options to purchase 25,000 shares granted by Mr.
Bartolini to APP Investments, Inc., an affiliate of Mr. Panzo, as such
58,000 shares are included within the shares held by Mr. Bartolini for
the purposes hereof.
Material Voting Arrangements
Concurrent with the completion of the Merger, as of November 30, 1994,
Messrs. Bartolini, Schaeffer and Carlson entered into a Voting Trust Agreement
(the "Voting Trust Agreement") pursuant to which 400,000 shares were placed in a
voting trust. The Voting Trust Agreement provides that, on any matter requiring
stockholder vote, the trustee will vote such shares in the same percentage as
the other then issued and outstanding shares of Common Stock are voted. Such
shares may be released from the Voting Trust Agreement pursuant to an earn-out
formula whereby for the years ended June 30, 1995, 1996 and 1997, 10,000 trust
shares will be released for each $150,000 of cumulative net income after taxes
of the Company up to $3,000,000 and 5,000 shares will be released for each
$150,000 of cumulative net income after taxes in excess of $3,000,000, less the
number of trust shares previously transferred to the shareholders under this
formula. The trust shares will be released pro rata in accordance with the
number of trust shares beneficially owned by each shareholder. If the shares are
not released pursuant to the earn-out formula within three years, such shares
will be cancelled. The trustee under the Voting Trust Agreement is English,
McCaughan & O'Bryan, P.A., counsel to the Company.
Effect of Issuance of Common Stock Upon Conversion of Debentures
and Exercise of Warrants.
The Company may be caused to issue up to an additional 1,410,112 shares
upon conversion of the outstanding principal and accrued interest due under the
Debentures, and up to an additional 1,961,125 shares upon exercise of the
Warrants. See "DESCRIPTION OF SECURITIES." A number of holders of such
Debentures and Warrants may become principal stockholders of the Company should
they elect to convert their Debentures and/or exercise their Warrants. Stock
ownership, for the purpose of identifying the principal stockholders included
within the foregoing table, has been calculated in accordance with Rule
13d-3(d)(1) promulgated under the Securities Exchange Act of 1934 and Item 403
of Regulation S-B, promulgated under the Securities Act of 1933, as amended.
Accordingly, stock ownership has been calculated to
78
<PAGE>
include all shares issuable upon conversion of the Debentures and exercise of
the Warrants where the holder has the right to acquire such shares within 60
days.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock,
$.15 par value per share, of which 6,700,041 are outstanding as of the date of
this Prospectus.
Holders of Common Stock have equal rights to receive dividends when, as
and if declared by the Board of Directors, out of funds legally available
therefor. Holders of Common Stock have one vote for each share held of record
and do not have cumulative voting rights.
Holders of Common Stock are entitled upon liquidation of the Company to
share ratably in the net assets available for distribution, subject to the
rights, if any, of holders of any preferred stock then outstanding. Shares of
Common Stock are not redeemable and have no pre-emptive or similar rights. All
outstanding shares of Common Stock are fully paid and non-assessable.
Preferred Stock
Within the limits and restrictions contained in the Certificate of
Incorporation, the Board of Directors has the authority, without further action
by the stockholders, to issue up to 10,000,000 shares of Preferred Stock (the
"Preferred Stock"), in one or more series, and to fix, as to any such series,
the dividend rate, redemption prices, preferences on liquidation or dissolution,
sinking fund terms, if any, conversion rights, voting rights, and any other
preference or special rights and qualifications. There are presently no shares
of Preferred Stock outstanding.
Shares of Preferred Stock issued by the Board of Directors could be
utilized, under certain circumstances, to make an attempt to gain control of the
Company more difficult or time consuming. For example, shares of Preferred Stock
could be issued with certain rights which might have the effect of diluting the
percentage of Common Stock owned by a significant stockholder or issued to
purchasers who might side with management in opposing a takeover bid which the
Board of Directors determines is not in the best interest of the Company and its
stockholders. This provision may be viewed as having possible anti-takeover
effects. A takeover
79
<PAGE>
transaction frequently affords stockholders the opportunity to sell their shares
at a premium over current market prices. The Board of Directors has not
authorized any series of Preferred Stock.
Debentures
From April 1995 through December 31, 1995, the Company issued and sold
in private placement transactions to accredited investors an aggregate of
$21,325,000 principal amount 9% Convertible Subordinated Debentures (the
"Debentures"). The Debentures were offered and sold in conjunction with warrants
to purchase 1,961,125 shares of the Company's Common Stock as "Debenture Units".
The indebtedness evidenced by the Debentures is subordinated to the
prior payment when due of the principal and interest on all senior indebtedness
of the Company. Therefore, upon any distribution of its assets in a liquidation
or dissolution of the Company, or in bankruptcy, reorganization, insolvency,
receivership or similar proceedings relating to the Company, the holders of the
Debentures will not be entitled to receive payment until the holders of the
Company's senior indebtedness are paid in full. Furthermore, upon the occurrence
of any event of default with respect to any senior indebtedness of the Company,
no payments may be made thereafter to the holders of the Debentures until the
Company has cured such event of default.
As of December 31, 1995, Debentures with principal balances in the
aggregate of $8,260,000 had been converted into 930,523 shares of the Company's
Common Stock.
Of the outstanding Debentures at December 31, 1995, $3,000,000
principal amount bear a maturity date three (3) years from the date of funding
(July 1998). The remainder of the Debentures with aggregate principal balances
of $10,065,000 bear maturity dates one (1) year from the date of funding (from
April 1996 to December 1996). With the exception of $3,000,000 principal amount,
which requires quarterly payments, interest on the Debentures is due on a
semi-annual basis.
Conversion Feature
At the option of the holders, the principal and accrued interest due
under the Debentures is convertible into shares of Common Stock. Prior to such
conversion, the holders thereof are not entitled to voting rights or other
rights provided by law to security holders.
Of the Debentures, $11,850,000 principal amount sold during April
through July 1995, are convertible into shares of the
80
<PAGE>
Company's Common Stock at a conversion price equal to the lower of: (i) 75% of
the average closing bid price of the Company's Common Stock as reported by The
NASDAQ Stock MarketSM for the ten (10) consecutive trading days immediately
preceding the date of conversion; or (ii) $9.00.
Of the remaining Debentures, $250,000 principal amount sold during
August 1995 are convertible into shares of the Company's Common Stock at a
conversion price of $10.50 per share, and $3,300,000 principal amount sold
during September 1995 are convertible into shares of the Company's Common Stock
at a conversion price of $12.50 per share.
Of the remaining Debentures, $5,925,000 sold during December 1995 are
convertible into shares of Common Stock at a conversion price equal to the lower
of: (i) 85% of the average closing bid price of the Company's Common Stock as
reported by The NASDAQ Stock MarketSM for the ten (10) consecutive trading days
immediately preceding the date of conversion; or (ii) $11.00 per share.
As of December 31, 1995, $8,260,000 principal amount of these
Debentures have been converted into 930,523 shares of the Company's Common
Stock.
Based upon present trading prices, 1,410,112 additional shares of
Common Stock may be issuable upon conversion of the remaining principal and
accrued interest due under $13,065,000 principal amount of Debentures.
Redemption Feature
Except for the $5,925,000 principal amount of Debentures sold in
December, 1995, the Debentures are subject to redemption by the Company at the
principal amount thereof, together with any accrued interest, on thirty (30)
days written notice upon the following conditions: (i) if a registration
statement covering the resale of the shares issuable upon conversion of the
Debentures is effective as of that date; and (ii) if the average of the closing
bid prices of the Company's Common Stock as reported by The NASDAQ Stock
MarketSM exceeds a designated redemption price (the "Debenture Redemption
Price") for ten (10) consecutive trading days ending within fifteen (15) days of
the notice of redemption.
Of the outstanding Debentures, $5,140,000 principal amount bear a
Debenture Redemption Price of $15.00. The remaining $2,000,000 principal amount
bear a Debenture Redemption Price of $18.00.
81
<PAGE>
Of the Debentures subject to redemption, $3,000,000 principal amount of
the Debentures provide the holder with the option to elect not to have the
Debentures subject to redemption, however, from the point of such election and
thereafter, the Debentures become non-interest bearing.
$5,925,000 principal amount of Debentures sold during December 1995 are
not redeemable by the Company.
Warrants.
From April 1995 through December 1995, the Company has granted
2,151,125 common stock purchase warrants (the "Warrants"). 1,961,125 of the
Warrants were granted as part of the Debenture Units. 190,000 Warrants were
issued by the Company to Board members and certain consultants and advisers in
consideration for financial advisory services. See "CERTAIN TRANSACTIONS."
Exercise
Each of the Warrants permits the holder to purchase a share of the
Company's Common Stock at a designated exercise price for a period of three (3)
years from the date of grant.
The respective exercise prices of the Warrants issued as part of the
Debenture Units are identified in the following table.
Number of Warrants Exercise Price
------------------ --------------
1,360,000 $ 9.00
12,500 $12.00
50,000 $12.30
175,000 $14.00
363,625 $15.00
---------
1,961,125
The 1,360,000 Warrants that contain a $9.00 exercise price may not be
exercised by the holders thereof until the earlier of: (i) March 31, 1996; or
(ii) consent of the Company. The remainder of the Warrants may be exercised at
the option of their holders commencing no later than November 4, 1995.
Prior to exercise, holders of the Warrants are not entitled to voting
rights or other rights provided by law to securityholders of the Company.
A complete exercise of the Warrants, if at all, would yield to
the Company proceeds of $20,909,375. There can be no assurances
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<PAGE>
that all or a substantial percentage of the Warrants will be exercised.
Redemption
1,580,145 of the Warrants are subject to redemption by the Company
commencing with the date of issuance and 380,980 are subject to redemption by
the Company commencing two (2) years from the date of issuance, all at a price
of $.001 per Warrant on thirty (30) days written notice upon the following
conditions: (i) if a registration statement covering the resale of the shares
issuable upon exercise of the Warrants is effective as of that date; and (ii) if
the average of the closing bid prices of the Company's Common Stock as reported
by The NASDAQ Stock MarketSM exceeds a designated price (the "Warrant Redemption
Price") for ten (10) consecutive trading days ending with fifteen (15) days of
the notice of redemption.
Number of Warrants Warrant Redemption Price
------------------ ------------------------
1,462,500 $15.00
12,000 $18.00
486,625 $25.00
The present trading price of the Company's Common Stock (see "MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS") would not be sufficient to
effectuate a redemption of any of the Warrants. There can be no assurances that
the trading price of the Company's Common Stock will attain a level sufficiently
high to effectuate a redemption. There also can be no assurances that even with
a sufficiently high trading price the Company will elect to cause a redemption
of the Warrants. Any call for redemption would have the likely effect of causing
the exercise of these Warrants.
Registration Rights
The Company has granted certain registration rights to the holders of
the Debentures and the Warrants pursuant to which the Company has agreed to
register for resale the shares of Common Stock issued or issuable upon the
conversion of the Debentures and the exercise of the Warrants.
Certain of these shares have been included in the Registration
Statement of which this Prospectus is a part. See "SELLING SECURITY HOLDERS."
Inclusive of the shares whose resale is offered by this Prospectus, the
Company has granted incidental ("piggy back") registration rights in connection
with the resale of up to
83
<PAGE>
2,948,341 shares issuable or issued upon conversion of the Debentures and upon
exercise of the Warrants. Pursuant to such rights, the Company has agreed to
include the resale of such shares in any subsequent registration statement
relating to a public offering of the Company's securities to the extent that
such inclusion is not deemed by the Company or an underwriter, if any, to
adversely effect such offering or the market for the Company's securities. In
the event that such shares are not otherwise included within a registration
statement, the Company has agreed to use its best efforts to file with the
Commission a registration statement covering such shares on or before May 15,
1996.
In connection with such registration(s), generally the Company has no
obligation: (i) to assist or cooperate in the offering or disposition of such
shares of Common Stock; (ii) to indemnify or hold harmless any underwriter;
(iii) to obtain a commitment from an underwriter relative to the sale of such
shares; or (iv) to include such shares of Common Stock within an underwritten
offering of the Company. Accordingly, the Company's only obligation is to
include any such shares in such registration statements as described above. The
Company will assume no obligation or responsibility whatsoever to determine a
method of disposition for such shares or to otherwise include such shares within
the confines of such registered offering(s).
Options Granted by Stockholder
During May 1995, Robert R. Bartolini, the Company's Chairman and Chief
Executive Officer, granted options to purchase, in the aggregate, 210,000 shares
of Common Stock held by him at exercise prices of $6.00 and $9.00 per share (the
"Options"). The Options granted at $6.00 shall terminate on the later of: (i)
December 31, 1995; or (ii) 60 days after the Company causes the registration of
the shares issuable upon the exercise of such Options. The Options granted at
$9.00 have a term of one (1) year. The Options may not be exercised until the
earlier of: (i) November 4, 1995; or (ii) upon consent of the Company.
Reservation of Shares.
The Company has reserved a sufficient number of shares of Common Stock
for issuance upon conversion of the Debentures and exercise of the Warrants and
such shares when issued will be fully paid and non-assessable.
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<PAGE>
Transfer Agent
The transfer agent for the Company's securities is StockTrans, Inc., 7
East Lancaster Avenue, Ardmore, Pennsylvania 19003, (610) 649-7300.
Shares Eligible For Future Sale
Taking into account resale of the shares covered by this Prospectus and
the anticipated registration of certain additional shares issued upon conversion
of the Debentures, approximately 3,400,000 shares of the Company's outstanding
Common Stock are "restricted securities," as that term is defined under Rule 144
under the Act and in the future may be sold without registration upon compliance
with Rule 144. A person (including a group of persons whose shares are
aggregated) who has satisfied a two year holding period for restricted
securities, including an affiliate of the Company, may sell an amount of
restricted securities up to 1% of the Company's outstanding Common Stock in each
three month period thereafter. Persons who are not affiliated with the Company
and who have owned the restricted securities for at least three years are not
subject to the 1% limitation. Of the 3,400,000 shares which constitute
restricted securities, approximately 2,535,978 are presently held by persons who
may be deemed "affiliates" of the Company. These individuals acquired their
shares during November 1994. Accordingly, resales may occur as early as November
1996. Provided these individuals remain "affiliates", their resales would be
limited to 1% of the Company's outstanding Common Stock in each three month
period thereafter. Of the 3,400,000 Shares which constitute restricted
securities approximately 864,022 are presently held by non-affiliates. These
shares were acquired during November 1994. Accordingly, resales can occur as
early as November 1996 (limited to 1% of the Company's outstanding common stock
per quarter) and unlimited resales can occur as early as October 1997.
Any substantial sale of restricted securities under Rule 144 may in the
future have a depressive effect upon the price of the Company's Common Stock in
any market that may develop therefor.
Delaware Anti-Takeover Law
The Company will be governed by the provisions of Section 203 of the
General Corporation Law of the State of Delaware (the "GCL"), an anti-takeover
law. In general, the law prohibits a public Delaware corporation from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is
85
<PAGE>
approved in a prescribed manner. "Business combination" includes mergers, asset
sales and other transactions resulting in a financial benefit to the
stockholder. An "interested stockholder" is a person who, together with its
affiliates and associates, owns (or within three years, did own) 15% or more of
the corporation's voting stock.
The provisions regarding certain business combinations under the GCL
could have the effect of delaying, deferring or preventing a change in control
of the Company or the removal of existing management. A takeover transaction
frequently affords stockholders the opportunity to sell their shares at a
premium over current market prices.
SELLING SECURITY HOLDERS
All of the shares of Common Stock of the Company offered by this
Prospectus are being sold for the account of the selling security holders
identified in the following table (the "Selling Security Holders").
The Selling Security Holders are offering for sale an aggregate of up
to 693,430 shares of Common Stock which consist of: (i) 311,830 shares of Common
Stock previously issued by the Company in private placement transactions; (ii)
261,600 shares issuable, if at all, upon conversion of certain outstanding
Debentures; and (iii) 120,000 shares issuable, if at all, upon the exercise of
certain outstanding Warrants, all of which shares of Common Stock, Debentures
and Warrants were previously issued by the Company in private placement
transactions. See "DESCRIPTION OF SECURITIES." 79,849 of the shares of Common
Stock included in this Prospectus were previously included in the Company's
Prospectus dated December 15, 1995, which is superseded by this Prospectus.
The following table sets forth the number of Shares being held of
record or beneficially (to the extent known by the Company) by such Selling
Security Holders and provides (by footnote reference) any material relationship
between the Company and such Selling Security Holder, all of which is based upon
information currently available to the Company.
The shares of Common Stock offered by the Selling Security Holders may
be offered for sale from time to time at market prices prevailing at the time of
sale or at negotiated prices, and without payment of any underwriting discounts
or commissions except for usual and customary selling commissions paid to
brokers or dealers.
86
<PAGE>
<TABLE>
<CAPTION>
Number of Number of
Number of Shares of Shares of
Shares of Common Common
Common Stock to be Stock Percentage Percentage
Stock Before Sold in After Before After
Name Offering(2) Offering Offering Offering(1) Offering(1)
- ---- ------------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Anguili, Nick 50,200 50,200(3) 0 * 0%
Centaur Financial Corp.(4) 112,242(5) 11,242(3) 101,000 1.65% 1.5%
Diversified Securities Fund I, L.P. 14,636(6) 9,636(3) 5,000 * *
Hance, Edward 1,000 1,000(3) 0 * 0%
Lyons, Rachel 1,000 1,000(3) 0 * 0%
Garnick, Michael 14,579 14,000(3) 579 * *
Ginsburg, Bruce 55,210 27,778(3) 27,432 * *
GRA Investments Corp. 251,181 178,781(3) 72,400 3.71% 1.07%
Rosner, Steven B. Money Purchase 32,193 17,193(3) 15,000 * *
Pension Plan
Solomon, Martin 254,400 254,400(7) 0 3.66% 0%
TGP Associates Limited Partnership 127,200 127,200(8) 0 1.86% 0%
Yazzie, Susan Reeser 1,000 1,000(3) 0 * 0%
Total 693,430
========
</TABLE>
- ----------------------
(*) Less than 1%
(1) Based upon 6,700,041 shares of Common Stock outstanding as of the date of
this Prospectus.
(2) The number of shares calculated below includes all shares presently
owned, as well as all shares which may be acquired, if at all, upon the
conversion of outstanding principal and interest due under the
Debentures and/or exercise of outstanding Warrants.
(3) Represents shares of outstanding Common Stock.
(4) An affiliate of the Steven B. Rosner Money Purchase Pension Plan.
(5) Includes 11,242 shares of outstanding Common Stock; 43,000 shares
issuable, if at all, upon the exercise of certain Warrants; and 58,000
shares issuable, if at all, upon the exercise of Options granted by Mr.
Robert R. Bartolini.
(6) Includes 9,636 shares of outstanding Common Stock and 5,000 shares
issuable, if at all, upon conversion of Warrants.
(7) Represents 174,400 shares issuable, if at all, upon conversion of
outstanding Debentures and 80,000 shares issuable, if at all, upon
the exercise of outstanding Warrants.
(8) Represents 87,200 shares issuable, if at all, upon the conversion of
outstanding Debentures and 40,000 shares issuable, if at all, upon the
exercise of outstanding Warrants.
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<PAGE>
PLAN OF DISTRIBUTION
The Selling Security Holder is offering for sale, exchange or transfer
shares of Common Stock that have previously been issued to such holders in
private placement transactions, and shares of Common Stock issuable, if at all,
upon the conversion of the Debentures. Such shares are being offered for his own
account, and not for the account of the Company. The Company will not receive
any proceeds from the sale of the shares of Common Stock by the Selling Security
Holder.
Selling Security Holder will, prior to any sales, agree (a) not to
effect any offers or sales of the Common Stock in any manner other than as
specified in this Prospectus, (b) to inform the Company of any sale of Common
Stock at least one business day prior to such sale and (c) not to purchase or
induce others to purchase Common Stock in violation of Rule 10b-6 under the
Exchange Act.
The shares of Common Stock may be sold from time to time to purchasers
directly by the Selling Security Holder acting as principal for their own
account in one or more transactions in the over-the-counter market or in
negotiated transactions at market prices prevailing at the time of sale or at
prices otherwise negotiated. Alternatively, the shares of Common Stock may be
offered from time to time through agents, brokers, dealers or underwriters
designated from time to time, and such agents, brokers, dealers or underwriters
may receive compensation in the form of commissions or concessions from the
Selling Security Holder or the purchasers of the Common Stock.
Under the Exchange Act and the regulations thereunder, any person
engaged in a distribution of the shares of Common Stock of the Company offered
by this Prospectus may not simultaneously engage in market making activities
with respect to the Common Stock of the Company during the applicable "cooling
off" periods prior to the commencement of such distribution. In addition, and
without limiting the foregoing, Selling Security Holder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder including, without limitation, and Rules 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of Common Stock by the
Selling Security Holder.
88
<PAGE>
The Company will use its best efforts to file, during any period in
which offers or sales are being made, one or more post-effective amendments to
the Registration Statement of which this Prospectus is a part to describe any
material information with respect to the plan of distribution not previously
disclosed in this Prospectus or any material change to such information in this
Prospectus.
LEGAL MATTERS
The validity of the Common Stock offered hereby has been passed upon
for the Company by Clark, Ladner, Fortenbaugh & Young, One Commerce Square, 2005
Market Street, 22nd Floor, Philadelphia, Pennsylvania, 19103.
STATEMENT OF INDEMNIFICATION
The Company has adopted the provisions of Section 102(b)(7) of the GCL
which eliminate or limit the personal liability of a director to the Company or
its stockholders for monetary damages for breach of fiduciary duty under certain
circumstances. Furthermore, under Section 145 of the GCL, the Company may
indemnify each of its directors and officers against his expenses (including
reasonable costs, disbursements and counsel fees) in connection with any
proceeding involving such person by reason of his having been an officer or
director to the extent he acted in good faith and in a manner reasonably
believed to be in, or not opposed to the best interest of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The determination of whether indemnification is proper
under the circumstances, unless made by a court, shall be determined by the
Board of Directors.
Insofar as indemnification for liabilities under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in a successful
defense of any action, suit or proceeding) is asserted by a director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issuer.
89
<PAGE>
EXPERTS
The financial statements as of December 31, 1994 and for each of the
two years in the period ended December 31, 1994 included in this Prospectus have
been so included in reliance on the report of Price Waterhouse LLP, independent
certified public accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, a
Registration Statement on Form SB-2 with respect to the Common Stock being
registered hereby. This Prospectus does not contain all the information
contained in such Registration Statement, as permitted by the Rules and
Regulations of the Securities and Exchange Commission. The Registration
Statement, including exhibits thereto, may be inspected without charge, and
copies of all or any part thereof may be obtained from the Commission's
principal office in Washington, D.C. at Room 1024, 450 Fifth Street N.W.,
Washington, DC. 20549, and at the Commission's regional offices at 7 World Trade
Center, Suite 1300, New York, New York 10048, and at Northwest Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained upon written request addressed to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, DC 20549, at
prescribed rates. For further information with respect to the Company, the
Common Stock being registered hereby and the contents of any contract or
document referred to herein, reference is made to the Registration Statement and
the exhibits filed as a part thereof.
90
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page Reference
Report of Independent Certified Public Accountants..........................F-1
Consolidated Balance Sheet
as of December 31, 1994.....................................................F-2
Consolidated Statements of Operations
for the Years Ended December 31, 1994 and 1993..............................F-3
Consolidated Statement of Changes in
Stockholders' Equity for the Years Ended
December 31, 1994 and 1993..................................................F-4
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1994 and 1993..............................F-5
Notes to Consolidated Financial Statements
for the Year Ended December 31, 1994........................................F-7
Consolidated Balance Sheet (Unaudited)
as of September 30, 1995 and December 31, 1994.............................F-24
Consolidated Condensed Statements of Operations
(Unaudited) for the Three and Nine Months Ended
September 30, 1995 and 1994................................................F-25
Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended September 30, 1995 and 1994......................F-26
Notes to Consolidated Financial Statements
for the (Unaudited) Interim Nine Month Period
Ended September 30, 1995 ..................................................F-27
91
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders
of NAL Financial Group Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
NAL Financial Group Inc. and its subsidiaries at December 31, 1994, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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 the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
- -------------------------
PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
March 29, 1995
F-1
<PAGE>
NAL Financial Group Inc.
Consolidated Balance Sheet
December 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Loan and lease receivables:
Automotive finance contracts, net $23,974,929
Consumer loans receivable, net 1,491,694
Mortgage loans receivable, net 4,822,667
Less: Allowance for possible losses (305,000)
-----------
Net loan and lease receivables 29,984,290
Cash and cash equivalents 664,848
Restricted cash 1,061,041
Net investment in operating leases 1,230,647
Returned vehicle inventory, net 150,779
Real estate owned 44,250
Debt issue costs, net 214,112
Property and equipment, net 510,885
Accrued interest receivable 167,692
Other assets, net 489,809
-----------
Total assets $34,518,353
===========
Liabilities and Stockholders' Equity
Pa$ticipations and notes payable $22,502,041
Accounts payable and accrued expenses 400,057
Security deposits 344,834
Other liabilities 242,660
Deferred income taxes 110,460
Due to stockholder 62,494
-----------
Total liabilities 23,662,546
-----------
Commitments and contingencies (Notes 8 and 14) --
-----------
Stockholders' equity:
Preferred stock, $1,000 par value, 10,000,000 shares authorized, no
shares issued --
Common stock, $.15 par value, 50,000,000 shares authorized,
5,592,968 shares issued and outstanding 838,945
Paid in capital 8,483,714
Retained earnings 1,533,148
-----------
Total stockholders' equity 10,855,807
-----------
$34,518,353
===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
<PAGE>
NAL Financial Group Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 1994 and 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
-------- ------
<S> <C> <C>
Revenue:
Interest income $ 3,322,577 $ 4,371,156
Purchase discount accretion 2,064,714 2,959,355
Gain on sale of loan pools 2,292,249 1,925,230
Gain on loan sales to correspondents -- 206,255
Rental 79,390 --
Other income 478,153 68,422
Lease termination losses, net (103,883) (243,327)
----------- -----------
8,133,200 9,287,091
----------- -----------
Expenses:
Interest 1,957,420 2,965,941
Salaries, wages, and employee benefits 2,337,557 2,270,771
Commissions 69,482 48,468
Professional services 364,927 532,287
Consulting fees 537,793 600,000
Provision for credit losses 572,636 --
Servicing fees 79,503 320,242
Depreciation and amortization 320,294 289,835
Other operating expenses 1,235,922 938,743
----------- -----------
7,475,534 7,966,287
----------- -----------
Income before provision for income taxes and
extraordinary losses 657,666 1,320,804
Provision for income taxes 263,343 522,616
----------- -----------
394,323 798,188
Extraordinary loss on early extinguishment of debt
(net of taxes of $188,745) -- 326,949
----------- -----------
Net income $ 394,323 $ 471,239
=========== ===========
Per share data:
Primary:
Income before extraordinary item $ 0.08 $ 0.15
Extraordinary item -- (0.16)
----------- -----------
Net income $ 0.08 $ 0.09
=========== ===========
Fully diluted:
Income before extraordinary item $ 0.07 $ 0.14
Extraordinary item -- (0.06)
----------- -----------
Net income $ 0.07 $ 0.08
=========== ===========
</TABLE>
F-3
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
NAL Financial Group Inc.
Consolidated Statement of Changes in Stockholders' Equity
For the Years Ended December 31, 1994 and 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock Common Stock Less: Total
Par Par Paid in Note Retained Stockholders'
Shares Value Shares Value Capital Receivable Earnings Equity
------ ----- ------ ----- ------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 -- $ -- 10,000 $ 10,000 $ 2,471,169 $ -- $ 3,101,034 $ 5,582,203
Redemption of stock -- -- (5,928) (5,928) (1,464,909) -- (929,163) (2,400,000)
Capital contribution -- -- -- -- 1,900,000 -- -- 1,900,000
Issuance of stock -- -- 214 214 289,065 -- -- 289,279
Note receivable from stockholder -- -- -- -- -- (2,034,638) -- (2,034,638)
Net income -- -- -- -- -- -- 471,239 471,239
------ ------ --------- -------- ---------- ---------- ---------- -----------
Balance, December 31, 1993 -- -- 4,286 4,286 3,195,325 (2,034,638) 2,643,110 3,808,083
Dividends -- -- -- -- -- -- (1,069,460) (1,069,460)
Redemption of stock -- -- (2,143) (2,143) (1,597,670) 2,034,638 (434,825) --
Redemption of predecessor stock
in connection with the merger -- -- (2,143) (2,143) (1,597,655) -- -- (1,599,798)
Issuance of stock in connection
with the merger -- -- 5,592,968 838,945 8,483,714 -- -- 9,322,659
Net income -- -- -- -- -- -- 394,323 394,323
------ ------ --------- -------- ---------- ---------- ---------- -----------
Balance, December 31, 1994 -- $ -- 5,592,968 $838,945 $8,483,714 $ -- $1,533,148 $10,855,807
====== ====== ========= ======== ========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
NAL Financial Group Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1994 and 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
-------- ------
<S> <C> <C>
Cash flows from operating activities:
Net income 394,323 $ 471,239
Adjustments to reconcile net income to net cash
provided by operating activities:
Accretion of purchase discount (2,064,714) (2,959,356)
Provision for credit losses 572,636 --
Depreciation and amortization 320,294 289,835
Gain on sales of loan pools (2,292,249) (1,925,230)
Gain on loan sales to correspondents -- (206,255)
Non-cash portion of extraordinary loss -- 278,841
Changes in assets and liabilities:
Payments received on automotive finance contracts, net 7,417,861 11,226,692
Payments received on consumer loans receivable, net 8,421,534 6,483,220
Payments received on mortgage loans receivable, net 5,083,106 13,055,970
Decrease in due from regulatory agencies -- 326,652
Decrease in restricted cash 921,492 3,188,547
Increase in real estate owned (44,250) --
Decrease (increase) in returned lease inventory 94,427 (44,839)
(Increase) decrease in other assets and accrued interest
receivable (125,605) 274,526
Decrease (increase) in due from affiliates 43,667 (998,817)
Increase (decrease) in security deposits 101,759 (463,189)
Increase (decrease) in other liabilities 88,271 (668,026)
(Decrease) increase in accrued income taxes (33,590) 51,285
------------ ------------
Net cash provided by operating activities 18,898,962 28,381,095
------------ ------------
Cash flows from investing activities:
Proceeds from sale of loan pools 14,614,031 8,658,496
Purchase of automotive finance contracts (22,681,679) (1,045,276)
Purchase of vehicles under operating leases (1,283,300) --
Purchase of consumer loans receivable (14,795,381) (7,848,436)
Purchase and origination of mortgage loans receivable (221,713) (19,884,294)
Purchase of property and equipment (253,004) (36,237)
------------ ------------
Net cash used in investing activities (24,621,046) (20,155,747)
------------ ------------
</TABLE>
(Continued)
F-5
<PAGE>
NAL Financial Group Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1994 and 1993
(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
------- ------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of common stock $ 7,722,861 $ --
Stock redemption -- (1,558,583)
Loan to stockholder -- (703,588)
Proceeds to participations and notes payable 33,911,781 54,955,306
Repayment of participations and notes payable (34,249,908) (60,694,835)
Payment of debt issue costs (24,352) (497,454)
Dividends (1,069,459) --
------------ ------------
Net cash provided by (used in) financing
activities 6,290,923 (8,499,154)
------------ ------------
Net increase (decrease) in cash and cash equivalents 568,839 (273,806)
Cash and cash equivalents, beginning of year 96,009 369,815
------------ ------------
Cash and cash equivalents, end of year $ 664,848 $ 96,009
============ ============
Supplemental disclosures of cash flow information
Cash paid during the year for interest $ 1,859,353 $ 3,635,737
============ ============
Cash paid during the year for taxes $ 320,501 244,031
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE>
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
1. Organization and Nature of Operations
NAL Financial Group Inc. (the "Company") commenced operations in June 1991 as a
specialized finance company for the purpose of engaging in
consumer finance transactions involving the origination,
purchase, remarketing and servicing of consumer loan and lease
receivables. Since June 1994, the Company's principal business
has been the acquisition and servicing of automotive loans and
leases originated by dealers in connection with sales or leases
to individuals with sub-prime credit.
On November 30, 1994, the Company merged with Corporate Financial
Ventures, Inc. ("CFVI"), a public company (the "Merger"). Under the
terms of the Merger, the Company's stockholders received 3,160,000
shares of CFVI in exchange for all outstanding shares of stock of the
Company. Stockholders of the Company received approximately 56% of the
outstanding common stock of CFVI. Additionally, the Company raised net
proceeds of approximately $7,700,000 in a private placement of
1,549,667 shares of its common stock in connection with the merger.
The Merger has been accounted for as a reverse acquisition by the
Company. Upon completion of the Merger, CFVI assumed the historic
operations of the Company and changed its name to NAL Financial Group
Inc. As the Merger is not considered a business combination as defined
in Accounting Principles Board Opinion No. 16, "Business
Combinations", pro forma information is not presented. The operations
of CFVI prior to the Merger were not significant.
The Company operates its business through four wholly-owned
subsidiaries. The principal operations of the Company are conducted
through NAL Acceptance Corporation ("NAC"). NAL Insurance Services,
Inc. ("NIS") provides automobile and other forms of insurance
services. NAL Mortgage Corporation ("NMC") presently is inactive.
Performance Cars of South Florida, Inc. ("PCSF") was incorporated in
January 1995 to conduct the Company's used vehicle operations. Unless
otherwise specified, references to the Company includes NAC, NIS, NMC,
and PCSF.
2. Accounting Policies
A summary of the significant accounting policies followed in the
preparation of the accompanying financial statements is presented
below:
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated.
F-7
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
Revenue Recognition
Interest income is recognized using the interest method over the
contractual term of the loans and leases and is recognized in full
upon early termination of individual lease contracts. Certain loan and
lease origination costs are deferred and amortized to interest income
over the life of the related loans and leases using the interest
method. Purchase discount is recognized using the interest method after
considering actual and estimated prepayment rates. Revenue from
operating leases is recognized as rental revenue on a straight-line
basis over the lease term.
Interest on acquired non-performing loans is fully reserved and is
recognized as income when collected.
Lease termination gains (losses) are recorded when earned and represent
the difference between the sales price of the returned vehicle and the
net book value. Customer termination penalties are recognized when
earned and are included in lease termination gains.
Late charges and other miscellaneous fees are credited to income as
earned.
Loans and Leases
Mortgage loans, consumer loans, and automotive finance
contracts purchased or originated for investment are stated at cost,
net of purchase discount and unearned interest income, since the
Company has the ability and presently intends to hold the portfolios
to maturity. An allowance for uncollectible interest is provided for
loans 90 days or more delinquent. Purchase discounts are deferred and
recognized over the lives of the related loans and leases using the
interest method. Unamortized purchase discount is included in interest
income upon full repayment.
An allowance for credit losses is maintained at a level that
management considers adequate to provide for potential losses based
upon an evaluation of known and inherent risks in the portfolios.
Management's periodic evaluation is based upon an analysis of the
portfolios, historical loss experience, current economic conditions,
collateral value and other relevant factors. Future adjustments to the
allowance may be necessary if economic conditions differ substantially
from the assumptions used in making the evaluation.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" ("SFAS 114") in May 1993 which was amended by Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures"
F-8
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
("SFAS 118") in October 1994. SFAS 114 requires a creditor to evaluate the
collectibility of both contractual interest and principal of certain impaired
receivables when assessing the need for a loss accrual and to measure loans that
are restructured in a troubled debt restructuring to reflect the time value of
money. SFAS 114 is not applicable to leases and large groups of smaller-balance
homogeneous loans that are collectively evaluated for impairment. SFAS 118
amends SFAS 114 to allow a creditor to use existing methods for recognizing
interest income on an impaired loan. SFAS 118 also amends the disclosure
requirements in SFAS 114 to require information about the recorded investment in
certain impaired loans and about how a creditor recognizes interest income
related to those impaired loans. SFAS 114, as amended by SFAS 118, applies to
financial statements for fiscal years beginning after December 15, 1994. The
Company plans to adopt SFAS 114, as amended by SFAS 118, in the first interim
period of fiscal year 1995. The impact of adoption on the financial position or
results of operations is not expected to be material.
At December 31, 1994, the Company had approximately $236,000 in non-accrual
loans. Had these loans been on full-accrual, interest income of $26,000 would
have been recognized for the year then ended.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, the Company has defined
cash and cash equivalents as those highly liquid investments purchased with an
original maturity of three months or less.
Restricted Cash
Restricted cash represents deposit accounts established pursuant to
servicing agreements between the Company and various participants which
represents collections from customers, and cash reserve accounts established
under certain participation agreements. The collection accounts are settled
monthly by the Company with the participants.
Net Investment in Operating Leases
Operating automotive leases to third parties are originated by dealers and
acquired by the Company, which assumes ownership of the vehicle. Vehicles held
under operating lease agreements are recorded at cost and depreciated on a
straight-line basis over the lease term to the estimated residual value.
Returned Vehicle Inventory
Vehicles acquired through repossession or termination of a lease or loan
are valued at the lower of the unpaid principal balance or market value at the
date of repossession.
Real Estate Owned
Real estate acquired in settlement of loans is carried at the lower of cost
or fair value of the asset minus estimated costs to sell.
F-9
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
Debt Issue Costs
Debt issue costs are capitalized and amortized to operations over the life
of the related debt, which currently approximates three years.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is computed using the straight line method over the estimated
useful lives of the related assets.
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax
return.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
This method requires an asset and liability approach to accounting for income
taxes on a current and deferred basis using current income tax rates. Deferred
income tax assets are recognized for temporary differences that will result in
deductible amounts in future years. Deferred income tax liabilities are
recognized for temporary differences that will result in taxable amounts in
future years.
Concentration of Credit Risk
The Company considers its primary market area for loan and lease
origination activities to be the state of Florida. However, the properties
collateralizing the purchased loan receivable portfolios are located primarily
throughout the eastern United States, Texas and California. Although the Company
has a diversified loan portfolio, a substantial portion of its debtors' ability
to honor their obligations to the Company is dependant upon the economic
stability of these areas.
Interest Rate Risk
Loan portfolio purchases are funded by participations which bear interest
at fixed rates, or at variable rates subject to certain minimum percentages. The
durations of the participations are determined by the durations of the related
loan portfolios since the proceeds of obligor payments are applied to repayment
of participations. This also minimizes fluctuations in the difference between
the interest rate earned on loans and the interest rate incurred on
participations.
Earnings Per Share
Earnings per common share are computed based on the weighted average number
of common and common equivalent shares outstanding during the period. The
weighted average number of shares of common and common equivalent shares
outstanding used to compute primary and fully diluted earnings per share was
5,192,968 and 5,592,968, respectively.
F-10
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
Reclassification
Certain 1993 amounts have been reclassified to conform with current year
presentation.
3. Automotive Finance Contracts
<TABLE>
<CAPTION>
December 31,
1994
------------
<S> <C>
Direct finance leases:
Minimum lease payments $ 4,936,889
Estimated residual values (at maturity) 2,985,254
-----------
Total direct finance leases 7,922,143
Loan contracts 8,175,202
Advances to dealers 10,697,787
-----------
26,795,132
Less: Unearned income (2,004,435)
Purchase discount (815,768)
-----------
Automotive finance contracts, net $23,974,929
===========
</TABLE>
Automotive finance contracts are collateralized primarily by the related
automobiles and the related security deposits on leases. These contracts are
pledged as security for the participations and notes payable.
Advances to dealers represent amounts funded by the Company to automobile
dealerships which are collateralized by loan and lease receivables of the dealer
serviced for a fee by the Company. At December 31, 1994, approximately
$15,463,000 in loan and lease receivables are being serviced by the Company
relating to these advances. These advances bear interest at fixed rates, or at
variable rates subject to certain minimum percentages. The duration of these
advances are determined by the duration of the related collateralized loan and
lease receivables.
At December 31, 1994, contractual maturities of automotive finance
contracts are as follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Direct finance
leases $ 2,387,916 $ 1,650,962 $ 1,570,283 $ 1,648,085 $ 633,899 $ 30,998 $ 7,922,143
Loan contracts 2,589,119 1,871,737 1,717,011 1,234,329 528,315 234,691 8,175,202
Advances to
dealers 3,875,233 3,462,894 2,278,480 751,143 330,037 -- 10,697,787
----------- ----------- ----------- ----------- ----------- ---------- -------------
$ 8,852,268 $ 6,985,593 $ 5,565,774 $ 3,633,557 $ 1,492,251 $ 265,689 $ 26,795,132
=========== =========== =========== =========== =========== ========== =============
</TABLE>
F-11
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
It is the Company's experience that generally a portion of the portfolios
are repaid before the contractual maturity dates. Accordingly, the above
tabulation is not to be regarded as a forecast of the timing of future cash
collections. Additionally, this tabulation assumes liquidation of the residual
values upon expiration of the leases.
4. Consumer Loans Receivable
<TABLE>
<CAPTION>
December 31,
1994
------------
<S> <C>
Loans receivable secured by:
Boats $ 442,856
Mobile homes 524,274
Other 1,365,886
----------
2,333,016
Less: Unearned purchase discount (841,322)
----------
Consumer loans receivable, net $1,491,694
==========
</TABLE>
The consumer loans receivable portfolio is diversified with a customer base
located primarily throughout the eastern United States. The portfolio is pledged
as security for the participations.
At December 31, 1994, contractual maturities of consumer loans receivable
are as follows:
<TABLE>
<S> <C>
Fully matured $ 800,067
1995 647,253
1996 263,736
1997 137,113
1998 93,741
1999 88,312
Thereafter 302,794
----------
$2,333,016
==========
</TABLE>
The fully matured loans totaling $800,067 were purchased by the Company at
a substantial discount and are considered non-performing at December 31, 1994.
The Company has a net investment of approximately $174,000 in these loans at
December 31, 1994.
It is the Company's experience that a portion of the portfolio is repaid
before the contractual maturity date. Accordingly, the above tabulation is not
to be regarded as a forecast of the timing of future cash collections.
F-12
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
5. Mortgage Loans Receivable
<TABLE>
<CAPTION>
December 31,
1994
------------
<S> <C>
Residential first mortgages $3,486,751
Residential second mortgages 2,554,713
----------
6,041,464
Less: Unearned purchase discount (1,218,797)
----------
Mortgage loans receivable, net $4,822,667
==========
</TABLE>
At December 31, 1994, contractual maturities of mortgage loans receivable
are as follows:
<TABLE>
<S> <C>
Fully matured $ 394,063
1995 651,789
1996 199,662
1997 266,894
1998 757,749
1999 148,542
Thereafter 3,622,765
----------
$6,041,464
==========
</TABLE>
The fully matured loans totaling $394,063 were purchased by the Company at
a substantial discount and are considered non-performing at December 31, 1994.
The Company has a net investment of approximately $93,000 in
these loans at December 31, 1994.
It is the Company's experience that generally a portion of the portfolio is
repaid before the contractual maturity dates. Accordingly, the above tabulation
is not to be regarded as a forecast of the timing of future cash collections.
At December 31, 1994, the loans had stated rates ranging from 6% to 18%,
and consisted of 58% and 42% of fixed-rate and adjustable-rate instruments,
respectively. The adjustable rate loans have interest rate adjustment
limitations and are generally indexed to average one-year U.S. Treasury Bill
rates. These loans are pledged as security for the participations.
F-13
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
6. Allowance for Possible Losses
Changes in allowance for loan losses for the years ended December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Balance at beginning of period $ 277,316 $ 277,316
Provision charged to operations 572,636 --
Loans charged off, net of recoveries (544,952) --
--------- ---------
Balance at end of period $ 305,000 $ 277,316
========= =========
</TABLE>
During March and May 1994, the Company purchased two loan portfolios for
approximately $3,400,000 at significant discounts. A substantial portion of
these portfolios was comprised of non-performing loans. An analysis performed
subsequent to these acquisitions regarding future collections on loans within
these portfolios which had fully-matured resulted in the net charge-off of a
portion of the purchase price ($457,000 in 1994). At December 31, 1994, the
Company has a net investment remaining of approximately $897,000 in these
portfolios.
7. Net Investment in Operating Leases
<TABLE>
<CAPTION>
December 31,
1994
-------------
<S> <C>
Vehicles held under operating
leases, at cost $1,283,300
Less: Accumulated depreciation (52,653)
------------
$1,230,647
============
</TABLE>
At December 31, 1994, future minimum rental revenue on operating leases
are as follows:
<TABLE>
<S> <C>
1995 $322,897
1996 307,326
1997 216,253
---------
$846,476
=========
</TABLE>
F-14
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
8. Property and Equipment
Property and equipment at December 31, 1994 consists of the following:
<TABLE>
<CAPTION>
Estimated
useful
Amount life
-------- ------------
<S> <C> <C>
Furniture, fixtures, and office equipment $ 646,899 5-7 years
Less: Accumulated depreciation (136,014)
------------
$ 510,885
============
</TABLE>
The Company leases office space under agreements which expire December
31, 2001.
The future minimum non-cancelable lease payments are as follows:
<TABLE>
<S> <C>
1995 $ 243,591
1996 253,300
1997 267,000
1998 280,876
1999 295,178
Thereafter 659,377
-----------
$ 1,999,322
===========
</TABLE>
F-15
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
9. Participations and Notes Payable
Participations and notes payable at December 31, 1994 consists of the
following:
<TABLE>
<S> <C>
Note payable under a $10 million (increased to $25 million in January 1995)
automobile loan and lease financing facility, interest due monthly at 5.5% over
LIBOR established and fixed at time of funding, (weighted average rate of 9.3%
at December 31, 1994) with General Electric Capital Corporation, secured by
certain automotive finance contracts. $ 11,019,914
Borrowing under participation arrangements with Fairfax Savings, a
Federal Savings Bank ("Fairfax"), interest at fixed rates ranging
from 10% to 12% (weighted average rate of 11.74% at December 31,
1994), principal and interest due monthly, secured by undivided
interests in automotive finance contracts, consumer loans receivable,
and mortgage loans receivable ranging from 80% to 95%. 9,321,395
Note payable under a $20 million restricted financing facility with
Congress Financial Corporation, interest due monthly at 2% over prime
rate (10.5% at December 31, 1994), secured by automotive finance
contracts, consumer loans receivable, and mortgage loans receivable. 977,123
Borrowing under participation arrangements with investors, secured by
undivided interests in automotive finance contracts, consumer loans receivable,
and mortgage loans receivable; interest at fixed rates ranging from 9% to 18%
(weighted average rate of 16% at December 31, 1994). 911,311
Unsecured note, interest at 25%, principal and interest payable monthly
through December 1995. 126,347
Unsecured note, non-interest bearing, payable in monthly installments of
$6,529 through February 1995, $100,000 balloon payment due March 1995. 105,012
Borrowing under participation arrangement with a stockholder, secured by
undivided interests in certain mortgage loans receivable, interest at a fixed
rate of 18%. 40,939
------------
$ 22,502,041
============
</TABLE>
F-16
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
The participation arrangements with Fairfax are accounted for as
collateralized borrowings. The agreements under the participation arrangements
specify the distribution of cash collections from the lease and loan
receivables. The order of distributions of cash flows received is as follows:
(1) Payment to Fairfax for principal and interest due on the
participations.
(2) Payment of any amounts payable to Fairfax which may have
arisen due to the Company's failure to perform its obligation under the
participation agreement, at which time Fairfax would have assumed and incurred
expenses to perform these responsibilities.
(3) An amount equal to 25% to 50% of the remaining cash balance, if any,
will be deposited into segregated interest bearing accounts at Fairfax (the
reserve accounts) until the balances in the reserve accounts equal 25% to 50% of
the principal balances of the participation agreements. The reserve accounts at
December 31, 1994 are included in the consolidated balance sheet as restricted
cash.
(4) Payment to the Company of the remaining cash in the operating account,
if any, including all payments and reimbursements due under the servicing
agreement.
The reserve accounts are pledged as additional collateral under the
agreements. Should the cash collections from the loan and lease receivables be
insufficient to pay Fairfax principal and interest due on the participation
arrangements, or to pay Fairfax for the cost of servicing obligations it may
assume under the agreements, any shortfall may be withdrawn from the reserve
accounts. Accordingly, any loss of Fairfax's participation principal and
interest is paid from the reserve account and is not absorbed by Fairfax.
Restricted cash pledged as additional collateral to Fairfax at December 31, 1994
amounted to $886,000.
The Company services the loan and lease receivables collateralizing the
participation arrangements, including payment collection and posting, contact
with customers, and repossession and disposal of collateral on defaulted
contracts.
The December 31, 1994 principal balance of automotive finance contracts,
mortgage loans receivable and consumer loans receivable subject to the
participation arrangements with Fairfax are as follows:
<TABLE>
<S> <C>
Automotive finance contracts $ 9,491,924
Mortgage loans receivable 3,971,526
Consumer loans receivable 760,624
-------------
$ 14,224,074
=============
</TABLE>
The weighted average coupon rate of the above was 15.23% at December 31,
1994.
F-17
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
Scheduled maturities of participations and notes payable at December 31,
1994 are as follows:
<TABLE>
<S> <C>
1995 $ 5,509,824
1996 4,379,141
1997 3,796,593
1998 3,495,428
1999 2,437,409
Thereafter 2,883,646
-------------
$ 22,502,041
=============
</TABLE>
Since the repayment of the above debt is directly related to the timing of
the future cash collections of the loan and lease receivables, the above
schedule of maturities may not be representative of the actual repayments. The
above schedule of maturities excludes the balances held in the reserve accounts.
The Company must maintain certain net worth ratios based on covenants
within one of its debt agreements.
10. Stockholders' Equity
On April 30, 1993, the Company redeemed 5,928 shares of common stock held
by First Trustmark ("FTM") for $2,400,000 which, in management's opinion, did
not exceed the fair value of the shares. A portion of the proceeds was applied
to the cancellation of the receivable due from FTM to the Company. In addition,
FTM agreed that the Company will file a consolidated tax return with FTM through
April 30, 1993. Due to FTM's tax net operating loss carryforwards, $1,900,000 of
the accrued income taxes recorded by the Company through date of redemption was
treated as a capital contribution in 1993.
On April 30, 1993, the Company exchanged 214 shares of its stock for 10%
minority interest in NAC.
In October 1993, the president and chief executive officer of the Company,
who is also a stockholder, purchased all outstanding shares not previously owned
by him to give him 95% ownership in the Company. The president of NAC owned the
remaining 5%. In connection with this transaction, the stockholder executed a
note in favor of the Company; the note bore interest at 5% and was due September
30, 1995. In June 1994, the Company redeemed 2,143 shares of its common stock
from this stockholder by cancelling the note.
Merger
In accordance with the terms of the Merger, of the 3,160,000 shares of
common stock issued to the Company's stockholders, 400,000 shares issued to
certain directors and officers were
F-18
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
placed in a Voting Trust under the terms of a Voting Trust Agreement. The
Voting Trust provides that, on any matter requiring stockholder vote, the
trustee will vote the shares in the same percentage as the other then issued and
outstanding shares of common stock are voted. Such shares may be released from
the Voting Trust pursuant to the following earn-out formula. Based upon the
Company's audited financial statements for the years ending December 31, 1995,
1996, and 1997, 10,000 shares will be released for each $150,000 of cumulative
net income after taxes the Company earns up to $3,000,000, and 5,000 shares will
be released for each $150,000 of cumulative net income after taxes in excess of
$3,000,000, less the number of shares previously released under this formula.
Any shares not released within three years will be cancelled. Originally, the
Company intended to account for the release of all shares held in the Voting
Trust as compensation expense. The Company has reassessed the accounting for
shares after further consideration of the relevant facts and circumstances and
has determined that the release of 340,000 of the 400,000 shares placed into the
Voting Trust will be considered additional consideration and not result in
compensation expense. The remaining 60,000 shares will still be considered
compensatory in nature resulting in a charge for the fair market value at the
date of release. Certain shares held in the Voting Trust have been excluded from
the computation of primary earnings per share, but have been included in the
calculation of fully diluted earnings per share.
Concurrent with the completion of the Merger, certain stockholders entered
into a Shareholders' Agreement whereby the stockholders agreed, among other
provisions, for the election of eight directors, two of which will be
independent directors. The Shareholders' Agreement also provides certain
limitations on transactions involving the stockholders' shares.
Stock Option Plan
The Company has adopted a stock option plan (the "Plan") which covers
600,000 shares of the Company's common stock. Under the terms of the Plan,
officers, directors, key employees and consultants of the Company are eligible
to receive incentive as well as non-qualified stock options and stock
appreciation rights. Incentive stock options granted under the Plan are
exercisable for a period of up to 10 years from the date of grant at an exercise
price which is not less than the fair market value of the Company's common
stock on the date of the grant. For any stockholder owning more than 10% of the
outstanding common stock, incentive stock options are exercisable for a period
of up to five years from the date of grant at an exercise price which is not
less than 110% of the fair market value of the Company's common stock on the
date of the grant. Non-qualified stock options and stock appreciation rights may
be granted on terms determined by the Company's Board of Directors. Stock
appreciation rights give the holder the privilege of surrendering such rights
for the appreciation in the Company's common stock between the time of grant and
surrender.
Effective December 15, 1994, the Company granted 280,000 options under the
Plan, 150,000 to non-management employees and 130,000 to members of management
of the Company. The options granted to non-management employees carry an
exercise price of
F-19
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
$6.00 with an expiration date of December 15, 2004. These options vest
after three years. The options granted to management carry exercise prices
ranging from $6.00 to $6.60 with expiration dates of December 15, 1999 -
December 15, 2004. These options vest on a pro-rata basis over periods of three
to four years, and may be exercised only if the employee is employed by the
Company at the time of exercise, and the Company has achieved specific earnings
goals for the applicable year.
11. Income Taxes
The components of the provision for income taxes for the years ended
December 31, 1994 and 1993, consist of the following:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Current tax expense:
Federal $ 231,591 $ 649,115
State 43,981 103,287
--------- ---------
275,572 752,402
--------- ---------
Deferred tax benefit:
Federal (10,390) (375,605)
State (1,839) (42,926)
--------- ---------
(12,229) (418,531)
--------- ---------
Total provision for income taxes
including extraordinary item 263,343 333,871
Benefit from extraordinary item -- 188,745
--------- ---------
Total provision for income taxes
excluding extraordinary item $ 263,343 $ 522,616
========= =========
</TABLE>
The income tax provision differs from the amount determined by multiplying
pre-tax income by the statutory federal income tax rate. The reconciliation
between the expected tax provision and the actual tax provision is as follows:
<TABLE>
<S> <C> <C>
Income taxes at statutory rate 223,606 $462,281
State taxes 27,814 47,219
Other 11,923 13,116
-------- --------
Provsion for income taxes $263,343 $522,616
======== ========
</TABLE>
F-20
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
The net deferred income tax liability as of December 31, 1994, is comprised
of the following temporary differences:
<TABLE>
<S> <C>
Deductible Temporary Differences
Deferred gain on sale of loan portfolio $ 89,392
Depreciation 2,400,978
Bad debt reserves 114,772
Other 7,189
----------
Deferred income tax asset 2,612,331
----------
Taxable Temporary Differences
Direct financing leases (2,709,132)
Capitalized loan costs (13,659)
----------
Deferred income tax liability (2,722,791)
----------
Net Deferred income tax liability $ (110,460)
==========
</TABLE>
12. Related Party Transactions
An affiliate provided executive and financial services to the Company
during 1994 and 1993. The Company reimbursed the affiliate $675,000 and $600,000
for the years ended December 31, 1994 and 1993, respectively, for these services
under a consulting agreement. The consulting agreement includes providing advice
on the purchase and sale of consumer loan and lease portfolios and financing
arrangements. Under the terms of the agreement, the Company pays the affiliate a
fee of $50,000 per month through March 1995. During 1994, the Company prepaid
the remaining amounts due under the contract at a $75,000 discount. The
unamortized portion of the payment in the amount of $131,000 is included in
prepaid expenses at December 31, 1994.
In October 1994, the Company sold a repossessed boat to an officer of the
Company in consideration for a note in the amount of $89,000 and the offset by
the Company of a $21,000 payable to the officer. The note bears interest at an
annual rate of 10% and is payable in October 1995.
On November 30, 1994, the Company sold a portfolio of 14 loans with a total
principal balance of $1.1 million to the president and chief executive officer
of the Company for a price of $591,000. These loans were included in a portfolio
purchased during 1994 at a significant discount. The portion of the purchase
price allocated to the loans sold approximated the sales price to the officer;
therefore, no gain or loss was recognized on the sale. The Company sold these
loans at a purchase price based on the estimated discounted cash flows
F-21
<PAGE>
NAL Financial Group Inc.
Notes to Consolidated Financial Statements
December 31, 1994
- --------------------------------------------------------------------------------
anticipated on the specific loans purchased. This is the same method the Company
uses to value all its bulk portfolio acquisitions. The sales price of the loans
of $591,000 offset $591,000 of a previously established liability owed by the
Company to the officer for bonuses and dividends. The Company continues to
service the loans for the officer.
Upon completion of the Merger, the Company entered into an employment
agreement (the "Agreement") with the president and chief executive officer of
the Company. The Agreement provides for a base salary of $275,000 per year plus
discretionary bonuses, as approved by the Board of Directors, in addition to
certain benefits. The Agreement is renewable annually for successive three year
periods; however, the president may terminate the Agreement upon written notice
the earlier of one year from the date of such notice or 90 days after his
replacement has been hired by the Company. The president may not terminate the
Agreement prior to three years from the date of the Agreement.
The Company provided payroll services to an affiliated company during 1994
under an agreement by which the affiliate reimburses the Company for payroll
advances. During 1994 the Company advanced the affiliate approximately $66,000
for payroll. At December 31, 1994, the Company had a receivable of $24,000 due
from this affiliate for advances.
The consolidated balance sheet at December 31, 1994 includes $715,965 of
related party receivables less $778,459 of related party payables.
13. Employee Benefits
The Company sponsors a 401(k) savings plan covering most employees.
Contributions made by the Company to the 401(k) plan are based on a specified
percentage of employee contributions. Total Company contributions were $22,787
and $38,117 for the years ended December 31, 1994 and 1993, respectively.
14. Litigation
The Company is involved in various litigation matters arising in the normal
course of business. Legal counsel's and management's assessment are that none of
these matters are anticipated to have a material adverse impact on the financial
position or results of operations of the Company.
15. Subsequent Events
In January 1995, the Company purchased a $1,800,000 automobile loan
portfolio at a purchase price of approximately $1,500,000, funded partially by
the facility with Congress Financial Corporation.
In March 1995, the Company commenced the private placement of $3,000,000 of
convertible subordinated debentures offered in debenture units. Each debenture
unit consists of $500,000 principal amount 9% convertible subordinated debenture
and 50,000
F-22
<PAGE>
warrants. The debentures mature the earlier of one year or the completion
of a "financing transaction", as that term is defined in the Confidential
Private Offering Memorandum. Each warrant entitles the warrant holder to
purchase one share of the Company's common stock for a three-year period
at an exercise price of $9.00 per share. Through March 29, 1995, the
Company has received $1,485,000 in connection with the offering.
F-23
<PAGE>
NAL FINANCIAL GROUP INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
ASSETS
Net loan and lease receivables $102,335,591 $30,289,290
Reserve for credit losses (3,057,193) (501,806)
------------ ------------
Net receivables 99,278,398 29,787,484
Cash and cash equivalents 473,348 664,848
Restricted cash 862,406 1,061,041
Net investment in operating leases 3,318,035 1,230,647
Returned automobile inventory, net 2,483,616 150,779
Debt issue costs, net 887,682 214,112
Property and equipment, net 1,096,538 510,885
Accrued interest receivable 1,370,390 167,692
Other assets, net 2,435,895 534,058
------------- ------------
Total assets $112,206,308 $34,321,546
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Borrowings:
Lines of credit and
warehouse facilities $31,732,937 $11,997,037
Debt participation interests 47,143,939 10,273,644
Convertible subordinated
debentures 8,065,965 ---
Other 34,575 231,359
------------- ------------
Total borrowings 86,977,416 22,502,040
Accounts payable and accrued
expenses 251,513 400,057
Security deposits 698,814 344,834
Accrued income taxes 432,950 110,460
Other liabilities 1,963,225 45,854
Due to shareholder 853,514 62,494
----------- ------------
Total liabilities 91,177,432 23,465,739
----------- ------------
Stockholders' equity
Preferred stock, S1,000 par value,
10,000,000 shares authorized,
no shares issued --- ---
Common stock, $.15 par value,
50,000,000 shares authorized,
6,550,347 and 5,592,968 shares
issued and outstanding at
September 30, 1995 and December
31, 1994, respectively 982,552 838,945
Paid in capital 17,443,384 8,483,714
Retained earnings 2,602,940 1,533,148
----------- -----------
Total stockholders' equity 21,028,876 10,855,807
----------- -----------
Total liabilities and
stockholders' equity $112,206,308 $34,321,546
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE>
NAL FINANCIAL GROUP,INC.
Consolidated Condensed Statements of Operations
<TABLE>
<CAPTION>
For the Nine Months For the Three Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES
Interest income $ 10,400,092 $ 2,020,177 $ 4,696,974 $ 583,928
Purchase discount
accretion 599,289 1,800,676 178,892 629,982
Gain on sale of
loan pools 127,673 2,137,024 127,673 697,262
Other income 1,241,140 239,833 876,510 118,302
------------ ------------ ------------ ------------
12,368,194 6,197,710 5,880,049 2,029,474
============ ============ ============ ============
EXPENSES
Interest expense 4,636,356 1,409,926 2,132,943 536,733
Operating expenses 4,514,227 3,683,617 2,056,174 1,445,123
Provision for
credit loss 1,412,138 355,548 709,362 221,026
Compensation expense
related to a Voting
Trust Arrangement
(Note 4) 80,000 -- -- --
------------ ------------ ------------ ------------
10,642,721 5,449,091 4,898,479 2,202,882
------------ ------------ ------------ ------------
Income (loss)
before provision
for taxes 1,725,473 748,619 981,570 (173,408)
Provision (credit)
for taxes 655,680 293,864 372,998 (65,727)
------------ ------------ ------------ ------------
Net Income (Loss) $ 1,069,793 $ 454,755 $ 608,572 ($ 107,681)
============ ============ ============ ============
PER SHARE DATA
Earnings per share:
Primary $ .18 $ .09 $ .10 S(.02)
Fully diluted .18 .08 .10 (.02)
Weighted average number
of shares outstanding:
Primary 5,875,228 5,192,968 6,144,997 5,192,968
Fully diluted 6,013,263 5,592,968 6,340,921 5,592,968
</TABLE>
F-25
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
NAL FINANCIAL GROUP INC.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,069,793 $ 4S4,755
Adjustments to reconcile net income to
cash provided by operating activities:
Accretion of purchase discount (599,289) (1,800,676)
Provision for credit losses 1,412,138 355,548
Depreciation and amortization 690,901 223,607
Gain on sale of loan pools (127,673) (2,137,024)
Non-cash charge related to Voting
Trust Arrangement 80,OOO --
Changes in assets and liabilities:
Payments received on receivables 31,788,300 15,412,737
Other, net 112,469 824,256
----------- -----------
Net cash provided by operating
activities 34,426,639 13,333,203
----------- -----------
Cash flows from investing activities:
Proceeds from sale of loan pools 1,622,723 15,173,690
Purchase of receivables (108,875,869) (21,732,535)
Purchase of property and equipment (688,907) (162,054)
----------- -----------
Net cash used in investing activities (107,942,053) (6,720,899)
----------- -----------
Cash flows from financing activities:
Net proceeds from financings 111,093,651 19,969,537
Repayments of financings (40,661,708) (25,768,637)
Issuance of common stock 2,100,950 --
Note payable from shareholder 791,021 --
Payment of dividends -- (618,000)
----------- -----------
Net cash provided by (used in)
financing activities 73,323,914 (6,417,100)
----------- ------------
Net (decrease) increase in cash
and cash equivalents (191,500) 195,204
Cash and cash equivalents,
beginning of year 664,848 96,009
----------- -----------
Cash and cash equivalents,end of year $ 473,348 $ 291,213
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for interest $3,964,533 $1,204,499
========== ==========
Cash paid during period for taxes $ 345,648 $ 302,660
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-26
<PAGE>
NAL Financial Group Inc.
Notes To Consolidated Financial Statements
September 30, 1995
1. BASIS OF PRESENTATION
The interim financial information of NAL Financial Group Inc. (the
"Company"), which is included herein, is unaudited and has been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. In the opinion of
management, these interim financial statements include all the adjustments
necessary to fairly present the results of the interim periods and all such
adjustments are of a normal recurring nature. The interim financial statements
presented herein include the accounts of the Company and its wholly-owned
subsidiaries and should be read in conjunction with the audited financial
statements, and the footnotes thereto, for the year ended December 31, 1994.
Certain 1994 amounts have been reclassified to conform with the current year
presentation.
Operating results for the nine and three month periods ended September 30,
1995 are not necessarily indicative of the results which may be expected for the
year ended December 31, 1995.
2. ORGANIZATION AND NATURE OF OPERATIONS
The Company commenced operations in June 1991 as a specialized finance
company for the purpose of engaging in consumer finance transactions involving
the origination, purchase, remarketing and servicing of consumer loan and lease
receivables. Since June 1994, the Company's principal business has been the
acquisition and servicing of automotive loans and leases originated by dealers
in connection with sales or leases to individuals with sub-prime credit.
On November 30, 1994, the Company merged with Corporate Financial Ventures,
Inc. ("CFVI"), a public company (the "Merger"). Under the terms of the Merger,
the Company's stockholders received 3,160,000 shares of CFVI in exchange for all
outstanding shares of stock of the Company. Stockholders of the Company received
approximately 56% of the outstanding common stock of CFVI. The Merger has been
accounted for as a reverse acquisition of the Company. Upon completion of the
Merger, CFVI assumed the historic operations of the Company and changed its name
to NAL Financial Group Inc. The operations of CFVI prior to the Merger were not
significant.
F-27
<PAGE>
3. LOAN AND LEASE RECEIVABLES
Loan and lease receivables as of September 30, 1995 and December 31, 1994
consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Automotive finance contracts
Gross contracts receivable $ 104,556,879 $ 26,795,132
Less: Unearned interest (6,277,920) (2,004,435)
Deferred acquisition fees (105,485) --
Unamortized acquisition discount -- (815,768)
------------- -------------
98,173,474 23,974,929
Consumer contracts receivable
Gross contracts receivable 3,087,354 2,333,016
Less: Unearned interest (435,030) --
Unamortized acquisition discount (351,349) (841,322)
------------- -------------
2,300,975 1,491,694
Mortgage loans receivable
Gross loans receivable 2,545,423 6,041,464
Less: Unamortized acquisition discount (684,281) (1,218,797)
------------- -------------
1,861,142 4,822,667
------------- -------------
Net loan and lease receivables $102,335,591 $30,289,290
============= =============
</TABLE>
The reserve available for credit losses consists of an allowance for losses
established through a provision from earnings, non-refundable contract
acquisition discounts on automotive finance contracts purchased from dealers,
and refundable reserves such as dealer holdback. Prior to the end of the third
quarter of 1995, the Company amortized the non-refundable acquisition discount
to income over the life of the related receivables as an enhancement of yield.
However, beginning with the fourth quarter of 1995, management has decided to
cease amortization and allocate the entire non-refundable acquisition discount
to the reserve available for credit losses.
The following table sets forth the components of the total reserve
available for credit losses as of September 30, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Non-refundable acquisition discount, net $1,890,234 ---
Allowance for credit losses 572,955 $ 305,000
Dealer holdback 594,004 196,806
---------- ----------
Total reserve available for credit losses $3,057,193 $ 501,806
========== ==========
</TABLE>
F-28
<PAGE>
4. VOTING TRUST ARRANGEMENT
Of the 3,160,000 shares of the Company's common stock received by certain
stockholders in conjunction with the merger of the Company in November 1994,
400,000 shares were placed into a voting trust arrangement by which shares may
be released on an annual basis pursuant to a formula tied to net income earned
by the Company. Any shares not released from the arrangement at the end of three
years will be canceled.
Management has evaluated the accounting treatment relating to the potential
release of the shares under the arrangement using recent accounting guidance and
the relevant facts and circumstances, and has determined that the potential
release of approximatly 340,000 shares of the total amount of shares held
under the arrangement is not compensatory. The potential release of the
remaining 60,000 shares is considered compensatory based on the relevant facts
and circumstances, and accordingly, an expense will be reflected for financial
reporting purposes as these shares become eligible for release. This expense
will be a non-cash charge and will not affect working capital or total
stockholders' equity.
Accordingly, compensation expense of $80,000 has been recorded for the nine
months ended September 30, 1995 for the portion of the 60,000 shares that have
become eligible for release under the agreement.
5. Subsequent Events
From October 1995 to December 1995, the Company issued and sold, in private
placement transactions to accredited investors, an aggregate of $5,925,000
principal amount of 9.00% Convertible Subordinated Debentures (the
"Debentures"). The Debentures were offered and sold in conjunction with warrants
to purchase shares of the Company's common stock as "Debenture Units". The
Debentures are subordinated to senior indebtedness and bear maturities of one
year. At September 30, 1995, the Company had $8,500,000 principal amount of
previously issued Debentures outstanding, of which Debentures with an aggregate
principal amount $1,360,000 converted to shares of the Company's Common Stock
during the period October 1995 to December 1995.
In December 1995, the Company completed the sale of approximately $40
million of automobile loans in a privately-placed securitization transaction.
F-29
<PAGE>
No dealer, salesperson or other person has been authorized in connection with
this offering to give any information or to make any representations other than
those contained in this Prospectus. This Prospectus does not constitute an offer
or a solicitation in any jurisdiction to any person to whom it is unlawful to
make such an offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create an implication
that there has been no change in the circumstances of the Company or the facts
herein set forth since the date hereof.
----------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Prospectus Summary.........................................................3
The Company................................................................3
The Offering...............................................................4
Summary Financial
Information..............................................................8
Risk Factors..............................................................10
Use of Proceeds...........................................................19
Market for Common Equity
and Related Stockholder
Matters.................................................................19
Capitalization............................................................21
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations..............................................................21
Business of the Company...................................................45
Management................................................................65
Certain Transactions......................................................73
Principal Stockholders....................................................76
Description of Securities.................................................80
Selling Security Holders..................................................87
Plan of Distribution......................................................89
Legal Matters.............................................................90
Statement of Indemnification..............................................90
Experts...................................................................91
Additional Information....................................................91
Financial Statements.....................................................F-1
</TABLE>
79,849 Shares of Common Stock
Offered by Certain Selling
Security Holders as Offered
by Prospectus dated December 15, 1995
613,581 Shares of Common Stock
offered by certain
Selling Security Holders
NAL FINANCIAL GROUP INC.
-------------------
P R O S P E C T U S
-------------------
-----------------
January _____ , 1995
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Company has adopted the provisions of Section 102(b)(7) of the
Delaware General Corporation Law (the "Delaware Act") which eliminate or limit
the personal liability of a director to the Company or its stockholders for
monetary damages for breach of fiduciary duty under certain circumstances.
Furthermore, under Section 145 of the Delaware Act, the Company may indemnify
each of its directors and officers against his expenses (including reasonable
costs, disbursements and counsel fees) in connection with any proceeding
involving such person by reason of his having been an officer or director to the
extent he acted in good faith and in a manner reasonably believed to be in, or
not opposed to the best interest of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The determination of whether indemnification is proper under the
circumstances, unless made by a court, shall be determined by the Board of
Directors.
Reference is made to Item 28 for the undertakings of the Registrant
with respect to indemnification of liabilities arising under the Securities Act
of 1933, as amended (the "Act").
Item 25. Other Expenses of Issuance and Distribution
The following is a list of the estimated expenses to be incurred by
the Registrant in connection with the preparation and filing of this
Registration Statement.
S.E.C. Registration Fee.......................................$22,583*
Printing and Engraving.........................................25,000
Accountants' Fees and Expenses.................................25,000
Blue Sky Filing Fees and Expenses................................ N/A
Legal Fees and Expenses........................................50,000
=======
TOTAL:...............................................$100,000
*Filed with Registration Statement File No. 33-97948, as originally
submitted on October 9, 1995
Item 26. Recent Sales of Unregistered Securities
1. In December 1993, the Company sold 143,333 post-split shares of
Common Stock, to Discretionary Investment Trust dated July 7, 1993 in
consideration for the purchase price of $100,000 plus certain valuable services
rendered. This sale was undertaken as a private placement transaction exempt
under Section 4(2) of the Act, as a transaction by an issuer not involving a
public offering.
II-1
<PAGE>
2. During October 1994, the Company sold 714,999 shares of Common
Stock, $.15 par value, in private placement transactions exempt under Section
4(2) of the Act, as a transaction by an issuer not involving a public offering,
as set forth below.
<TABLE>
<CAPTION>
Number of Shares
Name of Common Stock Consideration
- ---- ---------------- -------------
<S> <C> <C>
Audley International
Investments Limited 300,000 $48,600
American Maple Leaf
Financial
Corporation 333,333 $19,999
Ernest and Kathy
Bartlett 19,166 $ 3,105
Kenneth A. Rosen 43,334 $ 7,020
SPH Investments
P/S Plan f/b/o
Stephen P.
Harrington 19,166 $ 3,105
</TABLE>
3. During November and December 1994, the Company sold 1,549,667
shares of Common Stock, $.15 par value, to accredited and sophisticated
investors in a private placement transaction exempt from registration pursuant
to Rule 506 of Regulation D. In connection with this transaction, brokerage
commissions of $539,370 (6.5%) were paid. The following individuals purchased
shares at $6.00:
Number of Shares
Name of Common Stock
- ---- ----------------
Allen, Alvin 10,000
Alperin, David 3,375
Alperin, Judith 2,500
Alu, James M 9,000
Angiuli, Nick 154,696
Apothaker, Jonathan 875
Beckerman, Sam 3,500
Bellino, Michael/Supnick, Richard 2,500
Steven R. Blecker TTEE for Athanacia Bell Trust 4,000
Steven R. Blecker TTEE for Elizabeth Bell Trust 4,000
Block, Charles 2,500
Borenstein, Howard 2,500
Brennan, Quinn 3,375
The Bridge Fund 8,500
Brown Valet, Inc. 5,250
Button, Richard 7,000
Buck, Paul 5,000
Cantor, Michael 30,000
Chaiken, Carl 875
Cohen, Bernard 6,000
Cohen, Susan 2,500
Colon, Jose F. 13,000
Costa, Neil and Ahrens, Lynne JTWROS 14,500
II-2
<PAGE>
Number of Shares
Name of Common Stock
- ---- ----------------
Cox, J. Douglas 3,500
Cox, Kathryn Retirement Trust 3,500
Diamond Import Group 3,500
Diversified Securities Fund I, L.P. 3,500
Eugene M. Eisner MD PA Pension Trust 5,000
Fabrikant, Martin 2,500
Feldman, Joel & Shirley, JTWROS 1,750
Flam, Robert M 5,000
Foreman, Michael 3,000
Frankel, Richard 10,000
Garnick, Michael 100,000
Garnick, Richard 1,250
Gates, Andrew and Gloria 1,750
Genack, Menachem 875
GiroCredit Bank (Switzerland) A.G. 17,500
Goldberg, Paul 3,500
Goldberg, Robert Theodore 3,500
Goldberg, Sheldon E. & Toni A 2,500
GOP Partners 17,000
Henderson, Marilyn 7,000
Hess, Julie 5,000
Hollander, Bernard 3,500
Interbanc Mortgage Services, Inc. 33,000
Jackenthal, Herb 875
Jeddi Limited 25,000
Joseph, Gerson 5,000
Josephart, Herbert Employee Defined
Benefit Pension Plan dtd 1/1/91
Herbert and Marcia Josephart TTEES 5,000
JRJ, Inc. 13,000
Kaplan, Charles 875
Kaplan, Susan 2,500
Karp, Florence c/f Penelope Karp and Athena Karp 12,500
Kaufman, Richard and Adrienne JTWROS 1,500
Lambert, Terrence 2,500
Lilly, Richard M 2,000
Linsker, Rita 3,500
Love, Douglas 5,000
Lucas, Russell 2,500
Luongo, Michael 875
Manheimer, Marvin 2,500
Marks, Mitchell 12,500
Masucci, Robert N., II 875
McCabe, William Dennis III 2,500
Miller, Alan I. 50,000
Miller, Marc 5,000
Moorman, Jeffrey 3,500
Moriuchi, Takashi B 875
Morgenstern, Richard 4,000
Mousaieff, Yoram 7,000
MRS Investments 37,500
Najmy, Joseph 3,500
II-3
<PAGE>
Nedwick, Robert & Barbara JTWROS 6,000
Pacht, Harvey & Joan 3,500
Prevor Marketing International Inc. 4,000
Rabin, Jeffrey 50,000
Rachenbach, Jack L 3,500
Rauseo, Mark 2,500
Rehcam Investments, LP 4,500
Rehcam Investments, NV 4,500
Reiff, Geraldine ttee, Carol Reiff Gottlieb
Co-ttee f/b/o Geraldine Reiff UAD 1/2/91 5,000
Rice, Howard T. Revocable Trust 3/10/76
Howard T. Rice TTEE 3,500
Rice, Irving & Elaine, JTWROS 3,500
Rogoff, Ellen 1,750
Rogoff, Les 7,000
Rosen, Joseph 3,334
Rosen, Kenneth A. 16,666
Rosen, Kenneth A. Pension Plan 20,000
Rosner, Anita 2,500
Sato, Ken 4,500
Schoenbaum, Jeff 10,000
Schnell, David 5,000
Schraub, Howard 10,658
Scinicariello, M 3,500
Serota, Marvin & Marsha 3,500
SGA Trading Corp. 4,000
Shapiro, Allan 10,000
Shotz, Steven & Barbara 3,500
Shrem, Bella 7,000
Sibco Partners 3,500
Silverman, Eugene 7,000
Slovin, Gilbert 438
Slovin, Joel 875
Smolen, Eric 6,000
Sorrentino, Andrew 5,250
Staller, Jerome 15,000
Stanley, Michael 5,000
Strassberg, David 5,000
Tupper, Ronald W. 25,000
Van Brunt, Dwight S 5,000
Ward, Dean 4,250
Wray, Paul & Herron, Diane JTWROS 16,000
Yanni, Louis 2,500
II-4
<PAGE>
The following individuals purchased shares at $4.00:
Jeffrey I. Binder
& Rosalie Binder 250,000
George A. Levin
& Gayla Sue Levin 250,000
4. As of November 30, 1994, the Company issued a total of 3,160,000
shares of Common Stock, $.15 par value, to the stockholders set forth in the
table below in consideration for the exchange of 100% of the stock of NAL
Financial Group Inc., a Florida corporation.
Shares of
Name Common Stock
- ---- ------------
Edward M. Bartolini 50,000
Marcia G. Bartolini and Robert R
Bartolini as co-trustees of the Marcia
G. Bartolini Revocable Trust dated July 27, 1992 264,022
Robert R. Bartolini and Marcia G
Bartolini as co-trustees of the Robert
R. Bartolini Revocable Trust dated July 27, 1992 2,212,180
Robert J. Carlson 60,196
George Schnabel as trustee of the Robert
R. Bartolini and Marcia G. Bartolini
Irrevocable Trust dated July 27, 1992 264,022
John T. Schaeffer 309,580
The issuance of such shares was exempt from registration pursuant to
Section 4(2) of the Act, as a transaction by an issuer not involving a public
offering.
5. During the period from April 1995 through December 1995, the Company
sold $21,325,000 of 9% Convertible Subordinated Debenture Units in a private
placement transaction exempt under Section 506 of Regulation D and Section 4(2)
of the Act, as a transaction by an issuer not involving a public offering, as
set forth below. Each Unit consists of a 9% Convertible Subordinated Debenture
and common stock purchase warrants as set forth below. In connection with this
transaction, brokerage commissions of $1,229,000 were paid.
II-5
<PAGE>
Amount of Number of
Name Debenture Warrants
- ---- --------- ---------
American Maple Leaf $1,200,000 120,000
Financial Corporation
Gerald Appel $25,000 1,250
Myles Bass $925,000 64,750
$575,000 40,250
S. Beckerman $100,000 4,500
R. Button $100,000 4,500
Capital Growth Investment $50,000 5,000
Trust
Centaur Financial Corp. $100,000 10,000
Doug Cox $125,000 5,625
K. Cox $100,000 4,500
Discretionary Investment $900,000 90,000
Trust dated July 7, 1993
Diversified Securities Fund I, L.P. $100,000 5,000
Equity Associates Corp. $50,000 5,000
FAC Enterprises $750,000 75,000
Bruce Ginsburg $250,000 25,000
GRA Investments, Corp. $1,550,000 155,000
Michael Garnick $300,000 12,000
Norton Herrick $1,250,000 87,500
HMA Investments, Inc. $600,000 60,000
Profit Sharing f/b/o
Howard Appel
Interbanc Mortgage $200,000 9,000
Florence Karp as c/f $750,000 75,000
Penelope Karp,
Athena Karp,
Justine Karp, and
Ulysses Karp
Florence Karp $3,000,000 375,000
as c/f Penelope and Athena
Karp
Provence Holdings $625,000 56,250
Steven B. Rosner $250,000 25,000
Steven B. Rosner $150,000 15,000
Money Purchase Pension Plan
Rozel International $1,750,000 175,000
Holdings Limited $1,300,000 58,500
II-6
<PAGE>
Martin Solomon $2,000,000 80,000
TGP Associates Limited Partnership $1,000,000 40,000
Westminster Capital, Inc. $1,250,000 87,500
6. During May 1995 and September 1995, the Company issued 190,000
Common Stock purchase Warrants in connection with certain financial advisory
services provided, as follows:
Name Number of Warrants Date of Grant
- ---- ------------------ -------------
American Maple Leaf 33,000 May 4, 1995
Financial Corporation
Ernest & Kathy 15,000 May 4, 1995
Bartlett
Centaur Financial 33,000 May 4, 1995
Corporation
FAC Enterprises, Inc. 50,000 August 28, 1995
25,000 September 14, 1995
34,000 May 4, 1995
7. During August 1995, the Company sold 176,500 shares of Common Stock
in an offshore offering at a purchase price of $12.30 per share, for an
aggregate purchase price of $2,160,000 as set forth below. In connection with
this transaction, brokerage commissions of $70,000 were paid.
Name Shares of
- ---- Common Stock
------------
Everest Capital Investment, Ltd. 79,295
Everest Capital International, Ltd. 98,205
The issuance of such shares was exempt from registration pursuant to Regulation
S promulgated under the Act.
II-7
<PAGE>
Item 27. Exhibits
The following Exhibits are filed as part of this Report:
Exhibit
No. Description Method of Filing
- --- ----------- ----------------
2.1 Merger Agreement between Incorporated by
the shareholders of NAL reference to Exhibit
Financial Group Inc., NAL 2.1 to the Registrant's
Financial Group Inc., and Form 8-K filed under
the Registrant dated the Securities Exchange
October 4, 1994 and as Act of 1934 on December 8,
amended, November 30, 1994 1994 (the "Form 8- K")
3.1 Certificate of Incorporated by
Incorporation of reference to Exhibit
Registrant, as amended 3.1 to the Registrant's
December 1, 1994 Registration Statement
on Form SB-2 filed
under the Securities Act
of 1933 on January
31, 1995, Registration No.
33-88966 (the
"Registration
Statement")
3.2 By-laws of the Registrant Incorporated by
as amended as of November reference to Exhibit
30, 1994 3.2 to the Registration
Statement
4.1 Copy of Specimen Common Incorporated by
Stock Certificate reference to Exhibit
4.1 to the Registration
Statement
4.2 Form of 9% Subordinated Incorporated by
Convertible Debenture reference to Exhibit 4.2
to Amendment No. 1
to the Registration
Statement on Form SB-2,
Registration No. 33-
97948, filed on October
25, 1995 ("Amendment
No. 1 to the October
1995 Registration
Statement")
II-8
<PAGE>
4.3 Form of Common Stock Incorporated by
Purchase Warrant reference to Exhibit
4.3 to Amendment No. 1
to the October 1995
Registration Statement.
4.4 Form of Registration Rights Incorporated by
Agreement reference to Exhibit
4.4 of Amendment No. 1
to the October 1995
Registration Statement.
5.1 Opinion of Clark, Ladner, Incorporated by
Fortenbaugh & Young reference to Exhibit
5.1 to Amendment No. 2
to the Registration
Statement on Form SB-2,
Registration No. 33-
97948, filed on
December 4, 1995
9.1 Voting Trust Agreement by Incorporated by
and among English, reference to Exhibit
McCaughan & O'Bryan, P.A., 2.2 to the Form 8-K
John T. Schaeffer, Robert
J. Carlson and The Robert
R. Bartolini Trust, dated
November 30, 1994
10.1 Shareholders' Agreement by Incorporated by
and among Robert J. reference to Exhibit
Carlson, John T. Schaeffer, 2.3 to the Form 8-K
The Robert R. Bartolini
Trust, The Marcia G. Barto-
lini Trust, The Schnabel
Trust, Jeffrey Binder and
George Levin
10.2 Loan and Security Agreement Incorporated by
between Congress Financial reference to Exhibit
Corporation and the 10.2 to the
Registrant dated March 16, Registration Statement
1993
10.3 Program Agreement between Incorporated by
NAL Acceptance Corporation reference to Exhibit
and General Electric 10.3 to the
Capital Auto Lease, Inc. Registrant's
dated July 1, 1995 Registration Statement
on Form SB-2 filed
under the Securities
Act of 1933 on October
10, 1995, Registration
No. 33-97948 (the
"October 1995
Registration
Statement")
II-9
<PAGE>
10.4 Amended and Restated Loan Incorporated by
and Security Agreement reference to Exhibit
between General Electric 10.4 to the
Capital Corporation and NAL Registration Statement
Acceptance Corporation dated
September 28, 1994
10.5 Loan Purchase Agreement Incorporated by
between Fairfax Savings reference to Exhibit
Bank and the Registrant 10.5 to the
dated October 6, 1994 Registration Statement
10.6 Participation Agreement Incorporated by
between Fairfax Savings, reference to Exhibit
FSB and NAL Acceptance 10.6 to the
Corporation dated December Registration Statement
14, 1993
10.7 Employment Agreement by and Incorporated by
between the Registrant and reference to Exhibit
Robert R. Bartolini dated 10.7 to Amendment No. 1
November 30, 1994 to the Registration
Statement filed April
12, 1995 ("Amendment
No. 1")
10.8 Lease Agreement by and Incorporated by
between NAL Acceptance reference to Exhibit
Corporation and The 10.8 to Amendment No. 1
Northwestern Mutual Life
Insurance Company dated
October 2, 1991, as
modified by Lease
Modification Agreement #1
dated February 18, 1994 and
Lease Modification
Agreement #2 dated January
20, 1995
10.9 Lease Agreement by and Incorporated by
between NAL Acceptance reference to Exhibit
Corporation and The 10.9 to Amendment No. 1
Northwestern Mutual Life
Insurance Company dated
June 7, 1994 as modified by
Lease Modification
Agreement #1 dated June 28,
1994, Lease Modification
Agreement #2 dated December
1, 1994 and Lease
Modification Agreement #3
dated January 20, 1995
II-10
<PAGE>
10.10 Modification Agreement # 4 Incorporated by
dated July 1, 1995 to Lease reference to Exhibit
Agreement by and between 10.10 to the October
NAL Acceptance Corporation 1995 Registration
and the Northwestern Mutual Statement
Life Insurance Company
dated June 7, 1994.
10.11 Sublease Agreement by and Incorporated by
between NAL Acceptance reference to Exhibit
Corporation and FTM 10.10 to Amendment No. 1
Holdings, Inc. dated March
30, 1994
10.12 Sublease Agreement by and Incorporated by
between the Registrant and reference to Exhibit
FTM Holdings, Inc. dated 10.11 to Amendment
February 1, 1995 No. 1
10.13 Master Repurchase Agreement Incorporated by
between Greenwich Capital reference to Exhibit
Financial Products, Inc. 10.13 to the October
and Autorics, Inc. dated 1995 Registration
September 5, 1995 Statement
10.14 Option to Purchase Assets Incorporated by
of Special Finance, Inc. reference to Exhibit
dated August 1, 1995 10.14 to the October
1995 Registration
Statement
10.15 Receivables Purchase Filed herewith
Agreement among NAL
Acceptance Corporation,
Autorics II, Inc. and
Autorics, Inc. dated
December 1, 1995
II-11
<PAGE>
10.16 Sale and Servicing Filed herewith
Agreement among
NAL Auto Trust 1995-1 and
Autorics II, Inc., NAL
Acceptance Corporation and
Bankers Trust Company dated
December 1, 1995
10.17 Indenture between NAL Auto Filed herewith
Trust 1995-1 and Bankers
Trust Company dated
December 1, 1995
10.18 Administration Agreement Filed herewith
among NAL Auto Trust 1995-
1, NAL Acceptance
Corporation, and Bankers
Trust Company dated
December 1, 1995
10.19 Trust Agreement between Filed herewith
Autorics II, Inc. and
Wilmington Trust dated
December 1, 1995
10.20 Certificate Purchase Filed herewith
Agreement between Autorics
II, Inc. and NAL Acceptance
Corporation dated December
20, 1995
10.21 Note Purchase Agreement Filed herewith
between Autorics II, Inc.
and NAL Acceptance
Corporation dated December
20, 1995
21 Subsidiaries of the Filed herewith
Registrant
23.1 Consent of Clark, Ladner, Filed under Exhibit 5.1
Fortenbaugh & Young
23.2 Consent of Price Waterhouse Filed herewith
LLP
Item 28. Undertakings
The undersigned registrant hereby undertakes:
II-12
<PAGE>
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to: (i) include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, as
amended; (ii) reflect in the prospectus any facts or events arising after the
effective date of the registration statement; and (iii) include any additional
or changed material information on the plan of distribution.
2. For the purpose of determining liability under the
Securities Act of 1933, as amended, each post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
3. To file a post-effective amendment to remove from registration any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in a successful defense of any action, suit or
proceeding) is asserted by a director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-13
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Post-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, in the City of Fort Lauderdale, State of Florida on
January 28, 1996.
NAL FINANCIAL GROUP INC.
BY: /s/ Robert R. Bartolini
_____________________________
Robert R. Bartolini
Chairman of the Board,
President and Chief Executive
Officer
In accordance with the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 1 to the Registration Statement was signed by
the following persons in the capacities and on the dates stated.
Signature Title Date
--------- ----- ----
s/ Robert R. Bartolini Chairman, President January 28,1996
-------------------
Robert R. Bartolini and Chief Executive
Officer
(*)
___________________
John T. Schaeffer Director January 28,1996
(*)
___________________
Robert J. Carlson Vice-President- January 28,1996
Finance, Principal
Accounting Officer
(*)
___________________
Andrew P. Panzo Director January 28,1996
(*)
___________________
Abraham Bernstein Director January 28,1996
/s/Robert R. Bartolini, Attorney-in-Fact
-----------------------------------------
Robert R. Bartolini, Attorney-in-Fact
<PAGE>
===============================================================================
Registration No. 33-97948
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
EXHIBITS
Filed with
Post-Effective
Amendment No. 1
To
Form SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NAL FINANCIAL GROUP INC.
(Exact name of registrant as specified in its charter)
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EXHIBIT INDEX
Exhibit No. Description Page
10.15 Receivables Purchase Agreement among NAL
Acceptance Corporation, Autorics II,
Inc. and Autorics, Inc. dated December
1, 1995
10.16 Sale and Servicing Agreement among
NAL Auto Trust 1995-1 and Autorics
II, Inc., NAL Acceptance Corporation
and Bankers Trust Company dated December 1,
1995
10.17 Indenture between NAL Auto Trust 1995-1
and Bankers Trust Company dated December
1, 1995
10.18 Administration Agreement among NAL Auto
Trust 1995-1, NAL Acceptance
Corporation, and Bankers Trust Company
dated December 1, 1995
10.19 Trust Agreement between Autorics II,
Inc. and Wilmington Trust dated December
1, 1995
10.20 Certificate Purchase Agreement between
Autorics II, Inc. and NAL Acceptance
Corporation dated December 20, 1995
10.21 Note Purchase Agreement between Autorics
II, Inc. and NAL Acceptance Corporation
dated December 20, 1995
21 Subsidiaries of the Registrant
23.2 Consent of Price Waterhouse LLP
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EXECUTION COPY
RECEIVABLES PURCHASE AGREEMENT dated as of December 1, 1995, among NAL
ACCEPTANCE CORPORATION, a Florida corporation ("NAL"), AUTORICS, INC., a
Delaware Corporation (the "Seller"), and AUTORICS II, INC., a Delaware
corporation (the "Purchaser").
WHEREAS in the regular course of its business, the Seller has purchased
certain motor vehicle retail installment sale contracts secured by new and used
automobiles, light-duty trucks and vans from NAL which, in turn purchased such
contracts from motor vehicle dealers and 3 others; and
WHEREAS the Purchaser wishes to purchase the Receivables (as
hereinafter defined) and to transfer the Receivables to NAL Auto Trust 1995-1
(the "Trust"), which will issue the 6.65% Asset Backed Notes, Class A-1 and
7.70% Asset Backed Notes, Class A-2 (collectively, the "Notes"), payment of
which will be secured by the Receivables, and the 14.25% Asset Backed
Certificates representing fractional undivided interests in the property of the
Trust including the Receivables, subject to the rights of the Indenture Trustee
on behalf of the Noteholders;
WHEREAS the Seller and Purchaser are wholly owned subsidiaries of NAL
and NAL wishes to facilitate the transfer of the Receivables and, to that end,
has agreed to make certain representations and warranties relating to the
Receivables and to pay certain expenses and amounts with respect hereto; and
WHEREAS NAL, the Seller and the Purchaser wish to set forth the terms
pursuant to which the Seller will sell the Receivables to the Purchaser;
NOW, THEREFORE, in consideration of the foregoing, other good and
valuable consideration and the mutual terms and covenants contained herein, the
parties hereto agree as follows:
ARTICLE I
Certain Definitions
Terms not defined in this Agreement shall have the meaning set forth in
the Sale and Servicing Agreement or the Indenture, as applicable. As used in
this Agreement, the following terms shall, unless the context otherwise
requires, have the following meanings (such meanings to be equally applicable to
the singular and plural forms of the terms defined):
"Agreement" shall mean this Receivables Purchase Agreement, as the same
may be amended and supplemented from time to time.
"Assignment" shall mean the document of assignment substantially in the
form of Exhibit A.
"Certificates" shall mean the Trust Certificates (as defined in the
Trust Agreement).
"Certificateholders" shall mean the holders of Certificates.
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"Closing Date" shall mean December 21, 1995.
"Collections" shall mean all amounts collected by the Servicer (from
whatever source) on or with respect to the Receivables.
"Cutoff Date" means December 1, 1995.
"Indenture" shall mean the Indenture dated as of December 1, 1995
between the Trust and Bankers Trust Company, as trustee (the "Indenture
Trustee"), as the same may be amended and supplemented from time to time.
"NAL" shall mean NAL Acceptance Corporation, a Florida corporation, its
successors and assigns.
"Noteholders" shall mean the holders of the Notes.
"Private Placement Memorandum" shall mean the Private Placement
Memorandum dated December 21, 1995, relating to the Notes and the Certificates.
"Purchaser" shall mean AUTORICS II, Inc., a Delaware corporation, its
successors and assigns.
"Receivable" shall mean any Contract listed on Schedule I hereto (which
Schedule may be in the form of microfiche).
"Repurchase Event" shall have the meaning specified in Section 6.02.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
Agreement dated as of December 1, 1995, among the Trust, the Purchaser, Bankers
Trust Company, as Back- up Servicer, and the Seller, as the same may be amended
and supplemented from time to time.
"Schedule of Receivables" shall mean the list of Receivables annexed
hereto as Schedule I.
"Seller" shall mean Autorics, Inc., a Delaware corporation, its
successors and assigns.
"Trust Agreement" shall mean the Trust Agreement dated as of December
1, 1995, between the Purchaser and Wilmington Trust Company, as the owner
trustee (the "Owner Trustee"), as the same may be amended and supplemented from
time to time.
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. In consideration of the
Purchaser's delivery to or upon the order of the Seller of $39,677,272.41, the
Seller does hereby sell, transfer, assign, set over and otherwise convey to the
Purchaser, without recourse (subject to the obligations of the Seller and NAL
herein), all right, title and interest of the Seller in and to (but none of the
obligations of the Seller with respect to):
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(a) the Receivables, and all moneys received thereon on and after
the Cutoff Date plus all Payaheads as of the Cutoff Date;
(b) the security interests in the Financed Vehicles granted by Obligors
pursuant to the Receivables, any other right to realize upon property securing a
Receivable and any other interest of the Seller in such Financed Vehicles
including the Seller's right, title and interest in the lien on the Financed
Vehicles in the name of Autorics, Inc. or the Seller's agent, NAL or SFI;
(c) any proceeds with respect to the Receivables from claims on
any Insurance Policies relating to the Financed Vehicles or Obligors;
(d) proceeds of any recourse (but none of the obligations) to
Dealers on Receivables;
(e) any Financed Vehicle that shall have secured a Receivable and shall
have been acquired by or on behalf of the Seller, the Purchaser, or, upon the
assignment contemplated by the Sale and Servicing Agreement, the Servicer or the
Trust;
(f) the Receivables Files; and
(g) the proceeds of any and all of the foregoing.
SECTION 2.02. The Closing. The sale and purchase of the Receivables
shall take place at a closing (the "Closing") at the offices of Brown & Wood,
One World Trade Center, New York, New York 10048 on the Closing Date,
simultaneously with the closings under (a) the Sale and Servicing Agreement and
(b) the Indenture.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Seller as of the Closing Date:
(a) Organization and Good Standing. The Purchaser has been duly
organized and is validly existing as a corporation in good standing under the
laws of the State of Delaware, with the power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the power, authority and legal right to acquire and own the Receivables.
(b) Due Qualification. The Purchaser is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease of
its property or the conduct of its business shall require such qualifications.
(c) Power and Authority. The Purchaser has the power and
authority to execute and deliver this Agreement and to carry out its terms, and
the execution, delivery and
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performance of this Agreement has been duly authorized by the Purchaser by all
necessary corporate action.
(d) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the certificate of
incorporation or bylaws of the Purchaser, or any indenture, agreement or other
instrument to which the Purchaser is a party or by which it is bound; or result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than the
Sale and Servicing Agreement, the Indenture and the Trust Agreement); or violate
any law or, to the best of the Purchaser's knowledge, any order, rule or
regulation applicable to the Purchaser of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Purchaser or its properties.
(e) No Proceedings. There are no proceedings or investigations pending
or, to the Purchaser's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Purchaser or its properties: (i) asserting the invalidity
of this Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (iii) seeking any determination
or ruling that might materially and adversely affect the performance by the
Purchaser of its obligations under, or the validity or enforceability of, this
Agreement.
SECTION 3.02. Representations and Warranties of the Seller and NAL.
(a) The Seller hereby represents and warrants to the Purchaser as of the
Closing Date:
(i) Organization and Good Standing. The Seller has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware, with the power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently
conducted, and had at all relevant times, and has, the power, authority
and legal right to acquire and own the Receivables.
(ii) Due Qualification. The Seller is duly qualified to
do business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business shall
require such qualifications.
(iii) Power and Authority. The Seller has the power and
authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full power and authority to sell and assign the
property sold and assigned to the Purchaser hereby and has duly
authorized such sale and assignment to the Purchaser by all necessary
corporate action; and the execution, delivery and performance of this
Agreement has been duly authorized by the Seller by all necessary
corporate action.
(iv) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the articles of incorporation or bylaws of the Seller,
or any indenture, agreement or other instrument to which the Seller is
a party or by which it is bound; or result in the creation or
imposition of any Lien upon any of its
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properties pursuant to the terms of any such indenture, agreement or
other instrument (other than this Agreement); or violate any law or, to
the best of the Seller's knowledge, any order, rule or regulation
applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.
(v) No Proceedings. There are no proceedings or
investigations pending or, to the Seller's best knowledge, threatened
before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (A) asserting the invalidity of this Agreement, (B) seeking
to prevent the consummation of any of the transactions contemplated by
this Agreement or (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under or the validity or enforceability of, this Agreement.
(vi) Principal Place of Business. The principal place of
business and chief executive office of the Seller are located at the
place set forth in Section 6.08(a) and such location has not changed
since the date the Seller was incorporated.
(vii) Use of Names. The legal name of the Seller is the
name used by it in this Agreement and the Seller has not changed its
name since the date of its incorporation and does not have trade names,
fictitious names, assumed names or "doing business" names.
(viii) Solvency. The Seller is solvent and will not become
insolvent after giving effect to the transactions contemplated in this
Agreement; the Seller is paying its debts, if any, as they become due;
the Seller, after giving effect to the transactions contemplated in
this Agreement, will have adequate capital to conduct its business.
(b) NAL hereby represents and warrants to the Purchaser as of the
Closing Date:
(i) Organization and Good Standing. NAL has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Florida, with the power and authority to
own its properties and to conduct its business as such properties are
currently owned and such business is presently conducted, and had at
all relevant times, and has, the power, authority and legal right to
acquire and own the Receivables.
(ii) Due Qualification. NAL is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business shall
require such qualifications.
(iii) Power and Authority. NAL has the power and
authority to execute and deliver this Agreement and to carry out its
terms; NAL has full power and authority to perform its obligations
under this Agreement; and the execution, delivery and performance of
this Agreement has been duly authorized by NAL by all necessary
corporate action.
(iv) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
shall not conflict with, result in
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any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of NAL, or any indenture, agreement or other
instrument to which NAL is a party or by which it is bound; or result
in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other
instrument (other than this Agreement); or violate any law or, to the
best of NAL's knowledge, any order, rule or regulation applicable to
NAL of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over NAL or its properties.
(v) No Proceedings. There are no proceedings or
investigations pending or, to NAL's best knowledge, threatened before
any court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over NAL or its properties: (A)
asserting the invalidity of this Agreement, (B) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement
or (C) seeking any determination or ruling that might materially and
adversely affect the performance by NAL of its obligations under or the
validity or enforceability of, this Agreement.
(c) NAL makes the following representations and warranties in respect
of the Receivables, on which the Purchaser relies in accepting the Receivables.
Such representations and warranties speak as of the execution and delivery of
this Agreement, but shall survive the sale, transfer and assignment of the
Receivables to the Purchaser and the subsequent sale, assignment and transfer of
the Receivables pursuant to the Sale and Servicing Agreement and the Grant
thereof pursuant to the Indenture:
(i) Characteristics of Receivables. Each Receivable (A)
was originated in the United States of America by a Dealer for the
retail sale of a Financed Vehicle in the ordinary course of such
Dealer's business, was fully and properly executed by the parties
thereto, was purchased by NAL from such Dealer under an existing dealer
agreement, and was validly assigned by such Dealer to NAL in accordance
with the terms of such dealer agreement and from NAL to the Seller
pursuant to the Contract Purchase Agreement dated September 5, 1995
between NAL and the Seller, (B) has created a valid, subsisting and
enforceable first priority security interest in favor of the Seller in
the Financed Vehicle, which security interest is assignable by the
Seller to the Purchaser, by the Purchaser to the Trust and by the Trust
to the Indenture Trustee, (C) contains customary and enforceable
provisions such that the rights and remedies of the holder thereof are
adequate for realization against the collateral of the benefits of the
security, (D) provides for level monthly payments (provided that the
payment in the first or last month in the life of the Receivable may be
different from the level payments) that fully amortize the Amount
Financed by maturity and yield interest at the Annual Percentage Rate,
and (E) provides, in the event that such contract is prepaid, for a
prepayment that fully pays the Principal Balance of the Receivable and
includes a full month's interest in the month of prepayment at the
Annual Percentage Rate.
(ii) Schedule of Receivables. The information set forth
in Schedule I to this Agreement is true and correct in all material
respects as of the opening of business on the Cutoff Date, and no
selection procedures believed to be adverse to the Noteholders or the
Certificateholders were utilized in selecting the Receivables. The
computer tape
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regarding the Receivables made available to the Purchaser and its
assigns is true and correct in all respects.
(iii) Compliance with Law. Each Receivable and the sale
of the related Financed Vehicle complied at the time it was originated
or made, and at the execution of this Agreement complies, in all
material respects with all requirements of applicable federal, state
and local laws and regulations thereunder, including usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations B and S and state adaptations of
the National Consumer Act and of the Uniform Consumer Credit Code, and
other consumer credit laws and equal credit opportunity and disclosure
laws.
(iv) Binding Obligation. Each Receivable represents the
genuine, legal, valid and binding payment obligation in writing of the
Obligor, enforceable by the holder thereof in accordance with its
terms.
(v) No Government Obligor. None of the Receivables is
due from the United States of America or any state or from any agency,
department or instrumentality of the United States of America or any
state.
(vi) Security Interest in Financed Vehicle. Immediately
prior to the sale, assignment and transfer thereof, each Receivable
shall be secured by a validly perfected first security interest in the
Financed Vehicle in favor of the Seller as secured party or all
necessary and appropriate actions have been commenced that would result
in the perfection of a first security interest in the Financed Vehicle
in favor of the Seller as secured party.
(vii) Receivables in Force. No Receivable has been
satisfied, subordinated or rescinded, nor has any Financed Vehicle been
released from the lien granted by the related Receivable in whole or in
part.
(viii) No Waiver. No provision of a Receivable has been
waived except by a writing constituting an amendment to the applicable
Contract.
(ix) No Amendments. No Receivable has been amended such
that the amount of the Obligor's scheduled payments has been increased.
(x) No Defenses. No right of rescission, setoff,
counterclaim or defense has been asserted or threatened with respect to
any Receivable.
(xi) No Liens. To the best of the Seller's knowledge, no
liens or claims have been filed for work, labor or materials relating
to a Financed Vehicle that are liens prior to, or equal or coordinate
with, the security interest in the Financed Vehicle created by any
Receivable.
(xii) No Default. No Receivable has a payment that is
more than 59 days overdue as of the Cutoff Date and no default, breach,
violation or event permitting acceleration under the terms of any
Receivable has occurred; no continuing condition that with notice or
the lapse of time would constitute a default, breach, violation or
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event permitting acceleration under the terms of any Receivable has
arisen; and the Seller has not waived any of its rights regarding the
occurrence of any of the foregoing.
(xiii) Insurance. The Seller, in accordance with its
customary procedures, has determined that each Obligor has obtained
physical damage insurance covering the Financed Vehicle and under the
terms of the Receivable the Obligor is required to maintain such
insurance.
(xiv) Title. It is the intention of the parties hereto
that the transfer and assignment herein contemplated constitute a sale
of the Receivables from the Seller to the Purchaser, and that the
beneficial interest in and title to the Receivables not be part of the
debtor's estate in the event of the filing of a bankruptcy petition by
or against the Seller under any bankruptcy law. Immediately prior to
the transfer and assignment herein contemplated, the Seller had good
and marketable title to each Receivable free and clear of all Liens
and, immediately upon the transfer thereof, the Purchaser shall have
good and marketable title to each Receivable, free and clear of all
Liens; and the transfer has been perfected under the UCC.
(xv) Lawful Assignment. No Receivable was originated in,
or is subject to the laws of, any jurisdiction under which the sale,
transfer and assignment of such Receivable or any Receivable under this
Agreement, the Sale and Servicing Agreement or the Indenture is
unlawful, void or voidable.
(xvi) All Filings Made. All filings (including UCC
filings) necessary in any jurisdiction to give the Purchaser a first
perfected ownership interest in the Receivables have been made.
(xvii) One Original. There is only one executed original
of each Receivable.
(xviii) Maturity of Receivables. Each Receivable has an
original maturity of not more than 60 months; the weighted average
remaining term of the Receivables is 50.98 months as of the Cutoff
Date.
(xix) Scheduled Payments. (A) Each Receivable has a first
Scheduled Payment due, in the case of Precomputed Receivables, or a
scheduled due date, in the case of Simple Interest Receivables, on or
prior to January 6, 1996, and (B) no Receivable has a final scheduled
payment date later than the Final Scheduled Maturity Date.
(xx) Location of Receivable Files. The Receivable Files
are kept at one or more of the locations listed in Schedule II hereto.
(xxi) Outstanding Principal Balance. The Amount Financed
pursuant to each Receivable is at least $1,000.
(xxii) Financing. Approximately 56.18% of the aggregate
principal balance of the Receivables, constituting 64.42% of the number
of Receivables as of the Cutoff Date, represent financing of used
vehicles; the remainder of the Receivables represent financing of new
vehicles; approximately 75.14% of the aggregate principal balance of
the Receivables as of the Cut-off Date represent Precomputed
Receivables; and the
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remainder of the Receivables represent Simple Interest Receivables. The
aggregate Principal Balance of the Receivables as of the Cutoff Date is
$40,135,897.86.
(xxiii) No Bankruptcies. As of the Cutoff Date, no Obligor
on any Receivable was noted in the related Receivable File as having
filed for bankruptcy.
(xxiv) No Repossessions. No Financed Vehicle securing any
Receivable is in repossession status.
(xxv) Chattel Paper. Each Receivable constitutes
"chattel paper" as defined in the UCC.
(xxvi) Underwriting Guidelines. Each Receivable was
originated by the Dealer and purchased by NAL in accordance with the
underwriting guidelines described in the Private Placement Memorandum.
(xxvii) Servicing. As of the Cutoff Date each Receivable
was being serviced by the Servicer and no other person had a right to
service such Receivable.
(xxviii) Full Amount Advanced. The full principal amount of
each Receivable has been advanced to each Obligor, and there is no
requirement for future advances thereunder. The Obligor with respect to
the Receivable does not have any option under the Receivables to borrow
from any person additional funds secured by the Financed Vehicle.
(xxix) Obligation to Dealers or Others. The Purchaser and
its assignees will assume no obligations to Dealers or other
originators of prior holders of the Receivables (including, but not
limited to obligations under dealer reserves) as a result of its
purchase of the Receivables.
(xxx) Collection Practices. The Collection practices
utilized by any person servicing a Receivable in seeking payment under
the documentation evidencing such Receivable have been in all respects
legal, proper and customary in the automobile loan servicing business.
(xxxi) First Payment. The first payment on each Receivable
with respect to which the first payment was not yet due as of the
Cutoff Date will be made in full no later than the 45th day after its
due date.
(xxxii) Private Placement Memorandum. The Private Placement
Memorandum does not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein not misleading.
(xxxiii) Subsequent Transfer. The representations and
warranties of the Depositor in Section 3.01 of the Sale and Servicing
Agreement are true and correct.
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ARTICLE IV
Conditions
SECTION 4.01. Conditions to Obligation of the Purchaser. The
obligation of the Purchaser to purchase the Receivables is subject to the
satisfaction of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Seller and NAL hereunder shall be true and correct on the
Closing Date with the same effect as if then made, and each of the Seller and
NAL shall have performed all obligations to be performed by it hereunder on or
prior to the Closing Date.
(b) Computer Files Marked. The Seller shall, at its own expense, on or
prior to the Closing Date indicate in its computer files that the Receivables
have been sold to the Purchaser pursuant to this Agreement, and deliver to the
Purchaser the Schedule of Receivables certified by the Chairman, the President,
a Vice President or the Treasurer to be true, correct and complete.
(c) Documents To Be Delivered by the Seller at the Closing.
(i) The Assignment. At the Closing, the Seller will execute
and deliver an Assignment substantially in the form of Exhibit A
hereto.
(ii) Evidence of UCC Filing. On or prior to the Closing Date,
the Seller shall record and file, at its own expense, a UCC-1 financing
statement in each jurisdiction in which required by applicable law,
executed by the Seller, as seller or debtor, and naming the Purchaser
as purchaser or secured party, describing the Receivables and the other
property included in the Owner Trust Estate, meeting the requirements
of the laws of each such jurisdiction and in such manner as is
necessary to perfect the sale, transfer, assignment and conveyance of
such Receivables to the Purchaser. The Seller shall deliver a
file-stamped copy or other evidence satisfactory to the Purchaser of
such filing to the Purchaser on or prior to the Closing Date.
(iii) Other Documents. Such other documents as the Purchaser
may reasonably request.
(d) Other Transactions. The transactions contemplated by the Sale
and Servicing Agreement, the Indenture and the Trust Agreement to be consummated
on the Closing Date shall be consummated on such date.
SECTION 4.02. Conditions to Obligation of the Seller. The obligation of
the Seller to sell the Receivables to the Purchaser is subject to the
satisfaction of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Purchaser hereunder shall be true and correct on the Closing
Date with the same effect as if then made, and the Seller shall have performed
all obligations to be performed by it hereunder on or prior to the Closing Date.
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(b) Receivables Purchase Price. On the Closing Date, the Purchaser
shall have delivered to the Seller the purchase price specified in Section 2.01.
ARTICLE V
Covenants of the Seller and NAL
The Seller and NAL agree with the Purchaser as follows:
SECTION 5.01. Protection of Right, Title and Interest. (a) Filings. NAL
and the Seller shall cause all financing statements and continuation statements
and any other necessary documents covering the right, title and interest of the
Seller and the Purchaser, respectively, in and to the Receivables and the other
property included in the Owner Trust Estate to be promptly filed and at all
times to be kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve and protect the right, title
and interest of the Purchaser hereunder in and to the Receivables and the other
property included in the Owner Trust Estate. NAL and the Seller shall deliver to
the Purchaser file stamped copies of, or filing receipts for, any document
recorded, registered or filed as provided above, as soon as available following
such recordation, registration or filing. The Purchaser shall cooperate fully
with NAL and the Seller (and the Seller will cooperate with NAL) in connection
with the obligations set forth above and will execute any and all documents
reasonably required to fulfill the intent of this paragraph.
(b) Name Change. Within 15 days after the Seller makes any change in
its name, identity or corporate structure that would make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the applicable provisions of the UCC or any title
statute, the Seller shall give the Purchaser notice of any such change and, no
later than 5 days after the effective date thereof, shall file such financing
statements or amendments as may be necessary to continue the perfection of the
Purchaser's interest in the property included in the Owner Trust Estate.
(c) Resolution. The Seller shall have an obligation to give the
Purchaser at least 60 days' prior written notice of any relocation of its
principal executive office if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall promptly file any such amendment or new financing statement.
The Servicer shall at all times maintain each office from which it shall service
Receivables, and its principal executive office, within the United States of
America.
(d) Notice. If at any time the Seller shall propose to sell, grant a
security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the Seller
shall give to such prospective purchaser, lender or other transferee computer
tapes, records or printouts (including any restored from backup archives) that,
if they shall refer in any manner whatsoever to any Receivable, shall indicate
clearly that such Receivable has been sold and is owned by the Purchaser. Should
any third party inquire of the Seller as to the Receivables, the Seller will
promptly indicate to such party that the Receivables have been sold to the
Purchaser pursuant to this Agreement.
SECTION 5.02. Other Liens or Interests. Except for the conveyances
hereunder and under the Sale and Servicing Agreement, the Indenture, the Trust
Agreement and the
11
<PAGE>
other Basic Documents, the Seller will not sell, pledge, assign or transfer to
any Person, or grant, create, incur, assume or suffer to exist any Lien on, or
any interest in, to or under the Receivables, and the Seller shall defend the
right, title and interest of the Purchaser in, to and under the Receivables
against all claims of third parties claiming through or under the Seller;
provided, however, that the Seller's obligations under this Section shall
terminate upon the termination of the Trust pursuant to the Trust Agreement.
SECTION 5.03. Costs and Expenses. NAL agrees to pay all reasonable
costs and disbursements in connection with the perfection, as against all third
parties, of the Purchaser's right, title and interest in and to the Receivables.
SECTION 5.04. Indemnification. NAL shall indemnify the Purchaser for
any liability resulting from the failure of a Receivable to be originated in
compliance with all requirements of law and for any breach of any of its or the
Seller's representations and warranties contained herein and for any failure by
the Seller to comply with its obligations under Sections 5.01 and 5.02 hereof.
These indemnity obligations shall be in addition to any obligation that NAL or
the Seller may otherwise have.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Obligations of Seller and NAL. The obligations of the
Seller and NAL under this Agreement shall not be affected by reason of any
invalidity, illegality or irregularity of any Receivable.
SECTION 6.02. Repurchase Events. NAL hereby covenants and agrees with
the Purchaser for the benefit of the Purchaser, the Trust, the Indenture
Trustee, the Noteholders, the Owner Trustee, and the Certificateholders that the
occurrence of a breach of any of the NAL's representations and warranties
contained in Section 3.02(c), unless any such breach shall have been cured by
the last day of the Collection Period following the discovery thereof by NAL, or
receipt by NAL of written notice from the Owner Trustee, the Indenture Trustee,
the Depositor, the Servicer, or the Back-up Servicer, shall constitute an event
obligating NAL to purchase as of such last day any Receivable hereunder with
respect to which such breach occurred if such breach has had a material and
adverse effect on the interests of the Purchaser or the Trust in and to such
Receivable (each, a "Repurchase Event"), at the Purchase Amount from the
Purchaser or, upon the assignment contemplated by the Sale and Servicing
Agreement, from the Trust. The repurchase obligation of NAL shall constitute the
sole remedy (other than that provided by Section 5.04) of the Purchaser, the
Trust, the Indenture Trustee, the Noteholders, the Owner Trustee or the
Certificateholders against NAL with respect to any Repurchase Event.
SECTION 6.03. Purchaser Assignment of Repurchased Receivables. With
respect to all Receivables purchased by NAL pursuant to this Agreement, the
Purchaser shall assign, without recourse, representation or warranty, to NAL all
the Purchaser's right, title and interest in and to such Receivables and all
security and documents relating thereto.
SECTION 6.04. The Trust. The Seller and NAL acknowledge and agree that
(a) the Purchaser will, pursuant to the Sale and Servicing Agreement, sell the
Receivables to the Trust and assign its rights under this Agreement to the
Trust, (b) the Trust will, pursuant
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<PAGE>
to the Indenture, Grant the Receivables and its rights under this Agreement and
the Sale and Servicing Agreement to the Indenture Trustee on behalf of the
Noteholders and (c) the representations and warranties contained in this
Agreement and the rights of the Purchaser under this Agreement, including under
Section 6.02 are intended to benefit the Trust, the Certificateholders and the
Noteholders. The Seller and NAL hereby consent to all such sales and assignments
and agree that the Owner Trustee or, if pursuant to the Indenture, the Indenture
Trustee may exercise the rights of the Purchaser and enforce the obligations of
the Seller and NAL hereunder directly and without the consent of the Purchaser.
SECTION 6.05. Amendment. This Agreement may be amended from time to
time, with prior written notice to each Rating Agency, by a written amendment
duly executed and delivered by NAL, the Seller and the Purchaser, to cure any
ambiguity, to correct or supplement any provision herein which may be
inconsistent with any other provision herein, or to add any other provision with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement or the Sale and Servicing
Agreement, the Trust Agreement or the Indenture; provided that such amendment
shall not, in the Opinion of Counsel satisfactory to the Owner Trustee and the
Indenture Trustee, materially and adversely affect the interest of any
Noteholder or Certificateholder in the Trust or the Receivables. This Agreement
may also be amended by NAL, the Seller and the Purchaser, with prior written
notice to each Rating Agency, with the consent of the holders of Notes
evidencing at least a majority of the Outstanding Amount of the Notes and the
holders of Certificates evidencing at least a majority of the Certificate
Balance for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders in the Trust or
Receivables; provided, however, that no such amendment may (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that are required to be
made for the benefit of Noteholders or Certificateholders or (ii) reduce the
aforesaid percentage of the Notes and Certificates that is required to consent
to any such amendment, without the consent of the holders of all the outstanding
Notes and Certificates.
SECTION 6.06. Accountants' Letters. (a) Price Waterhouse LLP will
review the characteristics of the Receivables and will compare those
characteristics to the information with respect to the Receivables contained in
the Private Placement Memorandum; (b) the Seller will cooperate with the
Purchaser and Price Waterhouse LLP in making available all information and
taking all steps reasonably necessary to permit such accountants to complete the
review set forth in clause (a) above and to deliver the letters required of them
under the Private Placement Memorandum; (c) Price Waterhouse LLP will deliver to
the Purchaser a letter, dated the date of the Private Placement Memorandum, in
the form previously agreed to by the Seller and the Purchaser, with respect to
the financial and statistical information contained in the Private Placement
Memorandum and with respect to such other information as may be agreed in the
form of letter.
SECTION 6.07. Waivers. No failure or delay on the part of the
Purchaser, or any assignee of the Purchaser, in exercising any power, right or
remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude any other
or further exercise thereof or the exercise of any other power, right or remedy.
SECTION 6.08. Notices. All demands, notices and communications under
this Agreement shall be in writing, personally delivered or mailed by certified
mail, return receipt
13
<PAGE>
requested, or recognized overnight courier or by facsimile confirmed by delivery
or mail as described above, and shall be deemed to have been duly given upon
receipt (a) in the case of the Seller, to AUTORICS, 500 Cypress Creek Road West,
Suite 590, Fort Lauderdale, Florida 33309, Telephone: 305-938-8200; Fax:
305-938-8209, Attention: Dennis LaVigne; (b) in the case of the Purchaser, to
AUTORICS II, Inc., 500 Cypress Creek Road West, Suite 590, Fort Lauderdale,
Florida 33309, Telephone: 305-938-8200; Fax: 305-938-8209, Attention: Dennis
LaVigne; (c) in the case of NAL, to NAL ACCEPTANCE CORPORATION, 500 Cypress
Creek Road West, Suite 590, Fort Lauderdale, Florida 33309, Telephone:
305-938-8200; Fax: 305- 938-8209, Attention: Dennis LaVigne; and (d) in the case
of each Rating Agency, to Duff & Phelps Credit Rating Co., 55 East Monroe
Street, Chicago, Ill. 60603; Tel: 312-263-2610; Fax: 312-263-2852; Attn:
Asset-Backed Research and Monitoring and to Fitch Investors Service, Inc., One
State Street Plaza, 32nd Floor, New York, N.Y. 10004 Tel: (212) 908- 0637; Fax:
(212) 480-4438; Attn: Michael N. Babick; or as to each of the foregoing, at
such other address as shall be designated by written notice to the other
parties.
SECTION 6.09. Costs and Expenses. The Seller shall pay all expenses
incident to the performance of its obligations under this Agreement and NAL
agrees to pay all reasonable out-of-pocket costs and expenses of the Purchaser,
excluding fees and expenses of counsel, in connection with the perfection as
against third parties of the Purchaser's right, title and interest in and to the
Receivables and the enforcement of any obligation of the Seller hereunder.
SECTION 6.10. Representations of the Seller and the Purchaser. The
respective agreements, representations, warranties and other statements by NAL,
the Seller and the Purchaser set forth in or made pursuant to this Agreement
shall remain in full force and effect and will survive the sales and assignments
referred to in Section 6.04.
SECTION 6.11. Confidential Information. The Purchaser agrees that it
will neither use nor disclose to any Person the names and addresses of the
Obligors, except in connection with the enforcement of the Purchaser's rights
hereunder, under the Receivables, under the Sale and Servicing Agreement, the
Indenture, the Trust Agreement or any other Basic Document or as required by any
of the foregoing or by law.
SECTION 6.12. Headings and Cross-References. The various headings in
this Agreement are included for convenience only and shall not affect the
meaning or interpretation of any provision of this Agreement. References in this
Agreement to Section names or numbers are to such Sections of this Agreement.
SECTION 6.13. GOVERNING LAW. THIS AGREEMENT AND THE ASSIGNMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER OR THEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 6.14. Counterparts. This Agreement may be executed in two or
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers duly authorized as of the date and year
first above written.
AUTORICS, INC.,
by _______________________
Name:
Title:
NAL ACCEPTANCE CORPORATION,
by _______________________
Name:
Title:
AUTORICS II, INC.,
by _______________________
Name:
Title:
15
<PAGE>
EXHIBIT A
ASSIGNMENT
For value received, in accordance with the Receivables Purchase
Agreement dated as of December 1, 1995, among AUTORICS, INC. (the "Seller"), NAL
ACCEPTANCE CORPORATION and AUTORICS II, INC. (the "Purchaser"), the Seller does
hereby sell, assign, transfer and otherwise convey unto the Purchaser, without
recourse (subject to the obligations of the Seller and NAL in the Receivables
Purchase Agreement), all right, title and interest of the Seller in and to (but
none of the obligations of the Seller with respect to) (i) the Receivables and
all moneys received thereon on and after the Cutoff Date plus all Payaheads as
of the Cutoff Date; (ii) the security interests in the Financed Vehicles granted
by the Obligors pursuant to the Receivables, any other right to realize upon
property securing a Receivable and any other interest of the Seller in such
Financed Vehicles including the Seller's right, title and interest in the lien
on the Financed Vehicles in the name of Autorics, Inc. or the Seller's agents
NAL or SFI; (iii) any proceeds with respect to Receivables from claims on any
Insurance Policies relating to the Financed Vehicles or Obligors; (iv) the
proceeds of any recourse (but none of the obligations) to Dealers on
Receivables; (v) any Financed Vehicle that shall have secured a Receivable and
shall have been acquired by or on behalf of the Purchaser, or, upon the
assignment contemplated by the Sale and Servicing Agreement, the Servicer or the
Trust; (vi) the Receivables Files; and (vii) the proceeds of any and all of the
foregoing. The foregoing sale does not constitute and is not intended to result
in any assumption by the Purchaser of any obligation of the undersigned to the
Obligors, insurers, Dealers or any other person in connection with the
Receivables, Receivable Files, any insurance policies or any agreement or
instrument relating to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the
Receivables Purchase Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Receivables Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of December 1, 1995.
AUTORICS, INC.
by ________________________
Name:
Title:
A-1
<PAGE>
SCHEDULE I
Schedule of Receivables
[To Be Delivered at Closing]
I-1
<PAGE>
SCHEDULE I
Location of Receivable Files
Bankers Trust Company
Four Albany Street
New York, NY 10006
I-2
<PAGE>
EXECUTION COPY
SALE AND SERVICING AGREEMENT
among
NAL AUTO TRUST 1995-1,
Issuer,
and
AUTORICS II, INC.
Depositor,
and
NAL ACCEPTANCE CORPORATION,
Servicer
and
BANKERS TRUST COMPANY,
Backup Servicer
Dated as of December 1, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
Definitions
<S> <C> <C>
SECTION 1.01. Definitions................................................................................... 1
SECTION 1.02. Other Definitional Provisions................................................................. 12
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables..................................................................... 12
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of the Depositor with Respect to the
Receivables................................................................................ 13
SECTION 3.02. Repurchase upon Breach........................................................................ 13
SECTION 3.03. Custody of Receivable Files................................................................... 14
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer............................................................................ 15
SECTION 4.02. Collection and Allocation of Receivable Payments.............................................. 15
SECTION 4.03. Realization upon Receivables.................................................................. 15
SECTION 4.04. Insurance..................................................................................... 16
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles........................................ 16
SECTION 4.06. Covenants of Servicer......................................................................... 16
SECTION 4.07. Purchase of Receivables upon Breach........................................................... 16
SECTION 4.08. Servicing Fee................................................................................. 17
SECTION 4.09. Servicer's Certificate........................................................................ 17
SECTION 4.10. Annual Statement as to Compliance; Notice of Default.......................................... 17
SECTION 4.11. Annual Independent Certified Public Accountants' Report....................................... 17
SECTION 4.12. Servicer Expenses............................................................................. 18
SECTION 4.13. Appointment of Subservicer.................................................................... 18
SECTION 4.14. Oversight of Servicing........................................................................ 18
SECTION 4.15. Duties of Backup Servicer..................................................................... 19
ARTICLE V
Trust Accounts; Distributions; Reserve Account; Statements to Certificateholders and Noteholders
SECTION 5.01. Establishment of Trust Accounts............................................................... 19
SECTION 5.02. Collections................................................................................... 21
SECTION 5.03. Application of Collections.................................................................... 21
SECTION 5.04. Additional Deposits........................................................................... 21
SECTION 5.05. Distributions................................................................................. 21
SECTION 5.06. Reserve Account............................................................................... 22
i
<PAGE>
SECTION 5.07. Statements to Certificateholders and Noteholders.............................................. 23
SECTION 5.08. Transfer of the Notes......................................................................... 24
SECTION 5.09. Dealer Reserve Account........................................................................ 24
ARTICLE VI
The Depositor
SECTION 6.01. Representations of Depositor.................................................................. 25
SECTION 6.02. Corporate Existence........................................................................... 26
SECTION 6.03. Liability of Depositor; Indemnities........................................................... 27
SECTION 6.04. Merger or Consolidation of, or Assumption of the Obligations of,
Depositor.................................................................................. 27
SECTION 6.05. Limitation on Liability of Depositor and Others............................................... 27
SECTION 6.06. Depositor May Own Certificates or Notes....................................................... 27
SECTION 6.07. Sale of Receivables........................................................................... 28
ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer................................................................... 28
SECTION 7.02. Indemnities of Servicer....................................................................... 29
SECTION 7.03. Merger or Consolidation of, or Assumption of the Obligations of, Servicer..................... 30
SECTION 7.04. Limitation on Liability of Servicer and Others................................................ 30
SECTION 7.05. NAL Not To Resign as Servicer................................................................. 31
SECTION 7.06. Representations of Backup Servicer............................................................ 31
SECTION 7.07. Merger or Consolidation of, or Assumption of the Obligations of, Backup
Servicer................................................................................... 31
SECTION 7.08. Bankers Trust Not To Resign as Backup Servicer................................................ 32
ARTICLE VIII
Default
SECTION 8.01. Servicer Default.............................................................................. 32
SECTION 8.02. Appointment of Successor...................................................................... 33
SECTION 8.03. Notification to Noteholders and Certificateholders............................................ 34
SECTION 8.04. Waiver of Past Defaults....................................................................... 34
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables.......................................................... 34
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment..................................................................................... 35
SECTION 10.02. Protection of Title to Trust.................................................................. 36
SECTION 10.03. Notices....................................................................................... 37
SECTION 10.04. Assignment by the Depositor or the Servicer................................................... 38
SECTION 10.05. Limitations on Rights of Others............................................................... 38
ii
<PAGE>
SECTION 10.06. Severability.................................................................................. 38
SECTION 10.07. Separate Counterparts......................................................................... 38
SECTION 10.08. Headings...................................................................................... 38
SECTION 10.09. Governing Law................................................................................. 38
SECTION 10.10. Assignment by Issuer.......................................................................... 38
SECTION 10.11. Nonpetition Covenants......................................................................... 38
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture Trustee................................ 38
SCHEDULE A Schedule of Receivables
EXHIBIT A Form of Distribution Date Statement to Noteholders
EXHIBIT B Form of Distribution Date Statement to Certificateholders
EXHIBIT C Form of Servicer's Certificate
EXHIBIT D Form of Receivables Checklist
EXHIBIT E Form of Receivables Assignment
</TABLE>
iii
<PAGE>
SALE AND SERVICING AGREEMENT dated as of December 1, 1995, among NAL AUTO
TRUST 1995-1, a Delaware business trust (the "Issuer"), AUTORICS II,
INC., a Delaware corporation (the "Depositor"), NAL ACCEPTANCE
CORPORATION, a Florida corporation (the "Servicer") and BANKERS TRUST
COMPANY, a New York banking corporation (the "Backup Servicer").
WHEREAS the Issuer desires to purchase a portfolio of receivables arising
in connection with automobile retail installment sale contracts generated by NAL
Acceptance Corporation in the ordinary course of business which were sold by NAL
Acceptance Corporation to the Seller and by the Seller to the Depositor;
WHEREAS the Depositor is willing to sell such receivables to the Issuer;
and
WHEREAS NAL Acceptance Corporation is willing to service such
receivables;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
"AA" means Auto Analyst, Inc., a Georgia corporation, and any successor
in interest.
"Amount Financed" means, with respect to any Receivable, the amount
advanced under the Receivable toward the purchase price of the Financed Vehicle
and any related costs, exclusive of any amount allocable to the premium of "dual
interest" insurance covering the Financed Vehicle.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate
of finance charges stated in the related Contract.
"Backup Servicer" means, Bankers Trust Company, a New York banking
corporation, and its successors or assigns, when acting in its capacity as
Backup Servicer under this Agreement.
"Certificate Balance" equals, as of the Closing Date, the Initial
Certificate Balance and, thereafter, will equal the Initial Certificate Balance
reduced by all amounts allocable to principal previously distributed to
Certificateholders.
"Certificate Distribution Account" has the meaning assigned to such term
in the Trust Agreement.
"Certificate Pool Factor" means, as of the close of business on the last
day of a Collection Period, a seven-digit decimal figure equal to the
Certificate Balance (after giving effect to any reductions therein to be made on
the immediately following Distribution Date) divided by the Initial Certificate
Balance. The Certificate Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Certificate Pool Factor will decline to reflect reductions in
the Certificate Balance.
"Certificateholders" or "Holders" (when used in the context of the
Holders of Certificates) has the meaning assigned to such term in the Trust
Agreement.
<PAGE>
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount for such date.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, (i) the excess of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date, over the amount in
respect of interest that is actually deposited in the Certificate Distribution
Account on such preceding Distribution Date, plus (ii) 90 days of interest on
the amount of such excess for such preceding Distribution Date, to the extent
permitted by law, at the Pass-Through Rate.
"Certificateholders' Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders' Quarterly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date. Interest with respect
to the Certificates shall be computed on the basis of a 360-day year consisting
of twelve 30-day months for all purposes of this Agreement and the Basic
Documents.
"Certificateholders' Quarterly Interest Distributable Amount" means, with
respect to any Distribution Date, 90 days of interest at the Pass-Through Rate
on the Certificate Balance on the immediately preceding Distribution Date (or,
in the case of the first Distribution Date, on the Closing Date) after giving
effect to all payments of principal to Certificateholders on such immediately
preceding Distribution Date.
"Certificateholders' Quarterly Principal Distributable Amount" means,
with respect to any Distribution Date prior to the Distribution Date on which
the Notes are paid in full, zero; and with respect to any Distribution Date on
or after the Distribution Date on which the Notes are paid in full, 100% of the
Principal Distribution Amount for such Distribution Date (less, on the
Distribution Date on which the Notes are paid in full, the portion thereof
payable as principal of the Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the
close of a particular Distribution Date, the excess of the Certificateholders'
Quarterly Principal Distributable Amount and any outstanding Certificateholders'
Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Certificate
Distribution Account on such particular Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders' Quarterly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; provided, however, that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Balance. In addition, on the Final
Scheduled Distribution Date, the principal required to be included in the
Certificateholders' Principal Distributable Amount will include the lesser of
(a) (i) any Scheduled Payments of principal due and remaining unpaid on each
Precomputed Receivable and (ii) any principal due and remaining unpaid on each
Simple Interest Receivable, in each case, in the Trust as of the Final Scheduled
Distribution Date or (b) the amount that is necessary (after giving effect to
the other amounts to be deposited in the Certificate Distribution Account on
such Distribution Date and allocable to principal) to reduce the Certificate
Balance to zero.
"Certificates" means the Trust Certificates (as defined in the Trust
Agreement).
"Class" means any one of the classes of Notes.
"Class A-1 Final Scheduled Distribution Date" means the September 15,
2000 Distribution Date.
"Class A-1 Noteholder" means the Person in whose name a Class A-1 Note is
registered in the Note Register.
2
<PAGE>
"Class A-2 Final Scheduled Distribution Date" means the December 15, 2000
Distribution Date.
"Class A-2 Noteholder" means the Person in whose name a Class A-2 Note is
registered in the Note Register.
"Closing Date" means December 21, 1995.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.01(a)(i).
"Collection Period" means the three calendar-month period ending on the
last day of the month preceding the month of each Distribution Date. Any amount
or balance stated as of the last day of a Collection Period shall give effect to
the following calculations as determined as of the close of business on such
last day: (1) all applications of collections, (2) all current and previous
Payaheads, (3) all applications of Payahead Balances and (4) all distributions
to be made on the following Distribution Date.
"Computer Tape" means a computer tape generated by the Servicer which
provides information relating to the Receivables.
"Contract" means a motor vehicle retail installment sale contract.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at Four Albany Street, New York, New York, Corporate Trust and Agency
Group, Structured Finance Team; or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Depositor, or the principal corporate trust office of any successor Indenture
Trustee (of which address such successor Indenture Trustee will notify the
Noteholders and the Depositor).
"Custodial Agreement" means the Custodial Agreement dated as of December
21, 1995, among the Issuer, Bankers Trust Company, as Indenture Trustee and
Custodian, and the Servicer.
"Custodian" means Bankers Trust Company, as Custodian under the Custodial
Agreement and any successor Custodian pursuant to the Custodial Agreement.
"Cutoff Date" means December 1, 1995.
"Dealer" means the dealer, SFI, AA or other entity who sold a Financed
Vehicle and who originated the related Contract or who acquired a Contract and
in either case assigned the related Receivable to NAL under an existing
agreement between it and NAL.
"Dealer Reserve Account" means the account designated as such,
established and maintained pursuant to Section 5.01.
"Delinquency Trigger Event" means, as to any Collection Period, that the
Average Three Month Delinquency Ratio as of the last day of such Collection
Period is greater than 6%. "Average Three Month Delinquency Ratio" means, as of
any date, the ratio of the average aggregate Principal Balances of Receivables
that are 60 days or more delinquent for each of the three prior calendar months
prior to such date to the average of the Pool Balances as of the end of such
periods.
"Delivery" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of
3
<PAGE>
Section 9-105(1)(i) of the UCC and are susceptible of physical delivery,
transfer thereof to the Indenture Trustee or its nominee or custodian by
physical delivery to the Indenture Trustee or its nominee or custodian
endorsed to, or registered in the name of, the Indenture Trustee or its
nominee or custodian or endorsed in blank, and, with respect to a
"certificated security" (as defined in Section 8-102(1)(a) of the UCC)
transfer thereof (i) by delivery of such certificated security endorsed
to, or registered in the name of, the Indenture Trustee or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined in
Section 8-313 of the UCC) and the making by such financial intermediary
of entries on its books and records identifying such certificated
securities as belonging to the Indenture Trustee or its nominee or
custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the
Indenture Trustee or its nominee or custodian, or (ii) by delivery
thereof to a "clearing corporation" (as defined in Section 8-102(3) of
the UCC) and the making by such clearing corporation of appropriate
entries on its books reducing the appropriate securities account of the
transferor and increasing the appropriate securities account of a
financial intermediary by the amount of such certificated security, the
identification by the clearing corporation of the certificated securities
for the sole and exclusive account of the financial intermediary, the
maintenance of such certificated securities by such clearing corporation
or a "custodian bank" (as defined in Section 8-102(4) of the UCC) or the
nominee of either subject to the clearing corporation's exclusive
control, the sending of a confirmation by the financial intermediary of
the purchase by the Indenture Trustee or its nominee or custodian of such
securities and the making by such financial intermediary of entries on
its books and records identifying such certificated securities as
belonging to the Indenture Trustee or its nominee or custodian (all of
the foregoing, "Physical Property"), and, in any event, any such Physical
Property in registered form shall be in the name of the Indenture Trustee
or its nominee or custodian; and such additional or alternative
procedures as may hereafter become appropriate to effect the complete
transfer of ownership of any such Trust Account Property (as defined
herein) to the Indenture Trustee or its nominee or custodian, consistent
with changes in applicable law or regulations or the interpretation
thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that is a book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations, the
following procedures, all in accordance with applicable law, including
applicable Federal regulations and Articles 8 and 9 of the UCC:
book-entry registration of such Trust Account Property to an appropriate
book-entry account maintained with a Federal Reserve Bank by a financial
intermediary which is also a "depository" pursuant to applicable Federal
regulations and issuance by such financial intermediary of a deposit
advice or other written confirmation of such book-entry registration to
the Indenture Trustee or its nominee or custodian of the purchase by the
Indenture Trustee or its nominee or custodian of such book-entry
security; the making by such financial intermediary of entries in its
books and records identifying such book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations as
belonging to the Indenture Trustee or its nominee or custodian and
indicating that such custodian holds such Trust Account Property solely
as agent for the Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate
to effect complete transfer of ownership of any such Trust Account
Property to the Indenture Trustee or its nominee or custodian, consistent
with changes in applicable law or regulations or the interpretation
thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the sending
of a confirmation by the financial intermediary of the purchase by the
Indenture Trustee or its nominee or custodian of such uncertificated
security, and the making by such financial intermediary of entries on its
books and records identifying such uncertificated certificates as
belonging to the Indenture Trustee or its nominee or custodian.
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"Depositor" means AUTORICS II, Inc., a Delaware corporation and any
successor in interest.
"Distribution Date" means March 15, June 15, September 15 and December 15
of each year or, if such day is not a Business Day, the immediately following
Business Day, commencing on March 15, 1996.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution shall have a credit rating from each
Rating Agency in one of its generic rating categories that signifies investment
grade.
"Eligible Institution" means (a) the corporate trust department of the
Indenture Trustee or the Owner Trustee or (b) a depository institution organized
under the laws of the United States of America or any one of the states thereof
or the District of Columbia (or any domestic branch of a foreign bank), which
(i) has either (A) a long-term unsecured debt rating of A or better by each
Rating Agency, or if not rated by each Rating Agency, of A or better by Standard
& Poor's, A1 or better by Moody's and, if rated by one of the Rating Agencies, A
or better by such agency and (ii) whose deposits are insured by the FDIC. If so
qualified, the Indenture Trustee or the Owner Trustee may be considered an
Eligible Institution for the purposes of clause (b) of this definition.
"Eligible Investments" means book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
the full and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of
any depository institution or trust company incorporated under the laws
of the United States of America or any state thereof (or any domestic
branch of a foreign bank) and subject to supervision and examination by
federal or state banking or depository institution authorities; provided,
however, that at the time of the investment or contractual commitment to
invest therein, the commercial paper or other short-term unsecured debt
obligations thereof (other than such obligations the rating of which is
based on the credit of a Person other than such depository institution or
trust company) shall have a short-term credit rating from each Rating
Agency in the highest investment category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each Rating
Agency in the highest investment category granted thereby;
(d) investments in money market mutual funds having a rating from
Standard & Poor's and Moody's and, if any Rating Agency rates such fund,
from such agency in the highest investment category granted by each
Rating Agency so rating such fund (including funds for which the
Indenture Trustee or the Owner Trustee or any of their respective
Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of
America or any agency or instrumentality thereof the obligations of which
are backed by the full faith and credit of the United States of America,
in
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either case entered into with a depository institution or trust company
(acting as principal) described in clause (b); and
(g) any other investment with respect to which the Issuer or the
Servicer has received written notification from each Rating Agency that
the acquisition of such investment as an Eligible Investment will not
result in a withdrawal or downgrading of the ratings on the Notes or
Certificates.
"Excess Spread" shall have the meaning set forth in Section 5.06(a)(ii).
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Distribution Date" means the December 15, 2000
Distribution Date.
"Final Scheduled Maturity Date" means November 30, 2000.
"Financed Vehicle" means an automobile, light-duty truck or van, together
with all accessions thereto, securing an Obligor's indebtedness under the
related Receivable.
"Indenture" means the Indenture dated as of December 1, 1995, between the
Issuer and the Indenture Trustee.
"Indenture Trustee" means the Person acting as Indenture Trustee under
the Indenture, its successors in interest and any successor trustee under the
Indenture.
"Initial Certificate Balance" shall have the meaning set forth in the
Trust Agreement.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"Insolvency Proceeds" shall have the meaning set forth in Section 9.01.
"Insurance Policies" means any physical damage, credit life, disability,
theft, mechanical breakdown, dual interest or guaranteed auto-protection
insurance policies or coverage relating to the Financed Vehicles or Obligors.
"Investment Earnings" means, with respect to any Payment Determination
Date, the investment earnings (net of losses and investment expenses) on amounts
on deposit in the Trust Accounts (other than the Dealer Reserve Account) to be
deposited into the Collection Account and to be deemed to constitute a portion
of the Total Distribution Amount for the related Distribution Date pursuant to
Section 5.01(b).
"Issuer" means NAL Auto Trust 1995-1.
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"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to a Receivable by operation of law as a result of any act or
omission by the related Obligor.
"Liquidated Receivable" means any defaulted Receivable as to which the
Servicer has determined that all amounts which it expects to recover from or on
account of such Receivables have been recovered or with respect to which the
related Financed Vehicle has been realized upon and disposed of and the proceeds
of such disposition have been received; provided that any Receivable which is
120 days or more past due shall be deemed to be a Liquidated Receivable.
"Liquidation Proceeds" means, with respect to any Liquidated Receivable,
the moneys collected in respect thereof, from whatever source, including
Insurance Policy proceeds, net of the sum of any amounts expended by the
Servicer in connection with such liquidation and any amounts required by law to
be remitted to the Obligor on such Liquidated Receivable.
"Loss Trigger Event" means, as to any Collection Period, that the Average
Six Month Realized Loss Ratio as of the last day of such Collection Period is
greater than 5%. The "Average Six Month Realized Loss Ratio" as of any date is
the ratio, expressed on an annualized basis, of the average of the aggregate
Realized Losses in respect of Liquidated Receivables for each of the six
calendar month periods (or lesser number of calendar months from the Cutoff
Date) prior to such date to the average of the Pool Balance as of the beginning
of such periods.
"Moody's" means Moody's Investors Service, Inc., and any successors in
interest.
"NAL" means NAL Acceptance Corporation, a Florida corporation and any
successor in interest.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.01.
"Note Pool Factor" means, with respect to each Class of Notes as of the
close of business on the last day of a Collection Period, a seven-digit decimal
figure equal to the Outstanding Amount of such Class of Notes divided by the
original Outstanding Amount of such Class of Notes. The Note Pool Factor for
each Class of Notes will be 1.0000000 as of the Closing Date; thereafter, the
Note Pool Factor will decline to reflect reductions in the Outstanding Amount of
the applicable Class of Notes.
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable Amount
and the Noteholders' Interest Distributable Amount for such Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, (i) the excess of the Noteholders' Interest Distributable
Amount for the preceding Distribution Date, over the amount in respect of
interest that is actually deposited in the Note Distribution Account on such
preceding Distribution Date, plus (ii) 90 days of interest on the amount of such
excess for such preceding Distribution Date, to the extent permitted by law, at
the respective Interest Rates borne by each Class of the Notes.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Quarterly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date. For all purposes of this Agreement and the
Basic Documents, interest with respect to each Class of Notes shall be computed
on the basis of a 360-day year consisting of twelve 30-day months.
"Noteholders' Quarterly Interest Distributable Amount" means, with
respect to any Distribution Date, 90 days of interest on the Class A-1 Notes and
the Class A-2 Notes at the Class A-1 Interest Rate and the Class A-2 Interest
Rate, respectively, on the Outstanding Amount of the Notes of such Class
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on the immediately preceding Distribution Date (or, in the case of the first
Distribution Date, the Closing Date) after giving effect to all payments of
principal to the Noteholders on such immediately preceding Distribution Date.
"Noteholders' Quarterly Principal Distributable Amount" means, with
respect to any Distribution Date, for so long as the Class A-1 Notes or Class
A-2 Notes are outstanding, 100% of the Principal Distribution Amount; provided,
however, that on the Distribution Date on which the Outstanding Amount of the
Class A-2 Notes is reduced to zero, the portion, if any, of the Principal
Distribution Amount that is not applied to the Class A-2 Notes will be applied
to the principal of the Certificates.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
business on a particular Distribution Date, the excess of the Noteholders'
Quarterly Principal Distributable Amount and any outstanding Noteholders'
Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Note
Distribution Account on such particular Distribution Date.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Quarterly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carryover
Shortfall as of the close of the preceding Distribution Date; provided, however,
that the Noteholders' Principal Distributable Amount shall not exceed the
Outstanding Amount of the Notes. In addition, (i) on the Class A-1 Final
Scheduled Distribution Date, the Noteholder's Principal Distributable Amount
will not be less than the amount that is necessary (after giving effect to all
other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the Outstanding Amount
of the Class A-1 Notes to zero; and (ii) on the Class A-2 Final Scheduled
Distribution Date the Noteholders' Principal Distributable Amount will not be
less than the amount that is necessary (after giving effect to all other amounts
to be deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the Outstanding Amount of the Class A-2 Notes
to zero.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president or any vice president and (b) a treasurer, assistant
treasurer, the controller or any assistant controller, secretary or assistant
secretary of the Seller, the Depositor, the Servicer or the Backup Servicer, as
appropriate.
"Opinion of Counsel" means one or more written opinions of counsel, who
may be an employee of or counsel to the Seller, the Depositor, Servicer or the
Backup Servicer, which counsel shall be acceptable to the Indenture Trustee, the
Owner Trustee or each Rating Agency, as applicable.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means the Person acting as Owner Trustee under the Trust
Agreement, its successors in interest and any successor owner trustee under the
Trust Agreement.
"Pass-Through Rate" means 14.25% per annum.
"Payahead" on a Receivable that is a Precomputed Receivable means the
amount, as of the close of business on the last day of a Collection Period,
computed in accordance with Section 5.03 with respect to such Receivable.
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"Payahead Account" means the account designated as such, established and
maintained pursuant to Section 5.01.
"Payahead Balance" on a Receivable that is a Precomputed Receivable means
the sum, as of the close of business on the last day of a Collection Period, of
all Payaheads made by or on behalf of the Obligor with respect to such
Precomputed Receivable, as reduced by applications of previous Payaheads with
respect to such Precomputed Receivable pursuant to Section 5.03.
"Payment Determination Date" means, with respect to any Distribution
Date, the 10th day of the month (or if such day is not a Business Day, the next
succeeding Business Day) of such Distribution Date.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Pool Balance" means, as of the close of business on the last day of a
Collection Period or any other date of determination, the aggregate Principal
Balance of the Receivables as of such day (excluding Purchased Receivables and
Liquidated Receivables).
"Precomputed Receivable" means any Receivable under which the portion of
a payment allocable to earned interest (which may be referred to in the related
Contract as an add-on finance charge) and the portion allocable to the Amount
Financed is determined according to the sum of periodic balances or the sum of
monthly balances or any equivalent method or are monthly actuarial receivables.
"Principal Balance" means (a) with respect to any Precomputed Receivable
as of the close of business on the last day of a Collection Period, the Amount
Financed minus the sum of (i) that portion of all Scheduled Payments due on or
prior to such day allocable to principal using the actuarial or constant yield
method, (ii) any payment of the Purchase Amount with respect to the Precomputed
Receivable allocable to principal and (iii) any prepayment in full applied to
reduce the Principal Balance of the Precomputed Receivable and (b) with respect
to any Simple Interest Receivable as of the close of business on the last day of
a Collection Period, the Amount Financed minus the sum of (i) the portion of all
payments made by or on behalf of the related Obligor on or prior to such day and
allocable to principal using the Simple Interest Method and (ii) any payment of
the Purchase Amount with respect to the Simple Interest Receivable allocable to
principal.
"Principal Distribution Amount" means, with respect to any Distribution
Date, an amount equal to the sum of the following amounts with respect to the
related Collection Period (i) with respect to Precomputed Receivables, the
principal component of all monthly payments scheduled to be received with
respect to such Receivables and all prepayments in full of such Receivables
(including amounts with respect thereto withdrawn from the Payahead Account);
(ii) with respect to Simple Interest Receivables, that portion of all
collections on such Receivables allocable to principal; (iii) the Principal
Balance of all Precomputed Receivables that became Liquidated Receivables during
such Collection Period; (iv) all Liquidation Proceeds attributable to the
principal amount of Simple Interest Receivables that became Liquidated
Receivables during such Collection Period, plus all Realized Losses with respect
to such Liquidated Receivables; and (v) to the extent attributable to principal,
the Purchase Amount of each Receivable that was purchased by NAL or by the
Servicer during the related Collection Period.
"Purchase Amount" means the amount, as of the close of business on the
last day of a Collection Period, required to prepay in full a Receivable under
the terms thereof including interest to the end of the month of purchase.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.07 or by NAL pursuant to Section 3.02.
"Rating Agency" means each of Fitch Investors Service, L.P. and Duff &
Phelps Credit Rating Co. and their successors in interest.
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"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to such Rating Agency) prior notice thereof and that each Rating
Agency shall have notified the Depositor, the Servicer, the Owner Trustee and
the Indenture Trustee in writing that such action will not result in a reduction
or withdrawal of the then current rating of the Notes or the Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Contract listed on Schedule A (which Schedule may
be in the form of microfiche).
"Receivable Files" means the documents specified in Section 3.03.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of December 1, 1995, among NAL, Autorics, Inc., as seller, and the
Depositor, as purchaser.
"Recoveries" means, with respect to any Receivable that becomes a
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in which
such Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts required
by law to be remitted to the Obligor.
"Repossession Trigger Event" means, as to any Collection Period, that the
Average Six Month Repossession Ratio as of the last day of such Collection
Period is greater than 12%. "Average Six Month Repossession Ratio" as of any
date is the ratio (expressed on an annualized basis) of the average of the
aggregate Principal Balances of Receivables with respect to which the related
Financed Vehicle has been repossessed by the Servicer for each of the six
calendar months (or lesser number of calendar months since the Cutoff Date)
prior to such date to the average Pool Balances as of the beginning of such
periods.
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 5.01.
"Reserve Account Initial Deposit" means $1,705,776.
"Scheduled Payment" on a Precomputed Receivable means that portion of the
payment required to be made by the Obligor during a calendar month sufficient to
amortize the Principal Balance under the actuarial method over the term of the
Receivable and to provide interest at the APR.
"Seller" means AUTORICS, Inc., a Delaware corporation, and any successor
in interest.
"Servicer" means NAL, in its capacity as the servicer of the Receivables,
and each successor to NAL (in the same capacity) pursuant to Section 7.03 or
8.02.
"Servicer Default" means an event specified in Section 8.01.
"Servicer's Certificate" means an Officers' Certificate of the Servicer
delivered pursuant to Section 4.09, substantially in the form of Exhibit C.
"Servicing Fee" means the fee payable to the Servicer for services
rendered during a Collection Period, determined pursuant to Section 4.08.
"Servicing Fee Rate" means 3.00% per annum.
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"SFI" means Special Finance, Inc., a Florida corporation, and any
successor in interest.
"Simple Interest Method" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the fixed rate of
interest multiplied by the unpaid principal balance multiplied by the period of
time elapsed since the preceding payment of interest was made, and the remainder
of such payment is allocable to principal.
"Simple Interest Receivable" means any Receivable under which the portion
of a payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple Interest Method.
"Specified Reserve Account Balance" means, with respect to any
Distribution Date, $1,705,776 until the first Distribution Date on which the
Pool Balance on the close of business on the last day of the Collection Period
preceding such date is less than or equal to $20,067,948.93 (one-half of the
Initial Pool Balance). On such Distribution Date and thereafter the Specified
Reserve Account Balance shall equal the greater of 8.50% of the Pool Balance on
the close of business on the last day of the related Collection Period and
$802,717.95 until the first Distribution Date on which the Pool Balance on the
close of business on the last day of the preceding Collection Period is less
than or equal to $802,717.95. On such Distribution Date and thereafter the
Specified Reserve Account Balance shall equal 100% of the Pool Balance on the
close of business on the last day of the related Collection Period. In no event,
however, shall the Specified Reserve Account Balance exceed the aggregate
outstanding principal balance of the Notes and the Certificates.
"Standard & Poor's" means Standard & Poor's Rating Services, a division
of the McGraw Hill Companies, Inc. and any successor in interest.
"Total Distribution Amount" means, with respect to a Distribution Date,
the sum of the following amounts with respect to the related Collection Period:
(i) that portion of all collections on the Receivables (including amounts
withdrawn from the Payahead Account but excluding amounts deposited into the
Payahead Account) allocable to principal and interest; (ii) all Liquidation
Proceeds, and all Recoveries in respect of Liquidated Receivables that were
written off in prior Collection Periods; (iii) the Purchase Amount of each
Receivable that was purchased by NAL or by the Servicer during the related
Collection Period; and (iv) Investment Earnings.
"Trigger Event" means any Distribution Date on which one or more of a
Delinquency Trigger Event, a Repossession Trigger Event or a Loss Trigger Event
has occurred with respect to the previously ended Collection Period. A Trigger
Event will be deemed to have terminated as to any Distribution Date (subject to
the reoccurrence of such event) if neither a Delinquency Trigger Event, a Loss
Trigger Event or a Repossession Trigger Event shall have occurred during the
related Collection Period.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit, and all
proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.01.
"Trust Agreement" means the Trust Agreement dated as of December 1, 1995,
between the Depositor and the Owner Trustee.
"Trust Officer" means, in the case of the Indenture Trustee, any Officer
within the Corporate Trust Office of the Indenture Trustee, including any Vice
President, Assistant Vice President, Secretary,
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Assistant Secretary or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject and, with respect to the Owner Trustee,
any officer in the Corporate Trust Administration Department of the Owner
Trustee with direct responsibility for the administration of the Trust Agreement
and the Basic Documents on behalf of the Owner Trustee.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms used
and not otherwise defined herein have the meanings assigned to them in the
Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. (a) In consideration of the
Issuer's delivery on the Closing Date to or upon the order of the Depositor of
$39,677,271.41, the Depositor does hereby sell, transfer, assign, set over and
otherwise convey to the Issuer, without recourse (subject to the obligations
herein), all right, title and interest of the Depositor in and to (but none of
the Depositor's obligations with respect to):
(1) the Receivables and all moneys received thereon on and after
the Cutoff Date plus all Payaheads as of the Cutoff Date;
(2) the security interests in the Financed Vehicles granted by
Obligors pursuant to such Receivables, any other right to realize upon
property securing a Receivable and any other interest
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of the Depositor in such Financed Vehicles including the Depositor's
right, title and interest in the lien on the Financed Vehicles in the
name of the Depositor's agent, Autorics, Inc., NAL or SFI;
(3) any proceeds with respect to the Receivables from claims on
any Insurance Policies relating to Financed Vehicles or Obligors;
(4) proceeds of any recourse (but none of the obligations) to
Dealers on Receivables;
(5) any Financed Vehicle that shall have secured a Receivable and
shall have been acquired by or on behalf of the Seller, the Depositor,
the Servicer, or the Trust;
(6) the Receivables Files;
(7) the Receivables Purchase Agreement, including the right of the
Depositor to cause NAL to purchase Receivables under certain
circumstances;
(8) the Trust Accounts; and
(9) the proceeds of any and all of the foregoing.
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of the Depositor with
Respect to the Receivables. The Depositor makes the following representations
and warranties with respect to the Receivables on which the Issuer relies in
acquiring the Receivables and issuing the Notes and Certificates. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the sale, transfer and
assignment of the Receivables to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) Title. It is the intention of the Depositor that the transfer
and assignment herein contemplated constitute a sale of the Receivables
from the Depositor to the Issuer and that the beneficial interest in and
title to the Receivables not be part of the debtor's estate in the event
of the filing of a bankruptcy petition by or against the Depositor under
any bankruptcy law. No Receivable has been sold, transferred, assigned or
pledged by the Depositor to any Person other than the Issuer. Immediately
prior to the transfer and assignment herein contemplated, the Depositor
had good and marketable title to each Receivable, free and clear of all
Liens and rights of others and, immediately upon the transfer thereof,
the Issuer shall have good and marketable title to each Receivable, free
and clear of all Liens and rights of others; and the transfer has been
perfected under the UCC.
(b) All Filings Made. All filings (including UCC filings)
necessary in any jurisdiction to give (i) the Issuer a first perfected
ownership interest in the Receivables and (ii) the Indenture Trustee a
first perfected security interest in the Receivables shall have been
made.
SECTION 3.02. Repurchase upon Breach. The Depositor, the Servicer, the
Backup Servicer and the Issuer, as the case may be, shall inform the other
parties to this Agreement, NAL and the Indenture Trustee promptly, in writing,
upon the discovery of any breach of the Depositor's representations and
warranties made pursuant to Section 3.01 or of NAL's representations and
warranties made pursuant to Section 3.02(c) of the Receivables Purchase
Agreement. Unless any such breach shall have been cured by the last day of the
Collection Period following the discovery thereof by NAL or the receipt by NAL
of written notice thereof from the Owner Trustee, the Indenture Trustee, the
Depositor, the Servicer or the Backup Servicer, the Depositor, the Issuer or the
Owner Trustee shall enforce the
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obligation of NAL under the Receivables Purchase Agreement, to purchase as of
such last day any Receivable with respect to which such a breach had occurred if
such breach has a material and adverse effect on the interests of the Depositor
or the Trust in and to such Receivable. In consideration for the purchased
Receivable, NAL shall remit the Purchase Amount in the manner specified in
Section 6.02 of the Receivables Purchase Agreement. Subject to the provisions of
Section 6.03, the sole remedy of the Issuer, the Owner Trustee, the Indenture
Trustee, the Noteholders or the Certificateholders with respect to a breach of
representations and warranties pursuant to Section 3.01 and the agreement
contained in this Section shall be to require NAL to purchase Receivables
pursuant to this Section and the Receivables Purchase Agreement.
SECTION 3.03. Custody of Receivable Files. (a) In connection with the
sale and transfer of the Receivables pursuant to this Agreement, the Issuer,
simultaneously with the execution and delivery of this Agreement, is entering
into the Custodial Agreement with the Custodian pursuant to which the Issuer
appoints the Custodian, and the Custodian accepts such appointment, to act as
the agent and bailee of the Issuer and the Indenture Trustee, for all purposes
of Article 9 of the UCC, as Custodian of the following documents or instruments,
which are hereby constructively delivered to the Indenture Trustee, as pledgee
of the Issuer, with respect to each Receivable:
(i) a list of Receivables in the form of Schedule A hereto,
identifying such Receivable together with the Computer Tape identifying
such Receivable and a completed checklist in the form of Exhibit D hereto
(it being expressly understood and agreed that the Custodian and
Indenture Trustee have no duties or responsibilities for checking or
verifying the accuracy or completeness of such checklist);
(ii) the fully executed original Receivable with manual signatures
and Dealer endorsements, together with executed assignments thereof by
NAL, the Seller and the Depositor in blank, which assignments shall be
substantially in the form of Exhibit E hereto;
(iii) a written confirmation from the Servicer certifying as to
the Insurance Policies covering the Receivable and stating that they are
in full force and effect;
(iv) the original certificate of title relating to the Financed
Vehicle or (a) a copy of the application for a certificate of title and
(b) a copy of the existing title, lien entry form or receipt of
registration or (c) a copy of the related letter guarantee, in each case
noting the lien of NAL, the Seller or SFI; provided, however, that at any
time during the term hereof the Owner Trustee may request and require
that the Depositor cause the party in whose name the lien is noted to
transfer such lien to the Depositor;
(v) an original or copy of the credit application of the Obligor;
and
(vi) financing statements on Form UCC-1 listing the Owner Trustee
as the secured party with respect to each Receivable and the other items
conveyed pursuant to Section 2.01 and stamped to indicate filing with the
Office of the Secretary of State of the State of Florida and with the
Office of the Secretary of State of Delaware.
(b) Access to Records. The Servicer or the Custodian, as the case may be,
shall provide to (or in the case of the Custodian shall be required pursuant to
the Custodial Agreement to provide to) the Indenture Trustee, the Issuer, the
Backup Servicer, Noteholders and Certificateholders and their duly authorized
representatives, attorneys or auditors access to the Receivable Files in such
cases where the Indenture Trustee, the Issuer, a Noteholder or a
Certificateholder is required by applicable statutes or regulations to review
the related accounts, records and computer systems maintained by the Servicer or
the Custodian, as the case may be, such access being afforded without charge but
only upon reasonable request and during normal business hours at offices of the
Servicer or the Custodian, as the case may be, designated by the Servicer or the
Custodian. Nothing in this Section shall derogate from the obligation of the
Servicer or the Custodian to observe any applicable law prohibiting disclosure
of
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information regarding the Obligors, and the failure of the Servicer or the
Custodian to provide access as provided in this Section as the result of such
obligation shall not constitute a breach of this Section.
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer. The Servicer, for the benefit of the
Issuer (to the extent provided herein), shall manage, service, administer and
make collections on the Receivables (other than Purchased Receivables) with
reasonable care, acting prudently and in accordance with customary and usual
servicing procedures for other institutional servicers of receivables of the
type subject to this Agreement and applicable law, and to the degree not
inconsistent with the foregoing, using that degree of skill and attention that
the Servicer exercises with respect to all comparable automotive receivables
that it services for itself or others. The Servicer's duties shall include
collection and posting of all payments, responding to inquiries of Obligors on
such Receivables, investigating delinquencies, sending billing statements to
Obligors, reporting tax information to Obligors, accounting for collections, and
furnishing monthly, and annual statements to the Owner Trustee and the Indenture
Trustee with respect to distributions. Subject to the provisions of Section
4.02, the Servicer shall follow its customary standards, policies and procedures
in performing its duties as Servicer. Without limiting the generality of the
foregoing, the Servicer is authorized and empowered to execute and deliver, on
behalf of itself, the Issuer, the Owner Trustee, the Indenture Trustee, the
Certificateholders and the Noteholders or any of them, any and all instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other comparable instruments, with respect to such Receivables or to the
Financed Vehicles securing such Receivables. If the Servicer shall commence a
legal proceeding to enforce a Receivable, the Issuer (in the case of a
Receivable other than a Purchased Receivable) shall thereupon be deemed to have
automatically assigned, solely for the purpose of collection, such Receivable to
the Servicer. If in any enforcement suit or legal proceeding it shall be held
that the Servicer may not enforce a Receivable on the ground that it shall not
be a real party in interest or a holder entitled to enforce such Receivable, the
Owner Trustee shall, at the Servicer's expense and direction, take steps to
enforce such Receivable, including bringing suit in its name or the name of the
Owner Trustee, the Indenture Trustee, the Certificateholders or the Noteholders.
The Owner Trustee shall (and the Custodian pursuant to the Custodial Agreement
shall be required) upon the written request of the Servicer furnish the Servicer
with any powers of attorney and other documents reasonably necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder.
SECTION 4.02. Collection and Allocation of Receivable Payments. The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable automotive receivables that it services for itself or others. The
Servicer may grant extensions, rebates or adjustments on a Receivable or arrange
with the Obligor to extend or modify the payment schedule, which actions shall
not, for the purposes of this Agreement, modify the original due dates or
amounts of the Scheduled Payments on a Precomputed Receivable or the original
due dates or amounts of the originally scheduled payments of interest on Simple
Interest Receivables; provided, however, that if the Servicer extends the date
for final payment by the Obligor of any Receivable beyond the Final Scheduled
Maturity Date, it shall promptly repurchase the Receivable from the Issuer in
accordance with the terms of Section 4.07. The Servicer may in its discretion
waive any late payment charge or any other fees that may be collected in the
ordinary course of servicing a Receivable. The Servicer shall not agree to any
alteration of the interest rate on any Receivable or of the amount of any
Scheduled Payment on Precomputed Receivables or the originally scheduled
payments on Simple Interest Receivables.
SECTION 4.03. Realization upon Receivables. On behalf of the Issuer, the
Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of and liquidate the
Financed Vehicle securing any Receivable as to which the Servicer shall
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have determined eventual payment in full is unlikely. The Servicer shall follow
such customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of automotive receivables, which may include
reasonable efforts to realize upon any recourse to Dealers and selling the
Financed Vehicle at public or private sale. The foregoing shall be subject to
the provision that, in any case in which the Financed Vehicle shall have
suffered damage, the Servicer shall not expend funds in connection with the
repair or the repossession of such Financed Vehicle unless it shall determine in
its discretion that such repair and/or repossession will increase the
Liquidation Proceeds by an amount greater than the amount of such expenses. The
Servicer may not sell any Financed Vehicles to J.D. Byrider Systems, Inc. for
less than 100% of such Financed Vehicles' wholesale value, determined from the
"Black Book".
SECTION 4.04. Insurance. The Servicer shall, in accordance with its
customary servicing procedures, require that each Obligor shall have obtained
physical damage and theft insurance covering the Financed Vehicle as of the
execution of the Receivable. The Servicer shall notify each insurer providing a
"guaranteed auto protection" insurance policy with respect to the Receivables to
include the Indenture Trustee as an additional insured and its payee on each
such policy. Upon receipt of notification that the insurance required pursuant
to the terms of any Receivable is not in place, the Servicer shall obtain "dual
interest" insurance chargeable to the Obligor in accordance with its customary
servicing procedures.
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles. The
Servicer shall, in accordance with its customary servicing procedures, take such
steps as are necessary to maintain perfection of the security interest created
by each Receivable in the related Financed Vehicle. The Servicer is hereby
authorized to take such steps as are necessary to re-perfect such security
interest on behalf of the Issuer and the Indenture Trustee in the event of the
relocation of a Financed Vehicle or for any other reason.
SECTION 4.06. Covenants of Servicer. The Servicer shall not release the
Financed Vehicle securing any Receivable from the security interest granted by
such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or repossession, nor shall the Servicer impair the rights
of the Issuer, the Indenture Trustee, the Certificateholders or the Noteholders
in such Receivable, nor shall the Servicer (except in the case of an extension
permitted pursuant to Section 4.02) increase the number of scheduled payments
due under a Receivable.
Neither NAL nor any Affiliate thereof shall incur liabilities of any kind
to SunTrust Bank, South Florida, National Association ("SunTrust"), if the total
amount of such liabilities outstanding at any time exceeds $10,000 except for
liabilities with respect to which SunTrust has expressly agreed to irrevocably
and unconditionally waive all right of set-off or other claims that it may have
under contract, applicable law or otherwise with respect to any funds or monies
SunTrust may hold from time to time pursuant to the Lock-box Agreement dated
November 27, 1995 between NAL, SunTrust and General Electric Capital
Corporation, or any other agreement related to the holding of any proceeds of
the Receivables or the other property conveyed pursuant to Section 2.01.
SECTION 4.07. Purchase of Receivables upon Breach. The Servicer or the
Owner Trustee shall inform the other party and the Indenture Trustee and the
Depositor promptly, in writing, upon the discovery of any breach pursuant to
Section 4.02, 4.05 or 4.06. Unless the breach shall have been cured by the last
day of the Collection Period following such discovery, the Servicer shall
purchase as of such last day any Receivable with respect to which such breach
had occurred if such breach has a material and adverse effect on the interests
of the Depositor or the Trust in and to such Receivable. If the Servicer takes
any action during any Collection Period pursuant to Section 4.02 that impairs
the rights of the Issuer, the Indenture Trustee, the Certificateholders or the
Noteholders in any Receivable or as otherwise provided in Section 4.02, the
Servicer shall purchase such Receivable as of the last day of such Collection
Period. In consideration of the purchase of any such Receivable pursuant to
either of the two preceding sentences, the Servicer shall remit the Purchase
Amount in the manner specified in Section 5.04. Subject to Section 7.02, the
sole remedy of the Issuer, the Owner Trustee, the
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Indenture Trustee, the Certificateholders or the Noteholders with respect to a
breach pursuant to Section 4.02, 4.05 or 4.06 shall be to require the Servicer
to purchase Receivables pursuant to this Section. The Owner Trustee shall have
no duty to conduct any affirmative investigation as to the occurrence of any
condition requiring the repurchase of any Receivable pursuant to this Section.
SECTION 4.08. Servicing Fee. The Servicing Fee for a Distribution Date
shall equal the product of (a) one-fourth, (b) the Servicing Fee Rate and (c)
the Pool Balance as of the first day of the preceding Collection Period. The
Servicer shall also be entitled to all late fees, prepayment charges (including,
in the case of a Receivable that provides for payments according to the "Rule of
78s" and that is prepaid in full, the difference between the Principal Balance
of such Receivable (plus accrued interest to the date of prepayment) and the
principal balance of such Receivable computed according to the "Rule of 78s"),
and other administrative fees or similar charges allowed by applicable law with
respect to the Receivables, collected (from whatever source) on the Receivables,
plus any reimbursement pursuant to the last paragraph of Section 7.02.
SECTION 4.09. Servicer's Certificate. Not later than 11:00 a.m. (New York
time) on the 10th day of each month, or if such 10th day is not a Business Day,
the next succeeding Business Day, the Servicer shall deliver to the Owner
Trustee, each Paying Agent, the Indenture Trustee, the Backup Servicer (in
electronic media form acceptable to the Backup Servicer) and the Depositor, with
a copy to the Rating Agencies, a Servicer's Certificate substantially in the
form attached hereto as Exhibit C setting forth the applicable information for
each of the items set forth therein. Receivables to be purchased by the Servicer
or by NAL shall be identified by the Servicer by account number with respect to
such Receivable (as specified in Schedule A).
SECTION 4.10. Annual Statement as to Compliance; Notice of Default. (a)
The Servicer shall deliver to the Owner Trustee and the Indenture Trustee, on or
before February 28 of each year beginning February 28, 1997, an Officers'
Certificate, dated as of December 31 of the preceding year, stating that (i) a
review of the activities of the Servicer during the preceding 12-month period
(or such shorter period as shall have elapsed since the Closing Date) and of its
performance under this Agreement has been made under such officers' supervision
and (ii) to the best of such officers' knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement throughout such
year or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officers and the nature and status
thereof. The Indenture Trustee shall send a copy of such certificate and the
report referred to in Section 4.11 to each Rating Agency. A copy of such
certificate and the report referred to in Section 4.11 may be obtained by any
Certificateholder or Noteholder by a request in writing to the Owner Trustee
addressed to the Corporate Trust Office. Upon the telephone request of the Owner
Trustee, the Indenture Trustee will promptly furnish the Owner Trustee with a
list of Noteholders as of the date specified by the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Backup Servicer and each Rating Agency, promptly after having
obtained knowledge thereof, but in no event later than five (5) Business Days
thereafter, written notice in an Officers' Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Servicer Default
under Section 8.01.
SECTION 4.11. Annual Independent Certified Public Accountants' Report.
The Servicer shall cause a firm of independent certified public accountants,
which may also render other services to the Servicer, the Depositor or their
Affiliates, to deliver to the Owner Trustee and the Indenture Trustee on or
before February 28 of each year beginning February 28, 1997, a report addressed
to the Board of Directors of the Servicer, to the effect that such firm has
examined the financial statements of the Servicer for the preceding twelve
months for, in the case of the first such report, during such longer period that
shall have elapsed since the Closing Date) and issued its report thereon and
that such examination (a) was made in accordance with generally accepted
auditing standards and accordingly included such tests of the accounting records
and such other auditing procedures as such firm considered necessary in the
circumstances; (b) included tests relating to automotive loans serviced for
others in accordance with the requirements of the Uniform Single Audit Program
for Mortgage Bankers
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(the "Program"), to the extent the procedures in such Program are applicable to
the servicing obligations set forth in this Agreement; and (c) except as
described in the report, disclosed no exceptions or errors in the records
relating to automobile, light-duty truck and van loans serviced for others that,
in the firm's opinion, paragraph four of such Program requires such firm to
report.
Such report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 4.12. Servicer Expenses. The Servicer shall be required to pay
all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of independent accountants, taxes imposed on
the Servicer and expenses incurred in connection with distributions and reports
to Certificateholders and Noteholders.
SECTION 4.13. Appointment of Subservicer. The Servicer may at any time
appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; and provided, further, that the
Servicer shall remain obligated and be liable to the Issuer, the Owner Trustee,
the Indenture Trustee, the Certificateholders and the Noteholders for the
servicing and administering of the Receivables in accordance with the provisions
hereof without diminution of such obligation and liability by virtue of the
appointment of such subservicer and to the same extent and under the same terms
and conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of the subservicer shall be as agreed between
the Servicer and its subservicer from time to time, and none of the Issuer, the
Owner Trustee, the Indenture Trustee, the Certificateholders or the Noteholders
shall have any responsibility therefor.
SECTION 4.14. Oversight of Servicing.
(a) Commencing on the date of execution of this Agreement and continuing
until the earlier of (i) the termination of the Trust created by the Trust
Agreement and (ii) the appointment of the Backup Servicer as Servicer under this
Agreement, the Servicer shall, on the last day of each calendar month, deliver
to the Backup Servicer in the Computer Tape format acceptable to the Back-up
Servicer, such information as is necessary to permit the Backup Servicer to
service the Receivables in accordance with the provisions of this Agreement. The
Backup Servicer shall accept and store, but shall not be required to examine,
such information. Upon notice that the Servicer has resigned or upon the removal
of the Servicer under this Agreement, the Backup Servicer shall assume all
responsibilities of the Servicer (or of Indenture Trustee or any other Person
then acting as successor to such Servicer in accordance with Sections 8.01 and
8.02) under this Agreement within thirty days of such notice or removal. The
Backup Servicer shall service the Receivables in accordance with provisions of
this Agreement.
(b) On the date that each Servicer's Certificate is delivered by the
Servicer to the Owner Trustee and Indenture Trustee, the Servicer shall also
deliver a Computer Tape containing detailed information with respect to the
Receivables for the related Collection Period. The Backup Servicer shall
determine that (i) the Servicer's Certificate appears on its face to be complete
and (ii) that amounts credited to and withdrawn from the Trust Accounts and the
balance of such Trust Accounts are the same as the amount set forth in such
Servicer's Certificate. To the extent verifiable using the information contained
in the Servicer's Certificate, the Backup Servicer shall calculate and check
that the calculations made by the Servicer in the Servicer's Certificate are
mathematically accurate.
(c) In the event of any discrepancies or exceptions noted by the Backup
Servicer in the Servicer's Certificate, the Backup Servicer shall, within three
Business Days of its receipt of the Servicer's Certificate, notify the Servicer
of such discrepancies or exceptions. The Servicer shall consult with the Backup
Servicer and use its best efforts to ensure that such Servicer's Certificate is
corrected, and that subsequent Servicer's Certificates are accurate. If such
discrepancies or exceptions
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cannot be reconciled within 30 days, the Backup Servicer's interpretation shall
prevail for all subsequent Distribution Dates.
(d) The Backup Servicer will not be responsible for delays attributable
to the Servicer's failure to deliver information, defects in the information
supplied by Servicer or other circumstances beyond the control of the Backup
Servicer.
SECTION 4.15. Duties of Backup Servicer.
(a) The Backup Servicer shall perform such duties and only such duties as
are specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Backup Servicer.
(b) In the absence of bad faith or negligence on its part, the Backup
Servicer may conclusively rely as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Backup Servicer and conforming to the requirements of this
Agreement.
(c) The Backup Servicer shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if the
repayment of such funds or adequate written indemnity against such risk or
liability is not reasonably assured to it in writing prior to the expenditure or
risk of such funds or incurrence of financial liability.
(d) The Servicer shall indemnify, defend and hold harmless the Backup
Servicer, its agents, officers, directors or employees from and against any
claim, action, loss, damage, penalty, fine, cost, expense, or other liability,
including court costs and reasonable attorney's fees and expenses, incurred as a
result of its acts or omissions or its breach of its own representations made in
this Agreement or the Backup Servicer's performance of its duties under this
Agreement. The right of indemnification provided hereby shall survive the
termination of this Agreement. The Servicer shall not be liable to the Backup
Servicer, under this Section 4.15 or otherwise, for the improper acts,
negligence or bad faith of the Backup Servicer.
ARTICLE V
Trust Accounts; Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Establishment of Trust Accounts. (a) (i) The Servicer, for
the benefit of the Noteholders and the Certificateholders, shall
establish and maintain in the name of the Indenture Trustee an Eligible
Deposit Account (the "Collection Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of
the Noteholders and the Certificateholders.
(ii) The Servicer, for the benefit of the Noteholders, shall
establish and maintain in the name of the Indenture Trustee an Eligible
Deposit Account (the "Note Distribution Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the
benefit of the Noteholders.
(iii) The Servicer, for the benefit of the Noteholders and the
Certificateholders, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account (the "Reserve Account"),
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Noteholders and the Certificateholders.
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(iv) The Servicer, for the benefit of the Noteholders and the
Certificateholders, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account (the "Payahead Account"),
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Noteholders and the Certificateholders.
(v) The Servicer, for the benefit of the Noteholders, the
Certificateholders and NAL, shall establish and maintain in the name of
the Indenture Trustee an Eligible Deposit Account (the "Dealer Reserve
Account") bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Noteholders, the
Certificateholders, the Depositor and NAL.
(b) With respect to the Collection Account, the Note Distribution
Account, the Reserve Account, the Payahead Account and the Dealer Reserve Amount
(collectively the "Trust Accounts") funds on deposit in such Trust Accounts
(other than the Note Distribution Account) shall be invested by the Indenture
Trustee in Eligible Investments. All such Eligible Investments of the Trust Fund
shall be held by the Indenture Trustee for the benefit of the beneficiaries of
such accounts; provided, that on each Payment Determination Date all interest
and other investment income (net of losses and investment expenses) on funds on
deposit in the Trust Accounts (other than the Dealer Reserve Account) shall be
deposited into the Collection Account and shall be deemed to constitute a
portion of the Total Distribution Amount for the related Distribution Date.
Investment income (net of losses and investment expenses) on the Dealer Reserve
Account will be payable on each Distribution Date to the Depositor. Other than
as permitted by each Rating Agency, funds on deposit in the Trust Accounts shall
be invested in Eligible Investments that will mature not later than the Business
Day immediately preceding the next Distribution Date. Funds deposited in a Trust
Account on a day which immediately precedes a Distribution Date are not required
to be invested overnight.
(c) (i) The Indenture Trustee shall possess all right, title and interest
in all funds on deposit from time to time in the Trust Accounts and in
all proceeds thereof (including all income thereon) and all such funds,
investments, proceeds and income shall be part of the Trust Estate. The
Trust Accounts shall be under the sole dominion and control of the
Indenture Trustee for the benefit of the Noteholders and the
Certificateholders (and in the case of the Dealer Reserve Account, NAL),
as the case may be. If, at any time, any of the Trust Accounts ceases to
be an Eligible Deposit Account, the Indenture Trustee (or the Servicer on
its behalf) shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent)
establish a new Trust Account as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Trust Account.
(ii) With respect to the Trust Account Property, the Indenture
Trustee agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in deposit
accounts shall be held solely in the Eligible Deposit Accounts,
subject to the last sentence of Section 5.01(c)(i); and each such
Eligible Deposit Account shall be subject to the exclusive custody
and control of the Indenture Trustee, and the Indenture Trustee
shall have sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance
with paragraph (a) of the definition of "Delivery" and shall be
held, pending maturity or disposition, solely by the Indenture
Trustee or a financial intermediary (as such term is defined in
Section 8-313(4) of the UCC) acting solely for the Indenture
Trustee;
(C) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to
federal book-entry regulations shall be delivered in
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accordance with paragraph (b) of the definition of "Delivery" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued book-entry registration of such
Trust Account Property as described in such paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed
by clause (C) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "Delivery" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture
Trustee's (or its nominee's) ownership of such security.
(iii) The Servicer shall have the power, revocable by the
Indenture Trustee or by the Owner Trustee with the consent of the
Indenture Trustee, to instruct the Indenture Trustee to make withdrawals
and payments from the Trust Accounts for the purpose of permitting the
Servicer or the Owner Trustee to carry out its respective duties
hereunder or permitting the Indenture Trustee to carry out its duties
under the Indenture.
(d) The Servicer shall on or prior to each Distribution Date (and prior
to deposits to the Note Distribution Account or the Certificate Distribution
Account) transfer from the Collection Account to the Payahead Account an amount
equal to the increase in the Payahead Balance as described in Section 5.03
received by the Servicer during the related Collection Period or, if the
Payahead Balance decreased during such Collection Period, shall transfer an
amount equal to the amount of such decrease from the Payahead Account to the
Collection Account.
SECTION 5.02. Collections. The Servicer shall remit within two Business
Days of receipt thereof to the Collection Account all payments by or on behalf
of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Liquidation Proceeds and Recoveries, both as collected
during the Collection Period.
SECTION 5.03. Application of Collections. All collections for the
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor shall be applied
first, in the case of Precomputed Receivables, to the Scheduled Payment
and, in the case of Simple Interest Receivables, to interest and
principal in accordance with the Simple Interest Method. With respect to
Precomputed Receivables, any remaining excess shall be added to the
Payahead Balance, and shall be applied to prepay the Precomputed
Receivable (in reduction of the Payahead Balance as evidenced by a
transfer of the net amount of such reduction from the Payahead Account to
the Collection Account), but only if the sum of such excess and the
previous Payahead Balance shall be sufficient to prepay the Receivable in
full. Otherwise, any such remaining excess payments shall constitute a
Payahead (as shall the accumulated amount of such excess on the
Receivables as of the Cut-off Date) and shall increase the Payahead
Balance.
SECTION 5.04. Additional Deposits. The Servicer and the Depositor shall
deposit or cause to be deposited in the Collection Account the aggregate
Purchase Amount with respect to Purchased Receivables, and the Servicer shall
deposit therein all amounts to be paid under Section 9.01. The Servicer will
deposit the aggregate Purchase Amount with respect to Purchased Receivables in
the Collection Account when such obligations are due.
SECTION 5.05. Distributions. (a) On each Payment Determination Date, the
Servicer shall calculate all amounts required to be deposited in the Note
Distribution Account and the Certificate Distribution Account.
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(b) On each Distribution Date, the Servicer shall instruct the Indenture
Trustee (based on the information contained in the Servicer's Certificate
delivered on the related Payment Determination Date pursuant to Section 4.09) to
make the following deposits and distributions for receipt by the Servicer or
deposit in the applicable account by 1:00 p.m. (New York time), to the extent of
the Total Distribution Amount, in the following order of priority:
(i) only in the event NAL is not the Servicer, to the Servicer,
the Servicing Fee (and all unpaid Servicing Fees from prior Collection
Periods);
(ii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clause (i), the Noteholders'
Interest Distributable Amount;
(iii) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) and
(ii), the Noteholders' Principal Distributable Amount;
(iv) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iii), the Certificateholders' Interest Distributable Amount;
(v) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iv), the Certificateholders' Principal Distributable Amount;
(vi) to the Reserve Account, the Total Distribution Amount
remaining after application of clauses (i) through (v), as and to the
extent provided in Section 5.06;
(vii) for so long as NAL is the Servicer, to the Servicer, from
the Total Distribution Amount remaining after the application of clauses
(i) through (vi), the Servicing Fee and all unpaid Servicing Fees from
prior Collection Periods; and
(viii) to the Depositor, any remaining amount.
Notwithstanding that the Notes have been paid in full, the Indenture Trustee
shall continue to maintain the Collection Account hereunder until the
Certificate Balance is reduced to zero.
SECTION 5.06. Reserve Account. (a) (i) On the Closing Date, the Owner
Trustee will deposit, on behalf of the Depositor, the Reserve Account Initial
Deposit into the Reserve Account from the net proceeds of the sale of the Notes
and the Certificates.
(ii) If on a Distribution Date (i) the amount on deposit in
the Reserve Account, after any withdrawals therefrom on or prior to such
Distribution Date, is less than the Specified Reserve Account Balance,
there shall be deposited into the Reserve Account on such Distribution
Date pursuant Section 5.05(b)(vi) the portion of the Total Distribution
Amount on such Distribution Date remaining after payment of the Servicing
Fee (but only in the event NAL is not the Servicer), the Noteholders'
Distributable Amount and the Certificateholders' Distributable Amount
(such amount, the "Excess Spread") until the amount on deposit in the
Reserve Account equals the Specified Reserve Account Balance for such
Distribution Date and (ii) a Trigger Event has occurred and not
terminated, there shall be deposited into the Reserve Account on such
Distribution Date pursuant to Section 5.05(vi) all of the Excess Spread,
if any, for such Distribution Date.
(b) Unless a Trigger Event has occurred and has not terminated, if the
amount on deposit in the Reserve Account on any Distribution Date (after giving
effect to all deposits thereto or withdrawals
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therefrom on such Distribution Date) is greater than the Specified Reserve
Account Balance for such Distribution Date, the Servicer shall instruct the
Indenture Trustee to distribute the amount of such excess to the Depositor.
During the pendency of a Trigger Event no amounts will be released to the
Depositor from the Reserve Account (other than pursuant to clause (e) of this
Section 5.06, if applicable).
(c) In the event that the Noteholders' Distributable Amount for a
Distribution Date exceeds the sum of the amounts deposited into the Note
Distribution Account pursuant to Section 5.05(b)(ii) and (iii) on such
Distribution Date, the Servicer shall instruct the Indenture Trustee to withdraw
from the Reserve Account on such Distribution Date an amount equal to such
excess, to the extent of funds available therein, and deposit such amount into
the Note Distribution Account on such Distribution Date.
(d) In the event that the Certificateholders' Distributable Amount for a
Distribution Date exceeds the sum of the amounts deposited into the Certificate
Distribution Account pursuant to Section 5.05(b)(iv) and (v) on such
Distribution Date, the Servicer shall instruct the Indenture Trustee to withdraw
from the Reserve Account on such Distribution Date an amount equal to such
excess, to the extent of funds available therein after giving effect to
paragraph (c) above, and deposit such amount into the Certificate Distribution
Account on such Distribution Date.
(e) Following the payment in full of the aggregate Outstanding Amount of
the Notes and the Certificate Balance and of all other amounts owing or to be
distributed hereunder or under the Indenture or the Trust Agreement to
Noteholders and Certificateholders and the termination of the Trust, any amount
remaining on deposit in the Reserve Account shall be distributed to the
Depositor.
(f) Upon any distribution to the depositor of amounts from the Reserve
Fund in accordance with the terms hereof, neither the Noteholders nor the
Certificateholders will have any rights in, or claims to, such amounts.
SECTION 5.07. Statements to Certificateholders and Noteholders. (a) On or
prior to each Distribution Date, the Servicer shall provide to the Indenture
Trustee (with a copy to each Rating Agency and each Paying Agent) for the
Indenture Trustee to forward to each Noteholder of record as of the most recent
Record Date and to the Owner Trustee (with a copy to each Paying Agent) for the
Owner Trustee to forward to each Certificateholder of record as of the most
recent Record Date a statement substantially in the form of Exhibits A and B,
respectively, setting forth at least the following information as to the Notes
and the Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal
allocable to each Class of Notes and to the Certificates;
(ii) the amount of such distribution allocable to interest
allocable to each Class of Notes and to the Certificates;
(iii) the Pool Balance as of the close of business on the last day
of the preceding Collection Period;
(iv) the Outstanding Amount of each Class of Notes, the Note Pool
Factor for each such Class, the Certificate Balance and the Certificate
Pool Factor as of the close of business on the last day of the preceding
Collection Period, after giving effect to payments allocated to principal
reported under clause (i) above;
(v) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period;
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(vi) the amount of aggregate Realized Losses, if any, with respect
to the related Collection Period;
(vii) the aggregate Principal Balance of Receivables that are 30
to 59 days, 60 to 89 days and 90 days or more delinquent;
(viii) the Average Three Delinquency Ratio, the Average Six Month
Repossession Ratio and the Average Six Month Realized Loss Ratio as of
the last day of the related Collection Period.
(ix) the Noteholders' Interest Carryover Shortfall, the
Noteholders' Principal Carryover Shortfall, the Certificateholders'
Interest Carryover Shortfall and the Certificateholders' Principal
Carryover Shortfall, if any, in each case as applicable to each Class of
Securities, after giving effect to payments on such Distribution Date,
and the changes in such amounts from the preceding statement;
(x) the aggregate Purchase Amounts for Receivables, if any, that
were purchased by NAL or the Servicer during the related Collection
Period;
(xi) the balance, if any, of the Reserve Account after giving
effect to deposits and withdrawals to be made on such Distribution Date,
and the change in such balance from the preceding Statement; and
(xii) the aggregate Payahead Balance.
Each amount set forth under clauses (i), (ii), (v) and (ix) above shall
be expressed as a dollar amount per $1,000 of original principal balance of a
Certificate or Note, as applicable.
(b) On or prior to the 15th day of each month that is not a month
in which a Distribution Date occurs and on or prior to each Distribution
Date, the Indenture Trustee shall forward to each Noteholder of record
and the Owner Trustee shall forward to each Certificateholder of record
the Servicer's Certificate provided to it pursuant to Section 4.09
(except that on any Distribution Date information otherwise provided to
such holder pursuant to clause (a) of this Section 5.08 need not have
been included in such certificate).
SECTION 5.08. Transfer of the Notes. In the event any Holder of the Notes
shall wish to transfer such Note, the Depositor shall provide to such Holder and
any prospective transferee designated by such Holder information regarding the
Notes and the Receivables and such other information as shall be necessary to
satisfy the condition to eligibility set forth in Rule 144A(d)(4) for transfer
of any such Note without registration thereof under the Securities Act of 1933,
as amended, pursuant to the exemption from registration provided by Rule 144A.
SECTION 5.09. Dealer Reserve Account. (a) On the Closing Date, the Owner
Trustee will deposit, on behalf of the Depositor, an amount equal to $127,734.45
into the Dealer Reserve Account.
(b) On each Distribution Date, the Servicer shall be entitled to withdraw
from the Dealer Reserve Account for payment to NAL, an amount equal to the
amount payable or paid by NAL to Dealers (other than SFI and AA) during the
related Collection Period in respect of dealer reserves on the Receivables and
amounts to which NAL may be entitled from such dealer reserves under NAL's
agreements with such Dealers. After payment in full, or the provision for such
payment, of all amounts payable to Dealers (other than SFI and AA) in respect of
dealer reserves on the Receivables, any funds remaining on deposit in the Dealer
Reserve Account will be paid to the Depositor. Amounts on deposit in the Dealer
Reserve Account will not be available to make payments on the Securities or for
any other purpose other than that set forth above in this clause (b).
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ARTICLE VI
The Depositor
SECTION 6.01. Representations of Depositor. The Depositor makes the
following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Depositor is duly
organized and validly existing as a corporation in good standing under
the laws of the State of Delaware, with the corporate power and authority
to own its properties and to conduct its business as such properties are
currently owned and such business is presently conducted, and had at all
relevant times, and has, the corporate power, authority and legal right
to acquire and own the Receivables.
(b) Due Qualification. The Depositor is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business shall
require such qualifications.
(c) Power and Authority. The Depositor has the corporate power and
authority to execute and deliver this Agreement and to carry out its
terms; the Depositor has full power and authority to sell and assign the
property to be sold and assigned to and deposited with the Issuer, and
the Depositor shall have duly authorized such sale and assignment to the
Issuer by all necessary corporate action; and the execution, delivery and
performance of this Agreement has been duly authorized by the Depositor
by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the Depositor enforceable in accordance with
its terms.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a
default under, the certificate of incorporation or bylaws of the
Depositor, or any indenture, agreement or other instrument to which the
Depositor is a party or by which it is bound; or result in the creation
or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); or violate any law or, to the best of
the Depositor's knowledge, any order, rule or regulation applicable to
the Depositor of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
(f) No Proceedings. There are no proceedings or investigations
pending, or to the Depositor's best knowledge, threatened, before any
court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its properties:
(i) asserting the invalidity of this Agreement, the Receivables Purchase
Agreement, the Indenture or any of the other Basic Documents, the Notes
or the Certificates, (ii) seeking to prevent the issuance of the Notes or
the Certificates or the consummation of any of the transactions
contemplated by this Agreement, the Receivables Purchase Agreement, the
Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement, the Receivables Purchase Agreement,
the Indenture,
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any of the other Basic Documents, the Notes or the Certificates or (iv)
which might adversely affect the federal or state income tax attributes
of the Notes or the Certificates.
(g) Principal Place of Business. The principal place of business
and chief executive office of the Depositor are located at the place set
forth in Section 10.03(a) and such location has not changed since the
date the Depositor was incorporated.
(h) Use of Names. The legal name of Depositor is the name used by
it in this Agreement and Depositor has not changed its name since the
date of its incorporation and does not have trade names, fictitious
names, assumed names or "doing business" names.
(i) Solvency. Depositor is solvent and will not become insolvent
after giving effect to the transactions contemplated in this Agreement;
Depositor is paying its debts, if any, as they become due; Depositor,
after giving effect to the transactions contemplated in this Agreement,
will have adequate capital to conduct its business.
SECTION 6.02. Corporate Existence. (a) During the term of this Agreement,
the Depositor will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
(b) During the term of this Agreement, the Depositor shall observe the
applicable legal requirements for the recognition of the Depositor as a legal
entity separate and apart from its Affiliates, including the following:
(i) the Depositor shall maintain corporate records and books of
account separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the Depositor
shall not commingle its assets and funds with those of its Affiliates;
(iii) the Depositor shall hold such appropriate meetings of its
board of directors as are necessary to authorize all the Depositor's
corporate actions required by law to be authorized by the board of
directors, shall keep minutes of such meetings and of meetings of its
stockholder(s) and observe all other customary corporate formalities (and
any successor Depositor not a corporation shall observe similar
procedures in accordance with its governing documents and applicable
law);
(iv) the Depositor shall at all times hold itself out to the
public under the Depositor's own name as a legal entity separate and
distinct from its Affiliates;
(v) all transactions and dealings between the Depositor and its
Affiliates will be conducted on an arm's-length basis;
(vi) except as provided for by the Basic Documents, the Depositor
shall not utilize NAL as its agent and shall not agree to act as the
agent of any other Person; and
(vii) the Depositor shall at all times have at least one director
that is an "Independent Director" as such term is defined in the
certificate of incorporation.
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SECTION 6.03. Liability of Depositor; Indemnities. (a) The Depositor
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Depositor under this Agreement.
(b) The Depositor shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Certificateholders and the
Noteholders and any of the officers, directors, employees and agents of the
Issuer, the Owner Trustee and the Indenture Trustee from and against any loss,
liability or expense incurred by reason of (i) the Depositor's willful
misfeasance, bad faith or negligence in the performance of its duties under this
Agreement or by reason of reckless disregard of its obligations and duties under
this Agreement and (ii) the Depositor's or the Issuer's violation of federal or
state securities laws in connection with the offering and sale of the Notes and
the Certificates.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee and the termination of
this Agreement and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Depositor shall have made any indemnity payments
pursuant to this Section and the Person to or on behalf of whom such payments
are made thereafter shall collect any of such amounts from others, such Person
shall promptly repay such amounts to the Depositor, without interest.
SECTION 6.04. Merger or Consolidation of, or Assumption of the
Obligations of, Depositor. Any Person (a) into which the Depositor may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Depositor shall be a party or (c) which may succeed to the properties and
assets of the Depositor substantially as a whole, which Person in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Depositor under this Agreement, shall be the successor to the Depositor
hereunder without the execution or filing of any document or any further act by
any of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 3.01 shall have been breached and no Servicer Default, and
no event that, after notice or lapse of time, or both, would become a Servicer
Default shall have occurred and be continuing, (ii) the Depositor shall have
delivered to the Owner Trustee and the Indenture Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, (iii) the Rating Agency
Condition shall have been satisfied with respect to such transaction and (iv)
the Depositor shall have delivered to the Owner Trustee and the Indenture
Trustee an Opinion of Counsel stating that, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary fully to preserve and
protect the interest of the Owner Trustee and Indenture Trustee, respectively,
in the Receivables and reciting the details of such filings, or (B) no such
action shall be necessary to preserve and protect such interests.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with clauses (i), (ii), (iii) and (iv)
above shall be conditions to the consummation of the transactions referred to in
clauses (a), (b) or (c) above.
SECTION 6.05. Limitation on Liability of Depositor and Others. The
Depositor and any director, officer, employee or agent of the Depositor may rely
in good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement and that in its opinion may involve it in any
expense or liability.
SECTION 6.06. Depositor May Own Certificates or Notes. The Depositor and
any Affiliate thereof may in its individual or any other capacity become the
owner or pledgee of Certificates or Notes
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with the same rights as it would have if it were not the Depositor or an
Affiliate thereof, except as expressly provided herein or in any Basic Document.
SECTION 6.07. Sale of Receivables. Depositor shall take no actions
inconsistent with the Trust's ownership of the Receivables. Depositor shall
promptly respond to any third-party inquiries regarding the Receivables by
indicating that ownership thereof has been transferred to the Trust.
ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer. The Servicer makes the
following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized
and validly existing as a corporation in good standing under the laws of
the state of its incorporation, with the corporate power and authority to
own its properties and to conduct its business as such properties are
currently owned and such business is presently conducted, and had at all
relevant times, and has, the corporate power, authority and legal right
to acquire, own, sell and service the Receivables.
(b) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business (including
the servicing of the Receivables as required by this Agreement) shall
require such qualifications.
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its
terms; and the execution, delivery and performance of this Agreement have
been duly authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the Servicer enforceable in accordance with its
terms.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a
default under, the articles of incorporation or bylaws of the Servicer,
or any indenture, agreement or other instrument to which the Servicer is
a party or by which it is bound; or result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than this Agreement); or
violate any law or any order, rule or regulation applicable to the
Servicer of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's best knowledge, threatened, before any
court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties:
(i) asserting the invalidity of this Agreement, the Receivables Purchase
Agreement, the Indenture,
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any of the other Basic Documents, the Notes or the Certificates, (ii)
seeking to prevent the issuance of the Notes or the Certificates or the
consummation of any of the transactions contemplated by this Agreement,
the Receivables Purchase Agreement, the Indenture or any of the other
Basic Documents, (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement,
the Receivables Purchase Agreement, the Indenture, any of the other Basic
Documents, the Notes or the Certificates or (iv) relating to the Servicer
and which might adversely affect the federal or state income tax
attributes of the Notes or the Certificates.
(g) No Insolvent Obligors. As of the Cutoff Date, no Obligor on a
Receivable is shown on the Receivable Files as the subject of a
bankruptcy proceeding.
SECTION 7.02. Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement:
(a) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Backup Servicer,
the Noteholders, the Certificateholders, and the Depositor, their
respective officers, directors, employees and agents from and against any
and all costs, expenses, losses, damages, claims and liabilities, arising
out of or resulting from the use, ownership or operation by the Servicer
or any Affiliate thereof of a Financed Vehicle.
(b) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Backup Servicer and
the Depositor and their respective officers, directors, employees and
agents from and against any taxes that may at any time be asserted
against any such Person with respect to the transactions contemplated
herein and in the Basic Documents, including any sales, gross receipts,
general corporation, tangible personal property, privilege or license
taxes (but, in the case of the Issuer, not including any taxes asserted
with respect to, and as of the date of, the sale of the Receivables to
the Issuer or the issuance and original sale of the Certificates and the
Notes, or asserted with respect to ownership of the Receivables, or
federal or other income taxes arising out of distributions on or
transfers of the Certificates or the Notes) and costs and expenses in
defending against the same.
(c) The Servicer shall indemnify, defend and hold harmless the
Issuer, the Owner Trustee, the Indenture Trustee, the Backup Servicer,
the Depositor, the Certificateholders and the Noteholders and their
respective officers, directors, employees and agents from and against any
and all costs, expenses, losses, claims, damages and liabilities to the
extent that such cost, expense, loss, claim, damage or liability arose
out of, or was imposed upon any such Person through, the negligence,
willful misfeasance or bad faith of the Servicer in the performance of
its duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement.
(d) The Servicer shall indemnify, defend and hold harmless the
Owner Trustee and the Indenture Trustee and their respective officers,
directors, employees and agents from and against all costs, expenses,
losses, claims, damages and liabilities arising out of or incurred in
connection with the acceptance or performance of the trusts and duties
herein and in the Trust Agreement contained, in the case of the Owner
Trustee, and in the Indenture contained, in the case of the Indenture
Trustee, except to the extent that such cost, expense, loss, claim,
damage or liability: (i) in the case of the Owner Trustee, shall be due
to the willful misfeasance, bad faith or negligence (except for errors in
judgment) of the Owner Trustee or, in the case of the Indenture Trustee,
shall be due to the willful misfeasance, bad faith or negligence (except
for errors in judgment) of the Indenture Trustee; or (ii) in the case of
the Owner Trustee, shall arise from the breach by the Owner Trustee of
any of its representations or warranties set forth in Section 7.03 of the
Trust Agreement.
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(e) The Servicer shall pay any and all taxes levied or assessed
upon all or any part of the Owner Trust Estate.
For purposes of this Section, in the event of the termination of the
rights and obligations of NAL (or any successor thereto pursuant to Section
7.03) as Servicer pursuant to Section 8.01, or a resignation by such Servicer
pursuant to this Agreement, such Servicer shall be deemed to be the Servicer
pending appointment of a successor Servicer (other than the Indenture Trustee)
pursuant to Section 8.02.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement and shall include reasonable fees and expenses of counsel and expenses
of litigation. If the Servicer shall have made any indemnity payments pursuant
to this Section and the Person to or on behalf of whom such payments are made
thereafter collects any of such amounts from others, such Person shall promptly
repay such amounts to the Servicer, without interest.
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (a) into which the Servicer may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Servicer shall be a party, (c) which may succeed to the properties and
assets of the Servicer substantially as a whole or (d) with respect to the
Servicer's obligations hereunder, which is a corporation 50% or more of the
voting stock of which is owned, directly or indirectly, by NAL, which Person
executed an agreement of assumption to perform every obligation of the Servicer
hereunder, shall be the successor to the Servicer under this Agreement without
further act on the part of any of the parties to this Agreement; provided,
however, that (i) immediately after giving effect to such transaction, no
Servicer Default and no event which, after notice or lapse of time, or both,
would become a Servicer Default shall have occurred and be continuing, (ii) the
Servicer shall have delivered to the Owner Trustee and the Indenture Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions precedent provided for in this Agreement
relating to such transaction have been complied with, (iii) the Rating Agency
Condition shall have been satisfied with respect to such transaction, (iv)
immediately after giving effect to such transaction, the successor to the
Servicer shall become the Administrator under the Administration Agreement in
accordance with Section 8 of such Agreement and (v) the Servicer shall have
delivered to the Owner Trustee and the Indenture Trustee an Opinion of Counsel
stating that, in the opinion of such counsel, either (A) all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and the Indenture Trustee, respectively, in the Receivables and
reciting the details of such filings or (B) no such action shall be necessary to
preserve and protect such interests. Notwithstanding anything herein to the
contrary, the execution of the foregoing agreement of assumption and compliance
with clauses (i), (ii), (iii), (iv) and (v) above shall be conditions to the
consummation of the transactions referred to in clause (a), (b) or (c) above.
SECTION 7.04. Limitation on Liability of Servicer and Others. Neither the
Servicer nor any of the directors, officers, employees or agents of the Servicer
shall be under any liability to the Issuer, the Noteholders or the
Certificateholders, except as provided under this Agreement, for any action
taken or for refraining from the taking of any action pursuant to this Agreement
or for errors in judgment; provided, however, that this provision shall not
protect the Servicer or any such person against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties or by reason of reckless disregard of obligations
and duties under this Agreement. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document of any
kind prima facie properly executed and submitted by any person respecting any
matters arising under this Agreement.
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Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its duties to service the Receivables in accordance with this
Agreement and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of this Agreement and the Basic
Documents and the rights and duties of the parties to this Agreement and the
Basic Documents and the interests of the Certificateholders under the Trust
Agreement and the Noteholders under the Indenture.
SECTION 7.05. NAL Not To Resign as Servicer. Subject to the provisions of
Section 7.03, NAL shall not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement except upon a determination that
the performance of its duties under this Agreement shall no longer be
permissible under applicable law. Notice of any such determination permitting
the resignation of NAL shall be communicated to the Owner Trustee and the
Indenture Trustee at the earliest practicable time (and, if such communication
is not in writing, shall be confirmed in writing at the earliest practicable
time) and any such determination shall be evidenced by an Opinion of Counsel to
such effect delivered to the Owner Trustee and the Indenture Trustee
concurrently with or promptly after such notice. No such resignation shall
become effective until the Indenture Trustee or a successor Servicer shall (i)
have assumed the responsibilities and obligations of NAL in accordance with
Section 8.02 and (ii) have become the Administrator under the Administration
Agreement in accordance with Section 8 of such Agreement.
SECTION 7.06. Representations of Backup Servicer. The Backup Servicer
makes the following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Backup Servicer is duly
organized and validly existing as a New York banking corporation in good
standing under the laws of the state of its incorporation, with the
corporate power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the
corporate power, authority and legal right to acquire, own, sell and
service the Receivables.
(b) Due Qualification. The Backup Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business (including
the servicing of the Receivables as required by this Agreement) shall
require such qualifications.
(c) Power and Authority. The Backup Servicer has the corporate
power and authority to execute and deliver this Agreement and to carry
out its terms; and the execution, delivery and performance of this
Agreement have been duly authorized by the Backup Servicer by all
necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the Backup Servicer enforceable in accordance
with its terms.
SECTION 7.07. Merger or Consolidation of, or Assumption of the
Obligations of, Backup Servicer. Any Person (a) into which the Backup Servicer
may be merged or consolidated, (b) which may result from any merger or
consolidation to which the Backup Servicer shall be a party, (c) which may
succeed to the properties and assets of the Backup Servicer substantially as a
whole or (d) with respect to the Backup Servicer's obligations hereunder, shall
be the successor to the Backup Servicer under this Agreement without further act
on the part of any of the parties to this Agreement.
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SECTION 7.08. Resignation as Backup Servicer. Subject to the provisions
of Section 7.07, the Backup Servicer may resign upon 30 days' written notice to
the Indenture Trustee and the Owner Trustee; provided, however, that no such
resignation shall become effective unless and until a successor reasonably
acceptable to the Indenture Trustee and the Owner Trustee shall have assumed the
responsibilities and obligations of the Backup Servicer and the Rating Agency
Condition shall have been satisfied in connection therewith; provided, further,
that if the Backup Servicer shall have resigned after its determination that the
performance of its duties under this Agreement shall no longer be permissible
under applicable law as evidenced by an Opinion of Counsel to such effect
delivered to the Owner Trustee and the Indenture Trustee, then, in the event a
successor Backup Servicer is not appointed within 30 days after such a
resignation, the Backup Servicer may petition a court for its removal.
ARTICLE VIII
Default
SECTION 8.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deliver or cause to be
delivered to the Owner Trustee or the Indenture Trustee, as applicable,
for deposit in any of the Trust Accounts or the Certificate Distribution
Account any required payment or to direct the Owner Trustee or the
Indenture Trustee, as applicable, to make any required distributions
therefrom, which failure continues unremedied for a period of five
Business Days after discovery of such failure by an officer of the
Servicer, or after the date on which written notice of such failure shall
have been given (A) to the Servicer by the Owner Trustee or the Indenture
Trustee, as applicable, or (B) to the Servicer, and to the Owner Trustee
and the Indenture Trustee, as applicable, by the Holders of Notes,
evidencing not less than 25% of the Outstanding Amount of the Notes or,
if the Notes have been paid in full, by Holders of Certificates
evidencing not less than 25% of the outstanding Certificate Balance; or
(b) failure by the Servicer duly to observe or to perform in any
material respect any other covenants or agreements of the Servicer set
forth in this Agreement or any other Basic Document, which failure shall
(i) materially and adversely affect the rights of Certificateholders or
Noteholders and (ii) continue unremedied for a period of 60 days after
the date on which written notice of such failure, requiring the same to
be remedied, shall have been given (A) to the Servicer by the Owner
Trustee or the Indenture Trustee or (B) to the Servicer, and to the Owner
Trustee and the Indenture Trustee by the Holders of Notes or
Certificates, as applicable, evidencing not less than 25% of the
Outstanding Amount of the Notes or 25% of the outstanding Certificate
Balance; or
(c) the occurrence of an Insolvency Event with respect to the
Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Holders of Notes evidencing
not less than 25% of the Outstanding Amount of the Notes, by notice then given
in writing to the Servicer (and to the Indenture Trustee and the Owner Trustee
if given by the Noteholders) may terminate all the rights and obligations (other
than the obligations set forth in Section 7.02 hereof) of the Servicer under
this Agreement. On or after the receipt by the Servicer of such written notice,
all authority and power of the Servicer under this Agreement, whether with
respect to the Notes, the Certificates or the Receivables or otherwise, shall,
without further action, pass to and be vested in the Indenture Trustee or such
successor Servicer as may be appointed under Section 8.02; and, without
limitation, the Indenture Trustee and the Owner
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Trustee are hereby authorized and empowered to execute and deliver, for the
benefit of the predecessor Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Receivables
and related documents, or otherwise. The predecessor Servicer shall cooperate
with the successor Servicer, the Indenture Trustee and the Owner Trustee in
effecting the termination of the responsibilities and rights of the predecessor
Servicer under this Agreement, including the transfer to the successor Servicer
for administration by it of all cash amounts that shall at the time be held by
the predecessor Servicer for deposit, or shall thereafter be received by it with
respect to any Receivable. All reasonable costs and expenses (including
attorneys' fees) incurred in connection with transferring the Receivable Files
to the successor Servicer and amending this Agreement to reflect such succession
as Servicer pursuant to this Section shall be paid by the predecessor Servicer
upon presentation of reasonable documentation of such costs and expenses. Upon
receipt of notice of the occurrence of a Servicer Default, the Owner Trustee
shall give notice thereof to each Rating Agency.
SECTION 8.02. Appointment of Successor. (a) Upon the Servicer's receipt
of notice of termination pursuant to Section 8.01 or the Servicer's resignation
in accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in the case
of termination, only until the date specified in such termination notice or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the later of (i) the date 45 days
from the delivery to the Owner Trustee, the Indenture Trustee and the Backup
Servicer of written notice of such resignation (or written confirmation of such
notice) in accordance with the terms of this Agreement and (ii) the date upon
which the predecessor Servicer shall become unable to act as Servicer, as
specified in the notice of resignation and accompanying Opinion of Counsel. In
the event of the Servicer's termination hereunder, the Indenture Trustee shall
appoint a successor Servicer, and the successor Servicer shall accept its
appointment (including its appointment as Administrator under the Administration
Agreement as set forth in Section 8.02(b)) by a written assumption in form
acceptable to the Owner Trustee and the Indenture Trustee. If the Indenture
Trustee appoints the Backup Servicer as successor Servicer in accordance with
Sections 7.03 or 8.01 (after confirmation from each Rating Agency that such
appointment will not result in the withdrawal or downgrade of the then current
ratings of the Class A-1 Notes, the Class A-2 Notes and the Certificates), the
Backup Servicer shall be the successor in all respects to the Servicer in its
capacity as Servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof; provided, however, that the Backup Servicer shall not be liable for any
acts or omissions of the Servicer occurring prior to such succession or for any
breach by the Servicer of any of its representations and warranties contained
herein or in any related document or agreement. Notwithstanding the above, if
the Backup Servicer is legally unable or unwilling to act as Servicer, the
Indenture Trustee will appoint a successor Servicer to act as Servicer. As
compensation for acting as successor Servicer, the Backup Servicer shall be
entitled to receive the Servicing Fee. In the event that a successor Servicer
has not been appointed at the time when the predecessor Servicer has ceased to
act as Servicer in accordance with this Section, the Indenture Trustee without
further action shall automatically be appointed the successor Servicer and the
Indenture Trustee shall be entitled to the Servicing Fee. Notwithstanding the
above, the Indenture Trustee shall, if it shall be legally unable so to act,
appoint or petition a court of competent jurisdiction to appoint any established
institution, having a net worth of not less than $50,000,000 and whose regular
business shall include the servicing of automotive receivables, as the successor
to the Servicer under this Agreement.
(b) Upon appointment, the successor Servicer (including the Indenture
Trustee acting as successor Servicer) shall (i) be the successor in all respects
to the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto placed on the
predecessor Servicer and shall be entitled to the Servicing Fee and all the
rights granted to the
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predecessor Servicer by the terms and provisions of this Agreement and (ii)
become the Administrator under the Administration Agreement in accordance with
Section 8 of such Agreement.
(c) The Servicer may not resign unless it is prohibited from
serving as such by law.
SECTION 8.03. Notification to Noteholders and Certificateholders. Upon
any termination of, or appointment of a successor to the Servicer pursuant to
this Article VIII, the Owner Trustee shall give prompt written notice thereof to
Certificateholders, and the Indenture Trustee shall give prompt written notice
thereof to Noteholders and each Rating Agency.
SECTION 8.04. Waiver of Past Defaults. The Holders of Notes evidencing
not less than a majority of the Outstanding Amount of the Notes or the Holders
of Certificates evidencing not less than a majority of the outstanding
Certificate Balance (in the case of any default which does not adversely affect
the Indenture Trustee or the Noteholders) may, on behalf of all Noteholders and
Certificateholders, waive in writing any default by the Servicer in the
performance of its obligations hereunder and its consequences, except a default
in making any required deposits to or payments from any of the Trust Accounts in
accordance with this Agreement or in respect of a covenant or the Servicer or
provision herein that cannot be waived without the consent of each
Securityholder (which event the related waiver will require the approval of the
Holders of all Securities). Upon any such waiver of a past default, such default
shall cease to exist, and any Servicer Default arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables. (a) As of the last
day of any Collection Period immediately preceding a Distribution Date as of
which the then outstanding Pool Balance is 5% or less of the Original Pool
Balance, the Servicer shall have the option to purchase the Owner Trust Estate,
other than the Trust Accounts and the Certificate Distribution Account. To
exercise such option, the Servicer shall deposit pursuant to Section 5.04 in the
Collection Account an amount equal to the aggregate Purchase Amount for the
Receivables (including defaulted Receivables), plus the appraised value of any
such other property held by the Trust other than the Trust Accounts and the
Certificate Distribution Account, such value to be determined by an appraiser
mutually agreed upon by the Servicer, the Owner Trustee and the Indenture
Trustee, and shall succeed to all interests in and to the Trust. Notwithstanding
the foregoing, the Servicer shall not be permitted to exercise such option
unless the amount to be deposited in the Collection Account pursuant to the
preceding sentence is greater than or equal to the sum of the Outstanding Amount
of the Notes and the Certificate Balance and all accrued but unpaid interest
(including any overdue interest) thereon to and including the last day of the
Collection Period immediately preceding the redemption date.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.02 of
the Trust Agreement, the Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "Insolvency Proceeds") in the Collection Account. On the
Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Distribution
Date, on the Distribution Date immediately following such deposit), the Servicer
shall instruct the Indenture Trustee to make the following deposits (after the
application on such Distribution Date of the Total Distribution Amount and funds
on deposit in the Reserve Account pursuant to Sections 5.05 and 5.06) from the
Insolvency
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Proceeds and any funds remaining on deposit in the Reserve Account (including
the proceeds of any sale of investments therein as described in the following
sentence):
(i) to the Note Distribution Account, any portion of the
Noteholders' Interest Distributable Amount not otherwise deposited into
the Note Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the Outstanding Amount of
the Notes (after giving effect to the reduction in the Outstanding Amount
of the Notes to result from the deposits made in the Note Distribution
Account on such Distribution Date and on prior Distribution Dates);
(iii) to the Certificate Distribution Account, any portion of the
Certificateholders' Interest Distributable Amount not otherwise deposited
into the Certificate Distribution Account on such Distribution Date; and
(iv) to the Certificate Distribution Account, the Certificate
Balance (after giving effect to the reduction in the Certificate Balance
to result from the deposits made in the Certificate Distribution Account
on such Distribution Date under prior Distribution Dates).
Any investments on deposit in the Reserve Account or Note Distribution Account
which will not mature on or before such Distribution Date shall be sold by the
Indenture Trustee at such time as will result in the Indenture Trustee receiving
the proceeds from such sale not later than the Payment Determination Date
preceding such Distribution Date. Any Insolvency Proceeds remaining after the
deposits described above shall be paid to the Depositor.
(c) As described in Article 9 of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner Trustee and
the Indenture Trustee as soon as practicable after the Servicer has received
notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement.
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment. This Agreement may be amended by the Depositor,
the Servicer and the Issuer, with the consent of the Indenture Trustee, but
without the consent of any of the Noteholders or the Certificateholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement or for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions in this Agreement or of modifying in any manner the rights
of the Noteholders or the Certificateholders; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel delivered to the Owner
Trustee and the Indenture Trustee, adversely affect in any material respect the
interests of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor,
the Servicer and the Issuer, with the consent of the Indenture Trustee, the
consent of the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes and the consent of the Holders (as defined in
the Trust Agreement) of outstanding Certificates evidencing not less than a
majority of the outstanding Certificate Balance, for the purpose of adding any
provisions to or changing in any manner
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or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, that no such amendment shall (a) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
Receivables or distributions that shall be required to be made for the benefit
of the Noteholders or the Certificateholders or (b) reduce the aforesaid
percentage of the Outstanding Amount of the Notes and the Certificate Balance,
the Holders of which are required to consent to any such amendment, without the
consent of the Holders of all the outstanding Notes and the Holders (as defined
in the Trust Agreement) of all the outstanding Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee and each Rating Agency.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
10.02(i)(1). The Owner Trustee and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's or
the Indenture Trustee's, as applicable, own rights, duties or immunities under
this Agreement or otherwise. No amendment to this Agreement will have any effect
on the rights and obligations of the Backup Servicer hereunder unless the Backup
Servicer shall consent thereto in writing.
SECTION 10.02. Protection of Title to Trust. (a) The Depositor shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Issuer and of the Indenture Trustee in the Receivables and in the proceeds
thereof. The Depositor shall deliver (or cause to be delivered) to the Owner
Trustee and the Indenture Trustee file- stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following such
filing.
(b) Neither the Depositor nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of ss. 9-402(7) of
the UCC, unless it shall have given the Owner Trustee and the Indenture Trustee
at least five days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements.
(c) Each of the Depositor and the Servicer shall have an obligation to
give the Owner Trustee and the Indenture Trustee at least 60 days' prior written
notice of any relocation of its principal executive office if, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
of any new financing statement and shall promptly file any such amendment or new
financing statement. The Servicer shall at all times maintain each office from
which it shall service Receivables, and its principal executive office, within
the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the
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amounts from time to time deposited in the Collection Account and the Payahead
Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables, the Servicer's
master computer records (including any backup archives) that refer to a
Receivable shall indicate clearly the interest of the Issuer and the Indenture
Trustee in such Receivable and that such Receivable is owned by the Issuer and
has been pledged to the Indenture Trustee. Indication of the Issuer's and the
Indenture Trustee's interest in a Receivable shall be deleted from or modified
on the Servicer's computer systems when, and only when, the related Receivable
shall have been paid in full or repurchased.
(f) If at any time the Depositor or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Issuer and has been pledged to the Indenture Trustee.
(g) The Servicer shall permit the Indenture Trustee, the Backup Servicer
and their agents at any time during normal business hours to inspect, audit and
make copies of and abstracts from the Servicer's records regarding any
Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee or to
the Indenture Trustee, within five Business Days, a list of all Receivables (by
contract number and name of Obligor) then held as part of the Trust, together
with a reconciliation of such list to the Schedule of Receivables and to each of
the Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the
Indenture Trustee:
(1) promptly after the execution and delivery of this Agreement
and of each amendment hereto, an Opinion of Counsel stating that, in the
opinion of such counsel, either (A) all financing statements and
continuation statements have been executed and filed that are necessary
fully to preserve and protect the interest of the Owner Trustee and the
Indenture Trustee in the Receivables, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details
are given, or (B) no such action shall be necessary to preserve and
protect such interest; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Closing Date, an Opinion of Counsel, dated as of a date during
such 90-day period, stating that, in the opinion of such counsel, either
(A) all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the
interest of the Owner Trustee and the Indenture Trustee in the
Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no such
action shall be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above shall specify any
action necessary (as of the date of such opinion) to be taken in the following
year to preserve and protect such interest.
SECTION 10.03. Notices. All demands, notices, communications and
instructions upon or to the Depositor, the Servicer, the Owner Trustee, the
Indenture Trustee or each Rating Agency under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested,
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and shall be deemed to have been duly given upon receipt (a) in the case of the
Depositor, to NAL Acceptance Corporation, 500 Cypress Creek Road West, Suite
590, Fort Lauderdale, Florida 33309, Telephone: 305-938-8200; Fax: 305-938-8209,
Attention: Dennis La Vigne, (b) in the case of the Servicer, to NAL Acceptance
Corporation, 500 Cypress Road West, Suite 590, Fort Lauderdale, Florida 33309,
(c) in the case of the Issuer or the Owner Trustee, at the Corporate Trust
Office (as defined in the Trust Agreement), (d) in the case of the Indenture
Trustee or Backup Servicer, at the Corporate Trust Office, (e) in the case of
the Rating Agencies, to Fitch Investors Service, Inc., One State Street Plaza,
New York, New York 10004 and Duff & Phelps Credit Rating Co., 55 E. Monroe
Street, Chicago, Illinois 60603, Telephone: 312-263-2610, Fax: 312-263-2852,
Attention: Asset-Backed Research and Monitoring; or, as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.
SECTION 10.04. Assignment by the Depositor or the Servicer.
Notwithstanding anything to the contrary contained herein, except as provided in
the remainder of this Section, as provided in Sections 6.04 and 7.03 herein and
as provided in the provisions of this Agreement concerning the resignation of
the Servicer, this Agreement may not be assigned by the Depositor or the
Servicer.
SECTION 10.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Depositor, the Servicer, the Issuer,
the Owner Trustee, the Certificateholders, the Indenture Trustee and the
Noteholders, and nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 10.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 10.07. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 10.08. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 10.09. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 10.10. Assignment by Issuer. The Depositor and the Servicer
hereby acknowledge and consent to any mortgage, pledge, assignment and grant of
a security interest by the Issuer to the Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders of all right, title and interest of
the Issuer in, to and under the Receivables and the assignment of any or all of
the Issuer's rights and obligations hereunder to the Indenture Trustee.
SECTION 10.11. Nonpetition Covenants. (a) Notwithstanding any prior
termination of this Agreement, the Servicer, the Backup Servicer and the
Depositor shall not, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Issuer or the Depositor,
acquiesce, petition or otherwise invoke or cause the Issuer or the Depositor to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer or the Depositor under any
federal or state bankruptcy, insolvency or similar law, or
38
<PAGE>
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Issuer or the Depositor or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Issuer or the Depositor.
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee. (a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or,
except as expressly provided in the Trust Agreement, as beneficial owner of the
Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer. For all purposes
of this Agreement, in the performance of its duties or obligations hereunder or
in the performance of any duties or obligations of the Issuer hereunder, the
Owner Trustee shall be subject to, and entitled to the benefits of, the terms
and provisions of Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by Bankers Trust Company, not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
NAL AUTO TRUST 1995-1
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee on behalf of the Trust
By: ________________________________________
Name:
Title:
AUTORICS II, Inc.,
Depositor
By: ________________________________________
Name:
Title:
NAL ACCEPTANCE CORPORATION, Servicer
By: ________________________________________
Name:
Title:
BANKERS TRUST COMPANY, Backup
Servicer
By: ________________________________________
Name:
Title:
Acknowledged and accepted as of the day and year first above written:
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
By: __________________________
Name:
Title:
<PAGE>
SCHEDULE A
Schedule of Receivables
<PAGE>
EXHIBIT A
NAL Acceptance Corporation
NAL Auto Trust 1995-1 Distribution Date Statement to Noteholders
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Principal Distribution Amount
Class A-1 Notes: ($ per $1,000 original principal amount)
Class A-2 Notes: ($ per $1,000 original principal amount)
Interest Distribution Amount
Class A-1 Notes: ($ per $1,000 original principal amount)
Class A-2 Notes: ($ per $1,000 original principal amount)
Pool Balance
Note Balance
Class A-1 Notes
Class A-2 Notes
Note Pool Factor
Class A-1 Notes
Class A-2 Notes
Certificate Balance
Servicing Fee
Servicing Fee Per $1,000 original principal amount
Realized Losses
Noteholders' Interest Carryover Shortfall per $1,000 original principal amount
Noteholders' Principal Carryover Shortfall per $1,000 original principal amount
Purchase Amounts
Reserve Account Balance
Payahead Balance
Average Three Month Delinquency Ratio
Average Six Month Realized Loss Ratio
Average Six Month Repossession Ratio
Delinquency Trigger Event [YES] [NO]
Repossession Trigger Event [YES] [NO]
Loss Trigger Event [YES] [NO]
<PAGE>
Delinquent Receivables
30 days
60 days
90 days
</TABLE>
<PAGE>
EXHIBIT B
NAL Acceptance Corporation
NAL Auto Trust 1995-1 Distribution Date Statement to Certificateholders
- ------------------------------------------------------------------------------
Principal Distribution Amount
Principal Per $1,000 Initial Certificate Balance
Interest Distribution Amount
Interest Per $1,000 Initial Certificate Balance
Pool Balance
Note Balance:
Class A-1 Notes:
Class A-2 Notes:
Note Pool Factor:
Class A-1 Notes:
Class A-2 Notes:
Certificate Balance
Certificate Pool Factor
Servicing Fee
Servicing Fee Per $1,000 Initial Certificate Balance
Realized Losses
Noteholders' Interest Carryover Shortfall per $1,000 original Note principal
amount
Noteholders' Principal Carryover Shortfall per $1,000 original Note principal
amount
Certificateholders' Interest Carryover Shortfall per $1,000 Initial Certificate
Balance
Certificateholders' Principal Carryover Shortfall per $1,000 Initial Certificate
Balance
Purchase Amounts
Reserve Account Balance
Payahead Balance
Average Three Month Delinquency Ratio
Average Six Month Realized Loss Ratio
Average Six Month Repossession Ratio
Delinquency Trigger Event [YES] [NO]
Repossession Trigger Event [YES] [NO]
Loss Trigger Event [YES] [NO]
B-1
<PAGE>
Delinquent Receivables
30 days
60 days
90 days
- --------------------------------------------------------------------------
B-2
<PAGE>
EXHIBIT C
Form of Servicer's Certificate
NAL Acceptance Corporation
NAL Auto Trust 1995-1 Monthly Servicer's Certificate(1)
[___________, 199__]
Dates Covered: From & Incl. _____ To & Incl.
<TABLE>
<S> <C> <C>
I. Collections
Principal Payments Received................................................$
Interest Payments Received.................................................$
Liquidation Proceeds.......................................................$
Recoveries on Previously Liquidated Receivables............................$
Aggregate Purchase Amount for Purchased Receivables........................$
Amount Attributable to Interest...................................$
Amount Attributable to Principal .................................$
Investment Earnings .......................................................$
Total Collections $
II. Distributions*
Total Required Principal Reduction of the Securities..............$
Principal Distribution Amount
Class A-1 Notes ($_________ per $1,000 original principal
amount) Class A-2 Notes ($_________ per $1,000 original
principal amount) Certificates ($_________ per $1,000 original
principal amount)
Interest Distribution Amount
Class A-1 Notes ($_________ per $1,000 original principal
amount) Class A-2 Notes ($_________ per $1,000 original
principal amount) Certificates ($_________ per $1,000 original
principal amount)
Total Distributable Amount
Class A-1 Notes ($_________ per $1,000 original principal
amount) Class A-2 Notes ($_________ per $1,000 original
principal amount) Certificates ($_________ per $1,000 original
principal amount)
Additional Required Distributions
Servicing Fee.....................................................$
Deposit to the Reserve Account....................................$
Reserve Account
Withdrawals for this Distribution Date............................$
Cumulative Withdrawals............................................$
III. Payahead Account Information
Beginning Period Balance..........................................$
Amounts Deposited into Payahead Account...........................$
Amounts Withdrawn from Payahead Account...........................$
Ending Balance....................................................$
</TABLE>
- -------------------
(1) Items that are marked with an * will be delivered quarterly.
<PAGE>
IV. Pool Balance and Portfolio Information
<TABLE>
<CAPTION>
Beginning of Period End of Period
<S> <C> <C> <C>
Pool Balance................................... $ $
Note Balances*
Class A-1 Notes........................ $ $
Class A-2 Notes........................
Note Pool Factor*
Class A-1 Notes........................
Class A-2 Notes........................
Certificate Balance*........................... $ $
Certificate Pool Factor*.......................
Remaining Number of Receivables................
Weighted Average A/R...........................
Weighted Average Remaining Term................
V. Reconciliation of the Reserve Account*
Beginning Balance..........................................$
Withdrawals from Reserve Account...........................$
Amounts Available for Deposit
to Reserve Account......................................$
Specified Reserve Account Balance..........................$
Amounts Deposited to Reserve Account.......................$
Ending Balance.............................................$
VI. Loss and Delinquency Report Activity
Realized Losses for Collection Period......................$
Liquidated Receivables
Aggregate Principal Balance........................$
Liquidation Proceeds...............................$
Recoveries on Previously
Liquidated Receivables...........................$
Cumulative Realized Losses.........................$
Delinquency
30-59 days
Principal Amount...................................$
Number of Receivables..............................
60-89 days
Principal Amount...................................$
Number of Receivables..............................
90 days or more
Principal Amount...................................$
Number of Receivables..............................
<FN>
- --------
* Items that are marked with an * will be delivered quarterly.
</FN>
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C> <C>
Total Amount
Principal Amount...................................$
Number of Receivables..............................
VII. Original Deal Parameter Inputs
Aggregate Principal Balance of the
Receivables as of the Cutoff Date.................................$40,135,897.86
Weighted Average APR of the Receivables
as of the Cutoff Date.............................................19.5795%
Weighted Average Remaining Term of the
Receivables as of the Cutoff Date.................................50.48 months
Number of Receivables...............................................3,305
Initial Reserve Account Balance.....................................$1,705,776
</TABLE>
C-3
<PAGE>
EXHIBIT D
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(RIGHT SIDE OF FILE)
<TABLE>
<CAPTION>
RISK
NAME:______________________ CODE:_______________________ ACCOUNT #:______________________
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
(X) (X)
UNDER EXCEPTIONS INT DOCUMENTATION AUDIT COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
Application
- -----------------------------------------------------------------------------------------------------------------------------------
Credit Report
- -----------------------------------------------------------------------------------------------------------------------------------
Explanation
Derogatory Credit
- ----------------------------------------------------------------------------------------------------------------------------------
Credit Decision Notification
- ----------------------------------------------------------------------------------------------------------------------------------
Investigation Work
A) Home Address Verified
B) Employment Verified
- ----------------------------------------------------------------------------------------------------------------------------------
1040's/W-2/Paystubs
- -----------------------------------------------------------------------------------------------------------------------------------
Current Telephone Bill in
Applicant's Name and Address
- -----------------------------------------------------------------------------------------------------------------------------------
Reference Sheet (5 included)
- -----------------------------------------------------------------------------------------------------------------------------------
Other Stips - Specify
- -----------------------------------------------------------------------------------------------------------------------------------
Insurance Confirmation
by NAL Insurance Dept.
- -----------------------------------------------------------------------------------------------------------------------------------
Loan/Lease Worksheet
- -----------------------------------------------------------------------------------------------------------------------------------
Copy of Funding Check
- -----------------------------------------------------------------------------------------------------------------------------------
Collections/Other
Correspondence
- -----------------------------------------------------------------------------------------------------------------------------------
Approved Dealer
- -----------------------------------------------------------------------------------------------------------------------------------
GE Approval
===================================================================================================================================
- ---------------------------------------- ------------------------------
Signature - Funder Date
- ---------------------------------------- ------------------------------
Signature - Auditor Date
</TABLE>
D-1
<PAGE>
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(LEFT SIDE OF FILE)
<TABLE>
<CAPTION>
NAME:______________________ CODE:_______________________ ACCOUNT #:______________________
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
(X) (X)
UNDER EXCEPTIONS INT DOCUMENTATION AUDIT COMMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
Contract:
A) Trade-In/Down Payment
B) Interest Rate
C) Term
D) Monthly Payment
E) Add's Approved
F) Dealer Advance Per Approval
- -----------------------------------------------------------------------------------------------------------------------------------
Original Assignment
- -----------------------------------------------------------------------------------------------------------------------------------
Copy of Application for
Certificate of Title
- ----------------------------------------------------------------------------------------------------------------------------------
Certificate of Origin (MSO)(New)
Copy of Title (Used)
- ----------------------------------------------------------------------------------------------------------------------------------
Lien Guarantee/
Lien Registration
- ----------------------------------------------------------------------------------------------------------------------------------
Bill of Sale /
Buyer's Order Signed
- ----------------------------------------------------------------------------------------------------------------------------------
Manufacturers Invoice (New)
- ----------------------------------------------------------------------------------------------------------------------------------
Copy Black Book /
NADA Valuation
- ----------------------------------------------------------------------------------------------------------------------------------
Odometer Statement (Used)
- ----------------------------------------------------------------------------------------------------------------------------------
Photocopy of Driver's License
- ----------------------------------------------------------------------------------------------------------------------------------
Add's Documentation
- ----------------------------------------------------------------------------------------------------------------------------------
Notice to Cosigner
- ----------------------------------------------------------------------------------------------------------------------------------
Signed Disclosure Form for
A & H Insurance (if applicable)
- ----------------------------------------------------------------------------------------------------------------------------------
Customer Phone Interview
Correspondence
==================================================================================================================================
- ---------------------------------------- ------------------------------
Signature - Funder Date
- ---------------------------------------- ------------------------------
Signature - Auditor Date
</TABLE>
D-2
<PAGE>
EXHIBIT E
Form of Assignment
Reference is made to the Sale and Servicing Agreement dated as of
December 1, 1995 (the "Sale and Servicing Agreement") among NAL Auto Trust
1995-1, Autorics II, Inc. ("Autorics II"), NAL Acceptance Corporation ("NAL")
and Bankers Trust Company. All capitalized terms used herein without definition
shall have the respective meanings specified in the Sale and Servicing
Agreement.
[NAL] [Autorics, Inc.] [Autorics II] hereby assigns to ____________,
for which the Custodian is acting as custodian and bailee under the terms of the
Custodial Agreement all right, title and interest of [NAL] [Autorics, Inc.]
[Autorics II] in and to (but none of [NAL] [Autorics, Inc.] [Autorics II]'s
obligations with respect to):
(1) the Receivables and all moneys received thereon on and after the
Cutoff Date plus all Payaheads as of the Cutoff Date;
(2) the security interests in the Financed Vehicles granted by Obligors
pursuant to such Receivables, any other right to realize upon property securing
a Receivable and any other interest of [NAL] [Autorics, Inc.] [Autorics II] in
such Financed Vehicles including [NAL] [Autorics, Inc.] [Autorics II]'s right,
title and interest in the lien on the Financed Vehicles in the name of the
Depositor's agent, Autorics, Inc., NAL or SFI;
(3) any proceeds with respect to the Receivables from claims on any
Insurance Policies relating to Financed Vehicles or Obligors;
(4) proceeds of any recourse (but none of the obligations) to Dealers on
Receivables;
(5) any Financed Vehicle that shall have secured a Receivable and shall
have been acquired by or on behalf of the Seller, the Depositor, the Servicer,
or the Trust;
(6) the Receivables Files; and
(7) the proceeds of any and all of the foregoing.
[NAL] [AUTORICS, INC.] [AUTORICS II, INC.]
By:__________________________
Name:
Title:
E-1
<PAGE>
EXECUTION COPY
INDENTURE
between
NAL AUTO TRUST 1995-1,
as Issuer
and
BANKERS TRUST COMPANY,
as Indenture Trustee
Dated as of December 1, 1995
1
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Rules of Construction.................................... 6
ARTICLE II
The Notes
SECTION 2.01. Form.................................................... 7
SECTION 2.02. Execution, Authentication and Delivery.................. 7
SECTION 2.03. Temporary Notes......................................... 7
SECTION 2.04. Limitations on Transfer of the Notes.................... 7
SECTION 2.05. Registration; Registration of Transfer and Exchange..... 8
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes.............. 9
SECTION 2.07. Persons Deemed Owner.................................... 10
SECTION 2.08. Payment of Principal and Interest; Defaulted Interest... 10
SECTION 2.09. Cancellation............................................ 10
SECTION 2.10. Tax Treatment........................................... 11
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal and Interest....................... 11
SECTION 3.02. Maintenance of Office or Agency......................... 11
SECTION 3.03. Money for Payments To Be Held in Trust.................. 11
SECTION 3.04. Existence............................................... 12
SECTION 3.05. Protection of Trust Estate.............................. 13
SECTION 3.06. Opinions as to Trust Estate............................. 13
SECTION 3.07. Performance of Obligations; Servicing of Receivables.... 13
SECTION 3.08. Negative Covenants...................................... 15
SECTION 3.09. Annual Statement as to Compliance....................... 15
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms..... 16
SECTION 3.11. Successor or Transferee................................. 17
SECTION 3.12. No Other Business....................................... 17
SECTION 3.13. No Borrowing............................................ 17
SECTION 3.14. Servicer's Obligations.................................. 17
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities....... 17
SECTION 3.16. Capital Expenditures.................................... 17
SECTION 3.17. Removal of Administrator................................ 17
SECTION 3.18. Restricted Payments..................................... 17
SECTION 3.19. Notice of Events of Default............................. 18
SECTION 3.20. Further Instruments and Acts............................ 18
i
<PAGE>
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture................. 18
SECTION 4.02. Application of Trust Money.............................. 19
SECTION 4.03. Repayment of Moneys Held by Paying Agent................ 19
ARTICLE V
Remedies
SECTION 5.01. Events of Default....................................... 19
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment...... 20
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee.................................... 20
SECTION 5.04. Remedies; Priorities.................................... 22
SECTION 5.05. Optional Preservation of the Receivables................ 23
SECTION 5.06. Limitation of Suits..................................... 23
SECTION 5.07. Unconditional Rights of Noteholders To Receive
Principal and Interest.................................. 24
SECTION 5.08. Restoration of Rights and Remedies...................... 24
SECTION 5.09. Rights and Remedies Cumulative.......................... 24
SECTION 5.10. Delay or Omission Not a Waiver.......................... 24
SECTION 5.11. Control by Noteholders.................................. 24
SECTION 5.12. Waiver of Past Defaults................................. 25
SECTION 5.13. Undertaking for Costs................................... 25
SECTION 5.14. Waiver of Stay or Extension Laws........................ 25
SECTION 5.15. Action on Notes......................................... 25
SECTION 5.16. Performance and Enforcement of Certain Obligations...... 26
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee............................. 26
SECTION 6.02. Rights of Indenture Trustee............................. 27
SECTION 6.03. Individual Rights of Indenture Trustee.................. 27
SECTION 6.04. Indenture Trustee's Disclaimer.......................... 28
SECTION 6.05. Notice of Defaults...................................... 28
SECTION 6.06. Reports by Indenture Trustee to Holders................. 28
SECTION 6.07. Compensation and Indemnity.............................. 28
SECTION 6.08. Replacement of Indenture Trustee........................ 28
SECTION 6.09. Successor Indenture Trustee by Merger................... 29
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee....................................... 29
SECTION 6.11. Eligibility; Disqualification........................... 30
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders................................ 31
SECTION 7.02. Preservation of Information; Communications to
Noteholders............................................. 31
ii
<PAGE>
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money..................................... 31
SECTION 8.02. Trust Accounts.......................................... 31
SECTION 8.03. General Provisions Regarding Accounts................... 32
SECTION 8.04. Release of Trust Estate................................. 32
SECTION 8.05. Opinion of Counsel...................................... 33
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders.. 33
SECTION 9.02. Supplemental Indentures with Consent of Noteholders..... 34
SECTION 9.03. Execution of Supplemental Indentures.................... 35
SECTION 9.04. Effect of Supplemental Indenture........................ 35
SECTION 9.05. Reference in Notes to Supplemental Indentures........... 35
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption............................................. 36
SECTION 10.02. Form of Redemption Notice.............................. 36
SECTION 10.03. Notes Payable on Redemption Date....................... 36
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions, etc.............. 37
SECTION 11.02. Form of Documents Delivered to Indenture Trustee....... 37
SECTION 11.03. Acts of Noteholders.................................... 38
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and
Rating Agencies........................................ 38
SECTION 11.05. Notices to Noteholders; Waiver......................... 39
SECTION 11.06. Alternate Payment and Notice Provisions................ 39
SECTION 11.07. [Reserved]............................................. 39
SECTION 11.08. Effect of Headings and Table of Contents............... 39
SECTION 11.09. Successors and Assigns................................. 39
SECTION 11.10. Separability........................................... 39
SECTION 11.11. Benefits of Indenture.................................. 39
SECTION 11.12. Legal Holidays......................................... 39
SECTION 11.13. GOVERNING LAW.......................................... 40
SECTION 11.14. Counterparts........................................... 40
SECTION 11.15. Recording of Indenture................................. 40
SECTION 11.16. Trust Obligation....................................... 40
SECTION 11.17. No Petition............................................ 40
SECTION 11.18. Inspection............................................. 40
iii
<PAGE>
SCHEDULE I Schedule of Receivables
EXHIBIT A - 1 Form of Class A-1 Note
EXHIBIT A - 2 Form of Class A-2 Note
EXHIBIT B [Reserved]
EXHIBIT C Transferor Certificate
EXHIBIT D Investment Letter
iv
<PAGE>
INDENTURE dated as of December 1, 1995, between NAL AUTO TRUST 1995-1, a
Delaware business trust (the "Issuer"), and BANKERS TRUST COMPANY, a New York
banking corporation, solely as trustee and not in its individual capacity (the
"Indenture Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Issuer's Class A-1 6.65%
Asset Backed Notes (the "Class A-1 Notes") and Class A-2 7.70% Asset Backed
Notes (the "Class A-2 Notes" and, together with the Class A-1 Notes, the
"Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date, as
Indenture Trustee for the benefit of the Holders of the Notes, all of the
Issuer's right, title and interest in and to (but none of the obligations with
respect to) (a) the Receivables and all moneys received thereon on or after the
Cutoff Date plus all Payaheads as of the Cutoff Date; (b) the security interests
in the Financed Vehicles granted by Obligors pursuant to such Receivables, any
other right to realize upon property securing a Receivable, and any other
interest of the Issuer in such Financed Vehicles including the Issuer's right,
title and interest in the lien on the Financed Vehicles held in the name of the
Depositor's agents, Autorics, Inc., NAL or SFI; (c) any proceeds with respect to
the Receivables from claims on any Insurance Policies relating to the Financed
Vehicles or Obligors; (d) proceeds of any recourse (but none of the obligations)
to Dealers on Receivables; (e) any Financed Vehicle that shall have secured a
Receivable and that shall have been acquired by or on behalf of the Seller, the
Depositor, the Servicer, or the Issuer; (f) the Receivables Files; (g) the Trust
Accounts; (h) the Sale and Servicing Agreement and the Receivables Purchase
Agreement, including the right of the Issuer to cause NAL to purchase
Receivables under certain circumstances; and (i) all present and future claims,
demands, causes of action and chooses in action in respect of any or all of the
foregoing, and all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any or all of the foregoing, including all
proceeds of the conversion thereof, voluntary or involuntary, into cash or other
liquid property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind, and
other forms of obligations, and receivables, instruments and other property that
at any time constitute all or part of, or are included in the proceeds of, any
of the foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction, and to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of
the Notes, 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 ability to the end that the
interests of the Holders of the Notes may be adequately and effectively
protected.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions. (a) Except as otherwise specified herein
or as the context may otherwise require, the following terms have the
respective meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a).
<PAGE>
"Administration Agreement" means the Administration Agreement dated as of
December 1, 1995, among the Administrator, the Issuer and the Indenture Trustee.
"Administrator" means NAL Acceptance Corporation, a Florida corporation,
or any successor Administrator under the Administration Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter) and, so
long as the Administration Agreement is in effect, any Vice President or more
senior officer of the Administrator who is authorized to act for the
Administrator in matters relating to the Issuer and to be acted upon by the
Administrator pursuant to the Administration Agreement and who is identified on
the list of Authorized Officers delivered by the Administrator to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"AUTORICS II" means AUTORICS II, Inc., a Delaware corporation, and any
successor in interest.
"Basic Documents" means the Certificate of Trust, the Trust Agreement,
the Sale and Servicing Agreement, the Receivables Purchase Agreement, the
Administration Agreement, and other documents and certificates delivered in
connection therewith.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in the cities of New York, New
York, Wilmington, Delaware or Ft. Lauderdale, Florida are authorized or
obligated by law, regulation or executive order to remain closed.
"Certificate of Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
"Class A-1 Interest Rate" means 6.65% per annum (computed on the basis of
a 360-day year consisting of twelve 30-day months).
"Class A-1 Notes" means the Class A-1 6.65% Asset Backed Notes,
substantially in the form of Exhibit A-1.
"Class A-2 Interest Rate" means 7.70% per annum (computed on the basis of
a 360 day year consisting of twelve 30-day months).
"Class A-2 Notes" means the Class A-2 7.70% Asset Backed Notes,
substantially in the form of Exhibit A-2.
"Closing Date" means December 21, 1995.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
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"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Agreement is located
at Four Albany Street, New York, New York 10006; Attention: Corporate Trust and
Agency Group, Structured Finance Team, or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Issuer, or the principal corporate trust office of any successor Indenture
Trustee at the address designated by such successor Indenture Trustee by notice
to the Noteholders and the Issuer.
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Depositor" means AUTORICS II, Inc., a Delaware corporation, and any
successor in interest.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary, or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and a right of set-off against, deposit, set over, and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise, and generally to do
and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indenture Trustee" means Bankers Trust Company, a New York banking
corporation, solely as trustee under this Indenture and not in its individual
capacity, or any successor Indenture Trustee under this Indenture.
"Independent" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Issuer, any other obligor on the
Notes, the Depositor and any Affiliate of any of the foregoing Persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Depositor or any Affiliate
of any of the foregoing Persons and (c) is not connected with the Issuer, any
such other obligor, the Depositor or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director, or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered
to the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
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"Interest Rate" means the Class A-1 Interest Rate and the Class A-2
Interest Rate.
"Issuer" means NAL Auto Trust 1995-1 until a successor replaces it and,
thereafter, means the successor and, for purposes of any provision contained
herein and required by the TIA, each other obligor on the Notes.
"Issuer Order" or "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"NAL" means NAL Acceptance Corporation, a Florida corporation, and any
successor in interest.
"Note" means a Class A-1 Note or a Class A-2 Note.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.05.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be an employee of
or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee,
which opinion or opinions shall be addressed to the Indenture Trustee as
Indenture Trustee, shall comply with any applicable requirements of Section
11.01 and shall be in form and substance satisfactory to the Indenture Trustee.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered
to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
for such notice has been made, satisfactory to the Indenture Trustee);
and
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes
are held by a bona fide purchaser;
provided, that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor upon the Notes, the Depositor or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Indenture Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, or waiver, only Notes that a Responsible Officer of the
Indenture Trustee actually knows to be so owned shall be so disregarded. Notes
so owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Indenture Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Issuer, any other obligor upon the Notes, the Depositor or any Affiliate of
any of the foregoing Persons.
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"Outstanding Amount" means the aggregate principal amount of all Notes,
or Class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
Owner Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11
and is authorized by the Issuer to make payments to and distributions from the
Collection Account and the Note Distribution Account, including payments of
principal of or interest on the Notes on behalf of the Issuer.
"Payment Date" means a Distribution Date.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, or government or any agency or political
subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.06 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Rating Agency Condition" means, with respect to any action, that the
Rating Agency shall have been given 10 days (or such shorter period as is
acceptable to the Rating Agency) prior notice thereof and that the Rating Agency
shall have notified the Depositor, the Servicer and the Issuer in writing that
such action will not result in a reduction or withdrawal of the then current
rating of the Notes.
"Receivables Purchase Agreement" means the Receivables Purchase Agreement
dated as of December 1, 1995, among Autorics, Inc., as seller, NAL, and Autorics
II, as purchaser.
"Record Date" means, with respect to a Distribution Date or Redemption
Date, the close of business on the last day of the preceding month.
"Redemption Date" means in the case of a redemption of the Notes pursuant
to Section 10.01(a) or a payment to Noteholders pursuant to Section 10.01(b),
the Distribution Date specified by the Servicer or the Issuer pursuant to
Section 10.01(a) or (b), as applicable.
"Redemption Price" means in the case of a redemption of the Notes
pursuant to Section 10.01(a), an amount equal to the unpaid principal amount of
the Notes redeemed plus accrued and unpaid interest thereon to and including the
last day of the month preceding the month of such Redemption Date at the
weighted average of the Interest Rates for each Class of Notes being so redeemed
or (b) in the case of a payment made to Noteholders pursuant to Section
10.01(b), the amount on deposit in the Note Distribution Account, but not in
excess of the amount specified in clause (a) above.
"Registered Holder" means the Person in whose name a Note is registered
on the Note Register on the applicable Record Date.
"Responsible Officer" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any Vice President, Assistant Vice President, Assistant Treasurer, Assistant
Secretary, Managing Director or any other officer of the Indenture Trustee
customarily performing functions similar to those performed by any of the above
designated
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officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of December 1, 1995, among the Issuer, AUTORICS II, the Back-up
Servicer and NAL.
"Schedule of Receivables" means the list of the Receivables set forth in
Schedule I (which Schedule may be in the form of microfiche).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means AUTORICS, Inc., in its capacity as seller under the
Receivables Purchase Agreement, and its successor in interest.
"Servicer" means NAL in its capacity as servicer under the Sale and
Servicing Agreement, and any Successor Servicer thereunder.
"State" means any one of the 50 States of the United States of America
or the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.07(e).
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trust Estate" means all money, instruments, chattel paper, general
intangibles, rights and other property that are subject or intended to be
subject to the lien and security interest of this Indenture for the benefit of
the Noteholders (including, without limitation, all property and interests
Granted to the Indenture Trustee), including all proceeds thereof.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
(b) Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein have the
respective meanings set forth in the Sale and Servicing Agreement for all
purposes of this Indenture.
SECTION 1.02. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time
amended, modified or supplemented and includes (in the case of agreements
or instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
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ARTICLE II
The Notes
SECTION 2.01. Form. The Class A-1 Notes and the Class A-2 Notes, in each
case together with the Indenture Trustee's certificate of authentication, shall
be in substantially the form set forth in Exhibit A-1 and Exhibit A-2,
respectively, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibit A-1 and Exhibit A-2 are part of the terms of this
Indenture.
SECTION 2.02. Execution, Authentication and Delivery. The Notes shall
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes.
The Indenture Trustee shall upon its receipt of an Issuer Order
authenticate and deliver Class A-1 Notes for original issue in an aggregate
principal amount of $36,524,000 and Class A-2 Notes for original issue in an
aggregate principal amount of $1,605,000.
Each Note shall be dated the date of its authentication. The Notes shall
be issuable as registered Notes in the minimum denomination of $100,000 and in
integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized signatories,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.
SECTION 2.03. Temporary Notes. Pending the preparation of definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes that are printed,
lithographed, typewritten, mimeographed, or otherwise produced, of the tenor of
the definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer shall 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 the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute, and the Indenture 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 2.04. Limitations on Transfer of the Notes. The Notes have
not been and will not be registered under the Securities Act and will not be
listed on any exchange. No transfer of a Note
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shall be made unless such transfer is made pursuant to an effective registration
statement under the Securities Act and any applicable state securities laws or
is exempt from the registration requirements under said Act and such state
securities laws. In the event that a transfer is to be made in reliance upon an
exemption from the Securities Act and state securities laws, in order to assure
compliance with the Securities Act and such laws, the Holder desiring to effect
such transfer and such Holder's prospective transferee shall each certify to the
Indenture Trustee and the Issuer in writing the facts surrounding the transfer
in substantially the forms set forth in Exhibit C (the "Transferor Certificate")
and Exhibit D (the "Investment Letter"). Except in the case of a transfer as to
which the proposed transferee has confirmed that it is a "qualified
institutional buyer" as provided in Section 2(b) of the Investment Letter, there
shall also be delivered to the Indenture Trustee an opinion of counsel that such
transfer may be made pursuant to an exemption from the Securities Act and state
securities laws, which opinion of counsel shall not be an expense of the Trust,
the Owner Trustee or the Indenture Trustee (unless it is the transferee from
whom such opinion is to be obtained) or of the Depositor or NAL; provided that
such opinion of counsel in respect of the applicable state securities laws may
be a memorandum of law rather than an opinion if such counsel is not licensed in
the applicable jurisdiction. The Depositor shall provide to any Holder of a Note
and any prospective transferee designated by any such Holder information
regarding the Notes and the Receivables and such other information as shall be
necessary to satisfy the condition to eligibility set forth in Rule 144A(d)(4)
for transfer of any such Note without registration thereof under the Securities
Act pursuant to the registration exemption provided by Rule 144A. Each Holder of
a Note desiring to effect such a transfer shall, and does hereby agree to,
indemnify the Issuer, the Owner Trustee, the Indenture Trustee and the Depositor
against any liability that may result if the transfer is not so exempt or is not
made in accordance with federal and state securities laws.
SECTION 2.05. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe and the restrictions on
transfers of the Notes set forth herein, the Issuer shall provide for the
registration of Notes and the registration of transfers of Notes. The Indenture
Trustee initially shall be the "Note Registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. Upon any resignation of any
Note Registrar, the Issuer shall promptly appoint a successor or, if it elects
not to make such an appointment, assume the duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Holders of the Notes and
the principal amounts and number of such Notes.
Subject to the limitations on transfer set forth herein, upon surrender
for registration of transfer of any Note at the office or agency of the Issuer
to be maintained as provided in Section 3.02, if the requirements of Section
8-401(1) of the UCC are met, the Issuer shall execute, and the Indenture Trustee
shall authenticate and the Noteholder shall obtain from the Indenture Trustee,
in the name of the designated transferee or transferees, one or more new Notes
of the same Class in any authorized denominations, of a like aggregate principal
amount.
Notes may be exchanged for other Notes of the same Class in any
authorized denominations, of a like aggregate principal amount, upon surrender
of the Notes to be exchanged at such office or agency. Whenever any Notes are so
surrendered for exchange, if the requirements of Section 8-401(1) of the UCC are
met, the Issuer shall execute, and the Indenture Trustee shall authenticate and
the Noteholder shall obtain from the Indenture Trustee, the Notes which the
Noteholder making the exchange is entitled to receive.
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All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.03 or 9.05 not involving any transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make, and the Note Registrar need not register,
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to the
Note.
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of written notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by a bona
fide purchaser, and provided that the requirements of Section 8-405 of the UCC
are met, the Issuer shall execute, and upon its written request the Indenture
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note of the same Class;
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,
or shall have been called for redemption, instead of issuing a replacement Note,
the Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date 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, the Issuer and the Indenture 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
the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
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 Indenture
Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
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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 2.07. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest on such
Note and for all other purposes whatsoever, whether or not such Note be overdue,
and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the
Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.08. Payment of Principal and Interest; Defaulted Interest. (a)
The Class A-1 Notes and the Class A-2 Notes shall accrue interest at the Class
A-1 Interest Rate and the Class A-2 Interest Rate respectively, as set forth in
Exhibits A-1 and A-2, respectively, and such interest shall be payable on each
Distribution Date as specified therein, subject to Section 3.01. Any installment
of interest or principal payable on a Note that is punctually paid or duly
provided for by the Issuer on the applicable Distribution Date shall be paid to
the Person in whose name such Note (or one or more Predecessor Notes) is
registered on the Record Date by check mailed first-class postage prepaid to
such Person's address as it appears on the Note Register on such Record Date,
except that, upon written request of a Noteholder to the Paying Agent not later
than the Record Date prior to the related Distribution Date, payment will be
made by wire transfer in immediately available funds to the account designated
by such Holder and except for the final installment of principal payable with
respect to such Note on a Distribution Date or on the Class A-1 Final Scheduled
Distribution Date or Class A-2 Final Scheduled Distribution Date, as applicable,
which shall be payable as provided below. The funds represented by any such
checks returned undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Distribution Date as provided in the forms of the Notes set forth in Exhibit A-1
and Exhibit A-2. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on the
date on which an Event of Default shall have occurred and be continuing, if the
Indenture Trustee or Holders of the Notes representing not less than a majority
of the Outstanding Amount of the Notes have declared the Notes to be immediately
due and payable in the manner provided in Section 5.02. All principal payments
on each Class of Notes shall be made pro rata to the Noteholders of such Class
entitled thereto. The Indenture Trustee shall notify the Person in whose name a
Note is registered at the close of business on the Record Date preceding the
Distribution Date on which the Issuer expects that the final installment of
principal of and interest on such Note will be paid. Such notice shall be mailed
or transmitted by facsimile prior to such final Distribution Date and shall
specify that such final installment will be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in connection
with redemptions of Notes shall be mailed to Noteholders as provided in Section
10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Issuer shall fix or cause to be fixed any such
special record date and payment date and, at least 15 days before any such
special record date, the Issuer shall mail to each Noteholder a notice that
states the special record date, the payment date and the amount of defaulted
interest to be paid.
SECTION 2.09. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated
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and delivered hereunder which the Issuer may have acquired in any manner
whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time unless the Issuer shall direct by an Issuer Order that
they be destroyed or returned to it and such Issuer Order is timely and the
Notes have not been previously disposed of by the Indenture Trustee.
SECTION 2.10. Tax Treatment. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that, for federal, state and
local income, single business and franchise tax purposes, the Notes will qualify
as indebtedness of the Issuer secured by the Trust Estate. The Issuer, by
entering into this Indenture, and each Noteholder, by its acceptance of a Note,
agree to treat the Notes for federal, state and local income, single business
and franchise tax purposes as indebtedness of the Issuer.
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal and Interest. The Issuer will duly and
punctually pay the principal of and interest, if any, on the Notes in accordance
with the terms of the Notes and this Indenture. Without limiting the foregoing,
subject to Section 8.02(c), the Issuer will cause to be distributed all amounts
on deposit in the Note Distribution Account on a Distribution Date deposited
therein pursuant to the Sale and Servicing Agreement (i) for the benefit of the
Class A-1 Notes, to the Class A-1 Noteholders and (ii) for the benefit of the
Class A-2 Notes, to the Class A-2 Noteholders. Amounts properly withheld under
the Code by any Person from a payment to any Noteholder of interest and/or
principal shall be considered as having been paid by the Issuer to such
Noteholder for all purposes of this Indenture.
SECTION 3.02. Maintenance of Office or Agency. The Issuer will maintain
in the Borough of Manhattan, The City of New York, an office or agency where
Notes may be surrendered for registration of transfer or exchange, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
SECTION 3.03. Money for Payments To Be Held in Trust. As provided in
Section 8.02(a) and (b), all payments of amounts due and payable with respect to
any Notes that are to be made from amounts withdrawn from the Collection Account
and the Note Distribution Account pursuant to Section 8.02(c) shall be made on
behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no
amounts so withdrawn from the Collection Account and the Note Distribution
Account for payments of Notes shall be paid over to the Issuer except as
provided in this Section.
On or before the Business Day preceding each Distribution Date and
Redemption Date, the Issuer shall deposit or cause to be deposited in the Note
Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due under the Notes, such sum to be held in trust for the benefit of
the Persons entitled thereto, and (unless the Paying Agent is the Indenture
Trustee) shall promptly notify the Indenture Trustee of its action or failure so
to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture
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Trustee (and if the Indenture 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 Indenture Trustee written notice of any default by
the Issuer (or any other obligor upon 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 Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture 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
Paying Agent 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.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture 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 Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent 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 the Issuer on Issuer Request; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and written direction of the Issuer cause to be published
once, in a newspaper published in the English language, customarily published on
each Business Day and of general circulation in The City of New York, 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 the Issuer. The
Indenture Trustee shall also adopt and employ, at the expense and written
direction of the Issuer, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Indenture Trustee or of any
Paying Agent, at the last address of record for each such Holder).
SECTION 3.04. Existence. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each
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jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Indenture, the Notes, the Collateral and
each other instrument or agreement included in the Trust Estate.
SECTION 3.05. Protection of Trust Estate. The Issuer will from time to
time execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action necessary or advisable
to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee and the Noteholders in such Trust Estate against
the claims of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.05.
SECTION 3.06. Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are necessary to perfect and make effective the lien and security interest of
this Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) On or before July 31, in each calendar year, beginning in 1996, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements and continuation
statements as is necessary to maintain the lien and security interest created by
this Indenture and reciting the details of such action, or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and filing of any
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest of this
Indenture until July 31 in the following calendar year.
SECTION 3.07. Performance of Obligations; Servicing of Receivables. (a)
The Issuer will not take any action and will use its best efforts not to permit
any action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
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(b) The Issuer may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Indenture Trustee in an Officer's Certificate of the Issuer
shall be deemed to be action taken by the Issuer. Initially, the Issuer has
contracted with the Servicer and the Administrator to assist the Issuer in
performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Basic Documents and in the
instruments and agreements included in the Trust Estate, including but not
limited to filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Sale and Servicing Agreement in accordance with and within the time periods
provided for herein and therein. Except as otherwise expressly provided therein,
the Issuer shall not waive, amend, modify, supplement or terminate any Basic
Document or any provision thereof without the consent of the Indenture Trustee
or the Holders of at least a majority of the Outstanding Amount of the Notes.
(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default under the Sale and Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee and the Rating Agencies thereof, and shall specify in such
notice the action, if any, the Issuer is taking with respect to such default. If
a Servicer Default shall arise from the failure of the Servicer to perform any
of its duties or obligations under the Sale and Servicing Agreement with respect
to the Receivables, the Issuer shall take all reasonable steps available to it
to remedy such failure.
(e) As promptly as possible after the giving of notice of termination to
the Servicer of the Servicer's rights and powers pursuant to Section 8.01 of the
Sale and Servicing Agreement, the Issuer shall appoint a successor servicer (the
"Successor Servicer"), and such Successor Servicer shall accept its appointment
by a written assumption in a form acceptable to the Indenture Trustee. In the
event that a Successor Servicer has not been appointed and accepted its
appointment at the time when the Servicer ceases to act as Servicer, the
Indenture Trustee without further action shall automatically be appointed the
Successor Servicer. The Indenture Trustee may resign as the Servicer by giving
written notice of such resignation to the Issuer and in such event will be
released from such duties and obligations, such release not to be effective
until the date a new servicer enters into a servicing agreement with the Issuer
as provided below. Upon delivery of any such notice to the Issuer, the Issuer
shall obtain a new servicer as the Successor Servicer under the Sale and
Servicing Agreement. Any Successor Servicer other than the Indenture Trustee
shall (i) be an established financial institution having a net worth of not less
than $50,000,000 and whose regular business includes the servicing of Contracts
and (ii) enter into a servicing agreement with the Issuer having substantially
the same provisions as the provisions of the Sale and Servicing Agreement
applicable to the Servicer. If within 30 days after the delivery of the notice
referred to above, the Issuer shall not have obtained such a new servicer, the
Indenture Trustee may appoint, or may petition a court of competent jurisdiction
to appoint, a Successor Servicer. In connection with any such appointment, the
Indenture Trustee may make such arrangements for the compensation of such
successor as it and such successor shall agree, subject to the limitations set
forth below and in the Sale and Servicing Agreement, and in accordance with
Section 8.02 of the Sale and Servicing Agreement, the Issuer shall enter into an
agreement with such successor for the servicing of the Receivables (such
agreement to be in form and substance satisfactory to the Indenture Trustee). If
the Indenture Trustee shall succeed to the Servicer's duties as servicer of the
Receivables as provided herein, it shall do so in its individual capacity and
not in its capacity as Indenture Trustee and, accordingly, the provisions of
Article VI hereof shall be inapplicable to the Indenture Trustee in its duties
as the successor to the Servicer and the servicing of the Receivables.
(f) Upon any termination of the Servicer's rights and powers pursuant to
the Sale and Servicing Agreement, the Issuer shall promptly notify the Indenture
Trustee in writing. As soon as a Successor Servicer is appointed, the Issuer
shall notify the Indenture Trustee of such appointment, specifying in such
notice the name and address of such Successor Servicer.
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(g) Without derogating from the absolute nature of the assignment granted
to the Indenture Trustee under this Indenture or the rights of the Indenture
Trustee hereunder, the Issuer agrees (i) that it will not, without the prior
written consent of the Indenture Trustee or the Holders of at least a majority
in Outstanding Amount of the Notes, amend, modify, waive, supplement, terminate
or surrender, or agree to any amendment, modification, supplement, termination,
waiver or surrender of, the terms of any Collateral (except to the extent
otherwise provided in the Sale and Servicing Agreement) or the Basic Documents,
or waive timely performance or observance by the Servicer or the Depositor under
the Sale and Servicing Agreement; and (ii) that any such amendment shall not (A)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, distributions that are required to be made for the benefit of the
Noteholders or (B) reduce the aforesaid percentage of the Notes that is required
to consent to any such amendment, without the consent of the Holders of all the
Outstanding Notes. If any such amendment, modification, supplement or waiver
shall be so consented to by the Indenture Trustee or such Holders, the Issuer
agrees, promptly following a request by the Indenture Trustee to do so, to
execute and deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Indenture Trustee may deem
necessary or appropriate in the circumstances.
SECTION 3.08. Negative Covenants. So long as any Notes are Outstanding,
the Issuer shall not:
(i) except as expressly permitted by this Indenture or the Sale and
Servicing Agreement, sell, transfer, exchange or otherwise dispose of any
of the properties or assets of the Issuer, including those included in
the Trust Estate, unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal
or interest payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code) or assert any claim against
any present or former Noteholder by reason of the payment of the taxes
levied or assessed upon any part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture to
be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations with respect to
the Notes under this Indenture except as may be expressly permitted
hereby, (B) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien of this Indenture) to
be created on or extend to or otherwise arise upon or burden the Trust
Estate or any part thereof or any interest therein or the proceeds
thereof (other than tax liens, mechanics' liens and other liens that
arise by operation of law, in each case on any of the Financed Vehicles
and arising solely as a result of an action or omission of the related
Obligor) or (C) permit the lien of this Indenture not to constitute a
valid first priority (other than with respect to any such tax, mechanics'
or other lien) security interest in the Trust Estate.
SECTION 3.09. Annual Statement as to Compliance. The Issuer will deliver
to the Indenture Trustee, within 120 days after the end of each fiscal year of
the Issuer (commencing with the fiscal year 1995), an Officer's Certificate
stating, as to the Authorized Officer signing such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year and
of its performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in its compliance with any such condition or covenant, specifying
each such default known to such Authorized Officer and the nature and
status thereof.
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SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms. (a)
The Issuer shall not consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any State and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the Indenture
Trustee, the due and punctual payment of the principal of and interest on
all Notes and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be performed or
observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which
is hereby restricted (A) shall be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any State, (B) expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory to
the Indenture Trustee, the due and punctual payment of the principal of
and interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly agrees by
means of such supplemental indenture that all right, title and interest
so conveyed or transferred shall be subject and subordinate to the rights
of Holders of the Notes, and (D) unless otherwise provided in such
supplemental indenture, expressly agrees to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
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(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
SECTION 3.11. Successor or Transferee. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of the
Issuer pursuant to Section 3.10(b), NAL Auto Trust 1995-1 will be released from
every covenant and agreement of this Indenture to be observed or performed on
the part of the Issuer with respect to the Notes immediately upon the delivery
of written notice to the Indenture Trustee stating that NAL Auto Trust 1995-1 is
to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the Basic Documents
and activities incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
SECTION 3.14. Servicer's Obligations. The Issuer shall cause the
Servicer to comply with Sections 4.09, 4.10, 4.11 and Article IX of the Sale
and Servicing Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by the Sale and Servicing Agreement or this Indenture, the
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. Removal of Administrator. So long as any Notes are
Outstanding, the Issuer shall not remove the Administrator without cause unless
the Rating Agency Condition shall have been satisfied in connection with such
removal.
SECTION 3.18. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, (x)
distributions to the Servicer, the Owner Trustee and the Certificateholders as
contemplated by, and to the extent funds are available for such purpose under,
the Sale and Servicing Agreement or the Trust Agreement and (y) payments to the
Indenture Trustee pursuant to Section 1(a)(ii) of the Administration Agreement.
The Issuer will not, directly or indirectly, make payments to or distributions
from the Collection Account except in accordance with this Indenture and the
Basic Documents.
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SECTION 3.19. Notice of Events of Default. The Issuer shall give the
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and each default on the part of the Servicer of its
obligations under the Sale and Servicing Agreement.
SECTION 3.20. Further Instruments and Acts. Upon request of the Indenture
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08,
3.10, 3.12 and 3.13, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.02) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.06 and (ii) Notes for whose
payment money has theretofore been deposited in trust or segregated and
held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.03) have been
delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
a. have become due and payable,
b. are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving
of notice of redemption by the Indenture Trustee in the name, and
at the expense, of the Issuer,
and the Issuer, in the case of a. or b. above, has irrevocably deposited or
caused to be irrevocably deposited with the Indenture Trustee cash or direct
obligations of or obligations guaranteed by the United States of America (which
will mature prior to the date such amounts are payable), in trust for such
purpose, in an amount sufficient to pay and discharge the entire indebtedness
on such Notes not theretofore delivered to the Indenture Trustee for
cancellation when due to the applicable final scheduled Distribution Date or
Redemption Date, as the case may be;
(B) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the Indenture
Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.01(a)
and, subject to Section 11.02, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
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SECTION 4.02. Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such moneys need not be segregated from other funds except to the
extent required herein or in the Sale and Servicing Agreement or required by
law.
SECTION 4.03. Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.03 and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
ARTICLE V
Remedies
SECTION 5.01. Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a
period of five days; or
(ii) default in the payment of the principal of or any installment
of the principal of any Note when the same becomes due and payable; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is
elsewhere in this Section specifically dealt with), or any representation
or warranty of the Issuer made in this Indenture or in any certificate or
other writing delivered pursuant hereto or in connection herewith proving
to have been incorrect in any material respect as of the time when the
same shall have been made, and such default shall continue or not be
cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of 30 days after there shall
have been given, by registered or certified mail, to the Issuer by the
Indenture Trustee or to the Issuer and the Indenture Trustee by the
Holders of at least 25% of the Outstanding Amount of the Notes, a written
notice specifying such default or incorrect representation or warranty
and requiring it to be remedied and stating that such notice is a notice
of Default hereunder; or
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Trust Estate in an involuntary case under any applicable
federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or for
any substantial part of the Trust Estate, or ordering the winding-up or
liquidation of the Issuer's affairs, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or the consent by the
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Issuer to the entry of an order for relief in an involuntary case under
any such law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Trust Estate, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of any
action by the Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee, within five days after the
occurrence thereof, written notice in the form of an Officer's Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (iii), its status and what action the Issuer is
taking or proposes to take with respect thereto.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee or the Holders of Notes representing not less than a majority
of the Outstanding Amount of the Notes may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Outstanding Amount of the Notes,
by written notice to the Issuer and the Indenture Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay:
(A) all payments of principal of and interest on all Notes and all
other amounts that would then be due hereunder or upon such Notes if
the Event of Default giving rise to such acceleration had not occurred;
and
(B) all sums paid or advanced by the Indenture Trustee hereunder
and the reasonable compensation, expenses, disbursements and advances
of the Indenture Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the principal
of the Notes that has become due solely by such acceleration, have been
cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee. (a) The Issuer covenants that if (i) default is made in
the payment of any interest on any Note when the same becomes due and payable,
and such default continues for a period of five days, or (ii) default is made
in the payment of the principal of or any installment of the principal of any
Note when the same becomes due and payable, the Issuer will, upon demand of the
Indenture Trustee, pay to it, for the benefit of the Holders of the Notes, the
whole amount then due and payable on such Notes for principal and interest,
with interest on the overdue principal, and, to the extent payment at such rate
of interest shall be legally enforceable, on overdue installments of interest,
at the rate borne by the Notes and in addition thereto 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
Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the
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collection of the sums so due and unpaid, and may prosecute such Proceeding to
judgment or final decree, and may enforce the same against the Issuer or other
obligor upon such Notes and collect in the manner provided by law out of the
property of the Issuer or other obligor upon such Notes, wherever situated, the
moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture Trustee
may, as more particularly provided in Section 5.04, in its discretion, proceed
to protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization, or
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee (including any claim for
reasonable compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys and counsel, and
for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Indenture Trustee on
their behalf; and
(iv) 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 Indenture
Trustee or the Holders of Notes allowed in any Proceedings relative to the
Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization,
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arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof or to authorize the Indenture Trustee to vote in respect of the
claim of any Noteholder in any such proceeding except, as aforesaid, to vote for
the election of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
SECTION 5.04. Remedies; Priorities. (a) If an Event of Default
shall have occurred and be continuing, the Indenture Trustee may do one or more
of the following (subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes or under
this Indenture with respect thereto, whether by declaration or otherwise,
enforce any judgment obtained and collect from the Issuer and any other
obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies
of the Indenture Trustee and the Holders of the Notes; and
(iv) sell the Trust Estate or any portion thereof or rights or interest
therein, at one or more public or private sales called and conducted in any
manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, other than an Event of
Default described in Section 5.01(i) or (ii), unless (A) the Holders of 100% of
the Outstanding Amount of the Notes consent thereto, (B) the proceeds of such
sale or liquidation distributable to the Noteholders are sufficient to discharge
in full all amounts then due and unpaid upon such Notes for principal and
interest or (C) the Indenture Trustee determines that the Trust Estate will not
continue to provide sufficient funds for the payment of principal of and
interest on the Notes as they would have become due if the Notes had not been
declared due and payable, and the Indenture Trustee obtains the consent of
Holders of 66-2/3% of the Outstanding Amount of the Notes. In determining such
sufficiency or insufficiency with respect to clause (B) and (C), the Indenture
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose, which opinion shall be conclusive evidence as to such
feasibility or sufficiency.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section 6.07;
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SECOND: to Holders of the Class A-1 Notes for amounts due and unpaid
on the Class A-1 Notes for interest (including any premium), ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Class A-1 Notes for interest (including any premium);
THIRD: to Holders of the Class A-2 Notes for amounts due and unpaid on
the Class A-2 Notes for interest (including any premium), notably, without
preference of priority of any kind, according to the amounts due and payable on
the Class A-2 Notes for interest (including any premium);
FOURTH: to Holders of the Class A-1 Notes for amounts due and unpaid on
the Class A-1 Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A-1 Notes for
principal, until the Outstanding Amount of the Class A- 1 Notes is reduced to
zero;
FIFTH: to Holders of the Class A-2 Notes for amounts due and unpaid on
the Class A-2 Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A-2 Notes for
principal, until the Outstanding Amount of the Class A-2 Notes is reduced to
zero;
SIXTH: to the Issuer for amounts required to be distributed to the
Certificateholders pursuant to the Trust Agreement.
The Indenture Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date,
the Issuer shall mail to each Noteholder and the Indenture Trustee a notice that
states the record date, the payment date and the amount to be paid.
SECTION 5.05. Optional Preservation of the Receivables. If the Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Trust Estate. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Indenture Trustee shall take such desire into
account when determining whether or not to maintain possession of the Trust
Estate. In determining whether to maintain possession of the Trust Estate, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose, which opinion shall be conclusive evidence as to such
sufficiency.
SECTION 5.06. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Indenture Trustee to institute such
Proceeding in respect of such Event of Default in its own name as Indenture
Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;
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(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
SECTION 5.08. Restoration of Rights and Remedies. If the Indenture Trustee
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission of the
Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
SECTION 5.11. Control by Noteholders. The Holders of a majority of the
Outstanding Amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction to the
Indenture Trustee to sell or liquidate the Trust Estate shall be by Holders
of Notes representing not less than 100% of the Outstanding Amount of the
Notes;
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(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Indenture Trustee elects to retain the Trust Estate pursuant to
such Section, then any direction to the Indenture Trustee by Holders of
Notes representing less than 100% of the Outstanding Amount of the Notes to
sell or liquidate the Trust Estate shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or might materially adversely affect the rights of
any Noteholders not consenting to such action.
SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default or Event of Default and its consequences except
a Default (a) in payment of principal of or interest on any of the Notes or (b)
in respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Note. In the case of any such waiver,
the Issuer, the Indenture Trustee and the Holders of the Notes shall be restored
to their former positions and rights hereunder, respectively, but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of a Note by such Holder's acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) 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 stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such
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judgment upon any portion of the Trust Estate or upon any of the assets of the
Issuer. Any money or property collected by the Indenture Trustee shall be
applied in accordance with Section 5.04(b).
SECTION 5.16. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Depositor, the Servicer or NAL, as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement and the Receivable Purchase Agreement and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Sale and Servicing Agreement or the Receivables
Purchase Agreement to the extent and in the manner directed by the Indenture
Trustee, including the transmission of notices of default on the part of the
Depositor, the Servicer, or NAL thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Depositor or the Servicer of each of their obligations under the Sale and
Servicing Agreement or the Receivables Purchase Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing or by
telephone (confirmed in writing promptly thereafter)) of the Holders of 66-2/3%
of the Outstanding Amount of the Notes shall, exercise all rights, remedies,
powers, privileges and claims of the Issuer against the Depositor or the
Servicer under or in connection with the Sale and Servicing Agreement and the
Receivables Purchase Agreement including the right or power to take any action
to compel or secure performance or observance by the Depositor, the Servicer or
NAL, as the case may be, of each of their obligations to the Issuer thereunder
and to give any consent, request, notice, direction, approval, extension or
waiver under the Sale and Servicing Agreement and the Receivables Purchase
Agreement, as the case may be, and any right of the Issuer to take such action
shall be suspended.
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee. (a) If an Event of Default has
occurred and is continuing of which a Responsible Officer of the Indenture
Trustee shall have actual knowledge, the Indenture Trustee shall exercise 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 person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture 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 Indenture Trustee and conforming to the requirements of this Indenture;
however, the Indenture Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this
Indenture.
(c) The Indenture 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 paragraph does not limit the effect of paragraph (b) of this
Section;
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(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture 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 5.11.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or indemnity reasonably satisfactory to it against such risk or
liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section.
SECTION 6.02. Rights of Indenture Trustee. (a) The Indenture
Trustee may conclusively rely, as to the truth of the statements or the
correctness of the opinions expressed therein, on any document believed by it
to be genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture 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; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, including Issuer's
counsel, and the advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture Trustee
in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Indenture Trustee must comply with Section 6.11.
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SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is continuing and
if it is either actually known or written notice of the existence thereof has
been delivered to a Responsible Officer of the Indenture Trustee, the Indenture
Trustee shall promptly mail to each Noteholder and each Rating Agency notice of
the Default. Except in the case of a Default in payment of principal of or
interest on any Note (including payments pursuant to the mandatory redemption
provisions of such Note), the Indenture Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders. To the extent that a
Responsible Officer has actual knowledge thereof or receives written notice
thereof, the Indenture Trustee shall provide each Rating Agency promptly with
notice in the event that any Event of Default is cured or waived, including a
description of the nature and extent of such Event of Default and the actions
taken to cure or waive it.
SECTION 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns.
SECTION 6.07. Compensation and Indemnity. The Issuer shall, or shall cause
the Administrator to, pay to the Indenture Trustee from time to time reasonable
compensation for its services. The Indenture Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall, or shall cause the Administrator to, reimburse the Indenture Trustee for
all reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and experts.
The Issuer shall, or shall cause the Administrator to, indemnify the Indenture
Trustee against any and all loss, liability or expense (including attorneys'
fees and expenses) incurred by it in connection with the administration of this
trust and the performance of its duties hereunder. The Indenture Trustee shall
notify the Issuer and the Administrator promptly of any claim for which it may
seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and the
Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder. The Issuer shall, or shall cause the Administrator to,
defend any such claim, and the Indenture Trustee may have separate counsel and
the Issuer shall, or shall cause the Administrator to, pay the fees and expenses
of such counsel. Neither the Issuer nor the Administrator need reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own willful misconduct,
negligence or bad faith.
The Issuer's obligations to the Indenture Trustee pursuant to this Section
shall survive the discharge of this Indenture, the maturity of the Notes and the
resignation or removal of the Indenture Trustee. When the Indenture Trustee
incurs expenses after the occurrence of a Default specified in Section 5.01(iv)
or (v) with respect to the Issuer, the expenses are intended to constitute
expenses of administration under Title 11 of the United States Code or any other
applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. Replacement of Indenture Trustee. No resignation or removal
of the Indenture Trustee and no appointment of a successor Indenture Trustee
shall become effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee may
resign at any time by so notifying the Issuer. The Holders of a majority in
Outstanding Amount of the Notes may remove the Indenture Trustee by so notifying
the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer
shall remove the Indenture Trustee if:
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(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the
office of Indenture Trustee for any reason (the Indenture Trustee in such event
being referred to herein as the retiring Indenture Trustee), the Issuer shall
promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property of the Issuer, including all
property in the Trust Estate, held by it as Indenture Trustee to the successor
Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the
Notes may petition any court of competent jurisdiction for the appointment of a
successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section, the Issuer's and the Administrator's obligations under Section 6.07
shall continue for the benefit of the retiring Indenture Trustee. The Indenture
Trustee shall not be liable for the acts or omissions of any successor Indenture
Trustee.
SECTION 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one
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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 Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Noteholders, such title
to the Trust Estate, or any part hereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the
Indenture 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 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.
(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) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and exercised
or performed by the Indenture 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 Indenture
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 Indenture Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust Estate or any portion thereof
in any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture 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 Agreement and
the conditions of this Article VI. 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
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement 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 Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee shall at
all times be a financial institution organized and doing business under the laws
of the United States of America or any state, be authorized under such laws to
exercise corporate trust powers, be subject to supervision and examination by
Federal or state authority, and have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition.
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ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Holders of Notes as of such Record Date, and (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished.
SECTION 7.02. Preservation of Information; Communications to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Indenture Trustee as provided in Section 7.01
and the names and addresses of Holders of Notes received by the Indenture
Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any
list furnished to it as provided in such Section 7.01 upon receipt of a new list
so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA ss. 312(c).
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.02. Trust Accounts. (a) On or prior to the Closing Date, the
Issuer shall cause the Servicer to establish and maintain, in the name of the
Indenture Trustee, for the benefit of the Noteholders and the
Certificateholders, the Trust Accounts as provided in Section 5.01 of the Sale
and Servicing Agreement.
(b) On or before each Distribution Date, all amounts required to be
deposited in the Note Distribution Account with respect to the preceding
Collection Period pursuant to Sections 5.05 and 5.06 of the Sale and Servicing
Agreement will be transferred from the Collection Account and/or the Reserve
Account to the Note Distribution Account.
(c) On each Distribution Date and Redemption Date, the Indenture Trustee
shall distribute all amounts on deposit in the Note Distribution Account to
Noteholders in respect of the Notes to the
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extent of amounts due and unpaid on the Notes for principal and interest
(including any premium) in the following amounts and in the following order of
priority (except as otherwise provided in Section 5.04(b)):
(i) to the Holders of the Class A-1 Notes, accrued and unpaid
interest on the Class A-1 Notes.
(ii) to the Holders of the Class A-2 Notes, accrued and unpaid
interest on the Class A-2 Notes;
(iii) to the Holders of the Class A-1 Notes on account of principal
until the Outstanding Amount of the Class A-1 Notes is reduced to zero;
(iv) to the Holders of the Class A-2 Notes on account of principal until
the Outstanding Amount of the Class A-2 Notes is reduced to zero.
SECTION 8.03. General Provisions Regarding Accounts. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Trust Accounts (other than the Note Distribution
Account) shall be invested in Eligible Investments and reinvested by the
Indenture Trustee upon Issuer Order, subject to the provisions of Section
5.01(b) of the Sale and Servicing Agreement. All income or other gain from
investments of moneys deposited in the Trust Accounts (other than the Dealer
Reserve Account) shall be deposited by the Indenture Trustee in the Collection
Account, and any loss resulting from such investments shall be charged to such
account. All income and other gain from investment of monies in the Dealer
Reserve Account (net of any losses and investment expenses) will be payable on
each Distribution Date to the Depositor. The Issuer will not direct the
Indenture Trustee to make any investment of any funds or to sell any investment
held in any of the Trust Accounts unless the security interest Granted and
perfected in such account will continue to be perfected in such investment or
the proceeds of such sale, in either case without any further action by any
Person, and, in connection with any direction to the Indenture Trustee to make
any such investment or sale, if requested by the Indenture Trustee, the Issuer
shall deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way
be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Issuer (or the Servicer) shall have failed to give
investment directions for any funds on deposit in the Trust Accounts to the
Indenture Trustee by 10:00 a.m. Eastern Time (or such other time as may be
agreed by the Issuer and Indenture Trustee) on any Business Day or (ii) a
Default or Event of Default shall have occurred and be continuing with respect
to the Notes but the Notes shall not have been declared due and payable pursuant
to Section 5.02 or (iii) if such Notes shall have been declared due and payable
following an Event of Default and amounts collected or receivable from the Trust
Estate are being applied in accordance with Section 5.05 as if there had not
been such a declaration, then the Indenture Trustee shall, to the fullest extent
practicable, invest and reinvest funds in the Trust Accounts in one or more
Eligible Investments.
SECTION 8.04. Release of Trust Estate. (a) Subject to the payment of its
fees and expenses pursuant to Section 6.07, the Indenture Trustee may, and when
required by the provisions of this Indenture shall, execute instruments to
release property from the lien of this Indenture, or convey the Indenture
Trustee's interest in the same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article VIII
shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
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(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Trust Estate that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.04(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate and an Opinion of Counsel meeting the
applicable requirements of Section 11.01.
SECTION 8.05. Opinion of Counsel. The Indenture Trustee shall receive at
least seven days notice when requested by the Issuer to take any action pursuant
to Section 8.04(a), accompanied by copies of any instruments involved, and the
Indenture Trustee shall also require, as a condition to such action, an Opinion
of Counsel, in form and substance satisfactory to the Indenture Trustee, stating
the legal effect of any such action, outlining the steps required to complete
the same, and concluding that all conditions precedent to the taking of such
action have been complied with and such action will not materially and adversely
impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Trust Estate. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders. (a)
Without the consent of the Holders of any Notes but with prior notice to the
Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Indenture Trustee,
for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be inconsistent with any
other provision herein or in any supplemental indenture or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided, that such action
shall not adversely affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture
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as shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) if required by law, to modify, eliminate or add to the provisions
of this Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar federal
statute hereafter enacted and to add to this Indenture such other
provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder.
SECTION 9.02. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies and with the consent of the Holders of
not less than a majority of the Outstanding Amount of the Notes, by Act of such
Holders delivered to the Issuer and the Indenture Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest
rate thereon or the Redemption Price with respect thereto, change the
provisions of this Indenture relating to the application of collections on,
or the proceeds of the sale of, the Trust Estate to payment of principal of
or interest on the Notes, or change any place of payment where, or the coin
or currency in which, any Note or the interest thereon is payable, or
impair the right to institute suit for the enforcement of the provisions of
this Indenture requiring the application of funds available therefor, as
provided in Article V, to the payment of any such amount due on the Notes
on or after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or
waived without the consent of the Holder of each Outstanding Note affected
thereby;
(vi) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest or
principal due on any Note on any Distribution Date (including the
calculation of any of the individual components of such calculation) or to
affect the
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rights of the Holders of Notes to the benefit of any provisions for the
mandatory redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Trust
Estate or, except as otherwise permitted or contemplated herein, terminate
the lien of this Indenture on any property at any time subject hereto or
deprive the Holder of any Note of the security provided by the lien of this
Indenture.
The Indenture Trustee may, but shall in no way be obligated to, in its sole
discretion determine whether or not any Notes would be affected by any
supplemental indenture and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Indenture Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture, which opinion shall be conclusive
evidence as to such authorization or permission. The Indenture Trustee may, but
shall not be obligated to, enter into any such supplemental indenture that
affects the Indenture Trustee's own rights, duties, liabilities or immunities
under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.05. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
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ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption. (a) The Notes are subject to redemption in
whole, but not in part, at the direction of the Servicer pursuant to Section
9.01(a) of the Sale and Servicing Agreement, on any Distribution Date on which
the Servicer exercises its option to purchase the Trust Estate pursuant to said
Section 9.01(a), for a purchase price equal to the Redemption Price; provided,
that the Issuer has available funds sufficient to pay the Redemption Price. The
Servicer or the Issuer shall furnish the Rating Agencies notice of such
redemption. If the Notes are to be redeemed pursuant to this Section 10.01(a),
the Servicer or the Issuer shall furnish notice of such election to the
Indenture Trustee not later than 20 days prior to the Redemption Date, and the
Issuer shall deposit by 10:00 A.M. New York City time on the Redemption Date
with the Indenture Trustee in the Note Distribution Account the Redemption Price
of the Notes to be redeemed, whereupon all such Notes shall be due and payable
on the Redemption Date upon the furnishing of a notice complying with Section
10.02 to each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to Section
9.02 of the Trust Agreement, all amounts on deposit in the Note Distribution
Account shall be paid to the Noteholders up to the Outstanding Amount of the
Notes and all accrued and unpaid interest thereon. If amounts are to be paid to
Noteholders pursuant to this Section 10.01(b), the Servicer or the Issuer shall,
to the extent practicable, furnish notice of such event to the Indenture Trustee
not later than 20 days prior to the Redemption Date, whereupon all such amounts
shall be payable on the Redemption Date.
SECTION 10.02. Form of Redemption Notice. (a) Notice of redemption under
Section 10.01(a) shall be given by the Indenture Trustee by first-class mail,
postage prepaid, or by facsimile mailed or transmitted not later than 10 days
prior to the applicable Redemption Date to each Holder of Notes as of the close
of business on the Record Date preceding the applicable Redemption Date, at such
Holder's address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment of the
Redemption Price.
Notice of redemption of the Notes shall be given by the Indenture Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(b) is not required to
be given to Noteholders.
SECTION 10.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption as required by
Section 10.02 (in the case of redemption pursuant to Section 10.01(a)), become
due and payable at the Redemption Price on the Redemption Date and (unless the
Issuer shall default in the payment of the Redemption Price) no interest shall
accrue on the Redemption Price for any period after the date to which accrued
interest is calculated for purposes of calculating the Redemption Price.
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ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions, etc. Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee (i) an Officer's Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with, and (ii) an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with,
except that, in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
SECTION 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Depositor, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Depositor, the Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective
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date of such certificate or report (as the case may be), of the facts and
opinions stated in such document shall in such case be conditions precedent to
the right of the Issuer to have such application granted or to the sufficiency
of such certificate or report. The foregoing shall not, however, be construed to
affect the Indenture Trustee's right to rely upon the truth and accuracy of any
statement or opinion contained in any such document as provided in Article VI.
SECTION 11.03. Acts of Noteholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided such action shall become effective when such instrument or instruments
are delivered to the Indenture Trustee and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 6.01)
conclusive in favor of the Indenture Trustee and the Issuer, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Indenture Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Indenture
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
shall be in writing and if such request, demand, authorization, direction,
notice, consent, waiver or act of Noteholders is to be made upon, given or
furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Indenture Trustee at its Corporate Trust Office,
or
(ii) the Issuer by the Indenture Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and personally
delivered or mailed postage prepaid or by recognized overnight courier or
by facsimile confirmed by delivery or mail as described above to the Issuer
addressed to: NAL Auto Trust 1995-1, in care of Wilmington Trust Company,
as Owner Trustee, 100 N. Market Street, Rodney Square North, Wilmington,
Delaware 19801; facsimile: 305- 651 8882; Attention of Corporate Trust
Administrator, or at any other address previously furnished in writing to
the Indenture Trustee by the Issuer or the Administrator. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to (i) in the case of
Fitch's Investors Service, L.P., at the following address: One State Street
Plaza, New York, N.Y. 10004, and (ii) in the case of Duff & Phelps Inc. at the
following address: 55 E. Monroe Street (35th Floor), Chicago, Illinois 60603; or
as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
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SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Holder's address as it appears on the Note Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders 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 that is mailed in the manner herein
provided shall conclusively be 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 Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.06. Alternate Payment and Notice Provisions. Notwithstanding any
provision of this Indenture or any of the Notes to the contrary, the Issuer may
enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
SECTION 11.07. [Reserved]
SECTION 11.08. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.09. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind its successors, co-trustees and agents.
SECTION 11.10. Separability. 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 11.11. Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 11.12. Legal Holidays. In any case where the date on which
any payment is due shall not be a Business Day, then (notwithstanding any
other provision of the Notes or this Indenture)
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<PAGE>
payment need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the date on which
nominally due, and no interest shall accrue for the period from and after any
such nominal date.
SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed in
writing (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacity) and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity. For
all purposes of this Indenture, in the performance of any duties or obligations
of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to
the benefits of, the terms and provisions of Article VI, VII and VIII of the
Trust Agreement.
SECTION 11.17. No Petition. The Indenture Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Depositor or the Issuer, or
join in any institution against the Depositor or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the Basic Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall, and shall cause its representatives to, hold in confidence all
such information provided, however, that the foregoing shall not be construed to
prohibit (i) disclosure of any and all information that is or becomes publicly
known, or information obtained by the Indenture Trustee from sources other than
the Issuer, Administrator, Seller or Servicer, (ii) disclosure of any and all
information (A) if required to do so by any applicable statute, law, rule or
regulation, (B) to any government agency or regulatory or self-regulatory body
having or claiming
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authority to regulate or oversee any aspects of the Indenture Trustee's business
or that of its Affiliates, (C) pursuant to any subpoena, civil investigative
demand or similar demand or request of any court, regulatory authority,
arbitrator or arbitration to which the Indenture Trustee or an Affiliate or an
officer, director, employer or shareholder thereof is a party, (D) in any
preliminary or final offering circular, registration statement or contract or
other document pertaining to the transactions contemplated by this Agreement
approved in advance by the Issuer or (E) to any Affiliate, independent or
internal auditor, agent, employee or attorney of the Indenture Trustee having a
need to know the same, provided that the Indenture Trustee advises such
recipient of the confidential nature of the information being disclosed, (iii)
any other disclosure authorized by the Seller, Administrator, Issuer or Servicer
or (iv) disclosure to the other parties to the transactions contemplated by this
Agreement.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
NAL AUTO TRUST 1995-1,
by: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee,
by: _______________________________
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee,
by: _______________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Patricia A. Evans, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said NAL AUTO
TRUST 1995-1, a Delaware business trust, and that he executed the same as the
act of said business trust for the purpose and consideration therein expressed,
and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 21st day of December,
1995.
______________________________________________
Notary Public in and for the State of New York.
My commission expires:
______________________
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STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Melissa Kaye Adelson, known to
me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of BANKERS TRUST
COMPANY, a New York banking corporation, and that she executed the same as the
act of said corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 21st day of December, 1995.
_______________________________________________
Notary Public in and for the State of New York.
My commission expires:
______________________
<PAGE>
SCHEDULE 1
44
<PAGE>
EXHIBIT A-1
[FORM OF CLASS A-1 NOTE]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF
ANY STATE IN THE UNITED STATES OR ANY FOREIGN SECURITIES LAWS. BY ITS ACCEPTANCE
OF THIS NOTE THE HOLDER HEREOF IS DEEMED TO REPRESENT TO THE DEPOSITOR AND THE
INDENTURE TRUSTEE (i) THAT IT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE 1933 ACT (AN
"ACCREDITED INVESTOR") AND THAT IT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT
(AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH
OTHERS ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER IS A BANK ACTING IN ITS
FIDUCIARY CAPACITY) FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, THE PUBLIC DISTRIBUTION HEREOF OR (ii) THAT IT IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE 1933 ACT AND
IS ACQUIRING SUCH NOTE FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS)
OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QUALIFIED
INSTITUTIONAL BUYERS).
NO SALE, PLEDGE OR OTHER TRANSFER OF THIS NOTE MAY BE MADE BY ANY PERSON UNLESS
EITHER (i) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO THE DEPOSITOR, (ii)
SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO AN ACCREDITED INVESTOR THAT
EXECUTES A CERTIFICATE, SUBSTANTIALLY IN THE FORM SPECIFIED IN THE INDENTURE, TO
THE EFFECT THAT IT IS AN ACCREDITED INVESTOR ACTING FOR ITS OWN ACCOUNT (AND NOT
FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS
ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER IS A BANK ACTING IN ITS
FIDUCIARY CAPACITY), (iii) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE 1933 ACT, SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO
A PERSON WHOM THE PROSPECTIVE TRANSFEROR REASONABLY BELIEVES AFTER DUE INQUIRY
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A), ACTING FOR ITS
OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO ARE QUALIFIED INSTITUTIONAL BUYERS) TO WHOM NOTICE IS
GIVEN THAT THE SALE, PLEDGE OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
OR (iv) SUCH SALE, PLEDGE OR OTHER TRANSFER IS OTHERWISE MADE IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, IN WHICH CASE THE
INDENTURE TRUSTEE SHALL REQUIRE THAT BOTH THE PROSPECTIVE TRANSFEROR AND THE
PROSPECTIVE TRANSFEREE CERTIFY TO THE INDENTURE TRUSTEE AND THE DEPOSITOR IN
WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION SHALL BE IN
FORM AND SUBSTANCE SATISFACTORY TO THE INDENTURE TRUSTEE AND THE DEPOSITOR.
EXCEPT IN THE CASE OF A TRANSFER DESCRIBED IN CLAUSES (i) OR (iii) ABOVE, THE
INDENTURE TRUSTEE SHALL REQUIRE A WRITTEN OPINION OF COUNSEL (WHICH SHALL NOT BE
AT THE EXPENSE OF THE DEPOSITOR, ANY AFFILIATE OF THE DEPOSITOR OR THE INDENTURE
TRUSTEE) SATISFACTORY TO THE DEPOSITOR AND THE INDENTURE TRUSTEE TO THE EFFECT
THAT SUCH TRANSFER WILL NOT VIOLATE THE 1933 ACT. NO SALE, PLEDGE OR OTHER
TRANSFER MAY BE MADE TO ANY ONE PERSON FOR SECURITIES WITH A FACE AMOUNT OF LESS
THAN $100,000 AND, IN THE CASE OF ANY PERSON ACTING ON BEHALF OF ONE OR MORE
THIRD PARTIES (OTHER THAN A BANK (AS DEFINED IN SECTION 3(a)(2) OF THE 1933 ACT)
ACTING IN ITS FIDUCIARY CAPACITY), FOR SECURITIES WITH A FACE AMOUNT OF LESS
THAN $100,000 FOR EACH SUCH THIRD PARTY.
EACH SECURITYHOLDER, BY ITS ACCEPTANCE OF THIS SECURITY, COVENANTS AND AGREES
THAT SUCH SECURITYHOLDER SHALL NOT, PRIOR TO THE DATE THAT IS ONE YEAR AND ONE
DAY AFTER THE TERMINATION OF THE TRUST AGREEMENT, ACQUIESCE, PETITION OR
OTHERWISE INVOKE OR CAUSE THE TRUST, THE DEPOSITOR OR THE SELLER TO INVOKE THE
PROCESS OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF COMMENCING OR
SUSTAINING A
A-1-1
<PAGE>
CASE AGAINST THE TRUST, THE DEPOSITOR OR THE SELLER UNDER ANY FEDERAL OR STATE
BANKRUPTCY, INSOLVENCY, REORGANIZATION OR SIMILAR LAW, OR APPOINTING A RECEIVER,
LIQUIDATOR, ASSIGNEE, TRUSTEE, CUSTODIAN, SEQUESTRATOR OR OTHER SIMILAR OFFICIAL
OF THE TRUST, THE DEPOSITOR OR THE SELLER OR ANY SUBSTANTIAL PART OF ITS
PROPERTY, OR ORDERING THE WINDING UP OR LIQUIDATION OF THE AFFAIRS OF THE TRUST,
THE DEPOSITOR OR THE SELLER.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $________________
No. R- CUSIP NO. 62872EAA2
NAL AUTO TRUST 1995-1
CLASS A-1 6.65% ASSET BACKED NOTES
NAL Auto Trust 1995-1, a business trust organized and existing under
the laws of the State of Delaware (herein referred to as the "Issuer"), for
value received, hereby promises to pay to _______________________________, or
registered assigns, the principal sum of _______________________ DOLLARS payable
on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is $__________ and the
denominator of which is $__________ by (ii) the aggregate amount, if any,
payable from the Note Distribution Account in respect of principal on the Class
A-1 Notes pursuant to Section 3.01 of the Indenture dated as of December 1, 1995
(the "Indenture"), between the Issuer and Bankers Trust Company, a New York
banking corporation, as Indenture Trustee (the "Indenture Trustee"); provided,
however, that the entire unpaid principal amount of this Note shall be due and
payable on the earlier of the September 2000 Distribution Date (the "Class A-1
Final Scheduled Distribution Date") and the Redemption Date, if any, pursuant to
Section 10.01 of the Indenture. Capitalized terms used but not defined herein
are defined in Article I of the Indenture, which also contains rules as to
construction that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (or, in the case of the first Distribution Date, the
Closing Date) after giving effect to all payments of principal made on the
preceding Distribution Date, subject to certain limitations contained in Section
3.01 of the Indenture. Interest on this Note for each Distribution Date will
accrue from and including the first day of the preceding Collection Period (or,
in the case of the first Distribution Date, from and including the Cutoff Date).
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
A-1-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: _________________ NAL AUTO TRUST 1995-1,
by: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement,
by: _______________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: _________________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee,
by: ___________________________________
Authorized Signatory
A-1-3
<PAGE>
Reverse
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 6.65% Asset Backed Notes (herein called the "Class
A-1 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-1 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes and the Class A-2 Notes (collectively, the
"Notes") are and will be equally and ratably secured by the collateral pledged
as security therefor as provided in the Indenture but subject, as between the
Class A-1 and Class A-2 Notes, to the distribution priorities set forth in
Sections 5.04 and 8.02 of the Indenture.
Principal of the Class A-1 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
15th day of each March, June, September and December or, if any such date is not
a Business Day, the next succeeding Business Day, commencing March, 1996.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-1 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01 of
the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount
of the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee or the Holders
of Notes representing not less than a majority of the Outstanding Amount of the
Notes have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02 of the Indenture. All principal payments on the Class
A-1 Notes shall be made pro rata to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
unless such Person notifies the Paying Agent in writing not later than the
Record Date prior to a Distribution Date that payments are to be made by wire
transfer in immediately available funds to the account designated by such
Person. Payments by check shall be mailed to the Person entitled thereto at the
address of such Person as it appears on the Note Register as of the applicable
Record Date without requiring that this Note be submitted for notation of
payment. Any reduction in the principal amount of this Note (or any one or more
Predecessor Notes) effected by any payments made on any Distribution Date shall
be binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
or transmitted by facsimile prior to such Distribution Date, and the amount then
due and payable shall be payable only upon presentation and surrender of this
Note at the Indenture Trustee's principal Corporate Trust Office or at the
office of the Indenture Trustee's agent appointed for such purposes located in
The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture and subject to the limitations set forth
therein and on the face hereof, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with
A-1-4
<PAGE>
such signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder, by acceptance of a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder, by acceptance of a Note covenants and agrees by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Depositor, the Seller or the Issuer, or join in any
institution against the Depositor, the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note, agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
A-1-5
<PAGE>
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of Wilmington Trust Company in its
individual capacity, Bankers Trust Company in its individual capacity, any owner
of a beneficial interest in the Issuer, or any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on this Note or performance of, or
failure to perform, any of the covenants, obligations or indemnifications
contained in the Indenture. The Holder of this Note by its acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Holder shall have no claim against
any of the foregoing for any deficiency, loss or claim therefrom; provided,
however, that nothing contained herein shall be taken to prevent recourse to,
and enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
A-1-6
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
_________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
_____________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _______________________, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated: ________________ ______________________________________*/
Signature Guaranteed:
_____________________________*/
- ------------------------
*/ NOTICE: The signature to this assignment must correspond with the name of
the registered - owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change whatever.
Such signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.
A-1-7
<PAGE>
EXHIBIT A-2
[FORM OF CLASS A-2 NOTE]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF
ANY STATE IN THE UNITED STATES OR ANY FOREIGN SECURITIES LAWS. BY ITS ACCEPTANCE
OF THIS NOTE THE HOLDER HEREOF (A) IS DEEMED TO REPRESENT TO THE DEPOSITOR AND
THE INDENTURE TRUSTEE (i) THAT IT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE 1933 ACT (AN
"ACCREDITED INVESTOR") AND THAT IT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT
(AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH
OTHERS ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER IS A BANK ACTING IN ITS
FIDUCIARY CAPACITY) FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, THE PUBLIC DISTRIBUTION HEREOF OR (ii) THAT IT IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE 1933 ACT AND
IS ACQUIRING SUCH NOTE FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS)
OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QUALIFIED
INSTITUTIONAL BUYERS).
NO SALE, PLEDGE OR OTHER TRANSFER OF THIS NOTE MAY BE MADE BY ANY PERSON UNLESS
EITHER (i) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO THE DEPOSITOR, (ii)
SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO AN ACCREDITED INVESTOR THAT
EXECUTES A CERTIFICATE, SUBSTANTIALLY IN THE FORM SPECIFIED IN THE INDENTURE, TO
THE EFFECT THAT IT IS AN ACCREDITED INVESTOR ACTING FOR ITS OWN ACCOUNT (AND NOT
FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS
ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER IS A BANK ACTING IN ITS
FIDUCIARY CAPACITY), (iii) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE 1933 ACT, SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO
A PERSON WHOM THE PROSPECTIVE TRANSFEROR REASONABLY BELIEVES AFTER DUE INQUIRY
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A), ACTING FOR ITS
OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO ARE QUALIFIED INSTITUTIONAL BUYERS) TO WHOM NOTICE IS
GIVEN THAT THE SALE, PLEDGE OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
OR (iv) SUCH SALE, PLEDGE OR OTHER TRANSFER IS OTHERWISE MADE IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, IN WHICH CASE THE
INDENTURE TRUSTEE SHALL REQUIRE THAT BOTH THE PROSPECTIVE TRANSFEROR AND THE
PROSPECTIVE TRANSFEREE CERTIFY TO THE INDENTURE TRUSTEE AND THE DEPOSITOR IN
WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION SHALL BE IN
FORM AND SUBSTANCE SATISFACTORY TO THE INDENTURE TRUSTEE AND THE DEPOSITOR
EXCEPT IN THE CASE OF A TRANSFER DESCRIBED IN CLAUSES (i) OR (iii) ABOVE, THE
INDENTURE TRUSTEE SHALL REQUIRE A WRITTEN OPINION OF COUNSEL (WHICH SHALL NOT BE
AT THE EXPENSE OF THE DEPOSITOR, ANY AFFILIATE OF THE DEPOSITOR OR THE INDENTURE
TRUSTEE) SATISFACTORY TO THE DEPOSITOR AND THE INDENTURE TRUSTEE TO THE EFFECT
THAT SUCH TRANSFER WILL NOT VIOLATE THE 1933 ACT. NO SALE, PLEDGE OR OTHER
TRANSFER MAY BE MADE TO ANY ONE PERSON FOR SECURITIES WITH A FACE AMOUNT OF LESS
THAN $100,000 AND, IN THE CASE OF ANY PERSON ACTING ON BEHALF OF ONE OR MORE
THIRD PARTIES (OTHER THAN A BANK (AS DEFINED IN SECTION 3(a)(2) OF THE 1933 ACT)
ACTING IN ITS FIDUCIARY CAPACITY), FOR SECURITIES WITH A FACE AMOUNT OF LESS
THAN $100,000 FOR EACH SUCH THIRD PARTY.
EACH SECURITYHOLDER, BY ITS ACCEPTANCE OF THIS SECURITY, COVENANTS AND AGREES
THAT SUCH SECURITYHOLDER SHALL NOT, PRIOR TO THE DATE THAT IS ONE YEAR AND ONE
DAY AFTER THE TERMINATION OF THE TRUST AGREEMENT, ACQUIESCE, PETITION OR
OTHERWISE INVOKE OR CAUSE THE TRUST, THE DEPOSITOR OR THE SELLER TO INVOKE THE
PROCESS OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF COMMENCING OR
SUSTAINING A
A-2-1
<PAGE>
CASE AGAINST THE TRUST, THE DEPOSITOR OR THE SELLER UNDER ANY FEDERAL OR STATE
BANKRUPTCY, INSOLVENCY, REORGANIZATION OR SIMILAR LAW, OR APPOINTING A RECEIVER,
LIQUIDATOR, ASSIGNEE, TRUSTEE, CUSTODIAN, SEQUESTRATOR OR OTHER SIMILAR OFFICIAL
OF THE TRUST, THE DEPOSITOR OR THE SELLER OR ANY SUBSTANTIAL PART OF ITS
PROPERTY, OR ORDERING THE WINDING UP OR LIQUIDATION OF THE AFFAIRS OF THE TRUST,
THE DEPOSITOR OR THE SELLER.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $______________
No. R- CUSIP NO. 62872EAB0
NAL AUTO TRUST 1995-1
CLASS A-2 7.70% ASSET BACKED NOTES
NAL Auto Trust 1995-1, a business trust organized and existing under
the laws of the State of Delaware (herein referred to as the "Issuer"), for
value received, hereby promises to pay to _______________________________, or
registered assigns, the principal sum of _______________ DOLLARS payable on each
Distribution Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $_________ and the denominator of which is
$_________ by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-2 Notes pursuant to
Section 3.01 of the Indenture dated as of December 1, 1995 (the "Indenture"),
between the Issuer and Bankers Trust Company, a New York banking corporation, as
Indenture Trustee (the "Indenture Trustee"); provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the earlier of
the December 2000 Distribution Date (the "Class A-2 Final Scheduled Distribution
Date") and the Redemption Date, if any, pursuant to Section 10.01 of the
Indenture. Capitalized terms used but not defined herein are defined in Article
I of the Indenture, which also contains rules as to construction that shall be
applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (or, in the case of the first Distribution Date, the
Closing Date) after giving effect to all payments of principal made on the
preceding Distribution Date, subject to certain limitations contained in Section
3.01 of the Indenture. Interest on this Note for each Distribution Date will
accrue from and including the first day of the preceding Collection Period (or,
in the case of the first Distribution Date, from and including the Cutoff Date).
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture, or be valid or
obligatory for any purpose.
A-2-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: _________________ NAL AUTO TRUST 1995-1,
by: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement,
by: ______________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: _________________ BANKERS TRUST COMPANY, not in its
individual capacity but solely as
Indenture Trustee,
by: ___________________________________
Authorized Signatory
A-2-3
<PAGE>
Reverse
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 7.70% Asset Backed Notes (herein called the "Class
A-2 Notes"), all issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-2 Notes are subject to all
terms of the Indenture.
The Class A-1 Notes and the Class A-2 Notes (collectively, the
"Notes") are and will be equally and ratably secured by the collateral pledged
as security therefor as provided in the Indenture but subject, as between the
Class A-1 and Class A-2 Notes, to the distribution priorities set forth in
Sections 5.04 and 8.02 of the Indenture.
Principal of the Class A-2 Notes will be payable on each Distribution
Date in an amount described on the face hereof. "Distribution Date" means the
15th day of each March, June, September and December or, if any such date is not
a Business Day, the next succeeding Business Day, commencing March, 1996.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Class A-2 Final Scheduled
Distribution Date and the Redemption Date, if any, pursuant to Section 10.01 of
the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount
of the Notes shall be due and payable on the date on which an Event of Default
shall have occurred and be continuing and the Indenture Trustee or the Holders
of Notes representing not less than a majority of the Outstanding Amount of the
Notes have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02 of the Indenture. All principal payments on the Class
A-2 Notes shall be made pro rata to the Class A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
unless such Person notifies the Paying Agent in writing not later than the
Record Date prior to a Distribution Date that payments are to be made by wire
transfer in immediately available funds to the account designated by such
Person. Payments by check shall be mailed to the Person entitled thereto at the
address of such Person as it appears on the Note Register as of the applicable
Record Date without requiring that this Note be submitted for notation of
payment. Any reduction in the principal amount of this Note (or any one or more
Predecessor Notes) effected by any payments made on any Distribution Date shall
be binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
or transmitted by facsimile prior to such Distribution Date, and the amount then
due and payable shall be payable only upon presentation and surrender of this
Note at the Indenture Trustee's principal Corporate Trust Office or at the
office of the Indenture Trustee's agent appointed for such purposes located in
The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture and subject to the limitations set forth
therein and on the face hereof, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with
A-2-4
<PAGE>
such signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended, and thereupon one or more new
Notes of authorized denominations and in the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be charged for any registration of transfer or exchange of this Note, but
the transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
Each Noteholder, by acceptance of a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder covenants and agrees by accepting the benefits of the
Indenture that such Noteholder will not at any time institute against the
Depositor, the Seller or the Issuer, or join in any institution against the
Depositor, the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note, agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
A-2-5
<PAGE>
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of Wilmington Trust Company in its
individual capacity, Bankers Trust Company in its individual capacity, any owner
of a beneficial interest in the Issuer, or any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on this Note or performance of, or
failure to perform, any of the covenants, obligations or indemnifications
contained in the Indenture. The Holder of this Note by its acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Holder shall have no claim against
any of the foregoing for any deficiency, loss or claim therefrom; provided,
however, that nothing contained herein shall be taken to prevent recourse to,
and enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
A-2-6
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
______________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
______________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ______________________, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated: _________________ ___________________________________*/
Signature Guaranteed:
________________________________*/
- ------------------------
*/ NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.
A-2-7
<PAGE>
EXHIBIT C
FORM OF TRANSFEROR CERTIFICATE
[DATE]
[Depositor]
[Depositor Address]
[Owner Trustee]
[Owner Trustee Address]
[Indenture Trustee]
[Indenture Trustee Address]
Re: NAL Auto Trust 1995-1
Class A-[ ] [ ]% Asset Backed Notes
-------------------------------------
Ladies and Gentlemen:
In connection with our disposition of the above-referenced Class A-[ ]
[ ]% Asset Backed Notes (the "Notes") we certify that (a) we understand that the
Notes have not been registered under the Securities Act of 1933, as amended (the
"Act"), and are being transferred by us in a transaction that is exempt from the
registration requirements of the Act and (b) we have not offered or sold any
Notes to, or solicited offers to buy any Notes from, any person, or otherwise
approached or negotiated with any person with respect thereto, in a manner that
would be deemed, or taken any other action which would result in, a violation of
Section 5 of the Act.
Very truly yours,
[NAME OF TRANSFEROR]
By: __________________________
Authorized Officer
C-1
<PAGE>
EXHIBIT D
FORM OF INVESTMENT LETTER
Depositor
[Address]
Owner Trustee
[Address]
[Indenture Trustee]
[Address]
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate principal
amount of % Asset Backed Notes (the "Securities") of NAL Auto Trust 1995-1 (the
"Issuer"), we confirm that:
1. We understand that the Securities have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), and may
not be sold except as permitted in the following sentence. We
understand and agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, (x) that such Securities
are being offered only in a transaction not involving any public
offering within the meaning of the 1933 Act and (y) that such
Securities may be resold, pledged or transferred only (i) to the
Depositor, (ii) to an "accredited investor" as defined in Rule
501(a)(1),(2),(3) or (7) (an "Accredited Investor") under the 1933 Act
acting for its own account (and not for the account of others) or as a
fiduciary or agent for others (which others also are Accredited
Investors unless the holder is a bank acting in its fiduciary capacity)
that executes a certificate substantially in the form hereof, (iii) so
long as such Security is eligible for resale pursuant to Rule 144A
under the 1933 Act ("Rule 144A"), to a person whom we reasonably
believe after due inquiry is a "qualified institutional buyer" as
defined in Rule 144A, acting for its own account (and not for the
account of others) or as a fiduciary or agent for others (which others
also are "qualified institutional buyers") to whom notice is given that
the resale, pledge or transfer is being made in reliance on Rule 144A
or (iv) in a sale, pledge or other transfer made in a transaction
otherwise exempt from the registration requirements of the 1933 Act, in
which case (A) the Indenture Trustee shall require that both the
prospective transferor and the prospective transferee certify to the
Indenture Trustee and the Depositor in writing the facts surrounding
such transfer, which certification shall be in form and substance
satisfactory to the Indenture Trustee and the Depositor and (B) the
Indenture Trustee shall require a written opinion of counsel (which
will not be at the expense of the Depositor, any affiliate of the
Depositor or the Indenture Trustee) satisfactory to the Depositor and
the Indenture Trustee to the effect that such transfer will not violate
the 1933 Act, in each case in accordance with any applicable securities
laws of any state of the United States. We will notify any purchaser of
the Security from us of the above resale restrictions, if then
applicable. We further understand that in connection with any transfer
of the Security by us that the Depositor and the Indenture Trustee may
request, and if so requested we will furnish such certificates and
other information as they may reasonably require to confirm that any
such transfer complies with the foregoing restrictions. We understand
that no sale, pledge or other transfer may be made to any one person of
Securities with a face amount of less than $100,000 and, in the case of
any person acting on behalf of one or more third parties (other than a
bank (as defined in Section 3(a)((2) of the 1933 Act) acting in its
fiduciary capacity), of Securities with a face amount of less than
$100,000 for each such third party.
D-1
<PAGE>
2. [CHECK ONE]
/ / (a) We are an "accredited investor" (as defined in Rule
501(a)(1),(2),(3) or (7) of Regulation D under the Securities
Act) acting for our own account (and not for the account of
others) or as a fiduciary or agent for others (which others
also are Accredited Investors unless we are a bank acting in
its fiduciary capacity). We have such knowledge and
experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the
Security, and we and any accounts for which we are acting are
each able to bear the economic risk of our or their
investment for an indefinite period of time. We are
acquiring the Security for investment and not with a view to,
or for offer and sale in connection with, a public
distribution.
/ / (b) We are a "qualified institutional buyer" as defined under
Rule 144A under the 1933 Act and are acquiring the Security
for our own account (and not for the account of others) or as
a fiduciary or agent for others (which others also are
"qualified institutional buyers"). We are familiar with Rule
144A under the 1933 Act and are aware that the seller of the
Security and other parties intend to rely on the statements
made herein and the exemption from the registration
requirements of the 1933 Act provided by Rule 144A.
3. We understand that the Depositor, the Trust, Greenwich
Capital Markets, Inc. ("Greenwich") and others will rely upon the truth
and accuracy of the foregoing acknowledgments, representations and
agreements, and we agree that if any of the acknowledgments,
representations and warranties deemed to have been made by us by our
purchase of the Securities, for our own account or for one or more
accounts as to each of which we exercise sole investment discretion,
are no longer accurate, we shall promptly notify the Depositor and
Greenwich.
4. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
---------------------------------------
(Name of Purchaser)
By: ____________________________________
Date: ___________________________________
D-2
<PAGE>
EXECUTION COPY
This ADMINISTRATION AGREEMENT dated as of December 1, 1995,
among NAL AUTO TRUST 1995-1, a Delaware business trust (the "Issuer"),
NAL ACCEPTANCE CORPORATION, a Delaware corporation, as administrator
(the "Administrator"), and BANKERS TRUST COMPANY, a New York banking
corporation, not in its individual capacity but solely as Indenture
Trustee (the "Indenture Trustee"),
W I T N E S S E T H :
WHEREAS, the Issuer is issuing the Class A-1 6.65% Asset Backed Notes
and the Class A-2 7.70% Asset Backed Notes (collectively, the "Notes") pursuant
to the Indenture dated as of December 1, 1995 (as amended and supplemented from
time to time, the "Indenture"), between the Issuer and the Indenture Trustee
(capitalized terms used and not otherwise defined herein shall have the meanings
assigned to such terms in the Indenture);
WHEREAS, the Issuer has entered into certain agreements in connection
with the issuance of the Notes and of certain beneficial ownership interests in
the Issuer, including (i) a Sale and Servicing Agreement dated as of December 1,
1995 (as amended and supplemented from time to time, the "Sale and Servicing
Agreement"), among the Issuer, NAL Acceptance Corporation, as servicer, Bankers
Trust Company, as back-up servicer, and Autorics II, Inc., as depositor (the
"Depositor"), and (ii) the Indenture (the Sale and Servicing Agreement and the
Indenture being referred to hereinafter collectively as the "Related
Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer and the Owner
Trustee are required to perform certain duties in connection with (a) the Notes
and the collateral therefor pledged pursuant to the Indenture (the "Collateral")
and (b) the beneficial ownership interests in the Issuer (the registered holders
of such interests being referred to herein as the "Owners");
WHEREAS, the Issuer and the Owner Trustee desire to have the
Administrator perform certain of the duties of the Issuer and the Owner Trustee
referred to in the preceding clause and to provide such additional services
consistent with the terms of this Agreement and the Related Agreements as the
Issuer and the Owner Trustee may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
1. Duties of the Administrator. (a) Duties with Respect to the
Indenture. (i) The Administrator agrees to perform all its duties as
Administrator . In addition, the Administrator shall consult with the Owner
Trustee regarding the duties of the Issuer or the Owner Trustee under the
Indenture. The Administrator shall monitor the performance of the Issuer and
shall advise the Owner Trustee when action is necessary to comply with the
Issuer's or the Owner Trustee's duties under the Indenture. The Administrator
shall prepare for execution by the Issuer, or shall cause the preparation by
other appropriate persons of, all such documents, reports, filings, instruments,
certificates and opinions that it shall be the duty of the Issuer or the Owner
Trustee to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Administrator shall take all appropriate action that is the
duty of the Issuer or the Owner Trustee to take pursuant to the Indenture
including, without limitation, such of the foregoing as are required with
respect to the following matters under the Indenture (references are to sections
of the Indenture):
(A) the duty to cause the Note Register to be kept and to give the
Indenture Trustee notice of any appointment of a new Note Registrar and the
location, or change in location, of the Note Register (Section 2.05);
(B) the notification of Noteholders of the final principal payment on
their Notes (Section 2.08(b));
(C) the fixing or causing to be fixed of any specified record date and
the notification of the Noteholders with respect to special payment dates, if
any (Section 2.08(c));
(D) the preparation of or obtaining of the documents and instruments
required for authentication of the Notes and delivery of the same to the
Indenture Trustee (Section 2.02);
(E) the maintenance of an office in the Borough of Manhattan, City of
New York, for registration of transfer or exchange of Notes (Section 3.02);
(F) the duty to cause newly appointed Paying Agents, if any, to deliver
to the Indenture Trustee the instrument specified in the Indenture regarding
funds held in trust (Section 3.03);
(G) the direction to the Indenture Trustee to deposit moneys with
Paying Agents, if any, other than the Indenture Trustee (Section 3.03);
(H) the obtaining and preservation of the Issuer's qualification to do
business in each jurisdiction in which such
2
<PAGE>
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the Collateral and each other
instrument and agreement included in the Trust Estate (Section 3.04);
(I) the preparation of all supplements and amendments to the Indenture
and all financing statements, continuation statements, instruments of further
assurance and other instruments and the taking of such other action as is
necessary or advisable to protect the Trust Estate (Section 3.05);
(J) the delivery of the Opinion of Counsel on the Closing Date and the
annual delivery of Opinions of Counsel as to the Trust Estate, and the annual
delivery of the Officer's Certificate and certain other statements as to
compliance with the Indenture (Sections 3.06 and 3.09);
(K) the identification to the Indenture Trustee in an Officer's
Certificate of a Person with whom the Issuer has contracted to perform its
duties under the Indenture (Section 3.07(b));
(L) the notification of the Indenture Trustee and the Rating Agencies
of a Servicer Default under the Sale and Servicing Agreement and, if such
Servicer Default arises from the failure of the Servicer to perform any of its
duties under the Sale and Servicing Agreement with respect to the Receivables,
the taking of all reasonable steps available to remedy such failure (Section
3.07(d));
(M) the duty to cause the Servicer to comply with Sections 4.09, 4.10,
4.11 and Article IX of the Sale and Servicing Agreement (Section 3.14);
(N) the preparation and obtaining of documents and instruments required
for the release of the Issuer from its obligations under the Indenture (Section
3.11(b));
(O) the delivery of written notice to the Indenture Trustee and the
Rating Agencies of each Event of Default under the Indenture and each default by
the Servicer or the Depositor under the Sale and Servicing Agreement (Section
3.19);
(P) the monitoring of the Issuer's obligations as to the satisfaction
and discharge of the Indenture and the preparation of an Officer's Certificate
and the obtaining of the Opinion of Counsel and the Independent Certificate
relating thereto (Section 4.01);
(Q) the compliance with any written directive of the Indenture Trustee
with respect to the sale of the Trust Estate in a commercially reasonable manner
if an Event of Default shall have occurred and be continuing (Section 5.04);
3
<PAGE>
(R) the preparation and delivery of notice to Noteholders of the
removal of the Indenture Trustee and the appointment of a successor Indenture
Trustee (Section 6.08);
(S) the preparation of any written instruments required to confirm more
fully the authority of any co-trustee or separate trustee and any written
instruments necessary in connection with the resignation or removal of any
co-trustee or separate trustee (Sections 6.08 and 6.10);
(T) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee is not the
Note Registrar (Section 7.01);
(U) the opening of one or more accounts in the Issuer's name, the
preparation and delivery of Issuer Orders, Officer's Certificates and Opinions
of Counsel and all other actions necessary with respect to investment and
reinvestment of funds in the Trust Accounts (Sections 8.02 and 8.03);
(V) the preparation of an Issuer Request and Officer's Certificate and
the obtaining of an Opinion of Counsel and Independent Certificates, if
necessary, for the release of the Trust Estate (Sections 8.04 and 8.05);
(W) the preparation of Issuer Orders and the obtaining of Opinions of
Counsel with respect to the execution of supplemental indentures and the mailing
to the Noteholders of notices with respect to such supplemental indentures
(Sections 9.01, 9.02 and 9.03);
(X) the execution and delivery of new Notes conforming to any
supplemental indenture (Section 9.05);
(Y) the duty to notify Noteholders of redemption of the Notes or to
cause the Indenture Trustee to provide such notification (Section 10.02);
(Z) the preparation and delivery of all Officer's Certificates and
Opinions of Counsel with respect to any requests by the Issuer to the Indenture
Trustee to take any action under the Indenture (Section 11.01);
(AA) the notification of the Rating Agencies, upon the failure of the
Indenture Trustee to give such notification, of the information required
pursuant to Section 11.04 of the Indenture (Section 11.04);
(BB) the preparation and delivery to Noteholders and the
Indenture Trustee of any agreements with respect to alternate
payment and notice provisions (Section 11.06);
(CC) the recording of the Indenture, if applicable
(Section 11.15); and
4
<PAGE>
(DD) the delivery to each Noteholder of such information as may be
required to enable such holder to prepare its federal and state tax returns.
(ii) The Administrator will:
(A) pay the Indenture Trustee (and any separate trustee or co-trustee
appointed pursuant to Section 6.10 of the Indenture (a "Separate Trustee")) from
time to time reasonable compensation for all services rendered by the Indenture
Trustee or Separate Trustee, as the case may be, under the Indenture (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(B) except as otherwise expressly provided in the Indenture, reimburse
the Indenture Trustee or any Separate Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Indenture Trustee or Separate Trustee, as the case may be, in accordance with
any provision of the Indenture (including the reasonable compensation, expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
(C) indemnify the Indenture Trustee and its officers, directors, agents
and employees and any Separate Trustee and their respective agents for, and hold
them harmless against, any losses, liability or expense (including attorney's
fees and expenses) incurred by it in connection with the administration of the
trust created by the Indenture and the performance of its duties under the
Indenture; provided, that, the Administrator need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith; and
(D) pay the Owner Trustee (and any Indemnified Party, as defined in
Section 8.02 of the Trust Agreement) any amounts owed to it under Section 8.01
or 8.02 of the Trust Agreement.
(b) Additional Duties. (i) In addition to the duties of the
Administrator set forth above, the Administrator shall perform such calculations
and shall prepare or shall cause the preparation by other appropriate persons
of, and shall execute on behalf of the Issuer or the Owner Trustee, all such
documents, reports, filings, instruments, certificates and opinions that it
shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver
pursuant to the Related Agreements or Section 5.05(a), (b), (c) or (d) of the
Trust Agreement, and at the request of the Owner Trustee shall take all
appropriate action that it is the duty of the Issuer or the Owner Trustee to
take pursuant to the Related Agreements. In furtherance thereof, the Owner
Trustee shall, on behalf of itself and of the Issuer, execute and deliver to the
Administrator and to each successor Administrator appointed pursuant to the
terms hereof, one or more
5
<PAGE>
powers of attorney substantially in the form of Exhibit A hereto, appointing the
Administrator the attorney-in-fact of the Owner Trustee and the Issuer for the
purpose of executing on behalf of the Owner Trustee and the Issuer all such
documents, reports, filings, instruments, certificates and opinions. Subject to
Section 5 of this Agreement, and in accordance with the directions of the Owner
Trustee, the Administrator shall administer, perform or supervise the
performance of such other activities in connection with the Collateral
(including the Related Agreements) as are not covered by any of the foregoing
provisions and as are expressly requested by the Owner Trustee and are
reasonably within the capability of the Administrator.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for promptly
notifying the Owner Trustee in the event that any withholding tax is imposed on
the Trust's payments (or allocations of income) to an Owner as contemplated in
Section 5.02(c) of the Trust Agreement. Any such notice shall specify the amount
of any withholding tax required to be withheld by the Owner Trustee pursuant to
such provision.
(iii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
performance of the duties of the Owner Trustee set forth in Section 5.05(a),
(b), (c) and (d), the penultimate sentence of Section 5.05 and Section 5.06(a)
of the Trust Agreement with respect to, among other things, accounting and
reports to Owners; provided, however, that the Owner Trustee shall retain
responsibility for the distribution of the Schedule K-1s necessary to enable
each Owner to prepare its federal and state income tax returns.
(iv) The Administrator shall satisfy its obligations with respect to
clauses (ii) and (iii) above by retaining, at the expense of the Trust payable
by the Administrator, a firm of independent public accountants (the
"Accountants") acceptable to the Owner Trustee, which shall perform the
obligations of the Administrator thereunder. In connection with paragraph (ii)
above, the Accountants will provide prior to December 31, 1995, a letter in form
and substance satisfactory to the Owner Trustee as to whether any tax
withholding is then required and, if required, the procedures to be followed
with respect thereto to comply with the requirements of the Code. The
Accountants shall be required to update the letter in each instance that any
additional tax withholding is subsequently required or any previously required
tax withholding shall no longer be required.
(v) The Administrator shall perform the duties of the Administrator
specified in Section 10.02 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee, and any other
duties expressly required to be performed by the Administrator under the Trust
Agreement.
6
<PAGE>
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into transactions
or otherwise deal with any of its affiliates; provided, however, that the terms
of any such transactions or dealings shall be in accordance with any directions
received from the Issuer and shall be, in the Administrator's opinion, no less
favorable to the Issuer than would be available from unaffiliated parties.
(c) Non-Ministerial Matters. (i) With respect to matters that in the
reasonable judgment of the Administrator are non-ministerial, the Administrator
shall not take any action unless within a reasonable time before the taking of
such action, the Administrator shall have notified the Owner Trustee of the
proposed action and the Owner Trustee shall not have withheld consent or
provided an alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include, without limitation:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Receivables);
(C) the amendment, change or modification of the Related Agreements;
(D) the appointment of successor Note Registrars, successor Paying
Agents and successor Indenture Trustees pursuant to the Indenture or the
appointment of successor Administrators or Successor Servicers, or the consent
to the assignment by the Note Registrar, Paying Agent or Indenture Trustee of
its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(ii) Notwithstanding anything to the contrary in this Agreement, the
Administrator shall not be obligated to, and shall not, (x) make any payments to
the Noteholders under the Related Agreements, (y) sell the Trust Estate pursuant
to Section 5.04 of the Indenture or (z) take any other action that the Issuer
directs the Administrator not to take on its behalf.
2. Records. The Administrator shall maintain appropriate books of
account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Issuer at any time
during normal business hours.
3. Compensation. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator
7
<PAGE>
shall be entitled to $1,000 per annum which shall be solely an obligation of the
Servicer.
4. Additional Information To Be Furnished to the Issuer. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
5. Independence of the Administrator. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer, the Administrator shall
have no authority to act for or represent the Issuer or the Owner Trustee in any
way and shall not otherwise be deemed an agent of the Issuer or the Owner
Trustee.
6. No Joint Venture. Nothing contained in this Agreement (i) shall
constitute the Administrator and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
7. Other Activities of Administrator. Nothing herein shall prevent the
Administrator or its Affiliates from engaging in other businesses or, in its
sole discretion, from acting in a similar capacity as an administrator for any
other person or entity even though such person or entity may engage in business
activities similar to those of the Issuer, the Owner Trustee or the Indenture
Trustee.
8. Term of Agreement; Resignation and Removal of Administrator. (a)
This Agreement shall continue in force until the dissolution of the Issuer, upon
which event this Agreement shall automatically terminate.
(b) Subject to Section 8(e), the Administrator may resign its duties
hereunder by providing the Issuer with at least 60 days' prior written notice.
(c) Subject to Section 8(e), the Issuer may remove the Administrator
without cause by providing the Administrator with at least 60 days' prior
written notice.
(d) Subject to Section 8(e), at the sole option of the Issuer, the
Administrator may be removed immediately upon written notice of termination from
the Issuer to the Administrator if any of the following events shall occur:
(i) the Administrator shall default in the performance of any of its
duties under this Agreement and, after notice of such
8
<PAGE>
default, shall not cure such default within ten days (or, if such default cannot
be cured in such time, shall not give within ten days such assurance of cure as
shall be reasonably satisfactory to the Issuer);
(ii) a court having jurisdiction in the premises shall enter a decree
or order for relief, and such decree or order shall not have been vacated within
60 days, in respect of the Administrator in any involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect or appoint a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for the Administrator or any substantial part
of its property or order the winding-up or liquidation of its affairs; or
(iii) the Administrator shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, shall consent to the appointment of a receiver, liquidator,
assignee, trustee, custodian, sequestrator or similar official for the
Administrator or any substantial part of its property, shall consent to the
taking of possession by any such official of any substantial part of its
property, shall make any general assignment for the benefit of creditors or
shall fail generally to pay its debts as they become due.
The Administrator agrees that if any of the events specified in clauses
(ii) or (iii) of this Section shall occur, it shall give written notice thereof
to the Issuer and the Indenture Trustee within seven days after the happening of
such event.
(e) No resignation or removal of the Administrator pursuant to this
Section shall be effective until (i) a successor Administrator shall have been
appointed by the Issuer and (ii) such successor Administrator shall have agreed
in writing to be bound by the terms of this Agreement in the same manner as the
Administrator is bound hereunder.
(f) The appointment of any successor Administrator shall be effective
only after satisfaction of the Rating Agency Condition with respect to the
proposed appointment.
(g) Subject to Section 8(e) and 8(f), the Administrator acknowledges
that upon the appointment of a Successor Servicer pursuant to the Sale and
Servicing Agreement, the Administrator shall immediately resign and such
Successor Servicer shall automatically become the Administrator under this
Agreement.
9. Action upon Termination, Resignation or Removal. Promptly upon the
effective date of termination of this Agreement pursuant to Section 8(a) or the
resignation or removal of the Administrator pursuant to Section 8(b) or (c),
respectively, the Administrator shall be entitled to be paid all fees and
reimbursable expenses accruing to it to the date of such
9
<PAGE>
termination, resignation or removal. The Administrator shall forthwith upon such
termination pursuant to Section 8(a) deliver to the Issuer all property and
documents of or relating to the Collateral then in the custody of the
Administrator. In the event of the resignation or removal of the Administrator
pursuant to Section 8(b) or (c), respectively, the Administrator shall cooperate
with the Issuer and take all reasonable steps requested to assist the Issuer in
making an orderly transfer of the duties of the Administrator.
10. Notices. Any notice, report or other communication
given hereunder shall be in writing and addressed as follows:
(a) if to the Issuer or the Owner Trustee, to:
NAL Auto Trust 1995-1
In care of Wilmington Trust Company
Rodney Square North
1100 Market Street
Wilmington, Delaware 19890
Attention: Corporate Trustee Department
(b) if to the Administrator, to:
NAL Acceptance Corporation
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Attention: Dennis LaVigne
(c) if to the Indenture Trustee, to:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust Administration -- Structured
Finance
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand-delivered
to the address of such party as provided above.
11. Amendments. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Issuer, the Administrator
and the Indenture Trustee, with the written consent of the Owner Trustee,
without the consent of the Noteholders and the Certificateholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Noteholders or Certificateholders; provided that such amendment will not, in
the Opinion of Counsel satisfactory to the Indenture Trustee and each Rating
Agency,
10
<PAGE>
materially and adversely affect the interest of any Noteholder or
Certificateholder. This Agreement may also be amended by the Issuer, the
Administrator and the Indenture Trustee with the written consent of the Owner
Trustee and the holders of Notes evidencing at least a majority of the
Outstanding Amount of the Notes and the holders of Certificates evidencing at
least a majority of the Certificate Balance for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of Noteholders or the
Certificateholders; provided, however, that no such amendment may (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that are required to be
made for the benefit of the Noteholders or Certificateholders or (ii) reduce the
aforesaid percentage of the holders of Notes and Certificates which are required
to consent to any such amendment, without the consent of the holders of all the
outstanding Notes and Certificates. Notwithstanding the foregoing, the
Administrator may not amend this Agreement without the permission of the
Depositor, which permission shall not be unreasonably withheld.
12. Successors and Assigns. This Agreement may not be assigned by the
Administrator unless such assignment is previously consented to in writing by
the Issuer and the Owner Trustee and subject to the satisfaction of the Rating
Agency Condition in respect thereof. An assignment with such consent and
satisfaction, if accepted by the assignee, shall bind the assignee hereunder in
the same manner as the Administrator is bound hereunder. Notwithstanding the
foregoing, this Agreement may be assigned by the Administrator without the
consent of the Issuer or the Owner Trustee to a corporation or other
organization that is a successor (by merger, consolidation or purchase of
assets) to the Administrator; provided that such successor organization executes
and delivers to the Issuer, the Owner Trustee and the Indenture Trustee an
agreement in which such corporation or other organization agrees to be bound
hereunder by the terms of said assignment in the same manner as the
Administrator is bound hereunder. Subject to the foregoing, this Agreement shall
bind any successors or assigns of the parties hereto.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
14. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
15. Counterparts. This Agreement may be executed in counterparts, each
of which when so executed shall be an
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<PAGE>
original, but all of which together shall constitute but one and the same
agreement.
16. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall 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.
17. Not Applicable to NAL Acceptance Corporation in Other Capacities.
Nothing in this Agreement shall affect any obligation NAL Acceptance Corporation
may have in any other capacity.
18. Limitation of Liability of Owner Trustee and Indenture Trustee. (a)
Notwithstanding anything contained herein to the contrary, this instrument has
been countersigned by Wilmington Trust Company in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall
Wilmington Trust Company in its individual capacity or any beneficial owner of
the Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder, as to all of which
recourse shall be had solely to the assets of the Issuer. For all purposes of
this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Bankers Trust Company not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
19. Third-Party Beneficiary. The Owner Trustee is a third-party
beneficiary to this Agreement and is entitled to the rights and benefits
hereunder and may enforce the provisions hereof as if it were a party hereto.
* * * * * * * * * * * * * * * * * * * * * *
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
NAL AUTO TRUST 1995-1
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Owner Trustee
By:
---------------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
By:
---------------------------------------------
Name:
Title:
NAL ACCEPTANCE CORPORATION,
as Administrator
By:
---------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
POWER OF ATTORNEY
STATE OF NEW YORK }
}
COUNTY OF NEW YORK }
KNOW ALL MEN BY THESE PRESENTS, that Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as owner
trustee (the "Owner Trustee") for NAL Auto Trust 1995-1 (the "Trust"), does
hereby make, constitute and appoint NAL Corporation, as administrator under the
Administration Agreement dated as of December 1, 1995 (the "Administration
Agreement"), among the Trust, NAL Acceptance Corporation and Bankers Trust
Company, as Indenture Trustee, as the same may be amended from time to time, and
its agents and attorneys, as Attorneys-in-Fact to execute on behalf of the Owner
Trustee or the Trust all such documents, reports, filings, instruments,
certificates and opinions as it should be the duty of the Owner Trustee or the
Trust to prepare, file or deliver pursuant to the Related Agreements, or
pursuant to Section 5.05(a), (b), (c) or (d) of the Trust Agreement, including,
without limitation, to appear for and represent the Owner Trustee and the Trust
in connection with the preparation, filing and audit of federal, state and local
tax returns pertaining to the Trust, and with full power to perform any and all
acts associated with such returns and audits that the Owner Trustee could
perform, including without limitation, the right to distribute and receive
confidential information, defend and assert positions in response to audits,
initiate and defend litigation, and to execute waivers of restrictions on
assessments of deficiencies, consents to the extension of any statutory or
regulatory time limit, and settlements.
All powers of attorney for this purpose heretofore filed or executed by
the Owner Trustee are hereby revoked.
Capitalized terms that are used and not otherwise defined herein shall
have the meanings ascribed thereto in the Administration Agreement.
EXECUTED this ___ of December, 1995.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
--------------------------------
Name:
Title:
A-1
<PAGE>
STATE OF ___________ }
}
COUNTY OF _________ }
Before me, the undersigned authority, on this day personally appeared
_______________________, known to me to be the person whose name is subscribed
to the foregoing instrument, and acknowledged to me that he/she signed the same
for the purposes and considerations therein expressed.
Sworn to before me this ___ day of _______, 199_.
- --------------------------------------------------------------------------------
Notary Public - State of ____________
A-2
<PAGE>
EXECUTION COPY
================================================================================
TRUST AGREEMENT
between
AUTORICS II, INC.,
as Depositor,
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
Dated as of December 1, 1995
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms.................................... 1
SECTION 1.02. Other Definitional Provisions........................ 3
ARTICLE II
Organization
SECTION 2.01. Name................................................. 4
SECTION 2.02. Office............................................... 4
SECTION 2.03. Purposes and Powers.................................. 4
SECTION 2.04. Appointment of Owner Trustee......................... 5
SECTION 2.05. Initial Capital Contribution of Owner Trust
Estate............................................ 5
SECTION 2.06. Declaration of Trust................................. 5
SECTION 2.07. Liability of the Owners.............................. 6
SECTION 2.08. Title to Trust Property.............................. 6
SECTION 2.09. Situs of Trust....................................... 6
SECTION 2.10. Representations and Warranties of the
Depositor......................................... 7
SECTION 2.11. Maintenance of the Demand Note....................... 8
SECTION 2.12. Federal Income Tax Allocations....................... 8
ARTICLE III
Trust Certificates and Transfer of Interes
SECTION 3.01. Initial Ownership..................................... 9
SECTION 3.02. The Trust Certificates................................ 9
SECTION 3.03. Authentication of Trust Certificates.................. 9
SECTION 3.04. Registration of Transfer and Exchange of
Trust Certificates................................ 10
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust
Certificates...................................... 12
SECTION 3.06. Persons Deemed Owners................................. 12
SECTION 3.07. Access to List of Certificateholders' Names
and Addresses..................................... 12
SECTION 3.08. Maintenance of Office or Agency....................... 13
SECTION 3.09. Appointment of Paying Agent........................... 13
SECTION 3.10. Ownership by Depositor of Trust
Certificates...................................... 14
i
<PAGE>
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to Owners with Respect to
Certain Matters.................................... 14
SECTION 4.02. Action by Owners with Respect to Certain
Matters............................................... 15
SECTION 4.03. Action by Owners with Respect to Bankruptcy........... 15
SECTION 4.04. Restrictions on Owners' Power......................... 15
SECTION 4.05. Majority Control...................................... 15
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account........................ 16
SECTION 5.02. Application of Trust Funds............................ 16
SECTION 5.03. Method of Payment..................................... 17
SECTION 5.04. No Segregation of Moneys; No Interest................. 17
SECTION 5.05. Accounting and Reports to the Noteholders,
Owners, the Internal Revenue Service and
Others............................................. 17
SECTION 5.06. Signature on Returns; Tax Matters Partner............. 18
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority..................................... 18
SECTION 6.02. General Duties........................................ 18
SECTION 6.03. Action upon Instruction............................... 18
SECTION 6.04. No Duties Except as Specified in this
Agreement or in Instructions....................... 19
SECTION 6.05. No Action Except Under Specified Documents
or Instructions.................................... 20
SECTION 6.06. Restrictions.......................................... 20
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties....................... 20
SECTION 7.02. Furnishing of Documents............................... 22
SECTION 7.03. Representations and Warranties........................ 22
SECTION 7.04. Reliance; Advice of Counsel........................... 22
SECTION 7.05. Not Acting in Individual Capacity..................... 23
SECTION 7.06. Owner Trustee Not Liable for Trust
Certificates or Receivables........................ 23
SECTION 7.07. Owner Trustee May Own Trust Certificates and
Notes.............................................. 23
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<PAGE>
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses..................... 24
SECTION 8.02. Indemnification....................................... 24
SECTION 8.03. Payments to the Owner Trustee......................... 24
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement........................ 25
SECTION 9.02. Dissolution upon Bankruptcy of the
Depositor.......................................... 26
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trust.............. 27
SECTION 10.02. Resignation or Removal of Owner Trustee............... 27
SECTION 10.03. Successor Owner Trustee............................... 28
SECTION 10.04. Merger or Consolidation of Owner Trustee.............. 28
SECTION 10.05. Appointment of Co-Trustee or Separate
Trustee............................................ 29
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments............................ 30
SECTION 11.02. No Legal Title to Owner Trust Estate in
Owners............................................. 31
SECTION 11.03. Limitations on Rights of Others....................... 32
SECTION 11.04. Notices............................................... 32
SECTION 11.05. Severability.......................................... 32
SECTION 11.06. Separate Counterparts................................. 32
SECTION 11.07. Successors and Assigns................................ 32
SECTION 11.08. Covenants of the Depositor............................ 33
SECTION 11.09. No Petition........................................... 33
SECTION 11.10. No Recourse........................................... 33
SECTION 11.11. Headings.............................................. 34
SECTION 11.12. GOVERNING LAW......................................... 34
SECTION 11.13. [Reserved]............................................ 34
SECTION 11.14. Depositor Payment Obligation.......................... 34
EXHIBIT A Form of Trust Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Certificate Depository Agreement
iii
<PAGE>
TRUST AGREEMENT dated as of December 1, 1995, between AUTORICS II,
INC., a Delaware corporation, as depositor (the "Depositor") and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as owner
trustee (the "Owner Trustee").
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms. For all purposes of this
Agreement, the following terms shall have the meanings set forth
below:
"Administration Agreement" shall mean the Administration Agreement
dated as of December 1, 1995, among the Trust, the Indenture Trustee and NAL
Acceptance Corporation, as Administrator.
"Agreement" shall mean this Trust Agreement, as the same may be amended
and supplemented from time to time.
"Basic Documents" shall mean the Sale and Servicing Agreement, the
Indenture, the Administration Agreement, the Custodial Agreement and the other
documents, instruments and certificates
delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in
Section 3.04.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from
time to time.
"Certificate Distribution Account" shall have the meaning assigned to
such term in Section 5.01.
"Certificate of Trust" shall mean the Certificate of Trust in the form
of Exhibit B filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the
register mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" or "Holder" shall mean a Person in whose name a
Trust Certificate is registered.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee
located at 1100 N. Market Street, Rodney Square North, Wilmington,
DE 19890, Attn: Corporate Trust Administration, or at such other
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<PAGE>
address as the Owner Trustee may designate by notice to the Owners and the
Depositor, or the principal corporate trust office of any successor Owner
Trustee at the address designated by such successor Owner Trustee by notice to
the Owners and the Depositor.
"Custodial Agreement" shall mean the Custodial Agreement dated as of
December 21, 1995, between the Trust and Bankers Trust Company, as Custodian.
"Demand Note" shall mean, in the case of the Depositor, the Demand Note
dated December 20, 1995, from NAL to the Depositor.
"Depositor" shall mean AUTORICS II, Inc. in its capacity as
depositor hereunder.
"ERISA" shall have the meaning assigned thereto in
Section 3.04.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Expenses" shall have the meaning assigned to such term in
Section 8.02.
"Indemnified Parties" shall have the meaning assigned to such term in
Section 8.02.
"Indenture" shall mean the Indenture dated as of December 1, 1995
between the Trust and Bankers Trust Company, as Indenture Trustee.
"Initial Certificate Balance" shall mean $2,006,897.86.
"NAL" shall mean NAL Acceptance Corporation, a Florida Corporation, and
any successor in interest.
"Owner" shall mean each Holder of a Trust Certificate.
"Owner Trust Estate" shall mean all right, title and interest of the
Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from time
to time in the Trust Accounts and the Certificate Distribution Account and all
other property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust pursuant to the Sale and Servicing Agreement and the
Administration Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
2
<PAGE>
"Paying Agent" shall mean any paying agent or co-paying agent appointed
pursuant to Section 3.09 and shall initially be Wilmington Trust Company.
"Record Date" shall mean, with respect to any Distribution Date, the
close of business on the last day of the month immediately preceding such
Distribution Date.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
Agreement dated as of December 1, 1995, among the Trust, as issuer, the
Depositor, as seller, NAL Acceptance Corporation, as servicer and Bankers Trust
Company, as Backup Servicer as the same may be amended or supplemented from time
to time.
"Secretary of State" shall mean the Secretary of State of the
State of Delaware.
"Treasury Regulations" shall mean regulations, including proposed or
temporary Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Certificate" shall mean a certificate evidencing the beneficial
interest of an Owner in the Trust, substantially in the form attached hereto as
Exhibit A.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms
used and not otherwise defined herein have the meanings assigned to them in the
Sale and Servicing Agreement or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this
3
<PAGE>
Agreement as a whole and not to any particular provision of this Agreement;
Section and Exhibit references contained in this Agreement are references to
Sections and Exhibits in or to this Agreement unless otherwise specified; and
the term "including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
Organization
SECTION 2.01. Name. The Trust created hereby shall be known as "NAL
Auto Trust 1995-1," in which name the Owner Trustee may conduct the business of
the Trust, make and execute contracts and other instruments on behalf of the
Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in Delaware
as the Owner Trustee may designate by written notice to the Owners and the
Depositor.
SECTION 2.03. Purposes and Powers. (a) The purpose of the Trust is to
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and
the Trust Certificates pursuant to this Agreement and to sell the Notes
and the Trust Certificates;
(ii) with the proceeds of the sale of the Notes and the
Trust Certificates, to purchase the Receivables, to fund the Reserve
Account and to pay the organizational, start-up and transactional
expenses of the Trust;
(iii) to assign, grant, transfer, pledge, mortgage and
convey the Trust Estate pursuant to the Indenture and to hold, manage
and distribute to the Owners pursuant to the terms of the Sale and
Servicing Agreement any portion of the Trust Estate released from the
Lien of, and remitted to the Trust pursuant to, the Indenture;
4
<PAGE>
(iv) to enter into and perform its obligations under
the Basic Documents to which it is to be a party;
(v) to engage in those activities, including entering
into agreements, that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected
therewith; and
(vi) subject to compliance with the Basic Documents, to
engage in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
to the Owners and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.04. Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Depositor
shall pay organizational expenses of the Trust as they may arise or shall, upon
the request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject to
the obligations of the Trust under the Basic Documents. It is the intention of
the parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall be treated as a partnership,
with the assets of the partnership being the Receivables and other assets held
by the Trust, the partners of the partnership being the Certificateholders
(including the Depositor, in its capacity as recipient of distributions from the
Reserve Account), and the Notes being debt of the partnership. The parties agree
that, unless otherwise required by appropriate tax authorities, the Trust will
file or cause to be filed annual or other necessary returns, reports and other
forms consistent with the characterization of the Trust as a partnership for
such tax
5
<PAGE>
purposes. Effective as of the date hereof, the Owner Trustee shall have all
rights, powers and duties set forth herein and in the Business Trust Statute
with respect to accomplishing the purposes of the Trust.
The Responsible Officers of the Owner Trustee shall constitute a board
of trustees of the Trust to the extent any applicable jurisdiction may require
the establishment of such a board. The Division Vice President of the Corporate
Trust Administration Department shall hold the title and position of Chairman of
the Board of Trustees for all such purposes and shall be vested with the power
and authority to execute as Chairman of the Board of Trustees such instruments,
certificates, agreements and other writings as shall be deemed necessary or
beneficial by the Trustee.
SECTION 2.07. Liability of the Owners. (a) The Depositor shall be
liable directly to and will indemnify any injured party for all losses, claims,
damages, liabilities and expenses of the Trust (including Expenses, to the
extent not paid out of the Owner Trust Estate) to the extent that the Depositor
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Depositor were a general partner;
provided, however, that the Depositor shall not be liable for any losses
incurred by a Certificateholder in the capacity of an investor in the Trust
Certificates, or by a Noteholder in the capacity of an investor in the Notes. In
addition, any third party creditors of the Trust (other than in connection with
the obligations described in the preceding sentence for which the Depositor
shall not be liable) shall be deemed third party beneficiaries of this paragraph
and paragraph (c) below. The obligations of the Depositor under this paragraph
and paragraph (c) below shall be evidenced by the Trust Certificates described
in Section 3.10, which for purposes of the Business Trust Statute shall be
deemed to be a separate class of Trust Certificates from all other Trust
Certificates issued by the Trust; provided that the rights and obligations
evidenced by all Trust Certificates, regardless of class, shall, except as
provided in this Section, be identical.
(b) No Owner, other than to the extent set forth in paragraphs (a) and
(c), shall have any personal liability for any liability or obligation of the
Trust.
(c) The Depositor agrees to be liable directly to and will indemnify
any injured party for all losses, claims, damages, liabilities and expenses
(other than those incurred by a Certificateholder in the capacity of an investor
in the Trust Certificates and a Noteholder in the capacity of an investor in the
Notes) as though such arrangements were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Depositor were a general partner.
6
<PAGE>
SECTION 2.08. Title to Trust Property. Legal title to all the Owner
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in which
case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
SECTION 2.09. Situs of Trust. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York. The Trust shall not have any employees in any state other
than Delaware; provided, however, that nothing herein shall restrict or prohibit
the Owner Trustee from having employees within or without the State of Delaware.
Payments will be received by the Trust only in Delaware or New York, and
payments will be made by the Trust only from Delaware or New York. The only
office of the Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee that:
(a) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware,
with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
(b) The Depositor is duly qualified to do business as a
foreign corporation in good standing and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of its property or the conduct of its business shall require such
qualifications.
(c) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Depositor has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trust and the Depositor has duly
authorized such sale and assignment and deposit to the Trust by all
necessary corporate action; and the execution, delivery and performance
of this Agreement have been duly authorized by the Depositor by all
necessary corporate action.
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a
party or by which it is
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bound; nor result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement
or other instrument (other than pursuant to the Basic Documents); nor
violate any law or, to the best of the Depositor's knowledge, any
order, rule or regulation applicable to the Depositor of any court or
of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Depositor or
its properties.
(e) There are no proceedings or investigations pending or, to
the Depositor's best knowledge, threatened before any court, regulatory
body, administrative agency or other governmental instrumentality
having jurisdiction over the Depositor or its properties: (A) asserting
the invalidity of this Agreement, (B) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement
or (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Depositor of its obligations
under, or the validity or enforceability of, this Agreement.
SECTION 2.11. Maintenance of the Demand Note. To the fullest extent
permitted by applicable law, the Depositor agrees that it shall not sell,
convey, pledge, transfer or otherwise dispose of the Demand Note.
SECTION 2.12. Federal Income Tax Allocations. Net income of the Trust
for any quarter as determined for federal income tax purposes (and each item of
income, gain, loss and deduction entering into the computation thereof) shall be
allocated:
(a) among the Certificateholders as of the first day following the end
of such month, in proportion to their ownership of principal amount of Trust
Certificates on such date, net income in an amount up to the sum of (i) the
Certificateholders' Quarterly Interest Distributable Amount for such quarter,
(ii) interest on the excess, if any, of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date over the amount in
respect of interest that is actually deposited in the Certificate Distribution
Account on such preceding Distribution Date, to the extent permitted by law, at
the Pass-Through Rate from such preceding Distribution Date through the current
Distribution Date, (iii) the portion of the market discount on the Receivables
accrued during such quarter that is allocable to the excess, if any, of the
initial aggregate principal amount of the Trust Certificates over their initial
aggregate issue price and (iv) any other amounts of income payable to the
Certificateholders for such quarter; such sum to be reduced by any amortization
by the Trust of premium on Receivables that corresponds to any excess of the
issue price of Certificates over their principal amount; and
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(b) to the Depositor, to the extent of any remaining net income.
If the net income of the Trust for any quarter is insufficient for the
allocations described in clause (a) above, subsequent net income shall first be
allocated to make up such shortfall before being allocated as provided in the
preceding sentence. Net losses of the Trust, if any, for any quarter as
determined for federal income tax purposes (and each item of income, gain, loss
and deduction entering into the computation thereof) shall be allocated to the
Depositor to the extent the Depositor is reasonably expected to bear the
economic burden of such net losses, and any remaining net losses shall be
allocated among the Certificateholders as of the first Record Date following the
end of such quarter in proportion to their ownership of principal amount of
Trust Certificates on such Record Date. The Depositor is authorized to modify
the allocations in this paragraph if necessary or appropriate, in its sole
discretion, for the allocations to fairly reflect the economic income, gain or
loss to the Depositor or to the Certificateholders, or as otherwise required by
the Code.
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by
the contribution by the Depositor pursuant to Section 2.05 and until the
issuance of the Trust Certificates, the Depositor shall be the sole beneficiary
of the Trust.
SECTION 3.02. The Trust Certificates. The Trust Certificates shall be
issued in minimum denominations of $100,000 and in integral multiples of $1,000
in excess thereof; provided, however, that the Trust Certificates issued to the
Depositor pursuant to Section 3.10 may be issued in such denomination as
required to include any residual amount. The Trust Certificates shall be
executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Trust Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the Trust,
shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Trust Certificates
or did not hold such offices at the date of authentication and delivery of such
Trust Certificates.
A transferee of a Trust Certificate shall become a Certificateholder
and shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Trust
Certificate duly registered in such transferee's name pursuant to Section 3.04.
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SECTION 3.03. Authentication of Trust Certificates. On the Closing
Date, the Owner Trustee shall cause the Trust Certificates in an aggregate
principal amount equal to the Initial Certificate Balance to be executed on
behalf of the Trust, authenticated and delivered to or upon the written order of
the Depositor, signed by its chairman of the board, its president, any vice
president, secretary or any assistant treasurer, without further corporate
action by the Depositor, in authorized denominations. No Trust Certificate
shall entitle its Holder to any benefit under this Agreement or be valid for any
purpose unless there shall appear on such Trust Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee, by manual signature; such authentication shall constitute
conclusive evidence that such Trust Certificate shall have been duly
authenticated and delivered hereunder. All Trust Certificates shall be dated
the date of their authentication.
SECTION 3.04. Registration of Transfer and Exchange of Trust
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.08, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Trust Certificates and of
transfers and exchanges of Trust Certificates as herein provided. Wilmington
Trust Company shall be the initial Certificate Registrar.
The Certificates have not been and will not be registered under the
Securities Act and will not be listed on any exchange. No transfer of a
Certificate shall be made unless such transfer is made pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws or is exempt from the registration requirements under said Act
and such state securities laws. In the event that a transfer is to be made in
reliance upon an exemption from the Securities Act and state securities laws, in
order to assure compliance with the Securities Act and such laws, the Holder
desiring to effect such transfer and such Holder's prospective transferee shall
each certify to the Owner Trustee and the Depositor in writing the facts
surrounding the transfer in substantially the forms set forth in Exhibit C (the
"Transferor Certificate") and Exhibit D (the "Investment Letter"). Except in the
case of a transfer as to which the proposed transferee has provided an
Investment Letter with respect to a Rule 144A transaction, there shall also be
delivered to the Owner Trustee an opinion of counsel that such transfer may be
made pursuant to an exemption from the Securities Act and state securities laws,
which opinion of counsel shall not be an expense of the Trust, the Owner Trustee
or the Indenture Trustee (unless it is the transferee from whom such opinion is
to be obtained) or of the Depositor or NAL; provided that such opinion of
counsel in respect of the applicable state securities laws may be a memorandum
of law rather than an opinion if such counsel is not licensed in the applicable
jurisdiction. The Depositor shall provide to any Holder of a Certificate and any
prospective transferee designated
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by any such Holder information regarding the Certificates and the Receivables
and such other information as shall be necessary to satisfy the condition to
eligibility set forth in Rule 144A(d)(4) for transfer of any such Certificate
without registration thereof under the Securities Act pursuant to the
registration exemption provided by Rule 144A. Each Holder of a Certificate
desiring to effect such a transfer shall, and does hereby agree to, indemnify
the Issuer, the Owner Trustee, the Indenture Trustee and the Depositor against
any liability that may result if the transfer is not so exempt or is not made in
accordance with federal and state securities laws.
No transfer of a Trust Certificate shall be made to any Person unless
the Owner Trustee has received (A) a certificate in the form of paragraph 3 to
the Investment Letter from such Person to the effect that such Person is not (i)
an employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that is subject to the
provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Code or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan") or (B) an
opinion of counsel satisfactory to the Owner Trustee and the Depositor to the
effect that the purchase and holding of such Trust Certificate will not
constitute or result in the assets of the Issuer being deemed to be "plan
assets" subject to the prohibited transactions provisions of ERISA or Section
4975 of the Code and will not subject the Owner Trustee, the Indenture Trustee
or the Depositor to any obligation in addition to those undertaken in the Basic
Documents; provided, however, that the Owner Trustee will not require such
certificate or opinion in the event that, as a result of a change of law or
otherwise, counsel satisfactory to the Owner Trustee has rendered an opinion to
the effect that the purchase and holding of a Trust Certificate by a Benefit
Plan or a Person that is purchasing or holding such a Trust Certificate with the
assets of a Benefit Plan will not constitute or result in a prohibited
transaction under ERISA or Section 4975 of the Code. The preparation and
delivery of the certificate and opinions referred to above shall not be an
expense of the Issuer, the Owner Trustee, the Indenture Trustee, the Servicer or
the Depositor.
The Owner Trustee shall cause each Certificate to contain a legend
stating that transfer of the Certificates is subject to certain restrictions and
referring prospective purchasers of the Certificates to the terms of this
Agreement with respect to such restrictions.
Upon surrender for registration of transfer of any Trust Certificate at
the office or agency maintained pursuant to Section 3.08, the Owner Trustee
shall execute, authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Trust Certificates in authorized
denominations of a like aggregate amount dated the date of authentication by the
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Owner Trustee or any authenticating agent. At the option of a Holder, Trust
Certificates may be exchanged for other Trust Certificates of authorized
denominations of a like aggregate amount upon surrender of the Trust
Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Trust Certificate surrendered for registration of transfer or exchange
shall be cancelled and subsequently disposed of by the Owner Trustee in
accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make, and the Certificate Registrar shall not register
transfers or exchanges of, Trust Certificates for a period of 15 days preceding
the due date for any payment with respect to the Trust Certificates.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.
If (a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Trust Certificate has been acquired by a
bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute and
the Owner Trustee shall authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Trust Certificate, a new Trust
Certificate of like tenor and denomination. In connection with the issuance of
any new Trust Certificate under this Section, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Trust Certificate issued pursuant to this Section shall constitute
conclusive evidence of ownership in the Trust, as if originally issued, whether
or not the lost, stolen or destroyed Trust Certificate shall be found at any
time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a
Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar or any Paying Agent
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may treat the Person in whose name any Trust Certificate is registered in the
Certificate Register as the owner of such Trust Certificate for the purpose of
receiving distributions pursuant to Section 5.02 and for all other purposes
whatsoever, and none of the Owner Trustee, the Certificate Registrar or any
Paying Agent shall be bound by any notice to the contrary.
SECTION 3.07. Access to List of Certificateholders' Names and
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
Servicer and the Depositor, within 15 days after receipt by the Owner Trustee of
a written request therefor from the Servicer or the Depositor, a list, in such
form as the Servicer or the Depositor may reasonably require, of the names and
addresses of the Certificateholders as of the most recent Record Date. If three
or more Certificateholders or one or more Holders of Trust Certificates
evidencing not less than 25% of the Certificate Balance apply in writing to the
Owner Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Trust Certificates and such application is
accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each Holder, by
receiving and holding a Trust Certificate, shall be deemed to have agreed not to
hold any of the Depositor, the Certificate Registrar or the Owner Trustee
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
SECTION 3.08. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic Documents
may be served. The Owner Trustee initially designates Harris Trust Company of
New York, 77 Water Street, 4th Floor, New York, New York 10005, Attention:
Wilbert Myles, as its office for such purposes. The Owner Trustee shall give
prompt written notice to the Depositor and to the Certificateholders of any
change in the location of the Certificate Register or any such office or agency.
SECTION 3.09. Appointment of Paying Agent. The Paying Agent shall make
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02 and shall report the amounts of such distributions to
the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. The Owner Trustee may revoke such power and
remove the Paying Agent if the Owner Trustee determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material
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respect. The Owner Trustee will be the initial Paying Agent. In the event that
the Owner Trustee shall no longer be the Paying Agent, the Owner Trustee shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company). The Owner Trustee shall cause such successor Paying Agent or any
additional Paying Agent appointed by the Owner Trustee to execute and deliver to
the Owner Trustee an instrument in which such successor Paying Agent or
additional Paying Agent shall agree with the Owner Trustee that, as Paying
Agent, such successor Paying Agent or additional Paying Agent will hold all
sums, if any, held by it for payment to the Certificateholders in trust for the
benefit of the Certificateholders entitled thereto until such sums shall be paid
to such Certificateholders. The Paying Agent shall return all unclaimed funds to
the Owner Trustee and upon removal of a Paying Agent such Paying Agent shall
also return all funds in its possession to the Owner Trustee. The provisions of
Sections 7.01, 7.03, 7.04 and 8.01 shall apply to the Owner Trustee also in its
role as Paying Agent, for so long as the Owner Trustee shall act as Paying Agent
and, to the extent applicable, to any other paying agent appointed hereunder.
Any reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
SECTION 3.10. Ownership by Depositor of Trust Certificates. The
Depositor shall on the Closing Date retain Trust Certificates representing at
least 1% of the Initial Certificate Balance and shall thereafter retain
beneficial and record ownership of Trust Certificates representing at least 1%
of the Certificate Balance. Any attempted transfer of any Trust Certificate that
would reduce such interest of the Depositor below 1% of the Certificate Balance
shall be void. The Owner Trustee shall cause any Trust Certificate issued to the
Depositor to contain a legend stating "THIS CERTIFICATE IS NON-TRANSFERABLE".
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take action
unless at least 30 days before the taking of such action, the Owner Trustee
shall have notified the Certificateholders in writing of the proposed action and
the Owners shall not have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Owners have withheld consent or
provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims
or lawsuits brought in connection with the collection of the Receivables) and
the compromise of any action, claim or lawsuit brought by or against the Trust
(except with
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respect to the aforementioned claims or lawsuits for collection of
the Receivables);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed
under the Business Trust Statute);
(c) the amendment of the Indenture by a supplemental
indenture in circumstances where the consent of any Noteholder is
required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment would materially adversely affect the interests of the Owners;
(e) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or to amend or supplement any provision
in a manner or add any provision that would not materially adversely affect the
interests of the Owners; or
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar, or the consent to the assignment by the Note
Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Owners with Respect to Certain Matters. The
Owner Trustee shall not have the power, except upon the written direction of the
Owners, to (a) remove the Administrator under the Administration Agreement
pursuant to Section 8 thereof, (b) appoint a successor Administrator under the
Administration Agreement pursuant to Section 8 thereof, (c) remove the Servicer
under the Sale and Servicing Agreement pursuant to Section 8.01 thereof or (d)
except as expressly provided in the Basic Documents, sell the Receivables after
the termination of the Indenture. The Owner Trustee shall take the actions
referred to in the preceding sentence only upon written instructions signed by
the Owners.
SECTION 4.03. Action by Owners with Respect to Bankruptcy. The Owner
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the delivery to the Owner Trustee by each such Owner of a certificate
certifying that such Owner reasonably believes that the Trust is insolvent.
SECTION 4.04. Restrictions on Owners' Power. The Owners shall not
direct the Owner Trustee to take or to refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the Owner
Trustee under this
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Agreement or any of the Basic Documents or would be contrary to Section 2.03 or
contrary to applicable law, nor shall the Owner Trustee be obligated to follow
any such direction, if given.
SECTION 4.05. Majority Control. Except as expressly provided herein,
any action that may be taken by the Owners under this Agreement may be taken by
the Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance. Except as expressly provided herein, any written notice of
the Owners delivered pursuant to this Agreement shall be effective if signed by
Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance at the time of the delivery of such notice.
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for
the benefit of the Certificateholders, shall establish and maintain in the name
of the Trust an Eligible Deposit Account (the "Certificate Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Certificate Distribution Account and
in all proceeds thereof. Except as otherwise expressly provided herein, the
Certificate Distribution Account shall be under the sole dominion and control of
the Owner Trustee for the benefit of the Certificateholders. If, at any time,
the Certificate Distribution Account ceases to be an Eligible Deposit Account,
the Owner Trustee (or the Depositor on behalf of the Owner Trustee, if the
Certificate Distribution Account is not then held by the Owner Trustee or an
affiliate thereof) shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent) establish a
new Certificate Distribution Account as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Certificate Distribution
Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution
Date, the Owner Trustee will distribute to Certificateholders, on a pro rata
basis, amounts deposited in the Certificate Distribution Account pursuant to
Sections 5.05 and 5.06 of the Sale and Servicing Agreement with respect to such
Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to Section 5.07 of the
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Sale and Servicing Agreement with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to an Owner, such tax shall reduce the amount
otherwise distributable to the Owner in accordance with this Section. The Owner
Trustee is hereby authorized and directed to retain from amounts otherwise
distributable to the Owners sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the Owner
Trustee from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to an Owner
shall be treated as cash distributed to such Owner at the time it is withheld by
the Trust and remitted to the appropriate taxing authority. If there is a
possibility that withholding tax is payable with respect to a distribution (such
as a distribution to a non-U.S. Owner), the Owner Trustee may in its sole
discretion withhold such amounts in accordance with this paragraph (c).
SECTION 5.03. Method of Payment. Subject to Section 9.01(c),
distributions required to be made to Certificateholders on any Distribution Date
shall be made to each Certificateholder of record on the preceding Record Date
either (x) by wire transfer, in immediately available funds, to the account of
such Holder at a bank or other entity having appropriate facilities therefor, if
such Certificateholder shall have provided to the Certificate Registrar
appropriate written instructions no later than the Record Date prior to such
Distribution Date, or (y) if such Holder does not qualify under clause (x), by
check mailed to such Certificateholder at the address of such holder appearing
in the Certificate Register.
SECTION 5.04. No Segregation of Moneys; No Interest. Subject to
Sections 5.01 and 5.02, moneys received by the Owner Trustee hereunder need not
be segregated in any manner except to the extent required by law or the Sale and
Servicing Agreement and may be deposited under such general conditions as may be
prescribed by law, and the Owner Trustee shall not be liable for any interest
thereon.
SECTION 5.05. Accounting and Reports to the Noteholders, Owners, the
Internal Revenue Service and Others. The Owner Trustee shall (a) maintain (or
cause to be maintained) the books of the Trust on a calendar year basis and the
accrual method of accounting, (b) deliver to each Owner, as may be required by
the Code and applicable Treasury Regulations, such information as may be
required (including Schedule K-1) to enable each Owner to prepare its federal
and state income tax returns, (c) file such tax returns relating to the Trust
(including a partnership information return, IRS Form 1065) and make such
elections as from time to time may be required or appropriate under any
applicable state or
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federal statute or any rule or regulation thereunder so as to maintain the
Trust's characterization as a partnership for federal income tax purposes, (d)
cause such tax returns to be signed in the manner required by law and (e)
collect or cause to be collected any withholding tax as described in and in
accordance with Section 5.02(c) with respect to income or distributions to
Owners. The Owner Trustee shall elect under Section 1278 of the Code to include
in income currently any market discount that accrues with respect to the
Receivables. The Owner Trustee shall not make the election provided under
Section 754 of the Code.
SECTION 5.06. Signature on Returns; Tax Matters Partner. (a) The Owner
Trustee shall sign on behalf of the Trust the tax returns of the Trust, unless
applicable law requires an Owner to sign such documents, in which case such
documents shall be signed by the Depositor.
(b) The Depositor shall be designated the "tax matters
partner" of the Trust pursuant to Section 6231(a)(7)(A) of the Code
and applicable Treasury Regulations.
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is to be
a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and, in
each case, in such form as the Depositor shall approve, as evidenced
conclusively by the Owner Trustee's execution thereof. In addition to the
foregoing, the Owner Trustee is authorized, but shall not be obligated, to take
all actions required of the Trust pursuant to the Basic Documents. The Owner
Trustee is further authorized from time to time to take such action as the
Administrator recommends with respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the Basic Documents to which the Trust is a
party and to administer the Trust in the interest of the Owners, subject to the
Basic Documents and in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any Basic Document, and the Owner Trustee shall not be held
liable for the default or failure of the Administrator to carry out its
obligations under the Administration Agreement.
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SECTION 6.03. Action upon Instruction. (a) Subject to Article IV and
in accordance with the terms of the Basic Documents, the Owners may by written
instruction direct the Owner Trustee in the management of the Trust. Such
direction may be exercised at any time by written instruction of the Owners
pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Owners requesting
instruction as to the course of action to be adopted, and to the extent the
Owner Trustee acts in good faith in accordance with any written instruction of
the Owners received, the Owner Trustee shall not be liable on account of such
action to any Person. If the Owner Trustee shall not have received appropriate
instruction within 10 days of such notice (or within such shorter period of time
as reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Basic Document or any such provision
is ambiguous as to its application, or is, or appears to be, in conflict with
any other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Owners requesting
instruction and, to the extent that the Owner Trustee acts or refrains from
acting in good faith in accordance with any such instruction received, the Owner
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Owner Trustee shall not have received appropriate instruction
within 10 days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
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SECTION 6.04. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.03; and no implied duties or obligations
shall be read into this Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Securities and Exchange Commission filing
for the Trust or to record this Agreement or any Basic Document. The Owner
Trustee nevertheless agrees that it will, at its own cost and expense, promptly
take all action as may be necessary to discharge any liens on any part of the
Owner Trust Estate that result from actions by, or claims against, the Owner
Trustee that are not related to the ownership or the administration of the Owner
Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Basic Documents
and (iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section
2.03 or (b) that, to the actual knowledge of the Owner Trustee, would result in
the Trust's becoming taxable as a corporation for federal income tax purposes.
The Owners shall not direct the Owner Trustee to take action that would violate
the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts, but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any
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circumstances, except (i) for its own willful misconduct or gross negligence (or
negligence in the case of handling funds), (ii) for liabilities arising from the
failure by the Owner Trustee to perform obligations expressly undertaken by it
in the last sentence of Section 6.04 hereof, (iii) for any investments made by
the Owner Trustee with Wilmington Trust Company (in its individual capacity) in
its commercial capacity, (iv) in the case of the inaccuracy of any
representation or warranty contained in Section 7.03 expressly made by the Owner
Trustee or (v) for federal or Delaware taxes, fees or other charges, based on or
measured by any fees, commissions or compensation received by the Owner Trustee
in connection with any of the transactions contemplated by this Agreement or any
of the Basic Documents. In particular, but not by way of limitation (and subject
to the exceptions set forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment
made by a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or any Owner;
(c) No provision of this Agreement or any Basic Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or under
any Basic Document if the Owner Trustee shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Depositor or for the form, character, genuineness, sufficiency, value or
validity of any of the Owner Trust Estate, or for or in respect of the validity
or sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume or incur any liability, duty or obligation to any Noteholder or to
any Owner, other than as expressly provided for herein or expressly agreed to in
the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Depositor, the Indenture Trustee, the Servicer or the
Backup Servicer under any of the Basic Documents or otherwise, and the Owner
Trustee shall have no obligation or liability to perform the obligations of the
Trust under this Agreement or the Basic Documents that are required to be
performed by the Administrator under the Administration Agreement,
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the Indenture Trustee under the Indenture or the Servicer or AUTORICS II, Inc.,
as Depositor under the Sale and Servicing Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Basic Document, at the request, order or direction of any of
the Owners, unless such Owners have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its negligence or willful misconduct in the
performance of any such act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish
to the Owners promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Depositor, for the benefit of the Owners, that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution or the delivery by it of this Agreement, nor
the consummation by it of the transactions contemplated hereby, nor compliance
by it with any of the terms or provisions hereof will contravene any federal or
Delaware law, governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound.
SECTION 7.04. Reliance; Advice of Counsel. (a) The Owner Trustee
shall incur no liability to anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order,
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certificate, report, opinion, bond, or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of determination of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter, and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled Persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such Persons and not contrary to this Agreement or
any Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity, and all Persons having any claim against the Owner Trustee by reason
of the transactions contemplated by this Agreement or any Basic Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
Receivables. The Owner Trustee makes no representations as to the validity or
sufficiency of this Agreement, of any Basic Document or of the Trust
Certificates (other than the signature and countersignature of the Owner Trustee
on the Trust Certificates) or the Notes, or of any Receivable or related
documents. The Owner Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Receivable, or the perfection and priority of any security interest created
by any Receivable in any Financed Vehicle or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Owner
Trust Estate or its ability to generate the payments to be distributed to
Certificateholders under this Agreement or the Noteholders under the Indenture,
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including, without limitation: the existence, condition and ownership of any
Financed Vehicle; the existence and enforceability of any insurance thereon; the
existence and contents of any Receivable on any computer or other record
thereof; the validity of the assignment of any Receivable to the Trust or of any
intervening assignment; the completeness of any Receivable; the performance or
enforcement of any Receivable; the compliance by the Depositor or the Servicer
with any warranty or representation made under any Basic Document or in any
related document or the accuracy of any such warranty or representation, or any
action of the Administrator, the Indenture Trustee or the Servicer or any
subservicer taken in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Administrator, the Indenture Trustee and the Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee
shall receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Depositor and the
Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the
Administrator pursuant to the Administration Agreement for its other reasonable
expenses hereunder, including the reasonable compensation, expenses and
disbursements of such agents, representatives, experts and counsel as the Owner
Trustee may employ in connection with the exercise and performance of its rights
and its duties hereunder.
SECTION 8.02. Indemnification. Pursuant to the Administration
Agreement, the Administrator shall be liable as primary obligor for, and shall
indemnify the Owner Trustee and its successors, assigns, agents and servants
(collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reasonable
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may at any time be imposed on, incurred by, or asserted
against the Owner Trustee or any Indemnified Party in any way relating to or
arising out of this Agreement, the Basic Documents, the Owner Trust Estate, the
administration of the Owner Trust Estate or the action or inaction of the Owner
Trustee hereunder, except only that the Administrator shall not be liable for or
required to indemnify an Indemnified Party from and against Expenses arising or
resulting from any of the matters described in the third sentence of Section
7.01. The
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indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Administrator, which approval shall not be
unreasonably withheld.
SECTION 8.03. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement
(other than Article VIII) and the Trust shall terminate and be of no further
force or effect (i) upon the final distri- bution by the Owner Trustee of all
moneys or other property or proceeds of the Owner Trust Estate in accordance
with the terms of the Indenture, the Sale and Servicing Agreement and Article V
or (ii) at the time provided in Section 9.02. The bankruptcy, liquidation,
dissolution, death or incapacity of any Owner, other than the Depositor as
described in Section 9.02, shall not (x) operate to terminate this Agreement or
the Trust or (y) entitle such Owner's legal representatives or heirs to claim an
accounting or to take any action or proceeding in any court for a partition or
winding up of all or any part of the Trust or Owner Trust Estate or (z)
otherwise affect the rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), neither the Depositor nor
any Owner shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates to
the Paying Agent for payment of the final distribution and cancellation, shall
be given by the Owner Trustee by letter to Certificateholders mailed within five
Business Days of receipt of notice of such termination from the Servicer given
pursuant to Section 9.01(c) of the Sale and Servicing Agreement, stating (i) the
Distribution Date upon or with respect to which final payment of the Trust
Certificates shall be made upon presentation and surrender of the Trust
Certificates at the office of the Paying Agent therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Trust Certificates at the office of the
Paying Agent therein specified. The Owner
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Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Trust Certificates,
the Paying Agent shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to Section 5.02.
In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Trust Certificates for cancellation and receive the final distribution with
respect thereto. If within one year after the second notice all the Trust
Certificates shall not have been surrendered for cancellation, the Owner Trustee
may take appropriate steps, or may appoint an agent to take appropriate steps,
to contact the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies shall be distributed by the Owner
Trustee to the Depositor.
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
SECTION 9.02. Dissolution upon Bankruptcy of the Depositor. In the
event that an Insolvency Event shall occur with respect to the Depositor, this
Agreement shall be terminated in accordance with Section 9.01 90 days after the
date of such Insolvency Event, unless, before the end of such 90-day period, the
Owner Trustee shall have received written instructions from (a) Holders of
Certificates (other than the Depositor) representing more than 50% of the
Certificate Balance (not including the Certificate Balance of the Trust
Certificates held by the Depositor) and (b) each of the (i) Holders (as defined
in the Indenture) of Class A-1 Notes representing more than 50% of the
Outstanding Amount of the Class A-1 Notes and (ii) Holders (as defined in the
Indenture) of Class A-2 Notes representing more than 50% of the Outstanding
Amount of the Class A-2 Notes, to the effect that each such party disapproves of
the liquidation of the Receivables and termination of the Trust. Promptly after
the occurrence of any Insolvency Event with respect to the Depositor, (A) the
Depositor shall give the Indenture Trustee and the Owner Trustee written notice
of such Insolvency Event, (B) the Owner Trustee shall, upon the receipt of such
written notice from the Depositor, give prompt written notice to the
Certificateholders and the Indenture Trustee, of the occurrence of such event
and (C) the Indenture Trustee shall, upon receipt of written notice of such
Insolvency Event from the Owner Trustee or the Depositor, give prompt written
notice to the
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Noteholders of the occurrence of such event; provided, however, that any failure
to give a notice required by this sentence shall not prevent or delay, in any
manner, a termination of the Trust pursuant to the first sentence of this
Section 9.02. Upon a termination pursuant to this Section, the Owner Trustee
shall direct the Indenture Trustee promptly to sell the assets of the Trust
(other than the Trust Accounts and the Certificate Distribution Account), in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds of such a sale of the assets of the Trust shall be treated as
collections under the Sale and Servicing Agreement.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities. If such
corporation shall publish reports of condition at least annually pursuant to law
or to the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Owner Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Owner Trustee shall resign immediately in the manner and with
the effect specified in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator. Upon receiving such
notice of resignation, the Administrator shall promptly appoint a successor
Owner Trustee by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Owner Trustee and one copy to the successor
Owner Trustee. If no successor Owner Trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign after
written request therefor by the Administrator, or if at any time the Owner
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public
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officer shall take charge or control of the Owner Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Administrator may remove the Owner Trustee. If the Administrator shall remove
the Owner Trustee under the authority of the immediately preceding sentence, the
Administrator shall promptly appoint a successor Owner Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
outgoing Owner Trustee so removed and one copy to the successor Owner Trustee,
and shall pay all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each Rating Agency.
SECTION 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator and to its predecessor Owner Trustee an instrument accepting
such appointment under this Agreement, and thereupon the resignation or removal
of the predecessor Owner Trustee shall become effective, and such successor
Owner Trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its predecessor
under this Agreement, with like effect as if originally named as Owner Trustee.
The predecessor Owner Trustee shall upon payment of its fees and expenses
deliver to the successor Owner Trustee all documents and statements and monies
held by it under this Agreement; and the Administrator and the predecessor Owner
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within 10 days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.
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SECTION 10.04. Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, without the execution or filing of any instrument or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, that such corporation shall be eligible pursuant to
Section 10.01 and, provided, further, that the Owner Trustee shall mail notice
of such merger or consolidation to each Rating Agency.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Administrator and Owner Trustee to act as co-trustee, jointly
with the Owner Trustee, or as separate trustee or separate trustees, of all or
any part of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust or any part thereof and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Administrator and the Owner Trustee may consider necessary or desirable.
If the Administrator shall not have joined in such appointment within 15 days
after the receipt by it of a request so to do, the Owner Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee under
this Agreement shall be required to meet the terms of eligibility as a successor
Owner Trustee pursuant to Section 10.01 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed by the
Owner 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 Owner 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 Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Owner Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly
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by such separate trustee or co-trustee, but solely at the direction
of the Owner Trustee;
(b) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement; and
(c) The Administrator and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner 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 Agreement and
the conditions of this Article. 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 Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement 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
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor co-trustee or separate trustee.
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments. This Agreement may be
amended by the Depositor and the Owner Trustee, with prior written notice to
each Rating Agency, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any
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material respect the interests of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor
and the Owner Trustee, with prior written notice to each Rating Agency, with the
consent of the Holders (as defined in the Indenture) of Notes evidencing not
less than a majority of the Outstanding Amount of the Notes and the consent of
the Holders of Certificates evidencing not less than a majority of the
Certificate Balance, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made for
the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the Certificate
Balance required to consent to any such amendment, without the consent of the
holders of all the outstanding Notes and Certificates.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and each
Rating Agency.
It shall not be necessary for the consent of Certificateholders,
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment that affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
In connection with the execution of any amendment to this Trust
Agreement or any amendment of any other agreement to which the Issuer is a
party, the Owner Trustee shall be entitled to
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receive and conclusively rely upon an Opinion of Counsel to the effect that such
amendment is authorized or permitted by the Basic Documents and that all
conditions precedent in the Basic Documents for the execution and delivery
thereof by the Issuer or the Owner Trustee, as the case may be, have been
satisfied.
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners. The
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership interest therein only in accordance with Articles V and IX.
No transfer, by operation of law or otherwise, of any right, title or interest
of the Owners to and in their ownership interest in the Owner Trust Estate shall
operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Owner Trust Estate.
SECTION 11.03. Limitations on Rights of Others. Except for Section
2.07, the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Owners, the Administrator and, to the extent
expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement (other than Section 2.07 hereof), whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.04. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt by the intended recipient or three Business Days after
mailing if personally delivered or mailed by certified mail, return receipt
requested and postage prepaid or by recognized overnight courier or by facsimile
confirmed by delivery or mail as described above (except that notice to the
Owner Trustee shall be deemed given only upon actual receipt by the Owner
Trustee), if to the Owner Trustee, addressed to the Corporate Trust Office; if
to the Depositor, addressed to AUTORICS II, Inc., 500 Cypress Creek Road West,
Suite 590, Fort Lauderdale, FL 33309; tel.: 305-938-8200; facsimile:
305-938-8209, Attention: Dennis LaVigne; or, as to each party, at such other
address as shall be designated by such party in a written notice to each other
party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
32
<PAGE>
SECTION 11.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Depositor and its permitted assignees, the Owner Trustee and its successors and
each Owner and its successors and permitted assigns, all as herein provided. Any
request, notice, direction, consent, waiver or other instrument or action by an
Owner shall bind the successors and assigns of such Owner.
SECTION 11.08. Covenants of the Depositor. In the event that (a)
Certificateholders' Principal Carryover Shortfalls shall occur or (b) any
litigation with claims in excess of $1,000,000 to which the Depositor is a party
which shall be reasonably likely to result in a material judgment against the
Depositor that the Depositor will not be able to satisfy shall be commenced by
an Owner, during the period beginning nine months following the commencement of
such litigation and continuing until such litigation is dismissed or otherwise
terminated (and, if such litigation has resulted in a final judgment against the
Depositor, such judgment has been satisfied), the Depositor shall not pay any
dividend to NAL, or make any distribution on or in respect of its capital stock
to NAL, or repay the principal amount of any indebtedness of the Depositor held
by NAL, unless (i) after giving effect to such payment, distribution or
repayment, the Depositor's liquid assets shall not be less than the amount of
actual damages claimed in such litigation or (ii) the Rating Agency Condition
shall have been satisfied with respect to any such payment, distribution or
repayment. The Depositor will not at any time institute against the Trust any
bankruptcy proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Trust
Certificates, the Notes, the Trust Agreement or any of the Basic Documents.
SECTION 11.09. No Petition. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Trust Certificate, and the
Indenture Trustee and each Noteholder, by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the Depositor or the Trust, or join in any institution against the
Depositor or the Trust of, any bankruptcy proceedings under any United States
33
<PAGE>
federal or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, this Agreement or any of the
Basic Documents.
SECTION 11.10. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Depositor, the Servicer, the Administrator, the Owner
Trustee, the Indenture Trustee or any Affiliate thereof and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated in this Agreement, the Trust Certificates or the Basic
Documents.
SECTION 11.11. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. [Reserved.]
SECTION 11.14. Depositor Payment Obligation. The Depositor shall be
responsible for payment of the Administrator's fees under the Administration
Agreement and shall reimburse the Administrator for all expenses and liabilities
of the Administrator incurred thereunder. In addition, the Depositor shall be
responsible for the payment of all fees and expenses of the Trust, the Owner
Trustee and the Indenture Trustee paid by any of them in connection with any of
their obligations under the Basic Documents to obtain or maintain any required
license under the Motor Vehicle Sales Finance Act.
* * * * * *
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
AUTORICS II, INC., as Depositor,
by:
---------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee,
by:
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF TRUST CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE SECURITIES OR BLUE SKY
LAWS OF ANY STATE IN THE UNITED STATES OR ANY FOREIGN SECURITIES LAWS. BY ITS
ACCEPTANCE OF THIS CERTIFICATE THE HOLDER HEREOF IS DEEMED TO REPRESENT TO THE
DEPOSITOR AND THE OWNER TRUSTEE (i) THAT IT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE
1933 ACT (AN "ACCREDITED INVESTOR") AND THAT IT IS ACQUIRING THIS CERTIFICATE
FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR
AGENT FOR OTHERS (WHICH OTHERS ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER
IS A BANK ACTING IN ITS FIDUCIARY CAPACITY) FOR INVESTMENT AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, THE PUBLIC DISTRIBUTION HEREOF OR
(ii) THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER
THE 1933 ACT AND IS ACQUIRING SUCH CERTIFICATE FOR ITS OWN ACCOUNT (AND NOT FOR
THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO
ARE QUALIFIED INSTITUTIONAL BUYERS).
NO SALE, PLEDGE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE BY ANY PERSON
UNLESS EITHER (i) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO THE DEPOSITOR,
(ii) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO AN ACCREDITED INVESTOR THAT
EXECUTES A CERTIFICATE, SUBSTANTIALLY IN THE FORM SPECIFIED IN THE TRUST
AGREEMENT, TO THE EFFECT THAT IT IS AN ACCREDITED INVESTOR ACTING FOR ITS OWN
ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER IS A BANK
ACTING IN ITS FIDUCIARY CAPACITY), (iii) SO LONG AS THIS CERTIFICATE IS ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT, SUCH SALE, PLEDGE OR OTHER
TRANSFER IS MADE TO A PERSON WHOM THE PROSPECTIVE TRANSFEROR REASONABLY BELIEVES
AFTER DUE INQUIRY IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A), ACTING FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A
FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QUALIFIED INSTITUTIONAL
BUYERS) TO WHOM NOTICE IS GIVEN THAT THE SALE, PLEDGE OR TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A, OR (iv) SUCH SALE, PLEDGE OR OTHER TRANSFER IS
OTHERWISE MADE IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
1933 ACT, IN WHICH CASE THE OWNER TRUSTEE SHALL REQUIRE THAT BOTH THE
PROSPECTIVE TRANSFEROR AND THE PROSPECTIVE TRANSFEREE CERTIFY TO THE OWNER
TRUSTEE AND THE DEPOSITOR IN WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH
CERTIFICATION SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE
AND THE DEPOSITOR. EXCEPT IN THE CASE OF A TRANSFER DESCRIBED IN CLAUSES (i) OR
(ii) ABOVE, THE OWNER TRUSTEE SHALL REQUIRE A WRITTEN OPINION OF COUNSEL (WHICH
SHALL NOT BE AT THE EXPENSE OF THE DEPOSITOR, ANY AFFILIATE OF THE DEPOSITOR OR
THE OWNER TRUSTEE)
36
<PAGE>
SATISFACTORY TO THE DEPOSITOR AND THE OWNER TRUSTEE TO THE EFFECT THAT SUCH
TRANSFER WILL NOT VIOLATE THE 1933 ACT. NO SALE, PLEDGE OR OTHER TRANSFER MAY BE
MADE TO ANY ONE PERSON FOR SECURITIES WITH A FACE AMOUNT OF LESS THAN $100,000
AND, IN THE CASE OF ANY PERSON ACTING ON BEHALF OF ONE OR MORE THIRD PARTIES
(OTHER THAN A BANK (AS DEFINED IN SECTION 3(a)(2) OF THE 1933 ACT) ACTING IN ITS
FIDUCIARY CAPACITY), FOR SECURITIES WITH A FACE AMOUNT OF LESS THAN $100,000 FOR
EACH SUCH THIRD PARTY."
EACH SECURITYHOLDER, BY ITS ACCEPTANCE OF THIS SECURITY, COVENANTS AND AGREES
THAT SUCH SECURITYHOLDER, SHALL NOT, PRIOR TO THE DATE THAT IS ONE YEAR AND ONE
DAY AFTER THE TERMINATION OF THE TRUST AGREEMENT, ACQUIESCE, PETITION OR
OTHERWISE INVOKE OR CAUSE THE TRUST, THE DEPOSITOR OR THE SELLER TO INVOKE THE
PROCESS OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF COMMENCING OR
SUSTAINING A CASE AGAINST THE TRUST, THE DEPOSITOR OR THE SELLER UNDER ANY
FEDERAL OR STATE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR SIMILAR LAW, OR
APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE, CUSTODIAN, SEQUESTRATOR OR
OTHER SIMILAR OFFICIAL OF THE TRUST, THE DEPOSITOR OR THE SELLER OR ANY
SUBSTANTIAL PART OF ITS PROPERTY, OR ORDERING THE WINDING UP OR LIQUIDATION OF
THE AFFAIRS OF THE TRUST, THE DEPOSITOR OR THE SELLER.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF (i) AN "EMPLOYEE
BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA")), THAT IS SUBJECT TO THE PROVISIONS
OF TITLE I OF ERISA, (ii) A PLAN DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR (iii) ANY ENTITY WHOSE
UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE
ENTITY, UNLESS THE BENEFIT PLAN ACQUIRING THIS CERTIFICATE HAS AVAILABLE TO IT
AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES UNDER SECTION 406(a) OF ERISA
AND SECTION 4975 OF THE CODE AND SUCH EXEMPTION IS APPLICABLE TO THE PURCHASE
AND HOLDING OF THIS CERTIFICATE.
[THIS CERTIFICATE IS NONTRANSFERABLE.]1
- --------
1To be included only on the Certificates representing the 1% minimum required to
be retained by the Depositor and any Certificates issued in exchange therefor.
37
<PAGE>
NUMBER $_________
R- CUSIP NO. 62872EAC8
NAL AUTO TRUST 1995-1
14.25% ASSET BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which consists of retail installment sale contracts for new and used
automobiles and light duty trucks (collectively, the "Receivables"), all monies
received on or after the related Cutoff Date, security interests in the vehicles
financed thereby, certain bank accounts and the proceeds thereof, proceeds from
claims on certain insurance policies and certain other rights under the Trust
Agreement and the Sale and Servicing Agreement and all proceeds of the
foregoing.
THIS TRUST CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF AUTORICS II, INC., NAL ACCEPTANCE CORPORATION OR
ANY OF THEIR RESPECTIVE AFFILIATES.
THIS CERTIFIES THAT ________________ is the registered owner of
____________________________________________ DOLLARS nonassessable, fully-paid,
fractional undivided interest in NAL Auto Trust 1995-1 (the "Trust"), formed by
AUTORICS II, Inc., a Delaware corporation (the "Depositor").
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
WILMINGTON TRUST COMPANY, not
in its individual capacity,
but solely as Owner Trustee
by: ________________________
Authorized Signatory
A-1
<PAGE>
The Trust was created pursuant to a Trust Agreement dated as of
December 1, 1995, (as so amended and restated and further amended or
supplemented from time to time, the "Trust Agreement"), among the Depositor and
Wilmington Trust Company, as owner trustee (the "Owner Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Trust Agreement or the Sale and Servicing
Agreement dated as of December 1, 1995 (as amended and supplemented from time to
time, the "Sale and Servicing Agreement"), among the Trust, the Depositor, NAL
Acceptance Corporation, as servicer (the "Servicer"), and Bankers Trust Company,
as backup servicer, as applicable.
This Certificate is one of the duly authorized Certificates designated
as "14.25% Asset Backed Certificates" (herein called the "Trust Certificates").
Also issued under an Indenture dated as of December 1, 1995 (the "Indenture"),
between the Trust and Bankers Trust Company, as indenture trustee, are the two
classes of Notes designated as "Class A-1 6.65% Asset Backed Notes," and "Class
A-2 7.70% Asset Backed Notes" (collectively, the "Notes"). This Trust
Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the Holder of this
Trust Certificate by virtue of its acceptance hereof assents and by which such
Holder is bound. The property of the Trust consists of retail installment sale
contracts for new and used automobiles, light duty trucks and vans
(collectively, the "Receivables"), all monies received on or after the Cutoff
Date plus all Payaheads as of the Cutoff Date; any proceeds with respect to the
Receivables from claims on any physical damage, credit life or disability,
theft, mechanical breakdown or "guaranteed auto protection" insurance policies
relating to Financed Vehicles or Obligors; proceeds of any recourse (but none of
the obligations) to Dealers on Receivables; any Financed Vehicle that shall have
secured a Receivable and shall have been acquired by or on behalf of the
Depositor, the Servicer, or the Trust; the Receivables Files; the Receivables
Purchase Agreement, including the right of the Depositor to cause NAL to
purchase Receivables under certain circumstances; the Trust Accounts; and
certain other rights under the Trust Agreement and the Sale and Servicing
Agreement and all proceeds of the foregoing. The rights of the Holders of the
Trust Certificates are subordinated to the rights of the Holders of the Notes,
as set forth in the Sale and Servicing Agreement.
Under the Trust Agreement, there will be distributed March 15, June 15,
September 15 and December 15 of each year or, if such day is not a Business Day,
the immediately following Business Day (each, a "Distribution Date"), commencing
on March 15, 1996, to the Person in whose name this Trust Certificate is
registered at the close of business on the last day of the month immediately
preceding such Distribution Date (the "Record Date"), such Certificateholder's
fractional undivided interest in the
A-2
<PAGE>
amount to be distributed to Certificateholders on such Distribution Date. No
distributions of principal will be made on any Certificate until all of the
Notes have been paid in full.
The Holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement and the Indenture.
It is the intent of the Depositor, the Servicer and the
Certificateholders that, for purposes of federal income, state and local income
and single business tax and any other income taxes, the Trust will be treated as
a partnership and the Certificateholders (including the Depositor) will be
treated as partners in that partnership. The Depositor and the other
Certificateholders, by acceptance of a Trust Certificate, agree to treat, and to
take no action inconsistent with the treatment of, the Trust Certificates for
such tax purposes as partnership interests in the Trust.
Each Certificateholder, by its acceptance of a Trust Certificate,
covenants and agrees that such Certificateholder will not at any time institute
against the Depositor, or join in any institution against the Depositor of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Trust
Certificates, the Notes, the Trust Agreement or any of the Basic Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Trust Certificate or the making of any notation hereon.
Except as otherwise provided in the Trust Agreement and notwithstanding the
above, the final distribution on this Trust Certificate will be made after due
notice by the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Trust Certificate at the office or agency
maintained for that purpose by the Owner Trustee in the Borough of Manhattan,
The City of New York.
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Trust Certificate shall not entitle the Holder hereof to any benefit under
the Trust Agreement or the Sale and Servicing Agreement or be valid for any
purpose.
A-3
<PAGE>
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Trust Certificate to be duly
executed.
NAL AUTO TRUST 1995-1
by: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Owner Trustee
Dated: _____________ by: ________________________
Authorized Signatory
A-4
<PAGE>
[REVERSE OF TRUST CERTIFICATE]
The Trust Certificates do not represent an obligation of, or an
interest in, the Depositor, the Servicer, the Seller, the Owner Trustee or any
affiliates of any of them and no recourse may be had against such parties or
their assets, except as expressly set forth or contemplated herein or in the
Trust Agreement or the Basic Documents. In addition, this Trust Certificate is
not guaranteed by any governmental agency or instrumentality and is limited in
right of payment to certain collections and recoveries with respect to the
Receivables (and certain other amounts), all as more specifically set forth
herein and in the Sale and Servicing Agreement. A copy of each of the Sale and
Servicing Agreement and the Trust Agreement may be examined by any
Certificateholder upon written request during normal business hours at the
principal office of the Depositor and at such other places, if any, designated
by the Depositor.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Owner Trustee with the consent of the Holders
of the Trust Certificates and the Notes, each voting as a class, evidencing not
less than a majority of the Certificate Balance and the outstanding principal
balance of the Notes of each such class. Any such consent by the Holder of this
Trust Certificate shall be conclusive and binding on such Holder and on all
future Holders of this Trust Certificate and of any Trust Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof, whether or
not notation of such consent is made upon this Trust Certificate. The Trust
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the Holders of any of the Trust Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Trust Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the
Owner Trustee and the Certificate Registrar duly executed by the Holder hereof
or such Holder's attorney duly authorized in writing, and thereupon one or more
new Trust Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is the Owner Trustee.
Except as provided in the Trust Agreement, the Trust Certificates are
issuable only as registered Trust Certificates
A-5
<PAGE>
without coupons in denominations of $100,000 and in integral multiples of $1,000
in excess thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Trust Certificates are exchangeable for new Trust
Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the Holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Certificate Registrar or any such agent shall be affected by
any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement and
the Sale and Servicing Agreement and the disposition of all property held as
part of the Owner Trust Estate. The Servicer of the Receivables may at its
option purchase the Owner Trust Estate at a price specified in the Sale and
Servicing Agreement, and such purchase of the Receivables and other property of
the Trust will effect early retirement of the Trust Certificates; however, such
right of purchase is exercisable only as of the last day of any Collection
Period as of which the Pool Balance is less than or equal to 5% of the Original
Pool Balance.
A-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
the within Trust Certificate, and all rights thereunder, and hereby irrevocably
constitutes and appoints attorney, to
----------------------------------- ,
transfer said Trust Certificate on the books of the Certificate Registrar, with
full power of substitution in the premises.
Dated:
________________________________________*/
Signature Guaranteed:
____________________________*/
- -----------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Trust Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-7
<PAGE>
EXHIBIT B
CERTIFICATE OF TRUST OF
NAL AUTO TRUST 1995-1
THIS Certificate of Trust of NAL AUTO TRUST 1995-1 (the "Trust"), dated
December [ ], 1995, is being duly executed and filed by Wilmington Trust
Company, a Delaware banking corporation, as trustee, to form a business trust
under the Delaware Business Trust Act (12 Del. Code, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is NAL
AUTO TRUST 1995-1.
2. Delaware Trustee. The name and business address of the
trustee of the Trust in the State of Delaware is NAL Auto Trust
1995-1, c/o Wilmington Trust Company, 1100 N. Market St., Rodney
Square North, Wilmington, Delaware 19890, Attention: Corporate
Trust Administration.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
Wilmington Trust Company,
not in its individual capacity
but solely as owner trustee under
a Trust Agreement dated as of
December 1, 1995
By:
-------------------------------------------
Name:
Title:
B-1
<PAGE>
EXHIBIT C
FORM OF TRANSFEROR CERTIFICATE
[DATE]
Autorics II, Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890
Re: NAL Auto Trust 1995-1
14.25% Asset Backed Certificates
Ladies and Gentlemen:
In connection with our disposition of the above-referenced 14.25% Asset
Backed Certificates (the "Certificates") we certify that (a) we understand that
the Certificates have not been registered under the Securities Act of 1933, as
amended (the "Act"), and are being transferred by us in a transaction that is
exempt from the registration requirements of the Act and (b) we have not offered
or sold any Certificates to, or solicited offers to buy any Certificates from,
any person, or otherwise approached or negotiated with any person with respect
thereto, in a manner that would be deemed, or taken any other action which would
result in, a violation of Section 5 of the Act.
Very truly yours,
[NAME OF TRANSFEROR]
By:
---------------------------------
Authorized Officer
C-1
<PAGE>
EXHIBIT D
Form of Investment Letter
Autorics II, Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate principal
amount of 14.25% Asset Backed Certificates (the "Certificates") of NAL Auto
Trust 1995-1 (the "Issuer"), we confirm that:
1. We understand that the Certificates have not been
registered under the Securities Act of 1933, as amended (the "1933
Act"), and may not be sold except as permitted in the following
sentence. We understand and agree, on our own behalf and on behalf of
any accounts for which we are acting as hereinafter stated, (x) that
such Certificates are being offered only in a transaction not involving
any public offering within the meaning of the 1933 Act and (y) that
such Certificates may be resold, pledged or transferred only (i) to the
Depositor, (ii) to an "accredited investor" as defined in Rule
501(a)(1),(2),(3) or (7) (an "Accredited Investor") under the 1933 Act
acting for its own account (and not for the account of others) or as a
fiduciary or agent for others (which others also are Accredited
Investors unless the holder is a bank acting in its fiduciary capacity)
that executes a certificate substantially in the form hereof, (iii) so
long as such Certificate is eligible for resale pursuant to Rule 144A
under the 1933 Act ("Rule 144A"), to a person whom we reasonably
believe after due inquiry is a "qualified institutional buyer" as
defined in Rule 144A, acting for its own account (and not for the
account of others) or as a fiduciary or agent for others (which others
also are "qualified institutional buyers") to whom notice is given that
the resale, pledge or transfer is being made in reliance on Rule 144A
or (iv) in a sale, pledge or other transfer made in a transaction
otherwise exempt from the registration requirements of the 1933 Act, in
which case (A) the Owner Trustee shall require that both the
prospective transferor and the prospective transferee certify to the
Owner Trustee and the Depositor in writing the facts surrounding such
transfer, which certification shall be in form and substance
D-1
<PAGE>
satisfactory to the Owner Trustee and the Depositor and (B) the Owner
Trustee shall require a written opinion of counsel (which will not be
at the expense of the Depositor, any affiliate of the Depositor or the
Owner Trustee) satisfactory to the Depositor and the Owner Trustee to
the effect that such transfer will not violate the 1933 Act, in each
case in accordance with any applicable securities laws of any state of
the United States. We will notify any purchaser of the Certificates
from us of the above resale restrictions, if then applicable. We
further understand that in connection with any transfer of the
Certificates by us that the Depositor and the Owner Trustee may
request, and if so requested we will furnish such certificates and
other information as they may reasonably require to confirm that any
such transfer complies with the foregoing restrictions. We understand
that no sale, pledge or other transfer may be made to any one person of
Certificates with a face amount of less than $100,000 and, in the case
of any person acting on behalf of one or more third parties (other than
a bank (as defined in Section 3(a)((2) of the 1933 Act) acting in its
fiduciary capacity), of Certificates with a face amount of less than
$100,000 for each such third party.
2. [CHECK ONE]
|_| (a) We are an "accredited investor" (as defined in Rule
501(a)(1),(2),(3) or (7) of Regulation D under the
Certificates Act) acting for our own account (and not for
the account of others) or as a fiduciary or agent for
others (which others also are Accredited Investors unless
we are a bank acting in its fiduciary capacity). We have
such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and
risks of our investment in the Certificates, and we and
any accounts for which we are acting are each able to
bear the economic risk of our or their investment for an
indefinite period of time. We are acquiring the
Certificates for investment and not with a view to, or
for offer and sale in connection with, a public
distribution.
|_| (b) We are a "qualified institutional buyer" as defined
under Rule 144A under the 1933 Act and are acquiring the
Certificates for our own account (and not for the account
of others) or as a fiduciary or agent for others (which
others also are "qualified institutional buyers"). We
are familiar with Rule 144A under the 1933 Act and are
aware that the seller of the Certificates and other
parties intend to rely on the statements made herein and
the exemption from the registration requirements of the
1933 Act provided by Rule 144A.
3. We are not (i) an employee benefit plan (as defined
in Section 3(3) of the Employee Retirement Income Security Act
D-2
<PAGE>
of 1974, as amended ("ERISA")) that is subject to the provisions of
Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the
Code or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan").
We hereby acknowledge that no transfer of any Certificate shall be
permitted to be made to any person unless the Trustee has received (i)
a certificate from such transferee to the effect of the preceding
sentence or an opinion of counsel satisfactory to the Trustee to the
effect that the purchase and holding of any such Certificate will not
constitute or result in the assets of the Issuer being deemed to be
"plan assets" and subject to the prohibited transaction provisions of
ERISA or Section 4975 of the Code and will not subject the Owner
Trustee, the Indenture Trustee or the Depositor to any obligation in
addition to those undertaken in the Basic Documents with respect to the
Certificates (provided, however, that the Owner Trustee will not
require such certificate or opinion in the event that, as a result of
change of law or otherwise, counsel satisfactory to the Owner Trustee
has rendered an opinion to the effect that the purchase and holding of
any such Certificate by a Benefit Plan or a Person that is purchasing
or holding any such Certificate with the assets of a Benefit Plan will
not constitute or result in a prohibited transaction under ERISA or
Section 4975 of the Code).
4. We understand that the Depositor, the Trust, Greenwich
Capital Markets, Inc. ("Greenwich") and others will rely upon the truth
and accuracy of the foregoing acknowledgments, representations and
agreements, and we agree that if any of the acknowledgments,
representations and warranties deemed to have been made by us by our
purchase of the Certificates, for our own account or for one or more
accounts as to each of which we exercise sole investment discretion,
are no longer accurate, we shall promptly notify the Depositor and
Greenwich.
D-3
<PAGE>
5. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
---------------------------------------
(Name of Purchaser)
By: ____________________________________
Date: ___________________________________
D-4
<PAGE>
EXECUTION COPY
AUTORICS II, INC.
Depositor
NAL ACCEPTANCE CORPORATION
Servicer
$1,986,000 14.25% Asset Backed Certificates
CERTIFICATE PURCHASE AGREEMENT
New York, New York
December 20, 1995
Greenwich Capital Financial Products, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Dear Sirs:
Autorics II, Inc., a Delaware corporation (the "Depositor") and a
wholly owned subsidiary of NAL Acceptance Corporation, a Florida corporation
("NAL"), proposes to cause NAL Auto Trust 1995-1 (the "Trust") to issue and sell
to you (you are referred to from time to time herein as the "Purchaser")
$1,986,000 principal amount of its 14.25% Asset Backed Certificates (the
"Certificates"). The assets of the Trust will include a pool of sub-prime
precomputed and simple interest motor vehicle retail installment sale contracts
(the "Receivables"), certain monies received thereon on and after December 1,
1995 (the "Cutoff Date"), Payaheads received thereon prior to the Cutoff Date
but due thereafter, all liquidation proceeds with respect thereto (including
certain insurance proceeds), security interests in the used and new automobiles,
light duty trucks and vans financed thereby, the related Receivables files, the
Trust Accounts and proceeds of the foregoing. The Receivables will be serviced
for the Trust by NAL. The Certificates will be issued pursuant to the Trust
Agreement to be dated as of December 1, 1995 (as amended and supplemented from
time to time, the "Trust Agreement"), between the Depositor and Wilmington Trust
Company, as owner trustee (the "Owner Trustee"). The Certificates will represent
fractional undivided interests in the Trust.
Simultaneously with the issuance and sale of the Certificates, the
Trust will also issue $36,524,000 principal amount of its 6.65% Asset Backed
Notes, Class A-1 (the "Class A-1 Notes"), $1,605,000 principal amount of its
7.70% Asset Backed
<PAGE>
Notes Class A-2 (the "Class A-2 Notes" and, collectively with the Class A-1
Notes, the "Notes"). The Notes will be sold pursuant to a purchase agreement
dated the date hereof (the "Note Purchase Agreement") between the Depositor and
Greenwich Capital Markets, Inc. ("GCM"). The Certificates and the Notes are
referred to herein collectively as the "Securities". The Notes will be issued
pursuant to the Indenture to be dated as of December 1, 1995 (as amended and
supplemented from time to time, the "Indenture") between the Trust and Bankers
Trust Company, as indenture trustee (the "Indenture Trustee"). The Notes will be
secured by the assets of the Trust pursuant to the Indenture.
The sale of the Certificates to the Purchaser will be made without
registration of the Certificates under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon exemptions from the registration
requirements of the Securities Act.
The Trust will acquire the Receivables from the Depositor pursuant to a
Sale and Servicing Agreement to be dated as of December 1, 1995 (as amended and
supplemented from time to time, the "Sale and Servicing Agreement"), among the
Trust, the Depositor, NAL, as servicer and Bankers Trust Company, as backup
servicer. NAL will also agree to perform certain administrative functions on
behalf of the Trust pursuant to the Administration Agreement, dated as of
December 1, 1995 (as amended and supplemented from time to time, the
"Administration Agreement") among NAL, as administrator, the Trust and the
Indenture Trustee. The Depositor will acquire the Receivables from Autorics,
Inc., a Delaware corporation and a wholly owned subsidiary of NAL ("Autorics"),
on the Closing Date (as defined herein) pursuant to a Receivables Purchase
Agreement to be dated as of December 1, 1995 (as amended and supplemented from
time to time, the "Receivables Purchase Agreement") among the Depositor, as
purchaser, Autorics, as seller and NAL for the purpose of making certain
representations and warranties as to the Receivables and for certain other
matters. Payments on the Receivables will be made into a Lockbox Account which
will be established and maintained pursuant to a Lockbox Account Agreement,
dated as of November 27, 1995 (as amended from time to time, the "Lockbox
Account Agreement") among NAL, General Electric Capital Corporation ("GECC"),
and SunTrust Bank, South Florida, National Association ("SunTrust").
In connection with the sale of the Securities by the Depositor, the
Depositor and NAL have prepared a preliminary private placement memorandum,
dated December 19, 1995 (including any and all exhibits thereto, the
"Preliminary Memorandum"), and a private placement memorandum, dated the date
hereof (including any and all exhibits thereto, the "Final Memorandum"). Each of
the Preliminary Memorandum and the Final Memorandum sets forth certain
information concerning the Depositor, NAL, Autorics and
2
<PAGE>
the Securities. Capitalized terms used and not otherwise defined herein shall
have the meanings assigned thereto in the Final Memorandum.
1. Representations and Warranties. NAL and the Depositor jointly and
severally (and with respect to each representation and warranty made as to
Autorics in this Section 1, Autorics, NAL and the Depositor jointly and
severally) represent and warrant to, and agree with, you, and each purchaser of
a Certificate directly from you or one of your affiliates, that:
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading and the
Final Memorandum, at the date hereof, does not, and at the Closing Date
will not (and any amendment or supplement thereto, at the date thereof
and at the Closing Date, will not), contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Depositor and
NAL make no representation or warranty as to the information contained
in or omitted from the Preliminary Memorandum or the Final Memorandum,
or any amendment or supplement thereto, in reliance upon and in
conformity with information furnished in writing to the Depositor or
NAL by GCM specifically for inclusion therein. The Depositor and NAL
acknowledge that the statements set forth in the Preliminary Memorandum
and in the Final Memorandum in the second and third sentences of the
first paragraph under the heading "Plan of Distribution" constitute the
only information furnished by GCM for inclusion in the Preliminary
Memorandum or the Final Memorandum.
(b) The Depositor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, has full power and authority (corporate and other)
necessary to own or hold its properties and to conduct its business as
now conducted by it and to enter into and perform its obligations under
this Agreement, the Trust Agreement, the Sale and Servicing Agreement
and the Receivables Purchase Agreement and to cause the Trust to
authorize, issue and sell the Notes and Certificates as contemplated by
the Note Purchase Agreement and this Agreement, respectively.
(c) NAL has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Florida,
has full power and authority (corporate and other) necessary to own or
hold its
3
<PAGE>
properties and to conduct its business as now conducted by it and to
enter into and perform its obligations under this Agreement, the Sale
and Servicing Agreement, the Administration Agreement, the Lockbox
Account Agreement, that certain demand note dated December 20, 1995
from NAL to the Depositor (the "Demand Note") and the Receivables
Purchase Agreement.
(d) Autorics has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, has full power and authority (corporate and other)
necessary to own or hold its properties and to conduct its business as
now conducted by it and to enter into and perform its obligations under
this Agreement and the Receivables Purchase Agreement.
(e) This Agreement has been duly authorized, executed
and delivered by the Depositor, NAL and Autorics I.
(f) Each of the Trust Agreement, the Sale and Servicing
Agreement and the Receivables Purchase Agreement, when executed and
delivered as contemplated hereby and thereby, will have been duly
authorized, executed and delivered by the Depositor, and when so
executed and delivered, will constitute a legal, valid, binding and
enforceable agreement of the Depositor, subject, as to enforceability,
to bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and to general principles of
equity regardless of whether enforcement is sought in a proceeding in
equity or at law.
(g) Each of the Sale and Servicing Agreement, the
Administration Agreement, the Lockbox Account Agreement, the Demand
Note and the Receivables Purchase Agreement, when executed and
delivered as contemplated hereby and thereby, will have been duly
authorized, executed and delivered by NAL, and when so executed and
delivered, will constitute a legal, valid, binding and enforceable
agreement of NAL, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and to general principles of equity
regardless of whether enforcement is sought in a proceeding in equity
or at law.
(h) The Receivables Purchase Agreement, when executed and
delivered as contemplated hereby and thereby, will have been duly
authorized, executed and delivered by Autorics, and when so executed
and delivered, will constitute a legal, valid, binding and enforceable
agreement of Autorics, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
4
<PAGE>
creditors' rights generally and to general principles of equity
regardless of whether enforcement is sought in a proceeding in equity
or at law.
(i) The execution, delivery and performance of this Agreement,
the Note Purchase Agreement, the Trust Agreement, the Sale and
Servicing Agreement, the Administration Agreement, the Lockbox Account
Agreement, the Demand Note and the Receivables Purchase Agreement and
the issuance and sale of the Securities and compliance with the terms
and provisions hereof and of the Indenture and the Trust Agreement will
not result in a breach or violation of any of the terms and provisions
of, or constitute a default under, any agreement or instrument to which
the Depositor, NAL or Autorics, as the case may be, is a party or by
which the Depositor, NAL or Autorics is bound or to which any of the
properties of the Depositor, NAL or Autorics is subject or of any
statute, order or regulation applicable to the Depositor, NAL or
Autorics of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Depositor, NAL or
Autorics or any of their respective properties, in each case which
could reasonably be expected to have a material adverse effect on the
transactions contemplated herein.
(j) As of the Closing Date, the Securities and the Indenture,
the Trust Agreement, the Sale and Servicing Agreement, the
Administration Agreement and the Receivables Purchase Agreement will
conform in all material respects to the respective descriptions thereof
contained in the Final Memorandum. As of the Closing Date, the
Securities will be duly and validly authorized and, when duly and
validly executed, authenticated and delivered in accordance with the
Indenture and Trust Agreement, as the case may be, and delivered to you
or GCM, as the case may be, against payment therefor as provided herein
or in the Note Purchase Agreement, as applicable, will be duly and
validly issued and outstanding and entitled to the benefits of the
Indenture and the Trust Agreement, as the case may be.
(k) The Depositor's representations and warranties in the
Trust Agreement and in the Sale and Servicing Agreement, NAL's
representations and warranties in the Receivables Purchase Agreement,
the Administration Agreement and the Sale and Servicing Agreement and
Autorics I's representations and warranties in the Receivables Purchase
Agreement will be true and correct in all material respects as of the
Closing Date and each such representation and warranty will be true and
correct in all material respects on each date thereafter if and to the
extent that on such date such representation and warranty is made again
by the
5
<PAGE>
Depositor, NAL or Autorics, as the case may be, pursuant to the terms
of the related agreement.
(l) None of the Depositor, NAL and Autorics is in violation of
its certificate of incorporation or by-laws or in default under any
agreement, indenture or instrument the effect of which violation or
default would be material to the Depositor, NAL or Autorics I. None of
the Depositor, NAL and Autorics is a party to, bound by or in breach or
violation of any indenture or other agreement or instrument, or subject
to or in violation of any statute, order or regulation of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over it that materially and adversely affects, or may in
the future materially and adversely affect, (i) the ability of the
Depositor, NAL or Autorics to perform its obligations under this
Agreement, and, to the extent that it is a party thereto, the Trust
Agreement, the Sale and Servicing Agreement, the Lockbox Account
Agreement, the Demand Note, the Administration Agreement or the
Receivables Purchase Agreement or (ii) the business, operations,
financial condition, properties, assets or prospects of the Depositor,
NAL or Autorics I.
(m) There are no actions or proceedings against, or
investigations of, the Depositor, NAL or Autorics pending, or, to the
knowledge of the Depositor, NAL or Autorics, threatened, before any
court, arbitrator, administrative agency or other tribunal (i)
asserting the invalidity of this Agreement, the Indenture, the Trust
Agreement, the Sale and Servicing Agreement, the Administration
Agreement, the Lockbox Account Agreement, the Demand Note or the
Receivables Purchase Agreement or the Securities, (ii) seeking to
prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by this Agreement, the Indenture, the
Trust Agreement, the Sale and Servicing Agreement, the Administration
Agreement, the Lockbox Account Agreement, the Demand Note or the
Receivables Purchase Agreement, (iii) that, if adversely determined,
could adversely affect the business, operations, financial condition,
properties, assets or prospects of the Depositor, NAL or Autorics or
the validity or enforceability of, or (to the extent each is a party
thereto) the performance by the Depositor, NAL or Autorics of their
respective obligations under, this Agreement, the Indenture, the Trust
Agreement, the Sale Servicing Agreement, the Administration Agreement,
the Lockbox Account Agreement, the Demand Note or the Receivables
Purchase Agreement or the Securities or (iv) seeking to affect
adversely the federal
6
<PAGE>
or Florida income tax attributes of the Certificates as
described in the Final Memorandum.
(n) Immediately prior to the assignment of the Receivables to
the Trust as contemplated by the Sale and Servicing Agreement, the
Depositor (i) had good title to, and was the sole owner of, each
Receivable and the other property purported to be transferred by it to
the Trust pursuant to the Sale and Servicing Agreement free and clear
of any pledge, mortgage, lien, security interest or other encumbrance
(collectively, "Liens"), (ii) had not assigned to any person any of its
right, title or interest in such Receivables or property or in the
Receivables Purchase Agreement and (iii) will have the power and
authority to sell such Receivables and property to the Trust, and upon
the execution and delivery of the Sale and Servicing Agreement by the
Owner Trustee on behalf of the Trust, the Trust will have acquired all
of the Depositor's right, title and interest in and to such Receivables
and property free and clear of any Lien (except for the Lien of the
Indenture).
(o) There are no contracts, agreements or understandings
between the Depositor or NAL and any person granting such person the
right to require the Depositor or NAL to file a registration statement
under the Securities Act with respect to any Securities owned or to be
owned by such person.
(p) The sale of the Certificates pursuant to this Agreement
and of the Notes pursuant to the Note Purchase Agreement is exempt from
the registration and prospectus delivery requirements of the Securities
Act. In the case of each offer or sale of the Securities, no form of
general solicitation or general advertising was used by the Depositor,
any affiliates of the Depositor or any person acting on its or their
behalf, including, but not limited to, advertisements, articles,
notices or other communications published in any newspaper, magazine or
similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation
or general advertising. Neither the Depositor, any affiliates of the
Depositor nor any person acting on its or their behalf has offered or
sold, nor will the Depositor or any person acting on its behalf offer
or sell directly or indirectly, any Security or any other security in
any manner that, assuming the accuracy of the representations and
warranties and the performance of the covenants given by you, would
render the issuance and sale of any of the Certificates as contemplated
hereby a
7
<PAGE>
violation of Section 5 of the Securities Act or the registration or
qualification requirements of any state securities laws, nor has any
such person authorized, nor will it authorize, any person to act in
such manner.
(q) Neither the Depositor nor the Trust is, and neither the
issuance and sale of the Securities nor the activities of the Trust
pursuant to the Indenture or the Trust Agreement will cause the
Depositor or the Trust to be, an "investment company" or under the
"control" of an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company
Act").
(r) It is not necessary to qualify the Indenture or
the Trust Agreement under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act").
(s) Neither the Depositor nor any affiliate thereof has paid
or agreed to pay to any person any compensation for soliciting another
to purchase any Securities (except as contemplated by the Note Purchase
Agreement).
(t) The information provided by the Depositor and NAL pursuant
to Section 5(k) hereof will not, at the date thereof, contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
2. Representations, Warranties and Covenants of the Pur-
chaser. You represent and warrant to, and agree with, the
Depositor that:
(a) You are purchasing the Certificates solely for your own
account as principal and not as nominee or agent for any other person,
and not with a view to, or for offer or sale in connection with, any
distribution (within the meaning of the Securities Act) or
fractionalization thereof, subject, nevertheless, to the understanding
that the disposition of your property shall at all times be and remain
within your control.
(b) You are an "accredited investor" as defined in Rule
501(a)(1), (2) or (3) of Regulation D and a "qualified institutional
buyer" as defined in Rule 144A under the Securities Act.
(c) Neither you nor any person acting on your behalf has made
or will make offers or sales of the Certificates by
8
<PAGE>
means of any form of general solicitation or general advertising
(within the meaning of Regulation D).
3. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties set forth herein, the Depositor
agrees to sell the Certificates to you in the original principal balance with
respect thereto set forth on cover page hereof, and you agree to purchase such
Certificates from the Depositor, for the purchase price equal to .9365625% of
such original principal balance plus accrued interest thereon at the interest
rate with respect thereto from and including the Cutoff Date to, but not
including, the Closing Date. If, on or prior to January 21, 1996, you resell any
Certificates at a yield-to-maturity of less than 16% per annum, you shall remit
to the Depositor, in immediately available funds no later than two Business Days
after the date of settlement of such resale, as an adjustment to the purchase
price for such Certificates paid by you hereunder, the dollar price equivalent
of such lower yield (but no more than the dollar price equivalent of a yield-to-
maturity 100 basis points lower than the yield-to-maturity referred to above).
Nothing herein shall be deemed to create any obligation on your part, express or
implied, to sell or to make any attempt to sell Certificates at any time.
4. Delivery and Payment. Delivery of and payment for the Certificates
shall be made at the office of Brown & Wood, One World Trade Center, New York,
New York 10048, at 10:00 a.m., New York time, on the date specified in Schedule
I hereto (or such later date not later than seven business days after such
specified date as you shall designate), which date and time may be changed by
agreement between you and the Depositor (such date and time of delivery and
payment for the Certificates being herein called the "Closing Date"). Delivery
of the Certificates shall be made to you against payment by you of the purchase
price therefor in immediately available funds. Any amount required to be
remitted by you in connection with a Resale Adjustment shall be made by you on
the day upon which settlement occurs with respect to the applicable sale of
Certificates, by check mailed to the address of Depositor set forth in Section 9
hereof, or, if the Depositor shall have provided you, not less than five
business days prior to such settlement date, with written instructions for
wiring any such remittance, by wire transfer to a U.S. depository institution
reasonably acceptable to you.
The Depositor agrees to have the Certificates available for inspection,
checking and packaging by you in New York, New York, not later than 10:00 a.m.
on the business day prior to the Closing Date.
5. Covenants of the Depositor and NAL. The Depositor and
NAL jointly and severally covenant and agree with you that:
9
<PAGE>
(a) During the period referred to in Section 5(c), the
Depositor or NAL will furnish to you, without charge, copies of the
Final Memorandum (including all documents incorporated by reference
therein and all amendments or supplements to such documents) in such
reasonable quantities as you request.
(b) At any closing occurring during the period referred to in
Section 5(c) as to which any of the Certificates are resold by you to
any subsequent purchaser, the Depositor and NAL will furnish or cause
to be furnished to such subsequent purchaser, if you so request, a
letter from each person furnishing a certificate or opinion on the
Closing Date as described in Sections 6(a), (b) and (c) hereof, in
which such person shall state that such subsequent purchaser may rely
upon such original certificate or opinion as though delivered and
addressed to such subsequent purchaser and made on and as of the
closing of the resale to such subsequent purchaser, except for such
exceptions set forth in such letter as are attributable to events
occurring after the Closing Date.
(c) If, at any time prior to 90 days after the date hereof or
such earlier date as you shall have resold all of the Certificates, any
event occurs as a result of which the Final Memorandum (as then amended
or supplemented) would include an untrue statement of a material fact,
or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it should be necessary to amend or supplement the
Final Memorandum to comply with applicable law, the Depositor and NAL
will promptly prepare and furnish to you an amendment or supplement to
the Final Memorandum satisfactory to you that will correct such
statement or omission.
(d) Neither the Depositor nor NAL will amend or supplement the
Final Memorandum without your prior written consent.
(e) During the period referred to in Section 5(c), the
Depositor or NAL will, at your request, furnish through you to any
prospective purchaser of Certificates from you such information as is
reasonably requested and is reasonably available concerning matters
reasonably relevant to such prospective purchaser's decision to
purchase the Certificates and the Depositor and NAL jointly and
severally represent and warrant that such information will be accurate
and not misleading.
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<PAGE>
(f) The Depositor and NAL authorize you to deliver to
investors copies of the Final Memorandum, as then amended or
supplemented, as contemplated by Section 5(c) hereof and any
information provided under Section 5(e) hereof in connection with any
reoffer or resale of the Certificates by you in accordance herewith.
(g) The Depositor and NAL jointly and severally agree to pay
all costs and expenses in connection with the transactions herein
contemplated, including, but not limited to, (i) the printing and
delivery to you of the Preliminary Memorandum, the Final Memorandum,
and each amendment thereto, (ii) the fees of the Owner Trustee, and its
counsel, (iii) the fee of the Indenture Trustee and its counsel, (iv)
the preparation, issuance and delivery of the Securities to you, (v)
the fees and disbursements of the Depositor's accountants, Price
Waterhouse LLP (including but not limited to the letters furnished by
it pursuant to Section 6(m) hereof), (vi) the fees and disbursements of
your counsel, and (vii) any fees charged by Duff & Phelps Credit Rating
Co. ("Duff & Phelps") or Fitch Investors Service, Inc. ("Fitch") for
the rating of the Certificates.
(h) Each of the Depositor and NAL will not, and will not
permit any of the affiliates (as such term is defined in Rule 501(b) of
Regulation D) of the Depositor (such affiliates (including NAL) being
herein after referred to as the "Affiliates") to, resell any
Certificates that have been acquired by it or by any of them.
(i) Neither the Depositor, nor any of its Affiliates, nor any
person acting on its or their behalf will, directly or indirectly, make
offers or sales of any security, or solicit offers to buy any security,
under circumstances that would require the registration of the
Certificates under the Securities Act.
(j) Neither the Depositor, nor any of its Affiliates, nor any
person acting on its or their behalf will engage in any form of general
solicitation or general advertising (within the meaning of Regulation
D) in connection with any offer or sale of the Securities.
(k) So long as any of the Certificates are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities
Act, the Depositor and NAL will, unless the Depositor becomes subject
to and complies with Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), provide to each holder of
such restricted securities and to each prospective purchaser (as
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designated by such holder) of such restricted securities, upon the
request of such holder or prospective purchaser, any information
required to be provided by Rule 144A(d)(4) under the Securities Act.
This covenant is intended to be for the benefit of the holders, and the
prospective purchasers designated by such holders, from time to time of
such restricted securities.
(l) To the extent, if any, that the rating provided with
respect to the Certificates by Duff & Phelps or Fitch is conditional
upon the furnishing of documents or the taking of any actions by the
Depositor or NAL, the Depositor or NAL, as the case may be, shall
furnish such documents and take any such other actions.
6. Conditions to the Purchase of the Certificates. Your obligation
hereunder to purchase the Certificates shall be subject to the accuracy of the
representations and warranties on the part of the Depositor, NAL and Autorics
contained herein as of the date hereof and as of the Closing Date, to the
accuracy of the statements of the Depositor, NAL and Autorics made in any
certificates delivered pursuant to the provisions hereof, to the performance by
each of the Depositor, NAL and Autorics of its obligations hereunder and to the
following additional conditions:
(a) Each of the Depositor, NAL and Autorics shall have
delivered to you an officers' certificate, signed by its President or
vice president and dated the Closing Date, to the effect that the
signer of such certificate has carefully examined this Agreement and,
in the case of NAL and the Depositor, the Final Memorandum and that:
(i) the representations and warranties of the Depositor, NAL or
Autorics, as the case may be, in this Agreement are true and correct in
all material respects at and as of the Closing Date with the same
effect as if made on the Closing Date and (ii) it has complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date.
(b) You shall have received an opinion, addressed to you, of
English, McCaughan & O'Bryan, P.A., counsel for the Depositor, NAL and
Autorics, dated the Closing Date, in form and substance satisfactory to
you and your counsel, substantially in the form attached as Exhibit A
hereto.
(c) With respect to each state in which Financed Vehicles are
registered, you shall have received an opinion, addressed to you, of
special counsel to the Depositor admitted to practice in such state and
otherwise acceptable to you, dated the Closing Date, in form and
substance
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satisfactory to you and your counsel, substantially in the
form attached as Exhibit B hereto.
(d) You shall have received an opinion addressed to you of
Brown & Wood, in its capacity as federal tax counsel for the Trust,
dated the Closing Date, to the effect that the statements in the Final
Memorandum under the heading "Certain Federal Income Tax Consequences"
and under the heading "Summary of Terms -- Tax Status" (to the extent
relating to federal income tax consequences) accurately describe the
material federal income tax consequences to holders of the
Certificates.
(e) You shall have received an opinion addressed to you of
Brown & Wood, in its capacity as special counsel to the Purchaser,
dated the Closing Date, with respect to the validity of the
Certificates and such other related matters as you shall require, and
the Depositor shall have furnished or caused to be furnished to such
counsel such documents as they may reasonably request for the purpose
of enabling them to pass upon such matters. Brown & Wood, in its
capacity as special ERISA counsel to the Trust, shall have delivered an
opinion, addressed to you and dated the Closing Date, to the effect
that the statements in the Final Memorandum under the heading "ERISA
Considerations," to the extent that they constitute statements of
matters of law or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and accurately describe the
material consequences to holders of the Certificates under ERISA.
(f) You shall have received an opinion addressed to you, the
Depositor and NAL of Richard, Layton & Finger, counsel to the Owner
Trustee, dated the Closing Date and satisfactory in form and substance
to you and your counsel, substantially in the form attached as Exhibit
C hereto.
(g) Counsel to the Depositor, NAL and Autorics shall have
furnished and addressed to you any opinions addressed to Duff & Phelps
or Fitch and not otherwise furnished pursuant to this Section 6.
(h) You shall have received evidence satisfactory to you that,
on or before the Closing Date, UCC-1 financing statements have been or
are being filed in the office of the Secretary of State of the States
of Florida and Delaware reflecting the transfer of the interest of
Autorics, NAL and the Depositor in the Receivables and the proceeds
thereof to NAL, the Depositor and the Trust, respectively, and the
grant of the security interest by the Trust in the
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Receivables and the proceeds thereof to the Indenture Trustee.
(i) On the date of the Preliminary Memorandum, on the date
hereof and on the Closing Date, Price Waterhouse LLP shall have
furnished to you a letter or letters, dated respectively as of the date
of the Preliminary Memorandum, the date hereof and as of the Closing
Date, substantially in the forms of the drafts to which you have
previously agreed and otherwise in form and substance satisfactory to
you and to your counsel.
(j) You shall have received from Duff & Phelps a rating letter
assigning a rating not lower than "BB" to the Certificates, which
ratings shall not have been modified, lowered or withdrawn.
(k) You shall have received from Fitch a rating letter
assigning a rating not lower than "BB" to the Certificates, which
ratings shall not have been modified, lowered or withdrawn.
(l) The Notes shall have been issued by the Trust and
purchased by GCM pursuant to the Note Purchase Agreement.
(m) You shall have received such further information,
certificates, documents and opinions as you may reasonably
have requested.
(n) All proceedings in connection with the transactions
contemplated by this Agreement and all documents incident hereto shall
be satisfactory in form and substance to you and your counsel, and you
and your counsel shall have received such information, certificates and
documents as you or they may have reasonably requested.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
if either of the Depositor, NAL or Autorics is in breach of any covenants or
agreements contained herein or if any of the opinions and certificates referred
to above or elsewhere in this Agreement shall not be in all material respects
reasonably satisfactory in form and substance to you and your counsel, this
Agreement and all your obligations hereunder may be canceled by you at, or at
any time on or prior to, the Closing Date. Notice of such cancellation shall be
given to the Depositor in writing, or by telephone or facsimile transmission
confirmed in writing.
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<PAGE>
7. Indemnification and Contribution. (a) The Depositor and NAL, jointly
and severally, agree to indemnify and hold harmless you, your directors,
officers, employees and agents and each person who controls you within the
meaning of either the Securities Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which you or any of
them may become subject under the Securities Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Memorandum, the Final
Memorandum or any information provided by the Depositor or NAL to any holder or
prospective purchaser of Notes pursuant to Section 5(k), or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Depositor and
NAL will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made in the Preliminary
Memorandum or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Depositor by you or any of your affiliates specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which the
Depositor or NAL may otherwise have.
(b) You agree to indemnify and hold harmless the Depositor and NAL,
their directors, their officers, and each person who controls the Depositor or
NAL within the meaning of either the Securities Act or the Exchange Act, to the
same extent as the foregoing indemnity from the Depositor and NAL to you, but
only with reference to written information relating to you furnished to the
Depositor by you specifically for inclusion in the Preliminary Memorandum or the
Final Memorandum (or in any amendment or supplement thereto). This indemnity
agreement will be in addition to any liability which you may otherwise have. The
Depositor and NAL acknowledge that the statements set forth in the second and
third sentences of the first paragraph under the heading "Plan of Distribution"
in the Preliminary Memorandum and in the Final Memorandum constitute the only
information furnished in writing by or on behalf of you for inclusion in the
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<PAGE>
Preliminary Memorandum or the Final Memorandum (or in any amendment or
supplement thereto).
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability that it may have to any indemnified party otherwise than under
this Section 7. In case any such action is brought against any indemnified party
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
that it may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to assume the
defense thereof, with counsel satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party or parties shall have
reasonably concluded that there may be legal defenses available to it or them
and/or other indemnified parties that are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to elect separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election to so assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, approved, in the case
of paragraph (a) of this Section 7, by you and representing the indemnified
parties under such paragraph (a) who are parties to such action), (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party; and except that, if clause (i) or (iii) is applicable,
such liability shall only be in respect of the counsel referred to in such
clause (i) or (iii). An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to
16
<PAGE>
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) If the indemnification provided for in this Section 7 shall for any
reason be unavailable to an indemnified party under this Section 7, then the
Depositor, NAL and you shall contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses") to
which the Depositor, NAL and you may be subject in such proportion that you are
responsible for the excess, if any, of the Resale Price for any Certificates
sold by you over the purchase price paid by you pursuant to Section 3 (including
any Resale Adjustment) and the Depositor and NAL are responsible the balance. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, the Depositor, NAL and you shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Depositor and NAL on the one hand and of you on the other in
connection with the statements or omissions which resulted in such Losses as
well as any other relevant equitable considerations. Relative benefits shall be
determined as provided in the preceding sentence. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Depositor and NAL on the one hand or you
on the other. The Depositor, NAL and you agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other
method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person who controls you within the meaning of either the
Securities Act or the Exchange Act and each of your directors, officers,
employees and agents shall have the same rights to contribution as you, and each
person who controls the Depositor or NAL within the meaning of either the
Securities Act or the Exchange Act and each officer and director of the
Depositor or NAL shall have the same rights to contribution as the Depositor or
NAL, subject in each case to the applicable terms and conditions of this
paragraph (d). Any party entitled to contribution will, promptly after receipt
of notice
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<PAGE>
of commencement of any action, suit or proceeding against such party in respect
of which a claim for contribution may be made against another party or parties
under this paragraph (d), notify such party or parties from whom contribution
may be sought, but the omission to so notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any other
obligation it or they may have hereunder or otherwise than under this paragraph
(d).
8. Termination. (a) If the sale of the Certificates shall not be
consummated because any condition to your obligations set forth in Section 6
hereof is not satisfied or because of any refusal, inability or failure on the
part of the Depositor, NAL or Autorics to perform any agreement herein or comply
with any provision hereof other than by reason of your default, the Depositor
and NAL jointly and severally agree to reimburse you for the reasonable fees and
expenses of your counsel and for such other out-of-pocket expenses as shall have
been incurred by you in connection with this Agreement and the proposed purchase
of the Securities, and upon demand the Depositor or NAL shall pay the full
amount thereof to you.
(b) This Agreement will survive delivery of and payment for the
Certificates. The provisions of Section 7 and this Section 8(c) shall survive
the termination or cancellation of this Agreement.
9. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to you, will be mailed, delivered or
transmitted by facsimile and confirmed to you at 600 Steamboat Road, Greenwich,
Connecticut 06830, Attention: Robert Young and Bruce Katz; or, if sent to the
Depositor, NAL or Autorics, will be mailed, delivered or transmitted by
facsimile and confirmed to it at NAL Acceptance Corporation, 500 Cypress Creek
Road West, Suite 590, Fort Lauderdale, Florida 33309, Attention: Dennis LaVigne.
10. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7 and their
successors and assigns, and no other person will have any right or obligation
hereunder.
11. Applicable Law; Counterparts. This Agreement will be governed by
and construed in accordance with the laws of the State of New York. This
Agreement may be executed in any number of counterparts, each of which shall for
all purposes be deemed to be an original and all of which shall together
constitute but one and the same instrument.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
letter and your acceptance shall represent a binding agreement between you and
the Depositor, NAL and Autorics I.
Very truly yours,
NAL ACCEPTANCE CORPORATION
By:_________________________
Name:
Title:
AUTORICS II, INC.
By:_________________________
Name:
Title:
AUTORICS, INC.
By:_________________________
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
By:____________________________
Name:
Title:
19
<PAGE>
EXECUTION COPY
AUTORICS II, INC.
Depositor
NAL ACCEPTANCE CORPORATION
Servicer
$36,524,000 6.65% Asset Backed Notes, Class A-1
$ 1,605,000 7.70% Asset Backed Notes, Class A-2
NOTE PURCHASE AGREEMENT
New York, New York
December 20, 1995
Greenwich Capital Markets, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Dear Sirs:
Autorics II, Inc., a Delaware corporation (the "Depositor") and a
wholly owned subsidiary of NAL Acceptance Corporation, a Florida corporation
("NAL"), proposes to cause NAL Auto Trust 1995-1 (the "Trust") to issue and sell
to you (you are referred to from time to time herein as the "Purchaser")
$36,524,000 principal amount of its 6.65% Asset Backed Notes, Class A-1 (the
"Class A-1 Notes") and $1,605,000 principal amount of its 7.70% Asset Backed
Notes Class A-2 (the "Class A-2 Notes" and, collectively with the Class A-1
Notes, the "Notes"). The assets of the Trust will include a pool of sub-prime
precomputed and simple interest motor vehicle retail installment sale contracts
(the "Receivables"), certain monies received thereon on and after December 1,
1995 (the "Cutoff Date"), Payaheads received thereon prior to the Cutoff Date
but due thereafter, all insurance proceeds and liquidation proceeds with respect
thereto, security interests in the used and new automobiles, light duty trucks
and vans financed thereby, the related Receivables files, the Trust Accounts and
proceeds of the foregoing. The Receivables will be serviced for the Trust by
NAL. The Notes will be issued pursuant to the Indenture to be dated as of
December 1, 1995 (as amended and supplemented from time to time, the
"Indenture") between the Trust and Bankers Trust Company, as indenture trustee
(the "Indenture Trustee"). The Notes will be secured by the assets of the Trust
pursuant to the Indenture. In addition, simultaneously with the issuance and
sale of the Notes, the Trust will also issue $2,006,897.86 principal amount of
its 14.25% Asset Backed Certificates (the "Certificates"). The Certificates will
be
<PAGE>
issued pursuant to the Trust Agreement to be dated as of December 1, 1995 (as
amended and supplemented from time to time, the "Trust Agreement"), between the
Depositor and Wilmington Trust Company, as owner trustee (the "Owner Trustee").
The Certificates will represent fractional undivided interests in the Trust. The
Certificates will be sold pursuant to a purchase agreement dated the date hereof
(the "Certificate Purchase Agreement") between the Depositor and Greenwich
Capital Financial Products, Inc. ("GCFP"). The Notes and the Certificates are
hereinafter referred to collectively as the "Securities."
The sale of the Notes to the Purchaser will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions from the registration
requirements of the Securities Act. You have advised the Depositor that you will
offer and sell the Notes purchased by you hereunder in accordance with Section 2
hereof as soon as you deem advisable.
The Trust will acquire the Receivables from the Depositor pursuant to a
Sale and Servicing Agreement to be dated as of December 1, 1995 (as amended and
supplemented from time to time, the "Sale and Servicing Agreement"), among the
Trust, the Depositor and NAL, as servicer. NAL will also agree to perform
certain administrative functions on behalf of the Trust pursuant to the
Administration Agreement, dated as of December 1, 1995 (as amended and
supplemented from time to time, the "Administration Agreement") among NAL, as
administrator, the Trust and the Indenture Trustee. The Depositor will acquire
the Receivables from Autorics, Inc., a Delaware corporation and a wholly owned
subsidiary of NAL, ("Autorics") on the Closing Date (as defined herein) pursuant
to a Receivables Purchase Agreement to be dated as of December 1, 1995 (as
amended and supplemented from time to time, the "Receivables Purchase
Agreement") among the Depositor, as purchaser, Autorics, as seller and NAL for
the purpose of making certain representations and warranties as to the
Receivables and for certain other matters. Payments on the Receivables will be
made into a Lockbox Account which will be established and maintained pursuant to
a Lockbox Account Agreement, dated as of November 27, 1995 (as amended from time
to time (the "Lockbox Account Agreement") among NAL, General Electric Capital
Corporation ("GECC"), and SunTrust Bank, South Florida, National Association
("SunTrust").
In connection with the sale of the Notes by the Depositor, the
Depositor and NAL have prepared a preliminary private placement memorandum,
dated December 19, 1995 (including any and all exhibits thereto, the
"Preliminary Memorandum"), and a private placement memorandum, dated the date
hereof (including any and all exhibits thereto, the "Final Memorandum"). Each of
the Preliminary Memorandum and the Final Memorandum sets forth certain
information concerning the Depositor, NAL, Autorics and
2
<PAGE>
the Securities. The Depositor and NAL hereby confirm that they have authorized
the use of the Preliminary Memorandum and the Final Memorandum, and any
amendment or supplement thereto, in connection with the offer and sale of the
Notes by you. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned thereto in the Final Memorandum.
1. Representations and Warranties. NAL and the Depositor jointly and
severally (and with respect to each representation and warranty made as to
Autorics in this Section 1, Autorics, NAL and the Depositor jointly and
severally) represent and warrant to, and agree with, you, and each purchaser of
a Note directly from you, that:
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading and the
Final Memorandum, at the date hereof, does not, and at the Closing Date
will not (and any amendment or supplement thereto, at the date thereof
and at the Closing Date, will not), contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Depositor and
NAL make no representation or warranty as to the information contained
in or omitted from the Preliminary Memorandum or the Final Memorandum,
or any amendment or supplement thereto, in reliance upon and in
conformity with information furnished in writing to the Depositor or
NAL by the Purchaser specifically for inclusion therein. The Depositor
and NAL acknowledge that the statements set forth in the Preliminary
Memorandum and in the Final Memorandum in the second and third
sentences of the first paragraph under the heading "Plan of
Distribution" constitute the only information furnished by the
Purchaser for inclusion in the Preliminary Memorandum or the Final
Memorandum.
(b) The Depositor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, has full power and authority (corporate and other)
necessary to own or hold its properties and to conduct its business as
now conducted by it and to enter into and perform its obligations under
this Agreement, the Trust Agreement, the Sale and Servicing Agreement
and the Receivables Purchase Agreement and to cause the Trust to
authorize, issue and sell the Notes and Certificates as contemplated by
this Agreement and the Certificate Purchase Agreement, respectively.
3
<PAGE>
(c) NAL has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Florida,
has full power and authority (corporate and other) necessary to own or
hold its properties and to conduct its business as now conducted by it
and to enter into and perform its obligations under this Agreement, the
Sale and Servicing Agreement, the Administration Agreement, the Lockbox
Account Agreement, that certain demand note dated December 20, 1995
from NAL to the Depositor (the "Demand Note") and the Receivables
Purchase Agreement.
(d) Autorics has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, has full power and authority (corporate and other)
necessary to own or hold its properties and to conduct its business as
now conducted by it and to enter into and perform its obligations under
this Agreement and the Receivables Purchase Agreement.
(e) This Agreement has been duly authorized, executed
and delivered by the Depositor, NAL and Autorics I.
(f) Each of the Trust Agreement, the Sale and Servicing
Agreement and the Receivables Purchase Agreement, when executed and
delivered as contemplated hereby and thereby, will have been duly
authorized, executed and delivered by the Depositor, and when so
executed and delivered, will constitute a legal, valid, binding and
enforceable agreement of the Depositor, subject, as to enforceability,
to bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and to general principles of
equity regardless of whether enforcement is sought in a proceeding in
equity or at law.
(g) Each of the Sale and Servicing Agreement, the
Administration Agreement, the Lockbox Account Agreement, the Demand
Note and the Receivables Purchase Agreement, when executed and
delivered as contemplated hereby and thereby, will have been duly
authorized, executed and delivered by NAL, and when so executed and
delivered, will constitute a legal, valid, binding and enforceable
agreement of NAL, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and to general principles of equity
regardless of whether enforcement is sought in a proceeding in equity
or at law.
(h) The Receivables Purchase Agreement, when executed and
delivered as contemplated hereby and thereby, will have been duly
authorized, executed and delivered by Autorics,
4
<PAGE>
and when so executed and delivered, will constitute a legal, valid,
binding and enforceable agreement of Autorics, subject, as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and to
general principles of equity regardless of whether enforcement is
sought in a proceeding in equity or at law.
(i) The execution, delivery and performance of this Agreement,
the Certificate Purchase Agreement, the Trust Agreement, the Sale and
Servicing Agreement, the Administration Agreement, the Lockbox Account
Agreement, the Demand Note and the Receivables Purchase Agreement and
the issuance and sale of the Securities and compliance with the terms
and provisions hereof and of the Indenture and the Trust Agreement will
not result in a breach or violation of any of the terms and provisions
of, or constitute a default under, any agreement or instrument to which
the Depositor, NAL or Autorics, as the case may be, is a party or by
which the Depositor, NAL or Autorics is bound or to which any of the
properties of the Depositor, NAL or Autorics is subject or of any
statute, order or regulation applicable to the Depositor, NAL or
Autorics of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Depositor, NAL or
Autorics or any of their respective properties, in each case which
could reasonably be expected to have a material adverse effect on the
transactions contemplated herein.
(j) As of the Closing Date, the Securities and the Indenture,
the Trust Agreement, the Sale and Servicing Agreement, the
Administration Agreement and the Receivables Purchase Agreement will
conform in all material respects to the respective descriptions thereof
contained in the Final Memorandum. As of the Closing Date, the
Securities will be duly and validly authorized and, when duly and
validly executed, authenticated and delivered in accordance with the
Indenture and Trust Agreement, as the case may be, and delivered to you
or GCFP, as the case may be, against payment therefor as provided
herein or in the Certificate Purchase Agreement, as applicable, will be
duly and validly issued and outstanding and entitled to the benefits of
the Indenture and the Trust Agreement, as the case may be.
(k) The Depositor's representations and warranties in the
Trust Agreement and in the Sale and Servicing Agreement, NAL's
representations and warranties in the Receivables Purchase Agreement,
the Administration Agreement and the Sale and Servicing Agreement and
Autorics I's representations and warranties in the Receivables Purchase
Agreement will be true and correct in all material respects as of the
Closing Date and each such representation and
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warranty will be true and correct in all material respects on each date
thereafter if and to the extent that on such date such representation
and warranty is made again by the Depositor, NAL or Autorics, as the
case may be, pursuant to the terms of the related agreement.
(l) None of the Depositor, NAL and Autorics is in violation of
its certificate of incorporation or by-laws or in default under any
agreement, indenture or instrument the effect of which violation or
default would be material to the Depositor, NAL or Autorics I. None of
the Depositor, NAL and Autorics is a party to, bound by or in breach or
violation of any indenture or other agreement or instrument, or subject
to or in violation of any statute, order or regulation of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over it that materially and adversely affects, or may in
the future materially and adversely affect, (i) the ability of the
Depositor, NAL or Autorics to perform its obligations under this
Agreement, and, to the extent that it is a party thereto, the Trust
Agreement, the Sale and Servicing Agreement, the Lockbox Account
Agreement, the Demand Note, the Administration Agreement or the
Receivables Purchase Agreement or (ii) the business, operations,
financial condition, properties, assets or prospects of the Depositor,
NAL or Autorics I.
(m) There are no actions or proceedings against, or
investigations of, the Depositor, NAL or Autorics pending, or, to the
knowledge of the Depositor, NAL or Autorics, threatened, before any
court, arbitrator, administrative agency or other tribunal (i)
asserting the invalidity of this Agreement, the Indenture, the Trust
Agreement, the Sale and Servicing Agreement, the Administration
Agreement, the Lockbox Account Agreement, the Demand Note or the
Receivables Purchase Agreement or the Securities, (ii) seeking to
prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by this Agreement, the Indenture, the
Trust Agreement, the Sale and Servicing Agreement, the Administration
Agreement, the Lockbox Account Agreement, the Demand Note or the
Receivables Purchase Agreement, (iii) that, if adversely determined,
could adversely affect the business, operations, financial condition,
properties, assets or prospects of the Depositor, NAL or Autorics or
the validity or enforceability of, or (to the extent each is a party
thereto) the performance by the Depositor, NAL or Autorics of their
respective obligations under, this Agreement, the Indenture, the Trust
Agreement, the Sale Servicing Agreement, the Administration Agreement,
the Lockbox Account Agreement, the
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Demand Note or the Receivables Purchase Agreement or the Securities or
(iv) seeking to affect adversely the federal or Florida income tax
attributes of the Notes as described in the Final Memorandum.
(n) Immediately prior to the assignment of the Receivables to
the Trust as contemplated by the Sale and Servicing Agreement, the
Depositor (i) had good title to, and was the sole owner of, each
Receivable and the other property purported to be transferred by it to
the Trust pursuant to the Sale and Servicing Agreement free and clear
of any pledge, mortgage, lien, security interest or other encumbrance
(collectively, "Liens"), (ii) had not assigned to any person any of its
right, title or interest in such Receivables or property or in the
Receivables Purchase Agreement and (iii) will have the power and
authority to sell such Receivables and property to the Trust, and upon
the execution and delivery of the Sale and Servicing Agreement by the
Owner Trustee on behalf of the Trust, the Trust will have acquired all
of the Depositor's right, title and interest in and to such Receivables
and property free and clear of any Lien (except for the Lien of the
Indenture).
(o) The Trust's assignment of the Receivables and other
Collateral (as defined in the Indenture) to the Indenture Trustee
pursuant to the Indenture will vest in the Indenture Trustee, for the
benefit of the Noteholders, a first priority perfected security
interest therein, subject to no prior Lien.
(p) There are no contracts, agreements or understandings
between the Depositor or NAL and any person granting such person the
right to require the Depositor or NAL to file a registration statement
under the Securities Act with respect to any Securities owned or to be
owned by such person.
(q) The sale of the Notes pursuant to this Agreement and of
the Certificates pursuant to the Certificate Purchase Agreement is
exempt from the registration and prospectus delivery requirements of
the Securities Act. In the case of each offer or sale of the Notes, no
form of general solicitation or general advertising was used by the
Depositor, any affiliates of the Depositor or any person acting on its
or their behalf, including, but not limited to, advertisements,
articles, notices or other communications published in any newspaper,
magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any
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general solicitation or general advertising. Neither the Depositor, any
affiliates of the Depositor nor any person acting on its or their
behalf has offered or sold, nor will the Depositor or any person acting
on its behalf offer or sell directly or indirectly, any Security or any
other security in any manner that, assuming the accuracy of the
representations and warranties and the performance of the covenants
given by you, would render the issuance and sale of any of the Notes as
contemplated hereby a violation of Section 5 of the Securities Act or
the registration or qualification requirements of any state securities
laws, nor has any such person authorized, nor will it authorize, any
person to act in such manner.
(r) Neither the Depositor nor the Trust is, and neither the
issuance and sale of the Securities nor the activities of the Trust
pursuant to the Indenture or the Trust Agreement will cause the
Depositor or the Trust to be, an "investment company" or under the
"control" of an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company
Act").
(s) It is not necessary to qualify the Indenture or
the Trust Agreement under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act").
(t) Neither the Depositor nor any affiliate thereof has paid
or agreed to pay to any person any compensation for soliciting another
to purchase any Notes (except as contemplated by this Agreement).
(u) The information provided by the Depositor and NAL pursuant
to Section 5(l) hereof will not, at the date thereof, contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
2. Representations, Warranties and Covenants of the Purchaser.
You represent and warrant to, and agree with, the Depositor that:
(a) You have not offered or sold, and will not offer or sell,
any Notes except (i) to those you reasonably believe to be qualified
institutional buyers (as defined in Rule 144A under the Securities Act)
and that, in connection with each such sale, you have taken or will
take reasonable steps to ensure that the purchaser of such Notes is
aware that such sale is being made in reliance on Rule 144A, or
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(ii) to other institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act
(hereinafter "Regulation D")) who provide to you and to the Depositor a
letter in the form of Exhibit A to the Final Memorandum or (iii) in a
transaction complying with or exempt from the registration requirements
of the Securities Act and in accordance with any applicable securities
laws of any state of the United States or any other jurisdiction.
(b) You are an "accredited investor" as defined in Rule
501(a)(1), (2) or (3) of Regulation D and a "qualified institutional
buyer" as defined in Rule 144A under the Securities Act.
(c) Neither you nor any person acting on your behalf has made
or will make offers or sales of the Notes by means of any form of
general solicitation or general advertising (within the meaning of
Regulation D).
3. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties set forth herein, the Depositor
agrees to sell the Class A-1 Notes and the Class A-2 Notes to you in each case
in the original principal balance with respect thereto set forth on Schedule I,
and you agree to purchase such Class A-1 Notes and Class A-2 Notes from the
Depositor, for the purchase price (expressed as a percentage of such original
principal balance) for each of the Class A-1 Notes and Class A-2 Notes set forth
with respect thereto on Schedule I (plus, in each case, accrued interest thereon
at the applicable rate with respect thereto from and including the Cutoff Date
to, but not including, the Closing Date).
If, on or prior to January 21, 1996, you resell any Class A- 1 Notes at
reoffer spreads less than 140 basis points over two-year Treasury Notes or any
Class A-2 Notes at reoffer spreads less than 300 basis points over two-year
Treasury Notes, you shall remit to the Depositor, in immediately available funds
no later than two Business Days after the date of settlement of such resale, as
an adjustment to the purchase price for such Notes paid by you hereunder, the
dollar price equivalent of such lower reoffer spreads (but no more than the
dollar price equivalent of reoffering spreads 10 basis points lower in the case
of the Class A-1 Notes, and 50 basis points lower in the case of the Class A-2
Notes, than the reoffering spreads referred to above). Nothing herein shall be
deemed to create any obligation on your part, express or implied, to sell or to
make any attempt to sell Certificates at any time.
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4. Delivery and Payment. Delivery of and payment for the Notes shall be
made at the office of Brown & Wood, One World Trade Center, New York, New York
10048, at 10:00 a.m., New York time, on the date specified in Schedule I hereto
(or such later date not later than seven business days after such specified date
as you shall designate), which date and time may be changed by agreement between
you and the Depositor (such date and time of delivery and payment for the Notes
being herein called the "Closing Date"). Delivery of the Notes shall be made to
you against payment by you of the purchase price therefor in immediately
available funds.
The Depositor agrees to have the Notes available for inspection,
checking and packaging by you in New York, New York, not later than 10:00 a.m.
on the business day prior to the Closing Date.
5. Covenants of the Depositor and NAL. The Depositor and NAL jointly
and severally covenant and agree with you that:
(a) During the period referred to in Section 5(c), the
Depositor or NAL will furnish to you, without charge, copies of the
Final Memorandum (including all documents incorporated by reference
therein and all amendments or supplements to such documents) in such
reasonable quantities as you request.
(b) At any closing occurring during the period referred to in
Section 5(c) as to which any of the Notes are resold by you to any
subsequent purchaser, the Depositor and NAL will furnish or cause to be
furnished to such subsequent purchaser, if you so request, a letter
from each person furnishing a certificate or opinion on the Closing
Date as described in Sections 6(a), (b) and (c) hereof, in which such
person shall state that such subsequent purchaser may rely upon such
original certificate or opinion as though delivered and addressed to
such subsequent purchaser and made on and as of the closing of the
resale to such subsequent purchaser, except for such exceptions set
forth in such letter as are attributable to events occurring after the
Closing Date.
(c) If, at any time prior to 90 days after the date hereof or
such earlier date as you shall have resold all of the Notes, any event
occurs as a result of which the Final Memorandum (as then amended or
supplemented) would include an untrue statement of a material fact, or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it should be necessary to amend or
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<PAGE>
supplement the Final Memorandum to comply with applicable law, the
Depositor and NAL will promptly prepare and furnish to you an amendment
or supplement to the Final Memorandum satisfactory to you that will
correct such statement or omission.
(d) Neither the Depositor nor NAL will amend or supplement the
Final Memorandum without your prior written consent.
(e) During the period referred to in Section 5(c), the
Depositor or NAL will, at your request, furnish through you to any
prospective purchaser of Notes from you such information as is
reasonably requested and is reasonably available concerning matters
reasonably relevant to such prospective purchaser's decision to
purchase the Notes and the Depositor and NAL jointly and severally
represent and warrant that such information will be accurate and not
misleading.
(f) The Depositor and NAL authorize you to deliver to
investors copies of the Final Memorandum, as then amended or
supplemented, as contemplated by Section 5(c) hereof and any
information provided under Section 5(e) hereof in connection with any
reoffer or resale of the Notes by you in accordance herewith.
(g) The Depositor and NAL will arrange for the qualification
of the Notes for sale by you under the laws of such jurisdictions as
you may designate and will maintain such qualifications in effect as
long as required for the sale of the Notes. The Depositor or NAL will
promptly advise you of the receipt by suspension of the qualification
of the Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
(h) The Depositor and NAL jointly and severally agree to pay
all costs and expenses in connection with the transactions herein
contemplated, including, but not limited to, (i) the printing and
delivery to you of the Preliminary Memorandum, the Final Memorandum,
and each amendment thereto, (ii) the fees of the Owner Trustee, and its
counsel, (iii) the fee of the Indenture Trustee and its counsel, (iv)
the preparation, issuance and delivery of the Securities to you, (v)
the fees and disbursements of the Depositor's accountants, Price
Waterhouse LLP (including but not limited to the letters furnished by
it pursuant to Section 6(m) hereof), (vi) the fees and disbursements of
your counsel, (vii) the qualification of the Notes under securities
laws in accordance with the provisions of Section
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5(g), including filing fees and the fees and disbursements
of Brown & Wood in connection therewith and in connection
with the preparation of any blue sky or legal investment
survey and (vii) any fees charged by Duff & Phelps Credit
Rating Co. ("Duff & Phelps") or Fitch Investors Service,
Inc. ("Fitch") for the rating of the Notes.
(i) Each of the Depositor and NAL will not, and will not
permit any of the affiliates (as such term is defined in Rule 501(b) of
Regulation D) of the Depositor (such affiliates (including NAL) being
herein after referred to as the "Affiliates") to, resell any Notes that
have been acquired by it or by any of them.
(j) Neither the Depositor, nor any of its Affiliates, nor any
person acting on its or their behalf will, directly or indirectly, make
offers or sales of any security, or solicit offers to buy any security,
under circumstances that would require the registration of the Notes
under the Securities Act.
(k) Neither the Depositor, nor any of its Affiliates, nor any
person acting on its or their behalf will engage in any form of general
solicitation or general advertising (within the meaning of Regulation
D) in connection with any offer or sale of the Securities.
(l) So long as any of the Notes are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, the
Depositor and NAL will, unless the Depositor becomes subject to and
complies with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), provide to each holder of such
restricted securities and to each prospective purchaser (as designated
by such holder) of such restricted securities, upon the request of such
holder or prospective purchaser, any information required to be
provided by Rule 144A(d)(4) under the Securities Act. This covenant is
intended to be for the benefit of the holders, and the prospective
purchasers designated by such holders, from time to time of such
restricted securities.
(m) For a period from the date of this Agreement until the
retirement of the Notes, the Depositor and NAL will deliver to you the
monthly servicing report, the annual statements of compliance and the
annual independent certified public accounts' reports furnished to the
Indenture Trustee or the Owner Trustee pursuant to the Indenture, the
Trust Agreement or the Administration
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Agreement, as soon as such statements and reports are furnished to the
Indenture Trustee or the Owner Trustee.
(n) To the extent, if any, that the rating provided with
respect to the Notes by Duff & Phelps or Fitch is conditional upon the
furnishing of documents or the taking of any actions by the Depositor
or NAL, the Depositor or NAL, as the case may be, shall furnish such
documents and take any such other actions.
(o) Until 30 days following the Closing Date, neither the
Depositor or NAL nor any trust or other entity originated, directly or
indirectly, by the Depositor or NAL will, without the your prior
written consent, offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly, or announce the offering of, any securities
(other than the Securities).
(p) The Depositor will enter into the Trust Agreement, NAL
will enter into the Administration Agreement, the Depositor and NAL
will enter into the Sale and Servicing Agreement and NAL, the Depositor
and Autorics will enter into the Receivables Purchase Agreement on or
prior to the Closing Date.
6. Conditions to the Purchase of the Notes. Your obligation hereunder
to purchase the Notes shall be subject to the accuracy of the representations
and warranties on the part of the Depositor, NAL and Autorics contained herein
as of the date hereof and as of the Closing Date, to the accuracy of the
statements of the Depositor, NAL and Autorics made in any certificates delivered
pursuant to the provisions hereof, to the performance by each of the Depositor,
NAL and Autorics of its obligations hereunder and to the following additional
conditions:
(a) Each of the Depositor, NAL and Autorics shall have
delivered to you an officers' certificate, signed by its President or
vice president and dated the Closing Date, to the effect that the
signer of such certificate has carefully examined this Agreement and,
in the case of NAL and the Depositor, the Final Memorandum and that:
(i) the representations and warranties of the Depositor, NAL or
Autorics, as the case may be, in this Agreement are true and correct in
all material respects at and as of the Closing Date with the same
effect as if made on the Closing Date and (ii) it has complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date.
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(b) You shall have received an opinion, addressed to you, of
English, McCaughan & O'Bryan, P.A., counsel for the Depositor, NAL and
Autorics, dated the Closing Date, in form and substance satisfactory to
you and your counsel, substantially in the form attached hereto as
Exhibit A.
(c) With respect to each state in which Financed Vehicles are
registered, you shall have received an opinion, addressed to you, of
special counsel to the Depositor admitted to practice in such state and
otherwise acceptable to you, dated the Closing Date, in form and
substance satisfactory to you and your counsel, substantially in the
form attached as Exhibit B hereto.
(d) You shall have received an opinion addressed to you of
Brown & Wood, in its capacity as federal tax counsel for the Trust,
dated the Closing Date, to the effect that the statements in the Final
Memorandum under the heading "Certain Federal Income Tax Consequences"
and under the heading "Summary of Terms -- Tax Status" (to the extent
relating to federal income tax consequences) accurately describe the
material federal income tax consequences to holders of the Notes.
(e) You shall have received an opinion addressed to you of
Brown & Wood, in its capacity as special counsel to the Purchaser,
dated the Closing Date, with respect to the validity of the Notes and
such other related matters as you shall require, and the Depositor
shall have furnished or caused to be furnished to such counsel such
documents as they may reasonably request for the purpose of enabling
them to pass upon such matters. Brown & Wood, in its capacity as
special ERISA counsel to the Trust, shall have delivered an opinion,
addressed to you and dated the Closing Date, to the effect that the
statements in the Final Memorandum under the heading "ERISA
Considerations," to the extent that they constitute statements of
matters of law or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and accurately describe the
material consequences to holders of the Notes under ERISA.
(f) You will have received an opinion addressed to you, the
Depositor and NAL of Seward & Kissel, counsel to the Indenture Trustee,
dated the Closing Date and satisfactory in form and substance to you
and your counsel, substantially in the form attached as Exhibit C
hereto.
(g) You shall have received an opinion addressed to you, the
Depositor and NAL of Richard, Layton & Finger, counsel to the Owner
Trustee, dated the Closing Date and
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satisfactory in form and substance to you and your counsel,
substantially in the form attached as Exhibit D hereto.
(h) Counsel to the Depositor, NAL and Autorics shall have
furnished and addressed to you any opinions addressed to Duff & Phelps
or Fitch and not otherwise furnished pursuant to this Section 6.
(i) You shall have received evidence satisfactory to you that,
on or before the Closing Date, UCC-1 financing statements have been or
are being filed in the office of the Secretary of State of the States
of Florida and Delaware reflecting the transfer of the interest of
Autorics, NAL and the Depositor in the Receivables and the proceeds
thereof to NAL, the Depositor and the Trust, respectively, and the
grant of the security interest by the Trust in the Receivables and the
proceeds thereof to the Indenture Trustee.
(j) On the date of the Preliminary Memorandum, on the date
hereof and on the Closing Date, Price Waterhouse LLP shall have
furnished to you a letter or letters, dated respectively as of the date
of the Preliminary Memorandum, the date hereof and as of the Closing
Date, substantially in the forms of the drafts to which you have
previously agreed and otherwise in form and substance satisfactory to
you and to your counsel.
(k) You shall have received from Duff & Phelps a rating letter
assigning a rating not lower than "A" to the Class A-1 Notes and a
rating not lower than "BBB" to the Class A-2 Notes, which ratings shall
not have been modified, lowered or withdrawn.
(l) You shall have received from Fitch a rating letter
assigning a rating not lower than "A" to the Class A-1 Notes and a
rating not lower than "BBB" to the Class A-2 Notes, which ratings shall
not have been modified, lowered or withdrawn.
(m) You shall have received such further information,
certificates, documents and opinions as you may reasonably
have requested.
(n) All proceedings in connection with the transactions
contemplated by this Agreement and all documents incident hereto shall
be satisfactory in form and substance to you and your counsel, and you
and your counsel shall have received such information, certificates and
documents as you or they may have reasonably requested.
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If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
if either of the Depositor, NAL or Autorics is in breach of any covenants or
agreements contained herein or if any of the opinions and certificates referred
to above or elsewhere in this Agreement shall not be in all material respects
reasonably satisfactory in form and substance to you and your counsel, this
Agreement and all your obligations hereunder may be canceled by you at, or at
any time on or prior to, the Closing Date. Notice of such cancellation shall be
given to the Depositor in writing, or by telephone or facsimile transmission
confirmed in writing.
7. Indemnification and Contribution. (a) The Depositor and NAL, jointly
and severally, agree to indemnify and hold harmless you, your directors,
officers, employees and agents and each person who controls you within the
meaning of either the Securities Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which you or any of
them may become subject under the Securities Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Memorandum, the Final
Memorandum or any information provided by the Depositor or NAL to any holder or
prospective purchaser of Notes pursuant to Section 5(l), or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Depositor and
NAL will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made in the Preliminary
Memorandum or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Depositor by you specifically for inclusion therein. This indemnity
agreement will be in addition to any liability which the Depositor or NAL may
otherwise have.
(b) You agree to indemnify and hold harmless the Depositor and NAL,
their directors, their officers, and each person who controls the Depositor or
NAL within the meaning of either the
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Securities Act or the Exchange Act, to the same extent as the foregoing
indemnity from the Depositor and NAL to you, but only with reference to written
information relating to you furnished to the Depositor by you specifically for
inclusion in the Preliminary Memorandum or the Final Memorandum (or in any
amendment or supplement thereto). This indemnity agreement will be in addition
to any liability which you may otherwise have. The Depositor and NAL acknowledge
that the statements set forth in the second and third sentences of the first
paragraph under the heading "Plan of Distribution" in the Preliminary Memorandum
and in the Final Memorandum constitute the only information furnished in writing
by or on behalf of you for inclusion in the Preliminary Memorandum or the Final
Memorandum (or in any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability that it may have to any indemnified party otherwise than under
this Section 7. In case any such action is brought against any indemnified party
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
that it may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to assume the
defense thereof, with counsel satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party or parties shall have
reasonably concluded that there may be legal defenses available to it or them
and/or other indemnified parties that are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to elect separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election to so assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, approved, in the case
of paragraph (a)
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of this Section 7, by you and representing the indemnified parties under such
paragraph (a) who are parties to such action), (ii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party; and except
that, if clause (i) or (iii) is applicable, such liability shall only be in
respect of the counsel referred to in such clause (i) or (iii). An indemnifying
party will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) If the indemnification provided for in this Section 7 shall for any
reason be unavailable to an indemnified party under this Section 7, then the
Depositor, NAL and you shall contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses") to
which the Depositor, NAL and you may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Depositor and NAL
on the one hand and by you on the other from the offering of the Notes;
provided, however, that in no case shall you be responsible for any amount in
excess of the net purchase discount or commission applicable to the Notes
purchased by you hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Depositor, NAL and you
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Depositor and NAL on the
one hand and of you on the other in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Depositor and NAL shall be deemed to be
equal to the total net proceeds from the offering (before deducting expenses),
and benefits received by you shall be deemed to be equal to the total purchase
discounts and commissions received by you from the Depositor in connection with
the purchase of the Notes hereunder. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the Depositor and NAL on the one hand or you on the
other. The Depositor, NAL and you agree that it would not be
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just and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person who controls you
within the meaning of either the Securities Act or the Exchange Act and each of
your directors, officers, employees and agents shall have the same rights to
contribution as you, and each person who controls the Depositor or NAL within
the meaning of either the Securities Act or the Exchange Act and each officer
and director of the Depositor or NAL shall have the same rights to contribution
as the Depositor or NAL, subject in each case to the applicable terms and
conditions of this paragraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this paragraph (d), notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this paragraph (d).
8. Termination. (a) This Agreement shall be subject to termination in
your absolute discretion by notice given to the Depositor prior to delivery of
and payment for the Notes, if prior to such time, (i) there shall have occurred
any change, or any development involving a prospective change, in or affecting
particularly the business, assets or properties of the Depositor, NAL or NAL
Financial Group, Inc.; (ii) trading of securities generally on the New York
Stock Exchange, the American Stock Exchange or over the NASDAQ National Market
shall have been suspended or materially limited; (iii) trading of any securities
of NAL Financial Group, Inc. or any of its subsidiaries shall have been
suspended or materially limited; (iv) a general moratorium on commercial banking
activities in New York, Florida or Delaware shall have been declared by either
federal or New York, Florida or Delaware authorities; or (v) there shall have
occurred any material outbreak or declaration of hostilities or other calamity
or crisis involving the United States, in each case the effect of which is such
as to make it, in your reasonable judgment, inadvisable or impracticable to
market the Notes on the terms specified herein.
(b) If the sale of the Notes shall not be consummated because any
condition to your obligations set forth in Section 6
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hereof is not satisfied or because of any refusal, inability or failure on the
part of the Depositor, NAL or Autorics to perform any agreement herein or comply
with any provision hereof other than by reason of your default, the Depositor
and NAL jointly and severally agree to reimburse you for the reasonable fees and
expenses of your counsel and for such other out-of-pocket expenses as shall have
been incurred by you in connection with this Agreement and the proposed purchase
of the Notes, and upon demand the Depositor or NAL shall pay the full amount
thereof to you.
(c) This Agreement will survive delivery of and payment for the Notes.
The provisions of Section 7 and this Section 8(c) shall survive the termination
or cancellation of this Agreement.
9. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to you, will be mailed, delivered or
transmitted by facsimile and confirmed to you at 600 Steamboat Road, Greenwich,
Connecticut 06830, Attention: Robert Young and Bruce Katz; or, if sent to the
Depositor, NAL or Autorics, will be mailed, delivered or transmitted by
facsimile and confirmed to it at NAL Acceptance Corporation, 500 Cypress Creek
Road West, Suite 590, Fort Lauderdale, Florida 33309, Attention: Dennis LaVigne.
10. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7 and their
successors and assigns, and no other person will have any right or obligation
hereunder.
11. Applicable Law; Counterparts. This Agreement will be governed by
and construed in accordance with the laws of the State of New York. This
Agreement may be executed in any number of counterparts, each of which shall for
all purposes be deemed to be an original and all of which shall together
constitute but one and the same instrument.
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
letter and your acceptance shall represent a binding agreement between you and
the Depositor, NAL and Autorics I.
Very truly yours,
NAL ACCEPTANCE CORPORATION
By:_________________________
Name:
Title:
AUTORICS II, INC.
By:_________________________
Name:
Title:
AUTORICS, INC.
By:_________________________
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
GREENWICH CAPITAL MARKETS, INC.
By:____________________________
Name:
Title:
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SCHEDULE I
Purchase Agreement dated December 20, 1995.
Closing Date: December 12, 1995
Cut-off Date: December 1, 1995.
Original
Principal Purchase
Designation Balance Price
- ----------- --------- --------
Class A-1 Notes $36,524,000 .98859375%
Class A-2 Notes $1,605,000 .96718750%
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Exhibit 21
Subsidiaries of the Registrant
Subsidiary State of Incorporation
- ---------- ----------------------
NAL Acceptance Corporation Florida
NAL Insurance Services, Inc. Florida
Performance Cars of South Florida, Inc. Florida
NAL Mortgage Corporation Florida
Autorics, Inc. Delaware
Autorics II, Inc. Delaware
Consent of Independent Certified Public Accountants
We hereby consent to the use in the Prospectus constituting part of this
Registration Ststement on Form SB-2 of our report dated March 29, 1995 relating
to the financial statements of NAL Financial Group Inc., which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ PRICE WATERHOUSE LLP
- ------------------------
PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
January 25, 1996
