AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998
Registration No. 333
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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NISSAN AUTO RECEIVABLES
1998-A GRANTOR TRUST
(In which the Certificates represent undivided interests)
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NISSAN AUTO RECEIVABLES CORPORATION
(Originator of the Trust described herein)
Delaware 9999 33-047655
(State or other jurisdiction(Primary Standard Industrial (IRS Employer No.)
of incorporation or organization) Classification Code Number)
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990 W. 190th Street
Torrance, California 90502
(310) 719-8013
(Name, address including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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JOY CROSE, ESQ.
Nissan Auto Receivables Corporation
990 W. 190th Street
Torrance, California 90502
(310) 719-8024
(Name, address including zip code, and telephone
number, including area code, of Agent for Service)
Copies to:
DANIEL METTE, ESQ.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212-310-8000)
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Approximate date of commencement of proposed sale to the public: As soon as
practicable on or after the effective date of this Registration Statement.
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 the Securities Act of
1933, please check the following box. [ ]
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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Title of Securities Amount To Be Offering Price Aggregate Amount of
Being Registered Registered Per Unit Offering Price Registration Fee
- ------------------------------------------ ----------------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Asset Backed Certificates, Class A..... $1,000,000 100%(1) $1,000,000 $295.00
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose 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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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NYFS11...:\95\65595\0001\2307\FRM9108Z.49E
<PAGE>
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by an sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any state.
- --------------------------------------------------------------------------------
Subject to Completion, Dated September 29, 1998
Prospectus
$[____________]
Nissan Auto Receivables 1998-A Grantor Trust
[____%] Asset Backed Certificates, Class A
Nissan Auto Receivables Corporation
Seller
Nissan Motor Acceptance Corporation
Servicer
The [____]% Asset Backed Certificates (the "Certificates") will consist of two
Classes of Certificates, the Class A Certificates and the Class B Certificates.
Only the Class A Certificates are being offered hereby. The Class A Certificates
will evidence in the aggregate an undivided ownership interest of [____]% of a
trust (the "Trust") to be formed pursuant to a Pooling and Servicing Agreement
to be entered into among Nissan Auto Receivables Corporation, as Seller (the
"Seller"), Nissan Motor Acceptance Corporation, as Servicer (the "Servicer") and
in its individual capacity, and [____________], as Trustee. The Class B
Certificates, which initially will be retained by the Seller, will evidence in
the aggregate an undivided ownership interest of [___]% of the Trust. The rights
of the Class B Certificateholders to receive distributions with respect to the
Receivables (as defined below) are subordinated to the rights of the Class A
Certificateholders, to the extent described herein. Principal, and interest to
the extent of the Pass-Through Rate of [____]% per annum, will be distributed on
or about the 15th day of each month beginning [____________, 1998] (the
"Distribution Date"). The Final Scheduled Distribution Date on the Certificates
will be the [_____________] Distribution Date. The Trust property will consist
of a pool of retail installment sale contracts originated on or after
[___________,], secured by new and used automobiles and light trucks (the
"Receivables"), certain monies due or paid thereunder on or after
[_____________, 1998], security interests in the vehicles financed thereby, any
proceeds from claims on any insurance policies covering such vehicles or the
obligors thereunder, the rights of the Seller under certain Agreements
(described herein), the rights of the Seller to seek recourse, if any, against
the dealers that originated the Receivables and the proceeds of any and all of
the foregoing. There currently is no secondary market for the Class A
Certificates and there is no assurance that one will develop. The Underwriters
expect, but are not obligated, to make a market in the Class A Certificates.
There is no assurance that any such market, if one develops, will continue.
For a discussion of certain factors that should be considered in connection with
an investment in the Class A Certificates, see "Risk Factors" beginning on page
9.
THE CLASS A CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF THE SELLER, THE SERVICER OR ANY OF
THEIR RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Price to Underwriting Proceeds to
Public(1) Discount Seller(1)(2)
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Per Class A Certificate [________]% [________]% [________]%
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Total $[________] $[________] $[________]
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(1) Plus accrued interest at the Pass-Through Rate calculated from
[____________], 1998.
(2) Before deducting expenses payable by the Seller estimated to be $[________.]
The Class A Certificates are offered by the Underwriters when, as, and if issued
and accepted by the Underwriters and subject to their right to reject orders in
whole or in part. It is expected that the Class A Certificates will be delivered
in book-entry form on or about [____________], 1998.
The date of this Prospectus is [__], 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A
CERTIFICATES OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE
PURCHASE OF THE CLASS A CERTIFICATES TO COVER SYNDICATE SHORT POSITIONS AND
THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
AVAILABLE INFORMATION
Nissan Auto Receivables Corporation (the "Seller"), as originator and on behalf
of the Trust, has filed a Registration Statement on Form S-1 under the
Securities Act of 1933, as amended (the "Securities Act"), with the Securities
and Exchange Commission (the "Commission") with respect to the Class A
Certificates offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement and amendments thereof and to
the exhibits thereto, which are available for inspection without charge at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549; Seven World Trade Center, Suite 1300, New York,
New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of the Registration Statement and amendments
thereof and exhibits thereto may be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a site on the World Wide Web
at"http://www.sec.gov" at which users can view and download copies of reports,
proxy, information statements and other information filed electronically through
the Electronic Data Gathering, Analysis and Retrieval system.
REPORTS TO CLASS A CERTIFICATEHOLDERS BY THE TRUSTEE
[____________] (the "Trustee"), as Trustee for the Class A Certificateholders
and Class B Certificateholders (collectively, the "Certificateholders") under
the Pooling and Servicing Agreement to be dated as of [____________], 1998, by
and among the Seller, the Servicer, Nissan Motor Acceptance Corporation and the
Trustee, will provide to Class A Certificateholders (which shall be Cede & Co.
as the nominee of DTC unless Definitive Certificates (as defined herein) are
issued under the limited circumstances described herein) monthly and annual
reports concerning the Receivables. Copies of such reports may be obtained by
beneficial owners of Class A Certificates by delivering a request in writing to
the Trustee at [____________], [________________________________], Attention:
[_________________]. See "The Certificates-Statements to Class A
Certificateholders," "-General," and "-Book-Entry Registration." The Seller, as
originator of the Trust, will be subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, will file reports and other information with the
Commission. Copies of reports and other information may be inspected and copied
at the public reference facilities of the Commission identified above in
"Available Information". The Seller intends to discontinue filing such reports
upon completion of the reporting period required by Section 15(d) of the
Exchange Act. The Trustee, however, will continue to provide the Class A
Certificateholders with the monthly and annual reports concerning the
Receivables as described above.
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<PAGE>
SUMMARY
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. Certain capitalized terms
used in the Summary are defined elsewhere in this Prospectus. A listing of the
pages on which some of such terms are defined is found in the "Index of Terms."
Issuer............ Nissan Auto Receivables 1998-A Grantor Trust (the
"Trust"), to be formed by the Seller pursuant to a
Pooling and Servicing Agreement to be dated as of
[____________], 1998 (the "Agreement"), among the
Seller, Nissan Motor Acceptance Corporation ("NMAC"), as
Servicer (in such capacity, the "Servicer") and in its
individual capacity, and [_____________], as trustee
(the "Trustee").
Seller............ Nissan Auto Receivables Corporation, a wholly-owned
subsidiary of NMAC.
Servicer.......... NMAC, a wholly-owned subsidiary of Nissan Motor
Corporation in the U.S.A. ("NMC"). NMC, the primary
distributor of Nissan and Infiniti vehicles in the
continental United States, is an indirect wholly-owned
subsidiary of Nissan Motor Co., Ltd., a Japanese
corporation.
Securities Offered. The Certificates consist of two classes, entitled
[____]% Asset Backed Certificates, Class A (the "Class A
Certificates"), and [____]% Asset Backed Certificates,
Class B (the "Class B Certificates," and collectively
with the Class A Certificates, the "Certificates"). Only
the Class A Certificates are being offered hereby. Each
Certificate will represent a fractional undivided
interest in the Trust. The Trust property will consist
of a pool of retail installment sale contracts
originated on or after [____________], secured by new
and used automobiles and light trucks (the
"Receivables"), certain monies paid thereunder on or
after [____________], 1998 (the "Cutoff Date"), security
interests in the vehicles securing the Receivables
("Financed Vehicles"), any proceeds from claims on any
physical damage, credit life, credit disability or other
insurance policies covering such vehicles or the
obligors thereunder, the rights of the Seller under the
Purchase Agreement, the Custody and Pledge Agreement and
the Yield Supplement Agreement (each as defined herein),
the rights of the Seller to seek recourse, if any,
against the dealers that originated the Receivables, the
rights of the Seller in certain rebates of premiums and
other amounts relating to insurance policies and other
items financed under the Receivables and the proceeds of
any and all of the foregoing. The Class A Certificates
shall be issued in fully registered form in
denominations of $1,000 and integral multiples thereof
(except that one Certificate may be issued in an amount
not an integral multiple of $1,000). The Receivables
will be purchased by the Seller from NMAC pursuant to a
Purchase Agreement (the "Purchase Agreement") between
the Seller and NMAC providing for such purchase on or
before the date of issuance of the Certificates.
The Class A Certificates will evidence in the aggregate
an undivided ownership interest of [___]% (the "Class A
Percentage") of the Trust (initially representing
$[__________]) and the Class B Certificates will
evidence in the aggregate an undivided ownership
interest of [___]% (the "Class B Percentage") of the
Trust (initially representing $[__________]). The Class
B Certificates are subordinated to the Class A
Certificates to the extent described herein. The Class B
Certificates are not being offered hereby and initially
will be retained by the Seller. The Class B Certificates
may be transferred in accordance with the terms of the
Agreement.
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<PAGE>
Registration of the
Class A Certificates. The Class A Certificates initially will be represented
by one or more Class A Certificates registered in the
name of Cede & Co. ("Cede"), as the nominee of The
Depository Trust Company ("DTC"). No person acquiring an
interest in the Class A Certificates (a "Class A
Certificate Owner") will be entitled to receive a
definitive certificate representing such person's
interest, except in the event that Definitive
Certificates (as defined herein) are issued under the
limited circumstances described herein. All references
herein to Class A Certificateholders shall reflect the
rights of Class A Certificate Owners, as such rights may
be exercised through DTC and its Participants (as
defined herein), except as otherwise specified herein.
See "The Certificates-Definitive Certificates."
Pass-Through Rate. [____]% per annum.
Interest.......... On each Distribution Date, the Trustee shall pass
through and distribute pro rata to the holders of record
of Class A Certificates (the "Class A
Certificateholders") as of the fourteenth day of the
current calendar month or, if Definitive Certificates
are issued, the last day of the related Collection
Period (the "Record Date"), interest at one-twelfth of
the Pass- Through Rate, calculated on the basis of a
360-day year consisting of twelve 30-day months, on the
Class A Certificate Balance (as defined herein) as of
the last day of the related Collection Period (as
defined herein) generally to the extent of funds
available from (i) Available Interest (as Available
Interest has been reduced by reimbursing the Servicer
for any outstanding Advances and paying the Servicing
Fee); (ii) the Subordination Spread Account; and (iii)
the Class B Percentage of Available Principal. The
"Class A Certificate Balance" shall equal, initially,
the Class A Percentage of the Pool Balance as of the
Cutoff Date and thereafter shall equal the initial Class
A Certificate Balance reduced by all principal
distributions on the Class A Certificates.
Principal......... On each Distribution Date, the Trustee shall pass
through and distribute pro rata to Class A
Certificateholders as of the related Record Date the
Class A Percentage of all collections on the Receivables
allocable to principal. Such principal, generally to the
extent of funds available from (i) Available Principal
(as Available Principal has been reduced as described
above with respect to interest distributions to the
Class A Certificateholders); (ii) the Subordination
Spread Account; and (iii) Available Interest (as
Available Interest has been reduced by reimbursing the
Servicer for any outstanding Advances and paying the
Servicing Fee and from making interest distributions to
the Class A Certificateholders), will be passed through
on each Distribution Date to the Class A
Certificateholders in an amount equal to the Class A
Percentage of: (a) the principal portion of all payments
received during the related Collection Period, including
prepayments of principal; (b) the principal balance of
each Receivable that was purchased by the Servicer or
repurchased by the Seller, in each case, under an
obligation that arose during the related Collection
Period; and (c) the principal balance of each Receivable
liquidated by the Servicer during the related Collection
Period. A "Collection Period" with respect to a
Distribution Date will be the calendar month preceding
the month in which such Distribution Date occurs, or, in
the case of the initial Distribution Date, the period
from the Cutoff Date through the last day of the
calendar month preceding the month in which the initial
Distribution Date occurs.
Subordination..... The rights of the holders of record of the Class B
Certificates (the "Class B Certificateholders" and,
together with the Class A Certificateholders, the
"Certificateholders") to receive distributions to which
they would otherwise be entitled with respect to the
Receivables will be subordinated to the rights of the
Class A Certificateholders, as more fully described
4
<PAGE>
under "The Certificates-Subordination of the Class B
Certificates; Subordination Spread Account." The Class B
Certificateholders will not receive any distributions of
interest or principal with respect to a Distribution
Date until the full amount of interest and principal on
the Class A Certificates relating to such Distribution
Date has been distributed to the Class A
Certificateholders. This subordination is intended to
enhance the likelihood of timely receipt by Class A
Certificateholders of the full amount of interest and
principal required to be distributed to them, and to
afford such Class A Certificateholders limited
protection against losses in respect of the Receivables.
The protection afforded to the Class A
Certificateholders by the subordination feature
described above will be effected by the preferential
right of the Class A Certificateholders to receive
current distributions from collections on or in respect
of the Receivables to the extent described herein. In
addition, the Class A Certificateholders will have the
benefit of a segregated trust account held by the
Trustee for their exclusive benefit (the "Subordination
Spread Account"), as described below.
Subordination Spread
Account......... The Subordination Spread Account will be created
pursuant to a Custody and Pledge Agreement dated as of
[____________], 1998 (the "Custody and Pledge
Agreement") between the Seller and [____________], as
custodian for the benefit of the Class A
Certificateholders, and will be funded with an initial
deposit by the Seller of cash or Eligible Investments
maturing on or prior to the initial Distribution Date
and having a value of $[__________] (the "Subordination
Initial Deposit"). The Subordination Initial Deposit
thereafter will be augmented by the deposit in the
Subordination Spread Account of all amounts otherwise
distributable to the Class B Certificateholders and all
Excess Amounts otherwise distributable to the Seller
until the amount in the Subordination Spread Account
reaches an amount equal to the Specified Subordination
Spread Account Balance. "Excess Amounts" in respect of a
Distribution Date will be all interest collections on or
in respect of the Receivables on deposit in the
Certificate Account in respect of such Distribution
Date, after the Servicer has been reimbursed for any
outstanding Advances and has been paid the Servicing Fee
(including any unpaid Servicing Fees with respect to one
or more prior Collection Periods) and after giving
effect to all distributions of interest and principal
required to be made to the Class A and Class B
Certificateholders on such Distribution Date.
Thereafter, amounts otherwise distributable to the Class
B Certificateholders and Excess Amounts otherwise
distributable to the Seller will be deposited in the
Subordination Spread Account to the extent necessary to
maintain the amount in the Subordination Spread Account
at an amount equal to the Specified Subordination Spread
Account Balance. On each Distribution Date, funds will
be withdrawn from the Subordination Spread Account as
described herein for distribution to the Class A
Certificateholders to cover any shortfalls in the amount
of interest and principal required to be distributed to
them. The "Specified Subordination Spread Account
Balance" with respect to any Distribution Date will be
equal to $[__________] except that in the event that on
any Distribution Date (i) the annualized average for the
preceding three Collection Periods of the percentage
equivalents of the ratios of net losses (i.e., the net
balances of all Receivables which are determined to be
uncollectible in the Collection Period, less any
Liquidation Proceeds with respect to such net balances
from that or prior Collection Periods) to the Pool
Balance as of the first day of each such Collection
Period exceeds [___]% or (ii) the average for the
preceding three Collection Periods of the percentage
equivalents of the ratios of the number of Receivables
that are delinquent 60 days or more to the outstanding
number of Receivables exceeds [___]%, then the Specified
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Subordination Spread Account Balance for such
Distribution Date (and for each succeeding Distribution
Date until the relevant averages have not exceeded the
specified percentages in clauses (i) and (ii) above for
three successive Distribution Dates) shall be a dollar
amount equal to (x) [___]% of the Pool Balance as of the
first day of the related Collection Period minus (y) the
excess of the Pool Balance over the Class A Certificate
Balance both as of the first day of such Collection
Period, but in no event shall the Specified
Subordination Spread Account Balance be more than
$[__________], or less than $[__________]. On any
Distribution Date on which the aggregate balance of the
Class A Certificates is $[__________] or less, after
giving effect to the distributions on such Distribution
Date, the Specified Subordination Spread Account Balance
shall be the greater of the balance described above or
$[__________]. The Subordination Spread Account will be
maintained as a segregated account with [____________]
and will not be part of the Trust.
The Seller may, from time to time after the date of this
Prospectus, request each rating agency then rating the
Class A Certificates to approve a different formula for
determining the Specified Subordination Spread Account
Balance or a change in the manner by which the
Subordination Spread Account is funded, if such new
formula or manner would not affect the then-current
rating of the Class A Certificates. See "The
Certificates-Subordination of the Class B Certificates;
Subordination Spread Account."
On each Distribution Date, after giving effect to all
distributions made on such Distribution Date, any
amounts in the Subordination Spread Account in excess of
the Specified Subordination Spread Account Balance will
be distributed as described under "The
Certificates-Subordination of the Class B Certificates;
Subordination Spread Account" and, upon such
distribution, the Class A Certificateholders will have
no further rights in, or claims to, such amounts.
Yield Supplement
Reserve Account
and Yield
Supplement
Agreement....... In order to maintain the rating of the Class A
Certificates at the initial level, a segregated trust
account will be established by the Seller and pledged to
and maintained by the Class A Agent for the benefit of
the Class A Certificateholders (the "Yield Supplement
Reserve Account"). Pursuant to the Agreement, on each
Distribution Date, to the extent funds are available,
the Class A Agent will withdraw from the Yield
Supplement Reserve Account and deposit in the
Certificate Account an amount equal to the Yield
Supplement Amount. The "Yield Supplement Amount" is an
amount (if positive) calculated by the Servicer, which
is the amount with respect to each Receivable (other
than a Liquidated Receivable, after the Collection
Period in which such Receivable became a Liquidated
Receivable), for any Collection Period, equal to
one-twelfth times (i) interest calculated at a rate
equal to the sum of the Pass-Through Rate and 1.00% (the
"Servicing Rate"), minus (ii) interest at such
Receivable's APR, in each case on such Receivable's
principal balance as of the first day of the Collection
Period.
The initial amount of the Yield Supplement Reserve
Account will be $[__________] (the "Initial Yield
Supplement Reserve Amount"). The amount required to be
on deposit in the Yield Supplement Reserve Account (the
"Required Yield Supplement Reserve Amount") will be
equal to the lesser of (i) the maximum aggregate Yield
Supplement Amounts that will become due under the Yield
Supplement Agreement,
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<PAGE>
assuming that payments on the Receivables are made on
their scheduled due dates and that no Receivable becomes
a Prepaid Receivable, or (ii) the Initial Yield
Supplement Reserve Amount. To the extent that amounts on
deposit in the Yield Supplement Reserve Account exceed
the Required Yield Supplement Reserve Amount, the excess
will be released to the Seller. The Yield Supplement
Reserve Account will be maintained by the Class A Agent
for the benefit of the Class A Certificateholders and
will not be part of the Trust. See "The
Certificates-Yield Supplement Reserve Account and Yield
Supplement Agreement." A "Prepaid Receivable" is a
Receivable which during a Collection Period is prepaid
in full or accelerated under certain circumstances, or
with respect to which the related Financed Vehicle is
repossessed or becomes a total loss.
The Seller will enter into a yield supplement agreement
(the "Yield Supplement Agreement") with the Class A
Agent and the Servicer, and the Seller will assign the
Yield Supplement Agreement to the Trust. The Seller has
no obligation to further fund the Yield Supplement
Reserve Account after the deposit of the Initial Yield
Supplement Reserve Amount. See "The Certificates-Yield
Supplement Reserve Account and Yield Supplement
Agreement."
Distribution Date. The 15th day of each month (or if such 15th day is not a
business day, the next following business day).
Advances.......... The Servicer will advance each month to the Trust, in
respect of each Receivable, an amount equal to the
product of the principal balance of the Receivable as of
the first day of the related Collection Period and one-
twelfth of its APR minus the amount of interest actually
received on the Receivable with respect to such
Collection Period (an "Advance"). The Servicer will not
be required to make any Advance (other than an Advance
of an interest shortfall arising from a Prepaid
Receivable) to the extent that it does not expect to
recoup the Advance from subsequent collections or
recoveries. No advances of principal will be made with
respect to the Receivables. See "The
Certificates-Advances." The Servicer will be reimbursed
for Advances from collections of interest on the
Receivables prior to distribution of any Available
Interest to Certificateholders. See "The
Certificates-Distributions on Certificates."
Repurchases of Certain
Receivables..... The Seller will be obligated to repurchase any
Receivable if the interest of the Trust therein is
materially adversely affected by a breach of any
representation or warranty made by the Seller with
respect to such Receivable if the breach has not been
cured by the last day of the second month following the
discovery by or notice to the Seller of the breach. NMAC
will be obligated to repurchase such Receivable from the
Seller pursuant to the Purchase Agreement
contemporaneously with the Seller's re purchase from the
Trust. See "The Certificates-Sale and Assignment of
Receivables."
Servicer Fee...... The Servicer will receive each month a fee for servicing
the Receivables (the "Servicing Fee"). The monthly
Servicing Fee shall be one-twelfth of 1.00% of the Pool
Balance as of the first day of the related Collection
Period. The Servicer shall also receive any late,
prepayment and other administrative fees and expenses
collected during such month plus reinvestment proceeds
on any payments received in respect of the Receivables
(the "Supplemental Servicing Fee" and together with the
Servicing Fee, the "Servicer Fee"). See "The
Certificates-Servicing Compensation."
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<PAGE>
Optional Purchase. The Servicer may purchase all of the Receivables as of
the last day of any month on or after which the
aggregate principal balance of the Receivables (after
giving effect to the current calendar month's
collections) declines below 10% of the aggregate face
amount of the original Pool Balance. The purchase price
will be equal to the aggregate Purchase Amounts, and
will be distributed to Certificateholders on the next
following Distribution Date. See "The
Certificates-Termination."
Trustee........... [____________].
Class A Agent..... [____________].
Tax Status........ The Trust will be characterized as a grantor trust for
federal income tax purposes and will not be subject to
federal income tax. Class A Certificate Owners must
report their respective allocable shares of all income
earned on the Trust assets, and, subject to certain
limitations, individuals, estates and trusts may deduct
their respective allocable shares of reasonable
servicing and other fees. See "Federal Income Tax
Consequences-Classification of the Trust." Individuals
should consult their own tax advisors to determine the
federal, state, local and other tax consequences of the
purchase, ownership and disposition of the Class A
Certificates. Prospective investors should note that no
rulings have been or will be sought from the Internal
Revenue Service (the "Service") with respect to any of
the federal income tax consequences discussed herein,
and no assurance can be given that the Service will not
take contrary positions. See "Federal Income Tax
Consequences."
The exact characterization for federal income tax
purposes of the payments received with respect to the
Yield Supplement Agreement is not clear. Arguably, the
arrangement set forth in the Yield Supplement Agreement
should be treated as a loan made by the Class A
Certificate Owners to the Seller in an amount equal to
the discounted present value of the Yield Supplement
Amounts, if any, which are expected to be received,
resulting in original issue discount to the Class A
Certificate Owners for the amount of the discount.
Alternatively, it is possible that the entire amount of
Yield Supplement Amounts should be included in income as
accrued or received and not treated as interest and that
the Class A Certificate Owners should also be entitled
to amortize the portion of the purchase price allocable
to their right to receive Yield Supplement Amounts,
possibly on a straight-line basis over the term of the
Class A Certificates. See "Federal Income Tax
Consequences-Payments Under the Yield Supplement
Agreement." In such latter case, such payments may not
constitute "portfolio interest." See "Federal Income Tax
Consequences- Foreign Class A Certificate Owners."
ERISA
Considerations.. As described herein, the Class A Certificates may, in
general, be purchased by employee benefit plans that are
subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), subject to certain
conditions. See "ERISA Considerations."
Rating............ As a condition of issuance, the Class A Certificates
will be rated in the highest rating category by at least
one nationally recognized rating agency (each such
agency, a "Rating Agency"). There is no assurance that a
rating will not be lowered or withdrawn by a Rating
Agency based on a change in circumstances deemed by such
Rating Agency to adversely affect the Class A
Certificates. See "Rating of the Class A Certificates."
8
<PAGE>
RISK FACTORS
Prospective investors in the Class A Certificates should consider the following
risk factors in connection with the purchase of the Class A Certificates.
Limited Assets
The Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables and the
Subordination Spread Account. The Certificates represent interests solely in the
Trust and are not obligations of, and will not be insured or guaranteed by, the
Seller, the Servicer or any of their respective affiliates, or the Trustee or
any other person or entity. Holders of the Class A Certificates must rely for
repayment upon payments on the Receivables and, if and to the extent available,
amounts on deposit in the Subordination Spread Account. Similarly, although
funds in the Subordination Spread Account will be available on each Distribution
Date to cover shortfalls in distributions of interest and principal on the Class
A Certificates, amounts to be deposited in the Subordination Spread Account are
limited in amount, and if the Subordination Spread Account is exhausted, the
Trust will depend solely on current distributions on the Receivables to make
payments on the Certificates. On any Distribution Date when the amount on
deposit in the Subordination Spread Account exceeds the Specified Subordination
Spread Account Balance, the amount of such excess will not be available to the
Class A Certificateholders on any subsequent Distribution Date. See "The
Certificates-Subordination of the Class B Certificates; Subordination Spread
Account." In limited circumstances, the Trust will also have access to funds in
the Yield Supplement Reserve Account. See "The Certificates-Yield Supplement
Reserve Account and Yield Supplement Agreement."
Prepayment Considerations
The weighted average lives of the Class A Certificates will be reduced by full
or partial prepayments on the Receivables. The Receivables are prepayable at any
time without penalty. Prepayments may result from payments by or on behalf of
the related Obligors, the receipt of proceeds from physical damage or credit
life and/or credit disability insurance, repurchases by NMAC or the Seller as a
result of certain uncured breaches of representations and warranties made with
respect to the Receivables and purchases by the Servicer as a result of certain
uncured breaches of the covenants made by it with respect to the servicing of
the Receivables. See "The Receivables-Maturity and Prepayment Considerations."
Prepayments can also result from the liquidation of vehicles and the
Receivables. NMAC's retail loss experience with respect to its total portfolio
of receivables serviced for itself and third parties in the year ended March 31,
1997 was higher than in previous years due to an effort to finance a broader
credit range of customers to support the sale of Nissan and Infiniti vehicles
and a general increase in personal bankruptcy filings. NMAC's management reacted
to this negative trend by initiating changes to its credit policy that tightened
the range of available credit in order to originate an improved mix of business.
If the Trust experiences high levels of losses on the Receivables,
correspondingly high levels of liquidations and prepayments may result. Such
prepayments could shorten the weighted average life of the Class A Certificates.
The Seller maintains only limited records regarding prepayment rates and is not
aware of publicly available industry statistics that set forth principal
prepayment experience for retail installment sales contracts similar to the
Receivables. The Seller can make no prediction as to the actual prepayment rates
that will be experienced on the Receivables. The Seller, however, believes that
the actual rate of prepayments will result in the weighted average life of the
Receivables, and therefore of the Class A Certificates, being shorter than the
period from the Closing Date to the Final Scheduled Maturity Date.
Substantially all reinvestment risks (which will vary from investor to investor,
but which may include the risk that principal payments will have to be
reinvested at a lower yield) resulting from a faster or slower incidence of
prepayment of Receivables will be borne by the Certificateholders.
Security Interest in Financed Vehicles
Because of the administrative burden and expense that would be entailed in doing
so, the certificates of title for the Financed Vehicles, which will name NMAC as
secured party, will not be amended or reissued to reflect the assignment of the
security interests in the Financed Vehicles by NMAC to the Seller or by the
Seller to the Trust. In most states, as against creditors of the related
obligor, such assignment is an effective conveyance of such security interest.
In the absence of fraud or forgery by the related Obligor (as herein defined) or
9
<PAGE>
administrative error by state or local recording officials, the notation of the
lien of NMAC on the certificates of title and NMAC's possession of the
certificates of title (for purposes of servicing the Receivables) should be
sufficient to protect the Trust against the rights of subsequent purchasers of
the related Financed Vehicles and subsequent lenders who take security interests
in the related Financed Vehicles. If there are any Financed Vehicles as to which
NMAC failed to obtain perfected security interests, such security interests
would be subordinate to, among others, subsequent purchasers of such Financed
Vehicles and holders of perfected security interests in such Financed Vehicles.
In addition, because neither the Trust nor the Trustee will be listed as legal
owner on the certificates of title to the Financed Vehicles, the security
interests in the Financed Vehicles could be defeated through fraud, forgery or
negligence. See "Certain Legal Aspects of the Receivables-Security Interests in
the Financed Vehicles."
Consumer Protection Laws
The Receivables are subject to federal and state consumer protection laws which
impose requirements with respect to the making, transfer, acquisition,
enforcement and collection of consumer loans. Such laws, as well as any new laws
or rules which may be adopted, may adversely affect the Servicer's ability to
collect on the Receivables. In addition, failure by the Seller to have complied,
or the Servicer to comply, with such requirements could adversely affect the
enforceability of the Receivables. Each of NMAC and the Seller will make
representations and warranties relating to the validity and enforceability of
the Receivables and their compliance with applicable law in connection with
their performance of the transactions contemplated by the Purchase Agreement and
the Agreement. Pursuant to the Purchase Agreement and the Agreement, if the
Trust's interest in a Receivable is materially and adversely affected by the
failure of such Receivable to comply with applicable requirements of consumer
protection law, such representation or warranty is not complied with and such
noncompliance continues beyond the applicable cure period, the Receivables
affected thereby will be repurchased by NMAC or the Seller under the Purchase
Agreement and Agreement, respectively. See "Certain Legal Aspects of the
Receivables-Consumer Protection Laws."
Credit Enhancement
Credit enhancement with respect to the Class A Certificates will be provided by
the subordination of the Class B Certificates and the funds in the Subordination
Spread Account. These funds consist of the amounts (both principal and interest)
otherwise distributable to holders of the Class B Certificates that are required
under the Agreement to be deposited in the Subordination Spread Account. The
amount available for distribution to the Certificateholders on any Distribution
Date and the time necessary for the Subordination Spread Account to reach the
specified Subordination Spread Account Balance after the Closing Date will be
affected by the delinquency, net loss, repossession and prepayment experience of
the Receivables and, therefore, cannot be accurately predicted. In addition, the
amount required to be on deposit in the Subordination Spread Account with
respect to any Distribution Date will be limited to the Specified Subordination
Spread Account Balance for such Distribution Date.
Certain Legal Aspects-Bankruptcy Considerations
The Seller will warrant to the Trust in the Agreement that the sale of the
Receivables by the Seller to the Trust is a valid sale of the Receivables to the
Trust. Notwithstanding the foregoing, if the Seller were to become a debtor in a
bankruptcy case and a creditor or trustee-in-bankruptcy of such debtor or such
debtor itself were to take the position that the sale of Receivables to the
Trust should instead be treated as a pledge of such Receivables to secure a
borrowing of such debtor, delays in payments of collections of Receivables to
the related security holders could occur or (should the court rule in favor of
any such trustee, debtor or creditor) reductions in the amounts of such payments
could result. If the transfer of Receivables to the Trust is treated as a pledge
instead of a sale, a tax or government lien on the property of the Seller
arising before the transfer of a Receivable to the Trust may have priority over
the Trust's interest in such Receivable. If the transactions contemplated herein
are treated as a sale, the Receivables would not be part of the Seller's
bankruptcy estate and would not be available to the Seller's creditors. See
"Certain Legal Aspects of the Receivables-Certain Bankruptcy Considerations."
The Agreement will provide that the Servicer may retain all payments on or in
respect of the Receivables received from Obligors and all proceeds of
Receivables collected during each Collection Period without segregation in its
own accounts until deposited in the Collection Account (as defined below) on the
business day prior to the related Distribution Date unless and until (i) NMAC
ceases to be the Servicer, (ii) an Event of
10
<PAGE>
Default exists and is continuing or (iii) the short-term unsecured debt of NMAC
ceases to be rated at least P-1 by Moody's and A-1 by S&P, and alternative
arrangements acceptable to the Rating Agencies are not made. The Servicer does
not currently have the rating referred to in clause (iii). As a result,
following execution of the Agreement, the Servicer will be required to deposit
all such payments and proceeds into the Collection Account not later than one
Business Day after receipt. Pending deposit into the Collection Account,
collections on the related Receivables will not be segregated from funds of the
Servicer. If the Servicer were to become a debtor in a bankruptcy case or were
otherwise unable to remit such funds, the Class A Certificateholders might incur
a delay in the distribution or a loss of funds.
Limited Liquidity
There is currently no secondary market for the Class A Certificates. The
Underwriters currently intend to make a market in the Class A Certificates, but
they are under no obligation to do so. There can be no assurance that a
secondary market will develop or, if a secondary market does develop with
respect to the Class A Certificates, that it will provide the Class A
Certificateholders with liquidity of investment or that it will continue for the
life of the Class A Certificates.
Uncertainty of Federal Income Tax Consequences of Yield Supplement Agreement
Tax counsel is unable to opine as to the Federal income tax consequences of the
Yield Supplement Agreement. See "Federal Income Tax Consequences-Payments Under
the Yield Supplement Agreement."
FORMATION OF THE TRUST
The Seller will establish the Trust by selling and assigning the Trust property,
as described below, to the Trustee in exchange for the Certificates. The
Servicer will service the Receivables pursuant to the Agreement and will be
compensated for acting as the Servicer. See "The Certificates-Servicing
Compensation." To facilitate servicing and to minimize administrative burden and
expense, the Servicer will retain physical possession of the Receivables and
documents relating thereto as custodian for the Trustee. Due to the
administrative burden and expense, the certificates of title to the Financed
Vehicles will not be amended to reflect the assignment of the security interest
in the Financed Vehicles to the Trustee. In the absence of such amendment, the
Trustee may not have a perfected security interest in the Financed Vehicles in
all states. See "Certain Legal Aspects of the Receivables-Security Interests in
the Financed Vehicles." The Trustee will not be responsible for the legality,
validity or enforceability of any security interest in any Financed Vehicle.
If the protection provided to the Class A Certificateholders by the
subordination of the Class B Certificates and by the Subordination Spread
Account is insufficient, the Class A Certificateholders would have to look
solely to the Obligors (as defined below) on the Receivables, the proceeds from
the repossession and sale of Financed Vehicles which secure defaulted
Receivables and the proceeds from Dealer Recourse (as defined below). In such
event, certain factors, such as the Trustee's not having perfected security
interests in the Financed Vehicles in all states, may affect the Trust's ability
to repossess and sell the collateral securing the Receivables, and thus may
reduce the proceeds to be distributed to Certificateholders. See "The
Certificates-Subordination of the Class B Certificates; Subordination Spread
Account" and "Certain Legal Aspects of the Receivables."
PROPERTY OF THE TRUST
Each Certificate represents a fractional undivided interest in the Trust. The
property of the Trust will consist of a pool of retail installment sale
contracts originated on or after [____________], between Nissan and Infiniti
dealers (the "Dealers") and retail purchasers (the "Obligors") secured by new
and used automobiles and light trucks and all principal and interest payments
made on or after the Cutoff Date and certain other property. In some states, a
"demonstration" vehicle is not titled so that vehicles used as demonstration
vehicles in such states may be classified as new vehicles. The Receivables were
originated by Dealers in accordance with NMAC's requirements under agreements
with Dealers governing the assignment of the Receivables to NMAC. The
Receivables have been so assigned and evidence the indirect financing made
available by NMAC to the Obligors. On or prior to the issuance of the
Certificates, the Receivables will be sold to the Seller by NMAC, but will be
serviced by NMAC. The property of the Trust also will include (i) such amounts
as from time to time may be held in separate trust accounts (the "Collection
Account" and the "Certificate Account") established and maintained pursuant to
the Agreement; (ii) security interests in the Financed Vehicles and any
accessions thereto; (iii) any Dealer Recourse; (iv) the right to proceeds of
credit life and credit disability insurance
11
<PAGE>
covering the Financed Vehicles or Obligors; (v) the rights of the Seller under
the Purchase Agreement, the Custody and Pledge Agreement and the Yield
Supplement Agreement; (vi) certain rebates of premiums and other amounts
relating to certain insurance policies and other items financed under the
Receivables in effect as of the Cutoff Date; and (vii) any and all proceeds of
the foregoing. The property of the Trust does not include amounts on deposit
from time to time in the Yield Supplement Reserve Account or the Subordination
Spread Account.
Additionally, pursuant to agreements between NMAC and the Dealers, the Dealers
are obligated to repurchase Receivables from NMAC which do not meet certain
representations made by the Dealers ("Dealer Recourse"). Such Dealer Recourse is
limited to breaches of representations and warranties and is not related to
credit losses on the Receivables. See "The Receivables."
THE RECEIVABLES
The Receivables were purchased by NMAC from Dealers in the ordinary course of
business in accordance with NMAC's underwriting standards. The Receivables were
selected from NMAC's portfolio by several criteria, including the following:
each Receivable (i) was originated in the United States, (ii) has a contractual
Annual Percentage Rate ("APR") that equals or exceeds [___]%, (iii) provides for
level monthly payments which provide interest at the APR on a simple interest
basis and fully amortize the amount financed over an original term to maturity
no greater than [___] months, (iv) has a remaining term to maturity, as of the
Cutoff Date, of not less than [______] months and not greater than [_____]
months, (v) had an original balance of not more than $[________] and a remaining
principal balance as of the Cutoff Date of not less than $[_______] nor more
than $[________], (vi) is not more than [___] days past due as of the Cutoff
Date, (vii) is attributable to the purchase of a new or used automobile or light
truck and is secured thereby, (viii) was originated on or after [____________],
19[__], (ix) has been entered into by an Obligor that was not in bankruptcy
proceedings (according to the records of NMAC) as of the Cutoff Date, (x) is
secured by a Financed Vehicle that as of the Cutoff Date has not been
repossessed (according to the records of NMAC), (xi) has not had forced-placed
insurance premiums added to the amount financed, and (xii) has not been extended
by more than [____] months. The Receivables are secured by Nissan, Infiniti and
other vehicles. No selection procedures believed to be adverse to the
Certificateholders were utilized in selecting the Receivables from qualifying
retail installment sale contracts. Except as described in item (ii) above, the
Receivables were not selected on the basis of their APRs.
The composition, geographical distribution and distribution by annual percentage
rate of the Receivables as of the Cutoff Date are as set forth in the following
tables.
Composition of the Receivables
Aggregate Principal Balance............... $
Number of Receivables.....................
Average Principal Balance................. $
Average Original Amount Financed.......... $
(Range)................................. $ to
Weighted Average APR...................... %
(Range)................................. % to %
Approximate Weighted Average Original
Term to Maturity........................ months
(Range)................................. to months
Weighted Average Remaining Term to
Maturity................................ months
(Range)................................. to months
Percentage by Principal Balance of
Receivables of New and Used Vehicles.... % (New) and %(Used)
Percentage by Principal Balance of
Receivables Financed Through Nissan
and Infiniti Dealers.................... %(Nissan) and %(Infiniti)
12
<PAGE>
Geographic Distribution of the
Receivables
---------------------
Percentage of
Aggregate Principal
State(1)(2) Balance
- ----------- ---------------------
Alaska...................................................... %
Arizona.....................................................
Arkansas....................................................
California..................................................
Colorado....................................................
Connecticut.................................................
Delaware....................................................
Florida.....................................................
Georgia.....................................................
Idaho.......................................................
Illinois....................................................
Indiana.....................................................
Iowa........................................................
Kansas......................................................
Kentucky....................................................
Louisiana...................................................
Maine.......................................................
Maryland....................................................
Massachusetts...............................................
Michigan....................................................
Minnesota...................................................
Mississippi.................................................
Missouri....................................................
Montana.....................................................
Nebraska....................................................
Nevada......................................................
New Hampshire...............................................
New Jersey..................................................
New Mexico..................................................
New York....................................................
North Carolina..............................................
North Dakota................................................
Ohio........................................................
Oklahoma....................................................
Oregon......................................................
Rhode Island................................................
South Carolina..............................................
South Dakota................................................
Tennessee...................................................
Texas.......................................................
Utah........................................................
Vermont.....................................................
Virginia....................................................
Washington..................................................
West Virginia...............................................
Wyoming.....................................................
-------
Total(3).................................................. 100.00%
=======
- ------------
(1) Based on the addresses of the originating Dealers.
(2) Retail installment sale contracts originated in Alabama, Pennsylvania and
Wisconsin have been excluded for administrative reasons.
(3) Percentages do not add to 100.00% due to rounding.
13
<PAGE>
Distribution by APR of the Receivables
----------------------------------------
Percentage
Number of Principal of Aggregate
APR Range (%) Receivables Balance Principal
Balance
----------------------------------------
5.0 to 5.99......................... %
6.0 to 6.99.........................
7.0 to 7.99.........................
8.0 to 8.99.........................
9.0 to 9.99.........................
10.0 to 10.99........................
11.0 to 11.99........................
12.0 to 12.99........................
13.0 to 13.99........................
14.0 to 14.99........................
15.0 to 15.99........................
16.0 to 16.99........................
17.0 to 17.99........................
18.0 to 18.99........................
19.0 and above.......................
----------------------------------------
Totals(1)............................ $ 100.00%
========================================
- ------
(1)Percentages do not add to 100.00% due to rounding.
Maturity and Prepayment Considerations
All the Receivables are prepayable at any time. If prepayments are received on
the Receivables, the actual weighted average life of the Receivables will be
shorter than would otherwise be the case. (For this purpose the term
"prepayments" includes prepayments in full, partial prepayments and liquidations
due to default, as well as receipt of proceeds from credit life, credit
disability and casualty insurance policies and certain other Receivables
repurchased by the Seller or the Servicer.) Weighted average life means the
average amount of time during which each dollar of principal on a receivable is
outstanding.
The rate of prepayments on the Receivables may be influenced by a variety of
economic, social and other factors, including the fact that an Obligor generally
may not sell or transfer a Financed Vehicle securing a Receivable without the
consent of NMAC. NMAC believes that the actual rate of prepayments will result
in a shorter weighted average life than would be the case in the absence of such
prepayments. Increases in the rate of prepayment will shorten the weighted
average life of the Class A Certificates and decreases in the rate of prepayment
will lengthen the weighted average life of the Class A Certificates.
Substantially all reinvestment risks (which will vary from investor to investor,
but which may include the risk that principal payments will have to be
reinvested at a lower yield) resulting from a faster or slower incidence of
prepayment of Receivables will be borne by the Certificateholders. See also "The
Certificates-Termination" regarding the Servicer's option to purchase the
Receivables when the aggregate principal balance of the Receivables (the "Pool
Balance") is less than 10% of the Pool Balance as of the Cutoff Date.
Interest on the Receivables will be passed through to Class A Certificateholders
on each Distribution Date to the extent of the Pass-Through Rate, applied to the
Class A Certificate Balance on the last day of the related Collection Period
from funds available from Available Interest (reduced by the amounts distributed
to reimburse the Servicer for outstanding Advances and payment of Servicing
Fees). In the event of prepayments on Receivables, Class A Certificateholders
will receive an amount equal to thirty (30) days' interest on such Class A
Certificate Balance to the extent that amounts, including amounts otherwise
allocable to the Class B Certificates or the Seller, are available from
Available Interest after payment of the Servicing Fee and reimbursement of
outstanding Advances, and if such amounts are insufficient, the Class A
Certificateholders
14
<PAGE>
will receive such excess first, from amounts on deposit in the Subordination
Spread Account, and second, from the Class B Percentage of Available Principal.
If such amounts are insufficient, the amount of interest distributed to the
Class A Certificateholders may be less than that described above. See "The
Certificates-Distributions on Certificates." Although the Receivables have
different APRs, disproportionate rates of prepayments between Receivables with
APRs greater than or less than a rate equal to the sum of the Pass-Through Rate
and the Servicing Rate will generally not affect the yield to Class A
Certificateholders because the Seller has assigned to the Trust the Seller's
rights under the Yield Supplement Agreement and rights to receive payments from
the Yield Supplement Reserve Account. However, higher rates of prepayments of
Receivables with higher APRs will decrease the amount available to cover
delinquencies and defaults on the Receivables and may decrease the amount
available to be deposited in the Subordination Spread Account.
No prediction can be made as to the rate of prepayments on the Receivables in
either stable or changing interest rate environments. NMAC maintains limited
records of the historical prepayment experience of the retail installment sale
contracts included in its portfolio and its experience with respect to the
retail installment sale contracts now included in its portfolio is insufficient
to draw any specific conclusions with respect to the expected rates of
prepayments in full on the Receivables. NMAC is not aware of any publicly
available statistics for the entire auto finance industry on an aggregate basis
that set forth principal prepayment experience for retail installment sale
contracts similar to the Receivables over an extended period of time.
Delinquencies, Repossessions and Net Losses
Set forth below is certain information concerning NMAC's experience with respect
to its total portfolio of U.S. retail installment sale contracts for new and
used automobiles and light trucks. The portfolio consists of retail installment
sale contracts in all fifty states, the District of Columbia and Guam. 89% of
NMAC's total portfolio of U.S. retail installment sales contracts (excluding
those with original maturities of 64 months or more) consists of new and used
automobiles and light trucks financed through Nissan dealers, with the remaining
11% financed through Infiniti dealers.
There can be no assurance that the behavior of the Receivables will be
comparable to NMAC's experience shown in the following tables.
15
<PAGE>
Delinquency Experience(1)
<TABLE>
<CAPTION>
At March 31,
At August 31, -----------------------------------------------------------
1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts Outstanding.......... 334,521 330,662 317,238 274,807 226,684 239,592
Delinquencies as a Percent of
Contracts Outstanding (2)
30-59 Days............................ 2.84% 2.55% 3.10% 2.40% 2.10% 2.50%
60-89 Days............................ 0.52% 0.36% 0.49% 0.25% 0.15% 0.24%
90 Days or More....................... 0.08% 0.06% 0.17% 0.05% 0.02% 0.24%
</TABLE>
Net Credit Loss and Repossession Experience(1)
(dollars in thousands)
<TABLE>
<CAPTION>
At or For Five
Months Ended
August 31, At or For Twelve Months Ended March 31,
-------------- -----------------------------------------------------------
1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Principal Amount Outstanding............. $3,568,416 $3,497,123 $3,276,423 $2,659,232 $1,921,100 $1,794,943
Average Principal Amount
Outstanding........................... $3,622,127 $3,248,193 $3,181,569 $2,308,058 $1,822,669 $2,029,439
Number of Contracts Outstanding.......... $334,521 $330,662 317,238 274,807 226,684 239,592
Average Number of Contracts
Outstanding........................... $337,009 $316,769 309,257 250,040 229,248 266,020
Charge-offs(3)........................... $36,477 $134,671 $158,969 $72,838 $43,201 $55,051
Recoveries(4)............................ $17,655 $40,002 $31,874 $20,489 $16,465 $21,785
Net Losses............................... $18,821 $94,669 $127,095 $52,349 $29,736 $33,266
Net Losses as a Percent of Principal
Amount Outstanding.................... 1.27% 2.71% 3.88% 1.97% 1.55% 1.85%
Number of Repossessions(5)............... 4,119 14,164 17,569 9,841 8,530 12,834
Number of Repossessions as a Percent of
the Average Number of Contracts
Outstanding........................... 1.22% 4.47% 5.68% 3.94% 3.72% 4.82%
</TABLE>
- ----------------
(1)The information in the Delinquency Experience and Net Credit Loss and
Repossession Experience tables includes retail installment sale contracts for
new and used automobiles and light trucks and includes contracts which NMAC
has sold to third parties but continues to service; it does not include
retail installment sale contracts purchased by NMAC under certain special
financing programs. The information in the tables relates only to retail
installment sales contracts with original terms of less than 64 months. The
Trust does not include Receivables with original maturities of 64 months or
greater. In general, NMAC has experienced higher overall levels of losses
with respect to contracts with original maturities of 64 to 72 months than
with respect to contracts with shorter original maturities. All amounts and
percentages, except as indicated, are based on the principal balances of the
contracts net of unearned finance and other charges. Averages are computed by
taking a simple average of month end outstandings for each period presented.
(2)An account is considered delinquent if 20% or more of the scheduled payment
is past due.
(3)Charge-offs represent the total aggregate net principal balance of contracts
determined to be uncollectible in the period less proceeds from disposition
of related vehicles, other than recoveries described in Note (4). Charge-offs
do not include expenses associated with collection, repossession or
disposition of the vehicle.
(4)Recoveries generally include amounts received on contracts following the time
at which the contract is charged off. Recoveries do not include expenses
associated with collection.
(5)The number of repossessions excludes accounts that have been subsequently
reinstated.
16
<PAGE>
(6)Annualized Rate. The five-month period ending August 31, 1998 is not
necessarily indicative of a full year's actual results.
NMAC's retail loss experience is dependent upon receivables levels, the number
of repossessions, the amount outstanding at the time of repossession and the
resale value of repossessed vehicles. The losses in the year ended March 31,
1997 were higher than in previous years due to an effort to finance a broader
credit range of customers to support the sale of Nissan and Infiniti vehicles
and a general increase in personal bankruptcy filings. NMAC's management reacted
to this negative trend by initiating changes to its credit policy that tightened
the range of available credit in order to originate an improved mix of business.
All of the Receivables are simple interest contracts. In general, as payments
are received under a simple interest contract, interest accrued to date is paid
first, the remaining amount of the payment is applied to principal until the
principal balance is brought current and then the remaining payment is applied
to reduce any unpaid late charges or associated fees as provided in the
Receivable and any excess then remaining will further reduce remaining
principal. Accordingly, if an Obligor pays the fixed monthly installment in
advance of the due date, the portion of the payment allocable to interest for
the period since the preceding payment will be less than it would be if the
payment were made on the due date, and the portion of the payment allocable to
reduce the principal balance will be correspondingly greater. Conversely, if the
Obligor pays the fixed monthly installment after its due date, the portion of
the payment allocable to interest for the period since the last payment will be
greater than it would be if the payment were made on the due date, and the
portion of the payment allocable to reduce the principal balance will be
correspondingly smaller. Accordingly, the scheduled final monthly payment will
be smaller or larger depending on the timing of prior payments.
Underwriting of Motor Vehicle Loans
NMAC purchases automobile and/or light duty truck retail installment sales
contracts from approximately 1,227 Nissan and Infiniti Dealers located
throughout the United States, including the District of Columbia, and in Guam.
Underwriting of such retail installment sales contracts is performed by using
standard underwriting procedures. The Receivables are originated by Dealers in
accordance with NMAC's requirements under existing agreements with such Dealers
and will be purchased in accordance with NMAC's underwriting procedures which
emphasize, among other factors, the applicant's willingness and ability to pay
and the value of the vehicle to be financed.
Applications received from Dealers must be signed by the applicant and must
contain, among other information, the applicant's name, address, social security
number, residential status, source and amount of monthly income and amount of
monthly rent or mortgage payment. Upon receipt of the above information, NMAC
obtains a credit report from an independent credit bureau reporting agency.
The credit decision is influenced by the applicant's credit score as obtained
from a statistically derived empirical credit scoring process and other
considerations. The credit scoring process considers credit bureau, application
and contract information. Other considerations include ratios such as car
payment to income and total debt payments to total income, residential status,
monthly mortgage or rent payment, bank accounts and other personal information.
The final credit decision is made based upon the degree of credit risk perceived
and the amount of credit requested.
NMAC uses risk-based pricing which includes a tiered system of interest rates
and loan-to-value ratios representing the varying degrees of risk assigned to
different ranges of credit risk. The less credit worthy (and the greater degree
of risk assigned to) an Obligor, the higher will be the interest rate (and the
lower will be the permissible loan-to-value ratio) assigned to such Obligor.
NMAC's retail contract requires that Obligors maintain specific levels and types
of insurance coverage to protect the Financed Vehicle against loss. NMAC
requires evidence of insurance coverage by Obligors at the time of origination
of the Receivable, but performs no verification of continued coverage
thereafter. NMAC will not be obligated to make payments to the Trust with
respect to any loss as to which third party insurance has not been maintained,
except to the extent of its obligations under the Purchase Agreement.
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Servicing of the Receivables
NMAC considers a receivable to be past due when the Obligor fails to make a
payment by the due date and delinquent when a payment is 15 days past due. Mail
notices and telephone contacts requesting payment are initiated shortly
thereafter. If the delinquent receivable cannot be brought current or completely
collected within 60 to 90 days, NMAC generally attempts to take action to
repossess the vehicle. Repossessed vehicles are held in inventory to comply with
any applicable statutory requirements for reinstatement and then are sold. Any
deficiencies remaining after repossession and sale of the vehicle or after the
full charge-off of the receivable are pursued by or on behalf of NMAC to the
extent practicable and legally permitted. See "Certain Legal Aspects of the
Receivables - Deficiency Judgments and Excess Proceeds." Obligors are contacted
and repayment schedules are established and monitored until the deficiencies are
either paid in full or become impractical to pursue.
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CLASS A CERTIFICATE AND POOL FACTORS
The "Class A Certificate Factor" is a seven-digit decimal which the Servicer
will compute each month indicating the Class A Certificate Balance as of the
close of business on the Distribution Date in that month as a fraction of the
original Class A Certificate Balance. The Class A Certificate Factor will be
1.0000000 as of the Cutoff Date; thereafter, the Class A Certificate Factor will
decline to reflect reductions in the Class A Certificate Balance. The amount of
a Class A Certificateholder's pro rata share of the Class A Certificate Balance
can be determined by multiplying the original denomination of the holder's
Certificate by the Class A Certificate Factor as of the close of business on the
most recent Distribution Date. The Class A Certificate Factor will be made
available through the Trustee.
The "Class A Pool Factor" is a seven-digit decimal figure which the Servicer
will compute each month and will be calculated by dividing the Class A
Certificate Balance as of the close of business on the Distribution Date in that
month by the Pool Balance as of the Cutoff Date.
Pursuant to the Agreement, the Servicer provides the Trustee with monthly
reports concerning the payments received on the Receivables, the Class A
Certificate Balance, the Class A Certificate Factor, the Class A Pool Factor and
various other items of information. Class A Certificate Owners may obtain copies
of such monthly reports from the Trustee upon delivery of a written request to
the Trustee. Class A Certificateholders of record during any calendar year will
be furnished information by the Trustee for tax reporting purposes not later
than the latest date permitted by law. See "The Certificates- Statements to
Class A Certificateholders."
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the Class A
Certificates (i.e., the proceeds of sale minus expenses related to the offering)
will be applied to the purchase of the Receivables from NMAC.
THE SELLER
The Seller, a wholly owned subsidiary of NMAC, was incorporated in the State of
Delaware on August 5, 1991. The Seller was organized for limited purposes, which
include purchasing receivables from NMAC and transferring such receivables to
third parties and any activities incidental to and necessary or convenient for
the accomplishment of such purposes. The Seller's certificate of incorporation
limits the activities of the Seller to the foregoing purposes. The Seller has no
substantial assets other than those related to this and similar transactions.
The principal executive offices of the Seller are located at 990 W. 190th
Street, Torrance, California 90502. The telephone number of such offices is
(310) 719-8013.
THE SERVICER
NMAC was incorporated in California in November 1981 and began operations in
February 1982. It is a wholly owned subsidiary of NMC, the primary distributor
of Nissan vehicles in the continental United States. NMC is an indirect wholly
owned subsidiary of Nissan Motor Co., Ltd., a Japanese corporation ("Nissan"),
which is a worldwide manufacturer and distributor of motor vehicles, industrial
equipment and aerospace products.
NMAC offers indirect automotive consumer loan and lease financing and direct
dealer financing, through (and to) approximately 1,079 Nissan and 148 Infiniti
dealers in the United States. NMAC's underwriting, servicing and collection
activities are conducted principally at a processing center in Dallas, Texas.
The mailing address of NMAC's executive offices is 990 W. 190th Street,
Torrance, California 90502. The telephone number of such offices is (310)
719-8000.
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THE CERTIFICATES
The Class A Certificates offered hereby will be issued pursuant to the
Agreement. Copies of the Agreement (without exhibits) may be obtained by the
Class A Certificateholders upon request in writing to the Servicer, at its
address set forth above. Citations to the relevant sections of the Agreement
appear below in parentheses. The following summary does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Agreement.
General
The Class A Certificates will be offered for purchase in denominations of $1,000
and integral multiples thereof (except that one Certificate may be issued in an
amount not an integral multiple of $1,000) and will be represented initially by
physical certificates registered in the name of Cede as the nominee of DTC,
except that, as described below under "The Certificates-Book-Entry
Registration," one Class A Certificate may be issued to the Seller in a
denomination that includes any residual portion of the Class A Percentage of the
original Pool Balance. No Class A Certificate Owner will be entitled to receive
a certificate representing such person's interest in the Class A Certificates,
except as set forth below under "The Certificates-Definitive Certificates."
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, all references to actions by Class A
Certificateholders shall refer to actions taken by DTC upon instructions from
its Participants (as defined below), and all references herein to distributions,
notices, reports and statements to Class A Certificateholders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Class A Certificates, as the case may be, for distribution to
Class A Certificate Owners in accordance with DTC procedures. See "The
Certificates- Book-Entry Registration."
In general, it is intended that Class A Certificateholders receive, on each
Distribution Date, the Class A Percentage of all payments of principal received
on the Receivables made during or with respect to the preceding calendar month
(the "Collection Period"), plus interest at the Pass-Through Rate on the Class A
Certificate Balance as of the last day of the related Collection Period,
calculated on the basis of a 360-day year consisting of twelve 30-day months,
plus the Class A Percentage of the outstanding amount of each Receivable that
became a Liquidated Receivable during such Collection Period. (Section 5.06.)
See "The Certificates-Distributions on Certificates." If a scheduled payment is
not made by or on behalf of the Obligor, the portion of interest included in
such scheduled payment will be paid to the Class A Certificateholders out of
amounts otherwise payable to the Class B Certificateholders. A prepayment of a
Receivable may be made by or on behalf of an Obligor, by application of certain
insurance proceeds, as a result of a purchase of a Receivable made by the Seller
or the Servicer or upon the repossession and liquidation of the respective
Financed Vehicle or other enforcement measures taken with respect to a defaulted
Receivable. See "The Certificates-Sale and Assignment of Receivables," and
"-Servicing Procedures."
The Certificates will evidence interests in the Trust created pursuant to the
Agreement. The Class A Certificates will evidence in the aggregate an undivided
ownership interest of [____]% (the "Class A Percentage") of the principal amount
of Receivables held by the Trust and the Class B Certificates will evidence in
the aggregate an undivided ownership interest of [____]% (the "Class B
Percentage") thereof. The Class B Certificates, which are not being offered
hereby, will be held initially by the Seller. The Class B Certificates may be
transferred in accordance with the terms of the Agreement. (Sections 7.01, 7.02
and 7.03.)
Book-Entry Registration
DTC is a limited purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York UCC and a "clearing agency" registered
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. DTC
was created to hold securities for its participating organizations
("Participants") and to facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entries, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations. 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").
Class A Certificate Owners that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Class A Certificates may do so only through Participants
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and Indirect Participants. In addition, Class A Certificate Owners will receive
all distributions of principal and interest from the Trustee through DTC
Participants. Under a book-entry format, Class A Certificate Owners may
experience some delay in their receipt of payments, since such payments will be
forwarded by the Trustee to Cede, as nominee for DTC. DTC will forward such
payments to its Participants, which thereafter will forward them to Indirect
Participants or Class A Certificate Owners. It is anticipated that the only
"Class A Certificateholder" will be Cede, as nominee of DTC. Class A Certificate
Owners will not be recognized by the Trustee as Class A Certificateholders, as
such term is used in the Agreement, and Class A Certificate Owners will be
permitted to exercise the rights of Class A Certificateholders only indirectly
through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and its
operations (the "Rules"), DTC is required to make book-entry transfers of Class
A Certificates among Participants on whose behalf it acts with respect to the
Class A Certificates and to receive and transmit distributions of principal of,
and interest on, the Class A Certificates. Participants and Indirect
Participants with which Class A Certificate Owners have accounts with respect to
the Class A Certificates similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Class A
Certificate Owners. Accordingly, although Class A Certificate Owners will not
possess Class A Certificates, the Rules provide a mechanism by which
Participants will receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on behalf of
Indirect Participants and certain banks, the ability of a Class A Certificate
Owner to pledge Class A Certificates to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such Class A
Certificates, may be limited due to the lack of a physical certificate for such
Class A Certificates.
DTC has advised the Seller that it will take any action permitted to be taken by
a Class A Certificateholder under the Agreement only at the direction of one or
more Participants to whose accounts with DTC the Class A Certificates are
credited. Additionally, DTC has advised the Seller that it will take such
actions with respect to specified percentages of the Class A Certificates only
at the direction of and on behalf of Participants whose holdings include
undivided interests that satisfy such specified percentages. DTC may take
conflicting actions with respect to other undivided interests to the extent that
such actions are taken on behalf of Participants whose holdings include such
other undivided interests.
Neither the Seller nor the Trustee will have any liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Class A Certificates held by Cede, as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
Definitive Certificates
The Class A Certificates will be issued in fully registered, certificated form
("Definitive Certificates") to Class A Certificate Owners or their nominees,
rather than to DTC or its nominee, only if (i) the Seller advises the Trustee in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the Class A Certificates and the
Seller is unable to locate a qualified successor, (ii) the Seller, at its
option, elects to terminate the book-entry system through DTC or (iii) after the
occurrence of an Event of Default (as defined herein), Class A Certificate
Owners representing not less than 51% of the Class A Certificate Balance advise
the Trustee through DTC in writing that the continuation of a book-entry system
through DTC (or a successor thereto) is no longer in the Class A Certificate
Owners' best interest. (Section 7.10.)
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify all Class A Certificate Owners
through Participants of the availability of Definitive Certificates. Upon
surrender by DTC of the definitive certificates representing the Class A
Certificates and receipt of instructions for re-registration, the Trustee will
reissue the Class A Certificates as Definitive Certificates to Class A
Certificate Owners.
Distributions of principal of, and interest on, the Class A Certificates will
thereafter be made by the Trustee directly to holders of Definitive Certificates
in whose names the Definitive Certificates were registered at the close of
business on the Record Date in accordance with the procedures set forth in the
Agreement. Such distributions will be made by check mailed to the address of
such holder as it appears on the register maintained by the Trustee.
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The final payment on any Class A Certificate, however (whether Definitive
Certificates or the Class A Certificates registered in the name of Cede or
otherwise), will be made only upon presentation and surrender of such Class A
Certificate at the office or agency specified in the notice of final
distribution to Certificateholders.
Definitive Certificates will be transferable and exchangeable at the offices of
the Trustee or of a certificate registrar named in a notice delivered to holders
of Definitive Certificates. No service charge will be imposed for any
registration of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
Sale and Assignment of Receivables
Prior to or at the time of issuance of the Class A Certificates, pursuant to a
Purchase Agreement (the "Purchase Agreement"), NMAC will sell and assign to the
Seller, without recourse, its entire interest in the Receivables, including its
security interests in the Financed Vehicles. At the time of issuance of the
Class A Certificates, the Seller will sell and assign to the Trustee, without
recourse, the Seller's entire interest in the Receivables, including the
security interests in the Financed Vehicles. Each Receivable will be identified
in a schedule to the Agreement, but the existence and characteristics thereof
will not be verified by the Trustee. The Trustee will, concurrently with such
sale and assignment, execute, authenticate and deliver the Certificates to the
Seller in exchange for the Receivables. (Section 7.02.) The Seller will sell the
Class A Certificates to the Underwriters and will initially retain the Class B
Certificates. See "Underwriting."
In the Purchase Agreement, NMAC will represent and warrant to the Seller, and in
the Agreement, the Seller will represent and warrant to the Trustee, among other
things, that (i) the information provided with respect to the Receivables is
correct in all material respects; (ii) the Obligor on each Receivable is
required to maintain physical damage insurance in accordance with NMAC's normal
requirements; (iii) at the date of issuance of the Certificates, the Receivables
are free and clear of all security interests, liens, charges and encumbrances
and no offsets, defenses or counterclaims against it have been asserted or
threatened; (iv) at the date of issuance of the Certificates, each of the
Receivables is or will be secured by a first priority perfected security
interest in the Financed Vehicle in favor of NMAC; and (v) each Receivable, at
the time it was originated, complied, and at the date of issuance of the
Certificates, complies in all material respects with applicable federal and
state laws, including consumer credit, truth in lending, equal credit
opportunity and disclosure laws. As of the last day of the second (or, if the
Seller elects, the first) month following the discovery by or notice to the
Seller of a breach of any representation or warranty of the Seller which
materially and adversely affects the interests of the Certificateholders in a
Receivable (the initial determination of a material adverse effect generally
being made by the Servicer), the Seller, unless it cures the breach, will
purchase such Receivable from the Trustee, and NMAC will purchase such
Receivable from the Seller, at a price equal to the amount required to be paid
by the related Obligor to prepay the Receivable (including interest accrued
thereon, through the due date for the Obligor's payment in such Collection
Period, at the APR), after giving effect to the receipt of any monies collected
(from whatever source) on such Receivable, if any (such price, the "Purchase
Amount"). The obligation of the Seller to repurchase a Receivable is not
conditioned on performance by NMAC of its obligation to repurchase a Receivable.
The purchase obligation will constitute the sole remedy available to the
Certificateholders or the Trustee for any such uncured breach (other than
remedies that may be available under federal securities laws or other laws).
(Sections 7.01 and 7.02.)
Pursuant to the Agreement, the Servicer will service and administer the
Receivables. The Agreement will also designate the Servicer as custodian to
maintain possession as the Trustee's agent of the retail installment sale
contracts and any other documents relating to the Receivables. (Section 3.03.)
To assure uniform quality in servicing both the Receivables and the Servicer's
own portfolio of receivables, as well as to facilitate servicing and save
administrative costs, the documents will not be physically segregated from other
similar documents that are in the Servicer's possession or otherwise stamped or
marked to reflect the transfer to the Trust so long as NMAC is servicing the
Receivables. However, Uniform Commercial Code financing statements reflecting
the sale and assignment of the Receivables by NMAC to the Seller and by the
Seller to the Trustee will be filed, and the Servicer's accounting records and
computer systems will reflect such sale and assignment. Because the Receivables
will remain in the Servicer's possession and will not be stamped or otherwise
marked to reflect the assignment to the Trustee, if a subsequent purchaser were
able to take physical possession of the Receivables without knowledge of the
assignment, the Trustee's interest in the Receivables could be defeated. In such
event, distributions to Certificateholders may be adversely affected. In
addition, under certain circumstances the Trustee's security interest in
collections that have been received by the Servicer but not yet remitted to the
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Collection Account could be defeated. See "Certain Legal Aspects of the
Receivables - Security Interests in the Financed Vehicles."
Accounts
The Servicer will establish two segregated trust accounts in the name of the
Trustee on behalf of the Certificateholders, the first into which certain
payments made on or with respect to the Receivables will be deposited (the
"Collection Account"), and the second from which all distributions with respect
to the Receivables and the Certificates will be made (the "Certificate
Account"). The Collection Account and the Certificate Account each shall be
maintained with the Trustee so long as (i) the Trustee's short-term unsecured
debt obligations have a rating of P-1 by Moody's Investors Service, Inc. and a
rating of A-1+ by Standard & Poor's Ratings Services (the "Required Deposit
Rating") or (ii) such account is maintained in a segregated trust account in the
trust department of the Trustee. If the short-term unsecured debt obligations of
the Trustee do not have the Required Deposit Rating, the Servicer shall, with
the Trustee's assistance as necessary, cause the Collection Account and the
Certificate Account to be moved to a bank whose short-term unsecured debt
obligations have such a rating or moved to the trust department of the Trustee.
The Collection Account and the Certificate Account shall initially be maintained
in the trust department of the Trustee. (Section 5.01.)
Eligible Investments
Funds in the Collection Account and the Certificate Account will be invested in
Eligible Investments at the direction of or by the Servicer and funds in the
Yield Supplement Reserve Account and the Subordination Spread Account
(collectively with the Collection Account and the Certificate Account, the
"Accounts") will be invested in Eligible Investments at the direction of NMAC,
each as provided in the Agreement. "Eligible Investments" are limited to
investments acceptable to the rating agencies then rating the Class A
Certificates as being consistent with the then-current rating of the Class A
Certificates (including obligations of the Servicer and its affiliates, to the
extent consistent with such rating). Examples of Eligible Investments as of the
consummation of this offering include obligations which are guaranteed as to
timely payment of principal and interest by the United States, certificates of
deposit of federal or state banks and commercial paper and money market funds,
that at the date of investment, have the highest rating issuable by the rating
agencies then rating the Class A Certificates. Eligible Investments with respect
to monies in the Collection Account and the Certificate Account are limited to
obligations or securities that mature not later than the next Distribution Date.
If permitted by the rating agencies then rating the Class A Certificates,
however, monies on deposit in the Yield Supplement Reserve Account and the
Subordination Spread Account may be invested in obligations or securities that
mature later than the next Distribution Date. Any earnings (net of losses and
investment expenses) on amounts on deposit in the Accounts will be paid to the
Seller or NMAC as provided in the Agreement and will not be available to the
Class A Certificateholders.
Servicing Procedures
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables and will continue such collection procedures as it
follows with respect to its own automotive retail installment sale contracts, in
a manner consistent with the Agreement. (Section 4.01.) Consistent with its
normal procedures, the Servicer may, in its discretion, grant credit-related
extensions but shall not otherwise change the terms of a Receivable (except that
the Servicer may change the number or amount of an Obligor's monthly payments in
the event of a prepayment resulting from refunds of credit life and disability
insurance premiums and service contracts and make similar adjustments to payment
terms to the extent required by law). If the Servicer determines that eventual
payment in full of a Receivable is unlikely, the Servicer will follow its normal
practices and procedures to realize upon the Receivable, including the
repossession and disposition of the Financed Vehicle securing the Receivable at
a public or dealer sale, or the taking of any other action permitted by
applicable law. (Section 4.03.) See "The Receivables-Servicing of the
Receivables."
Collections
The Servicer will deposit all payments on Receivables received from Obligors and
all proceeds of Receivables collected during each Collection Period into the
Collection Account not later than the business day after receipt. However, so
long as NMAC is the servicer and provided that (i) there exists no Event of
Default and (ii) each other condition to making monthly deposits as may be
required by the Agreement is satisfied, the Servicer may retain such amounts
until the related Distribution Date. The Servicer or the Seller, as the case may
be, will
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remit the aggregate Purchase Amount of Receivables to be purchased from the
Trust to the Collection Account on the business day immediately preceding the
Distribution Date. The Servicer will be entitled to withhold, or to be
reimbursed from amounts otherwise payable into or on deposit in the Collection
Account, amounts previously deposited in the Collection Account but later
determined to have resulted from mistaken deposits or postings. Except in
certain circumstances described in the Agreement, pending deposit into the
Collection Account, collections may be employed by the Servicer at its own risk
and for its own benefit and will not be segregated from its own funds. (Section
5.02.)
For purposes of the Agreement, collections on a Receivable made during a
Collection Period shall be applied first to interest accrued to date, second to
principal until the principal balance is brought current, third to reduce the
unpaid late charges as provided in the Receivable and finally to prepay
principal on the Receivable.
(Sections 5.03 and 5.06.)
Advances
On or before the business day prior to each Distribution Date, the Servicer will
make a payment into the Collection Account for each Receivable of an amount
equal to the product of the principal balance of the Receivable as of the first
day of the related Collection Period and one-twelfth of its APR minus the amount
of interest actually received on the Receivable during the Collection Period
(such amount, an "Advance"). If such a calculation results in a negative number,
an amount equal to such negative amount shall be paid to the Servicer in
reimbursement of outstanding Advances. In addition, in the event that a
Receivable becomes a Liquidated Receivable, the amount of accrued and unpaid
interest thereon (but not including interest for the current Collection Period)
shall, up to the amount of outstanding Advances in respect thereof, be withdrawn
from the Collection Account and paid to the Servicer in reimbursement of such
outstanding Advances. The amount of any such Advance made in respect of the
related Collection Period and the outstanding amount of unreimbursed Advances on
such Distribution Date will be reflected on the Trustee's report to the Class A
Certificateholders. See "Statements to Class A Certificateholders." The Servicer
will not be required to make any Advance (other than the Advance of an interest
shortfall arising from a Prepaid Receivable) to the extent that it does not
expect to recoup the Advance from subsequent collections or recoveries. No
advances of principal will be made with respect to the Receivables.
Servicing Compensation
The Servicer is entitled under the Agreement to receive a servicing fee (the
"Servicing Fee") for each Collection Period equal to one-twelfth of 1.00%
multiplied by the Pool Balance as of the first day of such Collection Period.
The Servicer is also entitled to receive a supplemental servicing fee (the
"Supplemental Servicing Fee") for each Collection Period equal to any late,
prepayment and other administrative fees and expenses collected during the
Collection Period, plus any interest earned during the Collection Period on
deposits made in the Collection Account with respect to the Receivables. The
Servicer is not entitled to any other compensation for servicing the
Receivables. The Servicer will be paid the Servicing Fee and the Supplemental
Servicing Fee (collectively, the "Servicer Fee") for each Collection Period on
the following Distribution Date. However, if it is acceptable to each Rating
Agency without a reduction in the rating of the Class A Certificates (or, if
applicable, the Class B Certificates), the Servicing Fee in respect of a
Collection Period (together with any portion of the Servicing Fee that remains
unpaid from prior Distribution Dates) will be paid at the beginning of such
Collection Period out of collections of interest on the Receivables for such
Collection Period. The Servicing Fee shall be paid from Available Interest prior
to the payment of the Class A Interest Distributable Amount to the Class A
Certificateholders.
The Servicer Fee is intended to compensate the Servicer for performing the
functions of a third party servicer of the Receivables as an agent for the
Certificateholders, including collecting and posting all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies, sending
payment statements to Obligors, reporting tax information to Obligors, paying
costs of collections and policing the collateral. The Servicer Fee will also
compensate the Servicer for administering the Receivables, including making
Advances, accounting for collections and furnishing monthly statements to the
Trustee with respect to distributions. The Servicer Fee also will reimburse the
Servicer for certain taxes, the Trustee's fees, accounting fees, outside auditor
fees, data processing costs and other costs incurred in connection with
administering the Receivables. (Section 4.08 and 4.13.)
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Yield Supplement Reserve Account and Yield Supplement Agreement
Payments of the Yield Supplement Amounts will be made from funds on deposit in a
segregated trust account to be established by the Seller and pledged to and
maintained with the Class A Agent for the benefit of the holders of the Class A
Certificates (the "Yield Supplement Reserve Account"). The initial amount of the
Yield Supplement Reserve Account will be $[___________] (the "Initial Yield
Supplement Reserve Amount"). If the Yield Supplement Amounts with respect to any
Distribution Date exceed the amount available for withdrawal from the Yield
Supplement Reserve Account on such Distribution Date, the Seller will not have
any further obligation under the Yield Supplement Agreement to deposit any
further amounts into the Yield Supplement Reserve Account. The amount required
to be on deposit in the Yield Supplement Reserve Account (the "Required Yield
Supplement Reserve Amount") will be equal to the lesser of (i) maximum aggregate
Yield Supplement Amounts that will become due under the Yield Supplement
Agreement, assuming that payments on the Receivables are made on their scheduled
due dates and that no Receivable becomes a Prepaid Receivable, or (ii) the
Initial Yield Supplement Reserve Amount. The maximum aggregate Yield Supplement
Amounts may decline as a result of prepayments or repayments in full of the
Receivables. To the extent that on any Distribution Date the amount on deposit
in the Yield Supplement Reserve Account exceeds the Required Yield Supplement
Reserve Amount on such Distribution Date, the excess shall be paid to the
Seller. The Yield Supplement Reserve Account will be maintained by the Class A
Agent for the benefit of the Class A Certificateholders and will not be part of
the Trust.
Simultaneously with the sale and assignment of the Receivables by NMAC to the
Seller, the Seller will enter into the Yield Supplement Agreement with the Class
A Agent and the Servicer. The Seller will assign the Yield Supplement Agreement
to the Trust.
Distributions on Certificates
On or before the tenth calendar day of each month (or, if such tenth day is not
a business day, the next succeeding business day), the Servicer will inform the
Trustee of the amount of aggregate collections on the Receivables, the aggregate
Advances to be made by the Servicer and the aggregate Purchase Amount of
Receivables to be purchased by the Seller or the Servicer, all with respect to
the related Collection Period.
(Section 4.09.)
The Servicer shall determine prior to each Distribution Date the Total Available
Amount, the Available Interest, the Available Principal, the Class A
Distributable Amount and the Class B Distributable Amount and, based on the
Total Available Amount and the other distributions to be made on such
Distribution Date, as described below, determine the amount to be distributed to
Certificateholders of each Class. (Section 5.06(b).)
Determination of Available Amounts. The "Total Available Amount" for a
Distribution Date (being the funds available for distribution to
Certificateholders of each Class with respect to such Distribution Date in
accordance with the priorities described below) shall be the sum of the
Available Interest and the Available Principal.
The "Available Interest" for a Distribution Date shall be the sum of the
following amounts with respect to the related Collection Period: (i) that
portion of all collections on the Receivables allocable to interest; (ii) all
proceeds, including recoveries, of the liquidation of defaulted Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer and any
amounts required by law to be remitted to the Obligors on such Liquidated
Receivables, received in connection with such liquidation ("Liquidation
Proceeds"), to the extent attributable to interest due thereon in accordance
with the Servicer's customary servicing procedures; (iii) all Advances made by
the Servicer; (iv) the Purchase Amount received with respect to each Receivable
purchased by the Seller or Servicer under an obligation which arose during such
Collection Period, to the extent attributable to interest thereon; and (v) the
Yield Supplement Amount received by the Trustee.
The "Available Principal" for a Distribution Date shall be the sum of the
following amounts with respect to the related Collection Period: (i) that
portion of all collections on the Receivables allocable to principal; (ii) all
Liquidation Proceeds, to the extent attributable to principal due thereon, in
accordance with the Servicer's customary servicing procedures; and (iii) the
Purchase Amount received with respect to each Receivable purchased by the Seller
or the Servicer under an obligation which arose during such Collection Period,
to the extent attributable to principal thereon.
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The Available Interest on any Distribution Date shall exclude amounts paid to
the Servicer as reimbursement for Advances.
Calculation of Distributable Amounts. The "Class A Distributable Amount" with
respect to a Distribution Date shall be an amount equal to the sum of:
(a) the "Class A Principal Distributable Amount," consisting of the Class A
Percentage of:
(i) all payments of principal received during the related Collection
Period, including prepayments of principal;
(ii) the principal balance of each Receivable that was purchased by the
Seller or the Servicer under an obligation that arose during the
related Collection Period (except to the extent included in (i) above);
and
(iii) the principal balance of each Receivable that became a Liquidated
Receivable during the related Collection Period (except to the extent
included in (i) or (ii) above); plus
(b) the "Class A Interest Distributable Amount," consisting of thirty (30)
days' interest at the Pass-Through Rate on the Class A Certificate
Balance as of the close of business on the last day of the related
Collection Period.
The "Class A Certificate Balance" shall equal, initially, the Class A Percentage
of the Pool Balance as of the Cutoff Date and, thereafter shall equal the
initial Class A Certificate Balance, reduced by all amounts previously
distributed to Class A Certificateholders that were allocable to principal.
The "Class B Distributable Amount" with respect to a Distribution Date shall be
an amount equal to the sum of:
(a) the "Class B Principal Distributable Amount," consisting of the Class B
Percentage of the amounts set forth under (a)(i) through (a)(iii) above
with respect to the Class A Principal Distributable Amount, plus
(b) the "Class B Interest Distributable Amount," consisting of thirty (30)
days' interest at the Pass-Through Rate on the Class B Certificate Balance
as of the close of business on the last day of the related Collection
Period.
The "Class B Certificate Balance" shall equal, initially, the Class B Percentage
of the Pool Balance as of the Cutoff Date and, thereafter shall equal the amount
by which the Pool Balance on the last day of the related Collection Period
exceeds the Class A Certificate Balance on such Distribution Date.
Calculation of Amounts to be Distributed. Prior to each Distribution Date, the
Servicer will calculate the amount to be distributed to the Certificateholders.
On each Distribution Date, the Trustee will distribute to the Certificateholders
the following amounts in the following order of priority, to the extent of funds
available for distribution on such Distribution Date:
(i) to the Class A Certificateholders, an amount equal to the Class A
Interest Distributable Amount and any unpaid Class A Interest Carryover
Shortfall, such amount to be paid from Available Interest (as Available
Interest has been reduced by reimbursing the Servicer for any outstanding
Advances and paying the Servicer the Servicing Fee, including any unpaid
Servicing Fees with respect to one or more prior Collection Periods); and
if such Available Interest is insufficient, the Class A Certificateholders
will receive such excess first, from monies on deposit in the Subordination
Spread Account and second, if such amounts are insufficient, from the Class
B Percentage of Available Principal;
(ii) to the Class A Certificateholders, an amount equal to the Class A
Principal Distributable Amount and any unpaid Class A Principal Carryover
Shortfall, such amount to be paid from Available Principal (as Available
Principal has been reduced as described in clause (i) above); and if such
Available Principal is insufficient, the Class A Certificateholders will be
entitled to receive such excess first, from amounts on deposit in the
Subordination Spread Account and second, if such amounts are insufficient,
from Available Interest (as Available Interest has been reduced as
described in clause (i) above);
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(iii) to the Class B Certificateholders, an amount equal to the Class B
Interest Distributable Amount and any unpaid Class B Interest Carryover
Shortfall, such amount to be paid from Available Interest (after giving
effect to the reduction in Available Interest described in clauses (i) and
(ii) above);
(iv) to the Class B Certificateholders, an amount equal to the Class B
Principal Distributable Amount and any unpaid Class B Principal Carryover
Shortfall, such amount to be paid from Available Principal (after giving
effect to the reduction in Available Principal described in clauses (i) and
(ii) above); and if such Available Principal is insufficient, from
Available Interest (after giving effect to the reduction in Available
Interest described in clauses (i), (ii) and (iii) above); and
(v) to the Seller, any Excess Amounts, except as required to be deposited
in the Subordination Spread Account (Section 5.06);
provided, however, that amounts otherwise distributable to the Class B
Certificateholders will be deposited by the Trustee in the Subordination Spread
Account to cover any deficiency in the Specified Subordination Spread Account
Balance.
Notwithstanding anything herein to the contrary, no amount shall be paid to the
Class A Certificateholders in respect of any Yield Supplement Amount with
respect to a Receivable, except to the extent of amounts withdrawn from the
Yield Supplement Reserve Account and deposited in the Certificate Account,
except that if the Yield Supplement Amounts exceed funds available in the Yield
Supplement Reserve Account, such excess shall be withdrawn from the
Subordination Spread Account.
The "Class A Interest Carryover Shortfall" with respect to any Distribution Date
will equal the excess, if any, of (x) the Class A Interest Distributable Amount
for such Distribution Date and any outstanding unpaid interest owed to holders
of Class A Certificates from the immediately preceding Distribution Date plus
interest on such outstanding unpaid interest amount, to the extent permitted by
law, at the Pass-Through Rate from such immediately preceding Distribution Date
through the current Distribution Date, over (y) the amount of interest
distributed to the Class A Certificateholders on such Distribution Date. The
"Class A Principal Carryover Shortfall" with respect to any Distribution Date
will equal the excess of the Class A Principal Distributable Amount for such
Distribution Date plus any outstanding unpaid principal owed to holders of Class
A Certificates with respect to one or more prior Distribution Dates over the
amount of principal that the holders of the Class A Certificates actually
received on such Distribution Date. The "Class B Interest Carryover Shortfall"
and the "Class B Principal Carryover Shortfall" with respect to any Distribution
Date will be calculated in the same manner as the Class A Interest Carryover
Shortfall and the Class A Principal Carryover Shortfall, as the case may be,
appropriately modified to relate to the Class B Certificates.
Any excess amounts in the Certificate Account with respect to any Distribution
Date, after giving effect to the distributions described in clauses (i) through
(iv) of the third preceding paragraph ("Excess Amounts"), will be distributed to
the Seller, except in the case of deficits in the Subordination Spread Account,
in which case such amounts will be distributed in the following amounts and in
the following order of priority: (i) to the Subordination Spread Account until
the amount on deposit therein equals the Specified Subordination Spread Account
Balance and (ii) to the Seller.
Notwithstanding the foregoing distribution priorities, if the Servicer shall
fail to make an Advance, the portion of any such shortfall attributable thereto
shall be paid only from amounts available in the Subordination Spread Account.
(Section 5.06(c).)
Subordination of the Class B Certificates; Subordination Spread Account
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables will be subordinated to the rights of the Class A
Certificateholders in the event of defaults or delinquencies on the Receivables
as provided in the Agreement. The Class B Certificateholders will not receive
any distributions of interest or principal with respect to a Distribution Date
until the full amount of interest and principal relating to such Distribution
Date has been distributed to the Class A Certificateholders. This subordination
is intended to enhance the likelihood of timely receipt by Class A
Certificateholders of the full amount of interest and principal required to be
paid to them, and to afford such Class A Certificateholders limited protection
against losses in respect of the Receivables.
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The protection afforded to the Class A Certificateholders will be effected both
by the preferential right, as described above, of the Class A Certificateholders
to receive current distributions with respect to the Receivables and by the
establishment of the Subordination Spread Account. The Subordination Spread
Account will be created with an initial deposit by the Seller of the
Subordination Initial Deposit in the amount set forth in the
"Summary-Subordination Spread Account" and will be augmented by deposit therein
of all amounts otherwise distributable to the Class B Certificateholders and all
Excess Amounts otherwise distributable to the Seller until the amount in the
Subordination Spread Account reaches the amount set forth in the
"Summary-Subordination Spread Account" as the Specified Subordination Spread
Account Balance. Thereafter, amounts otherwise distributable to the Class B
Certificateholders and Excess Amounts otherwise distributable to the Seller will
be deposited in the Subordination Spread Account to the extent necessary to
maintain the amount in the Subordination Spread Account at the Specified
Subordination Spread Account Balance.
Amounts held from time to time in the Subordination Spread Account will continue
to be held for the benefit of holders of the Class A Certificates. Funds in the
Subordination Spread Account shall be invested in Eligible Investments.
Investment income on amounts in the Subordination Spread Account will not be
available for distribution to the holders of the Class A Certificates or
otherwise subject to any claims or rights of the holders of the Class A
Certificates.
The time necessary for the Subordination Spread Account to reach and maintain
the Specified Subordination Spread Account Balance at any time after the date of
issuance of the Certificates will be affected by the delinquency, credit loss
and repossession and prepayment experience of the Receivables and, therefore,
cannot be accurately predicted.
If on any Distribution Date the holders of the Class A Certificates do not
receive the sum of the Class A Distributable Amount, the Class A Interest
Carryover Shortfall and the Class A Principal Carryover Shortfall for such
Distribution Date (after giving effect to any amounts withdrawn from the
Subordination Spread Account and the Class B Distributable Amount and applied to
such deficiency, as described above), the holders of the Class B Certificates
will not receive any portion of the Total Available Amount.
The subordination of the Class B Certificates and the establishment of the
Subordination Spread Account described above are intended to enhance the
likelihood of receipt by Class A Certificateholders of the full amount of
principal and interest on the Receivables due them and to decrease the
likelihood that the Class A Certificateholders will experience losses. However,
in certain circumstances, the Subordination Spread Account could be depleted and
shortfalls on the Class A Certificates could result.
The Seller may, from time to time after the date of this Prospectus, request
each rating agency then rating the Class A Certificates to approve a formula for
determining the Specified Subordination Spread Account Balance that is different
from the one described above and would result in a decrease in the amount of the
Specified Subordination Spread Account Balance or a change in the manner by
which the Subordination Spread Account is funded. If each rating agency then
rating the Class A Certificates delivers a letter to the Trustee to the effect
that the use of any such new formulation will not result in a qualification,
reduction or withdrawal of its then-current rating of the Class A Certificates,
then the Specified Subordination Spread Account Balance will be determined in
accordance with such new formula. The Agreement will accordingly be amended,
without the consent of any Certificateholder, to reflect such new calculation.
On each Distribution Date, the Trustee will remit all Excess Amounts to the
Seller, except in the case of deficits in the Subordination Spread Account, in
which case the Trustee will deposit all Excess Amounts into the Subordination
Spread Account until the amount on deposit therein equals the Specified
Subordination Spread Account Balance, prior to remitting such amounts to the
Seller. If the amount on deposit in the Subordination Spread Account on such
Distribution Date (after giving effect to all deposits or withdrawals therefrom
on such Distribution Date) is greater than the Specified Subordination Spread
Account Balance, the Trustee will release and distribute such excess, together
with any Excess Amounts not required to be deposited into the Subordination
Spread Account, first, to the Class B Certificateholders, an amount equal to the
sum of outstanding Class B Interest Carryover Shortfall and Class B Principal
Carryover Shortfall and, to the extent available, any excess shall be
distributed to the Seller. Upon any such release of amounts from the
Subordination Spread Account, the Class A Certificateholders will have no
further rights in, or claims to, such amounts. (Section 5.06).
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Neither the Class B Certificateholders, the Seller nor the Servicer will be
required to refund any amounts properly distributed or paid to them, whether or
not there are sufficient funds on any subsequent Distribution Date to make full
distributions to the Class A Certificateholders.
Net Deposits
As an administrative convenience and for so long as certain conditions are
satisfied, the Servicer will be permitted to make the deposit of collections and
aggregate Advances and Purchase Amounts for or with respect to the Collection
Period net of distributions to the Servicer as reimbursement of Advances or
payment of the Servicer Fee with respect to the Collection Period. The Servicer,
however, will account to the Trustee and to the Certificateholders as if all
deposits, distributions and transfers were made individually. (Section 5.08.)
The following chart sets forth an example of the application of the foregoing
provisions to a monthly distribution:
October 1......... Cutoff Date. The original Pool Balance equals the
aggregate principal balance of the Receivables.
October 1-31...... Collection Period. The Servicer receives monthly
payments, prepayments and other proceeds in respect of
the Receivables.
November 10....... Determination Date. On or before the [tenth] calendar
day of the month (or, if such tenth day is not a
business day, the next succeeding business day). On this
date the Servicer notifies the Trustee of, among other
things, the amounts to be distributed on the
Distribution Date.
November 14....... Record Date. Distributions on the Distribution Date are
made to Certificateholders of record at the close of
business on this date.
November 16....... Distribution Date. On or before this date, the Seller
and the Servicer (or the Trustee) make the required
remittances and transfers to the Collection Account and
the Certificate Account in immediately available funds,
and the Trustee distributes to holders of the Class A
Certificates and the Class B Certificates amounts
payable in respect of the Certificates and pays the
Servicer Fee and remits amounts to the Subordination
Spread Account (if required).
Statements to Class A Certificateholders
On each Distribution Date, the Trustee will include with each distribution to
each record owner of a Class A Certificate (which, except as described herein,
shall be Cede as the nominee for DTC unless Definitive Certificates are issued
under the limited circumstances described herein) as of the close of business on
the related Record Date a statement, setting forth the following information
with respect to the related Collection Period as to each Class of Certificates,
to the extent applicable:
(i) the amount of the distribution allocable to principal on the
Certificates;
(ii) the amount of the distribution allocable to interest on the
Certificates;
(iii) the amount of the distribution allocable to the Yield Supplement
Amount;
(iv) the amount on deposit in the Yield Supplement Reserve Account;
(v) the Pool Balance as of the close of business on the last day of the
related Collection Period;
(vi) the amount of the Servicing Fee paid to the Servicer with respect to the
related Collection Period and the Class A Percentage of the Servicing Fee,
the amount of any unpaid Servicing Fees and the change in
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<PAGE>
such amount from that of the prior Distribution Date and the amount of any
additional servicing compensation paid to the Servicer with respect to the
related Collection Period;
(vii) the amount of the Class A Interest Carryover Shortfall and Class A
Principal Carryover Shortfall, if any, as of the close of such Distribution
Date and the change in such amounts from those of the prior Distribution
Date;
(viii) the Class A Certificate Balance, the Class A Certificate Factor, the
Class A Pool Factor and Class B Certificate Balance as of such Distribution
Date;
(ix) the amount, if any, otherwise distributable to the Class B
Certificateholders that is distributed to Class A Certificateholders on such
Distribution Date;
(x) the balance of the Subordination Spread Account on such Distribution
Date, after giving effect to distributions made on such Distribution Date and
the change in such balance from that of the prior Distribution Date; and
(xi) the amount of Advances made in respect of the related Collection Period
and the amount of unreimbursed Advances on such Distribution Date.
Each amount set forth pursuant to subclauses (i), (ii), (vi) and (vii) above
shall be expressed in the aggregate and as a dollar amount per $1,000 of
original principal balance of a Class A Certificate.
Copies of such statements may be obtained by Class A Certificate Owners by
delivering a request in writing addressed to the Trustee at its address set
forth above in "Reports To Class A Certificateholders By The Trustee."
Within the prescribed period of time for tax reporting purposes after the end of
each calendar year during the term of the Agreement, the Trustee shall mail to
each person who at any time during such calendar year shall have been a Class A
Certificateholder and received any payment thereon a statement containing the
sum of the amounts or the amount as of the end of each calendar year, as the
case may be, described in (i), (ii), (iii), (v), (vi) and (vii) above for the
purposes of such Class A Certificateholder's preparation of federal income tax
returns. (Section 5.09.) See "Federal Income Tax Consequences."
Evidence as to Compliance
The Agreement will provide that a firm of independent public accountants will
furnish to the Trustee on or before June 30th of each year, beginning June 30,
1999, a report as to compliance by the Servicer during the preceding twelve
months ended March 31 (or for the initial report, for such shorter period as
shall have elapsed from the date of issuance of the Certificates) with certain
standards relating to the servicing of the Receivables and certain other
matters. (Section 4.11.)
The Agreement will also provide for delivery to the Trustee, on or before June
30th of each year, commencing June 30, 1999, of a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled its obligations
under the Agreement throughout the preceding twelve months ended March 31 (or
for the initial report, for such shorter period as shall have elapsed from the
date of issuance of the Certificates) or, if there has been a default in the
fulfillment of any such obligation, describing each such default. (Section
4.10.)
Copies of such reports and certificates may be obtained by Class A Certificate
Owners by a request in writing addressed to the Trustee.
Certain Matters Regarding the Servicer
The Agreement will provide that NMAC may not resign from its obligations and
duties as servicer thereunder, except upon determination that NMAC's performance
of such duties is no longer permissible under applicable law. No such
resignation will become effective until the Trustee or a successor servicer has
assumed NMAC's servicing obligations and duties under the Agreement. (Section
9.06.)
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The Agreement will further provide that neither the Servicer, nor any of its
directors, officers, employees or agents will be under any liability to the
Trust or the Certificateholders for taking any action or for refraining from
taking any action pursuant to the Agreement, or for errors in judgment;
provided, however, that neither the Servicer nor any such person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence (except for errors in judgment) in
the performance of duties, or by reason of reckless disregard of obligations and
duties thereunder. In addition, the Agreement will provide that the Servicer is
under no obligation to appear in, prosecute or defend any legal action that is
not incidental to the Servicer's servicing responsibilities under the Agreement
and that, in its opinion, may cause it to incur any expense or liability. The
Servicer may, however, undertake any reasonable action that it may deem
necessary or desirable in respect of the Agreement, the rights and duties of the
parties thereto and the interests of the Certificateholders thereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom will be expenses, costs and liabilities of the Servicer, and the
Servicer will not be entitled to be reimbursed therefor. (Section 9.04.)
Any entity into which the Servicer or the Seller, as applicable, may be merged
or consolidated, or any entity resulting from any merger, conversion or
consolidation to which the Servicer or the Seller, as applicable, is a party, or
any entity succeeding to the business of the Servicer or the Seller, as
applicable, or any corporation, more than 50% of the voting stock of which is
owned, directly or indirectly, by Nissan, which assumes the obligations of the
Servicer or the Seller, as applicable, will be the successor of the Servicer or
the Seller, as applicable, under the Agreement. (Sections 8.03 and 9.03.) For as
long as NMAC is the Servicer, it may at any time subcontract substantially all
of its duties as servicer under the Agreement to any corporation more than 50%
of the voting stock of which is owned, directly or indirectly, by Nissan, and
the Servicer may at any time perform certain specific duties as servicer through
other subcontractors. (Section 9.05.)
Events of Default
"Events of Default" under the Agreement will consist of (i) any failure by the
Servicer or the Seller, as applicable, to deliver to the Trustee for
distribution to the Certificateholders or deposit in the Subordination Spread
Account any required payment, which failure continues unremedied for three
business days after written notice from the Trustee is received by the Servicer
or the Seller, as applicable, or after discovery by an officer of the Servicer
or the Seller, as applicable; (ii) any failure by the Seller or the Servicer
duly to observe or perform in any material respect any other covenant or
agreement in the Agreement which failure materially and adversely affects the
rights of Certificateholders and which continues unremedied for 90 days after
the giving of written notice of such failure (1) to the Seller or the Servicer,
as applicable, by the Trustee or (2) to the Seller or the Servicer, as
applicable, and to the Trustee by holders of Class A Certificates evidencing not
less than 25% of the Class A Certificate Balance; and (iii) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings with respect to the Servicer indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations. (Section 10.01.)
Rights Upon Event of Default
As long as an Event of Default under the Agreement remains unremedied, the
Trustee or holders of Class A Certificates evidencing not less than 25% of the
Class A Certificate Balance may terminate all the rights and obligations of the
Servicer under the Agreement, whereupon the Trustee (or a successor servicer
appointed by the Trustee, as described below) will succeed to all the
responsibilities, duties and liabilities of the Servicer under the Agreement and
will be entitled to similar compensation arrangements. If, however, a bankruptcy
trustee or similar official has been appointed for the Servicer, and no Event of
Default other than such appointment has occurred, such trustee or official may
have the power to prevent the Trustee or the Class A Certificateholders from
effecting a transfer of servicing. In the event that the Trustee is unwilling or
unable to so act, it may appoint, or petition a court of competent jurisdiction
for the appointment of, a successor with a net worth of at least $100,000,000
and whose regular business includes the servicing of automotive receivables. The
Trustee, or any person appointed as successor Servicer, shall be the successor
in all respects to the predecessor Servicer under the Agreement and all
references therein to the Servicer shall apply to such successor Servicer. The
Trustee may make arrangements for compensation to be paid to the successor
Servicer, which in no event may be greater than the Servicer Fee. (Sections
10.01 and 10.02.)
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Waiver of Past Defaults
The holders of Class A Certificates evidencing not less than 51% of the Class A
Certificate Balance may, on behalf of all Certificateholders, waive any default
by the Servicer in the performance of its obligations under the Agreement and
its consequences, except a default in making any required deposits to the
Collection Account or the Certificate Account in accordance with the Agreement.
No such waiver shall impair the Certificateholders' rights with respect to
subsequent defaults. (Section 10.05.)
Amendment
The Agreement may be amended by the Seller, the Servicer, NMAC (so long as NMAC
has rights or obligations thereunder) and the Trustee, without the consent of
the Certificateholders, (i) to cure any ambiguity, correct or supplement any
provision therein which may be inconsistent with any other provision therein, or
make any other provisions with respect to matters or questions arising under the
Agreement which are not inconsistent with the provisions of the Agreement;
provided that such action will not, in the opinion of counsel satisfactory to
the Trustee, materially and adversely affect the interest of any
Certificateholder, and (ii) to change the formula for determining the Specified
Subordination Spread Account Balance upon certain confirmation from the Rating
Agencies as described above in "The Certificates-Subordination of the Class B
Certificates; Subordination Spread Account." The Agreement may also be amended
by the Seller, the Servicer, NMAC (so long as NMAC has rights or obligations
thereunder) and the Trustee with the consent of the holders of Class A
Certificates and Class B Certificates, each voting as a Class, evidencing not
less than 51% of the Class A Certificate Balance and Class B Certificate
Balance, respectively, for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Agreement or modifying
in any manner the rights of Certificateholders; provided, however, that no such
amendment may (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on Receivables or distributions
that are required to be made on any Certificate or change the Pass-Through Rate
or the Specified Subordination Spread Account Balance (except as described above
under clause (ii) of the immediately preceding sentence) without the consent of
each "adversely affected" Certificateholder or (ii) reduce the aforesaid
percentage of the Class A Certificate Balance or Class B Certificate Balance
which is required to consent to any such amendment, without the consent of the
holders of all Certificates of such Class. (Section 13.01.) An amendment
referred to in clause (i) of the immediately preceding sentence will be deemed
not to "adversely affect" a Certificateholder of any Class only if each Rating
Agency then rating the Certificates confirms that such amendment will not result
in a reduction or withdrawal of its rating on the Certificates of such Class.
List of Certificateholders
Upon written request of the Servicer, the Trustee will provide to the Servicer
within 15 days after receipt of such request a list of the names and addresses
of all Certificateholders of record as of the most recent Record Date. Upon
written request by three or more Class A Certificateholders or by holders of
Class A Certificates evidencing not less than 25% of the Class A Certificate
Balance, and upon compliance by such Certificateholders with certain other
provisions of the Agreement, the Trustee will afford such Class A
Certificateholders access during business hours to the current list of
Certificateholders for purposes of communicating with other Class A
Certificateholders with respect to their rights under the Agreement. (Section
7.06.)
The Agreement will not provide for the holding of any annual or other meetings
of Certificateholders.
Termination
The respective obligations of the Seller, the Servicer, NMAC (so long as NMAC
has rights or obligations thereunder) and the Trustee pursuant to the Agreement
will terminate upon (i) the maturity or other liquidation of the last Receivable
and the disposition of any amounts received upon liquidation of any remaining
Receivables and (ii) the payment to Certificateholders of all amounts required
to be paid to them pursuant to the Agreement. In order to avoid excessive
administrative expense, the Servicer, or its successor, is permitted at its
option to purchase from the Trust, as of the last day of any month as of which
the then outstanding Pool Balance (after giving effect to such calendar month's
collections) is less than 10% of the original Pool Balance, all remaining
Receivables at a price equal to the aggregate of the Purchase Amounts thereof as
of such last day. Exercise of such right will effect early retirement of the
Certificates. The Trustee will give written notice of
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termination to each Certificateholder of record. The final distribution to any
Certificateholder will be made only upon surrender and cancellation of such
holder's Certificate at any office or agency of the Trustee specified in the
notice of termination. Any funds remaining in the Trust, after the Trustee has
taken certain measures to locate a Certificateholder and such measures have
failed, will be distributed, subject to applicable law, to the Childrens
Hospital Los Angeles. (Sections 12.01 and 12.02.)
Duties of the Trustee
The Trustee will make no representations as to the validity or sufficiency of
the Agreement, the Certificates (other than the authentication of the
Certificates), or any Receivables or related documents, and is not accountable
for the use or application by the Servicer of any funds paid to the Seller or
the Servicer in respect of the Certificates or the Receivables, or the
investment of any monies by the Servicer before such monies are deposited into
the Certificate Account. The Trustee will not independently verify the
Receivables. If no Event of Default has occurred, the Trustee is required to
perform only those duties specifically required of it under the Agreement. In
addition to making distributions to the Certificateholders, those duties
generally are limited to the receipt of the various certificates, reports or
other instruments required to be furnished to the Trustee under the Agreement,
in which case it will only be required to examine them to determine whether they
conform to the requirements of the Agreement. The Trustee shall not be charged
with knowledge of a failure by the Servicer to perform its duties under the
Agreement which failure constitutes an Event of Default unless the Trustee
obtains actual knowledge of such failure as specified in the Agreement.
(Sections 11.01 and 11.05.)
The Trustee will be under no obligation to exercise any of the rights or powers
vested in it by the Agreement or to make any investigation of matters arising
thereunder or to institute, conduct or defend any litigation thereunder or in
relation thereto at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby. (Section 11.04.) No Class A
Certificateholder will have any right under the Agreement to institute any
proceeding with respect to the Agreement, other than with respect to the failure
by the Seller or Servicer, as applicable, to remit payments, unless such holder
previously has given to the Trustee written notice of default and unless the
holders of Class A Certificates evidencing not less than 25% of the Class A
Certificate Balance have made written request upon the Trustee to institute such
proceeding in its own name as Trustee thereunder and have offered to the Trustee
reasonable indemnity and the Trustee for 30 days has neglected or refused to
institute any such proceeding. (Section 13.03.)
The Trustee
[____________] is the Trustee under the Agreement. The Trustee, in its
individual capacity or otherwise, may hold Certificates in its own name or as
pledgee. (Section 11.06.) For the purpose of meeting the legal requirements of
certain jurisdictions, the Servicer and the Trustee acting jointly (or in some
instances, the Trustee acting alone) shall have the power to appoint co-trustees
or separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by the Agreement shall be conferred or imposed upon the Trustee
and such 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 such separate trustee or co-trustee who shall exercise and perform
such rights, powers, duties and obligations solely at the direction of the
Trustee. (Section 11.13.)
The Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement, becomes legally unable to act, or becomes insolvent. In such
circumstances, the Servicer 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. (Section 11.10.)
The Agreement will provide that the Servicer will pay the Trustee's fees.
(Section 11.07.) The Agreement will further provide that the Trustee will be
entitled to indemnification by the Seller and the Servicer for, and will be held
harmless against, any loss, liability, fee, disbursement or expense incurred by
the Trustee not resulting from the Trustee's own willful misfeasance, bad faith
or negligence (other than by reason of a breach of any of its representations or
warranties set forth in the Agreement). The Agreement will further provide that
the Seller and the Servicer will indemnify the Trustee for certain taxes that
may be asserted in connection with the transaction.
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RATING OF THE CLASS A CERTIFICATES
It is a condition to issuance of the Class A Certificates that they be rated in
the highest rating category by at least one nationally recognized Rating Agency.
The rating is not a recommendation to purchase, hold or sell Class A
Certificates, inasmuch as such rating does not comment as to market price or
suitability for a particular investor. There is no assurance that the rating
will remain for any given period of time or that the rating will not be lowered
or withdrawn entirely by any Rating Agency if in its judgment circumstances in
the future so warrant.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Security Interests in the Financed Vehicles
In all states in which the Receivables have been originated, retail installment
sale contracts such as the Receivables evidence the credit sale of vehicles by
dealers to obligors; the contracts also constitute personal property security
agreements and include grants of security interests in the vehicles under the
Uniform Commercial Code (the "UCC") and pursuant to Motor Vehicle Retail
Installment Sales Acts (the "MVRISA") and applicable Retail Installment Sales
Acts (the "RISA") or the Consumer Credit Codes (generally pursuant to the
Uniform Consumer Credit Code (the "UCCC")) of the various states. Perfection of
security interests in the vehicles is generally governed by the motor vehicle
registration laws of the state in which the vehicle is located. In most states
in which the Receivables have been originated, a security interest in a vehicle
is perfected by notation of the secured party's lien on the vehicle's
certificate of title. Each Receivable prohibits the sale or transfer of the
Financed Vehicle without NMAC's consent.
Pursuant to the Purchase Agreement, NMAC will assign its security interests in
the Financed Vehicles securing the Receivables to the Seller and, pursuant to
the Agreement, the Seller will assign its security interests in the Financed
Vehicles securing the Receivables to the Trustee. However, because of the
administrative burden and expense, the Servicer, the Seller and the Trustee will
not amend any certificate of title to identify the Trust as the new secured
party on the certificates of title relating to the Financed Vehicles. Also, the
Servicer will continue to hold any certificates of title relating to the
Financed Vehicles in its possession as custodian for the Trustee pursuant to the
Agreement. See "The Certificates-Sale and Assignment of Receivables."
In most states, assignments such as those under the Purchase Agreement and the
Agreement are an effective conveyance of a security interest without amendment
of any lien noted on a vehicle's certificate of title, and the assignee succeeds
thereby to the assignor's rights as secured party. In such states, in the
absence of fraud or forgery by the vehicle owner or the Servicer or
administrative error by state or local agencies, the notation of NMAC's lien on
the certificates of title will be sufficient to protect the Trust against the
rights of subsequent purchasers of a Financed Vehicle or subsequent lenders who
take a security interest in a Financed Vehicle. If there are any Financed
Vehicles as to which NMAC failed to obtain a perfected security interest, its
security interest would be subordinate to, among others, subsequent purchasers
of the Financed Vehicles and holders of perfected security interests. Such a
failure, however, would constitute a breach of NMAC's warranties under the
Purchase Agreement and of the Seller's warranties under the Agreement and would
create an obligation of NMAC under the Purchase Agreement and of the Seller
under the Agreement to purchase the related Receivable unless the breach is
cured. See "The Certificates-Sale and Assignment of Receivables." By not
identifying the Trust as the secured party on the certificate of title, the
security interest of the Trust in the Financed Vehicle could be defeated through
fraud or negligence. The Seller will assign its rights under the Purchase
Agreement to the Trust.
Under the laws of most states, the perfected security interest in a vehicle
would continue for four months after a vehicle is moved to a state other than
the state in which it is initially registered and thereafter until the vehicle
owner re-registers the vehicle in the new state. Most states require surrender
of a certificate of title to re-register a vehicle; accordingly, to re-register
a vehicle in any such state, a secured party must surrender possession if it
holds the certificate of title to the vehicle, or, in the case of vehicles
registered in states providing for the notation of a lien on the certificate of
title but not possession by the secured party, the secured party would receive
notice of surrender if the security interest is noted on the certificate of
title. Thus, the secured party would have the opportunity to re-perfect its
security interest in the vehicle in the state of relocation. In states that do
not require a certificate of title for registration of a motor vehicle,
re-registration could defeat perfection. In the ordinary course of servicing
receivables, NMAC takes steps to effect re-
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perfection upon receipt of notice of re-registration or information from the
obligor as to relocation. Similarly, when an obligor sells a vehicle, NMAC must
surrender possession of the certificate of title or will receive notice as a
result of its lien noted thereon and accordingly will have an opportunity to
require satisfaction of the related Receivable before release of the lien. Under
the Agreement, the Servicer is obligated to take appropriate steps, at the
Servicer's expense, to maintain perfection of security interests in the Financed
Vehicles.
Under the laws of most states, liens for repairs performed on a motor vehicle
and liens for certain unpaid taxes take priority over even a perfected security
interest in a Financed Vehicle. The Internal Revenue Code of 1986 also grants
priority to certain federal tax liens over the lien of a secured party. The laws
of certain states and federal law permit the confiscation of motor vehicles
under certain circumstances if used in unlawful activities, which may result in
the loss of a secured party's perfected security interest in the confiscated
motor vehicle. NMAC will represent to the Seller and the Seller will represent
to the Trust that each security interest in a Financed Vehicle is or will be
prior to all other present liens (other than tax liens and liens that arise by
operation of law) upon, and security interests in, such Financed Vehicle.
However, liens for repairs or taxes, or the confiscation of a Financed Vehicle,
could arise or occur at any time during the term of a Receivable. No notice will
be given to the Trustee or Certificateholders in the event such a lien arises or
confiscation occurs.
Repossession
In the event of default by an obligor under a retail installment sales contract,
the holder of such sale contract has all the remedies of a secured party under
the UCC, except where specifically limited by other state laws (such as MVRISA,
RISA or UCCC). The UCC remedies of a secured party in most states include the
right to repossession by self-help means, unless such means would constitute a
breach of the peace. Unless a vehicle is voluntarily surrendered, self-help
repossession is the method employed by NMAC in the majority of instances in
which a default occurs and is accomplished simply by retaking possession of the
financed vehicle. In cases where the obligor objects or raises a defense to
repossession, or if otherwise required by applicable state law, a court order
must be obtained from the appropriate state court, and the vehicle must then be
repossessed in accordance with that order.
Notice of Sale; Redemption Rights
In the event of default by an obligor, some jurisdictions require that such
obligor be notified of the default and be given a time period within which the
obligor may cure the default prior to repossession. Generally, this cure right
may be exercised on a limited number of occasions in any one-year period.
The UCC and other state laws require the secured party to provide the obligor
with reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. The obligor
generally has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid accelerated balance of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for the sale, plus, in some jurisdictions, reasonable
attorneys' fees, or, in some states, by payment of delinquent installments or
the unpaid balance.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of the repossessed vehicles generally will be applied to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness of the obligor on the receivable. While some states impose
prohibitions or limitations on the pursuit of deficiencies if the unpaid balance
at the time of such default does not exceed a certain threshold amount, a
deficiency judgment can be sought in those states that do not prohibit or limit
such pursuits. However, the deficiency judgment would be a personal judgment
against the obligor for the shortfall, and a defaulting obligor can be expected
to have very little capital or sources of income available following
repossession. Therefore, in many cases, it may not be useful to seek a
deficiency judgment or, if one is obtained, it may be settled at a significant
discount.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
lender to remit the surplus to any holder of any lien with respect to the
vehicle or if no such lien holder exists or there are remaining funds, the UCC
requires the lender to remit the surplus to the former obligor.
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Consumer Protection Laws
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting
Act, the Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the
Soldiers and Sailors Civil Relief Act of 1940, the Federal Reserve Board's
Regulations B and Z, state adaptations of the National Consumer Credit
Protection Act and of the UCCC, state "Lemon Laws" designed to prevent fraud in
the sale of used vehicles and state motor vehicle retail installment sales acts,
retail installment sales acts and other similar laws. Also, state laws impose
finance charge ceilings and other restrictions on consumer transactions and
require contract disclosures in addition to those required under federal law.
These requirements impose specific statutory liabilities upon creditors who fail
to comply with their provisions. In some cases, this liability could attach to
an assignee or affect an assignee's ability to enforce consumer finance
contracts such as the Receivables.
The Federal Trade Commission's Trade Regulation Rule on Preservation of
Consumer's Claims and Defenses (the "FTC Rule"), the provisions of which are
generally duplicated by the UCCC, other state statutes, or the common law in
certain states, has the effect of subjecting a seller (and certain related
lenders and their assignees) in a consumer credit transaction and any assignee
of the seller to all claims and defenses which the obligor in the transaction
could assert against the seller of the goods. Liability under the FTC Rule is
limited to the amounts paid by the obligor under the contract, and the holder of
the contract may also be unable to collect any balance remaining due thereunder
from the obligor.
The Receivables are subject to the requirements of the FTC Rule. Accordingly,
the Trustee, as holder of the Receivables, will be subject to any claims or
defenses that the purchaser of the Financed Vehicle may assert against the
seller of the Financed Vehicle. Such claims are limited to a maximum liability
equal to the amounts paid by the obligor on the Receivable. Under most state
motor vehicle dealer licensing laws, sellers of motor vehicles are required to
be licensed to sell motor vehicles at retail sale. Furthermore, Federal Odometer
Regulations promulgated under the Motor Vehicle Information and Cost Savings Act
require that all sellers of new and used vehicles furnish a written statement
signed by the seller certifying the accuracy of the odometer reading. If a
seller is not properly licensed or if an Odometer Disclosure Statement was not
provided to the purchaser of the related financed vehicle, the obligor may be
able to assert a defense against the seller of the vehicle. If an obligor were
successful in asserting any such claim or defense, such claim or defense would
constitute a breach of NMAC's and the Seller's representations and warranties
under the Purchase Agreement and the Agreement, respectively, and would create
an obligation of NMAC and the Seller to repurchase the Receivable unless the
breach is cured. See "The Certificates - Sale and Assignment of the
Receivables."
Courts have imposed general equitable principles on secured parties pursuing
repossession of collateral or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
NMAC and the Seller will warrant under the Purchase Agreement and the Agreement,
respectively, that each Receivable complies with all requirements of law in all
material respects. Accordingly, if an Obligor has a claim against the Trust for
violation of any law and such claim materially and adversely affects the Trust's
interest in a Receivable (the initial determination of a material adverse effect
generally being made by the Servicer), such violation would constitute a breach
of warranty under the Purchase Agreement and the Agreement and would create an
obligation of NMAC and the Seller to repurchase the Receivable unless the breach
is cured. See "The Certificates - Sale and Assignment of the Receivables."
Certain Bankruptcy Considerations
The Seller has taken steps in structuring the transactions contemplated hereby
that are intended to ensure that the voluntary or involuntary application for
relief by NMAC or its parent, NMC, under the United States Bankruptcy Code or
similar applicable state laws ("Insolvency Laws") will not result in
consolidation of the assets and liabilities of the Seller with those of NMAC or
NMC. These steps include the creation of the Seller as a separate,
limited-purpose subsidiary pursuant to a certificate of incorporation containing
certain limitations (including restrictions on the nature of the Seller's
business and a restriction on the Seller's ability to commence a voluntary case
or proceeding under any Insolvency Law without the unanimous affirmative vote of
all of its directors).
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The Seller has received the advice of counsel to the effect, based on a reasoned
analysis of analogous case law (although there is no precedent based on directly
similar facts), that, subject to certain facts, assumptions and qualifications
specified therein, it would not be a proper exercise by a court of its equitable
discretion to disregard the separate corporate existence of the Seller and to
require the consolidation of the assets and liabilities of the Seller with the
assets and liabilities of NMAC or NMC in the event of the application of the
federal bankruptcy laws to NMAC or NMC. Among other things, counsel in rendering
such advice assumed that the Seller will follow certain procedures in the
conduct of its affairs, including maintaining records and books of account
separate from those of NMAC, refraining from commingling its assets with those
of NMAC and refraining from holding itself out as having agreed to pay, or being
liable for, the debts of NMAC. The Seller intends to follow and has represented
to such counsel that it will follow these and other procedures related to
maintaining its separate corporate identity. However, in the event that the
Seller did not follow these procedures, there can be no assurance that a court
would not conclude that the assets and liabilities of the Seller should be
consolidated with those of NMAC. Such court also might conclude that the holding
by NMAC (as a result of consolidation) of a subordinated interest in the
Receivables requires that the transfer of the Receivables be deemed a pledge to
secure a borrowing by NMAC rather than a sale of the Receivables. If a court
were to reach such conclusions, or a filing were made under any Insolvency Law
by or against the Seller, or if an attempt were made to litigate any of the
foregoing issues, delays in distributions on the Certificates (and possible
reductions in the amount of such distributions) could occur.
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including federal bankruptcy laws and related state
laws, may interfere with or affect the ability of a lender to realize upon
collateral or enforce a deficiency judgment. For example, in a Chapter 13
proceeding under the federal bankruptcy law, a court may prevent a lender from
repossessing a motor vehicle, and, as part of the rehabilitation plan, reduce
the amount of the secured indebtedness to the market value of the motor vehicle
at the time of bankruptcy (as determined by the court), leaving the party
providing financing as a general unsecured creditor for the remainder of the
indebtedness. A bankruptcy court may also reduce the monthly payments due under
a contract or change the rate of interest and time of repayment of the
indebtedness.
Transfers of Vehicles
The Receivables prohibit the sale or transfer of the vehicle securing a
Receivable without NMAC's consent and permit NMAC to accelerate the maturity of
the Receivable upon a sale or transfer without its consent. If the Servicer
consents to such a sale or transfer, the Servicer may enter into a transfer of
equity agreement with the secondary purchaser for the purpose of effecting the
transfer of the Financed Vehicle.
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FEDERAL INCOME TAX CONSEQUENCES
The following discussion, insofar as it constitutes statements of law or legal
conclusions, represents the opinion of Weil, Gotshal & Manges LLP, special
counsel to the Seller, and is subject to the qualifications set forth herein.
The discussion summarizes the material U.S. federal income tax consequences of
the acquisition, ownership and disposition of the Class A Certificates. This
discussion is a summary of the material U.S. federal income tax consequences
only and is not a complete analysis of the tax considerations that may be
applicable to every prospective investor. The following discussion does not
consider all aspects of U.S. federal income tax law that may be relevant to the
purchase, ownership and disposition of the Class A Certificates by such holder
in light of its circumstances. This discussion also does not address the federal
income tax consequences of ownership of Class A Certificates not held as capital
assets within the meaning of Section 1221 of the U.S. Internal Revenue Code of
1986 (the "Code"), the consequences to investors subject to special treatment
under the federal income tax laws, such as dealers in securities or foreign
currency, tax-exempt entities, foreign investors, financial institutions,
insurance companies or persons that either hold the Class A Certificates as part
of a "straddle","hedge" or a "conversion transaction" or have a "functional
currency" other than the U.S. dollar, or the indirect consequences to an equity
owner of an entity acquiring a Class A Certificate. Finally, any U.S. federal
gift or estate tax consequences or any tax consequences arising out of the tax
laws of any state, local or foreign jurisdiction are also not described.
This summary is based upon the Code, existing and proposed regulations
thereunder, and current administrative rulings and court decisions, all of which
are subject to change, possibly on a retroactive basis. Prospective investors
should note that no rulings have been or will be sought from the Internal
Revenue Service (the "Service") with respect to any of the federal tax
consequences discussed below, and no assurance can be given that the Service
will not take contrary positions. PERSONS CONSIDERING THE PURCHASE OF CLASS A
CERTIFICATES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF
FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN
TAXING JURISDICTION, TO THEIR PARTICULAR SITUATIONS. IN PARTICULAR, SUCH PERSONS
SHOULD CONSULT THEIR TAX ADVISORS AS TO WHETHER STATE OR LOCAL TAXING
JURISDICTIONS WHERE SERVICING AND OTHER ACTIVITIES OF THE TRUST OCCUR MAY ASSERT
THAT A CERTIFICATE HOLDER IS SUBJECT TO TAX SOLELY AS A RESULT OF SUCH
CERTIFICATE HOLDER'S BENEFICIAL OWNERSHIP IN THE TRUST.
Unless the context otherwise requires, for the balance of this discussion, the
term "Class A Certificateholder" means the holder of a Class A Certificate and a
"holder" or a "Class A Certificate holder" means the beneficial owner of a Class
A Certificate.
Classification of the Trust
Under current law and assuming execution of, and compliance with, the Agreement,
the Custody and Pledge Agreement and the Yield Supplement Agreement, the Trust
will be classified for federal income tax purposes as a grantor trust and not as
an association taxable as a corporation.
For federal income tax purposes, each holder will be considered to own an
undivided interest in the Trust's assets, be required to include in its gross
income, for federal income tax purposes, its share of the gross income of the
Trust and be entitled to deduct (subject both to possible recharacterization of
certain fees paid by the Trust to the Servicer and to any limitations generally
applicable to such holder) its share of the expenses of the Trust allocable to
it.
Although each Class A Certificate holder will be considered, for federal income
tax purposes, to own its pro rata share of the principal of the Receivables in
the Trust and of the Yield Supplement Amounts, each holder's share of the right
to interest on the Receivables, however, is not entirely certain. Each Class A
Certificate holder's right to interest with respect to a particular Receivable
should be limited to its pro rata share of the lesser of (i) the interest that
accrues on the principal of that Receivable at the Pass-Through Rate plus its
pro rata share of the Servicing and Trustee fees allocable to it (which fees
will be deemed to be paid over, on behalf of the holder, to the Servicer and the
Trustee, respectively) and (ii) the total interest payable on that Receivable.
For administrative convenience, however, the Trustee may report information with
respect to a Class A Certificate holder's investment in a Class A Certificate on
an aggregate basis as though such Class A Certificate holder's investment in the
Receivables and other assets were equal to such Class A Certificate holder's
share of the initial Class A Principal Balance and on which interest and Yield
Supplement Amounts are payable at a combined rate equal to the sum of the
Pass-Through Rate and the Servicing Rate. If the Service were to require
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reporting on an asset-by-asset basis, the amount of income reportable for a
period could differ from the amount reportable on an aggregate basis. In
particular, as described more fully below, High Yield Receivables (as defined
below) are subject to the "stripped bond" rules of the Code which could result
in such Receivables having original issue discount ("OID"), and Low Yield
Receivables (as defined below) may be subject to the market discount or imputed
interest rules.
Payments Under the Yield Supplement Agreement
A Class A Certificate holder should allocate a portion of its purchase price or
other tax basis in the Class A Certificate to its right to receive Yield
Supplement Amounts. See "Original Issue Discount, Imputed Interest and Market
Discount."
Tax counsel is unable to opine as to the federal income tax characterization of
the right to receive Yield Supplement Amounts. Arguably, the arrangement is
economically analogous to a loan made by the Class A Certificate holder to the
Seller in an amount equal to the discounted present value of the Yield
Supplement Amounts, if any, which are expected to be received, resulting in OID
to the Class A Certificate holder's for the amount of the discount. In that
case, each Class A Certificate holder will accrue income in respect of its
interest in such discounted present value under the rules relating to OID under
a method that takes account of the compounding of interest and the holder's
expected yield to maturity. Alternatively, it is possible that the entire amount
of Yield Supplement Amounts should be included in income as accrued or received
and not treated as interest and that the Class A Certificate holder should also
be entitled to amortize the portion of its purchase price allocable to its right
to receive Yield Supplement Amounts, possibly on a straight-line basis over the
term of the Class A Certificates. In that case, the Yield Supplement Amounts
also might be unrelated taxable income for a tax-exempt investor. Although the
Seller believes that these two characterizations of the Yield Supplement
Agreement are the most likely characterizations, no assurance can be given,
however, that either of these two characterizations will be accepted by the
Service.
Original Issue Discount, Imputed Interest and Market Discount
Original Issue Discount; General. The Receivables bear interest at varying
rates. Because a Class A Certificate holder will be viewed as owning an interest
in each of the Trust's assets, a portion of the Class A Certificate holder's
purchase price of a Class A Certificate (whether on initial sale or in a
subsequent transaction) may be required to be allocated among each of the
Trust's assets based on their respective fair market values. See discussion
below under "-Effect of Allocation of Basis."
Because the Seller will retain the right to receive interest at a rate equal to
the excess of the APR of each Receivable over the sum of the Pass-Through Rate
and the Servicing Rate, the issuance of a Class A Certificate will result in the
separation of ownership ("stripping") of a portion of the rights to interest
payments on those Receivables (the "High Yield Receivables") that bear an
interest rate which is greater than the sum of the Pass-Through Rate and the
Servicing Rate from the principal of such Receivables. Those Receivables (the
"Low Yield Receivables") that bear an interest rate which is less than or equal
to the sum of the Pass-Through Rate and the Servicing Rate do not provide rights
to receive interest in excess of the sum of the Pass-Through Rate and the
Servicing Rate and, therefore, will not be treated as stripped instruments.
Instead, yield supplement amounts will be paid to eliminate the difference
between the actual yield on each Low Yield Receivable and the yield which would
have resulted on such Receivable if its interest rate had equaled the sum of the
Pass-Through Rate and the Servicing Rate.
The Trust intends to take the position that, under the Code, the stripping of
the High Yield Receivables will result in OID. Accordingly, each Class A
Certificate holder will accrue income in respect of its interest in such
Receivables under the rules relating to original issue discount under a method
that takes account of the compounding of interest, based on the particular Class
A Certificate holder's expected yield to maturity.
A Class A Certificate holder that purchases a Class A Certificate for an amount
greater than its outstanding principal balance will be required to make an
election under Section 171 of the Code to amortize premium in respect of the
Receivables in order to accrue income based on the Class A Certificate holder's
yield rather than at the Pass-Through Rate. Such an election would apply to all
of the taxable debt instruments held at or acquired after the first day of the
holder's first taxable year to which such election applies, and may be revoked
only with the consent of the Service.
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Imputed Interest and Market Discount. For the reasons discussed above, the Low
Yield Receivables will not be treated as stripped bonds.
Some or all of the Low Yield Receivables may have imputed interest and/or market
discount. If a Low Yield Receivable did not have "adequate stated interest" (as
the term is defined in Section 483 of the Code) when originated, then such
Receivable would be treated as having "imputed interest." Under the imputed
interest rules of the Code, a portion of the Receivable's stated principal
amount equal to such total unstated interest would be recharacterized as
interest and the Receivable's principal amount would be correspondingly reduced.
If the imputed interest rules applied, the total unstated interest would be
included in the Class A Certificate holder's gross income over the term of the
Receivable using a constant yield-to-maturity method.
It is uncertain whether the imputed interest rules would apply to a Class A
Certificate holder. If these rules do not apply, or with respect to Low Yield
Receivables which had adequate stated interest when issued, the market discount
rules instead may be applicable.
In general, under the market discount provisions of the Code, principal payments
received by the Trust, and all or a portion of the gain recognized upon a sale
or other disposition of a Receivable or upon the sale or other disposition of a
Class A Certificate by a Class A Certificate holder, will be treated as ordinary
income to the extent of accrued market discount. Any payments received by a
Class A Certificate holder upon a sale or other disposition of a Class A
Certificate in an amount in excess of accrued market discount will be treated as
capital gain. The character of any gain from the sale of a Class A Certificate
allocable to rights pursuant to the Yield Supplement Agreement as ordinary or
capital gain, however, is uncertain. In addition, a portion of the interest
deductions of the Class A Certificate holder attributable to any indebtedness
treated as incurred or continued to purchase or carry a Receivable may have to
be deferred, unless a Class A Certificate holder makes an election to include
market discount in income currently as it accrues (in lieu of including accrued
market discount in income at the time of disposition). Such election would apply
to all debt instruments acquired by the taxpayer on or after the first day of
the first taxable year to which such election applies, and may be revoked only
with consent of the Service. Taxpayers may, in general, elect to accrue market
discount either (i) under a constant yield-to-maturity method or (ii) in the
proportion that the stated interest paid on the obligation for the current
period bears to the total remaining interest on the obligation.
Effect of Allocation of Basis. In determining whether a Class A Certificate
holder has purchased its interest in the Receivables (or any Receivable) at a
discount or whether such Receivables (or any Receivable) have OID or, in the
case of Low Yield Receivables, have market discount, a portion of the purchase
price of a Class A Certificate should be allocated to the Class A Certificate
holder's undivided interest in accrued but unpaid interest (which, upon receipt,
will constitute a return of basis and not interest income), amounts collected as
of the time of purchase but not yet distributed, rights to receive Yield
Supplement Amounts pursuant to the Yield Supplement Agreement and, possibly, to
contingent rights to receivable Shortfall Amounts pursuant to the Yield
Supplement Agreement. As a result, the portion of the purchase price allocable
to a Class A Certificate holder's undivided interest in the Receivables (or any
Receivable) could be decreased and the potential OID and/or market discount on
the Receivables (or any Receivable) could be increased. Although the matter is
not entirely certain, it appears that, as a technical matter, each holder should
calculate income separately for its interest in each Receivable (by first
allocating to each Receivable and to each other asset in the Trust a portion of
the holder's basis in the Class A Certificate). Further, in the case of any
"affected investor" (as defined below), in computing yield to maturity, all
interest on the Receivables allocable to the Class A Certificates, including
interest effectively paid over to the Servicer and the Trustee (and, if either
of the credit support arrangements is treated as a separate asset, as discussed
below, the Class B Certificate holder or the Seller, as the case may be), is
taken into account. For this purpose "affected investors" are individuals,
persons, including estates and trusts, that compute taxable income in the same
manner as an individual and certain "pass-through entities". If required to
report income in respect of the Class A Certificates to the Service and Class A
Certificate holders, however, the Servicer and Trustee currently intend to
accrue income on an aggregate basis, based on an assumed initial offering price
of the Class A Certificates and based on the net amounts distributable on the
Class A Certificates. This method of reporting on a net basis may not be
permitted. Furthermore, subsequent purchasers of Class A Certificates will have
to adjust the amounts reported to them based upon their basis in the Class A
Certificates.
Possible Alternative Characterization. Prospective investors should be aware
that the Service could take the position that, in accruing OID and, possibly,
market discount, a Receivable-by-Receivable or pool-wide prepayment assumption
should be used to determine yield and time to maturity. If the holder purchased
its Class A Certificate at a yield higher than the Pass-Through Rate on the
Class A Certificates (that is, for an amount
40
<PAGE>
less than the principal amount of Receivables allocable to the Class A
Certificate), such an assumption could accelerate income on the Class A
Certificate.
Prospective investors should also be aware that, although the Seller believes
that neither the Class A Certificate holders' right to be paid prior to payment
being made on the Class B Certificates nor the Class A Certificate holders'
right to be paid out of the Subordination Spread Account should be treated as an
asset separate from the Class A Certificate holders' rights in the Receivables,
the Service could take a contrary view. If either of those rights were
characterized as a separate asset, a portion of such holder's basis in its Class
A Certificate could be required to be allocated to those rights or a Class A
Certificate holder might be considered to own a greater percentage of the right
to interest on the Receivables (and be deemed to pay over that additional
interest as a guarantee or other fee as it is paid or accrued).
Sale or Prepayment
Upon the sale, exchange or retirement of a Class A Certificate, a Class A
Certificate holder will recognize taxable gain or loss in respect of its
undivided interest in each asset held by the Trust. Gain or loss with respect to
each undivided interest in a Trust asset is equal to the difference between the
allocable portion of the amount realized and the Class A Certificate holder's
adjusted basis in such asset. A Class A Certificate holder's initial basis in
each Receivable (see "Original Issue Discount, Imputed Interest and Market
Discount-Effect of Allocation of Basis" above) generally would be increased by
any OID, imputed interest or market discount amortization and decreased by any
premium amortization attributable to such Receivable and taken into account in
determining the Class A Certificate holder's taxable income and any
distributions (other than "qualified stated interest") received.
As a consequence of the foregoing, a disposition or retirement of a Class A
Certificate for no net gain or loss may for tax purposes consist of a sale of
one asset (e.g., an interest in some Receivables) for a gain and the disposition
of another asset at a loss (e.g., an interest in other Receivables). Although
such gains or losses generally should be treated as offsetting capital gains and
losses (unless earned by a dealer), absent the making of an election to include
market discount currently in income (as discussed above), gain realized on an
interest in Receivables acquired with market discount may yield ordinary gain to
the extent of accrued market discount, which (i) for a corporate taxpayer could
not be offset by, and (ii) for an individual taxpayer could only be offset by up
to $3,000 of, any capital loss attributable to an interest in any other
Receivables or Trust assets. See "Original Issue Discount, Imputed Interest and
Market Discount-Effect of Allocation of Basis" above. The character of any gain
realized allocable to the Class A Certificate holder's rights under the Yield
Supplement Agreement as ordinary or capital also is uncertain. Any loss realized
would be treated as a capital loss.
In general, gain or loss on any sale, exchange or retirement of a Class A
Certificate would be capital gain or loss. However, it is possible that the
Service will take the position that, under the rules for accruing OID, gain on
any prepayment of the Receivables will be ordinary income.
Deductions
Each holder of a Class A Certificate will generally be allowed to deduct,
consistent with its method of accounting, any fees paid or deemed paid by the
Trust allocable to that Class A Certificate. The Service could take the position
that some or all of the fees paid to the Servicer are not deductible by the
Trust as compensation for servicing but rather represent some sort of retained
interest in the Receivables. Except to the extent described in the following
paragraph, the overall tax consequences should be substantially the same in
either event.
Prospective investors also should be aware, however, that individuals, estates
and trusts that own Class A Certificates (directly or indirectly through
pass-through entities) will be allowed to deduct such fees for regular income
tax purposes only to the extent such fees and all of the investor's other
miscellaneous itemized deductions exceed two percent of the holder's adjusted
gross income. (Further, certain itemized deductions otherwise allowable to
individuals are further reduced to the extent the Class A Certificate holder's
adjusted gross income exceeds a statutory threshold.) Additionally, no deduction
will be allowed in respect of fees for such persons for alternative minimum tax
purposes.
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<PAGE>
Foreign Class A Certificate Owners
Interest attributable to Receivables which is received by a Class A Certificate
holder that is not a "United States person" and has no connection with the
United States other than owning the Class A Certificate should generally
constitute "portfolio interest" and, accordingly, not be subject to the normal
30% withholding tax imposed with respect to such payments, provided that such
Class A Certificate holder fulfills certain certification requirements. Under
such requirements, the holder must certify, under penalties of perjury, that it
is not a "United States person" and provide its name and address. For this
purpose, "United States person" means a citizen or resident of the United
States, a corporation, partnership, or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, an
estate or trust the income of which is includible in gross income for United
States federal income tax purposes regardless of its source or a trust with
respect to which a court within the United States is able to exercise primary
supervision over its administration and one or more United States fiduciaries
have the authority to control all of its substantial decisions.
PAYMENTS RECEIVED OUT OF THE YIELD SUPPLEMENT RESERVE ACCOUNT OR IN RESPECT OF
THE YIELD SUPPLEMENT AGREEMENT MAY NOT QUALIFY FOR EXEMPTION FROM THE 30%
WITHHOLDING TAX AND THE TRUST INTENDS TO WITHHOLD WITH RESPECT TO SUCH PAYMENTS.
NONE OF THE TRUST, THE SELLER, THE SERVICER OR THE TRUSTEE IS REQUIRED TO
"GROSS-UP" A HOLDER FOR ANY AMOUNTS WITHHELD FROM PAYMENTS TO CLASS A
CERTIFICATE HOLDERS.
Backup Withholding
Payments made on the Class A Certificates and proceeds from the sale of the
Class A Certificates will not be subject to a "backup" withholding tax of 31%
unless, in general, the Class A Certificate holder fails to comply with certain
reporting procedures and is not an exempt recipient under applicable provisions
of the Code.
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<PAGE>
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain responsibilities on fiduciaries of employee benefit plans
subject to ERISA ("ERISA Plans"). A fiduciary of an ERISA Plan should consider,
among other matters, whether an investment in the Certificates is prudent, is
permitted by the documents governing the ERISA Plan, and is appropriate in view
of the ERISA Plan's investment policy and portfolio.
ERISA Section 406 prohibits a fiduciary of an ERISA Plan from causing such plan
to directly or indirectly engage in a broad range of transactions involving the
assets of such plan and a person who is "party in interest" (as defined in
ERISA) to such plan unless a statutory or administrative exemption applies to
the transaction. Code Section 4975 prohibits similar transactions involving a
plan subject to such Section (including individual retirement accounts) and a
person who is a "disqualified person" (as defined in the Code) with respect to
such plan. These transactions (referred to as "prohibited transactions")
involving an ERISA Plan or other plan subject to Code Section 4975
(collectively, "Plans") include sales, exchanges, loans, extensions of credit,
leases and certain other transactions. A party in interest or disqualified
person is hereinafter referred to as a "Party in Interest".
Code Section 4975 and ERISA Sections 502(i) and 502(l) of ERISA impose certain
excise taxes and civil penalties on a Party in Interest (and possibly other
persons) that engages or participates in a prohibited transaction.
Under regulations issued by the United States Department of Labor (the "Plan
Asset Regulations"), the assets of an entity in which a Plan owns an equity
interest may be treated as if they were "plan assets" of such Plan. The
Certificates may be treated as equity interests under the Plan Asset
Regulations, and the assets of the Trust may constitute "plan assets" of Plans
owning Certificates unless an exception applies (such as the exception for
certain publicly offered securities). There are no assurances that the assets of
the Trust would not be treated as "plan assets" of Plans owning Certificates.
Therefore, prospective Plan investors should consider the applicability of an
exemption from the prohibited transaction provisions of ERISA and the Code to
their purchase, holding or sale of Certificates, and to the operations of the
Trust.
The purchase and holding of Class A Certificates by Plans may be exempt from the
prohibited transaction restrictions under an administrative exemption granted to
[___________________], Prohibited Transaction Exemption 90-23, as amended
("Exemption"). The Exemption applies to certain prohibited transaction
restrictions of ERISA and related excise tax provisions of the Code with respect
to (i) the initial purchase, the holding and the subsequent resale by Plans of
certificates in an asset-backed pass-through trust that holds certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption, and (ii) the servicing, management and operation
of such trust. The obligations that such a trust might hold include secured
motor vehicle installment obligations, such as the Receivables. The United
States Department of Labor has clarified in Prohibited Transaction Exemption
97-34 that the rights of a trustee under a yield supplement arrangement of the
type described under "Description of the Certificates-Yield Supplement Reserve
Account and Yield Supplement Agreement" above may be held as assets of a trust
without jeopardizing the availability of the Exemption.
The Exemption does not apply to Plans sponsored by the Seller, any Underwriter,
the Trustee, the Servicer, any obligor with respect to Receivables included in
the Trust and constituting more than 5% of the aggregate unamortized principal
balance of the assets in the Trust, or any affiliate of such persons (the
"Restricted Group").
Among the conditions that must be satisfied for the Exemption to apply are the
following:
1. the acquisition of the certificates by a Plan is on terms (including the
price for the certificates) that are at least as favorable to the Plan as
they would be in an arm's-length transaction with an unrelated party;
2. the rights and interests evidenced by the certificates acquired by the
Plan are not subordinated to the rights and interests evidenced by other
certificates of the trust (such as the Class B Certificates which are not
eligible for the Exemption);
43
<PAGE>
3. the certificates acquired by the Plan have received a rating at the time
of such acquisition that is one of the three highest generic rating
categories from either Standard & Poor's Ratings Services ("S&P"), Moody's
Investors Service, Inc. ("Moody's") or Duff & Phelps, Inc. ("D&P");
4. the Trustee must not be an affiliate of any other member of the Restricted
Group;
5. the sum of all payments made to and retained by the Underwriter in
connection with the distribution of the certificates represents not more than
reasonable compensation for underwriting the certificates; the sum of all
payments made to and retained by the sponsor of the trust pursuant to the
transfer of the obligations to the trust represents not more than the fair
market value of such obligations; and the sum of all payments made to and
retained by the servicers of the obligations represents not more than
reasonable compensation for such persons' services and reimbursement of such
persons' reasonable expenses in connection therewith; and
6. the Plan investing in the certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933.
The Trust must also meet the following requirements:
1. the corpus of the Trust must consist solely of assets of the type that
have been included in other investment pools;
2. certificates in such other investment pools must have been rated in one of
the three highest rating categories of S&P, Moody's or D&P for at least one
year prior to the Plan's acquisition of Certificates; and
3. certificates evidencing interests in such other investment pools must have
been purchased by investors other than Plans for at least one year prior to
the Plan's acquisition of Certificates.
Moreover, the Exemption provides relief from certain prohibited transactions
that may occur when a fiduciary causes a Plan to acquire certificates in a trust
in which the fiduciary (or its affiliate) is an obligor on the obligations held
in the trust; provided that, among other requirements, (i) in the case of an
acquisition in connection with the initial issuance of certificates, at least
fifty percent of each class of certificates in which Plans have invested is
acquired by persons independent of the Restricted Group and at least fifty
percent of the aggregate interest in the trust is acquired by persons
independent of the Restricted Group; (ii) such fiduciary (or its affiliate) is
an obligor with respect to five percent or less of the fair market value of the
obligations contained in the trust; (iii) the Plan's investment in certificates
of any class does not exceed twenty-five percent of all of the certificates of
that class outstanding at the time of the acquisition; and (iv) immediately
after the acquisition, no more than twenty-five percent of the assets of the
Plan with respect to which such person is a fiduciary are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity.
None of the Receivables of any one Obligor shall exceed 5% of the principal of
the Trust at the outset, and the Trustee will try to dispose of assets of the
Trust to avoid violating such limit.
The Seller believes that the Exemption could apply to the acquisition and
holding of Class A Certificates (but not Class B Certificates) by Plans.
However, no assurances can be provided that the conditions for the application
of such exemption have or will be satisfied, and each fiduciary with respect to
a Plan should review the applicability of the Exemption with its counsel prior
to acquiring Class A Certificates. Class B Certificates should not be acquired
by a Plan in the absence of a determination that another exemption applies.
Certain employee benefit plans, such as governmental plans and church plans (if
no election has been made under Code Section 410(d)), are not subject to the
requirements of ERISA, and assets of such plans may be invested in Certificates
without regard to the ERISA considerations described herein, subject to the
provisions of other applicable federal and state law. Any such plan which is
exempt from taxation under Code Section 501(a) may, however, forfeit its
tax-exempt status if it engages in a prohibited transaction in violation of Code
Section 503.
44
<PAGE>
Prospective Plan investors should consult with their legal advisors concerning
the impact of ERISA and the Code, the applicability of the Exemption, and the
potential consequences of their specific circumstances, prior to making an
investment in the Class A Certificates.
45
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
between the Seller and _________, acting for itself and as representative of the
other Underwriters named below (the "Underwriting Agreement"), the Seller has
agreed to sell to the Underwriters, and each of the Underwriters has agreed to
purchase, the principal amount of the Class A Certificates set forth opposite
its name below.
Principal Amount of
Underwriters Class A Certificates
------------ --------------------
Total................................... $
==============
In the Underwriting Agreement, the several Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the Class A
Certificates offered hereby if any of the Class A Certificates are purchased.
The Seller has been advised by the Underwriters that they propose initially to
offer the Class A Certificates to the public at the price set forth herein, and
to certain dealers at such price less a concession not in excess of .[___]% of
the Class A Certificate amounts. The Underwriters may allow and such dealers may
reallow a concession not in excess of .[___]% of the Class A Certificate amounts
to certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed.
In connection with the offering of the Class A Certificates, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Class A Certificates. Specifically, the Underwriters may overallot
the offering, creating a syndicate short position. Underwriters may bid for and
purchase Class A Certificates in the open market to cover syndicate short
positions. In addition, the Underwriters may bid for and purchase Class A
Certificates in the open market to stabilize the price of the Class A
Certificates. These activities may stabilize or maintain the market price of the
Class A Certificates above independent market levels. The Underwriters are not
required to engage in these activities, and may end these activities at any
time.
The Seller and NMAC have agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or to
contribute to payments which the Underwriters may be required to make in respect
thereof. In the opinion of the Commission, certain indemnification provisions
for liability arising under the federal securities law are contrary to public
policy and therefore unenforceable.
In the ordinary course of their respective businesses, the Underwriters and
their respective affiliates have engaged and may engage in investment banking
and/or commercial banking transactions with Nissan and its affiliates.
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed upon for the
Seller and the Servicer by Joy Crose, Esq., and by Weil, Gotshal & Manges LLP,
New York, New York, and for the Underwriters by [_________________].
Certain federal income tax and other matters will be passed upon for the Seller
by Weil, Gotshal & Manges LLP.
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<PAGE>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus and the
pages on which the definitions of such terms may be found herein.
Accounts.......................................................... 23
Advance........................................................... 7, 24
Agreement......................................................... 3
APR............................................................... 12
Available Interest................................................ 25
Available Principal............................................... 25
Cede.............................................................. 4
Certificate Account............................................... 11, 23
Certificateholders................................................ 2, 4
Certificates...................................................... 1, 3
Class A Agent..................................................... 8
Class A Certificate Balance....................................... 4, 26
Class A Certificateholders........................................ 4, 38
Class A Certificate holder........................................ 38
Class A Certificate Factor........................................ 19
Class A Certificate Owner......................................... 3
Class A Certificates.............................................. 3
Class A Distributable Amount...................................... 26
Class A Interest Carryover Shortfall.............................. 27
Class A Interest Distributable Amount............................. 26
Class A Percentage................................................ 3, 20
Class A Pool Factor............................................... 19
Class A Principal Carryover Shortfall............................. 27
Class A Principal Distributable Amount............................ 26
Class B Certificate Balance....................................... 26
Class B Certificateholders........................................ 4
Class B Certificates.............................................. 3
Class B Distributable Amount...................................... 26
Class B Interest Carryover Shortfall.............................. 27
Class B Interest Distributable Amount............................. 26
Class B Percentage................................................ 3, 20
Class B Principal Carryover Shortfall............................. 27
Class B Principal Distributable Amount ........................... 26
Code.............................................................. 38
Collection Account................................................ 11, 23
Collection Period................................................. 4, 20
Commission........................................................ 2
Custody and Pledge Agreement...................................... 5
Cutoff Date....................................................... 3
D&P............................................................... 44
Dealer Recourse................................................... 12
Dealers........................................................... 11
Definitive Certificates........................................... 21
Determination Date................................................ 29
Distribution Date................................................. 1, 6
DTC............................................................... 4
Eligible Investments.............................................. 23
ERISA............................................................. 8, 43
ERISA Plans....................................................... 43
Events of Default................................................. 31
Excess Amounts.................................................... 5, 27
Exchange Act...................................................... 2
Exemption......................................................... 43
Final Scheduled Distribution Date................................. 1
47
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Financed Vehicles................................................. 3
FTC Rule.......................................................... 36
High Yield Receivables............................................ 39
holder............................................................ 38
Indirect Participants............................................. 20
Initial Yield Supplement Reserve Amount........................... 7, 25
Insolvency Laws................................................... 36
Liquidated Receivables............................................ 25
Liquidation Proceeds.............................................. 25
Low Yield Receivables............................................. 39
Moody's........................................................... 44
MVRISA............................................................ 34
Nissan............................................................ 19
NMAC.............................................................. 3
NMC............................................................... 3
Obligors.......................................................... 11
OID............................................................... 39
Participants...................................................... 20
party in interest................................................. 43
Pass-Through Rate................................................. 4
Plan Asset Regulations............................................ 43
Plans............................................................. 43
Pool Balance...................................................... 14
Prepaid Receivable................................................ 7
prohibited transactions........................................... 43
Purchase Agreement................................................ 3, 22
Purchase Amount................................................... 22
Rating Agency..................................................... 8
Receivables....................................................... 1, 3
Record Date....................................................... 4
Required Deposit Rating........................................... 23
Required Yield Supplement Reserve Amount.......................... 6, 25
Restricted Group.................................................. 43
RISA.............................................................. 34
Rules............................................................. 21
S&P............................................................... 44
Securities Act.................................................... 2
Seller............................................................ 1, 2, 3
Service........................................................... 7, 38
Servicer.......................................................... 1, 3
Servicer Fee...................................................... 7, 24
Servicing Fee..................................................... 7, 24
Servicing Rate.................................................... 6
Specified Subordination Spread Account Balance.................... 5
Subordination Initial Deposit..................................... 5
Subordination Spread Account...................................... 5
Supplemental Servicing Fee........................................ 7, 24
Total Available Amount............................................ 25
Trust............................................................. 1, 3
Trustee........................................................... 2, 3, 7
UCC............................................................... 34
UCCC.............................................................. 34
Underwriters...................................................... 46
Underwriting Agreement............................................ 46
United States person.............................................. 42
Yield Supplement Agreement........................................ 6
Yield Supplement Amount........................................... 6
Yield Supplement Reserve Account.................................. 6, 25
48
<PAGE>
<TABLE>
<S> <C>
$[ ]
No dealer, salesperson, or other person has been
authorized to give any information or to make any
representations other than those contained in this Nissan Auto Receivables
Prospectus and, if given or made, such information 1998-A Grantor Trust
or representations must not be relied upon as
having been authorized by the Seller, the Servicer
or the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of an [ ]% Asset Backed
offer to buy any of the securities offered hereby Certificates, Class A
in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction.
Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances,
create any implication that the information
contained herein is correct as of any time
subsequent to its date.
---------------
Table of Contents
Nissan Auto Receivables
Page Corporation
Seller
Available Information...........................2
Reports to Class A Certificateholders by
the Trustee...................................2
Summary.........................................3
Risk Factors....................................9 Nissan Motor
Formation of the Trust.........................11 Acceptance Corporation
Property of the Trust..........................11 Servicer
The Receivables................................12
Class A Certificate and Pool Factors...........19
Use of Proceeds................................19
The Seller.....................................19
The Servicer...................................19
The Certificates...............................20
Rating of the Class A Certificates.............34
Certain Legal Aspects of the Receivables.......34
Federal Income Tax Consequences................38
ERISA Considerations...........................43
Underwriting...................................46
Legal Opinions.................................46
Index of Terms.................................47
---------------
Until 90 days after the date of this Prospectus, Prospectus
all dealers effecting transactions in the Class A
Certificates, whether or not participating in this Dated [__], 1998
distribution, may be required to deliver a
Prospectus. This is in addition to the obligation
of dealers to deliver a Prospectus when acting as
underwriters and with respect to their unsold
allotments or subscriptions.
</TABLE>
<PAGE>
Part II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with the
offering described in this Registration Statement:
Securities and Exchange Commission fee..................... $295.00
Rating agency fees......................................... *
Printing expenses.......................................... *
Accountants' fees.......................................... *
Fees and expenses of Trustee............................... *
Blue Sky fees and expenses................................. *
Legal fees and expenses.................................... *
Miscellaneous expenses..................................... *
-------
Total.................................................... $
=======
- ------------------------------
* To be filed by amendment
Item 14. Indemnification of Directors and Officers.
Set forth below are certain provisions of law and of the Certificate of
Incorporation of Nissan Auto Receivables Corporation. The general effect of such
provisions is to provide indemnification to officers and directors of such
corporation for actions taken in good faith. In addition, set forth below are
the indemnification provisions of the Underwriting Agreement.
Section 145 of the General Corporation Law of Delaware provides as follows:
145. Indemnification of Officers, Directors, Employees and Agents; Insurance-
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party 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 the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by the person in connection with such action, suit or
proceeding if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith and
in a manner which the person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or suit if
the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except
that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the
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<PAGE>
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section (unless
ordered by a court) shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made,
with respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors,
even though less than a quorum, or (3) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion,
or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified
by the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by former directors and officers or other employees
and agents may be so paid upon such terms and conditions, if any, as the
corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against such person and incurred by such person in any such capacity, or
arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under
this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect
to the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; reference to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
reference to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interest of the corporation" as referred to
in this section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a
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<PAGE>
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Article Five of the Certificate of Incorporation of Nissan Auto Receivables
Corporation provides as follows:
"(a) A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the corporation or
its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law or
(iv) for any transaction from which the director derived an improper
personal benefit.
If the Delaware General Corporation Law is amended after approval by the
stockholders of this Article Five to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation law, as so
amended.
(b) Any repeal or modification of paragraph (a) of this Article Five by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such
repeal or modification.
(c) (i) Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative, investigative or otherwise (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he
or she is the legal representative, is or was a director, officer or employee
of the corporation or is or was serving at the request of the corporation as
a director, officer or employee of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer or employee or in any
other capacity while serving as a director, officer or employee, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than said law permitted the corporation to provide
prior to such amendment), against all expense, liability and loss (including
penalties, fines, judgments, attorneys' fees, amounts paid or to be paid in
settlement and excise taxes imposed on fiduciaries with respect to (i)
employee benefit plans, (ii) charitable organizations or (iii) similar
matters) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has
ceased to be a director, officer or employee and shall inure to the benefit
of his or her heirs, executors and administrators; provided, however, that
the corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person
(other than pursuant to subparagraph (c)(ii) of this Article Five) only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the corporation. The right to indemnification conferred in this subparagraph
(c)(i) of Article Five shall be a contract right and shall include the right
to be paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if
the Delaware General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of a
proceeding shall be made only upon delivery to the corporation of an
undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this subparagraph (c)(i)
of Article Five or otherwise.
(ii) If a claim which the corporation is obligated to pay under subparagraph
(c)(i) of this Article Five is not paid in full by the corporation within 60
days after a written claim has been received by the corporation, the claimant
may at any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any is
required, has been tendered to the corporation) that the claimant has not met
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<PAGE>
the standards of conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the corporation.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is proper in the circumstances because he or she has not met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
(iii) The provisions of this paragraph (c) of Article Five shall cover
claims, actions, suits and proceedings, civil or criminal, whether now
pending or hereafter commenced, and shall be retroactive to cover acts or
omissions or alleged acts or omissions which heretofore have taken place. If
any part of this paragraph (c) of Article Five should be found to be invalid
or ineffective in any proceeding, the validity and effect of the remaining
provisions shall not be affected.
(iv) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
paragraph (c) of Article Five shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, By-Law, agreement, vote of stockholders or
disinterested directors or otherwise.
(v) The corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the corporation or another
corporation, partnership, joint venture, trust or other enterprise against
any such expense, liability or loss, whether or not the corporation would
have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
(vi) The corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification, and rights to be paid by
the corporation the expenses incurred in defending any proceeding in advance
of its final disposition, to any agent of the corporation to the fullest
extent of the provisions of this paragraph (c) of Article Five with respect
to the indemnification and advancement of expenses of directors, officers and
employees of the corporation."
Item 15. Recent Sales of Unregistered Securities.
Not Applicable.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
1.1 - Form of Underwriting Agreement.**
3.1 - Certificate of Incorporation of the Seller (filed as Exhibit
3.1 to the Seller's Registration Statement on Form S-1, No.
33-47413).*
3.2 - By-Laws of the Seller (filed as Exhibit 3.2 to the Seller's
Registration Statement on Form S-1, No. 33-47413).*
4.1 - Form of Pooling and Servicing Agreement among the Seller, the
Servicer, Nissan Motor Acceptance Corporation and the
Trustee.**
4.2 - Form of Custody and Pledge Agreement between the Seller and
the Custodian.**
5.1 - Opinion of Weil, Gotshal & Manges LLP with respect to
legality.**
8.1 - Opinion of Weil, Gotshal & Manges LLP with respect to tax
matters.**
10.1 - Form of Purchase Agreement between NMAC and the Seller.**
10.2 - Form of Yield Supplement Agreement among the Seller, the
Servicer and the Class A Agent.**
23.1 - Consent of Weil, Gotshal & Manges LLP (included as part of
Exhibit 5.1).**
23.2 - Consent of Weil, Gotshal & Manges LLP (included as part of
Exhibit 8.1).**
- ----------
* Incorporated by reference.
** To be filed by amendment.
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<PAGE>
(b) Financial Statement Schedules:
Not applicable.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(b) 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 under Item 14 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 Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the 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 whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus 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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Torrance
and State of California, on the 25th day of September, 1998.
NISSAN AUTO RECEIVABLES CORPORATION
By: /s/ Yoichiro Nagashima
-----------------------------------------
(Yoichiro Nagashima, President and
Chairman of the Board of Directors)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
/s/ Yoichiro Nagashima President, Chairman of the September 25, 1998
- -------------------------- Board of Directors and
Yoichiro Nagashima Director (principal
executive officer)
/s/ Yasuro Osawa Treasurer, Assistant September 25, 1998
- -------------------------- Secretary and Director
Yasuro Osawa (principal financial
officer and principal
accounting officer)
/s/ Joy M. Crose Secretary and Director September 25, 1998
- --------------------------
Joy M. Crose
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<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
1.1 - Form of Underwriting Agreement.**
3.1 - Certificate of Incorporation of the Seller (filed as Exhibit
3.1 to the Seller's Registration Statement on Form S-1, No.
33-47413).*
3.2 - By-Laws of the Seller (filed as Exhibit 3.2 to the Seller's
Registration Statement on Form S-1, No. 33-47413).*
4.1 - Form of Pooling and Servicing Agreement among the Seller, the
Servicer, Nissan Motor Acceptance Corporation and the
Trustee.**
4.2 - Form of Custody and Pledge Agreement between the Seller and
the Custodian.**
5.1 - Opinion of Weil, Gotshal & Manges LLP with respect to
legality.**
8.1 - Opinion of Weil, Gotshal & Manges LLP with respect to tax
matters.**
10.1 - Form of Purchase Agreement between NMAC and the Seller.**
10.2 - Form of Yield Supplement Agreement among the Seller, the
Servicer and the Class A Agent.**
23.1 - Consent of Weil, Gotshal & Manges LLP (included as part of
Exhibit 5.1).**
23.2 - Consent of Weil, Gotshal & Manges LLP (included as part of
Exhibit 8.1).**
- ----------
* Incorporated by reference.
** To be filed by amendment.
II-7
