<PAGE> 1
As filed with the Securities and Exchange Commission on July 3, 1997
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
NAVISTAR FINANCIAL SECURITIES CORPORATION
(Exact name of registrant as specified in its charter)
NAVISTAR FINANCIAL DEALER NOTE MASTER TRUST
(Issuer with respect to the Certificates)
--------------
<TABLE>
<S> <C>
Delaware 36-3731520
(Registrant's State or other jurisdiction of (Registrant's I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
---------------
<TABLE>
<S> <C>
William W. Jones
Navistar Financial Securities Corporation
Navistar Financial Securities Corporation 2850 West Golf Road
2850 West Golf Road Rolling Meadows, IL 60008
Rolling Meadows, IL 60008 (847) 734-4000
(847) 734-4000 (Name, address, including zip code, and
(Address, including zip code, and telephone number, telephone number, including area code,
including area code, of Registrant's principal executive offices) of agent for service)
</TABLE>
--------------
Copies to:
Kenneth P. Morrison Robert F. Hugi
Kirkland & Ellis Mayer, Brown & Platt
200 East Randolph Drive 190 South LaSalle Street
Chicago, Illinois 60601 Chicago, Illinois 60603
(312) 861-2000 (312) 782-0600
--------------
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement as
determined by the Registrant in light of market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================
Title of Each Class Proposed Maximum Proposed Maximum
of Securities to be Amount to be Aggregate Price Per Aggregate Offering Amount of
Registered Registered Unit (1) Price (1) Registration Fee
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dealer Note Master
Trust Asset Backed
Certificates $1,000,000 100% $1,000,000 $304
- ---------------------------------------------------------------------------------------------------------
1990 Trust Floating
Rate Pass Through
Certificates (2) (2) (2) $100(3)
=========================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Not applicable.
(3) As prescribed by Section 6(b) of the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
===============================================================================
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED JULY 3, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus Dated , 1997)
NAVISTAR FINANCIAL DEALER NOTE MASTER TRUST
$
Floating Rate Dealer Note Asset Backed Certificates, Series 1997-1
NAVISTAR FINANCIAL SECURITIES CORPORATION, SELLER
NAVISTAR FINANCIAL CORPORATION, SERVICER
The Floating Rate Dealer Note Asset Backed Certificates, Series 1997-1 (the
"Series 1997-1 Certificates") offered hereby evidence undivided interests in
certain assets of the Navistar Financial Dealer Note Master Trust (the "Master
Trust" or the "Issuer") created pursuant to a Pooling and Servicing Agreement
(the "Pooling and Servicing Agreement") among Navistar Financial Corporation
("NFC" or the "Servicer"), Navistar Financial Securities Corporation ("NFSC" or
the "Seller"), The Chase Manhattan Bank, as Trustee under the 1990 Trust, and
The Bank of New York, as trustee (the "Master Trust Trustee"). The Master
Trust assets in which the Series 1997-1 Certificates have an undivided interest
will include, initially, the Class A-5 Floating Rate Pass-Through Certificate
(the "Class A-5 Investor Certificate") issued by the Dealer Note Trust 1990
(the "1990 Trust") created pursuant to a Pooling and Servicing Agreement dated
as of December 1, 1990 (as amended, the "1990 Trust Agreement") among NFSC, NFC
and The Chase Manhattan Bank, as trustee. Following the termination of the
1990 Trust, the Master Trust assets in which the Series 1997-1 Certificate-
holders will have an interest will include the Dealer Notes and other assets
described in the accompanying Prospectus dated , 1997 (the "Prospectus").
Interest on the Series 1997-1 Certificates will generally be paid on the
twenty-fifth day of each month commencing , 1997 (each, a
"Distribution Date"). The interest rate will be % for the period from
, 1997 (the "Closing Date") through , 1997 and for each
Distribution Period thereafter will be equal to LIBOR (as defined herein) plus
% (the "Offered Certificate Rate"). The payment of principal with respect
to the Series 1997-1 Certificates is expected to be made in full on the
Distribution Date (the "Expected Payment Date"). However, under
certain circumstances, the actual payment in full of the Series 1997-1
Certificates could occur earlier or later than the Expected Payment Date.
SEE "RISK FACTORS" AT PAGE 22 IN THE ACCOMPANYING PROSPECTUS FOR A
DISCUSSION OF MATERIAL RISKS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS
IN CONNECTION WITH AN INVESTMENT IN THE SERIES 1997-1 CERTIFICATES.
THE SERIES 1997-1 CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE MASTER
TRUST ONLY AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE SELLER, THE
SERVICER OR ANY AFFILIATE THEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT SELLER (1)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Series 1997-1 Certificate % % %
- -----------------------------------------------------------------------------
Total $ $ $
- -----------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses payable by the Seller estimated to be $ .
The Series 1997-1 Certificates are offered by the Underwriters, subject to
prior sale, when, as and if issued by the Seller and accepted by the
Underwriters. The Underwriters reserve the right to withdraw, cancel or modify
such offer and reject orders in whole or in part. It is expected that the
Series 1997-1 Certificates will be delivered in book-entry form through the
facilities of the Depository Trust Company, CEDEL S.A., and the Euroclear
System on or about , 1997, against payment therefor in immediately
available funds.
, 1997
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SERIES 1997-1
CERTIFICATES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN THE SERIES 1997-1 CERTIFICATES AND THE IMPOSITION OF A PENALTY
BID, DURING AND AFTER THE OFFERING. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this Prospectus Supplement and
the Prospectus in connection with the offer made by this Prospectus Supplement
and the Prospectus, and, if given or made, such information or representations
must not be relied upon as having been authorized by Navistar International
Corporation ("NIC"), Navistar International Transportation Corp. ("NITC"), NFC,
NFSC or the Underwriter. This Prospectus Supplement and the Prospectus do not
constitute an offer to sell or a solicitation of any offer to buy any
securities other than the registered securities offered by this Prospectus
Supplement and the Prospectus, nor does it constitute an offer to sell or a
solicitation of any offer to buy any securities by anyone in any jurisdiction
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person
to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus Supplement and the Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that
information herein is correct as of any time subsequent to the date hereof.
Until , 1997, all dealers effecting transactions in the Series
1997-1 Certificates, whether or not participating in this distribution, may be
required to deliver a Prospectus Supplement and the Prospectus to which it
relates. This delivery requirement is in addition to the obligation of dealers
to deliver a Prospectus Supplement and Prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Dealer Notes ........................................ S-3
Description of the Series 1997-1 Certificates ........... S-9
1990 Trust Investor Certificates ........................ S-15
Underwriting ............................................ S-16
Legal Opinions .......................................... S-17
Index of Terms .......................................... S-18
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information ................................... 3
Reports to the Offered Certificateholders ............... 3
Incorporation of Certain Documents by Reference.......... 3
Prospectus Summary ...................................... 4
Risk Factors ............................................ 22
Navistar Financial Securities Corporation and the
Master Trust ........................................... 26
Use of Proceeds ......................................... 27
The Navistar Financial Dealer Floor Plan Financing
Business ............................................... 27
Relationship with NITC .................................. 31
Description of the Offered Certificates ................. 35
Terms of the 1990 Trust Investor Certificates ........... 70
Description of the Purchase Agreements .................. 80
Federal Income Tax Matters .............................. 81
Certain State Tax Matters ............................... 87
Certain Matters Relating to Bankruptcy .................. 88
Certain Matters Relating to the Dealer Notes ............ 89
ERISA Considerations .................................... 89
Plan of Distribution .................................... 90
Legal Matters ........................................... 91
Index of Terms .......................................... 92
Annex I -- Global Clearance, Settlement
and Tax Documentation Procedures ....................... 98
</TABLE>
S-2
<PAGE> 4
The Seller has not authorized any offer of Series 1997-1 Certificates to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995 (the "UK Regulations"). The Series 1997-1
Certificates may not lawfully be offered or sold to persons in the United
Kingdom except in circumstances which do not result in an offer to the public
in the United Kingdom within the meaning of the U.K. Regulations or otherwise
are in compliance with all applicable provisions of the U.K. Regulations.
THE SERIES 1997-1 CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE
PART OF A SEPARATE SERIES OF OFFERED CERTIFICATES BEING OFFERED BY THE SELLER
PURSUANT TO ITS PROSPECTUS DATED , 1997, OF WHICH THIS
PROSPECTUS SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS
SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING THIS
OFFERING WHICH IS NOT CONTAINED HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO
READ THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE
SERIES 1997-1 CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS
RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
There is currently no secondary market for the Series 1997-1 Certificates, and
there is no assurance that one will develop. The Underwriters expect, but are
not obligated, to make a market in the Series 1997-1 Certificates. However,
even if the Underwriters do make such a market, there is no assurance that any
such market will continue.
Capitalized terms used and not defined herein have the meanings they are given
in the Prospectus.
THE DEALER NOTES
GENERAL
Dealer Notes that are conveyed to the Active Trust consist of all wholesale
notes issued by Dealers that are identified by the Servicer as meeting the
eligibility criteria specified in the Applicable Agreement for Dealer Notes.
In order to be eligible, each Dealer Note must be issued pursuant to NFC's
Credit Guidelines and meet certain other criteria provided in the Agreement.
See "Description of the Offered Certificates--Eligible Dealer Notes" and
"--Certain Representations and Warranties; Ineligible Dealer Notes; Purchase of
Certificateholders' Interest" in the Prospectus. The aggregate principal
amount of Eligible Dealer Notes as of the Closing Date is expected to be in
excess of $600 million.
The following tables provide general statistics regarding the total portfolio
of wholesale notes serviced by NFC (the "Wholesale Portfolio") for the periods
ended on the dates specified. As of the Closing Date, the Dealer Notes which
are expected to be held in the 1990 Trust will represent approximately 95% of
the Wholesale Portfolio. However, there can be no assurance that the Dealer
Notes which are transferred to the 1990 Trust after the Closing Date and which,
after the 1990 Trust Termination Date, will be transferred to the Master Trust,
will continue to constitute such a significant portion of the Wholesale
Portfolio. There can be no assurance that the experience of the Dealer Notes
in the future will be similar to the historical experience set forth below.
The Seller believes that the improved performance of the Wholesale Portfolio
since fiscal year 1992 is largely attributable to the improved United States
economy since 1992. Fluctuations in net losses and delinquencies in the
Wholesale Portfolio generally follow cycles in the overall business environment
and, the Seller believes, are particularly sensitive to the industrial sector,
which generates a significant portion of freight tonnage hauled. Truck demand
and Wholesale Portfolio performance also depend on general economic conditions,
interest rates and fuel costs.
S-3
<PAGE> 5
LOSS EXPERIENCE
The following table provides the loss experience on the Wholesale Portfolio for
the periods indicated:
LOSS EXPERIENCE FOR THE WHOLESALE PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
ANNUALIZED
NET LOSSES AVERAGE
(RECOVERIES)/ MATURITY
FISCAL YEAR- AVERAGE AVERAGE (DAYS IN
TO-DATE PERIOD NET DEALER LIQUIDATIONS NET LOSSES DEALER NOTE DEALER NOTES YEAR/
ENDING LAST NOTE LOSSES OF DEALER (RECOVERIES)/ PRINCIPAL PRINCIPAL ANNUALIZED ANNUALIZED
DAY OF (RECOVERIES)(1) NOTES(1) LIQUIDATIONS(1) BALANCE(2) BALANCE(3) TURNOVER(4) TURNOVER)
- -------------- --------------- ----------- --------------- ----------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal Year 1997
January......... $0.0 $ 599.7 0.00% $690.2 0.00% 3.48x 105.2
April........... (0.1) 1,232.1 (0.01) 683.2 (0.03) 3.61x 101.4
Fiscal Year 1996
January......... 0.1 721.6 0.01 913.0 0.04 3.16x 115.5
April........... 0.0 1,436.2 0.00 920.3 0.00 3.12x 117.0
July............ 0.0 2,139.8 0.00 906.5 0.00 3.15x 116.2
October......... (0.2) 2,874.4 (0.01) 859.7 (0.02) 3.34x 109.3
Fiscal Year 1995
January......... (0.1) 618.6 (0.01) 597.5 (0.07) 4.14x 88.2
April........... (0.1) 1,237.5 (0.01) 643.9 (0.03) 3.84x 95.1
July............ (0.3) 1,963.3 (0.02) 689.7 (0.06) 3.80x 96.3
October......... (0.9) 2,712.4 (0.03) 706.0 (0.13) 3.84x 95.1
Fiscal Year 1994
January......... 0.1 485.6 0.03 576.8 0.07 3.37x 108.3
April........... 0.1 1,024.8 0.01 593.6 0.03 3.45x 105.8
July............ 0.1 1,656.1 0.01 602.5 0.02 3.66x 99.7
October......... 0.1 2,278.9 0.01 579.2 0.03 3.93x 92.9
Fiscal Year 1993
January......... 0.0 377.1 0.00 431.1 0.00 3.50x 104.3
April........... 0.4 795.2 0.05 461.2 0.17 3.45x 105.8
July............ 0.9 1,283.5 0.07 475.3 0.25 3.60x 101.4
October......... 0.8 1,820.1 0.04 477.1 0.16 3.81x 95.8
Fiscal Year 1992
January......... 1.0 312.6 0.32 390.0 1.03 3.21x 113.7
April........... 1.1 646.0 0.18 414.2 0.53 3.12x 117.0
July............ 1.2 1,047.0 0.12 433.4 0.37 3.22x 113.4
October......... 0.8 1,501.7 0.06 428.9 0.20 3.50x 104.3
</TABLE>
- ----------
(1) Figures shown for Net Dealer Note Losses and Liquidations of Dealer Notes
are cumulative within each fiscal year. Thus, figures as of January 31 of
each fiscal year represent the Net Dealer Note Losses or Liquidations of
Dealer Notes for the first quarter of such fiscal year; figures as of
April 30 of each fiscal year represent the cumulative Net Dealer Note
Losses or Liquidations of Dealer Notes for the first six months of such
fiscal year; and so on.
(2) Figures shown for Average Dealer Note Principal Balance are calculated as
the year-to-date average of the daily outstanding Dealer Note Principal
Balance.
(3) The Net Losses for a fiscal quarter used in the numerator are cumulative
within a fiscal year and have been annualized. Thus, the numerator for
the figure shown as of the fiscal quarter ended January 31 of each fiscal
year equals the Net Dealer Note Losses for such fiscal quarter multiplied
by four; for April 30 equals the cumulative Net Dealer Note Losses for the
six months ended on such date multiplied by two; for July 31 equals the
cumulative Net Dealer Note Losses for the nine months ended on such date
multiplied by 4/3; and for October 31 equals such cumulative Net Dealer
Note Losses.
(4) Turnover is calculated as the annualized Liquidations of Dealer Notes for
each fiscal period (annualized in the same manner described in note 3 for
Net Losses) divided by Average Dealer Note Principal Balance.
Losses occur on wholesale notes when a Dealer has been terminated under
circumstances in which the Dealer has sold one or more financed vehicles to a
retail customer and has failed to remit the appropriate proceeds of such sale
to NFC. Losses also occur when used trucks financed at wholesale and
repossessed by NFC from a terminated Dealer cannot be
S-4
<PAGE> 6
sold for the balance due on the underlying wholesale note. By contrast, losses
generally have not occurred when new trucks financed by NFC are repossessed from
terminated Dealers, because such new trucks are repurchased by the manufacturer
(NITC or an OEM Supplier). NFC recognizes losses on wholesale notes at the time
it deems such wholesale notes to be uncollectible (which is generally at the
time it has exhausted all non-legal remedies).
The characteristics of the Dealer Notes held by the Active Trust have not been
and are not expected to be significantly different from the characteristics of
the Wholesale Portfolio at any given time, except to the extent that the
eligibility requirements in the Applicable Agreement for Dealer Notes serve to
screen out certain types of wholesale notes at their inception (such as
wholesale notes from Dealers who are on cash on delivery terms or who are
insolvent, although Dealer Notes which have been or are transferred to the
Active Trust will not become ineligible if the Dealer thereafter is put on cash
on delivery status or becomes insolvent). Such differences are not expected to
affect adversely the performance of the Dealer Notes held by the Active Trust
in comparison to the Wholesale Portfolio at such time.
DELINQUENCIES
The following table presents the aggregate amount of delinquent principal
payments (past due over 30 days) for the Wholesale Portfolio as a percentage of
the total principal amount outstanding as of the end of the fiscal quarters
specified:
DELINQUENCIES AS A PERCENTAGE OF THE WHOLESALE PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNTS OF
DEALER NOTE DEALER NOTES
PRINCIPAL PAST DUE OVER
LAST DAY OF OUTSTANDING 30 DAYS
- ----------- ----------- --------------
<S> <C> <C> <C>
Fiscal Year 1997
January.......................... $651.3 $1.4 0.22%
April............................ 670.2 2.1 0.31
Fiscal Year 1996
January.......................... 927.6 0.6 0.06
April............................ 909.7 0.8 0.09
July............................. 803.2 1.2 0.15
October.......................... 685.9 1.3 0.19
Fiscal Year 1995
January.......................... 611.3 0.6 0.11
April............................ 766.0 0.3 0.04
July............................. 723.2 0.4 0.06
October.......................... 854.4 0.4 0.05
Fiscal Year 1994
January.......................... 564.5 0.6 0.11
April............................ 638.0 0.6 0.09
July............................. 546.3 0.2 0.04
October.......................... 586.5 0.4 0.06
Fiscal Year 1993
January.......................... 447.4 1.4 0.32
April............................ 522.9 1.0 0.19
July............................. 449.3 0.5 0.11
October.......................... 559.0 0.7 0.13
Fiscal Year 1992
January.......................... 435.3 2.8 0.64
April............................ 452.6 2.0 0.44
July............................. 421.2 1.9 0.46
October.......................... 402.3 1.6 0.40
</TABLE>
S-5
<PAGE> 7
AGING EXPERIENCE
The following table provides the age distribution of the Wholesale Portfolio by
principal amount outstanding as of the dates indicated:
AGE DISTRIBUTION OF THE WHOLESALE PORTFOLIO
<TABLE>
<CAPTION>
APRIL 30 OCTOBER 31
---------- ----------------------------
DAYS 1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
1-180....... 81% 76% 70% 84% 88% 87% 80%
181-360..... 11 20 21 14 10 11 16
Over 360.... 8 4 9 2 2 2 4
---- ---- ---- ---- ---- ---- ----
Total....... 100% 100% 100% 100% 100% 100% 100%
</TABLE>
CYCLICALITY
The average outstanding principal amount of the Wholesale Portfolio has varied
historically according to business cycles in the truck manufacturing industry.
The following table provides the highest, lowest and average principal amounts
outstanding based on month-end balances during the years indicated:
OUTSTANDING PRINCIPAL AMOUNT OF THE WHOLESALE PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DURING HIGHEST LOWEST AVERAGE OF
YEAR ENDED MONTH-END MONTH-END MONTH-END
OCTOBER 31, AMOUNT AMOUNT AMOUNTS
- ----------- --------- --------- ----------
<S> <C> <C> <C>
1996....... $933 $686 $850
1995....... 854 588 709
1994....... 638 473 570
1993....... 559 425 475
1992....... 502 367 421
</TABLE>
S-6
<FF>
<PAGE> 8
GEOGRAPHIC DISTRIBUTION
The following table provides the geographic distribution of the principal
amount of the Wholesale Portfolio as of April 30, 1997:
GEOGRAPHIC DISTRIBUTION OF THE WHOLESALE PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
AMOUNT WHOLESALE AMOUNT WHOLESALE
STATE OUTSTANDING PORTFOLIO STATE OUTSTANDING PORTFOLIO
- ------ ----------- ------------- ------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Illinois.... $63.5 9.48% Alabama....... $13.6 2.03%
Texas....... 49.9 7.45 Georgia....... 13.1 1.96
Minnesota... 48.4 7.22 Missouri...... 12.7 1.90
Pennsylvania 42.6 6.35 New Jersey.... 12.4 1.85
Michigan.... 27.8 4.14 Massachusetts. 11.2 1.67
Maryland.... 27.5 4.11 Mississippi... 10.6 1.59
Indiana..... 27.0 4.03 Colorado...... 9.6 1.44
Ohio........ 26.5 3.95 Arkansas...... 9.3 1.38
New York.... 24.4 3.63 North Carolina 9.1 1.35
Wisconsin... 24.3 3.63 Louisiana..... 8.0 1.19
Tennessee... 22.4 3.34 Nebraska...... 7.1 1.06
Virginia.... 22.3 3.33 Connecticut... 7.0 1.05
Florida..... 22.3 3.33 All others (1) 77.1 11.50
California.. 22.1 3.30 ------ ------
Oklahoma.... 18.4 2.74 Total......... $670.2 100.00%
</TABLE>
- --------
(1) Includes the remaining 23 states (each of which represents less than 1%
of the Wholesale Portfolio).
SEASONALITY
The aggregate principal amount of the Wholesale Portfolio generally varies
during the year. The following table provides the average principal amount of
the Wholesale Portfolio during the months specified:
SEASONAL FLUCTUATION IN THE WHOLESALE PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
AVERAGE MONTHLY AMOUNT
OUTSTANDING DURING FISCAL YEAR
------------------------------
MONTH 1997 1996 1995 1994 1993 1992
- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
November...... $694 $876 $604 $578 $411 $358
December...... 706 938 593 578 434 399
January....... 656 923 597 549 431 413
February...... 658 925 633 567 459 433
March......... 674 927 683 601 486 433
April......... 677 928 749 649 514 448
May........... 903 776 643 508 456
June.......... 898 814 638 501 489
July.......... 831 752 578 483 470
August........ 759 705 508 453 415
September..... 703 745 480 471 415
October....... 690 811 534 523 411
</TABLE>
S-7
<PAGE> 9
Declines in the principal amount of Dealer Notes outstanding due to seasonality,
cyclicality, competitive conditions or other factors may cause Principal
Collections to be invested in 1990 Trust Investment Securities or Eligible
Investments, as the case may be, rather than to be used for acquisitions or
assignments of Dealer Notes. See "Terms of the 1990 Trust Investor
Certificates--Application of Collections" and "Description of the Offered
Certificates--Allocation of Collections After the 1990 Trust Termination Date"
in the Prospectus.
LIQUIDATIONS
The following table provides the liquidation history with respect to NFC
month-end balances outstanding and one-month liquidations of notes in the
Wholesale Portfolio for the months indicated:
LIQUIDATION HISTORY OF WHOLESALE PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT
--- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal Year 1997
Balances........ $694 $655 $651 $668 $675 $670
Liquidations.... 184 209 207 193 208 230
Fiscal Year 1996
Balances........ 904 913 928 926 933 910 $896 $892 $803 $709 $694 $686
Liquidations.... 236 236 250 222 243 249 237 216 251 267 219 249
Fiscal Year 1995
Balances........ 599 588 611 656 737 766 809 806 723 707 778 854
Liquidations.... 213 199 206 183 231 205 225 246 254 256 219 273
Fiscal Year 1994
Balances........ 579 545 565 566 622 638 631 612 546 473 482 587
Liquidations.... 157 182 147 153 192 194 210 206 215 236 189 198
Fiscal Year 1993
Balances........ 428 425 447 473 508 523 504 525 449 450 482 559
Liquidations.... 120 130 127 117 143 158 155 154 179 173 169 195
Fiscal Year 1992
Balances........ 367 391 435 429 428 453 462 502 421 403 419 402
Liquidations.... 92 105 116 97 109 127 107 128 166` 149 138 168
</TABLE>
MONTHLY PAYMENT RATES
The following table sets forth the highest and lowest monthly payment rates for
the Wholesale Portfolio in the periods shown and the average of the monthly
payment rates for all months during the periods shown, in each case calculated
as the percentage equivalent of a fraction, the numerator of which is the
aggregate of all collections of principal during the specified period and the
denominator of which is the aggregate ending principal balance of the Wholesale
Portfolio for such period. There can be no assurance that the rate of
Principal Collections for the Dealer Notes in the Active Trust will be similar
to the historical experience set forth below.
HISTORICAL MONTHLY PAYMENT RATES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL 30 YEAR ENDED OCTOBER 31
-------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993 1992
Highest Month.......................... 34.3% 27.4% 37.7% 36.2% 49.9% 39.9% 41.8%
Lowest Month........................... 26.5 24.0 24.0 26.8 26.0 24.7 22.6
Average for the Months in the Period .. 30.7 26.0 28.2 31.4 33.3 31.5 29.4
</TABLE>
S-8
<FF>
<PAGE> 10
DESCRIPTION OF THE SERIES 1997-1 CERTIFICATES
MASTER TRUST TRUSTEE
The Bank of New York is the Master Trust Trustee. NFC and its affiliates
(other than the Seller) may from time to time enter into normal banking and
trustee relationships with The Bank of New York or any other bank that may
become a successor Master Trust Trustee. As of the date of this Prospectus
Supplement, the Corporate Trust Office is located at 101 Barclay Street, New
York, New York 10286, Attention: Corporate Trust Administration.
TERMS AND CONDITIONS
The Series 1997-1 Certificates are a Series of Offered Certificates described
in the attached Prospectus to be issued by the Master Trust. In addition to
the terms and conditions set forth below, reference is made to the Prospectus
for the terms and conditions of the Series 1997-1 Certificates (including a
description of when principal and interest distributions are to be made on, and
settlement information for, the Series 1997-1 Certificates). Also, see "Early
Distribution at the Option of the Series 1997-1 Certificateholders" for a
description of certain circumstances in which early distributions of principal
may be made to Series 1997-1 Certificateholders) and "Other Series Issued by
Master Trust" for a description of Other Series issued by the Master Trust
which are outstanding as of the date of this Prospectus Supplement.
<TABLE>
<CAPTION>
<S> <C>
Initial Invested Amount $
Expected Payment Date
Subordinated Percentage
Specified Accumulation Period Commencement Date
Series Termination Date
</TABLE>
"Accumulation Period Commencement Date" shall mean the first day of the nth
full Due Period prior to the Expected Payment Date where n is the number of
Due Periods in the Accumulation Period Length; provided, however, that the
Accumulation Period Commencement Date shall be the Specified Accumulation
Period Commencement Date if, on the Specified Accumulation Period
Commencement Date, any other outstanding Series shall have entered into an
investment period or an early amortization period; and provided further
that, if the Accumulation Period Length and the Accumulation Period
Commencement Date have been determined previously but the Accumulation
Period has not commenced and any other outstanding Series shall enter into
an investment period or any early amortization period, the Accumulation
Period Commencement Date shall be the date that such outstanding Series
shall have entered into an investment period or an early amortization
period.
"Accumulation Period Length" shall mean a period which is between one and
nine Due Periods and which is determined by the Servicer in its sole
discretion on or prior to the first day of the Due Period which is nine
months prior to the Due Period related to the Distribution Date which is the
Expected Payment Date.
"Controlled Amortization Amount" shall mean an amount equal to (a) the
Invested Amount as of the Distribution Date preceding the Accumulation
Period Commencement Date divided by (b) the Accumulation Period Length.
"LIBOR" shall mean (a) prior to the 1990 Trust Termination Date, the
one-month London interbank offered rate as determined by the 1990 Trust
Trustee in accordance with the 1990 Trust Agreement, and (b) after the 1990
Trust Termination Date, the interest rate determined by the Master Trust
Trustee in accordance with the following provisions:
(i) On each LIBOR Determination Date, LIBOR will be determined on the
basis of the offered rates for deposits in United States Dollars having a
one month maturity, which appear on the Reuters Screen LIBO Page as of
11:00 A.M., London time, on such LIBOR Determination Date. Such posted
offered rates are for value on the second business day after which
dealings in deposits in United States Dollars are transacted in the London
interbank market. If at least two such offered rates appear on the
Reuters Screen LIBO Page, the rate in respect of such LIBOR Determination
Date will be the arithmetic mean (rounded, if necessary, to the nearest
one hundred-thousandth of a percent) of such offered rates as determined
by the Master Trust Trustee. If fewer
S-9
<FF>
<PAGE> 11
than two offered rates appear, LIBOR in respect of such LIBOR
Determination Date will be determined as if the parties had specified
the rate described in (ii) below.
(ii) On any LIBOR Determination Date on which fewer than two offered
rates appear on the Reuters Screen LIBO Page as specified in (i) above,
LIBOR will be determined on the basis of the rates at which deposits in
United States Dollars are offered by the Reference Banks at approximately
11:00 A.M., London time, on such LIBOR Determination Date to prime banks
in the London interbank market, having a one month maturity, such
deposits commencing on the second London business day immediately
following such LIBOR Determination Date and in a principal amount of not
less than U.S. $1,000,000 that is representative for a single transaction
in such market at such time. The Master Trust Trustee will request the
principal London office of each of such Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided,
LIBOR in respect of such LIBOR Determination Date will be the arithmetic
mean (rounded, if necessary, to the nearest one hundred-thousandth of a
percent) of such quotations. If fewer than two quotations are provided,
LIBOR in respect of such LIBOR Determination Date will be the arithmetic
mean (rounded, if necessary, to the nearest one hundred-thousandth of a
percent) of the rates quoted by three major banks in The City of New York
selected by the Master Trust Trustee at approximately 11:00 A.M., New
York City time, on such LIBOR Determination Date for loans in United
States Dollars to leading European banks, having a one month maturity,
such loans commencing on the second London business day immediately
following such LIBOR Determination Date and in a principal amount of not
less than U.S. $1,000,000 that is representative for a single transaction
in such market at such time, provided, however, that if the banks in The
City of New York selected as aforesaid by the Master Trust Trustee are
not quoting as mentioned in this sentence, LIBOR with respect to such
LIBOR Determination Date will be LIBOR in effect immediately prior to
such LIBOR Determination Date.
"LIBOR Determination Date" means, with respect to any Distribution Period,
the date which is two London business days prior to the start of such
Distribution Period.
"Minimum Negative Carry Required Amount" shall mean, on any LIBOR
Determination Date after the Fully Funded Date, an amount equal to the
product of (a) three and (b) the Projected Investment Shortfall for such
LIBOR Determination Date.
"Minimum Series Seller's Interest" shall mean, with respect to any business
day after the 1990 Trust Termination Date, the sum of (a) the Available
Subordinated Amount as of the end of the preceding Transfer Date, (b) the
Negative Carry Subordinated Amount as of the end of the preceding Transfer
Date (minus the product of (i) 1.00 plus the Subordinated Percentage and
(ii) the amount of funds, if any, on deposit in the Negative Carry Reserve
Fund as of the end of the preceding business day) and (c) the Required
Excess Seller Interest as of the end of the preceding Distribution Date.
"Negative Carry Reserve Fund Required Amount" means, with respect to each
Transfer Date, an amount equal to the sum of (x) the product of (i)
%, (ii) the Invested Amount as of the preceding Distribution Date and (iii)
the number of Due Periods remaining until the Expected Payment Date and (y)
an amount equal to the product of % and the Invested Amount as of the
preceding Distribution Date; except that from and after the Fully Funded
Date, the Negative Carry Reserve Fund Required Amount shall be zero.
"Negative Carry Subordinated Amount" shall mean, (a) on any Transfer Date
related to a Due Period occurring prior to the commencement of the
Accumulation Period, any Early Amortization Period or any Investment Period,
an amount equal to the product of (i) the Negative Carry Reserve Fund
Required Amount and (ii) 1.00 plus the Subordinated Percentage and (b) at the
beginning of each Transfer Date thereafter, an amount equal to the Negative
Carry Subordinated Amount as of the end of the immediately preceding Transfer
Date (after giving effect to all reductions in the Negative Carry
Subordinated Amount on such preceding Transfer Date).
"New Vehicle Monthly Interest Rate" shall mean, with respect to any Due
Period, the product of (a) the per annum rate of interest and finance
charges billed by NFC during such Due Period on Dealer Notes financing new
vehicles and (b) the quotient of (i) the number of days during such Due
Period and (ii) the actual number of days in the related calendar year.
"Offered Certificate Rate" shall mean the interest rate on the Series 1997-1
Certificates, which shall be calculated on the basis of actual days elapsed
and a 360-day year, and will be % for the period from , 1997 (the
S-10
<FF>
<PAGE> 12
"Closing Date") through , 1997 and for each Distribution
Period thereafter will equal LIBOR as of the related LIBOR Determination Date
plus %.
"Projected Dealer Note Income" shall mean, on any Transfer Date after the 1990
Trust Termination Date, an amount equal to the sum of (a) the product of (i) the
principal amount of Dealer Notes financing new vehicles outstanding on such
Transfer Date, (ii) the New Vehicle Monthly Interest Rate for the Due Period in
which such Transfer Date occurs and (iii) the Series Allocation Percentage for
such Due Period and (b) the product of (i) the principal amount of Dealer Notes
financing used vehicles outstanding on such Transfer Date, (ii) the Used Vehicle
Monthly Interest Rate for such Due Period and (iii) the Series Allocation
Percentage for such Due Period.
"Projected Investment Income" shall mean, on any LIBOR Determination Date after
the Fully Funded Date with respect to the related Distribution Period, the
product of (a) the sum of the amount of funds on deposit on such LIBOR
Determination Date in each of the Spread Account and the Series Principal
Account and the Series Allocation Percentage of the amount of funds on deposit
in the Excess Funding Account (to the extent any such amounts are not required
to be paid on the following Distribution Date) and (b) an amount equal to (i)
the lesser of (A) LIBOR as of such LIBOR Determination Date minus 0.125% and
(B) the 30-day AA Federal Reserve commercial paper composite rate, expressed on
a money-market yield basis, minus 0.125% multiplied by (ii) the result of
(A) the number of days during the related Distribution Period divided by (B)
360.
"Projected Investment Shortfall" shall mean, on any LIBOR Determination Date
after the 1990 Trust Termination Date with respect to the Distribution Period to
which such LIBOR Determination Date relates, the positive amount, if any, by
which (a) Projected Monthly Interest for such Distribution Period exceeds (b)
Projected Investment Income for such Distribution Period.
"Projected Monthly Interest" shall mean, on any LIBOR Determination Date after
the 1990 Trust Termination Date with respect to the related Distribution Period,
an amount equal to the product of (a) the Offered Certificate Rate for such
Distribution Period, (b) the Invested Amount as of the immediately preceding
Distribution Date (minus, if the following Distribution Date is an Early
Distribution Date, the aggregate Early Distribution Amounts to be paid on such
following Early Distribution Date) and (c) the result of (i) the actual number
of days in such Distribution Period divided by (ii) 360.
"Projected Monthly Servicing Fee" shall mean, on any Transfer Date after the
1990 Trust Termination Date with respect to the Due Period in which such
Transfer Date occurs, an amount equal to one-twelfth of the product of (a) 1%,
(b) the aggregate principal amount of Dealer Notes as of such Transfer Date, (c)
the Series 1997-1 Allocation Percentage for the Due Period related to such
Transfer Date and (d) the Floating Allocation Percentage for the Due Period
related to such Transfer Date.
"Projected Spread" shall mean, on any Transfer Date after the 1990 Trust
Termination Date with respect to the Distribution Period next following the
Distribution Period to which such Transfer Date relates and prior to the Fully
Funded Date, the sum of (a) the positive amount, if any, by which (i) the sum of
(A) Projected Monthly Interest for such Distribution Period and (B) the
Projected Monthly Servicing Fee for the Due Period in which such Transfer Date
occurs exceeds (ii) the Projected Dealer Note Income as of such Transfer Date
and (b) 1.25% of the Invested Amount as of the preceding Distribution Date.
"Reference Banks" shall mean the principal London offices of Morgan Guaranty
Trust Company of New York, Swiss Bank Corporation and Barclays Bank PLC.
"Required Excess Seller Interest" shall mean, with respect to any business day,
3.0% of the Invested Amount as of the end of the preceding Distribution Date
(and such percentage shall be the "Required Excess Seller Interest
Percentage").
"Required Subordinated Amount" shall mean, with respect to any Transfer Date
related to a Due Period commencing after the 1990 Trust Termination Date, an
amount equal to % of the Maximum Subordinated Amount as of such Transfer
Date.
"Series Allocable Servicing Fee" shall equal, for each Due Period commencing
after the 1990 Trust Termination Date and occurring prior to the earlier of the
first Distribution Date following the Series Termination Date and the
S-11
<FF>
<PAGE> 13
first Distribution Date on which the Invested Amount is zero, an amount equal
to one-twelfth of the product of (a) 1%, (b) the aggregate principal amount
of Dealer Notes outstanding as of the last day of such Due Period, and (c)
the Series Allocation Percentage with respect to such Due Period, except that
the Series Allocable Servicing Fee shall be zero with respect to each Due
Period following the Fully Funded Date.
"Used Vehicle Monthly Interest Rate" shall mean, with respect to any Due
Period, the product of (a) the per annum rate of interest and finance charges
billed by NFC during such Due Period on Dealer Notes financing used vehicles
and (b) the quotient of (i) a number equal to the number of days during such
Due Period and (ii) the actual number of days in the related calendar year.
RATINGS OF THE CERTIFICATES
It is a condition to issuance of the Series 1997-1 Certificates that they be
rated in the highest long-term rating category by each of Standard and Poor's
Ratings Services and Moody's Investors Service, Inc. The rating of the Series
1997-1 Certificates addresses the likelihood of the timely payment of interest
at the Offered Certificate Rate and the ultimate payment of principal by the
Series Termination Date on the Series 1997-1 Certificates, whether or not an
Investment Event occurs. However, a Rating Agency does not evaluate, and the
rating of the Series 1997-1 Certificates does not address, the likelihood that
the outstanding principal amount of the Series 1997-1 Certificates will be paid
on the Expected Payment Date or the likelihood of the payment of any penalty
interest. The rating of the Series 1997-1 Certificates is based primarily on
the value of the Class A-5 Investor Certificate and the Dealer Notes and the
rating requirements for investments of funds in Eligible Deposit Accounts
maintained for the benefit of the Series 1997-1 Certificateholders and the
level of subordination of the 1990 Trust Seller Interest and the Master Trust
Seller's Interest. A rating is not a recommendation to buy, sell or hold
securities, inasmuch as such rating does not comment as to the market price or
the suitability for a particular investor. There is no assurance that a rating
will remain for any given period of time or that a rating will not be lowered
or withdrawn entirely by a Rating Agency if in its judgment circumstances in
the future so warrant.
EARLY AMORTIZATION EVENTS
An "Early Amortization Event" with respect to Series 1997-1 refers to any of
the following events:
(a) the Master Trust becomes an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, and is not exempt
from compliance with such Act;
(b) the earlier of (i) the Transfer Date on which (A) the cumulative
amount of draws from the Negative Carry Reserve Fund is equal to or
greater than (B) an amount equal to the (1) Negative Carry Reserve Fund
Required Amount as of the first Transfer Date following the occurrence
of an Investment Event (or, if earlier, the date immediately preceding
the Fully Funded Date) plus (2) any investment earnings attributable to
the Negative Carry Reserve Fund minus (3) the product of 0.30%
and the Invested Amount and (ii) subsequent to the Fully Funded Date,
the date on which the amount on deposit in the Negative Carry Reserve
Fund is less than or equal to the Minimum Negative Carry Required
Amount;
(c) the Invested Amount is not reduced to zero by the Expected Payment
Date (other than after the Fully Funded Date); or
(d) the United States government or any agency or instrumentality
thereof files a notice of a lien under Internal Revenue Code Section
6323 or any similar statutory provision (including, but not limited to,
Section 302(f) or Section 4068 of ERISA) on the assets of NFC or NFSC
which is or may in the future be prior to the lien of the Master Trust
Trustee on the assets of the Master Trust (including without limitation
proceeds of the Dealer Notes).
Upon the occurrence of Early Amortization Event (b) or (d), distributions in
respect of the Invested Amount will commence on the immediately succeeding
Distribution Date. Upon the occurrence of any other Early Amortization
Event, distributions in respect of the Invested Amount will commence at the
time described in the Prospectus.
INVESTMENT EVENTS
An "Investment Event" with respect to Series 1997-1 refers to any of the
following events occurring:
S-12
<FF>
<PAGE> 14
(a) failure on the part of the Seller (i) to make any payment,
distribution or deposit required under the Pooling and Servicing
Agreement on the date due or within five business days thereafter or
(ii) to observe or perform in any material respect any other material
covenants or agreements of the Seller, which continues unremedied for a
period of 60 days after written notice of such failure shall have been
given to the Seller;
(b) any representation or warranty made by the Seller pursuant to the
Pooling and Servicing Agreement or any information contained in the
schedule of Dealer Notes delivered thereunder shall prove to have been
incorrect in any material respect when made or when delivered, which
representation, warranty or schedule, or the circumstances or condition
that caused such representation, warranty or schedule to be incorrect,
continues to be incorrect or uncured in any material respect for a
period of 60 days after written notice of such incorrectness shall have
been given to the Seller and as a result of which the interests of the
Series 1997-1 Certificateholders are materially and adversely affected,
except that an Investment Event shall not be deemed to occur if the
Seller has repurchased the related Dealer Notes or all such Dealer
Notes, if applicable, during such period in accordance with the
provisions of the Pooling and Servicing Agreement;
(c) after the 1990 Trust Termination Date, the Seller shall become
legally unable for any reason to transfer Dealer Notes to the Master
Trust in accordance with the provisions of the Pooling and Servicing
Agreement;
(d) on any Transfer Date related to a Due Period commencing after the
1990 Trust Termination Date, the Available Subordinated Amount for such
Transfer Date will be reduced to an amount less than the Required
Subordinated Amount;
(e) any Servicer Termination Event shall occur (i) which would have a
material adverse effect on the Series 1997-1 Certificateholders and
(ii) for which the Servicer has received a notice of termination;
(f) after the 1990 Trust Termination Date, the delivery by the Seller
to the Master Trust Trustee of a notice stating that the Seller will no
longer continue to sell Dealer Notes to the Master Trust commencing on
the date specified in such notice;
(g) after the 1990 Trust Termination Date, by reference to the Coverage
Differentials (defined generally as the excess of the annualized yield
on the Dealer Notes over an amount equal to the weighted average
interest payable on the outstanding Series for each of the related Due
Period and the three immediately preceding Due Periods), the sum of the
three highest such Coverage Differentials divided by three (the
"Average Coverage Differential") shall be equal to or less than
negative two percent (2%) on each of three consecutive Determination
Dates;
(h) at the end of any Due Period commencing after the 1990 Trust
Termination Date, the Master Trust Seller's Interest is reduced to an
amount less than the Master Trust Minimum Seller's Interest and the
Seller has failed to assign additional Dealer Notes or cash to the
Master Trust in the amount of such deficiency within ten business days
following the end of such Due Period;
(i) on any Determination Date after the 1990 Trust Termination Date,
the Turnover is less than 1.7;
(j) on any Determination Date after the 1990 Trust Termination Date,
the quotient of (i) the sum of Dealer Note Losses for each of the
related Due Period and the five immediately preceding Due Periods and
(ii) the sum of Principal Collections for each of the related Due
Period and the five immediately preceding Due Periods, is greater than
or equal to 1%;
(k) at any time prior to the 1990 Trust Termination Date, a 1990 Trust
Amortization Event occurs under the 1990 Trust with respect to the
Related 1990 Certificate (other than a 1990 Trust Amortization Event
that also constitutes an Early Amortization Event under the Master
Trust) or the Scheduled Class Amortization Date occurs with respect
to the Related 1990 Certificate;
(l) the occurrence of certain events of bankruptcy, insolvency or
receivership relating to the Seller, NFC, NITC or NIC; and
S-13
<FF>
<PAGE> 15
(m) after the 1990 Trust Termination Date, failure on the part of NITC
to make a deposit in the Interest Deposit Account required by the terms
of the Master Trust Interest Deposit Agreement on or before the date
occurring five business days after the date such deposit is required by
the Master Trust Interest Deposit Agreement to be made.
EARLY DISTRIBUTION AT THE OPTION OF THE SERIES 1997-1 CERTIFICATEHOLDERS
In the event that an Investment Event occurs, each Series 1997-1
Certificateholder will have a limited time during which such Series 1997-1
Certificateholder may elect to receive an early distribution of all or any
portion (in integral multiples of $1,000) of its share of the Invested Amount
as of the Early Distribution Date in lieu of continuing to hold all of its
Series 1997-1 Certificates. This distribution is an "Early Distribution" and
the amount of such distribution is the "Early Distribution Amount." The Early
Distribution Amounts shall be paid on the third Distribution Date following the
Fully Funded Date (the "Early Distribution Date") out of the proceeds of
Eligible Investments in the Series Principal Account maturing on the related
Transfer Date. Any Early Distribution Amounts shall cease to accrue interest
on the Early Distribution Date. The outstanding principal amount of a Series
1997-1 Certificate will be reduced by the amount of any Early Distribution
Amount paid on that Series 1997-1 Certificate.
Upon the occurrence of any Investment Event, the Servicer shall give prompt
written notice thereof to the Master Trust Trustee and the Master Trust Trustee
shall give notice to the Series 1997-1 Certificateholders. In order to request
an Early Distribution, a Series 1997-1 Certificateholder must provide written
notice (an "Early Distribution Notice") by certified mail, postage paid to the
Master Trust Trustee and the Servicer not less than 20 days prior to the Early
Distribution Date. Such Early Distribution Notice shall specify the original
Invested Amount of the portion of the Series 1997-1 Certificates with respect
to which the Early Distribution is requested. Any such Early Distribution
Notice shall be irrevocable. Except to the limited extent provided above, no
Series 1997-1 Certificateholder will have the opportunity to request an early
distribution of all or any portion of such Certificateholder's share of the
Invested Amount.
On the Early Distribution Date, the Master Trust Trustee shall withdraw from
the Negative Carry Reserve Fund and pay to the Seller a fraction of the funds
on deposit therein, which fraction shall equal the Early Distribution Amount
divided by the Invested Amount as of the Early Distribution Date.
OTHER SERIES ISSUED BY MASTER TRUST
The table below sets forth the principal characteristics of the other Series of
investor certificates issued by the Master Trust which are outstanding on the
date of this Prospectus Supplement.
SERIES 1995-1
<TABLE>
<S> <C>
Certificate Rate .............................. LIBOR + 0.30%
Closing Date .................................. June 8, 1995
Expected Payment Date ......................... August 25, 2004
Initial Invested Amount ....................... $200,000,000
Interest in 1990 Trust ........................ Class A-4 Investor Certificate
Number of classes within Series ............... One
Ordinary means of principal repayment ......... Accumulation Period
Primary source of credit enhancement .......... Subordination
Series Termination Date ....................... August 25, 2007
Servicing Fee Percentage ...................... 1%
Subordinated Percentage ....................... 15.5%
</TABLE>
S-14
<PAGE> 16
1990 TRUST INVESTOR CERTIFICATES
PRINCIPAL TERMS
The principal terms of each Class of 1990 Trust Investor Certificates (the
"Principal Terms") are as follows:
Related 1990 Certificate. The Class A-5 Investor Certificate is the Related
1990 Certificate to be issued to the Master Trust in connection with the
issuance of the Series 1997-1 Certificates, as described in the attached
Prospectus. The Class A-5 Investor Certificate will be issued by the 1990
Trust. In addition to the terms and conditions set forth below, reference is
made to the Prospectus for the terms and conditions of the Class A-5 Investor
Certificate.
<TABLE>
<CAPTION>
<S> <C>
Class Initial Invested Amount............... $
Class Initial Investor Interest............. $
Class Termination Date......................
Related 1990 Certificate Rate............... LIBOR + %
</TABLE>
The "Scheduled Class Amortization Date" for the Class A-5 Investor Certificate
shall mean the earlier of (a) , 200 , and (b) the date on which
any Early Amortization Event or Investment Event, in each case with respect to
the Series 1997-1 Certificates, occurs.
Class A-2 Investor Certificates
<TABLE>
<CAPTION>
<S> <C>
Class Initial Invested Amount.............. $100,000,000
Class Initial Investor Interest............ $100,000,000
Class Certificate Margin................... 0.85%
Scheduled Class Amortization Date.......... December 1, 1997
Class Termination Date..................... January 25, 2002
Class A-3 Investor Certificates
Class Initial Invested Amount.............. $100,000,000
Class Initial Investor Interest............ $100,000,000
Class Certificate Margin................... 0.90%
Scheduled Class Amortization Date.......... December 1, 1998
Class Termination Date..................... January 25, 2003
Class A-4 Investor Certificates
Class Initial Invested Amount.............. $207,860,000
Class Initial Investor Interest............ $207,860,000
Class Certificate Margin................... 0.30%
Class Termination Date..................... July 25, 2007
</TABLE>
The "Scheduled Class Amortization Date" for the Class A-4 Investor Certificate
shall mean the earlier of (a) August 25, 2004 and (b) the date on which any
Early Amortization Event or Investment Event, in each case with respect to the
Series 1995-1 Certificates (the Series of certificates issued by the Master
Trust in connection with the Class A-4 Investor Certificate), occurs.
SUBORDINATION OF SELLER'S INTEREST
The right of the holder of the 1990 Trust Seller Certificate to receive payments
in respect of the 1990 Trust Seller Interest is subordinated to the interests of
the 1990 Trust Investor Certificates, including the Class A-5 Investor
Certificate, to the extent of the 1990 Trust Available Subordinated Amount. As
of the Distribution Date (after giving pro forma effect to the issuance of the
Class A-5 Investor Certificate to the Master Trust and the issuance of the
Series 1997-1 Certificates by the Master Trust), the 1990 Trust Available
Subordinated Amount was $ . For additional information
regarding the subordination of the 1990 Trust Seller Interest, see "Terms of the
1990 Trust
S-15
<PAGE> 17
Investor Certificates--Limited Subordination of the 1990 Trust Seller Interest;
1990 Trust Available Subordinated Amount" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement"), the Seller has agreed to sell to each of the
Underwriters named below, and each of the Underwriters has severally agreed to
purchase from the Seller, the principal amount of Series 1997-1 Certificates
set forth opposite its name below:
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
AMOUNT OF
SERIES 1997-1 CERTIFICATES
UNDERWRITERS TO BE PURCHASED
------------ --------------------------
<S> <C>
........................... $
...........................
__________
Total.................... $
</TABLE>
The Seller has been advised by the Underwriters that they propose initially to
offer the Series 1997-1 Certificates to the public at the price set forth on
the cover page hereof, and to certain dealers at such price less a concession
not in excess of %. The Underwriters may allow, and such dealers may
reallow to certain other dealers, a subsequent concession not in excess of %.
After the initial public offering, the public offering price and such
concessions may be changed.
The Seller does not intend to apply for listing of the Series 1997-1
Certificates on a national securities exchange, but has been advised by the
Underwriters that they intend to make a market in the Series 1997-1
Certificates. The Underwriters are not obligated, however, to make a market in
the Series 1997-1 Certificates and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the Series 1997-1 Certificates.
, on behalf of the Underwriters, may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in accordance
with Regulation M under the Exchange Act. Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the Series 1997-1 Certificates in
the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit to
reclaim a selling concession from a syndicate member when the Series 1997-1
Certificates originally sold by such syndicate member are purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the prices of the Series 1997-1 Certificates to be higher than they would
otherwise be in the absence of such transactions. These transactions, if
commenced, may be discontinued at any time.
Each Underwriter has represented and agreed that (a) it has not offered or sold,
and will not offer or sell, Series 1997-1 Certificates to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted, and will not result in an offer to the public in the United Kingdom
within the meaning of the U.K. Regulations, (b) it has complied with and will
comply with all applicable provisions of the Financial Services Act of 1986 of
Great Britain with respect to anything done by it in relation to the Series
1997-1 Certificates in, from or otherwise involving the United Kingdom and (c)
it has only issued or passed on and will only issue or pass on in the United
Kingdom any document in connection with the issue of the Series 1997-1
Certificates to a person who is of a kind described in Article 11(3) of the
Financial Services Act of 1986, as amended, (Investment Advertisement)
(Exceptions) Order 1996, as amended, or is a person to whom the document may
otherwise lawfully be issued or passed on.
S-16
<FF>
<PAGE> 18
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged and may in the future engage in
commercial banking or investment banking transactions with affiliates of the
Seller, including the Seller's parent, NFC. The Underwriters have agreed to
reimburse the Seller for certain expenses incurred in connection with the
issuance and distribution of the Series 1997-1 Certificates.
The Seller has agreed to indemnify the Underwriters against certain liabilities
including liabilities under the Securities Act of 1933.
LEGAL OPINIONS
In addition to the legal opinions described in the Prospectus, certain legal
matters relating to the Series 1997-1 Certificates will be passed upon for the
Underwriters by Mayer, Brown & Platt.
S-17
<FF>
<PAGE> 19
INDEX OF TERMS
<TABLE>
<CAPTION>
<S> <C>
1990 Trust ....................................... 1
1990 Trust Agreement ............................. 1
Accumulation Period Commencement Date ............ 9
Accumulation Period Length ....................... 9
Average Coverage Differential .................... 13
Class A-5 Investor Certificate ................... 1
Closing Date ..................................... 1
Controlled Amortization Amount ................... 9
Distribution Date ................................ 1
Early Amortization Event ......................... 12
Early Distribution ............................... 14
Early Distribution Amount ........................ 14
Early Distribution Date .......................... 14
Early Distribution Notice ........................ 14
Expected Payment Date ............................ 1, 9
Initial Invested Amount .......................... 9
Investment Event ................................. 12
Issuer ........................................... 1
LIBOR ............................................ 9
LIBOR Determination Date ......................... 10
Master Trust ..................................... 1
Master Trust Trustee ............................. 1
Minimum Negative Carry Required Amount ........... 10
Minimum Series Seller's Interest ................. 10
Negative Carry Reserve Fund Required Amount ...... 10
Negative Carry Subordinated Amount ............... 10
New Vehicle Monthly Interest Rate ................ 10
NFC .............................................. 1
NFSC ............................................. 1
NIC .............................................. 2
NITC ............................................. 2
Offered Certificate Rate ......................... 1, 10
Pooling and Servicing Agreement .................. 1
Principal Terms .................................. 15
Projected Dealer Note Income ..................... 11
Projected Investment Income ...................... 11
Projected Investment Shortfall ................... 11
Projected Monthly Interest ....................... 11
Projected Monthly Servicing Fee .................. 11
Projected Spread ................................. 11
Prospectus ....................................... 1
Reference Banks .................................. 11
Required Excess Seller Interest .................. 11
Required Excess Seller Interest Percentage ....... 11
Required Subordinated Amount ..................... 11
Seller ........................................... 1
Series 1997-1 Certificates ....................... 1
Series Allocable Servicing Fee ................... 11
Series Termination Date .......................... 9
Servicer ......................................... 1
Specified Accumulation Period Commencement Date .. 9
Subordinated Percentage .......................... 9
UK Regulations ................................... 3
Used Vehicle Monthly Interest Rate ............... 12
Wholesale Portfolio .............................. 3
</TABLE>
S-18
<PAGE> 20
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 3, 1997
PROSPECTUS
NAVISTAR FINANCIAL DEALER NOTE MASTER TRUST
DEALER NOTE ASSET BACKED CERTIFICATES
----------
NAVISTAR FINANCIAL SECURITIES CORPORATION
SELLER
----------
NAVISTAR FINANCIAL CORPORATION
SERVICER
----------
The Dealer Note Asset Backed Certificates described herein (the "Certificates")
each represent an undivided interest in certain assets of the Navistar
Financial Dealer Note Master Trust (the "Master Trust") created pursuant to the
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement") entered
into among Navistar Financial Corporation ("NFC" or the "Servicer"), Navistar
Financial Securities Corporation ("NFSC" or the "Seller"), The Chase Manhattan
Bank, as trustee under the 1990 Trust (as defined below), and The Bank of New
York, as trustee of the Master Trust (the "Master Trust Trustee"). The
Certificates may be offered and sold from time to time (the "Offered
Certificates"), in one or more series (each, an "Offered Series"), in an amount
(the "Initial Invested Amount"), at a price and on terms to be determined at
the time of sale and to be set forth in a supplement to this Prospectus (each,
a "Prospectus Supplement"). Interest on the Offered Certificates will be paid
on the twenty-fifth day of each month (or if such day is not a business day,
the next business day thereafter) (each, a "Distribution Date"). If so
provided in the Prospectus Supplement for an Offered Series, and unless an
Early Amortization Event occurs, upon the occurrence of certain events
described in such Prospectus Supplement an Investment Period with respect to
such Offered Series will commence and certain amounts allocable to the Offered
Certificates will be deposited in the Series Principal Account and used to make
principal payments with respect to the Offered Certificates on the Expected
Payment Date (or earlier or later under certain circumstances described herein
and in the Prospectus Supplement).
The Navistar Financial Dealer Note Trust 1990 (the "1990 Trust") was formed
pursuant to a Pooling and Servicing Agreement, dated as of December 1, 1990,
among NFC, as Servicer, NFSC, as Seller, and The Chase Manhattan Bank, as
trustee (the "1990 Trust Trustee") (as it has been or may be supplemented and
amended, the "1990 Trust Agreement"). The corpus of the 1990 Trust includes,
among other things, wholesale dealer notes which are generated from time to
time in the ordinary course of business and are issued by dealers to finance
purchases of new and used medium and heavy duty trucks and new and used
trailers, all monies due or to become due with respect thereto, the interest of
the Seller in the security interests in the related financed vehicles, and all
proceeds of the foregoing. Prior to the date hereof, the 1990 Trust has issued
four classes of 1990 Trust Investor Certificates, the Class A-1, Class A-2,
Class A-3 and Class A-4 Investor Certificates. Of such 1990 Trust Investor
Certificates, only the Class A-4 Investor Certificate is included in the assets
of the Master Trust. Certain assets of the 1990 Trust have been allocated to
the holders of the 1990 Trust Investor Certificates (whether or not issued to
the Master Trust), each of which represents a fractional undivided interest in
the 1990 Trust, including the right to receive varying percentages of the
collections with respect to the assets in the 1990 Trust. (continued on next
page)
----------
THE OFFERED CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE MASTER TRUST
ONLY AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE
SELLER, THE SERVICER OR ANY AFFILIATE THEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
SEE "RISK FACTORS" AT PAGE 22 FOR A DISCUSSION OF MATERIAL RISKS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS IN CONNECTION WITH AN INVESTMENT IN THE
OFFERED CERTIFICATES.
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of Offered Certificates unless accompanied by a Prospectus
Supplement.
The date of this Prospectus is , 1997.
<PAGE> 21
Prior to the 1990 Trust Termination Date, (a) the assets of the Master Trust
will include the Class A-4 Investor Certificate, any 1990 Trust Investor
Certificate issued to the Master Trust in connection with the issuance of any
Offered Series (each, a "Related 1990 Certificate"), any 1990 Trust Investor
Certificate issued to the Master Trust in connection with the issuance of any
other series of certificates issued by the Master Trust (each, a "Subsequent
1990 Trust Investor Certificate"), any interest rate hedge or other enhancement
that the Master Trust may have entered into or obtained for the benefit of any
such series (any series of certificates issued by the Master Trust, including
any Offered Series, is referred to herein as a "Series"), the 1990 Trust Seller
Certificate, and all funds on deposit in certain accounts of the Master Trust,
(b) the dealer notes are sold on a daily basis to the Seller pursuant to the
1990 Trust Purchase Agreement between NFC and the Seller, and the Seller in
turn conveys the dealer notes on a daily basis to the 1990 Trust, and (c) the
holders of any Series of Offered Certificates (the "Offered
Certificateholders") will have an interest only in the Related 1990
Certificate, any interest rate hedge or other enhancement that the Master Trust
may have entered into or obtained for the benefit of such Series of Offered
Certificates, and all of the funds on deposit in certain accounts of the Master
Trust.
As of the 1990 Trust Termination Date, if a 1990 Trust Early Amortization
Period shall not have occurred prior to such date, (a) the 1990 Trust will
transfer to the Master Trust all of the property of the 1990 Trust (other than
funds on deposit in respect of the Class A-2 or Class A-3 Investor
Certificates, the two outstanding classes of 1990 Trust Investor Certificates
that are not assets of the Master Trust), and (b) the Class A-4 Investor
Certificate, each Related 1990 Certificate, any Subsequent 1990 Trust Investor
Certificate and the 1990 Trust Seller Certificate will automatically be
canceled, and all rights of the Master Trust with respect to such certificates
will terminate.
As of the 1990 Trust Termination Date and thereafter, (a) the assets of the
Master Trust will include all Dealer Notes transferred to the Master Trust by
the 1990 Trust and all Dealer Notes thereafter transferred to the Master Trust
by the Seller, all monies due or to become due with respect thereto and all
proceeds of such Dealer Notes, the interest of the Seller in the security
interests in the Financed Vehicles related to the Dealer Notes and the proceeds
thereof, the interest of the Seller in the Insurance Proceeds, each Interest
Rate Swap, interest rate cap, or other interest rate hedge, if any, that the
Master Trust may have entered into or obtained for the benefit of any Series,
and all funds on deposit in certain accounts of the Master Trust, (b) NFC will
sell Dealer Notes on a daily basis to the Seller pursuant to the Master Trust
Purchase Agreement (which will become effective upon the 1990 Trust Termination
Date), and the Seller in turn will convey on a daily basis the Dealer Notes to
the Master Trust, and (c) the Offered Certificateholders will have an interest
in and a right to receive a varying percentage of each month's collections with
respect to the dealer notes contained in the Master Trust as of such time. NFC
will service the dealer notes in its capacity as Servicer under the 1990 Trust
Agreement or the Pooling and Servicing Agreement, as applicable, and will
receive a monthly servicing fee as compensation for its servicing activities
thereunder.
From time to time, subject to certain conditions, the Seller may designate and
offer other Series of certificates, which may have terms significantly
different from the terms of an Offered Series.
The Seller will own the interest in the Master Trust not represented by the
Offered Certificates or the certificates of any other Series issued by the
Master Trust. A portion of the Master Trust Seller's Interest will be
subordinated to the rights of the Offered Certificateholders after the 1990
Trust Termination Date to the limited extent described herein. See
"Description of the Offered Certificates--Allocations of Collections After the
1990 Trust Termination Date--Limited Subordination of Master Trust Seller's
Interest; Liquidity Reserve Account; Spread Account."
There is currently no secondary market for the Offered Certificates, and there
is no assurance that one will develop. The underwriters with respect to an
Offered Series are expected, but are not obligated, to make a market in such
Offered Certificates. However, even if the underwriters do make such a market,
there is no assurance that any such market will continue.
Delivery of the Offered Certificates is expected to be made in book-entry form
only through the facilities of The Depository Trust Company ("DTC").
- 2 -
<PAGE> 22
AVAILABLE INFORMATION
The Seller has filed a Registration Statement (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with the
Securities and Exchange Commission (the "Commission") with respect to the
Offered Certificates offered pursuant to this Prospectus and the related
Prospectus Supplement. This Prospectus, which forms part of the Registration
Statement, does not contain all of the information contained in the
Registration Statement and the exhibits thereto. For further information,
reference is made to the Registration Statement and the amendments thereof and
the exhibits thereto, which are available for inspection without charge at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048;
and Northwestern Atrium Center, Suite 1400, 500 West Madison Street, Chicago,
IL 60601. Copies of the Registration Statement and the amendments thereof and
the exhibits thereto may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Seller is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. Such
reports and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60601. Copies of such material can be obtained from the
Public References Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Electronic reports and other
information filed through the Commission's Electronic Data Gathering, Analysis
and Retrieval system are publicly available through the Commission's Web site
(http://www.sec.gov).
REPORTS TO THE OFFERED CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual reports
containing information concerning the Master Trust, prepared by the Servicer,
will be sent on behalf of the Master Trust to Cede & Co. ("Cede") (as the
registered holder of the Offered Certificates) to be available for forwarding
to holders of interests in the Offered Certificates. The Seller is authorized
to file, and will file on behalf of the Master Trust, such periodic reports
with respect to the Master Trust as are required to be filed pursuant to the
Exchange Act or any rules and regulations thereunder. The annual reports
will not contain financial information that has been examined and reported on
by independent public accountants.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following reports and documents filed by NFSC on behalf of the Master Trust
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act are hereby
incorporated by reference in this Prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended October 31,
1996; and
(2) Current Reports on Form 8-K for December 24, 1996 and January 27,
February 25, March 25, April 25, May 27, and June 24, 1997.
All reports and other documents filed by NFSC on behalf of the Master Trust
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent
to the date of this Prospectus and prior to the termination of the offering of
the investor certificates shall be deemed to be incorporated by reference into
this Prospectus and to be a part hereof. Any statement contained herein or in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus.
The Servicer will provide without charge to each person, including any
beneficial owner of investor certificates, to whom a copy of this Prospectus is
delivered, a copy of any and all the documents incorporated herein by reference
(other than exhibits to such documents) upon request. Requests should be
directed to Navistar Financial Corporation, 2850 West Golf Road, Rolling
Meadows, IL 60008 (telephone 847/734-4094).
- 3 -
<PAGE> 23
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to the Offered Certificates contained in the related
Prospectus Supplement to be prepared and delivered in connection with the
offering of such Offered Certificates. Certain capitalized terms used in this
Prospectus Summary are defined elsewhere in this Prospectus. A listing of the
pages on which terms are defined is found in the "Index of Terms."
SECURITIES OFFERED................. Dealer Note Asset Backed Certificates.
ISSUER............................. Navistar Financial Dealer Note Master
Trust.
SELLER............................. Navistar Financial Securities Corporation,
a wholly owned special purpose financing
subsidiary of Navistar Financial
Corporation.
SERVICER........................... Navistar Financial Corporation, a wholly
owned subsidiary of Navistar International
Transportation Corp.
MASTER TRUST TRUSTEE............... The Bank of New York.
1990 TRUST TERMINATION DATE........ The "1990 Trust Termination Date" means the
close of business on the date, which will
be given retroactive effect, which is the
last day of the Due Period related to the
Distribution Date on which the Class
Invested Amount of each of the Class A-1,
A-2 and A-3 Investor Certificates is
reduced to zero. In the absence of a 1990
Trust Amortization Event, the 1990 Trust
Termination Date will occur following the
repayment of the Class Invested Amount for
the Class A-3 Investor Certificates, which
repayment will commence on the first
Distribution Date following the Due Period
commencing December 1, 1998.
Prior to the 1990 Trust Termination Date,
the principal assets held by the Master
Trust will be the Class A-4 Investor
Certificate, each Related 1990 Certificate,
any Subsequent 1990 Trust Investor
Certificate, any associated Interest Rate
Swap and the 1990 Trust Seller Certificate.
Each Related 1990 Certificate will bear
interest at a rate intended to provide
sufficient cash flows to make required
payments of interest on the Offered
Certificates or on an associated Interest
Rate Swap and will have an invested amount
intended to be sufficient, in the event of
early amortization of the 1990 Trust, to
repay the Invested Amount on the Offered
Certificates or, in the event that such
amortization event constitutes an
Investment Period with respect to the
Offered Certificates, to fund the Series
Principal Account and the Negative Carry
Reserve Fund. As described in more detail
herein, prior to the 1990 Trust Termination
Date, the 1990 Trust will be the Active
Trust and will hold the Dealer Notes and
certain related assets and receive and
allocate the collections and losses thereon
to holders of the 1990 Trust Investor
Certificates, including the Master Trust as
holder of each Related 1990 Certificate.
During this time, the Master Trust will be
essentially a passive entity in which
Collections received on each Related 1990
Certificate and any Net Swap Receipts will
be used to make payments to
Certificateholders, including the Offered
Certificateholders, and any Net Swap
Payments.
Following the 1990 Trust Termination Date,
the Master Trust will become the Active
Trust. As described in more detail herein,
the Dealer Notes and other assets held by
the 1990 Trust will be transferred to the
Master Trust,
- 4 -
<PAGE> 24
and the Master Trust will
thereafter receive and allocate the
Collections thereon to Certificateholders,
including Offered Certificateholders.
MASTER TRUST PROPERTY.............. Until the occurrence of the 1990 Trust
Termination Date the assets of the Master
Trust will include (a) the 1990 Trust
Seller Certificate transferred by the
Seller to the Master Trust, all rights of
the Seller thereunder and all other rights
of the Seller under the 1990 Trust
Agreement (including the right to exchange
such 1990 Trust Seller Certificate for new
classes of 1990 Trust Investor Certificates
in the manner described herein, the right
to receive distributions and other payments
from the 1990 Trust, and the right to
receive funds on deposit in the 1990 Trust
Liquidity Reserve Account, 1990 Trust
Spread Account and 1990 Trust Interest
Deposit Account), (b) the Class A-4
Investor Certificate, each Related 1990
Certificate and any Subsequent 1990 Trust
Investor Certificate and all monies due or
to become due with respect thereto, (c)
each Interest Rate Swap, interest rate cap,
or other interest rate hedge, if any, that
the Master Trust may have entered into or
obtained for the benefit of any Series and
(d) all funds on deposit in certain
accounts of the Master Trust, including
funds on deposit in the Collections
Account, the Series Principal Account, the
Distribution Account, the Negative Carry
Reserve Fund and any other Series Accounts
created under a Supplement to the Pooling
and Servicing Agreement.
Each Related 1990 Certificate will be a
newly-issued 1990 Trust Investor
Certificate issued to the Master Trust in
connection with the issuance of a Series of
Offered Certificates. The Class Initial
Invested Amount of the Related 1990
Certificate is expected to equal or exceed
the Initial Invested Amount of the Offered
Certificates. The Related 1990 Certificate
will bear interest at a floating rate equal
to one month LIBOR plus a margin, which
margin will be established as specified in
the Prospectus Supplement. The Related
1990 Certificate will represent an
undivided interest in the 1990 Trust and
will entitle the Master Trust, as the
holder thereof, to share in the collections
on the Dealer Notes held by the 1990 Trust
ratably with each other series of 1990
Trust Investor Certificates issued by the
1990 Trust (including the Class A-4
Investor Certificate, any Related 1990
Certificate and any Subsequent 1990 Trust
Investor Certificate) on the basis
described herein. A Related 1990
Certificate will be transferred to the
Master Trust in connection with the
issuance of the Offered Certificates to
provide a source of funds for the required
payments thereon prior to the 1990 Trust
Termination Date. Prior to such date,
Dealer Notes issued to the 1990 Trust
cannot be transferred to the Master Trust.
As of the 1990 Trust Termination Date (a)
the 1990 Trust will transfer to the Master
Trust all of its right, title and interest
in and to all of the property of the 1990
Trust (other than funds on deposit in
respect of the Class A-2 or Class A-3
Investor Certificates), and (b) the Class
A-4 Investor Certificate, each Related 1990
Certificate, any Subsequent 1990 Trust
Investor Certificate and the 1990 Trust
Seller Certificate will automatically be
canceled, and all rights of the Master
Trust with respect to such certificates
will terminate. As of the 1990 Trust
Termination Date, funds on deposit in the
1990 Trust Spread Account will be
transferred to the Master Trust and
allocated among the Offered Series and any
other outstanding Series that so provides
based on the projected spread for each such
Series (including the Projected Spread for
the Offered Series). Any such funds
allocated to the Offered Series will be
deposited in the Spread Account for the
benefit of the Offered Certificateholders.
In addition, as of the 1990 Trust
Termination Date, 1990 Trust Investment
Securities will be transferred to the
Master Trust and deposited in the Excess
Funding
- 5 -
<PAGE> 25
Account for the benefit of the
Offered Certificateholders and the
certificateholders of each other
outstanding Series (such other
certificateholders, together with the
Offered Certificateholders, are referred to
as the "Certificateholders"). Finally, as
of the 1990 Trust Termination Date, funds
on deposit in the 1990 Trust Interest
Deposit Account will be transferred to the
Master Trust and deposited in the Interest
Deposit Account, subject to allocation and
distribution as Finance Charge Collections
to the extent provided herein. Thus, as of
the 1990 Trust Termination Date and
thereafter, the assets of the Master Trust
will include (a) all Dealer Notes
transferred to the Master Trust by the 1990
Trust and all Dealer Notes thereafter
transferred to the Master Trust by the
Seller, all monies due or to become due
with respect thereto and all proceeds of
such Dealer Notes, (b) the interest of the
Seller in the security interests in the
Financed Vehicles related to the Dealer
Notes and the proceeds thereof, (c) the
interest of the Seller in the Insurance
Proceeds, (d) each Interest Rate Swap,
interest rate cap, or other interest rate
hedge, if any, that the Master Trust may
have entered into or obtained for the
benefit of any Series, and (e) all funds on
deposit in certain accounts of the Master
Trust, including funds on deposit in the
Series Principal Account, the Distribution
Account, the Spread Account, the Excess
Funding Account, the Interest Deposit
Account, the Negative Carry Reserve Fund
and any other Series Account created under
a Supplement to the Pooling and Servicing
Agreement.
On each business day (except in certain
limited circumstances), NFC will sell
Dealer Notes to the Seller and the Seller
will transfer such Dealer Notes to the 1990
Trust, or after the 1990 Trust Termination
Date, the Master Trust (in either case, the
"Active Trust") based on criteria provided
in the 1990 Trust Agreement when the 1990
Trust is the Active Trust or the Pooling
and Servicing Agreement when the Master
Trust is the Active Trust (in either case,
the "Applicable Agreement"). Accordingly,
the aggregate amount of Dealer Notes in the
Active Trust will fluctuate from day to day
as new Dealer Notes are generated and as
existing Dealer Notes are collected,
charged off as uncollectible or otherwise
adjusted or removed from the Active Trust.
DEALER NOTES....................... The Dealer Notes consist of wholesale notes
issued by Dealers to finance new and used
trucks and new and used trailers
manufactured by or for NITC and other
manufacturers. A Dealer Note is created
upon shipment of, or upon receipt of an
invoice with respect to, each new truck to
such a Dealer or upon the purchase or
acceptance in trade by such a Dealer of a
used vehicle or trailer. NFC purchases
Dealer Notes on a daily basis from NITC and
from dealers. Currently, the Dealer Notes
bear interest at a floating rate equal to
the prime rate as announced from time to
time by certain U.S. financial institutions
plus a margin. See generally, "The
Navistar Financial Dealer Floor Plan
Financing Business."
The Seller transfers Dealer Notes
identified by the Servicer as Eligible
Dealer Notes on a daily basis to the
Servicer on behalf of the Active Trust
(except in certain limited circumstances).
Under certain circumstances, the Seller may
be required to purchase (a) from the Active
Trust (in which case NFC will be required
to purchase from the Seller), those Dealer
Notes previously transferred to the Active
Trust that were not Eligible Dealer Notes
as of the date of transfer to the Active
Trust or (b) from the holders thereof (in
which case NFC will be required to purchase
from the Seller), all outstanding classes
of 1990 Trust Investor Certificates or the
Certificateholders' Interest in the Master
Trust, as the case may be, if a
- 6 -
<PAGE> 26
material amount of Dealer Notes were not
Eligible Dealer Notes as of the date of
transfer to the Master Trust. If the
Related 1990 Certificate is purchased
from the Master Trust, an Investment
Event will occur and amounts received in
respect thereof (other than accrued 1990
Trust Investor Certificate Interest) will
be treated as Principal Collections. See
"Description of the Offered Certificates--
Certain Representations and Warranties;
Ineligible Dealer Notes; Purchase of
Certificateholders' Interest."
SERVICING THE DEALER NOTES......... The Applicable Agreement authorizes NFC to
service and administer the Dealer Notes on
behalf of the Active Trust and the Seller
and to collect payments due under the
Dealer Notes in accordance with its
customary and usual servicing procedures.
Prior to the 1990 Trust Termination Date,
the Servicer will be entitled to receive a
fee payable in arrears equal to 1.0% per
annum of the daily average principal amount
of Dealer Notes pursuant to the 1990 Trust
Agreement. After the 1990 Trust
Termination Date, the Servicer will receive
a servicing fee with respect to each
outstanding Series, determined at the time
of issuance of such Series. The servicing
fee payable with respect to the Offered
Series will be specified in the Prospectus
Supplement.
OFFERED CERTIFICATES............... The Offered Certificates on the date of
their original issuance (with respect to
the Offered Series, the "Closing Date")
will be issued in minimum denominations of
$1,000 and in integral multiples thereof.
Prior to the 1990 Trust Termination Date,
all amounts payable by the 1990 Trust in
respect of the Related 1990 Certificate
("Related 1990 Certificate Collections")
will be allocated to the Offered Series and
amounts payable by the 1990 Trust in
respect of any other 1990 Trust Investor
Certificate issued in connection with the
issuance of a Series will be allocated as
provided in the Supplement related to the
other Series. All allocations to the
Offered Certificateholders, both prior to
and after the 1990 Trust Termination Date,
are referred to herein as the "Offered
Certificateholders' Interest."
The Offered Certificates will evidence an
undivided beneficial interest in the assets
of the Master Trust allocated to the
Offered Certificateholders' Interest and
will represent the right to receive from
such assets funds up to (but not in excess
of) the amounts required to make monthly
payments of interest on the Invested Amount
at the Offered Certificate Rate ("Monthly
Interest") and to make the payment of
principal on the Expected Payment Date (or
earlier or later under certain
circumstances) in an amount not to exceed
the Invested Amount. Prior to the 1990
Trust Termination Date, Related 1990
Certificate Collections, Investment Income
and any Net Swap Receipts will be the sole
source used to fund payments due in respect
of the Offered Certificates (including, to
the extent described herein, Monthly
Interest and Net Swap Payments), and any
other amounts received by the Master Trust
will be allocated to the Seller or to other
outstanding Series.
The principal amount of the Master Trust
Seller's Interest will fluctuate (a) prior
to the 1990 Trust Termination Date, based
on changes in the size of the 1990 Trust
Seller Interest, (b) based on changes in
the outstanding principal amount of any
variable funding certificate issued by the
Master Trust, (c) after the 1990 Trust
Termination Date, as the aggregate
principal amount of the Dealer Notes in the
Master Trust changes from time to time and
(d) as new Series are issued and as
outstanding Series amortize.
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<PAGE> 27
The Offered Certificates will represent
beneficial interests in the Master Trust
only and will not represent interests in or
obligations of NFC, the Seller or the 1990
Trust. Neither the Offered Certificates
nor the Dealer Notes are insured or
guaranteed by NFC or the Seller or any
affiliate thereof or by any governmental
agency.
REGISTRATION OF THE OFFERED
CERTIFICATES....................... The Offered Certificates will initially be
represented by one or more certificates
registered in the name of Cede, as the
nominee of DTC. No person acquiring an
interest in the Offered Certificates will
be entitled to receive a Definitive
Certificate representing such person's
interest unless Definitive Certificates are
issued under the limited circumstances
described herein. See "Description of the
Offered Certificates--Definitive
Certificates."
ISSUANCE OF NEW SERIES............. The Pooling and Servicing Agreement
provides that, pursuant to any one or more
supplements thereto (each, a "Supplement"),
the Seller may cause the Master Trust
Trustee to issue one or more new Series of
certificates (a "New Issuance"). The
Pooling and Servicing Agreement also
provides that the Seller may specify with
respect to any Series, among other things,
the Principal Terms of such Series. Such
Series may have the benefit of letters of
credit, surety bonds, cash collateral
accounts, collateral invested amounts,
spread accounts, guaranteed rate
agreements, liquidity facilities, interest
rate swap agreements or other similar
arrangements. The Seller may offer any
Series to the public under a prospectus in
transactions registered under the
Securities Act or to other investors
pursuant to other disclosure documents in
private placements and other transactions
exempt from registration under the
Securities Act, in each case directly or
through one or more underwriters or
placement agents. The Master Trust Trustee
and the Servicer do not expect to file
periodic reports with the Commission or
otherwise publicize the issuance of a
Series exempt from registration under the
Securities Act. See "Risk Factors--Limited
Restrictions on New Issuances; Effects of
Additional Series" for a discussion of the
impact that a New Issuance may have on the
Offered Series.
Under the Pooling and Servicing Agreement
and pursuant to a Supplement, a New
Issuance may only occur upon delivery to
the Master Trust Trustee of, among other
things, the following: (a) a Supplement
specifying the Principal Terms, (b) a Tax
Opinion and (c) evidence of satisfaction of
the Rating Agency Condition. The Pooling
and Servicing Agreement further provides
that, if the Seller effects a New Issuance
prior to the 1990 Trust Termination Date,
the Master Trust Trustee will, to the
extent requested by the Seller but without
any further action by the Seller or any
Certificateholder, deliver the 1990 Trust
Seller Certificate to the 1990 Trust
Trustee prior to such New Issuance in
exchange for one or more 1990 Trust
Investor Certificates and a newly issued
1990 Trust Seller Certificate. See
"Description of the Offered
Certificates--New Issuances."
INTEREST........................... Monthly Interest on the Offered
Certificates will accrue at the Offered
Certificate Rate and will be paid on the
twenty-fifth day of each month, or if such
twenty-fifth day is not a business day, the
next business day thereafter. Monthly
Interest will accrue from the most recent
Distribution Date on which interest has
been paid (or, with respect to the initial
Distribution Date, the Closing Date) to but
excluding the current Distribution Date on
the Invested Amount at a per annum rate
equal to the Offered Certificate Rate.
Monthly Interest for any Distribution Date
due
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<PAGE> 28
but not paid on such Distribution Date
will be due on the next Distribution Date.
Prior to the 1990 Trust Termination Date
and prior to the commencement of a Class
Amortization Period for the Related 1990
Certificate, to the extent described
herein, the Related 1990 Certificate
Interest Collections and any Net Swap
Receipts, together with Investment Income,
will be used to make payments when due of
Monthly Interest to the Offered
Certificateholders and Net Swap Payments to
any Swap Counterparty. Upon the
commencement, if any, of a Class
Amortization Period for the Related 1990
Certificate, Monthly Interest will be
funded from (a) Related 1990 Certificate
Interest Collections, Investment Income,
any Net Swap Receipts and any other amounts
on deposit in the Distribution Account and
(b) amounts on deposit in the Negative
Carry Reserve Fund.
After the 1990 Trust Termination Date,
Offered Series Finance Charge Collections,
Investment Income, any Net Swap Receipts
and certain other amounts, to the extent
described herein, will be used to make
payments of Monthly Interest to the Offered
Certificateholders and any Net Swap
Payments to a Swap Counterparty. Under
certain circumstances, Monthly Interest and
any Net Swap Payments will be funded from
withdrawals from the Spread Account,
withdrawals from the Negative Carry Reserve
Fund, withdrawals from the Liquidity
Reserve Account and Available Seller's
Finance Charge Collections to the extent
described herein.
PRINCIPAL.......................... Although the final payment of principal
with respect to the Offered Certificates is
expected to be made on the Expected Payment
Date, such final principal payment may be
made earlier if an Early Amortization Event
occurs or an Early Distribution election is
made in connection with an Investment Event
(see "Investment Period" below), or later
under certain circumstances described
herein. Unless an Early Amortization Event
occurs or an Early Distribution election is
made in connection with an Investment
Event, it is expected that principal will
be paid in one lump sum on the Expected
Payment Date. If an Early Amortization
Event occurs, an Early Amortization Period
will commence, and (unless otherwise
provided in the Prospectus Supplement)
principal will be paid to the Offered
Certificateholders on each Distribution
Date thereafter beginning with the first
Distribution Period following the Due
Period in which such Early Amortization
Period commences. Principal payments (if
any) prior to the 1990 Trust Termination
Date will be funded out of Related 1990
Certificate Principal Collections. After
the 1990 Trust Termination Date, principal
payments will be funded from Principal
Collections allocated to the Offered Series
in the manner set forth herein. See "Risk
Factors--Payments and Maturity."
ALLOCATIONS PRIOR TO 1990
TRUST TERMINATION DATE ............ Prior to the 1990 Trust Termination Date,
the assets of the Master Trust will be
allocated to the Offered
Certificateholders' Interest as described
below.
Related 1990 Certificate Collections,
Investment Income and any Net Swap Receipts
will be allocated to the Offered
Certificateholders' Interest (but only to
the extent necessary to make payments in
respect of the Offered Certificates and any
Interest Rate Swap) or paid to the Seller.
Related 1990 Certificate Interest
Collections and any Net Swap Receipts will
be deposited in the Distribution Account
and, together with Investment Income,
distributed to the Offered
Certificateholders and any Swap
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<PAGE> 29
Counterparty to the extent necessary to
make payments on the Offered Certificates
and any Net Swap Payments as provided
herein. Unless an Investment Event or an
Early Amortization Event occurs prior to
the 1990 Trust Termination Date, no
principal distributions will be made on any
Related 1990 Certificate. During an
Investment Period or an Early Amortization
Period, Related 1990 Certificate Principal
Collections will be allocated pro rata
between the Series Principal Account to the
extent of the Invested Amount and the
Negative Carry Reserve Fund to the extent
of the Negative Carry Reserve Fund Deposit
Amount. Any remaining Related 1990
Certificate Principal Collections shall be
paid to the Seller. Except for such
subordinated right to receive remaining
Related 1990 Certificate Principal
Collections prior to the 1990 Trust
Termination Date, the Master Trust Seller's
Interest is not subordinated to the Offered
Certificateholders' Interest. All
distributions and other payments made to
the Master Trust as assignee of the
Seller's rights under the 1990 Trust
Agreement or as holder of the 1990 Trust
Seller Certificate (the "1990 Trust Seller
Collections") will be allocated between any
variable funding certificate issued by the
Master Trust and the Seller (or as
otherwise provided in any Supplement). If
any new class of 1990 Trust Investor
Certificates is issued under the 1990 Trust
to the Master Trust in respect of the
issuance of any new Series by the Master
Trust, then any payment to the Master Trust
with respect to such class will be
related to the issuance of such Series.
ALLOCATIONS AFTER THE 1990
TRUST TERMINATION DATE ............ After the 1990 Trust Termination Date,
Finance Charge Collections, Principal
Collections and Dealer Note Losses will be
allocated to the Offered Series based on
the Series Allocation Percentage. Finance
Charge Collections, Principal Collections
and Dealer Note Losses not allocated to the
Offered Series will be allocated to other
outstanding Series. Series Allocable
Finance Charge Collections, Series
Allocable Principal Collections and Series
Allocable Dealer Note Losses will be
further allocated between the Offered
Certificateholders' Interest and the Master
Trust Seller's Interest. In addition,
after the 1990 Trust Termination Date, a
portion of the Master Trust Seller's
Interest will be subordinated to the
Offered Certificateholders' Interest under
certain circumstances summarized below in
"--Subordination of the Master Trust
Seller's Interest."
Series Allocable Finance Charge Collections
and Series Allocable Dealer Note Losses
will be allocated at all times to the
Offered Certificateholders' Interest based
on the Floating Allocation Percentage.
Investment Income will be allocated
entirely to the Offered Certificateholders'
Interest at all times. Any Series
Allocable Finance Charge Collections and
Investment Income allocated to the Offered
Certificateholders' Interest and not needed
to pay the Offered Series Servicing Fee,
Monthly Interest and Net Swap Payments nor
applied in certain other ways may be
reallocated to other Series to the extent
of any shortfalls and otherwise will be
allocated to the Seller.
During the Revolving Period, Series
Allocable Principal Collections will be
allocated to the Offered
Certificateholders' Interest based on the
Floating Allocation Percentage. During the
Revolving Period, Offered Series Principal
Collections will be available for
reallocation to other Series that so
provide and that are in amortization, early
amortization or accumulation periods to the
extent necessary to cover any principal
shortfalls with respect thereto.
Otherwise, Offered Series Principal
Collections generally will be
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<PAGE> 30
allocated to any variable funding
certificate issued by the Master Trust or
paid to the Seller during the Revolving
Period or, to the extent described herein,
allocated to and deposited in the Excess
Funding Account in order to maintain the
Master Trust Seller's Interest at a level
equal to the Master Trust Minimum Seller's
Interest. The purpose of the Excess
Funding Account is to hold Principal
Collections that would otherwise be paid to
the Seller in order to maintain the Master
Trust Seller's Interest at a level equal to
the Minimum Master Trust Seller's Interest.
Any amounts on deposit in the Excess
Funding Account will be invested in
Eligible Investments.
During an Accumulation Period, Investment
Period or Early Amortization Period, Series
Allocable Principal Collections will be
allocated to the Offered Certificate-
holders' Interest based on the Principal
Allocation Percentage and togethe with
any shared principal collections from
other Series allocable to the Offered
Series, deposited in the Series
Principal Account (subject to certain
limitations). In addition, during the
Accumulation Period (unless an Investment
Event or an Early Amortization Event shall
have occurred), deposits of principal to
the Series Principal Account will not
exceed the Controlled Deposit Amount and,
subject to certain limitations, any Offered
Series Principal Collections in excess of
the Controlled Deposit Amount will be paid
to the Seller or allocated to other Series
that so provide. See "Description of the
Offered Certificates--Principal."
REVOLVING PERIOD................. During the period commencing immediately
following the 1990 Trust Termination Date
and ending upon the commencement of the
first to occur of the Accumulation Period,
any Investment Period, or any Early
Amortization Period (the "Revolving
Period"), Series Allocable Principal
Collections are effectively reinvested in
the Master Trust to enable Investor
Certificateholders to invest in the Master
Trust for a period that is expected to
exceed substantially the average maturity
of the Dealer Notes. Unless an Investment
Period or an Early Amortization Period is
occurring, the Revolving Period will begin
on the 1990 Trust Termination Date and will
end on the earliest of (a) the business day
immediately preceding the Accumulation
Period Commencement Date, (b) the business
day immediately preceding the Investment
Period Commencement Date and (c) the
business day immediately preceding the
Early Amortization Period Commencement
Date. See "Description of the Offered
Certificates--Investment Events; --Early
Amortization Events" for a discussion of
certain events that might lead to the
termination of the Revolving Period in
advance of the Accumulation Period
Commencement Date.
SHARED SELLER PRINCIPAL COLLECTIONS During the Revolving Period, Shared Seller
Principal Collections will be allocated
among any other Series that provide for
shared seller principal collections in
respect of principal shortfalls before
being allocated to the Excess Funding
Account, if necessary, or paid to the
Seller. During the Accumulation Period,
Shared Seller Principal Collections and any
shared seller principal collections for any
other Series that provide for shared seller
principal collections will be allocated
among an Offered Series to the extent of
any Accumulation Period Principal Shortfall
and each other series that provides for the
use of shared seller principal collections
in respect of principal shortfalls before
being allocated to the Excess Funding
Account, if necessary, or paid to the
Seller. There will be no Shared Seller
Principal Collections during any Investment
Period or Early Amortization Period.
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<PAGE> 31
INVESTMENT PERIOD.................. The Prospectus Supplement for the Offered
Series will specify whether the terms of an
Offered Series will include Investment
Events and Investment Periods. Unless an
Early Amortization Period commences, if an
Investment Event occurs, the Offered
Certificates will have an investment period
(the "Investment Period") which will
commence on the Investment Period
Commencement Date and, except as described
below, will continue until the earlier of
(a) the commencement of an Early
Amortization Period and (b) payment of the
Invested Amount in full on the Expected
Payment Date. During the Investment
Period, Related 1990 Certificate Principal
Collections or Offered Series Principal
Collections, as the case may be, and
certain other amounts allocable to the
Offered Certificateholders' Interest, will
be deposited on each Distribution Date or
business day, respectively, in the Series
Principal Account and will be used to make
principal distributions to the Offered
Certificateholders on the Expected Payment
Date or any Early Distribution Date. During
an Investment Period, funds held in the
Series Principal Account will be invested
from time to time in Eligible Investments
to avoid accelerating the repayment of the
Invested Amount. The amount to be
deposited in the Series Principal Account
on any Distribution Date during the
Investment Period will not be limited to
any Controlled Deposit Amount.
Beginning on the Distribution Date falling
in an Investment Period on which the amount
on deposit in the Series Principal Account
equals the Invested Amount and the
cumulative amount on deposit in the
Negative Carry Reserve Fund (excluding any
investment earnings) equals the Negative
Carry Reserve Fund Required Amount (without
giving effect to clause (b) in the
definition thereof) (the "Fully Funded
Date"), the Offered Certificateholders will
no longer have any interest in the Related
1990 Certificate or the Dealer Notes, as
the case may be, and all the representa-
tions and covenants of the Seller and the
Servicer relating to the Related 1990
Certificate or the Dealer Notes, as well as
certain other provisions of the Pooling and
Servicing Agreement and all remedies for
breaches thereof, will no longer accrue to
the benefit of the Offered Certificate-
holders. On and after the Fully Funded
Date, the Offered Certificateholders
will instead have an interest in the funds
on deposit in the Series Principal Account,
the Distribution Account and the Negative
Carry Reserve Fund, Investment Income on
all such funds, the Interest Rate Swap and
Net Swap Receipts. In addition, upon the
occurrence of the Fully Funded Date, no
Related 1990 Certificate Collections,
Finance Charge Collections, Principal
Collections or Dealer Note Losses will be
allocated to the Offered Series and, if the
final distribution has been made with
respect to each other Series or the fully
funded date has occurred with respect
thereto, all right, title and interest in
and to any 1990 Trust Investor Certificates
issued to the Master Trust and the Dealer
Notes will be conveyed and transferred to
the Seller. See "Description of the
Offered Certificates--Termination; Fully
Funded Date."
During an Investment Period, the amount of
funds available to pay Monthly Interest and
Net Swap Payments may (before application
of the Negative Carry Reserve Fund) be less
than during the Revolving Period, because
funds on deposit in the Series Principal
Account are expected to earn interest at a
lower rate than the rate payable on the
Dealer Notes. As a result, the Negative
Carry Reserve Fund is designed to provide
an additional source of funds for the
payment of Monthly Interest and Net Swap
Payments.
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<PAGE> 32
In connection with the issuance of the
Offered Certificates, the Prospectus
Supplement may provide for Early
Distributions of principal to certain
Offered Certificateholders on the Early
Distribution Date. In such case, the terms
"Early Distribution," "Early Distribution
Amount" and "Early Distribution Date" will
be defined in the Prospectus Supplement.
If the Prospectus Supplement does not
provide for Early Distributions, such terms
will not be operative.
ACCUMULATION PERIOD................ Unless an Investment Period or an Early
Amortization Period commences and unless
otherwise specified in the Prospectus
Supplement with respect to the Offered
Series, the Offered Certificates will have
an accumulation period (the "Accumulation
Period"), which allows for the accumulation
of principal in the Series Principal
Account in anticipation of a lump sum
payment on the Expected Payment Date, and
which will commence on the Accumulation
Period Commencement Date and continue until
the earliest of (a) the commencement of an
Investment Period, (b) the commencement of
an Early Amortization Period and (c)
payment of the Invested Amount in full.
During the Accumulation Period, Offered
Series Principal Collections and certain
other amounts allocable to the Offered
Certificateholders' Interest will be
deposited on each business day in an
Eligible Deposit Account under the Master
Trust (the "Series Principal Account") and
will be used to make principal
distributions to the Offered
Certificateholders when due. The
cumulative amount to be deposited in the
Series Principal Account for any Due Period
during the Accumulation Period will be
limited to an amount equal to the
Controlled Deposit Amount.
On or prior to the Distribution Date which
is ten months prior to the Expected Payment
Date, the Servicer will determine the
number of Due Periods in the Accumulation
Period (the "Accumulation Period Length")
and the day on which the Accumulation
Period commences (the "Accumulation Period
Commencement Date"), which will be the
first day of a Due Period. Notwithstanding
the foregoing, the Accumulation Period
Commencement Date will be the "Specified
Accumulation Period Commencement Date"
(which will be set forth in the Prospectus
Supplement) if, prior to such date, any
other outstanding Series shall have entered
into an investment period or an early
amortization period. In addition, if the
Accumulation Period Length and the
Accumulation Period Commencement Date have
been determined but the Accumulation Period
has not commenced and any other outstanding
Series enters into an investment period or
an early amortization period, the
Accumulation Period Commencement Date will
be the date that such outstanding Series
has entered into its investment period or
early amortization period.
Other Series issued by the Master Trust may
have either an accumulation period or an
amortization period. Such accumulation
periods or amortization periods may have
different lengths and begin on different
dates. Thus, certain Series may be in
their revolving periods, while others are
in periods during which Principal
Collections are distributed to, or reserved
for, such Series.
EARLY AMORTIZATION PERIOD.......... The Prospectus Supplement for an Offered
Series will specify that the Pooling and
Servicing Agreement requires the
accelerated repayment of principal (to the
extent of Related 1990 Certificate
Principal Collections or Offered Series
Principal Collections, as the case may be)
during the Early Amortization Period, which
commences upon the occurrence of an Early
Amortization Event. Therefore, if an Early
Amortization Period
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<PAGE> 33
commences prior to the 1990 Trust
Termination Date, Related 1990 Certificate
Principal Collections will (unless
otherwise provided in the Prospectus
Supplement) be distributed to the Offered
Certificateholders monthly on each
Distribution Date beginning with the
Distribution Date following the Due Period
in which such Early Amortization Period
commences.
If an Early Amortization Period commences
after the 1990 Trust Termination Date, then
the Revolving Period, the Investment Period
or the Accumulation Period, as applicable,
will terminate, and Offered Series
Principal Collections and certain other
amounts allocable to the Offered
Certificateholders' Interest will no longer
be paid to the Seller or the holders of any
other outstanding Series or retained in the
Excess Funding Account but instead will
(unless otherwise specified in the
Prospectus Supplement) be distributed to
the Offered Certificateholders monthly on
each Distribution Date beginning with the
Distribution Date following the Due Period
in which an Early Amortization Period
commences.
During an Early Amortization Period,
distributions of principal on the Offered
Certificates will not be subject to the
Controlled Deposit Amount. See
"Description of the Offered
Certificates--Distributions to Offered
Certificateholders and the Swap
Counterparty; --Principal." In addition
(unless otherwise provided in the
Prospectus Supplement), on the Distribution
Date following the first Due Period
occurring during an Early Amortization
Period, any amounts on deposit in the
Series Principal Account and amounts on
deposit in the Excess Funding Account that
are allocable to the Offered Series (based
on the Series Allocation Percentage for the
Offered Series) will be paid to the Offered
Certificateholders up to the Invested
Amount. See "Description of the Offered
Certificates--Distributions to the Offered
Certificateholders and the Swap
Counterparty." No Investment Period may
commence during an Early Amortization
Period.
NEGATIVE CARRY RESERVE FUND........ The Negative Carry Reserve Fund provides an
additional source of funds to make Monthly
Interest payments and Net Swap Payments
during an Investment Period, Early
Amortization Period or Accumulation Period
and in limited instances to fund the
Liquidity Reserve Account and to make
principal payments with respect to the
Offered Certificates . Therefore, if,
during any Investment Period, Early
Amortization Period or Accumulation Period,
Related 1990 Certificate Interest
Collections (if any), Investment Income,
Offered Series Finance Charge Collections
(if any), Net Swap Receipts and, after the
1990 Trust Termination Date, excess
interest collections from other Series
allocable to the Offered Series and certain
amounts otherwise attributable to the
Seller are not sufficient to pay Monthly
Interest and Net Swap Payments, the Master
Trust Trustee shall, after applying funds
from the Spread Account (if any) and,
during an Early Amortization Period or
Investment Period, the Liquidity Reserve
Account, withdraw funds from the Negative
Carry Reserve Fund up to the amount of such
respective insufficiencies, to make
payments of Monthly Interest and Net Swap
Payments pro rata based on their respective
amounts. The Negative Carry Reserve Fund
will be funded (a) prior to the 1990 Trust
Termination Date (but only after an
Investment Event or Early Amortization
Event has occurred), from Related 1990
Certificate Collections, and (b) after the
1990 Trust Termination Date (after the
occurrence of an Investment Event or an
Early Amortization Event or during the
Accumulation Period), from Available
Seller's Finance Charge Collections and
Available Seller's Principal Collections,
in each case to the extent of the Negative
Carry Reserve Fund Deposit Amount.
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<PAGE> 34
SPREAD ACCOUNT..................... As of the 1990 Trust Termination Date, the
Master Trust Trustee will establish and
maintain an Eligible Deposit Account under
the Master Trust for the benefit of the
Offered Certificateholders (the "Spread
Account"), which is intended to provide an
additional source of funds for the payment
of Monthly Interest, Net Swap Payments, the
Offered Series Servicing Fee and certain
other deficiencies and losses on the Dealer
Notes and in limited instances to fund the
Liquidity Reserve Account and to make
principal payments with respect to the
Offered Certificates. The Spread Account
will be funded initially in an amount up to
the Projected Spread with funds transferred
from the 1990 Trust Spread Account and
allocated to the Offered Certificates and
from funds otherwise allocable to the
Seller. Generally, on any Transfer Date,
the funds on deposit will be increased if
the sum of Monthly Interest, Net Swap
Payments and the Offered Series Servicing
Fee, in each case as projected for the
following Distribution Period, exceeds the
amount of the Master Trust's projected
income for the related Due Period which is
allocable to the Offered Series based on
the Series Allocation Percentage. On any
Transfer Date occurring prior to or on the
Fully Funded Date but after the 1990 Trust
Termination Date on which the Offered
Series Finance Charge Collections,
Investment Income, Net Swap Receipts, and
certain amounts otherwise attributable to
the Seller as described herein are not
sufficient to pay the Offered Series
Servicing Fee, Monthly Interest and the Net
Swap Payment (including any previously due
but unpaid Monthly Interest and Net Swap
Payments, and interest thereon) and to
cover Offered Series Dealer Note Losses and
unreimbursed Certificateholder Charge-Offs,
the amount on deposit in the Spread Account
on such Transfer Date shall be applied by
the Master Trust Trustee up to the amount
of such insufficiency to make such payments
in the order and priority described herein,
subject to certain limitations described
herein. The amount required to be
maintained in the Spread Account may be
reduced upon satisfaction of the Rating
Agency Condition. The Spread Account is
not required to be funded after the Fully
Funded Date.
Prior to the 1990 Trust Termination Date,
the 1990 Trust Spread Account will be
available to satisfy shortfalls of interest
on the Related 1990 Certificate and the
other outstanding 1990 Trust Investor
Certificates. The 1990 Trust Spread
Account is required to be funded at all
times with an amount equal to at least
1.25% of the result of the aggregate
outstanding principal amount of all 1990
Trust Investor Certificates minus
unreimbursed charge-offs and losses on
investments of principal payable to the
holders of 1990 Trust Investor
Certificates. The funds on deposit in the
1990 Trust Spread Account are required to
be increased to the extent that the sum of
projected interest on the 1990 Trust
Investor Certificates and projected fees of
the Servicer exceeds the 1990 Trust's
projected income for the related Due
Period.
SUBORDINATION OF THE MASTER
TRUST SELLER'S INTEREST............ Prior to the 1990 Trust Termination Date,
all subordination in respect of the Offered
Certificates will be provided by the 1990
Trust Available Subordinated Amount under
the 1990 Trust Agreement, and the Master
Trust Seller's Interest will not be
subordinated to the Offered
Certificateholders' Interest (except that
the Seller will be entitled to receive
Related 1990 Certificate Principal
Collections only to the extent the Invested
Amount and the Negative Carry Reserve Fund
Deposit Amount have been provided for in
full). The 1990 Trust Available
Subordinated Amount generally is equal to
15.5% of the 1990 Trust Total Invested
Amount, subject to certain reductions,
reinstatements, floors and other
limitations. See "Terms of the 1990 Trust
Investor Certificates--Limited
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<PAGE> 35
Subordination of the 1990 Trust Seller
Interest; 1990 Trust Available Subordinated
Amount."
Beginning on the 1990 Trust Termination
Date and thereafter until the Fully Funded
Date, the right of the Seller to receive
payments in respect of the Master Trust
Seller's Interest will be subordinated to
the interests of the Offered
Certificateholders. Such subordination is
limited to the Available Subordinated
Amount, plus, following the commencement of
the Accumulation Period, any Investment
Period or any Early Amortization Period,
the Negative Carry Subordinated Amount. If
Available Certificateholder Interest
Collections and Net Swap Receipts are
insufficient to cover the Offered Series
Servicing Fee, accrued Monthly Interest,
the Net Swap Payment, if any, and the
Offered Series Dealer Note Losses, a
limited portion of the Master Trust
Seller's Interest will be available to make
up such deficiency. If such portion is not
sufficient, certain amounts in the Spread
Account and, in certain circumstances, the
Liquidity Reserve Account and the Negative
Carry Reserve Fund, will also be available
to cover such deficiency. See "Description
of the Offered Certificates--Allocation of
Collections After the 1990 Trust
Termination Date--Limited Subordination of
Master Trust Seller's Interest; Spread
Account; Liquidity Reserve Account."
The "Available Subordinated Amount" for the
Offered Series on the Transfer Date related
to the first Due Period commencing after
the 1990 Trust Termination Date will equal
the product of the Invested Amount and the
Subordinated Percentage (which will be set
forth in the Prospectus Supplement). The
Available Subordinated Amount for each
Transfer Date thereafter will be reduced by
amounts previously drawn from the Master
Trust Seller's Interest and, subject to
certain limitations, by reductions in the
Invested Amount, and will be reinstated to
the extent Available Certificateholder
Interest Collections, Net Swap Receipts and
Excess Interest Collections are paid to the
Seller or, during any Investment Period or
Early Amortization Period, deposited in the
Liquidity Reserve Account (up to an amount
equal to the Subordinated Percentage
multiplied by the Invested Amount).
LIQUIDITY RESERVE ACCOUNT.......... After the 1990 Trust Termination Date and
prior to or on the commencement of an
Investment Period or an Early Amortization
Period, the Master Trust Trustee will
establish (for the benefit of the Seller)
an Eligible Deposit Account the purpose of
which is to cash-collateralize the
Available Subordinated Amount during an
Investment Period or an Early Amortization
Period (the "Liquidity Reserve Account").
In addition, in certain circumstances, the
Liquidity Reserve Account provides an
additional source of funds to make
principal payments with respect to the
Offered Certificates. Upon the
commencement of an Investment Period or an
Early Amortization Period, funds in the
Spread Account will be deposited in the
Liquidity Reserve Account. During an
Investment Period or an Early Amortization
Period, Available Seller's Finance Charge
Collections and Available Seller's
Principal Collections will be deposited in
the Liquidity Reserve Account until such
time as the amount on deposit is equal to
the Available Subordinated Amount, in order
to provide a source of funds for payments
in respect thereof.
ADVANCES........................... For any Due Period, the Servicer will be
required to make an Advance to the
collections account under the Active Trust
in an amount equal to all Dealer Finance
Charges for such Due Period which have not
been paid by the Transfer Date (other than
the amount of Dealer Finance Charges that
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<PAGE> 36
the Servicer determines will be
uncollectible). Once any previously unpaid
Dealer Finance Charges are paid on the
Dealer Notes to which any portion of an
Advance relates, or when the Servicer
determines that it will be unable to
recover such unpaid Dealer Finance Charges
on the Dealer Notes to which the portion of
the Advance relates, the Servicer will be
reimbursed in an amount equal to such
portion of the Advance.
INTEREST RATE SWAP................. In connection with the issuance of any
Series of Offered Certificates, the Master
Trust may enter into one or more interest
rate swap agreements (each, an "Interest
Rate Swap") with a Swap Counterparty with
terms that will be more fully described in
the Prospectus Supplement. If the Master
Trust does enter into an Interest Rate
Swap, all terms and provisions described
herein relating to the Interest Rate Swap,
including the defined terms "Swap
Counterparty," "Swap Fixed Rate," "Swap
Floating Rate," "Swap Receipt," "Swap
Payment," "Net Swap Receipt" and "Net Swap
Payment," will apply and be operative. If
the Master Trust Trustee does not enter
into an Interest Rate Swap, such terms and
provisions, as well as paragraphs (x) and
(y) under "Description of the Offered
Certificates-- Allocation of Collections
After the 1990 Trust Termination Date--
Available Certificateholder Interest
Collections," will not be operative (unless
otherwise specified in the Prospectus
Supplement). The Master Trust will likely
not enter into an Interest Rate Swap in the
event that the Offered Certificate Rate is
a floating rate. The floating rate payable
by the Master Trust in respect of an
Interest Rate Swap or an Offered Series
that bears interest at a floating rate, as
applicable, is the "Applicable Floating
Rate."
In accordance with the terms of each
Interest Rate Swap, the Swap Counterparty
will be obligated to pay to the Master
Trust, not later than each Distribution
Date, interest at a rate per annum equal to
the Swap Fixed Rate on the Invested Amount
as of the preceding Distribution Date
(after giving effect to all distributions
on such date). In exchange for such
payments, the Master Trust will be
obligated to pay to the Swap Counterparty,
on each Distribution Date, interest at a
per annum rate equal to the Swap Floating
Rate on the Invested Amount as of the
preceding Distribution Date (after giving
effect to all distributions on such date).
With respect to each Distribution Date, the
payment to the Master Trust by the Swap
Counterparty will be referred to herein as
the "Swap Receipt" and the payment by the
Master Trust to the Swap Counterparty will
be referred to herein as the "Swap
Payment." Under the Interest Rate Swap, on
each Distribution Date, the amount the
Master Trust is obligated to pay will be
netted against the amount the Swap
Counterparty is obligated to pay such that
only the net amount will be due from the
Master Trust (referred to herein as the
"Net Swap Payment") or from the Swap
Counterparty (referred to herein as the
"Net Swap Receipt"), as the case may be.
Net Swap Receipts on any Distribution Date
will be allocated and distributed in the
same manner as Series Allocable Finance
Charge Collections on such Distribution
Date, except as otherwise described herein.
Net Swap Payments will be paid out of
Related 1990 Certificate Interest
Collections, Investment Income and, in
certain circumstances, the Negative Carry
Reserve Fund, prior to the 1990 Trust
Termination Date, and thereafter out of
Offered Series Finance Charge Collections,
Investment Income, excess interest
collections from other Series allocable to
the Offered Series, withdrawals from the
Spread Account, withdrawals from the
Negative Carry Reserve Fund, withdrawals
from the Liquidity Reserve Account and
Available Seller's Finance Charge
Collections to the extent described herein.
Net Swap Payments and Monthly Interest
will be paid on a pari
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<PAGE> 37
passu basis, as described under
"Description of the Offered Certificates--
Allocations of Collections After the 1990
Trust Termination Date."
THE 1990 TRUST..................... The 1990 Trust was formed pursuant to a
Pooling and Servicing Agreement, dated as
of December 1, 1990, among NFC, as
Servicer, NFSC, as Seller, and The Chase
Manhattan Bank, as trustee (the "1990 Trust
Trustee"), as supplemented by the
supplement relating to the Related 1990
Certificate to be dated as of the Closing
Date among NFC, as Servicer, NFSC, as
Seller, and the 1990 Trust Trustee and any
other supplement relating to any other 1990
Trust Investor Certificate (as so
supplemented and as it has been or may be
supplemented and amended, the "1990 Trust
Agreement"). The property of the 1990
Trust includes all Eligible Dealer Notes
previously and hereafter transferred to the
1990 Trust, all monies due or to become due
with respect thereto and all proceeds of
such Dealer Notes, the interest of the
Seller in the security interests in the
Financed Vehicles related to the Dealer
Notes, the interest of the Seller in the
Insurance Proceeds, the 1990 Trust
Investment Securities and such funds as
from time to time are deposited in the
accounts created under the 1990 Trust for
the benefit of the holders of 1990 Trust
Investor Certificates.
RELATED 1990 CERTIFICATE........... The Related 1990 Certificate represents a
fractional undivided interest in the 1990
Trust. The Master Trust, as holder of the
Related 1990 Certificate, will be entitled
to receive (a) monthly payments of interest
at a rate equal to the Related 1990
Certificate Rate (which will be set forth
in the Prospectus Summary) and (b) payments
of principal (to the extent of the unpaid
Class Invested Amount for the Related 1990
Certificate), such principal payments
beginning after the earlier of the
Scheduled Class Amortization Date for the
Related 1990 Certificate and the date on
which a 1990 Trust Amortization Event
occurs. The Class Invested Amount for the
Related 1990 Certificate will be equal to
the Class Initial Invested Amount for the
Related 1990 Certificate less principal
repayments, charge-offs and losses of
principal on investments of funds on
deposit in the Certificate Principal
Account under the 1990 Trust allocated to
the Related 1990 Certificate which are not
otherwise reimbursed. The aggregate
interest in the assets of the 1990 Trust
represented by the Related 1990 Certificate
at any time will not exceed an amount equal
to the Class Invested Amount for such class
at such time plus accrued and unpaid
interest thereon. The Related 1990
Certificate represents an interest in the
1990 Trust and does not represent an
interest in or obligation of NFC or the
Seller.
As of the date hereof, the 1990 Trust has
three other issued and outstanding classes
of Investor Certificates: its Class A-2
Floating Rate Pass-Through Certificates
(the "Class A-2 Investor Certificates"),
having an outstanding principal balance of
$100,000,000, its Class A-3 Floating Rate
Pass-Through Certificates (the "Class A-3
Investor Certificates"), having an
outstanding principal balance of
$100,000,000, and its Class A-4 Floating
Rate Pass-Through Certificates (the "Class
A-4 Investor Certificate"), having an
outstanding principal balance of
$207,860,000. The Class A-2, Class A-3 and
Class A-4 Investor Certificates and the
Related 1990 Certificate, together with any
other outstanding class of certificates
issued under the 1990 Trust, are referred
to as the "1990 Trust Investor
Certificates." The 1990 Trust previously
issued Class A-1 Floating Rate Pass-Through
Certificates (the "Class A-1 Investor
Certificates"), having an initial
outstanding principal balance of
$100,000,000, which have since been paid in
full.
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<PAGE> 38
The other principal terms of each of
the Related 1990 Certificate, the Class
A-2, Class A-3 and Class A-4 Investor
Certificates, as well as any other class of
1990 Trust Investor Certificates issued to
the Master Trust, will be set forth in the
Prospectus Supplement.
Interest on the Related 1990 Certificate
will be paid on the twenty-fifth day of
each month, or if such twenty-fifth day is
not a business day, the next business day
thereafter. Interest will accrue from the
most recent Distribution Date on which
interest has been paid to but excluding the
current Distribution Date on the unpaid
principal amount of the Related 1990
Certificate at a floating per annum rate
(the "Related 1990 Certificate Rate") equal
to one-month LIBOR plus an amount which
shall be specified in the Prospectus
Supplement (calculated on the basis of a
360-day year of twelve 30-day months).
Interest payments will be funded from that
portion of Dealer Finance Charges, NITC
Finance Charges and 1990 Trust Investment
Income during the Due Period allocable to
the Related 1990 Certificate (after making
payments in respect of the 1990 Trust
Monthly Servicing Fee and Advance
Reimbursements, if any). If such funds are
insufficient to pay interest on the Related
1990 Certificate, such interest payments
will be paid from funds otherwise payable
with respect to the 1990 Trust Seller
Certificate, to the extent of the 1990
Trust Available Subordinated Amount.
No principal payments will be made with
respect to the Related 1990 Certificate
during the 1990 Trust Non-Amortization
Period. Upon the occurrence of the Class
Amortization Date for the Related 1990
Certificate, however, the holder of the
Related 1990 Certificate will begin to
receive monthly payments of principal in
addition to interest. Once the Class
Amortization Period has commenced for the
Related 1990 Certificate, monthly payments
of principal will begin on the Distribution
Date related to the Due Period during which
the Class Amortization Date for the Related
1990 Certificate occurred.
The occurrence of a 1990 Trust Amortization
Event is the only circumstance under which
principal payments to each class of 1990
Trust Investor Certificates will commence
prior to the Scheduled Class Amortization
Date for each such class. If a 1990 Trust
Amortization Event occurs, each outstanding
class of 1990 Trust Investor Certificates
will begin to receive payments of principal
on the Distribution Date related to the Due
Period during which the 1990 Trust
Amortization Event takes place. See "Terms
of the 1990 Trust Investor Certificates --
1990 Trust Amortization Events" for a
discussion of events which constitute 1990
Trust Amortization Events.
1990 TRUST SELLER CERTIFICATE...... The 1990 Trust Seller Certificate
represents the fractional undivided
interest in the 1990 Trust not represented
by the 1990 Trust Investor Certificates
(the "1990 Trust Seller Interest"). The
right of the holder of the 1990 Trust
Seller Certificate to receive payments in
respect of the 1990 Trust Seller Interest
is subordinated to the interests of the
1990 Trust Investor Certificates to the
extent of the 1990 Trust Available
Subordinated Amount. As amounts are made
available for the benefit of the 1990 Trust
Investor Certificates from the subordinated
portion of the 1990 Trust Seller Interest,
the 1990 Trust Available Subordinated
Amount and, in certain circumstances, the
1990 Trust Seller Interest, will be
reduced. In subsequent Due Periods, the
1990 Trust Available Subordinated Amount
may be reinstated by the amount of any
payments of 1990 Trust Excess Servicing in
respect of the 1990 Trust Seller
Certificate. The amount of the
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<PAGE> 39
1990 Trust Seller Interest must at all
times equal or exceed the 1990 Trust
Minimum Seller Interest. Since the date of
the first issuance of 1990 Trust Investor
Certificates, the 1990 Trust Available
Subordinated Amount has not been drawn
upon, but there can be no assurance that it
will not be drawn upon in the future.
The 1990 Trust Agreement provides that,
subject to certain conditions, the holder
of the 1990 Trust Seller Certificate may
deliver the 1990 Trust Seller Certificate
to the 1990 Trust Trustee in exchange for
(a) one or more newly issued classes of
1990 Trust Investor Certificates and (b) a
reissued 1990 Trust Seller Certificate.
The Master Trust, as holder of the 1990
Trust Seller Certificate, will effect such
an exchange only in the event that the
Seller effects a New Issuance under the
Master Trust as described herein.
CREDIT ENHANCEMENT UNDER
THE 1990 TRUST..................... Credit enhancement of the 1990 Trust
Investor Certificates is afforded by the
use of 1990 Trust Excess Servicing and
subordination of the 1990 Trust Seller
Interest to the extent of the 1990 Trust
Available Subordinated Amount. Such
subordination is effected by payments from
1990 Trust Seller Interest Income, the 1990
Trust Spread Account, the proceeds of 1990
Trust Investment Securities and (during a
1990 Trust Amortization Term) the 1990
Trust Liquidity Reserve Account and by
reductions in the 1990 Trust Seller
Interest. Credit enhancement of the 1990
Trust Investor Certificates will be limited
at all times during the term of the 1990
Trust to the sum of 1990 Trust Excess
Servicing and the 1990 Trust Available
Subordinated Amount. If at any time during
the term of the 1990 Trust the 1990 Trust
Available Subordinated Amount is reduced to
zero, the holders of 1990 Trust Investor
Certificates (including the Master Trust,
as holder of the Related 1990 Certificate)
will thereafter bear the credit and other
risks associated with their fractional
undivided interest in the 1990 Trust
directly without the benefit of any further
credit enhancement other than 1990 Trust
Excess Servicing, if any. Prior to the
1990 Trust Termination Date, Offered
Certificates are dependent upon
distributions by the 1990 Trust in respect
of the Related 1990 Certificate.
Accordingly, if credit enhancement of the
Related 1990 Certificate is insufficient,
the Offered Certificateholders could suffer
losses.
1990 TRUST EXCESS SERVICING........ "1990 Trust Excess Servicing" means on any
Determination Date during the term of the
1990 Trust the excess of 1990 Trust
Interest Income over the sum of Advance
Reimbursements, the 1990 Trust Monthly
Servicing Fee, 1990 Trust Investor
Certificate Interest and notional interest
on the 1990 Trust Seller Certificate (in
each case, for the related Due Period or
Distribution Period, as applicable). Any
1990 Trust Excess Servicing which is not
needed to offset losses is paid to the
holder of the 1990 Trust Seller
Certificate. If the 1990 Trust Available
Subordinated Amount has previously been
reduced, it is reinstated up to an amount
no greater than the 1990 Trust Maximum
Subordinated Amount by certain payments of
1990 Trust Excess Servicing to the holder
of the 1990 Trust Seller Certificate.
Payments of 1990 Trust Excess Servicing for
the benefit of any class of 1990 Trust
Investor Certificates will not reduce the
1990 Trust Available Subordinated Amount.
TAX STATUS......................... The Seller has received an opinion of Tax
Counsel that under existing law the Offered
Certificates will be treated as
indebtedness for federal income tax
purposes. Tax Counsel has also opined that
similar treatment would apply for Illinois
income tax purposes and New York income and
corporate franchise tax purposes. Each
Offered Certificateholder, by the
acceptance
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<PAGE> 40
of an Offered Certificate, will
agree to treat the Offered Certificates as
indebtedness for United States federal,
state and local income and franchise tax
purposes. See "Federal Income Tax Matters"
and "Certain State Tax Matters."
ERISA CONSIDERATIONS............... If the assets of the Master Trust are
deemed to be "plan assets" of Offered
Certificateholders, a Plan's ownership of
the Offered Certificates might give rise to
a prohibited transaction under ERISA and
the Code. Unless certain conditions are
satisfied, no assurances can be given that
the assets of the Master Trust will not be
deemed to be "plan assets." Regardless of
whether or not the assets of the Master
Trust are deemed to be "plan assets,"
however, prior to purchasing Offered
Certificates on behalf of a Plan, the Plan
fiduciary should determine whether an
investment in the Offered Certificates is
permitted under the documents and
instruments governing the Plan and should
consult with counsel with respect to the
potential consequences under ERISA and the
Code of the Plan's acquisition and
ownership of Offered Certificates. See
"ERISA Considerations."
RATING OF THE OFFERED CERTIFICATES. It is a condition of issuance that the
Offered Certificates be rated in the
highest rating category by at least one
nationally recognized statistical rating
organization.
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<PAGE> 41
RISK FACTORS
LIMITED LIQUIDITY
There is currently no market for the Offered Certificates, and there is no
assurance that one will develop. The underwriters with respect to an Offered
Series are expected, but are not obligated, to make a market in such Offered
Certificates. However, even if the underwriters do make such a market, there
is no assurance that such market will continue.
DELAYS OR REDUCTIONS IN PAYMENTS DUE TO INSOLVENCY
The transfers of the Dealer Notes from NITC to NFC, from NFC to the Seller and
from the Seller to the Active Trust have been structured to be treated as
sales. In the event that NITC, NFC or the Seller were to become a debtor in a
bankruptcy case and a creditor or trustee in bankruptcy of such debtor or such
debtor itself were to take the position that the transfer of the Dealer Notes
by such debtor should be recharacterized as a pledge of such Dealer Notes to
secure a borrowing of such debtor, then delays in payments of collections on
the Dealer Notes to the Active Trust could occur and, if a court ruled in favor
of any such creditor, trustee in bankruptcy or debtor, reductions in the amount
of such payments could result. If the transfer of Dealer Notes to NFC, the
Seller or the Active Trust were recharacterized as a pledge, then a tax or
other similar lien on the property of NITC, NFC or the Seller might have
priority over the interest of the Seller or the Active Trust, respectively, in
such Dealer Notes. See "Certain Matters Relating to Bankruptcy."
In addition, if NFC or the Seller were to become a debtor in a bankruptcy case
and a creditor or trustee in bankruptcy of such debtor or such debtor itself
were to request a bankruptcy court to order that NFC be substantively
consolidated with the Seller, delays in and reductions in the amount of
payments and distributions on the Offered Certificates could result.
If certain events relating to the bankruptcy of NIC, NITC, NFC or the Seller
occur, then an Investment Event will occur and, among other things, the Active
Trust will stop acquiring additional Dealer Notes. See "Certain Matters
Relating to Bankruptcy."
Transfers made in certain specified transactions contemplated by the Applicable
Agreement, including payments made with respect to repurchases of Dealer Notes,
may be recoverable by NITC, NFC, the Servicer or the Seller, as debtor in
possession, or by a creditor or a trustee in bankruptcy of NITC, NFC, the
Servicer or the Seller as preferential transfers from NITC, NFC, the Servicer
or the Seller if such transfers are made within certain periods prior to the
filing of a bankruptcy case in respect of NITC, NFC, the Servicer or the
Seller.
The Seller warrants in the Applicable Agreement that transfers of the Dealer
Notes to the Active Trust are either (a) valid transfers and assignments of the
Dealer Notes and the proceeds thereof to the Active Trust or (b) a grant to the
Active Trust of a security interest in such property. The Seller has taken all
required actions under Illinois, New York and Delaware state law to perfect the
1990 Trust's interests and the Master Trust's interests in such assets. The
Seller has also taken all actions necessary under Illinois and New York law to
perfect the transfer to the Master Trust of the 1990 Trust Seller Certificate
and the Class A-4 Investor Certificate and will take all actions necessary
under Illinois and New York law to perfect the transfer to the Master Trust of
any Related 1990 Certificate. In addition, the Seller warrants that, if the
transfer of Dealer Notes by the Seller to the Active Trust is a grant to the
Active Trust of a security interest in the Dealer Notes, the Active Trust will
at all times have a first priority perfected security or ownership interest in
all Dealer Notes transferred to the Active Trust and all proceeds thereof,
except that if such a transfer is deemed to create a security interest under
the Illinois, New York or Delaware Uniform Commercial Codes (collectively, the
"Uniform Commercial Code"), certain prospective liens on the property of the
Seller may have priority over the Active Trust's interests in such Dealer
Notes.
Pursuant to the terms of the Applicable Agreement and the Active Purchase
Agreement, under certain circumstances the Seller may be required to purchase
Ineligible Dealer Notes from the Active Trust, in which case NFC will be
required to purchase all such Ineligible Dealer Notes from the Seller. In
addition, in the event of a breach of certain representations and warranties or
if a material amount of Dealer Notes are Ineligible Dealer Notes, and (a) prior
to the 1990 Trust Termination Date, such event has a material adverse effect on
the holders of the 1990 Trust Investor Certificates, the Seller may be required
to purchase all outstanding classes of 1990 Trust Investor Certificates or (b)
after
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<PAGE> 42
the 1990 Trust Termination Date, such event has a material adverse effect on
the Certificateholders, the Seller may be required to purchase the
Certificateholders' Interest. In either case, NFC will be required to purchase
all such outstanding certificates or the Certificateholders' Interest from the
Seller. See "Description of the Offered Certificates--Certain Representations
and Warranties; Ineligible Dealer Notes; and Purchase of Certificateholders'
Interest." The 1990 Trust Trustee has not, and it is not anticipated that
either it or the Master Trust Trustee will, make any examination of the Dealer
Notes or the records relating thereto for the purpose of establishing
compliance with eligibility requirements, representations and warranties or any
other purpose.
Application of federal and state bankruptcy and debtor-related laws could
affect the interests of the Master Trust in the Dealer Notes (as holder of 1990
Trust Investor Certificates, including any Related 1990 Certificate) prior to
the 1990 Trust Termination Date, and the interests of the Offered
Certificateholders in the Dealer Notes after the 1990 Trust Termination Date,
if such laws result in any Dealer Notes being written off as uncollectible or
result in delays in payments due on such Dealer Notes.
LIMITED AMOUNT OF CREDIT ENHANCEMENT
Prior to the 1990 Trust Termination Date, the Master Trust is dependent upon
distributions by the 1990 Trust in respect of the Related 1990 Certificate,
Investment Income and Swap Receipts to fund payments and distributions to the
Offered Certificateholders and Swap Payments with respect to each such Offered
Series. Therefore, prior to the 1990 Trust Termination Date, credit
enhancement with respect to any Offered Series will only be provided through
the 1990 Trust and by the Interest Rate Swap and, under certain circumstances,
the Negative Carry Reserve Fund with respect to such Offered Series. Credit
enhancement of the 1990 Trust Investor Certificates (including any Related 1990
Certificates) is afforded by the use of 1990 Trust Excess Servicing and
subordination of the 1990 Trust Seller Interest to the extent of the 1990 Trust
Available Subordinated Amount. Such subordination is effected by payments from
1990 Trust Seller Interest Income, the 1990 Trust Spread Account, the proceeds
of 1990 Trust Investment Securities and (during a 1990 Trust Amortization Term)
the 1990 Trust Liquidity Reserve Account, and by reductions in the 1990 Trust
Seller Interest. Credit enhancement of the 1990 Trust Investor Certificates
will be limited at all times during the term of the 1990 Trust to the sum of
1990 Trust Excess Servicing and the 1990 Trust Available Subordinated Amount.
If at any time during the term of the 1990 Trust the 1990 Trust Available
Subordinated Amount is reduced to zero, the holders of 1990 Trust Investor
Certificates (including the Master Trust, as holder of a Related 1990
Certificate) will thereafter bear the credit and other risks associated with
their fractional undivided interest in the 1990 Trust directly without the
benefit of any further credit enhancement other than 1990 Trust Excess
Servicing, if any. Accordingly, a 1990 Trust Early Amortization Period could
occur, leading to an Investment Event with respect to the Offered Certificates.
In that case, under certain circumstances, losses on the Offered Certificates
could result if credit enhancement in respect of the Related 1990 Certificate
has been exhausted.
After the 1990 Trust Termination Date, credit enhancement of an Offered Series
will be provided by the subordination of a portion of the Master Trust Seller's
Interest to the extent of the Available Subordinated Amount as described
herein, plus, in some instances, the Negative Carry Subordinated Amount, the
Spread Account and the Interest Rate Swap with respect to such Offered Series.
The amount of such credit enhancement is limited and will be reduced from time
to time as described herein. See "Description of the Offered
Certificates--Allocation of Collections Prior to the 1990 Trust Termination
Date" and "-- Allocation of Collections After the 1990 Trust Termination Date."
BASIS RISK ON DEALER NOTES
The interest rate on Dealer Notes is presently based on the prime rate, while
the Related 1990 Certificate Rate and the Applicable Floating Rate will be
based on the one-month London interbank offered rate as determined by the
Active Trustee ("LIBOR"). The prime rate, which is an "administered" rate,
tends to lag behind one-month LIBOR, which is a "market rate," and the spread
between the prime rate and LIBOR could thus narrow or disappear during periods
of rising interest rates. During the past ten years, the prime rate has
exceeded one-month LIBOR at all times. However, there is no assurance that the
prime rate will continue to exceed LIBOR in the future. In addition, the
approximate five week lag between the date on which the interest rate on Dealer
Notes is established by NFC and the date on which the Related 1990 Certificate
Rate and the Applicable Floating Rate are fixed could create a distortion
during periods of rapidly rising or volatile interest rates, even though the
underlying prime rate-LIBOR relationship remained constant during such period.
See "Description of the Offered Certificates--Due Periods; Distribution
Periods." If any of the foregoing situations causes the positive spread
between the Dealer Note interest rate and the Related 1990 Certificate Rate or
the Applicable Floating Rate to decline or disappear in the future, the result
could be, under certain
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circumstances, an Investment Event and, if all sources of credit enhancement
were exhausted, losses on the Offered Certificates. Credit enhancement, if
available, will minimize the effect of any such situation.
RISK OF DEFAULT BY INTEREST RATE SWAP COUNTERPARTY
A payment default by a Swap Counterparty will result in the commencement of an
Early Amortization Period and may result in the termination of the Interest
Rate Swap. Amounts, if any, on deposit in the Negative Carry Reserve Fund will
be available to make interest payments on the Offered Certificates during an
Early Amortization Period. Nonetheless, if the Interest Rate Swap is
terminated, reductions in the amount of interest paid on the Offered
Certificates may result. See "Description of the Offered
Certificates--Interest Rate Swap" and "-- Early Amortization Events."
DEPENDENCE OF ACTIVE TRUST ON NFC AND NITC
The Active Trust is completely dependent on NFC as its exclusive source for
Acquisitions or Assignments of new Dealer Notes. The ability of NFC to supply
new Dealer Notes to the Active Trust is in turn dependent to a substantial
degree on the ability of NITC to sell Navistar Vehicles to Dealers in exchange
for Dealer Notes. There is, however, no assurance that NITC will continue to
sell Navistar Vehicles at the same rate as in prior years as a result of the
possibility of declining sales in the trucking industry generally, strikes,
fires or other unforeseeable events. A significant decline in NITC's sales of
Navistar Vehicles may cause an Investment Event.
NITC currently purchases all new Navistar Vehicles that NFC has repossessed
from terminated Dealers for cash equal to the balance due on the underlying
Dealer Notes financing such vehicles. If NITC were to cease purchasing such
repossessed vehicles, the amount of Dealer Notes written off as uncollectible
could increase, which could, if all sources of credit enhancement under the
Active Trust were exhausted, result in losses on the Offered Certificates.
NITC currently has no plans to cease such purchases.
NITC provides a substantial amount of floor plan and other financial assistance
to Dealers through a number of formal and informal programs. See "The Navistar
Financial Dealer Floor Plan Financing Business" and "Relationship with NITC."
Such financial assistance often accounts for more than half of all outstanding
interest obligations on the Dealer Notes. The Interest Deposit Agreement
requires NITC to deposit the amount of such assistance in the Interest Deposit
Account at approximately the same time that such financial assistance is
granted. However, if NITC were to discontinue providing such assistance to
Dealers, the effect could be to reduce sales of Navistar Vehicles, which may
cause an Investment Event.
If NFC were to cease acting as Servicer, delays in processing payments made by
Dealers could occur, therefore creating delays in payments to Offered
Certificateholders.
DEPENDENCE ON RATE OF DEALERS' PAYMENTS ON DEALER NOTES
Dealer Notes are generally due and payable by Dealers upon the sale of the
underlying Financed Vehicle. The timing of such sales by the Dealers is
uncertain and there is no assurance that any particular pattern of payments
will occur on the Dealer Notes. Further, there is no assurance that new Dealer
Notes will continue to be generated. A significant decline in the generation
of Dealer Notes that lasts for an extended period of time may cause an
Investment Event.
The payment of principal on the Offered Certificates is dependent on Dealer
repayments. Accordingly, a significant decline in the rate of payments on the
Dealer Notes could slow the distribution of principal on Offered Certificates
during an Early Amortization Period. In addition, the Offered Certificates may
not be fully amortized by the Expected Payment Date. In the event that other
Series are issued subsequent to the Closing Date, the payment of the Offered
Certificates in full by the Expected Payment Date may become dependent on the
reallocation of Principal Collections which are initially allocated to such
other outstanding Series. The shorter the Accumulation Period, the greater the
likelihood that such a reallocation will be necessary. If one or more other
Series from which Principal Collections are expected to be available to be
reallocated to the payment of the Offered Certificates enters into an early
amortization period or investment period, Principal Collections allocated to
such Series may not be available to be reallocated to make payments of
principal of the Offered Certificates and the final payment of principal of the
Offered Certificates may be later than the Expected Payment Date. Upon written
request, the Seller will make available to Offered Certificateholders the
prospectus or other document describing or summarizing the salient terms of any
subsequently issued Series (a
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<PAGE> 44
"Disclosure Document") which describe the events which could result in the
commencement of an early amortization event or investment period with respect
to such outstanding Series.
RISKS ARISING FROM CONCENTRATION OF DEALERS
As of April 30, 1997, NFC provided wholesale financing to 345 of NITC's
domestic Dealers. Of such Dealers, 100 are expected to account for
approximately 75% of the Dealer Notes. As a result of this level of Dealer
concentration, the financial failure of any single Dealer could adversely
affect the Offered Certificateholders. In order to mitigate the potential
impact of the financial failure of any single large Dealer on the Active Trust,
however, the Applicable Agreement prohibits the Active Trust from holding
Dealer Notes from a single Dealer in excess of the greater of (a) $4,000,000 or
(b) 2.0% of the sum of the aggregate principal balance of Dealer Notes and the
aggregate principal amount of 1990 Trust Investment Securities (or funds on
deposit in the Excess Funding Account) in the Active Trust (the "Concentration
Limit"), although the Seller has the right from time to time in its sole
discretion to decrease or increase (but not above the greater of (a) or (b)
above) the Concentration Limit with respect to any Dealer.
POTENTIAL ADVERSE IMPACT OF ISSUANCE OF ADDITIONAL SERIES
The Master Trust is expected to issue additional Series (which may be
represented by different classes within a Series) from time to time. A
Supplement delivered in connection with the issuance of other Series will
specify certain Principal Terms applicable to such Series. Such Principal
Terms may include methods for determining applicable allocation percentages and
allocating collections, provisions creating different or additional security or
other credit enhancement, different classes of certificates (including
subordinated classes of certificates) and any other amendment or supplement to
the Pooling and Servicing Agreement which is made applicable only to such
Series. No Supplement, however, may change the terms of the Offered
Certificates or the terms of the Pooling and Servicing Agreement as applied to
the Offered Certificates. See "Description of the Offered Certificates--New
Issuances." As long as any Offered Certificates are outstanding, a condition to
the execution of any Supplement will be that the Rating Agency Condition shall
have been satisfied.
There can be no assurance, however, that the terms of any other Series might
not have an impact on the timing or amount of payments received by an Offered
Certificateholder. Although the imposition of the Rating Agency Condition is
intended to protect against the possibility that such impact would be
materially adverse to any Offered Series, the issuance of additional Series
could result in less excess interest collections being available for
reallocation to an Offered Series (for example, if the additional Series has a
higher interest rate or swap floating rate than a previously outstanding series
or class of investor certificates) and in a longer Accumulation Period or Early
Amortization Period for an Offered Series (if such additional Series were to
have an expected payment date that would require it to be in an accumulation
period at the same time as the Offered Series or if it were to enter an Early
Amortization Period at the same time as the Offered Series). Further, the
issuance of an additional Series will reduce the Seller's Interest in the
Active Trust, which could increase the possibility that a shortfall in the
amount of available Dealer Notes in the Active Trust would require funds to be
retained in the Active Trust and invested in short-term eligible investments in
order to maintain the required minimum seller's interest. Increased holdings
of eligible investments in the Active Trust will reduce the overall portfolio
yield of the Active Trust, which could lead to the occurrence of an Investment
Event or Early Amortization Event.
NITC'S ABILITY TO CHANGE TERMS OF DEALER NOTES
NITC may change the terms governing new Dealer Notes at any time so long as any
such change is made on a non-discriminatory basis. Although the Active Trust
is obligated to acquire only Eligible Dealer Notes including those Dealer Notes
with an interest rate (a) based on the prime rate or another benchmark floating
interest rate and (b) subject to adjustment at least monthly, there is no
assurance that the interest rate on Dealer Notes will always exceed the Related
1990 Certificate Rate or the Applicable Floating Rate (see "Risk Factors--Basis
Risk"). Failing to maintain an appropriate spread between the interest rate on
Dealer Notes and the Related 1990 Certificate Rate or the Applicable Floating
Rate, respectively, may cause an Investment Event.
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<PAGE> 45
NAVISTAR FINANCIAL SECURITIES CORPORATION AND THE MASTER TRUST
NAVISTAR FINANCIAL SECURITIES CORPORATION
NFSC was incorporated in the State of Delaware on September 13, 1990. NFSC was
organized for the limited purpose of purchasing Dealer Notes from NFC and
transferring such Dealer Notes to third parties. NFSC's executive offices are
located at Navistar Financial Securities Corporation, 2850 W. Golf Road,
Rolling Meadows, IL, telephone (847) 734-4000.
THE MASTER TRUST
The Master Trust was formed in accordance with the laws of the State of
Illinois pursuant to the Pooling and Servicing Agreement. Under the Pooling
and Servicing Agreement, the Seller assigned the 1990 Trust Seller Certificate
and all other rights of the Seller under the terms of the 1990 Trust Agreement
to the Master Trust. On the Closing Date with respect to any Series of Offered
Certificates, the Seller will instruct the Master Trust Trustee to deliver the
1990 Trust Seller Certificate to the 1990 Trust, and the 1990 Trust Trustee
will authenticate and deliver a Related 1990 Certificate and a reissued 1990
Trust Seller Certificate to the Master Trust Trustee.
Until the 1990 Trust Termination Date, the assets of the Master Trust will
include (a) the 1990 Trust Seller Certificate transferred by the Seller to the
Master Trust, all rights of the Seller thereunder (including the right to
exchange such 1990 Trust Seller Certificate for new classes of 1990 Trust
Investor Certificates in the manner described herein) and all monies due or to
become due with respect thereto, (b) the Class A-4 Investor Certificate, each
Related 1990 Certificate and any Subsequent 1990 Trust Investor Certificate and
all monies due or to become due with respect thereto, (c) each Interest Rate
Swap, interest rate cap, or other interest rate hedge that the Master Trust may
have entered into or obtained for the benefit of any Series and (d) all funds
on deposit in certain accounts of the Master Trust, including funds on deposit
in the Collections Account, the series principal accounts, the distribution
account, the negative carry reserve funds, if any, and any other Series
Accounts for each Series. Certain terms of the 1990 Trust, and the 1990 Trust
Seller Certificate, the Class A-4 Investor Certificate and the Related 1990
Certificates issued and to be issued thereunder, are described herein under the
heading "Terms of the 1990 Trust Investor Certificates."
As of the 1990 Trust Termination Date, (a) the 1990 Trust will transfer to the
Master Trust all of its right, title and interest in and to all of the property
of the 1990 Trust (other than funds on deposit in the Trust Accounts for the
benefit of, and allocated to, 1990 Trust Investor Certificates that are not
held by the Master Trust), and (b) the Class A-4 Investor Certificate, each
Related 1990 Certificate, any Subsequent 1990 Trust Investor Certificate and
the 1990 Trust Seller Certificate will automatically be canceled, and all
rights of the Master Trust with respect to such certificates will terminate.
As of the 1990 Trust Termination Date, funds on deposit in the 1990 Trust
Spread Account will be transferred to the Master Trust, allocated among an
Offered Series and any other outstanding Series that so provides based on the
projected spread for each such Series (including the Projected Spread for the
Offered Series) and deposited in the associated Spread Account for the benefit
of the Offered Certificateholders and the spread accounts for each other
outstanding Series for the benefit of the Certificateholders of such other
outstanding Series; 1990 Trust Investment Securities will be transferred to the
Master Trust and deposited in the Excess Funding Account for the benefit of the
Certificateholders; and funds on deposit in the 1990 Trust Interest Deposit
Account will be transferred to the Master Trust and deposited in the Interest
Deposit Account, subject to allocation and distribution as Finance Charge
Collections to the extent described herein. Thus, after the 1990 Trust
Termination Date, the assets of the Master Trust will include (a) all Dealer
Notes transferred to the Master Trust by the 1990 Trust and all Dealer Notes
thereafter transferred to the Master Trust by the Seller, all monies due or to
become due with respect thereto and all proceeds of such Dealer Notes, (b) the
interest of the Seller in the security interests in the Financed Vehicles
related to the Dealer Notes and all proceeds thereof, (c) the interest of the
Seller in any amounts recovered by the Servicer pursuant to any casualty
insurance policies covering any Dealer with respect to Financed Vehicles (the
"Insurance Proceeds"), (d) each Interest Rate Swap, interest rate cap or other
interest rate hedge, if any, entered into or obtained by the Master Trust
Trustee for the benefit of any Series, and (e) all funds on deposit in certain
accounts of the Master Trust, including funds on deposit in the Series
Principal Account, the Distribution Account, the Spread Account, the Excess
Funding Account, the Interest Deposit Account, the Negative Carry Reserve Fund
and any other Series Account created under a Supplement to the Pooling and
Servicing Agreement associated with the Offered Series.
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<PAGE> 46
On each business day (except in certain limited circumstances) during the term
of the Active Trust, NFC will sell Dealer Notes to the Seller and the Seller
will transfer such Dealer Notes to the Active Trust based on criteria provided
in the Applicable Agreement. Accordingly, the aggregate amount of Dealer Notes
in the Active Trust will fluctuate from day to day as new Dealer Notes are
generated and as existing Dealer Notes are collected, charged off as
uncollectible or otherwise adjusted or removed from the Active Trust.
The Master Trust was formed pursuant to the Pooling and Servicing Agreement for
these and similar transactions. Prior to formation, the Master Trust had no
assets or obligations. The Master Trust has not engaged and will not engage in
any business activity other than acquiring and holding 1990 Trust Investor
Certificates, the 1990 Trust Seller Certificate, the Dealer Notes, and the
other assets of the Master Trust described herein and proceeds therefrom,
issuing certificates of any Series or class, and issuing the Master Trust
Seller's Certificate.
USE OF PROCEEDS
Except as provided in the Prospectus Supplement, the net proceeds from the sale
of the Offered Certificates will be paid to the Seller, which will use such
proceeds (net of any amounts retained in the Excess Funding Account to maintain
the Master Trust Seller's Interest at least equal to the Minimum Master Trust
Seller's Interest) to repay indebtedness to NFC incurred by the Seller in
connection with the Seller's purchase of Dealer Notes from NFC prior to the
associated Closing Date under a Master Revolving Credit Agreement between NFC
and the Seller (the "Master Revolving Credit Agreement"). Interest accrues on
the outstanding principal amount of the note representing such indebtedness
(the "Master Revolving Note") at a rate per annum equal to the prime rate of
interest announced from time to time by Morgan Guaranty Trust Company of New
York. The principal amount of the Master Revolving Note is due and payable on
the date on which the Master Trust Purchase Agreement terminates in accordance
with its terms. NFC will use the proceeds received from the Seller to repay
outstanding short term indebtedness.
THE NAVISTAR FINANCIAL DEALER FLOOR PLAN FINANCING BUSINESS
Wholesale promissory notes issued by Dealers to NITC or NFC ("Dealer Notes")
are conveyed to the Active Trust by the Seller pursuant to the Applicable
Agreement. When used herein, unless the context otherwise requires, "Dealer
Notes" shall refer to those Dealer Notes which are held by the Active Trust.
The Dealer Notes are issued by Dealers to purchase new vehicles manufactured or
distributed by NITC (each such vehicle, a "Navistar Vehicle") or other
manufacturers (each such vehicle, an "OEM Vehicle") or to finance new trailers,
used vehicles and used trailers accepted in trade by Dealers or purchased by
them (all such new and used vehicles and trailers, "Financed Vehicles"). The
Active Trust will include Dealer Notes financing OEM Vehicles for a Dealer only
if NFC also provides financing for Navistar Vehicles for such Dealer.
As used herein, "Dealer" means (a) a person with whom NITC has a valid Dealer
Agreement to sell Navistar Vehicles, (b) a truck equipment manufacturer to whom
NITC sells vehicles pursuant to a valid Dealer Agreement or (c) a person with
whom NFC has a valid Dealer Agreement to extend used truck floor plan terms.
NFC is the principal source of "wholesale" or "floor plan" financing for
Dealers in the United States, financing, as of April 30, 1997, 90% of the total
number of Dealers (approximately 345). The percentage of new NITC trucks sold
directly to Dealers in the United States for which NFC provided financing was
approximately 95% and 94% for the first six months of fiscal years 1997 and
1996, respectively, and 94%, 93%, 93%, 89% and 88% for fiscal years 1996, 1995,
1994, 1993 and 1992, respectively. Dealers financed by NFC include medium duty
truck dealers, medium and heavy duty truck dealers and a small number of allied
equipment manufacturers (such as school bus distributors and manufacturers and
distributors of cement mixers) who purchase chassis or other truck components
from NITC. NFC services the Dealers through its home office located in Rolling
Meadows, Illinois and through six District Finance Offices located throughout
the United States.
CREATION OF DEALER NOTES
NFC finances 100% of the wholesale invoice price of new Financed Vehicles,
including destination charges. In the case of Navistar Vehicles, NITC creates a
wholesale note upon shipment of each new truck to a Dealer and executes such
wholesale note under the signature authority of the Dealer granted to NITC. NFC
purchases all wholesale notes relating to new Navistar Vehicles from Dealers
financed by NFC on a daily basis from NITC (see "Relationship With NITC").
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<PAGE> 47
NFC creates wholesale notes with respect to OEM Vehicles upon NFC's receipt of
an invoice from the vehicle manufacturer and executes such wholesale note under
the signature authority of the Dealer granted to NFC. NFC finances 75% of the
as-is appraised retail value of used vehicles taken in trade by a Dealer or
purchased by a Dealer from outside sources, and 100% of the purchase price for
used vehicles purchased by a Dealer from a NITC Used Truck Center and at 100%
of the NFC appraised value for repossessed vehicles purchased from NFC. Used
vehicles represented approximately 8% and 6% of the aggregate amount of
wholesale notes serviced by NFC as of April 30, 1997 and 1996, respectively,
and 8%, 7%, 7%, 7% and 8% of the aggregate amount of wholesale notes serviced
by NFC as of October 31, 1996, 1995, 1994, 1993 and 1992, respectively. NFC
will continue to purchase from NITC wholesale notes issued by a Dealer for new
Navistar Vehicles and to provide floor plan financing to a Dealer for used
vehicles so long as such Dealer's Dealer Agreement is in effect and such Dealer
satisfies NFC's Credit Guidelines (see --"Credit Approval Process and Credit
Guidelines" and "Dealer Monitoring").
CREDIT APPROVAL PROCESS AND CREDIT GUIDELINES
NFC provides floor plan financing to Dealers pursuant to pre-established credit
guidelines ("Credit Guidelines"). NFC must approve each prospective Dealer
before such Dealer receives a NITC Dealer Sales/Maintenance Agreement (a
"Dealer Agreement").
NFC bases its approval upon a credit evaluation of the principal owners of a
prospective Dealer and such Dealer's capital structure. In conducting such an
evaluation, representatives of NFC's District Finance Office will conduct
interviews with prospective Dealer principal(s), obtain credit applications and
personal financial statements, review "letters of intent" provided by
management of the prospective dealership and review existing business plans and
proposed funding sources for the purchase and/or financing of the prospective
dealership (which proposals generally include pro forma financials for the
following three to five years). In addition, NFC will obtain both personal and
business credit references and will evaluate any available credit bureau
reports.
If a prospective Dealer is approved by NFC, the Dealer and NITC enter into a
Dealer Agreement and NITC offers the Dealer wholesale floor plan terms approved
by NFC. The principal owner of the Dealer is generally required by NFC to
guarantee the Dealer's obligations to NITC and NFC. Pursuant to the Dealer
Agreement, in order to secure all indebtedness of the Dealer to NFC or NITC,
the Dealer grants to NFC and NITC a first priority security interest in its
inventory of new and used vehicles. Generally, the Dealer also grants NFC a
security interest in its service parts inventory. NFC maintains a master
physical damage insurance policy providing coverage for each Financed Vehicle
with Harco National Insurance Company ("Harco"), a wholly owned subsidiary of
NFC. The policy provides coverage to NFC and the related Dealer on all
Financed Vehicles for the actual cash value of each such Financed Vehicle up to
an aggregate amount of $10 million per contiguous Dealer location for each loss
occurrence. Harco maintains reinsurance with financially strong,
non-affiliated reinsurers for any loss in excess of $250,000 per occurrence.
The policy has been endorsed to provide that the Seller and the 1990 Trust
Trustee are loss payees as their interests may appear, and such policy (or any
successor policy) will be endorsed to provide that the Master Trust Trustee
will be substituted for the 1990 Trust Trustee as loss payee thereunder as of
the 1990 Trust Termination Date.
NFC establishes a base inventory guideline to provide floor plan financing
adequate for a Dealer's normal vehicle sales. The inventory guidelines are
based upon the Dealer's financial strength, its current credit and collection
history and the Dealer's historical or projected sales volume. NFC reviews a
Dealer's guideline at least annually.
Each month, the NFC corporate office staff and the appropriate District Finance
Office compare each Dealer's prescribed inventory guideline with the aggregate
principal amount of wholesale notes actually issued by such Dealer and
outstanding. If the amount of notes outstanding exceeds the Dealer's guideline
by a certain percentage (which percentage is based upon the Dealer's financial
strength rating), the NFC District Credit Manager may place the Dealer on
inventory control. In addition, a Dealer may also be placed on inventory
control if such Dealer fails to remit proceeds as agreed, if the Dealer's new
or used vehicle inventory is over-aged, if the Dealer's Open Account is past
due or if a Dealer's check is returned unpaid. Once any Dealer is placed on
inventory control, the District Finance Office will report monthly to NFC home
office management any progress made to resolve the deficiency. Upon its
review, NFC corporate office management will take appropriate actions with
respect to such Dealer. For example, NITC may be requested to sell and
transfer certain truck inventory to another Dealer, and, in extreme cases, NFC
may foreclose on all outstanding wholesale notes, place the Dealer on
cash-on-delivery terms or terminate the Dealer.
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<PAGE> 48
Dealers that are placed on inventory control will not receive NFC financing for
shipments unless specifically approved by NFC. Accordingly, if NITC generates
a wholesale note to finance the purchase of a Navistar Vehicle by a Dealer on
inventory control without the prior approval of NFC, NFC will charge NITC for
the amount of such wholesale note. NFC may approve shipments to a Dealer on
inventory control to fill orders for trucks that have already been sold to a
retail purchaser or to permit the Dealer to stock a particular model vehicle.
A Dealer will remain on inventory control until the circumstances that caused
it to be placed on inventory control are remedied to the satisfaction of the
District Finance Office Credit Manager. NFC will not purchase the invoice or
set up a floor plan note for OEM Vehicles if a Dealer is in default or shipment
is otherwise not approved by NFC.
The following table sets forth the percentage of Dealers on inventory control
and the percentage of the total wholesale note balances of such Dealers as of
the end of the fiscal quarters specified:
<TABLE>
Percentage of Percentage of Notes
Fiscal Quarter Dealers on from Dealers
Ending Last Day of Inventory Control on Inventory Control
- ------------------------------- ----------------- --------------------
<S> <C> <C>
Fiscal Year 1997
January...................... 0.8% 1.6%
April........................ 0.8 1.6
Fiscal Year 1996
January...................... 2.1 1.1
April........................ 1.6 2.0
July......................... 1.9 2.6
October...................... 1.6 2.1
Fiscal Year 1995
January...................... 2.9 4.9
April........................ 2.2 0.9
July......................... 2.6 1.6
October...................... 2.3 1.4
Fiscal Year 1994
January...................... 6.5 11.8
April........................ 5.0 7.7
July......................... 5.1 8.9
October...................... 4.0 6.2
Fiscal Year 1993
January...................... 6.0 11.9
April........................ 7.3 12.7
July......................... 7.1 12.6
October 6.2 10.6
Fiscal Year 1992
January...................... 6.3 10.6
April........................ 6.9 10.1
July......................... 6.4 10.1
October...................... 6.5 8.7
</TABLE>
The high percentage of Dealers on inventory control in 1992 through 1994
reflects the time necessary for Dealers impacted by the recession in 1991 and
1992 to rebuild their financial strength to a level where they can be taken off
inventory control. A key component in NFC's credit approval system is the
Dealer's equity position; in the event that a Dealer is put on inventory
control due to low equity, then its removal from inventory control is dependent
upon increasing its sales and profits over the period of time necessary to
rebuild its equity.
PAYMENT TERMS
A wholesale note issued by a Dealer for a new Financed Vehicle is due on the
earlier of the sale of the truck or a specified date generally within 12 months
from the first day of the calendar month following the date of shipment of the
truck to the Dealer. If such note is not paid at the end of the 12-month
period, the Dealer may extend the term of the note for 90 days in exchange for
a quarterly curtailment payment equal to 10% of the original balance of the
note. These curtailment payments and 90-day extensions are permitted until the
balance of the note is paid in full or until the unit
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<PAGE> 49
is sold, as long as the Dealer maintains its floor plan financing arrangements
with NFC and the related Financed Vehicle is on-hand and in saleable condition.
NFC may in its discretion, based upon local or regional economic conditions,
waive such curtailment payments.
A wholesale note secured by a used vehicle is due on the earlier of the sale of
the Financed Vehicle or a specified date generally no later than 180 days from
the date of financing. A Dealer is allowed to extend quarterly the term of a
used vehicle wholesale note for 90-day periods upon payment of a curtailment
amount equal to 10% of the original principal balance of the wholesale note.
These extensions may continue until the note is paid in full. NFC may in its
discretion waive the first curtailment payment.
Currently, NFC charges interest on wholesale notes outstanding during any month
at a rate equal to the prime rate plus a designated spread. The prime rate is
currently reset monthly by NFC based upon the reference banks' prime rate as of
the third Monday of the preceding month and is applied to all balances
outstanding during the applicable period. Wholesale notes secured by new
vehicles currently bear interest at a spread equal to 1% over the prime rate,
while used vehicle wholesale notes bear interest at a spread equal to 1-1/2%
over the prime rate.
The competitive rate environment is changing the pricing of Dealer floor plan
financing. Upon giving notice to the Dealers, NITC/NFC may change the
reference rate mechanism in any manner (including changing the reference banks,
the intervals between which the reference rate is reset or the reference rate
itself) or the applicable spread(s). In addition, NFC may from time to time
offer special pricing programs to Dealers who enroll in those programs. NFC is
currently offering the Advantage program which allows an enrolled Dealer to
obtain discounts based on the volume and finance market share of retail finance
and lease business generated by that Dealer. A Dealer can earn rebates that
effectively reduce its floor plan financing charges by up to 100 basis points.
Additional pricing actions may be taken by NFC to meet competition in their
market area.
NFC also currently charges each Dealer a monthly charge (the "Flat Charge")
equal to 0.065% of the Dealer's aggregate outstanding wholesale note balance as
of the end of each month, subject to certain monthly minimum charges. Upon
giving notice to the Dealers, NITC/NFC may change the Flat Charge percentage.
BILLING AND COLLECTION PROCEDURES
A statement (the "Open Account Statement") setting forth interest and Flat
Charges and other billing and account information is prepared by NFC and
distributed on a monthly basis to each Dealer. Each Dealer's Open Account
Statement is generated on approximately the second business day of the month,
and payments are due on the fifteenth day of the month in which they are
billed. Interest and Flat Charges are billed in arrears. Dealers remit
interest payments by check or electronic funds transfer to a lockbox owned by
NFC. See "Relationship with NITC--Open Account."
Each Dealer's monthly Open Account Statement also contains a "Wholesale Note
and Inventory Statement" prepared by NFC, listing each outstanding note issued
by the Dealer and detailing all credits and debits applied to each wholesale
note during the period. Dealers are required to remit principal payments on
wholesale notes when due by check or electronic funds transfer to NFC's
lockbox.
DEALER MONITORING; WRITE-OFFS
NFC Finance Sales Representatives or agents of NFC conduct physical inventories
of each Dealer's inventory on a regular basis to verify that the Dealer is
paying its wholesale notes upon receiving payment for the related Financed
Vehicles from retail customers. NFC performs these inventories monthly for
most Dealers, although some Dealers with satisfactory financial strength and
good payment histories or with small dealerships in remote areas are
inventoried only every sixty to ninety days. The timing of each visit is
varied and no advance notice is given to the Dealer. Representatives conduct a
physical inventory by comparing the serial numbers of the vehicles on the
Dealers' premises to a current listing of vehicles being financed by NFC.
Representatives also confirm with outside sources such as body shops that they
hold units of a Dealer's inventory. NFC District Finance Offices perform
approximately five test checks per month to ensure that each Finance Sales
Representative's inventory procedures are proper. Test check procedures are
more stringent than inventories and involve a review of a Dealer's remittance
habits and financial records and an evaluation of such Dealer's financial
strength.
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<PAGE> 50
When NFC discovers that a Dealer is suffering financial difficulties, NFC's
District Finance Office closely monitors the Dealer while working with the
Dealer to improve its financial condition. In these circumstances, NFC field
management personnel may perform a more detailed audit to verify a Dealer's
inventory, cash and sales records. These detailed audits also take place when
the routine inventory reveals a shortage in a Dealer's inventory, when NFC
receives from a Dealer a check for which the Dealer does not have sufficient
funds or when NFC deems itself insecure. The Dealer is required to make a
payment in certified funds of all amounts owing to NFC before the NFC
representative leaves the Dealer's premises. If the Dealer cannot pay the
amount owing to NFC, NFC will place the Dealer on cash-on-delivery status for
parts orders, and prohibit future shipment of vehicle orders to the Dealer
unless such orders are "sold orders" and specific arrangements are made to
assure prompt receipt of the proceeds by NFC.
If NFC's review reveals that a Dealer has used proceeds from vehicle sales due
to NFC for other purposes, the NFC District Finance Office places the Dealer on
cash-on-delivery terms, causes NITC to hold all shipments to the Dealer and
sends letters to the Dealer's guarantors and bank advising them of NFC's
interest in the Dealer's funds. In addition, NFC's District Finance Office
management takes certain actions at the dealership, including obtaining the
manufacturer's statement of origin or the certificate of title for each vehicle
in the Dealer's inventory.
If a Dealer is unable to pay amounts owing to NFC, NITC may terminate such
Dealer's Dealer Agreement in accordance with the terms of the Dealer Agreement
and applicable state law. Generally, in such circumstances the Dealer will
return all new trucks and parts inventory to NITC in accordance with the terms
of the Dealer Agreement and will receive credit against such Dealer's
outstanding wholesale notes. If the Dealer resists such termination, however,
NFC will declare the Dealer in default of its obligations, accelerate its
wholesale notes and foreclose on its collateral by taking possession of the
Dealer's vehicle and parts inventory or, if necessary, NFC will obtain a court
order requiring foreclosure. The Dealer's new vehicle inventory purchased from
NITC is returned to NITC in exchange for NITC's cash payment in full of such
Dealer's wholesale notes and the fulfillment of any other obligations owing to
NFC subject to the terms of the Dealer Agreement and applicable state law.
(Similar arrangements are in effect with other OEM Suppliers with respect to
OEM Notes.) Used vehicles are sold to the highest bidder; the proceeds are paid
to NFC to satisfy amounts owing to it. NFC will seek to collect any remaining
amounts it is owed from any other collateral that it may hold and from the
Dealer's guarantors. Once NFC has commenced liquidating a Dealer's inventory,
it writes off any amounts that it identifies as uncollectible. During the
course of a liquidation, NFC may recognize additional losses or recoveries.
Collections under a parts security agreement, a guarantee or other security
arrangement are generally allocated to the following items in the following
order: Open Account balances, new wholesale note balances, parts note balances,
deficiency balances on used floor plan notes, Dealer retail note deficiencies,
retail note recourse obligations, and finally, obligations owed to NITC by the
Dealer. Dealer Notes secured by new OEM Vehicles also are generally foreclosed
by return of such vehicles to the manufacturer in the event of Dealer
termination.
RELATIONSHIP WITH NITC
NITC manufactures and markets medium and heavy duty trucks, including school
buses, mid-range diesel engines and replacement parts primarily for sale in the
United States and Canada, as well as selected export markets. NITC has been
manufacturing trucks for approximately 90 years; it is now the industry market
share leader in the North American combined medium and heavy duty truck market,
offering a full line of diesel-powered products in the common carrier, private
carrier, government/service, leasing, construction, energy/petroleum and
student transportation markets. NITC also produces mid-range diesel engines
for use in its medium duty trucks, school buses and selected heavy duty truck
models and for sale to original equipment manufacturers. As NFC is a wholly
owned finance subsidiary of NITC, the level of NFC's floor plan financing
activity is substantially dependent on the level of sales of NITC and its
Dealers so that any continuing material change therein may have a corresponding
effect on NFC's floor plan financing business.
NITC provides floor plan assistance to Dealers through several formal and
informal programs, which are specifically discussed in "Special Price
Allowances at Retail" and "Floor Plan Financing Assistance." Much of this
assistance is provided at the option of NITC, which may terminate any of such
optional programs in whole or in part at any time.
INTEREST DEPOSIT AGREEMENTS AND INTEREST DEPOSIT ACCOUNTS
In order to promote the sale of Navistar Vehicles, NITC periodically grants
interest credits to Dealers and implements programs pursuant to which NITC
undertakes to pay, on behalf of the Dealers, interest owing on the related
Dealer Notes (during such time, such Dealer Notes are referred to as
"Non-Interest Bearing Dealer Notes"). In order to insure that
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the amount of such interest owed to the Active Trust will be available (i)
prior to the 1990 Trust Termination Date, NITC, the Servicer and the 1990 Trust
Trustee have entered into an interest deposit agreement (the "1990 Trust
Interest Deposit Agreement") and (ii) after the 1990 Trust Termination Date,
NITC, the Servicer and the Master Trust have entered into an interest deposit
agreement which will become effective on the 1990 Trust Termination Date (the
operative Interest Deposit Agreement being the "Active Interest Deposit
Agreement"), in each case pursuant to which NITC makes or will make weekly
deposits into the 1990 Trust Interest Deposit Account or the Interest Deposit
Account, as applicable, in an amount equal to the amount of interest NITC has
undertaken during that week to pay on behalf of the Dealers. Pursuant to the
terms of the Active Interest Deposit Agreement, NITC and the Servicer will
calculate the NITC Interest Amount as of the close of business on Friday (or
the immediately preceding business day if such Friday is not a business day) of
each week and as of the close of business on the last business day of each Due
Period (each, a "Calculation Day").
The "NITC Interest Amount" equals the sum of (a) the amount of the aggregate
amount of interest credits ("Up-Front Interest Credit") granted to Dealers by
NITC during the current Due Period, (b) the aggregate amount of NITC Earned
Interest on all Non-Interest Bearing Dealer Notes accrued during the current
Due Period and (c) the amount of the aggregate amount of NITC Future Due
Interest on all Non-Interest Bearing Dealer Notes as of such Calculation Day.
"NITC Earned Interest" means, on any Calculation Day or NITC Interest Transfer
Date with respect to any Dealer Note that was a Non-Interest Bearing Dealer
Note during the related Due Period or any portion thereof, an amount equal to
the product of (i) the product of (a) the principal amount of such Non-Interest
Bearing Dealer Note and (b) the interest rate on such Dealer Note billed by NFC
during such Due Period (the "Current Interest Rate") and (ii) the quotient of
(a) a number equal to the number of days elapsed during the Due Period for
which the Dealer Note is outstanding and is a Non-Interest Bearing Dealer Note
and (b) the actual number of days in the related calendar year.
"NITC Future Due Interest" means, with respect to any Non-Interest Bearing
Dealer Note on any Calculation Day, an amount equal to the product of (i) the
product of (a) the principal amount of such Non-Interest Bearing Dealer Note
and (b) the Current Interest Rate and (ii) the quotient of (a) a number equal
to the number of days from and including the Calculation Day to, but not
including, the date on which the obligor on such Dealer Note is requested to
start paying interest and (b) the actual number of days in the related calendar
year.
If on any Calculation Day (i) prior to the 1990 Trust Termination Date, the
amount on deposit in the interest deposit account which the 1990 Trust Trustee
has established and will maintain in the name of the 1990 Trust for the benefit
of the holders of 1990 Trust Investor Certificates (the "1990 Trust Interest
Deposit Account") and (ii) after the 1990 Trust Termination Date, the amount on
deposit in the interest deposit account which the Master Trust Trustee will
establish prior to the 1990 Trust Termination Date and maintain for the benefit
of the Certificateholders (the "Interest Deposit Account"), including any
interest earned thereon (collectively, the "Deposit Amount"), is less than the
NITC Interest Amount, NITC will deposit the amount of such deficiency in the
1990 Trust Interest Deposit Account or the Interest Deposit Account, as
applicable. However, if on any Calculation Day the Deposit Amount exceeds the
NITC Interest Amount, the Servicer will direct the Active Trustee to withdraw
the amount of such excess from the 1990 Trust Interest Deposit Account or the
Interest Deposit Account, as applicable, on the business day following such
Calculation Day (the "NITC Payment Date") and refund that amount to NITC.
MASTER INTERCOMPANY AGREEMENT
The operating relationship between NFC and NITC is governed by a Master
Intercompany Agreement dated as of April 26, 1993 and amended from time to time
(the "Master Intercompany Agreement").
Purchase of Notes and Accounts Receivable. The Master Intercompany Agreement
requires that NITC, with limited exceptions, offer NFC all wholesale and retail
notes and installment sales contracts which NITC acquires in the regular course
of its business from sales of trucks and related equipment to Dealers and
customers. Such offers must be on terms which will (together with charges made
to others for financing services) afford reasonable compensation for the
financing services rendered by NFC to NITC and the Dealers with respect to the
sale of NITC products and used goods. NFC in turn has agreed, to the extent
that it is able to finance such purchases, that it will purchase all such
receivables without recourse except those, if any, as to which the risk of loss
is unacceptable to NFC.
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<PAGE> 52
Pursuant to the Master Intercompany Agreement, NFC also purchases NITC
wholesale accounts receivable from the Dealers arising out of NITC's sales of
goods (primarily parts) and services to such Dealers. NFC receives
compensation from NITC in the form of a floating rate service charge for
financing these accounts.
Payments to NITC for Administrative and Other Services. The Master
Intercompany Agreement provides for payment by NFC to NITC of service fees for
data processing and other administrative services provided by NITC to NFC. The
amounts of these service fees are agreed upon from time to time, taking into
consideration such services and the costs thereof. NFC paid NITC service fees
of $2.4 million, $2.4 million, $2.5 million, $2.3 million and $2.6 million, for
fiscal years 1996, 1995, 1994, 1993 and 1992, respectively.
NO GUARANTEE BY NITC
None of the operating agreements constitute guarantees by NITC of the interest
on or principal of the notes, the account balances or any other obligation of
the obligors thereunder.
SPECIAL PRICE ALLOWANCES AT RETAIL
NITC agrees from time to time with a Dealer to pay a portion of the principal
amount of a wholesale note issued by the Dealer when the Dealer sells the
vehicle financed by such note to a retail customer. These retail special price
allowances ("Retail SPAs") (in addition to the wholesale special price
allowances described below) are intended to respond to competitive pressures by
allowing a Dealer to offer a lower price to a potential customer.
Generally, NITC will approve a Retail SPA for a vehicle held in inventory only
when the Dealer has identified a potential buyer. A representative of the
Dealer applies for the Retail SPA over the telephone, at which time a
representative of NITC asks for certain pertinent information. NITC will quote
the Dealer the Retail SPA on the telephone and later confirm it on a computer
printout sent to the Dealer. Once approved, a Retail SPA is only effective for
a 60-day period; if the Dealer does not sell the vehicle to the identified
customer during that time, the Dealer must reapply for, or seek an extension
of, the Retail SPA.
NITC is required to remit the amount of a Retail SPA to NFC upon the sale by
the Dealer of the vehicle financed by the wholesale note. However, NFC does
not reduce the principal balance of the wholesale note until it actually
receives payment of the Retail SPA from NITC. Although NITC has never failed
to make such a payment, it is the policy of NFC and NITC that the Dealer is
obligated to the holder of the wholesale note for the entire principal amount
of the wholesale note until NFC receives payment from NITC. If NITC becomes
financially unable to continue providing such assistance or otherwise refuses
to follow through with its payment obligations, delays in the payment of Dealer
Notes could occur as a result of Dealer disputes with NFC (in which a Dealer
could assert that the outstanding balance of the disputed Dealer Note should be
reduced by the amount of any credit or deduction previously approved by NITC
with respect to such Dealer Note).
The amount of Retail SPAs paid by NITC in each month during the period April,
1994 through April, 1997, ranged between a low of approximately 0.23% and a
high of approximately 3.18% of the outstanding Dealer Notes during such month.
The amount of Retail SPAs paid by NITC during each of the consecutive 12-month
periods ending on the last day of each month from April, 1994 through April,
1997 as a percentage of sales during such period ranged between a low of
approximately 2.86% and a high of approximately 7.69%.
In addition to providing Retail SPAs, from time to time NITC will also provide
wholesale special price allowances to Dealers ordering trucks for inventory.
Unlike a Retail SPA, a wholesale special price allowance will reduce the
invoice price of the truck and the original principal amount of the wholesale
note. Therefore, in contrast to a Retail SPA, NITC has no subsequent principal
payment obligation with respect to such wholesale note.
FLOOR PLAN FINANCING ASSISTANCE
General. NITC currently has a number of formal and informal floor plan
assistance programs for Dealers. NITC implements these programs in two ways:
by issuing Dealers interest credits to be applied to their monthly bills, or by
paying wholesale note interest to NFC on the Dealers' behalf for a specified
period of time. In each case, these programs
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<PAGE> 53
are agreements between NITC and the Dealers and do not affect the Dealers'
obligations on the wholesale notes until NFC receives payment of amounts owing
to it on the wholesale notes. NITC may choose to discontinue or alter such
programs in the future.
Interest Credits. NITC's floor plan assistance terms currently provide that,
upon issuance of a wholesale note by a Dealer, NITC will issue a credit (an
"Interest Credit") to a Dealer's Open Account balance in order to provide the
Dealer with a specified free interest period for the related Financed Vehicle.
NITC presently provides a free interest period of 15 days for Financed Vehicles
that the Dealer has sold to retail customers, 45 days for Financed Vehicles
that the Dealer intends to hold as inventory and 105 days for school bus
chassis. The Interest Credit is issued when NITC issues an invoice for the
Financed Vehicle and is computed at the interest rate in effect as of such
date, taking into account the principal amount of the wholesale note and the
number of days covered by the interest credit.
The aggregate amount of Interest Credits is applied to the Dealer's Open
Account balance on a monthly basis. If the aggregate amount of such credits
exceeds the interest charges for the month, the Dealer is entitled to apply the
excess to any of its outstanding obligations to NFC and NITC that appear on its
Open Account Statement. The Dealer remains obligated to pay interest on the
wholesale note to which the Interest Credit relates.
Pursuant to the Active Interest Deposit Agreement, NITC deposits in the 1990
Trust Interest Deposit Account or the Interest Deposit Account, as applicable
on a weekly basis an amount equal to all Interest Credits granted by it to
Dealers during each such week (see "Interest Deposit Agreements and Interest
Deposit Accounts").
Payment of Interest by NITC. NITC's current floor plan assistance terms also
include an agreement by NITC to pay interest on behalf of the Dealers for the
period during which the Financed Vehicles are in transit to the Dealers. In
addition, NITC periodically implements special sales programs pursuant to which
it agrees to pay interest on behalf of the Dealers for extended periods.
Pursuant to the Master Intercompany Agreement, NITC pays the amount of interest
owing on the wholesale notes directly to NFC; the Dealers are not billed for
interest owing on the wholesale notes for the specified period. NITC will
continue to pay interest on a wholesale note on behalf of a Dealer until the
first to occur of the end of the specified time period and the sale of the
related Financed Vehicle.
The Active Interest Deposit Agreement requires NITC to deposit in the 1990
Trust Interest Deposit Account or the Interest Deposit Account, as applicable,
on a weekly basis an amount equal to the aggregate amount of interest that NITC
has agreed during such week to pay on behalf of the Dealers, regardless of
whether such interest has been earned on the wholesale notes or if such
interest is to be earned in the future.
The following table sets forth the average monthly amount of Interest Credits
and NITC interest payments (in millions of dollars) for the periods ended on
the date specified:
<TABLE>
SIX MONTHS
ENDED
APRIL 30 YEAR ENDED OCTOBER 31
----------- ---------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Average monthly amount of Interest Credits....... $1.2 $1.8 $1.6 $1.7 $0.9 $0.6 $0.6
Average monthly amount of NITC interest payments. 1.4 1.5 1.4 1.5 1.5 1.1 1.2
</TABLE>
OPEN ACCOUNT
NITC sells parts, accessories and other miscellaneous items, and charges for
services provided, to Dealers through their open accounts (each, an "Open
Account"). Dealers are billed monthly on their Open Account balances. NITC
also issues credits to the Open Account, which include Interest Credits,
warranty work reimbursements, other sales and interest adjustments and
miscellaneous credits. A Dealer's monthly Open Account Statement includes
NFC's charge to the Dealer for accrued wholesale note interest. This charge
appears as a net item (which is calculated in the Wholesale Note and Inventory
Statement that accompanies the Open Account Statement), and includes the
application of any Interest Credits issued to the Dealer by NITC. The Open
Account Statement also contains the Flat Charge billed to such Dealer.
The Open Account billing period is for a calendar month, from the first day of
the month through the last day of the month (i.e., a Due Period). NFC issues
Open Account Statements on approximately the second business day following
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<PAGE> 54
the end of the Due Period. If a Dealer fails to pay its Open Account balance
by the fifteenth day of the month following the end of the Due Period, interest
on the balance of the Account is charged retroactively from the beginning of
such month until the balance is paid. The Dealer's Open Account Statement is
accompanied by NFC's Wholesale Note and Inventory Statement, which lists each
truck in the Dealer's inventory being financed during the month, showing, by
unit, the amount of interest charged by NFC during that month and the amount of
Interest Credits or other adjustments issued by NITC. The net interest owed by
the Dealer after application of Interest Credits is shown at the bottom of the
Wholesale Note and Inventory Statement and is also reflected on the Dealer's
Open Account Statement.
NFC purchases the aggregate Open Account balances of all Dealers from NITC on a
non-recourse basis. NFC's purchase of Open Account items occurs during the
month as part of the daily, weekly, or monthly settlements between NITC and NFC
pursuant to the Master Intercompany Agreement. Credits due the Dealer for
warranty work, floor plan interest reimbursement and other items are netted
against the price paid by NFC for the aggregate Dealer Open Account balance.
DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Offered Certificates will be issued pursuant to the Pooling and Servicing
Agreement dated as of June 8, 1995 (as supplemented and amended from time to
time, the "Pooling and Servicing Agreement"), among NFSC, NFC, the 1990 Trust
Trustee and the Master Trust Trustee, which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Master Trust
Trustee will make available for inspection a copy of the Pooling and Servicing
Agreement (without exhibits or schedules) and any Supplement to Offered
Certificateholders without charge upon written request. The following summary
describes certain terms of the Pooling and Servicing Agreement, does not
purport to be complete and is qualified in its entirety by reference to the
Pooling and Servicing Agreement.
The Offered Certificates will evidence undivided beneficial interests in
certain assets of the Master Trust allocated to the Offered Certificateholders'
Interest, representing the right to receive from such assets funds up to (but
not in excess of) the amounts required to make payments of interest on and
principal of the Offered Certificates pursuant to the Pooling and Servicing
Agreement.
The Offered Certificates will be available for purchase in minimum
denominations of $1,000 and integral multiples thereof in book-entry form only.
The Seller will keep or cause to be kept by a transfer agent (initially the
Master Trust Trustee) a register for the Offered Certificates (the "Certificate
Register"). Unless otherwise designated by the Seller in writing to the Master
Trust Trustee, the Certificate Register will be maintained at the Corporate
Trust Office of the Master Trust Trustee. The Master Trust Trustee, the paying
agent, the transfer agent, and any agent of any of them may treat the person in
whose name any Offered Certificate is registered as the owner of such Offered
Certificate for all purposes, including receiving distributions, and none of
the Master Trust Trustee, the paying agent, the transfer agent, or any agent of
any of them will be affected by any notice to the contrary.
INTEREST
The rate per annum at which Monthly Interest for the Offered Certificates (the
"Offered Certificate Rate") will accrue will be set forth in the Prospectus
Supplement. During each Distribution Period, Monthly Interest on the Invested
Amount will accrue at the Offered Certificate Rate for such Distribution Period
and will be payable to the Offered Certificateholders on each Distribution
Date. Monthly Interest will accrue from and including the preceding
Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to but excluding the current Distribution Date and,
if Monthly Interest is calculated at a fixed rate, will be calculated on a
basis of a 360-day year of twelve 30-day months and, if Monthly Interest is
calculated at a floating rate, will be calculated on a basis of actual days
elapsed and a 360-day year. Monthly Interest due for any Distribution Date but
not paid on such Distribution Date will be due on the next Distribution Date,
together with interest on such amount at the Offered Certificate Rate for the
Distribution Period related to such Distribution Date.
On each Transfer Date related to a Due Period commencing prior to the 1990
Trust Termination Date and prior to the commencement of a Class Amortization
Period with respect to the Related 1990 Certificate, interest payments received
by the Master Trust in respect of the Related 1990 Certificate (the "Related
1990 Certificate Interest Collections") and
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<PAGE> 55
any Net Swap Receipts will be deposited in the Distribution Account and,
together with Investment Income (if any), will be used to make payments of
Monthly Interest to the Offered Certificateholders when due. Upon the
commencement, if any, of a Class Amortization Period with respect to the
Related 1990 Certificate, funds on deposit in the Negative Carry Reserve Fund
will also be used to make payments of Monthly Interest to the Offered
Certificateholders. After the 1990 Trust Termination Date, Monthly Interest
will generally be derived from Available Certificateholder Interest
Collections, Net Swap Receipts and, under certain circumstances, withdrawals
from the Spread Account, the Negative Carry Reserve Fund, the Liquidity Reserve
Account and Available Seller's Finance Charge Collections to the extent
described herein.
PRINCIPAL
The date on which the final payment of principal with respect to the Offered
Certificates is expected to be made (the "Expected Payment Date") will be set
forth in the related Prospectus Supplement. In general, no principal payments
will be made to the Offered Certificateholders until the Expected Payment Date
or until the first Distribution Date related to the Due Period in which an
Early Amortization Period commences. Although it is expected that the final
payment in respect of the Invested Amount will be made on the Expected Payment
Date, the Invested Amount may be paid earlier or, depending on the actual
payment rate on the Dealer Notes, later, as described under "Risk
Factors--Payments and Maturity."
Distributions on the Offered Certificates will be made on each Distribution
Date to the holders of Offered Certificates in whose names the Offered
Certificates were registered (expected to be Cede, as nominee of DTC) at the
close of business on the day preceding such Distribution Date (each, a "Record
Date"). However, the final distribution on the Offered Certificates will be
made only upon presentation and surrender of the Offered Certificates.
Distributions to DTC will be made in immediately available funds.
Pre-1990 Trust Termination Date. Prior to the 1990 Trust Termination Date,
unless a Class Amortization Period with respect to the Related 1990 Certificate
has commenced, the Master Trust will not receive any payments of principal in
respect of the Related 1990 Certificate (such payments are referred to herein
as the "Related 1990 Certificate Principal Collections").
"Class Amortization Period" means, for a class of 1990 Trust Investor
Certificates, the first to occur of (a) the period from and including the
Scheduled Class Amortization Date to and including the date of the final
distribution to the holders of such class and (b) the period from and including
the date on which a 1990 Trust Amortization Event occurs to and including the
date of the final distribution to the holders of such class.
On each Transfer Date related to a Due Period occurring during a Class
Amortization Period with respect to the Related 1990 Certificate (which will
result in the occurrence of either an Early Amortization Event or an Investment
Event as described herein), Related 1990 Certificate Principal Collections will
be allocated between the Series Principal Account and the Negative Carry
Reserve Fund as described in "--Allocation of Collections Prior to the 1990
Trust Termination Date--Allocations." The funds on deposit in the Series
Principal Account will be used to pay the Invested Amount (i) on each
Distribution Date related to a Due Period occurring during an Early
Amortization Period (unless otherwise provided in the Prospectus Supplement,
commencing with the Distribution Date related to the Due Period in which the
Early Amortization Event occurs) until the Invested Amount has been paid in
full or the Series Termination Date has occurred or (ii) on the Expected
Payment Date or any Early Distribution Date if an Investment Event has
occurred. Even if the amount on deposit in the Series Principal Account on the
Expected Payment Date is insufficient to pay the Invested Amount in full, such
amount will be distributed to the Offered Certificateholders at such time. Any
remaining Related 1990 Certificate Principal Collections shall be paid to the
Seller.
Post-1990 Trust Termination Date. On each business day with respect to the
Revolving Period, Offered Series Principal Collections, subject to certain
limitations, will either be (a) allocated to one or more Series which are in
amortization, early amortization or accumulation periods to cover principal
payments due to the Certificateholders of any such Series or (b) if no such
Series is then amortizing or accumulating principal in series principal
accounts, (i) allocated to any variable funding certificate at the Seller's
option, (ii) allocated to and deposited in the Excess Funding Account to the
extent necessary to maintain the Minimum Master Trust Seller's Interest or
(iii) paid to the Seller.
Unless and until an Early Amortization Event shall have occurred and until the
Invested Amount is paid in full, on each Transfer Date related to a Due Period
occurring during the Accumulation Period or any Investment Period, Offered
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<PAGE> 56
Series Principal Collections will no longer be paid for the benefit of another
Series or to the Seller as described above but instead an amount thereof up to
the Controlled Deposit Amount for each such Due Period, in the case of the
Accumulation Period, or the Invested Amount, in the case of an Investment
Period, will be deposited in the Series Principal Account and will be used to
pay the Invested Amount on the Expected Payment Date or any Early Distribution
Date. As described in "--Allocations of Collections After the 1990 Trust
Termination Date--Principal Collections," Shared Principal Collections and
Shared Seller Principal Collections may also be available for deposit into the
Series Principal Account in respect of the Invested Amount. If on the Expected
Payment Date the amount on deposit in the Series Principal Account is less than
the Invested Amount, the Early Amortization Period will commence and on each
Distribution Date thereafter the Offered Certificateholders will receive
distributions of Offered Series Principal Collections until the Invested Amount
has been paid in full or the Series Termination Date has occurred. If the
Expected Payment Date occurs after the Fully Funded Date, the Offered
Certificateholders will only be entitled to receive the amounts on deposit in
the Series Principal Account. See "Description of Offered
Certificates--Termination; Fully Funded Date." Even if the amount on deposit in
the Series Principal Account on the Expected Payment Date is insufficient to
pay the Invested Amount in full, such amount will be distributed to the Offered
Certificateholders at such time.
BOOK-ENTRY REGISTRATION
Offered Certificateholders may hold their Offered Certificates through DTC (in
the United States) or CEDEL or Euroclear (in Europe) if they are participants
in such systems, or indirectly through organizations which are participants in
such systems.
Cede, as nominee for DTC, will be the registered holder of the global Offered
Certificates. Except as described herein, no Offered Certificateholder will be
entitled to receive a certificate representing such person's interest in the
Offered Certificates. Unless and until Definitive Certificates are issued
under the limited circumstances described below, all references herein to
actions by Offered Certificateholders shall refer to actions taken by DTC upon
instructions from its Participants, and all references herein to distributions,
notices, reports and statements to Offered Certificateholders shall refer to
distributions, notices, reports and statements to Cede, as the registered
holder of the Offered Certificates, for distribution to the Offered
Certificateholders in accordance with DTC procedures.
CEDEL and Euroclear will hold omnibus positions on behalf of their participants
through customers' securities accounts in CEDEL's and Euroclear's names on the
books of their respective depositaries which in turn will hold such positions
in customers' securities accounts in the depositaries' names on the books of
DTC. Citibank, N.A. ("Citibank") will act as depositary for CEDEL and Morgan
Guaranty Trust Company of New York will act as depositary for Euroclear (in
such capacities, the "Foreign Agency Depositaries").
Transfers between DTC Participants will occur in the ordinary way in accordance
with DTC rules. Transfers between CEDEL Participants and Euroclear
Participants will occur in the ordinary way in accordance with their applicable
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through CEDEL or Euroclear
Participants, on the other, will be effected in DTC in accordance with DTC
rules on behalf of the relevant European international clearing system by its
Foreign Agency Depositary. However, such cross-market transactions will
require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its rules
and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Foreign Agency
Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. CEDEL Participants and Euroclear Participants may not deliver
instructions directly to the Foreign Agency Depositaries.
Because of time-zone difference, credits of securities received in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or CEDEL Participant on such business day. Cash received in CEDEL or
Euroclear as a result of sales of securities by or through a CEDEL Participant
or a Euroclear Participant to a DTC Participant will be received with value on
the DTC settlement date but will be available in the relevant CEDEL or
Euroclear cash account
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<PAGE> 57
only as of the business day following settlement in DTC. For additional
information regarding clearance and settlement procedures for the Offered
Certificates, see Annex I hereto, and for information with respect to tax
documentation procedures relating to the Offered Certificates, see Annex I
hereto and "Tax Matters--Certain Federal Income Tax Consequences--Foreign
Investors."
DTC is a limited-purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the UCC and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participating organizations ("Participants") and facilitate
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes in their accounts, thereby eliminating
the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations (including
underwriters involved in the distribution of the Offered Certificates).
Indirect access to the DTC system also is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Offered Certificateholders that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Offered Certificates may do so only through Participants and
Indirect Participants. In addition, Offered Certificateholders will receive
all distributions of principal of and interest on the Offered Certificates from
the Master Trust Trustee through DTC and its Participants. Under a book-entry
format, Offered Certificateholders will receive payments after the related
Distribution Date because, while payments are required to be forwarded to Cede,
as nominee for DTC, on each such date, DTC will forward such payments to its
Participants which thereafter will be required to forward them to Indirect
Participants or Offered Certificateholders. It is anticipated that the only
"Investor Certificateholder" (as such term is used in the Pooling and Servicing
Agreement) will be Cede, as nominee of DTC, and that Offered Certificateholders
will not be recognized by the Master Trust Trustee as Investor
Certificateholders under the Pooling and Servicing Agreement. Offered
Certificateholders will only be permitted to exercise the rights of Investor
Certificateholders under the Pooling and Servicing Agreement indirectly through
DTC and its Participants who in turn will exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC and its
operations, DTC is required to make book-entry transfers among Participants on
whose behalf it acts with respect to the Offered Certificates and is required
to receive and transmit distributions of principal of and interest on the
Offered Certificates. Participants and Indirect Participants with which
Offered Certificateholders have accounts with respect to the Offered
Certificates similarly are required to make book-entry transfers and receive
and transmit such payments on behalf of their respective Offered
Certificateholders.
Because DTC can only act on behalf of Participants, who in turn act on behalf
of Indirect Participants and certain banks, the ability of an Offered
Certificateholder to pledge Offered Certificates to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of such
Offered Certificates, may be limited due to the lack of a physical certificate
for such Offered Certificates.
DTC has advised the Seller that it will take any action permitted to be taken
by an Offered Certificateholder under the Pooling and Servicing Agreement only
at the direction of one or more Participants to whose account with DTC the
Offered Certificates are credited. DTC may take conflicting actions with
respect to an undivided interest held by a Participant to the extent that it is
directed to do so by such Participant based on such Participant's instructions
from various beneficial owners.
Cedel, Societe Anonyme ("CEDEL"), 67 Bd Grande-Duchesse Charlotte, L-1420,
Luxembourg (R.C. Luxembourg 1331) was incorporated in 1970 as a limited
company under Luxembourg law. CEDEL is owned by banks, securities dealers, and
financial institutions and currently has over 100 shareholders, including U.S.
financial institutions or their subsidiaries. No single entity may own more
than five percent of CEDEL's stock.
CEDEL is registered as a "depositaire professional de titre" in Luxembourg, and
as such is subject to regulation by the Luxembourg Monetary Authority, which
also supervises Luxembourg's banks.
CEDEL provides clearance and settlement services for its customers and
currently accepts over 40,000 securities issues for clearance, settlement, and
custody. CEDEL's customers consist of broker-dealers, financial institutions,
and other securities professionals involved in the movement and/or custody of
securities. CEDEL's U.S. customers are limited
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to brokers, dealers, and banks. Currently, CEDEL has approximately 2900
customers located in over 60 countries, including all major European countries,
Canada and the United States.
The Euroclear System was created in 1968 to hold securities for participants of
the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need or physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 30 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing, and interfaces with
domestic markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office
(the "Euroclear Operator" or "Euroclear"), under contract with Euroclear S.C.,
a Belgian cooperative corporation (the "Cooperative"). All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear Clearance System cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy
for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include any
underwriters, agents or dealers involved in the distribution of the Offered
Certificates. Indirect access to the Euroclear System is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking corporation
which is a member bank of the Federal Reserve System. As such, it is regulated
and examined by the Board of Governors of the Federal Reserve System and the
New York State Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator are
governed by the Terms and Conditions Governing Use of Euroclear and the related
Operative Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the Terms and Conditions only on behalf of Euroclear Participants,
and has no record of or relationship with persons holding through Euroclear
Participants.
Distributions with respect to Offered Certificates held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Foreign Agency Depositary. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. See "Certain Federal Income Tax
Matters." CEDEL or the Euroclear Operator, as the case may be, will take any
other action permitted to be taken by an Investor Certificateholder under the
Pooling and Servicing Agreement or the Supplement related to the Offered
Certificates on behalf of a CEDEL Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its Foreign
Agency Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Offered Certificates among participants of
DTC, CEDEL and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
The Offered Certificates will be issued in fully registered, certificated form
to Offered Certificateholders or their nominees ("Definitive Certificates"),
rather than to DTC or its nominee only if (a) the Seller advises the Master
Trust Trustee in writing that DTC is no longer willing or able to properly
discharge its responsibilities under the depository agreement with respect to
the Offered Certificates, and the Master Trust Trustee or the Seller is unable
to locate a qualified successor, (b) the Seller, at its option, elects to
terminate the book-entry system through DTC or (c) after the occurrence of a
Master Trust Servicer Termination Event or a 1990 Trust Servicer Termination
Event (any such event, a "Servicer Termination Event"), Offered
Certificateholders representing beneficial interests aggregating not less a
majority of the Invested Amount advise the Master Trust Trustee and DTC through
Participants in writing that the continuation of a book-entry system through
DTC (or a successor thereto) is no longer in the best interests of the such
Offered Certificateholders.
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<PAGE> 59
Upon the occurrence of any of the events described in the immediately preceding
paragraph, DTC is required to notify all Participants of the availability
through DTC of Definitive Certificates for the Offered Certificates. Upon
surrender by DTC of the certificate or certificates representing the Offered
Certificates, accompanied by instructions for re-registration, the Master Trust
Trustee will issue the Offered Certificates in the form of Definitive
Certificates, and thereafter the Master Trust Trustee will recognize each
holder of a Definitive Certificate as an Investor Certificateholder under the
Pooling and Servicing Agreement. In the event that Definitive Certificates are
issued or DTC ceases to be the clearing agency for the Offered Certificates,
the Pooling and Servicing Agreement provides that the Offered
Certificateholders will be notified of such event.
Upon the issuance of Definitive Certificates, distributions of principal and
Monthly Interest will be made by the Master Trust Trustee directly to the
holders of Definitive Certificates in accordance with the procedures set forth
herein and in the Pooling and Servicing Agreement. Payments of principal, if
any, and Monthly Interest on each Distribution Date will be made to holders in
whose names the Definitive Certificates were registered at the close of business
on the related Record Date. Distributions will be made by check mailed to the
address of such holder as it appears on the register maintained by the Master
Trust Trustee. The final payment on any Offered Certificate (whether Definitive
Certificates or Book-Entry Certificates), however, will be made only upon
presentation and surrender of such Offered Certificate at the office or agency
specified in the notice of final distribution to Offered Certificateholders.
The Master Trust Trustee will provide such notice to registered Offered
Certificateholders not later than the Determination Date of the month of such
final payment.
"Determination Date" means, with respect to any Due Period, the twelfth day
of each calendar month next following the end of such Due Period, or if such
twelfth day is not a Business Day, the next Business Day thereafter.
Definitive Certificates will be transferable and exchangeable at the offices of
the Master Trust Trustee, or at such other office as the Seller shall designate
(initially the Corporate Trust Office). No service charge will be imposed for
any registration of transfer or exchange, but the transfer agent may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
THE MASTER TRUST SELLER'S CERTIFICATES
The Pooling and Servicing Agreement provides that the Seller may exchange one
or more portions of the certificate evidencing the Master Trust Seller's
Interest (the "NFSC Certificate") for one or more certificates (each, a
"Supplemental Certificate" and together with the NFSC Certificate the "Master
Trust Seller's Certificates") for transfer or assignment upon the execution and
delivery of a Supplement to the Pooling and Servicing Agreement (which
Supplement shall be subject to the amendment section of the Pooling and
Servicing Agreement to the extent that it amends any of the terms of the
Pooling and Servicing Agreement) so long as (a) the Seller shall have delivered
to the Master Trust Trustee and any Enhancement Provider a Tax Opinion with
respect to such exchange and (b) the Rating Agency Condition shall have been
satisfied. Any subsequent transfer or assignment of a Supplemental Certificate
is also subject to the conditions described in the preceding sentence. Upon
satisfaction of the foregoing conditions, the Seller may exchange the NFSC
Certificate for one or more Supplemental Certificates in order to transfer a
portion of the Master Trust Seller's Interest, to facilitate the issuance of a
new Series, or for any other reason. If any Supplemental Certificates are
issued, allocations to the Master Trust Seller's Interest as described herein
will include amounts subsequently allocated between the holder of the NFSC
Certificate and the holders of any Supplemental Certificates.
NEW ISSUANCES
The Pooling and Servicing Agreement provides that the Master Trust Trustee will
issue two types of certificates: (a) one or more Series of investor
certificates (including the Offered Certificates) which are transferable and
have the characteristics described below and (b) the Master Trust Seller's
Certificates. The Pooling and Servicing Agreement also provides that, pursuant
to one or more Supplements, the Seller may cause the Master Trust Trustee to
issue one or more new Series. Under the Pooling and Servicing Agreement, the
Seller may specify, among other things, the Principal Terms with respect to any
Series. The Seller may offer any Series to the public under a Disclosure
Document in transactions either registered under the Securities Act or exempt
from registration thereunder, directly or through one or more underwriters or
placement agents. There is no limit to the number of Series that may be issued
under the Pooling and Servicing Agreement.
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<PAGE> 60
The Pooling and Servicing Agreement provides that the Seller may specify
Principal Terms of a new Series such that each Series has an amortization
period or accumulation period which may have a different length and begin on a
different date than the amortization period or accumulation period for any
other Series. Further, one or more Series may be in their early amortization
periods or accumulation periods while other Series are not. Thus, certain
Series may be amortizing or accumulating principal, while other Series are not.
Moreover, different Series may have the benefits of letters of credit, surety
bonds, cash collateral accounts, collateral invested amounts, spread accounts,
guaranteed rate agreements, liquidity facilities, tax protection agreements,
interest rate swap agreements or other similar arrangements (each, an
"Enhancement") which may be issued by different entities. Under the Pooling
and Servicing Agreement, the Master Trust Trustee will hold each form of
Enhancement only on behalf of the Series (or a particular class within a
Series) with respect to which it relates. The Pooling and Servicing Agreement
also provides that the Seller may specify different series certificate rates
and monthly servicing fees with respect to each Series (or a particular class
within a Series). In addition, the Seller has the option under the Pooling and
Servicing Agreement to vary among Series (or classes within a Series) the terms
upon which a Series (or classes within a Series) may be repurchased by the
Seller.
"Principal Terms" means, with respect to any Series, the principal terms of such
Series, which may include without limitation: (a) the name or designation; (b)
the initial principal amount (or method for calculating such amount or, with
respect to any variable funding certificate, variations in principal amount);
(c) the rate of interest thereon (or method for the determination thereof); (d)
the payment date or dates and the date or dates from which interest shall
accrue; (e) the method of allocating Collections to Certificateholders; (f) the
designation of any Series Accounts and the terms governing the operation of any
such Series Accounts; (g) the amount of the Servicing Fee allocable to such
Series and the Certificateholders' portion thereof; (h) the issuer and terms of
any form of Enhancement with respect thereto; (i) the terms of which the
investor certificates of such Series may be exchanged for investor certificates
of another Series, repurchased by the Seller or remarketed to other investors;
(j) the series termination date for such Series; (k) the number of classes of
investor certificates of such Series and, if more than one class, the rights and
priorities of each such class; (l) the extent to which the investor certificates
of such Series will be issuable in temporary or permanent global form (and, in
such case, the depositary for such global certificate or certificates, the terms
and conditions, if any, upon which such global certificate may be exchanged, in
whole or in part, for Definitive Certificates, and the manner in which any
interest payable on a temporary or global certificate will be paid); (m) whether
the investor certificates of such Series may be issued in bearer form and any
limitations imposed thereon; (n) the priority of such Series with respect to any
other Series; (o) whether such Series will be prefunded; and (p) any other terms
of such Series.
Under the Pooling and Servicing Agreement and pursuant to a Supplement, a new
Series may be issued only upon the satisfaction of certain specified
conditions. The Seller may cause the issuance of a new Series by notifying the
Master Trust Trustee at least five business days in advance of the date on
which such Series will be issued (with respect to any such Series, the "Series
Issuance Date"). The notice shall state the designation of any Series (and
classes within a Series, if any). The Pooling and Servicing Agreement provides
that the Master Trust Trustee will issue any such Series only upon delivery to
it of the following: (i) a Supplement in form satisfactory to the Master Trust
Trustee signed by the Seller and the Servicer and specifying the Principal
Terms of such Series, (ii) the form of any Enhancement and any related
agreement, (iii) an opinion of counsel to the effect that, for federal income
tax purposes, (x) such issuance will not adversely affect the characterization
of the certificates of any outstanding Series (including the Offered
Certificates) (or class within a Series) either as debt or as a partnership
interest, (y) such issuance will not cause a taxable event to any
Certificateholder (including the Offered Certificateholders) or cause the
Master Trust to be treated as an association (or publicly traded partnership)
taxable as a corporation (an opinion of counsel to the effect referred to in
clauses (x) and (y) with respect to any action is referred to herein as a "Tax
Opinion") and (z) such new Series will be characterized as debt or as a
partnership interest (other than an interest in a publicly traded partnership)
in the hands of any person other than the Seller, any affiliate of the Seller
or any trust in which the Seller or any affiliate of the Seller holds an
interest, (iv) evidence of satisfaction of the Rating Agency Condition and (v)
evidence that the amount of the Master Trust Seller's Interest as of such date
(after giving effect to such issuance and the deposit, if any, of proceeds from
such issuance in the Excess Funding Account) will not be less than the Minimum
Master Trust Seller's Interest. Such proceeds will be deposited in the Excess
Funding Account as contemplated by clause (v) if the principal balance of
Dealer Notes at the time of such new issuance is less than the sum of the
Master Trust Invested Amount and the Minimum Master Trust Seller's Interest and
would constitute, in effect, a "pre-funding" pending an increase in the
available amount of Dealer Notes. Such issuance is also subject to the
condition that the Seller shall have represented and warranted that such
issuance shall not, in the reasonable belief of the Seller, cause an Early
Amortization Event or Investment Event to occur. In addition, prior to the
1990 Trust Termination Date, it is a condition precedent to the issuance of a
new Series that the Master Trust Trustee shall have received a newly issued
1990 Trust Investor Certificate and 1990 Trust Seller Certificate. Upon
satisfaction of all such conditions, the Master Trust Trustee will issue such
Series.
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<PAGE> 61
TRANSFER OF DEALER NOTES TO THE ACTIVE TRUST
Each business day since December 27, 1990, the Servicer has acquired, on behalf
of the 1990 Trust, Eligible Dealer Notes from the Seller for an acquisition
price equal to the aggregate principal amount of such Dealer Notes plus accrued
and unpaid finance charges thereon for the current Due Period, if any (each
such acquisition, an "Acquisition"). Subject to the availability of new
Eligible Dealer Notes, the Servicer will continue to make Acquisitions on each
business day on and after the Closing Date on behalf of the 1990 Trust during
its term as Active Trust except upon the occurrence of certain bankruptcy
events involving the Seller, NFC, NITC or NIC. Effective as of the 1990 Trust
Termination Date, the Seller shall assign Eligible Dealer Notes ("Assignments")
on each business day to the Servicer on behalf of the Master Trust during its
term as the Active Trust except upon the occurrence of a bankruptcy event
involving the Seller, NFC, NITC or NIC. The Servicer has delivered to the 1990
Trust Trustee, and will continue to deliver to the 1990 Trust Trustee (during
the period prior to the 1990 Trust Termination Date) or the Master Trust
Trustee (during the period after the 1990 Trust Termination Date) (the
operative trustee during any such period being referred to herein as the
"Active Trustee") a computer file, hard copy or microfiche list which shall
contain a true and complete list of all Dealer Notes acquired on each business
day, which shall be deemed to be an amendment as of such business day to the
computer file, hard copy or microfiche list delivered to the Active Trustee
containing a true and complete list of outstanding Dealer Notes conveyed to the
Active Trust.
ELIGIBLE DEALER NOTES
The Seller obtains from NFC only those Dealer Notes that are identified by the
Servicer as Eligible Dealer Notes. The Seller in turn conveys such Eligible
Dealer Notes to the Active Trust (see "Description of Offered
Certificates--Transfer of Dealer Notes to the Active Trust)." In certain
circumstances, the Seller may be required to repurchase (a) those Dealer Notes
previously transferred to the Active Trust which are Ineligible Dealer Notes
from the Active Trust and (b) in the event that a material amount of Dealer
Notes are Ineligible Dealer Notes, (i) prior to the 1990 Trust Termination
Date, all classes of 1990 Trust Investor Certificates (in which case an
Investment Event would occur) or (ii) after the 1990 Trust Termination Date,
the interests in the Master Trust of the Certificateholders of all outstanding
Series (the "Certificateholders' Interest"), from the holders thereof (see
"Description of Offered Certificates--Certain Representations and Warranties;
Ineligible Dealer Notes; Purchase of Certificateholders' Interest").
An "Eligible Dealer Note" is any Dealer Note: (a) which is payable in United
States dollars; (b) which was created in compliance with all requirements of
law the failure with which to comply would have a material adverse effect on
Certificateholders; (c) with respect to which all consents or authorizations
of, or registrations with, any Governmental Authority required to be obtained
in connection with (i) the creation of such Dealer Note or the Dealer
Agreement, or (ii) the execution, delivery and performance by any Person who
sells OEM Vehicles to a Dealer and who has entered into an agreement for the
benefit of NFC to repurchase new vehicle inventory from NFC upon NFC's
foreclosure upon such inventory owned by such Dealer (subject to such
customary conditions and limitations as are acceptable to NFC) (an "OEM
Supplier") or by NITC of the Dealer Agreement pursuant to which such Dealer
Note was created, have been duly obtained, and are in full force and effect
as of such date of creation; (d) as to which at all times following the
transfer of such Dealer Note to the Active Trust, the Active Trust will have
good and marketable title thereto free and clear of all liens arising prior
to the transfer or arising at any time under or through any member of
Navistar International Corporation, a Delaware corporation, ("NIC"), NITC,
NFC, NFSC and any other direct or indirect subsidiaries of NIC (the "Navistar
Group"); (e) which will at all times be the legal, valid and binding payment
obligation of the Dealer obligated thereunder, enforceable against such
Dealer in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy or other similar laws, and except as such
enforceability may be limited by general principles of equity; (f) which
constitutes either an "account," "chattel paper" or a "general intangible"
under and as defined in Article 9 of the Uniform Commercial Code; (g) which
is not subject to any right of rescission, setoff, counterclaim or any other
defense (including defenses arising out of violations of usury laws) of the
Dealer, other than defenses arising out of applicable bankruptcy or other
similar laws, and except as such enforceability may be limited by general
principles of equity; (h) as to which, at the time of transfer of such Dealer
Note to the Active Trust, the Servicer has satisfied its obligations with
respect to such Dealer Note; (i) as to which, at the time of transfer of such
Dealer Note to the Active Trust, the Servicer has not taken nor failed to
take any action which would impair the rights of the Active Trust or the
holders of interests therein; (j) which, at the time of transfer of such
Dealer Note to the Active Trust, has not been issued by a Dealer that is
insolvent; (k) which, at the time of transfer by NFSC of such Dealer Note to
the Active Trust, has not been issued by a Dealer that has been placed on
cash-on-delivery terms by the Servicer; (l) which, at the time of transfer by
NFSC of such Dealer Note to the Active Trust, is not past due over thirty
days;
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<PAGE> 62
(m) which has not been issued by a Dealer in connection with such Dealer's
purchase of parts from NITC or an OEM Supplier; (n) which, when the principal
amount of such Dealer Note is added to the principal amount of the other
outstanding Dealer Notes issued by the same Dealer previously or concurrently
transferred to the Active Trust, shall not cause the sum of the principal
amounts of all such Dealer Notes to exceed the applicable Concentration Limit
as of the close of business on the business day preceding the date on which
such Dealer Note is to be transferred; (o) which, in the case of a Dealer
Note financing an OEM Vehicle (an "OEM Note"), when the principal amount of
such OEM Note is added to the principal amount of the other outstanding OEM
Notes previously transferred to the Active Trust, shall not cause the sum of
such principal amounts to exceed 10% (or any larger percentage as to which
the Rating Agency Condition has been satisfied) of the sum of the aggregate
principal balance of Dealer Notes and the aggregate principal amount of 1990
Trust Investment Securities (or funds on deposit in the Excess Funding
Account) in the Active Trust; (p) as to which a valid first priority security
interest in the Financed Vehicle has been transferred to the Active Trust;
(q) as to which the Navistar Group has assigned to the Active Trust
designation as loss payee on the insurance policies insuring the Financed
Vehicle against casualty and theft losses; (r) the principal amount of which
is due upon the sale of the related Financed Vehicle; (s) the interest rate
of which (i) is based on the prime rate or another benchmark floating
interest rate and (ii) is subject to adjustment at least monthly; (t) the
principal amount of which (i) in the case of a Financed Vehicle which is a
new vehicle, is equal to not more than one hundred percent of the invoice
price of such Financed Vehicle, (ii) in the case of a Financed Vehicle which
is a used vehicle purchased by a Dealer from a NITC Used Truck Center or a
repossessed vehicle purchased from NFC, is equal to not more than one hundred
percent of the agreed upon purchase price, and (iii) in the case of a
Financed Vehicle which is a used vehicle taken in trade by a Dealer or
purchased by a Dealer from outside sources, is equal to not more than
seventy-five percent of the "as is" value of such Financed Vehicle as
determined by NFC's appraisal thereof; (u) which was created in accordance
with the standard practice of the Navistar Group; and (v) which finances a
new or used medium or heavy-duty truck, bus or trailer produced by or for a
member of the Navistar Group or an OEM Supplier.
CERTAIN REPRESENTATIONS AND WARRANTIES; INELIGIBLE DEALER NOTES; PURCHASE OF
CERTIFICATEHOLDERS' INTEREST
The Seller has made and will make certain representations and warranties to the
Active Trust (as of the date of the Applicable Agreement, as of the Closing
Date, and as of the date of any Acquisition or Assignment, as the case may be)
relating to the Applicable Agreement and the Dealer Notes to the effect, among
other things, that (a) each Dealer Note existing on the date of any Acquisition
or Assignment was or will have been conveyed to the Active Trust free and clear
of any lien (excluding certain permitted liens), (b) all appropriate consents
and governmental authorizations required to be obtained by the Seller in
connection with the transfer of such Dealer Notes to the Active Trust have been
obtained, (c) the Applicable Agreement or the Acquisition or Assignment, as the
case may be, constitutes either a valid transfer and assignment of the Seller's
right, title, and interest in the Dealer Notes and the proceeds thereof, or a
grant of a first priority perfected "security interest" (as such term is
defined in the Uniform Commercial Code) in such property to the Active Trust
and (d) as of the date of any Acquisition or Assignment, the Seller is not
insolvent. The Seller will not be required to remake such representations and
warranties on the 1990 Trust Termination Date with respect to Dealer Notes
previously transferred to the 1990 Trust, but any repurchase obligations under
the 1990 Trust Agreement with respect to any such Dealer Notes will survive for
the benefit of the Master Trust.
These representations and warranties survive the transfer of the Dealer Notes
to the Active Trust. In the event of a breach with respect to a Dealer Note of
any representations and warranties set forth in (a) above or in the event that
any Dealer Note is not an Eligible Dealer Note as a result of the failure to
satisfy certain eligibility requirements (as specified in the Applicable
Agreement), each such Dealer Note will be automatically removed from the Active
Trust on the terms and conditions described in the following paragraph. In the
event of a breach of any representations and warranties described in (b), (c)
or (d) in the preceding paragraph or in the event that any Dealer Note is an
not an Eligible Dealer Note as a result of the failure to satisfy certain other
eligibility requirements (as specified in the Applicable Agreement), and as a
result of such breach or event the Active Trust's rights to such Dealer Notes
are impaired, then in the event such breach or event is not cured within a
specified period, each such Dealer Note will be removed from the Active Trust
on the terms and conditions described in the following paragraph.
When removal of a Dealer Note is required pursuant to the terms described in
the preceding paragraph (any such Dealer Note being an "Ineligible Dealer
Note"), such Ineligible Dealer Note will be automatically removed from the
Active Trust and the principal balance of such Ineligible Dealer Note will be
deducted from the prior principal balance of Dealer Notes in the Active Trust.
The Seller will deposit in the Collections Account within two business days of
its removal an amount equal to the principal amount of such Ineligible Dealer
Note plus accrued but unpaid finance charges thereon.
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Such deposit will be considered a payment in full of the Ineligible Dealer Note
and will be applied as Principal Collections. Upon each removal of an
Ineligible Dealer Note from the Active Trust, the Active Trustee will be deemed
to transfer to the Seller, without recourse, representation or warranty (except
for the warranty that since the date of transfer by the Seller under the
Applicable Agreement the Active Trustee has not sold, transferred, or encumbered
such Ineligible Dealer Note), all right, title, and interest of the Master Trust
in and to such Ineligible Dealer Note and all proceeds thereof. The provisions
described in this paragraph and the immediately preceding paragraph will
constitute the sole remedy for any breach of the representations and warranties
described above.
The Seller also has made and will make representations and warranties to the
1990 Trust and the Master Trust to the effect, among other things, that as of
the date of the Applicable Agreement and any Supplement (including the date of
the Supplement for the Offered Series), and the date of any Acquisition or
Assignment (including the 1990 Trust Termination Date), as the case may be, (a)
the 1990 Trust Agreement (and any Supplement thereto) constitutes a legal,
valid and binding obligation of the Seller (but only to the extent that the
date of any such representation and warranty occurs prior to the 1990 Trust
Termination Date), (b) the Pooling and Servicing Agreement and any Supplement
(including the Offered Series Supplement) constitutes a legal, valid and
binding obligation of the Seller, (c) each Acquisition and Assignment
constitutes a legal, valid and binding obligation of the Seller and (d)
Schedule 1 or any update thereto, as the case may be, is and will be an
accurate and complete listing in all material respects of all Dealer Notes as
of the Closing Date, each Series Issuance Date, the 1990 Trust Termination
Date, and the date of Acquisition or Assignment, as the case may be. Each such
representation and warranty survives the transfer of the Dealer Notes to the
Active Trust.
In the event of any breach of any of the representations and warranties
described in the immediately preceding paragraph or if a material amount of
Dealer Notes are Ineligible Dealer Notes, and (i) prior to the 1990 Trust
Termination Date such event has a material adverse effect on the holders of
1990 Trust Investor Certificates (including the Master Trust as holder of the
Related 1990 Certificate), either the 1990 Trust Trustee, or the holders of
1990 Trust Investor Certificates evidencing fractional undivided interests
aggregating more than 50% of sum of the Class Investor Interest of all
outstanding classes of 1990 Trust Investor Certificates (the "1990 Trust Total
Investor Interest"), by written notice to the Seller (and to the 1990 Trust
Trustee and the Servicer if given by the holders of 1990 Trust Investor
Certificates), may direct the Seller to purchase all outstanding classes of
1990 Trust Investor Certificates within 60 days of such notice, or within such
longer period as may be specified in such notice or (ii) after the 1990 Trust
Termination Date such event has a material adverse effect on the
Certificateholders, either the Master Trust Trustee or Certificateholders
evidencing not less than a majority of the series invested amount for all
outstanding Series, by written notice to the Seller (and to the Master Trust
Trustee and the Servicer if given by the Certificateholders), may direct the
Seller to purchase the Certificateholders' Interest within 60 days of such
notice, or within such longer period as may be specified in such notice in each
case. The Seller will be obligated to make such purchase on a Distribution
Date occurring within such period on the terms and conditions described below.
Prior to the 1990 Trust Termination Date, the Seller will deposit in the 1990
Trust Collections Account on a Transfer Date occurring within such period the
purchase price for the 1990 Trust Investor Certificates, which will equal the
1990 Trust Total Investor Interest preceding the date such deposit is made plus
an amount equal to all accrued but unpaid 1990 Trust Investor Certificate
Interest. Payment of such purchase price will be considered a prepayment in
full of the Dealer Notes in the 1990 Trust. If the 1990 Trust Trustee or the
holders of 1990 Trust Investor Certificates give notice directing the Seller to
purchase the 1990 Trust Investor Certificates as provided above, the obligation
of the Seller to purchase the 1990 Trust Investor Certificates pursuant to this
paragraph will constitute the sole remedy respecting an event of the type
specified in the first sentence of the preceding paragraph available to the
holders of 1990 Trust Investor Certificates (including the Master Trust as
holder of the Related 1990 Certificate), and an Investment Event would occur
under the Master Trust.
After the 1990 Trust Termination Date, in the event of any such breach, an
Investment Event will occur and, upon receipt of the notice described above,
the Seller will deposit in the Collections Account on a Transfer Date occurring
within such period the purchase price for each outstanding Series of
certificates, which, with respect to the Offered Series, will equal the
Invested Amount plus all accrued interest thereon. The purchase price payable
with respect to the Offered Certificates will be allocated to the Offered
Series and deposited in and held in the Series Principal Account until the
Expected Payment Date. See "Description of the Offered
Certificates--Investment Events."
Notwithstanding the foregoing, no purchase pursuant to the provisions described
above will be required, and no Investment Event will occur under the Master
Trust, if during such period the representations and warranties described
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above shall be satisfied in all material respects or there shall no longer be a
material amount of Ineligible Dealer Notes, as the case may be, and any
material adverse effect on the holders of 1990 Trust Investor Certificates or
the Certificateholders, as the case may be, caused thereby shall have been
cured.
If an insolvency event occurs with respect to the Seller, NITC, NIC or NFC, on
the day of such insolvency event, the Seller will (subject to the actions of
the Certificateholders) immediately cease to transfer Dealer Notes to the
Active Trust and promptly give notice to the Master Trust Trustee of such
insolvency event. Under the terms of the Pooling and Servicing Agreement, if
an insolvency event occurs with respect to the Seller after the 1990 Trust
Termination Date but prior to the date on which the Series 1995-1 investor
certificates issued by the Master Trust have been paid in full, then within 15
days the Master Trust Trustee will publish a notice of such insolvency event
stating that the Master Trust Trustee intends to sell, liquidate or otherwise
dispose of the Dealer Notes in a commercially reasonable manner and on
commercially reasonable terms, unless within a specified period of time
Certificateholders representing more than 50% of the aggregate series invested
amount of the certificates of each such Series and each person holding a
Supplemental Certificate, instruct the Master Trust Trustee not to sell,
dispose of or otherwise liquidate the Dealer Notes and to continue transferring
Dealer Notes as before such insolvency event. If the portion of such proceeds
allocated to the Offered Certificateholders' Interest and the proceeds of any
collections on the Dealer Notes in the Collections Account allocable to the
Offered Certificateholders' Interest are not sufficient to pay the unpaid
Invested Amount in full plus accrued and unpaid interest thereon, Offered
Certificateholders will incur a loss.
Neither the 1990 Trust Trustee or the Master Trust Trustee has made, nor is it
required or anticipated that the Active Trustee will make, any initial or
periodic general examination of the Dealer Notes or any records relating to the
Dealer Notes for the purpose of establishing the presence or absence of
defects, compliance with representations and warranties of the Seller or for
any other purpose. In addition, neither the 1990 Trust Trustee or the Master
Trust Trustee has made, nor is it anticipated or required that the Active
Trustee will make, any initial or periodic general examination of the Servicer
for the purpose of establishing the compliance by the Servicer with its
representations or warranties, the observation of its obligations under the
1990 Trust Agreement or the Pooling and Servicing Agreement, or for any other
purpose.
DUE PERIODS; DISTRIBUTION PERIODS
Each Applicable Agreement uses the related concepts of "Due Periods" and
"Distribution Periods" as units of time. Each "Due Period" is a calendar
month, beginning on the first day of such month and ending on the last day of
such month. Each Due Period has a related Distribution Date and Distribution
Period. The "Distribution Date" related to a Due Period is the twenty-fifth
day of the calendar month (or, if such day is not a business day, the next
business day thereafter) next following the end of such Due Period. The
"Distribution Period" related to a Due Period is the approximate one-month
period which begins on the preceding Distribution Date and ends on and includes
the day immediately preceding the Distribution Date for such Due Period. Thus,
for example, the Due Period running from July 1, 1997 through July 31, 1997
will have a related Distribution Date of August 25, 1997 and a related
Distribution Period running from July 25, 1997 through but excluding August 25,
1997.
Finance Charges accrue and are collected with respect to Due Periods. Interest
on each Related 1990 Certificate and Monthly Interest, by contrast, accrue and
are paid with respect to the related Distribution Period. NFC establishes the
interest rate on Dealer Notes for a Due Period on the third Monday of the
preceding month. The rate at which interest accrues on the Related 1990
Certificate, however, is established as of the day which is two London business
days prior to the start of the Distribution Period related to such Due Period.
Similarly, the Applicable Floating Rate payable by the Master Trust to the Swap
Counterparty or the Offered Certificateholders is established as of the day
which is two London business days prior to the start of the Distribution Period
related to such Due Period. As the Distribution Period does not begin until
the twenty-fifth day of the related Due Period, the result is that the interest
rate for Dealer Notes is established more than five weeks prior to the
determination of the interest rate on the Related 1990 Certificate and the
Applicable Floating Rate.
"Finance Charges" means, with respect to any Due Period, Dealer Finance
Charges and NITC Finance Charges for such Due Period.
"Dealer Finance Charges" means, with respect to any Due Period, the interest
and other finance charges accrued with respect to the Dealer Notes during
such Due Period and billed by the Servicer on a monthly basis to Dealers.
Dealer Finance Charges do not include NITC Finance Charges.
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"NITC Finance Charges" means, with respect to any Due Period, the sum of (a)
the amount of Up-Front Interest Credit granted by NITC during such Due Period
and (b) the amount of Aggregate NITC Earned Interest accrued during such Due
Period.
"Aggregate NITC Earned Interest" means, with respect to any Due Period, the
aggregate amount of NITC Earned Interest on all Non-Interest Bearing Dealer
Notes accrued during such Due Period.
ADVANCES
For any Due Period, the Servicer will make an advance (an "Advance") to the
1990 Trust Collections Account or the Collections Account, as the case may be,
of an amount equal to all Dealer Finance Charges for such Due Period which have
not been paid by the Transfer Date (other than Uncollectible Finance Charges)
("Unpaid Dealer Finance Charges"). Once any previously Unpaid Dealer Finance
Charges are paid on the Dealer Notes to which any portion of an Advance
relates, or when the Servicer determines that it will be unable to recover such
Unpaid Dealer Finance Charges on the Dealer Notes to which the portion of the
Advance relates, the Servicer will be reimbursed in an amount equal to such
portion of the Advance.
"Uncollectible Finance Charges" means, with respect to any Due Period, the
amount of Dealer Finance Charges that the Servicer, on or before the related
Determination Date, determines in its sole discretion will be uncollectible.
The reimbursement by the Active Trust to the Servicer of an Advance is referred
to herein as an "Advance Reimbursement." Prior to the 1990 Trust Termination
Date, Advance Reimbursements are funded from Dealer Finance Charge Collections
and NITC Finance Charges before they are allocated for the payment of 1990
Trust Investor Certificate Interest. After the 1990 Trust Termination Date,
Advance Reimbursements will be funded on each Transfer Date from Dealer Finance
Charge Collections and NITC Finance Charges before Finance Charge Collections
are allocated among the outstanding Series.
"Dealer Finance Charge Collections" means with respect to any Due Period the
amount of Dealer Finance Charges received from Dealers plus Advances for the
current Due Period and any Unpaid Dealer Finance Charges or Uncollectible
Finance Charges from prior Due Periods actually collected by the Transfer
Date related to such Due Period.
THE SERVICER
General. Pursuant to the terms of the Applicable Agreement, the Servicer is
authorized to service and administer the Dealer Notes and collect payments due
under the Dealer Notes in accordance with its customary and usual servicing
procedures. See "The Navistar Financial Dealer Floor Plan Financing Business"
for a description of NFC's customary and usual servicing procedures. In
addition, under each of the 1990 Trust Agreement and the Pooling and Servicing
Agreement (collectively, the "Agreements"), the Servicer is also authorized to
make withdrawals and payments from the various trust accounts under the 1990
Trust and the Master Trust (collectively the "Trusts"). Servicing activities
performed by the Servicer include collecting and recording payments,
communicating with Dealers, monitoring Dealer inventory, investigating payment
delinquencies and maintaining internal records with respect to each Dealer
Note. Managerial and custodial services performed by the Servicer include
providing assistance in any inspections of the documents and records relating
to the Dealer Notes, maintaining the agreements, documents, and files relating
to the Dealer Notes as custodian for the Active Trust, and providing related
data processing and reporting services for holders of 1990 Trust Investor
Certificates (including the Master Trust as holder of the Related 1990
Certificate), the Offered Certificateholders and on behalf of each of the 1990
Trust Trustee and the Master Trust Trustee.
Servicing Compensation and Payment of Expenses. As compensation for its
servicing activities and reimbursement for its expenses under the 1990 Trust
Agreement, the Servicer will be entitled to receive a servicing fee payable in
arrears equal to 1.0% per annum (calculated on the basis of a 360-day year and
twelve 30-day months) of the daily average principal amount of Dealer Notes,
which will be payable by the 1990 Trust monthly in respect of any Due Period on
each Distribution Date (the "1990 Trust Monthly Servicing Fee"). The 1990
Trust Monthly Servicing Fee is allocable to the holders of 1990 Trust Investor
Certificates for such Due Period in an amount equal to the product of the 1990
Trust Monthly Servicing Fee for the related Due Period and the 1990 Trust Total
Investor Percentage for such Due Period, and the remaining portion of the 1990
Trust Monthly Servicing Fee will be allocable to the 1990 Trust Seller
Interest.
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"1990 Trust Total Investor Percentage" means, with respect to any Due Period,
the percentage equivalent of a fraction the numerator of which is the 1990
Trust Total Investor Interest at the beginning of such Due Period, and the
denominator of which is the sum of the 1990 Trust Total Investor Interest at
the beginning of such Due Period plus a number equal to the average daily
1990 Trust Seller Interest calculated for such Due Period.
With respect to each Due Period commencing after the 1990 Trust Termination
Date, the Servicer will be entitled to receive a servicing fee in respect of
each day prior to the termination of the Master Trust, payable in arrears, on
the related Distribution Date. The "Servicing Fee" shall be the aggregate of
the fees payable with respect to all outstanding Series (including the Offered
Series). The portion of the Servicing Fee payable with respect to the Offered
Series will be set forth in the Prospectus Supplement (the "Series Allocable
Servicing Fee"). Unless otherwise specified in the Prospectus Supplement, the
Series Allocable Servicing Fee will be allocated to the Offered
Certificateholders based on the Floating Allocation Percentage (such allocated
portion being referred to herein as the "Offered Series Servicing Fee"); the
remainder of the Series Allocable Servicing Fee will be allocated to the
holders of the Master Trust Seller's Certificates. See "Description of Offered
Certificates--Allocation of Collections After the 1990 Trust Termination Date."
The Servicer is obligated to pay certain expenses incurred in connection with
servicing the Dealer Notes, including expenses related to the payment of fees
and disbursements of the 1990 Trust Trustee and the Master Trust Trustee
(collectively, the "Trustees"), the Special Servicer Agent and independent
accountants and all other fees and expenses of the Trusts not expressly stated
in the Agreements to be for the account of the holders of certificates issued
by the Trusts, other than federal, state, or local income or franchise taxes,
if any, of the Trusts, the Trustees, or such holders. The Servicer will be
required to pay such expenses for its own account and will not be entitled to
any payment therefor other than the 1990 Trust Monthly Servicing Fee or the
Servicing Fee, as the case may be.
Servicer Covenants. Under the terms of the Applicable Agreement, the Servicer
covenants, among other things, that (a) it will not change the Credit
Guidelines, nor will it change its current practices with respect to the
recognition of estimated or actual loss on Dealer Notes (subject in each case
to certain materiality standards), (b) so long as any Series or 1990 Trust
Investor Certificate is outstanding, it will maintain casualty loss insurance
on the Financed Vehicles substantially similar to that maintained by the
Servicer on the Closing Date for the Offered Series and (c) if required to
select certain Dealer Notes from the Dealer Notes issued by a particular Dealer
in order to satisfy the Concentration Limit, it will select such Dealer Notes
in a manner that will not be adverse to the rights of the holders of
certificates issued by the Active Trust.
Certain Matters Regarding the Servicer. NFC may not resign from its
obligations and duties as Servicer under the Agreements, except upon a
determination that such duties are no longer permissible under applicable law.
No such resignation will become effective until the Trustees or a successor
Servicer has assumed the Servicer's responsibilities and obligations under the
Agreements.
Any person into which, in accordance with the Agreements, NFC may be merged or
consolidated or any person resulting from any merger or consolidation to which
NFC is a party, or any person succeeding to the business of NFC, upon execution
of a supplement to each of the Agreements (pursuant to which such person will
assume the rights and obligations of the Servicer under the Agreements) will be
the successor to NFC as the Servicer under the Agreements.
1990 Trust Servicer Termination Event. Prior to the 1990 Trust Termination
Date, in the event of any 1990 Trust Servicer Termination Event and so long as
the 1990 Trust Servicer Termination Event shall not have been remedied, either
the 1990 Trust Trustee or holders of 1990 Trust Investor Certificates
evidencing fractional undivided interests aggregating not less than 51% of the
sum of the Class Invested Amounts for each class of 1990 Trust Investor
Certificates outstanding during the Distribution Period calculated as of the
beginning of the Distribution Period (the "1990 Trust Total Invested Amount"),
by written notice to NFC as Servicer (and to the 1990 Trust Trustee if given by
the holders of 1990 Trust Investor Certificates), may terminate all of the
rights and obligations of NFC as Servicer under the 1990 Trust Agreement. If
NFC is terminated as Servicer under the terms of the 1990 Trust Agreement, then
NFC shall automatically be terminated under the Pooling and Servicing Agreement
without any action on the part of the Master Trust Trustee or the
Certificateholders.
After the 1990 Trust Termination Date, in the event of any Master Trust
Servicer Termination Event and for so long as the Master Trust Servicer
Termination Event shall not have been remedied, the Master Trust Trustee, by
written notice
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to the Servicer, may terminate all of the rights and obligations of NFC as
Servicer under the Pooling and Servicing Agreement.
Upon the occurrence of any such event, the Active Trustee will as promptly as
possible appoint a successor Servicer (to whom all authority and power of the
Servicer under each of the Agreements will pass and be vested in), and, if no
successor Servicer has been appointed by the Active Trustee and accepted its
appointment by the time NFC ceases to act as Servicer, all authority, power,
and obligations of NFC as Servicer under the Agreements will pass to and be
vested in the 1990 Trust Trustee with respect to the 1990 Trust and the Master
Trust Trustee with respect to the Master Trust.
A "1990 Trust Servicer Termination Event" refers to any of the following events
which shall occur:
(a) failure by NFC as Servicer to make any payment, transfer or deposit, or
failure to give instructions to the 1990 Trust Trustee regarding the same, on
the date it is required to do so under the 1990 Trust Agreement (or within
five business days thereafter);
(b) failure on the part of NFC as Servicer duly to observe or perform in any
material respect any other covenants or material agreements of the Servicer
set forth in the 1990 Trust Agreement which continues unremedied for a period
of 60 days after written notice is received by the Servicer from the 1990
Trust Trustee or by the Servicer and the 1990 Trust Trustee from the holders
of 1990 Trust Investor Certificates evidencing fractional undivided interests
aggregating not less than 25% of the 1990 Trust Total Invested Amount;
(c) any representation, warranty or certification made by NFC as Servicer in
the 1990 Trust Agreement or in any certificate delivered pursuant to the 1990
Trust Agreement proves to have been incorrect when made, which has a material
adverse effect on the rights of the holders of 1990 Trust Investor
Certificates, and which representation, warranty or certification, or the
circumstances or condition which caused such representation, warranty or
certification to be incorrect, continues to be incorrect or uncured in any
material respect for a period of 60 days after written notice is received by
the Servicer from the 1990 Trust Trustee or by the Servicer and the 1990
Trust Trustee from the holders of 1990 Trust Investor Certificates evidencing
fractional undivided interests aggregating not less than 25% of the 1990
Trust Total Invested Amount; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of NFC while acting as Servicer under the 1990 Trust Agreement.
A "Master Trust Servicer Termination Event" refers to any of the following
events which shall occur:
(a) failure by NFC as Servicer to make any payment, transfer or deposit, or
failure to give instructions to the Master Trust Trustee regarding the same,
on the date it is required to do so under the Pooling and Servicing Agreement
(or within five business days thereafter);
(b) failure on the part of NFC as Servicer duly to observe or perform in any
material respect any other covenants or material agreements of the Servicer
set forth in the Pooling and Servicing Agreement which continues unremedied
for a period of 60 days after written notice is received by the Servicer from
the Master Trust Trustee;
(c) any representation, warranty or certification made by NFC as Servicer in
the Pooling and Servicing Agreement or in any certificate delivered pursuant
to the Pooling and Servicing Agreement proves to have been incorrect when
made, which has a material adverse effect on the rights of the holders of
investor certificates, and which representation, warranty or certification,
or the circumstances or condition which caused such representation, warranty
or certification to be incorrect, continues to be incorrect or uncured in any
material respect for a period of 60 days after written notice is received by
the Servicer from the Master Trust Trustee; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of NFC while acting as Servicer under the Pooling and Servicing
Agreement.
Upon the occurrence of any 1990 Trust Servicer Termination Event, the Servicer
will give prompt written notice thereof to the 1990 Trust Trustee, and the 1990
Trust Trustee will give notice to the holders of the 1990 Trust Investor
Certificates. If the Master Trust Trustee receives any such notice in respect
of any 1990 Trust Investor Certificate issued to the Master Trust (including
the Related 1990 Certificate), the Master Trust Trustee will give notice to the
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Certificateholders (including the Offered Certificateholders) and to any
Enhancement Provider. Upon any termination or appointment of a successor
Servicer under the 1990 Trust, the 1990 Trust Trustee will give prompt written
notice thereof to the Rating Agencies and to holders of 1990 Trust Investor
Certificates. If the Master Trust Trustee receives any such notice in respect
of any 1990 Trust Investor Certificate issued to the Master Trust (including
the Related 1990 Certificate), the Master Trust Trustee will give notice to the
Certificateholders (including the Offered Certificateholders, the Rating
Agencies then rating such certificates and any Enhancement Provider). Under
the 1990 Trust Agreement, the holders of 1990 Trust Investor Certificates
evidencing fractional undivided interests aggregating not less than 51% of the
1990 Trust Total Invested Amount may, on behalf of all holders of 1990 Trust
Investor Certificates, waive the effect of any 1990 Trust Servicer Termination
Event occurring during such period, except for the failure to make any required
deposits or payments in accordance with the 1990 Trust Agreement.
Upon the occurrence of a Master Trust Servicer Termination Event, the Servicer
will give prompt written notice thereof to the Master Trust Trustee, and the
Master Trust Trustee will give notice to the Certificateholders and to any
Enhancement Provider. Upon any termination or appointment of a successor
Servicer under the Master Trust, the Master Trust Trustee will give prompt
written notice thereof to the Rating Agencies, the Certificateholders, and any
Enhancement Provider. In addition, under the Pooling and Servicing Agreement,
delays in performance for 10 business days with respect to clause (a) above or
60 business days with respect to clauses (b) and (c) above will not constitute
a Master Trust Servicer Termination Event with respect to the Master Trust if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Servicer and such delay or failure was caused by an act of God
or the public enemy, acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. Under the Pooling and Servicing
Agreement, the holders of 1990 Trust Investor Certificates evidencing
fractional undivided interests in the Master Trust aggregating not less than
51% of the Trust Invested Amount may, on behalf of all holders of Investor
Certificates, waive the effect of any Master Trust Servicer Termination Event
occurring during such period, except for the failure to make any required
deposits or payments in accordance with the Pooling and Servicing Agreement.
Special Servicer Agent. During any Investment Period, funds on deposit in the
Series Principal Account, the Distribution Account, the Liquidity Reserve
Account, the Negative Carry Reserve Fund and the Spread Account will be
invested at the direction of an agent selected by the Servicer, which initially
will be the Master Trust Trustee (the "Special Servicer Agent"), in Eligible
Investments selected by the Special Servicer Agent. The Special Servicer Agent
will be compensated by the Servicer.
The Special Servicer Agent may be removed at any time by the Servicer; provided
that no removal of the Special Servicer Agent shall be effective until a
successor person meeting the criteria and approved as described above shall
have been appointed as the Special Servicer Agent and shall have accepted its
appointment as such and the Rating Agency Condition for the Offered Series
shall have been satisfied.
MASTER TRUST ACCOUNTS; OTHER ACCOUNTS FOR THE OFFERED SERIES
The Master Trust Trustee will establish and will maintain two Eligible Deposit
Accounts in the name of the Master Trust Trustee for the benefit of the
Certificateholders, including the Offered Certificateholders (one of which will
be the "Collections Account" and the other of which will be the "Excess Funding
Account"). The Master Trust Trustee will also establish and maintain in the
name of the Master Trust Trustee for the benefit of the Offered
Certificateholders the Series Principal Account, the Spread Account and an
Eligible Deposit Account known as the "Distribution Account" from which
distributions to the Offered Certificateholders will be made.
"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 or any one of the states thereof (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 has a credit rating from each Rating Agency in one of
its generic rating categories which signifies investment grade.
"Eligible Institution" means (a) the corporate trust department of the Master
Trust Trustee or (b) a depository institution organized under the laws of the
United States or any one of the states thereof, or the District of Columbia
(or a domestic branch of a foreign bank), which at all times (i) has either
(x) a long-term unsecured debt rating acceptable to the Rating Agencies or
(y) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies and (ii) whose deposits are insured by the
FDIC.
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Funds in the Collections Account, the Excess Funding Account, the Distribution
Account, the Series Principal Account, the Liquidity Reserve Account and the
Spread Account generally will be invested in Eligible Investments. The
Distribution Account, the Series Principal Account, the Spread Account, the
Negative Carry Reserve Fund and the Liquidity Reserve Account are referred to
herein as the "Series Accounts."
The following investments are "Eligible Investments" (except that Eligible
Investments shall not include investments in securities, instruments or
obligations of the Seller, NITC or the Servicer or any of their affiliates,
except as permitted by the Rating Agencies):
(a) book-entry securities, negotiable instruments or securities represented
by instruments in bearer or registered form having (except in the case of
clause (iv) below) remaining maturities occurring not later than the
Distribution Date next succeeding the Master Trust Trustee's acquisition
thereof, except as otherwise described herein, which evidence:
(i) direct obligations of, and obligations fully guaranteed as to timely
payment by, the United States of America;
(ii) demand deposits, time deposits or certificates of deposit of, or
bankers' acceptances issued by, any depositary 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 Master
Trust's investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other
than such obligations the rating of which is based on the credit of a
person or entity other than such depository institution or trust company)
thereof shall have a credit rating from each of the Rating Agencies in the
highest investment category granted thereby;
(iii) commercial paper having, at the time of the Master Trust's
investment or contractual commitment to invest therein, a rating from each
of the Rating Agencies in the highest investment category granted thereby;
(iv) except during an Investment Period, investments in money market funds
having a rating from each of the Rating Agencies in the highest investment
category granted thereby or otherwise approved in writing thereby;
(v) repurchase obligations (x) 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) a depository institution or trust
company (acting as principal) described in clause (ii) or (B) a depository
institution or trust company the deposits of which are insured by FDIC or
(y) the counterparty for which has a rating from each of the Rating
Agencies in the highest investment category for short-term unsecured debt
obligations, the collateral for which is held by a custodial bank for the
benefit of the Trust or the Indenture Trustee, is marked to market daily
and is maintained in an amount that exceeds the amounts of such repurchase
obligation, and which requires liquidation of the collateral immediately
upon the amount of such collateral being less than the amount of such
repurchase obligation (unless the counterparty immediately satisfies the
repurchase obligation upon being notified of such shortfall); and
(vi) commercial paper master notes where the issuer has, at the time of
the Master Trust's investment or contractual commitment to invest therein,
a rating from each of the Rating Agencies in the highest investment
category for short-term unsecured debt obligations; and
(b) any other investment consisting of a financial asset that by its terms
converts to cash within a finite period of time, provided that the Rating
Agency Condition is satisfied.
Eligible Investments of funds in the Series Principal Account, the Excess
Funding Account, the Negative Carry Reserve Fund and the Liquidity Reserve
Account will be subject to the following additional restrictions: (x) no more
than 20% of the aggregate Eligible Investments in all of such accounts
collectively shall be obligations of or investments in any single issuer
(except that such 20% limitation shall not apply to Eligible Investments of the
type specified in clause (a)(i)) and (y) each Eligible Investment shall be
denominated and be payable solely in U.S. dollars, shall bear interest at a
specified rate that is, or is based upon, London interbank offered rate or a
commercial paper rate, shall entitle the holder
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to a fixed principal amount at maturity and shall have a yield that is not
inversely or disproportionately affected by changes in interest rates.
"Rating Agency Condition" means, with respect to any proposed action and any
outstanding Series, that the Rating Agencies have been informed of such
proposed action and have notified the Seller and the Master Trust Trustee
that such action will not result in a reduction or withdrawal of their then
existing rating of such Series.
"Rating Agencies" means, with respect to any outstanding Series, any
nationally recognized statistical rating organization then maintaining a
rating of such Series at the request of the Seller.
Any earnings (net of losses and investment expenses) on funds in the
Collections Account or the Excess Funding Account will be credited to the
Collections Account or the Excess Funding Account, respectively.
The Servicer will have the power to designate specific investments as well as
the revocable power to instruct the Master Trust Trustee to (1) make
withdrawals and payments from the Collections Account and the Excess Funding
Account, (2) make withdrawals from the Series Principal Account and the Spread
Account (and, in accordance with instructions from the Servicer, make deposits
of funds so withdrawn into the Distribution Account or otherwise apply such
funds in accordance with such instructions), and (3) make withdrawals and
distributions from the Distribution Account, in each case for the purpose of
carrying out its duties under the Pooling and Servicing Agreement. The
Servicer may select an appropriate agent as representative of the Servicer for
the purpose of designating such investments. The Servicer is not required to
reimburse the Master Trust for any losses occurring on Eligible Investments.
EXCESS FUNDING ACCOUNT
On each business day after the 1990 Trust Termination Date and prior to the
Fully Funded Date, Principal Collections not used for other purposes will be
retained in the Excess Funding Account to the extent necessary to maintain the
Master Trust Seller's Interest at an amount equal to (or, in the discretion of
the Seller, greater than) the Minimum Master Trust Seller's Interest. Funds on
deposit in the Excess Funding Account will be invested in Eligible Investments.
Upon the maturity of Eligible Investments, the proceeds thereof in the Excess
Funding Account shall be treated as Principal Collections.
"Master Trust Seller's Interest" with respect to any business day after the
1990 Trust Termination Date will equal the aggregate principal amount of
Dealer Notes plus the aggregate principal amount of funds in the Excess
Funding Account, plus the aggregate amount of funds in all series principal
accounts (and funds being held for deposit therein), including the Series
Principal Account, each as of such day, minus the Master Trust Invested
Amount on such day (or as of the Distribution Date on or immediately
preceding such business day).
"Minimum Master Trust Seller's Interest" with respect to any business day
after the 1990 Trust Termination Date will equal the aggregate of the minimum
series seller's interest for each outstanding Series. The minimum series
seller's interest for the Offered Series (the "Minimum Series Seller's
Interest") will be set forth in the Prospectus Supplement.
NEGATIVE CARRY RESERVE FUND
The Master Trust Trustee will establish and maintain in the name of the Master
Trust Trustee an Eligible Deposit Account for the benefit of the Offered
Certificateholders and the Swap Counterparty (the "Negative Carry Reserve
Fund"). Funds in the Negative Carry Reserve Fund will be invested in Eligible
Investments. On each Transfer Date related to a Due Period commencing prior to
the 1990 Trust Termination Date and occurring during any Investment Period or
any Early Amortization Period, Related 1990 Certificate Collections, Investment
Income and Net Swap Receipts will be deposited in the Negative Carry Reserve
Fund to the extent of the Negative Carry Reserve Fund Deposit Amount as
provided under "Description of the Offered Certificates -- Allocation of
Collections Prior to the 1990 Trust Termination Date." After the 1990 Trust
Termination Date and during the Accumulation Period, any Investment Period or
any Early Amortization Period, Available Seller's Finance Charge Collections
and Available Seller's Principal Collections will be deposited in the Negative
Carry Reserve Fund to the extent of the Negative Carry Reserve Fund Deposit
Amount as provided under "Description of the Offered Certificates -- Allocation
of Collections After the 1990 Trust Termination Date."
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The "Negative Carry Reserve Fund Required Amount" equals (a) for any Transfer
Date prior to the Fully Funded Date, the amount designated in the Prospectus
Supplement and (b) for each Transfer Date after the Fully Funded Date, zero.
The "Negative Carry Reserve Fund Deposit Amount" equals, for any Transfer
Date, the excess, if any, of (a) the lesser of (i) the Negative Carry Reserve
Fund Required Amount for such Transfer Date and (ii) the result of (A) the
Negative Carry Subordinated Amount as of the end of the preceding Transfer
Date divided by (B) 1.00 plus the Subordinated Percentage over (b) the amount
of funds on deposit in the Negative Carry Reserve Fund on such Transfer Date
(after giving effect to any withdrawals therefrom on such date).
Offered Certificateholders will not have any rights to amounts on deposit in
the Negative Carry Reserve Fund or interest income thereon, except as described
herein. Upon the payment in full of the Invested Amount, any funds remaining
on deposit in the Negative Carry Reserve Fund will be paid to the Seller.
INTEREST RATE SWAP
In connection with the issuance of the Offered Certificates, the Master Trust
may enter into an Interest Rate Swap with the Swap Counterparty. The "Swap
Counterparty" and other terms relating to the Interest Rate Swap will be more
fully described in the Prospectus Supplement. If the Master Trust does enter
into an Interest Rate Swap, all terms and provisions described herein relating
to the Interest Rate Swap, including the defined terms "Swap Counterparty,"
"Swap Fixed Rate," "Swap Floating Rate," "Swap Receipt," "Swap Payment," "Net
Swap Receipt" and "Net Swap Payment," will apply and be operative. If the
Master Trust does not enter into an Interest Rate Swap, such terms and
provisions, as well as paragraphs (x) and (y) under "--Allocation of
Collections After the 1990 Trust Termination Date--Available Certificateholder
Interest Collections," will not be operative (unless otherwise specified in the
Prospectus Supplement for the Offered Series).
In accordance with the terms of the Interest Rate Swap, the Swap Counterparty
will be obligated to pay to the Master Trust, not later than each Distribution
Date, interest at a fixed rate per annum (the "Swap Fixed Rate") on the
Invested Amount as of the preceding Distribution Date (after giving effect to
all distributions on such date). In exchange for such payments, the Master
Trust will be obligated to pay to the Swap Counterparty, on each Distribution
Date, interest at a floating rate per annum based on LIBOR (the "Swap Floating
Rate") on the Invested Amount as of the preceding Distribution Date (after
giving effect to all distributions on such date). Under the Interest Rate
Swap, the amount the Master Trust is obligated to pay will be netted against
the amount the Swap Counterparty is obligated to pay such that only the Net
Swap Payment will be due from the Master Trust or the Net Swap Receipt will be
due from the Swap Counterparty, as the case may be. Net Swap Receipts (money
owed by the Swap Counterparty) will be paid to the Collections Account not
later than each Distribution Date and distributed in the same manner as Related
1990 Certificate Interest Collections on each Distribution Date related to a
Due Period commencing prior to the 1990 Trust Termination Date, and on each
Distribution Date thereafter in the same manner as Offered Series Finance
Charge Collections, except as otherwise described herein, and Net Swap Payments
(money owed to the Swap Counterparty) will be paid not later than each
Distribution Date out of Related 1990 Certificate Interest Collections and
Investment Income prior to the 1990 Trust Termination Date, and thereafter out
of Available Certificateholder Interest Collections, excess interest
collections from other Series allocable to the Offered Series, Available Draw
Funds and withdrawals from the Negative Carry Reserve Fund to the extent
described herein. Net Swap Payments and Monthly Interest on the Offered
Certificates will be paid on a pari passu basis as described under "Description
of the Offered Certificates--Distributions to Certificateholders and the Swap
Counterparty." The notional principal amount of the Interest Rate Swap will be
equal to the Invested Amount.
1990 TRUST TERMINATION DATE
Prior to the 1990 Trust Termination Date, the principal assets held by the
Master Trust will be the Class A-4 Investor Certificate, each Related 1990
Certificate, any Subsequent 1990 Trust Investor Certificate, any associated
Interest Rate Swap and the 1990 Trust Seller Certificate. Each Related 1990
Certificate will bear interest at a rate intended to provide sufficient cash
flows to make required payments of interest on the Offered Certificates or on
an associated Interest Rate Swap and will have an invested amount intended to
be sufficient, in the event of early amortization of the 1990 Trust, to repay
the Invested Amount on the Offered Certificates or, in the event that such
amortization event constitutes an Investment Period with respect to the Offered
Certificates, to fund the Series Principal Account and the Negative Carry
Reserve Fund. As described in more detail herein, prior to the 1990 Trust
Termination Date the 1990 Trust will be the
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Active Trust and will hold the Dealer Notes and certain related assets and
receive and allocate the collections and losses thereon to holders of the 1990
Trust Investor Certificates, including the Master Trust as holder of each
Related 1990 Certificate. During this time, the Master Trust will be
essentially a passive entity in which Collections received on each Related 1990
Certificate and Net Swap Receipts will be used to make Net Swap Payments and
payments to Certificateholders, including the Offered Certificateholders.
Following the 1990 Trust Termination Date, the Master Trust will become the
Active Trust. As described in more detail herein, the Dealer Notes and other
assets held by the 1990 Trust will be transferred to the Master Trust, and the
Master Trust will thereafter receive and allocate the Collections thereon to
Certificateholders, including Offered Certificateholders.
"1990 Trust Termination Date" means the close of business on the date, which
will be given retroactive effect, which is the last day of the Due Period
related to the Distribution Date on which the Class Invested Amount of each
of the Class A-1, A-2 and A-3 Investor Certificates is reduced to zero. In
the absence of a 1990 Trust Amortization Event, the 1990 Trust Termination
Date will occur following the repayment of the Class Invested Amount for the
Class A-3 Investor Certificates issued by the 1990 Trust, which repayment
will commence on the first Distribution Date following the Due Period
commencing December 1, 1998, which is the Scheduled Class Amortization Date
for the Class A-3 Investor Certificates.
ALLOCATION OF COLLECTIONS PRIOR TO THE 1990 TRUST TERMINATION DATE
Collections. On each Distribution Date related to a Due Period commencing
prior to the 1990 Trust Termination Date, the Servicer will deposit, or direct
the 1990 Trust Trustee to deposit, all Related 1990 Certificate Collections due
to the Master Trust as holder of the Related 1990 Certificate into the
Collections Account but only to the extent of the aggregate amount of
Collections required to be deposited into each Series Account or, without
duplication, distributed on such Distribution Date to Certificateholders, to
any Swap Counterparty or to any other Enhancement Provider pursuant to the
terms of any Supplement or any agreement governing the terms of any Enhancement
(an "Enhancement Agreement"). If at any time prior to such Distribution Date
the amount of Collections deposited in the Collections Account exceeds the
amount required to be deposited, the Servicer will be permitted to withdraw the
excess from the Collections Account.
"Collections" shall mean (a) prior to the 1990 Trust Termination Date,
amounts distributed by the 1990 Trust to the Master Trust as holder of any
1990 Trust Investor Certificate issued to and held by the Master Trust and
(b) after the 1990 Trust Termination Date, NITC Finance Charges, Dealer
Finance Charge Collections and Principal Collections.
Allocations. On each Distribution Date related to a Due Period commencing
prior to the 1990 Trust Termination Date, all Related 1990 Certificate
Collections and Investment Income will be allocated to the Offered Series.
"Investment Income" means, for any Distribution Period, the sum of (a) income
from the investment of funds on deposit in the Series Principal Account, the
Spread Account, the Distribution Account and the Negative Carry Reserve Fund
and (b) the Series Allocation Percentage of income from the investment of
funds on deposit in the Collections Account and the Excess Funding Account.
On each Transfer Date related to a Due Period commencing prior to the 1990
Trust Termination Date, Related 1990 Certificate Interest Collections for such
Due Period and Investment Income and any Net Swap Receipts for the related
Distribution Period will be applied in the following amounts and in the
following order of priority:
(a) On a pro rata basis between clauses (i) and (ii), (i) an amount equal
to (A) Monthly Interest for such Distribution Period, plus (B) Monthly
Interest for any prior Distribution Period to the extent that such
amount has not previously been distributed to the Offered
Certificateholders on a prior Distribution Date, plus (C) to the extent
permitted by law, additional interest at the Offered Certificate Rate
for such Distribution Period that has accrued on the aggregate of any
Monthly Interest previously due but not distributed and (ii) an amount
equal to the Net Swap Payment, if any, for such Distribution Period
(plus any Net Swap Payments for any prior Distribution Period, and
interest thereon, to the extent that such amount has not been previously
distributed to the Swap Counterparty on a prior Distribution Date), will
be deposited into the Distribution Account.
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(b) During any Early Amortization Period or any Investment Period, an
amount equal to the Negative Carry Reserve Fund Deposit Amount shall be
deposited in the Negative Carry Reserve Fund.
Any Related 1990 Certificate Interest Collections, Investment Income or Net
Swap Receipts remaining after the applications described in paragraphs (a) and
(b) above shall be allocated and paid to the Seller.
If, during any Investment Period or Early Amortization Period prior to the 1990
Trust Termination Date, Related 1990 Certificate Interest Collections for such
Due Period and Investment Income and Net Swap Receipts for the related
Distribution Period are insufficient to make the applications described in
clause (a) above, the Master Trust Trustee shall withdraw funds from the
Negative Carry Reserve Fund and apply such funds in the same manner as Related
1990 Certificate Interest Collections pursuant to clause (a) above. The
Negative Carry Subordinated Amount shall be reduced by the product of (i) the
amount so applied and (ii) 1.00 plus the Subordinated Percentage.
On each Transfer Date related to a Due Period commencing prior to the 1990
Trust Termination Date and occurring during a Class Amortization Period with
respect to the Related 1990 Certificate (which will result in the occurrence of
either an Early Amortization Event or an Investment Event as described herein),
Related 1990 Certificate Principal Collections for such Due Period will be
allocated pro rata between the Series Principal Account to the extent of the
Invested Amount and the Negative Carry Reserve Fund to the extent of the
Negative Carry Reserve Fund Deposit Amount. Any remaining Related 1990
Certificate Principal Collections shall be paid to the Seller.
ALLOCATION OF COLLECTIONS AFTER THE 1990 TRUST TERMINATION DATE
Collections. After the 1990 Trust Termination Date, the Servicer will deposit
all Principal Collections into the Collections Account within two business days
of receipt thereof. With respect to each Due Period commencing after the 1990
Trust Termination Date, on a business day no earlier than the second business
day following the end of that Due Period but no later than the fifth business
day following the end of that Due Period (each a "NITC Interest Transfer
Date"), the Servicer will direct the Master Trust Trustee to withdraw from the
Interest Deposit Account and deposit in the Collections Account an amount equal
to the NITC Finance Charges for the immediately preceding Due Period (see
"Relationship with NITC--Interest Deposit Agreements; Interest Deposit
Accounts"). In addition, the Servicer will deposit all Dealer Finance Charge
Collections in the Collections Account within two business days of receipt
thereof, net of any Dealer Finance Charge Collections that represent Advance
Reimbursements. Finally, the Servicer will deposit any Advance for the Due
Period in the Collections Account on or before the Transfer Date (see
"Description of Offered Certificates--Advances").
Notwithstanding the foregoing, if NFC achieves and maintains an acceptable
short term rating from the Rating Agencies then rating each outstanding Series
or if the Rating Agency Condition with respect to each outstanding Series has
been satisfied, the Servicer may make a single deposit in the Collections
Account in same-day or next-day funds not later than 12:00 noon, New York City
time, on the Transfer Date in a net amount equal to the amount which would have
been on deposit with respect to the immediately preceding Due Period in the
Collections Account. In addition, the Servicer will only be required to
deposit Collections into the Collections Account up to the aggregate amount of
Collections required to be deposited into each Series Account or, without
duplication, distributed on the related Distribution Date to Certificateholders
or to any Swap Counterparty or any person providing any other Enhancement
(other than the Certificateholders or the holders of any Master Trust Seller's
Certificates) (an "Enhancement Provider") pursuant to the terms of any
Supplement or Enhancement Agreement, and if at any time prior to such
Distribution Date the amount of Collections deposited in the Collections
Account exceeds the amount required to be deposited the Servicer will be
permitted to withdraw the excess from the Collections Account.
Allocations Among Series--Principal Collections. On each business day prior to
the Fully Funded Date, the Servicer will allocate to each outstanding Series,
including the Offered Series, its share of Principal Collections. Allocations
to the Offered Series will be made in amounts equal to the product of the
Series Allocation Percentage for the Due Period in which such business day
occurs and the amount of Principal Collections for such business day (referred
to herein as "Series Allocable Principal Collections").
"Principal Collections" means, with respect to any business day the sum of
(a) Dealer Note Collections for such business day, (b) amounts deposited by
the Seller on such business day in respect of Ineligible Dealer Notes as
described in "-- Certain Representations and Warranties; Ineligible Dealer
Notes; Purchase of Certificateholders' Interest" and (c) prior to the 1990
Trust Termination Date, the aggregate principal amount of proceeds of
maturing
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1990 Trust Investment Securities and, after the 1990 Trust Termination Date,
the aggregate principal amount of Eligible Investments in the Excess Funding
Account maturing on such business day.
"Dealer Note Collections" means, with respect to each business day, (a) all
payments including Insurance Proceeds, if any, received by the Servicer from
persons other than NFC in respect of repayment of principal of the Dealer
Notes at one of its administrative units charged with processing funds and
recording them in the Servicer's records, in the form of cash, checks, wire
transfers or other forms of payment in accordance with the Dealer Agreement
in effect from time to time, (b) all cash payments made by NFC or NITC in
respect of non-cash proceeds received from Dealers or credits granted to
Dealers by NITC with respect to the repayment of principal of the Dealer
Notes and (c) recoveries made by the Servicer allocable to the Dealer Notes,
in each case as deposited in the Collections Account on such business day.
The "Series Allocation Percentage" for the Offered Series for any Due Period
commencing after the 1990 Trust Termination Date is equal to the percentage
equivalent of a fraction, the numerator of which is the Adjusted Invested
Amount and the denominator of which is the Master Trust Adjusted Invested
Amount, in each case as of the end of the Distribution Date preceding such
Due Period (after giving effect to all payments made on such Distribution
Date).
"Invested Amount" means, with respect to any Distribution Date, the Initial
Invested Amount minus the sum of (a) the aggregate amount of payments of
principal in respect of the Offered Certificates paid to the Offered
Certificateholders on or prior to such Distribution Date, (b) the aggregate
amount of Certificateholder Charge-Offs not reimbursed on or prior to such
Distribution Date, (c) the aggregate amount of Series Principal Account
Losses on or prior to such Distribution Date and (d) the aggregate Early
Distribution Amounts made on or prior to such Distribution Date.
"Adjusted Invested Amount" means, with respect to any Distribution Date, the
Initial Invested Amount, plus the Available Subordinated Amount as of the end
of the related Transfer Date, plus the Negative Carry Subordinated Amount as
of the end of such Transfer Date, minus the product of (i) the amount, if
any, of funds on deposit in the Negative Carry Reserve Fund at the end of
such Transfer Date and (ii) 1.00 plus the Subordinated Percentage, minus the
aggregate amount of Certificateholder Charge-Offs not reimbursed on or prior
to such Distribution Date, minus the aggregate Early Distribution Amounts
made on or prior to such Distribution Date.
"Series Principal Account Losses" means losses of principal on investment of
funds in the Series Principal Account.
The "Master Trust Invested Amount" is equal to the sum of the invested
amounts for all outstanding Series.
The "Master Trust Adjusted Investment Amount" is equal to the sum of the
adjusted invested amounts for all outstanding Series.
Allocations Among Series--Finance Charge Collections and Dealer Note Losses.
Pursuant to the Pooling and Servicing Agreement, on each Transfer Date related
to a Due Period commencing after the 1990 Trust Termination Date and occurring
prior to the Fully Funded Date, the Servicer will allocate to each outstanding
Series, including the Offered Series, its share of Finance Charge Collections
and Dealer Note Losses for such Due Period. Allocations to the Offered Series
will be made in amounts equal to the product of the Series Allocation
Percentage and the amount of Finance Charge Collections and Dealer Note Losses
for such Due Period (referred to herein as "Series Allocable Finance Charge
Collections" and "Series Allocable Dealer Note Losses," respectively).
"Dealer Note Losses" means, with respect to any Due Period commencing after
the 1990 Trust Termination Date, the aggregate face amount of Dealer Notes
written off as uncollectible by the Servicer during such Due Period minus any
recoveries made during such Due Period on Dealer Notes previously written off
as uncollectible.
"Finance Charge Collections" shall mean, with respect to any Due Period, the
positive amount, if any, by which the sum of Dealer Finance Charge
Collections and NITC Finance Charges exceeds Advance Reimbursements during
such Due Period.
Allocation Between the Offered Certificateholders and the Seller--Principal
Collections. After allocating amounts among the Series, on each business day
after the 1990 Trust Termination Date the Servicer will allocate to the Offered
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Certificateholders the Floating Allocation Percentage of Series Allocable
Principal Collections for such business day during the Revolving Period or the
Principal Allocation Percentage of Series Allocable Principal Collections for
such business day during the Accumulation Period, any Early Amortization Period
or any Investment Period (such amount on each such business day, together with
any Available Certificateholder Interest Collections and Net Swap Receipts
treated as Offered Series Principal Collections on such business day as
described in paragraph (d) of "-- Available Certificateholder Interest
Collections" below, being "Offered Series Principal Collections").
Amounts allocated to the Offered Series but not allocated to the Offered
Certificateholders as described above will be allocated to the Seller, as the
holder of the Master Trust Seller's Certificates. As described below, a
portion of the amount allocated to the Seller is subordinated to the Offered
Certificateholders' Interest and is generally drawn from Available Seller's
Principal Collections.
The "Floating Allocation Percentage" for the Offered Series for any Due
Period commencing after the 1990 Trust Termination Date is equal to the
percentage equivalent of a fraction, the numerator of which is the Invested
Amount as of the immediately preceding Distribution Date and the denominator
of which is the product of (a) the sum of the aggregate principal amount of
Dealer Notes in the Master Trust and the aggregate principal amount of funds
in the Excess Funding Account as of the end of the preceding Due Period and
(b) the Series Allocation Percentage for the Due Period for which the
Floating Allocation Percentage is being calculated.
The "Principal Allocation Percentage" for the Offered Series for any Due
Period commencing after the 1990 Trust Termination Date and occurring during
the Accumulation Period, any Investment Period, or any Early Amortization
Period is equal to the percentage equivalent of a fraction, the numerator of
which is the Invested Amount at the end of the last day of the Revolving
Period and the denominator of which is equal to the product of (a) the sum of
the aggregate amount of Dealer Notes in the Master Trust and the aggregate
principal amount of funds in the Excess Funding Account as of the end of the
last day of the Revolving Period and (b) the Series Allocation Percentage for
the Due Period for which the Principal Allocation Percentage is being
calculated.
Allocation Between the Offered Certificateholders and the Seller--Finance
Charge Collections and Dealer Note Losses. On each Transfer Date related to a
Due Period commencing after the 1990 Trust Termination Date, the Servicer will
allocate to the Offered Certificateholders, from the amount allocated to the
Offered Series for such Transfer Date, the following amounts:
(a) the Floating Allocation Percentage of Series Allocable Finance Charge
Collections for such Due Period (the "Offered Series Finance Charge
Collections"); and
(b) the Floating Allocation Percentage of Series Allocable Dealer Note
Losses for such Due Period ("Offered Series Dealer Note Losses").
Amounts allocated to the Offered Series but not allocated to the Offered
Certificateholders as described above will be allocated to the Seller, as the
holder of the Master Trust Seller's Certificates. As described below, a
portion of the amount allocated to the Seller is subordinated to the Offered
Certificateholders' Interest and is generally drawn from Available Seller's
Finance Charge Collections.
"Available Seller's Finance Charge Collections" for any Due Period commencing
after the 1990 Trust Termination Date means an amount equal to the product of
(a) the excess of (i) the Seller's Percentage for such Due Period over (ii)
the result of the Excess Seller's Percentage for such Due Period minus the
Required Excess Seller Interest Percentage and (b) Series Allocable Finance
Charge Collections for such Due Period, except that Available Seller's
Finance Charge Collections shall be zero for any Due Period to the extent the
Available Subordinated Amount and the Negative Carry Subordinated Amount
(minus the product of (i) the amount of funds on deposit in the Negative
Carry Reserve Fund and (ii) 1.00 plus the Subordinated Percentage) equals or
is reduced to zero on the Transfer Date related to such Due Period.
"Available Seller's Principal Collections" for any business day after the
1990 Trust Termination Date means an amount equal to the product of (a) the
excess of (i) the Seller's Percentage for the Due Period in which such
business day occurs over (ii) the Excess Seller's Percentage for such Due
Period and (b) Series Allocable Principal Collections for such Due Period,
except that Available Seller's Principal Collections shall be zero for any
business day to the extent the Available Subordinated Amount and the Negative
Carry Subordinated Amount (minus the
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product of (i) the amount of funds on deposit in the Negative Carry Reserve
Fund and (ii) 1.00 plus the Subordinated Percentage) equals or is reduced to
zero on the Transfer Date immediately preceding such business day.
"Excess Seller's Percentage" for any Due Period commencing after the 1990
Trust Termination Date means a percentage (not less than 0% nor more than
100%) equal to the Seller's Percentage minus the percentage equivalent (not
less than 0% nor more than 100%) of a fraction, the numerator of which is the
sum of the (a) Available Subordinated Amount as of the end of the related
Transfer Date and (b) the Negative Carry Subordinated Amount (minus the
product of (i) the amount of funds on deposit in the Negative Carry Reserve
Fund and (ii) 1.00 plus the Subordinated Percentage), and the denominator of
which is the product of (x) the sum of the aggregate principal amount of
Dealer Notes and aggregate principal amount of funds on deposit in the Excess
Funding Account as of the end of the immediately preceding Due Period and (y)
the Series Allocation Percentage for the Due Period for which the Excess
Seller's Percentage is being calculated.
"Excess Seller's Principal Collections" for any business day during a Due
Period commencing after the 1990 Trust Termination Date means the product of
(a) Series Allocable Principal Collections for such business day and (b) the
Excess Seller's Percentage for such Due Period.
"Seller's Percentage" for any Due Period commencing after the 1990 Trust
Termination Date means 100% minus (a) the Floating Allocation Percentage for
such Due Period, when used with respect to Finance Charge Collections and
Dealer Note Losses at all times and Principal Collections during the
Revolving Period, or (b) the Principal Allocation Percentage for such Due
Period, when used with respect to Principal Collections during the
Accumulation Period, any Investment Period or Early Amortization Period.
"Seller's Principal Collections" for any business day after the 1990 Trust
Termination Date means an amount equal to the sum of (a) Available Seller's
Principal Collections for such business day and (b) Excess Seller's Principal
Collections for such business day.
"Required Excess Seller Interest Percentage" shall be set forth in the
Prospectus Supplement for the Offered Series.
Available Certificateholder Interest Collections. On each Transfer Date
related to a Due Period commencing after the 1990 Trust Termination Date but
ending prior to the Fully Funded Date, Offered Series Finance Charge
Collections for such Due Period together with other amounts comprising
Investment Income for the related Distribution Period (collectively, "Available
Certificateholder Interest Collections"), and Net Swap Receipts for the related
Distribution Period, if any, will be applied in the following amounts and in
the following order of priority:
(a) An amount equal to the Offered Series Servicing Fee for such Due
Period (unless such amount has been netted against deposits to the
Collections Account or waived) will be retained (or deposited) in the
Collections Account and allocated to the Servicer.
(b) On a pro rata basis between clauses (i) and (ii), (i) an amount equal
to (A) Monthly Interest for such Distribution Period, plus (B) Monthly
Interest for any prior Distribution Period to the extent that such
amount has not previously been distributed to the Offered
Certificateholders on a prior Distribution Date, plus (C) to the extent
permitted by law, additional interest at the Offered Certificate Rate
for such Distribution Period that has accrued on the aggregate of any
Monthly Interest previously due but not distributed and (ii) an amount
equal to the Net Swap Payment, if any, for such Distribution Period
(plus any Net Swap Payments for any prior Distribution Period, and
interest thereon, to the extent that such amount has not been previously
distributed to the Swap Counterparty on a prior Distribution Date), will
be deposited into the Distribution Account.
(c) An amount equal to any Offered Series Dealer Note Losses, if any, for
such Due Period will be reimbursed by being treated as Offered Series
Principal Collections for such Transfer Date.
(d) An amount equal to the aggregate amount of unreimbursed
Certificateholder Charge-Offs, if any, for such Due Period will be
reimbursed by being treated as Offered Series Principal Collections for
such Transfer Date and will reimburse such Certificateholder
Charge-Offs.
(e) An amount equal to any Spread Account Deposit Amount, if any, for
such Due Period will be deposited into the Spread Account.
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(f) An amount equal to the aggregate outstanding amounts of the Offered
Series Servicing Fee which have been previously waived (unless such
amount has been waived again) shall be allocated and paid to the
Servicer.
(g) An amount equal to the excess, if any, of the Maximum Subordinated
Amount as of the end of the preceding Transfer Date over the Available
Subordinated Amount as of the end of the preceding Transfer Date shall
be (i) during the Revolving Period or the Accumulation Period, allocated
and paid to the Seller or (ii) during an Investment Period or an Early
Amortization Period, deposited in the Liquidity Reserve Account, and in
either case (i) or (ii) the Available Subordinated Amount shall be
reinstated by the amount of such payment or deposit.
Any Available Certificateholder Interest Collections and Net Swap Receipts not
used as described above (or to pay amounts owing to a present or former Swap
Counterparty in connection with certain swap termination events) will
constitute "Excess Interest Collections" and will be available for allocation
to other Series to the extent of shortfalls and otherwise will be allocated to
the Seller. By contrast, if Available Certificateholder Interest Collections
and Net Swap Receipts are not sufficient to satisfy each of the applications
described above on any Transfer Date, then excess interest collections from
other Series allocable to the Offered Series will be applied as Available
Certificateholder Interest Collections in the priority and the manner described
in clauses (a) through (g) above. If Excess Interest Collections for all
Series are less than the shortfalls for all Series that provide for allocations
of excess interest collections from other Series, such excess interest
collections from other Series will be allocable to shortfalls for the Offered
Series and any other Series that so provides pro rata based on the relative
amounts of each Series' shortfall.
If Available Certificateholder Interest Collections, Net Swap Receipts and
excess interest collections from other Series allocated to the Offered Series
are insufficient to make all of the applications described in clauses (a), (b),
(c) and (d) above, there will be a "Deficiency Amount," which will equal the
aggregate amount of such insufficiency. Funds from, but only to the extent of,
the following sources and in the following order of priority will be applied,
in the same fashion as Available Certificateholder Interest Collections and
pursuant to the clauses and in the priorities set forth above, to reduce a
Deficiency Amount:
(x) under the circumstances specified in clause (b) of the definition of
Early Amortization Event, the amount of Available Seller's Finance
Charge Collections or other funds which the Seller elects to use
thereunder;
(y) on any Transfer Date during an Early Amortization Period caused by a
payment default by the Swap Counterparty, Available Seller's Finance
Charge Collections in an amount equal to the least of (i) the Deficiency
Amount, (ii) the portion of the Net Swap Receipt that was not received
for the related Distribution Period and (iii) the Negative Carry
Subordinated Amount;
(z) Available Draw Funds, in an amount not to exceed the Draw Amount.
The Negative Carry Subordinated Amount will be reduced by the product of (i)
the amount of any application of Available Seller's Finance Charge Collections
pursuant to clause (y) above and (ii) 1.00 plus the Subordinated Percentage.
The Available Subordinated Amount will be reduced by the amount of any
Available Draw Funds applied pursuant to clause (z) above.
"Available Draw Funds" for any Transfer Date means funds which shall be drawn
from the following sources in the following order of priority:
(i) Available Seller's Finance Charge Collections remaining after
the applications specified in clauses (x) and (y) above;
(ii) the Spread Account; and
(iii) for any Transfer Date occurring during any Investment Period
or Early Amortization Period, the Liquidity Reserve Account.
"Draw Amount" means the least of (a) the Deficiency Amount, (b) the Available
Subordinated Amount as of the end of the preceding Transfer Date and (c)
Available Draw Funds for such Transfer Date.
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If all of the amounts applied above are insufficient to make the entire
application described in clause (c) above, the Available Subordinated Amount
shall be reduced (but not below zero) by the amount of such insufficiency and
the Offered Series Dealer Note Losses will be deemed reimbursed by the amount
of such reduction.
If during the Accumulation Period, any Investment Period or any Early
Amortization Period, Available Certificateholder Interest Collections, Net Swap
Receipts, excess interest collections from other Series and Available Draw
Funds applied above are insufficient to make all the applications described in
clause (b) above, the Master Trust Trustee shall withdraw funds from the
Negative Carry Reserve Fund and apply such funds in the same manner as
Available Certificateholder Interest Collections pursuant to clause (b) above.
The Deficiency Amount will be reduced by the amount so applied and the Negative
Carry Subordinated Amount will be reduced by the product of (i) the amount so
applied and (ii) 1.00 plus the Subordinated Percentage.
On each Transfer Date related to a Due Period occurring during an Investment
Period or during the Accumulation Period, any remaining Available Seller's
Finance Charge Collections not used as Available Draw Funds will be deposited
in the Negative Carry Reserve Fund to the extent of the Negative Carry Reserve
Fund Deposit Amount. On each Transfer Date related to a Due Period occurring
during an Investment Period or an Early Amortization Period, any remaining
Available Seller's Finance Charge Collections not used as Available Draw Funds
or deposited in the Negative Carry Reserve Fund (to the extent required as
described in the preceding sentence) will be deposited in the Liquidity Reserve
Account to the extent that the Available Subordinated Amount as of the end of
the preceding Transfer Date exceeds the aggregate amount of funds on deposit in
the Liquidity Reserve Account and the Spread Account, and then, to the extent
of any remaining Negative Carry Reserve Fund Deposit Amount, shall be deposited
in the Negative Carry Reserve Fund. Available Seller's Finance Charge
Collections remaining after the applications described in the preceding
sentence shall, to the extent of any remaining shortfall in the application
described in clause (e) above (or, if less, the amount of remaining Available
Seller's Finance Charge Collections), be applied in accordance with such
clause.
On each Transfer Date related to a Due Period commencing after the Due Period
related to the Fully Funded Date, Available Certificateholder Interest
Collections for such Due Period and Net Swap Receipts for the related
Distribution Period, if any, will be applied on a pari passu basis in an amount
equal to (A) Monthly Interest for the Distribution Period (including any
previously due but unpaid Monthly Interest, and interest thereon) and (B) the
Net Swap Payment, if any, for the related Distribution Period (including any
previously due but unpaid Net Swap Payments, and interest thereon). If such
amounts are insufficient to pay Monthly Interest and Net Swap Payments, then
funds up to such insufficiency will be withdrawn from the Negative Carry
Reserve Fund and applied for such purposes. The Negative Carry Subordinated
Amount shall be reduced by the product of (i) the amount so applied and (ii)
1.00 plus the Subordinated Percentage.
Principal Collections. On each business day, Offered Series Principal
Collections will be applied in the following priority:
(a) Offered Series Principal Collections will first be deposited in the
Series Principal Account to the extent required to make principal
distributions to the Offered Certificateholders. No amount is required
to be set aside for such purpose during the Revolving Period. On each
business day during any Investment Period or any Early Amortization
Period, Offered Series Principal Collections will be allocated to the
Offered Certificateholders and deposited in the Series Principal Account
to the extent the Invested Amount as of the preceding Distribution Date
exceeds the amount of funds on deposit in the Series Principal Account
on such business day. On each business day during the Accumulation
Period (but not during any Early Amortization Period or Investment
Period), Offered Series Principal Collections will be allocated to the
Offered Certificateholders and deposited in the Series Principal Account
in an amount which, when added to the amount of Offered Series Principal
Collections previously deposited in the Series Principal Account during
the Due Period in which such business day occurs, shall not exceed the
Controlled Deposit Amount for such Due Period.
(b) Shared Principal Collections, if any, will be determined and
allocated to other Series that so provide to the extent of any principal
shortfalls with respect thereto and otherwise will be deposited in the
Excess Funding Account to the extent necessary to maintain the Master
Trust Seller's Interest at an amount equal to (or, in the discretion of
the Seller, greater than) the Minimum Master Trust Seller's Interest or
allocated to the Seller. Shared principal collections for all other
Series will be determined on each business day and allocated to the
Offered Series to the extent of any Principal Shortfall. If shared
principal collections for all Series are less than the principal
shortfalls for all Series that provide for allocations of shared
principal collections from other
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Series, such shared principal collections from other Series will be
allocable to shortfalls for the Offered Series and any other Series that
so provides pro rata based on the relative amounts of each such Series'
principal shortfall.
"Controlled Deposit Amount" for any Due Period occurring during the
Accumulation Period means the excess, if any, of (a) the product of the
Controlled Amortization Amount and the number of Due Periods that have
occurred with respect to the Accumulation Period through and including
such Due Period (but not in excess of the Accumulation Period Length) over
(b) the amount on deposit in the Series Principal Account at the end of
the preceding Due Period, except that, notwithstanding the foregoing, the
Seller may, in its sole discretion, increase the Controlled Deposit Amount
at any time and from time to time.
"Controlled Amortization Amount" means an amount equal to the Invested
Amount as of the Distribution Date preceding the Accumulation Period
Commencement Date divided by the Accumulation Period Length.
The portion of Offered Series Principal Collections in excess of the amount
required to be allocated to the Series Principal Account to be available for
required principal distributions on the Offered Certificates as described
herein is referred to as "Shared Principal Collections." Thus, Shared Principal
Collections for any business day during the Revolving Period will equal Offered
Series Principal Collections (because no amounts are then required to be set
aside for distributions of principal on the Offered Certificates), and for any
Due Period during the Accumulation Period, any Early Amortization Period or any
Investment Period, will equal the excess, if any, of Offered Series Principal
Collections over the amount deposited in the Series Principal Account pursuant
to paragraph (a) above.
The extent to which Offered Series Principal Collections for a business day are
insufficient to make the required allocations to the Series Principal Account
is referred to as the "Principal Shortfall." Thus, the Principal Shortfall for
any business day during the Accumulation Period (an "Accumulation Period
Principal Shortfall") will equal the excess, if any, of the Controlled Deposit
Amount over the amount of Offered Series Principal Collections deposited in the
Series Principal Account on such business day when added to the amount of
Offered Series Principal Collections previously deposited in the Series
Principal Account during such Due Period, or during any Early Amortization
Period or Investment Period will equal the excess, if any, of the Invested
Amount (reduced by amounts on deposit in the Series Principal Account and the
aggregate amount of Series Principal Account Losses for the Distribution Period
in which such business day occurs) over Offered Series Principal Collections.
On each business day (A) during the Accumulation Period, Available Seller's
Principal Collections will be deposited in the Negative Carry Reserve Fund in
an amount equal to the Negative Carry Reserve Fund Deposit Amount, and (B)
during an Early Amortization Period or Investment Period (prior to the Fully
Funded Date), Available Seller's Principal Collections will be, on a pro rata
basis between clauses (i) and (ii) based on the respective amounts owed, (i)
deposited in the Liquidity Reserve Account to the extent the Available
Subordinated Amount as of the end of the immediately preceding Transfer Date
exceeds the amount of funds on deposit in the Liquidity Reserve Account and
(ii) deposited in the Negative Carry Reserve Fund in an amount equal to the
Negative Carry Reserve Fund Deposit Amount. The amounts required to be
deposited pursuant to the preceding sentence shall be reduced by the amount of
Available Seller's Finance Charge Collections deposited in the Negative Carry
Reserve Fund or the Liquidity Reserve Account, as applicable, on such business
day. Any remaining Available Seller's Principal Collections shall be deemed
"Remaining Available Seller's Principal Collections" and included in Shared
Seller Principal Collections as provided below.
On each business day during the Revolving Period or the Accumulation Period,
Shared Seller Principal Collections, if any, and shared seller principal
collections for any other Series that provides for shared seller principal
collections shall be determined on each business day and allocated in the
following priority: (i) to the Offered Series to the extent of any
Accumulation Period Principal Shortfall and to any other Series to the extent
such Series provides for the use of shared seller principal collections in
respect of principal shortfalls, (ii) to the Excess Funding Account to the
extent necessary to maintain the Master Trust Seller's Interest at an amount
equal to (or, in the discretion of the Seller, greater than) the Minimum Master
Trust Seller's Interest and (iii) to the Seller. If shared seller principal
collections for all Series, including Shared Seller Principal Collections, are
less than the shortfalls for which shared seller principal collections may be
used, including any Accumulation Period Principal Shortfall, then such shared
seller principal collections will be allocated to all such shortfalls,
including any Accumulation Period Principal Shortfall, pro rata based on the
relative amounts of each such shortfall.
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"Shared Seller Principal Collections" means on each business day (i)
during a Revolving Period, all Available Seller's Principal Collections
and all Excess Seller's Principal Collections and (ii) during an
Accumulation Period, all Remaining Available Seller's Principal
Collections and all Excess Seller's Principal Collections. There shall be
no Shared Seller Principal Collections during any Investment Period or
Early Amortization Period.
On each business day during any Investment Period or any Early Amortization
Period, all Excess Seller's Principal Collections, all Remaining Available
Seller's Principal Collections and all shared principal collections not
allocated in respect of principal shortfalls shall be allocated and paid to the
Seller or deposited in the Excess Funding Account to the extent necessary to
maintain the Master Trust Seller's Interest at an amount equal to (or, in the
Seller's discretion, greater than) the Minimum Master Trust Seller's Interest.
If on any Distribution Date during an Investment Period after the application
of all funds to be allocated or distributed on such date the excess, if any, of
(a) the Invested Amount over (b) the amount in the Series Principal Account
(the "Investment Period Shortfall Amount") is less than or equal to the
aggregate amount of funds contained in the Liquidity Reserve Account, then
funds shall be withdrawn from the Liquidity Reserve Account in an amount equal
to the Investment Period Shortfall Amount and shall be deposited in the Series
Principal Account. If on any Distribution Date during an Early Amortization
Period after the application of all funds to be allocated or distributed on
such date the excess, if any, of (x) the Invested Amount over (y) the amount in
the Series Principal Account (the "Early Amortization Period Shortfall Amount")
is less than or equal to the aggregate amount of funds contained in the
Negative Carry Reserve Fund and the Liquidity Reserve Account, then funds shall
be withdrawn first from the Negative Carry Reserve Fund and then from the
Liquidity Reserve Account in an amount equal to the Early Amortization Period
Shortfall Amount and shall be deposited in the Series Principal Account.
Limited Subordination of Master Trust Seller's Interest; Spread Account;
Liquidity Reserve Account. After the 1990 Trust Termination Date, a portion of
the Master Trust Seller's Interest will be subordinated to the Offered
Certificateholders' Interest to the extent of the Available Subordinated Amount
and, under certain circumstances, the Negative Carry Subordinated Amount.
The "Available Subordinated Amount" for the Offered Series will be zero for
each Transfer Date relating to a Due Period commencing prior to the 1990
Trust Termination Date and on the Transfer Date related to the first Due
Period after the 1990 Trust Termination Date will equal the product of the
Subordinated Percentage and the Invested Amount, and for each Transfer Date
thereafter will equal the lesser of: (a) the Maximum Subordinated Amount for
the Offered Series and (b) the Available Subordinated Amount for the Offered
Series as of the end of the preceding Transfer Date (after giving effect to
all adjustments thereto on such Transfer Date).
The "Maximum Subordinated Amount" for the Offered Series means the product of
(a) the Invested Amount and (b) the Subordinated Percentage, except that upon
the occurrence of an Investment Event or an Early Amortization Event, the
Maximum Subordinated Amount shall not decline until the Invested Amount
equals the Maximum Subordinated Amount, and thereafter the Maximum
Subordinated Amount will equal the Invested Amount.
The "Subordinated Percentage" with respect to the Offered Certificates will be
set forth in the Prospectus Supplement.
If the Available Subordinated Amount falls below the Required Subordinated
Amount for any Transfer Date, an Investment Event will occur. The "Required
Subordinated Amount" will be set forth in the Prospectus Supplement.
"Negative Carry Subordinated Amount" shall mean, (a) on any Transfer Date
related to a Due Period occurring prior to the commencement of the
Accumulation Period, any Early Amortization Period or any Investment Period,
an amount equal to the product of (i) the Negative Carry Reserve Fund
Required Amount and (ii) 1.00 plus the Subordinated Percentage and (b) at the
beginning of each Transfer Date thereafter, an amount equal to the Negative
Carry Subordinated Amount as of the end of the immediately preceding Transfer
Date (after giving effect to all reductions in the Negative Carry
Subordinated Amount on such preceding Transfer Date).
The Spread Account will be an Eligible Deposit Account established and
maintained prior to the 1990 Trust Termination Date in the name of the Master
Trust Trustee for the benefit of the Offered Certificateholders. As described
above, the Spread Account is available to supplement Available
Certificateholder Interest Collections, Net Swap Receipts, excess interest
collections from other Series allocable to the Offered Series and Available
Seller's Finance Charge Collections.
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Monies in the Spread Account will be invested in Eligible Investments. After
the earliest of (a) the payment in full of the Invested Amount, (b) the Fully
Funded Date and (c) the Series Termination Date, any funds remaining on deposit
in the Spread Account will be distributed to the Seller. On any Transfer Date
after the 1990 Trust Termination Date and prior to the Fully Funded Date, if
the amount in the Spread Account is less than the Projected Spread, the Master
Trust Trustee will deposit the amount of such deficiency (the "Spread Account
Deposit Amount"), to the extent available from Available Certificateholder
Interest Collections, Net Swap Receipts, excess interest collections from
Offered Series and Available Seller's Finance Charge Collections, in the Spread
Account as described above in "Available Certificateholder Interest
Collections." The Spread Account will initially be funded with an amount up to
the Projected Spread from funds on deposit in the 1990 Trust Spread Account and
allocated to the Offered Series. See "Navistar Financial Securities
Corporation and the Master Trust--The Master Trust." The "Projected Spread"
will be set forth in the Prospectus Supplement. During an Investment Period or
an Early Amortization Period, the Master Trust Trustee will deposit all Spread
Account funds in the Liquidity Reserve Account.
The Liquidity Reserve Account will be an Eligible Deposit Account established
and maintained on or prior to the commencement of an Early Amortization Period
or an Investment Period in the name of the Master Trust for the benefit of the
Seller. After the 1990 Trust Termination Date and after the commencement of an
Investment Period or an Early Amortization Period, Available Seller's Principal
Collections that would otherwise be paid to the Seller will be deposited in the
Liquidity Reserve Account, to the extent described herein, until such time as
the amount on deposit is equal to the Available Subordinated Amount, in order
to assure a source of funds for payment with respect thereto. The Seller will
possess all right, title and interest in all funds on deposit in the Liquidity
Reserve Account, except that no such funds will be paid to the Seller during an
Investment Period or Early Amortization Period if such payment would reduce the
funds in the Liquidity Reserve Account below an amount equal to the Available
Subordinated Amount.
CERTIFICATEHOLDER CHARGE-OFFS
If, for any Transfer Date, the Available Subordinated Amount equals or is
reduced to zero (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on such Transfer Date) and the Deficiency
Amount is greater than zero (as reduced by all the allocations, distributions,
withdrawals and deposits to be made on such Transfer Date), the Invested Amount
will be reduced by such Deficiency Amount, but not by more than the Offered
Series Dealer Note Losses for the related Due Period remaining unreimbursed
after all applications of funds or reductions of the Available Subordinated
Amount described herein (a "Certificateholder Charge-Off"). As of any Transfer
Date, Certificateholder Charge-Offs for all prior Transfer Dates will be
considered unreimbursed unless such amounts are reimbursed (and to the extent
not reimbursed). Unreimbursed Certificateholder Charge-Offs will be reimbursed
on any subsequent Transfer Date out of Available Certificateholder Interest
Collections, Net Swap Receipts, excess interest collections from other Series
allocable to the Offered Series and, to the extent available therefor,
Available Draw Funds and, in certain circumstances, funds on deposit in the
Negative Carry Reserve Fund. To the extent so reimbursed, Certificateholder
Charge-offs will no longer be considered unreimbursed, and the Invested Amount
will be reinstated to the extent any Certificateholder Charge-Offs are
reimbursed. See "Description of Offered Certificates--Allocation of
Collections After the 1990 Trust Termination Date--Available Certificateholder
Interest Collections."
DISTRIBUTIONS TO OFFERED CERTIFICATEHOLDERS AND THE SWAP COUNTERPARTY
On the business day immediately preceding each Distribution Date (the "Transfer
Date"), the Servicer will instruct the Master Trust Trustee to transfer to the
Distribution Account the funds on deposit in the Series Principal Account and,
to the extent provided herein, the Collections Account, and the Servicer will
instruct the Master Trust Trustee to make, without duplication, the following
distributions from the Distribution Account. All such transfers and
distributions will be made after allocations, if any, to the Series Principal
Account for such Distribution Date have been made.
(a) Interest Distributions and Net Swap Payments. On each Distribution
Date (including the Expected Payment Date), Monthly Interest will be
distributed to the Offered Certificateholders as accrued interest on the
Offered Certificates. To the extent any interest is due but not
distributed on any such Distribution Date, such amount will be
distributed on the following Distribution Date, along with, to the
extent permitted by law, interest at the Offered Certificate Rate on
such amount. In addition, Net Swap Payments, if any, (including any
previously due but unpaid Net Swap Payments and interest thereon) will
be made to the Swap Counterparty. If funds are inadequate to pay the
aggregate amount of Monthly Interest and Net Swap Payments, such
payments will be made to the extent of funds available pro rata based on
the relative amounts due.
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(b) Expected Payment Date. On the Expected Payment Date, in addition to
the amount described in (a) above, amounts on deposit in the Series
Principal Account will be distributed as principal (up to a maximum of
the Invested Amount on such Distribution Date) on the Offered
Certificates.
(c) Early Amortization Period. Except as otherwise provided in the
Prospectus Supplement, on each Distribution Date related to a Due Period
occurring during an Early Amortization Period, in addition to the amount
described in (a) above, amounts on deposit in the Series Principal
Account will be distributed as principal (up to a maximum of the
Invested Amount on such Distribution Date) on the Offered Certificates.
(d) Early Distributions. On any Early Distribution Date, the amount on
deposit in the Series Principal Account treated as Early Distribution
Amounts will be distributed as principal on the Offered Certificates for
which an Early Distribution election has been made.
INVESTMENT EVENTS
If an Investment Event occurs prior to the 1990 Trust Termination Date, the
Related 1990 Certificate will begin to amortize and Related 1990 Certificate
Principal Collections will be deposited into the Series Principal Account on
each day such Related 1990 Certificate Principal Collections are paid to the
Master Trust by, or on behalf of, the 1990 Trust (in an amount not to exceed,
in the aggregate, the Invested Amount). If an Investment Event occurs after
the 1990 Trust Termination Date, commencing on the first business day following
the Investment Period Commencement Date, Series Allocable Principal Collections
will no longer be paid to the Seller or allocated to any other Series but
instead will be deposited in the Series Principal Account on each business day
(in an amount not to exceed, in the aggregate, the Invested Amount), except as
described below, and the Controlled Deposit Amount will no longer apply to
allocations of principal in respect of the Offered Certificates.
The "Investment Events," if any, with respect to the Offered Series will be
specified in the Prospectus Supplement.
An Investment Period will commence as of the close of business on the business
day immediately preceding the day on which the Investment Event is deemed to
have occurred (the "Investment Period Commencement Date"). Deposits of
principal to the Series Principal Account on each business day will begin on
the first business day following the Investment Period Commencement Date.
In connection with the issuance of the Offered Certificates, the Prospectus
Supplement may provide for Early Distributions of principal to certain Offered
Certificateholders on the Early Distribution Date. In such case, the terms
"Early Distribution," "Early Distribution Amount" and "Early Distribution Date"
will be defined in the Prospectus Supplement. If the Prospectus Supplement
does not provide for Early Distributions, such terms will not be operative.
EARLY AMORTIZATION EVENTS
If an Early Amortization Event occurs prior to the 1990 Trust Termination Date,
the Related 1990 Certificate will begin to amortize and Related 1990
Certificate Principal Collections will be deposited into the Series Principal
Account on each day such Related 1990 Certificate Principal Collections are
paid to the Master Trust by, or on behalf of, the 1990 Trust (in an amount not
to exceed, in the aggregate, the Invested Amount). If an Early Amortization
Event occurs after the 1990 Trust Termination Date, commencing on the first
business day following the Early Amortization Period Commencement Date, Offered
Series Principal Collections will no longer be paid to the Seller, allocated to
any other Series or retained in the Excess Funding Account for the benefit of
the Offered Series but instead will be deposited into the Series Principal
Account (in an amount not to exceed, in the aggregate, the Invested Amount) to
be distributed to Offered Certificateholders monthly on each Distribution Date.
The Controlled Deposit Amount will not apply to allocations in respect of the
Offered Certificates. Unless the Prospectus Supplement with respect to an
Offered Series otherwise specifies, an "Early Amortization Event" refers to any
of the following events:
(a) the Master Trust becomes an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, and is not exempt
from compliance with such Act;
(b) the failure of the Swap Counterparty to make any payment under the
Interest Rate Swap within one day after the date such payment was due
(after taking into account any applicable grace period under the
Interest Rate Swap) unless (i) the Seller causes Available Seller's
Finance Charge Collections or other funds to be applied
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to make such payment and (ii) the Servicer engages a replacement Swap
Counterparty (which may be itself) prior to the next Transfer Date and
the Rating Agency Condition is satisfied;
(c) the Invested Amount is not reduced to zero by the Expected Payment
Date (other than after the Fully Funded Date);
(d) the United States government or any agency or instrumentality thereof
files a notice of a lien on the assets of NFC or NFSC under Internal
Revenue Code Section 6323 or any similar statutory provision
(including, but not limited to, Section 302(f) or Section 4068 of
ERISA) which is or may in the future be prior to the lien of the Master
Trust Trustee on the assets of the Master Trust (including without
limitation proceeds of the Dealer Notes); and
(e) any other event specified in the Prospectus Supplement with respect
to an Offered Series.
Upon the occurrence of any event described above, an Early Amortization Event
will be deemed to have occurred without any notice or other action on the part
of any other party immediately upon the occurrence of such event. The Early
Amortization Period will commence as of the close of business on the business
day immediately preceding the day on which the Early Amortization Event is
deemed to have occurred (the "Early Amortization Period Commencement Date").
Except as otherwise provided in the Prospectus Supplement, monthly
distributions in respect of the Invested Amount will begin on the first
Distribution Date following the Due Period in which an Early Amortization
Period has commenced.
"Early Amortization Period" means the period beginning on the Early
Amortization Period Commencement Date and ending upon the first to occur of
(a) the payment in full to the Offered Certificateholders of the Invested
Amount and (b) the Series Termination Date.
TERMINATION; FULLY FUNDED DATE
Termination. The Master Trust will terminate on the first to occur of (a) the
day following the Distribution Date on which the aggregate series invested
amounts for all Series is zero and no Series of variable funding certificates
is outstanding or, if later, the date on which the final distribution has been
made or provided for with respect to the Offered Certificates and each other
Series of certificates (it being understood that no distribution on any
variable funding certificate shall be final while such variable funding
certificate remains outstanding), (b) the date on which proceeds from the sale,
disposal or other liquidation of the Dealer Notes are distributed to the
Certificateholders following an insolvency event with respect to the Seller, as
provided in the Pooling and Servicing Agreement and (c) a day which is 21 years
less one day after the death of the officers and the last survivor of all the
lineal descendants of every officer of the Master Trust Trustee who are living
on the date hereof except that if at any time any of the obligations and
responsibilities of the Seller, the Servicer and the Master Trust Trustee under
the Pooling and Servicing Agreement shall be or become valid under applicable
law for a period subsequent to the 21st anniversary of the death of such last
survivor (or, without limiting the generality of the foregoing, if legislation
shall become effective providing for the validity or permitting the effective
grant of responsibilities and obligations for a period in gross, exceeding the
period for which such responsibilities and obligations are hereinabove stated
to extend and be valid), then such responsibilities and obligations shall not
terminate as aforesaid but shall extend to and continue in effect, but only if
such nontermination and extension shall then be valid under applicable law,
until one day prior to such time as the same shall, under applicable law, cease
to be valid. Upon termination of the Master Trust, all right, title and
interest in the 1990 Trust Seller Certificate and any 1990 Trust Investor
Certificate held by the Master Trust or the Dealer Notes, as the case may be,
and other funds of the Master Trust (other than amounts in the Collections
Account, the Excess Funding Account, any series principal account or
distribution account for the final distribution of principal and interest to
Certificateholders, Swap Counterparties and other Enhancement Providers) will
be conveyed and transferred to the Seller.
In any event, the last payment of principal and interest on the Offered
Certificates will be due and payable no later than the "Series Termination
Date" which will be set forth in the Prospectus Supplement. In the event that
the Invested Amount is greater than zero on the Series Termination Date (after
giving effect to deposits and distributions otherwise to be made on such Series
Termination Date), the Master Trust Trustee will sell or cause to be sold (and
apply the proceeds to the extent necessary to pay such remaining amounts to all
Offered Certificateholders) an interest in the Dealer Notes in an amount equal
to 110% of the Invested Amount on such Series Termination Date (after giving
effect to such deposits and distributions) except that in no event shall such
amount exceed the Series Allocation Percentage (for the Due Period in which
such Series Termination Date occurs) of Dealer Notes and amounts on deposit in
the Excess
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Funding Account held by the Master Trust on such Series Termination Date. The
net proceeds of such sale and any collections on the Dealer Notes will be paid
pro rata to Offered Certificateholders on the Series Termination Date as the
final payment on the Offered Certificates. Any excess will be distributed (i)
first, to pay any amounts owing by the Master Trust to the Swap Counterparty
pursuant to the Interest Rate Swap to such Swap Counterparty and (ii) second,
to the Seller.
Fully Funded Date. Following the occurrence of the Fully Funded Date, Offered
Certificateholders will no longer have any interest in the Related 1990
Certificate or the Dealer Notes, as the case may be, and all the
representations and covenants of the Seller and the Servicer relating to the
Dealer Notes as well as certain other provisions of the Pooling and Servicing
Agreement and all remedies for breach thereof, will no longer accrue to the
benefit of the Offered Certificateholders. In addition, upon the occurrence of
the Fully Funded Date, (i) neither Related 1990 Certificate Collections nor
Finance Charge Collections, Principal Collections or Dealer Notes Losses, as
the case may be, will be allocated to the Offered Series and (ii) if the final
distribution has been made with respect to each other Series of investor
certificates or the Fully Funded Date has occurred with respect thereto, all
right, title and interest in the Related 1990 Certificate or Dealer Notes (and
related assets held by the Master Trust), as the case may be, will be conveyed
and transferred to the Seller.
REPORTS TO OFFERED CERTIFICATEHOLDERS
On each Distribution Date related to a Due Period commencing prior to the 1990
Trust Termination Date, the paying agent will forward to each holder of 1990
Trust Investor Certificates (including the Master Trust as holder of the
Related 1990 Certificate) a statement prepared by the Servicer and delivered to
the 1990 Trust Trustee based on information provided by the Servicer setting
forth the following information (which, in the case of (a), (b), (c), (h) and
(i) below, will be stated for each class of 1990 Trust Investor Certificates on
the basis of an original principal amount of $1,000 per certificate and, in the
case of (h) and (i), will also be stated on an aggregate basis):
(a) the total amount of payments;
(b) the principal amount of such payment allocable to principal payable
in respect of the 1990 Trust Investor Certificates ("Certificate
Principal");
(c) the amount of such payment allocable to 1990 Trust Investor
Certificate Interest;
(d) the aggregate amount of Principal Collections processed during the
related Due Period, and the amount of such Principal Collections which
were allocated to each class for which a Class Amortization Date has
occurred (an "Amortizing Class"), if any, deposited in the 1990 Trust
Spread Account or the Liquidity Reserve Account, used to purchase New
Dealer Notes or 1990 Trust Investment Securities or paid to the Seller;
(e) the aggregate amount of Dealer Finance Charges and NITC Finance
Charges for the Due Period;
(f) the aggregate amount of Dealer Notes and 1990 Trust Investment
Securities, the 1990 Trust Total Investor Interest as a percentage of
the aggregate amount of the Dealer Notes and 1990 Trust Investment
Securities as of the end of the day on the last day of the related Due
Period (after giving effect to payments and adjustments made pursuant to
the 1990 Trust Agreement);
(g) the Class Charged-Off Amount for each class of 1990 Trust Investor
Certificates for such Distribution Date after giving effect to payments
and adjustments made pursuant to the 1990 Trust Agreement;
(h) an amount equal to the product of 1990 Trust Principal Losses and the
1990 Trust Total Investor Percentage (the "Investor Loss Amount") and
Class Loss Amounts and the amount by which the Investor Loss Amount and
Class Loss Amounts have been reduced on the Transfer Date;
(i) the amount of the 1990 Trust Monthly Servicing Fee and the amount of
the 1990 Trust Monthly Servicing Fee allocable to the 1990 Trust
Investor Certificates for the related Due Period;
(j) the 1990 Trust Available Subordinated Amount and the 1990 Trust
Seller Interest;
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(k) the amount of Principal Collections on deposit in the 1990 Trust
Collections Account and the share thereof allocable to each Amortizing
Class;
(l) the sum of (i) income from 1990 Trust Investment Securities, and (ii)
income form the investment of funds in the Certificate Series Principal
Account, the 1990 Trust Distribution Account and the 1990 Trust
Collections Account, each during such Due Period (the "1990 Trust
Investment Income") for the Due Period;
(m) the 1990 Trust Deficiency Amount for such Distribution Date after
giving effect to payments and adjustments made pursuant the 1990 Trust
Agreement;
(n) the amount by which (i) the sum of (a) Investor Certificate Interest
for such Distribution Date and (b) the Deficiency Amount immediately
prior to such date exceeds (ii) the amount to be paid to the
Distribution Account (after giving effect to the payments and
adjustments described herein (the "1990 Trust Deficiency Amount") from
the preceding Distribution Date being reimbursed on the Distribution
Date;
(o) the total amount to be deposited in the 1990 Trust Distribution
Account in respect of 1990 Trust Investor Certificate Interest on such
Distribution Date;
(p) each Class Invested Amount and Class Investor Interest after giving
effect to payments and adjustments made pursuant to the 1990 Trust
Agreement;
(q) the 1990 Trust Minimum Seller Interest after giving effect to
payments and adjustments made pursuant to the Agreement;
(r) during any 1990 Trust Amortization Term and with respect to any
Amortizing Class, the percentage equivalent of a fraction the numerator
of which is the Class Investor Interest for such Class and the
denominator of which is the sum of the 1990 Trust Total Investor
Interest and the 1990 Trust Seller Interest, each as of the Class
Amortization Date (the "Class Amortization Percentages"); and
(s) with respect to Investment Securities in the Collection Account and
Eligible Investments in the Liquidity Reserve Account, a listing of all
such investments as of the last day of the Due Period, including
specified information with respect thereto.
Upon receipt of any such statement in respect of the Related 1990 Certificate,
the Master Trust Trustee will forward, or will cause the Servicer to forward, a
copy of such statement to each Offered Certificateholder (which is expected to
be Cede as nominee for DTC unless Definitive Certificates are issued).
On each Distribution Date, the paying agent will forward to each Offered
Certificateholder (which is expected to be Cede as nominee for DTC unless
Definitive Certificates are issued) a statement prepared by the Servicer and
delivered to the Master Trust Trustee based on information provided by the
Servicer setting forth, among other things, the following information (which,
prior to the 1990 Trust Termination Date, will include only the amounts
referred to in (c), (d) and (e) below and which, in the case of (a), (b), (c),
(h) and (i) below, will be stated on the basis of an original principal amount
of $1,000 per Offered Certificate):
(a) the aggregate amount of Collections, including the aggregate amount
of Finance Charge Collections and the aggregate amount of Principal
Collections for the related Due Period;
(b) the Series Allocation Percentage, the Floating Allocation Percentage
and the Principal Allocation Percentage (if applicable) for the related
Due Period;
(c) the total amount, if any, to be distributed on the Offered
Certificates on such Distribution Date;
(d) the amount, if any, of such distribution allocable to the Invested
Amount;
(e) the amount, if any, of such distribution allocable to interest on the
Offered Certificates;
(f) Dealer Note Losses for the related Due Period;
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(g) the Draw Amount as of the related Transfer Date, if any;
(h) the amount of the Certificateholder Charge-Offs and the amount of
reimbursements thereof as of the related Transfer Date;
(i) the amount of the Offered Series Servicing Fee to be paid on such
Distribution Date;
(j) the Controlled Deposit Amount for the related Due Period (if
applicable);
(k) the Invested Amount (after giving effect to all distributions that
will occur on such Distribution Date);
(l) the aggregate amount of Dealer Notes and funds on deposit in the
Excess Funding Account as of the end of the last day of the related Due
Period (after giving effect to payments and adjustments made pursuant to
the Pooling and Servicing Agreement);
(m) the Available Subordinated Amount and the Negative Carry Subordinated
Amount (after giving effect to draws thereon on such Distribution Date);
and
(n) with respect to Eligible Investments in the Series Principal Account,
the Excess Funding Account, the Negative Carry Reserve Fund and the
Liquidity Reserve Account, a listing of all such investments as of the
last day of the Due Period, including specified information with respect
thereto.
In addition, on or about January 31 of each calendar year (beginning in 1998
with respect to the Offered Certificateholders), the Master Trust Trustee will
furnish to the Servicer and the paying agent a list of each person who at any
time during the preceding calendar year was an Offered Certificateholder and
received any payment thereon and the dates such person held an Offered
Certificate, and the paying agent will furnish to each such Offered
Certificateholder a statement prepared by the paying agent containing the
information required to be provided by an issuer of indebtedness under the Code
for such preceding calendar year or the applicable portion thereof during which
such person was an Offered Certificateholder, together with such other
customary information as is necessary or desirable to enable the Offered
Certificateholders to prepare their tax returns. As long as the holder of
record of the Offered Certificates is Cede, as nominee of DTC, beneficial
owners of Offered Certificates will receive tax and other information from
Participants and Indirect Participants rather than from the Master Trust
Trustee or the Servicer.
EVIDENCE AS TO COMPLIANCE
Pursuant to the Applicable Agreement, on or about April 15 of each calendar
year, beginning in April, 1992, the Servicer has caused and will continue to
cause a firm of nationally recognized independent public accountants (who may
also render other services to the Servicer or the Seller) to furnish a report
to the Active Trustee to the effect that they have compared the mathematical
calculations of each amount set forth in each of the monthly certificates
forwarded by the Servicer to the Seller, the Active Trustee and the paying
agent (as required under the Applicable Agreement) during the preceding
calendar year with the computer reports of the Servicer and such accountants
are of the opinion that such amounts are in agreement, except for such
exceptions as shall be set forth in such report. In addition, such a firm has
furnished and will continue to furnish a report to the Active Trustee and the
Servicer to the effect that such firm is of the opinion that the system of
internal accounting controls in effect on the date of such statement relating
to the servicing procedures performed by the Servicer under the Applicable
Agreement, taken as a whole, was sufficient for the prevention and detection of
errors and irregularities which would be material to the assets of the Active
Trust and that nothing has come to their attention that would cause them to
believe that such servicing has not been conducted in compliance with the
Applicable Agreement, except for such exceptions as shall be set forth in such
report. The procedures to be followed by such accountants will not constitute
an audit conducted in accordance with generally accepted auditing standards.
Each of the 1990 Trust Agreement and the Pooling and Servicing Agreement also
requires the Servicer to have delivered to the trustee thereunder, the Seller
and the Rating Agencies, on or about April 15 of each calendar year, beginning
in April, 1992, and within ten business days of the Servicer's discovery of a
Servicer Termination Event, an officer's certificate stating that (a) in the
course of such officer's duties as an officer of the Servicer such officer
would normally obtain knowledge of any Servicer Termination Event and (b)
whether such officer has obtained knowledge of any such
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Servicer Termination Event, and, if so, specifying each Servicer Termination
Event of which the signing officer has knowledge and the nature of the Servicer
Termination Event.
The Pooling and Servicing Agreement requires the Seller to have delivered to
the Master Trust Trustee, the Servicer and the Rating Agencies, on or about
April 15 of each calendar year, and within ten business days after the Seller
has knowledge of any event discussed below, an officer's certificate stating
that (a) in the course of such officer's duties as an officer of the Seller
such officer would normally obtain knowledge of any 1990 Trust Amortization
Event, an Investment Event or an Early Amortization Event or any breach of the
Seller's covenants in the Pooling and Servicing Agreement and (b) whether such
officer has obtained knowledge of any such 1990 Trust Amortization Event,
Investment Event or Early Amortization Event or breach of covenant, and, if so,
specifying such 1990 Trust Amortization Event, Investment Event or Early
Amortization Event or breach of covenant of which the signing officer has
knowledge and the nature thereof.
The Servicer will give the Master Trust Trustee copies of all statements,
certificates and reports furnished to the 1990 Trust Trustee, and copies
thereof, as well as copies of any statements, certificates, and reports
furnished directly to the Master Trust Trustee, may be obtained by a request in
writing to the Master Trust Trustee addressed to the Corporate Trust Office.
INDEMNIFICATION OF MASTER TRUST AND MASTER TRUST TRUSTEE; LIMITATION ON
LIABILITY OF CERTAIN PERSONS
Pursuant to the terms of the Pooling and Servicing Agreement, the Seller and
NFC will indemnify and hold harmless the Master Trust and the Master Trust
Trustee from and against any loss, liability, expense, damage or injury
suffered arising out of the activities of the Master Trust or the Master Trust
Trustee, except that (i) the Seller and NFC will not indemnify the Master Trust
or the Offered Certificateholders for liabilities arising from actions taken by
the Master Trust Trustee at the request of Offered Certificateholders, (ii) the
Seller and NFC will not indemnify the Master Trust or the Master Trust Trustee
for any liability, costs, or expenses of the Master Trust or the Master Trust
Trustee resulting from the Master Trust Trustee's own negligent action, its own
negligent failure to act, or its own misconduct and (iii) the Seller and NFC
will not indemnify the Master Trust or the Offered Certificateholders with
respect to any federal, state, or local income or franchise taxes (or any
interest or penalties with respect thereto) required to be paid by the Offered
Certificateholders. Generally, the 1990 Trust and the 1990 Trust Trustee are
similarly indemnified and held harmless under the 1990 Trust Agreement.
The Agreements provide that no recourse under any obligation or covenant of the
Agreements, or for any claim based thereon, may be had against any
incorporator, director, officer, or stockholder of the Seller or the Servicer.
The Servicer will be under no obligation to appear in, prosecute, or defend any
legal action which is not incidental to its duties under the Agreements which
in the Servicer's reasonable opinion may involve it in any expense or
liability.
THE MASTER TRUST TRUSTEE
The Prospectus Supplement with respect to each Offered Series will specify the
entity that will act as the Master Trust Trustee under the Pooling and
Servicing Agreement, including the location of its principal office for the
conduct of its corporate trust business (the "Corporate Trust Office") as of
the date of this Prospectus. NFC and its affiliates (other than the Seller)
may from time to time enter into normal banking and trustee relationships with
the Master Trust Trustee. The Master Trust Trustee may not hold certificates
issued under the Master Trust in its own name (but may do so in a fiduciary
capacity). In addition, for purposes of meeting the legal requirements of
certain local jurisdictions, the Master Trust Trustee will have the power to
appoint a co-trustee or separate trustees of all or any part of the Master
Trust. In the event of such appointment, all rights, powers, duties and
obligations conferred or imposed upon the Master Trust Trustee by the Pooling
and Servicing Agreement will be conferred or imposed upon the Master Trust
Trustee and such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the Master Trust Trustee shall be incompetent or
unqualified to perform certain acts, singly upon such separate trustee or
co-trustee who will exercise and perform such rights, powers, duties and
obligations solely at the direction of the Master Trust Trustee.
The Master Trust Trustee may resign at any time upon written notice to the
Seller and the appointment of a successor Master Trust Trustee. In addition,
the Seller may remove the Master Trust Trustee if the Master Trust Trustee
ceases to be eligible to continue as such under the Pooling and Servicing
Agreement or if the Master Trust Trustee becomes insolvent. In such
circumstances, the Seller will be obligated to appoint a successor Master Trust
Trustee. Any
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resignation or removal of the Master Trust Trustee and appointment of a
successor Master Trust Trustee does not become effective until acceptance of
the appointment by the successor Master Trust Trustee.
AMENDMENTS
The Pooling and Servicing Agreement or any Supplement may be amended by the
Seller, the Servicer and the Master Trust Trustee without the consent of the
Certificateholders of any Series, provided such action will not, as evidenced
by an officer's certificate of the Servicer, have a material adverse effect on
the interests of the Certificateholders of such Series.
The Pooling and Servicing Agreement or Supplement may also be amended by the
Seller, the Servicer and the Master Trust Trustee with the consent of the
holders of certificates evidencing not less than 66-2/3% of the aggregate
series invested amounts of the certificates of each adversely affected Series
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Pooling and Servicing Agreement or of
modifying in any manner the rights of Certificateholders. No such amendment,
however, may (a) reduce in any manner the stated amount of, or delay the stated
timing of, distributions required to be made on any certificate or the stated
amount available under any Enhancement without the consent of the holder of
such certificate, (b) change the manner of calculating the Certificateholder's
Interest of any Series without the consent of all Certificateholders of the
adversely affected Series, (c) adversely affect the rating of any Series or
class of any Rating Agency without the consent of two-thirds of the voting
interests of such Series or class or (d) reduce the aforesaid percentages of
the voting interests required to consent to such amendment without the consent
of each Certificateholder. Promptly following the execution of an amendment
described in this paragraph, the Master Trust Trustee will furnish written
notice of the substance of such amendment to each Certificateholder.
The 1990 Trust Agreement may be amended by NFC, the Seller and the 1990 Trust
Trustee, without consent of the holders of the 1990 Trust Investor
Certificates, to cure any ambiguity or to correct or supplement any defective
or inconsistent provision therein or to add any other provisions with respect
to matters or questions arising under the Agreement which are not inconsistent
with the provisions of the 1990 Trust Agreement. No such amendment, however,
may adversely affect in any material respect the interest of the holders of the
1990 Trust Investor Certificates.
The 1990 Trust Agreement may also be amended by NFC, the Seller and the 1990
Trust Trustee with the consent of the holders of 1990 Trust Investor
Certificates evidencing fractional undivided interests aggregating not less
than 66-2/3% of the 1990 Trust Total Invested Amount for the purpose of adding
any provisions to, changing in any manner, or eliminating any of the provisions
of the Agreement or modifying in any manner the rights of holders of 1990 Trust
Investor Certificates. No such amendment, however, may (a) reduce in any
manner the amount of, or delay the timing of, distributions required to be made
on any 1990 Trust Investor Certificate, (b) change the definition of or the
manner of calculating the Class Investor Interest, the 1990 Trust Total
Investor Interest, the Class Invested Amount, the 1990 Trust Total Invested
Amount, the 1990 Trust Total Investor Percentage, the Class Amortization
Percentage, the Class Charged-Off Amount, the Class Loss Amount, the 1990 Trust
Investor Loss Amount, or the 1990 Trust Minimum Seller Interest or (c) reduce
the aforesaid percentage required to consent to any such amendment, in each
case without the consent of each holder of a 1990 Trust Investor Certificate.
Promptly following the execution of any amendment to the 1990 Trust Agreement,
the 1990 Trust Trustee will furnish written notice of the substance of such
amendment to each holder of a 1990 Trust Investor Certificate.
VOTING OF THE MASTER TRUST'S INTERESTS IN THE 1990 TRUST
The Master Trust Trustee will have the right, without the consent of the
Certificateholders, to vote, or to consent or withhold consent with respect to,
the Class A-4 Certificate and any Related 1990 Certificate on any matter for
which votes or consents are solicited under the 1990 Agreement, provided that
such action will not, as evidenced by an officer's certificate of the Servicer,
have a material adverse effect on the Certificateholders of any Series.
The Master Trust Trustee will also have the right, with the consent of the
Applicable Voting Percentage of the Certificateholders, to vote, or to consent
or withhold consent, with respect to the Class A-4 Certificate and any Related
1990 Certificate on any matter for which votes or consents are solicited under
the 1990 Agreement.
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"Applicable Voting Percentage" means, with respect to any matter for
which votes or consents are solicited under the 1990 Agreement, the
percentage of votes or consents of the 1990 Trust Investor Certificates
needed to pass the proposed matter.
AMENDMENT TO SELLER CERTIFICATE OF INCORPORATION
The Pooling and Servicing Agreement authorizes the Seller to amend and restate
its Certificate of Incorporation to allow it greater flexibility in certain
respects than it now enjoys. The amended and restated Certificate of
Incorporation will clarify the degree to which the Seller may incur additional
indebtedness, will provide that further amendments to the amended and restated
Certificate of Incorporation may be effected upon satisfaction of the Rating
Agency Condition with respect to all outstanding rated securities, and will
expand in limited respects the types of securitization transactions in which
the Seller may engage. The Seller intends to file the amended and restated
Certificate of Incorporation no later than the Distribution Date following the
1990 Trust Termination Date. The Seller believes that each of these provisions
is consistent with the establishment of NFSC as a limited purpose corporation.
The amended and restated Certificate of Incorporation will be substantially in
the form of an exhibit to the Pooling and Servicing Agreement, a copy of which
may be obtained from the Master Trust Trustee upon request.
LIST OF CERTIFICATEHOLDERS
In the event that Definitive Certificates are issued, upon written request of
three or more Certificateholders of record, and after having been adequately
indemnified by such Certificateholders for its costs and expenses, the Master
Trust Trustee will afford such Certificateholders access, during normal
business hours, to the current list of Certificateholders for purposes of
communicating with other Certificateholders with respect to their rights under
the Pooling and Servicing Agreement.
SELLER AUTHORIZED TO FILE REPORTS PURSUANT TO SECURITIES EXCHANGE ACT
The Seller is authorized to file on behalf of the Master Trust all reports
required to be filed with the Commission or any exchange or association of
securities dealers pursuant to the Exchange Act, or any rules or regulations
thereunder. The Seller does not intend to maintain registration of the Offered
Certificates under the Exchange Act if it becomes unnecessary to do so.
CERTAIN LIMITATIONS ON RIGHTS OF CERTIFICATEHOLDERS
Except as otherwise described in "Amendments," no Certificateholder will have
any right to vote or control in any manner the operation and management of the
Master Trust, or the obligations of the parties thereto. The Pooling and
Servicing Agreement does not provide for any annual or other meeting of the
Certificateholders.
GOVERNING LAW
The Master Trust will be administered by the Master Trust Trustee in accordance
with the internal laws of the State of Illinois, without reference to its
conflict of law provisions.
TERMS OF THE 1990 TRUST INVESTOR CERTIFICATES
Pursuant to the terms of the 1990 Trust Agreement, each 1990 Trust Investor
Certificate represents a fractional undivided interest in the 1990 Trust,
including the right to receive a floating percentage of NITC Finance Charges,
Dealer Finance Charge Collections, and, with respect to any Amortizing Class, a
fixed percentage of Principal Collections. The 1990 Trust assets include the
Eligible Dealer Notes existing as of the associated Closing Date, any Eligible
Dealer Notes subsequently transferred to the 1990 Trust and all monies due or
to become due with respect thereto, the interest of the Seller in the security
interests in the related Financed Vehicles, all proceeds of the Dealer Notes
(including Insurance Proceeds), the 1990 Trust Investment Securities and such
funds as from time to time are deposited in certain accounts.
The 1990 Trust Seller Certificate represents the 1990 Trust Seller Interest. The
1990 Trust Seller Interest represents that fractional undivided interest in the
1990 Trust which is not represented by the 1990 Trust Investor Certificates,
including the right to receive a floating percentage of NITC Finance Charges,
Dealer Finance Charge Collections and, upon
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amortization, Principal Collections, subject to the subordination of a
portion of its interest to the interests of the holders of 1990 Trust Investor
Certificates.
1990 Trust Investor Certificate Interest on the 1990 Trust Investor
Certificates will be paid on the twenty-fifth day of each month, or if such
twenty-fifth day is not a Business Day, the next Business Day thereafter.
Interest accrues on the unpaid principal amount of each class of 1990 Trust
Investor Certificates at a per annum rate equal to LIBOR plus the "Class
Certificate Margin" (which is set forth in the Prospectus Supplement) (the
"Class Certificate Rate") for such class (calculated on the basis of a 360-day
year of twelve 30-day months).
The Class Amortization Date for any class of 1990 Trust Investor Certificates
(on which date the 1990 Trust related Amortization Period will commence) is the
earlier of (i) the Scheduled Class Amortization Date for such class or (ii) the
date on which a 1990 Trust Amortization Event occurs. Once an Amortization
Period has commenced for any class of 1990 Trust Investor Certificates, monthly
principal payments to holders of such class will begin on the Distribution Date
related to the Due Period in which the Class Amortization Date occurred.
Principal payments on the Class A-1 Investor Certificates began on January 27,
1997, and the Class A-1 Investor Certificates have been paid in full.
Principal payments with respect to the Class A-2 and Class A-3 Investor
Certificates are scheduled to begin on January 26, 1998 and January 25, 1999,
respectively. Because the 1990 Trust Termination Date is expected to occur
prior to the Class Amortization Dates for the Class A-4 Investor Certificate or
the Related 1990 Certificates, no scheduled principal payments are expected to
be made on the Class A-4 Investor Certificate or the Related 1990 Certificates.
TRUST ACCOUNTS
General. Pursuant to the terms of the 1990 Trust Agreement and the 1990 Trust
Interest Deposit Agreement, the 1990 Trust Trustee has established or will
establish six different trust accounts (collectively, the "Trust Accounts"),
each as further described below for the benefit of each class of 1990 Trust
Investor Certificates. Each Trust Account will be a non-interest bearing
segregated account established with the trust department of the 1990 Trust
Trustee or with an office or branch of a depository institution organized under
the laws of the United States of America or any one of the states thereof which
at all times has a short-term certificate of deposit rating of A-1+/P-1 or
better by Standard & Poor's Ratings Group and Moody's Investors Service, Inc.,
respectively, and whose deposits are insured by the Federal Deposit Insurance
Corporation, acting through either the Savings Association Insurance Fund or
the Bank Insurance Fund or any fund established by a United States government
regulatory body or agency succeeding to the function thereof (the "FDIC"), or
any successor thereto (a "Qualified Institution") (which Qualified Institution
may be the 1990 Trust Trustee). The Servicer will have the revocable power to
instruct the 1990 Trust Trustee to withdraw funds from the Trust Accounts for
the purpose of carrying out its duties under the 1990 Trust Agreement and the
1990 Trust Interest Deposit Agreement. Funds on deposit overnight or for a
longer period in a Trust Account will be invested in Eligible Investments with
a stated maturity, if any, within a period from the date of issuance thereof
approved by the Rating Agencies on or prior to the Transfer Date on which the
funds represented thereby are to be deposited in the 1990 Trust Distribution
Account pursuant to the 1990 Trust Agreement, except that with respect to any
funds on deposit in the 1990 Trust Interest Deposit Account, any Eligible
Investment must mature no later than two business days after the end of each
Due Period. (Funds on deposit in the 1990 Trust Interest Deposit Account are
subject to certain other restrictions as specified in the 1990 Trust Interest
Deposit Agreement). Net interest and earnings (less investment expenses) on
all such deposited funds will be included in the calculation of 1990 Trust
Investment Income for the relevant Due Period, except that with respect to the
1990 Trust Spread Account and the 1990 Trust Interest Deposit Account, all such
interest and earnings will be added to the amounts on deposit in each of the
1990 Trust Spread Account and the 1990 Trust Interest Deposit Account,
respectively.
1990 Trust Distribution Account, Collections Account, and Certificate Principal
Account. The 1990 Trust Trustee has established and will maintain in the name
of the 1990 Trust (a) for the benefit of the holders of 1990 Trust Investor
Certificates, (i) a "1990 Trust Distribution Account," from which all payments
to holders of 1990 Trust Investor Certificates will be made and (ii) a
"Certificate Principal Account," which account will serve as the depository for
all Principal Collections allocated to an Amortizing Class until otherwise
transferred to the 1990 Trust Distribution Account on the Transfer Date and (b)
for the benefit of the holders of 1990 Trust Investor Certificates, a "1990
Trust Collections Account," which will serve as the initial depository for all
NITC Finance Charges, Dealer Finance Charge Collections and 1990 Trust
Principal Collections (collectively, the "1990 Trust Collections").
1990 Trust Liquidity Reserve Account. The 1990 Trust Trustee, for the benefit
of the Seller, will establish (on or prior to the commencement of a 1990 Trust
Early Amortization Period) and maintain in the name of the 1990 Trust a "1990
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Trust Liquidity Reserve Account." During a 1990 Trust Early Amortization
Period, all Principal Collections that would otherwise be used for Acquisitions
or paid to the Seller will be deposited in the 1990 Trust Liquidity Reserve
Account until such time as the amount on deposit is equal to the 1990 Trust
Available Subordinated Amount, in order to assure a source of funds for credit
enhancement on the 1990 Trust Investor Certificates. The Seller will possess
all right, title and interest in all funds on deposit in the 1990 Trust
Liquidity Reserve Account, except that no funds on deposit will be paid to the
Seller during a 1990 Trust Early Amortization Period if such payment would
reduce the funds in the 1990 Trust Liquidity Reserve Account below an amount
equal to the 1990 Trust Available Subordinated Amount (see "Terms of the 1990
Trust Investor Certificates -- Limited Subordination of the 1990 Trust Seller
Interest; -- 1990 Trust Available Subordinated Amount; -- 1990 Trust
Amortization Events").
1990 Trust Spread Account. The 1990 Trust Trustee has established and will
maintain in the name of the 1990 Trust, for the benefit of the holders of the
1990 Trust Investor Certificates, a "1990 Trust Spread Account," which account
will be funded at all times with an amount equal to at least 1.25% of the 1990
Trust Total Invested Amount. The funds on deposit will be increased if, as of
the first day of the calendar month in which the Distribution Date occurs or,
if such first day is not a business day, the next business day thereafter, the
sum of the aggregate 1990 Trust Investor Certificate Interest for each class of
1990 Trust Investor Certificates and the 1990 Trust Servicing Fee, in each case
as projected for all classes of 1990 Investor Certificates for the Distribution
Period, and the product of (a) 1.0% per annum calculated on the basis of a
360-day year and twelve 30-day months and (b) the principal amount of Dealer
Notes outstanding exceeds the projected income from the 1990 Trust's portfolio
of Dealer Notes for the related Due Period. The "1990 Trust Projected Spread"
is equal to any such excess plus 1.25% of the 1990 Trust Total Invested Amount.
If the 1990 Trust Projected Spread is greater than the amount on deposit in
the 1990 Trust Spread Account (the "1990 Trust Spread Account Deposit"), the
Servicer will withdraw from the 1990 Trust Collections Account all Principal
Collections remaining after deposits in the Certificate Principal Account of
Principal Collections allocable to any Amortizing Class and deposit such
Principal Collections in the 1990 Trust Spread Account until the amount of the
1990 Trust Spread Account Deposit equals the 1990 Trust Projected Spread;
however, if the 1990 Trust Spread Account Deposit is greater than the 1990
Trust Projected Spread, the Servicer will withdraw the amount of such excess
from the 1990 Trust Spread Account, deposit such excess in the 1990 Trust
Collections Account, and apply it as Principal Collections for the current Due
Period in accordance with the 1990 Trust Agreement. See "Terms of the 1990
Trust Investor Certificates -- Application of Collections."
1990 TRUST AMORTIZATION EVENTS
The occurrence of a 1990 Trust Amortization Event is the only circumstance
under which a 1990 Trust Amortization Term will commence prior to a Scheduled
Class Amortization Date. The "Scheduled Class Amortization Date" for each of
the Class A-2 and Class A-3 Investor Certificates is December 1, 1997, December
1, 1998, respectively, for the Class A-4 Investor Certificate, the earlier of
(a) August 25, 2004 and (b) the date on which there occurs any Early
Amortization Event or Investment Event with respect to the Series of
certificates issued by the Master Trust related to the Class A-4 Investor
Certificate, and, for a Related 1990 Certificate and for any other class of
1990 Trust Investor Certificates issued to the Master Trust, will be set forth
in the Prospectus Supplement. The Scheduled Class Amortization Date for the
Class A-1 Investor Certificates occurred on December 1, 1996, and such
certificates have been paid in full. The first Distribution Date of a 1990
Trust Early Amortization Period will be the Distribution Date related to the
Due Period in which the 1990 Trust Amortization Event takes place. During a
1990 Trust Early Amortization Period, all Principal Collections that would
otherwise be paid to the Seller pursuant to the 1990 Trust Agreement will
instead be deposited in the 1990 Trust Liquidity Reserve Account until such
time as the amount on deposit in the 1990 Trust Liquidity Reserve Account is
equal to the 1990 Trust Available Subordinated Amount.
A "1990 Trust Amortization Event" is defined under the 1990 Trust Agreement as
any one of the following events occurring prior to the 1990 Trust Termination
Date:
(a) failure on the part of the Seller (i) to make any payment,
distribution or deposit required under the 1990 Trust Agreement (or
within five business days thereafter) or (ii) to observe or perform in
any material respect any other material covenants or agreements of the
Seller, which continues unremedied for a period of 60 days after written
notice of such failure shall have been given to the Seller;
(b) any representation or warranty made by the Seller pursuant to the
1990 Trust Agreement or any information contained in the schedule of
Dealer Notes delivered thereunder (or any supplement thereto) shall
prove to have been incorrect in any material respect when made or when
delivered, which representation, warranty or
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schedule, or the circumstances or condition that caused such
representation, warranty or schedule to be incorrect, continues to
be incorrect or uncured in any material respect for a period of 60 days
after written notice of such incorrectness shall have been given to
the Seller;
(c) certain events of bankruptcy, insolvency or receivership involving
any of the Seller, NFC, NITC or NIC;
(d) the Seller shall become legally unable for any reason to transfer
Dealer Notes to the 1990 Trust in accordance with the provisions of the
1990 Trust Agreement;
(e) the 1990 Trust Available Subordinated Amount is reduced to less than
87.1% of the 1990 Trust Maximum Subordinated Amount;
(f) the 1990 Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, and shall not be exempt
from compliance with such Act;
(g) any 1990 Trust Servicer Termination Event shall occur (i) which would
have a material adverse effect on the holders of 1990 Trust Investor
Certificates and (ii) for which the Servicer has received a notice of
termination;
(h) at the end of any Due Period the 1990 Trust Seller Interest is
reduced to an amount less than the 1990 Trust Minimum Seller Interest
and the Seller has failed to assign additional Dealer Notes to the 1990
Trust in the amount of such deficiency within ten business days
following the end of such Due Period;
(i) by reference to the Coverage Differentials (defined generally as the
excess of the annualized yield on the dealer notes over an amount equal
to the weighted average interest payable on the outstanding classes of
1990 Trust Investor Certificates for each of the related Due Period and
the three immediately preceding Due Periods), the sum of the three
highest such Coverage Differentials divided by three (the "Average
Coverage Differential") shall be equal to or less than negative two
percent (2%) on each of three consecutive Determination Dates;
(j) on any Determination Date, the result of (i) the product of (A) the
sum of Dealer Note Collections for each of the related Due Period and
for the two immediately preceding Due Periods and (B) four divided by
(ii) the daily average principal amount of Dealer Notes outstanding
during such Due Periods ("Turnover") is less than 1.7;
(k) on any Determination Date, the quotient of (i) the sum of 1990 Trust
Dealer Note Losses for each of the related Due Period and the five
immediately preceding Due Periods and (ii) the sum of Principal
Collections for each of the related Due Period and the five immediately
preceding Due Periods, is greater than or equal to 1%; or
(l) failure on the part of NITC to make a deposit in the 1990 Trust
Interest Deposit Account required by the terms of the 1990 Trust
Interest Deposit Agreement on or before the date occurring five business
days after the date such deposit is required by the 1990 Trust Interest
Deposit Agreement to be made.
In the case of any event described in clause (a) or (b) above, a 1990 Trust
Amortization Event will be deemed to have occurred only if, after the
applicable grace period expires, either the 1990 Trust Trustee or holders of
1990 Trust Investor Certificates evidencing fractional undivided interests
aggregating not less than 51% of the 1990 Trust Total Invested Amount by
written notice to the Seller and the Servicer (and to the 1990 Trust Trustee if
given by the holders of 1990 Trust Investor Certificates), declare that a 1990
Trust Amortization Event has occurred as of the date of such notice, and in the
case of any other event described above, a 1990 Trust Amortization Event will
be deemed to have occurred without any notice or other action on the part of
the 1990 Trust Trustee or the holders of 1990 Trust Investor Certificates
immediately upon the occurrence of such event. Upon the occurrence of a 1990
Trust Amortization Event, a "1990 Trust Early Amortization Period" will
commence.
LIMITED SUBORDINATION OF THE 1990 TRUST SELLER INTEREST; 1990 TRUST AVAILABLE
SUBORDINATED AMOUNT
The right of the holder of the 1990 Trust Seller Certificate to receive
payments in respect of the 1990 Trust Seller Interest is subordinated to the
interests of holders of the 1990 Trust Investor Certificates to the extent of
the 1990 Trust Available Subordinated Amount. The "1990 Trust Available
Subordinated Amount" for the Distribution Date immediately preceding the
related Closing Date will be set forth in the Prospectus Supplement. As
amounts are made available for the benefit of the holders of the 1990 Trust
Investor Certificates from the subordinated portion of the 1990 Trust Seller
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Interest, the 1990 Trust Available Subordinated Amount and, in certain
circumstances, the 1990 Trust Seller Interest, will be reduced. In subsequent
Due Periods, the 1990 Trust Available Subordinated Amount may be reinstated by
payments of 1990 Trust Excess Servicing to the holder of the 1990 Trust Seller
Certificate (but in no event to exceed the 1990 Trust Maximum Subordinated
Amount).
As further protection for the holders of the 1990 Trust Investor Certificates,
the 1990 Trust Agreement requires the 1990 Trust Seller Interest to be
maintained at an amount equal to (a) the greater of (i) 118.5% of the sum of
the Class Initial Invested Amounts for all outstanding classes of 1990 Trust
Investor Certificates and (ii) after the earlier of the Scheduled Class
Amortization Date for such class and the date on which a 1990 Trust
Amortization Event occurs (the "Class Amortization Date"), 90% of the sum of
the 1990 Trust Total Invested Amount and the 1990 Trust Seller Interest as of
such Class Amortization Date, minus (b) the 1990 Trust Total Invested Amount
(the "1990 Trust Minimum Seller Interest"). Therefore, if any payment to the
Seller pursuant to the 1990 Trust Agreement would reduce the 1990 Trust Seller
Interest to an amount below the 1990 Trust Minimum Seller Interest, rather than
making such payment to the holder of the 1990 Trust Seller Certificate, such
payment will instead, to the extent necessary to maintain the 1990 Trust Seller
Interest at an amount equal to the 1990 Trust Minimum Seller Interest, be
invested by the 1990 Trust Trustee in 1990 Trust Investment Securities.
"1990 Trust Investment Securities" means investments of Principal Collections
in Eligible Investments necessary in order to maintain the 1990 Trust Seller
Interest at an amount not less than the 1990 Trust Minimum Seller Interest.
Generally, the maximum 1990 Trust Available Subordinated Amount (the "1990
Trust Maximum Subordinated Amount") will equal 15.5% of the 1990 Trust Total
Invested Amount. Therefore, as Principal Collections during a 1990 Trust
Amortization Term reduce the 1990 Trust Total Invested Amount, the 1990 Trust
Maximum Subordinated Amount will be proportionately reduced. However, if on
any date (a) the sum of (i) the difference between the 1990 Trust Maximum
Subordinated Amount and the 1990 Trust Available Subordinated Amount, each as
of such Class Amortization Date, and (ii) the aggregate amount of reductions to
the 1990 Trust Available Subordinated Amount due to principal losses or
interest deficiencies after such Class Amortization Date exceeds (b) 2% of the
1990 Trust Total Invested Amount as of such date, the 1990 Trust Maximum
Subordinated Amount will not decline until the 1990 Trust Total Invested Amount
equals the 1990 Trust Maximum Subordinated Amount, and thereafter the 1990
Trust Maximum Subordinated Amount will equal the 1990 Trust Total Invested
Amount. In addition, if only one class of 1990 Trust Investor Certificates is
outstanding, the 1990 Trust Maximum Subordinated Amount will not be reduced
below the 1990 Trust Minimum Subordinated Amount until the 1990 Trust Total
Invested Amount equals such 1990 Trust Minimum Subordinated Amount, and
thereafter the 1990 Trust Maximum Subordinated Amount will decline dollar for
dollar with the 1990 Trust Total Invested Amount. The "1990 Trust Minimum
Subordinated Amount" will equal 6% of the Class Initial Invested Amount of such
outstanding class.
Notwithstanding the foregoing, if a 1990 Trust Amortization Event occurs, the
1990 Trust Maximum Subordinated Amount will remain at its then current level
until the 1990 Trust Total Invested Amount is reduced to such level, whereupon
the 1990 Trust Maximum Subordinated Amount will decline dollar for dollar with
the 1990 Trust Total Invested Amount.
For any Due Period, the 1990 Trust Available Subordinated Amount will be the
lesser of (a) the 1990 Trust Maximum Subordinated Amount at the end of the
immediately preceding Due Period and (b) the 1990 Trust Available Subordinated
Amount at the end of the immediately preceding Due Period after adjusting for
any payments by the 1990 Trust described herein.
NON-AMORTIZATION PERIOD; AMORTIZATION TERM
During any period in which no class of 1990 Trust Investor Certificates is
amortizing (a "Non-Amortization Period"), all Dealer Notes and 1990 Trust
Investment Securities will be treated alike, and there will be no principal
payments made with respect to any class. Upon the occurrence of any Scheduled
Class Amortization Date or, if earlier, a 1990 Trust Amortization Event, a 1990
Trust Amortization Term will commence, and each Amortizing Class will begin to
receive monthly payments of principal in addition to interest. If the 1990
Trust Amortization Event has commenced by reason of a Scheduled Class
Amortization Date, the remaining classes (each a "Non-Amortizing Class") will
continue to receive monthly payments of interest, without payment of principal.
A 1990 Trust Amortization Term will end on the date on which the final
distribution to the holders of the 1990 Trust Investor Certificates of any
Amortizing Class is made.
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COLLECTIONS
NITC Finance Charges; Dealer Finance Charge Collections. On the NITC Interest
Transfer Date, the Servicer will direct the 1990 Trust Trustee to withdraw from
the 1990 Trust Interest Deposit Account and deposit in the 1990 Trust
Collections Account an amount equal to the NITC Finance Charges for the
immediately preceding Due Period. In addition, the Servicer will deposit all
Dealer Finance Charge Collections in the 1990 Trust Collections Account within
two business days of receipt thereof, net of any Dealer Finance Charge
Collections that represent Advance Reimbursements. Finally, the Servicer will
deposit any Advance for the Due Period in the 1990 Trust Collections Account on
the Transfer Date.
Principal Collections. Each business day during the Non-Amortization Period,
the Servicer will deposit all Principal Collections in the 1990 Trust
Collections Account within two business days of receipt thereof. The Servicer
will first utilize such Principal Collections to make any necessary payments to
the 1990 Trust Spread Account. To the extent available, the Servicer will next
utilize Principal Collections to acquire all available Dealer Notes from the
Seller. Finally, the Principal Collections remaining in the 1990 Trust
Collections Account after giving effect to all payments and adjustments
described in this paragraph will be paid to the Seller and the 1990 Trust
Seller Interest will be reduced by the amount of such payment, except that if
the 1990 Trust Seller Interest is reduced to an amount equal to the 1990 Trust
Minimum Seller Interest, any remaining Principal Collections in the 1990 Trust
Collections Account will be held as 1990 Trust Investment Securities (which
1990 Trust Investment Securities will mature on or prior to the Transfer Date
related to the Due Period in which they are acquired).
Each business day during an Amortization Term, the Servicer will deposit all
Principal Collections in the 1990 Trust Collections Account within two business
days of receipt thereof. For each Amortizing Class, the Servicer will direct
the 1990 Trust Trustee to withdraw from the 1990 Trust Collections Account and
deposit in the Certificate Principal Account an amount equal to the product of
the amount of Dealer Note Collections deposited in the 1990 Trust Collections
Account since the preceding business day and the Class Amortization Percentage
for such Amortizing Class. Except as provided below, the remaining Principal
Collections in the 1990 Trust Collections Account will be (a) first, deposited
in the 1990 Trust Spread Account if any payment to the 1990 Spread Account is
necessary pursuant to the terms of the 1990 Trust Agreement, (b) second (except
in certain limited circumstances), used to acquire Dealer Notes and (c) third,
paid to the Seller (subject to the terms and conditions described in the
preceding paragraph). During a 1990 Trust Early Amortization Period, any
amount that would otherwise be used for Acquisitions or paid to the Seller will
instead be deposited in the 1990 Trust Liquidity Reserve Account, until the
amount of funds in such Account equals the 1990 Trust Available Subordinated
Amount.
On each Transfer Date during a 1990 Trust Amortization Term, for each
Amortizing Class, the Servicer will direct the 1990 Trust Trustee to deposit in
the Certificate Principal Account an amount equal to the product of the
principal amount of the proceeds of 1990 Trust Investment Securities maturing
on such Transfer Date (after giving effect to any payments made for the benefit
of holders of 1990 Trust Investor Certificates) and the Class Amortization
Percentage for such Amortizing Class, except that the Servicer will not direct
the 1990 Trust Trustee to make such a transfer if, after giving effect to such
transfer, the 1990 Trust Seller Interest would be reduced to less than the 1990
Trust Minimum Seller Interest. The remaining proceeds will be deposited in the
1990 Trust Spread Account, used to acquire Dealer Notes or paid to the Seller
in accordance with the 1990 Trust Agreement.
APPLICATION OF COLLECTIONS
1990 Trust Monthly Servicing Fee; Advance Reimbursements. On each Transfer
Date, prior to making any payments in accordance with the terms and conditions
described in this section, the 1990 Trust Monthly Servicing Fee for the Due
Period and any unpaid Advance Reimbursements will be paid to the Servicer (such
payment will be paid from NITC Finance Charges and Dealer Finance Charge
Collections).
1990 Trust Investor Certificate Interest. The primary source for the payment
of 1990 Trust Investor Certificate Interest, with respect to any Due Period,
will be "1990 Trust Investor Interest Income," which will equal the product of
(a) the amount by which 1990 Trust Interest Income exceeds the sum of the 1990
Trust Monthly Servicing Fee, Advance Reimbursements and 1990 Trust Excess
Servicing as of the related Determination Date and (b) the 1990 Trust Total
Investor Percentage. If the amount of 1990 Trust Investor Interest Income to
be deposited in the 1990 Trust Distribution Account on any Transfer Date is
less than accrued and unpaid 1990 Trust Investor Certificate Interest, funds
from the following sources will be paid to the 1990 Trust Distribution Account
for the benefit of the holders of 1990 Trust
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Investor Certificates up to the amount of the 1990 Trust Available Subordinated
Amount (and in each case such payment to the 1990 Trust Distribution Account
will be made only to the extent of the remaining deficiency and in no event
will such payment exceed the remaining 1990 Trust Available Subordinated
Amount, which will be reduced by the amount of any such payment): (i) first,
from 1990 Trust Seller Interest Income, if any, (ii) second, through a cash
withdrawal from the 1990 Trust Spread Account, (iii) third, from the proceeds
of 1990 Trust Investment Securities maturing on the Transfer Date and (iv)
fourth, during a 1990 Trust Amortization Term, through a cash withdrawal from
the 1990 Trust Liquidity Reserve Account (and each payment pursuant to clauses
(ii), (iii) and (iv) will reduce the 1990 Trust Seller Interest by the amount
of such payment).
1990 Trust Deficiency Amounts. If on any Transfer Date there is a previously
existing 1990 Trust Deficiency Amount and the amount deposited in the 1990
Trust Distribution Account pursuant to the preceding paragraph is equal to 1990
Trust Investor Certificate Interest for the Distribution Period, then 1990
Trust Excess Servicing will be used to reduce the 1990 Trust Deficiency Amount.
If a deficiency remains, funds from the following sources will be paid to the
1990 Trust Distribution Account for the benefit of the holders of 1990 Trust
Investor Certificates, up to the amount of the 1990 Trust Available
Subordinated Amount (and in each case such payment to the 1990 Trust
Distribution Account will be made only to the extent of the remaining
deficiency and in no event will such payment exceed the remaining 1990 Trust
Available Subordinated Amount, which will be reduced by the amount of any such
payment): (a) first, from 1990 Trust Seller Interest Income, if any, (b)
second, through a cash withdrawal from the 1990 Trust Spread Account, (c)
third, from the proceeds of 1990 Trust Investment Securities maturing on the
Transfer Date and (d) fourth, during a 1990 Trust Amortization Term, through a
cash withdrawal from the 1990 Trust Liquidity Reserve Account (and each payment
pursuant to clauses (b), (c) and (d) will reduce the 1990 Trust Seller Interest
by the amount of such payment). Any 1990 Trust Deficiency Amount remaining
after giving effect to the payments described in this paragraph and the
preceding paragraph will be allocated among the classes of 1990 Trust Investor
Certificates pro rata according to Class Investor Interests as of the beginning
of the Due Period and each class of 1990 Trust Investor Certificates' pro rata
share of the 1990 Trust Deficiency Amount will not be available for
distribution to such class.
"Class Investor Interest" means, on any date during any Due Period with
respect to any class of 1990 Trust Investor Certificates, an amount equal to
the related Class Initial Invested Amount minus the sum of (a) the aggregate
amount on deposit in the Certificate Principal Account allocable to the
holders of such class on such date, (b) the aggregate amount of payments of
Certificate Principal paid to such class prior to such Due Period, (c) the
aggregate amount of Class Charged-off Amounts not reimbursed prior to such
Due Period (after giving effect to the payments and adjustments described
herein), and (d) the aggregate amount of Certificate Principal Account
Losses, allocable to the respective class of 1990 Trust Investor
Certificates.
"Certificate Principal Account Losses" means losses of principal on
investments of funds on deposit in the Certificate Principal Account. If
there is more than one Amortizing Class during any Due Period, Certificate
Principal Account Losses will be allocated pro rata on the basis of Class
Investor Interests.
1990 Trust Principal Losses--1990 Trust Non-Amortization Period. On each
Transfer Date during which a 1990 Trust Amortization Period is not occurring
(the "1990 Trust Non-Amortization Period") the Servicer will determine the
amount of 1990 Trust Principal Losses allocable to the holders of 1990 Trust
Investor Certificates on the basis of the 1990 Trust Total Investor Percentage
(the "1990 Trust Investor Loss Amount").
"1990 Trust Principal Losses" means, with respect to any Due Period, the sum of
(a) the Dealer Note Losses and (b) the aggregate amount of losses on the sale
of 1990 Trust Investment Securities; provided, however, the 1990 Trust
Principal Losses will not include Certificate Principal Account Losses.
"1990 Trust Amortization Period" means, for a class of 1990 Trust Investor
Certificates, the period during which such class is amortizing.
Any such 1990 Trust Investor Loss Amount will be allocated to the Seller
through a payment to the Seller of an amount of 1990 Trust Excess Servicing, if
any remains after giving effect to the payments described above, equal to the
1990 Trust Investor Loss Amount, in exchange for an equal amount of the 1990
Trust Seller Interest. Both the 1990 Trust Seller Interest and the 1990 Trust
Investor Loss Amount will be reduced by the amount of such payment. If the
available 1990 Trust Excess Servicing is less than the 1990 Trust Investor Loss
Amount, the 1990 Trust Seller Interest will be further reduced by an amount
equal to the lesser of (a) the 1990 Trust Available Subordinated Amount (after
giving effect to any previous increases or decreases therein) and (b) the
remaining 1990 Trust Investor Loss Amount. The 1990
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Trust Investor Loss Amount and the 1990 Trust Available Subordinated Amount
each will be reduced by the amount of such further reduction in the 1990 Trust
Seller Interest.
1990 Trust Principal Losses-Amortization Term. On each 1990 Trust Transfer
Date during any period during which a 1990 Trust Amortization Period is
occurring (a "1990 Trust Amortization Term"), an amount not to exceed the
lesser of 1990 Trust Excess Servicing (after giving effect to the payments
described above) and the 1990 Trust Investor Loss Amount, each for the related
Due Period, will be withdrawn from the 1990 Trust Collections Account and
deposited in the 1990 Trust Distribution Account or paid to the Seller as
described below. The amount of 1990 Trust Excess Servicing withdrawn from the
1990 Trust Collections Account will be allocated among the classes of 1990
Trust Investor Certificates pro rata according to Class Investor Interests as
of the beginning of the Due Period. If 1990 Trust Excess Servicing is less
than the 1990 Trust Investor Loss Amount, the amount of such deficiency will be
allocated pro rata among the classes of 1990 Trust Investor Certificates
according to Class Investor Interests as of the beginning of the Due Period and
will be added to the related Class Loss Amounts.
The amount of 1990 Trust Excess Servicing allocable to each Non-Amortizing
Class will be paid to the Seller in exchange for an equal amount of the 1990
Trust Seller Interest, which will be reduced by the amount of any such payment.
If a deficiency remains, the 1990 Trust Seller Interest will be further
reduced by an amount equal to the lesser of the 1990 Trust Available
Subordinated Amount (after giving effect to any previous adjustments thereof)
and the sum of the Class Loss Amounts for the Non-Amortizing Classes. The 1990
Trust Available Subordinated Amount will be reduced, and the Class Loss Amounts
for the Non-Amortizing Classes will be reduced pro rata according to Class
Investor Interests as of the beginning of the Due Period, by the amount by
which the 1990 Trust Seller Interest is further reduced. The Class Loss
Amounts remaining after the adjustments described in this paragraph will be the
respective "Class Charged-Off Amounts" for the Non-Amortizing Classes, which
will reduce the related Class Invested Amounts and Class Investor Interests.
"Class Invested Amount" means, with respect to any Distribution Period for
any class of 1990 Trust Investor Certificates, the related Class Initial
Invested Amount minus the sum of (a) the aggregate amount of payments of
Certificate Principal paid to the holders of such class on or prior to the
Distribution Date for the immediately preceding Distribution Period, (b) the
aggregate amount of Class Charged-off Amounts not reimbursed on or prior to
the Distribution Date for the immediately preceding Distribution Period and
(c) the aggregate amount of Certificate Principal Account Losses on or prior
to the Distribution Date for the immediately preceding Due Period allocable
to the respective class of 1990 Trust Investor Certificates.
"Class Loss Amount" means, with respect to any Due Period for any class of
1990 Trust Investor Certificates, the sum of (a) such class's pro rata share
of any Investor Loss Amount (after giving effect to the payment of 1990 Trust
Excess Servicing), (b) the Class Charged-Off Amount (if any) for such class
at the end of the prior Due Period (after giving effect to the payments and
adjustments described herein), and (c) the Certificate Principal Account
Losses (if any) allocable to such class for the Due Period. The Class Loss
Amount for each class of 1990 Trust Investor Certificates shall initially be
zero.
"Class Initial Invested Amount" with respect to any outstanding class of 1990
Trust Investor Certificates will be set forth in the Prospectus Supplement.
The amount of 1990 Trust Excess Servicing allocable to an Amortizing Class will
be paid from the 1990 Trust Distribution Account to such Amortizing Class. If
any Amortizing Class has a previously existing Class Loss Amount, an amount
equal to the lesser of the Class Loss Amount for such class and any remaining
1990 Trust Excess Servicing will be deposited in the 1990 Trust Distribution
Account for payment to the holders of 1990 Trust Investor Certificates of such
Amortizing Class, and the related Class Loss Amount will be reduced by the
amount of such payment. If two or more classes of 1990 Trust Investor
Certificates are amortizing simultaneously, such payment of 1990 Trust Excess
Servicing will be allocated pro rata among such Amortizing Classes based on
Class Investor Interests as of the beginning of the Due Period. If, after
giving effect to the payments described above, a Class Loss Amount remains with
respect to an Amortizing Class, payments first, from the positive amount, if
any, by which the sum of all Dealer Finance Charges, NITC Finance Charges and
1990 Trust Investment Income exceeds Uncollectible Finance Charges, each for
such Due Period (the "1990 Trust Seller Interest Income") and second, during a
1990 Trust Early Amortization Period through a withdrawal from the 1990 Trust
Liquidity Reserve Account, will be made to the 1990 Trust Distribution Account
for the benefit of such Amortizing Class to the extent of the 1990 Trust
Available Subordinated Amount, which will be reduced by the amount of such
payment. Each payment described in the preceding sentence will be allocated
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pro rata among all Amortizing Classes that have Class Loss Amounts based on
Class Investor Interests as of the beginning of the Due Period and will be made
only to the extent of the remaining Class Loss Amounts for such classes and in
no event in excess of the 1990 Trust Available Subordinated Amount. If the
aggregate amount deposited in the 1990 Trust Distribution Account for the
benefit of an Amortizing Class pursuant to the provisions described in this
paragraph is less than the Class Loss Amount for such class, the 1990 Trust
Seller Interest and the Class Loss Amount each will be reduced by the amount of
such remaining deficiency to the extent of the 1990 Trust Available
Subordinated Amount (after giving effect to any previous adjustments thereof).
The Class Loss Amount for an Amortizing Class remaining after giving effect to
the payments and adjustments described in this paragraph is the Class
Charged-Off Amount for such class for the Due Period. The related Class
Invested Amount and Class Investor Interest will be increased or reduced, as
the case may be, by an amount equal to the difference between (a) the Class
Charged-Off Amount for the immediately preceding Due Period and (b) the Class
Charged-Off Amount for the Due Period. All payments to an Amortizing Class
described in this paragraph will be treated as payments of Certificate
Principal and will therefore reduce the related Class Invested Amount and Class
Investor Interest by the amount of such payments.
If the sum of the Class Loss Amounts for all outstanding classes of 1990 Trust
Investor Certificates (after the application of 1990 Trust Excess Servicing)
exceeds the 1990 Trust Available Subordinated Amount (after giving effect to
all previous adjustments thereof), the 1990 Trust Available Subordinated Amount
will be allocated pro rata among the classes of 1990 Trust Investor
Certificates according to Class Investor Interests as of the beginning of the
Due Period and each class of 1990 Trust Investor Certificates will only have
available such class' pro rata share of the 1990 Trust Available Subordinated
Amount.
DISTRIBUTIONS
General. During the term of the 1990 Trust, the amounts to be paid to the
holders of 1990 Trust Investor Certificates will be (unless otherwise
specified) withdrawn from the 1990 Trust Collections Account and deposited in
the 1990 Trust Distribution Account on each Transfer Date. On each
Distribution Date, the 1990 Trust Trustee will instruct the paying agent how to
distribute the amounts on deposit in the 1990 Trust Distribution Account to the
holders of 1990 Trust Investor Certificates. Payments made in respect of a
Related 1990 Certificate will be made by wire transfer to such account as the
1990 Trust Trustee shall designate. The 1990 Trust Trustee is acting as the
paying agent. The 1990 Trust Trustee will be permitted to resign as paying
agent upon 30 days prior written notice and upon the appointment of a successor
thereto. Any paying agent will have the revocable power to withdraw funds from
the 1990 Trust Distribution Account for the purpose of making the distributions
referred to above.
Investor Certificateholders. On each Distribution Date during the 1990 Trust
Non-Amortization Period, the Servicer will direct the 1990 Trust Trustee to
withdraw and cause the paying agent to pay funds from the 1990 Trust
Distribution Account to the holders of 1990 Trust Investor Certificates in an
amount equal to the 1990 Trust Investor Certificate Interest plus the 1990
Trust Deficiency Amount as of the immediately preceding Distribution Date.
"1990 Trust Investor Certificate Interest" means, with respect to any
Distribution Period, an amount equal to interest at one-twelfth of the
related Class Certificate Rate multiplied by the related Class Invested
Amount for such Distribution Period for each class of 1990 Trust Investor
Certificates outstanding during such Distribution Period.
On each Transfer Date during a 1990 Trust Amortization Term, all amounts, if
any, on deposit in the Certificate Principal Account with respect to Principal
Collections during the related Due Period will be deposited in the 1990 Trust
Distribution Account. The Servicer will then direct the 1990 Trust Trustee to
cause the paying agent to pay from funds in the Distribution Account available
therefor on each Distribution Date, first, to the holders of certificates in
any Amortizing Class, the amount of Principal Collections allocable to such
class and second, to the holders of 1990 Trust Investor Certificates (including
the Master Trust Trustee with respect to a Related 1990 Certificate), an amount
equal to 1990 Trust Investor Certificate Interest plus the 1990 Trust
Deficiency Amount as of the immediately preceding Distribution Date.
Seller. The Seller will be entitled to receive any 1990 Trust Excess Servicing
which is not needed to reimburse holders of 1990 Trust Investor Certificates
for losses suffered during any Due Period and, to the extent that the 1990
Trust Available Subordinated Amount has been previously reduced, 1990 Trust
Excess Servicing will reinstate it accordingly (but in no event in excess of
the 1990 Trust Maximum Subordinated Amount). In addition, an amount equal to
the excess of all remaining Dealer Finance Charge Collections, Advances and
NITC Finance Charges during any Due Period
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over the sum of all other payments required to be made under the 1990 Trust
Agreement during such Due Period will be paid to the Seller.
NET PAYMENT
All payments made pursuant to the 1990 Trust Agreement on any Transfer Date on
which NFC is the Servicer between the Servicer and the 1990 Trust Collections
Account may be aggregated for such Transfer Date such that NFC, acting as
Servicer, will only make one payment to such account in satisfaction of all
payments of the Servicer pursuant to the Agreement, reduced by the amount to be
received by NFC, acting as Servicer and as agent of the Seller, from the 1990
Trust Distribution Account on the related Distribution Date.
CLASS TERMINATION DATE
All principal or interest with respect to any class of 1990 Trust Investor
Certificates will be due and payable no later than January 25, 2002 for the
Class A-2 Investor Certificates, January 25, 2003 for the Class A-3 Investor
Certificates, July 25, 2007 for the Class A-4 Investor Certificate and, with
respect to any Related 1990 Certificate, such date as is set forth in the
Prospectus Supplement (each, a "Class Termination Date"). If the Class
Investor Interest of any class of 1990 Trust Investor Certificates is greater
than zero on its Class Termination Date, the 1990 Trust Trustee will sell or
cause to be sold an amount of Dealer Notes up to 110% of the Class Investor
Interest of such class at the close of business on such date, and will pay the
proceeds to all holders of 1990 Trust Investor Certificates of such class pro
rata in final payment of all principal of and accrued interest on such 1990
Trust Investor Certificates. Any proceeds of such sale in excess of such
principal and interest paid will be paid to the Seller. Upon the Class
Termination Date with respect to any Class Investor Certificates, final payment
of all amounts allocable to any 1990 Trust Investor Certificates of such class
will be made only upon presentation and surrender of such 1990 Trust Investor
Certificates at the office or agency specified in the notice of final
distribution to the holders of 1990 Trust Investor Certificates. The 1990
Trust Trustee will provide such notice to registered holders of 1990 Trust
Investor Certificates not later than the Determination Date of the month of
such final payment.
OPTIONAL REPURCHASE
The Seller may repurchase, at its option, all outstanding classes of 1990 Trust
Investor Certificates after the Class Investor Interest for each class of 1990
Trust Investor Certificates has been reduced to an amount equal or less than
ten percent of the class Initial Investor Interest for each such class. The
Seller may effect such repurchase by depositing into the Certificate Principal
Account an amount equal to the sum of each such Class Investor Interests plus
accrued and unpaid interest thereon at the applicable class Certificate Rates.
TERMINATION OF 1990 TRUST
The 1990 Trust will terminate on the earlier to occur of (a) the day after the
day on which funds shall have been deposited in the 1990 Trust Distribution
Account sufficient to pay the Class Invested Amount plus interest accrued at
the applicable Class Certificate Rate through the last day of the Distribution
Period relating to such Distribution Date in full on each of the Class A-1,
A-2, and A-3 Investor Certificates and (b) a day which is 21 years less one day
after the death of the last survivor of all the officers and the lineal
descendants of every officer of the 1990 Trust Trustee who were living on the
date of the 1990 Trust Agreement, except that if at any time any such rights,
privileges, or options shall be or become valid under applicable law for a
period subsequent to the 21st anniversary of the death of such last survivor
(or, without limiting the generality of the foregoing, if legislation shall
become effective providing for the validity or permitting the effective grant
of such rights, privileges, and options for a period in gross exceeding the
period for which such rights, privileges, and options are hereinabove stated to
extend and be valid), then such rights, privileges, or options shall not
terminate as aforesaid but shall extend to and continue in effect, but only if
such not termination and extension shall then be valid under applicable law,
until on day prior to such time as the same shall, under applicable law, cease
to be valid.
If on the Distribution Date in the month immediately preceding the month in
which the termination of the 1990 Trust occurs pursuant to clause (b) above,
the Class Invested Amount of any class of 1990 Trust Investor Certificates
would be greater than zero, the Servicer will sell within 30 days of such
Distribution Date all of the Dealer Notes owned by
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the 1990 Trust. The proceeds of such sale will be treated as 1990 Trust
Collections and will be allocated in accordance with the 1990 Trust Agreement.
DESCRIPTION OF THE PURCHASE AGREEMENTS
The Dealer Notes are transferred to the Active Trust by the Seller and are
acquired by the Seller from NFC (a) prior to the 1990 Trust Termination Date,
pursuant to the Purchase Agreement dated as of December 1, 1990 between NFC and
NFSC (the "1990 Trust Purchase Agreement") and (b) after the 1990 Trust
Termination Date, pursuant to the Purchase Agreement dated as of June 8, 1995
between NFC and NFSC and to be effective on the 1990 Trust Termination Date
(the "Master Trust Purchase Agreement," and together with the 1990 Trust
Purchase Agreement, the "Purchase Agreements") (the operative Purchase
Agreement being the "Active Purchase Agreement"). The following summary
describes certain terms of the Purchase Agreements and is qualified in its
entirety by reference to the Purchase Agreements.
PRIOR SALES OR TRANSFER OF DEALER NOTES
Pursuant to the 1990 Trust Purchase Agreement, NFC has, since December 27,
1990, on each business day sold or transferred to the Seller all of its right,
title and interest in and to all of the Eligible Dealer Notes (other than
Dealer Notes contributed by NFC to NFSC (the "Contributed Dealer Notes")) owned
by it on such day, all monies due (including accrued finance charges) or to
become due with respect thereto and all proceeds (including Insurance Proceeds)
thereon, and the interest of NFC in the security interests in the Financed
Vehicles related to such Dealer Notes. The purchase price paid by the Seller
for such Dealer Notes was the principal amount thereof plus accrued finance
charges thereon. Such purchase price was paid by the Seller either in cash or
by means of a loan under the Master Revolving Credit Agreement (a "Master
Loan"). Pursuant to the Contribution Agreement, on December 27, 1990, NFC
transferred to the Seller as a one-time contribution to capital the Contributed
Dealer Notes, all monies due (including accrued finance charges) or to become
due with respect thereto and all proceeds (including Insurance Proceeds)
thereon, and the interest of NFC in the security interests in the Financed
Vehicles related to such Dealer Notes.
In connection with the sales or transfers of the Dealer Notes to the Seller,
NFC indicates in its computer files that the Dealer Notes have been sold or
transferred to the Seller, and that such Dealer Notes have been transferred by
the Seller to the 1990 Trust. In addition, NFC provides to the Seller a
computer file or a microfiche list containing a true and complete list of all
such Dealer Notes, identified by Dealer Note number. The records and
agreements relating to the Dealer Notes have not been and will not be
segregated by NFC from other documents and agreements relating to other
wholesale notes and have not been and will not be stamped or marked to reflect
the sale or transfer of the Dealer Notes to the Seller, but the computer
records of NFC are marked to evidence such sale or transfer. NFC has filed
Uniform Commercial Code financing statements with respect to the Dealer Notes
meeting the requirements of Illinois, New York and Delaware state law. See
"Special Considerations--Certain Legal Aspects" and "Certain Matters Relating
to the Dealer Notes."
ONGOING DAILY SALES OF DEALER NOTES
The Purchase Agreements provide that on each business day during the term of
the Active Trust (except upon the occurrence of a bankruptcy event involving
the Seller, NFC , NITC or NIC), NFC will continue to sell to the Seller (each
such transaction, a "Daily Note Sale") all Eligible Dealer Notes existing and
owned by NFC as of such business day, all monies due or to become due with
respect thereto and all proceeds (including Insurance Proceeds) thereon, and
the interest of NFC in the security interests in the Financed Vehicles related
to such Dealer Notes. The Active Purchase Agreement permits NFC to adjust the
principal amount of Dealer Notes that are considered Eligible Dealer Notes (see
"Description of the Offered Certificates--Eligible Dealer Notes").
The purchase price to be paid by the Seller for such Dealer Notes will equal
the principal amount of such Dealer Notes plus accrued finance charges thereon,
and will be paid to NFC in the form of cash or a Master Loan under the Master
Revolving Credit Agreement. However, if the amount specified above does not,
in the opinion of the Seller, approximate the fair market value of the Dealer
Notes being purchased, then such Daily Note Sale shall be on terms between NFC
and the Seller that reasonably approximate such fair market value.
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In connection with each Daily Note Sale, NFC will update its computer files to
indicate that Dealer Notes have been sold to the Seller pursuant to a Daily
Note Sale and deliver to the Seller a computer file, hard copy or microfiche
list containing a true and complete list of all Dealer Notes sold to the Seller
pursuant to such Daily Note Sale, identified by Dealer Note number.
REPRESENTATIONS AND WARRANTIES
NFC has made certain representations and warranties to the Seller to the effect
that, among other things, (a) it is duly incorporated and in good standing and
that it has the authority to consummate the transactions contemplated by the
Purchase Agreements, (b) each of the Purchase Agreements is the valid, binding
and enforceable obligation of NFC, (c) that all information furnished to the
Seller is accurate in all material respects and (d) that there are no
proceedings pending or threatened against NFC that would have a material
adverse effect on the performance by NFC of its obligations under the Purchase
Agreements.
REPURCHASE OBLIGATIONS
NFC has agreed in the Active Purchase Agreement that if the Seller is required
to repurchase the 1990 Trust Investor Certificates issued by the 1990 Trust or
the Certificateholders' Interest pursuant to the Applicable Agreement, NFC will
in turn repurchase such certificates or the Certificateholders' Interest from
the Seller. The purchase price paid by NFC will be equal to the purchase price
required to be paid by the Seller pursuant to the Applicable Agreement, and
shall be paid prior to or concurrently with any corresponding payments required
to be made by the Seller pursuant to the Applicable Agreement.
NFC also has agreed in the Active Purchase Agreement that if (a) any Dealer
Note has not been sold to the Seller free and clear of any encumbrances or is
not in compliance with all legal requirements applicable to NFC, (b) NFC has
not obtained all necessary governmental consents or approvals required to be
obtained in connection with the sale of such Dealer Note to the Seller or
(c) the Seller has otherwise been required to repurchase such Dealer Note
pursuant to the Applicable Agreement, then NFC will repurchase such Dealer Note
from the Seller. The purchase price to be paid for such Dealer Note will equal
the principal amount of such Dealer Note plus accrued finance charges thereon.
NFC must pay for such Dealer Note no later than the date upon which the Seller
is obligated to make a corresponding payment to the Active Trust pursuant to the
Applicable Agreement.
CERTAIN COVENANTS
In the Active Purchase Agreement, NFC has covenanted that it will perform its
obligations under the agreements relating to the Dealer Notes in conformity
with the Credit Guidelines. NFC has further covenanted that, except for the
sale and conveyances under the Active Purchase Agreement or the Applicable
Agreement, NFC will not sell, pledge, assign or transfer any interest in the
Dealer Notes to any other person. NFC has also covenanted that it will file
all necessary documents covering the Seller's right, title and interest in the
Dealer Notes.
TERMINATION
The then Active Purchase Agreement will terminate immediately after the Master
Trust terminates.
FEDERAL INCOME TAX MATTERS
GENERAL
The following discussion of anticipated material generally applicable federal
income tax consequences of the purchase, ownership and disposition of Offered
Certificates is based on the advice of Kirkland & Ellis ("Tax Counsel") as
special tax counsel to the Seller and NFC. The discussion is based upon
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations thereunder, current
administrative rulings, judicial decisions and other applicable authorities.
There can be no assurance that the Internal Revenue Service (the "IRS") will
not challenge the conclusions reached herein, and no ruling from the IRS has
been or will be sought. Furthermore, legislative, judicial or administrative
changes may occur, perhaps with retroactive effect, that could affect
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the accuracy of the statements and conclusions set forth herein as well as the
tax consequences to Offered Certificateholders.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to Offered Certificateholders in light of their
personal investment circumstances, nor, except for certain limited discussions
of particular topics, to certain types of holders subject to special treatment
under the federal income tax laws (e.g., financial institutions, broker-dealers,
life insurance companies, tax-exempt organizations, nonresident alien
individuals and foreign corporations). This information is directed to
prospective purchasers of Offered Certificates who purchase Offered Certificates
in the primary Offering, who are citizens or residents of the United States,
including domestic corporations and partnerships, and who hold the Offered
Certificates as "capital assets" within the meaning of Section 1221 of the Code.
THEREFORE, PROSPECTIVE INVESTORS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS
TO THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF INVESTOR CERTIFICATES.
CHARACTERIZATION OF THE OFFERED CERTIFICATES AS INDEBTEDNESS
The Seller, NFC and the Offered Certificateholders express in the Pooling and
Servicing Agreement and on the Offered Certificates their intent that, for
federal, state and local income and franchise tax purposes, the Offered
Certificates will be indebtedness secured by the Related 1990 Certificate prior
to the 1990 Trust Termination Date and by the Dealer Notes after the 1990 Trust
Termination Date. The Seller and each Offered Certificateholder, by acquiring
an interest in an Offered Certificate, agree to treat the Offered Certificates
as indebtedness for federal, state and local income and franchise tax purposes.
However, because different criteria are applied in determining the non-tax
accounting characterization of the transaction, the Seller will treat the
transaction for financial accounting purposes as a sale of an ownership
interest in the Dealer Notes and not as the creation of a debt obligation.
Applying current law to the facts of the transaction as set forth in the
Pooling and Servicing Agreement and other relevant documents, Tax Counsel has
advised the Seller and NFC that, in its opinion, although the matter is not
free from doubt, the Offered Certificates would be treated as indebtedness for
federal income tax purposes for the reasons set forth below.
Generally, the federal income tax characterization of a transaction depends
upon its economic substance, and the substance of the issuance of Offered
Certificates is consistent with treating the Offered Certificates as debt for
federal income tax purposes. Further, as mentioned above, the parties to the
transaction have agreed to treat the Offered Certificates as debt obligations
for tax purposes. Although certain judicial precedents hold that in
appropriate circumstances a taxpayer must treat a transaction in accordance
with the form chosen by such taxpayer, regardless of the substance of the
transaction, Tax Counsel has advised that, in its opinion, those precedents are
inapplicable here.
Although the IRS and the courts have set forth several factors to be taken into
account in determining whether the substance of a transaction is a sale of
property or a loan secured by the transferred property, the primary factors
utilized in making this determination are whether the transferee has assumed
the risk of loss or other economic burdens relating to the property and whether
the transferee has obtained the opportunity for gain or other benefits of the
ownership thereof. If such economic benefits and burdens associated with
ownership of property remain with the transferor and have not passed to the
transferee, the transaction is characterized as a financing rather than a sale.
Under the Pooling and Servicing Agreement, the Offered Certificateholders are
entitled (a) to receive Monthly Interest, and (b) subject to certain reductions
in the event of principal losses on Dealer Notes after all credit enhancement
has been exhausted, to the return of their principal investment. Although
Offered Certificateholders may benefit because floating rate instruments such as
the Dealer Notes benefit in a rising market over fixed rate instruments, this
benefit exists with many debt instruments and is entirely unrelated to the
performance of the Dealer Notes. Thus, no significant amount of potential gain
inherent in the Dealer Notes has been transferred to Offered Certificateholders.
Similarly, the Offered Certificateholders do not bear the risk of loss which is
associated with direct ownership of the Dealer Notes. If the Offered
Certificateholders purchased Dealer Notes directly, they would incur losses if
any Dealers defaulted. The Offered Certificates, by contrast, are substantially
insulated from any such loss experience because of credit support mechanisms
provided in the Agreements. Any potential losses are expected to be satisfied
from, and to the extent of: credit enhancement provided prior to the 1990 Trust
Termination Date under the 1990 Trust in respect of the Related 1990
Certificate, the Interest Rate Swap and, under certain circumstances, the
Negative Carry Subordinated
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Amount and, after the 1990 Trust Termination Date, and to the extent provided
herein, Available Seller's Collections. In part because of the availability of
these sources to satisfy any shortfalls in Dealer payments, the Rating Agencies
have given the Offered Certificates their highest credit rating. This superior
rating strongly indicates that the risk of loss to the Offered
Certificateholders is anticipated to be remote.
As Offered Certificateholders do not share significantly in either the benefits
or burdens associated with direct ownership of the Dealer Notes, the
arrangement created by the Pooling and Servicing Agreement is properly viewed
for federal income tax purposes as a financing, rather than a sale, of the
Dealer Notes. Therefore, the Offered Certificates would be treated, in
economic substance, as indebtedness for which the Related 1990 Certificate or
the Dealer Notes, as the case may be, and other assets held in the Master Trust
serve as collateral.
The above discussion is only a summary of certain aspects of the analysis and
conclusions contained in the tax opinion filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The ensuing
discussion of federal income tax consequences assumes that the Offered
Certificates are treated as debt for federal income tax purposes.
STATED INTEREST ON OFFERED CERTIFICATES
Interest paid on the Offered Certificates would be taxable as ordinary income
for federal income tax purposes when received or accrued by Offered
Certificateholders in accordance with their respective methods of accounting.
As discussed below, the Offered Certificates will be subject to the usual rules
applicable to bond premium and market discount. Interest received on the
Offered Certificates may also constitute "investment income" for purposes of
certain limitations of the Code concerning the deductibility of investment
interest expense.
ORIGINAL ISSUE DISCOUNT
The Offered Certificates are expected to be issued at par and, therefore, it is
not anticipated that the Offered Certificates will bear any original issue
discount ("OID"). However, because the Offered Certificates do not provide for
the payment of late penalty interest on default, the Offered Certificates may
be treated as issued with OID. In general, OID is the excess of the stated
redemption price at maturity of a debt instrument over its issue price, unless
such excess falls within a statutorily defined de minimis exception.
Nevertheless, the holder of an Offered Certificate that has de minimis OID is
required to include such de minimis OID in income as principal payments are
made in proportion to the ratio each such principal payment bears to the stated
principal amount of such Offered Certificate. Any amount of de minimis OID
includible in income under the preceding sentence is treated as gain recognized
on retirement of the debt instrument.
The OID provisions of the Code are complex, and unresolved issues abound in the
area even though final Regulations have been adopted. If, in spite of
expectations, any Offered Certificates are in fact issued with OID, the
following rules would generally apply; however, Offered Certificateholders are
urged to consult their own tax advisors with respect to the impact on them of
the matters discussed below.
Offered Certificateholders will generally be required to include OID in income
in advance of receipt of all or a portion of the cash representing such OID,
regardless of whether they otherwise report taxable income on the cash or the
accrual method. A holder of a debt instrument issued with OID must recognize
as ordinary income the amount of OID as it accrues, in accordance with a
constant yield method. The amount of OID to be included in income in any
taxable year is determined by allocating to each day during such year on which
the holder holds the instrument a pro rata portion of the OID attributable to
the "accrual period" which includes such day. Under applicable Treasury
Regulations, the Offered Certificates have a monthly accrual period.
In addition, because of the payment terms of the Offered Certificates, the IRS
could contend that interest thereon should be treated as part of the stated
redemption price at maturity. In such case, an Offered Certificateholder would
be required to recognize all interest as OID under the rules described above
(but would not recognize ordinary income upon receipt of actual payments of cash
denominated as interest). Thus, each cash payment would be treated as an amount
already included in income (to the extent OID has accrued as of the date of the
interest payment and is not allocated to prior payments), or as a repayment of
principal.
Further, under Section 1272(a)(6) of the Code, special rules apply to any debt
instrument on which payments may be accelerated due to prepayments of other
obligations securing those debt instruments. When these rules apply, the
computation of OID must be determined by taking into account both the prepayment
assumptions used in pricing the
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debt instrument and the actual prepayment experience. As a result, the amount
of OID on such debt instrument which will accrue in any given accrual period may
either increase or decrease, depending upon the actual prepayment rate.
U.S. holders may generally elect to include in income all interest (including
stated interest, acquisition discount, OID, de minimis OID, market discount, de
minimis market discount, and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium) that accrues on a debt instrument by using
the constant yield method applicable to OID, subject to certain limitations and
exceptions. If such election is made, amounts of de minimis OID and de minimis
market discount which otherwise would have been treated as gain upon retirement
or disposition of an Offered Certificate are instead treated as ordinary
interest income.
Certain information must be furnished annually on the amount of OID, if any,
accruing during the year (as well as interest paid during that year) to the IRS
and to certain classes of Offered Certificateholders. Since information with
respect to OID is based upon the adjusted issue price of Offered Certificates,
any subsequent holders who purchase Offered Certificates for an amount in
excess of the adjusted issue price will be required to determine for themselves
the amount of OID (if any) that they are required to report.
TREATMENT OF MARKET DISCOUNT BY SUBSEQUENT PURCHASERS
The resale of an Offered Certificate may be affected by the market discount
provisions of the Code. Generally, if a holder of a debt instrument acquires
it at a market discount (i.e., at a price below its stated redemption price at
maturity or its adjusted issue price if it was issued with OID, subject to a
statutorily defined de minimis exception) and thereafter realizes gain upon a
disposition of the debt instrument (including a gift), the lesser of (a) such
gain (or appreciation, in the case of a gift) or (b) the portion of the market
discount that accrued while the debt instrument was held by such holder, will
be treated as ordinary interest income at the time of the disposition. In
addition, a holder who acquires a debt instrument at a market discount may be
required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or maintained to purchase or carry the
debt instrument until the holder disposes of the debt instrument in a taxable
transaction.
Partial principal payments on the Offered Certificates will be made monthly
under certain circumstances. A holder who acquires an Offered Certificate at a
market discount will be required to treat as ordinary interest income the
portion of any principal payment attributable to accrued market discount on
such Offered Certificate.
A holder who acquires an Offered Certificate at a market discount may elect to
include market discount in income as the discount accrues on a constant
interest rate basis. The current inclusion election, once made, applies to all
market discount obligations acquired on or after the first day of the first
taxable year to which the election applies, and may not be revoked without the
consent of the IRS. If such election is made, the rules described in the
preceding two paragraphs (regarding recognition of ordinary income in certain
circumstances and the deferral of interest deductions) will not apply.
TREATMENT OF ACQUISITION PREMIUM AND AMORTIZABLE BOND PREMIUM
A subsequent holder who pays an "acquisition premium" for an Offered
Certificate may be entitled to reduce (but not below zero) any amount of OID
otherwise includible in such holder's income. "Acquisition premium" is any
amount paid by a subsequent holder for an Offered Certificate in excess of its
adjusted issue price at the time of its acquisition, but less than or equal to
the sum of all amounts payable on the debt instrument after the purchase date
other than payments of qualified stated interest.
A holder of an Offered Certificate who acquires such instrument (including at
its original issuance) at a price in excess of its stated redemption price at
maturity, will be exempt from the OID rules described above. Moreover, such
holder may be able to elect to amortize the excess under a constant interest
rate method as "bond premium" pursuant to Section 171 of the Code. The
legislative history to the Tax Reform Act of 1986 indicates that amortization of
bond premium on an obligation providing for partial principal payments before
maturity should be governed by rules such as those provided for the accrual of
market discount (as described above).
A holder electing to amortize bond premium must reduce his tax basis in the
obligation by the aggregate amount of deductions allowable for such premium.
If a debt instrument purchased at a premium is redeemed in full prior to
maturity, a purchaser who elects to deduct bond premium should be entitled to a
deduction for any remaining unamortized bond premium in the taxable year of
redemption. Under present law, amortizable bond premium generally
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offsets interest income on the obligation rather than constituting a separate
interest deduction item subject to the investment interest limitations of the
Code.
The IRS has issued proposed regulations with respect to amortizing bond premium
which bring the amortization rules more in line with the final OID regulations.
If these proposed regulations become final in their existing form, an election
under the finalized regulations will apply to bonds held on or after the first
day of the taxable year in which the election was made.
SALES OF INVESTOR CERTIFICATES
In general, a Certificateholder will recognize gain or loss upon the sale,
exchange, redemption or other taxable disposition of an Offered Certificate
measured by the difference between (a) the amount of cash and the fair market
value of any property received (other than amounts attributable to, and taxable
as, accrued stated interest) and (b) the Certificateholder's tax basis in the
Offered Certificate (as increased by any OID or market discount included in
income and as decreased by any deduction for amortizable bond premium
previously allowed and by the amount of principal payments previously received
thereon). Subject to the OID and market discount rules discussed above, any
such gain or loss generally will be capital gain or loss if such certificate
was held as a capital asset, and generally would be long-term capital gain or
loss if such Offered Certificate was held for more than one year.
Under present law, the federal income tax rates for individuals applicable to
long-term capital gains (28%) are less than those applicable to ordinary income
(maximum 39.6%). However, these rates could be changed by subsequent
legislation.
FOREIGN HOLDERS
This section generally discusses the United States federal income tax
consequences of the ownership and disposition of Offered Certificates by a
holder who is not a "United States person" (a "foreign holder"). The term
"United States person" means (a) a citizen or resident of the United States,
(b) a corporation or partnership created or organized in the United States or
under the laws of the United States or of any State, and (c) an estate or trust
the income of which is subject to United States federal income taxation
regardless of its source. The term "foreign person" means a person who is not
a "United States person." Some foreign holders (including certain residents of
certain United States possessions or territories) may be subject to special
rules not discussed herein.
Payments of interest (including OID, if any) made to a foreign holder which are
not effectively connected with such holder's conduct of a trade or business
within the United States generally will not be subject to United States federal
income tax or withholding tax if (a) the foreign holder is not a "10 percent
shareholder" or a "controlled foreign corporation" with respect to which the
Seller or NFC is a "related person" within the meaning of the Code and (b) the
beneficial owner (and, if relevant, a financial institution on the beneficial
owner's behalf) provides an appropriate statement, signed under penalties of
perjury, certifying that the beneficial owner of the Offered Certificate is a
foreign person and providing the beneficial owner's name and address. The
statement generally must be provided in the year a payment occurs or in either
of the two preceding years.
Any capital gain realized on the sale, exchange, redemption, retirement or other
taxable disposition of an Offered Certificate by a foreign holder generally will
not be subject to United States federal income tax or withholding tax, provided
that (a) the gain is not effectively connected with the foreign holder's conduct
of a trade or business in the United States and (b) in the case of an individual
foreign holder, (i) he is not present in the United States for 183 days or more
in the taxable year of such disposition, or (ii)(A) he does not have a "tax
home" in the United States and (B) the gain is not attributable to an office or
other fixed place of business he maintained in the United States.
If the interest, gain or income on an Offered Certificate held by a foreign
holder is effectively connected with such holder's conduct of a trade or
business in the United States, then the foreign holder (albeit exempt from the
withholding tax if he provides an appropriate statement) generally will be
subject to United States federal income tax on such interest, gain or income at
regular federal income tax rates. In addition, if such holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% of its
"effectively connected earnings and profits" within the meaning of the Code for
the taxable year, as adjusted for certain items, unless it qualifies for a
lower rate under an applicable tax treaty.
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Provided that an Offered Certificate is treated as debt, it will be excludable,
for United States federal estate tax purposes, from the estate of an individual
who, at the time of his death, was a foreign holder if, immediately before his
death, (a) he was not a "10 percent shareholder" of the Seller or NFC within
the meaning of the Code, and (b) such Offered Certificate was not effectively
connected with his conduct of a United States trade or business.
See also the discussion below of potential consequences to foreign holders if
the IRS were to contend successfully that the Offered Certificates do not
constitute indebtedness for federal income tax purposes.
The IRS has issued proposed regulations which may impose additional reporting
requirements on certain Foreign Holders.
THE FOREGOING DESCRIPTION OF THE POTENTIAL UNITED STATES FEDERAL TAX
CONSEQUENCES TO FOREIGN HOLDERS IS NECESSARILY INCOMPLETE. FOREIGN HOLDERS ARE
STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION
TO THEM OF THE FOREGOING MATTERS.
BACKUP WITHHOLDING
A 31% "backup" withholding tax and information reporting requirements apply to
certain payments of principal and interest (and OID, if any) on an obligation,
and to proceeds of certain sales of an obligation before maturity, to certain
nonexempt Offered Certificateholders who are United States persons, if such
holders fail to provide correct taxpayer identification numbers and other
information. The Seller, its paying agent, or a broker, as the case may be,
will be required to withhold from any payment that is subject to backup
withholding a tax equal to 31% of such payment unless the Offered
Certificateholder furnishes its taxpayer identification number in the manner
prescribed in applicable Treasury Regulations, and unless certain other
conditions are met.
In the case of payments of principal and interest (and OID, if any) on Offered
Certificates by the Seller or paying agents of the Seller to foreign holders,
temporary Treasury regulations provide that backup withholding and information
reporting will not apply if the holder has provided the required certification
of its status as a foreign person under penalties of perjury, or has otherwise
established an exemption (provided that neither the Seller nor its paying agent
has actual knowledge that the holder is a United States person or that the
conditions of any other exemption are not in fact satisfied). Special rules
apply if payment is collected by a foreign office of a custodian, nominee or
other agent acting on behalf of an owner of an Offered Certificate. Payments
of the proceeds of a sale of Offered Certificates to or through a broker are
also subject to special rules.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against an Offered Certificateholder's United States federal
income tax, provided that the required information is furnished to the IRS.
OTHER POSSIBLE CHARACTERIZATIONS OF CERTIFICATES
As noted above, Tax Counsel has opined that the Offered Certificates would be
treated as indebtedness for federal income tax purposes, and the foregoing
discussion of tax consequences assumes that this will be the case. There can be
no assurance that the IRS or the courts will agree with Tax Counsel's opinion.
If a court were to determine that the Agreement does not create a debt
obligation for Federal income tax purposes, the arrangement created by the
Agreement could be classified for such purposes as, alternatively, a partnership
or a publicly traded partnership treated as a corporation. The tax consequences
to Offered Certificateholders of each such possible recharacterization are
described briefly below. Investors should consult their own tax advisors as to
the possible tax consequences to them of potential alternative treatments.
If the arrangement created by the Agreement were characterized as a partnership
among the Seller and the Offered Certificateholders, the partnership in all
likelihood would be treated as a "publicly traded partnership." If such
partnership were nevertheless not taxable as a corporation (for example,
because its income is interest not derived in the conduct of a financial
business), such partnership would not be subject to Federal income tax.
Rather, each item of income, gain, loss, deduction and credit generated through
the ownership of the Dealer Notes by such a partnership would be passed through
to the Seller and the Offered Certificateholders as partners in such a
partnership according to their respective interests therein. The amount and
timing of income reportable by the Offered Certificateholders as
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partners could differ materially from the income reportable by the Offered
Certificateholders if the Offered Certificates are characterized as debt.
In addition, if such a partnership were considered to be engaged in a trade or
business within the United States, each foreign holder would be required to
file a United States income tax return and pay tax on its share of partnership
income at regular rates (including the branch profits tax in the case of a
foreign corporation). The partnership itself would be subject to a withholding
tax on distributions to (or, at its election, income allocable to) foreign
holders, and each foreign holder would be credited with his share of the
withholding tax paid by the partnership. Further, even if the partnership were
not considered to be engaged in a trade or business within the United States,
it appears that partnership withholding would be required in the case of any
foreign holder who is engaged in a trade or business within the United States
to which the Offered Certificate income is effectively connected.
Alternatively, if such a partnership is not considered to be engaged in a trade
or business within the United States and if income with respect to an Offered
Certificate is not otherwise effectively connected with a foreign holder's
conduct of a trade or business within the United States, the holder generally
would be subject to United States federal withholding tax at a rate of 30%
(unless reduced by an applicable treaty) on his distributive share of the
partnership's interest income.
If the arrangement created by the Agreement were taxable as a corporation
because of being a publicly traded partnership, it would be subject to federal
income taxes (and possibly state income taxes --see "Certain State Matters") at
corporate tax rates on its taxable income generated by ownership of the Dealer
Notes. Such a tax could result in reduced distributions to Offered
Certificateholders. In addition, if the Offered Certificates were treated as
interests in a publicly traded partnership taxable as a corporation, all or a
portion of any such distributions would, to the extent of the current and
accumulated earnings and profits of such corporation, be treated as dividend
income to the Offered Certificateholders. Such dividends, if payable to
corporate holders, would be eligible for the dividends received deduction. In
the case of foreign holders, such dividend income would generally be subject to
a 30% withholding tax unless the rate were reduced by an applicable treaty.
If the arrangement created by the Agreement were treated as a partnership (but
not as a publicly traded partnership), any income allocated to a
Certificateholder that is a tax-exempt entity likely would constitute
"unrelated business taxable income."
In the opinion of Tax Counsel, because the Offered Certificates would be
characterized as debt, no attempt will be made to comply with any IRS reporting
or tax payment requirements which might be applicable if the transaction were
treated as creating a partnership or a corporation.
CERTAIN STATE TAX MATTERS
GENERAL
Offered Certificateholders may also become liable for state income taxes in one
or more taxing jurisdictions. State income tax consequences (including local
income tax consequences) to each Offered Certificateholder depend upon the
provisions of the state tax laws to which the Investor Certificateholder is
subject. Because each state's income tax laws are different, it is impossible
to predict the income tax consequences to the Offered Certificateholders in all
of the state taxing jurisdictions in which they are already subject to tax.
ILLINOIS AND NEW YORK
Most of the activities to be undertaken by the Servicer and the Trustee will
take place in Illinois and New York. If the Offered Certificates are
characterized as indebtedness for federal income tax purposes, in the opinion
of Tax Counsel, as to Illinois and New York state tax consequences, although
the matter is not free from doubt, this treatment would also apply for purposes
of the Illinois income tax, and the New York income and corporate franchise
taxes. If the Offered Certificates are characterized as debt in the named
states, the Offered Certificateholders not otherwise subject to taxation in
those states will not, although the matter is not free from doubt, become
subject to such taxes solely because of their ownership of Offered
Certificates. Offered Certificateholders already subject to taxation in those
states, however, could
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be required to pay tax on or measured by interest income (including OID, if any)
generated by, and on gain from the disposition of, the Offered Certificates.
The above discussion of state tax consequences assumes the Offered Certificates
will be characterized as debt for federal income tax purposes. However, if the
arrangement created by the Agreement were treated as a partnership or as a
publicly traded partnership taxable as a corporation, the state income tax
consequences to the Offered Certificateholders could be materially different.
If the arrangement created by the Agreement were treated as a partnership for
Illinois and New York state tax purposes, it is possible that each state could
view the partnership as doing business in its state and, unless Offered
Certificateholders were treated as holding debt of such partnership, could
treat each Offered Certificateholder as deriving income from activities in the
state. As a result, the state might, under applicable income apportionment and
sourcing rules, treat some part of the partnership's income as allocable to
such state and then tax an Offered Certificateholder on its share of such
income. Moreover, classification of the arrangement as a "partnership" might
cause an Offered Certificateholder not otherwise subject to tax in these states
to pay state tax on income beyond that derived from the Offered Certificates.
In addition, such partnership could be subject to the Illinois personal
property replacement tax, which taxes would reduce the amounts available for
distribution to Offered Certificateholders.
If the Offered Certificateholders were treated as owning interests in a
corporation for state tax purposes, then the hypothetical corporation could be
subject to Illinois income and New York income and corporate franchise taxes.
Such taxes could result in reduced distributions to Offered Certificateholders.
An Offered Certificateholder not otherwise subject to Illinois or New York
state tax law should not become subject to such tax laws solely as a result of
its ownership of Offered Certificates.
There can be no assurance that no other state will claim that activities with
respect to the Agreement have taken place in such state and therefore subject
Offered Certificateholders to taxation in such state. If any state taxing
authority were to assert such a claim successfully, the treatment of the
Offered Certificates for purposes of such state's income tax laws would be
determined thereunder, and there can be no assurance that the Offered
Certificates would be treated as indebtedness for purposes of taxation in that
state.
The foregoing description of the potential state tax consequences is
necessarily incomplete. Offered Certificateholders are urged to consult their
own tax advisors with respect to the applicability of state and local income
and franchise taxes to their investment in the Offered Certificates.
CERTAIN MATTERS RELATING TO BANKRUPTCY
The Seller's certificate of incorporation includes a provision that, under
certain circumstances, requires the Seller to designate two directors who
qualify under the certificate of incorporation as "Independent Directors." The
Seller's certificate of incorporation provides that the Seller will not file a
voluntary petition for relief under the Bankruptcy Code without the unanimous
affirmative vote of its directors. Pursuant to the Pooling and Servicing
Agreement, the Servicer, the Master Trust Trustee and each Investor
Certificateholder covenant that it will not institute against the Seller or the
Master Trust any bankruptcy, reorganization or other proceedings under any
federal or state bankruptcy law until one year and one day after all
Certificateholders have been paid in full.
The transfers of Dealer Notes from NITC to NFC, from NFC to the Seller and from
the Seller to the Active Trust have been structured as, and will be treated by
the parties as, sales. In 1993, the U.S. Court of Appeals for the Tenth
Circuit ruled that accounts sold prior to a bankruptcy should be treated as
property of the bankruptcy estate. In the event that NITC, NFC or the Seller
were to become a debtor in a bankruptcy case and a creditor or trustee in
bankruptcy of such debtor or such debtor itself were to apply this analysis or
otherwise take the position that the transfer of the Dealer Notes from such
debtor to the Seller or the Active Trust, as the case may be, should be
recharacterized as a pledge of such Dealer Notes to secure a borrowing by such
debtor, then delays in receipt of Collections on such Dealer Notes to the
Active Trust and payments on the Offered Certificates could result or, should
the court rule in favor of any creditor, trustee in bankruptcy or debtor,
reductions in the amount of such payments could result.
In addition, if NFC or the Seller were to become a debtor in a bankruptcy case
and a creditor or trustee in bankruptcy of such debtor or such debtor itself
were to request a court to order that NFC should be substantively consolidated
with
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the Seller, delays in payments on the Offered Certificates could result. Should
the bankruptcy court rule in favor of any such creditor, trustee in bankruptcy
or debtor, reductions in the amount of such payments could result.
If NIC, NITC, NFC or the Seller were to become a debtor in a bankruptcy case,
an Early Amortization Event would occur. In such event, all Series Allocable
Principal Collections would be applied to principal payments on the Offered
Certificates and Dealer Notes thereafter would no longer be sold to the Seller
and transferred to the Active Trust. The occurrence of certain events of
bankruptcy, insolvency or receivership with respect to the Servicer will also
result in a Master Trust Servicer Termination Event. A trustee in bankruptcy
of the Servicer (including the Servicer as debtor in possession) may have the
power to prevent either the Active Trustee or the holders of Certificates
issued by the Active Trust from appointing a successor Servicer.
In addition, if the Applicable Agreement is deemed an executory contract under
bankruptcy laws, a trustee in bankruptcy of any party to such agreement
(including such party as debtor in possession) may have the power to assume
(i.e., reaffirm) or reject such agreement. A party deciding whether to assume
or reject any such agreement would be given a reasonable period of time to make
such decision, perhaps even until the time of confirmation of the plan of
reorganization, which could result in delays in payments or distributions on
the related securities.
Transfers made in certain isolated transactions contemplated by the Applicable
Agreement (including payments made by NFC or the Seller with respect to
repurchases of Dealer Notes) may be recoverable by NFC or the Seller, as debtor
in possession, or by a trustee in bankruptcy of NFC or the Seller, as a
preferential transfer from NFC or the Seller if such transfers are made within
certain periods prior to the filing of a bankruptcy case in respect of NFC or
the Seller and certain other conditions are met.
In addition, application of federal bankruptcy and state debtor relief laws to
any Dealer could affect the interests of the Active Trust and the Active
Trustee in the Dealer Notes of such Dealer if the enforcement of such laws
result in any Dealer Notes conveyed to the Active Trust being written off as
uncollectible by the Servicer. Whether or not any such Dealer Notes are
written off as uncollectible, delays in payments due on such Dealer Notes could
result.
CERTAIN MATTERS RELATING TO THE DEALER NOTES
The Seller has warranted in the Applicable Agreement that the transfer of the
Dealer Notes to the Active Trust is either (a) a valid transfer and assignment
of the Dealer Notes to the Active Trust or (b) a grant to the Active Trust of a
security interest in the Dealer Notes. The Seller has taken all required
actions under Illinois, New York and Delaware state law to perfect the Active
Trust's interests in such assets. In addition, the Seller has warranted that,
if the transfer of Dealer Notes by the Seller to the Active Trust is a grant to
the Active Trust of a security interest in the Dealer Notes, the Active Trust
will at all times have a first priority perfected security or ownership interest
in all Dealer Notes transferred to the Active Trust and all proceeds thereof,
except that if such a transfer is deemed to create a security interest under the
Uniform Commercial Code, certain prospective liens on the property of the Seller
may have priority over the Active Trust's interests in such Dealer Notes. If
the Seller were to become a debtor in a bankruptcy case, and a bankruptcy
trustee or the Seller as debtor in possession or a creditor of the Seller were
to take the position that the transfer of the Dealer Notes from the Seller to
the Active Trust should be recharacterized as a pledge of such Dealer Notes,
delays in distributions on the Offered Certificates or, should the bankruptcy
court rule in favor of any such trustee, debtor in possession or creditor,
reductions in such distributions could result. There is a substantial
possibility that the Active Trust may not have a perfected security interest in
any of the Dealer Notes created after the filing of a petition for relief under
the Bankruptcy Code. Nevertheless, it is anticipated that the Active Trust will
either own or have a perfected security interest in Dealer Notes existing on the
date of filing a petition under the Bankruptcy Code and will be able to make
payments in respect of principal and interest on the 1990 Trust Investor
Certificates or the Offered Certificates, as the case may be, although there can
be no assurance that all of such payments would be timely.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
the Code impose certain restrictions on employee benefit plans to which they
apply ("Plans") and on persons who have certain specified relationships to
Plans ("parties in interest" within the meaning of ERISA and "disqualified
persons" within the meaning of the Code, referred to herein as "Parties in
Interest"). ERISA also imposes certain duties on persons who are fiduciaries
of Plans and prohibits a Plan from engaging in a broad range of transactions
involving "plan assets" with Parties in
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Interest with respect to the Plan, unless a statutory or administrative
exemption applies. Accordingly, Plans with respect to which the Seller, the
Servicer or the Master Trust Trustee are Parties in Interest may be prohibited
from purchasing Offered Certificates unless such an exemption applies. (Similar
rules apply to the investment of individual retirement accounts as defined in
the Code.) Prohibited transactions may generate excise taxes and other
liabilities.
If the assets of the Master Trust were deemed to be assets of Plans that are
Offered Certificateholders, a transaction involving the Master Trust's assets
might give rise to a prohibited transaction under ERISA and the Code, unless an
exemption applies. The U.S. Department of Labor ("DOL") has issued a
regulation (the "Plan Assets Regulation") concerning whether the assets of a
Plan will be deemed to include the underlying assets of an entity (such as a
master trust) when the Plan acquires an "equity" interest in the entity. An
equity interest is defined in the Plan Assets Regulation as an interest in an
entity other than an instrument which is treated as debt under applicable local
law and which has no substantial equity features. The Seller has been advised
that Offered Certificateholders will be taxed as if the Offered Certificates
are debt for federal income tax purposes. If under ERISA the Offered
Certificates are deemed to be debt, the Trust's assets will not be treated as
Plan assets solely as a result of the purchase of an Offered Certificate by a
Plan. However, the tax characterization of the Offered Certificates is not
determinative of the characterization of these securities for ERISA purposes.
Assuming that the Offered Certificates are equity interests under applicable
local law or have substantial equity features, the Plan Assets Regulation
provides that the issuer of a security is not deemed to hold "plan assets" if
the security (a) is freely transferable, (b) is held by 100 or more investors
who are independent of both the issuer and one another, and (c) satisfies
certain registration requirements under the federal securities laws. There can
be no advance assurance that the Offered Certificates will meet the criteria
for this exemption. There will be no restrictions imposed on the transfer of
the Offered Certificates, and if the 100-investor threshold is met, the Seller
intends to cause the registration requirements to be satisfied. However, it
cannot be known in advance whether the 100-investor threshold will be met by
the Offered Certificates, and the Underwriter intends not to sell Offered
Certificates to Plans unless and until it believes the Offered Certificates
will meet the 100-investor threshold.
The Plan Assets Regulation also provides an exemption from "plan assets"
treatment for securities issued by an entity if, immediately after the most
recent acquisition of any equity interest in the entity, less than 25% of the
value of each class of equity interests in the entity is held by "benefit plan
investors" (e.g., Plans, governmental plans, other benefit plans not subject to
ERISA and certain entities whose underlying assets include plan assets by
reason of a Plan's investment in the entity). Because the availability of this
exemption depends upon the identity of the Certificateholders at any time,
there can be no assurance that the Offered Certificates will qualify for this
exemption.
Employee benefit plans that are governmental plans (as defined in section
3(32) of ERISA) and certain church plans (as defined in section 3(33) of ERISA)
are not subject to ERISA requirements. Accordingly, assets of such plans may be
invested in the Offered Certificates without regard to the ERISA restrictions
described above, subject to applicable provisions of other federal and state
laws.
In accordance with ERISA's fiduciary standards, if the Underwriter offers to
sell certificates to Plans, the Plan fiduciary should determine whether an
investment in the Offered Certificates is permitted under the documents and
instruments governing the Plan, consistent with the Plan's overall investment
policy and appropriate in view of the composition of its investment portfolio.
Any Plan fiduciary who proposes to cause a Plan to purchase Offered
Certificates should consult with its own counsel with respect to the potential
consequences under ERISA and the Code of the Plan's acquisition and ownership
of Offered Certificates. Assets of a Plan or individual retirement account
should not be invested in the Offered Certificates unless it is clear that the
assets of the Master Trust will not be plan assets and that the investment by
the Plan will not be a prohibited transaction for which no statutory or
administrative exemption applies.
PLAN OF DISTRIBUTION
Under the terms and subject to the conditions contained in an underwriting
agreement (the "Underwriting Agreement"), with respect to the Master Trust, the
Seller will agree to sell to each of the underwriters named in the related
Prospectus Supplement, and each of such underwriters will severally agree to
purchase from the Seller, the principal amount of the Offered Certificates set
forth therein and in the Prospectus Supplement.
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In the Underwriting Agreement, the underwriter(s) will agree, subject to the
terms and conditions set forth therein, to purchase all the Offered
Certificates which are offered hereby and by the Prospectus Supplement if any
of such Offered Certificates are purchased. In the event of a default by any
such underwriter, the Underwriting Agreement will provide that, in certain
circumstances, purchase commitments of the nondefaulting underwriters, if any,
may be increased or the Underwriting Agreement may be terminated.
The Prospectus Supplement will either (i) set forth the price at which Offered
Certificates will be offered to the public and any concessions that may be
offered to certain dealers participating in the offering of such Offered
Certificates or (ii) specify that the Offered Certificates are to be resold by
the underwriter(s) in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
Offered Certificates, the public offering price and such concessions may be
changed.
The underwriter(s), may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Exchange Act. Over-allotment involves syndicate sales in excess of
the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Offered Certificates in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the underwriter(s) to reclaim a selling
concession from a syndicate member when the Offered Certificates originally
sold by such syndicate member are purchased in a syndicate covering
transactions and penalty bids may cause the prices of the Offered Certificates
to be higher than they would otherwise be in the absence of such transactions.
These transactions, if commenced, may be discontinued at any time.
The Underwriting Agreement will provide that NFC and the Seller will indemnify
the underwriter(s) against certain liabilities, including liabilities under the
Securities Act.
The Master Trust Trustee may, from time to time, invest the funds acquired from
the underwriters in the Excess Funding Account in Eligible Investments.
The place and time of delivery for the Offered Certificates in respect of which
this Prospectus is delivered will be set forth in the Prospectus Supplement.
LEGAL MATTERS
The legality of the Offered Certificates and certain legal matters regarding
tax consequences of the issuance of the Offered Certificates and creditors
rights will be passed upon for NFC and the Seller by Kirkland & Ellis, Chicago,
Illinois.
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INDEX OF TERMS
1990 Trust....................................... 1
1990 Trust Agreement............................. 1, 18
1990 Trust Amortization Event.................... 72
1990 Trust Amortization Period................... 76
1990 Trust Amortization Term..................... 77
1990 Trust Available Subordinated Amount......... 73
1990 Trust Collections........................... 71
1990 Trust Collections Account................... 71
1990 Trust Deficiency Amount..................... 66
1990 Trust Distribution Account.................. 71
1990 Trust Early Amortization Period............. 73
1990 Trust Excess Servicing...................... 20
1990 Trust Interest Deposit Account.............. 32
1990 Trust Interest Deposit Agreement............ 32
1990 Trust Investment Income..................... 66
1990 Trust Investment Securities................. 74
1990 Trust Investor Certificate Interest......... 78
1990 Trust Investor Certificates................. 18
1990 Trust Investor Interest Income.............. 75
1990 Trust Investor Loss Amount.................. 76
1990 Trust Liquidity Reserve Account............. 71
1990 Trust Maximum Subordinated Amount........... 74
1990 Trust Minimum Seller Interest............... 74
1990 Trust Minimum Subordinated Amount........... 74
1990 Trust Monthly Servicing Fee................. 46
1990 Trust Non-Amortization Period............... 76
1990 Trust Principal Losses...................... 76
1990 Trust Projected Spread...................... 72
1990 Trust Purchase Agreement.................... 80
1990 Trust Seller Collections.................... 10
1990 Trust Seller Interest....................... 19
1990 Trust Seller Interest Income................ 77
1990 Trust Servicer Termination Event............ 48
1990 Trust Spread Account........................ 72
1990 Trust Spread Account Deposit................ 72
1990 Trust Termination Date...................... 4, 53
1990 Trust Total Invested Amount................. 47
1990 Trust Total Investor Interest............... 44
1990 Trust Total Investor Percentage............. 47
1990 Trust Trustee............................... 1, 18
Accumulation Period.............................. 13
Accumulation Period Commencement Date............ 13
Accumulation Period Length....................... 13
Accumulation Period Principal Shortfall.......... 60
Acquisition...................................... 42
Active Interest Deposit Agreement................ 32
Active Purchase Agreement........................ 80
Active Trust..................................... 6
Active Trustee................................... 42
Adjusted Invested Amount......................... 55
Advance.......................................... 46
Advance Reimbursement............................ 46
Aggregate NITC Earned Interest................... 46
Agreements....................................... 46
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Amortizing Class.................................... 65
Applicable Agreement................................ 6
Applicable Floating Rate............................ 17
Applicable Voting Percentage........................ 69
Assignments......................................... 42
Available Certificateholder Interest Collections.... 57
Available Draw Funds................................ 58
Available Seller's Finance Charge Collections....... 56
Available Seller's Principal Collections............ 56
Available Subordinated Amount....................... 16, 61
Average Coverage Differential....................... 73
Calculation Day..................................... 32
Cede................................................ 3
CEDEL............................................... 38
Certificate Principal............................... 65
Certificate Principal Account....................... 71
Certificate Principal Account Losses................ 76
Certificate Register................................ 35
Certificateholder Charge-Off........................ 62
Certificateholders.................................. 6
Certificateholders' Interest........................ 42
Certificates........................................ 1
Citibank............................................ 37
Class A-1 Investor Certificates..................... 18
Class A-2 Investor Certificates..................... 18
Class A-3 Investor Certificates..................... 18
Class A-4 Investor Certificate...................... 18
Class Amortization Date............................. 74
Class Amortization Percentages...................... 66
Class Amortization Period........................... 36
Class Certificate Margin............................ 71
Class Certificate Rate.............................. 71
Class Charged-Off Amounts........................... 77
Class Initial Invested Amount....................... 77
Class Invested Amount............................... 77
Class Investor Interest............................. 76
Class Loss Amount................................... 77
Class Termination Date.............................. 79
Closing Date........................................ 7
Code................................................ 81
Collections......................................... 53
Collections Account................................. 49
Commission.......................................... 3
Concentration Limit................................. 25
Contributed Dealer Notes............................ 80
Controlled Amortization Amount...................... 60
Controlled Deposit Amount........................... 60
Cooperative......................................... 39
Corporate Trust Office.............................. 68
Credit Guidelines................................... 28
Current Interest Rate............................... 32
Daily Note Sale..................................... 80
Dealer.............................................. 27
Dealer Agreement.................................... 28
Dealer Finance Charge Collections................... 46
Dealer Finance Charges.............................. 45
Dealer Note Collections............................. 55
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Dealer Note Losses................................. 55
Dealer Notes....................................... 27
Deficiency Amount.................................. 58
Definitive Certificates............................ 39
Deposit Amount..................................... 32
Determination Date................................. 40
Disclosure Document................................ 25
Distribution Account............................... 49
Distribution Date.................................. 45
Distribution Period................................ 45
DOL................................................ 90
Draw Amount........................................ 58
DTC................................................ 2
Due Period......................................... 45
Early Amortization Event........................... 63
Early Amortization Period.......................... 64
Early Amortization Period Commencement Date........ 64
Early Amortization Period Shortfall Amount......... 61
Early Distribution................................. 63
Early Distribution Amount.......................... 63
Early Distribution Date............................ 63
Eligible Dealer Note............................... 42
Eligible Deposit Account........................... 49
Eligible Institution............................... 49
Eligible Investments............................... 50
Enhancement........................................ 41
Enhancement Agreement.............................. 53
Enhancement Provider............................... 54
ERISA.............................................. 89
Euroclear.......................................... 39
Euroclear Operator................................. 39
Euroclear Participants............................. 39
Excess Funding Account............................. 49
Excess Interest Collections........................ 58
Excess Seller's Percentage......................... 57
Excess Seller's Principal Collections.............. 57
Exchange Act....................................... 3
Expected Payment Date.............................. 36
FDIC............................................... 71
Finance Charge Collections......................... 55
Finance Charges.................................... 45
Financed Vehicles.................................. 27
Flat Charge........................................ 30
Floating Allocation Percentage..................... 56
Foreign Agency Depositaries........................ 37
foreign holder..................................... 85
Fully Funded Date.................................. 12
Harco.............................................. 28
Independent Directors.............................. 88
Indirect Participants.............................. 38
Ineligible Dealer Note............................. 43
Initial Investment Amount.......................... 1
Insurance Proceeds................................. 26
Interest Credit.................................... 34
Interest Deposit Account........................... 32
Interest Rate Swap................................. 17
Invested Amount.................................... 55
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Investment Events................................ 63
Investment Income................................ 53
Investment Period................................ 9, 12
Investment Period Commencement Date.............. 63
Investment Period Shortfall Amount............... 61
Investor Loss Amount............................. 65
IRS.............................................. 81
LIBOR............................................ 23
Liquidity Reserve Account........................ 16
Master Intercompany Agreement.................... 32
Master Loan...................................... 80
Master Revolving Credit Agreement................ 27
Master Revolving Note............................ 27
Master Trust..................................... 1
Master Trust Adjusted Investment Amount.......... 55
Master Trust Invested Amount..................... 55
Master Trust Purchase Agreement.................. 80
Master Trust Seller's Certificates............... 40
Master Trust Seller's Interest................... 51
Master Trust Servicer Termination Event.......... 48
Master Trust Trustee............................. 1, 4
Maximum Subordinated Amount...................... 61
Minimum Master Trust Seller's Interest........... 51
Minimum Series Seller's Interest................. 51
Monthly Interest................................. 7
Navistar Group................................... 42
Navistar Vehicle................................. 27
Negative Carry Reserve Fund...................... 51
Negative Carry Reserve Fund Deposit Amount....... 52
Negative Carry Reserve Fund Required Amount...... 52
Negative Carry Subordinated Amount............... 61
Net Swap Payment................................. 17
Net Swap Receipt................................. 17
New Issuance..................................... 8
NFC.............................................. 1
NFSC............................................. 1
NFSC Certificate................................. 40
NIC.............................................. 42
NITC Earned Interest............................. 32
NITC Finance Charges............................. 46
NITC Future Due Interest......................... 32
NITC Interest Amount............................. 32
NITC Interest Transfer Date...................... 54
NITC Payment Date................................ 32
Non-Amortization Period.......................... 74
Non-Amortizing Class............................. 74
Non-Interest Bearing Dealer Notes................ 31
OEM Note......................................... 43
OEM Supplier..................................... 42
OEM Vehicle...................................... 27
Offered Certificate Rate......................... 35
Offered Certificateholders....................... 2
Offered Certificateholders' Interest............. 7
Offered Certificates............................. 1
Offered Series................................... 1
Offered Series Dealer Note Losses................ 56
Offered Series Finance Charge Collections........ 56
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Offered Series Principal Collections............. 56
Offered Series Servicing Fee..................... 47
OID.............................................. 83
Open Account..................................... 34
Open Account Statement........................... 30
Participants..................................... 38
Parties in Interest.............................. 89
Plan Assets Regulation........................... 90
Plans............................................ 89
Pooling and Servicing Agreement.................. 1, 35
Principal Allocation Percentage.................. 56
Principal Collections............................ 54
Principal Shortfall.............................. 60
Principal Terms.................................. 41
Projected Spread................................. 62
Prospectus Supplement............................ 1
Purchase Agreements.............................. 80
Qualified Institution............................ 71
Rating Agencies.................................. 51
Rating Agency Condition.......................... 51
Record Date...................................... 36
Registration Statement........................... 3
Related 1990 Certificate......................... 2
Related 1990 Certificate Collections............. 7
Related 1990 Certificate Interest Collections.... 35
Related 1990 Certificate Principal Collections... 36
Related 1990 Certificate Rate.................... 19
Required Excess Seller Interest Percentage....... 57
Required Subordinated Amount..................... 61
Retail SPAs...................................... 33
Revolving Period................................. 11
Scheduled Class Amortization Date................ 72
Securities Act................................... 3
Seller........................................... 1
Seller's Percentage.............................. 57
Seller's Principal Collections................... 57
Series........................................... 2
Series Accounts.................................. 50
Series Allocable Dealer Note Losses.............. 55
Series Allocable Finance Charge Collections...... 55
Series Allocable Principal Collections........... 54
Series Allocable Servicing Fee................... 47
Series Allocation Percentage..................... 55
Series Issuance Date............................. 41
Series Principal Account......................... 13
Series Principal Account Losses.................. 55
Series Termination Date.......................... 64
Servicer......................................... 1
Servicer Termination Event....................... 39
Servicing Fee.................................... 47
Shared Principal Collections..................... 60
Special Servicer Agent........................... 49
Specified Accumulation Period Commencement Date.. 13
Spread Account................................... 15
Spread Account Deposit Amount.................... 62
Subordinated Percentage.......................... 61
Subsequent 1990 Trust Investor Certificate....... 2
- 96 -
<PAGE> 116
<TABLE>
<CAPTION>
<S> <C>
Supplement........................................ 8
Supplemental Certificate.......................... 40
Swap Counterparty................................. 52
Swap Fixed Rate................................... 52
Swap Floating Rate................................ 52
Swap Payment...................................... 17
Swap Receipt...................................... 17
Tax Counsel....................................... 81
Tax Opinion....................................... 41
Terms and Conditions.............................. 39
Transfer Date..................................... 62
Trust Accounts.................................... 71
Trustees.......................................... 47
Trusts............................................ 46
Turnover.......................................... 73
Uncollectible Finance Charges..................... 46
Underwriting Agreement............................ 90
Uniform Commercial Code........................... 22
United States person.............................. 85
Unpaid Dealer Finance Charges..................... 46
Up-Front Interest Credit.......................... 32
Wholesale Note and Inventory Statement............ 30
</TABLE>
- 97 -
<PAGE> 117
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT
AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally Offered Certificates (the
"Global Securities") will be available only in book-entry form. Investors in
the Global Securities may hold such Global Securities through any of DTC, CEDEL
or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same day funds.
Secondary market trading between investors holding Global Securities through
CEDEL and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-marketing trading between CEDEL or Euroclear and DTC
participants holding Global Securities will be effected on a
delivery-against-payment basis through Citibank, N.A. ("Citibank") and Morgan
Guaranty Trust Company of New York ("Morgan") as the respective depositaries of
CEDEL and Euroclear and as participants in DTC.
Non-U.S. holders of Global Securities will be exempt from U.S. withholding
taxes, provided that such holders meet certain requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations or
their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective
depositaries, Citibank and Morgan, which in turn will hold such positions in
accounts as participants of DTC.
Investors electing to hold their Global Securities through DTC will follow the
settlement practices applicable to securities previously issued by the Master
Trust. Investor securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no
"lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to securities
previously issued by the Master Trust in same-day funds.
Trading between CEDEL and/or participants. Secondary market trading between
CEDEL participants and/or Euroclear participants will be settled using the
procedures applicable to conventional eurobonds in same-day funds.
Finally, day traders that use CEDEL or Euroclear and that purchase Global
Securities from DTC participants for delivery to CEDEL participants or
Euroclear participants should note that these trades would automatically fail
on the sale side
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<PAGE> 118
unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(1) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary
procedures;
(2) borrowing the Global Securities in the U.S. from a DTC participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(3) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC participants is at
least one day prior to the value date for the sale to the CEDEL
participant or Euroclear participants.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A holder of Global Securities holding securities through CEDEL or Euroclear (or
through DTC if the holder has an address outside the U.S.) will be subject to
the 30% U.S. withholding tax that generally applies to payments of interest
(including original issue discount) on registered debt issued by U.S. persons
unless such holder takes one of the following steps to obtain an exemption or
reduced tax rate:
Exemption for non-U.S. persons with effectively connected income (Form 4224).
A non-U.S. person, including a non-U.S. corporation or bank with a U.S. branch,
for which the interest income is effectively connected with its conduct of a
trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on
Income Effectively Connected with the Conduct of a Trade or Business in the
United States).
Exemption or reduced rate for non-U.S. persons resident in treaty countries
(Form 1001). Non-U.S. persons that are beneficial owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the beneficial owner
or his agent.
Exemption for U.S. persons (Form W-9). U.S. persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Request for Taxpayer
Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The holder of Global Security, or
in the case of a Form 1001 or a Form 4224 filer, his agent, files by submitting
the appropriate form to the person through whom he holds (the clearing agency,
in the case of persons holding directly on the books of the clearing agency).
Form W-8 and Form 1001 are effective for three calendar years and Form 4224 is
effective for one calendar year.
This summary does not deal with all aspects of federal income tax withholding
that may be relevant to foreign holders of these Global Securities. Investors
are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
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<PAGE> 119
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
issuance and distribution of the securities being registered, other than
underwriting discounts and commissions. All such expenses will be paid by the
Company.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee .. $404
Accounting fees and expenses ......................... *
Legal fees and expenses .............................. *
Trustee's fees ....................................... *
Printing and engraving ............................... *
Blue sky fees and expenses (including counsel) ....... *
Rating Agency Fees ................................... *
Miscellaneous ........................................ *
-------
Total $ *
=======
</TABLE>
*To be updated by Amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each of NIC, NITC, NFC and the Registrant are incorporated under the laws
of Delaware. Section 145 of the Delaware General Corporation Law provides that
a Delaware corporation may indemnify any persons, including officers and
directors, who are, or are threatened to be made, parties to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person was an officer,
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, for criminal proceedings, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director actually and
reasonably incurred.
Each Certificate of Incorporation with respect to NIC, NITC, NFC and the
Registrant, provide, in effect, that, subject to certain limited exceptions,
each such corporation will indemnify its officers and directors to the extent
permitted by Delaware General Corporation Law. In addition, NIC maintains
insurance providing for payment, subject to certain exceptions, on behalf of
officers and directors of NIC and its subsidiaries of money damages incurred as
a result of legal actions instituted against them in their capacities as such
officers or directors (whether or not such person could be indemnified against
such expense, liability or loss under the Delaware General Corporation Law).
Insofar as indemnification by the Company for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
II-1
<PAGE> 120
ITEM 16. EXHIBITS.
(a) Exhibits:
The exhibits to this Registration Statement are listed in the
Exhibit Index below.
(b) Financial Statements Schedules: Not applicable with respect
to the Registrant.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, unless the information required to be included in
such post-effective amendment is contained in a periodic report filed
with or furnished to the Securities and Exchange Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 and incorporated herein by reference;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement, unless the information required to be
included in a post-effective amendment is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated herein by reference.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the
II-2
<PAGE> 121
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-3
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Rolling Meadows, State of Illinois, on July 3, 1997.
NAVISTAR FINANCIAL
SECURITIES CORPORATION
as originator of the
Master Trust, Registrant
By: /s/ John J. Bongiorno
---------------------------------
John J. Bongiorno
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John. J. Bongiorno, R. Wayne Cain and William W.
Jones and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities (including his capacity as a director
and/or officer of Navistar Financial Securities Corporation), to sign and file
any and all amendments (including post-effective amendments) to this
registration statement or any registration statement relating to this offering
that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary in connection with such matters as he might or could do
in person and hereby ratifying and confirming all that each of such
attorneys-in-fact and agents or their or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney has been signed on July 3, 1997,
by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY
---------- --------
<S> <C>
/s/ John J. Bongiorno Director, President and Chief Executive Officer
---------------------
John J. Bongiorno
/s/ R. Wayne Cain Director, Vice President and Treasurer
---------------------
R. Wayne Cain (Principal Financial Officer)
/s/ Phyllis E. Cochran Director, Vice President and Controller
----------------------
Phyllis E. Cochran (Principal Accounting Officer)
/s/ Vernon M. Endo Director
----------------------
Vernon M. Endo
/s/ Marion Silverman Director
----------------------
Marion Silverman
/s/ Thomas M. Hough Director
----------------------
Thomas M. Hough
/s/ Robert C. Lannert Director
----------------------
Robert C. Lannert
</TABLE>
II-4
<PAGE> 123
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. Description
- ----------- -----------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement (No. 33-36767)).
3.2 By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to
the Registrant's Registration Statement (No. 33-36767)).
4.1 Form of Pooling and Servicing Agreement dated as of December 1, 1990
(the "1990 Pooling and Servicing Agreement"), among the Registrant,
Navistar Financial Corporation ("ANFC") and the Trustee (incorporated by
reference to Exhibit 4.1 to the Registrant's Registration Statement (No.
33-36767)).
4.2 Form of Amendment No. 1 to the 1990 Pooling and Servicing Agreement
(incorporated by reference to Exhibit 4.2 to the Registrant's Registration
Statement (No. 33-87374)).
4.3 Form of Amendment No. 2 to the 1990 Pooling and Servicing Agreement
(incorporated by reference to Exhibit 4.8 to the Registrant's Registration
Statement (No. 33-87374)).
4.4* Form of Amendment No. 3 to the 1990 Pooling and Servicing Agreement.
4.5* Form of Amendment No. 4 to the 1990 Pooling and Servicing Agreement.
4.6* Form of Class A-5 Supplement among the Registrant, NFC and the Trustee.
4.7* Form of Class A-5 Investor Certificate.
4.8 Form of Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") among the Registrant, NFC, Chase Manhattan Bank, and the
Master Trust Trustee (incorporated by reference to Exhibit 4.5 to the
Registrant's Registration Statement (No. 33-87374)).
4.9* Form of Series 1997-1 Supplement among the Registrant, NFC, Chase
Manhattan Bank, and the Master Trust Trustee.
4.10* Form of Series 1997-1 Investor Certificate.
5.1* Opinion of Kirkland & Ellis with respect to certain matters involving the
Series 1997-1 Investor Certificates.
8.1* Opinion of Kirkland & Ellis with respect to certain tax matters.
10.1 Form of Contribution Agreement between Navistar Financial Corporation and
the Registrant (incorporated by reference to Exhibit 10.1 to the
Registrant's Registration Statement (No. 33-36767)).
10.2 Form of Purchase Agreement between Navistar Financial Corporation and the
Registrant (incorporated by reference to Exhibit 10.2 to the Registrant's
Registration Statement (No. 33-36767)).
10.3 Form of Master Trust Purchase Agreement between Navistar Financial
Corporation and the Registrant (incorporated by reference to Exhibit 10.3
to the Registrant's Registration Statement (No. 33-36767)).
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBIT NO. Description
- ----------- -----------
<S> <C>
10.4 Form of Master Revolving Credit Agreement between Navistar Financial
Corporation and the Registrant (incorporated by reference to Exhibit 10.4
to the Registrant's Registration Statement (No. 33-36767)).
23.1* Consent of Kirkland & Ellis (included in opinion filed as Exhibit 5.1).
23.2* Consent of Kirkland & Ellis (included in opinion filed as Exhibit 8.1).
24.1 Powers of Attorney (included in signature page).
</TABLE>
* To be filed by Amendment
