<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 2000
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 Identification No.)
incorporation or organization)
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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 (Name, address, including zip code, and telephone
executive offices) number, including area code, of agent for service)
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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>
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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>
<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
Dealer Note Master Trust Asset Backed
Certificates.......................... $1,000,000 100% $1,000,000 $264
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
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.
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<PAGE> 2
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE
AND MAY BE CHANGED. WE MAY NOT SELL THE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE
SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 21, 2000
NAVISTAR FINANCIAL DEALER NOTE MASTER TRUST
$ CLASS A FLOATING RATE DEALER NOTE ASSET BACKED CERTIFICATES, SERIES
2000-2
NAVISTAR FINANCIAL SECURITIES CORPORATION
SELLER
NAVISTAR FINANCIAL CORPORATION
SERVICER
<TABLE>
<S> <C>
BEFORE YOU PURCHASE ANY OF THE GENERAL:
CERTIFICATES, YOU SHOULD CONSIDER - The trust assets include wholesale dealer notes
CAREFULLY THE RISK FACTORS BEGINNING generated from time to time in a portfolio of revolving
ON PAGE S-4 IN THIS PROSPECTUS financing arrangements with truck dealers to finance
SUPPLEMENT AND PAGE IN THE their truck inventory. The trust's main source of
PROSPECTUS. funds for making payments on the series 2000-2
certificates is collections on the wholesale dealer
The sole source of payments of the notes.
payments of the certificates is the
assets of the trust. The certificates - Interest on the series 2000-2 certificates will
are not interests in or obligations accrue at a floating rate of LIBOR plus % per
of Navistar Financial Securities annum. Interest will be payable on the 25th of each
Corporation, Navistar Financial month, unless the 25th is not a business day, in
Corporation, or any other person or which case the payment will be made on the following
entity. business day. The first payment will be on
, 2000.
This prospectus supplement may be
used to offer and sell the - Principal of the series 2000-2 certificates is
certificates only if accompanied by expected to be paid on , 200 .
the prospectus.
- The seller's interest in the trust will be
subordinated to the rights of the holders of the series
2000-2 certificates to the limited extent described
in this prospectus supplement.
</TABLE>
The underwriter will purchase the series 2000-2 certificates. The
underwriter will offer the series 2000-2 certificates to the public at varying
prices. The underwriter will pay to the seller % of the principal amount of
the series 2000-2 certificates, plus accrued interest from , 2000. The
seller's expenses of the offering are estimated to be $ ,000.
We expect that delivery of the series 2000-2 certificates will be made
available, in book-entry form only, through the facilities of The Depository
Trust Company, Clearstream Banking, S.A. or the Euroclear System on or about
, 2000.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Underwriters of the Class A Certificates
The date of this prospectus supplement is
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................ S-1
The Parties.......................... S-1
The Certificates..................... S-1
Priority of Payments................. S-2
Credit Enhancement................... S-2
Trust Property....................... S-2
Servicing Fees....................... S-2
Tax Status........................... S-3
ERISA Considerations................. S-3
Ratings.............................. S-3
Mailing Address and Telephone Number
of Principal Executive Offices.... S-3
Risk Factors........................... S-4
Dependence on other series' allocated
principal collections may result
in late payment of series 2000-2
certificate....................... S-4
Use of Proceeds........................ S-5
The Dealer Notes....................... S-5
General.............................. S-5
Loss Experience...................... S-6
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Delinquencies........................ S-7
Aging Experience..................... S-8
Cyclicality.......................... S-8
Geographic Distribution.............. S-9
Seasonality.......................... S-9
Liquidations......................... S-10
Monthly Payment Rates................ S-10
Description of the Series 2000-2
Certificates......................... S-11
Trustee.............................. S-11
Terms and Conditions................. S-11
Ratings of the Certificates.......... S-14
Early Amortization Events............ S-14
Other Series Issued by the Trust....... S-16
Subordination of Seller's Interest... S-17
Issuance of Additional Classes of
Certificates...................... S-17
Plan of Distribution................... S-18
Legal Matters.......................... S-18
</TABLE>
<PAGE> 4
WHERE TO FIND INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
We provide information to you about the certificates in two separate
documents that provide varying levels of detail:
(1) the prospectus, which provides general information, some of which
may not apply to your series; and
(2) this prospectus supplement, which provides information regarding
the pool of receivables held by the trust and specifies the terms of your
series.
IF THE TERMS OF YOUR SERIES VARY BETWEEN THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in the prospectus and this
prospectus supplement. We have not authorized anyone to provide you with other
or different information. You should not assume that the information in the
prospectus and this prospectus supplement is accurate on any date other than the
dates stated on their respective covers.
We are not offering the certificates in any state where the offer is not
permitted.
Capitalized terms used in this prospectus supplement are defined either in
this prospectus supplement or in the prospectus. You can find definitions of
frequently used terms and a listing of pages where terms are defined in the
Glossary at the end of the prospectus.
---------------------------
<PAGE> 5
SUMMARY
This summary highlights selected information from this prospectus
supplement and provides an overview to aid in your understanding of the
certificates. It does not contain all of the information that you need to
consider in making your investment decision. To understand the terms of this
offering of the certificates, carefully read this entire prospectus supplement
and the accompanying prospectus.
THE PARTIES
ISSUER
Navistar Financial Dealer Note Master Trust
SELLER
Navistar Financial Securities Corporation, a wholly-owned subsidiary of
Navistar Financial Corporation
SERVICER
Navistar Financial Corporation
TRUSTEE
The Bank of New York
THE CERTIFICATES
The trust will issue one class of certificates.
The sole source of payments on the certificates is the assets of the trust.
The certificates are not interests in, obligations of or insured or guaranteed
by Navistar Financial Corporation, Navistar Financial Securities Corporation or
any other person or entity.
CLOSING DATE
, 2000
DISTRIBUTION DATES
Distributions on the certificates will generally be made monthly on the
25th day of each month, starting , 2000. If the 25th day is not a
business day, the distribution will be made on the next business day.
INTEREST PAYMENTS
The interest rate for the certificates will be LIBOR plus %.
Interest on the certificates will be calculated on the basis of the actual
number of days in the applicable interest period divided by 360.
PRINCIPAL PAYMENTS
The entire principal balance of the certificates is expected to be paid on
, 200 . However, special circumstances could cause principal to be
paid earlier or later or in reduced amounts. See "Risk Factors" in this
prospectus supplement and the prospectus.
REVOLVING PERIOD
The series 2000-2 certificates will have a revolving period that will begin
at the close of business on the closing date and end when the accumulation
period for the series 2000-2 certificates begins. The revolving period will also
end if an early amortization period begins.
ACCUMULATION PERIOD
The series 2000-2 certificates will have an accumulation period, unless an
early amortization period begins before the start of the accumulation period.
The accumulation period will be a period of one to months long. No
principal payments will be made on the series 2000-2 certificates during the
accumulation period.
EARLY AMORTIZATION PERIOD
The series 2000-2 certificates may have an early amortization period if an
early amortization event occurs and is not cured. See "Description of the
Offered Certificates -- Early Amortization Events" in the prospectus and
"Description of the 2000-2 Certificates -- Early Amortization Events" in this
prospectus supplement for a description of the events that might cause an early
amortization period to begin. During an early amortization period, principal
payments will be made on the series 2000-2 certificates to the extent of funds
available for that purpose.
S-1
<PAGE> 6
PRIORITY OF PAYMENTS
On each distribution date, the trust will allocate to the series 2000-2
certificates finance charge collections on the dealer notes received during the
prior calendar month and limited funds transferred by International Truck and
Engine Corp. The Trust will combine these funds with any funds transferred from
the spread account and will generally distribute the funds in the following
order of priority:
- - servicing fees to the servicer
- - interest on the series 2000-2 certificates
- - amounts to reimburse losses and charge-offs on the dealer notes
- - to the spread account, the amount, if any, necessary to fund the spread
account up to its required amount
- - to pay any shortfalls in interest due to certificateholders of other series
- - the remainder to the seller
CREDIT ENHANCEMENT
Credit enhancement provides protection for the certificates against losses
and delays in payments on the dealer notes.
SPREAD ACCOUNT
On the closing date an amount of cash or eligible investments equal to
$ will be deposited into a spread account.
The amount in the spread account will be adjusted to a specified amount on
each distribution date. Amounts in the spread account on any distribution date
in excess of the specified amount for that distribution date will be paid to the
seller. The amount required to be on deposit in the spread account on each
distribution date is based upon the projected spread. The projected spread is
the difference between the interest rate that the trust earns on the dealer
notes and the interest rate that the trust pays on the certificates.
The trustee will withdraw funds from the spread account on the day
preceding each distribution date to the extent that the funds of the trust
otherwise available to pay interest on the certificates (after payment of the
servicing fees) are less than amounts payable on the certificates. The trustee
will then disburse these funds according to the priority of distributions
described under the caption "Priority of Payments" above.
SUBORDINATION OF THE SELLER'S INTEREST
The seller's interest in the dealer notes will be subordinated to the
rights of the series 2000-2 certificateholders to the extent described in this
prospectus supplement and the prospectus. Collections on dealer notes that would
otherwise be allocated to the seller may be used to pay interest on the series
2000-2 certificates, but only to the extent of the available subordinated
amount.
The available subordinated amount will initially be % of the aggregate
principal balance of the series 2000-2 certificates. The available subordinated
amount will decline as funds allocable to the seller are used to pay interest on
the series 2000-2 certificates or absorb dealer note losses allocable to the
series 2000-2 certificates.
TRUST PROPERTY
The primary assets of the trust will be a pool of wholesale loans evidenced
by dealer notes. The dealer notes are secured by new and used medium or heavy
duty trucks, buses or trailers. The dealer notes had an aggregate principal
balance of $ as of , 2000.
The assets of the trust will also include:
- - security interests in the vehicles financed by the dealer notes and the
proceeds of repossessed vehicles
- - amounts held on deposit in specified bank accounts, including the spread
account
- - any proceeds from claims on vehicle insurance policies, and
- - specified rights of the seller under the purchase agreement under which
Navistar Financial Securities Corporation acquired the dealer notes.
SERVICING FEES
Navistar Financial Corporation will service the dealer notes. The trust
will pay the servicer a monthly servicing fee of one-twelfth of 1% of the
principal balance of the dealer notes as compensation for servicing the dealer
notes. The servicer will also be entitled to retain any late fees,
S-2
<PAGE> 7
prepayment charges and other similar fees and charges collected during the prior
month.
TAX STATUS
Kirkland & Ellis, special tax counsel, is of the opinion that for federal
income tax purposes, the certificates will be characterized as indebtedness and
the trust will not be characterized as an association (or publicly traded
partnership) taxable as a corporation.
By accepting a certificate, you will agree to treat the certificates as
indebtedness for federal, state and local income and franchise tax purposes.
See "Federal Income Tax Consequences" and "State and Local Tax
Consequences" in the prospectus concerning the application of federal, state and
local tax laws.
ERISA CONSIDERATIONS
An employee benefit plan subject to the Employee Retirement Income Security
Act of 1974 might be prohibited from investing in the certificates. See "ERISA
Considerations" in the prospectus for a description of the limitations on
purchases of the certificates by employee benefit plans.
RATINGS
The certificates will be issued only if they are rated in the highest
rating category for long-term debt obligations by at least one nationally
recognized rating agency
If circumstances change, a rating agency may change its rating of the
certificates. If a rating agency lowers its rating of the certificates, no one
is obligated to provide additional credit enhancement or to restore the original
rating.
MAILING ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES
The mailing address of Navistar Financial Corporation is 2850 West Golf
Road, Rolling Meadows, Illinois, 60008, telephone (847) 734-4000. The mailing
address of Navistar Financial Securities Corporation is 2850 West Golf Road,
Rolling Meadows, Illinois, 60008, telephone (847) 734-4000. The principal office
of the trust is in New York, in care of Bank of New York, as trustee, 101
Barclay Street Floor 12-E, New York, New York, 10286.
S-3
<PAGE> 8
RISK FACTORS
In addition to the risk factors on page of the prospectus, you should
consider the following risk factors in deciding whether to purchase the
certificates.
DEPENDENCE ON OTHER SERIES'
ALLOCATED PRINCIPAL
COLLECTIONS
MAY RESULT IN LATE PAYMENT
OF
SERIES 2000-2 CERTIFICATE
PRINCIPAL The shorter the accumulation period for the series
2000-2 certificates, the greater the chance that
payment in full of the series 2000-2 certificates
on the expected principal payment date will depend
on principal collections initially allocated to
another series of certificates being available to
make principal payments on the series 2000-2
certificates.
A series of certificates from which principal
collections were expected to be available to make
payments on the series 2000-2 certificates may
enter an early amortization period or investment
period after the beginning of the accumulation
period for the series 2000-2 certificates. If that
were to occur, excess principal collection from
that series that otherwise would have been
available to the series 2000-2 certificates would
not be available. As a result, the final payment of
principal of the series 2000-2 certificates may be
later than the expected principal payment date. On
written request, the seller will give series 2000-2
certificateholders disclosure documents relating to
any other outstanding series of certificates. Those
documents describe the events which could result in
the start of an early amortization period or
investment period for those series.
See "The Navistar Financial Dealer Floor Plan
Financing Business" in the prospectus and
"Description of the Series 2000-2 Certificates --
Early Amortization Events" in this prospectus
supplement for more information about the timing of
payments on the series 2000-2 certificates.
S-4
<PAGE> 9
[USE OF PROCEEDS
------------------ .]
THE DEALER NOTES
GENERAL
Dealer notes that are conveyed to the trust consist of all wholesale notes
issued by dealers that are identified by the servicer as meeting the eligibility
criteria for dealer notes. In order to be eligible, each dealer note must be
issued pursuant to Navistar Financial's credit guidelines and meet other
criteria provided in the Purchase 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 $ billion.
The following tables provide general statistics regarding the total
portfolio of wholesale notes serviced by Navistar Financial for the periods
ended on the dates specified. We call this portfolio the Wholesale Portfolio. As
of the closing date, the dealer notes which are expected to be held in the trust
will represent approximately 95% of the Wholesale Portfolio. However, we cannot
assure that the dealer notes which are held in the trust will continue to
constitute such a significant portion of the Wholesale Portfolio. We cannot
assure that the experience of the dealer notes in the future will be similar to
the historical experience described in the tables below.
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-5
<PAGE> 10
LOSS EXPERIENCE
The following table provides the loss experience on the Wholesale Portfolio
for the periods indicated:
LOSS EXPERIENCE FOR THE WHOLESALE PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
ANNUALIZED
NET LOSSES AVERAGE
(RECOVERIES)/ MATURITY
AVERAGE AVERAGE (DAYS IN
NET DEALER NOTE LIQUIDATIONS NET LOSSES DEALER NOTE DEALER NOTES YEAR/
FISCAL YEAR-TO-DATE PERIOD LOSSES OF DEALER (RECOVERIES)/ PRINCIPAL PRINCIPAL ANNUALIZED ANNUALIZED
ENDING LAST DAY OF (RECOVERIES) NOTES LIQUIDATIONS BALANCE BALANCE TURNOVER TURNOVER)
- -------------------------- --------------- ------------ ------------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal Year 1999
January................ $(0.1) $ 934.0 (0.01)% $1,103.4 (0.05)% 3.39x 107.7
April.................. (0.1) 1,940.6 (0.01) 1,116.9 (0.03) 3.47x 105.2
July................... (0.2) 2,961.1 (0.01) 1,125.7 (0.02) 3.51x 104.0
October................ (0.2) 4,002.6 0.00 1,111.2 (0.02) 3.60x 101.4
Fiscal Year 1998
January................ (0.1) 725.3 (0.01) 716.7 (0.06) 4.05x 90.1
April.................. (0.3) 1,557.0 (0.02) 775.4 (0.08) 4.02x 90.8
July................... (0.3) 2,486.3 (0.01) 818.3 (0.05) 4.05x 90.1
October................ (0.3) 3,464.8 (0.01) 837.9 (0.04) 4.14x 88.2
Fiscal Year 1997
January................ 0.0 599.7 0.00 690.2 0.00 3.48x 105.2
April.................. (0.1) 1,232.1 (0.01) 683.2 (0.03) 3.61x 101.4
July................... (0.1) 1,945.5 (0.01) 682.3 (0.02) 3.80x 96.1
October................ (0.2) 2,767.8 (0.01) 674.9 (0.03) 4.10x 89.0
Fiscal Year 1996
January................ 0.1 721.6 0.01 913.0 0.04 3.16x 115.5
April.................. 0.0 1,436.2 0.00 920.3 0.00 3.12x 117.0
July................... 0.0 2,139.8 0.00 906.5 0.00 3.15x 116.2
October................ (0.2) 2,874.4 (0.01) 859.7 (0.02) 3.34x 109.3
Fiscal Year 1995
January................ (0.1) 618.6 (0.01) 597.5 (0.07) 4.14x 88.2
April.................. (0.1) 1,237.5 (0.01) 643.9 (0.03) 3.84x 95.1
July................... (0.3) 1,963.3 (0.02) 689.7 (0.06) 3.80x 96.3
October................ (0.9) 2,712.4 (0.03) 706.0 (0.13) 3.84x 95.1
</TABLE>
Note that "Net Dealer Note Losses (Recoveries)" 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 that 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 that fiscal year; and so on.
The "Average Dealer Note Principal Balance" is calculated as the
year-to-date average of the daily outstanding Dealer Note Principal Balance.
The "Net Losses (Recoveries)" for a fiscal quarter used in the numerator of
the column headed "Net Losses (Recoveries)/Liquidations" 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 (Recoveries) for that fiscal quarter multiplied by four; for
April 30 equals the cumulative Net Dealer Note Losses (Recoveries) for the six
months ended on that date multiplied by two; for July 31 equals the cumulative
Net Dealer Note Losses (Recoveries) for the nine months ended on that date
multiplied by 4/3; and for October 31 equals the cumulative Net Dealer Note
Losses (Recoveries).
Turnover is calculated as the annualized Liquidations of Dealer Notes for
each fiscal period, annualized in the same manner described above for Net Losses
(Recoveries) and divided by Average Dealer Note Principal Balance.
Losses occur on wholesale notes when a dealer has been terminated under
circumstances in which the dealer has sold one or more financed vehicles to a
retail customer and has failed to remit the appropriate proceeds of that sale to
Navistar Financial. Losses also occur when used trucks financed at wholesale and
repossessed by Navistar Financial from a terminated dealer cannot be sold for
the balance due on the
S-6
<PAGE> 11
underlying wholesale note. By contrast, losses generally have not occurred when
new trucks financed by Navistar Financial are repossessed from terminated
dealers, because these new trucks are repurchased by the manufacturer,
International Truck and Engine, or by an OEM supplier for an amount equal to the
remaining principal balance on the underlying wholesale note. Navistar Financial
recognizes losses on wholesale notes at the time it deems these wholesale notes
to be uncollectible. This is generally at the time Navistar Financial has
exhausted all non-legal remedies.
The characteristics of the dealer notes held by the 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 pooling and servicing agreement for dealer notes serve to
screen out specified types of wholesale notes at their inception. For example,
wholesale notes from dealers who are on cash on delivery terms or who are
insolvent are ineligible, although dealer notes which have been or are
transferred to the trust will not become ineligible if the dealer is later put
on cash on delivery status or later becomes insolvent. We do not expect these
differences to affect adversely the performance of the dealer notes held by the
trust in comparison to the Wholesale Portfolio at that time.
DELINQUENCIES
The following table presents the aggregate amount of delinquent principal
payments -- those 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>
TOTAL PRINCIPAL AGGREGATE AMOUNT OF
AMOUNT OF DELINQUENT PRINCIPAL
DEALER NOTES PAYMENTS ON DEALER NOTES
LAST DAY OF OUTSTANDING (PAST DUE OVER 30 DAYS)
- ----------- --------------- ------------------------
<S> <C> <C> <C>
Fiscal Year 1999
January............................................... $1,099.9 $1.0 0.09%
April................................................. 1,150.1 1.1 0.09
July.................................................. 1,036.0 1.4 0.14
October............................................... 1,225.5 1.3 0.11
Fiscal Year 1998
January............................................... 758.2 2.1 0.28
April................................................. 892.0 1.1 0.13
July.................................................. 854.2 0.9 0.10
October............................................... 1,039.4 0.7 0.06
Fiscal Year 1997
January............................................... 651.3 1.4 0.22
April................................................. 670.2 2.1 0.31
July.................................................. 649.1 2.4 0.38
October............................................... 691.1 2.0 0.28
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
</TABLE>
S-7
<PAGE> 12
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>
OCTOBER 31
------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Days
1-180................................................... 85% 90% 90% 70% 84%
181-360................................................. 11 9 7 21 14
Over 360................................................ 4 1 3 9 2
--- --- --- --- ---
Total................................................. 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>
HIGHEST LOWEST AVERAGE OF
DURING YEAR ENDED MONTH-END MONTH-END MONTH-END
OCTOBER 31, AMOUNT AMOUNT AMOUNTS
- ----------------- --------- --------- ----------
<S> <C> <C> <C>
1999..................................................... $1,225 $1,034 $1,111
1998..................................................... 1,039 709 838
1997..................................................... 694 635 669
1996..................................................... 933 686 850
1995..................................................... 854 588 709
</TABLE>
S-8
<PAGE> 13
GEOGRAPHIC DISTRIBUTION
The following table provides the geographic distribution of the principal
amount of the Wholesale Portfolio as of October 31, 1999:
GEOGRAPHIC DISTRIBUTION OF THE WHOLESALE PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT WHOLESALE
STATE OUTSTANDING PORTFOLIO
- ----- ----------- -------------
<S> <C> <C>
Texas................ $ 109.6 8.94%
Illinois............. 100.4 8.19
California........... 60.1 4.91
Ohio................. 59.2 4.83
Pennsylvania......... 57.5 4.69
Minnesota............ 53.2 4.34
New York............. 52.7 4.30
Florida.............. 49.1 4.01
Indiana.............. 45.6 3.72
Tennessee............ 45.2 3.68
Georgia.............. 41.6 3.40
Wisconsin............ 39.3 3.20
Arkansas............. 38.2 3.11
Michigan............. 36.9 3.01
Virginia............. 32.8 2.68
Missouri............. 30.6 2.50
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT WHOLESALE
STATE OUTSTANDING PORTFOLIO
- ----- ----------- -------------
<S> <C> <C>
Alabama.............. $ 29.8 2.43%
Maryland............. 27.7 2.26
Iowa................. 24.5 2.00
North Carolina....... 23.3 1.90
Nebraska............. 22.9 1.87
Utah................. 18.5 1.51
Mississippi.......... 18.1 1.47
New Jersey........... 16.5 1.34
Massachusetts........ 15.8 1.29
Oklahoma............. 13.0 1.06
South Carolina....... 13.0 1.06
Kentucky............. 12.3 1.00
-------- ------
Subtotal........... 1,087.4 88.70
All others(1)........ 138.1 11.30
-------- ------
Total.............. 1,225.5 100.00%
</TABLE>
The row "All Others" includes the remaining 22 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>
MONTH 1999 1998 1997 1996 1995
- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
November...................................... $1,081 $ 689 $ 694 $ 876 $ 604
December...................................... 1,113 732 706 938 593
January....................................... 1,080 726 656 923 597
February...................................... 1,126 794 658 925 633
March......................................... 1,125 836 674 927 683
April......................................... 1,136 869 677 928 749
May........................................... 1,165 899 676 903 776
June.......................................... 1,155 926 686 898 814
July.......................................... 1,105 884 675 831 752
August........................................ 1,032 854 648 759 705
September..................................... 1,040 863 645 703 745
October....................................... 1,125 969 666 690 811
</TABLE>
S-9
<PAGE> 14
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 Eligible Investments rather than to be
used for acquisitions or assignments of dealer notes. See "Description of the
Offered Certificates -- Allocation of Collections" in the prospectus.
LIQUIDATIONS
The following table provides the liquidation history with respect to
Navistar Financial month-end balances outstanding and one-month liquidations of
dealer 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 1999
Balances............... 1,125 1,092 1,100 1,146 1,116 1,150 1,170 1,138 1,036 1,034 1,051 1,226
Liquidations........... 281 349 304 293 358 356 333 356 331 325 374 343
Fiscal Year 1998
Balances............... 713 709 758 819 852 892 915 920 854 835 902 1,039
Liquidations........... 216 250 260 240 299 293 285 325 319 332 312 334
Fiscal Year 1997
Balances............... 694 655 651 668 675 670 681 688 649 635 649 691
Liquidations........... 184 209 207 193 208 230 216 238 259 264 263 296
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
</TABLE>
MONTHLY PAYMENT RATES
The following table describes 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, these
figures are 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 that period.
HISTORICAL MONTHLY PAYMENT RATES
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Highest Month........................................... 35.6% 39.8% 42.8% 37.7% 36.2%
Lowest Month............................................ 25.0 29.3 26.5 24.0 26.8
Average for the Months in the Period.................... 29.9 33.9 34.6 28.2 31.4
</TABLE>
S-10
<PAGE> 15
DESCRIPTION OF THE SERIES 2000-2 CERTIFICATES
TRUSTEE
The Bank of New York is the trustee. Navistar Financial and its
affiliates -- other than the seller -- may enter into normal banking and trustee
relationships with The Bank of New York or any other bank that may become a
successor 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 2000-2 certificates are a series of offered certificates
described in the attached prospectus to be issued by the trust. In addition to
the terms and conditions described in this prospectus supplement, you should
refer to the prospectus for the terms and conditions of the series 2000-2
certificates. The prospectus includes a description of when principal and
interest distributions are to be made on, and settlement information provided
for, the series 2000-2 certificates. Also, see "Other Series Issued by the
Trust" for a description of other series issued by the trust which are
outstanding as of the date of this prospectus supplement.
<TABLE>
<S> <C>
Initial Invested Amount..................................... $ ,000,000
Expected Payment Date....................................... , 20
Subordinated Percentage..................................... %
Specified Accumulation Period Commencement Date............. , 20
Series Termination Date..................................... , 20
</TABLE>
There will be no Investment Events with respect to the series 2000-2
certificates and thus there will be no Investment Period, Investment Period
Commencement Date, Investment Period Short Fall Amount or Fully Funded Date. In
addition, there will be no Negative Carry Reserve Fund with respect to the
series 2000-2 certificates and thus there will be no Negative Carry Reserve Fund
Deposit Amount, Negative Carry Reserve Fund Required Amount or Negative Carry
Subordinated Amount.
"Accumulation Period Commencement Date" means 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 the outstanding series shall have entered into an Investment Period or an
Early Amortization Period.
"Accumulation Period Length" means 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.
"LIBOR" means the interest rate determined by the trustee in accordance
with the following provisions:
(1) 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 that LIBOR Determination Date.
These 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 of these
offered rates appear on the Reuters Screen LIBO Page, the rate for
that LIBOR Determination Date will be the arithmetic mean (rounded, if
necessary, to the nearest one
S-11
<PAGE> 16
hundred-thousandth of a percent) of these offered rates as determined by
the trustee. If fewer than two offered rates appear, LIBOR in for that
LIBOR Determination Date will be determined as if the parties had
specified the rate described in (2) below.
(2) On any LIBOR Determination Date on which fewer than two offered rates
appear on the Reuters Screen LIBO Page as specified in (1) 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 that LIBOR Determination
Date to prime banks in the London interbank market, having a one month
maturity, those deposits commencing on the second London business day
immediately following that 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 that market at that time. The trustee will
request the principal London office of each of those Reference Banks
to provide a quotation of its rate. If at least two of those
quotations are provided, LIBOR for that LIBOR Determination Date will
be the arithmetic mean (rounded, if necessary, to the nearest one
hundred-thousandth of a percent) of those quotations. If fewer than
two quotations are provided, LIBOR for that 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 trustee at approximately
11:00 A.M., New York City time, on that LIBOR Determination Date for
loans in United States Dollars to leading European banks, having a one
month maturity, those loans commencing on the second London business
day immediately following that 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 that market at that time,
provided, however, that if the banks in the city of New York selected
as aforesaid by the Trustee are not quoting as mentioned in this
sentence, LIBOR with respect to that LIBOR Determination Date will be
LIBOR in effect immediately prior to that 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 that
distribution period, which for the initial distribution period is ,
2000.
"Minimum Series Seller's Interest" means, for any business day, the sum of
(a) the Available Subordinated Amount as of the end of the preceding transfer
date and (b) the Required Excess Seller Interest as of the end of the preceding
distribution date.
"New Vehicle Monthly Interest Rate" means, for any due period, the product
of:
(1) the per annum rate of interest and finance charges billed by Navistar
Financial during that due period on dealer notes financing new
vehicles; and
(2) the quotient of:
(a) the number of days during that due period, and
(b) the actual number of days in the related calendar year.
"Offered Certificate Rate" means the interest rate on the series 2000-2
certificates, which shall be calculated on the basis of actual days elapsed and
a 360-day year, and for the initial distribution period and for each subsequent
distribution period will equal LIBOR as of the applicable LIBOR Determination
Date plus %.
"Projected Dealer Note Income" means, on any transfer date, an amount equal
to the sum of:
(1) the product of:
(a) the principal amount of dealer notes financing new vehicles
outstanding on that transfer date,
S-12
<PAGE> 17
(b) the New Vehicle Monthly Interest Rate for the due period in which
that transfer date occurs, and
(c) the Series Allocation Percentage for that due period; and
(2) the product of:
(a) the principal amount of dealer notes financing used vehicles
outstanding on that transfer date,
(b) the Used Vehicle Monthly Interest Rate for that due period, and
(c) the Series Allocation Percentage for that due period.
"Projected Monthly Interest" means, on any LIBOR Determination Date that
relates to a distribution period, an amount equal to the product of (1) the
Offered Certificate Rate for that distribution period, (2) the Invested Amount
as of the immediately preceding distribution date and (3) the result of the
actual number of days in that distribution period divided by 360.
"Projected Monthly Servicing Fee" means, on any transfer date with respect
to the due period in which that transfer date occurs, an amount equal to
one-twelfth of the product of (1) 1%, (2) the aggregate principal amount of
dealer notes as of that transfer date, (3) the Series 2000-2 Allocation
Percentage for the due period related to that transfer date and (4) the Floating
Allocation Percentage for the due period related to that transfer date.
"Projected Spread" means, on any transfer date with respect to the
distribution period next following the distribution period to which that
transfer date relates, the sum of:
(1) the positive amount, if any, by which
(a) the sum of Projected Monthly Interest for that distribution period
and the Projected Monthly Servicing Fee for the due period in which
that transfer date occurs exceeds;
(b) the Projected Dealer Note Income as of that transfer date; and
(2) 1.25% of the Invested Amount as of the preceding distribution date.
"Reference Banks" means the principal London offices of Morgan Guaranty
Trust Company of New York, Swiss Bank Corporation and Barclays Bank PLC.
"Required Excess Seller Interest" means, for any business day, 3.0% of the
Invested Amount as of the end of the preceding distribution date (and 3% is the
"Required Excess Seller Interest Percentage" ).
"Required Subordinated Amount" means, for any transfer date, an amount
equal to 87.1% of the Maximum Subordinated Amount as of that transfer date.
"Series Allocable Servicing Fee" equals, for each due period 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 (1) 1%, (2) the aggregate
principal amount of dealer notes outstanding as of the last day of that due
period, and (3) the Series Allocation Percentage for that due period.
"Used Vehicle Monthly Interest Rate" means, for any due period, the product
of:
(1) the per annum rate of interest and finance charges billed by Navistar
Financial during that due period on dealer notes financing used
vehicles; and
(2) the quotient of:
(a) the number of days during that due period, and
(b) the actual number of days in the related calendar year.
S-13
<PAGE> 18
RATINGS OF THE CERTIFICATES
We will not issue the series 2000-2 certificates unless they are rated in
the highest long-term rating category by each of and . The
rating of the series 2000-2 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 2000-2 certificates.
However, a rating agency does not evaluate, and the rating of the series 2000-2
certificates does not address, the likelihood that the outstanding principal
amount of the series 2000-2 certificates will be paid on the expected payment
date or the likelihood of the payment of any penalty interest. The rating of the
series 2000-2 certificates is based primarily on the value of the dealer notes
and the rating requirements for investments of funds in Eligible Deposit
Accounts maintained for the benefit of the series 2000-2 certificateholders and
the level of subordination of the Seller's Interest. A rating is not a
recommendation to buy, sell or hold securities, because the rating does not
comment as to the market price or the suitability for a particular investor. We
cannot assure 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, future circumstances warrant a rating change.
EARLY AMORTIZATION EVENTS
An "Early Amortization Event" for series 2000-2 refers to any of the
following events:
(1) the trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, and is not exempt from
compliance with that Act;
(2) the Invested Amount is not reduced to zero by the expected payment
date;
(3) the United States government or any government agency or
instrumentality files a notice of a lien under Internal Revenue Code sec.
6323 or any similar statutory provision (including, but not limited to,
302(f) or sec. 4068 of ERISA) on the assets of Navistar Financial or the
seller which is or may in the future be prior to the lien of the trustee on
the assets of the trust (including without limitation proceeds of the
dealer notes);
(4) failure on the part of the seller (a) to make any payment,
distribution or deposit required under the pooling and servicing agreement
on the date due or within five business days after the due date or (b) 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 that failure shall have been given to the
seller;
(5) any representation or warranty made by the seller in the pooling
and servicing agreement or any information contained in the schedule of
dealer notes delivered to the trust 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 that
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 that incorrectness shall have been given to the seller
and as a result of which the interests of the series 2000-2
certificateholders are materially and adversely affected. However, an early
amortization event shall not be deemed to occur if the seller has
repurchased the related dealer notes or all dealer notes, if applicable,
during that period in accordance with the provisions of the pooling and
servicing agreement;
(6) the seller shall become legally unable for any reason to transfer
dealer notes to the trust in accordance with the provisions of the pooling
and servicing agreement;
(7) on any transfer date, the Available Subordinated Amount for that
transfer date will be reduced to an amount less than the Required
Subordinated Amount;
(8) any Servicer Termination Event shall occur which would have a
material adverse effect on the series 2000-2 certificateholders and the
servicer has received a notice of termination;
S-14
<PAGE> 19
(9) the delivery by the seller to the trustee of a notice stating that
the seller will no longer continue to sell dealer notes to the trust
beginning on the date specified in that notice;
(10) on three consecutive determination dates, the "Average Coverage
Differential" (which is the average of the highest three of the four most
recent Coverage Differentials (which is generally the difference between
the annualized percentage yield on the dealer notes and the sum of 1.00%
and the Offered Certificate Rate for the related due period)) shall be
equal to or less than negative two percent (-2.00%);
(11) at the end of any due period, the Seller's Interest is reduced to
an amount less than the Minimum Seller's Interest and the seller has failed
to assign additional dealer notes or cash to the trust in the amount of
that deficiency within ten business days following the end of that due
period;
(12) on any determination date, the Turnover is less than 1.7;
(13) on any determination date, the quotient of (a) the sum of Dealer
Note Losses for each of the related due periods and the five immediately
preceding due periods and (b) the sum of principal collections for each of
the related due periods and the five immediately preceding due periods, is
greater than or equal to 1%;
(14) the occurrence of specified events of bankruptcy, insolvency or
receivership relating to the seller, Navistar Financial, International
Truck and Engine or Navistar International Corporation; and
(15) failure on the part of International Truck and Engine 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 that deposit is required by the Interest Deposit
Agreement to be made.
Upon the occurrence of early amortization event (3), distributions on the
Invested Amount will begin on the next distribution date. Upon the occurrence of
any other early amortization event, distributions on the Invested Amount will
begin at the time described in the prospectus.
S-15
<PAGE> 20
OTHER SERIES ISSUED BY THE TRUST
The table below describes the principal characteristics of the other series
of investor certificates issued by the trust which are outstanding on the date
of this prospectus supplement.
<TABLE>
<S> <C>
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
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%
SERIES 1997-1
Certificate Rate............................................ LIBOR + 0.15%
Closing Date................................................ August 19, 1997
Expected Payment Date....................................... August 25, 2003
Initial Invested Amount..................................... $200,000,000
Number of classes within Series............................. One
Ordinary means of principal repayment....................... Accumulation Period
Primary source of credit enhancement........................ Subordination
Series Termination Date..................................... August 25, 2006
Servicing Fee Percentage.................................... 1%
Specified Accumulation Period Commencement Date............. November 1, 2002
Subordinated Percentage..................................... 15.5%
SERIES 1998-1
Certificate Rate............................................ LIBOR + 0.16%
Closing Date................................................ July 17, 1998
Expected Payment Date....................................... July 25, 2008
Initial Invested Amount..................................... $200,000,000
Number of classes within Series............................. One
Ordinary means of principal repayment....................... Accumulation Period
Primary source of credit enhancement........................ Subordination
Series Termination Date..................................... July 25, 2011
Specified Accumulation Period Commencement Date............. October 1, 2007
Servicing Fee Percentage.................................... 1%
Subordinated Percentage..................................... 15.5%
SERIES 2000-VFC
Certificate Rate............................................
Closing Date................................................ January 28, 2000
Expected Payment Date.......................................
Initial Invested Amount..................................... $300,000,000
Number of classes within Series............................. One
Ordinary means of principal repayment....................... Amortization Period
Primary source of credit enhancement........................ Subordination
Series Termination Date.....................................
Servicing Fee Percentage.................................... 1%
Subordinated Percentage..................................... 15.5%
</TABLE>
S-16
<PAGE> 21
SUBORDINATION OF SELLER'S INTEREST
The right of the holder of the Seller Certificate to receive payments in
respect of the Seller's Interest is subordinated to the interests of the
investor certificates, to the extent of the Available Subordinated Amount. The
Available Subordinated Amount will initially be 15.5% of the invested amount of
series 2000-2. The Available Subordinated Amount will decrease as funds
allocated to the Seller's Interest are used to pay interest, servicing fees, and
absorb dealer note losses.
As of the 2000 distribution date (after giving pro forma effect
to the issuance of the series 2000-2 certificates by the trust), the Available
Subordinated Amount was $ million. For additional information regarding
the subordination of the Seller's Interest, see "Description of the Offered
Certificates -- Allocation of Collections -- Limited Subordination of Seller's
Interest; Spread Account; Liquidity Reserve Account" in the prospectus.
ISSUANCE OF ADDITIONAL CLASSES OF CERTIFICATES
The seller may in the future issue additional classes of Dealer Note Asset
Backed Certificates which would be payable out of Series Allocable Principal
Collections and Series Allocable Finance Charge Collections allocated to the
series 2000-2 certificates on the basis of the Series Allocation Percentage for
the series 2000-2 certificates. A future issuance will require amendment to the
pooling and servicing agreement, the supplement with respect to the series
2000-2 certificates and other related documents. Notwithstanding the description
under the caption "Description of the Offered Certificates -- Amendments" in the
prospectus, the pooling and servicing agreement, may be amended without the
consent of the series 2000-2 certificateholders provided that the Rating Agency
Condition shall have been satisfied with respect to the series 2000-2
certificates in connection with any future issuance.
S-17
<PAGE> 22
PLAN OF DISTRIBUTION
Subject to the terms and conditions contained in an underwriting agreement,
the seller has agreed to sell to as the underwriter, and the
underwriter has agreed to purchase from the seller, all of the series 2000-2
certificates.
The seller does not intend to apply for listing of the series 2000-2
certificates on a national securities exchange. The underwriter intends to make
a secondary market in the series 2000-2 certificates but has no obligation to do
so. No one can assure that a secondary market for the series 2000-2 certificates
will develop or, if it does develop, that it will continue or that it will
provide holders of the series 2000-2 certificates with a sufficient level of
liquidity of, or trading markets for, the series 2000-2 certificates.
The seller has been advised that the underwriter proposes initially to
offer the series 2000-2 certificates to the public at the public offering prices
stated on the cover page of this prospectus supplement, and to specified dealers
at those prices less a concession not in excess of % per certificate
denomination. The underwriter may allow and those dealers may reallow, a
concession not in excess of % per certificate denomination. After the
initial public offering, the public offering price and these concessions may be
changed.
In order to facilitate the offering of the series 2000-2 certificates, the
underwriter may engage in transactions that stabilize, maintain or otherwise
affect the price of the series 2000-2 certificates. Specifically, the
underwriter may overallot in connection with the offering, creating a short
position in the series 2000-2 certificates, the underwriter may bid for, and
purchase, the series 2000-2 certificates in the open market. Any of these
activities may stabilize or maintain the market price of the 2000-2 certificates
above independent market levels. The underwriter is not required to engage in
these activities, and may end any of these activities at any time.
In the ordinary course of its business, the underwriter and its 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, Navistar Financial.
The seller has agreed to indemnify the underwriter against specified
liabilities including liabilities under the Securities Act of 1933 and to
contribute to payments the underwriter may be required to make under the
Securities Act of 1933.
LEGAL MATTERS
In addition to the legal opinions described in the prospectus, specified
legal matters relating to the series 2000-2 certificates will be passed upon for
the underwriter by Mayer, Brown & Platt.
S-18
<PAGE> 23
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 21, 2000
PROSPECTUS
NAVISTAR FINANCIAL DEALER NOTE TRUST
DEALER NOTE ASSET BACKED CERTIFICATES
---------------------------
NAVISTAR FINANCIAL SECURITIES CORPORATION
SELLER
---------------------------
NAVISTAR FINANCIAL CORPORATION
SERVICER
---------------------------
<TABLE>
<S> <C>
BEFORE YOU PURCHASE ANY OF THE TRUST--
THE CERTIFICATES, YOU - may periodically issue asset backed certificates in one
SHOULD CONSIDER CAREFULLY or more series
THE RISK FACTORS BEGINNING
ON PAGE IN THIS - will own--
PROSPECTUS.
- dealer notes arising from a portfolio of truck dealer
The sole source of revolving floor plan financing agreements
payments of the
certificates is the assets - payments due on those dealer notes
of the trust. The
certificates are not - other property described in this prospectus and in the
interests in or prospectus supplement
obligations of Navistar
Financial Securities - will not own the dealer accounts from which the dealer
Corporation, Navistar notes arise
Financial Corporation, or
any other person or THE CERTIFICATES
entity. - will represent indebtedness secured by the assets of the
trust
This prospectus may be
used to offer and sell any - will be paid only from the assets of the trust
series of certificates
only if accompanied by the - will represent the right to payments in the amounts and
prospectus supplement for at the times described in the prospectus supplement for that
that series. series
- offered by this prospectus will be rated investment grade
by at least one nationally recognized rating agency
- may benefit from one or more forms of credit enhancement
- may be issued as part of a designated series which may
include one or more classes
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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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TABLE OF CONTENTS
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WHERE TO FIND INFORMATION IN THIS
PROSPECTUS AND THE PROSPECTUS
SUPPLEMENT......................... 1
SUMMARY.............................. 2
Securities Offered................. 2
Issuer............................. 2
Seller............................. 2
Servicer........................... 2
Trustee............................ 2
The Trust.......................... 2
Dealer Notes....................... 2
Servicing the Dealer Notes......... 3
Offered Certificates............... 3
Registration of the Offered
Certificates.................... 3
Issuance of New Series............. 3
Interest........................... 4
Principal.......................... 4
Allocations to
Certificateholders.............. 4
Revolving Period................... 5
Shared Seller Principal
Collections..................... 5
Investment Period.................. 5
Accumulation Period................ 6
Early Amortization Period.......... 6
Negative Carry Reserve Fund........ 7
Spread Account..................... 7
Subordination of the Seller's
Interest........................ 8
Liquidity Reserve Account.......... 8
Advances........................... 8
Interest Rate Swap................. 8
Tax Status......................... 9
ERISA Considerations............... 9
Rating of the Offered
Certificates.................... 9
RISK FACTORS......................... 10
THE SELLER AND THE TRUST............. 16
Navistar Financial Securities
Corporation..................... 16
The Trust.......................... 16
USE OF PROCEEDS...................... 16
THE NAVISTAR FINANCIAL DEALER FLOOR
PLAN FINANCING BUSINESS............ 17
Creation of Dealer Notes........... 17
Credit Approval Process and Credit
Guidelines...................... 18
Payment Terms...................... 19
Billing and Collection
Procedures...................... 20
Dealer Monitoring; Write-Offs...... 21
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RELATIONSHIP WITH INTERNATIONAL TRUCK
AND ENGINE......................... 22
Interest Deposit Agreements and
Interest Deposit Accounts....... 22
Master Intercompany Agreement...... 23
No Guarantee by International Truck
and Engine...................... 23
Special Price Allowances at
Retail.......................... 23
Floor Plan Financing Assistance.... 24
Open Account....................... 25
DESCRIPTION OF THE OFFERED
CERTIFICATES....................... 26
General............................ 26
Interest........................... 26
Principal.......................... 27
Book-Entry Registration............ 28
Definitive Certificates............ 30
The Seller's Certificates.......... 31
New Issuances...................... 32
Transfer of Dealer Notes to the
Trust........................... 33
Eligible Dealer Notes.............. 33
Certain Representations and
Warranties; Ineligible Dealer
Notes; Purchase of
Certificateholders' Interest.... 35
Due Periods; Distribution
Periods......................... 37
Advances........................... 37
The Servicer....................... 38
Trust Accounts; Other Accounts for
the Offered Series.............. 40
Excess Funding Account............. 42
Negative Carry Reserve Fund........ 42
Interest Rate Swap................. 42
Allocation of Collections.......... 43
Certificateholder Charge-Offs...... 49
Distributions to Offered
Certificateholders and the Swap
Counterparty.................... 49
Investment Events.................. 50
Early Amortization Events.......... 50
Termination; Fully Funded Date..... 51
Reports to Offered
Certificateholders.............. 52
Evidence as to Compliance.......... 53
Indemnification of Trust and
Trustee; Limitation on Liability
of Certain Persons.............. 54
The Trustee........................ 54
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Amendments......................... 55
List of Certificateholders......... 55
Seller Authorized to File Reports
Pursuant to Securities Exchange
Act............................. 55
Certain Limitations on Rights of
Certificateholders.............. 55
Governing Law...................... 55
DESCRIPTION OF THE PURCHASE
AGREEMENT.......................... 56
Daily Sales of Dealer Notes........ 56
Representations and Warranties..... 56
Repurchase Obligations............. 57
Certain Covenants.................. 57
Termination........................ 57
MATERIAL FEDERAL INCOME TAX
MATTERS............................ 57
General............................ 57
Characterization of the Offered
Certificates as Indebtedness.... 58
Stated Interest on Offered
Certificates....................... 58
Original Issue Discount............ 58
Treatment of Market Discount and
Acquisition Premium............. 59
Disposition of Investor
Certificates.................... 60
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Information Reporting and Backup
Withholding..................... 60
Tax Consequences to Foreign
Holders......................... 60
Tax Characterization of the
Trust........................... 61
STATE TAX MATTERS.................... 63
General............................ 63
Illinois and New York.............. 63
CERTAIN MATTERS RELATING TO
BANKRUPTCY......................... 64
CERTAIN MATTERS RELATING TO THE
DEALER NOTES....................... 65
ERISA CONSIDERATIONS................. 65
PLAN OF DISTRIBUTION................. 66
LEGAL MATTERS........................ 67
GLOSSARY............................. 68
ANNEX I.............................. 78
GLOBAL CLEARANCE, SETTLEMENT AND TAX
DOCUMENTATION PROCEDURES........... 78
Initial Settlement................. 78
Secondary Market Trading........... 78
Certain U.S. Federal Income Tax
Documentation Requirements...... 79
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WHERE TO FIND INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents that provide varying levels of detail:
(1) this prospectus, which provides general information, some of which may
not apply to a particular series of certificates, including your series;
and
(2) the prospectus supplement for a series of certificates, which will
provide financial and other information regarding the pool of
receivables held by the trust and will specify the terms of a particular
series of certificates, including:
- which classes of the series are being offered;
- the timing of interest and principal payments for each class of the
series;
- the priority of interest and principal payments for each class of the
series;
- information about credit enhancement for each class of the series, if
any;
- the ratings for each class of the series; and
- the method for selling each class of the series.
IF THE TERMS OF YOUR SERIES OF CERTIFICATES VARY BETWEEN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT FOR THAT SERIES, YOU SHOULD RELY ON THE
INFORMATION IN THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus and the
prospectus supplement for your series of certificates. We have not authorized
anyone to provide you with other or different information. You should not assume
that the information in this prospectus and any prospectus supplement is
accurate on any date other than the dates stated on their respective covers.
We are not offering the certificates in any state where the offer is not
permitted.
You can find definitions of terms frequently used in this prospectus and
references to pages where terms are defined under the caption "Glossary" which
appears at the end of this prospectus.
We include cross-references in this prospectus to captions in this
prospectus where you can find further related discussions.
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SUMMARY
This summary highlights selected information from this prospectus and
provides an overview to aid in your understanding of the certificates. It does
not contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of a series of certificates,
carefully read this entire prospectus and the prospectus supplement for that
series.
SECURITIES OFFERED
Dealer Note Asset Backed Certificates
ISSUER
Navistar Financial Dealer Note 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 International
Truck and Engine Corporation (f/k/a Navistar International Transportation Corp.)
TRUSTEE
The Bank of New York
THE TRUST
The trust was formed pursuant to a pooling and servicing agreement. The
primary assets of the trust consist of a pool of receivables arising under
revolving floor plan financing agreements between Navistar Financial and retail
truck, bus and trailer dealers. We call these receivables dealer notes. The
seller transfers the dealer notes to the trust and grants the trust a security
interest in the dealer notes and the other property of the trust.
The assets of the trust also include:
- the interest of the seller in any insurance proceeds from the vehicles
underlying the receivables;
- any interest rate swap, interest rate cap, or other interest rate hedge
that the trust may enter into or obtain for the benefit of any series;
and
- amounts on deposit in specified trust accounts maintained for the trust
or for a series or a class of certificates.
On each business day, except in certain limited circumstances, Navistar
Financial sells dealer notes to the seller and the seller transfers the dealer
notes to the trust based on criteria provided in the pooling and servicing
agreement. Accordingly, the aggregate amount of dealer notes in the trust will
fluctuate from day to day as new dealer notes are generated and as existing
dealer notes are paid, charged off as uncollectible or otherwise adjusted or
removed from the trust.
DEALER NOTES
The dealer notes are wholesale notes issued by truck, bus and trailer
dealers to finance new and used trucks, buses and trailers manufactured by or
for International Truck and Engine and other manufacturers. A dealer note is
created when a dealer purchases a new truck or purchases or accepts a used truck
or trailer. Navistar Financial purchases dealer notes on a daily basis from
International Truck and Engine and from dealers. Currently, the dealer notes
bear interest at a floating rate equal to the prime rate plus a margin. See
generally, "The Navistar Financial Dealer Floor Plan Financing Business."
The seller transfers to the trust only those dealer notes that meet
predetermined eligibility criteria. The seller may later be required to
repurchase any dealer notes that did not meet the eligibility criteria when they
were transferred. In this case, Navistar Financial will be required to purchase
those ineligible dealer notes from the seller. If a material amount of dealer
notes did not meet the eligibility criteria when they were transferred to the
trust, the seller may be required to repurchase the interests of the
certificateholders. See "Description of the Offered Certificates -- Certain
Representations and Warranties; Ineligible Dealer Notes; Purchase of
Certificateholders' Interest."
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SERVICING THE DEALER NOTES
The servicer services and administers the dealer notes on behalf of the
trust. The servicer collects payments due under the dealer notes in accordance
with its customary and usual servicing procedures. The servicer receives a
servicing fee with respect to each outstanding series. The servicing fee is
determined at the time of issuance of each series and is specified in the
prospectus supplement.
OFFERED CERTIFICATES
The trust will originally issue the offered certificates in minimum
denominations of $1,000 and in integral multiples of $1,000. We refer to all
allocations to the offered certificateholders as the "Offered
Certificateholders' Interest."
The offered certificates will represent an undivided beneficial interest in
that portion of the trust's assets which are allocated to the Offered
Certificateholders' Interest. The offered certificates will represent the right
to receive monthly payments of interest at the offered certificate rate and the
payment of principal on the expected final payment date up to the invested
amount.
The trust will pay interest and principal to certificateholders only from
the following sources:
- principal collections and finance charge collections on the dealer
notes;
- income from the investment of trust funds;
- any net payments from interest rate swaps; and
- any other amounts described in this prospectus or a prospectus
supplement.
Any other amounts received by the trust will be allocated to the seller or
to other outstanding series.
The principal amount of the seller's interest in the trust property will
fluctuate under the following conditions:
- as the outstanding principal amount of any variable funding certificate
issued by the trust changes;
- as the aggregate principal amount of the dealer notes in the trust
changes; and
- as the trust issues new series and pays off outstanding series.
The offered certificates represent beneficial interests in the trust only
and do not represent interests in or obligations of Navistar Financial or the
seller. The offered certificates and the dealer notes are not insured or
guaranteed by Navistar Financial, the seller, any affiliate of Navistar
Financial or the seller, 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. A person
acquiring an interest in the offered certificates generally will not be entitled
to receive a definitive certificate representing that person's interest. See
"Description of the Offered Certificates -- Definitive Certificates."
ISSUANCE OF NEW SERIES
The seller may cause the trustee to issue one or more new series of
certificates. The seller will do so by issuing a supplement that will specify
the principal terms of the new series. Any new series may have the benefit of
various types of credit enhancement.
The seller may offer any series to the public in transactions registered
under the Securities Act or to other investors in transactions exempt from
registration under the Securities Act. The trustee and the servicer do not
expect to file periodic reports with the Securities Exchange Commission or
otherwise publicize the issuance of a series exempt from registration under the
Securities Act. See "Risk Factors -- Issuance of additional series could
adversely impact the trust" for a discussion of the impact that the issuance of
a new series may have on the offered series.
To issue a new series, the seller must deliver to the trustee a supplement
specifying the principal terms of the new series, an opinion of counsel
regarding tax matters, and assurance that the new series will not cause a rating
agency to lower its rating on any outstanding series. See "Description of the
Offered Certificates -- New Issuances."
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INTEREST
Monthly interest on the certificates will accrue at the offered certificate
rate on the invested amount. Monthly interest will accrue from the most recent
distribution date on which interest has been paid (or, with respect to the
initial distribution date, from the closing date) to but excluding the current
distribution date.
The trust will pay monthly interest on the twenty-fifth day of each month,
or the next business day if the twenty-fifth day is not a business day. Monthly
interest for any distribution date due but not paid on that distribution date
will be due on the next distribution date.
The trust will pay monthly interest and any net swap payments from finance
charge collections, investment income, any net swap receipts and other amounts.
Under certain circumstances, the trust will pay monthly interest and any net
swap payments from amounts in the spread account, the negative carry reserve
fund, the liquidity reserve account and available seller's finance charge
collections. However, the trust will pay these amounts only to the extent
described in this prospectus and the prospectus supplement.
PRINCIPAL
The trust expects to make the final payment of principal on the offered
certificates on the expected payment date. However, the 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. The final principal payment may also occur later
under those circumstances described in this prospectus.
Unless an early amortization event occurs or an early distribution election
is made in connection with an investment event, we expect 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 begin. In this case, unless
otherwise provided in the prospectus supplement, principal will be paid to the
offered certificateholders on each following distribution date. These principal
payments will begin in the first distribution period following the due period in
which the early amortization period begins.
The trust makes principal payments from those principal collections on the
dealer notes which are allocated to the offered series as described in this
prospectus. See "Risk Factors -- A bankruptcy of Navistar Financial or the
seller may delay or reduce payments on the certificates."
ALLOCATIONS TO CERTIFICATEHOLDERS
The trust allocates finance charge collections, principal collections and
dealer note losses to each outstanding series based upon that series' interest
in the trust relative to each other series. The amounts allocated to each series
are then allocated among the certificateholders of each outstanding series.
In addition, a portion of the seller's interest is subordinated to the
interests of the certificateholders. We describe the extent of this
subordination below in "-- Subordination of the Seller's Interest."
Some amounts may be allocated to the certificateholders but may not be
needed to pay servicing fees, monthly interest, principal or other payments to
certificateholders. These amounts may be reallocated to other series to the
extent that those other series experience shortfalls in payments due to them.
Otherwise, these amounts will be allocated to the seller.
During the revolving period, principal collections will generally be
allocated to the seller to purchase more dealer notes. During the revolving
period, principal collections may also be available to cover shortfalls for any
other series that is in an amortization, early amortization or accumulation
period. Otherwise, principal collections generally will be allocated to any
variable funding certificate issued by the trust. In some circumstances,
principal collections allocable to the seller may instead be held in the excess
funding account so that the seller maintains its interest in the trust at the
required minimum level. The trust will invest any amounts on deposit in the
excess funding account in eligible investments.
During an accumulation period, investment period or early amortization
period, principal collections allocable to the offered certificateholders'
interest will be combined with principal collections allocable to other series.
The trust will either hold these funds in the series
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principal account and pay them to certificateholders, or hold these funds until
the final expected payment date. During an accumulation period, the trust may
deposit funds into the series principal account up to a monthly predetermined
maximum, after which excess funds will be paid to the seller. See "Description
of the Offered Certificates -- Principal."
REVOLVING PERIOD
The revolving period begins on the closing date and ends when an
accumulation period, investment period, or early amortization period begins.
During the revolving period, principal collections are effectively reinvested in
the trust. This reinvestment enables investor certificateholders to invest in
the trust for a period that is expected to exceed substantially the average
maturity of the dealer notes. 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
before the beginning of the accumulation period.
SHARED SELLER PRINCIPAL COLLECTIONS
During the revolving period and the accumulation period, shared seller
principal collections will be allocated among any other series that provide for
shared seller principal collections to cover principal shortfalls. Next, shared
seller principal collections will be allocated to the excess funding account, if
necessary, or paid to the seller. Shared seller principal collections will not
be paid 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 which will begin
on the investment period commencement date and, except as described below, will
continue until the earlier of:
(1) the beginning of an early amortization period; and
(2) payment of the invested amount in full on the expected payment date.
During the investment period, the trustee will deposit offered series
principal collections and other amounts allocable to the offered
certificateholders' interest into the series principal account on each
distribution date or business day, respectively. The trust will use funds in the
series principal account to pay principal to the offered certificateholders on
the expected payment date or any early distribution date. During an investment
period, the trust will invest funds held in the series principal account 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.
On the fully funded date, the offered certificateholders will no longer
have any interest in the dealer notes. Also, all of 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 breaches of that agreement, will no longer accrue to the benefit of
the offered certificateholders. The fully funded date is the first distribution
date falling in an investment period on which:
(1) the amount on deposit in the series principal account equals the
invested amount; and
(2) 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).
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 of those funds, the interest rate swap and net swap
receipts. In addition, upon the occurrence of the fully funded date, no finance
charge collections, principal collections or dealer note losses will be
allocated to the offered series. If the final distribution has been made for
other series or the fully funded date has occurred for each other
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series, the trustee will convey and transfer all right, title and interest in
and to the dealer notes 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 funds available during the revolving period. This is
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. The negative
carry reserve fund is designed to remedy this situation by providing an
additional source of funds for the payment of monthly interest and net swap
payments.
A prospectus supplement may provide for early distributions of principal to
certain offered certificateholders on the early distribution date. In this 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, these terms will
not be operative.
ACCUMULATION PERIOD
The offered certificates will have an accumulation period unless an
investment period or an early amortization period begins or unless otherwise
specified in the prospectus supplement. An accumulation period allows for the
accumulation of principal in the series principal account in anticipation of a
lump sum payment on the expected payment date. The accumulation period will
begin on the accumulation period commencement date and continue until the
earliest of
(1) the beginning of an investment period;
(2) the beginning of an early amortization period; and
(3) payment of the invested amount in full.
During the accumulation period, offered series principal collections and
specified other amounts allocable to the offered certificateholders' interest
will be deposited on each business day in the series principal account. The
trustee will use funds in the series principal account to pay principal 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 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 accumulation period length, which is the number of due periods in
the accumulation period; and
- the accumulation period commencement date, which is the day on which the
accumulation period begins and which will be the first day of a due
period.
However, if any other outstanding series shall have entered into an
investment period or an early amortization period prior to the accumulation
period commencement date, then the accumulation period will begin on the
specified accumulation period commencement date. The specified accumulation
period commencement date shall be stated in the prospectus supplement.
In addition, if the accumulation period length and the accumulation period
commencement date have been determined but the accumulation period has not
begun, and any other series enters into an investment period or an early
amortization period, the accumulation period commencement date will be the date
that the other series has entered into its investment period or early
amortization period.
Other series issued by the trust may have either an accumulation period or
an amortization period. These other accumulation periods or amortization periods
may have different lengths and begin on different dates. Thus, some series may
be in their revolving periods, while others are in periods during which
aggregate principal collections are distributed to, or reserved for, those
series having an accumulation period or amortization period.
EARLY AMORTIZATION PERIOD
During an early amortization period, certificateholders will receive an
accelerated repayment of principal, but only to the extent of offered series
principal collections. The prospectus supplement for an offered series will
specify early
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amortization events, which are events that trigger an early amortization period.
In the event of an early amortization period, the revolving period, the
investment period or the accumulation period, as applicable, will terminate. The
offered series principal collections and specified other amounts allocable to
the offered certificateholders' interest will no longer be paid to the seller,
to the holders of any other outstanding series or to the holders of any retained
interest in the excess funding account. Instead, these funds will be distributed
to the offered certificateholders, unless otherwise specified in the prospectus
supplement. These monthly distributions will begin on the distribution date
following the due period in which an early amortization period begins.
During an early amortization period, distributions of principal on the
offered certificates will not be subject to the controlled deposit amount.
During an early amortization period, any amounts in the series principal account
and in the excess funding account that are allocable to the offered series will
be paid to the offered certificateholders up to the invested amount. An
investment period will not begin during an early amortization period.
NEGATIVE CARRY RESERVE FUND
The prospectus supplement will specify whether the terms of the offered
series will include a 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. In limited instances the trustee may use the negative carry
reserve fund to fund the liquidity reserve account and to make principal
payments with respect to the offered certificates.
The trustee may withdraw funds from the negative carry reserve fund to pay
monthly interest and any net swap payments if the sources of funds from the
trust are insufficient to make these payments. The trustee will make payments
pro rata to the certificateholders and the swap counterparty based on the amount
of the shortfalls. The trustee will first apply any funds from the spread
account and, during an early amortization period or investment period, the
liquidity reserve account.
The negative carry reserve fund will be funded only after the occurrence of
an investment event or an early amortization event or during the accumulation
period. The negative carry reserve fund will be funded from available seller's
finance charge collections and available seller's principal collections.
Deposits into the negative carry reserve fund will be limited to the negative
carry reserve fund deposit amount.
SPREAD ACCOUNT
The trustee will establish and maintain a 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. In limited instances the spread
account will also be used 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 otherwise allocable to the seller. On each transfer
date, the servicer will calculate the projected obligations of the trust
(monthly interest, new swap payments and offered series servicing fee) and the
projected income of the trust for the next distribution period. If the trust's
projected obligations exceed the trust's projected income, the amount in the
spread account will increase.
If the trustee is unable to pay the trust's obligations from collections on
the dealer notes, net swap receipts and certain other amounts, the trustee shall
withdraw funds from the spread account to pay the trust's obligations. The
trustee shall make these payments in the order of priority described in this
prospectus and in the prospectus supplement.
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. Funds on deposit in the
spread account will not be available to make payments to certificateholders
after the fully funded date. See "Description of the Offered
Certificates -- Allocation of Collections -- Limited Subordination of Seller's
Interest; Spread Account; Liquidity Reserve Account."
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SUBORDINATION OF THE SELLER'S INTEREST
Until the fully funded date, the seller's right to receive payments in
respect of the seller's interest in the trust will be subordinated to the
interests of the offered certificateholders. This subordination is limited to
the available subordinated amount during the revolving period. During an
accumulation period, investment period or early amortization period, the amount
of subordination will be the available subordinated amount plus the negative
carry subordinated amount.
If available certificateholder interest collections and any net swap
receipts are insufficient to cover any offered series servicing fee, accrued
monthly interest, any net swap payment, and the offered series dealer note
losses, a limited portion of the seller's interest in the trust will be
available to make up the deficiency. If this portion is not sufficient,
specified amounts in the spread account and, in some circumstances, the
liquidity reserve account and the negative carry reserve fund, will also be
available to cover the deficiency. See "Description of the Offered
Certificates -- Allocation of Collections -- Limited Subordination of Seller's
Interest; Spread Account; Liquidity Reserve Account."
The available subordinated amount for the first due period will equal the
product of the invested amount and the subordinated percentage. The subordinated
percentage will be stated in the prospectus supplement. The available
subordinated amount for each subsequent transfer date will be reduced by amounts
previously drawn from the seller's interest in the trust and, subject to certain
limitations, by reductions in the invested amount.
Reductions in the available subordinated amount 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.
The available subordinated amount will never exceed an amount equal to the
subordinated percentage multiplied by the invested amount.
LIQUIDITY RESERVE ACCOUNT
The liquidity reserve account will only be established if an investment
period or an early amortization period occurs. The purpose of the liquidity
reserve account is to cash-collateralize the available subordinated amount
during an investment period or an early amortization period. In addition, in
specified circumstances, the liquidity reserve account provides an additional
source of funds to make principal payments with respect to the offered
certificates.
If an investment period or an early amortization period begins, 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 the amount on deposit is equal
to the available subordinated amount.
ADVANCES
For any due period, the servicer will make an advance to the trust's
collections account to cover all dealer finance charges for that due period
which have not been paid by the transfer date. The servicer will not advance
funds for the amount of dealer finance charges that the servicer determines will
be uncollectible. The servicer will be reimbursed for all or a portion of an
advance when the unpaid dealer finance charges relating to the advance are
either paid or determined to be uncollectible.
INTEREST RATE SWAP
In connection with the issuance of any series of offered certificates, the
trust may enter into one or more interest rate swap agreements with a swap
counterparty. The terms of an interest rate swap will be more fully described in
the prospectus supplement. If the trust does enter into an interest rate swap,
all terms and provisions described in this prospectus 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 will be operative.
If the trustee does not enter into an interest rate swap, the above terms
and provisions, as well as paragraphs (x) and (y) under "Description of the
Offered Certificates -- Allocation of Collections -- Available Certificateholder
Interest Collections," will not be operative, unless
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otherwise specified in the prospectus supplement. The trust will likely not
enter into an interest rate swap if the offered certificate rate is a floating
rate. We call the floating rate payable by the trust in respect of an interest
rate swap or an offered series that bears interest at a floating rate the
"applicable floating rate."
Each interest rate swap will require the swap counterparty to pay to the
trust interest at the swap fixed rate. The trust will be obligated to pay to the
swap counterparty interest at the swap floating rate. Interest is payable on or
before each distribution date. Interest is calculated based on the invested
amount as of the preceding distribution date, after giving effect to all
distributions on that distribution date.
We refer to the payment to the trust by the swap counterparty as the "swap
receipt" and the payment by the trust to the swap counterparty as the "swap
payment." The amount the 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 either the trust or the swap counterparty. The net amount owed
by the trust is the "net swap payment" and the net amount owed by the swap
counterparty is the "net swap receipt."
Net swap receipts will be allocated and distributed in the same manner as
series allocable finance charge collections, except as otherwise described in
this prospectus. Net swap payments will be paid, to the extent described in this
prospectus, out of:
- offered series finance charge collections,
- investment income,
- excess interest collections from other series allocable to the offered
series,
- withdrawals from the spread account,
- withdrawals from the negative carry reserve fund,
- withdrawals from the liquidity reserve account, and
- available seller's finance charge collections.
Net swap payments and monthly interest will be paid with equal priority, as
described under "Description of the Offered Certificates -- Allocations of
Collections."
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
"Material Federal Income Tax Matters" and "State Tax Matters."
ERISA CONSIDERATIONS
If the assets of the 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 Internal Revenue Code.
Unless certain conditions are satisfied, we cannot assure that the assets of the
trust will not be deemed to be "plan assets."
Regardless of whether or not the assets of the 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. The plan fiduciary should also consult with counsel with respect to the
potential consequences under ERISA and the Internal Revenue Code of the plan's
acquisition and ownership of offered certificates. See "ERISA Considerations."
RATING OF THE OFFERED CERTIFICATES
We will not issue the offered certificates unless they are rated in the
highest rating category by at least one nationally recognized statistical rating
organization.
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RISK FACTORS
LIMITED ABILITY TO RESELL
CERTIFICATES The underwriters for a series of certificates may
assist in the resale of those certificates, but
they are not required to do so. A trading market
for the certificates may not develop. If a trading
market does develop, it might not be sufficiently
liquid to allow you to resell any of your
certificates.
A BANKRUPTCY OF NAVISTAR
FINANCIAL OR THE SELLER MAY
DELAY
OR REDUCE PAYMENTS ON THE
CERTIFICATES Navistar Financial will sell dealer notes to the
seller, and the seller will transfer the dealer
notes to the trust. Navistar Financial and the
seller have taken steps, such as the creation of
the seller as a special purpose entity, to ensure
that the transactions described in this prospectus
are respected, and to reduce the likelihood that
the seller would voluntarily file for bankruptcy.
However, if Navistar Financial or the seller were
to become a debtor in bankruptcy, a court could
conclude that the dealer notes transferred to the
trust are not owned by the trust, but rather are
part of the estate of the debtor in bankruptcy. The
court may conclude that the transfer of the dealer
notes from the party in bankruptcy was not really a
sale, but rather a secured financing. The court may
also conclude that the party in bankruptcy and the
owner of the dealer notes should be treated as a
single entity rather than separate entities. If
either of these were to occur, you could experience
delays or reductions in payments on your
certificates as a result of:
- the "automatic stay" provisions of the U.S.
Bankruptcy Code, which prevent creditors from
exercising remedies against a debtor in
bankruptcy, and provisions of the U.S.
Bankruptcy Code that permit substitution of
collateral in specified circumstances;
- any tax or government liens on Navistar
Financial's or the seller's property that arose
prior to the transfer of dealer notes to the
trust having a right to be paid from collections
on the dealer notes before those collections are
used to make payments on your certificates; and
- the fact that the trust or the trustee may not
have a perfected security interest in the
financed vehicles or cash collections on the
dealer notes held by Navistar Financial at the
time a bankruptcy proceeding begins.
If Navistar Financial or the seller were to become
a debtor in bankruptcy, the seller may be able to
recover payments made by it to the trust to
repurchase dealer notes prior to the date of the
bankruptcy petition. This could result in delays or
reductions in payments on your certificates.
In addition, if Navistar Financial, International
Truck and Engine, any of their affiliates, or any
of the manufacturers of the underlying vehicles
filed for bankruptcy, the dealers might respond by
delaying or withholding payments on the dealer
notes, even without legal or contractual
justification. This could result in delays or
reductions in payments on your certificates.
FAILURE OF NAVISTAR
FINANCIAL OR
THE SELLER TO FULFILL ITS
REPURCHASE
OBLIGATIONS MAY ADVERSELY
AFFECT
THE TRUST Navistar Financial, the seller and their respective
affiliates generally are not obligated to make
payments to you on your certificates and do not
insure or guarantee the payment of the dealer notes
or your
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<PAGE> 36
certificates. However, Navistar Financial will make
representations and warranties to the seller
regarding the characteristics of the dealer notes.
The seller will assign these representations and
warranties to the trust, and the seller will make
its own representations and warranties to the trust
in connection with the transfer of the dealer notes
to the trust. If Navistar Financial or the seller
breaches its representations and warranties, and
the breach materially and adversely affects a
dealer note or the interests of the
certificateholders in that dealer note, the seller
will be obligated to repurchase that dealer note
from the trust. Navistar Financial would be
required to purchase that dealer note from the
seller. If Navistar Financial fails to repurchase
that dealer note from the seller, the seller may
not have adequate funds to repurchase the affected
dealer note from the trust and you may experience
delays or reductions in payments on your
certificates. See "Description of the Offered
Certificates -- Certain Representations and
Warranties; Ineligible Dealer Notes; and Purchase
of Certificateholders' Interest."
The trustee has not, and we do not anticipate that
the trustee will, make any examination of the
dealer notes or the records relating to the dealer
notes for the purpose of establishing compliance
with eligibility requirements, representations and
warranties or any other purpose.
THE TRUST ASSETS ARE
LIMITED TO
THE DEALER NOTES AND
LIMITED
AMOUNTS OF CREDIT
ENHANCEMENT The certificates represent obligations of the trust
only. The sole source of payments on the
certificates are the assets of the trust. The trust
will not have any significant assets or sources of
funds other than the dealer notes, its limited
rights in accounts, and other rights or credit
enhancements as specified in the prospectus
supplement. The certificates are not obligations of
and are not insured or guaranteed by Navistar
Financial, the seller or any other entity or person
(including any affiliate of Navistar Financial,
International Truck and Engine, or the seller). See
"Description of the Offered
Certificates -- Allocation of Collections."
You must rely primarily on payments on the trust's
dealer notes, funds in the specified accounts and
any other credit enhancements for repayment of your
certificates. In addition, you may have to look to
the proceeds from the repossession and sale of the
collateral that secures defaulted dealer notes and
the proceeds from any recourse against dealers
under the financing agreements. If these sources
are insufficient, you might experience delays or
reductions in payments on your certificates.
CHANGES IN THE RELATIONSHIP
BETWEEN LIBOR AND THE PRIME
RATE MAY ADVERSELY AFFECT
THE
TRUST The interest rate on dealer notes is presently
based on the prime rate, while the interest rate
payable on the certificates will be based on the
one-month LIBOR. The prime rate, which is an
"administered rate," tends to lag behind one-month
LIBOR, which is a "market rate." Therefore, the
spread between the prime rate and LIBOR could
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, we
cannot assure 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
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on dealer notes is established by Navistar
Financial and the date on which the interest rate
on the certificates are fixed could create a
distortion during periods of rapidly rising or
volatile interest rates. This could occur even
though the underlying prime rate-LIBOR relationship
remained constant during that period. See
"Description of the Offered Certificates -- Due
Periods; Distribution Periods."
If the positive spread between the dealer note
interest rate and the interest rate payable on the
certificates declines or disappears in the future,
an investment event or early amortization event
could occur. If all sources of credit enhancement
were exhausted, you could experience delays or
reductions in payments on your certificates.
A DEFAULT BY THE SWAP
COUNTERPARTY MAY ADVERSELY
AFFECT
THE TRUST A payment default by a swap counterparty will cause
an early amortization period to begin and may
terminate the interest rate swap. Any amounts 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, the termination of the interest rate
swap could reduce the amount of interest paid on
your certificates. See "Description of the Offered
Certificates -- Interest Rate Swap" and "-- Early
Amortization Events."
THE TRUST DEPENDS ON
NAVISTAR
FINANCIAL AND INTERNATIONAL
TRUCK AND ENGINE TO
GENERATE
NEW DEALER NOTES The trust completely depends on Navistar Financial
as its exclusive source for new dealer notes.
Navistar Financial depends on the ability of
International Truck and Engine to sell
International vehicles to dealers in exchange for
new dealer notes.
We cannot assure that International Truck and
Engine will continue to sell International vehicles
at the same rate as in prior years. Decreased sales
could result from the possibility of declining
sales in the trucking industry generally, strikes,
fires or other unforeseeable events. A significant
decline in International Truck and Engine's sales
of International vehicles may cause delays or
reductions in payments on your certificates.
International Truck and Engine currently purchases
all new International vehicles that Navistar
Financial has repossessed from terminated dealers.
International Truck and Engine pays cash for these
vehicles equal to the balance due on the underlying
dealer notes. If International Truck and Engine
were to stop purchasing these repossessed vehicles,
the amount of dealer notes written off as
uncollectible could increase. An increase in the
amount of dealer notes written off could result in
losses on your certificates if all sources of
credit enhancement for your certificates were
exhausted. International Truck and Engine currently
plans to continue these purchases.
International Truck and Engine 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 International Truck and Engine."
This financial assistance often accounts for more
than half of all outstanding interest obligations
on the dealer notes. International Truck and Engine
deposits the amount of this assistance in the
interest deposit account at approximately the same
time that it gives a dealer financial assistance.
However, sales of International vehicles could
decrease if International Truck and Engine were to
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<PAGE> 38
discontinue providing financial assistance to
dealers. A reduction in sales of International
vehicles could cause delays or reductions in
payment on your certificates.
Navistar Financial currently services the dealer
notes. If Navistar Financial were to stop acting as
servicer, you could experience delays in payments
on your certificates. Navistar Financial plans to
continue servicing the dealer notes.
THE FAILURE OF DEALERS TO
MAKE
PAYMENTS ON THE DEALER
NOTES
COULD DELAY OR REDUCE
PAYMENTS
ON THE CERTIFICATES The trust's ability to make payments on the
certificates generally depends on collections from
dealers on the dealer notes. The prospectus
supplement will describe past patterns of dealer
payments on similar dealer notes.
The timing of the sale of vehicles is uncertain. It
depends on many economic and social factors that
are beyond the control of Navistar Financial, the
seller and the trust. Navistar Financial does not
guarantee that dealers will pay on the dealer notes
at the same rate as in the past or in any
particular pattern. If the dealers' ability to pay
on the dealer notes declines for whatever reason,
you might experience delays or reductions in
payments on your certificates.
DEALER NOTES MAY BE
UNSECURED
DUE TO SALES OUT OF TRUST Dealers give Navistar Financial a security interest
in the vehicles they purchase to secure their
obligations under the dealer notes. When the
financed vehicle is sold, Navistar Financial's
security interest in the vehicle generally will
terminate. If the dealer who sold the vehicle fails
to pay Navistar Financial the amount owed on the
dealer notes, the dealer notes will become
unsecured because the buyer generally takes the
vehicle free of the security interest. If the
financed vehicle is sold "out of trust," that is,
sold without the dealer applying the proceeds of
the sale to repay the dealer notes, the trust will
not be able to foreclose on the financed vehicle.
This may result in delays or reductions in payments
on your certificates.
FAILURE OF NAVISTAR
FINANCIAL TO
GENERATE SUFFICIENT NEW
DEALER
NOTES MAY RESULT IN THE
TRUST
HOLDING ASSETS WITH A LOWER
YIELD The trust depends upon Navistar Financial to
generate new dealer notes to replace the dealer
notes that are repaid. In the event that Navistar
Financial is unable to generate sufficient new
dealer notes, or is unable to transfer the dealer
notes it generates because of restrictions in its
financing arrangements or otherwise, the trust will
be required to hold cash or investment securities
rather than dealer notes. The yield on cash or
investment securities may be lower than the yield
on dealer notes. Because the trust's assets are the
sole source of payments on the certificates, this
could result in delays or reductions in payments on
your certificates. Navistar Financial does not
guarantee that it will continue to generate dealer
notes at historical rates. The following events
could negatively impact Navistar Financial's
ability to generate new dealer notes:
- A decline in the manufacture and sale of trucks
and trailers due to an economic downturn, a
labor disruption, competitive pressure, or other
factors
- A change in vehicle distribution practices
- A change in dealer inventory management
practices
- A change in the interest rates charged by
Navistar Financial to dealers
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<PAGE> 39
- A change in the amounts of the credit lines or
other terms offered by Navistar Financial to
dealers
- Defaults on accounts by dealers
- Termination of dealer franchises
- Dealers becoming insolvent or filing for
bankruptcy
- Seasonal fluctuations in the sale of vehicles
DEALER CONCENTRATION MAY
RESULT
IN LARGER LOSSES FROM A
SINGLE
DEALER DEFAULT As of October 31, 1999, Navistar Financial provided
wholesale financing to 332 of International Truck
and Engine's domestic dealers. Of these 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 reduce the
potential impact of the financial failure of any
single large dealer on the trust, each dealer is
subject to a concentration limit. The concentration
limit prohibits the trust from holding dealer notes
from a single dealer in excess of the greater of
the following:
(1) $4,000,000; or
(2) 2.0% of the sum of the aggregate principal
balance of dealer notes and the aggregate
principal amount of funds on deposit in the
excess funding account in the trust.
THE ISSUANCE OF ADDITIONAL
SERIES
COULD ADVERSELY IMPACT THE
TRUST We expect the trust to issue additional series in
the future. We will deliver a supplement in
connection with the issuance of other series which
will describe the principal terms of the series.
The principal terms may include:
- methods for determining applicable allocation
percentages and allocating collections;
- provisions creating different or additional
security or other credit enhancement;
- provisions creating different classes of
certificates, including subordinated classes of
certificates; and
- any other amendment or supplement to the pooling
and servicing agreement which is applicable only
to that series.
A new supplement will not change the terms of your
certificates or the terms of the pooling and
servicing agreement as applied to your
certificates. See "Description of the Offered
Certificates -- New Issuances." As long as any
offered certificates are outstanding, the
applicable rating agencies must confirm that they
will not lower or withdraw the rating on any
offered series before we can execute a supplement
and issue the new series. We call this requirement
the rating agency condition.
The rating agency condition is intended to protect
against an adverse effect on the offered
certificates. However, the terms of any other
series might have an impact on the timing or amount
of payments on certificates. The issuance of
additional series could reduce excess interest
collections which would otherwise be available to
your series. For example, the additional series
might have a higher interest rate or swap floating
rate than your series of certificates.
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<PAGE> 40
An additional series could also create a longer
accumulation period or early amortization period
for your series. For example, an additional series
could have an expected payment date that would
require it to be in an accumulation period at the
same time as your series, or an additional series
could enter an early amortization period at the
same time as your series. Further, the issuance of
an additional series will reduce the seller's
interest in the trust. A lower seller's interest
could increase the possibility that a shortfall in
the amount of available dealer notes in the trust
would require funds to be retained in the trust and
invested in short-term eligible investments in
order to maintain the required minimum seller's
interest in the trust. Increased holdings of
eligible investments in the trust will reduce the
overall portfolio yield of the trust, which could
cause delays or reductions in payments on your
certificates.
Upon written request, the seller will provide to
you the prospectus or other document describing or
summarizing the salient terms of any subsequently
issued series. This document will describe the
events which could result in the commencement of an
early amortization event or investment period with
respect to that series.
INTERNATIONAL TRUCK AND
ENGINE'S
ABILITY TO CHANGE TERMS OF
DEALER
NOTES COULD ADVERSELY
IMPACT THE
TRUST International Truck and Engine may change the terms
governing new dealer notes at any time so long as
any change is made on a non-discriminatory basis.
The trust is obligated to acquire only eligible
dealer notes, which include those dealer notes with
an interest rate:
- based on the prime rate or another benchmark
floating interest rate; and
- subject to adjustment at least monthly.
We cannot assure that the interest rate on dealer
notes will always exceed the applicable floating
rate. Failing to maintain an appropriate spread
between the interest rate on dealer notes and the
applicable floating rate may cause delays or
reductions in payments on your certificates. See
"Risk Factors -- Changes in the relationship
between LIBOR and the prime rate may adversely
affect the trust."
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<PAGE> 41
THE SELLER AND THE TRUST
NAVISTAR FINANCIAL SECURITIES CORPORATION
Navistar Financial Securities Corporation (the "seller") was incorporated
in the State of Delaware on September 13, 1990. The seller was organized for the
limited purpose of purchasing dealer notes from Navistar Financial Corporation
("Navistar Financial") and transferring those dealer notes to third parties. The
seller's executive offices are located at Navistar Financial Securities
Corporation, 2850 W. Golf Road, Rolling Meadows, IL, telephone (847) 734-4000.
THE TRUST
The trust was formed in accordance with the laws of the State of Illinois
pursuant to the pooling and servicing agreement. The assets of the trust
include:
- all dealer notes transferred to the trust by the 1990 Trust and all
dealer notes thereafter transferred to the trust by the seller, all
monies due or to become due and all proceeds of the dealer notes;
- the interest of the seller in the security interests in the financed
vehicles related to the dealer notes and all proceeds of those security
interests;
- the interest of the seller in any amounts recovered by the servicer from
any casualty insurance policies covering any dealer with respect to
financed vehicles (the "Insurance Proceeds");
- any interest rate swap, interest rate cap or other interest rate hedge
entered into or obtained by the trustee for the benefit of any series;
and
- all funds on deposit in specified accounts of the 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 trust, Navistar Financial sells dealer notes to the seller and the
seller transfers those dealer notes to the trust based on criteria provided in
the pooling and servicing agreement. Accordingly, the aggregate amount of dealer
notes in the trust fluctuates 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 trust.
The trust was formed pursuant to the pooling and servicing agreement for
these and similar transactions. Prior to formation, the trust had no assets or
obligations. The trust has not engaged and will not engage in any business
activity other than:
- acquiring and holding the dealer notes and the other assets of the trust
described in this prospectus and proceeds from those assets,
- issuing certificates of any series or class, and
- issuing the 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. The seller will use
those proceeds (net of any amounts retained in the Excess Funding Account to
maintain the Seller's Interest at least equal to the Minimum Seller's Interest)
to repay indebtedness to Navistar Financial incurred by the seller in connection
with the seller's purchase of dealer notes from Navistar Financial prior to the
associated closing date. The seller incurs this indebtedness under a Master
Revolving Credit Agreement between Navistar Financial and the seller (the
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<PAGE> 42
"Master Revolving Credit Agreement"). Interest accrues on the outstanding
principal amount of the note representing this 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 Purchase Agreement terminates in accordance with its terms. Navistar
Financial 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 International Truck and
Engine Corporation ("International Truck and Engine") or Navistar Financial are
conveyed to the trust by the seller under the pooling and servicing agreement.
When used in this prospectus, unless the context otherwise requires, "dealer
notes" refers to those dealer notes which are held by the trust. The dealer
notes are issued by dealers to purchase new vehicles manufactured or distributed
by International Truck and Engine (we call these "International vehicles") or
other manufacturers (we call these "OEM vehicles") or to finance new trailers,
used vehicles and used trailers accepted in trade by dealers or purchased by
them (we call these "financed vehicles"). The trust will include dealer notes
financing OEM vehicles for a dealer only if Navistar Financial also provides
financing for International vehicles for that dealer.
As of October 31, 1999, Navistar Financial was the principal source of
"wholesale" or "floor plan" financing for approximately 332 dealers in the
United States. The percentage of new International trucks sold directly to
dealers in the United States for which Navistar Financial provided financing was
approximately 96%, 95%, 94%, 94% and 93% for fiscal years 1999, 1998, 1997, 1996
and 1995, respectively. Dealers financed by Navistar Financial 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 International Truck and Engine. Navistar Financial
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
Navistar Financial finances 100% of the wholesale invoice price of new
financed vehicles, including destination charges. In the case of International
vehicles, International Truck and Engine creates a wholesale note upon shipment
of each new truck to a dealer and executes that wholesale note under the
signature authority of the dealer granted to International Truck and Engine.
Navistar Financial purchases all wholesale notes relating to new International
vehicles from dealers financed by Navistar Financial on a daily basis from
International Truck and Engine, as described in "Relationship With International
Truck and Engine."
Navistar Financial creates wholesale notes with respect to OEM vehicles
upon Navistar Financial's receipt of an invoice from the vehicle manufacturer
and executes those wholesale note under the signature authority of the dealer
granted to Navistar Financial. Navistar Financial 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 an International Truck and Engine Used Truck
Center and at 100% of the Navistar Financial appraised value for repossessed
vehicles purchased from Navistar Financial. Used vehicles represented
approximately 6%, 7%, 8%, 8% and 7% of the aggregate amount of wholesale notes
serviced by Navistar Financial as of October 31, 1999, 1998, 1997, 1996 and
1995, respectively. Navistar Financial will continue to purchase from
International Truck and Engine wholesale notes issued by a dealer for new
International vehicles and to provide floor plan financing to a dealer for used
vehicles so long as that dealer's dealer agreement is in effect and that dealer
satisfies Navistar Financial's credit guidelines. See "-- Credit Approval
Process and Credit Guidelines" and "-- Dealer Monitoring; Write-Offs."
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<PAGE> 43
CREDIT APPROVAL PROCESS AND CREDIT GUIDELINES
Navistar Financial provides floor plan financing to dealers based upon
pre-established credit guidelines ("Credit Guidelines"). Navistar Financial must
approve each prospective dealer before that dealer receives an International
Truck and Engine Dealer Sales/Maintenance Agreement (a "dealer agreement").
Navistar Financial bases its approval upon a credit evaluation of the
principal owners of a prospective dealer and that dealer's capital structure. In
conducting a credit evaluation, representatives of Navistar Financial'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, Navistar
Financial will obtain both personal and business credit references and will
evaluate any available credit bureau reports.
If a prospective dealer is approved by Navistar Financial, the dealer and
International Truck and Engine enter into a dealer agreement and International
Truck and Engine offers the dealer wholesale floor plan terms approved by
Navistar Financial. The principal owner of the dealer is generally required by
Navistar Financial to guarantee the dealer's obligations to International Truck
and Engine and Navistar Financial. Pursuant to the dealer agreement, in order to
secure all indebtedness of the dealer to Navistar Financial or International
Truck and Engine, the dealer grants to Navistar Financial and International
Truck and Engine a first priority security interest in its inventory of new and
used vehicles. Generally, the dealer also grants Navistar Financial a security
interest in its service parts inventory. Navistar Financial maintains a master
physical damage insurance policy providing coverage for each financed vehicle
with Harco National Insurance Company ("Harco"), a wholly owned subsidiary of
Navistar Financial. The policy provides coverage to Navistar Financial and the
related dealer on all financed vehicles for the actual cash value of each
financed vehicle up to an aggregate amount of $17 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
trustee are loss payees as their interests may appear.
Navistar Financial 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.
Navistar Financial reviews a dealer's guideline at least annually.
Each month, the Navistar Financial 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 that dealer and outstanding. If the amount of notes outstanding exceeds the
dealer's guideline by a certain percentage (the percentage is based upon the
dealer's financial strength rating), the Navistar Financial district credit
manager may place the dealer on inventory control. In addition, a dealer may
also be placed on inventory control if
- the 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 Navistar Financial's home office management any progress
made to resolve the deficiency. Upon its review, Navistar Financial's corporate
office management will take appropriate actions with respect to that dealer. For
example, International Truck and Engine may be requested to sell and transfer
specified truck inventory to another dealer. In extreme cases, Navistar
Financial may foreclose on all outstanding wholesale notes, place the dealer on
cash-on-delivery terms or terminate the dealer.
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<PAGE> 44
Dealers that are placed on inventory control will not receive Navistar
Financial financing for shipments unless specifically approved by Navistar
Financial. Accordingly, if International Truck and Engine generates a wholesale
note to finance the purchase of an International vehicle by a dealer on
inventory control without the prior approval of Navistar Financial, Navistar
Financial will charge International Truck and Engine for the amount of that
wholesale note. Navistar Financial 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. Navistar Financial 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 Navistar Financial.
The following table shows the percentage of dealers on inventory control
and the percentage of the total wholesale note balances of those 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 1999
January.............................................. 0.6% 0.1%
April................................................ 0.9 0.9
July................................................. 1.2 0.3
October.............................................. 2.1 0.5
Fiscal Year 1998
January.............................................. 0.9 1.2
April................................................ 0.6 1.7
July................................................. 0.6 0.2
October.............................................. 0.6 0.2
Fiscal Year 1997
January.............................................. 0.8 1.6
April................................................ 0.8 1.6
July................................................. 0.9 1.3
October.............................................. 0.9 1.5
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
</TABLE>
A key component in Navistar Financial'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
19
<PAGE> 45
date of shipment of the truck to the dealer. If the 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
Navistar Financial and the underlying financed vehicle has not been sold and
delivered to the customer. Navistar Financial may, in its discretion, waive any
curtailment payment.
A wholesale note secured by a used vehicle is due on the earlier of the
sale of the financed vehicle or a specified date generally no later than 180
days from the date of financing. A dealer is allowed to extend quarterly the
term of a used vehicle wholesale note for 90-day periods upon payment of a
curtailment amount equal to 10% of the original principal balance of the
wholesale note, as long as the vehicle is in dealer inventory. These extensions
may continue until the note is paid in full. Navistar Financial may in its
discretion waive any curtailment payment.
Currently, Navistar Financial 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 Navistar Financial 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 generally bear interest at a spread
equal to 1% over the prime rate, while used vehicle wholesale notes generally
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, International Truck and
Engine or Navistar Financial may change the reference rate mechanism in any
manner -- for example, by 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, Navistar Financial may offer special pricing programs to
dealers who enroll in those programs. Navistar Financial 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
base floor plan financing charges by up to 100 basis points. Additional pricing
actions may be taken by Navistar Financial to meet competition in their market
area.
Navistar Financial also currently charges each dealer a monthly charge,
called 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 specified monthly
minimum charges. Under some rebate programs a dealer may reduce its flat charges
by up to 50%. Upon giving notice to the dealers, International Truck and
Engine/Navistar Financial may change the flat charge percentage.
BILLING AND COLLECTION PROCEDURES
An open account statement, which describes interest and flat charges and
other billing and account information, is prepared by Navistar Financial 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 Navistar Financial.
See "Relationship with International Truck and Engine -- Open Account."
Each dealer's monthly open account statement also contains a "Wholesale
Note and Inventory Statement" prepared by Navistar Financial, 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 Navistar Financial's lockbox.
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<PAGE> 46
DEALER MONITORING; WRITE-OFFS
Navistar Financial finance sales representatives or agents of Navistar
Financial 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. Navistar
Financial 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 Navistar Financial. Representatives also confirm with
outside sources such as body shops that they hold units of a dealer's inventory.
Navistar Financial 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 that dealer's financial strength.
When Navistar Financial discovers that a dealer is suffering financial
difficulties, Navistar Financial's district finance office closely monitors the
dealer while working with the dealer to improve its financial condition. In
these circumstances, Navistar Financial 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 Navistar Financial receives from a dealer a check for which the
dealer does not have sufficient funds, or
- when Navistar Financial deems itself insecure.
The dealer is required to make a payment in certified funds of all amounts
owing to Navistar Financial before the Navistar Financial representative leaves
the dealer's premises. If the dealer cannot pay the amount owing to Navistar
Financial, Navistar Financial may place the dealer on cash-on-delivery status
for parts orders, and prohibit future shipment of vehicle orders to the dealer
unless those orders are "sold orders" and specific arrangements are made to
assure prompt receipt of the proceeds by Navistar Financial.
If Navistar Financial's review reveals that a dealer has used proceeds from
vehicle sales due to Navistar Financial for other purposes, the Navistar
Financial district finance office may place the dealer on cash-on-delivery
terms. Navistar Financial causes International Truck and Engine to hold all
shipments to the dealer and sends letters to the dealer's guarantors and bank
advising them of Navistar Financial's interest in the dealer's funds. In
addition, Navistar Financial'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 Navistar Financial,
International Truck and Engine may terminate that dealer's dealer agreement in
accordance with the terms of the dealer agreement and applicable state law.
Generally, in these circumstances the dealer will return all new trucks and
parts inventory to International Truck and Engine in accordance with the terms
of the dealer agreement and will receive credit against the dealer's outstanding
wholesale notes. If the dealer resists termination, however, Navistar Financial
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. If necessary, Navistar Financial will obtain a
court order requiring foreclosure. The dealer's new vehicle inventory purchased
from International Truck and Engine is returned to International Truck and
Engine in exchange for International Truck and Engine's cash payment in full of
the dealer's wholesale notes and the fulfillment of any other obligations owing
to Navistar Financial 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 Navistar
21
<PAGE> 47
Financial to satisfy amounts owing to it. Navistar Financial 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 Navistar Financial has commenced liquidating a dealer's inventory, it
writes off any amounts that it identifies as uncollectible. During the course of
a liquidation, Navistar Financial 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:
(1) open account balances, new wholesale note balances, parts note
balances, deficiency balances on used floor plan notes;
(2) dealer retail note deficiencies, retail note recourse obligations, and
finally;
(3) obligations owed to International Truck and Engine by the dealer.
Dealer notes secured by new OEM vehicles also are generally foreclosed by
return of these vehicles to the manufacturer in the event of dealer termination.
RELATIONSHIP WITH INTERNATIONAL TRUCK AND ENGINE
International Truck and Engine 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. International Truck and Engine 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. International Truck and Engine 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
Navistar Financial is a wholly owned finance subsidiary of International Truck
and Engine, the level of Navistar Financial's floor plan financing activity is
substantially dependent on the level of sales of International Truck and Engine
and its dealers so that any continuing material change in International Truck
and Engine and its dealers may have a corresponding effect on Navistar
Financial's floor plan financing business.
International Truck and Engine 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 International Truck and
Engine, which may terminate any of these optional programs in whole or in part
at any time.
INTEREST DEPOSIT AGREEMENTS AND INTEREST DEPOSIT ACCOUNTS
In order to promote the sale of International vehicles, International Truck
and Engine periodically grants interest credits to dealers and implements
programs pursuant to which International Truck and Engine undertakes to pay, on
behalf of the dealers, interest owing on some of the dealer notes. We refer to
these dealer notes as non-interest bearing dealer notes. In order to insure that
the amount of the interest owed to the trust will be available, International
Truck and Engine, the servicer and the trust have entered into an Interest
Deposit Agreement. Pursuant to the Interest Deposit agreement, International
Truck and Engine makes weekly deposits into the Interest Deposit Account in an
amount equal to the amount of interest International Truck and Engine has
undertaken during that week to pay on behalf of the dealers. Pursuant to the
terms of the Interest Deposit Agreement, International Truck and Engine and the
servicer will calculate the ITEC Interest Amount as of the close of business on
Friday (or the immediately preceding business day if that 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").
If on any Calculation Day the amount on deposit in the Interest Deposit
Account which the trustee has established and maintains for the benefit of the
certificateholders (the "Interest Deposit Account"), including any interest
earned on that account (collectively, the "Deposit Amount"), is less than the
ITEC
22
<PAGE> 48
Interest Amount, International Truck and Engine will deposit the amount of the
deficiency in the Interest Deposit Account. However, if on any Calculation Day
the Deposit Amount exceeds the ITEC Interest Amount, the servicer will direct
the trustee to withdraw the excess from the Interest Deposit Account on the
business day following that Calculation Day (the "ITEC Payment Date") and refund
that amount to International Truck and Engine.
MASTER INTERCOMPANY AGREEMENT
The operating relationship between Navistar Financial and International
Truck and Engine 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 International Truck and Engine, with limited exceptions,
offer Navistar Financial all wholesale and retail notes and installment sales
contracts which International Truck and Engine acquires in the regular course of
its business from sales of trucks and related equipment to dealers and
customers. These 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 Navistar Financial to International Truck and
Engine and the dealers with respect to the sale of International Truck and
Engine products and used goods. Navistar Financial in turn has agreed, to the
extent that it is able to finance these purchases, that it will purchase all of
these receivables without recourse except those, if any, as to which the risk of
loss is unacceptable to Navistar Financial.
Pursuant to the Master Intercompany Agreement, Navistar Financial also
purchases International Truck and Engine wholesale accounts receivable from the
dealers arising out of International Truck and Engine's sales of goods
(primarily parts) and services to those dealers. Navistar Financial receives
compensation from International Truck and Engine in the form of a floating rate
service charge for financing these accounts.
Payments to International Truck and Engine for Administrative and Other
Services. The Master Intercompany Agreement provides for payment by Navistar
Financial to International Truck and Engine of service fees for data processing
and other administrative services provided by International Truck and Engine to
Navistar Financial. The amounts of these service fees are agreed upon
periodically, taking into consideration the nature and costs of those services.
Navistar Financial paid International Truck and Engine service fees of $2.6
million, $2.6 million, $2.1 million, $2.4 million and $2.4 million, for fiscal
years 1999, 1998, 1997, 1996, and 1995, respectively.
NO GUARANTEE BY INTERNATIONAL TRUCK AND ENGINE
None of the operating agreements are guarantees by International Truck and
Engine of the interest on or principal of the notes, the account balances or any
other obligation of the obligors under the agreements.
SPECIAL PRICE ALLOWANCES AT RETAIL
International Truck and Engine may agree 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 that note to a retail customer. These retail
special price allowances (in addition to wholesale special price allowances) are
intended to respond to competitive pressures by allowing a dealer to offer a
lower price to a potential customer.
Generally, International Truck and Engine will approve a retail special
price allowance for a vehicle held in inventory only when the dealer has
identified a potential buyer. A representative of the dealer applies for the
retail special price allowance over the telephone, at which time a
representative of International Truck and Engine asks for certain pertinent
information. International Truck and Engine will quote the dealer the retail
special price allowance on the telephone and later confirm it on a computer
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<PAGE> 49
printout sent to the dealer. Once approved, a retail special price allowance 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 special price allowance.
International Truck and Engine is required to remit the amount of a retail
special price allowance to Navistar Financial upon the sale by the dealer of the
vehicle financed by the wholesale note. However, Navistar Financial does not
reduce the principal balance of the wholesale note until it actually receives
payment of the retail special price allowance from International Truck and
Engine. Although International Truck and Engine has never failed to make such a
payment, it is the policy of Navistar Financial and International Truck and
Engine that the dealer is obligated to the holder of the wholesale note for the
entire principal amount of the wholesale note until Navistar Financial receives
payment from International Truck and Engine. If International Truck and Engine
becomes financially unable to continue providing this 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 Navistar Financial.
In a dispute, 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 International Truck and Engine with respect to that
dealer note.
The amount of retail special price allowances paid by International Truck
and Engine in each month during the period October, 1996 through October, 1999,
ranged between a low of approximately 0.27% and a high of approximately 2.72% of
the outstanding dealer notes during that month.
The amount of retail special price allowances paid by International Truck
and Engine during each of the consecutive 12-month periods ending on the last
day of each month from October, 1996 through October, 1999 as a percentage of
sales during that period ranged between a low of approximately 2.31% and a high
of approximately 6.55%.
In addition to providing retail special price allowances, International
Truck and Engine may also provide wholesale special price allowances to dealers
ordering trucks for inventory. Unlike a retail special price allowance, a
wholesale special price allowance will reduce the invoice price of the truck and
the original principal amount of the wholesale note. Therefore, in contrast to a
retail special price allowance, International Truck and Engine has no subsequent
principal payment obligation for that wholesale note.
FLOOR PLAN FINANCING ASSISTANCE
General. International Truck and Engine currently has a number of formal
and informal floor plan assistance programs for dealers. International Truck and
Engine implements these programs in two ways:
(1) by issuing dealers interest credits to be applied to their monthly
statements, or
(2) by paying wholesale note interest to Navistar Financial on the
dealers' behalf for a specified period of time. In each case, these
programs are agreements between International Truck and Engine and the
dealers and do not affect the dealers' obligations on the wholesale
notes until Navistar Financial receives payment of amounts owing to it
on the wholesale notes. International Truck and Engine may choose to
discontinue or alter these programs in the future.
Interest Credits. International Truck and Engine's floor plan assistance
terms currently provide that, upon issuance of a wholesale note by a dealer,
International Truck and Engine will issue a credit -- an Interest Credit -- to a
dealer's floor plan statement and then transfer the Interest Credit to the
dealer's open account balance in order to provide the dealer with a specified
free interest period for the underlying financed vehicle. International Truck
and Engine 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 International Truck and Engine
issues an invoice for the financed vehicle and is computed at the interest rate
in effect as of that date, taking into account the principal amount of the
wholesale note and the number of days covered by the Interest Credit.
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<PAGE> 50
The aggregate amount of Interest Credits is transferred from the dealer's
floor plan statement to its open account balance on a monthly basis. If the
aggregate amount of these credits exceeds the interest charges for the month,
the dealer is entitled to apply the excess to any of its outstanding obligations
to Navistar Financial and International Truck and Engine 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 Interest Deposit Agreement, International Truck and Engine
deposits in the Interest Deposit Account on a weekly basis an amount equal to
all Interest Credits granted by it to dealers during that week. See "Interest
Deposit Agreements and Interest Deposit Accounts."
Payment of Interest by International Truck and Engine. International Truck
and Engine's current floor plan assistance terms also include an agreement by
International Truck and Engine to pay interest on behalf of the dealers for the
period during which the financed vehicles are in transit to the dealers. In
addition, International Truck and Engine periodically implements special sales
programs in which it agrees to pay interest on behalf of the dealers for
extended periods. Pursuant to the Master Intercompany Agreement, International
Truck and Engine pays the amount of interest owing on the wholesale notes
directly to Navistar Financial. The dealers are not billed for interest owing on
the wholesale notes for the specified period. International Truck and Engine
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 or the sale of the
underlying financed vehicle.
The Interest Deposit Agreement requires International Truck and Engine to
deposit in the Interest Deposit Account on a weekly basis an amount equal to the
aggregate amount of interest that International Truck and Engine has agreed
during that week to pay on behalf of the dealers, regardless of whether that
interest has been earned on the wholesale notes or if that interest is to be
earned in the future.
The following table describes the average monthly amount of Interest
Credits and International Truck and Engine interest payments (in millions of
dollars) for the periods ended on the date specified:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average monthly amount of Interest Credits............ $1.5 $1.7 $1.4 $1.6 $1.7
Average monthly amount of International Truck and
Engine interest payments............................ 2.9 2.6 1.6 1.4 1.5
</TABLE>
OPEN ACCOUNT
International Truck and Engine sells parts, accessories and other
miscellaneous items, and charges for services provided, to dealers through their
open accounts. Dealers are billed monthly on their open account balances.
International Truck and Engine 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 Navistar Financial'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 International Truck and Engine. The open account statement also
contains the flat charge billed to the 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 (we call the calendar month a
"due period"). Navistar Financial 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 that month until the balance is
paid. The dealer's open account statement is accompanied by Navistar Financial's
Wholesale Note and Inventory Statement, which lists each truck in the dealer's
inventory being financed during the month. The Wholesale Note and Inventory
Statement shows by unit, the amount of interest charged by Navistar Financial
during that month and the amount of interest credits or other adjustments
25
<PAGE> 51
issued by International Truck and Engine. 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.
Navistar Financial purchases the aggregate open account balances of all
dealers from International Truck and Engine on a non-recourse basis. Navistar
Financial's purchase of open account items occurs during the month as part of
the daily, weekly, or monthly settlements between International Truck and Engine
and Navistar Financial 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 Navistar Financial 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, among Navistar Financial
Securities Corporation, Navistar Financial, the 1990 Trustee and the trustee,
which has been filed as an exhibit to the registration statement of which this
prospectus is a part. The 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, but does not purport to be complete.
The offered certificates will evidence undivided beneficial interests in
the assets of the trust allocated to the Offered Certificateholders' Interest.
The offered certificates represent the right to receive from those 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 and integral multiples of $1,000. The seller will keep or cause to
be kept by a transfer agent (initially the trustee) a register for the offered
certificates, the certificate register. Unless otherwise designated by the
seller in writing to the trustee, the certificate register will be maintained at
the corporate trust office of the trustee. The 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 that offered certificate
for all purposes, including receiving distributions. None of the trustee, the
paying agent, the transfer agent, or any agent of any of them will be affected
by any notice to the contrary.
INTEREST
The rate per annum at which monthly interest for the offered certificates,
the Offered Certificate Rate, will accrue will be set forth in the prospectus
supplement. During each distribution period, monthly interest on the Invested
Amount will accrue at the Offered Certificate Rate for that 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). Monthly interest will accrue to but excluding the current distribution
date. If monthly interest is calculated at a fixed rate, it will be calculated
on a basis of a 360-day year of twelve 30-day months. If monthly interest is
calculated at a floating rate, it 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 that distribution date will be due on the next distribution date,
together with interest on that amount at the Offered Certificate Rate for the
distribution period related to that distribution date.
Offered Series Finance Charge Collections, Investment Income, any net swap
receipts and specified other amounts, to the extent described in this
prospectus, will be used to make payments of monthly interest to the offered
certificateholders and 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
26
<PAGE> 52
Reserve Account and Available Seller's Finance Charge Collections to the extent
described in this prospectus.
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 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 begins. Although we expect that the final payment 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. See "Risk Factors -- A bankruptcy of Navistar Financial or the
seller may delay or reduce payments on the certificates."
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 that 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.
On each business day during the revolving period, offered series principal
collections, subject to specified limitations, will either be:
(1) 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 series; or
(2) if no series is then amortizing or accumulating principal in series
principal accounts,
(a) allocated to any variable funding certificate at the seller's
option,
(b) allocated to and deposited in the Excess Funding Account to the
extent necessary to maintain the Minimum Seller's Interest, or
(c) 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. Instead a portion of Offered
Series Principal Collections up to the Controlled Deposit Amount for each 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 -- 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 begin and on each subsequent
distribution date 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, that amount will be
distributed to the offered certificateholders at that time.
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BOOK-ENTRY REGISTRATION
Offered certificateholders may hold their offered certificates through DTC
(in the United States) or Clearstream Banking or Euroclear (in Europe) if they
are participants in those systems, or indirectly through organizations which are
participants in those systems.
Cede, as nominee for DTC, will be the registered holder of the global
offered certificates. Except as described in this prospectus, no offered
certificateholder will be entitled to receive a certificate representing that
person's interest in the offered certificates. Unless and until definitive
certificates are issued under the limited circumstances described below, all
references in this prospectus to actions by offered certificateholders shall
refer to actions taken by DTC upon instructions from its Participants, and all
references in this prospectus 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.
Clearstream Banking and Euroclear will hold omnibus positions on behalf of
their participants through customers' securities accounts in Clearstream
Banking's and Euroclear's names on the books of their respective depositaries
which in turn will hold those positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank, N.A. will act as depositary
for Clearstream Banking and Morgan Guaranty Trust Company of New York will act
as depositary for Euroclear (in these capacities, the "Foreign Agency
Depositaries").
Transfers between DTC Participants will occur in the ordinary way in
accordance with DTC rules. Transfers between Clearstream Banking Participants
and Euroclear Participants will occur in the ordinary way in accordance with
their rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
Banking 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, these cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in that 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. Clearstream Banking Participants and Euroclear Participants
may not deliver instructions directly to the Foreign Agency Depositaries.
Because of time-zone differences, credits of securities received in
Clearstream Banking 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. These credits or any
transactions in these securities settled during processing will be reported to
the relevant Euroclear or Clearstream Banking Participant on that business day.
Cash received in Clearstream Banking or Euroclear as a result of sales of
securities by or through a Clearstream Banking 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 Clearstream Banking 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 to this prospectus. For information with
respect to tax documentation procedures relating to the offered certificates,
see Annex I to this prospectus and "Material Federal Income Tax
Matters -- Foreign Holders."
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
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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
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 date, DTC will forward these payments to its Participants which
will then be required to forward them to Indirect Participants or offered
certificateholders. We anticipate that the only "Investor Certificateholder" (as
this term is used in the pooling and servicing agreement) will be Cede, as
nominee of DTC, and that offered certificateholders will not be recognized by
the 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
these 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 the
offered certificates, may be limited due to the lack of a physical certificate
for the 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.
Clearstream Banking, societe anonyme ("Clearstream Banking"), (formerly
known as "Cedel International"), 67 Bd Grande-Duchesse Charlotte, L-1331,
Luxembourg, was incorporated in 1970 as a limited company under Luxembourg law.
Clearstream Banking is owned by a parent corporation, Clearstream Banking
International, societe anonyme, the shareholders of which are banks, securities
dealers and financial institutions. Clearstream Banking International currently
has about 100 shareholders, including U.S. financial institutions or their
subsidiaries. No single entity may own more than five percent of Clearstream
Banking's stock. Clearstream Banking 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. Clearstream
Banking provides clearance and settlement services for its customers and
currently accepts over 70,000 securities issues for clearance, settlement, and
custody. Clearstream Banking's customers consist of broker-dealers, financial
institutions, and other securities professionals involved in the movement and/or
custody of securities. Clearstream Banking's U.S. customers are limited to
brokers, dealers, and banks. Currently, Clearstream Banking has approximately
3000 customers located in over 60 countries, including all major European
countries, Canada and the United States.
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The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need or
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 30
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear S.C., a Belgian cooperative corporation (the "Cooperative"). All
operations are conducted by the Euroclear Operator, and all Euroclear securities
clearance accounts and Euroclear Clearance System cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include any
underwriters, agents or dealers involved in the distribution of the offered
certificates. Indirect access to the Euroclear System is also available to other
firms that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operative Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants, and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to offered certificates held through Clearstream
Banking or Euroclear will be credited to the cash accounts of Clearstream
Banking 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 "Material Federal
Income Tax Matters." Clearstream Banking 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 Clearstream Banking
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to its Foreign Agency Depositary's ability to effect
these actions on its behalf through DTC.
Although DTC, Clearstream Banking and Euroclear have agreed to the above
procedures in order to facilitate transfers of offered certificates among
participants of DTC, Clearstream Banking and Euroclear, they are under no
obligation to perform or continue to perform these procedures and these
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:
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(1) the seller advises the 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
trustee or the seller is unable to locate a qualified successor;
(2) the seller, at its option, elects to terminate the book-entry system
through DTC; or
(3) after the occurrence of a Servicer Termination Event, offered
certificateholders representing beneficial interests aggregating not
less a majority of the Invested Amount advise the trustee and DTC
through Participants in writing that the continuation of a book-entry
system through DTC (or a successor of DTC) is no longer in the best
interests of the 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 trustee will issue the offered certificates in the form of
definitive certificates, and thereafter the 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 this event.
Upon the issuance of definitive certificates, distributions of principal
and monthly interest will be made by the trustee directly to the holders of
definitive certificates in accordance with the procedures described in this
prospectus 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 that holder as it appears on the register maintained by the 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 the offered certificate at the office or agency specified in the
notice of final distribution to offered certificateholders. The trustee will
provide this notice to registered offered certificateholders not later than the
determination date of the month of the final payment.
Definitive certificates will be transferable and exchangeable at the
offices of the trustee, or at any 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 with any registration.
THE SELLER'S CERTIFICATES
The pooling and servicing agreement provides that the seller may exchange
one or more portions of the certificate evidencing the Seller's Interest (the
"Navistar Financial Securities Corporation Certificate") for one or more
certificates (each, a "Supplemental Certificate" and together with the Navistar
Financial Securities Corporation Certificate the "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:
(1) the seller shall have delivered to the trustee and any Enhancement
Provider a Tax Opinion with respect to that exchange; and
(2) 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 above conditions, the seller may exchange the Navistar Financial
Securities Corporation Certificate for one or more Supplemental Certificates in
order to transfer a portion of the 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 Seller's Interest as described in this
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prospectus will include amounts later allocated between the holder of the
Navistar Financial Securities Corporation Certificate and the holders of any
Supplemental Certificates.
NEW ISSUANCES
The pooling and servicing agreement provides that the trustee will issue
two types of certificates:
(1) one or more series of investor certificates (including the offered
certificates) which are transferable and have the characteristics
described below; and
(2) the Seller's Certificates.
The pooling and servicing agreement also provides that, pursuant to one or
more supplements, the seller may cause the 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 or exempt from registration under the Securities Act, 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, one or more series may
be amortizing or accumulating principal, while other series are not. Moreover,
different series may have the benefits of letters of credit, surety bonds, cash
collateral accounts, collateral invested amounts, spread accounts, guaranteed
rate agreements, liquidity facilities, tax protection agreements, interest rate
swap agreements or other similar arrangements (each, an "Enhancement") which may
be issued by different entities. Under the pooling and servicing agreement, the
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.
Under the pooling and servicing agreement and pursuant to a supplement, a
new series may be issued only upon the satisfaction of specified conditions. The
seller may cause the issuance of a new series by notifying the trustee at least
five business days in advance of the date on which the series will be issued
(with respect to any series, the "Series Issuance Date"). The notice shall state
the designation of the series (and classes within a series, if any). The pooling
and servicing agreement provides that the trustee will issue any series only
upon delivery to it of the following:
- a supplement in form satisfactory to the trustee signed by the seller
and the servicer and specifying the Principal Terms of that series;
- the form of any Enhancement and any related agreement;
- an opinion of counsel to the effect that, for federal income tax
purposes;
(1) the 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,
(2) the issuance will not cause a taxable event to any certificateholder
(including the offered certificateholders) or cause the 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 (1) and (2) with respect to any action is referred to in
this prospectus as a "Tax Opinion"), and
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(3) the 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,
- evidence of satisfaction of the Rating Agency Condition; and
- evidence that the amount of the Seller's Interest as of that date (after
giving effect to that issuance and the deposit, if any, of proceeds from
that issuance in the Excess Funding Account) will not be less than the
Minimum Seller's Interest.
The proceeds will be deposited in the Excess Funding Account if the
principal balance of dealer notes at the time of the new issuance is less than
the sum of the Trust Invested Amount and the Minimum Seller's Interest and would
constitute, in effect, a "pre-funding" pending an increase in the available
amount of dealer notes. The issuance is also subject to the condition that the
seller shall have represented and warranted that the issuance shall not, in the
reasonable belief of the seller, cause an Early Amortization Event or Investment
Event to occur. Upon satisfaction of all these conditions, the trustee will
issue the series.
TRANSFER OF DEALER NOTES TO THE TRUST
The servicer assigns eligible dealer notes ("Assignments") on each business
day to the seller on behalf of the trust and is obligated to continue to do so
except upon the occurrence of specified bankruptcy events involving the seller,
Navistar Financial, International Truck and Engine or Navistar International
Corporation. Additionally, the servicer delivers to the trustee on each business
day a computer file, hard copy or microfiche list which shall contain a true and
complete list of all dealer notes acquired on that business day. This delivery
shall be deemed to be an amendment as of that business day to the computer file,
hard copy or microfiche list delivered to the trustee containing a true and
complete list of outstanding dealer notes conveyed to the trust on or about the
date of the pooling and servicing agreement.
ELIGIBLE DEALER NOTES
The seller obtains from Navistar Financial only those dealer notes that are
identified by the servicer as eligible dealer notes. The seller in turn conveys
the eligible dealer notes to the trust. See "Description of Offered
Certificates -- Transfer of Dealer Notes to the Trust." In specified
circumstances, the seller may be required to repurchase:
(1) those dealer notes previously transferred to the trust which are
ineligible dealer notes from the trust; and
(2) in the event that a material amount of dealer notes are ineligible
dealer notes, the interests in the trust of the certificateholders of
all outstanding series (the "Certificateholders' Interest"), from the
holders of those series. See "Description of Offered
Certificates -- Certain Representations and Warranties; Ineligible
Dealer Notes; Purchase of Certificateholders' Interest."
An "eligible dealer note" is any dealer note which meets the following
criteria:
- it is payable in United States dollars;
- it was created in compliance with all requirements of law the failure
with which to comply would have a material adverse effect on
certificateholders;
- all consents or authorizations of, or registrations with, any
governmental authority required to be obtained have been duly obtained,
and are in full force and effect as of the date of creation which relate
to either;
(1) the creation of the dealer note or the related dealer agreement, or
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(2) 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 Navistar Financial to repurchase new vehicle inventory
from Navistar Financial upon Navistar Financial's foreclosure upon
that inventory owned by that dealer (subject to those customary
conditions and limitations as are acceptable to Navistar Financial)
(an "OEM Supplier") or by International Truck and Engine of the
dealer agreement pursuant to which dealer note was created,
- at all times following the transfer of the dealer note to the trust, the
trust will have good and marketable title to the dealer note, 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,
International Truck and Engine, Navistar Financial, Navistar Financial
Securities Corp. and any other direct or indirect subsidiaries of
Navistar International Corporation (the "Navistar Group");
- it will at all times be the legal, valid and binding payment obligation
of the dealer, enforceable against that dealer in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy
or other similar laws, and except as enforceability may be limited by
general principles of equity;
- it constitutes either an "account," "chattel paper" or a "general
intangible" under and as defined in Article 9 of the Uniform Commercial
Code;
- it 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 enforceability may be
limited by general principles of equity;
- at the time of transfer of the dealer note to the trust, the servicer
has satisfied its obligations with respect to that dealer note;
- at the time of transfer of the dealer note to the trust, the servicer
has not taken nor failed to take any action which would impair the
rights of the trust or the holders of interests in the trust;
- at the time of transfer of the dealer note to the trust, the dealer note
has not been issued by a dealer that is insolvent;
- at the time of transfer by the seller of the dealer note to the trust,
the dealer note has not been issued by a dealer that has been placed on
cash-on-delivery terms by the servicer;
- at the time of transfer by the seller of the dealer note to the trust,
the dealer note is not past due over thirty days;
- it has not been issued by a dealer in connection with the dealer's
purchase of parts from International Truck and Engine or an OEM
Supplier;
- when the principal amount of the 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, the dealer note
shall not cause the sum of the principal amounts of all dealer notes to
exceed the applicable Concentration Limit as of the close of business on
the business day preceding the date on which the dealer note is to be
transferred;
- in the case of a dealer note financing an OEM vehicle, when the
principal amount of that OEM Note is added to the principal amount of
the other outstanding OEM Notes previously transferred to the trust, it
shall not cause the sum of these 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 funds on deposit in the Excess
Funding Account in the trust;
- a valid first priority security interest in the financed vehicle has
been transferred to the trust;
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- the Navistar Group has assigned to the trust designation as loss payee
on the insurance policies insuring the financed vehicle against casualty
and theft losses;
- the principal amount of the dealer note is due upon the sale of the
underlying financed vehicle;
- the interest rate of the dealer note is based on the prime rate or
another benchmark floating interest rate and is subject to adjustment at
least monthly;
- the principal amount of the dealer note:
(1) in the case of a financed vehicle which is a new vehicle, is equal
to not more than 100% of the invoice price of the financed vehicle,
(2) in the case of a financed vehicle which is a used vehicle purchased
by a dealer from an International Truck and Engine Used Truck Center
or a repossessed vehicle purchased from Navistar Financial, is equal
to not more than 100% of the agreed upon purchase price, and
(3) 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 75% of the "as is" value of the financed
vehicle as determined by Navistar Financial's appraisal;
- it was created in accordance with the standard practice of the Navistar
Group; and
- it 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.
CERTAIN REPRESENTATIONS AND WARRANTIES; INELIGIBLE DEALER NOTES; PURCHASE OF
CERTIFICATEHOLDERS' INTEREST
The seller has made and will make certain representations and warranties to
the trust (as of the date of the pooling and servicing agreement, as of the
closing date, and as of the date of any assignment of a dealer note) relating to
the pooling and servicing agreement and the dealer notes to the effect, among
other things, that
(1) each dealer note existing on the date of any Acquisition or Assignment
was or will have been conveyed to the trust free and clear of any lien
(excluding permitted liens);
(2) all appropriate consents and governmental authorizations required to
be obtained by the seller in connection with the transfer of the
dealer notes to the trust have been obtained;
(3) the pooling and servicing 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 of the dealer note, or a grant of a first priority perfected
"security interest" (as that term is defined in the Uniform Commercial
Code) in the property to the trust; and
(4) as of the date of any Acquisition or Assignment, the seller is not
insolvent.
These representations and warranties survive the transfer of the dealer
notes to the trust. In the event of a breach with respect to a dealer note of
any representations and warranties set forth in clause (1) above or in the event
that any dealer note is not an eligible dealer note as a result of the failure
to satisfy the eligibility requirements (as specified in the pooling and
servicing agreement), each ineligible dealer note will be automatically removed
from the trust on the terms and conditions described in the following paragraph.
In the event of a breach of any representations and warranties described in
clauses (2), (3) or (4) in the preceding paragraph or in the event that any
dealer note is not an eligible dealer note as a result of the failure to satisfy
certain other eligibility requirements (as specified in the pooling and
servicing agreement), and as a result of that breach or event the trust's rights
to the ineligible dealer notes are impaired, then in the event that breach or
event is not cured within a specified period, each ineligible dealer note will
be removed from the trust on the terms and conditions described in the following
paragraph.
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When removal of a dealer note is required pursuant to the terms described
in the preceding paragraph (any of these dealer notes being an "ineligible
dealer note"), the ineligible dealer note will be automatically removed from the
trust and the principal balance of the ineligible dealer note will be deducted
from the prior principal balance of dealer notes in the trust. The seller will
deposit in the Collections Account within two business days of its removal an
amount equal to the principal amount of that ineligible dealer note plus accrued
but unpaid finance charges on the dealer note. This 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 trust, the
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 pooling and servicing agreement the trustee has
not sold, transferred, or encumbered that ineligible dealer note), all right,
title, and interest of the trust in and to the ineligible dealer note and all
proceeds on the dealer note. 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 trust to the effect, among other things, that as of the date of the pooling
and servicing agreement and any supplement (including the date of the supplement
for the offered series), and the date of any Acquisition or Assignment:
- the pooling and servicing agreement and any supplement (including the
Offered Series Supplement) constitutes a legal, valid and binding
obligation of the seller;
- each Acquisition or Assignment constitutes a legal, valid and binding
obligation of the seller; and
- Schedule 1 or any update to Schedule 1, 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, and the
date of Acquisition or Assignment, as the case may be.
Each representation and warranty survives the transfer of the dealer notes to
the 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 this event has a material adverse
effect on the certificateholders, either the 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 trustee and the
servicer if given by the certificateholders), may direct the seller to purchase
the Certificateholders' Interest within 60 days of that notice, or within a
longer period as may be specified in the notice in each case. The seller will be
obligated to make the purchase on a distribution date occurring within that
period on the terms and conditions described below.
In the event of any breach, an Investment Event or Early Amortization 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 that
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 on the Invested Amount. 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 in the case of an Investment Event or distributed to the offered
certificateholders on the following distribution date in the case of an Early
Amortization Event. See "Description of the Offered Certificates -- Investment
Events" and "-- Early Amortization Events."
Notwithstanding the foregoing, no purchase pursuant to the provisions
described above will be required, and no Investment Event or Early Amortization
Event will occur under the trust, if during that 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 certificateholders caused by the
breach shall have been cured.
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If an insolvency event occurs with respect to the seller, International
Truck and Engine, Navistar International Corporation or Navistar Financial, on
the day of the insolvency event, the seller will (subject to the actions of the
certificateholders) immediately cease to transfer dealer notes to the trust and
promptly give notice to the trustee of the insolvency event. Under the terms of
the pooling and servicing agreement, if an insolvency event occurs with respect
to the seller prior to the date on which the Series 1995-1 investor certificates
issued by the trust have been paid in full, then within 15 days the trustee will
publish a notice of the insolvency event stating that the 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 series and each
person holding a Supplemental Certificate, instruct the trustee not to sell,
dispose of or otherwise liquidate the dealer notes and to continue transferring
dealer notes as before that insolvency event. If the portion of those proceeds
allocated to the Offered Certificateholders' Interest and the proceeds of any
collections on the dealer notes in the Collection Account allocable to the
Offered Certificateholders' Interest are not sufficient to pay the unpaid
Invested Amount in full plus accrued and unpaid interest on the Invested Amount,
offered certificateholders will incur a loss.
The trustee has not made, nor is it required or anticipated that the
trustee will make, any initial or periodic general examination of the dealer
notes or any records relating to the dealer notes for the purpose of
establishing the presence or absence of defects, compliance with representations
and warranties of the seller or for any other purpose. In addition, the trustee
has not made, nor is it anticipated or required that the 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 pooling and servicing
agreement, or for any other purpose.
DUE PERIODS; DISTRIBUTION PERIODS
The pooling and servicing 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 that month and ending on the last
day of that 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 that day is not a business day,
the next business day) next following the end of that due period. The
"distribution period" related to a due period is generally 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 that due
period. Thus, for example, the due period running from July 1, 2000 through July
31, 2000 will have a related distribution date of August 25, 2000 and a related
distribution period running from July 25, 2000 through but excluding August 25,
2000. The length of the initial distribution period may be longer or shorter
than a normal distribution period and will be set forth in the prospectus
supplement.
Finance charges accrue and are collected with respect to due periods.
Monthly interest, by contrast, accrues and is paid with respect to the related
distribution period. Navistar Financial establishes the interest rate on dealer
notes for a due period on the third Monday of the preceding month. The
Applicable Floating Rate payable by the 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 that
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 Applicable
Floating Rate.
ADVANCES
For any due period, the servicer will make an advance (an "Advance") to the
Collections Account of an amount equal to all Dealer Finance Charges for that
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
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Advance relates, or when the servicer determines that it will be unable to
recover that 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 that portion of the Advance.
The reimbursement by the trust to the servicer of an Advance is referred to
in this prospectus as an "Advance Reimbursement." Advance Reimbursements are
funded on each transfer date from Dealer Finance Charge Collections and ITEC
Finance Charges before Finance Charge Collections have been allocated among the
outstanding series.
THE SERVICER
Pursuant to the terms of the pooling and servicing 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 Navistar Financial's customary and usual servicing
procedures. In addition, under the pooling and servicing agreement, the servicer
is also authorized to make withdrawals and payments from the various trust
accounts under the trust. 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 trust, and providing
related data processing and reporting services for the offered
certificateholders and on behalf of the trustee.
Servicing Compensation and Payment of Expenses. As compensation for its
servicing activities and reimbursement for its expenses under the pooling and
servicing agreement, the servicer will be entitled to receive a servicing fee
for each day prior to the termination of the trust, payable in arrears, on the
related distribution date. The "Servicing Fee" shall be the aggregate of the
fees allocable to all outstanding series (including the offered series). The
portion of the servicing fee allocable 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. We call this portion the "Offered Series Servicing Fee").
The remainder of the Series Allocable Servicing Fee will be allocated to the
holders of the Seller's Certificates. See "Description of Offered
Certificates -- Allocation of Collections."
The servicer is obligated to pay specified expenses incurred in connection
with servicing the dealer notes, including expenses related to the payment of
fees and disbursements of the trustee, the Special Servicer Agent and
independent accountants and all other fees and expenses of the trust not
expressly stated in the pooling and servicing agreement to be for the account of
the holders of certificates issued by the trust. The servicer will not pay
federal, state, or local income or franchise taxes, if any, of the trust, the
trustee, or the certificateholders. The servicer will be required to pay these
expenses for its own account and will not be entitled to any payment for these
expenses other than the servicing fee.
Servicer Covenants. Under the terms of the pooling and servicing
agreement, the servicer covenants, among other things, that:
- 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 specified materiality standards);
- so long as any series 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
- if required to select any dealer notes from the dealer notes issued by a
particular dealer in order to satisfy the Concentration Limit, it will
select those dealer notes in a manner that will not be adverse to the
rights of the holders of certificates issued by the trust.
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Certain Matters Regarding the Servicer. Navistar Financial may not resign
from its obligations and duties as servicer under the pooling and servicing
agreement, except upon a determination that its duties are no longer permissible
under applicable law. Any resignation will become effective only after the
trustee or a successor servicer has assumed the servicer's responsibilities and
obligations under the pooling and servicing agreement.
Any person into which, in accordance with the pooling and servicing
agreement, Navistar Financial may be merged or consolidated or any person
resulting from any merger or consolidation to which Navistar Financial is a
party, or any person succeeding to the business of Navistar Financial, upon
execution of a supplement to the pooling and servicing agreement (pursuant to
which that person will assume the rights and obligations of the servicer under
the pooling and servicing agreement) will be the successor to Navistar Financial
as the servicer under the pooling and servicing agreement.
In the event of any Servicer Termination Event and for so long as the
Servicer Termination Event shall not have been remedied, the trustee, by written
notice to the servicer, may terminate all of the rights and obligations of
Navistar Financial as servicer under the pooling and servicing agreement.
Upon the occurrence of any Servicer Termination Event, the trustee will as
promptly as possible appoint a successor servicer, to whom all authority and
power of the servicer under each of the pooling and servicing agreement will
pass and be vested in. If no successor servicer has been appointed by the
trustee and accepted its appointment by the time Navistar Financial ceases to
act as servicer, all authority, power, and obligations of Navistar Financial as
servicer under the pooling and servicing agreement will pass to and be vested in
the trustee with respect to the trust.
A Servicer Termination Event refers to any of the following events:
(1) failure by Navistar Financial as servicer to make any payment,
transfer or deposit, or failure to give instructions to the trustee
regarding the same, on the date it is required to do so under the
pooling and servicing agreement (or within five business days later);
(2) failure on the part of Navistar Financial 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 trustee;
(3) any representation, warranty or certification made by Navistar
Financial 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 that 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 trustee; or
(4) the occurrence of specified events of bankruptcy, insolvency or
receivership of Navistar Financial while acting as servicer under the
pooling and servicing agreement.
Upon the occurrence of a Servicer Termination Event, the servicer will give
prompt written notice of the event to the trustee, and the trustee will give
notice to the certificateholders and to any Enhancement Provider. Upon any
termination or appointment of a successor servicer under the trust, the trustee
will give prompt written notice 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 (1)
above or 60 business days with respect to clauses (2) and (3) above will not
constitute a Servicer Termination Event with respect to the trust if the delay
or failure could not be prevented by the exercise of reasonable diligence by the
servicer and the 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 Investor Certificates evidencing fractional undivided interests in the
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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 Servicer
Termination Event occurring during that 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 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.
TRUST ACCOUNTS; OTHER ACCOUNTS FOR THE OFFERED SERIES
The trustee will establish and will maintain two Eligible Deposit Accounts
in the name of the trustee for the benefit of the certificateholders, including
the offered certificateholders. One of these accounts will be the "Collections
Account" and the other will be the "Excess Funding Account"). The trustee will
also establish and maintain in the name of the 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.
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 in this prospectus 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, International Truck and Engine or the servicer or any
of their affiliates, except as permitted by the rating agencies):
(1) book-entry securities, negotiable instruments or securities
represented by instruments in bearer or registered form having (except
in the case of clause (d) below) remaining maturities occurring not
later than the distribution date immediately following the trustee's
acquisition of the investment, except as otherwise described in this
prospectus, which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) 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 trust's investment or contractual commitment to
invest therein, the commercial paper or other short-term unsecured
debt obligations (other than obligations the rating of which is
based on the credit of a person or entity other than depository
institution or trust company) thereof shall have a credit rating
from each of the rating agencies in the highest investment category
granted thereby;
(c) commercial paper having, at the time of the trust's investment or
contractual commitment to invest therein, a rating from each of the
rating agencies in the highest investment category granted thereby;
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(d) 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;
(e) repurchase obligations (A) 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 (i) a depository
institution or trust company (acting as principal) described in
clause (b) or (ii) a depository institution or trust company the
deposits of which are insured by FDIC or (B) 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, is marked to market daily and is maintained in an amount
that exceeds the amounts of that repurchase obligation, and which
requires liquidation of the collateral immediately upon the amount
of that collateral being less than the amount of that repurchase
obligation (unless the counterparty immediately satisfies the
repurchase obligation upon being notified of the shortfall); or
(f) commercial paper master notes where the issuer has, at the time of
the 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
(2) 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.
Except as otherwise permitted by the rating agencies or as set forth in the
applicable prospectus supplement, 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 the greater of (A) $1,000,000 and (B) 20% of the
aggregate Eligible Investments in all of such accounts collectively
shall be obligations of or investments in any single issuer (except
that this 20% limitation shall not apply to Eligible Investments of
the type specified in clause (1)(a) or, with respect to the Excess
Funding Account, Eligible Investments of the type specified in clause
(1)(d)) 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.
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 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 those funds in accordance with those 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 those
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investments. The servicer is not required to reimburse the trust for any
losses occurring on Eligible Investments.
EXCESS FUNDING ACCOUNT
On each business day 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 Seller's Interest at an amount equal to
(or, in the discretion of the seller, greater than) the Minimum 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 of
the Eligible Investments in the Excess Funding Account shall be treated as
principal collections.
NEGATIVE CARRY RESERVE FUND
If and to the extent specified in the prospectus supplement, the trustee
will establish and maintain in the name of the 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. 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 "-- Allocation of
Collections."
The prospectus supplement for the offered series will specify whether the
terms of the offered series will include a Negative Carry Reserve Fund, Negative
Carry Reserve Fund Deposit Amount, Negative Carry Reserve Fund Required Amount
or Negative Carry Subordinated Amount.
Offered certificateholders will not have any rights to amounts on deposit
in the Negative Carry Reserve Fund or interest income from that fund, except as
described in this prospectus. 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 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 trust does enter into an
interest rate swap, all terms and provisions described in this prospectus
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 trust does not enter into an interest rate swap, these terms
and provisions, as well as paragraphs (x) and (y) under "-- Allocation of
Collections -- 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 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 that date). In exchange for these payments, the 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 that date). Under the interest rate swap, the
amount the 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 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 Offered Series Finance Charge Collections,
except as otherwise described in this prospectus. Net Swap Payments (money owed
to the swap counterparty) will be paid not later than each distribution date out
of Available
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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 in this prospectus.
Net Swap Payments and monthly interest on the offered certificates will be paid
on an equal priority basis as described under "-- Distributions to Offered
Certificateholders and the Swap Counterparty." The notional principal amount of
the Interest Rate Swap will be equal to the Invested Amount.
ALLOCATION OF COLLECTIONS
Collections. The servicer deposits all principal collections into the
Collections Account within two business days of receipt of collections. For each
due period, 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 an "ITEC Interest Transfer Date"), the servicer
directs the trustee to withdraw from the Interest Deposit Account and deposit in
the Collections Account an amount equal to the ITEC Finance Charges for the
immediately preceding due period. See "Relationship with International Truck and
Engine -- Interest Deposit Agreements and Interest Deposit Accounts." In
addition, the servicer deposits 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 deposits any Advance for the due period in the Collections
Account on or before the transfer date. See "-- Advances."
Notwithstanding the foregoing, if Navistar Financial 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 Seller's
Certificates) (an "Enhancement Provider") pursuant to the terms of any
supplement or Enhancement Agreement. If at any time prior to that 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 that business
day occurs and the amount of principal collections for that business day
("Series Allocable Principal Collections").
Allocations Among Series -- Finance Charge Collections and Dealer Note
Losses. Pursuant to the pooling and servicing agreement, on each transfer date
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 the related 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 that due period (the "Series Allocable Finance Charge
Collections" and "Series Allocable Dealer Note Losses," respectively).
Allocation Between the Offered Certificateholders and the
Seller -- Principal Collections. After allocating amounts among the series, on
each business day the servicer will allocate to the offered certificateholders
the Floating Allocation Percentage of Series Allocable Principal Collections for
that business day during the revolving period or the Principal Allocation
Percentage of Series Allocable Principal Collections for that business day
during the Accumulation Period, any Early Amortization Period
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or any Investment Period (these amounts on each business day, together with any
Available Certificateholder Interest Collections and Net Swap Receipts treated
as Offered Series Principal Collections on that 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 Seller's Certificates. As described below, a portion of the amount
allocated to the seller is subordinated to the Offered Certificateholders'
Interest and is generally drawn from Available Seller's Principal Collections.
Allocation Between the Offered Certificateholders and the Seller -- Finance
Charge Collections and Dealer Note Losses. On each transfer date related to a
due period, the servicer will allocate to the offered certificateholders, from
the amount allocated to the offered series for that transfer date, the following
amounts:
- the Floating Allocation Percentage of Series Allocable Finance Charge
Collections for that due period (the "Offered Series Finance Charge
Collections"); and
- the Floating Allocation Percentage of Series Allocable Dealer Note
Losses for that 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 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 Certificateholder Interest Collections. On each transfer date
related to a due period ending prior to the Fully Funded Date, Offered Series
Finance Charge Collections for that due period together with other amounts
comprising Investment Income for the related distribution period (collectively,
"Available Certificateholder Interest Collections"), and any Net Swap Receipts
for the related distribution period will be applied in the following amounts and
in the following order of priority:
(1) An amount equal to the Offered Series Servicing Fee for that due
period (unless that 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.
(2) On a pro rata basis between clauses (i) and (ii), (i) an amount equal
to (A) monthly interest for that distribution period, plus (B) monthly
interest for any prior distribution period to the extent that the
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 that 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 that
distribution period (plus any Net Swap Payments for any prior
distribution period, and interest thereon, to the extent that the
amount has not been previously distributed to the swap counterparty on
a prior distribution date), will be deposited into the distribution
account.
(3) An amount equal to any Offered Series Dealer Note Losses for that due
period will be reimbursed by being treated as Offered Series Principal
Collections for that transfer date.
(4) An amount equal to the aggregate amount of any unreimbursed
Certificateholder Charge-Offs for that due period will be reimbursed
by being treated as Offered Series Principal Collections for that
transfer date and will reimburse those Certificateholder Charge-Offs.
(5) An amount equal to any Spread Account Deposit Amount for that due
period will be deposited into the Spread Account.
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(6) An amount equal to the aggregate outstanding amounts of the Offered
Series Servicing Fee which have been previously waived (unless that
amount has been waived again) shall be allocated and paid to the
servicer.
(7) 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 that 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 (1)
through (7) 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 (1), (2),
(3) and (4) above, there will be a "Deficiency Amount," which will equal the
aggregate amount of the 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 described above, to reduce a
Deficiency Amount:
(x) under the circumstances specified in clause (2) 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; and
(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:
(1) Available Seller's Finance Charge Collections remaining after the
applications specified in clauses (x) and (y) above;
(2) the Spread Account; and
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(3) for any transfer date occurring during any Investment Period or Early
Amortization Period, the Liquidity Reserve Account.
If all of the amounts applied above are insufficient to make the entire
application described in clause (3) above, the Available Subordinated Amount
shall be reduced (but not below zero) by the amount of the insufficiency and the
Offered Series Dealer Note Losses will be deemed reimbursed by the amount of the
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
(3) above, the trustee shall withdraw funds from the Negative Carry Reserve Fund
and apply those funds in the same manner as Available Certificateholder Interest
Collections pursuant to clause (2) 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 (x) the amount so applied and (y) 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 (5) above (or, if less, the amount of remaining
Available Seller's Finance Charge Collections), be applied in accordance with
clause (5) above.
On each transfer date related to a due period beginning after the due
period related to the Fully Funded Date, Available Certificateholder Interest
Collections for that due period and Net Swap Receipts for the related
distribution period, if any, will be applied on an equal priority 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 these
amounts are insufficient to pay monthly interest and Net Swap Payments, then
funds up to the insufficiency will be withdrawn from the Negative Carry Reserve
Fund and applied for these purposes. The Negative Carry Subordinated Amount
shall be reduced by the product of (x) the amount so applied and (y) 1.00 plus
the Subordinated Percentage.
Principal Collections. On each business day, Offered Series Principal
Collections will be applied in the following priority:
(1) 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 this 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 that 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
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amount which, when added to the amount of Offered Series Principal
Collections previously deposited in the Series Principal Account during
the due period in which that business day occurs, shall not exceed the
Controlled Deposit Amount for that due period.
(2) 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
Seller's Interest at an amount equal to (or, in the discretion of the
seller, greater than) the Minimum 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 those 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
series' principal shortfall.
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 in
this prospectus 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).
Shared Principal Collections 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 (1) 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 that business day when added to the amount of
Offered Series Principal Collections previously deposited in the Series
Principal Account during that due period. During any Early Amortization Period
or Investment Period Principal Shortfall 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 that business day occurs) over Offered Series Principal
Collections.
On each business day (1) 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 (2) 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 (a) and (b) 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 and (b) deposited in the
Negative Carry Reserve Fund in an amount equal to the Negative Carry Reserve
Fund Deposit Amount. The amounts required to be deposited pursuant to the
preceding sentence shall be reduced by the amount of Available Seller's Finance
Charge Collections deposited in the Negative Carry Reserve Fund or the Liquidity
Reserve Account, as applicable, on that 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 to the
following priority:
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(1) to the offered series to the extent of any Accumulation Period
Principal Shortfall and to any other series to the extent that series
provides for the use of shared seller principal collections for
principal shortfalls;
(2) to the Excess Funding Account to the extent necessary to maintain the
Seller's Interest at an amount equal to (or, in the discretion of the
seller, greater than) the Minimum Seller's Interest; and
(3) 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 those shared seller principal collections will be
allocated to all shortfalls, including any Accumulation Period Principal
Shortfall, pro rata based on the relative amounts of each shortfall.
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 to principal shortfalls shall be allocated and paid to the seller or
deposited in the Excess Funding Account to the extent necessary to maintain the
Seller's Interest at an amount equal to (or, in the seller's discretion, greater
than) the Minimum Seller's Interest. There shall be no Shared Seller Principal
Collections during any Investment Period or Early Amortization Period.
If on any distribution date during an Investment Period after the
application of all funds to be allocated or distributed on that date the excess,
if any, of (1) the Invested Amount over (2) 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 that
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 Seller's Interest; Spread Account; Liquidity
Reserve Account. A portion of the 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.
If the Available Subordinated Amount falls below the Required Subordinated
Amount for any transfer date, an Investment Event or Early Amortization Event
will occur. The "Required Subordinated Amount" will be set forth in the
prospectus supplement.
The Spread Account will be an Eligible Deposit Account established and
maintained in the name of the 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 (1) the payment
in full of the Invested Amount, (2) the Fully Funded Date and (3) the Series
Termination Date, any funds remaining on deposit in the Spread Account will be
distributed to the seller. On any transfer date prior to the Fully Funded Date,
if the amount in the Spread Account is less than the Projected Spread, the
trustee will deposit the amount of that 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,
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in the Spread Account as described above in "Available Certificateholder
Interest Collections." See "The Seller and the Trust -- The Trust." The
"Projected Spread" will be set forth in the prospectus supplement. During an
Investment Period or an Early Amortization Period, the 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 beginning of an Early Amortization
Period or an Investment Period in the name of the trust for the benefit of the
seller. 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 in this prospectus, until the amount on deposit is equal to the
Available Subordinated Amount, in order to assure a source of funds for payment
of the Available Subordinated Amount. The seller will possess all right, title
and interest in all funds on deposit in the Liquidity Reserve Account, except
that no funds in that account will be paid to the seller during an Investment
Period or Early Amortization Period if the 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 that transfer date) and the Deficiency
Amount is greater than zero (as reduced by all the allocations, distributions,
withdrawals and deposits to be made on that transfer date), the Invested Amount
will be reduced by the 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 in this prospectus (a "Certificateholder Charge-Off"). As of
any transfer date, Certificateholder Charge-Offs for all prior transfer dates
will be considered unreimbursed unless those 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 -- 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 trustee to transfer to the
Distribution Account the funds on deposit in the Series Principal Account and,
to the extent provided in this prospectus, the Collections Account. The servicer
will instruct the trustee to make, without duplication, the following
distributions from the Distribution Account. All of these transfers and
distributions will be made after allocations, if any, to the Series Principal
Account for that distribution date have been made.
(1) 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 that distribution date, that amount will be distributed
on the following distribution date, along with, to the extent
permitted by law, interest at the Offered Certificate Rate on that
amount. In addition, any Net Swap Payments (including any previously
due but unpaid Net Swap Payments and interest on Net Swap Payments)
will be made to the swap counterparty. If funds are inadequate to pay
the aggregate amount of monthly interest and Net Swap Payments, those
payments will be made to the extent of funds available pro rata based
on the relative amounts due.
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(2) Expected Payment Date. On the expected payment date, in addition to
the amount described in (1) above, amounts on deposit in the Series
Principal Account will be distributed as principal (up to a maximum of
the Invested Amount on that distribution date) on the offered
certificates.
(3) 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 (1) above, amounts on deposit in the Series
Principal Account will be distributed as principal (up to a maximum of
the Invested Amount on that distribution date) on the offered
certificates.
(4) 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
Upon the occurrence of an Investment Event, beginning on the first business
day following the Investment Period Commencement Date, Series Allocable
Principal Collections will no longer be paid to the seller or allocated to any
other series but instead will be deposited in the Series Principal Account on
each business day (in an amount not to exceed, in the aggregate, the Invested
Amount), except as described below. The Controlled Deposit Amount will no longer
apply to allocations of principal to the offered certificates.
An Investment Period will begin 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 this 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, these terms will not be operative.
EARLY AMORTIZATION EVENTS
Upon the occurrence of an Early Amortization Event, beginning 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. Instead, they 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 to the offered
certificates. Unless the prospectus supplement for an offered series otherwise
specifies, an "Early Amortization Event" refers to any of the following events:
(1) the trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and is not exempt from
compliance with that Act;
(2) the failure of the swap counterparty to make any payment under the
Interest Rate Swap within one day after the date the 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 the
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;
(3) the Invested Amount is not reduced to zero by the expected payment
date (other than after the Fully Funded Date);
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(4) the United States government or any government agency or
instrumentality files a notice of a lien on the assets of Navistar
Financial or the seller 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 trustee on the assets of the trust (including
without limitation proceeds of the dealer notes); and
(5) 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 that event. The Early
Amortization Period will begin as of the close of business on the business day
immediately preceding the day on which the Early Amortization Event is deemed to
have occurred (the "Early Amortization Period Commencement Date"). Except as
otherwise provided in the prospectus supplement, monthly distributions in
respect of the Invested Amount will begin on the first distribution date
following the due period in which an Early Amortization Period has commenced.
TERMINATION; FULLY FUNDED DATE
Termination. The trust will terminate on the first to occur of:
(1) 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 the variable funding certificate
remains outstanding);
(2) 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 of the seller, as
provided in the pooling and servicing agreement; and
(3) 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 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 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 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 trust, all right, title and interest in the dealer
notes held by the trust, and other funds of the 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 the Series
Termination Date), the trustee will sell or cause to be sold (and apply the
proceeds to the extent necessary to pay the remaining amounts to all offered
certificateholders) an interest in the dealer notes in an amount equal to 110%
of the Invested Amount on the Series Termination Date after giving effect to
those deposits and distributions except that in no event shall that amount
exceed the Series Allocation Percentage for the due period in which the
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Series Termination Date occurs of dealer notes and amounts on deposit in the
Excess Funding Account held by the trust on the Series Termination Date. The net
proceeds of that 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 first, to
pay any amounts owing by the trust to the swap counterparty pursuant to the
Interest Rate Swap to such swap counterparty and 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 dealer notes,
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 of those representations and
covenants, will no longer accrue to the benefit of the offered
certificateholders. In addition, upon the occurrence of the Fully Funded Date:
- no finance charge collections, principal collections or Dealer Note
Losses will be allocated to the offered series; and
- if the final distribution has been made on each other series of investor
certificates or the Fully Funded Date has occurred, all right, title and
interest in the dealer notes (and related assets held by the trust) will
be conveyed and transferred to the seller.
REPORTS TO OFFERED CERTIFICATEHOLDERS
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 trustee based on information provided by the servicer setting
forth, among other things, the following information (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 that distribution date;
(d) the amount, if any, of the distribution allocable to the Invested
Amount;
(e) the amount, if any, of the 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 that
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 that distribution date);
(l) the aggregate amount of dealer notes and funds on deposit in the
Excess Funding Account as of the end of the last day of the related
due period (after giving effect to payments and adjustments made
pursuant to the pooling and servicing agreement);
(m) the Available Subordinated Amount and the Negative Carry Subordinated
Amount (after giving effect to draws thereon on that distribution
date);
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(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 of these investments as of
the last day of the due period, including specified information with
respect thereto; and
(o) the amount of Remaining Available Seller's Principal Collections, the
aggregate amount of Excess Seller's Principal Collections and
Remaining Available Seller's Principal Collections treated as Shared
Seller Principal Collections, the aggregate amount of shared seller
principal collections from other series, and the amount of shared
seller principal collections allocated to the offered certificates and
to other series.
In addition, on or about January 31 of each calendar year (beginning in
2001 with respect to the offered certificateholders), the 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 on an offered certificate and the dates that person held an offered
certificate, and the paying agent will furnish to each 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 that preceding
calendar year or the applicable portion thereof during which that person was an
offered certificateholder, together with any 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 trustee or the servicer.
EVIDENCE AS TO COMPLIANCE
Pursuant to the pooling and servicing agreement, on or about April 15 of
each calendar year, the servicer will 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 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
trustee and the paying agent (as required under the pooling and servicing
agreement) during the preceding calendar year with the computer reports of the
servicer and those accountants are of the opinion that those amounts are in
agreement, except for those exceptions as shall be set forth in that report. In
addition, a firm has furnished and will continue to furnish a report to the
trustee and the servicer to the effect that the firm is of the opinion that the
system of internal accounting controls in effect on the date of the statement
relating to the servicing procedures performed by the servicer under the pooling
and servicing 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 trust and that nothing has come to their attention that would cause them to
believe that the servicing has not been conducted in compliance with the pooling
and servicing agreement, except for those exceptions as shall be set forth in
that report. The procedures to be followed by those accountants will not
constitute an audit conducted in accordance with generally accepted auditing
standards.
The pooling and servicing agreement also requires the servicer to have
delivered to the trustee, the seller and the rating agencies, on or about April
15 of each calendar year, and within ten business days of the servicer's
discovery of a Servicer Termination Event, an officer's certificate stating that
(1) in the course of that officer's duties as an officer of the servicer
that officer would normally obtain knowledge of any Servicer Termination
Event; and
(2) whether that officer has obtained knowledge of any that 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 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
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(1) in the course of that officer's duties as an officer of the seller
that officer would normally obtain knowledge of any Investment Event or
an Early Amortization Event or any breach of the seller's covenants in
the pooling and servicing agreement; and
(2) whether that officer has obtained knowledge of any that Investment
Event or Early Amortization Event or breach of covenant, and, if so,
specifying that Investment Event or Early Amortization Event or breach
of covenant of which the signing officer has knowledge and the nature of
the event.
The servicer will give the trustee copies of all statements, certificates
and reports, and copies of these documents may be obtained by a request in
writing to the trustee addressed to the corporate trust office.
INDEMNIFICATION OF TRUST AND TRUSTEE; LIMITATION ON LIABILITY OF CERTAIN PERSONS
Pursuant to the terms of the pooling and servicing agreement, the seller
and Navistar Financial will indemnify and hold harmless the trust and the
trustee from and against any loss, liability, expense, damage or injury suffered
arising out of the activities of the trust or the trustee, except that:
(1) the seller and Navistar Financial will not indemnify the trust or the
offered certificateholders for liabilities arising from actions taken by
the trustee at the request of offered certificateholders;
(2) the seller and Navistar Financial will not indemnify the trust or the
trustee for any liability, costs, or expenses of the trust or the
trustee resulting from the trustee's own negligent action, its own
negligent failure to act, or its own misconduct; and
(3) the seller and Navistar Financial will not indemnify the 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.
The pooling and servicing agreement provides that no recourse under any
obligation or covenant of the pooling and servicing agreement, 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 pooling and servicing agreement which in the
servicer's reasonable opinion may involve it in any expense or liability.
THE TRUSTEE
The prospectus supplement with respect to each offered series will specify
the entity that will act as the 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. Navistar Financial and its affiliates (other than the seller) may
enter into normal banking and trustee relationships with the trustee. The
trustee may not hold certificates issued under the 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 trustee will have the
power to appoint a co-trustee or separate trustees of all or any part of the
trust. In the event of an appointment, all rights, powers, duties and
obligations conferred or imposed upon the trustee by the pooling and servicing
agreement will be conferred or imposed upon the trustee and the separate trustee
or co-trustee jointly, or, in any jurisdiction in which the trustee shall be
incompetent or unqualified to perform certain acts, singly upon the separate
trustee or co-trustee who will exercise and perform those rights, powers, duties
and obligations solely at the direction of the trustee.
The trustee may resign at any time upon written notice to the seller and
the appointment of a successor trustee. In addition, the seller may remove the
trustee if the trustee ceases to be eligible to continue as to be ineligible
under the pooling and servicing agreement or if the trustee becomes insolvent.
In these circumstances, the seller will be obligated to appoint a successor
trustee. Any resignation or removal of the trustee and appointment of a
successor trustee does not become effective until acceptance of the appointment
by the successor trustee.
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AMENDMENTS
The pooling and servicing agreement or any supplement may be amended by the
seller, the servicer and the trustee without the consent of the
certificateholders of any series, provided the amendment will not, as evidenced
by an officer's certificate of the servicer, have a material adverse effect on
the interests of the certificateholders of that series.
The pooling and servicing agreement or supplement may also be amended by
the seller, the servicer and the 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 amendment, however, may:
(1) 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 certificate;
(2) change the manner of calculating the Certificateholder's Interest of
any series without the consent of all certificateholders of the
adversely affected series;
(3) adversely affect the rating of any series or class of any rating
agency without the consent of two-thirds of the voting interests of that
series or class; or
(4) reduce the percentages of the voting interests in clause (3) required
to consent to the amendment without the consent of each
certificateholder. Promptly following the execution of an amendment
described in this paragraph, the trustee will furnish written notice of
the substance of the amendment to each certificateholder.
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 those certificateholders for its costs and expenses, the trustee
will afford those certificateholders access, during normal business hours, to
the current list of certificateholders for purposes of communicating with other
certificateholders about 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 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 trust, or the obligations of the parties to the trust. The pooling and
servicing agreement does not provide for any annual or other meeting of the
certificateholders.
GOVERNING LAW
The trust will be administered by the trustee in accordance with the
internal laws of the State of Illinois, without reference to its conflict of law
provisions.
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DESCRIPTION OF THE PURCHASE AGREEMENT
The dealer notes are transferred to the trust by the seller and are
acquired by the seller from Navistar Financial pursuant to the purchase
agreement dated as of June 8, 1995 between Navistar Financial and the seller
(the "purchase agreement"). The following summary describes specified terms of
the purchase agreement, but this summary is not a complete description of the
purchase agreement.
DAILY SALES OF DEALER NOTES
The purchase agreement provides that on each business day during the term
of the trust (except upon the occurrence of a bankruptcy event involving the
seller, Navistar Financial , International Truck and Engine or Navistar
International Corporation), Navistar Financial will sell to the seller (each
such transaction, a "Daily Note Sale") all eligible dealer notes existing and
owned by Navistar Financial as of that business day, all monies due or to become
due with respect thereto and all proceeds (including Insurance Proceeds)
thereon, and the interest of Navistar Financial in the security interests in the
financed vehicles related to the dealer notes. The purchase agreement permits
Navistar Financial to adjust the principal amount of dealer notes that are
considered eligible dealer notes. See "Description of the Offered
Certificates -- Eligible Dealer Notes."
The purchase price to be paid by the seller for those dealer notes will
equal the principal amount of those dealer notes plus accrued finance charges on
the dealer notes, and will be paid to Navistar Financial 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 the Daily Note Sale
shall be on terms between Navistar Financial and the seller that reasonably
approximate the fair market value.
In connection with each Daily Note Sale, Navistar Financial will update its
computer files to indicate that the dealer notes have been sold or transferred
to the seller pursuant to a Daily Note Sale. In addition, Navistar Financial
will provide 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 that Daily Note Sale, identified by dealer note number. The records
and agreements relating to the dealer notes have not been and will not be
segregated by Navistar Financial 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 Navistar Financial are marked to evidence the sale or transfer.
Navistar Financial 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 "Risk Factors -- A bankruptcy of Navistar Financial or
the seller may delay or reduce payments on the certificates" and "Certain
Matters Relating to the Dealer Notes."
REPRESENTATIONS AND WARRANTIES
Navistar Financial has made representations and warranties to the seller to
the effect that, among other things:
(1) it is duly incorporated and in good standing and that it has the
authority to consummate the transactions contemplated by the purchase
agreement;
(2) the purchase agreement is the valid, binding and enforceable
obligation of Navistar Financial;
(3) that all information furnished to the seller is accurate in all
material respects; and
(4) that there are no proceedings pending or threatened against Navistar
Financial that would have a material adverse effect on the performance
by Navistar Financial of its obligations under the purchase agreement.
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REPURCHASE OBLIGATIONS
Navistar Financial has agreed in the purchase agreement that if the seller
is required to repurchase the Certificateholders' Interest pursuant to the
pooling and servicing agreement, Navistar Financial will in turn repurchase the
Certificateholders' Interest from the seller. The purchase price paid by
Navistar Financial will be equal to the purchase price required to be paid by
the seller pursuant to the pooling and servicing agreement, and shall be paid
prior to or concurrently with any corresponding payments required to be made by
the seller pursuant to the pooling and servicing agreement.
Navistar Financial also has agreed in the purchase agreement to repurchase
any dealer note from the seller if
(1) that 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 Navistar Financial;
(2) Navistar Financial has not obtained all necessary governmental
consents or approvals required to be obtained in connection with the
sale of that dealer note to the seller; or
(3) the seller has otherwise been required to repurchase the dealer note
pursuant to the pooling and servicing agreement.
The purchase price to be paid for the repurchased dealer note will equal
the principal amount of the dealer note plus accrued finance charges on the
dealer note. Navistar Financial must pay for the dealer note no later than the
date upon which the seller is obligated to make a corresponding payment to the
trust pursuant to the pooling and servicing agreement.
CERTAIN COVENANTS
In the purchase agreement, Navistar Financial has covenanted that it will
perform its obligations under the agreements relating to the dealer notes in
conformity with the Credit Guidelines. Navistar Financial has further covenanted
that, except for the sale and conveyances under the purchase agreement or the
pooling and servicing agreement, Navistar Financial will not sell, pledge,
assign or transfer any interest in the dealer notes to any other person.
Navistar Financial has also covenanted that it will file all necessary documents
covering the seller's right, title and interest in the dealer notes.
TERMINATION
The purchase agreement will terminate immediately after the trust
terminates.
MATERIAL FEDERAL INCOME TAX MATTERS
GENERAL
We describe below the material U.S. federal income tax consequences of the
purchase, ownership and disposition of offered certificates. The discussion is
based upon current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), existing and proposed Treasury Regulations under the Code, current
administrative rulings, judicial decisions and other applicable authorities.
There are no cases or Internal Revenue Service ("IRS") rulings on similar
transactions involving instruments issued by a trust with terms similar to the
offered certificates. As a result, we cannot assure that the IRS will not
challenge the conclusions reached in this discussion. Also, we have not sought
and will not seek a ruling from the IRS. Furthermore, legislative, judicial or
administrative changes may occur, perhaps with retroactive effect, that could
affect the accuracy of the statements and conclusions in this discussion as well
as the tax consequences to offered certificateholders.
This discussion does not 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. Examples include financial institutions,
broker-dealers, life insurance companies, tax-
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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. WE SUGGEST THAT YOU CONSULT WITH YOUR
OWN TAX ADVISORS AND TAX RETURN PREPARERS REGARDING THE PREPARATION OF ANY ITEM
ON A TAX RETURN, EVEN WHEN THE ANTICIPATED TAX TREATMENT HAS BEEN DISCUSSED IN
THIS PROSPECTUS. WE SUGGEST THAT YOU CONSULT WITH YOUR OWN TAX ADVISORS AS TO
THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO YOU OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF OFFERED CERTIFICATES.
CHARACTERIZATION OF THE OFFERED CERTIFICATES AS INDEBTEDNESS
The seller, Navistar Financial and the offered certificateholders express
in the pooling and servicing agreement and in 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 dealer notes. The
seller and each offered certificateholder, by acquiring an interest in an
offered certificate, will agree to treat the offered certificates as
indebtedness for federal, state and local income and franchise tax purposes.
With respect to the issuance of the offered certificates, Kirkland & Ellis,
special tax counsel to the seller and Navistar Financial ("Tax Counsel"), will
deliver its opinion to the effect that, although no specific authority exists
with respect to the characterization for federal income tax purposes of
securities having the same terms as the offered certificates, based on the terms
of the offered certificates and the transactions regarding the dealer notes set
forth in this prospectus, the offered certificates will be characterized as
indebtedness for federal income tax purposes. See "Tax Characterization of the
Trust -- Risks of Alternative Characterization" below for a discussion of the
potential federal income tax consequences to offered certificateholders if the
IRS were successful in challenging the characterization of the offered
certificates for federal income tax purposes. The discussion of federal income
tax consequences set forth below assumes that the offered certificates are
treated as debt for federal income tax purposes.
STATED INTEREST ON OFFERED CERTIFICATES
Based on the above opinion, and assuming the offered certificates are not
issued with original issue discount ("OID"), the stated interest on offered
certificates will be taxable to an offered certificateholder as ordinary income
when received by offered certificateholders utilizing the cash method of
accounting and when accrued by offered certificateholders utilizing the accrual
method of accounting. As discussed below, the offered certificates will be
subject to the rules applicable to bond premium and market discount. Interest
received on the offered certificates may constitute "investment income" for
purposes of certain limitations of the Code concerning the deductibility of
investment interest expense.
ORIGINAL ISSUE DISCOUNT
In general, OID is the excess of the "stated redemption price at maturity"
of a debt instrument over its "issue price," unless that excess falls within a
statutorily defined de minimis exception. An offered certificate's "stated
redemption price at maturity" is the aggregate of all payments required to be
made under the offered certificate through maturity except "qualified stated
interest." "Qualified stated interest" is generally interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at fixed intervals of one year or less during the entire term of the
instrument at certain specified rates. The "issue price" will generally be the
first price at which a substantial amount of the offered certificates are sold,
excluding sales to bond holders, brokers or similar persons acting as
underwriters, placement agents or wholesalers.
Although we do not anticipate that any of the offered certificates will be
issued at a greater than de minimis discount and therefore should not have OID,
a class of offered certificates may nevertheless be deemed to be issued with
OID. If an offered certificate were treated as being issued with OID, the
offered certificateholder would generally be required to include OID in income
as interest over the term of the offered certificate on a constant yield basis,
resulting in the inclusion in income in advance of the receipt of cash
attributable to that income. Thus, each cash payment would be treated as an
amount already
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included in income (to the extent OID has accrued as of the date of the interest
distribution and is not allocated to prior distributions), or as a repayment of
principal. This treatment should not have a significant effect on offered
certificateholders using the accrual method of accounting. However,
certificateholders utilizing the cash method of accounting may be required to
report income with respect to the offered certificates in advance of the receipt
of cash representing that income. Even if an offered certificate has OID falling
within the de minimis exception, an offered certificateholder must include such
OID in income proportionately as principal payments are made on that offered
certificate.
A holder of an offered certificate which has a fixed maturity date not more
than one year from the issue date of that offered certificate (a "Short-Term
Certificate") will generally not be required to include OID on the offered
certificate in income as it accrues, provided that the holder
- is not an accrual method taxpayer,
- is not a bank,
- is not a broker or dealer that holds the offered certificate as
inventory,
- is not a regulated investment company or common trust fund,
- is not the beneficial owner of certain pass-through entities specified
in the Code,
- does not hold the instrument as part of a hedging transaction, or
- does not hold the instrument as a stripped bond or stripped coupon.
Instead, the holder of a Short-Term Certificate would include the OID
accrued on the offered certificate in gross income upon a sale or exchange of
the offered certificate or at maturity, or if that offered certificate is
payable in installments, as principal is paid on the certificate. Such a holder
would be required to defer deductions for any interest expense on an obligation
incurred to purchase or carry the Short-Term Certificate to the extent it
exceeds the sum of any interest income and OID accrued on that offered
certificate. However, that holder may elect to include OID in income as it
accrues on all obligations having a maturity of one year or less held by the
holder in that taxable year or thereafter, in which case the deferral rule of
the preceding sentence will not apply. For purposes of this paragraph, OID
accrues on a Short-Term Certificate on a ratable (straight-line) basis, unless
the holder irrevocably elects (under regulations to be issued by the United
States Treasury Department) with respect to that obligation to apply a constant
interest method, using the holder's yield to maturity and daily compounding.
TREATMENT OF MARKET DISCOUNT AND ACQUISITION PREMIUM
A holder who purchases an offered certificate after the initial
distribution of the certificate at a "market discount" that exceeds a
statutorily defined de minimis amount will be subject to the "market discount"
rules of the Code. A holder who purchases an offered certificate at a premium
will be subject to the bond premium amortization rules of the Code.
In general, "market discount" is the excess of stated redemption price at
maturity or its adjusted issue price if it was issued with OID over its purchase
price. If an offered certificate were purchased after the initial distribution
of the certificate at a "market discount," any gain on sale of that offered
certificate attributable to the holder's unrecognized accrued market discount
would generally be treated as ordinary income to the holder. 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.
Instead of recognizing any market discount upon a disposition of an offered
certificate and being required to defer any applicable interest expense, a
holder may elect to include market discount in income currently as the discount
accrues. The current income inclusion election, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year in which the election applies, and may not be revoked without the consent
of the IRS.
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In the event that an offered certificate is treated as purchased at a
premium, that premium will be amortizable by an offered certificateholder as an
offset to interest income (with a corresponding reduction in that offered
certificateholder's tax basis) on a constant yield basis if that offered
certificateholder elects to do so. This election will also apply to all other
debt instruments held by the offered certificateholder during the year in which
the election is made and to all debt instruments acquired after that year.
DISPOSITION OF INVESTOR CERTIFICATES
If an offered certificateholder sells an offered certificate, the holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted tax basis in the offered
certificate. The adjusted tax basis of the offered certificate to a particular
offered certificateholder will generally equal the holder's cost for the offered
certificate, increased by any OID and market discount previously included by
such offered certificateholder in income with respect to the offered certificate
and decreased by any bond premium previously amortized and any principal
payments previously received by that offered certificateholder with respect to
that offered certificate. This gain or loss will be capital gain or loss if the
offered certificate was held as a capital asset, except for gain representing
accrued interest or accrued market discount not previously included in income.
Capital gain or loss will be long-term if the offered certificate was held by
the holder for more than one year and otherwise will be short-term. Any capital
losses realized generally may be used by a corporate taxpayer only to offset
capital gains, and by an individual taxpayer only to the extent of capital gains
plus $3,000 of other income.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The trustee will be required to report annually to the IRS, and to each
related offered certificateholder of record, the amount of interest paid on the
offered certificates and the amount of any interest withheld for federal income
taxes for each calendar year, except as to exempt holders. Exempt holders are
generally corporations, tax-exempt organizations, qualified pension and
profit-sharing trusts, individual retirement accounts, or nonresident aliens who
provide certification as to their status. Each non-exempt holder will be
required to provide to the trustee, under penalties of perjury, a certificate
containing the holder's name, address, correct federal taxpayer identification
number and a statement that the holder is not subject to backup withholding.
Should a nonexempt offered certificateholder fail to provide the required
certification, the trustee will be required to withhold, from interest otherwise
payable to the holder, 31% of that interest and remit the withheld amount to the
IRS as a credit against the holder's federal income tax liability.
The IRS has issued new regulations governing the backup withholding and
information reporting requirements. The new regulations are generally effective
for payments made after December 31, 2000. Offered certificateholders should
consult their tax advisors with respect to any effect of the new regulations.
Because the seller will, for federal income tax purposes, treat all offered
certificates as indebtedness issued by a trust characterized as either a
partnership or a division of whichever entity owns all of the Seller's
Certificates, the seller will not comply with the tax reporting requirements
that would apply under any alternative characterization of the offered
certificates or the trust described below.
TAX CONSEQUENCES TO FOREIGN HOLDERS
Based on the above opinion that the offered certificates will be treated as
indebtedness for federal income tax purposes, if interest paid (or accrued)
and/or OID accrued to an offered certificateholder who is a nonresident alien,
foreign corporation or other non-U.S. person (a "foreign person") is not
effectively connected with the conduct of a trade or business within the United
States by the foreign person, the interest and or OID (if any) generally will be
considered "portfolio interest", and generally will not be subject to federal
income tax and withholding tax, provided that the foreign person
- is not actually or constructively a "10 percent shareholder" of the
trust or the seller (including a holder of 10% of the outstanding
Seller's Certificates) or a "controlled foreign corporation" with
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respect to which the trust or the seller is a "related person" within the
meaning of the Code or a bank whose receipt of interest is described in
Section 871(h)(3) of the Code, and
- provides an appropriate statement, signed under penalties of perjury,
certifying that the beneficial owner of the offered certificate is a
foreign person and providing that foreign person's name and address.
If the information provided in this statement changes, the offered
certificateholder must so inform the Trustee within 30 days of such change. If
that interest was not portfolio interest, then it would be subject to federal
income tax withholding at a rate of 30 percent, unless that tax was reduced or
eliminated pursuant to an applicable tax treaty. The IRS has issued new
regulations governing withholding, backup withholding and information reporting
requirements. The new regulations are generally effective for payments made
after December 31, 2000. Foreign persons should consult their tax advisors with
respect to any effect of the new regulations.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of an offered certificate by a foreign person will be exempt
from federal income and withholding tax, provided that
- the gain is not effectively connected with the conduct of a trade or
business in the United States by the foreign person, and
- in the case of an individual, the foreign person is not present in the
United States for 183 days or more in the taxable year.
If the interest, gain or income on an offered certificate held by the
foreign person is effectively connected with the conduct of a trade or business
in the United States by the foreign person, the holder (although exempt from the
income withholding tax previously discussed if an appropriate statement is
furnished) generally will be subject to federal income tax on the interest, gain
or income at regular federal income tax rates. In addition, if the foreign
person is a foreign corporation, it may be subject to a branch profits tax equal
to 30 percent 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.
Under current Treasury regulations, backup withholding (imposed at a rate
of 31%) will not apply to payments made in respect of an offered certificate
held by a foreign person if the certifications described above are received,
provided in each case that the trust or the paying agent, as the case may be,
does not have actual knowledge that the payee is a U.S. person. The IRS has
issued new regulations governing the backup withholding and information
reporting requirements. The new regulations are generally effective for payments
made after December 31, 2000. Offered certificateholders who are foreign persons
should consult their tax advisors with respect to the any effect of the new
regulations. Because the seller will, for federal income tax purposes, treat all
offered certificates as indebtedness issued by a trust characterized as either a
partnership or a division of whichever entity owns all of the Seller's
Certificates, the seller will not comply with the tax reporting requirements
that would apply under any alternative characterization of the offered
certificates or trust described below.
TAX CHARACTERIZATION OF THE TRUST
Depending upon whether the equity of the trust is owned by one or more
persons, the trust will be treated as a partnership or a division of seller for
federal income tax purposes. Although, as described above, it is the opinion of
Tax Counsel that the offered certificates will properly be characterized as
indebtedness for federal income tax purposes, this opinion is not binding on the
IRS or the courts and we cannot assure that this characterization will prevail.
If the IRS were to contend successfully that any class of any offered series of
the offered certificates is not debt for federal income tax purposes or if
Seller's Certificates are sold or issued in any manner which results in there
being more than one holder of Seller's Certificates, the arrangement among the
seller, the servicer and the holders of that class of offered certificates or
Seller's Certificates, as applicable, would be classified as a partnership for
federal income tax purposes.
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If the IRS treats the offered certificates as indebtedness and if all of
the Seller's Certificates are owned by the seller, the equity of the trust will
be wholly-owned by the seller. In that case, under the "check-the-box" Treasury
Regulations, the trust will be treated as a division of the seller, and hence a
disregarded entity for federal income tax purposes. In other words, for federal
income tax purposes, the seller will be treated as the owner of all the assets
of the trust and the obligor of all the liabilities of the trust. Accordingly,
the trust would not be liable for any federal income taxes as it would be deemed
not to exist for federal income tax purposes. Under the "check-the-box" Treasury
regulations, unless it is treated as a trust for federal income tax purposes, an
unincorporated domestic entity with more than one equity owner is automatically
classified as a partnership for federal income tax purposes. Because it is a
business trust, the trust will not qualify as a trust for federal income tax
purposes. Accordingly, if the IRS were to contend successfully that any class of
any offered series of offered certificates is not debt for federal income tax
purposes or if the Seller's Certificates are sold or issued in any manner which
results in there being more than one holder of Seller's Certificates, the trust
will be treated as a partnership.
If the Seller's Certificates are issued to more than one person, the seller
and the Servicer will agree, and the applicable holders of the Seller's
Certificates will agree by their purchase or acquisition of those Seller's
Certificates, to treat the trust as a partnership for purposes of all applicable
income and franchise tax purposes. In this case, the partners of that
partnership would be the holders of the Seller's Certificates (including the
seller) and the offered certificates would be debt of that partnership. However,
the proper characterization of the arrangement involving the Seller's
Certificates, the seller and the servicer is not clear because there is no
authority on transactions closely comparable to those transactions contemplated
in this prospectus.
Risks of Alternative Characterization. If the trust were an association
taxable as a corporation for federal income tax purposes, it would be subject to
corporate income tax. Any such corporate income tax could materially reduce or
eliminate cash that would otherwise be distributable with respect to the
applicable offered certificates (and offered certificateholders could be liable
for any that tax that is unpaid by the trust). However, upon the issuance of
each series of offered certificates, Tax Counsel will deliver its opinion that
the trust will not be classified as an association taxable as a corporation and
under certain Code and Treasury Regulations (the "PTP Regulations") will not be
classified as a publicly traded partnership ("PTP") taxable as a corporation.
Under the PTP Regulations, a partnership may be classified as a PTP if
equity interests in the partnership are traded on an "established securities
market" or are "readily tradeable" on a "secondary market" or its "substantial
equivalent." For federal income tax purposes, a PTP is taxable as a corporation
in the manner described above. However, in cases in which Seller's Certificates
are issued to more than one person, the trust will comply with certain safe
harbors available under the PTP Regulations to avoid PTP characterization. In
cases in which IRS successfully contended that any class of any offered series
of the offered certificates is not debt for federal income tax purposes, the
trust would in all likelihood be treated as a PTP. But even if the trust were
classified as a PTP, it would avoid taxation as a corporation if 90% or more of
its annual income constituted "qualifying income" not derived in the conduct of
a "financial business." It is unclear, however, whether the trust's income would
be so classified.
If the trust were classified as a PTP but one not taxable as a corporation,
the trust would not be subject to federal income tax, but each partner would be
required to take into account such partner's allocable share of income, gains,
losses, deductions and credits of the trust. The amount and timing of income
reportable by any offered certificateholder as a partner in a partnership could
differ materially from the income reportable by the offered certificateholder if
the offered certificates are characterized as debt.
Because the seller will treat all of the offered certificates as
indebtedness issued by a trust characterized as a partnership or as a division
of whichever entity owns all of the Seller's Certificates, the seller will not
comply with any tax reporting requirements that would apply under any
alternative characterization of the offered certificates or the trust.
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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 Illinois and New York,
the offered certificateholders not otherwise subject to taxation in those states
will not, although the matter is not free from doubt, become subject to these
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 pooling and servicing 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 pooling and servicing agreement were
treated as a partnership for Illinois and New York state tax purposes, it is
possible that each state could view the partnership as doing business in its
state and, unless offered certificateholders were treated as holding debt of
such partnership, could treat each offered certificateholder as deriving income
from activities in the state. As a result, the state might, under applicable
income apportionment and sourcing rules, treat some part of the partnership's
income as allocable to that state and then tax an offered certificateholder on
its share of that 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, that partnership could be subject to the
Illinois personal property replacement tax, which tax 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.
These 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 these tax laws solely as a result of its
ownership of offered certificates in the hypothetical corporation.
We cannot assure that no other state will claim that activities with
respect to the pooling and servicing agreement have taken place in that state
and therefore subject offered certificateholders to taxation in that state. If
any state taxing authority were to assert such a claim successfully, the
treatment of the offered certificates for purposes of that state's income tax
laws would be determined under those income tax laws, and we cannot assure that
the offered certificates would be treated as indebtedness for purposes of
taxation in that state.
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The above description of the potential state tax consequences is
necessarily incomplete. We suggest you consult with your own tax advisor with
respect to the applicability of state and local income and franchise taxes to
your 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 trustee and each Investor Certificateholder
covenant that they will not institute against the seller or the 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 International Truck and Engine to
Navistar Financial, from Navistar Financial to the seller and from the seller to
the trust have been structured as sales 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 International Truck and Engine, Navistar
Financial or the seller were to become a debtor in a bankruptcy case and a
creditor or trustee in bankruptcy of that debtor or that debtor itself were to
apply this analysis or otherwise take the position that the transfer of the
dealer notes from that debtor to the seller or the trust, as the case may be,
should be recharacterized as a pledge of the dealer notes to secure a borrowing
by that debtor, then delays in receipt of collections on the dealer notes to the
trust and payments on the offered certificates could result. Should the court
rule in favor of any creditor, trustee in bankruptcy or debtor, reductions in
the amount of those payments could also result.
In addition, if Navistar Financial or the seller were to become a debtor in
a bankruptcy case and a creditor or trustee in bankruptcy of that debtor or that
debtor itself were to request a court to order that Navistar Financial 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 that
creditor, trustee in bankruptcy or debtor, reductions in the amount of those
payments could result.
If Navistar International Corporation, International Truck and Engine,
Navistar Financial or the seller were to become a debtor in a bankruptcy case,
an Early Amortization Event would occur. In this event, all Series Allocable
Principal Collections would be applied to principal payments on the offered
certificates and dealer notes thereafter would no longer be sold to the seller
and transferred to the trust. The occurrence of specified events of bankruptcy,
insolvency or receivership with respect to the servicer will also result in a
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
trustee or the holders of certificates issued by the trust from appointing a
successor servicer.
In addition, if the pooling and servicing agreement is deemed an executory
contract under bankruptcy laws, a trustee in bankruptcy of any party to the
agreement (including a debtor in possession) may have the power to assume (that
is, reaffirm) or reject that agreement. A party deciding whether to assume or
reject any agreement would be given a reasonable period of time to make a
decision, perhaps even until the time of confirmation of the plan of
reorganization, which could result in delays in payments or distributions on the
securities.
Transfers made in some isolated transactions contemplated by the pooling
and servicing agreement (including payments made by Navistar Financial or the
seller with respect to repurchases of dealer notes) may be recoverable by
Navistar Financial or the seller, as debtor in possession, or by a trustee in
bankruptcy of Navistar Financial or the seller, as a preferential transfer from
Navistar Financial or the seller if the transfers are made within specified
periods prior to the filing of a bankruptcy case in respect of Navistar
Financial or the seller and specified other conditions are met.
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In addition, application of federal bankruptcy and state debtor relief laws
to any dealer could affect the interests of the trust and the trustee in the
dealer notes of that dealer if the enforcement of those laws result in any
dealer notes conveyed to the trust being written off as uncollectible by the
servicer. Whether or not any dealer notes are written off as uncollectible,
delays in payments due on the dealer notes could result.
CERTAIN MATTERS RELATING TO THE DEALER NOTES
The seller has warranted in the pooling and servicing agreement that the
transfer of the dealer notes to the trust is either:
(1) a valid transfer and assignment of the dealer notes to the trust; or
(2) a grant to the 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 trust's interests in the trust assets. In
addition, the seller has warranted that, if the transfer of dealer notes by the
seller to the trust is a grant to the trust of a security interest in the dealer
notes, the trust will at all times have a first priority perfected security or
ownership interest in all dealer notes transferred to the trust and all proceeds
thereof, except that if 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 trust's interests in the 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 trust
should be recharacterized as a pledge of the dealer notes, delays in
distributions on the offered certificates could result. Should the bankruptcy
court rule in favor of any such trustee, debtor in possession or creditor,
reductions in the distributions could result. There is a substantial possibility
that the 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, we anticipate that the 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 offered certificates. We cannot assure that all
of these payments would be timely.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on employee benefit plans to which they
apply ("Plans") and on persons who have certain specified relationships to Plans
("parties in interest" within the meaning of ERISA and "disqualified persons"
within the meaning of the Code, referred to herein as "Parties in Interest").
ERISA also imposes certain duties on persons who are fiduciaries of Plans and
prohibits a Plan from engaging in a broad range of transactions involving "plan
assets" with Parties in 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 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 trust were deemed to be assets of Plans that are
offered certificateholders, a transaction involving the 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 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
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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:
(1) is freely transferable;
(2) is held by 100 or more investors who are independent of both the
issuer and one another; and
(3) 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
trust will not be plan assets and that the investment by the Plan will not be a
prohibited transaction for which no statutory or administrative exemption
applies.
PLAN OF DISTRIBUTION
Under the terms and subject to the conditions contained in an underwriting
agreement (the "Underwriting Agreement"), with respect to the trust, the seller
will agree to sell to each of the underwriters named in the related prospectus
supplement, and each of the underwriters will severally agree to purchase from
the seller, the principal amount of the offered certificates set forth in the
underwriting agreement and in the prospectus supplement.
In the underwriting agreement, the underwriter(s) will agree, subject to
the terms and conditions set forth in that agreement, to purchase all the
offered certificates which are offered by this prospectus and by the prospectus
supplement if any of the offered certificates are purchased. In the event of a
default by any underwriter, the Underwriting Agreement will provide that, in
certain circumstances, any purchase
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commitments of the nondefaulting underwriters may be increased or the
Underwriting Agreement may be terminated.
The prospectus supplement will either:
(1) set forth the price at which offered certificates will be offered to
the public and any concessions that may be offered to dealers
participating in the offering of those offered certificates; or
(2) 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 the sale.
After the initial public offering of any offered certificates, the public
offering price and the 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 the 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 these transactions. These
transactions, if commenced, may be discontinued at any time.
The underwriting agreement will provide that Navistar Financial and the
seller will indemnify the underwriter(s) against specified liabilities,
including liabilities under the Securities Act.
The 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 Navistar Financial and the seller by
Kirkland & Ellis, Chicago, Illinois.
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GLOSSARY
"Accumulation Period Principal Shortfall" is defined on page 47.
"Acquisition Premium" is defined on page 59.
"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 that 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 that
transfer date and (ii) 1.00 plus the Subordinated Percentage, minus the
aggregate amount of Certificateholder Charge-Offs not reimbursed on or prior to
that distribution date, minus the aggregate Early Distribution Amounts made on
or prior to that distribution date.
"Advance" is defined on page 32.
"Advance Reimbursement" is defined on page 38.
"Aggregate ITEC Earned Interest" means, with respect to any due period, the
aggregate amount of ITEC Earned Interest on all non-interest bearing dealer
notes accrued during that due period.
"Applicable Floating Rate" is defined on page 9.
"Assignments" is defined on page 33.
"Available Certificateholder Interest Collections" is defined on page 44.
"Available Draw Funds" is defined on page 45.
"Available Seller's Finance Charge Collections" for any due period means an
amount equal to the product of:
(1) the excess of (i) the Seller's Percentage for that due period over
(ii) the result of the Excess Seller's Percentage for that due period
minus the Required Excess Seller Interest Percentage; and
(2) Series Allocable Finance Charge Collections for that 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 that due period.
"Available Seller's Principal Collections" for any business day means an
amount equal to the product of:
(1) 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
that due period; and
(2) Series Allocable Principal Collections for that 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 that business day.
"Available Subordinated Amount" for the Offered Series will equal the
product of the Subordinated Percentage and the Invested Amount, and for each
subsequent transfer date thereafter equal the lesser of: (1) the Maximum
Subordinated Amount for the offered series and (2) 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 that transfer date).
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"Calculation Day" is defined on page 22.
"Certificateholder Charge-Off " is defined on page 49.
"Certificateholders' Interest" is defined on page 33.
"Code" is defined on page 57.
"Collections Account" is defined on page 40.
"Controlled Deposit Amount" for any due period occurring during the
Accumulation Period means the excess, if any, of:
(1) 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 that due period (but not in excess of the
Accumulation Period Length) over
(2) 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.
"Cooperative" is defined on page 30.
"Corporate Trust Office" is defined on page 54.
"Credit Guidelines" is defined on page 18.
"Daily Note Sale" is defined on page 56.
"Dealer" means:
(1) a person with whom International Truck and Engine has a valid dealer
agreement to sell International vehicles;
(2) a truck equipment manufacturer to whom International Truck and Engine
sells vehicles pursuant to a valid dealer agreement; or
(3) a person with whom Navistar Financial has a valid dealer agreement to
extend used truck floor plan terms.
"Dealer Agreement" is defined on page 18.
"Dealer Finance Charges" means, with respect to any due period, the
interest and other finance charges accrued with respect to the dealer notes
during that due period and billed by the servicer on a monthly basis to dealers.
Dealer Finance Charges do not include ITEC Finance Charges.
"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 that due period.
"Dealer Note Collections" means, with respect to each business day:
(1) all payments including insurance proceeds, if any, received by the
servicer from persons other than Navistar Financial 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;
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(2) all cash payments made by Navistar Financial or International Truck
and Engine in respect of non-cash proceeds received from dealers or
credits granted to dealers by International Truck and Engine with
respect to the repayment of principal of the dealer notes; and
(3) recoveries made by the servicer allocable to the dealer notes, in each
case as deposited in the Collections Account on that business day.
"Dealer Note Losses" means, with respect to any due period the aggregate
face amount of dealer notes written off as uncollectible by the servicer during
that due period minus any recoveries made during that due period on dealer notes
previously written off as uncollectible.
"Deficiency Amount" is defined on page 45.
"Definitive Certificates" is defined on page 30.
"Determination Date" means, with respect to any due period, the twelfth day
of each calendar month next following the end of that due period, or if the
twelfth day is not a business day, the next business day.
"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 that transfer date.
"Distribution Account" is defined on page 40.
"Distribution Date" is defined on page 37.
"Distribution Period" is defined on page 37.
"DOL" is defined on page 65.
"Due Period" is defined on page 25.
"Early Amortization Event" is defined on page 50.
"Early Amortization Period" means the period beginning on the Early
Amortization Period Commencement Date and ending upon the first to occur of (1)
the payment in full to the offered certificateholders of the Invested Amount and
(2) the Series Termination Date.
"Early Amortization Period Commencement Date" is defined on page 51.
"Early Amortization Period Shortfall Amount" is defined on page 48.
"Early Distribution" is defined on page 50.
"Early Distribution Amount" is defined on page 50.
"Early Distribution Date" is defined on page 50.
"Eligible Deposit Account" means either
(1) a segregated account with an Eligible Institution or
(2) a segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States
or any one of the states thereof (or any domestic branch of a foreign
bank), having corporate trust powers and acting as trustee for funds
deposited in such account, so long as any of the securities of such
depository institution has a credit rating from each rating agency in
one of its generic rating categories which signifies investment grade.
"Eligible Institution" means:
(1) the corporate trust department of the trustee; or
(2) 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 (a) has either
(A) a long-term unsecured debt rating acceptable to the rating
agencies or
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(B) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the rating agencies and (b) whose deposits are insured by the
FDIC.
"Eligible Investments" is defined on page 40.
"Enhancement" is defined on page 32.
"Enhancement Provider" is defined on page 43.
"ERISA" is defined on page 65.
"Euroclear" is defined on page 30.
"Euroclear Operator" is defined on page 30.
"Euroclear Participants" is defined on page 30.
"Excess Funding Account" is defined on page 40.
"Excess Interest Collections" is defined on page 45.
"Excess Seller's Percentage" for any due period means a percentage (not
less than 0% nor more than 100%) equal to the Seller's Percentage minus the
percentage equivalent (not less than 0% nor more than 100%) of a fraction, the
numerator of which is the sum of the:
(1) Available Subordinated Amount as of the end of the related transfer
date; and
(2) 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 means the product of:
(1) Series Allocable Principal Collections for that business day; and
(2) the Excess Seller's Percentage for that due period.
"Finance Charges" means, with respect to any due period, dealer Finance
Charges and ITEC Finance Charges for that due period.
"Finance Charge Collections" means, with respect to any due period, the
positive amount, if any, by which the sum of dealer Finance Charge Collections
and ITEC Finance Charges exceeds Advance Reimbursements during that due period.
"Financed Vehicles" is defined on page 17.
"Floating Allocation Percentage" for the offered series for any due period
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
(1) the sum of the aggregate principal amount of dealer notes in the trust
and the aggregate principal amount of funds in the Excess Funding
Account as of the end of the preceding due period and
(2) the Series Allocation Percentage for the due period for which the
Floating Allocation Percentage is being calculated.
"Foreign Agency Depositaries" is defined on page 28.
"Foreign Holder" is defined on page 61.
"Fully Funded Date" is defined on page 5.
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"Global Securities" is defined in Annex I.
"Harco" is defined on page 18.
"Indirect Participants" is defined on page 29.
"Ineligible Dealer Note" is defined on page 36.
"Insurance Proceeds" is defined on page 16.
"Interest Credit" is defined on page 24.
"Interest Deposit Amount" is defined on page 22.
"International Vehicle" is defined on page 17.
"Invested Amount" means, with respect to any distribution date, the Initial
Invested Amount minus the sum of
(1) the aggregate amount of payments of principal in respect of the
offered certificates paid to the offered certificateholders on or
prior to that distribution date,
(2) the aggregate amount of Certificateholder Charge-Offs not reimbursed
on or prior to that distribution date,
(3) the aggregate amount of Series Principal Account Losses on or prior to
that distribution date and
(4) the aggregate Early Distribution Amounts made on or prior to that
distribution date.
"Investment Events," if any, with respect to the offered series will be
specified in the prospectus supplement.
"Investment Period" is defined on pages 5 and 50.
"Investment Period Commencement Date" is defined on page 50.
"Investment Period Shortfall Amount" is defined on page 48.
"ITEC Earned Interest" means, on any Calculation Day or ITEC 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
(1) 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
Navistar Financial during that due period (the "Current Interest
Rate") and
(2) 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.
"ITEC Finance Charges" means, with respect to any due period, the sum of:
(1) the amount of Up-Front Interest Credit granted by International Truck
and Engine during that due period; and
(2) the amount of Aggregate ITEC Earned Interest accrued during that due
period.
"ITEC Future Due Interest" means, with respect to any non-interest bearing
dealer note on any Calculation Day, an amount equal to the product of
(1) the product of (a) the principal amount of the non-interest bearing
dealer note and (b) the Current Interest Rate and
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(2) 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 that dealer note is requested to start paying interest
and (b) the actual number of days in the related calendar year.
"ITEC Interest Amount" equals the sum of:
(1) the amount of the aggregate amount of interest credits ("Up-Front
Interest Credit") granted to dealers by International Truck and Engine
during the current due period;
(2) the aggregate amount of ITEC Earned Interest on all non-interest
bearing dealer notes accrued during the current due period; and
(3) the amount of the aggregate amount of ITEC Future Due Interest on all
non-interest bearing dealer notes as of such Calculation Day.
"Master Intercompany Agreement" is defined on page 23.
"Master Revolving Credit Agreement" is defined on page 17.
"Master Revolving Note" is defined on page 17.
"Maximum Subordinated Amount" for the offered series means the product of:
(1) the Invested Amount; and
(2) 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.
"Minimum Seller's Interest" with respect to any business day 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.
"Navistar Financial Securities Corporation Certificate" is defined on page
31.
"Navistar Group" is defined on page 34.
"Negative Carry Reserve Fund" is defined on page 42.
"Negative Carry Reserve Fund Deposit Amount" equals, for any transfer date,
the excess, if any, of:
(1) the lesser of (a) the Negative Carry Reserve Fund Required Amount for
that transfer date and (b) the result of (ii) the Negative Carry
Subordinated Amount as of the end of the preceding transfer date
divided by (ii) 1.00 plus the Subordinated Percentage over
(2) the amount of funds on deposit in the Negative Carry Reserve Fund on
that transfer date (after giving effect to any withdrawals therefrom
on such date).
"Negative Carry Reserve Fund Required Amount" equals:
(1) for any transfer date prior to the Fully Funded Date, the amount
designated in the prospectus supplement and
(2) for each transfer date after the Fully Funded Date, zero.
"Negative Carry Subordinated Amount" shall mean,
(1) on any transfer date related to a due period occurring prior to the
beginning 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
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(2) 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 the preceding
transfer date).
"Net Swap Payment" is defined on page 9.
"Net Swap Receipt" is defined on page 9.
"Non-Interest Bearing Dealer Notes" is defined on page 22.
"OEM Supplier" is defined on page 34.
"OEM Vehicle" is defined on page 17.
"Offered Certificate Rate" is defined on page 26.
"Offered Certificateholders' Interest" is defined on page 3.
"Offered Series Dealer Note Losses" is defined on page 44.
"Offered Series Finance Charge Collections" is defined on page 44.
"Offered Series Principal Collections" is defined on page 44.
"Offered Series Servicing Fee" is defined on page 38.
"OID" is defined on page 58.
"Participants" is defined on page 28.
"Parties in Interest" is defined on page 65.
"Plan Assets Regulation" is defined on page 65.
"Plans" is defined on page 65.
"Pooling and Servicing Agreement" is defined on page 26.
"Principal Allocation Percentage" for the offered series for any due period
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
(1) the sum of the aggregate amount of dealer notes in the 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
(2) the Series Allocation Percentage for the due period for which the
Principal Allocation Percentage is being calculated.
"Principal Collections" means, with respect to any business day the sum of
(1) dealer note Collections for such business day,
(2) 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."
"Principal Shortfall" is defined on page 47.
"Principal Terms" means, with respect to any Series, the principal terms of
such Series, which may include without limitation:
- the name or designation;
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<PAGE> 100
- the initial principal amount (or method for calculating such amount or,
with respect to any variable funding certificate, variations in
principal amount);
- the rate of interest thereon (or method for the determination thereof);
- the payment date or dates and the date or dates from which interest
shall accrue;
- the method of allocating collections to certificateholders;
- the designation of any series accounts and the terms governing the
operation of any such series accounts;
- the amount of the servicing fee allocable to the series and the
certificateholders' portion of the servicing fee;
- the issuer and terms of any form of Enhancement;
- the terms of which the investor certificates of the series may be
exchanged for investor certificates of another series, repurchased by
the seller or remarketed to other investors;
- the series termination date for the series;
- the number of classes of investor certificates of the series and, if
more than one class, the rights and priorities of each class;
- the extent to which the investor certificates of the series will be
issuable in temporary or permanent global form (and, in that case, the
depositary for the global certificate or certificates, the terms and
conditions, if any, upon which the 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);
- whether the investor certificates of the series may be issued in bearer
form and any limitations imposed on the bearer form;
- the priority of the series with respect to any other series;
- whether the series will be prefunded; and
- any other terms of the series.
"Projected Spread" is defined on page 49.
"Purchase Agreement" is defined on page 56.
"Rating Agencies" means, with respect to any outstanding series, any
nationally recognized statistical rating organization then maintaining a rating
of that series at the request of the seller.
"Rating Agency Condition" means, with respect to any proposed action and
any outstanding Series, that the rating agencies have been informed of the
proposed action and have notified the seller and the trustee that such action
will not result in a reduction or withdrawal of their then existing rating of
that series.
"Record Date" is defined on page 27.
"Remaining Available Seller's Principal Collections" is defined on page 47.
"Required Excess Seller Interest Percentage" shall be set forth in the
prospectus supplement for the offered series.
"Required Subordinated Amount" is defined on page 48.
"Retail Special Price Allocations" is defined on page 23.
"Seller's Interest" with respect to any business day will equal the
aggregate principal amount of dealer notes plus the aggregate amount of funds in
the Excess Funding Account, plus the aggregate amount of
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funds in all series principal accounts (and funds being held for deposit in
those accounts), including the Series Principal Account, each as of such day,
minus the Trust Invested Amount on such day (or as of the distribution date on
or immediately preceding that business day).
"Seller's Percentage" for any due period means 100% minus:
(1) 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
(2) 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 means an amount equal
to the sum of:
(1) Available Seller's Principal Collections for that business day; and
(2) Excess Seller's Principal Collections for that business day.
"Series Accounts" is defined on page 40.
"Series Allocable Dealer Note Losses" is defined on page 43.
"Series Allocable Finance Charge Collections" is defined on page 43.
"Series Allocable Principal Collections" is defined on page 43.
"Series Allocable Servicing Fee" is defined on page 38.
"Series Allocation Percentage" for the offered series 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 Trust Adjusted Invested
Amount, in each case as of the end of the distribution date preceding that due
period (after giving effect to all payments made on that distribution date).
"Series Issuance Date" is defined on page 32.
"Series Principal Account Losses" means losses of principal on investment
of funds in the Series Principal Account.
"Series Termination Date" is defined on page 51.
"Servicer Termination Event" is defined on page 39.
"Servicing Fee" is defined on page 38.
"Shared Seller Principal Collections" means on each business day:
(1) during a revolving period, all Available Seller's Principal
Collections and all Excess Seller's Principal Collections and
(2) during an Accumulation Period, all Remaining Available Seller's
Principal Collections and all Excess Seller's Principal Collections.
"Special Servicer Agent" is defined on page 40.
"Specified Accumulation Period Commencement Date" is defined on page 6.
"Spread Account" is defined on pages 7 and 48.
"Spread Account Deposit Amount" is defined on page 48.
"Subordinated Percentage" with respect to the offered certificates will be
set forth in the prospectus supplement.
"Supplemental Certificate" is defined on page 31.
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]"Swap Counterparty" is defined on page 42.
"Swap Fixed Rate" is defined on page 42.
"Swap Floating Rate" is defined on page 42.
"Swap Payment" is defined on page 9.
"Swap Receipt" is defined on page 9.
"Tax Counsel" is defined on page 58.
"Tax Opinion" is defined on page 32.
"Terms and Conditions" is defined on page 30.
"Transfer Date" is defined on page 49.
"Trust Adjusted Investment Amount" is equal to the sum of the adjusted
invested amounts for all outstanding series.
"Trust Invested Amount" is equal to the sum of the invested amounts for all
outstanding series.
"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.
"Underwriting Agreement" is defined on page 66.
"Unpaid Dealer Finance Charges" is defined on page 37.
"Up-Front Interest Credit" is defined in the glossary under "ITEC Interest
Amount."
"Wholesale Note and Inventory Statement" is defined on page 20.
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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,
Clearstream Banking 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 Clearstream Banking 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 Clearstream Banking 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
Clearstream Banking 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, Clearstream Banking 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
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 Clearstream
Banking 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 trust in same-day funds.
Trading between Clearstream Banking and/or participants. Secondary market
trading between Clearstream Banking participants and/or Euroclear participants
will be settled using the procedures applicable to conventional eurobonds in
same-day funds.
Finally, day traders that use Clearstream Banking or Euroclear and that
purchase Global Securities from DTC participants for delivery to Clearstream
Banking participants or Euroclear participants should
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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 Clearstream Banking or Euroclear for one day (until
the purchase side of the day trade is reflected in their Clearstream
Banking 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 Clearstream
Banking 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 Clearstream
Banking participant or Euroclear participants.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A holder of Global Securities holding securities through Clearstream
Banking or Euroclear (or through DTC if the holder has an address outside the
U.S.) will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. persons unless such holder takes one of the following steps to
obtain an exemption or reduced tax rate:
Exemption for non-U.S. persons with effectively connected income (Form
4224). A non-U.S. person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. persons resident in treaty countries
(Form 1001). Non-U.S. persons that are beneficial owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the beneficial owner or
his agent.
Exemption for U.S. persons (Form W-9). U.S. persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Request for Taxpayer
Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The holder of Global
Security, or in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom he holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
This summary does not deal with all aspects of federal income tax
withholding that may be relevant to foreign holders of these Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
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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......... $264
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Trustee's fees.............................................. *
Printing and engraving...................................... *
Blue sky fees and expenses (including counsel).............. *
Rating Agency Fees.......................................... *
Miscellaneous............................................... *
----
Total..................................................... $*
====
</TABLE>
- ---------------
* To be updated by Amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each of Navistar International Corporation, International Truck and Engine
Corporation (f/k/a Navistar International Transportation Corp.), Navistar
Financial Corporation 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 of the Bylaws with respect to Navistar International Corporation,
International Truck and Engine Corporation, Navistar Financial Corporation 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, Navistar
International Corporation maintains insurance providing for payment, subject to
certain exceptions, on behalf of officers and directors of Navistar
International Corporation 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
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<PAGE> 106
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
ITEM 16. EXHIBITS.
(a) Exhibits:
The exhibits to this Registration Statement are listed in the Exhibit
Index below.
(b) Financial Statements Schedules: Not applicable with respect to the
Registrant.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, unless the information required to be included in
such post-effective amendment is contained in a periodic report filed with
or furnished to the Securities and Exchange Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 and incorporated herein by reference;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement, unless the information required to be
included in a post-effective amendment is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated herein by reference.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is,
II-2
<PAGE> 107
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the 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> 108
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Rolling Meadows, State of Illinois, on March 21, 2000.
NAVISTAR FINANCIAL
SECURITIES CORPORATION
as originator of the Master Trust,
Registrant
By: /s/ JOHN J. BONGIORNO
------------------------------------
John J. Bongiorno
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John. J. Bongiorno, R. Wayne Cain and William W.
Jones and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities (including his capacity as a director
and/or officer of Navistar Financial Securities Corporation), to sign and file
any and all amendments (including post-effective amendments) to this
registration statement or any registration statement relating to this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary in connection with such matters as he might or could do in person and
hereby ratifying and confirming all that each of such attorneys-in-fact and
agents or their or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney has been signed on March 21, 2000,
by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY
- ---------- --------
<S> <C>
/s/ JOHN J. BONGIORNO Director, President and Chief Executive Officer
- ------------------------------------------------
John J. Bongiorno
/s/ R. WAYNE CAIN Director, Vice President and Treasurer
- ------------------------------------------------ (Principal Financial Officer)
R. Wayne Cain
/s/ PHYLLIS E. COCHRAN Director, Vice President and Controller
- ------------------------------------------------ (Principal Accounting Officer)
Phyllis E. Cochran
</TABLE>
II-4
<PAGE> 109
<TABLE>
<CAPTION>
SIGNATURES CAPACITY
- ---------- --------
<S> <C>
/s/ VERNON M. ENDO Director
- ------------------------------------------------
Vernon M. Endo
/s/ MARION SILVERMAN Director
- ------------------------------------------------
Marion Silverman
/s/ THOMAS M. HOUGH Director
- ------------------------------------------------
Thomas M. Hough
/s/ ROBERT C. LANNERT Director
- ------------------------------------------------
Robert C. Lannert
</TABLE>
II-5
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
NAVISTAR FINANCIAL SECURITIES CORPORATION
Adopted in accordance with Sections 242 and 245 of the General Corporation Law
of the State of Delaware. Navistar Financial Securities Corporation, a
corporation organized under the General Corporation Law of the State of
Delaware, for the purpose amending and restating its Certificate of
Incorporation filed with the office of the Secretary of State of Delaware on
September 13, 1990 under the name Navistar Financial Securities Corporation,
hereby certifies that effective on March 24, 1999 its Amended and Restated
Certificate of Incorporation is amended and restated to read in its entirety as
follows:
ARTICLE FIRST
The name of the corporation is Navistar Financial Securities Corporation
(the "Corporation").
ARTICLE SECOND
The address of the Corporation's registered office in the State of Delaware
is The Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE THIRD
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in the following activities:
(a) to acquire from Navistar Financial Corporation ("NFC") or any of its
subsidiaries or affiliates or from third parties (collectively, "Originators")
all or any portion of the right, title and interest of any such party in and to
wholesale or retail notes, accounts, contracts, finance leases, operating
leases, installment obligations, general intangibles or other rights to payment
from dealers that sell trucks, school buses, chassis and other vehicles by
allied equipment manufacturers or other obligors, monies due thereunder and
proceeds related thereto, ownership or security interests in the vehicles or
other assets financed thereby, and related fights (collectively, the
"Receivables and Related Assets");
(b) to acquire, own, hold, service, sell, assign, pledge and otherwise deal
with the Receivables and Related Assets, collateral securing the Receivables and
Related Assets, related
<PAGE> 2
insurance policies, agreements with NFC or any of its subsidiaries or affiliates
and any proceeds or further rights associated with any of the foregoing;
(c) to sell, transfer, assign, pledge, hypothecate or otherwise convey a
fill or limited interest in all or a portion of the Receivables and Related
Assets to NFC or any of its subsidiaries or affiliates or any other person
pursuant to pooling and servicing agreements, indentures, loan agreements.
purchase agreements or other agreements or instruments (the "Agreements") to be
entered into by the Corporation;
(d) to perform its obligations under any Agreements, and arty other
agreements or instruments in connection with any of the foregoing; and
(e) to engage in any activity and to exercise any powers permitted to
corporations under the laws of the State of Delaware that are related or
incidental to the foregoing and necessary, convenient or advisable to accomplish
the foregoing.
ARTICLE FOURTH
Notwithstanding any other provision of this Certificate of Incorporation
and any provision of law that otherwise so empowers the Corporation, the
Corporation shall not, without receiving prior written confirmation from each
nationally recognized rating agency that has been requested by the Corporation
or any of its affiliates to rate any then outstanding class or series of notes,
certificates, commercial paper or other securities backed, in whole or in part,
by the Receivables and Related Assets, whether such securities are issued by the
Corporation. an affiliate of the Corporation or any other person (such rating
agency being a "Relevant Rating Agency" and rated securities being "Rated
Instruments"), and which is then rating such Rated Instruments, that any such
action taken by the Corporation will not have an adverse effect upon the rating
of such Rated Instrument, do any of the following:
(a) engage in any business or activity other than those set forth in
Article Third;
(b) incur any indebtedness for borrowed money, or assume or guaranty any
indebtedness of any other person, other than (A) indebtedness incurred in
connection with the Rated Instruments, (B) indebtedness incurred in connection
with the acquisition of Receivables and Related Rights or otherwise permitted by
any Agreement, and (C) indebtedness to Navistar Financial Corporation ("NFC")
where (i) NEC has delivered to the Corporation an undertaking that it will not
institute against, or join arty other person in instituting against, the
Corporation any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding or other proceeding under any federal or state bankruptcy
or similar law, for at least one year after all Rated Instruments are paid in
full, (ii) such indebtedness does not constitute a claim against the Corporation
in the event that the Corporation's assets are insufficient to pay in full such
obligations and (iii) such indebtedness is nonrecourse against any assets of the
Corporation other than the assets pledged to secure such additional debt;
-2-
<PAGE> 3
(c) dissolve or liquidate, in whole or in part;
(d) consolidate or merge with or into any other entity or convey or
transfer its properties and assets substantially as an entirety to any entity,
other than transfers permitted pursuant to the Agreement, unless:
(i) the entity (if other than the Corporation) formed or surviving the
consolidation or merger of which acquires the properties and assets of the
corporation is organized and existing under the laws of the State of
Delaware, expressly assumes the due and punctual payment of, and all
obligations of the Corporation, including those obligations of the
Corporation under the Agreement, and has a Certificate of Incorporation
containing provisions identical to the provisions of Article Third, this
Article Fourth, Article Fifth, Article Fourteenth and Article Sixteenth;
and
(ii) immediately after giving effect to the transaction, no default or
event of default has occurred and is continuing under any indebtedness of
the Corporation or any agreements relating to such indebtedness; provided
that the Corporation shall provide the Relevant Rating Agencies with notice
of each merger or consolidation at least thirty days prior to the
effectiveness thereon; or
(e) without the affirmative vote of 100% of the members of the Board of
Directors of the corporation, institute proceedings to be adjudicated bankrupt
or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition seeking or consent to reorganization
or relief under any applicable federal or state law relating to bankruptcy, or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Corporation or a substantial
part of its property, or make any assignment for the benefit of creditors, or
admit in writing its inability to pay its debts generally as they become due, or
take corporate action in furtherance of any such action.
ARTICLE FIFTH
(a) At all times the Board of Directors shall include at least two
individuals who are Independent Directors. As used herein, an "Independent
Director" shall be an individual who: (i) is not and has not ever been employed
by NFC or any of its subsidiaries or affiliates as a director, officer or
employee; (ii) is not (and is not affiliated with a company or firm that is) a
significant advisor or consultant to NFC or any of its subsidiaries or
affiliates; (iii) is not affiliated with a significant customer or supplier of
NEC or any of its subsidiaries or affiliates; (iv) is not affiliated with a
company of which NFC or any of its subsidiaries and affiliates is a significant
customer or supplier; (v) does not have significant personal services
contract(s) with NFC or any of its subsidiaries or affiliates; (vi) is not
affiliated with a tax-exempt entity that receives significant contributions from
NEC or any of its subsidiaries or affiliates; (vii) is not the beneficial owner
at the time of such individual's appointment as an Independent Director, or at
any time thereafter while serving as an Independent Director, of such number of
shares of any classes of common stock of
-3-
<PAGE> 4
Navistar International Corporation the value of which constitutes more than 5%
of such individual s net worth; and (viii) is not a spouse, parent, sibling or
child of any person described by (i) through (vii).
(b) As used in paragraph (a) of this Article Fifth, the following terms
shall have the meanings set forth in this section:
(i) An "affiliate" of a person, or a person "affiliated with," a
specified person, shall mean a person that directly.) or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, the specified person.
(ii) The term "control" (including the terms "controlling,"
"controlled by" and "under common control with") shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a person. whether through the ownership of
voting securities, by contract, or otherwise; provided, however, that a
person shah not be deemed to control another person solely because he or
she is a director of such other person.
(iii) The term "person" shall mean any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group deemed to be a person pursuant to
Section 1 3(d)(3) of the Securities Exchange Act of 1934, as amended, as in
effect an January 1, 1993.
(iv) A "subsidiary" of NEC shall mean any corporation a majority of
the voting stock of which is owned, directly or indirectly through one or
more other subsidiaries, by NEC.
(v) A person shall be deemed to be, or to be affiliated with, a
company or firm that is a "significant advisor or consultant to NEC or any
of its subsidiaries or affiliates" if he, she, or it, as the case may be,
received or would receive fees or similar compensation from NFC or any of
its subsidiaries or affiliates in excess of the lesser of (A) 3% of' the
consolidated gross revenues which NEC and its subsidiaries received for the
sale of their products and services during the last fiscal year of NEC; (B)
5% of the gross revenues of the person during the last calendar year, f'
such person is a self-employed individual; and (C) 5% of the consolidated
gross revenues received by such company or firm for the sale of its
products and services during its last fiscal year, if the person is a
company or firm; provided, however, that director's fees and expense
reimbursements shall not be included in the gross revenues of an individual
for purposes of this determination.
(vi) A "significant customer of NFC or any of its subsidiaries or
affiliates" shall mean a customer from which NEC and any of its
subsidiaries or affiliates
-4-
<PAGE> 5
collectively in the last fiscal year of NEC received payments in
consideration for the products and services of NFC and its subsidiaries or
affiliates which are in excess of 3% of the consolidated gross revenues of
NFC and its subsidiaries during such fiscal year.
(vii) A "significant supplier of NEC or any of its subsidiaries or
affiliates" shall mean a supplier to which NEC and any of its subsidiaries
or affiliates collectively in the last fiscal year of NFC made payments in
consideration for the supplier's products and services in excess of 3% of
the consolidated gross revenues of NEC and its subsidiaries during such
fiscal year.
(viii) NFC or any of its subsidiaries and affiliates shall be deemed a
"significant customer" of a company if NFC and any of its subsidiaries and
affiliates collectively were the direct source during such company's last
fiscal year of in excess of 5% of the gross revenues which such company
received for the sale of its products and services during such fiscal year.
(ix) NEC or any of its subsidiaries and affiliates shall be deemed a
"significant supplier" of a company if NEC and any of its subsidiaries and
affiliates collectively received in such company's last fiscal year
payments front such company in excess of 5% of the gross revenues which
such company received during such fiscal year for the sale of its products
and services.
(x) A person shall be deemed to have "significant personal services
contracts with NEC or any of its subsidiaries or affiliates" if the fees
and other compensation received by the person pursuant to personal services
contracts with NEC and any of its subsidiaries or affiliates exceeded or
would exceed 5% of his or her gross revenues during the last calendar year.
(xi) A tax-exempt entity shall be deemed to receive "significant
contributions from NEC or any of its subsidiaries or affiliates" if such
tax-exempt entity received during its contributions from NEC or its
subsidiaries or affiliates in excess of the lesser of (A) 3% of the
consolidated gross revenues of NFC and its subsidiaries during such fiscal
year and (B) 5% of the contributions received by the tax-exempt entity
during such fiscal year.
(c) If any Independent Director ceases to serve as a director for any
reason, the Corporation shall give each Relevant Rating Agency prompt notice of
the new Independent Director designated to fill such vacancy.
ARTICLE SIXTH
No Independent Director shall, with regard to any act, or failure to act,
in connection
-5-
<PAGE> 6
with any matter referred to in clause (e) of Article Fourth owe a fiduciary duty
or other obligation to the stockholders (except as may specifically be required
by the statutory law of any applicable jurisdiction); instead, each Independent
Director's fiduciary duty or other obligations with regard to such act, or
failure to act, in connection with any matter referred to in clause (e) of
Article Fourth shall be owed to the Corporation including, without limitation,
the creditors of the Corporation. Every stockholder shall be deemed to have
consented to the foregoing by virtue of such stockholder's purchase of shares of
capital stock of the Corporation, no further act or deed of any stockholder
being required to evidence such consent.
ARTICLE SEVENTH
Election of directors need not be by written ballot unless the by-laws of
the Corporation so provide.
ARTICLE EIGHTH
The Board of Directors of the Corporation is authorized to adopt, amend or
repeal the by-laws of the Corporation.
ARTICLE NINTH
The total number of shares of stock which the Corporation has authority to
issue is 1,000 shares of Common Stock, with a par value of $1.00 per share.
ARTICLES TENTH
The Corporation is to have perpetual existence.
ARTICLE ELEVENTH
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make, alter
or repeal the by-laws of the Corporation.
ARTICLE TWELFTH
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or in the by-laws
of the Corporation.
ARTICLE THIRTEENTH
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<PAGE> 7
To the fullest extent permitted by the General Corporation Law of the State
of Delaware as the same exists or may hereafter be amended, a director of the
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this Article shall not adversely affect any right or protection
of a director of the Corporation existing at the time of such repeal or
modification.
ARTICLE FOURTEENTH
Neither the Corporation's funds nor any other assets of the Corporation are
to be commingled with those of any other corporate or natural person.
The Corporation will maintain separate corporate records and books of
account from those of any other corporate or natural person.
ARTICLE FIFTEENTH
The Corporation expressly elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware.
ARTICLE SIXTEENTH
The Corporation shall not, without the prior written consent of the
Trustee, amend, alter, change or repeal any provision of this Certificate of
Incorporation, nor shall the Corporation, without the prior written consent of
each Relevant Rating Agency amend, alter, change or repeal Articles Third,
Fourth, Fifth, Fourteenth or this Article Sixteenth of this Certificate of
Incorporation. Subject to the foregoing limitations, the corporation reserves
the right to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed herein
and by the laws of the State of Delaware, and all rights conferred upon
stockholders herein are granted subject to this reservation.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the undersigned, being the Secretary, hereinabove
named, for the purpose of amending the Certificate of Incorporation of the
Corporation pursuant to the GCL, under the penalties of perjury do each hereby
declare and certify that this is the act and deed of the Corporation and the
facts stated herein are true, accordingly have hereunto signed this Certificate
of Amendment of Certificate of Incorporation this 24th day of March. 1999.
NAVISTAR FINANCIAL SECURITIES
CORPORATION
By: /s/ William W. Jones
----------------------------------------
Its Secretary
-8-
<PAGE> 1
Exhibit 4.4
AMENDMENT NO. 3 TO THE
POOLING AND SERVICING AGREEMENT
THIS AMENDMENT NO. 3 (this "Amendment") is made as of July 17, 1998, 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, The Chase Manhattan Bank (formerly known
as 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 and by Amendment No.
2, dated March 27, 1996 (as amended, the "Pooling and Servicing Agreement"). In
order to (i) include within the definition of Eligible Investments certain
additional investments and (ii) change the concentration of Eligible Investments
allowed in the Series Principal Account, Excess Funding Account, Negative Carry
Account and the Liquidity Reserve Account, 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. The definition of "Eligible Investments" in
Section 1.01 of the Pooling and Servicing Agreement is hereby deleted in its
entirety and replaced with the following:
"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
clauses (iv) or (vii) below) remaining maturities occurring not later than
the Distribution Date next succeeding the Master Trust Trustee's
acquisition thereof, except as otherwise described herein or the related
Supplement, 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 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
<PAGE> 2
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 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;
(iv) except during an Investment Period, investments in money market
funds or common trust 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 (including funds for which the
Master Trust Trustee or the 1990 Trust Trustee or any of their
respective affiliates is investment manager or advisor, so long as
such fund shall have such rating);
(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 depository institution or
trust company (acting as principal) described in clause (ii) 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; or
2
<PAGE> 3
(vii) with respect to the Excess Funding Account only, obligations of
a trust (the assets of which consist solely of Investor Certificates
issued by the Master Trust and of one or more liquidity swap
arrangements for the benefit of investors in such trust) having, at
the time of the Master Trust's investment or contractual commitment to
invest therein, a rating not lower than the highest rating 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
(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.
Unless the Rating Agency Condition is satisfied, Eligible Investments of
funds in the Series Principal Account, Excess Funding Account, Negative Carry
Reserve Fund and the Liquidity Reserve Account will be subject to the following
additional restrictions: (x) no more than the greater of (A) $1,000,000 and (B)
20% of the aggregate Eligible Investments in all 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) or, with respect to the Excess Funding Account, Eligible
Investments of the type specified in clauses (a)(iv) or (a)(vii)); 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, LIBOR 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.
2. Amendment to Section 4.02. Clause (b)(ii) of Section 4.02 of the Pooling
and Servicing Agreement is deleted in its entirety and replaced with the
following:
"(ii) Funds on deposit in the Excess Funding Account overnight or for
a longer period shall at all times be invested by the Master Trust Trustee
in Eligible Investments at the direction of the Servicer or its agent,
subject to the restrictions set forth below and in Section 4.06. Except as
otherwise permitted by the Rating Agencies then rating the Investor
Certificates and except for Eligible Investments of the type specified in
clause (vii) of the definition of Eligible Investments, any Eligible
Investments with a stated maturity shall mature no later than the following
Transfer Date. Net interest and earnings (less investment expenses) on
funds on deposit in the Excess Funding Account shall be included in the
calculation of Investment Income for the relevant Due Period."
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
3
<PAGE> 4
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.
* * *
4
<PAGE> 5
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: /s/ RW Cain
--------------------------------------
Its: Vice President & Treasurer
--------------------------------------
NAVISTAR FINANCIAL CORPORATION
as Servicer
By: /s/ RW Cain
--------------------------------------
Its: Vice President & Treasurer
--------------------------------------
THE BANK OF NEW YORK
as Master Trust Trustee
By: /s/ Reyne A. Macadaeg
--------------------------------------
Its: Assistant Vice President
--------------------------------------
5
<PAGE> 1
Exhibit 4.6
FORM OF SERIES 2000-___ CERTIFICATE
[Form of the face of the Series 2000-___ 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 2000-___
evidencing a fractional undivided interest in certain assets of the
NAVISTAR FINANCIAL DEALER NOTE MASTER TRUST,
the corpus of which consists primarily of certain promissory notes acquired by
Navistar Financial Corporation ("NFC") to finance certain vehicles purchased by
a dealer (the "Dealer Notes") and other property related thereto. This
certificate (a "Series 2000-___ Certificate") does not represent an interest in
or obligation of Navistar Financial Securities Corporation ("NFSC" or the
"Seller"), NFC, Navistar International Corporation, a Delaware corporation,
Navistar International Transportation Corp. ("NITC"), a Delaware corporation, or
any affiliate thereof.
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Unless the certificate of authentication hereon has been executed by or on
behalf of the Master Trust Trustee, by manual signature, this Series 2000-___
Certificate shall not be entitled to any benefit under the Pooling and Servicing
Agreement or be valid for any purpose.
THIS SERIES 2000-___ 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.
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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
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[Form of the reverse of the Series 2000-___ Certificates]
This certifies that _________ (the "Series 2000-___ 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 2000-___ Supplement dated as
of __________ (the "Series Supplement") among the Seller, NFC and the Master
Trust Trustee, that are allocated to the Series 2000-___ 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:
(a) 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;
(b) any Enhancements; and
(c) 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.
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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 2000-___ 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.
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 and each Investor Certificateholder 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, agrees to be bound hereby.
On each Distribution Date, the Master Trust Trustee shall distribute to
each Series 2000-___ 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 2000-___ 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 2000-___ Certificates pursuant to the Pooling
and Servicing Agreement. Distributions with respect to this Certificate will be
made by the Master Trust Trustee to 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) by wire transfer of immediately
available funds to the account specified by the Certificateholder. 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 the
Dealer Notes and certain other amounts, all as more specifically set forth
herein and in the Pooling and Servicing Agreement.
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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 2000-___ Certificateholders, so long as any such action shall not, as
evidenced by an Officer's Certificate, adversely affect in any material respect
the interests of the Series 2000-___ 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.
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.
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 2000-___ 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 2000-___ Certificates are exchangeable for
new Series 2000-___ 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.
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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.
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ASSIGNMENT
Social Security or other identifying number of assignee
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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:
-------------------------
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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.
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<PAGE> 1
Exhibit 10.3
INTEREST DEPOSIT AGREEMENT
THIS INTEREST DEPOSIT AGREEMENT (this "Agreement") is made and entered into
this 8th day of June, 1995 by and among Navistar International Transportation
Corp., a Delaware corporation ("NITC"), Navistar Financial Corporation, a
Delaware corporation ("NFC"), as Servicer (the "Servicer") and The Bank of New
York, a New York banking corporation, as Master Trust Trustee (the "Master Trust
Trustee").
RECITALS
A. The Servicer, Navistar Financial Securities Corporation, a Delaware
corporation (the "Seller") and the Master Trust Trustee are parties to a Pooling
and Servicing Agreement of even date herewith (the "Pooling and Servicing
Agreement"). Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to those terms in the Pooling and Servicing Agreement.
B. The Pooling and Servicing Agreement provides that, after the 1990 Trust
Termination Date (the "Effective Date"), the Seller will convey Dealer Notes,
which were initially issued to NFC by Dealers to finance, among other things,
the Dealers' purchases of Navistar Vehicles, to a Master Trust to be formed
pursuant to the Pooling and Servicing Agreement.
C. In order to promote the sale of Navistar Vehicles, NITC periodically
grants interest credits to Dealers and implements programs pursuant to which
NITC undertakes to pay on behalf of the Dealers interest owing on the Dealer
Notes.
D. NITC, the Servicer and the Master Trust Trustee desire to enter into an
agreement pursuant to which NITC shall make weekly deposits into an account
owned by the Master Trust in an amount equal to the amount of interest NITC has
undertaken to pay on behalf of the Dealers to insure that the amount of such
interest owed to the Master Trust will be available.
E. NITC, NFC, as servicer, and Chemical Bank (as successor to Manufacturers
Hanover Trust Company), as trustee (the "1990 Trust Trustee"), are parties to an
Interest Deposit Agreement dated as of December 1, 1990 (the "1990 Interest
Deposit Agreement"), pursuant to which NITC has agreed to deposit certain
amounts in an account (the "1990 Interest Deposit Account") maintained by the
1990 Trust Trustee in its capacity as such under the Pooling And Servicing
Agreement dated as of December 1, 1990 (the "1990 Pooling and Servicing
Agreement") among the Seller, NFC, as servicer and the 1990 Trust Trustee. Upon
the termination of the trust formed by the 1990 Pooling and Servicing Agreement
(the "1990 Trust"), the 1990 Trust Trustee is required pursuant to the 1990
Interest Deposit Agreement to distribute all amounts on deposit in the 1990
Interest Deposit Account to NITC. NITC desires to cause such funds to be
deposited in the Interest Deposit Account on the 1990 Trust Termination Date.
<PAGE> 2
NOW, THEREFORE, IN CONSIDERATION of these promises and the mutual and
dependent promises hereinafter set forth, the parties agree as follows:
1. Establishment and Administration of Interest Deposit Account.
(a) The Master Trust Trustee, for the benefit of the Certificateholders and
the other Beneficiaries, shall cause to be established and maintained in the
name of the Master Trust, a non-interest bearing Eligible Deposit Account (the
"Interest Deposit Account") bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Certificateholders and
the other Beneficiaries. Unless such power is revoked by the Master Trust
Trustee and subject to the provisions of the Pooling and Servicing Agreement,
the Servicer shall have the revocable power to instruct the Master Trust Trustee
to withdraw funds from the Interest Deposit Account for the purpose of carrying
out the duties of the Servicer hereunder and under the Pooling and Servicing
Agreement. The Servicer at all times shall maintain accurate records reflecting
each transaction in the Interest Deposit Account.
(b) Funds on deposit in the Interest Deposit Account overnight or for a
longer period shall at all times be invested by the Master Trust Trustee in
Eligible Investments selected by the Servicer at the direction of the Servicer
or its agent, subject to the restrictions set forth below. The Master Trust
Trustee, acting in accordance with instructions from the Servicer, shall take
all necessary actions to perfect its Security Interest in Eligible Investments.
Any Eligible Investment with a stated maturity shall mature no later than two
Business Days after the end of each Due Period.
(c) Notwithstanding anything in the 1990 Interest Deposit Agreement to the
contrary, NITC hereby assigns to the Master Trust Trustee the right to receive,
on the 1990 Trust Termination Date, all amounts payable to NITC on such date
pursuant to Section 4(b) of the 1990 Trust Agreement. On the date hereof, NITC
shall execute and the Servicer shall file a UCC-1 financing statement showing
NITC as debtor and the Master Trust Trustee as secured party reflecting the
assignment contemplated hereby. Such amounts shall be paid to the Master Trust
Trustee pursuant to the terms of Section 2.02(b)(v) of the Pooling and Servicing
Agreement, and upon the Master Trust Trustee's receipt thereof, shall be
deposited in the Interest Deposit Account.
2. Calculation of 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 (beginning with the week in which the 1990 Trust
Termination Date occurs) and as of the close of business on the last day of each
Due Period thereafter and prior to the Final Master Trust Termination Date (each
such day, a "Calculation Day"), NITC and the Servicer shall calculate the NITC
Interest Amount as of such date. The "NITC Interest Amount" shall equal the sum
of (a) the amount of Up-Front Interest Credit granted by NITC during the current
Due Period, (b) the amount of Aggregate NITC Earned Interest accrued during the
current Due Period and (c) the amount of Aggregate NITC Future Due Interest as
of such Calculation Day.
3. Deposit in Interest Deposit Account; Refund to NITC.
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(a) If on any Calculation Day the amount on deposit in the Interest Deposit
Account, including any interest earned thereon (the "Deposit Amount"), is less
than the NITC Interest Amount, NITC shall deposit the amount of such deficiency
in the Interest Deposit Account by wire transfer of immediately available funds
on the Business Day immediately following such Calculation Day (the "NITC
Payment Day").
(b) If on any Calculation Day the Deposit Amount exceeds the NITC Interest
Amount, the Servicer shall direct the Master Trust Trustee to withdraw the
amount of such excess from the Interest Deposit Account on the related NITC
Payment Date and refund that amount to NITC by wire transfer of immediately
available funds.
(c) If on the Calculation Day the Deposit Amount is equal to the NITC
Interest Amount, no payment or refund shall be made on the related NITC Payment
Date.
4. Payments from the Interest Deposit Account. In addition to the payments
described in paragraph 3 above, the Master Trust Trustee shall be authorized to
make the following payments from the Interest Deposit Account:
(a) On a Business Day no earlier than the second Business Day following the
end of a Due Period but no later than the fifth Business Day following the end
of a Due Period (the "NITC Interest Transfer Date"), the Servicer shall direct
the Master Trust Trustee to withdraw from the Interest Deposit Account and
transfer to the Collections Account an amount equal to the NITC Finance Charges
for such Due Period, as provided in Section 4.03(b) of the Pooling and Servicing
Agreement.
(b) Upon termination of the Master Trust pursuant to Section 12.01 of the
Pooling and Servicing Agreement, the Master Trust Trustee shall pay to NITC any
amounts remaining in the Interest Deposit Account.
5. Successor Servicer. If a Successor Servicer is appointed pursuant to
Section 10.02 of the Pooling and Servicing Agreement, all references in this
Agreement to the Servicer shall be deemed to refer to the Successor Servicer.
6. Effective Date. Notwithstanding any provision herein to the contrary,
the rights of the Master Trust Trustee and the obligations of NITC (other than
those set forth in paragraph 1(c), which shall be effective upon NITC's
execution hereof) and the Servicer hereunder shall not become effective until
the Effective Date and this Agreement shall have no force and effect until the
Effective Date (other than the provisions of paragraph 1(c), which shall be
effective upon NITC's execution hereof).
7. Termination. This Agreement shall terminate after the payment to NITC of
any amounts remaining in the Interest Deposit Account pursuant to paragraph 4(b)
hereof.
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<PAGE> 4
8. Amendment.
(a) This Agreement may be amended from time to time by NITC, the Servicer
and the Master Trust Trustee to cure any ambiguity or to correct or supplement
any defective or inconsistent provision herein or to add any other provisions
with respect to matters or questions arising under this Agreement which shall
not be inconsistent with the provisions of this Agreement; provided, however,
such action shall not adversely affect in any material respect the interests of
the Certificateholders under the Pooling and Servicing Agreement and no
amendments shall be effected until written notice thereof shall have been
delivered to the Rating Agencies. 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 this Agreement or otherwise.
(b) This Agreement may also be amended from time to time by NITC, the
Servicer and the Master Trust Trustee for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Certificateholders;
provided, however, that the Master Trust Trustee shall not consent to such
amendment unless it has received the consent of the Holders of Investor
Certificates evidencing not less than 66 2/3% of the Series Invested Amounts of
the Investor Certificates of each outstanding Series and no amendments shall be
effected until written notice thereof shall have been delivered to the Rating
Agencies.
(c) It shall not be necessary for the consent of Certificateholders under
this paragraph 8 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Master Trust Trustee may prescribe.
9. Governing Law. This Agreement 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 reference to its conflict of laws provisions.
10. Notices. All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by registered mail, return receipt requested, to (a) in the case of
NITC, Navistar International Transportation Corp., 455 City Front Plaza,
Chicago, IL 60611, Attention: Vice President and Treasurer, (b) in the case of
NFC as Servicer, Navistar Financial Corporation, 2850 West Golf Road, Rolling
Meadows, IL 60008, Attention: Vice President and Treasurer and (c) in the case
of the Master Trust Trustee, the Corporate Trust Office; or, as to each party,
at such other address as shall be designated by such party in a written notice
to each other party.
11. Severability of Provisions. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall for any reason
whatsoever be held invalid, then such
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covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement.
12. No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Master Trust Trustee, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges therein provided
are cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.
13. Counterparts. This Agreement may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
14. Successors and Assigns. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns.
15. Assignment. This Agreement may not be assigned by NITC or the Servicer
without the express written consent of the Master Trust Trustee, which consent
shall not be granted without the prior consent of Holders of Investor
Certificates evidencing not less than 51% of the Trust Invested Amount. No such
assignment shall be effective until the Servicer shall have given the Rating
Agencies written notice thereof.
16. Rights and Remedies of Master Trust Trustee. The rights and remedies of
the Master Trust Trustee under the Pooling and Servicing Agreement are expressly
incorporated into this Agreement.
* * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
NAVISTAR INTERNATIONAL TRANSPORTATION
CORP.
By: /s/ T M Hough
--------------------------------------------------
Its: Vice President and Treasurer
--------------------------------------------------
NAVISTAR FINANCIAL CORPORATION
as Servicer
By: /s/ R W Cain
--------------------------------------------------
Its: Vice President
--------------------------------------------------
THE BANK OF NEW YORK
as Master Trust Trustee
By: /s/ Patricia M. Russo
--------------------------------------------------
Its: Assistant Treasurer
--------------------------------------------------
Accepted and Agreed
CHEMICAL BANK, as
1990 Trust Trustee
By: /s/ illegible
------------------------------
Its: Assistant Vice President
-------------------------------
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