SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _________ To ____________
NAL FINANCIAL GROUP INC.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-25476 23-2455294
-------- ------- ----------
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, Florida 33309
------------------------------
Registrant's telephone number, including area code: (954) 938-8200
Not Applicable
--------------
(Former name, if changed since last report)
Check whether the Registrant: (1) 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 90
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 August 12, 1996 is 7,003,220 shares.
Transitional Small Business Disclosure Format
Yes ____ No X
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<PAGE>
NAL FINANCIAL GROUP INC.
INDEX
-----
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION* PAGE
----------------------
<S> <C> <C> <C>
Item 1. Consolidated Balance Sheets at June 30,
1996 (Unaudited) and December 31, 1995 1
Consolidated Statements of Operations for
the Three months ended June 30, 1996
and 1995 (Unaudited) and for the Six months
ended June 30, 1996 and 1995 (Unaudited) 2
Consolidated Condensed Statements of
Cash Flows for the Six months ended
June 30, 1996 and June 30, 1995 (Unaudited) 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and
Analysis or Plan of Operation 7
PART II OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 23
Item 2. Changes in Securities 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote
of Security Holders 23
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 25
</TABLE>
*The accompanying financial information at June 30, 1996 and the quarter and six
months then ended and the accompanying financial information at June 30, 1995
and the quarter and six months then ended is not covered by an Independent
Certified Public Accountant's Report.
ii
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
---------------------------------
NAL FINANCIAL GROUP INC.
Consolidated Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
-------- -------------
1996 1995
---- ----
<S> <C> <C>
ASSETS
Cash $ 5,639 $ 921
Contract receivables, net 95,639 101,214
Investment in operating leases 5,247 4,055
Automobile inventory 1,625 1,886
Excess servicing receivables 15,323 4,999
Premises and equipment, net 2,403 1,803
Accrued interest receivable 1,874 1,460
Debt issue costs 1,925 1,032
Goodwill 3,799 --
Other assets 4,401 4,665
-------- --------
TOTAL ASSETS $137,875 $122,035
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Credit and warehouse facilities $ 47,550 $ 33,429
Debt participation interests 24,599 42,301
Convertible subordinated debt 23,835 12,924
Accounts payable and accrued expenses 1,521 1,047
Income taxes payable 3,317 1,604
Stockholder loan -- 2,919
Other liabilities 5,115 3,872
-------- --------
TOTAL LIABILITIES 105,937 98,175
-------- --------
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,
7,003,220 shares outstanding at June 30, 1996 and
6,700,041 shares outstanding at December 31, 1995 1,050 1,005
Paid in capital 22,597 18,525
Retained earnings 8,291 4,330
-------- --------
TOTAL STOCKHOLDERS' EQUITY 31,938 23,860
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $137,875 $122,035
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
1
<PAGE>
NAL FINANCIAL GROUP INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Finance charges and discount accretion $ 5,679 $ 3,591 $10,571 $ 6,123
Interest expense (2,874) (1,565) (5,359) (2,503)
------- ------- ------- -------
Net interest income 2,805 2,026 5,212 3,620
Provision for credit losses (898) (385) (1,789) (703)
------- ------- ------- -------
Net interest income after provision
for credit losses 1,907 1,641 3,423 2,917
======= ======= ======= =======
OTHER INCOME
Gain on sale of contracts 3,283 -- 6,280 --
Fees and other 2,298 209 4,108 365
------- ------- ------- -------
Total other income 5,581 209 10,388 365
======= ======= ======= =======
OTHER EXPENSES
Salaries and employee benefits 1,456 498 2,911 835
Depreciation and amortization 525 200 961 325
Occupancy expense 250 56 463 179
Professional services 426 66 734 287
Other operating expense 1,214 431 2,026 832
Non cash charge for the release of
escrow shares 100 80 207 80
------- ------- ------- -------
Total other expenses 3,971 1,331 7,302 2,538
======= ======= ======= =======
Income before income taxes 3,517 519 6,509 744
Provision for income taxes (1,375) (197) (2,549) (283)
------- ------- ------- -------
NET INCOME $ 2,142 $ 322 $ 3,960 $ 461
======= ======= ======= =======
Primary Earnings Per Share:
Net income available to common and common
equivalent shares $ 2,469 $ 322 $ 4,651 $ 461
Weighted average number of common and
common equivalent shares 8,654 5,416 8,307 5,416
Net income per share $0.29 $0.06 $0.56 $0.09
Fully Diluted Earnings Per Share:
Net income available to common and common
equivalent shares $ 2,829 $ 322 $ 5,238 $ 468
Weighted average number of common and
common equivalent shares 10,640 5,855 10,028 5,855
Net income per share $ 0.27 $ 0.05 $ 0.52 $ 0.08
</TABLE>
2
<PAGE>
NAL FINANCIAL GROUP INC.
Consolidated Statement of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
For the Six Months
------------------
Ended June, 30
--------------
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities: $ 3,960 $ 461
Net Income
Adjustments to reconcile net income to net cash used in operations:
Accretion of discount -- (420)
Provisions for credit losses 1,789 703
Depreciation and amortization 1,418 325
Gain on sale of loan pools (6,280) --
Non-cash charge - escrow shares 207 80
Changes in assets and liabilities:
Other, net 785 (285)
--------- --------
Net cash provided by operating activities 1,879 864
--------- --------
Cash flows from investing activities:
Purchase of receivables (117,503) (68,454)
Payments received on receivables 30,158 20,531
Purchase of property and equipment (786) (380)
--------- --------
Net cash used by investing activities (88,131) (48,303)
--------- --------
Cash flows from financing activities:
Purchase of Special Finance, Inc. (750) --
Net proceeds from financings 120,501 63,130
Repayments of financings (124,161) (16,021)
Repayment of stockholder loan (2,919) --
Net Proceeds from securitization of finance contracts 84,445 --
Proceeds from subordinated debenture 12,702 --
--------- --------
Net cash provided by financing activities 89,818 47,109
--------- --------
Net increase (decrease) in cash and cash equivalents 3,566 (330)
Cash and equivalents, beginning of period 921 665
--------- --------
Cash and cash equivalents, end of period $ 4,487 $ 335
========= ========
Supplemental disclosures of cash flows information
Cash paid during the period for interest $ 3,206 $ 2,190
========= ========
Cash paid during the period for taxes $ 1,110 $ 207
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
NAL FINANCIAL GROUP INC.
Notes to Consolidated Financial Statements
June 30, 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 six month period ended June 30, 1996 are not
necessarily indicative of the results which may be expected for the year ending
December 31, 1996.
2. Finance Receivables
Finance receivables as of June 30, 1996 and December 31, 1995 consist
of the following:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
(in thousands)
Automobile finance contracts
Gross contracts receivable $105,306 $106,983
Less: Unearned interest (9,543) (7,069)
Deferred acquisition fees (80) (123)
-------- --------
95,683 99,791
======== ========
Consumer contracts receivable
Gross contracts receivable 2,296 2,768
Less: Unearned interest (199) (286)
Purchase discount (193) (193)
-------- --------
1,904 2,289
======== ========
Mortgage loans receivable
Gross loans receivable 1,650 2,064
Less: Purchase discount (243) (259)
-------- --------
1,407 1,805
-------- --------
Total finance receivables 98,994 103,885
Reserve available for credit losses (3,355) (2,671)
-------- --------
Total finance receivables, net $ 95,639 $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 automobile finance contracts purchased from dealers, and refundable
4
<PAGE>
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
automobile 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 June 30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
(in thousands) June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Non-refundable purchase discount $2,865 $1,513
Allowance for credit losses 41 653
Dealer holdback 449 505
------ ------
Total reserve available for credit losses $3,355 $2,671
====== ======
</TABLE>
3. Excess Servicing Receivables
Excess servicing receivables result from the sale of contracts on which
the Company retains servicing rights and a portion of the excess cash flows.
Excess servicing receivables are determined by computing the difference between
the weighted average yield of the contracts sold and the yield to the purchaser
of the asset-backed security, 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 future 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 cancelled.
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
5
<PAGE>
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 $207,000 and $80,000 has been
recorded for the six months ended June 30, 1996 and 1995, respectively, for the
portion of the 60,000 shares that has become eligible for release under the
Agreement.
5. Business Combination
As of June 28, 1996, the Company purchased certain assets of Special
Finance, Inc., a Florida based automobile finance company ("Special Finance")
pursuant to an option agreement for a purchase price of $1 million, plus 125,000
shares of the Company's Common Stock and options to purchase 65,000 shares of
Common Stock at an exercise price of $6.00 per share. An option price of
$250,000 paid to Special Finance on August 1, 1995 was credited against the
purchase price. As a result of this purchase, the Company recorded goodwill in
the amount of $3.8 million.
6. Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation." SFAS No. 123 establishes financial
accounting and reporting standards for stock-based employee compensation plans.
The statement defines a "fair value based method" of accounting for employee
stock options or similar equity instruments and encourages all entities to adopt
that method of accounting for all of their employee stock compensation plans.
However, SFAS No. 123 also allows an entity to continue to measure compensation
costs for those plans using the "intrinsic value based method" of accounting,
which the Company currently uses. The accounting requirements of SFAS No. 123
are effective for transactions entered into during fiscal years beginning after
December 15, 1995. The disclosure requirements are effective for financial
statements for fiscal years beginning after December 15, 1995, or for an earlier
fiscal year for which SFAS No. 123 is initially adopted for recognizing
compensation cost. Management has determined that the Company will continue to
measure compensation costs using the "intrinsic value based method" and will
disclose the effect on net income and earnings per share using the "fair value
based method" in the footnotes to the Company's financial statements upon the
adoption of SFAS No. 123.
In June 1996, the FASB issued Statement of Financial Accounting
Standards No. 125 ("SFAS No. 125"), "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities based on a financial-components
approach that focuses on control. SFAS No. 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996 and is to be prospectively applied. Management is currently
evaluating the impact of adoption of SFAS No. 125 on its financial position and
results of operations.
6
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
---------------------------------------------------------
The following information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of the Company included in
this Report.
The Company is a specialized indirect consumer finance company engaged
in the purchase, sale and servicing of automobile finance contracts
("Contracts") originated by franchised and select independent dealers
("Dealers") in connection with sales or leases of used and new automobiles to
consumers with non-prime credit. Non-prime consumers are perceived to be
relatively high credit risks due to various factors, including, among other
things, the manner in which they have handled previous credit, the absence or
limited extent of their prior credit history or their limited financial
resources. The Company purchases loan and lease Contracts relating primarily to
the "C" credit segment of the non-prime automobile finance market. The Company
is also engaged in providing a range of insurance and related products to its
Dealers and customers through its insurance subsidiary, NAL Insurance Services,
Inc. The Company has a remarketing subsidiary, Performance Cars of South
Florida, Inc. with a J.D. Byrider car dealership franchise, which provides an
efficient and cost effective means of disposing of some of the Company's
repossessed and off-lease vehicles.
Contract Acquisition
The Company acquires Contracts from diversified sources through its
origination programs. During the past two years ending June 30, 1996, the
Company purchased $284 million of loan Contracts and $32 million of lease
Contracts through its origination programs. The following table sets forth the
Contracts acquired and the portfolio serviced by the Company during each of the
last eight quarters.
<TABLE>
<CAPTION>
For the Quarters Ended
----------------------
Operating Data Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(dollars in thousands) 1996 1996 1995 1995 1995 1995 1994 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Contracts purchased during the
period:
Loan Contracts $ 61,539 $ 53,533 $ 53,288 $ 39,828 $ 27,918 $ 26,423 $ 17,504 $ 5,879
Lease Contracts 3,609 3,686 3,989 4,085 5,241 6,733 3,446 1,237
-------- -------- -------- -------- -------- -------- -------- --------
Total Contracts Purchased 65,148 57,219 57,277 43,913 33,159 33,156 20,950 7,116
Number of Dealers 1,381 1,271 909 787 406 296 196 83
Servicing portfolio:
Owned $111,928 $117,210 $113,831 $111,888 $ 87,938 $ 65,824 $ 44,415 $ 33,028
Serviced for Securitization
Trusts and Others 118,818 73,742 39,934 -- -- -- -- --
Total servicing portfolio 230,746 $190,952 $153,765 $111,888 $ 87,938 $ 65,824 $ 44,415 $ 33,028
</TABLE>
The Company has experienced significant growth in its volume of
Contracts purchased. Contract volume has increased to $65.1 million for the
quarter ended June 30, 1996 from $33.2 million for the quarter ended June 30,
1995, representing an increase of 97%. The growth in Contract volume is
attributable primarily to the increase in the number of Dealers participating in
7
<PAGE>
the Company's programs, which increased to 1,381 Dealers at June 30, 1996 from
406 Dealers at June 30, 1995, representing an increase of 240%. The growth in
Contract volume has resulted in an increase in the Company's servicing
portfolio. The servicing portfolio at June 30, 1996 was $230.7 million compared
to $87.9 million at June 30, 1995, representing an increase of 163%.
Revenues
The increase in Contract volume and the servicing portfolio has led to
an increase in revenues as demonstrated in the following table:
<TABLE>
<CAPTION>
For the Quarters Ended
----------------------
Revenue Data: Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(in thousands) 1996 1996 1995 1995 1995 1995 1994 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Loan Contracts $ 4,704 $3,970 $ 4,235 $3,638 $2,450 $1,470 $ 674 $ 282
Lease Contracts 1,206 1,101 1,020 919 796 587 335 118
------- ------ ------- ------ ------ ------ ------ ------
Interest Income 5,910 5,071 5,255 4,557 3,246 2,057 1,009 400
Non-automobile Interest Income 133 114 222 319 346 476 541 831
Gain on sale of loan Contracts 3,283 2,997 4,123 478 -- -- 155 697
Servicing fees 302 557 104 4 5 6 -- --
Insurance fees 407 236 280 155 43 102 17 7
Other fees 1,225 722 580 368 162 47 214 94
------- ------ ------- ------ ------ ------ ------ ------
Total Revenues $11,260 $9,697 $10,564 $5,881 $3,802 $2,688 $1,936 $2,029
======= ====== ======= ====== ====== ====== ====== ======
</TABLE>
The Company generates revenues primarily through the purchase, sale
and ongoing servicing of Contracts. The Company earns interest income and fees
on Contracts purchased and held in portfolio, including those awaiting
securitization. Upon the sale of Contracts through the Company's securitization
program, the Company recognizes a gain on sale of Contracts. The Company
continues to service these Contracts and earns a servicing fee currently equal
to three percent per annum of the outstanding principal balance of the Contracts
sold. The Company also receives revenues from the sale of insurance and related
products and other miscellaneous fees.
Net Interest Income
Net interest income is the difference between the interest earned on
Contracts held in portfolio, including those awaiting securitization, and the
interest costs associated with the Company's borrowings to finance such
Contracts. Net interest income will fluctuate and be impacted by the spread
between the portfolio yield and the cost of the Company's borrowings, changes in
overall Contract acquisition volume and the timing of securitizations. The
following table illustrates the weighted average net interest rate spread
(expressed as a percentage) earned on Contracts acquired:
8
<PAGE>
<TABLE>
<CAPTION>
For the Quarters Ended
----------------------
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
Net Interest Spread: 1996 1996 1995 1995 1995 1995 1994 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income (1):
Loan Contracts 22.16% 20.60% 21.46% 21.70% 22.23% 23.83% 22.49% 18.05%
Lease Contracts 18.85 17.88 18.77 19.90 20.58 19.13 21.06 19.60
----- ----- ----- ----- ----- ----- ----- -----
Total Automobile
Contracts 21.11 19.94 20.88 21.31 21.80 22.26 21.99 18.47
Non-automobile Contracts 17.41 12.81 22.21 29.20 27.55 27.12 23.46 35.37
----- ----- ----- ----- ----- ----- ----- -----
Total 21.01 19.70 20.93 21.70 22.25 23.04 22.49 27.15
Interest Expense (2) 10.80 10.12 10.94 10.97 11.11 11.45 11.11 13.75
----- ----- ----- ----- ----- ----- ----- -----
Net Interest Spread 10.21% 9.58% 9.99% 10.73% 11.14% 11.59% 11.38% 13.40%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- -----------------------------------------
(1) Represents interest income plus discount accretion (if any) less
amortization of deferred costs, expressed as a percentage of average
receivable outstanding.
(2) Represents interest expense as a percentage of average total debt
outstanding.
- -----------------------------------------
Gain on Sale of Loans
The Company has sold its loan Contracts through the Company's
securitization program in each of the last three quarters. The Company
recognizes a gain on sale of loan Contracts in an amount equal to: (i) the
excess servicing receivable from the trust during the life of the
securitization, plus (ii) the net proceeds received from the securitization less
the aggregate book value of the loan Contracts transferred to the trust. The
excess servicing receivable represents the estimated present value of excess
servicing cash flows after taking into account the Company's estimates for the
net credit loss and prepayment on the loan Contracts in the trust. Excess
servicing cash flows represent the difference between the weighted average
interest rate earned on loan Contracts and the interest rate paid to investors
in the securitization transaction, less a contractual servicing fee currently
equal to three percent per annum and any ongoing trust administration expenses.
See "Liquidity and Capital Resources - Securitizations."
The gain on sale of loan Contracts is affected by, among other things,
the amount of loan Contracts sold in the securitization transaction, the net
spread on the transaction, upfront costs of the transaction and estimated
losses and prepayments on the loan Contracts. Net spread is the major component
of the total gain on sale. The following table illustrates the net spread for
each of the Company's securitizations:
<TABLE>
<CAPTION>
Interest
Weighted Rate Paid
Securitization Original Average to Gross Net
-------------- Balance Contract Rate Investors(1) Spread (2) Spread (3)
(dollars in thousands) ------- ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
1996-2 Auto Trust........ $ 49,500 19.20% 7.58% 11.62% 8.62%
1996-1 Auto Trust........ 40,750 19.26% 7.47% 11.79% 8.79%
1995-1 Auto Trust....... 40,115 19.58% 7.10% 12.48% 9.48%
--------
Total.................... $130,365
========
</TABLE>
- ----------------------------
(1) Weighted average interest rate paid to investors in the Securitization
transaction.
(2) Difference between weighted average Contract rate and weighted average
interest rate paid to investors.
(3) Difference between Gross spread less contractual servicing fees.
- ----------------------------
9
<PAGE>
The decrease in the net spread when comparing the 1995-1 transaction to
the 1996-1 securitization, and further when comparing to the 1996-2 transaction,
reflected a decrease in the weighted average coupon rate of the loans
securitized, and an increase in the rate paid to investors, due primarily to an
increase in market interest rates.
Servicing Fee Income
Throughout the life of the Contract, the Company earns a contractual
servicing fee from the securitization trust, currently equal to three percent
per annum of the principal balance outstanding of the Contracts sold to the
trust. Servicing fee income increased from $104,000 for the quarter ended
December 31, 1995, representing approximately one month's servicing income from
the first securitization transaction, to $302,000 for the quarter ended June 30,
1996 due to the completion of another two securitization transactions.
Servicing fee income and the excess servicing receivable may be
impacted by changes in the amount of losses and levels of prepayments from those
assumed by the Company at the time of securitization. To the extent the
assumptions used are materially different from actual results, the amount of
excess servicing cash flows received by the Company over the remaining life of
the securitization could be significantly affected.
Other Income
The Company generates revenues from the sale of a variety of insurance
and related products to Dealers and its customers. The Company, acting as agent
for third party insurance companies, offers insurance products. The Company
recognizes as revenue the commissions or fees received upon the sale of these
products to customers. Other fees consist primarily of late fees earned on the
Company's servicing portfolio. Insurance and other fees have continued to
increase due primarily to the increase in the volume of Contracts purchased and
the growth in the servicing portfolio.
Results of Operations
The following table presents the principal components of the Company's
net income for the periods presented:
<TABLE>
<CAPTION>
For Quarters Ended For Six Months Ended
------------------ --------------------
(in thousands) June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net interest income $2,805 $2,026 $5,212 $3,620
Gain on sale of loan Contracts 3,283 -- 6,280 --
Servicing Fees and other income 2,298 209 4,108 365
------ ------ ------ ------
Total revenue 8,386 2,235 15,600 3,985
Provision for credit losses (898) (385) (1,789) (703)
Operating expenses (3,871) (1,251) (7,096) (2,458)
------ ------ ------ ------
Income before taxes 3,617 599 6,715 824
Provision for income taxes (1,375) (197) (2,548) (283)
Non-cash charge for escrow shares (100) (80) (207) (80)
------ ------ ------ ------
Net Income $2,142 $ 322 $3,960 $ 461
====== ====== ====== ======
</TABLE>
10
<PAGE>
Quarters Ended June 30, 1996 and 1995.
Net Interest Income. Net Interest Income increased to $2.8 million for
the quarter ended June 30, 1996 from $2.1 million for the quarter ended June 30,
1995. The increase is primarily attributable to: (i) the growth of average
Contracts held in portfolio and those awaiting securitization from $65 million
for the quarter ended June 30, 1995 to $109.3 million for the quarter ended June
30, 1996, representing an increase of 68%; and (ii) lower costs of funds
achieved through lower-cost warehousing facilities which were not available
during the comparable quarter in 1995.
Gain on Sale of Loans. The Company completed a $49.5 million
securitization during the quarter ended June 30, 1996, resulting in a gain on
sale of $3.3 million. The Company did not securitize any loans during the
quarter ended June 30, 1995, since the Company's securitization program began
during the fourth quarter of 1995.
Servicing Fees and Other Income. During the period from June 30, 1995
to June 30, 1996, the Company completed three securitization transactions
aggregating $130.4 million. As a result, servicing fee income increased to
$302,000 for the quarter ended June 30, 1996, from $5,000 for the quarter ended
June 30, 1995. Other income, consisting of insurance income and other fees, also
increased to $1.6 million from $205,000 for the quarter ended June 30, 1996 and
1995, respectively. This increase is due to the increase in the volume of
Contracts acquired and the growth of the servicing portfolio to $230.7 million
at June 30, 1996 from $87.9 million at June 30, 1995.
Provision For Credit Losses. During the quarter ended June 30, 1996,
the Company recorded a provision for credit losses totaling $898,000 compared to
$385,000 for the same quarter of the preceding year. This increase is primarily
due to an increase in the volume of Contracts purchased during the quarter ended
June 30, 1996 versus the corresponding period in 1995.
Operating Expenses. Operating expenses increased from $1.3 million for
the quarter ended June 30, 1995 to $3.9 million for the quarter ended June 30,
1996. The increase is primarily due to the growth of the servicing portfolio.
Expressed as a percentage of average total servicing portfolio, operating
expenses were approximately 7% for both of the quarters ended June 30, 1996 and
June 30, 1995, on an annualized basis.
Non-Cash Charge for Escrow Shares. On November 30, 1994, the Company
became publicly held by virtue of a merger with an existing, yet inactive public
shell. In connection with the merger, certain shares of the Company's common
stock were placed in escrow to be released to certain selling stockholders based
on a formula tied to earnings. For financial reporting purposes, the release of
a portion of these shares is considered compensatory and a non-cash charge to
earnings is reflected in the financial statements. This charge does not affect
working capital or total stockholder's equity. During the quarter ended June 30,
1996, the Company recorded a charge to earnings of $100,000 compared to $80,000
for the quarter ended June 30, 1995.
11
<PAGE>
Net Income. Net income for the quarter ended June 30, 1996 was $2.1
million or $.27 per fully diluted share. This compares to net income of $322,000
or $.05 per fully diluted share for the quarter ended June 30, 1995. Net income,
excluding the non-cash charge for release of escrow shares, was $2.2 million or
$.28 per share for the quarter ended June 30, 1996 in comparison to $402,000 or
$.06 per share for the quarter ended June 30, 1995.
Six Months Ended June 30, 1996 and 1995.
Net Interest Income. Net interest income for the six months ended June
30, 1996 was $5.2 million compared to $3.6 million for the six months ended June
30, 1995, representing a 44% increase. This increase was primarily a result of
the growth in average Contracts held in portfolio and those awaiting
securitization from $78.5 million for the six months ended June 30, 1995 to $99
million for the six months ended June 30, 1996.
Gain on Sale of Loans. Gain on sale of loans for the six months ended
June 30, 1996 was $6.3 million compared to $0 for the six months ended June 30,
1995. No securitizations were completed during the six months ended June 30,
1995.
Servicing Fees and Other Income. During the period from December 1995
through June 1996, the Company completed three securitization transactions
aggregating $130.4 million. As a result, servicing fee income was $859,000 for
the six months ended June 30, 1996 compared to $11,000 for the preceding year.
Other income, consisting of insurance and other fees, increased from $354,000 to
$2.6 million for the six months ended June 30, 1995 and 1996, respectively.
These increases were primarily due to an increase in the volume of Contracts
purchased and the growth in the servicing portfolio to $230.7 million at June
30, 1996 from $87.9 million at June 30, 1995.
Provision for Credit Losses. The Company's provision for credit losses
for the six months ended June 30, 1996 was $1.8 million compared to $703,000 for
the six months ended June 30, 1995. This increase related primarily to
provisions recorded for an estimate of possible losses which may be incurred in
connection with the acquisition of new Contracts during 1996.
Operating Expenses. Operating expenses increased to $7.1 million for
the six months ended June 30, 1996 compared to $2.5 million for the six months
ended June 30, 1995. This increase was attributable to the hiring of additional
personnel in almost all areas of the Company's operations to support its growth.
As a percentage of average total portfolio being serviced by the Company during
the year, operating expenses were approximately 7.5% for the six months ended
June 30, 1996 and 1995.
Non-Cash Charge For Escrow Shares. The Company recorded a charge to
earnings of $207,000 for the six months ended June 30, 1996 compared to $80,000
for the six months ended June 30, 1995 for shares released from the escrow
arrangement which was established in connection with the merger.
Net Income. The Company reported net income of $4.0 million or $.52 per
fully diluted share for the six months ended June 30, 1996 compared to net
income of $461,000 or $.08 per fully diluted share for the six months ended June
12
<PAGE>
30, 1995. Net income, excluding the non-cash charge for releasing escrow shares,
was $4.2 million or $.54 per share for the six months ended June 30, 1996.
Delinquency and Credit Loss Experience
The Company's profitability depends largely upon its ability to
effectively manage delinquency and credit losses. The Company believes that its
experience with the credit profile of customers in the non-prime industry, its
underwriting guidelines, and its collection expertise have contributed
positively to the Company's credit loss experience. The Company maintains a
reserve available to absorb future credit losses on Contracts which are held in
portfolio and on loan Contracts while they are awaiting securitization. The
Company evaluates historical charge-off experience against the reserve as well
as other analyses, including portfolio performance analyses and delinquency
trends, to ensure that the reserve is adequate to absorb estimated future
losses.
Acquisition Discounts. The Company purchases Contracts from Dealers at
discounts from their stated principal amount to provide for credit risk. The
discounts typically range from 3 to 10%. The amount of the discount varies based
upon the underwriting tier that the Contract falls within, the terms of the
transaction and the quality of the collateral.
Any discount which management considers necessary to absorb future
credit losses is allocated to the reserves available for credit losses. The
remaining portion of the discount, if any, is recognized as income using the
level-yield method of accretion.
Reserves Available for Credit Losses. In the event of a payment
default, the liquidation proceeds of the financed vehicle may not cover the
outstanding Contract balance and costs of recovery. The Company maintains a
reserve available for credit losses at an amount which the Company believes is
adequate to absorb future credit losses on Contracts subject to non-recourse
arrangements which are held in portfolios and during the warehousing period. The
reserve available for credit losses is comprised of the acquisition discounts,
dealer reserves, and an allowance for credit losses. On a monthly basis, the
Company evaluates the adequacy of the reserves available for credit losses by
analyzing the Contract portfolios in their entirety using a "static pool
analysis" method in which the historical charge-offs are stratified according to
the Contract origination date. These Contracts are grouped together by calendar
month of origination, and the related historical charge-off experience on such
Contracts is analyzed to evaluate the reasonableness and adequacy of the
reserves available for credit losses. This analysis takes into consideration
historical loss experience, current economic conditions, levels of repossessed
assets, delinquency experience, seasoning of Contracts, and other relevant
factors. Should management deem the level of acquisition discounts and dealer
reserves to be inadequate, an additional provision for credit losses will be
recorded to increase the allowance for credit losses and, therefore, the overall
level of reserves available for credit losses.
13
<PAGE>
The following table sets forth information regarding credit loss
experience of the total servicing portfolio for the periods presented:
<TABLE>
<CAPTION>
For the Quarters Ended For the Year Ended
---------------------- ------------------
Credit Losses:(1)(4) June 30, March 31, Dec. 31,
-------- --------- --------
(dollars in thousands) 1996 1996 1995
---- ---- ----
<S> <C> <C> <C>
Loan Contracts Serviced: $174,793 $141,370 $107,926
Gross charge-offs percentage (2) 9.77% 6.02% 3.68%
Net charge-off percentage (3) 5.64% 4.19% 3.68%
Lease Contracts Serviced: $25,445 $24,139 $22,518
Gross charge-off percentage (2) 6.98% 6.40% 4.19%
Net charge-off percentage (3) 4.93% 5.57% 4.19%
Total Loan and Lease Contracts: $200,238 $165,509 $130,443
Gross charge-off percentage (2) 9.39% 6.08% 3.78%
Net charge-off percentage (3) 5.54% 4.41% 3.78%
Recourse Contracts Serviced: $23,329 $19,036 $18,129
Gross charge-off percentage (2) -- -- --
Net charge-off percentage (3) -- -- --
Total Serviced Portfolios: $223,567 $184,545 $148,573
Gross charge-off percentage(2) 8.42% 5.40% 3.15%
Net charge-off percentage(3) 4.97% 3.92% 3.15%
- -----------------------------
</TABLE>
(1) This table excludes non-automobile bulk-purchase contracts.
(2) Gross charge-offs are computed as principal balance less liquidation
proceeds received expressed as a percentage of average balance
outstanding during the period.
(3) Computed as gross charge-offs less any recoveries expressed as a
percentage of average balance outstanding during the period.
(4) Percentages for the quarters ended March 31 and June 30, 1996 have been
annualized.
14
<PAGE>
Delinquency Experience. The Company attempts to minimize credit losses
by monitoring the level of delinquencies through follow up and collection of
delinquent accounts. The following table reflects the Company's delinquency
experience for the periods presented:
<TABLE>
<CAPTION>
As of As of As of
----- ------ -----
June 30, 1996 March 31, 1996 Dec. 31, 1995
------------- -------------- -------------
<S> <C> <C> <C>
Delinquency(1)(2)
(dollars in thousands)
Loan Contracts Serviced $174,334 $140,746 $107,191
Delinquencies:
31-60 Days 8.46% 6.91% 8.83%
61-90 Days 2.86% 2.30% 2.99%
Greater than 90 Days 2.38% 2.12% 2.18%
------- ------- -------
Total 13.70% 11.33% 14.00%
Lease Contracts Serviced $ 24,541 $ 23,033 $ 21,361
Delinquencies:
31-60 Days 5.20% 5.44% 7.51%
61-90 Days 2.43% 1.82% 1.90%
Greater than 90 Days 1.51% 1.10% 1.83%
------- ------- -------
Total 9.14% 8.36% 11.24%
Recourse Contracts Serviced $ 15,959 $ 13,696 $ 13,459
Delinquencies:
31-60 Days 8.61% 12.41% 15.27%
61-90 Days 4.83% 3.69% 2.31%
Greater than 90 Days 1.52% 4.21% 0.48%
------- ------- -------
Total 14.96% 20.31% 18.06%
Total Contracts $214,834 $177,475 $142,011
Delinquencies:
31-60 Days 8.10% 7.15% 9.24%
61-90 Days 2.96% 2.34% 2.76%
Greater than 90 Days 2.22% 2.15% 1.96%
------- ------- -------
Total 13.28% 11.64% 13.96%
====== ====== ======
</TABLE>
- ----------------------------
(1) Table excludes non-automobile contracts.
(2) This table excludes certain portfolios which are accounted for on a
cost recovery basis.
The Company has prepared analyses of its automobile 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 the analyses suggest that
the probability of a contract becoming delinquent or going into default is
highest during the "seasoning period" which begins 3 to 4 months, and ends 12 to
14 months, after the origination date. The Company believes that the increase in
the over 60 day delinquency percentage from December 31, 1995 to June 30, 1996
is primarily the result of an increase in the percentage of automobile finance
Contracts in the "seasoning period", rather than any change in the underlying
average credit characteristics of the Company's portfolio.
If the rate of the Company's volume continues to escalate, an
increasingly greater portion of the Company's portfolio is expected to fall into
the "seasoning period" described above, causing a rise in the overall portfolio
delinquency and default rates, without regard to underwriting performance.
Assuming no changes in any other factors that may affect delinquency and default
rates, the Company believes this trend should stabilize or reverse when the
15
<PAGE>
volume of mature Contracts (with lower delinquency and default rates) is
sufficient to reduce the portfolio delinquency and default rates.
Liquidity and Capital Resources
The Company's business requires substantial cash to support the growth
in Contracts purchased. As a general matter, the Company finances the purchase
of its Contracts by drawing against its credit facilities. Under the terms of
these facilities, funding is provided for between 80% and 90% of the principal
balance of the Contracts. Accordingly, the Company must secure the remainder of
the acquisition price from equity or other funding sources. As the Company
continues to increase the volume of Contracts purchased, it must secure
additional equity or other funding sources to meet these requirements. 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 June 30, 1996, the Company had secured its principal source of
working capital through senior indebtedness comprised of warehouse facilities,
revolving credit facilities and its specialized borrowing facility, as well as
subordinated junior indebtedness consisting of unsecured subordinated debentures
and a note to a stockholder, and the proceeds from the sale of shares of common
stock in a private placement transaction.
The following table presents the composition of the Company's credit
facilities, specialized borrowing facility and outstanding borrowings, as well
as proceeds received from the private placement of common stock and sales of
loans under securitizations for the periods presented.
<TABLE>
<CAPTION>
For the Quarters Ended
----------------------
(in thousands) June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Sources of Financing
--------------------
Warehouse Facilities:
Available Line $125,000 $ --
Outstanding Balance 25,700 --
Revolving Credit Facilities:
Available Line: 45,000 45,000
Outstanding Borrowings 21,851 23,950
Specialized Borrowing Facility 24,599 38,887
Subordinated Debentures:
Issued - Cumulative 33,825 5,650
Converted to Common Stock - Cumulative (9,825) (1,550)
------- -------
Outstanding 24,000 4,100
Unsecured Notes -- 67
Note Due to Stockholder -- 1,128
------- -------
Total Outstanding Borrowings $ 96,150 $68,132
======== =======
Net Proceeds from Sales of Loans Under
Securitizations $ 46,615 $ --
======== =======
</TABLE>
<PAGE>
Warehouse Facilities. During September 1995, the Company entered into a
$50 million warehouse facility (the "Greenwich Facility") with Greenwich Capital
Financial Products, Inc. ("Greenwich"). This facility is structured as a reverse
repurchase agreement which is characterized as borrowings for financial
reporting purposes. Under the terms of this facility, the Company receives an
advance of approximately 90% of the outstanding principal balance of the loan
Contract at an interest rate of 2.25% over 30 day LIBOR. If at any time during
the financing period 90% of the market value of the Contract is less than the
amount advanced, Greenwich may require the Company to transfer money or
additional Contracts to Greenwich until the margin amount is satisfied. Market
value may be affected by, among other things, sudden changes in interest rates,
delinquency rates and credit losses. Although management believes that this is
unlikely to occur to any significant degree, a margin call could require an
allocation of certain of the Company's liquidity and capital resources. The term
of the Greenwich Facility is for one year, automatically renewable for an
additional year. At June 30, 1996, the Company had $25.7 million outstanding
under the Greenwich Facility.
The Greenwich Facility includes certain financial and operational
covenants including, among other things, the required maintenance of a minimum
net worth of $30 million, prohibition upon a debt to equity ratio in excess of 8
to 1, and the maintenance of certain loan portfolio performance criteria. For
the purpose of the Greenwich Facility, net worth has been defined as total
stockholders' equity plus subordinated indebtedness not due within 90 days. At
June 30, 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 Greenwich
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.
During May 1996, the Company entered into a $75 million warehouse
facility (the "Cargill Facility") with Cargill Corporate Capital Group
("Cargill"), with the terms and conditions similar to the Greenwich Facility.
The term of the Cargill Facility is one year, which is automatically renewable
for an additional year.
The Company uses these warehouse facilities to purchase loan Contracts
with the objective to sell such contracts through securitization transactions.
Towards that end, since the fourth quarter of 1995, the Company has completed
the sale of in the aggregate of approximately $130 million of automobile loans
in privately-placed securitization transactions. The proceeds from the Company's
securitization transactions have historically been used to pay down the
warehouse facilities, thereby making the warehouse facilities available to fund
acquisitions of additional Contracts.
Revolving Credit Facilities. In March 1993, the Company entered into a
$20 million three-year revolving credit facility (the "Congress Facility") with
Congress Financial Corporation ("Congress") which has recently been extended
until March 1997. The Congress Facility bears interest at a floating rate of 2%
17
<PAGE>
over the prime rate of CoreStates Bank, N.A., with interest payable monthly. The
facility is secured by certain loan and lease Contracts. The Congress Facility
can be utilized for the financing of additional Contract purchases which meet
certain credit guidelines established by Congress, in its sole discretion. As of
June 30, 1996, the Company had $1.4 million outstanding under this line.
During February 1994, the Company entered into a $5 million one-year
revolving credit facility (the "GECC Facility") with GE Capital Credit Corp.
("GECC"). In September 1994, the GECC Facility was increased to $10 million. The
GECC Facility bears interest payable monthly at rates fixed at the time of
financing and is secured by certain lease and loan Contracts. Principal is
repaid monthly according to an agreed upon schedule. In March 1995, the GECC
Facility line was increased to $25 million. At June 30, 1996, the Company had
drawn down approximately $20.4 million under the facility. The GECC Facility is
automatically renewed annually unless GECC provides the Company with notice of
termination 90 days prior to such renewal.
The Congress Facility and the GECC Facility are also subject to certain
financial and operational covenants that are similar to those imposed under the
Greenwich Facility.
Specialized Borrowing Facility. Since inception, the Company has
secured a significant amount of its financing through borrowings classified as
debt participation interests, in which the Company has sold an undivided
interest, typically 80% to 90%, in portfolios of receivables on a full recourse
basis to financial institutions and individual lenders. As of June 30, 1996, the
Company had an existing series of borrowings under a specialized borrowing
facility with Fairfax Savings, a Federal Savings Bank ("Fairfax") in the
approximate amount of $24.6 million. Approximately $23.8 million of the Fairfax
financing has been utilized to acquire Contracts. Borrowings under this facility
are subject to interest at prime plus 2.5% fixed at the time of the financing.
The remaining approximately $712,000 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%, respectively.
In general, under the terms of the participation agreements, the
lender's principal advance is repaid in proportion to the principal received
from the underlying collateral. Interest on the outstanding principal balance of
the advance is due monthly. Collections received in excess of the principal and
interest due Fairfax are allocated to a restricted cash reserve account on
deposit with Fairfax until certain specified balances are maintained, generally
calculated as a percentage of the outstanding balance of the advance. Any
remaining collections are paid to the Company.
Under the Company's participation agreements, collections received from
receivables 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.
18
<PAGE>
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 the first quarter of 1996, the Company completed
the offering and sale in private placement transactions of $23.8 million 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 $2.1 million. During April 1996, the
Company also concluded the institutional placement of $10 million of Debentures
and 675,000 Warrants.
Through June 30, 1996, an aggregate of $9.8 million principal amount of
the Debentures were converted into 1,108,297 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) at conversion prices ranging from $9 to $12.50.
As of June 30, 1996 the Company had $24 million principal amount of
Debentures outstanding with maturity dates as follows: (i) $8.5 million from
September 1996 to December 1996; (ii) $10,000,000 in October 1997; (iii) $3
million in July/August 1998; and (iv) $2.5 million in January 1999.
Once the stock achieves certain trading prices ranging from $18 to $25,
the Company has the right to serve notice of redemption on the holders of
approximately $11 million 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
conversion rather than 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 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 and $15. Upon complete exercise of the Warrants, the
Company would receive aggregate gross proceeds of approximately $32 million.
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.
19
<PAGE>
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 and $25.
Any call for redemption will have the likely effect of causing the exercise of
these Warrants.
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 eliminating
the need to repay the principal amount (and in certain instances, interest) due
thereunder. Trading prices at levels consistently lower than the conversion
prices of the Debentures, however, will make conversion of the Debentures less
likely, thus requiring the Company to allocate certain of its capital resources
towards the retirement of the Debentures at maturity. If all of such Debentures
were converted, the Company would not be required to repay approximately $27.6
million (including principal and interest at maturity) as of June 1996. In
addition, an exercise of all of the Warrants would have the effect of securing
approximately $32 million of additional working capital. However, there can be
no assurances that the issuance of such shares would not have a depressive
effect upon the market for the Company's Common Stock.
Securitizations. Securitization of loan Contracts is an integral part
of the Company's continuing financing strategy which (i) provides a lower cost
of financing; (ii) allows the Company to increase its liquidity; (iii) provides
for redeployment of capital; and (iv) reduces risks associated with interest
rate fluctuations. The Company uses the net proceeds from a securitization to
pay down the loans outstanding under its warehouse facilities, thereby creating
availability to purchase additional loan Contracts. The Company has completed
three securitizations totaling approximately $130 million. The following is a
summary of the basic structure of the Company's last three securitizations.
There can be no assurances, however, that the Company will continue to use this
structure for future securitizations.
The Company transfers a pool of loan Contracts to a trust (the "Trust")
which simultaneously issues one or more classes of securities (the "Securities")
backed by the assets of the Trust. The assets of the Trust include the loan
Contracts and a reserve account. Initially, the Company makes a deposit into the
reserve account and thereafter, it maintains the reserve account at certain
levels (the "Maintenance Level") during the life of the securitization by
depositing certain cash flows from the Trust which the Company would otherwise
have received. The Company continues to service the loan Contracts and earns a
contractual servicing fee of 3% per annum (the "Contractual Servicing Fee").
The Securities are rated "A", "BBB" and "BB" by Duff and Phelps Credit
Rating Co. and Fitch Investors Services L.P.; and are sold to investors in a
private offering. These Securities carry fixed interest rate coupons, payable
quarterly. Generally, all collections of interest and principal from loan
Contracts are utilized to pay interest due on the Securities and to reduce the
principal balance of the Securities. Collections of interest in excess of that
required to pay for (i) the interest due on the Securities, (ii) ongoing fees
and expenses of the Trust, and (iii) the Contractual Servicing Fees (the "Excess
20
<PAGE>
Servicing Cash Flows") are deposited into the reserve account only to the extent
necessary to maintain it at the required Maintenance Level. The remaining Excess
Servicing Cash Flows, if any, are paid to the Company. In the event that the
collections of interest and principal from the loan Contracts are not sufficient
to cover the required distributions of interest and principal on the Securities,
the trustee may withdraw funds from the reserve account to make up for the
shortfall.
The Company recognizes a gain on sale of the loan Contracts from the
securitization in an amount equal to: (i) the excess servicing receivable from
the Trust during the life of securitization, plus (ii) the net proceeds received
from the Securitization less the aggregate book value of the loan Contracts
transferred to the Trust. The excess servicing receivable represents the present
value of the Excess Servicing Cash Flows after taking into account the Company's
estimates for the net credit loss and prepayment on the loan Contracts in the
Trust.
The gain on sale through securitization has been a significant
component of the Company's revenues in each of the three quarters in which the
securitization transactions have been completed. The Company believes that such
gain on sale will continue to represent a significant source of the Company's
revenues in all financial reporting periods in which the Company completes a
securitization. If for any reason whatsoever, the Company is unable to complete
a securitization during a quarter, then the Company's revenues for such period
would likely decline and could result in lower income for that quarter. Also,
failure to complete a securitization of the loan Contracts or delays in
completing such securitization could further subject the Company to interest
rate risk since the Company finances the loan Contracts through floating
interest rate warehouse facilities.
The Company continues to explore alternative structures for the
securitization of its loan Contracts in order to achieve a lower cost of
financing and to maximize the net proceeds from the securitization. The Company
believes that it would lower the cost of financing by structuring the
securitization in a manner that results in the issuance of triple-A rated
Securities backed by the assets of the Trust, and then by selling such
Securities in a public (not private) offering depending upon the size of the
securitization. However, there can be no assurances that the Company will be
able to achieve this in the near future.
Other Uses of Working Capital
- -----------------------------
In June 1996, the Company purchased certain assets of Special Finance,
Inc. ("Special Finance") pursuant to an option agreement for a purchase price of
$1 million, 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 Special Finance on August 1, 1995 was credited against the
purchase price. Special Finance is a Florida based automobile finance company
which purchases and brokers finance contracts from dealerships in twelve states.
Prior to the acquisition, the Company purchased a significant volume of loan
Contracts from Special Finance. Of the Company's outstanding contracts as of
June 30, 1996, approximately 44% were acquired from Special Finance.
21
<PAGE>
During June 1996, the Company allocated certain capital resources
towards the repayment of an outstanding stockholder loan in the amount of
approximately $3 million.
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. Operating costs have
increased during the past year due primarily to the expansion of the Company's
operations. 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 finance the purchase or lease of an automobile.
Recent Accounting Pronouncements
- --------------------------------
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation." SFAS No. 123 establishes financial
accounting and reporting standards for stock-based employee compensation plans.
The statement defines a "fair value based method" of accounting for employee
stock options or similar equity instruments and encourages all entities to adopt
that method of accounting for all of their employee stock compensation plans.
However, SFAS No. 123 also allows an entity to continue to measure compensation
costs for those plans using the "intrinsic value based method" of accounting,
which the Company currently uses. The accounting requirements of SFAS No. 123
are effective for transactions entered into during fiscal years beginning after
December 15, 1995. The disclosure requirements are effective for financial
statements for fiscal years beginning after December 15, 1995, or for an earlier
fiscal year for which SFAS No. 123 is initially adopted for recognizing
compensation cost. Management has determined that the Company will continue to
measure compensation costs using the "intrinsic value based method" and will
disclose the effect on net income and earnings per share using the "fair value
based method" in the footnotes to the Company's financial statements upon the
adoption of SFAS No. 123.
In June 1996, the FASB issued Statement of Financial Accounting
Standards No. 125 ("SFAS No. 125"), "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities based on a financial-components
approach that focuses on control. SFAS No. 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996 and is to be prospectively applied. Management is currently
evaluating the impact of adoption of SFAS No. 125 on its financial position and
results of operations.
22
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the Company's Annual Meeting of Stockholders held on May
31, 1996, the stockholders voted upon and approved five resolutions.
(1) To amend the Company's Certificate of Incorporation to
classify the Board of Directors into three different classes. 3,807,166 votes
were cast for the proposal, 121,166 votes were cast against the proposal and
there were 17,033 abstentions.
(2) To amend 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. 3,794,151 votes
were cast for the proposal, 131,966 votes were cast against the proposal and
there were 19,248 abstentions.
(3) The election of five directors.
<TABLE>
<CAPTION>
Nominee Shares Voted in Favor Shares Withheld Authority
------- ---------------------- -------------------------
<S> <C> <C>
Robert R. Bartolini 5,909,203 19,669
Ngaire E. Cuneo 5,908,603 20,269
James F. DeVoe 5,908,403 20,469
David R. Jones 5,908,703 20,169
John T. Schaeffer 5,908,603 19,269
</TABLE>
(4) To amend the Company's Amended and Restated 1994 Stock
Option Plan (the "1994 Plan") to provide for an increase in the number of shares
of common stock the Company is authorized to issue under the 1994 Plan from
600,000 shares to 1,000,000 shares. 3,973,918 votes were cast for the proposal,
150,692 votes were cast against the proposal and there were 31,048 abstentions.
23
<PAGE>
(5) To ratify the appointment of Price Waterhouse LLP as the
Company's independent auditors for the fiscal year ending December 31, 1996.
5,803,959 votes were cast for the proposal, 11,001 votes were cast against the
proposal and there were 9,029 abstentions.
Item 5. Other Information
-----------------
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
When used in this Quarterly Report on Form 10-QSB and in other public
statements by the Company and Company officers, the words "may," "will,"
"expect," "anticipate," "continue," "estimate," "project," "intend," and similar
expressions are intended to identify forward-looking statements regarding events
and financial trends which may affect the Company's future operating results and
financial position. Such statements are subject to risks and uncertainties that
could cause the Company's actual results and financial position to differ
materially. Such factors include, among others: (i) the Company's ability to
retain existing or obtain additional financing at rates and upon terms
acceptable to the Company in order to maintain and expand its portfolio of
finance contracts and to continue the periodic warehousing and sale of such
contracts in securitization transactions; (ii) the potential adverse effect a
decrease in the trading price of the Company's common stock would have upon the
Company's ability to obtain financing through the placement of debt and equity
securities, and upon the likelihood of conversion of outstanding debentures and
the exercise of outstanding warrants; (iii) the potential depressive impact an
influx of shares into the market may have upon the trading price of the
Company's common stock upon the resale of shares issuable upon the conversion of
outstanding debentures or upon the exercise of outstanding warrants; (iv) the
sensitivity of the Company's business to general economic conditions associated
with the non-prime market, including risks associated with interest rate
fluctuations, default and prepayment of contracts, market concentrations and
risks associated with recovery of residual value; (v) the reliance of the
Company upon the continued service of its executive officers; (vi) the Company's
ability to remain in compliance with numerous federal and state consumer
protection laws and regulations; and (vii) other economic, competitive and
governmental factors affecting the Company's operations, market, products and
services. Additional factors are described in the Company's other public reports
and registration statements filed with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on forward-looking statements
when made, which speak only as of the date made. The Company undertakes no
obligation to publicly release the results of any revision of these
forward-looking statements to reflect events or circumstances after the date
they are made or to reflect the occurrence of unanticipated events.
24
<PAGE>
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit No. Description
----------- -----------
<S> <C> <C>
3.3 Certificate of Amendment to the Certificate of Incorporation of the
Registrant dated May 31, 1996
3.4 Amended and Restated Bylaws of the Registrant dated May 31, 1996
4.13 Form of Amended and Restated Registration Rights Agreement
10.29 Administration Agreement among NAL Auto Trust 1996-2, NAL Acceptance
Corporation, and Bankers Trust Company dated June 17, 1996
10.30 Receivables Purchase Agreement among NAL Acceptance Corporation,
Autorics, Inc. and Autorics II, Inc. dated as of June 17, 1996
10.31 Sale and Servicing Agreement among NAL Auto
Trust 1996-2, Autorics II, Inc., NAL
Acceptance Corporation and Bankers Trust
Company dated as of June 17, 1996
10.32 Indenture between NAL Auto Trust 1996-2 and Bankers Trust Company
dated as of June 17, 1996
10.33 Trust Agreement between Autorics II, Inc. and Wilmington Trust
Company dated as of June 17, 1996
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
</TABLE>
25
<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: /s/ Robert R. Bartolini Dated: August 12, 1996
---------------------------------------------
Robert R. Bartolini
Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert J. Carlson Dated: August 12, 1996
---------------------------------------------
Robert J. Carlson
Vice President, Finance
(Principal Financial
and Accounting Officer)
26
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.3 Certificate of Amendment to the Certificate of Incorporation of the Registrant dated May
31, 1996
3.4 Amended and Restated Bylaws of the Registrant dated May 31, 1996
4.13 Form of Amended and Restated Registration Rights Agreement
10.29 Administration Agreement among NAL Auto Trust 1996-2, NAL Acceptance Corporation, and
Bankers Trust Company dated June 17, 1996
10.30 Receivables Purchase Agreement among NAL Acceptance Corporation, Autorics, Inc. and
Autorics II, Inc. dated as of June 17, 1996
10.31 Sale and Servicing Agreement among NAL Auto Trust 1996-2, Autorics II, Inc., NAL Acceptance
Corporation and Bankers Trust Company dated as of June 17, 1996
10.32 Indenture between NAL Auto Trust 1996-2 and Bankers Trust Company dated as of June 17, 1996
10.33 Trust Agreement between Autorics II, Inc. and Wilmington Trust Company dated as of June 17,
1996
27 Financial Data Schedule
</TABLE>
27
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
NAL FINANCIAL GROUP INC.
The undersigned, desiring to amend the Certificate of
Incorporation of NAL Financial Group Inc., a Delaware corporation, pursuant to
Section 242 of the Delaware General Corporation Law, DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation, by unanimous written
consent of its members, has duly adopted the following resolutions
proposing and declaring advisable the following amendments to the
Certificate of Incorporation:
RESOLVED: That Section 10 be amended to read as follows:
10. BOARD OF DIRECTORS:
(a) NUMBERS, ELECTIONS AND TERMS. Except as otherwise fixed by
or pursuant to provisions hereof relating to the rights of the
holders of any class or series of stock having a preference
over common stock as to dividends or upon liquidation to elect
additional Directors under specified circumstances, the number
of Directors of the Corporation shall be fixed from time to
time by affirmative vote of a majority of the Directors then
in office. The Directors, other than those who may be elected
by the holders of any classes or series of stock having a
preference over the common stock as to dividends or upon
liquidation, shall be classified, with respect to the time for
which they severally hold office, into three classes, as
nearly equal in number as possible, as shall be provided in
the manner specified in the By-Laws of the Corporation, one
class to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1997, another
class to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1998, and another
class to be originally elected for a term expiring at the
annual meeting of stockholders to be held in 1999, with each
class to hold office until its successor is elected and
qualified. At each annual meeting of the stockholders of the
Corporation after fiscal year 1996, the successors of the
class of Directors whose term expires at that meeting shall be
elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the
year of their election. Election of directors need not be by
written ballot unless so provided in the By-Laws of the
Corporation.
<PAGE>
(b) NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Except as
otherwise fixed by or pursuant to provisions hereof relating
to the rights of the holders of any class or series of stock
having a preference over common stock as to dividends or upon
liquidation to elect additional Directors under specified
circumstances, newly created directorships resulting from any
increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled by
the affirmative vote of a majority of the remaining Directors
then in office, even though less then a quorum of the Board of
Directors. Any Director elected in accordance with the
preceding sentence shall hold office for the remainder of the
full term of the class of Directors in which the new
directorship was created or the vacancy occurred and until
such Director's successor shall have been elected and
qualified. No decrease in the number of Directors constituting
the Board of Directors shall shorten the term of any incumbent
director.
(c) REMOVAL. Except as otherwise fixed by or pursuant to the
provisions hereof relating to the rights of the holders of any
class or series of stock having a preference over common stock
as to dividends or upon liquidation to elect additional
Directors under specified circumstances, any Director may be
removed from office only for cause and only by the affirmative
vote of the holders of two-thirds of the combined voting power
of the then outstanding shares of stock entitled to vote
generally in the election of Directors, voting together as a
single class.
(d) AMENDMENT, REPEAL, ETC. Notwithstanding anything contained
in this Certificate of Incorporation to the contrary, the
consent of the Board of Directors shall be required to alter,
amend or adopt any provisions inconsistent with or to repeal
this Section 10.
<PAGE>
RESOLVED: That a Section 14 be included to read as follows:
14. AMENDMENTS TO CERTIFICATE OF INCORPORATION. Amendments to the
Certificate of Incorporation of the Corporation shall require the
affirmative vote of two-thirds of the holders of a majority of the
combined voting power of the then outstanding shares of stock entitled
to vote on any proposed amendment to the Certificate of Incorporation.
Notwithstanding the foregoing, in the event that a resolution to amend
the Certificate of Incorporation of the Corporation is adopted by the
affirmative vote of at least eighty percent (80%) of the Board of
Directors, approval of the amendment shall only require the affirmative
vote of the holders of a majority of the combined voting power of the
then outstanding shares of stock entitled to vote generally on such
amendment, voting together as a single class.
SECOND: That a majority of the Stockholders have approved the above
written amendments at a duly convened meeting in accordance with the
provisions of Sections 211 and 222 of the Delaware General Corporation
Law.
THIRD: That the aforesaid Amendment shall be duly adopted in accordance
with Section 242 of the Delaware General Corporation Law.
FOURTH: That this Amendment shall become effective upon its filing in
the office of the Secretary of State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate to be signed by its Chief Executive
Officer and Secretary, this 31st day of May, 1996.
NAL FINANCIAL GROUP INC.
By: /s/ Robert R. Bartolini
-----------------------------
Chief Executive Officer
By: /s/ JoAnn Woodside
-----------------------------
Secretary
AS ADOPTED ON MAY 31, 1996
AMENDED AND RESTATED
BYLAWS OF
NAL FINANCIAL GROUP INC.
A Delaware Corporation
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year for the purpose of electing directors and
conducting such other proper business as may come before the meeting. The date,
time and place of the annual meeting may be determined by resolution of the
board of directors or as set by the Chairman and Chief Executive Officer, if
there be one, or the President, of the Corporation.
Section 2. Special Meetings. Unless otherwise prescribed by Delaware
Corporation Law or by the Certificate of Incorporation, special meetings of
stockholders, for any purpose or purposes, may be called only by either the
Chairman and Chief Executive Officer, if there be one, or the President, and
shall be called by the Secretary or any Assistant Secretary, if there be one, at
the request in writing of a majority of the board of directors. Such request
shall state the purpose or purposes of the proposed meeting. Upon receipt of
such written request, the Chairman and Chief Executive Officer, if there be one,
or the President of the Corporation shall fix a date and time for such meeting
which such date shall be within ten business days of the proposed date specified
in the written request.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
Corporation.
Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than 10 nor more than 60 days before the date of the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the board of directors, the Chairman and Chief Executive Officer or the
Secretary, and if mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
stockholder at his, her or its address as the same appears on the records of the
Corporation. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends for the express purpose
of objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 5. Quorum. The holders of the majority of the outstanding
shares of capital stock entitled to vote at a meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders, except as otherwise provided by statute or by the Certificate of
Incorporation. If a quorum is not present, the holders of fifty percent of the
shares present in person or represented by proxy at the meeting, and entitled to
vote at the meeting, may adjourn the meeting to another time and/or place. When
a specified item of business requires a vote by a class or series (if the
Corporation shall then have outstanding shares of more than one class or series)
voting as a class, the holders of a majority of the shares of such class or
series shall constitute a quorum (as to such class or series) for the
transaction of such item of business.
Section 6. Waiver of Notice. Any stockholder, either before or after
any stockholders' meeting, may waive in writing notice of the meeting, and his
waiver shall be deemed the equivalent of giving notice. Attendance at a meeting
by a stockholder shall constitute a waiver of notice, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
Section 7. Notice of Business. At any meeting of the stockholders of
the Corporation, only such proper business shall be conducted as shall have been
brought before the meeting (i) by or at the direction of the board of directors
or (ii) by any stockholder of the Corporation who is a stockholder of record at
the time of giving of the notice provided for in this Section 7, who shall be
entitled to vote at such meeting and who complies with the notice procedures set
forth in this Section 7. For business to be brought before a meeting of
stockholders by a stockholder, the stockholder shall have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive office of the Corporation not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that in the event that
less than 60 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary of the Corporation shall set forth as to each matter the stockholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and, in the event that such business includes a proposal
to amend any document, including these Bylaws, the language of the proposed
amendment, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of capital stock of the Corporation which are beneficially owned by such
stockholder and (iv) any material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at a meeting of the stockholders except in accordance with the
procedures set forth in this Section 7. The chairman of the meeting of
stockholders shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of these Bylaws, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this Section 7, a stockholder shall also comply with all applicable requirements
of the Securities and Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder with respect to matters set forth in this
Section 7.
Section 8. Voting. Unless otherwise required by Delaware Corporation
Law, the Certificate of Incorporation or these Bylaws, any question brought
before any meeting of stockholders shall be decided by the vote of the holders
of a majority of the stock represented and entitled to vote thereat. Each
stockholder shall have one vote for each share of stock entitled to vote held of
record by such stockholder and a proportionate vote for each fractional share so
held, unless otherwise provided in the Certificate of Incorporation. The board
of directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot. Persons holding stock in a
fiduciary capacity shall be entitled to vote the shares so held. Persons whose
stock is pledged shall be entitled to vote, unless in the transfer by the
pledgor on the books of the Corporation he has expressly empowered the pledgee
to vote thereon, in which case only the pledgee, or his proxy, may represent
such stock and vote thereon.
If shares having voting power stand of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety, or otherwise, or if two or more
persons have the same fiduciary relationship respecting the same shares, unless
the Secretary of the Corporation is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to voting shall
have the following effect: (i) if only one votes, his act binds all; (ii) if
more than one vote, the act of the majority so voting binds all; and (iii) if
more than one vote, but the vote is evenly split on any particular matter, each
fraction may vote the securities in question proportionately, or any person
voting the shares or a beneficiary, if any, may apply to the Court of Chancery
or any court of competent jurisdiction in the State of Delaware to appoint an
additional person to act with the persons so voting the shares. The shares shall
then be voted as determined by a majority of such persons and the person
appointed by the Court. If a tenancy is held in unequal interests, a majority or
even-split for the purpose of this subsection shall be a majority or even-split
in interest.
Section 9. Proxies. A stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. No proxy shall be or acted upon after three (3) years from its date,
unless the proxy provides for a longer period.
Section 10. Consent of Stockholders in Lieu of Meeting. No action
required or permitted to be taken at any annual or special meeting of
stockholders of the Corporation may be taken without a meeting, and stockholders
of the Corporation may not take action by written consent.
Section 11. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The lists shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 12. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 11 of this Article I or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE II
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. Except as otherwise
fixed by or pursuant to provisions of the Certificate of Incorporation relating
to the rights of the holders of any class or series of stock having a preference
over the Common Stock and as to dividends or upon liquidation to elect
additional directors under specified circumstances, the number of directors of
the Corporation which shall constitute the board as of the date these Bylaws are
first amended and restated shall be [five]. Thereafter, the number of directors
shall be established from time to time by resolution of the board of directors.
The directors, other than those who may be elected by the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation, shall be classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible, one class to be originally elected for a term expiring at the annual
meeting of stockholders to be held in fiscal year 1997, another class to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in fiscal year 1998, and another class to be originally elected for a
term expiring at the annual meeting of stockholders to be held in fiscal year
1999, with each class to hold office until its successor is elected and
qualified. At each annual meeting of the stockholders of the Corporation after
fiscal year 1996, the successors of the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election. The directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote in the election of directors. Directors need not be stockholders. Election
of directors need not be by written ballot.
Only persons who are nominated in accordance with the following
procedures shall be eligible for election by the stockholders as directors of
the Corporation. Nominations of persons for election as directors of the
Corporation may be made at a meeting of stockholders (a) by or at the direction
of the board of directors, (b) by any nominating committee or persons appointed
by the board of directors or (c) by any stockholder of the Corporation entitled
to vote for the election of directors at the meeting who complies with the
notice procedures set forth in this Section 2. Such nominations, other than
those made by or at the direction of the board of directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive office of the Corporation not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that in the event that
less than 60 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary of the Corporation shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
person and (iv) any other information relating to the person that is required to
be disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as now or hereafter
amended; and (b) as to the stockholder giving the notice, (i) the name and
record address of such stockholder and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by such
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director of the
Corporation. No person shall be eligible for election by the stockholders as a
director of the Corporation unless nominated in accordance with the procedures
set forth herein. The chairman of the meeting of the stockholders shall, if the
facts warrant, determine and declare to the meeting that nomination was not made
in accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
Section 3. Removal and Resignation. Subject to the rights of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect directors under specified circumstances, any director
may be removed from office only for cause and only by the affirmative vote of
the holders of two-thirds of the combined voting power of the then outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class. Any director may resign at any time upon written
notice to the Corporation.
Section 4. Vacancies. Any vacancies in the board of directors for any
reason, and directorships resulting from any increase in the number of
directors, may be filled by the board of directors, although less than a quorum,
and any directors so chosen shall hold office until the next election of the
class for which such directors shall have been chosen and until their successors
shall be elected and qualified.
Section 5. Annual Meetings. The annual meeting of each newly elected
board of directors shall be held without other notice than this Bylaw
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the Chairman and Chief Executive Officer, if there shall be one, or
the President, on at least 24 hours notice to each director, either personally,
by telephone, by mail, or by facsimile; in like manner and on like notice the
Chairman and Chief Executive Officer, if there shall be one, or the President,
must call a special meeting on the written request of at least a majority of the
directors.
Section 7. Quorum. Required Vote and Adjournment. A majority of the
total number of directors shall constitute a quorum for the transaction of
business. The vote of a majority of directors present at a meeting at which a
quorum is present shall be the act of the board of directors. If a quorum shall
not be present at any meeting of the board of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation, which
to the extent provided in such resolution or these Bylaws shall have and may
exercise the powers of the board of directors in the management and affairs of
the Corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. The vote of a majority of committee
members present at a meeting at which a quorum is present shall be the act of a
committee.
Section 10. Communications Equipment. Members of the board of directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of
the board of directors or any committee thereof who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except when
such member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the Secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the Secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by
the Certificate of Incorporation, any action required or permitted to be taken
at any meeting of the board of directors, or of any committee thereof, may be
taken without a meeting if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
Section 13. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the board of directors and may be paid a
fixed sum (which may be cash or other property or any combination thereof) for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE III
OFFICERS
Section 1. Number. The officers of the Corporation shall be elected by
the board of directors and shall consist of a Chairman and Chief Executive
Officer, a President, one or more Vice Presidents, a Secretary, a Treasurer, and
such other officers and assistant officers as may be deemed necessary or
desirable by the board of directors. Any number of offices may be held by the
same person, except that no person may simultaneously hold the office of
President and Secretary. In its discretion, the board of directors may choose
not to fill any office for any period that it may deem advisable.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The Chairman and Chief Executive Officer shall appoint other officers to
serve for such terms as he or she deems desirable. Vacancies may be filled or
new offices created and filled at any meeting of the board of directors. Each
officer shall hold office until a successor is duly elected and qualified or
until his or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the Corporation.
Section 6. The Chairman and Chief Executive Officer. The Chairman and
Chief Executive Officer shall be the chief executive officer of the Corporation.
The Chairman and Chief Executive Officer shall preside at all meetings of the
stockholders and board of directors at which he or she is present; subject to
the powers of the board of directors, shall have general charge of the business,
affairs and property of the Corporation and control over its officers, agents
and employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The Chairman and Chief Executive Officer
shall execute bonds, mortgages and other contracts requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the board of directors to some other officer or
agent of the Corporation. The Chairman and Chief Executive Officer shall have
such other powers and perform such other duties as may be prescribed by the
board of directors or as may be provided in these Bylaws.
Section 7. President. The President shall, in the absence or disability
of the Chairman and Chief Executive Officer, act with all of the powers and be
subject to all the restrictions of the Chairman and Chief Executive Officer. The
President shall also perform such other duties and have such other powers as the
board of directors, the Chairman and Chief Executive Officer or these Bylaws
may, from time to time, prescribe.
Section 8. Vice-Presidents. The Vice-President, if any, or if there
shall be more than one, the Vice-Presidents in the order determined by the board
of directors shall, in the absence or disability of the President, act with all
of the powers and be subject to all the restrictions of the President. The
Vice-Presidents shall also perform such other duties and have such other powers
as the board of directors, the Chairman and Chief Executive Officer or these
Bylaws may, from time to time, prescribe.
Section 9. The Secretary and Assistant Secretaries. The Secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the Chairman
and Chief Executive Officer's supervision, the Secretary shall give, or cause to
be given, all notices required to be given by these Bylaws or by law; shall have
such powers and perform such duties as the board of directors, the Chairman and
Chief Executive Officer or these Bylaws may, from time to time, prescribe; and
shall have custody of the corporate seal of the Corporation. The Secretary, or
an Assistant Secretary, shall have authority to affix the corporate seal to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such Assistant Secretary. The board of
directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature. The
Assistant Secretary, or if there be more than one, the Assistant Secretaries in
the order determined by the board of directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
board of directors, the Chairman and Chief Executive Officer, the President, or
Secretary may, from time to time, prescribe.
Section 10. The Treasurer and Assistant Treasurer. The Treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the Corporation as may be ordered by the board of directors;
shall cause the funds of the Corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the Chairman and Chief Executive Officer and the board of
directors, at its regular meeting or when the board of directors so requires, an
account of the Corporation; and shall have such powers and perform such duties
as the board of directors, the Chairman and Chief Executive Officer, the
President or these Bylaws may, from time to time, prescribe. If required by the
board of directors, the Treasurer shall give the Corporation a bond (which shall
be rendered every six years) in such sums and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of
the duties of the office of Treasurer and for the restoration to the
Corporation, in case of death, resignation, retirement, or removal from office,
of all books, papers, vouchers, money, and other property of whatever kind in
the possession or under the control of the Treasurer belonging to the
Corporation. The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the board of directors, shall in
the absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer. The Assistant Treasurers shall perform such other
duties and have such other powers as the board of directors, the Chairman and
Chief Executive Officer, the President or Treasurer may, from time to time,
prescribe.
Section 11. Other Officers. Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these Bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 12. Absence or Disability of Officers. In the case of the
absence or disability of any officer of the Corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE IV
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation by
the Chairman and Chief Executive Officer, the President or a Vice-President and
the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by such holder in the Corporation. If such a certificate
is countersigned (1) by a transfer agent or an assistant transfer agent other
than the Corporation or its employee or (2) by a registrar, other than the
Corporation or its employee, the signature of any such Chairman and Chief
Executive Officer, President, Vice-President, Secretary, or Assistant Secretary
may be facsimiles. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on, any such certificate or
certificates shall cease to be such officer or officers of the Corporation
whether because of death, resignation or otherwise before such certificate or
certificates have been delivered by the Corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures have been used thereon had not ceased to be such officer or
officers of the Corporation. All certificates for shares shall be consecutively
numbered or otherwise identified. The name of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the books of the Corporation. Shares of stock of the
Corporation shall only be transferred on the books of the Corporation by the
holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the Corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as the Corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or Canada or any state or province thereof to act as
its transfer agent or registrar, or both in connection with the transfer of any
class or series of securities of the Corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be made
against the Corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
the Corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty nor less than ten
days before the date of such meeting. If no record date is fixed by the board of
directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the close of business on the next
day preceding the day on which notice is given, or if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 4. Fixing a Record Date for Other Purposes. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 5. Registered Stockholders. Prior to the surrender to the
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the Corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 6. Subscriptions for Stock. Unless otherwise provided for in
the subscription agreement, subscriptions for shares shall be paid in full at
such time, or in such installments and at such times, as shall be determined by
the board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the Corporation may proceed to collect the
amount due in the same manner as any debt due the Corporation.
ARTICLE V
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other
orders for the payment of money by or to the Corporation and all notes and other
evidences of indebtedness issued in the name of the Corporation shall be signed
by such officer or officers, agent or agents of the Corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer
or officers, or any agent or agents, of the Corporation to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
Corporation or of its subsidiary, including any officer or employee who is a
director of the Corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the Corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
any other corporation held by the Corporation shall be voted by the Chairman and
Chief Executive Officer, unless the board of directors specifically confers
authority to vote with respect thereto, which authority may be general or
confined to specific instances, upon some other person or officer. Any person
authorized to vote securities shall have the power to appoint proxies, with
general power of substitution.
Section 8. Inspection of Books and Records. Any stockholder of record,
in person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the Corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at its registered
office in the State of Delaware or at its principal place of business.
Section 9. Section Headings. Section headings in these Bylaws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these Bylaws is or becomes inconsistent with any provision of the Certificate of
Incorporation, the General Corporation Law of the State of Delaware or any other
applicable law, the provision of these Bylaws shall not be given any effect to
the extent of such inconsistency but shall otherwise be given full force and
effect.
ARTICLE VI
AMENDMENTS
These Bylaws may be amended, altered, or repealed and new bylaws
adopted at any meeting of the board of directors by a majority vote. The fact
that the power to adopt, amend, alter, or repeal the Bylaws has been conferred
upon the board of directors shall not divest the stockholders of the same
powers.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is dated as of ____________________,
1996, by and among NAL FINANCIAL GROUP INC., a Delaware corporation (the
"Company") and the undersigned holder of securities of the Company (the
"Holder").
W I T N E S S E T H:
WHEREAS, the Holder purchased from the Company certain Subordinated
Convertible Debenture Units, which each consisted of a 9% Subordinated
Convertible Debenture (the "Debenture(s)") and common stock purchase warrants
(the "Warrant(s)");
WHEREAS, the Holders have received or are entitled to receive certain
shares of the Company's Common Stock ("Restricted Stock") upon conversion of the
Debentures and the exercise of the Warrants;
WHEREAS, the Company and the Holder are parties to prior agreements
which grant registration rights in connection with the Restricted Stock;
WHEREAS, based upon existing market conditions, and in order to
accomodate the Company's desire to undertake an underwritten public offering of
its Common Stock, the parties hereto desire to amend and restate any and all
prior agreements concerning the registration of the Restricted Stock under the
Securities Act of 1933, as amended.
NOW, THEREFORE, the parties hereto agree as follows:
AGREEMENT
1. DEFINITIONS.
(a) "Agreement" shall mean this Amended and Restated
Registration Rights Agreement.
(b) "Company" shall mean NAL Financial Group Inc.
(c) "Holder" shall mean the Holder of certain Debentures and
Warrants who has received or has the right to receive, shares of the Company's
Common Stock upon conversion of the Debentures and/or exercise of the Warrants.
(d) "Restricted Stock" shall mean the Common Stock of the
Company that has been or may be issued to the Holder upon conversion of the
Debentures and/or exercise of the Warrants.
(e) "Securities Act" shall meant the Securities Act of 1933,
as amended, or any similar or successor federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at any
relevant time.
(f) "SEC" shall mean the United States Securities and
Exchange Commission.
Capitalized terms used in this Registration Rights Agreement and not
herein defined shall have the same meaning ascribed thereto in the Debentures
and the Warrants, as applicable.
2. REGISTRATION RIGHTS.
(a) Piggyback Rights.
(i) In the event that the Company files a
registration statement with the SEC for the purpose of registering any of
the Company's capital stock for offering to the public on its own behalf, the
Company shall include in any such registration statement the shares of
Restricted Common Stock reserved for issuance upon conversion of the Debentures
and exercise of the Warrants or shares of Restricted Common Stock previously
issued (and not yet registered) upon conversion of the Debentures.
(ii) The Company's obligation in subparagraph
2(a)(i) above shall extend only to the inclusion of the shares of
Restricted Stock in a registration statement, and not as to the determination of
the manner of disposition. Absent the consent of the Underwriter, the Company
shall have no obligation to include the shares of Restricted Stock requesting
inclusion pursuant to subparagraph 2(a)(i) above in any underwritten offering,
to otherwise assure the terms and conditions of distribution, or to obtain a
commitment from any underwriter relative to the sale of such shares of
Restricted Stock.
(iii) If the underwriter of an underwritten
offering (or, in the case of an offering not being underwritten, the
Company) believes in its sole discretion that the inclusion of the Restricted
Stock in a registration statement would materially and adversely affect the
success of the offering covered by such registration statement or the market for
the Company's securities, then, at the election of the Company or such
Underwriter, the inclusion of the Restricted Stock in the registration statement
may be deferred, or the amount of Restricted Stock to be included in the
registration statement may be reduced pro rata (among the Holders of Restricted
Stock) to the extent necessary to reduce the amount of Restricted Stock to be
covered by such registration statement to the amount recommended by the
underwriter or the Company. In the event that there is a deferral of
registration or a reduction of the Restricted Stock covered by the registration
statement as stated above, then the Restricted Stock not so included in the
registration statement shall retain its "Piggyback Rights" until such time as
the Restricted Stock is included within a registration statement pursuant to
Paragraph 2(b) hereof.
(iv) The Holder acknowledges that the Company may
file a registration statement with the SEC during May 1996 or thereafter,
the purpose of which is to register the resale of certain shares of common stock
held by certain Holders who have elected not to execute this Agreement, if any,
as well as by other common stock holders certain of whom may be officers and
directors. The Holder waives any right to participate in this registration and
acknowledges that this registration would not involve shares being offered by
the Company, thus, the provisions of paragraph 2(a) would be inapplicable.
(b) Mandatory Registration.
(i) To the extent that the Holders have shares of
Restricted Stock that have not been included for resale purposes within a
registration statement in accordance with the provisions of Paragraph 2(a)
above, the Company agrees to file a registration statement with the SEC
registering for resale the Restricted Stock no later than 120 days following
completion of an underwritten offering of stock on behalf of the Company,
however, in no event later than January 31, 1997.
(ii) In the event that the Company does not complete
an underwritten offering of stock by September 30, 1996, or is not by
September 30, 1996 otherwise involved in the underwriting process in connection
with such an anticipated offering, the Company agrees to file a registration
statement for the purpose of this paragraph by no later than October 30, 1996.
(iii) In any registration statement filed pursuant
to the provisions of subparagraphs 2(b)(i) and (ii) above, the Holder shall
agree not to effect the public sale of any shares of Restricted Stock issued or
issuable upon exercise of the Warrants for a period of ninety (90) days from the
effectiveness thereof.
3. INDEMNIFICATION.
The Company has agreed to indemnify and hold harmless each
Holder from and against any and all losses, claims, damages and liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the Restricted
Stock, except insofar as such losses, claims, damages or liabilities are caused
by any such untrue statement or are otherwise based upon information furnished
to the Company by such Holder or on such Holder's behalf for use therein;
provided, however, that the foregoing indemnity agreement with respect to such
prospectus shall not inure to the benefit of such Holder from whom the person
asserting any such loss, claim, damage or liability purchased the Restricted
Stock if it is determined that it was the responsibility of such Holder to
provide such person with a current copy of the prospectus and such current copy
of the prospectus would have cured the defect giving rise to such loss, claim,
damage or liability.
4. REGISTRATION PROCEDURES.
If and whenever the Company effects the registration of any of
the Restricted Stock pursuant to Paragraph 2 under the Securities Act, the
Company will use its best efforts to:
(a) Prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby or as required under the Securities Act.
(b) Prepare and file with the SEC 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
the period specified in Subparagraph 3(a) above and as necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
Restricted Stock covered by such registration statement in accordance with the
sellers' intended method of disposition set forth in such registration statement
for such period.
(c) Furnish to each seller and to each underwriter such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus), as such persons may reasonably request
in order to facilitate the public sale or other disposition of the Restricted
Stock covered by such registration statement.
(d) Use its best efforts to register or qualify the Restricted
Stock covered by such registration statement under the securities or blue sky
laws of such jurisdictions as the sellers, or, in the case of an underwritten
public offering, the managing underwriter shall reasonably request; provided,
however, that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction.
(e) Immediately notify each seller under such registration
statement and each underwriter, 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 contained in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits 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.
(f) Make available for inspection by each seller, 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 and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement.
(g) For purposes of Subparagraphs 3(a) and 3(b) above, the
period of distribution of Restricted Stock shall be deemed to extend for nine
months (120 days in the case of registration on Form S-3) or such earlier date
as (A) in an underwritten public offering, each underwriter has completed the
distribution of all securities purchased by it; and (B) in any other
registration, all shares of Restricted Stock covered thereby shall have been
sold.
(h) If the Common Stock of the Company is listed on any
securities exchange or automated quotation system, the Company shall list (with
the listing application being made at the time of the filing of such
registration statement or as soon thereafter as is reasonably practicable) the
Restricted Stock covered by such registration statement on such exchange or
automated quotation system.
5. EXPENSES.
(a) For the purposes of this Paragraph 5, the term
"Registration Expenses" shall mean: all expenses incurred by the Company in
complying with Paragraphs 2 and 3 of this Agreement, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel and independent public accountants for the Company
(other than the expenses of any special audit as described below), fees of the
National Association of Securities Dealers, Inc. ("NASD"), fees and expenses of
listing shares of Restricted Stock on any securities exchange or automated
quotation system on which the Company's shares are listed and fees of transfer
agents and registrars. The term "Selling Expenses" shall mean: all underwriting
discounts and selling commissions applicable to the sale of Restricted Stock,
and all accountable or non-accountable expenses paid to any underwriter in
respect of the sale of Restricted Stock.
(b) Except as otherwise provided herein, the Company will pay
all Registration Expenses in connection with the registration statement filed
pursuant to Paragraphs 2 and 3 of this Agreement. All Selling Expenses in
connection with any registration statement filed pursuant to Paragraphs 2 and 3
of this Agreement shall be borne by the participating sellers in proportion to
the number of shares sold by each, or by such persons other than the Company
(except to the extent the Company shall be a seller) as they may agree.
6. OBLIGATIONS OF HOLDER.
(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 Restricted Stock 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
Paragraphs 2 and 3 of 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.
7. MISCELLANEOUS PROVISIONS.
(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, Florida 33309
Attention: Robert R. Bartolini
with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
1200 Two Logan Square
18th and 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.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(This Space Left Blank Intentionally)
(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 of any kind between the parties with respect to such subject
matter, including any and all prior Registration Rights Agreements.
NAL FINANCIAL GROUP INC.
By:______________________________
Robert R. Bartolini
Chief Executive Officer
HOLDER
By:______________________________
EXECUTION COPY
This ADMINISTRATION AGREEMENT dated as of June 17, 1996, among
NAL AUTO TRUST 1996-2, a Delaware business trust (the "Issuer"), NAL
ACCEPTANCE CORPORATION, a Delaware corporation, as administrator (the
"Administrator"), and BANKERS TRUST COMPANY, a New York banking
corporation, not in its individual capacity but solely as Indenture
Trustee (the "Indenture Trustee"),
W I T N E S S E T H :
WHEREAS, the Issuer is issuing the Class A-1 7.25% Asset Backed Notes
and the Class A-2 8.60% Asset Backed Notes (collectively, the "Notes") pursuant
to the Indenture dated as of June 17, 1996 (as amended and supplemented from
time to time, the "Indenture"), between the Issuer and the Indenture Trustee
(capitalized terms used and not otherwise defined herein shall have the meanings
assigned to such terms in the Indenture);
WHEREAS, the Issuer has entered into certain agreements in connection
with the issuance of the Notes and of certain beneficial ownership interests in
the Issuer, including (i) a Sale and Servicing Agreement dated as of June 17,
1996 (as amended and supplemented from time to time, the "Sale and Servicing
Agreement"), among the Issuer, NAL Acceptance Corporation, as servicer, Bankers
Trust Company, as back-up servicer, and Autorics II, Inc., as depositor (the
"Depositor"), and (ii) the Indenture (the Sale and Servicing Agreement and the
Indenture being referred to hereinafter collectively as the "Related
Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer and the Owner
Trustee are required to perform certain duties in connection with (a) the Notes
and the collateral therefor pledged pursuant to the Indenture (the "Collateral")
and (b) the beneficial ownership interests in the Issuer (the registered holders
of such interests being referred to herein as the "Owners");
WHEREAS, the Issuer and the Owner Trustee desire to have the
Administrator perform certain of the duties of the Issuer and the Owner Trustee
referred to in the preceding clause and to provide such additional services
consistent with the terms of this Agreement and the Related Agreements as the
Issuer and the Owner Trustee may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
1.Duties of the Administrator. (a) Duties with Respect to the
Indenture. (i) The Administrator agrees to perform all its duties as
Administrator . In addition, the Administrator shall consult with the Owner
Trustee regarding the duties of the Issuer or the Owner Trustee under the
Indenture. The Administrator shall monitor the performance of the Issuer and
shall advise the Owner Trustee when action is necessary to comply with the
Issuer's or the Owner Trustee's duties under the Indenture. The Administrator
shall prepare for execution by the Issuer, or shall cause the preparation by
other appropriate persons of, all such documents, reports, filings, instruments,
certificates and opinions that it shall be the duty of the Issuer or the Owner
Trustee to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Administrator shall take all appropriate action that is the
duty of the Issuer or the Owner Trustee to take pursuant to the Indenture
including, without limitation, such of the foregoing as are required with
respect to the following matters under the Indenture (references are to sections
of the Indenture):
(A) the duty to cause the Note Register to be kept and to give the
Indenture Trustee notice of any appointment of a new Note Registrar and the
location, or change in location, of the Note Register (Section 2.05);
(B) the notification of Noteholders of the final principal payment on
their Notes (Section 2.08(b));
(C) the fixing or causing to be fixed of any special record date and
the notification of the Noteholders with respect to special payment dates, if
any (Section 2.08(c));
(D) the preparation of or obtaining of the documents and instruments
required for authentication of the Notes and delivery of the same to the
Indenture Trustee (Section 2.02);
(E) the maintenance of an office in the Borough of Manhattan, City of
New York, for registration of transfer or exchange of Notes (Section 3.02);
(F) the duty to cause newly appointed Paying Agents, if any, to deliver
to the Indenture Trustee the instrument specified in the Indenture regarding
funds held in trust (Section 3.03);
(G) the direction to the Indenture Trustee to deposit moneys with
Paying Agents, if any, other than the Indenture Trustee (Section 3.03);
(H) the obtaining and preservation of the Issuer's qualification to do
business in each jurisdiction in which such
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<PAGE>
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the Collateral and each other
instrument and agreement included in the Trust Estate (Section 3.04);
(I) the preparation of all supplements and amendments to the Indenture
and all financing statements, continuation statements, instruments of further
assurance and other instruments and the taking of such other action as is
necessary or advisable to protect the Trust Estate (Section 3.05);
(J) the delivery of the Opinion of Counsel on the Closing Date and the
annual delivery of Opinions of Counsel as to the Trust Estate, and the annual
delivery of the Officer's Certificate and certain other statements as to
compliance with the Indenture (Sections 3.06 and 3.09);
(K) the identification to the Indenture Trustee in an Officer's
Certificate of a Person with whom the Issuer has contracted to perform its
duties under the Indenture (Section 3.07(b));
(L) the notification of the Indenture Trustee and the Rating Agencies
of a Servicer Default under the Sale and Servicing Agreement and, if such
Servicer Default arises from the failure of the Servicer to perform any of its
duties under the Sale and Servicing Agreement with respect to the Receivables,
the taking of all reasonable steps available to remedy such failure (Section
3.07(d));
(M) the duty to cause the Servicer to comply with Sections 4.09, 4.10,
4.11 and Article IX of the Sale and Servicing Agreement (Section 3.14);
(N) the preparation and obtaining of documents and instruments required
for the release of the Issuer from its obligations under the Indenture (Section
3.11(b));
(O) the delivery of written notice to the Indenture Trustee and the
Rating Agencies of each Event of Default under the Indenture and each default by
the Servicer or the Depositor under the Sale and Servicing Agreement (Section
3.19);
(P) the monitoring of the Issuer's obligations as to the satisfaction
and discharge of the Indenture and the preparation of an Officer's Certificate
and the obtaining of the Opinion of Counsel and the Independent Certificate
relating thereto (Section 4.01);
(Q) the compliance with any written directive of the Indenture Trustee
with respect to the sale of the Trust Estate in a commercially reasonable manner
if an Event of Default shall have occurred and be continuing (Section 5.04);
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<PAGE>
(R) the preparation and delivery of notice to Noteholders of the
removal of the Indenture Trustee and the appointment of a successor Indenture
Trustee (Section 6.08);
(S) the preparation of any written instruments required to confirm more
fully the authority of any co-trustee or separate trustee and any written
instruments necessary in connection with the resignation or removal of any
co-trustee or separate trustee (Sections 6.08 and 6.10);
(T) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee is not the
Note Registrar (Section 7.01);
(U) the opening of one or more accounts in the Issuer's name, the
preparation and delivery of Issuer Orders, Officer's Certificates and Opinions
of Counsel and all other actions necessary with respect to investment and
reinvestment of funds in the Trust Accounts (Sections 8.02 and 8.03);
(V) the preparation of an Issuer Request and Officer's Certificate and
the obtaining of an Opinion of Counsel and Independent Certificates, if
necessary, for the release of the Trust Estate (Sections 8.04 and 8.05);
(W) the preparation of Issuer Orders and the obtaining of Opinions of
Counsel with respect to the execution of supplemental indentures and the mailing
to the Noteholders of notices with respect to such supplemental indentures
(Sections 9.01, 9.02 and 9.03);
(X) the execution and delivery of new Notes conforming to any
supplemental indenture (Section 9.05);
(Y) the duty to notify Noteholders of redemption of the Notes or to
cause the Indenture Trustee to provide such notification (Section 10.02);
(Z) the preparation and delivery of all Officer's Certificates and
Opinions of Counsel with respect to any requests by the Issuer to the Indenture
Trustee to take any action under the Indenture (Section 11.01);
(AA) the notification of the Rating Agencies, upon the failure of the
Indenture Trustee to give such notification, of the information required
pursuant to Section 11.04 of the Indenture (Section 11.04);
(BB) the preparation and delivery to Noteholders and the Indenture
Trustee of any agreements with respect to alternate payment and notice
provisions (Section 11.06);
(CC) the recording of the Indenture, if applicable (Section 11.15); and
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<PAGE>
(DD) the delivery to each Noteholder of such information as may be
required to enable such holder to prepare its federal and state tax returns
(Section 6.06).
(ii) The Administrator will:
(A) pay the Indenture Trustee (and any separate trustee or co-trustee
appointed pursuant to Section 6.10 of the Indenture (a "Separate Trustee")) from
time to time reasonable compensation for all services rendered by the Indenture
Trustee or Separate Trustee, as the case may be, under the Indenture (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(B) except as otherwise expressly provided in the Indenture, reimburse
the Indenture Trustee or any Separate Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Indenture Trustee or Separate Trustee, as the case may be, in accordance with
any provision of the Indenture (including the reasonable compensation, expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
(C) indemnify the Indenture Trustee and its officers, directors, agents
and employees and any Separate Trustee and their respective agents for, and hold
them harmless against, any losses, liability or expense (including attorney's
fees and expenses) incurred by it in connection with the administration of the
trust created by the Indenture and the performance of its duties under the
Indenture; provided, that, the Administrator need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith; and
(D) pay the Owner Trustee (and any Indemnified Party, as defined in
Section 8.02 of the Trust Agreement) any amounts owed to it under Section 8.01
or 8.02 of the Trust Agreement.
(b) Additional Duties. (i) In addition to the duties of the
Administrator set forth above, the Administrator shall perform such calculations
and shall prepare or shall cause the preparation by other appropriate persons
of, and shall execute on behalf of the Issuer or the Owner Trustee, all such
documents, reports, filings, instruments, certificates and opinions that it
shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver
pursuant to the Related Agreements or Section 5.05(a), (b), (c) or (d) of the
Trust Agreement, and at the request of the Owner Trustee shall take all
appropriate action that it is the duty of the Issuer or the Owner Trustee to
take pursuant to the Related Agreements. In furtherance thereof, the Owner
Trustee shall, on behalf of itself and of the Issuer, execute and deliver to the
Administrator and to each successor Administrator appointed pursuant to the
terms hereof, one or more
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<PAGE>
powers of attorney substantially in the form of Exhibit A hereto, appointing the
Administrator the attorney-in-fact of the Owner Trustee and the Issuer for the
purpose of executing on behalf of the Owner Trustee and the Issuer all such
documents, reports, filings, instruments, certificates and opinions. Subject to
Section 5 of this Agreement, and in accordance with the directions of the Owner
Trustee, the Administrator shall administer, perform or supervise the
performance of such other activities in connection with the Collateral
(including the Related Agreements) as are not covered by any of the foregoing
provisions and as are expressly requested by the Owner Trustee and are
reasonably within the capability of the Administrator.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for promptly
notifying the Owner Trustee in the event that any withholding tax is imposed on
the Trust's payments (or allocations of income) to an Owner as contemplated in
Section 5.02(c) of the Trust Agreement. Any such notice shall specify the amount
of any withholding tax required to be withheld by the Owner Trustee pursuant to
such provision.
(iii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
performance of the duties of the Owner Trustee set forth in Section 5.05(a),
(b), (c) and (d), the penultimate sentence of Section 5.05 and Section 5.06(a)
of the Trust Agreement with respect to, among other things, accounting and
reports to Owners; provided, however, that the Owner Trustee shall retain
responsibility for the distribution of the Schedule K-1s necessary to enable
each Owner to prepare its federal and state income tax returns.
(iv) The Administrator shall satisfy its obligations with respect to
clauses (ii) and (iii) above by retaining, at the expense of the Trust payable
by the Administrator, a firm of independent public accountants (the
"Accountants") acceptable to the Owner Trustee, which shall perform the
obligations of the Administrator thereunder. In connection with paragraph (ii)
above, the Accountants will provide prior to December 31, 1996, a letter in form
and substance satisfactory to the Owner Trustee as to whether any tax
withholding is then required and, if required, the procedures to be followed
with respect thereto to comply with the requirements of the Code. The
Accountants shall be required to update the letter in each instance that any
additional tax withholding is subsequently required or any previously required
tax withholding shall no longer be required.
(v) The Administrator shall perform the duties of the Administrator
specified in Section 10.02 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee, and any other
duties expressly required to be performed by the Administrator under the Trust
Agreement.
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<PAGE>
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into transactions
or otherwise deal with any of its affiliates; provided, however, that the terms
of any such transactions or dealings shall be in accordance with any directions
received from the Issuer and shall be, in the Administrator's opinion, no less
favorable to the Issuer than would be available from unaffiliated parties.
(c) Non-Ministerial Matters. (i) With respect to matters that in the
reasonable judgment of the Administrator are non-ministerial, the Administrator
shall not take any action unless within a reasonable time before the taking of
such action, the Administrator shall have notified the Owner Trustee of the
proposed action and the Owner Trustee shall not have withheld consent or
provided an alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include, without limitation:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Receivables);
(C) the amendment, change or modification of the Related Agreements;
(D) the appointment of successor Note Registrars, successor Paying
Agents and successor Indenture Trustees pursuant to the Indenture or the
appointment of successor Administrators or Successor Servicers, or the consent
to the assignment by the Note Registrar, Paying Agent or Indenture Trustee of
its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(ii) Notwithstanding anything to the contrary in this Agreement, the
Administrator shall not be obligated to, and shall not, (x) make any payments to
the Noteholders under the Related Agreements, (y) sell the Trust Estate pursuant
to Section 5.04 of the Indenture or (z) take any other action that the Issuer
directs the Administrator not to take on its behalf.
2. Records. The Administrator shall maintain appropriate books of
account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Issuer at any time
during normal business hours.
3. Compensation. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator
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<PAGE>
shall be entitled to $1,000 per annum which shall be solely an obligation of the
Servicer.
4. Additional Information To Be Furnished to the Issuer. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
5. Independence of the Administrator. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer, the Administrator shall
have no authority to act for or represent the Issuer or the Owner Trustee in any
way and shall not otherwise be deemed an agent of the Issuer or the Owner
Trustee.
6. No Joint Venture. Nothing contained in this Agreement (i) shall
constitute the Administrator and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
7. Other Activities of Administrator. Nothing herein shall prevent the
Administrator or its Affiliates from engaging in other businesses or, in its
sole discretion, from acting in a similar capacity as an administrator for any
other person or entity even though such person or entity may engage in business
activities similar to those of the Issuer, the Owner Trustee or the Indenture
Trustee.
8. Term of Agreement; Resignation and Removal of Administrator. (a)
This Agreement shall continue in force until the dissolution of the Issuer, upon
which event this Agreement shall automatically terminate.
(b) Subject to Section 8(e), the Administrator may resign its duties
hereunder by providing the Issuer with at least 60 days' prior written notice.
(c) Subject to Section 8(e), the Issuer may remove the Administrator
without cause by providing the Administrator with at least 60 days' prior
written notice.
(d) Subject to Section 8(e), at the sole option of the Issuer, the
Administrator may be removed immediately upon written notice of termination from
the Issuer to the Administrator if any of the following events shall occur:
(i) the Administrator shall default in the performance of any of its
duties under this Agreement and, after notice of such
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default, shall not cure such default within ten days (or, if such default cannot
be cured in such time, shall not give within ten days such assurance of cure as
shall be reasonably satisfactory to the Issuer);
(ii) a court having jurisdiction in the premises shall enter a decree
or order for relief, and such decree or order shall not have been vacated within
60 days, in respect of the Administrator in any involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect or appoint a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for the Administrator or any substantial part
of its property or order the winding-up or liquidation of its affairs; or
(iii) the Administrator shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, shall consent to the appointment of a receiver, liquidator,
assignee, trustee, custodian, sequestrator or similar official for the
Administrator or any substantial part of its property, shall consent to the
taking of possession by any such official of any substantial part of its
property, shall make any general assignment for the benefit of creditors or
shall fail generally to pay its debts as they become due.
The Administrator agrees that if any of the events specified in clauses
(ii) or (iii) of this Section shall occur, it shall give written notice thereof
to the Issuer and the Indenture Trustee within seven days after the happening of
such event.
(e) No resignation or removal of the Administrator pursuant to this
Section shall be effective until (i) a successor Administrator shall have been
appointed by the Issuer and (ii) such successor Administrator shall have agreed
in writing to be bound by the terms of this Agreement in the same manner as the
Administrator is bound hereunder.
(f) The appointment of any successor Administrator shall be effective
only after satisfaction of the Rating Agency Condition with respect to the
proposed appointment.
(g) Subject to Section 8(e) and 8(f), the Administrator acknowledges
that upon the appointment of a Successor Servicer pursuant to the Sale and
Servicing Agreement, the Administrator shall immediately resign and such
Successor Servicer shall automatically become the Administrator under this
Agreement.
9. Action upon Termination, Resignation or Removal. Promptly upon the
effective date of termination of this Agreement pursuant to Section 8(a) or the
resignation or removal of the Administrator pursuant to Section 8(b) or (c),
respectively, the Administrator shall be entitled to be paid all fees and
reimbursable expenses accruing to it to the date of such
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<PAGE>
termination, resignation or removal. The Administrator shall forthwith upon such
termination pursuant to Section 8(a) deliver to the Issuer all property and
documents of or relating to the Collateral then in the custody of the
Administrator. In the event of the resignation or removal of the Administrator
pursuant to Section 8(b) or (c), respectively, the Administrator shall cooperate
with the Issuer and take all reasonable steps requested to assist the Issuer in
making an orderly transfer of the duties of the Administrator.
10. Notices. Any notice, report or other communication given hereunder
shall be in writing and addressed as follows:
(a) if to the Issuer or the Owner Trustee, to:
NAL Auto Trust 1996-2
In care of Wilmington Trust Company
Rodney Square North
1100 Market Street
Wilmington, Delaware 19890
Attention: Corporate Trustee Department
(b) if to the Administrator, to:
NAL Acceptance Corporation
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Attention: Dennis LaVigne
(c) if to the Indenture Trustee, to:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust Administration -- Structured
Finance
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand-delivered
to the address of such party as provided above.
11. Amendments. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Issuer, the Administrator
and the Indenture Trustee, with the written consent of the Owner Trustee,
without the consent of the Noteholders and the Certificateholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Noteholders or Certificateholders; provided that such amendment will not, in
the Opinion of Counsel satisfactory to the Indenture Trustee and each Rating
Agency,
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<PAGE>
materially and adversely affect the interest of any Noteholder or
Certificateholder. This Agreement may also be amended by the Issuer, the
Administrator and the Indenture Trustee with the written consent of the Owner
Trustee and the holders of Notes evidencing at least a majority of the
Outstanding Amount of the Notes and the holders of Certificates evidencing at
least a majority of the Certificate Balance for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of Noteholders or the
Certificateholders; provided, however, that no such amendment may (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that are required to be
made for the benefit of the Noteholders or Certificateholders or (ii) reduce the
aforesaid percentage of the holders of Notes and Certificates which are required
to consent to any such amendment, without the consent of the holders of all the
outstanding Notes and Certificates. Notwithstanding the foregoing, the
Administrator may not amend this Agreement without the permission of the
Depositor, which permission shall not be unreasonably withheld.
12. Successors and Assigns. This Agreement may not be assigned by the
Administrator unless such assignment is previously consented to in writing by
the Issuer and the Owner Trustee and subject to the satisfaction of the Rating
Agency Condition in respect thereof. An assignment with such consent and
satisfaction, if accepted by the assignee, shall bind the assignee hereunder in
the same manner as the Administrator is bound hereunder. Notwithstanding the
foregoing, this Agreement may be assigned by the Administrator without the
consent of the Issuer or the Owner Trustee to a corporation or other
organization that is a successor (by merger, consolidation or purchase of
assets) to the Administrator; provided that such successor organization executes
and delivers to the Issuer, the Owner Trustee and the Indenture Trustee an
agreement in which such corporation or other organization agrees to be bound
hereunder by the terms of said assignment in the same manner as the
Administrator is bound hereunder. Subject to the foregoing, this Agreement shall
bind any successors or assigns of the parties hereto.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
14. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
15. Counterparts. This Agreement may be executed in counterparts, each
of which when so executed shall be an
11
<PAGE>
original, but all of which together shall constitute but one and the same
agreement.
16. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
17. Not Applicable to NAL Acceptance Corporation in Other Capacities.
Nothing in this Agreement shall affect any obligation NAL Acceptance Corporation
may have in any other capacity.
18. Limitation of Liability of Owner Trustee and Indenture Trustee. (a)
Notwithstanding anything contained herein to the contrary, this instrument has
been countersigned by Wilmington Trust Company in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall
Wilmington Trust Company in its individual capacity or any beneficial owner of
the Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder, as to all of which
recourse shall be had solely to the assets of the Issuer. For all purposes of
this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Bankers Trust Company not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
19. Third-Party Beneficiary. The Owner Trustee is a third-party
beneficiary to this Agreement and is entitled to the rights and benefits
hereunder and may enforce the provisions hereof as if it were a party hereto.
* * * * * * * * * * * * * * * * * * * * * *
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
NAL AUTO TRUST 1996-2
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Owner Trustee
By:
--------------------------------
Name: Emmett R. Harmon
Title: Vice President
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
By: --------------------------------
Name:
Title:
NAL ACCEPTANCE CORPORATION,
as Administrator
By:
--------------------------------
Name: Robert Carlson
Title: Vice President/Finance
<PAGE>
EXHIBIT A
POWER OF ATTORNEY
STATE OF NEW YORK }
}
COUNTY OF NEW YORK }
KNOW ALL MEN BY THESE PRESENTS, that Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as owner
trustee (the "Owner Trustee") for NAL Auto Trust 1996-2 (the "Trust"), does
hereby make, constitute and appoint NAL Corporation, as administrator under the
Administration Agreement dated as of June 17, 1996 (the "Administration
Agreement"), among the Trust, NAL Acceptance Corporation and Bankers Trust
Company, as Indenture Trustee, as the same may be amended from time to time, and
its agents and attorneys, as Attorneys-in-Fact to execute on behalf of the Owner
Trustee or the Trust all such documents, reports, filings, instruments,
certificates and opinions as it should be the duty of the Owner Trustee or the
Trust to prepare, file or deliver pursuant to the Related Agreements, or
pursuant to Section 5.05(a), (b), (c) or (d) of the Trust Agreement, including,
without limitation, to appear for and represent the Owner Trustee and the Trust
in connection with the preparation, filing and audit of federal, state and local
tax returns pertaining to the Trust, and with full power to perform any and all
acts associated with such returns and audits that the Owner Trustee could
perform, including without limitation, the right to distribute and receive
confidential information, defend and assert positions in response to audits,
initiate and defend litigation, and to execute waivers of restrictions on
assessments of deficiencies, consents to the extension of any statutory or
regulatory time limit, and settlements.
All powers of attorney for this purpose heretofore filed or executed by
the Owner Trustee are hereby revoked.
Capitalized terms that are used and not otherwise defined herein shall
have the meanings ascribed thereto in the Administration Agreement.
EXECUTED this ___ of June, 1996.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
----------------------------------
Name:
Title:
A-1
<PAGE>
STATE OF ___________ }
}
COUNTY OF _________ }
Before me, the undersigned authority, on this day personally appeared
_______________________, known to me to be the person whose name is subscribed
to the foregoing instrument, and acknowledged to me that he/she signed the same
for the purposes and considerations therein expressed.
Sworn to before me this ___ day of _______, 199_.
Notary Public - State of ____________
A-2
EXECUTION COPY
RECEIVABLES PURCHASE AGREEMENT dated as of June 17, 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 1996-2
(the "Trust"), which will issue the 7.25% Asset Backed Notes, Class A-1 and
8.60% Asset Backed Notes, Class A-2 (collectively, the "Notes"), payment of
which will be secured by the Receivables, and the 12.85% 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.
1901 August 8, 1996
<PAGE>
"Closing Date" shall mean June 28, 1996.
"Collections" shall mean all amounts collected by the Servicer (from
whatever source) on or with respect to the Receivables.
"Cutoff Date" means June 17, 1996.
"Indenture" shall mean the Indenture dated as of June 17, 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 June 28, 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 June 17, 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 June 17,
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 $[________], 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):
1901 August 8, 1996
2
<PAGE>
(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
1901 August 8, 1996
3
<PAGE>
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.
1901 August 8, 1996
4
<PAGE>
(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
1901 August 8, 1996
5
<PAGE>
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
1901 August 8, 1996
6
<PAGE>
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.
1901 August 8, 1996
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<PAGE>
(viii) No Waiver. No provision of a Receivable has been
waived except by a writing constituting an amendment to the applicable
Contract.
(ix) No Amendments. No Receivable has been amended such
that the amount of the Obligor's scheduled payments has been increased.
(x) No Defenses. No right of rescission, setoff,
counterclaim or defense has been asserted or threatened with respect to
any Receivable.
(xi) No Liens. To the best of the Seller's knowledge,
no liens or claims have been filed for work, labor or materials
relating to a Financed Vehicle that are liens prior to, or equal or
coordinate with, the security interest in the Financed Vehicle created
by any Receivable.
(xii) No Default. No Receivable has a payment that is
more than 59 days overdue as of the Cutoff Date and no default, breach,
violation or event permitting acceleration under the terms of any
Receivable has occurred; no continuing condition that with notice or
the lapse of time would constitute a default, breach, violation or
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 47.21 months as of the Cutoff
Date.
1901 August 8, 1996
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<PAGE>
(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 [_____ __], 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 57.13% of the aggregate
Tprincipal balance of the Receivables, constituting 65.34% 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 92.80% 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 $49,499,746.78.
(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.
1901 August 8, 1996
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(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.
1901 August 8, 1996
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(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
1901 August 8, 1996
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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
1901 August 8, 1996
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<PAGE>
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.
1901 August 8, 1996
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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
1901 August 8, 1996
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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.
1901 August 8, 1996
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers duly authorized as of the date and year
first above written.
AUTORICS, INC.,
by ____________________________________
Name: Robert Carlson
Title: Vice President/Finance
NAL ACCEPTANCE CORPORATION,
by ____________________________________
Name: Robert Carlson
Title: Vice President/Finance
AUTORICS II, INC.,
by ____________________________________
Name: Robert Carlson
Title: Vice President/Finance
<PAGE>
ASSIGNMENT
For value received, in accordance with the Receivables Purchase
Agreement dated as of June 17, 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 June 17, 1996.
AUTORICS, INC.
by ________________________
Name:
Title:
1901 August 8, 1996
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SCHEDULE I
Schedule of Receivables
[To Be Delivered at Closing]
1901 August 8, 1996
I-1
<PAGE>
SCHEDULE II
Location of Receivable Files
Bankers Trust Company
Four Albany Street
New York, NY 10006
1901 August 8, 1996
I-2
EXECUTION COPY
- -------------------------------------------------------------------------------
SALE AND SERVICING AGREEMENT
among
NAL AUTO TRUST 1996-2,
Issuer,
and
AUTORICS II, INC.,
Depositor,
and
NAL ACCEPTANCE CORPORATION,
Servicer
and
BANKERS TRUST COMPANY,
Backup Servicer
Dated as of June 17, 1996
- -------------------------------------------------------------------------------
<PAGE>
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....................................... 21
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............................ 23
SECTION 4.06. Covenants of Servicer.................................... 23
SECTION 4.07. Purchase of Receivables upon
Breach.......................................... 23
SECTION 4.08. Servicing Fee............................................ 24
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
i
<PAGE>
ARTICLE V
Trust Accounts; Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Establishment of Trust Accounts........................... 28
SECTION 5.02. Collections............................................... 30
SECTION 5.03. Application of Collections............................... 30
SECTION 5.04. Additional Deposits....................................... 31
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..................................... 35
SECTION 5.09. Dealer Reserve Account.................................... 35
ARTICLE VI
The Depositor
SECTION 6.01. Representations of Depositor.............................. 36
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........................................ 39
SECTION 6.05. Limitation on Liability of
Depositor and Others............................. 40
SECTION 6.06. Depositor May Own Certificates or
Notes............................................ 40
SECTION 6.07. Sale of Receivables....................................... 40
ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer............................... 40
SECTION 7.02. Indemnities of Servicer................................... 42
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....................................... 44
SECTION 7.05. NAL Not To Resign as Servicer............................. 44
SECTION 7.06. Representations of Backup Servicer........................ 45
SECTION 7.07. Merger or Consolidation of, or
Assumption of the Obligations of,
Backup Servicer.................................. 46
SECTION 7.08. Resignation as Backup Servicer............................ 46
ii
<PAGE>
ARTICLE VIII
Default
SECTION 8.01. Servicer Default.......................................... 46
SECTION 8.02. Appointment of Successor.................................. 48
SECTION 8.03. Notification to Noteholders and
Certificateholders............................... 49
SECTION 8.04. Waiver of Past Defaults................................... 49
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All
Receivables...................................... 50
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment................................................. 51
SECTION 10.02. Protection of Title to Trust.............................. 52
SECTION 10.03. Notices ................................................. 55
SECTION 10.04. Assignment by the Depositor or the
Servicer......................................... 55
SECTION 10.05. Limitations on Rights of Others........................... 55
SECTION 10.06. Severability.............................................. 55
SECTION 10.07. Separate Counterparts..................................... 56
SECTION 10.08. Headings ................................................. 56
SECTION 10.09. Governing Law............................................. 56
SECTION 10.10. Assignment by Issuer...................................... 56
SECTION 10.11. Nonpetition Covenants..................................... 56
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
iii
<PAGE>
SALE AND SERVICING AGREEMENT dated as of June 17, 1996, among NAL AUTO
TRUST 1996-2, 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.
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"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
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(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 June 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
September 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 June 28, 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
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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 June 17,
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 June 17, 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.
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"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-
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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 17, September 15 and December
15 of each year or, if such day is not a Business Day, the immediately following
Business Day, commencing on September 16, 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
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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;
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(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 September 15, 2001
Distribution Date.
"Final Scheduled Maturity Date" means May 25, 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 June 17, 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
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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 1996-2.
"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
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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.
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"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.
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"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 [____]% 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
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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
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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 June 17, 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 $2,227,489.
"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.
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"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, $2,227.488.61 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 $24,749,873.39 (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
$989,994.94 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 $989,994.94. 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.
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"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 June 17, 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
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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
$[_________], 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;
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(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
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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);
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(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.
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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
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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.
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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 reperfect 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,
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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
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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
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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 Backup
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
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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.
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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
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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
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"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
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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
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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
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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:
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(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.
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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
$[_________] into the Dealer Reserve Account.
(b) On each Distribution Date, the Servicer shall be entitled to withdraw
from the Dealer Reserve Account for payment to NAL, an amount equal to the
amount payable or paid by NAL to Dealers (other than SFI and AA) during the
related Collection Period in respect of dealer reserves on the Receivables and
amounts to which NAL may be entitled from such dealer reserves under NAL's
agreements with such Dealers. After payment in full, or the provision for such
payment, of all amounts payable to Dealers (other than SFI and AA) in respect of
dealer reserves on the Receivables, any funds remaining on deposit in the Dealer
Reserve Account will be paid to the Depositor. Amounts on deposit in the Dealer
Reserve Account will not be available to make payments on the Securities or for
any other purpose other than that set forth above in this clause (b).
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ARTICLE VI
The Depositor
SECTION 6.01. Representations of Depositor. The Depositor makes the
following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Depositor is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Delaware, with the corporate power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the corporate
power, authority and legal right to acquire and own the Receivables.
(b) Due Qualification. The Depositor is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such qualifications.
(c) Power and Authority. The Depositor has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; the
Depositor has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Issuer, and the Depositor shall have
duly authorized such sale and assignment to the Issuer by all necessary
corporate action; and the execution, delivery and performance of this Agreement
has been duly authorized by the Depositor by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the Depositor enforceable in accordance with its
terms.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the certificate of
incorporation or bylaws of the Depositor, or any indenture, agreement or other
instrument to which the Depositor is a party or by which it is bound; or result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); or violate any law or, to the best of the
Depositor's knowledge, any order, rule or regulation applicable
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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.
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(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
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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
clause (a), (b) or (c) above.
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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.
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(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.
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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,
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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,
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(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
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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.
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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
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(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
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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
Section 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.
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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.
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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
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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
51
<PAGE>
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
52
<PAGE>
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.
53
<PAGE>
(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.
54
<PAGE>
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.
55
<PAGE>
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
56
<PAGE>
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.
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
NAL AUTO TRUST 1996-2
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Owner Trustee on behalf of the
Trust
By:
---------------------------------
Name: Emmett R. Harmon
Title: Vice President
AUTORICS II, Inc.,
Depositor
By:
---------------------------------
Name: Robert Carlson
Title: Vice President/Finance
NAL ACCEPTANCE CORPORATION,
Servicer
By:
---------------------------------
Name: Robert Carlson
Title: Vice President/Finance
BANKERS TRUST COMPANY, Backup Servicer
By:
---------------------------------
Name:
Title:
Acknowledged and accepted as of the day and year first above written:
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
By:
----------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
Schedule of Receivables
A-1
<PAGE>
EXHIBIT A
NAL Acceptance Corporation
NAL Auto Trust 1996-2 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]
A-2
<PAGE>
Repossession Trigger Event [YES] [NO]
Loss Trigger Event [YES] [NO]
Delinquent Receivables
30 days
60 days
90 days
A-3
<PAGE>
EXHIBIT B
NAL Acceptance Corporation
NAL Auto Trust 1996-2 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 $1,000
Initial Certificate Balance
Purchase Amounts
Reserve Account Balance
Payahead Balance
Average Three Month Delinquency Ratio
Average Six Month Realized Loss Ratio
B-1
<PAGE>
Average Six Month Repossession Ratio
Delinquency Trigger Event [YES] [NO]
Repossession Trigger Event [YES] [NO]
Loss Trigger Event [YES] [NO]
Delinquent Receivables
30 days
60 days
90 days
- -------------------------------------------------------------------------------
B-2
<PAGE>
EXHIBIT C
Form of Servicer's Certificate
------------------------------
NAL Acceptance Corporation
NAL Auto Trust 1996-2 Monthly Servicer's Certificate(1)
[___________, 199__]
Dates Covered: From & Incl. _____ To & Incl. _______
I. Collections
Principal Payments Received..........................................$
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 $1,000 original principal
amount)
- -------------------
(1) Items that are marked with an * will be delivered quarterly.
C-1
<PAGE>
Additional Required Distributions
Servicing Fee...............................................$
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..............................................$
C-2
<PAGE>
IV. Pool Balance and Portfolio Information
Beginning End
of Period 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......................
Total Amount
Principal Amount...........................$
Number of Receivables......................
C-3
<PAGE>
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...........................$
C-4
<PAGE>
EXHIBIT D
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
D-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
D-2
<PAGE>
EXHIBIT E
Form of Assignment
Reference is made to the Sale and Servicing Agreement dated as of June 17,
1996 (the "Sale and Servicing Agreement") among NAL Auto Trust 1996-2, 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;
E-1
<PAGE>
(8) the Trust Accounts; and
(9) the proceeds of any and all of the foregoing.
[NAL] [AUTORICS, INC.]
[AUTORICS II, INC.]
By:__________________________
Name:
Title:
E-2
EXECUTION COPY
INDENTURE
between
NAL AUTO TRUST 1996-2,
as Issuer
and
BANKERS TRUST COMPANY,
as Indenture Trustee
Dated as of June 17, 1996
1
<PAGE>
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....................... 10
SECTION 2.03. Temporary Notes.............................................. 10
SECTION 2.04. Limitations on Transfer of the Notes......................... 11
SECTION 2.05. Registration; Registration of Transfer and
Exchange....................................... 13
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes................... 16
SECTION 2.07. Persons Deemed Owner......................................... 17
SECTION 2.08. Payment of Principal and Interest; Defaulted
Interest....................................... 17
SECTION 2.09. Cancellation................................................. 18
SECTION 2.10. Tax Treatment................................................ 18
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal and Interest............................ 19
SECTION 3.02. Maintenance of Office or Agency.............................. 19
SECTION 3.03. Money for Payments To Be Held in Trust....................... 19
SECTION 3.04. Existence.................................................... 21
SECTION 3.05. Protection of Trust Estate................................... 21
SECTION 3.06. Opinions as to Trust Estate.................................. 22
SECTION 3.07. Performance of Obligations; Servicing of
Receivables.................................... 22
SECTION 3.08. Negative Covenants........................................... 24
SECTION 3.09. Annual Statement as to Compliance............................ 25
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain
Terms.......................................... 25
SECTION 3.11. Successor or Transferee...................................... 27
SECTION 3.12. No Other Business............................................ 27
SECTION 3.13. No Borrowing................................................. 27
SECTION 3.14. Servicer's Obligations....................................... 28
SECTION 3.15. Guarantees, Loans, Advances and Other
Liabilities.................................... 28
SECTION 3.16. Capital Expenditures......................................... 28
SECTION 3.17. Removal of Administrator..................................... 28
SECTION 3.18. Restricted Payments.......................................... 28
SECTION 3.19. Notice of Events of Default.................................. 28
SECTION 3.20. Further Instruments and Acts................................. 28
i
<PAGE>
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture...................... 29
SECTION 4.02. Application of Trust Money................................... 30
SECTION 4.03. Repayment of Moneys Held by Paying Agent..................... 30
ARTICLE V
Remedies
SECTION 5.01. Events of Default............................................ 30
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment...................................... 32
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee............... 32
SECTION 5.04. Remedies; Priorities......................................... 35
SECTION 5.05. Optional Preservation of the Receivables..................... 36
SECTION 5.06. Limitation of Suits.......................................... 37
SECTION 5.07. Unconditional Rights of Noteholders To
Receive Principal and Interest................. 37
SECTION 5.08. Restoration of Rights and Remedies........................... 38
SECTION 5.09. Rights and Remedies Cumulative............................... 38
SECTION 5.10. Delay or Omission Not a Waiver............................... 38
SECTION 5.11. Control by Noteholders....................................... 38
SECTION 5.12. Waiver of Past Defaults...................................... 39
SECTION 5.13. Undertaking for Costs........................................ 39
SECTION 5.14. Waiver of Stay or Extension Laws............................. 40
SECTION 5.15. Action on Notes.............................................. 40
SECTION 5.16. Performance and Enforcement of Certain
Obligations.................................... 40
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee.................................. 41
SECTION 6.02. Rights of Indenture Trustee.................................. 42
SECTION 6.03. Individual Rights of Indenture Trustee....................... 43
SECTION 6.04. Indenture Trustee's Disclaimer............................... 43
SECTION 6.05. Notice of Defaults........................................... 43
SECTION 6.06. Reports by Indenture Trustee to Holders...................... 43
SECTION 6.07. Compensation and Indemnity................................... 43
SECTION 6.08. Replacement of Indenture Trustee............................. 44
SECTION 6.09. Successor Indenture Trustee by Merger........................ 45
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee..................... 46
SECTION 6.11. Eligibility; Disqualification................................ 47
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ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders....................... 47
SECTION 7.02. Preservation of Information; Communications
to Noteholders................................. 48
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money.......................................... 48
SECTION 8.02. Trust Accounts............................................... 48
SECTION 8.03. General Provisions Regarding Accounts........................ 49
SECTION 8.04. Release of Trust Estate...................................... 50
SECTION 8.05. Opinion of Counsel........................................... 50
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of
Noteholders.................................... 51
SECTION 9.02. Supplemental Indentures with Consent of
Noteholders.................................... 52
SECTION 9.03. Execution of Supplemental Indentures......................... 54
SECTION 9.04. Effect of Supplemental Indenture............................. 54
SECTION 9.05. Reference in Notes to Supplemental
Indentures..................................... 54
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption.................................................. 55
SECTION 10.02. Form of Redemption Notice................................... 55
SECTION 10.03. Notes Payable on Redemption Date............................ 56
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions, etc................... 56
SECTION 11.02. Form of Documents Delivered to Indenture
Trustee....................................... 57
SECTION 11.03. Acts of Noteholders......................................... 57
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer
and Rating Agencies........................... 58
SECTION 11.05. Notices to Noteholders; Waiver.............................. 59
SECTION 11.06. Alternate Payment and Notice Provisions..................... 59
SECTION 11.07. [Reserved].................................................. 60
SECTION 11.08. Effect of Headings and Table of Contents.................... 60
SECTION 11.09. Successors and Assigns...................................... 60
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SECTION 11.10. Separability................................................ 60
SECTION 11.11. Benefits of Indenture....................................... 60
SECTION 11.12. Legal Holidays.............................................. 60
SECTION 11.13. Governing Law............................................... 60
SECTION 11.14. Counterparts................................................ 60
SECTION 11.15. Recording of Indenture...................................... 60
SECTION 11.16. Trust Obligation............................................ 61
SECTION 11.17. No Petition................................................. 61
SECTION 11.18. Inspection.................................................. 61
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
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INDENTURE dated as of June 17, 1996, between NAL AUTO TRUST 1996-2, 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 7.25%
Asset Backed Notes (the "Class A-1 Notes") and Class A-2 8.60% 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.
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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 June 28, 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
June 17, 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
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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 7.25% 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 7.25% Asset Backed Notes,
substantially in the form of Exhibit A-1.
"Class A-2 Interest Rate" means 8.60% 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 8.60% 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 June 28, 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.
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"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Agreement is located
at Four Albany Street, New York, New York 10006; Attention: Corporate Trust and
Agency Group, Structured Finance Team, or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Issuer, or the principal corporate trust office of any successor Indenture
Trustee at the address designated by such successor Indenture Trustee by notice
to the Noteholders and the Issuer.
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Depositor" means AUTORICS II, Inc., a Delaware corporation,
and any successor in interest.
"Depository Agreement" means the agreement dated June 28, 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.
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"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 1996-2 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
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described in, and otherwise complying with, the applicable requirements of
Section 11.01, and delivered to the Indenture Trustee. Unless otherwise
specified, any reference in this Indenture to an Officer's Certificate shall be
to an Officer's Certificate of any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be an employee of
or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee,
which opinion or opinions shall be addressed to the Indenture Trustee as
Indenture Trustee, shall comply with any applicable requirements of Section
11.01 and shall be in form and substance satisfactory to the Indenture Trustee.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
for such notice has been made, satisfactory to the Indenture Trustee);
and
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes
are held by a bona fide purchaser;
provided, that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor upon the Notes, the Depositor or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Indenture Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, or waiver, only Notes that a Responsible Officer of the
Indenture Trustee actually knows to be so owned shall be so disregarded. Notes
so owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Indenture Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Issuer, any other obligor upon the Notes, the Depositor or any Affiliate of
any of the foregoing Persons.
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"Outstanding Amount" means the aggregate principal amount of all Notes,
or Class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
Owner Trustee under the Trust Agreement.
"Paying Agent" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 and is authorized by the Issuer to make payments to and distributions from
the Collection Account and the Note Distribution Account, including payments of
principal of or interest on the Notes on behalf of the Issuer.
"Payment Date" means a Distribution Date.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization, or government or any agency or political
subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.06 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Rating Agency Condition" means, with respect to any action, that the
Rating Agency shall have been given 10 days (or such shorter period as is
acceptable to the Rating Agency) prior notice thereof and that the Rating Agency
shall have notified the Depositor, the Servicer and the Issuer in writing that
such action will not result in a reduction or withdrawal of the then current
rating of the Notes.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement dated as of June 17, 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
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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 June 17, 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.
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"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
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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 $45,044,000 and Class A-2 Notes for original issue in an
aggregate principal amount of $1,980,000.
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
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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:
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(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;
(iv) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding 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
(v) 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
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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
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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.
(e) 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.
(f) 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
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2.05 (f). 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.
(g) 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.
(h) 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.
(i) 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.
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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.
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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
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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
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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:
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(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
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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
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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
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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
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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
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(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;
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(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;
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(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 1996-2 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 1996-2 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,
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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
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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
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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
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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,
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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
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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
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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):
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(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);
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THIRD: to Holders of the Class A-2 Notes for amounts due and unpaid on
the Class A-2 Notes for interest (including any premium), notably, without
preference of priority of any kind, according to the amounts due and
payable on the Class A-2 Notes for interest (including any premium);
FOURTH: to Holders of the Class A-1 Notes for amounts due and unpaid on
the Class A-1 Notes for principal, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Class A-1
Notes for principal, until the Outstanding Amount of the Class A-1 Notes is
reduced to zero;
FIFTH: to Holders of the Class A-2 Notes for amounts due and unpaid on
the Class A-2 Notes for principal, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Class A-2
Notes for principal, until the Outstanding Amount of the Class A-2 Notes is
reduced to zero;
SIXTH: to the Issuer for amounts required to be distributed to the
Certificateholders pursuant to the Trust Agreement.
The Indenture Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date,
the Issuer shall mail to each Noteholder and the Indenture Trustee a notice that
states the record date, the payment date and the amount to be paid.
SECTION 5.05. Optional Preservation of the Receivables. If the Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Trust Estate. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Indenture Trustee shall take such desire into
account when determining whether or not to maintain possession of the Trust
Estate. In determining whether to maintain possession of the Trust Estate, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose, which opinion shall be conclusive evidence as to such
sufficiency.
SECTION 5.06. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
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(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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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to it as provided in such Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA ss. 312(c).
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.02. Trust Accounts. (a) On or prior to the Closing Date, the
Issuer shall cause the Servicer to establish and maintain, in the name of the
Indenture Trustee, for the benefit of the Noteholders and the
Certificateholders, the Trust Accounts as provided in Section 5.01 of the Sale
and Servicing Agreement.
(b) On or before each Distribution Date, all amounts required to be
deposited in the Note Distribution Account with respect to the preceding
Collection Period pursuant to Sections 5.05 and 5.06 of the Sale and Servicing
Agreement will be transferred from the Collection Account and/or the Reserve
Account to the Note Distribution Account.
(c) On each Distribution Date and Redemption Date, the Indenture Trustee
shall distribute all amounts on deposit in the Note Distribution Account to
Noteholders in respect of the Notes to the 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)):
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(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
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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.
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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.
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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;
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(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
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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
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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
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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
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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.
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(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 1996-2, 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
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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.
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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
60
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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
61
<PAGE>
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.
62
<PAGE>
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 1996-2,
by: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee,
by:
-----------------------------------------
Name: Emmett R. Harmon
Title: Vice President
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee,
by:
-----------------------------------------
Name:
Title:
63
<PAGE>
STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Emmett R. Harmon, 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 1996-2, a Delaware business trust, and that he executed the same as the
act of said business trust for the purpose and consideration therein expressed,
and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 28th day of June, 1996.
-----------------------------------------------------------------
Notary Public in and for the State of New York.
My commission expires:
- ------------------------------------
<PAGE>
STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared Lara Graff, 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 28th day of June, 1996.
------------------------------------------------------------------
Notary Public in and for the State of New York.
My commission expires:
- ----------------------------------------
<PAGE>
SCHEDULE 1
66
<PAGE>
EXHIBIT A-1
[FORM OF CLASS A-1 NOTE]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF
ANY STATE IN THE UNITED STATES OR ANY FOREIGN SECURITIES LAWS. BY ITS ACCEPTANCE
OF THIS NOTE THE HOLDER HEREOF IS DEEMED TO REPRESENT TO THE DEPOSITOR AND THE
INDENTURE TRUSTEE (i) THAT IT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE 1933 ACT (AN
"ACCREDITED INVESTOR") AND THAT IT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNT
(AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH
OTHERS ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER IS A BANK ACTING IN ITS
FIDUCIARY CAPACITY) FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, THE PUBLIC DISTRIBUTION HEREOF OR (ii) THAT IT IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE 1933 ACT AND
IS ACQUIRING SUCH NOTE FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS)
OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QUALIFIED
INSTITUTIONAL BUYERS).
NO SALE, PLEDGE OR OTHER TRANSFER OF THIS NOTE MAY BE MADE BY ANY PERSON UNLESS
EITHER (i) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO THE DEPOSITOR, (ii)
SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO AN ACCREDITED INVESTOR THAT
EXECUTES A CERTIFICATE, SUBSTANTIALLY IN THE FORM SPECIFIED IN THE INDENTURE, TO
THE EFFECT THAT IT IS AN ACCREDITED INVESTOR ACTING FOR ITS OWN ACCOUNT (AND NOT
FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS
ALSO ARE ACCREDITED INVESTORS UNLESS THE HOLDER IS A BANK ACTING IN ITS
FIDUCIARY CAPACITY), (iii) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE 1933 ACT, SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO
A PERSON WHOM THE PROSPECTIVE TRANSFEROR REASONABLY BELIEVES AFTER DUE INQUIRY
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A), ACTING FOR ITS
OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO ARE QUALIFIED INSTITUTIONAL BUYERS) TO WHOM NOTICE IS
GIVEN THAT THE SALE, PLEDGE OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
OR (iv) SUCH SALE, PLEDGE OR OTHER TRANSFER IS OTHERWISE MADE IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, IN WHICH CASE THE
INDENTURE TRUSTEE SHALL REQUIRE THAT BOTH THE PROSPECTIVE TRANSFEROR AND THE
PROSPECTIVE TRANSFEREE CERTIFY TO THE INDENTURE TRUSTEE AND THE DEPOSITOR IN
WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH CERTIFICATION SHALL BE IN
FORM AND SUBSTANCE SATISFACTORY TO THE INDENTURE TRUSTEE AND THE DEPOSITOR.
EXCEPT IN THE CASE OF A TRANSFER DESCRIBED IN CLAUSES (i) OR (iii) ABOVE, THE
INDENTURE TRUSTEE SHALL REQUIRE A WRITTEN OPINION OF COUNSEL (WHICH SHALL NOT BE
AT THE EXPENSE OF THE DEPOSITOR, ANY AFFILIATE OF THE DEPOSITOR OR THE INDENTURE
TRUSTEE) SATISFACTORY TO THE DEPOSITOR AND THE INDENTURE TRUSTEE TO THE EFFECT
THAT SUCH TRANSFER WILL NOT VIOLATE THE 1933 ACT.
A-1-1
<PAGE>
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. 628948AD3
NAL AUTO TRUST 1996-2
CLASS A-1 7.25% ASSET BACKED NOTES
NAL Auto Trust 1996-2, a business trust organized and existing under
the laws of the State of Delaware (herein referred
A-1-2
<PAGE>
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 June 17, 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.
A-1-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: _________________ NAL AUTO TRUST 1996-2,
by: WILMINGTON TRUST COMPANY, not in
its individual capacity but
solely as Owner Trustee under the
Trust Agreement,
by:
--------------------------------
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: _________________ BANKERS TRUST COMPANY, not
in its individual capacity
but solely as Indenture
Trustee,
by:
-----------------------------
Authorized Signatory
A-1-4
<PAGE>
Reverse
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 7.25% 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 September, 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
A-1-5
<PAGE>
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
A-1-6
<PAGE>
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
A-1-7
<PAGE>
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.
A-1-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
- ---------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
___________________________________________________________________________
___________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________________________________
_______________________________________ , attorney, to transfer said Note
on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: __________________________ _________________________________*/
Signature Guaranteed:
_________________________________*/
- ------------------------
*/ NOTICE: The signature to this assignment must correspond
with the name of the registered owner as it appears on the
face of the within Note in every particular, without
alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note
Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in
addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.
A-1-9
<PAGE>
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
A-2-1
<PAGE>
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. 628948AE1
NAL AUTO TRUST 1996-2
CLASS A-2 8.60% ASSET BACKED NOTES
A-2-2
<PAGE>
NAL Auto Trust 1996-2, 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 June 17, 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.
A-2-3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: _________________ NAL AUTO TRUST 1996-2,
by: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Owner Trustee under the Trust
Agreement,
by:
--------------------------------
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: _________________ BANKERS TRUST COMPANY, not in
its individual capacity but
solely as Indenture Trustee,
by:
---------------------------------
Authorized Signatory
A-2-4
<PAGE>
Reverse
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 8.60% 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 September, 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
A-2-5
<PAGE>
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
A-2-6
<PAGE>
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.
A-2-7
<PAGE>
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of Wilmington Trust Company in its
individual capacity, Bankers Trust Company in its individual capacity, any owner
of a beneficial interest in the Issuer, or any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on this Note or performance of, or
failure to perform, any of the covenants, obligations or indemnifications
contained in the Indenture. The Holder of this Note by its acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Holder shall have no claim against
any of the foregoing for any deficiency, loss or claim therefrom; provided,
however, that nothing contained herein shall be taken to prevent recourse to,
and enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
A-2-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
___________________________________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
___________________________________________________________________________
___________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints __________________________________________________
_________________________________ , attorney, to transfer said Note
on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: ________________________ _________________________________*/
Signature Guaranteed:
_________________________________*/
- ------------------------
*/ NOTICE: The signature to this assignment must correspond
with the name of the registered owner as it appears on the
face of the within Note in every particular, without
alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note
Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in
addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.
A-2-9
<PAGE>
EXHIBIT C
FORM OF TRANSFEROR CERTIFICATE
[DATE]
[Depositor]
[Depositor Address]
[Owner Trustee]
[Owner Trustee Address]
[Indenture Trustee]
[Indenture Trustee Address]
Re: NAL Auto Trust 1996-2
Class A-[ ] [ ]% Asset Backed Notes
-------------------------------------
Ladies and Gentlemen:
In connection with our disposition of the above-referenced Class A-[ ]
[ ]% Asset Backed Notes (the "Notes") we certify that (a) we understand that the
Notes have not been registered under the Securities Act of 1933, as amended (the
"Act"), and are being transferred by us in a transaction that is exempt from the
registration requirements of the Act and (b) we have not offered or sold any
Notes to, or solicited offers to buy any Notes from, any person, or otherwise
approached or negotiated with any person with respect thereto, in a manner that
would be deemed, or taken any other action which would result in, a violation of
Section 5 of the Act.
Very truly yours,
[NAME OF TRANSFEROR]
By: ______________________
Authorized Officer
C-1
<PAGE>
EXHIBIT D
FORM OF INVESTMENT LETTER
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 1996-2
(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
D-1
<PAGE>
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
D-2
<PAGE>
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: ____________________
D-3
EXECUTION COPY
- -------------------------------------------------------------------------------
TRUST AGREEMENT
between
AUTORICS II, INC.,
as Depositor,
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
Dated as of June 17, 1996
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms.......................................... 1
SECTION 1.02. Other Definitional Provisions.............................. 3
ARTICLE II
Organization
SECTION 2.01. Name....................................................... 4
SECTION 2.02. Office..................................................... 4
SECTION 2.03. Purposes and Powers........................................ 4
SECTION 2.04. Appointment of Owner Trustee............................... 5
SECTION 2.05. Initial Capital Contribution of Owner Trust
Estate................................................... 5
SECTION 2.06. Declaration of Trust....................................... 5
SECTION 2.07. Liability of the Owners.................................... 6
SECTION 2.08. Title to Trust Property.................................... 7
SECTION 2.09. Situs of Trust............................................. 7
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
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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
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
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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
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
EXHIBIT A Form of Trust Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Certificate Depository Agreement
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<PAGE>
TRUST AGREEMENT dated as of June 17, 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 June 17, 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.
"Certificate of Trust" shall mean the Certificate of Trust in the form
of Exhibit B filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the
register mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" or "Holder" shall mean a Person in whose name a
Trust Certificate is registered.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located
at 1100 N. Market Street, Rodney Square North, Wilmington, DE 19890, Attn:
Corporate Trust Administration, or at such other
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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
June 17, 1996, between the Trust and Bankers Trust Company, as Custodian.
"Demand Note" shall mean, in the case of the Depositor, the Demand Note
dated June 27, 1996, from NAL to the Depositor.
"Depositor" shall mean AUTORICS II, Inc. in its capacity as depositor
hereunder.
"Depositor's Interest" shall mean the Trust Certificate owned by the
Depositor evidencing (i) a not less than 1% undivided interest in the
Certificate Balance and interest at the Pass-Through Rate and (ii) all other
amounts in respect of the Trust property to which the Depositor is entitled
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 June 17, 1996 between
the Trust and Bankers Trust Company, as Indenture Trustee.
"Initial Certificate Balance" shall mean $2,475,746.78.
"NAL" shall mean NAL Acceptance Corporation, a Florida Corporation, and
any successor in interest.
"Owner" shall mean each Holder of a Trust Certificate.
"Owner Trust Estate" shall mean all right, title and interest of the
Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from time
to time in the Trust Accounts and the Certificate Distribution Account and all
other property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust pursuant to the Sale and Servicing Agreement and the
Administration Agreement.
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<PAGE>
"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 June 17, 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
document to the
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<PAGE>
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 1996-2," 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;
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<PAGE>
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to purchase the Receivables, to fund the Reserve Account
and to pay the organizational, start-up and transactional expenses of
the Trust;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Owners pursuant to the terms of the Sale and
Servicing Agreement any portion of the Trust Estate released from the
Lien of, and remitted to the Trust pursuant to, the Indenture;
(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
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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.
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.
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SECTION 2.08. Title to Trust Property. Legal title to all the Owner
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in which
case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
SECTION 2.09. Situs of Trust. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York. The Trust shall not have any employees in any state other
than Delaware; provided, however, that nothing herein shall restrict or prohibit
the Owner Trustee from having employees within or without the State of Delaware.
Payments will be received by the Trust only in Delaware or New York, and
payments will be made by the Trust only from Delaware or New York. The only
office of the Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee that:
(a) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware,
with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
(b) The Depositor is duly qualified to do business as a
foreign corporation in good standing and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of its property or the conduct of its business shall require such
qualifications.
(c) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Depositor has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trust and the Depositor has duly
authorized such sale and assignment and deposit to the Trust by all
necessary corporate action; and the execution, delivery and performance
of this Agreement have been duly authorized by the Depositor by all
necessary corporate action.
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a
party or by which it is
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<PAGE>
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 Provisions. Annex A to this Agreement
sets forth the tax accounting and administration of the Trust in a manner
consistent with its treatment as a partnership for federal, state and local tax
purposes.
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 isuance 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
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and entitled to the benefit of this Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Trust Certificates or did not hold such
offices at the date of authentication and delivery of such Trust Certificates.
A transferee of a Trust Certificate shall become a Certificateholder
and shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Trust
Certificate duly registered in such transferee's name pursuant to Section 3.04.
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
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transferee has provided an Investment Letter with respect to a Rule 144A
transaction, there shall also be delivered to the Owner Trustee an opinion of
counsel that such transfer may be made pursuant to an exemption from the
Securities Act and state securities laws, which opinion of counsel shall not be
an expense of the Trust, the Owner Trustee or the Indenture Trustee (unless it
is the transferee from whom such opinion is to be obtained) or of the Depositor
or NAL; provided that such opinion of counsel in respect of the applicable state
securities laws may be a memorandum of law rather than an opinion if such
counsel is not licensed in the applicable jurisdiction. The Depositor shall
provide to any Holder of a Certificate and any prospective transferee designated
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
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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
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
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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
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
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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
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 the Depositor's Trust
Certificate that would reduce such interest of the Depositor below 1% of the
Certificate Balance shall be void. The Owner Trustee shall cause
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the Depositor's Trust Certificate 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 Owners, to (a) remove the
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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
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time, the Certificate Distribution Account ceases to be an Eligible Deposit
Account, the Owner Trustee (or the Depositor on behalf of the Owner Trustee, if
the Certificate Distribution Account is not then held by the Owner Trustee or an
affiliate thereof) shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent) establish a
new Certificate Distribution Account as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Certificate Distribution
Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution
Date, the Owner Trustee will distribute to Certificateholders, on a pro rata
basis, amounts deposited in the Certificate Distribution Account pursuant to
Sections 5.05 and 5.06 of the Sale and Servicing Agreement with respect to such
Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to Section 5.07 of the Sale and Servicing Agreement with
respect to such Distribution Date.
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. In accordance with Annex A hereto, 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, in a manner
consistent with its treatment as a partnership for federal and applicable state
and local tax purposes, (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
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prepare its federal and state income tax returns, (c) file such tax returns
relating to the Trust (including a partnership information return, IRS Form
1065) and make such elections as from time to time may be required or
appropriate under any applicable state or 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. 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.
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is to be
a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and, in
each case, in such form as the Depositor shall approve, as evidenced
conclusively by the Owner Trustee's execution thereof. In addition to the
foregoing, the Owner Trustee is authorized, but shall not be obligated, to take
all actions required of the Trust pursuant to the Basic Documents. The Owner
Trustee is further authorized from time to time to take such action as the
Administrator recommends with respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the Basic Documents to which the Trust is a
party and to administer the Trust in the interest of the Owners, subject to the
Basic Documents and in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any Basic Document, and the Owner Trustee shall not be held
liable for the default or failure of the Administrator to carry out its
obligations under the Administration Agreement.
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SECTION 6.03. Action upon Instruction. (a) Subject to Article IV and
in accordance with the terms of the Basic Documents, the Owners may by
written instruction direct the Owner Trustee in the management of the Trust.
Such direction may be exercised at any time by written instruction of the Owners
pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Owners requesting
instruction as to the course of action to be adopted, and to the extent the
Owner Trustee acts in good faith in accordance with any written instruction of
the Owners received, the Owner Trustee shall not be liable on account of such
action to any Person. If the Owner Trustee shall not have received appropriate
instruction within 10 days of such notice (or within such shorter period of time
as reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Basic Document or any such provision
is ambiguous as to its application, or is, or appears to be, in conflict with
any other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Owners requesting
instruction and, to the extent that the Owner Trustee acts or refrains from
acting in good faith in accordance with any such instruction received, the Owner
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Owner Trustee shall not have received appropriate instruction
within 10 days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
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SECTION 6.04. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.03; and no implied duties or obligations
shall be read into this Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Securities and Exchange Commission filing
for the Trust or to record this Agreement or any Basic Document. The Owner
Trustee nevertheless agrees that it will, at its own cost and expense, promptly
take all action as may be necessary to discharge any liens on any part of the
Owner Trust Estate that result from actions by, or claims against, the Owner
Trustee that are not related to the ownership or the administration of the Owner
Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Basic Documents
and (iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section
2.03 or (b) that, to the actual knowledge of the Owner Trustee, would result in
the Trust's becoming taxable as a corporation for federal income tax purposes.
The Owners shall not direct the Owner Trustee to take action that would violate
the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties
hereunder with respect to such trusts, but only upon the terms of this
Agreement. The Owner Trustee also agrees to disburse all moneys actually
received by it constituting part of the Owner Trust Estate upon the terms of the
Basic Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any
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circumstances, except (i) for its own willful misconduct or gross negligence (or
negligence in the case of handling funds), (ii) for liabilities arising from the
failure by the Owner Trustee to perform obligations expressly undertaken by it
in the last sentence of Section 6.04 hereof, (iii) for any investments made by
the Owner Trustee with Wilmington Trust Company (in its individual capacity) in
its commercial capacity, (iv) in the case of the inaccuracy of any
representation or warranty contained in Section 7.03 expressly made by the Owner
Trustee or (v) for federal or Delaware taxes, fees or other charges, based on or
measured by any fees, commissions or compensation received by the Owner Trustee
in connection with any of the transactions contemplated by this Agreement or any
of the Basic Documents. In particular, but not by way of limitation (and subject
to the exceptions set forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment
made by a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of
the Administrator or any Owner;
(c) No provision of this Agreement or any Basic Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or under
any Basic Document if the Owner Trustee shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Depositor or for the form, character, genuineness, sufficiency, value or
validity of any of the Owner Trust Estate, or for or in respect of the validity
or sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume or incur any liability, duty or obligation to any Noteholder or to
any Owner, other than as expressly provided for herein or expressly agreed to in
the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Depositor, the Indenture Trustee, the Servicer or the
Backup Servicer under any of the Basic Documents or otherwise, and the Owner
Trustee shall have no obligation or liability to perform the obligations of the
Trust under this Agreement or the Basic Documents that are required to be
performed by the Administrator under the Administration Agreement,
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the Indenture Trustee under the Indenture or the Servicer or AUTORICS II,
Inc., as Depositor under the Sale and Servicing Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Basic Document, at the request, order or direction of any of
the Owners, unless such Owners have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its negligence or willful misconduct in the
performance of any such act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish
to the Owners promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee
hereby represents and warrants to the Depositor, for the benefit of the Owners,
that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution or the delivery by it of this Agreement, nor
the consummation by it of the transactions contemplated hereby, nor compliance
by it with any of the terms or provisions hereof will contravene any federal or
Delaware law, governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound.
SECTION 7.04. Reliance; Advice of Counsel. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order,
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certificate, report, opinion, bond, or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of determination of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter, and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled Persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such Persons and not contrary to this Agreement or
any Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity, and all Persons having any claim against the Owner Trustee by reason
of the transactions contemplated by this Agreement or any Basic Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
Receivables. The Owner Trustee makes no representations as to the validity or
sufficiency of this Agreement, of any Basic Document or of the Trust
Certificates (other than the signature and countersignature of the Owner Trustee
on the Trust Certificates) or the Notes, or of any Receivable or related
documents. The Owner Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Receivable, or the perfection and priority of any security interest created
by any Receivable in any Financed Vehicle or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Owner
Trust Estate or its ability to generate the payments to be distributed to
Certificateholders under this Agreement or the Noteholders under the Indenture,
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including, without limitation: the existence, condition and ownership of any
Financed Vehicle; the existence and enforceability of any insurance thereon; the
existence and contents of any Receivable on any computer or other record
thereof; the validity of the assignment of any Receivable to the Trust or of any
intervening assignment; the completeness of any Receivable; the performance or
enforcement of any Receivable; the compliance by the Depositor or the Servicer
with any warranty or representation made under any Basic Document or in any
related document or the accuracy of any such warranty or representation, or any
action of the Administrator, the Indenture Trustee or the Servicer or any
subservicer taken in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Administrator, the Indenture Trustee and the Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Depositor and the
Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the
Administrator pursuant to the Administration Agreement for its other reasonable
expenses hereunder, including the reasonable compensation, expenses and
disbursements of such agents, representatives, experts and counsel as the Owner
Trustee may employ in connection with the exercise and performance of its rights
and its duties hereunder.
SECTION 8.02. Indemnification. Pursuant to the Administration Agreement,
the Administrator shall be liable as primary obligor for, and shall indemnify
the Owner Trustee and its successors, assigns, agents and servants
(collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reasonable
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may at any time be imposed on, incurred by, or asserted
against the Owner Trustee or any Indemnified Party in any way relating to or
arising out of this Agreement, the Basic Documents, the Owner Trust Estate, the
administration of the Owner Trust Estate or the action or inaction of the Owner
Trustee hereunder, except only that the Administrator shall not be liable for or
required to indemnify an Indemnified Party from and against Expenses arising or
resulting from any of the matters described in the third sentence of Section
7.01. The
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indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Administrator, which approval shall not be
unreasonably withheld.
SECTION 8.03. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement (other
than Article VIII) and the Trust shall terminate and be of no further force
or effect (i) upon the final distri- bution by the Owner Trustee of all moneys
or other property or proceeds of the Owner Trust Estate in accordance with the
terms of the Indenture, the Sale and Servicing Agreement and Article V or (ii)
at the time provided in Section 9.02. The bankruptcy, liquidation, dissolution,
death or incapacity of any Owner, other than the Depositor as described in
Section 9.02, shall not (x) operate to terminate this Agreement or the Trust or
(y) entitle such Owner's legal representatives or heirs to claim an accounting
or to take any action or proceeding in any court for a partition or winding up
of all or any part of the Trust or Owner Trust Estate or (z) otherwise affect
the rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), neither the Depositor nor any
Owner shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates to
the Paying Agent for payment of the final distribution and cancellation, shall
be given by the Owner Trustee by letter to Certificateholders mailed within five
Business Days of receipt of notice of such termination from the Servicer given
pursuant to Section 9.01(c) of the Sale and Servicing Agreement, stating (i) the
Distribution Date upon or with respect to which final payment of the Trust
Certificates shall be made upon presentation and surrender of the Trust
Certificates at the office of the Paying Agent therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Trust Certificates at the office of the
Paying Agent therein specified. The Owner
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Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Trust Certificates,
the Paying Agent shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to Section 5.02.
In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Trust Certificates for cancellation and receive the final distribution with
respect thereto. If within one year after the second notice all the Trust
Certificates shall not have been surrendered for cancellation, the Owner Trustee
may take appropriate steps, or may appoint an agent to take appropriate steps,
to contact the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies shall be distributed by the Owner
Trustee to the Depositor.
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
SECTION 9.02. Dissolution upon Bankruptcy of the Depositor. In the
event that an Insolvency Event shall occur with respect to the Depositor, this
Agreement shall be terminated in accordance with Section 9.01 90 days after the
date of such Insolvency Event, unless, before the end of such 90-day period, the
Owner Trustee shall have received written instructions from (a) Holders of
Certificates (other than the Depositor) representing more than 50% of the
Certificate Balance (not including the Certificate Balance of the Trust
Certificates held by the Depositor) and (b) each of the (i) Holders (as defined
in the Indenture) of Class A-1 Notes representing more than 50% of the
Outstanding Amount of the Class A-1 Notes and (ii) Holders (as defined in the
Indenture) of Class A-2 Notes representing more than 50% of the Outstanding
Amount of the Class A-2 Notes, to the effect that each such party disapproves of
the liquidation of the Receivables and termination of the Trust. Promptly after
the occurrence of any Insolvency Event with respect to the Depositor, (A) the
Depositor shall give the Indenture Trustee and the Owner Trustee written notice
of such Insolvency Event, (B) the Owner Trustee shall, upon the receipt of such
written notice from the Depositor, give prompt written notice to the
Certificateholders and the Indenture Trustee, of the occurrence of such event
and (C) the Indenture Trustee shall, upon receipt of written notice of such
Insolvency Event from the Owner Trustee or the Depositor, give prompt written
notice to the
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Noteholders of the occurrence of such event; provided, however, that any failure
to give a notice required by this sentence shall not prevent or delay, in any
manner, a termination of the Trust pursuant to the first sentence of this
Section 9.02. Upon a termination pursuant to this Section, the Owner Trustee
shall direct the Indenture Trustee promptly to sell the assets of the Trust
(other than the Trust Accounts and the Certificate Distribution Account), in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds of such a sale of the assets of the Trust shall be treated as
collections under the Sale and Servicing Agreement.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities. If such
corporation shall publish reports of condition at least annually pursuant to law
or to the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Owner Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Owner Trustee shall resign immediately in the manner and with
the effect specified in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator. Upon receiving such
notice of resignation, the Administrator shall promptly appoint a successor
Owner Trustee by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Owner Trustee and one copy to the successor
Owner Trustee. If no successor Owner Trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign after
written request therefor by the Administrator, or if at any time the Owner
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public
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officer shall take charge or control of the Owner Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Administrator may remove the Owner Trustee. If the Administrator shall remove
the Owner Trustee under the authority of the immediately preceding sentence, the
Administrator shall promptly appoint a successor Owner Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
outgoing Owner Trustee so removed and one copy to the successor Owner Trustee,
and shall pay all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each Rating Agency.
SECTION 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator and to its predecessor Owner Trustee an instrument accepting
such appointment under this Agreement, and thereupon the resignation or removal
of the predecessor Owner Trustee shall become effective, and such successor
Owner Trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its predecessor
under this Agreement, with like effect as if originally named as Owner Trustee.
The predecessor Owner Trustee shall upon payment of its fees and expenses
deliver to the successor Owner Trustee all documents and statements and monies
held by it under this Agreement; and the Administrator and the predecessor Owner
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within 10 days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.
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SECTION 10.04. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding;
provided, that such corporation shall be eligible pursuant to Section 10.01 and,
provided, further, that the Owner Trustee shall mail notice of such merger or
consolidation to each Rating Agency.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Administrator and Owner Trustee to act as co-trustee, jointly
with the Owner Trustee, or as separate trustee or separate trustees, of all or
any part of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust or any part thereof and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Administrator and the Owner Trustee may consider necessary or desirable.
If the Administrator shall not have joined in such appointment within 15 days
after the receipt by it of a request so to do, the Owner Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee under
this Agreement shall be required to meet the terms of eligibility as a successor
Owner Trustee pursuant to Section 10.01 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed by the
Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Owner Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly
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by such separate trustee or co-trustee, but solely at the direction
of the Owner Trustee;
(b) No trustee under this Agreement shall be personally liable by reason
of any act or omission of any other trustee under this Agreement; and
(c) The Administrator and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor co-trustee or separate trustee.
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments. This Agreement may be
amended by the Depositor and the Owner Trustee, with prior written notice to
each Rating Agency, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any
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material respect the interests of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor
and the Owner Trustee, with prior written notice to each Rating Agency, with the
consent of the Holders (as defined in the Indenture) of Notes evidencing not
less than a majority of the Outstanding Amount of the Notes and the consent of
the Holders of Certificates evidencing not less than a majority of the
Certificate Balance, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made for
the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the Certificate
Balance required to consent to any such amendment, without the consent of the
holders of all the outstanding Notes and Certificates.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and each
Rating Agency.
It shall not be necessary for the consent of Certificateholders,
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment that affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
In connection with the execution of any amendment to this Trust
Agreement or any amendment of any other agreement to which the Issuer is a
party, the Owner Trustee shall be entitled to
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receive and conclusively rely upon an Opinion of Counsel to the effect that such
amendment is authorized or permitted by the Basic Documents and that all
conditions precedent in the Basic Documents for the execution and delivery
thereof by the Issuer or the Owner Trustee, as the case may be, have been
satisfied.
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners. The
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership interest therein only in accordance with Articles V and IX.
No transfer, by operation of law or otherwise, of any right, title or interest
of the Owners to and in their ownership interest in the Owner Trust Estate shall
operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Owner Trust Estate.
SECTION 11.03. Limitations on Rights of Others. Except for Section 2.07,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Owners, the Administrator and, to the extent
expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement (other than Section 2.07 hereof), whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.04. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt by the intended recipient or three Business Days after
mailing if personally delivered or mailed by certified mail, return receipt
requested and postage prepaid or by recognized overnight courier or by facsimile
confirmed by delivery or mail as described above (except that notice to the
Owner Trustee shall be deemed given only upon actual receipt by the Owner
Trustee), if to the Owner Trustee, addressed to the Corporate Trust Office; if
to the Depositor, addressed to AUTORICS II, Inc., 500 Cypress Creek Road West,
Suite 590, Fort Lauderdale, FL 33309; tel.: 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.
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SECTION 11.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Depositor and its permitted assignees, the Owner Trustee and its successors and
each Owner and its successors and permitted assigns, all as herein provided. Any
request, notice, direction, consent, waiver or other instrument or action by an
Owner shall bind the successors and assigns of such Owner.
SECTION 11.08. Covenants of the Depositor. In the event that (a)
Certificateholders' Principal Carryover Shortfalls shall occur or (b) any
litigation with claims in excess of $1,000,000 to which the Depositor is a party
which shall be reasonably likely to result in a material judgment against the
Depositor that the Depositor will not be able to satisfy shall be commenced by
an Owner, during the period beginning nine months following the commencement of
such litigation and continuing until such litigation is dismissed or otherwise
terminated (and, if such litigation has resulted in a final judgment against the
Depositor, such judgment has been satisfied), the Depositor shall not pay any
dividend to NAL, or make any distribution on or in respect of its capital stock
to NAL, or repay the principal amount of any indebtedness of the Depositor held
by NAL, unless (i) after giving effect to such payment, distribution or
repayment, the Depositor's liquid assets shall not be less than the amount of
actual damages claimed in such litigation or (ii) the Rating Agency Condition
shall have been satisfied with respect to any such payment, distribution or
repayment. The Depositor will not at any time institute against the Trust any
bankruptcy proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Trust
Certificates, the Notes, the Trust Agreement or any of the Basic Documents.
SECTION 11.09. No Petition. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Trust Certificate, and the
Indenture Trustee and each Noteholder, by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the Depositor or the Trust, or join in any institution against the
Depositor or the Trust of, any bankruptcy proceedings under any United States
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federal or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, this Agreement or any of the
Basic Documents.
SECTION 11.10. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Depositor, the Servicer, the Administrator, the Owner
Trustee, the Indenture Trustee or any Affiliate thereof and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated in this Agreement, the Trust Certificates or the Basic
Documents.
SECTION 11.11. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. [Reserved.]
SECTION 11.14. Depositor Payment Obligation. The Depositor shall be
responsible for payment of the Administrator's fees under the Administration
Agreement and shall reimburse the Administrator for all expenses and liabilities
of the Administrator incurred thereunder. In addition, the Depositor shall be
responsible for the payment of all fees and expenses of the Trust, the Owner
Trustee and the Indenture Trustee paid by any of them in connection with any of
their obligations under the Basic Documents to obtain or maintain any required
license under the Motor Vehicle Sales Finance Act.
* * * * * *
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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: Robert Carlson
Title: Vice President/Finance
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee,
by:
------------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE>
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
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, THE PUBLIC DISTRIBUTION HEREOF (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) OR (iii) THAT IT IS AN INVESTOR THAT IS
OTHERWISE PERMITTED TO ACQUIRE THIS CERTIFICATE UNDER THE TRUST AGREEMENT.
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
A-1
<PAGE>
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
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
A-2
<PAGE>
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.
A-3
<PAGE>
NUMBER $_________
R- CUSIP NO.
NAL AUTO TRUST 1996-2
12.85% ASSET BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which consists of retail installment sale contracts for new and used
automobiles and light duty trucks (collectively, the "Receivables"), all monies
received on or after the related Cutoff Date, security interests in the vehicles
financed thereby, certain bank accounts and the proceeds thereof, proceeds from
claims on certain insurance policies and certain other rights under the Trust
Agreement and the Sale and Servicing Agreement and all proceeds of the
foregoing.
THIS TRUST CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION
OF AUTORICS II, INC., NAL ACCEPTANCE CORPORATION OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THIS CERTIFIES THAT ________________ is the registered owner of
____________________________________________ DOLLARS nonassessable, fully-paid,
fractional undivided interest in NAL Auto Trust 1996-2 (the "Trust"), formed by
AUTORICS II, Inc., a Delaware corporation (the "Depositor").
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
WILMINGTON TRUST COMPANY, not
in its individual capacity,
but solely as Owner Trustee
by: ________________________
Authorized Signatory
A-4
<PAGE>
The Trust was created pursuant to a Trust Agreement dated as of June
17, 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 June
17, 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 "12.85% Asset Backed Certificates" (herein called the "Trust Certificates").
Also issued under an Indenture dated as of June 17, 1996 (the "Indenture"),
between the Trust and Bankers Trust Company, as indenture trustee, are the two
classes of Notes designated as "Class A-1 7.25% Asset Backed Notes," and "Class
A-2 8.60% Asset Backed Notes" (collectively, the "Notes"). This Trust
Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the Holder of this
Trust Certificate by virtue of its acceptance hereof assents and by which such
Holder is bound. The property of the Trust consists of retail installment sale
contracts for new and used automobiles, light duty trucks and vans
(collectively, the "Receivables"), all monies received on or after the Cutoff
Date plus all Payaheads as of the Cutoff Date; any proceeds with respect to the
Receivables from claims on any physical damage, credit life or disability,
theft, mechanical breakdown or "guaranteed auto protection" insurance policies
relating to Financed Vehicles or Obligors; proceeds of any recourse (but none of
the obligations) to Dealers on Receivables; any Financed Vehicle that shall have
secured a Receivable and shall have been acquired by or on behalf of the
Depositor, the Servicer, or the Trust; the Receivables Files; the Receivables
Purchase Agreement, including the right of the Depositor to cause NAL to
purchase Receivables under certain circumstances; the Trust Accounts; and
certain other rights under the Trust Agreement and the Sale and Servicing
Agreement and all proceeds of the foregoing. The rights of the Holders of the
Trust Certificates are subordinated to the rights of the Holders of the Notes,
as set forth in the Sale and Servicing Agreement. [The Depositor's Interest
shall also entitle the Depositor to the distributions specified in Sections 5.05
and 5.06 of 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 September 16, 1996, to the Person in whose name this Trust
A-5
<PAGE>
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.
A-6
<PAGE>
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Trust Certificate shall not entitle the Holder hereof to any benefit under
the Trust Agreement or the Sale and Servicing Agreement or be valid for any
purpose.
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 1996-2
by: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Owner Trustee
Dated: _____________ by: ________________________
Authorized Signatory
A-7
<PAGE>
[REVERSE OF TRUST CERTIFICATE]
The Trust Certificates do not represent an obligation of, or an
interest in, the Depositor, the Servicer, the Seller, the Owner Trustee or any
affiliates of any of them and no recourse may be had against such parties or
their assets, except as expressly set forth or contemplated herein or in the
Trust Agreement or the Basic Documents. In addition, this Trust Certificate is
not guaranteed by any governmental agency or instrumentality and is limited in
right of payment to certain collections and recoveries with respect to the
Receivables (and certain other amounts), all as more specifically set forth
herein and in the Sale and Servicing Agreement. A copy of each of the Sale and
Servicing Agreement and the Trust Agreement may be examined by any
Certificateholder upon written request during normal business hours at the
principal office of the Depositor and at such other places, if any, designated
by the Depositor.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Owner Trustee with the consent of the Holders
of the Trust Certificates and the Notes, each voting as a class, evidencing not
less than a majority of the Certificate Balance and the outstanding principal
balance of the Notes of each such class. Any such consent by the Holder of this
Trust Certificate shall be conclusive and binding on such Holder and on all
future Holders of this Trust Certificate and of any Trust Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof, whether or
not notation of such consent is made upon this Trust Certificate. The Trust
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the Holders of any of the Trust Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Trust Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the
Owner Trustee and the Certificate Registrar duly executed by the Holder hereof
or such Holder's attorney duly authorized in writing, and thereupon one or more
new Trust Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is the Owner Trustee.
Except as provided in the Trust Agreement, the Trust Certificates are
issuable only as registered Trust Certificates
A-8
<PAGE>
without coupons in denominations of $100,000 and in integral multiples of $1,000
in excess thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Trust Certificates are exchangeable for new Trust
Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the Holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Certificate Registrar or any such agent shall be affected by
any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement and
the Sale and Servicing Agreement and the disposition of all property held as
part of the Owner Trust Estate. The Servicer of the Receivables may at its
option purchase the Owner Trust Estate at a price specified in the Sale and
Servicing Agreement, and such purchase of the Receivables and other property of
the Trust will effect early retirement of the Trust Certificates; however, such
right of purchase is exercisable only as of the last day of any Collection
Period as of which the Pool Balance is less than or equal to 5% of the Original
Pool Balance.
A-9
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
the within Trust Certificate, and all rights thereunder, and hereby irrevocably
constitutes and appoints __________________ , attorney, to transfer said Trust
Certificate on the books of the Certificate Registrar, with full power of
substitution in the premises.
Dated:
________________________________________*/
Signature Guaranteed:
____________________________*/
_________________
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Trust Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-10
<PAGE>
EXHIBIT B
CERTIFICATE OF TRUST OF
NAL AUTO TRUST 1996-2
THIS Certificate of Trust of NAL AUTO TRUST 1996-2 (the "Trust"), dated
June [ ], 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, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is NAL
AUTO TRUST 1996-2.
2. Delaware Trustee. The name and business address of the
trustee of the Trust in the State of Delaware is NAL Auto Trust
1996-2, 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
June [ ], 1996
By: __________________________________
Name:
Title:
B-1
<PAGE>
EXHIBIT C
FORM OF TRANSFEROR CERTIFICATE
[DATE]
Autorics II, Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890
Re: NAL Auto Trust 1996-2
12.85% Asset Backed Certificates
--------------------------------
Ladies and Gentlemen:
In connection with our disposition of the above-referenced 12.85% Asset
Backed Certificates (the "Certificates") we certify that (a) we understand that
the Certificates have not been registered under the Securities Act of 1933, as
amended (the "Act"), and are being transferred by us in a transaction that is
exempt from the registration requirements of the Act and (b) we have not offered
or sold any Certificates to, or solicited offers to buy any Certificates from,
any person, or otherwise approached or negotiated with any person with respect
thereto, in a manner that would be deemed, or taken any other action which would
result in, a violation of Section 5 of the Act.
Very truly yours,
[NAME OF TRANSFEROR]
By:
-----------------------------------
Authorized Officer
C-1
<PAGE>
EXHIBIT D
FORM OF INVESTMENT LETTER
Autorics II, Inc.
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate principal
amount of 12.85% Asset Backed Certificates (the "Certificates") of NAL Auto
Trust 1996-2 (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
D-1
<PAGE>
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.
D-2
<PAGE>
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.
D-3
<PAGE>
5. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By: _________________________________
Name:
Title:
Date: ________________________________
D-4
<PAGE>
ANNEX A
TAX PARTNERSHIP PROVISIONS
1. Characterization for Tax Purposes. For United States federal and
applicable state and local income tax purposes, the Depositor's contribution of
the Receivables to the Trust in exchange for interests in the Trust, and the
sale by the Depositor of the Certificates (other than the retention by the
Depositor of the Depositor's Trust Certificate) is intended to constitute the
formation of a partnership (the "Tax Partnership") whose partners are the
Certificateholders (which are hereinafter collectively referred to as the "Tax
Partners").
2. Election with Respect to Subchapter K. Notwithstanding anything to
the contrary, each Tax Partner agrees: (a) not to elect to be excluded from the
application of Subchapter K of Chapter 1 of Subtitle A of the Code, or any
comparable provisions of applicable state laws; and (b) to join in the execution
of such additional documents and elections as may be required in order to
effectuate the foregoing.
3. Capital Contributions and Capital Accounts.
(a) The value of the interests contributed by the
Certificateholders (other than the Depositor) shall equal the amount
paid by such Certificateholders, respectively, for their Certificates
and such amounts shall constitute the opening balance in their Capital
Accounts (as hereinafter defined). The value of the interests
contributed by the Depositor shall equal the fair market value of the
Depositor's Interest, which the Tax Partners agree shall be based on
the sum, without duplication, of (i) the Reserve Account Initial
Deposit and (ii) the value of the Depositor's Interest based on (A) as
to the Certificate Balance and interest at the Pass-Through Rate of the
Depositor's Trust Certificate, the average price of the Certificates to
investors and (B) as to all other amounts due the Depositor, the
present value of the cash flow to the Depositor of the amounts to which
the Depositor is entitled to receive pursuant to Sections 5.05(b)(viii)
and 5.06(b) and (e) of the Sale and Servicing Agreement at each
Distribution Date or upon termination of the Trust using a discount
rate that reflects an appropriate arm's-length equity rate of return
and a prepayment assumption of 1.75 ABS, and such total shall be
submitted to the Owner Trustee in writing within ten (10) Business Days
after the Closing Date. Such amount shall constitute the opening
balance in the Depositor's Capital Account.
(b) An individual capital account (a "Capital Account") shall
be maintained for each Tax Partner in compliance with Treasury
Regulation Sections 1.704-1(b)(2)(iv) and 1.704-2 and accordingly,
except as otherwise provided herein:
(i) The Capital Account of each Tax Partner shall be
credited by (A) the amount of cash and the fair market value
of property other than cash contributed (or deemed contributed
pursuant to Code Section 708) by such Tax Partner to the Tax
Partnership (net of any liabilities assumed by the Tax
Partnership upon such contribution or to which such property
is subject at the
<PAGE>
time of such contribution); and (B) the amount of any item of
taxable income or gain and the amount of any item of income or
gain exempt from tax allocated to such Tax Partner.
(ii) The Capital Account of each Tax Partner shall be
debited by (A) the amount of any item of tax deduction or loss
allocated to such Tax Partner; (B) such Tax Partner's
allocable share of expenditures not deductible in computing
taxable income and not properly chargeable as capital
expenditures; and (C) the amount of cash and the fair market
value of any property other than cash (net of any liabilities
assumed by such Tax Partner or to which such property is
subject at the time of distribution) distributed to such Tax
Partner.
(iii) Immediately prior to any distribution of
property in kind, the Tax Partners' Capital Accounts shall be
adjusted by assuming that the distributed properties were sold
for cash at their respective fair market values as of the date
of distribution and crediting or debiting each Tax Partner's
Capital Account with its respective share of the hypothetical
gains or losses resulting from such assumed sales in the same
manner as gains or losses on actual sales of such properties
would be allocated under Paragraph 6 below.
5. Federal and State Income Tax Returns and Elections.
(a) The Tax Partners agree that the Depositor shall serve as
the "tax matters partner" (as such term is defined in Code Section
6231(a)(7) (the "Tax Matters Partner") of the Tax Partnership. The Tax
Matters Partner shall (i) apply to the Internal Revenue Service for a
taxpayer identification number for the Tax Partnership, (ii) elect to
adopt the accrual method of accounting and the calendar year as the Tax
Partnership's fiscal year (the "Fiscal Year"), (iv) make such other
elections as it deems proper, (v) prepare, execute and file the
necessary federal and state partnership income tax returns for the Tax
Partnership and (vi) keep the other Tax Partners informed of all
material matters that may come to its attention in its capacity as Tax
Matters Partner. Each Tax Partner agrees to furnish the Tax Matters
Partner with all pertinent information relating to activities under
this Agreement which is necessary for the Tax Matters Partner to
prepare and file federal and state partnership returns. In acting as
Tax Matters Partner, the Tax Matters Partner shall use its best
efforts, but shall incur no liability to the other Tax Partners.
(b) Within 60 days after the end of each of the Tax
Partnership's taxable years, the Tax Matters Partner shall send to each
Tax Partner who has been a Tax Partner at any time during the taxable
year then ended such tax information as shall be necessary for the
preparation by such Tax Partner of its Federal income tax return and
state income and other tax returns, if any, in states where the Tax
Partnership is organized or is qualified to do business.
2
<PAGE>
6. Allocations.
(a)(i) "Net Income" and "Net Loss" respectively, for any
period, means the income or losses of the Tax Partnership as determined
in accordance with the method of accounting followed by the Tax
Partnership for Federal income tax purposes, including, for all
purposes, any income exempt from tax and any expenditures of the Tax
Partnership described in Code Section 705(a)(2)(B); provided, however,
(i) that any item allocated under Paragraph 6(c) shall be excluded from
the computation of Net Loss and (ii) that if, as a result of the
contribution of an asset whose fair market value differs from its
adjusted basis for Federal income tax purposes or as a result of the
revaluation of the Tax Partnership's assets, the book value of any Tax
Partnership asset differs from its adjusted basis for Federal income
tax purposes, gain, loss, depreciation and amortization with respect to
such assets shall be computed using the asset's book value consistently
with the requirements of Treasury Regulation Section
1.704-1(b)(2)(iv)(g).
(ii) "Period" shall mean the period ending on each
Distribution Date; provided that as to the month in which the
Closing Date occurs, Period shall mean the period commencing
on the Closing Date and ending on the first Distribution Date
and as to the period in which the Tax Partnership terminates,
Period shall mean the period beginning on the first day of
such period and ending on the date of the Tax Partnership's
termination.
(b) The Tax Partners agree that the Tax Partnership's Net
Income and Net Loss and each item of income, gain, loss, or deduction
entering into the computation thereof for any Fiscal Year shall be
allocated by first allocating the Tax Partnership's Net Income and Net
Loss (and each item of income, gain, loss, or deduction entering into
the computation thereof) for each Period or portion thereof within such
Fiscal Year (as if such Period (or portion) were a complete fiscal
year), dividing the amount of such allocations for the Period ending
March 15 on a daily basis between calendar years and then aggregating
the allocations for the portion of such Period within each Fiscal Year;
provided, that the Tax Partnership's Net Income or Net Loss for the
period commencing December 16 and ending December 31 may be determined
on an estimated basis to permit timely preparation of the Partnership's
tax returns and reporting to the Tax Partners. In the case of the
transfer of any interest in the Tax Partnership, the items of Net
Income and Net Loss allocated for any Period with respect to the
transferred interest shall be allocated between the transferor and
transferee of such interest on a daily basis within such Period. The
Tax Partnership's Net Income and Net Loss for each Period within a
Fiscal Year shall be allocated as follows:
(i) Net Income for such Period shall be allocated
as follows:
(A) An amount of Net Income equal to the
excess of (x) the sum for such Period and each
preceding Period up to the Period beginning with the
Closing Date, of (1) the product of the Pass-Through
Rate and (2) the Certificate Balance amount for such
Period (and each such preceding Period) over (y) all
amounts allocated to the Certificateholders pursuant
to this Paragraph 6(b)(i)(A) shall be allocated 100%
to the
3
<PAGE>
Certificateholders (including the Depositor), in
proportion to their holdings of Trust Certificates;
provided that the product of (1) and (2) in clause
(x) shall be computed on the basis of a 360 day year
consisting of twelve 30 day months.
(B) An amount of Net Income equal to the
excess of (x) the sum for such Period and each
preceding Period up to the Period beginning with the
Closing Date, of that portion of any excess of the
principal amount of the Trust Certificates over their
initial issue price (disregarding accrued interest)
that would have accrued with respect to such Periods
if the Trust Certificates were indebtedness and such
excess were original issue discount over (y) all
amounts previously allocated to the
Certificateholders pursuant to this Paragraph
6(b)(i)(B) shall be allocated 100% to the
Certificateholders (including the Depositor), in
proportion to their holdings of Trust Certificates.
(C) Any remaining Net Income shall be
allocated 100% to the Depositor.
(ii) Net Losses for such Period shall be
allocated as follows:
(A) 100% to the Depositor until the excess
of the Adjusted Capital Account (as hereinafter
defined) balance of the Depositor over the amount
specified in Paragraph 3(a)(i)(A) (as adjusted for
all prior distributions of principal and accruals of
market discount income allocable to the Depositor)
equals zero.
(B) 100% to the Certificateholders
(including the Depositor) in proportion to their
holdings of Trust Certificates, until the Adjusted
Capital Account balances of the Certificateholders
equal zero; and
(C) Any remaining Net Losses shall be
allocated 100% to the Depositor.
(c)(i) Any deductions attributable to (w) the amortization of
premium on the Receivables, (x) payments to the Owner Trustee, (y)
payments to the Servicer and (z) payments of any other expenses, claims
and losses of the Trust shall be specially allocated to the Depositor.
(ii) If there is a net decrease in "partnership
minimum gain" (within the meaning of Treasury Regulation
Section 1.704-2(d)) for a Fiscal year, then there shall be
allocated to each Tax Partner items of income and gain for
that year equal to that Tax Partner's share of the net
decrease in partnership minimum gain (within the meaning of
Treasury Regulation Section 1.704-2(g)(2)), subject to the
exceptions set forth in Treasury Regulation Sections
1.704-2(f)(2), (3) and (5), provided, that if the Tax
Partnership has any discretion as to an exception set forth
pursuant to Treasury Regulation Section 1.704-2(f)(5), the Tax
4
<PAGE>
Matters Partner may exercise such discretion on behalf of the
Tax Partnership. In the event the application of the minimum
gain chargeback requirement would cause a distortion in the
economic arrangement among the Tax Partners, the Tax Matters
Partner shall request the Commissioner to waive the minimum
gain chargeback requirement pursuant to Treasury Regulation
Section 1.704-2(f)(4). The foregoing is intended to be a
"minimum gain chargeback" provision as described in Treasury
Regulation Section 1.704-2(f) and shall be interpreted and
applied in all respects in accordance with that Treasury
Regulation.
If during a Fiscal Year there is a net decrease in
partner nonrecourse debt minimum gain (as determined in
accordance with Treasury Regulation Section 1.704-2(i)(3)),
then, in addition to the amounts, if any, allocated pursuant
to the preceding paragraph, any Tax Partner with a share of
that partner nonrecourse debt minimum gain (determined in
accordance with Treasury Regulation Section 1.704-2(i)(5)) as
of the beginning of the Fiscal Year shall, subject to the
exceptions set forth in Treasury Regulation Section
1.704-2(i)(4), including exceptions analogous to those
provided pursuant to Treasury Regulation Sections
1.704-2(f)(2), (3) and (5) (provided, that if the Tax
Partnership has any discretion as to an exception set forth
pursuant to Treasury Regulation Section 1.704-2(f)(5) as made
applicable by Treasury Regulation Section 1.704-2(i)(4), the
Tax Matters Partner may exercise such discretion on behalf of
the Tax Partnership) be allocated items of income and gain for
the year (and, if necessary, for succeeding years) equal to
that Tax Partner's share of the net decrease in the partner
nonrecourse minimum gain. In the event the application of the
minimum gain chargeback requirement would cause a distortion
in the economic arrangement among the Tax Partners, the Tax
Matters Partner shall request the Commissioner to waive the
minimum gain chargeback requirement pursuant to Treasury
Regulation Sections 1.704-2(i)(4) and 1.704-2(f)(4). The
foregoing is intended to be the "chargeback of partner
nonrecourse debt minimum gain" required by Treasury Regulation
Section 1.704-2(i)(4) and shall be interpreted and applied in
all respects in accordance with that Treasury Regulation.
(iii) If during any Fiscal year of the Tax
Partnership a Tax Partner unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation
Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or
increases a deficit balance in the Tax Partner's Adjusted
Capital Account (as defined below), there shall be allocated
to the Tax Partner items of income and gain (consisting of a
pro rata portion of each item of Tax Partnership income,
including gross income, and gain for such year) in an amount
and manner sufficient to eliminate such deficit as quickly as
possible. The foregoing is intended to be a "qualified income
offset" provision as described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in
all respects in accordance with the Treasury Regulation.
A Tax Partner's "Adjusted Capital Account", at any
time, shall equal the Tax Partner's Capital Account at such
time (x) increased by the sum of (A) the amount of the Tax
Partner's share of partnership minimum gain (as defined in
5
<PAGE>
Treasury Regulation Section 1.704-2(g)(1) and (3)), (B) the
amount of the Tax Partner's share of partner nonrecourse debt
minimum gain (as defined in Treasury Regulation Section
1.704-2(i)(5)), and (C) any amount of the deficit balance in
its Capital Account and Tax Partner is obligated to restore on
liquidation of the Tax Partnership and (y) decreased by
reasonably expected adjustments, allocations and distributions
described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
(iv) Notwithstanding anything to the contrary in this
Paragraph 6, Tax Partnership losses, deductions, or Code
Section 705(a)(2)(B) expenditures that are attributable to a
particular partner nonrecourse liability shall be allocated to
the Tax Partner that bears the economic risk of loss for the
liability in accordance with the rules of Treasury Regulation
Section 1.704-2(i).
(v) Notwithstanding any provision of Paragraphs 6(b)
and 6(c)(i), no allocation of items of loss or deduction shall
be made to a Tax Partner if it would cause the Tax Partner to
have a negative balance in its Adjusted Capital Account.
Allocations of items of loss or deduction that would be made
to a Tax Partner but for this Paragraph 6(c)(v) shall instead
be made first to the Depositor to the extent not inconsistent
with this Paragraph 6(c)(v), and second, to the
Certificateholders in proportion to the amounts distributable
for the related Period pursuant to Sections 5.05(b)(iv) or (v)
of the Sale and Servicing Agreement, to the extent
distributions under either such Section were reduced. To the
extent allocations of items of loss or deduction cannot be
made to any Tax Partner because of this Paragraph 6(c)(v),
such allocations shall be made to the Tax Partners in
accordance with Paragraphs 6(b) and 6(c)(i) notwithstanding
this Paragraph 6(c)(v).
(vi) To the extent that any item of income, gain,
loss or deduction has been specially allocated pursuant to
Paragraphs 6(c)(iii) and (v) and such allocation is
inconsistent with the way in which the same amount otherwise
would have been allocated under Paragraphs 6(b) and 6(c)(i),
subsequent allocations under Paragraph 6(b) and 6(c)(i) shall
be made, to the extent possible and without duplication, in a
manner consistent with Paragraphs 6(c)(ii), (iii), (iv) and
(v) which negate as rapidly as possible the effect of all such
inconsistent allocations.
(vii) Any allocations made pursuant to this Paragraph
6 shall be made in the following order:
(i) Paragraph 6(c)(ii)
(ii) Paragraph 6(c)(iii)
(iii) Paragraph 6(c)(iv)
(iv) Paragraph 6(c)(vi)
6
<PAGE>
(v) Paragraph 6(c)(i)
(vi) Paragraph 6(b)(i) and (ii)
These provisions shall be applied as if all distributions and
allocations were made at the end of the Fiscal Year. Where any
provision depends on the Capital Account of any Tax Partner,
that Capital Account shall be determined after the operation
of all preceding provisions for the year. These allocations
shall be made consistently with the requirements of Treasury
Regulation Section 1.704-2(j).
(d) The income, gains, losses, deductions and credits of the
Tax Partnership for Federal, state and local income tax purposes shall
be allocated in the same manner as the corresponding items entering
into the computation of Net Income and Net Losses were allocated
pursuant to Paragraphs 6(b) and (c) provided that solely for Federal,
local and state income and franchise tax purposes and not for book or
Capital Account purposes, income, gain, loss and deduction with respect
to property properly carried on the Tax Partnership's books at a value
other than its tax basis shall be allocated (i) in the case of property
contributed in kind, in accordance with the requirements of Code
Section 704(c) and such Treasury Regulations as may be promulgated
thereunder from time to time, and (ii) in the case of other property,
in accordance with the principles of Code Section 704(c) and the
Treasury Regulations thereunder as incorporated among the requirements
of the relevant provisions of the Treasury Regulations under Code
Section 704(b).
(e) The Tax Partnership shall comply with all withholding
requirements under Federal, state and local law and shall remit amounts
withheld to and file required forms with the applicable jurisdictions.
To the extent the Tax Partnership is required to withhold and pay over
any amounts with respect to distributions or allocations to any Tax
Partner, the amount withheld shall be treated as a distribution to that
Tax Partner. In the event of any claimed overwithholding, Tax Partners
shall have no claim for recovery against the Tax Partnership or other
Tax Partners. If the amount withheld was not withheld from actual
distributions, the Tax Partnership, may at its option, (i) require the
Tax Partner to reimburse the Tax Partnership for such withholding (and
each Tax Partner agrees to reimburse the Tax Partnership promptly
following such request) or (ii) reduce any subsequent distributions by
the amount of such withholding. If there is a possibility that
withholding tax is payable with respect to a distribution (such as a
distribution to a non-U.S. Tax Partner), the Tax Partnership may in its
sole discretion withhold such amounts in accordance with this
Partnership may in its sole discretion withhold such amounts in
accordance with this Paragraph 6(e). Each Tax Partner agrees to furnish
the Tax Partnership with any representations and forms as shall
reasonably be requested by the Tax Partnership to assist it in
determining the extent of, and in fulfilling, its withholding
obligations. If a Tax Partner wishes to apply for a refund of any such
withholding tax, the Owner Trustee shall reasonably cooperate with such
Tax Partner in making such claim as long as the Tax Partner agrees to
reimburse the Tax Partnership for any out-of-pocket expenses incurred.
7
<PAGE>
7. Sale of Interests. The Tax Partners agree that any sale by a Tax
Partner of any ownership interest in a Trust Certificate shall be deemed to be a
sale of all or a portion of such Tax Partner's interest in the Tax Partnership.
8. Termination of a Tax Partner's Interest. Any distribution by the Tax
Partnership in termination of any Tax Partner's interest in the Tax Partnership
other than pursuant to Paragraph 9 below shall be in an amount of cash or
property other than cash having a net fair market value equal to the positive
Capital Account balance of such Tax Partner at the time such interest is
terminated, after such Capital Account balance has been adjusted in accordance
with Paragraphs 4 and 6 above for all operations preceding such distribution and
the applicable Treasury Regulations under Code Section 704(b), and shall be made
by the later of: (a) the end of the Tax Partnership's taxable year in which such
termination occurs; or (b) within 90 days after the date of such termination.
9. Distributions upon Termination. Upon termination of the Agreement
pursuant to its terms, the activities of the Tax Partners under this Annex A
shall be concluded and the assets subject to the Agreement and this Annex A
shall be distributed to the Tax Partners in the manner and in the order set
forth below:
(a) Debts of the Tax Partnership created pursuant to the
Indenture on the Trust Agreement, other than to Tax Partners, shall be
paid.
(b) All cash on hand representing unexpended contributions
by any Tax Partner shall be returned to the contributor.
(c) The Tax Partners' Capital Accounts shall be adjusted by:
(i) assuming the sale of all remaining assets at their fair market
values as of the date of termination of the Trust Agreement; and (ii)
debiting or crediting each Tax Partner's Capital Account with the Tax
Partner's respective share of the hypothetical gains or losses
resulting from such assumed sales in the same manner as such Tax
Partner's Capital Account would be debited or credited under Paragraph
6 above for gains or losses on actual sales of such properties.
(d) All Tax Partnership assets shall be distributed to the Tax
Partners in accordance with their respective Capital Account balances
as so adjusted by the later of: (i) the end of the Tax Partnership's
taxable year in which the termination occurs; or (ii) within 90 days
after the date of such termination.
If property subject to the Agreement is distributed pursuant to this paragraph,
the amount of the distribution shall be equal to the net fair market value of
the distributed property.
8
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,639
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 98,994
<ALLOWANCE> 3,355
<TOTAL-ASSETS> 137,875
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 105,937
<LONG-TERM> 0
0
0
<COMMON> 23,647
<OTHER-SE> 8,291
<TOTAL-LIABILITIES-AND-EQUITY> 137,875
<INTEREST-LOAN> 5,679
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,679
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 2,874
<INTEREST-INCOME-NET> 2,805
<LOAN-LOSSES> 898
<SECURITIES-GAINS> 3,283
<EXPENSE-OTHER> 3,971
<INCOME-PRETAX> 3,517
<INCOME-PRE-EXTRAORDINARY> 3,517
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,142
<EPS-PRIMARY> .29
<EPS-DILUTED> .27
<YIELD-ACTUAL> 21.01
<LOANS-NON> 0
<LOANS-PAST> 11,119<F1>
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,172
<CHARGE-OFFS> 2,533
<RECOVERIES> 1,716
<ALLOWANCE-CLOSE> 3,355
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> INCLUDES 60 DAY AND GREATER DELINQUENCY
</FN>
</TABLE>
