SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______________ to
_____________________.
Commission File Number: 0-25476
NAL FINANCIAL GROUP INC.
(Exact name of small business issuer as specified in its charter)
Delaware 23-2455294
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, Florida 33309
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: 954-938-8200
Check whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the Registrant was required to
file such reports) and (2) has been subject to such filing requirements for the
past ninety days.
(1) Yes X No
----- -----
(2) Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the Registrant's sole class of
common stock, as of May 1, 1996 is 6,838,107 shares.
Transitional Small Business Disclosure Format
Yes No X
---- -----
<PAGE>
NAL FINANCIAL GROUP INC.
INDEX
Part I Financial Information* Page
- - ------ ---------------------- ----
Item 1 Consolidated Balance Sheets - March 31, 1996 and
December 31, 1995 3
Consolidated Statements of Operations - for the
Three Months Ended March 31, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows
for the Three Months Ended March 31, 1996 and
1995 5
Notes to Consolidated Financial Statements 6-8
Item 2 Management's Discussion and Analysis or Plan of
Operation 9-24
Part II Other Information
Item 1 Legal Proceedings 25
Item 2 Changes in Securities 25
Item 3 Defaults Upon Senior Securities 25
Item 4 Submission of Matters to a Vote of Securities
Holders 25
Item 5 Other Information 25
Item 6 Exhibits and Reports on Form 8-K 25
(a) Exhibits
--------
- - -------------
* The accompanying financial information at March 31, 1996 and the
quarter then ended is not covered by an Independent Certified Public
Accountant's Report.
<PAGE>
NAL Financial Group Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, Dec 31,
1996 1995
--------- ----------
<S> <C> <C>
ASSETS
Finance receivables, net $ 100,917 $ 101,214
Cash 2,738 921
Restricted cash 1,292 1,032
Accrued interest receivable 1,436 1,460
Investment in operating leases, net 4,146 4,055
Automobile inventory 3,594 1,886
Property and equipment, net 1,933 1,803
Excess servicing receivables 10,213 4,999
Other assets 3,735 4,665
--------- -----------
TOTAL ASSETS $ 130,004 $ 122,035
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Debt participation interests $ 37,907 $ 42,380
Credit & warehouse facilities 40,676 33,429
Convertible subordinated debt, net 15,430 12,924
Stockholder loans 2,962 2,919
Drafts payable 2,627 2,593
Deferred taxes 2,389 1,604
Accounts payable and accrued expenses 1,312 1,047
Other liabilities 946 1,279
--------- ---------
TOTAL LIABILITIES 104,249 98,175
--------- ---------
Commitments and contingencies - -
--------- ---------
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,
6,700,041 shares issued and outstanding
at March 31, 1996 and December 31, 1995 1,005 1,005
Paid in capital 18,603 18,525
Retained earnings 6,147 4,330
-------- --------
TOTAL STOCKHOLDERS' EQUITY 25,755 23,860
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $130,004 $122,035
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE>
NAL Financial Group Inc.
Consolidated Statements of Operations
For the Three Months Ended March 31, 1996 and March 31, 1995
(In thousands, except per share amounts)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, March 31,
1996 1995
--------- --------
<S> <C> <C>
INTEREST INCOME
Finance charges and purchase discount accretion $ 4,892 $ 2,532
Interest expense (2,485) (939)
--------- --------
Net interest income before provision for credit losses 2,407 1,593
Provision for credit losses (891) (317)
--------- --------
Net interest income after provision for credit losses 1,516 1,276
--------- -------
OTHER INCOME
Gain on sale of contracts 2,997 -
Fees and other 1,810 155
--------- --------
Total other income 4,807 155
--------- --------
OPERATING AND OTHER EXPENSES
Salaries and employee benefits 1,586 257
Depreciation and amortization 436 125
Occupancy expense 213 123
Professional and consulting services 299 221
Other operating expenses 690 481
Non cash charge for the release of escrow shares 107 -
--------- --------
Total expenses 3,331 1,207
--------- --------
Income before income taxes 2,992 224
Provision for income taxes (1,174) (85)
--------- --------
NET INCOME $ 1,818 $ 139
======= =======
Primary Earnings Per Share:
Net Income available to common and common
equivalent shares $1,818 $139
Weighted average number of common and common
equivalent shares 7,234 5,192
Net income per share $.25 $.03
Fully diluted Earnings Per Share:
Net Income available to common and common
equivalent shares $2,047 $139
Weighted average number of common and common
equivalent shares 8,700 5,592
Net income per share $.24 $.02
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
NAL Financial Group Inc.
Consolidated Condensed Statements of Cash Flows
For the Three Months Ended March 31, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,818 $ 139
Adjustments to reconcile net income to net cash
used in provided by operating activities:
Accretion of purchase discount - (246)
Provision for credit losses 891 317
Depreciation and amortization 436 125
Gain on sale of loan pools (2,997) -
Non cash charge - escrow shares 107
Changes in assets and Liabilities:
Increase in excess servicing receivables (5,214) -
Other, net 1,044 2,077
--------- ----------
Net cash (used in) provided by operating activities (3,915) 2,412
--------- ----------
Cash flows from investing activities:
Purchase of finance contracts (49,620) (32,265)
Payments received on finance contracts 11,727 7,371
Purchase of property and equipment (218) (212)
--------- ----------
Net cash used in investing activities (38,111) (25,106)
--------- ----------
Cash flows from financing activities:
Net proceeds from financings 52,643 30,048
Repayments of financings (49,827) (7,751)
Net proceeds from securitization of finance contracts 38,527 -
Proceeds from issuance of subordinated debt 2,500 -
--------- ----------
Net cash provided by financing activities 43,843 22,297
--------- ----------
Net increase (decrease) in cash and cash equivalents 1,817 (397)
Cash and cash equivalents, beginning of period 921 665
========= ==========
Cash and cash equivalents, end of period: $ 2,738 $ 268
========= ==========
Supplemental disclosures of cash flow information
Cash paid during the period for interest $ 2,265 $ 922
========= =========
Cash paid during the period for taxes $ 356 $ 57
========= ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
NAL Financial Group Inc.
Notes To Consolidated Financial Statements
March 31, 1996
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 which
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, 1995. Certain 1995 amounts
have been reclassified to conform with the current year presentation.
Operating results for the three month period ended March 31, 1996 are not
necessarily indicative of the results which may be expected for the year ending
December 31, 1996.
6
<PAGE>
2. Finance Receivables
Finance receivables as of March 31, 1996 and December 31, 1995 consist of the
following:
<TABLE>
<CAPTION>
(In thousands) March 31, Dec. 31,
1996 1995
--------- ----------
<S> <C> <C>
Automotive finance contracts
Gross contracts receivable $109,175 $106,983
Less: Unearned interest (7,701) (7,069)
Deferred acquisition fees (107) (123)
--------- ---------
101,367 99,791
------- -------
Consumer contracts receivable
Gross contracts receivable 2,483 2,768
Less: Unearned interest (233) (286)
Purchase discount (193) (193)
--------- ---------
2,057 2,289
-------- --------
Mortgage loans receivable
Gross loans receivable 1,924 2,064
Less: Purchase discount (259) (259)
--------- ---------
1,665 1,805
-------- --------
Total net finance receivables 105,089 103,885
Reserve available for credit losses (4,172) (2,671)
-------- ---------
Total finance receivables, net $100,917 $101,214
======== ========
</TABLE>
The reserve available for credit losses consists of an allowance for losses
established through a provision from earnings, non-refundable purchase discount
on automotive finance contracts purchased from dealers, and refundable reserves
such as dealer holdback. Purchase discount represents the differential, if any,
between the amount financed on a contract and the price paid by the Company to
acquire the contract, net of any acquisition costs. Any discount on automotive
finance contracts which management considers necessary to absorb future credit
losses is allocated to the reserve available for credit losses. The remaining
portion of the discount, if any, is recognized as interest income over the life
of the contracts.
The following table sets forth the components of the total reserve available for
credit losses as of March 31, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
March 31, Dec. 31,
1996 1995
--------- --------
<S> <C> <C>
(In thousands)
Non-refundable purchase discount $2,887 $1,513
Allowance for credit losses 877 653
Dealer holdback 408 505
------ ------
Total reserve available for credit losses $4,172 $2,671
====== ======
</TABLE>
7
<PAGE>
3. Excess Servicing Receivables
Excess servicing receivables ("ESR") result from the sale of contracts on which
the Company retains servicing rights and a portion of the excess cash flows.
ESRs are determined by computing the difference between the weighted average
yield of the contracts sold and the yield to the purchaser, adjusted for the
normal servicing fee based on the agreements between the Company and the
purchaser. The resulting differential is recorded as a gain in the year of the
sale equal to the present value of the estimated cash flows, net of any portion
of the excess that may be due to the purchaser and adjusted for anticipated
prepayments, repossessions, liquidations and other losses. The excess servicing
cash flows over the estimated remaining life of the contracts have been
calculated using estimates for prepayments, losses (charge-offs) and weighted
average discount rates, which the Company expects market participants would use
for similar instruments.
4. Voting Trust Agreement
On November 30, 1994, the Company became publicly held by virtue of a merger
with an existing, yet inactive, public company. Of the 3,160,000 shares of the
Company's common stock received by certain stockholders in conjunction with the
merger, 400,000 shares were placed into a voting trust agreement (the
"Agreement") 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 Agreement 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 Agreement using recent accounting guidance and
the relevant facts and circumstances, and has determined that the potential
release of approximately 340,000 shares of the total amount of shares held under
the Agreement is not compensatory. The potential release of the remaining
approximately 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 $107,000 has been recorded for the three
months ended March 31, 1996 for the portion of the 60,000 shares that has become
eligible for release under the Agreement.
5. Subsequent Events
During April 1996, $1,140,000 in convertible subordinated debt converted to
138,066 shares of common stock.
Also during April, the Company issued $10 million in additional convertible
subordinated debt together with 675,000 common stock purchase warrants. The debt
matures in 18 months and carries a 9% coupon rate. The holder may convert the
debt on or prior to the maturity date at a conversion rate of the lower of (i)
$12.00; or (ii) 80% of the closing bid price upon conversion.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of the Company included in
this Report.
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 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 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 non-prime credit.
While certain of the Company's loans and leases may be held until maturity, the
Company intends to periodically pool and sell its portfolios of loans through
securitization transactions.
9
<PAGE>
Results of Operations
Quarter Ended March 31, 1996 compared to Quarter Ended March 31, 1995
The Company reported net income of $1,818,000 or $.24 per share on a
fully diluted basis for the quarter ended March 31, 1996. This compares to net
income of $139,000 or $.02 per share on a fully diluted basis for the quarter
ended March 31, 1995. Net income included a non-cash charge to income of
$107,000 and $0 for the quarter ended March 31, 1996 and 1995, respectively, for
the release of shares held in escrow pursuant to the Merger in November 1994.
Operating income, excluding this charge, was $1,925,000 ($.25 per share) and
$139,000 ($.02 per share), respectively.
The increase in net income was due to the Company's success in
significantly increasing its portfolio of automotive finance contracts when
comparing the 1996 quarter to the 1995 quarter. Contracts acquired during the
1996 quarter totaled $56,000,000 compared to $29,660,000 for the 1995 quarter.
This increase positively affected the Company's earnings and was reflective of
the Company's success in the establishment and continuous expansion of its
network of automobile dealerships participating in the Company's financing
programs.
The following table presents the principal components of the Company's
net income for the quarters ended March 31, 1996 and 1995:
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31
($000's)
-------------------------------------------
1996 1995 CHANGE
------ ------ -------
<S> <C> <C> <C>
Net Interest Income $2,407 $1,593 $814
Provisions for Credit Losses (891) (317) (574)
Gains on Sales of Contracts
and Other Income 4,807 155 4,652
Operating and Other Expenses (3,331) (1,207) (2,124)
------ ------ ------
Income Before Income Taxes 2,992 224 2,768
Provision for Income Taxes (1,174) (85) (1,089)
------ ------ ------
Net Income $1,818 $139 $1,679
</TABLE>
Net Interest Income
During the first quarter of 1996, 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
3.17%, from 11.64% to 8.47%, when compared to the same period of the preceding
year. This decrease was due primarily to a 4.50% decrease in the effective rate
earned on interest-earning assets, from 23.09% to 18.59%, offset slightly by a
decrease in the Company's effective cost rate from 11.45% to 10.12%, or 1.33%.
The decrease in the net interest spread rate in 1996 was primarily
attributable to, among other things, management's decision beginning in fourth
quarter of 1995 to cease the accretion to earnings of purchase discount
considered necessary to absorb future credit losses and instead allocate this
amount to the reserve available for credit losses.
10
<PAGE>
Additionally, the net interest spread rate for the first quarter of
1995 included earnings on bulk purchased portfolios with higher effective
interest rates than the rates earned on automotive finance contracts. Although
the net interest spread rate earned in the current period on automotive finance
contracts is less than the net interest spread rate earned in prior periods on
bulk purchased portfolios, the increase in volume of automotive finance
contracts originated during 1996 more than offset the decrease in net interest
spread rate and resulted in a positive contribution to earnings when comparing
first quarter 1996 to first quarter 1995.
The decrease in the net interest earnings rate was offset slightly by
a decrease in the effective rate paid on interest-bearing borrowings. This
decrease was due to lower cost financing facilities obtained during the latter
half of 1995 which were used to finance the purchase of automotive finance
contracts.
The effects of these factors upon the Company's net interest income
are reflected within the following table (dollars in thousands):
<TABLE>
<CAPTION>
Effective Yield Earned/ Average Balance Interest Income/
Rate Paid Interest Expense
--------------------------- ------------------------------ ---------------------------
1996 1995 Change 1996 1995 Change 1996 1995 Change
------ ------ ------- -------- ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Finance Contracts 18.59% 23.09% -4.50% $105,288 $43,873 $61,415 $4,892 $2,532 $ 2,360
Borrowings 10.12% 11.45% -1.33% 98,254 32,773 65,481 2,485 939 1,546
Net Interest Spread 8.47% 11.64% -3.17% 2,407 1,593 814
Net Interest Margin 9.14% 14.53% -5.39%
</TABLE>
Change Due to
---------------------------
Rate Volume Total
------ ------ ------
Finance Contracts ($4,734) $7,094 $2,360
Borrowings (1,312) 2,858 1,546
Net Interest Spread (3,423) 4,237 814
Given existing market rates of interest, management expects that the
effective yields earned on automotive finance contracts will remain relatively
stable within the short-term. Net interest income in the future will be
dependent upon, among other things, the effective rate paid on the Company's
borrowings as well as the volume of originated finance contracts.
To a large extent, the Company's ability to support its growth in the
rate of the acquisition and origination of automotive finance contracts in the
future will depend upon, among other things: (i) continued expansion of the
Company's network of dealers and other sources of auto loans and leases ; (ii)
maintaining underwriting guidelines relative to credit decisions which are
intended to result in reduction in delinquency experience and credit losses; and
(iii) the availability of adequate sources of capital (on terms and at rates
that provide an acceptable interest spread) to finance the growth of the
Company's business.
Provision for Possible Credit Losses
The provision for possible credit losses which totaled $891,000 for
the quarter ended March 31, 1996, reflects an increase of $574,000 over the
amount of $317,000 reported for the 1995 quarter. This increase related
primarily to provisions recorded for an estimate of possible losses which may be
incurred in connection with the increased volume of new automotive finance
contracts acquired during 1996 versus the 1995 period.
During the fourth quarter of 1995, management elected to discontinue
the accretion to earnings of the purchase discount considered necessary to
absorb future credit losses and instead allocate this amount to the Company's
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.
11
<PAGE>
Management periodically reviews the adequacy of the reserve for credit
losses and considers whether the level of reserve is sufficient to cover any
losses of the carrying value through an evaluation of the collateral pledged for
the finance contracts, 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.
Gains on Sales of Contracts and Other Income
Gains on sales of loans totaled $2,997,000 during the quarter ended
March 31, 1996 compared to $0 for the quarter ended March 31, 1995. During 1996,
the Company completed its second securitization transaction whereby the Company
pooled approximately $41 million of its portfolio of originated automobile loans
for sale in a privately placed transaction.
Gains from the sale of loans in securitization transactions have
provided a significant portion of the net income of the Company during the
fourth quarter of 1995 and the first quarter of 1996, and are likely to continue
to represent a significant portion of the Company's net income during all
periods in which securitization transactions are undertaken.
Fee and other income increased $1,655,000 from $155,000 during the
quarter ended March 31, 1995 to $1,810,000 during the quarter ended March 31,
1996, due in part to an increase in servicing fee income as the Company
continues to securitize more of its portfolio of automotive finance contracts.
The Company has also recognized increases in insurance commissions from the sale
of policies, late fee income, and operating lease income all due to increase in
volume. Other income also includes approximately $300,000 of gross profit on the
sale of vehicles through the Company's retail sales facility for the quarter
ended March 31, 1996.
Operating and Other Expenses
Operating and other expenses increased $2,124,000 to $3,331,000 during
the quarter ended March 31, 1996 from $1,207,000 during the quarter ended March
31, 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. This increase was also attributable to an
increase in depreciation and amortization as the Company continued to build its
infrastructure in order to meet the needs of a growing organization and asset
base. Expressed as a percentage of average total portfolio being serviced by the
Company during the quarter, operating and other expenses decreased to 8.1%
during the quarter ending March 31, 1996 from 8.8% during the quarter ended
March 31, 1995, on an annualized basis.
Management expects that operating expenses will continue to increase
as the size of its portfolio of automotive finance contracts increases. However,
management does not expect that the rate of growth of these expenses will be
proportionate with the rate of growth of the Company's revenues or the increase
in its automotive finance contracts.
12
<PAGE>
Delinquency Experience
The following table summarizes delinquency experience on total
finance contracts owned by the Company, as well as automotive finance contracts
serviced for others, at March 31, 1996 and 1995, and December 31, 1995.
<TABLE>
<CAPTION>
As of March 31, As of December 31, 1995
1996 1995
-------------------------- -------------------------
Dollars Contracts Dollars Contracts Dollars Contracts
------------ --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total finance contracts serviced $181,004,844 16,736 $57,767,411 4,788 $145,936,162 13,337
Delinquencies:
60-89 Days delinquent:
Automotive finance contracts serviced 4,160,871 402 297,060 31 3,916,286 395
Other finance contracts serviced 144,963 10 425,100 9 202,097 9
Total 4,305,834 412 722,160 40 4,118,383 404
90 Days or more delinquent:
Automotive finance contracts serviced 3,810,495 424 220,002 25 2,789,773 272
Other finance contracts serviced 1,076,599 32 358,981 11 948,031 5
Total 4,987,095 456 578,983 36 3,737,804 297
Total 60 Days or more delinquent:
Automotive finance contracts serviced 7,971,367 82 517,062 56 6,706,059 667
Other finance contracts serviced 1,221,562 42 784,081 20 1,150,128 34
Total 9,192,929 868 1,301,143 76 7,856,187 701
</TABLE>
The following table summarizes delinquency experience on total finance
contracts as a percent of gross servicing portfolio outstanding at March 31,
1996 and 1995 and December 31 1995:
<TABLE>
<CAPTION>
As of March 31, As of December 31, 1995
1996 1995
--------------------- ----------------------
Dollars Contracts Dollars Contracts Dollars Contracts
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
60-89 Day delinquent:
Automotive finance contracts
serviced 2.30% 2.40% 0.51% 0.65% 2.68% 2.96%
Other finance contracts serviced 0.08% 0.06% 0.74% 0.19% 0.14% 0.07%
Total 2.38% 2.46% 1.25% 0.84% 2.82% 3.03%
90 Days or more delinquent:
Automotive finance contracts
serviced 2.11% 2.53% 0.38% 0.52% 1.91% 2.04%
Other finance contracts serviced 0.59% 0.19% 0.62% 0.23% 0.65% 0.19%
Total 2.70% 2.72% 1.00% 0.75% 2.56% 2.23%
Total delinquencies over 60 days:
Automotive finance contracts
serviced 4.41% 4.93% 0.89% 1.17% 4.60% 5.00%
Other finance contracts serviced: 0.67% 0.25% 1.36% 0.42% 0.78% 0.25%
Total 5.08% 5.18% 2.25% 1.59% 5.38% 5.25%
</TABLE>
Delinquency for the three months ended March 31, 1996 and
December 31, 1995 excludes four under-performing, bulk purchase portfolios
acquired during 1994 and 1995 and accounted for using a cost recovery method
whereby income is recognized only for the excess of collections received over
the purchase price basis of the loans. At March 31, 1996, principal balance and
book balance of these portfolios amounted to $3,080,128 and $1,708,914,
respectively. Delinquency for March 31, 1995 excludes two under-performing, bulk
purchase portfolios acquired during the 1994 year with principal balance and
book balance amounting to $2,584,975 and $1,063,709, respectively, at March 31,
1995.
13
<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 contract 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.
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.
Net Credit Loss Experience
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 conditions differ
substantially from the assumptions used in making the evaluation.
14
<PAGE>
The following table summarizes charge-off experience, net of
recoveries from carrying value, on total finance contracts owned by the Company,
as well as automotive finance contracts serviced for others by the Company, for
the quarter ended March 31, 1996 and the year ended December 31, 1995 (dollars
in thousands).
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Principal Outstanding $183,272 $148,500
Average principal outstanding 165,861 91,943
Net losses:
Automotive finance contracts $ 1,632 $ 2,730
Other finance contracts - 432
--------- ---------
Total net losses $ 1,632 $ 3,162
========= =========
Net losses as a percent of ending finance contracts serviced:
Automotive finance contracts (1) 3.56% 1.84%
Other finance contracts (1) - 0.29%
--------- --------
Total net losses (1) 3.56% 2.13%
========= ========
Net losses as a percent of average finance contracts serviced:
Automotive finance contracts (1) 3.94% 2.97%
Other finance contracts (1) - 0.47%
---------- ---------
Total net losses (1) 3.94% 3.44%
========== =========
</TABLE>
- - ---------------
(1) The percentages for the quarter ended March 31, 1996 have been annualized.
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 operation
of the Company's sales lot will improve charge-off experience by reducing the
losses realized upon the disposition of repossessed automobiles.
15
<PAGE>
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 (1)
--------------------------------------------------------------------------------------------
June Sept. Dec. March June Sept. Dec. March
1994 1994 1994 1995 1995 1995 1995 1996
---- ---- ----- ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Contracts Acquired $3.26 $7.12 $14.76 $29.66 $34.79 $43.97 $50.61 $52.3
($ in millions)
Number 423 848 1,490 2,657 2,889 3,524 3,965 4,262
</TABLE>
- - ---------------
(1) Table excludes certain dealer advances.
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 for between 80-90% of the principal balance or 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 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 has been facilitated by its ability to successfully complete
private placements of debt and equity securities and gain access to increasing
sources of financing.
Through March 31, 1996, the Company had secured its principal sources
of working capital through senior indebtedness comprised of a series of debt
participation interests, revolving lines of credit, and a repurchase facility;
as well as subordinated junior indebtedness consisting of unsecured subordinated
debentures and advances from an officer, and the proceeds from the sale of
shares of common stock in a private placement transaction.
16
<PAGE>
As of March 31, 1996, the respective balances due under the Company's
outstanding indebtedness were as follows:
Senior Indebtedness:
<TABLE>
<S> <C> <C>
Lines of Credit and Warehouse
Facilities........................................................ $40,676,000
Debt Participation Interests........................................ 37,907,000
Subordinated Indebtedness:
Private Placement of Convertible
Subordinated Debentures
Issued: $23,825,000
Less: Converted to Common Stock (8,260,000) $15,565,000
--------- -----------
Unsecured Advances.................................................. 2,962,000
-----------
</TABLE>
Lines of Credit, Warehouse Facilities and Debt Participations
In March 1993, the Company entered into a $20,000,000 three-year
revolving credit facility with Congress Financial Corporation (the "Congress
Credit Facility") which has recently been extended to March 1997. The Congress
Credit Facility bears interest at 2% over the prime rate of CoreStates Bank,
N.A. (10.25% at March 31, 1996), payable monthly, and is secured by certain
lease contracts receivable and consumer and mortgage loans receivable. As of
March 31, 1996, 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 General Electric Capital Corporation (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 mortgage loans receivable. In March 1995,
the GECC Credit Facility available line was increased to $25,000,000 and at
March 31, 1996, the Company had drawn down approximately $19,216,000 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.
During September 1995, the Company 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 (90%) of the outstanding principal balance. These
advances are accounted for as financing transactions characterized as
borrowings. 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
17
<PAGE>
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. At March 31,
1996, the Company had $21,428,000 outstanding under the Repurchase Facility.
The Company uses the Repurchase Facility to fund additional growth in
loan and lease receivables with the intent to pool and securitize these
receivables. Towards that end, during the first quarter of 1996, the Company
completed its second sale of approximately $41 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.
The Repurchase Facility includes certain financial and operational
covenants including, among other things, the required maintenance of a minimum
net worth of $30 million, 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. At
March 31, 1996, the Company was in compliance with all relevant financial and
operational covenants. Management continues to closely monitor the performance
of its loan portfolios in order to insure compliance with all financial and
operational covenants.
An event of default is also deemed to occur under the Repurchase
Facility in the event of the death of two of the Company's executive officers
(or if both of these individuals cease serving as officers) or if the Company is
unable to securitize at least $250 million of loans over a two year period, with
at least $100 million securitized in any 365 day period.
The Congress Credit Facility and the GECC Credit Facility are also
subject to certain financial and operational covenants that are not inconsistent
with those imposed under the Repurchase Facility.
During May 1996, the Company entered into a $75 million repurchase
facility with Cargill Financial Corporation, (the "Additional Repurchase
Facility"), with terms and conditions similar to the Repurchase Facility. The
Additional Repurchase Facility will also be used to warehouse loans prior to the
Company pooling these loans for sale through securitization transactions.
Management believes that the Additional Repurchase Facility provides the Company
with the necessary liquidity to continue its role of growth in the acquisition
of its non-prime automotive finance contracts.
Since inception, the Company has also secured a significant amount of
its working capital through debt participation interests. As of March 31, 1996,
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 $37,566,000. Approximately $36,669,000
million of the Fairfax financing has been utilized to acquire automotive finance
contracts. These amounts are subject to interest at prime plus 2.5% fixed at the
time of the financing. The remaining approximately $897,000 of the Fairfax
Financing has been utilized to acquire bulk purchase portfolios prior to 1995.
These amounts are subject to interest at fixed rates from 10% to 13.5%.
In general, under the terms of the participation agreements, principal
payments on the agreements are tied to the payments received from the secured
contracts and loans receivable. Interest is due monthly. Proceeds received from
contracts financed by Fairfax are first paid to Fairfax to the extent of any
unpaid principal and interest due on the participations. Thereafter, proceeds
are allocated to a reserve account until certain balances are achieved and the
remainder is paid to the Company.
18
<PAGE>
Under the Company's participation agreements, collections received from
loans securing the participations are deposited into 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 the principal balances under the
participation agreements are reduced to certain levels.
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 period
from April 1995 through first quarter of 1996, the Company completed the
offering and sale in private placement transactions of $23,825,000 of 9%
Convertible Subordinated Debentures (the "Debentures") and 2,136,125 Common
Stock Purchase Warrants (the "Warrants"), as well as 176,500 shares of its
common stock which yielded net proceeds of $2,100,950. During April 1996, the
Company also completed the institutional placement of $10,000,000 of Debentures
and 675,000 Warrants.
Through May 1, 1996, an aggregate of $9,400,000 principal amount of the
Debentures was converted into 1,068,585 shares of Common Stock. The principal
amount and accrued interest due under the remainder of the Debentures is
convertible into shares of Common Stock (at the option of the holders thereof)
in accordance with the following table:
Principal Amount(1) Conversion Price
- - ------------------- ----------------
$3,000,000................... Lower of: (i) $9.00; or (ii) 75% of average
closing bid price upon conversion.
$8,425,000................... Lower of: (i) $11.00; or (ii) 85% of average
closing bid price upon conversion.
$10,000,000.................. Lower of: (i) $12.00; or (ii) 80% of closing
bid price upon conversion.
$3,000,000................... $12.50
- - -----------
$24,425,000
===========
- - ------------
(1) As of May 1, 1996
19
<PAGE>
Once the stock achieves the trading prices identified in the table
provided below, the Company has the right to serve notice of the redemption of
the Debentures for the principal amount thereof (together with accrued
interest). 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).
Principal Amount (1)(2)(3) Redemption Price
- - ------------------------- ----------------
$6,425,000 .......................................... $18
$5,000,000 .......................................... $25
- - ----------
$11,425,000
===========
- - -------------
(1) As of May 1, 1996.
(2) $3,000,000 of the Debentures are not subject to a call for redemption,
in which event, however, the Debentures become non-interest bearing.
(3) $10,000,000 of the Debentures are not subject to a call for redemption.
Although management is optimistic that a substantial number of the
remaining Debentures will be subject to conversion prior to their maturity, a
possibility exists that the Company could be required to allocate liquidity and
capital resources to the retirement of these Debentures.
The respective maturity dates of the Debentures are identified in the
following table:
Principal Amount (1) Maturity Date
- - -------------------- --------------
$3,000,000................................... September 1996
$2,500,000................................... November 1996
$3,425,000.................................... December 1996
$10,000,000.................................. October 1997
$3,000,000................................... July/August 1998
$2,500,000................................... January 1999
- - ----------
$24,425,000
===========
- - ---------------
(1) As of May 1, 1996.
20
<PAGE>
The Company may also secure certain amounts of working capital in the
future from the exercise of existing Warrants. In connection with its financing
activities since April 1995, the Company has issued 2,811,125 Warrants at
exercise prices between $9.00-$15.00. Upon complete exercise of the Warrants,
the Company would receive aggregate gross proceeds of $32,023,375.
Exercise of the Warrants is largely a function of the spread between the
trading price of the Company's Common Stock and the exercise price of the
Warrants. Thus, there can be no assurances that the future trading prices of the
Company's Common Stock will be sufficient to encourage the exercise of a
material number of the Warrants in the near term, if at all.
Exercise of the Warrants is also a function of other factors such as the
term of the Warrant or any associated rights of redemption. Principally all of
the outstanding Warrants shall remain outstanding until 1998 and 1999, although
some remain outstanding until 2001. In addition, certain of the Warrants 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 will have the likely effect of causing the exercise of these
Warrants.
The Company has granted certain registration rights to the holders of the
Debentures and the Warrants. Pursuant to these rights, the Company has agreed to
include the resale of approximately 3.1 million shares, issuable, if at all,
upon the conversion of the Debentures and the exercise of the Warrants in a
registration statement to be filed with the Securities and Exchange Commission
on or before May 15, 1996. Management is presently in discussion with the
holders of the Debentures and Warrants in order to modify these arrangements so
that the underlying shares become eligible for public trading on an incremental
basis. These discussions have not yet been concluded as of the date of this
Report. Registration rights with respect to the remainder of the Debentures and
Warrants are scheduled to commence during December 1996 and January 1997.
The Company's liquidity and capital resources may continue to be
affected by the trading price of the Company's Common Stock. Trading prices at
levels consistently higher than the conversion prices of the Debentures will
likely facilitate conversion of the Debentures in the near term. A conversion
of the Debentures would positively affect the Company's liquidity by obviating
the need to repay the principal amount (and in certain
21
<PAGE>
instances, interest) due thereunder. Trading at reduced prices, however, will
make less likely conversion of the Debentures, thus requiring the Company to
allocate certain of its capital resources towards the retirement of the
Debentures at maturity.
As of the date of this Report, the Company had outstanding 6,838,107
shares of Common Stock. By virtue of the registration rights, commencing May 15,
1996, unless an alternative arrangement is concluded, the Company will be caused
to register for resale purposes of up to approximately 3.1 million shares
issuable, if at all, upon the conversion of the Debentures and exercise of the
Warrants. This may have the effect of substantially increasing the number of
shares eligible for public trading. 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.
Securitization of Loans
During the fourth quarter of 1995, the Company completed its first sale
of approximately $40 million of automotive loans in a privately-placed
securitization transaction. This was followed by a further sale of
approximately $41 million of automotive loans in a second securitization
transaction that occurred during March 1996. Both of these transactions
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 transactions were used to reduce the
Company's outstanding warehouse facilities, thereby making the warehouse
facilities available to fund the acquisition of additional automotive
contracts. The Company expects to complete future securitizations, generally,
on a quarterly basis. However, there can be no assurances to that effect.
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. Periodically, 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 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
The Company may be required to repay advances from its chief executive
officer, the balance of which was $2,962,000 as of March 31, 1996. During
April, 1996, the Company executed a note in favor of the chief executive
officer for this amount with interest payable at 11%. The note matures October
31, 1997.
22
<PAGE>
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 automobile finance
contracts receivable. Pursuant to an option agreement entered into on March 31,
1996 (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.
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 which may either involve
private placements to targeted institutional purchasers or underwritten public
offerings. 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. However,
there can be no assurances that the Company will secure additional sources of
financing.
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, are adequate to
meet the Company's liquidity requirements for its existing operations.
Continued growth of the Company's operations will remain subject to expansion
of the Company's sources of financing. 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.
23
<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.
24
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is hereby made to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1995.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
25
<PAGE>
Exhibit No. Description
----------- -----------
4.5 Securities Purchase Agreement between NAL
Financial Group, Inc., Beneficial Standard
Life Insurance Company and Great American
Reserve Insurance Company dated as of
April 23, 1996
4.6 9% Subordinated Convertible Debenture in the
principal amount of $5,000,000 payable to
Great American Reserve Insurance Company
4.7 9% Subordinated Convertible Debenture in the
principal amount of $5,000,000 payable to
Beneficial Standard Life Insurance Company
4.8 Common Stock Purchase Warrant granted to
Conseco, Inc. ($12.625)
4.9 Common Stock Purchase Warrant granted to
Conseco, Inc. ($14.52)
4.10 Stockholders' Agreement entered into as of
April 23, 1996 among NAL Financial Group
Inc., Beneficial Standard Life Insurance
Company and Great American Reserve Insurance
Company
4.11 Registration Rights Agreement between NAL
Financial Group Inc. and Conseco, Inc.
4.12 Registration Rights Agreement between NAL
Financial Group Inc., Beneficial Standard
Life Insurance Company and Great American
Reserve Life Insurance Company
10.22 Master Repurchase Agreement between Cargill
Financial Services Corporation ("Cargill")
and Autorics, Inc. dated as of May 1, 1996
10.23 Annex to Master Repurchase Agreement and
related exhibits between Cargill and
Autorics, Inc. dated as of May 1, 1996
10.24 Multi-Party Custodial and Servicing Agreement
by and among Cargill, Autorics, Bankers Trust
Company and NAL Acceptance Corporation dated
as of May 1, 1996
10.25 Receivables Purchase Agreement among NAL
Acceptance Corporation, Autorics, Inc. and
Autorics II, Inc. dated as of March 8, 1996
10.26 Sales and Servicing Agreement among NAL Auto
Trust 1996-1, Autorics II, Inc., NAL
Acceptance Corporation and Bankers Trust
Company dated as of March 8, 1996
10.27 Indenture between NAL Auto Trust 1996-1 and
Bankers Trust Company dated as of March 8,
1996
10.28 Trust Agreement between Autorics, II, Inc.
and Wilmington Trust Company dated as of
March 8, 1996
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant caused this Form 10-QSB to be signed on its behalf by the
undersigned, thereunto duly authorized.
NAL FINANCIAL GROUP INC.
BY: Dated: May 14, 1996
---------------------------------------
Robert R. Bartolini
Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)
BY: Dated: May 14, 1996
--------------------------------------
Robert J. Carlson
Vice President, Finance
(Principal Financial
and Accounting Officer)
26
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
4.5 Securities Purchase Agreement between NAL
Financial Group, Inc., Beneficial Standard
Life Insurance Company and Great American
Reserve Insurance Company dated as of
April 23, 1996
4.6 9% Subordinated Convertible Debenture in the
principal amount of $5,000,000 payable to
Great American Reserve Insurance Company
4.7 9% Subordinated Convertible Debenture in the
principal amount of $5,000,000 payable to
Beneficial Standard Life Insurance Company
4.8 Common Stock Purchase Warrant granted to
Conseco, Inc. ($12.625)
4.9 Common Stock Purchase Warrant granted to
Conseco, Inc. ($14.52)
4.10 Stockholders' Agreement entered into as of
April 23, 1996 among NAL Financial Group
Inc., Beneficial Standard Life Insurance
Company and Great American Reserve Insurance
Company
4.11 Registration Rights Agreement between NAL
Financial Group Inc. and Conseco, Inc.
4.12 Registration Rights Agreement between NAL
Financial Group Inc., Beneficial Standard
Life Insurance Company and Great American
Reserve Life Insurance Company
10.22 Master Repurchase Agreement between Cargill
Financial Services Corporation ("Cargill")
and Autorics, Inc. dated as of May 1, 1996
10.23 Annex to Master Repurchase Agreement and
related exhibits between Cargill and
Autorics, Inc. dated as of May 1, 1996
10.24 Multi-Party Custodial and Servicing Agreement
by and among Cargill, Autorics, Bankers Trust
Company and NAL Acceptance Corporation dated
as of May 1, 1996
10.25 Receivables Purchase Agreement among NAL
Acceptance Corporation, Autorics, Inc. and
Autorics II, Inc. dated as of March 8, 1996
10.26 Sales and Servicing Agreement among NAL Auto
Trust 1996-1, Autorics II, Inc., NAL
Acceptance Corporation and Bankers Trust
Company dated as of March 8, 1996
10.27 Indenture between NAL Auto Trust 1996-1 and
Bankers Trust Company dated as of March 8,
1996
10.28 Trust Agreement between Autorics, II, Inc.
and Wilmington Trust Company dated as of
March 8, 1996
27 Financial Data Schedule
SECURITIES PURCHASE AGREEMENT
Dated as of April 23, 1996
between
NAL FINANCIAL GROUP INC.
and
BENEFICIAL STANDARD LIFE INSURANCE COMPANY
and
GREAT AMERICAN RESERVE INSURANCE COMPANY
<PAGE>
TABLE OF CONTENTS
Section Page
1. Definitions.................................................. 1
2. The Purchase of Securities
2.1. Sale and Purchase of Securities................. 9
2.2. Use of Proceeds................................. 9
3. Conditions Precedent
3.1. Conditions to the Purchase...................... 9
4. Representations and Warranties of the Purchasers
4.1. Organization....................................11
4.2. Due Execution, Delivery and Performance
of the Agreement................................12
4.3. Investment Representation.......................12
5. Representations and Warranties of the Company
5.1. Corporate Existence; Compliance with Law........13
5.2. Executive Offices...............................13
5.3. Subsidiaries....................................13
5.4. Corporate Power; Authorization;
Enforceable Obligations.........................14
5.5. SEC Documents...................................14
5.6. Absence of Certain Changes or Events............15
5.7. Interim Financial Statements....................16
5.8. Projections...........................................16
5.9. Ownership of Property...........................16
5.10. No Default......................................17
5.11. Employment Matters..............................17
5.12. Other Ventures..................................17
5.13. Taxes...........................................17
5.14. ERISA...........................................18
5.15. No Litigation...................................20
5.16. Employment and Labor Agreements.................20
5.17. Other Contracts.......................................20
5.18. Patents, Trademarks, Copyrights and
Licenses........................................21
5.19. Licenses........................................21
5.20. Capital Structure of the Company................21
5.21. Investment Company Act..........................22
5.22. Underwriting Guidelines.........................22
6. Financial Statements and Information
6.1. Reports and Notices.............................23
6.2. Certificates; Other Information.................25
6.3. 1996 Projections................................26
(i)
<PAGE>
Section Page
7. Affirmative Covenants
7.1. Maintenance of Existence and Conduct
of Business......................................26
7.2. Payment of Obligations...........................27
7.3. Books and Records................................27
7.4. Litigation.......................................27
7.5. Insurance........................................27
7.6. Compliance with Law..............................27
7.7. Agreements.......................................27
7.8. Employee Plans...................................28
7.9. Access...........................................29
7.10. Board Representation; Board Observer.............30
8. Negative Covenants
8.1. Mergers, Etc.....................................30
8.2. Amendment of Certificate of Incorporation........31
8.3. Investments; Loans and Advances..................31
8.4. Indebtedness.....................................31
8.5. Employee Loans...................................31
8.6. Transactions with Affiliates.....................32
8.7. Liens............................................32
8.8. Capital Expenditures.............................32
8.9. Sales of Assets..................................32
8.10. Cancellation of Indebtedness.....................32
8.11. ERISA............................................33
8.12. Tax Sharing......................................33
8.13. Bartolini Note...................................33
9. Events of Default; Rights and Remedies
9.1. Events of Default................................33
9.2. Remedies.........................................36
10. Triggering Events
10.1. Events...........................................36
10.2. Payment Acceleration.............................36
10.3. Redemption.......................................36
10.4. Funds Unavailable................................37
10.5. Notice...........................................37
11. Right of First Refusal........................................38
12. Securities Law Matters
Legends..........................................38
13. Miscellaneous
13.1. Press Releases...................................39
13.2. Expenses...............................................39
13.3. Assignment.......................................39
13.4. Remedies.........................................39
13.5. Waiver of Jury Trial.............................39
(ii)
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Section Page
13.6. Arbitration......................................39
13.7. Severability.....................................40
13.8. Parties..........................................40
13.9. Conflict of Terms................................40
13.10. Governing Law....................................40
13.11. Notices..........................................40
13.12. Survival.........................................42
13.13. Section Titles...................................42
13.14. Counterparts.....................................42
EXHIBIT A - FORM OF DEBENTURE
EXHIBIT B - FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT C - FORM OF STOCKHOLDERS' AGREEMENT
EXHIBIT D - FORM OF OPINION OF COUNSEL
(iii)
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of April 23, 1996 between NAL
FINANCIAL GROUP INC., a Delaware corporation (the "Company") and BENEFICIAL
STANDARD LIFE INSURANCE COMPANY, a California life insurance corporation, and
GREAT AMERICAN RESERVE INSURANCE COMPANY, a Texas life insurance corporation
(together, the "Purchasers").
W I T N E S S E T H:
WHEREAS, upon the terms and conditions hereinafter provided, the
Company has agreed to issue and sell to the Purchasers, and the Purchasers have
each agreed to purchase from the Company, $5,000,000 of 9% Subordinated
Convertible Debentures of the Company in substantially the form attached hereto
as Exhibit A (the "Debentures") convertible into shares of Common Stock, $.15
par value, of the Company (the "Common Stock") (the Debentures and the Common
Stock are together referred to herein as the "Securities").
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
I. DEFINITIONS
In addition to the defined terms appearing above, capitalized terms
used in this Agreement shall have (unless otherwise provided elsewhere in this
Agreement) the following respective meanings when used herein:
"Affiliate" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether of record or
beneficially, or as a trustee, guardian or other fiduciary, 5 percent or more of
the Stock having ordinary voting power in the election of directors of such
Person, (ii) each Person that controls, is controlled by or is under common
control with such Person or any Affiliate of such Person, or (iii) each of such
Person's officers, directors and general partners. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise. For purposes of this definition the Purchasers shall not be deemed to
be an Affiliate of the Company or any of the Affiliates of the Company.
"Agreement" shall mean this Securities Purchase Agreement, including
all amendments, modifications and supplements hereto and any appendices,
exhibits or schedules to any of the foregoing, and shall refer to this
Securities Purchase Agreement as the same may be in effect at the time such
reference becomes operative.
<PAGE>
"Ancillary Agreements" shall mean any supplemental agreement,
undertaking, instrument, document or other writing executed by the Company or
any of its Subsidiaries or by any of their Stockholders as a condition to
purchasing any of the Securities under this Agreement or otherwise in connection
herewith, including, without limitation, the Stockholders' Agreement.
"Bartolini" shall mean Robert R. Bartolini, Chairman of the
Board, President and Chief Executive Officer of the Company.
"Bartolini Note" shall mean that certain Promissory Note of even date
herewith issued by the Company to Bartolini in the principal amount of
$2,919,000.
"Board" shall mean the Company's Board of Directors.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a
day on which banks are required or permitted to be closed in the State of
Indiana.
"Capital Lease" shall mean any obligation that is required to be
classified and accounted for as a capital lease on the face of a balance sheet
of such person prepared in accordance with generally accepted accounting
principles; and the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with generally accepted accounting principles.
"Capital Expenditures" shall mean all payments for any fixed assets or
improvements (whether paid in cash or accrued as liabilities, and including in
all events all amounts expended or capitalized under capital leases and any
expenditures financed by anybody during that period), including, without
limitation, computer software and computer software licenses, or for
replacements, substitutions or additions thereto, that have a useful life of
more than one year and which are required to be capitalized under GAAP.
"Charges" shall mean all Federal, state, county, city, municipal,
local, foreign or other governmental taxes at the time due and payable, levies,
assessments, charges, liens, claims or encumbrances upon or relating to (i) the
Obligations, (ii) the Company or any of its Subsidiaries' employees, payroll,
income or gross receipts, (iii) the Company or any of its Subsidiaries'
ownership or use of any of its assets, or (iv) any other aspect of the Company
or any of its Affiliates' business, in each case including any and all interest
and penalties.
"Closing Date" shall mean that date upon which the Closing occurs and
shall be a date agreed upon between the Company and the Purchasers and "Closing"
shall mean the moment on the Closing Date on which the purchase and sale of the
Securities is made.
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"Conseco Director" shall mean the individual designated by the
Purchasers pursuant to the Stockholders' Agreement to be elected to the Board.
"Consolidated Net Worth" of a Person shall mean, at any date of
determination, the total assets less the total liabilities of such Person and
its Subsidiaries on a consolidated basis, determined in accordance with GAAP.
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time.
"ERISA Affiliate" shall mean, with respect to the Company, any trade or
business (whether or not incorporated) under common control with the Company and
which, together with the Company, are treated as a single employer under Section
414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to the Company or any ERISA
Affiliate, (i) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan; (ii) the withdrawal of the Company, any of its Subsidiaries
or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (iii) the complete or partial withdrawal of the Company,
any of its Subsidiaries or any ERISA Affiliate from any Multiemployer Plan; (iv)
the filing of a notice of intent to terminate a Title IV Plan or the treatment
of a plan amendment as a termination under Section 4041 of ERISA; (v) the
institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by
the PBGC; (vi) the failure to make required contributions to a Qualified Plan;
or (vii) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or the imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA.
"Event of Default" shall have the meaning assigned to it in
Section 9.1 hereof.
"Financials" shall mean the financial statements referred to
in Section 6.1(a) and (b) hereof.
"Financing Agreements" shall mean the following agreements, together
with the related documents thereto, in each case as such agreements may be
amended (including any amendment and restatement
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thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, refunding, replacing or
otherwise restructuring all or any portion of the indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agent, lender or group of lenders: Loan and Security Agreement between
Congress Financial Corporation and the Company, dated March 16, 1993; the
Amended and Restated Loan and Security Agreement between General Electric
Capital Corporation and NAL Acceptance Corporation, dated September 28, 1994;
the Loan Purchase Agreement between Fairfax Savings Bank and the Company, dated
October 6, 1994; the Participation Agreement between Fairfax Savings, FSB and
NAL Acceptance Corporation, dated December 14, 1993; the Master Repurchase
Agreement between Greenwich Capital Financial Products, Inc. and Autorics, Inc.,
dated September 5, 1995; the Trust Agreement between Autorics II, Inc. and
Wilmington Trust, dated December 1, 1995; the Trust Agreement between Autorics
II, Inc. and Wilmington Trust dated March 21, 1996; the Master Equipment Lease
Agreement between MITEL Financial Services and the Company, dated November 6,
1995; the Participation Agreement, dated February 25, 1993 between Fairfax
Savings, FSB and NAL Acceptance Corporation for the Jackson loan portfolio; the
Participation Agreement, dated July 16, 1993, between Fairfax Savings Bank, FSB
and NAL Acceptance Corporation for the Premier Bank portfolio; the Participation
Agreement, dated December 14, 1993 between Fairfax Savings, FSB and NAL
Acceptance Corporation for the Williamette loan portfolio; the Participation
Agreement, dated April 6, 1994, between Fairfax Savings Bank, FSB and NAL
Acceptance Corporation for the Premier Motors loan portfolio; the Participation
Agreement, dated May 31, 1994 between Fairfax Savings, FSB and NAL Acceptance
Corporation for the Park Finance of Broward loan portfolio; the Participation
Agreement, dated March 31, 1994 between Fairfax Savings, FSB and NAL Acceptance
Corporation for the DAIWA loan portfolio; the Participation Agreement, dated May
3, 1995, between Fairfax Savings Bank, FSB and NAL Acceptance Corporation for
the Medical Equipment Resources leases; the Participation Agreement, dated
February 22, 1995, between Fairfax Savings, FSB and NAL Acceptance Corporation
for the February loan originations.
"Fiscal Year" shall mean the calendar year.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof, and any agency, department or other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Indebtedness" of any Person shall mean (i) all indebtedness
of such Person for borrowed money (including, without limitation,
4
<PAGE>
reimbursement and all other obligations with respect to surety bonds, letters of
credit and bankers' acceptances, whether or not matured), but not including
accounts payable and other obligations to trade creditors and normal operating
expenses characterized as liabilities incurred in the ordinary course of
business, (ii) all obligations evidenced by notes, bonds, debentures or similar
instruments (except where such instruments evidence repayment of amounts
referred to in subparagraph (i)), (iii) all Capital Lease Obligations excluding
$250,000, and (iv) in the case of the Company, the Obligations.
"Investment Guidelines" shall have the meaning assigned to such term in
Section 8.3 hereof.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto.
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"Licenses" shall have the meaning assigned to such term in
Section 5.20; individually a "License."
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, Charge, claim, security interest,
easement or encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Code or comparable law of any jurisdiction).
"Material Adverse Effect" shall mean any material adverse effect on the
business, assets, operations, or financial or other condition of the Company or
any of its Subsidiaries.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which the Company, any of its Subsidiaries
or any ERISA Affiliate is obligated to make, or has made or been obligated to
make, contributions on behalf of participants who are employed by any of them.
"Obligations" shall mean any principal, interest, premium, penalties,
fees and other liabilities and obligations due under the documentation governing
any Indebtedness (including interest after the commencement of any bankruptcy,
insolvency, rehabilitation, liquidation, conservation, supervision or similar
proceedings).
"Other Taxes" shall mean any present or future stamp or documentary
taxes or any other sales, transfer, excise or property
5
<PAGE>
taxes, charges or similar levies that arise from any payment made with respect
to this Agreement or the Ancillary Agreements and any other agreements and
instruments contemplated thereby.
"Parent" shall mean, as to any corporate entity, the Person who owns
100 percent of the capital stock of such entity.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"Pension Plan" shall mean an employee pension benefit plan, as defined
in Section (3)(2) of ERISA (other than a Multiemployer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which the
Company, any of its Subsidiaries or, if a Title IV Plan, any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Permitted Encumbrances" shall mean the following encumbrances: (i)
Liens for taxes or assessments or other governmental charges or levies, either
not yet due and payable or to the extent that nonpayment thereof is permitted by
the terms of this Agreement; (ii) pledges or deposits securing obligations under
worker's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (iii) pledges or deposits securing bids,
tenders, contracts (other than contracts for the payment of money) or leases to
which the Company or any of its Subsidiaries is a party as lessee made in the
ordinary course of business; (iv) deposits securing public or statutory
obligations of the Company or any of its Subsidiaries; (v) workers', mechanics,
suppliers', carriers', warehousemen's or other similar liens arising in the
ordinary course of business and securing indebtedness aggregating not in excess
of $50,000 at any time outstanding, not yet due and payable; (vi) deposits
securing or in lieu of surety, appeal or customs bonds in proceedings to which
the Company or any of its Subsidiaries is a party, provided that such deposits
could not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect; (vii) pledges or deposits effected by the Company or
any of its Subsidiaries as a condition to obtaining or maintaining any License
of such Person; (viii) any attachment or judgment lien, unless the judgment it
secures shall not, within 60 days after the entry thereof, have been discharged
or execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay; (ix) all Liens securing
Senior Indebtedness; and (x) zoning restrictions, easements, licenses, or other
restrictions on the use of real property or other minor irregularities in title
(including leasehold title) thereto, so long as the same do not materially
impair the use, value, or marketability of such real property, leases or
leasehold estates.
6
<PAGE>
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, entity or
government (whether Federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
"Plan" shall mean an employee benefit plan, as defined in Section 3(3)
of ERISA, which the Company or any of its Subsidiaries maintains or makes or is
obligated to make contributions to on behalf of participants who are or were
employed by any of them.
"Qualified Plan" shall mean an employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is intended to be tax-qualified under
Section 401(a) of the IRC, and which the Company, any of its Subsidiaries or any
ERISA Affiliate maintains or makes or is obligated to make contributions to on
behalf of participants who are or were employed by any of them.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement by and among the Company and the Purchasers dated as of the date
hereof and in substantially the form attached hereto as Exhibit B.
"Reserves" shall mean such reserves as may be established by the
Company or any of its Subsidiaries or as may otherwise be required in accordance
with GAAP.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall mean all reports, schedules, forms, statements
and other documents required to be filed with the SEC.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Senior Indebtedness" shall mean (i) all Indebtedness under the
Financing Agreements whether or not existing or hereinafter incurred and whether
fixed or contingent, (ii) all Indebtedness the proceeds of which are used for
the purchase and origination of automobile leases and loans which provide the
security for such Indebtedness whether or not existing or hereinafter incurred
and whether fixed or contingent, and (iii) all other Indebtedness secured by
purchase money security interests whether perfected or unperfected.
"Stockholders' Agreement" shall mean that certain Stockholders'
Agreement (in substantially the form attached hereto as Exhibit C), dated as of
April 23, 1996, by and among the Company, and the persons set forth on the
Schedule of Existing
7
<PAGE>
Stockholders thereto, the Purchasers and Conseco, Inc., and all amendments or
modifications thereto.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended).
"Stockholders" shall mean, with respect to any Person, all of the
holders of Stock of such Person immediately following the Closing Date.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of 50 percent or more of the outstanding Stock
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person, and (b) any partnership in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of 50 percent or
more.
"Taxes" shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding taxes imposed on or measured by the net income of the
Purchasers by the jurisdictions under the laws of which the Purchasers are
organized or is engaged in business (other than by reason of the transactions
contemplated by this Agreement or the Ancillary Agreements) or any political
subdivision thereof.
"Title IV Plan" shall mean a Pension Plan, other than a Multiemployer
Plan, which is covered by Title IV of ERISA.
"Transactions" shall mean the purchase and sale of the Securities as
described in the recitals to this Agreement, and all transactions related or
incidental thereto.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
amount, if any, of the sum of (i) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions in effect under such
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Title IV Plan, and (ii) for a period of five (5) years following a transaction
reasonably likely to be covered by Section 4069 of ERISA, the liabilities
(whether or not accrued) that could be avoided by the Company, any of its
Subsidiaries or any ERISA Affiliate as a result of such transaction.
"Withdrawal Liability" shall mean, at any time, the aggregate amount of
the liabilities, if any, pursuant to Section 4201 of ERISA, and any increase in
contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given such term in
accordance with GAAP and all financial computations hereunder shall be computed,
unless otherwise specifically provided herein, in accordance with GAAP
consistently applied and consistent with the Financials. That certain terms or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing.
The words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the Exhibits and Schedules
hereto, as the same may from time to time be amended, modified or supplemented
and not to any particular section, subsection or clause contained in this
Agreement. As used herein, the word "or" is not exclusive.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
II. THE PURCHASE OF SECURITIES
2.1. Sale and Purchase of Securities. (a) Subject to the terms and
conditions herein, on the Closing Date, the Purchasers each agree to purchase
from the Company, and the Company agrees to issue and sell to each of the
Purchasers, Debentures for a purchase price of $5,000,000 each. The Debentures
shall be issued in denominations specified by the Purchasers and shall be issued
in the name of each respective Purchaser. The Debentures shall be in the forms
attached hereto as Exhibit A. The Closing shall take place in New York, New York
on the Closing Date. On the Closing Date, the Company will deliver to Purchasers
the Debentures sold by the Company to each respective Purchaser, against
delivery by each of the Purchasers of the purchase price to the Company.
2.2. Use of Proceeds. The Company shall use the proceeds of the sale of
the Securities to purchase and originate automobile loans and leases and fund
working capital needs in connection with such purchases and originations and for
other purposes set forth in
9
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the Company's projections which have been delivered to the
Purchasers.
III. CONDITIONS PRECEDENT
3.1. Conditions to the Purchase. Notwithstanding any other provision of
this Agreement and without affecting in any manner the rights of the Purchasers
hereunder, the Company shall have no rights under this Agreement (but shall have
all applicable obligations hereunder), and the Purchasers shall not be obligated
to make the purchases of the Securities hereunder, unless and until each of the
following conditions precedent shall have been fulfilled or waived by the
Purchasers, and the Company shall have delivered, where applicable, in form and
substance satisfactory to the Purchasers, and (unless otherwise indicated) each
dated the Closing Date:
(a) All of the representations and warranties of the Company contained
in this Agreement or in any of the Ancillary Agreements shall be correct in all
material respects as though made on and as of the Closing Date, except to the
extent that any such representation or warranty expressly relates to an earlier
date and for changes therein permitted or contemplated by this Agreement.
(b) The Purchasers shall have received a written certification by the
chief financial officer of the Company as to the matters set forth in Section
3.1(a) hereof.
(c) A favorable opinion of counsel for the Company substantially in the
form attached hereto as Exhibit D, it being understood that to the extent that
such opinion of counsel shall rely upon any other opinion of counsel, each such
other opinion shall be in form and substance satisfactory to the Purchasers and
shall provide that the Purchasers may rely thereon.
(d) Resolutions of the Board certified by the Secretary or Assistant
Secretary of the Company, to be dated, duly adopted and in full force and effect
as of the Closing Date, authorizing (i) the consummation of the Transactions,
(ii) specific officers to execute and deliver the Ancillary Agreements and (iii)
appointing the Conseco Director to the Board.
(e) Certificates of the secretary or an assistant secretary of the
Company, dated the Closing Date, as to the incumbency and signatures of the
officers or representatives of such entity executing this Agreement and the
Ancillary Agreements and any other certificates or other documents to be
delivered pursuant hereto or thereto, together with evidence of the incumbency
of such secretary or assistant secretary.
(f) Governmental certificates, dated the most recent
practicable date prior to the Closing Date, with telegram updates
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where available, showing that each of the Company and its Subsidiaries is
organized and in good standing in the jurisdiction of its organization and is
qualified as a foreign corporation and in good standing in all other
jurisdictions in which it is qualified to transact business.
(g) Each consent, license and approval required in connection with (i)
the execution, delivery, performance, validity and enforceability of this
Agreement, the Ancillary Agreements, and the consummation of the Transactions
and (ii) the conduct by each of the Company and its Subsidiaries of its business
after the Closing Date; such consents, licenses and approvals shall be in full
force and effect and be satisfactory in form and substance to the Purchasers.
(h) A copy of the certificate of incorporation and all amendments
thereto of each of the Company, Autorics II, Inc., Autorics, Inc. and NAL
Acceptance Corporation and copies of its by-laws all of which shall be certified
by the secretary or assistant secretary of each respective corporation as true
and correct as of the Closing Date.
(i) The Purchasers shall have received the Financials, projections and
such other financial and other information regarding the Company and its
Subsidiaries as the Purchasers deem appropriate.
(j) A certificate of the Chief Executive Officer of the Company,
satisfactory in form and substance to the Purchasers, stating that, as of the
Closing Date, no change has occurred in the business, assets, operating
properties, operations, prospects, financial or other condition of the Company
or any of its Subsidiaries since December 31, 1995 which would result in a
Material Adverse Effect.
(k) The Stockholders' Agreement.
(l) The Registration Rights Agreement.
(m) The Debenture.
(n) Bartolini shall have exchanged the current promissory note issued
by the Company to Bartolini for a new note a copy of which is attached hereto as
part of Schedule 3.1(n).
(o) Drafts of the financial statements of the kind referred to in
Section 6.1(a) hereof for the period ended March 31, 1996.
(p) Such additional information and materials as the
Purchasers may request.
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IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers, with respect to each Purchaser, individually and not
jointly, as to matter related to each respective Purchaser, make the following
representations and warranties to the Company, each and all of which shall
survive the execution and delivery of this Agreement and the Closing until the
Securities are no longer held by the Purchasers:
4.1 Organization. The Purchasers are corporations duly organized,
validly existing, and in good standing under the laws of the state of their
respective incorporation and each have full corporate power and authority to
enter into this Agreement and to perform its obligations hereunder. The
Purchasers are wholly owned subsidiaries of Conseco, Inc.
4.2 Due Execution, Delivery and Performance of the Agreement. The
execution, delivery, and performance of this Agreement (i) have been duly
authorized by all requisite corporate action by each respective Purchaser, and
(ii) will not violate the Certificate or Articles of Incorporation or Bylaws of
each respective Purchaser or any provision of any material indenture, mortgage,
agreement, contract, or other instrument to which it is a party or by which it
or any of its material properties or assets are bound, or be in conflict with,
result in a breach of or constitute (upon notice or lapse of time or both) a
default under any such indenture, mortgage, agreement, contract, or other
instrument. This Agreement is a legal, valid, and binding obligation of each of
the Purchasers enforceable against each respective Purchaser in accordance with
its terms.
4.3 Investment Representation. The Purchasers represent and warrant
that each respective Purchaser is purchasing the Securities for their own
account, for investment purposes and not with a view to the distribution
thereof. The Purchasers agree that they will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of any of the
Securities (or solicit any offers to buy, purchase, or otherwise acquire or take
a pledge of any of the Securities), except in compliance with the Securities Act
of 1933, as amended (the "Act"), the rules and regulations thereunder and any
applicable state securities laws.
The Purchasers each recognize that investing in the Securities involves
a high degree of risk, and each Purchaser is in a financial position to hold the
Securities indefinitely and is able to bear the economic risk and withstand a
complete loss of its investment in the Securities. Each Purchaser is a
sophisticated investor and is capable of evaluating the merits and risks of
investing in the Company. The Purchasers have had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management, have been given full and complete access to information concerning
the Company, and have utilized
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such access to its satisfaction for the purpose of obtaining information or
verifying information and have had the opportunity to inspect the Company's
operation. Purchasers have had the opportunity to ask questions of, and receive
answers from the management of the Company (and, except for any of the Company's
investment bankers, any person acting on its behalf) concerning the Securities
and the terms and conditions of this Agreement and the agreements and
transactions contemplated hereby, and to obtain any additional information as
the Purchasers may have requested in making its investment decision. Each
Purchaser is an "accredited investor", as defined by Regulation D promulgated
under the Act. Each Purchaser understands that the Securities have not been, and
will not be registered under the Securities Act by reason of their issuance by
the Company in a transaction exempt from the registration requirements of the
Act; and that the Securities must be held by the Purchasers indefinitely unless
a subsequent disposition thereof is registered under the Act or is exempt from
registration.
Notwithstanding anything to the contrary in this Agreement, no
investigation by the Purchasers shall affect the representations and warranties
of the Company under this Agreement or contained in any document, certificate or
other writing furnished or to be furnished to Purchasers in connection with the
transactions contemplated hereby.
V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce the Purchasers to purchase the Securities as herein provided,
the Company makes the following representations and warranties to the
Purchasers, each and all of which shall survive the execution and delivery of
this Agreement and the Closing until the date eighteen months from the date
hereof:
5.1. Corporate Existence; Compliance with Law. Each of the Company and
its subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of its state or country of incorporation; (ii) is
duly qualified to do business and is in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not have a Material
Adverse Effect); (iii) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease, and to conduct its
business as now, heretofore and proposed to be conducted; (iv) has all material
licenses, permits, consents or approvals from or by, and has made all material
filings with, and given all material notices to, all Governmental Authorities
having jurisdiction, to the extent required for such ownership, operation and
conduct (including, without limitation, the consummation of the Transactions)
(v) is in
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compliance with its certificate or articles of incorporation, as applicable, and
by-laws; and (vi) is in compliance with all applicable provisions of law where
the failure to comply would have a Material Adverse Effect.
5.2. Executive Offices. The current location of the Company's and each
of its Subsidiaries' executive offices and principal place of business is set
forth on Schedule 5.2 hereto.
5.3. Subsidiaries. There currently exist, and upon consummation of the
Transactions there shall exist, no Subsidiaries of the Company other than as set
forth on Schedule 5.3 hereto, which sets forth such Subsidiaries, together with
their respective jurisdictions of organization, and the authorized and
outstanding capital Stock of each such Subsidiary, by class and number and
percentage of each class legally owned by the Company or a Subsidiary of the
Company or any other Person, or to be owned on the Closing Date. There are no
options, warrants, rights to purchase or similar rights covering capital Stock
of any such Subsidiary.
5.4. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by the Company of this Agreement and the
Ancillary Agreements and all instruments and documents to be delivered by the
Company: (i) are within the Company's and its Subsidiaries' corporate power;
(ii) have been, or by the Closing Date will be, duly authorized by all necessary
or proper corporate action; (iii) are not in contravention of any provision of
the Company's or its Subsidiaries' respective certificates or articles of
incorporation, as applicable, or by-laws; (iv) will not violate, in any material
respect, any law or regulation, including any and all Federal and state
securities laws, or any order or decree of any court or governmental
instrumentality; (v) except as set forth on Schedule 5.4, will not, in any
material respect, conflict with or result in the breach or termination of,
constitute a default under or accelerate any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other material
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their property is bound;
and (vi) will not result in the creation or imposition of any Lien upon any of
the property of the Company or any of its Subsidiaries. Except as set forth on
Schedule 5.4, no consent, waiver or authorization of, or filing with, any Person
(including, without limitation, any Governmental Authority), which has not been
obtained as of the Closing Date is required in connection with the execution,
delivery, performance by, or validity of this Agreement or the Ancillary
Agreements, except those which the failure to obtain will not have a Material
Adverse Effect. All such consents, waivers, authorizations and filings, except
as set forth on Schedule 5.4, have been obtained or made. On or prior to the
Closing Date, each of this Agreement and the Ancillary Agreements shall have
been duly
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executed and delivered for the benefit of or on behalf of the Company or its
Subsidiaries, as the case may be, and each shall then constitute a legal, valid
and binding obligation of the Company or its Subsidiaries, to the extent they
are parties thereto, enforceable against them in accordance with its terms.
5.5. SEC Documents. (i) The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since November 30,
1994 (such reports, schedules, forms, statements and other documents are
hereinafter referred to as the "SEC Documents"); (ii) as of their respective
dates, the SEC Documents complied, in all material respects, with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such SEC Documents, and none of the SEC
Documents as of such dates contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; and (iii) the consolidated financial statements
of the Company included in the SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of unaudited statements, as permitted by Item 310 of Regulation S-B)
and fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited quarterly statements, to normal year-end audit adjustments).
5.6. Absence of Certain Changes or Events. Except as disclosed in the
SEC Documents filed and publicly available prior to the date of this Agreement
(the "Filed SEC Documents") or in Schedule 5.6 attached hereto, since the date
of the most recent audited financial statements included in the Filed SEC
Documents, the Company and its subsidiaries have conducted their business only
in the ordinary course, and there has not been (i) any change which would have a
material adverse effect on the business, financial condition or results of
operations of the Company and its subsidiaries taken as a whole, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
outstanding capital stock, (iii) any split, combination or reclassification of
any of its outstanding capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its outstanding capital stock, (iv) (x) any granting by the
Company or any of its subsidiaries to any executive officer or other employee of
the
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Company or any of its subsidiaries of any increase in compensation, except in
the ordinary course of business consistent with prior practice or as was
required under employment agreements in effect as of the date of the most recent
audited financial statements included in the Filed SEC Documents, (y) any
granting by the Company or any of its subsidiaries to any such executive officer
or other employee of any increase in severance or termination pay, except in the
ordinary course of business consistent with prior practice or as was required
under any employment, severance or termination agreements in effect as of the
date of the most recent audited financial statements included in the Filed SEC
Documents or (z) any entry by the Company or any of its subsidiaries into any
employment, severance or termination agreement with any such executive officer
or other employee or (v) any change in accounting methods, principles or
practices by the Company or any of its subsidiaries materially affecting its
assets, liability or business, except insofar as may have been required by a
change in generally accepted accounting principles.
5.7. Interim Financial Statements. The Company has delivered or will
deliver to Purchasers true and complete copies of the unaudited balance sheet of
the Company at January 31 and February 29, 1996 and related statements of income
and cash flow statements for the periods then ended (the "Interim Financial
Statements"). The Interim Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved, except for the disclosure of footnotes. The balance sheets
included in the Interim Financial Statements fairly present the financial
position, assets and liabilities (whether accrued, absolute, contingent or
otherwise) of the Company at the dates indicated, and the statements of income
fairly present the results of operations of the Company for the periods
indicated. The Interim Financial Statements contain all adjustments, which are
solely of a normal recurring nature, necessary to present fairly the financial
position and results of operations for the period then ended. To the knowledge
of the Company, the draft unaudited consolidated balance sheet, income statement
and statement of cash inflows and outflows of the Company for the month ending
March 31, 1996 and quarter ended March 31, 1996 delivered by the Company at
Closing pursuant to the Agreement present fairly in accordance with GAAP, except
as may be indicated in any auditor's review report (subject to normal year end
adjustments), the consolidated financial position, the consolidated results of
operations and statement of cash inflows and outflows of the Company as at the
end of such periods and for the period then ended based upon management's review
and analysis to date.
5.8. Projections. The financial projections delivered to the Purchasers
are attached hereto as Schedule 5.8. No facts to the knowledge of the Company
exist which would result in any material change in any of such projections. The
projections are based upon good faith estimates derived from reasonable
expectations at the
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time such projections were made, all of which were fair in light of current
conditions at the time they were made, reflect the assumptions stated therein,
and reflect the reasonable estimate of the Company of the results of operations
and other information projected therein on a GAAP basis.
5.9. Ownership of Property. (a) Except as disclosed in Schedule 5.9(a),
the Company and its Subsidiaries do not own any real property.
(b) All real property leased by the Company or any of its Subsidiaries
is set forth on Schedule 5.9(b). Each of such leases is valid and enforceable in
accordance with its terms and is in full force and effect. Except leases or real
property that is the subject of a security interest in favor of the Company,
neither the Company nor the applicable Subsidiary nor any other party to any
such lease is in default of its obligations thereunder or has delivered or
received any notice of default under any such lease, nor has any event occurred
which, with the giving of notice, the passage of time or both, would constitute
a default under any such lease, except for any default which would not have a
Material Adverse Effect.
5.10. No Default. Neither the Company nor any of its subsidiaries is in
default, nor to the knowledge of any of the Company or any of its subsidiaries
is any third party in default, under or with respect to any contract, agreement,
lease or other instrument, including, but not limited to, the Financing
Agreements, to which any of the Company or its Subsidiaries is a party, except
for any default which (either individually or collectively with other defaults
arising out of the same event or events) would not have a Material Adverse
Effect. No Default or Event of Default exists on the date hereof.
5.11. Employment Matters. Hours worked by and payments made to
employees of the Company or any of its Subsidiaries are not in violation of the
Fair Labor Standards Act or any other applicable law dealing with such matters
which would have a Material Adverse Effect. All payments due from the Company or
any of its Subsidiaries on account of employee health and welfare insurance
which would have a Material Adverse Effect if not paid have been paid or accrued
as a liability on the books of the Company or such Subsidiary.
5.12. Other Ventures. Except as set forth in the Filed SEC Documents or
on Schedule 5.12 hereto, neither the Company nor any of its Subsidiaries is
engaged in any joint venture or partnership with any other Person.
5.13. Taxes. Except as set forth on Schedule 5.13 hereto, all Federal,
state, local and foreign tax returns, reports and statements required to be
filed (including, for all purposes of
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this Section 5.13, any filed or to be filed on a consolidated, combined or
unitary basis with any other company) by each of the Company or any of its
subsidiaries have been timely filed with the appropriate Governmental Authority
and such returns, reports and statements were true, correct and complete in all
material respects. All Charges and other impositions due and payable have been
paid prior to the date on which any fine, penalty, interest or late charge may
be added thereto for nonpayment thereof, or any such fine, penalty, interest or
late charge has been paid. Proper and accurate amounts have been withheld by
each of the Company and its Subsidiaries from their respective employees for all
periods in full and complete compliance with the tax, social security and
unemployment withholding provisions of applicable Federal, state, local and
foreign law and such withholdings have been timely paid to the respective
Governmental Authorities. The Federal income tax returns of each of the Company
and its subsidiaries have been examined by the IRS or the period covered by such
tax returns has been closed by applicable statute of limitations, for all
periods set forth on Schedule 5.13. The state income or franchise tax returns of
each of the Company and its subsidiaries have been examined by the relevant
Governmental Authority or the period covered by such tax returns has been closed
by applicable statute of limitations, in each case for all periods set forth on
Schedule 5.13. Except as set forth on Schedule 5.13 hereto, all deficiencies
asserted as a result of such examinations or otherwise have been paid, fully
settled or adequately provided for in the Financials and no issue has been
raised by a Federal, state, local or foreign Governmental Authority in any such
examination which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period. No other deficiency for any Charges has been proposed, asserted
or assessed against any of the Company or its subsidiaries by any Federal,
state, local or foreign Governmental Authority. Except as set forth on Schedule
5.13 hereto, no Federal, state, local or foreign tax audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Charges or tax returns of any of the Company or its subsidiaries.
Except as described in Schedule 5.13 hereto, none of the Company or its
subsidiaries has executed or filed with the IRS or any other Governmental
Authority any agreement or other document extending, or having the effect of
extending, the period of time within which to file a tax return, report or
statement which has not since been filed or the period for assessment or
collection of any Charges. None of the Company or its subsidiaries has agreed or
has been requested to or has an application pending to make any adjustment under
IRC Section 481(a) by reason of a change in accounting method or otherwise.
Except as set forth on Schedule 5.13 hereto, neither the Company nor any of its
Subsidiaries is a party to, bound by or has any obligation under any tax sharing
or similar agreement or arrangement.
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5.14. ERISA. (a) Schedule 5.14 lists all Plans maintained or
contributed to by the Company or any of its Subsidiaries and all Qualified Plans
maintained or contributed to by any ERISA Affiliate, and of those plans listed
separately identifies the Title IV Plans, Multiemployer Plans, unfunded Pension
Plans and welfare plans, as defined in Section 3(l) of ERISA, providing retiree
benefits.
(b) Each Qualified Plan has been determined by the IRS to qualify under
Section 401 of the IRC, and the trusts created thereunder have been determined
to be exempt from tax under the provisions of Section 501 of the IRC, and to the
best knowledge of the Company nothing has occurred which would cause the loss of
such qualification or tax-exempt status.
(c) Each Plan set forth on Schedule 5.14 is in compliance in all
material respects with the applicable provisions of ERISA and the IRC, including
the filing of reports required under the IRC or ERISA which are true and correct
in all material respects as of the date filed, and with respect to each Plan,
other than a Qualified Plan, all required contributions and benefits, have been
paid in accordance with the provisions of each such Plan.
(d) None of the Company, its Subsidiaries or any ERISA Affiliate, with
respect to any Qualified Plan, has failed to make any contribution or pay any
amount due as required by Section 412 of the IRC or Section 302 of ERISA or the
terms of any such plan.
(e) Except as set forth on Schedule 5.14, no Title IV Plan has any
Unfunded Pension Liability.
(f) Except as set forth on Schedule 5.14, with respect to all Plans
which are welfare plans, as defined in Section 3(1) of ERISA, providing retiree
benefits the present value of future anticipated expenses pursuant to the latest
actuarial projections of liabilities does not exceed $100,000.
(g) Except as set forth on Schedule 5.14, with respect to Pension
Plans, other than Qualified Plans, the present value of the liabilities for
current participants thereunder using reasonable interest assumptions does not
exceed $50,000.
(h) Except as set forth on Schedule 5.14, there has been no, nor is
there reasonably expected to occur any, ERISA Event or event described in
Section 4068 of ERISA with respect to any Title IV Plan.
(i) Except set forth on Schedule 5.14, there are no pending, or to the
knowledge of the Company or any of its Subsidiaries, threatened claims, actions
or lawsuits (other than claims for benefits in the normal course), asserted or
instituted against (i) any Plan or its assets, (ii) any fiduciary with respect
to any Plan
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or (iii) the Company, any of its Subsidiaries or any ERISA Affiliate with
respect to any Plan.
(j) Except as set forth on Schedule 5.14, none of the Company, any of
its Subsidiaries or any ERISA Affiliate has incurred or reasonably expects to
incur any Withdrawal Liability (and no event has occurred which, with the giving
of notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 of ERISA as a result of a complete or partial withdrawal from a
Multiemployer Plan.
(k) Except as set forth in Schedule 5.14, none of the Company, any of
its Subsidiaries or any ERISA Affiliate has engaged in a transaction which
resulted or could result in any liability under Section 4069 of ERISA.
(l) Except as set forth on Schedule 5.14, no plan which is a welfare
benefit plan, as defined in Section 3(1) of ERISA, provides for continuing
benefits or coverage for any participant or any beneficiary of a participant
after such participant's termination of employment (except as may be required by
Section 4980B of the IRC and at the sole expense of the participant or the
beneficiary of the participant) which would result in a liability in an amount
which would have a Material Adverse Effect. The Company, its Subsidiaries and
each ERISA Affiliate have complied with the notice and continuation coverage
requirements of Section 4980B of the IRC and the regulations thereunder, except
where the failure to comply would not result in any Material Adverse Effect.
(m) Neither the Company nor any of its Subsidiaries has engaged in a
prohibited transaction, as defined in Section 4975 of the IRC or Section 406 of
ERISA, in connection with any Plan, which would subject the Company or any of
its Subsidiaries (after giving effect to any exemption) to a material tax on
prohibited transactions imposed by Section 4975 of the IRC or any other material
liability.
5.15. No Litigation. Except as set forth in the Filed SEC Documents or
on Schedule 5.15 hereto, no material action, claim or proceeding is now pending
or, to the knowledge of the Company or any of its subsidiaries, threatened
against any of the Company or any of its subsidiaries, at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any
Federal, state, local or foreign government or of any agency or subdivision
thereof, or before any arbitrator or panel of arbitrators nor to the knowledge
of any of the Company or any of its subsidiaries does a state of facts exist
which is reasonably likely to give rise to such proceedings. None of the matters
set forth therein questions the validity of any of this Agreement or the
Ancillary Documents or any action taken or to be taken pursuant thereto, or
would have either individually or in the aggregate a Material Adverse Effect.
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5.16. Employment and Labor Agreements. Except as set forth the Filed
SEC Documents, there are no employment, consulting, servicing or management
agreements with respect to management of the Company or any of its Subsidiaries
and there are no collective bargaining agreements or other labor agreements
covering any employees of the Company or any of its Subsidiaries. A true and
complete copy of each such agreement has been furnished to the Purchasers.
5.17. Other Contracts. Schedule 5.17 attached hereto or the Filed SEC
Documents lists each agreement, contract, lease, sublease, promissory note or
evidence of indebtedness (whether written or oral) that involves the payment or
potential payment by or to the Company or any of its Subsidiaries of more than
One Hundred Thousand Dollars ($100,000) or that is otherwise individually
material to the business of the Company or such Subsidiary.
To the Company's knowledge, each of the agreements, contracts,
commitments, leases, plans and other instruments, documents and undertakings to
be listed in Schedule 5.17 in response to this Section is valid and enforceable
in accordance with its terms, except to the extent that (a) enforcement may be
limited by or subject to the principles of public policy and any bankruptcy and
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to or limited to creditors' rights generally and (b) the remedy
of specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court or
other similar entity before which any proceeding therefor may be brought. To the
knowledge of the Company, there does not exist any default by any third party to
any such agreement, contract, commitment, lease, plan or other instrument,
document or undertaking which default would have a Material Adverse Effect.
5.18. Patents, Trademarks, Copyrights and Licenses. Each of the Company
and its Subsidiaries own all material licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, and trade names
necessary to continue to conduct its business as heretofore conducted, now
conducted and proposed to be conducted, each of which is listed on Schedule 5.18
hereto. To the knowledge of the Company, the Company and its Subsidiaries
conduct their respective businesses without infringement or claim of
infringement of any license, patent, copyright, service mark, trademark, trade
name, trade secret or other intellectual property right of others, except where
such infringement or claim of infringement would not have a Material Adverse
Effect. There is no infringement or claim of infringement by others of any
material license, patent, copyright, service mark, trademark, trade name, trade
secret or other intellectual property right of the Company or any of its
Subsidiaries.
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5.19. Licenses. Schedule 5.19 attached hereto lists all of the
jurisdictions in which the Company or any of its Subsidiaries hold active
licenses, permits or authorizations to transact business (collectively, the
"Licenses"). Except as set forth on Schedule 5.19, no such License is the
subject of a proceeding for suspension or revocation or any similar proceedings
and to the Company's knowledge no such suspension or revocation has been
threatened by any licensing authority.
5.20. Capital Structure of the Company. The entire authorized capital
stock of the Company consists solely of 50,000,000 shares of common stock, par
value $.15 per share, of which 6,700,041 shares are issued and outstanding, and
10,000,000 shares of preferred stock, $1,000 par value, none of which are
outstanding. All of the issued and outstanding shares of capital stock of the
Company have been duly authorized, are not subject to preemptive rights and were
issued in full compliance with all federal, state and local laws, rules and
regulations. Except for warrants to purchase shares of Common Stock issued to
holders of convertible subordinated debentures of the Company, options to
purchase Common Stock and warrants to purchase Common Stock as set forth on
Schedule 5.20 hereto, the options issuable under the Company's Stock Option Plan
to purchase 600,000 shares of Common Stock and options to purchase 40,000 shares
of Common Stock granted to the directors of the Company, which have been
disclosed to the Purchasers by the Company, there are no outstanding or
authorized subscriptions, options, warrants, calls, commitments, agreements or
arrangements of any kind relating to the issuance, transfer, delivery or sale of
any additional shares of capital stock or other securities of the Company,
including, but not limited to, any right of conversion or exchange under any
outstanding security, agreement or other instrument. Except as set forth in
Schedule 5.20 hereto, there are no authorized or outstanding voting agreements,
voting trusts, proxies, stockholder agreements, rights to purchase, transfer
restrictions, or other similar arrangements with respect to any of the capital
stock of the Company. Except as set forth on Schedule 5.20 hereto, there are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the capital stock of the Company. Except as set forth on
Schedule 5.20, the Company has no indebtedness for dividends, interest or other
distributions declared or accumulated but unpaid with respect to any securities
of the Company. No Person has a claim arising out of a violation of any
preemptive rights of a stockholder of the Company, nor any claim based upon
ownership, repurchase or redemption of any shares of the Company's capital
stock.
5.21. Investment Company Act. The Company is not, and is not directly
or indirectly controlled by or acting on behalf of any Person which is, required
to register as an "investment company" under the Investment Company Act of 1940,
as amended.
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5.22. Underwriting Guidelines. Each automobile loan originated or
purchased by the Company since May 22, 1995 which is reflected on the balance
sheet and included in the securitization pools of the Company at March 31, 1996
was originated or purchased in accordance with the Company's underwriting
guidelines with such exceptions which, in the aggregate, do not have a Material
Adverse Effect. The Company's current underwriting guidelines are contained in
Schedule 5.22. Since March 31, 1996, the Company has originated or purchased
automobile loans and leases in accordance with the underwriting guidelines
contained in Schedule 5.22 with such exceptions which, in the aggregate, do not
have a Material Adverse Effect.
VI. FINANCIAL STATEMENTS AND INFORMATION
6.1. Reports and Notices. The Company covenants and agrees
that from and after the Closing Date until such time as no amounts
are owing under the Debentures, it shall deliver to the Purchasers:
(a) GAAP Financial Statements:
(i) As soon as possible and in any event within 45 days after the end
of the first three quarterly fiscal periods of each Fiscal Year commencing the
quarter ending June 30, 1996, within 30 days after the end of each month
commencing with April 1996 and within 15 days after the end of each month
commencing with January 1997 (A) a copy of the unaudited consolidated balance
sheets of the Company as of the close of each period and for the period from the
beginning of such fiscal year to the end of such period and the related
consolidated statements of income and cash flows (summarized for monthly
reports) of the Company for such periods, and (B) a copy of the unaudited
consolidated statements of income of the Company for such period, all prepared
in accordance with GAAP, except as indicated in the auditor's review report
(subject to normal year end adjustments) and accompanied by a certification of
the chief financial officer of the Company that all such financial statements
are complete and correct and present fairly in accordance with GAAP, except as
indicated in the auditor's review report (subject to normal year-end
adjustments) the consolidated financial position, the consolidated results of
operations and cash flows of the Company as at the end of such period and for
the period then ended, and a certification of the chief financial officer of the
Company that there was no Event of Default or event that with the passage of the
grace or cure periods specified in Section 9.1 hereof would result in an Event
of Default in existence as of such time. Each such statement shall set forth in
comparative form the figures for the corresponding periods of the preceding
fiscal year and for the corresponding current period reflected in the annual
budget of the Company and its Subsidiaries and shall include a brief management
report discussing all material variances from budget and recent developments
which management
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believes may in the future result in material variances from its budget.
(ii) Within 45 days after the close of each Fiscal Year commencing with
the Fiscal Year ending December 31, 1996, a copy of the respective unaudited
consolidated financial statements of the Company, consisting of consolidated
balance sheets and consolidated statements of income and retained earnings and
cash flows, as the case may be, and where applicable setting forth in
comparative form in each case the consolidated figures for the previous fiscal
year, which statements shall be prepared in accordance with GAAP, except as
indicated in the auditor's review report and accompanied by a certification of
the chief financial officer of the Company that all such financial statements
are complete and correct and present fairly in accordance with GAAP the
consolidated financial position, the consolidated results of operations and cash
flows of the Company as at the end of such year and for the period then ended
and a certification of the chief financial officer of the Company that there was
no Event of Default or event that with the passage of the grace or cure periods
specified in Section 9.1 hereof would result in an Event of Default in existence
as of such time. Each such statement shall set forth in comparative form the
figures for the corresponding periods of the preceding fiscal year and for the
corresponding periods reflected in the annual budget of the Company and its
Subsidiaries and shall include a brief management report discussing all
materials variances from budget and recent developments which management
believes may in the future result in material variances from its budget.
(iii) Within 90 days after the close of each Fiscal Year commencing
with the Fiscal Year ending December 31, 1996, a copy of the respective annual
audited consolidated financial statements of the Company, consisting of
consolidated balance sheets and consolidated statements of income and retained
earnings and cash flows, as the case may be, and where applicable setting forth
in comparative form in each case the consolidated figures for the previous
fiscal year, which financial statements shall be prepared in accordance with
GAAP, except as indicated in the auditor's review report, certified (only with
respect to the consolidated financial statements) without qualification by a
firm of independent certified public accountants of recognized national standing
selected by the Company with respect to the financial statements of the Company,
and accompanied by a certification of the chief financial officer of the Company
that all such financial statements are complete and correct and present fairly
in accordance with GAAP, except as indicated in the auditor's review report, the
consolidated financial position, the consolidated results of operations and cash
flows of the Company as at the end of such year and for the period then ended
that there was no Event of Default or event that with the passage of the grace
or cure periods specified in 9.1 hereof would result in an Event of Default in
existence as of such time. Each such statement shall set forth
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in comparative form the figures for the corresponding periods of the preceding
fiscal year and for the corresponding periods reflected in the annual budget of
the Company and its Subsidiaries commencing June 30, 1996 and shall include a
brief management report discussing all materials variances from budget and
recent developments which management believes may in the future result in
material variances from its budget.
(b) SEC Documents; Reports; Notices:
(i) Within 10 days after the Company's issuance or receipt thereof,
copies of (v) the preliminary prospectus and the effective prospectus contained
in any registration statement filed with the SEC or any state securities law
authority; (x) any annual or periodic report filed with the SEC; (y) any listing
application filed with any stock exchange or amendment thereof; and (z) each
annual report and all other reports or information, including proxy
solicitations, which the Company shall from time to time send to any of its
shareholders.
(ii) Within 30 days after month end for 1996 and within 15 days after
month end for 1997, a copy of the following reports: summarized rate/volume
analysis by type of finance contract; summarized expense analysis; static pool
analysis; delinquency and credit loss experience; and analysis of customer
applications, approvals and fundings. Each such report shall set forth in
comparative form the figures for the corresponding periods of the preceding
fiscal year and, to the extent applicable commencing June 30, 1996, for the
corresponding periods reflected in the annual budget or projections of the
Company and its Subsidiaries and shall include a brief management report
discussing all material variances from budget and recent developments which
management believes may in the future result in material variances from its
budget or projections.
(ii) Upon request, a copy of weekly origination and collection reports
and such other reports otherwise prepared for the Company's internal use.
(iii) Within 2 days, a copy of all other information or notices
delivered to the Company's lenders.
(c) As soon as practicable, but in any event within two (2) Business
Days after the Company becomes aware of the existence of any Event of Default,
telephonic or telegraphic notice specifying the nature of such Event of Default
or development or information, including the expected effect thereof, which
notice shall be promptly confirmed in writing within five (5) Business Days.
6.2. Certificates; Other Information. The Company covenants
and agrees that it shall deliver:
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(a) to the Purchasers, (x) not later than thirty (30) days prior to the
end of each Fiscal Year of the Company commencing with December 31, 1996, a copy
of the preliminary projections of the Company and its Subsidiaries of (i) the
monthly operating budget including, but not limited to, balance sheets,
statements of cash flow, statements of income, a detailed listing of material
assumptions made in preparing such budget, cost budgets by department and a
detail of receivable composition, and (ii) new business plans, such projections
and business plan to be acceptable to the Purchasers and to be accompanied by a
certificate of the chief financial officer of the Company to the effect that
such projections have been prepared on the basis of sound financial planning and
that such projections are based upon reasonable estimates and assumptions (which
estimates and assumptions shall be acceptable to the Purchasers), all of which
are fair in light of current conditions, have been prepared on the basis of the
assumptions stated therein, and reflect the reasonable estimate of the Company
of the results of operations and other information projected therein and (y) not
later than January 31 of each Fiscal Year a final form of the projections
delivered pursuant to Section 6.2(a)(x) hereof or a letter from the chief
financial officer of the Company certifying that the projections delivered
pursuant to Section 6.2(a)(x) hereof shall be treated as the final projections
for such Fiscal Year;
(b) to the Purchasers, immediately, notice of actual or threatened
suspension, termination or revocation of any material License of the Company or
any of its Subsidiaries by any Governmental Authority; and
(c) such other information respecting the Company's or any of its
Subsidiaries' business, prospects or financial condition or prospects as the
Purchasers may, from time to time, reasonably request.
6.3. 1996 Projections. The Company covenants and agrees to use its best
efforts to deliver, by June 30, 1996, an operating budget of the Company for the
last six months of 1996 in the form required by Section 6.2(a) hereof.
VII. AFFIRMATIVE COVENANTS
The Company covenants and agrees that, unless the Purchasers shall
otherwise consent in writing, from and after the date hereof and until the
earlier of the date (i) Purchasers have received a cash return on their
investments in the Company equal to the principal of the Debentures plus
interest of 9 percent per annum or (ii) no amounts are owing under the
Debentures:
7.1. Maintenance of Existence and Conduct of Business. The Company
shall and shall cause each of its Subsidiaries to (a) do or cause to be done all
things necessary to preserve and keep in full
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force and effect its corporate existence, including, without limitation, all
Licenses or similar qualifications required by them to engage in their business
in all jurisdictions in which they are at the time so engaged; (b) continue to
conduct its business substantially as now conducted or as otherwise permitted
hereunder; and (c) at all times maintain, preserve and protect all of its
trademarks and tradenames (if any), and preserve all the remainder of its
material property, in use or useful in the conduct of its business and keep the
same in good repair, working order and condition (taking into consideration
ordinary wear and tear) and from time to time make, or cause to be made, all
needful and proper repairs, renewals and replacements, betterments and
improvements thereto consistent with industry practices, so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times. The Company shall give written notice to the Purchasers prior to
the Company's or any of its Subsidiaries' ceasing to conduct business in any
country or state.
7.2. Payment of Obligations. (a) Subject to subsection (b) below, the
Company shall and shall cause each of its Subsidiaries to pay and discharge or
cause to be paid and discharged all its Indebtedness, as and when due and
payable (including any applicable grace period).
(b) The Company and each of its Subsidiaries shall have the right to
pay the Indebtedness arising under Section 7.2(a) and in good faith contest, by
proper legal actions or proceedings, the validity or amount of such Indebtedness
or claims.
7.3. Books and Records. The Company shall and shall cause each of its
Subsidiaries to keep adequate records and books of account with respect to its
business activities, in which proper entries, reflecting all of their financial
transactions, are made in accordance with GAAP and on a basis consistent with
the Financials.
7.4. Litigation. The Company shall notify the Purchasers in writing,
promptly upon learning thereof, of any material litigation or administrative
proceeding commenced or threatened against the Company or any of its
Subsidiaries.
7.5. Insurance. Schedule 7.5 lists in summary form all insurance
maintained by the Company and its Subsidiaries. The Company shall and shall
cause each of its Subsidiaries to continue to maintain such insurance. The
Company shall and shall cause each of its Subsidiaries to pay all insurance
premiums payable by them.
7.6. Compliance with Law. The Company shall and shall cause each of its
Subsidiaries to comply, in all material respects, with all Federal, state and
local laws and regulations applicable to it, including, without limitation,
ERISA, those regarding the
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collection, payment and deposit of employees' income, unemployment and social
security taxes and those relating to insurance or environmental matters, where
the failure to comply would have a Material Adverse Effect.
7.7. Agreements. The Company shall and shall cause each of its
Subsidiaries to perform, within all required time periods (after giving effect
to any applicable grace periods), all of its obligations and enforce all of its
rights under each material agreement to which it is a party. The Company shall
not and shall cause each of its Subsidiaries not to terminate or modify in any
manner adverse to any such party any provision of any such material agreement to
which it is a party except in the ordinary course of business, consistent with
past practice.
7.8. Employee Plans. (a) With respect to other than a Multiemployer
Plan, for each Qualified Plan hereafter adopted or maintained by the Company,
any of its Subsidiaries or any ERISA Affiliate, the Company shall (i) be in
possession of, or cause its Subsidiaries or ERISA Affiliates to be in possession
of, determination letters from the IRS to the effect that such Qualified Plan is
qualified within the meaning of Section 401(a) of the IRC; and (ii) from and
after the adoption of any such Qualified Plan, cause such plan to be qualified
within the meaning of Section 401(a) of the IRC and to be administered in all
material respects in accordance with the requirements of ERISA and Section
401(a) of the IRC.
(b) With respect to each welfare benefit plan, as defined in Section
3(1) of ERISA, hereafter adopted or maintained by the Company, any of its
Subsidiaries or any ERISA Affiliate, the Company shall comply, in all material
respects, or cause its Subsidiaries or ERISA Affiliates to comply, in all
material respects with the notice and continuation coverage requirements of
Section 4980B of the IRC and the regulations thereunder.
(c) (i) Promptly and in any event within thirty (30) days after the
Company, any of its Subsidiaries or any ERISA Affiliate knows or has reason to
know that any ERISA Event has occurred, and (ii) promptly and in any event
within ten (10) days after the Company, any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know that a request for a minimum funding
waiver under Section 412 of the IRC has been filed with respect to any Qualified
Plan, the Company shall furnish to the Purchasers a written statement of the
chief financial officer or other appropriate officer of the Company describing
such ERISA Event or waiver request and the action, if any, which the Company,
any of its Subsidiaries or any ERISA Affiliate proposes to take with respect
thereto and a copy of any notice filed with the PBGC or the IRS pertaining
thereto.
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(d) Promptly and in any event within thirty (30) days after the filing
thereof by the Company, any of its Subsidiaries or any ERISA Affiliate, the
Company shall furnish to the Purchasers a copy of each annual report (Form 5500
Series, including Schedule B thereto) with respect to each Pension Plan, and
upon request by the Purchasers, with respect to any other Plan.
(e) Promptly and in any event within thirty (30) days after receipt
thereof, the Company shall furnish to the Purchasers a copy of any adverse
notice, determination letter, ruling or opinion the Company, any of its
Subsidiaries or any ERISA Affiliate received from the PBGC, DOL or IRS with
respect to any Qualified Plan.
(f) Promptly and in any event within ten (10) Business Days after
receipt thereof, the Company shall furnish to the Purchasers a copy of any
correspondence the Company, any of its Subsidiaries or any ERISA Affiliate
receives from the plan sponsor (as defined by Section 4001(a)(10) of ERISA) of
any Multiemployer Plan concerning potential withdrawal liability of the Company,
any of its Subsidiaries or any ERISA Affiliate, or notice of any reorganization,
with respect to any Multiemployer Plan, together with a written statement of the
chief financial officer or other appropriate officer of the Company of the
action which the Company, any of its Subsidiaries or any ERISA Affiliate
proposes to take with respect thereto.
(g) Promptly and in any event within thirty (30) Business Days after
the adoption thereof, the Company shall furnish to the Purchasers notice of (i)
any amendment to a Title IV Plan which results in an increase in benefits or the
adoption of any new Title IV Plan, (ii) any amendment to a, or adoption of a
new, welfare benefit plan, as defined in Section 3(1) of ERISA, which the
Company or any of its Subsidiaries maintains, contributes or has an obligation
to contribute to, and which results in an increase in benefits for retirees or
new benefits for retirees, and (iii) any amendment to terminate a Title IV Plan
or treatment of a plan amendment as a termination under Section 4041 of ERISA.
(h) Promptly and in any event after receipt of written notice of
commencement thereof, the Company shall furnish to the Purchasers notice of any
action, suit or proceeding before any court or other governmental authority
affecting the Company, any of its Subsidiaries or any ERISA Affiliate with
respect to any Plan, except those which, in the aggregate, if adversely
determined could not have a Material Adverse Effect.
(i) Promptly and in any event within thirty (30) days after notice or
knowledge thereof, the Company shall furnish to the Purchasers notice that the
Company or any of its Subsidiaries, has become or may become subject to a
material tax on prohibited transactions imposed by Section 4975 of the IRC,
together with a copy of Form 5330.
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7.9. Access. (a) The Company shall and shall cause each of its
Subsidiaries to allow the Purchasers and any of its officers, employees and/or
agents, upon reasonable notice (unless a Default or Event of Default has
occurred and is continuing, in which case no notice shall be required),
exercisable as frequently as the Purchasers (or representative thereof)
reasonably determines to be appropriate, during normal business hours (or at
such other times as may reasonably be requested by the Purchasers or
representative), to inspect the properties and facilities of the Company or any
of its Subsidiaries and, at its own expense, to inspect, audit and make extracts
from all of the Company's or any of its Subsidiaries' records, files and books
of account. The Company shall obtain and deliver any document or instrument
reasonably necessary for the Purchasers (or representative), as any of them may
reasonably request, to obtain records from any service bureau maintaining
records for the Company or any of its Subsidiaries as any of the Purchasers may
reasonably request. The Company shall also maintain duplicate records or
supporting documentation on media, including, without limitation, computer tapes
and discs owned by the Company or any of its Subsidiaries.
(b) The Purchasers (or representative) shall not use and shall cause to
be kept confidential any non-public information obtained pursuant to this
Agreement and not otherwise disclose such information to any third party in
accordance with the Confidentiality and Non-Disclosure Agreement, dated April
22, 1996, by and among the Company and the Purchasers and the Company's insider
trading policies as reasonably constituted from time to time, except (i) as may
be required in connection with the administration of matters relating to this
Agreement, (ii) as may be required in connection with the enforcement of any
rights of the Purchasers pursuant to this Agreement or any of the Ancillary
Agreements, or (iii) as may otherwise be required by law.
7.10. Board Representation; Board Observer. The Company shall use its
best efforts to cause and maintain the election to the Board the Conseco
Director. The Conseco Director shall offer to tender his or her resignation
pursuant to the Stockholders' Agreement. In the event that the Conseco Director
is unable to attend any meeting of the Board of Directors of the Company, the
Company will permit any authorized representative of the Purchasers to attend
any such meeting as an observer who shall be an officer of Vice President or
above of a corporation wholly owned by Conseco, Inc.
VIII. NEGATIVE COVENANTS
The Company covenants and agrees that, without the Purchasers' prior
written consent, from and after the date hereof and until the earlier of the
date (i) Purchasers shall have received in cash a return on their investments in
the Company equal to the principal
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amount of the Debentures plus interest at 9 percent per annum or (ii) no amounts
are owing under the Debentures:
8.1. Mergers, Etc. Except with respect to the acquisition of Special
Finance, Inc. pursuant to that certain Option to Purchase Assets and Asset
Purchase Agreement, dated August 1, 1995, by and between Special Finance, Inc.,
Leonard Silvestri, Sr. and Leonard Silvestri, Jr. and the Company, neither the
Company nor any Subsidiary thereof, shall directly or indirectly, by operation
of law or otherwise, merge with, consolidate with, acquire all or substantially
all of the assets or capital stock of, or otherwise combine with, any Person or
form or acquire any Subsidiary.
8.2 Amendment of Certificate of Incorporation. Except to effectuate the
staggered terms of the directors of the Company and an amendment to the
Company's Certificate of Incorporation to require a supermajority vote of
stockholders to approve amendments to the Company's Certificate of Incorporation
in certain circumstances all as contemplated in the Company's preliminary proxy
statement for the 1996 annual meeting of its stockholders and to amend the
Company bylaws as set forth in Schedule 8.2, the Company and each of its
Subsidiaries shall not amend its articles or certificate of incorporation or
organization without the consent of the Board and the Conseco Director and shall
not amend their certificate or articles of incorporation or by-laws in any
manner which would adversely affect the rights of the Purchasers.
8.3. Investments; Loans and Advances. (a) Except as otherwise permitted
by Sections 8.1 and 8.3 hereof and except in connection with its purchases and
originations of sub-prime automobile loans and leases, the Company shall not and
shall not permit any of its Subsidiaries to make any investment in, or make or
accrue loans or advances of money to, any Person, through the direct or indirect
holding of securities or otherwise; provided, however, that the Company and its
Subsidiaries may make and own investments in (i) marketable direct obligations
issued or unconditionally guaranteed by the United States of America or any
agency thereof maturing within thirty days from the date of acquisition thereof;
(ii) commercial paper maturing no more than thirty days from the date of
creation thereof and at the time of their acquisition having the highest rating
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc.; and (iii) certificates of deposit, maturing no more than thirty
days from the date of creation thereof, issued by commercial banks incorporated
under the laws of the United States of America, each having at the time of the
acquisition of any such certificate of deposit combined capital, surplus and
undivided profits of not less than $200,000,000 and a rating of "A" or better by
a nationally recognized rating agency (collectively the "Investment Guidelines")
8.4. Indebtedness. Except as otherwise expressly permitted by this
Section 8.4 or by any other Section of this Agreement or
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upon unanimous vote of the Company's Board of Directors, the Company shall not,
nor shall it permit any of its Subsidiaries to, create, incur, assume or permit
to exist any Indebtedness, whether recourse or nonrecourse, and whether
superior, pari passu or junior, except (i) Senior Indebtedness; (ii) lease
payment obligations under leases which the Company or such Subsidiary is not
prohibited from entering into under this Agreement; (iii) deferred taxes; and
(iv) unfunded pension fund and other employee benefit plan obligations and
liabilities but only to the extent they are permitted to remain unfunded under
applicable law.
8.5. Employee Loans. Except automobile loans or leases entered into in
the ordinary course of business consistent with past practice, the Company shall
not and shall not permit any of its Subsidiaries to make or accrue any loans or
other advances of money to any employee of the Company or any such Subsidiary.
8.6. Transactions with Affiliates. (a) The Company shall not, except as
provided in Schedule 8.6 or as disclosed in the SEC Filed Documents and except
for compensation arrangements entered into with the consent of the Conseco
Director, and shall not permit any of its Subsidiaries to, enter into or be a
party to any transaction with any Affiliates of the Company except in the
ordinary course of and pursuant to the reasonable requirements of the Company's
or such Subsidiary's business and upon fair and reasonable terms that are no
less favorable to the Company or such Subsidiary than would be obtained at the
time of such transaction in a comparable arm's-length transaction with a Person
not an Affiliate of the Company or such Subsidiary and in any event only if such
transaction is effected in accordance with all applicable laws and regulations
and is not in an amount in excess of $100,000 or is approved by the Board and
the Conseco Director. The agreements referred to in Schedule 8.6, if any, shall
not be amended, assigned (by either party thereto), extended or terminated by
the Company or any of its Subsidiaries, nor shall they grant any waivers
thereunder, without the consent of the Purchasers.
8.7. Liens. The Company shall not and shall not permit any of its
Subsidiaries to create or permit any Lien on any of its properties or assets
which would have a Material Adverse Effect except Permitted Encumbrances.
8.8. Capital Expenditures. The Company shall not and shall not permit
any of its Subsidiaries to make Capital Expenditures that, in the aggregate,
shall exceed the amounts of such expenditures provided for in the business plan
or projections of the Company for any Fiscal Year, or individually, shall exceed
$75,000, which are not approved by the Company's Board of Directors or otherwise
approved in advance in writing by the Purchasers.
8.9. Sales of Assets. The Company shall not and shall not permit any of
its Subsidiaries to sell, transfer, or otherwise
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dispose of any assets or properties; provided, however, that the foregoing shall
not prohibit (i) the sale of assets in the ordinary course of business,
consistent with past practice; (ii) the sale of surplus or obsolete equipment
and fixtures; and (iii) transfers resulting from any casualty or condemnation of
assets or properties.
8.10. Cancellation of Indebtedness. The Company shall not and shall not
permit any of its Subsidiaries to cancel any claim or debt owing to it, except
for reasonable consideration and in the ordinary course of business, consistent
with past practice.
8.11. ERISA. The Company shall not, directly or indirectly, and shall
not permit its Subsidiaries or any ERISA Affiliate to directly or indirectly by
reason of an amendment or amendments to, or the adoption of, one or more Title
IV Plans, permit the present value of all benefit liabilities, as defined in
Title IV of ERISA (using the actuarial assumptions utilized by the PBGC upon
termination of a plan), to exceed the fair market value of assets allocable to
such benefits, all determined as of the most recent valuation date for each such
Title IV Plan, by more than $100,000, or to increase such benefit liabilities to
the extent security must be provided to any Title IV Plan under Section
401(a)(29) of the IRC. Neither the Company nor any of its Subsidiaries shall
establish or become obligated to any new welfare benefit plan, as defined in
Section 3(1) of ERISA, or modify any existing welfare benefit plan, for
retirees, which would result in the present value of future liabilities under
any such plans to increase by more than $100,000. Except as set forth on
Schedule 5.14, neither the Company nor any of its Subsidiaries shall establish
or become obligated to any new unfunded Pension Plan, which would result in the
present value of future liabilities under any such plans to increase by more
than $100,000.
8.12. Tax Sharing. The Company shall not make any tax sharing or
similar payment to any Affiliate in excess of: (a) its separate state, local
and/or foreign income tax liability; plus (b) its pro rata share of the
consolidated Federal income tax liability as determined under Treas. Reg. ss.
1.1552-1(a)(1); plus (c) its pro rata share of any consolidated, combined or
unitary state, local and/or foreign income tax computed similarly as under
subparagraph (b).
8.13. Bartolini Note. The Company shall not prepay the Bartolini Note
until such time as the Company has secured replacement financing at a rate of
interest no greater than 13 percent per annum and such other terms as are
reasonably acceptable to Purchasers.
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IX. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
9.1. Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder until the earlier of the date (i) Purchasers have received
a return on their investments in the Company equal to the principal of the
Debentures plus interest of 9 percent per annum or (ii) no amounts are owing
under the Debentures:
(a) The Company shall fail or neglect to perform, keep or observe any
of the provisions of Sections 7 or 8 of this Agreement and the same shall remain
unremedied for a period ending on the first to occur of five (5) days after the
Company shall receive written notice of any such failure from the Purchasers or
fifteen (15) days after the Company shall become aware thereof.
(b) The Company shall fail or neglect to perform, keep or observe any
other provision of this Agreement or of any of the other Ancillary Agreements
and the same shall remain unremedied for a period ending on the first to occur
of ten (10) days after the Company shall receive written notice of any such
failure from the Purchasers or thirty (30) days after the Company shall become
aware thereof.
(c) A default shall occur under any other agreement, document or
instrument to which the Company or any Subsidiary thereof is a party or by which
the Company or such Subsidiary or any of the Company's or such Subsidiary's
property is bound, and such default (i) involves the failure to make any payment
(whether of principal, interest or otherwise) due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) in respect of
any Indebtedness of the Company or such Subsidiary in an aggregate amount
exceeding $100,000, or (ii) causes (or permits any holder of such Indebtedness
of a trustee to cause) such Indebtedness or a portion thereof in an aggregate
amount exceeding $100,000, to become due prior to its stated maturity or prior
to its regularly scheduled dates of payment.
(d) Any representation or warranty herein or in this Agreement or any
Ancillary Agreement or in any written statement pursuant thereto or hereto,
report, financial statement or certificate made or delivered to the Purchasers
by the Company or any of its Subsidiaries shall be untrue or incorrect in any
material respect, as of the date when made or deemed made, and the same shall
remain unremedied for a period ending on the first to occur of five (5) days
after the Company shall receive written notice of any such failure from the
Purchasers or fifteen (15) days after the Company shall become aware thereof.
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(e) The Company shall fail to make any principal or interest payment
with respect to any Senior Indebtedness when the same shall be due and payable
(including any applicable grace period), or any maturity date under the Senior
Indebtedness is accelerated.
(f) Bartolini shall cease to serve as the Chief Executive Officer of
the Company by reason of death, disability, termination or any other reason and
a replacement acceptable to the Purchasers has not been hired by the Company
within fifteen (15) days of such event; provided, however, that if Bartolini
dies and John T. Schaeffer is then the President and Chief Operating Officer of
NAL Acceptance Corporation and an employee of the Company in good standing and
so long as John T. Schaeffer continues in such position, no Event of Default
shall have occurred.
(g) Any of the material assets of the Company or any of its
Subsidiaries thereof shall be attached, seized, levied upon or subject to a writ
or distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of the Company or any of its
Subsidiaries and shall remain unstayed or undismissed for thirty (30)
consecutive days; or any Person other than the Company or such Subsidiary shall
apply for the appointment of a receiver, trustee or custodian for any of the
assets of the Company or such Subsidiary and such application shall remain
unstayed or undismissed for thirty (30) consecutive days; or the Company or such
Subsidiary shall have concealed, removed or permitted to be concealed or
removed, any part of its property, with intent to hinder, delay or defraud its
creditors or any of them or made or suffered a transfer of any of its property
or the incurring of an obligation which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar law.
(h) A case or proceeding shall have been commenced against the Company
or any of its Subsidiaries in a court having competent jurisdiction seeking a
decree or order in respect of the Company or such Subsidiary (i) under title 11
of the United States Code, as now constituted or hereafter amended, or any other
applicable federal, state or foreign bankruptcy or other similar law; (ii)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) of the Company or such Subsidiary or of any substantial
part of its or their properties; or (iii) ordering the winding-up or liquidation
of the affairs of the Company or such Subsidiary and such case or proceeding
shall remain undismissed or unstayed for sixty (60) consecutive days or such
court shall enter a decree or order granting the relief sought in such case or
proceeding.
(i) The Company or any of its Subsidiaries shall (i) file a petition
seeking relief under title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal, state or foreign bankruptcy
or other similar law; (ii)
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consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
the Company or such Subsidiary or of any substantial part of its properties;
(iii) fail generally to pay its debts as such debts become due; or (iv) take any
corporate action in furtherance of any such action.
(j) Final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money in excess of $100,000 in the
aggregate shall be rendered against the Company or any of its Subsidiaries and
the same shall not be (i) fully covered by insurance in accordance with Section
7.5 hereof, or (ii) vacated, stayed, bonded, paid or discharged for a period of
thirty (30) days.
(k) Any other event shall have occurred and be continuing, including
the revocation of any License or other material suspension of the authority of
the Company to conduct its business, which would have a Material Adverse Effect
and the Purchasers shall have given the Company at least twenty (20) days'
notice thereof.
(l) With respect to any Plan, (i) a prohibited transaction within the
meaning of Section 4975 of the IRC or Section 406 of ERISA occurs which in the
reasonable determination of the Purchasers could result in direct or indirect
liability to the Company or any of its Subsidiaries, (ii) with respect to any
Title IV Plan, the filing of a notice to voluntarily terminate any such plan in
a distress termination, (iii) with respect to any Multiemployer Plan, the
Company, any of its Subsidiaries or any ERISA Affiliate shall incur any
Withdrawal Liability, (iv) with respect to any Qualified Plan, the Company, any
of its Subsidiaries or any ERISA Affiliate shall incur an accumulated funding
deficiency or request a funding waiver from the IRS, or (v) with respect to any
Title IV Plan or Multiemployer Plan which has an ERISA Event not described in
clauses (ii) - (iv) hereof, in the reasonable determination of the Purchasers
there is a reasonable likelihood for termination of any such plan by the PBGC;
provided, however, that the events listed in clauses (i) - (v) hereof shall
constitute Events of Default only if the liability, deficiency or waiver request
of the Company, any of its Subsidiaries or any ERISA Affiliate, whether or not
assessed, exceeds $50,000, in any case set forth in (i) through (v) above, or
exceeds $100,000, in the aggregate for all such cases.
9.2. Remedies. If any Event of Default specified in Section 9.1 shall
have occurred and be continuing, the Purchasers shall have the right to require
full payment of the principal amount of the Debentures together with all accrued
and unpaid interest.
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X. TRIGGERING EVENT
10.1. Events. The following event shall be considered a triggering
event under this Agreement ("Triggering Event"):
Upon the maturity date of the Debentures, the Company fails or
refuses to register shares of Common Stock issued or issuable to the
Purchasers pursuant to the terms and provisions of the Registration
Rights Agreement.
10.2. Payment Acceleration. From and after the occurrence of a
Triggering Event, the Purchasers shall be entitled to accelerate the maturity
date of the Debentures and to receive immediate payment in full of all amounts
owing thereunder.
10.3. Redemption. From and after the occurrence of a Triggering Event,
the Purchasers shall be entitled to cause the Company to redeem the Debentures
in such amount as may be specified by the Purchasers in a request delivered to
the Company by the Purchasers, and the Company shall redeem such Debentures, by
paying to the holder thereof an amount equal to the market value of the greatest
number of shares of Common Stock into which the Debentures are convertible. The
market value and the maximum number of shares of Common Stock into which the
Debentures are convertible shall be determined using the higher of the average
of the closing prices of a share of Common Stock, as reported by the principal
stock exchange upon which shares of Common Stock are traded, for the 20 trading
days prior to (i) the day of the public announcement of a Triggering Event or
(ii) the day of the event giving rise to the to the Triggering Event. If the
Common Stock is not listed for trading on a nationally recognized stock exchange
or on the NASDAQ System on the day before the Triggering Event, for purposes of
determining the number of shares of Common Stock issuable upon conversion of the
Debentures and the redemption price provided for in this Section 10.3, the
market value of a share of Common Stock shall be determined by reference to the
closing price of a share of Common Stock as reported by the NASDAQ/NMS on the
date of this Agreement.
10.4. Funds Unavailable. If sufficient funds are not legally available
for repayment of all of the Debentures under Section 10.2 hereof or payment of
the redemption amount under Section 10.3 hereof following the occurrence of a
Triggering Event, the Company and its Subsidiaries will take all lawful action
necessary to enable the Company to make such payment to the fullest extent
possible, including without limitation, (i) the sale of additional equity
securities, (ii) any necessary action under applicable law to reduce the
Company's surplus or other funds legally available, (iii) additional borrowing
by, or a refinancing of, the Company, (iv) asset sales and (v) a sale of the
Company or Subsidiaries to a third party. The Company will retain, at the
Company's expense and with the consent of the Purchasers, an investment banking
firm
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to assist the Company in taking the action referred to in the preceding
sentence; such investment banking firm shall provide its service to the Company
under the direction of a committee which will have two members, one of whom will
be a representative of the Company and the other will be a representative of the
Purchasers. Except as provided in the following paragraph, the foregoing shall
not preclude the holders of Debentures from availing themselves of any other
remedy available at law or equity at any time to collect amounts due and payable
to them by the Company.
10.5. Notice. When a Triggering Event has occurred, the Company shall
immediately give written notice thereof to each of the Purchasers. The Company
shall also promptly notify the Purchasers of any event which could reasonably
become a Triggering Event with the lapse of time or otherwise promptly after
obtaining knowledge thereof.
XI. RIGHT OF FIRST REFUSAL
Until such time as Purchasers have received a return on their
investments in the Company equal to the principal amount of such investments
plus interest at 9 percent per annum or no amounts are owing under the
Debentures, upon any offer, sale or issuance, for cash or other property, of
subordinated indebtedness of the Company, then the Purchasers shall have the
right to subscribe to and purchase such notes and evidences of subordinated
indebtedness (the "New Indebtedness") at a price and on such other terms and
conditions as are no less favorable to the Purchasers than those on which the
New Indebtedness will be offered, sold or issued to other persons. The
Purchasers shall have the option to purchase up to such portion of the New
Indebtedness as shall be equal to each of the Purchaser's pro rata investment in
the Company of the entire amount of investments made in the Company by the
Purchasers at such date. The Company shall give written notice to the Purchasers
of any and each opportunity for exercise of its rights under this Article XI,
setting forth the price of such New Indebtedness and the amount of such New
Indebtedness that each Purchaser is entitled to purchase. Such notice shall be
delivered to the Purchasers at the address then shown in the records of the
Company, and the Purchasers may exercise their rights to purchase such New
Indebtedness by written notice thereof delivered to the Company at its principal
office not later than 10 business days following the date on which notice of
such rights was received by the Purchasers. In the event the Purchasers do not
elect to purchase their respective shares of the offered New Indebtedness, any
other Affiliate of the Purchasers that is a wholly owned subsidiary of Conseco,
Inc. shall be given notice thereof and shall have five business days thereafter
to elect to purchase such unpurchased allotment.
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XII. SECURITIES LAW MATTERS
Legends. Each certificate or instrument representing the Securities
shall bear a legend substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY
THE HOLDER PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED APRIL 23,
1996 BY AND BETWEEN NAL FINANCIAL GROUP INC., GREAT AMERICAN RESERVE
INSURANCE COMPANY AND BENEFICIAL STANDARD LIFE INSURANCE COMPANY, AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("THE ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION, UNDER THE ACT, BASED ON AN OPINION LETTER OF COUNSEL
REASONABLE SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION."
XIII. MISCELLANEOUS
13.1. Press Releases. Except as required by applicable law, Purchasers
and the Company will not give notice to third parties or otherwise make any
public statement or releases concerning this Agreement or the transactions
contemplated hereby except for such written information as shall have been
approved in writing as to form and content by the other party, which approval
shall not be unreasonably withheld.
13.2. Expenses. The Company will pay its own costs and expenses and the
costs and expenses of the Purchasers incident to preparing for, entering into
and carrying out this Agreement and the consummation of the transactions
contemplated hereby. The Company agrees and covenants that the fees of the
Company's investment banking advisors (including Sands Brothers & Co., Ltd.)
incurred in connection with the transactions contemplated herein and the
transactions entered into with Affiliates of the Purchasers shall not exceed
$550,000.
13.3. Assignment. The Company may not assign any of its rights, title,
interest, remedies, powers and duties hereunder. The Company hereby consents to
the Purchasers' assignments, at any time or times, of any of the Purchasers'
rights, title, interests, remedies, powers and duties hereunder, whether
evidenced by a writing or not, to any of the Affiliates of the Purchasers that
are Subsidiaries of Conseco, Inc. The Company agrees that it will use its best
efforts to assist and cooperate with the Purchasers in any manner reasonably
requested by the Purchasers to effect such assignments.
13.4. Remedies. The Purchasers' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other
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rights and remedies which the Purchasers may have under any other agreement,
including without limitation, the Ancillary Agreements, by operation of law or
otherwise.
13.5. Waiver of Jury Trial. The parties hereto waive all right to trial
by jury in any action or proceeding to enforce or defend any rights under this
Agreement or the Ancillary Agreements.
13.6. Arbitration. If a dispute arises as to interpretation of this
Agreement, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Purchasers and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in Carmel, Indiana. The decision of a majority of the Arbitrators shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. Each party
shall pay the fees and expenses of the arbitrator appointed by it, its counsel
and its witnesses. The parties shall share equally the fees and expenses of the
impartial arbitrator.
13.7. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
13.8. Parties. This Agreement and the other Ancillary Agreements shall
be binding upon, and inure to the benefit of, the successors of the Company, and
the successors and assigns of the Purchasers.
13.9. Conflict of Terms. Except as otherwise provided in this Agreement
or any of the Ancillary Agreements by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the Ancillary
Agreements, the provision contained in this Agreement shall govern and control.
13.10. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT OR IN ANY OF THE ANCILLARY AGREEMENTS, IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
40
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MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. THE PURCHASERS AND THE COMPANY AGREE TO SUBMIT TO PERSONAL JURISDICTION
AND TO WAIVE ANY OBJECTION AS TO VENUE IN THE FEDERAL OR STATE COURTS IN THE
COUNTY OF MARION, STATE OF INDIANA. SERVICE OF PROCESS ON THE COMPANY OR THE
PURCHASERS IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF
THE ANCILLARY AGREEMENTS SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE
ADDRESS LISTED IN SECTION 13.9 HEREOF. NOTHING HEREIN SHALL PRECLUDE THE
PURCHASERS OR THE COMPANY FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION.
13.11. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give or serve upon
another any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and either shall be delivered in person with receipt acknowledged or
by registered or certified mail, return receipt requested, postage prepaid, or
telecopied and confirmed by telecopy answer back, addressed as follows:
(a) If to the Purchasers at
Beneficial Standard Life Insurance Company
Great American Reserve Insurance Company
745 Fifth Avenue, Suite 2700
New York, New York 10151
ATTN: Ngaire E. Cuneo
Executive Vice President
Telecopy Number: (212) 644-1299
With copies to
Beneficial Standard Life Insurance Company
Great American Reserve Insurance Company
11825 N. Pennsylvania Street
Carmel, Indiana 46032
ATTN: Lawrence W. Inlow, Esq.
Executive Vice President
Telecopy Number: (317) 817-6163
and
Beneficial Standard Life Insurance Company
Great American Reserve Insurance Company
745 Fifth Avenue, Suite 2700
New York, New York 10151
ATTN: Michael F. Bonnet
Telecopy Number: (212) 644-1299
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(b) If to the Company at
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Fort Lauderdale, Florida 33309
ATTN: Robert R. Bartolini, President
With a copy to
Stephen M. Cohen, Esq.
Buchanan Ingersoll Professional Corporation
Two Logan Square, 12th Floor
18th and Arch Streets
Philadelphia, Pennsylvania 19103
Telecopy Number: (215) 665-3977
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, or upon receipt if the same shall have been
telecopied and confirmed by telecopy answer back or three (3) Business Days
after the same shall have been deposited in the United States mail. Failure or
delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication. Delivery
of notices as provided herein shall be deemed to provide notice to both
Purchasers.
13.12. Survival. The representations and warranties of the Company in
this Agreement shall survive the execution, delivery and acceptance hereof by
the parties hereto and the Closing for a period ending on the earlier of the
date (i) the Purchasers have received, in cash, a return on their investments in
the Company equal to the principal amount of the Debentures plus interest at 9
percent per annum or (ii) no amounts are owing under the Debenture.
13.13. Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
13.14. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
BENEFICIAL STANDARD LIFE
INSURANCE COMPANY
As one of the Purchasers
By:
Ngaire E. Cuneo, Executive
Vice President
GREAT AMERICAN RESERVE
INSURANCE COMPANY
As one of the Purchasers
By:
Ngaire E. Cuneo, Executive
Vice President
NAL FINANCIAL GROUP INC.
As the Company
By:
Robert R. Bartolini,
Chief Executive Officer
43
9% Subordinated Convertible Debenture
$5,000,000 Dated: April 23, 1996
FOR VALUE RECEIVED, the undersigned, NAL FINANCIAL GROUP INC., a
Delaware corporation ("Maker" or the "Company"), promises to pay to the order of
GREAT AMERICAN RESERVE INSURANCE COMPANY ("Lender"), in immediately available
funds at the office of Lender at 11825 North Pennsylvania Street, Carmel,
Indiana 46032 or at such other location as the holder hereof may designate from
time to time, the principal amount of $5,000,000 as set forth in a Securities
Purchase Agreement by and between Lender and Maker, (the "Securities Purchase
Agreement") to which this is attached and incorporated therein, together with
interest from the date hereof (computed on the basis of a year of 360 days of
twelve 30-day months) on the outstanding principal balance, to be fixed at a
rate equal to 9% per annum, in accordance with the following terms:
1. Principal and all unpaid interest which accrues thereon shall be
payable in full at the election of Lender upon eighteen (18) months from the
date hereof (hereinafter the "Maturity"). Interest on the outstanding principal
balance of this Debenture at the rate of 9% per annum, shall be due and payable
on a quarterly basis, on March 31, June 30, September 30 and December 31. Maker
may not prepay part or all of the principal due under this Debenture without the
consent of Lender.
2. This Debenture has been issued pursuant to, and in conjunction with
a Securities Purchase Agreement (the "Securities Purchase Agreement") as of even
date herewith between Maker and Lender pursuant to which Maker agreed to sell,
and Lender agreed to purchase, the Debentures evidenced by this instrument. The
terms and provisions of the Securities Purchase Agreement shall govern the terms
and provisions of this Debenture and any conflict between this Debenture and the
Securities Purchase Agreement shall be resolved by the Securities Purchase
Agreement.
3. This Debenture may not be offered for sale or sold, or otherwise
transferred in any transaction which would constitute a sale thereof within the
meaning of the Securities Act of 1933, as amended (the "1933 Act"), unless (i)
such security has been registered for sale under the 1933 Act and registered or
qualified upon applicable state securities laws relating to the offer and sale
of securities; or (ii) exemptions from the registration requirements of the 1933
Act and the registration or qualification requirements of all such state
securities laws are available and the Maker shall have received an opinion of
counsel satisfactory to Maker that the proposed sale or other disposition of
such securities may be effected without registration under the 1933 Act and
would not result in any violation of any applicable state securities laws
relating to the registration or qualification of securities for sale, such
opinion to be satisfactory to counsel to Maker.
4. The indebtedness evidenced by this Debenture is subordinated to the
prior payment when due of the principal of, premium, if any, and interest on all
"Senior Indebtedness" (as defined below) of Maker. Therefore, upon any
distribution of its assets in a liquidation or dissolution of Maker, or in
bankruptcy, reorganization, insolvency, receivership or similar proceedings
relating to Maker, Lender will not be entitled to receive payment of the
indebtedness evidenced by this Debenture until the holders of Senior
Indebtedness are paid in full. Upon the occurrence of an "Event of Default" with
respect to any Senior Indebtedness, as such Event of Default may be defined in
such instrument evidencing the Senior Indebtedness, to the extent such Event of
Default permits the holders of such Senior Indebtedness to accelerate the
maturity thereof, then upon written notice thereof given to Maker by any holder
of such Senior Indebtedness or their representative, no payment shall be made by
Maker in respect of this Debenture until Maker has cured such Event of Default
to the satisfaction of the holders of such Senior Indebtedness. "Senior
Indebtedness" means all direct or indirect, contingent or certain indebtedness
of any type, kind or nature (present or future) created, incurred, assumed or
guaranteed by Maker in its day-to-day operations, including specifically all
present and future term loans, lines of credit, warehouse facilities, debt
participation interests as well as other future indebtedness which may be
secured by any of the Maker's assets. As of December 31, 1995, Maker's "Senior
Indebtedness" was evidenced by the "Debt Participation Interests" and "Credit
and Warehouse Facilities" reflected on its balance sheet as of and at that date.
The amount of "Senior Indebtedness" incurred by Maker shall likely increase as
the amount of automotive finance contracts purchased by Maker continues to
increase. "Senior Indebtedness" shall not include accounts payable and trade
debt incurred in the day-to-day operations of the business of Maker, as well as
any pre-existing or subsequently issued subordinated indebtedness.
5. An Event of Default under this Debenture means any of the following
events (whether the reason for such Event of Default shall be voluntary or
involuntary or be 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) nonpayment of principal or interest
when due which nonpayment is unremedied for a period of ten (10) days; (ii) any
other material breach of the terms hereof which shall remain unremedied for a
period ending on the first to occur of ten (10) days after the Maker shall
receive written notice of any such failure from the Lender or fifteen (15) day
after the Maker shall become aware thereof; or (ii) a material breach of the
terms of the Securities Purchase Agreement, the occurrence of a "Triggering
Event" (as defined in the Securities Purchase Agreement) or the occurrence of a
default under the Securities Purchase Agreement any or each of which remain
unremedied after notice and to the extent set forth within Sections 9 or 10 of
the Securities Purchase Agreement, whichever is applicable.
6. The unpaid principal of this Debenture is convertible at the option
of the Lender, in whole or in part, upon surrender of this Debenture at the
principal office of the Company, into restricted shares of the Maker's Common
Stock at a conversion price ("Conversion Price") equal to the lesser of: (i) 80%
of the closing bid price of the Company's Common Stock, as reported on the
principal exchange or automated quotation system upon which the Company's Common
Stock trades, on the date of conversion of the Debenture; or (ii) $12.00 per
share. Upon such conversion, all principal due under this Debenture shall be
discharged and the Company released from all obligations thereunder, however,
accrued interest shall be paid to the date of conversion. At the option of the
Lender, accrued interest may also be subject to conversion in the same manner as
principal. The conversion price of the Debenture may be subject to adjustment in
the manner provided at Paragraph 7.
The shares of the Company's Common Stock issuable upon the exercise of
the conversion feature shall be "restricted securities" as that term is defined
under Rule 144 of the 1933 Act and, as a consequence, may not be sold or
otherwise transferred except pursuant to registration under the 1933 Act or an
available exemption therefrom.
7. Adjustments. The number of shares issuable to the Lender upon
conversion of this Debenture is subject to adjustment from time to time as
follows:
7.1. Reorganization, Merger or Sale of Assets. If at any time
while this Debenture, or any portion thereof, is outstanding there shall be (i)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation with or into another corporation in which the Company is not the
surviving entity, or a reverse triangular merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of the Company's properties and assets as, or substantially as, an
entirety to any other person, then, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so that the
holder of this Debenture shall thereafter be entitled to receive upon conversion
of the Debentures the number of shares of stock or other securities or property
of the successor corporation resulting from such reorganization, merger,
consolidation, sale or transfer that a holder of the shares deliverable upon
conversion of this Debenture would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Debenture had
been converted immediately before such reorganization, merger, consolidation,
sale or transfer, all subject to further adjustment as provided in this Section
7. The foregoing provisions of this Section 7.1 shall similarly apply to
successive reorganizations, consolidations, mergers, sales and transfers and to
the stock or securities of any other corporation that are at the time receivable
upon the conversion of this Debenture. If the per-share consideration payable to
Lender for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Debenture
with respect to the rights and interests of Lender after the transaction, to the
end that the provisions of this Debenture shall be applicable after that event,
as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon conversion of this Debenture.
7.2. Reclassification. If the Company, at any time while this
Debenture, or any portion thereof, remains outstanding, by reclassification of
securities or otherwise, shall change any of the securities as to which
conversion rights under this Debenture exist into the same or a different number
of securities of any other class or classes, this Debenture shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the conversion rights under this Debenture immediately prior to
such reclassification or other change and the Conversion Price or number of
shares received upon such conversion shall be appropriately adjusted, all
subject to further adjustment as provided in this Section 7.
7.3. Split, Subdivision or Combination of Shares. If the
Company at any time while this Debenture, or any portion thereof, remains
outstanding shall split, subdivide or combine the securities as to which
conversion rights under this Debenture exist, into a different number of
securities of the same class, the number of shares issuable upon conversion
shall be proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
7.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Debenture, or any portion hereof, remains outstanding
and unexpired the holders of the securities as to which conversion rights under
this Debenture exist at the time shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Debenture shall represent the right to
acquire upon conversion, in addition to the number of shares of the security
receivable upon conversion of this Debenture, and without payment of any
additional consideration therefor, the amount of such other or additional stock
or other securities or property (other than cash) of the Company that such
holder would hold on the date of such conversion had it been the holder of
record of the security receivable upon conversion of this Debenture on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such conversion, retained such shares and/or all other
additional stock, other securities or property available by this Debenture as
aforesaid during such period, giving effect to all adjustments called for during
such period by the provisions of this Section 7.
7.5. Issuance of Shares Below Conversion Price.
(a) If while this Debenture, or any portion hereof,
remains outstanding, the Company shall offer and sell Additional Shares of
Common Stock (as hereinafter defined) for consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such Additional
Shares of Common Stock, the Conversion Price in effect immediately prior to each
such issuance shall forthwith be adjusted upon such issuance to a price equal to
the price paid per share for such Additional Shares of Common Stock.
(b) For the purpose of the calculations provided in this
Section 11.5, if at any time or from time to time after the date hereof the
Company shall issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such Common
Stock or securities being hereinafter referred to as "Convertible Securities"),
then, and in each case, if the Effective Price (as hereinafter defined) of such
rights, options or Convertible Securities shall be less than the Conversion
Price, the Company shall be deemed to have issued at the time of the issuance of
such rights or options or Convertible Securities the maximum number of
Additional Shares of Common Stock issuable upon exercise or conversion thereof
and to have received as consideration for the issuance of such shares an amount
equal to the total amount of the consideration, if any, payable to the Company
upon exercise or conversion of such options or rights. "Effective Price" shall
mean the quotient determined by dividing the total of all of such consideration
by such maximum number of Additional Shares of Common Stock. No further
adjustment shall be made as a result of the actual issuance of Additional Shares
of Common Stock on the exercise of any such rights or options or the conversion
of any such Convertible Securities. In the case of Convertible Securities which
have a conversion price which is based, in whole or in part, upon a discount to
the market price or value of the Common Stock, then for the purposes of
calculating the Effective Price, the consideration shall be deemed to include
the minimum conversion price payable to the Company.
If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire prior to the
Maturity hereof without having been exercised, the adjustment to the number of
shares available hereunder upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the number of shares that would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion of such Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Company for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or selling
the Convertible Securities actually converted plus the consideration, if any,
actually received by the Company on the conversion of such Convertible
Securities.
(c) For the purpose of the calculations provided for in
this Section 11.5, if at any time or from time to time after the date hereof the
Company shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less than
the then Conversion Price, the Company shall be deemed to have issued at the
time of the issuance of such rights or options the maximum number of Additional
Shares of Common Stock issuable upon conversion of the total amount of
Convertible Securities covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares of Common Stock an
amount equal to the amount of consideration, if any, received by the Company for
the issuance of such rights or options, plus the consideration, if any, payable
to the Company upon the conversion of such Convertible Securities. "Effective
Price" shall mean the quotient determined by dividing the total amount of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment of such Conversion Price adjusted upon the issuance of such
rights or options shall be made as a result of the actual issuance of the
Convertible Securities upon the exercise of such rights or options or upon the
actual issuance of Additional Shares of Common Stock upon the conversion of such
Convertible Securities.
The provisions of subsection (b) above for readjustment
upon the expiration of rights or options or the rights of conversion of
Convertible Securities, shall apply mutatis mutandis to the rights, options and
Convertible Securities referred to in this subsection (c).
(d) The term "Additional Shares of Common Stock" as used
herein shall mean all shares of Common Stock issued or deemed issued by the
Company after the date hereof, other than (i) securities issued pursuant to or
in connection with the terms of the Securities Purchase Agreement dated of even
date herewith, by and among the Company and the Great American Reserve Insurance
Company and Beneficial Standard Life Insurance Company, and the debentures
issued thereunder; (ii) shares of Common Stock issued upon conversion of
convertible securities or the exercise of common stock purchase warrants
outstanding as of the date hereof; (iii) shares of Common Stock issuable to
employees, officers or directors pursuant to the Company's stock option plan;
(iv) shares of Common Stock issued or issuable to directors in connection with
their service as directors; (v) shares of Common Stock issued or issuable to
directors, officers or employees for services rendered or to be rendered
pursuant to arrangements approved by the Board of Directors; and (vii) shares of
Common Stock issued in connection with a business combination, merger,
consolidation, asset acquisition or the acquisition of the business of another
corporation (through the purchase of stock or assets) approved by the Board of
Directors.
7.6. No Impairment. Maker will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by Maker, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 7 and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of Lender against impairment.
8. Lender, by acceptance hereof, acknowledges that this Debenture and
the shares to be issued upon conversion hereof are being acquired solely for
Lender's own account and not as a nominee for any other party, and for
investment, and that Lender will not offer, sell or otherwise dispose of this
Debenture or any shares to be issued upon conversion hereof except under
circumstances that will not result in a violation of applicable federal and
state securities laws. Upon exercise of this Debenture, Lender shall, if
requested by Maker, confirm in writing, in a form satisfactory to Maker, that
the shares so purchased are being acquired solely for Lender's own account and
not as a nominee for any other party, for investment, and not with a view toward
distribution or resale.
All shares issued upon exercise hereof shall be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES AND ANY
SECURITIES OR SHARES ISSUED UPON CONVERSION THEREOF MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.
9. Maker covenants that during the term that this Debenture is
outstanding, Maker will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the shares upon the
conversion of this Debenture, from time to time, will take all steps necessary
to amend its Certificate of Incorporation (the "Certificate") to provide
sufficient reserves of shares of Common Stock issuable upon the conversion of
the Debenture. Maker further covenants that all shares that may be issued upon
the conversion of this Debenture and payment of the Conversion Price, all as set
forth herein, will be free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously or otherwise specified herein). Maker agrees that its issuance
of this Debenture shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the shares upon the conversion of this Debenture.
10. Notices.
(a) Whenever the number of shares issuable or the Conversion
Price hereunder shall be adjusted pursuant to Section 7 hereof, the Company
shall issue a certificate signed by its Chief Financial Officer setting forth,
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
Conversion Price and number of shares purchasable hereunder after giving effect
to such adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to Lender.
(b) All notices, advices and communications under this
Debenture shall be deemed to have been given, (i) in the case of personal
delivery, on the date of such delivery and (ii) in the case of mailing, on the
third business day following the date of such mailing, addressed as follows:
<PAGE>
If to Maker:
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Ft. Lauderdale, FL 33309
Attention: Robert R. Bartolini, President
With a Copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, Professional Corporation
Two Logan Square, 12th Floor
18th & Arch Streets
Philadelphia, PA 19103-2771
and to the Lender:
at the address of the Lender appearing
on the books of the
Company or the Company's transfer agent, if any.
With a Copy to:
Lawrence W. Inlow, Esquire
Great American Reserve Insurance Company
11825 N. Pennsylvania Street
Carmel, IN 46032
Either of Maker or Lender may from time to time change the address to
which notices to it are to be mailed hereunder by notice in accordance with the
provisions of this section 10.
11. Lender shall be entitled to the registration rights set forth in a
certain Registration Rights Agreement of even date herewith by and between Maker
and Lender.
12. Amendments.
(a) Any term of this Debenture may be amended with the written
consent of the Company and the Holder. Any amendment effected in accordance with
this Section 10 shall be binding upon the Holder, each future holder and the
Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Debenture, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
13. Maker and any other party now or hereafter liable for the payment
of this Debenture in whole or in part, hereby severally (i) waive demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration and all other notice,
filing of suit and diligence in collecting this Debenture, (ii) agree to the
release of any party primarily or secondarily liable hereon, (iii) agree that
the Lender shall not be required first to institute suit or exhaust its remedies
hereon against Maker or others liable or to become liable hereon or to enforce
its rights against them, and (iv) consent to any extension or postponement of
time of payment of this Debenture and to any other indulgence with respect
hereto without notice thereof to any of them.
14. This Debenture will not be transferable at any time on or prior to
Maturity except for transfers to affiliates, successors to the ultimate parent
of the Lender, by operation of law, pursuant to a merger of Lender into another
entity or pursuant to the sale of all or substantially all of the assets of
Lender that are in compliance with all Federal and State securities laws with
respect to this Debenture.
15. This Debenture shall bind Maker and its successors and assigns, and
the benefits hereof shall inure to the benefit of Lender and its successors and
assigns. All references herein to "Maker" and "Lender" shall be deemed to apply
to Maker and Lender, respectively, and to their respective successors and
assigns.
16. Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
interpretation and enforceability of this Debenture and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
17. Jurisdiction. The Lender and the Maker agree to submit to personal
jurisdiction and to waive any objection as to venue in the federal or state
courts in the County of Marion, State of Indiana. Service of process on the
Maker or the Lender in any action arising out of or relating to this Debenture
shall be effective if mailed to such party at the address listed in Section 10
hereof.
<PAGE>
WITNESS the due execution hereof on the date first above written with
the intention that this Debenture shall constitute a sealed instrument.
NAL FINANCIAL GROUP INC.
By: ___________________________ (Seal)
Robert R. Bartolini
Chief Executive Officer
<PAGE>
NOTICE OF CONVERSION
TO: NAL FINANCIAL GROUP INC.
(1) The undersigned hereby elects to purchase _______ shares of Common
Stock of NAL FINANCIAL GROUP INC. pursuant to the terms of the attached
Debenture, and tenders herewith payment of the purchase price for such shares in
full.
(2) In converting this Debenture, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment, and that the undersigned will
not offer, sell or otherwise dispose of any such shares of Common Stock except
under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
--------------------------------
(Name)
---------------------------------
(Name)
(4) Please issue a new Debenture for the unexercised portion of the
attached Debenture in the name of the undersigned or in such other name as is
specified below:
---------------------------------
(Name)
- - ------------------------------ --------------------------------
(Date) (Signature)
9% Subordinated Convertible Debenture
$5,000,000 Dated: April 23, 1996
FOR VALUE RECEIVED, the undersigned, NAL FINANCIAL GROUP INC., a
Delaware corporation ("Maker" or the "Company"), promises to pay to the order of
BENEFICIAL STANDARD LIFE INSURANCE COMPANY ("Lender"), in immediately available
funds at the office of Lender at 11825 North Pennsylvania Street, Carmel,
Indiana 46032 or at such other location as the holder hereof may designate from
time to time, the principal amount of $5,000,000 as set forth in a Securities
Purchase Agreement by and between Lender and Maker, (the "Securities Purchase
Agreement") to which this is attached and incorporated therein, together with
interest from the date hereof (computed on the basis of a year of 360 days of
twelve 30-day months) on the outstanding principal balance, to be fixed at a
rate equal to 9% per annum, in accordance with the following terms:
1. Principal and all unpaid interest which accrues thereon shall be
payable in full at the election of Lender upon eighteen (18) months from the
date hereof (hereinafter the "Maturity"). Interest on the outstanding principal
balance of this Debenture at the rate of 9% per annum, shall be due and payable
on a quarterly basis, on March 31, June 30, September 30 and December 31. Maker
may not prepay part or all of the principal due under this Debenture without the
consent of Lender.
2. This Debenture has been issued pursuant to, and in conjunction with
a Securities Purchase Agreement (the "Securities Purchase Agreement") as of even
date herewith between Maker and Lender pursuant to which Maker agreed to sell,
and Lender agreed to purchase, the Debentures evidenced by this instrument. The
terms and provisions of the Securities Purchase Agreement shall govern the terms
and provisions of this Debenture and any conflict between this Debenture and the
Securities Purchase Agreement shall be resolved by the Securities Purchase
Agreement.
3. This Debenture may not be offered for sale or sold, or otherwise
transferred in any transaction which would constitute a sale thereof within the
meaning of the Securities Act of 1933, as amended (the "1933 Act"), unless (i)
such security has been registered for sale under the 1933 Act and registered or
qualified upon applicable state securities laws relating to the offer and sale
of securities; or (ii) exemptions from the registration requirements of the 1933
Act and the registration or qualification requirements of all such state
securities laws are available and the Maker shall have received an opinion of
counsel satisfactory to Maker that the proposed sale or other disposition of
such securities may be effected without registration under the 1933 Act and
would not result in any violation of any applicable state securities laws
relating to the registration or qualification of securities for sale, such
opinion to be satisfactory to counsel to Maker.
4. The indebtedness evidenced by this Debenture is subordinated to the
prior payment when due of the principal of, premium, if any, and interest on all
"Senior Indebtedness" (as defined below) of Maker. Therefore, upon any
distribution of its assets in a liquidation or dissolution of Maker, or in
bankruptcy, reorganization, insolvency, receivership or similar proceedings
relating to Maker, Lender will not be entitled to receive payment of the
indebtedness evidenced by this Debenture until the holders of Senior
Indebtedness are paid in full. Upon the occurrence of an "Event of Default" with
respect to any Senior Indebtedness, as such Event of Default may be defined in
such instrument evidencing the Senior Indebtedness, to the extent such Event of
Default permits the holders of such Senior Indebtedness to accelerate the
maturity thereof, then upon written notice thereof given to Maker by any holder
of such Senior Indebtedness or their representative, no payment shall be made by
Maker in respect of this Debenture until Maker has cured such Event of Default
to the satisfaction of the holders of such Senior Indebtedness. "Senior
Indebtedness" means all direct or indirect, contingent or certain indebtedness
of any type, kind or nature (present or future) created, incurred, assumed or
guaranteed by Maker in its day-to-day operations, including specifically all
present and future term loans, lines of credit, warehouse facilities, debt
participation interests as well as other future indebtedness which may be
secured by any of the Maker's assets. As of December 31, 1995, Maker's "Senior
Indebtedness" was evidenced by the "Debt Participation Interests" and "Credit
and Warehouse Facilities" reflected on its balance sheet as of and at that date.
The amount of "Senior Indebtedness" incurred by Maker shall likely increase as
the amount of automotive finance contracts purchased by Maker continues to
increase. "Senior Indebtedness" shall not include accounts payable and trade
debt incurred in the day-to-day operations of the business of Maker, as well as
any pre-existing or subsequently issued subordinated indebtedness.
5. An Event of Default under this Debenture means any of the following
events (whether the reason for such Event of Default shall be voluntary or
involuntary or be 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) nonpayment of principal or interest
when due which nonpayment is unremedied for a period of ten (10) days; (ii) any
other material breach of the terms hereof which shall remain unremedied for a
period ending on the first to occur of ten (10) days after the Maker shall
receive written notice of any such failure from the Lender or fifteen (15) day
after the Maker shall become aware thereof; or (ii) a material breach of the
terms of the Securities Purchase Agreement, the occurrence of a "Triggering
Event" (as defined in the Securities Purchase Agreement) or the occurrence of a
default under the Securities Purchase Agreement any or each of which remain
unremedied after notice and to the extent set forth within Sections 9 or 10 of
the Securities Purchase Agreement, whichever is applicable.
6. The unpaid principal of this Debenture is convertible at the option
of the Lender, in whole or in part, upon surrender of this Debenture at the
principal office of the Company, into restricted shares of the Maker's Common
Stock at a conversion price ("Conversion Price") equal to the lesser of: (i) 80%
of the closing bid price of the Company's Common Stock as reported on the
principal exchange or automated quotation system upon which the Company's Common
Stock trades on the date of conversion of the Debenture; or (ii) $12.00 per
share. Upon such conversion, all principal due under this Debenture shall be
discharged and the Company released from all obligations thereunder, however,
accrued interest shall be paid to the date of conversion. At the option of the
Lender, accrued interest may also be subject to conversion in the same manner as
principal. The conversion price of the Debenture may be subject to adjustment in
the manner provided at Paragraph 7.
The shares of the Company's Common Stock issuable upon the exercise of
the conversion feature shall be "restricted securities" as that term is defined
under Rule 144 of the 1933 Act and, as a consequence, may not be sold or
otherwise transferred except pursuant to registration under the 1933 Act or an
available exemption therefrom.
7. Adjustments. The number of shares issuable to the Lender upon
conversion of this Debenture is subject to adjustment from time to time as
follows:
7.1. Reorganization, Merger or Sale of Assets. If at any time
while this Debenture, or any portion thereof, is outstanding there shall be (i)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation with or into another corporation in which the Company is not the
surviving entity, or a reverse triangular merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of the Company's properties and assets as, or substantially as, an
entirety to any other person, then, as a part of such reorganization, merger,
consolidation, sale or transfer, lawful provision shall be made so that the
holder of this Debenture shall thereafter be entitled to receive upon conversion
of the Debentures the number of shares of stock or other securities or property
of the successor corporation resulting from such reorganization, merger,
consolidation, sale or transfer that a holder of the shares deliverable upon
conversion of this Debenture would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Debenture had
been converted immediately before such reorganization, merger, consolidation,
sale or transfer, all subject to further adjustment as provided in this Section
7. The foregoing provisions of this Section 7.1 shall similarly apply to
successive reorganizations, consolidations, mergers, sales and transfers and to
the stock or securities of any other corporation that are at the time receivable
upon the conversion of this Debenture. If the per-share consideration payable to
Lender for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Debenture
with respect to the rights and interests of Lender after the transaction, to the
end that the provisions of this Debenture shall be applicable after that event,
as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon conversion of this Debenture.
7.2. Reclassification. If the Company, at any time while this
Debenture, or any portion thereof, remains outstanding, by reclassification of
securities or otherwise, shall change any of the securities as to which
conversion rights under this Debenture exist into the same or a different number
of securities of any other class or classes, this Debenture shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the conversion rights under this Debenture immediately prior to
such reclassification or other change and the Conversion Price or number of
shares received upon such conversion shall be appropriately adjusted, all
subject to further adjustment as provided in this Section 7.
7.3. Split, Subdivision or Combination of Shares. If the
Company at any time while this Debenture, or any portion thereof, remains
outstanding shall split, subdivide or combine the securities as to which
conversion rights under this Debenture exist, into a different number of
securities of the same class, the number of shares issuable upon conversion
shall be proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
7.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Debenture, or any portion hereof, remains outstanding
and unexpired the holders of the securities as to which conversion rights under
this Debenture exist at the time shall have received, or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock or
other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Debenture shall represent the right to
acquire upon conversion, in addition to the number of shares of the security
receivable upon conversion of this Debenture, and without payment of any
additional consideration therefor, the amount of such other or additional stock
or other securities or property (other than cash) of the Company that such
holder would hold on the date of such conversion had it been the holder of
record of the security receivable upon conversion of this Debenture on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such conversion, retained such shares and/or all other
additional stock, other securities or property available by this Debenture as
aforesaid during such period, giving effect to all adjustments called for during
such period by the provisions of this Section 7.
7.5. Issuance of Shares Below Conversion Price.
(a) If while this Debenture, or any portion hereof,
remains outstanding, the Company shall offer and sell Additional Shares of
Common Stock (as hereinafter defined) for consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such Additional
Shares of Common Stock, the Conversion Price in effect immediately prior to each
such issuance shall forthwith be adjusted upon such issuance to a price equal to
the price paid per share for such Additional Shares of Common Stock.
(b) For the purpose of the calculations provided in this
Section 11.5, if at any time or from time to time after the date hereof the
Company shall issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such Common
Stock or securities being hereinafter referred to as "Convertible Securities"),
then, and in each case, if the Effective Price (as hereinafter defined) of such
rights, options or Convertible Securities shall be less than the Conversion
Price, the Company shall be deemed to have issued at the time of the issuance of
such rights or options or Convertible Securities the maximum number of
Additional Shares of Common Stock issuable upon exercise or conversion thereof
and to have received as consideration for the issuance of such shares an amount
equal to the total amount of the consideration, if any, payable to the Company
upon exercise or conversion of such options or rights. "Effective Price" shall
mean the quotient determined by dividing the total of all of such consideration
by such maximum number of Additional Shares of Common Stock. No further
adjustment shall be made as a result of the actual issuance of Additional Shares
of Common Stock on the exercise of any such rights or options or the conversion
of any such Convertible Securities. In the case of Convertible Securities which
have a conversion price which is based, in whole or in part, upon a discount to
the market price or value of the Common Stock, then for the purposes of
calculating the Effective Price, the consideration shall be deemed to include
the minimum conversion price payable to the Company.
If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire prior to the
Maturity hereof without having been exercised, the adjustment to the number of
shares available hereunder upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the number of shares that would
have been in effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional Shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion of such Convertible Securities, and such Additional
Shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Company for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or selling
the Convertible Securities actually converted plus the consideration, if any,
actually received by the Company on the conversion of such Convertible
Securities.
(c) For the purpose of the calculations provided for in
this Section 11.5, if at any time or from time to time after the date hereof the
Company shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less than
the then Conversion Price, the Company shall be deemed to have issued at the
time of the issuance of such rights or options the maximum number of Additional
Shares of Common Stock issuable upon conversion of the total amount of
Convertible Securities covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares of Common Stock an
amount equal to the amount of consideration, if any, received by the Company for
the issuance of such rights or options, plus the consideration, if any, payable
to the Company upon the conversion of such Convertible Securities. "Effective
Price" shall mean the quotient determined by dividing the total amount of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment of such Conversion Price adjusted upon the issuance of such
rights or options shall be made as a result of the actual issuance of the
Convertible Securities upon the exercise of such rights or options or upon the
actual issuance of Additional Shares of Common Stock upon the conversion of such
Convertible Securities.
The provisions of subsection (b) above for readjustment
upon the expiration of rights or options or the rights of conversion of
Convertible Securities, shall apply mutatis mutandis to the rights, options and
Convertible Securities referred to in this subsection (c).
(d) The term "Additional Shares of Common Stock" as used
herein shall mean all shares of Common Stock issued or deemed issued by the
Company after the date hereof, other than (i) securities issued pursuant to or
in connection with the terms of the Securities Purchase Agreement dated of even
date herewith, by and among the Company and the Great American Reserve Insurance
Company and Beneficial Standard Life Insurance Company, and the debentures
issued thereunder; (ii) shares of Common Stock issued upon conversion of
convertible securities or the exercise of common stock purchase warrants
outstanding as of the date hereof; (iii) shares of Common Stock issuable to
employees, officers or directors pursuant to the Company's stock option plan;
(iv) shares of Common Stock issued or issuable to directors in connection with
their service as directors; (v) shares of Common Stock issued or issuable to
directors, officers or employees for services rendered or to be rendered
pursuant to arrangements approved by the Board of Directors; and (vii) shares of
Common Stock issued in connection with a business combination, merger,
consolidation, asset acquisition or the acquisition of the business of another
corporation (through the purchase of stock or assets) approved by the Board of
Directors.
7.6. No Impairment. Maker will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by Maker, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 7 and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of Lender against impairment.
8. Lender, by acceptance hereof, acknowledges that this Debenture and
the shares to be issued upon conversion hereof are being acquired solely for
Lender's own account and not as a nominee for any other party, and for
investment, and that Lender will not offer, sell or otherwise dispose of this
Debenture or any shares to be issued upon conversion hereof except under
circumstances that will not result in a violation of applicable federal and
state securities laws. Upon exercise of this Debenture, Lender shall, if
requested by Maker, confirm in writing, in a form satisfactory to Maker, that
the shares so purchased are being acquired solely for Lender's own account and
not as a nominee for any other party, for investment, and not with a view toward
distribution or resale.
All shares issued upon exercise hereof shall be stamped or imprinted
with a legend in substantially the following form (in addition to any legend
required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES AND ANY
SECURITIES OR SHARES ISSUED UPON CONVERSION THEREOF MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.
9. Maker covenants that during the term that this Debenture is
outstanding, Maker will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the shares upon the
conversion of this Debenture, from time to time, will take all steps necessary
to amend its Certificate of Incorporation (the "Certificate") to provide
sufficient reserves of shares of Common Stock issuable upon the conversion of
the Debenture. Maker further covenants that all shares that may be issued upon
the conversion of this Debenture and payment of the Conversion Price, all as set
forth herein, will be free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously or otherwise specified herein). Maker agrees that its issuance
of this Debenture shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the shares upon the conversion of this Debenture.
10. Notices.
(a) Whenever the number of shares issuable or the Conversion
Price hereunder shall be adjusted pursuant to Section 7 hereof, the Company
shall issue a certificate signed by its Chief Financial Officer setting forth,
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
Conversion Price and number of shares purchasable hereunder after giving effect
to such adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to Lender.
(b) All notices, advices and communications under this
Debenture shall be deemed to have been given, (i) in the case of personal
delivery, on the date of such delivery and (ii) in the case of mailing, on the
third business day following the date of such mailing, addressed as follows:
<PAGE>
If to Maker:
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Ft. Lauderdale, FL 33309
Attention: Robert R. Bartolini, President
With a Copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, Professional Corporation
Two Logan Square, 12th Floor
18th & Arch Streets
Philadelphia, PA 19103-2771
and to the Lender:
at the address of the Lender appearing
on the books of the
Company or the Company's transfer agent, if any.
With a Copy to:
Lawrence W. Inlow, Esquire
Beneficial Standard Life Insurance Company
11825 N. Pennsylvania Street
Carmel, IN 46032
Either of Maker or Lender may from time to time change the address to
which notices to it are to be mailed hereunder by notice in accordance with the
provisions of this section 10.
11. Lender shall be entitled to the registration rights set forth in a
certain Registration Rights Agreement of even date herewith by and between Maker
and Lender.
12. Amendments.
(a) Any term of this Debenture may be amended with the written
consent of the Company and the Holder. Any amendment effected in accordance with
this Section 10 shall be binding upon the Holder, each future holder and the
Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Debenture, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
13. Maker and any other party now or hereafter liable for the payment
of this Debenture in whole or in part, hereby severally (i) waive demand,
presentment for payment, notice of nonpayment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration and all other notice,
filing of suit and diligence in collecting this Debenture, (ii) agree to the
release of any party primarily or secondarily liable hereon, (iii) agree that
the Lender shall not be required first to institute suit or exhaust its remedies
hereon against Maker or others liable or to become liable hereon or to enforce
its rights against them, and (iv) consent to any extension or postponement of
time of payment of this Debenture and to any other indulgence with respect
hereto without notice thereof to any of them.
14. This Debenture will not be transferable at any time on or prior to
Maturity except for transfers to affiliates, successors to the ultimate parent
of the Lender, by operation of law, pursuant to a merger of Lender into another
entity or pursuant to the sale of all or substantially all of the assets of
Lender that are in compliance with all Federal and State securities laws with
respect to this Debenture.
15. This Debenture shall bind Maker and its successors and assigns, and
the benefits hereof shall inure to the benefit of Lender and its successors and
assigns. All references herein to "Maker" and "Lender" shall be deemed to apply
to Maker and Lender, respectively, and to their respective successors and
assigns.
16. Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
interpretation and enforceability of this Debenture and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
17. Jurisdiction. The Lender and the Maker agree to submit to personal
jurisdiction and to waive any objection as to venue in the federal or state
courts in the County of Marion, State of Indiana. Service of process on the
Maker or the Lender in any action arising out of or relating to this Debenture
shall be effective if mailed to such party at the address listed in Section 10
hereof.
<PAGE>
WITNESS the due execution hereof on the date first above written with
the intention that this Debenture shall constitute a sealed instrument.
NAL FINANCIAL GROUP INC.
By: ______________________________ (Seal)
Robert R. Bartolini
Chief Executive Officer
<PAGE>
NOTICE OF CONVERSION
TO: NAL FINANCIAL GROUP INC.
(1) The undersigned hereby elects to purchase _______ shares of Common
Stock of NAL FINANCIAL GROUP INC. pursuant to the terms of the attached
Debenture, and tenders herewith payment of the purchase price for such shares in
full.
(2) In converting this Debenture, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment, and that the undersigned will
not offer, sell or otherwise dispose of any such shares of Common Stock except
under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
--------------------------------
(Name)
---------------------------------
(Name)
(4) Please issue a new Debenture for the unexercised portion of the
attached Debenture in the name of the undersigned or in such other name as is
specified below:
---------------------------------
(Name)
- - ------------------------------ ---------------------------------
(Date) (Signature)
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED APRIL 23, 1996 BY AND BETWEEN
NAL FINANCIAL GROUP INC. AND BENEFICIAL STANDARD LIFE INSURANCE COMPANY AND
GREAT AMERICAN RESERVE INSURANCE COMPANY, AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN
OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION."
WARRANT TO PURCHASE COMMON STOCK
OF
NAL FINANCIAL GROUP INC.
Void after April 23, 2001
WHEREAS, Conseco, Inc. has arranged for two of its wholly-owned
subsidiaries to purchase $10,000,000 of subordinated convertible debentures of
the Company pursuant to a Securities Purchase Agreement, as of the date hereof,
by and among the Company and such subsidiaries of Conseco, Inc.
This certifies that, for value received, CONSECO, INC. ("Holder"), is
entitled, subject to the terms set forth below, to purchase from NAL FINANCIAL
GROUP INC. (the "Company"), a Delaware corporation, shares of the Common Stock
of the Company (the "Shares"), as constituted on the date hereof (the "Warrant
Issue Date"), with the Notice of Exercise attached hereto duly executed, and
simultaneous payment therefor in lawful money of the United States, at the
Exercise Price as set forth in Section 2 below. The number, character and
Exercise Price of the shares are subject to adjustment as provided below.
1. Term of Warrant. This Warrant shall be exercisable, in whole or in
part, during the term commencing on the Warrant Issue Date and ending at 5:00
p.m. on April 23, 2001, and shall be void thereafter.
2. Exercise Price and Number of Shares.
2.1 Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $12.625 per share of common stock, as adjusted pursuant to
Section 11 hereof.
2.2 Number of Shares. The number of shares of the Company's Common
Stock, $.15 par value per share ("Common Stock") which may be purchased pursuant
to this Warrant shall be 500,000 shares, as adjusted pursuant to Section 11
hereof.
<PAGE>
3. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are exercisable
by the Holder in whole or in part, at any time, or from time to time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto duly
completed and executed on behalf of the Holder, at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company), upon payment in cash or by check acceptable to the Company.
(b) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within ten (10) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor and amount.
6. Rights of Stockholders. Subject to Sections 9 and 11 of this Warrant
and the provisions of any other written agreement between the Company and the
Holder, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Stock or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value, or change of stock to no par value, consolidation, merger,
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised as provided herein.
<PAGE>
7. Transfer of Warrant.
7.1. Exchange of Warrant Upon a Transfer. On surrender of this
Warrant for exchange, properly endorsed, the Company at its expense shall issue
to or on the order of the Holder a new warrant or warrants of like tenor, in the
name of the Holder or as the Holder (on payment by the Holder of any applicable
transfer taxes) may direct, of the number of shares issuable upon exercise
hereof.
7.2. Compliance with Securities Laws; Restrictions on Transfers.
(a) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Shares to be issued upon exercise hereof
are being acquired solely for the Holder's own account and not as a nominee for
any other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any Shares to be issued upon exercise
hereof except under circumstances that will not result in a violation of
applicable federal and state securities laws. Upon exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
(b) Neither this Warrant nor any share of Common Stock issued
upon exercise of this Warrant may be offered for sale or sold, or otherwise
transferred or sold in any transaction which would constitute a sale thereof
within the meaning of the Securities Act of 1933, as amended (the "1933 Act"),
unless (i) such security has been registered for sale under the 1933 Act and
registered or qualified under applicable state securities laws relating to the
offer an sale of securities, or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification requirements
of all such state securities laws are available and the Company shall have
received an opinion of counsel satisfactory to the Company that the proposed
sale or other disposition of such securities may be effected without
registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale, such counsel and such opinion to be satisfactory to the
Company.
(c) All Shares issued upon exercise hereof shall be stamped
or imprinted with a legend in substantially the following form (in addition to
any legend required by state securities laws).
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED APRIL 23, 1996 BY AND BETWEEN
NAL FINANCIAL GROUP INC. AND BENEFICIAL STANDARD LIFE INSURANCE COMPANY AND
GREAT AMERICAN RESERVE INSURANCE COMPANY, AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN
OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION."
<PAGE>
Holder recognizes that investing in the Warrant and the Common Stock
involves a high degree of risk, and Holder is in a financial position to hold
the Warrant and the Common Stock indefinitely and is able to bear the economic
risk and withstand a complete loss of its investment in the Warrant and the
Common Stock. The Holder is a sophisticated investor and is capable of
evaluating the merits and risks of investing in the Company. The Holder has had
an opportunity to discuss the Company's business, management and financial
affairs with the Company's management, has been given full and complete access
to information concerning the Company, and has utilized such access to its
satisfaction for the purpose of obtaining information or verifying information
and have had the opportunity to inspect the Company's operation. Holder has had
the opportunity to ask questions of, and receive answers from the management of
the Company (and any person acting on its behalf) concerning the Warrant and the
Common Stock and the agreements and transactions contemplated hereby, and to
obtain any additional information as Holder may have requested in making its
investment decision. The Holder is an "accredited investor", as defined by
Regulation D promulgated under the Act.
8. Reservation of Stock. The Company covenants that during the term
that this Warrant is exercisable, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide for the
issuance of the shares upon the exercise of this Warrant, from time to time,
will take all steps necessary to amend its Certificate of Incorporation (the
"Certificate") to provide sufficient reserves of shares of Common Stock issuable
upon the exercise of the Warrant. The Company further covenants that all shares
that may be issued upon the exercise of rights represented by this Warrant, upon
exercise of the rights represented by this Warrant and payment of the Exercise
Price, all as set forth herein, will be free from all taxes, liens and charges
in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares of Common Stock upon
the exercise of this Warrant.
9. Notices.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Warrant.
(b) All notices, advices and communications under this Warrant
shall be deemed to have been given, (i) in the case of personal delivery, on the
date of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:
<PAGE>
If to the Company:
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Ft. Lauderdale, FL 33309
Attention: Mr. Robert R. Bartolini
With a Copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, Professional Corporation
Two Logan Square, 12th Floor
18th & Arch Streets
Philadelphia, PA 19103-2771
and to the Holder:
at the address of the Holder appearing on the
books of the Company or the Company's transfer agent,
if any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
10. Amendments.
(a) Any term of this Warrant may be amended with the written
consent of the Company and the Holder. Any amendment effected in accordance with
this Section 10 shall be binding upon the Holder, each future holder and the
Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Warrant, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
11. Adjustments. The number of Shares of Common Stock purchasable
hereunder and the Exercise Price is subject to adjustment from time to time upon
the occurrence of certain events, as follows:
11.1. Reorganization, Merger or Sale of Assets. If at any time
while this Warrant, or any portion thereof, is outstanding and unexpired there
shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding
<PAGE>
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of substantially all of the Company's properties and assets as, or
substantially as, an entirety to any other person, then, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the holder of this Warrant shall thereafter be entitled to
receive upon payment of the Exercise Price then in effect, the number of shares
of stock or other securities or property of the successor corporation resulting
from such reorganization, merger, consolidation, sale or transfer that a holder
of the shares deliverable upon exercise of this Warrant would have been entitled
to receive in such reorganization, consolidation, merger, sale or transfer if
this Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 11. The foregoing provisions of this Section 11.1 shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation that are
at the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
11.2. Reclassification. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 11.
11.3. Split, Subdivision or Combination of Shares. If the Company
at any time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price and the number of shares issuable upon exercise
of this Warrant shall be proportionately adjusted.
11.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this
<PAGE>
Warrant shall represent the right to acquire, in addition to the number of
shares of the security receivable upon exercise of this Warrant, and without
payment of any additional consideration therefor, the amount of such other or
additional stock or other securities or property (other than cash) of the
Company that such holder would hold on the date of such exercise had it been the
holder of record of the security receivable upon exercise of this Warrant on the
date hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock, other securities or property available by this Warrant as
aforesaid during such period.
11.5. Cumulative Adjustments for Issuance(s) of Shares.
(a) (i) If at any time during the eighteen-month period
following the Warrant Issue Date, the Company shall offer and sell Additional
Shares of Common Stock (as hereinafter defined) for consideration per share less
than the Exercise Price in effect immediately prior to the issuance of such
Additional Shares of Common Stock, the Exercise Price in effect immediately
prior to each such issuance shall forthwith be adjusted upon such issuance to a
price equal to the price paid per share for such Additional Shares of Common
Stock;
(ii) Following the expiration of the eighteen-month
period from the Warrant Issue Date, the following adjustments shall be made to
the Exercise Price:
If at any time between the Warrant Issue Date and the date upon which
this Warrant is exercised, in whole or in part ("Exercise Date"), the Company
shall offer and sell Additional Shares of Common Stock (as hereinafter defined)
for cash consideration in a private or public sale transaction(s), then
immediately prior to the exercise of the Warrant, in whole or in part, the
Exercise Price Per Share as adjusted pursuant to Section 11.1 through 11.5, if
any (the "Adjusted Exercise Price Per Share") and the number of shares issuable
upon exercise shall be adjusted only in the event that the average consideration
per share ("Average Sales Price Per Share") received by the Company upon such
sale(s) on a cumulative basis (as adjusted to take into account the effect of
any adjustments under Section 11.1 through 11.4) is less than the Exercise Price
on the Warrant Issue Date.
The Adjusted Exercise Price per Share as adjusted in conjunction with
the exercise of this Warrant on the Exercise Date shall equal the product of the
Exercise Price Per Share on the Warrant Issue Date multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
the Warrant Issue Date (as adjusted to take into account the effect of any
adjustment under Sections 11.1 through 11.4 during the period from the Warrant
Issue Date to the Exercise Date, if any) plus the number of shares of Common
Stock which the aggregate consideration received for the issuance(s) or sale(s)
of the Additional Shares of Common Stock during the period from the Warrant
Issue Date to the Exercise Date would purchase at the Adjusted Exercise Price
Per Share on the Warrant Issue Date, and the denominator of which shall be the
number of shares of Common Stock outstanding after taking into account the
Additional Shares of Common Stock (including upon exercise of warrants and
conversion of Convertible Securities).
<PAGE>
(b) For the purpose of this Section 11.5, the consideration
received by the Company for any issue or sale of securities shall, (i) to the
extent it consists of cash, be computed at the gross amount of cash received by
the Company before deduction of any underwriting or similar commissions,
concessions or compensation paid or allowed by the Company in connection with
such issue or sale, (ii) to the extent it consists of a service or property
other than cash, be computed at the fair value of that service or property as
determined in good faith by the Board of Directors; and (iii) if Additional
Shares of Common Stock, Convertible Securities (as hereinafter defined), or
rights or options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Company for a consideration that covers both,
be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or rights or options.
(c) For the purpose of the calculations provided in this
Section 11.5, if at any time or from time to time after the Warrant Issue Date
the Company shall issue any rights or options for the purchase of, or stock or
other securities convertible into, Additional Shares of Common Stock (such
Common Stock or securities being hereinafter referred to as "Convertible
Securities"), then, and in each case, if the Effective Price (as hereinafter
defined) of such rights, options or Convertible Securities shall be less than
the Exercise Price, the Company shall be deemed to have issued at the time of
the issuance of such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, payable to the
Company upon exercise or conversion of such options or rights. "Effective Price"
shall mean the quotient determined by dividing the total of all of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. In the case of Convertible
Securities which have a conversion price which is based, in whole or in part,
upon a discount to the market price or value of the Common Stock, then for the
purposes of calculating the Effective Price, the consideration shall be deemed
to include the minimum conversion price payable to the Company.
If any such rights or options or the conversion privilege represented
by any such Convertible Securities shall expire without having been exercised,
the adjustment to the number of shares available hereunder upon the issuance of
such rights, options or Convertible Securities shall be readjusted to the number
of shares that would have been in effect had an adjustment been made on the
basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company for the granting of
all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted
plus the
<PAGE>
consideration, if any, actually received by the Company on the conversion of
such Convertible Securities.
(d) For the purpose of the calculations provided for in this
Section 11.5, if at any time or from time to time after the Warrant Issue Date
the Company shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective Price thereof is less than
the then Exercise Price, the Company shall be deemed to have issued at the time
of the issuance of such rights or options the maximum number of Additional
Shares of Common Stock issuable upon conversion of the total amount of
Convertible Securities covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares of Common Stock an
amount equal to the amount of consideration, if any, received by the Company for
the issuance of such rights or options, plus the consideration, if any, payable
to the Company upon the conversion of such Convertible Securities. "Effective
Price" shall mean the quotient determined by dividing the total amount of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment of such Exercise Price adjusted upon the issuance of such
rights or options shall be made as a result of the actual issuance of the
Convertible Securities upon the exercise of such rights or options or upon the
actual issuance of Additional Shares of Common Stock upon the conversion of such
Convertible Securities.
The provisions of subsection (c) above for readjustment upon the
expiration of rights or options or the rights of conversion of Convertible
Securities, shall apply mutatis mutandis to the rights, options and Convertible
Securities referred to in this subsection (d).
(e) Upon each adjustment in the Exercise Price or the
Adjusted Exercise Price, as applicable, pursuant to any provision of Section
11.5(a)(ii), the number of shares of Common Stock purchasable hereunder shall be
adjusted, to the nearest one hundredth of a whole share, to the product obtained
by multiplying such number of shares purchasable immediately prior to such
adjustment in the Exercise Price by a fraction, the numerator of which shall be
the Exercise Price immediately prior to such adjustment and the denominator of
which shall be the Exercise Price immediately thereafter. For purposes of any
calculation under this subsection, the Exercise Price and the adjusted Exercise
Price shall be determined to the nearest ten-thousandth of a cent.
(f) The term "Additional Shares of Common Stock" as used
herein shall mean all shares of Common Stock issued or deemed issued by the
Company after the Warrant Issue Date, other than (i) securities issued pursuant
to or in connection with the Securities Purchase Agreement dated of even date
herewith, by and among the Company and the Great American Reserve Insurance
Company, Beneficial Standard Life Insurance Company and Conseco, Inc., and the
debentures issued thereunder; (ii) shares of Common Stock issued upon conversion
of convertible securities or the exercise of common stock purchase warrants
outstanding as of the Warrant Issue Date; (iii) shares of Common Stock issuable
to employees, officers or directors pursuant to the Company's stock option plan;
(iv) shares of Common Stock issued or issuable to directors in connection with
their service as directors; (v) shares of Common Stock issued or issuable to
directors, officers or employees for services rendered or to be rendered
pursuant to arrangements approved by the Board of Directors; and (vii) shares of
Common Stock issued in connection with a business combination, merger,
consolidation, asset
<PAGE>
acquisition or the acquisition of the business of another
corporation (through the purchase of stock or assets) approved by the Board of
Directors.
11.6 The Company will not, by any voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 11 and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holders of this Warrant against impairment.
12. Registration Rights. The Holder shall be entitled to the
registration rights set forth in that certain Registration Rights Agreement of
even date herewith by and between the Company and such Holder.
13. Severability. Whenever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Warrant
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Warrant shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
14. Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
interpretation and enforceability of this Warrant and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Delaware, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
15. Jurisdiction. The Holder and the Company agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts in the County of Marion, State of Indiana. Service of process on
the Company or the Holder in any action arising out of or relating to this
Warrant shall be effective if mailed to such party at the address listed in
Section 9 hereof.
16. Arbitration. If a dispute arises as to interpretation of this
Warrant, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in Carmel, Indiana. The decision of a majority of the Arbitrators shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. Each party
shall pay the fees and expenses of the
<PAGE>
arbitrator appointed by it, its counsel and its witnesses. The parties shall
share equally the fees and expenses of the impartial arbitrator.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: April 23, 1996
HOLDER: CONSECO, INC. NAL FINANCIAL GROUP INC.
By:_____________________________ By:_____________________________
Ngaire E. Cuneo Robert R. Bartolini
Executive Vice President Chief Executive Officer
<PAGE>
NOTICE OF EXERCISE
TO: NAL FINANCIAL GROUP INC.
(1) The undersigned hereby elects to purchase _______ shares of Common
Stock of NAL FINANCIAL GROUP INC. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment, and that the undersigned will
not offer, sell or otherwise dispose of any such shares of Common Stock except
under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(Name)
-----------------------------------
(Name)
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(Name)
- - -------------------- -----------------------------------
(Date) (Signature)
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED APRIL 23, 1996 BY AND BETWEEN
NAL FINANCIAL GROUP INC. AND BENEFICIAL STANDARD LIFE INSURANCE COMPANY AND
GREAT AMERICAN RESERVE INSURANCE COMPANY, AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN
OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION."
WARRANT TO PURCHASE COMMON STOCK
OF
NAL FINANCIAL GROUP INC.
Void after April 23, 2001
WHEREAS, Conseco, Inc. has arranged for two of its wholly-owned
subsidiaries to purchase $10,000,000 of subordinated convertible debentures of
the Company pursuant to a Securities Purchase Agreement, as of the date hereof,
by and among the Company and such subsidiaries of Conseco, Inc.
This certifies that, for value received, CONSECO, INC. ("Holder"), is
entitled, subject to the terms set forth below, to purchase from NAL FINANCIAL
GROUP INC. (the "Company"), a Delaware corporation, shares of the Common Stock
of the Company (the "Shares"), as constituted on the date hereof (the "Warrant
Issue Date"), with the Notice of Exercise attached hereto duly executed, and
simultaneous payment therefor in lawful money of the United States, at the
Exercise Price as set forth in Section 2 below. The number, character and
Exercise Price of the shares are subject to adjustment as provided below.
1. Term of Warrant. This Warrant shall be exercisable, in whole or in
part, during the term commencing on the Warrant Issue Date and ending at 5:00
p.m. on April 23, 2001, and shall be void thereafter.
2. Exercise Price and Number of Shares.
2.1 Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $14.52 per share of common stock, as adjusted pursuant to
Section 11 hereof.
2.2 Number of Shares. The number of shares of the Company's Common
Stock, $.15 par value per share ("Common Stock") which may be purchased pursuant
to this Warrant shall be 15,000 shares, as adjusted pursuant to Section 11
hereof.
3. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are exercisable
by the Holder in whole or in part, at any time, or from time to time, by the
surrender of this Warrant and the Notice of Exercise annexed hereto duly
completed and executed on behalf of the Holder, at
<PAGE>
the office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the Holder at the address of the Holder
appearing on the books of the Company), upon payment in cash or by check
acceptable to the Company.
(b) This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within ten (10) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor and amount.
6. Rights of Stockholders. Subject to Sections 9 and 11 of this Warrant
and the provisions of any other written agreement between the Company and the
Holder, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of Common Stock or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change
of par value, or change of stock to no par value, consolidation, merger,
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised as provided herein.
7. Transfer of Warrant.
7.1. Exchange of Warrant Upon a Transfer. On surrender of this
Warrant for exchange, properly endorsed, the Company at its expense shall issue
to or on the order of the Holder a new warrant or warrants of like tenor, in the
name of the Holder or as the Holder (on
<PAGE>
payment by the Holder of any applicable transfer taxes) may direct, of the
number of shares issuable upon exercise hereof.
7.2. Compliance with Securities Laws; Restrictions on Transfers.
(a) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the Shares to be issued upon exercise hereof are being
acquired solely for the Holder's own account and not as a nominee for any other
party, and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any Shares to be issued upon exercise hereof except
under circumstances that will not result in a violation of applicable federal
and state securities laws. Upon exercise of this Warrant, the Holder shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of Common Stock so purchased are being acquired solely
for the Holder's own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale.
(b) Neither this Warrant nor any share of Common Stock issued upon
exercise of this Warrant may be offered for sale or sold, or otherwise
transferred or sold in any transaction which would constitute a sale thereof
within the meaning of the Securities Act of 1933, as amended (the "1933 Act"),
unless (i) such security has been registered for sale under the 1933 Act and
registered or qualified under applicable state securities laws relating to the
offer an sale of securities, or (ii) exemptions from the registration
requirements of the 1933 Act and the registration or qualification requirements
of all such state securities laws are available and the Company shall have
received an opinion of counsel satisfactory to the Company that the proposed
sale or other disposition of such securities may be effected without
registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification
of securities for sale, such counsel and such opinion to be satisfactory to the
Company.
(c) All Shares issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form (in addition to any
legend required by state securities laws).
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE HOLDER
PURSUANT TO A SECURITIES PURCHASE AGREEMENT DATED APRIL 23, 1996 BY AND BETWEEN
NAL FINANCIAL GROUP INC. AND BENEFICIAL STANDARD LIFE INSURANCE COMPANY AND
GREAT AMERICAN RESERVE INSURANCE COMPANY, AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION
FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN
OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION."
Holder recognizes that investing in the Warrant and the Common Stock
involves a high degree of risk, and Holder is in a financial position to hold
the Warrant and the Common Stock indefinitely and is able to bear the economic
risk and withstand a complete loss of its investment in the Warrant and the
Common Stock. The Holder is a sophisticated investor and is capable of
evaluating the merits and risks of investing in the Company. The Holder has had
an opportunity
<PAGE>
to discuss the Company's business, management and financial affairs with the
Company's management, has been given full and complete access to information
concerning the Company, and has utilized such access to its satisfaction for the
purpose of obtaining information or verifying information and have had the
opportunity to inspect the Company's operation. Holder has had the opportunity
to ask questions of, and receive answers from the management of the Company (and
any person acting on its behalf) concerning the Warrant and the Common Stock and
the agreements and transactions contemplated hereby, and to obtain any
additional information as Holder may have requested in making its investment
decision. The Holder is an "accredited investor", as defined by Regulation D
promulgated under the Act.
8. Reservation of Stock. The Company covenants that during the term
that this Warrant is exercisable, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide for the
issuance of the shares upon the exercise of this Warrant, from time to time,
will take all steps necessary to amend its Certificate of Incorporation (the
"Certificate") to provide sufficient reserves of shares of Common Stock issuable
upon the exercise of the Warrant. The Company further covenants that all shares
that may be issued upon the exercise of rights represented by this Warrant, upon
exercise of the rights represented by this Warrant and payment of the Exercise
Price, all as set forth herein, will be free from all taxes, liens and charges
in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares of Common Stock upon
the exercise of this Warrant.
9. Notices.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Warrant.
(b) All notices, advices and communications under this Warrant shall
be deemed to have been given, (i) in the case of personal delivery, on the date
of such delivery and (ii) in the case of mailing, on the third business day
following the date of such mailing, addressed as follows:
If to the Company:
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Ft. Lauderdale, FL 33309
Attention: Mr. Robert R. Bartolini
<PAGE>
With a Copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, Professional Corporation
Two Logan Square, 12th Floor
18th & Arch Streets
Philadelphia, PA 19103-2771
and to the Holder:
at the address of the Holder appearing on the books
of the Company or the Company's transfer agent, if
any.
Either of the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 9.
10. Amendments.
(a) Any term of this Warrant may be amended with the written
consent of the Company and the Holder. Any amendment effected in accordance with
this Section 10 shall be binding upon the Holder, each future holder and the
Company.
(b) No waivers of, or exceptions to, any term, condition or
provision of this Warrant, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
11. Adjustments. The number of Shares of Common Stock purchasable
hereunder and the Exercise Price is subject to adjustment from time to time upon
the occurrence of certain events, as follows:
11.1. Reorganization, Merger or Sale of Assets. If at any time
while this Warrant, or any portion thereof, is outstanding and unexpired there
shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (iii) a sale or transfer of substantially all of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation, sale or transfer,
lawful provision shall be made so that the holder of this Warrant shall
thereafter be entitled to receive upon payment of the Exercise Price then in
effect, the number of shares of stock or other securities or property of the
<PAGE>
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or transfer,
all subject to further adjustment as provided in this Section 11. The foregoing
provisions of this Section 11.1 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
11.2. Reclassification. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 11.
11.3. Split, Subdivision or Combination of Shares. If the Company
at any time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price and the number of shares issuable upon exercise
of this Warrant shall be proportionately adjusted.
11.4. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise,
<PAGE>
retained such shares and/or all other additional stock, other securities or
property available by this Warrant as aforesaid during such period.
11.5. Cumulative Adjustments for Issuance(s) of Shares.
(a) (i) If at any time during the eighteen-month period
following the Warrant Issue Date, the Company shall offer and sell Additional
Shares of Common Stock (as hereinafter defined) for consideration per share less
than the Exercise Price in effect immediately prior to the issuance of such
Additional Shares of Common Stock, the Exercise Price in effect immediately
prior to each such issuance shall forthwith be adjusted upon such issuance to a
price equal to the price paid per share for such Additional Shares of Common
Stock;
(ii) Following the expiration of the eighteen-month
period from the Warrant Issue Date, the following adjustments shall be made to
the Exercise Price:
If at any time between the Warrant Issue Date and the date
upon which this Warrant is exercised, in whole or in part ("Exercise Date"), the
Company shall offer and sell Additional Shares of Common Stock (as hereinafter
defined) for cash consideration in a private or public sale transaction(s), then
immediately prior to the exercise of the Warrant, in whole or in part, the
Exercise Price Per Share as adjusted pursuant to Section 11.1 through 11.5, if
any (the "Adjusted Exercise Price Per Share") and the number of shares issuable
upon exercise shall be adjusted only in the event that the average consideration
per share ("Average Sales Price Per Share") received by the Company upon such
sale(s) on a cumulative basis (as adjusted to take into account the effect of
any adjustments under Section 11.1 through 11.4) is less than the Exercise Price
on the Warrant Issue Date.
The Adjusted Exercise Price per Share as adjusted in conjunction with
the exercise of this Warrant on the Exercise Date shall equal the product of the
Exercise Price Per Share on the Warrant Issue Date multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
the Warrant Issue Date (as adjusted to take into account the effect of any
adjustment under Sections 11.1 through 11.4 during the period from the Warrant
Issue Date to the Exercise Date, if any) plus the number of shares of Common
Stock which the aggregate consideration received for the issuance(s) or sale(s)
of the Additional Shares of Common Stock during the period from the Warrant
Issue Date to the Exercise Date would purchase at the Adjusted Exercise Price
Per Share on the Warrant Issue Date, and the denominator of which shall be the
number of shares of Common Stock outstanding after taking into account the
Additional Shares of Common Stock (including upon exercise of warrants and
conversion of Convertible Securities).
(b) For the purpose of this Section 11.5, the consideration received by
the Company for any issue or sale of securities shall, (i) to the extent it
consists of cash, be computed at the gross amount of cash received by the
Company before deduction of any underwriting or similar commissions, concessions
or compensation paid or allowed by the Company in connection with such issue or
sale, (ii) to the extent it consists of a service or
<PAGE>
property other than cash, be computed at the fair value of that service or
property as determined in good faith by the Board of Directors; and (iii) if
Additional Shares of Common Stock, Convertible Securities (as hereinafter
defined), or rights or options to purchase either Additional Shares of Common
Stock or Convertible Securities are issued or sold together with other stock or
securities or other assets of the Company for a consideration that covers both,
be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or rights or options.
(c) For the purpose of the calculations provided in this Section 11.5,
if at any time or from time to time after the Warrant Issue Date the Company
shall issue any rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares of Common Stock (such Common
Stock or securities being hereinafter referred to as "Convertible Securities"),
then, and in each case, if the Effective Price (as hereinafter defined) of such
rights, options or Convertible Securities shall be less than the Exercise Price,
the Company shall be deemed to have issued at the time of the issuance of such
rights or options or Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, payable to the Company upon exercise
or conversion of such options or rights. "Effective Price" shall mean the
quotient determined by dividing the total of all of such consideration by such
maximum number of Additional Shares of Common Stock. No further adjustment shall
be made as a result of the actual issuance of Additional Shares of Common Stock
on the exercise of any such rights or options or the conversion of any such
Convertible Securities. In the case of Convertible Securities which have a
conversion price which is based, in whole or in part, upon a discount to the
market price or value of the Common Stock, then for the purposes of calculating
the Effective Price, the consideration shall be deemed to include the minimum
conversion price payable to the Company.
If any such rights or options or the conversion privilege represented
by any such Convertible Securities shall expire without having been exercised,
the adjustment to the number of shares available hereunder upon the issuance of
such rights, options or Convertible Securities shall be readjusted to the number
of shares that would have been in effect had an adjustment been made on the
basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company for the granting of
all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted
plus the consideration, if any, actually received by the Company on the
conversion of such Convertible Securities.
(d) For the purpose of the calculations provided for in this Section
11.5, if at any time or from time to time after the Warrant Issue Date the
Company shall issue any rights or options for the purchase of Convertible
Securities, then, in each such case, if the Effective
<PAGE>
Price thereof is less than the then Exercise Price, the Company shall be deemed
to have issued at the time of the issuance of such rights or options the maximum
number of Additional Shares of Common Stock issuable upon conversion of the
total amount of Convertible Securities covered by such rights or options and to
have received as consideration for the issuance of such Additional Shares of
Common Stock an amount equal to the amount of consideration, if any, received by
the Company for the issuance of such rights or options, plus the consideration,
if any, payable to the Company upon the conversion of such Convertible
Securities. "Effective Price" shall mean the quotient determined by dividing the
total amount of such consideration by such maximum number of Additional Shares
of Common Stock. No further adjustment of such Exercise Price adjusted upon the
issuance of such rights or options shall be made as a result of the actual
issuance of the Convertible Securities upon the exercise of such rights or
options or upon the actual issuance of Additional Shares of Common Stock upon
the conversion of such Convertible Securities.
The provisions of subsection (c) above for readjustment upon the
expiration of rights or options or the rights of conversion of Convertible
Securities, shall apply mutatis mutandis to the rights, options and Convertible
Securities referred to in this subsection (d).
(e) Upon each adjustment in the Exercise Price or the Adjusted Exercise
Price, as applicable, pursuant to any provision of Section 11.5(a)(ii), the
number of shares of Common Stock purchasable hereunder shall be adjusted, to the
nearest one hundredth of a whole share, to the product obtained by multiplying
such number of shares purchasable immediately prior to such adjustment in the
Exercise Price by a fraction, the numerator of which shall be the Exercise Price
immediately prior to such adjustment and the denominator of which shall be the
Exercise Price immediately thereafter. For purposes of any calculation under
this subsection, the Exercise Price and the adjusted Exercise Price shall be
determined to the nearest ten-thousandth of a cent.
(f) The term "Additional Shares of Common Stock" as used herein shall
mean all shares of Common Stock issued or deemed issued by the Company after the
Warrant Issue Date, other than (i) securities issued pursuant to the terms of
the Securities Purchase Agreement dated of even date herewith, by and among the
Company and the Great American Reserve Insurance Company, Beneficial Standard
Life Insurance Company and Conseco, Inc., and the debentures issued thereunder;
(ii) shares of Common Stock issued upon conversion of convertible securities or
the exercise of common stock purchase warrants outstanding as of the Warrant
Issue Date; (iii) shares of Common Stock issuable to employees, officers or
directors pursuant to the Company's stock option plan; (iv) shares of Common
Stock issued or issuable to directors in connection with their service as
directors; (v) shares of Common Stock issued or issuable to directors, officers
or employees for services rendered or to be rendered pursuant to arrangements
approved by the Board of Directors; and (vii) shares of Common Stock issued in
connection with a business combination, merger, consolidation, asset acquisition
or the acquisition of the business of another corporation (through the purchase
of stock or assets) approved by the Board of Directors.
<PAGE>
11.6 The Company will not, by any voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Section 11 and in the taking
of all such action as may be necessary or appropriate in order to protect the
rights of the Holders of this Warrant against impairment.
12. Registration Rights. The Holder shall be entitled to the
registration rights set forth in that certain Registration Rights Agreement of
even date herewith by and between the Company and such Holder.
13. Severability. Whenever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this Warrant
in such jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Warrant shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
14. Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity,
interpretation and enforceability of this Warrant and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Delaware, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
15. Jurisdiction. The Holder and the Company agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts in the County of Marion, State of Indiana. Service of process on
the Company or the Holder in any action arising out of or relating to this
Warrant shall be effective if mailed to such party at the address listed in
Section 9 hereof.
16. Arbitration. If a dispute arises as to interpretation of this
Warrant, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and the third by the said two
arbitrators, or, if they cannot agree, then the third arbitrator shall be
appointed by the American Arbitration Association. The third arbitrator shall be
chairman of the panel and shall be impartial. The arbitration shall take place
in Carmel, Indiana. The decision of a majority of the Arbitrators shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. Each party
shall pay the fees and expenses of the arbitrator appointed by it, its counsel
and its witnesses. The parties shall share equally the fees and expenses of the
impartial arbitrator.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: April 23, 1996
HOLDER: CONSECO, INC. NAL FINANCIAL GROUP INC.
By:_____________________________ By:_____________________________
Ngaire E. Cuneo Robert R. Bartolini
Executive Vice President Chief Executive Officer
<PAGE>
NOTICE OF EXERCISE
TO: NAL FINANCIAL GROUP INC.
(1) The undersigned hereby elects to purchase _______ shares of Common
Stock of NAL FINANCIAL GROUP INC. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon conversion
thereof are being acquired solely for the account of the undersigned and not as
a nominee for any other party, and for investment, and that the undersigned will
not offer, sell or otherwise dispose of any such shares of Common Stock except
under circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(Name)
-----------------------------------
(Name)
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
-----------------------------------
(Name)
- - -------------------- -----------------------------------
(Date) (Signature)
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT entered into as of April 23,
1996, among NAL FINANCIAL GROUP INC. (the "Company"), BENEFICIAL STANDARD LIFE
INSURANCE COMPANY ("BSLIC"), and GREAT AMERICAN RESERVE INSURANCE COMPANY
("GARCO"), and each of the "Existing Stockholders" listed on the signature page
hereof. BSLIC, GARCO and the Existing Stockholders are collectively referred to
as the "Stockholders" and individually as a "Stockholder." Capitalized terms
used herein are defined in paragraph 7 hereof.
The Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition of
the Company's Board of Directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company, (iii) limiting the manner and terms by
which the Stockholders' stock may be transferred, and (iv) certain related
matters. The execution and delivery of this Agreement is a condition to GARCO
and BSLIC's acquisition of the Company's securities pursuant to a Securities
Purchase Agreement entered into on even date herewith.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Board of Directors.
(a) Each Stockholder shall vote all of his Stockholder Shares
which are voting shares and any other voting securities of the Company over
which such Stockholder has voting control and shall take all other necessary or
desirable actions within his control (whether in his capacity as a stockholder,
director, member of a board committee or officer of the Company or otherwise,
and including attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary or desirable actions within its control
(including calling special board and stockholder meetings), so that:
(i) one (1) person designated by BSLIC and GARCO (the
"Designee") shall be nominated and elected or appointed to serve on the
Board of Directors of the Company;
(ii) the Designee shall also be appointed to serve on
each of the "Audit Committee" and the "Compensation Committee" as
established pursuant to paragraphs 1(b) and (c) below.
(b) The Board of Directors shall create a Compensation
Committee which shall consist of three (3) directors, a majority of which shall
be non-employee directors;
(c) The Audit Committee of the Board of Directors shall
consist of three (3) directors, a majority of which shall be non-employee
directors;
(d) In the event that the Designee for any reason ceases to
serve as a member of the Board during his or her term of office, the resulting
vacancy on the Board shall be filled by an alternative representative designated
by GARCO and BSLIC as provided hereunder.
(e) Upon termination of this Agreement, the Designee (or
replacement thereof) shall offer to tender his or her resignation to the Board
of Directors effective as of the date of termination. Such resignation in
undated form shall be attached hereto. Robert R. Bartolini, or the then Chairman
of the Company's Board of Directors shall be authorized by virtue of this
Agreement to accept and date such resignation upon the termination of this
Agreement. This authorization shall be evidenced by such Designee's signature at
the end hereof.
2. Restrictions on Transfer of Stockholder Shares:
(a) Transfer of Stockholder Shares. Except for Permitted
Transfers (as defined in paragraph 2(b) below), no Existing Stockholder shall
sell, transfer, assign, pledge or otherwise dispose of (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law)
any shares of Common Stock (a "Transfer") for a period of the earlier of: (i)
termination of this Agreement; or (ii) eighteen (18) months from the date hereof
except in accordance with the following exemptions:
(i) the Transfer of up to 100,000 Shares of Common Stock
in the aggregate by John T. Schaeffer;
(ii) the Transfer of up to 210,000 shares of Common
Stock by Robert R. Bartolini pursuant to the exercise of certain Common
Stock purchase options granted by Mr. Bartolini in 1995; and
(iii) commencing January 1, 1997, Transfers by the
Existing Stockholders of no more than 50,000 shares of Common Stock on
a quarterly basis.
(b) Permitted Transfers. The restrictions set forth in
paragraph 2 shall not apply with respect to any Transfer of Stockholder Shares
(a "Permitted Transfer") by any Stockholder (i) in the case of the Existing
Stockholder, pursuant to applicable laws of descent and distribution or among
the Existing Stockholder's Family Group or (ii) in the case of GARCO and BSLIC,
among their Affiliates (collectively referred to herein as "Permitted
Transferees"); provided that the restrictions contained in paragraph 2 shall
continue to be applicable to the Stockholder Shares after any such Transfer and
provided further that the transferees of such Stockholder Shares shall have
agreed in writing to be bound by the provisions of this Agreement affecting the
Stockholder Shares so transferred. For purposes of this Agreement, "Family
Group" means an Existing Stockholders' spouse and descendants (whether natural
or adopted) and any trust solely for the benefit of the Existing Stockholder
and/or the Existing Stockholders' spouse and/or descendants, and "Affiliate"
means any other Person directly or indirectly controlling, controlled by or
under common control.
(c) Consent to Registration. Notwithstanding anything to the
contrary in the Securities Purchase Agreement and the "Ancillary Agreements"
defined therein, BSLIC and GARCO do hereby consent and agree to permit the
Company to include the resale of the shares of Common Stock identified in
paragraphs 2(a)(i), 2(a)(ii) and 2(a)(iii) in any registration statement to be
filed by the Company with the Securities and Exchange Commission subsequent to
the date hereof, provided such resale does not conflict with the rights of BSLIC
and GARCO to the extent set forth in the Registration Rights Agreement; and
BSLIC and GARCO does agree to cause the Designee to vote for and consent to such
a registration.
3. Termination of Agreement. This Agreement shall terminate
automatically and the terms hereof shall be of no further force and effect at
such time as GARCO and BSLIC have each received a return on their investment in
the Company equal to the principal amount of such investments plus interest at
9% per annum as set forth in the Securities Purchase Agreement.
4. Legend.
(a) Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares after such transfer) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"The securities represented by this certificate are subject to
a Stockholders' Agreement dated as of April 23, 1996, among
NAL Financial Group Inc. (the "Company"), certain of the
Company's stockholders and Beneficial Standard Life Insurance
Company and Great American Reserve Insurance Company, as
amended and modified from time to time. A copy of such
Stockholders Agreement shall be furnished without charge by
the Company to the holder hereof upon written request."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding as of the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares upon Transfer pursuant to
the terms hereof or upon the termination of this Agreement
(b) Notwithstanding the above, certain shares of Common Stock
for which Robert R. Bartolini is the beneficial owner, are presently subject to
certain pledge arrangements. Mr. Bartolini will use his best efforts to
terminate these pledge arrangements as shortly as possible following this
transaction, and upon the receipt of his shares, he will comply with the
provisions of paragraph 4(a) above.
5. Transfers in Violation of Agreement. Any Transfer or
attempted Transfer of any Stockholder Shares in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer on
its books or treat any purported transferee of such Stockholder Shares as the
owner of such shares for any purpose.
6. Representations and Warranties.
(a) Each Stockholder represents and warrants for himself,
herself or itself, severally and not jointly, that:
(i) such Stockholder is the record or beneficial owner
of the number of Stockholder Shares set forth opposite his, her or its
name on the signature page hereof (subject to adjustment in the case of
BSLIC and GARCO),
(ii) this Agreement has been duly authorized, executed
and delivered by such Stockholder and constitutes the valid and binding
obligation of such Stockholder, enforceable in accordance with its
terms, and
(iii) except with respect to the existing Voting Trust
for the benefit of Robert R. Bartolini and John T. Schaeffer, such
Stockholder has not granted and is not a party to any proxy, voting
trust or other agreement which is inconsistent with, conflicts with or
violates any provisions of this Agreement.
(b) Except with respect to the existing Voting Trust for the
benefit of Robert R. Bartolini and John T. Schaeffer, no holder of Stockholder
Shares shall grant any proxy or become party to any voting trust or other
agreement which is inconsistent with, conflicts with or violates any provision
of this Agreement.
7. Definitions.
"Board" has the meaning set forth in the preamble.
"Common Stock" means the Company's Common Stock, par value
$.15 per share.
"Company" has the meaning set forth in the preamble.
"Existing Stockholders" has the meaning set forth in the
preamble.
"Permitted Transferee" has the meaning set forth in paragraph
2(b).
"Permitted Transfer" has the meaning set forth in paragraph
2(b).
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Registration Rights Agreement" means the registration rights
agreements by and between BSLIC AND GARCO and the Company dated as of the date
hereof.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated as of an even date herewith by and between the Company and BSLIC
AND GARCO.
"Stockholder Shares" means (i) any Common Stock, preferred
stock or other equity securities purchased or otherwise acquired by any
Stockholder, (ii) any options, warrants or other rights to acquire equity
securities, including any convertible debentures and (iii) any direct or
indirect interest in any of the above. As to any particular shares constituting
Stockholder Shares, such shares shall cease to be Stockholder Shares when they
have been (x) effectively registered under the Securities Act and disposed of in
accordance with the terms of this Agreement and the registration statement
covering them or (y) sold in accordance with the terms of this Agreement to the
public through a broker, dealer or market maker pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act.
"Stockholders" has the meaning set forth in the preamble.
"Transfer" has the meaning set forth in paragraph 2(a).
"Underlying Common Stock" means the shares of the Company's
Common Stock issued or issuable upon conversion of the Debenture purchased
pursuant to the Securities Purchase Agreement.
8. Amendment and Waiver. Except as otherwise provided herein,
no modification, amendment or waiver of any provision of this Agreement will be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company or such Stockholder.
The failure of any party to enforce any of the provisions of this Agreement will
in no way be construed as a waiver of such provisions and will not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
9. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
10. Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement together with the Company's Certificate of Incorporation
and the Securities Purchase Agreement and the exhibits thereto embodies the
complete agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersedes and preempts any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
11. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by the Company and its successors and assigns and the Stockholders and any
subsequent holders of Stockholder Shares and the respective successors and
assigns of each of them, so long as they hold Stockholder Shares.
12. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
13. Remedies. The Company and the Stockholders shall be
entitled to enforce their rights under this Agreement specifically, to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in their favor. The parties hereto agree and
acknowledge that money damages would not be an adequate remedy for any breach of
the provisions of this Agreement and that the Company and the Stockholders may
in their sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief (without posting
a bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
14. Notices. Any notice provided for in this Agreement shall
be in writing and shall be either personally delivered, or mailed first class
mail (postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the Notices Schedule attached hereto and
to any subsequent holder of Stockholder Shares subject to this Agreement at such
address as indicated by the Company's records, or at such address or to the
attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices shall be deemed to have been given
hereunder when delivered personally, three days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service. The
Company's address is:
NAL Financial Group Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Attention: Robert R. Bartolini, President
With a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
Two Logan Square, 12th Floor
18th & Arch Streets
Philadelphia, PA 19103-2771
15. Governing Law. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity, interpretation and enforceability of this Agreement and the exhibits
and schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
16. Jurisdiction. The Company and the Stockholders agree to
submit to personal jurisdiction and to waive any objection as to venue in the
federal or state courts in the County of Marion, State of Indiana. Service of
process on the Company or the Stockholders in any action arising out of or
relating to this Agreement shall be effective if mailed to such party at the
address listed in Section 14 hereof.
17. Arbitration. If a dispute arises as to interpretation of
this Agreement, it shall be decided finally by three arbitrators in an
arbitration proceeding conforming to the Rules of the American Arbitration
Association applicable to commercial arbitration. The arbitrators shall be
appointed as follows: one by the Company, and the Existing Stockholders, one by
BSLIC and GARCO and one by all of the Stockholders. The arbitration shall take
place in Carmel, Indiana. The decision of a majority of the Arbitrators shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. Each party
shall pay the fees and expenses of the arbitrator appointed by it, its counsel
and its witnesses. The parties shall share equally the fees and expenses of the
impartial arbitrator.
18. Descriptive Headings. The descriptive headings and
captions of this Agreement and the Schedules attached hereto are inserted for
convenience only and do not constitute a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
THE COMPANY:
NAL FINANCIAL GROUP INC.
By:_____________________________
Robert R. Bartolini, President
<PAGE>
EXISTING STOCKHOLDERS:
By:______________________________
Robert R. Bartolini(1)(2)
By:______________________________
John T. Schaeffer(1)
BENEFICIAL STANDARD LIFE INSURANCE COMPANY
By:________________________________
Title:_____________________________
GREAT AMERICAN RESERVE INSURANCE COMPANY
By:________________________________
Title:_____________________________
For the sole and limited purpose of consenting to the
provisions of paragraph 1(e) hereof:
DESIGNEE
By:_____________________________
- - ------------------------------------
(1) Shares held directly and beneficially, including beneficial ownership
through the Voting Trust Agreement held on behalf of Robert R. Bartolini and
John T. Schaeffer by English, McCaughan & O'Bryan, P.A
(2) Includes shares held by The Robert R. Bartolini and Marcia G. Bartolini
Revocable Trust dated July 27, 1992 and The Marcia G. Bartolini Revocable Trust
dated July 27, 1992, for which Robert R. Bartolini serves as a Co-Trustee.
<PAGE>
SCHEDULE OF EXISTING STOCKHOLDERS
Name and Address Stockholder Shares
Robert R. Bartolini 2,235,647(1)
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Fort Lauderdale, FL 33309
John T. Schaeffer 302,913(2) NAL Financial Group Inc. 500 Cypress Creek Road
West, Suite 590 Fort Lauderdale, FL 33309
- - ---------------------------------
(1) 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.
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.
(2) 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.
Includes 13,333 Incentive Stock Options granted to Mr. Schaeffer in December
1994 which vested as of January 1, 1996.
<PAGE>
NOTICES SCHEDULE
If to Mr. Bartolini:
Robert R. Bartolini
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Fort Lauderdale, FL 33309
If to Mr. Schaeffer:
John T. Schaeffer
NAL Financial Group Inc.
500 Cypress Creek Road West, Suite 590
Fort Lauderdale, FL 33309
If to BSLIC:
Beneficial Standard Life Insurance Company
11825 N. Pennsylvania Street
P.O. Box 1911
Carmel, IN 46032
Attention: Ngaire E. Cuneo
Executive Vice President
If to GARCO:
Great American Reserve Insurance Company
11825 N. Pennsylvania Street
P.O. Box 1911
Carmel, IN 46032
Attention: Ngaire E. Cuneo
Executive Vice President
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT made and entered into as of this 23rd day
of April, 1996, by and between NAL FINANCIAL GROUP INC., a Delaware corporation
(the "Company") and CONSECO, INC. ("CONSECO").
BACKGROUND
Pursuant to a Securities Purchase Agreement dated April 23, 1996 (the
"Purchase Agreement"), by and among the Company and two wholly owned
subsidiaries of CONSECO, the Company has issued to such CONSECO subsidiaries, in
the aggregate, $10,000,000 principal amount of 9% subordinated convertible
debentures (the "Debentures") and has issued to CONSECO Warrants (the
"Warrants") to purchase 515,000 shares of Common Stock of the Company in
connection with arranging such financing.
In order to induce CONSECO to arrange the investment by its
subsidiaries into the Company, the Company has agreed to provide CONSECO with
the rights set forth in this Agreement.
Article 1. CERTAIN DEFINITIONS.
In addition to the other terms defined in this Agreement,
the following terms shall be defined as follows:
"Brokers' Transactions" has the meaning ascribed to such
term pursuant to Rule 144 under the Securities Act.
"Business Day" means any day on which the New York Stock
Exchange ("NYSE") is open for trading.
"Common Stock" means any outstanding shares of Common Stock
of the Company, as well as any Shares issuable upon the exercise of the
Warrants.
"Company" means NAL Financial Group Inc., a Delaware
corporation.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the SEC thereunder, all as the same
shall be in effect at the relevant time.
"Holder" means CONSECO for so long as (and to the extent
that) it owns any Registrable Securities, and its successors, assigns, and
direct and indirect transferees who become registered owners of Registrable
Securities or securities exercisable, exchangeable or convertible into
Registrable Securities.
<PAGE>
"Mandatory Registration Statement" means a Mandatory
Registration Statement of the Company pursuant to the provisions of Section 2(a)
of this Agreement which covers Common Stock on an appropriate form then
permitted by the SEC to be used for such registration and the sales contemplated
to be made thereby under Rule 415 under the Securities Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
Registration Statement, including pre and post-effective amendments thereto, in
each case including the prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"Mandatory Registration" means a registration of Common
Stock effected pursuant to Section 2(a) hereof.
"Outstanding" means with respect to any securities as of any
date, all such securities therefore issued, except any such securities therefore
canceled or held by the Company or any successor thereto whether in its treasury
or not) or any affiliate of the Company or any successor thereto shall not be
deemed "Outstanding" for the purpose of this Agreement.
"Person" means an individual, a partnership (general or
limited), corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
"Registrable Security(ies)" means all or any portions of any
shares of Common Stock or other equity securities of the Company that may be
issued upon the exercise of the Warrants and any additional shares of Common
Stock or other equity securities of the Company issued or issuable after the
date hereof in respect of any such securities (or other equity securities issued
in respect thereof) by way of a stock dividend or stock split, in connection
with a combination, exchange, reorganization, recapitalization or
reclassification of Company securities, or pursuant to a merger, division,
consolidation or other similar business transaction or combination involving the
Company; provided that: as to any particular Registrable Securities, such
securities shall cease to constitute Registrable Securities (i) when a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of thereunder, or (ii) when and to the extent such securities are
permitted to be distributed pursuant to Rule 144 (or any successor provision to
such Rule) under the Securities Act or are otherwise freely transferable to the
public without further registration under the Securities Act and are not subject
to any limitations on the amount of sales under Rule 144 or (iii) when such
securities shall have ceased to be Outstanding and, in the case of clause (ii),
the Company shall, if requested by the Holder thereof, have delivered to such
Holder the written opinion of independent counsel to the Company to such effect.
Any time this Agreement requires the vote or consent of the Holder of a
"majority" or other stated percentage of the Registrable Securities, the term
Registrable Securities shall, solely for purposes of calculating such vote, be
deemed to include the Registrable Securities then issuable under the Warrants
and any other securities exercisable or exchangeable for, or convertible into,
Registrable Securities.
<PAGE>
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with the registration requirements set
forth in this Agreement including, without limitation, the following: (i) the
fees, disbursements and expenses of the Company's counsel(s), accountants, and
experts in connection with the registration under the Securities Act of
Registrable Securities; (ii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus, any other offering documents and amendments and supplements
thereto, and the mailing and delivery of copies thereof to the underwriters and
dealers, if any; (iii) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements, and any other documents in connection with
the offering, sale or delivery of Registrable Securities to be disposed of; (iv)
any other expenses in connection with the qualification of Registrable
Securities for offer and sale under state securities laws, including the fees
and disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(v) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Registrable
Securities to be disposed of and any blue sky registration or filing fees, and
(vi) the fees and expenses incurred in connection with the listing of
Registrable Securities on each securities exchange (or NASDAQ National Market
System) on which Company securities of the same class are then listed; provided,
however, that Registration Expenses with respect to any registration pursuant to
this Agreement shall not include (x) expenses of any Holder's counsel, or (y)
any underwriting discounts or commissions attributable to Registrable
Securities, each of which shall be borne by the Holder.
"SEC" means the United States Securities and Exchange
Commission, or such other federal agency at the time having the principal
responsibility for administering the Securities Act.
"Securities Act" means the Securities Act or 1933, as
amended, and the rules and regulations of the SEC thereunder, all as the same
shall be in effect at the relevant time.
Article 2. MANDATORY REGISTRATION.
(a) Mandatory Registration
(i) Upon written request of the Holder which may be made commencing
upon the eighteenth (18th) month following the date hereof, the Company shall
file to register for resale under the Securities Act the Registrable Securities
held by (or then issuable to) the Holder for sale pursuant to a Mandatory
Registration. The Company will use its best efforts to have the Mandatory
Registration declared effective as soon thereafter as is practicable, and to
keep such Mandatory Registration (or, if applicable, a successor Mandatory
Registration filed pursuant to Section 2(a)(ii) below) continuously effective
for the earlier of a period of three years or until all securities included in
such Mandatory Registration have ceased to be Registrable Securities (the "Lapse
Date").
<PAGE>
(ii) If the Company is precluded by Rule 415 or any other applicable
rule under the Securities Act from including all Registrable Securities in any
Mandatory Registration Statement or from keeping any Mandatory Registration
Statement continuously effective from the filing date thereof through the Lapse
Date, the Company shall file such additional or further Mandatory Registrations,
as may be required, so that, subject to the other provisions of this Agreement,
all Registrable Securities requested to be included are included on a
continuously effective Mandatory Registration Statement for substantially all of
the period from the filing date of the first Mandatory Registration Statement
through the Lapse Date.
Article 3. PIGGYBACK REGISTRATIONS.
(a) Right to Piggyback. If at any time after January 1, 1997, the
Company proposes to file a registration statement under the Securities Act
(except with respect to registration statements on Forms S-4, S-8, or any other
form not available for registering the Registrable Securities for sale to the
public), with respect to an offering of Common Stock for its own account or for
the account of another person, then the Company shall in each case give written
notice of such proposed filing to the Holder of Registrable Securities at least
45 days before the anticipated filing date of the registration statement with
respect thereto (the "Piggyback Registration"), and shall, subject to Section
3(b) and 3(c) below, include in such Piggyback Registration such amount of
Registrable Securities as each such Holder may request within 20 days of the
receipt of such notice.
(b) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the Company, the Company shall include in such registration (i)
first, the Registrable Securities requested to be included in such registration,
however, only to the extent of 50% of the Registrable Securities then owned by
the Holders; and (ii) second, the securities proposed to be sold by the Company.
(c) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities other than the Holders of Registrable Securities, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the holders initially requesting such registration, the Company
shall include in such registration (i) first, the securities requested to be
included therein by the holders requesting such registration, if such holders
had secured registration rights prior to the date hereof and are not officers or
directors of the Company, (ii) second, the Registrable Securities requested to
be included in such registration, to the extent that the number of shares to be
registered will not, in the opinion of the managing underwriters, adversely
affect the offering of the securities pursuant to clause (i), pro rata among the
Holder of such securities on the basis of the number of shares so requested to
be included therein owned by each such Holder, and (iii) third, other securities
requested to be included in such registration.
<PAGE>
Article 4. HOLDBACK AGREEMENTS.
(a) Each Holder of Registrable Securities shall not effect any public
sale or distribution (including sales pursuant to Rule 144) of equity securities
of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the 30 days prior to and the 120-day
period beginning on the effective date of any underwritten primary registration
undertaken by the Company pursuant to a Registration Statement initially filed
with the SEC after January 1, 1997 (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) The Company (i) shall not effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the 30 days prior to and during the
120-day period beginning on the effective date of any underwritten Demand
Registration on behalf of the Holders of Registrable Securities (except as part
of such underwritten registration or pursuant to registrations on Form S-8 or
S-4 or any successor form), unless the underwriters managing the registered
public offering otherwise agree.
Article 5. REGISTRATION PROCEDURES.
Whenever the Holder of Registrable Securities has requested that any
Registrable Securities be registered pursuant to this Agreement, the Company
shall use its best efforts to effect the registration of the resale of such
Registrable Securities and pursuant thereto the Company shall as soon as
practicable:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to the resale of such Registrable Securities
and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company shall furnish to the counsel
selected by the Holder of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed,
which documents shall be subject to the review and consent of such counsel);
(b) notify each Holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 180 days and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to the Holder such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
<PAGE>
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any Holder reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition of the Registrable Securities owned by the sellers in such
jurisdictions (provided that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subparagraph, (ii) subject itself to taxation
in any such jurisdiction or (iii) consent to general service of process in any
such jurisdiction);
(e) notify the Holder, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necess ary to make the statements therein not misleading, and, at the request of
any such seller, the Company shall prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary underwriting agreements (containing
terms acceptable to the Company) as the Holder of a majority of the Registrable
Securities being sold or the underwriters, if any, reasonably request; and
(i) make available for inspection during normal business hours by any
seller of Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent accountants
to supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
Article 6. REGISTRATION EXPENSES.
All Registration Expenses in connection with any of the registration
events identified within this Agreement shall be borne by the Company. All other
expenses shall be borne by the Holder.
<PAGE>
Article 7 INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
the Holder, its officers and directors and each Person who controls such Holder
(within the meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses caused by any untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished to the Company by such Holder for use therein or by such
Holder's failure to deliver a copy of the registration statement or prospectus
or any amendments or supplements thereto after the Company has furnished such
holder with a sufficient number of copies of the same. In connection with an
underwritten offering, the Company shall provide reasonable and customary
indemnification to such underwriters, their officers and directors and each
Person who controls such underwriters (within the meaning of the Securities Act)
to the same extent as provided above with respect to the indemnification of the
Holder.
(b) In connection with any registration statement in which a Holder
of Registrable Securities is participating, each such Holder shall furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims,. damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished by such Holder; provided that the obligation to indemnify shall be
individual, not joint and several, for each Holder and shall be limited to the
net amount of proceeds received by such Holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in
<PAGE>
the reasonable judgment of any indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified parties
with respect to such claim.
(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
Article 8 OBLIGATION OF HOLDER.
(a) In connection with each registration hereunder, the Holder will
furnish to the Company in writing such information with respect to it and the
securities held by it, and the proposed distribution by it as shall be
reasonably requested by the Company in order to assure compliance with federal
and applicable state securities laws, as a condition precedent to including such
seller's Registrable Securities in the registration statement. The Holder also
shall agree to promptly notify the Company of any changes in such information
included in the registration statement or prospectus as a result of which there
is an untrue statement of material fact or an omission to state any material
fact required or necessary to be stated therein in order to make the statements
contained therein not misleading in light of the circumstances then existing.
(b) In connection with each registration pursuant to this Agreement,
the Holder will not effect sales thereof until notified by the Company of the
effectiveness of the registration statement, and thereafter will suspend such
sales after receipt of telegraphic or written notice from the Company to suspend
sales to permit the Company to correct or update a registration statement or
prospectus. At the end of any period during which the Company is obligated to
keep a registration statement current, the Holder shall discontinue sales of
shares pursuant to such registration statement upon receipt of notice from the
Company of its intention to remove from registration the shares covered by such
registration statement which remain unsold, and the Holder shall notify the
Company of the number of shares registered which remain unsold immediately upon
receipt of such notice from the Company.
Article 9 INFORMATION BLACKOUT.
(a) At any time when a registration statement effected pursuant to
this Agreement relating to Registrable Securities is effective, upon written
notice from the Company to the Holder that the Company has determined in good
faith that sale of Registrable Securities pursuant to the registration statement
would require disclosure of non-public material information not otherwise
required to be disclosed under applicable law (an "Information Blackout"), the
Holder shall suspend sales of Registrable Securities pursuant to such
registration statement until the earlier of:
(i) ten (10) days after the Company makes such good faith
determination; and
<PAGE>
(ii) such time as the Company notifies the Holder that such
material information has been disclosed to the public or has ceased to be
material or that sales pursuant to such registration statement may otherwise be
resumed (the number of days from such suspension of sales by the Holder until
the day when such sale may be resumed hereunder is hereinafter called a "Sales
Blackout Period").
(b) Notwithstanding the foregoing, there shall be no more than two
(2) Information Blackouts during the term of this Agreement and no Sales
Blackout Period shall continue for more than ten (10) consecutive days.
Article 10 MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to that
state's conflict of laws provisions.
(b) Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
without the written consent of the Company and the Holder.
(d) Notices. All communications under this Agreement shall be
sufficiently given if delivered by hand or by overnight courier or mailed by
registered or certified mail, postage prepaid, addressed,
(i) if to the Company, to:
NAL Financial Group Inc.
500 Cypress Creek Road West
Suite 590
Ft. Lauderdale, FL 33309
Attention: President
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
2100 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
<PAGE>
or, in the case of the Holder, at such address as each such Holder shall have
furnished in writing to the Company; or at such other address as any of the
parties shall have furnished in writing to the other parties hereto; with a copy
to:
Lawrence Inlow, Esquire
Conseco, Inc.
11825 N. Pennsylvania Street
Carmel, IN 46219
Ngaire E. Cuneo, Executive Vice President
11825 N. Pennsylvania Street
Carmel, IN 46219
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Entire Agreement; Survival; Termination. This Agreement is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(g) Jurisdiction. The Company and the Holder agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts in the County of Marion, State of Indiana. Service of process on
the Company or the Holder in any action arising out of or relating to this
Agreement shall be effective if mailed to such party at the address listed in
paragraph 10(d) above.
(h) Arbitration. If a dispute arises as to interpretation of this
Agreement, it shall be decided finally by three arbitrators in an arbitration
proceeding conforming to the Rules of the American Arbitration Association
applicable to commercial arbitration. The arbitrators shall be appointed as
follows: one by the Company, one by the Holder and one by the Company and the
Holder. The arbitration shall take place in Carmel, Indiana. The decision of a
majority of the Arbitrators shall be conclusively binding upon the parties and
final, and such decision shall be enforceable as a judgment in any court of
competent jurisdiction. Each party shall pay the fees and expenses of the
arbitrator appointed by it, its counsel and its witnesses. The parties shall
share equally in the fees and expenses of the impartial arbitrator.
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
have executed this Agreement as of the date first written above.
NAL FINANCIAL GROUP INC.
By:__________________________________
Name:_____________________________
Title:____________________________
CONSECO. INC.
By:___________________________________
Name:______________________________
Title:_____________________________
<PAGE>
NOTICE SCHEDULE:
CONSECO, Inc.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT made and entered into as of this
23rd day of April, 1996, by and between NAL FINANCIAL GROUP INC., a Delaware
corporation (the "Company"), BENEFICIAL STANDARD LIFE INSURANCE COMPANY
("BSLIC') and GREAT AMERICAN RESERVE INSURANCE COMPANY ("GARCO").
BACKGROUND
Pursuant to a Securities Purchase Agreement dated April 23,
1996 (the "Purchase Agreement"), by and among the Company, BSLIC and GARCO, the
Company has issued to BSLIC and GARCO, in the aggregate, $10,000,000 principal
amount of 9% subordinated convertible debentures (the "Debentures").
In order to induce BSLIC and GARCO to enter into the foregoing
transactions, the Company has agreed to provide BSLIC and GARCO with the rights
set forth in this Agreement.
Article 1. CERTAIN DEFINITIONS.
In addition to the other terms defined in this Agreement, the
following terms shall be defined as follows:
"Brokers' Transactions" has the meaning ascribed to such
term pursuant to Rule 144 under the Securities Act.
"Business Day" means any day on which the New York Stock
Exchange ("NYSE") is open for trading.
"Common Stock" means any outstanding shares of Common Stock of
the Company, as well as any Shares issuable upon the conversion of the
Debentures.
"Company" means NAL Financial Group Inc., a Delaware
corporation.
"Demand Registrations" mean all registrations of Registrable
Securities covered by Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder, all as the same
shall be in effect at the relevant time.
"Holders" mean BSLIC and GARCO for so long as (and to the
extent that) they own any Registrable Securities, and each of their successors,
assigns, and direct and indirect transferees who become registered owners of
Registrable Securities or securities exercisable, exchangeable or convertible
into Registrable Securities.
<PAGE>
"Mandatory Registration Statement" means a Mandatory
Registration Statement of the Company pursuant to the provisions of Section 2(b)
of this Agreement which covers Common Stock on an appropriate form then
permitted by the SEC to be used for such registration and the sales contemplated
to be made thereby under Rule 415 under the Securities Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
Registration Statement, including pre and post-effective amendments thereto, in
each case including the prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"Mandatory Registration" means a registration of Common
Stock effected pursuant to Section 2(b) hereof.
"Outstanding" means with respect to any securities as of any
date, all such securities therefore issued, except any such securities therefore
canceled or held by the Company or any successor thereto whether in its treasury
or not) or any affiliate of the Company or any successor thereto shall not be
deemed "Outstanding" for the purpose of this Agreement.
"Person" means an individual, a partnership (general or
limited), corporation, limited liability company, joint venture, business trust,
cooperative, association or other form of business organization, whether or not
regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
"Registrable Security(ies)" means all or any portions of any
shares of Common Stock or other equity securities of the Company that may be
issued upon the conversion of, or in exchange for, the Debentures and any
additional shares of Common Stock or other equity securities of the Company
issued or issuable after the date hereof in respect of any such securities (or
other equity securities issued in respect thereof) by way of a stock dividend or
stock split, in connection with a combination, exchange, reorganization,
recapitalization or reclassification of Company securities, or pursuant to a
merger, division, consolidation or other similar business transaction or
combination involving the Company; provided that: as to any particular
Registrable Securities, such securities shall cease to constitute Registrable
Securities (i) when a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of thereunder, or (ii) when and to the
extent such securities are permitted to be distributed pursuant to Rule 144 (or
any successor provision to such Rule) under the Securities Act or are otherwise
freely transferable to the public without further registration under the
Securities Act and are not subject to any limitations on the amount of sales
under Rule 144 or (iii) when such securities shall have ceased to be Outstanding
and, in the case of clause (ii), the Company shall, if requested by the Holder
or Holders thereof, have delivered to such Holder or Holders the written opinion
of independent counsel to the Company to such effect. Any time this Agreement
requires the vote or consent of the Holder of a "majority" or other stated
percentage of the Registrable Securities, the term Registrable Securities shall,
solely for purposes of calculating such vote, be deemed to include the
Registrable Securities then issuable under the Debenture and Warrant and any
other securities exercisable or exchangeable for, or convertible into,
Registrable Securities.
-2-
<PAGE>
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with the registration requirements set
forth in this Agreement including, without limitation, the following: (i) the
fees, disbursements and expenses of the Company's counsel(s), accountants, and
experts in connection with the registration under the Securities Act of
Registrable Securities; (ii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus, any other offering documents and amendments and supplements
thereto, and the mailing and delivery of copies thereof to the underwriters and
dealers, if any; (iii) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements, and any other documents in connection with
the offering, sale or delivery of Registrable Securities to be disposed of; (iv)
any other expenses in connection with the qualification of Registrable
Securities for offer and sale under state securities laws, including the fees
and disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(v) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Registrable
Securities to be disposed of and any blue sky registration or filing fees, and
(vi) the fees and expenses incurred in connection with the listing of
Registrable Securities on each securities exchange (or NASDAQ National Market
System) on which Company securities of the same class are then listed; provided,
however, that Registration Expenses with respect to any registration pursuant to
this Agreement shall not include (x) expenses of any Holder's counsel, or (y)
any underwriting discounts or commissions attributable to Registrable
Securities, each of which shall be borne by the Holder.
"SEC" means the United States Securities and Exchange
Commission, or such other federal agency at the time having the principal
responsibility for administering the Securities Act.
"Securities Act" means the Securities Act or 1933, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the relevant time.
Article 2. DEMAND REGISTRATION, MANDATORY REGISTRATION.
(a) Demand Registration
(i) Commencing after January 1, 1997, a Holder or the Holders
may request at any time (by written notice delivered to the Company) that the
Company register under the Securities Act all or any portion of the Registrable
Securities held by (or then issuable to) such Holder or Holders (the "Requesting
Holders") for sale in the manner specified in such notice . In each such case,
such notice shall specify the number of Registrable Securities for which
registration is requested, the proposed manner of disposition of such
securities, and the minimum price per share at which the Requesting Holders
would be willing to sell such securities in an underwritten offering. The
Company shall, within five (5) Business Days after its receipt of any Requesting
Holders' notice under this Section 2(a)(i), give written notice of such request
to all other Holders of Registrable Securities and afford them the opportunity
-3-
<PAGE>
of including in the requested registration statement such of their Registrable
Securities as they shall specify in a written notice given to the Company within
ten (10) days after their receipt of the Company's notice. Within five (5)
Business Days after the expiration of such ten (10) day period, the Company
shall notify all Holders requesting registration of (A) the aggregate number of
Registrable Securities proposed to be registered by all Holders, (B) the
proposed filing date of the registration statement, and (C) such other
information concerning the offering as any Holder may have reasonably requested.
If the Holders of a majority in aggregate amount of the Registrable Securities
to be included in such offering shall have requested that such offering be
underwritten, the managing underwriter for such offering shall be chosen by the
holders of a majority in aggregate amount of the Registrable Securities being
registered, with the consent of the Company, which consent shall not be
unreasonably withheld, not less than thirty-five (35) days prior to the proposed
filing date stated in the Company's notice, and the Company shall thereupon
promptly notify such Holders as to the identity of the managing underwriter, if
any, for the offering. On or before the 30th day prior to such anticipated
filing date, any Holder may give written notice to the Company and the managing
underwriter specifying either that (A) Registrable Securities of such Holder are
to be included in the underwriting, on the same terms and conditions as the
securities otherwise being sold through the underwriters under such registration
or (B) such Registrable Securities are to be registered pursuant to such
registration statement and sold in the open market without any underwriting, on
terms and conditions comparable to those normally applicable to offerings in
reasonably similar circumstances, regardless of the method of disposition
originally specified in Holder's request for registration.
(ii) Company shall use its best efforts to file with the SEC
within forty-five (45) days after the Company's receipt of the initial
Requesting Holders' written notice pursuant to Section 2(a)(i), a registration
statement for the public offering and sale, in accordance with the method of
disposition specified by such Holders, of the number of Registrable Securities
specified in such notice, and thereafter use its best efforts to cause such
registration statement to become effective as quickly thereafter as is
practicable, provided that the Company may delay the filing of such registration
statement for up to an additional forty-five (45) days if the Company determines
that such a delay is necessary either: (i) to obtain additional financial
statements for inclusion in such registration statement as a result of an
acquisition or probable acquisition of a "significant subsidiary" as such term
is defined by the SEC in Regulation S-X; or (ii) in order to complete or
otherwise bring to fruition a material business combination or proposed material
corporate transaction which in a pending status would render difficult the
completion of a registration statement in accordance with applicable SEC
regulations. Such registration statement may be on Form S-1 or another
appropriate form (including Form S-3) that the Company is eligible to use and
that is reasonably acceptable to the managing underwriter; if any, provided,
however, that if Form S-3 is used, upon the request of the managing underwriter,
the prospectus included in the registration statement shall be amplified to
include such additional information as such underwriter may reasonably request
regarding the Company, its business and management (including, without
limitation, the information called for by Items 101, 102, 103, 201, 202, 301 and
303 of Regulation S-K under the Securities Act).
(iii) The Company shall not have any obligation hereunder to
register any Registrable Securities under this Section 2(a) unless it shall have
received requests from Holders to register at least 40% of the total Registrable
Securities. Further, the Holder(s) shall only have the right to exercise their
rights of demand under this Section 2(a)(i) on two occasions.
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(iv) Notwithstanding anything to the contrary contained
herein, the Company's obligation in Section 2(a)(i) above shall extend only to
the inclusion of the Registrable Securities in a registration statement filed
under the Securities Act. The Company shall have no obligation to assure the
terms and conditions of distribution, to obtain a commitment from an underwriter
relative to the sale of the Registrable Securities or to otherwise assume any
responsibility for the manner, price or terms of the distribution of the
Registrable Securities.
(v) The Company shall not include in any Demand Registration
requested by the Holders of Registrable Securities pursuant to Section 2(a)(i)
above any securities which are not Registrable Securities without the prior
written consent of the Holders of at least a majority of the Registrable
Securities initially requesting such registration. If a Demand Registration is
an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold in an orderly manner in such offering within a price range
acceptable to the Holders of a majority of the Registrable Securities requesting
registration, the Company shall include in such registration (i) first, the
number of Registrable Securities requested to be included which in the opinion
of such underwriters can be sold in an orderly manner within the price range of
such offering, pro rata among the respective Holders thereof on the basis of the
amount of Registrable Securities owned by each such Holder, and (ii) second, if
all of the Registrable Securities requested to be included under clause (i) have
been included, the number of other securities, if any, requested to be included
which in the opinion of such underwriters can be sold in an orderly manner
within the price range of such offering, pro rata among the respective Holders
thereof on the basis of the amount of such other securities owned by each such
Holder.
(vi) The Company shall not be obligated to effect any
underwritten Demand Registration within 180 days after the effective date of a
previous underwritten Demand Registration or a previous registration in which
the Holders of Registrable Securities were given piggyback rights pursuant to
Section 3 and in which there was no reduction in the number of Registrable
Securities requested to be included.
(b) Mandatory Registration
(i) The Company shall file to register for resale under the
Securities Act the Registrable Securities held by (or then issuable to) the
Holders for sale pursuant to a Mandatory Registration not later than the
maturity date of the Debentures. The Company will use its best efforts to have
the Mandatory Registration declared effective as soon thereafter as is
practicable, and to keep such Mandatory Registration (or, if applicable, a
successor Mandatory Registration filed pursuant to Section 2(b)(ii) below)
continuously effective for the earlier of a period of three years or until all
securities included in such Mandatory Registration have ceased to be Registrable
Securities (the "Lapse Date").
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(ii) If the Company is precluded by Rule 415 or any other
applicable rule under the Securities Act from including all Registrable
Securities in any Mandatory Registration Statement or from keeping any Mandatory
Registration Statement continuously effective from the filing date thereof
through the Lapse Date, the Company shall file such additional or further
Mandatory Registrations, as may be required, so that, subject to the other
provisions of this Agreement, all Registrable Securities requested to be
included are included on a continuously effective Mandatory Registration
Statement for substantially all of the period from the filing date of the first
Mandatory Registration Statement through the Lapse Date.
Article 3. PIGGYBACK REGISTRATIONS.
(a) Right to Piggyback. If at any time after January 1, 1997,
the Company proposes to file a registration statement under the Securities Act
(except with respect to registration statements on Forms S-4, S-8, or any other
form not available for registering the Registrable Securities for sale to the
public), with respect to an offering of Common Stock for its own account or for
the account of another person, then the Company shall in each case give written
notice of such proposed filing to the Holders of Registrable Securities at least
45 days before the anticipated filing date of the registration statement with
respect thereto (the "Piggyback Registration"), and shall, subject to Section
3(b) and 3(c) below, include in such Piggyback Registration such amount of
Registrable Securities as each such Holder may request within 20 days of the
receipt of such notice.
(b) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company, the Company shall include in
such registration (i) first, the Registrable Securities requested to be included
in such registration, however, only to the extent of 50% of the Registrable
Securities then owned by the Holders; and (ii) second, the securities proposed
to be sold by the Company.
(c) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities other than the Holders of Registrable Securities, and
the managing underwriters advise the Company in writing that in their opinion
the number of securities requested to be included in such registration exceeds
the number which can be sold in an orderly manner in such offering within a
price range acceptable to the holders initially requesting such registration,
the Company shall include in such registration (i) first, the securities
requested to be included therein by the holders requesting such registration, if
such holders had secured registration rights prior to the date hereof and are
not officers or directors of the Company, (ii) second, the Registrable
Securities requested to be included in such registration, to the extent that the
number of shares to be registered will not, in the opinion of the managing
underwriters, adversely affect the offering of the securities pursuant to clause
(i), pro rata among the Holders of such securities on the basis of the number of
shares so requested to be included therein owned by each such Holder, and (iii)
third, other securities requested to be included in such registration.
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<PAGE>
Article 4. HOLDBACK AGREEMENTS.
(a) Each Holder of Registrable Securities shall not effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the 30 days prior to and the 120-day
period beginning on the effective date of any underwritten primary registration
undertaken by the Company pursuant to a Registration Statement initially filed
with the SEC after January 1, 1997 (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) The Company (i) shall not effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the 30 days prior to and
during the 120-day period beginning on the effective date of any underwritten
Demand Registration on behalf of the Holders of Registrable Securities (except
as part of such underwritten registration or pursuant to registrations on Form
S-8 or S-4 or any successor form), unless the underwriters managing the
registered public offering otherwise agree.
Article 5. REGISTRATION PROCEDURES.
Whenever the Holders of Registrable Securities have requested
that any Registrable Securities be registered pursuant to this Agreement, the
Company shall use its best efforts to effect the registration of the resale of
such Registrable Securities and pursuant thereto the Company shall as soon as
practicable:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to the resale of such
Registrable Securities and use its best efforts to cause such registration
statement to become effective (provided that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
shall furnish to the counsel selected by the Holders of a majority of the
Registrable Securities covered by such registration statement copies of all such
documents proposed to be filed, which documents shall be subject to the review
and consent of such counsel);
(b) notify each Holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
of not less than 180 days and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
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<PAGE>
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any Holder reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition of the Registrable Securities owned by the sellers
in such jurisdictions (provided that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company
are then listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
registration statement;
(h) enter into such customary underwriting agreements
(containing terms acceptable to the Company) as the Holders of a majority of the
Registrable Securities being sold or the underwriters, if any, reasonably
request; and
(i) make available for inspection during normal business hours
by any seller of Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent accountants
to supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
Article 6. REGISTRATION EXPENSES.
All Registration Expenses in connection with any of the
registration events identified within this Agreement shall be borne by the
Company. All other expenses shall be borne by the Holders.
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<PAGE>
Article 7 INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted
by law, each Holder of Registrable Securities, its officers and directors and
each Person who controls such Holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information furnished to the Company by
such Holder for use therein or by such Holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company shall
provide reasonable and customary indemnification to such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Holders of Registrable Securities.
(b) In connection with any registration statement in which a
Holder of Registrable Securities is participating, each such Holder shall
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, shall indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims,. damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished by such Holder; provided that the obligation to indemnify shall be
individual, not joint and several, for each Holder and shall be limited to the
net amount of proceeds received by such Holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent such failure has not prejudiced the indemnifying party) and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
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<PAGE>
(d) The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of securities.
The Company also agrees to make such provisions, as are reasonably requested by
any indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
Article 8 OBLIGATION OF HOLDERS.
(a) In connection with each registration hereunder, each
selling Holder will furnish to the Company in writing such information with
respect to such seller and the securities held by such seller, and the proposed
distribution by them as shall be reasonably requested by the Company in order to
assure compliance with federal and applicable state securities laws, as a
condition precedent to including such seller's Registrable Securities in the
registration statement. Each selling Holder also shall agree to promptly notify
the Company of any changes in such information included in the registration
statement or prospectus as a result of which there is an untrue statement of
material fact or an omission to state any material fact required or necessary to
be stated therein in order to make the statements contained therein not
misleading in light of the circumstances then existing.
(b) In connection with each registration pursuant to this
Agreement, the Holders included therein will not effect sales thereof until
notified by the Company of the effectiveness of the registration statement, and
thereafter will suspend such sales after receipt of telegraphic or written
notice from the Company to suspend sales to permit the Company to correct or
update a registration statement or prospectus. At the end of any period during
which the Company is obligated to keep a registration statement current, the
Holders included in said registration statement shall discontinue sales of
shares pursuant to such registration statement upon receipt of notice from the
Company of its intention to remove from registration the shares covered by such
registration statement which remain unsold, and such Holders shall notify the
Company of the number of shares registered which remain unsold immediately upon
receipt of such notice from the Company.
Article 9 INFORMATION BLACKOUT.
(a) At any time when a registration statement effected
pursuant to this Agreement relating to Registrable Securities is effective, upon
written notice from the Company to the Holders that the Company has determined
in good faith that sale of Registrable Securities pursuant to the registration
statement would require disclosure of non-public material information not
otherwise required to be disclosed under applicable law (an "Information
Blackout"), all Holders shall suspend sales of Registrable Securities pursuant
to such registration statement until the earlier of:
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<PAGE>
(i) ten (10) days after the Company makes such
good faith determination; and
(ii) such time as the Company notifies the Holders
that such material information has been disclosed to the public or has
ceased to be material or that sales pursuant to such registration statement may
otherwise be resumed (the number of days from such suspension of sales by the
Holders until the day when such sale may be resumed hereunder is hereinafter
called a "Sales Blackout Period").
(b) Notwithstanding the foregoing, there shall be no more than
two (2) Information Blackouts during the term of this Agreement and no Sales
Blackout Period shall continue for more than ten (10) consecutive days.
Article 10 MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without
regard to that state's conflict of laws provisions.
(b) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(c) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given without the written consent of the Company and the Holders.
(d) Notices. All communications under this Agreement shall
be sufficiently given if delivered by hand or by overnight courier or mailed
by registered or certified mail, postage prepaid, addressed,
(i) if to the Company, to:
NAL Financial Group Inc.
500 Cypress Creek Road West
Suite 590
Ft. Lauderdale, FL 33309
Attention: President
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with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
2100 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
or, in the case of the Holders, at such address as each such Holder shall have
furnished in writing to the Company; or at such other address as any of the
parties shall have furnished in writing to the other parties hereto; with a copy
to:
Lawrence Inlow, Esquire
Great American Life Insurance Company
11825 N. Pennsylvania Street
Carmel, IN 46219
Lawrence Inlow, Esquire
Beneficial Standard Life Insurance Company
11825 N. Pennsylvania Street
Carmel, IN 46219
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(f) Entire Agreement; Survival; Termination. This Agreement is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(g) Jurisdiction. The Company and Holders agree to submit to
personal jurisdiction and to waive any objection as to venue in the federal or
state courts in the County of Marion, State of Indiana. Service of process on
the Company or the Holders in any action arising out of or relating to this
Agreement shall be effective if mailed to such party at the address listed in
paragraph 10(d) above.
(h) Arbitration. If a dispute arises as to interpretation of
this Agreement, it shall be decided finally by three arbitrators in an
arbitration proceeding conforming to the Rules of the American Arbitration
Association applicable to commercial arbitration. The arbitrators shall be
appointed as follows: one by the Company, and the Holders, one by BSLIC and
GARCO and one by all of the Holders. The arbitration shall take place in Carmel,
Indiana. The decision of a majority of the Arbitrators shall be conclusively
binding upon the parties and final, and such decision shall be enforceable as a
judgment in any court of competent jurisdiction. Each party shall pay the fees
and expenses of the arbitrator appointed by it, its counsel and its witnesses.
The parties shall share equally in the fees and expenses of the impartial
arbitrator.
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<PAGE>
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
have executed this Agreement as of the date first written above.
NAL FINANCIAL GROUP INC.
By: __________________________________
Name:_____________________________
Title:____________________________
GREAT AMERICAN RESERVE
INSURANCE COMPANY
By: ___________________________________
Name:______________________________
Title:_____________________________
BENEFICIAL STANDARD LIFE INSURANCE
COMPANY
By: ___________________________________
Name:______________________________
Title:_____________________________
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NOTICE SCHEDULE:
List of Holders:
-14-
MASTER REPURCHASE AGREEMENT
Public Securities Association [LOGO]
40 Broad Street, New York, NY 10004-2373
Telephone (212) 809-7000
MASTER REPURCHASE AGREEMENT
Dated as of
----------- --, -----
Between:
CARGILL FINANCIAL SERVICES CORPORATION
- - --------------------------------------
and
- - --------------------------------------
AUTORICS, INC.
- - --------------------------------------
1. Applicability
From time to time the parties hereto may enter into transactions in
which one party ("Seller") agrees to transfer to the other ("Buyer")
securities or financial instruments ("Securities") against the transfer
of funds by Buyer, with a simultaneous agreement by Buyer to transfer to
Seller such Securities at a date certain or on demand, against the
transfer of funds by Seller. Each such transaction shall be referred to
herein as a "Transaction" and shall be governed by this Agreement,
including any supplemental terms or conditions contained in Annex I
hereto, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency", with respect to any party, (i) the
commencement by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or
similar law, or such party seeking the appointment of a receiver,
trustee, custodian or similar official for such party or any substantial
part of its property, or (ii) the commencement of any such case or
proceeding against such party, or another seeking such an appointment,
or the filing against a party of an application for a protective decree
under the provisions of the Securities Investor Protection Act of 1970,
which (A) is consented to or not timely contested by such party, (B)
results in the entry of an order for relief, such an appointment, the
issuance of such a protective decree or the entry of an order having a
similar effect, or (C) is not dismissed within 15 days, (iii) the making
by a party of a general assignment for the benefit of creditors, or (iv)
the admission in writing by a party of such party's inability to pay
such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided by
Seller to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Buyer's Margin Amount", with respect to any Transaction as of
any date, the amount obtained by application of a percentage (which may
be equal to the percentage that is agreed to as the Seller's Margin
Amount under subparagraph (q) of this Paragraph), agreed to by Buyer and
Seller prior to entering into the Transaction, to the Repurchase Price
for such Transaction as of such date;
(d) "Confirmation", the meaning specified in Paragraph 3(b) hereof;
(e) "Income", with respect to any Security at any time, any
principal thereof then payable and all interest, dividends or other
distributions thereon;
(f) "Margin Deficit", the meaning specified in Paragraph 4(a)
hereof;
(g) "Margin Excess", the meaning specified in Paragraph 4(b)
hereof;
(h) "Market Value", with respect to any Securities as of any date,
the price for such Securities on such date obtained from a generally
recognized source agreed to by the parties or the most recent closing
bid quotation from such a source, plus accrued Income to the extent not
included therein (other than any Income credited or transferred to, or
applied to the obligations of, Seller pursuant to Paragraph 5 hereof) as
of such date (unless contrary to market practice for such Securities);
(i) "Price Differential", with respect to any Transaction hereunder
as of any date, the aggregate amount obtained by daily application of
the Pricing Rate for such Transaction to the Purchase Price for such
Transaction on a 360 day per year basis for the actual number of days
during the period commencing on (and including) the Purchase Date for
such Transaction and ending on (but excluding) the date of determination
(reduced by any amount of such Price Differential previously paid by
Seller to Buyer with respect to such Transaction);
(j) "Pricing Rate", the per annum percentage rate for determination
of the Price Differential;
(k) "Prime Rate", the prime rate of U.S. money center commercial
banks as published in The Wall Street Journal;
(l) "Purchase Date", the date on which Purchased Securities are
transferred by Seller to Buyer;
(m) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Securities are transferred by Seller to Buyer, and (ii)
thereafter, such price increased by the amount of any cash transferred
by buyer to Seller pursuant to Paragraph 4(b) hereof and decreased by
the amount of any cash transferred by Seller to Buyer pursuant to
Paragraph 4(a) hereof or applied to reduce Seller's obligations under
clause (ii) of Paragraph 5 hereof;
(n) "Purchased Securities", the Securities transferred by Seller to
Buyer in a Transaction hereunder, and any Securities substituted
therefor in accordance with Paragraph 9 hereof. The term "Purchased
Securities" with respect to any Transaction at any time also shall
include Additional Purchased Securities delivered pursuant to Paragraph
4(a) and shall exclude Securities returned pursuant to Paragraph 4(b);
(o) "Repurchase Date", the date on which Seller is to repurchase
the Purchased Securities from Buyer, including any date determined by
application of the provisions of Paragraphs 3(c) or 11 hereof;
(p) "Repurchase Price", the price at which Purchased Securities are
to be transferred from Buyer to Seller upon termination of a
Transaction, which will be determined in each case (including
Transactions terminable upon demand) as the sum of the Purchase Price
and the Price Differential as of the date of such determination,
increased by any amount determined by the application of the provisions
of Paragraph 11 hereof;
(q) "Seller's Margin Amount", with respect to any Transaction as of
any date, the amount obtained by application of a percentage (which may
be equal to the percentage that is agreed to as the Buyer's Margin
Amount under subparagraph (c) of this Paragraph), agreed to by Buyer and
Seller prior to entering into the Transaction, to the Repurchase Price
for such Transaction as of such date.
3. Initiation; Confirmation; Termination
(a) An agreement to enter into a Transaction may be made orally or
in writing at the initiation of either Buyer or Seller. On the Purchase
Date for the Transaction, the Purchased Securities shall be transferred
to Buyer or its agent against the transfer of the Purchase Price to an
account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or
Seller (or both), as shall be agreed, shall promptly deliver to the
other party a written confirmation of each Transaction (a
"Confirmation"). The Confirmation shall describe the Purchased
Securities (including CUSIP number, if any), identify Buyer and Seller
and set forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the
Repurchase Date, unless the Transaction is to be terminable on demand,
(iv) the Pricing Rate or Repurchase Price applicable to the Transaction,
and (v) any additional terms or conditions of the Transaction not
inconsistent with this Agreement. The Confirmation, together with this
Agreement, shall constitute conclusive evidence of the terms agreed
between Buyer and Seller with respect to the Transaction to which the
Confirmation relates, unless with respect to the Confirmation specific
objection is made promptly after receipt thereof. In the event of any
conflict between the terms of such Confirmation and this Agreement, this
Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such demand
shall be made by Buyer or Seller, no later than such time as is
customary in accordance with market practive, by telephone or otherwise
on or prior to the business day on which such termination will be
effective. On the date specified in such demand, or on the date fixed
for termination in the case of Transactions having a fixed term,
termination of the Transaction will be effected by transfer to Seller or
its agent of the Purchased Securities and any Income in respect thereof
received by Buyer (and not previously credited or transferred to, or
applied to the obligations of, Seller pursuant to Paragraph 5 hereof)
against the transfer of the Repurchase Price to an account of Buyer.
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all Purchased
Securities subject to all Transactions in which a particular party
hereto is acting as Buyer is less than the aggregate Buyer's Margin
Amount for all such Transactions (a "Margin Deficit"), then Buyer may by
notice to Seller require Seller in such Transactions, at Seller's
option, to transfer to Buyer cash or additional Securities reasonably
acceptable to Buyer ("Additional Purchased Securities"), so that the
cash and aggregate Market Value of the Purchased Securities, including
any such Additional Purchased Securities, will thereupon equal or exceed
such aggregate Buyer's Margin Amount (decreased by the amount of any
Margin Deficit as of such date arising from any Transactions in which
such Buyer is acting as Seller).
(b) If at any time the aggregate Market Value of all Purchased
Securities subject to all Transactions in which a particular party
hereto is acting as Seller exceeds the aggregate Seller's Margin Amount
for all such Transactions at such time (a "Margin Excess"), then Seller
may by notice to Buyer require Buyer in such Transactions, at Buyer's
option, to transfer cash or Purchased Securities to Seller, so that the
aggregate Market Value of the Purchased Securities, after deduction of
any such cash or any Purchased Securities so transferred, will thereupon
not exceed such aggregate Seller's Margin Amount (increased by the
amount of any Margin Excess as of such date arising from any
Transactions in which such Seller is acting as Buyer).
(c) Any cash transferred pursuant to the Paragraph shall be
attributed to such Transactions as shall be agreed upon by Buyer and
Seller.
(d) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer or Seller (or both) under
subparagraphs (a) and (b) of this Paragraph may be exercised only where a Margin
Deficit or Margin Excess exceeds a specified dollar amount or a specified
percentage of the Repurchase Prices for such Transactions (which amount or
percentage shall be agreed to by Buyer and Seller prior to entering into any
such Transactions).
(e) Seller and Buyer may agree, with respect to any or all
Transactions hereunder, that the respective rights of Buyer and Seller
under subparagraphs (a) and (b) of this Paragraph to require the
elimination of a Margin Deficit or a Margin Excess, as the case may be,
may be exercised whenever such a Margin Deficit or Margin Excess exists
with respect to any single Transaction hereunder (calculated without
regard to any other Transaction outstanding under this Agreement).
5. Income Payments
Where a particular Transaction's term extends over an Income payment date
on the Securities subject to that Transaction, Buyer shall, as the parties may
agree with respect to such Transaction (or, in the absence of any agreement, as
Buyer shall reasonably determine in its discretion), on the date such Income is
payable either (i) transfer to or credit to the account of Seller an amount
equal to such Income payment or payments with respect to any Purchased
Securities subject to such Transaction or (ii) apply the Income payment or
payments to reduce the amount to be transferred to Buyer by Seller upon
termination of the Transaction. Buyer shall not be obligated to take any action
pursuant to the preceding sentence to the extent that such action would result
in the creation of a Margin Deficit, unless prior thereto or simultaneously
therewith Seller transfers to Buyer cash or Additional Purchased Securities
sufficient to eliminate such Margin Deficit.
6. Security Interest
Although the parties intend that all Transactions hereunder be sales and
purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction, and shall
be deemed to have granted to Buyer a security interest in, all of the Purchased
Securities with respect to all Transactions hereunder and all proceeds thereof.
7. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds hereunder shall be
in immediately available funds. All Securities transferred by one party hereto
to the other party (i) shall be in suitable form for transfer or shall be
accompanied by duly executed instruments of transfer or assignment in blank and
such other documentation as the party receiving possession may reasonably
request, (ii) shall be transferred on the book-entry system of a Federal Reserve
Bank, or (iii) shall be transferred by any other method mutually acceptable to
Seller and Buyer. As used herein with respect to Securities, "transfer" is
intended to have the same meaning as when used in Section 8-313 of the New York
Uniform Commercial Code or, where applicable, in in any federal regulation
governing transfers of the Securities.
8. Segregation of Purchased Securities
To the extent required by applicable law, all Purchased Securities in the
possession of Seller shall be segregated from other securities in its possession
and shall be identified as subject to this Agreement. Segregation may be
accomplished by appropriate identification on the books and records of the
holder, including a financial intermediary or a clearing corporation. Title to
all Purchased securities shall pass to Buyer and, unless otherwise agreed by
Buyer and Seller, nothing in this Agreement shall preclude Buyer from engaging
in repurchase transactions with the Purchased Securities or otherwise pledging
or hypothecating the Purchased Securities, but no such transaction shall relieve
Buyer of its obligations to transfer Purchased Securities to Seller pursuant to
Paragraphs 3, 4 or 11 hereof, or of Buyer's obligation to credit or pay
Income to, or apply Income to the obligations of, Seller pursuant to
Paragraph 5 hereof.
- - --------------------------------------------------------------------------------
Required Disclosure for Transactions in Which the Seller Retains Custody of the
Purchased Securities
Seller is not permitted to substitute other securities for those subject to
this Agreement and therefore must keep Buyer's securities segregated at all
times, unless in this Agreement Buyer grants Seller the right to substitute
other securities. If Buyer grants the right to substitute, this means that
Buyer's securities will likely be commingled with Seller's own securities during
the trading day. Buyer is advised that, during any trading day that Buyer's
securities are commingled with Seller's securities, they [will]* [may]** be
subject to liens granted by Seller to [its clearing bank]* [third parties]** and
may be used by Seller for deliveries on other securities transactions. Whenever
the securities are commingled, Seller's ability to resegregate substitute
securities for Buyer will be subject to Seller's ability to satisfy [the
clearing]* [any]** lien or to obtain substitute securities.
- - --------------------------------------------------------------------------------
* Language to be used under 17 C.F.R. Section 403.4(e) if Seller is a
government securities broker or dealer other than a financial institution.
** Language to be used under 17 C.F.R. Section 403.5(d) if Seller is a financial
institution.
9. Substitution
(a) Seller may, subject to agreement with and acceptance by Buyer,
substitute other Securities for any Purchased Securities. Such substitution
shall be made by transfer to Buyer of such other Securities and transfer to
Seller of such Purchased Securities. After substitution, the substituted
Securities shall be deemed to be Purchased Securities.
(b) In Transactions in which the Seller retains custody of Purchased
Securities, the parties expressly agree that Buyer shall be deemed, for purposes
of subparagraph (a) of this Paragraph, to have agreed to and accepted in this
Agreement substitution by Seller of other Securities for Purchased Securities;
provided, however, that such other Securities shall have a Market Value at
least equal to the Market Value of the Purchased Securities for which they are
substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the other that (i) it
is duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance, (ii) it will engage in such Transactions as principal (or, if
agreed in writing in advance of any Transaction by the other party hereto, as
agent for a disclosed principal), (iii) the person signing this Agreement on its
behalf is duly authorized to do so on its behalf (or on behalf of any such
disclosed principal), (iv) it has obtained all authorizations of any
governmental body required in connection with this Agreement and the
Transactions hereunder and such authorizations are in full force and effect and
(v) the execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance, charter, by-law or
rule applicable to it or any aggreement by which it is bound or by which any of
its assets are affected. On the Purchase Date for any Transaction Buyer and
Seller shall be deemed to repeat all the foregoing representations made by it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer fails to transfer
Purchased Securities upon the applicable Repurchase Date, (ii) Seller or Buyer
fails, after one business day's notice, to comply with Paragraph 4 hereof, (iii)
Buyer fails to comply with Paragraph 5 hereof, (iv) an Act of Insolvency occurs
with respect to Seller or Buyer, (v) any representation made by Seller or Buyer
shall have been incorrect or untrue in any material respect when made or
repeated or deemed to have been made or repeated, or (vi) Seller or Buyer shall
admit to the other its inability to, or its intention not to, perform any of its
obligations hereunder (each an "Event of Devault"):
(a) At the option of the nondefaulting party, exercised by written notice
to the defaulting party (which option shall be deemed to have been exercised,
even if no notice is given, immediately upon the occurrence of an Act of
Insolvency), the Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
(b) In all Transactions in which the defaulting party is acting as Seller,
if the nondefaulting party exercises or is deemed to have exercised the option
referred to in subparagraph (a) of this Paragraph, (i) the defaulting party's
obligations hereunder to repurchase all Purchased Securities in such
Transactions shall thereupon become immediately due and payable, (ii) to the
extent permitted by applicable law, the Repurchase Price with respect to each
such Transaction shall be increased by the aggregate amount obtained by daily
application of (x) the greater of the Pricing Rate for such Transaction or the
Prime Rate to (y) the Repurchase Price for such Transaction as of the Repurchase
Date as determined pursuant to subparagraph (a) of this Paragraph (decreased as
of any day by (A) any amounts retained by the nondefaulting party with respect
to such Repurchase Price pursuant to clause (iii) of this subparagraph, (B) any
proceeds from the sale of Purchased Securities pursuant to subparagraph (d)(i)
of this Paragraph, and (C) any amounts credited to the account of the
defaulting party pursuant to subparagraph (e) of this Paragraph) on a 360 day
per year basis for the actual number of days during the period from and
including the date of the Event of Default giving rise to such option to but
excluding the date of payment of the Repurchase Price as so increased, (iii) all
Income paid after such exercise or deemed exercise shall be retained by the
nondefaulting party and applied to the aggregate unpaid Repurchase Prices owed
by the defaulting party, and (iv) the defaulting party shall immediately
deliver to the nondefaulting party any Purchased Securities subject to such
Transactions then in the defaulting party's possession.
(c) In all Transactions in which the defaulting party is acting as Buyer,
upon tender by the nondefaulting party of payment of the aggregate Repurchase
Prices for all such Transactions, the defaulting party's right, title and
interest in all Purchased Securities subject to such Transactions shall be
deemed transferred to the nondefaulting party, and the defaulting party shall
deliver all such Purchased Securities to the nondefaulting party.
(d) After one business day's notice to the defaulting party (which
notice need not be given if an Act of Insolvency shall have occurred, and which
may be the notice given under subparagraph (a) of this Paragraph or the notice
referred to in clause (ii) of the first sentence of this Paragraph), the
nondefaulting party may:
(i) as to Transactions in which the defaulting party is acting as
Seller, (A) immediately sell, in a recognized market at such price or
prices as the nondefaulting party may reasonably deem satisfactory, any
or all Purchased Securities subject to such Transactions and apply the
proceeds thereof to the aggregate unpaid Repurchase Prices and any other
amounts owing by the defaulting party hereunder
or (B) in its sole discretion elect, in lieu of selling all or a
portion of such Purchased Securities, to give the defaulting party
credit for such Purchased Securities in an amount equal to the price
therefor on such date, obtained from a generally recognized source
or the most recent closing bid quotation from such a source, against
the aggregate unpaid Repurchase Prices and any other amounts owing
by the defaulting party hereunder; and
(ii) as to Transactions in which the defaulting party is acting
as Buyer, (A) purchase securities ("Replacement Securities") of the
same class and amount as any Purchased Securities that are not
delivered by the defaulting party to the nondefaulting party as
required hereunder or (B) in its sole discretion elect, in lieu of
purchasing Replacement Securities, to be deemed to have purchased
Replacement Securities at the price therefor on such date, obtained
from a generally recognized source or the most recent closing bid
quotation from such a source.
(e) As to Transactions in which the defaulting party is acting as
Buyer, the defaulting party shall be liable to the nondefaulting party
(i) with respect to Purchased Securities (other than Additional
Purchased Securitites), for any excess of the price paid (or deemed
paid) by the nondefaulting party for Replacement Securities therefor
over the Repuchase Price for such Purchased Securities and (ii) with
respect to Additional Purchased Securities, for the price paid (or
deemed paid) by the nondefaulting party for the Replacement Securities
therefor. In addition, the defaulting party shall be liable to the
nondefaulting party for interest on such remaining liability with
respect to each such purchase (or deemed purchase) of Replacement
Securities from the date of such purchase (or deemed purchase) until
paid in full by Buyer. Such interest shall be at a rate equal to the
greater of the Pricing Rate for such Transaction or the Prime Rate.
(f) For purposes of this Paragraph 11, the Repurchase Price for
each Transaction hereunder in respect of which the defaulting party is
acting as Buyer shall not increase above the amount of such Repurchase
Price for such Transaction determined as of the date of the exercise or
deemed exercise by the nondefaulting party of its option under
subparagraph (a) of this Paragraph.
(g) The defaulting party shall be liable to the nondefaulting party
for the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or as a consequence of an Event
of Default, together with interest thereon at a rate equal to the
greater of the Pricing Rate for the relevant Transaction or the Prime
Rate.
(h) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other
agreement or applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto and
will enter into each Transaction hereunder in consideration of and in
reliance upon the fact that, all Transactions hereunder constitute a
single business and contractual relationship and have been made in
consideration of each other. Accordingly, each of Buyer and Seller
agrees (i) to perform all of its obligations in respect of each
Transaction hereunder, and that a default in the performance of any such
obligations shall constitute a default by it in respect of all
Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any Transaction
against obligations owing to them in respect of any other Transactions
hereunder and (iii) that payments, deliveries and other transfers made
by either of them in respect of any Transaction shall be deemed to have
been made in consideration of payments, deliveries and other transfers in
respect of any other Transactions hereunder, and the obligations to make
any such payments, deliveries and other transfers may be applied against
each other and netted.
13. Notices and Other Communications
Unless another address is specified in writing by the respective
party to whom any notice or other communication is to be given
hereunder, all such notices or communications shall be in writing or
confirmed in writing and delivered at the respective addresses set forth
in Annex II attahced hereto.
14. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the
parties containing general terms and conditions for repurchase
transactions. Each provision and agreement herein shall be treated as
separate and independent from any other provision or agreement herein
and shall be enforceable notwithstanding the unenforceability of any
such other provision or agreement.
15. Non-assignability; Termination
The rights and obligations of the parties under this Agreement and
under any Transaction shall not be assigned by either party without the
prior written consent of the other party. Subject to the foregoing, this
Agreement and any Transactions shall be binding upon and shall inure to
the benefit of the parties and their respective successors and assigns.
This Agreement may be cancelled by either party upon giving written
notice to the other, except that this Agreement shall, notwithstanding
such notice, remain applicable to any Transactions then outstanding.
16. Governing Law
This Agreement shall be governed by the laws of the State of New
York without giving effect to the conflict of law principles thereof.
17. No Waivers, Etc.
No express or implied waiver of any Event of Default by either party
shall consitute a waiver of any other Event of Default and no exercise
of any remedy hereunder by any party shall constitute a waiver of its
right to exercise any other remedy hereunder. No modification or waiver
of any provision of this Agreement and no consent by any party to a
departure herefrom shall be effective unless and until such shall be in
writing and duly executed by both of the parties hereto. Without
limitation on any of the foregoing, the failure to give a notice
pursuant to subparagraphs 4(a) or 4(b) hereof will not constitute a
waiver of any right to do so at a later date.
18. Use of Employee Plan Assets
(a) If assets of an employee benefit plan subject to any provision
of the Employee Retirement Income Security Act of 1974 ("ERISA") are
intended to be used by either party hereto (the "Plan Party") in a
Transaction, the Plan Party shall so notify the other prior to the
Transaction. The Plan Party shall represent in writing to the other
party that the Transaction does not constitute a prohibited transaction
under ERISA or is otherwise exempt therefrom, and the other party may
proceed in reliance thereon but shall not be required so to proceed.
(b) Subject to the last sentence of subparagraph (a) of this
Paragraph, any such Transaction shall proceed only if Seller furnishes
or has furnished to Buyer its most recent available audited statement of
its financial condition and its most recent subsequent unaudited
statement of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph,
Seller shall be deemed (i) to represent to Buyer that since the date of
Seller's latest such financial statements, there has been no material
adverse change in Seller's financial condition which Seller has not
disclosed to Buyer, and (ii) to agree to provide Buyer with future
audited and unaudited statements of its financial condition as they are
issued, so long as it is a Seller in any outstanding Transaction
involving a Plan Party.
19. Intent
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the
United States Code, as amended (except insofar as the type of Securities
subject to such Transaction or the term of such Transaction would render
such definition inapplicable), and a "securities contract" as that is
defined in Section 741 of Title 11 of the United States Code, as
amended.
(b) It is understood that either party's right to liquidate
Securities delivered to it in connection with Transactions hereunder or
to exercise any other remedies pursuant to Paragraph 11 hereof, is a
contractual right to liquidate such Transaction as described in Sections
555 and 559 of Title 11 of the United States Code, as amended.
20. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is
a broker or dealer registered with the Securities and Exchange
Commission ("SEC") under Section 15 of the Securities Exchange Act
of 1934 ("1934 Act"), the Securities Investor Protection Corporation
has taken the position that the provisions of the Securities
Investor Protection Act of 1970 ("SIPA") do not protect the other
party with respect to any Transaction hereunder;
(b) in the case of Transactions in which one of the parties is
a government securities broker or a government securities dealer
registered with the SEC under Section 15C of the 1934 Act, SIPA will
not provide protection to the other party with respect to any
Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is
a financial institution, funds held by the financial institution
pursuant to a Transaction hereunder are not a deposit and therefore
are not insured by the Federal Deposit Insurance Corporation, the
Federal Savings and Loan Insurance Corporation or the National
Credit Union Share Insurance Fund, as applicable.
CARGILL FINANCIAL AUTORICS, INC.
SERVICES CORPORATION
By /s/ Signature By /s/ Signauture
------------------------------ ------------------------------
Title Title Vice President
------------------------------ ------------------------------
Date Date 5/6/96
------------------------------ ------------------------------
EXECUTION COPY
ANNEX I
(continued)
ADDITIONAL SUPPLEMENTAL TERMS TO MASTER REPURCHASE AGREEMENT,
DATED AS OF MAY 1, 1996, BETWEEN
CARGILL FINANCIAL SERVICES CORPORATION AND
AUTORICS, INC.
1. APPLICABILITY. These Additional Supplemental Terms
(the "Additional Supplemental Terms") to Master
Repurchase Agreement (the "Repurchase Agreement")
modify the terms and conditions of the Repurchase
Agreement and the terms under which the parties hereto
may, from time to time, enter into Transactions (the
Repurchase Agreement, together with the Annexes
thereto, the "Agreement"). The Agreement shall be
read, taken and construed as one and the same instru-
ment. Capitalized terms used in these Additional
Supplemental Terms and not otherwise defined herein
shall have the meanings set forth in the Repurchase
Agreement. To the extent that these Additional
Supplemental Terms conflict with the terms of the
Repurchase Agreement, these Additional Supplemental
Terms shall control.
2. ADDITIONAL DEFINITIONS.
(a) "Advance Rate Percentage" shall mean ninety percent
(90%) and, upon thirty (30) days' prior written
notice thereof to Buyer, ninety-five percent (95%),
as applicable.
(b) "Affiliate" shall mean, as to any Person, any other
Person that, directly or indirectly, is in control
of, is controlled by, or is under common control
with, such Person, within the meaning of control
under Section 15 of the Securities Act of 1933, as
amended.
(c) "Annual Commitment Fee" shall have the meaning
assigned in Paragraph 13(d) of these Additional
Supplemental Terms.
<PAGE>
(d) "Back-Up Servicer" shall have the meaning assigned
in Paragraph 18(b) of these Additional Supple-
mental Terms.
(e) "Base Rate" shall be LIBOR; provided, however,
that Buyer may in its sole and absolute
discretion, upon sixty (60) days' prior written
notice to Seller, change the Base Rate to
Commercial Paper Rate; provided further, however,
that thereafter Buyer may, in each case upon sixty
(60) days' prior written notice to Seller, change
the Base Rate from Commercial Paper Rate to LIBOR
or from LIBOR to Commercial Paper Rate, as the
case may be.
(f) "Business Day" shall mean any day other than (i) a
Saturday or a Sunday or (ii) another day on which
banking institutions in the States of Florida or New
York are authorized or obligated by law, executive
order, or governmental decree to be closed.
(g) "Buyer" shall mean Cargill Financial Services
Corporation, a Delaware corporation.
(h) "Collection Account" shall mean the trust or other
account or accounts approved by and for the benefit
of Buyer established by Servicer at Buyer's direction
with Bankers Trust Company and/or such other
financial institution or institutions as determined
by Buyer upon written notice to Seller and Servicer.
(i) "Collection Period" in respect of a Payment Date
shall be the calendar month preceding the calendar
month in which such Payment Date occurs (or, in the
case of the first Collection Period for a
Transaction, the period from and including the
related Cut-off Date through the end of the calendar
month in which the Cut-off Date occurs).
(j) "Collections" shall have the meaning set forth in
Section 3.9 of the Custodial Agreement.
(k) "Commercial Paper Determination Date" shall mean,
with respect to any Interest Reset Period, the
Business Day immediately preceding the Interest
Reset Date.
I-2
<PAGE>
(l) "Commercial Paper Rate" shall mean, with respect to
each Interest Reset Date, the rate determined by
Buyer as follows:
(i) The Money Market Yield of the rate on the
Commercial Paper Determination Date
immediately preceding such Interest Reset
Date for 30-day commercial paper as such
rate is published by the Federal Reserve
Board "Statistical Release H.15(519),
Selected Interest Rates" or any successor
publication of the Federal Reserve Board,
under the heading "Commercial Paper";
(ii) If by 3:00 p.m., New York City time, on any
Commercial Paper Determination Date such
rate is not so published, then the
Commercial Paper Rate shall be the Money
Market Yield of the rate on that Commercial
Paper Determination Date for 30-day
commercial paper as published by the Federal
Reserve Bank of New York in its daily
statistical release, "Composite 3:30 p.m.
Quotations for United States Government
Securities" ("Composite Quotations") under
the heading "Commercial Paper";
(iii) If by 3:30 p.m., New York City time, on such
Commercial Paper Determination Date such
rate is not so published in Composite
Quotations, the Commercial Paper Rate for
that Commercial Paper Determination Date
shall be the Money Market Yield of the
arithmetic mean of the offered rates of
three leading dealers of commercial paper
in The City of New York selected by Buyer
as of 11:00 a.m., New York City time, on
that Commercial Paper Determination Date,
for 30-day commercial paper placed for an
industrial issuer whose bond rating is
"AA", or the equivalent, from a nationally
recognized statistical rating organization;
and
(iv) If fewer than three dealers selected as
aforesaid by Buyer are quoting the rate
referred to in (c) above, the Commercial
Paper Rate with respect to such Commercial
Paper Determination Date will remain the
Commercial Paper Rate in effect on such
Commercial Paper Determination Date.
I-3
<PAGE>
(m) "Computer Tape" means a computer tape or other
electronic medium generated by Servicer which
provides information relating to the Contracts.
(n) "Confirmation" shall have the meaning assigned in
Paragraph 3(c) of these Additional Supplemental
Terms.
(o) "Contracts" means motor vehicle retail installment
sales contracts, installment loan agreements and
security agreements and all addenda thereto, as
amended or supplemented from time to time, secured
by Financed Vehicles and purchased by Seller in
the ordinary course of its business solely from
NAL Acceptance, all rights to receive payments
which are (i) in the case of a Precomputed
Contract, due pursuant thereto on or after the
related Cut-off Date, and (ii) in the case of a
Simple Interest Contract, received by Servicer on
or after the related Cut-off Date and all other
proceeds thereof (including without limitation any
recourse rights against third persons) from and
after the related Cut-off Date, but excluding, in
the case of a Precomputed Contract, any rights to
receive payments which are due prior to the
related Cut-off Date.
(p) "Custodial Agreement" shall refer to the Multi-Party
Custodial and Servicing Agreement, by and among
Seller, Buyer, Custodian and, for certain limited
purposes described therein, NAL Acceptance, providing
for the custody of the Contracts and related
documents and the servicing of the Contracts.
(q) "Custodial Receipt and Confirmation" shall refer to
the confirmation statement issued by Custodian that
evidences receipt and confirms ownership of the
Contracts and other documents indicated thereon.
(r) "Custodian" shall refer to Bankers Trust Company, a
New York banking corporation, in its capacity as
custodian under the Custodial Agreement.
(s) "Custodian's Contract File" shall have the meaning
set forth in Section 4.1 of the Custodial
Agreement.
I-4
<PAGE>
(t) "Cut-off Date" shall mean, in respect of a
Transaction, the date as of which the Contract
information for such Transaction is given on the
Computer Tape in respect of such Transaction
delivered by Seller to Buyer.
(u) "Dealer" shall mean the dealer who sold a Financed
Vehicle to an Obligor and who originated and
assigned the Contract relating to such Financed
Vehicle to any Person, including but not limited
to, NAL Acceptance, Special Finance Inc. or Auto
Analyst, Inc., as the case may be, in the normal
course of business under a Dealer Agreement, and
any successor to such Dealer.
(v) "Dealer Agreement" shall mean any purchase and
sale agreement between a Dealer and any Person in
the business of originating such agreements in the
ordinary course of business, which such Person
shall include but not be limited to NAL
Acceptance, Special Finance, Inc. or Auto Analyst,
Inc., as the case may be, with respect to such
Dealer's motor vehicle retail installment sales
contracts, installment loan agreements and
security agreements and all addenda thereto,
substantially in the form attached hereto as
Exhibit E, which such agreement may not be amended
in any material respect without Buyer's prior
written consent.
(w) "Dealer Recourse" shall mean, with respect to a
Contract, all of NAL Acceptance's rights arising
under the related Dealer Agreement or otherwise
against the Dealer which originated such Contract.
(x) "Enhancement" shall mean one or more letters of
credit, surety arrangements, guaranty contracts or
other forms of credit enhancement facility for the
benefit of Buyer, which enhancement shall
guarantee the Maximum Amount of Transactions
entered into hereunder; provided, however, the
Enhancement shall be in an amount and term so as
to permit Buyer to have the Repurchase Facility
(in an amount equal to the Maximum Amount and for
the remaining term of the Repurchase Facility)
rated "AAA" or its equivalent by the Rating
Agencies.
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<PAGE>
(y) "Financed Vehicles" shall mean any new or used
automobile or light-duty truck financed by loans and
sales contracts arising under Contracts.
(z) "Guaranty" shall refer to the Limited Guaranty
provided by NAL Acceptance and NAL Financial in
accordance with Paragraph 17 of these Additional
Supplemental Terms and substantially in the form
attached hereto as Exhibit A.
(aa) "Insurance Policies" shall mean any comprehensive
and collision, fire and theft and physical damage
insurance policies maintained by Obligors
(including, without limitation, the Obligor's
comprehensive insurance policy), any credit policy
(including without limitation credit life and
credit disability) and any Risk Default Policy
covering the Contracts, Obligors and/or Financed
Vehicles.
(bb) "Interest Reset Date" shall mean the day upon
which the Price Differential resets, which shall
be (i) in the event of a daily Interest Reset
Period, each Business Day in the case of the
Commercial Paper Rate and each LIBOR Business Day
in the case of LIBOR, and (ii) in the event of a
monthly Interest Reset Period, the first Business
Day of the Interest Reset Period in the case of
the Commercial Paper Rate and the first LIBOR
Business Day of the Interest Reset Period in the
case of LIBOR.
(cc) "Interest Reset Period" shall be daily; provided,
however, that Buyer may, upon sixty (60) days'
prior written notice to Seller, change the
frequency of the reset period to monthly, in which
case the Interest Reset Period shall mean the
period commencing on and including a Payment Date
(or commencing on and including the date the
Interest Reset Period changes to monthly in the
case of a change from daily to monthly Interest
Reset Periods) to but excluding the next
succeeding Payment Date; provided further,
however, that thereafter Buyer may, in each case
upon sixty (60) days' notice to Seller, change the
Interest Reset Period from monthly to daily or
daily to monthly, as the case may be.
(dd) "LIBOR" shall mean, with respect to each Interest
Reset Date, the London interbank offered rate for
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<PAGE>
one-month United States dollar deposits determined by
Buyer on the LIBOR Determination Date immediately
preceding the Interest Reset Date as follows:
(a) On each LIBOR Determination Date, Buyer
shall determine LIBOR as of 11:00 a.m.
(London time) on such LIBOR Determination
Date on the basis of the quotations thereof
which appears on Telerate Page 3750.
(b) If on any LIBOR Determination Date, LIBOR
does not appear on Telerate Page 3750, Buyer
shall determine LIBOR on the basis of
quotations provided by Reference Banks on
such LIBOR Determination Date to prime banks
in the London interbank market. LIBOR as
determined by Buyer is the arithmetic mean
of such quotations.
(c) If on any LIBOR Determination Date at least
two of the Reference Banks provide
quotations, LIBOR shall be determined in
accordance with clause (b) above on the
basis of the offered quotations of those
Reference Banks providing such quotations.
(d) If on the LIBOR Determination Date only one
or none of the Reference Banks provides such
offered quotations, LIBOR shall be:
(i) the rate per annum (rounded, as
aforesaid) that Buyer determines to
be either (A) the arithmetic mean
of the offered quotations that
leading banks in The City of New
York selected by Buyer are quoting
at or about 11:00 a.m. New York
City time on the relevant LIBOR
Determination Date for one-month
loans in U.S. Dollars to leading
banks active in the London
interbank eurodollar market or
those of them (being at least
two in number) to which such offered
quotations are, in the opinion of
Buyer, being so quoted, or (B) in
the event that Buyer can determine
no such arithmetic mean, the
arithmetic mean of the offered
quotations that leading banks in
The City of New York selected
by Buyer are quoting at or about
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<PAGE>
11:00 a.m. (London time) on such
LIBOR Determination Date to leading
banks active in the London interbank
eurodollar market for one-month
Dollar deposits; or
(ii) if the banks selected as aforesaid
by Buyer are not quoting as
described in clause (i) above, LIBOR
for such Interest Reset Date shall
be LIBOR as determined on the
previous LIBOR Determination Date.
(ee) "LIBOR Business Day" shall mean any day on which
dealings in deposits in United States dollars are
transacted in the London interbank market.
(ff) "LIBOR Determination Date" shall mean, with respect
to any Interest Reset Date, the second LIBOR Business
Day immediately preceding such Interest Reset Date.
(gg) "List Number" shall have the meaning assigned in
Paragraph 3(e) of these Additional Supplemental
Terms.
(hh) "List of Contracts" shall have the meaning
assigned in Paragraph 3(e) of these Additional
Supplemental Terms.
(ii) "Maximum Amount" shall have the meaning assigned
in Paragraph 13(b) of these Additional
Supplemental Terms.
(jj) "Money Market Yield" shall be a yield calculated
in accordance with the following formula:
D x 360
Money Market Yield = ------------- x 100
360 - (D x M)
where "D" refers to the per annum rate for commercial
paper referred to in the definition of Commercial
Paper Rate, quoted on a bank discount basis and
expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which
interest is being calculated.
(kk) "NAL Acceptance" shall refer to NAL Acceptance
Corporation, a Florida corporation, and any
successor thereto.
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<PAGE>
(ll) "NAL Financial" shall refer to NAL Financial Group
Inc., a Delaware corporation, and any successor
thereto.
(mm) "Net Worth" shall refer to net worth determined in
accordance with currently promulgated generally
accepted accounting principles.
(nn) "1933 Act" shall mean the Securities Act of 1933,
as amended.
(oo) "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended.
(pp) "Obligor" shall mean the obligor under any
Contract.
(qq) "Other Event" shall have the meaning assigned in
Paragraph 9(a)(ix) of these Additional
Supplemental Terms.
(rr) "Payment Date" shall mean the tenth (10th) day of
each month, or if such tenth day is not a Business
Day, the Business Day next succeeding such tenth day.
(ss) "Permitted Sale" shall mean an arm's length sale of
Portfolio Contracts either through (i) a
securitization of such Portfolio Contracts or (ii) a
"whole loan" sale of such Portfolio Contracts to any
Person, which such Person shall not be an Affiliate.
(tt) "Person" shall mean any legal person, including any
individual, corporation, limited liability company,
partnership, association, joint venture, joint-stock
company, estate, trust, unincorporated organization,
governmental entity or other entity of similar
nature.
(uu) "Policies and Procedures" shall have the meaning
assigned in Paragraph 12(f) of these Additional
Supplemental Terms.
(vv) "Portfolio Contracts" shall mean each and every
Contract purchased by Buyer under this Agreement and
which has not been otherwise sold, securitized or
disposed of by Seller in a Permitted Sale or as
otherwise provided herein.
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<PAGE>
(ww) "Precomputed Contract" shall refer to a Contract
pursuant to which the portion of a payment thereon
allocable to interest (which may be referred to
therein as add-on finance charge) and the portion of
a payment thereon allocable to principal (or the
amount financed) is determined according to the rule
of 78's method or the actuarial method.
(xx) "Price Differential" shall be computed in
accordance with Paragraph 14 of these Additional
Supplemental Terms.
(yy) "Rating Agencies" shall mean Moody's Investors
Service, Inc., Standard & Poor's Ratings Services,
A Division of the McGraw-Hill Companies, Inc.,
Duff & Phelps Credit Rating Co. and Fitch
Investors Service, L.P.
(zz) "Records" shall mean, with respect to any Contract,
all documents, books, records and other information
(including, without limitation, computer programs,
tapes, disks, data processing software and related
property and rights) relating to such Contract.
(aaa) "Reference Banks" shall mean three major banks that
are engaged in the London interbank market, selected
by Buyer.
(bbb) "Related Assets" shall mean (i) Seller's security
interest in Financed Vehicles, (ii) Seller's
rights, remedies, powers and privileges under the
Contracts, including any personal guaranty there-
of, (iii) Seller's rights, remedies, powers and
privileges under the Related Documents, (iv)
Seller's rights, remedies, powers and privileges
under the Dealer Agreements, including but not
limited to Dealer Recourse and any holdback
amounts, (v) insurance proceeds under Insurance
Policies, (vi) such other financial interests and
assets as shall be acceptable to Buyer in its sole
discretion, (vii) Records, and (viii) all proceeds
of the foregoing.
(ccc) "Related Document" shall mean, with respect to
Seller, the Custodial Agreement, the Sale and
Purchase Agreement, and this Agreement, and with
respect to NAL Acceptance, the Sale and Purchase
Agreement, the Custodial Agreement and the
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<PAGE>
Guaranty and with respect to NAL Financial, the
Guaranty.
(ddd) "Risk Default Policy" shall mean any risk default
insurance policy providing default insurance with
respect to any Contract.
(eee) "Sale and Purchase Agreement" shall mean the
Contracts Purchase Agreement dated as of May 1, 1996,
by and between NAL Acceptance and Seller pursuant to
which NAL Acceptance originates or purchases
Contracts and sells the Contracts to Seller, as such
document may be amended from time to time with
Buyer's prior written consent.
(fff) "Securities" shall be deemed to include Contracts and
the Related Assets; provided, however, that such
Contracts and Related Assets shall not be deemed to
be securities for the purposes of any securities or
blue sky laws.
(ggg) "Securitized Closing Date" shall mean, with respect
to a Securitized Contract Group, the date on which
the related asset-backed securities are issued.
(hhh) "Securitized Contract Group" shall mean Portfolio
Contracts sold by Seller as part of an identifiable
pool or package of Contracts in a Permitted Sale.
(iii) "Seller" shall mean Autorics, Inc., a Delaware
corporation, and any successor thereto.
(jjj) "Servicer" shall mean NAL Acceptance, and any
successor thereto.
(kkk) "Servicer Default" shall have the meaning assigned
in Paragraph 9(c) of these Additional Supplemental
Terms.
(lll) "Servicer's Certificate" shall have the meaning
assigned in Section 3.5 of the Custodial
Agreement.
(mmm) "Servicer's Fee" shall mean an amount computed as the
quotient of (x) the product of (i) three percent
(3%), and (ii) the aggregate outstanding amount of
Purchased Securities subject to this Agreement,
determined as of the first day of the
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<PAGE>
immediately preceding Collection Period, and (y)
12.
(nnn) "Simple Interest Contract" shall refer to a
Contract pursuant to which the portion of a
payment thereon allocable to interest is equal to
the product of the interest rate for such Contract
times the unpaid principal balance times the
period of time elapsed since the date on which the
preceding payment of interest was made; the
remainder of such payment, if any, is allocated to
principal.
(ooo) "Subordinated Debt" shall mean, with respect to NAL
Financial, indebtedness for money borrowed that is
subordinated by its terms to the obligations of NAL
Financial under the Guaranty.
(ppp) "Termination Date" shall have the meaning assigned
in Paragraph 11 of these Additional Supplemental
Terms.
(qqq) "Transaction" shall, in addition to the definition
set forth in the Repurchase Agreement, refer to
substitutions pursuant to Paragraph 9 of the
Repurchase Agreement.
(rrr) "Transaction Request" shall have the meaning
assigned in Paragraph 3 of these Additional
Supplemental Terms.
3. INITIATION; CONFIRMATION; TERMINATION.
(a) An agreement to enter into a Transaction may not be
entered into orally. Unless otherwise agreed, Seller
shall give Buyer at least three (3) Business Days
prior notice of any proposed date on which Purchased
Securities will be transferred from Seller to Buyer.
(b) At least three (3) Business Days prior to each
date on which Purchased Securities will be
transferred from Seller to Buyer, Seller shall
deliver to Buyer a request to enter into the
related Transaction in the form of Exhibit B
hereto (each, a "Transaction Request"). In
addition, at least three (3) Business Days in
advance of each date on which Purchased Securities
will be transferred from Seller to Buyer, Seller
shall deliver to Buyer, in computer readable form,
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<PAGE>
such data relating to the Contracts and Related
Assets as Buyer, from time to time, may reasonably
request. Seller shall deliver to Custodian the
documents relating to the Contracts so as to enable
Custodian to certify to Buyer at least one (1)
Business Day prior to the related Purchase Date that
Custodian has received, for each Contract to be
subject to such Transaction, the items listed in
Section 4.1 of the Custodial Agreement. Furthermore,
Seller shall make available or, at Buyer's request,
deliver to Buyer or Custodian the documents relating
to the Contracts and Related Assets for inspection by
Buyer no later than two (2) Business Days after prior
written notice thereof.
(c) If Buyer, in its reasonable judgment, determines
that any of the Contracts and Related Assets are
acceptable to Buyer, Buyer will confirm the terms
of each Transaction by delivering a written con-
firmation to Seller on or before the Business Day
immediately preceding the related Purchase Date,
in the form of Exhibit C attached hereto (a
"Confirmation"); provided, that Buyer shall not
confirm the terms of a Transaction or deliver a
written confirmation to Seller until Buyer has
received from Custodian a certification that
Custodian has received, for each Contract to be
subject to such Transaction, the items listed in
Section 4.1 of the Custodial Agreement.
(d) Such Confirmation shall describe the Contracts and
Related Assets, identify Buyer and Seller, and set
forth the items listed on the form of Confirmation
and may contain additional terms or conditions as
agreed to by Buyer and Seller not inconsistent with
this Agreement.
(e) Seller will deliver and release to Custodian and
Buyer by at least 11:30 a.m. New York time three
(3) Business Days prior to the date on which
Purchased Securities will be transferred from
Seller to Buyer a detailed listing of Contracts
subject to this Agreement (which listing shall
include such fields of information as agreed to by
Buyer and Seller) (a "List of Contracts"). Each
List of Contracts shall bear a number (a "List
Number") unique to such list and each and every
Contract purchased by Seller pursuant to the Sale
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<PAGE>
and Purchase Agreement. On the date on which
Purchased Securities will be transferred from Seller
to Buyer, Custodian shall, pursuant to the Custodial
Agreement, issue a Custodial Receipt and Confirmation
to Buyer. If such Custodial Receipt and Confirmation
is in form and substance as required by the Custodial
Agreement and the Contracts and Related Assets are
acceptable to Buyer, Buyer shall thereafter transfer
the Purchase Price to Seller, provided that all other
conditions set forth in this Agreement are met or
waived in writing by Buyer.
(f) Any Confirmation by Buyer shall be deemed to have
been received by Seller: (i) on the date sent if
given by telecopy, and (ii) on the Business Day
following the day sent if sent by a nationally
recognized overnight courier service.
(g) Each Confirmation signed by Seller and returned to
Buyer by Seller in accordance with paragraph (c)
above, together with this Agreement, shall be
conclusive evidence of the terms of the Transac-
tion(s) covered thereby. Seller may object in
writing to a Confirmation within one (1) Business
Day after receipt of such Confirmation. Buyer may
send a corrected Confirmation to Seller no more
than two (2) Business Days after the date such
objection was received by Buyer. An objection
sent by Seller must state specifically that the
writing is an objection, must specify the provi-
sion(s) being objected to by Seller, must set
forth such provision(s) in the manner that Seller
believes they should be stated, and must be
received by Buyer no more than one (1) Business
Day after the Confirmation or corrected Confirma-
tion was received by Seller.
(h) In the case of Transactions terminable upon demand
by Buyer or Seller, such demand shall be made by
the party desiring to terminate the Transaction
in writing at least fifteen (15) Business Days
prior to the Business Day on which such
termination will be effective. On the date
specified in such demand, or on the date fixed for
termination in the case of Transactions having a
fixed term, termination of the Transaction will be
effected by transfer to Buyer or its agent of the
Repurchase Price and all other amounts due
hereunder with respect to such Transactions to an
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<PAGE>
account of Buyer. Upon receipt of the Repurchase
Price by Buyer, Buyer will deliver to Seller a
canceled Custodial Receipt and Confirmation which
relates to the Purchased Securities being
transferred. Upon such delivery to Seller of a
canceled Custodial Receipt and Confirmation, title to
all Purchased Securities relating to such terminated
Transaction and all Income in respect thereof shall
pass to Seller.
(i) If there is any conflict between the terms of a
Confirmation issued by Buyer and this Agreement, the
Confirmation shall prevail.
4. MARGIN MAINTENANCE. Paragraph 4(a) of the Repurchase
Agreement is hereby modified to provide that if the
notice to be given by Buyer to Seller under such section
is given at or prior to 10:00 a.m. New York time, Seller
shall transfer cash or the Additional Purchased
Securities to Buyer prior to 5:00 p.m. New York time on
the third (3rd) Business Day after receipt of such
notice, and if such notice is given after 10:00 a.m. New
York time, Seller shall transfer cash or the Additional
Purchased Securities prior to 5:00 p.m. New York time on
the fourth (4th) Business Day after receipt of such
notice. Seller shall cause the Confirmation in respect
of any such transfer of Additional Purchased Securities
to be delivered to Buyer at the time of such transfer.
Paragraph 4(b) of the Repurchase Agreement is hereby deleted.
5. PAYMENTS. All collections, exclusive of scheduled
payments due on Precomputed Contracts prior to the
related Cut-off Date and collected on or after such Cut-
off Date, in respect of the Contracts shall be deposited
into the Collection Account within one (1) Business Day
after the receipt thereof by Servicer. In respect of
each Transaction, Custodian, on the basis of the
Servicer's Certificate provided by Servicer, shall apply
on each Payment Date all collections in respect of the
Contracts in such Transaction that were received in the
related Collection Period (or, in the case of payments
made by Seller pursuant to paragraph 8(e), made in
respect of such Payment Date) in the following order of
priority: (i) to pay to Buyer an amount necessary to
reduce the aggregate outstanding amount of Purchased
Securities subject to this Agreement to an amount equal
to the product of (a) the Advance Rate Percentage, and
(b) the aggregate outstanding amount of Purchased
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<PAGE>
Securities subject to this Agreement, determined as of the close
of business as of the last day of the immediately preceding
Collection Period; (ii) to pay to Custodian such fees and
expenses due and payable under Section 6.3 of the Custodial
Agreement; (iii) to pay to Back-Up Servicer such fees and
expenses due and payable under the back-up servicing agreement
(said amount not to exceed an amount calculated as the quotient
of (x) a monthly amount computed as the product of (A) seven and
one-half (7.5) basis points (.075%), and (B) the aggregate
outstanding amount of Purchased Securities subject to this
Agreement, determined as of the first day of the immediately
preceding Collection Period, and (y) 12); (iv) to pay to
Servicer the Servicer's Fee; (v) to pay to Buyer the unpaid
Price Differential accrued from and including the first day of
the immediately preceding Collection Period (or, in the case of
a Transaction whose Purchase Date occurred after such first day
of the immediately preceding Collection Period, from and
including such Purchase Date) to and including the last day of
the immediately preceding Collection Period; (vi) to pay to
Buyer such portion of the Annual Commitment Fee as is due and
payable, if any; (vii) to pay to Buyer, all theretofore accrued
and unpaid expenses in respect of the related Collection Period
due to Buyer under or in connection herewith or any Related
Document; (viii) to pay to the applicable party, in respect of
any Transaction any, and all, shortfalls in respect of any, and
all, Payment Dates occurring prior to the current Payment Date,
the amounts due to the applicable parties pursuant to clauses
(i), (ii), (iii), (v), (vi), or (vii); (ix) provided that no
Event of Default shall have occurred and be continuing, to
Seller or Seller's designee, such collections to the extent of
collections remaining after application pursuant to clauses (i)
through (viii); and (x) if an Event of Default shall have
occurred and be continuing, to Buyer, such collections remaining
after application pursuant to clauses (i), (ii), (iii), (v),
(vi), (vii), or (viii). On any Payment Date that the collections
are not sufficient to pay Buyer the amounts owed to it pursuant
to clauses (i), (v), (vi), (vii), and (viii) (the "Deficiency"),
Buyer shall have the unconditional right to exercise its rights
pursuant to the Guaranty in respect of said Deficiency. The
calculation of such collections shall be set forth in the
Servicer's Certificate in respect of such Collection Period. The
Price Differential shall be calculated as set forth in Paragraph
14. For the purposes of this Agreement, the principal balance of
each Contract and collections of
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<PAGE>
interest thereon and principal thereof shall be determined as if
such Contract were a Simple Interest Contract. All payments due
to Buyer under this section shall be made without any offset for
withholding and, to the extent Buyer is required by law to
withhold any amount with respect to such payments, such payments
shall be increased by the amount such that the net amount
received by Buyer (on an after tax basis) is equal to the amount
which would have been received had no withholding been made.
6. MARKET VALUE DETERMINATION.
(a) Notwithstanding the definition set forth in
Paragraph 2(h) of the Repurchase Agreement, Seller shall
determine the "Market Value" of all of the Contracts subject to
the Transactions in accordance with this Paragraph 6 of these
Additional Supplemental Terms as of the close of business of
each Collection Period and shall advise Buyer of the results of
such determination on or before the fifth (5th) Business Day
succeeding such Collection Period. As of any date of
determination, the Market Value of all of the Contracts subject
to the Transactions shall be determined as the lesser of:
(i) The product of (x) the Advance Rate Percentage,
and (y) the "pro forma market value" of the
Contracts (as determined in clause (b) below);
(ii) The product of (x) the Advance Rate Percentage,
and (y) Seller's Purchase Price of the Contracts;
(iii) The product of (x) the Advance Rate Percentage,
and (y) the par value of the Contracts; and
(iv) The product of (x) the Advance Rate Percentage, (y)
the unpaid balance of the Contracts, and (z) the
quotient of (1) the original Seller's Purchase
Price of the Contracts, and (2) the par value of
the Contracts.
Notwithstanding the calculations set forth in 6(a)(i) through
(6)(a)(iv) above, the "Market Value" shall be deemed to be
equal to zero for (i) Contracts that are ninety-one (91) days
or more delinquent, and (ii) any Contract for which the
Financed Vehicle has been or is in the process of being
repossessed.
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<PAGE>
(b) The "pro forma market value" of the Portfolio Contracts
shall be computed as the present value of (t) the aggregate
unpaid balance amount of the Portfolio Contracts, (u) the
weighted average coupon rate of all of the Portfolio
Contracts, (v) the weighted average remaining maturity of all
of the Portfolio Contracts, (w) the trailing six-month
annualized net charge-off rate for Seller's inception to-date
portfolio of Contracts originated in accordance with the terms
and conditions of the underwriting guidelines attached hereto
as Exhibit F, (x) a prepayment rate equal to 1.50% ABS, (y) a
servicing rate equal to 3.0% per annum, and (z) a discount
rate equal to the sum of (1) four percent (4%) per annum, and
(2) the yield of on-the-run two-year United States Treasury
Notes.
7. SECURITY INTEREST.
(a) In the event, for any reason, any Transaction is
construed by any court as a secured loan rather
than a purchase and sale, the parties intend that
Seller shall have granted to Buyer, through
Custodian as agent and bailee for Buyer, a per-
fected first priority security interest in all of
the Purchased Securities including, without
limitation, the Contracts and the Related Assets
sold hereunder. If, for any reason, a Contract is
construed by a court as security for a loan to the
related Dealer, the parties intend that Seller
shall have transferred all right, title and
interest in and to such loan and the security
interest in such Contract and Related Assets to
Buyer.
(b) Seller shall pay all fees and expenses associated
with perfecting such security interest including,
without limitation, the cost of filing financing
statements and continuation statements under the
Uniform Commercial Code.
(c) In the event that Buyer elects to engage in
repurchase transactions with the Purchased
Securities or otherwise elects to sell, pledge,
hypothecate or otherwise finance the Purchased
Securities, Seller shall, at the request of Buyer
and at the expense of Buyer, which such expense
shall not exceed $50,000 during the term of this
Agreement, (i) provide Buyer's counterparty in
such transaction with an opinion of counsel to the
effect that such counterparty has a perfected
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<PAGE>
first priority security interest in such Purchased
Securities including, without limitation, the
Contracts and the Related Assets sold hereunder, and
(ii) do and perform such further acts and things
necessary to enable Custodian to do and perform such
further acts and things and to execute and deliver to
Buyer and its counterparty such additional
agreements, acknowledgements, powers and instruments
as are required by Buyer in connection with such
transaction and such counterparty.
Notwithstanding Section 6 of the Repurchase Agreement
and this Section 7, the parties recognize the
treatment of such Transactions by applicable taxing
authorities and accordingly agree that for federal,
state and local tax purposes, each Transaction
hereunder and the aggregate of Transactions hereunder
shall be treated as a secured loan transaction
between Seller, as borrower, and Buyer as lender.
Neither party shall take any position in connection
with its tax filing or reporting obligations which is
inconsistent with such character for tax purposes and
shall treat: (i) the Purchase Price with respect to
each Transaction as a loan advance by Buyer to
Seller, (ii) each amount paid to Buyer with respect
to the repayment of the Purchase Price and the Price
Differential Amount, including amounts payable
pursuant to clauses (i) and (v) (but not clause (vi))
of Section 5 of this Annex, all Repurchase Prices and
all similar amounts, as attributable to interest
payments at the Pricing Rate (or such other rate as
set forth herein) and payments of principle, as the
case may be and (iii) prior to any Event of Default,
the Purchased Securities and related Income as
property of the Seller held by Buyer as collateral
for the obligations hereunder.
8. REPRESENTATIONS.
(a) Buyer represents and warrants to Seller, and shall
on and as of the Purchase Date for any Transaction
be deemed to represent and warrant to Seller, that
Buyer is duly organized and validly existing in
good standing under the laws of the State of
Delaware; Buyer has the full corporate power and
authority to execute, deliver and perform, and to
enter into and consummate, the transactions
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<PAGE>
contemplated by this Agreement and has duly
authorized by all necessary corporate action on the
part of Buyer the execution, delivery and performance
of this Agreement; and this Agreement, assuming the
due authorization, execution and delivery thereof by
each of the other parties thereto, constitutes a
legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its
terms, except to the extent that (a) the
enforceability thereof may be limited by federal or
state bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to
creditors' rights generally, and (b) the
enforceability thereof may be limited by general
equitable principles (regardless of whether
enforcement is sought in a proceeding in equity or at
law).
(b) Seller represents and warrants to Buyer and its
assigns, and shall on and as of the Purchase Date
for any Transaction be deemed to represent and
warrant, as follows:
(i) It has been duly organized and is validly
existing as a corporation in good standing
under the laws of the State of Delaware,
with power and authority to own its
properties and to conduct its business as
such properties shall be currently owned
and such business is presently conducted,
and has had at all relevant times, and
shall have, power, authority, and legal
right to acquire and own the Contracts.
(ii) It 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 businesses shall require such
qualifications, licenses or approvals.
(iii) It has the power and authority to execute
and deliver the Related Documents and to
carry out their respective terms. Seller has
full power and authority to sell the
Contracts to Buyer.
(iv) The Agreement is, and each Transaction when
entered into under the Agreement will be, a
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<PAGE>
legal, valid and binding obligation of
Seller, enforceable against it in accordance
with the terms of the Agreement.
(v) The consummation of the transactions contem-
plated by the Related Documents and the
fulfillment of the terms hereof shall not
conflict with, result in any breach of any
of the terms and provisions of, nor
constitute (with or without notice or lapse
of time) a default under, the certificate of
incorporation or by-laws of Seller, or any
indenture, agreement, or other instrument to
which Seller is a party or by which it shall
be bound; nor result in the creation or
imposition of any lien upon any of its
properties pursuant to the terms of any such
indenture, agreement, or other instrument,
other than the Related Documents, nor
violate any law or any order, rule, or
regulation applicable to Seller of any
court or of any federal or state regulatory
body, administrative agency, or other
governmental instrumentality having
jurisdiction over Seller or its properties.
(vi) There are no proceedings or investigations
pending, or threatened, before any court,
regulatory body, administrative agency, or
other governmental instrumentality having
jurisdiction over Seller or its respective
properties: (i) asserting the invalidity of
a Related Document; (ii) seeking to prevent
the consummation of any of the transactions
contemplated by a Related Document; or
(iii) seeking any determination or ruling
that may have a material adverse change in
the business, results of operations,
financial condition or prospects of Seller,
or the performance by Seller of its respec-
tive obligations under, or the validity or
enforceability of, a Related Document.
(vii) All approvals, authorizations, consents,
orders or other actions or registrations
with any Person or any governmental body or
official required to be obtained on or prior
to the date hereof in connection with the
execution and delivery of the Related
Documents, the performance of the
transactions contem-
I-21
<PAGE>
plated by the Related Documents and the
fulfillment of the terms hereof and thereof
have been obtained.
(viii) The chief executive office of Seller is now,
and for at least four months has been,
located at 500 Cypress Creek Road West,
Suite 590, Fort Lauderdale, Florida 33309.
Neither Seller nor any of its respective
executive officers, has operated under any
trade names, or, within the last five years,
changed names or been the subject of any
proceeding under the United States
Bankruptcy Code or merged with or into or
consolidated with any other corporation.
(ix) (a) Seller is not insolvent and will not
become insolvent as a result of the transfer
of the Contracts on such Purchase Date, (b)
Seller did not intend to incur or believe
that it would incur debts that would be
beyond Seller's ability to pay as such debts
matured, (c) such transfer was not made with
the actual intent to hinder, delay or
defraud any Person, and (d) the assets of
Seller did not constitute unreasonably
small capital to carry out its business as
conducted.
(x) Seller is not required to be registered
under the Investment Company Act of 1940, as
amended.
(xi) Seller, NAL Acceptance and NAL Financial are
each a separate and independent corporate
entity from Custodian, neither Seller, NAL
Acceptance nor NAL Financial owns a control-
ling interest in Custodian either directly
or through Affiliates and no director or
officer of Seller, NAL Acceptance or NAL
Financial is also a director or officer of
Custodian.
(xii) Seller has unimpaired capital in the form of
cash or U.S. Treasury bills or a mutual fund
(reasonably acceptable to Buyer) which
invests in U.S. government securities or
U.S. Treasury bills or Contracts or
interests in contracts contributed to Seller
by NAL Acceptance and/or NAL Financial, and
Net Worth equal to or greater than $50,000.
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<PAGE>
(xiii) Each Contract was entered into by NAL
Acceptance directly, or acquired by NAL
Acceptance in the normal course of business
directly from the originating Dealer, or
otherwise in the ordinary course of NAL
Acceptance's business, was individually
reviewed for compliance with NAL
Acceptance's underwriting standards
attached hereto as Exhibit F and complies
with such underwriting standards and is
otherwise in accordance with NAL
Acceptance's customary origination
policies and procedures.
(xiv) Since the date of the most recent financial
statement of Seller, delivered by it
pursuant to Paragraph 12 of these Additional
Supplemental Terms, there has been no
material adverse change in the business,
results of operations, financial condition
or prospects of Seller.
(xv) Seller shall be at the time it delivers any
Purchased Securities for any Transaction,
and shall continue to be, through the
Purchase Date relating to each such
Transaction, the legal and beneficial owner
of such Purchased Securities and all rights
relating thereto, free of any lien,
security interest, option or encumbrance
except for the security interest created
by or pursuant to the Agreement.
(xvi) Seller has due authority to execute the
UCC-1 financing statements and continuation
statements relating to each Contract and the
Related Assets in favor of Custodian as
agent and bailee for Buyer.
(xvii) No transaction contemplated hereby requires
compliance with any bulk sales act or
similar law.
(xviii) No purchase of a Contract by Buyer from
Seller or by Seller from NAL Acceptance
constitutes a fraudulent transfer or
fraudulent conveyance or is otherwise void
or voidable under similar laws or
principles, the doctrine of equitable
subordination or for any other reason.
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<PAGE>
(xix) Seller has not utilized any adverse
selection from its assets in respect of the
Contracts sold to Buyer pursuant to this
Agreement or any adverse selection from its
assets in respect of Contracts sold by
Seller pursuant to this Agreement.
(c) Seller covenants with Buyer as follows:
(i) Other Liens or Interests. Except for the
conveyances hereunder, Seller will not sell,
pledge, assign or transfer to any other
Person, or grant, create, incur, assume or
suffer to exist any lien on any interest in,
the Contracts or Related Assets, including,
without limitation, any option to buy or
right to receive income with respect to the
Contracts or Related Assets, and Seller
shall defend the right, title, and interest
of Buyer in, to and under such Contracts and
Related Assets against all claims of third
parties claiming through or under Seller.
(ii) Notice of Material Adverse Change. Promptly
upon becoming aware thereof, Seller shall
give Buyer notice in writing of any material
adverse change or event or condition that
may have a material adverse change in the
business, results of operations, financial
condition or prospects of Seller or which
may adversely affect the collectibility of
any of the Contracts or the ability of
Seller to perform its obligations under the
Related Documents.
(iii) Preservation of Corporate Existence. Seller
shall preserve and maintain its corporate
existence, rights, franchises and privileges
in the jurisdiction of its incorporation,
and qualify and remain qualified in good
standing as a foreign corporation in each
jurisdiction where the failure to preserve
and maintain such existence, rights,
franchises, privileges and qualification
would materially adversely affect (i) the
interests of Buyer hereunder or (ii) the
ability of Seller to perform its obligations
under any Related Document to which it is a
party. Seller shall not, except to the
extent required by law, amend, alter,
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<PAGE>
change, or repeal its Certificate of
Incorporation filed on August 11,
1995, without the prior written consent
of Buyer, which consent may be denied by
Buyer in its sole and absolute discretion.
(iv) Compliance with Laws. Seller shall comply in
all material respects with all laws, rules,
statutes, regulations, decrees, and orders
of, and all applicable restrictions imposed
by, all governmental bodies applicable to
Seller, its business and properties, and the
Contracts and Related Assets.
(v) Enforceability of Obligations. Seller shall
take such actions as are within its power to
ensure that, with respect to each Contract,
the obligation of any related Obligor to pay
the unpaid balance of such Contract in
accordance with the terms thereof remains
legal, valid, binding and enforceable
against such Obligor.
(vi) Books and Records. Seller shall maintain
and implement administrative and operating
procedures (including, without limitation,
the ability to recreate records regarding
the Contracts in the event of the
destruction of any original records
thereof), and keep and maintain all
documents, books, records and other
information reasonably necessary or
advisable for the collection of all
Contracts (including, without limitation,
records adequate to permit the
identification of all collections and
adjustments to each existing Contract).
Seller shall, in the books and records with
respect to the Portfolio Contracts, note
that each Portfolio Contract has been sold
to Buyer.
(vii) Fulfillment of Obligations. Seller will
duly observe and perform or cause to be
observed or performed, all material
obligations and undertakings on its part to
be observed and performed under or in
connection with the Contracts and Related
Assets, and will duly observe and perform
all material provisions, covenants and other
promises required to be observed by it under
the contracts related to the Contracts, will
do nothing to impair the right, title and
interest of Buyer in and to
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<PAGE>
the Contracts and the Related Assets and
will pay when due any taxes, including
without limitation any sales tax, excise
tax, withholding tax, intangibles tax, doing
business tax, franchise tax, property tax or
other tax or charge, payable in connection
with the Contracts and Related Assets and
their creation and satisfaction, ownership,
financing, or servicing or otherwise in
connection with the transactions
contemplated hereby.
(viii) Litigation. As soon as possible, and in any
event within three (3) Business Days of
Seller's knowledge thereof, Seller shall
give Buyer written notice of (i) any
litigation, investigation or proceeding
against Seller which may exist at any time
which could have a material adverse effect
on the business, financial condition,
results of operations or prospects of Seller
or impair the ability of Seller to perform
its obligations under any Related Document
or materially and adversely affect the
collectibility or servicing of any of the
Contracts, and (ii) any material adverse
development in any such previously disclosed
litigation.
(ix) Access to Seller's Books and Records.
Seller shall provide to Buyer access to its
servicing system, files, documents, books,
records, accounts, correspondence and other
records, with respect to the Contracts and
other motor vehicle retail installment sale
contracts owned or serviced for its own
account or the account of others to
determine whether any such Contracts or
contracts were selected for inclusion under
this Agreement on any basis which would have
a material adverse effect on Buyer or any
subsequent owner thereof, during normal
business hours on any Business Day and at
the expense of Buyer or, if either Seller or
NAL Acceptance is in default of its
obligations under a Related Document, Seller
and NAL Acceptance.
(x) Merger or Consolidation of Seller. Any
Person into which Seller may be merged or
consolidated, or any corporation resulting
from any merger, conversion or consolidation
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<PAGE>
to which Seller shall be a party, or any
Person succeeding to the business of Seller,
shall be the successor of Seller hereunder,
without the execution or filing of any paper
or any further act on the part of any of the
parties hereto, anything herein to the
contrary notwithstanding; provided, however,
that no such merger, conversion,
consolidation or succession shall occur
unless Buyer is provided with 120 days prior
written notice and the resulting or
succeeding entity has limited corporate
purposes substantially identical to those of
Seller, as evidenced to Buyer's
satisfaction, including appropriate opinions
of counsel obtained at the expense of
Seller.
(xi) No Assignment. Except in connection with a
merger or reorganization of Seller or a sale
of all or substantially all of such entity's
assets, Seller shall not assign this
Agreement except by mutual consent of the
parties hereto.
(xii) Dealer Recourse. Seller agrees to
diligently exercise, on behalf of Buyer, all
its rights and remedies against Dealers
arising under Dealer Agreements with respect
to the Contracts from time to time and to
the extent of any cash or other recoveries
thereunder. Such amounts shall be held in
trust by Seller for the benefit of Buyer.
(xiii) Other Information. Seller agrees to provide
to Buyer all information regarding its
operations and practices and any Contracts
as Buyer shall reasonably request, from time
to time, in writing.
(xiv) Amendments. Seller agrees that any amendment
to the Sale and Purchase Agreement shall
require the prior written consent of Buyer,
said consent may be denied by Buyer in its
sole and absolute discretion.
(xv) Capitalization. Seller will maintain
unimpaired capital in the form of cash or
U.S. Treasury bills or a mutual fund
(reasonably acceptable to Buyer) which
invests in U.S. government securities or
U.S.
I-27
<PAGE>
Treasury bills or Contracts or interests in
contracts contributed to Seller by NAL
Acceptance or NAL Financial, and Net Worth
equal to or greater than $50,000. Seller
shall not pay dividends to NAL Acceptance if
an Event of Default shall have occurred and
be continuing.
(xvi) UCC Filings. Seller shall file a UCC-1
financing statement in favor of Custodian
under the Custodial Agreement relating to
the Contracts and the Related Assets and any
payments or proceeds arising therefrom, said
financing statement to be acceptable to
Buyer in its sole and absolute discretion.
During the term of this Agreement, Seller
shall receive Buyer's written consent prior
to filing any, and all, changes to the
aforementioned financing statement,
including the filing of any UCC-3 financing
statements of change in connection with any,
and all, releases of Contracts, including
but not limited to, a Permitted Sale.
(xvii) Continuation Statement Filings. Seller shall
file such continuation statements as may be
necessary in order to ensure that the
interest of Custodian under the financing
statement referred to in clause (xvi) above
does not lapse.
(xviii) Monthly Compliance Statement. Seller shall
deliver to Buyer on each Payment Date a
certificate dated such Payment Date and
signed by two authorized officers of Seller
familiar with this Agreement and the
Transactions stating that (i) a review of
the activities of Seller and the performance
of Seller of its obligations under this
Agreement for the period from the preceding
Payment Date to such Payment Date has been
made under their supervision, and (ii) based
on such review, Seller has fulfilled all of
its obligations under this Agreement during
such period or, if there has been a default
in the performance of any such obligation,
specifying such default and the status
thereof.
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<PAGE>
(xix) Corporate Separateness. Seller is and shall
be operated in such a manner that it will
not be substantively consolidated in the
bankruptcy estate of any Affiliate, such
that the separate corporate existence of
Seller would be disregarded in the event of
a bankruptcy or insolvency of any Affiliate,
and in that regard:
(a) Seller shall remain a limited purpose
corporation whose activities are restricted
to purchasing and selling Contracts in
accordance with its certificate of
incorporation;
(b) Seller has and shall have no
subsidiaries;
(c) Seller shall not engage in any
intercorporate transactions with any
Affiliate except for the transactions set
forth in this Agreement (or reasonably
related thereto) and transactions described
in subsection (i) of the definition of
Permitted Sales, the Custodial Agreement,
the Sale and Purchase Agreement, and the
Related Documents;
(d) Seller shall maintain separate corporate
records and books of account from any
Affiliate, hold regular corporate meetings
and otherwise observe corporate formalities
and keep and maintain a separate suite
designated as its business office;
(e) the financial statements and books and
records of any Affiliate shall reflect the
separate corporate existence of Seller;
(f) Seller shall maintain its assets
separately from the assets of any Affiliate
(including through the maintenance of a
separate bank account); Seller's funds and
assets, and records relating thereto shall
not be commingled with those of any
Affiliate and the separate creditors of
Seller shall be entitled to be satisfied out
of Seller's assets prior to any value in
Seller becoming available to Seller's equity
holders;
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<PAGE>
(g) except as provided for in the Guaranty,
no Affiliate of Seller shall (A) pay
Seller's expenses, except by a contribution
of capital to Seller, (B) guarantee Seller's
obligations, or (C) advance funds to Seller
for the payment of expenses or otherwise;
(h) all business correspondence of Seller
and other communications shall be conducted
in Seller's own name and on its own
stationery;
(i) except in Louisiana, no Affiliate of
Seller (except for Servicer) will act as an
agent of Seller in any capacity and Seller
shall not act as agent for any Affiliate of
Seller, but instead shall present itself to
the public as a corporation separate from
any other Person, independently engaged in
the business of purchasing and selling
Contracts;
(j) at least two of the five directors of
Seller shall be independent directors, which
independent directors shall at no time be a
stockholder, director, officer or employee
of NAL Acceptance or NAL Financial and shall
be acceptable to Buyer, in its reasonable
discretion;
(k) Seller shall obtain proper authorization
from its board of directors of all corporate
action requiring such authorization by
written resolution or by written consent and
meetings of such board of directors shall be
held not less frequently than four times per
year. Seller shall provide notification to
Buyer of any such meetings and complete and
correct copies of all of Seller's drafts of
board of directors' minutes, resolutions,
unanimous written consents, agendas, and
other materials no later than 5 Business
Days prior to such meeting or adoption of
board of director action. Seller shall
provide copies of all information pertaining
to board of director action at the same time
such information is provided to members of
the board.
(l) Seller shall obtain proper authorization
from its stockholders of all corporate
actions requiring stockholder approval;
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<PAGE>
meetings of the stockholders of Seller shall
be held not less frequently than one time
per year;
(m) although the organization expenses of
Seller have been paid by NAL Acceptance,
operating expenses and liabilities of Seller
shall be paid solely and exclusively by
Seller from its own funds or from capital
contributions from NAL Acceptance;
(n) the annual financial statements of
Seller shall disclose the effects of
Seller's transactions in accordance with
generally accepted accounting principles and
shall disclose that the assets of Seller are
not available to pay creditors of NAL
Acceptance or any Affiliate thereof; and
(o) the resolutions, agreements and other
instruments of Seller underlying the
transactions described in this Agreement and
in the Related Documents shall be
continuously maintained by Seller as
official records of Seller, separately
identified and held apart from the records
of Servicer and each Affiliate thereof.
(xx) No Modifications to Underwriting Guidelines
or Policies and Procedures. Seller shall not
(i) materially modify the underwriting guide
attached hereto as Exhibit F, (ii)
materially modify its buying practices, or
(iii) materially modify, or fail to follow
or comply in any material respect with, any
of its Policies and Procedures in any case,
without the prior consent of Buyer, which
consent shall not be unreasonably withheld
and shall be deemed granted by Buyer on the
tenth (10th) Business Day following Buyer's
receipt of a proposed modification if Buyer
has not expressed to Seller its disapproval
of such proposal prior to such tenth (10th)
Business Day.
(xxi) No Amendments. None of the Related Documents
shall be amended, supplemented or otherwise
modified without Buyer's prior written
consent, which consent shall be granted by
Buyer in its sole and absolute discretion.
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<PAGE>
(xxii) Corporate Organization. Seller shall at all
times be a direct, wholly-owned subsidiary
of NAL Acceptance.
(xxiii) No Use of Cargill Name. Seller and its
Affiliates, associates and employees shall
not refer to or name Cargill, Incorporated
or Cargill Financial Services Corporation,
or use the name Cargill in any manner, oral
or written, including, without limitation,
in any press release, advertising, printed
material, electronic medium or any other
medium without the prior written consent of
Buyer, which consent shall be granted by
Buyer in its sole and absolute discretion;
provided that with respect to any proposed
1933 or 1934 Act filing, no such consent
shall be required so long as (1) such
reference or use of the name Cargill is
required by the rules and regulations
promulgated thereunder as evidenced by
advice from counsel to Seller or such
Affiliate and (2) Buyer shall have received
a copy of any such proposed filing and shall
have had a reasonable opportunity to comment
on such filing prior to filing.
(xxiv) No Adverse Selection. Seller will not
utilize any adverse selection from its
assets in respect of the Contracts sold to
Buyer pursuant to this Agreement or any
adverse selection from its assets in respect
of Contracts sold by Seller pursuant to this
Agreement.
(xxv) Limits on Purchase Price. Seller shall not
purchase and sell to Buyer any Contract (i)
for a purchase price in excess of the
purchase price for such Contract paid by NAL
Acceptance, (ii) which has been purchased by
NAL Acceptance at a discount from the par
amount that is greater than fifteen percent
(15%), or (iii) that has an annual
percentage interest rate less than fifteen
percent (15%).
(xxvi) Permitted Sales. In connection with each
Permitted Sale that is a securitization of
Portfolio Contracts, the underwriter or
placement agent retained in connection
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<PAGE>
therewith shall select the specific
Contracts for inclusion in such
securitization, and in connection with each
Permitted Sale that is not a securitization,
Seller shall select the specific Contracts
for inclusion in such Permitted Sale using
its best efforts so as not to adversely
impact the risk profile of the Contracts
that remain subject to this Agreement.
(xxvii) Dealer Visits. Seller shall permit Buyer,
and shall use its best efforts to obtain the
consent of each affected Dealer permitting
Buyer, to accompany Seller for on-site due
diligence inspection of such Dealer's
operations and procedures in connection with
the origination of Contracts for sale to NAL
Acceptance.
(xxviii) Contract Information Entered into Servicing
System. Servicer shall have entered, for any
Contracts, the necessary boarding and
servicing information completely, and
correctly, into its servicing system prior
to Seller selling such Contracts to Buyer.
(xxix) Concentration Limits. Effective May 31,
1996, the outstanding Repurchase Price for
the Purchased Securities subject to this
Agreement with respect to Contracts
purchased from any Dealer shall not exceed
eight percent (8%) of the aggregate
outstanding Repurchase Price for the
Purchased Securities subject to this
Agreement.
(d) Buyer represents and warrants to Seller as of the
Repurchase Date:
(i) There are no proceedings or investigations
pending, or threatened, before any court,
regulatory body, administrative agency, or
other governmental instrumentality having
jurisdiction over Buyer or its respective
properties (i) asserting the invalidity of
this Agreement or the Custodial Agreement;
(ii) seeking to prevent the consummation of
any of the transactions contemplated by this
Agreement or the Custodial Agreement; or
(iii) seeking any determination or ruling
that may have a material adverse effect on
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<PAGE>
the performance by Buyer of its respective
obligations under, or the validity or
enforceability of, this Agreement or the
Custodial Agreement.
(ii) (a) Buyer is not insolvent and will not
become insolvent as a result of the transfer
of the related Contracts on such Repurchase
Date, (b) Buyer did not intend to incur or
believe that it would incur debts that would
be beyond Buyer's ability to pay as such
debts matured, (c) such transfer was not
made with the actual intent to hinder, delay
or defraud any Person, and (d) the assets of
Buyer did not constitute unreasonably small
capital to carry out its business as
conducted.
(iii) The Purchased Securities are free of any
lien, security interest, option or
encumbrance created by Buyer except for the
security interest created by or pursuant to
the Agreement.
(e) Seller hereby represents and warrants to Buyer, with
respect to each Contract in a Transaction, as of the related
Purchase Date and, with respect to the Contracts in a
Securitized Contract Group, as of the related Securitized
Closing Date, as set forth in Schedule I hereto.
The representations and warranties made in this paragraph 8(e) shall
survive the transfer and assignment of the Purchased Securities by Buyer and its
successors and assigns. Upon discovery by Seller or Buyer of a breach of any of
the representations and warranties in Schedule I hereof, the party discovering
such breach shall give prompt written notice to the other party.
On or before each Payment Date, Seller shall repurchase (x) each
Contract in respect of which there exists as of the end of the related
Collection Period any breach of any representation and warranty made in this
paragraph 8(e), and (y) any Contract that is 90 or more days delinquent as of
the end of such Collection Period and shall deposit into the Collection Account
on or before such Payment Date an amount equal to the Repurchase Price. Such
payments shall be applied pursuant to Paragraph 5 of these Additional
Supplemental Terms.
In the event that an Obligor asserts a claim or defense under The
Federal Trade Commission's regulation concerning
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<PAGE>
Preservation of Consumers' Claims and Defenses (16 C.F.R. ss. 433), Seller shall
immediately repurchase the related Contract by remitting the Repurchase Price in
immediately available funds to the Collection Account.
Seller hereby covenants and agrees with Buyer to repurchase any
Contract at the Repurchase Price with respect to which an original certificate
of title or such other original document evidencing the security interest of
Seller in the Financed Vehicle is not contained within Custodian's Contract File
within 120 days of the Purchase Date. The repurchase obligation hereunder shall
arise and the Repurchase Price shall be remitted to the Collection Account by or
on behalf of Seller in immediately available funds within two (2) Business Days
of receipt by Seller of written notice thereof from either Buyer, Custodian or
Servicer.
9. EVENTS OF DEFAULT.
(a) The term "Event of Default" shall, in addition to
the definition set forth in the Repurchase
Agreement, include each of the following events:
(i) Any governmental or self-regulatory
authority shall take possession of Seller,
NAL Acceptance or NAL Financial or their
property or appoint any receiver,
conservator or other official and such
receiver, conservator or other official is
not dismissed or otherwise terminated within
sixty (60) days of such taking of
possession; or Seller, NAL Acceptance or NAL
Financial shall take any action to authorize
any of the actions set forth in this clause
(i).
(ii) The Agreement shall for any reason cease to
create a valid, first priority security
interest in any of the Purchased Securities
purported to be covered thereby.
(iii) A final judgment by any competent court in
the United States of America for the payment
of money in an amount of at least $100,000
is rendered against Seller, NAL Acceptance
or NAL Financial, and the same remains
undischarged for a period of sixty (60) days
during which execution of such judgment is
not effectively stayed.
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<PAGE>
(iv) Seller, NAL Acceptance or NAL Financial
shall fail to perform any of its obligations
under the Related Documents; provided, that
if such obligation does not require
the payment of funds, then such failure
shall not be an Event of Default until such
failure has continued for a period of ten
(10) Business Days; or Seller, NAL
Acceptance or NAL Financial shall admit its
inability to, or state its intention not to,
perform any of such obligations.
(v) Any representation or warranty made by
Seller, NAL Acceptance or NAL Financial in
any Related Document shall have been
incorrect or untrue when made or repeated or
when deemed to have been made or repeated;
provided that if the representation and
warranty in Paragraph 8(e) in respect of a
Contract is incorrect or untrue, then such
incorrect or untrue representation and
warranty shall be an Event of Default only
upon the failure of Seller to repurchase
such Contract in accordance with Paragraph
8(e).
(vi) Except as provided in subsection (viii)
below, Seller, NAL Acceptance or NAL
Financial shall breach any covenant set
forth in the Related Documents; provided,
that if such covenant does not require the
payment of funds, such breach shall not
constitute an Event of Default until such
breach has continued for a period of ten
(10) Business Days.
(vii) Either Seller, NAL Acceptance, or NAL
Financial shall admit its inability, or
state its intention not to, perform any of
its obligations under the Related Documents;
(viii) NAL Acceptance or NAL Financial shall breach
any of their covenants set forth in the
Guaranty and such breach shall be continuing
for more than five (5) Business Days.
(ix) Any event of default or any event ("Other
Event") which with notice, the passage of
time or both shall constitute an event of
default shall occur and be continuing under
any repurchase or other financing agreement
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<PAGE>
for borrowed funds or other funds or any
indenture or other agreement for borrowed
funds by which Seller, NAL Acceptance or NAL
Financial is bound or affected shall occur
and be continuing; provided, that if such
Other Event does not arise from a failure to
pay funds, then such Other Event shall not
be an Event of Default unless such Other
Event has continued until the earlier of (i)
a period of ten (10) Business Days, and (ii)
the expiration of any cure period granted in
the agreement pursuant to which such Other
Event occurred.
(x) Seller, NAL Financial or NAL Acceptance
shall be in default under any other
agreement to which it is a party; provided,
however, that such a default shall not
constitute an Event of Default if the
exercise of such remedies by Seller's, NAL
Financial's or NAL Acceptance's
counterparty, as the case may be, with
respect to such default would not have a
material adverse impact on Seller's, NAL
Financial's or NAL Acceptance's (i) ability
to perform its respective obligations under
the Related Documents, and (ii) business,
operations, properties, prospects, or
condition (financial or otherwise);
(xi) Seller, NAL Acceptance or NAL Financial fail
to operate or conduct its business
operations or any material portion thereof
in the ordinary course, and such failure
continues for more than twenty-four (24)
hours; provided, that in the case of such a
failure due to acts of God, such failure
shall be an Event of Default only if such
failure continues after the time the
operation or conduct of such business
operations could be resumed with reasonable
best efforts; provided further, however,
that this provision shall not prohibit
Seller, NAL Acceptance or NAL Financial from
engaging in any new line of business;
(xii) In the judgment of Buyer a material adverse
change shall have occurred in the business,
operations, properties, prospects or
condition (financial or otherwise) of
Seller, NAL Acceptance or NAL Financial;
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<PAGE>
(xiii) The capitalization of Seller shall at any
time fail to comply with Paragraph 8(c)(xv)
of these Additional Supplemental Terms;
(xiv) Seller, NAL Acceptance or NAL Financial
shall fail to promptly notify Buyer of (i)
the acceleration of any debt obligation or
the termination of any credit facility of
Seller, NAL Acceptance or NAL Financial,
respec- tively; (ii) the amount and maturity
of any such debt assumed after the date
hereof; (iii) any adverse developments with
respect to pending or future litigation
involving Seller, NAL Acceptance or NAL
Financial, respectively; and (iv) any other
developments which might materially and
adversely affect the financial condition of
Seller, NAL Acceptance or NAL Financial;
(xv) Seller or NAL Acceptance shall have failed
to comply in any material respect with the
terms and conditions of the Custodial
Agreement;
(xvi) If Mr. Robert R. Bartolini shall cease to be
an officer of NAL Acceptance or NAL
Financial, other than as a result of death
or disability;
(xvii) As of the last day of any Collection Period,
the aggregate principal balance of motor
vehicle installment sale contracts and loans
serviced by NAL Acceptance that are
delinquent 30 days or more exceeds fifteen
percent (15%) of the aggregate principal
balance of all motor vehicle installment
sale contracts and loans serviced by NAL
Acceptance at the end of such Collection
Period and continues for a period of sixty
(60) days;
(xviii) As of the last day of any Collection Period,
the aggregate principal balance of motor
vehicle installment sale contracts and loans
serviced by NAL Acceptance that are delin-
quent 60 days or more exceeds eight percent
(8%) of the aggregate principal balance of
all motor vehicle installment sale contracts
and loans serviced by NAL Acceptance at the
end of such Collection Period and continues
for a period of sixty (60) days;
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<PAGE>
(xix) As of the last day of any Collection Period
and the last day of the two immediately
preceding Collection Periods, the aggregate
principal balance of motor vehicle
installment sale contracts and loans
serviced by NAL Acceptance that are
delinquent 30 days or more exceeds fourteen
percent (14%) of the aggregate principal
balance of all motor vehicle installment
sale contracts and loans serviced by NAL
Acceptance at the end of such Collection
Period and continues for a period of sixty
(60) days;
(xx) As of the last day of any Collection Period
and the last day of the two immediately
preceding Collection Periods, the aggregate
principal balance of motor vehicle
installment sale contracts and loans
serviced by NAL Acceptance that are
delinquent 60 days or more exceeds seven
percent (7%) of the aggregate principal
balance of all motor vehicle installment
sale contracts and loans serviced by NAL
Acceptance at the end of such Collection
Period and continues for a period of sixty
(60) days;
(xxi) As of the last day of any Collection Period,
the average of the aggregate principal
balance of motor vehicle installment sale
contracts and loans serviced by NAL
Acceptance in respect of which the related
motor vehicle has been repossessed in such
Collection Period equals or exceeds thirteen
percent (13%) (on an annualized basis) of
the average aggregate principal balance of
all motor vehicle installment sale contracts
and loans serviced by NAL Acceptance as of
the last day of each such Collection Period
and continues for a period of thirty (30)
days;
(xxii) As of the last day of any Collection Period
and the last day of the two immediately
preceding Collection Periods, the average of
the aggregate principal balance of motor
vehicle installment sale contracts and loans
serviced by NAL Acceptance in respect of
which the related motor vehicle has been
repossessed in such Collection Period equals
or exceeds twelve percent (12%) (on an
annualized basis) of the average of the
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<PAGE>
aggregate principal balance of all motor
vehicle installment sale contracts and loans
serviced by NAL Acceptance as of the last
day of each such Collection Period and
continues for a period of thirty (30) days;
(xxiii) The average of the aggregate net losses for
any Collection Period on motor vehicle
installment sale contracts and loans
serviced by NAL Acceptance equal or exceed
eight percent (8%) (on an annualized basis)
of the average of the aggregate principal
balance of all motor vehicle installment
sales contracts and loans serviced by NAL
Acceptance as of the last day of each such
Collection Period and continues for a period
of thirty (30) days;
(xxiv) The average of the aggregate net losses for
any Collection Period and the two
immediately preceding Collection Periods on
motor vehicle installment sale contracts and
loans serviced by NAL Acceptance equal or
exceed seven percent (7%) (on an annualized
basis) of the average of the aggregate
principal balance of all motor vehicle
installment sales contracts and loans
serviced by NAL Acceptance as of the last
day of each such Collection Period and
continues for a period of thirty (30) days;
(xxv) NAL Acceptance's or NAL Financial's report
of independent accountants includes a "going
concern" or "scope limitation" reference;
(xxvi) A change in control and/or ownership of
Seller or NAL Acceptance through any means
other than through an initial public
offering of the stock of Seller or NAL
Acceptance;
(xxvii) Seller shall have failed to make any
required payment to Buyer when due
hereunder;
(xxviii) Seller breaches the clean-up requirement set
forth in Paragraph 13 of these Additional
Supplemental Terms;
(xxix) An Act of Insolvency with respect to Seller
or any Affiliate of Seller shall have
occurred, or the Internal Revenue Service
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<PAGE>
shall file a notice of lien pursuant to
Section 6363 of the Internal Revenue Code of
1986, as amended, with regard to the assets
of Seller or any Affiliate thereof in
excess, in the aggregate for any one such
Person, of $100,000 and such lien shall not
have been released, or the Pension Benefit
Guaranty Corporation shall, or shall
indicate its intention to, file notice of
lien pursuant to Section 4068 of the
Employee Retirement Income Security Act of
1974 with regard to any of the assets of
Seller or any Affiliate thereof;
(xxx) Any representation, warranty or statement
(other than a Contract representation and
warranty contained in Schedule I) made in
this Agreement, any other Related Documents
or any certificate, report or other
statement, in writing or orally, delivered
to Buyer by Seller or an Affiliate pursuant
hereto or thereto shall prove to be
incorrect in any material respect as of the
date made and, within ten (10) Business Days
after written notice thereof shall have been
given to Seller by Buyer, the circumstances
or conditions rendering any such
representation, warranty, or statement
incorrect shall not have been eliminated or
otherwise cured to the satisfaction of
Buyer;
(xxxi) Failure on the part of Seller, NAL
Acceptance, or NAL Financial to observe or
perform in any material respect any covenant
or agreement of Seller, NAL Acceptance, or
NAL Financial set forth in this Agreement
(other than a failure by Seller specifically
dealt with elsewhere in this Agreement);
provided, however, that such failure shall
not become an Event of Default if (i) such
failure is curable, (ii) cure is
economically viable, and (iii) such failure
is cured to the satisfaction of Buyer within
three (3) Business Days with such period
commencing on the earlier of the giving of
written notice of such failure to Seller or
the discovery of such failure by Seller;
provided further, however, that no notice or
period of grace shall be required hereunder
with respect to a
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<PAGE>
failure which has occurred twice within the
previous twelve (12) months;
(xxxii) Any of the Related Documents shall cease to
be in full force and effect;
(xxxiii) A material change is made to the
Underwriting Guide without Buyer's prior
written consent;
(xxxiv) A termination event shall have occurred
under the Custodial Agreement and shall
continue unremedied for more than three (3)
Business Days;
(xxxv) Failure to complete, authorize and approve
the Policies and Procedures required by
Paragraph 12(f)(v) of these Additional
Supplemental Terms within thirty (30) days
of the date of this Agreement.
(b) Upon the occurrence and during the continuance of
an Event of Default:
(i) At the option of Buyer, exercised by written
notice to Seller (which option shall be
deemed to have been exercised, even if no
notice is given, immediately upon the
occurrence of an Act of Insolvency), the
Repurchase Date for each Transaction
hereunder shall be deemed immediately to
occur.
(ii) If an Event of Default occurs and if Buyer
exercises or is deemed to have exercised the
option referred to in subparagraph (i) of
this paragraph, (A) Seller's obligations
hereunder to repurchase all Purchased
Securities in such Transactions shall
thereupon become immediately due and
payable, (B) to the extent permitted by
applicable law, the Price Differential with
respect to each such Transaction shall be
increased to the aggregate amount obtained
by daily application of the sum of (x) the
Base Rate, and (y) seven and one-half
percent (7.5%) for each such Transaction to
the Purchase Price for such Transaction as
of the Repurchase Date as determined
pursuant to subparagraph (i) of this
Paragraph on a 365-day per year basis for
the actual number of days during
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<PAGE>
the period from and including the Repurchase
Date, as determined in subparagraph (i)
above, giving rise to such option to but
excluding the date of payment of the
Repurchase Price as so increased, and (C)
all collections on the Contracts which have
not been previously applied in reduction of
the Repurchase Price or remitted to Seller
shall be applied in reduction of the
aggregate unpaid Repurchase Price.
(iii) Seller shall be liable to Buyer for (A) the
amount of all reasonable legal or other
expenses incurred by Buyer in connection
with or as a consequence of an Event of
Default, (B) consequential damages plus all
expenses incurred by Buyer in connection
with or as a consequence of a Seller's Event
of Default, including legal costs, (C)
together with interest on the foregoing at
the rate determined in sub-paragraph (ii)
above as of the date of determination of the
foregoing amounts.
(iv) After one (1) Business Day's notice to
Seller (which notice need not be given if an
Act of Insolvency shall have occurred) Buyer
may: (A) immediately sell in a commercially
reasonable manner, in a recognized market at
such price or prices as Buyer may reasonably
deem satisfactory, any or all Purchased
Securities and Additional Purchased
Securities subject to Transactions and apply
the proceeds thereof to the aggregate unpaid
Repurchase Price and any other amounts owing
by Seller hereunder or (B) in its sole
discretion elect, in lieu of selling all or
a portion of such Purchased Securities and
Additional Purchased Securities, to give
Seller credit for such Purchased Securities
or Additional Purchased Securities in an
amount equal to the price therefor on such
date, obtained from a generally recognized
source or the most recent closing bid
quotation from such a source, against the
aggregate unpaid Repurchase Price and any
other amounts owing by Seller hereunder.
(v) The parties recognize that it may not be
possible to purchase or sell all of the
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<PAGE>
Purchased Securities or Additional Purchased
Securities on a particular Business Day, or
in a transaction with the same purchaser, or
in the same manner because the market for
such Purchased Securities or Additional
Purchased Securities may not be liquid.
Accordingly, Buyer may elect, in its sole
discretion, the time and manner of
liquidating any Purchased Securities or
Additional Purchased Securities and nothing
contained herein shall (A) obligate Buyer to
liquidate any Purchased Securities or
Additional Purchased Securities on the
occurrence of an Event of Default or to
liquidate all Purchased Securities and
Additional Purchased Securities in the same
manner or on the same Business Day or (B)
constitute a waiver of any right or remedy
of Buyer. However, in recognition of the
parties' agreement that the Transactions
hereunder have been entered into in
consideration of and in reliance upon the
fact that all Transactions hereunder
constitute a single business and contractual
relationship and that each Transaction has
been entered into in consideration of the
other Transactions, the parties further
agree that Buyer shall use its best efforts
to liquidate all Transactions hereunder upon
the occurrence of an Event of Default. The
parties recognize that, in the event for any
reason any Transaction is construed by any
court as a secured loan rather than a
purchase and sale, the Uniform Commercial
Code of the State of New York addresses the
reasonableness of the manner in which
Purchased Securities or Additional Purchased
Securities may be liquidated.
(vi) Buyer shall have, in addition to all the
rights and remedies provided herein and
provided by applicable federal, state,
foreign, and local laws (including, without
limitation, the rights and remedies of a
secured party under the Uniform Commercial
Code of the State of New York, to the extent
that the Uniform Commercial Code is applica-
ble, and the right to offset any mutual debt
and claim), all rights and remedies
available
I-44
<PAGE>
to Buyer in law, in equity, or under any
other agreement between Buyer and Seller.
(vii) Buyer may exercise one or more of the
remedies available to Buyer immediately upon
the occurrence of an Event of Default and at
any time thereafter without notice to
Seller. All rights and remedies of Buyer
arising under this Agreement as amended from
time-to-time hereunder are cumulative and
not exclusive of any other rights or
remedies which Buyer may have.
(viii) Buyer may treat any or all of Seller's
obligations to Buyer under this Agreement or
any Transaction as immediately due.
(ix) Buyer may cover or hedge its positions under
this Agreement or with respect to all or
some of the Purchased Securities purchased
or sold pursuant to this Agreement.
(x) Buyer may immediately suspend its obligation
to enter into any additional Transactions
under this Agreement.
(xi) Buyer may sell any or all non-cash
collateral held by it.
(xii) In addition to its rights hereunder, Buyer
shall have the right to proceed against any
assets of Seller which may be in the posses-
sion of Buyer, including the right to liqui-
date such assets and to set-off the proceeds
against monies owed by Seller to Buyer
pursuant to this Agreement. Buyer may
set-off cash, the proceeds of the
liquidation of the Purchased Securities and
Additional Purchased Securities, any
collateral or its proceeds, and all other
sums or obligations owed by Buyer to Seller,
NAL Acceptance or NAL Financial against all
of Seller's obligations to Buyer, whether
under this Agreement, under a Transaction,
or under any other agreement between the
parties, or otherwise, whether or not such
obligations are then due, without prejudice
to Buyer's right to recover any deficiency.
Any cash, proceeds, or property in excess of
any amounts due, or which Buyer reasonably
believes may become due, to it
I-45
<PAGE>
from Seller shall be returned to Seller
after satisfaction of all obligations of
Seller to Buyer.
(xiii) Buyer may cancel, terminate, or liquidate
any related hedging transactions.
(xiv) Seller shall pay immediately to Buyer, and
hereby indemnifies, defends, and holds Buyer
harmless from and against, all losses,
expenses, costs, damages, claims, causes of
action and/or liabilities that Buyer may
sustain in connection with or as a result of
(A) any Event of Default, (B) the exercise
of any remedy by Buyer, (C) the liquidation
of Purchased Securities and Additional
Purchased Securities, (D) any claim by an
Obligor with respect to a Contract or the
conduct of the party originating, servicing,
or holding the Contract, including as to all
of the foregoing, by way of example and
not of limitation, (i) any premium that
Buyer may be required to pay for a
replacement Contract, (ii) attorney's fees,
(iii) expenses of hedging, (iv) interest on
the foregoing at the rate determined in
subparagraph (ii) above as of the date of
determination of the foregoing amounts
(provided that such interest shall not
exceed the maximum rate, if any, permitted
by law), (v) all costs, taxes and expenses
incurred by Buyer in connection with the
liquidation of a Purchased Security or
Additional Purchased Security, (vi) any
incidental or consequential damages that may
be suffered by Buyer, Seller acknowledging
its understanding that Buyer may have
obligations to others with respect to
Contracts which are the subject of a
Transaction and that Buyer may face claims
or damages as a result of an Event of
Default or the liquidation of any such
Purchased Securities or Additional Pur-
chased Securities; (vii) any and all damages
suffered by Buyer in connection with the
liquidation, cancellation, diminution in
value of, or any other loss on a related
hedging transaction or position where the
transaction entered into or the position
taken is directly related to a Transaction
between the parties, and the damages
incurred
I-46
<PAGE>
result from Seller's breach of its
obligations thereunder; and (viii) if Buyer
has liquidated any Purchased Securities or
Additional Purchased Securities by
purchasing Contracts from or selling
Contracts to others in either an actual or a
deemed sale, the difference between the
price actually received by it, or deemed to
have been received by it, and the Repurchase
Price of such Purchased Securities or
Additional Purchased Securities.
(xv) Notwithstanding the exercise of any remedy
or the liquidation of any Purchased
Securities or Additional Purchased
Securities hereunder, Seller shall remain
liable for all of its remaining obligations
hereunder to Buyer and all of Seller's
representations, warranties, and covenants
shall continue.
(xvi) If Seller does not pay Buyer any sums due
hereunder when the same are due, Buyer may,
in its sole discretion, and without waiver
of any of its rights hereunder, and only
upon written notice to Seller, permit such
unpaid amounts to be carried as debit
balances in Seller's account. Seller agrees
to pay upon demand any and all such amounts,
with interest thereon from the original date
when due at a per annum rate equal to the
rate determined in subparagraph (ii) above;
provided that such interest shall in no
event exceed the maximum rate, if any,
permitted by law.
(xvii) Buyer may by notice to Seller, compel Seller
to deliver any documents, Collections, or
proceeds which Seller was obligated to
deliver to Buyer pursuant to this Agreement
which were not actually delivered by Seller.
(xviii) Buyer shall, without regard to the adequacy
of the security for Seller's obligations
under this Agreement, be entitled to the
appointment of a receiver by any court
having jurisdiction, without notice, to take
possession of and protect, collect, manage,
liquidate, and sell the Contracts and
Related Assets or any portion thereof, and
collect the payments due with respect to the
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<PAGE>
Contracts and Related Assets or any portion
thereof. Seller shall pay all costs and
expenses incurred by Buyer in connection
with the appointment and activities of such
receiver.
(xix) Buyer may enforce its rights and remedies
hereunder without prior judicial process or
hearing to the extent and where permitted by
applicable law, and Seller hereby expressly
waives any defenses Seller might otherwise
have to require Buyer to enforce its rights
by judicial process. Seller also waives any
defense Seller might otherwise have arising
from the use of nonjudicial process,
enforcement and sale of all or any portion
of the Contracts and Related Assets, or from
any other election of remedies so long as
any such action taken by Buyer is in good
faith and is commercially reasonable. Seller
recognizes that nonjudicial remedies are
consistent with the usages of the trade, are
responsive to commercial necessity and are
the result of a bargain at arm's length.
(c) The occurrence and continuation of any one of the
following events shall be a "Servicer Default" under
this Agreement and the Custodial Agreement:
(i) The entry of a decree or order for relief by
a court having jurisdiction in respect of
Servicer in an involuntary case under the
federal bankruptcy laws, as now or hereafter
in effect, or by other present or future
federal or state bankruptcy, insolvency or
similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian,
sequestrator or other similar official of
Servicer or of any substantial part of its
property, or ordering the winding up or
liquidation of the affairs of Servicer and
the continuance of any such decree or order
unstayed and in effect for a period of 30
consecutive days;
(ii) Servicer shall become insolvent or admit in
writing its inability to pay its debts as
they come due, or the commencement by
Servicer of a voluntary case under the
federal bankruptcy laws as now or hereafter
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<PAGE>
in effect, or any other present or future
federal or state bankruptcy, insolvency or
similar law, or the consent by Servicer to
the appointment of, or taking possession by
a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar
official of Servicer or of any substantial
part of its property or the making by
Servicer of an assignment for the benefit of
creditors or the failure by Servicer
generally to pay its debts as such debts
become due or the taking of corporate action
by Servicer in furtherance of any of the
foregoing;
(iii) Servicer shall fail to make any payment,
transfer or deposit, or to give instructions
to make such payment, transfer or deposit,
which is required under the Custodial
Agreement;
(iv) Servicer shall fail to deliver a Servicer's
Certificate in accordance with Section 3.5
of the Custodial Agreement;
(v) Servicer shall default in the due
performance and observance of any other
material provision of any Related Document
other than the provisions referred to in
subsection (iii) and (iv) above and such
default shall have continued for a period of
five (5) days after the earlier to occur of
(i) receipt by Servicer of written notice
thereof or (ii) a responsible officer of
Servicer shall have had actual knowledge
thereof;
(vi) Any representation or warranty made by
Servicer in any Related Document shall have
been incorrect or untrue when made or
repeated or when deemed to have been made or
repeated; or
(vii) A final judgment by any competent court in
the United States of America for the payment
of money in an amount of at least $100,000
is rendered against Servicer and the same
remains undischarged for a period of sixty
(60) days during which execution of such
judgment is not effectively stayed.
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<PAGE>
If a Servicer Default shall have occurred and Buyer
shall give Servicer notice that Servicer is terminated as
Servicer, all of the rights and obligations of NAL Acceptance,
as servicer, under the Custodial Agreement shall immediately
terminate upon such notice. Notwithstanding any termination of
the rights and obligations of Servicer, NAL Acceptance shall
remain responsible for any acts or omissions to act by it as
Servicer prior to such termination and shall cooperate with
the parties hereto and Back-Up Servicer to effect an orderly
transfer of servicing to any such Back-Up Servicer.
(d) The parties hereby agree that sales of Purchased
Securities under Paragraph 11(d)(i) of the Repurchase
Agreement shall be deemed to include and permit sales
of Purchased Securities pursuant to a securities
offering.
10. PAYMENTS IN TRUST. All payments which are received by
Seller contrary to the provisions of the Related
Documents shall be received in trust for the benefit of
Buyer and shall be segregated from other funds of
Seller and shall be promptly remitted to Buyer.
11. TERM OF AGREEMENT. The last sentence of Paragraph 15
of the Repurchase Agreement is hereby deleted. The
term of this Agreement shall be from the date first set
forth above to May 6, 1998 (the "Termination Date").
On the Termination Date, all Transactions then
outstanding shall be immediately terminated in
accordance with the provisions of Paragraph 3 of these
Additional Supplemental Terms.
12. RECURRING REPORTS; POLICIES AND PROCEDURES.
(a) As soon as available, and in any event within the time
required by rules and regulations promulgated under the 1934
Act, Seller shall furnish or cause to be furnished to Buyer
the consolidated audited balance sheets of NAL Financial as of
the end of such fiscal year and the consolidated audited
statements of income, changes in shareholders' equity and cash
flows of NAL Financial for such fiscal year, all in reasonable
detail and stating in comparative form the respective figures
for the corresponding date and period in the preceding fiscal
year, prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied
by the certification of such entity's independent accountants
(who shall be a
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nationally recognized firm or otherwise acceptable to Buyer).
(b) As soon as available, and in any event within 45 days
after the close of each of the first three quarters of each
fiscal year of NAL Financial, Seller shall furnish or cause to
be furnished to Buyer, the consolidated unaudited balance
sheets of NAL Financial as of the end of such quarter and the
consolidated unaudited statements of income, changes in the
shareholders' equity and cash flows of NAL Financial for the
portion of the fiscal year then ended, all in reasonable
detail and stating in comparative form the respective figures
for the corresponding date and period in the preceding fiscal
year, prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied
by the certification of such entity's independent accountants
(who shall be a nationally recognized firm or otherwise
acceptable to Buyer).
(c) As soon as available, and in any event within 30 days
after the close of each month, Seller shall furnish or cause
to be furnished to Buyer the consolidated unaudited balance
sheets of NAL Financial as of the end of such month and the
consolidated unaudited statements of income and changes in the
shareholders' equity of NAL Financial for the month then
ended, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and
period in the preceding month, prepared in accordance with
generally accepted accounting principles, consistently
applied.
(d) Each delivery of Purchased Securities by Seller to Buyer
hereunder will constitute a representation by Seller that
there has been no material adverse change in Seller's, NAL
Acceptance's or NAL Financial's business, results of
operations, financial condition or prospects not disclosed to
Buyer since the date of NAL Financial's most recent financial
statement. Seller shall provide Buyer, from time to time at
Seller's expense, with such information of a financial or
operational nature respecting Seller, NAL Acceptance or NAL
Financial as Buyer may reasonably request promptly upon
receipt of such request.
(e) Not later than the tenth (10th) day of each month,
Seller shall deliver such delinquency, repossession,
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liquidation or additional reports as Buyer may from
time to time reasonably require.
(f) On or before the execution date of this Agreement, Seller
and NAL Acceptance shall deliver to Buyer the following, each
in form and substance satisfactory to Buyer; provided, that if
the materials to be delivered by each of Seller and NAL
Acceptance shall be identical, only one such Person shall be
required to make the delivery: (i) the Underwriting Guide;
(ii) Servicing and Collections Policies and Procedures; (iii)
Quality Control Policies and Procedures; (iv) Licensing
Policies and Procedures; (v) Disaster Recovery Policies and
Procedures; and (vi) Dealer Review, Approval, and Diligence
Policies and Procedures (collectively, the "Policies and
Procedures"). Seller and NAL Acceptance hereby agree to
provide to Buyer amendments to the Policies and Procedures
promptly upon the implementation of any amendments thereto.
(g) As soon as available, Seller shall furnish or cause to be
furnished to Buyer annual budgets for each of Seller, NAL
Acceptance and NAL Financial, and within 30 days after the
close of each month, a report setting forth actual variances
with respect to such budget projections.
(h) Seller shall furnish or cause to be furnished the
Servicer's Certificate pursuant to Section 3.5 of the
Custodial Agreement. Seller shall deliver or cause to be
delivered to Buyer, Custodian, and Back-Up Servicer an annual
statement as to performance of Servicer under, and compliance
with, the Custodial Agreement during the preceding
twelve-month (12) period as well as an annual independent
public accountants' servicing report as to Servicer's
compliance with its obligations to service the Contracts and
such other reasonable audits or reports as Buyer, Custodian,
or Back-Up Servicer may reasonably require from time to time.
13. MINIMUM AND MAXIMUM TRANSACTION AMOUNTS; MARGIN; ANNUAL
COMMITMENT FEE; CLEAN-UP PROVISIONS. With respect to
Transactions:
(a) The minimum Repurchase Price of any Transaction
shall be $500,000;
(b) The aggregate outstanding Repurchase Price for the
Purchased Securities subject to the Agreement,
together with any amounts owed to Buyer by Seller
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or any of its affiliates under any repurchase
arrangement, at any one time shall not exceed
$75,000,000 during the first 12 months and
$100,000,000 during the second 12 months of this
Agreement (the "Maximum Amount"). Notwithstanding the
foregoing, this Agreement shall provide for a maximum
amount available to Seller that, from time to time,
is an amount less than the Maximum Amount (the
"Periodic Maximum Amount"). The amount of the
Periodic Maximum Amount will be an amount equal to
(i) during the first year of the Agreement,
twenty-five million ($25,000,000), fifty-million
($50,000,000), or seventy-five million ($75,000,000),
and (ii) during the remaining term of the Agreement,
twenty-five million ($25,000,000), fifty-million
($50,000,000), seventy-five million ($75,000,000), or
one-hundred million ($100,000,000). The Periodic
Maximum Amount will be used for purposes of (i)
determining the maximum permitted aggregate
outstanding Repurchase Price for the Purchased
Securities subject to the Agreement, and (ii)
computing the Annual Commitment Fee. The initial
Periodic Maximum Amount shall be twenty-five million
($25,000,000). Seller shall be required to provide
Buyer with a thirty (30) day prior written
notification of Seller's request to increase or
decrease (as the case may be) the Periodic Maximum
Amount. If Seller provides Buyer with the required
prior written notification, Buyer shall be obligated
to increase or decrease (as the case may be) the
amount of the Periodic Maximum Amount to the amount
requested by Seller provided that an Event of Default
and/or a termination event has not occurred and is
continuing; provided, however, that in no event shall
Buyer be obligated (i) to increase the Periodic
Maximum Amount to an amount that exceeds the Maximum
Amount, and (ii) to decrease the Periodic Maximum
Amount to an amount that results in a Periodic
Maximum Amount of less than twenty-five million
($25,000,000).
(c) The percentage used to determine Buyer's Margin
Amount shall be as mutually agreed upon by Buyer and
Seller but in no event less than one hundred ten
percent (110%);
(d) An annual commitment fee shall be paid by NAL
Acceptance or Seller and shall be computed on a
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daily basis as the product of (i) the Periodic
Maximum Amount then in effect, and (ii) a per annum
commitment fee equal to one-half of one percent
(.50%) (the "Annual Commitment Fee"). The Annual
Commitment Fee shall be paid semiannually in
semiannual installments, in arrears, commencing on
the six-month (6) anniversary of the execution of
this Agreement and any, and all, remaining semiannual
installments shall become due and payable on the
later to occur of (i) the Termination Date, and (ii)
on such day that the aggregate outstanding Repurchase
Price for the Purchased Securities subject to this
Agreement is paid in full. However, if NAL Acceptance
provides Enhancement, then the Annual Commitment Fee
shall be computed as the product of (a) the Maximum
Amount, and (b) a per annum commitment fee equal to
one-quarter of one percent (.25%); and
(e) During any consecutive fifteen-month (15) period
either (i) the aggregate outstanding Repurchase
Price for the Purchased Securities subject to this
Agreement shall be equal to or less than thirty
percent (30%) of the Maximum Amount for at least
ten (10) consecutive days or (ii) Seller and NAL
Acceptance shall consummate one or more Permitted
Sales of Portfolio Contracts involving one or more
securitizations in an aggregate amount equal to or
in excess of fifty million dollars ($50,000,000).
14. REPURCHASE PRICE; PRICE DIFFERENTIAL. The Repurchase
Price as of any date shall include that portion of the
Price Differential that has accrued but has not been
paid. The Price Differential shall accrue and be
calculated for each Transaction, based on the actual
number of days in a Collection Period and a 365-day
year. The Price Differential shall be payable monthly
in arrears to Buyer with respect to each Transaction on
the earlier of each Payment Date or the termination
date for the related Transaction. The Price
Differential for any Transaction shall accrue, as
calculated above, on the Repurchase Price (a) if an
Event of Default or Servicer Default has not occurred
and the Advance Rate is ninety per cent (90%), at the
sum of (i) the Base Rate, and (ii) a fixed spread equal
to two and one-quarter percent (2.25%) per annum, or
(b) if an Event of Default or Servicer Default has not
occurred and the Advance Rate is ninety-five percent
(95%), at the sum of (i) the Base Rate, and (ii) a
fixed spread equal to two and one-half percent (2.50%)
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per annum and (c) if an Event of Default or Servicer Default
has occurred and remains uncured, at the sum of (i) the Base
Rate, and (ii) a fixed spread equal to seven and one-half
percent (7.50%) per annum. If NAL Acceptance provides
Enhancement, the Price Differential shall be computed as the
sum of (i) the Base Rate, and (ii) a fixed spread equal to one
and one-quarter percent (1.25%) per annum. Payment of the
Price Differential to Buyer shall be made on said Payment Date
no later than 1:00 p.m. New York time by wire transfer in
immediately available funds pursuant to the wire instructions
set forth on Exhibit G.
15. ADDITIONAL INFORMATION.
(a) At any reasonable time, Seller shall permit Buyer,
its agents or attorneys, to inspect and copy any
and all documents and data in its possession
pertaining to each Contract and the Related
Assets, or any other Purchased Security that is
the subject of such Transaction. Such inspection
shall occur upon the request of Buyer at a mutu-
ally agreeable location during regular business
hours and on a date not more than two (2) Business
Days after the date of such request.
(b) Seller shall provide Buyer with copies of all filings
made by or on behalf of Seller, NAL Acceptance, NAL
Financial or any Affiliate thereof, pursuant to the
1933 Act and the 1934 Act, promptly upon making such
filings.
16. TRANSACTIONS OPTIONAL. Notwithstanding any other
provision of the Agreement or the Custodial Agreement
to the contrary, the initiation of each Transaction is
subject to the approval of Buyer in its sole discre-
tion. Without limiting the prior sentence, Buyer may
reject any Security from inclusion in a Transaction
hereunder on any reasonable basis.
17. CONDITIONS PRECEDENT. Buyer's first Transaction hereunder is
subject to the condition precedent that Buyer shall have
received, on or before the date of such Purchase, the
following, each (unless otherwise indicated) dated as of such
date and in form and substance satisfactory to Buyer:
(a) executed Agreement;
(b) executed Sale and Purchase Agreement;
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(c) executed Custodial Agreement;
(d) executed Guaranty Agreement;
(e) a certificate of an officer and the Secretary
of each of Seller, NAL Acceptance, and NAL
Financial certifying as to the following, which
shall be attached to such certificate (i)
copies of their respective articles or
certificates of incorporation, (ii) copies of
their respective bylaws, (iii) copies of the
resolutions of their boards of directors
approving the Agreement and the Related
Documents to be delivered by them hereunder,
respectively, and the transactions contemplated
thereby, and (iv) the names and true signatures
of the officers authorized on its behalf to
sign the Agreement and the Related Documents to
be delivered by them, respectively;
(f) a good standing certificate (or its equivalent)
for each of Seller, NAL Acceptance, and NAL
Financial issued by the Secretary of State of
their respective states of incorporation;
(g) acknowledgment copies of effective financing
statements (Form UCC-1), filed on or prior to
the date of the initial Transaction, naming
(A) NAL Acceptance as debtor and Seller as
secured party and Buyer as assignee and filed
in connection with transactions contemplated by
the Sale and Purchase Agreement, and (B) Seller
as debtor and Buyer as secured party, or other,
similar instruments or documents, as may be
necessary or, in the opinion of Buyer,
desirable under the Uniform Commercial Code or
any comparable law of all appropriate
jurisdictions to perfect Buyer's interests in
the Contracts and Related Assets;
(h) a search report provided in writing to Buyer
listing all effective financing statements that
name Seller, NAL Acceptance, and NAL Financial
as debtor and that are filed in the
jurisdictions in which filings were made
pursuant to Paragraph 8(c)(xvi) and in such
other jurisdictions that Buyer shall reasonably
request, together with copies of such financing
statements;
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(i) favorable corporate authority, enforceability,
perfection, "substantive consolidation" and
"true sale" opinions of English, McCaughan &
O'Bryan, P.A., counsel to Seller, NAL
Acceptance, and NAL Financial in form and
substance acceptable to Buyer and addressed and
delivered to Buyer, substantially in the form
attached as Exhibit D hereto;
(j) executed lockbox agreement with the lockbox
bank and assignments of rights thereunder by
Servicer to Buyer;
(k) evidence that each of the conditions precedent
to the execution, delivery and effectiveness of
each Related Document has been satisfied and
that each Related Document is effective;
(l) the Underwriting Guide and Policies and
Procedures;
(m) Seller's payment to Brown & Wood for Buyer's
legal fees and disbursements incurred in
connection with the negotiation and execution of
the Agreement and Related Documents, in an
amount equal to $60,000 plus disbursements; and
(n) such other or further documents as Buyer in its
reasonable discretion shall require.
18. ADDITIONAL CONDITIONS. Seller shall cause each of the
following conditions to occur:
(a) NAL Acceptance and NAL Financial shall have delivered
to Buyer an undated letter to NAL Acceptance's and
NAL Financial's archivist authorizing and directing
such archivist to make available to Buyer and its
agents all printouts and all computer software
pertaining to the Securities; and
(b) Commencing on the earlier to occur of (i) the date
that NAL Acceptance or its Affiliate completes a
Permitted Sale involving its first securitization,
and (ii) the date that the aggregate outstanding
amount of Purchased Securities subject to this
Agreement is equal to or greater than fifty
million dollars ($50,000,000), NAL Acceptance
shall engage an organization acceptable to Buyer
to provide back-up servicing and collection
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services to NAL Acceptance and Seller, such approval
not to be unreasonably withheld (the "Back-Up
Servicer"). Back-Up Servicer shall have servicing and
collections experience with respect to contracts
similar to the Contracts subject to this Agreement
and shall be acceptable to the Rating Agencies and
the provider of any Enhancement.
19. REPURCHASE AND OTHER FINANCING TRANSACTIONS. Buyer may
in its sole election engage in repurchase transactions
with the Purchased Securities or otherwise pledge,
hypothecate or finance the Purchased Securities with
one or more counterparties or lenders of Buyer's choice
for any kind of financing in any manner whatsoever;
provided, however, that no such transaction by Buyer
shall relieve Buyer of its obligations to Seller in
connection with the repurchase by Seller of any
Purchased Securities in accordance with the terms of
this Agreement; provided further, however, that Buyer
shall be obligated at all times to remain the sole
representative of such counterparties or lenders for
purposes hereunder and shall be entitled to make any
and all decisions with respect to the Transactions
hereunder without the vote of such counterparties or
lenders.
20. CONSENT TO JURISDICTION AND JURY WAIVER. THE PARTIES
IRREVOCABLY AGREE TO SUBMIT TO THE PERSONAL JURISDIC-
TION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND THAT THE EXCLUSIVE
VENUE OF ALL ACTIONS AND PROCEEDINGS, EXCEPT A PROCEED-
ING FOR ENFORCEMENT OF A JUDGMENT, SHALL BE IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK, THE PARTIES IRREVOCABLY WAIVING ANY
OBJECTION THERETO. IF, FOR ANY REASON, FEDERAL
JURISDICTION IS NOT AVAILABLE, AND ONLY IF FEDERAL
JURISDICTION IS NOT AVAILABLE, THE PARTIES IRREVOCABLY
AGREE TO SUBMIT TO THE PERSONAL JURISDICTION OF THE
SUPREME COURT OF THE STATE OF NEW YORK AND THAT THE
EXCLUSIVE VENUE OF ALL ACTIONS AND PROCEEDINGS, EXCEPT
A PROCEEDING FOR THE ENFORCEMENT OF A JUDGMENT, SHALL
BE IN THE SUPREME COURT OF THE STATE OF NEW YORK, NEW
YORK COUNTY, THE PARTIES IRREVOCABLY WAIVING ANY
OBJECTION THERETO. EACH PARTY HERETO EXPRESSLY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT OR ANY OTHER AGREEMENT RELATED HERETO.
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21. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of New York and the obligations,
rights and remedies of the parties hereunder shall be
determined in accordance with such laws.
22. FURTHER ASSURANCES. Seller agrees to do such further
acts and things and to execute and deliver to Buyer
such additional assignments, acknowledgements,
agreements, powers and instruments as are required by
Buyer to carry into effect the purposes of this
Agreement, to perfect the interests of Custodian in the
Contracts and the Related Assets or to better assure
and confirm unto Buyer its rights, powers and remedies
hereunder.
23. BINDING TERMS. All of the representations, warranties,
covenants, stipulations, promises and agreements in the
Agreement shall bind and inure to the benefit of the
successors and assigns of the parties hereto, whether
expressed or not.
24. NOTICES AND OTHER COMMUNICATIONS. Any provision of
Paragraph 13 of the Repurchase Agreement to the
contrary notwithstanding, any notice required or
permitted by the Agreement shall be in writing
(including telecopy) and shall be effective and deemed
delivered only when received by the party to which it
is sent; provided, however, that a facsimile
transmission shall be deemed to be received when
transmitted so long as the transmitting machine has
provided an electronic confirmation of such
transmission. Any such notice shall be sent to a party
at the address or facsimile transmission number set
forth in Annex II attached hereto.
25. FEES AND DISBURSEMENTS. Seller shall promptly pay all
fees and expenses (including without limitation those
of counsel and accountants) incurred by Buyer and
Custodian in entering into, amending or enforcing the
Related Documents to which it is a party and the
Transactions.
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IN WITNESS WHEREOF, Buyer and Seller have caused their names to be
signed hereto by their respective officers thereunto duly authorized, all as of
the day and year first above written.
CARGILL FINANCIAL SERVICES
CORPORATION, as Buyer
By: /s/ DAVID A. METZGER
------------------------
Name:
Title:
AUTORICS, INC., as Seller
By: /s/ DENNIS R. LaVIGNE
------------------------
Name: Dennis R. LaVigne
Title: Vice President
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EXHIBIT A
_____________ ___, 1996
Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, Minnesota 55343-9497
Attn: Structured Finance Funding Desk
NAL ACCEPTANCE CORPORATION
NAL FINANCIAL GROUP INC.
Limited Guaranty
Master Repurchase Agreement Dated as of May , 1996
Gentlemen:
1. For value received and in accordance with the terms of the Master
Repurchase Agreement, dated as of May ___, 1996 (the "Repurchase Agreement")
between Cargill Financial Services Corporation, as buyer ("Buyer"), and
Autorics, Inc., as seller ("Seller"), NAL Acceptance Corporation ("NAL
Acceptance") and NAL Financial Group Inc. ("NAL Financial") hereby, jointly and
severally, unconditionally and irrevocably guarantee payment and performance to
Buyer, or any successor in interest of Buyer, of all amounts and performance due
to Buyer under the Repurchase Agreement or the Multi-Party Custodial and
Servicing Agreement, dated as of May ___, 1996 (the "Custodial Agreement") among
Buyer, Seller and Bankers Trust Company, as Custodian; provided, however, the
maximum amount payable to Buyer, hereunder, shall not exceed the lesser of (i)
the sum of (a) the product of (1) fifteen percent (15%), and (2) the Maximum
Amount, (b) accrued and unpaid interest under the Repurchase Agreement, (c)
accrued and unpaid Annual Commitment Fees, and (d) accrued and unpaid Buyer
expenses, if any, and (ii) fifteen million dollars ($15,000,000). Buyer or
Bankers Trust Company, as custodian under the Custodial Agreement ("Custodian"),
may make demands under this Guaranty for such amounts and performance from time
to time. NAL Acceptance and NAL Financial hereby represent that their
obligations hereunder do and shall rank pari passu with all unsecured and
unsubordinated indebtedness of NAL Acceptance and NAL Financial, as applicable.
Terms used and not defined herein shall have the meanings assigned in the
Repurchase Agreement and the Additional Supplemental Terms (the "Additional
Supplemental Terms") thereto dated as of May ___, 1996.
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2. Payments and performance required under this Guaranty shall be
payable and performed whenever any amount or performance guaranteed hereunder
has not been promptly made to Buyer in accordance with the Repurchase Agreement
or the Custodial Agreement, without regard to any stay or delay with respect to
such payment or performance permitted or required by bankruptcy or any other
applicable law. Neither Buyer nor Custodian on behalf of Buyer shall be required
to realize upon any Purchased Security or other security or exercise any
remedies prior to making a demand under this Guaranty. All payments due
hereunder shall be paid in immediately available funds after demand no later
than 1:00 p.m. New York time on the second (2nd) Business Day following the date
of such demand.
3. Demand shall be made in writing to the address specified in this
paragraph or by presentation of facsimile documentation at (305) 938-8209, or
such other number or name as NAL Acceptance or NAL Financial may require and
documentation shall be followed by original documentation as soon as reasonably
practicable to NAL Acceptance's or NAL Financial's office located at 500 Cypress
Creek Road West, Suite 590, Fort Lauderdale, Florida 33309, or such other number
or name which may be designated by NAL Acceptance or NAL Financial by written
notice delivered to Custodian.
4. This Guaranty shall be governed by, and construed in accordance
with, the laws of the State of New York. Communications with respect to this
Guaranty other than requests for payment pursuant to a notice referred to in the
preceding paragraph shall also be addressed to NAL Acceptance and NAL Financial
at 500 Cypress Creek Road West, Suite 590, Fort Lauderdale, Florida 33309,
specifically referring to this Guaranty.
5. NAL Acceptance and NAL Financial hereby waive all rights of
subrogation, contribution, reimbursement, indemnity or otherwise, whether
arising by contract or operation of law (including, without limitation, any such
right arising under the Federal Bankruptcy Code) or otherwise by reason of any
payment or performance by NAL Acceptance or NAL Financial pursuant to the
provisions of this Guaranty and agrees for the benefit of each of Seller's
creditors that any such payment by it shall constitute a contribution of capital
by NAL Acceptance or NAL Financial, as applicable, to Seller.
6. As further security for this Guaranty and to secure all of Seller's
obligations to Buyer, NAL Acceptance and NAL Financial hereby grant a present
security interest in and transfers and assigns to Buyer (a) any and all
interest, if any, it may now or hereafter have in the Purchased Securities (as
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defined in the Repurchase Agreement) until such securities have been sold or
otherwise disposed of by Buyer, and (b) all claims and demands, presently
existing or hereafter accrued thereon, and any and all collateral or security
NAL Acceptance and NAL Financial now has or may hereafter have or acquire
against Seller with respect to the Securities or any of them with full right on
the part of Buyer in its own name or in the name of NAL Acceptance and NAL
Financial to collect and enforce such claims by legal action, proof of debt in
bankruptcy or other liquidation proceedings, and to vote in any proceedings for
the arrangement of debts at any time proposed, and NAL Acceptance and NAL
Financial hereby irrevocably appoint Buyer as attorney-in-fact for NAL
Acceptance and NAL Financial for the purpose of such enforcement and for the
purpose of endorsing in the name of NAL Acceptance and NAL Financial any
instrument for the payment of money.
7. In the event that any representation or warranty made by Seller or
by NAL Acceptance or NAL Financial in the Related Documents shall be false or
misleading in any material respect, there shall be immediately due from NAL
Acceptance and NAL Financial to Buyer the loss, cost, damage or expense incurred
by Buyer by reason of such representation or warranty being false or misleading
in any material respect.
8. In the event that Buyer for any reason whatsoever shall deem it
necessary to enforce this Guaranty or of any rights hereunder or otherwise,
there shall be immediately due from NAL Acceptance and NAL Financial to Buyer,
all losses, costs, damages, expenses, claims and liabilities associated with
such enforcement, including but not limited to, reasonable attorneys' fees and
disbursements, together with all costs and expenses of any related action.
9. NAL Financial and NAL Acceptance each covenants as follows:
(a) Net Worth. NAL Financial shall not permit the sum of its net
worth, determined in accordance with generally accepted accounting principles
("Net Worth") to become less than six million dollars ($6,000,000).
(b) Other Liens or Interests. Except for the conveyances under the
Related Documents, neither NAL Financial nor NAL Acceptance will sell, pledge,
assign or transfer to any other person, or grant, create, incur, assume or
suffer to exist any lien on any interest in the Contracts or the Related Assets,
including, without limitation, any option to buy or right to receive income with
respect to the Contracts, and each of NAL Financial and NAL Acceptance shall
defend the right, title, and
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interest of Buyer in, to and under such Contracts and Related Assets against all
claims of third parties claiming through or under NAL Financial or NAL
Acceptance.
(c) Notice of Material Adverse Change. Promptly upon becoming aware
thereof, each of NAL Financial and NAL Acceptance shall give Buyer notice in
writing of any material adverse change or event or condition that may have a
material adverse change, in the business, results of operations, financial
condition or prospects of NAL Financial or NAL Acceptance, or any other
affiliate of NAL Financial, as the case may be, or which may adversely affect
the collectibility of any of the Contracts or the ability of Servicer to service
such Contracts or the ability of NAL Acceptance, Servicer, or Seller to perform
its or their respective obligations under the Related Documents.
(d) Preservation of Corporate Existence. NAL Financial and NAL
Acceptance shall preserve and maintain their respective corporate existence,
rights, franchises and privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a corporation in each
jurisdiction where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualification would materially adversely affect (i)
the interests of Buyer hereunder or (ii) the ability of Seller, NAL Financial or
NAL Acceptance to perform their obligations under any Related Document to which
it is a party.
(e) Compliance with Laws. NAL Financial and NAL Acceptance shall comply
in all material respects with all laws, rules, statutes, regulations, decrees,
and orders of, and all applicable restrictions imposed by, all governmental
bodies applicable to NAL Financial and NAL Acceptance, their businesses and
properties, and the Contracts.
(f) Enforceability of Obligations. Each of NAL Financial and NAL
Acceptance shall take such actions as are within its power to ensure that, with
respect to each Contract, the obligation of any related Obligor to pay the
unpaid balance of such Contract in accordance with the terms thereof remain
legal, valid, binding and enforceable against such Obligor.
(g) Books and Records. NAL Acceptance shall maintain and implement
administrative and operating procedures (including, without limitation, the
ability to recreate records regarding the Contracts in the event of the
destruction of any original records thereof), and keep and maintain all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Contracts (including, without limitation,
records adequate to permit the identification of all collections
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<PAGE>
and adjustments to each existing Contract). NAL Acceptance shall, in its files
and other books and records with respect to the Portfolio Contracts, note that
each Portfolio Contract has been sold to Buyer.
(h) Fulfillment of Obligations. NAL Acceptance will duly observe and
perform or cause to be observed or performed, all material obligations and
undertakings on its part to be observed and performed under or in connection
with the Related Documents and the Contracts, and will duly observe and perform
all material provisions, covenants and other promises required to be observed by
them under the contracts related to the Contracts, will do nothing to impair the
right, title and interest of Buyer in and to the Contracts and Related Assets
and will pay when due any taxes, including without limitation any sales tax,
excise tax or other similar tax or charge, payable in connection with the
Contracts and their creation and satisfaction.
(i) Litigation. As soon as possible, and in any event within three (3)
Business Days of NAL Acceptance's or NAL Financial's knowledge thereof, NAL
Acceptance or NAL Financial as the case may be, shall give Buyer written notice
of (i) any litigation, investigation or proceeding against NAL Financial or NAL
Acceptance or any other affiliate of NAL Financial which may exist at any time
which could have a material adverse effect on the business, financial condition,
results of operations or prospects of such entity or impair the ability of such
entity to perform its obligations under any Related Document or materially and
adversely effect the collectibility or servicing of any of the Contracts and
(ii) any material adverse development in any such previously disclosed
litigation.
(j) Access to Books and Records. NAL Financial and NAL Acceptance shall
provide to Buyer access to their files, documents, books, records, accounts,
correspondence and other records, including the Contract Files, with respect to
the Contracts and other motor vehicle retail installment sale contracts owned or
serviced for its own account or the account of others, but only upon reasonable
written request, during normal business hours and at the expense of Buyer or, if
either NAL Financial or NAL Acceptance is in default of its obligations under a
Related Document, NAL Financial and NAL Acceptance.
(k) Merger or Consolidation of NAL Financial or NAL Acceptance. Any
Person into which NAL Financial or NAL Acceptance may be merged or consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which such entity shall be a party, or any Person succeeding to the business of
such entity, shall be the successor of such entity hereunder, without the
execution or filing of any paper or any
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further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding; provided, however, that no such merger or
consolidation shall occur unless Buyer is provided with one hundred twenty (120)
days prior written notice.
(l) No Assignment. Except in connection with a merger or reorganization
of NAL Financial or NAL Acceptance or a sale of all or substantially all of such
entity's assets, neither NAL Financial nor NAL Acceptance shall assign this
Agreement except with the prior written consent of Buyer.
(m) Monthly Reports. NAL Financial and NAL Acceptance shall deliver or
cause to be delivered to Buyer on each Payment Date, or more frequently if
possible, a report setting forth the following information, separately stated
for all motor vehicle installment sale contracts and loans serviced by NAL
Acceptance on the one hand, and all Portfolio Contracts on the other hand, as
applicable: (i) the number of Contracts subject to such Transaction; (ii) the
aggregate of payments received on such Contracts during the related Collection
Period allocable to principal; (iii) the aggregate of payments received on such
Contracts during the related Collection Period allocable to interest; (iv) the
aggregate principal balance of such Contracts as of the close of business on the
last day of the preceding Collection Period, after giving effect to payments
allocated to principal on such day; (v) the weighted average contract rate of
such Contracts as of the beginning of the related Collection Period; (vi) the
amount (and number) of such delinquencies 1 to 30 days, 31 to 60 days, 61 to 90
days, 91 to 120 days and 121 or more days as of the end of the preceding
Collection Period; (vii) the percentage of such Contracts secured by new
Financed Vehicles, and the percentage of Contracts secured by used Financed
Vehicles as of the beginning of the related Collection Period; (viii) gross
charge-offs, recoveries and net losses for the related Collection Period; (ix)
(a) the number and aggregate principal balance of all Contracts in respect of
which the related Financed Vehicle has been repossessed during the related
Collection Period and (b) the number and aggregate principal balance of all
Contracts that were liquidated (otherwise than pursuant to a voluntary
prepayment) during such Collection Period; (x) first payment defaults for the
preceding Collection Period; (xi) Obligor bankruptcy filings for the preceding
Collection Period; (xii) repossession and liquidation expenses for the preceding
Collection Period; (xiii) deficiency and recovery expenses for the preceding
Collection Period; (xiv) prepayments and prepayment fees for preceding month;
(xv) the calculations (including the information necessary to do such
calculations), in reasonable detail, showing whether or not an Event of Default
has occurred pursuant to each of clauses (xvii) through (xxvii) of Paragraph
9(a) of the Additional Supplemental
A-6
<PAGE>
Terms to the Repurchase Agreement; and (xvi) (a) the acceleration of any debt
obligation or the termination of any credit facility of Seller, Servicer or NAL
Financial, respectively, if any; (b) the amount and maturity of any such debt
assumed after the date hereof, if any; (c) any adverse developments with respect
to pending or future litigation involving Seller, Servicer or NAL Financial,
respectively, if any; (d) any other developments which might materially and
adversely affect the financial condition of Seller, Servicer or NAL Financial.
(n) Collections on Contracts. NAL Financial shall hold in trust for
Buyer any collections in respect of the Contracts that are, for any reason,
received by it otherwise than in accordance with the Related Documents, shall
hold such collections segregated from its own funds and shall promptly remit
such collections to the Collection Account as required under the Related
Documents.
(o) Other Information. NAL Financial and NAL Acceptance agree to
provide to Buyer all information regarding their respective operations and
practices as Buyer shall reasonably request in writing. In addition, NAL
Acceptance agrees to provide to Buyer copies of all written manuals or
instructions of NAL Acceptance with respect to the origination, servicing,
collection, repossession/resale and recovery of Financed Vehicles, including,
without limitations, the program guidelines for a state or states (collectively,
the "Procedures Manuals"). NAL Acceptance shall agree to provide a schedule
showing maximum annual percentage rates permitted on Contracts, by state and
shall update such schedule to reflect changes in such maximum rates.
10. Each of NAL Acceptance and NAL Financial represents and warrants to
Buyer, and shall on and as of the Purchase Date for any Transaction be deemed to
represent and warrant, as follows:
(a) Each of NAL Acceptance and NAL Financial is duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Florida and Delaware, respectively, with power and authority to own its
properties and to conduct its business as such properties shall be currently
owned and such business is presently conducted, and has had at all relevant
times, and shall have, power, authority, and legal right to acquire and own the
Contracts.
(b) It 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
businesses shall require such qualifications, licenses or approvals.
A-7
<PAGE>
(c) It has the power and authority to execute and deliver the Related
Documents and to carry out their respective terms. NAL Acceptance has full power
and authority to sell the Contracts to Seller.
(d) The consummation of the transactions contemplated by the Related
Documents and the fulfillment of the terms hereof shall not conflict with,
result in any breach of any of the terms and provisions of, nor constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or by-laws of each, or any indenture, agreement, or other
instrument to which each is a party or by which it shall be bound; nor result in
the creation or imposition of any lien upon any of its properties pursuant to
the terms of any such indenture, agreement, or other instrument, other than the
Related Documents, nor violate any law or any order, rule, or regulation
applicable to each of any court or of any federal or state regulatory body,
administrative agency, or other governmental instrumentality having jurisdiction
over each or its properties.
(e) There are no proceedings or investigations pending, or threatened,
before any court, regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over each entity or its respective
properties: (i) asserting the invalidity of a Related Document; (ii) seeking to
prevent the consummation of any of the transactions contemplated by a Related
Document; or (iii) seeking any determination or ruling that may have a material
adverse change in the business, results of operations, financial condition or
prospects of each entity, or the performance by each entity of its respective
obligations under, or the validity or enforceability of, a Related Document.
(f) All approvals, authorizations, consents, orders or other actions or
registrations with any Person or any governmental body or official required to
be obtained on or prior to the date hereof in connection with the execution and
delivery of the Related Documents, the performance of the transactions
contemplated by the Related Documents and the fulfillment of the terms hereof
and thereof have been obtained.
11. This Guaranty sets forth in full NAL Acceptance's and NAL
Financial's undertaking, and such undertaking shall not in any way be modified,
amended, amplified or limited by reference to any document, instrument or
agreement referred to herein other than any request for payment hereunder and
the Repurchase Agreement and any such reference shall not be deemed to
incorporate herein by reference any document, instrument or agreement except for
requests for payment pursuant to a Notice and the Repurchase Agreement.
A-8
<PAGE>
12. NAL Acceptance and NAL Financial hereby waive the right of trial by
jury in any litigation arising hereunder and also waives the right in any such
litigation, to impose counterclaims or set-offs of any kind or description
unless such counterclaim or set-off is compulsory or mandatory in nature under
the New York Civil Practice Law and Rules. NAL Acceptance and NAL Financial
further agree to submit to personal jurisdiction in the State of New York in any
action or proceeding arising out of this Guaranty.
13. The obligations of NAL Acceptance and NAL Financial under this
Guaranty are irrevocable, primary, absolute and unconditional and shall be paid
or performed strictly in accordance with this Guaranty under all circumstances
irrespective of:
(a) any lack of validity or enforceability of, or any amendment or
other modification of, or waiver, with respect to any of the Related Documents
or the Transactions;
(b) any exchange or release of any other obligations hereunder;
(c) the existence of any claim, set-off, defense, reduction, abatement
or other right that Buyer or Seller may have at any time against either of NAL
Acceptance or NAL Financial or any other Person;
(d) any document presented in connection with the Guaranty proving to
be forged, fraudulent, invalid or insufficient in any respect of any statement
therein being untrue or inaccurate in any respect;
(e) any payment by either of NAL Acceptance or NAL Financial under the
Guaranty against presentation of a certificate or other document that does not
strictly comply with terms of the Guaranty; and
(f) any other circumstances, other than payment in full, that might
otherwise constitute a defense available to, or discharge of, Buyer or Seller in
respect of any of the Related Documents.
A-9
<PAGE>
Neither the failure of Seller or Buyer to perform any covenant or
obligation in favor of NAL Acceptance or NAL Financial (or otherwise), nor the
failure or omission to make a demand permitted hereunder, nor the commencement
of any bankruptcy, debtor or other insolvency proceeding by or against Seller or
Buyer or any other person shall in any way affect or limit NAL Acceptance's or
NAL Financial's obligations under this Guaranty. If an action or proceeding to
enforce this Guaranty is brought, the beneficiary shall be entitled to recover
from NAL Acceptance or NAL Financial costs and expenses reasonably incurred,
including without limitation reasonable fees and expenses of counsel.
NAL ACCEPTANCE CORPORATION
By______________________________
Name:
Title:
NAL FINANCIAL GROUP INC.
By_______________________________
Name:
Title:
Accepted:
CARGILL FINANCIAL SERVICES
CORPORATION
By________________________________
Name:
Title:
A-10
<PAGE>
EXHIBIT B
FORM OF TRANSACTION REQUEST
Cargill Financial Services Corporation
Attention: Structured Finance Funding Desk
6000 Clearwater Drive
Minnetonka, MN 55343-9497
Gentlepersons:
We (i) hereby deliver the List of Contracts, and (ii) hereby deliver a
Computer Tape in computer readable form (dbf format) or Lotus Worksheet with
respect to the Contracts set forth on the List of Contracts attached hereto as
Appendix I to you pursuant to the Master Repurchase Agreement between Cargill
Financial Services Corporation and Autorics, Inc. dated as of May __, 1996 (the
"Agreement"). Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Agreement, and the undersigned hereby requests
a Transaction pursuant thereto.
Very truly yours,
AUTORICS, INC.,
as Seller
By:___________________________
Name:
Title:
B-1
<PAGE>
EXHIBIT C
FORM OF CONFIRMATION
______________ ___, 199__
Autorics, Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, Florida 33309
Confirmation No.:___________________
Gentlepersons:
We have received your Transaction Request with respect to the Contracts
listed in Appendix I hereto. This letter evidences our agreement to purchase
from you Contracts, pursuant to the Master Repurchase Agreement between Cargill
Financial Services Corporation and Autorics, Inc., dated as of May __, 1996 (the
"Agreement"), as set forth below. Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Agreement.
Confirmation Date: ____________________________
Cut-off Date: ____________________________
Purchased Securities: See List of Contracts attached
as Appendix I hereto, with
such revisions thereto as are
needed thereon.
Number of Contracts: _____________________________
Aggregate principal
balance of Contracts
as of Cut-off Date: _____________________________
Purchase Price: _____________________________
Price Differential: _____________________________
Repurchase Date: _____________________________
First Payment Date: _____________________________
Advance Rate
Percentage: _____________________________
Percentage used to
determine Buyer's
Margin Amount: _____________________________
C-1
<PAGE>
CARGILL FINANCIAL SERVICES
CORPORATION, as Buyer
By:_________________________________
Name:_______________________________
Title:______________________________
Agreed to as of _________ ___, 199___
AUTORICS, INC., as Seller
By:_________________________________
Name:_______________________________
Title:______________________________
C-2
<PAGE>
EXHIBIT D
OPINION OF COUNSEL TO SELLER
D-1-1
<PAGE>
1. NAL Acceptance is a corporation duly organized, validly existing and
in good standing under the laws of Florida and has corporate power and authority
to enter into and perform its obligations under the Sale and Purchase Agreement,
the Custodial Agreement and the Guaranty. NAL Acceptance is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of the business transacted by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets or condition (financial or
other) of NAL Acceptance and its subsidiaries, considered as a whole.
2. NAL Financial is a corporation duly organized, validly existing and
in good standing under the laws of Delaware and has corporate power and
authority to enter into and perform its obligations under the Guaranty and the
Custodial Agreement. NAL Financial is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the character
of the business transacted by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets or condition (financial or other) of NAL Financial and its
subsidiaries, considered as a whole.
3. The Related Documents have been duly authorized, executed and
delivered by NAL Acceptance and NAL Financial, as applicable, and constitute
valid and legally binding obligations of NAL Acceptance and NAL Financial, as
applicable, enforceable against NAL Acceptance and NAL Financial, as applicable,
in accordance with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights generally and to general equity principles.
4. No consent, approval, authorization or order of any state or federal
court or government agency or body is required to be obtained by NAL Acceptance
or NAL Financial, as applicable, for the consummation of the transactions
contemplated by the Related Documents.
5. The consummation of any of the transactions contemplated by the
Related Documents will not conflict with, result in a breach of, or constitute a
default under the articles of incorporation or bylaws of NAL Acceptance or NAL
Financial, as applicable, or the terms of any indenture or other agreement or
instrument known to us to which NAL Acceptance or NAL Financial, as applicable,
is party or bound, nor violate any law or any order known to such counsel to be
applicable to NAL Acceptance or NAL Financial, as applicable, or any regulations
applicable to NAL Acceptance or NAL Financial, as applicable, of any state or
D-1-2
<PAGE>
federal court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over NAL Acceptance or NAL Financial, as
applicable.
6. There is no pending or threatened action, suit or proceeding before
any court or governmental agency, authority or body or any arbitrator involving
NAL Acceptance or NAL Financial, as applicable, or relating to the transactions
contemplated by the Related Documents.
7. The transfer from time to time of the Contracts by NAL Acceptance to
Seller and the transfer of Contracts by Seller to Custodian should not be
voidable as a fraudulent transfer under the United States Bankruptcy Code (Title
11, U.S.C.) or Florida Law.
8. Each of NAL Acceptance and NAL Financial is duly registered as a
sales finance company in each state in which Contracts were originated, to the
extent such registration is required by applicable law and has obtained all
other licenses and governmental approvals in each jurisdiction to the extent
such licenses and approvals are required.
9. Seller is a corporation duly organized, validly existing and in good
standing under the laws of Delaware and has corporate power and authority to
enter into and perform its obligations under the Repurchase Agreement and the
Custodial Agreement. Seller is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the character
of the business transacted by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets or condition (financial or other) of Seller.
10. The Repurchase Agreement and the Custodial Agreement have each been
duly authorized, executed and delivered by Seller, and each constitutes a valid
and legally binding obligation of Seller enforceable against Seller in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other similar laws of general applicability
relating to or affecting creditors' rights generally and to general equity
principles.
11. No consent, approval, authorization or order of any state or
federal court or governmental agency or body is required to be obtained by
Seller for the consummation of the transactions contemplated by the Repurchase
Agreement or the Custodial Agreement.
D-1-3
<PAGE>
12. The consummation of any of the transactions contemplated by the
Repurchase Agreement and the Custodial Agreement will not conflict with, result
in a breach of, or constitute a default under the articles of incorporation or
bylaws of Seller or the terms of any indenture or other agreement or instrument
known to such counsel to which Seller is a party or bound, nor violate any law
or any order known to such counsel to be applicable to Seller or any regulation
applicable to Seller, of any state or federal court, regulation applicable to
Seller, administrative agency, governmental body or arbitrator having
jurisdiction over Seller.
13. There is no pending or threatened action, suit or proceeding before
any court or governmental agency, authority or body or any arbitrator involving
Seller or relating to the transactions contemplated by the Repurchase Agreement
or the Custodial Agreement which, if adversely determined, would have a material
adverse effect on Buyer or any person or entity to whom Buyer sells Contracts
under a repurchase arrangement.
14. Upon delivery of Contracts as required by the Custodial Agreement,
the conveyance from time to time of Contracts described on the List of Contracts
by Seller to Custodian will create a "security interest", as such term is
defined in Florida Statutes 671.201(37), in such Contracts, which security
interest will be valid and enforceable in accordance with the terms of such
Custodial Agreement, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
applicable to Seller and to general principles of equity (regardless of whether
considered in a proceeding in equity or at law). Subject to the filing of
continuation statements, such security interest will upon delivery of the
applicable List of Contracts be perfected and Custodian's security interest will
be a first priority perfected security interest.
15. Buyer has a valid, first priority perfected security interest in
Financed Vehicles.
16. Seller is duly registered as a sales finance company in each state
in which Contracts were originated, to the extent such registration is required
by applicable law and has obtained all other licenses and governmental approvals
in each jurisdiction to the extent such licenses are required.
17. If NAL Acceptance became a debtor under the Code, the transfer by
NAL Acceptance to Seller from time to time of Contracts and the proceeds thereof
would ultimately be characterized, by a court exercising reasonable judgment
under existing statutes and judicial precedents, as a true sale,
D-1-4
<PAGE>
sufficient to remove the Contracts and the distributions thereon and proceeds
thereof from NAL Acceptance's estate for the purposes of Section 541 of the Code
(11 U.S.C. section 541) in the event NAL Acceptance became a debtor under the
Code, and Section 362(a) of the Code (11 U.S.C. section 362(a)) would not apply
to the Contracts and the distributions thereon and proceeds thereof in such an
insolvency proceeding relating to NAL Acceptance (except that such counsel need
express no opinion as to proceeds of Contracts held by NAL Acceptance on the
date NAL Acceptance were to become a debtor under the Code).
18. In the event NAL Acceptance became a debtor under the Code, a court
exercising reasonable judgment under existing statutes and precedents should not
order that the assets and liabilities of Seller be consolidated with those of
NAL Acceptance based upon any legal theory currently recognized under applicable
law and applicable to the circumstances, including (i) state laws disregarding
the separateness of a corporation and its stockholders or (ii) any equitable
doctrine analogous to the bankruptcy law doctrine of substantive consolidation.
19. The Contract forms, copies of which are attached hereto, comply
with the requirements of Federal and Florida law, including without limitation
consumer protection laws.
D-1-5
<PAGE>
EXHIBIT E
FORM OF DEALER AGREEMENTS
E-1
<PAGE>
EXHIBIT F
CREDIT DEPARTMENT POLICIES AND PROCEDURES
F-1
<PAGE>
EXHIBIT G
WIRE INSTRUCTIONS
Buyer Wire Instructions:
Bank: Citibank, N.A. New York
Address: Citibank Global Cash Management
100 Court Square
Long Island City, New York 11120
ABA Number: 021000089
Account Number: 40567992
For the credit of: CFSC Clg
Seller Wire Instructions:
Bank: Sun Bank
Address: Fort Lauderdale, Florida
ABA Number: 067006076
Account Number: 417006210527
For the credit of: NAL Acceptance Corporation
G-1
<PAGE>
Schedule I
(i) Due Authorization Execution, and Delivery. The
execution, delivery and performance of the Related Documents and the
consummation of the transactions provided for therein have been duly
authorized by Seller by all necessary action on the part of Seller and
the Related Documents have been duly executed and delivered by Seller.
(ii) No Violations. The consummation of the transactions
contemplated by the Related Documents and the fulfillment of the terms
hereof shall not conflict with, result in any breach of any of the
terms and provisions of, nor constitute (with or without notice or
lapse of time) a default under, the certificate of incorporation or
by-laws of Seller, or any indenture, agreement, or other instrument to
which Seller is a party or by which it shall be bound; nor result in
the creation or imposition of any lien upon any of its properties
pursuant to the terms of any such indenture, agreement, or other
instrument, other than the Related Documents, nor violate any law or
any order, rule, or regulation applicable to Seller of any court or of
any federal or state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over Seller or its
properties.
(iii) Binding Obligation. Each of the Related Documents
to which it is a party constitutes a legal, valid and binding
obligation of Seller, enforceable against Seller, in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a suit
at law or in equity). It is the intention of Seller that, and Seller
hereby represents and warrants that, the transfer and assignment herein
contemplated constitutes a sale of the Contracts from Seller to Buyer
and that the beneficial interest in and title to the Contracts will not
be part of Seller's estate in the event of the filing of a bankruptcy
petition by or against Seller under any bankruptcy law.
(iv) Eligibility of Contracts. Seller hereby represents
and warrants to Buyer that as of each Purchase Date and with respect to
the Contracts in a Securitized Contract Group, as of the related
Securitized Closing Date:
1
<PAGE>
(A) Characteristics of Contracts. Each Contract (1)
shall have been 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, shall be payable in
United States dollars, shall have been fully and properly
executed by the parties thereto, shall have been purchased
from a Dealer under an existing Dealer Agreement and sold by
NAL Acceptance to Seller pursuant to the Sale and Purchase
Agreement (which Dealer had all necessary licenses and permits
to originate such Contract and qualified for participation in
NAL Acceptance's non-prime vehicle finance program) and shall
have been validly sold and assigned by Seller to Buyer, (2)
shall have been purchased by NAL Acceptance in the ordinary
course of its business, (3) shall have created or shall create
a valid, subsisting, and enforceable first priority perfected
security interest in favor of NAL Acceptance in the Financed
Vehicle, which security interest has been assigned by NAL
Acceptance to Seller and by Seller to Buyer and all filings
(including, without limitation, UCC filings) have been made
and all other actions taken that are necessary to provide
Buyer a first priority perfected security interest in the
Contracts and the proceeds thereof, (4) shall contain
customary and enforceable provisions such that the rights and
remedies of the holder thereof shall be adequate for
realization against the collateral of the benefits of the
security, (5) shall provide for level monthly payments
(provided that the payment in the first or last month in the
life of the Contract may be minimally different from the level
payment) that fully amortize the amount financed by maturity
date and yield interest at the rate specified in the Contract,
(6) shall permit either partial or full prepayment of such
Contract without penalty or premiums, (7) is (a) not
delinquent for more than twenty (20) days on either the date
that NAL Acceptance purchased the Contract from the Dealer, or
the date NAL Acceptance sold the Contract to Seller, and (b)
not more than ninety (90) days delinquent at any time while
financed under the Agreement; and (8) has (a) an effective
annual percentage interest rate equal to or greater than
fifteen percent (15%), (b) an unpaid balance equal to or
greater than $3,000 and equal to or less than $35,000, (c) a
remaining maturity equal to or greater than twelve (12) months
and equal to or less than seventy-two (72) months, (d) an
original maturity equal to or greater than twelve (12) months
and equal to or less than seventy-two (72) months, (e) a down
payment
2
<PAGE>
equal to or greater than ten percent (10%), and (f) an advance
rate as set forth in the underwriting guidelines attached
hereto as Exhibit F.
(B) No Government or Foreign Obligor. None of the
Contracts shall be 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. All of the
Contracts shall be due from Obligors who are citizens, or
legal resident aliens, of the United States of America.
(C) Contracts in Force. No Contract shall have been
satisfied, subordinated, or rescinded, nor shall any Financed
Vehicle have been released from the lien granted by the
related Contract in whole or in part.
(D) No Waiver. No provision of a Contract shall
have been waived.
(E) No Defenses. No right of rescission, set-off,
counterclaim, or defense shall have been asserted or
threatened with respect to any Contract.
(F) No Liens. No liens or claims shall have been
filed for work, labor, or materials relating to a Financed
Vehicle that shall be liens prior to, or equal or coordinate
with, the security interest in the Financed Vehicle granted by
the Contract.
(G) No Default or Charge-off. Except for payment
defaults continuing for a period of not more than 20 days, no
default, breach, violation, or event permitting acceleration
under the terms of any Contract shall have occurred; and no
continuing condition that with notice or the lapse of time
would constitute a default, breach, violation, or event
permitting acceleration under the terms of any Contract shall
have arisen; and Seller shall not have waived any of the
foregoing; and no Contract shall have been charged off in
whole or in part as of the Purchase Date.
(H) Insurance. Seller shall have determined that the
Obligor, at the time of origination of its Contract, obtained
physical damage insurance covering the Financed Vehicle in an
amount at least equal to the lesser of its maximum insurable
value and the amount financed under such Contract and with
appropriate deductibles in accordance with the underwriting
3
<PAGE>
guidelines and that such physical damage insurance is still in
full force and effect.
(I) Title. No Contract has been sold, transferred,
assigned, or pledged by NAL Acceptance to any Person other
than Seller or by Seller to any Person other than Buyer or, if
any such sale, transfer, assignment or pledge to any such
Person has occurred, such Contract has been sold, transferred
or assigned back to NAL Acceptance or Seller, as applicable,
free and clear of all liens, encumbrances, security interests
and rights of others. Immediately prior to the sale herein
contemplated, Seller had good and marketable title to each
Contract free and clear of all liens, encumbrances, security
interests, and rights of others and, immediately upon the sale
thereof, Buyer shall have good and marketable title to each
Contract, free and clear of all liens, encumbrances, security
interests, and rights of others; and, as of the Purchase Date
such sale to Buyer has been perfected under the UCC.
(J) Valid Assignment. No Contract shall have been
originated in, or shall be subject to the laws of, any
jurisdiction under which the sale, transfer, and assignment of
such Contract under the applicable Dealer Agreement, or this
Agreement shall be unlawful, void, or voidable. Seller has not
entered into any agreement with any account debtor that
prohibits, restricts or conditions the assignment of any
portion of the Contracts and has not entered into any
agreement which prohibits, restricts or conditions the
assignment of any Dealer Recourse.
(K) Prior Financing Statements. Except as described
in the Intercreditor Agreement dated as of December 20, 1995
among NAL Acceptance, Seller, Cargill Financial Corporation
(Florida), Fairfax Savings, FSB, General Electric Capital
Corporation, Greenwich Capital Financial Products, Inc. and
Buyer, and amended as of May 1, 1996, as of the related
Purchase Date other than financing statements naming NAL
Acceptance as "seller/debtor" and Seller as "purchaser/secured
party," there is no effective financing statement (or similar
statement or instrument of registration under the law of any
jurisdiction) on file or registered in any public office filed
by NAL Acceptance or Seller or purporting to be filed on
behalf of NAL Acceptance or Seller covering any interest of
any kind in the
4
<PAGE>
Contracts or intended so to be, except those in favor of
Buyer.
(L) One Original. There shall be only one original
executed copy of each Contract and such Contract shall be in
the possession of Custodian.
(M) Vehicles. Each Financed Vehicle shall have been a
new or used automobile, van or light truck at the time the
related Obligor executed the Contract. As of the related date
of origination, no Financed Vehicle has mileage in excess of
105,000 miles recorded on its odometer. No Financed Vehicle is
in repossession status.
(N) Maximum Amount Financed. No Contract that
satisfies Tier 1 of the underwriting guidelines in Exhibit F
hereto shall have a maximum amount financed that exceeds
$40,000; no Contract that does not satisfy Tier 1 of such
underwriting guidelines shall have a maximum amount financed
in excess of $30,000.
(O) Security Interest in Financed Vehicle.
Immediately prior to the sale, assignment, and transfer
thereof, each Contract shall be secured by a validly perfected
first priority security interest in the Financed Vehicle in
favor of Seller as secured party and, upon the sale thereof to
Buyer on the related Purchase Date, Buyer shall have a valid
and effective assignment of such security interest.
(P) No Extensions. Except to the extent provided in
NAL Acceptance's Collection Department Manual, the number of
scheduled payments shall not have been extended on any
Contract on or before the Purchase Date.
(Q) Credit Policies. Each Contract has been
originated in compliance with the Credit Department Policies
and Procedures set forth in Exhibit F hereto.
(R) Scheduled Payments. Each Contract shall have
a first scheduled payment due on or prior to 45 calendar days
after the origination thereof.
(S) Method of Amortization. All allocations of
payments with respect to each Contract to principal and
interest, and determinations of periodic charges and the like,
shall be made using the rule of 78's method, the actuarial
method or the simple interest method,
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based on a 360-day year consisting of twelve 30-day months.
Each payment on a Contract shall be applied first to the
amount of interest accrued on such Contract and then to reduce
the principal amount outstanding on the Contract.
(T) Dealer Default. No Contract shall be subject to a
repurchase obligation under the terms of the related Contract
or Dealer Agreement by a Dealer, an affiliate of the Dealer or
any other entity which repurchase obligation has not been
satisfied within 30 calendar days after the occurrence of an
event triggering such repurchase obligation.
(U) Schedule of Contracts. The information set forth
in the List of Contracts and any other information in respect
of a Contract given by Seller to Buyer is true and correct as
of the close of business on the related Purchase Date.
(V) Compliance with Applicable Law. Each Contract
complied at the time it was originated and, at its Purchase
Date and Securitized Closing Date complies in all material
respects with all requirements of applicable federal, state
and local laws and regulations thereunder, including without
limitation usury laws, local licensing, the federal Truth-in-
Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the Magnuson-Moss Warranty Act,
the Federal Reserve Board's Regulations B and Z, the Fair Debt
Collection Practices Act, the Federal Trade Commission Act,
state adaptations of the National Consumer Act and of the
Uniform Consumer Credit Code, and other applicable consumer
credit laws and equal credit opportunity and disclosure laws.
(W) Binding Obligation. Each Contract represents the
genuine, legal, valid and binding payment obligation in
writing of the Obligor, enforceable by the holder thereof in
accordance with its terms. No Obligor is subject of a current
bankruptcy proceeding.
(X) Chattel Paper. Each Contract constitutes
"chattel paper" as defined in the applicable UCC.
(Y) Dealer Agreements. The representations and
warranties of the Dealer in the Dealer Agreement with respect
to each Contract purchased by NAL Acceptance pursuant to
such Dealer Agreement were substantially
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true and correct as of the date NAL Acceptance acquired such
Contract from that Dealer.
(Z) No Adverse Selection. Except as otherwise
consented to by Buyer in writing, each Contract (i) was not
selected for inclusion under this Agreement from Seller's
portfolio on any basis which would have a material adverse
effect on Buyer or any subsequent owner thereof and (ii) is
representative in all material respects of each other
uninsured motor vehicle retail installment sale contract
purchased by NAL Acceptance from Dealers.
(AA) Obligor Notices. Each Obligor has been
instructed to make scheduled payments on its Contracts to
NAL Acceptance at a Lockbox.
(BB) Insurance. Seller has caused to be performed any
and all acts required to preserve the rights and remedies of
Buyer in any Insurance Policies of Seller applicable to the
Contracts sold by Seller.
(CC) Servicing. Each Contract is being serviced by
NAL Acceptance.
(DD) Origination. No error, omission,
misrepresentation, negligence fraud or similar action occurred
on the part of any Person in connection with the origination
of any Contract.
(EE) Parke and Premiere. No Contract was originated
by Parke or Premiere or their successors.
(FF) Dealer Discount. NAL Acceptance purchased each
Contract from a Dealer at a discount equal to or less than
fifteen percent (15%).
(GG) Obligor Bankruptcy. As of the Cut-off Date, no
Obligor was the subject of a current bankruptcy proceeding.
(HH) Marking Records. As of the Purchase Date for
each Contract, Servicer's servicing records relating to the
Contracts are clearly and unambiguously marked to show that
the Contracts are owned by Buyer in accordance with the terms
of this Agreement and the Related Documents.
(II) Electronic Medium. The electronic file
delivered by Seller to Custodian and Buyer at least
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three Business Days before each Purchase Date in accordance
with Section 3(b) of the Agreement was complete and accurate
as of the Cut-off Date and includes a description of the
Contracts therein.
(JJ) Contract Files Complete. There exists a
Custodian's Contract File pertaining to each Contract and such
Custodian's Contract File contains, without limitation, the
following: (a) a List of Contracts, with the List Number set
forth thereon, containing such Contract, together with the
Computer Tape containing such Contract and a completed
checklist in the form of Exhibit E to the Custodial Agreement;
(b) the fully executed original Contract with manual
signatures and Dealer endorsements, together with executed
assignments thereof by NAL Acceptance and Seller in blank,
which assignments shall be substantially in the forms of
Exhibit C-1 and C-2 to the Custodial Agreement; (c) a written
confirmation from Servicer certifying as to the Insurance
Policies covering the Contract and stating that they are in
full force and effect; (d) 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 Seller, NAL Acceptance, Special Finance,
Inc. or Auto Analyst, Inc.; provided, however, that at any
time during the term hereof Buyer may request and require that
Seller cause the party in whose name the lien is noted to
transfer such lien to Seller; (e) an original or copy of the
credit application of the Obligor; and (f) a financing
statement on Form UCC-1 listing Custodian as the secured party
with respect to Contracts and Related Assets set forth on the
List of Contracts for each Transaction maintained by Custodian
and stamped to indicate filing with the Office of the
Secretary of State of the State of Florida. Each such document
which is required to be signed by the Obligor has been signed
by the Obligor in the appropriate spaces. All blanks on any
form have been properly filled in and each form has otherwise
been correctly prepared. A copy of the complete Custodian's
Contract File, which fulfills the documentation requirements
of the underwriting guidelines as in effect at the time of
purchase for each Contract, is in the possession of Servicer.
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(KK) All Filings Made. All filings required to be
made by any Person and all actions required to be taken or
performed by any Person in any jurisdiction to give Buyer a
first priority perfected security interest or ownership
interest in, the Contracts, Related Assets and the proceeds
thereof have been made, taken or performed.
(LL) No Impairment. Seller has not done anything to
convey any right to any Person that would result in such
Person having a right to payments due under the Contract or
otherwise to impair the rights of Buyer or Custodian in any
Contract or the proceeds thereof.
(MM) Contract Not Assumable. No Contract is assumable
by another Person in a manner which would release the Obligor
thereof from such Obligor's obligations to Seller with respect
to such Contract.
(NN) Conforming Contracts. Each Contract included
in a Transaction conforms to the representations and
warranties herein on the date of such Transaction.
(OO) Additional Representations and Warranties. Each
representation and warranty with respect to a Contract set
forth in the related Confirmation, if any, is true and correct
as of the Purchase Date for such Contract.
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ANNEX II
Names and Addresses for Communications Between Parties
Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, MN 55343-9497
Attention: Corporate Capital Group Funding
Desk
(for funding matters)
telephone: (612) 984-3058
fax: (612) 984-3844
(for reporting matters)
telephone: (612) 984-3565
fax: (612) 984-3255
with a copy to:
Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, MN 55343-9497
Attention: Law Department
telephone: (612) 742-6334
fax: (612) 984-3898
-----------------------
Autorics, Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, Florida 33309
Attention: Mr. John T. Schaeffer
Mr. Robert R. Bartolini
telephone: (305) 938-8200
fax: (305) 938-8209
EXECUTION COPY
================================================================================
MULTI-PARTY CUSTODIAL AND SERVICING AGREEMENT
by and among
CARGILL FINANCIAL SERVICES CORPORATION,
Buyer
AUTORICS, INC.,
Seller
BANKERS TRUST COMPANY,
Custodian
and
NAL ACCEPTANCE CORPORATION,
Servicer
Dated as of May 1, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1. General........................................................................................... 2
Section 1.2. Certain Defined Terms............................................................................. 2
Section 1.3. Incorporation of Certain Definitions.............................................................. 7
Section 1.4. Reference to Time................................................................................. 7
ARTICLE II
CUSTODIAL ARRANGEMENT
Section 2.1. Documents Maintained by Servicer.................................................................. 8
Section 2.2. List of Contracts................................................................................. 8
ARTICLE III
SERVICING
Section 3.1. Duties of Servicer; Standard of Care.............................................................. 8
Section 3.2. Collection of Payments............................................................................ 9
Section 3.3. Realization upon Contracts........................................................................ 10
Section 3.4. Maintenance of Security Interests in Financed
Vehicles........................................................................................ 10
Section 3.5. Servicer's Certificate............................................................................ 10
Section 3.6. Notice of Default................................................................................. 12
Section 3.7. Servicer Expenses................................................................................. 12
Section 3.8. Establishment of Collection Account............................................................... 12
Section 3.9. Collections....................................................................................... 13
Section 3.10. Representations of Servicer...................................................................... 13
Section 3.11. Merger or Consolidation of, or Assumption of
the Obligations of, Servicer................................................................... 15
Section 3.12. Resignation...................................................................................... 15
Section 3.13. Appointment of Successor......................................................................... 15
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Section 3.14. Annual Accountants' Report; Quarterly
Compliance Report.............................................................................. 16
Section 3.15. Temporary Release of Deposited Documents......................................................... 17
ARTICLE IV
CUSTODIAL DUTIES
Section 4.1. Transfer of Contracts; Delivery of Documents...................................................... 17
Section 4.2. The Custodial Receipt and Confirmations........................................................... 18
Section 4.3. Custodial Register................................................................................ 19
Section 4.4. Payments.......................................................................................... 19
Section 4.5. Additional Documents Delivered to Custodian
after an Event of Default....................................................................... 20
Section 4.6. Authorized Persons................................................................................ 20
Section 4.7. Copies of Documents............................................................................... 20
ARTICLE V
OWNERSHIP AND TRANSFER OF CONTRACTS
Section 5.1. The Custodial Receipt and Confirmations........................................................... 21
Section 5.2. No Service Charge for Sale or Transfer of
Contracts....................................................................................... 21
Section 5.3. Persons Deemed Owners............................................................................. 21
Section 5.4. Unilateral Transfer of Contracts Owned by
Seller.......................................................................................... 21
Section 5.5. Transfers to Third Persons........................................................................ 22
Section 5.6. Verification Certificate.......................................................................... 23
ARTICLE VI
CUSTODIAN
Section 6.1. Representations, Warranties and Covenants of
Custodian....................................................................................... 23
Section 6.2. Custodian of Documents............................................................................ 24
Section 6.3. Charges and Expenses.............................................................................. 24
Section 6.4. No Adverse Interests.............................................................................. 25
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Section 6.5. Inspections.................................................................................... 25
Section 6.6. Insurance...................................................................................... 25
Section 6.7. Limitation of Liability........................................................................ 25
Section 6.8. Indemnification................................................................................ 25
Section 6.9. Concerning Custodian........................................................................... 25
Section 6.10. Resignation or Removal of Custodian............................................................ 27
Section 6.11. Successor Custodian............................................................................ 28
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. Amendment...................................................................................... 28
Section 7.2. Consent to Jurisdiction; Waivers of Jury
Trial........................................................................................ 28
Section 7.3. Notices........................................................................................ 29
Section 7.4. Severability of Provisions..................................................................... 30
Section 7.5. No Partnership................................................................................. 30
Section 7.6. Counterparts................................................................................... 30
Section 7.7. Assignment..................................................................................... 30
Section 7.8. Headings....................................................................................... 30
Section 7.9. Further Assurances............................................................................. 31
Section 7.10. Governing Law.................................................................................. 31
EXHIBIT A Custodial Receipt and Confirmation............................................................. A-1
EXHIBIT B Form of Transfer Instructions.................................................................. B-1
EXHIBIT C-1 Form of Assignment ............................................................................ C-1-1
EXHIBIT C-2 Form of Assignment............................................................................. C-2-1
EXHIBIT D Certification.................................................................................. D-1
EXHIBIT E Documentation Checklist........................................................................ E-1
EXHIBIT F Notice to Custodian............................................................................ F-1
EXHIBIT G Notice of Default Certificate.................................................................. G-1
EXHIBIT H Request for Release of Documents and
Receipt ..................................................................................... H-1
EXHIBIT I Verification Certificate....................................................................... I-1
</TABLE>
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MULTI-PARTY CUSTODIAL AND SERVICING AGREEMENT
This Multi-Party Custodial and Servicing Agreement (the
"Agreement"), dated as of May 1, 1996, is by and among Cargill Financial
Services Corporation, a Delaware corporation ("Buyer"), Autorics, Inc., a
Delaware corporation ("Seller"), Bankers Trust Company, a New York banking
corporation, ("Custodian") and, for the limited purposes set forth herein, NAL
Acceptance Corporation ("NAL Acceptance" or "Servicer").
Recitals
--------
NAL Acceptance originates Contracts and sells such Contracts
and the Related Assets relating thereto to Seller;
Pursuant to the Repurchase Agreement, Seller may from time to
time enter into Transactions, evidenced by confirmations, to transfer and sell
certain Securities to Buyer against transfer of funds from Buyer to Seller;
Seller and Buyer desire to provide for the delivery,
servicing, custody and management of the Contracts and the Related Assets which
may become subject to a Transaction;
In connection with the foregoing, Seller and Buyer desire to
engage Custodian to act as custodian of Contracts and as paying agent for the
benefit of Seller, Buyer and subsequent purchasers of Contracts from Buyer, as
their interests may appear, and as agent and bailee for Buyer to receive
delivery of the Contracts and perfect Buyer's ownership and other security
interests in the Contracts and the Related Assets on behalf of Buyer by its
possession of Custodian's Contract Files and by being named in its capacity or
agent and bailee for Buyer as secured party in financing statements;
NAL Acceptance, or any permitted successor thereto, will act
as servicer with respect to the Contracts;
Custodian is willing and able to perform the duties and
obligations of a custodian, agent and bailee as set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, Buyer, Seller, Custodian and, for the
limited purposes set forth herein, NAL Acceptance agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1. General. For the purpose of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires,
the terms defined in this Article include the plural as well as the singular,
the words "herein," "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section or
other subdivision, and Section references refer to Sections of this Agreement.
Section 1.2. Certain Defined Terms. Whenever used in this
Agreement, unless the context otherwise requires, the following words shall have
the meanings set forth below:
"Agent": Subject to the terms of this Agreement, Custodian in
its capacity as agent for Buyer and any other Owner (other than Seller).
"Agreement": This Multi-Party Custodial and Servicing
Agreement, including all exhibits hereto, and all amendments hereof and
supplements hereto.
"Business Day": Any day other than (i) a Saturday or a Sunday
or (ii) another day on which banking institutions in the States of Florida or
New York are authorized or obligated by law, executive order, or governmental
decree to be closed.
"Buyer": Cargill Financial Services Corporation, a Delaware
corporation.
"Collections": As defined in Section 3.9 hereof.
"Collection Account": The account established pursuant to
Section 3.8 hereof.
"Computer Tape": A computer tape or other electronic medium in
a format acceptable to the Custodian generated by Servicer which provides
information relating to the Contracts.
"Contracts": Motor vehicle retail installment sales contracts,
installment loan agreements and security agreements and all addenda thereto, as
amended or supplemented from time to time, secured by Financed Vehicles and
purchased by Seller in the ordinary course of its business from NAL Acceptance,
all rights to receive payments which are (i) in the case of a Precomputed
Contract, due pursuant thereto on or after the related Cut-off Date and (ii) in
the case of a Simple Interest Contract, received by Servicer on or after the
related Cut-off Date and all other
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proceeds thereof (including without limitation any recourse rights against third
persons) from and after the Cut-off Date, but excluding, in the case of a
Pre-computed Contract, any rights to receive payments which are due prior to the
related Cut-off Date.
"Corporate Trust Office": The principal office of Custodian 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, 10th Floor, New York, New York 10006 (Attention: Structured
Finance Administration).
"Custodial Receipt and Confirmation": A confirmation statement
issued by Custodian substantially in the form attached hereto as Exhibit A.
"Custodial Register": The register maintained by Custodian
pursuant to Section 4.3, which reflects as to each Contract the Owner thereof.
"Custodian": Bankers Trust Company, a New York banking
corporation, in its custodial capacity under this Agreement.
"Custodian's Contract File": As defined in Section 4.1 hereof.
"Cut-off Date": In respect of a Transaction, the date as of
which the Contract information for such Transaction is given on the Computer
Tape in respect of such Transaction delivered by Seller to Buyer.
"Dealer": The dealer who sold a Financed Vehicle to an Obligor
and who originated and assigned the Contract relating to such Financed Vehicle
to any Person, including but not limited to, NAL Acceptance, Special Finance,
Inc. or Auto Analyst, Inc., as the case may be, in the normal course of business
under a Dealer Agreement, and any successor to such Dealer.
"Dealer Agreement": Any purchase and sale agreement between a
Dealer and any Person in the business of originating such agreements in the
ordinary course of business, which Person shall include but not be limited to
NAL Acceptance, Special Finance, Inc. and Auto Analyst, Inc., as the case may
be, with respect to such Dealer's motor vehicle retail installment sales
contracts, installment loan agreements and security agreements and all addenda
thereto, substantially in the form attached to the Repurchase Agreement as
Exhibit E, which agreement may not be amended in any material respect without
Buyer's prior written consent.
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"Dealer Recourse": With respect to a Contract, all of NAL
Acceptance's rights arising under the related Dealer Agreement or otherwise
against the Dealer which originated such Contract.
"Eligible Investments": Negotiable instruments or securities
represented by instruments in bearer or registered form, or, in the case of
deposits described below, deposit accounts held in the name of Custodian for the
benefit of Buyer which evidence:
(a) direct obligations of, or obligations fully
guaranteed as to timely payment by, the United States of
America;
(b) demand deposits, time deposits or certificates of
deposit (having original maturities of no more than 365 days)
of depository institutions or trust companies incorporated
under the laws of the United States of America or any state
thereof (or domestic branches of foreign banks) and subject to
supervision and examination by federal or state banking or
depository institution authorities;
(c) commercial paper (having original or remaining
maturities of no more than 30 days);
(d) demand deposits, time deposits and certificates
of deposit which are fully insured by the Federal Deposit
Insurance Corporation;
(e) bankers' acceptances (having original maturities
of no more than 365 days) issued by any depository institution
or trust company referred to in clause (b) above; or
(f) money market funds (including funds for which
Custodian or any of its affiliates is investment manager or
advisor).
"Financed Vehicles": Any new or used automobile or light-duty
truck financed by loans and sales contracts arising under Contracts.
"Guaranty": The Limited Guaranty provided by NAL Financial and
NAL Acceptance pursuant to the Repurchase Agreement.
"Insurance Policies": Any comprehensive and collision, fire
and theft and physical damage insurance policies maintained by Obligors
(including, without limitation, the Obligor's
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<PAGE>
comprehensive insurance policy), any credit policy (including without limitation
credit life and credit disability) and any Risk Default Policy covering the
Contracts, Obligors and/or Financed Vehicles.
"List Number": As defined in the Repurchase Agreement.
"List of Contracts": As defined in the Repurchase Agreement.
"NAL Acceptance": NAL Acceptance Corporation, a Florida
corporation, and any successor thereto.
"NAL Financial": NAL Financial Group Inc., a Delaware
corporation, and any successor thereto.
"Notice Schedule": As defined in Section 5.5 hereof.
"Obligor": The obligor under any Contract.
"Owner": With respect to any Contract and the Related Assets,
the Person reflected in the Custodial Register as being the owner thereof.
"Permitted Sale": An arm's length sale of Portfolio Contracts
either through (i) a securitization of such Portfolio Contracts or (ii) a "whole
loan" sale of such Portfolio Contracts to any Person, which Person shall not be
an Affiliate.
"Person": Any legal person, including any individual,
corporation, limited liability company, partnership, association, joint venture,
joint-stock company, estate, trust, unincorporated organization, governmental
entity or other entity of similar nature.
"Portfolio Contract": Each and every Contract purchased by
Buyer under the Repurchase Agreement and which has not been otherwise sold,
securitized or disposed of by Seller in a Permitted Sale or as otherwise
provided in the Repurchase Agreement.
"Precomputed Contract": A Contract pursuant to which the
portion of a payment thereon allocable to interest (which may be referred to
therein as add-on finance charge) and the portion of a payment thereon allocable
to principal (or the amount financed) is determined according to the rule of
78's method or the actuarial method.
"Purchase Date": The date on which Securities are transferred
by Seller to Buyer.
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<PAGE>
"Purchase Price": With respect to any Transaction, the price
to be paid or deemed to be paid by Buyer for the Contracts.
"Related Assets": (i) Seller's security interest in Financed
Vehicles, (ii) Seller's rights, remedies, powers and privileges under the
Contracts, including any personal guaranty thereof, (iii) Seller's rights,
remedies, powers and privileges under the Related Documents, (iv) Seller's
rights, remedies, powers and privileges under the Dealer Agreements, including
but not limited to Dealer Recourse and any holdback amounts, (v) insurance
proceeds under Insurance Policies, (vi) such other financing interests and
assets as shall be acceptable to Buyer in its sole discretion, (vii) Records and
(viii) all proceeds of the foregoing.
"Related Document": With respect to Seller, this Agreement,
the Sale and Purchase Agreement, and the Repurchase Agreement, and with respect
to NAL Acceptance, the Sale and Purchase Agreement, the Guaranty and this
Agreement, and with respect to NAL Financial, the Guaranty.
"Repurchase Agreement": The Master Repurchase Agreement,
dated as of May 1, 1996 between Buyer and Seller, including all amendments and
supplements and addenda thereto.
"Repurchase Date": With respect to any Transaction, the date
on which the Contracts and the Related Assets are to be repurchased pursuant to
the Repurchase Agreement.
"Responsible Officer": When used with respect to Custodian,
any officer within the Corporate Trust Office of Custodian including any Vice
President, Assistant Vice President, Assistant Treasurer, Assistant Secretary or
any other officer of Custodian 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 such particular subject.
"Risk Default Policy": Any risk default insurance policy
providing default insurance with respect to any Contract.
"Sale and Purchase Agreement": The Sale and Purchase Agreement
dated as of May __, 1996, by and between NAL Acceptance and Seller pursuant to
which NAL Acceptance originates or purchases Contracts and sells the Contracts
to Seller, as such document may be amended from time to time with Buyer's prior
written consent.
"Seller": Autorics, Inc., a Delaware corporation, and any
successor thereto.
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"Servicer": NAL Acceptance, and any successor thereto.
"Servicer's Certificate": As defined in Section 3.5.
"Servicer's Fee": An amount computed as the quotient of (x)
the product of (i) three percent (3%), and (ii) the aggregate outstanding amount
of Purchased Securities subject to the Repurchase Agreement, determined as of
the first day of the immediately preceding Collection Period, and (y) 12.
"Simple Interest Contract": A Contract pursuant to which the
portion of a payment thereon allocable to interest is equal to the product of
the interest rate for such Contract times the unpaid principal balance times the
period of time elapsed since the date on which the preceding payment of interest
was made; the remainder of such payment, if any, is allocated to principal.
"Successor Servicing Fee": An amount computed as the quotient
of (x) the product of (i) three percent (3%), and (ii) the aggregate outstanding
amount of Purchased Securities subject to the Repurchase Agreement, determined
as of the first day of the immediately preceding Collection Period, and (y) 12.
"Third Person": A Person other than Seller, Buyer or Custodian
which has acquired an interest in the Contracts from Buyer, directly or
indirectly, and continues to have an interest in such Contracts.
"Transaction": As defined in the Repurchase Agreement.
"Transfer Instruction": With respect to each Transaction,
notification, substantially in the form of Exhibit B hereto, of a Transaction
provided by Seller to Custodian. Transfer Instructions may be provided in
writing and must be received by Custodian prior to 10:00 a.m. on the Purchase
Date or Repurchase Date, as applicable.
Section 1.3.Incorporation of Certain Definitions. All
capitalized terms used herein and not otherwise defined shall have the meanings
assigned in the Repurchase Agreement unless the context clearly indicates
otherwise.
Section 1.4. Reference to Time. All references to time herein
shall be deemed to refer to New York time unless otherwise provided.
7
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ARTICLE II
CUSTODIAL ARRANGEMENT
Section 2.1. Documents Maintained by Servicer. Prior
to the occurrence of an Event of Default under the Repurchase Agreement,
Servicer shall retain possession of the documents and files with respect to the
Related Assets (which shall include copies of the documents listed in clauses
(1) through (6) of Section 4.1 that have been delivered to Custodian). All
documents held by Servicer shall be held by it as agent of Custodian for the
benefit of the Owner of the related Contracts and the Related Assets as
indicated on the Custodial Register.
Section 2.2. List of Contracts. Custodian shall maintain the
most recent version of the List of Contracts for each Transaction, as such list
may be amended from time to time as set forth below. Custodian shall receive a
printed copy of each amended List of Contracts with each revised copy of the
Computer Tape. Each List of Contracts in respect of a Transaction in the custody
of Custodian shall be the definitive List of Contracts for such Transaction for
all purposes under this Agreement.
ARTICLE III
SERVICING
Section 3.1. Duties of Servicer; Standard of Care.
(a) The parties hereto agree and acknowledge that,
notwithstanding the purchase and sale of the Contracts and Related Assets
contemplated hereby, NAL Acceptance shall continue to service the Contracts and
Related Assets for the benefit of Buyer and, if Buyer shall exercise its rights
to sell the Contracts and Related Assets pursuant to this Agreement prior to the
related Repurchase Date, Buyer's assigns; provided, however, that the obligation
of NAL Acceptance to service Contracts and Related Assets for the benefit of
Buyer as aforesaid shall cease upon the payment to Buyer of the Repurchase Price
therefor.
(b) Servicer shall manage, service, administer and make
collections on the Contracts. Servicer's duties shall include collection and
posting of all payments, responding to inquiries of Obligors on the Contracts
and accounting for collections. Without limiting the generality of the
foregoing, Servicer is authorized and empowered to execute and deliver, on
behalf of itself and Owner any and all instruments of satisfaction or
cancellation, or partial or full release or discharge, and all other comparable
instruments, with respect to the Contracts or to the Financed Vehicles securing
such Contracts.
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In performing its duties and obligations hereunder, Servicer shall comply with
all applicable state and federal laws and shall exercise that degree of skill
and care consistent with the highest degree of skill and care that Servicer
exercises with respect to similar motor vehicle retail installment sales
contracts serviced by Servicer for its own account or others and that is
consistent with prudent industry standards. At all times during the term of this
Agreement, Servicer shall maintain in force both fidelity bond and errors and
omissions coverage in an amount equal to or greater than the amounts (i)
maintained by companies with similar scope, nature, and extent of operations and
that service rated securitization transactions, and (ii) that is consistent with
prudent industry standards.
(c) If Servicer shall commence a legal proceeding to enforce a
Contract, the Owner of such Contract shall thereupon be deemed to have
automatically assigned, solely for the purpose of collection, such Contract to
Servicer. If in any enforcement suit or legal proceeding it shall be held that
Servicer may not enforce a Contract on the ground that it shall not be a real
party in interest or a holder entitled to enforce such Contract, the Owner of
such Contract shall, at Servicer's expense and direction, take steps to enforce
such Contract, including bringing suit in its name. Such Owner shall upon the
written request of Servicer furnish Servicer with any powers of attorney and
other documents reasonably necessary or appropriate to enable Servicer to carry
out its servicing and administrative duties hereunder.
(d) For the term of this Agreement, Servicer shall conduct
quarterly and annual performance reviews of the Dealers and provide to Owner the
information with respect to such Dealers specified upon Buyer's request based on
such reviews. In addition, Servicer shall perform all administrative
responsibilities relating to Dealers in respect of the Contracts.
Section 3.2. Collection of Payments. Servicer shall make
diligent efforts to collect all payments called for under the terms and
provisions of the Contracts as and when the same shall become due. Servicer
shall allocate collections between principal and interest in accordance with the
terms of the Contracts. Servicer may grant extensions, rebates or adjustments on
a Contract consistent with its customary practices; provided, however, that
except as required or permitted by law in connection with disaster, military and
other credit relief policies and procedures implemented by Servicer with respect
to Contracts in connection with defaults thereon, Servicer shall not modify the
original due dates of the scheduled payments on any Contract for more than one
month for each full year of the original term of such Contract or change the
dollar amount of the scheduled payments thereunder. Servicer may in its
discretion
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waive any late payment charge or any other fees that may be collected in the
ordinary course of servicing a Contract.
Section 3.3. Realization upon Contracts. On behalf of Owner,
Servicer shall use diligent efforts to repossess or otherwise convert the
ownership of the Financed Vehicle securing any Contract as to which Servicer
shall have determined eventual payment in full is unlikely, which may include
selling the Financed Vehicle at public or private sale, and shall make diligent
efforts to realize all insurance proceeds and any Dealer Recourse with respect
thereto; provided, however, that in any case in which the Financed Vehicle shall
have suffered damage, 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 proceeds
by an amount greater than the amount of such expenses. Servicer shall not
release the Financed Vehicle securing any Contract from the security interest
granted by such Contract in whole or in part except in the event of payment in
full by the Obligor thereunder or other discounted settlement of the obligations
of the Obligor thereunder in connection with a workout of such Contract.
On behalf of Owner, Servicer shall use diligent efforts to
pursue any claims under the Insurance Policies or exercise any rights with
respect to Dealer Recourse.
Section 3.4. Maintenance of Security Interests in Financed
Vehicles. Servicer shall take such steps as are necessary to maintain perfection
of the security interest created by each Contract in the related Financed
Vehicle in the name of Seller. Servicer is hereby authorized to take such steps
as are necessary to reperfect such security interest on behalf of Owner in the
event of the relocation of a Financed Vehicle or for any other reason.
Section 3.5. Servicer's Certificate. (a) On the second
Business Day prior to any Payment Date, with respect to each Transaction and the
Contracts subject thereto, Servicer shall deliver to Owner and Custodian a
certificate (the "Servicer's Certificate") setting forth the following
information, and such other information as Buyer may from time to time request:
(i) The number of Contracts subject to such Transaction;
(ii) The aggregate of payments received on such Contracts
during the preceding Collection Period allocable to
principal;
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(iii) The aggregate of payments received on such Contracts during the
preceding Collection Period allocable to interest;
(iv) The aggregate principal balance of such Contracts as of the close
of business on the last day of the preceding Collection Period, after
giving effect to payments allocated to principal on such day;
(v) The weighted average contract rate of such Contracts as of the
beginning of the preceding Collection Period;
(vi) The amount (and number) of such delinquencies 1 to 30 days, 31 to
60 days, 61 to 90 days, 91 to 120 days and 121 or more days as of the
end of the preceding Collection Period;
(vii) The percentage of such Contracts secured by new Financed
Vehicles, and the percentage of Contracts secured by used Financed
Vehicles as of the beginning of the preceding Collection Period;
(viii) Gross charge-offs, recoveries and net losses for the preceding
Collection Period;
(ix) (A) The number and aggregate principal balance of all Contracts in
respect of which the related Financed Vehicle has been repossessed
during the preceding Collection Period and (B) the number and aggregate
principal balance of all Contracts that were liquidated (otherwise than
pursuant to a voluntary prepayment) during such Collection Period;
(x) First payment defaults for the preceding Collection Period;
(xi) Obligor bankruptcy filings for the preceding Collection Period;
(xii) Repossession and liquidation expenses for the preceding
Collection Period;
(xiii) Deficiency and recovery expenses for the preceding Collection
Period;
(xiv) Prepayments and prepayment fees for the preceding Collection
Period;
(xv) the calculations (including the information necessary to do such
calculations), in reasonable detail, showing whether or not an Event of
Default has occurred pursuant to each of clause xiii and clauses xvii
through xxvi of
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Paragraph 9(a) of the Additional Supplemental Terms to the Repurchase
Agreement; and
(xvi) (a) The acceleration of any debt obligation or the termination of
any credit facility of Seller, Servicer or NAL Financial, respectively,
if any; (b) the amount and maturity of any such debt assumed after the
date hereof, if any; (c) any adverse developments with respect to
pending or future litigation involving Seller, Servicer or NAL
Financial, respectively, if any; and (d) any other developments which
might materially and adversely affect the financial condition of
Seller, Servicer or NAL Financial.
Section 3.6. Notice of Default. Servicer shall deliver to
Buyer and Custodian, promptly after having obtained knowledge thereof, but in no
event later than five Business Days thereafter, written notice of any event
which with the giving of notice or lapse of time, or both, would become an Event
of Default.
Section 3.7. Servicer Expenses. 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
Servicer, expenses incurred in connection with distributions and reports to
Owner or Custodian, fees and expenses of any subservicer or any other
subcontractor to provide for successor servicers.
Section 3.8. Establishment of Collection Account. (a) On or
before the first Purchase Date, Servicer shall establish and shall thereafter
maintain or cause to be maintained under the sole control of Custodian, an
account (the "Collection Account") entitled "Bankers Trust Company, as Custodian
under the Multi-Party Custodial and Servicing Agreement dated as of May 1, 1996
among Custodian, Cargill Financial Services Corporation, Autorics, Inc. and NAL
Acceptance Corporation"; provided, however, until the occurrence of an Event of
Default or contrary notice from Buyer, Servicer shall be permitted to make
deposits to the Collection Account. Funds on deposit in the Collection Account
shall be invested by Custodian in a proprietary money market fund or, if Buyer
so notifies Custodian, in Eligible Investments based on written instructions by
Buyer to Custodian, or so long as authorized in writing by Buyer, by Servicer to
Custodian, and maturing no later than the Business Day preceding the earlier of
the Repurchase Date and the Payment Date following the date of investment.
(b) Buyer shall possess all right, title and interest in all
funds on deposit from time to time in the Collection Account and in all proceeds
thereof (including, subject to the rights of Servicer to retain such amounts,
all income thereon).
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Section 3.9. Collections. Seller and Servicer covenant and
agree to procure all checks and other payments with respect to the Contracts,
Dealer Recourse and insurance proceeds ("Collections") and to make such checks
or other forms of payment immediately available to Buyer by causing their
deposit into the Collection Account within one (1) Business Day of receipt or as
otherwise directed by Buyer in writing. Seller, Servicer and Custodian covenant
and agree to notify Buyer if Collections have not been deposited to the
Collection Account for a period of two (2) Business Days; provided that
Custodian shall be obligated to so notify Buyer only to the extent that a
Responsible Officer has actual knowledge thereof. Any amounts received or
collected by Seller or Servicer shall be held in trust by them for the benefit
of Buyer and immediately remitted to the Collection Account or otherwise as
instructed by Buyer.
Section 3.10. Representations of Servicer. Servicer hereby
represents and warrants to Buyer that at the date of execution of this Agreement
and at each Purchase Date:
(i) Organization and Good Standing. Servicer has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Florida with power and authority to own
its properties and to conduct its business as such properties shall be
currently owned and such business is presently conducted and has had at
all relevant times, the power, authority and legal right to service the
Contracts.
(ii) Due Qualification. Servicer is duly qualified to do
business as a foreign corporation and is in good standing, and has
obtained all necessary licenses, permits, authorizations and approvals
in all jurisdictions in which the ownership or lease of property or the
conduct of its business or the performance of its duties under the
Related Documents shall require such qualifications, licenses, permits,
authorizations or approvals.
(iii) Power and Authority. Servicer has full power and
authority to execute and deliver the Related Documents and to carry out
their respective terms.
(iv) No Proceedings. There are no proceedings or
investigations pending, or, to Servicer's best knowledge, threatened,
before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over Servicer or its
properties: (i) asserting the invalidity of a Related Document; (ii)
seeking to prevent the consummation of any of the transactions
contemplated by a Related Document; or (iii) seeking any determination
or ruling that may have had a material adverse change in the business,
results of
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operations, financial condition or prospects of Servicer or the
performance by Servicer of its obligations under, or the validity or
enforceability of, a Related Document.
(v) All Consents Required. All approvals, authorizations,
consents, orders or other actions of or registrations with any Person
or of any governmental body or official required to be obtained on or
prior to the date hereof in connection with the execution and delivery
of the Related Documents, the performance of the transactions
contemplated by the Related Documents and the fulfillment of the terms
hereof and thereof have been obtained.
(vi) Place of Business. The chief executive office of
Servicer is located at 500 Cypress Creek Road West, Suite 590, Fort
Lauderdale, Florida 33309. Neither Servicer, nor any of its executive
officers, has operated under any trade names, or, within the last five
years, changed names or been the subject of any proceeding under the
United States Bankruptcy Code.
(vii) Due Authorization Execution, and Delivery. The
execution, delivery and performance of the Related Documents and the
consummation of the transactions provided for herein and therein have
been duly authorized by Servicer by all necessary action on the part of
Servicer and the Related Documents have been duly executed and
delivered by Servicer.
(viii) No Violations. The consummation of the transactions
contemplated by the Related Documents and the fulfillment of the terms
hereof shall not conflict with, result in any breach of any of the
terms and provisions of, nor constitute (with or without notice or
lapse of time) a default under, the articles of incorporation or
by-laws of Servicer, or any indenture, agreement, or other instrument
to which Servicer is a party or by which it shall be bound; nor result
in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any such indenture, agreement, or other
instrument; nor violate any law or any order, rule, or regulation
applicable to Servicer of any court or of any federal or state
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over Servicer or its properties.
(ix) Binding Obligation. The Related Documents constitute
legal, valid and binding obligations of Servicer enforceable against
Servicer in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general and
except as such enforceability may be limited by
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general principles of equity (whether considered in a suit at law or in
equity).
Section 3.11. Merger or Consolidation of, or Assumption of
the Obligations of, Servicer. Any Person (a) into which Servicer may be merged
or consolidated, (b) which may result from any merger or consolidation to which
Servicer shall be a party, or (c) which may succeed to the properties and assets
of Servicer substantially as a whole, which Person executed an agreement of
assumption to perform every obligation of Servicer hereunder, shall be the
successor to Servicer under this Agreement without further act on the part of
any of the parties to this Agreement; provided, however, that (1) Servicer shall
have delivered to Buyer and Custodian 120 days prior written notice of any such
merger or consolidation; (2) immediately after giving effect to such
transaction, no Event of Default, and no event which, after notice or lapse of
time, or both, would become an Event of Default shall have occurred and be
continuing; (3) Servicer shall have delivered to Buyer a certificate 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; and (4) Servicer
shall have delivered to Buyer an opinion of counsel stating that, in the opinion
of such counsel, either (i) 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 Buyer in the Contracts and reciting the
details of such filings, or (ii) no such action shall be necessary to preserve
and protect such interests.
Section 3.12. Resignation. Subject to the provisions of
Section 3.11, Servicer shall not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement except upon a determination by
the board of directors of Servicer that the performance of its duties under this
Agreement shall no longer be permissible under applicable law (any such
determination permitting the resignation of Servicer shall be evidenced by an
opinion of counsel to such effect delivered to Buyer and Custodian) and that
Servicer cannot reasonably comply therewith. No such resignation shall become
effective until a successor interim servicer acceptable to Buyer shall have
assumed the responsibilities and obligations of Servicer in respect of the
Contracts provided hereby.
Section 3.13. Appointment of Successor. (a) Upon Servicer's
receipt of notice of termination by Buyer after an Event of Default or
Servicer's resignation pursuant to Section 3.12, 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
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of such notice and, in the case of such resignation, until the later of (1) the
date sixty (60) days from the delivery to Buyer of written notice of such
resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (2) the date upon which Servicer shall become unable
to act as Servicer, as specified in the notice of resignation and the
accompanying opinion of counsel and subject to the last sentence of Section
3.12. In the event of Servicer's resignation or termination hereunder, Buyer
shall appoint a successor Servicer, and the successor Servicer shall accept its
appointment by a written assumption in form acceptable to the Owner and
Custodian. 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 3.13, Custodian without further action shall automatically be
appointed the successor Servicer. Notwithstanding the above, Custodian shall, if
it shall be unwilling or unable so to act, appoint, or petition a court of
competent jurisdiction to appoint, any established financial institution, having
a net worth of not less than $50,000,000 and whose regular business shall
include the servicing of motor vehicle receivables, as the successor to Servicer
under this Agreement; provided that such successor Servicer shall be reasonably
acceptable to Buyer.
(b) Upon appointment, the successor Servicer shall be the
successor in all respects to the predecessor Servicer and shall be subject to
all the responsibilities, duties, and liabilities arising thereafter relating
thereto placed on the predecessor Servicer, and shall be entitled to the
Successor Servicing Fee and all of the rights granted to the predecessor
Servicer, by the terms and provisions of the Agreement. A successor Servicer
(including Custodian) shall have no responsibility, shall not be in default and
shall incur no liability, for any act or failure to act by the predecessor
Servicer. Custodian shall not bear any of the costs, fees and expenses related
to the transfer of servicing obligations hereunder to a successor Servicer.
Section 3.14. Annual Accountants' Report; Quarterly
Compliance Report. (a) Servicer shall deliver to Buyer on or before ninety (90)
days after the end of its fiscal year, copies of its annual report to its
shareholders (prepared at its expense) which annual report shall include audited
financial statements prepared by a firm of independent certified public
accountants, who may also render other services to Servicer.
(b) Servicer shall deliver to Buyer and to Custodian a
certificate of an officer of Servicer, dated as of the last day of the month
preceding each quarter, stating that: (i) a review of the activities of Servicer
during the preceding three (3) month period and of its performance under this
Agreement has been made under such officer's supervision, and (ii) based on such
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review, Servicer has fulfilled all of its obligations under this Agreement
throughout such quarter or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and the
nature and status thereof.
Section 3.15. Temporary Release of Deposited Documents .
Servicer may from time to time request Custodian in writing to permit the
withdrawal of certain documents held by Custodian hereunder for the purpose of
servicing the Contracts or for permanent withdrawal, which request and
withdrawal shall be made in accordance with procedures set forth as Exhibit H
hereto. Custodian may permit the withdrawal of documents relating to the
Contracts for the purpose of servicing such documents without the written
consent of Buyer.
ARTICLE IV
CUSTODIAL DUTIES
Section 4.1. Transfer of Contracts; Delivery of Documents. At
least three (3) Business Days prior to a Contract becoming subject to this
Agreement, and thereby becoming eligible for inclusion in a Transaction, Seller
shall deliver, or cause to be delivered, to Custodian as Agent and Custodian the
following documents, together with a checklist indicating that such documents
have been checked by Seller:
(1) a List of Contracts, with the List Number set
forth thereon, containing such Contract,
together with the Computer Tape containing
such Contract and a completed checklist in
the form of Exhibit E hereto (it being
expressly understood and agreed that
Custodian has no duties or responsibilities
for checking or verifying the accuracy or
completeness of such checklist);
(2) the fully executed original Contract with
manual signatures and Dealer endorsements,
together with executed assignments thereof
by NAL Acceptance and Seller in blank, which
assignments shall be substantially in the
form of Exhibit C-1 and C-2 hereto;
(3) a written confirmation from Servicer
certifying as to the Insurance Policies
covering the Contract and stating that they
are in full force and effect;
(4) the original certificate of title relating to
the Financed Vehicle or (a) a copy of the
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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 Seller, NAL
Acceptance or Special Finance, Inc.
provided, however, that at any time during
the term hereof Buyer may request and
require that Seller cause the party in whose
name the lien is noted to transfer such lien
to Seller;
(5) an original or copy of the credit application
of the Obligor; and
(6) a financing statement on Form UCC-1 listing
Custodian as the secured party with respect
to Contracts and Related Assets set forth on
the List of Contracts for each Transaction
maintained by Custodian and stamped to
indicate filing with the Office of the
Secretary of State of the State of Florida.
Upon receipt of the foregoing items in respect of a
Transaction and completion of its review thereof, Custodian shall, at the
written direction of Seller, send to Buyer and Seller a certification in the
form of Exhibit D hereto that Custodian has received, for each Contract to be
subject to such Transaction, the items listed in clauses (1) through (6) of this
Section 4.1. The financing statement in clause (6) need be received only once.
On or prior to the Purchase Date for a Transaction, Servicer shall deliver to
Custodian in respect of each Contract subject to such Transaction a checklist in
the form of Exhibit E hereto indicating that Servicer has in its possession the
items on such checklist.
Seller shall file or cause to be filed all amendments to such
financing statement and all continuation statements as may be necessary to
perfect the interests of Custodian in the Contracts, Related Assets and
collateral related thereto. All financing statements, amendments and
continuation statements shall be filed at the expense of Seller.
All documents relating to the Contracts and Related Assets
referred to in clauses (1) through (6) above are referred to herein as the
"Custodian's Contract File".
Section 4.2. The Custodial Receipt and Confirmations. Upon
receipt of Transfer Instructions given by Seller in order to consummate a
Transaction, Custodian shall, with respect to the Contracts to be transferred to
Buyer in connection with such Transaction, number sequentially, execute and
deliver to Buyer
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one or more Custodial Receipt and Confirmations in the form attached hereto as
Exhibit A.
Each Custodial Receipt and Confirmation shall be delivered in
accordance with Sections 5.1(b) and (c) hereof. Upon the repurchase of Contracts
by Seller pursuant to the Repurchase Agreement and the written acknowledgment of
such repurchase by Buyer, Buyer shall promptly deliver to Custodian the
applicable Custodial Receipt and Confirmation issued in connection with such
repurchased Contracts.
Section 4.3. Custodial Register. Custodian shall cause to be
kept at its Corporate Trust Office a register (the "Custodial Register") in
which, subject to such reasonable regulations as it may prescribe, Custodian
shall reflect the ownership of Contracts as confirmed by Custodial Receipt and
Confirmations in substantially the form set forth herein as Exhibit A,
Acknowledgments from Custodian in substantially the form set forth herein as
Exhibit F and Retention Certificates in substantially the form set forth herein
as Exhibit G. The Custodial Register shall be deemed to contain proprietary
information and only Custodian and Buyer shall have access to such information.
Section 4.4. Payments. In respect of each Transaction, on each
Payment Date Custodian, on the basis of Servicer's Certificate provided by NAL
Acceptance hereunder, shall apply all collections (exclusive of scheduled
payments due on Precomputed Contracts prior to the related Cut-off Date and
collected after such Cut-off Date) in respect of the Contracts in such
Transaction that were received by Servicer in the related Collection Period (or,
in the case of payments made by Seller pursuant to Paragraph 8(e) of the
Additional Supplemental Terms, made in respect of such Payment Date) prior to
such Payment Date in the following order of priority: (i) to pay to Buyer an
amount necessary to reduce the aggregate outstanding amount of Purchased
Securities subject to this Agreement to an amount equal to the product of (a)
the Advance Rate Percentage, and (b) the aggregate outstanding amount of
Purchased Securities subject to this Agreement, determined as of the close of
business as of the last day of the immediately preceding Collection Period; (ii)
to pay to Custodian such fees and expenses due and payable under Section 6.3 of
this Agreement; (iii) to pay to Back-Up Servicer such fees and expenses due and
payable under the back-up servicing agreement (said amount not to exceed an
amount calculated as the quotient of (x) a monthly amount computed as the
product of (A) seven and one-half (7.5) basis points (.075%), and (B) the
aggregate outstanding amount of Purchased Securities subject to this Agreement,
determined as of the first day of the immediately preceding Collection Period,
and (y) 12); (iv) to pay to Servicer Servicer's Fee; (v) to pay to Buyer the
unpaid Price Differential accrued from and including the first day of the
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immediately preceding Collection Period (or, in the case of a Transaction whose
Purchase Date occurred after such first day of the immediately preceding
Collection Period, from and including such Purchase Date) to and including the
last day of the immediately preceding Collection Period; (vi) to pay to Buyer
such portion of the Annual Commitment Fee as is due and payable, if any; (vii)
to pay to Buyer, all theretofore accrued and unpaid expenses in respect of the
related Collection Period due to Buyer under or in connection herewith or any
Related Document; (viii) to pay to the applicable party, in respect of any
Transaction any, and all, shortfalls in respect of any, and all, Payment Dates
occurring prior to the current Payment Date, the amounts due to the applicable
parties pursuant to clauses (i), (ii), (iii), (v), (vi), or (vii); (ix) provided
that no Event of Default shall have occurred and be continuing, to Seller or
Seller's designee, such collections to the extent of collections remaining after
application pursuant to clauses (i) through (viii); and (x) if an Event of
Default shall have occurred and be continuing, to Buyer, such collections
remaining after application pursuant to clauses (i), (ii), (iii), (v), (vi),
(vii), or (viii). The calculation of such collections shall be set forth in
Servicer's Certificate in respect of such Collection Period.
Section 4.5. Additional Documents Delivered to Custodian after
an Event of Default.
(a) If an Event of Default on the part of Seller under the
Repurchase Agreement shall occur and be continuing and upon request of Buyer to
Servicer (with notice thereof to Custodian), Servicer is obligated to deliver to
Custodian to hold as agent and bailee for the Owner of the related Contract the
original Insurance Policies covering the Contracts and related Financed
Vehicles, together with assignments thereof in blank, in form satisfactory to
Owner.
(b) Custodian shall hold the documents delivered to it
pursuant to subsection (a) above as agent and bailee for the benefit of the
Owner of the related Contract.
Section 4.6. Authorized Persons. Buyer and Servicer shall each
deliver to Custodian from time to time a letter containing (i) a list of persons
authorized to execute documents on its behalf in respect of this Agreement and
(ii) a specimen signature for such persons.
Section 4.7. Copies of Documents. At the written request of
Seller or Buyer, Custodian shall make copies of specified documents relating to
the Contracts that are in its possession and deliver such copies to the
requesting party, all of which shall be an expense of the requesting party.
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ARTICLE V
OWNERSHIP AND TRANSFER OF CONTRACTS
Section 5.1. The Custodial Receipt and Confirmations.
(a) Each Custodial Receipt and Confirmation issued by
Custodian pursuant to the terms of this Agreement shall confirm Buyer's
ownership interest in the Contracts specified in such Custodial Receipt and
Confirmation. Each Custodial Receipt and Confirmation shall be executed by
manual signature on behalf of Custodian by a Responsible Officer of Custodian.
(b) Custodian shall issue a Custodial Receipt and Confirmation
to Buyer upon receipt of Transfer Instructions from Seller (which Custodial
Receipt and Confirmation shall list the Contracts being transferred to Buyer)
and deliver such Custodial Receipt and Confirmation in accordance with Section
5.1(c). Seller shall not name any person other than Buyer as a transferee in any
Transfer Instructions. All Custodial Receipt and Confirmations shall be dated as
of the date on which they are issued by Custodian.
(c) Custodian shall (i) deliver each Custodial Receipt and
Confirmation, with a schedule of related Contracts attached, by facsimile
transmission on the date such Custodial Receipt and Confirmation is required to
be issued and (ii) deliver the executed original, with the schedule of related
Contracts attached as required pursuant to subsection (b) above, as soon
thereafter as practicable, but in any event not later than the second succeeding
Business Day.
(d) Upon the request of Buyer, Custodian shall deliver to
Buyer within one Business Day of such request a copy of the Custodial Register,
which shall include the List of Contracts for each Custodial Receipt and
Confirmation.
Section 5.2. No Service Charge for Sale or Transfer of
Contracts. No service charge shall be made for any sale or transfer of
Contracts, but Custodian may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any sale or
transfer of Contracts.
Section 5.3. Persons Deemed Owners. Custodian shall treat as
the Owner of any Contract for all purposes whatsoever the person indicated as
the Owner thereof on the Custodial Register, and Custodian shall not be affected
by notice to the contrary.
Section 5.4. Unilateral Transfer of Contracts Owned by Seller.
Custodian shall, with respect to any Contracts which are not subject to a
Custodial Receipt and Confirmation, follow the
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instructions of Seller regarding the release and transfer of such Contracts from
this Agreement and shall do such other acts and execute such other documents as
may be deemed reasonably necessary by Seller to effect such release and
transfer. Such release and transfer shall be effected by Custodian solely on the
instructions of Seller and without any instructions or other communication from
any other party. All costs, fees and expenses relating to such release and
transfer shall be borne by Seller.
Section 5.5. Transfers to Third Persons. Custodian
acknowledges that Buyer may, but need not, transfer all or part of its
beneficial ownership interest in any or all Contracts to one or more Third
Persons. Buyer shall deliver to Custodian (a) a written notice substantially in
the form of Exhibit F hereto (a "Notice to Custodian") at least twenty-four (24)
hours prior to any such transfer, which Notice to Custodian will provide that
Buyer will transfer all or part of its beneficial ownership interest in the
Contracts identified on a schedule (the "Notice Schedule") attached to such
Notice to Custodian to a Third Person, (b) the existing Custodial Receipt and
Confirmation relating to such Contracts and (c) a Computer Tape listing the
Contracts to be transferred to such Third Person and the Contracts, if any, to
be retained by Buyer, respectively, together with a modem therefor. Such Notice
Schedule need not include all of the Contracts subject to such Custodial Receipt
and Confirmation. Within twenty-four (24) hours of receipt by Custodian of such
written notice, or on the Transfer Date (as defined below), whichever is later,
Custodian shall promptly deliver a Custodial Receipt and Confirmation covering
the Contracts listed in such Notice Schedule to such Third Person, pursuant to
which Custodian will be holding the Contracts identified in such Notice Schedule
solely and exclusively as the bailee of and custodian for such Third Person and
(ii) deliver to Buyer or its designee a Custodial Receipt and Confirmation
indicating the Contracts, if any, held pursuant to the Custodial Receipt and
Confirmation referred to in clause (b) above that shall be retained by Buyer;
provided, however, that Custodian shall not be required to deliver such new
Custodial Receipt and Confirmations until Custodian has received from Buyer
appropriate schedules to be attached thereto. The Notice to Custodian sent by
Buyer to Custodian shall specify (i) the name of the Third Person, (ii) the
address of the Third Person, which may be an address in care of Buyer, (iii) the
Notice Schedule and (iv) the effective date of transfer (the "Transfer Date").
Upon receipt of a Notice to Custodian from Buyer, Custodian shall (a) retain
possession and custody of Custodian's Contract File with respect to the
Contracts in the Notice Schedule as bailee (as that term is used in Section
9-305 of the UCC) of and custodian for such Third Person, and (b) make
appropriate notations in Custodian's books and records (including the Custodial
Register) reflecting that the Contracts identified in the Notice Schedule are
owned by such Third Person.
22
<PAGE>
Subsequent transfers of beneficial ownership interests in the
Contracts, identified in the Notice Schedule by a predecessor Third Person,
shall be effected by following the requirements of the preceding paragraph, with
the Third Person transferor satisfying the obligations of Buyer therein.
Custodian shall segregate and maintain continuous custody of
such Custodian's Contract Files for the benefit of the Third Person to whom it
has sent a Custodial Receipt and Confirmation and shall accept instructions from
no other person with respect to such Contract Files for so long as such Third
Person has an interest in such Contracts and until and unless otherwise
instructed by such Third Person. Buyer shall remain primarily liable for all of
Buyer's obligations with respect to such transferred Contract Files until the
transferee assumes the liabilities of Buyer hereunder.
With respect to the repurchase of the Contracts by Seller from
Buyer under the Repurchase Agreement, the interest of any Third Person in any
such Contracts shall automatically terminate simultaneously with the payment to
Buyer of the Repurchase Price for such Contracts under the Repurchase Agreement
and any such interest shall be deemed to have been transferred to Buyer as of
such time, except with respect to any Contracts delivered to a Third Person
pursuant to the Notice of Default Certificate attached hereto as Exhibit G.
Pursuant to the preceding sentence, the interest of any Third Person shall
automatically terminate irrespective of whether such Third Person receives the
appropriate payment for such Contracts.
Section 5.6. Verification Certificate. No later than five (5)
Business Days after the end of each calendar month, Custodian shall prepare and
send to Buyer the Verification Certificate substantially in the form attached
hereto as Exhibit I.
ARTICLE VI
CUSTODIAN
Section 6.1. Representations, Warranties and Covenants of
Custodian. Subject to the terms hereof, (i) Seller and Buyer hereby appoint
Custodian as Custodian hereunder; (ii) Buyer hereby appoints Custodian as its
Agent hereunder and for the purposes set forth in the Recitals; and (iii)
Custodian hereby accepts such appointments. Any reference to the Agent in any
financing statement or other document shall refer to the Agent as defined
herein. With respect to each Custodial Receipt and Confirmation, Custodian
hereby represents and warrants to, and covenants with the party indicated
thereon as the Owner of the
23
<PAGE>
related Contracts, that as of the date such Custodial Receipt and Confirmation
is provided:
(a) Custodian is duly organized, validly existing and in good
standing under the laws of the State of New York;
(b) Custodian has the corporate power and authority to enter
into and perform its obligations under this Agreement and has duly authorized,
executed and delivered this Agreement; and
(c) The execution and delivery of this Agreement will not
conflict with or result in a breach of any of the provisions of Custodian's
charter or by-laws.
(d) Except in accordance with Buyer's written request,
Custodian will not release or remove any security interest arising under
financing statements and continuation statements filed pursuant to Section 4.1
hereof in the Contracts, Related Assets and related collateral subject to this
Agreement.
Section 6.2. Custodian of Documents. Custodian, either
directly or by acting through an agent (which agent shall not be Seller or an
affiliate of Seller) or nominee, shall hold all documents relating to any
Contract or Related Asset that come into its possession for the exclusive use
and benefit of the Owner of such Contract and Related Assets and shall make
disposition thereof only in accordance with the instructions furnished by such
Owner. Custodian shall segregate and maintain continuous custody of all such
documents received by it in secure facilities in accordance with customary
standards for such custody and shall not release such documents or transfer such
documents to any other party, including any sub-custodian, without the express
written consent of the related Owner.
Section 6.3. Charges and Expenses. NAL Acceptance agrees to be
liable for the payment of all fees of Custodian in connection with the
performance of its duties hereunder in accordance with written agreements to be
entered into from time to time among Custodian, Buyer and NAL Acceptance,
including, without limitation, fees and expenses of counsel incurred by
Custodian in the performance of its duties hereunder; provided, however, that
(i) Custodian shall in no event acquire any lien upon any Contract or Related
Assets deposited under this Agreement, or any claim against any party or any
Owner, by reason of the failure of NAL Acceptance to pay such charges or
expenses and (ii) in the event NAL Acceptance fails to pay the fees and expenses
of Custodian as set forth in such written agreement, Custodian shall have no
obligation to take actions or incur costs in connection with this Agreement
unless Buyer, Seller, an Owner or another Person has made adequate provision for
payment of Custodian's fees and expenses.
24
<PAGE>
Section 6.4. No Adverse Interests. Custodian covenants and
warrants to Buyer, Seller and each Owner that to the actual knowledge of its
Responsible Officers: (i) as of the related date on which Custodian receives
evidence of the perfection of its interest in the related Contracts and Related
Assets, it holds no adverse interest, by way of security or otherwise, in any
Contract or Related Assets; and (ii) the execution of this Agreement and the
creation of the custodial relationship hereunder does not create any interest,
by way of security or otherwise of Custodian in or to any Contract or Related
Assets, other than Custodian's rights as custodian hereunder.
Section 6.5. Inspections. Upon reasonable prior written notice
to Custodian, any Owner and such Owner's agents, accountants, attorneys and
auditors will be permitted during normal business hours to examine Custodian's
documents, records and other papers in possession of or under the control of
Custodian relating to the Contracts owned by such Owner.
Section 6.6. Insurance. Custodian shall, at its own expense,
maintain at all times during the existence of this Agreement and keep in full
force and effect, (1) customary fidelity insurance, (2) customary theft of
documents insurance and (3) customary forgery insurance subject to deductibles.
Section 6.7. Limitation of Liability. Custodian assumes no
obligation, and shall be subject to no liability, under this Agreement to
Owners, except that Custodian agrees to use its best judgment and good faith in
the performance of such obligations and duties as are specifically set forth
herein. Custodian shall not be liable for any action or non-action by it in
reliance on advice of counsel believed by it in good faith to be competent to
give such advice. Custodian may conclusively rely and shall be protected in
acting upon any written notice, order, certificate, request, direction or other
document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
Section 6.8. Indemnification. Seller and NAL Acceptance agree,
jointly and severally, to indemnify Custodian against, and to hold it harmless
from, any claims, losses, liabilities, and any related out-of-pocket expenses
(including without limitation reasonable attorney's fees and expenses), which it
may incur in connection with this Agreement or the Custodial Receipt and
Confirmations, other than any liabilities and expenses arising out of
Custodian's negligence or bad faith. The indemnification provided in this
Section 6.8 shall survive the termination of this Agreement and the termination
of Custodian as Custodian under this Agreement.
25
<PAGE>
Section 6.9. Concerning Custodian.
(a) Limitation of Liability; Indemnification. In no event
shall Custodian be liable to Buyer, Seller or any third party for special,
indirect or consequential damages, or lost profits or loss of business, arising
under or in connection with this Agreement. Custodian may, with respect to
questions of law, apply for and obtain the advice and opinion of counsel, and
shall be fully protected with respect to anything done or omitted by it in good
faith in conformity with such reasonable advice or opinion. NAL Acceptance and
Seller agree, jointly and severally, to indemnify Custodian and to hold it
harmless against any and all losses (including claims by NAL Acceptance or
Seller) which are sustained by Custodian as a result of Custodian's action or
inaction in connection with this Agreement, except those losses arising out of
Custodian's negligence, bad faith or willful misconduct. Such indemnity shall
survive the termination of this Agreement and the termination of Custodian as
Custodian under this Agreement.
(b) No Guaranty by Custodian. It is expressly agreed and
acknowledged by Buyer and Seller that Custodian is not guaranteeing performance
of or assuming any liability for the obligations of Buyer or Seller hereunder
nor is it assuming any credit risk associated with Transactions hereunder, which
liabilities and risks are the responsibility of Buyer and Seller; further, it is
expressly agreed that Custodian is not undertaking to make credit available to
Seller or Buyer to enable it to complete Transactions hereunder.
(c) No Duty of Inquiry. Without limiting the generality of the
foregoing, Custodian shall be under no obligation to inquire into, and shall not
be liable for;
(i) The validity of the issue of any Securities purchased or
sold by or for Buyer or Seller, the legality of the purchase or sale or
the validity or enforceability of any Custodial Receipt and
Confirmation;
(ii) The due authority of any authorized person to act on behalf of
Buyer or Seller with respect to cash or Securities held in an account
of Buyer or Seller Account; or
(iii) The due authority of Buyer, Seller or any entities for which
Buyer acts to purchase, sell or hold any particular Security hereunder.
(d) Force Majeure. Custodian shall not be responsible or
liable for any failure or delay in the performance of its obligations under this
Agreement arising out of or caused, directly or indirectly, by circumstances
beyond its reasonable control, including without limitation, acts of God,
earthquakes,
26
<PAGE>
fires, floods, wars, civil or military disturbances, sabotage, epidemics, riots,
loss or malfunctions of utilities, computer (hardware or software) or
communications service, labor disputes, acts of civil or military authority, or
governmental, judicial or regulatory actions; provided however, that Custodian
shall use its best efforts to resume performance as soon as possible.
(e) No Additional Duties. Custodian shall have no duties or
responsibilities except such duties and responsibilities as are specifically set
forth in this Agreement and no covenant or obligation shall be implied in this
Agreement against Custodian.
(f) Custodian Not a Trustee. Custodian is an agent and bailee
of, and custodian for, the Owner, subject to the terms of this Agreement, and is
not a trustee acting on behalf of the Owner.
(g) Custodian Not Responsible for Losses on Contracts or
Eligible Investments. Custodian shall not be responsible for any losses incurred
by Owner in respect of the Contracts or Eligible Investments other than any
losses arising out of Custodian's negligence, bad faith or wilful misconduct.
(h) Custodian Not Required to Risk Its Own Funds. Custodian
shall not be required to expend its own funds in the performance of its duties
hereunder if it shall have reasonable grounds to believe that repayment of such
funds is not reasonably assured.
Section 6.10. Resignation or Removal of Custodian. Custodian
may at any time resign and be discharged from the obligations hereby created by
giving written notice thereof to Buyer. Upon receiving such notice of
resignation, Buyer shall promptly appoint a successor Custodian, by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Custodian and one copy to the successor Custodian. If no successor
Custodian shall have been so appointed and have accepted appointment within 30
days after the giving of such notice of resignation, the resigning Custodian may
petition any court of competent jurisdiction for the appointment of a successor
Custodian.
If at any time Custodian shall fail to resign after written
request therefor by Buyer, or if at any time Custodian shall be legally unable
to act, or shall be adjudged a bankrupt or insolvent, or a receiver of Custodian
or of its property shall be appointed, or any public officer shall take charge
or control of Custodian or of its property or affairs for the purpose of
rehabilitation, conservation, or liquidation, then Buyer may remove Custodian.
If it shall remove Custodian under the authority of the immediately preceding
sentence, Buyer shall
27
<PAGE>
promptly appoint a successor Custodian by written instrument, in duplicate, one
copy of which instrument shall be delivered to Custodian so removed and one copy
to the successor Custodian.
Any resignation or removal of Custodian and appointment of a
successor Custodian pursuant to any of the provisions of this Section 6.10 shall
not become effective until acceptance of appointment by the successor Custodian
pursuant to Section 6.11.
Section 6.11. Successor Custodian. Any successor Custodian
appointed pursuant to Section 6.10 shall execute, acknowledge, and deliver to
Buyer and to its predecessor Custodian an instrument accepting such appointment
under this Agreement, and thereupon the resignation or removal of the
predecessor Custodian shall become effective and such successor Custodian,
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 Custodian. The predecessor
Custodian shall, upon payment of all amounts due and payable to it, deliver to
the successor Custodian all documents and statements held by it under this
Agreement; and Seller, Buyer, Servicer and the predecessor Custodian 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
Custodian all such rights, powers, duties, and obligations.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. Amendment. This Agreement may be amended from
time to time by Custodian, Buyer, Seller and NAL Acceptance by written agreement
signed by such parties.
Section 7.2. Consent to Jurisdiction; Waivers of Jury Trial.
The parties irrevocably agree to submit to the personal jurisdiction of the
United States District Court for the Southern District of New York and that the
exclusive venue of all actions and proceedings, except a proceeding for
enforcement of a judgment, shall be in the United States District Court for the
Southern District of New York, the parties irrevocably waiving any objection
thereto. If, for any reason, federal jurisdiction is not available, and only if
federal jurisdiction is not available, the parties irrevocably agree to submit
to the personal jurisdiction of the Supreme Court of the State of New York and
that the exclusive venue of all actions and proceedings, except a proceeding for
the enforcement of a judgment, shall be in the Supreme Court of the State of New
York, New York County, the parties irrevocably waiving any objection thereto.
28
<PAGE>
Section 7.3. Notices. All demands, notices and communications
hereunder, except as otherwise provided herein, shall be in writing (including
telegraphic, facsimile or telex communications) and shall be effective and
deemed delivered only when received by the party to which it is sent; provided,
however, that a facsimile transmission shall be deemed to be received when
transmitted so long as the transmitting machine has provided an electronic
confirmation of such transmission. Any such notice shall be sent to a party at
the address or facsimile transmission number set forth below:
(a) in the case of Custodian:
Bankers Trust Company
4 Albany Street
10th Floor
New York, New York 10006
Attention: Structured Finance Administration
Telephone: (212) 250-6864
Telecopy: (212) 250-6439
with a copy to:
Bankers Trust Company
4 Albany Street
7th Floor
New York, New York 10006
Attention: Mortgage Custody
Telephone: (212) 250-5371
Telecopy: (212) 250-1185
(b) in the case of Buyer:
Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, Minnesota 55343-9497
Attention: Corporate Capital Group Funding Desk
Telephone: (612) 984-3058
Telecopy: (612) 984-3844
with a copy to:
Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, Minnesota 55343-9497
Attention: Law Department
Telephone: (612) 742-6334
Telecopy: (612) 984-3898
29
<PAGE>
(c) in the case of Seller:
Autorics, Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, Florida 33309
Attention: John T. Schaeffer
Robert R. Bartolini
Telephone: (305) 938-8200
Telecopy: (305) 938-8209
(d) in the case of NAL Acceptance:
NAL Acceptance Corporation
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, Florida 33309
Attention: John T. Schaeffer
Robert R. Bartolini
Telephone: (305) 938-8200
Telecopy: (305) 938-8209
Section 7.4. Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 7.5. No Partnership. Nothing herein contained shall be
deemed or construed to create a co-partnership or joint venture between the
parties hereto and the services of NAL Acceptance shall be rendered as an
independent contractor and not as agent for Buyer or Seller.
Section 7.6. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall together constitute but
one and the same instrument.
Section 7.7. Assignment. Except as expressly provided herein,
no party hereto shall sell, pledge, assign or otherwise transfer this Agreement
without the prior written consent of the other parties hereto.
Section 7.8. Headings. Section headings are for reference
purposes only and shall not be construed as a part of this Agreement.
30
<PAGE>
Section 7.9. Further Assurances. Seller, Custodian and NAL
Acceptance agree to do such further acts and things and to execute and deliver
to Buyer such additional assignments, agreements, powers and instruments as are
reasonably required by Buyer to carry into effect the purposes of this
Agreement, to perfect the interests of Custodian on behalf of Owner in the
Contracts and the Related Assets related thereto, to accommodate Buyer in the
event Buyer enters into repurchase arrangements with respect to the Securities
with any counterparty or to better assure and confirm unto Buyer its rights,
powers and remedies hereunder.
Section 7.10. Governing Law. This Agreement shall be governed
by the laws of the State of New York and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws.
31
<PAGE>
IN WITNESS WHEREOF, Buyer, Seller, Custodian and, for the
limited purposes indicated below, NAL Acceptance have caused their names to be
signed hereto by their respective officers thereunto duly authorized, all as of
the day and year first above written.
CARGILL FINANCIAL SERVICES CORPORATION,
as Buyer
By /s/ A. D MITZER
--------------------------------
Name:
Title:
AUTORICS, INC.,
as Seller
By
--------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Custodian
By
--------------------------------
Name:
Title:
NAL ACCEPTANCE CORPORATION,
as Servicer
By:
-------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, Buyer, Seller, Custodian and, for the
limited purposes indicated below, NAL Acceptance have caused their names to be
signed hereto by their respective officers thereunto duly authorized, all as of
the day and year first above written.
CARGILL FINANCIAL SERVICES CORPORATION,
as Buyer
By
--------------------------------
Name:
Title:
AUTORICS, INC.,
as Seller
By /s/ DENNIS R. LAVIGNE
--------------------------------
Name: Dennis R. LaVigne
Title: Vice President
BANKERS TRUST COMPANY,
as Custodian
By
--------------------------------
Name:
Title:
NAL ACCEPTANCE CORPORATION,
as Servicer
By /s/ DENNIS R. LAVIGNE
--------------------------------
Name: Dennis R. LaVigne
Title: Vice President
<PAGE>
IN WITNESS WHEREOF, Buyer, Seller, Custodian and, for the
limited purposes indicated below, NAL Acceptance have caused their names to be
signed hereto by their respective officers thereunto duly authorized, all as of
the day and year first above written.
CARGILL FINANCIAL SERVICES CORPORATION,
as Buyer
By
--------------------------------
Name:
Title:
AUTORICS, INC.,
as Seller
By
--------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Custodian
By /s/ MELISSA KAYE ADELSON
--------------------------------
Name: Melissa Kaye Adelson
Title: Vice President
NAL ACCEPTANCE CORPORATION,
as Servicer
By:
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
Custodial Receipt and Confirmation
[Date]
[ADDRESSEE]
Re: Confirmation of Ownership Interest in
Contracts under Repurchase Agreement
Gentlemen:
Bankers Trust Company, in its capacity as custodian (the
"Custodian") under a Multi-Party Custodial and Servicing Agreement dated May __,
1996 (the "Agreement"), by and among Cargill Financial Services Corporation
("Buyer"), Autorics, Inc., Custodian and NAL Acceptance Corporation, is pleased
to confirm your ownership interest, under the terms and conditions of the
Agreement, of the Contracts (as defined in the Agreement) and the payments due
thereunder listed on the schedule bearing List Number attached hereto, which
Contracts, based on such schedule, evidence an aggregate principal balance
thereunder equal to $_________ as of the date hereof.
In accordance with the provisions of Section 4.2 of the
above-referenced Agreement, the undersigned, as Custodian, hereby certifies that
(i) it has received all of the items listed in Section 4.1 of the Agreement with
respect to each Contract and the Related Assets identified on the List of
Contracts attached to the Transfer Instructions dated __________; (ii) the
documents referred to in the preceding clause (i) have been reviewed by it and
appear regular on their face; (iii) the signature block on such contract
contains a manual signature; and (iv) Custodian has received an original
executed [Transfer Instructions] [Notice to Custodian] in the form attached to
the Agreement. Any exceptions or deficiencies in a Custodian's Contract File are
set forth in an exception report attached hereto and made a part hereof.
Custodian shall act as agent and bailee exclusively for you
with respect to each such Contract until your interest therein is extinguished
or transferred as provided under the Agreement.
Custodian further certifies that as to each Contract,
Custodian holds the Contract without written notice (a) of any adverse claims,
liens or encumbrances, (b) that any Contract was overdue or has been dishonored,
(c) of evidence on the face of any Contract or other document relating thereto
in Custodian's possession of any security interest therein, or (d) of any
defense against or claim to the Contract by any other party.
A-1
<PAGE>
Custodian makes no representations or warranties as to the
validity, legality, sufficiency, enforceability, genuineness or prior recorded
status of any of the documents contained in each Custodian's Contract File or
the collectability, insurability, effectiveness or suitability of any Contract.
This Custodial Receipt and Confirmation is not divisible or
negotiable. However, you or an affiliate may transfer this Custodial Receipt and
Confirmation by special endorsement to another party as collateral for a loan or
pursuant to a repurchase transaction or to a third-party custodian pursuant to a
repurchase transaction.
Capitalized terms used herein without definition shall have
the meanings ascribed to them in the Agreement.
Bankers Trust Company,
as Custodian
By /s/
--------------------------------
Name:
Title:
cc: Autorics, Inc.
A-2
<PAGE>
EXHIBIT B
Form of Transfer Instructions
[Date]
Bankers Trust Company
4 Albany Street
New York, New York 102006
Dear _________:
Reference is made to the Multi-Party Custodial and Servicing Agreement
dated May __, 1996 among Autorics, Inc., Bankers Trust Company, Cargill
Financial Services Corporation and NAL Acceptance Corporation and to the Master
Repurchase Agreement dated May __, 1996 between Autorics, Inc. and Cargill
Financial Services Corporation (the "Agreement").
The undersigned, as Seller of the Contracts and Related Assets listed
on Schedule I hereto, hereby instructs you to transfer all of the undersigned's
right, title and interest in and to such Contracts and Related Assets, by
annotation on your books and records, to the following person:
Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, MN 55343-9497
AUTORICS, INC., as Seller
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
B-1
<PAGE>
EXHIBIT C-1
Form of Assignment
Reference is made to the Party Custodial and Servicing
Agreement dated as of May __, 1996 (the "Agreement") among Cargill Financial
Services Corporation, Autorics, Inc. ("Autorics"), Bankers Trust Company and NAL
Acceptance Corporation ("NAL Acceptance") and the Contracts Purchase Agreement
dated as of May __, 1996 (the "Contracts Purchase Agreement") between NAL
Acceptance and Autorics. All capitalized terms used herein without definition
shall have the respective meanings specified in the Agreement or the Contracts
Purchase Agreement.
NAL Acceptance does hereby assign to Autorics (i) all of NAL
Acceptance's right, title and interest in and to the Contracts listed on the
List of Contracts attached hereto and the proceeds thereof, (ii) the Related
Assets, (iii) any Insurance Policies relating to a Financed Vehicle securing a
Contract, (iv) its lien on each Financed Vehicle securing a Contract, the
application for certificate of title, any related lien on each Financed Vehicle
securing a Contract, any related lien entry form, any related letter of
guarantee and any related receipt of registration, (v) all documents contained
in Custodian's Contract Files and (vi) all proceeds in any way derived from the
foregoing.
NAL ACCEPTANCE CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
C-1-1
<PAGE>
EXHIBIT C-2
Form of Assignment
Reference is made to the Multi-Party Custodial and Servicing
Agreement dated as of May __, 1996 (the "Agreement") among Cargill Financial
Services Corporation ("CFSC"), Autorics, Inc. ("Autorics"), Bankers Trust
Company and NAL Acceptance Corporation. All capitalized terms used herein
without definition shall have the respective meanings specified in the
Agreement.
Autorics does hereby assign to _____________________, for
which Custodian is acting as custodian and bailee under the terms of the
Agreement, (i) all of Autorics' right, title and interest in and to the
Contracts listed on the List of Contracts attached hereto and the proceeds
thereof, (ii) the Related Assets, (iii) any Insurance Policies relating to a
Financed Vehicle securing a Contract, (iv) its lien on each Financed Vehicle
securing a Contract, the application for certificate of title, any related lien
on each Financed Vehicle securing a Contract, any related lien entry form, any
related letter of guarantee and any related receipt of registration, (v) all
documents contained in Custodian's Contract Files and (vi) all proceeds in any
way derived from the foregoing.
AUTORICS, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
C-2-1
<PAGE>
EXHIBIT D
CERTIFICATION
To: Cargill Financial Services Corporation
Autorics, Inc.
Date: __________ __, 199_
The undersigned hereby certifies that it is in possession of
the Contracts listed on the schedule attached hereto which have been delivered
to us pursuant to the Multi-Party Custodial and Servicing Agreement dated as of
May __, 1996, among Cargill Financial Services Corporation, Autorics, Inc.,
Bankers Trust Company and NAL Acceptance Corporation.
Bankers Trust Company,
as Custodian
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
D-1
<PAGE>
EXHIBIT E
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(RIGHT SIDE OF FILE)
RISK
NAME:_________________CODE:__________________ ACCOUNT #:______________________
<TABLE>
<CAPTION>
====================================================================================================================================
(X) (X)
UNDER EXCEPTIONS INT DOCUMENTATION AUDIT COMMENTS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
====================================================================================================================================
</TABLE>
- - ---------------------------- ------------------------------
Signature - Funder Date
- - ---------------------------- ------------------------------
Signature - Auditor Date
E-1
<PAGE>
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(LEFT SIDE OF FILE)
NAME:_________________CODE:__________________ ACCOUNT #:______________________
<TABLE>
<CAPTION>
====================================================================================================================================
(X) (X)
UNDER EXCEPTIONS INT DOCUMENTATION AUDIT COMMENTS
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
====================================================================================================================================
</TABLE>
- - ---------------------------- ------------------------------
Signature - Funder Date
- - ---------------------------- ------------------------------
Signature - Auditor Date
E-2
<PAGE>
EXHIBIT F
NOTICE TO CUSTODIAN
To:
From:
Date:
You are hereby notified that the undersigned has assigned its
right, title and interest in and to the Contracts identified in the Schedule
attached hereto (the "Notice Schedule") to [transferee's name and address] and
the undersigned hereby releases all right, title and interest in and to such
Contracts. You are hereby instructed to hold such Contracts pursuant to the
terms of the Multi-Party Custodial and Servicing Agreement, dated as of May __,
1996 among Cargill Financial Services Corporation, Autorics, Inc., Bankers Trust
Company and NAL Acceptance Corporation for the sole and exclusive benefit of
[name of transferee] and to execute and deliver to such person a Custodial
Receipt and Confirmation reflecting such custody.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
F-1
<PAGE>
EXHIBIT G
NOTICE OF DEFAULT CERTIFICATE
(REQUEST FOR RELEASE OF DOCUMENTS)
To:
Re: Multi-Party Custodial and Servicing Agreement dated as of
May __, 1996 among Cargill Financial Services Corporation,
Autorics, Inc., Bankers Trust Company and NAL Acceptance
Corporation (the "Custody Agreement")
As the transferee of certain Contracts identified in the
Notice Schedule attached to the Notice to Custodian, dated [date] from
[transferor] (a copy of which Notice is attached hereto) we hereby notify you
that an Event of Default has occurred under our agreement with Cargill Financial
Services Corporation and we are entitled to receive the Contracts so identified
in such Notice Schedule. Accordingly, pursuant to the Custody Agreement, we
request the release, and acknowledge receipt, of such Contracts identified in
such Notice Schedule and described below.
List Number:
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Notice of Default Certificate received by Custodian on __________ __, 199_:
Bankers Trust Company,
as Custodian
By:
----------------------------
Date:
--------------------------
G-1
<PAGE>
EXHIBIT H
REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
To: [Addressee]
Re: The Multi-Party Custodial and Servicing Agreement (the "Agreement"),
dated as of May __, 1996, among Cargill Financial Services Corporation,
Autorics, Inc., Bankers Trust Company and NAL Acceptance Corporation.
In connection with the administration of the Contracts held by
you as Custodian on behalf of Buyer, we request the release, and acknowledge
receipt, of the (Custodian's Contract File [specify documents]) for Contract
described below, for the reason indicated.
Obligor's Name Address & Zip Code:
Loan Number:
Reason for Requesting Documents (check one)
____ 1. Contract Paid in Full. (Servicer hereby certifies that
all amounts received in connection therewith have been
credited to the Collection Account as provided in the
Agreement.
____ 2. Repurchase of Contract pursuant to Paragraph 8(e) of the
Additional Supplemental Terms to the Repurchase Agreement.
(Servicer hereby certifies that the repurchase price has been
credited to the Collection Account as provided in the
Repurchase Agreement.)
____ 3. Contract Liquidated By ________________________.
(Servicer hereby certifies that all proceeds of
repossession, insurance, or other liquidation have been
finally received and credited to the Collection Account
pursuant to the Agreement).
____ 4. Contract being realized upon.
H-1
<PAGE>
____ 5. Other (explain) ____________________.
If box 1, 2 or 3 above is checked, and if all or part of
Custodian's Contract File was previously released to us, please release to us
our previous request and receipt on file with you, as well as any additional
documents in your possession relating to the specified Contract.
If box 4 or 5 above is checked, upon our return of all of the
above documents to you as Custodian, please acknowledge your receipt by signing
in the space indicated below, and returning this form.
The terms used and not otherwise defined herein shall have the
meaning assigned to them in the Agreement.
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
Acknowledgment of Documents returned to Custodian:
BANKERS TRUST COMPANY, as Custodian
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
H-2
<PAGE>
EXHIBIT I
VERIFICATION CERTIFICATE
______________ __, 199_
Cargill Financial Services Corporation
Attn.: Corporate Capital Group Funding Desk
6000 Clearwater Drive
Minnetonka, MN 55343-9497
Re: Multi-Party Custodial and Servicing Agreement dated as of
May___, 1996, by and among Cargill Financial Services
Corporation, Autorics, Inc., NAL Acceptance Corporation, and
Bankers Trust Company, as custodian (the "Custodial
Agreement")
Gentlepersons:
In accordance with Section 5.6 of the Custodial Agreement, the
undersigned, as Custodian, hereby certifies that, as of the last day of the
previous calendar month (_________ __, 199_), Custodian had in its possession
______ files held pursuant to the Custodial Agreement.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Custodial Agreement.
BANKERS TRUST COMPANY,
as Custodian
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
I-1
Execution Copy
RECEIVABLES PURCHASE AGREEMENT dated as of March 8, 1996, 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 1996-1
(the "Trust"), which will issue the 7.10% Asset Backed Notes, Class A-1 and
8.00% Asset Backed Notes, Class A-2 (collectively, the "Notes"), payment of
which will be secured by the Receivables, and the 13.50% 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.
"Closing Date" shall mean March 22, 1996.
"Collections" shall mean all amounts collected by the Servicer (from
whatever source) on or with respect to the Receivables.
"Cutoff Date" means March 8, 1996.
"Indenture" shall mean the Indenture dated as of March 8, 1996 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 March 21, 1996, 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 March 8, 1996, 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 March 8,
1996, 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 $38,132,633, 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):
(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;
(g) the obligations, duties and responsibilities of NAL to the Seller
made hereunder, including without limitation, the representations and warranties
made by NAL pursuant to Section 3.02(b) of this Agreement and the
representations and warranties on the Receivables made by NAL pursuant to
Section 3.02(c) of this Agreement and the right of the Seller to cause NAL to
purchase the Receivables under certain circumstances; and
(h) 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 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 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 Seller 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 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.
NAL agrees that such representations and warranties shall be conveyed
hereunder by the Seller to the Purchaser, by the Purchaser to the Issuer under
the Sale and Servicing Agreement, and pledged by the Issuer to the Indenture
Trustee. NAL further agrees that any such Person to whom such rights are
conveyed may enforce any and all remedies for the breach thereof directly
against NAL. NAL agrees that the Purchaser shall rely on such representations
and warranties in accepting the Receivables.
(c) NAL makes the following representations and warranties to the
Seller in respect of the Receivables. NAL agrees that such representations and
warranties shall be conveyed hereunder by the Seller to the Purchaser, by the
Purchaser to the Issuer under the Sale and Servicing Agreement, and pledged by
the Issuer to the Indenture Trustee. NAL further agrees that any such Person to
whom such rights are conveyed may enforce any and all remedies for the breach
thereof directly against NAL. NAL agrees that the Purchaser shall rely on such
representations and warranties 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 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 Receivable has a first full payment that
is 45 or more days overdue as of the Cutoff Date; no continuing
condition that with notice or the lapse of time would constitute a
default, breach, violation or 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 49.48 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 April 13, 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 60.31% of the aggregate principal
balance of the Receivables, constituting 68.40% 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 82.5% of the aggregate principal balance of
the Receivables as of the Cut-off Date represent Precomputed
Receivables; and the remainder of the Receivables represent Simple
Interest Receivables. The aggregate Principal Balance of the
Receivables as of the Cutoff Date is $40,825,653.68.
(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.
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.
(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 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 Seller's or any of its assignees 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 Seller for the benefit of the Seller and its assignees or their respective
assignees the occurrence of a breach of any of 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, provided, however, in the case of a breach
of the representation and warranty in Section 3.02(c)(xxvi) arising from the
failure to formally document or approve exceptions to the underwriting
guidelines, NAL will be obligated only to repurchase the related Receivable
only to the extent that the undocumented or unapproved exception was not
otherwise consistent with the exceptions made (and formally documented or
approved) to similar applicants and Receivables at approximately the same time.
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 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 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:
954-958-3590: Fax: 954-938-8209, 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: 954-958-3591; Fax: 954-938-8209,
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.
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:
EXHIBIT A
ASSIGNMENT
For value received, in accordance with the Receivables Purchase
Agreement dated as of March 8, 1996, 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; (vii) the obligations, duties and
responsibilities of NAL to the Seller made hereunder, including without
limitation, the representations and warranties made by NAL pursuant to Section
3.02(b) of the Receivables Purchase Agreement and the representations and
warranties made by NAL pursuant to Section 3.02(c) of the Receivables Purchase
Agreement; and (viii) 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 March 8, 1996.
AUTORICS, INC.
by ________________________
Name:
Title:
SCHEDULE I
Schedule of Receivables
[To Be Delivered at Closing]
SCHEDULE II
Location of Receivable Files
Bankers Trust Company
Four Albany Street
New York, NY 10006
EXECUTION COPY
SALE AND SERVICING AGREEMENT
among
NAL AUTO TRUST 1996-1,
Issuer,
and
AUTORICS II, INC.
Depositor,
and
NAL ACCEPTANCE CORPORATION,
Servicer
and
BANKERS TRUST COMPANY,
Backup Servicer
Dated as of March 8, 1996
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Other Definitional Provisions............................ 16
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables................................ 17
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of the
Depositor with Respect to the Receivables.............. 18
SECTION 3.02. Repurchase upon Breach................................... 19
SECTION 3.03. Custody of Receivable Files.............................. 19
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer....................................... 20
SECTION 4.02. Collection and Allocation of Receivable Payments......... 21
SECTION 4.03. Realization upon Receivables............................. 22
SECTION 4.04. Insurance................................................ 22
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles... 22
SECTION 4.06. Covenants of Servicer.................................... 23
SECTION 4.07. Purchase of Receivables upon Breach...................... 23
SECTION 4.08. Servicing Fee............................................ 23
SECTION 4.09. Servicer's Certificate................................... 24
SECTION 4.10. Annual Statement as to Compliance; Notice of Default..... 24
SECTION 4.11. Annual Independent Certified Public Accountants' Report.. 25
SECTION 4.12. Servicer Expenses........................................ 25
SECTION 4.13. Appointment of Subservicer............................... 25
SECTION 4.14. Oversight of Servicing................................... 26
SECTION 4.15. Duties of Backup Servicer................................ 27
ARTICLE V
Trust Accounts; Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Establishment of Trust Accounts.......................... 27
SECTION 5.02. Collections.............................................. 30
SECTION 5.03. Application of Collections............................... 30
SECTION 5.04. Additional Deposits...................................... 30
SECTION 5.05. Distributions............................................ 31
SECTION 5.06. Reserve Account.......................................... 32
SECTION 5.07. Statements to Certificateholders and Noteholders......... 33
SECTION 5.08. Transfer of the Notes.................................... 34
SECTION 5.09. Dealer Reserve Account................................... 35
ARTICLE VI
The Depositor
SECTION 6.01. Representations of Depositor............................. 35
SECTION 6.02. Corporate Existence...................................... 37
SECTION 6.03. Liability of Depositor; Indemnities...................... 38
SECTION 6.04. Merger or Consolidation of, or Assumption of
the Obligations of, Depositor.......................... 38
SECTION 6.05. Limitation on Liability of Depositor and Others.......... 39
SECTION 6.06. Depositor May Own Certificates or Notes.................. 39
SECTION 6.07. Sale of Receivables...................................... 39
ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer.............................. 40
SECTION 7.02. Indemnities of Servicer.................................. 41
SECTION 7.03. Merger or Consolidation of, or Assumption of
the Obligations of, Servicer........................... 43
SECTION 7.04. Limitation on Liability of Servicer and
Others................................................. 43
SECTION 7.05. NAL Not To Resign as Servicer............................ 44
SECTION 7.06. Representations of Backup Servicer....................... 44
SECTION 7.07. Merger or Consolidation of, or Assumption of
the Obligations of, Backup Servicer.................... 45
SECTION 7.08. Resignation as Backup Servicer........................... 45
ARTICLE VIII
Default
SECTION 8.01. Servicer Default......................................... 46
SECTION 8.02. Appointment of Successor................................. 47
SECTION 8.03. Notification to Noteholders and Certificateholders....... 48
SECTION 8.04. Waiver of Past Defaults.................................. 49
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables..................... 49
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment............................................... 51
SECTION 10.02. Protection of Title to Trust............................ 52
SECTION 10.03. Notices................................................. 54
SECTION 10.04. Assignment by the Depositor or the Servicer............. 54
SECTION 10.05. Limitations on Rights of Others......................... 55
SECTION 10.06. Severability............................................ 55
SECTION 10.07. Separate Counterparts................................... 55
SECTION 10.08. Headings................................................ 55
SECTION 10.09. Governing Law........................................... 55
SECTION 10.10. Assignment by Issuer.................................... 55
SECTION 10.11. Nonpetition Covenants................................... 55
SECTION 10.12. Limitation of Liability of Owner Trustee and
Indenture Trustee..................................... 56
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
SALE AND SERVICING AGREEMENT dated as of March 8, 1996, among NAL AUTO
TRUST 1996-1, 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.
"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 March 15, 2001
Distribution Date.
"Class A-1 Noteholder" means the Person in whose name a Class A-1 Note is
registered in the Note Register.
"Class A-2 Final Scheduled Distribution Date" means the June 15, 2001
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 March 22, 1996.
"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 March 22,
1996, 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 March 8, 1996.
"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 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.
"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 June 17, 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 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 June 15, 2001
Distribution Date.
"Final Scheduled Maturity Date" means March 12, 2001.
"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 March 8, 1996, 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 1996-1.
"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 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 13.50% 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.
"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.
"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 March 8, 1996, 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 $2,139,384.
"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.
"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, $2,139,384 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 $20,375,084.65 (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
$815,003.39 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 $815,003.39. 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 Company 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 March 8, 1996,
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, 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
$38,132,633, 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 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) all right, title and interest of the Depositor under the
Receivables Purchase Agreement, including, without limitation, 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 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 (initially), the Indenture Trustee (until all
amounts in respect of the Notes have been paid) and thereafter the Issuer, all
in accordance with the terms of the Custody Agreement, for all purposes of
Article 9 of the UCC, as Custodian of the following documents or instruments,
which are hereby constructively delivered to the Issuer or Indenture Trustee, as
pledgee of the Issuer, as the case may be, 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 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 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 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 or, 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 (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 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.
(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 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. With respect to a Precomputed Receivable the related payment on
behalf of which is less than the Scheduled Payment, amounts (to the
extent of the related Payahead Balance) in respect of such deficiency
will be transferred from the Payahead Account to the Collection Account
in accordance with Section 5.01(d).
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.
(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 to 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(b)(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 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. After the occurrence and
during the continuance 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;
(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 Servicer 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
$120,534.90 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).
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, 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.
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 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, 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.
(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.
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.
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 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, the
effectiveness of which appointment shall be subject to 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. 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 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 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 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 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, 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: 954-958-3591; Fax:
954-938-8209, 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 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.
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 1996-1
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:
SCHEDULE A
Schedule of Receivables
EXHIBIT A
NAL Acceptance Corporation
NAL Auto Trust 1996-1 Distribution Date Statement to Noteholders
- - -------------------------------------------------------------------------------
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]
Delinquent Receivables
30 days
60 days
90 days
EXHIBIT B
NAL Acceptance Corporation
NAL Auto Trust 1996-1 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]
Delinquent Receivables
30 days
60 days
90 days
- - -------------------------------------------------------------------------------
EXHIBIT C
Form of Servicer's Certificate
NAL Acceptance Corporation
NAL Auto Trust 1996-1 Monthly Servicer's Certificate(1)
[___________, 199__]
Dates Covered: From & Incl. _____ To & Incl.
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......................... $
- - -------------------
(1) Items that are marked with an * will be delivered quarterly.
IV. Pool Balance and Portfolio Information
Beginning of Period End of Period
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..........
- - --------
* Items that are marked with an * will be delivered quarterly.
Total Amount
Principal Amount...............$
Number of Receivables..........
VII. Original Deal Parameter Inputs
Aggregate Principal Balance of the
Receivables as of the Cutoff Date.............$
Weighted Average APR of the Receivables
as of the Cutoff Date......................... %
Weighted Average Remaining Term of the
Receivables as of the Cutoff Date............. months
Number of Receivables...........................
Initial Reserve Account Balance.................$
EXHIBIT D
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(RIGHT SIDE OF FILE)
RISK
NAME:_______________________ CODE:_____________________ ACCOUNT #:______________
================================================================================
(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
NAL ACCEPTANCE CORPORATION
CREDIT FILE CONTENTS
LOAN AND LEASE
(LEFT SIDE OF FILE)
NAME:_______________________ CODE:_____________________ ACCOUNT #:______________
================================================================================
(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
EXHIBIT E
Form of Assignment
Reference is made to the Sale and Servicing Agreement dated as of March
8, 1996 (the "Sale and Servicing Agreement") among NAL Auto Trust 1996-1,
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;
(7) all right, title and interest of [Autorics, Inc.] [Autorics II]
under the Receivables Purchase Agreement, including, without limitation, the
right of [Autorics, Inc.] [Autorics II] to cause NAL to purchase Receivables
under certain circumstances;
(8) the Trust Accounts; and
(9) the proceeds of any and all of the foregoing.
[NAL] [AUTORICS, INC.]
[AUTORICS II, INC.]
By:__________________________
Name:
Title:
EXECUTION COPY
INDENTURE
between
NAL AUTO TRUST 1996-1,
as Issuer
and
BANKERS TRUST COMPANY,
as Indenture Trustee
Dated as of March 8, 1996
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions....................................... 2
SECTION 1.02. Rules of Construction............................. 9
ARTICLE II
The Notes
SECTION 2.01. Form............................................ 9
SECTION 2.02. Execution, Authentication and
Delivery........................................ 9
SECTION 2.03. Temporary Notes................................. 10
SECTION 2.04. Limitations on Transfer of the Notes............ 10
SECTION 2.05. Registration; Registration of Transfer
and Exchange.................................... 13
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen
Notes........................................... 14
SECTION 2.07. Persons Deemed Owner............................ 15
SECTION 2.08. Payment of Principal and Interest;
Defaulted Interest.............................. 15
SECTION 2.09. Cancellation.................................... 16
SECTION 2.10. Tax Treatment................................... 17
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal and Interest............... 17
SECTION 3.02. Maintenance of Office or Agency................. 17
SECTION 3.03. Money for Payments To Be Held in Trust.......... 18
SECTION 3.04. Existence....................................... 19
SECTION 3.05. Protection of Trust Estate...................... 19
SECTION 3.06. Opinions as to Trust Estate..................... 20
SECTION 3.07. Performance of Obligations; Servicing
of Receivables.................................. 21
SECTION 3.08. Negative Covenants.............................. 23
SECTION 3.09. Annual Statement as to Compliance............... 23
SECTION 3.10. Issuer May Consolidate, etc., Only on
Certain Terms................................... 24
SECTION 3.11. Successor or Transferee......................... 25
SECTION 3.12. No Other Business............................... 26
SECTION 3.13. No Borrowing.................................... 26
SECTION 3.14. Servicer's Obligations.......................... 26
SECTION 3.15. Guarantees, Loans, Advances and Other
Liabilities..................................... 26
SECTION 3.16. Capital Expenditures............................ 26
SECTION 3.17. Removal of Administrator........................ 26
SECTION 3.18. Restricted Payments............................. 26
SECTION 3.19. Notice of Events of Default..................... 27
SECTION 3.20. Further Instruments and Acts.................... 27
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of
Indenture....................................... 27
SECTION 4.02. Application of Trust Money...................... 28
SECTION 4.03. Repayment of Moneys Held by Paying
Agent........................................... 28
ARTICLE V
Remedies
SECTION 5.01. Events of Default............................... 29
SECTION 5.02. Acceleration of Maturity; Rescission
and Annulment................................... 30
SECTION 5.03. Collection of Indebtedness and Suits
for Enforcement by Indenture Trustee............ 31
SECTION 5.04. Remedies; Priorities............................ 33
SECTION 5.05. Optional Preservation of the
Receivables..................................... 35
SECTION 5.06. Limitation of Suits............................. 35
SECTION 5.07. Unconditional Rights of Noteholders To
Receive Principal and Interest.................. 36
SECTION 5.08. Restoration of Rights and Remedies.............. 36
SECTION 5.09. Rights and Remedies Cumulative.................. 36
SECTION 5.10. Delay or Omission Not a Waiver.................. 36
SECTION 5.11. Control by Noteholders.......................... 37
SECTION 5.12. Waiver of Past Defaults......................... 37
SECTION 5.13. Undertaking for Costs........................... 38
SECTION 5.14. Waiver of Stay or Extension Laws................ 38
SECTION 5.15. Action on Notes................................. 38
SECTION 5.16. Performance and Enforcement of Certain
Obligations..................................... 38
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee..................... 39
SECTION 6.02. Rights of Indenture Trustee..................... 40
SECTION 6.03. Individual Rights of Indenture
Trustee......................................... 41
SECTION 6.04. Indenture Trustee's Disclaimer.................. 41
SECTION 6.05. Notice of Defaults.............................. 41
SECTION 6.06. Reports by Indenture Trustee to
Holders......................................... 42
SECTION 6.07. Compensation and Indemnity...................... 42
SECTION 6.08. Replacement of Indenture Trustee................ 43
SECTION 6.09. Successor Indenture Trustee by Merger........... 44
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee...................... 44
SECTION 6.11. Eligibility; Disqualification................... 45
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee
Names and Addresses of Noteholders.............. 46
SECTION 7.02. Preservation of Information;
Communications to Noteholders................... 46
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money............................. 46
SECTION 8.02. Trust Accounts.................................. 47
SECTION 8.03. General Provisions Regarding Accounts........... 47
SECTION 8.04. Release of Trust Estate......................... 48
SECTION 8.05. Opinion of Counsel.............................. 49
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without
Consent of Noteholders.......................... 49
SECTION 9.02. Supplemental Indentures with Consent
of Noteholders.................................. 50
SECTION 9.03. Execution of Supplemental Indentures............ 52
SECTION 9.04. Effect of Supplemental Indenture................ 52
SECTION 9.05. Reference in Notes to Supplemental
Indentures...................................... 53
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption..................................... 53
SECTION 10.02. Form of Redemption Notice...................... 53
SECTION 10.03. Notes Payable on Redemption Date............... 54
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions,
etc............................................ 54
SECTION 11.02. Form of Documents Delivered to
Indenture Trustee.............................. 55
SECTION 11.03. Acts of Noteholders............................ 56
SECTION 11.04. Notices, etc., to Indenture Trustee,
Issuer and Rating Agencies..................... 56
SECTION 11.05. Notices to Noteholders; Waiver................. 57
SECTION 11.06. Alternate Payment and Notice
Provisions..................................... 58
SECTION 11.07. [Reserved]..................................... 58
SECTION 11.08. Effect of Headings and Table of
Contents....................................... 58
SECTION 11.09. Successors and Assigns......................... 58
SECTION 11.10. Separability................................... 58
SECTION 11.11. Benefits of Indenture.......................... 58
SECTION 11.12. Legal Holidays................................. 58
SECTION 11.13. Governing Law.................................. 59
SECTION 11.14. Counterparts................................... 59
SECTION 11.15. Recording of Indenture......................... 59
SECTION 11.16. Trust Obligation............................... 59
SECTION 11.17. No Petition.................................... 59
SECTION 11.18. Inspection..................................... 60
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
EXHIBIT E Form of Depository Agreement
INDENTURE dated as of March 8, 1996, between NAL AUTO TRUST 1996-1, 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 7.10%
Asset Backed Notes (the "Class A-1 Notes") and Class A-2 8.00% 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 choses 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).
"Account Agreement" means the Account Agreement, dated March 22, 1996 by
and between SunTrust Bank, South Florida, National Association and Servicer,
with the Issuer and the Indenture Trustee as third party beneficiaries.
"Administration Agreement" means the Administration Agreement dated as of
March 8, 1996, 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.
"Book-Entry Note" means the Note that (i) evidences all or part of the
Notes, (ii) the beneficial ownership of which is evidenced by book entries on
the ledger or accounts of the Depository where such Note is held and (iii) bears
the legend set forth in Exhibits A-1 and A-2.
"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 7.10% 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 7.10% Asset Backed Notes,
substantially in the form of Exhibit A-1.
"Class A-2 Interest Rate" means 8.00% 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 8.00% Asset Backed Notes,
substantially in the form of Exhibit A-2.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means March 22, 1996.
"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.
"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.
"Depository Agreement" means the agreement dated March 22, 1996, among
the Issuer, the Trustee, and The Depository Trust Company, as the initial
Clearing Agency, substantially in the form of Exhibit E.
"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.
"Interest Rate" means the Class A-1 Interest Rate and the Class A-2
Interest Rate.
"Issuer" means NAL Auto Trust 1996-1 until a successor replaces it and,
thereafter, means the successor and, for purposes of any provision contained
herein, 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 Owner" means, with respect to any Note held in book-entry form,
the Person who is the beneficial owner of such Note, as reflected on the books
of the Clearing Agency (directly as a Clearing Agency participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency.
"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.
"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 March 8, 1996, 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 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 March 8, 1996, 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.
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 $37,082,000 and Class A-2 Notes for original issue in an
aggregate principal amount of $1,630,000.
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 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 cause the Servicer to 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.
If an election is made to hold a Note in book-entry form, the Note shall
be registered in the name of a nominee designated by the Clearing Agency (and
may be aggregated as to denominations with other Notes held by the Clearing
Agency). With respect to Notes held in book-entry form:
(i) the Note Registrar and the Trustee will be entitled to deal
with the Clearing Agency for all purposes of this Indenture (including
the payment of principal of and interest on the Notes and the giving of
instructions or directions hereunder) as the sole holder of the Notes,
and shall have no obligation to the Note Owners;
(ii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this
Section shall control;
(iii) the rights of Note Owners will be exercised only through the
Clearing Agency and will be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Depository Agreement;
(vi) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the Notes,
the Clearing Agency will be deemed to represent such percentage only to
the extent that it has received instructions to such effect from Note
Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
Notes and has delivered such instructions to the Trustee; and
(iv) without the consent of the Issuer and the Trustee, no such
Note may be transferred by the Depository except to a successor
Depository that agrees to hold such Note for the account of the Owners or
except upon the election of the Owner thereof or a subsequent transferee
to hold such Note in physical form.
Neither the Trustee nor the Registrar shall have any responsibility to monitor
or restrict the transfer of beneficial ownership in any Note an interest in
which is transferable through the facilities of the Depository.
If (i) the Administrator advises the Indenture Trustee in writing that
the Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Notes held in book-entry form and the
Administrator is unable to locate a qualified successor, (ii) the Administrator
at its option advises the Indenture Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Default or a Servicer Default, Note Owners
representing beneficial interests aggregating at least a majority of the
Outstanding Amount of such Notes advise the Clearing Agency in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of such Note Owners, then the Clearing Agency shall notify
all Note Owners and the Indenture Trustee of the occurrence of any such event
and of the availability of definitive Notes to Note Owners requesting the same.
Upon surrender to the Indenture Trustee of the typewritten Notes representing
the Notes held in book-entry form by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Indenture Trustee
shall authenticate the definitive Notes in accordance with the instructions of
the Clearing Agency. None of the Issuer, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of definitive Notes, the Indenture Trustee shall recognize the
Holders of the definitive Notes as Noteholders.
The Issuer shall cause each Note to contain a legend stating that
transfer of the Notes is subject to certain restrictions and referring
prospective purchasers of the Notes to this Section 2.4 with respect to such
restrictions.
SECTION 2.05. Registration; Registration of Transfer and Exchange. (a)
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.
(b) 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.
(c) 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.
(d) 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.
(e) 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.
(f) Any and all transfers from a Book-Entry Note to a transferee wishing
to take delivery in the form of a definitive Note will require the transferee to
take delivery subject to the restrictions on the transfer of such definitive
Note described in the legend set forth on the face of the Note substantially in
the form of Exhibits A-1 and A-2 as attached hereto (the "Legend"), and such
transferee agrees that it will transfer such a Note only as provided therein and
herein. No such transfer shall be made and the Trustee shall not register any
such transfer unless such transfer is made in accordance with this Section 2.05
hereof.
Upon acceptance for exchange or transfer of a beneficial interest in a
Book-Entry Note for a definitive Note, as provided herein, the Trustee shall
endorse on the schedule affixed to the related Book-Entry Note (or on a
continuation of such schedule affixed to the such Book-Entry Note and made a
part thereof) an appropriate notation evidencing the date of such exchange or
transfer and a decrease in the principal balance of such Book-Entry Note equal
to the principal balance of such definitive Note issued in exchange therefor or
upon transfer thereof. Unless determined otherwise by the Trustee in accordance
with applicable law, a definitive Note issued upon transfer of or exchange for a
beneficial interest in the Book-Entry Note shall bear the Legend.
(g) If a Holder of a definitive Note wishes at any time to transfer such
definitive Note to a Person who wishes to take delivery thereof in the form of a
beneficial interest in the Book-Entry Note, such transfer may be effected only
in accordance with the applicable procedures of the Depository and this Section
2.05 (g). Upon receipt by the Trustee at the Corporate Trust Office of (1) the
definitive Note to be transferred with an assignment and transfer, (2) written
instructions given in accordance with the applicable procedures from a
participant directing the Trustee to credit or cause to be credited to another
specified participant's account a beneficial interest in the Book-Entry Note, in
an amount equal to the principal balance of the definitive Note to be so
transferred, (3) a written order given in accordance with the applicable
procedures containing information regarding the account of the participant to be
credited with such beneficial interest, and (4) representations from the
transferee to the effect that it is a "qualified institutional buyer" as
provided in Section 2(b) of the Investment Letter, the Trustee shall cancel such
definitive Note, execute and deliver a new definitive Note for the principal
balance of the definitive Note not so transferred, registered in the name of the
Holder or the Holder's transferee (as instructed by the Holder), and the Trustee
shall instruct the Depository to increase the principal balance of the
Book-Entry Note, by the principal balance of the definitive Note to be so
transferred, and to credit or cause to be credited to the account of the Person
specified in such instructions a corresponding principal balance of the
Book-Entry Note.
Under no circumstances may an institutional "accredited investor" within
Regulation D of the Securities Act take delivery in the form of a beneficial
interest in a Book-Entry Note if such purchaser is not a "qualified
institutional buyer" as defined under Rule 144A under the 1933 Act.
(h) An exchange of a beneficial interest in a Book-Entry Note for a
definitive Note or Notes, an exchange of a definitive Note or Notes for a
beneficial interest in the Book-Entry Note and exchange of a definitive Note or
Notes for another definitive Note or Notes (in each case, whether or not such
exchange is made in anticipation of subsequent transfer, and in the case of the
Book-Entry Note, so long as the Book-Entry Note remains outstanding and is held
by or on behalf of the Depository), may be made only in accordance with this
Section 2.05 and in accordance with the rules of the Depository.
(i) 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.
(j) 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.
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 (i) upon written request of a Noteholder to the Paying Agent not
later than the Record Date prior to the related Distribution Date or (ii) if the
registered Noteholder is the nominee of the Clearing Agency, 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 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
(and each Note Owner by its acceptance of a beneficial interest in a Note held
in book-entry form), 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 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 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 December 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 December 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.
(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) In the event of the Servicer's termination under the Sale and
Servicing Agreement, 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) of the Sale and Servicing Agreement) 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 of the Sale and Servicing Agreement (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 the Sale and
Servicing Agreement and the transactions set forth or provided for therein and
shall be subject to all the responsibilities, duties and liabilities relating
thereto placed on the Servicer by the terms and provisions thereof; 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 therein 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 or unwilling 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 the Sale and Servicing Agreement.
(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.
(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 1996), 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.
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
(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 1996-1 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 1996-1 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.
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.
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 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 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, 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;
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 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;
(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;
(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 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;
(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.
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 and under the Account
Agreement. 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:
(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 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.
SECTION 6.12. Authorization Concerning the Account Agreement. The
Indenture Trustee is hereby authorized to enter into the Account Agreement.
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 Certificate-
holders, 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 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 received 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.
(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 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 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.
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.
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 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 1996-1, in care of Wilmington Trust Company,
as Owner Trustee, 100 N. Market Street, Rodney Square North, Wilmington,
Delaware 19801; facsimile: 302-651-8882; 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.
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) 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 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 1996-1,
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:
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
, 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 1996-1, a Delaware business trust, and that
she 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 22nd day of March, 1996.
------------------------------------------------
Notary Public in and for the State of New York.
My commission expires:
- - ------------------------------------
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 22nd day of March, 1996.
-------------------------------------------------
Notary Public in and for the State of New York.
My commission expires:
- - ----------------------------------------
SCHEDULE 1
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.
SECTION 2.04 OF THE INDENTURE CONTAINS FURTHER RESTRICTIONS ON THE TRANSFER AND
RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE, BY ACCEPTANCE HEREOF, IS
DEEMED TO HAVE ACCEPTED THIS NOTE SUBJECT TO THE FOREGOING RESTRICTIONS ON
TRANSFERABILITY.
EACH NOTEHOLDER OR NOTE OWNER, BY ITS ACCEPTANCE OF THIS SECURITY, COVENANTS AND
AGREES THAT SUCH NOTEHOLDER OR NOTE OWNER 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.
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.
[UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
REGISTERED $________________
No. R- CUSIP NO. 628948AA9
NAL AUTO TRUST 1996-1
CLASS A-1 7.10% ASSET BACKED NOTES
NAL Auto Trust 1996-1, 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 March 8, 1996
(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 March 15, 2001 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.
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 1996-1,
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
Reverse
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 7.10% 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 June, 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 either (i) such Person notifies the Paying Agent in writing not later
than the Record Date prior to a Distribution Date or (ii) the Registered Holder
of this Note is the nominee of the Clearing Agency, in which case, 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 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 or Note Owner, 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 or Note Owner, 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 or Note Owner, 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.
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.
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.
EXHIBIT A-2
[FORM OF CLASS A-2 NOTE]
THIS CLASS A-2 NOTE IS SUBORDINATED TO THE CLASS A-1 NOTES TO THE EXTENT SET
FORTH IN THE INDENTURE.
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.
SECTION 2.04 OF THE INDENTURE CONTAINS FURTHER RESTRICTIONS ON THE TRANSFER AND
RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE, BY ACCEPTANCE HEREOF, IS
DEEMED TO HAVE ACCEPTED THIS NOTE SUBJECT TO THE FOREGOING RESTRICTIONS ON
TRANSFERABILITY.
EACH NOTEHOLDER OR NOTE OWNER, BY ITS ACCEPTANCE OF THIS SECURITY, COVENANTS AND
AGREES THAT SUCH NOTEHOLDER OR NOTE OWNER 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.
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.
[UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
REGISTERED $______________
No. R- CUSIP NO. 628948AB7
NAL AUTO TRUST 1996-1
CLASS A-2 8.00% ASSET BACKED NOTES
NAL Auto Trust 1996-1, 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 March 8, 1996 (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 June 15, 2001 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.
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 1996-1,
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
Reverse
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 8.00% 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 June, 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 (i) such Person notifies the Paying Agent in writing not later than the
Record Date prior to a Distribution Date or (ii) the Registered Holder of this
Note is the nominee of the Clearing Agency, in which case, 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 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 or Note Owner, 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 or Note Owner 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 or Note Owner, 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.
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.
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.
EXHIBIT C
FORM OF TRANSFEROR CERTIFICATE
[DATE]
[Depositor]
[Depositor Address]
[Owner Trustee]
[Owner Trustee Address]
[Indenture Trustee]
[Indenture Trustee Address]
Re: NAL Auto Trust 1996-1
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
EXHIBIT D
FORM OF INVESTMENT LETTER
Autorics II, Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, Florida 33309
Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Bankers Trust Company
4 Albany Street
New York, New York 10006
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate principal
amount of % Asset Backed Notes (the "Securities") of NAL Auto Trust 1996-1
(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, 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 (i) or (iii), 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) which is
satisfactory to the Depositor and the Indenture Trustee be delivered to
the Indenture Trustee and the Depositor 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.
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: ______________________
Name:
Title:
Date: ____________________
TRUST AGREEMENT
between
AUTORICS II, INC.,
as Depositor,
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
Dated as of March 8, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
----
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............................................................ 7
SECTION 2.09. Situs of Trust..................................................................... 7
<PAGE>
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 Interests
SECTION 3.01. Initial Ownership.................................................................. 9
SECTION 3.02. The Trust Certificates............................................................. 9
SECTION 3.03. Authentication of Trust Certificates............................................... 10
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.................................................................... 13
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
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................................................................... 16
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
<PAGE>
SECTION 6.02. General Duties..................................................................... 18
SECTION 6.03. Action upon Instruction............................................................ 19
SECTION 6.04. No Duties Except as Specified in this
Agreement or in Instructions..................................................... 20
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............................................................................ 24
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...................................................... 25
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 Trustee......................................... 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........................................... 29
SECTION 10.05. Appointment of Co-Trustee or Separate
Trustee.......................................................................... 29
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments......................................................... 30
<PAGE>
SECTION 11.02. No Legal Title to Owner Trust Estate in
Owners........................................................................... 32
SECTION 11.03. Limitations on Rights of Others.................................................... 32
SECTION 11.04. Notices............................................................................ 32
SECTION 11.05. Severability....................................................................... 33
SECTION 11.06. Separate Counterparts.............................................................. 33
SECTION 11.07. Successors and Assigns............................................................. 33
SECTION 11.08. Covenants of the Depositor......................................................... 33
SECTION 11.09. No Petition........................................................................ 33
SECTION 11.10. No Recourse........................................................................ 34
SECTION 11.11. Headings........................................................................... 34
SECTION 11.12. GOVERNING LAW...................................................................... 34
SECTION 11.13. [Reserved]......................................................................... 34
SECTION 11.14. Depositor Payment Obligation....................................................... 34
</TABLE>
EXHIBIT A Form of Trust Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Certificate Depository Agreement
TRUST AGREEMENT dated as of March 8, 1996, 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 March 8, 1996, 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.
<PAGE>
"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 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
March 8, 1996, between the Trust and Bankers Trust Company, as Custodian.
"Demand Note" shall mean, in the case of the Depositor, the Demand Note
dated March 21, 1996, 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 March 8, 1996 between
the Trust and Bankers Trust Company, as Indenture Trustee.
"Initial Certificate Balance" shall mean $2,038,169.30.
"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
<PAGE>
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.
"Paying Agent" shall mean any paying agent or co-paying agent appointed
pursuant to Section 3.09 and shall initially be Wilmington Trust Company.
"Person" shall mean 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.
"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 March 8, 1996, 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
<PAGE>
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; 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 1996-1," 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
<PAGE>
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;
(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 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.
<PAGE>
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.
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,
<PAGE>
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 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
<PAGE>
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
(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,
<PAGE>
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.
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
<PAGE>
jurisdiction. The Depositor shall provide to any Holder of a Certificate and any
prospective transferee designated 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 attached hereto as Exhibit D 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"), (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 or (C) if such Person is an insurance company,
a representation that such Person is an insurance company that is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in section v(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates and any deemed extension of credit from a Certificateholder which
is a party in interest to a Plan, the assets of which are held by such
"Insurance Company" are covered under PTCE 95-60; 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
Owner Trustee or any authenticating agent. At the option of a Holder, Trust
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
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 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
<PAGE>
applicable state or 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.
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.
<PAGE>
(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.
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
<PAGE>
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 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
<PAGE>
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, 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.
<PAGE>
(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, 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
<PAGE>
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,
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
<PAGE>
7.01. The 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 distribution 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 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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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.
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
<PAGE>
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 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 material respect the interests
of any Noteholder or Certificateholder.
<PAGE>
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 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
<PAGE>
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.: 954-958-3591; facsimile:
954-938-8209, 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.
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)
<PAGE>
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
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
<PAGE>
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.
* * * * * *
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:
EXHIBIT A
FORM OF TRUST CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED TO THE NOTES, AS SET FORTH IN THE SALE AND
SERVICING AGREEMENT.
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
<PAGE>
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
(iii) 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) 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
<PAGE>
UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE
ENTITY. ACCORDINGLY, NO CERTIFICATE WILL BE REGISTERED FOR TRANSFER UNLESS THE
OWNER TRUSTEE RECEIVES EITHER (1) A REPRESENTATION FROM THE TRANSFEREE OF SUCH
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE NEITHER IS NOR IS ACTING ON
BEHALF OF A PLAN AND IS NOT USING THE ASSETS OF A PLAN SUBJECT TO ERISA OR THE
CODE TO INVEST IN THE CERTIFICATES, (2) IF THE TRANSFEREE IS A PLAN, OR IS
ACTING ON BEHALF OF A PLAN, OR IS USING THE ASSETS OF A PLAN, AN OPINION OF
COUNSEL SATISFACTORY TO THE OWNER TRUSTEE TO THE EFFECT THAT SUCH TRANSFER WILL
NOT RESULT IN THE ASSETS OF THE TRUST BEING DEEMED TO BE "PLAN ASSETS" OR (3) IF
THE PURCHASER IS AN INSURANCE COMPANY, A REPRESENTATION THAT THE PURCHASER IS AN
INSURANCE COMPANY THAT IS PURCHASING SUCH CERTIFICATES WITH FUNDS CONTAINED IN
AN "INSURANCE COMPANY GENERAL ACCOUNT" (AS SUCH TERM IS DEFINED IN SECTION V(e)
OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60")) AND THAT THE
PURCHASE AND HOLDING OF SUCH CERTIFICATES AND ANY DEEMED EXTENSION OF CREDIT
FROM A CERTIFICATEHOLDER WHICH IS A PARTY IN INTEREST TO A PLAN, THE ASSETS OF
WHICH ARE HELD BY SUCH "INSURANCE COMPANY" ARE COVERED UNDER PTCE 95-60. ANY
PURPORTED TRANSFER OF A CERTIFICATE TO OR ON BEHALF OF A PLAN WITHOUT THE
DELIVERY OF AN OPINION OF COUNSEL REFERRED TO IN CLAUSE (2) ABOVE OR THE
REPRESENTATION REFERRED TO IN CLAUSE (3) ABOVE SHALL BE VOID AND OF NO EFFECT.
[THIS CERTIFICATE IS NONTRANSFERABLE.]1/
-
- - --------------------
1/To be included only on the Certificates representing the 1% minimum required -
to be retained by the Depositor and any Certificates issued in exchange
therefor.
NUMBER $
-------
R- CUSIP NO.
NAL AUTO TRUST 1996-1
13.50% 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
<PAGE>
DOLLARS nonassessable, fully-paid,
fractional undivided interest in NAL Auto Trust 1996-1 (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
The Trust was created pursuant to a Trust Agreement dated as of March
8, 1996, (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
March 8, 1996 (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 "13.50% Asset Backed Certificates" (herein called the "Trust Certificates").
Also issued under an Indenture dated as of March 8, 1996 (the "Indenture"),
between the Trust and Bankers Trust Company, as indenture trustee, are the two
classes of Notes designated as "Class A-1 7.10% Asset Backed Notes," and "Class
A-2 8.00% 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
<PAGE>
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 June 17, 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 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
<PAGE>
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.
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 1996-1
by: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Owner Trustee
Dated: by:
--------- -------------------------
Authorized Signatory
[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
<PAGE>
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 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.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns
and transfers unto
<PAGE>
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.
EXHIBIT B
CERTIFICATE OF TRUST OF
NAL AUTO TRUST 1996-1
THIS Certificate of Trust of NAL AUTO TRUST 1996-1 (the "Trust"), dated
March [ ], 1996, 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, Section 3801 et seq.).
1. Name. The name of the business trust formed hereby is
NAL AUTO TRUST 1996-1.
<PAGE>
2. Delaware Trustee. The name and business address of the
trustee of the Trust in the State of Delaware is NAL Auto Trust
1996-1, 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
March [ ], 1996
By:
---------------------------
Name:
Title:
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 1996-1
13.50% Asset Backed Certificates
Ladies and Gentlemen:
In connection with our disposition of the above-referenced 13.50% 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
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 13.50% Asset Backed Certificates (the "Certificates") of NAL Auto
Trust 1996-1 (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 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 (iii) above, 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 be delivered 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 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, (ii) 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) or (iii) if the transferee is an insurance company, a
representation that the transferee is an insurance company that is
purchasing such certificates with funds contained in an "Insurance
Company General Account" (as such term is defined in Section V(e) of
Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60)) and that
the purchase and holding of such Certificates and any deemed extension
of credit from a Certificateholder which is a party in interest to a
Plan, the assets of which are held by such "Insurance Company" are
covered under PTCE 95-60.
4. We understand that the Depositor, the Trust, Greenwich Capital
Financial Products, 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.
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:
---------------------------------
Name:
Title:
Date:
--------------------------------
D-3
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,030
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 105,089
<ALLOWANCE> 4,172
<TOTAL-ASSETS> 130,004
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 104,249
<LONG-TERM> 0
0
0
<COMMON> 19,608
<OTHER-SE> 6,147
<TOTAL-LIABILITIES-AND-EQUITY> 130,004
<INTEREST-LOAN> 4,892
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,892
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 2,485
<INTEREST-INCOME-NET> 2,407
<LOAN-LOSSES> 891
<SECURITIES-GAINS> 2,997
<EXPENSE-OTHER> 3,331
<INCOME-PRETAX> 2,992
<INCOME-PRE-EXTRAORDINARY> 2,992
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,818
<EPS-PRIMARY> .25
<EPS-DILUTED> .24
<YIELD-ACTUAL> 18.59
<LOANS-NON> 0
<LOANS-PAST> 9,193
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,671
<CHARGE-OFFS> 1,632
<RECOVERIES> 3,133
<ALLOWANCE-CLOSE> 4,172
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
