<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1997
REGISTRATION NO. 333-30737
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
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.)
------------------------
Navistar Financial Securities Corporation William W. Jones
2850 West Golf Road Navistar Financial Securities Corporation
Rolling Meadows, IL 60008 2850 West Golf Road
(847) 734-4000 Rolling Meadows, IL 60008
(Address, including zip code, and telephone number, (847) 734-4000
including area code, of Registrant's principal executive (Name, address, including zip code, and telephone number,
offices) including area code, of agent for service)
------------------------
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
------------------------
</TABLE>
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>
==========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE PRICE PER AGGREGATE OFFERING AMOUNT OF REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
Dealer Note Master Trust Asset Backed
Certificates........................ $400,000,00 100% $400,000,000 $121,213
--------------------------------------------------------------------------------------------------------------------------
1990 Trust Floating Rate Pass Through
Certificates........................ (3) (3) (3) $100(4)
==========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) $404 of the registration fee was paid with the initial filing.
(3) Not applicable.
(4) 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
SUBJECT TO COMPLETION, DATED JULY 18, 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 Certificateholders
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 26 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 Bank, societe anonyme, and the Euroclear
System on or about , 1997, against payment therefor in immediately
available funds.
, 1997
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.
<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-10
1990 Trust Investor Certificates..... S-16
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Underwriting......................... S-18
Legal Opinions....................... S-19
Index of Terms....................... S-20
</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.................... 5
Risk Factors.......................... 26
Navistar Financial Securities
Corporation and the Master Trust.... 30
Use of Proceeds....................... 31
The Navistar Financial Dealer Floor
Plan Financing Business............. 31
Relationship with NITC................ 36
Description of the Offered
Certificates........................ 40
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Terms of the 1990 Trust Investor
Certificates........................ 79
Description of the Purchase
Agreements.......................... 90
Federal Income Tax Matters............ 92
Certain State Tax Matters............. 98
Certain Matters Relating to
Bankruptcy.......................... 99
Certain Matters Relating to the Dealer
Notes............................... 100
ERISA Considerations.................. 100
Plan of Distribution.................. 102
Legal Matters......................... 102
Index of Terms........................ 103
Annex I -- Global Clearance,
Settlement and Tax Documentation
Procedures.......................... 109
</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
(RECOVERIES)/
AVERAGE
FISCAL YEAR- NET LOSSES AVERAGE DEALER
TO-DATE PERIOD NET DEALER NOTE LIQUIDATIONS (RECOVERIES)/ DEALER NOTE NOTES
ENDING LAST LOSSES OF DEALER LIQUIDATIONS PRINCIPAL PRINCIPAL ANNUALIZED
DAY OF (RECOVERIES)(1) NOTES(1) (1) BALANCE(2) BALANCE(3) TURNOVER(4)
-------------- --------------- ------------ ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year 1997
January............ $ 0.0 $ 599.7 0.00% $690.2 0.00% 3.48x
April.............. (0.1) 1,232.1 (0.01) 683.2 (0.03) 3.61x
Fiscal Year 1996
January............ 0.1 721.6 0.01 913.0 0.04 3.16x
April.............. 0.0 1,436.2 0.00 920.3 0.00 3.12x
July............... 0.0 2,139.8 0.00 906.5 0.00 3.15x
October............ (0.2) 2,874.4 (0.01) 859.7 (0.02) 3.34x
Fiscal Year 1995
January............ (0.1) 618.6 (0.01) 597.5 (0.07) 4.14x
April.............. (0.1) 1,237.5 (0.01) 643.9 (0.03) 3.84x
July............... (0.3) 1,963.3 (0.02) 689.7 (0.06) 3.80x
October............ (0.9) 2,712.4 (0.03) 706.0 (0.13) 3.84x
Fiscal Year 1994
January............ 0.1 485.6 0.03 576.8 0.07 3.37x
April.............. 0.1 1,024.8 0.01 593.6 0.03 3.45x
July............... 0.1 1,656.1 0.01 602.5 0.02 3.66x
October............ 0.1 2,278.9 0.01 579.2 0.03 3.93x
Fiscal Year 1993
January............ 0.0 377.1 0.00 431.1 0.00 3.50x
April.............. 0.4 795.2 0.05 461.2 0.17 3.45x
July............... 0.9 1,283.5 0.07 475.3 0.25 3.60x
October............ 0.8 1,820.1 0.04 477.1 0.16 3.81x
Fiscal Year 1992
January............ 1.0 312.6 0.32 390.0 1.03 3.21x
April.............. 1.1 646.0 0.18 414.2 0.53 3.12x
July............... 1.2 1,047.0 0.12 433.4 0.37 3.22x
October............ 0.8 1,501.7 0.06 428.9 0.20 3.50x
<CAPTION>
AVERAGE
MATURITY
FISCAL YEAR- (DAYS IN
TO-DATE PERIOD YEAR/
ENDING LAST ANNUALIZED
DAY OF TURNOVER)
-------------- ----------
<S> <C>
Fiscal Year 1997
January............ 105.2
April.............. 101.4
Fiscal Year 1996
January............ 115.5
April.............. 117.0
July............... 116.2
October............ 109.3
Fiscal Year 1995
January............ 88.2
April.............. 95.1
July............... 96.3
October............ 95.1
Fiscal Year 1994
January............ 108.3
April.............. 105.8
July............... 99.7
October............ 92.9
Fiscal Year 1993
January............ 104.3
April.............. 105.8
July............... 101.4
October............ 95.8
Fiscal Year 1992
January............ 113.7
April.............. 117.0
July............... 113.4
October............ 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.
S-4
<PAGE> 6
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 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.
S-5
<PAGE> 7
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-6
<PAGE> 8
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-7
<PAGE> 9
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
AMOUNT WHOLESALE
STATE OUTSTANDING PORTFOLIO
- ----- ----------- -------------
<S> <C> <C>
Illinois............... $ 63.5 9.48%
Texas.................. 49.9 7.45
Minnesota.............. 48.4 7.22
Pennsylvania........... 42.6 6.35
Michigan............... 27.8 4.14
Maryland............... 27.5 4.11
Indiana................ 27.0 4.03
Ohio................... 26.5 3.95
New York............... 24.4 3.63
Wisconsin.............. 24.3 3.63
Tennessee.............. 22.4 3.34
Virginia............... 22.3 3.33
Florida................ 22.3 3.33
California............. 22.1 3.30
Oklahoma............... 18.4 2.74
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT WHOLESALE
STATE OUTSTANDING PORTFOLIO
- ----- ----------- -------------
<S> <C> <C>
Alabama................ $ 13.6 2.03%
Georgia................ 13.1 1.96
Missouri............... 12.7 1.90
New Jersey............. 12.4 1.85
Massachusetts.......... 11.2 1.67
Mississippi............ 10.6 1.59
Colorado............... 9.6 1.44
Arkansas............... 9.3 1.38
North Carolina......... 9.1 1.35
Louisiana.............. 8.0 1.19
Nebraska............... 7.1 1.06
Connecticut............ 7.0 1.05
All others(1).......... 77.1 11.50
------ ------
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>
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
S-8
<PAGE> 10
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
-------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
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-9
<PAGE> 11
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>
<S> <C> <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
S-10
<PAGE> 12
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 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
S-11
<PAGE> 13
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 "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.
S-12
<PAGE> 14
"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 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;
S-13
<PAGE> 15
(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 sec. 6323 or
any similar statutory provision (including, but not limited to, sec. 302(f)
or sec. 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:
(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;
S-14
<PAGE> 16
(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
(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.
S-15
<PAGE> 17
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
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%
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>
<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>
<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
</TABLE>
S-16
<PAGE> 18
Class A-3 Investor Certificates
<TABLE>
<S> <C>
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
</TABLE>
Class A-4 Investor Certificates
<TABLE>
<S> <C>
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 Investor Certificates -- Limited Subordination of the 1990 Trust
Seller Interest; 1990 Trust Available Subordinated Amount" in the Prospectus.
S-17
<PAGE> 19
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)
S-18
<PAGE> 20
(Exceptions) Order 1996, as amended, or is a person to whom the document may
otherwise lawfully be issued or passed on.
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-19
<PAGE> 21
INDEX OF TERMS
<TABLE>
<S> <C>
1990 Trust.................................................. 1
1990 Trust Agreement........................................ 1
Accumulation Period Commencement Date....................... 10
Accumulation Period Length.................................. 10
Average Coverage Differential............................... 14
Class A-5 Investor Certificate.............................. 1
Closing Date................................................ 1
Controlled Amortization Amount.............................. 10
Distribution Date........................................... 1
Early Amortization Event.................................... 13
Early Distribution.......................................... 15
Early Distribution Amount................................... 15
Early Distribution Date..................................... 15
Early Distribution Notice................................... 15
Expected Payment Date....................................... 1, 10
Initial Invested Amount..................................... 10
Investment Event............................................ 14
Issuer...................................................... 1
LIBOR....................................................... 10
LIBOR Determination Date.................................... 11
Master Trust................................................ 1
Master Trust Trustee........................................ 1
Minimum Negative Carry Required Amount...................... 11
Minimum Series Seller's Interest............................ 11
Negative Carry Reserve Fund Required Amount................. 11
Negative Carry Subordinated Amount.......................... 11
New Vehicle Monthly Interest Rate........................... 12
NFC......................................................... 1
NFSC........................................................ 1
NIC......................................................... 2
NITC........................................................ 2
Offered Certificate Rate.................................... 1, 12
Pooling and Servicing Agreement............................. 1
Principal Terms............................................. 16
Projected Dealer Note Income................................ 12
Projected Investment Income................................. 12
Projected Investment Shortfall.............................. 12
Projected Monthly Interest.................................. 12
Projected Monthly Servicing Fee............................. 12
Projected Spread............................................ 12
Prospectus.................................................. 1
Reference Banks............................................. 13
Required Excess Seller Interest............................. 13
Required Excess Seller Interest Percentage.................. 13
Required Subordinated Amount................................ 13
Seller...................................................... 1
Series 1997-1 Certificates.................................. 1
Series Allocable Servicing Fee.............................. 13
Series Termination Date..................................... 10
Servicer.................................................... 1
Specified Accumulation Period Commencement Date............. 10
Subordinated Percentage..................................... 10
UK Regulations.............................................. 3
Used Vehicle Monthly Interest Rate.......................... 13
Wholesale Portfolio......................................... 3
</TABLE>
S-20
<PAGE> 22
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 18, 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 26 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> 23
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> 24
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 Master Trust 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
Reference 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.
3
<PAGE> 25
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).
4
<PAGE> 26
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.
5
<PAGE> 27
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.
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
6
<PAGE> 28
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
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.
7
<PAGE> 29
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 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
8
<PAGE> 30
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.
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,
9
<PAGE> 31
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 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.
10
<PAGE> 32
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 THE 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 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
11
<PAGE> 33
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 allocated as provided in the Supplement
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.
12
<PAGE> 34
Otherwise, Offered Series Principal Collections
generally will be 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 Certificateholders'
Interest based on the Principal Allocation
Percentage and, together 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
13
<PAGE> 35
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.
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 representations 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 Certificateholders. 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
14
<PAGE> 36
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.
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
15
<PAGE> 37
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 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
16
<PAGE> 38
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.
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,
17
<PAGE> 39
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 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
18
<PAGE> 40
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 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
19
<PAGE> 41
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
20
<PAGE> 42
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 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
21
<PAGE> 43
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.
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
22
<PAGE> 44
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 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
23
<PAGE> 45
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 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
24
<PAGE> 46
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.
25
<PAGE> 47
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
26
<PAGE> 48
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 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
27
<PAGE> 49
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 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.
28
<PAGE> 50
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 "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
29
<PAGE> 51
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.
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
30
<PAGE> 52
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.
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
31
<PAGE> 53
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").
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.
32
<PAGE> 54
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.
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.
33
<PAGE> 55
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>
<CAPTION>
PERCENTAGE OF NOTES
FISCAL QUARTER PERCENTAGE OF DEALERS FROM DEALERS ON
ENDING LAST DAY OF ON INVENTORY CONTROL 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 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
34
<PAGE> 56
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 any 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.
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
35
<PAGE> 57
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
36
<PAGE> 58
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 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
37
<PAGE> 59
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.
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
38
<PAGE> 60
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 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>
<CAPTION>
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>
39
<PAGE> 61
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 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.
40
<PAGE> 62
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 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 xpected 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
41
<PAGE> 63
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 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
42
<PAGE> 64
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 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 New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York 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). DTC is owned by a number of its
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. 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
43
<PAGE> 65
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 Bank, societe anonyme ("CEDEL"), 67 Bd Grande-Duchesse Charlotte,
L-1331, Luxembourg, was incorporated in 1970 as a limited company under
Luxembourg law. CEDEL is owned by a parent corporation, Cedel International,
societe anonyme, the shareholders of which are banks, securities dealers and
financial institutions. Cedel International currently has about 100
shareholders, including U.S. financial institutions or their subsidiaries. No
single entity may own more than five percent of Cedel International's stock.
CEDEL is registered as a bank in Luxembourg, and as such is subject to
regulation by the Institut Monetaire Luxembourgeous, the Luxembourg Monetary
Authority, which supervises Luxembourg banks. CEDEL provides clearance and
settlement services for its customers and currently accepts over 70,000
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 to brokers, dealers, and banks. Currently, CEDEL has
approximately 3000 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.
44
<PAGE> 66
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.
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
45
<PAGE> 67
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.
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.
46
<PAGE> 68
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
47
<PAGE> 69
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.
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
48
<PAGE> 70
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; (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
49
<PAGE> 71
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. 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
50
<PAGE> 72
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
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
51
<PAGE> 73
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.
"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
52
<PAGE> 74
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.
"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
53
<PAGE> 75
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 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
54
<PAGE> 76
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 Certificateholders (including the Offered Certificateholders) and
to any
55
<PAGE> 77
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.
56
<PAGE> 78
"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.
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); or
57
<PAGE> 79
(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 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.
58
<PAGE> 80
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."
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
59
<PAGE> 81
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 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
60
<PAGE> 82
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.
(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
61
<PAGE> 83
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 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).
62
<PAGE> 84
"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 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
63
<PAGE> 85
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 (which shall not exceed 100%) 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 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
64
<PAGE> 86
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.
65
<PAGE> 87
(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.
66
<PAGE> 88
"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.
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
67
<PAGE> 89
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 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
68
<PAGE> 90
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.
"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).
69
<PAGE> 91
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. 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
70
<PAGE> 92
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.
(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
71
<PAGE> 93
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 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 sec. 6323 or any similar statutory provision
(including, but not limited to, sec. 302(f) or sec. 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
72
<PAGE> 94
"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 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
73
<PAGE> 95
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;
(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;
74
<PAGE> 96
(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;
(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);
75
<PAGE> 97
(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 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
76
<PAGE> 98
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 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.
77
<PAGE> 99
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
78
<PAGE> 100
and any Related 1990 Certificate on any matter for which votes or consents are
solicited under the 1990 Agreement.
"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
79
<PAGE> 101
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 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
80
<PAGE> 102
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 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
81
<PAGE> 103
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 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;
82
<PAGE> 104
(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 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
83
<PAGE> 105
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.
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).
84
<PAGE> 106
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 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
85
<PAGE> 107
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)ws 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 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
86
<PAGE> 108
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 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
87
<PAGE> 109
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
88
<PAGE> 110
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 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.
89
<PAGE> 111
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 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").
90
<PAGE> 112
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.
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.
91
<PAGE> 113
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 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
92
<PAGE> 114
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 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.
93
<PAGE> 115
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 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.
94
<PAGE> 116
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 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.
95
<PAGE> 117
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.
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.
96
<PAGE> 118
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 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.
97
<PAGE> 119
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
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,
98
<PAGE> 120
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 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
99
<PAGE> 121
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
100
<PAGE> 122
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 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.
101
<PAGE> 123
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.
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.
102
<PAGE> 124
INDEX OF TERMS
<TABLE>
<S> <C>
1990 Trust.................................................. 1
1990 Trust Agreement........................................ 1, 21
1990 Trust Amortization Event............................... 82
1990 Trust Amortization Period.............................. 86
1990 Trust Amortization Term................................ 86
1990 Trust Available Subordinated Amount.................... 83
1990 Trust Collections...................................... 81
1990 Trust Collections Account.............................. 81
1990 Trust Deficiency Amount................................ 75
1990 Trust Distribution Account............................. 81
1990 Trust Early Amortization Period........................ 83
1990 Trust Excess Servicing................................. 24
1990 Trust Interest Deposit Account......................... 37
1990 Trust Interest Deposit Agreement....................... 37
1990 Trust Investment Income................................ 74
1990 Trust Investment Securities............................ 83
1990 Trust Investor Certificate Interest.................... 88
1990 Trust Investor Certificates............................ 22
1990 Trust Investor Interest Income......................... 85
1990 Trust Investor Loss Amount............................. 86
1990 Trust Liquidity Reserve Account........................ 81
1990 Trust Maximum Subordinated Amount...................... 83
1990 Trust Minimum Seller Interest.......................... 83
1990 Trust Minimum Subordinated Amount...................... 84
1990 Trust Monthly Servicing Fee............................ 53
1990 Trust Non-Amortization Period.......................... 86
1990 Trust Principal Losses................................. 86
1990 Trust Projected Spread................................. 81
1990 Trust Purchase Agreement............................... 90
1990 Trust Seller Collections............................... 12
1990 Trust Seller Interest.................................. 23
1990 Trust Seller Interest Income........................... 87
1990 Trust Servicer Termination Event....................... 55
1990 Trust Spread Account................................... 81
1990 Trust Spread Account Deposit........................... 81
1990 Trust Termination Date................................. 5, 60
1990 Trust Total Invested Amount............................ 54
1990 Trust Total Investor Interest.......................... 50
1990 Trust Total Investor Percentage........................ 53
1990 Trust Trustee.......................................... 1, 21
Accumulation Period......................................... 15
Accumulation Period Commencement Date....................... 15
Accumulation Period Length.................................. 15
Accumulation Period Principal Shortfall..................... 68
Acquisition................................................. 48
Active Interest Deposit Agreement........................... 37
Active Purchase Agreement................................... 90
Active Trust................................................ 7
Active Trustee.............................................. 48
Adjusted Invested Amount.................................... 63
</TABLE>
103
<PAGE> 125
<TABLE>
<S> <C>
Advance..................................................... 52
Advance Reimbursement....................................... 53
Aggregate NITC Earned Interest.............................. 52
Agreements.................................................. 53
Amortizing Class............................................ 74
Applicable Agreement........................................ 7
Applicable Floating Rate.................................... 20
Applicable Voting Percentage................................ 79
Assignments................................................. 48
Available Certificateholder Interest Collections............ 65
Available Draw Funds........................................ 66
Available Seller's Finance Charge Collections............... 64
Available Seller's Principal Collections.................... 64
Available Subordinated Amount............................... 19, 69
Average Coverage Differential............................... 82
Calculation Day............................................. 37
Cede........................................................ 3
CEDEL....................................................... 44
Certificate Principal....................................... 74
Certificate Principal Account............................... 81
Certificate Principal Account Losses........................ 86
Certificate Register........................................ 40
Certificateholder Charge-Off................................ 71
Certificateholders.......................................... 7
Certificateholders' Interest................................ 48
Certificates................................................ 1
Citibank.................................................... 43
Class A-1 Investor Certificates............................. 22
Class A-2 Investor Certificates............................. 22
Class A-3 Investor Certificates............................. 22
Class A-4 Investor Certificate.............................. 22
Class Amortization Date..................................... 83
Class Amortization Percentages.............................. 75
Class Amortization Period................................... 41
Class Certificate Margin.................................... 80
Class Certificate Rate...................................... 80
Class Charged-Off Amounts................................... 87
Class Initial Invested Amount............................... 87
Class Invested Amount....................................... 87
Class Investor Interest..................................... 86
Class Loss Amount........................................... 87
Class Termination Date...................................... 89
Closing Date................................................ 8
Code........................................................ 92
Collections................................................. 61
Collections Account......................................... 56
Commission.................................................. 3
Concentration Limit......................................... 29
Contributed Dealer Notes.................................... 90
Controlled Amortization Amount.............................. 68
Controlled Deposit Amount................................... 68
Cooperative................................................. 44
Corporate Trust Office...................................... 77
</TABLE>
104
<PAGE> 126
Credit Guidelines........................................... 32
Current Interest Rate....................................... 37
Daily Note Sale............................................. 90
Dealer...................................................... 32
Dealer Agreement............................................ 32
Dealer Finance Charge Collections........................... 53
Dealer Finance Charges...................................... 52
Dealer Note Collections..................................... 62
Dealer Note Losses.......................................... 63
Dealer Notes................................................ 31
Deficiency Amount........................................... 66
Definitive Certificates..................................... 45
Deposit Amount.............................................. 37
Determination Date.......................................... 46
Disclosure Document......................................... 29
Distribution Account........................................ 56
Distribution Date........................................... 52
Distribution Period......................................... 52
DOL......................................................... 101
Draw Amount................................................. 67
DTC......................................................... 2
Due Period.................................................. 52
Early Amortization Event.................................... 72
Early Amortization Period................................... 73
Early Amortization Period Commencement Date................. 73
Early Amortization Period Shortfall Amount.................. 69
Early Distribution.......................................... 72
Early Distribution Amount................................... 72
Early Distribution Date..................................... 72
Eligible Dealer Note........................................ 48
Eligible Deposit Account.................................... 56
Eligible Institution........................................ 57
Eligible Investments........................................ 57
Enhancement................................................. 47
Enhancement Agreement....................................... 60
Enhancement Provider........................................ 62
ERISA....................................................... 100
Euroclear................................................... 44
Euroclear Operator.......................................... 44
Euroclear Participants...................................... 44
Excess Funding Account...................................... 56
Excess Interest Collections................................. 66
Excess Seller's Percentage.................................. 64
Excess Seller's Principal Collections....................... 65
Exchange Act................................................ 3
Expected Payment Date....................................... 41
FDIC........................................................ 80
Finance Charge Collections.................................. 63
Finance Charges............................................. 52
Financed Vehicles........................................... 32
Flat Charge................................................. 35
Floating Allocation Percentage.............................. 64
Foreign Agency Depositaries................................. 43
105
<PAGE> 127
<TABLE>
<S> <C>
foreign holder.............................................. 96
Fully Funded Date........................................... 14
Harco....................................................... 33
Independent Directors....................................... 99
Indirect Participants....................................... 43
Ineligible Dealer Note...................................... 50
Initial Investment Amount................................... 1
Insurance Proceeds.......................................... 31
Interest Credit............................................. 39
Interest Deposit Account.................................... 37
Interest Rate Swap.......................................... 20
Invested Amount............................................. 63
Investment Events........................................... 72
Investment Income........................................... 61
Investment Period........................................... 11, 14
Investment Period Commencement Date......................... 72
Investment Period Shortfall Amount.......................... 69
Investor Loss Amount........................................ 74
IRS......................................................... 92
LIBOR....................................................... 27
Liquidity Reserve Account................................... 19
Master Intercompany Agreement............................... 37
Master Loan................................................. 90
Master Revolving Credit Agreement........................... 31
Master Revolving Note....................................... 31
Master Trust................................................ 1
Master Trust Adjusted Investment Amount..................... 63
Master Trust Invested Amount................................ 63
Master Trust Purchase Agreement............................. 90
Master Trust Seller's Certificates.......................... 46
Master Trust Seller's Interest.............................. 58
Master Trust Servicer Termination Event..................... 55
Master Trust Trustee........................................ 1, 5
Maximum Subordinated Amount................................. 70
Minimum Master Trust Seller's Interest...................... 58
Minimum Series Seller's Interest............................ 58
Monthly Interest............................................ 9
Navistar Group.............................................. 48
Navistar Vehicle............................................ 31
Negative Carry Reserve Fund................................. 59
Negative Carry Reserve Fund Deposit Amount.................. 59
Negative Carry Reserve Fund Required Amount................. 59
Negative Carry Subordinated Amount.......................... 70
Net Swap Payment............................................ 20
Net Swap Receipt............................................ 20
New Issuance................................................ 9
NFC......................................................... 1
NFSC........................................................ 1
NFSC Certificate............................................ 46
NIC......................................................... 48
NITC Earned Interest........................................ 37
NITC Finance Charges........................................ 52
NITC Future Due Interest.................................... 37
</TABLE>
106
<PAGE> 128
<TABLE>
<S> <C>
NITC Interest Amount........................................ 37
NITC Interest Transfer Date................................. 62
NITC Payment Date........................................... 37
Non-Amortization Period..................................... 84
Non-Amortizing Class........................................ 84
Non-Interest Bearing Dealer Notes........................... 37
OEM Note.................................................... 49
OEM Supplier................................................ 48
OEM Vehicle................................................. 31
Offered Certificate Rate.................................... 41
Offered Certificateholders.................................. 2
Offered Certificateholders' Interest........................ 9
Offered Certificates........................................ 1
Offered Series.............................................. 1
Offered Series Dealer Note Losses........................... 64
Offered Series Finance Charge Collections................... 64
Offered Series Principal Collections........................ 63
Offered Series Servicing Fee................................ 54
OID......................................................... 93
Open Account................................................ 40
Open Account Statement...................................... 35
Participants................................................ 43
Parties in Interest......................................... 100
Plan Assets Regulation...................................... 101
Plans....................................................... 100
Pooling and Servicing Agreement............................. 1, 40
Principal Allocation Percentage............................. 64
Principal Collections....................................... 62
Principal Shortfall......................................... 68
Principal Terms............................................. 47
Projected Spread............................................ 70
Prospectus Supplement....................................... 1
Purchase Agreements......................................... 90
Qualified Institution....................................... 80
Rating Agencies............................................. 58
Rating Agency Condition..................................... 58
Record Date................................................. 41
Registration Statement...................................... 3
Related 1990 Certificate.................................... 2
Related 1990 Certificate Collections........................ 8
Related 1990 Certificate Interest Collections............... 41
Related 1990 Certificate Principal Collections.............. 41
Related 1990 Certificate Rate............................... 22
Required Excess Seller Interest Percentage.................. 65
Required Subordinated Amount................................ 70
Retail SPAs................................................. 38
Revolving Period............................................ 13
Scheduled Class Amortization Date........................... 81
Securities Act.............................................. 3
Seller...................................................... 1
Seller's Percentage......................................... 65
Seller's Principal Collections.............................. 65
Series...................................................... 2
</TABLE>
107
<PAGE> 129
<TABLE>
<S> <C>
Series Accounts............................................. 57
Series Allocable Dealer Note Losses......................... 63
Series Allocable Finance Charge Collections................. 63
Series Allocable Principal Collections...................... 62
Series Allocable Servicing Fee.............................. 54
Series Allocation Percentage................................ 62
Series Issuance Date........................................ 47
Series Principal Account.................................... 15
Series Principal Account Losses............................. 63
Series Termination Date..................................... 73
Servicer.................................................... 1
Servicer Termination Event.................................. 45
Servicing Fee............................................... 53
Shared Principal Collections................................ 68
Special Servicer Agent...................................... 56
Specified Accumulation Period Commencement Date............. 15
Spread Account.............................................. 17
Spread Account Deposit Amount............................... 70
Subordinated Percentage..................................... 70
Subsequent 1990 Trust Investor Certificate.................. 2
Supplement.................................................. 9
Supplemental Certificate.................................... 46
Swap Counterparty........................................... 59
Swap Fixed Rate............................................. 59
Swap Floating Rate.......................................... 59
Swap Payment................................................ 20
Swap Receipt................................................ 20
Tax Counsel................................................. 92
Tax Opinion................................................. 47
Terms and Conditions........................................ 45
Transfer Date............................................... 71
Trust Accounts.............................................. 80
Trustees.................................................... 54
Trusts...................................................... 53
Turnover.................................................... 82
Uncollectible Finance Charges............................... 53
Underwriting Agreement...................................... 102
Uniform Commercial Code..................................... 26
United States person........................................ 96
Unpaid Dealer Finance Charges............................... 52
Up-Front Interest Credit.................................... 37
Wholesale Note and Inventory Statement...................... 35
</TABLE>
108
<PAGE> 130
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.
109
<PAGE> 131
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 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.
110
<PAGE> 132
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......... $ 121,213
Accounting fees and expenses................................ 110,000
Legal fees and expenses..................................... 300,000
Trustee's fees.............................................. 100,000
Printing and engraving...................................... 100,000
Blue sky fees and expenses (including counsel).............. 10,000
Rating Agency Fees.......................................... 400,000
Miscellaneous............................................... 40,000
----------
Total..................................................... $1,211,213
==========
</TABLE>
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> 133
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 posteffective 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
II-2
<PAGE> 134
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question 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> 135
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 Amendment No. 1 to
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 18,
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
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed on July 18, 1997, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY
---------- --------
<S> <C>
JOHN J. BONGIORNO* Director, President and Chief Executive
- ----------------------------------------------------- Officer
John J. Bongiorno
/s/ R. WAYNE CAIN Director, Vice President and Treasurer
- ----------------------------------------------------- (Principal Financial Officer)
R. Wayne Cain
PHYLLIS E. COCHRAN* Director, Vice President and Controller
- ----------------------------------------------------- (Principal Accounting Officer)
Phyllis E. Cochran
VERNON M. ENDO* Director
- -----------------------------------------------------
Vernon M. Endo
MARION SILVERMAN* Director
- -----------------------------------------------------
Marion Silverman
THOMAS M. HOUGH* Director
- -----------------------------------------------------
Thomas M. Hough
ROBERT C. LANNERT* Director
- -----------------------------------------------------
Robert C. Lannert
* By /s/ R. WAYNE CAIN
- -----------------------------------------------------
R. Wayne Cain
Attorney-in-fact
</TABLE>
II-4
<PAGE> 136
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
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 ("NFC") 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.
4.11 Form of Amendment No. 1 to the Pooling and Servicing
Agreement.
4.12 Form of Amendment No. 2 to the Pooling and Servicing
Agreement.
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)).
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)
24.1 Powers of Attorney (included on signature page of initial
filing).
</TABLE>
<PAGE> 1
EXHIBIT 1.1
UNDERWRITING AGREEMENT
Navistar Financial Securities Corporation
Navistar Financial Dealer Note Master Trust
$[__________]
Series 1997-1 Floating Rate Dealer Note Asset Backed Certificates
August __, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
11 Madison Avenue
New York, NY 10010
Ladies and Gentlemen:
Navistar Financial Securities Corporation, a Delaware corporation (the
"Company"), as originator of the Navistar Financial Dealer Note Master Trust
(the "Master Trust"), proposes, subject to the terms and conditions stated
herein, to cause to be issued and sold to the underwriters listed in Schedule I
hereto (the "Underwriters") an aggregate of [$___________] principal amount of
the Series 1997-1 Floating Rate Dealer Note Asset Backed Certificates (the
"Securities"). The Securities will be issued by the Master Trust pursuant to a
Pooling and Servicing Agreement, dated as of June 8, 1995, and a Series 1997-1
Supplement dated as of [August __, 1997] (collectively, the "Master Pooling and
Servicing Agreement"), among the Company, Navistar Financial Corporation
("NFC"), as Servicer and Bank of New York, as trustee (the "Master Trust
Trustee"). Capitalized terms used and not otherwise defined herein are used as
defined in the Master Pooling and Servicing Agreement.
The Master Trust assets in which the Securities will have an undivided
interest include a Seller Certificate (the "Seller Certificate"), issued
pursuant to a Pooling and Servicing Agreement, dated as of November 1, 1990 and
amended as of May 26, 1993, and March 23, 1995 (as further amended as of June
8, 1995, and October 16, 1996, the "Existing Pooling and Servicing Agreement")
and a Class A-5 Pass-Through Certificate (the "Class A-5 Certificate") issued
pursuant to the Existing Pooling and Servicing Agreement as supplemented by a
Supplement A-5 to the Existing Pooling Servicing Agreement, to be dated as of
[August
<PAGE> 2
__, 1997](the "Class A-5 Supplement"; the Existing Pooling and Servicing
Agreement as supplemented by the Class A-5 Supplement is referred to herein as
the "1990 Pooling and Servicing Agreement"), each among the Company, NFC, as
servicer, and The Chase Manhattan Bank (as successor to Manufacturers Hanover
Trust Company), as trustee (the "1990 Trustee"). The trust formed pursuant to
the 1990 Pooling and Servicing Agreement is referred to herein as the "1990
Trust."
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement on Form S-3 (File No. 333-[___]), including a prospectus, for the
registration of asset-backed securities (issuable in series and classes
thereof), including the Securities, which registration statement has become
effective, and a copy of which, as amended to the date hereof, has heretofore
been delivered to the Underwriters. The Seller proposes to file with the
Commission pursuant to Rules 424(b)(5) and 424(c) under the Securities Act a
supplement dated [August __, 1997] (the "Prospectus Supplement") to the
prospectus dated [August __, 1997](the "Base Prospectus") relating to the
Securities and the method of distribution thereof. Such registration
statement, including exhibits thereto, is hereinafter called the "Registration
Statement"; and the Base Prospectus and the Prospectus Supplement, together
with any amendment thereof or supplement thereto authorized by the Seller prior
to the Closing Date for use in connection with the offering of the Securities
are hereinafter called the "Prospectus."
The Company hereby agrees with the Underwriters as follows:
1. The Company agrees to sell and deliver the Securities to the
Underwriters as hereinafter provided, and the Underwriters, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agree to purchase, severally and not jointly,
from the Company the respective principal amount of Securities set forth
opposite each Underwriter's name in Schedule I hereto at a price equal to
[__________]% of their principal amount plus accrued interest, if any, from
[August __, 1997] to the date of payment and delivery.
2. The Company understands that the Underwriters intend (i) to make a
public offering of the Securities as soon as they deem advisable after this
Agreement has become effective and (ii) initially to offer the Securities upon
the terms set forth in the Prospectus.
3. Payment for the Securities shall be made to the Company or to its
order by wire transfer or other same day funds at the
2
<PAGE> 3
office of Kirkland & Ellis, Chicago, Illinois at 9:00 A.M., Chicago time, on
[August __, 1997], or at such other time on the same or such other date, not
later than the fifth Business Day thereafter, as the Underwriters and the
Company may agree upon in writing. The time and date of such payment for the
Securities are referred to herein as the "Closing Date." As used herein, the
term "Business Day" means any day other than a Saturday, a Sunday or a day on
which banks are permitted or required to be closed in New York City.
Payment for the Securities shall be made against delivery to the
Underwriters on the Closing Date of one or more definitive certificate(s)
representing the Securities registered in the name of Cede & Co., as nominee
for The Depositary Trust Company and in such denominations, as permitted by the
Master Pooling and Servicing Agreement, as the Underwriters shall request in
writing not later than two full Business Days prior to the Closing Date, with
any transfer taxes payable in connection with the transfer to the Underwriters
of the Securities duly paid by the Company. The certificate(s) for the
Securities will be made available for inspection and packaging by the
Underwriters in New York, New York not later than 1:00 P.M., New York City
time, on the Business Day prior to the Closing Date.
4. The Company represents and warrants to each of the Underwriters
that:
(a) no order preventing or suspending the use of any
preliminary prospectus filed as part of the Registration Statement has
been issued by the Commission, and each preliminary prospectus filed
as part of the Registration Statement, as originally filed or as part
of any amendment thereto, or filed pursuant to Rule 424 under the
Securities Act, complied when so filed in all material respects with
the Securities Act, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
provided that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in
writing by such Underwriter expressly for use therein;
(b) the Registration Statement has become effective, and
the Registration Statement as of its effective date (the "Effective
Date"), and the Prospectus, as of the date of the Prospectus
Supplement, complied in all material respects with the applicable
requirements of the Securities Act; no stop order suspending the
effectiveness of the Registration
3
<PAGE> 4
Statement has been issued and no proceeding for that purpose has been
instituted or, to the best knowledge of the Company, threatened by the
Commission; and the Registration Statement, as of the Effective Date,
did not contain an untrue statement of a material fact and did not
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and the
Prospectus, as of the date of the Prospectus Supplement, did not, and
as of the Closing Date will not, contain an untrue statement of a
material fact and did not and will not omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that
the foregoing representations and warranties shall not apply to
statements or omissions in the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by
such Underwriter expressly for use therein;
(c) each of the Company and NFC has been duly
incorporated under the laws of its jurisdiction of incorporation; each
of the Company and NFC is a validly existing corporation in good
standing under the laws of its jurisdiction of incorporation, with
full power and corporate authority to own, lease and operate its
properties and conduct its business, and is duly qualified as a
foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, except where the failure to be so qualified or in good
standing would not have a material adverse effect on the business,
results of operations or financial condition or the material
properties or assets of the Company or NFC or the performance of their
obligations hereunder or under the Securitization Agreements (as
defined below) (a " Material Adverse Effect");
(d) each of this Agreement, the Master Pooling and
Servicing Agreement, the Existing Pooling and Servicing Agreement, the
1990 Purchase Agreement and the Contribution Agreement (as defined in
the Existing Pooling and Servicing Agreement) (collectively, excluding
this Agreement, the " Existing Agreements") has been duly authorized,
executed and delivered by the Company and NFC;
(e) the execution and delivery of the Series 1997-1
Supplement, the Class A-5 Supplement and the Purchase Agreement
(collectively, the "Additional Agreements" and, together with the
Existing Agreements, the "Securitization
4
<PAGE> 5
Agreements") have been duly and validly authorized by the Company and
NFC;
(f) this Agreement constitutes the valid and binding
agreement of the Company and NFC; and each Existing Agreement
constitutes, and when executed and delivered by each of the Company
and NFC, each Additional Agreement will (assuming due authorization,
execution and delivery by the 1990 Trustee or the Master Trust
Trustee, as applicable) constitute, a legal, valid and binding
agreement of each of the Company and NFC, enforceable against the
Company and NFC in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought;
(g) the Securities and the Securitization Agreements conform
in all material respects to the descriptions thereof in the
Prospectus;
(h) the Securities have been duly and validly authorized
for issuance and, when executed by the Company and authenticated by
the Master Trust Trustee in accordance with the provisions of the
Master Pooling and Servicing Agreement, and delivered to and paid for
by the Underwriters in accordance with the terms hereof, will have
been duly and validly executed, authenticated, issued and delivered
and will be entitled to the benefits of the Master Pooling and
Servicing Agreement, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be
brought;
(i) the Class A-5 Certificate has been duly and validly
authorized for issuance and, when executed by the Company and
authenticated by the 1990 Trustee in accordance with the provisions of
the 1990 Pooling and Servicing Agreement, and delivered to the Master
Trust Trustee in accordance with the terms of the Master Pooling and
Servicing Agreement, will have been duly executed, authenticated,
issued and delivered and will be entitled to the benefits of the 1990
Pooling and Servicing Agreement, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of
5
<PAGE> 6
equity and the discretion of the court before which any proceeding
therefor may be brought;
(j) the Seller Certificate has been duly and validly
issued, executed and authenticated in accordance with the provisions
of the 1990 Pooling and Servicing Agreement, and is entitled to the
benefits of the 1990 Pooling and Servicing Agreement, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought;
(k) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Securities and the Securitization Agreements, and the consummation
by the Company of the transactions contemplated herein and therein and
in the Prospectus, (i) do not and will not result in any violation of
the Certificate of Incorporation or the By-laws of the Company and
(ii) do not and will not conflict with, or result in a breach or
violation of any of the terms or provisions of, or constitute a
default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right to
accelerate the maturity or require the prepayment of any indebtedness
or the purchase of any capital stock under, or result in the creation
or imposition of any lien, charge or encumbrance upon any properties
or assets of the Company under, (A) any contract, indenture, mortgage,
deed of trust, loan agreement, note, lease, partnership agreement or
other agreement or instrument to which the Company, NFC, Navistar
International Transportation Corporation ("NITC") or Navistar
International Corporation ("NIC") is a party or by which any of them
may be bound or to which any of their respective properties or assets
may be subject, (B) (assuming, prior to the effectiveness of the
Registration Statement, compliance with the Securities Act) any
applicable law or statute, rule or regulation (other than the
securities or Blue Sky laws of the various states of the United States
of America) or (C) any judgment, order or decree of any government,
governmental instrumentality, agency, body or court, domestic or
foreign, having jurisdiction over the Company, NFC, NITC or NIC or any
of their respective properties or assets;
(l) the execution and delivery by NFC of, and the
performance by NFC of all of its obligations under, this Agreement and
the Securitization Agreements, and the consummation by NFC of the
transactions contemplated herein
6
<PAGE> 7
and therein and in the Prospectus, (i) do not and will not result in
any violation of the Certificate of Incorporation or the By-laws of
NFC and (ii) do not and will not conflict with, or result in a breach
or violation of any of the terms or provisions of, or constitute a
default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right to
accelerate the maturity or require the prepayment of any indebtedness
or the purchase of any capital stock under, or result in the creation
or imposition of any lien, charge or encumbrance upon any properties
or assets of NFC under, (A) any contract, indenture, mortgage, deed of
trust, loan agreement, note, lease, partnership agreement or other
agreement or instrument to which NFC, the Company, NITC or NIC is a
party or by which any of them may be bound or to which any of their
respective properties or assets may be subject, (B) (assuming, prior
to the effectiveness of the Registration Statement, compliance with
the Securities Act) any applicable law or statute, rule or regulation
(other than the securities or Blue Sky laws of the various states of
the United States of America) or (C) any judgment, order or decree of
any government, governmental instrumentality, agency, body or court,
domestic or foreign, having jurisdiction over NFC, the Company, NITC
or NIC or any of their respective properties or assets;
(m) the representations and warranties of the Company and NFC
set out in the Securitization Agreements are true and correct in all
material respects;
(n) no authorization, approval, consent, order, registration,
qualification or license of, or filing with, any government,
governmental instrumentality, agency, body or court, domestic or
foreign, or third party (other than as have been or will be prior to
the Closing Date obtained under the Securities Act or as may
subsequently be required under the Securities Exchange Act of 1934
(the "Exchange Act") or as may be required under the securities or
Blue Sky laws of the various states of the United States of America)
is required for the valid authorization, issuance, sale and delivery
of the Securities, or the performance by the Company or NFC of all of
its obligations under this Agreement, the Securitization Agreements or
(in the case of the Company) the Securities, or the consummation by
the Company or NFC of the transactions contemplated by this Agreement,
the Securitization Agreements or the Prospectus;
(o) neither the Company nor NFC (i) is in violation of
its Certificate of Incorporation or By-Laws or (ii) is in breach or
violation of any of the terms or provisions of, or with the giving of
notice or lapse of time, or both, would
7
<PAGE> 8
be in default under, any contract, indenture, mortgage, deed of trust,
loan agreement, note, lease, partnership agreement, or other agreement
or instrument to which the Company or NFC is a party or by which
either of them may be bound or to which any of their properties or
assets may be subject, except for such violations or defaults that
would not have a Material Adverse Effect;
(p) there is no action, suit or proceeding before or by any
government, governmental instrumentality, agency, body or court,
domestic or foreign, now pending or, to the best knowledge of the
Company and NFC after due inquiry, threatened against or affecting the
Company or NFC (i) asserting the invalidity of this Agreement, any
Securitization Agreement or the Securities, (ii) seeking to prevent
the issuance of the Securities or the consummation of any of the
transactions contemplated by this Agreement or any Securitization
Agreement, (iii) that might materially and adversely affect the
performance by either the Company or NFC of its obligations under, or
the validity or enforceability of, this Agreement, any Securitization
Agreement or the Securities, (iv) seeking to affect adversely the
federal income tax attributes of the Securities described in the
Prospectus or (v) that if determined adversely as to either the
Company or NFC would have a Material Adverse Effect on either the
Company or NFC;
(q) there has not been any material adverse change in the
business, results of operations or financial condition or the material
properties or assets of NITC or NFC since the end of the most recent
fiscal quarter of NITC or NFC;
(r) any taxes, fees, and other governmental charges in
connection with the execution and delivery of this Agreement and the
Securitization Agreements and the execution, delivery, and sale of the
Securities have been or will be paid at or before the Closing Date;
(s) the Dealer Notes and/or Investment Securities held by the
1990 Trust on the Closing Date (after giving effect to all
transactions occurring on such date) will have an aggregate principal
amount of not less than $[___________];
(t) neither the Master Pooling and Servicing Agreement nor the
1990 Pooling and Servicing Agreement is required to be qualified under
the Trust Indenture Act of 1939, as amended (the " Trust Indenture
Act"), and none of the Company, the 1990 Trust or the Master Trust is
required to be registered under the Investment Company Act of 1940, as
amended (the " Investment Company Act");
8
<PAGE> 9
(u) neither the Company nor NFC is a party to, or otherwise
bound by, any indenture or other material agreement or instrument, or,
to the Company's or NFC's knowledge, subject to or in violation of any
statute, regulation, or order of any governmental body, administrative
agency, regulatory body, or court having jurisdiction over the Company
or NFC that would have a Material Adverse Effect; and
(v) there are no contracts or other documents of a character
required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or the
Prospectus which are not filed or described as required.
5. The Company covenants and agrees with the several Underwriters as
follows:
(a) to cause the Prospectus Supplement to be transmitted to
the Commission for filing pursuant to Rules 424(b)(5) and 424(c) under
the Securities Act by means reasonably calculated to result in filing
with the Commission pursuant to said rule;
(b) to deliver, at the expense of the Company, (i) on the
Closing Date, [four] signed copies of the Registration Statement (as
originally filed) and each amendment thereto, in each case including
exhibits, to the Underwriters, and (ii) during the period mentioned in
paragraph (e) below, to each of the Underwriters as many copies of the
Prospectus (including all amendments and supplements thereto and
documents incorporated by reference therein) as the Underwriters may
reasonably request;
(c) before filing any amendment or supplement to the
Registration Statement or the Prospectus, to furnish to the
Underwriters and their counsel a copy of the proposed amendment or
supplement for review within a reasonable time prior to the proposed
filing thereof and not to file any such proposed amendment or
supplement to which the Underwriters or their counsel reasonably
object;
(d) to advise the Underwriters promptly, and to confirm
such advice in writing, (i) when any amendment to the Registration
Statement shall have become effective, (ii) of any request by the
Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for any additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation or threatening of any proceeding for that purpose
9
<PAGE> 10
and (iv) of the receipt by the Company of any notification with
respect to any suspension of the qualification of the Securities for
offer and sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and to use its best efforts to
prevent the issuance of any such stop order or notification and, if
issued, to obtain promptly the withdrawal thereof;
(e) if, during such period of time after the first date
of the public offering of the Securities as in the opinion of counsel
for the Underwriters or in the opinion of counsel for the Company a
prospectus relating to the Securities is required by law to be
delivered in connection with sales by an Underwriter or dealer, any
event shall occur or information shall become known as a result of
which it is necessary to amend or supplement the Prospectus in order
to make the statements therein, in the light of the circumstances at
the time the Prospectus is delivered to a purchaser, not misleading,
or if it is necessary to amend or supplement the Prospectus to comply
with law, forthwith to, at the sole expense of the Company, prepare
and, subject to Section 5(c) above, file with the Commission, and
furnish to the Underwriters and to the dealers (whose names and
addresses the Underwriters will furnish to the Company) to which
Securities may have been sold by the Underwriters and to any other
dealers upon request, such amendments or supplements to the Prospectus
as may be necessary so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances at
the time the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus will comply with law;
(f) (i) to use its best efforts to qualify the Securities
for offer and sale under the securities or Blue Sky laws of such
jurisdictions as the Underwriters shall reasonably request and to
continue such qualification in effect so long as reasonably required
for distribution of the Securities and (ii) to pay all fees and
expenses (including fees and disbursements of counsel for the
Underwriters) incurred in connection with such qualification and in
connection with the determination of the eligibility of the Securities
for investment under the laws of such jurisdictions as the
Underwriters may designate; provided that the Company shall not be
required to file a general consent to service of process or qualify as
a foreign corporation in any jurisdiction;
(g) to cause the Master Trust to make generally available
to holders of the Securities and to the Underwriters, in accordance
with Rule 158 under the Securities Act or otherwise, as soon as
practicable, but in
10
<PAGE> 11
any event not later than forty-five days after the end of the fourth
full fiscal quarter (ninety days in the case of the last fiscal
quarter in any fiscal year) following the fiscal quarter ending after
the Effective Date, an earnings statement of the Master Trust (which
need not be audited) complying with Section 11(a) of the Securities
Act and covering a period of at least twelve consecutive months
beginning after the Effective Date;
(h) so long as the Securities are outstanding, to deliver
or cause to be delivered to the Underwriters the annual statements as
to compliance and the annual statement(s) of a firm of independent
public accountants delivered to the Master Trust Trustee pursuant to
the Master Pooling and Servicing Agreement and to the 1990 Trustee
pursuant to the 1990 Pooling and Servicing Agreement, in each case
promptly after such statements are furnished to the Company;
(i) to pay or cause to be paid all costs and expenses
incident to the performance of its obligations hereunder, including
without limitation, all costs and expenses (i) incident to the
preparation, issuance, execution, authentication and delivery of the
Securities, including any expenses of the 1990 Trustee and the Master
Trust Trustee, (ii) incident to the preparation, printing and filing
under the Securities Act of the Registration Statement, the Prospectus
and any preliminary prospectus (including in each case all exhibits,
amendments and supplements thereto), (iii) incurred in connection with
the qualification or exemption of the sale of the Securities under
state securities or Blue Sky laws and the determination of their
eligibility for investment under state and federal laws, including
filing fees and reasonable fees and disbursements of counsel in
connection therewith, (iv) in connection with the printing (including
word processing and duplication costs) and delivery of this Agreement,
the Securitization Agreements and all other agreements relating hereto
or thereto, the Preliminary Blue Sky Memorandum and the furnishing to
the Underwriters and dealers of copies of the Registration Statement
and the Prospectus, including mailing and shipping, as herein
provided, and (v) payable to rating agencies in connection with the
rating of the Securities;
(j) so long as any of the Securities are outstanding, to
furnish to the Underwriters as soon as practicable after the end of
the fiscal year, (i) all documents required to be distributed to
security holders of either the Master Trust or the 1990 Trust or filed
with the Commission pursuant to the Exchange Act, or any order of the
Commission thereunder and (ii) from time to time, any other
information concerning
11
<PAGE> 12
the Company filed with any government or regulatory authority that is
otherwise publicly available, as the Underwriters may reasonably
request; and
(k) to the extent, if any, that the rating provided with
respect to the Securities by the rating agency or agencies that
initially rate the Securities is conditional upon the furnishing of
documents or the taking of any other actions by the Company, to
furnish, as soon as practicable, such documents and take any such
other reasonable actions.
The Company and NFC agree with the Underwriters during the period of
30 days from the date of the Prospectus, not to offer, sell, contract to sell
or announce any offering of any securities of the Company or any other
affiliate of NFC, or any other trust for which the Company or any other
affiliate of NFC is depositor, which represent participation interests in
wholesale dealer notes issued by dealers to finance purchases of new and used
medium and heavy duty trucks, without the Underwriters' prior written consent,
which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, the Company and NFC may at any time cause the Master Trust to issue
a variable funding certificate to be placed with any single-seller asset-backed
commercial paper vehicle administered by NFC.
6. The several obligations of the Underwriters hereunder to purchase
the Securities are subject to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) No stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for such
purpose shall be pending before or threatened by the Commission; and
any requests for additional information by the Commission shall have
been complied with to the reasonable satisfaction of the Underwriters.
(b) Each of the representations and warranties of the
Company and NFC contained herein shall be true and correct on and as
of the Closing Date as if made on and as of the Closing Date, and each
of the Company and NFC shall have complied with all agreements and all
conditions on its part to be performed or satisfied hereunder at or
prior to the Closing Date.
(c) All corporate proceedings and related matters in
connection with the organization of the Company, the validity of the
Securitization Agreements and the registration, authorization, issue,
sale and delivery of the Securities shall have been satisfactory to
counsel to the
12
<PAGE> 13
Underwriters, and such counsel shall have been furnished with such
papers and information as they may reasonably have requested to enable
them to pass upon the matters referred to in this paragraph (c).
(d) The Underwriters shall have received on the Closing Date
a signed opinion of Kirkland & Ellis, special counsel for the Company
and NFC, in form and substance reasonably satisfactory to the
Underwriters and counsel to the Underwriters, dated the Closing Date
and addressed to the Underwriters, to the effect that:
(i) the Securities have been duly and validly
authorized for issuance and when executed by the Company and
authenticated by the Master Trust Trustee in accordance with
the provisions of the Master Pooling and Servicing Agreement,
and delivered to and paid for by the Underwriters in
accordance with the terms hereof, will have been duly
executed, authenticated, issued and delivered and will be
entitled to the benefits provided by the Master Pooling and
Servicing Agreement, in accordance with its terms;
(ii) the Class A-5 Certificate has been duly and
validly authorized for issuance and, when executed by the
Company and authenticated by the 1990 Trustee in accordance
with the provisions of the 1990 Pooling and Servicing
Agreement, and delivered to the Master Trust Trustee in
accordance with the terms of the Master Pooling and Servicing
Agreement, will have been duly executed, authenticated, issued
and delivered and will be entitled to the benefits of the 1990
Pooling and Servicing Agreement, in accordance with its terms;
(iii) this Agreement has been duly authorized,
executed and delivered on the part of the Company and NFC and
is a valid and binding agreement of each of the Company and
NFC; and each Existing Agreement constitutes, and when
executed and delivered by each of the Company and NFC, each
Additional Agreement will constitute, a legal, valid and
binding agreement of each of the Company and NFC (and assuming
due authorization, execution and delivery by the 1990 Trustee
or the Master Trust Trustee, as applicable, with respect to
the Additional Agreements), enforceable against the Company
and NFC in accordance with its terms,
(iv) the execution and delivery by the Company of,
and the performance by the Company of all of its obligations
under, this Agreement, the Class A-5
13
<PAGE> 14
Certificate, the Securities and the Securitization Agreements,
and the consummation by the Company of the transactions
contemplated herein and therein and in the Prospectus, (A)
have been duly authorized by all necessary corporate action on
the part of the Company, (B) do not and will not result in any
violation of the Certificate of Incorporation or the By-laws
of the Company and (C) do not and will not conflict with, or
result in a breach or violation of any of the terms or
provisions of, or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a
default) under, or give rise to any right to accelerate the
maturity or require the prepayment of any indebtedness or the
purchase of any capital stock under, or result in the creation
or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company under (1) any contract,
indenture, mortgage, deed of trust, loan agreement, note,
lease, partnership agreement or other agreement or instrument
to which the Company, NFC, NITC or NIC is a party or by which
any of them may be bound or to which any of their respective
properties or assets may be subject, which has been specified
by the Company in an officers' certificate as being material
to the Company, NFC, NITC or NIC (except that such counsel
need not express any opinion with respect to conflicts,
breaches or defaults under cross-default provisions arising
out of a default under any agreement not so specified in such
officers' certificate), (2) based upon existing facts of which
such counsel is aware, any Federal or State of New York or
Illinois law which, in such counsel's experience, is normally
applicable to general business corporations which are not
engaged in regulated business activities and to transactions
of the type contemplated by this Agreement and the
Securitization Agreements (but without such counsel having
made any special investigation as to any other laws), except
that such counsel shall express no opinion as to any law (x)
which might be violated by any misrepresentation or omission
of fact or a fraudulent act in connection with the
transactions contemplated by this Agreement or (y) to which
the Company, NFC, NITC or NIC may be subject solely as a
result of the Underwriters' (as opposed to underwriters
generally) legal or regulatory status, or the Underwriters'
(as opposed to underwriters generally) involvement in the
transactions contemplated by this Agreement or (3) any
judgment, order or decree of any government, governmental
instrumentality, agency, body or court, domestic or foreign,
known to such counsel
14
<PAGE> 15
and having jurisdiction over the Company, NFC, NITC or NIC or
any of their respective properties or assets;
(v) the execution and delivery by NFC of, and the
performance by NFC of all of its obligations under, this
Agreement and the Securitization Agreements and the
consummation by NFC of the transactions contemplated herein
and therein and in the Prospectus, (A) have been duly
authorized by all necessary corporate action on the part of
NFC, (B) do not and will not result in any violation of the
Certificate of Incorporation or the By-laws of NFC and (C) do
not and will not conflict with, or result in a breach or
violation of any of the terms or provisions of, or constitute
a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or give rise to any
right to accelerate the maturity or require the prepayment of
any indebtedness or the purchase of any capital stock under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any properties or assets of NFC under (1) any
contract, indenture, mortgage, deed of trust, loan agreement,
note, lease, partnership agreement or other agreement or
instrument to which the Company, NFC, NITC or NIC is a party
or by which any of them may be bound or to which any of their
respective properties or assets may be subject which has been
specified by the Company in an officers' certificate as being
material to the Company, NFC, NITC or NIC (except that such
counsel need not express any opinion with respect to
conflicts, breaches or defaults under cross-default provisions
arising out of a default under any agreement not so specified
in such officers' certificate), (2) based upon existing facts
of which such counsel is aware, any Federal or State of New
York or Illinois law which, in such counsel's experience, is
normally applicable to general business corporations which are
not engaged in regulated business activities and to
transactions of the type contemplated by the Securitization
Agreements (but without such counsel having made any special
investigation as to any other laws), except that such counsel
shall express no opinion as to any law (x) which might be
violated by any misrepresentation or omission of fact or a
fraudulent act in connection with the transactions
contemplated by this Agreement or (y) to which the Company,
NFC, NITC or NIC may be subject solely as a result of the
Underwriters' (as opposed to underwriters generally) legal or
regulatory status, or the Underwriters' (as opposed to
underwriters generally) involvement in the transactions
contemplated by this
15
<PAGE> 16
Agreement or (3) any judgment, order or decree of any
government, governmental instrumentality, agency, body or
court, domestic or foreign, known to such counsel and having
jurisdiction over the Company, NFC, NITC or NIC or any of
their respective properties or assets;
(vi) the statements contained in the Registration
Statement under the headings "Federal Income Tax Matters,"
"Certain State Tax Matters," "ERISA Considerations" and
"Certain Matters Relating to Bankruptcy" to the extent that
they constitute statements of matters of law or legal
conclusions with respect thereto, are correct in all material
respects; and the Securities, the Class A-5 Certificate and
the Securitization Agreements conform in all material respects
to the descriptions thereof in the Prospectus set forth under
the caption "Description of the Offered Certificates";
(vii) neither the Master Pooling and Servicing
Agreement nor the 1990 Pooling and Servicing Agreement is
required to be qualified under the Trust Indenture Act, and
none of the Company, the 1990 Trust and the Master Trust is
required to be registered under the Investment Company Act;
(viii) no authorization, approval, consent, order,
registration, qualification or license of, or filing with, any
government, governmental instrumentality, agency, body or
court, domestic or foreign, is required for the valid
authorization, issuance, sale and delivery of the Securities
or the Class A-5 Certificate, or the performance by the
Company or NFC of all of its obligations under this Agreement,
the Securitization Agreements or (in the case of the Company)
the Securities or the Class A-5 Certificate or the
consummation by the Company or NFC of the transactions
contemplated hereby, thereby or by the Prospectus, except such
consents, approvals, authorizations, registrations,
qualifications or licenses as have been obtained under the
Securities Act and as may be required under state securities
or Blue Sky laws of the various states of the United States of
America, and such other consents, approvals, authorizations,
registrations, qualifications, or licenses as have been
obtained, with such counsel specifying the same; and
(ix) the Registration Statement at the time it
became effective and the Prospectus as of its date and any
further amendments and supplements thereto made by
16
<PAGE> 17
the Company prior to the Closing Date (other than financial,
statistical and accounting data therein as to which such
counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act.
Such counsel shall also advise, based on its participation in
the preparation of the Registration Statement and the Prospectus and
conferences with officers and representatives of the Company,
representatives of the independent public accountants for the Company,
representatives of the Underwriters and counsel to the Underwriters,
that nothing has come to its attention that leads it to believe that
the Registration Statement and any post-effective amendment thereto
(other than the financial statements, supporting schedules and other
financial and statistical data set forth therein, as to which no
advice need be given), at the time such Registration Statement or
post-effective amendment became effective or at the Closing Date,
contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or
that the Prospectus (as supplemented, if applicable) other than the
financial statements, supporting schedules and other financial and
statistical data set forth therein, as to which no advice need be
given), as of its date or as of the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
In rendering such opinions, such counsel may rely as to
matters of fact, to the extent such counsel reasonably deems proper,
on certificates of responsible officers of the Company and
certificates or other written statements of officials of jurisdictions
having custody of documents respecting the corporate existence or good
standing of the Company. In addition, such opinion of counsel may
state that such counsel's opinions are subject to the effect of
applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance or transfer or other laws of general
applicability relating to or affecting the enforcement of creditors'
rights from time to time in effect and to general principles of
equity.
(e) Kirkland & Ellis shall have furnished to the Underwriters
a letter stating that the Underwriters may rely on their opinions, as
special counsel to the Company and NFC, as delivered to Moody's
Investors Service, Inc. and
17
<PAGE> 18
Standard & Poor's Ratings Group in connection with the rating of the
Securities.
(f) The Underwriters shall have received on the Closing
Date a signed opinion of William W. Jones, General Counsel of NFC, in
form and substance reasonably satisfactory to the Underwriters and
counsel to the Underwriters, dated the Closing Date and addressed to
the Underwriters, to the effect that:
(i) each of the Company and NFC has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware with full
power and authority (corporate and other) to own, lease and
operate its properties and to conduct its business;
(ii) except as described in the Registration
Statement and the Prospectus, there is no action, suit or
proceeding before or by any government, governmental
instrumentality, agency, body or court, domestic or foreign,
now pending or, to the best knowledge of such counsel,
threatened against or affecting the Company, NFC, NITC or NIC
that could have a Material Adverse Effect or that could have a
material adverse effect on the consummation of the
transactions contemplated in, or the fulfillment of the terms
of, this Agreement, the Prospectus or the Securitization
Agreements; there is no action, suit or proceeding before or
by any government, governmental instrumentality, agency, body
or court, now pending, or to the best knowledge of such
counsel, threatened against or affecting the Company, NFC,
NITC or NIC that is required to be described in the
Registration Statement or the Prospectus that is not so
described; and to the best of such counsel's knowledge, there
are no contracts or other documents of a character required to
be described or referred to in the Registration Statement or
the Prospectus, or to be filed as an exhibit to the
Registration Statement, that are not described, filed or
referred to as required;
(iii) the execution and delivery by the Company and
NFC of, and the performance by the Company and NFC of all of
the provisions of its obligations under, this Agreement, the
Securitization Agreements and the Securities, and the
consummation by the Company and NFC of the transactions
contemplated herein, therein and in the Prospectus, do not and
will not conflict with, or result in a breach or violation of
any of the terms or provisions of, or constitute a default (or
an event which, with notice or lapse of time, or both, would
18
<PAGE> 19
constitute a default) under, or give rise to any right to
accelerate the maturity or require the prepayment of any
indebtedness or the purchase of any capital stock under, or
result in the creation or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or of
any Subsidiary under, (A) any contract, indenture, mortgage,
deed of trust, loan agreement, note, lease, partnership
agreement or other agreement or instrument to which the
Company, NFC, NITC or NIC is a party or by which any of them
may be bound or to which any of their respective properties or
assets may be subject or (B) any judgment, order or decree of
any government, governmental instrumentality, agency, body or
court, domestic or foreign, having jurisdiction over the
Company, NFC, NITC or NIC or any of their respective
properties or assets; and
(iv) the statements contained in the Registration
Statement under the heading "Certain Matters Relating to the
Dealer Notes," to the extent that they constitute statements
of matters of law or legal conclusions with respect thereto,
are correct in all material respects.
Such counsel shall also advise, based on his participation in
the preparation of the Registration Statement and the Prospectus and
conferences with officers and representatives of the Company,
representatives of the independent public accountants for the Company,
representatives of the Underwriters and counsel to the Underwriters,
that nothing has come to his attention that leads him to believe that
the Registration Statement and any post-effective amendment thereto
(other than the financial statements, supporting schedules and other
financial and statistical data set forth therein, as to which no
advice need be given), at the time such Registration Statement or
post-effective amendment became effective or at the Closing Date,
contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or
that the Prospectus (as supplemented, if applicable) (other than the
financial statements, supporting schedules and other financial and
statistical data set forth therein, as to which no advice need be
given), as of its date or as of the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
19
<PAGE> 20
(g) On the date hereof and at the Closing Date, Deloitte
& Touche shall have furnished to the Underwriters letters, dated the
respective date of delivery thereof, in form and substance
satisfactory to the Underwriters.
(h) Counsel to each of the 1990 Trustee and the Master
Trust Trustee shall have furnished to the Underwriters written
opinions, dated the Closing Date, in form and substance reasonably
satisfactory to the Underwriters.
(i) The Dealer Notes and/or Investment Securities held by
the 1990 Trust on the Closing Date (after giving effect to all
transactions occurring on such date) will have an aggregate principal
amount of not less than $[___________].
(j) At or prior to the Closing Date, the Securities shall
be rated "Aaa" by Moody's Investors Service, Inc. and "AAA" by
Standard & Poor's Ratings Group.
(k) The Company shall have furnished or caused to be furnished
to the Underwriters a certificate, dated the Closing Date, by either
the President or a Vice President of NITC and NFC (in his capacity as
such) to the effect that the signer of such certificate has carefully
examined the Securitization Agreements and to the effect that: (i) the
representations and warranties of the Company and NFC contained in
such agreements are true and correct in all material respects at and
as of the Closing Date with the same effect as if made at the Closing
Date, (ii) the Company and NFC have complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date, (iii) no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or, to
the Company's knowledge, threatened, (iv) there shall have been no
material adverse change in the business, results of operation or
financial condition or the material properties or assets of NITC or
NFC since the end of the most recent fiscal quarter of NITC or NFC,
and (v) nothing has come to his attention that would lead him to
believe that the Prospectus contains any untrue statement of a
material fact or omits to state any material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(l) The Underwriters shall have received on and as of the
Closing Date an opinion dated the Closing Date of Mayer, Brown &
Platt, counsel to the Underwriters, addressed to the Underwriters and
in form and substance satisfactory to the Underwriters with respect to
the validity of the Securities,
20
<PAGE> 21
the Master Pooling and Servicing Agreement, the Registration
Statement, the Prospectus and other related matters as the
Underwriters may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters.
(m) On or prior to the Closing Date, the Company shall
have furnished to the Underwriters such further certificates and
documents as the Underwriters or their counsel, Mayer, Brown & Platt,
shall reasonably request.
7. (a) The Company and NFC will jointly and severally indemnify and
hold harmless each Underwriter and each Person who controls any Underwriter
within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which the Underwriters or any of them may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus or any amendment
or supplement thereto, or any related preliminary prospectus, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse each Underwriter and each Person who
controls any Underwriter within the meaning of the Securities Act for any
actual legal or other expenses reasonably incurred by the Underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that
neither the Company nor NFC will be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with written
information furnished to the Company or NFC by any Underwriter specifically for
use therein.
(b) Each Underwriter, severally, agrees to indemnify and hold
harmless the Company and NFC against any losses, claims, damages or liabilities
to which the Company or NFC, as applicable, may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent,
21
<PAGE> 22
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to NFC, as applicable, by such Underwriter specifically for use
therein, and will reimburse any actual legal or other expenses reasonably
incurred by the Company or NFC, as applicable, in connection with investigating
or defending any such loss, claim, damage, liability or action as such expenses
are incurred.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action or the assertion by a third
party of a claim, such indemnified party will, if a claim in respect thereof is
to be made against the indemnifying party under subsection (a) or (b) above,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party except and to the extent of any prejudice
to such indemnifying party arising from such failure to provide such notice. In
case any such action is brought against any indemnified party and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company or NFC on the one hand and the Underwriters on the other from
the offering of the Securities or (ii) if the allocation provided by clause (i)
above is not
22
<PAGE> 23
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company or NFC on the one hand and the Underwriters on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company or NFC on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities
(before deducting expenses) received by the Company or NFC bear to the total
underwriting discounts and commissions received by the Underwriters. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or NFC or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Securities purchased by such
Underwriter hereunder. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Company and NFC under this Section
shall be in addition to any liability that the Company or NFC may otherwise
have and shall extend, upon the same terms and conditions, to each Person, if
any, who controls any Underwriter within the meaning of the Securities Act; and
the obligations of any Underwriter under this Section shall be in addition to
any liability that such Underwriter may otherwise have and shall extend, upon
the same terms and conditions, to each director of the Company and NFC, to each
officer of the Company or NFC who signed the Registration Statement and to each
Person, if any, who controls the Company or NFC within the meaning of the
Securities Act.
(f) The respective indemnities, agreements, representations,
warranties and other statements of the Company or NFC or its officers and of
the Underwriters set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation or statement as to the
23
<PAGE> 24
results thereof, made by or on behalf of the Underwriters, the Company or NFC
or any of their respective representatives, officers or directors or any
controlling Person, and will survive delivery of and payment for the
Securities.
8. Each of the Underwriters represents and agrees that:
(a) it has not offered or sold, and will not offer or
sell, any Series 1997-1 Certificates to persons in the United Kingdom,
other than 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 Public
Offers of Securities Regulations 1995;
(b) it has complied and will comply with all applicable
provisions of the Financial Services Act 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 Series 1997-1 Certificates to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986, as
amended, (Investment Advertisements) (Exceptions) Order 1996, as
amended, or is otherwise a person to whom the document may otherwise
lawfully be issued or passed on.
9. Notwithstanding anything herein contained, this Agreement may be
terminated in the absolute discretion of the Underwriters, by notice given to
the Company, if after the execution and delivery of this Agreement and prior to
the Closing Date (i) trading generally shall have been suspended or materially
limited on or by, as the case may be, any of the New York Stock Exchange, the
American Stock Exchange or the National Association of Securities Dealers,
Inc., (ii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities or
(iii) there shall have occurred any outbreak or escalation of hostilities or
any change in financial markets or any calamity or crisis that, in the judgment
of the Underwriters, is material and adverse and which, in the judgment of the
Underwriters, makes it impracticable or inadvisable to market the Securities on
the terms and in the manner contemplated in the Prospectus.
24
<PAGE> 25
10. If this Agreement shall be terminated by the Underwriters because
of any failure or refusal on the part of the Company to comply with the terms
or to fulfill any of the conditions of this Agreement, or if for any reason the
Company shall be unable to perform its obligations under this Agreement, the
Company agrees to reimburse the Underwriters for all out-of-pocket expenses
(including the fees and expenses of their counsel) reasonably incurred by the
Underwriters in connection with this Agreement or the offering contemplated
hereunder.
11. Any action by the Underwriters hereunder may be taken by the
Underwriters jointly or by Credit Suisse First Boston Corporation alone on
behalf of the Underwriters, and any such action taken by Credit Suisse First
Boston Corporation alone shall be binding upon the Underwriters. All notices
and other communications hereunder shall be in writing and shall be deemed to
have been duly given if mailed or telecopied. Notices to the Underwriters
shall be given to the Underwriters, c/o Credit Suisse First Boston Corporation,
11 Madison Avenue, New York, New York 10010, Attention: Investment Banking
Department-Transactions Advisory Group (facsimile: (212) [___________].
Notices to the Company shall be given to it at 2850 W. Golf Road, Rolling
Meadows, IL 60008; Attention: William W. Jones (facsimile: (847) 734-4090).
12. This Agreement shall inure to the benefit of and be binding upon
the Underwriters and the Company and any controlling person referred to herein
and their respective successors, heirs and legal representatives. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriters and the
Company and their respective successors, heirs and legal representatives and
the controlling persons and officers and directors referred to in Section 7 and
their heirs and legal representatives, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained.
No purchaser of Securities from any Underwriter shall be deemed to be a
successor merely by reason of such purchase.
13. This Agreement may be signed in counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument.
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS
OF LAWS PROVISIONS THEREOF.
25
<PAGE> 26
If the foregoing is in accordance with your understanding, please sign
and return four counterparts hereof.
Very truly yours,
NAVISTAR FINANCIAL SECURITIES
CORPORATION
By:_____________________________
Name:
Title:
NAVISTAR FINANCIAL CORPORATION
By:_____________________________
Name: R. Wayne Cain
Title: Vice President Treasurer
Accepted: August __, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
By:________________________________
Name:
Title:
26
<PAGE> 27
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amounts
of Securities
Underwriter to be Purchased
- ----------- -----------------
<S> <C>
Credit Suisse First Boston Corporation . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 1
EXHIBIT 4.4
AMENDMENT NO. 3 TO THE
POOLING AND SERVICING AGREEMENT
THIS AMENDMENT NO. 3 (this "Amendment") is made as of June 8,
1995, by and among Navistar Financial Securities Corporation, a Delaware
corporation ("NFSC"), Navistar Financial Corporation, a Delaware corporation
("NFC"), and Chemical Bank, as Trustee (the "Trustee").
NFSC, as Seller, NFC, as Servicer, and the Trustee are parties
to a Pooling and Servicing Agreement, dated as of December 1, 1990 (the
"Pooling and Servicing Agreement"). In order to clarify that a lien by the
Internal Revenue Service or the Pension Benefit Guaranty Corporation is
intended to be a "Lien" as defined in the Pooling and Servicing Agreement and
pursuant to Section 13.01(a) of the Pooling and Servicing Agreement, the
Seller, the Servicer and the Trustee have agreed to amend the Pooling and
Servicing Agreement in the manner set forth herein. Capitalized terms used
herein but not otherwise defined have the meanings set forth in the Pooling and
Servicing Agreement.
1. Amendment. The definition of "Lien" in Section
1.01 of the Pooling and Servicing Agreement is hereby amended and restated to
read in its entirety as follows:
'"Lien" shall mean any mortgage, deed of trust,
pledge, hypothecation, encumbrance, lien or other security
interest or agreement, including, without limitation, any
conditional sale or other title retention agreement, and any
financing lease having substantially the same economic effect
as any of the foregoing; provided, however, that statutory and
other non-consensual liens (other than Internal Revenue
Service liens and liens in respect of pension obligations)
shall not be Liens; and provided, further, that liens for
municipal or other local taxes shall not be Liens if such
taxes shall not at the time be due and payable or if the
Seller shall currently be contesting the validity thereof in
good faith by appropriate proceedings and shall have set aside
on its books adequate reserves with respect thereto.'
2. Miscellaneous. This Amendment shall be construed in
accordance with the internal laws of the State of Illinois, without reference
to its conflict of law provisions. This Amendment may be executed in two or
more counterparts, each of which shall be an original, but all of which
together constitute one and the same instrument. Promptly after the execution
of this Amendment the Trustee shall furnish written notification of the
substance of this Amendment to each Investor Certificateholder.
* * *
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 3 to the Pooling and Servicing Agreement to be duly executed by
their respective officers as of the date first written above.
NAVISTAR FINANCIAL SECURITIES
CORPORATION
as Seller
By:___________________________________
Its:__________________________________
NAVISTAR FINANCIAL CORPORATION
as Servicer
By:___________________________________
Its:__________________________________
CHEMICAL BANK
as Trustee
By:___________________________________
Its:__________________________________
2
<PAGE> 1
EXHIBIT 4.5
AMENDMENT NO. 4 TO THE
POOLING AND SERVICING AGREEMENT
THIS AMENDMENT NO. 4 (this "Amendment") is made as of November
22, 1996, by and among Navistar Financial Securities Corporation, a Delaware
corporation ("NFSC"), Navistar Financial Corporation, a Delaware corporation
("NFC"), and The Chase Manhattan Bank, as Trustee (the "Trustee").
NFSC, as Seller, NFC, as Servicer, and the Trustee are parties
to a Pooling and Servicing Agreement, dated as of December 1, 1990 (as amended
from time to time, the "Pooling and Servicing Agreement"). Pursuant to
Section 13.01(b) of the Pooling and Servicing Agreement, NFSC, NFC and the
Trustee have agreed to amend the Pooling and Servicing Agreement in the manner
set forth herein. Capitalized terms used herein but not otherwise defined have
the meanings set forth in the Pooling and Servicing Agreement.
1. Amendment. Subparagraph (n) of the definition
of "Eligible Dealer Note" in Section 1.01 of the Pooling and Servicing
Agreement is hereby amended and restated to read in its entirety as follows:
'(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 Trust, shall not cause the sum
of the principal amounts of all such Dealer Notes to exceed
the greater of (1) $4,000,000 or (2) 2% of the sum of the
aggregate principal balance of Dealer Notes and the aggregate
principal amount of Investment Securities in the Trust as of
the close of business on the Business Day preceding the date
on which such Dealer Note is to be transferred (the
"Concentration Limit"); provided that the Seller may from time
to time in its sole discretion decrease or increase (but not
above the greater of clauses (1) or (2) above) the
Concentration Limit with respect to any Dealer;'
2. Miscellaneous. This Amendment shall be construed in
accordance with the internal laws of the State of Illinois, without reference
to its conflict of law provisions. This Amendment may be executed in two or
more counterparts, each of which shall be an original, but all of which
together constitute one and the same instrument. Promptly after the execution
of this Amendment the Trustee shall furnish written notification of the
substance of this Amendment to each Investor Certificateholder.
* * *
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 4 to the Pooling and Servicing Agreement to be duly executed by
their respective officers as of the date first written above.
NAVISTAR FINANCIAL SECURITIES
CORPORATION
as Seller
By:____________________________________
Its:___________________________________
NAVISTAR FINANCIAL CORPORATION
as Servicer
By:____________________________________
Its:___________________________________
THE CHASE MANHATTAN BANK
as Trustee
By:____________________________________
Its:___________________________________
2
<PAGE> 1
EXHIBIT 4.6
CLASS A-5 SUPPLEMENT
DEALER NOTE TRUST 1990
CLASS A-5 SUPPLEMENT, dated as of _______, 1997 (this
"Supplement") among Navistar Financial Corporation ("NFC"), a Delaware
corporation, as Servicer, Navistar Financial Securities Corporation ("NFSC"), a
Delaware corporation, as Seller, and The Chase Manhattan Bank, a New York
corporation, as trustee (the "Trustee"), to the Pooling and Servicing Agreement
dated as of December 1, 1990 and as amended as of May 23, 1993, March 23, 1995,
June 8, 1995, and November 22, 1996 (the "Agreement") among NFC, NFSC and the
Trustee.
RECITALS
Section 6.12 of the Agreement provides, among other things,
that the Seller and the Trustee may at any time and from time to time enter
into a supplement to the Agreement for the purpose of authorizing the issuance
by the Trustee to the Seller for execution and redelivery to the Trustee for
authentication of one or more Classes of Investor Certificates. The Seller has
tendered the Exchange Notice required by Section 6.12(b) of the Agreement and
hereby enters into this Supplement with the Trustee as required by Section
6.12(c) of the Agreement to provide for the issuance, authentication and
delivery of the Dealer Note Trust 1990 Floating Rate Pass-Through Certificate,
Class A-5 (the "Class A-5 Investor Certificate"). In the event that any term
or provision contained herein shall conflict with or be inconsistent with any
term or provision contained in the Agreement, the terms and provisions of this
Supplement shall govern.
All capitalized terms not otherwise defined herein are defined
in the Agreement. All Article, Section or Subsection references herein shall
mean Article, Section or Subsections of the Agreement, except as otherwise
provided herein.
SECTION 1. Designation.
The Dealer Note Trust 1990 Floating Rate Pass-Through
Certificate authorized hereunder shall be designated generally as the Class A-5
Investor Certificate, and the Class A-5 Investor Certificate created hereunder
shall be issued to The Bank of New York, as trustee (the "Master Trust
Trustee") under the Pooling and Servicing Agreement dated as of June 8, 1995,
as amended or supplemented (the "Master Trust Agreement") among NFC, NFSC, the
Trustee and the Master Trust Trustee.
SECTION 2. Class Initial Invested Amount.
The Class Initial Invested Amount of the Class A-5 Investor
Certificate shall be $_______.
SECTION 3. Class Initial Investor Interest.
The Class Initial Investor Interest of the Class A-5 Investor
Certificate shall be $_______.
<PAGE> 2
SECTION 4. Class Certificate Margin.
The Class Certificate Margin for the Class A-5 Investor
Certificate shall be ___%.
SECTION 5. Scheduled Class Amortization Date.
The Scheduled Class Amortization Date of the Class A-5
Investor Certificate shall be the earlier of (a) _______, 200__ and (b) the
date on which any "Early Amortization Event" or "Investment Event" (as such
terms are defined in the Master Trust Agreement as supplemented by the Series
1997-1 Supplement dated as of _______, 1997 among NFC, NFSC and the Master
Trust Trustee (the "Series 1997-1 Supplement")) occurs with respect to the
Series 1997-1 Investor Certificates issued under the Master Trust Agreement and
the related Series 1997-1 Supplement thereunder.
SECTION 6. Delivery of the Class A-5 Investor Certificate;
Transferability.
(a) The Trustee shall deliver the Class A-5 Investor
Certificate to the Master Trust Trustee when authenticated in accordance with
Section 6.11 of the Agreement.
(b) The Class A-5 Investor Certificate shall not be
transferrable prior to the 1990 Trust Termination Date.
SECTION 7. Accrual of Interest on the Class A-5 Investor Certificate.
Interest shall accrue on the Class A-5 Investor Certificate
from _______, 1997.
SECTION 8. Class Termination Date; Termination of Trust.
(a) The Class Termination Date for the Class A-5 Investor
Certificate shall be the earlier of (a)_______, 200__ and (b) 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 first Distribution Date on which the Class
Invested Amount of each of the Class A-1, A-2 and A-3 Investor Certificates has
been reduced to zero (the "1990 Trust Termination Date"). Notwithstanding the
provisions of the Agreement, on the Distribution Date related to the 1990 Trust
Termination Date, the Master Trust Trustee shall deliver the Class A-5 Investor
Certificate to the Trustee in exchange for, and the Trustee shall transfer to
the Master Trust Trustee (all such deliveries and transfers to be given effect
as of the 1990 Trust Termination Date), all of the Trust's right, title and
interest in and to:
(i) the Dealer Notes held by the Trust as of the
1990 Trust Termination Date, all monies due (including accrued finance
charges) or to become due with respect thereto and all proceeds (as
defined in Section 9-306 of the UCC) of such Dealer Notes;
(ii) the security interests in the Financed Vehicles
related to such Dealer Notes granted by Dealers pursuant to the Dealer
Agreements and any accessions to such security interests;
(iii) the Insurance Proceeds;
-2-
<PAGE> 3
(iv) Investment Securities; and
(v) funds on deposit in the Investor Accounts (other
than funds on deposit in the Distribution Account for the benefit of,
and allocated to, Investor Certificates that are not held by the
Master Trust Trustee);
and the Class A-5 Investor Certificate shall automatically be cancelled and be
of no further force and effect with no further right of payment attached
thereto.
(b) Notwithstanding the provisions of Article XII of the
Agreement, the respective obligations and responsibilities of the Seller, the
Servicer and the Trustee created by the Agreement (other than any outstanding
obligation of the Trustee to make payments to the Class A-1, Class A-2 or Class
A-3 Investor Certificateholders as set forth in the Agreement and except with
respect to the duties described in Section 12.03(b) of the Agreement) shall
terminate as of the close of business on the 1990 Trust Termination Date.
SECTION 9. Ratification of Agreement.
As supplemented by this Supplement, the Agreement is in all
respects ratified and confirmed and the Agreement, as so supplemented by this
Supplement shall be read, taken and construed as one and the same instrument.
SECTION 10. Counterparts.
This Supplement may be executed in two or more counterparts,
each of which so executed shall be deemed to be an original, but all of which
shall together constitute but one and the same instrument.
SECTION 11. Governing Law.
This Supplement shall be construed, and the obligations,
rights and remedies of the parties hereunder shall be determined, in accordance
with the laws of the State of Illinois, without reference to its conflict law
of provisions.
* * * * *
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee
have caused this Supplement to be duly executed by their respective officers
thereunto duly authorized as of the date first written above.
NAVISTAR FINANCIAL SECURITIES
CORPORATION
By:_____________________________________
Its:____________________________________
NAVISTAR FINANCIAL CORPORATION
By:_____________________________________
Its:____________________________________
THE CHASE MANHATTAN BANK
By:_____________________________________
Its:____________________________________
-4-
<PAGE> 1
EXHIBIT 4.7
INVESTOR CERTIFICATE
Class A-5
No. 1 $________
DEALER NOTE TRUST 1990
FLOATING RATE PASS-THROUGH CERTIFICATE
NAVISTAR FINANCIAL SECURITIES CORPORATION
SELLER
NAVISTAR FINANCIAL CORPORATION
SERVICER
(Not an interest in or obligation of Navistar Financial Securities
Corporation or Navistar Financial Corporation)
This certifies that the Navistar Financial Dealer Note Master Trust
(the "Investor Certificateholder" or "Master Trust") is the registered owner of
a Fractional Undivided Interest in the Dealer Note Trust 1990 (the "Trust")
created pursuant to a Pooling and Servicing Agreement, dated as of December 1,
1990 (as amended or supplemented, the "Agreement") by and among Navistar
Financial Corporation, a Delaware corporation ("NFC"), as Servicer, Navistar
Financial Securities Corporation, a Delaware corporation ("NFSC" or "Seller"),
as Seller, and The Chase Manhattan Bank, a New York corporation, as trustee
(the "Trustee"), and the Class A-5 Supplement (defined on the reverse side
hereof). The corpus of the Trust consists of a portfolio of (i) wholesale
notes (the "Dealer Notes"), issued by certain Persons ("Dealers"), existing as
of the Closing Date, or thereafter created, to finance the purchase of new and
used vehicles (including new and used trailers) (the "Financed Vehicles"),
which Dealer Notes are initially acquired by NFC from Navistar International
Transportation Corp., in the case of new vehicles and trailers, and directly
from Dealers, in the case of used vehicles and trailers, and subsequently
transferred by NFC to the Seller and thereafter transferred by the Seller to
the Trust, all monies due or to become due with respect thereto and all
proceeds (as defined in Section 9-306 of the UCC) of such Dealer Notes; (ii)
the interest of NFSC in the security interests in the Financed Vehicles related
to the Dealer Notes; and (iii) the interest of NFSC in the Insurance Proceeds.
Reference is hereby made to the further provisions of this Investor Certificate
set forth on the reverse hereof, and such further provisions shall for all
purposes have the same effect as if set forth at this place. To the extent not
otherwise defined herein or on the reverse hereof, the capitalized terms used
herein have the meanings assigned to them in the Agreement and the
within-mentioned Class A-5 Supplement.
Although a summary of certain provisions of the Agreement and the
Class A-5 Supplement is set forth on the reverse hereof, this Investor
Certificate does not purport to summarize the Agreement and the Class A-5
Supplement, is qualified in its entirety by the terms and provisions of the
Agreement and the Class A-5 Supplement and reference is made to the Agreement
and the
<PAGE> 2
Class A-5 Supplement for information with respect to the interests, rights,
benefits, obligations, proceeds, and duties evidenced hereby and the rights,
duties and obligations of the Trustee. A copy of the Agreement may be
requested from the Trustee by writing to the Trustee at the Chase Manhattan
Bank, 450 W. 33rd Street, New York, New York 10004, Attention: Corporate Trust
Department. By virtue of the acceptance hereof, the Investor Certificateholder
assents to and is bound by the Agreement and the Class A-5 Supplement, as each
may be amended from time to time.
This Investor Certificate shall not be entitled to any benefit under
the Agreement or any amendment thereto, or become vested or obligatory for any
purpose until the certificate of authentication hereon shall have been signed
by or on behalf of the Trustee under the Agreement.
-2-
<PAGE> 3
IN WITNESS WHEREOF, NFSC has caused this Investor Certificate to be
duly executed and authenticated.
NAVISTAR FINANCIAL SECURITIES CORPORATION
By:_____________________________________
Its:____________________________________
[SEAL]
Attested to:
By: ____________________________
Date: ___________________________
-3-
<PAGE> 4
It is the intent of NFSC and the Investor Certificateholders that, for
federal, state and local income and franchise tax purposes only, the Investor
Certificates will be treated as evidence of indebtedness. The Investor
Certificateholder, by the acceptance of this Investor Certificate, agrees to
treat this Investor Certificate for federal, state and local income and
franchise tax purposes as indebtedness secured by the Dealer Notes and other
assets held in the Trust.
Subject to the Agreement and the Class A-5 Supplement dated as of
______, 1997 among NFC, NFSC and the Trustee (the "Class A-5 Supplement"),
payments of principal to the holder of a Class of Investor Certificates are
limited to the unpaid Class Invested Amount, which may be less than the unpaid
balance of such Class of Investor Certificates. Principal payments with
respect to this Class A-5 Investor Certificate are scheduled to begin no later
than the earlier of (a) _______, 200__ and (b) the date on which any "Early
Amortization Event" or "Investment Event" (as such terms are defined in the
Master Trust Agreement and the Series 1997-1 Supplement) occurs with respect to
the Series 1997-1 Investor Certificates issued under the Master Trust Agreement
and the Series 1997-1 Supplement (the "Scheduled Class Amortization Date").
This Investor Certificate is the Certificate entitled "Dealer Note
Trust 1990 Floating Rate Pass-Through Certificate Class A-5," which represents
a fractional undivided interest in certain assets of the Trust. The Trust's
assets are allocated in part to the Investor Certificateholders with the
remainder allocated to the holder of the Seller Certificate. In addition to
the Investor Certificates, a Seller Certificate is issued to the Seller (or its
assignee) pursuant to the Agreement that will represent the Seller Interest in
the Trust, which will be the interest in the Trust not represented by the
Investor Certificates. The Seller Certificate may be exchanged by the holder
of the Seller Certificate pursuant to the Agreement for one or more newly
issued Classes of Investor Certificates and a reissued Seller Certificate upon
the terms and conditions set forth in the Agreement.
The aggregate interest in the assets of the Trust represented by this
Class A-5 Investor Certificate at any time shall not exceed an amount equal to
the Class Invested Amount at such time, plus accrued and unpaid interest
thereon, as provided in the Agreement and the Class A- 5 Supplement. Each of
the Class Initial Invested Amount and the Class Initial Investor Interest is
$_______. The Class Invested Amount on any Distribution Date will be an amount
equal to $_______ minus the sum of (a) the aggregate amount of payments of
Certificate Principal paid to such Class of Investor Certificateholders prior
to such Distribution Date, (b) the aggregate amount of Class Charged-Off
Amounts not reimbursed prior to such Distribution Date and (c) the aggregate
amount of losses of principal on or prior to the Distribution Date on
investments of funds on deposit in the Certificate Principal Account. The
Class Investor Interest on any date of calculation will be an amount equal to
the Class Invested Amount at such time minus amounts, if any, on deposit in the
Certificate Principal Account allocable to this Class A-5 Investor Certificate.
Class Certificate Interest will be distributed monthly to the Investor
Certificateholder of record as of the Record Date on the twenty- fifth day of
each calendar month or, if such twenty-fifth day is not a Business Day, on the
next succeeding Business Day (each, a "Distribution Date"), commencing _______,
1997; provided, however, that Class Certificate Interest for the _______, 1997
Distribution Date will include accrued interest for the period commencing on
_______, 1997.
-4-
<PAGE> 5
Class Certificate Interest shall be determined at the applicable Class
Certificate Rate determined in accordance with the Agreement and the Class A-5
Supplement on the Class Invested Amount as of the first day of the Distribution
Period. The Record Date with respect to any Distribution Date shall be the
last day of the calendar month preceding such Distribution Date.
No principal will be payable to the Holder of the Class A-5 Investor
Certificate until the Distribution Date related to the Scheduled Class
Amortization Date. Prior to the Scheduled Class Amortization Date for the
Class A-5 Investor Certificate, Principal Collections otherwise allocable to
the Investor Certificateholders shall be used to make necessary deposits to the
Spread Account or to purchase additional Dealer Notes or Investment Securities
or, in certain circumstances, shall be paid to the holders of an Amortizing
Class or to the Seller (or its assignee).
Beginning on the Scheduled Class Amortization Date and ending when the
Class A-5 Investor Certificate has been paid in full or the Trust otherwise
terminates (the "Amortization Period"), Principal Collections allocable to the
Amortizing Class will no longer be used to make deposits to the Spread Account,
to purchase new Dealer Notes or Investment Securities or be paid to the Seller,
as described above, but instead will be distributed monthly on the Distribution
Date relating to each Due Period following the Scheduled Class A-5 Amortization
Date. Such allocation shall be made on the basis of the Class Amortization
Percentage as determined on the Scheduled Class A-5 Amortization Date.
Principal Collections not allocable to an Amortizing Class shall be used to
make necessary deposits to the Spread Account, to purchase additional Dealer
Notes or Investment Securities or, in certain circumstances, shall be paid to
the Seller (or its assignee).
Distributions with respect to the Class A-5 Investor Certificate will
be made by the Paying Agent by immediately available funds to the Class A-5
Investor Certificateholder of record appearing in the Certificate Register
(except for the final distribution in respect of this Class A-5 Investor
Certificate) without presentation or surrender of this Class A-5 Investor
Certificate or the making of any notation thereon.
On any Distribution Date, the Seller may, but shall not be obligated
to, purchase all outstanding Classes of Investor Certificates after the Class
Investor Interest for each such Class has been reduced to an amount equal to or
less than ten percent of the Class Initial Investor Interest for such Class, by
depositing into the Certificate Principal Account, on or prior to the related
Transfer Date, an amount equal to the sum of such Class Investor Interests plus
accrued and unpaid interest thereon at the applicable Class Certificate Rates
through the Distribution Date on which such amount is scheduled to be
distributed. The amount deposited shall be paid to the Investor
Certificateholders of the related Class on the Distribution Date following the
date of such deposit. All Investor Certificates of a Class that are purchased
by the Seller shall be delivered by the Seller upon such purchase to, and be
cancelled by, the Trustee and be disposed of in accordance with the Agreement.
All principal or interest with respect to the Class A-5 Investor
Certificate shall be due and payable no later than the Class A-5 Termination
Date (other than a Class A-5 Termination Date which is also the 1990 Trust
Termination Date). In the event that the Class A-5 Investor Interest is
greater than zero on the Class A-5 Termination Date (other than a Class A-5
Termination Date
-5-
<PAGE> 6
which is also the 1990 Trust Termination Date), the Trustee will sell or cause
to be sold, and pay the proceeds to all Class A-5 Investor Certificateholders
pro rata in final payment of all principal of and accrued interest on the Class
A-5 Investor Certificate, an amount of Dealer Notes up to 110% of the Class A-5
Investor Interest at the close of business on such date. Any proceeds of such
sale in excess of such principal and interest paid shall be paid to the Seller
(or its assignee). Upon the Class A-5 Termination Date, (a) if the Class A-5
Termination Date is not also the 1990 Trust Termination Date, final payment of
all amounts allocable to the Class A-5 Investor Certificate shall be made and
(b) if the Class A-5 Termination Date is also the 1990 Trust Termination Date,
certain assets of the Trust shall be delivered to the Master Trust against
delivery of this Certificate, in each case in the manner provided in the
Agreement and the Class A-5 Supplement.
The Class A-5 Investor Certificate does not represent an obligation
of, or an interest in, NFSC or the Servicer. The Class A-5 Investor
Certificate is limited in right of payment to certain collections respecting
the Dealer Notes, all as more specifically set forth hereinabove and in the
Agreement.
The Agreement permits, with certain exceptions, the amendment thereof
and the modification of the rights and obligations of the Servicer and the
rights of Investor Certificateholders under the Agreement at any time by the
Servicer, the Seller and the Trustee in certain cases without the consent of
the Investor Certificateholders and in all other cases with the consent of the
Investor Certificateholders owning fractional undivided interests aggregating
not less than 66-2/3% of the Total Invested Amount; provided, however, that no
such amendment shall (a) reduce in any manner the amount of, or delay the
timing of, distributions which are required to be made on any Investor
Certificate, (b) change the definition of or the manner of calculating each
Class Investor Interest, the Total Investor Interest, each Class Invested
Amount, the Total Invested Amount, the Total Investor Percentage, each Class
Amortization Percentage, each Class Charged-Off Amount, each Class Loss Amount
or the Investor Loss Amount or (c) reduce the aforesaid percentage required to
consent to any such amendment, without the consent of each Investor
Certificateholder then of record. Any such amendment and any such consent by
the Class A-5 Investor Certificateholder shall be conclusive and binding on
such Investor Certificateholder and upon all future Holders of the Class A-5
Investor Certificate and of any Investor Certificate issued in exchange hereof
or in lieu hereof whether or not notation thereof is made upon the Class A-5
Investor Certificate.
This Class A-5 Investor Certificate is not transferrable prior to the
1990 Trust Termination Date.
The Servicer, the Trustee, the Paying Agent and the Transfer Agent,
and any agent of any of them, may treat the person in whose name this Class A-5
Investor Certificate is registered as the owner hereof for all purposes, and
neither the Servicer, the Trust nor the Trustee, the Paying Agent, the Transfer
Agent, nor any agent of any of them or any such agent shall be affected by
notice to the contrary except in certain circumstances described in the
Agreement and the Class A-5 Supplement.
THE TRUSTEE IS NOT RESPONSIBLE FOR THE VALIDITY OF ANY
CERTIFICATE. THE TRUSTEE ASSUMES NO RESPONSIBILITY FOR THE FOREGOING
DESCRIPTIONS PREPARED BY NAVISTAR FINANCIAL SECURITIES CORPORATION
-6-
<PAGE> 7
SUMMARIZING CERTAIN PROVISIONS OF THE POOLING AND SERVICING AGREEMENT, THE
CLASS A-5 SUPPLEMENT AND THE DEALER NOTE TRUST 1990, AND MAKES NO WARRANTIES OR
REPRESENTATIONS AS TO THE VALIDITY, GENUINESS, VALUE OR SUFFICIENCY OF ANY
CERTIFICATE OR ANY INTEREST OR RIGHT REPRESENTED THEREBY.
-7-
<PAGE> 8
This is one of the Investor Certificates referred to in the
within-mentioned Agreement.
THE CHASE MANHATTAN BANK
As Trustee
By:____________________________________
Authorized Officer
-8-
<PAGE> 1
EXHIBIT 4.9
================================================================================
NAVISTAR FINANCIAL SECURITIES CORPORATION
SELLER
NAVISTAR FINANCIAL CORPORATION
SERVICER
AND
THE BANK OF NEW YORK
MASTER TRUST TRUSTEE
ON BEHALF OF THE SERIES 1997-1 CERTIFICATEHOLDERS
----------------------------------
SERIES 1997-1 SUPPLEMENT
DATED AS OF _______, 1997
TO
POOLING AND SERVICING AGREEMENT
DATED AS OF JUNE 8, 1995
----------------------------------
FLOATING RATE
DEALER NOTE ASSET BACKED CERTIFICATES, SERIES 1997-1
DEALER NOTE MASTER TRUST
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
CREATION OF SERIES 1997-1 AND THE SERIES 1997-1 CERTIFICATES;
CONVEYANCE OF CLASS A-5 CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 Conveyance of Class A-5 Investor Certificate . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
SERVICING FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.01 Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV
RIGHTS OF SERIES 1997-1 CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.01 Rights of the Series 1997-1 Certificateholders . . . . . . . . . . . . . . . . . 17
SECTION 4.02 Establishment of Series Principal Account, Spread
Account, Negative Carry Reserve Fund and Liquidity
Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.03 Application of Class A-5 Investor Certificate Collections
Prior to the 1990 Trust Termination Date . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.04 Application of Available Certificateholder Interest Collections
After the 1990 Trust Termination Date . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.05 Application of Available Seller's Finance Charge
Collections, Spread Account, Liquidity Reserve Account
and Negative Carry Reserve Fund to Deficiency Amount . . . . . . . . . . . . . . 23
SECTION 4.06 Investor Charge-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.07 Application of Seller's Finance Charge Collections After the
1990 Trust Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.08 Application of Series Allocable Principal Collections After
the 1990 Trust Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.09 Shared Principal Collections . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.10 Distributions to Series 1997-1 Certificateholders . . . . . . . . . . . . . . . . 28
SECTION 4.11 Accumulation Period Length; Accumulation Period
Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.12 Partial Month Due Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.13 Closing Date Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.14 Additional Rights upon the Occurrence of Certain Events . . . . . . . . . . . . . 30
SECTION 4.15 Voting of the Master Trust's Interests in the 1990 Trust . . . . . . . . . . . . 30
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V
DISTRIBUTIONS AND REPORTS TO SERIES 1997-1
CERTIFICATEHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.01 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.02 Monthly and Annual Certificateholders' Statement . . . . . . . . . . . . . . . . 31
ARTICLE VI
EARLY AMORTIZATION EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.01 Additional Early Amortization Events . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII
INVESTMENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 7.01 Investment Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VIII
OTHER SERIES PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.01 Effect of Fully Funded Date; Conveyance of Dealer Notes . . . . . . . . . . . . . 36
SECTION 8.02 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IX
FINAL DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 9.01 Sale of Investors' Interest Pursuant to Section 2.07
of the Agreement; Distributions Pursuant to Section 2.03
or 12.03 of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 9.02 Distribution of Proceeds of Sale, Disposition or Liquidation
of the Dealer Notes Pursuant to Section 9.02 of the
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 9.03 Early Distributions at the Option of the Investor
Certificateholder After the Fully Funded Date . . . . . . . . . . . . . . . . . . 39
ARTICLE X
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 10.01 Ratification of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 10.02 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 10.03 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
-ii-
<PAGE> 4
EXHIBITS
Exhibit A - Form of Investor Certificate
Exhibit B-1 - Form of Monthly Servicer and Settlement Statement
Exhibit B-2 - Form of Monthly Servicer and Settlement Statement
-iii-
<PAGE> 5
SERIES 1997-1 SUPPLEMENT
TO POOLING AND SERVICING AGREEMENT
SERIES 1997-1 SUPPLEMENT dated as of _______, 1997 (the
"Series Supplement"), by and among NAVISTAR FINANCIAL SECURITIES CORPORATION, a
Delaware corporation, as Seller (the "Seller"), NAVISTAR FINANCIAL CORPORATION,
a Delaware corporation, as Servicer (the "Servicer"), and THE BANK OF NEW YORK,
a New York banking corporation, as trustee (together with its successors in
trust thereunder as provided in the Agreement referred to below, the "Master
Trust Trustee") under the Pooling and Servicing Agreement, dated as of June 8,
1995 (the "Agreement") among the Seller, the Servicer, the Master Trust Trustee
and The Chase Manhattan Bank, as trustee under the 1990 Trust Agreement.
Section 6.09 of the Agreement provides that the Seller may
from time to time direct the Master Trust Trustee to issue, on behalf of the
Master Trust, one or more new Series of Investor Certificates representing
fractional undivided interests in the Master Trust. The Principal Terms of any
new Series are to be set forth in a Supplement to the Agreement.
Pursuant to this Series Supplement, the Seller and the Master
Trust Trustee shall create a new Series of Investor Certificates and specify
the Principal Terms thereof.
ARTICLE I
CREATION OF SERIES 1997-1 AND
THE SERIES 1997-1 CERTIFICATES;
CONVEYANCE OF CLASS A-5 CERTIFICATE
SECTION 1.01 Designation.
(a) There is hereby created a new Series pursuant to the
Agreement and this Series Supplement to be known as the "Series 1997-1." The
interest of the Investor Certificateholders in Series 1997-1 shall be
represented by the Series 1997-1 Certificates.
(b) If any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Agreement, the terms and provisions of this Series Supplement shall govern with
respect to Series 1997-1.
SECTION 1.02 Conveyance of Class A-5 Investor Certificate.
(a) By execution of this Series Supplement, the Seller
does hereby sell, transfer, assign, set over and otherwise convey, without
recourse (except as otherwise expressly provided herein or in the Agreement),
to the Master Trust for the benefit of the Series 1997-1 Certificateholders and
the holders of the Master Trust Seller's Certificates all right, title and
interest of the Seller in and to the Class A-5 Investor Certificate, all
monies due or to become due with respect thereto and all proceeds (as defined
in Section 9-306 of the UCC) thereof. If such sale, transfer, assignment,
set-over or conveyance is deemed to create a security interest in such
property, the Seller does hereby grant to the Master Trust a security interest
therein (which shall be deemed to be a first perfected security interest) and
agrees that this Series Supplement shall constitute a security agreement under
applicable law.
<PAGE> 6
(b) As provided in Section 2.03(a) of the Agreement, the
Master Trust Trustee accepts delivery of the Class A-5 Investor Certificate and
agrees to maintain physical possession thereof.
ARTICLE II
DEFINITIONS
SECTION 2.01 Definitions.
(a) Whenever used in this Series Supplement, the
following words and phrases shall have the following meanings:
"1990 Trust Spread Account" shall mean the Spread Account
established and maintained pursuant to the 1990 Trust Agreement.
"Accumulation Period" shall mean, unless an Investment Event
or an Early Amortization Event shall have occurred prior thereto, the period
commencing on the Accumulation Period Commencement Date and ending upon the
first to occur of (a) the commencement of an Investment Period, (b) the
commencement of an Early Amortization Period and (c) the payment of the
Invested Amount in full.
"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 pursuant to Section 4.11 but the Accumulation Period has
not commenced and any other outstanding Series shall enter into an investment
period or an 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
pursuant to Section 4.11.
"Adjusted Invested Amount" shall mean, with respect to any
Distribution Date, an amount (which shall never be less than zero) equal to 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 the related Transfer Date, minus the product of (x) the amount, if
any, of funds on deposit in the Negative Carry Reserve Fund at the end of such
Transfer Date and (y) 1.00 plus the Subordinated Percentage, minus the
aggregate amount of Investor 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.
"Amortizing/Investing Due Period" shall have the meaning
specified in Section 4.12.
2
<PAGE> 7
"Available Certificateholder Interest Collections" shall mean,
with respect to any Due Period commencing after the 1990 Trust Termination
Date, the sum of (a) Investor Finance Charge Collections for such Due Period
and (b) Investment Income for the related Distribution Period.
"Available Draw Funds" shall have the meaning specified in
Section 4.05(b).
"Available Seller's Finance Charge Collections" shall mean,
with respect to any Due Period commencing after the 1990 Trust Termination
Date, an amount equal to the product of (a) the excess of (i) the Seller's
Percentage for such Due Period over (ii) the result (if positive) 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; provided, however, 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 (x) the amount of funds, if any, on deposit in the Negative Carry
Reserve Fund as of the end of the preceding Transfer Date and (y) 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" shall mean, with
respect to any Business Day after the 1990 Trust Termination Date, 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 Business Day; provided, however, 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
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.
"Available Subordinated Amount" shall mean (a) for each
Transfer Date related to a Due Period commencing prior to the 1990 Trust
Termination Date, zero, (b) on the Transfer Date related to the first Due
Period after the 1990 Trust Termination Date (before giving effect to all
adjustments in the Available Subordinated Amount on such Transfer Date), the
product of (i) the Subordinated Percentage and (ii) the Invested Amount as of
the preceding Distribution Date, and (c) for each Transfer Date thereafter
(before giving effect to all adjustments in the Available Subordinated Amount
thereto on such Transfer Date), the lesser of (i) the Maximum Subordinated
Amount as of such Transfer Date and (ii) the Available Subordinated Amount as
of the end of the preceding Transfer Date.
"Average Coverage Differential" shall be determined, on any
Determination Date, by reference to the Coverage Differentials for each of the
related Due Period and the three immediately preceding Due Periods, and shall
equal the sum of the three highest such Coverage Differentials divided by
three. Average Coverage Differential shall be expressed as a percentage, and
shall be rounded to the nearest one-hundredth of a percentage point.
"Business Day" shall mean, with respect to Series 1997-1, any
day other than a Saturday, a Sunday, or a day on which banking institutions in
New York, New York, Chicago, Illinois, or the city in which the Corporate Trust
Office is located, or in connection with the
3
<PAGE> 8
determination of LIBOR, London, England, are authorized or obligated by law or
executive order to be closed or remain closed.
"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 through _______, 1997 and for each Distribution Period thereafter will
equal LIBOR as of the related LIBOR Determination Date plus ____%.
"Class A-5 Investor Certificate" shall mean the Class A-5
Floating Rate Pass-through Certificate issued by the 1990 Trust to the Master
Trust in connection with the issuance of the Series 1997-1 Certificates.
"Class A-5 Investor Certificate Collections" shall mean, with
respect to any Due Period, the sum of Class A-5 Investor Certificate Interest
Collections and Class A-5 Investor Certificate Principal Collections for such
Due Period.
"Class A-5 Investor Certificate Interest Collections" shall
mean, with respect to any Due Period, all interest payments received by the
Master Trust on the Distribution Date related to such Due Period in respect of
the Class A-5 Investor Certificate, plus with respect to the Initial Due
Period, the funds deposited pursuant to Section 4.13.
"Class A-5 Investor Certificate Principal Collections" shall
mean, with respect to any Due Period, all principal payments received by the
Master Trust on the Distribution Date related to such Due Period in respect of
the Class A-5 Investor Certificate.
"Closing Date" shall mean _______, 1997.
"Common Depository" shall mean Cede & Co.
"Controlled Amortization Amount" shall mean an amount equal to
the result of (a) the Invested Amount as of the Distribution Date preceding the
Specified Accumulation Period Commencement Date divided by (b) the Accumulation
Period Length.
"Controlled Deposit Amount" shall mean, with respect to any
Due Period occurring during the Accumulation Period, the excess, if any, of (a)
the product of (i) the Controlled Amortization Amount and (ii) the number of
Due Periods, including such Due Period, that have elapsed with respect to the
Accumulation Period (but not in excess of the Accumulation Period Length) over
(b) the amount on deposit in the Series Principal Account at the close of
business on the last Business Day of the preceding Due Period; provided,
however, that, notwithstanding the foregoing, the Seller may, in its sole
discretion, increase the Controlled Deposit Amount at any time and from time to
time.
"Coverage Differential" shall mean, with respect to any Due
Period, the result of (a) the Portfolio Yield for such Due Period minus (b) the
sum of (i) the Certificate Rate for the related Distribution Period and (ii)
one percent (1%). Coverage Differential shall be expressed as a percentage,
and shall be rounded to the nearest one-hundredth of a percentage point.
4
<PAGE> 9
"Deficiency Amount" shall have the meaning specified in
Section 4.05(a).
"Draw Amount" shall mean, with respect to any Transfer Date,
the least of (a) the Deficiency Amount for such Transfer Date, (b) the
Available Subordinated Amount as of the end of the preceding Transfer Date and
(c) Available Draw Funds for such Transfer Date.
"Early Amortization Event" shall mean, with respect to Series
1997-1, any event specified in Section 9.01(c) of the Agreement, together with
any additional Early Amortization Event specified in Section 6.01 of this
Series Supplement, but shall not mean any other event specified in Section 9.01
of the Agreement; provided, however, that for purposes of Section 6.09(b)(v) of
the Agreement, Early Amortization Event shall also include any Investment
Event.
"Early Amortization Period" shall mean an Early Amortization
Period with respect to Series 1997-1 that occurs as a result of any event
specified in Section 9.01(c) of the Agreement or any Early Amortization Event
specified in Section 6.01 of this Series Supplement.
"Early Amortization Period Shortfall Amount" shall have the
meaning specified in Section 4.08(e).
"Early Distribution" shall have the meaning specified in
Section 9.03(b).
"Early Distribution Amount" shall have the meaning specified
in Section 9.03(c).
"Early Distribution Date" shall have the meaning specified in
Section 9.03(b).
"Early Distribution Initial Invested Amount" shall have the
meaning specified in Section 9.03(b).
"Early Distribution Notice" shall have the meaning specified
in Section 9.03(b).
"Eligible Investments" shall mean
(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,
that 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 depository institution or trust
company incorporated under the laws of the United
States of America or any state thereof (or any
domestic branch of a foreign bank) and subject to
supervision and examination by federal or state
banking or depository institution authorities;
provided, however, that at the time of the Master
Trust's investment or contractual commitment to
invest therein, the commercial
5
<PAGE> 10
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) of such
depository institution or trust company shall have a
credit rating not lower than the highest investment
category for short term unsecured debt obligations
granted by the applicable Rating Agency from each
Rating Agency then Rating the affected Series of
Investor Certificates;
(iii) commercial paper having, at the time of the
Master Trust's investment or contractual commitment
to investment therein, a rating not lower than the
highest investment category for short term unsecured
debt obligations granted by the applicable Rating
Agency from each Rating Agency then Rating the
affected Series of Investor Certificates;
(iv) except during an Investment Period,
investments in money market funds having a rating not
lower than the highest investment category for short
term unsecured debt obligations granted by the
applicable Rating Agency from each Rating Agency then
Rating the affected Series of Investor Certificates
or otherwise approved in writing by each of such
Rating Agencies;
(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 not lower than
the highest investment category for short term
unsecured debt obligations granted by the applicable
Rating Agency from each Rating Agency then Rating the
affected Series of Investor Certificates, 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 required 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); or
(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
not lower than the highest investment category for
short term unsecured debt obligations granted by the
applicable Rating Agency from each Rating Agency then
Rating the affected Series of Investor Certificates;
and
6
<PAGE> 11
(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.
"Excess Seller's Percentage" shall mean, with respect to any
Due Period commencing after the 1990 Trust Termination Date, a percentage
(which percentage shall never be less than 0% nor more than 100%) equal to the
excess of (a) the Seller's Percentage for such Due Period, over (b) the
percentage equivalent (which percentage shall never be less than 0% nor more
than 100%) of a fraction, the numerator of which is the sum of (i) the
Available Subordinated Amount as of the end of the related Transfer Date and
(ii) the Negative Carry Subordinated Amount, as of the end of such Transfer
Date (minus the product of (A) the amount of funds, if any, on deposit in the
Negative Carry Reserve Fund as of the end of such Transfer Date and (B) 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 in the Master
Trust and the aggregate principal amount of funds on deposit in the Excess
Funding Account, both as of the end of the immediately preceding Due Period and
(y) the Series 1997-1 Allocation Percentage for the Due Period for which the
Excess Seller's Percentage is being calculated.
"Excess Seller's Principal Collections" shall mean, with
respect to any Business Day during a Due Period commencing after the 1990 Trust
Termination Date, the product of (a) Series Allocable Principal Collections for
such Business Day and (b) the Excess Seller's Percentage for such Due Period.
"Expected Payment Date" shall mean the_____, 200__
Distribution Date.
"Floating Allocation Percentage" shall mean, with respect to
any Due Period commencing after the 1990 Trust Termination Date, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is the Invested Amount as of the immediately preceding
Distribution Date (after giving effect to all increases and reductions thereof
on such 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 on deposit in the Excess Funding
Account, both as of the end of the immediately preceding Due Period, and (b)
the Series 1997-1 Allocation Percentage for the Due Period for which the
Floating Allocation Percentage is being calculated.
"Fully Funded Date" shall mean the first Distribution Date
falling in an Investment Period on which the amount on deposit in the Series
Principal Account (excluding any investment earnings) equals the Invested
Amount and the cumulative amount of funds deposited in the Negative Carry
Reserve Fund (excluding any investment earnings) equals the Negative Carry
Reserve Fund Required Amount (without giving effect to the proviso in the
definition thereof).
"Initial Invested Amount" shall mean $__________.
"Initial Spread Account Required Amount" shall mean the
Projected Spread as of the 1990 Trust Termination Date.
7
<PAGE> 12
"Invested Amount" shall mean, with respect to any Distribution
Date, an amount (which shall never be less than zero) equal to the Initial
Invested Amount, minus the sum of (a) the aggregate amount of payments of
principal in respect of the Series 1997-1 Certificates made to Series 1997-1
Certificateholders on or prior to such Distribution Date, (b) the aggregate
amount of Investor Charge-Offs not reimbursed pursuant to Section 4.04(a)(iv)
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.
"Investment Event" shall have the meaning specified in Section
7.01.
"Investment Income" shall mean, for any Distribution Period
with respect to Series 1997-1, the sum of (i) income during such Distribution
Period from the investment of funds on deposit in the Series Principal Account,
the Spread Account, and the Negative Carry Reserve Fund and (ii) the product of
(a) the Series Allocation Percentage for such Distribution Period and (b)
income from the investment of funds on deposit in the Collections Account and
the Excess Funding Account.
"Investment Period" shall mean the period beginning at the
close of business on the Investment Period Commencement Date, and ending upon
the earliest to occur of (a) the payment in full to the Series 1997-1
Certificateholders of the Invested Amount, (b) the Series Termination Date and
(c) the commencement of an Early Amortization Period.
"Investment Period Commencement Date" shall mean the Business
Day immediately preceding the date on which an Investment Event is deemed to
have occurred.
"Investment Period Shortfall Amount" shall have the meaning
specified in Section 4.08(e).
"Investor Charge-Off" shall have the meaning specified in
Section 4.06.
"Investor Dealer Note Losses" shall mean, with respect to any
Due Period commencing after the 1990 Trust Termination Date, the product of (a)
the Floating Allocation Percentage for such Due Period and (b) Series Allocable
Dealer Note Losses for such Due Period.
"Investor Finance Charge Collections" shall mean, with respect
to any Due Period commencing after the 1990 Trust Termination Date, an amount
equal to the product of (a) the Floating Allocation Percentage for such Due
Period and (b) Series Allocable Finance Charge Collections for such Due Period.
"Investor Principal Collections" shall mean, with respect to
any Business Day after the 1990 Trust Termination Date, the sum of (a) the
product of (i) with respect to the Revolving Period, the Floating Allocation
Percentage and with respect to the Accumulation Period, any Investment Period
or any Early Amortization Period, the Principal Allocation Percentage, in
either case for the Due Period in which such Business Day occurs and (ii)
Series Allocable Principal Collections for such Business Day and (b) on any
Transfer Date, the amount, if any, of Available Certificateholder Interest
Collections treated as Investor Principal Collections pursuant to Sections
4.04(a)(iii) and (iv).
8
<PAGE> 13
"Investor Servicing Fee" shall have the meaning specified in
Section 3.01.
"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 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
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 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" shall mean, with respect to any
Distribution Period, the date which is two Business Days prior to the start of
such Distribution Period.
9
<PAGE> 14
"Liquidity Reserve Account" shall have the meaning specified
in Section 4.02(d)(i).
"Maximum Subordinated Amount" shall mean, with respect to any
Transfer Date related to a Due Period commencing after the 1990 Trust
Termination Date, the product of (a) the Invested Amount as of the preceding
Distribution Date and (b) the Subordinated Percentage; provided, however, that
with respect to a Transfer Date related to a Due Period occurring during an
Early Amortization Period, the Maximum Subordinated Amount shall not decline
until the Invested Amount equals the Maximum Subordinated Amount, and
thereafter the Maximum Subordinated Amount shall equal the Invested Amount.
"Minimum Negative Carry Required Amount" shall mean, on any
LIBOR Determination Date after the Fully Funded Date, with respect to any
Transfer Date occurring on or 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 1997-1 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.
"Monthly Interest" shall mean, with respect to each Transfer
Date related to a Distribution Period, an amount equal to the product of (a)
the Certificate Rate for such Distribution Period and (b) the Invested Amount
as of the preceding Distribution Date (or the Initial Invested Amount with
respect to the first Transfer Date) and (c) a fraction, which (i) with respect
to the first Transfer Date, shall be equal to __ divided by 360 and (ii) with
respect to each subsequent Transfer Date, shall be equal to the actual number
of days in the related Distribution Period divided by 360.
"Monthly Servicing Fee" shall have the meaning specified in
Section 3.01.
"Negative Carry Reserve Fund" shall have the meaning specified
in Section 4.02(c)(i).
"Negative Carry Reserve Fund Deposit Amount" shall mean, with
respect to each 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
prior to such Transfer Date (after giving effect to any amounts that have been
withdrawn prior to such date).
"Negative Carry Reserve Fund Required Amount" means, with
respect to each Transfer Date, an amount equal to the sum of (a) the product of
(i) ___ basis points, (ii) the Invested Amount as of the preceding Distribution
Date, and (iii) the number of Due Periods remaining until the Expected Payment
Date and (b) an amount equal to the product of .___% and the Invested
10
<PAGE> 15
Amount as of the preceding Distribution Date; provided, however, 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 New Vehicle Dealer
Notes 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.
"Portfolio Yield" shall mean, with respect to any Due Period,
the product of (a) the quotient of (i) Finance Charges for such Due Period and
(ii) the daily average principal amount of Dealer Notes outstanding during such
Due Period and (b) a fraction, the numerator of which is 365 and the
denominator of which is the actual number of days elapsed during such Due
Period. Portfolio Yield shall be expressed as a percentage, and shall be
rounded to the nearest one-hundredth of a percentage point.
"Principal Allocation Percentage" shall mean, with respect to
any Due Period commencing on or after the 1990 Trust Termination Date and
occurring during the Accumulation Period, any Investment Period or any Early
Amortization Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is the Invested Amount as of
the end 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 on deposit in the Excess
Funding Account, both as of the end of the Revolving Period and (b) the Series
1997-1 Allocation Percentage for the Due Period for which the Principal
Allocation Percentage is being calculated.
"Principal Shortfall" shall mean, with respect to Series
1997-1, the Series 1997-1 Principal Shortfall.
"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
1997-1 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 1997-1 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
11
<PAGE> 16
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 1997-1
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
related Distribution Period, 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
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.
"Reassignment Amount" shall mean, with respect to any
Distribution Date, after giving effect to any deposits and distributions
otherwise to be made on such Distribution Date, the sum of (a) the Invested
Amount on such Distribution Date, and (b) accrued and unpaid interest thereon.
"Reference Banks" shall mean the principal London offices of
Morgan Guaranty Trust Company of New York, Swiss Bank Corporation and Barclays
Bank PLC.
"Remaining Available Seller's Principal Calculations" shall
have the meaning specified in Section 4.08(d).
12
<PAGE> 17
"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.
"Revolving Due Period" shall have the meaning specified in
Section 4.12.
"Revolving Period" shall mean, unless an Investment Event or
an Early Amortization Event shall have occurred prior thereto, the period
beginning on the 1990 Trust Termination Date and ending on the earlier of (a)
the close of business on the Business Day immediately preceding the
Accumulation Period Commencement Date, (b) the close of business on the
Investment Period Commencement Date and (c) the close of business on the
Business Day immediately preceding the day on which an Early Amortization Event
occurs.
"Seller's Percentage" shall mean, with respect to any Due
Period commencing after the 1990 Trust Termination Date, 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 or Principal
Collections during the Revolving Period, and (b) the Principal Allocation
Percentage for such Due Period, when used with respect to Principal Collections
during the Accumulation Period, any Investment Period or any Early Amortization
Period.
"Seller's Principal Collections" shall mean, with respect to
any Business Day after the 1990 Trust Termination Date, 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.
"Series 1997-1" shall mean the Series of Investor
Certificates, the terms of which are specified in this Series Supplement.
"Series 1997-1 Accounts" shall mean, collectively, the Series
Principal Account, the Distribution Account maintained for the Series 1997-1
Certificateholders, the Liquidity Reserve Account, the Negative Carry Reserve
Fund and the Spread Account.
"Series 1997-1 Accumulation Period Principal Shortfall" shall
mean, with respect to any Business Day occurring during the Accumulation
Period, the excess, if any, of the Controlled Deposit Amount for the Due Period
in which such Business Day occurs over the amount of Investor Principal
Collections deposited in the Series Principal Account on such Business Day when
added to the amount of Investor Principal Collections previously deposited in
the Series Principal Account during such Due Period.
"Series 1997-1 Allocation Percentage" shall mean the Series
Allocation Percentage with respect to Series 1997-1.
13
<PAGE> 18
"Series 1997-1 Certificateholders" shall mean the holders of
Series 1997-1 Certificates.
"Series 1997-1 Certificateholders' Interest" shall mean that
portion of the Certificateholders' Interest evidenced by the Series 1997-1
Certificates.
"Series 1997-1 Certificates" shall mean any one of the
certificates executed by the Seller and authenticated by the Master Trust
Trustee, substantially in the form of Exhibit A.
"Series 1997-1 Principal Shortfall" shall equal either (a)
with respect to any Business Day occurring during the Accumulation Period, the
Series 1997-1 Accumulation Period Principal Shortfall or (b) with respect to
any Business Day during any Early Amortization Period or Investment Period, the
excess, if any, of the Invested Amount (reduced by (i) amounts on deposit in
the Series Principal Account and (ii) the aggregate amount of Series Principal
Account Losses for the Distribution Period in which such Business Day occurs)
as of the immediately preceding Distribution Date over Investor Principal
Collections for such Business Day.
"Series 1997-1 Rating Agency Condition" shall mean, with
respect to any action, that each Rating Agency shall have notified the Seller,
the Servicer, and the Master Trust Trustee in writing that such action will not
result in a reduction or withdrawal of the rating of the Series 1997-1
Certificates with respect to which it is a Rating Agency.
"Series 1997-1 Shared Principal Collections" shall have the
meaning specified in Section 4.09(b).
"Series 1997-1 Shared Seller Principal Collections" shall have
the meaning specified in Section 4.08(d)(iv).
"Series Allocable Dealer Note Losses" shall mean, with respect
to any Due Period commencing after the 1990 Trust Termination Date, the product
of (a) the Series 1997-1 Allocation Percentage for such Due Period and (b)
Dealer Note Losses for such Due Period.
"Series Allocable Finance Charge Collections" shall mean, with
respect to any Due Period, the product of (a) the Series 1997-1 Allocation
Percentage for such Due Period and (b) the amount of Finance Charge Collections
for such Due Period.
"Series Allocable Principal Collections" shall mean, with
respect to any Business Day, the sum of (a) the product of (i) the Series
1997-1 Allocation Percentage for the related Due Period and (ii) the amount of
Principal Collections deposited in the Collections Account on such Business Day
and (b) if the Accumulation Period Commencement Date occurs on such Business
Day, the product of (i) the Series 1997-1 Allocation Percentage for such Due
Period and (ii) the amount of funds on deposit in the Excess Funding Account on
such Accumulation Period Commencement Date.
"Series Invested Amount" shall mean, with respect to Series
1997-1, the Invested Amount.
14
<PAGE> 19
"Series Principal Account" shall have the meaning specified in
Section 4.02(a)(i).
"Series Principal Account Losses" shall mean losses of
principal on investment of funds in the Series Principal Account.
"Series Termination Date" shall mean the ______, 20__
Distribution Date.
"Special Servicer Agent" shall have the meaning specified in
Section 4.02(f).
"Specified Accumulation Period Commencement Date" shall mean
_______, 200__.
"Spread Account" shall have the meaning specified in Section
4.02(b)(i).
"Spread Account Deposit Amount" shall mean, with respect to
any Transfer Date prior to the Fully Funded Date, the amount, if any, by which
the Projected Spread exceeds the amount of funds on deposit in the Spread
Account.
"Subject Month" shall have the meaning specified in Section
4.12.
"Subordinated Percentage" shall mean ___%.
"Turnover" shall have the meaning specified in Section
7.01(i).
"Used Vehicle Monthly Interest Rate" shall mean, with respect
to any Due Period, the product of (i) the per annum rate of interest and
finance charges billed by NFC during such Due Period on Used Vehicle Dealer
Notes and (ii) the quotient of (a) a number equal to the number of days during
such Due Period and (b) the actual number of days in the related calendar year.
(b) Notwithstanding anything to the contrary in this
Series Supplement or the Agreement, the term "Rating Agency" shall mean,
whenever used in this Series Supplement or the Agreement with respect to Series
1997-1, Moody's and Standard & Poor's. As used in this Series Supplement and
in the Agreement with respect to Series 1997-1, "highest investment category"
shall mean (i) in the case of Standard & Poor's, A-1+ or AAA, as applicable,
and (ii) in the case of Moody's, P-1 or Aaa, as applicable.
(c) All capitalized terms used herein and not otherwise
defined herein have the same meanings ascribed to them in the Agreement.
(d) The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Series Supplement shall refer to this
Series Supplement as a whole and not to any particular provision of this Series
Supplement; references to any Article, Section or Exhibit are references to
Articles, Sections and Exhibits in or to this Series Supplement unless
otherwise specified; and the term "including" means "including without
limitation."
(e) As used in this Series Supplement, references to the
Available Subordinated Amount "as of the end" of a Transfer Date and the
Negative Carry Subordinated Amount "as of the end" of a Transfer Date shall
mean the Available Subordinated Amount or the Negative Carry
15
<PAGE> 20
Subordinated Amount, each as of such Transfer Date, after giving effect to all
increases and reductions thereof pursuant to Article IV hereof.
(f) As used in this Series Supplement, accounting terms
which are not defined, and accounting terms partly defined, herein shall have
the respective meanings given to them under generally accepted accounting
principles as in effect on the date hereof. To the extent that the definitions
of accounting terms in this Series Supplement are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Series Supplement will control.
(g) With respect to any Distribution Date or Transfer
Date, the "related Due Period" and the "related Distribution Period" will mean
the Due Period and Distribution Period, respectively, immediately preceding
such Distribution Date or Transfer Date, and the relationships between Due
Periods and Distribution Periods will be correlative to the foregoing
relationships. With respect to any LIBOR Determination Date, the "related
Distribution Period" will mean the Distribution Period beginning on the
Distribution Date immediately following such LIBOR Determination Date.
(h) Each defined term used in this Series Supplement has
a comparable meaning when used in its plural or singular form. Each
gender-specific term used in this Series Supplement has a comparable meaning
whether used in a masculine, feminine or gender-neutral form.
ARTICLE III
SERVICING FEE
SECTION 3.01 Servicing Compensation. The monthly servicing fee (the
"Monthly Servicing Fee") shall be payable to the Servicer, in arrears, on each
Distribution Date in respect of a Due Period (or portion thereof) 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 first
Distribution Date on which the Invested Amount is zero, in an amount equal to
one-twelfth of the result of (a) 1% multiplied by (b) the aggregate principal
amount of Dealer Notes outstanding as of the last day of such Due Period and
multiplied by (c) the Series 1997-1 Allocation Percentage with respect to such
Due Period; provided, however, that the Monthly Servicing Fee shall be zero
with respect to each Due Period following the Fully Funded Date. The share of
the Monthly Servicing Fee allocable to the Series 1997-1 Certificateholders
with respect to any Transfer Date (the "Investor Servicing Fee") shall be equal
to the product of (a) the Monthly Servicing Fee and (b) the Floating Allocation
Percentage with respect to such Due Period. The remainder of the Monthly
Servicing Fee shall be paid by the Seller and in no event shall the Master
Trust, the Master Trust Trustee or the Series 1997-1 Certificateholders be
liable for the share of the Monthly Servicing Fee to be paid by the Seller; and
the remainder of the Servicing Fee shall be paid by the Seller and the Investor
Certificateholders of other Series and the Series 1997-1 Certificateholders
shall in no event be liable for the share of the Servicing Fee to be paid by
the Seller or the Investor Certificateholders of other Series. The Investor
Servicing Fee shall be payable to the Servicer solely to the extent amounts are
available for distribution in accordance with the terms of this Series
Supplement.
The Servicer will be permitted, in its sole discretion, to
waive the Monthly Servicing Fee for any Distribution Date by notice to the
Master Trust Trustee on or before the related
16
<PAGE> 21
Determination Date; provided, however, that the Servicer believes that
sufficient Series Allocable Finance Charge Collections will be available on any
future Distribution Date to pay the Investor Servicing Fee relating to the
waived Monthly Servicing Fee. If the Servicer so waives the Monthly Servicing
Fee for any Distribution Date, the Monthly Servicing Fee and the Investor
Servicing Fee for such Distribution Date shall be deemed to be zero for all
purposes of this Series Supplement and the Agreement; provided, however, that
such Investor Servicing Fee shall be paid on a future date solely to the extent
amounts are available therefor pursuant to Section 4.04(a)(vi); and provided
further that, to the extent any such waived Investor Servicing Fee is so paid,
the related portion of the Monthly Servicing Fee to be paid by the Seller shall
be paid by the Seller to the Servicer.
ARTICLE IV
RIGHTS OF SERIES 1997-1 CERTIFICATEHOLDERS
AND ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.01 Rights of the Series 1997-1 Certificateholders.
The Series 1997-1 Certificates shall represent fractional undivided interests
in the Master Trust, consisting of the right to receive, to the extent
necessary to make the required payments with respect to the Series 1997-1
Certificates at the times and in the amounts specified in this Series
Supplement, Collections allocated to Series 1997-1 pursuant to Article IV of
the Agreement and this Article IV, funds on deposit in the Collections Account
and the Excess Funding Account allocable to Series 1997-1 Certificateholders
pursuant to Article IV of the Agreement and this Article IV, and funds on
deposit in the Series 1997-1 Accounts (collectively, the "Series 1997-1
Certificateholders' Interest"), it being understood that the Series 1997-1
Certificates shall not represent any interest in any Series Account or
Enhancement for the benefit of any other Series or Class. The Servicer shall
apply, or instruct the Master Trust Trustee to apply, all funds on deposit in
the Collections Account and Excess Funding Account allocable to the Series
1997-1 Certificates, and all funds on deposit in the Series Principal Account,
the Spread Account, the Negative Carry Reserve Fund and the Distribution
Account maintained for the Series 1997-1 Certificateholders, as described in
this Article IV.
SECTION 4.02 Establishment of Series Principal Account, Spread
Account, Negative Carry Reserve Fund and Liquidity Reserve Account.
(a) Series Principal Account.
(i) On or prior to the commencement of an
Investment Period, an Early Amortization Period or the Accumulation
Period, the Master Trustee, for the benefit of the Series 1997-1
Certificateholders, shall establish and maintain in the name of the
Master Trust an Eligible Deposit Account bearing a designation clearly
indicating that the funds deposited therein are held for the benefit
of the Series 1997-1 Certificateholders (the "Series Principal
Account"). The Master Trust Trustee shall possess all right, title
and interest in all funds on deposit from time to time in the Series
Principal Account and in all proceeds thereof. Pursuant to authority
granted to it pursuant to Section 3.01(b) of the Agreement, the
Servicer shall have the revocable power to instruct the Master Trust
Trustee to withdraw funds from the Series Principal Account for the
purpose of carrying out the duties of the Servicer under this Series
Supplement and the Agreement. The Servicer at all times shall
maintain accurate records reflecting each transaction in the Series
Principal Account.
17
<PAGE> 22
(ii) Funds on deposit in the Series Principal
Account overnight or for a longer period shall at all times be
invested in Eligible Investments at the direction of the Servicer or
its agent, subject to the restrictions set forth in the Agreement and
subject to the requirement that each such Eligible Investment shall
have a stated maturity on or prior to the following Transfer Date (or
such longer maturity as shall be allowed upon satisfaction of the
Series 1997-1 Rating Agency Condition). Net interest and earnings
(less investment expenses) on funds on deposit in the Series Principal
Account, if any, shall be allocated and distributed as provided in
Section 4.03(a) or Section 4.04, as applicable.
(b) Spread Account.
(i) On or prior to the 1990 Trust Termination
Date, the Master Trust Trustee, for the benefit of the Series 1997-1
Certificateholders, shall cause to be established and maintained in
the name of the Master Trust, an Eligible Deposit Account bearing a
designation clearly indicating that the funds deposited therein are
held for the benefit of the Series 1997-1 Certificateholders (the
"Spread Account"). The Master Trust Trustee shall possess all right,
title and interest in all funds on deposit from time to time in the
Spread Account and in all proceeds thereof. Pursuant to authority
granted to it pursuant to Section 3.01(b) of the Agreement, the
Servicer shall have the revocable power to instruct the Master Trust
Trustee to withdraw funds from the Spread Account for the purpose of
carrying out the duties of the Servicer under this Series Supplement
and the Agreement. The Servicer at all times shall maintain accurate
records reflecting each transaction in the Spread Account. As of the
1990 Trust Termination Date, the Servicer shall cause to be deposited
in the Spread Account an amount equal to the lesser of (A) the
Projected Spread as of the immediately preceding Transfer Date and (B)
the amount of funds on deposit in the 1990 Trust Spread Account
multiplied by a fraction, the numerator of which is the Projected
Spread as of the immediately preceding Transfer Date, and the
denominator of which is the projected spreads as of the immediately
preceding Transfer Date for all outstanding Series which have spread
accounts.
(ii) Funds on deposit in the Spread Account
overnight or for a longer period shall at all times be invested in
Eligible Investments at the direction of the Servicer or its agent,
subject to the restrictions set forth in the Agreement and subject to
the requirement that each such Eligible Investment shall have a stated
maturity on or prior to the following Transfer Date. Net interest and
earnings (less investment expenses) on funds on deposit in the Spread
Account, if any, shall be allocated and distributed as provided in
Section 4.04.
(iii) On any Transfer Date related to a Due Period
commencing after the 1990 Trust Termination Date on which the amount
of funds on deposit in the Spread Account is greater than the
Projected Spread on such Transfer Date, the Servicer shall withdraw
the amount of such excess from the Spread Account and allocate and pay
such excess to the Seller. On the Transfer Date related to the Due
Period which follows the Fully Funded Date, the Servicer shall
withdraw the amount of funds on deposit in the Spread Account and
allocate and pay such amount to the Seller.
18
<PAGE> 23
(iv) Upon the commencement of and during an
Investment Period or an Early Amortization Period, the Master Trust
Trustee will deposit all funds in the Spread Account into the
Liquidity Account, and no additional funds shall be deposited into the
Spread Account.
(c) Negative Carry Reserve Fund.
(i) On or prior to the commencement of an
Investment Period, an Early Amortization Period or the Accumulation
Period, the Master Trust Trustee, for the benefit of the Series 1997-1
Certificateholders, shall establish and maintain in the name of the
Master Trust Trustee, on behalf of the Master Trust, an Eligible
Deposit Account bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Series 1997-1
Certificateholders (the "Negative Carry Reserve Fund"). The Master
Trust Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Negative Carry Reserve Fund and in
all proceeds thereof. Pursuant to authority granted to it pursuant to
Section 3.01(b) of the Agreement, the Servicer shall have the
revocable power to instruct the Master Trust Trustee to withdraw funds
from the Negative Carry Reserve Fund for the purpose of carrying out
the duties of the Servicer under this Series Supplement and the
Agreement. The Servicer at all times shall maintain accurate records
reflecting each transaction in the Negative Carry Reserve Fund.
(ii) Funds on deposit in the Negative Carry
Reserve Fund overnight or for a longer period shall at all times be
invested in Eligible Investments at the direction of the Servicer or
its agent, subject to the restrictions set forth in the Agreement and
subject to the requirement that each such Eligible Investment shall
have a stated maturity on or prior to the following Transfer Date.
Net interest and earnings (less investment expenses) on funds on
deposit in the Negative Carry Reserve Fund, if any, shall be allocated
and distributed as provided in Section 4.03(a) or Section 4.04, as
applicable.
(d) Liquidity Reserve Account.
(i) The Master Trust Trustee, for the benefit of
the Seller, shall establish on or prior to the commencement of an
Early Amortization Period or an Investment Period and maintain or
cause to be established and maintained in the name of the Master Trust
Trustee, an Eligible Deposit Account bearing a designation clearly
indicating that the funds deposited therein are held for the benefit
of the Seller (the "Liquidity Reserve Account"). The Seller shall
possess all right, title and interest in all funds on deposit from
time to time in the Liquidity Reserve Account and in all proceeds
thereof; provided, however, that no funds on deposit in the Liquidity
Reserve Account shall be paid to the Seller if such payment would
reduce the funds in such account below an amount equal to the
Available Subordinated Amount. Pursuant to authority granted to it
pursuant to Section 3.01(b) of the Agreement, the Servicer shall have
the revocable power to instruct the Master Trust Trustee to withdraw
funds from the Liquidity Reserve Account for the purpose of fulfilling
the obligations of the Seller under this Series Supplement and the
Agreement. The Servicer at all times shall maintain accurate records
reflecting transactions in the Liquidity Reserve Account.
19
<PAGE> 24
(ii) Funds on deposit in the Liquidity Reserve
Account overnight or for a longer period shall at all times be
invested in Eligible Investments at the direction of the Seller or its
agent, subject to the restrictions set forth in the Agreement. Any
Eligible Investment with a stated maturity shall mature on or prior to
the following Transfer Date. All net interest and earnings (less
investment expenses) on funds on deposit in the Liquidity Reserve
Account, if any, shall be paid to the Seller. On any Transfer Date
commencing after the 1990 Trust Termination Date on which the amount
on deposit in the Liquidity Reserve Account exceeds the Available
Subordinated Amount as of the end of such Transfer Date, the Servicer
shall withdraw the amount of such excess from the Liquidity Reserve
Account and allocate and pay such excess to the Seller.
(e) Replacement Series 1997-1 Accounts. If, at any time,
any of the Series 1997-1 Accounts ceases to be an Eligible Deposit Account, the
Master Trust Trustee (or the Servicer on its behalf) shall upon the earlier of
(a) 30 calendar days, or (b) the next Determination Date, establish a new
Series 1997-1 Account meeting the conditions specified in paragraphs (a), (b),
(c) or (d) above, as applicable, as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Series 1997-1 Account.
Neither the Seller, the Servicer nor any person or entity claiming by, through
or under the Seller, the Servicer or any such person or entity shall have any
right, title or interest in, or any right to withdraw any amount from, any
Series 1997-1 Account, except as expressly provided herein.
(f) Special Servicer Agent. Promptly following the
commencement of an Investment Period and effective for the duration thereof,
the Servicer shall select and appoint an agent, which initially will be the
Master Trust Trustee (the "Special Servicer Agent") as the Servicer's agent for
purposes of selecting investments as described in this Section 4.02(f). The
Special Servicer Agent will be compensated by the Servicer and will be
obligated to perform its duties hereunder whether or not it receives such
compensation. Notwithstanding any other provision of this Section 4.02 or
Section 4.03 or Section 4.04 of the Agreement, during any Investment Period,
funds on deposit in the Series 1997-1 Accounts will be invested at the
direction of the Special Servicer Agent in Eligible Investments selected by the
Special Servicer Agent, and on each Distribution Date during an Investment
Period, the Special Servicer Agent shall deliver a report to the Servicer, the
Master Trust Trustee and to each Series 1997-1 Certificateholder which shall
state, as of the last day of the related Due Period, the aggregate amount of
funds invested by the Special Servicer Agent, a brief description of each
Eligible Investment in which such funds are invested and the amount invested in
each such Eligible Investment, the rate of interest applicable to each such
Eligible Investment and the rating of each such Eligible Investment. The
Special Servicer Agent shall not (i) acquire or dispose of Eligible Investments
for the primary purpose of recognizing gains or decreasing losses resulting
from market value changes or (ii) dispose of Eligible Investments prior to
maturity at less than face value. The Special Servicer Agent may be removed at
any time by the Servicer; provided that, prior to such removal, (i) a successor
Special Servicer Agent shall have been selected by the Servicer and accepted
its appointment and (ii) the Series 1997-1 Rating Agency Condition shall have
been satisfied prior to the effectiveness of such appointment. So long as the
Master Trust Trustee is acting as the Special Servicer Agent, the Special
Servicer Agent shall be entitled to the same rights and remedies under the
Agreement as the Master Trust Trustee.
20
<PAGE> 25
SECTION 4.03 Application of Class A-5 Investor Certificate Collections
Prior to the 1990 Trust Termination Date.
(a) Class A-5 Investor Certificate Interest Collections.
On each Distribution Date related to a Due Period commencing prior to the 1990
Trust Termination Date, the Master Trust Trustee, acting in accordance with
instructions from the Servicer, shall apply Class A-5 Investor Certificate
Interest Collections for such Due Period and Investment Income for the related
Distribution Period in the following amounts and in the following order of
priority:
(i) Monthly Interest. An amount equal to Monthly
Interest for the related Distribution Period plus any Monthly Interest
due with respect to any prior Distribution Period not previously
distributed to the Series 1997-1 Certificateholders on a prior
Distribution Date, plus to the extent permitted by law, interest at
the Certificate Rate that has accrued on Monthly Interest that was due
pursuant to this clause (i) but was not previously distributed to the
Series 1997-1 Certificateholders on a prior Distribution Date shall be
deposited in the Distribution Account.
(ii) Negative Carry Reserve Fund Deposit Amount.
For any Distribution Date related to a Due Period occurring during an
Investment Period or an Early Amortization Period, an amount equal to
the Negative Carry Reserve Fund Deposit Amount shall be deposited in
the Negative Carry Reserve Fund.
(iii) Allocation to Seller. Any remaining Class A-5
Investor Certificate Interest Collections for the related Due Period
and Investment Income for the related Distribution Period shall be
allocated and paid to the Seller.
If during any Investment Period or Early Amortization Period, Class A-5
Investor Certificate Interest Collections for the related Due Period and
Investment Income for the related Distribution Period are not sufficient to
make all distributions required by Section 4.03(a)(i), the Master Trust Trustee
shall withdraw funds from the Negative Carry Reserve Fund to the extent of such
insufficiency and apply such funds in the same manner as Class A-5 Investor
Certificate Interest Collections pursuant to Section 4.03(a)(i). 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.
(b) Class A-5 Investor Certificate Principal Collections.
On each Transfer Date related to a Due Period commencing prior to the 1990
Trust Termination Date and occurring during an Investment Period or Early
Amortization Period, the Master Trust Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collections Account and
apply Class A-5 Investor Certificate Principal Collections, if any, for the
related Due Period in the following amounts and in the following order of
priority:
(i) Invested Amount and Negative Carry Reserve
Fund. On a pro rata basis between clauses (x) and (y), an amount
equal to (x) the excess of the Invested Amount over the amount of all
previous deposits to the Series Principal Account pursuant to this
Section 4.03(b)(i) shall be deposited in the Series Principal Account
and (y) the Negative Carry Reserve Fund Deposit Amount (reduced by the
amount deposited pursuant to Section 4.03(a)(ii)) shall be deposited
in the Negative Carry Reserve Fund.
21
<PAGE> 26
(ii) Allocation to Seller. Any remaining Class
A-5 Investor Certificate Principal Collections for such Due Period
shall be allocated and paid to the Seller.
SECTION 4.04 Application of Available Certificateholder Interest
Collections After the 1990 Trust Termination Date.
(a) Application of Available Certificateholder Interest
Collections Prior to the Fully Funded Date. On each Transfer Date related to a
Due Period commencing after the 1990 Trust Termination Date but ending prior to
the Fully Funded Date, the Master Trust Trustee, acting in accordance with
instructions from the Servicer, shall apply Available Certificateholder
Interest Collections for such Due Period in the following amounts and in the
following order of priority:
(i) Investor Servicing Fee. An amount equal to
the Investor Servicing Fee for such Due Period (unless such amount has
been netted against deposits to the Collections Account or waived)
shall be allocated and paid to the Servicer.
(ii) Monthly Interest. An amount equal to Monthly
Interest for the Distribution Period, plus any Monthly Interest due
with respect to any prior Distribution Period but not previously
distributed to the Series 1997-1 Certificateholders on a prior
Distribution Date, plus to the extent permitted by law, additional
interest at the Certificate Rate for such Distribution Period that has
accrued on Monthly Interest that was due pursuant to this clause (ii)
but was not previously distributed to the Series 1997-1
Certificateholders on a prior Distribution Date shall be deposited in
the Distribution Account.
(iii) Investor Dealer Note Losses. An amount equal
to the Investor Dealer Note Losses, if any, for such Due Period shall
be reimbursed by being treated as Investor Principal Collections for
such Transfer Date.
(iv) Reimbursement of Investor Charge-Offs. An
amount equal to the aggregate amount of unreimbursed Investor
Charge-Offs, if any, for any prior Due Period shall be reimbursed by
being treated as Investor Principal Collections for such Transfer
Date.
(v) Spread Account Deposit Amount. An amount
equal to the Spread Account Deposit Amount, if any, for such Transfer
Date shall be deposited into the Spread Account.
(vi) Deferred Investor Servicing Fee. An amount
equal to the aggregate outstanding amounts of the Investor Servicing
Fee which have been previously waived pursuant to Section 3.01 (unless
such amounts have been waived again) shall be allocated and paid to
the Servicer.
(vii) Reinstatement of Available Subordinated
Amount. 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 (A) during the Revolving Period or the
Accumulation Period, allocated and paid to the Seller or (B) during an
Investment Period or an Early Amortization Period, deposited in the
Liquidity Reserve Account, and in either case (A) or (B) the
22
<PAGE> 27
Available Subordinated Amount shall be reinstated by the amount of
such payment or deposit.
(viii) Excess Interest Collections. Any remaining
Available Certificateholder Interest Collections shall be treated as
Excess Interest Collections, and applied pursuant to Section 4.03(f)
of the Agreement.
If Available Certificateholder Interest Collections are not sufficient to
satisfy each of the applications described in clauses (i) through (vii) above
on any Transfer Date, then Excess Interest Collections from other Series
allocable to Series 1997-1 will be applied as Available Certificateholder
Interest Collections in the priority and the manner described in clauses (i)
through (vii) above. If Excess Interest Collections are less than the
shortfalls for all Series that provide for allocations of Excess Interest
Collections, such Excess Interest Collections shall be allocable to shortfalls
for Series 1997-1 and any other Series that so provides pro rata based on the
relative amounts of each Series' shortfall.
(b) Monthly Interest After the Fully Funded Date. On
each Transfer Date related to a Due Period commencing after the Due Period
related to the Fully Funded Date, the Master Trust Trustee, acting in
accordance with instructions from the Servicer, shall apply Available
Certificateholder Interest Collections for such Due Period in an amount equal
to Monthly Interest for the Distribution Period, plus any Monthly Interest due
with respect to any prior Distribution Period but not previously distributed to
the Series 1997-1 Certificateholders on a prior Distribution Date, plus to the
extent permitted by law, additional interest at the Certificate Rate that has
accrued on Monthly Interest that was due but was not previously distributed to
the Series 1997-1 Certificateholders on a prior Distribution Date, which amount
shall be deposited in the Distribution Account. Any remaining Available
Certificateholder Interest Collections shall be retained in the accounts in
which they were generated and invested. If such amounts are insufficient to
pay Monthly Interest, funds up to such insufficiency shall be withdrawn from
the Negative Carry Reserve Fund and applied for such purpose. 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.
SECTION 4.05 Application of Available Seller's Finance Charge
Collections, Spread Account, Liquidity Reserve Account and Negative Carry
Reserve Fund to Deficiency Amount.
(a) On each Transfer Date commencing after the 1990 Trust
Termination Date, the Servicer shall determine the amount (the "Deficiency
Amount"), if any, by which the amount of the entire allocations required on
such Transfer Date by Sections 4.04(a)(i) through (iv) exceeds the amount of
Available Certificateholder Interest Collections for such Due Period and Excess
Interest Collections allocated to Series 1997-1 on such Transfer Date, if any,
for the related Due Period.
(b) If the Deficiency Amount for any Transfer Date is
greater than zero, the Master Trust Trustee, acting in accordance with
instructions from the Servicer, shall apply available funds from the following
sources in the following order of priority in the same manner as Available
Certificateholder Interest Collections, each of which applications shall reduce
such Deficiency Amount (all such available funds being the "Available Draw
Funds" for such Transfer Date):
23
<PAGE> 28
(i) Available Seller's Finance Charge
Collections;
(ii) funds on deposit in the Spread Account;
(iii) for any Transfer Date occurring during any
Investment Period or Early Amortization Period, funds on deposit in
the Liquidity Reserve Account;
provided, however, that the amount applied pursuant to this Section 4.05(b)
shall not exceed the Draw Amount. The Available Subordinated Amount shall be
reduced by the aggregate amount of Available Draw Funds applied pursuant to
this Section 4.05(b).
(c) If during any Investment Period, Early Amortization
Period or Accumulation Period, Available Certificateholder Interest
Collections, Excess Interest Collections and Available Draw Funds applied
pursuant to this Article IV are insufficient to make all the applications
described in Section 4.04(a)(ii) or 4.04(b), 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
Section 4.04(a)(ii) or 4.04(b). If such funds are applied pursuant to Section
4.04(a)(ii), the Deficiency Amount shall be reduced by the amount so applied
and 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.
(d) If all of the amounts applied pursuant to Section
4.05(a) and (b) are insufficient to make the entire application described in
Section 4.04(a)(iii), the Available Subordinated Amount shall be reduced (but
not below zero) by the amount of such deficiency and any remaining Investor
Dealer Note Losses shall be deemed to be reimbursed to the extent of such
reduction.
SECTION 4.06 Investor Charge-Offs. If, for any Transfer Date on which
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 for such Transfer Date (as
reduced by the applications required by Section 4.05 of this Series Supplement)
is greater than zero, the Invested Amount shall be reduced by the lesser of (i)
such remaining Deficiency Amount for such Transfer Date and (ii) the amount of
Investor Dealer Note Losses for the related Due Period remaining unreimbursed
after all applications of funds or reductions of the Available Subordinated
Amount pursuant to Sections 4.04 and 4.05 (such lesser amount being an
"Investor Charge-Off").
SECTION 4.07 Application of Seller's Finance Charge Collections After
the 1990 Trust Termination Date.
(a) Application of Available Seller's Finance Charge
Collections. On each Transfer Date related to a Due Period commencing after
the 1990 Trust Termination Date, the Master Trust Trustee, acting in accordance
with instructions from the Servicer, shall withdraw and apply from the
Collections Account to the extent of Available Seller's Finance Charge
Collections for such Due Period, the following amounts in the following order
of priority:
24
<PAGE> 29
(i) On each Transfer Date related to a Due Period
for which a Deficiency Amount exists, the amount required by Section
4.05(b)(i) shall be applied as specified in Section 4.05(b).
(ii) On each Transfer Date related to a Due Period
(x) occurring during an Investment Period or (y) commencing after the
Accumulation Period Commencement Date, an amount equal to the Negative
Carry Reserve Fund Deposit Amount for such Transfer Date shall be
deposited in the Negative Carry Reserve Fund.
(iii) On each Transfer Date related to a Due Period
occurring during an Investment Period or an Early Amortization Period,
the amount, if any, by which the Available Subordinated Amount as of
the end of such Transfer Date exceeds the amount of funds on deposit
in the Liquidity Reserve Account shall be deposited in the Liquidity
Reserve Account.
(iv) On each Transfer Date related to a Due Period
occurring during an Early Amortization Period, an amount equal to the
Negative Carry Reserve Fund Deposit Amount for such Transfer Date
shall be deposited in the Negative Carry Reserve Fund.
(v) On each Transfer Date on which the full
Spread Account Deposit Amount was not deposited in the Spread Account
pursuant to Section 4.04(a)(v), an amount equal to the shortfall in
such Spread Account Deposit Amount shall be deposited in the Spread
Account.
(vi) Any remaining Available Seller's Finance
Charge Collections for the related Due Period shall be allocated and
paid to the Seller.
(b) Application of Series Allocable Finance Charge
Collections to the Seller. On each Transfer Date related to a Due Period
commencing after the 1990 Trust Termination Date, the Master Trust Trustee,
acting in accordance with instructions from the Servicer, shall withdraw from
the Collections Account and allocate and pay to the Seller an amount equal to
the product of (i) the result of the Excess Seller's Percentage for such Due
Period minus the Required Excess Seller Interest Percentage and (ii) Series
Allocable Finance Charge Collections for such Due Period.
SECTION 4.08 Application of Series Allocable Principal Collections
After the 1990 Trust Termination Date. On each Business Day after the 1990
Trust Termination Date, the Master Trust Trustee, acting in accordance with
instructions from the Servicer, shall withdraw Series Allocable Principal
Collections for such Business Day from the Collections Account and apply such
funds in the following amounts:
(a) Investor Principal Collections During Revolving
Period. During the Revolving Period, an amount equal to Investor Principal
Collections for such Business Day shall be treated as Shared Principal
Collections, and applied, pursuant to the written direction of the Servicer,
pursuant to Section 4.03(e) of the Agreement.
(b) Investor Principal Collections during Accumulation
Period, Investment Period, or Early Amortization Period. During the
Accumulation Period, any Investment Period, or
25
<PAGE> 30
any Early Amortization Period, Investor Principal Collections for such
Business Day shall be allocated to the Series 1997-1 Certificateholders and
deposited into 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; provided, however, that for
each Business Day of a Due Period occurring during the Accumulation Period, the
amount of Investor Principal Collections deposited in the Series Principal
Account on such Business Day, when added to the amount of Investor Principal
Collections previously deposited in the Series Principal Account during such
Due Period, shall not exceed the Controlled Deposit Amount for such Due Period.
Any Investor Principal Collections remaining after the applications described
in the preceding sentence shall be treated as Shared Principal Collections, and
applied, pursuant to the written direction of the Servicer, pursuant to Section
4.03(e) of the Agreement.
(c) Seller's Principal Collections During the Revolving
Period. During the Revolving Period, all Seller's Principal Collections for
such Business Day shall be allocated as follows: first, Excess Seller's
Principal Collections shall 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 Seller's discretion, greater than) the Minimum Master
Trust Seller's Interest, second, Available Seller's Principal Collections shall
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 Seller's
discretion, greater than) the Minimum Master Trust Seller's Interest, and
third, all remaining Seller's Principal Collections shall be deemed to be
Series 1997-1 Shared Seller Principal Collections and shall be allocated as
provided in Section 4.08(d)(iii).
(d) Seller's Principal Collections During Accumulation
Period, Investment Period or Early Amortization Period; Shared Seller Principal
Collections.
(i) During the Accumulation Period, Available
Seller's Principal Collections for such Business Day shall be
deposited in the Negative Carry Reserve Fund in an amount equal to the
Negative Carry Reserve Fund Deposit Amount (reduced by the amount
deposited pursuant to Section 4.07(a)(ii)). Any remaining Available
Seller's Principal Collections for such Business Day shall be deemed
to be "Remaining Available Seller's Principal Collections," which
shall be included in Series 1997-1 Shared Seller Principal Collections
and allocated as provided in clause (iii) below. During the
Accumulation Period, Excess Seller's Principal Collections shall be
included in Series 1997-1 Shared Seller Principal Collections and
allocated as provided in clause (iii) below.
(ii) During any Early Amortization Period or
Investment Period (prior to the Fully Funded Date), Available Seller's
Principal Collections for such Business Day shall be, on a pro rata
basis between clauses (A) and (B) below based on the respective
amounts owed, (A) 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 (including amounts deposited
pursuant to Section 4.07(a)(iii)), and (B) deposited in the Negative
Carry Reserve Fund in an amount equal to the Negative Carry Reserve
Fund Deposit Amount (reduced by the amounts deposited pursuant to by
Sections 4.07(a)(ii) and (a)(iv)). 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
26
<PAGE> 31
or the Liquidity Reserve Account, as applicable, on such Business Day.
Any remaining Available Seller's Principal Collections for such
Business Day shall be deemed to be "Remaining Available Seller's
Principal Collections." 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.
(iii) 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
1997-1 Series to the extend of any Series 1997-1 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
Series 1997-1 Shared Seller Principal Collections, are less than the
shortfalls for which shared seller principal collections may be used,
including any Series 1997-1 Accumulation Period Principal Shortfall,
then such shared seller principal collections will be allocated to all
such shortfalls, including any Series 1997-1 Accumulation Period
Principal Shortfall, pro rata based on the relative amounts of each
such shortfall.
(iv) "Series 1997-1 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 Series 1997-1
Shared Seller Principal Collections during any Investment Period or
Early Amortization Period.
(e) 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.
27
<PAGE> 32
SECTION 4.09 Shared Principal Collections.
(a) That portion of Shared Principal Collections for any
Business Day equal to the amount of Series 1997-1 Shared Principal Collections
for such Business Day will be allocated to Series 1997-1 and will be applied in
the same manner as Investor Principal Collections pursuant to Section 4.08(b)
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.
(b) "Series 1997-1 Shared Principal Collections," with
respect to any Business Day commencing after the 1990 Trust Termination Date,
shall mean an amount equal to the Series 1997-1 Principal Shortfall for such
Business Day; provided, however, that, if the aggregate amount of Shared
Principal Collections for all Series for such Business Day is less than the
aggregate amount of Principal Shortfalls for all Series for such Business Day,
then Series 1997-1 Shared Principal Collections for such Business Day shall
equal the product of (x) Shared Principal Collections for all Series for such
Business Day and (y) a fraction, the numerator of which is the Series 1997-1
Principal Shortfall for such Business Day and denominator of which is the
aggregate amount of Principal Shortfalls for all Series for such Business Day.
SECTION 4.10 Distributions to Series 1997-1 Certificateholders. On
each Transfer Date, after all allocations to the Distribution Account and the
Series Principal Account for the related Transfer Date have been made, the
Master Trust Trustee, acting in accordance with instructions from the Servicer,
shall transfer to the Distribution Account the funds on deposit in the Series
Principal Account and shall make, without duplication, the following
distributions from the Distribution Account:
(a) Interest Distributions. On each Distribution Date
(including the Expected Payment Date), Monthly Interest will be distributed to
the Series 1997-1 Certificateholders as accrued interest on the 1997-1
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
Certificate Rate on such amount.
(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 Series 1997-1
Certificates.
(c) Early Amortization Period. 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 Series 1997-1 Certificates;
provided, however, that upon the occurrence of an Early Amortization Event
described in clause (a) of Section 6.01, distributions in respect of the
Invested Amount will commence on the immediately succeeding Distribution Date.
28
<PAGE> 33
(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 Series 1997-1
Certificates for which an Early Distribution election has been made.
SECTION 4.11 Accumulation Period Length; Accumulation Period
Commencement Date. On or prior to the first Due Period which is nine months
prior to the Due Period related to the Distribution Date which is the
Expected Payment Date, the Servicer shall determine in its sole discretion the
Accumulation Period Length and the Accumulation Period Commencement Date and,
promptly following such determination, the Servicer shall notify the Master
Trust Trustee and the Rating Agencies in writing of such determination.
SECTION 4.12 Partial Month Due Period. The allocation and
distribution provisions in this Series Supplement are based upon the assumptions
that each Due Period will be a calendar month and that each Due Period will
have a unique related Transfer Date and Distribution Date. However, under
certain circumstances (such as the occurrence of an Early Amortization Event or
Investment Event), the Revolving Period could end on a date other than the last
day of a calendar month (the period from the first day of such month (the
"Subject Month") to and including the date of such occurrence being referred to
herein as the "Revolving Due Period"), and an Early Amortization Period or
Investment Period could commence on a date other than the first day of a
calendar month (the period from such other date until the last day of the
Subject Month being the "Amortizing/Investing Due Period"). If such a
circumstance occurs, then the Servicer, the Seller and the Master Trust Trustee
shall observe the following rules:
(i) the Transfer Date for both the Revolving Due
Period and the Amortizing/Investing Due Period shall be the date on
which the Transfer Date would have occurred if the Subject Month had
been an ordinary Due Period;
(ii) the allocations and distributions of Finance
Charge Collections (and all items derived from Finance Charge
Collections, such as Available Certificateholder Interest Collections
and Available Seller's Finance Charge Collections) and Dealer Note
Losses occurring during the Subject Month shall be made as if the
Subject Month were one Due Period, without any distinction between the
Revolving Due Period and the Amortizing/Investing Due Period; and
(iii) two separate sets of allocations and
distributions of Principal Collections (and all items derived from
Principal Collections, such as Investor Principal Collections and
Seller's Principal Collections) shall be made on such Transfer Date,
according to whether such Principal Collections were received during
the Revolving Due Period (in which case allocations and distributions
shall be made as provided in Sections 4.08(a) and (c)) or the
Amortizing/Investing Due Period (in which case allocations and
distributions shall be made as provided in Sections 4.08(b) and (d)).
SECTION 4.13 Closing Date Allocations. On the Closing Date, proceeds
from the issuance of the Series 1997-1 Certificates in an amount equal to the
product of (a) ____ divided by 30 and (b) the quotient of (i) the Invested
Amount multiplied by the Certificate Rate, divided by (ii) twelve shall be
deposited and held in the Collections Account until the Transfer Date related to
the first
29
<PAGE> 34
Distribution Date for Series 1997-1, and shall be applied as Class A-5 Investor
Certificate Interest Collections. The first Distribution Date for Series
1997-1 shall be _______, 1997.
SECTION 4.14 Additional Rights upon the Occurrence of Certain Events.
Notwithstanding the provisions of Section 9.02(a) of the Agreement, if any
insolvency event occurs with respect to the Seller, Navistar International
Corporation, Navistar International Transportation Corporation or Navistar
Financial Corporation 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 1990 Trust or the Master Trust, as applicable, 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 Certificate holders 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.
SECTION 4.15 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-5 Investor Certificate and any other Investor Certificate on any
matter for which votes or consents are solicited under the 1990 Trust 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-5 Investor Certificate and any
other Investor Certificate on any matter for which votes or consents are
solicited under the 1990 Trust Agreement.
"Applicable Voting Percentage" means, with respect to any matter for
which votes or consents are solicited under the 1990 Trust Agreement,
the percentage of votes or consents of the Investor Certificates
needed to pass the proposed matter.
ARTICLE V
DISTRIBUTIONS AND REPORTS
TO SERIES 1997-1 CERTIFICATEHOLDERS
SECTION 5.01 Distributions.
(a) The Paying Agent shall distribute (in accordance with
the Monthly Servicer Certificate and Settlement Statement delivered by the
Servicer to the Master Trust Trustee and the Paying Agent pursuant to Section
3.04(d) of the Agreement) to each Series 1997-1 Certificateholder of record on
the preceding Record Date (other than as provided in Section 12.02 of the
Agreement respecting a final distribution) (i) on each Distribution Date such
Certificateholder's pro rata share
30
<PAGE> 35
(based on the aggregate fractional undivided interests represented by the
Series 1997-1 Certificates held by such Certificateholder) of the amounts on
deposit in the Series 1997-1 Accounts as is payable to the Series 1997-1
Certificateholders on such Distribution Date pursuant to Sections 4.10 (a),
(b) and (c) and (ii) on the Early Distribution Date, for each Series 1997-1
Certificateholder that has elected to receive an Early Distribution, such
Certificateholder's Early Distribution Amount pursuant to Section 4.10(d).
(b) Except as provided in Section 12.03 of the Agreement
with respect to a final distribution, distributions to Series 1997-1
Certificateholders hereunder shall be made by check mailed to each Series
1997-1 Certificateholder at such Certificateholder's address appearing in the
Certificate Register without presentation or surrender of any Series 1997-1
Certificate or the making of any notation thereon; provided, however, that,
with respect to Series 1997-1 Certificates registered in the name of a Common
Depository, such distributions shall be made to such Common Depository in
immediately available funds.
SECTION 5.02 Monthly and Annual Certificateholders' Statement.
(a) Monthly Series 1997-1 Certificateholders' Statement.
At least two Business Days prior to each Distribution Date, the Servicer will
provide to the Master Trust Trustee and the Paying Agent, and on each
Distribution Date, the Paying Agent shall forward to each Series 1997-1
Certificateholder a Monthly Servicer Certificate and Settlement Statement
substantially in the form of Exhibit B-1 prior to the 1990 Trust Termination
Date or substantially in the form of Exhibit B-2 after the 1990 Trust
Termination Date, in each case with such changes as the Servicer shall deem
necessary or appropriate, prepared by the Servicer and delivered to the Master
Trust Trustee setting forth, among other things, the following information
which, prior to the 1990 Trust Termination Date, will include only the amounts
specified in (iii), (iv), (v), (xi), (xiv), (xv) and (xvi) below, and which, in
the case of (i), (ii), (iii), (viii), and (ix) below, shall be stated on the
basis of an original principal amount of $1,000 per Series 1997-1 Certificate:
(i) 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;
(ii) the Series 1997-1 Allocation Percentage, the
Floating Allocation Percentage and the Principal Allocation Percentage
(if applicable) for the related Due Period;
(iii) the total amount to be distributed on the
Series 1997-1 Certificates on such Distribution Date;
(iv) the amount, if any, of such distribution
allocable to the Invested Amount;
(v) the amount, if any, of such distribution
allocable to interest on the Series 1997-1 Certificates;
(vi) Dealer Note Losses for the related Due
Period;
31
<PAGE> 36
(vii) the Draw Amount as of the related Transfer
Date, if any;
(viii) the amount of the Investor Charge-Offs and
the amount of reimbursement thereof as of the related Transfer Date;
(ix) the amount of the Investor Servicing Fee to
be paid on such Distribution Date;
(x) the Controlled Deposit Amount for the related
Due Period (if applicable);
(xi) the Invested Amount (after giving effect to
all distributions that will occur on such Distribution Date);
(xii) the aggregate amount of Dealer Notes and
funds on deposit in each of the Excess Funding Account, Series
Principal Account, Negative Carry Reserve Fund and Spread Account as
of the end of the last day of the related Due Period (after giving
effect to payments and adjustments made pursuant to Article IV of this
Series Supplement and of the Agreement);
(xiii) the Available Subordinated Amount and the
Negative Carry Subordinated Amount, each as of the end of the related
Transfer Date;
(xiv) with respect to Eligible Investments in the
Series Principal Account, the Excess Funding Account, the Negative
Carry Reserve Fund and the Liquidity Reserve Account, as of the last
day of the related Due Period, the aggregate amount of funds invested
in Eligible Investments in each such Series Account, a brief
description of each such Eligible Investment and amount invested in
each such Eligible Investment, the rate of interest applicable to each
such Eligible Investment and the rating of each such Eligible
Investment;
(xv) the Dealers with the five largest aggregate
outstanding principal amounts of Dealer Notes in the 1990 Trust or the
Master Trust, as the case may be, as of the end of the related Due
Period;
(xvi) the aggregate outstanding principal amount of
Dealer Notes issued to finance OEM Vehicles as of the end of the
related Due Period;
(xvii) the percentages and all other information
calculated pursuant to Sections 6.01 and 7.01 to determine whether an
Early Amortization Event or an Investment Event, respectively, has
occurred;
(xviii) the amount of Excess Interest Collections and
Investor Principal Collections treated as Shared Principal
Collections, each for the related Due Period, and the amount of such
Excess Interest Collections and Shared Principal Collections allocated
to other Series; and
32
<PAGE> 37
(xix) the amount of Remaining Available Seller's
Principal Collections, the amount of Excess Seller's Principal
Collections and Remaining Available Seller's Principal Collections
treated as Series 1997-1 Shared Seller Principal Collections, the
amount of Shared Seller Principal Collections from other Series, and
the amount of Shared Seller Principal Collections allocated to Series
1997-1 and to other Series, each for the related Due Period.
(b) On each Distribution Date related to a Due Period
commencing prior to the 1990 Trust Termination Date, the Master Trust Trustee
shall furnish to the Paying Agent and the Paying Agent shall forward to each
Series 1997-1 Certificateholder the statement to be delivered pursuant to
Section 5.02(a) of the 1990 Trust Agreement.
(c) A copy of each statement provided pursuant to
subsections (a) and (b) will be made available for inspection at the Corporate
Trust Office.
(d) Annual Certificateholder's Tax Statement. On or
about January 31 of each calendar year, beginning with calendar year 1998, the
Master Trust Trustee shall furnish to the Servicer and Paying Agent a list of
each Person who at any time during the preceding calendar year was a Series
1997-1 Certificateholder and received any payment thereon and the dates such
Person held a Series 1997-1 Certificate, and the Paying Agent shall furnish to
each such Series 1997-1 Certificateholder a statement prepared by the Paying
Agent containing the information prepared by the Master Trust Trustee which is
required to be contained in the statement to Series 1997-1 Certificateholders
as set forth in Sections 5.02(a)(iii)-(a)(v) above, aggregated for such
calendar year or the applicable portion thereof during which such Person was a
Series 1997-1 Certificateholder, together with such other customary information
as the Master Trust Trustee or the Servicer deems necessary or desirable to
enable the Series 1997-1 Certificateholders to prepare their tax returns,
including information (to be supplied by the Servicer to the Master Trust
Trustee) regarding original issue discount on the Series 1997-1 Certificates,
if any. Such obligation of the Paying Agent shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Master Trust Trustee pursuant to any requirements of the
Internal Revenue Code as from time to time in effect.
ARTICLE VI
EARLY AMORTIZATION EVENTS
SECTION 6.01 Additional Early Amortization Events. The occurrence of
any of the following events shall, immediately upon the occurrence thereof
without notice or other action on the part of the Master Trust Trustee or the
Series 1997-1 Certificateholders, be deemed to be an Early Amortization Event
solely with respect to Series 1997-1:
(a) 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 or greater than (1) the 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 _____% multiplied
by the Invested Amount as of the preceding Distribution Date and (ii)
subsequent to the Fully Funded Date, the date on which the amount on
33
<PAGE> 38
deposit in the Negative Carry Reserve Fund is less than or equal to the Minimum
Negative Carry Required Amount;
(b) the Invested Amount is not reduced to zero by the
Expected Payment Date (other than after the Fully Funded Date); or
(c) 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 or the
assets of the Master Trust (including, without limitation, proceeds of the
Dealer Notes).
ARTICLE VII
INVESTMENT EVENTS
SECTION 7.01 Investment Events. If any one of the following events
shall occur:
(a) failure on the part of the Seller (i) to make any
payment, distribution or deposit required under the Agreement within five
business days of the date required 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 Agreement or any information contained in the schedule of
Dealer Notes delivered thereunder or this Series Supplement 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 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 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;
34
<PAGE> 39
(f) the delivery by the Seller to the Master Trust
Trustee, after the 1990 Trust Termination Date, 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, the Average
Coverage Differential shall be equal to or less than negative two percent
(2.00%) 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 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 quotient of (i) the product of (a) the sum of Dealer Note
Collections for each of the related Due Period and 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;
(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 one percent
(1.00%);
(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
Class A-5 Investor Certificate (other than a 1990 Trust Amortization Event that
also constitutes an Early Amortization Event under the Master Trust), the
Seller is required to repurchase the Class A-5 Investor Certificate under
Section 2.06 of the 1990 Trust Agreement, or the Scheduled Class Amortization
Date occurs with respect to the Class A-5 Investor Certificate;
(l) any of the Seller, NITC, NIC or NFC shall file a
petition commencing a voluntary case under any chapter of the federal
bankruptcy laws; or the Seller or NFC shall file a petition or answer or
consent seeking reorganization, arrangement, adjustment or composition under
any other similar applicable federal law, or shall consent to the filing of any
such petition, answer or consent; or the Seller, NITC, NIC or NFC shall
appoint, or consent to the appointment of a custodian, receiver, liquidator,
trustee, assignee, sequestrator or other similar official in bankruptcy or
insolvency of it or of any substantial part of its property; or the Seller,
NITC, NIC or NFC shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts generally as they become
due;
(m) any order for relief against any of the Seller, NITC,
NIC or NFC shall have been entered by a court having jurisdiction in the
premises under any chapter of the federal bankruptcy laws, and such order shall
have continued undischarged or unstayed for a period of 120 days; or a decree
or order by a court having jurisdiction in the premises shall have been entered
approving as properly filed a petition seeking reorganization, arrangement,
adjustment, or composition of the Seller, NITC, NIC or NFC under any other
similar applicable federal law, and
35
<PAGE> 40
such decree or order shall have continued undischarged or unstayed for a period
of 120 days; or a decree or order of a court having jurisdiction in the
premises for the appointment of a custodian, receiver, liquidator, trustee,
assignee, sequestrator or other similar official in bankruptcy or insolvency of
the Seller, NITC, NIC or NFC of any substantial part of their property, or for
the winding up or liquidation of their affairs, shall have been entered, and
such decree or order shall have remained in force undischarged or unstayed for
a period of 120 days; and
(n) 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 Interest Deposit Agreement on or before the date occurring five
Business Days after the date such deposit is required by the Interest Deposit
Agreement to be made;
then, subject to applicable law, and after the applicable grace period, if any,
an investment event (an "Investment Event") shall occur without any notice or
other action on the part of the Master Trust Trustee, any Special Servicer
Agent, any Paying Agent, the Series 1997-1 Certificateholders or any other
Beneficiary, immediately upon the occurrence of such event.
ARTICLE VIII
OTHER SERIES PROVISIONS
SECTION 8.01 Effect of Fully Funded Date; Conveyance of Dealer Notes.
(a) Notwithstanding anything to the contrary in the
Agreement, upon the occurrence of the Fully Funded Date, after giving effect to
all allocations, distributions, withdrawals and deposits to be made on such
date, the following provisions of the Agreement shall no longer apply in
respect of the Series 1997-1 Certificates to the Seller or the Servicer, as
applicable, the Series 1997-1 Certificates or the Series 1997-1
Certificateholders:
(i) Section 2.01 (except to the extent it relates
to amounts received with respect to the 1990 Seller's Certificate and
all other rights of the Seller under the 1990 Trust Agreement and
proceeds (including "proceeds" as defined in Section 9-306 of the UCC
as in effect in the State of Illinois) thereof on deposit in the
Series 1997-1 Accounts on the Fully Funded Date, after giving effect
to all such allocations, distributions, withdrawals and deposits);
(ii) Sections 2.02(a) and 2.02(b) (except to the
extent they relate to amounts received with respect to the Dealer
Notes, any security interests in the Financed Vehicles, Insurance
Proceeds, 1990 Trust Investment Securities and 1990 Trust Accounts
(including "proceeds" as defined in Section 9-306 of the UCC as in
effect in the State of Illinois) thereof on deposit in the Series
1997-1 Accounts on the Fully Funded Date, after giving effect to all
such allocations, distributions, withdrawals and deposits);
(iii) Section 2.05(a)(ii), 2.05(a)(iii),
2.05(a)(iv), 2.05(a)(v), 2.05(a)(vi), 2.05(a)(vii) and 2.05(a)(viii);
(iv) Section 2.06;
36
<PAGE> 41
(v) Section 2.07 (except to the extent it relates
to Section 2.05(a)(i));
(vi) Section 2.08;
(vii) Section 2.09;
(viii) Section 3.01;
(ix) Section 3.09;
(x) Section 3.10;
(xi) Section 4.03;
(xii) Section 6.09;
(xiii) Section 7.06;
(xiv) Section 8.06;
(xv) Section 8.08;
(xvi) Section 11.01(e); and
(xvii) Section 13.02.
(b) Upon the later to occur of (i) the Fully Funded Date
and the making of all allocations, distributions, withdrawals and deposits to
be made on such date and (ii) the date on which each other Series is either no
longer outstanding or the fully funded date has occurred with respect thereto,
the Master Trust Trustee shall sell, assign and convey to the Seller or its
designee, without recourse, representations or warranty, all right, title and
interest of the Master Trust in the Dealer Notes, whether then existing or
thereafter created, all security interests in the Financed Vehicles with
respect thereto, all monies due or to become due and all amounts received with
respect thereto and all proceeds thereof except for amounts on deposit in the
Collections Account that are allocable to Investor Certificates and amounts on
deposit in any Series Account. The Master Trust Trustee shall execute and
deliver such instruments of transfer and assignment, in each case without
recourse, as shall be reasonably requested by the Seller to vest in the Seller
or its designee all right, title and interest which the Master Trust had in all
such property.
SECTION 8.02 Tax Treatment. The Seller has entered into the Agreement
and this Series Supplement and the Series 1997-1 Certificates have been issued
with the intention that the Series 1997-1 Certificates will qualify under
applicable tax law as indebtedness secured by the Master Trust assets
attributable to the Series 1997-1 Certificates. The Seller and each Series
1997-1 Certificateholder and Certificate Owner, by the acceptance of its Series
1997-1 Certificate or Book-Entry Certificate, as applicable, agrees to treat
the Series 1997-1 Certificates as indebtedness secured by the Master Trust
assets attributable to the Series 1997-1 Certificates, for Federal income
taxes,
37
<PAGE> 42
state and local income and franchise taxes and any other taxes imposed on or
measured by income in whole or in part.
ARTICLE IX
FINAL DISTRIBUTIONS
SECTION 9.01 Sale of Investors' Interest Pursuant to Section 2.07 of
the Agreement; Distributions Pursuant to Section 2.03 or 12.03 of the
Agreement.
(a) The amount to be paid by the Seller to the
Collections Account with respect to Series 1997-1 in connection with a purchase
of the Certificateholders' Interest pursuant to Section 2.07 of the Agreement
shall equal the Reassignment Amount for the Distribution Date on which such
purchase occurs.
(b) With respect to the Reassignment Amount, if any,
deposited into the Collections Account pursuant to this Section 9.01 of this
Series Supplement or Section 2.07 of the Agreement or any proceeds deposited
into the Collections Account pursuant to Section 12.03(c) of the Agreement, the
Master Trust Trustee shall, not later than 12:00 noon, New York City time, on
the Distribution Date on which such amounts are deposited (or, if such date is
not a Distribution Date, on the immediately following Distribution Date) (in
the priority set forth below): (i) first, deposit the Invested Amount on such
Distribution Date into the Series Principal Account, (ii) second, deposit the
amount of accrued and unpaid interest on the unpaid balance of the Series
1997-1 Certificates in the Distribution Account, and (iii) third, pay the
remainder of any such Reassignment Amounts to the Seller.
(c) Notwithstanding any other provision to the contrary
in this Series Supplement or the Agreement, the entire amount deposited in the
Series Principal Account on a Distribution Date pursuant to Section 9.01(b) and
all other amounts on deposit therein shall be distributed in full to the Series
1997-1 Certificateholders on such Distribution Date and any distribution made
pursuant to this paragraph (c) shall be deemed to be a final distribution
pursuant to Section 12.03 of the Agreement with respect to Series 1997-1;
provided, however, that no such distribution shall be made on any date
occurring after the Fully Funded Date if, by reason of Section 8.01(a)(v), no
Reassignment Amount is required to be deposited in the Collections Account with
respect to Series 1997-1 on such Distribution Date.
SECTION 9.02 Distribution of Proceeds of Sale, Disposition or
Liquidation of the Dealer Notes Pursuant to Section 9.02 of the Agreement.
(a) Not later than 12:00 noon, New York City time, on the
Distribution Date following the date on which the Insolvency Proceeds are
deposited into the Collections Account pursuant to Section 9.02(b) of the
Agreement, the Master Trust Trustee shall first (in each case, after giving
effect to any deposits and distributions otherwise to be made on such
Distribution Date) deduct an amount equal to the Invested Amount on such
Distribution Date from the portion of the Insolvency Proceeds allocated to
Series Allocable Principal Collections and deposit such amount in the Series
Principal Account; provided that the amount of such deposit shall not exceed
the product of (x) the portion of the Insolvency Proceeds allocated to Series
Allocable Principal
38
<PAGE> 43
Collections and (y) 100% minus the Excess Seller's Percentage with respect to
the related Due Period. The remainder of the portion of the Insolvency
Proceeds allocated to Series Allocable Principal Collections shall be allocated
to the Master Trust Seller's Interest and shall be distributed on such
Distribution Date to the Seller.
(b) Not later than 12:00 noon, New York City time, on
such Distribution Date, the Master Trust Trustee shall first (in each case,
after giving effect to any deposits and distributions otherwise to be made on
such Distribution Date) deduct an amount equal to the sum of (i) Monthly
Interest for such Distribution Date, (ii) any Monthly Interest previously due
but not distributed on a prior Distribution Date and (iii) to the extent
permitted by law, interest at the Certificate Rate on Monthly Interest that was
due but not previously distributed to the Series 1997-1 Certificateholders on a
prior Distribution Date, from the portion of the Insolvency Proceeds allocated
to Series Allocable Finance Charge Collections and deposit such amount in the
Distribution Account; provided that the amount of such distribution shall not
exceed the product of (x) the portion of the Insolvency Proceeds allocated to
Series Allocable Finance Charge Collections and (y) 100% minus the Excess
Seller's Percentage with respect to the related Due Period. The remainder of
the portion of the Insolvency Proceeds allocated to Series Allocable Finance
Charge Collections shall be allocated to the Master Trust Seller's Interest and
shall be distributed on such Distribution Date to the Seller.
(c) Notwithstanding anything to the contrary in this
Series Supplement or the Agreement, the entire amount deposited in the Series
Principal Account and the Distribution Account pursuant to this Section 9.02
and all other amounts on deposit therein shall be distributed in full to the
Series 1997-1 Certificateholders on the Distribution Date on which funds are
deposited pursuant to this Section 9.02 (or, if not so deposited on a
Distribution Date, on the immediately following Distribution Date) and any
distribution made pursuant to this Section 9.02 shall be deemed to be a final
distribution pursuant to Section 12.03 of the Agreement with respect to Series
1997-1.
SECTION 9.03 Early Distributions at the Option of the Investor
Certificateholder After the Fully Funded Date.
(a) 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 at their respective addresses appearing at the Certificate
Register.
(b) Each Series 1997-1 Certificateholder may request the
early distribution (an "Early Distribution") of all or a portion of the
Invested Amount related to such Certificateholder's Series 1997-1 Certificates
by providing written notice (an "Early Distribution Notice") to the Servicer
and the Master Trust Trustee in accordance with Section 13.05 of the Agreement.
Any such Early Distribution Notice shall be provided not less than 20 days
prior to the third Distribution Date following the Fully Funded Date (the
"Early Distribution Date") and shall be irrevocable when so provided. Each
such Early Distribution Notice shall specify the amount of the Initial Invested
Amount related to the Series 1997-1 Certificates owned by such Series 1997-1
Certificateholder (the "Early Distribution Initial Invested Amount") with
respect to which the Early Distribution is to be made; provided, however, that
any request for an Early Distribution with respect to a portion of such
Certificateholder's Invested Amount shall only be in integral multiples of
$1,000. Any Series 1997-
39
<PAGE> 44
1 Certificateholder electing an Early Distribution shall surrender its Series
1997-1 Certificates to the Master Trust Trustee within two days of the Early
Distribution Date.
(c) Upon receipt of an Early Distribution Notice by a
Series 1997-1 Certificateholder in accordance with Section 9.03(b) and delivery
of the Series 1997-1 Certificates with respect to which the Early Distribution
Amount is being paid, the Master Trust Trustee shall distribute to such Series
1997-1 Certificateholder, on the Early Distribution Date, an amount equal to
the product of (i) the result obtained by dividing the amount of the Early
Distribution Initial Invested Amount that is the subject of the Early
Distribution Notice by the Initial Invested Amount and (ii) the Invested Amount
as of the Early Distribution Date (without giving effect to the payments
required by this Section 9.03) (the "Early Distribution Amount") from the
Series Principal Account in accordance with Section 4.10(d), in addition to
making any other payments required to be made under this Series Supplement in
respect of the Series 1997-1 Certificates on such Distribution Date.
(d) In addition, on any Early Distribution Date, the
Master Trust Trustee shall withdraw from the Negative Carry Reserve Fund an
amount equal to the product of (x) the amount of funds on deposit in the
Negative Carry Reserve Fund on such Distribution Date and (y) the result
obtained by dividing the aggregate Early Distribution Amounts for such Early
Distribution Date by the Invested Amount as such Early Distribution Date
(without giving effect to the payments required by this Section 9.03), and pay
such amount to the Seller.
(e) The payment of the Early Distribution Amount to the
applicable Series 1997-1 Certificateholder shall constitute payment in full of
the Certificateholder Initial Invested Amount which was the subject of such
Certificateholder's Early Distribution Notice, and such Early Distribution
Initial Invested Amount shall cease to accrue Monthly Interest as of the
Distribution Date. If less than the aggregate total Early Distribution Initial
Invested Amount is the subject of an Early Distribution, a new Series 1997-1
Certificate representing the Early Distribution Initial Invested Amount which
was not subject to such Early Distribution shall be issued to the applicable
Series 1997-1 Certificateholder without cost to such holder within 10 days
after surrender of its Series 1997-1 Certificate to the Master Trust Trustee.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01 Ratification of Agreement. As supplemented by this
Series Supplement, the Agreement is in all respects ratified and confirmed and
the Agreement as so supplemented by this Series Supplement shall be read, taken
and construed as one and the same instrument.
SECTION 10.02 Counterparts. This Series Supplement may be executed in
two or more counterparts (and by different parties on separate counterparts)
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
SECTION 10.03 GOVERNING LAW. THIS SERIES SUPPLEMENT SHALL BE
CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
40
<PAGE> 45
PROVISIONS, EXCEPT THAT THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE MASTER
TRUST TRUSTEE SHALL BE DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS.
[END OF PAGE]
[SIGNATURE PAGE FOLLOWS]
41
<PAGE> 46
IN WITNESS WHEREOF, the Seller, the Servicer and the Master
Trust Trustee have caused this Series Supplement to be duly executed by their
respective officers as of the day and year first above written.
NAVISTAR FINANCIAL SECURITIES
CORPORATION
as Seller
By:_____________________________________
Its:____________________________________
NAVISTAR FINANCIAL CORPORATION
as Servicer
By:_____________________________________
Its:____________________________________
THE BANK OF NEW YORK
as Master Trust Trustee
By:_____________________________________
Its:____________________________________
42
<PAGE> 47
EXHIBIT A
FORM OF SERIES 1997-1 CERTIFICATE
[Form of the face of the Series 1997-1 Certificates]
Initial
REGISTERED Invested Amount:
Certificate No. R-__
CUSIP NO. _________
Unless this Certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the issuer
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
DEALER NOTE MASTER TRUST
FLOATING RATE DEALER NOTE
ASSET BACKED CERTIFICATES, SERIES 1997-1
evidencing a fractional undivided interest in certain assets of the
NAVISTAR FINANCIAL DEALER NOTE MASTER TRUST,
the corpus of which consists primarily of (i) prior to the 1990 Trust
Termination Date (as defined in the Pooling and Servicing Agreement defined on
the reverse side hereof), the certificates issued or transferred under the
Pooling and Servicing Agreement dated as of December 1, 1990 (as amended or
supplemented, the "1990 Trust Agreement") by and among Navistar Financial
Corporation ("NFC"), Navistar Financial Securities Corporation ("NFSC" or the
"Seller") and The Chase Manhattan Bank, as trustee, to NFSC or The Bank of New
York, as trustee under the Pooling and Servicing Agreement (the "Master Trust
Trustee"), and all monies due or to become due with respect thereto and all
proceeds thereof, and all rights of the Seller under the terms of the 1990
Trust Agreement, or (ii) effective on the 1990 Trust Termination Date, certain
promissory notes acquired by NFC to finance certain vehicles purchased by a
dealer (the "Dealer Notes") and other property related thereto. This
certificate (a "Series 1997-1 Certificate") does not represent an interest in,
or obligation of, NFSC, NFC or any affiliate thereof.
<PAGE> 48
Unless the certificate of authentication hereon has been
executed by or on behalf of the Master Trust Trustee, by manual signature, this
Series 1997-1 Certificate shall not be entitled to any benefit under the
Pooling and Servicing Agreement or be valid for any purpose.
THIS SERIES 1997-1 CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Seller has caused this Certificate to
be duly executed.
NAVISTAR FINANCIAL
SECURITIES CORPORATION
By:
----------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates described in the within-mentioned Pooling and
Servicing Agreement.
THE BANK OF NEW YORK,
as Master Trust Trustee
By:
--------------------------
Authorized Signatory
-2-
<PAGE> 49
[Form of the reverse of the Series 1997-1 Certifcates]
This certifies that Cede & Co. (the "Series 1997-1
Certificateholder"), is the registered owner of a fractional undivided interest
in certain assets of the NAVISTAR FINANCIAL DEALER NOTE MASTER TRUST (the
"Master Trust") created pursuant to a Pooling and Servicing Agreement dated as
of June 8, 1995 (and as amended and supplemented from time to time, the
"P&S"), by and among NFC, as Servicer, NFSC, as Seller, The Chase Manhattan
Bank, as 1990 Trustee, and the Master Trust Trustee, as supplemented by the
Series 1997-1 Supplement dated as of _______, 1997 (the "Series Supplement")
among the Seller, NFC and the Master Trust Trustee, that are allocated to the
Series 1997-1 Certificateholders' Interest pursuant to the P&S and the Series
Supplement. The P&S and the Series Supplement are hereinafter collectively
referred to as the "Pooling and Servicing Agreement." The corpus of the Master
Trust will include:
(i) prior to the 1990 Trust Termination Date, all
of Seller's right, title and interest in and to (a) the 1990
Trust Seller's Certificate and any 1990 Trust Investor
Certificate issued to the Master Trust, and all monies due or
to become due with respect thereto and all proceeds (as
defined in Section 9-306 of the UCC) thereof and (b) all other
rights of the Seller under the terms of the 1990 Trust
Agreement (including, without limitation, the right to
exchange the 1990 Trust Seller Certificate pursuant to Section
6.12 of the 1990 Trust Agreement, the right to receive
distributions and other payments from the 1990 Trust, the
rights of the Seller upon termination of the 1990 Trust
pursuant to Section 12.04 of the 1990 Trust Agreement and the
right to receive funds on deposit in the Liquidity Reserve
Account); and
(ii) effective on the 1990 Trust Termination Date:
(a) all of the Seller's right, title,
and interest in and to the Eligible Dealer Notes
held by the Seller as of the 1990 Trust Termination
Date, all monies due (including accrued finance
charges) or to become due with respect thereto and
all proceeds (as defined in Section 9-306 of the
UCC) of such Dealer Notes;
(b) the Seller's interest in the
security interests in the Financed Vehicles related
to such Dealer Notes granted by Dealers pursuant to
the Dealer Agreements and any accessions to such
security interests;
(c) the Seller's interest in the
Insurance Proceeds;
(d) all of the 1990 Trust's right, title
and interest in and to the Dealer Notes held by the
1990 Trust as of the 1990 Trust Termination Date,
all monies due (including accrued finance charges)
or to become due with respect thereto and all
proceeds (as defined in Section 9-306 of the UCC) of
such Dealer Notes;
(e) the 1990 Trust's interest in the
security interests in the Financed Vehicles related
to such Dealer Notes granted by Dealers pursuant to
the Dealer Agreements and any accessions to such
security interests;
-3-
<PAGE> 50
(f) the 1990 Trust's interest in the
Insurance Proceeds;
(g) 1990 Trust Investment Securities;
(h) funds on deposit in the 1990 Trust
Accounts (other than funds on deposit for the benefit
of, and allocated to, 1990 Trust Investor
Certificates that are not held by the Master Trust);
(i) the Seller's right, title, and
interest in and to all available Eligible Dealer
Notes existing on each Business Day and owned by the
Seller, all monies due (including accrued finance
charges) or to become due with respect thereto and
all proceeds (as defined in Section 9-306 of the
UCC) of such Dealer Notes, the Seller's interest in
the security interests in the Financed Vehicles
related to such Dealer Notes granted by Dealers
pursuant to the Dealer Agreements and any accessions
to such security interests, the Seller's interest in
the Insurance Proceeds;
(j) any Enhancements; and
(k) all other assets and interests
constituting the Master Trust.
In addition to the Investor Certificates, the Master Trust Seller's Certificate
issued pursuant to the Pooling and Servicing Agreement represents the Master
Trust Seller's Interest in the Master Trust. The Master Trust Seller's
Certificate represents the interest in the Master Trust's assets not
represented by the Investor Certificates.
The Dealer Notes consist of promissory notes acquired by NFC
to finance the purchase by certain dealers and manufacturers and other persons
having agreements with NITC to sell certain new and used medium or heavy-duty
trucks and trailers manufactured by NITC or other manufacturers. Generally,
the principal amount of a Dealer Note is equal to the wholesale purchase price
of such vehicles and, subject to certain exceptions, is due upon the retail
sale of the vehicle.
Subject to the terms and conditions of the Pooling and
Servicing Agreement, the Seller may from time to time direct the Master Trust
Trustee, on behalf of the Master Trust, to issue one or more new Series of
Investor Certificates, which will represent fractional undivided interests in
certain of the Master Trust's assets.
This Certificate is issued under and is subject to the terms,
provisions and conditions of the Pooling and Servicing Agreement to which, as
amended and supplemented from time to time, the Series 1997-1 Certificateholder
by virtue of the acceptance hereof assents and is bound. Although a summary of
certain provisions of the Pooling and Servicing Agreement is set forth below,
this Certificate does not purport to summarize the Pooling and Servicing
Agreement and reference is made to the Pooling and Servicing Agreement for
information with respect to the interest, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Master Trust Trustee. A copy of the Pooling and Servicing Agreement
(without schedules and exhibits) may be requested from the Master Trust Trustee
by writing to the Master Trust Trustee at The Bank of New York, Corporate Trust
Office, 101 Barclay Street, New York, New York 10286, Attention: Corporation
Trust Department. To the extent not defined herein, the
-4-
<PAGE> 51
capitalized terms used herein, have the meanings ascribed to them in the
Pooling and Servicing Agreement.
The Seller has structured the Pooling and Servicing Agreement
and the Investor Certificates with the intention that the Investor Certificates
will qualify under applicable federal, state, local and foreign tax law as
indebtedness. Except to the extent expressly specified to the contrary in the
Series Supplement, the Seller, the Servicer, the Holders of the Master Trust
Seller's Certificates, each Investor Certificateholder, and each Certificate
Owner agree to treat and to take no action inconsistent with the treatment of
the Investor Certificates (or beneficial interest therein) as indebtedness for
purposes of federal, state, local and foreign income or franchise taxes and any
other tax imposed on or measured by income. Each Investor Certificateholder,
by acceptance of its Certificate and each Certificate Owner, by acquisition of
a beneficial interest in a Certificate, agree to be bound hereby. Each
Certificateholder agrees that it will cause any Certificate Owner acquiring an
interest in a Certificate through it to comply with the Pooling and Servicing
Agreement as to treatment as indebtedness under applicable tax law, as
described herein and in the Pooling and Servicing Agreement.
On each Distribution Date, the Master Trust Trustee shall
distribute to each Series 1997-1 Certificateholder of record at the close of
business on the Business Day preceding the Distribution Date for the related
Due Period (each a "Record Date") such Certificateholder's pro rata share
(based on the aggregate fractional undivided interest represented by the Series
1997-1 Certificates held by such Certificateholder, except as otherwise
provided in the Pooling and Servicing Agreement) of such amounts on deposit in
any Series Account as are payable in respect of the Series 1997-1 Certificates
pursuant to the Pooling and Servicing Agreement. Distributions with respect to
this Certificate will be made by the Master Trust Trustee by check mailed to
the address of the Certificateholder of record appearing in the Certificate
Register without the presentation or surrender of this Certificate or the
making of any notation thereon (except for the final distribution in respect of
this Certificate), except that with respect to Series 1997-1 Certificates
registered in the name of a Depository, including Cede & Co., the nominee for
The Depository Trust Company, distributions will be made in immediately
available funds. Final payment of this Certificate will be made only upon
presentation and surrender of this Certificate at the office or agency
specified in the notice of final distribution delivered by the Master Trust
Trustee to the Certificateholder in accordance with the Pooling and Servicing
Agreement.
This Certificate does not represent an obligation of, or an
interest in, the Seller, the Servicer, or any affiliate of any of them and is
not insured or guaranteed by any governmental agency or instrumentality. This
Certificate is limited in right of payment to certain Collections with respect
to the Class A-5 Investor Certificate or the Dealer Notes, as the case may be,
and certain other amounts, all as more specifically set forth herein and in the
Pooling and Servicing Agreement.
The Pooling and Servicing Agreement may be amended from time
to time (including in connection with the issuance of a Supplemental
Certificate) by the Servicer, the Seller and the Master Trust Trustee, without
the consent of any of the Series 1997-1 Certificateholders, so long as any such
action shall not, as evidenced by an Opinion of Counsel, adversely affect in
any material respect the interests of the Series 1997-1 Certificateholders or
the certificateholders of any other outstanding Series. The Master Trust
Trustee may, but shall not be obligated to, enter into any such
-5-
<PAGE> 52
amendment which affects the Master Trust Trustee's rights, duties or immunities
under the Pooling and Servicing Agreement or otherwise.
The Pooling and Servicing Agreement may also be amended from
time to time (including in connection with the issuance of a Supplemental
Certificate) by the Servicer, the Seller and the Master Trust Trustee with the
consent of the Holders of Investor Certificates evidencing not less than
66-2/3% of the aggregate unpaid principal amount of the Investor Certificates
of all 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 the
Investor Certificateholders; provided, however, that no such amendment to the
Pooling and Servicing Agreement shall (i) reduce in any manner the amount of or
delay the timing of distributions to be made to Investor Certificateholders or
deposits of amounts to be so distributed without the consent of such each
affected Investor Certificateholder; (ii) change the definition or the manner
of calculating the interest of any Investor Certificateholder or the amount
available under any Enhancement without the consent of each affected Investor
Certificateholder; (iii) reduce the percentage required to consent to any
amendment without the consent of each Investor Certificateholder; or (iv)
adversely affect the rating of any Series or Class by each Rating Agency
without the consent of the Holders of Investor Certificates of such Series or
Class evidencing not less than 66-2/3% of the aggregate unpaid principal amount
of the Investor Certificates of such Series or Class.
The Master Trust Trustee has the right, without the consent of
the Holders of any Investor Certificates, to vote, or to consent or withhold
consent with respect to, Class A-5 Certificate and any 1990 Trust Investor
Certificate issued to the Master Trust on any matter for which votes or
consents are solicited under the 1990 Trust Agreement, provided that such
action will not, as evidenced by an officer's certificate of the Servicer, have
a material adverse effect on the Holders of any Investor Certificates. The
Master Trust Trustee also has the right, with the consent of the Holders of the
Applicable Voting Percentage of the Holders of the Investor Certificates, to
vote, or to consent or withhold consent, with respect to the Class A-5
Certificate and any other 1990 Trust Investor Certificate issued to the Master
Trust on any matter for which votes or consents are solicited under the 1990
Trust Agreement. "Applicable Voting Percentage" means, with respect to any
matter for which votes or consents are solicited under the 1990 Trust
Agreement, the percentage of votes or consents of the 1990 Trust Investor
Certificates needed to pass the proposed matter.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth, the transfer of this Certificate is
registrable in the Certificate Register of the Master Trust Trustee upon
surrender of this Certificate for registration of transfer at the office or
agency maintained by the Master Trust Trustee in New York, New York,
accompanied by a written instrument of transfer in form satisfactory to the
Master Trust Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized, and thereupon one or more new Series 1997-1
Certificates of authorized denominations evidencing the same aggregate
fractional undivided interest will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates
without coupons in denominations specified in the Pooling and Servicing
Agreement.
-6-
<PAGE> 53
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth, Series 1997-1 Certificates are
exchangeable for new Series 1997-1 Certificates evidencing like aggregate
fractional undivided interests as requested by the Certificateholder
surrendering such Certificates. No service charge may be imposed for any such
exchange but the Master Trust Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
The Servicer, the Master Trust Trustee, the Transfer Agent and
any agent of any of them, may treat the Person in whose name this Certificate
is registered as the owner hereof for all purposes, and neither the Servicer
nor the Master Trust Trustee, the Transfer Agent, nor any agent of any of them,
shall be affected by notice to the contrary except in certain circumstances
described in the Pooling and Servicing Agreement.
-7-
<PAGE> 54
ASSIGNMENT
Social Security or other identifying number of assignee
____________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
__________________________________________
(name and address of assignee)
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints __________, attorney, to transfer said certificate on
the books kept for registration thereof, with full power of substitution in the
premises.
Dated: 1
------------------ ------------------------
Signature Guaranteed:
-------------------------
- --------------------
1 NOTE: The signature of this assignment must correspond with the name of
the registered owner as it appears on the reverse of the within Certificate in
every particular, without alteration, enlargement or any change whatsoever.
-8-
<PAGE> 55
EXHIBIT B-1
FORM OF MONTHLY SERVICER AND SETTLEMENT CERTIFICATE
DEALER NOTE MASTER TRUST
___________________
DEALER NOTE ASSET
BACKED CERTIFICATES,
SERIES 1997-1
___________________
Under the Series 1997-1 Supplement dated as of _______, 1997 (the
"Supplement") by and among Navistar Financial Corporation, ("NFC"), Navistar
Financial Securities Corporation ("NFSC") and The Bank of New York, as trustee
(the "Master Trust Trustee") to the Pooling and Serving Agreement dated as of
June 8, 1995 (the "Agreement") by and among NFC, NFSC, the Master Trust Trustee
and The Chase Manhattan Bank, as 1990 Trust Trustee, the Master Trust Trustee
is required to prepare certain information each month regarding current
distributions to certain accounts and payment to Series 1997-1
Certificateholders as well as the performance of the Master Trust during the
previous month The information which is required to be prepared with respect
to the Distribution Date of ______ __, ____, the Transfer Date of ________, __
___ and with respect to the performance of the Master Trust during the Due
Period ended on ____ __, ____ and the Distribution Period ended _____ __, ____
is set forth below. Certain of the information is presented on the basis of an
original principal amount of $1,000 per Investor Certificate. Certain other
information is presented based on the aggregate amounts for the Master Trust as
a whole. Capitalized terms used but not otherwise defined herein shall have
the meanings assigned to such terms in the Agreement and the Supplement.
1. NFC is Servicer under the Agreement.
2. The undersigned is a Servicing Officer.
3. Eligible Investments in the Excess Funding Account:
a. The aggregate amount of funds invested in
Eligible Investments ...............................$__________
b. Description of each Eligible Investment:
c. The rate of interest applicable to each such
Eligible Investment.................................________%
d. The rating of each such Eligible Investment.........___________
<PAGE> 56
4. The total amount to be distributed on the Series
1997-1 Certificates on the Distribution Date.................$__________
5. The total amount, if any, to be distributed on the
Series 1997-1 Certificates on the Distribution Date
allocable to the Invested Amount.............................$__________
6. The total amount, if any, to be distributed on
the Series 1997-1 Certificates on the Distribution
Date allocable to interest on the Series 1997-1
Certificates.................................................$__________
7. The Invested Amount as of the Distribution Date
(after giving effect to all distributions that will occur
on the Distribution Date)
8. Eligible Investments in the Series Principal Account:
a. The aggregate amount of funds invested in
Eligible Investments......................................$__________
b. Description of each Eligible Investment:
c. The rate of interest applicable to each such
Eligible Investment........................................_________%
d. The rating of each such Eligible Investment................__________
9. Eligible Investments in the Negative Carry Reserve
Fund:
a. The aggregate amount of funds invested in
Eligible Investments......................................$__________
b. Description of each Eligible Investment:
c. The rate of interest applicable to each such
Eligible Investment.........................................._______%
d. The rating of each such Eligible Investment................__________
10. Eligible Investments in the Liquidity Reserve
Account:
a. The aggregate amount of funds invested in
Eligible Investments......................................$__________
b. Description of each Eligible Investment:
2
<PAGE> 57
c. The rate of interest applicable to each such
Eligible Investment........................................_______%
d. The rating of each such Eligible Investment..............__________
11. The aggregate amount of Dealer Notes issued to finance
OEM Vehicles, as of the end of the Transfer Date............$__________
12. The Dealers with the five largest aggregate outstanding
principal amounts of Dealer Notes in the 1990 Trust as of
the end of the Transfer Date:
i) ..................................................________________
ii) .................................................________________
iii) ................................................________________
iv) .................................................________________
v) ..................................................________________
13. The information set forth in appendixes B-1A nd B-1B attached
hereto.
3
<PAGE> 58
APPENDIX B1-A
FORM OF MONTHLY CERTIFICATEHOLDERS'
STATEMENT
NAVISTAR FINANCIAL DEALER NOTE TRUST 1990
__________
FLOATING RATE DEALER NOTE
PASS-THROUGH CERTIFICATES
__________
Under the Pooling and Servicing Agreement dated as of December 1, 1990 by
and among Navistar Financial Corporation ("NFC"), Navistar Financial Securities
Corporation and The Chase Manhattan Bank, as Trustee, the Trustee is required
to prepare certain information each month regarding current distributions to
Investor Accounts and payments to Investor Certificateholders as well as the
performance of the Trust during the previous month. The information which is
required to be prepared with respect to the distribution of __________________,
19___ and with respect to the performance of the Trust during the Due Period
ended on ____________________, 19___ is set forth below. Certain of the
information is presented on the basis of an original principal amount of $1,000
per Investor Certificate. Certain other information is presented based on the
aggregate amounts for the Trust as a whole. To the extent not defined herein,
the capitalized terms used herein have the meanings assigned to them in the
Agreement.
A. Information Regarding Current Payments (Stated on the Basis of $1,000
Original Principal Amount).
1. The total amount of the payment to each Class of
Investor Certificateholders on _______________, 19___, per
$1,000 interest:
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
<PAGE> 59
2. The amount of the payment set forth in paragraph 1
above in respect of interest on each Class of Investor
Certificates, per $1,000 interest:
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
3. The amount of the payment set forth in paragraph 1 above
in respect of principal on each Class of Investor
Certificates, per $1,000 interest:
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
B. Information Regarding the Performance of the Trust.
1. Collections, Uses.
(a) The aggregate amount of Dealer Finance Charges for
the Due Period.....................................$__________
(b) The aggregate amount of NITC Finance Charges for
the Due Period.....................................$__________
(c) The aggregate amount of Principal Collections received
during the Due Period..............................$__________
(d) The aggregate amount of Principal Collections allocable
to the Amortizing Classes..........................$__________
(e) The aggregate amount of Principal Collections processed
during the Due Period which were deposited in the Spread
Account............................................$__________
2
<PAGE> 60
(f) The aggregate amount of Principal Collections
processed during the Due Period which were
deposited in the Liquidity Reserve Account.............$__________
(g) The aggregate amount of Principal Collections
processed during the Due Period which were used
to purchase new Dealer Notes...........................$__________
(h) The aggregate amount of Principal Collections
processed during the Due Period which were used to
purchase Investment Securities.........................$__________
(i) The aggregate amount of Principal Collections
processed during the related Due Period which were paid
to the Seller..........................................$__________
2. Dealer Notes and Investment Securities in the Trust;
Certificate Principal Account.
(a) The aggregate amount of Dealer Notes and Investment
Securities in the Trust as of the end of the Due
Period ended on __________, 19___ (which reflects
the Dealer Notes and Investment Securities
represented by both the Seller Certificate and
the Investor Certificates).............................$__________
(b) The amount of Dealer Notes and Investment Securities
in the Trust represented by the Investor Certificates
(the "Total Investor Interest") as of the Due Period
ended on __________, 19___.............................$__________
(c) The Total Investor Interest set forth in paragraph
2(b) above as a percentage of the aggregate amount of
Dealer Notes and Investment Securities set forth in
paragraph 2(a).........................................__________%
(d) The Total Invested Amount after giving effect to the
payments made on the Distribution Date..............$____________
3
<PAGE> 61
(e) The total amount withdrawn from the Certificate
Principal Account and deposited in the Distribution Account
for the benefit of each Amortizing Class in respect of
Principal Collections on the related Transfer Date:
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
3. Investor Certificate Interest.
(a) The total amount withdrawn from the Collections Account
and deposited in the Distribution Account on the related
Transfer Date in respect of Investor Certificate Interest
and any previously existing Deficiency
Amount................................................$__________
(b) The amount of the payment to each
Class in respect of Class Certificate
Interest and any previously existing
Deficiency Amount on the Distribution Date:
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
(c) The Deficiency Amount (if any) for such Distribution
Date.................................................$__________
(d) The amount of such Deficiency Amount allocable to each
Class:
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
4
<PAGE> 62
(e) The amount (if any) of the Deficiency Amount from the
preceding Distribution Date being reimbursed on the
Distribution Date..............................$__________
4. Losses.
(a) The aggregate amount of Dealer Notes charged-off as
uncollectible during the Due Period ended on
____________, 19__ allocable to the Investor
Certificates (the "Investor Loss Amount")......$__________
(b) The Class Loss Amount for each Class (if any):
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
5. Reimbursement of Losses; Charged-Off Amounts.
(a) The amount of Investor Loss Amount reimbursed or
allocated to the Seller on the related Transfer
Date.............................................$__________
(b) The aggregate amount of Class Loss Amounts (if any)
reimbursed or allocated to the Seller on the Distribution
Date.............................................$__________
(c) The Class Charged-Off Amount for each Class for the
immediately preceding Due Period:
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
5
<PAGE> 63
(d) The Class Charged-Off Amount for each Class for the Due
Period:
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
(e) For each Amortizing Class, the
positive (negative) difference between the
amounts set forth in paragraphs 5(e) and
5(f) above, per $1,000 interest (which will
have the effect of increasing (reducing),
the related Class Invested Amount and the
related Class Investor Interest):
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
6. Class Invested Amounts; Class Investor Interests.
(a) Each Class Invested Amount after giving effect to the
payments made on the Distribution Date:
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
6
<PAGE> 64
(b) Each Class Investor Interest after giving effect to the
payments made on the Distribution Date:
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
Class ___ ............. $__________
7. Servicing Fee.
(a) The aggregate amount of the Monthly Servicing Fee
payable by the Trust to the Servicer for the month of
____________, 19___..................................$__________
(b) The aggregate amount of the Monthly Servicing Fee set
forth in paragraph 6(a) above allocable to the Investor
Certificateholders....................................$__________
8. Available Subordinated Amount; Minimum Seller Interest.
(a) The Available Subordinated Amount as of the end of the ___ day of
____________, 19___...................................$__________
(b) The Minimum Seller Interest as of the ___ day of
________, 19___ is equal to...........................$__________
9. Class Amortization Percentages.
The Class Amortization Percentage for each Amortizing Class:
Class ___ ............. __________%
Class ___ ............. __________%
Class ___ ............. __________%
Class ___ ............. __________%
7
<PAGE> 65
THE CHASE MANHATTAN BANK
By: _________________________________
Title: ______________________________
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
certificate this ___ day of ___________, _____.
NAVISTAR FINANCIAL CORPORATION,
as Servicer
By: _________________________________
Its: ________________________________
8
<PAGE> 66
APPENDIX B1-B
FORM OF MONTHLY SERVICER CERTIFICATE
DEALER NOTE TRUST 1990
_______________
FLOATING RATE
PASS-THROUGH CERTIFICATES
_______________
The undersigned, a duly authorized representative of Navistar Financial
Corporation ("NFC"), as Servicer pursuant to the Pooling and Servicing
Agreement dated as of December 1, 1990 (the "Agreement") by and among NFC,
Navistar Financial Securities Corporation and The Chase Manhattan Bank, as
Trustee, does hereby certify with respect to the Due Period ending __________
___, 19___ and the related Distribution Period ending __________ ___, 19___ as
follows:
1. NFC is Servicer under the Agreement.
2. The undersigned is a Servicing Officer.
3. The amount of the Advance, if any, for the prior Due
Period was equal to.................................$__________
4. The amount of Dealer Finance Charge Collections for
the prior Due Period was equal to...................$__________
5. The amount of NITC Finance Charges for the prior Due
Period was equal to.................................$__________
6. The aggregate amount of all payments made pursuant
to Section 4.03 on the prior Distribution Date was
equal to............................................$__________
7. The Deficiency Amount as of the immediately
preceding Distribution Date was equal to............$__________
8. The Available Subordinated Amount as of the
beginning of the Due Period was equal to.............$_________
9. The Maximum Subordinated Amount as of the beginning
of the Due Period was equal to.......................$_________
10. The Projected Spread for the Distribution Period is
equal to.............................................$__________
<PAGE> 67
11. The amount on deposit in the Spread Account as of the Spread
Account Funding Date was equal to..........................$__________
12. The principal amount of Dealer Notes outstanding as
of the end of the Due Period is equal to...................$__________
13. The average daily balance of Dealer Notes
outstanding during the Due Period is equal to..............$__________
14. The amount of the Monthly Servicing Fee for the Due
Period is equal to.........................................$__________
15. The amount of the Investor Monthly Servicing Fee
for the Due Period is equal to.............................$__________
16. The amount of Dealer Finance Charges for the Due
Period is equal to.........................................$__________
17. The amount of NITC Finance Charges for the Due Period is
equal to...................................................$__________
18. The amount of Interest Income for the Due Period is equal
to.........................................................$__________
19. The amount of Investor Interest Income for the Due Period
is equal to................................................$__________
20. The amount of the Seller Interest Income for the
Due Period is equal to.....................................$__________
21. The average daily Seller Interest during the Due
Period is equal to.........................................$__________
22. The Total Investor Percentage for the Due Period is equal
to.........................................................$__________
23. The Excess Servicing for the Due Period is equal
to.........................................................$__________
24. The Deficiency Amount as of the current
Distribution Date (after giving effect to the payments made
pursuant to Section 4.03 of the Agreement) is equal
to.........................................................$__________
2
<PAGE> 68
25. The amount of the Deficiency Amount specified in 24 above
allocable to each Class:
Class ___ .................. $__________
Class ___ .................. $__________
Class ___ .................. $__________
Class ___ .................. $__________
26. The total amount of Advance Reimbursements for the
Due Period is equal to...............................$__________
27. The aggregate amount to be deposited in the
Distribution Account on the Transfer Date for
distribution on the Distribution Date to the
Investor Certificateholders is equal to..............$__________
28. The amounts to be paid out to the Holders of each
Class on the Distribution Date in respect of Investor
Certificate Interest:
Class ___ .................. $__________
Class ___ .................. $__________
Class ___ .................. $__________
Class ___ .................. $__________
29. The aggregate principal amount of Dealer Notes
repaid during the Due Period is equal to.............$__________
30. The aggregate principal amount of Dealer Notes
purchased by the Trust during the Due Period is
equal to.............................................$__________
31. The aggregate principal amount of Investment
Securities as of the end of the Due Period is
equal to.............................................$__________
32. The amount of Principal Losses for the Due Period
is equal to..........................................$__________
33. The amount of the Investor Loss Amount is equal
to...................................................$__________
3
<PAGE> 69
34. The Maximum Subordinated Amount as of the Distribution
Date (after giving effect to the transactions set forth in
Section 4.03 of the Agreement) is equal to................$__________
35. The Available Subordinated Amount as of the
Distribution Date (after giving effect to the
transactions set forth in Section 4.03 of the Agreement)
is equal to.............................................. $__________
36. The Seller Interest as of the Distribution Date
(after giving effect to the transactions set forth in
Section 4.03 of the Agreement) is equal to............... $__________
37. The Minimum Seller Interest (after giving effect to
the transactions set forth in Section 4.03 of the
Agreement) is equal to................................... $__________
38. The amount on deposit in the Spread Account (after
giving effect to the transactions set forth in Section
4.03 of the Agreement) is equal to....................... $__________
AMORTIZATION TERM
39. The Class Loss Amount for the Due Period for each Class:
Class ___ .................. $__________
Class ___ .................. $__________
Class ___ .................. $__________
Class ___ .................. $__________
40. The Class Charged-Off Amounts for each Class:
Class ___ .................. $__________
Class ___ .................. $__________
Class ___ .................. $__________
Class ___ .................. $__________
41. The amount of Principal Collections on
deposit in the Certificate Principal
Account..................................................$__________
4
<PAGE> 70
42. The amount of such Principal Collections allocable to each
Amortizing Class:
Class ___ .................. $__________
Class ___ .................. $__________
Class ___ .................. $__________
Class ___ .................. $__________
43. The amount on deposit in the Liquidity Reserve
Account (after giving effect to the transactions made
pursuant to Section 4.03 of the Agreement) is equal
to....................................................... $__________
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
certificate this ___ day of ______________,199_.
NAVISTAR FINANCIAL CORPORATION,
as Servicer,
By: ________________________________
Its: ________________________________
5
<PAGE> 71
EXHIBIT B-2
FORM OF MONTHLY SERVICER AND SETTLEMENT CERTIFICATE
DEALER NOTE MASTER TRUST
___________________
DEALER NOTE ASSET
BACKED CERTIFICATES,
SERIES 1997-1
___________________
Under the Series 1997-1 Supplement dated as of _______, 1997
(the "Supplement") by and among Navistar Financial Corporation, ("NFC"),
Navistar Financial Securities Corporation ("NFSC") and The Bank of New York, as
trustee (the "Master Trust Trustee") to the Pooling and Serving Agreement dated
as of June 8, 1995 (the "Agreement") by and among NFC, NFSC, the Master Trust
Trustee and The Chase Manhattan Bank, as 1990 Trust Trustee, the Master Trust
Trustee is required to prepare certain information each month regarding current
distributions to certain accounts and payments to Series 1997-1
Certificateholders as well as the performance of the Master Trust during the
previous month The information which is required to be prepared with respect to
the Distribution Date of ______ __, ____, the Transfer Date of ________, __ ___
and with respect to the performance of the Master Trust during the Due Period
ended on ____ __, ____ and the Distribution Period ended _____ __, ____ is set
forth below. Certain of the information is presented on the basis of an
original principal amount of $1,000 per Investor Certificate. Certain other
information is presented based on the aggregate amounts for the Master Trust as
a whole. Capitalized terms used but not otherwise defined herein shall have
the meanings assigned to such terms in the Agreement and the Supplement .
1. NFC is Servicer under the Agreement.
2. The undersigned is a Servicing Officer.
3. Master Trust Information.
3.1 The amount of the Advance, if any, for the
Due Period.................................$__________
3.2 The amount of NITC Finance Charges for the
Due period.................................$__________
3.3 The average daily balance of Dealer Notes
outstanding during the Due Period..........$__________
3.4 The total amount of Advance Reimbursements
for the Due Period.........................$__________
<PAGE> 72
3.5 The aggregate principal amount of Dealer
Notes repaid during the Due Period.........$__________
3.6 The aggregate principal amount of Dealer
Notes purchased by the Master Trust
during the Due Period......................$__________
3.7 The amount of the Servicing Fee for the
Due Period.................................$__________
3.8 The average daily Master Trust Seller's
Interest during the Due Period.............$__________
3.9 The Master Trust Seller's Interest as
of the Distribution Date (after giving
effect to the transactions set forth
in Article IV of the Supplement)...........$__________
3.10 The aggregate amount of Collections
for the Due Period.........................$__________
3.11 The aggregate amount of Finance Charge
Collections for the Due Period.............$__________
3.12 The aggregate amount of Principal
Collections for the Due Period.............$__________
3.13 The amount of Dealer Note Losses
for the Due Period.........................$__________
3.14 The aggregate amount of Dealer Notes as
of the last day of the Due Period..........$__________
3.15 The aggregate amount of funds on
deposit in the Excess Funding Account as
of the end of the last day of the Due
Period (after giving effect to the
transactions set forth in Article IV of
the Supplement and Article IV of the
Agreement).................................$__________
3.16 Eligible Investments in the Excess
Funding Account:
a. The aggregate amount of funds
invested in Eligible
Investments........................$__________
b. Description of each Eligible
Investment:
c. The rate of interest applicable to
each such Eligible Investment......._________%
-2-
<PAGE> 73
d. The rating of each such Eligible
Investment..........................__________
3.17 The aggregate amount of Dealer Notes
issued to finance OEM Vehicles, as of
the end of the Due Period..................$__________
3.18 The Dealers with the five largest aggregate
outstanding principal amounts of Dealer
Notes in the Master Trust as of the end of
the Due Period:
i)......................... __________________________
ii)........................ __________________________
iii)....................... __________________________
iv)........................ __________________________
v)......................... __________________________
4. Series 1997-1 Information.
4.1 The Deficiency Amount as of the Transfer
Date (after giving effect to the
transactions set forth in Article IV of
the Supplement)............................$__________
4.2 The Maximum Subordinated Amount as of
the Transfer Date (after giving effect to
the transactions set forth in Article IV
of the Supplement).........................$__________
4.3 The Projected Spread for the following
Distribution Period........................$__________
4.4 The amount on deposit in the Spread
Account as of the Transfer Date (after
giving effect to the transactions set
forth in Article IV of the Supplement).....$__________
4.5 The aggregate amount on deposit in
the Liquidity Reserve Account as of
the Transfer Date (after giving effect
to the transactions set forth in Article
IV of the Supplement)......................$__________
4.6 The aggregate amount on deposit in the
Negative Carry Reserve Fund as of the
Transfer Date (after giving effect to the
transactions set forth in Article IV of the
Supplement)................................$__________
4.7 The Invested Amount as of the Distribution
-3-
<PAGE> 74
Date (after giving effect to the
transactions set forth in Article IV of
the Supplement and to the payments made
on the Distribution Date)..................$__________
4.8 The amount of Series Allocable Dealer
Notes Losses for the Due Period............$__________
4.9 The amount of Series Allocable Finance
Charge Collections for the Due Period......$__________
4.10 The amount of Series Allocable Principal
Collections for the Due Period.............$__________
4.11 The amount of Series Principal Account
Losses for the Due Period..................$__________
4.12 The amount of Investor Dealer Note Losses
for the Due Period.........................$__________
4.13 The amount of Investor Finance Charge
Collections for the Due Period.............$__________
4.14 The amount of Investor Principal
Collections for the Due Period.............$__________
4.15 The amount of Available Certificateholder's
Interest Collections for the Due Period....$__________
4.16 The amount of Series 1997-1 Shared
Principal Collections for the
Due Period.................................$__________
4.17 The aggregate amount of the Series 1997-1
Principal Shortfall, if any, for the
Due Period.................................$__________
4.18 The Seller's Percentage for the Due
Period...................................... ________%
4.19 The Excess Seller's Percentage for the Due
Period...................................... ________%
4.20 The aggregate amount of Seller's Principal
Collections for the Due Period.............$__________
4.21 The amount of Available Seller's Finance
Charge Collections for the Due Period......$__________
4.22 The aggregate amount of Available Seller's
Principal Collections for the Due Period...$__________
-4-
<PAGE> 75
4.23 The aggregate amount of Excess Seller's
Principal Collections for the Due Period...$__________
4.24 The Controlled Amortization Amount, if
applicable, for the Due Period.............$__________
4.25 The Minimum Series 1997-1 Master Trust
Seller's Interest as of the Distribution
Date (after giving effect to the
transactions set forth in Article IV of
the Supplement)............................$__________
4.26 The Series 1997-1 Allocation Percentage
for the Due Period.........................._________%
4.27 The Floating Allocation Percentage for the
Due Period.................................._________%
4.28 The Principal Allocation Percentage,
if applicable, for the Due Period..........._________%
4.29 The total amount to be distributed on the
Series 1997-1 Certificated on the
Distribution Date..........................$__________
4.30 The total amount, if any, to be distributed
on the Series 1997-1 Certificates on the
Distribution Date allocable to the Invested
Amount.....................................$__________
4.31 The total amount, if any, to be distributed
on the Series 1997-1 Certificates on the
Distribution Date allocable to interest on
the Series 1997-1 Certificates.............$__________
4.32 The Draw Amount as of the Transfer Date....$__________
4.33 The amount of Investor Charge-Offs as of
Transfer Date..............................$__________
4.34 The amount of reimbursement of Investor
Charge- Offs as of the Transfer Date.......$__________
4.35 The amount of the Investor Servicing Fee
to be paid on such Distribution Date.......$__________
4.36 The aggregate amount of funds on deposit
in the Negative Carry Reserve Fund as of
the end
-5-
<PAGE> 76
of the last day of the Due Period (after
giving effect to the payments and
adjustments made pursuant to Article IV
of the Supplement and of the Agreement)....$__________
4.37 The aggregate amount of funds on deposit
in the Series Principal Account as of the
end of the last day of the Due Period
(after giving effect to the payments and
adjustments made pursuant to Article IV
of the Supplement and of the Agreement)....$__________
4.38 The aggregate amount of funds on deposit
in the Spread Account as of the end of the
last day of the Due Period (after giving
effect to payments and adjustments made
pursuant to Article IV of the Supplement
and the Agreement).........................$__________
4.39 Eligible Investments in the Series
Principal Account:
a. The aggregate amount of funds
invested in Eligible Investments...$__________
b. Description of each Eligible
Investment:
c. The rate of interest applicable to
each such Eligible Investment......._________%
d. The rating of each such Eligible
Investment..........................__________
4.40 Eligible Investments in the Negative Carry
Reserve Fund:
a. The aggregate amount of funds
invested in Eligible Investments...$__________
b. Description of each Eligible
Investment:
c. The rate of interest applicable to
each such Eligible Investment......._________%
d. The rating of each such Eligible
Investment..........................__________
4.41 Eligible Investments in the Liquidity
Reserve Account:
a. The aggregate amount of funds
invested in Eligible Investments...$__________
-6-
<PAGE> 77
b. Description of each Eligible
Investment:
c. The rate of interest applicable to
each such Eligible Investment......._________%
d. The rating of each such Eligible
Investment..........................__________
4.42 The amount of Excess Interest Collections
for the Due Period.........................$__________
4.43 The amount of Investor Principal
Collections treated as Shared Principal
Collections for the Due Period.............$__________
4.44 The amount of Excess Interest Collections
for the Due Period allocated to other
Series.....................................$__________
4.45 The amount of Investor Principal
Collections treated as Shared Principal
Collections for the Due Period allocated
to Other Series............................$__________
4.46 The percentages and all other information
calculated pursuant to Sections 6.01 and
7.01 of the Supplement.....................$__________
4.47 The amount of Remaining Available Seller's
Principal Collections for the Due Period...$__________
4.48 The amount of Series 1997-1 Shared Seller's
Principal Collections for the Due Period...$__________
4.49 The aggregate amount of Shared Seller's
Principal Collections from Other Series for
the Due Period.............................$__________
4.50 The amount of all Shared Seller's Principal
Collections allocated to Series 1997-1 for
the Due Period.............................$__________
4.51 The aggregate amount of all Shared Seller's
Principal Collections allocated to Other
Series for the Due Period..................$__________
-7-
<PAGE> 78
IN WITNESS WHEREOF, the undersigned has duly executed and
delivered this certificate this ___ day of ___________, _____.
NAVISTAR FINANCIAL CORPORATION,
as Servicer
By: _________________________
Its: _________________________
-8-
<PAGE> 1
EXHIBIT 4.10
SERIES 1997-1 CERTIFICATE
Initial
REGISTERED Invested Amount:
$_______
Certificate No. R-__
CUSIP NO. _______
Unless this Certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the issuer
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
DEALER NOTE MASTER TRUST
FLOATING RATE DEALER NOTE
ASSET BACKED CERTIFICATES, SERIES 1997-1
evidencing a fractional undivided interest in certain assets of the
NAVISTAR FINANCIAL DEALER NOTE MASTER TRUST,
the corpus of which consists primarily of (i) prior to the 1990 Trust
Termination Date (as defined in the Pooling and Servicing Agreement defined on
the reverse side hereof), the certificates issued or transferred under the
Pooling and Servicing Agreement dated as of December 1, 1990 (as amended or
supplemented, the "1990 Trust Agreement") by and among Navistar Financial
Corporation ("NFC"), Navistar Financial Securities Corporation ("NFSC" or the
"Seller") and The Chase Manhattan Bank, as trustee, to NFSC or The Bank of New
York, as trustee under the Pooling and Servicing Agreement (the "Master Trust
Trustee"), and all monies due or to become due with respect thereto and all
proceeds thereof, and all rights of the Seller under the terms of the 1990
Trust Agreement, or (ii) effective on the 1990 Trust Termination Date, certain
promissory notes acquired by NFC to finance certain vehicles purchased by a
dealer (the "Dealer Notes") and other property related thereto. This
certificate (a "Series 1997-1 Certificate") does not represent an interest in,
or obligation of, NFSC, NFC or any affiliate thereof.
Unless the certificate of authentication hereon has been
executed by or on behalf of the Master Trust Trustee, by manual signature, this
Series 1997-1 Certificate shall not be entitled to any benefit under the
Pooling and Servicing Agreement or be valid for any purpose.
<PAGE> 2
THIS SERIES 1997-1 CERTIFICATE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Seller has caused this Certificate to
be duly executed.
NAVISTAR FINANCIAL
SECURITIES CORPORATION
By:
---------------------------------
Name:
Title:
Dated: , 1997
-------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates described in the within-mentioned Pooling and
Servicing Agreement.
THE BANK OF NEW YORK,
as Master Trust Trustee
By:
------------------------------
Authorized Signatory
-2-
<PAGE> 3
This certifies that Cede & Co. (the "Series 1997-1
Certificateholder"), is the registered owner of a fractional undivided interest
in certain assets of the NAVISTAR FINANCIAL DEALER NOTE MASTER TRUST (the
"Master Trust") created pursuant to a Pooling and Servicing Agreement dated as
of June 8, 1995 (and as amended and supplemented from time to time, the
"P&S"), by and among NFC, as Servicer, NFSC, as Seller, The Chase Manhattan
Bank, as 1990 Trustee, and the Master Trust Trustee, as supplemented by the
Series 1997-1 Supplement dated as of _______, 1997 (the "Series Supplement")
among the Seller, NFC and the Master Trust Trustee, that are allocated to the
Series 1997-1 Certificateholders' Interest pursuant to the P&S and the Series
Supplement. The P&S and the Series Supplement are hereinafter collectively
referred to as the "Pooling and Servicing Agreement." The corpus of the Master
Trust will include:
(i) prior to the 1990 Trust Termination Date, all of
Seller's right, title and interest in and to (a) the 1990 Trust
Seller's Certificate and any 1990 Trust Investor Certificate issued to
the Master Trust, and all monies due or to become due with respect
thereto and all proceeds (as defined in Section 9-306 of the UCC)
thereof and (b) all other rights of the Seller under the terms of the
1990 Trust Agreement (including, without limitation, the right to
exchange the 1990 Trust Seller Certificate pursuant to Section 6.12 of
the 1990 Trust Agreement, the right to receive distributions and other
payments from the 1990 Trust, the rights of the Seller upon
termination of the 1990 Trust pursuant to Section 12.04 of the 1990
Trust Agreement and the right to receive funds on deposit in the
Liquidity Reserve Account); and
(ii) effective on the 1990 Trust Termination Date:
(a) all of the Seller's right, title, and
interest in and to the Eligible Dealer Notes held by the
Seller as of the 1990 Trust Termination Date, all monies due
(including accrued finance charges) or to become due with
respect thereto and all proceeds (as defined in Section 9-306
of the UCC) of such Dealer Notes;
(b) the Seller's interest in the security
interests in the Financed Vehicles related to such Dealer
Notes granted by Dealers pursuant to the Dealer Agreements and
any accessions to such security interests;
(c) the Seller's interest in the Insurance
Proceeds;
(d) all of the 1990 Trust's right, title and
interest in and to the Dealer Notes held by the 1990 Trust as
of the 1990 Trust Termination Date, all monies due (including
accrued finance charges) or to become due with respect thereto
and all proceeds (as defined in Section 9-306 of the UCC) of
such Dealer Notes;
(e) the 1990 Trust's interest in the security
interests in the Financed Vehicles related to such Dealer
Notes granted by Dealers pursuant to the Dealer Agreements and
any accessions to such security interests;
(f) the 1990 Trust's interest in the Insurance
Proceeds;
-3-
<PAGE> 4
(g) 1990 Trust Investment Securities;
(h) funds on deposit in the 1990 Trust Accounts
(other than funds on deposit for the benefit of, and allocated
to, 1990 Trust Investor Certificates that are not held by the
Master Trust);
(i) the Seller's right, title, and interest in
and to all available Eligible Dealer Notes existing on each
Business Day and owned by the Seller, all monies due
(including accrued finance charges) or to become due with
respect thereto and all proceeds (as defined in Section 9-306
of the UCC) of such Dealer Notes, the Seller's interest in the
security interests in the Financed Vehicles related to such
Dealer Notes granted by Dealers pursuant to the Dealer
Agreements and any accessions to such security interests, the
Seller's interest in the Insurance Proceeds;
(j) any Enhancements; and
(k) all other assets and interests constituting
the Master Trust.
In addition to the Investor Certificates, the Master Trust Seller's Certificate
issued pursuant to the Pooling and Servicing Agreement represents the Master
Trust Seller's Interest in the Master Trust. The Master Trust Seller's
Certificate represents the interest in the Master Trust's assets not
represented by the Investor Certificates.
The Dealer Notes consist of promissory notes acquired by NFC
to finance the purchase by certain dealers and manufacturers and other persons
having agreements with NITC to sell certain new and used medium or heavy-duty
trucks and trailers manufactured by NITC or other manufacturers. Generally,
the principal amount of a Dealer Note is equal to the wholesale purchase price
of such vehicles and, subject to certain exceptions, is due upon the retail
sale of the vehicle.
Subject to the terms and conditions of the Pooling and
Servicing Agreement, the Seller may from time to time direct the Master Trust
Trustee, on behalf of the Master Trust, to issue one or more new Series of
Investor Certificates, which will represent fractional undivided interests in
certain of the Master Trust's assets.
This Certificate is issued under and is subject to the terms,
provisions and conditions of the Pooling and Servicing Agreement to which, as
amended and supplemented from time to time, the Series 1997-1 Certificateholder
by virtue of the acceptance hereof assents and is bound. Although a summary of
certain provisions of the Pooling and Servicing Agreement is set forth below,
this Certificate does not purport to summarize the Pooling and Servicing
Agreement and reference is made to the Pooling and Servicing Agreement for
information with respect to the interest, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Master Trust Trustee. A copy of the Pooling and Servicing Agreement
(without schedules and exhibits) may be requested from the Master Trust Trustee
by writing to the Master Trust Trustee at The Bank of New York, Corporate Trust
Office, 101 Barclay Street, New York, New York 10286, Attention: Corporation
Trust Department. To the extent not defined herein, the capitalized terms used
herein, have the meanings ascribed to them in the Pooling and Servicing
Agreement.
-4-
<PAGE> 5
The Seller has structured the Pooling and Servicing Agreement
and the Investor Certificates with the intention that the Investor Certificates
will qualify under applicable federal, state, local and foreign tax law as
indebtedness. Except to the extent expressly specified to the contrary in the
Series Supplement, the Seller, the Servicer, the Holders of the Master Trust
Seller's Certificates, each Investor Certificateholder, and each Certificate
Owner agree to treat and to take no action inconsistent with the treatment of
the Investor Certificates (or beneficial interest therein) as indebtedness for
purposes of federal, state, local and foreign income or franchise taxes and any
other tax imposed on or measured by income. Each Investor Certificateholder,
by acceptance of its Certificate and each Certificate Owner, by acquisition of
a beneficial interest in a Certificate, agree to be bound hereby. Each
Certificateholder agrees that it will cause any Certificate Owner acquiring an
interest in a Certificate through it to comply with the Pooling and Servicing
Agreement as to treatment as indebtedness under applicable tax law, as
described herein and in the Pooling and Servicing Agreement.
On each Distribution Date, the Master Trust Trustee shall
distribute to each Series 1997-1 Certificateholder of record at the close of
business on the Business Day preceding the Distribution Date for the related
Due Period (each a "Record Date") such Certificateholder's pro rata share
(based on the aggregate fractional undivided interest represented by the Series
1997-1 Certificates held by such Certificateholder, except as otherwise
provided in the Pooling and Servicing Agreement) of such amounts on deposit in
any Series Account as are payable in respect of the Series 1997-1 Certificates
pursuant to the Pooling and Servicing Agreement. Distributions with respect to
this Certificate will be made by the Master Trust Trustee by check mailed to
the address of the Certificateholder of record appearing in the Certificate
Register without the presentation or surrender of this Certificate or the
making of any notation thereon (except for the final distribution in respect of
this Certificate), except that with respect to Series 1997-1 Certificates
registered in the name of a Depository, including Cede & Co., the nominee for
The Depository Trust Company, distributions will be made in immediately
available funds. Final payment of this Certificate will be made only upon
presentation and surrender of this Certificate at the office or agency
specified in the notice of final distribution delivered by the Master Trust
Trustee to the Certificateholder in accordance with the Pooling and Servicing
Agreement.
This Certificate does not represent an obligation of, or an
interest in, the Seller, the Servicer, or any affiliate of any of them and is
not insured or guaranteed by any governmental agency or instrumentality. This
Certificate is limited in right of payment to certain Collections with respect
to the Class A-5 Investor Certificate or the Dealer Notes, as the case may be,
and certain other amounts, all as more specifically set forth herein and in the
Pooling and Servicing Agreement.
The Pooling and Servicing Agreement may be amended from time
to time (including in connection with the issuance of a Supplemental
Certificate) by the Servicer, the Seller and the Master Trust Trustee, without
the consent of any of the Series 1997-1 Certificateholders, so long as any such
action shall not, as evidenced by an Opinion of Counsel, adversely affect in
any material respect the interests of the Series 1997-1 Certificateholders or
the certificateholders of any other outstanding Series. The Master Trust
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Master Trust Trustee's rights, duties or immunities under the
Pooling and Servicing Agreement or otherwise.
-5-
<PAGE> 6
The Pooling and Servicing Agreement may also be amended from
time to time (including in connection with the issuance of a Supplemental
Certificate) by the Servicer, the Seller and the Master Trust Trustee with the
consent of the Holders of Investor Certificates evidencing not less than
66-2/3% of the aggregate unpaid principal amount of the Investor Certificates
of all 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 the
Investor Certificateholders; provided, however, that no such amendment to the
Pooling and Servicing Agreement shall (i) reduce in any manner the amount of or
delay the timing of distributions to be made to Investor Certificateholders or
deposits of amounts to be so distributed without the consent of such each
affected Investor Certificateholder; (ii) change the definition or the manner
of calculating the interest of any Investor Certificateholder or the amount
available under any Enhancement without the consent of each affected Investor
Certificateholder; (iii) reduce the percentage required to consent to any
amendment without the consent of each Investor Certificateholder; or (iv)
adversely affect the rating of any Series or Class by each Rating Agency
without the consent of the Holders of Investor Certificates of such Series or
Class evidencing not less than 66-2/3% of the aggregate unpaid principal amount
of the Investor Certificates of such Series or Class.
The Master Trust Trustee has the right, without the consent of
the Holders of any Investor Certificates, to vote, or to consent or withhold
consent with respect to, Class A-5 Certificate and any 1990 Trust Investor
Certificate issued to the Master Trust on any matter for which votes or
consents are solicited under the 1990 Trust Agreement, provided that such
action will not, as evidenced by an officer's certificate of the Servicer, have
a material adverse effect on the Holders of any Investor Certificates. The
Master Trust Trustee also has the right, with the consent of the Holders of the
Applicable Voting Percentage of the Holders of the Investor Certificates, to
vote, or to consent or withhold consent, with respect to the Class A-5
Certificate and any other 1990 Trust Investor Certificate issued to the Master
Trust on any matter for which votes or consents are solicited under the 1990
Trust Agreement. "Applicable Voting Percentage" means, with respect to any
matter for which votes or consents are solicited under the 1990 Trust
Agreement, the percentage of votes or consents of the 1990 Trust Investor
Certificates needed to pass the proposed matter.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth, the transfer of this Certificate is
registrable in the Certificate Register of the Master Trust Trustee upon
surrender of this Certificate for registration of transfer at the office or
agency maintained by the Master Trust Trustee in New York, New York,
accompanied by a written instrument of transfer in form satisfactory to the
Master Trust Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized, and thereupon one or more new Series 1997-1
Certificates of authorized denominations evidencing the same aggregate
fractional undivided interest will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates
without coupons in denominations specified in the Pooling and Servicing
Agreement.
As provided in the Pooling and Servicing Agreement and subject
to certain limitations therein set forth, Series 1997-1 Certificates are
exchangeable for new Series 1997-1 Certificates evidencing like aggregate
fractional undivided interests as requested by the Certificateholder
surrendering such Certificates. No service charge may be imposed for any such
-6-
<PAGE> 7
exchange but the Master Trust Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
The Servicer, the Master Trust Trustee, the Transfer Agent and
any agent of any of them, may treat the Person in whose name this Certificate
is registered as the owner hereof for all purposes, and neither the Servicer
nor the Master Trust Trustee, the Transfer Agent, nor any agent of any of them,
shall be affected by notice to the contrary except in certain circumstances
described in the Pooling and Servicing Agreement.
-7-
<PAGE> 8
ASSIGNMENT
Social Security or other identifying number of assignee
______________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
__________________________________________
(name and address of assignee)
the within certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints __________, attorney, to transfer said certificate on
the books kept for registration thereof, with full power of substitution in the
premises.
Dated: 1
------------------- ------------------------
Signature Guaranteed:
-------------------------
- --------------------
1 NOTE: The signature of this assignment must correspond with the name of
the registered owner as it appears on the reverse of the within Certificate in
every particular, without alteration, enlargement or any change whatsoever.
-8-
<PAGE> 1
EXHIBIT 4.11
AMENDMENT NO. 1 TO THE
POOLING AND SERVICING AGREEMENT
THIS AMENDMENT NO. 1 (this "Amendment") is made as of September __, 1995,
by and among Navistar Financial Securities Corporation, a Delaware corporation
("NFSC"), Navistar Financial Corporation, a Delaware corporation ("NFC"), and
The Bank of New York, as Master Trust Trustee (the "Master Trust Trustee").
NFSC, as Seller, NFC, as Servicer, Chemical Bank, as 1990 Trust Trustee,
and the Master Trust Trustee are parties to a Pooling and Servicing Agreement,
dated as of June 8, 1995 (the "Pooling and Servicing Agreement"). In order to
clarify that the Seller maintains an interest in the Master Trust prior to the
1990 Trust Termination Date and pursuant to Section 13.01(a) of the Pooling and
Servicing Agreement, the Seller, the Servicer and the Master Trust Trustee have
agreed to amend the Pooling and Servicing Agreement in the manner set forth
herein. Capitalized terms used herein but not otherwise defined have the
meanings set forth in the Pooling and Servicing Agreement.
1. Amendment. The definition of "Master Trust Seller's Interest"
in Section 1.01 of the Pooling and Servicing Agreement is hereby amended and
restated to read in its entirety as follows:
"Master Trust Seller's Interest" shall mean, with respect to
any Business Day prior to the 1990 Trust Termination Date, the
interest of the Seller in the Master Trust, and with respect to any
Business Day after the 1990 Trust Termination Date, shall equal
the aggregate principal amount of Dealer Notes, plus the aggregate
amount of funds on deposit in the Excess Funding Account, plus the
aggregate amount of funds on deposit in all Series Principal
Accounts (and funds being held for deposit therein), each as of
such Business Day, minus the Trust Invested Amount on such Business
Day (or as of the Distribution Date on or immediately preceding
such Business Day).
2. Miscellaneous. This Amendment shall be construed in
accordance with the internal laws of the State of Illinois, without reference
to its conflict of law provisions, except that the obligations, rights and
remedies of the Master Trust Trustee shall be determined in accordance with the
internal laws of the State of New York, without regard to conflict of law
provisions. This Amendment may be executed in two or more counterparts, each
of which shall be an original, but all of which together constitute one and the
same instrument. The provisions of this Amendment shall be deemed to be
incorporated in, and made a part of, the Pooling and Servicing Agreement; and
the Pooling and Servicing Agreement, as amended by this Amendment, shall be
read, taken and construed as one and the same instrument. Promptly after the
execution of this Amendment the Master Trust Trustee shall furnish written
notification of the substance of this Amendment to each Investor
Certificateholder.
* * *
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
the Pooling and Servicing Agreement to be duly executed by their respective
officers as of the date first written above.
NAVISTAR FINANCIAL SECURITIES CORPORATION
as Seller
By:
--------------------------------------
Its:
--------------------------------------
NAVISTAR FINANCIAL CORPORATION
as Servicer
By:
--------------------------------------
Its:
--------------------------------------
THE BANK OF NEW YORK
as Master Trust Trustee
By:
--------------------------------------
Its:
--------------------------------------
2
<PAGE> 1
EXHIBIT 4.12
AMENDMENT NO. 2 TO THE
POOLING AND SERVICING AGREEMENT
THIS AMENDMENT NO. 2 (this "Amendment") is made as of March __, 1996, by
and among Navistar Financial Securities Corporation, a Delaware corporation
("NFSC"), Navistar Financial Corporation, a Delaware corporation ("NFC"), and
The Bank of New York, as Master Trust Trustee (the "Master Trust Trustee").
NFSC, as Seller, NFC, as Servicer, Chemical Bank, as 1990 Trust Trustee,
and the Master Trust Trustee are parties to a Pooling and Servicing Agreement,
dated as of June 8, 1995, and amended by Amendment No. 1 dated as of September
12, 1995 (as amended, the "Pooling and Servicing Agreement"). In order to (i)
include with the definition of an Eligible Dealer Note a Dealer Note which
finances any used medium or heavy-duty truck, bus or trailer, (ii) ensure that
the Master Trust Trustee has sufficient funds to pay Monthly Interest to the
Series 1995-1 Certificateholders and (iii) provide a mechanism for funds owing
to the Seller to be paid to the Seller, the Seller, the Servicer and the Master
Trust Trustee have agreed to amend the Pooling and Servicing Agreement in the
manner set forth herein. Capitalized terms used herein but not otherwise
defined have the meanings set forth in the Pooling and Servicing Agreement.
1. Amendment to Section 1.01. Section 1.01 of the Pooling and Servicing
Agreement is hereby amended as follows:
1.1 The following definition is added immediately after the
definition of "1990 Trust Agreement":
"1990 Trust Excess Servicing Amounts" means the amounts
specified in Sections 4.03(d)(i)(D), 4.03(d)(i)(F), 4.03(e)(i)(D)
and 4.03(e)(i)(J) of the 1990 Trust Agreement as payable to the
Seller, the rights to receive such amounts having been conveyed to
the Master Trust pursuant to Section 2.01 of this Agreement.
1.2 Clause (v) of the definition of "Eligible Dealer Note" is
deleted in its entirety and replaced with the following:
"(v) which finances a new medium or heavy-duty truck, bus or
trailer produced by or for a member of the Navistar Group or an OEM
Supplier or a used medium or heavy-duty truck, bus or trailer."
2. Section 4.07. The following new Section 4.07 is added to the Pooling
and Servicing Agreement:
"SECTION 4.07 Payments to Seller. Except as otherwise provided in
this Agreement or any Supplement, all payments required to be made to the
Seller or the holder of the 1990 Trust Seller's Certificate pursuant to
the 1990 Trust Agreement
<PAGE> 2
(the right to receive such payments having been conveyed to the Master
Trust pursuant to Section 2.01 of this Agreement) shall be paid to the
Seller at the times specified in the 1990 Trust Agreement."
3. Miscellaneous. This Amendment shall be construed in accordance with
the internal laws of the State of Illinois, without reference to its conflict
of law provisions, except that the obligations, rights and remedies of the
Master Trust Trustee shall be determined in accordance with the internal laws
of the State of New York, without regard to conflict of law provisions. This
Amendment may be executed in two or more counterparts, each of which shall be
an original, but all of which together constitute one and the same instrument.
The provisions of this Amendment shall be deemed to be incorporated in, and
made a part of, the Pooling and Servicing Agreement; and the Pooling and
Servicing Agreement, as amended by this Amendment, shall be read, taken and
construed as one and the same instrument. Promptly after the execution of this
Amendment the Master Trust Trustee shall furnish written notification of the
substance of this Amendment to each Investor Certificateholder.
* * *
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
the Pooling and Servicing Agreement to be duly executed by their respective
officers as of the date first written above.
NAVISTAR FINANCIAL SECURITIES
CORPORATION
as Seller
By:
--------------------------------------
Its:
--------------------------------------
NAVISTAR FINANCIAL CORPORATION
as Servicer
By:
--------------------------------------
Its:
--------------------------------------
THE BANK OF NEW YORK
as Master Trust Trustee
By:
--------------------------------------
Its:
--------------------------------------
3
<PAGE> 1
EXHIBIT 5.1
KIRKLAND & ELLIS
Partnerships Including Professional Corporations
200 East Randolph Drive
Chicago, Illinois 60601
312-861-2000
July 18, 1997
Navistar Financial Securities Corporation
2850 West Golf Road
Rolling Meadows, IL 60008
Re: Navistar Financial Securities Corporation
Navistar Financial Dealer Note Master Trust
Registration Statement No. 333-30737
We have acted as special counsel to Navistar Financial Securities
Corporation, a Delaware corporation (the "Company"), in connection with the
above-mentioned Registration Statement on Form S-3 filed with the Securities
and Exchange Commission (together with the exhibits and amendments thereto, the
"Registration Statement") in connection with the registration by the Company of
certain Dealer Note Asset Backed Certificates (the "Certificates") to be sold
from time to time in one or more series in amounts to be determined at the time
of sale and to be set forth in one or more Supplements (each, a "Prospectus
Supplement") to the Prospectus (the "Prospectus") included in the Registration
Statement.
As described in the Registration Statement, the Certificates will be
issued by Navistar Financial Dealer Note Master Trust (the "Master Trust").
The Master Trust was formed by the Company pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of June 8, 1995, as
amended, by and among the Company, Navistar Financial Corporation, a Delaware
corporation, as Servicer, The Chase Manhattan Bank, as Trustee of the Navistar
Financial Dealer Note Trust 1990, and The Bank of New York, as Master Trust
Trustee. Each series of Certificates will be issued pursuant to a supplement
to the Pooling and Servicing Agreement (a "Series Supplement").
In arriving at the opinion expressed below, among other things, we have
examined and relied, to the extent we deem proper, on (i) the Pooling and
Servicing Agreement (including the form of Certificates included as an exhibit
thereto), (ii) the form of the Series Supplement and (iii) the form of the
Underwriting Agreement to be executed by the Company and the representative of
the several underwriters (the "Underwriters") to be parties thereto (the
"Underwriting Agreement").
Subject to the assumptions, qualifications, and limitations identified
in this letter, and assuming the aforementioned documents are duly executed and
delivered in substantially the form
<PAGE> 2
Navistar Financial Securities Corporation
July 18, 1997
Page 2
we have examined, we hereby advise you that in our opinion after the Requisite
Preliminary Actions identified below have been taken, the Certificates will
have been validly issued and will be fully paid and non-assessable.
The term "Requisite Preliminary Actions" means: (i) the approval by the
Company's Board of Directors of resolutions authorizing the Company to execute
and deliver the Underwriting Agreement, to take the actions necessary to obtain
issuance of the Certificates under the Pooling and Servicing Agreement and to
sell the Certificates in accordance with the terms of the Underwriting
Agreement and to take the other actions contemplated by the Pooling and
Servicing Agreement and the Underwriting Agreement; (ii) the issuance by any
committee, group or executive of such authorization as may be required by the
resolutions contemplated in clause (i) as requisite to any of the actions cited
in clause (i); and (iii) the sale of the Certificates by the Company in
accordance with the terms of the Underwriting Agreement and the payment to the
Company of the consideration for the Certificates prescribed by the
Underwriting Agreement.
For purposes of this letter, once the Underwriters have paid for the
Certificates pursuant to the Underwriting Agreement, the Certificates will be
considered "fully paid and nonassessable."
Our advice on every legal issue addressed in this letter is based
exclusively on the internal law of the State of Illinois. We advise you that
issues addressed by this letter may be governed in whole or in part by other
laws, but we express no opinion as to whether any relevant difference exists
between the laws upon which our opinions are based and any other laws which may
actually govern. For purposes of our opinions we have assumed without
independent investigation the factual information supplied to us for purposes
of our opinions is complete and accurate.
We consent to the filing of both this letter and the letter filed as
Exhibit 8.1 of the Registration Statement as exhibits to the Registration
Statement and to the reference to this firm under the caption titled "Legal
Matters" in the prospectus which is part of the Registration Statement. In
giving this consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
KIRKLAND & ELLIS
<PAGE> 1
EXHIBIT 8.1
KIRKLAND & ELLIS
Partnerships Including Professional Corporations
200 East Randolph Drive
Chicago, Illinois 60601
312-861-2000
July 18, 1997
Navistar Financial Securities Corporation
2850 West Golf Road
Rolling Meadows, Illinois 60008
Re: Navistar Financial Securities Corporation
Navistar Financial Dealer Note Master Trust
Registration Statement No. 333-30737
We have acted as special counsel to Navistar Financial Securities
Corporation, a Delaware corporation (the "Company"), in connection with the
above-mentioned Registration Statement on Form S-3 filed with the Securities
and Exchange Commission (together with the exhibits and amendments thereto, the
"Registration Statement") in connection with the registration by the Company of
certain Dealer Note Asset Backed Certificates (the "Certificates") to be sold
from time to time in one or more series in amounts to be determined at the time
of sale and to be set forth in one or more Supplements (each, a "Prospectus
Supplement") to the Prospectus (the "Prospectus") included in the Registration
Statement.
As described in the Registration Statement, the Certificates will be
issued by Navistar Financial Dealer Note Master Trust (the "Master Trust").
The Master Trust was formed by the Company pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of June 8, 1995, as
amended, by and among the Company, Navistar Financial Corporation, a Delaware
corporation, as Servicer, The Chase Manhattan Bank, as Trustee of the Navistar
Financial Dealer Note Trust 1990, and The Bank of New York, as Master Trust
Trustee. Each series of Certificates will be issued pursuant to a supplement
to the Pooling and Servicing Agreement (a "Series Supplement").
In arriving at the opinion expressed below, among other things, we have
examined and relied, to the extent we deem proper, on (i) the Registration
Statement, (ii) in each case as filed as an exhibit to the Registration
Statement, (a) the form of Underwriting Agreement, (b) the Pooling and Servicing
Agreement and (c) the form of Series Supplement, and (iii) copies of such
other documents as we have deemed necessary for the expression of the opinion
contained herein.
We have examined and relied, with your permission, as to factual
matters upon the representations and warranties contained in or made pursuant
to the documents referred to above and upon the originals or copies certified or
otherwise identified to our satisfaction of all such corporate
<PAGE> 2
Navistar Financial Securities Corporation
July 18, 1997
Page 2
records of the Company and such other instruments and certificates of public
officials, officers and representatives of the Company and other persons, and
we have made such investigations of law as we have deemed appropriate. In such
examination, we have assumed, with your permission, the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies, and the authenticity of the originals of
all documents submitted to us as copies. With your permission, we have further
assumed the genuineness of the signatures of persons signing all documents and
instruments and the authority of such persons signing on behalf of the parties
thereto.
In rendering our opinion, we have also considered and relied upon the
Internal Revenue Code of 1986, as amended (the "Code"), administrative rulings,
judicial decisions, regulations, and such other authorities (including Treasury
regulations) as we have deemed appropriate, all as in effect on the date hereof
and all which are subject to change or different interpretation. However, we
will not seek a tax ruling from the Internal Revenue Service (the "IRS") with
respect to any of the matters discussed herein. Moreover, the statutory
provisions, regulations, interpretations and other authorities upon which our
opinion is based are subject to change, and such changes could apply
retroactively. In addition, there can be no assurance that positions contrary
to those stated in our opinion will not be taken by the IRS. Our opinion is in
no way binding on the IRS or any court, and it is possible that the IRS or a
court could, when presented with these facts, reach a different conclusion.
Based on the foregoing, and assuming the aforementioned documents are
duly executed and delivered in substantially the form we have examined, we are
of the opinion that the statements in the Prospectus under the heading "Federal
Income Tax Matters," to the extent that they constitute matters of law or legal
conclusions with respect thereto, have been prepared or reviewed by us and are
correct in all material respects.
Except for the opinion expressed above, we express no opinion as to any
other tax consequences of the transaction to any part under federal, state,
local, or foreign laws. In addition, we express no opinion as to the laws of
any jurisdiction other than the federal laws of the United States of America
to the extent specifically referred to herein.
Very truly yours,
KIRKLAND & ELLIS
