Exhibit 4.2
FORM OF CUSTODY AND PLEDGE AGREEMENT
CUSTODY AND PLEDGE AGREEMENT, dated as of [___________], 1998 entered
into among Nissan Auto Receivables Corporation, a Delaware corporation (the
"Seller"), Norwest Bank Minnesota, N.A., as custodian (the "Custodian"), and
Norwest Bank Minnesota, N.A., as trustee (the "Trustee").
W I T N E S S E T H
WHEREAS, the Seller is a party to that certain Pooling and Servicing
Agreement dated as of the date hereof, (the "Pooling and Servicing Agreement,"
and capitalized terms used herein not otherwise defined shall have the meanings
assigned to them in the Pooling and Servicing Agreement), among the Seller,
Nissan Motor Acceptance Corporation, as Servicer and in its individual capacity,
and the Trustee, pursuant to which, among other things, the Certificates
representing ownership interests in the Trust were issued;
WHEREAS, pursuant to the Pooling and Servicing Agreement, the Seller is
required to establish a Class A Subordination Spread Account and a Class B
Subordination Spread Account or otherwise make funds available to make payments
to the holders of the Class A Certificates and Class B Certificates,
respectively;
WHEREAS, the parties hereto desire to establish two separate trust
accounts in order to effectuate and secure the obligations of the Seller as
described in the Pooling and Servicing Agreement and as provided herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. OBLIGATION SECURED. In consideration of the purchase of the
Certificates, the Seller agrees to cause payment of the Certificates from funds
available in the Subordination Spread Accounts (as hereinafter defined) and from
receipt of Excess Amounts and Recapture Amounts (as hereinafter defined), as and
to the extent set forth herein. Such obligation is non-recourse in respect of
the Seller, and recourse may only be had to the Subordination Spread Accounts,
the Excess Amounts and the Recapture Amounts. Neither the Subordination Spread
Accounts, the Excess Amounts nor the Recapture Amounts shall be part of the
Trust.
SECTION 2. PLEDGE. In order to validly perfect its pledge, Seller hereby
conveys and transfers all of its right, title and interest in the Excess Amounts
and in the distributions to which it is entitled to under Section 5.06 of the
Pooling and Servicing Agreement as initial holder of the Class B Certificates
(the "Recapture Amounts") to the Custodian for the benefit of the
Certificateholders to have and to hold all such property in trust for the uses
and purposes, and subject to the terms and provisions, set forth in Section 5
hereof, and grants to the Custodian for the benefit of the Certificateholders a
first priority security interest in the Excess Amounts, the Recapture Amounts
and any and all proceeds thereof. The Custodian hereby acknowledges such
transfer and accepts the trust hereunder and shall hold and distribute the
Excess Amounts, the Recapture Amounts and the proceeds thereof in accordance
with the terms and provisions of Section 5 hereof. The Custodian shall possess
all right, title and interest in and to all of the items from time that comprise
the Excess Amounts and the Recapture Amounts and their proceeds. The Excess
Amounts and the Recapture Amounts shall be under the sole dominion and control
of the Custodian. Neither the Seller nor any Person or entity claiming by,
through or under the Seller shall have any right, title or interest in, any
control over the use of, or any right to withdraw from amounts from, the Excess
Amounts or the Recapture Amounts. All Excess Amounts and Recapture Amounts shall
be applied by the Custodian as specified in Section 5 hereof.
SECTION 3. APPOINTMENT OF CUSTODIAN. The Trustee, with the consent of the
Seller, hereby appoints the Custodian as custodian for, and agent of, the
Certificateholders to hold the property pledged and assigned hereunder and to
maintain the Subordination Spread Accounts and the Custodian hereby accepts such
appointment.
SECTION 4. THE SUBORDINATION SPREAD ACCOUNTS. Upon the execution of this
Agreement by the parties hereto, there is hereby created (i) a trust account for
the benefit of the Class A Certificateholders (the "Class A Subordination Spread
Account") to include the money and other property deposited and held therein and
(ii) a trust account for the benefit of the Class B Certificateholders (the
"Class B Subordination Spread Account," and collectively with the Class A
Subordination Spread Account, the "Subordination Spread Accounts") to include
the money and other property deposited and held therein, each as described
herein. On the date hereof, the Seller shall deposit the Subordination Initial
Deposit into the Class A Subordination Spread Account and the Class B Specified
Subordination Spread Account Balance into the Class B Subordination Spread
Account.
2
SECTION 5. ADDITIONAL PLEDGE OF DISTRIBUTIONS; ETC.
(a) In order to provide for prompt payment to the Certificateholders
and the Servicer, in accordance with Section 5.06(c) of the Pooling and
Servicing Agreement, and to assure availability of the amounts maintained in the
Subordination Spread Accounts, subject to the limitations set forth below, and
solely for the purpose of providing for payment of the Class A Distributable
Amount and the Class B Distributable Amount provided for in Section 5.06 of the
Pooling and Servicing Agreement and this Section 5, the Seller, on behalf of
itself and its successors and assigns, hereby conveys and transfers to the
Custodian and its successors and assigns (A) for the benefit of the Class A
Certificateholders, (x) all of its right, title and interest in and to the Class
A Subordination Spread Account, and all proceeds of the foregoing, including,
without limitation, all amounts and investments held from time to time in the
Class A Subordination Spread Account (whether in the form of deposit accounts,
physical property, book-entry securities, uncertificated securities or
otherwise); and (y) the Subordination Initial Deposit and all proceeds thereof
and (B) for the benefit of the Class B Certificateholders, (x) all of its right,
title and interest in and to the Class B Subordination Spread Account and all
proceeds of the foregoing, including, without limitation, all amounts and
investments held from time to time in the Class B Subordination Spread Account
(whether in the form of deposit accounts, physical property, book-entry
securities, uncertificated securities or otherwise); and (y) the Class B
Specified Subordination Spread Account Balance, as the same may be adjusted from
time to time in accordance with the terms of the Pooling and Servicing
Agreement, and all proceeds, thereof (all of the foregoing described in clauses
(A) and (B), subject to the limitations set forth below, the "Subordination
Spread Account Property"), to have and to hold all the aforesaid property,
rights and privileges in trust for the uses and purposes, and subject to the
terms and provisions, set forth in this Section 5, and grants to the Custodian
for the benefit of the Certificateholders a first priority security interest in
the Subordination Spread Account Property and any and all proceeds thereof. The
Custodian hereby acknowledges such transfer and accepts the trust hereunder and
shall hold and distribute the Subordination Spread Account Property in
accordance with the terms and provisions of this Section 5.
(b) The Custodian shall release to the Trustee by 5:00 p.m. on the day
preceding each Distribution Date (for deposit in the Certificate Account on such
Distribution Date), from funds available in the Subordination Spread Accounts,
if any, the amount required to be paid from the Class A Subordination Spread
Account and the Class B Subordination Spread Account pursuant to Section 5.06 of
the Pooling and Servicing Agreement.
3
(c) On each Distribution Date, if the amount of the respective
Subordination Spread Accounts (after giving effect to all payments to be made
from the Subordination Spread Accounts, in accordance with the Pooling and
Servicing Agreement on such Distribution Date) is less than the Class A
Specified Subordination Spread Account Balance or the Class B Specified
Subordination Spread Account Balance, as the case may be, for such Distribution
Date, the Trustee, after payment of any amounts required to be distributed to
the Class A Certificateholders and the Servicer, shall withhold the Excess
Amounts and the Recapture Amounts otherwise distributable to the Seller (in its
individual capacity and as initial holder of the Class B Certificates), and not
otherwise distributed to the Class A Certificateholders or the Servicer and
shall deposit the Excess Amounts and the Recapture Amounts in the following
order of priority: first, to the Class A Subordination Spread Account, until the
amount on deposit therein equals the Class A Specified Subordination Spread
Account Balance; second, from the Excess Amounts only, to the Class B
Subordination Spread Account, until the amount on deposit therein equals the
Class B Specified Subordination Spread Account Balance; and finally, to the
Seller. If the amount of the Class A Subordination Spread Account (after taking
into account any deposits and withdrawals therefrom on such Distribution Date in
accordance with the Pooling and Servicing Agreement) is greater than the Class A
Specified Subordination Spread Account Balance for such Distribution Date, the
Custodian shall release and distribute the amount of such excess first, to the
extent of any previously contributed and not yet recovered Recapture Amounts, to
the holders of Class B Certificates, second to the Class B Subordination Spread
Account until the amount on deposit therein equals the Class B Specified
Subordination Spread Account Balance, and finally, to the Seller. Amounts
properly distributed to the Seller or the Class B Certificateholders pursuant to
this Section 5(c) shall be deemed released from the trust and security interest
established by this Agreement, and the Seller and the Class B Certificateholders
shall in no event thereafter be required to refund any such distributed amounts.
(d) (i) Amounts held in the Class A Subordination Spread Account shall
be invested in the manner specified in Section 5.01 of the Pooling and Servicing
Agreement in the same manner as amounts in the Collection Account and
Certificate Account are invested; provided however, that (A) if permitted by the
rating agencies then rating the Certificates, monies on deposit in the Class A
Subordination Spread Account may be invested in obligations or securities that
mature later than the Business Day immediately preceding the next Distribution
Date, and (B) such investments shall be made in accordance with written
instructions from the Seller rather than the Servicer. Prior to the rating, if
any, of the Class B Certificates by the
4
rating agencies, amounts held in the Class B Subordination Spread Account shall
be invested in the discretion of the Seller upon its written instructions. From
and after the time, if any, that the Class B Certificates are rated, amounts
held in the Class B Subordination Spread Account shall be invested in
obligations or securities permitted by the rating agencies then rating such
Class B Certificates, in accordance with the written instructions of the Seller.
Such investments shall not be sold or disposed of prior to their respective
maturities. All investments in the Subordination Spread Accounts shall be made
in the name of the Custodian or its nominee and all income and gain realized
thereon shall be solely for the benefit of the Seller and shall be payable by
the Custodian to the Seller in accordance with subparagraph (iv) below.
(ii) With respect to the Class A Subordination Spread
Account Property, the Seller, on behalf of itself and its successors and
assigns, and the Custodian agree that:
(A) Any Subordination Spread Account Property
that is held in deposit accounts shall be held solely in the name of
the Custodian at one or more depository institutions. Each such
deposit account shall be subject to the exclusive custody and control
of the Custodian, and the Custodian shall have sole signature
authority with respect thereto;
(B) Any Subordination Spread Account Property
that constitutes Physical Property shall be delivered to the Custodian
in accordance with paragraph (a) of the definition of "Delivery"
contained in the Pooling and Servicing Agreement and shall be held,
pending maturity or disposition, solely by the Custodian or a
securities intermediary (as such term is defined in Section
8-102(a)(14) of the UCC) acting solely for the Custodian;
(C) Any Subordination Spread Account Property
that is a book-entry security held through the Federal Reserve System
pursuant to federal book-entry regulations shall be delivered in
accordance with paragraph (b) of the definition of "Delivery"
contained in the Pooling and Servicing Agreement and shall be
maintained by the Custodian, pending maturity or disposition, through
continued book-entry registration of such Subordination Spread Account
Property as described in such paragraph; and
(D) Any Subordination Spread Account Property
that is an "uncertificated security" under Article VIII of the UCC and
that is not governed by clause (C) above shall be delivered to the
Custodian in
5
accordance with paragraph (c) of the definition of "Delivery" contained
in the Pooling and Servicing Agreement and shall be maintained by the
Custodian, pending maturity or disposition, through continued
registration of the Custodian's (or its nominee's) ownership of such
security.
Effective upon Delivery of any Subordination Spread Account
Property in the form of physical property, book-entry securities or
uncertificated securities, the Custodian shall be deemed to have purchased such
Subordination Spread Account Property for value, in good faith, and without
notice of any adverse claim thereto.
(iii) Each of the Seller and the Servicer agrees to
take or cause to be taken such further action, to execute, deliver and file or
cause to be executed, delivered and filed such further documents and instruments
(including, without limitation, any UCC financing statements) as may be
determined to be necessary in order to perfect the interests created by this
Section 5 and otherwise fully to effectuate the purposes, terms and conditions
of this Agreement. The Seller shall:
(A) promptly execute, deliver and file any
financing statements, amendments, continuation statements,
assignments, certificates and other documents with respect to such
interests and perform all such other acts as may be necessary in order
to perfect or to maintain the perfection of the Custodian's security
interest; and
(B) make the necessary filings of financing
statements or amendments thereto within five (5) days after the
occurrence of any of the following: (1) any change in its corporate
name or any trade name; (2) any change in the location of its chief
executive office or principal place of business; or (3) any merger or
consolidation or other change in its identity or corporate structure
and promptly notify the Custodian of any such filings.
(iv) Investment earnings attributable to the
Subordination Spread Account Property and proceeds therefrom shall be held by
the Custodian for the benefit of the Seller with respect to the Subordination
Initial Deposit and the Excess Amounts and the Class B Certificateholders with
respect to Recapture Amounts, and shall be allocated monthly on a pro rata
basis. Subject to the immediately preceding sentence, investment earnings
attributable to the Subordination Spread Account Property shall not be subject
to any claims or rights of the Certificateholders or the Servicer. The Custodian
shall cause all investment earnings attributable to the Subordination Spread
Accounts to be distributed on each
6
Distribution Date to the Seller or the Class B Certificateholders, as the case
may be. Realized losses, if any, on investment of the Subordination Spread
Account Property shall be charged first against undistributed investment
earnings attributable to the Subordination Spread Account Property and then
against the Subordination Spread Account Property.
(v) The Custodian shall not enter into any
subordination or intercreditor agreement with respect to the Subordination
Spread Account Property.
(e) If the Servicer pursuant to Section 5.04 of the Pooling
and Servicing Agreement is required to make an Advance with respect to any
Distribution Date and does not do so from its own funds, the Custodian shall
withdraw funds from the Class A Subordination Spread Account and remit them to
the Trustee to cover any shortfall. Such payment shall be deemed to have been
made by the Servicer pursuant to Section 5.04 of the Pooling and Servicing
Agreement for purposes of making distributions pursuant to this Agreement, but
shall not otherwise satisfy the Servicer's obligation to deliver the amount of
the Advances to the Custodian, and the Servicer shall within two Business Days
replace any funds in the Class A Subordination Spread Account so used.
SECTION 6. INDEMNITY; SUCCESSOR CUSTODIAN; ETC. The Custodian shall be
entitled to, and is hereby granted, immunities, indemnities, exculpations and
protections of the same scope and extent as those provided to the Trustee
pursuant to the Pooling and Servicing Agreement as if no Event of Default has
occurred and is continuing. If the Trustee shall resign or be removed pursuant
to Section 11.10 of the Pooling and Servicing Agreement, the Custodian shall be
released from its duties hereunder and the successor Trustee shall appoint a new
Custodian or assume the duties and the responsibilities of the Custodian
hereunder. The Custodian shall not otherwise resign without the consent of the
Trustee and the Servicer.
SECTION 7. TERMINATION. This Agreement shall terminate concurrently upon
the earlier of payment in full of the Certificates and the termination of the
Pooling and Servicing Agreement pursuant to Article XII of the Pooling and
Servicing Agreement. Upon such termination, all Excess Amounts and Recapture
Amounts in the Subordination Spread Accounts and the Certificate Account shall
be distributed first, to the extent of any previously contributed and not yet
recovered Recapture Amounts, to the holders of Class B Certificates, and any
remaining amounts to the
7
Seller, and all such distributed amounts shall be released from the liens of
this Agreement and the trusts created hereunder.
SECTION 8. ASSIGNMENT. Notwithstanding anything to the contrary contained
herein, except as provided in Section 6 hereof and in the Pooling and Servicing
Agreement, neither this Agreement nor any of the rights or obligations hereunder
may be assigned.
SECTION 9. SUBSTITUTION OF COLLATERAL. The Custodian shall release and
deliver to the Seller or the Class B Certificateholders, as the case may be, the
Subordination Initial Deposit, the Excess Amounts or the Recapture Amounts upon
delivery to the Custodian of substitute collateral, provided that the Seller or
the Class B Certificateholders, as the case may be, at such party's own expense,
shall have provided the Custodian with a letter (in form and substance
reasonably acceptable to the Trustee) from each rating agency which has an
outstanding rating on the Certificates and which was requested by the Seller or
an affiliate to rate such Certificates to the effect that the substitution of
the substitute collateral for the Subordination Initial Deposit, the Excess
Amounts or the Recapture Amounts, as the case may be, will not cause such rating
agency to downgrade or withdraw the rating then assigned to such Certificates.
SECTION 10. FEES. Other than the fees that the Custodian, in its capacity
as Trustee, will receive pursuant to the Pooling and Servicing Agreement, the
Custodian will not be paid any additional fees for its duties hereunder;
provided that, if at any time the Custodian is a different corporate entity than
the Trustee, the Trustee shall pay to the Custodian such custodial fee as to
which the Trustee and the Custodian shall separately agree. In no event shall
such fee be paid from the Subordination Spread Accounts.
SECTION 11. TAXES. It is the intent of the parties that the Subordination
Spread Account Property be treated as property of the Seller or, if the Class B
Certificates are transferred by the Seller, by the Seller and the transferee
thereof in direct proportion to their respective contributions of such property,
for all federal, state and local income and franchise tax purposes. The
provisions of this Agreement should be interpreted accordingly. Further, the
Seller (and any such transferee) shall include all income earned on the
Subordination Spread Accounts and from any and all Subordination Spread Account
Property in its (or their) gross income, pro rata, for all such tax purposes.
8
SECTION 12. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Custodian or the Certificateholders, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
SECTION 13. THIRD-PARTY BENEFICIARIES. This Agreement will inure to the
benefit of and be binding upon the parties hereto, the Certificateholders, the
Trustee, the Servicer and their respective successors and permitted assigns.
Except as otherwise provided in this Section, no other Person will have any
right or obligation hereunder.
SECTION 14. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, and no consent to any departure by the Seller herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Seller, the Custodian and the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. This Agreement may be amended from time to time by the Seller, the
Trustee and the Custodian, without the consent of any of the Certificateholders,
to cure any ambiguity, to correct or supplement any provision in the Agreement
which may be inconsistent with any other provision therein, including making
such amendments as may be necessary in the event the Seller transfers any amount
of Class B Certificates, or to add any other provisions with respect to matters
or questions arising under this Agreement that shall not be inconsistent with
the provisions of this Agreement; provided, however, that such action shall not,
as evidenced by an Opinion of Counsel, materially and adversely affect the
interests of any Certificateholder.
This Agreement may also be amended from time to time by the Seller,
the Trustee and the Custodian with the consent of the Holders of Class A
Certificates (which consent of any Holder of a Class A Certificate given
pursuant to this Section or pursuant to any other provision of this Agreement
shall be conclusive and binding on such Holder and on all future Holders of such
Certificate and of any Certificate issued upon the transfer thereof or in
exchange thereof or in lieu thereof whether or not notation of such consent is
made upon such Certificate), evidencing not less than 51% of the Class A
Certificate Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement, or of
9
modifying in any manner the rights of the Holders of Certificates; provided,
however, that no such amendment shall (a) increase or reduce in any manner the
amount of the Class A Specified Subordination Spread Account Balance or the
Class B Specified Subordination Spread Account Balance (unless such changes are
made in accordance with the terms of the Pooling and Servicing Agreement), or
accelerate or delay the timing of payments from the Subordination Spread
Accounts, without the consent of each adversely affected Certificateholder, or
(b) reduce the aforesaid percentage of the Class A Certificate Balance which is
required to consent to any such amendment, without the consent of the Holders of
all Class A Certificates then outstanding. Notwithstanding the foregoing, no
such amendment pursuant to clause (a) of the preceding proviso shall be made
unless the rating agencies then rating the Certificates confirm that such
amendment will not result in a reduction on or withdrawal of its rating of the
Certificates of such class.
Prior to the execution of any such amendment or consent, the
Seller shall provide, and the Trustee shall distribute, written notification of
the substance of such amendment or consent to each of the rating agencies then
rating the Certificates at least ten Business Days prior to the execution
thereof.
Promptly after the execution of any such amendment or consent,
the Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder.
It shall not be necessary for the consent of
Certificateholders pursuant to this Section 14 to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents (and
any other consents of Certificateholders provided for in this Agreement) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Custodian may prescribe,
including the establishment of record dates pursuant to paragraph number 2 of
the Depository Agreement.
Prior to the execution of any amendment to this Agreement, the
Custodian shall be entitled to receive and rely upon an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by this
Agreement and the Opinion of Counsel referred to in Section 13.02(i)(1) of the
Pooling and Servicing Agreement. The Custodian may, but shall not be obligated
to, enter into any such amendment which affects the Custodian's own rights,
duties or immunities under this Agreement or otherwise.
10
SECTION 15. ADDRESSES FOR NOTICES. All notices and other communications
hereunder shall be made at the addresses, in the manner and with the effect
provided in Section 13.05 of the Pooling and Servicing Agreement; provided,
however, for purposes of giving notice pursuant to this Agreement, notices to
the Custodian may be addressed to the Corporate Trust Office specified in the
Pooling and Servicing Agreement.
SECTION 16. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
may be delivered by facsimile signatures or by hand, each of which when executed
and delivered shall be an original, but all of which together shall constitute
one and the same instrument.
11
IN WITNESS WHEREOF, the Seller, the Trustee and the Custodian
have caused this Agreement to be duly executed and delivered by their duly
elected officers as of the ___ day of __________ 1998.
NISSAN AUTO RECEIVABLES CORPORATION,
as Seller and as initial holder of the
Class B Certificates
By:
-----------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, N.A.
as Custodian
By:
-----------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, N.A.
as Trustee
By:
-----------------------------------------
Name:
Title:
Acknowledged and Agreed:
------------------------
NISSAN MOTOR ACCEPTANCE CORPORATION,
as Servicer
12
By:
--------------------------------------
Name:
Title:
13