<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended June 30, 1997
[ ] 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)
Indicate by check whether the Registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 18, 1997 is 12,830,139 shares.
================================================================================
<PAGE>
NAL FINANCIAL GROUP INC.
INDEX
PART I. FINANCIAL INFORMATION* PAGE
Item 1. Consolidated Balance Sheets as of June 30,
1997 (Unaudited) and December 31, 1996 1
Consolidated Statements of Operations for
the three months ended June 30, 1997 and
1996 (Unaudited) and for the six months
ended June 30, 1997 and 1996 (Unaudited) 2
Consolidated Statements of Cash Flows
for the six months ended June 30, 1997
and 1996 (Unaudited) 3
Notes to Consolidated Financial Statements 4-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-30
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 30
Item 2. Changes in Securities 32
Item 3. Defaults Upon Senior Securities 32
Item 4. Submission of Matters to a Vote
of Security Holders 32
Item 5. Other Information 32
Item 6. Exhibits and Reports on Form 8-K 34
*The accompanying financial information as of June 30, 1997 and the
quarter and six months then ended and the accompanying financial information is
not covered by an Independent Certified Public Accountant's Report.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
<CAPTION>
Jun 30, 1997 Dec 31, 1996
-------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,536 $ 6,781
Restricted cash 595 1,237
Contract receivables, net 37,179 67,776
Investment in operating leases, net 15,482 14,823
Automobile inventory, net 2,899 2,141
Retained interest in securitizations, net 56,798 41,598
Property and equipment, net 3,493 2,514
Accrued interest receivable 280 620
Debt issue costs, net 1,515 2,114
Goodwill, net 3,263 3,535
Other assets 7,222 6,646
--------- ---------
TOTAL ASSETS $ 130,262 $ 149,785
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Credit and warehouse facilities $ 38,178 $ 52,023
Debt participation interests 486 3,145
Convertible subordinated debt 21,718 24,873
Accounts payable and accrued expenses 2,916 2,091
Deferred taxes payable 1,572 5,799
Drafts payable 2,645 2,867
Other liabilities 7,369 2,609
--------- ---------
TOTAL LIABILITIES 74,884 93,407
--------- ---------
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,
12,093,198 shares outstanding at June 30, 1997 and
9,847,367 shares outstanding at December 31, 1996 1,814 1,477
Paid in capital 48,847 43,303
Retained earnings 4,854 11,598
Unrealized (loss) on securities available
for sale, net of taxes (137) --
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 55,378 56,378
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 130,262 $ 149,785
========= =========
</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 Jun 30, Ended Jun 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME:
Finance charges $ 4,955 $ 5,889 $ 10,895 $ 11,074
Interest expense (2,592) (2,874) (5,403) (5,359)
-------- -------- -------- --------
Net interest income 2,363 3,015 5,492 5,715
Provision for credit losses (3,450) (898) (5,417) (1,789)
-------- -------- -------- --------
Net interest income (expense) after
provision for credit losses (1,087) 2,117 75 3,926
-------- -------- -------- --------
OTHER INCOME:
Gain on sale of contracts 614 3,283 5,489 6,280
Fees and other (2,570) 1,935 401 3,452
-------- -------- -------- --------
Total other income (1,956) 5,218 5,890 9,732
-------- -------- -------- --------
OTHER EXPENSES:
Salaries and employee benefits 4,463 1,456 9,164 3,042
Depreciation and amortization 345 372 684 602
Occupancy expense 445 250 906 463
Professional services 430 426 591 725
Telecommunications expense 435 194 914 304
Other operating expenses 1,972 1,020 4,584 1,806
Non-cash charge for release of escrow
shares -- 100 -- 207
-------- -------- -------- --------
Total other expenses 8,090 3,818 16,843 7,149
-------- -------- -------- --------
Income (loss) before income taxes (11,133) 3,517 (10,878) 6,509
Provision (benefit) for income taxes (4,231) 1,375 (4,134) 2,549
-------- -------- -------- --------
NET INCOME (LOSS) ($ 6,902) $ 2,142 ($ 6,744) $ 3,960
======== ======== ======== ========
Primary Earnings (Loss) Per Share:
Net income (loss) available to common and
common equivalent shares ($ 6,902) $ 2,469 ($ 6,744) $ 4,651
Weighted average number of common and
common equivalent shares 10,933 8,654 10,602 8,307
Net income (loss) per share ($ 0.63) $ 0.29 ($ 0.64) $ 0.56
Fully Diluted Earnings (Loss) Per Share:
Net income (loss) available to common
and common equivalent shares ($ 6,902) $ 2,829 ($ 6,744) $ 5,238
Weighted average number of common and
common equivalent shares 10,933 10,640 10,602 10,028
Net income (loss) per share ($ 0.63) $ 0.27 ($ 0.64) $ 0.52
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
NAL FINANCIAL GROUP INC.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 6,744) $ 3,960
Adjustments to reconcile net income (loss) to net
cash (used in) operating activities:
Provision for credit losses 5,417 1,789
Depreciation and amortization 9,625 1,418
Gain on sale of contracts (5,489) (6,280)
Non-cash charge for the release of escrow shares -- 207
Purchase of automobile finance contracts (124,068) (115,446)
Proceeds from securitization of automobile finance contracts 140,885 84,445
Repayments of participations and credit facilities (219,492) (124,161)
Proceeds from participations and credit facilities 202,988 120,501
Changes in assets and liabilities:
Other, net (28,522) 1,243
--------- ---------
Net cash (used in) operating activities (25,400) (32,324)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of operating lease vehicles (3,768) (2,047)
Purchase of consumer finance contracts -- (10)
Payments received on contracts owned 8,761 23,747
Proceeds from sale of automobile inventory 7,843 5,953
Purchase of property and equipment (539) (786)
--------- ---------
Net cash provided by investing activities 12,297 26,857
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of Special Finance, Inc. -- (750)
Proceeds from issuance of subordinated debentures -- 12,702
Proceeds from issuance of term note 5,000 --
Proceeds from issuance of common stock 2,500 --
Payment of capital lease obligations (67) --
Net borrowings (repayments) from (to) stockholder 685 (2,919)
Payment of debt issue costs (260) --
---------
Net cash provided by financing activities 7,858 9,033
--------- ---------
Net increase (decrease) in cash and cash equivalents (5,245) 3,566
Cash and cash equivalents, beginning of period 6,781 921
--------- ---------
Cash and cash equivalents, end of period $ 1,536 $ 4,487
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 4,125 $ 3,206
========= =========
Cash paid during the period for taxes $ 15 $ 1,110
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
NAL FINANCIAL GROUP INC.
Notes to Consolidated Financial Statements
(In thousands, except per share data)
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-Q. 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,
1996. Certain 1996 amounts have been reclassified to conform with the current
year presentation.
The Company is experiencing a significant liquidity issue. In response to
this issue, the Company has deliberately slowed the acquisition of contract
receivables. Furthermore, efficient financing sources are being pursued and
emphasis has been placed on reducing overhead. The Company also continues to
explore alternative structures for securitization of its loan contracts in order
to maximize it proceeds from the securitization transactions. In addition, the
Company is evaluating alternatives involving its sale or financial
recapitalization. However, as of the date of this filing, the Company has been
unsuccessful in concluding a sale or recapitalization, and is considering other
alternatives, including reorganization or seeking other protection under the
United States Bankruptcy Code. However, there can be no assurances that any of
the alternatives currently being explored will be successful in addressing the
Company's material liquidity concerns. However, the interim financial statements
are prepared on the basis that the Company continues as a going concern and,
accordingly, do not necessarily reflect liquidation values.
Operating results for the six month period ended June 30, 1997 are not
necessarily indicative of the results which may be expected for the year ending
December 31, 1997.
4
<PAGE>
2. Contract Receivables
Contract receivables as of June 30, 1997 and December 31, 1996 consist of
the following:
Jun 30, 1997 Dec 31, 1996
------------ ------------
Automobile finance contracts:
Gross contracts receivable $ 46,600 $ 78,900
Less: Unearned interest (6,927) (8,247)
Deferred acquisition fees -- 134
-------- --------
39,673 70,787
-------- --------
Consumer contracts receivable:
Gross contracts receivable 1,446 1,766
Less: Unearned interest (72) (117)
Purchase discount (45) (83)
-------- --------
1,329 1,566
-------- --------
Mortgage loans receivable:
Gross loans receivable 1,190 1,354
Less: Purchase discount (60) (266)
-------- --------
1,130 1,088
-------- --------
Total contract receivables 42,132 73,441
Reserves available for credit losses (4,953) (5,665)
-------- --------
Total contract receivables, net $ 37,179 $ 67,776
======== ========
The reserves available for credit losses consist of an allowance for losses
established through a provision from earnings, non-refundable purchase discount
on automobile finance contracts purchased from dealers, and refundable reserves
such as dealer holdback. Purchase discount represents the differential, if any,
between the amount financed on a contract and the price paid by the Company to
acquire the contract, net of any acquisition costs. Any discount on automobile
finance contracts 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 interest income over the life
of the contracts.
3. Retained Interest in Securitizations
Retained interest in securitizations consists of interest-only strip
receivables, servicing fee receivables, accrued interest receivables and an
investment in spread accounts.
The Company adopted Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," ("SFAS 125") effective January 1, 1997. In accordance with SFAS
125, all previously recognized excess servicing assets through December 31, 1996
have been reclassified to interest-only strip receivables ("interest strips").
Additionally, the excess interest cash flows associated with the securitizations
completed during 1997 have also been characterized as interest strips. The
Company has classified these interest strips as available
5
<PAGE>
for sale in accordance with Statement of Financial Accounting Standards No.
115 "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
115"), and, accordingly, any differences between fair value and the carrying
amount are recorded in stockholders' equity, net of the related tax effects.
Interest strips result from the sale of contracts through securitization
whereby the Company retains an interest in the excess interest cash flows.
Interest strips are computed as the differential between the weighted average
interest rate earned on the contracts sold and the rate paid to the purchasers
of the contracts, adjusted for any contractual servicing fees to be paid to the
Company. The resulting differential represents an asset in the period in which
the contracts are sold equal to the present value of estimated future excess
interest cash flows adjusted for anticipated prepayments and losses. The
estimated future cash flows have been discounted using discount rates that the
Company would expect market participants to use for similar instruments.
Servicing fee receivables represent contractual servicing fees earned but
not yet paid to the Company relating to the servicing of securitized contracts.
Accrued interest receivables retained in securitizations represent accrued
interest on contracts held for sale but not collected as of the date of sale.
These amounts are collected over the remaining life of the securitization
trusts.
The investment in spread accounts represents the funding of cash reserve
accounts, as credit enhancements, in order to achieve a specified rating from
the credit rating agencies. The initial deposit is typically equal to a
specified percentage of the aggregate principal balance of the contracts sold.
The Company deposits the cash with a trustee, which in turn invests the cash in
highly liquid securities.
During the quarter ended June 30, 1997, the Company recorded a charge of
$4.5 million against the recorded value in the interest strips due to the
continual delay of receiving cash from the Company's securitizations and the
Company's belief that the accrual of servicing fees on certain of the Company's
securitizations would not be recoverable. This charge has been reflected in
other income in the Company's Consolidated Statement of Operations.
At June 30, 1997, the book value of the retained interest in
securitizations consisted of the following components:
Interest strips $20,702
Servicing fee receivables 7,399
Accrued interest receivables 3,524
Investment in spread accounts 25,173
-------
Retained interest in securitizations $56,798
=======
6
<PAGE>
4. Stock Option Plans
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations in
accounting for its employee and non-employee director stock options
(collectively, the "Plans").
Pro forma information regarding net income (loss) and earnings (loss) per
share had compensation expense been recorded at the grant date for awards under
the Plans consistent with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123") has been determined as
if the Company had accounted for the grants under the Plans in the periods ended
June 30, 1997 and 1996 under the fair value method of SFAS 123.
Six Months Ended
June30,
-------
1997 1996
---- ----
Pro forma net income (loss) ($6,849) $5,108
Pro forma fully diluted earnings (loss) per share ($ 0.65) $ 0.51
5. Supplemental Schedule of Non-Cash Investing and Financing Activities
Non-cash investing and financing activities for the six months ended June
30, 1997 and 1996 are as follows:
Jun 30, 1997 Jun 30, 1996
Conversion of subordinated debt $2,000 $1,565
====== ======
Net transfers to automobile inventory $9,856 $1,119
====== ======
6. Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share." SFAS 128 establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock or potential common stock. SFAS 128 is effective for financial statements
issued for periods ending after December 15, 1997. Management currently plans to
adopt SFAS 128 in its annual report on Form 10-K for the year ending December
31, 1997. Basic earnings per share, as defined in SFAS 128, would not have been
materially different from primary earnings per share for the quarter and six
months ended June 30, 1997.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129 ("SFAS 129"), "Disclosure of Information about Capital
Structure." SFAS 129 establishes standards for disclosing information about an
entity's capital structure. SFAS 129
7
<PAGE>
is effective for financial statements ending after December 15, 1997.
Management currently plans to adopt SFAS 129 in its annual report on Form 10-K
for the year ending December 31, 1997.
7. Commitments and Contingencies
Between April, 1997 and June, 1997, nine class action suits were filed in
the United States District Court for the Southern District of Florida on behalf
of purchasers of the Common Stock of the Company during the period of April,
1996 through April, 1997. The complaints are generally similar in their
allegations and charge the Company and certain of its officers with violations
of the anti-fraud provisions of the federal securities laws. The plaintiffs seek
to recover damages on behalf of themselves and all purchasers of the Company's
Common Stock during this period. The class action suits are presently being
consolidated into one case and the Company will not file its official response
to the allegations until after such consolidation is completed. However, the
Company has reviewed the allegations in the complaints and believe them to be
without foundation. The Company believes that it has complied at all times with
its disclosure obligations and plans to vigorously defend all claims made
against it. The Company is not currently a party to any other material
litigation, although it is involved from time to time in routine litigation
incident to its business and operations.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of the Company included in
this Report.
The Company is a specialized automobile finance company engaged in the
purchase, securitization 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. Consumers with non-prime credit are perceived
to be relatively high credit risks due to various factors, including the manner
in which they have handled previous credit, the absence or limited extent of
their prior credit history and their limited financial resources. The Company
purchases Contracts relating primarily to the "C" credit segment of the
automobile finance market. The Company is also engaged in offering 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 a cost effective means of disposing of some of the
Company's repossessed and off-lease vehicles.
Contract Acquisition
The Company acquires Contracts from diverse sources. In order to adjust for
credit risk and achieve an acceptable rate of return, the Company typically
purchases loan Contracts
8
<PAGE>
from Dealers at a discount from the principal amounts of such Contracts.
This discount is non-refundable to the Dealer. Currently, the discount is being
allocated to the reserves for credit losses. See "Acquisition Discounts." The
following table sets forth the Contracts acquired and the portfolio serviced by
the Company during each of the last five quarters.
<TABLE>
<CAPTION>
For the Quarters Ended
----------------------
Operating Data: Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(dollars in thousands) 1997 1997 1996 1996 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Contracts purchased during the period:
Loan Contracts $ 45,625 $ 94,024 $ 87,674 $ 76,647 $ 61,539
Lease Contracts 1,997 5,675 10,154 6,776 3,609
-------- -------- -------- -------- --------
Total Contracts Purchased $ 47,622 $ 99,699 $ 97,828 $ 83,423 $ 65,148
======== ======== ======== ======== ========
Number of Dealers (at end of period): 2,817 2,613 2,122 1,594 1,381
======== ======== ======== ======== ========
Servicing portfolio (at end of period):
Owned $ 58,140 $ 94,144 $ 91,934 $108,208 $111,928
Serviced for Securitization Trusts 323,131 297,504 243,932 175,679 118,818
-------- -------- -------- -------- --------
Total servicing portfolio $381,271 $391,648 $335,866 $283,887 $230,746
======== ======== ======== ======== ========
</TABLE>
Contract volume decreased to $47.6 million for the quarter ended June 30,
1997 from $65.1 million for the quarter ended June 30, 1996, representing a
decrease of 27%. The decline in Contract volume during the quarter ended June
30, 1997 was a result of the Company's deliberate slowing of Contract
acquisitions during the quarter. The Company expects volume to further decrease
reflecting the Company's focus on strengthening the infrastructure and improving
liquidity and credit quality. See "Results of Operations - Three Months Ended
June 30, 1997 and 1996 - Operating Expenses."
9
<PAGE>
Revenues
<TABLE>
<CAPTION>
For the Quarters Ended
----------------------
Revenue Data: Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
(dollars in thousands) 1997 1997 1996 1996 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest income:
Loan Contracts $ 3,271 $ 4,154 $ 4,260 $ 4,835 $ 4,704
Lease Contracts 1,619 1,724 1,652 1,284 1,052
------- ------- ------- ------- -------
Total interest income 4,890 5,878 5,912 6,119 5,756
Non-automobile interest income 65 62 76 92 133
Gain on sale of Contracts 614 4,875 6,445 7,147 3,283
Other income (2,570) 2,971 3,443 1,220 1,935
------- ------- ------- ------- -------
Total revenues $ 2,999 $13,786 $15,876 $14,578 $11,107
======= ======= ======= ======= =======
</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 loan Contracts through the Company's
securitization program, the Company recognizes a gain on sale of loan Contracts.
The Company continues to service these loan Contracts and earns a servicing fee
currently equal to three percent per annum of the outstanding principal balance
of the Contracts sold. Currently, the Company is not receiving its distribution
of cash related to this servicing fee as it is being used to further credit
enhance the Company's securitizations. See "Liquidity and Capital Resources -
Securitizations." The Company also receives revenues from the sale of insurance
and related products and other miscellaneous fees.
Revenues decreased from $11.1 million for the quarter ended June 30, 1996
to $3.0 million for the quarter ended June 30, 1997, due primarily to (i) a
decrease in interest income resulting from a slowing of Contract acquisitions as
well as a decline in the average Contracts held in portfolio and those awaiting
securitization during the quarter ended June 30, 1997, (ii) a lower gain on sale
recorded in the quarter ended June 30, 1997 due to an increase in the level of
credit enhancements required to securitize the Contracts, (see "Gain on Sale of
Contracts"), and (iii) a net servicing loss of $4.5 million included in other
income resulting primarily from the continual delay of receiving cash from the
securitizations, (see "Net Servicing Fee Income").
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:
10
<PAGE>
<TABLE>
<CAPTION>
For the Quarters Ended
----------------------
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
Net Interest Spread: 1997 1997 1996 1996 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest Income (1):
Loan Contracts 20.66% 20.77% 20.94% 23.25% 21.78%
Lease Contracts 17.94 19.05 19.53 18.02 16.45
----- ----- ----- ----- -----
Total automobile Contracts 19.69 20.23 20.53 21.91 20.56
Non-automobile Contracts 10.18 9.15 11.05 13.27 17.41
----- ----- ----- ----- -----
Total 19.45 19.98 20.30 21.70 20.48
Interest Expense (2) 10.61 10.03 10.21 10.32 10.80
----- ----- ----- ----- -----
Net interest spread 8.84% 9.95% 10.09% 11.38% 9.68%
===== ===== ===== ===== =====
</TABLE>
- -----------------------------------------
(1) Represents interest income expressed as a percentage of average receivables
outstanding.
(2) Represents interest expense as a percentage of average total debt
outstanding.
Gain on Sale of Contracts. The Company sells its loan Contracts through its
securitization program. The Company recognizes a gain on sale of loan Contracts
equal to the net proceeds received on the transaction, including the cash used
to fund the reserve account, less the allocated carrying value of the loan
Contracts sold. The gain is recorded in accordance with SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," ("SFAS 125") whereby a portion of the carrying amount of the
loan Contracts sold is allocated to any assets retained, typically an
interest-only strip, based on a measurement using relative fair values. Any
newly created interest in the securitization, typically the funding of a spread
account, is recorded at fair value.
An interest-only strip receivable ("interest strip") results from the
Company's right to receive any excess interest cash flows collected on the loan
Contracts sold. Excess interest cash flows are computed as the difference
between the weighted average interest rate earned on the loan Contracts sold and
the interest rate paid to investors in the securitization transaction, adjusted
for any contractual servicing fees to be paid to the Company. In determining the
fair value of an interest strip, the Company computes the present value of the
excess interest cash flows using estimates for net credit losses and
prepayments. The discount rate used is one that the Company would expect market
participants would use for similar financial instruments. Currently, the Company
is not receiving its distribution of contractual servicing or excess interest
cash flows associated with its securitization trusts as they are being used as
credit enhancements based on the terms of the securitization agreements. See
"Net Servicing Fee Income" and "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 net 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:
11
<PAGE>
<TABLE>
<CAPTION>
Weighted Interest Rate
Securitization Securitized Average Paid to Gross Net
(dollars in thousands) Balance Contract Rate Investors (1) Spread (2) Spread (3)
- ---------------------- ------- ------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1997-2 Auto Trust(4) ....... $135,007 19.58% 7.89% 11.69% 8.69%
1996-4 Auto Trust .......... 88,044 19.50% 7.02% 12.48% 9.48%
1996-3 Auto Trust .......... 70,052 19.37% 7.42% 11.95% 8.95%
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 .......... 40,136 19.58% 7.10% 12.48% 9.48%
--------
Total ...................... $343,489
========
</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.
(4) Amount includes $72.4 million in loan Contracts securitized in the 1997-1
transaction which had a weighted average contract rate, gross and net
spread of 19.54%, 11.22% and 8.22%, respectively.
During the quarter ended June 30, 1997, the 1997-1 transaction, which was
sold during the quarter ended March 31, 1997, was combined into the 1997-2
securitization by further increasing the level of credit enhancements in return
for a lower required rate of return by investors. Specifically, the Company
repurchased from the 1997-1 trust all Contracts which were sixty days or more
delinquent by the close of the 1997-2 transaction. In addition, the Company
increased the amount of cash collateral used to fund the reserve account. The
1997-1 transaction was then aggregated with the 1997-2 transaction and repriced
as a single transaction. The repricing resulted in a lower weighted average rate
paid to investors of 7.89% on the 1997-2 transaction compared to 8.32% on the
1997-1 transaction. The impact of the increase in level of credit enhancements
was a decrease in the gain on sale of loan Contracts to $614,000 for the quarter
ended June 30, 1997 from $3.3 million for the quarter ended June 30, 1996. The
decrease in the gain on sale of loan Contracts contributed significantly to the
net loss reported for the quarter ended June 30, 1997.
Net Servicing Fee Income. Throughout the life of the loan Contract sold to
trusts, the Company earns a contractual servicing fee from the securitization
trust, currently equal to three percent per year of the principal balance
outstanding. Servicing fees are reported as income when earned, net of any
amortization of interest strips. Net servicing fees may be reduced from those
that are contractually due if the Company believes that estimated future cash
flows would be insufficient to recover the carrying value of the retained
interest in securitizations. Servicing costs are charged to expense as incurred.
Net servicing fee income and the retained interest in securitizations may
be impacted by changes in the amount of losses and levels of prepayments from
those assumed by the Company at the time of the securitization. To the extent
the assumptions used are materially different from actual results, the amount of
excess interest cash flows received by the Company over the remaining life of
the securitization could be significantly affected.
During the quarter ended June 30, 1997, the Company recorded a charge of
$4.5 million against the recorded value in the interest strips due to the
continual delay of receiving cash from the Company's securitizations and the
Company's belief that the accrual of
12
<PAGE>
servicing fees on certain of the Company's securitizations would not be
recoverable. This charge has been reflected in other income in the Company's
Consolidated Statement of Operations.
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 and 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 growth in the servicing portfolio.
Results of Operations
The following table presents the principal components of the Company's net
income (loss) for the periods presented:
<TABLE>
<CAPTION>
For Quarters Ended For Six Months Ended
Jun 30, Jun 30,
------- -------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net interest income $ 2,363 $ 3,015 $ 5,492 $ 5,715
Gain on sale of loan Contracts 614 3,283 5,489 6,280
Net servicing fees and other income (2,570) 1,935 401 3,452
-------- -------- -------- --------
Total revenue 407 8,233 11,382 15,447
Provision for credit losses 3,450 898 5,417 1,789
Operating expenses 8,090 3,718 16,843 6,942
Non-cash charge for escrow shares -- 100 -- 207
-------- -------- -------- --------
Income (loss) before taxes (11,133) 3,517 (10,878) 6,509
Provision (benefit) for income taxes (4,231) 1,375 (4,134) 2,549
-------- -------- -------- --------
Net Income (Loss) ($ 6,902) $ 2,142 ($ 6,744) $ 3,960
======== ======== ======== ========
</TABLE>
13
<PAGE>
Three Months Ended June 30, 1997 and 1996.
Net Interest Income. Net interest income decreased to $2.4 million for the
quarter ended June 30, 1997 from $3.0 million for the quarter ended June 30,
1996. This decrease is primarily attributable to the Company's deliberate
slowing of Contract acquisitions as well as a decline in the average Contracts
held in portfolio and those awaiting securitization during the quarter ended
June 30, 1997.
Gain on Sale of Contracts. The Company completed a $135.0 million and a
$49.5 million securitization during the quarters ended June 30, 1997 and 1996,
respectively, resulting in gains on sale of $614,000 and $3.3 million,
respectively. Included in the $135.0 million is $72.4 million in loan Contracts
securitized during the first quarter ended March 31, 1997 which were aggregated,
along with the volume originated during the second quarter ended June 30, 1997,
into the most recent securitization. The gain on sale of loan Contracts recorded
during the quarter ended June 30, 1997, reflects the additional volume added
during the most recent quarter decreased by the additional level of credit
enhancements required on the combined transaction.
Net Servicing Income and Other Income. Net servicing fee income decreased
from $302,000 for the quarter ended June 30, 1996, to a servicing loss of $4.5
million for the quarter ended June 30, 1997. During the quarter ended June 30,
1997, the Company recorded a charge of $4.5 million against the recorded value
in the interest strips due to the continual delay of receiving cash from the
Company's securitizations and the Company's belief that the accrual of servicing
fees on certain of the Company's securitizations would not be recoverable. Other
income, consisting of insurance income and other fees increased to $1.8 million
from $1.6 million for the quarter ended June 30, 1997 and 1996, respectively.
This increase is due to the growth of the servicing portfolio to $381.3 million
at June 30, 1997 from $230.7 million at June 30, 1996.
Provision For Credit Losses. During the quarter ended June 30, 1997, the
Company recorded a provision for credit losses totaling $3.5 million compared to
$898,000 for the same quarter of the preceding year. This increase related to
provisions recorded for an estimate of possible losses that may be incurred in
connection with the acquisition of Contracts during the quarter ended June 30,
1997, and with the performance of previously purchased Contracts.
Operating Expenses. Operating expenses increased to $8.1 million for the
quarter ended June 30, 1997 from $3.7 million for the quarter ended June 30,
1996. Expressed as a percentage of average total servicing portfolio, operating
expenses were approximately 8.37% and 7.05% for the quarters ended June 30, 1997
and 1996, respectively, on an annualized basis.
14
<PAGE>
This increase was attributable to the acquisition of Special Finance Inc.
("SFI") in June 1996. The results of operations for the quarter ended June 30,
1997, include the operating expenses of SFI when compared to the quarter ended
June 30, 1996. The Company is currently evaluating its entire operations,
including the operations of SFI, in order to adjust the level of its operating
expenses to the current and anticipated origination and servicing levels. While
consolidation of SFI into the Company began during the second quarter ended June
30, 1997, the Company expects to further reduce its infrastructure. Towards that
end, the Company has decreased personnel to 385 from its peak of 582 during the
quarter ended March 31, 1997. Other planned changes to the Company's
infrastructure include the conversion of the Company's servicing system which is
scheduled to be completed by the end of the third quarter ending September 30,
1997. Once completed, the Company will have fully integrated application
processing, servicing, and accounting systems that will further enhance the
Company's operating efficiency.
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 stockholders' equity. During the quarter ended June 30,
1997, the Company was not required to take a charge.
Net Income (Loss). Net loss for the quarter ended June 30, 1997 was $6.9
million or a loss of $0.63 per fully diluted share. This compares to net income
of $2.1 million or $0.29 per fully diluted share for the quarter ended June 30,
1996.
Six Months Ended June 30, 1997 and 1996.
Net Interest Income. Net interest income decreased to $5.5 million for
the six months ended June 30, 1997 from $5.7 million for the six months ended
June 30, 1996. This decrease is primarily attributable to the Company's
deliberate slowing of Contract acquisitions as well as a decline in the average
Contracts held in portfolio and those awaiting securitization during the six
months ended June 30, 1997.
Gain on Sale of Contracts. The Company completed securitizations
totaling $135.0 million and $90.3 million during the six months ended June 30,
1997 and 1996, respectively, resulting in gains on sale of $5.5 million and $6.3
million, respectively. The decrease in the gain on sale is due to an increase in
the level of credit enhancements required on the 1997 transactions.
Net Servicing Income and Other Income. Net servicing fee income decreased
from $858,000 for the six months ended June 30, 1996 to a net servicing loss of
$3.6 million for the six months ended June 30, 1997, due primarily to the
amortization of the interest strips retained in the securitizations exceeding
the servicing fee income recognized.
15
<PAGE>
Other income, consisting of insurance income and other fees, increased to
$4.0 million from $2.6 million for the six months ended June 30, 1997 and 1996,
respectively. This increase is due to the growth of the servicing portfolio to
$381.3 million at June 30, 1997 from $230.7 million at June 30, 1996.
Provision For Credit Losses. During the six months ended June 30, 1997, the
Company recorded a provision for credit losses totaling $5.4 million compared to
$1.8 for the same period of the preceding year. This increase related to
provisions recorded for an estimate of possible losses that may be incurred in
connection with the acquisition of Contracts during the quarter ended June 30,
1997, and with the performance of previously purchased Contracts.
Operating Expenses. Operating expenses increased to $16.8 million for the
six months ended June 30, 1997 from $6.9 million for the six months ended June
30, 1996. Expressed as a percentage of average total servicing portfolio,
operating expenses were approximately 9.11% and 7.24% for the six months ended
June 30, 1997 and June 30, 1996, respectively, 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 stockholders' equity. During the six months ended June
30, 1997, the Company was not required to take a charge as the shares were fully
earned by December 31, 1996.
Net Income (Loss). Net loss for the six months ended June 30, 1997 was $6.7
million or a loss of $0.64 per fully diluted share. This compares to net income
of $4.0 million or $0.52 per fully diluted 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.
16
<PAGE>
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 2% to 10%. The amount of the discount varies
based upon the credit risk and 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. Currently, management is allocating the entire
amount of discount to the reserves available for credit losses and expects to
continue to do so in the foreseeable future.
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 reserves available
for credit losses at amounts which the Company believes are adequate to absorb
future credit losses on Contracts subject to non-recourse arrangements which are
held in portfolios and during the warehousing period. The reserves available for
credit losses are comprised of the acquisition discounts, dealer reserves, and
an allowance for credit losses. On a quarterly 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. Currently, the Company allocates the
entire discount to the reserves available for credit losses.
17
<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) Jun 30, 1997 Mar 31, 1997 Dec 31, 1996
(dollars in thousands) ------------ ------------ ------------
<S> <C> <C> <C>
Loan Contracts Serviced(5):
Gross charge-off percentage (2) 17.90% 17.06% 10.35%
Net charge-off percentage (3) 15.02% 15.04% 9.12%
Lease Contracts Serviced(5):
Gross charge-off percentage (2) 12.78% 11.77% 7.82%
Net charge-off percentage (3) 11.57% 10.35% 6.35%
Total Loan and Lease Contracts
Serviced(5):
Gross charge-off percentage (2) 17.39% 16.47% 10.03%
Net charge-off percentage (3) 14.67% 14.52% 8.78%
Special Recourse Contracts Serviced(5):
Gross charge-off percentage (2) -- -- --
Net charge-off percentage (3) -- -- --
Total Serviced Portfolio(5):
Gross charge-off percentage(2) 16.99% 15.83% 9.23%
Net charge-off percentage(3) 14.34% 13.96% 8.07%
</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 presented have been annualized.
(5) Contracts serviced are computed as the average principal balance
outstanding during the period plus inventory on hand.
Beginning in the first quarter ended March 31, 1997, and continuing
throughout the second quarter ended June 30, 1997, the Company changed its
policies and enhanced its procedures regarding repossessions. These changes
included, where permitted by law, accelerating the date of repossession upon
default. Collectors may now recommend repossession for first payment defaults
that are 30 days past due and for all other delinquent accounts, 45 days from
the date of last payment. This accelerates the date of repossession by an
average of 30 days, which has the effect of incurring credit losses earlier in
the collection cycle. Management believes that these changes will result in a
lower loss severity per vehicle and improve liquidity through the faster sale
of vehicle inventory, however, there can be no assurance to that effect.
18
<PAGE>
During 1997, the Company has experienced an increase in the rate of
bankruptcy filings by its borrowers, which is consistent with the trends
experienced by the industry as a whole. The Company charges off the entire
outstanding amount of a loan subsequent to a debtor's bankruptcy filing, in
accordance with its charge-off policy. The Company expects to recover more than
half of these amounts upon settlement made by the borrower either through
negotiation or a court order, or by the recovery and sale of the vehicle,
however, there can be no assurance to that effect. Such recoveries represent
future replenishment of reserves for credit losses.
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 Jun 30, 1997 As of Mar 31, 1997 As of Dec 31, 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
Delinquency(1) (2)
Loan Contracts Serviced
Delinquencies:
31-60 Days 8.47% 9.82% 10.30%
61-90 Days 3.46% 3.16% 3.38%
Greater than 90 Days 2.17% 1.70% 1.52%
----- ----- -----
Total 14.10% 14.68% 15.20%
===== ===== =====
Lease Contracts Serviced
Delinquencies:
31-60 Days 7.24% 9.07% 6.47%
61-90 Days 2.32% 2.82% 2.00%
Greater than 90 Days 1.63% 1.90% 2.54%
----- ----- -----
Total 11.19% 13.79% 11.01%
===== ===== =====
Recourse Contracts Serviced
Delinquencies(3):
31-60 Days 8.18% 10.48% 9.69%
61-90 Days -- -- --
Greater than 90 Days -- -- --
----- ----- -----
Total 8.18% 10.48% 9.69%
===== ===== =====
Total Contracts
Delinquencies:
31-60 Days 8.35% 9.77% 9.85%
61-90 Days 3.32% 3.01% 2.99%
Greater than 90 Days 2.10% 1.66% 1.57%
----- ----- -----
Total 13.77% 14.44% 14.41%
===== ===== =====
</TABLE>
- -------------------
(1) Table excludes non-automobile contracts.
(2) Table excludes certain portfolios which are accounted for on a cost
recovery basis.
(3) Contracts delinquent 61 days or more are repurchased by the originator of
the Contracts under the Recourse Program.
19
<PAGE>
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 typically begins 3 to 4 months, and
typically ends 12 to 14 months, after the origination date. The Company believes
as Contract volume continues to escalate, an increasingly greater portion of the
Company's portfolio is expected to fall into the "seasoning period" described
above, causing a rise in the overall portfolio delinquency and default rates,
without regard to underwriting performance. Assuming no changes in any other
factors that may affect delinquency and default rates, the Company believes this
trend should stabilize or reverse when the volume of mature Contracts (with
lower delinquency and default rates) is sufficient to reduce the portfolio
delinquency and default rates.
Liquidity and Capital Resources
The Company's business requires substantial cash to support its growth in
the rate of acquisition of new Contracts and to fund its expenses. The Company
has been required to use increasingly larger amounts of cash than it generated
from its operating activities. The Company has funded these negative cash flows
by drawing against its available warehouse and credit facilities. These
facilities provide for between 80% and 90% of the principal balance of the
Contracts. The Company funded the remainder of the purchase price through its
capital.
In connection with the securitization of loan Contracts, the Company is
required to fund reserve accounts as a means of providing credit enhancement to
each transaction. The Company funds these reserve accounts through a combination
of an initial cash deposit from the proceeds of the transaction, and the capture
of contractual servicing fees and excess interest cash flows until such reserve
accounts reach predetermined levels. These levels may be increased if the
average delinquency, and/or annualized loss and repossession rates of the trusts
exceed certain rates.
20
<PAGE>
The Company has completed seven securitization transactions, which included
the combination of the six and seventh transactions. Currently, the required
reserves of the first five of the securitizations have been increased due to
delinquency, loss or repossession rates exceeding the specified levels. The
structure of the combined sixth/seventh securitization transaction, concluded in
June 1997, requires that the initial reserve be increased for the first six
months by the capture of contractual servicing fee and excess servicing cash
flows. After the first six months, the Company will receive its contractual
serving fee without regard to delinquency or loss experience. As a result of
requirements to build the reserves for all of the trusts, as described, the
Company currently is not receiving any distributions of cash flows from any of
the trusts.
The securitization structures require that the Company repurchase from the
trusts any loan Contracts deposited into the trusts which subsequently default
on the first payment due. In addition, in connection with the restructuring and
credit enhancement of the 1997-1 transaction and the aggregation with the 1997-2
transaction, the Company repurchased from the 1997-1 transaction all Contracts
which were sixty days or more delinquent.
As a result of the above, the Company is experiencing a significant
liquidity issue. In response to this issue, the Company has deliberately slowed
the acquisition of Contracts. Furthermore, efficient financing sources are being
pursued and emphasis has been placed on reducing overhead. The Company also
continues to explore alternative structures for securitization of its loan
Contracts in order to maximize it proceeds from the securitization transactions.
In addition, the Company is evaluating alternatives involving its sale or
financial recapitalization. However, as of the date of this filing, the Company
has been unsuccessful in concluding a sale or recapitalization, and is
considering other alternatives, including reorganization or seeking other
protection under the United States Bankruptcy Code. However, there can be no
assurances that any of the alternatives currently being explored will be
successful in addressing the Company's material liquidity concerns.
Sources of Liquidity and Capital Resources:
Through June 30, 1997, the Company had secured its principal sources of
financing through senior indebtedness comprised of its warehouse facility,
revolving credit facilities and its specialized borrowing facility, as well as
subordinated indebtedness consisting of unsecured subordinated debentures. In
addition, the Company secures liquidity through the securitization of its loan
Contracts.
21
<PAGE>
The following table illustrates the Company's sources of financing as of
June 30, 1997 and 1996.
(dollars in thousands) For the Quarters Ended
June 30, 1997 June 30, 1996
------------- -------------
Sources of Financing:
Warehouse Facility:
Available Line $ 100,000 $ 50,000
Outstanding Balance 11,321 25,700
Revolving Credit Facilities:
Available Line 45,000 45,000
Outstanding Borrowings 24,907 21,851
Credit Facility:
--------- ---------
Outstanding Borrowings 1,950 --
Specialized Borrowing Facility 486 24,599
Term Note 5,000 --
Subordinated Debentures:
Issued - Cumulative 38,825 33,825
Converted to Common Stock - Cumulative (16,925) (9,825)
Principal repaid (28) --
--------- ---------
Outstanding 21,872 24,000
Note Due to Stockholder 770 --
--------- ---------
Total Outstanding Borrowings $ 66,306 $ 96,150
--------- ---------
Warehouse Facility. During September 1995, the Company entered into a $50
million warehouse facility (the "Greenwich Facility") with Greenwich Capital
Financial Products, Inc. ("Greenwich"). In November 1996, the Greenwich Facility
was increased to $100 million. This facility is structured as a reverse
repurchase agreement which is characterized as borrowings for financial
reporting purposes. Under the terms of this facility, as recently amended, the
Company's advance rate on the outstanding principal of the loan Contract has
been reduced to 86% from 88% with interest accruing at a rate of 3.00% over 30
day LIBOR. If at any time during the financing period 86% 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, unless Greenwich provides the
Company with notice of its intent to terminate within 60 days of such renewal.
At June 30, 1997, the Company had $11.3 million outstanding under the Greenwich
Facility.
22
<PAGE>
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, 1997,
the Company was in material 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).
The Company uses the Greenwich Facility to purchase loan Contracts with the
objective of selling 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 $343.4 million of automobile loans in
privately-placed securitization transactions. The proceeds from the Company's
securitization transactions have historically been used to pay down its
warehouse facility, thereby making the warehouse facility 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 been extended until March
1998. The Congress Facility bears interest at a floating rate of 2% over the
prime rate of CoreStates Bank, N.A., with interest payable monthly. The facility
is secured by certain loan and lease Contracts and has been used historically to
finance bulk purchase 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, 1997, the
Company had $1.5 million outstanding under this credit facility.
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, 1997, the Company had
drawn down approximately $23.4 million under the facility. GECC has elected not
to renew the GECC Facility which is scheduled to expire in September 1997, after
which time the Company may not draw down advances for the financing of new lease
contracts. However, the borrowing then existing will remain outstanding and will
be repaid over the term of the pledged lease Contracts. In anticipation of
expiration, the Company has entered into an agreement with GECC whereby GECC now
maintains custody of the cash collection accounts.
23
<PAGE>
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.
Revolving Line of Credit Facility. During September 1996, the Company
entered into a one year $3.5 million revolving line of credit (the "LOC
Facility") with a private third party. The LOC Facility is renewable at the
lender's discretion for an additional one year period, provided the Company
meets certain conditions. The LOC Facility bears interest at 13% with interest
payable monthly. The LOC Facility is secured by certain loan and lease
Contracts. As of June 30, 1997, the Company had drawn down approximately $2.0
million under the Facility. In July 1997, the borrowing under this facility was
paid down to and capped at $1.4 million.
In December 1996, the LOC Facility was amended to provide for financing for
up to an additional $6.0 million on certain of the Company's advances to dealers
under its recourse program. Advances under this portion of the facility were for
renewable ninety day periods and bear interest at 14.00%. In April 1997, by
agreement with the lender, the borrowings under this arrangement were paid down
to and were capped at $770,000, and the maturity date was set at September 1997.
In June 1997, the borrowings under this portion of the facility were paid off.
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, 1997, 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
$486,000. Approximately $58,000 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
$428,000 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.
24
<PAGE>
Distributions under some participation agreements with Fairfax include
deposits of a portion of the collections into segregated, interest-bearing
reserve accounts held for the benefit of the Company at Fairfax. These reserve
accounts are returned to the Company once the principal balances under the
participation agreements are reduced to certain levels.
The balances of the trust accounts 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".
Term Note. In June 1997, the Company entered into a $5 million term note
maturing on December 31, 1997, subject to certain acceleration conditions with
Conseco Private Capital Group, Inc. ("Conseco"). The term note bears interest at
a floating rate of 4.25% over the LIBOR rate. The term note is secured by the
common stock of Autorics II and any incidental rights associated by their
interests. In connection with the term note, the Company issued to Conseco
warrants to purchase 257,000 shares of Common Stock at an exercise price of
$0.15. In addition, the Company reduced to $0.15 the exercise price of 515,000
warrants previously granted to Conseco. The term note includes certain financial
covenants with which the Company was in compliance as of the date of this
filing.
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 September 1996, the Company completed the
offering and sale in private placement transactions of $38.8 million of
convertible subordinated debentures (the "Debentures") as well as 176,500 shares
of its common stock which yielded net proceeds of $2.1 million.
Through August 18, 1997, an aggregate of $17.6 million principal amount of
the Debentures were converted into 4,060,622 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 $7.50 to $11.00. The conversion price
of certain Debentures is subject to decrease by virtue of price protection and
adjustment features contained in such Debentures. At August 15, 1997, Debentures
with an aggregate principal balance of $21.1 million were outstanding. If the
Debentures were converted based upon the closing market price of the Common
Stock of $0.63 as of August 15, 1997, the Company would be caused to issue
approximately 37.8 million additional shares of Common Stock.
As of June 30, 1997 the Company had $21.9 million principal amount of
Debentures outstanding with maturity dates as follows: (i) $400,000 during the
quarter ending September 30, 1997; (ii) $11.0 million during the quarter ending
December 31, 1997; (iii) $3.0 million during the quarter ending June 30, 1998;
(iv) $5.0 million during the quarter ending September 30, 1998; and (v) $2.5
million during the quarter ending March 1999.
25
<PAGE>
The Company's liquidity and capital resources are affected by the trading
price of the Company's Common Stock. In view of the recent adverse publicity
affecting the non-prime market and the decline in the trading price of the
Company's Common Stock, management is uncertain as to the likelihood that the
holders of the Debentures will convert at their scheduled maturity date. If such
Debenture holders decide not to convert, the Company would be required to
allocate $11.4 million in liquidity and capital resources towards repayment of
principal on such Debentures during 1997.
If 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 $16 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).
The Company has issued 2,449,125 warrants at exercise prices between $7.50
and $15.00 and 772,000 warrants at an exercise price of $0.15. To date, none of
the warrants have been exercised. If exercised, the Company would receive
aggregate gross proceeds of approximately $25.5 million. The exercise price of
certain warrants and the proceeds thereof are subject to decrease by virtue of
price protection and adjustment features contained in such warrants.
Exercise of the warrants is largely a function of the spread between the
trading price of the Company's Common Stock and the exercise price of the
warrants. Thus, there can be no assurances that the future trading prices of the
Company's Common Stock will be sufficient to encourage the exercise of a
material number of the warrants in the near term, if at all.
Exercise of the warrants is also a function of other factors such as the
term of the warrant or any associated rights of redemption. Principally all of
the outstanding warrants shall remain outstanding until 1998 and 1999, although
some remain outstanding until 2001. In addition, certain of the warrants contain
features that permit redemption (at $.001 per warrant) based upon average
trading prices of the Company's Common Stock between $15 and $25. Any call for
redemption will have the likely effect of causing the exercise of these
warrants.
Securitizations. The Company securitizes loan Contracts as a part of a
financing strategy which provides a lower cost of financing and reduces risks
associated with interest rate fluctuations. In addition, 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.
26
<PAGE>
The Company has completed seven securitizations totaling approximately
$343.4 million. During the quarter ended June 30, 1997, the Company did not
receive its distribution of servicing cash flows associated with five
securitization trusts due to the delinquency, repossession, and credit losses
exceeding those allowable by the structure of the securitization trusts. The
following is a summary of the basic structure of the Company's 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 three percent per annum (the "Contractual Servicing
Fee"). This contractual servicing fee may, however, be captured by the Trust as
a means of building the reserve accounts to certain levels.
The Securities are rated by Duff and Phelps Credit Rating Co. and/or 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 are deposited into the reserve account
only to the extent necessary to maintain it at the required Maintenance Level.
The remaining excess interest 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 sells its loan Contracts through its securitization program.
The Company recognizes a gain on sale of Contracts equal to the net proceeds
received on the transaction, including the cash used to fund the reserve
account, less the allocated carrying value of the loan Contracts sold. The gain
is recorded in accordance with SFAS 125 whereby a portion of the carrying amount
in the loan Contracts sold is allocated to any assets retained, typically an
interest-only strip, based on a measurement using relative fair values. Any
newly created interest in the securitization, typically the funding of a spread
account, is recorded at fair value.
27
<PAGE>
The gain on sale through securitization has been a significant component of
the Company's revenues in each of the quarters in which the securitization
transactions have been completed. 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 decline and would 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 a
floating interest rate warehouse facility.
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. However,
there can be no assurances that the Company will be able to achieve this in the
near future.
Public Offering Of Common Stock. In December 1996, the Company completed an
underwritten, secondary public offering of 2,500,000 shares of Common Stock at
$7.50 per share, which yielded net proceeds of approximately $17.6 million. In
January 1997, the Company's underwriters exercised their over allotment option
to purchase an additional 375,000 shares of Common Stock at $7.50 per share. The
net proceeds to the Company from this sale were approximately $2.6 million.
Uses of Liquidity and Capital Resources
Purchase and Financing of Contracts. Purchasing of Contracts represents the
most significant cash requirement. The Company funds the purchase price of Loan
Contracts primarily through its warehouse and credit facilities. However,
because advance rates under these facilities generally provide for approximately
80% to 90% of the principal of Loan Contracts, the Company is required to fund
the remainder of the purchase price with other available cash resources.
The Company has funded the purchase of lease contracts through the $25
million GECC Facility, which, at June 30, 1997, had an outstanding balance of
approximately $23.4 million, and through funding on a temporary basis under the
Greenwich facility and a credit facility with a private investor. The Company is
currently exploring other financing sources and alternatives relative to the
acquisition of new lease contracts, as well as the refinancing of contracts
which are either temporarily financed or financed through equity capital.
28
<PAGE>
Securitization of Loan Contracts. In connection with the Company's
securitization of loan Contracts, the Company is required to fund cash reserve
accounts as credit enhancements to the transactions. The Company funds the
reserve accounts through a combination of an initial cash deposit upon the close
of each transaction, and through the capture of contractual servicing fees and
excess interest cash flows until these reserve accounts reach determined levels.
These levels may be increased if the average delinquency, and/or annualized loss
and repossession rates of the trusts exceed certain rates. The amount of time
required to fully fund each reserve account is dependent on numerous factors,
including, but not limited to (i) the size of the initial deposit, (ii) the net
interest rate spread, (iii) delinquencies and defaults, and (iv) liquidation of
repossessed inventory. Currently, the reserve levels for the first five of the
Company's six outstanding securitization transactions have been increased due to
delinquency, loss and/or repossession rates exceeding levels specified by the
transactions. The structure of the sixth outstanding transaction requires the
capture of contractual servicing fees, in addition to the capture of excess
interest, during the first six months. After six months, the Company will
receive contractual servicing fees, regardless of the delinquency or loss
experience of the trust. Until the required levels are achieved, however, the
Company is prohibited from receiving its distribution of contractual servicing
and excess interest cash flows. The trusts had $23.0 million in restricted cash
held in such reserve accounts at June 30, 1997.
The securitization structures require that the Company repurchase from the
trusts any loan Contracts deposited into the trusts which subsequently default
on the first payment due. In addition, in connection with the restructuring and
credit enhancement of the 1997-1 transaction and the aggregation with the 1997-2
transaction, the Company repurchased from the 1997-1 transaction all Contracts
which were sixty days or more delinquent.
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 February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings Per Share." SFAS 128 establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock or potential common stock. SFAS 128 is effective for financial statements
issued for periods ending after December 15, 1997. Management currently plans to
adopt SFAS 128 in its annual report on Form 10-K for the
29
<PAGE>
year ending December 31, 1997. Basic earnings per share, as defined in SFAS
128, would not have been different from primary earnings per share for the six
months ended June 30, 1997.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129 ("SFAS 129"), "Disclosure of Information about Capital
Structure." SFAS 129 establishes standards for disclosing information about an
entity's capital structure. SFAS 129 is effective for financial statements
ending after December 15, 1997. Management currently plans to adopt SFAS 129 in
its annual report on Form 10-K for the year ending December 31, 1997.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
During the period of April, 1997 through June, 1997, nine class action
suits were filed in the United States District Court for the Southern
District of Florida on behalf of the named plaintiffs and others who
purchased the Common Stock of the Company during the period of April, 1996
through April, 1997. The complaints are generally similar and charge the
Company and several of its officers with violations of the anti-fraud
provisions of the federal securities laws. The plaintiffs and their
respective counsel are presently working on determining the identity of the
lead plaintiff and lead counsel. In addition, all of the cases are expected
to be consolidated into one action during the third quarter and the Company
is not expected to officially respond to the allegations until after
consolidation is completed. However, the Company has reviewed the
allegations in the Complaint with its counsel, and believes the allegations
to be without foundation. The Company strongly believes that it has
complied at all times with its disclosure obligations and plans to
vigorously defend any claims made against it. The Company is currently not
a party to any other material litigation, although it is involved from time
to time in other litigation incident to its business and operations. The
captions for each class action suit filed against the Company are:
Wilson vs. NAL Financial Group Inc., Robert R. Bartolini, John T.
Schaeffer, Robert J. Carlson, and Dennis R. LaVigne, United States District
Court Case No. 97-6412-CIV- Hurley.
Briscoe vs. NAL Financial Group Inc., and Robert R. Bartolini, United
States District Court Case No. 97-6616-CIV-Furgeson.
Kaufman vs. NAL Financial Group Inc., Robert R. Bartolini, John T.
Schaeffer, Robert R. Carlson, and Dennis R. LaVigne, United States District
Court Case No. 97-6655-CIV-Zloch.
30
<PAGE>
Lowrance vs. NAL Financial Group Inc., Robert R. Bartolini, John T.
Schaeffer, Robert J. Carlson and Dennis R. LaVigne, United States District
Court Case No. 97-6659-CIV-Ungaro-Benages.
Raleigh Financial Corp. vs. NAL Financial Group Inc., Robert R. Bartolini,
John T. Schaeffer, Robert J. Carlson and Dennis R. LaVigne, United States
District Court Case No. 97-6679-CIV-Zloch.
Gilfand vs. NAL Financial Group Inc., Robert R. Bartolini, John T.
Schaeffer, Robert J. Carlson and Dennis R. LaVigne, United States District
Court Case No. 97-6693-CIV-Furgeson.
Titan Industries Money Purchase Profit Sharing Plan and Gary E. Williams
vs. NAL Financial Group Inc., and Robert R. Bartolini, United States
District Court Case No. 97-6689-CIV-Zloch.
Daoust vs. NAL Financial Group Inc., and Robert R. Bartolini, United States
District Court Case No 97-6707-CIV-Zloch.
Howard vs. NAL Financial Group Inc., Robert R. Bartolini, John T.
Schaeffer, Robert J. Carlson, and Dennis R. LaVigne, United States District
Court Case No. 97-6717-CIV-Zloch.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on June 6,
1997.
The following actions were taken:
1.) Ms. Ngaire E. Cuneo was elected to serve on the Board of Directors for
a three-year term expiring at the year 2000 annual meeting, or until her
successor has been elected and qualified. Tabulated voting results were as
follows:
31
<PAGE>
Votes For Votes Abstaining
-------------------------------------------
8,370,570 211,910
(79.41% of shares (2.010% of shares
outstanding) outstanding)
2.) Approval of Price Waterhouse LLP as the independent auditing firm for
the Company for the fiscal year ending December 31, 1997. Tabulated voting
results were as follows:
Votes For Votes Against Votes Abstaining
---------------------------------------------------------------------
8,420,205 133,850 28,425
(79.881% of shares (1.270% of shares (0.270% of shares
outstanding) outstanding) outstanding)
32
<PAGE>
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-Q 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
successfully address its material liquidity issue and, therefore, continue as a
going concern; (ii) changes in the level of future delinquencies, gross
charge-offs and recoveries; (iii) the Company's ability to implement its planned
consolidation and reduction in operating expenses; (iv) 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; (v) 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; (vi) 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; (vii) 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; (viii) the reliance of the
Company upon the continued service of its executive officers; (ix) the Company's
ability to remain in compliance with numerous federal and state consumer
protection laws and regulations; and (x) 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.
33
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
- ----------- ----------- ----------------
<S> <C> <C>
10.47 Administration Agreement among NAL Auto Trust 1997-2, NAL Acceptance Filed herewith
Corporation and Bankers Trust Company dated as of June 1, 1997
10.48 Receivables Purchase Agreement among NAL Acceptance Corporation, Filed herewith
Autorics, Inc. and Autorics II, Inc. dated as of June 1, 1997
10.49 Sale and Servicing Agreement among NAL Auto Trust 1997-2, Autorics II, Filed herewith
Inc. NAL Acceptance Corporation and LSI Financial Group dated as of June
1, 1997
10.50 Indenture between NAL Auto Trust 1997-2 and Bankers Trust Company dated Filed herewith
as of June 1, 1997
10.51 Trust Agreement between Autorics II, Inc. and Wilmington Trust Company Filed herewith
dated as of June 1, 1997
11 Statement re: computation of earnings per share Filed herewith
27 Financial Data Schedule Filed herewith
(b) Reports on Form 8-K
None.
</TABLE>
34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this Form 10-Q to be signed on its behalf by the
undersigned thereunto duly authorized.
NAL FINANCIAL GROUP INC.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
- ----------------------------- Chairman of the Board; August 19, 1997
Robert R. Bartolini President and Chief Executive
Officer
- ----------------------------- Senior Vice President of Finance August 19, 1997
Robert J. Carlson
</TABLE>
35
This ADMINISTRATION AGREEMENT dated as of June 1, 1997, among NAL AUTO
TRUST 1997-2, a Delaware business trust (the "Issuer"), NAL ACCEPTANCE
CORPORATION, a Florida 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 7.75% Asset Backed Notes, (the "Notes")
pursuant to the Indenture dated as of June 1, 1997 (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 1, 1997
(as amended and supplemented from time to time, the "Sale and Servicing
Agreement"), among the Issuer, NAL Acceptance Corporation, as servicer, LSI
Financial Group, 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
<PAGE>
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;
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);
2
<PAGE>
(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 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);
3
<PAGE>
(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);
(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);
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<PAGE>
(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
(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
5
<PAGE>
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 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
6
<PAGE>
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, 1997, 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
7
<PAGE>
required to be performed by the Administrator under the Trust Agreement.
(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
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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 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.
9
<PAGE>
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 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.
10
<PAGE>
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 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 1997-2
In care of Wilmington Trust Company
Rodney Square North
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1100 Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
(b) if to the Administrator, to:
NAL Acceptance Corporation
500 Cypress Creek Road West
Suite 590
Fort Lauderdale, FL 33309
Attention: Robert Carlson
(c) if to the Indenture Trustee, to:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group,
Structured Finance Team
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, 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
12
<PAGE>
rights of Noteholders or the Certificateholders; provided, however, that no such
amendment may (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on Receivables or distributions
that are required to be made for the benefit of the Noteholders or
Certificateholders or (ii) reduce the aforesaid percentage of the holders of
Notes and Certificates which are required to consent to any such amendment,
without the consent of the holders of all the outstanding Notes and
Certificates. Notwithstanding the foregoing, the Administrator may not amend
this Agreement without the permission of the Depositor, which permission shall
not be unreasonably withheld.
12. Successors and Assigns. This Agreement may not be assigned by the
Administrator unless such assignment is previously consented to in writing by
the Issuer and the Owner Trustee and subject to the satisfaction of the Rating
Agency Condition in respect thereof. An assignment with such consent and
satisfaction, if accepted by the assignee, shall bind the assignee hereunder in
the same manner as the Administrator is bound hereunder. Notwithstanding the
foregoing, this Agreement may be assigned by the Administrator without the
consent of the Issuer or the Owner Trustee to a corporation or other
organization that is a successor (by merger, consolidation or purchase of
assets) to the Administrator; provided that such successor organization executes
and delivers to the Issuer, the Owner Trustee and the Indenture Trustee an
agreement in which such corporation or other organization agrees to be bound
hereunder by the terms of said assignment in the same manner as the
Administrator is bound hereunder. Subject to the foregoing, this Agreement shall
bind any successors or assigns of the parties hereto.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
14. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
15. Counterparts. This Agreement may be executed in counterparts, each of
which when so executed shall be an
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<PAGE>
original, but all of which together shall constitute but one and the same
agreement.
16. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
17. Not Applicable to NAL Acceptance Corporation in Other Capacities.
Nothing in this Agreement shall affect any obligation NAL Acceptance Corporation
may have in any other capacity.
18. Limitation of Liability of Owner Trustee and Indenture Trustee. (a)
Notwithstanding anything contained herein to the contrary, this instrument has
been countersigned by Wilmington Trust Company 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 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.
* * * * * * * * * * * * * * * * * * * * * *
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<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 1997-2
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Owner Trustee
By:
-------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
By:
-------------------------------
Name:
Title:
NAL ACCEPTANCE CORPORATION,
as Administrator
By:
-------------------------------
Name: Robert Carlson
Title: Vice President
<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 1997-2 (the "Trust"), does hereby make,
constitute and appoint NAL Acceptance Corporation, as administrator under the
Administration Agreement dated as of June 1, 1997 (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 dated as of
June 1, 1997 between Autorics II, Inc. and Wilmington Trust Company, as Owner
Trustee, 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 ___th day of June, 1997.
A-1
<PAGE>
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
-----------------------------------
Name:
Title:
STATE OF NEW YORK }
}
COUNTY OF NEW YORK }
Before me, the undersigned authority, on this day personally appeared
Emmett R. Harmon, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he signed the same for the
purposes and considerations therein expressed.
Sworn to before me this ___th
day of June, 1997.
- -------------------------------------------------------------------------------
Notary Public - State of New York
A-2
RECEIVABLES PURCHASE AGREEMENT dated as of June 1, 1997, 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 others; and
WHEREAS the Purchaser wishes to purchase the Receivables (as hereinafter
defined) and to transfer the Receivables to NAL Auto Trust 1997-2 (the "Trust"),
which will issue the 7.75% Asset Backed Notes (the "Notes"), payment of which
will be secured by the Receivables, and the 9.10% Asset Backed Certificates
representing fractional undivided interests in the property of the Trust
including the Receivables, subject to the rights of the Indenture Trustee on
behalf of the Noteholders;
WHEREAS the Seller and Purchaser are wholly owned subsidiaries of NAL and
NAL wishes to facilitate the transfer of the Receivables and, to that end, has
agreed to make certain representations and warranties relating to the
Receivables and to pay certain expenses and amounts with respect hereto; and
WHEREAS NAL, the Seller and the Purchaser wish to set forth the terms
pursuant to which the Seller will sell the Receivables to the Purchaser;
NOW, THEREFORE, in consideration of the foregoing, other good and valuable
consideration and the mutual terms and covenants contained herein, the parties
hereto agree as follows:
ARTICLE I
Certain Definitions
Terms not defined in this Agreement shall have the meaning set forth in the
Sale and Servicing Agreement or the Indenture, as applicable. As used in this
Agreement, the following terms shall, unless the context otherwise requires,
have the following meanings (such meanings to be equally applicable to the
singular and plural forms of the terms defined):
"Agreement" shall mean this Receivables Purchase Agreement, as the same may
be amended and supplemented from time to time.
"Assignment" shall mean the document of assignment substantially in the
form of Exhibit A.
"Certificates" shall mean the Trust Certificates (as defined in the Trust
Agreement).
"Certificateholders" shall mean the holders of Certificates.
"Closing Date" shall mean June 27, 1997.
<PAGE>
"Collections" shall mean all amounts collected by the Servicer (from
whatever source) on or with respect to the Receivables.
"Cutoff Date" means June 1, 1997.
"Indenture" shall mean the Indenture dated as of June 1, 1997 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 27, 1997 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 1, 1997, among the Trust, the Purchaser, NAL, as Servicer and
LSI Financial Group, as Backup Servicer, 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 1, 1997,
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 $134,253,875 the
Seller does hereby sell, transfer, assign, set over and otherwise convey to the
Purchaser, without recourse (subject to the obligations of the Seller and NAL
herein), all right, title and interest of the Seller in and to (but none of the
obligations of the Seller with respect to):
(a) the Receivables, and all moneys received thereon on and after the
Cutoff Date plus all Payaheads as of the Cutoff Date;
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<PAGE>
(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 agents, 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 LLP, One
World Trade Center, New York, New York 10048 on the Closing Date, simultaneously
with the closings under (a) the Sale and Servicing Agreement and (b) the
Indenture.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Seller as of the Closing Date:
(a) Organization and Good Standing. The Purchaser has been duly organized
and is validly existing as a corporation in good standing under the laws of the
State of Delaware, with the power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the power,
authority and legal right to acquire and own the Receivables.
(b) Due Qualification. The Purchaser is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such qualifications.
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(c) Power and Authority. The Purchaser has the power and authority to
execute and deliver this Agreement and to carry out its terms, and the
execution, delivery and performance of this Agreement has been duly authorized
by the Purchaser by all necessary corporate action.
(d) No Violation. The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the certificate of
incorporation or bylaws of the Purchaser, or any indenture, agreement or other
instrument to which the Purchaser is a party or by which it is bound; or result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than the
Sale and Servicing Agreement, the Indenture and the Trust Agreement); or violate
any law or, to the best of the Purchaser's knowledge, any order, rule or
regulation applicable to the Purchaser of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Purchaser or its properties.
(e) No Proceedings. There are no proceedings or investigations pending or,
to the Purchaser's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Purchaser or its properties: (i) asserting the invalidity
of this Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (iii) seeking any determination
or ruling that might materially and adversely affect the performance by the
Purchaser of its obligations under, or the validity or enforceability of, this
Agreement.
SECTION 3.02. Representations and Warranties of the Seller and NAL. (a) The
Seller hereby represents and warrants to the Purchaser as of the Closing Date:
(i) Organization and Good Standing. The Seller has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of Delaware, with the power and authority to own its properties
and to conduct its business as such properties are currently owned and such
business is presently conducted, and had at all relevant times, and has,
the power, authority and legal right to acquire and own the Receivables.
(ii) Due Qualification. The Seller is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business shall require such
qualifications.
(iii) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and to carry out its terms; the Seller
has full power and authority to sell and assign the property sold and
assigned to the Purchaser hereby and has duly authorized such sale and
assignment to the Purchaser by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly
authorized by the Seller by all necessary corporate action.
(iv) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof shall not
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time)
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a default under, the articles of incorporation or bylaws of the Seller, or
any indenture, agreement or other instrument to which the Seller is a party
or by which it is bound; or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than this Agreement); or
violate any law or, to the best of the Seller's knowledge, any order, rule
or regulation applicable to the Seller of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.
(v) No Proceedings. There are no proceedings or investigations pending
or, to the Seller's best knowledge, threatened before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Seller of its obligations under or the validity or
enforceability of, this Agreement.
(vi) Principal Place of Business. The principal place of business and
chief executive office of the Seller are located at the place set forth in
Section 6.08(a) and such location has not changed since the date the Seller
was incorporated.
(vii) Use of Names. The legal name of the Seller is the name used by
it in this Agreement and the Seller has not changed its name since the date
of its incorporation and does not have trade names, fictitious names,
assumed names or "doing business" names.
(viii) Solvency. The Seller is solvent and will not become insolvent
after giving effect to the transactions contemplated in this Agreement; the
Seller is paying its debts, if any, as they become due; the Seller, after
giving effect to the transactions contemplated in this Agreement, will have
adequate capital to conduct its business.
(b) NAL hereby represents and warrants to the Seller as of the Closing
Date:
(i) Organization and Good Standing. NAL has been duly organized and is
validly existing as a corporation in good standing under the laws of the
State of Florida, with the power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is presently conducted, and had at all relevant times, and has,
the power, authority and legal right to acquire and own the Receivables.
(ii) Due Qualification. NAL is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business shall require such
qualifications.
(iii) Power and Authority. NAL has the power and authority to execute
and deliver this Agreement and to carry out its terms; NAL has full power
and authority to perform its obligations under this Agreement; and the
execution, delivery and performance of this Agreement has been duly
authorized by NAL by all necessary corporate action.
(iv) No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof shall not
conflict with, result in any breach
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of any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the articles of incorporation or
bylaws of NAL, or any indenture, agreement or other instrument to which NAL
is a party or by which it is bound; or result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than this Agreement); or
violate any law or, to the best of NAL's knowledge, any order, rule or
regulation applicable to NAL of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over NAL or its properties.
(v) No Proceedings. There are no proceedings or investigations pending
or, to NAL's best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over NAL or its properties: (A) asserting the invalidity of
this Agreement, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by NAL of its obligations under or the validity or
enforceability of, this Agreement.
NAL agrees that such representations and warranties shall be conveyed
hereunder by the Seller to the Purchaser, by the Purchaser to the Issuer under
the Sale and Servicing Agreement, and pledged by the Issuer to the Indenture
Trustee. NAL further agrees that any such Person to whom such rights are
conveyed may enforce any and all remedies for the breach thereof directly
against NAL. NAL agrees that the Purchaser shall rely on such representations
and warranties in accepting the Receivables.
(c) NAL makes the following representations and warranties to the Seller in
respect of the Receivables. NAL agrees that such representations and warranties
shall be conveyed hereunder by the Seller to the Purchaser, by the Purchaser to
the Issuer under the Sale and Servicing Agreement, and pledged by the Issuer to
the Indenture Trustee. NAL further agrees that any such Person to whom such
rights are conveyed may enforce any and all remedies for the breach thereof
directly against NAL. NAL agrees that the Purchaser shall rely on such
representations and warranties in accepting the Receivables. Such
representations and warranties speak as of the execution and delivery of this
Agreement, but shall survive the sale, transfer and assignment of the
Receivables to the Purchaser and the subsequent sale, assignment and transfer of
the Receivables pursuant to the Sale and Servicing Agreement and the Grant
thereof pursuant to the Indenture:
(i) Characteristics of Receivables. Each Receivable (A) was originated
in the United States of America by a Dealer for the retail sale of a
Financed Vehicle in the ordinary course of such Dealer's business, was
fully and properly executed by the parties thereto, was purchased by NAL
from such Dealer under an existing dealer agreement, and was validly
assigned by such Dealer to NAL in accordance with the terms of such dealer
agreement and from NAL to the Seller pursuant to the Contract Purchase
Agreement dated September 5, 1995 between NAL and the Seller, (B) has
created a valid, subsisting and enforceable first priority security
interest in favor of the Seller in the Financed Vehicle, which security
interest is assignable by the Seller to the Purchaser, by the Purchaser to
the Trust and by the Trust to the Indenture Trustee, (C) contains customary
and enforceable provisions such that the rights and remedies of the holder
thereof are adequate for realization against the collateral of the benefits
of the security, (D) provides for level monthly payments (provided that the
payment in the first or last month in the life of the Receivable may be
different from the level payments) that fully amortize the Amount Financed
by maturity and yield interest at the
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Annual Percentage Rate, and (E) provides, in the event that such Contract
is prepaid, for a prepayment that fully pays the Principal Balance of the
Receivable and includes a full month's interest in the month of prepayment
at the Annual Percentage Rate.
(ii) Schedule of Receivables. The information set forth in Schedule I
to this Agreement is true and correct in all material respects as of the
opening of business on the Cutoff Date, and no selection procedures
believed to be adverse to the Noteholders or the Certificateholders were
utilized in selecting the Receivables. The computer tape regarding the
Receivables made available to the Purchaser and its assigns is true and
correct in all respects.
(iii) Compliance with Law. Each Receivable and the sale of the related
Financed Vehicle complied at the time it was originated or made, and at the
execution of this Agreement complies, in all material respects with all
requirements of applicable federal, state and local laws and regulations
thereunder, including usury laws, the Federal Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and S
and state adaptations of the National Consumer Act and of the Uniform
Consumer Credit Code, and other consumer credit laws and equal credit
opportunity and disclosure laws.
(iv) Binding Obligation. Each Receivable represents the genuine,
legal, valid and binding payment obligation in writing of the Obligor,
enforceable by the holder thereof in accordance with its terms.
(v) No Government Obligor. None of the Receivables is due from the
United States of America or any state or from any agency, department or
instrumentality of the United States of America or any state.
(vi) Security Interest in Financed Vehicle. Immediately prior to the
sale, assignment and transfer thereof, each Receivable shall be secured by
a validly perfected first security interest in the Financed Vehicle in
favor of the Seller as secured party or all necessary and appropriate
actions have been commenced that would result in the perfection of a first
security interest in the Financed Vehicle in favor of the Seller as secured
party.
(vii) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released from
the lien granted by the related Receivable in whole or in part.
(viii) No Waiver. No provision of a Receivable has been waived except
by a writing constituting an amendment to the applicable Contract.
(ix) No Amendments. No Receivable has been amended such that the
amount of the Obligor's scheduled payments has been increased.
(x) No Defenses. No right of rescission, setoff, counterclaim or
defense has been asserted or threatened with respect to any Receivable.
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(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 30
days overdue as of the Cutoff Date; provided however that no more than
$7,345,341.43 aggregate principal balance of the Receivables may have
payments that are more than 30 days but less than 60 days overdue as of the
Cutoff Date; 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 50.99 months as of the Cutoff Date.
(xix) Scheduled Payments. (A) Each Receivable has a first Scheduled
Payment due, in the case of Precomputed Receivables, or a scheduled due
date, in the case of Simple Interest Receivables, on or prior to July 29,
1997 and (B) no Receivable has a final scheduled payment date later than
the Final Scheduled Maturity Date.
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(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 85.38% of the aggregate principal
balance of the Receivables, constituting 88.64% 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 92.39% 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 $135,007,436.
(xxiii) No Bankruptcies. As of the Cutoff Date, no Obligor on any
Receivable was noted in the related Receivable File as having filed for
bankruptcy.
(xxiv) No Repossessions. No Financed Vehicle securing any Receivable
is in repossession status.
(xxv) Chattel Paper. Each Receivable constitutes "chattel paper" as
defined in the UCC.
(xxvi) Underwriting Guidelines. Each Receivable was originated by the
Dealer and purchased by NAL in accordance with the underwriting guidelines
described in the Private Placement Memorandum.
(xxvii) Servicing. As of the Cutoff Date each Receivable was being
serviced by the Servicer and no other person had a right to service such
Receivable.
(xxviii) Full Amount Advanced. The full principal amount of each
Receivable has been advanced to each Obligor, and there is no requirement
for future advances thereunder. The Obligor with respect to the Receivable
does not have any option under the Receivables to borrow from any person
additional funds secured by the Financed Vehicle.
(xxix) Obligation to Dealers or Others. The Purchaser and its
assignees will assume no obligations to Dealers or other originators of
prior holders of the Receivables (including, but not limited to obligations
under dealer reserves) as a result of its purchase of the Receivables.
(xxx) Collection Practices. The Collection practices utilized by any
person servicing a Receivable in seeking payment under the documentation
evidencing such Receivable have been in all respects legal, proper and
customary in the automobile loan servicing business.
(xxxi) First Payment. The first payment on each Receivable with
respect to which the first payment was not yet due as of the Cutoff Date
will be made in full no later than the 45th day after its due date.
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(xxxii) Private Placement Memorandum. The Private Placement Memorandum
does not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading.
(xxxiii) Subsequent Transfer. The representations and warranties of
the Depositor in Section 3.01 of the Sale and Servicing Agreement are true
and correct.
ARTICLE IV
Conditions
SECTION 4.01. Conditions to Obligation of the Purchaser. The obligation of
the Purchaser to purchase the Receivables is subject to the satisfaction of the
following conditions:
(a) Representations and Warranties True. The representations and warranties
of the Seller and NAL hereunder shall be true and correct on the Closing Date
with the same effect as if then made, and each of the Seller and NAL shall have
performed all obligations to be performed by it hereunder on or prior to the
Closing Date.
(b) Computer Files Marked. The Seller shall, at its own expense, on or
prior to the Closing Date indicate in its computer files that the Receivables
have been sold to the Purchaser pursuant to this Agreement, and deliver to the
Purchaser the Schedule of Receivables certified by the Chairman, the President,
a Vice President or the Treasurer to be true, correct and complete.
(c) Documents To Be Delivered by the Seller at the Closing.
(i) The Assignment. At the Closing, the Seller will execute and
deliver an Assignment substantially in the form of Exhibit A hereto.
(ii) Evidence of UCC Filing. On or prior to the Closing Date, the
Seller shall record and file, at its own expense, a UCC-1 financing
statement in each jurisdiction in which required by applicable law,
executed by the Seller, as seller or debtor, and naming the Purchaser as
purchaser or secured party, describing the Receivables and the other
property included in the Owner Trust Estate, meeting the requirements of
the laws of each such jurisdiction and in such manner as is necessary to
perfect the sale, transfer, assignment and conveyance of such Receivables
to the Purchaser. The Seller shall deliver a file-stamped copy or other
evidence satisfactory to the Purchaser of such filing to the Purchaser on
or prior to the Closing Date.
(iii) Other Documents. Such other documents as the Purchaser may
reasonably request.
(d) Other Transactions. The transactions contemplated by the Sale and
Servicing Agreement, the Indenture and the Trust Agreement to be consummated on
the Closing Date shall be consummated on such date.
SECTION 4.02. Conditions to Obligation of the Seller. The obligation of the
Seller to sell the Receivables to the Purchaser is subject to the satisfaction
of the following conditions:
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(a) Representations and Warranties True. The representations and warranties
of the Purchaser hereunder shall be true and correct on the Closing Date with
the same effect as if then made, and the Seller shall have performed all
obligations to be performed by it hereunder on or prior to the Closing Date.
(b) Receivables Purchase Price. On the Closing Date, the Purchaser shall
have delivered to the Seller the purchase price specified in Section 2.01.
ARTICLE V
Covenants of the Seller and NAL
The Seller and NAL agree with the Purchaser as follows:
SECTION 5.01. Protection of Right, Title and Interest. (a) Filings. NAL and
the Seller shall cause all financing statements and continuation statements and
any other necessary documents covering the right, title and interest of the
Seller and the Purchaser, respectively, in and to the Receivables and the other
property included in the Owner Trust Estate to be promptly filed and at all
times to be kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve and protect the right, title
and interest of the Purchaser hereunder in and to the Receivables and the other
property included in the Owner Trust Estate. NAL and the Seller shall deliver to
the Purchaser file stamped copies of, or filing receipts for, any document
recorded, registered or filed as provided above, as soon as available following
such recordation, registration or filing. The Purchaser shall cooperate fully
with NAL and the Seller (and the Seller will cooperate with NAL) in connection
with the obligations set forth above and will execute any and all documents
reasonably required to fulfill the intent of this paragraph.
(b) Name Change. Within 15 days after the Seller makes any change in its
name, identity or corporate structure that would make any financing statement or
continuation statement filed in accordance with paragraph (a) above seriously
misleading within the applicable provisions of the UCC or any title statute, the
Seller shall give the Purchaser notice of any such change and, no later than 5
days after the effective date thereof, shall file such financing statements or
amendments as may be necessary to continue the perfection of the Purchaser's
interest in the property included in the Owner Trust Estate.
(c) Resolution. The Seller shall have an obligation to give the Purchaser
at least 60 days' prior written notice of any relocation of its principal
executive office if, as a result of such relocation, the applicable provisions
of the UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement and shall
promptly file any such amendment or new financing statement. The Servicer shall
at all times maintain each office from which it shall service Receivables, and
its principal executive office, within the United States of America.
(d) Notice. If at any time the Seller shall propose to sell, grant a
security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the Seller
shall give to such prospective purchaser, lender or other transferee computer
tapes, records or printouts (including any restored from backup archives) that,
if they shall refer in any manner whatsoever to any Receivable, shall indicate
clearly that such Receivable has
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been sold and is owned by the Purchaser. Should any third party inquire of the
Seller as to the Receivables, the Seller will promptly indicate to such party
that the Receivables have been sold to the Purchaser pursuant to this Agreement.
SECTION 5.02. Other Liens or Interests. Except for the conveyances
hereunder and under the Sale and Servicing Agreement, the Indenture, the Trust
Agreement and the other Basic Documents, the Seller will not sell, pledge,
assign or transfer to any Person, or grant, create, incur, assume or suffer to
exist any Lien on, or any interest in, to or under the Receivables, and the
Seller shall defend the right, title and interest of the Purchaser in, to and
under the Receivables against all claims of third parties claiming through or
under the Seller; provided, however, that the Seller's obligations under this
Section shall terminate upon the termination of the Trust pursuant to the Trust
Agreement.
SECTION 5.03. Costs and Expenses. NAL agrees to pay all reasonable costs
and disbursements in connection with the perfection, as against all third
parties, of the Seller's or any of its assignees right, title and interest in
and to the Receivables.
SECTION 5.04. Indemnification. NAL shall indemnify the Purchaser for any
liability resulting from the failure of a Receivable to be originated in
compliance with all requirements of law and for any breach of any of its or the
Seller's representations and warranties contained herein and for any failure by
the Seller to comply with its obligations under Sections 5.01 and 5.02 hereof.
These indemnity obligations shall be in addition to any obligation that NAL or
the Seller may otherwise have.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Obligations of Seller and NAL. The obligations of the Seller
and NAL under this Agreement shall not be affected by reason of any invalidity,
illegality or irregularity of any Receivable.
SECTION 6.02. Repurchase Events. NAL hereby covenants and agrees with the
Seller for the benefit of the Seller and its assignees or their respective
assignees the occurrence of a breach of any of NAL's representations and
warranties contained in Section 3.02(c), unless any such breach shall have been
cured by the last day of the Collection Period following the discovery thereof
by NAL, or receipt by NAL of written notice from the Owner Trustee, the
Indenture Trustee, the Depositor, the Servicer, or the Back-up Servicer, shall
constitute an event obligating NAL to purchase as of such last day any
Receivable hereunder with respect to which such breach occurred if such breach
has had a material and adverse effect on the interests of the Purchaser or the
Trust in and to such Receivable (each, a "Repurchase Event"), at the Purchase
Amount from the Purchaser or, upon the assignment contemplated by the Sale and
Servicing Agreement, from the Trust. 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
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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 the 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 the Rating Agency, with the consent of the holders of Notes evidencing
at least a majority of the Outstanding Amount of the Notes and the holders of
Certificates evidencing at least a majority of the Certificate Balance for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Noteholders or the Certificateholders in the Trust or Receivables; provided,
however, that no such amendment may (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments on
Receivables or distributions that are required to be made for the benefit of
Noteholders or Certificateholders or (ii) reduce the aforesaid percentage of the
Notes and Certificates that is required to consent to any such amendment,
without the consent of the holders of all the outstanding Notes and
Certificates.
SECTION 6.06. Accountants' Letters. (a) Price Waterhouse LLP will review
the characteristics of the Receivables and will compare those characteristics to
the information with respect to the Receivables contained in the Private
Placement Memorandum; (b) the Seller will cooperate with the Purchaser and Price
Waterhouse LLP in making available all information and taking all steps
reasonably necessary to permit such accountants to complete the review set forth
in clause (a) above and to deliver the letters required of them under the
Private Placement Memorandum; (c) Price Waterhouse LLP will deliver to the
Purchaser a letter, dated the date of the Private Placement Memorandum, in the
form previously agreed to by the Seller and the Purchaser, with respect to the
financial and statistical information contained in the Private Placement
Memorandum and with respect to such other information as may be agreed in the
form of letter.
SECTION 6.07. Waivers. No failure or delay on the part of the Purchaser, or
any assignee of the Purchaser, in exercising any power, right or remedy under
this Agreement shall
13
<PAGE>
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, Inc.,
500 Cypress Creek Road West, Suite 590, Fort Lauderdale, Florida 33309,
Telephone: 954-958-3590: Fax: 954-938-8209, Attention: Robert J. Carlson; (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: Robert J. Carlson; (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: Robert J.
Carlson; and (d) in the case of the Rating Agency, to Fitch Investors Service,
L.P., One State Street Plaza, 32nd Floor, New York, N.Y. 10004 Tel: (212)
908-0637; Fax: (212) 480-4438; Attn: Michael N. Babick; or as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.
SECTION 6.09. Costs and Expenses. The Seller shall pay all expenses
incident to the performance of its obligations under this Agreement and NAL
agrees to pay all reasonable out-of-pocket costs and expenses of the Purchaser,
excluding fees and expenses of counsel, in connection with the perfection as
against third parties of the Purchaser's right, title and interest in and to the
Receivables and the enforcement of any obligation of the Seller hereunder.
SECTION 6.10. Representations of the Seller and the Purchaser. The
respective agreements, representations, warranties and other statements by NAL,
the Seller and the Purchaser set forth in or made pursuant to this Agreement
shall remain in full force and effect and will survive the sales and assignments
referred to in Section 6.04.
SECTION 6.11. Confidential Information. The Purchaser agrees that it will
neither use nor disclose to any Person the names and addresses of the Obligors,
except in connection with the enforcement of the Purchaser's rights hereunder,
under the Receivables, under the Sale and Servicing Agreement, the Indenture,
the Trust Agreement or any other Basic Document or as required by any of the
foregoing or by law.
SECTION 6.12. Headings and Cross-References. The various headings in this
Agreement are included for convenience only and shall not affect the meaning or
interpretation of any provision of this Agreement. References in this Agreement
to Section names or numbers are to such Sections of this Agreement.
SECTION 6.13. GOVERNING LAW. THIS AGREEMENT AND THE ASSIGNMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER OR THEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
14
<PAGE>
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.
15
<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 J. Carlson
Title: Vice President
NAL ACCEPTANCE CORPORATION,
by
-------------------------------
Name: Robert J. Carlson
Title: Vice President
AUTORICS II, INC.,
by
-------------------------------
Name: Robert J. Carlson
Title: Vice President
16
<PAGE>
ASSIGNMENT
For value received, in accordance with the Receivables Purchase Agreement
dated as of June 1, 1997, 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
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 the Receivables from claims on any
Insurance Policies relating to the Financed Vehicles or Obligors; (iv) 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 under the Receivables Purchase Agreement, including without
limitation, the representations and warranties on the Receivables made by NAL
pursuant to Section 3.02(b) of the Receivables Purchase Agreement and the
representations and warranties on the Receivables made by NAL pursuant to
Section 3.02(c) of the Receivables Purchase Agreement and the right of the
Seller to cause NAL to purchase the Receivables under certain circumstances; 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 1, 1997.
AUTORICS, INC.
by
-------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
Schedule of Receivables
[To Be Delivered at Closing]
I-1
<PAGE>
SCHEDULE II
Location of Receivable Files
Bankers Trust Company
Four Albany Street
New York, NY 10006
II-1
SALE AND SERVICING AGREEMENT
among
NAL AUTO TRUST 1997-2,
Issuer,
and
AUTORICS II, INC.,
Depositor,
and
NAL ACCEPTANCE CORPORATION,
Servicer
and
LSI FINANCIAL GROUP,
Backup Servicer
Dated as of June 1, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions
Page
SECTION 1.01. Definitions...................................................I-1
SECTION 1.02. Other Definitional Provisions................................I-18
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables....................................II-1
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of the Depositor with Respect
to the Receivables..........................................III-1
SECTION 3.02. Repurchase upon Breach......................................III-1
SECTION 3.03. Custody of Receivable Files.................................III-2
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer...........................................IV-1
SECTION 4.02. Collection and Allocation of Receivable Payments.............IV-1
SECTION 4.03. Realization upon Receivables.................................IV-2
SECTION 4.04. Insurance....................................................IV-2
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles.......IV-3
SECTION 4.06. Covenants of Servicer........................................IV-3
SECTION 4.07. Purchase of Receivables upon Breach..........................IV-3
SECTION 4.08. Servicing Fee................................................IV-4
SECTION 4.09. Servicer's Certificate.......................................IV-4
SECTION 4.10. Annual Statement as to Compliance; Notice of Default.........IV-4
SECTION 4.11. Annual Independent Certified Public Accountants' Report......IV-5
SECTION 4.12. Servicer Expenses............................................IV-5
SECTION 4.13. Appointment of Subservicer...................................IV-5
SECTION 4.14. Oversight of Servicing.......................................IV-6
SECTION 4.15. Duties of Backup Servicer....................................IV-7
SECTION 4.16. Backup Servicing Fee.........................................IV-7
i
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ARTICLE V
Trust Accounts; Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 5.01. Establishment of Trust Accounts...............................V-1
SECTION 5.02. Collections...................................................V-3
SECTION 5.03. Application of Collections....................................V-3
SECTION 5.04. Additional Deposits...........................................V-4
SECTION 5.05. Distributions.................................................V-4
SECTION 5.06. Reserve Account...............................................V-5
SECTION 5.07. Statements to Certificateholders and Noteholders..............V-7
SECTION 5.08. Transfer of the Notes.........................................V-8
SECTION 5.09. Dealer Reserve Account........................................V-8
SECTION 5.10. Backup Servicer Account.......................................V-9
SECTION 6.01. Representations of Depositor.................................VI-1
SECTION 6.02. Corporate Existence..........................................VI-2
SECTION 6.03. Liability of Depositor; Indemnities..........................VI-3
SECTION 6.04. Merger or Consolidation of, or Assumption of the Obligations
of, Depositor..............................................VI-4
SECTION 6.05. Limitation on Liability of Depositor and Others..............VI-4
SECTION 6.06. Depositor May Own Certificates or Notes......................VI-5
SECTION 6.07. Sale of Receivables..........................................VI-5
ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer.................................VII-1
SECTION 7.02. Indemnities of Servicer.....................................VII-2
SECTION 7.03. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer..............................................VII-3
SECTION 7.04. Limitation on Liability of Servicer and Others..............VII-4
SECTION 7.05. NAL Not To Resign as Servicer...............................VII-5
SECTION 7.06. Representations of Backup Servicer..........................VII-5
SECTION 7.07. Merger or Consolidation of, or Assumption of the Obligations
of, Backup Servicer.......................................VII-6
SECTION 7.08. Resignation as Backup Servicer..............................VII-6
ARTICLE VIII
Default
SECTION 8.01. Servicer Default...........................................VIII-1
SECTION 8.02. Appointment of Successor...................................VIII-2
SECTION 8.03. Notification to Noteholders and Certificateholders.........VIII-3
SECTION 8.04. Waiver of Past Defaults....................................VIII-4
ii
<PAGE>
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables.........................IX-1
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment....................................................X-1
SECTION 10.02. Protection of Title to Trust.................................X-2
SECTION 10.03. Notices......................................................X-4
SECTION 10.04. Assignment by the Depositor or the Servicer..................X-4
SECTION 10.05. Limitations on Rights of Others..............................X-4
SECTION 10.06. Severability.................................................X-4
SECTION 10.07. Separate Counterparts........................................X-5
SECTION 10.08. Headings.....................................................X-5
SECTION 10.09. Governing Law................................................X-5
SECTION 10.10. Assignment by Issuer.........................................X-5
SECTION 10.11. Nonpetition Covenants........................................X-5
SECTION 10.12. Limitation of Liability of Owner Trustee and Indenture
Trustee....................................................X-5
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 1, 1997, among NAL AUTO
TRUST 1997-2, a Delaware business trust (the "Issuer"), AUTORICS II, INC., a
Delaware corporation (the "Depositor"), NAL ACCEPTANCE CORPORATION, a Florida
corporation (the "Servicer") and LSI FINANCIAL GROUP, INC. (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.
I-1
<PAGE>
"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.
"Backup Servicer" means LSI Financial Group, a California corporation,
and its successors or assigns, when acting in its capacity as Backup Servicer
under this Agreement.
"Backup Servicer Account" means the account designated as such,
established and maintained pursuant to Section 5.10.
"Backup Servicing Fee" means the fee payable to the Backup Servicer for
services rendered during a Collection Period, determined pursuant Section 4.16.
"Backup Servicing Fee Rate" means 0.05% per annum.
"Certificate Balance" equals, as of the Closing Date, the Initial
Certificate Balance and, thereafter, will equal the Initial Certificate Balance
reduced by all amounts allocable to principal previously distributed to
Certificateholders.
"Certificate Distribution Account" has the meaning assigned
to such term in the Trust Agreement.
"Certificate Pool Factor" means, as of the close of business on the
last day of a Collection Period, a seven-digit decimal figure equal to the
Certificate Balance (after giving effect to any reductions therein to be made on
the immediately following Distribution Date) divided by the Initial Certificate
Balance. The Certificate Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Certificate Pool Factor will decline to reflect reductions in
the Certificate Balance.
"Certificateholders" or "Holders" (when used in the context of the
Holders of Certificates) has the meaning assigned to such term in the Trust
Agreement.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount for such date.
I-2
<PAGE>
"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, (i) 10% of the Principal Distribution Amount or (ii)
if a Loss Trigger Event has occurred (whether or not such Loss Trigger Event is
subsequently cured), zero; and with respect to any Distribution Date on or after
the Distribution Date on which the Notes are paid in full, 100% of the Principal
Distribution Amount for such Distribution Date (less, on the Distribution Date
on which the Notes are paid in full, the portion thereof payable as principal of
the Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the
close of a particular Distribution Date, the excess of the Certificateholders'
Quarterly Principal Distributable Amount and any outstanding Certificateholders'
Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Certificate
Distribution Account on such particular Distribution Date.
I-3
<PAGE>
"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).
"Closing Date" means June 27, 1997.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.01(a)(i).
"Collection Period" means the three calendar-month period ending on the
last day of the month preceding the month of each Distribution Date. Any amount
or balance stated as of the last day of a Collection Period shall give effect to
the following calculations as determined as of the close of business on such
last day: (1) all applications of collections, (2) all current and previous
Payaheads, (3) all applications of Payahead Balances and (4) all distributions
to be made on the following Distribution Date.
"Cumulative Realized Loss Ratio" means, as to any Collection Period,
the ratio of the aggregate Realized Losses in respect of Liquidated Receivables
since the Cutoff Date to the Original Pool Balance.
I-4
<PAGE>
"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 1,
1997, 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 1, 1997.
"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 7.5%.
"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
I-5
<PAGE>
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 as having been credited to a securities
account in the name of the Indenture Trustee 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 the Indenture Trustee or 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 Indenture Trustee
or such 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 and as having been
credited to a securities account in the name of the Indenture Trustee
(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;
I-6
<PAGE>
(b) with respect to any security issued by the U.S. Treasury,
the Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that is a book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations, the
following procedures, all in accordance with applicable law, including
applicable Federal regulations and Articles 8 and 9 of the UCC:
book-entry registration of such Trust Account Property to an
appropriate "Participant's Securities Account" (as defined in such
applicable Federal regulations) maintained with a Federal Reserve Bank
by a financial intermediary which is also a "Participant" 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 as having been credited to a securities
account in the name of the Indenture Trustee and indicating that such
custodian holds such Trust Account Property solely as agent for the
Indenture Trustee or its nominee or custodian; 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 Indenture Trustee or a 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 and as having been credited to a securities
account in the name of the Indenture Trustee; 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.
I-7
<PAGE>
"Depositor" means AUTORICS II, Inc., a Delaware corporation
and any successor in interest.
"Distribution Date" means March 15, June 15, September 15 and December
15 of each year or, if such day is not a Business Day, the immediately following
Business Day, commencing on September 15, 1997.
"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
the 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 the
Rating Agency, or if not rated by the Rating Agency, of A or better by Standard
& Poor's, A1 or better by Moody's and, if rated by the Rating Agency, 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;
I-8
<PAGE>
(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 the 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 the 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 the Rating Agency rates such
fund, from such agency in the highest investment category granted by
the Rating Agency so rating such fund (including funds for which the
Indenture Trustee or the Owner Trustee or any of their respective
Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository institution
or trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that
is a direct obligation of, or fully guaranteed by, the United States of
America or any agency or instrumentality thereof the obligations of
which are backed by the full faith and credit of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (b); and
(g) any other investment with respect to which the Issuer or
the Servicer has received written notification from the 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.
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"Excess Spread" shall have the meaning set forth in Section
5.06(a)(ii).
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Distribution Date" means the December, 2002
Distribution Date.
"Final Scheduled Maturity Date" means June 1, 2002.
"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 1, 1997, between the
Issuer and the Indenture Trustee.
"Indenture Trustee" means the Person acting as Indenture Trustee under
the Indenture, its successors in interest and any successor trustee under the
Indenture.
"Initial Certificate Balance" shall have the meaning set
forth in the Trust Agreement.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
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"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 1997-2.
"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.
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"Loss Trigger Event" means, as to any Collection Period, that the
Cumulative Realized Loss Ratio as of the last day of any calendar month
occurring during such Collection Period is greater than the percentage set forth
in the table below.
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Loss Trigger Event Table
Cumulative Realized
Month Loss Ratio
- ----- -------------------
July 1997 0.75%
August 1997 1.67%
September 1997 2.58%
October 1997 3.50%
November 1997 4.42%
December 1997 5.33%
January 1998 6.25%
February 1998 7.17%
March 1998 8.08%
April 1998 9.00%
May 1998 9.31%
June 1998 9.63%
July 1998 9.94%
August 1998 10.25%
September 1998 10.56%
October 1998 10.88%
November 1998 11.19%
December 1998 11.50%
January 1999 11.81%
February 1999 12.12%
March 1999 12.44%
April 1999 12.75%
May 1999 12.94%
June 1999 13.12%
July 1999 13.31%
August 1999 13.50%
September 1999 13.69%
October 1999 13.87%
November 1999 14.06%
December 1999 14.25%
January 2000 14.44%
February 2000 14.62%
March 2000 14.81%
April 2000 15.00%
and thereafter
"Moody's" means Moody's Investors Service, Inc., and any
successors in interest.
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"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 Final Scheduled Distribution Date" means the December, 2002
Distribution Date.
"Note 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 Outstanding
Amount of the Notes divided by the original Outstanding Amount of the Notes. The
Note Pool Factor 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
Notes.
"Noteholder" means the Person in whose name a Note is registered in
the Note Register.
"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 Note Rate.
"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 the 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 Notes at the Note
Rate on the Outstanding Amount of the Notes 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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<PAGE>
"Noteholders' Quarterly Principal Distributable Amount" means, with
respect to any Distribution Date for so long as the Notes are outstanding, (i)
90% or (ii) if a Loss Trigger Event has occurred (whether or not such Loss
Trigger Event is subsequently cured), 100% of the Principal Distribution Amount;
provided, however, that on the Distribution Date on which the Outstanding Amount
of the Notes is reduced to zero, the portion, if any, of the Principal
Distribution Amount that is not applied to the 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, on the Note 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 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.
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"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 the Rating Agency, as applicable.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means the Person acting as Owner Trustee under the
Trust Agreement, its successors in interest and any successor owner trustee
under the Trust Agreement.
"Pass-Through Rate" means 9.10% 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).
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"Precomputed Receivable" means any Receivable under which the portion
of a payment allocable to earned interest (which may be referred to in the
related Contract as an add-on finance charge) and the portion allocable to the
Amount Financed is determined according to the sum of periodic balances or the
sum of monthly balances or any equivalent method or are monthly actuarial
receivables.
"Principal Balance" means (a) with respect to any Precomputed
Receivable as of the close of business on the last day of a Collection Period,
the Amount Financed minus the sum of (i) that portion of all Scheduled Payments
due on or prior to such day allocable to principal using the actuarial or
constant yield method, (ii) any payment of the Purchase Amount with respect to
the Precomputed Receivable allocable to principal and (iii) any prepayment in
full applied to reduce the Principal Balance of the Precomputed Receivable and
(b) with respect to any Simple Interest Receivable as of the close of business
on the last day of a Collection Period, the Amount Financed minus the sum of (i)
the portion of all payments made by or on behalf of the related Obligor on or
prior to such day and allocable to principal using the Simple Interest Method
and (ii) any payment of the Purchase Amount with respect to the Simple Interest
Receivable allocable to principal.
"Principal Distribution Amount" means, with respect to any Distribution
Date, an amount equal to the sum of the following amounts with respect to the
related Collection Period (i) with respect to Precomputed Receivables, the
principal component of all monthly payments scheduled to be received with
respect to such Receivables and all prepayments in full of such Receivables
(including amounts with respect thereto withdrawn from the Payahead Account);
(ii) with respect to Simple Interest Receivables, that portion of all
collections on such Receivables allocable to principal; (iii) the Principal
Balance of all Precomputed Receivables that became Liquidated Receivables during
such Collection Period; (iv) all Liquidation Proceeds attributable to the
principal amount of Simple Interest Receivables that became Liquidated
Receivables during such Collection Period, plus all Realized Losses with respect
to such Liquidated Receivables; and (v) to the extent attributable to principal,
the Purchase Amount of each Receivable that was purchased by NAL or by the
Servicer during the related Collection Period.
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<PAGE>
"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 Fitch Investors Service, L.P. and its successors
in interest.
"Rating Agency Condition" means, with respect to any action, that the
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to the Rating Agency) prior notice thereof and that the Rating Agency
shall have notified the Depositor, the Servicer, the Owner Trustee and the
Indenture Trustee in writing that such action will not result in a reduction or
withdrawal of the then current rating of the Notes or the Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Contract listed on Schedule A (which Schedule
may be in the form of microfiche).
"Receivable Files" means the documents specified in Section 3.03.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement dated as of June 1, 1997, 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.
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<PAGE>
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 5.01.
"Reserve Account Initial Deposit" means $11,603,581.
"Scheduled Payment" on a Precomputed Receivable means that portion of
the payment required to be made by the Obligor during a calendar month
sufficient to amortize the Principal Balance under the actuarial method over the
term of the Receivable and to provide interest at the APR.
"Seller" means AUTORICS, Inc., a Delaware corporation, and any
successor in interest.
"Servicer" means NAL, in its capacity as the servicer of the
Receivables, and each successor to NAL (in the same capacity) pursuant to
Section 7.03 or 8.02.
"Servicer Default" means an event specified in Section 8.01.
"Servicer's Certificate" means an Officers' Certificate of the Servicer
delivered pursuant to Section 4.09, substantially in the form of Exhibit C.
"Servicing Fee" means the fee payable to the Servicer for services
rendered during a Collection Period, determined pursuant to Section 4.08.
"Servicing Fee Commencement Date" means the Distribution Date that is
the earlier of (i) the March 1998 Distribution Date, (ii) the Distribution Date
on which the amount in deposit in the Reserve Account equals the Specified
Reserve Account Balance or, if a Trigger Event has occurred and not terminated,
the Trigger Event Reserve Account Balance or (iii) the first Distribution Date
following the date on which NAL is replaced as Servicer pursuant to Section
8.02.
"Servicing Fee Rate" means 2.95% per annum.
"SFI" means Special Finance, Inc., a Florida corporation, and any
successor in interest.
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<PAGE>
"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, the greater of 12% of the Pool Balance on the close of
business on the last day of the related Collection Period and $2,700,149 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
$2,700,149. On such Distribution Date and thereafter the Specified Reserve
Account Balance shall equal 100% of the Pool Balance on the close of business on
the last day of the related Collection Period. In no event, however, shall the
Specified Reserve Account Balance exceed the aggregate outstanding principal
balance of the Notes and the Certificates.
"Standard & Poor's" means Standard & Poor's Rating Services, a division
of the McGraw-Hill Companies and any successor in interest.
"Total Distribution Amount" means, with respect to a Distribution Date,
the sum of the following amounts with respect to the related Collection Period:
(i) that portion of all collections on the Receivables (including amounts
withdrawn from the Payahead Account but excluding amounts deposited into the
Payahead Account) allocable to principal and interest; (ii) all Liquidation
Proceeds, and all Recoveries in respect of Liquidated Receivables that were
written off in prior Collection Periods; (iii) the Purchase Amount of each
Receivable that was purchased by NAL or by the Servicer during the related
Collection Period; and (iv) Investment Earnings.
"Trigger Event" means a Delinquency Trigger Event or a Loss Trigger
Event. A Trigger Event will be deemed to have occurred as to any Distribution
Date if either a Delinquency Trigger Event or a Loss Trigger Event has occurred
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with respect to the related 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 or a Loss Trigger Event shall have
occurred during the related Collection Period.
"Trigger Event Reserve Account Balance" means, with respect to any
Distribution Date after a Trigger Event has occurred and not terminated, the
greater of 18% of the Pool Balance on the close of business on the last day of
the related Collection Period and $2,700,149 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 $2,700,149. On such
Distribution Date and thereafter the Trigger Event 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 Trigger Event Reserve
Account Balance exceed the aggregate outstanding principal balance of the Notes
and the Certificates.
"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 1, 1997,
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.
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SECTION 1.02. Other Definitional Provisions.
(a) Capitalized terms used and not otherwise defined herein have the
meanings assigned to them in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Article, Section, Schedule
and Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
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<PAGE>
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
(i) Certificates with a Certificate Balance of $13,507,436 and (ii) Notes with a
principal balance of $121,500,000 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 the Receivables, any other right to realize upon
property securing a Receivable and any other interest of the Depositor
in such Financed Vehicles including the Depositor's right, title and
interest in the lien on the Financed Vehicles in the name of the
Depositor's agent, Autorics, Inc., NAL or SFI;
(3) any proceeds with respect to the Receivables from claims
on any Insurance Policies relating to Financed Vehicles or Obligors;
(4) proceeds of any recourse (but none of the obligations) to
Dealers on Receivables;
(5) any Financed Vehicle that shall have secured a Receivable
and shall have been acquired by or on behalf of the Seller, the
Depositor, the Servicer, or the Trust;
(6) the Receivable 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;
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<PAGE>
(8) the Trust Accounts; and
(9) the proceeds of any and all of the foregoing.
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<PAGE>
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of the Depositor with
Respect to the Receivables. The Depositor makes the following representations
and warranties with respect to the Receivables on which the Issuer relies in
acquiring the Receivables and issuing the Notes and Certificates. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the sale, transfer and
assignment of the Receivables to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) Title. It is the intention of the Depositor that the transfer and
assignment herein contemplated constitute a sale of the Receivables from the
Depositor to the Issuer and that the beneficial interest in and title to the
Receivables not be part of the debtor's estate in the event of the filing of a
bankruptcy petition by or against the Depositor under any bankruptcy law. No
Receivable has been sold, transferred, assigned or pledged by the Depositor to
any Person other than the Issuer. Immediately prior to the transfer and
assignment herein contemplated, the Depositor had good and marketable title to
each Receivable, free and clear of all Liens and rights of others and,
immediately upon the transfer thereof, the Issuer shall have good and marketable
title to each Receivable, free and clear of all Liens and rights of others; and
the transfer has been perfected under the UCC.
(b) All Filings Made. All filings (including UCC filings) necessary in
any jurisdiction to give (i) the Issuer a first perfected ownership interest in
the Receivables and (ii) the Indenture Trustee a first perfected security
interest in the Receivables shall have been made.
SECTION 3.02. Repurchase upon Breach. The Depositor, the Servicer, the
Backup Servicer and the Issuer, as the case may be, shall inform the other
parties to this Agreement, NAL and the Indenture Trustee promptly, in writing,
upon the discovery of any breach of the Depositor's representations and
warranties made pursuant to Section 3.01 or of NAL's representations and
warranties made pursuant to Section 3.02(c) of the Receivables Purchase
Agreement. Unless any such breach shall have been cured by the last day of the
Collection Period following the discovery thereof by NAL or the receipt by NAL
of written notice thereof from the Owner Trustee, the Indenture Trustee, the
Depositor, the Servicer or the Backup Servicer, the Depositor, the Issuer or the
Owner Trustee shall enforce the obligation of NAL under the Receivables Purchase
Agreement, to purchase as of such last day any Receivable with respect to which
such a breach had occurred if such breach has a material and adverse effect on
the interests of the Depositor or the Trust in and to such Receivable. In
consideration for the purchased Receivable, NAL shall remit the Purchase Amount
in the manner specified in Section 6.02 of the
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Receivables Purchase Agreement. Upon payment of such Purchase Amount, NAL shall
have all right, title and interest in such Purchased Receivable and all proceeds
thereof. Subject to the provisions of Section 6.03, the sole remedy of the
Issuer, the Owner Trustee, the Indenture Trustee, the Noteholders or the
Certificateholders with respect to a breach of representations and warranties
pursuant to Section 3.01 and the agreement contained in this Section shall be to
require NAL to purchase Receivables pursuant to this Section and the Receivables
Purchase Agreement.
SECTION 3.03. Custody of Receivable Files. (a) In connection with the
sale and transfer of the Receivables pursuant to this Agreement, the Issuer,
simultaneously with the execution and delivery of this Agreement, is entering
into the Custodial Agreement with the Custodian pursuant to which the Issuer
appoints the Custodian, and the Custodian accepts such appointment, to act as
the agent and bailee of the Issuer (initially), the Indenture Trustee (until all
amounts in respect of the Notes have been paid) and thereafter the Issuer, all
in accordance with the terms of the Custody Agreement, for all purposes of
Article 9 of the UCC, as Custodian of the following documents or instruments,
which are hereby constructively delivered to the Issuer or Indenture Trustee, as
pledgee of the Issuer, as the case may be, with respect to each Receivable:
(i) a list of Receivables in the form of Schedule A hereto,
identifying such Receivable together with the Computer Tape identifying
such Receivable and a completed checklist in the form of Exhibit D
hereto (it being expressly understood and agreed that the Custodian and
Indenture Trustee have no duties or responsibilities for checking or
verifying the accuracy or completeness of such checklist);
(ii) the fully executed original Receivable with manual
signatures and Dealer endorsements, together with executed assignments
thereof by NAL, the Seller and the Depositor in blank, which
assignments shall be substantially in the form of Exhibit E hereto;
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(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
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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
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with any powers of attorney and other documents reasonably necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder.
SECTION 4.02. Collection and Allocation of Receivable Payments. The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable automotive receivables that it services for itself or others. The
Servicer may grant extensions, rebates or adjustments on a Receivable or arrange
with the Obligor to extend or modify the payment schedule, which actions shall
not, for the purposes of this Agreement, modify the original due dates or
amounts of the Scheduled Payments on a Precomputed Receivable or the original
due dates or amounts of the originally scheduled payments of interest on Simple
Interest Receivables; provided, however, that if the Servicer extends the date
for final payment by the Obligor of any Receivable beyond the Final Scheduled
Maturity Date, it shall promptly repurchase the Receivable from the Issuer in
accordance with the terms of Section 4.07. Upon payment of such Purchase Amount,
NAL shall have all right, title and interest in such Purchased Receivable and
all proceeds thereof. 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
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its discretion that such repair and/or repossession will increase the
Liquidation Proceeds by an amount greater than the amount of such expenses. The
Servicer may not sell any Financed Vehicles to J.D. Byrider Systems, Inc. for
less than 100% of such Financed Vehicles' wholesale value, determined from the
"Black Book".
SECTION 4.04. Insurance. The Servicer shall, in accordance with its
customary servicing procedures, require that each Obligor shall have obtained
physical damage and theft insurance covering the Financed Vehicle as of the
execution of the Receivable. The Servicer shall notify each insurer providing a
"guaranteed auto protection" insurance policy with respect to the Receivables to
include the Indenture Trustee as an additional insured and its payee on each
such policy. Upon receipt of notification that the insurance required pursuant
to the terms of any Receivable is not in place, the Servicer shall obtain "dual
interest" insurance chargeable to the Obligor in accordance with its customary
servicing procedures.
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles.
The Servicer shall, in accordance with its customary servicing procedures, take
such steps as are necessary to maintain perfection of the security interest
created by each Receivable in the related Financed Vehicle. The Servicer is
hereby authorized to take such steps as are necessary to re-perfect such
security interest on behalf of the Issuer and the Indenture Trustee in the event
of the relocation of a Financed Vehicle or for any other reason.
SECTION 4.06. Covenants of Servicer. The Servicer shall not release the
Financed Vehicle securing any Receivable from the security interest granted by
such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or repossession, nor shall the Servicer impair the rights
of the Issuer, the Indenture Trustee, the Certificateholders or the Noteholders
in such Receivable, nor shall the Servicer (except in the case of an extension
permitted pursuant to Section 4.02) increase the number of scheduled payments
due under a Receivable.
Neither NAL nor any Affiliate thereof shall incur liabilities of any
kind to SunTrust Bank, South Florida, National Association ("SunTrust"), if the
total amount of such liabilities outstanding at any time exceeds $10,000 except
for liabilities with respect to which SunTrust has expressly agreed to
irrevocably and unconditionally waive all right of set-off or other claims that
it may have under contract, applicable law or otherwise with respect to any
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funds or monies SunTrust may hold from time to time pursuant to the Lock-box
Agreement dated November 27, 1995 between NAL, SunTrust and General Electric
Capital Corporation, or any other agreement related to the holding of any
proceeds of the Receivables or the other property conveyed pursuant to Section
2.01.
SECTION 4.07. Purchase of Receivables upon Breach. The Servicer or the
Owner Trustee shall inform the other party and the Indenture Trustee and the
Depositor promptly, in writing, upon the discovery of any breach pursuant to
Section 4.02, 4.05 or 4.06. Unless the breach shall have been cured by the last
day of the Collection Period following such discovery, the Servicer shall
purchase as of such last day any Receivable with respect to which such breach
had occurred if such breach has a material and adverse effect on the interests
of the Depositor or the Trust in and to such Receivable. If the Servicer takes
any action during any Collection Period pursuant to Section 4.02 that impairs
the rights of the Issuer, the Indenture Trustee, the Certificateholders or the
Noteholders in any Receivable or as otherwise provided in Section 4.02, the
Servicer shall purchase such Receivable as of the last day of such Collection
Period. In consideration of the purchase of any such Receivable pursuant to
either of the two preceding sentences, the Servicer shall remit the Purchase
Amount in the manner specified in Section 5.04. Subject to Section 7.02, the
sole remedy of the Issuer, the Owner Trustee, the Indenture Trustee, the
Certificateholders or the Noteholders with respect to a breach pursuant to
Section 4.02, 4.05 or 4.06 shall be to require the Servicer to purchase
Receivables pursuant to this Section. Upon payment of such Purchase Amount, NAL
shall have all right, title and interest in such Purchased Receivable and all
proceeds thereof. 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
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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 Agency, 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,
within 120 days after the end of each fiscal year of the Issuer (commencing with
the fiscal year 1998), 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 the Rating Agency. A copy of such certificate and the report referred to in
Section 4.11 may be obtained by any Certificateholder or Noteholder by a request
in writing to the Owner Trustee addressed to the Corporate Trust Office. Upon
the telephone request of the Owner Trustee, the Indenture Trustee will promptly
furnish the Owner Trustee with a list of Noteholders as of the date specified by
the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Backup Servicer and the Rating Agency, promptly after having
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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, 1998, 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. In the event such firm requires the Indenture Trustee to agree
to the procedures performed by such firm, the Servicer shall direct the
Indenture Trustee in writing to so agree; it being understood and agreed that
the Indenture Trustee will deliver such letter of agreement in conclusive
reliance upon the direction of the Servicer, and the Indenture Trustee makes no
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
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,
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including fees and disbursements of independent accountants, taxes imposed on
the Servicer and expenses incurred in connection with distributions and reports
to Certificateholders and Noteholders.
SECTION 4.13. Appointment of Subservicer. The Servicer may at any time
appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; and provided, further, that the
Servicer shall remain obligated and be liable to the Issuer, the Owner Trustee,
the Indenture Trustee, the Certificateholders and the Noteholders for the
servicing and administering of the Receivables in accordance with the provisions
hereof without diminution of such obligation and liability by virtue of the
appointment of such subservicer and to the same extent and under the same terms
and conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of the subservicer shall be as agreed between
the Servicer and its subservicer from time to time, and none of the Issuer, the
Owner Trustee, the Indenture Trustee, the Certificateholders or the Noteholders
shall have any responsibility therefor.
SECTION 4.14. Oversight of Servicing.
(a) Commencing on the date of execution of this Agreement and
continuing until the earlier of (i) the termination of the Trust created by the
Trust Agreement and (ii) the appointment of the Backup Servicer as Servicer
under this Agreement, the Servicer shall, on the last day of each calendar
month, deliver to the Backup Servicer in the Computer Tape format acceptable to
the 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.
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(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 to the Backup Servicer a Computer Tape containing detailed information
with respect to the Receivables for the related Collection Period. The Backup
Servicer shall determine that (i) the Servicer's Certificate appears on its face
to be complete and (ii) that amounts credited to and withdrawn from the Trust
Accounts and the balance of such Trust Accounts are the same as the amount set
forth in such Servicer's Certificate. To the extent verifiable using the
information contained in the Servicer's Certificate, the Backup Servicer shall
calculate and check that the calculations made by the Servicer in the Servicer's
Certificate are mathematically accurate.
(c) In the event of any discrepancies or exceptions noted by the Backup
Servicer in the Servicer's Certificate, the Backup Servicer shall, within three
Business Days of its receipt of the Servicer's Certificate, notify the Servicer
and the Indenture Trustee 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.
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(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.
SECTION 4.16. Backup Servicing Fee.
The Backup Servicing Fee shall equal the product of (a) one-fourth, (b)
the Backup Servicing Fee Rate and (c) the Pool Balance as of the first day of
the preceding Collection Period.
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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
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(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
Accounts shall be held by the Indenture Trustee for the benefit of the
beneficiaries of such accounts; provided, that on each Payment Determination
Date all interest and other investment income (net of losses and investment
expenses) on funds on deposit in the Trust Accounts (other than the Dealer
Reserve Account) shall be deposited into the Collection Account and shall be
deemed to constitute a portion of the Total Distribution Amount for the related
Distribution Date. Investment income (net of losses and investment expenses) on
the Dealer Reserve Account will be payable on each Distribution Date to the
Depositor. Other than as permitted by the 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
Owner 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 the
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
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exclusive custody and control of the Indenture Trustee, and
the Indenture Trustee shall have sole signature authority with
respect thereto;
(B) any Trust Account Property that constitutes
Physical Property shall be delivered to the Indenture Trustee
in accordance with paragraph (a) of the definition of
"Delivery" and shall be held, pending maturity or disposition,
solely by the Indenture Trustee or a financial intermediary
(as such term is defined in Section 8-313(4) of the UCC)
acting solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to
federal book-entry regulations shall be delivered in
accordance with paragraph (b) of the definition of "Delivery"
and shall be maintained by the Indenture Trustee, pending
maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in
such paragraph; and
(D) any Trust Account Property that is an
"uncertificated security" under Article VIII of the UCC and
that is not governed by clause (C) above shall be delivered to
the Indenture Trustee in accordance with paragraph (c) of the
definition of "Delivery" and shall be maintained by the
Indenture Trustee, pending maturity or disposition, through
continued registration of the Indenture Trustee's (or its
nominee's) ownership of such security.
(iii) The Servicer shall have the power, revocable by the
Indenture Trustee or by the Owner Trustee with the consent of the
Indenture Trustee, to instruct the Indenture Trustee to make
withdrawals and payments from the Trust Accounts for the purpose of
permitting the Servicer or the Owner Trustee to carry out its
respective duties hereunder or permitting the Indenture Trustee to
carry out its duties under the Indenture.
(d) The Servicer shall on or prior to each Distribution Date (and prior
to deposits to the Note Distribution Account or the Certificate Distribution
Account) transfer from the Collection Account to the Payahead Account an amount
equal to the increase in the Payahead Balance as described in Section 5.03
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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.
(e) The Servicer shall withdraw from the Collection Account any amounts
determined by the Servicer to have been remitted thereto in error.
SECTION 5.02. Collections. The Servicer shall remit within two Business
Days of receipt thereof to the Collection Account all payments by or on behalf
of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Liquidation Proceeds and Recoveries, both as collected
during the Collection Period.
SECTION 5.03. Application of Collections. All collections
for the Collection Period shall be applied by the Servicer as
follows:
With respect to each Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor shall be applied
first, in the case of Precomputed Receivables, to the Scheduled Payment
and, in the case of Simple Interest Receivables, to interest and
principal in accordance with the Simple Interest Method. With respect
to Precomputed Receivables, any remaining excess shall be added to the
Payahead Balance, and shall be applied to prepay the Precomputed
Receivable (in reduction of the Payahead Balance as evidenced by a
transfer of the net amount of such reduction from the Payahead Account
to the Collection Account), but only if the sum of such excess and the
previous Payahead Balance shall be sufficient to prepay the Receivable
in full. Otherwise, any such remaining excess payments shall constitute
a Payahead (as shall the accumulated amount of such excess on the
Receivables as of the Cut-off Date) and shall increase the Payahead
Balance. With respect to a Precomputed Receivable the related payment
on behalf of which is less than the Scheduled Payment, amounts (to the
extent of the related Payahead Balance) in respect of such deficiency
will be transferred from the Payahead Account to the Collection Account
in accordance with Section 5.01(d).
SECTION 5.04. Additional Deposits. The Servicer and the Depositor shall
deposit or cause to be deposited in the Collection Account the aggregate
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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) (A) to the Backup Servicer, the Backup Servicing Fee
(and all unpaid Backup Servicing Fees from prior Collection Periods) and
(B) on and after the Servicing Fee Commencement Date, 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 Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i) and
(ii), the Certificateholders' Interest Distributable Amount;
(iv) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (i)
through (iii), the Noteholders' Principal 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;
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(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; and
(vii) 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 Backup Servicing Fee, the Servicing Fee (on and after
the Servicing Fee Commencement Date), the Noteholders' Interest
Distributable Amount, the Certificateholders' Interest Distributable
Amount, the Noteholders' Principal Distributable Amount and the
Certificateholders' Principal 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
or (ii) the amount on deposit in the Reserve Account, after any
withdrawals therefrom on or prior to such Distribution Date, is less
than the Trigger Event Reserve Account Balance and 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) the
Excess Spread, if any, for such Distribution Date until the amount on
deposit in the Reserve Account equals the Trigger Event Reserve Account
Balance.
(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
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thereto or withdrawals therefrom on such Distribution Date) is greater than the
Specified Reserve Account Balance for such Distribution Date, the Servicer shall
instruct the Indenture Trustee to distribute the amount of such excess to the
Depositor. If 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 Trigger Event Reserve Account Balance for such Distribution
Date, the Servicer shall instruct the Indenture Trustee to distribute the amount
of such excess to the Depositor.
(c) In the event that the Noteholders' Interest Distributable Amount
for a Distribution Date exceeds the amount deposited into the Note Distribution
Account pursuant to Section 5.05(b)(ii) 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' Interest Distributable
Amount for a Distribution Date exceeds the amount deposited into the Certificate
Distribution Account pursuant to Section 5.05(b)(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 after giving effect to paragraph (c) above, and
deposit such amount into the Certificate Distribution Account on such
Distribution Date.
(e) In the event that the Noteholders' Principal Distributable Amount
for a Distribution Date exceeds the amount deposited into the Note Distribution
Account pursuant to Section 5.05(b)(iv) 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 paragraphs (c) and (d) above, and
deposit such amount into the Note Distribution Account on such Distribution
Date.
(f) In the event that the Certificateholders' Principal Distributable
Amount for a Distribution Date exceeds the amount deposited into the Certificate
Distribution Account pursuant to Section 5.05(b)(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
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of funds available therein after giving effect to paragraphs (c), (d) and (e)
above, and deposit such amount into the Certificate Distribution Account on such
Distribution Date.
(g) 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.
(h) Upon any distribution to the Depositor of amounts from the Reserve
Account 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 the Rating Agency and each Paying Agent) for the
Indenture Trustee to forward to each Noteholder of record as of the most recent
Record Date and to the Owner Trustee (with a copy to each Paying Agent) for the
Owner Trustee to forward to each Certificateholder of record as of the most
recent Record Date a statement substantially in the form of Exhibits A and B,
respectively, setting forth at least the following information as to the Notes
and the Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal
allocable to the Notes and to the Certificates;
(ii) the amount of such distribution allocable to interest
allocable to the 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 the Notes, the Note Pool
Factor, 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,
and the amount of the Backup Servicing Fee paid to the Backup Servicer,
each with respect to the related Collection Period;
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(vi) the amount of aggregate Realized Losses, if any, with
respect to the related Collection Period;
(vii) the aggregate Principal Balance of Receivables that are
30 to 59 days, 60 to 89 days and 90 days or more delinquent;
(viii) the Average Three Month Delinquency Ratio and the
Cumulative Realized Loss Ratio 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, after giving effect to payments on such
Distribution Date, and the changes in such amounts from the preceding
statement;
(x) the aggregate Purchase Amounts for Receivables, if any,
that were purchased by NAL or the Servicer during the related Collection
Period;
(xi) the balance, if any, of the Reserve Account after giving
effect to deposits and withdrawals to be made on such Distribution Date,
and the change in such balance from the preceding statement; and
(xii) the aggregate Payahead Balance.
Each amount set forth under clauses (i), (ii), (v) and (ix) above shall
be expressed as a dollar amount per $1,000 of original principal balance of a
Certificate or Note, as applicable.
(b) On or prior to the 15th day of each month that is not a
month in which a Distribution Date occurs and on or prior to each
Distribution Date, the Indenture Trustee shall forward to each
Noteholder of record and the Owner Trustee shall forward to each
Certificateholder of record the Servicer's Certificate provided to it
pursuant to Section 4.09 (except that on any Distribution Date
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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 $106,822.93 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).
SECTION 5.10. Backup Servicer Account. (a) The Servicer, for the
benefit of the Backup Servicer, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account (the "Backup Servicer Account")
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Backup Servicer. The Backup Servicer Account shall
not be an asset of the Trust.
(b) Funds on deposit in the Backup Servicer Account shall be invested
at the direction of the Servicer by the Indenture Trustee in Eligible
Investments described in clause (d) of the definition thereof that will mature
not later than 30 days.
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(c) Funds on deposit in the Backup Servicer Account shall be used
solely to reimburse the Backup Servicer for its expenses relating to its
appointment as successor Servicer pursuant to Section 8.01 or 8.02. Amounts on
deposit in the Backup Servicer Account will not be available to make payments on
the Securities or for any other purpose other than that set forth in this clause
(d).
(d) Following the payment in full of (i) all amounts described under
subsection (d) hereof and (ii) 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 Backup Servicer Account shall be distributed to the Depositor.
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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
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in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); or violate any law or, to the best of the
Depositor's knowledge, any order, rule or regulation applicable to the Depositor
of any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the Depositor or
its properties.
(f) No Proceedings. There are no proceedings or investigations pending,
or to the Depositor's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (i) asserting the invalidity
of this Agreement, the Receivables Purchase Agreement, the Indenture or any of
the other Basic Documents, the Notes or the Certificates, (ii) seeking to
prevent the issuance of the Notes or the Certificates or the consummation of any
of the transactions contemplated by this Agreement, the Receivables Purchase
Agreement, the Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement, the Receivables Purchase Agreement, the
Indenture, any of the other Basic Documents, the Notes or the Certificates or
(iv) which might adversely affect the federal or state income tax attributes of
the Notes or the Certificates.
(g) Principal Place of Business. The principal place of business and
chief executive office of the Depositor are located at the place set forth in
Section 10.03(a) and such location has not changed since the date the Depositor
was incorporated.
(h) Use of Names. The legal name of the Depositor is the name used by
it in this Agreement and the 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. The Depositor is solvent and will not become insolvent
after giving effect to the transactions contemplated in this Agreement; the
Depositor is paying its debts, if any, as they become due; the Depositor, after
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giving effect to the transactions contemplated in this Agreement, will have
adequate capital to conduct its business.
SECTION 6.02. Corporate Existence. (a) During the term of this
Agreement, the Depositor will keep in full force and effect its existence,
rights and franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
(b) During the term of this Agreement, the Depositor shall observe the
applicable legal requirements for the recognition of the Depositor as a legal
entity separate and apart from its Affiliates, including the following:
(i) the Depositor shall maintain corporate records and
books of account separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the
Depositor shall not commingle its assets and funds with those of its
Affiliates;
(iii) the Depositor shall hold such appropriate meetings of
its board of directors as are necessary to authorize all the Depositor's
corporate actions required by law to be authorized by the board of
directors, shall keep minutes of such meetings and of meetings of its
stockholder(s) and observe all other customary corporate formalities (and
any successor Depositor not a corporation shall observe similar
procedures in accordance with its governing documents and applicable
law);
(iv) the Depositor shall at all times hold itself out to the
public under the Depositor's own name as a legal entity separate and
distinct from its Affiliates;
(v) all transactions and dealings between the Depositor and
its Affiliates will be conducted on an arm's-length basis;
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(vi) except as provided for by the Basic Documents, the
Depositor shall not utilize NAL as its agent and shall not agree to act
as the agent of any other Person; and
(vii) the Depositor shall at all times have at least one
director that is an "Independent Director" as such term is defined in the
certificate of incorporation.
SECTION 6.03. Liability of Depositor; Indemnities. (a) The Depositor
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Depositor under this Agreement.
(b) The Depositor shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Certificateholders and the
Noteholders and any of the officers, directors, employees and agents of the
Issuer, the Owner Trustee and the Indenture Trustee from and against any loss,
liability or expense incurred by reason of (i) the Depositor's willful
misfeasance, bad faith or negligence in the performance of its duties under this
Agreement or by reason of reckless disregard of its obligations and duties under
this Agreement and (ii) the Depositor's or the Issuer's violation of federal or
state securities laws in connection with the offering and sale of the Notes and
the Certificates.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee and the termination of
this Agreement and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Depositor shall have made any indemnity payments
pursuant to this Section and the Person to or on behalf of whom such payments
are made thereafter shall collect any of such amounts from others, such Person
shall promptly repay such amounts to the Depositor, without interest.
SECTION 6.04. Merger or Consolidation of, or Assumption of the
Obligations of, Depositor. Any Person (a) into which the Depositor may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Depositor shall be a party or (c) which may succeed to the properties and
assets of the Depositor substantially as a whole, which Person in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Depositor under this Agreement, shall be the successor to the Depositor
hereunder without the execution or filing of any document or any further act by
any of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 3.01 shall have been breached and no Servicer Default, and
no event that, after notice or lapse of time, or both, would become a Servicer
Default shall have occurred and be continuing, (ii) the Depositor shall have
delivered to the Owner Trustee and the Indenture Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, (iii) the Rating Agency
Condition shall have been satisfied with respect to such transaction and (iv)
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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.
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.
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SECTION 6.07. Sale of Receivables. The Depositor shall take no actions
inconsistent with the Trust's ownership of the Receivables. The Depositor shall
promptly respond to any third-party inquiries regarding the Receivables by
indicating that ownership thereof has been transferred to the Trust.
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ARTICLE VII
The Servicer; Backup Servicer
SECTION 7.01. Representations of Servicer. The Servicer makes the
following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the state
of its incorporation, with the corporate power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the corporate power, authority and legal right to acquire, own, sell and
service the Receivables.
(b) Due Qualification. The Servicer is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Servicer has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; and
the execution, delivery and performance of this Agreement have been duly
authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer enforceable in accordance with its terms.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof shall not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement or other
instrument to which the Servicer is a party or by which it is bound; or result
in the creation or imposition of any Lien upon any of its properties pursuant to
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the terms of any such indenture, agreement or other instrument (other than this
Agreement); or violate any law or any order, rule or regulation applicable to
the Servicer of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Servicer or its properties.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the Servicer's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties: (i) asserting the invalidity
of this Agreement, the Receivables Purchase Agreement, the Indenture, any of the
other Basic Documents, the Notes or the Certificates, (ii) seeking to prevent
the issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Receivables Purchase Agreement,
the Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement, the Receivables Purchase Agreement, the
Indenture, any of the other Basic Documents, the Notes or the Certificates or
(iv) relating to the Servicer and which might adversely affect the federal or
state income tax attributes of the Notes or the Certificates.
(g) No Insolvent Obligors. As of the Cutoff Date, no Obligor on a
Receivable is shown on the Receivable Files as the subject of a bankruptcy
proceeding.
SECTION 7.02. Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement:
(a) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Noteholders,
the Certificateholders, and the Depositor, their respective officers, directors,
employees and agents from and against any and all costs, expenses, losses,
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damages, claims and liabilities, arising out of or resulting from the use,
ownership or operation by the Servicer or any Affiliate thereof of a Financed
Vehicle.
(b) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Backup Servicer and the Depositor
and their respective officers, directors, employees and agents from and against
any taxes that may at any time be asserted against any such Person with respect
to the transactions contemplated herein and in the Basic Documents, including
any sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but, in the case of the Issuer, not including any
taxes asserted with respect to, and as of the date of, the sale of the
Receivables to the Issuer or the issuance and original sale of the Certificates
and the Notes, or asserted with respect to ownership of the Receivables, or
federal or other income taxes arising out of distributions on or transfers of
the Certificates or the Notes) and costs and expenses in defending against the
same.
(c) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Depositor,
the Certificateholders and the Noteholders and their respective officers,
directors, employees and agents from and against any and all costs, expenses,
losses, claims, damages and liabilities to the extent that such cost, expense,
loss, claim, damage or liability arose out of, or was imposed upon any such
Person through, the negligence, willful misfeasance or bad faith of the Servicer
in the performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
(d) The Servicer shall indemnify, defend and hold harmless the Owner
Trustee and the Indenture Trustee and their respective officers, directors,
employees and agents from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties herein and in the Trust
Agreement contained, in the case of the Owner Trustee, and in the Indenture
contained, in the case of the Indenture Trustee, except to the extent that such
cost, expense, loss, claim, damage or liability: (i) in the case of the Owner
Trustee, shall be due to the willful misfeasance, bad faith or negligence
(except for errors in judgment) of the Owner Trustee or, in the case of the
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Indenture Trustee, shall be due to the willful misfeasance, bad faith or
negligence (except for errors in judgment) of the Indenture Trustee; or (ii) in
the case of the Owner Trustee, shall arise from the breach by the Owner Trustee
of any of its representations or warranties set forth in Section 7.03 of the
Trust Agreement.
(e) The Servicer shall pay any and all taxes levied or assessed upon
all or any part of the Owner Trust Estate.
For purposes of this Section, in the event of the termination of the
rights and obligations of NAL (or any successor thereto pursuant to Section
7.03) as Servicer pursuant to Section 8.01, or a resignation by such Servicer
pursuant to this Agreement, such Servicer shall be deemed to be the Servicer
pending appointment of a successor Servicer (other than the Indenture Trustee)
pursuant to Section 8.02.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement and shall include reasonable fees and expenses of counsel and expenses
of litigation. If the Servicer shall have made any indemnity payments pursuant
to this Section and the Person to or on behalf of whom such payments are made
thereafter collects any of such amounts from others, such Person shall promptly
repay such amounts to the Servicer, without interest.
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (a) into which the Servicer may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Servicer shall be a party, (c) which may succeed to the properties and
assets of the Servicer substantially as a whole or (d) with respect to the
Servicer's obligations hereunder, which is a corporation 50% or more of the
voting stock of which is owned, directly or indirectly, by NAL, which Person
executed an agreement of assumption to perform every obligation of the Servicer
hereunder, shall be the successor to the Servicer under this Agreement without
further act on the part of any of the parties to this Agreement; provided,
however, that (i) immediately after giving effect to such transaction, no
Servicer Default and no event which, after notice or lapse of time, or both,
would become a Servicer Default shall have occurred and be continuing, (ii) the
Servicer shall have delivered to the Owner Trustee and the Indenture Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions precedent provided for in this Agreement
relating to such transaction have been complied with, (iii) the Rating Agency
Condition shall have been satisfied with respect to such transaction, (iv)
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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
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Documents and the rights and duties of the parties to this Agreement and the
Basic Documents and the interests of the Certificateholders under the Trust
Agreement and the Noteholders under the Indenture.
SECTION 7.05. NAL Not To Resign as Servicer. Subject to the provisions
of Section 7.03, NAL shall not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement except upon a determination that
the performance of its duties under this Agreement shall no longer be
permissible under applicable law. Notice of any such determination permitting
the resignation of NAL shall be communicated to the Owner Trustee and the
Indenture Trustee at the earliest practicable time (and, if such communication
is not in writing, shall be confirmed in writing at the earliest practicable
time) and any such determination shall be evidenced by an Opinion of Counsel to
such effect delivered to the Owner Trustee and the Indenture Trustee
concurrently with or promptly after such notice. No such resignation shall
become effective until the Indenture Trustee or a successor Servicer shall (i)
have assumed the responsibilities and obligations of NAL in accordance with
Section 8.02 and (ii) have become the Administrator under the Administration
Agreement in accordance with Section 8 of such Agreement.
SECTION 7.06. Representations of Backup Servicer. The Backup Servicer
makes the following representations on which the Issuer relies in acquiring the
Receivables and issuing the Notes and the Certificates. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date and shall survive the sale of the Receivables to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Backup Servicer is duly
organized and validly existing as a California 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
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or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Backup Servicer has the corporate power
and authority to execute and deliver this Agreement and to carry out its terms;
and the execution, delivery and performance of this Agreement have been duly
authorized by the Backup Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Backup Servicer enforceable in accordance with its
terms.
SECTION 7.07. Merger or Consolidation of, or Assumption of the
Obligations of, Backup Servicer. Any Person (a) into which the Backup Servicer
may be merged or consolidated, (b) which may result from any merger or
consolidation to which the Backup Servicer shall be a party, (c) which may
succeed to the properties and assets of the Backup Servicer substantially as a
whole or (d) with respect to the Backup Servicer's obligations hereunder, shall
be the successor to the Backup Servicer under this Agreement without further act
on the part of any of the parties to this Agreement.
SECTION 7.08. Resignation as Backup Servicer. Subject to the provisions
of Section 7.07, the Backup Servicer may resign or the Servicer may remove the
Backup Servicer upon 30 days' written notice to the Indenture Trustee, the Owner
Trustee, the Backup Servicer (in the case of a removal of the Backup Servicer)
and the Servicer (in the case of a resignation of the Backup Servicer). Upon
such resignation or removal, the Servicer shall appoint a successor Backup
Servicer; provided, however, that no such resignation or removal shall become
effective unless and until a successor reasonably acceptable to the Servicer 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
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appointed within 30 days after such a resignation, the Backup Servicer may
petition a court for its removal.
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ARTICLE VIII
Default
SECTION 8.01. Servicer Default. If any one of the following events
(a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deliver or cause to be delivered to
the Owner Trustee or the Indenture Trustee, as applicable, for deposit in any of
the Trust Accounts or the Certificate Distribution Account any required payment
or to direct the Owner Trustee or the Indenture Trustee, as applicable, to make
any required distributions therefrom, which failure continues unremedied for a
period of five Business Days after discovery of such failure by an officer of
the Servicer, or after the date on which written notice of such failure shall
have been given (A) to the Servicer by the Owner Trustee or the Indenture
Trustee, as applicable, or (B) to the Servicer, and to the Owner Trustee and the
Indenture Trustee, as applicable, by the Holders of Notes, evidencing not less
than 25% of the Outstanding Amount of the Notes or, if the Notes have been paid
in full, by Holders of Certificates evidencing not less than 25% of the
outstanding Certificate Balance; or
(b) failure by the Servicer duly to observe or to perform in any
material respect any other covenants or agreements of the Servicer set forth in
this Agreement or any other Basic Document, which failure shall (i) materially
and adversely affect the rights of Certificateholders or Noteholders and (ii)
continue unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
(A) to the Servicer by the Owner Trustee or the Indenture Trustee or (B) to the
Servicer, and to the Owner Trustee and the Indenture Trustee by the Holders of
Notes or Certificates, as applicable, evidencing not less than 25% of the
Outstanding Amount of the Notes or 25% of the outstanding Certificate Balance;
or
(c) the occurrence of an Insolvency Event with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Indenture Trustee or the Holders of Notes evidencing
not less than 25% of the Outstanding Amount of the Notes, by notice then given
in writing to the Servicer (and to the Indenture Trustee and the Owner Trustee
if given by the Noteholders) may terminate all the rights and obligations (other
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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 Backup Servicer 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, without
limitation, attorneys' fees and any expenses relating to the conversion of
computer files) incurred in connection with transferring the Receivable Files to
the successor Servicer and amending this Agreement to reflect such succession as
Servicer pursuant to this Section shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses. Upon
receipt of notice of the occurrence of a Servicer Default, the Owner Trustee
shall give notice thereof to the 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
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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 or resignation hereunder, the Backup
Servicer shall become the successor Servicer, and the Backup Servicer shall
accept such 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. In
such event, 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 to act as
Servicer, the Backup Servicer will appoint another successor Servicer to act as
Servicer, the effectiveness of which appointment shall be subject to
confirmation from the Rating Agency that such appointment will not result in the
withdrawal or downgrade of the then current ratings of the Notes and the
Certificates. In the event that such successor Servicer has not been appointed
at the time that the predecessor Servicer has ceased to act as Servicer in
accordance with this Section, the Backup Servicer shall 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. As compensation for acting as successor Servicer, the Backup Servicer
or other successor Servicer shall be entitled to receive the Servicing Fee.
(b) Promptly upon its appointment as successor Servicer, the Backup
Servicer shall appoint a successor Backup Servicer that shall (after
confirmation by the Rating Agency that such appointment will not result in the
withdrawal or downgrade of the then current ratings of the Notes or the
Certificates) be the successor in all respects to the predecessor Backup
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Servicer and shall be subject to all the responsibilities, duties and
liabilities arising thereafter relating thereto placed on the predecessor Backup
Servicer and shall be entitled to the Backup Servicing Fee and all the rights
granted to the predecessor Backup Servicer by the terms and provisions of this
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 the 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
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(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 Certificate Distribution Account, any portion of
the Certificateholders' Interest Distributable Amount not otherwise
deposited into the Certificate Distribution Account on such Distribution
Date;
(iii) to the Note Distribution Account, the Outstanding Amount
of the Notes (after giving effect to the reduction in the Outstanding
Amount of the Notes to result from the deposits made in the Note
Distribution Account on such Distribution Date and on prior Distribution
Dates); 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 and on 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 IX 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.
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ARTICLE X
Miscellaneous
SECTION 10.01. Amendment. This Agreement may be amended by the
Depositor, the Servicer and the Issuer, with the consent of the Indenture
Trustee, but without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Owner Trustee and the Indenture
Trustee, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor,
the Servicer and the Issuer, with the consent of the Indenture Trustee, the
consent of the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes and the consent of the Holders (as defined in
the Trust Agreement) of outstanding Certificates evidencing not less than a
majority of the outstanding Certificate Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions that shall be
required to be made for the benefit of the Noteholders or the Certificateholders
or (b) reduce the aforesaid percentage of the Outstanding Amount of the Notes
and the Certificate Balance, the Holders of which are required to consent to any
such amendment, without the consent of the Holders of all the outstanding Notes
and the Holders (as defined in the Trust Agreement) of all the outstanding
Certificates.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and the
Rating Agency.
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It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
10.02(i)(1). The Owner Trustee and the Indenture Trustee may, but shall not be
obligated to, enter into any such amendment which affects the Owner Trustee's or
the Indenture Trustee's, as applicable, own rights, duties or immunities under
this Agreement or otherwise. No amendment to this Agreement will have any effect
on the rights and obligations of the Backup Servicer hereunder unless the Backup
Servicer shall consent thereto in writing.
SECTION 10.02. Protection of Title to Trust. (a) The Depositor shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Issuer and of the Indenture Trustee in the Receivables and in the proceeds
thereof. The Depositor shall deliver (or cause to be delivered) to the Owner
Trustee and the Indenture Trustee file-stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following such
filing.
(b) Neither the Depositor nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of (section)
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
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of any new financing statement and shall promptly file any such amendment or new
financing statement. The Servicer shall at all times maintain each office from
which it shall service Receivables, and its principal executive office, within
the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
and the Payahead Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables, the Servicer's
master computer records (including any backup archives) that refer to a
Receivable shall indicate clearly the interest of the Issuer and the Indenture
Trustee in such Receivable and that such Receivable is owned by the Issuer and
has been pledged to the Indenture Trustee. Indication of the Issuer's and the
Indenture Trustee's interest in a Receivable shall be deleted from or modified
on the Servicer's computer systems when, and only when, the related Receivable
shall have been paid in full or repurchased.
(f) If at any time the Depositor or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Issuer and has been pledged to the Indenture Trustee.
(g) The Servicer shall permit the Indenture Trustee, the Backup
Servicer and their agents at any time during normal business hours to inspect,
audit and make copies of and abstracts from the Servicer's records regarding any
Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee or to
the Indenture Trustee, within five Business Days, a list of all Receivables (by
contract number and name of Obligor) then held as part of the Trust, together
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with a reconciliation of such list to the Schedule of Receivables and to each of
the Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee:
(1) promptly after the execution and delivery of this
Agreement and of each amendment hereto, an Opinion of Counsel stating
that, in the opinion of such counsel, either (A) all financing
statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the
Owner Trustee and the Indenture Trustee in the Receivables, and
reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (B) no such action shall be
necessary to preserve and protect such interest; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Closing Date, an Opinion of Counsel, dated as of a date
during such 90-day period, stating that, in the opinion of such
counsel, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and the
Indenture Trustee in the Receivables, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details
are given, or (B) no such action shall be necessary to preserve and
protect such interest.
Each Opinion of Counsel referred to in clause (1) or (2) above shall specify any
action necessary (as of the date of such opinion) to be taken in the following
year to preserve and protect such interest.
SECTION 10.03. Notices. All demands, notices, communications and
instructions upon or to the Depositor, the Servicer, the Owner Trustee, the
Indenture Trustee or the 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
X-4
<PAGE>
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 LaVigne, (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, at the Corporate Trust Office, (e) in the case of the Backup Servicer,
to LSI Financial Group, 17500 Chenal Parkway, Arksys Plaza, Suite 200, Little
Rock, Arkansas 72211: Attention: Thomas Rose, (f) in the case of the Rating
Agency, to Fitch Investors Service, L.P., One State Street Plaza, New York, New
York 10004; 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 Backup
Servicer, the Issuer, the Owner Trustee, the Certificateholders, the Indenture
Trustee and the Noteholders, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 10.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 10.07. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
X-5
<PAGE>
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
X-6
<PAGE>
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer. For all purposes of this Agreement, in the performance of its
duties or obligations hereunder or in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by Bankers Trust Company, not in its individual
capacity but solely as Indenture Trustee and in no event shall Bankers Trust
Company have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
X-7
<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 1997-2
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Owner Trustee on behalf of the
Trust
By:
-------------------------------
Name:
Title:
AUTORICS II, Inc.,
Depositor
By:
-------------------------------
Name: Robert J. Carlson
Title: Vice President
NAL ACCEPTANCE CORPORATION, Servicer
By:
-------------------------------
Name: Robert J. Carlson
Title: Vice President
LSI FINANCIAL GROUP, Backup
Servicer
By:
-------------------------------
Name: Thomas Rose
Title: Senior Vice President
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:
X-8
<PAGE>
SCHEDULE A
Schedule of Receivables
<PAGE>
EXHIBIT A
NAL Acceptance Corporation
NAL Auto Trust 1997-2 Distribution Date Statement to Noteholders
- --------------------------------------------------------------------------------
Principal Distribution Amount
($ per $1,000 original principal amount)
Interest Distribution Amount
($ per $1,000 original principal amount)
Pool Balance
Note Balance
Note Pool Factor
Certificate Balance
Servicing Fee
Servicing Fee Per $1,000 original principal amount
Backup Servicing Fee
Backup 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
A-1
<PAGE>
Average Three Month Delinquency Ratio
Cumulative Realized Loss Ratio
Delinquency Trigger Event [YES] [NO]
Loss Trigger Event [YES] [NO]
Delinquent Receivables
30 days
60 days
90 days
A-2
<PAGE>
EXHIBIT B
NAL Acceptance Corporation
NAL Auto Trust 1997-2 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
Note Pool Factor
Certificate Balance
Certificate Pool Factor
Servicing Fee
Servicing Fee Per $1,000 Initial Certificate Balance
Backup Servicing Fee
Backup 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
B-1
<PAGE>
Reserve Account Balance
Payahead Balance
Average Three Month Delinquency Ratio
Cumulative Realized Loss Ratio
Delinquency 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 1997-2 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
Notes ($_________ per $1,000 original principal amount)
Certificates ($____ per $1,000 original principal
amount)
Interest Distribution Amount
Notes ($_________ per $1,000 original principal amount)
Certificates ($_________ per $1,000 original principal
amount)
Total Distributable Amount
Notes ($_________ 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(1)............................................ $
Backup Servicing Fee(1) .................................... $
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.............................................. $
IV. Pool Balance and Portfolio Information
Beginning End of
............................. of Period Period
--------- ------
Pool Balance......................... $ $
Note Balance*........................ $ $
Note Pool Factor* ...................
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.......................... $
- --------
(1) On or after the Servicing Fee Commencement Date.
C-2
<PAGE>
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...............................
VII. Original Deal Parameter Inputs
<TABLE>
<S> <C>
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...................................... $
</TABLE>
C-3
<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
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
D-1
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
GE Approval
===================================================================================================================================
</TABLE>
- ------------------------------ -----------------------------------
Signature - Funder Date
- ------------------------------ -----------------------------------
Signature - Auditor Date
D-2
<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) Note 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>
D-3
<PAGE>
- ------------------------------ -----------------------------------
Signature - Funder Date
- ------------------------------ -----------------------------------
Signature - Auditor Date
D-4
<PAGE>
EXHIBIT E
Form of Assignment
Reference is made to the Sale and Servicing Agreement dated as of June
1, 1997 (the "Sale and Servicing Agreement") among NAL Auto Trust 1997-2,
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 the 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 Receivable Files;
(7) all right, title and interest of [Autorics, Inc.] [Autorics II]
under the Receivables Purchase Agreement, including, without limitation, the
E-1
<PAGE>
right of [Autorics, Inc.] [Autorics II] to cause NAL to purchase Receivables
under certain circumstances;
(8) the Trust Accounts; and
(9) the proceeds of any and all of the foregoing.
[NAL] [AUTORICS, INC.] [AUTORICS II, INC.]
By:
----------------------------------------
Name:
Title:
E-2
===============================================================================
INDENTURE
between
NAL AUTO TRUST 1997-2,
as Issuer
and
BANKERS TRUST COMPANY,
as Indenture Trustee
Dated as of June 1, 1997
===============================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions..................................................I-2
SECTION 1.02. Rules of Construction........................................I-9
ARTICLE II
The Notes
SECTION 2.01. Form........................................................II-1
SECTION 2.02. Execution, Authentication and Delivery......................II-1
SECTION 2.03. Temporary Notes.............................................II-1
SECTION 2.04. Limitations on Transfer of the Notes........................II-2
SECTION 2.05. Registration; Registration of Transfer
and Exchange............................................II-4
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen
Notes...................................................II-7
SECTION 2.07. Persons Deemed Owner........................................II-8
SECTION 2.08. Payment of Principal and Interest;
Defaulted Interest......................................II-8
SECTION 2.09. Cancellation................................................II-9
SECTION 2.10. Tax Treatment...............................................II-9
ARTICLE III
Covenants
SECTION 3.01. Payment of Principal and Interest..........................III-1
SECTION 3.02. Maintenance of Office or Agency............................III-1
SECTION 3.03. Money for Payments To Be Held in Trust.....................III-1
SECTION 3.04. Existence..................................................III-3
SECTION 3.05. Protection of Trust Estate.................................III-3
SECTION 3.06. Opinions as to Trust Estate................................III-4
SECTION 3.07. Performance of Obligations; Servicing of
Receivables............................................III-4
SECTION 3.08. Negative Covenants.........................................III-6
SECTION 3.09. Annual Statement as to Compliance..........................III-7
SECTION 3.10. Issuer May Consolidate, etc., Only on
Certain Terms..........................................III-7
SECTION 3.11. Successor or Transferee....................................III-9
SECTION 3.12. No Other Business..........................................III-9
SECTION 3.13. No Borrowing...............................................III-9
i
SECTION 3.14. Servicer's Obligations.....................................III-9
SECTION 3.15. Guarantees, Loans, Advances and Other
Liabilities...........................................III-10
SECTION 3.16. Capital Expenditures......................................III-10
SECTION 3.17. Removal of Administrator..................................III-10
SECTION 3.18. Restricted Payments.......................................III-10
SECTION 3.19. Notice of Events of Default...............................III-10
SECTION 3.20. Further Instruments and Acts..............................III-10
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of
Indenture...............................................IV-1
SECTION 4.02. Application of Trust Money..................................IV-2
SECTION 4.03. Repayment of Moneys Held by Paying
Agent...................................................IV-2
ARTICLE V
Remedies
SECTION 5.01. Events of Default............................................V-1
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment................................................V-2
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee.........................V-3
SECTION 5.04. Remedies; Priorities.........................................V-5
SECTION 5.05. Optional Preservation of the
Receivables..............................................V-6
SECTION 5.06. Limitation of Suits..........................................V-7
SECTION 5.07. Unconditional Rights of Noteholders To
Receive Principal and Interest...........................V-8
SECTION 5.08. Restoration of Rights and Remedies...........................V-8
SECTION 5.09. Rights and Remedies Cumulative...............................V-8
SECTION 5.10. Delay or Omission Not a Waiver...............................V-8
SECTION 5.11. Control by Noteholders.......................................V-8
SECTION 5.12. Waiver of Past Defaults......................................V-9
SECTION 5.13. Undertaking for Costs........................................V-9
SECTION 5.14. Waiver of Stay or Extension Laws............................V-10
SECTION 5.15. Action on Notes.............................................V-10
SECTION 5.16. Performance and Enforcement of Certain
Obligations.............................................V-10
ii
<PAGE>
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee.................................VI-1
SECTION 6.02. Rights of Indenture Trustee.................................VI-2
SECTION 6.03. Individual Rights of Indenture Trustee......................VI-2
SECTION 6.04. Indenture Trustee's Disclaimer..............................VI-3
SECTION 6.05. Notice of Defaults..........................................VI-3
SECTION 6.06. Reports by Indenture Trustee to Holders.....................VI-3
SECTION 6.07. Compensation and Indemnity..................................VI-3
SECTION 6.08. Replacement of Indenture Trustee............................VI-4
SECTION 6.09. Successor Indenture Trustee by Merger.......................VI-5
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee..............................VI-6
SECTION 6.11. Eligibility; Disqualification...............................VI-7
iii
<PAGE>
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee
Names and Addresses of Noteholders....................VII-1
SECTION 7.02. Preservation of Information;
Communications to Noteholders.........................VII-1
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money......................................VIII-1
SECTION 8.02. Trust Accounts...........................................VIII-1
SECTION 8.03. General Provisions Regarding Accounts....................VIII-1
SECTION 8.04. Release of Trust Estate..................................VIII-2
SECTION 8.05. Opinion of Counsel.......................................VIII-3
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent
of Noteholders.........................................IX-1
SECTION 9.02. Supplemental Indentures with Consent of
Noteholders............................................IX-2
SECTION 9.03. Execution of Supplemental Indentures.......................IX-3
SECTION 9.04. Effect of Supplemental Indenture...........................IX-4
SECTION 9.05. Reference in Notes to Supplemental
Indentures.............................................IX-4
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption..................................................X-1
SECTION 10.02. Form of Redemption Notice...................................X-1
SECTION 10.03. Notes Payable on Redemption Date............................X-2
iv
<PAGE>
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions,
etc....................................................XI-1
SECTION 11.02. Form of Documents Delivered to
Indenture Trustee......................................XI-1
SECTION 11.03. Acts of Noteholders........................................XI-2
SECTION 11.04. Notices, etc., to Indenture Trustee,
Issuer and Rating Agency...............................XI-3
SECTION 11.05. Notices to Noteholders; Waiver.............................XI-3
SECTION 11.06. Alternate Payment and Notice
Provisions.............................................XI-4
SECTION 11.07. [Reserved].................................................XI-4
SECTION 11.08. Effect of Headings and Table of
Contents...............................................XI-4
SECTION 11.09. Successors and Assigns.....................................XI-4
SECTION 11.10. Separability...............................................XI-4
SECTION 11.11. Benefits of Indenture......................................XI-5
SECTION 11.12. Legal Holidays.............................................XI-5
SECTION 11.13. Governing Law..............................................XI-5
SECTION 11.14. Counterparts...............................................XI-5
SECTION 11.15. Recording of Indenture.....................................XI-5
SECTION 11.16. Trust Obligation...........................................XI-5
SECTION 11.17. No Petition................................................XI-6
SECTION 11.18. Inspection.................................................XI-6
SCHEDULE I Schedule of Receivables
EXHIBIT A Form of Note
EXHIBIT B [Reserved]
EXHIBIT C Form of Transferor Certificate
EXHIBIT D Form of Investment Letter
EXHIBIT E Form of Depository Agreement
v
<PAGE>
INDENTURE dated as of June 1, 1997, between NAL AUTO TRUST 1997-2, 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 7.75% Asset Backed
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 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 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 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").
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The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, equally
and ratably without prejudice, priority or distinction, and to secure compliance
with the provisions of this Indenture, all as provided in this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of the
Notes, acknowledges such Grant, accepts the trusts under this Indenture in
accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Holders of the Notes may be adequately and effectively
protected.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions. (a) Except as otherwise specified herein or as
the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a).
"Account Agreement" means the Account Agreement, dated June 27, 1997 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 1, 1997, 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,
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by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Authorized Officer" means, with respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list
may be modified or supplemented from time to time thereafter) and, so long as
the Administration Agreement is in effect, any Vice President or more senior
officer of the Administrator who is authorized to act for the Administrator in
matters relating to the Issuer and to be acted upon by the Administrator
pursuant to the Administration Agreement and who is identified on the list of
Authorized Officers delivered by the Administrator to the Indenture Trustee on
the Closing Date (as such list may be modified or supplemented from time to time
thereafter).
"AUTORICS II" means AUTORICS II, Inc., a Delaware corporation, and any
successor in interest.
"Basic Documents" means the Certificate of Trust, the Trust Agreement, the
Sale and Servicing Agreement, the Receivables Purchase Agreement, the
Administration Agreement, and other documents and certificates delivered in
connection therewith.
"Book-Entry Note" means the Note that (i) evidences all or part of the
Notes, (ii) the beneficial ownership of which is evidenced by book entries on
the ledger or accounts of the Depository where such Note is held and (iii) bears
the legend set forth in Exhibit A.
"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.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
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"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 27, 1997.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
"Corporate Trust Office" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Agreement is located
at Four Albany Street, New York, New York 10006; Attention: Corporate Trust and
Agency Group, Structured Finance Team, or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Issuer, or the principal corporate trust office of any successor Indenture
Trustee at the address designated by such successor Indenture Trustee by notice
to the Noteholders and the Issuer.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Depositor" means AUTORICS II, Inc., a Delaware corporation, and any
successor in interest.
"Depository Agreement" means the agreement dated June 27, 1997, 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
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President, the Secretary, or the Treasurer of such corporation; and with respect
to any partnership, any general partner thereof.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and a right of set-off against, deposit, set over, and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise, and generally to do
and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indenture Trustee" means Bankers Trust Company, a New York banking
corporation, solely as trustee under this Indenture and not in its individual
capacity, or any successor Indenture Trustee under this Indenture.
"Independent" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Issuer, any other obligor on the
Notes, the Depositor and any Affiliate of any of the foregoing Persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Depositor or any Affiliate
of any of the foregoing Persons and (c) is not connected with the Issuer, any
such other obligor, the Depositor or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director, or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such
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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.
"Issuer" means NAL Auto Trust 1997-2 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 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 Rate" means 7.75% per annum (computed on the basis of a 360-day year
consisting of twelve 30-day months).
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.05.
"Notes" means the $121,500,000 7.75% Asset Backed Notes, substantially in
the form of Exhibit A.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be an employee of or
counsel to the Issuer and who shall be satisfactory to the Indenture Trustee,
which opinion or opinions shall be addressed to the Indenture Trustee as
Indenture Trustee, shall comply with any applicable requirements of
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Section 11.01 and shall be in form and substance satisfactory to the Indenture
Trustee.
"Outstanding" means, as of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee
or any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture or provision for such notice
has been made, satisfactory to the Indenture Trustee); and
(iii) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided, that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor upon the Notes, the Depositor or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Indenture Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, or waiver, only Notes that a Responsible Officer of the
Indenture Trustee actually knows to be so owned shall be so disregarded. Notes
so owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Indenture Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Issuer, any other obligor upon the Notes, the Depositor or any Affiliate of
any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes
Outstanding at the date of determination.
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"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 1, 1997, 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.
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"Redemption Date" means in the case of a redemption of the Notes pursuant
to Section 10.01(a) or a payment to Noteholders pursuant to Section 10.01(b),
the Distribution Date specified by the Servicer or the Issuer pursuant to
Section 10.01(a) or (b), as applicable.
"Redemption Price" means in the case of a redemption of the Notes pursuant
to Section 10.01(a), an amount equal to the unpaid principal amount of the Notes
redeemed plus accrued and unpaid interest thereon to and including the last day
of the month preceding the month of such Redemption Date at the Note Rate 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 1, 1997, 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.
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"Servicer" means NAL in its capacity as servicer under the Sale and
Servicing Agreement, and any Successor Servicer thereunder.
"State" means any one of the 50 States of the United States of America or
the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.07(e).
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trust Estate" means all money, instruments, chattel paper, general
intangibles, rights and other property that are subject or intended to be
subject to the lien and security interest of this Indenture for the benefit of
the Noteholders (including, without limitation, all property and interests
Granted to the Indenture Trustee), including all proceeds thereof.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
(b) Except as otherwise specified herein or as the context may otherwise
require, capitalized terms used but not otherwise defined herein have the
respective meanings set forth in the Sale and Servicing Agreement for all
purposes of this Indenture.
SECTION 1.02. Rules of Construction. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in
effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate
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delivered in connection herewith means such agreement, instrument or
statute as from time to time amended, modified or supplemented and includes
(in the case of agreements or instruments) references to all attachments
thereto and instruments incorporated therein; references to a Person are
also to its permitted successors and assigns.
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ARTICLE II
The Notes
SECTION 2.01. Form. The Notes, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibit A, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibit A 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 Notes for original issue in an aggregate principal
amount of $121,500,000.
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
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certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.
SECTION 2.03. Temporary Notes. Pending the preparation of definitive Notes,
the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes that are printed,
lithographed, typewritten, mimeographed, or otherwise produced, of the tenor of
the definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer shall cause definitive Notes to
be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute, and the Indenture Trustee shall authenticate and deliver in exchange
therefor, a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
SECTION 2.04. Limitations on Transfer of the Notes. The Notes have not been
and will not be registered under the Securities Act and will not be listed on
any exchange. No transfer of a Note shall be made unless such transfer is made
pursuant to an effective registration statement under the Securities Act and any
applicable state securities laws or is exempt from the registration requirements
under said Act and such state securities laws. In the event that a transfer is
to be made in reliance upon an exemption from the Securities Act and state
securities laws, in order to assure compliance with the Securities Act and such
laws, the Holder desiring to effect such transfer and such Holder's prospective
transferee shall each certify to the Indenture Trustee and the Issuer in writing
the facts surrounding the transfer in substantially the forms set forth in
Exhibit C (the "Transferor Certificate") and Exhibit D (the "Investment
Letter"). Except in the case of a transfer as to which the proposed transferee
has confirmed that it is a "qualified institutional buyer" as provided in
Section 2(b) of
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the Investment Letter, there shall also be delivered to the Indenture Trustee an
opinion of counsel that such transfer may be made pursuant to an exemption from
the Securities Act and state securities laws, which opinion of counsel shall not
be an expense of the Trust, the Owner Trustee or the Indenture Trustee (unless
it is the transferee from whom such opinion is to be obtained) or of the
Depositor or NAL; provided that such opinion of counsel in respect of the
applicable state securities laws may be a memorandum of law rather than an
opinion if such counsel is not licensed in the applicable jurisdiction. The
Depositor shall cause the Servicer to provide to any Holder of a Note and any
prospective transferee designated by any such Holder information regarding the
Notes and the Receivables and such other information as shall be necessary to
satisfy the condition to eligibility set forth in Rule 144A(d)(4) for transfer
of any such Note without registration thereof under the Securities Act pursuant
to the registration exemption provided by Rule 144A. Each Holder of a Note
desiring to effect such a transfer shall, and does hereby agree to, indemnify
the Issuer, the Owner Trustee, the Indenture Trustee and the Depositor against
any liability that may result if the transfer is not so exempt or is not made in
accordance with federal and state securities laws.
If an election is made to hold a Note in book-entry form, the Note shall be
registered in the name of a nominee designated by the Clearing Agency (and may
be aggregated as to denominations with other Notes held by the Clearing Agency).
With respect to Notes held in book-entry form:
(i) the Note Registrar and the Indenture 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;
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(vi) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the Clearing
Agency will be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Note Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes and has
delivered such instructions to the Indenture Trustee; and
(iv) without the consent of the Issuer and the Indenture 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 Indenture Trustee nor the Note Registrar shall have any
responsibility to monitor or restrict the transfer of beneficial ownership in
any Note an interest in which is transferable through the facilities of the
Depository.
If (i) the Administrator advises the Indenture Trustee in writing that the
Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Notes held in book-entry form and the
Administrator is unable to locate a qualified successor, (ii) the Administrator
at its option advises the Indenture Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Default or a Servicer Default, Note Owners
representing beneficial interests aggregating at least a majority of the
Outstanding Amount of such Notes advise the Clearing Agency in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of such Note Owners, then the Clearing Agency shall notify
all Note Owners and the Indenture Trustee of the occurrence of any such event
and of the availability of definitive Notes to Note Owners requesting the same.
Upon surrender to the Indenture Trustee of the typewritten Notes representing
the Notes held in book-entry form by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Indenture Trustee
shall authenticate the definitive Notes in accordance with the instructions of
the Clearing Agency. None of the Issuer, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of
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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
in any authorized denominations, of a like aggregate principal amount.
(c) Notes may be exchanged for other Notes in any authorized denominations,
of a like aggregate principal amount, upon
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surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, if the requirements of Section 8-401(1)
of the UCC are met, the Issuer shall execute, and the Indenture Trustee shall
authenticate and the Noteholder shall obtain from the Indenture Trustee, the
Notes which the Noteholder making the exchange is entitled to receive.
(d) All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
(e) Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
(f) Any and all transfers from a Book-Entry Note to a transferee wishing to
take delivery in the form of a definitive Note will require the transferee to
take delivery subject to the restrictions on the transfer of such definitive
Note described in the legend set forth on the face of the Note substantially in
the form of Exhibit A 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 Indenture Trustee shall not register any
such transfer unless such transfer is made in accordance with this Section 2.05.
Upon acceptance for exchange or transfer of a beneficial interest in a
Book-Entry Note for a definitive Note, as provided herein, the Indenture 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 (or otherwise record electronically)) 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
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exchange therefor or upon transfer thereof. Unless determined otherwise by the
Indenture Trustee in accordance with applicable law, a definitive Note issued
upon transfer of or exchange for a beneficial interest in the Book-Entry Note
shall bear the Legend.
(g) If a Holder of a definitive Note wishes at any time to transfer such
definitive Note to a Person who wishes to take delivery thereof in the form of a
beneficial interest in the Book-Entry Note, such transfer may be effected only
in accordance with the applicable procedures of the Depository and this Section
2.05 (g). Upon receipt by the Indenture 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 Indenture 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 Indenture Trustee shall
cancel such definitive Note, and upon the Issuer's execution of the Note,
authenticate 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 Securities Act.
(h) An exchange of a beneficial interest in a Book-Entry Note for a
definitive Note or Notes, an exchange of a definitive Note or Notes for a
beneficial interest in the Book-Entry Note and exchange of a definitive Note or
Notes for another definitive Note or Notes (in each case, whether or not such
exchange is made
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in anticipation of subsequent transfer, and in the case of the Book-Entry Note,
so long as the Book-Entry Note remains outstanding and is held by or on behalf
of the Depository), may be made only in accordance with this Section 2.05 and in
accordance with the rules of the Depository.
(i) No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.03 or 9.05 not involving any transfer.
(j) The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make, and the Note Registrar need not register,
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to the
Note.
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of written notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by a bona
fide purchaser, and provided that the requirements of Section 8-405 of the UCC
are met, the Issuer shall execute, and upon its written request the Indenture
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note; 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
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such replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Indenture
Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.07. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest on such
Note and for all other purposes whatsoever, whether or not such Note be overdue,
and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the
Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.08. Payment of Principal and Interest; Defaulted Interest. (a)
The Notes shall accrue interest at the Note Rate, as set forth in Exhibit A, 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
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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 Note Final Scheduled Distribution Date, 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 form of the Note set forth in Exhibit A.
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 the Notes shall
be made pro rata to the Noteholders entitled thereto. The Indenture Trustee
shall notify the Person in whose name a Note is registered at the close of
business on the Record Date preceding the Distribution Date on which the Issuer
expects that the final installment of principal of and interest on such Note
will be paid. Such notice shall be mailed or transmitted by facsimile prior to
such final Distribution Date and shall specify that such final installment will
be payable only upon presentation and surrender of such Note and shall specify
the place where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed to
Noteholders as provided in Section 10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the Note 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
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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.
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ARTICLE III
Covenants
SECTION 3.01. Payment of Principal and Interest. The Issuer will duly and
punctually pay the principal of and interest, if any, on the Notes in accordance
with the terms of the Notes and this Indenture. Without limiting the foregoing,
subject to Section 8.02(c), the Issuer will cause to be distributed all amounts
on deposit in the Note Distribution Account on a Distribution Date deposited
therein pursuant to the Sale and Servicing Agreement for the benefit of the
Notes, to the 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.
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On or before the Business Day preceding each Distribution Date and
Redemption Date, the Issuer shall deposit or cause to be deposited in the Note
Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due under the Notes, such sum to be held in trust for the benefit of
the Persons entitled thereto, and (unless the Paying Agent is the Indenture
Trustee) shall promptly notify the Indenture Trustee of its action or failure so
to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee written notice of any default by the
Issuer (or any other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to be made with respect to
the Notes;
(iii) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if
at any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other
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purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee
all sums held in trust by such Paying Agent, such sums to be held by the
Indenture Trustee upon the same trusts as those upon which the sums were held by
such Paying Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for two years after
such amount has become due and payable shall be discharged from such trust and
be paid to the Issuer on Issuer Request; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and written direction of the Issuer cause to be published
once, in a newspaper published in the English language, customarily published on
each Business Day and of general circulation in The City of New York, notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Issuer. The
Indenture Trustee shall also adopt and employ, at the expense and written
direction of the Issuer, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Indenture Trustee or of any
Paying Agent, at the last address of record for each such Holder).
SECTION 3.04. Existence. The Issuer will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in
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each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Indenture, the Notes, the
Collateral and each other instrument or agreement included in the Trust Estate.
SECTION 3.05. Protection of Trust Estate. The Issuer will from time to time
execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action necessary or advisable
to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Indenture Trustee and the Noteholders in such Trust Estate against the
claims of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.05.
SECTION 3.06. Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are necessary to perfect and make effective the lien and security interest of
this Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) On or before December 31, in each calendar year, beginning in 1997, the
Issuer shall furnish to the Indenture
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Trustee an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as is necessary to
maintain the lien and security interest created by this Indenture and reciting
the details of such action, or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security interest. Such
Opinion of Counsel shall also describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture until December 31
in the following calendar year.
SECTION 3.07. Performance of Obligations; Servicing of Receivables. (a) The
Issuer will not take any action and will use its best efforts not to permit any
action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Indenture Trustee in an Officer's Certificate of the Issuer
shall be deemed to be action taken by the Issuer. Initially, the Issuer has
contracted with the Servicer and the Administrator to assist the Issuer in
performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Basic Documents and in the
instruments and agreements included in the Trust Estate, including but not
limited to filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Sale and Servicing Agreement in accordance with and within the time periods
provided for herein and therein. Except
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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 Agency 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 or resignation under the
Sale and Servicing Agreement, the Backup Servicer shall become the successor
Servicer, and the Backup 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. In such event,
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 to act as
Servicer, the Backup Servicer will appoint a successor Servicer to act as
Servicer, the effectiveness of which appointment shall be subject to
confirmation from the Rating Agency that such appointment will not result in the
withdrawal or downgrade of the then current ratings of the Notes and the
Certificates. In the event that such 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 Backup Servicer will petition a court of
competent jurisdiction to appoint any established institution, having a net
worth of not less than
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$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. As compensation for acting as successor Servicer, the Backup Servicer
or any successor Servicer shall be entitled to receive the Servicing Fee.
(f) Promptly upon its appointment as successor Servicer, the Backup
Servicer shall appoint a successor Backup Servicer that shall (after
confirmation by the Rating Agency that such appointment will not result in the
withdrawal or downgrade of the then current ratings of the Notes or the
Certificates) be the successor in all respects to the predecessor Backup
Servicer and shall be subject to all the responsibilities, duties and
liabilities arising thereafter relating thereto placed on the predecessor Backup
Servicer and shall be entitled to the Backup Servicing Fee and all the rights
granted to the predecessor Backup Servicer by the terms and provisions of this
Agreement.
(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.
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SECTION 3.08. Negative Covenants. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the Sale and
Servicing Agreement, sell, transfer, exchange or otherwise dispose of any
of the properties or assets of the Issuer, including those included in the
Trust Estate, unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code) or assert any claim against any
present or former Noteholder by reason of the payment of the taxes levied
or assessed upon any part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be released
from any covenants or obligations with respect to the Notes under this
Indenture except as may be expressly permitted hereby, (B) permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance
(other than the lien of this Indenture) to be created on or extend to or
otherwise arise upon or burden the Trust Estate or any part thereof or any
interest therein or the proceeds thereof (other than tax liens, mechanics'
liens and other liens that arise by operation of law, in each case on any
of the Financed Vehicles and arising solely as a result of an action or
omission of the related Obligor) or (C) permit the lien of this Indenture
not to constitute a valid first priority (other than with respect to any
such tax, mechanics' or other lien) security interest in the Trust Estate.
SECTION 3.09. Annual Statement as to Compliance. The Issuer will deliver to
the Indenture Trustee, within 120 days after the end of each fiscal year of the
Issuer (commencing with the fiscal year 1997), 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
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(ii) to the best of such Authorized Officer's knowledge, based on such
review, the Issuer has complied with all conditions and covenants under
this Indenture throughout such year, or, if there has been a default in its
compliance with any such condition or covenant, specifying each such
default known to such Authorized Officer and the nature and status thereof.
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms. (a) The
Issuer shall not consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing under the
laws of the United States of America or any State and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Indenture Trustee, in form satisfactory to the Indenture Trustee, the due
and punctual payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this Indenture
on the part of the Issuer to be performed or observed, all as provided
herein;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the effect that
such transaction will not have any material adverse tax consequence to the
Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for relating
to such
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transaction have been complied with (including any filing required by the
Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer the conveyance or transfer of which is hereby
restricted (A) shall be a United States citizen or a Person organized and
existing under the laws of the United States of America or any State, (B)
expressly assumes, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the Indenture
Trustee, the due and punctual payment of the principal of and interest on
all Notes and the performance or observance of every agreement and covenant
of this Indenture on the part of the Issuer to be performed or observed,
all as provided herein, (C) expressly agrees by means of such supplemental
indenture that all right, title and interest so conveyed or transferred
shall be subject and subordinate to the rights of Holders of the Notes, and
(D) unless otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer against and from
any loss, liability or expense arising under or related to this Indenture
and the Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Indenture Trustee) to the effect that
such transaction will not have any material adverse tax consequence to the
Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel
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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 1997-2 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 1997-2 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, 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
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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 Agency 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.
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ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture shall
cease to be of further effect with respect to the Notes except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08,
3.10, 3.12 and 3.13, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.02) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 2.06 and (ii) Notes for whose payment money
has theretofore been deposited in trust or segregated and held in trust by
the Issuer and thereafter repaid to the Issuer or discharged from such
trust, as provided in Section 3.03) have been delivered to the Indenture
Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. have become due and payable,
b. are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving of
notice of redemption by the Indenture Trustee in the name, and at the
expense, of the Issuer,
and the Issuer, in the case of a. or b. above, has irrevocably deposited or
caused to be irrevocably deposited with the Indenture Trustee cash or
direct obligations of or
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obligations guaranteed by the United States of America (which will mature
prior to the date such amounts are payable), in trust for such purpose, in
an amount sufficient to pay and discharge the entire indebtedness on such
Notes not theretofore delivered to the Indenture Trustee for cancellation
when due to the applicable final scheduled Distribution Date or Redemption
Date, as the case may be;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the Indenture
Trustee) an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of Section 11.01(a)
and, subject to Section 11.02, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
SECTION 4.02. Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such moneys need not be segregated from other funds except to the
extent required herein or in the Sale and Servicing Agreement or required by
law.
SECTION 4.03. Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.03 and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
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ARTICLE V
Remedies
SECTION 5.01. Events of Default. "Event of Default," wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the same
becomes due and payable, and such default shall continue for a period of
five days; or
(ii) default in the payment of the principal of or any installment of
the principal of any Note when the same becomes due and payable; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when the same shall have
been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 30 days after there shall have been given, by registered or
certified mail, to the Issuer by the Indenture Trustee or to the Issuer and
the Indenture Trustee by the Holders of at least 25% of the Outstanding
Amount of the Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a notice of Default hereunder; or
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Trust Estate in an involuntary case under any applicable
federal or state
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bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial part
of the Trust Estate, or ordering the winding-up or liquidation of the
Issuer's affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Issuer to the entry of an
order for relief in an involuntary case under any such law, or the consent
by the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of the Trust Estate, or the
making by the Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay its debts as such
debts become due, or the taking of any action by the Issuer in furtherance
of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee, within five days after the
occurrence thereof, written notice in the form of an Officer's Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (iii), its status and what action the Issuer is
taking or proposes to take with respect thereto.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee or the Holders of Notes representing not less than a majority
of the Outstanding Amount of the Notes may declare all the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Outstanding Amount of the
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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
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prosecute such Proceeding to judgment or final decree, and may enforce the same
against the Issuer or other obligor upon such Notes and collect in the manner
provided by law out of the property of the Issuer or other obligor upon such
Notes, wherever situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture Trustee
may, as more particularly provided in Section 5.04, in its discretion, proceed
to protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization, or
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee (including any claim for
reasonable compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys and counsel, and
for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of
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negligence or bad faith) and of the Noteholders allowed in such
Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Indenture Trustee on
their behalf; and
(iv) to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Indenture
Trustee or the Holders of Notes allowed in any Proceedings relative to the
Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
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the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
SECTION 5.04. Remedies; Priorities. (a) If an Event of Default shall have
occurred and be continuing, the Indenture Trustee may do one or more of the
following (subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes or under
this Indenture with respect thereto, whether by declaration or otherwise,
enforce any judgment obtained and collect from the Issuer and any other
obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies
of the Indenture Trustee and the Holders of the Notes; and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, other than an Event of
Default described in Section 5.01(i) or (ii), unless (A) the Holders of 100% of
the Outstanding Amount of the Notes consent thereto, (B) the proceeds of such
sale or liquidation distributable to the Noteholders are sufficient to discharge
in full all amounts then due and unpaid
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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 not less than 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 Notes for amounts due and unpaid on the
Notes for interest (including any premium), ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes
for interest (including any premium);
THIRD: to the Issuer for amounts required to be distributed to the
Certificateholders in respect of interest pursuant to the Trust Agreement;
FOURTH: to Holders of the Notes for amounts due and unpaid on the
Notes for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal, until
the Outstanding Amount of the Notes is reduced to zero;
FIFTH: to the Issuer for amounts required to be distributed to the
Certificateholders in respect of principal 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
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Noteholder and the Indenture Trustee a notice that states the record date, the
payment date and the amount to be paid.
SECTION 5.05. Optional Preservation of the Receivables. If the Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Trust Estate. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Indenture Trustee shall take such desire into
account when determining whether or not to maintain possession of the Trust
Estate. In determining whether to maintain possession of the Trust Estate, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose, which opinion shall be conclusive evidence as to such
sufficiency.
SECTION 5.06. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of the
Notes have made written request to the Indenture Trustee to institute such
Proceeding in respect of such Event of Default in its own name as Indenture
Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;
(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
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period by the Holders of a majority of the Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.07. Unconditional Rights of Noteholders To Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
SECTION 5.08. Restoration of Rights and Remedies. If the Indenture Trustee
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
SECTION 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other
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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
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take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
SECTION 5.12. Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default or Event of Default and its consequences except
a Default (a) in payment of principal of or interest on any of the Notes or (b)
in respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Note. In the case of any such waiver,
the Issuer, the Indenture Trustee and the Holders of the Notes shall be restored
to their former positions and rights hereunder, respectively, but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of a Note by such Holder's acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note
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and in this Indenture (or, in the case of redemption, on or after the Redemption
Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.04(b).
SECTION 5.16. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Depositor, the Servicer or NAL, as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement and the Receivable Purchase Agreement and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Sale and Servicing Agreement or the Receivables
Purchase Agreement to the extent and in the manner directed by the Indenture
Trustee, including the transmission of notices of default on the part of the
Depositor, the Servicer, or NAL thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Depositor or the Servicer of each of their obligations under the
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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 not less
than 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.
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(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or indemnity reasonably satisfactory to it against such risk or
liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section.
SECTION 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee may
conclusively rely, as to the truth of the statements or the correctness of the
opinions expressed therein, on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
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(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, including Issuer's
counsel, and the advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture Trustee
in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Indenture Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Indenture Trustee must comply with Section 6.11.
SECTION 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.05. Notice of Defaults. If a Default occurs and is continuing and
if it is either actually known or written notice of the existence thereof has
been delivered to a Responsible Officer of the Indenture Trustee, the Indenture
Trustee shall promptly mail to each Noteholder and the 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 the Rating Agency promptly with
notice in the event
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that any Event of Default is cured or waived, including a description of the
nature and extent of such Event of Default and the actions taken to cure or
waive it.
SECTION 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns.
SECTION 6.07. Compensation and Indemnity. The Issuer shall, or shall cause
the Administrator to, pay to the Indenture Trustee from time to time reasonable
compensation for its services. The Indenture Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall, or shall cause the Administrator to, reimburse the Indenture Trustee for
all reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and experts.
The Issuer shall, or shall cause the Administrator to, indemnify the Indenture
Trustee against any and all loss, liability or expense (including attorneys'
fees and expenses) incurred by it in connection with the administration of this
trust and the performance of its duties hereunder and under the Account
Agreement. The Indenture Trustee shall notify the Issuer and the Administrator
promptly of any claim for which it may seek indemnity. Failure by the Indenture
Trustee to so notify the Issuer and the Administrator shall not relieve the
Issuer or the Administrator of its obligations hereunder. The Issuer shall, or
shall cause the Administrator to, defend any such claim, and the Indenture
Trustee may have separate counsel and the Issuer shall, or shall cause the
Administrator to, pay the fees and expenses of such counsel. Neither the Issuer
nor the Administrator need reimburse any expense or indemnify against any loss,
liability or expense incurred by the Indenture Trustee through the Indenture
Trustee's own willful misconduct, negligence or bad faith.
The Issuer's obligations to the Indenture Trustee pursuant to this Section
shall survive the discharge of this Indenture, the maturity of the Notes and the
resignation or removal of the Indenture Trustee. When the Indenture Trustee
incurs expenses after the occurrence of a Default specified in Section 5.01(iv)
or (v) with respect to the Issuer, the expenses are intended to constitute
expenses of administration under Title 11 of the
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United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
SECTION 6.08. Replacement of Indenture Trustee. No resignation or removal
of the Indenture Trustee and no appointment of a successor Indenture Trustee
shall become effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee may
resign at any time by so notifying the Issuer. The Holders of a majority in
Outstanding Amount of the Notes may remove the Indenture Trustee by so notifying
the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer
shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Indenture
Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the
office of Indenture Trustee for any reason (the Indenture Trustee in such event
being referred to herein as the retiring Indenture Trustee), the Issuer shall
promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property of the Issuer, including all
property in the Trust Estate, held by it as Indenture Trustee to the successor
Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is
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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
Agency prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal
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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
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given to each of them. Every instrument appointing any separate trustee or
co-trustee shall refer to this Agreement and the conditions of this Article VI.
Each separate trustee and co-trustee, upon its acceptance of the trusts
conferred, shall be vested with the estates or property specified in its
instrument of appointment, either jointly with the Indenture Trustee or
separately, as may be provided therein, subject to all the provisions of this
Indenture, specifically including every provision of this Indenture relating to
the conduct of, affecting the liability of, or affording protection to, the
Indenture Trustee. Every such instrument shall be filed with the Indenture
Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture Trustee shall at
all times be a financial institution organized and doing business under the laws
of the United States of America or any state, be authorized under such laws to
exercise corporate trust powers, be subject to supervision and examination by
Federal or state authority, and have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition.
SECTION 6.12. Authorization Concerning the Account Agreement. The Indenture
Trustee is hereby authorized to enter into the Account Agreement.
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ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
and (ii) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Holders of Notes as of such Record Date, and (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished.
SECTION 7.02. Preservation of Information; Communications to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Indenture Trustee as provided in Section 7.01
and the names and addresses of Holders of Notes received by the Indenture
Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any
list furnished to it as provided in such Section 7.01 upon receipt of a new list
so furnished.
(b) Noteholders may communicate pursuant to TIA (section) 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 (section) 312(c).
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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)):
(i) to the Holders of the Notes, accrued and unpaid interest on the
Notes;
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(ii) to the Holders of the Notes on account of principal until the
Outstanding Amount of the Notes is reduced to zero.
SECTION 8.03. General Provisions Regarding Accounts. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Trust Accounts (other than the Note Distribution
Account) shall be invested in Eligible Investments and reinvested by the
Indenture Trustee upon Issuer Order, subject to the provisions of Section
5.01(b) of the Sale and Servicing Agreement. All income or other gain from
investments of moneys deposited in the Trust Accounts (other than the Dealer
Reserve Account) shall be deposited by the Indenture Trustee in the Collection
Account, and any loss resulting from such investments shall be charged to such
account. All income and other gain from investment of monies in the Dealer
Reserve Account (net of any losses and investment expenses) will be payable on
each Distribution Date to the Depositor. The Issuer will not direct the
Indenture Trustee to make any investment of any funds or to sell any investment
held in any of the Trust Accounts unless the security interest Granted and
perfected in such account will continue to be perfected in such investment or
the proceeds of such sale, in either case without any further action by any
Person, and, in connection with any direction to the Indenture Trustee to make
any such investment or sale, if requested by the Indenture Trustee, the Issuer
shall deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way
be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as trustee, in accordance with their terms.
(c) If (i) the Issuer (or the Servicer) shall have failed to give
investment directions for any funds on deposit in the Trust Accounts to the
Indenture Trustee by 10:00 a.m. Eastern Time (or such other time as may be
agreed by the Issuer and Indenture Trustee) on any Business Day or (ii) a
Default or Event of Default shall have occurred and be continuing with respect
to the Notes but the Notes shall not have been declared due and payable pursuant
to Section 5.02 or (iii) if such Notes shall have been declared due and payable
following an Event of Default and
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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
VIII-3
<PAGE>
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.
VIII-4
<PAGE>
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 Agency, 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
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(vii) if required by law, to modify, eliminate or add to the
provisions of this Indenture to such extent as shall be necessary to effect
the qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such other
provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior notice to the Rating Agency, 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 Agency 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
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institute suit for the enforcement of the provisions of this Indenture
requiring the application of funds available therefor, as provided in
Article V, to the payment of any such amount due on the Notes on or after
the respective due dates thereof (or, in the case of redemption, on or
after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or
waived without the consent of the Holder of each Outstanding Note affected
thereby;
(vi) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest or
principal due on any Note on any Distribution Date (including the
calculation of any of the individual components of such calculation) or to
affect the rights of the Holders of Notes to the benefit of any provisions
for the mandatory redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Trust
Estate or, except as otherwise permitted or contemplated herein, terminate
the lien of this Indenture on any property at any time subject hereto or
deprive the Holder of any Note of the security provided by the lien of this
Indenture.
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The Indenture Trustee may, but shall in no way be obligated to, in its sole
discretion determine whether or not any Notes would be affected by any
supplemental indenture and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Indenture Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture, which opinion shall be conclusive
evidence as to such authorization or permission. The Indenture Trustee may, but
shall not be obligated to, enter into any such supplemental indenture that
affects the Indenture Trustee's own rights, duties, liabilities or immunities
under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all
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respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.05. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
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ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption. (a) The Notes are subject to redemption in
whole, but not in part, at the direction of the Servicer pursuant to Section
9.01(a) of the Sale and Servicing Agreement, on any Distribution Date on which
the Servicer exercises its option to purchase the Trust Estate pursuant to said
Section 9.01(a), for a purchase price equal to the Redemption Price; provided,
that the Issuer has available funds sufficient to pay the Redemption Price. The
Servicer or the Issuer shall furnish the Rating Agency notice of such
redemption. If the Notes are to be redeemed pursuant to this Section 10.01(a),
the Servicer or the Issuer shall furnish notice of such election to the
Indenture Trustee not later than 20 days prior to the Redemption Date, and the
Issuer shall deposit by 10:00 A.M. New York City time on the Redemption Date
with the Indenture Trustee in the Note Distribution Account the Redemption Price
of the Notes to be redeemed, whereupon all such Notes shall be due and payable
on the Redemption Date upon the furnishing of a notice complying with Section
10.02 to each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to Section
9.02 of the Trust Agreement, all amounts on deposit in the Note Distribution
Account shall be paid to the Noteholders up to the Outstanding Amount of the
Notes and all accrued and unpaid interest thereon. If amounts are to be paid to
Noteholders pursuant to this Section 10.01(b), the Servicer or the Issuer shall,
to the extent practicable, furnish notice of such event to the Indenture Trustee
not later than 20 days prior to the Redemption Date, whereupon all such amounts
shall be payable on the Redemption Date.
SECTION 10.02. Form of Redemption Notice. (a) Notice of redemption under
Section 10.01(a) shall be given by the Indenture Trustee by first-class mail,
postage prepaid, or by facsimile mailed or transmitted not later than 10 days
prior to the applicable Redemption Date to each Holder of Notes as of the close
of business on the Record Date preceding the applicable Redemption Date, at such
Holder's address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
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(i) the Redemption Date;
(ii) the Redemption Price;
(iii) Cusip number of the Notes;
(iv) publication date of the notice;
(v) date of issuance of the Notes;
(vi) Note Rate; and
(vii) the place where such Notes are to be surrendered for payment of
the Redemption Price.
Notice of redemption of the Notes shall be given by the Indenture Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(b) is not required to be
given to Noteholders.
SECTION 10.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption as required by
Section 10.02 (in the case of redemption pursuant to Section 10.01(a)), become
due and payable at the Redemption Price on the Redemption Date and (unless the
Issuer shall default in the payment of the Redemption Price) no interest shall
accrue on the Redemption Price for any period after the date to which accrued
interest is calculated for purposes of calculating the Redemption Price.
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ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions, etc. Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee (i) an Officer's Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with, and (ii) an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been complied with,
except that, in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
SECTION 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and
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one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Depositor, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Depositor, the Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.03. Acts of Noteholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such
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Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall become effective when such
instrument or instruments are delivered to the Indenture Trustee and, where it
is hereby expressly required, to the Issuer. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Noteholders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
6.01) conclusive in favor of the Indenture Trustee and the Issuer, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Indenture Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Indenture
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
SECTION 11.04. Notices, etc., to Indenture Trustee, Issuer and Rating
Agency. 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
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by delivery or mail as described above to the Issuer addressed to: NAL Auto
Trust 1997-2, in care of Wilmington Trust Company, as Owner Trustee, 1100
N. Market Street, Rodney Square North, Wilmington, Delaware 19801;
facsimile: 302-651-8882; Attention of Corporate Trust Administration, 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 Agency 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 Fitch Investors
Service, L.P., at the following address: One State Street Plaza, New York, N.Y.
10004, or, at such other address as shall be designated by written notice to the
other parties.
SECTION 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Holder's address as it appears on the Note Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
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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 Agency, 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 (reasonably acceptable to the
Indenture Trustee or any Paying Agent) providing for a method of payment, or
notice by the Indenture Trustee or any Paying Agent to such Holder, that is
different from the methods provided for in this Indenture for such payments or
notices. The Issuer will furnish to the Indenture Trustee a copy of each such
agreement and the Indenture Trustee will cause payments to be made and notices
to be given in accordance with such agreements.
SECTION 11.07. [Reserved]
SECTION 11.08. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.09. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind its successors, co-trustees and agents.
SECTION 11.10. Separability. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 11.11. Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
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SECTION 11.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed in
writing (it being understood that the Indenture Trustee and the Owner Trustee
have no such
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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
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preliminary or final offering circular, registration statement or contract or
other document pertaining to the transactions contemplated by this Agreement
approved in advance by the Issuer or (E) to any Affiliate, independent or
internal auditor, agent, employee or attorney of the Indenture Trustee having a
need to know the same, provided that the Indenture Trustee advises such
recipient of the confidential nature of the information being disclosed, (iii)
any other disclosure authorized by the Seller, Administrator, Issuer or Servicer
or (iv) disclosure to the other parties to the transactions contemplated by this
Agreement.
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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 1997-2,
by: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee,
by:
-------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee,
by:
-------------------------------
Name:
Title:
<PAGE>
STATE OF NEW YORK }
} ss.:
COUNTY OF NEW YORK }
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ____________________________,
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 1997-2, 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 27th day of June, 1997.
- -------------------------------------------------------------------------------
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 __________, 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 27th day of June, 1997.
- -------------------------------------------------------------------------------
Notary Public in and for the State of New York.
My commission expires:
- --------------------------------------------
<PAGE>
SCHEDULE 1
<PAGE>
EXHIBIT A
[FORM OF 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 WHO 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
A-1
<PAGE>
INDENTURE TRUSTEE AND THE DEPOSITOR IN WRITING THE FACTS SURROUNDING SUCH
TRANSFER, WHICH CERTIFICATION SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE
INDENTURE TRUSTEE AND THE DEPOSITOR. EXCEPT IN THE CASE OF A TRANSFER DESCRIBED
IN CLAUSES (i) OR (iii) ABOVE, THE INDENTURE TRUSTEE SHALL REQUIRE A WRITTEN
OPINION OF COUNSEL (WHICH SHALL NOT BE AT THE EXPENSE OF THE DEPOSITOR, ANY
AFFILIATE OF THE DEPOSITOR OR THE INDENTURE TRUSTEE) SATISFACTORY TO THE
DEPOSITOR AND THE INDENTURE TRUSTEE TO THE EFFECT THAT SUCH TRANSFER WILL NOT
VIOLATE THE 1933 ACT. NO SALE, PLEDGE OR OTHER TRANSFER MAY BE MADE TO ANY ONE
PERSON FOR SECURITIES WITH A FACE AMOUNT OF LESS THAN $100,000 AND, IN THE CASE
OF ANY PERSON ACTING ON BEHALF OF ONE OR MORE THIRD PARTIES (OTHER THAN A BANK
(AS DEFINED IN SECTION 3(a)(2) OF THE 1933 ACT) ACTING IN ITS FIDUCIARY
CAPACITY), FOR SECURITIES WITH A FACE AMOUNT OF LESS THAN $100,000 FOR EACH SUCH
THIRD PARTY.
SECTION 2.04 OF THE INDENTURE CONTAINS FURTHER RESTRICTIONS ON THE TRANSFER AND
RESALE OF THIS NOTE. EACH TRANSFEREE OF THIS NOTE, BY ACCEPTANCE HEREOF, IS
DEEMED TO HAVE ACCEPTED THIS NOTE SUBJECT TO THE FOREGOING RESTRICTIONS ON
TRANSFERABILITY.
EACH NOTEHOLDER OR NOTE OWNER, BY ITS ACCEPTANCE OF THIS SECURITY, COVENANTS AND
AGREES THAT SUCH NOTEHOLDER OR NOTE OWNER SHALL NOT, PRIOR TO THE DATE THAT IS
ONE YEAR AND ONE DAY AFTER THE TERMINATION OF THE TRUST AGREEMENT, ACQUIESCE,
PETITION OR OTHERWISE INVOKE OR CAUSE THE TRUST, THE DEPOSITOR OR THE SELLER TO
INVOKE THE PROCESS OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF
COMMENCING OR SUSTAINING A CASE AGAINST THE TRUST, THE DEPOSITOR OR THE SELLER
UNDER ANY FEDERAL OR STATE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR SIMILAR
LAW, OR APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE, CUSTODIAN,
SEQUESTRATOR OR OTHER SIMILAR OFFICIAL OF THE TRUST, THE DEPOSITOR OR THE SELLER
OR ANY SUBSTANTIAL PART OF ITS PROPERTY, OR ORDERING THE WINDING UP OR
LIQUIDATION OF THE AFFAIRS OF THE TRUST, THE DEPOSITOR OR THE SELLER.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
[UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
A-2
<PAGE>
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. ________________
NAL AUTO TRUST 1997-2
7.75% ASSET BACKED NOTES
NAL Auto Trust 1997-2, 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 Notes
pursuant to Section 3.01 of the Indenture dated as of June 1, 1997 (the
"Indenture"), between the Issuer and Bankers Trust Company, a New York banking
corporation, as Indenture Trustee (the "Indenture Trustee"); provided, however,
that the entire unpaid principal amount of this Note shall be due and payable on
the earlier of the December 16, 2002 Distribution Date (the "Note 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.
A-3
<PAGE>
Interest on this Note for each Distribution Date will accrue from and including
the first day of the preceding Collection Period (or, in the case of the first
Distribution Date, from and including the Cutoff Date). Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Note shall be paid in the manner specified on the
reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date: _______________________ NAL AUTO TRUST 1997-2,
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-4
<PAGE>
Reverse
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its 7.75% Asset Backed Notes (herein called the "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 Notes are subject to all terms of the Indenture.
The Notes are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the 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 in September 1997.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Note 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 Notes shall be
made pro rata to the 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
A-5
<PAGE>
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not noted hereon. If funds are expected to
be available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution Date, then the
Indenture Trustee, in the name of and on behalf of the Issuer, will notify the
Person who was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed or transmitted by facsimile prior to such
Distribution Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Note 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
A-6
<PAGE>
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Indenture Trustee or the Owner Trustee in
its individual capacity, (ii) any owner of a beneficial interest in the Issuer
or (iii) any partner, owner, beneficiary, agent, officer, director or employee
of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note covenants and agrees
by accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Depositor, the Seller or the Issuer, or join in any
institution against the Depositor, the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under any
United States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder or Note Owner, by acceptance of a
Note, agrees to treat the Notes for federal, state and local income, single
business and franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such
A-7
<PAGE>
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note be overdue, and none of the
Issuer, the Indenture Trustee or any such agent shall be affected by notice to
the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one or more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
A-8
<PAGE>
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-9
<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-10
<PAGE>
EXHIBIT B
[RESERVED]
B-1
<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 1997-2
7.75% Asset Backed Notes
------------------------
Ladies and Gentlemen:
In connection with our disposition of the above-referenced 7.75% 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 7.75% Asset Backed Notes (the "Securities") of NAL Auto
Trust 1997-2 (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
D-1
<PAGE>
Rule 144A, acting for its own account (and not for the account of others)
or as a fiduciary or agent for others (which others also are "qualified
institutional buyers") to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A or (iv) in a sale, pledge
or other transfer made in a transaction otherwise exempt from the
registration requirements of the 1933 Act, in which case, the Indenture
Trustee shall require that both the prospective transferor and the
prospective transferee certify to the Indenture Trustee and the Depositor
in writing the facts surrounding such transfer, which certification shall
be in form and substance satisfactory to the Indenture Trustee and the
Depositor. Except in the case of (i) or (iii), the Indenture Trustee shall
require a written opinion of counsel (which will not be at the expense of
the Depositor, any affiliate of the Depositor or the Indenture Trustee)
which is satisfactory to the Depositor and the Indenture Trustee be
delivered to the Indenture Trustee and the Depositor to the effect that
such transfer will not violate the 1933 Act, in each case in accordance
with any applicable securities laws of any state of the United States. We
will notify any purchaser of the Security from us of the above resale
restrictions, if then applicable. We further understand that in connection
with any transfer of the Security by us that the Depositor and the
Indenture Trustee may request, and if so requested we will furnish such
certificates and other information as they may reasonably require to
confirm that any such transfer complies with the foregoing restrictions. We
understand that no sale, pledge or other transfer may be made to any one
person of Securities with a face amount of less than $100,000 and, in the
case of any person acting on behalf of one or more third parties (other
than a bank (as defined in Section 3(a)((2) of the 1933 Act) acting in its
fiduciary capacity), of Securities with a face amount of less than $100,000
for each such third party.
2. [CHECK ONE]
|_| (a) We are an "accredited investor" (as defined in Rule
501(a)(1),(2),(3) or (7) of Regulation D under the Securities Act)
acting for our own account (and not for the account of others) or as a
fiduciary or agent for others (which others also are Accredited
Investors unless we are a bank acting in its fiduciary capacity). We
have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our investment
in the Security, and we and any accounts for which we are acting are
each able to bear the economic risk of our or their investment for an
indefinite period of time. We are acquiring the Security for
investment and not with a view to, or for offer and sale in connection
with, a public distribution.
|_| (b) We are a "qualified institutional buyer" as defined under Rule
144A under the 1933 Act and are acquiring the Security for our own
account (and not for the account of others) or as a fiduciary or agent
for others (which others also are "qualified institutional buyers").
We are familiar with Rule 144A under the 1933 Act and are aware that
the seller of the Security and other parties intend to rely on the
statements made herein and the exemption from the registration
requirements of the 1933 Act provided by Rule 144A.
3. We understand that the Depositor, the Trust, Greenwich Capital Markets,
Inc. ("Greenwich") and others will rely upon the truth and accuracy of the
foregoing acknowledgments, representations and agreements, and we agree that if
any of the acknowledgments, representations and warranties deemed to have been
made by us by our purchase of the Securities, for our own account or for one or
more accounts as to each of which we exercise sole investment discretion, are no
longer accurate, we shall promptly notify the Depositor and Greenwich.
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By:
-------------------------------
Name:
Title:
Date:
-----------------------------
D-3
<PAGE>
EXHIBIT E
FORM OF DEPOSITORY AGREEMENT
E-1
TRUST AGREEMENT
between
AUTORICS II, INC.,
as Depositor,
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
Dated as of June 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms..................................................................I-1
SECTION 1.02. Other Definitional Provisions......................................................I-4
ARTICLE II
Organization
SECTION 2.01. Name..............................................................................II-1
SECTION 2.02. Office............................................................................II-1
SECTION 2.03. Purposes and Powers...............................................................II-1
SECTION 2.04. Appointment of Owner Trustee......................................................II-1
SECTION 2.05. Initial Capital Contribution of Owner Trust
Estate............................................................................II-2
SECTION 2.06. Declaration of Trust..............................................................II-2
SECTION 2.07. Liability of the Owners...........................................................II-2
SECTION 2.08. Title to Trust Property...........................................................II-3
SECTION 2.09. Situs of Trust....................................................................II-3
SECTION 2.10. Representations and Warranties of the
Depositor.........................................................................II-3
SECTION 2.11. Maintenance of the Demand Note....................................................II-4
SECTION 2.12. Federal Income Tax Provisions.....................................................II-4
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Ownership................................................................III-1
SECTION 3.02. The Trust Certificates...........................................................III-1
SECTION 3.03. Authentication of Trust Certificates.............................................III-1
SECTION 3.04. Registration of Transfer and Exchange of
Trust Certificates...............................................................III-1
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust
Certificates.....................................................................III-4
SECTION 3.06. Persons Deemed Owners............................................................III-4
SECTION 3.07. Access to List of Certificateholders' Names
and Addresses....................................................................III-5
SECTION 3.08. Maintenance of Office or Agency..................................................III-5
SECTION 3.09. Appointment of Paying Agent......................................................III-5
i
SECTION 3.10. Ownership by Depositor of Trust
Certificates.....................................................................III-6
SECTION 3.11. Book-Entry Trust Certificates....................................................III-6
SECTION 3.12. Notices to Clearing Agency.......................................................III-7
SECTION 3.13. Definitive Trust Certificates....................................................III-7
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ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to Owners with Respect to
Certain Matters...................................................................IV-1
SECTION 4.02. Action by Owners with Respect to Certain
Matters...........................................................................IV-1
SECTION 4.03. Action by Owners with Respect to Bankruptcy.......................................IV-2
SECTION 4.04. Restrictions on Owners' Power.....................................................IV-2
SECTION 4.05. Majority Control..................................................................IV-2
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account.....................................................V-1
SECTION 5.02. Application of Trust Funds.........................................................V-1
SECTION 5.03. Method of Payment..................................................................V-1
SECTION 5.04. No Segregation of Moneys; No Interest..............................................V-2
SECTION 5.05. Accounting and Reports to the Noteholders,
Owners, the Internal Revenue Service and
Others.............................................................................V-2
SECTION 5.06. Signature on Returns...............................................................V-2
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority.................................................................VI-1
SECTION 6.02. General Duties....................................................................VI-1
SECTION 6.03. Action upon Instruction...........................................................VI-1
SECTION 6.04. No Duties Except as Specified in this
Agreement or in Instructions......................................................VI-2
SECTION 6.05. No Action Except Under Specified Documents
or Instructions...................................................................VI-3
SECTION 6.06. Restrictions......................................................................VI-3
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties..................................................VII-1
SECTION 7.02. Furnishing of Documents..........................................................VII-2
SECTION 7.03. Representations and Warranties...................................................VII-2
SECTION 7.04. Reliance; Advice of Counsel......................................................VII-3
SECTION 7.05. Not Acting in Individual Capacity................................................VII-3
iii
SECTION 7.06. Owner Trustee Not Liable for Trust
Certificates or Receivables......................................................VII-4
SECTION 7.07. Owner Trustee May Own Trust Certificates and
Notes............................................................................VII-4
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses...............................................VIII-1
SECTION 8.02. Indemnification.................................................................VIII-1
SECTION 8.03. Payments to the Owner Trustee...................................................VIII-1
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement....................................................IX-1
SECTION 9.02. Dissolution upon Bankruptcy of the
Depositor.........................................................................IX-2
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee.........................................X-1
SECTION 10.02. Resignation or Removal of Owner Trustee............................................X-1
SECTION 10.03. Successor Owner Trustee............................................................X-2
SECTION 10.04. Merger or Consolidation of Owner Trustee...........................................X-2
SECTION 10.05. Appointment of Co-Trustee or Separate
Trustee............................................................................X-3
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments........................................................XI-1
SECTION 11.02. No Legal Title to Owner Trust Estate in
Owners............................................................................XI-2
SECTION 11.03. Limitations on Rights of Others...................................................XI-3
SECTION 11.04. Notices...........................................................................XI-3
SECTION 11.05. Severability......................................................................XI-3
SECTION 11.06. Separate Counterparts.............................................................XI-3
SECTION 11.07. Successors and Assigns............................................................XI-4
SECTION 11.08. Covenants of the Depositor........................................................XI-4
SECTION 11.09. No Petition.......................................................................XI-4
SECTION 11.10. No Recourse.......................................................................XI-4
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SECTION 11.11. Headings..........................................................................XI-5
SECTION 11.12. GOVERNING LAW.....................................................................XI-5
SECTION 11.13. [Reserved.].......................................................................XI-5
SECTION 11.14. Depositor Payment Obligation......................................................XI-5
EXHIBIT A Form of Trust Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Transferor Certificate
EXHIBIT D Form of Investment Letter
EXHIBIT E Form of Depository Agreement
ANNEX A Tax Partnership Provisions
</TABLE>
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TRUST AGREEMENT dated as of June 1, 1997, 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 1, 1997, 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.
"Book-Entry Trust Certificate" shall mean a beneficial interest in the
Trust Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.11.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code (section) 3801 et seq., as the same may be amended
from time to time.
"Certificate Depository Agreement" shall mean the agreement dated June
27, 1997, among the Trust, the Owner Trustee, the Administrator and The
Depository Trust Company, as the initial Clearing Agency, substantially in the
form attached hereto as Exhibit E, relating to the Trust Certificates, as the
same may be amended and supplemented from time to time.
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<PAGE>
"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.
"Certificate Owner" shall mean, with respect to a Book-Entry Trust
Certificate, a Person who is the beneficial owner of such Book-Entry Trust
Certificate, as reflected on the books of the Clearing Agency or on the books of
a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Certificateholder" or "Holder" shall mean a Person in whose name a
Trust Certificate is registered.
"Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee located at 1100 N.
Market Street, Rodney Square North, Wilmington, DE 19890, Attn: Corporate Trust
Administration, or at such other address as the Owner Trustee may designate by
notice to the Owners and the Depositor, or the principal corporate trust office
of any successor Owner Trustee at the address designated by such successor Owner
Trustee by notice to the Owners and the Depositor.
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<PAGE>
"Custodial Agreement" shall mean the Custodial Agreement dated as of
June 1, 1997, between the Trust and Bankers Trust Company, as Custodian.
"Definitive Trust Certificates" shall have the meaning set forth in
Section 3.11.
"Demand Note" shall mean, in the case of the Depositor, the Demand Note
dated June 27, 1997, 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 1, 1997 between
the Trust and Bankers Trust Company, as Indenture Trustee.
"Initial Certificate Balance" shall mean $13,507,436.
"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,
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<PAGE>
all funds on deposit from time to time in the Trust Accounts and the Certificate
Distribution Account and all other property of the Trust from time to time,
including any rights of the Owner Trustee and the Trust pursuant to the Sale and
Servicing Agreement and the Administration Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
"Paying Agent" shall mean any paying agent or co-paying agent appointed
pursuant to Section 3.09 and shall initially be Wilmington Trust Company.
"Person" shall mean any individual, corporation, estate, partnership,
joint venture, association, joint stock company, trust (including any
beneficiary thereof), unincorporated organization, or government or any agency
or political subdivision thereof.
"Record Date" shall mean, with respect to any Distribution Date, the
close of business on the last day of the month immediately preceding such
Distribution Date.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
Agreement dated as of June 1, 1997, among the Trust, as issuer, the Depositor,
as seller, NAL Acceptance Corporation, as servicer and LSI Financial Group, 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.
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<PAGE>
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms
used and not otherwise defined herein have the meanings assigned to them in the
Sale and Servicing Agreement or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this 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.
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<PAGE>
ARTICLE II
Organization
SECTION 2.01. Name. The Trust created hereby shall be known as "NAL
Auto Trust 1997-2" 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;
(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
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<PAGE>
conservation of the Owner Trust Estate and the making of distributions
to the Owners and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.04. Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Depositor
shall pay organizational expenses of the Trust as they may arise or shall, upon
the request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject to
the obligations of the Trust under the Basic Documents. It is the intention of
the parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall be treated as a partnership,
with the assets of the partnership being the Receivables and other assets held
by the Trust, the partners of the partnership being the Certificateholders
(including the Depositor, in its capacity as recipient of distributions from the
Reserve Account), and the Notes being debt of the partnership. The parties agree
that, unless otherwise required by appropriate tax authorities, the Trust will
file or cause to be filed annual or other necessary returns, reports and other
forms consistent with the characterization of the Trust as a partnership for
such tax purposes. Effective as of the date hereof, the Owner Trustee shall have
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<PAGE>
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.
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
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<PAGE>
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.
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<PAGE>
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a
party or by which it is bound; nor result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement or other instrument (other than pursuant to
the Basic Documents); nor violate any law or, to the best of the
Depositor's knowledge, any order, rule or regulation applicable to the
Depositor of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
(e) There are no proceedings or investigations pending or, to
the Depositor's best knowledge, threatened before any court, regulatory
body, administrative agency or other governmental instrumentality
having jurisdiction over the Depositor or its properties: (A) asserting
the invalidity of this Agreement, (B) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement
or (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Depositor of its obligations
under, or the validity or enforceability of, this Agreement.
SECTION 2.11. Maintenance of the Demand Note. To the fullest extent
permitted by applicable law, the Depositor agrees that it shall not sell,
convey, pledge, transfer or otherwise dispose of the Demand Note.
SECTION 2.12. Federal Income Tax 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.
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<PAGE>
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.05 and until the issuance of
the Trust Certificates, the Depositor shall be the sole beneficiary of the
Trust.
SECTION 3.02. The Trust Certificates. The Trust Certificates shall be
issued in minimum denominations of $100,000 and in integral multiples of $1,000
in excess thereof; provided, however, that the Trust Certificates issued to the
Depositor pursuant to Section 3.10 may be issued in such denomination as
required to include any residual amount. The Trust Certificates shall be
executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Trust Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the Trust,
shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Trust Certificates
or did not hold such offices at the date of authentication and delivery of such
Trust Certificates.
A transferee of a Trust Certificate shall become a Certificateholder
and shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Trust
Certificate duly registered in such transferee's name pursuant to Section 3.04.
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
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<PAGE>
Owner Trustee, by manual signature; such authentication shall constitute
conclusive evidence that such Trust Certificate shall have been duly
authenticated and delivered hereunder. All Trust Certificates shall be dated the
date of their authentication.
SECTION 3.04. Registration of Transfer and Exchange of Trust
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.08, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Trust Certificates and of
transfers and exchanges of Trust Certificates as herein provided. Wilmington
Trust Company shall be the initial Certificate Registrar.
The Certificates have not been and will not be registered under the
Securities Act and will not be listed on any exchange. No transfer of a
Certificate shall be made unless such transfer is made pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws or is exempt from the registration requirements under said Act
and such state securities laws. In the event that a transfer is to be made in
reliance upon an exemption from the Securities Act and state securities laws, in
order to assure compliance with the Securities Act and such laws, the Holder
desiring to effect such transfer and such Holder's prospective transferee shall
each certify to the Owner Trustee and the Depositor in writing the facts
surrounding the transfer in substantially the forms set forth in Exhibit C (the
"Transferor Certificate") and Exhibit D (the "Investment Letter"). Except in the
case of a transfer as to which the proposed transferee has provided an
Investment Letter with respect to a Rule 144A transaction, there shall also be
delivered to the Owner Trustee an opinion of counsel that such transfer may be
made pursuant to an exemption from the Securities Act and state securities laws,
which opinion of counsel shall not be an expense of the Trust, the Owner Trustee
or the Indenture Trustee (unless it is the transferee from whom such opinion is
to be obtained) or of the Depositor or NAL; provided that such opinion of
counsel in respect of the applicable state securities laws may be a memorandum
of law rather than an opinion if such counsel is not licensed in the applicable
jurisdiction. The Depositor shall provide to any Holder of a Certificate and any
prospective transferee designated 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)
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<PAGE>
for transfer of any such Certificate without registration thereof under the
Securities Act pursuant to the registration exemption provided by Rule 144A.
Each Holder of a Certificate desiring to effect such a transfer shall, and does
hereby agree to, indemnify the Issuer, the Owner Trustee, the Indenture Trustee
and the Depositor against any liability that may result if the transfer is not
so exempt or is not made in accordance with federal and state securities laws.
No transfer of a Trust Certificate shall be made to any Person unless
the Owner Trustee has received (A) a certificate in the form of paragraph 3 to
the Investment Letter attached hereto as Exhibit D from such Person to the
effect that such Person is not (i) an employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a plan
described in Section 4975(e)(1) of the Code or (iii) any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity (each,
a "Benefit Plan"), (B) an opinion of counsel satisfactory to the Owner Trustee
and the Depositor to the effect that the purchase and holding of such Trust
Certificate will not constitute or result in the assets of the Issuer being
deemed to be "plan assets" subject to the prohibited transactions provisions of
ERISA or Section 4975 of the Code and will not subject the Owner Trustee, the
Indenture Trustee or the Depositor to any obligation in addition to those
undertaken in the Basic Documents or (C) if such Person is an insurance company,
a representation that such Person is an insurance company that is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in section v(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates and any deemed extension of credit from a Certificateholder which
is a party in interest to a Plan, the assets of which are held by such
"Insurance Company" are covered under PTCE 95-60; provided, however, that the
Owner Trustee will not require such certificate or opinion in the event that, as
a result of a change of law or otherwise, counsel satisfactory to the Owner
Trustee has rendered an opinion to the effect that the purchase and holding of a
Trust Certificate by a Benefit Plan or a Person that is purchasing or holding
such a Trust Certificate with the assets of a Benefit Plan will not constitute
or result in a prohibited transaction under ERISA or Section 4975 of the Code.
The preparation and delivery of the certificate and opinions referred to above
shall not be an expense of the Issuer, the Owner Trustee, the Indenture Trustee,
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the Servicer or the Depositor. The transferee of a beneficial interest in a
Book-Entry Trust Certificate shall be deemed to represent either (1) that it is
not acting on behalf of a Benefit Plan and is not using the assets of the
Benefit Plan to acquire such interest or (2) that it is an insurance company and
is acquiring such interest with funds contained in an insurance company general
account and that the purchase and holding of such interest is covered under
Sections I and III of PTCE 95-60. Any attempted or purported transfer in
violation of these transfer restrictions will be null and void and will vest no
rights in any purported transferee.
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
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governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make, and the Certificate Registrar shall not register
transfers or exchanges of, Trust Certificates for a period of 15 days preceding
the due date for any payment with respect to the Trust Certificates.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.
If (a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Trust Certificate has been acquired by a
bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute and
the Owner Trustee shall authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Trust Certificate, a new Trust
Certificate of like tenor and denomination. In connection with the issuance of
any new Trust Certificate under this Section, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Trust Certificate issued pursuant to this Section shall constitute
conclusive evidence of ownership in the Trust, as if originally issued, whether
or not the lost, stolen or destroyed Trust Certificate shall be found at any
time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a
Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar or any Paying Agent may treat the Person in whose name any
Trust Certificate is registered in the Certificate Register as the owner of such
Trust Certificate for the purpose of receiving distributions pursuant to
Section 5.02 and for all other purposes whatsoever, and none of the Owner
Trustee, the Certificate Registrar or any Paying Agent shall be bound by any
notice to the contrary.
SECTION 3.07. Access to List of Certificateholders' Names and
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
Servicer and the Depositor, within 15 days after receipt by the Owner Trustee of
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a written request therefor from the Servicer or the Depositor, a list, in such
form as the Servicer or the Depositor may reasonably require, of the names and
addresses of the Certificateholders as of the most recent Record Date. If three
or more Certificateholders or one or more Holders of Trust Certificates
evidencing not less than 25% of the Certificate Balance apply in writing to the
Owner Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Trust Certificates and such application is
accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each Holder, by
receiving and holding a Trust Certificate, shall be deemed to have agreed not to
hold any of the Depositor, the Certificate Registrar or the Owner Trustee
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
SECTION 3.08. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic Documents
may be served. The Owner Trustee initially designates Harris Trust Company of
New York, 77 Water Street, 4th Floor, New York, New York 10005, Attention:
Wilbert Myles, as its office for such purposes. The Owner Trustee shall give
prompt written notice to the Depositor and to the Certificateholders of any
change in the location of the Certificate Register or any such office or agency.
SECTION 3.09. Appointment of Paying Agent. The Paying Agent shall make
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02 and shall report the amounts of such distributions to
the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. The Owner Trustee may revoke such power and
remove the Paying Agent if the Owner Trustee determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect. The Owner Trustee will be the initial Paying
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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 the Depositor's
Trust Certificate to contain a legend stating "THIS CERTIFICATE IS
NON-TRANSFERABLE".
SECTION 3.11. Book-Entry Trust Certificates. The Trust Certificates,
upon original issuance, will be issued in the form of a typewritten Trust
Certificate or Trust Certificates representing Book-Entry Trust Certificates, to
be delivered to The Depository Trust Company, the initial Clearing Agency, by,
or on behalf of, the Trust; provided, however, that one Definitive Trust
Certificate may be issued to the Depositor pursuant to Section 3.10. Such Trust
Certificate or Trust Certificates shall initially be registered on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a definitive Trust
Certificate representing such Certificate Owner's interest in such Trust
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Certificate, except as provided in Section 3.13. Unless and until definitive,
fully registered Trust Certificates (the "Definitive Trust Certificates") have
been issued to Certificate Owners pursuant to Section 3.13:
(a) The provisions of this Section shall be in full force and effect;
(b) The Certificate Registrar and the Owner Trustee shall be entitled
to deal with the Clearing Agency for all purposes of this Agreement (including
the payment of principal of and interest on the Trust Certificates and the
giving of instructions or directions hereunder) as the sole Holder of the Trust
Certificates and shall have no obligation to the Certificate Owners;
(c) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control;
(d) The rights of Certificate Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Certificate Depository Agreement,
unless and until Definitive Trust Certificates are issued pursuant to Section
3.13, the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments of principal of
and interest on the Trust Certificates to such Clearing Agency Participants; and
(e) Whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Trust Certificates
evidencing a specified percentage of the Certificate Balance, the Clearing
Agency shall be deemed to represent such percentage only to the extent that it
has received instructions to such effect from Certificate Owners and/or Clearing
Agency Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Trust Certificates and has
delivered such instructions to the Owner Trustee.
SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Trust Certificates shall have been issued to Certificate
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Owners pursuant to Section 3.14, the Owner Trustee shall give all such notices
and communications specified herein to be given to Certificateholders to the
Clearing Agency, and shall have no obligations to the Certificate Owners.
SECTION 3.13. Definitive Trust Certificates. If (i) the Administrator
advises the Owner Trustee in writing that the Clearing Agency is no longer
willing or able to properly discharge its responsibilities with respect to the
Trust Certificates and the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Owner 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, Certificate Owners representing beneficial interests aggregating at
least a majority of the Certificate Balance advise the Clearing Agency in
writing that the continuation of a book-entry system through the Clearing Agency
is no longer in the best interest of the Certificate Owners, then the Clearing
Agency shall notify all Certificate Owners and the Owner Trustee of the
occurrence of any such event and of the availability of the Definitive Trust
Certificates to Certificate Owners requesting the same. Upon surrender to the
Owner Trustee of the typewritten Trust Certificate or Trust Certificates
representing the Book-Entry Trust Certificates by the Clearing Agency,
accompanied by registration instructions, the Owner Trustee shall execute and
authenticate the Definitive Trust Certificates in accordance with the
instructions of the Clearing Agency. Neither the Certificate Registrar nor the
Owner 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 Trust Certificates, the Owner
Trustee shall recognize the Holders of the Definitive Trust Certificates as
Certificateholders. The Definitive Trust Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Owner Trustee, as evidenced by its execution thereof.
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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
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Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Owners with Respect to Certain Matters. The
Owner Trustee shall not have the power, except upon the written direction of the
Owners, to (a) remove the Administrator under the Administration Agreement
pursuant to Section 8 thereof, (b) appoint a successor Administrator under the
Administration Agreement pursuant to Section 8 thereof, (c) remove the Servicer
under the Sale and Servicing Agreement pursuant to Section 8.01 thereof or (d)
except as expressly provided in the Basic Documents, sell the Receivables after
the termination of the Indenture. The Owner Trustee shall take the actions
referred to in the preceding sentence only upon written instructions signed by
the Owners.
SECTION 4.03. Action by Owners with Respect to Bankruptcy. The Owner
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the delivery to the Owner Trustee by each such Owner of a certificate
certifying that such Owner reasonably believes that the Trust is insolvent.
SECTION 4.04. Restrictions on Owners' Power. The Owners shall not
direct the Owner Trustee to take or to refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the Owner
Trustee under this 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.
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ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for
the benefit of the Certificateholders, shall establish and maintain in the name
of the Trust an Eligible Deposit Account (the "Certificate Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Certificate Distribution Account and
in all proceeds thereof. Except as otherwise expressly provided herein, the
Certificate Distribution Account shall be under the sole dominion and control of
the Owner Trustee for the benefit of the Certificateholders. If, at any time,
the Certificate Distribution Account ceases to be an Eligible Deposit Account,
the Owner Trustee (or the Depositor on behalf of the Owner Trustee, if the
Certificate Distribution Account is not then held by the Owner Trustee or an
affiliate thereof) shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent) establish a
new Certificate Distribution Account as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Certificate Distribution
Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution
Date, the Owner Trustee will distribute to Certificateholders, on a pro rata
basis, amounts deposited in the Certificate Distribution Account pursuant to
Sections 5.05 and 5.06 of the Sale and Servicing Agreement with respect to such
Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to Section 5.07 of the 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
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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 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 6(e) of Annex A hereto 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
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an Owner to sign such documents, in which case such documents shall be signed by
the Depositor.
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ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is to be
a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and, in
each case, in such form as the Depositor shall approve, as evidenced
conclusively by the Owner Trustee's execution thereof. In addition to the
foregoing, the Owner Trustee is authorized, but shall not be obligated, to take
all actions required of the Trust pursuant to the Basic Documents. The Owner
Trustee is further authorized from time to time to take such action as the
Administrator recommends with respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the Basic Documents to which the Trust is a
party and to administer the Trust in the interest of the Owners, subject to the
Basic Documents and in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any Basic Document, and the Owner Trustee shall not be held
liable for the default or failure of the Administrator to carry out its
obligations under the Administration Agreement.
SECTION 6.03. Action upon Instruction. (a) Subject to Article IV and in
accordance with the terms of the Basic Documents, the Owners may by written
instruction direct the Owner Trustee in the management of the Trust. Such
direction may be exercised at any time by written instruction of the Owners
pursuant to Article IV.
(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
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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.
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ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts, but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or gross negligence (or negligence in
the case of handling funds), (ii) for liabilities arising from the failure by
the Owner Trustee to perform obligations expressly undertaken by it in the last
sentence of Section 6.04 hereof, (iii) for any investments made by the Owner
Trustee with Wilmington Trust Company (in its individual capacity) in its
commercial capacity, (iv) in the case of the inaccuracy of any representation or
warranty contained in Section 7.03 expressly made by the Owner Trustee or (v)
for federal or Delaware taxes, fees or other charges, based on or measured by
any fees, commissions or compensation received by the Owner Trustee in
connection with any of the transactions contemplated by this Agreement or any of
the Basic Documents. In particular, but not by way of limitation (and subject to
the exceptions set forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment
made by a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or any Owner;
(c) No provision of this Agreement or any Basic Document shall require
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;
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(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Depositor or for the form, character, genuineness, sufficiency, value or
validity of any of the Owner Trust Estate, or for or in respect of the validity
or sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume or incur any liability, duty or obligation to any Noteholder or to
any Owner, other than as expressly provided for herein or expressly agreed to in
the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Depositor, the Indenture Trustee, the Servicer or the
Backup Servicer under any of the Basic Documents or otherwise, and the Owner
Trustee shall have no obligation or liability to perform the obligations of the
Trust under this Agreement or the Basic Documents that are required to be
performed by the Administrator under the Administration Agreement, the Indenture
Trustee under the Indenture or the Servicer or AUTORICS II, Inc., as Depositor
under the Sale and Servicing Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Basic Document, at the request, order or direction of any of
the Owners, unless such Owners have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its negligence or willful misconduct in the
performance of any such act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish
to the Owners promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
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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, 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,
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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,
including, without limitation: the existence, condition and ownership of any
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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.
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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 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.
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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 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
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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) Holders (as defined in the
Indenture) of Notes representing more than 50% of the Outstanding Amount of the
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
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shall, upon receipt of written notice of such Insolvency Event from the Owner
Trustee or the Depositor, give prompt written notice to the Noteholders of the
occurrence of such event; provided, however, that any failure to give a notice
required by this sentence shall not prevent or delay, in any manner, a
termination of the Trust pursuant to the first sentence of this Section 9.02.
Upon a termination pursuant to this Section, the Owner Trustee shall direct the
Indenture Trustee promptly to sell the assets of the Trust (other than the Trust
Accounts and the Certificate Distribution Account), in a commercially reasonable
manner and on commercially reasonable terms. The proceeds of such a sale of the
assets of the Trust shall be treated as collections under the Sale and Servicing
Agreement.
<PAGE>
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
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have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign after
written request therefor by the Administrator, or if at any time the Owner
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Administrator may remove the Owner
Trustee. If the Administrator shall remove the Owner Trustee under the authority
of the immediately preceding sentence, the Administrator shall promptly appoint
a successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed and one
copy to the successor Owner Trustee, and shall pay all fees owed to the outgoing
Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each Rating Agency.
SECTION 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator and to its predecessor Owner Trustee an instrument accepting
such appointment under this Agreement, and thereupon the resignation or removal
of the predecessor Owner Trustee shall become effective, and such successor
Owner Trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its predecessor
under this Agreement, with like effect as if originally named as Owner Trustee.
The predecessor Owner Trustee shall upon payment of its fees and expenses
deliver to the successor Owner Trustee all documents and statements and monies
held by it under this Agreement; and the Administrator and the predecessor Owner
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Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within 10 days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.
SECTION 10.04. Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, without the execution or filing of any instrument or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, that such corporation shall be eligible pursuant to
Section 10.01 and, provided, further, that the Owner Trustee shall mail notice
of such merger or consolidation to each Rating Agency.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Administrator and Owner Trustee to act as co-trustee, jointly
with the Owner Trustee, or as separate trustee or separate trustees, of all or
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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 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
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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.
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ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments. This Agreement may be
amended by the Depositor and the Owner Trustee, with prior written notice to
each Rating Agency, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any material respect the interests
of any Noteholder or Certificateholder.
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.
No amendment to this Agreement shall be recognized or be effective
without the written consent of the Trustee and receipt by the Trustee of an
Opinion of Counsel to the effect that such amendment will not (i) cause the
Trust to be treated as an association taxable as a corporation or as a
publicly-traded partnership for federal income tax purposes or (ii) cause the
Trust to be subject to an entity-level tax for State of Florida or State of
Arkansas tax purposes.
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Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and each
Rating Agency.
It shall not be necessary for the consent of Certificateholders,
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment that affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
In connection with the execution of any amendment to this Trust
Agreement or any amendment of any other agreement to which the Issuer is a
party, the Owner Trustee shall be entitled to receive and conclusively rely upon
an Opinion of Counsel to the effect that such amendment is authorized or
permitted by the Basic Documents and that all conditions precedent in the Basic
Documents for the execution and delivery thereof by the Issuer or the Owner
Trustee, as the case may be, have been satisfied.
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners. The
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership interest therein only in accordance with Articles V and IX.
No transfer, by operation of law or otherwise, of any right, title or interest
of the Owners to and in their ownership interest in the Owner Trust Estate shall
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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: Robert Carlson; or, as to each party, at such other
address as shall be designated by such party in a written notice to each other
party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 11.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
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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
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against the Depositor or the Trust, or join in any institution against the
Depositor or the Trust of, any bankruptcy proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, this Agreement or any of the
Basic Documents.
SECTION 11.10. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Depositor, the Servicer, the Administrator, the Owner
Trustee, the Indenture Trustee or any Affiliate thereof and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated in this Agreement, the Trust Certificates or the Basic
Documents.
SECTION 11.11. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. [Reserved.]
SECTION 11.14. Depositor Payment Obligation. The Depositor shall be
responsible for payment of the Administrator's fees under the Administration
Agreement and shall reimburse the Administrator for all expenses and liabilities
of the Administrator incurred thereunder. In addition, the Depositor shall be
responsible for the payment of all fees and expenses of the Trust, the Owner
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.
* * * * * *
XI-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
AUTORICS II, INC., as Depositor,
by: -------------------------------
Name: Robert J. Carlson
Title: Vice President
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee,
by: -------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF TRUST CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED TO THE NOTES, AS AND TO THE EXTENT SET FORTH IN
THE SALE AND SERVICING AGREEMENT.
UNLESS THIS TRUST CERTIFICATE 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 TRUST
CERTIFICATE 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.
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
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<PAGE>
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 WHO THE PROSPECTIVE TRANSFEROR REASONABLY BELIEVES
AFTER DUE INQUIRY IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A), ACTING FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A
FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QUALIFIED INSTITUTIONAL
BUYERS) TO WHOM NOTICE IS GIVEN THAT THE SALE, PLEDGE OR TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A, OR (iv) SUCH SALE, PLEDGE OR OTHER TRANSFER IS
OTHERWISE MADE IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
1933 ACT, IN WHICH CASE THE OWNER TRUSTEE SHALL REQUIRE THAT BOTH THE
PROSPECTIVE TRANSFEROR AND THE PROSPECTIVE TRANSFEREE CERTIFY TO THE OWNER
TRUSTEE AND THE DEPOSITOR IN WRITING THE FACTS SURROUNDING SUCH TRANSFER, WHICH
CERTIFICATION SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE OWNER TRUSTEE
AND THE DEPOSITOR. EXCEPT IN THE CASE OF A TRANSFER DESCRIBED IN CLAUSES (i) OR
(iii) ABOVE, THE OWNER TRUSTEE SHALL REQUIRE A WRITTEN OPINION OF COUNSEL (WHICH
SHALL NOT BE AT THE EXPENSE OF THE DEPOSITOR, ANY AFFILIATE OF THE DEPOSITOR OR
THE OWNER TRUSTEE) SATISFACTORY TO THE DEPOSITOR AND THE OWNER TRUSTEE TO THE
EFFECT THAT SUCH TRANSFER WILL NOT VIOLATE THE 1933 ACT. NO SALE, PLEDGE OR
OTHER TRANSFER MAY BE MADE TO ANY ONE PERSON FOR SECURITIES WITH A FACE AMOUNT
OF LESS THAN $100,000 AND, IN THE CASE OF ANY PERSON ACTING ON BEHALF OF ONE OR
MORE THIRD PARTIES (OTHER THAN A BANK (AS DEFINED IN SECTION 3(a)(2) OF THE 1933
ACT) ACTING IN ITS FIDUCIARY CAPACITY), FOR SECURITIES WITH A FACE AMOUNT OF
LESS THAN $100,000 FOR EACH SUCH THIRD PARTY.
EACH SECURITYHOLDER, BY ITS ACCEPTANCE OF THIS SECURITY, COVENANTS AND AGREES
THAT SUCH SECURITYHOLDER, SHALL NOT, PRIOR TO THE DATE THAT IS ONE YEAR AND ONE
DAY AFTER THE TERMINATION OF THE TRUST AGREEMENT, ACQUIESCE, PETITION OR
OTHERWISE INVOKE OR CAUSE THE TRUST, THE DEPOSITOR OR THE SELLER TO INVOKE THE
PROCESS OF ANY COURT OR GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF COMMENCING OR
SUSTAINING A CASE AGAINST THE TRUST, THE DEPOSITOR OR THE SELLER UNDER ANY
FEDERAL OR STATE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR SIMILAR LAW, OR
APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, TRUSTEE, CUSTODIAN, SEQUESTRATOR OR
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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 WILL NOT 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 AN
EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT SECURITY ACT OF 1974, AS AMENDED ("ERISA"), SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR A GOVERNMENTAL
PLAN (AS DEFINED IN SECTION 3(32) OF ERISA) SUBJECT TO ANY FEDERAL, STATE OR
LOCAL LAW ("SIMILAR LAW") WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, A "PLAN") AND IS NOT
USING THE ASSETS OF A PLAN SUBJECT TO ERISA OR THE CODE TO INVEST IN THE
CERTIFICATES, (2) IF THE TRANSFEREE IS A PLAN, OR IS ACTING ON BEHALF OF A PLAN
TO INVEST IN THIS CERTIFICATE, 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
SUBJECT THE DEPOSITOR, THE SELLER, THE SERVICER, THE BACKUP SERVICER, THE OWNER
TRUSTEE, OR THE INDENTURE TRUSTEE TO ANY OBLIGATION IN ADDITION TO THOSE
UNDERTAKEN IN THE TRUST AGREEMENT, THE SALE AND SERVICING AGREEMENT AND THE
ADMINISTRATION AGREEMENT, INCLUDING ANY LIABILITIES ASSESSED FOR "PROHIBITED
TRANSACTIONS" UNDER ERISA, THE CODE OR SIMILAR LAW (3) IF THE TRANSFEREE IS AN
INSURANCE COMPANY, A REPRESENTATION THAT THE TRANSFEREE IS AN INSURANCE COMPANY
THAT IS ACQUIRING 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.
THE TRANSFEREE OF A BENEFICIAL INTEREST IN A BOOK-ENTRY TRUST CERTIFICATE SHALL
BE DEEMED TO REPRESENT EITHER (1) THAT IT IS NOT ACTING ON BEHALF OF A PLAN AND
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<PAGE>
IS NOT USING THE ASSETS OF A PLAN TO ACQUIRE SUCH INTEREST OR (2) THAT IT IS AN
INSURANCE COMPANY AND IS ACQUIRING SUCH INTEREST WITH FUNDS CONTAINED IN AN
INSURANCE COMPANY GENERAL ACCOUNT AND THAT THE PURCHASE AND HOLDING OF SUCH
INTEREST IS COVERED UNDER SECTION I AND III OF PTCE 95-60.
[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-4
<PAGE>
NUMBER $_________
R- CUSIP NO. ______ __ _
NAL AUTO TRUST 1997-2
9.10% 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, vans 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 1997-2 (the "Trust"), formed by
AUTORICS II, Inc., a Delaware corporation (the "Depositor").
A-5
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
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<PAGE>
The Trust was created pursuant to a Trust Agreement dated as of June 1,
1997, (as amended or supplemented from time to time, the "Trust Agreement"),
between 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 1, 1997 (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 LSI Financial Group, as backup servicer, as applicable.
This Certificate is one of the duly authorized Certificates designated
as "9.10% Asset Backed Certificates" (herein called the "Trust Certificates").
Also issued under an Indenture dated as of June 1, 1997 (the "Indenture"),
between the Trust and Bankers Trust Company, as indenture trustee, are the Notes
designated as "7.75% Asset Backed Notes" (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 and to the extent set forth in the Sale and Servicing Agreement. [The
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<PAGE>
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 15, 1997, to the Person in whose name this Trust Certificate is
registered at the close of business on the last day of the month immediately
preceding such Distribution Date (the "Record Date"), such Certificateholder's
fractional undivided interest in the amount to be distributed to
Certificateholders on such Distribution Date. No distributions of principal will
be made on any Certificate on any Distribution Date until the full amount of
principal payable on the Notes on such Distribution Date has been paid in full;
provided, however, that if a Loss Trigger Event has occurred, no distributions
of principal (other than any Certificateholders' Principal Carryover Shortfall
outstanding as of the date of occurrence of such Loss Trigger Event) will be
made on any Certificate.
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, or Certificate Owner, by its acceptance of a
Trust Certificate or, in the case of a Certificate Owner, a beneficial interest
in a Trust Certificate, covenants and agrees that such Certificateholder or
Certificate Owner, as the case may be, 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,
A-8
<PAGE>
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Trust
Certificates, the Notes, the Trust Agreement or any of the Basic Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Trust Certificate or the making of any notation hereon.
Except as otherwise provided in the Trust Agreement and notwithstanding the
above, the final distribution on this Trust Certificate will be made after due
notice by the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Trust Certificate at the office or agency
maintained for that purpose by the Owner Trustee in the Borough of Manhattan,
The City of New York.
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Trust Certificate shall not entitle the Holder hereof to any benefit under
the Trust Agreement or the Sale and Servicing Agreement or be valid for any
purpose.
A-9
<PAGE>
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Trust Certificate to be duly
executed.
NAL AUTO TRUST 1997-2
by: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Owner Trustee
Dated: _____________ by: ________________________
Authorized Signatory
A-10
<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. 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
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<PAGE>
or such Holder's attorney duly authorized in writing, and thereupon one or more
new Trust Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is the Owner Trustee.
Except as provided in the Trust Agreement, the Trust Certificates are
issuable only as registered Trust Certificates without coupons in denominations
of $100,000 and in integral multiples of $1,000 in excess thereof. As provided
in the Trust Agreement and subject to certain limitations therein set forth,
Trust Certificates are exchangeable for new Trust Certificates of authorized
denominations evidencing the same aggregate denomination, as requested by the
Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Certificate Registrar or any such agent shall be affected by
any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement and
the Sale and Servicing Agreement and the disposition of all property held as
part of the Owner Trust Estate. The Servicer of the Receivables may at its
option purchase the Owner Trust Estate at a price specified in the Sale and
Servicing Agreement, and such purchase of the Receivables and other property of
the Trust will effect early retirement of the Trust Certificates; however, such
right of purchase is exercisable only as of the last day of any Collection
Period as of which the Pool Balance is less than or equal to 5% of the Original
Pool Balance.
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<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-13
<PAGE>
EXHIBIT B
CERTIFICATE OF TRUST OF
NAL AUTO TRUST 1997-2
THIS Certificate of Trust of NAL AUTO TRUST 1997-2 (the "Trust"), dated
June [ ], 1997, 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. C. (section) 3801 et seq.).
1. Name. The name of the business trust formed hereby is NAL
Auto Trust 1997-2.
2. Delaware Trustee. The name and business address of the
trustee of the Trust in the State of Delaware is Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001, Attn: Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be
effective upon filing with the Secretary of State.
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,
as trustee
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<PAGE>
By: _________________________________
Name:
Title:
B-2
<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 1997-2
9.10% Asset Backed Certificates
Ladies and Gentlemen:
In connection with our disposition of the above-referenced 9.10% 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]
C-1
<PAGE>
By: _________________________________
Authorized Officer
C-2
<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 9.10% Asset Backed Certificates (the "Certificates") of NAL
Auto Trust 1997-2 (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
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<PAGE>
also are "qualified institutional buyers") to whom notice is given that
the resale, pledge or transfer is being made in reliance on Rule 144A
or (iv) in a sale, pledge or other transfer made in a transaction
otherwise exempt from the registration requirements of the 1933 Act, in
which case the Owner Trustee shall require that both the prospective
transferor and the prospective transferee certify to the Owner Trustee
and the Depositor in writing the facts surrounding such transfer, which
certification shall be in form and substance satisfactory to the Owner
Trustee and the Depositor. Except in the case of a transfer described
in clauses (i) or (iii) above, the Owner Trustee shall require a
written opinion of counsel (which will not be at the expense of the
Depositor, any affiliate of the Depositor or the Owner Trustee)
satisfactory to the Depositor and the Owner Trustee be delivered to the
Depositor and the Owner Trustee to the effect that such transfer will
not violate the 1933 Act, in each case in accordance with any
applicable securities laws of any state of the United States. We will
notify any purchaser of the Certificates from us of the above resale
restrictions, if then applicable. We further understand that in
connection with any transfer of the Certificates by us that the
Depositor and the Owner Trustee may request, and if so requested we
will furnish such certificates and other information as they may
reasonably require to confirm that any such transfer complies with the
foregoing restrictions. We understand that no sale, pledge or other
transfer may be made to any one person of Certificates with a face
amount of less than $100,000 and, in the case of any person acting on
behalf of one or more third parties (other than a bank (as defined in
Section 3(a)((2) of the 1933 Act) acting in its fiduciary capacity), of
Certificates with a face amount of less than $100,000 for each such
third party.
2. [CHECK ONE]
|_| (a) We are an "accredited investor" (as defined in Rule
501(a)(1),(2),(3) or (7) of Regulation D under the
Certificates Act) acting for our own account (and not for
the account of others) or as a fiduciary or agent for
others (which others also are Accredited Investors unless
we are a bank acting in its fiduciary capacity). We have
such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and
risks of our investment in the Certificates, and we and
D-2
<PAGE>
any accounts for which we are acting are each able to
bear the economic risk of our or their investment for an
indefinite period of time. We are acquiring the
Certificates for investment and not with a view to, or
for offer and sale in connection with, a public
distribution.
|_| (b) We are a "qualified institutional buyer" as defined
under Rule 144A under the 1933 Act and are acquiring the
Certificates for our own account (and not for the account
of others) or as a fiduciary or agent for others (which
others also are "qualified institutional buyers"). We
are familiar with Rule 144A under the 1933 Act and are
aware that the seller of the Certificates and other
parties intend to rely on the statements made herein and
the exemption from the registration requirements of the
1933 Act provided by Rule 144A.
3. We are not (i) an employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) that is subject to the provisions of Title I of
ERISA, (ii) a plan described in Section 4975(e)(1) of the Code or (iii)
any entity whose underlying assets include plan assets by reason of a
plan's investment in the entity (each, a "Benefit Plan"). We hereby
acknowledge that no transfer of any Certificate shall be permitted to
be made to any person unless the Trustee has received (i) a certificate
from such transferee to the effect of the preceding sentence, (ii) an
opinion of counsel satisfactory to the Trustee to the effect that the
purchase and holding of any such Certificate will not constitute or
result in the assets of the Issuer being deemed to be "plan assets" and
subject to the prohibited transaction provisions of ERISA or Section
4975 of the Code and will not subject the Owner Trustee, the Indenture
Trustee or the Depositor to any obligation in addition to those
undertaken in the Basic Documents with respect to the Certificates
(provided, however, that the Owner Trustee will not require such
certificate or opinion in the event that, as a result of change of law
or otherwise, counsel satisfactory to the Owner Trustee has rendered an
opinion to the effect that the purchase and holding of any such
Certificate by a Benefit Plan or a Person that is purchasing or holding
any such Certificate with the assets of a Benefit Plan will not
D-3
<PAGE>
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
acquiring such Certificates with funds contained in an "Insurance
Company General Account" (as such term is defined in Section V(e) of
Prohibited Transaction Class Exemption 95- 60 ("PTCE 95-60)) and that
the purchase and holding of such Certificates and any deemed extension
of credit from a Certificateholder which is a party in interest to a
Plan, the assets of which are held by such "Insurance Company" are
covered under PTCE 95-60.
4. We understand that the Depositor, the Trust, Greenwich
Capital Financial Products, Inc. ("Greenwich") and others will rely
upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements, and we agree that if any of the
acknowledgments, representations and warranties deemed to have been
made by us by our purchase of the Certificates, for our own account or
for one or more accounts as to each of which we exercise sole
investment discretion, are no longer accurate, we shall promptly notify
the Depositor and Greenwich.
5. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By: _________________________________
Name:
Title:
Date: ________________________________
D-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"). The Servicer, on behalf of the Tax Partners, shall elect pursuant to
Treasury Regulation Section 301.7701-3(b)(1) to treat the Trust as a partnership
for federal income tax purposes (and shall not elect to treat the Trust or to
change the classification of the Trust to that of an association pursuant to
Treasury Regulation Section 301.7701-3(c)), and each Tax Partner irrevocably
agrees to be bound by such election.
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
<PAGE>
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 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.
2
<PAGE>
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.
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
3
<PAGE>
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 18 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
4
<PAGE>
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
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
5
<PAGE>
(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
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
6
<PAGE>
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
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
7
<PAGE>
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.
8
<PAGE>
(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)
(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.
9
<PAGE>
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. 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.
10
<PAGE>
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.
11
NAL FINANCIAL GROUP INC.
EXHIBIT 11
Statement Re: Computation of Per Share Earnings (Loss)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Quarters Ended For the Six Months Ended
---------------------- ------------------------
June 97 June 96 June 97 June 96
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary:
Weighted average shares outstanding 10,933 6,825 10,602 6,763
Net effect of dilutive stock options
based on the modified treasury stock method -- 1,829 -- 1,544
------- ------- ------- ------
Total weighted average shares outstanding 10,933 8,654 10,602 8,307
======= ======= ======= ======
Net income (loss) ($6,902) $ 2,142 ($6,744) $3,960
Income adjustment relating to reduction
of debt based on the modified treasury method -- 327 -- 691
------- ------- ------- ------
Net income (loss) available to common
and common equivalent shares ($6,902) $2,469 ($6,744) $4,651
======= ====== ======= ======
Per share amount ($0.63) $0.29 ($0.64) $0.56
======= ====== ======= ======
Fully Diluted:
Weighted average shares outstanding 10,933 6,825 10,602 6,763
Net effect of dilutive stock options
based on the modified treasury stock method -- 1,829 -- 1,544
Net effect of dilutive subordinated
debentures based on the if converted method -- 1,986 -- 1,721
------- ------- ------- ------
Total weighted average shares outstanding 10,933 10,640 10,602 10,028
======= ======= ======= ======
Net income (loss) ($6,902) $ 2,142 ($6,744) $3,960
Income adjustment relating to reduction
of debt based on the modified treasury method -- 327 -- 691
Income adjustment relating to reduction
of debt based on the if converted method -- 360 -- 587
------- ------- ------- ------
Net income (loss) available to common
and common equivalent shares ($6,902) $2,829 ($6,744) $5,238
======= ====== ======= ======
Per share amount ($0.63) $0.27 ($0.64) $0.52
======= ====== ======= ======
</TABLE>
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,131
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,798
<INVESTMENTS-CARRYING> 56,798
<INVESTMENTS-MARKET> 56,661
<LOANS> 42,132
<ALLOWANCE> 4,953
<TOTAL-ASSETS> 130,262
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 74,884
<LONG-TERM> 0
0
0
<COMMON> 50,661
<OTHER-SE> 4,717
<TOTAL-LIABILITIES-AND-EQUITY> 130,262
<INTEREST-LOAN> 4,955
<INTEREST-INVEST> 0
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<INTEREST-TOTAL> 4,955
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 2,592
<INTEREST-INCOME-NET> 2,363
<LOAN-LOSSES> 3,450
<SECURITIES-GAINS> 614
<EXPENSE-OTHER> 8,090
<INCOME-PRETAX> (11,133)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,902)
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.63)
<YIELD-ACTUAL> 19.45
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 4,452
<CHARGE-OFFS> 5,916
<RECOVERIES> 6,417
<ALLOWANCE-CLOSE> 4,953
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
